Table of Contents

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 20-F**

 

| **x** | **ANNUAL REPORT PURSUANT TO   SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the fiscal year ended   DECEMBER 31, 2015** |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------|

 

Commission file number 1-15018

 
| **Fibria   Celulose S.A.**                                                                                                                                                             |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (Exact name of Registrant as specified in its charter)                                                                                                                                 |
|                                                                                                                                                                                   |
| **N/A**                                                                                                                                                                                |
| (Translation of Registrant’s name into English)                                                                                                                                   |
|                                                                                                                                                                                   |
| **Federative Republic of Brazil**                                                                                                                                                      |
| (Jurisdiction of incorporation or organization)                                                                                                                                        |
|                                                                                                                                                                                   |
| **Rua Fidencio Ramos, 302, 3****rd**** floor**

**04551-010, São Paulo, SP, Brazil**                                                                                         |
| (Address of principal executive offices)                                                                                                                                               |
|                                                                                                                                                                                   |
| **Guilherme Perboyre Cavalcanti**

**Chief Financial Officer and Investor Relations   Officer**

**Phone: (55 11) 2138-4565**

**Fax: (55 11) 2138-4065**

**Email: ir@fibria.com.br** |
| (Name, Telephone, E-mail and/or Facsimile number and Address of   Company Contact Person)                                                                                              |

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

| Title of each class:                                                                                                     |   | Name of each   exchange on which registered: |
|--------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|
| Common Shares, without par value                                                                                         |   | New York Stock Exchange*                     |
| American Depositary Shares (as evidenced by American Depositary   Receipts), each representing one share of Common Stock |   | New York Stock Exchange                      |

 

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*      Not for trading purposes but only in connection with the registration on the New York Stock Exchange of American Depositary Shares representing those common shares.

 

Securities registered or to be registered pursuant to Section 12(g) of the Act: **None**

 

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Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: **None**

 

The number of outstanding shares of each class of stock of Fibria Celulose S.A. as of 

 
|   | December   31, 2015:                 |
|--------|--------------------------------------|
|   |                                 |
|   | 553,934,646   Shares of Common Stock |

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

x Yes   o No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes   x No

 

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

o Yes   x No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer x |   | Accelerated filer o |   | Non-accelerated filer o |
|---------------------------|--------|---------------------|--------|-------------------------|

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

| U.S. GAAP o |   | International Financial Reporting Standards as issued   by the International Accounting Standards Board x |   | Other o |
|-------------|--------|-----------------------------------------------------------------------------------------------------------|--------|---------|

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

 

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**TABLE OF CONTENTS**

 
| ** **                                                                              | **Page** |
|-----------------------------------------------------------------------------------------|----------|
|                                                                                    |     |
| ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND   ADVISERS                         | 1        |
|                                                                                    |     |
| ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                         | 1        |
|                                                                                    |     |
| ITEM 3. KEY INFORMATION                                                                 | 1        |
|                                                                                    |     |
| ITEM 4. INFORMATION ON FIBRIA                                                           | 22       |
|                                                                                    |     |
| ITEM 4A. UNRESOLVED STAFF COMMENTS                                                      | 61       |
|                                                                                    |     |
| ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                    | 61       |
|                                                                                    |     |
| ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                      | 89       |
|                                                                                    |     |
| ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY   TRANSACTIONS                             | 98       |
|                                                                                    |     |
| ITEM 8. FINANCIAL INFORMATION                                                           | 100      |
|                                                                                    |     |
| ITEM 9. THE OFFER AND LISTING                                                           | 106      |
|                                                                                    |     |
| ITEM 10. ADDITIONAL INFORMATION                                                         | 108      |
|                                                                                    |     |
| ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES   ABOUT MARKET RISK                   | 119      |
|                                                                                    |     |
| ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY   SECURITIES                       | 122      |
|                                                                                    |     |
| ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND   DELINQUENCIES                              | 123      |
|                                                                                    |     |
| ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF   SECURITY HOLDERS AND USE OF PROCEEDS | 123      |
|                                                                                    |     |
| ITEM 15. CONTROLS AND PROCEDURES                                                        | 123      |
|                                                                                    |     |
| ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                              | 123      |
|                                                                                    |     |
| ITEM 16B. CODE OF ETHICS                                                                | 123      |
|                                                                                    |     |
| ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                        | 124      |
|                                                                                    |     |
| ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR   AUDIT COMMITTEES                  | 125      |
|                                                                                    |     |
| ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER   AND AFFILIATED PURCHASERS      | 125      |
|                                                                                    |     |
| ITEM 16F. CHANGES IN REGISTRANT’S CERTIFYING   ACCOUNTANT                          | 125      |
|                                                                                    |     |
| ITEM 16G. CORPORATE GOVERNANCE                                                          | 125      |
|                                                                                    |     |
| ITEM 16H. MINE SAFETY DISCLOSURE                                                        | 127      |
|                                                                                    |     |
| ITEM 17. FINANCIAL STATEMENTS                                                           | 127      |
|                                                                                    |     |
| ITEM 18. FINANCIAL STATEMENTS                                                           | 127      |
|                                                                                    |     |
| ITEM 19. EXHIBITS                                                                       | 127      |

 

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**INTRODUCTION**

 

All references in this annual report to:

 

·                  “Fibria”, “we”, “our”, “us” and the “Company” are to Fibria Celulose S.A. (formerly Votorantim Celulose e Papel S.A.) and its consolidated subsidiaries (unless the context otherwise requires);

 

·                  “Votorantim Group” are to the group of companies, controlled by the Ermírio de Moraes family;

 

·                  “Votorantim Participações S.A.” or “VPar” are to the holding company of Votorantim Industrial S.A which was merged into Votorantim S.A. on January 1, 2016;

 

·                  Votorantim S.A. (current corporate name of Votorantim Industrial S.A.), “Votorantim Industrial S.A.”, or “VID,” are to one of our controlling shareholders;

 

·                  “Aracruz” are to Aracruz Celulose S.A. and its subsidiaries;

 

·                  “Aracruz Acquisition” are to our acquisition of 100% equity interest in Aracruz as a result of (1) Fibria’s acquisition in the first half of 2009 of (a) Arapar S.A., or Arapar, and São Teófilo Representações e Participações S.A., or São Teófilo, whose sole assets consisted of 12.35% of the total share capital, including 28.0% of the voting share capital, of Aracruz and (b) 12.35% of the total share capital, including 28.0% of the voting share capital, of Aracruz from Mr. Joseph Yacoub Safra and Mr. Moises Yacoub Safra, or the Safra Family, (2) the acquisition of 13,828,307 common shares of Aracruz, representing 3.04% of the outstanding common shares of Aracruz and 1.34% of the total share capital of Aracruz, in the mandatory tender offer launched by Fibria that took place on July 1, 2009, (3) the acquisition of 56,880,857 common share of Aracruz from BNDES on May 27, 2009, and (4) the Stock Swap Merger as described in Item 4. Information on Fibria — A. History and Development of Fibria;

 

·                  “BNDES” are to the Brazilian National Bank for Social and Economic Development owned by the Brazilian federal government;

 

·                  “BNDESPar” are to BNDES Participações S.A., a wholly owned subsidiary of BNDES, the Brazilian economic and social development bank owned by the Brazilian federal government;

 

·                  the “Ermírio de Moraes family” are to the families of Antônio Ermírio de Moraes, Ermírio Pereira de Moraes, Maria Helena de Moraes Scripilliti and José Ermírio de Moraes (in memoriam);

 

·                  the “Brazilian government” are to the federal government of the Federative Republic of Brazil and its agencies;

 

·                  “*Real*,” “*Reais*” or “R$” are to Brazilian *Reais*, the official currency of Brazil;

 

·                  “U.S.$”, “Dollars” or “U.S. Dollars” are to United States Dollars;

 

·                  “ton” and “MT” are to one metric ton (1,000 kilograms). One kilogram equals approximately 2.2 pounds;

 

·                  “kiloton” are to one thousand metric tons (1,000 tons);

 

·                  “BEKP” are to bleached eucalyptus kraft pulp;

 

·                  “ADSs” are to our American Depositary Shares, each representing one of our common shares;

 

·                  “CVM” are to the Comissão de Valores Mobiliários, the Brazilian securities commission;

 

·                  “Central Bank” are to the Brazilian Central Bank, the monetary authority of Brazil;

 

·                  “VCP” are to Votorantim Celulose e Papel S.A. or Fibria before the merger of Aracruz;

 

·                  “Fibria Trading” are to Fibria Trading International KFT;

 

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·                  “Fibria — MS” are to Fibria — MS Celulose Sul Matogrossence;

 

·                  “Portocel” are to a port facility in the State of Espírito Santo, which is operated by Portocel — Terminal Especializado de Barra do Riacho S.A., a subsdiary with 51% interest held by Fibria and 49% interest held by Celulose Nipo-Brasileira S.A. — CENIBRA;

 

·                  “Parkia” are to Parkia Participações S.A.

 

·                  “Commission” are to the Securities and Exchange Commission;

 

·                  “IFRS” are to International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB);

 

·                  “NYSE” are to the New York Stock Exchange; and

 

·                  “BM&FBOVESPA” are to BM&FBOVESPA S.A - Bolsa de Valores, Mercadorias e Futuros, the Brazilian Stock Exchange.

 

As used in this annual report, one hectare equals approximately 2.471 acres and one kilometer equals approximately 0.621 miles. References in this annual report to nominal production capacity or production capacity mean annual projected capacity for which the facility was designed, with the facility operating under optimal conditions, 24 hours a day, for 365 days a year and subject to reductions in rates of production for scheduled maintenance only. Actual production capacity may vary depending on operating conditions, the grades of pulp produced and other factors.

 

**PRESENTATION OF FINANCIAL AND OTHER DATA**

 

We have prepared our consolidated financial statements as of and for the years ended December 31, 2015, 2014 and 2013 included herein in compliance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The selected financial information should be read together with our consolidated financial statements, including the notes thereto, included elsewhere in this annual report.

 

The Brazilian *Real* is our functional currency including all our subsidiaries, and is also the currency used for the preparation and presentation of the consolidated financial statements.

 

We make statements in this annual report about our competitive position and market share in, and the market size of, the market pulp industry. We have made these statements on the basis of statistics and other information from third-party sources that we believe are reliable. We derive this third-party information principally from monthly reports published by Bracelpa — Associação Brasileira de Celulose e Papel (the Brazilian Association of Pulp and Paper), RISI (Resource Information Systems Inc.), PPPC (Pulp and Paper Product Council), Brian McClay, Poyry and Hawkins Wright, all of them specialized consultants in the pulp market. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share, market size or market growth data provided by third parties or by industry or general publications.

 

**FORWARD-LOOKING STATEMENTS**

 

This annual report includes forward-looking statements, principally in “Item 3. Key Information — D. Risk Factors”, “Item 4. Information on Fibria — B. Business Overview” and “Item 5. Operating and Financial Review and Prospects”. We have based these forward-looking statements largely on our current expectations about future events and financial trends affecting our business. These forward-looking statements are subject to risks, uncertainties and assumptions, including among other things:

 

·                  our direction and future operation;

 

·                  the implementation of our principal operating strategies; including our potential participation in acquisition or joint venture transactions or other investment opportunities;

 

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·                  general economic, political and business conditions, both in Brazil and in our principal export markets;

 

·                  industry trends and the general level of demand for, and change in the market prices of our products;

 

·      existing and future governmental regulation, including tax, labor, pension and environmental laws and regulations and import tariffs in Brazil and in other markets in which we operate or to which we export our products;

 

·                  the competitive nature of the industries in which we operate;

 

·                  our level of capitalization, including the levels of our indebtedness and overall leverage;

 

·                  the cost and availability of financing;

 

·                  our compliance with the covenants contained in the instruments governing our indebtedness;

 

·                  the implementation of our financing strategy and capital expenditure plans;

 

·                  inflation and fluctuations in currency exchange rates, including the Brazilian *Real* and the U.S. Dollar;

 

·                  legal and administrative proceedings to which we are or may become a party;

 

·                  the volatility of the prices of the raw materials we sell or purchase to use in our business;

 

·                  other statements included in this annual report that are not historical; and

 

·      other factors or trends affecting our financial condition or results of operations, including those factors identified or discussed in “Item 3. Key Information — D. Risk Factors.”

 

The words “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “hope”, “intend”, “may”, “might”, “should”, “would”, “will”, “understand” and similar words are intended to identify forward looking statements. We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur and are not guarantees of future performance. Our actual results and performance could differ substantially.

 

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**PART I**

 

**ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS**

 

Not applicable.

 

**ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE**

 

Not applicable.

 

**ITEM 3.  KEY INFORMATION**

 

**A.**                                    **Selected Financial Data**

 

IFRS Summary Financial and Operating Data

 

The following table presents a summary of our selected financial and operating data at the dates and for each of the periods indicated. The following information should be read together with our consolidated financial statements, including the notes thereto, included elsewhere in this annual report, “Presentation of Financial and Other Data” and “Item 5. Operating and Financial Review and Prospects”.

 

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| ** **                                                                                          | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| **CONSOLIDATED STATEMENT OF PROFIT OR**                                         | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| **LOSS **                                                                                      | ** ** | **2015**              | ** ** | **2014**              | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** |
| **(in thousands of Reais, unless otherwise indicated)**               | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** | ** **            | ** ** |
|                                                                                                |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| **Revenues**                                                                                        |       | 10,080,667            |       | 7,083,603             |       | 6,917,406             |       | 6,174,373             |       | 5,854,300             |       |
| Cost of sales                                                                                       |       | (5,878,209            | )          | (5,545,537            | )          | (5,382,688            | )          | (5,237,258            | )          | (5,124,269            | )          |
| **Gross   profit**                                                                                  |       | 4,202,458             |       | 1,538,066             |       | 1,534,718             |       | 937,115               |       | 730,031               |       |
| **Operating   income (expenses):**                                                                  |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Selling, general   and administrative                                                               |       | (702,874              | )          | (650,836              | )          | (647,669              | )          | (584,054              | )          | (605,353              | )          |
| Equity in   results of joint-venture and associate                                                  |       | 393                   |       | (622                  | )          | —                |       | (592                  | )          | (414                  | )          |
|                                                                                                |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Other operating   income (expenses), net                                                            |       | 24,347                |       | 770,007               |       | 823,398               |       | 354,026               |       | 253,395               | )          |
|                                                                                                |       | (678,134              | )          | 118,549               |       | 175,729               |       | (230,620              | )          | (352,372              | )          |
| **Income   before financial income and expenses**                                                   |       | 3,524,324             |       | 1,656,615             |       | 1,710,447             |       | 706,495               |       | 377,659               |       |
| Financial income                                                                                    |       | 221,679               |       | 133,950               |       | 110,723               |       | 167,646               |       | 217,000               |       |
| Financial   expenses                                                                                |       | (569,793              | )          | (1,040,597            | )          | (1,016,526            | )          | (944,405              | )          | (873,005              | )          |
| Result of   derivative financial Instruments, net                                                   |       | (830,128              | )          | (6,236                | )          | (215,313              | )          | (184,465              | )          | (276,877              | )          |
| Foreign exchange   loss and indexation charges, net                                                 |       | (2,507,023            | )          | (721,842              | )          | (932,907              | )          | (735,001              | )          | (935,789              | )          |
|                                                                                                |       | (3,685,265            | )          | (1,634,725            | )          | (2,054,023            | )          | (1,696,225            | )          | (1,868,671            | )          |
| **Income   (loss) from continuing operations before income taxes**                                  |       | (160,941              | )          | 21,890                |       | (343,576              | )          | (989,730              | )          | (1,491,012            | )          |
| Current income   tax (expense) benefit                                                              |       | (684,246              | )          | (46,280               | )          | (619,606              | )          | (42,167               | )          | 67,835                |       |
| Deferred income   tax (expense) benefit                                                             |       | 1,202,172             |       | 186,942               |       | 265,600               |       | 333,927               |       | 314,408               |       |
| **Net   income (loss) from continuing operations**                                                  |       | 356,985               |       | 162,552               |       | (697,582              | )          | (697,970              | )          | (1,108,769            | )          |
|                                                                                                |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| **Discontinued   operations**                                                                       |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Income from   discontinued operations                                                               |       | —                |       | —                |       | —                |       | —                |       | 364,629               |       |
| Income tax   expense, net                                                                           |       | —                |       | —                |       | —                |       | —                |       | (123,974              | )          |
| Net income from   discontinued operations                                                           |       | —                |       | —                |       | —                |       | —                |       | 240,655               |       |
| **Net   income (loss)**                                                                             |       | 356,985               |       | 162,552               |       | (697,582              | )          | (697,970              | )          | (868,114              | )          |
|                                                                                                |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Net income   (loss) attributable to shareholders of the Company — continuing   operations |       | 342,185               |       | 155,584               |       | (706,422              | )          | (704,706              | )          | (1,113,277            | )          |
| — discontinued   operations                                                                    |       | —                |       | —                |       | —                |       | —                |       | 240,655               |       |
| Net income   attributable to non-controlling interest                                               |       | 14,800                |       | 6,968                 |       | 8,840                 |       | 6,736                 |       | 4,508                 |       |
| **Net   income (loss)**                                                                             |       | 356,985               |       | 162,552               |       | (697,582              | )          | (697,970              | )          | (868,114              | )          |
| **Basic   earnings (loss) per share****or ADSs (in Brazilian   *Reais*)**(1)**:**    |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Continuing   operations                                                                             |       | 0.62                  |       | 0.28                  |       | (1.28                 | )          | (1.34                 | )          | (2.38                 | )          |
| Discontinued   operations                                                                           |       | —                |       | —                |       | —                |       | —                |       | 0.51                  |       |
| **Diluted   earnings (loss) per share****or ADSs (in Brazilian   *Reais*)** (1)**:** |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Continuing   operations                                                                             |       | 0.62                  |       | 0.28                  |       | (1.28                 | )          | (1.34                 | )          | (2.38                 | )          |
| Discontinued   operations                                                                           |       | —                |       | —                |       | —                |       | —                |       | 0.51                  |       |
| **Weighted   average number of shares outstanding (in thousands):**                            |       | 553,591               |       | 553,592               |       | 553,592               |       | 524,925               |       | 467,592               |       |
| **Dividends   per share (in Brazilian *Reais*:**                                                    |       | 0.54                  |       | 0.07                  |       | —                |       | —                |       | —                |       |
| **Dividends   per share (in U.S. Dollars)**(2):                                                     |       | 0.14                  |       | 0.03                  |       | —                |       | —                |       | —                |       |

 

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Note:        Following a change in the classification of profit-sharing and bonus plans in 2015from “Selling, general and administrative expenses” to “Other operating income (expenses), net”, the Consolidated Statement of Profit or Loss for the years ended December 31, 2014, 2013, 2012 and 2011, presented above, were adjusted for purposes of comparability by also reclassifying such amounts, totaling R$20,001 thousand, R$15,917 thousand, R$11,714 thousand and R$5,736 thousand, respectively. Please see Note 2.19 (c) to our consolidated financial statements.

 

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(1)                 Based on the weighted average number of shares outstanding for each year.

(2)                 Amount translated at the average rate of each year into U.S. Dollars for convenience. You should not construe this translation as representations that the *Real* amount actually represents these U.S. Dollar amounts or could be converted into U.S. Dollar at the rates indicated or at any other rate.

 

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**CONSOLIDATED BALANCE SHEET**

**(in thousands of Reais)**

 
| ** **                                      | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** |
|-------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                      | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                      | ** ** | **2015**              | ** ** | **2014**              | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** |
| Assets                                          |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Current                                         |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Cash and cash   equivalents                     |       | 1,077,651             |       | 461,067               |       | 1,271,752             |       | 943,856               |       | 381,915               |       |
| Marketable   securities                         |       | 1,411,864             |       | 682,819               |       | 1,068,182             |       | 2,351,986             |       | 1,677,926             |       |
| Derivative   financial instruments              |       | 26,795                |       | 29,573                |       | 22,537                |       | 18,344                |       | 31,638                |       |
| Trade accounts   receivable, net                |       | 742,352               |       | 538,424               |       | 382,087               |       | 754,768               |       | 945,362               |       |
| Accounts   receivable - land and buildings sold |       | —                |       | —                |       | 902,584               |       | —                |       | —                |       |
| Inventory                                       |       | 1,571,146             |       | 1,238,793             |       | 1,265,730             |       | 1,183,142             |       | 1,178,707             |       |
| Recoverable   taxes                             |       | 462,487               |       | 162,863               |       | 201,052               |       | 209,462               |       | 327,787               |       |
| Assets held for   sale                          |       | —                |       | —                |       | 589,849               |       | 589,849               |       | 644,166               |       |
| Other assets                                    |       | 168,283               |       | 147,638               |       | 103,228               |       | 194,526               |       | 108,062               |       |
|                                            |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                            |       | 5,460,578             |       | 3,261,177             |       | 5,807,001             |       | 6,245,933             |       | 5,295,563             |       |
|                                            |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Non-current                                     |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Marketable   securities                         |       | 68,142                |       | 51,350                |       | 48,183                |       | —                |       | —                |       |
| Derivative   financial instruments              |       | 273,694               |       | 161,320               |       | 71,017                |       | 26,475                |       | 43,446                |       |
| Related party   receivables                     |       | 11,714                |       | 7,969                 |       | 7,142                 |       | 6,245                 |       | 5,469                 |       |
| Deferred taxes                                  |       | 2,399,213             |       | 1,190,836             |       | 968,116               |       | 879,606               |       | 995,368               |       |
| Recoverable   taxes                             |       | 1,511,971             |       | 1,752,101             |       | 743,883               |       | 657,830               |       | 677,232               |       |
| Advances to   suppliers                         |       | 630,562               |       | 695,171               |       | 726,064               |       | 740,310               |       | 760,611               |       |
| Judicial   deposits                             |       | 195,344               |       | 192,028               |       | 197,506               |       | 157,567               |       | 137,060               |       |
| Assets held for   sale                          |       | 598,257               |       | 598,257               |       | —                |       | —                |       | —                |       |
| Other assets                                    |       | 92,714                |       | 91,208                |       | 252,135               |       | 172,612               |       | 95,060                |       |
| Investments                                     |       | 137,771               |       | 79,882                |       | 46,922                |       | 40,674                |       | 7,506                 |       |
| Biological   assets                             |       | 4,114,998             |       | 3,707,845             |       | 3,423,434             |       | 3,325,604             |       | 3,264,210             |       |
| Property, plant   and equipment                 |       | 9,433,386             |       | 9,252,733             |       | 9,824,504             |       | 11,174,561            |       | 11,841,247            |       |
| Intangible   assets                             |       | 4,505,634             |       | 4,552,103             |       | 4,634,265             |       | 4,717,163             |       | 4,809,448             |       |
|                                            |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                            |       | 23,973,400            |       | 22,332,803            |       | 20,943,171            |       | 21,898,647            |       | 22,636,657            |       |
|                                            |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Total assets                                    |       | 29,433,978            |       | 25,593,980            |       | 26,750,172            |       | 28,144,580            |       | 27,932,220            |       |

 
| ** **                                        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                        | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                        | ** ** | **2015**              | ** ** | **2014**              | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** |
| Liabilities and   shareholders’ equity       |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Current                                           |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Loans and   financing                             |       | 1,072,877             |       | 965,389               |       | 2,972,361             |       | 1,138,005             |       | 1,092,108             |       |
| Trade payables                                    |       | 668,017               |       | 593,348               |       | 586,541               |       | 435,939               |       | 373,692               |       |
| Payroll, profit   sharing and related charges     |       | 170,656               |       | 135,039               |       | 129,386               |       | 128,782               |       | 134,024               |       |
| Taxes payable                                     |       | 564,439               |       | 56,158                |       | 55,819                |       | 41,368                |       | 53,463                |       |
| Derivative   financial instruments                |       | 302,787               |       | 185,872               |       | 106,793               |       | 54,252                |       | 163,534               |       |
| Liabilities   related to the assets held for sale |       | —                |       | —                |       | 470,000               |       | 470,000               |       | —                |       |
| Dividends   payables                              |       | 86,288                |       | 38,649                |       | 2,374                 |       | 2,076                 |       | 1,520                 |       |
| Other payables                                    |       | 90,235                |       | 124,775               |       | 125,081               |       | 204,833               |       | 142,367               |       |
|                                              |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                              |       | 2,955,299             |       | 2,099,230             |       | 4,448,355             |       | 2,475,255             |       | 1,960,708             |       |

 

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| ** **                                                | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** | **As at**        | ** ** |
|-----------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                | ** ** | **2015**              | ** ** | **2014**              | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** |
| Non-current                                               |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Loans and   financing                                     |       | 11,670,955            |       | 7,361,130             |       | 6,800,736             |       | 9,629,950             |       | 10,232,309            |       |
| Derivative   financial instruments                        |       | 825,663               |       | 422,484               |       | 451,087               |       | 263,646               |       | 125,437               |       |
| Taxes payables                                            |       | —                |       | 124                   |       | 159                   |       | 77,665                |       | 76,510                |       |
| Deferred taxes                                            |       | 270,996               |       | 266,528               |       | 235,896               |       | 227,923               |       | 739,878               |       |
| Related parties   payable                                 |       |                  |       | —                |       | —                |       | —                |       | —                |       |
| Provision for   legal proceeds                            |       | 165,325               |       | 144,582               |       | 128,838               |       | 104,813               |       | 101,594               |       |
| Liabilities   related to the assets held for sale         |       | 477,000               |       | 477,000               |       | —                |       | —                |       | —                |       |
| Other payables                                            |       | 253,420               |       | 207,197               |       | 193,847               |       | 194,521               |       | 163,096               |       |
|                                                      |       |                  |       |                  |       |                  |       |                  |       |                  |       |
|                                                      |       | 13,663,359            |       | 8,879,045             |       | 7,810,563             |       | 10,498,518            |       | 11,438,824            |       |
|                                                      |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Total   liabilities                                       |       | 16,618,658            |       | 10,978,275            |       | 12,258,918            |       | 12,973,773            |       | 13,399,532            |       |
|                                                      |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Shareholders’   equity                               |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Share capital                                             |       | 9,729,006             |       | 9,729,006             |       | 9,729,006             |       | 9,729,006             |       | 8,379,397             |       |
| Share capital   reserve                                   |       | 15,474                |       | 3,920                 |       | 2,688                 |       | 2,688                 |       | 2,688                 |       |
| Treasury shares                                           |       | (10,378               | )          | (10,346               | )          | (10,346               | )          | (10,346               | )          | (10,346               | )          |
| Statutory   reserves                                      |       | 1,639,901             |       | 3,228,145             |       | 3,109,281             |       | 3,815,584             |       | 4,520,290             |       |
| Other reserves                                            |       | 1,378,365             |       | 1,613,312             |       | 1,614,270             |       | 1,596,666             |       | 1,611,837             |       |
|                                                      |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Equity   attributable to shareholders of the Company |       | 12,752,368            |       | 14,564,037            |       | 14,444,899            |       | 15,133,598            |       | 14,503,866            |       |
| Equity   attributable to non-controlling interests        |       | 62,952                |       | 51,668                |       | 46,355                |       | 37,209                |       | 28,822                |       |
|                                                      |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Total   shareholders’ equity                         |       | 12,815,320            |       | 14,615,705            |       | 14,491,254            |       | 15,170,807            |       | 14,532,688            |       |
|                                                      |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Total   liabilities and shareholders’ equity         |       | 29,433,978            |       | 25,593,980            |       | 26,750,172            |       | 28,144,580            |       | 27,932,220            |       |

 

Note:        The Consolidated Balance Sheet as at December 31, 2012 and 2011 were restated due to the retrospective impact of the adoption of IAS 19 (R), as mentioned in Note 2.26 to our 2013 consolidated financial statements.

 

5

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**OTHER FINANCIAL DATA**

 
| ** **                                                                            | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** | **Year ended**   | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                            | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| **(in thousands of Reais, unless otherwise indicated)** | ** ** | **2015**              | ** ** | **2014**              | ** ** | **2013**              | ** ** | **2012**              | ** ** | **2011**              | ** ** |
|                                                                                  |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Gross margin                                                                          |       | 41.7                  | %          | 21.7                  | %          | 22.2                  | %          | 15.2                  | %          | 12.5                  | %          |
| Operating margin                                                                      |       | 35.0                  | %          | 23.4                  | %          | 24.7                  | %          | 11.4                  | %          | 6.5                   | %          |
| Capital   expenditures(3)                                                        |       | 2,357,915             |       | 1,591,002             |       | 1,286,684             |       | 1,078,267             |       | 1,416,668             |       |
| Depreciation,   amortization and depletion                                            |       | 1,827,097             |       | 1,790,628             |       | 1,751,947             |       | 1,720,067             |       | 1,838,827             |       |
| Cash flow   provided by (used in):                                                    |       |                  |       |                  |       |                  |       |                  |       |                  |       |
| Operating activities                                                                  |       | 4,479,018             |       | 2,226,756             |       | 2,163,530             |       | 1,914,333             |       | 1,348,200             |       |
| Investing   activities                                                                |       | (3,315,200            | )          | (356,018              | )          | (433,849              | )          | (1,160,803            | )          | (727,666              | )          |
| Financing   activities                                                                |       | (852,642              | )          | (2,643,993            | )          | (2,275,991            | )          | (258,250              | )          | (649,133              | )          |

 

**OPERATIONAL DATA**

 
| ** **                                           | ** ** | **As at and for** | ** ** | **As at and for** | ** ** | **As at and for** | ** ** | **As at and for** | ** ** | **As at and for** | ** ** |
|------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                           | ** ** | **the year ended**     | ** ** | **the year ended**     | ** ** | **the year ended**     | ** ** | **the year ended**     | ** ** | **the year ended**     | ** ** |
| ** **                                           | ** ** | **December 31,**            | ** ** | **December 31,**            | ** ** | **December 31,**            | ** ** | **December 31,**            | ** ** | **December 31,**            | ** ** |
| ** **                                           | ** ** | **2015**                         | ** ** | **2014**                         | ** ** | **2013**                         | ** ** | **2012**                         | ** ** | **2011**                         | ** ** |
|                                                 |       |                             |       |                             |       |                             |       |                             |       |                             |       |
| Number of   employees                                |       | 4,197                            |       | 4,294                            |       | 4,192                            |       | 4,136                            |       | 4,301                            |       |
| Nominal   production capacity (thousand metric tons) |       |                             |       |                             |       |                             |       |                             |       |                             |       |
| Pulp                                                 |       | 5,300                            |       | 5,300                            |       | 5,300                            |       | 5,250                            |       | 5,250                            |       |
| Paper                                                |       | —                           |       | —                           |       | —                           |       | —                           |       | —                           |       |
| Sales volumes   (thousand metric tons):              |       |                             |       |                             |       |                             |       |                             |       |                             |       |
| Domestic market   pulp                               |       | 499                              |       | 517                              |       | 447                              |       | 531                              |       | 509                              |       |
| Export market   pulp                                 |       | 4,619                            |       | 4,788                            |       | 4,751                            |       | 4,826                            |       | 4,632                            |       |
| Total market   pulp                                  |       | 5,118                            |       | 5,305                            |       | 5,198                            |       | 5,357                            |       | 5,141                            |       |
|                                                 |       |                             |       |                             |       |                             |       |                             |       |                             |       |
| Domestic market   paper                              |       | —                           |       | —                           |       | —                           |       | —                           |       | 88                               |       |
| Export market   paper                                |       | —                           |       | —                           |       | —                           |       | —                           |       | 12                               |       |
| Total   paper(4)                                |       | —                           |       | —                           |       | —                           |       | —                           |       | 100                              |       |

 

----

(3) Relates to cash disbursed for the acquisition of property, plant and equipment and intangible assets and forests and advances for acquisition of timber from forestry partnership program.

 

(4)               The decrease in the paper sales volume reflects the sale of the Piracicaba unit in 2011. See “Item 4. Information on Fibria — A. History and Development of Fibria — Strategic Business Agreement (SBA) with Oji Paper”. Production capacity data is measured as of December 31 of each year.

 

**Exchange Rates**

 

Since 1999, the Brazilian Central Bank (Central Bank) has allowed the U.S. Dollar-*Real* exchange rate to float freely, and since then, the exchange rate has fluctuated considerably. The Central Bank has intervened occasionally to control unstable movements in foreign exchange rates. We cannot predict the Central Bank’s behavior related to the exchange rate market. The *Real* may depreciate or appreciate significantly against the U.S. Dollar in the future.

 

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The following tables set forth the exchange rate, expressed in *Reais* per U.S. Dollar (R$/U.S.$) for the periods indicated, as reported by the Central Bank.

 
| ** **                                 | ** ** | **Exchange Rate of Reais per U.S.$ 1.00** | ** ** |
|--------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| **Year Ended December 31,** | ** ** | **Low**                                                                 | ** ** | **High** | ** ** | **Average(1)** | ** ** | **Period-end** | ** ** |
|                                       |       |                                                                    |       |   |   |   |   |   |   |
| 2011                                       |       | 1.5345                                                                  |       | 1.9016 |   | 1.6746 |   | 1.8758 |   |
| 2012                                       |       | 1.7024                                                                  |       | 2.1121 |   | 1.9550 |   | 2.0435 |   |
| 2013                                       |       | 1.9528                                                                  |       | 2.4457 |   | 2.1605 |   | 2.3426 |   |
| 2014                                       |       | 2.1974                                                                  |       | 2.7403 |   | 2.3547 |   | 2.6562 |   |
| 2015                                       |       | 2.5754                                                                  |       | 4.1949 |   | 3.3387 |   | 3.9048 |   |

 
| **Month Ended**    | ** ** | **Low** | ** ** | **High** | ** ** | **Average(1)** | ** ** | **Period-end** | ** ** |
|-------------------------|------------|---------|------------|----------|------------|----------------|------------|----------------|------------|
|                    |       |    |       |     |       |           |       |           |       |
| September 30, 2015 |       | 3.6725  |       | 4.1949   |       | 3.9065         |       | 3.9729         |       |
| October 31, 2015   |       | 3.7386  |       | 4.0010   |       | 3.8801         |       | 3.8589         |       |
| November 30, 2015  |       | 3.7010  |       | 3.8589   |       | 3.7765         |       | 3.8506         |       |
| December 31, 2015  |       | 3.7476  |       | 3.9831   |       | 3.8711         |       | 3.9048         |       |
| January 31, 2016   |       | 3.9863  |       | 4.1558   |       | 4.0524         |       | 4.0428         |       |
| February 11, 2016  |       | 3.8653  |       | 3.9986   |       | 3.9449         |       | 3.9642         |       |

 

----

Source: Brazilian Central Bank.

(1)           Represents the daily average exchange rate during each of the relevant periods.

 

**B.**                                    **Capitalization and Indebtedness**

 

Not applicable.

 

**C.**                                    **Reasons for the Offer and Use of Proceeds**

 

Not applicable.

 

**D.**                                    **Risk Factors**

 

We are subject to various risks resulting from changing competitive, economic, political and social conditions that could harm our business, results of operations or financial condition. The risks described below, although not being the only ones we face, are the most important ones.

 

**Risks Relating to our Business**

 

***The market prices for our******pulp******products are cyclical***.

 

The prices we are able to obtain for our products depend on prevailing world prices for market pulp. World pulp prices have historically been cyclical and subject to significant fluctuations over short periods of time depending on a number of factors, including:

 

·      global demand for pulp products;

 

·      global pulp production capacity and inventories;

 

·      strategies adopted by major pulp producers; and

 

·      availability of substitutes for our pulp products.

 

All of these factors are beyond our control.

 

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Price fluctuations occur not only from year to year but also within a given year as a result of global and regional economic conditions, capacity constraints, mill openings and closures, supply of and demand for both raw materials and finished products, among other factors. As a reference, we use prices published by RISI for North America and prices released by FOEX for Europe and Asia. Through 2011, the global economy impacted the pulp market, which had an uptrend in the first half of the year, but ended the year in a lower level than it started with BEKP average prices at U.S.$865 per ton, U.S.$810 per ton and U.S.$699 per ton in North America, Europe and Asia, respectively. In 2012, the uncertainties surrounding the economic recession in Europe provided an unstable BEKP price environment. After following an upward trend in the first half of 2012, prices presented consecutive weekly decreases during the third quarter, but regained strength in the last three months of the year, leading BEKP prices to an annual average of U.S.$815 per ton in North America, U.S.$751 per ton in Europe and U.S.$635 per ton in Asia. In 2013, prices continued to climb during the most part of the first half of the year, due to relatively stable supply levels and strong demand. Nevertheless , as the summer in the Northern Hemisphere approached, slower seasonal demand introduced prices to a new cycle of decline that lasted until November, when prices started to show signs of recovery, ending the year at an annual average of U.S.$870 per ton in North America, U.S.$791 per ton in Europe and U.S.$673 per ton in Asia. In the beginning of 2014, however, prices were pressured by the new pulp capacities expected to come online during the first half of the year. Prices in all regions dropped until September, when the combination of more robust demand and low inventories levels led producers to implement a price increase effective from the fourth quarter. In 2014, average annual BEKP prices were U.S.$846 per ton in North America, U.S.$745 per ton in Europe and U.S.$609 per ton in Asia. In 2015, prices followed an upward trend for most of the year, reflecting both buoyant demand in all main markets and unexpected supply disruptions. The structurally well balanced market encouraged many BEKP producers to announce four price increases during the year. In the fourth quarter of 2015, the economic downturn in China placed strong pressure on prices and, as a result, the average annual BEKP prices were U.S.$890 per ton in North America, U.S.$784 per ton in Europe and U.S.$641 per ton in Asia.

 

Discounts from list prices are frequently granted by sellers to significant purchasers. Although we have long-term relationships with many of our customers, no assurance can be given that the prices for pulp will stabilize or not decline further in the future, or that demand for our products will not decline in the future. As a result, no assurance can be given that we will be able to operate our production facilities in a profitable manner in the future. A significant decline in the price of one or more of our products could have a material adverse effect on our net operating revenues, operating income and net income.

 

***China’s importance in the global pulp markets has increased in recent years, driven by increasing domestic consumption. Any negative economic development in China could rapidly impact exports, adversely affecting our revenues, cash flow and profitability.***

 

According to market statistics (PPPC), Chinese demand represented 30% of the global market pulp demand in 2015 and this consumption has increased at an annual average growth rate of 10.2% since 2005, above the global average of 2.1%. The recent investments in paper and board machines in China have been boosting pulp demand in China; however, the volatility of Chinese demand due to speculative buying movement is a key risk for any short-term demand forecast.

 

***Global crises and subsequent economic slowdowns, similar to those that occurred during 2008 and 2009 may adversely affect global pulp demand. As a result, our financial condition and results of operations may be adversely affected.***

 

Demand for our pulp products is directly linked to overall economic activity within those international markets in which we sell our products. After a steady period of growth between 2003 and 2007, the marked drop in demand resulting from the global economic crisis of 2008-2009 once again demonstrated the vulnerability of the pulp market to international volatility. From mid 2009 through 2010, the global economy recovered and provided improved conditions for the pulp market. In 2011, the market pulp industry had two distinct phases. During the first half of the year, the global market pulp demand increased by 7.7% over 2010, mostly due to strong Chinese demand. Beginning in July, the European crisis and its effects on the global economy negatively impacted world pulp demand. In 2012, the unstable economic environment continued pressuring pulp demand; however, positive results in emerging regions offset the losses in mature markets, leading to higher pulp demand compared to the previous year. In 2013, however, despite the persistent tepid economic climate, pulp demand grew by 3.2% with improvements seen in almost all major regions of the globe, especially due to higher investments in new paper capacity. According to PPPC, 39 new tissue paper machines were installed in 2013 and other 59 new tissue paper machines were forecast to enter the market in 2014. The weak economic environment persisted through 2014 but the impact of the capacity expansions happened in 2013 in all regions, mainly focused in the tissue market, combined with the installation of other new paper capacities mainly in China during the year, resulted again in higher pulp demand, which presented a 1.5% increase. In 2015, global pulp demand increased by 2.4%. In contrast to previous years, the gradual improvement of developed economies, primarily due to positive results in the main European economic indicators, was one of the key drivers of pulp demand growth, along with the continuing paper capacity expansion in China.

 

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A continued decline in the level of activity in either the domestic or the international markets within which we operate could adversely affect both the demand for and the price of our products and have a material adverse effect on us.

 

The deterioration of global economic conditions could, among other things:

 

·                  further negatively impact global demand for paper, reducing investments in new paper capacity and/or leading to paper mills closures, which would directly impact pulp consumption, or further lower market prices for our products, which could result in a continued reduction of our sales, operating income and cash flows;

 

·                  make it more difficult or costly for us to obtain financing for our operations or investments or to refinance our debt in the future;

 

·                  impair the financial condition of some of our customers, suppliers or counterparties to our derivative instruments, thereby increasing customer bad debts or non-performance by suppliers or counterparties;

 

·                  decrease the value of certain of our investments; and/or

 

·                  impair the financial viability of our insurers.

 

***New projects that have started up and others that are expected to reach the market in the next years may adversely affect our competitiveness.***

 

Market players have concluded the new pulp production capacity installations in South America and Asia. Better than expected demand and some adjustments in the supply base, with closures of old and inefficient capacities, supported the balance of market fundaments. It is important to note, however, that there is a risk that the installation of new capacities could result in a possible loss of market share, reduction of pulp prices and shortage of raw materials resulting in increase in wood and others input prices. Therefore, our results of operations and financial condition could be adversely affected.

 

***We may not be able to adjust production volume in a timely or cost-efficient manner in response to changes in demand.***

 

If we have to operate at significant idle capacity during periods of weak demand, we may be exposed to higher unit production costs since a significant portion of our cost structure is fixed in the short-term due to the high capital intensity of pulp operations. In addition, efforts to reduce costs during periods of weak demand could be limited by labor regulations or previous labor or government agreements. Conversely, during periods of high demand, our ability to rapidly increase production capacity is limited, which could render us unable to satisfy demand for our products. If we are unable to satisfy excess customer demand, we may lose market share.

 

***Our consolidated indebtedness will require that a portion of our cash flow be used to pay the principal and interest with respect to that indebtedness.***

 

As of December 31, 2015, our total consolidated indebtedness amounted to R$12,744 million, of which 91.6% represented long-term indebtedness.

 

The level of our indebtedness could have important consequences to the holders of our ADSs, including the following:

 

·                  the debt service requirements of our indebtedness could make it more difficult for us to make payments of dividends and other distributions to our shareholders, including the holders of our ADSs;

 

·                  Investment in pulp production requires a substantial amount of funds in order to form forests, maintain or production capacity, build infrastructure and preserve the environment. This need for significant capital is an important source of financial risk for the pulp industry. Our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements or other purposes could be limited;

 

·                  a portion of our cash flow from operations will need to be dedicated to the payment of principal and interest on our indebtedness and may not be available for other purposes;

 

·                  our level of indebtedness could limit our flexibility in planning for, or reacting to changes in, our business; and

 

·                  our level of indebtedness could make us more vulnerable in the event of a downturn in our business.

 

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***Our exports expose us to political and economic risks in foreign countries.***

 

Our sales outside Brazil accounted for 91%, 91% and 92% of our total consolidated net revenues during the years ended December 31, 2015, 2014 and 2013, respectively. Our exports, primarily to Europe, North America and Asia, expose us to risks not faced by companies operating solely in Brazil or any other single country. For example, our exports may be affected by import restrictions and tariffs, other trade protection measures and import or export licensing requirements.

 

Additionally, the international pulp industry is highly competitive. Certain of our competitors may have greater financial strength and access to cheaper sources of capital, and consequently have the ability to support strategic expenditures directed to increase their market share.

 

Our future financial performance will depend significantly on economic conditions in our principal export markets. Other risks associated with our international activities include:

 

·                  significant fluctuations in global demand for pulp products, which could impact our sales, operating income and cash flows;

 

·                  the entrance of new pulp producers or mergers and acquisitions between existing producers, which could limit our competitiveness in the market;

 

·                  the inability to successfully continue to expand our production capacity at the same pace as our competitors could negatively affect our market share;

 

·                  the deterioration of global economic conditions could impair the financial condition of some of our customers, suppliers or counterparties to our derivative instruments, thereby increasing customer bad debts or non-performance by suppliers or counterparties;

 

·                  the downward pressure on pulp prices may affect our profitability;

 

·                  changes in foreign currency exchange rates (against U.S. Dollar) and inflation in the foreign countries in which we operate;

 

·                  exchange and international trade controls;

 

·                  changes in a specific country’s or regions economic conditions;

 

·                  crisis in financial markets and the threat of a global economic slowdown;

 

·                  cultural differences; such business practices;

 

·                  adverse consequences deriving from changes in regulatory requirements, including environmental rules, regulations and Certification requirements;

 

·                  difficulties and costs associated with complying with, and enforcing remedies under, a wide variety of complex international laws, treaties, and regulations;

 

·                  adverse consequences from changes in tax laws; and

 

·                  logistics costs, disruptions in shipping or reduced availability of freight transportation.

 

While we attempt to manage certain of these risks through the use of risk management programs, it cannot and does not fully eliminate these risks. An occurrence of any of these events may negatively impact our ability to transact business in certain existing or developing markets and have a material adverse effect on our business.

 

***We are subject to regulatory risk associated with our international operations.***

 

Fibria is subject to local, regional and international laws and regulations in such diverse areas as product safety, product claims, trademarks, competition, employee health and safety, the environment, corporate governance, listing and disclosure, employment and taxes.

 

Failure to comply with laws and regulations could expose Fibria to civil and/or criminal actions leading to damages, fines and criminal sanctions against us and/or our employees with possible consequences for our corporate reputation.

 

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***Exchange rate instability may adversely affect our financial condition and results of operations and the market price of our shares and ADSs.***

 

Our production costs and operating expenses are substantially denominated in Brazilian *Reais* and most of our revenue and some assets are denominated in U.S. Dollars. In addition, 90% of our total debt, including swap transactions, is denominated in U.S. Dollars. As a result, exchange rate instability may adversely affect our financial condition and results of operations. It may also affect the amount of dividends we can distribute to our shareholders, including the holders of our ADSs and the market price of our shares and ADSs.

 

In September 2011, the worsening crisis in the Eurozone caused the sudden appreciation of the U.S. Dollar against the *Real.* As a result, the U.S Dollar appreciated by 12.6% against the *Real* in 2011. In 2012, the Brazilian Central Bank intervened several times to protect the *Real* from overvaluation. As a result, in 2012 the U.S Dollar appreciated by 8.9% against the *Real*. In 2013, the positive outlook of a recovering economy in the US and in the Eurozone caused a rapid depreciation of several Emerging Markets currencies, including the *Real*. As a result, in 2013 the U.S Dollar appreciated by 14.6% against the *Real*. In 2014, mainly as a result of Brazil’s macroeconomics scenario and general global uncertainties, the U.S Dollar appreciated by 13.4% against the *Real*. In 2015, the worsening in Brazil’s economic, political and fiscal conditions resulted in the rating agencies S&P, Fitch and Moody’s downgrading the Brazil sovereign rating below investment grade. As a result the U.S Dollar appreciated by 47% against the Real. See item 11. Quantitative and Qualitative Disclosures About Market Risk.

 

***Our business may be adversely impacted by risks related to hedging activities.***

 

We regularly enter into currency hedging transactions using financial derivatives instruments, through future contracts, options and swaps, in accordance with our Market Risk Management Policy. Hedging transactions aim, among others, to (1) protect our revenue (which is primarily denominated in U.S. Dollars) when converted to Brazilian *Reais*(our functional currency); (2) convert part of our debt which is denominated in Brazilian *Reais* into U.S. Dollars; (3) swap floating interest rates of our debt to fixed interest rates; and (4) swap floating monetary variation of our debt to fixed rate.

 

We account for our derivative instruments at fair value, in accordance with IFRS. The fair value of such instruments may increase or decrease due to fluctuations in currency exchange rates, interest rates, among others, prior to their settlement date. As a result we may incur unrealized losses due to these market risks factors. These fluctuations may also result from changes in economic conditions, investor sentiment, monetary and fiscal policies, the liquidity of global markets, international and regional political events,   acts of war, terrorism, among others.

 

In the event the Company ceases undertaking hedging transactions to the extent necessary, the Company may be exposed to commodity price and exchange and interest rate risks. As a result, the Company’s financial performance could be adversely affected.

 

***We may be adversely affected by the imposition and enforcement of more stringent environmental regulations that would******require us to spend additional funds***. ***Furthermore, violations of environmental law, regulations and authorizations could result in significant penalties that could materially adversely affect our results of operations and financial condition.***

 

Brazilian environment regulation applicable to forestry assets and to production operations is complex because they encompass federal, state and municipal regulations which involve different requirements and restrictions for each location where the Company operates. As such, the Company can be obligated, among other requirements, to obtain specific permits issues by governmental authorities. The requirements of the laws and regulations that cover these permits can increase the operating costs in order to limit or adjust effects or potential effects on the environment or the health of the Company’s employees.

 

Furthermore, violations of those laws, regulations and authorizations could result in administrative, civil or criminal penalties for the Company, its management and its employees. The administrative and criminal penalties assessed in the case of non-compliance with environmental legislation are applied independently of the obligation to repair any eventual environmental damage that results. On the civil side, entities that are proven to have contributed to the harm can be held liable for its remediation, which could result in substantial costs for the Company. As a consequence, when the Company engages third parties to act in connection with its operations, such as final disposal of waste, it can be held liable for eventual environmental damage cause by the these third parties.

 

Administrative infractions can result in substantial fines, suspension of operations, suspension of operating permits and imposition of restricted rights (such as barring entering into contracts with public entities, credit restriction, among other), in addition to criminal penalties for the Company.

 

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Failure to fulfill these laws, rules and authorizations also can result in the loss of certifications of forestry managements— Forest Stewardship Council® (FSC®) and Cerflor/Programme for the Endorsement of Forest Certification (PEFC) — and the certification of environmental management — ISO 14001 — resulting in restrictions on the export of cellulose.

 

In addition, environmental laws and regulations in certain countries may be more stringent than the ones we are subject to in Brazil, which may lead to such countries imposing trade related sanctions against Brazil or our industry. Furthermore, our limited ability to comply with more stringent foreign environmental laws and regulations may prevent us from seeking lower financing cost from foreign governmental related or multilateral development organizations, which may condition future financing on our compliance with more stringent environmental laws and regulations.

 

***Actions by federal or state legislatures or public enforcement authorities may adversely affect our operations.***

 

In the past, the State of Espírito Santo, where our Aracruz mill is located, has enacted laws to restrict the planting of eucalyptus forests for purposes of pulp production. Although injunctive relief against those state laws has been obtained, and new state legislation has revoked them, there can be no assurance that similar laws will not be enacted in the future which would impose limitations or restrictions on planting eucalyptus in the region where we operate.

 

***We may be materially adversely affected if operations at the transportation, storage, distribution and port facilities we own or utilize were to experience significant interruption.***

 

Our operations are dependent upon the uninterrupted operation of transportation, storage, distribution and port facilities that we own or utilize. Operations at these facilities could be partially or completely shut down, temporarily or permanently, as a result of any number of circumstances that are not under our control, such as:

 

·                  catastrophic events;

 

·                  strikes or other labor difficulties;

 

·                  other disruptions in means of transportation; and

 

·                  suspension or termination of concessions granted to us or to our commercial partners or independent contractors relating to the right to provide a specific service.

 

Any significant interruption at these facilities or inability to transport products to or from these facilities (including through exports) or to or from our customers for any reason may materially adversely affect us.

 

***Our insurance coverage may be insufficient to cover our losses.***

 

Our insurance may be insufficient to cover losses that we might incur. We have comprehensive insurance with leading insurers to cover damages to our facilities caused by fire, general third-party liability for accidents and operational risks, and international and domestic transportation. We do not maintain insurance coverage against any risks related to our forests, such as caused by pests and diseases, fire or drought. The occurrence of losses or other damages not covered by insurance or that exceed our insurance limits could result in unexpected additional costs and shortage of wood supply to our mills. “See Item 4. Information on Fibria — B. Business Overview — Insurance.”

 

***We face significant competition in some of our lines of business, which may adversely affect our market share and******profitability***.

 

The pulp industry is highly competitive. In the international pulp market, certain of our competitors may have greater financial strength and access to cheaper sources of capital, and consequently have the ability to support strategic expenditures directed to increase their market share. Our market share may be adversely affected if we are unable to successfully continue to expand our production capacity at the same pace as our competitors.

 

In addition, most markets for pulp are served by several suppliers, often from different countries. Many factors influence our competitive position, including mill efficiency and operating rates and the availability, quality and cost of wood, energy, water, chemicals, logistics and labor, and exchange rate fluctuations. Some of our competitors may have greater financial and marketing resources, and greater breadth of product offerings than we do. If we are unable to remain competitive with these producers in the future, our market share may be adversely affected.

 

In addition, downward pressure on the prices of pulp by our competitors may affect our profitability.

 

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***Delays in the expansion of our facilities or in building new facilities may affect our costs and results of operations.***

 

As part of our strategy to increase our international market share and improve our competitiveness through greater economies of scale, we may expand our existing production facilities or build one or more production facilities. We are currently expanding our facilities at Três Lagoas Unit through a brownfield project called Horizonte 2 with a nominal production capacity of 1.85 million metric tons, including the creep capacity of 100 thousand tons. The project is scheduled to start up in the fourth quarter of 2017 and it is currently on time and on budget. For further details please see “Item 4. D —Expansion. Horizonte 2 Project”. The expansion or construction of a production facility involves various risks. These risks include engineering, construction, integration with the existing mill on brownfield projects, regulatory and other significant challenges that may delay or prevent the successful operation of the project or significantly increase our costs. Our ability to complete successfully any expansion or new construction project on time is also subject to financing and other risks.

 

We may be adversely affected because:

 

·                  we may either not be able to complete any expansion or new construction project on time or within budget or be required by market conditions or other factors to delay the initiation of construction or the timetable to complete new projects or expansions;

 

·                  our new or modified facilities may not operate at designed capacity or may cost more to operate than we expect;

 

·                  we may not be able to sell our additional production at attractive prices; and

 

·                  we may not have the cash or be able to acquire financing to implement our growth plans; and

 

·     we may have a negative impact on the existing mill that can result on operational instability.

 

***Any downgrade in our credit ratings could adversely affect the availability of new financing and increase our cost of capital.***

 

In late 2008 and early 2009 Fitch, Moody’s and Standard & Poor’s  reduced our rating to BB+/Negative, Ba1/Negative and BB/Negative, respectively. On October 13, 2009, Fitch further reduced our rating to BB/Stable. After the announcement of the sale of Conpacel and KSR in December 2010 (See Item 4. Information on Fibria — A. History and Development of Fibria) our rating outlook was changed from Stable to Positive by both Fitch and Moody’s. In March 2011, Fitch raised our rating to BB+/Stable. In November and December 2011, respectively, S&P and Moody’s both revised the outlook from positive to stable due to a slower deleverage path. In February 2012, Fitch affirmed Fibria’s rating at BB+/Stable based on the expectation that we will lower debt and leverage during 2012. In February 2013 Fitch changed the rating outlook for Fibria to positive from stable. In March 2013 S&P upgraded Fibria’s rating from BB/positive to BB+/stable. In September 2013 Moody’s changed our outlook from stable to positive. In February 2014 Fitch Ratings upgraded our credit rating to BBB- with a stable outlook, thereby achieving Investment Grade status for this agency. In March 2014 S&P revised our credit rating outlook from stable to positive. In April 2015, S&P upgraded our rating to BBB- with a stable outlook and in November 2015, Moody’s upgraded our rating to Baa3 with a stable outlook, giving us the status of an Investment Grade company for the three rating agencies. S&P and Fitch downgraded Brazil’s sovereign rating from BBB- to BB+ in September 2015 and December 2015, respectively, and also in December 2015 Moody’s placed Brazil’s sovereign rating Baa3 for downgrade.  In February 2016, S&P downgraded Brazil’s sovereign rating from BB+ to BB with a negative outlook. After the downgrade actions on Brazil’s sovereign ratings, S&P, Moody’s and Fitch have reaffirmed their BBB-/stable and Baa3/stable ratings for Fibria.

 

The global scale ratings currently assigned to our foreign currency debt are BBB-/Stable by Fitch, BBB-/Stable by S&P and Baa3/Stable by Moody’s. If our ratings were to be downgraded by the rating agencies due to any external factor (which could include a downgrade of the Brazilian sovereign rating), our own operating performance and/or increased debt levels, our cost of capital may increase. Any downgrade could also negatively affect our operating and financial results and the availability of future financing.

 

***Our financing agreements include important covenants. Any default arising from a breach of such covenants could have a material adverse effect on us. In the event of a breach of such covenants, or for other factors affecting our financial condition, we may not be permitted to pay, or elect not to pay dividends.***

 

We are party to several financing agreements that require us to maintain certain financial ratios or to comply with other specific covenants. These covenants and restrictions, some of which are subject to certain important exceptions, include among others:

 

·                  limitations on making certain restricted payments;

 

·                  limitations on entering into certain transactions with affiliates;

 

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·                  limitations as to mergers or consolidations with any other person or selling or otherwise disposing of all or substantially all of our assets;

 

·                  the maintenance of maximum net debt to Adjusted EBITDA ratios; and

 

·                  the maintenance of minimum debt service coverage ratios.

 

Any default under the terms of our financing agreements that is not waived by the affected creditors may result in a decision by such creditors to accelerate the outstanding balance of the relevant debt. This may also result in the foreclosure on collateral and accelerate the maturity of debts under other financing agreements due to cross acceleration provisions. Our assets and cash flow may be insufficient to pay the full outstanding balance under such financing agreements, either upon their scheduled maturity dates or upon any acceleration of payments following an event of default. If such events were to occur, our financial condition would be adversely affected.

 

Defaults under the terms of our financing agreements may result in our inability to pay dividends.  In addition, in accordance with its bylaws, the Company should pay its shareholders 25% of its adjusted annual net income as a compulsory dividend.  The net income can be capitalized, used to compensate for a loss or even retained, as contemplated by Law 6,404/76, and therefore not be made available for payment of dividends.  The Company can elect to not pay a dividend to its shareholders in its fiscal year if its management demonstrates, and if the general shareholders’ meeting approves, if that such payment would be inadvisable given the financial condition of the Company.

 

***Unfavorable outcomes in litigation may negatively affect our results of operations, cash flows and financial******condition.***

 

We are involved in numerous tax, civil and labor disputes involving significant monetary claims.

 

In December 2012, a tax assessment in the amount of R$1.7 billion (see Note 24 to our 2015 Financial Statements) was issued by the Brazilian Federal Tax Authority, or RFB, against us, with respect to Corporate Income Taxes (Imposto de Renda Pessoa Jurídica), or IRPJ, and Social Contribution on Net Income (Contribuição Social Sobre o Lucro Líquido), or CSLL taxes as a result of an agreement signed between Fibria (on that occasion VCP) and International Paper. The subject matter of which was the exchange of industrial and forestry assets between the two companies. We filed an appeal against this decision. See note 24 to our 2015 consolidated financial statements.

 

In October 2013, a tax assessment in the amount of R$271 million, was issued by the RFB against us with respect to IRPJ and CSLL, during the period from 2010 between Fibria Trading International — FTI and Fibria. See note 24 to our 2015 consolidated financial statements.

 

In June 2014, a new tax assessment in the amount of R$272 million, was issued by the RFB against us, with respect to IRPJ, and CSLL, during the period from 2010, between Fibria Trading International — FTI, NORMUS and Fibria. See note 24 to our 2015 consolidated financial statements.

 

In October 2014, a new tax assessment in the amount of R$73 million, was issued by the RFB against us, with respect to IRPJ, and CSLL, on the earnings from investment in offshore subsidiaries during the period from 2009, between VCP Overseas Holding Kft. and Normus in 2009. We filed an appeal with the Brazilian Federal Revenue Service. See note 24 to our 2015 consolidated financial statements.

 

In November 2015, a new RFB tax assessment in the amount of R$52 million, was issued for IRPJ and CSLL related to the taxation of the profits earned in the fiscal year of 2011 by FTI (Fibria Trading International) and FAF (Fibria International GMBH) in Brazil. (See note 24 to our 2015 consolidated financial statements).

 

In December 2015, a new RFB tax assessment in the amount of R$549 million was issued for IRPJ and CSLL, as a result of alleged non-deductibility of depreciation, amortization and depletion expenses, during the fiscal year 2010. (See note 24 to our 2015 consolidated financial statements).

 

Additionally, we are continuously being audited by the Brazilian Federal Tax Authority with regard to our international structure, merger and acquisition transactions and the use of tax credits related to our raw materials.

 

If unfavorable decisions are rendered in one or more of these lawsuits, we could be required to pay substantial amounts, which could materially adversely affect our results of operations, cash flows and financial condition.

 

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***Competition for land for use as eucalyptus forests for purposes of pulp production or for other crops, such as soy beans, sugar cane and other commodities, may affect any eventual expansion.***

 

Greater global demand for certain commodities, especially for grains, bio-fuel and animal protein, may impact our forestry operations in two ways:

 

·                  greater competition for land could impact its price. Grain, bio-fuel and animal protein production generally are economically superior to forestry activities, and as a result, prospective increases in land values may inhibit expansion of new forests.

 

·                  for the same reason, we may face difficulties in convincing third-party partners to begin or to expand eucalyptus production for use in the pulp industry.

 

***We conduct certain of our operations through joint ventures that we do not solely****** ******control.***

 

In October 2000, Aracruz acquired a 45% stake in Veracel, a joint venture that operates a pulp plant and forests in the south of the State of Bahia. In January 2003, Aracruz increased its equity interest in Veracel to 50%. Stora Enso OYJ, or Stora Enso, owns the remaining 50% of the equity interests in Veracel. We, as legal successor by the merger with Aracruz, and Stora Enso are party to a shareholders’ agreement with respect to Veracel, pursuant to which the parties have the right to nominate an equal number of board members. Under this shareholders’ agreement, each shareholder may be required to make capital contributions and, if any of the parties fails to comply with any of its obligations regarding Veracel’s funding needs in connection with a pre-agreed investment and capital contribution plan, the other shareholder shall have the right to require the defaulting shareholder to transfer all of its equity interests in Veracel to the other shareholder at a discounted market value.

 

In view of our shared control of Veracel as described above, we may not unilaterally make major decisions with respect to this entity. In addition, the existing contractual arrangement with respect to Veracel may constrain our ability to take actions that would be in our best interests, and may prevent us from refraining them from taking actions that would be adverse to our interests.

 

***If we are unable to manage potential problems and risks related to acquisitions, and alliances, our business and growth******prospects may suffer.******Some of our competitors may be better positioned to acquire other pulp business.***

 

We may, as part of our business strategy, acquire other businesses in Brazil or elsewhere or enter into alliances. Our management is unable to predict whether or when any prospective acquisitions or alliances will occur, or the likelihood of a material transaction being completed on favorable terms and conditions. Our ability to continue to expand successfully through acquisitions or alliances depends on many factors, including our ability to identify acquisitions and negotiate, finance and close transactions. Even if we complete future acquisitions, we could fail to successfully integrate the operations, services and products of any acquired company. If we attempt to engage in future acquisitions, we would be subject to certain risks, including that:

 

·      we could fail to select the best partners or fail to effectively plan and manage any alliance strategy;

 

·      the acquisitions could increase our costs;

 

·      our management’s attention could be diverted from other business concerns; and

 

·      we could lose key employees of the acquired company.

 

Our failure to integrate new businesses or manage new alliances successfully could adversely affect our business and financial performance. Furthermore, the global pulp and paper industry is undergoing consolidation, and many companies compete for acquisition and alliance opportunities in our industry. Some of our competitors have greater financial and other resources than we do. This may reduce the likelihood that we will be successful in completing acquisitions and alliances necessary for the expansion of our business. In addition, any major acquisition we consider may be subject to regulatory approval. We may not be successful in obtaining required regulatory approvals on a timely basis or at all.

 

***The loss of certain of our customers or their ability to pay us could cause a significant impact on our results of operations, cash flows and financial condition.***

 

Our three largest customers represented 54% of our net revenue in 2015. Although such sales are supported by long-term contracts, if we are unable to replace the sales volumes represented by any of these important customers, the loss of any of these customers could have a material adverse effect on our results of operations, cash flows and financial condition.

 

As part of its relationship with its clients, the Company grants payment terms in accordance with its internal evaluation as to the capacity of payment of each client. In the event of a deterioration in such payment capacity, where the credit risk is not covered by

 

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trade credit insurance or other credit enhancement, such as letters of credit, including changes that result from the economic, political or regulatory situation of the Company’s clients at any time, such clients capacity to meet their payment obligations could be adversely affected. If a significant number of the Company’s clients become incapable of paying, the Company’s results of operations, including its cash flow, could be materially impacted.

 

***We may be subject to labor disputes from time to time that may adversely affect us.***

 

Most of our employees are represented by unions or equivalent bodies and are covered by collective bargaining or similar agreements which are subject to periodic renegotiation. In addition, we may not successfully conclude our labor negotiations on satisfactory terms, which may result in a significant increase in the cost of labor or may result in work stoppages or labor disturbances that disrupt our operations. Any such cost increases, work stoppages or disturbances could materially adversely affect us.

 

***Social movements and the possibility of expropriation may affect the normal use of, damage, or deprive us of the use of or fair value of, our properties.***

 

Activist groups in Brazil advocate land reform and property redistribution by invading and occupying rural areas. Fibria has been working alongside the Landless Workers’ Movement (or MST), the Federal Land Reform Agency (INCRA) and the government of the State of Bahia, and have agreed to design and implement an agroforestry production and settlement model project in 2011. In 2012, the project was launched, benefiting hundreds of families in areas occupied by the MST. We cannot assure that our properties will not be subject to invasion or occupation by these or other activist groups. A land invasion or occupation could materially impair the normal use of our lands or have a material adverse effect on our results of operations, financial condition or the value of our common shares.

 

In addition, our land may be subject to expropriation by the Brazilian government. Under Brazilian law, the federal government may expropriate land that is not in compliance with mandated local “social functions”, including rational and adequate exploitation of land, adequate use of available natural resources, preservation of the environment, compliance with labor laws, etc. If the Brazilian government expropriates any of our properties, our results of operations may be adversely affected to the extent that the government’s compensation proves inadequate. Moreover, we may be forced to accept public debt bonds, which have limited liquidity, instead of cash as compensation for expropriated land.

 

***Our controlling shareholders have entered into a Shareholders ́Agreement which regulates their power to control us.***

 

We are jointly controlled by Votorantim S.A. (current corporate name of Votorantim Industrial S.A.) and BNDESPar. Our controlling shareholders have entered into the First Amendment to the Shareholders Agreement dated October 29, 2014 that regulates their power, including the power to:

 

·                  elect some members of our Board of Directors; and

 

·                  determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations and dispositions and the timing and payment of any future dividends.

 

Votorantim S.A. and BNDESPar have entered into the First Amendment to the shareholders’ agreement dated October 29, 2014 under which the approval of certain matters will depend on the affirmative vote of BNDESPar. See “Item 10. Additional Information — C. Material Contracts — Shareholders’ Agreement of Fibria”.

 

In addition, BNDES was the creditor with respect to approximately 15% of our consolidated indebtedness as of December 31, 2015 and we expect to continue to obtain loans from BNDES. As one of our significant shareholders and the subsidiary of one of our important creditors, BNDESPar may exercise a significant influence over our business and corporate decisions, and its actions may be influenced by the policies of the Brazilian federal government, which may conflict with the interest of our shareholders and holders of our ADSs.

 

We currently engage in, and expect in the future to engage in, commercial and financial transactions, from time to time, with our controlling shareholders or their affiliates. Commercial and financial transactions between our affiliates and us create the potential for, or could result in, conflicts of interests. For a discussion of certain related party transactions, see “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions.”

 

***An impairment of goodwill or other intangible assets would adversely affect our financial condition and results of operations.***

 

As a result of the Aracruz Acquisition, we have recognized R$4,230 million of goodwill and have recorded several intangible assets from the Aracruz business (including database, patents, chemical supplier and other supplier relationships) with a fair value of

 

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R$779 million at the acquisition date (R$230 million as of December 31, 2015 and R$291 million as of December 31, 2014). Under IFRS, goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment annually or more often if an event or circumstance indicates that an impairment loss may have been incurred. Other intangible assets with a finite life are amortized on a straight-line basis over their estimated useful lives and reviewed for impairment whenever there is an indication of impairment. As of December 31, 2015 we performed our annual impairment test of the Goodwill, which is allocated in Cash Generating Units (CGUs) Aracruz, Portocel and Veracel. In addition, as required by IAS 36, when the book value of the net assets of the Company exceeds its market capitalization, an impairment analysis of long-lived assets must be performed. As a result, we performed an impairment analysis of our long-lived assets. The recoverability test did not result in the need to recognize any impairment of goodwill and fixed assets. See “Item 5. Operating and Financial Review and Prospects — B. Discussion of Critical Accounting Policies” and Note 37 to our 2015 consolidated financial statements.

 

Changes in the value of the key assumptions used in the impairment tests could result in impairment charges in the future that could be significant and that could have an adverse effect on our results of operations and financial condition.

 

***New laws and regulations relating to climate change and changes in existing regulation, as well as the physical effects of climate change, may result in increased liabilities and increased capital expenditures, which could have a material adverse effect on us.***

 

In 1997, an international conference on global warming concluded with an agreement known as the Kyoto Protocol, which has formed the basis for a range of international, national and sub-national proposals and regulations focusing on greenhouse gas reduction based on historical responsibility. . In 2009, Brazil among other countries adopted voluntary targets. Brazil had committed to cut its emissions below projected levels in 2020 and to set domestic targets for curbs on deforestation in its Amazon and Cerrado regions. In December of 2015, countries signed a new global accord, the Paris Agreement, adopting Nationally Determined Contributings (NDCs) as the actions to reduce their emissions after 2020. The Brazilian Intended NDC states increment of biofuels and other renewables in the national energy mix, zero illegal deforestation, reforestation and forest restoration and native forest management enhancement.

 

Although we cannot predict how future climate legislation or regulatory initiatives, whether international or local, or when will be adopted, Fibria has been recognizing these risks, and the Paris Agreement scenario does not substantially change them. We expect that there will be increased regulation related to greenhouse gases and climate change that may materially affect us, directly through increased capital expenditures and investment to comply with such laws, and indirectly, by affecting prices for transportation, energy and other inputs. In addition, the physical effects of climate change also may materially and adversely affect our operations, for example by changing air temperature and water levels, and subjecting us to unusual or different weather-related risks.  Both the new laws and regulations related to climate change, changes in existing regulations and the physical effects of climate change could result in increased liabilities and capital expenditures, all of which could have a material adverse effect on our business and results of operations.

 

***Various other risks could have a material adverse effect on our operational and financial results.***

 

Our operations are subject to various other risks affecting our forests and manufacturing processes, including fire, drought, disease, strikes, port closings, shipping costs, electrical failures and factory explosions, and limited supply, increased cost and poor quality of inputs in our manufacturing process such as chemicals, any of which could have a material adverse effect on our operational and financial results.

 

**Risks Relating to Brazil**

 

***Brazilian economic and political conditions and perceptions of these conditions in the international market have a direct impact on our business and our access to international capital and debt markets, and could adversely affect our results of operations and financial condition***.

 

Our production operations are conducted in Brazil but our pulp is mainly sold to international customers in Europe, North America and Asia. Accordingly, our financial condition and results of operations are in some ways dependent upon economic and political conditions in Brazil. The general cost of human capital, the cost of land (renting or buying) and the other general local supplies are points of concern. Nonetheless, future developments in the Brazilian economy may affect Brazil’s growth rates and, consequently, such supplies. As a result, these developments could impair our business strategies, results of operations or financial condition. The Brazilian government tries to limit unusual market conditions, like supply prices, abnormal speculation and the foreign exchange-rates, frequently intervening in the Brazilian economy and occasionally makes material changes in policies and regulations. Our business, financial condition and results of operations may be adversely affected by changes in government policies as well as general economic and political factors, including but not limited to:

 

·                  currency fluctuations;

 

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·                  interest rates;

 

·                  liquidity of domestic capital and lending markets;

 

·                  availability of experienced labor;

 

·                  policies impacting Brazil’s logistical infrastructure;

 

·                policies affecting Brazil’s forestry sector;

 

·                  tax policy;

 

·                  exchange control policies;

 

·                  other political, diplomatic, social and economic developments in or affecting Brazil; and

 

·                  inflation

 

Brazil has historically experienced high rates of inflation. Inflation, as well as government efforts to combat inflation, had significant negative effects on the Brazilian economy, particularly prior to 1995. Inflation rates were 5.9% in 2013,6.4% in 2014 and 10.67% in 2015, according to the Brazilian National Consumer Inflation Index (Índice Nacional de Preços ao Consumidor Amplo) or IPCA. Our cash production costs and operating expenses are substantially denominated in Brazilian *Reais* and tend to increase with Brazilian inflation because our suppliers and providers generally increase prices to reflect the depreciation of the currency. If the rate of Brazilian inflation increases more rapidly than any rate of appreciation of the U.S. Dollar, then, as expressed in U.S. Dollars, our operating expenses may increase. Inflation, actions to combat inflation and public speculation about possible additional actions also may contribute materially to economic uncertainty in Brazil and accordingly weaken investor confidence in Brazil, thus impacting our ability to access the international capital markets.

 

Historically, Brazil’s political scenario has influenced the performance of the Brazilian economy and political crises have affected the confidence of investors and the general public, which resulted in economic slowdown and heightened volatility in the securities issued abroad by Brazilian companies. Brazil’s gross domestic product, or GDP, in real terms, grew by 2.3% in 2013 and 0.1% in 2014, according to *Instituto Brasileiro de Geografia e Estatística* — IBGE, Brazil’s official statistics agency. In 2015, GDP had a downturn of 3.71%, according to the Focus Report estimates published by the Brazilian Central Bank.

 

Currently, Brazilian markets are experiencing heightened volatility due to the uncertainties derived from the ongoing *Lava Jato* investigation, being conducted by the Office of the Brazilian Federal Prosecutor, and its impact on the Brazilian economy and political environment. Members of the Brazilian federal government and of the legislative branch, as well as senior officers of large state-owned companies as well as privately held companies, have faced allegations of political corruption, since they have allegedly accepted bribes by means of kickbacks on contracts granted by the government to several infrastructure, oil and gas and construction companies. The profits of these kickbacks allegedly financed the political campaigns of political parties of the current federal government coalition that were unaccounted for or not publicly disclosed, and personally enriched the recipients of bribes under this bribery scheme. The potential outcome of these investigations is uncertain, but they have already had an adverse impact on the image and reputation of the implicated companies, and on the general market perception of the Brazilian economy. Brazil’s political scenario is further complicated by the ongoing impeachment proceedings against Brazil’s president, Dilma Rousseff.

 

We cannot predict whether such allegations will lead to further political and economic instability or whether new allegations against government officials will arise in the future. In addition, we cannot predict the outcome of any such allegations nor their effect on the Brazilian economy. Furthermore, future developments in policies of the Brazilian government and/or the uncertainty of whether and when such policies and regulations may be implemented, all of which are beyond our control, could have a material adverse effect on us.

 

***Changes in Brazilian tax laws may have an adverse impact on the taxes applicable to our business***

 

The Brazilian government frequently implements changes to tax regimes that may affect us and our customers. These include changes in prevailing tax rates and, occasionally, enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes.

 

Some of these changes may result in increases in our tax payments, which could adversely affect industry profitability and increase the prices of our products, restrict our ability to do business in our existing and target markets and cause our financial results to suffer. There can be no assurance that we will be able to maintain our projected cash flow and profitability following any increases in Brazilian taxes applicable to us and our operations.

 

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***We may be impacted by governmental actions affecting the Brazilian markets and economy.***

 

The Brazilian government has exercised and continues to exercise substantial influence over many aspects of the private sector. The Brazilian government, for example, could impose some restrictions for the export market, by creating export duties for any product, including our main source of revenues (market pulp), affecting the margins and the profitability of exporting companies. In addition, the Brazilian government through BNDES owns or controls many companies, including some of the largest in Brazil. For example, the BNDES, through its wholly-owned subsidiary company, BNDESPar, is a joint controlling shareholder of our Company together with Votorantim S.A., as per shareholder agreement terms, and so has historically been one of our important creditors.

 

***Fluctuations in interest rates could increase the cost of servicing our debt and negatively affect our overall financial performance.***

 

Our financial results are affected by changes in interest rates, such as the London Interbank Offered Rate (LIBOR), the Brazilian Interbank Deposit Certificate (*Certificado de Depósito Interbancário* known as CDI) and the Brazilian Long Term Interest Rate (*Taxa de Juros de Longo Prazo* known as or TJLP). The CDI rate has fluctuated significantly in the past in response to the expansion or contraction of the Brazilian economy, inflation control purpose, Brazilian government policies and other factors. The CDI rate was 14.14% p.a., 11.57% p.a. and 9.77% p.a. as of December 31, 2015, 2014 and 2013, respectively. The TJLP was reduced from 5.5% p.a. on June 27, 2012 to 5.0% p.a. on December 31, 2012 until December 31, 2014. After gradually increasing during 2015, the TJLP rate as of December 31, 2015 was 7.5% p.a.

 

A significant increase in interest rates, particularly TJLP or LIBOR, would have a material adverse effect on our financial expenses due to the fact that a significant part of our debt (BNDES loans and Export Prepayment Facilities) is linked to these rates. On the other hand, a significant reduction in the CDI rate could adversely impact the financial revenues derived from our investment activities since a relevant part of our cash is invested in Brazilian money market, linked to CDI. In order to mitigate these risks and benefit from the abnormal lower interest rates, we have contracted several swaps from LIBOR and TJLP to Pre Fixed rates. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk.

 

***Economic and market conditions in other countries, including in developing countries, may materially and adversely affect the Brazilian economy and, therefore, the market value of our ADSs.***

 

The market for securities issued by Brazilian companies is influenced by economic and market conditions in Brazil, and, to varying degrees, market conditions in other countries, including Latin American and developing countries. Although economic conditions are different in each country, the reaction of investors to developments in one country may cause the capital markets in other countries to fluctuate. Developments or conditions in other countries, including developing countries, have at times significantly affected the availability of credit in the Brazilian economy and resulted in considerable outflows of funds and declines in the amount of foreign currency invested in Brazil. It has also limited access to international capital markets, all of which may materially and adversely affect our ability to borrow funds at an acceptable interest rate or to raise equity capital when and if there should be a need for us to do so. The volatility in market prices for Brazilian securities has increased from time to time, and investors’ perception of increased risk due to crises in other countries, including developing countries, may also lead to a reduction in the market price of our ADSs.

 

***An electricity shortage and related electricity rationing may adversely affect our business and results of operations.***

 

Hydroelectric power is a major source of energy for Brazilian industry. Low levels of investment and below average rainfall have in the past resulted in low reservoir levels of critical hydroelectric capacity in Brazil’s southeast, central west and northeast regions. Alternative sources of power generation have often been delayed due to regulatory and other issues. During the period of 2000 and 2001, for example, the Brazilian government instituted a rationing and consumption reduction program to reduce electricity consumption from mid-2001 to early 2002. This program established limits on energy consumption by industrial, commercial and residential users.

 

In 2015, we generated internally approximately 117% of the electric energy requirements for our pulp production process. Of the total amount of thermal and electrical energy we self-generated, 90% was from renewable fuels, such as biomass and black liquor that are byproducts of the pulp production process, and 10% was from non-renewable fuels that we purchased, such as fuel oil and natural gas. Nonetheless, if Brazil experiences shortages in available electricity (whether due to hydrological conditions, infrastructure limitations or otherwise), similar or other policies may be put into place to limit or ration electrical power utilization. Although we believe we are adequately prepared with respect to energy since we are self-sufficient and even sell the overflow electric energy to the Brazilian grid, our sales may be adversely affected by the negative effect the energy shortage may have on the macroeconomic environment. In addition, we may also be adversely affected by the impact of the energy shortage on the activities of our main suppliers of raw materials. Any such shortage and related electricity rationing could have a material adverse effect on our business and results of operations.

 

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***Drought in some regions of Brazil, resulting in water scarcity and related rationing, may adversely affect our business and results of operations. Other impacts on water supply, such as environmental problems and regulatory restrictions, could adversely affect our business and result of operations.***

 

Some regions of Brazil are currently experiencing drought conditions, resulting in acute shortage of water and the implementation of rationing to control usage. Although we believe that not all of our operations will be affected by these conditions, certain of our units are located in the affected areas. Although our units are already very efficient is water use, we continue to improve the mill’s efficiency in water consumption and have defined a contingency plans for all the possible affected units, if required.  Nevertheless, we cannot assure that very severe droughts or governmental measures to address drought conditions will not have the effect of impacting our units’ operations, with the resulting adverse effect on our business and results of operations.

 

Other impacts on the water supply, such as the recent environmental catastrophe affecting the Rio Doce, or regulatory actions to limit access to water could have a significant and adverse effect on our business operations. For example, as a consequence of the mine tailings contamination of the Rio Doce, our Aracruz unit was required to suspend its use of water from that river for its operations for a short period of time. No impact was recorded, however, because the Aracruz Unit has a reservoir sufficient to sustain it for up to five months, which had at the time of the accident at least 90 days of water supply. Nonetheless, no assurance can be given that future environmental events or governmental regulatory action will not materially adversely affect the access to sufficient water for our operations.

 

**Risks Relating to Our Shares and ADSs**

 

***Exchange controls and restrictions on remittances abroad may adversely affect holders of our ADSs.***

 

One may be adversely affected if the Brazilian government imposes restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and, as it has done in the past, on the conversion of the *Real* into foreign currencies. These restrictions could hinder or prevent the conversion of dividends, distributions or the proceeds from any sale of shares or ADSs, as the case may be, into U.S. Dollars and the remittance of U.S. Dollars abroad. We cannot assure that the government will not take this type of or similar measures in the future. Holders of our ADSs could be adversely affected by delays in, or a refusal to grant, any required governmental approval for conversion of *Real* payments and remittances abroad in respect of the shares, including the shares underlying the ADSs. In such a case, our ADS depositary will distribute *Reais* or hold the *Reais* it cannot convert for the account of the ADS holders who have not been paid.

 

***Holders of our ADSs may face difficulties in serving process on or enforcing judgments against us and other persons.***

 

We are organized under and are subject to the laws of Brazil and all our directors and executive officers and our independent registered public accounting firm resides or is based in Brazil. Substantially all of our assets and those of these other persons are located in Brazil. As a result, it may not be possible for holders of the ADSs to effect service of process upon us or these other persons within the United States or other jurisdictions outside Brazil or to enforce against us or these other persons judgments obtained in the United States or other jurisdictions outside Brazil. Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain conditions are met, our ADS holders may face greater difficulties in protecting their interests due to actions by us, our directors or executive officers than would shareholders of a U.S. corporation.

 

***The relative volatility and illiquidity of the Brazilian securities markets may adversely affect holders of our ADSs.***

 

Investments in securities, such as our common shares or ADSs, of issuers from emerging market countries, including Brazil, involves a higher degree of risk than investments in securities of issuers from more developed countries. The Brazilian securities market is substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States. There is also significantly greater concentration in the Brazilian securities market than in major securities markets in the United States. These features may substantially limit the ability to sell the common shares underlying the ADSs at a price and time at which holders wish to do so. At December 31, 2015, the aggregate market capitalization of the 60 companies listed on the São Paulo Stock Exchange Index (Ibovespa) was equivalent to approximately U.S.$408 billion, and the ten largest companies listed on the São Paulo Stock Exchange Index represented approximately 62% of the market capitalization in the year.

 

In comparison, the 504 companies listed in the S&P 500 had a market capitalization of approximately U.S.$18 trillion as of December 31, 2015. A liquid and active market may never develop for our common shares or ADSs, and as a result, the ability of our ADS holders to sell at the desired price or time may be significantly hindered.

 

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***Holders of our ADSs may face difficulties in protecting their interests because we are subject to different corporate rules and regulations as a Brazilian company and our shareholders may have fewer and less well-defined rights.***

 

Holders of ADSs are not direct shareholders of our Company and are unable to enforce the rights of shareholders under our Bylaws and the Brazilian law. Our corporate affairs are governed by our Bylaws and the Brazilian law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, or elsewhere outside Brazil. Under Brazilian law, the rights of a holder of our common shares to protect its interests with respect to actions by us, our directors or executive officers may be fewer and less well-defined than under the laws of other jurisdictions.

 

Although insider trading and price manipulation are crimes under Brazilian law, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or the markets in some other jurisdictions. In addition, rules and policies against self-dealing or for preserving shareholder interests may be less well-defined and enforced in Brazil than in the United States and certain other countries, which may put holders of our common shares or ADSs at a potential disadvantage. In addition, the disclosure required of public companies in Brazil may be less complete or informative than that required of publicly-held companies in the United States or in certain other countries.

 

***Holders of our ADSs may not be able to exercise their voting rights.***

 

Holders of our ADSs may only exercise voting rights with respect to their underlying common shares in accordance with the provisions of the deposit agreement for our ADS program, or the Fibria Deposit Agreement. Under this Agreement, ADS holders may only vote by giving voting instructions to our Depositary. Because our Depositary appears on our share register and not the ADS holders, such holders are unable to exercise their right to vote without the representation of our Depositary unless they surrender their ADSs for cancellation in exchange for our common shares. In addition, pursuant to the Fibria Deposit Agreement, our Depositary will only notify our ADS holders of an upcoming vote and arrange to mail proxy cards to those holders if we request our Depositary to do so. Pursuant to our bylaws, the first call for a shareholders’ meeting must be published at least 15 days in advance of the relevant meeting, and the second call must be published at least eight days in advance of the meeting, in the case of insufficient quorum to approve the matters included in the first meeting. As a result, there may not be enough time for ADS holders to surrender their ADSs and withdraw underlying common shares, or for them to receive a proxy card in time to ensure that they can provide our Depositary with voting instructions. Our Depositary and its agents are not liable for failure to mail proxy cards in time for ADS holders to vote the common shares underlying their ADSs or to carry out voting instructions in the manner as instructed or at all. As a result, holders of ADSs may not be able to exercise the voting rights attached to the common shares underlying their ADSs.

 

***An exchange of ADSs for shares risks the loss of certain foreign currency remittance and Brazilian tax advantages.***

 

The ADSs benefit from the certificate of foreign capital registration, which permits our Depositary to convert dividends and other distributions with respect to common shares into foreign currency, and to remit the proceeds abroad. Holders of ADSs who exchange their ADSs for common shares will then be entitled to rely on the depositary’s certificate of foreign capital registration for five business days from the date of exchange. Thereafter, they will not be able to remit non-Brazilian currency abroad unless they obtain their own certificate of foreign capital registration, or unless they qualify under Resolution No. 2,689/00 of the National Monetary Council (CMN - *Conselho Monetário Nacional*), which entitles certain investors to buy and sell shares on Brazilian stock exchanges without obtaining separate certificates of registration. If holders of ADSs do not qualify under Resolution No. 2,689/00, they will generally be subject to less favorable tax treatment on distributions with respect to our common shares. There can be no assurance that the certificate of registration of our Depositary, or any certificate of foreign capital registration obtained by holders of ADSs, will not be affected by future legislative or regulatory changes, or that additional Brazilian law restrictions applicable to their investment in the ADSs may not be imposed in the future.

 

***Holders of our shares will be subject to, and holders of our ADSs could be subject to, Brazilian income tax on capital gains from sales of shares or ADSs.***

 

Brazilian Law No. 10,833/03 provides that gains on the disposition of assets located in Brazil by non-residents of Brazil, whether to other non-residents or to Brazilian residents, will be subject to Brazilian taxation. The common shares are expected to be treated as assets located in Brazil for purposes of the law, and gains on the disposition of common shares, even by non-residents of Brazil, are expected to be subject to Brazilian taxation. In addition, the ADSs may be treated as assets located in Brazil for purposes of the law, and therefore gains on the disposition of ADSs by non-residents of Brazil may also be subject to Brazilian taxation. Although the holders of ADSs outside Brazil may have grounds to assert that Law No. 10,833/00 does not apply to sales or other dispositions of ADSs, it is not possible to predict whether that understanding will ultimately prevail in the courts of Brazil given the general and unclear scope of Law No. 10,833/03 and the absence of judicial court rulings in respect thereto.

 

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***Holders of our ADSs may not be able to exercise the preemptive rights relating to the shares.***

 

Holders of our ADSs may not be able to exercise the preemptive rights relating to the common shares underlying their ADSs unless a registration statement under the U.S. Securities Act of 1933, as amended (the “Securities Act”) is effective with respect to the rights or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement with respect to the shares or other securities relating to these preemptive rights and we cannot assure holders of our ADSs that we will file any such registration statement. Unless we file a registration statement or an exemption from registration applies, holders of our ADSs may receive only the net proceeds from the sale of their preemptive rights by the depositary or, if the preemptive rights cannot be sold, the rights will be allowed to lapse.

 

***Judgments of Brazilian courts with respect to our shares will be payable only in Reais.***

 

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of the common shares, we will not be required to discharge our obligations in a currency other than *Reais*. Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than *Reais*may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the common shares or the ADSs.

 

**ITEM 4.  INFORMATION ON FIBRIA**

 

**A.**                                    **History and Development of Fibria**

 

We are incorporated under the laws of the Federative Republic of Brazil under the name Fibria Celulose S.A., as a publicly-held company with unlimited duration. We have the legal status of a stock corporation, operating under the Brazilian corporate law. Our headquarters and principal executive offices are located at Rua Fidencio Ramos, 302, Torre B, 3rd floor, 04551-010, São Paulo, SP, Brazil (telephone: 55 11 2138-4565). Our website address is www.fibria.com.br/ir. Information contained on our website is, however, not incorporated by reference in, and should not be considered as part of this annual report.

 

Our operations began in 1988 when the Votorantim Group, one of the largest privately held group of companies in Latin America, acquired Celpav Celulose e Papel Ltda., or Celpav, a pulp and paper producer based in the State of São Paulo. We began production in 1991 after expanding and modernizing our facilities. In September 1992, the Votorantim Group purchased Indústrias de Papel Simão S.A., or Papel Simão, which was listed on the BM&FBOVESPA. Celpav and Papel Simão subsequently merged and, in 1999, Papel Simão was renamed Votorantim Celulose e Papel S.A. On November 5, 2009 we adopted the corporate name Fibria Celulose S.A. and on December 31, 2009, we and Aracruz were merged to form Fibria (the surviving entity). See “Item 4. Information on Fibria — A. History and Development — The Aracruz Acquisition”.

 

On April 19, 2000, we completed a registered offering of 7,920,000 ADSs. Each ADS represented 500 preferred shares, and the ADSs were listed on NYSE, under the symbol “VCP.” Of the 7,920,000 ADSs being offered at that time, we sold 2,047,648 ADSs and certain of our shareholders sold the remaining 5,872,352 ADSs. Concurrently, 440,000,000 preferred shares were sold in Brazil.

 

Because VCP changed its name to Fibria on November 5, 2009, with the Aracruz Acquisition, the last trading day of VCP shares on the NYSE under the ticker symbol VCP was November 17, 2009. From November 18, 2009 on, the ticker symbol has changed to “FBR”.

 

We have grown and expanded our operations through the organic expansion of our pulp mills and paper production facilities, selective acquisition of equity interests in other pulp and paper companies and then streamlined our operations with the disposition of assets and lines of business we deemed not a part of our core business.

 

***Bahia Produtos de Madeira***

 

In 1998, as part of a strategy of diversification into other forest product businesses, Aracruz acquired Tecflor Industrial S.A or Tecflor, for the production of solid wood products. Tecflor was then renamed Aracruz Produtos de Madeira or APM. In 2001, APM sought to expand the presence of its Lyptus® brand of high-quality sawn wood in domestic and international markets and established a commercial partnership with the U.S. based Weyerhaeuser Co., or Weyco, one of the largest forestry companies in the world, for the exclusive distribution of Lyptus® in the North American markets. In October 2004, Aracruz sold two thirds of its shares in APM to Weyerhaeuser do Brasil Participações Ltda., a subsidiary of Weyco, for a total purchase price of U.S.$18.6 million. After the Aracruz Acquisition, APM was renamed Bahia Produtos de Madeira or BPM. We currently own 33.33% of the shares in BPM and have certain voting rights as set forth in the APM shareholders’ agreement. On July 31, 2014, we acquired 100% of the capital of WOP — Wood Participações Ltda., formerly Weyerhaeuser do Brasil Participações Ltda, for R$6,716 million, which held 66.67% of the capital of

 

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our associate Bahia Produtos de Madeira S.A. As from that date, the Company holds indirectly, 100% of the capital of Bahia Produtos de Madeira S.A.

 

***Acquisition of Interest in Ripasa***

 

In 2005, we purchased through a 50% joint venture with Suzano Bahia Sul Papel e Celulose S.A., or Suzano, the common and preferred shares of Ripasa S.A. Celulose e Papel or Ripasa. On March 31, 2005, we finalized the acquisition, through a 50% joint venture, of 77.59% (our interest — 38.80%) indirect interest in the voting capital and 46.06% (our interest — 23.03%) indirect interest in the total capital of Ripasa, for U.S.$275 million. In addition, a purchase option was executed for the option to purchase within six years common shares and preferred shares, totaling 22.41% of the voting stock and 13.45% of the total stock of Ripasa. We acquired our stake in these additional shares for R$298 million. At the time of this acquisition, Ripasa’s principal assets were the Americana pulp and paper mill and three other paper mills located in Embu, Cubatão and Limeira in the State of São Paulo.

 

In April 2006, Ripar, the joint venture between us and Suzano, was liquidated by dissolution and its only assets, the shares in Ripasa, were distributed equally to both us and Suzano.

 

In May 2006, the shareholders of Ripasa approved a corporate restructuring transaction in which the shareholders (other than us and Suzano) received shares of our Company, shares of Suzano and cash in exchange for their shares of Ripasa. In this transaction we issued 12,532,009 preferred shares to the former Ripasa shareholders. Following this transaction, we owned 50% of the share capital of Ripasa.

 

In March 2007, we sold our 50% interest in the paper mill located in Embu to Suzano for R$41.1 million. The Embu paper mill had an annual production capacity of 48 kilotons of cardboard. See “Item 4. Information on Fibria — A. History and Development of Fibria — Formation of Conpacel”.

 

In November 2007, we and Suzano sold our interests in the paper mills located in Cubatão and Limeira to MD Papéis for a total of R$122 million. The Cubatão paper mill had a production capacity of approximately 61 kilotons per year of graphic, editorial and special printing & writing papers. The Limeira paper mill had a production capacity of approximately 58 kilotons per year of cardboard.

 

***The Losango Project***

 

In 2005, we announced the beginning of the environmental licensing process for the implementation of a bleached eucalyptus pulp mill with an overall nominal capacity of 1.5 million tons of pulp per year to be built in the State of Rio Grande do Sul (named “The Losango Project”). As a result of the Aracruz Acquisition in 2009, we had a different portfolio of possible expansion projects, including two former Aracruz Units (Veracel II and a fourth pulp production line at the Aracruz Unit) and this together with the Três Lagoas Unit which started up in March 2009, were all brownfield projects. In view of that, we considered several alternatives for the Losango Project, including a full divestiture of the lands and forest. On June 30, 2011, Management approved the divestiture of the Losango project assets, and established a specific program to identify a potential buyer. As from June 30, 2011, we had classified the assets of the Losango Project as held for sale.

 

On September 10, 2012, we received and accepted a binding offer from CMPC Celulose Riograndense S.A. for the purchase of forestry assets and lands of Losango, consisting of approximately 100 thousand hectares of owned areas and nearly 39 thousand hectares of forestland of eucalyptus in these owned areas and in third parties leased areas, for a total amount of R$615 million. The transaction did not include the partnership program agreements developed in Losango areas, which will be maintained and honored by Fibria. On December 28, 2012 we announced the conclusion of the Purchase and Sale Agreement and the approval of the operation by the Economic Defense Council, the receipt of the first installment in the amount of R$470 million and the deposit of the second installment in the amount of R$140 million in an escrow account to be disbursed after the remaining applicable government approvals and other conditions precedent have been fulfilled. On November 2014, we received an additional R$7 million as an advance from CMPC. The remaining installment of R$5 million will be paid to us upon the effective transfer of existing contracts related to the asset and applicable government approvals.

 

The sale and purchase agreement establishes a period of 48 months, renewable at the option of CPMC for an additional 48 months, to obtain the required government approvals. If this approval is ultimately not obtained, we will be required to return to CMPC the amount of R$477 million paid to us, plus interest, and the escrow deposits made by CMPC will revert.

 

Since the signing of agreement with CMPC, we have taken action to obtain the approvals needed, such as the fulfillment of all conditions precedent, the partial renewal of the area operating license and filing the documentation required by the government agencies. We are confident that approval will be granted. However, the completion of the sale is not under our sole control and it depends on various government approvals, which have been slower than expected. Because of prolonged delays in obtaining all

 

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regulatory permits and licenses, at December 31, 2014, we reclassified the Losango Project as assets held for sale and liabilities from current asset/liabilities to long-term asset/liabilities.

 

We have concluded that these assets should remain classified as “assets held for sale” as non-current assets at December 31, 2015. The classification of these assets and liabilities on our Consolidated Balance Sheet as ‘held for sale’ has not had a significant effect on our Consolidated Statement of Profit and Loss.

 

***Asset Exchange with International Paper***

 

In February 2007, we transferred our Luiz Antonio pulp and paper mill and approximately 60,000 hectares of forest located in the State of São Paulo to International Paper Investments (Holland) B.V., a wholly owned subsidiary of International Paper, in exchange for the Três Lagoas pulp mill, which was then under construction, and approximately 100,000 hectares of surrounding forest. At the time that we received the Três Lagoas pulp mill, International Paper had fully funded the construction of this mill under a turn-key contract.

 

The Luiz Antonio mill had an annual production capacity of 410 kilotons of pulp and 355 kilotons of uncoated paper. As part of this transaction, we agreed to purchase 100 kilotons of BEKP per year on competitive terms for our use in other facilities under a long-term supply agreement.

 

In March 2009, we started operating our Três Lagoas mill located in the State of Mato Grosso do Sul. This mill successfully achieved its predicted capacity increasing our annual capacity by 1.3 million tons of market pulp. The total amount invested in this project was R$3,991 million. This amount includes disbursements made directly from Fibria, and the assets we received through our Asset Swap Agreement with International Paper.

 

As part of this transaction, we granted International Paper the right to construct, at its cost, up to two paper machines adjacent to, and integrated with, the Três Lagoas pulp mill. International Paper exercised this option with respect to one of the paper mills and has constructed a paper mill with annual production capacity of 200 to 250 kilotons of printing & writing paper adjacent to the Três Lagoas pulp mill. This paper mill commenced production in the first quarter of 2009. In connection with the exercise of this option, International Paper has entered into a long-term supply agreement under which we will provide International Paper with pulp and utilities and other services at rates based on our actual operating costs.

 

If International Paper exercises its right to build the second paper mill adjacent to the Três Lagoas pulp mill, the contract conditions follow the ones established for the first paper mill:

 

·                 we will be obligated to transfer certain parcels of real property to International Paper upon which the paper machine and ancillary facilities will be constructed; and

 

·                 International Paper will enter into a long-term supply agreement under which we will provide International Paper with pulp and utilities and other services at rates based on our actual operating costs.

 

In 2012, Fibria and International Paper agreed to extend International Paper’s option to build a new paper machine at the Três Lagoas unit. The new agreement gives International Paper the option to start-up the second paper machine between 2016 and 2018.

 

***Disposition of Mogi das Cruzes Paper Mill***

 

In May 2007, we sold our specialty paper mill located in the city of Mogi das Cruzes in the State of São Paulo to the controlling shareholder of Comércio e Indústria Multiformas Ltda. for R$57 million. The Mogi das Cruzes paper mill had an annual production capacity of 20 kilotons of industrial and specialty papers.

 

***Joint-venture with Ahlstrom***

 

In May 2007, we announced an intended joint venture agreement with the Finnish company Ahlstrom for the paper production in our facility located in Jacareí, State of São Paulo. The agreement was concluded in September 2007 and Ahlstrom acquired a 60% interest of this new joint venture for the paper assets in Jacareí mill, denominated Ahlstrom VCP Indústria de Papéis Especiais S.A. (“Ahlstrom VCP”), with an option to purchase the remaining 40% within two years.

 

In September 2008, pursuant to a series of options which were part of the agreement with Ahlstrom, we sold to Ahlstrom our remaining 40% equity interest in the joint-venture company for U.S.$42 million.

 

The parties also signed a long-term agreement whereby Fibria will supply eucalyptus pulp, utilities and other services to Ahlstrom VCP at the Jacareí mill at competitive prices, in order to partly support an annual production capacity of approximately 105,000 tons of uncoated wood-free papers.

 

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***Strategic Business Agreement (SBA) with Oji Paper***

 

In August 2007 we announced the execution of a long term SBA with Oji Paper Co. Ltd or Oji Paper. The agreement allowed us to further our offering of thermal paper technologies in Brazil and the region of Latin America, while allowing Oji Paper to expand its worldwide presence as a market leader in thermal technology. Through the execution of the SBA, we were able to draw on the technologies of Oji Paper as well as its global subsidiaries including the technology of Kanzaki Specialty Papers, Inc (KSP), Kanzan Spezialpapiere GmbH (Kanzan) and Oji Paper Thailand Ltd. (OPT). The SBA agreement coupled with the completion in 2008 of our Piracicaba mill expansion permitted the continuation of enhanced quality products and improved value to our customers.

 

On August 11, 2011, we signed a term sheet granting exclusivity to Oji Paper to negotiate the sale of the assets comprising the industrial plant and building, which constituted the complex known as the Piracicaba Unit. The closing of the sale was accomplished on September 29, 2011 for the agreed amount of U.S.$313 million. After the sale of Piracicaba, Fibria concentrates its operations on pulp production.

 

Due to the sale of Piracicaba to Oji Paper in September 2011, the SBA has been terminated and all royalties were duly paid by Fibria to Oji Paper.

 

***Formation of Conpacel***

 

In August 2008, Ripasa contributed its assets, other than the Americana pulp and paper mill, to Asapir Produção Florestal e Comércio Ltda., a newly formed company in which we and Suzano each owned 50% of the share capital.

 

In September 2008, Ripasa was transformed into Conpacel, a cost and production sharing unit, or consortium, in which we had an undivided 50% interest in the assets, liabilities and operations.

 

On December 21, 2010, we entered into a binding agreement with Suzano regarding the sale of our 50% interest in Conpacel, consisting of (1) a pulp and paper mill located in the city of Americana, State of São Paulo and (2) land totaling approximately 76 thousand hectares associated with the mill, and approximately 71 thousand hectares of forestland (of which 53 thousand hectares were owned and 18 thousand hectares were leased), for an aggregate purchase price of R$1,450 million. We consummated the sale on January 31, 2011. The Conpacel pulp and paper mill consisted of a pulp mill with an annual production capacity of 650 thousand tons and a paper mill with an annual production capacity of 390 thousand tons.

 

On December 21, 2010, we also entered into a binding agreement with Suzano for the sale of KSR, our paper distribution business unit, for an aggregate purchase price of R$50 million. The closing of the KSR sale occurred on February 28, 2011.

 

***Disposition of Guaíba Unit***

 

On October 7, 2009, we entered into a purchase and sale agreement with Empresas CMPC S.A. (CMPC) for the sale of (1) our pulp and paper mill located in the city of Guaíba, in the State of Rio Grande do Sul, (2) land totaling an area of approximately 212 thousand hectares of forestland associated with this mill (of which 32 thousand hectares were leased, under partnerships), (3) licenses and authorizations for a project to expand the pulp mill’s production capacity to approximately 1.85 million tons a year, including the creep capacity of 100 thousand tons, and (4) all of the share capital of Aracruz Riograndense, which we refer to collectively as the Guaíba Unit, for an aggregate purchase price of R$2,416 million, which generated a capital gain of R$33 million.

 

The Guaíba pulp and paper mill consisted of a pulp mill with an annual capacity of 450 kilotons and a paper mill with an annual capacity of 60 kilotons of printing & writing paper.

 

***Primary Public Offering of Common Shares***

 

On March 8, 2012, Fibria announced a primary public offering of common Company-issued shares. On April 30, 2012, 86,000,000 shares were issued at a unit price of R$15.83/share (U.S.$8.43/share) totaling R$1,361 million (without placement of a supplementary lot). The Public Offering was in accordance with the strategy to strengthen our capital structure.

 

***Disposition of forestry assets and land***

 

On March 8, 2012, as part of our strategy to strengthen our capital structure, we entered into a binding agreement with Fundo Florestas do Brasil (the “Fund”), through its subsidiary Caravelas Florestal S.A., for the sale of certain forests and land located in the south of Bahia, consisting of 16.2 thousand hectares of forests of eucalyptus for timber and pulp with an average annual production of 660 cubic meters of wood.

 

On June 29, 2012, Fibria signed a purchase and sale agreement for these assets in the total amount of R$235 million. A cash payment of R$200 million was received as an advance at the same date. As result of the due diligence process conducted by the purchaser, the sale price was adjusted to R$200 million. On December 7, 2012, the transaction was completed upon receipt of an acceptance notice signed by the buyer.

 

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On November 15, 2013, we entered into a Share Purchase Agreement and Other Covenants with Parkia, for the sale of certain land located in the states of São Paulo, Mato Grosso do Sul, Bahia and Espírito Santo, for a total of approximately 210 thousand hectares. On December 30, 2013, after obtaining the mandatory regulatory approvals as well as the completion of an audit by Parkia, the First Amendment to the Share Purchase Agreement and Other Covenants was concluded and signed, under which the total area subject to the transaction was adjusted to approximately 206 thousand hectares of lands, for the total amount of R$1,402,584 thousand, of which R$500,000 thousand has been received by the Company upon signing the agreement. The remaining balance, in the amount of R$902,584 thousand, was received by us during the first quarter of 2014, after the fulfillment of certain obligations and legal registers performed by the Company.

 

We may be entitled to an additional amount, not to exceed R$247,515 thousand, in three separated payments, each payment being up to one third of the amount, on the 7th, 14th and 21st anniversaries of the agreement. The entitlement to this amount is contingent on the appreciation of the land at each of such anniversaries, measured according to predefined measurement assumptions established in the agreement and adjusted by the variation of the IGP-M index through the actual payment dates.

 

We concurrently entered into forestry partnership agreements with Parkia for a period of up to 24 years, during which we will continue to manage our forests in the land sold. In exchange for the right to use the land by us for our forestry activities, the forestry partnership agreement grants to Parkia the right to receive 40% of the volume of wood (in cubic meters — m3), produced by us on the land during each harvesting cycle, limited to a “cap” contractually established. The transaction is in line with our strategy to strengthen our capital structure through debt prepayment. See Note No.1 (e) of our 2014 consolidated financial statements.

 

***Equity Investment — Ensyn***

 

In 2012, with an initial investment of U.S.$20 million, Fibria acquired 6.66% of Ensyn’s share capital and the option to invest additional US$10 million in its capital in the future. Furthermore, Fibria and Ensyn agreed to set up an equally-owned joint venture (F&E Technologies LLC), which was duly incorporated in Delaware for future investments in the production of liquid fuels and chemicals from biomass in Brazil. In 2014, Fibria entered into an Amendment to the 2012 Share Purchase Agreement, for the acquisition of approximately 3% of Ensyn’s capital for US$10 million, increasing our interest to 9.56% of Ensyn’s capital, and also providing us with certain rights which, if exercised, would allow us to subscribe additional US$5 million in Ensyn’s capital. In 2015, Fibria executed a new agreement for the purchase of approximately 3% of Ensyn’s capital, by the payment of US$5 million in exchange for the warrant issued in favor of the Company in 2014. As a result of the acquisition of additional capital in 2015, the Company holds 12.62% of the share capital of Ensyn and has the option to invest in the future additional US$10 million in its capital.

 

**Aracruz Acquisition and Related Transactions**

 

***Overview of Aracruz***

 

Prior to its acquisition, Aracruz was the world’s largest producer of market pulp according to Hawkins Wright, with an annual pulp production capacity of approximately 2.9 million tons as of December 31, 2008, including 50% of the annual pulp production capacity of Veracel. As of that date, Aracruz’s forestry base consisted of total forests of approximately 403.7thousand hectares located in three Brazilian states, including 50% of the forestry area of Veracel, consisting of approximately 258.5 thousand hectares of planted areas and approximately 145.2 thousand hectares of preserved areas.

 

Aracruz produced BEKP at its Aracruz and Guaíba pulp mills, and owned a 50% interest in Veracel, which owns and operates a pulp mill with an annual production capacity of 1.1 million tons as well as the related forestry assets. Aracruz produced uncoated paper at its Guaíba paper mill, which had an annual production capacity of 60 kilotons.

 

In 2008, Aracruz produced 3,106 kilotons of eucalyptus pulp, recorded consolidated net revenues from pulp sales of R$3,539 million, produced 56 kilotons of paper products and recorded consolidated net revenues from paper sales of R$115 million.

 

***Aracruz Acquisition***

 

In October 2001, we purchased 127,506,457 common shares of Aracruz, representing 28.0% of the voting share capital and 12.35% of the then total share capital interest in Aracruz in order to increase our exposure to the international pulp market, and we accounted for this investment under the equity method.

 

In January 2009, we acquired Arapar and São Teófilo, whose sole assets consisted of an aggregate of 12.35% of the total share capital, including 28.0% of the voting share capital, of Aracruz, for R$2,710 million. Under the purchase agreement, the purchase price was payable in six semi-annual installments without interest as follows: (1) R$500 million was paid in January 2009; (2) R$500 million was paid during the period of April, May and July 2009; (3) R$500 million was paid in January 2010; (4) R$500 million was paid in June 2010; (5) R$410 million was paid in January 2011; and (6) R$300 million was paid in July 2011.

 

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In April 2009, we purchased 12.35% of the total share capital, including 28.0% of the voting share capital, of Aracruz from the Safra Family for R$2,710 million. Under the purchase agreement for these shares, the purchase price was payable in six semi-annual installments without interest, except as noted below, as follows: (1) R$600 million was paid in cash in April 2009; (2) R$500 million was paid in January 2010; (3) R$500 million was paid in June 2010; (4) R$400 million was paid in October 2010, together with interest from July 2009 at the rate of 105% of CDI per annum; (5) R$410 million was paid in January 2011; and (6) R$300 million was paid in July 2011.

 

Following the Aracruz Acquisition, we owned 37.05% of the total share capital, including 84.00% of the voting share capital, of Aracruz. As a result of these purchases, in accordance with IFRS, we have fully consolidated the assets, liabilities and results of operations of Aracruz and its consolidated subsidiaries in our consolidated financial statements as from January 1, 2009.

 

***Capital Increase***

 

In April and May 2009, we issued and sold (1) 62.1 million common shares to our controlling shareholder, VID, for R$1,180 million, which was paid through the application of R$1,000 million of previously issued advances for capital increases and R$180 million in cash, (2) 43.6 million preferred shares to BNDESPar in exchange for 56.9 million common shares of Aracruz, representing 12.49% of the total share capital, including 5.51% of the voting share capital, of Aracruz, (3) 95.8 million preferred shares to BNDESPar for R$1,820 million in cash and (4) an aggregate of 9.3 million preferred shares to the Lorentzen, Moreira Salles, Almeida Braga and Safra families for an aggregate of R$180 million.

 

In connection with this capital increase, BNDESPar subscribed to debentures issued by VID that were convertible into common shares of our Company held by VID. Under these debentures, VID was obliged to invest the net proceeds it received from BNDESPar to purchase shares of our Company. On September 3, 2009, BNDESPar exercised its option to convert the VID Debentures. As a result of this conversion, VID transferred 30,526,316 common shares of our Company to BNDESPar, following which VID owned 35.2% and BNDESPar owned 41.8% of our total share capital, as of September 30, 2009.

 

***Conversion of VCP Preferred Shares to Common Shares***

 

In connection with the Aracruz Acquisition, we began to implement a corporate reorganization to simplify our capital structure. On May 30, 2009, in order to prepare our Company for the eventual migration of our common shares to the *Novo Mercado* listing segment of the BM&FBOVESPA, our shareholders approved the conversion of all of our outstanding preferred shares into common shares at the exchange ratio of 0.91 common shares for one preferred share. This conversion became effective on August 12, 2009, as a result of which we now have a single class of stock comprised solely of common shares. As a result of this conversion, the interests of VID and BNDESPar in the total share capital of our Company changed from 40.7% and 35.4%, respectively, to 35.2% and 40.8%, respectively.

 

***Mandatory Tender Offer***

 

On June 1, 2009, we announced the commencement of a mandatory tender offer for any and all outstanding common shares of Aracruz. The auction with respect to this tender offer took place on the BM&FBOVESPA on July 1, 2009. In the auction, we acquired 13,828,307 common shares of Aracruz, representing 3.04% of the outstanding common shares of Aracruz and 1.34% of the outstanding share capital of Aracruz, for an aggregate purchase price of R$236.6 million, payable according to the same payment schedule agreed to by the Safra family and the former shareholders of Arapar and São Teófilo in connection with the Aracruz Acquisition. Following this transaction, we owned 43.89% of the total share capital, including 99.53% of the voting share capital, of Aracruz.

 

***Stock Swap Merger***

 

As part of our corporate reorganization, on August 24, 2009, Fibria and Aracruz each held extraordinary shareholders’ meetings at which the Stock Swap Merger was approved. Pursuant to Stock Swap Merger (1) each issued and outstanding common share of Aracruz (other than common shares held directly or indirectly by Fibria or with respect to which the holder exercises withdrawal rights) was exchanged for 0.1347 Fibria common shares; (2) each issued and outstanding preferred share of Aracruz (other than preferred shares held by Fibria) was exchanged for 0.1347 Fibria common shares; and (3) Aracruz became a wholly-owned subsidiary of Fibria. The settlement of the Stock Swap Merger occurred on November 17, 2009, through the facilities of the BM&FBOVESPA.

 

Under the Brazilian Corporation Law, holders of common shares and class A preferred shares of Aracruz who did not vote in favor of the Stock Swap Merger, including those who abstained from voting or did not attend the Aracruz Extraordinary Shareholders’ Meeting, were entitled to withdraw their capital from Aracruz during a withdrawal period that was scheduled to expire on

 

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September 28, 2009. On September 28, 2009, we and Aracruz announced that the deadline for the exercise of withdrawal rights was extended until November 12, 2009. On October 28, 2009, we filed an F-4 registration statement with the SEC, which was declared effective by the SEC on November 12, 2009, to register the issuance of our shares to holders of Aracruz’s class B preferred shares (including the class B preferred shares of Aracruz that were represented by ADRs) that were residents of the United States.

 

Following the Stock Swap Merger, VID owned 29.3%, and BNDESPar owned 33.6% of our total share capital. The last trading day for one Aracruz ADR was November 17, 2009 and its final market price was U.S.$21.25. As of December 31, 2008 the market price for one Aracruz ADR was U.S.$11.28.

 

***Merger of Arapar and São Teófilo into Fibria***

 

As part of the corporate reorganization, the general shareholders’ meetings of each of Fibria, Arapar and São Teófilo approved on December 21, 2009, the merger of Arapar and São Teófilo with and into Fibria, with Fibria as the surviving entity. This merger was effective as of December 31, 2009.

 

***Merger of Aracruz into Fibria***

 

As part of the corporate reorganization and in order to maximize the synergies from the Aracruz Acquisition, effective as of December 31, 2009, Aracruz merged with and into Fibria, Fibria being the surviving entity.

 

**Our Ownership Structure**

 

We are jointly controlled by Votorantim S.A. (current corporate name of Votorantim Industrial S.A.) and BNDESPar, a subsidiary of BNDES. Votorantim S.A. in turn is controlled by Hejoassu Administração S.A. or Hejoassu, which is controlled by the Ermírio de Moraes family. As a result of the purchase of an additional equity interest in Aracruz and corporate re-organization of Fibria, both of which occurred during the first semester of 2009, our exchange offer for outstanding Aracruz shares and the merger of Aracruz into us, our ownership structure and principal investees as of December 31, 2015 is presented in the following chart.

 

 

As of December 31, 2015, our total shares amounted to 553,934,646 common shares.

 

**B.**                                    **Business Overview**

 

***Pulp Industry Overview***

 

The world pulp industry is mainly divided in two groups of grades: mechanical, which is the pulp produced only through the use of mechanical energy processes, and chemical, which is the pulp produced after the wood chips have been chemically treated with

 

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caustic soda. In the whole world, currently 169 million metric tons are consumed every year, from which 82% is chemical pulp, according to market statistics.

 

Both grades are sub-divided in: integrated pulp, which is the pulp produced for captive paper production in the same company or group, and market pulp, which is pulp produced to be sold in the market. Market pulp consumption currently sums up to 57 million metric tons, which represents 41% of all chemical pulp grade.

 

Chemical market pulp can be broken down in many different grades, depending on the wood species. The two main groups are Hardwood, which is composed by the species with short cellulose fibers, and Softwood, assembling the other species, composed by long cellulose fibers. Short fiber pulp is more prone to be produced in tropical areas, while long fiber pulp is only produced in temperate areas. Hardwood represents 54% of total market pulp demand with 31 million metric tons.

 

Fibria produces pulp from Eucalyptus, which is a species originally from Australia, but extremely well adapted to the Brazilian climate. Brazil is the country where Eucalyptus trees develop the highest yield in the whole world. Eucalyptus pulp is 70% of the whole Hardwood market, with a demand of 21 million metric tons in 2015.

 

 

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(1)         Fiber Consumption, Recycled Fiber and Pulp: RISI | Market Pulp, Hardwood and Eucalyptus: PPPC Global 100 Report December 2015

 

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**Market Pulp Capacity**

 

We are the world’s largest producer of market pulp, according to Hawkins Wright, with an aggregate pulp production capacity of approximately 5.3 million metric tons of eucalyptus per year, as shown in the chart below.

 

**Market Pulp Capacity Ranking *(000 tons)***

 

 

Source: Hawkins Wright — December 2015

 

Eucalyptus pulp capacity has outgrown all other market pulp grades, having grown 103% between 2006 and 2015, to a total of more than 23.5 million metric tons, with most of this growth taking place in Latin America. Increased volumes by Latin American producers, who hold much larger buffer and in-transit stocks (as new mills in the region are further inland), bigger vessel space, Supplier Managed Owned Inventories where invoicing is made upon pulp consumption rather than delivery, and the increase in both distance and reach of the pulp geographical distribution with the increasing importance of China in the market in recent years, have increased the minimum inventory necessary for eucalyptus distribution. According to the Special Research Note released by the Pulp and Paper Products Council (PPPC), the global balanced level of the hardwood pulp producers inventories is currently 39 days, an increase of 10 days since 2000. However, for Latin American producers the average inventory stands at 43 days as almost 90% of Latin America’s hardwood production is exported outside the region compared to only 38% of North American and Nordic regions.

 

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**Evolution of Bleached Hardwood Pulp producer’s inventory**

***(days of supply)***

 

 

Source: PPPC (World-20)

 

**Market Pulp Demand**

 

Market pulp is used basically to produce four types of papers: Printing & Writing, Tissue, Specialty and Packaging. Printing & Writing papers are used for newspapers, magazines, catalogs, books, commercial printing, business forms, stationeries, copying and digital printing. Tissue paper is a lightweight paper basically used for personal hygiene. Types of tissue paper are hygienic tissue, facial tissues, paper towels, wrapping tissue, toilet tissue and table napkins. While specialty papers are papers that are made with specific qualification for a very unique purpose. Types of specialty papers are carbon less paper, decorative paper, security paper, self - adhesive papers, and cigarette papers. Packaging includes all types of papers used by protecting products for distribution, sales and use, including containerboard, folding boxboard and liquid packaging board.

 

As the global economy started to recover from the 2008 credit crunch crisis, in 2010 a growth of 2.3% or 1.0 million metric tons took place.

 

In 2011, despite all the uncertainties with the European and American economy, global market pulp demand reached a total volume of 52.5 million tons which represents an increase of 4.7% or 2.4 million tons over 2010. The same unstable economic environment remained in 2012, but stocking movement, especially in China, led market pulp demand to post approximately 1.2% of growth during the year. The European region was the major market pulp consuming region totaling 17.8 million metric tons followed by China with 14.4 million metric tons in 2012.

 

Pulp demand continued to grow in 2013 driven mainly by new paper capacity that entered the market during the year. The  3.2% increase (or 1.3 million extra tons) was supported mainly by hardwood sales to China (due to a strong growth in the tissue and woodfree paper sectors) and a surprising rebound in North America (resulting from new tissue capacities, an improvement in consumer spending and the replacement of integrated pulp by market pulp).

 

In 2014, the pulp demand increased by 1.5% (or 807 thousand tons). The main markets for pulp, North American, Europe and China, registered growth in pulp demand during the year as a result of the continuation of the wave of investments in new paper machines that started in 2013, especially in China. The favorable hardwood price level also contributed to pulp demand growth due to a certain level of substitution of other fiber sources such as recovered paper and nonwood pulp.

 

In 2015, the positive 2.4% growth in pulp demand (or 1.3 million extra tons) was due to improved economic environment mainly in Europe and North America, while China continued to see its paper capacity base expanding.

 

Eucalyptus demand increased by 7.8% in 2011, 2.3% in 2012 7.8% in 2013, 8.7% in 2014 and 5.0% in 2015. PPPC projections for Eucalyptus global demand show an average growth of 4.2% between 2015 and 2016 much higher than the global market pulp demand average of 1.7% for the same period. The growth in the tissue paper grades and Printing & Writing expansions in Asia is expected to support this growth.

 

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**Total Market Pulp Demand & Eucalyptus Market Share**

 

 

Source: PPPC

 

**Pulp Price Dynamics**

 

As a global commodity, market pulp prices are impacted by macroeconomic dynamics, as are the prices of any other commodity. The graph below is a comparison of the trend of eucalyptus market pulp prices against the Economist Commodity Index since 1980.

 

 

Source: Hawkins Wright and The Economist, January 2016

 

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The main variable that is responsible in the formation of market pulp prices is the balance between supply and demand. This is the relationship between the availability of the pulp in the market for sale against the real demand for pulp in the market. This relation may be analyzed in the short term, medium term, and long term.

 

Short term for the pulp industry is normally defined as the next 12 months, through this period the variables that will impact the balance are: the operating rates of the pulp mills installed, the performance of the installed paper machines that will result in pulp consumption and the pulp inventory level in the whole supply chain. The most recent event that restricted pulp mills supply was the earthquake in Chile in 2010. Because of the earthquake, production in Chile had to stop, constraining supply and impacting directly the prices. Also, the paper machines can affect the pulp demand as they adjust their productivity output to variations on the economic scenario and market seasonality. Printing & Writing papers demands are more affected by economic changes and seasonality than the demand for tissue paper, because tissue papers are part of human hygiene. As demand weakens and supply continues constant inventories can increase and result in a negative impact in prices.

 

In the pulp industry we generally consider medium term a period from 1 to 5 years ahead. The result between the supply and demand in the medium term will be a reflection basically of the paper mills and pulp mills project announcements. The short term scenario and on the expected relative growth rate between the supply and demand, impact the pulp price projected to that period. This medium price expectation is of great importance, since companies use this value to decide about new mill projects.

 

The long term for the pulp industry is defined as above 5 years. Although production cost structure must be monitored in the short and medium term, the major impact come from the formation of pulp prices over the long term. The cost structure of the pulp industry will define the pulp equilibrium price, establishing a floor as a reference against which to measure the returns expected from the higher cost producers in developing their activities. The graph below shows cash production cost against production capacity tonnage, which impacts the pulp price:

 

**Delivered Cash Cost in U.S.$/t and BHKP cumulative capacity**

 

***(BHKP Supply Curve CIF Europe - 2015)***

 

 

Source: Hawkins Wright ( December 2015)

 

Pulp prices are quoted by region and depending on its International Commercial Terms - IncotermsTM. Regions have their own dynamics but the price that is used as a reference in the pulp industry continues to be the European prices as it continues to be the major consuming market pulp region. The graph below shows hardwood prices in the European market since 2006 and its historical volatility, resulted by the factors described above.

 

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**Hardwood FOEX Europe**

 

***(U.S.$/t)***

 

 

Source: FOEX

 

***Fibria’s Profile***

 

We are the world’s largest producer of market pulp, according to Hawkins Wright and PPPC, with an aggregate pulp production capacity of approximately 5.3 million metric tons of eucalyptus pulp per year. We believe that we are one of the lowest-cost producers of BEKP in the world, primarily due to our economies of scale, state-of-the-art and strategically located production facilities, the short harvest cycle of our trees and our use of high-end technology in our operations. During the first half of 2009, we acquired control of Aracruz and have fully consolidated the results of operations of Aracruz into our consolidated financial statements as from January 1, 2009. In September 2009, we adopted the trademark “Fibria” for our pulp and paper operations.

 

Our forest base is broad and diversified. As of December 31, 2015, it was comprised of approximately 969 thousand hectares (owned and leased, excluding the forestry partnership program areas, the forest base linked to the sale of forest assets in Southern Bahia State and Losango) located in seven Brazilian states. Approximately 568 thousand hectares of our total forestry land consisted of planted areas, approximately 338 thousand hectares of conservation areas with native vegetation, or preserved areas, and 63 thousand hectares related to other uses such as roads.

 

We produce bleached eucalyptus kraft pulp at the following three pulp mills, 100% owned by us:

 

·                  the Aracruz mill, located in the State of Espírito Santo with an annual production capacity of 2.34 million metric tons and which we acquired as part of the Aracruz Acquisition;

 

·                  the Três Lagoas pulp mill, located in the State of Mato Grosso do Sul with an annual production capacity of 1.3 million metric tons and whose operations started on March 30, 2009; and

 

·                  the Jacareí pulp mill, located in the State of São Paulo with an annual production capacity of 1.1 million metric tons.

 

In addition, we have a 50.0% interest in Veracel, which owns and operates a pulp mill in the municipality of Eunápolis, State of Bahia, with an annual production capacity of 1.12 million metric tons. Under IFRS, we include our proportionate share of the results of operations of Veracel in our consolidated results of operations.

 

In 2015 we produced 5,268 kilotons of pulp (including 50.0% of the pulp production of Veracel) and recorded consolidated net revenues of R$10,081 million. In 2014, we produced 5,274 kilotons of pulp (including 50.0% of the pulp production of Veracel) and recorded consolidated net revenues of R$7,084 million.

 

In 2015, our pulp production had the following end-use destination: Tissue 50%, Printing & Writing 35% and Specialties 15%. This analysis shows our sensitivity and exposure to the tissue segment and to a lesser extent the Printing & Writing segment.

 

Export sales accounted for 90% of our pulp sales volume in 2015 and 91% of our pulp sales volume in 2014. We export pulp products from terminals and a warehouse that we operate at the port of Santos, in the State of São Paulo. On December 9, 2015, we

 

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participated in a public auction promoted by the regulatory agency “Agência Nacional de Transportes Aquaviários - ANTAQ”, for the leasing of the public areas and infrastructures for handling and storage of paper, pulp and general cargo at port of Santos. The Company was awarded the contract based on its proposal for the Macuco Terminal (STS07 or Terminal 32), in the amount of R$115 million. The Company is awaiting the approval of the results of the public auction and the adjudication of the object by the Concession Authority, which is expected to be granted during the first quarter of 2016. Once the approval is received, we will have 45 days to fulfill the requirements stated in the auction notice and at which time, the Concession Authority will invite us to sign the lease contract. We also export our pulp products from Portocel, a specialized port terminal that is operated by our subsidiary, Portocel Terminal Especializado de Barra do Riacho S.A., or Portocel, which is located approximately 3 kilometers from our Aracruz mill, in the State of Espírito Santo. We also operate a port terminal located in the city of Caravelas in the State of Bahia, from which we transport wood to our Aracruz mill, and a port terminal in the city of Belmonte, in the south of the State of Bahia, from which we transport pulp produced by Veracel to Portocel.

 

The following map sets forth the location of the production facilities and the port terminals we operate:

 

 

**Our Strengths**

 

***Global leadership in market pulp***

 

We are the world’s largest producer of market pulp according to Hawkins Wright and PPPC, with a total pulp production capacity of approximately 5.3 million metric tons as of December 31, 2015 with regular annual sales about 91% to the international markets. According to market statistics, in 2015 we accounted for approximately 25% of the world demand of BEKP, approximately 17% of the world demand of bleached hardwood kraft market pulp and approximately 9% of the world demand of chemical market pulp. Our leadership is based on the sustainability of our forest operations (as a result of the shorter harvest cycle in Brazil as compared to other major producing countries), our state-of-the-art technology (including modern facilities and advanced cloning methods), our high productivity, our strong customer base and our long-term relationships with our customers.

 

***Low production costs***

 

Our efficiently structured operations in Brazil result in relatively low cash production costs. We believe that we are one of the lowest-cost producers of BEKP in the world. Our low production costs relative to many of our competitors are due to a number of factors, including:

 

·                  our significant economies of scale;

 

·                  our advanced forestry techniques in managing the planting, maintenance and harvesting of our forests;

 

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·                  our modern industrial plants;

 

·                  the comparatively short harvest cycle of our trees; and

 

·                  relatively low energy and chemical costs.

 

Climate and soil conditions in Brazil enable us to harvest our eucalyptus trees between 6 to 7 years after planting, while harvesting cycles of other forest species in the southern United States, Canada and Scandinavia can last from 25 to 70 years. Harvesting cycles of our main non-Brazilian competitors in the BEKP market (Spain, Portugal and Chile) are approximately 8 to 10 years.

 

In 2014 we enhanced our cost management culture with the implementation of the Zero Based Budgeting (ZBB) methodology, including operating expenses and capital expenditures as scope for the 2015 budgeting cycle. The ZBB annual budgeting is a very detailed, structured, and interactive process in order to facilitate meaningful financial debate among managers and executives. The ZBB process is based on developing deep visibility into cost drivers and using that visibility to set budget targets. We have hired the consulting firm *Catalitica Experience* to assist us on the ZBB implementation.

 

***State-of-the-art production facilities***

 

Our mills have adopted the latest designs, technologies and production processes as a result of significant investments we have made. The advanced technology and production processes used in our mills allow us to use a lower level of raw materials, mainly chemicals, which consequently reduces our production costs. In addition, our mills have advantages over older mills, particularly with respect to reduced emissions and solid waste disposal, providing for a more streamlined, efficient and environmental-friendly pulp production process. The Três Lagoas and Veracel mills, have one of the lowest production costs of market pulp per ton in the world according to market consultants statistics when compared to Hawinks Wright 2015 chart presented above on page xx. This is the result of state-of-the-art technology, including modern processes and equipment associated with efficiency in forests and industrial operations, as well as short distances between forests and mills.

 

***State-of-the-art research and technology***

 

Fibria started its eucalyptus plantations at the end of the 1960s using seeds from the Rio Claro Forest Nursery (SP). At that time, four species were considered appropriate: *Eucalyptus grandis, Eucalyptus saligna, Eucalyptus urophylla,*and*Eucalyptus alba*. During the 1970s specific provenances of *E. grandis* and *E. urophylla* proved to be the most suited to our environmental conditions and to the pulping process. Since then, many superior interspecific hybrid trees (*E. grandis* x *E. urophylla*) were generated and selected through classical breeding and used as clones for commercial plantations establishment. These eucalyptus improved clones presented significant gains in productivity, uniformity, and wood quality, giving Fibria an outstanding position on the world market. Fibria currently uses a different group of elite clones for each operational unit, which are replaced by new ones from time to time to ensure productivity evolution as well as sufficient genetic diversity at the landscape level. State-of-the-art classical breeding technologies are constantly updated and applied for developing successive advanced generations of Eucalyptus clones.

 

In addition, Fibria is constantly working on alternative silvicultural methods to boost plantations productivity. The combination of silviculture and genetic improvement are essential to ensure sustainable production and the health of the ecosystems in the long term, which represents an extra challenge due to climate and economic uncertainties. The development of adapted genotypes along with the improvement obtained via silvicultural practices is critical for the sustaining of the environmental services provided by the forests for the generations to come**.**Thanks to continuous progress, the land currently used to supply our pulp mills is half the area that would be required 40 years ago when forest productivity levels were much lower.

 

Product development has kept pace through the study of new processes intended to enable the design of new products and enhance our existing ones, including alternatives to improve customers’ processes and/or product performance, especially with regard to softness and strength. This has permitted us to continuously offer differentiated products notwithstanding that we operate in a commodity market. Our collaborations with other world-class companies have led to efforts to develop different products from our biomass and by-products that may represent new business opportunities in future.

 

***Integrated operations***

 

Our operations are vertically integrated. The process starts with the production of eucalyptus seedlings at our nurseries from where they are taken to our extensive forests. In the forests, seedlings are planted and after that harvested and transported to our production facilities where pulp is produced. After that, pulp is transported to port terminals that we own and operate for distribution to our clients.

 

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Our transportation and logistics activities are efficient and diversified. The strategic location of our forests and production facilities allow us to have lower transportation costs. The average distance from our forests to our mills is less than that of many of our domestic and international competitors, resulting in logistical efficiencies (for example, certain of our competitors in China meet their raw material needs with wood imported from Russia). Portocel, the port terminal we operate in the State of Espírito Santo, is located approximately 3 kilometers from our Aracruz mill. This allows us to efficiently export pulp produced at that mill and to receive pulp from Veracel. In addition, we export pulp from a terminal and warehouse that we operate at the port of Santos, in the State of São Paulo.

 

***Customer base***

 

We have long-term relationships with leading global paper manufacturers, particularly in the tissue segment. We have traditionally focused on paper producers who value pulp quality and reliable supply, some of which have been our customers for decades.

 

On May 4, 2015, Fibria (as intervening party and guarantor); Fibria International Trade GmbH and Klabin S.A. entered in a Eucalyptus Pulp Offtake Agreement for the supply of hardwood pulp that will be produced at the Klabin plant currently under construction in the city of Ortigueira in the state of Paraná (Puma Project), with the operational startup planned for 2016. The agreement establishes a firm commitment for acquisition by Fibria or its subsidiaries of a minimum of 900,000 tons per year of hardwood pulp, for exclusive sale by Fibria or its subsidiaries in countries outside South America. The additional volume produced by the new plant will be sold by Klabin directly as follows: hardwood pulp in Brazil and South America, and softwood pulp and fluff in the global market. The agreement term is six (6) years, four (4) of which at a minimum volume of 900,000 tons and two (2) years of a gradual reduction of volume (phase out). The volumes for the fifth and sixth years shall be equivalent to 75% and 50%, respectively, of the volume delivered in the fourth year of the agreement. The sales volume envisaged in the agreement may be reduced at any time, through prior notification, by up to 250,000 tons for a future possible integration in packaging paper (waiver). The agreement may also be renewed by mutual agreement. The selling price shall be equal to the average net price charged by Fibria, FOB (Free on Board) Paranaguá. On July 30, 2015, the agreement was approved without any reservations by the Brazilian antitrust authority (Conselho Administrativo de Defesa Econômica — CADE).

 

***Conducting our operations in a sustainable way***

 

We are committed to operating our businesses and resources in a sustainable manner in accordance with world-class sustainability standards. In 2015, Fibria was included in the 2015/2016 portfolio of the Dow Jones Emerging Markets sustainability Index (DJSI Emerging Markets). We were also awarded as Silver Class for the Dow Jones Sustainability Index — World (DJSI World), which means that our score on the sustainability assessment is very close to the worldwide leader. Additionally, Fibria was once again listed in the Corporate Sustainability Index (ISE) — a list of companies whose shares are listed at the BM&FBOVESPA, the Brazilian stock exchange, and that demonstrate a high level of commitment to best practices in the areas of sustainability and corporate governance.

 

We consider sustainability as an essential dimension of our corporate strategy and have implemented a corporate governance for sustainability to ensure that it is considered throughout our processes. We have a Sustainability Committee that plays a consultative role to the Board of Directors and is coordinated by our Chairman. This Committee meets three times a year to assess our sustainability strategy and its implementation, and includes independent experts. Linked to the Executive Officers, the Internal Sustainability Commission, comprised of managers from our various departments, seeks to operationalize the strategy defined by the Sustainability Committee and embed sustainability into our organizational culture. Finally, at each Unit, we have Local Relationship Commissions, that evaluate risks and opportunities in the relationship with local stakeholders.

 

At the end of 2015, we made further progress with the formalization of a Sustainability Policy, approved by the Board of Directors and available at the Company’s Investor Relations website, making further contribution to the governance of our aspirations which are already an integral part of our business proposition.

 

In 2013, we updated our Materiality Matrix, which identifies the most relevant issues for the Company and for society, taking into account its strategy and the vision of its stakeholders and this Matrix is still considered relevant. The Materiality Matrix was designed based on interviews with 28 people, of whom 10 occupy key posts in Fibria and 18 represent individuals from organizations, sectors or communities that have close ties with the Company. The latter group was composed of customers, suppliers, investors, government officials, members of NGOs, residents of neighboring communities, independent wood suppliers, certifying professionals and researchers. The work resulted in the definition of 24 themes, divided into four dimensions: economic, governance and management, environment and social. Of this total, the ten most material themes were selected by the stakeholders:

 

·      Certifications, voluntary commitments to the sector, and regulations

·      Local development and community impact

·      Business expansion

 

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·      Value generation through innovation

·      Financial Management

·      Social and environmental management of the supply chain

·      Forestry Management - biodiversity, land use

·      Government relations

·      Transparency and stakeholder engagement

·      Use of water

 

***Long-term sustainability targets***

 

In 2011, upon the recommendation of the Sustainability Committee, Fibria reinforced its commitment to this issue by introducing a set of Long-Term Targets that signal our path to 2025. The definition of these targets was based on a systems thinking methodology, carried out through a series of workshops over three months involving 40 executives from our 12 different departments with the coordination of experts from the Universidade do Vale dos Sinos (UNISINOS).

 

The discussions, took into consideration priority issues outlined in Fibria’s Materiality Matrix and social and environmental risks identified in the Enterprise Risk Management (ERM) tool, and identified a set of 90 variables that directly or indirectly affect the management of forests and the production and sale of pulp. These variables have been grouped and form six key themes that will guide Fibria’s activities towards 2025: market and return to shareholder; ecoefficiency; forest management model; relationship and communication with stakeholders; social acceptance and legitimacy; management of personnel and organizational culture.

 

The intersection of these issues led us to establish Long-Term Targets for 2025, which are annually monitored by the Executive Board. These targets are not exhaustive or static and can evolve or include new commitments, as the market, we or society demand it. Additionally, the Long-Term Targets do not replace the conventional tools of management, including Short-Term Targets, which will be aligned with the Long Term.

 

The 2025 Long-Term Targets are the following:

 

**Optimize the use of natural resources**

 

Our target is to reduce by one-third the amount of land required for the production of pulp, by increasing productivity from 10 tons of pulp per hectare per year, in 2011, to 15 tons of pulp per hectare per year with new clones planted in 2025, through:

 

·      traditional genetic improvement

·      improvement in forest management

·      increase in industrial productivity

 

Benefits:

 

·      lower concentration of land

·      greater availability of land for other purposes

·      increased competitiveness and greater return to shareholders

 

2015 results: 11.7 tons of pulp per hectare per year (potential of new clones effectively planted in 2015).

 

The graph below shows the expected productivity gains until 2025:

 

 

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**Contribute to the mitigation of the greenhouse effect**

 

Our target is to double the carbon absorption from the atmosphere, by increasing net capture from 5.5 million tCO2eq, in 2011, to 11.1 million tCO2eq, in 2025, through:

 

·      increase in forest areas (eucalyptus plantations and native reserves)

·      restoration with native species of degraded pasture areas

 

Benefits:

 

·      reducing atmospheric concentrations of greenhouse effect gases

 

Note: net annual capture is defined by the difference between the total capture by planted and native forests and the direct and indirect carbon emissions from forestry, industrial and logistics operations throughout the cycle of production of pulp, from the nursery to the customer.

 

2015 results: net capture of approximately 7 million tC002eq.

 

**Protect biodiversity**

 

Our target is to promote environmental restoration in 40 thousand hectares of own land, between 2012 and 2025 through:

 

·      plantation of native species

·      stimulate the natural regeneration of native species

 

Benefits:

 

·      enrichment of fauna and flora, including endangered species, in the Atlantic Rainforest and the Cerrado biomes

·      expansion of environmental services - carbon capture and water availability and quality, among others - areas whose original features have been altered due to human activity

 

Note: target does not consider Fibria’s support in restoration projects in third party land, developed in partnerships with other organizations.

 

2015 results: 13.9 thousand hectares under restoration from 2012 to 2015.

 

**Increase ecoefficiency**

 

Our target is to reduce by 91% the amount of industrial solid waste disposed at landfills through:

 

Decrease from 60 kg per tonne of pulp in 2011 to 5 kg per tonne of pulp in 2025:

 

·      reduction in the generation of waste by the mills

·      reuse of waste in the soil

 

Benefits:

 

·      reduction of the impacts and risks caused by industrial landfills

·      increase in ecoefficiency of our production processes

·      reduction in costs for the disposal of waste and substitution of supplies

 

2015 results: 46% reduction in industrial solid waste to landfills in relation to 2011.

 

**Strengthen the interaction between business and society**

 

Our target is to reach 80% of approval rate in neighboring communities through:

 

Elevation of the approval rate in neighboring communities from 50%, in 2011, to 80%, in 2025, through:

 

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·      improvement in the quality of relationship with the communities

·      support for local development projects

·      inclusion of the community in our value chain

 

Benefits:

 

·      harmonious coexistence with the neighboring communities

·      enabling environment for local development

 

Note: approval rate measured through research.

 

2015 results: 72.6% of approval on average (research is conducted bi-yearly, and the next result will be released in 2017)

 

**Strengthen the interaction between business and society**

 

Our target is to help the community make self-sustaining 70% of income generation projects supported by Fibria per:

 

Increase of self-sustaining projects from 5% in 2011 to 70% in 2025, through:

 

·      expansion of the Rural Territory Development Program (PDRT)

·      promotion of technical and management training, through partnerships and support of consultants

·      attraction of other partners

 

Benefits:

 

·      social inclusion of communities, reducing their socioeconomic vulnerability

·      protagonism of the community in its development

·      increased managerial and technical skills of community members

·      autonomy of the communities in relation to the private and public sectors

·      stimulation of the construction of social capital

·      reduction of conflicts and maintenance of good relations with neighboring communities

 

2015 results: 9% of the projects are considered self-sustainable.

 

***Corporate Governance***

 

We have a robust Governance, Risk and Compliance (GRC) department, which is directly linked to the CEO and reports to the Statutory Audit Committee, that embraces the following processes: compliance of risk policies; derivatives, debt and investments pricing; market and credit risk analyses; crisis management; business continuity planning and Enterprise Risk Management (ERM). The goal of the ERM is to ensure through a well-defined methodology that all significant risks are mapped and analyzed, with the appropriate treatment and control determined, in accordance with the Risk Management policies approved by the Board of Directors. See “Item 7. Major Shareholders and Related Party Transactions — B. Related Party Transactions” and “Item 16B — Code of Ethics”.

 

In 2015 we developed the Dividend Policy, the Policy of Authorities and our Sustainability Policy, all of which were approved by the Board of Directors and are available at our website, in order to maintain our business within the highest levels of integrity and transparency.

 

The Dividend Policy marks an advance in our corporate governance, and one of its main purposes is to indicate to the market that the Management will base its dividend payment proposal on our cash flow generation, with respect to its indebtedness and liquidity policies, maintaining its commitment to investment-grade status and considering its strategic plan. In accordance with such policy, dividends in addition to the mandatory minimum will be announced in the annual financial statements. Throughout the year, if our financial situation exceeds the envisaged scenario, management may propose an extraordinary dividend.

 

In 2015 we also enhanced the Competition Law Compliance Policy (Antitrust) and the Anticorruption Policy trainings. We reviewed our Code of Conduct in 2014, in order to continuously improve governance and ethical standards, we, among other governance improvement initiatives. The third edition of the document includes new specific topics, such as “Corruption” and brings important updates on the already existing ones. The Code of Conduct is the basis of our identity. It is where we express our

 

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fundamental, non-negotiable values that indicate the directions we should take in order to maintain an honest and positive work attitude. In view of the current business challenges and in line with its Values and Beliefs, we reinforced our Compliance Program through several training programs in 2015. For Fibria, being in compliance means to comply with and enforce internal and external, laws, rules, regulations and commitments, whether they have been assumed voluntarily or imposed on the organization. This initiative represents the maturation of our governance model, an evolution resulting from the existing culture of compliance. The Compliance Program assumes the adoption of preventive compliance measures, creating positive evidence of protection for the organization, contributing to mitigating possible sanctions and preserving our reputation as an intangible asset.

 

In line with the Compliance Program, we implemented in 2015 a Conflict of Interests Evaluation process to identify related parties risks that may arise from shareholders, employees and suppliers. Also during the year, the GRC department developed a monitoring cockpit, which is a dashboard with the main Company’s obligations and business requirements. According to the seven program pillars, it includes: Laws and Regulations; Licenses; Permits and Certifications; Contracts and Agreements; External Reporting; Support to Competition / Antitrust; Prevention of Losses and Fraud; and Anti-Corruption. The new booklet was distributed to employees and outsourced workers, who are being trained through compliance workshops about the importance of the items reviewed, as well as to strengthen their knowledge about the internal and external rules of organizational compliance. The focus of the training course was based on the Corruption Prevention and Antitrust pillars.

 

The entire monitoring process and environmental review is properly documented and reported to senior management on a quarterly basis, with the annual sign-off of the control chart rated by all governing bodies through a specific tool, GRC Process Control, which increases adherence to best governance practices. In compliance with section 404 of the Sarbanes-Oxley Act and CVM Instruction 480/92, the effectiveness of internal controls of the Company’s financial information is based on criteria established in COSO Internal Controls - Integrated Framework (2013).

 

**Our Strategies**

 

***Increase our market share in the international pulp market***

 

We intend to take advantage of our competitive strengths to further increase our market share in the international pulp market. We have focused our marketing efforts on the sale of BEKP to tissue manufacturers, a market segment that, in addition to being more stable than other market segments, has experienced global consumption growth at a cumulative aggregate annual growth rate of approximately 3.2% for the period from 2008 to 2015.

 

According to a recent survey by RISI, global tissue consumption growth is expected to accelerate at a 3.7% annual rate from 2015 to 2020, with China accounting for roughly 40% of the total tissue consumption increase during this period.

 

We believe that we can further increase our market share by leveraging our long-term customer relationships and focusing on customer service and product customization. We continue to strive to meet our customers’ needs by supplying customized pulp products with specifications that facilitate their manufacture of specific paper products. We strive for a high degree of customer satisfaction and are working to further improve the management of our inventory, which we believe will allow us to reduce the timing of our deliveries and better service our customers.

 

On May 4, 2015, we entered into an offtake agreement with Klabin for the supply of eucalyptus hardwood pulp that will be produced at the Klabin plant currently under construction in the city of Ortigueira in the state of Paraná (Puma Project), which comprises a pulp production capacity of 1.5 million tons of hardwood and 400 thousand tonnes of softwood and fluff, with the operational startup planned for the end of the first quarter of 2016. The agreement establishes a firm commitment for our acquisition of a minimum of 900,000 tons per year of hardwood pulp, for exclusive sale in countries outside South America. The additional volume produced by the new plant will be sold by Klabin directly as follows: hardwood pulp in Brazil and South America, and softwood pulp and fluff in the global market. The agreement term is six (6) years, with the last two years being a gradual phase out period, and may also be renewed by mutual interest. The pulp volumes derived from the deal with Klabin will be included on Fibria’s global commercial strategy. Besides our business rational that Klabin’s volumes will be placed into the market in a smoother way regarding pulp prices impact than if by a newcomer in the hardwood market pulp industry, due to our commercial and logistics expertise, the deal will allow us to obtain logistics and commercial optimization and synergies, support our customers’ growth, enhance our ability to meet customers’ needs and also represents potential for the development of new customers.

 

***Enhance our financial strength and corporate governance***

 

Our total consolidated indebtedness as of December 31, 2015 and 2014 amounted to R$12,744 million and R$8,327 million and 91.6% and 88.4% of which represented long-term indebtedness, respectively. We have been implementing a consistent and disciplined approach focused on reducing debt and its cost aiming to improve our capital structure, recover and maintain our investment grade rating and secure financing for our growth strategy under favorable market conditions.

 

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After applying concentrated efforts, in 2015 Fibria has reached a debt level that is adequate for its size at a cost that is in line with what is practiced by other low-risk Brazilian companies with access to international capital markets. As a credit quality recognition, Fitch has granted the Investment Grade rating for Fibria in late 2014 and during 2015 the Company was upgraded to Investment Grade by S&P and Moody’s. For a more detailed description of our Liability Management Plan, see “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Liability Management Plan.”

 

In addition, in order to improve our access to capital sources, in 2010 we upgraded the listing of our shares to the *Novo Mercado*(New Market) listing segment of the BM&FBOVESPA. The *Novo Mercado* listing segment imposes the most stringent corporate governance rules of any listing segment of the BM&FBOVESPA. In achieving this objective, we have implemented all of the administrative adjustments required to comply with the listing segment’s rules, including the appointment of independent members to our Board of Directors and making required changes to our bylaws.

 

In 2015, Fibria launched a Dividend Policy, approved by the Board of Directors, which is available on our website. One of its main purposes is to indicate to the market that the Management will base its dividend payment proposal on our cash flow generation, with respect to its indebtedness and liquidity policies, maintaining its commitment to investment-grade status and considering its strategic plan. In accordance with such policy, dividends in addition to the mandatory minimum will be announced in the annual financial statements. Throughout the year, if our financial situation exceeds the envisaged scenario, management may propose an extraordinary dividend.

 

***Increase operating efficiencies***

 

We intend to maintain the focus on our low-cost operations through greater operating efficiencies and economies of scale. To this end, we intend to continue to:

 

·                  focus on reducing our wood costs through increased eucalyptus yields by continuing to invest in the genetic improvement of our trees;

 

·                  take advantage of climate and soil conditions in Brazil and the short harvest cycle of eucalyptus trees; and

 

·                  improve the efficiency of our operations through further investment in harvesting equipment, production facilities and advanced information technology.

 

During 2015 we started to implement a new trailer to transport wood logs and woodchips, internally called PIFF, which is lighter than the regular trailer available in the market and allows a 10% yield increase on wood volume transportation. The PIFF trailer was developed by us with the Brazilian university UFSCAR and currently we are under process for intellectual property registration. With such new trailers we are reducing our wood costs, which are among the most relevant of our pulp production costs and therefore a priority for us. Considering all the wood logs transportation by truck we have, the PIFF is currently operational on 100% of our Três Lagoas, 50% of our Jacareí unit and 18% of our Aracruz unit.

 

 

In 2015 we implemented a harvest mechanization project in our hilly forested areas of Vale do Paraiba located in Sao Paulo state, which provides wood for our Jacareí unit. Previously, the mechanized harvest was locked up at 24 degrees steep. With the project, we increased our harvest productivity through mechanized operation in hilly areas until 35 degrees. Therefore, harvest

 

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with manual staff decreased significantly to areas extremely steep only. Besides the operational gain, mechanized operations also represents an improvement in safety.

 

 

In 2015 we launched a maritime shipping new project at Portocel to increase the wood cargo handling for our Aracruz unit, which is expected to startup in early 2017. With the project, we will be able to improve our competitiveness by the reduction on wood costs.

 

 

With the aim to maximize forestry operations productivity in the long-term, during 2015 we classified our forest base by categories, from “Diamond” to “Lead”, using an economic geo-model. We mapped all leased and owned forestry land using key indicators for silviculture, harvest and transportation activities on a current and future perspective approach on risks and opportunities, such as soil conditions, declivity, altitude, conservation areas, proximity to urban zones, roads availability, and transportation efficiency, among others. By gathering all such data and combining it, we were able to classify our forest base and settle targets towards a future category distribution as you can see on the chart below.

 

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With the structural change on our forest base from current to the target composition of categories, that we expect to achieve in 10 years, we will be able to reduce our wood operating costs and capital expenditures and therefore increase our competitiveness. The dynamics of forest base change related to such goal means that we will seek for opportunities to purchase or lease more attractive areas, divest from unattractive tracts, as well as implement technologies that will lead us to the structural wood cost.

 

In December 2015, we have executed a real estate purchase and sale commitment with VID, for: (i) the selling by us of the rural real estate located in the cities of Votorantim and Sorocaba, in the State of São Paulo, totaling 5,042 hectares, for the amount of R$172 million and (ii) the purchase from VID of the rural real estate located in Capão Bonito and Itapeva, also in the State of São Paulo, totaling 33,994 hectares, for the amount of R$452 million. Such transaction was intrinsically in accordance with our target composition of land categories.

 

***Continue to develop state-of-the-art technology in the forestry area***

 

Technological research and development has made it possible to improve our productivity while reducing the impact of our operations on the environment. In the forestry area, an intense research program and the adoption of modern forestry practices have significantly increased our competitiveness. The genetic improvement of eucalyptus trees through classical breeding has allowed us to use superior clones in our plantations, resulting in higher productivity. We currently perform 100% of our planting operations with improved clones. Higher process efficiency and better seedling’s quality were achieved due to a pioneering procedure for eucalyptus vegetative propagation (cloning). In the decade ending 2010, the average annual amount of pulp produced by our forests was about 11 tons per hectare per year, compared to 6.4 tons during the 1970s. One of Fibria’s long-term targets is to reduce by one-third the amount of land required for the pulp production, through increasing productivity by classical breeding. The goal is to reach 15 tons of pulp per hectare per year in plantations established with new clones deployed by 2025.

 

By continuing to focus on cutting-edge technological research and development, we aim to strengthen our position as one of the leading developers of technology in the forestry area, maintain our record as a low cost producer while meeting our standards of high quality production, increase the range of products that we offer to our customers and maintain our reputation as an environmentally friendly and socially responsible manufacturer. Altogether, this positioning has led to a deep analysis on increasing the value from our forestry biomass where biofuels is one of the most prominent. In 2012, with an initial investment of US$20 million, Fibria acquired 6.66% of Ensyn’s share capital. Furthermore, Fibria and Ensyn agreed to set up an equally-owned joint venture (F&E Technologies LLC), which was duly incorporated in Delaware for future investments in the production of liquid fuels and chemicals from biomass in Brazil. After 2012, the Company has exercised the options to increase its share of Ensyn’s capital and currently holds 12.62% of its share capital. The goal of the Ensyn-Fibria joint venture is to combine the strengths of each party in creating a producer of renewable liquid fuels from cellulosic feedstocks. In 2015, the basic engineering project for a Rapid Thermal Pyrolysis unit was put in place and finalized, allowing the JV to decide for the investment whenever pertinent. Also, in 2015, the Company recorded a major

 

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advance in the lignin research front by acquiring the assets of the Canadian company Lignol Innovations, now Fibria Innovations. As a result, Fibria became the owner of substantial intellectual property regarding the subject and established an important link with one of Canada’s leading universities, the University of British Columbia, expanding its options for the pursuit of new scientific knowledge. We are now working on making the best possible use of the quality of our patent portfolio and developing higher added value applications for lignin.

 

**Sustainability**

 

For Fibria sustainability involves incorporating social and environmental aspects, long term value generation strategies and stakeholder views resulting from dialogue into the business strategy and management. We are part of a value chain that gives importance to numerous aspects beyond traditional operations, such as developing a skilled and engaged workforce, managing and promoting projects that promote the growth and welfare of neighboring communities, preserving and recovering native forests, sequestering carbon, sustainable pest control, reducing waste, managing with transparency, and strengthening communication channels with civil society, the government and media. Sustainability embodies the recognition of public opinion, customer loyalty, employee pride and trust of partners and neighbors. Furthermore, it decreases risks, creates opportunities and makes us stronger to meet the needs of an increasingly demanding market that is mindful of the planet’s delicate balance.

 

At the end of 2015, we made further progress with the formalization of our Sustainability Policy, approved by the Board of Directors and available on the Company’s Investor Relations website, making a further contribution to the governance of our aspirations which are already an integral part of our business proposition.

 

***Community Relations***

 

We operate in seven Brazilian states and in over 230 municipalities, where Fibria owns mills, eucalyptus plantations and conservation areas. Neighboring our areas, there are independent wood suppliers with whom we hold long-term contracts for the supply of raw material for pulp. We have forged a wide range of relationships with diverse communities (traditional or otherwise), which are primarily impacted by its forestry activities. Therefore, quality relations with communities in the vicinity of our operations are crucial to our performance. We have continuously investing in community engagement processes and socio-environmental projects designed to foster social inclusion and improve the quality of life of neighboring populations. These are programs that help to strengthen its social capital, generate jobs and income, improve the locals’ quality of life, and above all establish a constructive dialogue in search of common solutions. Fibria seeks to ensure social legitimacy for its business by encouraging the integration of these communities into its forestry business, while seeking to establish planning and monitoring mechanisms aimed at identifying, preventing and mitigating the impacts of its activities.

 

Fibria’s Strategy for Community Relations and Social Investment includes five levels: survey and diagnosis of impacted communities, Relationship Prioritization Matrix, dialogue enhancement, relationship methods and tools, and monitoring. In 2015, over 5,500 families were benefited in multiple ways from their involvement in Fibria’s social-environmental programs. Since 2009, Fibria has invested over R$127 million in its programs of social development. In 2015, over 500 new families joined Fibria’s social projects, totaling 5,500 families with evidenced income being generated from these projects. In 2015, 3,035 families were involved in the Rural Territory Development Programme (PDRT) in the states of São Paulo, Mato Grosso do Sul, Bahia and Espírito Santo. The increase in wages since the beginning of the project is equivalent to approximately 2 to 4 minimum monthly wages per family. These funds come from Fibria and third parties such as the BNDES, the Votorantim Institute and members of the Responsible Network, comprised primarily of the Company’s suppliers and customers.

 

***Relationship with specific communities***

 

Fibria’s relationship with some communities particularly in the north of Espírito Santo and the south of Bahia, require special attention because they are historically more susceptible to conflicts, or are socially vulnerable. Fibria develops initiatives in which different entities - such as other companies, governments, third sector organizations and the communities themselves - are engaged, and seek to build, together, solutions of common interest. We have served the communities either directly or through engagement with other entities who can also contribute to finding solutions, such as the government, in its various echelons, NGOs and other companies. Some communities have received special attention from us, which has been developing specific social inclusion projects, often with input from government agencies and independent socioenvironmental agencies. This is the case of communities known as quilombolas (descended from former runaway slaves) and Indigenous communities of the Tupiniquim and Guarani ethnicities. Members of the Landless Workers’ Movement (MST) and families of local fishermen are yet other cases in point.

 

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***Engagement with Landless Movements***

 

An area of approximately 11,000 hectares owned by Fibria in Prado (BA), comprised of five farms, occupied by members of the Landless Rural Workers Movement (MST) since 2000, has ceased being a point of social tension and has been transformed into a pioneering sustainable rural production experience. In partnership with the government of Bahia and the Escola Superior de Agricultura Luiz de Queiroz (Esalq/USP), Fibria has prepared a project for the production of a mix of agroforestry crops, maximizing the soil use in plots distributed to hundreds of registered families. Named the Alvorecer (Dawning) Project, the sustainable settlement is assisted by a specialized technical team whose members reside at the site. In 2013, the project gained new momentum with the startup of a mid-level agricultural school with capacity to teach 300 students per shift.

 

The Alvorecer Project initiative began in 2011 when the Company agreed to negotiate with the National Institute for Settlement and Land Reform in Bahia (INCRA/Bahia) and facilitate the expropriation of land. Since then, the project has been consolidating itself as the most advanced model of a cooperative agricultural production system in the country. During this period, 100 technicians were trained through the program “Yes You Can”. The subprojects “Plantas Medicinais e Medicamentos da Biodiversidade em Sistemas Produtivos Agroflorestais” and “Monitoramento e Análise das Condições de Vida e Saúde e Fortalecimento das Ações de Saúde”, achieved excellent results in 2015 contributing to a significant improvement in the participant ́s health.

 

***Relations with Governments***

 

Fibria contributes to the development of public policies by means of various organizations of which it is a member, representing the forestry and the pulp and paper sectors.

 

***Annual Report***

 

Fibria adheres to the Global Reporting Initiative G4 guidelines for disclosure Comprehensive level, as well as the framework of the International Integrated Reporting Council (IIRC) and undergoes external verification. Through this process we seek to annually account for how we are addressing challenges and achieving results, with regard to sustainability strategy and a vision for the future, as well as our role in society. The Annual Report includes details of commitments and performance on the governance, economic, financial, social and environmental aspects of the business following the principles of Materiality, Stakeholder Inclusiveness, Sustainability Context, Completeness, Balance, Comparability, Accuracy, Timeliness, Clarity and Reliability. The Annual Report is widely distributed to all of Fibria’s stakeholder groups, from community leaders to ESG and long-term investors and analysts.

 

**Our Products**

 

***Pulp***

 

In 2015, we produced 5,185kilotons of pulp representing 30% of total Brazilian hardwood pulp production. In 2014, we produced 5,274 kilotons of pulp representing 32% of total Brazilian hardwood pulp production.

 

The following table sets forth the breakdown of our BEKP net revenues by region for the periods indicated.

 
| ** **    | ** ** | **2015**              | ** ** | **2014** | ** ** | **2013**                 | ** ** |
|---------------|------------|-----------------------|------------|----------|------------|--------------------------|------------|
|          |       | **(million   Reais)** |       |     |       | **(million Reais)** |       |   |   | **(million Reais)** |   |   |   |
|          |       |                  |       |     |       |                     |       |   |   |   |   |   |   |
| Net Revenues  |       |                  |       |     |       |                     |       |   |   |   |   |   |   |
| Europe        |       | 4,312                 |       | 43       | %          | 2,935                    |       | 42 | % | 2,680 |   | 39 | % |
| North America |       | 2,468                 |       | 25       | %          | 1,707                    |       | 24 | % | 1,931 |   | 28 | % |
| Asia          |       | 2,390                 |       | 24       | %          | 1,769                    |       | 25 | % | 1,708 |   | 25 | % |
| Brazil/Others |       | 818                   |       | 8        | %          | 592                      |       | 9 | % | 526 |   | 8 | % |
|          |       | 9,988                 |       | 100      | %          | 7,003                    |       | 100 | % | 6,845 |   | 100 | % |

 

***Pulp Production Process***

 

The pulp production process can be summarized in the outline below, and is comprised of three main activities: Forestry, Industrial and Logistics:

 

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***Forestry***

 

We only produce bleached eucalyptus kraft pulp from planted eucalyptus trees. Bleached eucalyptus kraft pulp is a high-quality variety of hardwood pulp. Eucalyptus is a hardwood tree, and its pulp has short fibers and is generally better suited to manufacturing tissue, coated and uncoated printing & writing paper and coated packaging boards. Short fibers are optimal for manufacturing wood-free paper with good printability, smoothness, brightness and uniformity.

 

Our pulp production is solely from wood extracted from eucalyptus trees grown in sustainable forest plantations. Eucalyptus trees are among the fastest-growing trees in the world given that climate and soil conditions in Brazil allow for eucalyptus tree harvest rotations of approximately 6 years, as compared to harvest rotations of approximately 10 to 12 years in Chile, and up to 25 years in the southern United States.

 

Our forestry operations are composed of four major activities: nurseries, silviculture, harvesting and transportation of wood from the forestry to the mills.

 

The process begins in the nurseries, where the seedlings are cultivated. We operate four nurseries located in the states of São Paulo, Mato Grosso do Sul, Espírito Santo and Bahia, with an aggregate annual production capacity of approximately 89 million seedlings. Our seedlings are 100% produced with cloning technology, one of the most advanced genetic processes for the formation eucalyptus trees in the world. Seedlings take between 70 to 120 days to be completely developed and set for planting in the forests when the silviculture process starts.

 

Eucalyptus planting is made respecting the most advanced technology related to soil cultivation combining the best practices of natural resources conservation and high productivity planting. As a result, it is possible to implement our forest base with minimum soil interference maintaining micro-organisms and protection against erosion. Silviculture is responsible for the planting and maintenance of the forests until the harvesting process starts.

 

After approximately 6 to 7 years, the eucalyptus trees are harvested. We use advanced and automated harvesting equipment in our forests. After harvested, the wood logs are transported either by truck, rail or barge (or a combination of these) from the forests to our production facilities. During harvesting all barks, tree tops and other biomass sources remain on the ground to preserve soil fertility. The logs are then transported to our production facilities where they are unloaded and then taken by conveyor belt to be debarked and chipped as will be described below.

 

Our forestry base is broad and diversified, comprised of total forestry area of approximately 969 thousand hectares as of December 31, 2015 located in 7 Brazilian states, consisting of approximately 568 thousand hectares of planted areas, approximately 338 thousand hectares of preserved areas (excluding the forest base linked to the sale of forest assets in Southern Bahia State and Losango), and 63 thousand hectares related to other uses such as roads.

 

The following table describes the location and the area of our forest base as of December 31, 2015:

 
| **State**            | ** ** | **Plantation**         | ** ** | **Conservation** | ** ** | **Other** | ** ** | **Total** | ** ** |
|----------------------|------------|------------------------|------------|------------------|------------|-----------|------------|-----------|------------|
| ** **           | ** ** | **(in hectares)** | ** ** |
|                 |       |                   |       |             |       |      |       |      |       |
| São Paulo       |       | 78,041                 |       | 56,081           |       | 9,647     |       | 143,769   |       |
| Minas Gerais         |       | 13,441                 |       | 11,454           |       | 1,199     |       | 26,094    |       |
| Rio de Janeiro       |       | 1,636                  |       | 1,520            |       | 221       |       | 3,377     |       |
| Mato Grosso do   Sul |       | 229,755                |       | 97,807           |       | 18,217    |       | 345,779   |       |
| Bahia(1)        |       | 134,099                |       | 108,997          |       | 19,215    |       | 262,311   |       |
| Espírito Santo  |       | 109,806                |       | 57,263           |       | 12,922    |       | 179,990   |       |
| Rio Grande do   Sul  |       | 1,416                  |       | 4,807            |       | 1,534     |       | 7,758     |       |
| Total(2)        |       | 568,195                |       | 337,929          |       | 62,955    |       | 969,078   |       |

 

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(1)           Includes the forests associated with the production facility of Veracel. Excludes forest base linked to the sale of forest assets in Southern Bahia State and Losango.

(2)           Excludes forestry partnership program areas (112 thousand hectares with 71 thousand forested hectares).

 

***Forest Preservation and Natural Resources***

 

All of our wood comes from tree plantations rather than from native forests. Since the 1980s, we have been harvesting eucalyptus through uniform propagated seedlings from carefully selected trees, planted in already degraded pasture lands. The characteristics of the seedlings we select are matched to different regions. This method allows us to (1) greatly increase forestry

 

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productivity, reducing the demand for new lands, (2) comply with environmental regulations, and (3) contribute to carbon reduction in the atmosphere.

 

Pursuant to the Brazilian Forestry Code (Law No. 12,727/ 2012), we are required to set aside 20% of our areas for preservation, conservation and environmental recovery. In 2015, we maintained 35% equivalent to 338 thousand hectares of our forest base for conservation purposes. These areas consist of either native forests or riparian buffer zones, or are maintained due their specific ecological characteristics. Furthermore, we maintain a restoration program, to recover degraded areas and endangered flora species.

 

We also invest in environmental studies and continuous monitoring, together with national and international universities, research centers and specialized consultants, in order to assure the environmental performance of our plantations, and ensure the conservation of the native ecosystems and availability of natural resources in the areas we operate. This is done by imposing conservation and improvement measures in the forestry activities plans considering the area environmental conditions.

 

In 2015, we conducted approximately 48 projects related to biodiversity and forestry management improvement. These projects cover different types of monitoring of water resources and biodiversity as well as endangered species protection, environmental education, carbon sequestration and landscape planning focused on biodiversity.

 

***Forestry Certification System***

 

We constantly seek alternatives and tools for the responsible production through voluntary certification and socio-environmental commitments. Certification systems are initiatives for continuous improvement of processes, environmental conservation and responsible development practices that benefit our relationship with society, government agencies, customers, suppliers, employees and other stakeholders.

 

Fibria has internationally recognized certifications in its operations, such as ISO 9001, ISO 14001, OHSAS 18001 and forest certification as FSC® and Cerflor/PEFC certifying responsible practices.

 

The main certifications for the forest industry are: the Forest Stewardship Council® (FSC®), given by an independent, non-governmental, not-for-profit organization and Cerflor created by the Brazilian program of forest certification, recognized internationally by the Programme for the Endorsement of Forest Certification Schemes - PEFC. The forestry certification system is divided in two categories: Forest Management, which verifies whether the wood is produced according to high standards that protect the environment, and Chain of Custody, which verifies that the Company uses only certified wood as raw material.

 

All our areas have both certifications as shown on the table below:

 

| **Unit**         | ** ** | **FSC®**                         | ** ** | **Cerflor/PEFC** |
|------------------|------------|---------------------------------------|------------|------------------|
|             |       |                                  |       |             |
| Três Lagoas |       | Certified   License Code: FSC-C100704 |       | Certified        |
| Jacareí     |       | Certified   License Code: FSC-C100042 |       | Certified        |
| Aracruz          |       | Certified   License Code: FSC-C110130 |       | Certified        |
| Veracel          |       | Certified   License Code: FSC-C017612 |       | Certified        |

 

All of Fibria’s Units are certified by the FSC® and CERFLOR/PEFC on Forest Management and Chain of Custody categories. Each system has its own principles and criteria. These certifications attest that the Company’s pulp is produced from planted forests managed responsibly.

 

***Industrial***

 

We highlight the following aspects of our industrial operations:

 

·      Eco design and eco-efficiency

·      Water footprint program

·      Controlled emission of carbon dioxide

·      Focus on operational stability

 

In the industrial operation the pulp is extracted from the wood by a process known as the Kraft Process. Among the innumerous advantages from an environmental standpoint, it is self-sufficient in thermal and electrical energy, since biomass is the main input used to produce them.

 

The main flow consists of a wood cooking process, a bleaching stage, and a final dryer stage. Once the logs are transported to our production facilities, they are unloaded and then taken by conveyor belt to be debarked and chipped. After that, wood chips are

 

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sent to digesters, where they are mixed with chemicals and cooked under temperature and pressure. During this process, lignin and resins are removed from the wood. Once removed, the lignin is used as fuel to produce thermal (steam) and electrical energy for our pulp mills. The used chemicals are removed at various stages of the production process and recycled within our pulp mills.

 

The unbleached pulp is then sent through the oxygen delignification process and the chemical bleaching process, traditionally using chlorine dioxide, ozone and hydrogen peroxide (at our Jacareí mill) or chlorine dioxide, oxygen and hydrogen peroxide (at our Três Lagoas and Aracruz mills). The cellulose fibers are screened, pressed and dried. The dried pulp is cut into sheets and packed into bales, resulting in market pulp.

 

The kraft pulp production process traditionally involved the use of elementary chlorine for bleaching. In recent years, demand for pulp that is bleached using little or no chlorine has grown significantly because of concerns over possible carcinogenic effects of chlorinated organic compounds released in water. We only produce elemental chlorine free pulp, or ECF pulp, that is produced without using elementary chlorine in its bleaching process.

 

The following table provides certain information regarding our production facilities and production for the years indicated:

 
| ** **          | ** ** | ** **          | ** ** | **Annual Production**   | ** ** | **Production for the Year Ended   December 31,** | ** ** |
|---------------------|------------|---------------------|------------|------------------------------|------------|---------------------------------------------------------------------------|------------|
| **Facility**        | ** ** | **Location**        | ** ** | **Capacity**                 | ** ** | **2015**                                                                  | ** ** | **2014** | ** ** | **2013** | ** ** |
| ** **          | ** ** | ** **          | ** ** | **(in thousand**        | ** ** | ** **                                                                | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **          | ** ** | ** **          | ** ** | **tons per year)** | ** ** | ** **                                                                | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Pulp   Units**:   |       |                |       |                         |       |                                                                      |       |   |   |   |   |
| Aracruz             |       | Espírito Santo |       | 2,340                        |       | 2,328                                                                     |       | 2,356 |   | 2,346 |   |
| Três Lagoas    |       | Mato Grosso do Sul  |       | 1,300                        |       | 1,248                                                                     |       | 1,276 |   | 1,272 |   |
| Jacareí        |       | São Paulo      |       | 1,100                        |       | 1,047                                                                     |       | 1,085 |   | 1,080 |   |
| Veracel   (1)  |       | Bahia               |       | 560                          |       | 562                                                                       |       | 557 |   | 561 |   |
| Total               |       |                |       | 5,300                        |       | 5,185                                                                     |       | 5,274 |   | 5,259 |   |

 

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(1)           Represents 50% of the annual production capacity and production of Veracel’s pulp mill.

 

***Eco design and eco-efficiency***

 

As an eco-efficient company, we pursue the balance of the five essential elements for life in all our operations (water, air, energy, earth and people) with the strategic aim of producing less carbon intensive products. Our recent projects are based on “Eco Design” and all of our industrial operations are managed according to the “4R” eco-efficiency principles (reduce, recycle, re-think and re-use). We are also part of the cleaner production program from United Nations Environmental Program.

 

***Energy***

 

Of the total amount of thermal and electrical energy we self-generated, 90% was from renewable fuels, such as biomass and black liquor that are byproducts of the pulp production process, and 10% was from non-renewable fuels that we purchased, such as fuel oil and natural gas. In 2015, we generated internally approximately 117% of our electric energy requirements for our pulp production process including the amount of exportation.

 

***Chemicals***

 

We use several chemicals in the pulp bleaching process. As we have significant dependence on certain chemicals, we entered into long-term “take-or-pay” contracts with suppliers of chemical products, fuel oil, diesel and natural gas for periods ranging from one to ten years, in order to mitigate this dependence. See “Item 8. A. Consolidated Statements and Other Financial Information — Commitments”.

 

***Water***

 

While not a significant cost component of our raw materials, water is essential to the production of pulp. In 2015, we used 31.1 cubic meters of water per ton of pulp (as compared with a consumption rate of 25 to 50 cubic meters per ton, as recommended under the EU IPPC Directive — Integrated Pollution Prevention Control — which sets out environmental protection best practice guidelines for paper and pulp mills and is widely adopted across the world as a recognized standard in production). We believe that our water usage rates are among the lowest within the pulp and paper industry and we are continually introducing new technology and implementing improvements in our industrial processes and methods to further decrease these rates. We believe that our water supplies are currently adequate.

 

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The water used at the Três Lagoas and Jacareí units is obtained from the Paraná and Paraíba do Sul rivers, respectively, which are adjacent to our mills. Each river system is within a separate hydrological river basin, thereby reducing the overall risk of unavailability of water due to adverse atmospheric or hydrological conditions. In the Aracruz Unit water is provided by several rivers and a public interest project developed by us and the municipal governments of Aracruz and the neighboring city of Linhares, under which we may obtain water from the Rio Doce river through an existing system of canals and rivers. The project provides water for the local communities and for the industrial and chemical districts of the municipality of Aracruz, as well as for irrigation of agricultural activities in the northern region of the State of Espírito Santo. The water from these sources flows into a 35 million cubic meter reservoir on the mill site. We estimate that the reservoir in the Aracruz unit holds enough water to supply the mill’s needs for a five-month period in the event of a drought. The contamination of the Rio Doce river by mine tailings caused by the Samarco accident required the Company’s Aracruz Unit to suspend its use of water from the Rio Doce river for a short period of time, without impact to Aracruz unit operations. At the time of the accident, the water reservoir of the mill had at least 90 days of water supply.

 

In the Aracruz Unit, wastewater undergoes a two-stage purification treatment process before it flows into the ocean. The Jacareí and Três Lagoas mills use an active sludge double stage wastewater treatment process, which guarantees at least 95% of BOD (Biological Organic Demand) removal.

 

The Brazilian government imposes tariffs on the industrial usage of river water. These tariffs have not had a significant impact on our costs.

 

After the water has been used in the manufacturing process, we pass the resultant effluents through mechanical and biological treatments before returning them to the rivers. We also have emergency lagoons and tanks that enable us to avoid releasing untreated effluents into the natural environment in the event of a problem with our effluent process and we have spill control systems to avoid leaks from our pulp production plants. We constantly monitor the characteristics of our liquid effluents through chemical, physical and biological analyses to ensure that they are acceptable for release into the environment.

 

***Effluents***

 

Effluents generated during the production process are treated in our units by a two-stage process. During the first stage, solids such as fibers, clay and carbonates are removed. In the second stage, these solids are biologically treated and broken down by microorganisms. We continuously evaluate the composition of the liquid effluents generated during the production process and with the results of these analysis, we can minimize the generation of effluents and maximize the quantity of effluents that may be recycled in our production processes.

 

***Solid Wastes***

 

Solid wastes generated in the production process are collected, treated and disposed by an efficient waste management program. Whenever possible, we have identified how solid waste materials generated during our pulp production processes may be put to alternative use. With the inorganic material we produce a soil acidity corrector used in our forests. Part of the organic material is used as fuel in biomass boilers.

 

The remainder of solid waste is processed by recycling systems into organic and inorganic material for use in our forests or disposed of in licensed landfill sites. We collect, treat and dispose of the small amount of hazardous waste generated by our facilities in accordance with Brazilian law.

 

***Controlled emission of carbon dioxide***

 

Climate change may affect the results of our business, which is based on the use of natural resources. We therefore consider climate-change-related physical and regulatory risks, as well as risks to our reputation, in our business strategy.

 

Physical risks are associated with changes in weather conditions and the availability of water that may jeopardize environmental services, such as regional climate regulation and water production, directly affecting our activities and, at times, those of our suppliers and customers. For this reason, we have assessed our vulnerability to climate change from the point of view of the entire value chain and adopts a precautionary approach to the management and operation of its industrial and forestry activities.

 

Our main physical risk prevention measures are listed below:

 

·                  the control and monitoring of production;

 

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·                  studies into the genetic improvement of eucalyptus production in order to identify those species most adaptable to different climate conditions;

 

·                  the monitoring of water consumption in forest areas;

 

·                  projects related to improving energy efficiency, water reuse and the stability of the industrial process;

 

·                  the exploration of different means of transport;

 

·                  waste reduction and reuse;

 

·                  restoration and conservation of natural areas around springs and other water resources;

 

·                  the compilation of an inventory of greenhouse gas (GHG) emissions from our activities, with a focus on the pulp carbon footprint; and.

 

·                  the annual monitoring of strategic suppliers on Sustainability topics, through the Value Chain data collection project, that seeks to identify best practices and risks.

 

In 2015, we completed our seventh GHG emission inventory, using 2014 as a base, which considered the industrial and forestry activities of the Aracruz (ES), Três Lagoas (MS) and Jacareí (SP) units, as well as their pulp export logistics operations.

 

The result of these studies showed a positive emissions balance, with 0.71 tons of CO2 equivalent sequestered per ton of pulp produced. Bureau Veritas Certification, according to ISO 14064-1 and Brazilian Programme GHG Protocol, an official adaptation of GHG Protocol, certificated the inventory.

 

Our 2015 GHG emission inventory was based mainly on GHG Protocol, a calculation protocol developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), adapted by the International Council of Forest & Paper Associations (ICFPA) for the pulp and paper sectors.

 

In 2010, BM&FBOVESPA launched a new Index — Índice Carbono Eficiente (ICO2) — to promote the adoption of environmental practices around climate change by Brazilian companies and since then we have been selected as part of the Index. In 2012, an Exchange Traded Fund (ETF) was launched based on ICO2 index.

 

***Operational Stability***

 

The challenge of this concept consists of engaging the industrial and forestry’s operations teams in a new one “Operational Strategy” in which the production rhythm would be modulated up and down, respecting the instantaneous limits of capacity of each process sector. To reach larger stability it was necessary also to reduce the frequency and duration of the occurrences that generated stops and/or reduction of production rhythm. In 2015 the operating stability was again above 90%, evidencing the operational excellence as one of the main competitive strength and value creation driver of our company.

 

For 2015, the Regulatory Standard 13 (Boiler and Pressure Vessel Inspection) extended the maximum period between recovery boiler inspections from 12 to 15 months. Consequently, downtimes that used to take place on an annual basis, almost always at the same time of year, are undergoing planning changes in accordance with the new regulation. In the long term, this extension will reduce costs and increase output. During 2015 we’ve increased our knowledge of operating stability and cost efficiency on running our mills for a 15 months period.

 

Please find below the scheduled maintenance downtime for the the coming years:

 

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***Logistics***

 

***Delivery of Wood to Our Pulp Mills***

 

Our forests, including the wood purchased in the market, are located an average distance of 225 kilometers from our pulp mills. We transport wood to our mills by truck, rail and sea barge. The trucks and sea barges are owned and operated by independent contractors who transport wood from our forests to our production facilities. In 2015, we transported approximately 18.8 million cubic meters of wood to our mills, approximately 86% by truck, 12% by sea barge and 2% by rail. Although the percentage of wood transported by sea barge and rail was relatively low, by using these transportation methods, we were able to reduce the logistics costs of our Aracruz and Jacareí mills. Transportation of wood to the mills represents a large portion of our pulp production costs, and reductions in our transportation logistics costs are priorities for us.

 

At the end of 2002, we improved our rail infrastructure at our Aracruz unit and launched a diversified transportation system that combined sea, road and rail transport to further integrate the forest-to-mill-to-port logistics at this unit. Furthermore, in 2003, a four kilometer-long rail spur used for unloading wood shipments directly at the Aracruz mill’s yard was completed. This improvement was important to optimize the receiving process of the wood that comes from the northern part of the State of Minas Gerais and other areas within the State of Espírito Santo. Our integrated, coastal wood shipment project involves an integrated tug and barge system and two port terminals. This sea transportation system links the far south of Bahia to the mills in the State of Espírito Santo. The port complex of Portocel, adjacent to the mills at Aracruz, receives wood from plantations in southern Bahia via barge.

 

In 2015 we initiated a temporary logistic operation to transport wood from Rio Grande do Sul State to our Aracruz unit located at Espirito Santo State by coastal vessels. The wood is loaded at Rio Grande port and unloaded at port of Barra do Riacho (Portocel), which is located approximately 3 kilometers from Aracruz mill. The wood related to this logistic setup derives from some supply agreements settled by us (through the former VCP) with local farmers in Rio Grande do Sul State at the time we envisioned the Losango Project. We expect to have such operation in service for 3 years. Please see “Item 4. Information on Fibria — A. History and Development of Fibria — The Losango Project”.

 

Due to its location in the State of Mato Grosso do Sul, which is landlocked and lacks any rail infrastructure, the Três Lagoas unit relies entirely on transportation by truck of its wood to the plant. The agreement with Wilson & Sons was terminated early by the mutual agreement of both parties.

 

During 2015 we started to implement a new trailer to transport wood logs and woodchips, internally called PIFF, which is lighter than the regular trailer available in the market and allows a 10% yield increase on wood volume transportation. The PIFF trailer was developed by us with the Brazilian university UFSCAR and currently we are under process for intellectual property registration. With such new trailers we are reducing our wood costs, which are among the most relevant of our pulp production costs and therefore a priority for us. Considering all the wood logs transportation by truck we have, the PIFF is currently operational on 100% of our Três Lagoas, 50% of our Jacareí unit and 18% of our Aracruz unit.

 

***Distribution Planning***

 

As a result of our commercial strategy to reinforce our position in the global pulp market and focus on long term relationship with our customers, we invest in technology and develop best practices regarding our logistics. Our distribution planning is based on the concept of integrated systems. Therefore our pulp mills, commercial offices and third party logistics worldwide have access to the most accurate real-time information allowing the planning team to manage Fibria’s supply chain with high standards and provide reliable logistics services to our customers, maintaining inventories in several distribution centers located in North America, Europe and Asia.

 

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***Delivery of Pulp from our Mills to the Ports***

 

The pulp produced in our mills is handled and carried according to the strictest standards of quality and stored in warehouses designed especially for pulp — all operated by first-class logistic companies.

 

Pulp production enters into a tracking system right after the bailing lines. Tracking is done by barcodes reading along the whole supply chain from the end of the bailing line up to the final customer (paper maker). Pulp traceability is guaranteed all the way up to the customers’ mills fulfilling all the requirements in any certification system.

 

***Três Lagoas mill***

 

Most of Três Lagoas’ pulp production is exported overseas. Pulp is transferred from the mill to the port of Santos by a reliable multi-modal (truck and rail) system on a daily basis. Part of the production is sold to International Paper, a paper mill close to Três Lagoas. In this case, pulp is pumped directly into the paper mill. The remaining part of the production is distributed into domestic market by trucks, regularly supplying our customers located in the Southern region of Brazil and guaranteeing timely delivery.

 

***Aracruz mill***

 

Aracruz’s pulp production is mainly destined to export markets. It has one of the most optimized pulp logistic setups between mill and port in the world as this mill is three kilometers far from the port of Portocel which provides operating reliability and competitive logistic costs. The pulp transportation between pulp mill and port is made by special trucks to optimize costs and guarantee bales quality.

 

***Jacareí mill***

 

Jacareí’s production is destined to domestic market and overseas. The pulp expedition to domestic market is done by trucks, regularly supplying our customers located in the Southern region and guaranteeing the delivery with quality and on time. The export pulp is transferred from the mill to the port of Santos by rail and truck on a daily basis through a reliable distribution system.

 

***Veracel mill***

 

Veracel’s production is also exported. A multi-modal (truck and barge) transportation system connects the mill to the domestic port of Portocel. Firstly the pulp is taken by truck, through a dedicated road, from the mill to Belmonte maritime terminal. From this terminal, pulp is carried up to Portocel by barge.

 

***Port Operations***

 

The pulp produced for export is shipped on dedicated vessels or partial service ones - provided by carriers with long-term contracts in place - to our terminals overseas and is then delivered to our customers. We operate in two ports, Santos at Sao Paulo State and Barra do Riacho at Espirito Santo State.

 

In October 2010, four long-term contracts were signed with the South Korean Pan Ocean Co. Ltd. (former STX Pan Ocean), valid for a period of 25 years for the construction of twenty sea vessels. Five vessels have been delivered, of which, the fifth one entered into service in the first quarter of 2014.

 

In September 2014, due to Pan Ocean’s application for rehabilitation done in 2013, the parties involved in such long term contracts (Fibria, banks and Pan Ocean) settled an agreement to terminate three (3) long-term contracts and, consequently, the delivery obligation of the remaining newbuilding vessels was extinguished.

 

With dedicated vessels and partial service vessels, Fibria is able to fully meet the export demand, with guaranteed service quality and cost efficiency.

 

**Port of Santos**

 

The port of Santos is located on the coast of the State of São Paulo. From this port we export pulp produced at the Jacareí and Três Lagoas mills which are located approximately 150 and 750 kilometers far from Santos port, respectively. We have a concession from the government of the State of São Paulo to operate a terminal and a warehouse at this port. The concession was granted under an operational lease agreement with Companhia Docas do Estado de São Paulo—CODESP that expires in September 2017. This particular warehouse has a storage capacity of 38 thousand metric tons of pulp and supports exports from the Jacareí mill. The

 

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operation of the port has facilitated the growth of our exports because it allows us to load vessels with pulp directly from our terminal, thereby significantly reducing freight and handling costs.

 

To facilitate exports out of our Três Lagoas mill, we have also signed a long-term contract with a terminal operator at Santos (Gearbulk Terminals) for additional storage capacity of 50 thousand metric tons of pulp at a new specialized terminal where rail connection and vessel berth priority were also considered.

 

In 2015 we initiated the temporary operation at the Macuco Terminal (STS07 or Terminal 32), currently with a capacity of 17 thousand metric tons of pulp, to reduce our logistics costs on the exports of Jacareí and Três Lagoas mills. In order to maintain our export capacity in the long term, on December 9, 2015 we participated in a public auction promoted by the regulatory agency “Agência Nacional de Transportes Aquaviários - ANTAQ”, for the concession of the public areas and infrastructures for handling and storage of paper, pulp and general cargo at port of Santos for an initial period of 25 years and renewable for an additional 25 years. The Company was awarded the contract based on its proposal for the same Macuco Terminal (STS07 or Terminal 32) where we now operate, in the amount of R$115 million. The Company is awaiting the approval of the results of the public auction and the adjudication of the object by the Concession Authority, which is expected to be granted during the first quarter of 2016. Once approval is received, we will have 45 days to fulfill the requirements stated in the auction notice and at which time, the Concession Authority will invite us to sign the concession contract. We will continue to evaluate other competitive alternatives to ship our pulp.

 

**Portocel**

 

The pulp produced for export at the Aracruz and Veracel pulp mills is shipped out of the Port of Barra do Riacho (Portocel), which is located approximately 3 kilometers from Aracruz and 260 nautical miles from Veracel’s barge terminal. This port is a modern facility that has the capacity to handle approximately 10 million metric tons of pulp and wood per year. Warehouse facilities at Portocel are capable of storing approximately 220 thousand metric tons of pulp (static storage).

 

We own 51% of Portocel, the company that operates the port terminal of Aracruz. The remaining 49% of Portocel is owned by Cenibra, another pulp manufacturer and one of our competitors.

 

***Delivery of Pulp from the Port to our Customers***

 

The major part of our sales to the final customer is delivered out of our overseas terminals in the United States, Europe, Mediterranean and East Asia. Again at this point, Fibria is very committed to customers’ requirements, cost advantage and environmental impacts when choosing the right option among the different modals of transportation: rail, truck, barges and coasters.

 

**Environmental policies**

 

The Brazilian Constitution grants the federal government, state and municipalities the power to enact environmental protection laws and issue regulations under such laws. While the federal government has the power to promulgate environmental regulations setting forth minimum standards of environmental protection, state governments have the power to enact more stringent environmental regulations. The municipalities may only issue regulations with respect to matters of local interest or to supplement federal or state laws. Most of the environmental regulations in Brazil are thus at the federal and state levels rather than at the local level, with environmental standards established in the operating permits issued to each plant rather than through regulations of general applicability. Applications for the renewal of operating permits are reviewed periodically.

 

The procedure to obtain an environmental license includes the following:

 

·                  the preliminary or provisional license — granted during the preliminary stage of the planning of the facility. This license provides an approval for the location and concept of the facility based on its environmental impact and establishes the basic requirements to be met during the subsequent stages of the project implementation;

 

·                  the installation license — authorizes the construction of the facility in accordance with the specifications set forth in the plans, programs and projects approved by the authorities; and

 

·                  the operating license — authorizes the operation of the facility after receipt of the preliminary and the installation licenses, and provides confirmation by the authorities that the environmental control measures and conditions required for the operation of the facility have been taken.

 

Environmental licenses are valid for a specified term but may be cancelled if any of the conditions or requirements imposed by the licensing authority for maintenance of the relevant license is not fulfilled.

 

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Occasionally, jurisdictional conflicts among environmental licensing authorities occur when the proposed exploratory activity is in a location that is regulated by more than one municipality or state, or is under the jurisdiction of both the state and federal governments. In addition, depending on the level of the environmental impact that is caused by the exploratory activity, the environmental licensing procedure may require assessments of environmental impact and the holding of public hearings, which may increase the complexity and the duration of the licensing procedure considerably, and expose the exploratory activity to potential legal claims.

 

All of Brazil states require licenses for the installation and operation of our industrial plants. These regulations were introduced in the last ten to twenty years. We are subject to the regulation of state environmental agencies of São Paulo, Espírito Santo, Bahia, Rio Grande do Sul and Mato Grosso do Sul, respectively known as *Companhia Ambiental do Estado de São Paulo* (CETESB), *Instituto Estadual do Meio Ambiente* (IEMA), *Instituto Estadual de Meio Ambiente (INEMA), Fundação Estadual de Proteção Ambiental Henrique Luiz Roessler* (FEPAM) and *Instituto de Meio ambiente do Mato Grosso do Sul* (IMASUL). Pursuant to these state regulations, state authorities are empowered to regulate a company’s operations by providing company-specific environmental standards in such company’s operating permit.

 

Our forestry activities are jointly regulated by the Brazilian federal environmental agencies and the state environmental agencies of the States of São Paulo, Espírito Santo, Minas Gerais and Rio Grande do Sul. The planting and cutting of trees is subject to prior approval by the relevant state or federal environmental agency. Brazilian law requires that at least 20% of the landholdings of a forestry company be registered and maintained with native species in all regions where Fibria develops its activities.

 

In addition, our operations are subject to various environmental laws and regulations issued by governmental authorities relating to air emissions, element discharges, solid waste and odor.

 

Pursuant to Brazilian law, individuals or legal entities that violate environmental laws can be punished by criminal and administrative sanctions. Criminal sanctions range from fines to imprisonment, in case of individuals, including directors, officers and managers of legal entities, or dissolution, in the case of legal entities. Administrative sanctions include fines, partial or total suspension of activities, forfeiture or restriction of tax incentives or benefits, and cancellation or suspension of financings from governmental agencies. In addition to criminal and administrative sanctions, pursuant to Brazilian environmental laws, the violator must also recover or indemnify the damage that was caused to the environment and third parties. Because Brazilian environmental law uses a standard of strict liability in determining the obligation to remediate damages caused to the environment and to indemnify affected third parties, the imposition of any such obligation is made regardless of whether the polluter is found to have been negligent. In addition, the corporate structure of a polluting company may be disregarded if the structure is deemed to be an obstacle to the complete recovery of the environmental damages.

 

We make periodic modifications to plants relating to environmental technology and equipment, and for the implementation of new procedures to minimize environmental risks associated with spills and potential releases.

 

Despite we promote control over compliance with the requirements of the legal standards applicable to our activity, it does not accrue costs related to meet any demand of subsequent legal norms.

 

***Insurance***

 

We maintain fully comprehensive insurance with leading insurers to cover property damage and business interruption risk, as well as in respect of international and domestic transportation. Our property insurance policy has maximum risk coverage of R$6,200 million, which we believe offers more than sufficient coverage for our current assets.

 

We do not maintain insurance coverage against fire, disease and other risks to our forests. There is a fire and disease risk associated with our forestry activities, however, we believe the total damage would be mitigated by our risk management procedures and the fact that our individual forests are not close to each other, thereby eliminating any risk that a fire or disease could spread easily to any other of our forests. We have taken various steps to prevent fires from occurring in our forests, including the maintenance of fire observation towers, a fleet of fire engines and teams of fire-fighting personnel, which we believe are safe and cost-effective methods of fire prevention. In each of the past three years, the forest fires we have experienced have not resulted in material damage to our total planted area. Given the natural protection afforded by the spread out locations of our forests, we do not believe that insuring our forests would be cost-effective.

 

We do not make provisions for risks of loss from fire and disease, and all losses and damages that occur are charged to expenses when incurred. We have not suffered a material loss from either fire or disease in our forests.

 

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**Joint Operation**

 

***Veracel***

 

Veracel, is a company organized under the laws of Brazil, in which each of Fibria and Stora Enso owns 50% of the equity interests (it had been a joint-venture between Aracruz and Stora Enso). Veracel grows and manages eucalyptus plantations and operates a pulp mill in the city of Eunápolis, in the State of Bahia. Veracel produces BEKP and has an annual production capacity of 1.12 million metric tons.

 

Fibria and Stora Enso have entered into a shareholders’ agreement defining their respective rights and obligations as shareholders of Veracel. This shareholders agreement expires in January 2023 and can be automatically extended for successive 20-year terms unless notice to the contrary is given by either party.

 

The Veracel shareholders’ agreement includes provisions that:

 

·                  each of Fibria and Stora Enso has the right to nominate three members of Veracel’s six-member Board of Directors;

 

·                  under certain circumstances, Fibria and Stora Enso may be required to make capital contributions to Veracel, on a pro rata basis;

 

·                  if either shareholder fails to comply with any of its obligations regarding Veracel’s funding needs in connection with Veracel’s investment plan and capital contributions, the other shareholder shall have the right to require the defaulting shareholder to transfer all (but not less than all) of its shares to the other shareholder at a discounted market value calculated according to the provisions of the Veracel shareholders’ agreement;

 

·                  so long as either Fibria or any of its subsidiaries is a shareholder of Veracel, Fibria will not acquire (or cause to be acquired) any interest in real property in the core area of Veracel; and

 

·                  so long as either Fibria or any of its subsidiaries is a shareholder of Veracel, Veracel will not acquire (or cause to be acquired) any interest in real property in the core area of Fibria.

 

In March 2005, Aracruz entered into a Pulp Supply and Purchase Agreement with Veracel pursuant to which Aracruz has agreed to buy 50% of the annual output of pulp from the Veracel mill. This agreement entered into force in May 2005, and will be in effect for as long as the Veracel Shareholders’ Agreement is effective. In May 2014 Fibria commenced an arbitration against Stora Enso for alleged breach of its obligations on certain provisions of the Shareholder’s Agreement. See “Item 8. Financial Information - A. Consolidated Statements and Other Financial Information. - Contingencies”.

 

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**C.**                                    **Organizational Structure**

 

The chart below shows our organizational structure as of December 31, 2015 (% of total capital).

 

 

Our operations are conducted by Fibria Celulose S.A. as the controlling and principal operating company. Although being a stand-alone company, we are a jointly controlled entity of the Votorantim Group, which has other interests in Brazil and abroad, principally in cement, metallurgy, agribusiness, chemicals and financial services. See “Item 4. Information on Fibria — A. History and Development of Fibria — Our Ownership Structure.”

 

Among the subsidiaries presented in the chart above we highlight:

 

·                  Fibria-MS Celulose Sul Mato Grossense Ltda: a wholly-owned subsidiary established for Três Lagoas mill operations.

 

·                  Portocel Term. Esp BR S.A.: a port terminal from where we export Aracruz and Veracel pulp production. It is a subsidiary with a 51% interest held by Fibria Celulose S.A. and a 49% interest held by Cenibra - Celulose Nipo-Brasileira.

 

·                  Veracel Celulose S.A.: a joint operation between Fibria Celulose S.A. (50%) and Stora Enso (50%) where we have the Veracel Unit operations.

 

·                  Fibria Overseas Holding KFT (located in Hungary) and Fibria International Celulose GmbH (located in Austria), are the companies established to hold the participation in its subsidiaries Fibria Trading International KFT (Hungary) and Fibria International Trade GmbH (Austria), respectively, as described below.

 

·                  Fibria Trading International Commercial and Servicing Limited Liability Company or Fibria Trading International KFT in its abbreviated form (located in Hungary and its subsidiary — Fibria Europe S.A. — located in Switzerland) and Fibria

 

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Celulose (USA) Inc (located in Delaware): subsidiaries established for the management, sale, operation, logistics, control and accounting of products in Europe, Asia and North America.

 

·                  Fibria International Celulose GmbH (located in Austria) and its subsidiary, Fibria International Trade GmbH (located in Austria and its branch located in Hong Kong and its subsidiary — Green Parrot B.V. — located in Netherlands): subsidiaries established for the management, sale, operation, logistics, control and accounting of products in Europe, Asia and North America.

 

·                  Fibria Overseas Finance Ltd (Cayman Islands) and Voto IV (Cayman Islands): established in order to facilitate access to the international financial markets. Fibria Overseas was the issuer of Fibria Notes 2019, 2020 and 2021 and Voto IV was the issuer of Voto IV notes in 2005.

 

·                  Ensyn and F&E Technologies LLC (Delaware — USA): In 2012, with an initial investment of US$20 million, Fibria acquired 6.66% of Ensyn’s share capital and the option to invest additional US$10 million in its capital in the future. Furthermore, Fibria and Ensyn agreed to set up an equally-owned joint venture (F&E Technologies LLC), which was duly incorporated in Delaware for future investments in the production of liquid fuels and chemicals from biomass in Brazil. In 2014, Fibria entered into an Amendment to the 2012 Share Purchase Agreement, for the acquisition of approximately 3% of Ensyn’s capital for US$10 million, increasing our interest to 9.56% of Ensyn’s capital, and also providing us with certain rights which, if exercised, would allow us to subscribe additional US$5 million in Ensyn’s capital. In 2015, Fibria executed a new agreement for the purchase of approximately 3% of Ensyn’s capital, by paying US$5 million in exchange of the warrant issued in favor of the Company in 2014. As a result of the acquisition of additional capital in 2015, the Company holds 12.62% of the share capital of Ensyn and has the option to invest in the future additional US$10 million in its capital.

 

**D.**            **Property, Plant and Equipment**

 

***Overview***

 

Our principal executive offices are located in the State of São Paulo, where we concentrate our financial, administrative and trading functions.

 

***Aracruz Unit***

 

The Aracruz Unit is our principal pulp mill. This is located in the State of Espírito Santo and is the largest bleached hardwood kraft market pulp production facility in the world. We acquired it as part of the Aracruz Acquisition. It has three production lines: Fiberline A, Fiberline B and Fiberline C. Its nominal production capacity is approximately 2.34 million metric tons of market pulp. Its area totaled 352 thousand hectares at the end of 2015, of which 202 thousand hectares was eucalyptus plantation, 125 thousand hectares was covered with natural preserved ecosystems (preservation area), and 25 thousand hectares had other uses. The Aracruz Unit is located approximately three kilometers from the port facilities at Aracruz (Portocel), of which we own 51%.

 

***Jacareí Unit***

 

The Jacareí Unit is located in the State of São Paulo and has a nominal production capacity of approximately 1.1 million metric tons of market pulp. Its area totaled 157 thousand hectares at the end of 2015, of which 85 thousand hectares was eucalyptus plantation, 62 thousand hectares was covered with natural preserved ecosystems (preservation area), and 10 thousand hectares had other uses. The pulp produced at the Jacareí Unit is transported by rail to the port of Santos which is 150 km distant from the unit.

 

***Três Lagoas Unit***

 

The Três Lagoas Unit began commercial operations in March 2009 with a production capacity of 1.3 million metric tons of market pulp. This unit is located in the State of Mato Grosso do Sul. At year-end 2015, the Três Lagoas unit’s area totaled 346 thousand hectares of which 230 thousand was eucalyptus plantation, 98 thousand hectares was covered with natural preserved ecosystems (preservation area), and 18 thousand hectares had other uses. Três Lagoas’ pulp production is transported from the mill by a reliable multi-modal (truck and rail) system on a daily basis to the port of Santos which is 920 km distant from the unit by rail and 788 km by truck. We are currently carrying out a brownfield project at the unit, named Horizonte 2 project, which, at startup, will increase the total production capacity to 3.05 million metric tons of market pulp. Please see “Item 4. D — Expansion — Horizonte 2 Project” for further details.

 

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***Veracel Unit***

 

We have a 50% interest in Veracel, which owns and operates a pulp mill in the municipality of Eunápolis, State of Bahia, with an annual production capacity of 1.12 million metric tons market pulp. The pulp produced in the Veracel unit is transported to Portocel, located an average distance of 541 km from Portocel.

 

The following table sets forth the distance between our forests (including the transport of wood purchased in the market) and our mills, the distance of these mills to the port of embarkation, and the nominal capacity of each mill at December 31, 2015:

 
| **Facility**     | ** ** | **Distance   from   forest   to pulp mill** | ** ** | **Distance   to   port of   Santos** | ** ** | **Distance   to   port of   Portocel** | ** ** | **Pulp   capacity   (tons/year)** | ** ** |
|------------------|------------|-------------------------------------------------------|------------|-------------------------------------------|------------|---------------------------------------------|------------|-----------------------------------|------------|
| Aracruz          |       | 318 km                                                |       | —                                    |       | 3 km                                        |       | 2,340,000                         |       |
| Veracel (50%)    |       | 69 km                                                 |       | —                                    |       | 541 km                                      |       | 560,000                           |       |
| Três Lagoas |       | 93 km                                                 |       | 788 km                                    |       | —                                      |       | 1,300,000                         |       |
| Jacareí     |       | 248 km                                                |       | 150 km                                    |       | —                                      |       | 1,100,000                         |       |

 

***Eucalyptus forests***

 

Currently, we obtain the majority of our wood from 568 thousand hectares of forest plantation from a total of 969 (São Paulo, Rio de Janeiro, Espírito Santo, Bahia, Mato Grosso do Sul, Minas Gerais and Rio Grande do Sul, not considering forest partnership program areas, the forest base linked to the sale of forest assets in Southern Bahia State and Losango). While we have enough wood to fulfill our needs, from time to time and when the terms are attractive we purchase wood from unrelated third parties to be used in our pulp mills.

 

As of December 31, 2015, we also had over 2,000 forest partners of the forestry partnership program with 112 thousand hectares of land tracts with approximately 71 thousand hectares of planted areas (mostly in Espírito Santo, Bahia, Rio Grande do Sul and São Paulo states), making our wood supplies relatively dispersed. Our forests, including the wood purchased in the market, are located an average distance of 225 kilometers from our pulp mills. Brazilian forest legislation requires that private properties have at least 20% of the area kept for conservation of native ecosystems, fragments of wild life or natural restored forest area (through planting of indigenous species). Of our own forests, approximately 59% are eucalyptus forest plantation, while 35% is conservation forest and the remaining 6% has other uses.

 

While the dispersion of our forest land entails some additional costs, we believe that it significantly reduces the risks of fire and disease. We also seek to minimize fire risk by maintaining a system of fire observation towers, a fleet of fire trucks, firefighting brigades and fully equipped patrol cars monitoring the areas 7 days a week. Given the natural protection afforded by the dispersion of our forests, we believe that prevention is the key strategy to avoid insuring our forests. Therefore, we assume all risks of losses from fire and other casualties. In addition, we annually monitor and manage our forests to prevent losses from leaf-cutter ants and any other insect break-outs. We have not suffered a material loss from, nor had our wood supply or operations compromised by, either fire or disease in forests that we harvest.

 

In 2015 as part of our reforestation efforts, we planted approximately 77 thousand hectares of eucalyptus in order to maintain our mills wood supply and pulp production. The harvested eucalyptus forests yielded between 35 and 42 cubic meters of wood per hectare per year that is an average of 230 vm3/ha/year at around 6 years harvesting age. Our forest productivity reflects the excellent climate and soil conditions for growing eucalyptus trees in all Brazilian states, with enough incidences of both sunlight and rainfall.

 

We operate four nurseries that in 2015 expedited over 112 million plants (rooted cuttings/seedlings), all of which were planted in our forests or supplied to the Forest Savings Program. To develop our eucalyptus forests, we select trees after precise genetic field trials, elite selected trees are cloned (cultivars) and then they are multiplied in large scale by vegetative propagation process (rooted cuttings). Vegetative propagation allows us to plant trees with the most favorable genetic characteristics for pulp production. These characteristics include fast growth rate, good quality of wood fibers, resistance to disease and “self-pruning” branches. Greater tree standardization provided by cloning also permits us to increase mechanization in tree harvesting, logging, and mill transportation, making it easier to adjust equipment and machinery to topographical conditions.

 

We continue to review our efforts at community relations and the common good, as part of our contribution to social and economic development. For example, we invited our neighbors again to join the Forestry Savings Program that is an opportunity to have a share of the forest benefits as to diversify their production chain and to increase their property income in a partnership project. As of December 31, 2015, local farmers, mostly small properties, had already planted 11 thousand hectares (including Veracel) of forests with our support.

 

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**Expansion**

 

*Horizonte 2 Project*

 

After the conclusion of viability studies, and detailed analysis by the Company management since 2014, the Board of Directors, during an Extraordinary Board of Directors Meeting held on May 14, 2015, approved the expansion plan of the Company consisting of the construction of a new line of pulp production in the city of Três Lagoas, state of Mato Grosso do Sul, called Horizonte 2 Project. The expansion of the Três Lagoas unit is the current option for Fibria’s growth for the creation of shareholder value.

 

The Horizonte 2 is a brownfield project which consists in the construction of a new bleached eucalyptus pulp production line with capacity of 1.85 million tons per year, including the creep capacity of 100 thousand tons. The construction on the Horizonte 2 Project has already begun and is advancing on schedule, with the project’s commissioning expected by the fourth quarter of 2017. The total investment is estimated to be U.S.$2.2 billion and already contemplates a creep capacity of 100 thousand tons. The facility will generate an additional 120 MWh of surplus energy.

 

Eucalyptus wood is available within a low average from forest to mill distance. The structural average total from forest to mill distance, considering the wood supply of both mills at Três Lagoas unit, will be 95 km. The forest base required for the Horizonte 2 project is 174 thousand hectares. Fibria already has all the wood needed for the first four years of the new plant’s operations from its own forests and forestry partnership contracts. With startup at the end of 2017, the Horizonte 2’s forest base working needs, equivalent to 174 thousand hectares, will be virtually concluded.

 

The bulk of investments will be incurred in 2016 and 2017, when industrial capital expenditures will be higher. The funding strategy of the project consists of low-cost long-term financing lines, such as export prepayment agreements, Agribusiness Receivables Certificates, export credit agencies Finnvera, BNDES and FDCO (Midwest Development Fund), as well as the Company’s own cash flow generation. For more information on the financing facilities, see “Item 5B: Liquidity and Capital Resources”.

 

The new project will further increase the Company’s cost competitiveness, strengthen its commercial positioning and expand its long-term growth potential, making it more robust in a still fragmented sector. The wood availability in a short from forest to mill distance, the dilution of fixed costs and the sale of surplus energy are the main factors behind the Company’s future improvement on cost competitiveness.

 

Considering all of the Company’s units, Fibria’s total annual pulp production capacity will increase from the current 5.3 million tons to over 7 million tons. In line with Company’s global sales strategy, the new volumes will be targeting the main growth markets, most notably Asia and Europe. Together with Klabin’s sales deal, the Company will sell a total volume of around 8 million tons annually, with the following expected global destinations: 37% to Europe, 36% to Asia, 19% to North America and 4% to Brazil and other countries.

 

It is worth noting that Fibria is the result of a merger between two companies with vast experience in the execution of major projects and therefore recognized for their success in the physical and financial execution of such projects.

 

*Project Execution*

 

In the second quarter of 2015, the Company negotiated the supply of infrastructure, turbogenerators, the entire energy transmission and distribution system, instruments, construction management, among others. In the third quarter of 2015, Fibria concluded negotiating and contracting the industrial and important services packages, marking the beginning of a new phase of the project. The Company contracted Andritz Group to supply the wood yard, pulp line (cooking, washing and bleaching), drying machine, recovery boiler, evaporation, caustification and lime kiln package. During the period, Fibria has also negotiated the supply of infrastructure, turbogenerators (Siemens), construction management (Time Now), automatic valves (Flowserve), centrifugal pumps (Sulzer), the entire electricity transmission and distribution system (Asea Brown Boveri - ABB), which includes the primary substation, motors, Motor Control Center (MCC) and transformer, and BOP - Balance of Plant (Pöyry). As is normal in this type of negotiation, the amounts of the contracts remain confidential. To enable stakeholders to follow the physical progress of the project, the Company has included a video on its Investor Relations website showing the status of the works, which is periodically updated.

 

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On October 30, 2015, the foundation stone of Horizonte 2 was laid. In the fourth quarter of 2015, the civil works of process areas began at accelerated rhythm and in the period, the anticipated earthwork, infrastructure, site preparation and temporary buildings were virtually concluded. The Horizonte 2 project closed the year of 2015 with an overall physical advance of 15%.

 

On the outbound logistics front, Fibria won the public bid for the Macuco terminal, which represents Terminal 32 in the port of Santos. Currently the concession process is moving ahead towards signature and we expect it to be concluded in the first quarter of 2016.

 

The Company’s future expansion plans will depend on global market conditions. Possible expansion projects include the expansion of two existing mills as follows:  Veracel II with a nominal capacity of 1.5 million metric tons (50% Fibria and 50% Stora Enso) and a 1.5 million metric tons additional capacity from a fourth line in the Aracruz Unit.

 

**Ensyn**

 

In line with our strategy of complementing the pulp business and exploring opportunities within the value chain of the forestry industry, Fibria announced in October 2012 the establishment of an alliance with Ensyn Corporation (“Ensyn”), a private company incorporated in Delaware, USA.

 

Ensyn has developed the commercially-proven Rapid Thermal ProcessingTM (“RTP”) technology, which converts wood and other non-food biomass into renewable liquid fuels and chemicals. Ensyn’s key renewable liquid fuel, Renewable Fuel OilTM (“RFO”), is a multi-purpose petroleum replacement fuel with uses including heating, conversion to transportation fuels and power generation in diesel engines.

 

In 2012, with an initial investment of US$20 million, Fibria acquired 6.66% of Ensyn’s share capital and the option to invest additional US$10 million in its capital in the future. Furthermore, Fibria and Ensyn agreed to set up an equally-owned joint venture (F&E Technologies LLC), which was duly incorporated in Delaware for future investments in the production of liquid fuels and chemicals from biomass in Brazil. In 2014, Fibria entered into an Amendment to the 2012 Share Purchase Agreement, for the acquisition of approximately 3% of Ensyn’s capital for US$10 million, increasing our interest to 9.56% of Ensyn’s capital, and also providing us with certain rights which, if exercised, would allow us to subscribe additional US$5 million in Ensyn’s capital. In 2015, Fibria executed a new agreement for the purchase of approximately 3% of Ensyn’s capital, by the payment of US$5 million in exchange of the warrant issued in favor of the Company in 2014. As a result of the acquisition of additional capital in 2015, the Company holds 12.62% of the share capital of Ensyn and has the option to invest in the future additional US$10 million in its capital.

 

**Fibria Innovations**

 

In 2015, the Company achieved a major advance in lignin research by acquiring the assets of the Canadian company Lignol Innovations, renamed Fibria Innovations. As a result, Fibria became the owner of substantial intellectual property regarding the subject and established an important link with one of Canada’s leading universities, the University of British Columbia, expanding its options for the pursuit of new scientific knowledge. We are now working on making the best possible use of the quality of our patent portfolio and developing higher added value applications for lignin.

 

**ITEM 4A. UNRESOLVED STAFF COMMENTS**

 

We have no outstanding unresolved comments from the Staff of the SEC.

 

**ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS**

 

The following discussion of our financial condition and operating results should be read in conjunction with our audited consolidated financial statements and the accompanying notes as of December 31, 2015, 2014 and 2013, included in this annual report that have been prepared in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), as well as with the information presented under “Presentation of Financial and Other Data” and “Item 3. Key Information — A. Selected Financial Data”.

 

“This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Item 3. — Key Information — D. Risk Factors” and the matters set forth in this annual report generally.

 

**Overview**

 

We are the world’s largest producer of market pulp, according to Hawkins Wright and the PPPC, with an aggregate pulp production capacity of approximately 5.3 million tons of eucalyptus pulp per year. We believe that we are one of the lowest-cost

 

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producers of BEKP in the world, primarily due to our economies of scale, our state-of-the-art and strategically located production facilities, the short harvest cycle of our trees and our use of high-end technology in our operations. During the first half of 2009, we acquired control of Aracruz and have fully consolidated the results of operations of Aracruz into our consolidated financial statements as from January 1, 2009. In September 2009, we adopted the trademark “Fibria” for our pulp and paper operations.

 

**Factors Affecting our Results of Operations**

 

Our results of operations have been affected by the disposition of other pulp and paper assets during the three-years period ended December 31, 2013 (Conpacel, KSR and Piracicaba). In addition, our results of operations for the years ended December 31, 2015, 2014 and 2013 have been affected, and our results of operations will continue to be affected, by a variety of factors, including:

 

·                  the expansion or contraction of global production capacity for the products that we sell and the growth rate of the global economy;

 

·                  fluctuations in the international market prices of our products, which are denominated in, or referenced to, the U.S. Dollar, and which could significantly affect our net revenues;

 

·                  the rate of growth of the global and Brazilian GDP, which affects demand for our products and, consequently, our sales volume;

 

·                  our capacity utilization rates, which significantly affect the cost of producing our products and may lead to impairment of our assets;

 

·                  the results of operations of those companies in which we have or had non-controlling equity interests or shared equity control, such as Veracel, a portion of which are or were consolidated into our results of operations as required by IFRS;

 

·                  changes in the *Real*/U.S. Dollar exchange rate, including the appreciation of the average U.S. Dollar against the *Real* by 42% in 2015, 9% in 2014 and 11% in 2013, which have affected (1) the amounts as expressed in *Reais* of our net revenues, our cost of sales (mainly due to chemicals and freight) and some of our operating and other expenses that are denominated in or linked to U.S. Dollars and (2) our net financial expenses as a result of our U.S. Dollar-denominated liabilities that require us to make principal and interest payments in U.S. Dollars;

 

·                  the level of our outstanding indebtedness, fluctuations in benchmark interest rates in Brazil, principally the LIBOR rate, which affects our interest expense on our U.S. Dollar-denominated floating rate debt, and fluctuations in the CDI rate, which affects our interest expense on our *Real* -denominated floating rate debt;

 

·                  inflation rates in Brazil, which were 10.7% in 2015, 6.4%% in 2014 and 5.9% in 2013, as measured by the IPCA, and the effects of inflation (deflation) on our operating expenses denominated in *Reais* and our *Real*-denominated debt that is indexed to take into account the effects of inflation or bears interest at rates that are partially adjusted for inflation; and

 

·                  changes in accounting policies and the Brazilian Corporation Law, as discussed elsewhere herein.

 

Our financial condition and liquidity is influenced by a variety of factors, including:

 

·                  our ability to generate cash flows from our operations;

 

·                  prevailing Brazilian and international interest rates and movements in exchange rates, which affect our debt service requirements;

 

·                  our ability to continue to be able to borrow funds from Brazilian and international financial institutions and to sell our debt securities in the Brazilian and international securities markets at acceptable rates, which is influenced by a number of factors discussed herein;

 

·                  our capital expenditure requirements, which consist primarily of maintenance of our operating facilities, expansion of our production capacity (including the Horizonte 2 project), acquisitions and research and development activities;

 

·                  the requirement under our by-laws that we pay dividends on an annual basis in an amount equal to at least 25% of our adjusted net income, unless our Board of Directors deems such payment inconsistent with our financial position; and

 

·                  changes in accounting policies and the Brazilian Corporation Law.

 

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***Effects of Fluctuations in Pulp Price***

 

The international market prices of our pulp have fluctuated significantly, and we believe that they will continue to do so in light of global economic developments, such as the increase in demand for pulp in China. Significant increases in the international market prices of our products, and consequently, the prices that we are able to charge, would likely increase our net revenues and our results of operations to the extent that we are able to maintain our operating margins and increased prices do not reduce sales volumes of our products. Conversely, significant decreases in the international market prices of our products, and consequently, the prices that we charge, would likely reduce our net revenues and our results of operations if we are unable to increase our operating margins or these reduced prices do not result in increased sales volumes of our products.

 

World pulp prices are cyclical because demand for paper depends heavily on general economic conditions and because production capacity adjusts slowly to changes in demand. For the year ended December 31, 2014, BEKP average reference prices in North America (RISI), Europe (FOEX) and Asia (FOEX) were U.S.$846, U.S.$745 and U.S.$609 per ton, respectively. For the year ended December 31, 2015, BEKP average reference prices in North America, Europe and Asia were U.S.$890, U.S.$784 and U.S.$641 per ton, respectively.

 

We have long-term sales relationships with substantially all of our pulp and paper customers in the domestic and the export markets. These contracts generally provide for the sale of our market pulp at prices we announce each month. These prices may vary among the different geographic areas where our customers are located. The price arrangements under our long-term contracts are generally consistent with prices for our other sales within the same region and follow the established list price of BEKP announced by major global pulp producers.

 

***Brazilian economic environment***

 

Our results of operations and financial condition, as reported in our consolidated financial statements, have been affected by the rate of Brazilian inflation and the rate of appreciation or depreciation of the U.S. Dollar against the Brazilian currency, considering an annual average rate. The table below shows the Brazilian National Consumer Inflation Index (IPCA), depreciation (appreciation) of the average U.S. Dollar against the *Real* and the period-end exchange rate and average exchange rates for the periods shown:

 
| ** **                                                                                                | ** ** | **2015** | ** ** | **2014** | ** ** | **2013** | ** ** | **2012** | ** ** | **2011** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|
| Inflation (IPCA)                                                                                          |       | 10.7     | %          | 6.4      | %          | 5.9      | %          | 5.8      | %          | 6.5      | %          |
| Depreciation   (appreciation) of the average U.S. Dollar vs. *Real*  (year   on year) |       | 42       | %          | 9        | %          | 11       | %          | 8.2      | %          | 11.2     | %          |
| Year/period-end   exchange rate—U.S.$ 1.00                                                      |       | R$       | 3.90       |     | R$         | 2.66     |       | R$       | 2.34       |     | R$         | 2.04 |   | R$ | 1.88 |   |
| Average   (daily-weighted) exchange rate(1) U.S.$ 1.00                                          |       | R$       | 3.34       |     | R$         | 2.35     |       | R$       | 2.16       |     | R$         | 1.95 |   | R$ | 1.67 |   |
|                                                                                                           |            |          |            |          |            |          |            |          |            |          |            |  |  |  |  |  |  |

 

----

(1)         The average (daily) exchange rate is the sum of the closing exchange rates at the end of each business day divided by the number of business days in the period.

 

***Effects of Fluctuations in Exchange Rates between the Real and the U.S. Dollar***

 

Our results of operations and financial condition have been, and will continue to be, affected by the rate of depreciation or appreciation of the U.S. Dollar against the *Real*because:

 

·                  a substantial portion of our revenues is denominated in U.S. Dollars;

 

·                  a substantial portion of our costs are incurred in *Reais*;

 

·                  we have certain operating expenses, costs for some of our raw materials and make certain other expenditures, that are denominated in or linked to U.S. Dollars; and

 

·                  we have significant amounts of U.S. Dollar-denominated liabilities that require us to make principal and interest payments in U.S. Dollars.

 

The majority of our pulp sales are made in the export market at prices that are based on international market prices expressed in U.S. Dollars. Although most of our domestic sales revenue is in *Reais,*substantially all of our products are sold at prices that are based on international market prices that are quoted in U.S. Dollars.

 

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When the U.S. Dollar*appreciates*against the *Real*, assuming international market prices of our products remain constant in U.S. Dollars, our net sales revenue from export sales increases and we generally attempt to increase the domestic prices for our products in *Reais*, which may result in reduced domestic sales volumes of our products. Conversely, when the U.S. Dollar*de*preciates against the*Real*, assuming international market prices of our products remain constant in U.S. Dollars, our net sales revenue from export sales declines and we generally decrease the domestic prices for our products in *Reais*, which may result in increased domestic sales volumes of our products. In periods of high volatility in the *Real*/U.S. Dollar exchange rate, there is usually a lag between the time that the U.S. Dollar appreciates or depreciates and the time that we are able to pass on increased or reduced costs in *Reais*to our customers. These pricing mismatches decrease when the *Real*/U.S. Dollar exchange rate is less volatile.

 

Our consolidated U.S. Dollar-denominated indebtedness represented 90% (including currency swaps) of our outstanding indebtedness as of December 31, 2015. As a result, when the *Real* appreciates against the U.S. Dollar:

 

·                  the interest costs on our U.S. Dollar-denominated indebtedness decrease in *Reais*, which decrease positively affects our results of operations in *Reais*;

 

·                  the amount of our U.S. Dollar-denominated indebtedness decreases in *Reais*, and our total liabilities and debt service obligations in *Reais*decrease; and

 

·                  our net financial expenses tend to decrease as a result of foreign exchange gains on the U.S. Dollar debt.

 

A depreciation of the *Real*against the U.S. Dollar has converse effects.

 

The U.S. Dollar-denominated debt service obligations provide a natural hedge against our export sales, which enable us to generate receivables payable in foreign currencies but they do not fully match them. Accordingly, we often enter into derivative transactions to mitigate exchange rate fluctuations in our U.S. Dollar-denominated net exposure. A significant portion of our indebtedness is linked to and repaid principally with the proceeds of our exports. This indebtedness is denominated in U.S. Dollars and is generally available at a lower cost than other types of available funding. We generally pledge a portion of our receivables as collateral for the ongoing debt service obligations, usually to cover the next interest payment and principal installments. These agreements also contain certain financial and other covenants.

 

***Effect of Level of Indebtedness and Interest Rates***

 

As of December 31, 2015, our total outstanding indebtedness on a consolidated basis was R$12,744 million. The level of our indebtedness results in significant financial expenses that are reflected in our statement of operations. Financial results consist of interest expense, exchange variations of U.S. Dollar- and other foreign currency-denominated assets and liabilities, derivative losses or gains, and other items as set forth in Note 32 to our 2015 consolidated financial statements. In 2015, we recorded total net financial expense of R$3,685 million, which mainly consisted of R$470 million of interest on loans and financings, R$2,507 million of foreign exchange loss on loans and financings and other assets and liabilities and R$830 million on losses on derivative financial instruments.  In 2014, we recorded total net financial expense of R$1,635 million, which mainly consisted of R$476 million of interest on loans and financings, R$499 million on financial charges in the partial repurchases of Bonds and R$722 million of foreign exchange loss on loans and financings and other assets and liabilities. The interest rates that we pay depend on a variety of market factors, including prevailing Brazilian and international interest rates and our risk assessments, our industry and the Brazilian economy made by potential lenders to us, potential purchasers of our debt securities and the rating agencies that assess us and our debt securities.

 

S&P, Moody’s and Fitch maintain ratings of our Company and certain of our debt securities. The ratings currently assigned to our foreign currency debt on the global scale are BBB-/Stable by Fitch, BBB-/Stable by S&P and Baa3/Stable by Moody’s. All rating agencies have already reaffirmed their BBB-/stable and Baa3/stable rating for Fibria after S&P and Fitch downgraded Brazil’s sovereign rating from BBB- to BB+ in September 2015 and December 2015, respectively, and Moody’s placement of Brazil’s sovereign rating Baa3 for downgrade in December 2015. In February 2016, S&P downgraded Brazil’s sovereign rating from BB+ to BB with a negative outlook. The achievement of the investment grade rating by us with all three rating agencies was mainly due to our pursuit of deleveraging despite market conditions, free cash flow generation, our appropriate and conservative approach to liquidity, the headroom under our financial covenants. The reaffirming of our rating by S&P, Fitch and Moody’s after the rating actions on Brazil’s sovereign ratings in September and December 2015, and February 2016, is due to rating agencies opinion that despite our asset concentration in Brazil, our condition as primarily an exporter limits the impact of weak domestic economic fundamentals on the Company’s creditworthiness, also being currently benefited by the weaker Real. Nevertheless, any ratings downgrades in the future would likely result in increased interest and other financial expenses relating to borrowings and debt securities and could adversely affect our ability to obtain such financing on satisfactory terms or in amounts required by us.

 

***Seasonality***

 

The market pulp industry seasonality pattern has been historically correlated with that of paper production. World paper production normally increases by the end of the summer vacations in the northern hemisphere, as well as during the Christmas and New Year holidays. However, due to specific factors, including pulp and paper machine closures, start-up of new capacities, changes

 

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in the cost structure of the industry and the increase of global pulp demand, the seasonality trends observed in the past for the pulp industry may be subject to changes in the future.

 

**Discussion of critical accounting policies and estimates**

 

This section focus on critical accounting estimates and assumptions where the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and the impact of the estimates and assumptions on financial condition or operating performance is material.

 

Critical accounting policies are those that are important to the portrayal of our consolidated financial position and results of operations and require management’s most difficult, subjective or complex judgments, estimates and assumptions. The application of these critical accounting policies often requires judgments made by management regarding the effects of matters that are inherently uncertain with respect to our results of operations and the carrying value of our assets and liabilities. Our results of operations and financial position may differ from those set forth in our consolidated financial statements if our actual experience differs from management’s assumptions and estimates. In order to provide an understanding of our critical accounting policies, including some of the variables and assumptions underlying the estimates, and the sensitivity of those assumptions and estimates to different parameters and conditions, we set forth below a discussion of our critical accounting policies relating to:

 

·      biological assets;

 

·                  contingent assets and liabilities;

 

·                  fair value of derivatives and other financial instruments;

 

·                  income tax and social contribution;

 

·                  goodwill impairment ; and

 

·                   employee benefits;

 

**Biological Assets**

 

Biological assets are measured semi-annually (June and December) at their fair value, net of estimated costs to sell. Depletion is calculated based on the total volume harvested.

 

Biological assets consist of eucalyptus forests exclusively from renewable plantations and intended for the production of bleached pulp. As a result of improvements in forest management techniques, including the genetic improvement of trees, the cycle of harvesting following replanting occurs between six and seven years.

 

Fair value is determined using the discounted cash flow method, taking into consideration the volume of wood, segregated by plantation year, measured at the sales price of standing timber. The average sales price was estimated based on market research and recent sales transactions, in the local market, for harvested eucalyptus wood. Adjustments to the sales price have been made in order to determine the estimated fair value of standing timber. The volumes used in the valuation are consistent with the annual average harvest for each region. The main assumptions used by us to determine the fair value of its biological assets are described in Note 18 to our 2015 consolidated financial statements.

 

**Contingent Assets and Liabilities**

 

The accounting practices for the accounting and disclosure of contingent assets and liabilities from legal proceedings are as follows:

 

(1) assets, previously treated as contingent, are recognized only when there is evidence that realization is virtually certain, generally when favorable, final and unappealable court decisions have been obtained and for which the value can be measured. Contingent assets, for which such conditions are not met, are only disclosed in the notes to the financial statements when material;

 

(2)  liabilities are provided to the extent that we expect that is probable that we will disburse cash and the amount can be reliably estimated. Tax and civil proceedings are accrued when losses are assessed as probable, and the amounts involved can be reliably measured. When the expectation of loss is possible, a description of the processes and amounts involved is disclosed in the

 

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notes to the financial statements. Labor proceedings are provisioned based on the historical percentage of disbursements. Tax and civil liabilities assessed as remote losses are neither accrued nor disclosed; and

 

As discussed in Note 24 to our 2015 consolidated financial statements as of and for the years ended December 31, 2015, 2014 and 2013 included elsewhere in this annual report, we are party to labor, civil and tax lawsuits at various court levels. The provisions against potential unfavorable outcome of claims in progress are established and updated based on management’s evaluation, as supported by external legal counsel. In addition, we have tax and civil claims arising in the normal course of business that are assessed as possible losses, as supported by external legal counsel. No provision has been recorded to cover possible unfavorable outcomes from these claims.

 

The Company is involved in 5,751 labor cases, which are assigned different probabilities of loss, from remote to probable. Because of the large number of cases, the Company uses historical data as a proxy for estimating future cash outflows and to determine the provision. The legal department follows outcomes and trends carefully to identify changes in patterns or court attitudes.

 

**Fair Value of Derivatives and other Financial Instruments**

 

For derivative and other financial instruments, we make assumptions based on market observable data as to future foreign exchange and interest rates to recognize the fair value of each instrument. Derivatives are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value. Changes in fair value are recorded in the Statement of profit or loss, in the line “Result of derivative financial instruments”.

 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Fibria uses judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. We also use our judgment to define scenarios and figures presented in the sensitivity analysis included in Note 5 to our 2015 consolidated financial statements. Any changes to the assumptions used for calculations involving the fair value of financial instruments could significantly affect our financial position.

 

Embedded derivatives in non-derivative host contracts are required to be separated when their risks and characteristics are not-closely related to those of host contracts and these are not measured at fair value through profit or loss.

 

Non-option embedded derivatives are separated from the host contract in accordance with its stated or implied substantive terms, so that they have zero fair value on initial recognition.

 

The amounts estimated by management are also compared with the Mark-to-Market (MtM) provided as reference by the banks (counterparties) and with the estimates performed by an independent financial advisor. A summary of the methodologies used for fair value determination purposes by instrument is presented in Note 6.2 to our consolidated financial statements as of and for the years ended December 31, 2015, 2014 and 2013 included elsewhere in this annual report.

 

**Income tax and social contribution**

 

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

 

Deferred income tax is recognized on unrealized foreign exchange gains and losses of assets and liabilities denominated in foreign currencies and treated on a cash basis for tax purposes. In other words, when foreign exchange losses are accrued they are only treated as tax deductible when the asset or liability is settled. Conversely, when foreign exchange gains are accrued they are only treated as taxable the asset or liability is settled. For accounting purposes, when the payment of tax occurs in a period different from the recording of the accrual of the gains and losses in the financial statements, a deferred tax expense or benefit is booked to match the accounting with the tax treatment.

 

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized

 

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by us and it is probable that the temporary difference will not be reversed in the foreseeable future.

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

 

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We have a history of recurring taxable income, against which we are usually able to offset our compensated with tax loss carryforward deferred tax assets. We believe, based on projections of income approved at the appropriate levels of our Corporate Governance that, the realization of the deferred tax assets is probable.

 

**Impairment of goodwill**

 

Under IFRS, goodwill is not subject to amortization but is tested at least annually for impairment. Upon acquisition of a business, goodwill is allocated to Cash Generating Units (“CGUs”) or groups of CGUs. The allocation is made to the CGUs or group of CGUs which will benefit/from the business combination originating the goodwill. Each CGU or group of CGUs to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. When impairment test of goodwill is performed the carrying amount of the assets and liabilities of the CGU or group of CGUs to which goodwill is allocated is compared to its recoverable amount.

 

We performed an impairment test as of December 31, 2015 and did not recognize any loss as of such date. Goodwill allocated to such groups of CGUs amounted to R$4,230 million as of December 31, 2015.

 

In measuring the value in use, we used discounted cash flows. A ten year period cash flow has been considered and an additional amount was calculated for the perpetuity of the cash flow of the tenth year, discounted to present value using the WACC (Weighted Average Cost of Capital) rate. A ten-year period was used as management considers that global price of pulp can be affected by several factors which generally are identified in periods longer than the production cycle of forest, which is between six and seven years.

 

The main assumptions used in determining value in use at December 31, 2015, are as follows:

 
| ** **                                             | ** ** | **Assumptions**  | ** ** |
|--------------------------------------------------------|------------|------------------|------------|
|                                                   |       |             |       |
| Average net pulp   price — U.S. Dollar/ton        |       | U.S.$573         |       |
| Average exchange   rate in the period - R$/U.S. Dollar |       | R$3.11           |       |
|                                                   |       |             |       |
| Discount rate -   WACC (nominal and real)              |       | 12.35% and 7.39% |       |

 

Management determined the gross margin based on past performance and on its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports.

 

**Employee benefits**

 

The accounting practices of employee benefits are as follows:

 

(a)         Pension obligation: we participate in pension plans, managed by a private pension entity, which provide post-employment benefits to employees, classified as defined contribution plans to which we pay fixed contributions to and for which we have no legal liability to make additional contributions if the fund does not have sufficient assets to honor the benefits due to employees for service in the current and prior periods. Contributions represent net costs and are recorded in the Statement of profit or loss in the period in which they are due. The amount of contributions for the year ended December 31, 2015 was R$9.7 million (R$9.3 million as of December 31, 2014 and R$8.8 million as of December 31, 2013) as disclosed in the Note 29(b) of our 2015 consolidated financial statements included elsewhere in this annual report.

 

(b)         Health care (post-retirement): some of our subsidiaries used to provide post-retirement health care benefits in the form of a lifetime benefit to a specific group of employees which has since been discontinued and closed to new participants from July 2007. The liability related to the health care plan for retired employees is stated at the present value of the obligation, in the amount of R$90 million as of December 31, 2015 (R$91.4 million as of December 31, 2014 and R$76.7 million as of December 31, 2013). Management’s estimate of the defined benefit obligation is calculated annually together with independent qualified actuaries. The present value of the defined benefit obligation is determined through an estimate of discounted future cash outflow, utilizing the discount rate disclosed in the Note 29(c) of our 2015 consolidated financial statements included elsewhere in this annual report. Changes in the present value of the liabilities of the plan regarding the interest accrued are immediately recognized in the Statement of profit or loss. The changes in the present value of the liabilities of the plan regarding the actuarial gain and loss are recognized directly in shareholder’s equity, in “Other comprehensive income”.

 

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(c)          Profit-sharing and bonus plans: we recognize a liability and an expense for bonuses and profit-sharing in the statement of profit or loss. As from 2015, the provisions for bonuses and profit-sharing programs are calculated based on qualitative and quantitative targets established by management and are recorded with a charge to the Statement of profit or loss under “Other operating income (expenses), net” (previously under “General and administrative expenses”; priory years have been reclassified to assure consistency of presentation). The total amount recorded as expenses for the year ended December 31, 2015 was R$96.0 million (R$69.6 million as of December 31, 2014 and R$55.7 million December 31, 2013).

 

The lines of “Administrative expenses” and “Other operating income (expenses), net” of 2014 and 2013 were adjusted in the amount of R$20.0 million and R$15.9 million, respectively, for comparison purposes.

 

(d)         Share-based compensation:

 

(i)             Phantom Stock Options Plan: we offer a compensation plan in which the amount of the benefit is determined based on changes in the quoted market price of its shares, based on a predetermined floor price and an established measurement date. The plan consists of cash payments, not involving the issue and/or delivery of shares for purposes of the plan. Our CEO and statutory and non-statutory officers are eligible for the plan. The obligations are recorded as a provision for amounts payable to the CEO and statutory and non-statutory officers, with a corresponding entry to the Statement of profit or loss, based on the fair value of the benefits granted and the vesting period. The fair value of this liability is re-measured at each reporting period. Details regarding of this compensation plan are detailed in Note 30(i) of our 2015 consolidated financial statements included elsewhere in this annual report.

 

(ii) Stock Options Plan: we operate an equity-settled transaction under which the entity receives services from employees as consideration for equity instruments (stock options) of the Company. The fair value of the employee services received in exchange for the grant of the options is recognized as an expense, against to the capital reserve. Our CEO, statutory and non-statutory officers and general managers are eligible for the plan. The total amount to be expensed is determined by reference to the fair value of the options granted, including any market performance conditions and the impact of any non-vesting conditions and excluding the impact of any service and non-market performance vesting conditions. Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, we revise our estimates of the number of options that are expected to vest based on the non-market vesting conditions. If necessary, we recognize the impact of the revision to original estimates in the Statement of profit or loss, with a corresponding adjustment to shareholders’ equity. Details regarding of this compensation plan are detailed in Note 30(ii) of our 2015 consolidated financial statements included elsewhere in this annual report.

 

**New accounting pronouncements**

 

The standards below have been issued and are effective for periods from January 1, 2016. We have not early adopted these standards.

 
| **Standard**                   | ** ** | **Effective date** | ** ** | **Main points introduced by the standard**                                                                                                                                                                                                                                                                           | ** ** | **Impacts of the adoption**                                                                                                                                                                                    |
|--------------------------------|------------|-------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| IFRS 9 - Financial Instruments |       | January 1, 2018    |       | The main change is that, in cases where the fair   value option is taken for financial liabilities, the part of a fair value change   which is due to an entity’s own credit risk is recorded in Other   comprehensive income rather than the Statement of profit or loss.                                                               |       | The Company is currently assessing the impacts of   the adoption.                                                                                                                                                             |
| IFRS 15 - Revenue recognition  |       | January 1, 2018    |       | This accounting standard establishes the accounting   principles to determine and measure revenue and when the revenue should be   recognized.                                                                                                                                                                                                |       | The Company is currently assessing the impacts of   the adoption.                                                                                                                                                             |
| IAS 41 - Agriculture           |       | January 1, 2016    |       | The “bearer plants” are to be accounted for as   property, plant and equipment (IAS 16), i.e., at cost less depreciation or   impairment provision. “Bearer plants” are defined as those used to produce   fruit/ regenerate for several years, but the plant itself, once mature, does   not suffer significant changes. |       | The Company has evaluated and concluded that the   revision of the standard will not impact its measurement and presentation of   its biological assets since they do not meet the definition of “bearer   plants”. |

 

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| IFRS 16 - Leases |   | January 1, 2019 |   | This accounting standard replaces the previous   leases standard, IAS 17 Leases, and related interpretations and sets out   the principles for the recognition, measurement, presentation and disclosure   of leases for both parties to a contract, i.e., the customers (‘lessees’) and   the suppliers (‘lessor’).

Lessees are required to recognize a lease liability   reflecting future lease payments and a ‘right-of-use asset’ for virtually all   lease contracts, except for certain short-term leases and leases of low-value   assets. For lessors, the accounting stays almost the same and continues to   classify its leases as operating leases or finance leases, and to account for   those two types of leases differently. |   | The Company is currently assessing the impacts of   the adoption. |
|------------------|--------|----------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|

 

There are no other IFRSs or IFRIC interpretations that are not yet effective that the Company expect to have a material impact on the Company’s financial position and results of operations.

 

**Main Components of o****ur Operating Results**

 

***Sales taxes and other deductions on revenues***

 

Our net revenues derived by our domestic operations are subject to the PIS/COFINS excise tax and the ICMS state value-added tax. The rate of the PIS/COFINS excise tax is 1.65% and 7.6%, respectively. The rate of the ICMS value-added tax varies from 7% to 18%, depending on the product sold and the Brazilian state in which the product is delivered. Revenues from export sales are not subject to Brazilian tax. Deductions consist of sales discounts that we provide to our customers and rebates on exports. Our net revenues are substantially denominated in U.S. Dollars.

 

***Cost of sales***

 

Cost of sales consist principally of cash production cost, depreciation, depletion and amortization, and freight. Cost of sales is mainly denominated in Brazilian *Reais.* The main components of the cash production cost are, by order of magnitude: wood, chemicals, maintenance, personnel and fuel. The cash production cost is a lead indicator of the Company’s economic performance in our industry, being a well-known parameter extensively used by industry’s investors and analysts.

 

***Selling expenses***

 

Selling expenses consists of sales and distribution expenses, mainly terminal, pulp loading, sales commissions and allowance for doubtful accounts. Selling expenses are mainly denominated in Brazilian *Reais.*

 

***General and administrative expenses***

 

The main components of our administrative expenses are personnel, third-party services (including the cost of external advisors and auditors), and depreciation and amortization expenses, among other things. Administrative expenses are mainly denominated in Brazilian *Reais.*

 

***Other operating income (expenses), net***

 

Other operating income (expenses), net are largely comprised of the change in fair value of biological assets, variable employees compensation expense, tax credits recognized (such as BEFIEX credit, in 2014), capital gain on disposal of Piracicaba unit (in 2011), capital gain on land and buildings sold (in 2015 and 2013), net gains or losses on disposal of property, plant and equipment, and others.

 

***Financial results***

 

Financial results mainly includes: (i) the earnings from financial investments denominated in U.S. Dollars and *Real*; (ii) net financial gains or losses from derivatives financial instruments; (iii) interest expense and early redemption costs on loans (Bonds) generally denominated in U.S. Dollars and (iv) foreign exchange gains and losses.

 

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**A.**                                    **Operating Results**

 

**Results of operations**

 

The following table sets forth certain items derived from our Statements of profit or loss for the years indicated:

 
| **(in thousands of Reais, unless otherwise indicated)** | ** ** | **2015**   | ** ** | **2014**   | ** ** | **2013**   | ** ** |
|---------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                                  |       |       |       |       |       |       |       |
| **Revenues**                                                                          |       | 10,080,667 |       | 7,083,603  |       | 6,917,406  |       |
| Cost of sales                                                                         |       | (5,878,209 | )          | (5,545,537 | )          | (5,382,688 | )          |
|                                                                                  |       |       |       |       |       |       |       |
| **Gross   profit**                                                                    |       | 4,202,458  |       | 1,538,066  |       | 1,534,718  |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Operating   income (expenses)**                                                     |       |       |       |       |       |       |       |
| Selling expenses                                                                      |       | (437,253   | )          | (365,214   | )          | (347,538   | )          |
| General and administrative                                                            |       | (265,621   | )          | (265,077   | )          | (284,214   | )          |
| Equity in   results of joint-venture                                                  |       | 393        |       | (622       | )          | —     |       |
| Other operating   income and expense, net                                             |       | 24,347     |       | 749,462    |       | 807,481    |       |
|                                                                                  |       |       |       |       |       |       |       |
|                                                                                  |       | (678,134   | )          | 118,549    |       | 175,729    |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Income   before financial income and expenses**                                     |       | 3,524,324  |       | 1,656,615  |       | 1,710,447  |       |
|                                                                                  |       |       |       |       |       |       |       |
| Financial income                                                                      |       | 221,679    |       | 133,950    |       | 110,723    |       |
| Financial   expenses                                                                  |       | (569,793   | )          | (1,040,597 | )          | (1,016,526 | )          |
| Result of   derivative financial instruments, net                                     |       | (830,128   | )          | (6,236     | )          | (215,313   | )          |
| Foreign exchange   loss and indexation charges, net                                   |       | (2,507,023 | )          | (721,842   | )          | (932,907   | )          |
|                                                                                  |       |       |       |       |       |       |       |
|                                                                                  |       | (3,685,265 | )          | (1,634,725 | )          | (2,054,023 | )          |
|                                                                                  |       |       |       |       |       |       |       |
| **Income   (loss) before income taxes**                                               |       | (160,941   | )          | 21,890     | )          | (343,576   | )          |
|                                                                                  |       |       |       |       |       |       |       |
| Income Taxes                                                                          |       |       |       |       |       |       |       |
| Current                                                                               |       | (684,246   | )          | (46,280    | )          | (619,606   | )          |
| Deferred                                                                              |       | 1,202,172  |       | 186,942    |       | 265,600    |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Net   income (loss) for the year**                                                  |       | 356,985    |       | 162,552    |       | (697,582   | )          |
|                                                                                  |       |       |       |       |       |       |       |
| **Attributable   to**                                                                 |       |       |       |       |       |       |       |
| Shareholders of   the Company                                                         |       | 342,185    |       | 155,584    |       | (706,422   | )          |
| Non-controlling   interest                                                            |       | 14,800     |       | 6,968      |       | 8,840      |       |
|                                                                                  |       |       |       |       |       |       |       |
| **Net   income (loss) for the year**                                                  |       | 356,985    |       | 162,552    |       | (697,582   | )          |
|                                                                                  |       |       |       |       |       |       |       |
| Basic earnings   (loss) per share (in *Reais*)                                        |       | 0.62       |       | 0.28       |       | (1.28      | )          |
|                                                                                  |       |       |       |       |       |       |       |
| Diluted earnings   (loss) per share (in *Reais*)                                      |       | 0.62       |       | 0.28       |       | (1.28      | )          |

 

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The following table sets forth our volume sold and net operating revenue by type of product:

 
| ** **                                  | ** ** | **2015** | ** ** | **2014** | ** ** | **2013** | ** ** |
|---------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| **Pulp:**                                   |       |     |       |     |       |     |       |
| Volumes (in   thousands of tons)            |       |     |       |     |       |     |       |
| Export                                      |       | 4,619    |       | 4,788    |       | 4,751    |       |
| Domestic                                    |       | 499      |       | 517      |       | 447      |       |
| Total                                       |       | 5,118    |       | 5,305    |       | 5,198    |       |
|                                        |       |     |       |     |       |     |       |
| Net operating   revenue (in millions of R$) |       |     |       |     |       |     |       |
| Export                                      |       | 9,169    |       | 6,412    |       | 6,342    |       |
| Domestic                                    |       | 819      |       | 591      |       | 504      |       |
| Subtotal                                    |       | 9,988    |       | 7,003    |       | 6,846    |       |
| Services,   allocated on pulp segment       |       | 93       |       | 80       |       | 72       |       |
| Total pulp                                  |       | 10,081   |       | 7,083    |       | 6,918    |       |
|                                        |       |     |       |     |       |     |       |
| Average prices   (in R$ per ton)       |       | 1,951    |       | 1,320    |       | 1,317    |       |

 

**Year ended December 31, 2015 compared to year ended December 31, 2014**

 

In 2015, the pulp market exceeded market expectations, characterized by higher-than-expected demand growth and unscheduled production downtimes, which meant that new supply was absorbed by the market, in turn allowing the introduction of successive price increases and the maintenance of balanced inventories.

 

Despite volatility during this period, especially in Asia, which impacted the PIX/FOEX BHKP price and forced Fibria to reduce its exposure in the region, the level of hardwood inventory reported by the PPPC (39 days in December), the 7% upturn in global eucalyptus pulp sales and supply limitations due to non-scheduled downtimes by the hardwood pulp producers still ensured positive market fundamentals. In 2015, recurring free cash flow, which excludes the dividend payments, capital expenditures related to the Horizonte 2 project and the purchase of land from VID in December 2015,  totaled R$2.9 billion and Adjusted EBITDA was R$5,337 million, a 91% increase over 2014.

 

Please see below the *b**reakdown from Adjusted EBITDA to Recurring Free Cash Flow:*

 
| **Recurring Free Cash Flow (R$ million)** | ** ** | **2015**  | ** ** | **2014** | ** ** |
|--------------------------------------------------------------------|------------|-----------|------------|----------|------------|
| Adjusted EBITDA                                                    |       | 5,337     |       | 2,791    |       |
| (-) Total   capital expenditures                                   |       | (2,358    | )          | (1,591   | )          |
| (-) Dividends                                                      |       | (2,148    | )          | —   |       |
| (-) Interest (paid)/received                                       |       | (298      | )          | (411     | )          |
| (-) Income tax                                                     |       | (76       | )          | (29      | )          |
| (+/-) Working   capital                                            |       | (504      | )          | (136     | )          |
| (+/-) Others                                                       |       | 20        |       | 12       |       |
| **Free   Cash Flow**                                               |       | **(27**   | **)**      | **636**  |       |
| (+) Capital   expenditures related to Horizonte 2 project          |       | 292       |       | —   |       |
| (+) Dividends                                                      |       | 2,148     |       | —   |       |
| (+) Land acquisition   from VID                                    |       | 452       |       | —   |       |
| **Recurring   Free Cash Flow**                                     |       | **2,865** |       | **636**  |       |

 

On November 3, 2015, Moody’s raised Fibria’s rating from ‘Ba1/Positive’ to ‘Baa3/Stable’. The upgrade mainly reflected the Company’s disciplined approach to leverage and liquidity and its capacity to consistently reduce its leverage ratios while preserving its liquidity position, in addition to expectations that it will continue to benefit from pulp prices and the depreciation of the *Real* against the dollar over the next 12-18 months. Consequently, Fibria’s credit metrics will enable the expansion of the Três Lagoas industrial complex while preserving its level of indebtedness in a manner compatible with a Baa3 investment grade rating, according to the rating agency. In addition to Moody’s, the other agencies (Fitch and S&P) reaffirmed the rating with stable outlook, even after the downgrade actions on the sovereign ratings in September and December 2015, and in February 2016.

 

As disclosed in Note 16 to our 2015 consolidated financial statements, on December 28, 2015, Fibria informed its shareholders and the market in general that it had executed private property purchase and sale contracts with one of its controlling

 

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shareholders, Votorantim Industrial S.A. (VID) through which: (i) the Company undertook to sell and transfer, and VID undertook to buy and acquire, rural properties owned by the Company, totaling 5,042 hectares, for R$172 million, and (ii) VID undertook to sell and transfer, and the Company undertook to buy and acquire, rural properties owned by VID, totaling 33,994 hectares, for R$452 million. The Company further disclosed that the amounts of the property purchases and sales were negotiated between the parties based on independent appraisals. The transaction aligns with Fibria’s intention to streamline its asset base in order to ensure and expand the structural competitiveness of its forestry activities.

 

In 2015, pulp production totaled 5,185 kilotons, down 2% from 2014, due to the slower stabilization curve following scheduled maintenance downtimes, which, for the first time, were held after 15 months of operations, instead of after 12 months like in previous years. Sales totaled 5,118 kilotons, 3.5% less than in 2014. Despite a strong performance for most of 2015, permitting three successive price hikes throughout the year, sales in the final quarter were negatively impacted by Chinese pressure on prices, leading Fibria to reduce its exposure in Asia below its historical average. Pulp inventories closed the year at 52 days, 4 days more than in 2014.

 

The cash production cost in 2015 was R$618/ton, 19% higher than 2014, primarily due to wood costs (R$35/ton) and the foreign exchange effect (R$28/ton). Other factors that that impacted the increased cash cost were the higher logistics costs with respect to wood (wider average transportation radius and more wood acquired from third parties), the heavier impact from scheduled maintenance stoppages and the reduced electricity sales. In U.S. Dollars, however, the annual cash cost fell by 16%

 

The financial result was a net expense of R$3.7 billion, versus an expense of R$1.6 billion in 2014, mainly due to the impact of the exchange variation on U.S. Dollar-denominated debt; the U.S. Dollar appreciated by 47% against the *Real* in 2015 and a large part of the Company’s debt is U.S. Dollar-pegged given its primary nature as an exporter. The deterioration in the hedge result, partially offset by dollar-pegged assets, which generated period revenue, also contributed to this result.

 

Adjusted EBITDA stood at R$5.3 billion, with a margin of 53%, a 91% increase over 2014 and a new record, primarily fueled by the appreciation of the US. dollar against the *Real* and the higher average net pulp price in dollars, partially offset by the upturn in cash cost sales and lower sales volume.

 

The Company ended the year with gross debt of R$12,744 million, corresponding to US$3,264 million, up 4% on the previous year in dollars due to period funding operations for the Horizonte 2 project. Net debt ended the year at R$11,015 million, the net debt/Adjusted EBITDA ratio in dollars stood at 1.78x and the total average debt maturity was 51 months.

 

As a result of all the above, we recorded net income of R$357 million, compared to R$163 million in 2014. The Company’s By-laws guarantee a mandatory dividend of 25% of net income after constitution of legal reserves. However, on December 17, 2015, the Board of Directors approved the proposal of dividends to be distributed in the amount of R$300 million, to be submitted to the approval in the Annual General Meeting in April 2016. Thus, considering the minimum mandatory dividend of R$81 million, the additional dividends proposed were R$219 million.

 

**Net Revenues**

 

Our net revenues increased by 42.3% to R$10,081million in 2015 from R$7,084 million in 2014, due to higher average net price in dollars and the appreciation of the U.S. Dollar against the *Real*during the period, partially offset by the reduction in sales volume.

 

Pulp sales volume totaled 5,118 kilotons, 3.5% less than in 2014 (or 187 kilotons), mainly due to a decrease in sales to Asia (117 kilotons, or 8.8%), North America (54 kilotons, or 4.3%) and Brazil/South America (18 kilotons, or 3.5%) in 2015 as compared to 2014. The sales for Europe were level in 2015 compared to 2014, with no relevant changes.

 

Export sales of pulp constituted 91.8% of our pulp net revenue and 90.3% of our pulp sales volume in 2015, compared to 91.6% and 90.3%, respectively, in 2014.

 

In 2015, 42.9% of our total sales volume was delivered to Europe, 23.6% to North America and 23.7% to Asia, as compared to 41.4%, 23.8% and 25.1%, respectively, in 2014. Discounts are frequently granted to our significant customers located in Europe and North America.

 

**Cost of Sales**

 

Cost of sales increased by 6.0%, or R$333 million, to R$5,878 million in 2015 from R$5,545 million in 2014, mainly, due to (i) the increase in the production cash cost, impacted by higher wood costs, the exchange rate, and the reduction in energy sales due to

 

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lower prices; and (ii) the impact of the exchange variation, on freight charges, partially offset by the reduced cost of bunker adjustments as a result of the slide in oil prices.

 

The cash production cost is one of the main components of our cost of sales. The cash production cost consists principally of the cost of sales excluding depreciation, depletion, amortization and freight. In 2015, the main components of the cash production cost, wood, chemicals, maintenance, personnel and energy/fuel represented approximately 44%, 22%, 14%, 6%, and 7%, respectively. There were no significant differences in the composition of cash production cost in 2015 as compared to 2014, except for the increase from 3% to 7% of energy/fuel due to the lower electricity sales (utilities results).

 

In 2015, our cash production cost per ton was R$618, an increase of 19% as compared to 2014, of R$519 per ton, mainly due to the following factors: i) higher wood costs, due to the higher share of wood acquired from third parties and wood brought from Losango, impacting the average distance from forest to mill; ii) the increased impact from scheduled maintenance downtimes; iii) the appreciation of the dollar against the real; and iv) the lower electricity sales. The annual inflation for 2015 was 10.7% (IPCA).

 

We are a beneficiary of the Special Tax Refund Regime for Exporting Companies (known as REINTEGRA), designed to return partially or in full any residual tax remaining in the production chain of exported goods, instituted by Law 13.043/2014. From February 27, 2015, the percentage to be applied over the export revenue for calculation of the tax credit was changed from 3% to 1% between March 1, 2015 and November 30, 2015 and 0.1% between December 1, 2015 and December 31, 2016. In 2017, the percentage to be used will be 2% and in 2018, 3% over the export revenue. During 2015, the Company recognized Reintegra credits of R$68.2 million, compared to R$37.0 million in 2014.

 

As a result of the above, our gross profit in 2015 increased by 173.2% or R$2,664 million, compared to 2014 and, consequently, our gross margin was 41.7% in 2015, compared to 21.7% in 2014.

 

**Selling Expenses**

 

Selling expenses amounted to R$437 million, 20% more than in 2014, chiefly due to the 42% appreciation of the average U.S. Dollar against the *Real*, which mainly impacted terminal expenses, partially offset by the downturn in sales volume. As a percentage of our net revenue, our selling expenses decreased to 4% in 2015 from 5% in 2014.

 

**General and Administrative Expenses**

 

General and administrative expenses totaled R$266 million, similar to the previous year. As a percentage of our net revenue, our general and administrative expenses decreased to 3% in 2014 from 4% in 2014.

 

**Equity in Results of Joint-Venture**

 

Equity in results of joint-venture recorded earnings of R$393 thousand in 2015, compared to a loss of R$622 thousand in 2014, as a result of our joint-venture F&E Technologies LLC.

 

**Other Operating Income (Expenses), Net**

 

The decrease of 96.8%, or R$725 million, in the other operating income (expenses), net is, substantially, the result of the combined following factors:

 

(i)                 R$852 million of tax credits recognized in 2014 (substantially BEFIEX Credit as described at our Note 24(d)(i) to our 2014 consolidated financial statements), against R$7 million in 2015;

 

(ii)              R$133 million increase in the fair value gain of biological assets from R$52 million in 2014 to R$185 million in 2015;

 

(iii)           R$135 million of gain on disposal of property, plant and equipment in 2015, compared to a R$68 million loss in 2014, mainly due to the net effect of the sale of 5 thousand hectares of land, as mentioned previously;

 

(iv)          the recognition of an additional impairment provision for ICMS credits, in the amount of R$165 million from previous years. Until September 2015, these provisions were the equivalent to 80% of the balance receivable from the state of Espírito Santo; however, due to the increasingly low likelihood of these credits being realized, the provision increased to 100% as from October 2015; and;

 

(v)             reversal of provision for legal provision (contingencies) in the amount of R$14 million in 2015, compared to new provisions for contingencies of R$14 million in 2014.

 

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**Financial Results**

 

Financial expense amounted to R$3,685 million in 2015, compared to R$1,635 million in 2014, primarily due to:

 

·                  Financial income: financial income increased to R$222 million in 2015 from R$134 million in 2014, due to R$84 million of interest on tax credits recognized (mainly BEFIEX), and R$132 million interest on financial investment earnings from use of cash and marketable securities.

 

·                  Financial expenses: financial expenses decreased to R$570 million in 2015 from R$1,041 million in 2014, due to (i) financial charges of R$599 paid in 2014 in the partial repurchases of Bonds against zero in 2015; (ii) decrease of R$19 million in 2015 in interest on loans and financing and loan commissions influenced by the repurchases previously mentioned; and (iii) an increase of R$47 million in other financial expenses.

 

·                 Foreign exchange loss, net: foreign exchange losses were R$2,507 million in 2015, compared to R$722 million in 2014, due to the impact of the exchange variation on US. dollar-denominated debt (the U.S. dollar appreciated by 47% against the *Real* in 2015), since a large part of the Company’s debt is denominated in U.S. dollars.

 

·                 Result of derivative financial instruments, net: our net expense with derivative financial instruments were R$830 million, compared to R$6.2 million in 2014, mainly due to the U.S. Dollar appreciation against the *Real*in 2015, impacting our outstanding debt swaps. The deterioration in the hedge result, partially offset by U.S. dollar-pegged assets, which generated period revenue, also contributed to this result. Because such foreign exchange losses will only be deductible by our Brazilian legal entities when their loans are paid, we recorded a deferred tax benefit (increasing the deferred tax asset) on those expenses that are deductible in future.

 

**Income taxes**

 

Brazilian corporate statutory income tax and social contribution rate is 34%. The Company and the subsidiaries located in Brazil are taxed based on their taxable income. The subsidiaries located outside of Brazil use methods established by the respective local jurisdictions. Income taxes have been calculated and recorded considering the applicable statutory tax rates enacted at the balance sheet date.

 

The Company still believes in the previsions of the International Double Taxation Treaties. However, as the final decision regarding its applicability is still pending on the Supreme Court (*Supremo Tribunal Federal — STF*), nowadays the Company taxes the foreign profits according to the Law 12,973/14.

 

The Law 12,973/14 revoked the article 74 of Provisional Measure 2,158/01. The law determines that the adjustment in the value of the investment, in the direct or indirect subsidiary, domiciled abroad, equivalent to its profits before tax, except for the foreign exchange, must be computed in the taxation basis of the corporate income tax and social contribution over profits of the controller company domiciled in Brazil, at the end of the fiscal year. The repatriation of these profits in subsequent years will not be subject to taxation in Brazil. The Company has provisions regarding the Corporate Income Tax of the subsidiaries on an accrual basis.

 

The effective tax rate applicable to our income (loss) before tax and social contribution was 321.8% and (642.6)% for the years ended December 31, 2015 and 2014, respectively. The income tax benefit for the year ended December 31, 2015 was R$518 million, compared to R$141 million for the year ended December 31, 2014.

 

Other than the change in the pretax accounting income the primary reasons for the changes included:

 

(i)                  net foreign exchange gains recognized by our foreign subsidiaries that use the Brazilian *Real* as the functional currency. As the Brazilian *Real* is not used for tax purposes in the foreign country this net foreign exchange gain is not recognized for tax purposes in the foreign country nor will it ever be subject to tax in Brazil. The tax effect of this exempt income was R$458 million and R$123 million in the years ended December 31, 2015 and 2014, respectively, reflecting the devaluation of the Brazilian *Real* in relation to these foreign currencies (primarily the U.S. Dollar and the Euro); and

 

(ii)               R$32 million tax effect on the benefit related to tax on net income (*Imposto sobre o Lucro Líquido - ILL*), recognized in 2014 against zero in 2015.

 

**Non-controlling Interest**

 

There were no significant changes in “Non-controlling interest” in 2015 compared to 2014.

 

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**Net Income (loss)**

 

As a result of the above mentioned, we generated a net income of R$357 million in 2015, as compared to R$162.6 million in 2014. As a percentage of net revenue, the net income was 3.5% in 2015, as compared to 2.3% in 2014.

 

**Year ended December 31, 2014 compared to year ended December 31, 2013**

 

In 2014, the pulp demand exceeded expectations, characterized by 11% growth over 2013. Regarding pulp supply, unexpected capacity closures helped keep the market balanced. This scenario allowed the market to absorb new supplies, maintaining manufacturers’ inventories in line with the historical average. In September, PIX/FOEX BHKP Europe price reached its lowest level (US$724/t), but has been showing gradual recovery, corroborated by the increase of 1% in the 4Q14 over the previous quarter. The positive fundamentals, especially on the demand side, led to an upturn in sales volume between 2013 and 2014, and a new price increase announcement by Fibria as of January 2015 (Europe: US$770/t). Finally, the cash production cost was 3% higher than in 2013, below period inflation.

 

In October, Fibria informed its shareholders and the market in general that Votorantim Industrial S.A. and BNDESPAR renewed the Company’s Shareholders’ Agreement, extending its term by five years, i.e. until October 29, 2019, among other terms and conditions. The Shareholders’ Agreement has been filed as an exhibit to this annual report.

 

As of July 9, Fibria has begun to benefit from the Special Tax Refund Regime for Exporting Companies — REINTEGRA, designed to return partially or in full any residual tax remaining in the production chain of exported goods, in effect as of October 1, 2014. The credit refund is equivalent to 3% of total export revenue based on the transfer price and is made either through: (i) offsetting with own debits, due or to become due, related to taxes managed by the Federal Revenue Service; or (ii) in cash, which may be requested in up to five years as of the end of the calendar quarter or the actual export date, whichever occurs later. In the year ended December 31, 2014, the Company recognized credits totaling R$37 million under the REINTEGRA program, recorded under cost of goods sold in the Statement of profit or loss. See Note 14(a) to our 2014 consolidated financial statements.

 

In 2014, pulp production totaled 5,274 thousand tons and sales totaled 5,305 thousand tons (101% of the annual production), a 2% increase over 2013, and due to higher sales, mainly in the European market. Pulp inventories closed the year at 48 days, 2 days less than in 2013.

 

The cash production cost was 1% higher, chiefly due to higher wood costs and the exchange rate effect, partially offset by our sales of energy. We are fully prepared to confront any adverse scenario in regard to possible energy rationing in 2015 given that it is self-sufficient in electricity. In 2014, Fibria produced 117% of the energy needed for its pulp production process. In 2014 we enhanced our cost management culture with the implementation of the Zero Based Budgeting (ZBB) methodology, including operating expenses and capital expenditures as scope for the 2015 budgeting cycle. The ZBB annual budgeting is a very detailed, structured, and interactive process in order to facilitate meaningful financial debate among managers and executives. The ZBB process is based on developing deep visibility into cost drivers and using that visibility to set budget targets.

 

The decrease in the financial result was in 2014 a net expense explained by the liability management aimed at reducing the principal and the cost of debt.

 

Gross debt in U.S. dollars totaled $3,135 million (equivalent to R$8,327 million), 25% down in Dollars in comparison with 2013. Fibria closed 2014 with a cash position of R$778 million, including the mark to market of derivatives. As indicated in 2014, the new liability management initiatives have contributed to reducing the total cost of debt to 3.4% p.a., while the average term remained at 55 months. In 2014, we repaid the total amount of R$6,636 million of the principal amount of indebtedness, of which R$3,176 million refers to early redemption of our bonds. The premium paid by us in this repurchase transactions was R$365 million. These initiatives will generate annual savings of approximately US$27 million in interest as of 2015. Net debt/Adjusted EBITDA in Dollars closed the period at 2.4x and 2.7x in*Reais*. Net debt consists of total debt less cash position.

 

As a result of all the above, we recorded a net income of R$163 million, compared to a loss of R$698 million in 2013. The Company’s By-laws guarantee a mandatory dividend of 25% of net income after constitution of legal reserves. Thus, the mandatory dividend relative to the fiscal year ended on December 31, 2014 was R$37 million.

 

**Net Revenues**

 

Our net revenues increased by 2% to R$7,084 million in 2014 from R$6,917 million in 2013, due to higher sales volume and a 9% appreciation of the U.S. Dollar during the period, given that the average net price in *Reais* remained flat. The increase in the average pulp price is described in “Item 5. Operating and Financial Review and Prospects — *Effects of Fluctuations in Pulp Price”.*

 

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Sales volume increased from 5,198 kilotons in 2013 to 5,305 kilotons in 2014, or 2%, mainly due to an increase in sales to Europe (180 kilotons, or 9%), Asia (45 kilotons, or 4%) and Brazil/South America (70 kilotons, or 16%) in 2014 as compared to 2013, partially offset by a decrease in sales to North America (188 kilotons, or 13%).

 

Export sales of pulp constituted 91.6% of our pulp net revenue and 90.3% of our pulp sales volume in 2014, compared to 92.6% and 91.4%, respectively, in 2013.

 

In 2014, 41.4% of our total sales volume was delivered to Europe, 23.8% to North America and 25.1% to Asia, as compared to 38.8%, 27.9% and 24.7%, respectively, in 2013. Discounts are frequently granted to our significant customers located in Europe and North America.

 

**Cost of Sales**

 

Cost of sales increased by 3.0% to R$5,545 million in 2014 from R$5,383 million in 2013, following the increase of our net revenue and as a result of the impact of the U.S. Dollar’s appreciation against the *Real*, that resulted in higher freight costs, which are denominated in U.S. Dollars and higher cash production cost. The cash production cost is one of the main components of our cost of sales. The cash production cost consists principally of the cost of sales excluding depreciation, depletion, amortization and freight. In 2014, the main components of the cash production cost, wood, chemicals, maintenance, personnel and fuel represented approximately 50%, 23%, 11%, 7%, and 3%, respectively. There were no significant differences in the composition of cash production cost in 2014 as compared to 2013.

 

In 2014, our cash production cost per ton was R$519, an increase of 3% as compared to 2013, of R$505 per ton, chiefly due to higher wood costs and the exchange rate effect, partially offset by our sales of energy. The share of third-party wood on the cash production cost was 11% in 2014, compared to 9% in 2013. The annual inflation for 2014 was 6.4% (IPCA), consequently, our cash production cost was 3.4% lower than inflation of the period. Fibria will continue to pursue its goal of maintaining its 2015 cash cost below inflation.

 

As a result of the above, our gross profit did not have significant changes in 2014 compared to 2013 (an increase of 0.2% in 2014). In 2014, our gross margin remained flat when compared to 2013 (22%).

 

**Selling Expenses**

 

Selling expenses increased by 5.1% to R$365 million in 2014 from R$348 million in 2013, mainly due to higher expenses with third-party services, such as handling, storage and transportation expenses, and the exchange rate effect, as a result of the U.S. Dollar’s 9% appreciation against the *Real*. As a percentage of our net revenue, our selling expenses increased to 5.2% in 2014 from 5.0% in 2013.

 

**General and Administrative Expenses**

 

General and administrative expenses decreased by 4.8% to R$286 million in 2014 from R$300 million in 2013. This decrease was, mainly, due to a decrease of R$8.5 million in labor expenses, R$5.3 million in depreciation and amortization and, R$4.0 million in consulting, legal and other fees paid to external advisors, partially offset by an increase of R$2.3 million in donations and sponsorship due to the donations for the Brazilian elections in 2014. As a percentage of our net revenue, our general and administrative expenses decreased to 4.0% in 2014 from 4.2% in 2013.

 

**Equity in Losses of Associate**

 

Equity in losses of associate was R$622 thousand in 2014, compared to zero in 2013, as a result of the loss of our joint-venture F&E Technologies LLC.

 

**Other Operating Income (Expenses), Net**

 

Other operating income, net amounted to R$770 million in 2014 compared to other operating income, net of R$823 million in 2013. This net decrease was primarily the result of (1) the capital gain on sale of land of R$527 million recorded in 2013 against zero in 2014, related to Asset Light project, as described in Note 1(e) of our 2014 consolidated financial statements; (2) reversal of provision for contingencies in the amount of R$14 million in 2014, against R$116 million in 2013, (3) R$50 million decrease in the fair value gain of biological assets from R$102 million in 2013 to R$52 million in 2014, partially offset by (4) R$852 million of tax credits recognized in 2014 (substantially BEFIEX Credit as described at our Note 24(d)(i) to our 2014 consolidated financial

 

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statements) against a total of R$107 million in 2013 and, (5) R$68 million of loss on disposal of property, plant and equipment in 2014, compared to R$221 million gain in 2013.

 

**Financial Results**

 

Financial expense amounted to R$1,635 million in 2014, compared to R$2,054 million in 2013, primarily due to:

 

·                  Financial income: financial income increased to R$134 million in 2014 from R$111 million in 2013, due to R$30.3 million of interest on tax credits recognized in 2014 (mainly BEFIEX), partially offset by a decrease of R$5.6 million in the financial investment earnings from use of cash and marketable securities for the settlement of debt in 2014.

 

·                  Financial expenses: financial expenses increased to R$1,041 million in 2014 from R$1,017 million during 2013, due to an increase of R$148.3 million related to financial charges in the partial repurchases of Bonds, partially offset by a decrease of R$100.1 million in interest on loans and financing and R$26 million in other financial expenses.

 

·                 Foreign exchange loss, net: foreign exchange losses were R$722 million in 2014, compared to R$933 million in 2013 mainly due to the U.S. Dollar appreciation against the *Real*in 2014.

 

·                 Result of derivative financial instruments, net: our net expense with derivative financial instruments were R$6.2 million in 2014, compared to R$215.3 million in 2013 mainly due to the U.S. Dollar appreciation against the *Real*in 2014, impacting our outstanding debt swaps.

 

**Income taxes**

 

Brazilian corporate statutory income tax and social contribution rate is 34%. Starting in 2013, we began paying income taxes on the profits generated by foreign subsidiaries in accordance with Article 74 of Provisional Measure 2,158/01 which states that the profits earned each year by foreign controlled subsidiaries are subject to the payment of income tax and social contribution in Brazil in the same year, at a rate of 34%, applied to the subsidiaries’ accounting profits before income tax. The repatriation of these profits in subsequent years is not subject to future taxation in Brazil. We record a provision for income taxes on foreign subsidiaries on an accruals basis. We decided to start paying these taxes primarily to mitigate any risk of future tax assessments on this matter. In 2014, the 12,973 law replaced the Article 74 confirming that earnings of offshore subsidiaries are subject to the payment of income tax and social contribution in Brazil as they accrue.

 

The effective tax rate applicable to our income before tax and social contribution was (642.6)% and (103.0)% for the years ended December 31, 2014 and 2013, respectively. The income tax benefit for the year ended December 31, 2014 was R$141 million compared to an expense of R$354 million for the year ended December 31, 2013.

 

Other than the change in the pretax accounting income the primary reasons for the changes included:

 

(i)                 net foreign exchange gains recognized by our foreign subsidiaries that use the Brazilian *Real* as the functional currency. As the Brazilian *Real* is not used for tax purposes in the foreign country this net foreign exchange gain is not recognized for tax purposes in the foreign country nor will it ever be subject to tax in Brazil. The tax effect of this exempt income was R$123 million and R$114 million in the years ended December 31, 2014 and 2013, respectively, reflecting the devaluation of the Brazilian *Real* in relation to these foreign currencies (primarily the U.S. Dollar and the Euro); and

 

(ii)              the reduction in taxes, fines and penalties from having opted to join the Tax Amnesty and Refinancing Program (REFIS) in the year ended December 31, 2013 which generated an expense of R$560 million in 2013.

 

**Non-controlling Interest**

 

There were no significant changes in “Non-controlling interest” in 2014 compared to 2013.

 

**Net Income (loss)**

 

As a result of the above, we generated a net income of R$162.6 million in 2014, as compared to a loss of R$697.6 million in 2013. As a percentage of net revenue, the net income was 2.3% in 2014, as compared to the loss of 10.1% in 2013.

 

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**B.**            **Liquidity and Capital Resources**

 

Our primary sources of liquidity have historically been cash flows from operating and financing activities and short-term and long-term borrowings. We believe these sources will continue to be the principal means with which we will meet our cash flow needs.

 

Our material cash requirements include the following:

 

·                  working capital;

 

·                  our debt service; and

 

·                  capital expenditures.

 

Long-term borrowings have generally been used to finance our major capital expenditure projects and have historically been sourced principally by either export prepayment contracts under which we, or a wholly owned subsidiary, borrow funds by offering the guarantee of export contracts (see Note 23 to our 2015 consolidated financial statements) or capital expenditures acquisition financing programs offered by the BNDES, a related party (see Note 16 to our 2015 consolidated financial statements). The scheduled maturities of these long-term loans have been structured to match the expected cash flow from the conclusion of the related capital expenditure projects and, as a result, reduce the risk of any significant deterioration of our liquidity position. We also rely on bonds or notes issued in the international markets by either wholly owned subsidiaries or by Votorantim Group subsidiaries, all mainly domiciled in other countries.

 

As of December 31, 2015 and 2014, our cash and cash equivalents and our marketable securities were R$2,558 million and R$1,195 million, respectively. Of our cash and cash equivalents and marketable securities held as of December 31, 2015, 58% was denominated in *Reais* invested in both public and private marketable securities. The remaining 42% of our cash, cash equivalents and marketable securities was denominated in U.S. Dollars held abroad, mostly invested in Time Deposits with maturity up to 90 days.

 

The fair value of derivative financial instruments represented a net liability balance of R$828 million as of December 31, 2015.

 

At December 31, 2015, our balance sheet presented a positive working capital balance (including our cash and cash equivalents, marketable securities, current loans and financings and derivative instruments) of R$2,505 million compared to R$1,162 million December 31, 2014. We do not expect to have any difficulty in meeting our short-term obligations since our current assets as of December 31, 2015 were equivalent to 1.8 times our current liabilities. Additionally we believe that we will be able to access either capital or banking markets, if necessary.

 

It is our indebtedness strategy over the next few years to use a substantial portion of our consolidated cash flow to pay principal and interest with respect to our indebtedness. In addition, we are active on liability management initiatives to reduce the cost of our debt whenever there are market opportunities.

 

**Sources of funds**

 

Our cash flow from operating, investing and financing activities is affected by various factors. The key factors that affect our cash flow from operations are (i) the volume of product sold and the market price of pulp, (ii) the exchange rate between Brazilian *Reais* and U.S. Dollars and (iii) the cost of our raw materials. Investing activities are mainly affected by (i) our capital expenditure program and (ii) our decision to divest some of our long-lived assets. Finally our cash flow from financing activities is directly related to the level of new debt we have incurred and on the repayment of existing debt.

 

*Operating Activities*

 

Net cash flow provided by operating activities was R$4,479 million compared to R$2,227 million in 2014, an increase of 101.1%. In 2015 we presented a loss of R$161 million before income taxes, compared to an income of R$22 million in 2014. Net cash flow provided by operating activities was impacted mainly by:

 

(i)                                                      an increase of 42.3% in the net revenue in the year, influenced by the sales volume, the U.S. Dollar appreciation against Real in 2015 and the pulp price, as above mentioned in this document;

 

(ii)                                                   the impact of working capital changes as reflected in the Statement of Cash Flow: a net increase in assets of R$353 million compared to a net decrease in liabilities of R$150 million.

 

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We adopt the indirect cash flow method to report our cash flow statement. See our “Consolidated Statements of Cash Flows” in connection with “Item 5. Operational and Financial Review and Prospects”.

 

**Uses of funds**

 

*Investing activities*

 

Net cash used in investing activities was R$3,315 million in 2015, compared to net cash used in investing activities of R$356 million in 2014.

 

In 2015, investing activities for which we used cash primarily consisted of (1) investments of R$2,358 million in property, plant, equipment, intangible assets and forest and advance for wood acquisition from forestry partnership program; (2) R$714 million in marketable securities; (3) R$12 million related to the new subsidiary Fibria Innovations; (4) the payment of R$20 million made for additional acquisition of interest in Ensyn, as detailed in Note 17(b) to our 2015 consolidated financial statements; (5) R$420 million of derivative settlements. In addition, we generated cash primarily due to R$208 million of proceeds from sale of property, plant and equipment, substantially the transaction involving our shareholder VID, as detailed in Note 16(a) to our 2015 consolidated financial statements.

 

In 2014, investing activities for which we used cash primarily consisted of (1) investments of R$1,540 million in property, plant, equipment, intangible assets and forest, (2) R$51 million regarding advance for wood acquisition from forestry partnership program and (3) R$27 million related to the payment made for additional acquisition of interest, mainly the additional purchase of 3% of Ensyn’s capital, as detailed in Note 17(a) to our 2014 consolidated financial statements. In addition, we generated cash primarily consisting of (1) R$903 million of proceeds from sale of land and buildings related to the Asset Light project occurred in 2013 as mentioned in Note 1(e) to our 2014 consolidated financial statements and (2) R$409 million on marketable securities.

 

In 2013, investing activities for which we used cash primarily consisted of (1) investments of R$1,190 million in property, plant, equipment, intangible assets and forest and (2) R$97 million regarding advance for wood acquisition from forestry partnership program. In addition, we generated cash primarily consisting of (1) R$500 million of proceeds from sale of land and building related to the Asset Light project as mentioned in Note 1(e) to our 2014 consolidated financial statements and (2) R$1,204 million on marketable securities.

 

*Financing Activities*

 

Net cash used in financing activities, which include short-term and long-term secured and unsecured borrowings, debt repayments, resulted in the use of cash of R$853 million in 2015 and R$2,644 million in 2014.

 

In 2015, we raised R$3,088 million, mainly, from financing through export prepayment facilities with financial institutions and the issuance of Agribusiness Receivables Certificates (CRA) in the total amount of R$675 million, with an interest rate of 99% of CDI, payments of interest semi-annually and final maturity for the principal in October 2021. The funding will be used to finance the Horizonte 2 project at our Três Lagoas Unit located in Mato Grosso do Sul state. We repaid the total amount of R$1,801 million of the principal amount of indebtedness and distributed R$2,148 million as dividends to the shareholders as mentioned in Note 28(a) to our 2015 consolidated financial statements.

 

In 2014, we raised R$4,346 million, mainly, from financing through export prepayment facilities with financial institutions and the issuance of US$600 million aggregate principal amount of our 5.25% Senior Notes due 2024. In 2014, we repaid the total amount of R$6,636 million of the principal amount of indebtedness, of which R$3,176 million refers to early redemption of our bonds. The premium paid by us in this repurchase transaction was R$365 million. The amount of R$3,460 million was used to the settlement of other outstanding indebtedness.

 

In 2013, we raised R$1,279 million, principally, from financing through export prepayment facilities with financial institutions. In 2013, we repaid the total amount of R$3,320 million of the principal amount, of which R$1,851 million refers to early redemption of our Bonds issued. The premium paid by us in this repurchase transaction was R$236 million and R$1,469 million to the settlement of other outstanding indebtedness.

 

Furthermore, we have access to short term and long term trade-finance lines to support any cash needs that could eventually arise.

 

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**Debt**

 

*Export credits (prepayments, ACE and ACC)*

 

In August 2015, the Company, through its subsidiary Fibria International Trade GMBH, signed an amendment to the export prepayment contract in the amount of US$400 million (equivalent then to R$1,390 million). The releases were made in three installments, being the first in the amount of US$98 million, maturing through 2019 and interest rate of 1.30% p.a. over the quarterly LIBOR, the second in the amount of US$144 million, maturing through 2019 and interest rate of 1.40% p.a. over the quarterly LIBOR and the third in the amount of US$158 million, maturing through 2021 and interest rate of 1.55% p.a. over the quarterly LIBOR. As of December 31, 2015, the principal outstanding balance was US$400 million (equivalent to R$ 1,562 million).

 

In 2015, the Company, through its jointly-operation Veracel, entered into export contracts (ACC) in the amount of US$54 million (equivalent then to R$167.7 million), with maturity in February 2016 and a fixed interest rate between 1.02% and 1.30% p.a. As of December 31, 2015, the principal outstanding balance was US$12 million (equivalent to R$45 million).

 

In December 2014, we signed an export prepayment contract with 11 banks in the amount of US$500 million (equivalent then to R$1.4 billion), of which US$130 million will mature through 2019 and an interest rate of 1.30% p.a. over the quarterly LIBOR, US$191 million will mature through 2019 and an interest rate of 1.40% p.a. over the quarterly LIBOR and US$179 million will mature through 2020 and an interest rate of 1.55% p.a. over the quarterly LIBOR. This line was used to prepay loans and financing with higher costs and less attractive maturities. As of December 31, 2015, the principal outstanding balance was US$ 500 million (equivalent to R$ 1,952 million).

 

In March 2014, the Company, through its subsidiary Fibria International Trade GMBH, entered into an export prepayment contract with four foreign banks, in the amount of U.S.$200 million (equivalent then to R$465 million), with quarterly interest payments of 1.75% p.a. plus quarterly LIBOR (which can be reduced to 1.55% p.a., depending on the level of leverage and risk rating of the Company) with a five-year term. As of December 31, 2015, the principal outstanding balance was US$200 million (equivalent to R$ 781 million).

 

In March 2014, the Company, through its subsidiary Fibria International Trade GMBH, entered into an export prepayment contract, in the amount of U.S.$100 million (equivalent then to R$232 million), with quarterly interest payments of 1.625% p.a. plus quarterly LIBOR with a five-year term. As of December 31, 2015, the principal outstanding balance was US$ 93 million (equivalent to R$ 363 million).

 

In April 2013, we, through Fibria Trading International KFT., entered into an export prepayment contract with three banks in the amount of U.S.$100 million (equivalent then to R$202 million), with maturity until 2018 and an initial interest rate of 1.625% p.a. over the quarterly LIBOR. As of December 31, 2015, the principal outstanding balance was US$100 million (equivalent to R$ 390 million).

 

In February 2012, Veracel entered into the export prepayment contract, in the amount of U.S.$33 million (equivalent then to R$56 million), with semiannual payment of interest, at 5% p.a. plus LIBOR and a single payment of the principal with maturity in 2017. In January 2016, the Company prepaid 100% of this contract.

 

In May 2011, we signed an export prepayment agreement with a syndicate of banks in the amount of U.S.$300 million (equivalent then to R$489 million), bearing quarterly LIBOR plus 1.8% p.a., which can be reduced to 1.60%, depending on our level of leverage and risk rating, with an eight-year term. As of December 31, 2015, the principal outstanding balance was US$ 255 million (equivalent to R$996 million).

 

In March 2010, the Company signed a bilateral Export Credit Contract in the amount of U.S.$535 million (equivalent then to R$956 million), bearing quarterly LIBOR plus 2.95% p.a., with maturities through 2017. The loans are guaranteed by export contracts, and the installments mature on shipment dates. At March 31, 2010 funds totaling U.S.$314 million (equivalent then to R$559 million) were released, and the remaining balance of U.S.$221 million (equivalent then to R$389 million) was released on April 6, 2010. This line was fully used to repay debt with higher costs and less favorable maturities. In April, 2011, the Company prepaid the amount of U.S.$100 million (equivalent then to R$161 million), and negotiated a longer term for payment of the remaining balance (from 2013 until 2018, with quarterly depreciation). There were no changes in interest rates charged. In 2012, the Company prepaid the amount of U.S.$200 million, with no changes on the other conditions of the contract. In 2013, in the maturity date, the amount of U.S.$43 million was paid. In 2014, also in the maturity date the amount of U.S.$32 million (equivalent to R$73 million) was paid and the final maturity was renegotiated for August 2019. In 2015, also in the maturity date the amount of US$ 40

 

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million (equivalent to R$136 million) was paid. After this transaction, the principal outstanding balance of this contract is U.S.$120 million (equivalent to R$469 million).

 

*Domestic floating-rate notes*

 

In October 2015, the Company concluded the public distribution of 675 thousand Agribusiness Credit Receivable Certificates to be issued by Eco Securitizadora de Direitos Creditórios do Agronegócio S.A. in the total amount of R$675 million, with an interest rate of 99% of CDI, payments of interest semi-annually and final maturity for the principal in October 2021. The funding will be used for the purchase of goods and hiring of services in connection with Horizonte 2 Project. The Agribusiness Credit Receivable Certificates are backed by agribusiness credit rights assigned by Itaú Unibanco S.A., from the Export Credit Note to be issued by Fibria-MS, guaranteed by the Company. The funds were received by the Company on October 23, 2015. As of December 31, 2015, the principal outstanding balance was R$675 million.

 

In June 2013, we entered into a contract with Banco do Brasil an Export Credit Note (Nota de Crédito à Exportação - NCE), in the total amount of R$498 million, with maturity in 2018 and interest rate of 105.85% of CDI. This contract is also linked to a swap contract in order to exchange the currency from Reais to Dollar and change of the variable rate to fixed rate, being the final cost 4.19% p.a. plus foreign exchange currency. As of December 31, 2015, the principal outstanding balance was R$392 million.

 

In September 2012, we entered into an Export Credit Note (NCE) and a related interest swap agreement, for an aggregate principal amount of R$173 with million with semiannual payment of interest of 100% of CDI and amortization of the principal in four annual settlements as from 2017. This contract is also linked to a cross-currency interest rate swap contract in order to exchange *Reais* to U.S. Dollars and change of the variable rate to fixed rate, being the final cost 4.90% p.a. plus foreign exchange currency. As of December 31, 2015, the principal outstanding balance was R$173 million.

 

*Domestic fixed-rate notes*

 

In December 2009, Fibria entered into an R$73 million financing with Banco do Brasil referring to Fund for the Financing of the Brazilian Midwest at 8.5% p.a. fixed rates in *Reais* and a six-month grace period (with a discount of 15% in case of compliance with contract obligations). This is a line offered by the government in order to incentivize, through financing, investments on the Central East region of Brazil. This amount matures through December 2017.

 

*International fixed-rate notes*

 

*Voto-Votorantim IV*

 

On June 24, 2005, we entered into a loan contract with Votorantim Overseas Trading Operations Limited IV (“VOTO IV”), a jointly controlled entity together with Votorantim Participações, which raised U.S.$400 million in the international capital markets (equivalent to R$955 million), bearing annual interest of 7.75%, maturing in 2020. We received 50% of the total funds raised, i.e., U.S.$200 million, equivalent then to R$477 million. In 2013 we prepaid a total amount of U.S.$42 million. As a result of this early redemption, we recognized financial expenses amounting to R$13.5 million, of which R$12.3 million related to the premiums paid in the repurchase transaction and R$1.2 million relating to the proportional amortization of the transaction costs of the Notes. In 2014 we prepaid the total amount of U.S.$61 million (equivalent to R$138 million). As a result of the early redemption, we recognized financial expenses amounting to R$33 million of which R$30 million related to the premiums paid in the repurchase transaction and R$3 million relating to the proportional amortization of the transaction costs of the Bonds. In 2015 we prepaid the total amount of U.S.$0.4 million. As a result of the early redemption, we recognized financial expenses amounting to U.S.$0.07 million of which U.S.$0.06 million related to the premium paid in the repurchase transaction and US$0.01 million relating to the proportional amortization of the transaction costs of the Bonds. After the early redemptions, the principal outstanding balance of these Bonds as of December 31, 2015 was U.S.$96.4 million (equivalent to R$376 million).

 

*Fibria 2024 Notes*

 

In May 2014, we, through our subsidiary Fibria Overseas Finance Ltd., raised US$600 million by issuance of a fully SEC-registered offering of the so-called “Fibria 2024 Bond”, an amount then equivalent to R$1.3 billion, maturing in ten years, bearing fixed interest of 5.25% p.a. The funds were received on May 12, 2014 and a portion of the proceeds was used for the early redemption of the Bond “Fibria 2021”.  This represented our first SEC registered debt offering (as opposed to privately place debt), which we believe reflects the stability we have achieved over the last several years, permitting us to achieve economies in pricing and a wider investor public. As of December 31, 2015, the principal outstanding balance was US$600 million (equivalent to R$2.3 billion).

 

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*BNDES Financing*

 

BNDES has been an important source of debt financing for our capital expenditures. In 2015, Fibria entered into five new contracts through the credit limit of R$1.7 billion defined in 2011, in the amounts of R$138.6 million (forests investments financing), R$10.5 million (industry investments financing), R$24 million (IT projects financing), R$35 million (acquisition of trucks) and R$7.5 million (social projects). In 2015 a total of R$254 million was released from BNDES to us (R$283 million in 2014). Loans from BNDES are secured by liens of property, plant and equipment and bank guarantee. The majority of our loans with BNDES bear interest indexed to a nominal long-term interest rate, TJLP. The remaining BNDES loans are indexed to UMBNDES (a weighted average exchange variation of a basket of currencies, predominantly U.S. Dollars) plus a spread and pre-fixed. As of December 31, 2015, the principal outstanding balance was R$1,835 million.

 

As of December 31, 2015, BNDES represented approximately 14.5% of our financial indebtedness, and is expected to remain as a significant source of financing in the future. See below details on amount and maturities:

 
| **Index** | ** ** | **R$ in millions** | ** ** | **Final Maturity** | ** ** |
|-----------|------------|------------------------------|------------|-------------------------|------------|
| TJLP      |       | 963                          |       | 2024                    |       |
| UMBNDES   |       | 731                          |       | 2023                    |       |
| PRE-FIXED |       | 130                          |       | 2022                    |       |
| SELIC     |       | 27                           |       | 2024                    |       |
|      |       | 1,851                        |       |                    |       |

 

For further information on the financing agreements with BNDES, see Exhibit 4.6 incorporated by reference in this annual report.

 

*Maturities*

 

At December 31, 2015, the amount of our short-term debt was R$1,073 million. At December 31, 2015, the annual maturities of our total debt were as follows:

 
| **Year**   | ** ** | **Amount**                     | ** ** |
|------------|------------|--------------------------------|------------|
| ** ** | ** ** | **(R$ in millions)** | ** ** |
|       |       |                           |       |
| 2016       |       | 1,073                          |       |
| 2017       |       | 1,070                          |       |
| 2018       |       | 1,864                          |       |
| 2019       |       | 3,169                          |       |
| 2020       |       | 1,195                          |       |
| 2021       |       | 1,893                          |       |
| 2022       |       | 98                             |       |
| 2023       |       | 44                             |       |
| 2024       |       | 2,338                          |       |
| Total      |       | 12,744                         |       |

 

*Covenants*

 

Financial covenants required under some long-term borrowings were renegotiated in June 2012 in order to mitigate the effects from changes in exchange rates. The renegotiation resulted on the following changes: (a) covenants are measured based on consolidated information translated into U.S. Dollars (as opposed to consolidated financial information in *Reais*), and (b) the indebtedness Net debt to Adjusted EBITDA ratio was increased to a maximum ratio of 4.5x as from June 2012.

 

The measurement of the ratios based on information translated into U.S. Dollars reduces the of effects changes in exchanges rates as compared to ratios based on information measured in *Reais*. A substantial portion of our debt is denominated in U.S. Dollars and as a result, particularly, the appreciation of the US dollar against the *Real*had significant impacts on the ratio when measured in *Real*. Under the prior computation criteria in the event of a U.S. Dollar appreciation the amount of net debt as of the end of the period would increase when measured in *Real*. Under the revised criteria by translating the Adjusted EBITDA from *Real* to U.S. Dollars at the average exchange rate of each quarter the impact of the depreciation of the Brazilian currency is mitigated.

 

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As of December 2015, our net debt to Adjusted EBITDA ratio (or indebtedness ratio) was 1.78 in U.S. Dollar (2.06 in R$). See Note 4.2.2 to our 2015 consolidated financial statements.

 
| ** **                                                        | ** ** | **Dec./   2015 and after** | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------------|------------|
| Debt Service   Coverage Ratio (1) — minimum ratio       |       | 1.0                                  |       |
| Net Debt to   Adjusted EBITDA Ratio (2) — maximum ratio |       | 4.5                                  |       |

 

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(1) The ratio of debt service coverage is defined as (a) Adjusted EBITDA (for the last four fiscal quarters translated into U.S. Dollars at the average exchange rate of each quarter), plus the balance of cash, cash equivalents and marketable securities at period-end translated into U.S. Dollar at period-end exchange rate divided by (b) debt service payment requirements for the following four consecutive quarters plus interest paid during the past four quarters translated into U.S. Dollars at period-end exchange rate of each quarter, plus the amount of hedging agreement that is scheduled to mature within one year.

 

(2) Defined as the ratio of (a) consolidated debt translated into U.S. Dollars at period-end exchange rate plus the fair value of hedging agreements, less the balance of cash, cash equivalents and marketable securities at period-end translated into U.S. Dollar at period-end exchange rate divided by Adjusted EBITDA (for the last four quarters translated into U.S. Dollars at the average exchange rate of each quarter).

 

Many of these instruments also contain other covenants that restrict, only in the event of default and if we are not considered investment grade by S&P, Moody ́s or Fitch, the ability of Fibria and its subsidiaries, among other things, to:

 

·                  merge or consolidate into other entities or otherwise dispose of all or substantially all of our assets;

 

·                  consummate certain asset sales and exchanges;

 

·                  making certain restricted payments, including payment of dividends; or

 

·                  enter into certain transactions with affiliates.

 

In addition, the instruments governing a substantial portion of our indebtedness contain cross-default or cross-acceleration clauses, such that the occurrence of an event of default under one of these instruments could trigger an event of default under other indebtedness or enable the creditors under other indebtedness to accelerate that indebtedness. The principal events of default under our export prepayment agreements include:

 

·                  non-payment of the principal amount or interest;

 

·                  inaccuracy of any declaration, guarantee or certification provided;

 

·                  cross-default and cross-judgment default, subject to an agreed minimum of U.S.$50 million or US$75 million, depending on the corresponding agreement;

 

·                  subject to certain cure periods, breach of any obligation under the agreement;

 

·                  certain events of bankruptcy or insolvency of Fibria or certain of its subsidiaries.

 

At December 31, 2015, we were in compliance with all covenants, which are required under some long term borrowings. See Note 23 to our 2015 consolidated financial statements and “Item 5 - Operating and Financial Review and Prospects — A. Operating Results — Results of Operations.”

 

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*B**reakdown of EBITDA and Adjusted EBITDA**(CVM Instruction 527/2012):*

 
| **Adjusted EBITDA (R$ million)**                  | ** ** | **2015**  | ** ** | **2014**  | ** ** |
|------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
| Income (loss) of   the period                                    |       | 357       |       | 163       |       |
| (+/-) Financial   results, net                                   |       | 3,685     |       | 1,635     |       |
| (+) Taxes on   income                                            |       | (518      | )          | (141      | )          |
| (+)   Depreciation, amortization and depletion                   |       | 1,892     |       | 1,874     |       |
| EBITDA                                                           |       | 5,416     |       | 3,530     |       |
| (+) Equity                                                       |       | (0        | )          | 1         |       |
| (-) Fair Value   of Biological Assets                            |       | (185      | )          | (52       | )          |
| (+/-) Loss   (gain) on disposal of property, plant and equipment |       | (135      | )          | 75        |       |
| (+) Accrual for   losses on ICMS credits                         |       | 248       |       | 88        |       |
| (-) Tax   credits/reversal of provision for contingencies        |       | (7        | )          | (851      | )          |
| **Adjustted   EBITDA**                                           |       | **5,337** |       | **2,791** |       |

 

EBITDA and Adjusted EBITDA are not a measurement defined by Brazilian and International Financial Reporting Standards, and represents income for the period before interest, income tax and social contribution, depreciation, amortization and depletion. The Company is presenting Adjusted EBITDA in accordance with CVM Instruction 527 of October 4, 2012, by adding or subtracting from the amount equity income, the provision for losses on recoverable ICMS, losses (gains) from the write-down of property, plant and equipment, the fair value of biological assets, and tax credits from reversal of provision for contingencies, in order to provide better information on its ability to generate cash, pay its debt and sustain its investments. Neither measurement should be considered as an alternative to the Company ́s operating income and operational cash flow as an indicator of liquidity for the periods in question. Please note that these measures may not be comparable to similarity tiled measures prepared by other companies.

 

***Liability Management Plan***

 

Since 2009, we have been implementing a consistent and disciplined approach focused on reducing debt and its cost aiming to improve our capital structure, recover and maintain our investment grade rating and secure financing for our growth strategy under favorable market conditions.

 

Our Liability Management Plan included (1) the issuance of Fibria 2019, 2020 and 2021 Notes totaling U.S.$2.5 billion, (2) the sale of the Guaíba Unit for U.S.$1.430 billion in December 2009, (3) the sale of Conpacel and KSR for R$1.5 billion in December 2010 (proceeds from the sale were received in January and February 2011, respectively), (4) the sale of the Piracicaba Unit for U.S.$313 million in September 2011, (5) an equity offering which totaled R$1,361 million in April 2012, (6) the sale of non-strategic assets such as lands and forest assets in Bahia and the Losango sale for R$470 million in December 2012,  (7) the sale of non-strategic land assets for Parkia in 2013 generating R$1.65 billion, (8) the prepayment of  more expensive debt, for example the total redemption in 2014 of our 2019, 2020 and 2021 Notes and the advanced settlement of export prepayments and export credit notes with unattractive costs and (9) the issuance of debt with more attractive costs and terms, for example the SEC registered 2024 Notes issuance of US$600 million in May 2014 maturing in ten years and subject to fixed interest rate of 5.25% p.a, and also the issuance of a syndicated export prepayment loan of US$500 million subject to an average interest rate of 1,43% p.a over the quarterly LIBOR and with an average term of 5 years. The 2024 Notes represented our first SEC registered debt offering (as opposed to privately place debt), which we believe reflects the stability we have achieved over the last several years, permitting us to achieve economies in pricing and a wider investor public.

 

In 2015 Fibria has reached a debt level that is adequate for its size and an average cost of debt that is consistent with other low-risk Brazilian companies with access to international capital markets. The Company has an Investment Grade rating with a stable outlook by the rating agencies S&P, Moody’s and Fitch, even after the Brazil’s sovereign rating downgrade at the end of 2015. Fibria’s credit metrics will enable the expansion of the Três Lagoas industrial complex while preserving its level of indebtedness in a manner compatible with a Baa3/BBB- rating, according to the rating agencies.

 

Our brownfield project in Três Lagoas, approved by the board on May 2015, will add 1.85 million tons/year, including the creep capacity of 100 thousand tons, to Fibria capacity increasing the total production capacity from 5.3 million tons/year to 7.05 million tons/year. Funding sources combine own cash (working capital release), banks (export pre-payment contract), Agribusiness Receivables Certificates (CRA), BNDES, Midwest Development Fund (FDCO) and foreign export credit agency (ECA).

 

In August 2015, the Company, through its subsidiary Fibria International Trade GMBH, signed an amendment to the export prepayment contract in the amount of U.S.$400 million (equivalent then to R$1,390 million). The releases were made in three installments, being the first in the amount of U.S.$98 million, maturing through 2019 and interest rate of 1.30% p.a. over the quarterly LIBOR, the second in the amount of U.S.$144 million, maturing through 2019 and interest rate of 1.40% p.a. over the quarterly

 

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LIBOR and the third in the amount of U.S.$158 million, maturing through 2021 and interest rate of 1.55% p.a. over the quarterly LIBOR.

 

In October 2015, Fibria concluded the issuance of an Agribusiness Receivables Certificates (CRA) in the total amount of R$675 million with an interest rate of 99% of CDI interbank rate and maturing in 2021.

 

***Liability and Liquidity Management Policy***

 

In August 2015, we reviewed our Liability and Liquidity Management Policy, originally created in May 2011, to maintain guidelines that allowed us to preserve our investment grade that allows access to credit lines with more attractive costs. This policy formalizes our goal to maintain a Net Debt over Adjusted EBITDA ratio in U.S. Dollars within the range of 2.0x and 2.5x. Nevertheless, Fibria can achieve, temporarily, a maximum leverage ratio of 3.5x during its expansion cycle. At no time, Fibria is allowed to take strategic and management decisions that will cause this ratio to exceed 3.5x. The policy also formalized the goal of maintaining the necessary liquidity for the cash conversion cycle and to meet short-term financial obligations. It provides that we will maintain a minimum cash balance comprised of the sum of: (i) a minimum operating cash balance, which reflects the cash conversion cycle and (ii) a minimum balance for coverage of debt service, which includes interest and short-term principal. In addition, we may seek additional liquidity, through revolving credit facilities, to meet the minimum cash balance according to rating agencies methodology.

 

***Capital expenditures***

 

Our capital expenditures (Capex) increased by 48% to R$2,358 million, as compared to R$1,591 million in 2014 and R$1,287 million in 2013. The increase was primarily due to the land acquisitions (Note 16(a)(iii) to our 2015 consolidated financial statements), the industrial expansion of the H2 Project and higher cost from the acquisition of standing timber from third parties. The 24% increase in 2014 compared to 2013 was mainly due to the increase in forestry renewal in turn due to (i) the Forestry Partnership Agreement and a Standing Timber Supply Agreement signed with Parkia in 2013 as a result of the 206 thousand hectares on land sale (please see Note 1(d) to our 2015 consolidated financial statements), and (ii) higher costs with the purchase of third-party timber. .

 

The table below sets forth a breakdown of our most significant capital expenditures for the periods indicated:

 
| ** **                                                                        | ** ** | **2015**                               | ** ** | **2014**    | ** ** | **2013**    | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------------------------|------------|-------------|------------|-------------|------------|
| ** **                                                                        | ** ** | **(in millions   of Reais)** | ** ** |
| Industrial   Expansion                                                            |       | 219                                    |       | 38          |       | 8           |       |
| Forest Expansion                                                                  |       | 74                                     |       | 74          |       | 65          |       |
| ***Subtotal   Expansion***                                                        |       | **293**                                |       | **112**     |       | **73**      |       |
| Safety/   Environment                                                             |       | 25                                     |       | 18          |       | 31          |       |
| Forestry Renewal   (includes the advance for wood purchase - partnership program) |       | 1,271                                  |       | 1,190       |       | 899         |       |
| Maintenance, IT,   R&D, Modernization                                    |       | 317                                    |       | 271         |       | 284         |       |
| ***Subtotal   Maintenance***                                                      |       | ***1,613***                            |       | ***1,479*** |       | ***1,287*** |       |
| Land purchase                                                                     |       | 452                                    |       | —      |       | —      |       |
| ***Total***                                                                       |       | ***2,358***                            |       | ***1,591*** |       | ***1,287*** |       |

 

For 2016, Management has approved a budget of R$8.2 billion for future capital expenditures. The increase over 2015 is mainly explained by the Horizonte 2 project, for which will be allocated R$5.4 billion of the total 2016 capital expenditures and R$1.5 billion for forestry renewal.

 

**C.**                                    **Research and development, patents and licenses, etc.**

 

As a pulp producer, we seek to gain a better understanding of the entire production process and obtain competitive advantages by continuous investments in research and technological development. By attempting to identify the characteristics of the final pulp that are essential for the production of high quality pulp and paper, we introduce new challenges to our tree breeding program and improve our processes to develop innovative, higher quality products. The research and development activities conducted within our research center are directed towards increasing the productivity of  our forests, improving the quality of the eucalyptus wood used as our raw material, increasing the efficiency of our productive process and industrial yields, and developing new, innovative higher quality products, in a sustainable way. These efforts are conducted not only within our research facilities, but also in partnership with various universities, suppliers and private research institutes. Our total budget, including operational expenses and capital expenditure in research and development was R$51 million in 2015 and R$47 million in 2014. Our expenditures in research and development have been commensurated with our growth and our continued efforts to maintain our competitive advantage. This strategy has enabled us to develop high quality sustainable forests at lower costs and with minimal environmental impact, and to continue to supply the market with improved products and reinforcing our long-term relationships with key customers. By the end of

 

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2010, the average annual amount of pulp produced per hectare was about 11 metric tons, compared to 6.4 metric tons obtained during the 1970s. Referring to this, one of the long-term targets we have is to keep reducing the amount of land required for the pulp production, as a result of increasing productivity via genetic, forest management and industrial performance improvements.

 

*Fibria Technology Center*

 

The main objective of the Fibria Technology Center is to add value to the overall business. Our portfolio of research projects includes activities ranging from plant breeding and propagation to developing new products. As a pulp producer, we seek to gain a better understanding of the entire production process and obtain competitive advantages by continuous investments in research and technological development.

 

Our forestry technology is focused on wood quality, forest productivity and forest sustainability through research in genetic improvement, forest biotechnology, plant physiology, soil and plant nutrition, silviculture, forest protection and environmental development. This intense research program has significantly increased our competitiveness.

 

We currently perform 100% of our planting program with improved clones which are efficiently propagated as a result of pioneering nursery procedures. In this regard, during the last few years, a new clonal propagation technology has been designed to increase rooting ability and plant quality while reducing the production costs. This new concept involves microcuttings production in temporary immersion bioreactors. As a result of this in house technology, two patents were recently filed in US and Brazil. We believe this new concept of propagation will establish new standards for eucalyptus nurseries.

 

Fibria also maintains a significant level of investment in a biotechnology program. In order to advance gains from classical breeding, a new strategy called Genome Wide Selection (GWS) is under development at Fibria. The GWS is based on the very early selection of superior eucalyptus clones by analyzing their DNA (molecular markers) profiles. By implementing this technique, which is totally new in the forestry sector, we expect to make the breeding cycles shorter, anticipating selection of superior materials. A new high throughput platform for intensive tree genotyping and different statistical models has been tested in order to increase the method efficiency. The preliminary results obtained by Fibria point out to very promising perspectives.

 

Other techniques like genetic transformation and mutagenesis are also under evaluation at Fibria, involving national and international partnerships. The main goal of this research program is to evaluate the potential of such technologies to generate “new” genetic variability potentially useful to improve forest and industrial sustainable productivity.

 

Fibria has increased efforts regarding the assessment of its potential intellectual property and protection. Achievements during 2015 in the intellectual property field include the acquisition of an important patent portfolio related to lignin (85 patent application or patent granted) and filed of 5 new patent applications and 3 new varieties of Eucalypts. In summary, Fibria now has 103 granted patents, 152 patent applications, 23 varieties of *Eucalyptus* with protection granted and 3 being analyzed by Brazilian National Plant Varieties Protection Services, demonstrating our success in innovation and genetic improvement efforts.

 

In a forestry based company, the maintenance and increase of forest biomass production together with silvicultural cost reduction is fundamental, especially in highly intensive management regimes. The optimization of the available resources to the forestry processes can be achieved dealing with plant nutrition, soil fertility and conservation, silvicultural practices and new production models. We are achieving these objectives through the development and use of specific precision silviculture systems that optimize the allocation of the available resources, while monitoring soil fertility and conservation. Results from these monitoring processes conducted over the last two decades, have revealed, particularly over the last decade, that fertility may be enhanced through programs of nutritional management. Thus, during 2015, we have developed activities related to the: (i) analysis and recommendation of new fertilizers, including by-products from our mills, using a unique fertilization system in all our sites, (ii)  dissemination and beginning of use of soil conservation parameters in forestry planning, (iii)  recommendation of specific management packages considering the wood cost at the mill gate, based on the concept of high intensive management In the past years, the reduction in nutritional formulations, the extent of automated management and the control of fertilization, has already led to gains in logistics, costs and safety on the use of fertilizers.

 

Currently, “eucalyptus physiological disorder” is one of the main problems that affect the productivity of planted forests in the Southern Bahia region. In order to evaluate mitigation options, the Company explored and analyzed a wide and diverse data base built through the past years in the Company (“big data” approach). This new approach, based on Predictive Analytics tools, for the first time, allowed the development of three high-performance predictive models to better understand the causes of physiological disorder, even as to map and estimate the risk of forest management future options. Fibria has become the pioneer of the forest sector on the use of this new technology approach.

 

Some diseases can be important limiting factor to the forest productivity, thus we also have continuous studies in order to keep the forest healthy and to reduce the using of chemical pesticides. Our researches were focused on the screening of disease resistant clones and for increase the use of biological pest control. We answered all questions about the pesticide derogation, contributing to preserve the certification FSC in our all units. Our researchers are encouraging the idea to create a new FSC regulation 

 

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polity for chemical pesticide use, considering the silvicultural aspects and rules for environmental security, instead of only the chemical characteristics of the molecules. In order to be prepared for the future challenges, the Technology Center started up the activities in its Forest Health Protection and Natural Resources Laboratory. This new laboratory has been used to produce agents of biological control of pests, to evaluate disease ́s resistance in all Fibria’s Eucalyptus clones and to diagnose forestry problems, helping to maintain our sustainability. In this context, the Company developed methods to evaluate the resistance of eucalyptus clones for the diseases caused by *Erwinia psidii* and *Ralstonia solanacearum*. These bacteria cause vascular disease in eucalyptus, leading to die back, wilting and death of the affected plants. The new methods developed allow a better evaluation and selection of clones resistant to these diseases, helping to reduce the risks in the Company’s plantations.

 

Furthermore, we have performed specific studies since 1993 into the quantity and quality of superficial and underground water by monitoring water tables in representative locations in our plantations and by our production units, which continue to indicate that there have been no material changes to the composition of the water in these water tables, thus confirming that our plantation and production processes are not contaminating the surrounding water tables. With the recent water shortage resulting from extreme climate conditions, Brazil registered during 2015 the driest winter in 84 years, spurring the Company to review some operational practices, for instance the irrigation of the plantations. Fibria uses the irrigation only at the time of planting seedlings to ensure their growth. In 2015, a new tool that used the climate and soil information to optimize the volume of water applied and reduce the operating costs of irrigation was developed, ensuring the sustainability of water resources.

 

Specific studies on Forest Ecophysiology based on our “Open-air Laboratories” (Fibria’s Watershed Project and Eddy-Covariance Flux Tower Net) are being conducted, allowing us to better understand the effects of climate change on Eucalyptus plantations. Direct measurements of forest-atmosphere exchanges of carbon dioxide, water and energy allow us to observe whole-ecosystem metabolism. The Eddy-covariance Flux Tower Net at Fibria ́s Units was installed during 2011-2012 and provides continuous record of net ecosystem CO2 exchange, evaporation, and energy flux between the atmosphere and Eucalyptus plantations, at hourly time resolution. At all four flux-tower sites of Fibria, the forest is accumulating carbon and contributing to the terrestrial “sink” for carbon that currently is reducing the growth atmospheric CO2. The atmospheric carbon fluxes provide a top-down look at forest growth and are complemented by ground measurements of vegetation and litter at large and small plots where we can identify which components in the forest are gaining and losing carbon. The combination of short-term carbon and water exchange fluxes observed at the towers with long-term changes in biomass observed at permanent plots provides a very powerful constraint to develop and evaluate ecosystem process models, which we used to forecast wood productivity under different climate scenarios. In 2015, we considered three IPCC (Intergovernmental Panel of Climate Change) climate scenarios to predict the risk of forest productivity losses among the unpredictable future climate conditions. These scenarios were customized to Fibria’s plantations areas. For each scenario (pessimistic, realistic, optimistic) we calculated the potential impact on the productivity of Fibria’s plantations and identified areas with climatic extremes, seeking the best recommendations for plantation, in order to mitigate potential losses or gains in forest productivity.

 

In our continuous search for better environmental performance, we started to use Ecosystem Services approach to integrate research topics and to improve our landscape management practices. Technical planning for biodiversity conservation is based mainly on the assets in Fibria’s biodiversity database which comprises all information about fauna and flora species registered in Fibria’s areas since 1992, with special focus on birds, which have been used as indicators of the functionality of the managed forest landscape. Also for conservation planning, we use our Fibria Bioindex software, which combines relevant indicators to allow landscape ecology analysis of our forest management areas comprising plantations and areas of natural vegetation (Rain Forest or Savanna fragments). Based on all these approaches, we continuously provide technical advice to improve forest operation practices in order to conserve biodiversity. In 2015, it was also developed an integrated landscape planning process based on the hydrological model SWAT (Soil and Water Assessment Tool) and Bioindex, which will support, from 2016, the short and long term planning of forests considering environmental criteria. This process enables decision making about the best landscape management for the production of high-productivity forests with less impact on water and environmental resources in Fibria’s areas.

 

Also in 2015, remote sensing techniques were confirmed by our team as feasible monitoring tools of forest-based eucalyptus plantations and of native vegetation for conservation purposes. These techniques will assess the forest in real time, broadening the base and the frequency of the forest quality monitoring, allowing early detection of possible causes of forest productivity losses, ensuring agility in decision-making.

 

Our research and development team continuously assess new trends and advances in the market in which we operate, allowing the development of new products and the entry into new markets. In particular, we have been following recent developments on the production technologies resulting in biofuels or alternative biomass-based products. Biorefinery comes as an important subject in our project portfolio. Our roadmap on biorefinery is frequently updated, and the correspondent laboratory has been receiving considerable investments on high-tech pieces of equipment to allow transformation and characterization of raw material and products, including biofuels and bio-chemicals. These capabilities and drivers along with the establishment of strategic alliances is paving out the way to speedup research and development of bioproducts. The ongoing projects and alliances envision the different and more promising alternatives, not only making use of forest biomass in nature, but also from the circling streams of the kraft process, such as

 

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those from lignin. Within this scope of increasing the value from our forestry biomass, in 2015 the Joint Venture created by Fibria and Ensyn advanced on basic engineering for the installation of the first RTP unit in Brazil. In the same direction, potential customers and applications had been assessed. Gasoline and diesel obtained from the co-processing of JV’s renewable fuel oil and vacuum gasoil had been certified by American NREL, as drop-in-fuel. In addition, new technology and business opportunities in the biorefinery field have been assessed which may result on the entering and strengthening on markets other than those for renewable fuel oil.

 

When it comes to our pulp and paper production processes, during this last year we assessed and introduced important setup changes in order to improve fiber strength even further. This approach associated with customers’ feedback comes in close connection, as a loop, with the tree breeding program. Along with what we call wood x process x product trinomium and the advantages of having these teams working side by side, we had been able to support Fibria’s strategy to be considered one of the best commercial and R&D partner by some of our most important customers.

 

Among these efforts in product development our team has focused on the increase of BEKP share in the paper composition and/or supporting customers improving their products’ performance. These efforts are split into two major streams: (a) looking forward to set specific properties on the BEKP fibers through changes in forest sourcing, pulping and bleaching processes and/or (b) determining the best practices for the use of BEKP in different systems of stock preparation, refining and papermaking technologies as a whole. An example of above mentioned “(a)” approach is the contracted commercialization as from 2016 of a new and boosted product called EucaStrong®, which shall bring value to both Fibria and its customers by saving resources and improve margins. Another one is the FSC-TCF beholding customers’ requests. This kind of technology and know-how allow our customers improve the usage of eucalyptus pulp and the performance of their final products.

 

**D.**                                    **Trend Information**

 

The primary trends which influence our sales and production and inventory levels are: the patterns and cycles of pulp purchases by paper producers, pulp and paper prices, the level of pulp inventory in the hands of pulp producers in the global market, global economic conditions and the effect of currency fluctuations.

 

We continue to pursue growth opportunities to create value for our shareholders through business expansion, strong operational performance and profitability and/or technological and product improvements, always in the context of a long-term strategic focus.

 

For additional information regarding trends in our business, see “Item 4 - B. Business Overview — Our Strategies”, “Item 4 - B. Business Overview — Effects of Fluctuations in Pulp Price” and “Item 5. Operating and Financial Review and Prospects - A. Operating Results.” For risks affecting our business, see “Item 3. Key Information — D. Risk Factors.”

 

**E.**                                    **Off-Balance Sheet Arrangements**

 

We participate in a number of off-balance sheet arrangements, mainly related to guarantees and take or pay contracts. We also have a number of swap transactions that are described in “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” All of these transactions are further described elsewhere in this annual report. See Notes 11 and 27 to our 2015 consolidated financial statements.

 

**F.**                                     **Tabular Disclosure of Contractual Obligations**

 

The following table summarizes our significant contractual obligations and commitments as of December 31, 2015. This table does not reflect swap transactions discussed under “Item 11. Quantitative and Qualitative Disclosures about Market Risk”.

 
| ** **                                                | ** ** | **Payments Due by Period** | ** ** |
|-----------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                | ** ** | **Less than   One Year**        | ** ** | **One to Three   Years** | ** ** | **Three to   Five Years** | ** ** | **More than   Five Years** | ** ** | **Total** | ** ** |
|                                                      |       | **(in millions of Reais)** |       |
| Total debt   commitments (1)                         |       | 1,358                                     |       | 4,452 |   | 7,326 |   | 2,818 |   | 15,954 |   |
| Operating leases   (2)                               |       | 331                                       |       | 644 |   | 972 |   | 2,943 |   | 4,890 |   |
| Purchase   obligations (3)                           |       | 423                                       |       | 717 |   | 357 |   | 841 |   | 2,338 |   |
| Pension   contributions (4)                          |       | 5                                         |       | 10 |   | 10 |   | 65 |   | 90 |   |
| Total   contractual obligations and commitments (5)  |       | 2,117                                     |       | 5,823 |   | 8,665 |   | 6,667 |   | 23,272 |   |

 

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(1)                     The amounts disclosed in the table are the contractual undiscounted cash flows and as such they differ from the amounts presented in the consolidated balance sheet.

 

(2)                     Includes land leases and sea transportation (domestic and export).

 

(3)                     Includes take-or-pay contracts. We have long-term “take-or-pay” contracts with suppliers of energy, transportation, diesel fuel and chemical products for an average period of nine years for which the contractual obligations are R$260 million per year.

 

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(4)                     Represents a contribution of R$5 million per year, in average.

 

(5)                     Excludes amounts of probable cash outflows which are expected to arise upon settlement of contingencies due to uncertainties with respect to timing of payments.

 

We are also subject to legal proceedings with respect to tax, civil, labor and other claims and have made provisions for accrued liability for legal proceedings related to certain probable and estimable losses arising from tax, civil and labor claims of R$346 million as of December 31, 2015. See “Item 8. Financial Information — A. Consolidated Statements and Other Financial Information — Contingencies”.

 

**ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES**

 

**A.**                                    **Directors and Senior Management**

 

We are managed by a Board of Directors and a Board of Executive Officers. The address of the management of our Company is Rua Fidêncio Ramos, 302, 3rd floor, São Paulo, State of São Paulo, Brazil.

 

**Board of Directors**

 

Our Board of Directors is required to meet four times a year and on an extraordinary basis whenever corporate interests so require. The members of the Board of Directors are appointed at General Shareholders’ Meetings and serve for two-year terms. Our Board’s responsibilities include determining our general business strategies, electing the Executive Officers and supervising the management. As of December 31, 2015, the Board of Directors was made up of the following members:

 
| **Name**                                    | ** ** | **Member Since** | ** ** | **Age** | ** ** | **Position**  |
|---------------------------------------------|------------|-----------------------|------------|---------|------------|---------------|
|                                        |       |                  |       |    |       |          |
| José Luciano Duarte Penido             |       | 2009                  |       | 67      |       | Chairman      |
|                                        |       |                  |       |    |       |          |
| *Maria Paula Soares Aranha*                 |       | *2013*                |       | *59*    |       | *Alternate*   |
|                                        |       |                  |       |    |       |          |
| João Carvalho de Miranda               |       | 2009                  |       | 53      |       | Vice-chairman |
|                                        |       |                  |       |    |       |          |
| *Sergio Augusto Malacrida Junior*           |       | 2014                  |       | 42      |       | *Alternate*   |
|                                        |       |                  |       |    |       |          |
| Raul Calfat                                 |       | 2009                  |       | 63      |       | Member        |
|                                        |       |                  |       |    |       |          |
| *Paulo Henrique de Oliveira Santos*         |       | *2009*                |       | *57*    |       | *Alternate*   |
|                                        |       |                  |       |    |       |          |
| Carlos Augusto Lira Aguiar                  |       | 2012                  |       | 70      |       | Member        |
|                                        |       |                  |       |    |       |          |
| *Julio Sergio de Souza Cardozo*             |       | 2014                  |       | 71      |       | *Alternate*   |
|                                        |       |                  |       |    |       |          |
| João Henrique Batista de Souza Schmidt |       | 2014                  |       | 37      |       | Member        |
|                                        |       |                  |       |    |       |          |
| *Francisco Fernanded Campos Valerio*        |       | *2015*                |       | *68*    |       | *Alternate*   |
|                                        |       |                  |       |    |       |          |
| Julio Cesar Maciel Ramundo                  |       | 2011                  |       | 46      |       | Member        |
|                                        |       |                  |       |    |       |          |
| *Victor Guilherme Tito*                     |       | *2015*                |       | *36*    |       | *Alternate*   |
|                                        |       |                  |       |    |       |          |
| Eduardo Rath Fingerl                        |       | 2009                  |       | 62      |       | Member        |
|                                        |       |                  |       |    |       |          |
| *Sergio Jose Suarez*                        |       | *2015*                |       | *33*    |       | *Alternate*   |
|                                        |       |                  |       |    |       |          |
| Marcos Barbosa Pinto                        |       | 2014                  |       | 38      |       | Member        |
|                                        |       |                  |       |    |       |          |
| *Arminio Fraga Neto*                        |       | 2014                  |       | 58      |       | *Alternate*   |
|                                        |       |                  |       |    |       |          |
| Alexandre Gonçalves Silva              |       | 2009                  |       | 70      |       | Member        |
|                                        |       |                  |       |    |       |          |
| *José Ecio Pereira da Costa Junior*    |       | *2013*                |       | *64*    |       | *Alternate*   |

 

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We present below a brief biographical description of each member of our Board of Directors:

 

*José Luciano Duarte Penido*. Mr. Penido has been Chairman of the Board of Directors of Fibria Celulose S.A. since November 2009. Previously, from 2004 to 2009, he was President and CEO of Votorantim Celulose S.A., now Fibria, having served also as a member of the Board of that company. Between 1992 and 2004 he served as CEO of Samarco Mineração.

 

Mr. Penido is an independent member of the Board of Directors of Copersucar, an independent member of the Board of Directors of Química Amparo Ipê, Member of the Corporate Governance and Sustainability Committee of Santander Brasil S.A. and member of the Executive Committee of the WBCSD’s - World Business Council for Sustainable Development.

 

*João Carvalho de Miranda.*Mr. Miranda has been a member and vice chairman of the Board of Directors of Fibria Celulose S.A. since November 2009. He has been CEO of Votorantim Industrial S.A. since January 2014. He joined Votorantim as CFO and Investor Relations Officer from March 2009 to December 2013. Before joining Votorantim, he was Executive Vice President of Citibank S.A. do Brasil, from 2006 to 2009. Previously, from 2004 to 2006, he held the position of CEO of Citibank N.A. in Chile, and acted as Corporate Banking Head at Citibank N.A. in Brazil, from 1998 to 2004.

 

Mr. Miranda is member of the Board of Directors and member of the Finance Committee of Votorantim Cimentos S.A, member of the Board of Directors of Votorantim Siderurgia and Votorantim Metais S.A.

 

*Raul Calfat*. Mr. Calfat has been a member of the Board of Directors of Fibria since December 2009. He was CEO of Votorantim Industrial S.A. from January 2012 to December 2013. In January 2004 he assumed the position of Executive Managing Director of Votorantim Investimentos Industriais and in January 2006 he became responsible for all industrial business of the company. Previously, from 1996 to 2003, he held the position of CEO of Votorantim Celulose e Papel and served as Chairman of the Pulp and Paper Association of São Paulo between 1993 and 1995, and as Vice President of the Brazilian Association of Pulp and Paper from 1996 to 2004.

 

Mr. Calfat is Chairman of the Board of Directors, a member of Personnel and Remuneration Committee, member of Finance Committee and member of Institutional Relations Committee of Votorantim Participações S.A. He is also an independent member of the Board of Directors, Chairman of the Related Parties Committee and member Audit Committee of Duratex S.A. and member of the Board of Directors of Ibá and member of the Board of Directors, Finance Committee and Productivity and Personnel Committee of Sociedade Beneficente de Senhoras — Hospital Sirio Libanes.

 

*Carlos Augusto Lira Aguiar*. Mr. Aguiar has been a member of the Board of Directors of Fibria Celulose S.A. since January 2012. He was President and CEO of Fibria from the Company’s creation in August 2009 through June 2011. He was President of Aracruz Celulose S.A. from April 1998 through December 2009, having joined the Company in 1981, performing various management positions in the areas of Production, Quality and Engineering. In 1985 he was promoted to Industrial Director and during the period from 1993 to 1998 he served as Vice President of Industrial and Forestry Operations. Mr. Aguiar began his career in the Pulp and Paper industry in 1970, having held various management positions in the area of production and projects.

 

Mr. Aguiar is Chairman of the Board of Directors of Veracel Celulose S.A and Ibá. The above mentioned entity Aracruz Celulose S.A. was merged into the Company and Veracel Celulose S.A. belongs to the same economic group of the Company.

 

*João Henrique Batista de Souza Schmidt.* Mr. Schmidt is member of the Board of Directors of Fibria Celulose S.A. since October 2014 and currently holds the position of Executive Director of Corporate Development at Votorantim Industrial S.A. Mr. Schmidt has more than 14 years of experience in investment banking, and was previously a Managing Director at Goldman Sachs in Brazil. Prior to Goldman Sachs, Mr. Schmidt worked at Citigroup in Brazil.

 

Mr. Schmidt is also a member of the Board of Directors of Citrosuco S.A. and member of the Supervisory Committee at Votorantim Energia.

 

*Francisco Fernandes Campos Valério*. Mr. Valério was executive officer of Industrial Operations, Engineering and Procurement of Fibria Celulose SA from September 2009 until May 2013. He previously held various positions at Votorantim Celulose e Papel 1997 until 2009 and senior positions in other pulp and paper companies, including, Bahia Sul, Aracruz, Suzano, Braskraft Florestal e Industrial and Olinkraft Celulose e Papel.

 

Mr. Valério has been an alternate member of the Board of Directors of Veracel Celulose S/A, Chairman of Sindicato Papel e Celulose do MS, member of the Board of Directors of Cocal Energia Responsável and member of the Board of Directors of Associação Brasileira Técnica de Celulose e Papel.

 

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*Julio Cesar Maciel Ramundo.*Mr. Ramundo has been a member of the Board of Directors of Fibria Celulose S.A. since December 2011. He has served as Executive Director of the Banco Nacional de Desenvolvimento Economico e Social - BNDES since May, 2011, responsible for the Industrial, Capital Markets and Venture Capital areas. He joined BNDES in 1992, where he held various management positions mainly in the industrial division. Julio holds a bachelor’s degree in Economics from Universidade Federal do Rio de Janeiro-UFRJ and an MBA with distinction from the London Business School, University of London.

 

Mr. Ramundo is a member of the Board of Directors of Granbio.

 

*Eduardo Rath Fingerl.*Mr. Fingerl has been a member of the Board of Directors of Fibria Celulose S.A. since December 2009. From April 2006 to April 2011, Mr. Fingerl was a director of the areas of Capital Market, Venture Capital and Environment at Banco Nacional de Desenvolvimento Economico e Social - BNDES. He joined BNDES in May 1976, and has made a career at the bank acting in several positions. From August 1989 to June 1993, he acted in the private sector as Technical Director of FBDS - Fundação Brasileira para o Desenvolvimento Sustentável and Director of PQB - Petroquímica da Bahia S.A.

 

Mr. Fingerl is an independent member of the Board of Directors of Vetria Mineração S.A and EcoRodovias S.A, and also participates on the Investments Committee, Finance and Risks.

 

*Marcos Barbosa Pinto.*Mr. Pinto Joined Gávea Investimentos in May 2011 as a Partner. Prior to joining Gavea, Marcos served as commissioner of the Brazilian Securities Commission (2007-10) and chief advisor to the president of the Brazilian National Development Bank (2005-06). Marcos also worked as a lawyer at Morrison & Foerster LLP in California (2001-02) and Levy & Salomão Advogados in São Paulo (2003-04), where he advised clients in a number of mergers and acquisitions as well as private equity deals. Marcos holds an LL.B. and a Ph.D. in law from the University of São Paulo, an LL.M. from the Yale Law School and a masters in economics from Getúlio Vargas in Rio de Janeiro (FGV-RJ). He was also a visiting researcher at Columbia University and taught corporate law at Fundação Getúlio Vargas in Rio de Janeiro (FGV-RJ).

 

Mr. Pinto is currently a member of the Board of Directors of Multiterminais, Unidas and Chilli Beans, OOG — Odebrecht Oil and Gas S.A. and Energisa S.A.

 

*Alexandre Gonçalves Silva.* Mr. Silva  has been an independent member of the Board of Directors of Fibria Celulose S.A. since December 2009. From 2001 through 2007 he served as President and CEO of GE do Brasil. Previously, he served as President and CEO of GE Celma, an aero engine repair and overhaul company located in Petropolis, Rio de Janeiro. In his 40-year career, he worked most of his time in diverse sectors of the commercial aircraft industry.

 

Mr. Silva is presently Chairman of the Board of Directors of Embraer and a member of the Board of Directors of Ultrapar, Nitroquimica, Tecsis and Amcham.

 

***ALTERNATES***

 

*Maria Paula Soares Aranha.* Mrs. Maria Paula Aranha has been an alternate member of the Board of Directors of Fibria Celulose S.A. since April 2013. She has been also the coordinator of our Statutory Audit Committee since May 2013. She was a member of the Fiscal Council of Fibria Celulose S.A. from April 2011 to April 2013. Since 2005 she has been acting in the field of controlling, corporate governance and operational risk management consultancy. Previously, she served as Superintendent of Planning and Control of Aliança do Brasil Companhia de Seguros (affiliate of Banco do Brasil). Mrs. Maria Paula joined Banco do Brasil S.A. in 1981 and has made a career at the bank acting as Division Manager of Controlling and Executive Manager of Controlling and Distribution.

 

Mrs. Maria Paula is a member of the Board of Directors and coordinator Statutory Audit Committee of Paranapanema S.A.

 

*Sergio Augusto Malacrida Junior.*Mr. Sergio Malacrida has been an alternate member of the Board of Directors of Fibria Celulose S.A since April 2014.  He has been also a member of the Finance Committee since September 2013. He currently is Director of Treasury and Investor Relations Officer of Votorantim Industrial. He was partner at PR&A Financial Products, partner at Vinci Partners, CFO at Vanguarda Agro, Treasurer at Fibria.

 

Mr. Sergio Malacrida is a member of the Finance Committee of Votorantim Cimentos, member of the Finance Committee of Funsejem and member of Supervisory Board at Votorantim Energia and Citrosuco. He is graduated in Economics (FEA/USP) and MsC in Mathematics (IME / USP).

 

*Paulo Henrique de Oliveira Santos.*Mr. Santos has been an alternate member of the Board of Directors of Fibria Celulose S.A. since December 2009. On January 2011 he has held the position of Director of Mergers and Acquisitions and Emerging

 

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Businesses at Votorantim Industrial S.A., and since 2000 he has held the position of Chairman of Votorantim Novos Negócios — VNN, acting in the private equity and venture capital market. In 2013 he has held the position of Acting CEO of Votorantim Cimentos. From 1997 to 2000 he was Financial Director of Votorantim Metais.

 

Mr. Santos is a member of the Board of Directors of Tivit S.A and Votorantim Cimentos S.A.

 

*Julio Sergio de Souza Cardozo.*Mr. Julio Sergio de Souza Cardozo is an alternate member of the Board of Directors of Fibria Celulose S.A. and member of Fibria’s Statutory Audit Committee as financial specialist. He is lecturer, business consultant and full professor. He is professor of the Masters Program in Accounting at UERJ - University of the State of Rio de Janeiro and in MBA courses as an invited professor in several programs in the country. He was a partner with Ernst & Young for more than twenty years and after his retirement he founded Julio Sergio Cardozo & Associates, a consulting business based in the city of São Paulo. He has a PhD equivalent in Accounting & Finance, Majors in Auditing & Internal Control — graduated by Rio de Janeiro State University.

 

Mr. Julio Cardozo is a member of the Board of Directors and Chairman of the Audit Committee of AVISTA Credit Card, Chairman of the Audit Committee of Saraiva S.A. and also member of the Fiscal Council of Usiminas S.A.

 

*Victor Guilherme Tito*. Mr. Tito since July 2014 is a Chief of Departmnet of Banco Nacional de Desenvolvimento — BNDES. Previously, he acted at BNDES as manager.

 

Mr. Tito has no management position at other companies.

 

*Sergio José Suarez Pompeo.*Mr. Pompeo was an alternate member of the Board of Directors of Fibria Celulose S.A. from October 2010 to April 2012 and was part of the Finance Committee of the Company from October 2010 to April 2012. He joined the Banco Nacional de Desenvolvimento Economico e Social - BNDES in 2008 and is currently the Manager of BNDES’ Capital Markets area, working in the Investment Department of such area. Between 2006 and 2008 he worked at Petrobras in the area of Petrochemical Investments. Between 2008 and 2009 he served as Board member of some companies providing services to Petrobras (Companhia de Recuperação Secundária - CRSEC, Marlim Participações and Nova Marlim Participações), and as an alternate member of the Fiscal Council of Bertin S.A.

 

Mr. Pompeo was a member of the Board of Directors of Tupy S.A from 2011 to 2013.

 

*Arminio Fraga Neto.* Mr. Arminio Fraga is founding partner of Gavea and Chairman of the following Committees: Investment, Private Equity and Multimarket funds, Executive and Remuneration, and member of the Risk Committee and Real Estate Fund of Grupo Gavea. From 2009 to 2013, Arminio Fraga was Chairman of the Board of Directors of BM&FBovespa. From 1999 to 2002 he was Chairman of the Central Bank of Brazil and before that he was Director of International Matters of the Central Bank of Brazil, from 1991 to 1992. From 1993 to 1999 he was Managing Director of Soros Fund Management in New York, focused in emerging markets. Additionally, Arminio Fraga was Vice-Chairman of Salomon Brothers in New York from 1989 to 1991, focused in arbitration in emerging markets. He was also Chief Economist and Manager of Operations in Banco Garantia from 1985 to 1988. Arminio Fraga taught regularly in universities in Brasil, such as Pontifícia Universidade Católica and Fundação Getúlio Vargas, Rio de Janeiro, and taught abroad at Columbia University from 1993 to 1999 and at Wharton School from 1988 to 1989. Arminio Fraga also published academic works in several specialized magazines in Brazil and abroad.

 

Mr. Arminio Fraga is member of the Board of Directors of Group of Thirty, member of the Consultive Board of Peterson Inst. For Int. Economics and member of the Board of Directors of Instituto Desiderata.

 

*José Ecio Pereira da Costa Junior.* Mr.Pereira has been an alternate member of the Board of Directors of Fibria Celulose S.A. He is a member of the Statutory Audit Committee since May 2013. He was Chairman of the Fiscal Council from December 2009 to April 2013. In December 2007 he started the business management consulting company JEPereira Consultoria em Gestão de Negócios. From June 2002 to June 2007 he acted as audit partner at Deloitte Touche Tohmatsu in Brazil in the sector of audit and consulting. He graduated in Business Administration from Getulio Vargas Foundation — FGV and Accounting from Faculdade São Judas Tadeu.

 

Mr. Pereira is a member of the Board of Directors and Chairman of the Audit Committee of Gafisa S.A., member of the Board of Directors of Princecampos Participações S.A., member of the Consultive Board of CVI Refrigerantes Ltda, member of the Audit Committee of Votorantim Cimentos S.A, Votorantim Metais S.A, member of the Board of Directors of IBEF-PR and member of the Audit Committee of Citrosuco S.A.

 

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**Board of Executive Officers**

 

The following executive officers were appointed by our Board of Directors. They are members of our board of executive officers and are our legal representatives. The board of executive officers meets periodically to review production, and commercial and financial operations. Our executive officers are as follows:

 
| **Name**                          | ** ** | **Age** | ** ** | **Position**                                                    |
|-----------------------------------|------------|---------|------------|-----------------------------------------------------------------|
| Marcelo Strufaldi Castelli        |       | 52      |       | Chief Executive Officer                                         |
| Paulo Ricardo Pereira da Silveira |       | 54      |       | Industrial Operations, Engineering and   Procurement       |
| Guilherme Perboyre Cavalcanti     |       | 48      |       | Chief Financial Officer & Investor   Relations Officer |
| Luiz Fernando Torres Pinto        |       | 63      |       | Human and Organizational Development                            |
| Henri Philippe van Keer           |       | 49      |       | Commercial & International Logistics                   |
| Aires Galhardo                    |       | 39      |       | Forestry Operations                                             |

 

We present below a brief biographical description of each executive officer that is not also member of our Board of Directors:

 

*Marcelo Strufaldi Castelli*. Mr. Castelli has been appointed as Chief Executive Officer effective on July 1, 2011. Prior to that, he served as our executive officer of Paper, Planning, Procurement and Forestry Operations and Technology since August 28, 2009. Mr. Castelli also served as the supply chain and strategy director of our Company, where he has served as member of the executive board since December 2006. In addition, since joining our Company in 1997, Mr. Castelli held various positions, including recovery, utilities and environment manager, general manager of the Jacareí mill and associate director of operations. Prior to that, Mr. Castelli worked at Suzano, Bahia Sul and Aracruz. Mr. Castelli holds a bachelor’s degree in Mechanical Engineering from Universidade de Mogi das Cruzes and a degree in Business Administration from Faculdades Associadas de São Paulo (FASP). Mr. Castelli also attended courses at IMD in Switzerland and holds a Master of Business Administration degree from Fundação Dom Cabral (FDC).

 

*Paulo Ricardo Pereira da Silveira.*Mr. Silveira has been appointed as the Executive Officer of Industry and Engineering since June, 2013. Mr. Silveira has being working for the pulp and paper sector in the last 27 years. Before becoming Executive Officer Mr. Silveira was the Industry General Manager of our Aracruz unit. Previously, he worked for companies such as Riocell, Klabin and Aracruz Celulose. Mr. Silveira holds a bachelor’s degree in Chemistry Engineering from Pontifícia Universidade Católica do Rio Grande do Sul (PUC-RS) and holds a Master degree in Business Administration from Universidade Federal do Rio Grande do Sul (UGRS) and a Master degree in Corporate Finance from Fundação Getúlio Vargas (FGV).

 

*Guilherme Perboyre Cavalcanti.*Mr. Cavalcanti was appointed as Fibria’s Chief Financial Officer and Investor Relations Officer on February 1, 2012. Mr. Cavalcanti joined Vale S.A. in 2005, as global director for corporate finance until July 2010, when he was appointed as Vale’s Chief Financial Officer and Investor Relations Officer. Previously, he worked for companies such as Globo Organizations, Banco UBS/Pactual and Banco Banif/Primus. He holds a Master’s degree in Economics from the Pontifícia Universidade Católica do Rio de Janeiro PUC-RJ.

 

*Luiz Fernando Torres Pinto.*Mr. Pinto has joined Fibria as the Executive Officer of Human & Organizational Development on October 24, 2011. Prior to Fibria, Mr. Pinto has held several management positions in human resources, industrial production and business units at the following Companies: SunCoke Energy, Cenibra, Aracruz Celulose and  Paranasa. Mr. Pinto has a major in Chemical Engineering from Universidade Federal de Minas Gerais, a Master in Business Administration in Corporate Management from Fundação Dom Cabral and a HR specialization from Stanford Business School.

 

*Henri Philippe van Keer*. Mr. van Keer was appointed as the Executive Officer of Commercial and International Logistics in May 2, 2012. Before becoming Executive Officer of Fibria, Mr. van Keer was General Manager of the Commercial Department (June 2011). He served as Vice-President (CEO) of Valcon Energy, a company specialized in the production of clean energy, for two and a half years (between January 2008 and May 2010). Nevertheless, he held positions in Aracruz Celulose SA: Brazil General Manager (between 2002 and 2007) and Area Sales Manager in Europe (between 1996 and 2002). In addition, he served as Director of Sales at EMI Area-Chambéry, Equipment Company / paper machines in France (between 1994 and 1996), as well as in CSNE - (French National Service) in São Paulo (between 1992 and 1994). Mr. van Keer is graduated in engineering at the Institut National Polytechnique de Grenoble, France, with refresher courses at the Ecole de Management de Lyon (Fr) & Cranfield School of Management (UK) MBA.

 

*Aires Galhardo.*Mr. Galhardo has served as Fibria’s Executive Officer of Forestry Operations since June 2011. Mr. Galhardo joined our Company in July 2007, holding several management positions in Forestry Operations. Prior to that, Mr. Galhardo worked at Ambev (Cia de Bebidas das Américas), managing during 5 years logistic operations. Mr. Galhardo holds a bachelor’s degree in Business Administration from Fundação Getúlio Vargas and a Master degree in Business Administration also from Fundação Getúlio Vargas.

 

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**Fiscal Council**

 

We have had a permanent Fiscal Council (*Conselho Fiscal*) since 2004, which is a corporate body independent of our management and our independent auditors.

 

At the Extraordinary Shareholders Meeting held on April 26, 2013 the Statutory Audit Committee was established, the same meeting approved the amendment of our Bylaws where the Fiscal Council  became a non-permanent corporate body and will only be installed upon request by the shareholders. For the fiscal year of 2014 and 2015 the Fiscal Council was appointed.

 

Members of our fiscal council may not be members of our Board of Directors or the Board of Executive Officers, nor can be our employees or the Votorantim Group, or a spouse or relative of any member of our management. Our Fiscal Council is made up of between three and five members who are elected at the annual shareholders’ meeting for a one-year term. Under the Brazilian Corporation Law, any group of non-controlling shareholders that holds at least 10% of the voting shares also has the right to separately elect one member of the fiscal council.

 

Set forth below are the names, ages and positions of the members of our Fiscal Council and their respective alternates, each of whom has been appointed to serve until April 2016:

 
| **Name**                     | ** ** | **Age** | ** ** | **Year First Elected** | ** ** | **Position** |
|------------------------------|------------|---------|------------|----------------------------------|------------|--------------|
| Mauricio Aquino Halewicz     |       | 42      |       | 2013                             |       | Member       |
| *Geraldo Gianini*            |       | *65*    |       | 2009                             |       | *Alternate*  |
| Gilsomar Maia Sebastião |       | 40      |       | 2013                             |       | Member       |
| *Antonio Felizardo Leocadio* |       | *43*    |       | 2014                             |       | *Alternate*  |
| Antonio Serigo Riede         |       | 59      |       | 2015                             |       | Member       |
| *Carlito Silverio Ludwig*    |       | *68*    |       | 2014                             |       | *Alternate*  |

 

**Statutory Audit Committee**

 

NYSE rules require that listed companies have an Statutory Audit Committee that (i) is comprised of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding Audit Committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. Our Statutory Audit Committee, which, subject to certain exceptions, is equivalent to a U.S. audit committee, was installed at the meeting of our Board of Directors held on December 18, 2009. On April 26, 2013 the Audit and Risk Committee became the Statutory Audit Committee — CAE according to the Extraordinary Shareholders Meeting resolutions by the amendment of our Bylaws within the terms of CVM Ruling 509, of November 16, 2011, which shall operate on a permanent basis. On May 27, 2013 the Board of Directors approved the establishment of the Statutory Audit Committee, its Internal Rules and appointed its members. The CAE complies with all of such requirements and provides assistance to our Board of Directors in matters involving our accounting, internal controls, financial reporting and compliance. Our Statutory Audit Committee recommends the appointment of our independent auditors to our Board of Directors and reviews the compensation of, and coordinates with, our independent auditors. Our Statutory Audit Committee also evaluates the effectiveness of our internal financial and legal compliance controls. Our Statutory Audit Committee is composed of at least three (3) at most five (5) members appointed by the Board of Directors for a 5 year term. All members of our Statutory Audit and Risk Committee satisfy the audit committee membership independence requirements established under rules of the SEC. The Board of Directors has determined that Julio Sergio Souza Cardozo is an audit committee “financial expert” within the meaning of the rules adopted by the SEC relating to the disclosure of financial experts on audit committees in periodic filings pursuant to the U.S. Securities Exchange Act.

 

The members of the Statutory Audit Committee are as follows:

 

| **Name**                               | ** ** | **Member Since** | ** ** | **Age** |
|----------------------------------------|------------|-----------------------|------------|---------|
| Julio Sergio Souza Cardozo             |       | Oct 1, 2014           |       | 71      |
|                                   |       |                  |       |    |
| Maria Paula Soares Aranha              |       | May 27, 2013     |       | 59      |
|                                   |       |                  |       |    |
| José Ecio Pereira da Costa Junior |       | May 27, 2013     |       | 64      |

 

As of December 31, 2015, the members of our Statutory Audit Committee, on an individual basis and as a group, directly own less than 1% of our common shares.

 

Our Statutory Audit Committee is governed by Internal Regulations which were approved by the Board of Directors in July 2014 which sets forth rules with respect to duties and responsibilities of the committee, its structure and functioning, as well as rights and obligations of its members.

 

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**Advisory Committees**

 

We also have five advisory committees, comprised of Board members and others, with the power to make recommendations for the consideration of the Board. These are the Statutory Audit Committee, the Finance Committee, the Innovation Committee, the Personnel and Remuneration Committee and the Sustainability Committee, each of which has its own internal regulations and acts in accordance with the scope our Bylaws. The Statutory Audit Committee supervises the quality and integrity of financial reports, adherence to legal, statutory and regulation, the suitability of processes relating to managing Risk and the activities of the internal and independent auditors. The Finance Committee advises on macroeconomic matters as well as financial strategy and cash and market risk management policies. The Innovation Committee assists the Board in analyzing initiatives related to research and technological innovation in forestry and industrial areas, and management in relation to new products and processes. The Personnel and Remuneration Committee is tasked with analyzing human resources policies, structures and practices and remuneration policy, among other related matters. The Sustainability Committee advises our Board of Directors on all matters relating to sustainability evaluates investment proposals in terms of sustainability and impact and monitors the implementation of policies, strategies and activities relating to the sustainability of our operations.

 

**B.**                                    **Compensation**

 

In 2015, the aggregate annual remuneration paid to our executive officers and directors was R$68,232 thousand. Details are set forth in the table below:

 
| ** **                                                        | ** ** | **2015**                                | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                        | ** ** | **(in thousands of   Reais)** | ** ** |
| Benefits to officers   and directors                    |       | 52,301                                  |       |
| Benefit program   - Phantom Stock Options and Stock Options plans |       | 15,931                                  |       |
|                                                              |       | 68,232                                  |       |

 

The Brazilian Corporation Law requires that members of our fiscal council receive remuneration equal to at least 10% of the average amount paid to our executive officers.

 

**C.**                                    **Board Practices**

 

Our Board of Directors meets ordinarily at least four times per year and extraordinarily whenever necessary, according to our interest or when called by the Chairman or by the majority of the members of the Board of Directors. Our Board of Directors is responsible for, among other things, establishing our general business policies and for electing our executive officers and supervising their management. The board of executive officers meets periodically to review production, commercial and financial operations. Each of our Board of Directors and our Board of Executive Officers is governed by their respective Internal Regulations both approved by the Board of Directors in October 2013 which set forth rules with respect to duties and responsibilities of each Board, its structure and functioning, as well as rights and obligations of its members.

 

According to the Brazilian corporate law and to our by-laws, the members of the Board of Directors are elected by the holders of our common shares at the general shareholders meeting. Fibria’s members of the Board of Directors serve two year terms. In April 2015 the sitting and alternate members were elected to serve a mandate until the Ordinary General Meeting to be held in 2017.

 

**D.**                                   **Employees**

 

As of December 31, 2015, we employed 4,197 people. We outsource many of our operations and substantially all of the transportation of wood, pulp and other raw materials. This accounted for 12,979 people as of December 31, 2015.

 

Several unions represent our employees and they are considered well organized institutions. Annual Collective agreements related to non-executive employees were renewed in 2015 for another year, except for the agreement of the industrial employees of our Aracruz Unit which is still under negotiation, formalized agreements resulted in a base salary increase of up to 9.9% (100% reposition of Brazilian inflation without real increase), including administrative, industry and forest personnel. We believe we have very good relations with our employees.

 

In March 2000, we began to participate in a Votorantim Group pension plan (Funsejem), which was made available to all of our employees. For more detailed information, see “Defined Contribution Pension Plan” below.

 

In December 2005, we provisioned for the costs of post-retirement benefits expected to be paid to current, former or inactive employees upon retirement. For more detailed information, see “Post-retirement Benefit Plan” below.

 

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**Defined Contribution Pension Plan**

 

In March 2000, we began co-sponsoring a multi-employer defined contribution plan of the Votorantim Group (Funsejem) which is available to all employees. For employees below a certain income level we match their contribution limited to 1.5% of the employee’s compensation. For employees above that income level we match the employee’s contribution up to 6% of the employee’s compensation. Additional contributions can be made at the employee’s option. Contributions vest in a range of percentages depending on the employee’s years of service and will fully vest upon the employee’s retirement, death or disability, provided the employee has at least one year of service. The Company’s contributions amounted to R$9.7 million in 2015 and R$9.3 million in 2014.

 

Former Aracruz employees participated in ARUS — Fundação Aracruz de Seguridade Social, a private, not for profit, pension plan operating as a multi-sponsored fund. As a result of the Aracruz Acquisition in 2009, all employees had the option to transfer their contributions made to ARUS to Funsejem as ARUS has been terminated.

 

**Profit Sharing Plan**

 

Pursuant to Brazilian federal law, companies operating in Brazil are required to share profits with employees beginning from fiscal year 1996. In 1996, we instituted a profit sharing plan for our employees in addition to providing health and life insurance, transportation, meals and training. Pursuant to the program, each employee’s share of profits is linked to our operational and financial results. Employees are eligible to receive a maximum payment of up to 2.5 monthly salaries payable in February of the following year. Payment is granted if defined goals set by management are achieved by the process or industrial unit in which the employee works and based on the individual performance of the employee. The unions that represent our employees have agreed to this profit sharing plan.

 

**Post-retirement Benefit Plan**

 

**Medical assistance provided to retirees**

 

We entered into an agreement with the São Paulo State Pulp and Paper Industry Workers’ Union to provide the funding for a lifetime medical assistance plan (SEPACO) for all of our employees, their dependents, until they come of age, and their spouses, for life.

 

Our policy determines that the cost of the benefit be allocated from the date of hiring to the date on which the employee becomes eligible to receive the medical assistance benefit.

 

The amount recorded as expenses for the year ended December 31, 2015, 2014 and 2013, was R$7 million, R$8 million and R$4 million, respectively.

 

The actuarial methods are based on economic and biometric assumptions, as follows:

 
| ** **                                                  | ** ** | **Actuarial   Assumptions** | ** ** |
|-------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                  | ** ** | **2015**                    | ** ** | **2014** | ** ** |
|                                                        |       |                        |       |   |   |
| Discount rate -   %                                         |       | 7.3                         |       | 6.00 |   |
| Real growth rate   of medical costs - %                     |       | 3.0                         |       | 3.0 |   |
| Rate of increase   of utilization of medical assistance - % |       | 3.0                         |       | 3.0 |   |
| Long-term   inflation - %                                   |       | 5.7                         |       | 5.0 |   |
| Biometric table   of general mortality                      |       | AT-2000                     |       | AT-2000 |   |
| Biometric table   of general mortality for invalids         |       | IAPB 57                     |       | IAPB 57 |   |

 

Based on the independent actuary’s report, the position of the actuarial calculations is as follows:

 
| ** **                               | ** ** | **2015**                               | ** ** | **2014**   | ** ** |
|------------------------------------------|------------|----------------------------------------|------------|------------|------------|
| ** **                               | ** ** | **(in thousands of   Reais** | ** ** | ** ** | ** ** |
| Reconciliation   of liabilities          |       |                                   |       |       |       |
| Present value of   actuarial obligations |       | 91,434                                 |       | 76,579     |       |
| Cost of current   service                |       |                                   |       |       |       |
| Interest on   actuarial obligations      |       | 10,339                                 |       | 12,697     |       |
| Benefits paid                            |       | (4,656                                 | )          | (3,945     | )          |
| (Gains) losses                           |       | (8,430                                 |       | 7,288      |       |
| Others                                   |       | 1,257                                  |       | (1,185     | )          |
| Balance of   actuarial obligations       |       | 89,944                                 |       | 91,434     |       |

 

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**Organizational climate survey**

 

Every two years, Fibria conducts a survey among its own employees to identify positive and negative factors that influence the behavior of staff and can impact on Company performance. In connection with our goals of a High Performance Culture, we implemented in 2014 the Q12TM methodology applied by Gallup to measure a new key indicator: engagement. This survey reached 91.3% of total employees, a record number of participants, which is an excellent coverage also comparing to the market. The general favorability scored 72.4%, representing an increase of 4.6% when compared to the previous cycle. Based on the results, Fibria started a process for setting priorities and action plans for the coming years through an extensive organizational culture program. This program seeks to maximize the Company’s value and professionals through a high performance and continuous development strategy.

 

A new Climate Survey will be conduct between September and October 2016 as an extension of Organizational Climate management.

 

**E.**                                    **Share Ownership**

 

As of December 31, 2015, the members of our Board of Directors and our Executive Officers, on an individual basis and as a group, directly owned less than 1% of our common shares. For information on the beneficial ownership by the Ermírio de Moraes family, see “Item 7. A. Major Shareholders and Related Party Transactions — Major Shareholders.”

 

The following table lists the amount of shares held directly by each individual member of our Board of Directors or Executive Officers and their representative percentage relative to the total outstanding shares as of December 31, 2015:

 
| **Board of Directors**              | ** ** | **Number of   Common Shares** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------|------------|
|                                          |       |                                    |       |
| José Luciano   Duarte Penido             |       | 2,001                                   |       |
| Maria Paula   Soares Aranha                   |       | 0                                       |       |
| João Carvalho de   Miranda               |       | 15                                      |       |
| Sergio Augusto   Malacrida Junior             |       | 0                                       |       |
| Raul Calfat                                   |       | 70                                      |       |
| Paulo Henrique   de Oliveira Santos           |       | 1                                       |       |
| Carlos Augusto   Lira Aguiar                  |       | 2,431                                   |       |
| Julio Sergio de   Souza Cardozo               |       | 0                                       |       |
| João Henrique   Batista de Souza Schmidt |       | 0                                       |       |
| Francisco   Fernaded Campos Valerio           |       | 3,539                                   |       |
| Julio Cesar   Maciel Ramundo                  |       | 0                                       |       |
| Victor Guilherme   Tito                       |       | 0                                       |       |
| Eduardo Rath   Fingerl                        |       | 616                                     |       |
| Sergio Jose   Suarez Pompeo                   |       | 1                                       |       |
| Marcos Barbosa   Pinto                        |       | 0                                       |       |
| Arminio Fraga   Neto                          |       | 0                                       |       |
| Alexandre   Gonçalves Silva              |       | 1                                       |       |
| José Ecio   Pereira da Costa Junior      |       | 0                                       |       |
|                                          |       |                                    |       |
| **Executive   Officers**                      |       |                                    |       |
| Marcelo   Strufaldi Castelli                  |       | 0                                       |       |
| Paulo Ricardo   Pereira da Silveira           |       | 3,000                                   |       |
| Luiz Fernando   Torres Pinto                  |       | 0                                       |       |
| Henri Philippe   van Keer                     |       | 0                                       |       |
| Aires Galhardo                                |       | 0                                       |       |
| Guilherme   Perboyre Cavalcanti               |       | 0                                       |       |
| **Total**                                     |       | **9,659**                               |       |

 

Source: Itaú Custódia.

 

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**ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS**

 

**A.**                                    **Major Shareholders**

 

As of December 31, 2015, Fibria had 553,934,646 common shares. The table below presents certain information as of December 31, 2015, regarding (i) any person known to us as the owner of 5% or more than of our outstanding common stock, and (ii) the total amount of the common stock owned by the members of our Board of Directors, Executive Officers and Fiscal Council.

 
| ** **                                                  | ** ** | **December 31, 2015** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------|------------|
| **Shareholders**                                            | ** ** | **Number of   shares**     | ** ** | **% of total** | ** ** |
| **Common   Shares**                                         |       |                            |       |   |   |
| Votorantim S.A                                              |       | 162,974,335                     |       | 29.42 |   |
| BNDES   Participações S.A                         |       | 161,082,681                     |       | 29.08 |   |
| Board of   Directors, Executive Officers and Fiscal Council |       | 9,673                           |       | 0.00 |   |
| Treasury Shares                                             |       | 344,042                         |       | 0.06 |   |
| Public (Free   Float)                                       |       | 292,526,912                     |       | 41.44 |   |
| **Total   Common Shares**                                   |       | **553,934,646**                 |       | **100.00** |   |

 

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(1)   Under the First Amendment to the Shareholders’ Agreement, BNDESPar is required to hold 20.589% of the total capital during the first three years (until October 2017) of the signature of the First Amendment of the Shareholders’ Agreement which took place on October 29, 2014, and for the next two years 10.2945% (from October 2017 to October 2019).

 

**B.**                                    **Related-Party Transactions**

 

We have engaged in a number of transactions with related parties, which are described in Note 16 to our 2015 consolidated financial statements, as of and for the years ended December 31, 2015, 2014 and 2013 included elsewhere in this annual report.

 

In 2013 we continued to refine our corporate governance, with the development of a Policy for Related Party Transactions, approved by our Board of Directors. This Policy is intended to establish standard procedures to be observed in the execution of transactions with related parties and in situations in which there may exist a conflict of interest, so as to assure that these transactions are conducted on market terms and are disclosed and reflected in our records in the correct and complete form.

 

Our commercial and financial transactions with our subsidiaries, companies of the Votorantim Group and other related parties are carried out at normal market prices and conditions, based on usual terms and rates applicable to third parties.

 

The following is a summary of the nature and conditions of the transactions with the related parties:

 

**Controlling shareholders**

 

We have a contract with Votorantim S.A. related to services provided by the Votorantim Shared Service Center, which provides outsourcing of operational services relating to administrative activities, personnel department, back office, accounting, taxes and the information technology infrastructure shared by the companies of the Votorantim Group. The contract provides for an overall remuneration of R$11 million and has a one-year term, with annual renewal upon formal confirmation by the parties.

 

Additionally, Votorantim S.A. provides various services related to technical advice, trainings, including management improvement programs. These services are also provided to the entire Votorantim Group and we reimburse Votorantim S.A. at cost for the charges related to the services used.

 

As from August 2015, due to the assignments of the land lease contracts made by Votorantim Metais and CBA to VID in July 2015, we have land lease contract with VID, with original maturities up to 2023, in the amount of R$81 million. The contracts were canceled in December 2015, after the purchase of these lands as mentioned below.

 

On December 28, 2015, we have executed private instruments of irrevocable and irreversible real estate purchase and sale commitment with VID, for: (i) the selling by us of the rural real estate located in the cities of Votorantim and Sorocaba, in the State of São Paulo, totaling 5,042 hectares, for the amount of R$172 million and (ii) the purchase from VID of the rural real estate located in Capão Bonito and Itapeva, also in the State of São Paulo, totaling 33,994 hectares, for the amount of R$452 million. The amounts of the rural real state purchased and sold were negotiated between the parties based on independent appraisals. The operation was settled on the same date.

 

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We have financing contracts with BNDES, the majority shareholder of BNDESPAR, for the purpose of financing investments in infrastructure and the acquisition of equipment and machines, as well as the expansion and modernization of our plants (See Note 23 of our 2015 consolidated financial statements).

 

Management believes that these transactions were contracted at terms consistent with those entered with independent parties, based on technical studies performed when these contracts were executed.

 

**Votorantim Group companies**

 

The Company, through its VOTO IV joint-operation had an account receivable of US$3 million with Votorantim Participações S.A., which matures in July 2016 (equivalent to R$12 million).

 

We have a commitment to purchase energy from Votener - Votorantim Comercializadora de Energia Ltda. to supply our units in Jacareí, Aracruz and Três Lagoas. Since these units already generate their own energy, the contract has the purpose of maximizing the competitiveness of the energy matrix. The amount to be paid or received upon the sale of energy changes based on plant energy requirements. The total amount contracted is approximately R$700 thousand for the services of energy commercialization to be rendered by Votener, maturing in 30 months, through December 31, 2015, renewable by agreement between the parties. In the event of early termination of the contract, that party is required to pay all obligations incurred up to effective date of termination of the contract. The contract remains in effect subject to formal renewal, which is currently under negotiation.

 

In April 2015, Fibria-MS placed a marketable security investment with Banco Votorantim, maturing in April 2016 with an average annual interest rate of 102.1% of the CDI.

 

The Company has a derivative instrument contract with Banco Votorantim S.A. The Shareholders’ Agreement limits the intercompany investments to R$200 million for securities and R$220 million of notional value for derivative instruments.

 

Banco Votorantim had rendered advisory services to us during the process of issuance of the Agribusiness Credit Receivable Certificates by Fibria-MS, where we paid the total amount of R$649 thousand regarding the fees for the structuring, distribution and success fees.

 

The Company contracted Votorantim CTVM Ltda. to render services related to the bid for the port of Santos terminal in the amount of R$80 thousand. Furthermore, the Votorantim CTVM Ltda. rendered services to us during the process of issuance of the Agribusiness Credit Receivable Certificates by Fibria-MS, where we paid distribution fees of R$203 thousand.

 

Votorantim Cimentos has an agreement with the Company for the supply of road construction supplies, such as rock and calcareous rock, in the amount of R$189 thousand through January 2016.

 

The Company had an agreement with Votorantim Cimentos to sell 25,101 cubic meters of wood, signed in March 2014, in the amount of R$126 thousand, which was paid in September 2015.

 

In November 2015, the Company contracted Polimix Concreto Ltda. for rendering concreting services, in the amount of R$143 thousand.

 

On December 23, 2015, we signed a cession of rights and obligations agreement with Votorantim Siderurgia S.A. (“VS”) for the cession to us of the first cycle of rotation of the eucalyptus forests regarding existing contracts signed with rural producers from the State of Minas Gerais. As a consequence, we agreed with the payment in the amount of R$4 million corresponding to the reimbursement of the value already paid in advance by VS to the rural producers regarding the existing contracts. The payment will be made as follows: 90% of the total within 20 days from signing of the cession and the remaining balance up to 20 days after the harvest.

 

The Company has an agreement with Pedreira Pedra Negra Ltda. for the supply of road construction supplies, such as rock and gravel, in the amount of R$363 thousand through January 5, 2016.

 

The Company has an agreement to purchase sodium sulfate and sulfuric acid from Votorantim Metais, in the amount of R$6 million, for the supply of 4,000 metric tons of sodium sulfate and 11,000 tons of sulfuric acid, up to April 2016.

 

Until July 2015, the Company had land lease agreements, for approximately 22,400 hectares, with Votorantim Metais Ltda., with original maturity in 2019, totaling R$76 million, which was assigned by Votorantim Metais to VID, on the same conditions previously established.

 

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Until July 2015, the Company had land lease agreements, for approximately 2,062 hectares, with Companhia Brasileira de Alumínio - CBA, with original maturity in 2023, totaling R$4 million, which were assigned by CBA to VID, on the same conditions previously established.

 

The Company also has a non-onerous assignment agreement with CBA through May 2016, for Terminal 32 in the Port of Santos which is used to export our pulp production.

 

In the years ended December 31, 2015, 2014 and 2013, no provision for impairment was recognized on assets involving related parties.

 

The total annual amount authorized by the Annual General Meeting on April 28, 2015 for the remuneration of Board of Executive Officers, Board of Directors, Fiscal Council, Audit, Risk, Compensation and Sustainability Committees for 2015 was R$56million. The remuneration expenses in 2015 included: (i) benefits to officers and directors (R$52 million); and (ii)  benefit program - Phantom Stock Options and Stock Options plans (R$16 million).

 

Benefits include fixed compensation (salaries and fees, vacation pay and 13th month salary), social security contributions to the National Institute of Social Security (INSS), to the Government Severance Indemnity Fund for Employees (FGTS) and the variable compensation program.

 

Benefits to key management do not include the compensation for the Statutory Audit Committee, Finance, Compensation and Sustainability Committees’ members of R$1.2 million for the year ended December 31, 2015.

 

The Company does not have any additional post-employment active plan and does not offer any other benefits, such as additional paid leave for time of service.

 

**Guarantees**

 

We do not provide guarantees in favor of other companies of the Votorantim Group.

 

**C.**                                    **Interests of Experts and Counsel**

 

Not applicable.

 

**ITEM 8. FINANCIAL INFORMATION**

 

**A.**                                    **Consolidated Statements and Other Financial Information**

 

See “Item 3. Key Information — A. Selected Financial Data” and “Item 18. Financial Statements.”

 

***Legal proceedings and provisions***

 

We are subject to numerous legal proceedings with respect to tax, labor and other claims. See Note 24 to our 2015 consolidated financial statements and discussions on our critical accounting policies.

 

We are party to certain legal proceedings in Brazil arising in the normal course of business, and have made provisions when we believe that we can reasonably estimate probable losses. In connection with some of these proceedings we have made deposits (included in other non-current assets) which will only be released to us upon a judgment in our favor. The provisions for tax and other litigation and the deposits are as follows:

 
| ** **                            | ** ** | **2015**                | ** ** | **2014**      | ** ** |
|---------------------------------------|------------|-------------------------|------------|---------------|------------|
| **In thousands of   Reais** | ** ** | **Judicial   deposits** | ** ** | **Provision** | ** ** | **Net** | ** ** | **Judicial   deposits** | ** ** | **Provision** | ** ** | **Net** | ** ** |
|                                  |       |                    |       |          |       |   |   |   |   |   |   |   |   |
| Nature of claims                      |       |                    |       |          |       |   |   |   |   |   |   |   |   |
| Tax                                   |       | 96,997                  |       | 106,571       |       | 9,574 |   | 88,858 |   | 100,604 |   | 11,746 |   |
| Labor                                 |       | 64,429                  |       | 201,561       |       | 137,132 |   | 52,304 |   | 174,179 |   | 121,875 |   |
| Civil                                 |       | 18,918                  |       | 37,537        |       | 18,619 |   | 16,400 |   | 27,361 |   | 10,961 |   |
| Total                                 |       | 180,344                 |       | 345,669       |       | 165,325 |   | 157,562 |   | 302,144 |   | 144,582 |   |

 

**Legal Matters**

 

We are party to a number of legal actions arising from our normal business activities. These include general civil, tax and employee litigation and administrative and environmental proceedings. Although the amount of any liability that could arise with

 

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respect to these actions cannot be accurately predicted, in our opinion, except as described below, such actions, if decided adversely, would not, individually or in the aggregate, have a material adverse effect on our financial condition.

 

We believe that our provisions for legal proceedings are sufficient to meet probable and reasonably estimable losses in the event of unfavorable court decisions and that the ultimate outcome of these matters will not have a material effect on our financial condition or results of operations. We cannot estimate the amount of all potential costs that we may incur or penalties that may be imposed on us other than those amounts for which we have provisions.

 

***Tax Proceedings***

 

We have instituted a number of legal proceedings in which we are seeking a refund or contesting the imposition of certain taxes. The following is a description of some of our most significant judicial and administrative tax proceedings.

 

Tax Incentive — Agency for the Development of the Northeastern Brazil (ADENE)

 

We have business units located within the regional development area of ADENE. As that region is deemed a priority for the Brazilian development, in December 2002, we requested and were granted by the Brazilian Federal Revenue Service the right to benefit from reductions in corporate income tax and non-refundable surcharges calculated on operating profits (as defined) for Aracruz plants A and B (period from 2003 to 2013) and plant C (period from 2003 to 2012).

 

On January 9, 2004, the benefit was cancelled, by the Ministry of Integration and we continued using the benefits, because it was challenging the Ministry of Integration Decision.

 

Nevertheless, the Brazilian Federal Revenue Service served us an assessment notice in December 2005 requiring the payment of the amounts of the tax incentive used in 2003 and 2004, plus interest, but without imposing any fine, amounting to R$316 million. The Tax Federal Administrative Court cancelled the part of the assessment related with 2003 benefits and the part related with 2004 was upheld. Because this ruling, the amount of the assessment was reduced to R$122 million updated to December 2015. We will challenge the Tax Federal Administrative Court ruling in a Judicial Court.

 

Our management, supported by our legal counsel, believes that the decision to cancel the tax benefits is erroneous and should not prevail, whether with respect to benefits already used, or in respect of future periods.

 

As regards to the benefits utilized, based on the position of its external legal counsel, our management believe that the tax payment demanded is unjustified, since we used the benefits strictly in accordance with the legal parameters and in conformity with the Brazilian Federal Revenue Service (Receita Federal do Brasil) determinations and ADENE’s qualifying reports.

 

Considering the facts that occurred in 2004, we decided to cease the use of tax benefits as from 2005, until a final court decision is obtained on the matter.

 

Based on the position of outside legal counsel, management understands that the likelihood of an unfavorable outcome for the tax benefits used until 2004 and those still pending use as from 2005 is considered as possible and therefore no provision has been recorded.

 

IRPJ/CSLL - partial approval

 

We have pending a number of requests for the approval of income tax credits with the Brazilian Federal Revenue Service with respect fiscal year 1997, totaling R$134 million. The authorities approved only R$83 million, which generated a debt of R$51 million (R$197 million updated as at December 312015). We timely appealed the rejection of the tax credits and obtained a partially favorable decision. Based on the opinion of our internal and external legal counsels, the probability of loss is possible and, as such, no provision has been recorded with respect thereto.

 

IRPJ/CSLL - Newark

 

Fibria received, in December 2007 and December 2010, two tax assessments in the amount, together, of R$237 million where Brazilian Federal Revenue Service charged Income Tax and Social Contribution of Newark Financial Inc., an offshore company controlled by VCP Exportadora e Participações Ltda. (succeeded by Fibria) with respect to the fiscal year 2005. Based on advice of counsel, we have determined that the likelihood of loss for the first tax assessment (December 2007) is remote and the probability of loss for the second tax assessment (December 2010) is possible and no provision has been recorded with respect thereto. The amount updated through December 31, 2015 was R$257 million.

 

Tax assessment - IRPJ/CSLL - Swap of industrial and forestry assets

 

In December 2012, a tax assessment in the amount of R$1.7 billion (see note 24 to our consolidated financial statements) was issued by the Brazilian Federal Tax Authority, or RFB, against us, with respect to IRPJ and CSLL taxes as a result of an agreement

 

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signed between Fibria (on that occasion VCP) and Internation Paper. The subject matter of which was the exchange of industrial and forestry assets between the two companies. On January 9, 2013 we filed an appeal with the Brazilian Federal Revenue Service.

 

In November 13, 2013, we became aware of the decision accepting the Company’s appeal against the tax assessment notice issued by the Brazilian Federal Revenue Service regarding the swap of industrial and forestry assets between us and International Paper. This was a first administrative instance decision and The Public prosecutor filed a mandatory appeal. The claim is pending a final decision from the Tax Federal Administrative Court (*Conselho Administrativo de Recursos Fiscais*).

 

On March 4, 2015, the Tax Federal Administrative Court (CARF - Conselho Administrativo de Recursos Fiscais) has declared admissible in part the administrative process, with a reduction in the fines from 150% to 75%. The amount updated through December 31, 2015 was R$1,633 million.

 

We filed an appeal against this decision. On January 19, 2016, the Tax Federal Administrative Court (CARF — Conselho Administrativo de Recursos Fiscais) rejected the appeal filed by the Company. The appeal was rejected as per the casting vote of CARF’s President, a Brazilian Federal Revenue Service’s representative, upon the tie resulting from the votes of the other counselors.

 

After the publication of the decision, the Company will analyze whether it would be appropriate to challenge the referred ruling in the administrative level. If the filing of an appeal in the administrative level is not advisable, the discussion will continue in judicial courts, with only a small cash impact for the Company, corresponding to the payment of the required judicial guarantee.

 

Based on the opinion of our internal and external legal counsels, the likelihood of loss is possible and no provision has been recorded with respect thereto.

 

IRPJ/CSLL — Fibria Trading International

 

In October 2013, a tax assessment in the amount of R$271 million, was issued by the Brazilian Federal Tax Authority (Receita Federal do Brasil or RFB) against us with respect to Corporate Income Taxes (Imposto de Renda Pessoa Jurídica), or IRPJ, and Social Contribution on Net Income (Contribuição Social Sobre o Lucro Líquido), or CSLL. The main discussion is the taxation of the profits earned in the fiscal year 2010, by the subsidiary Fibria Trading International — FTI in Brazil. The amount of the assessment was R$337 million up to December 31, 2015.

 

On November 28, 2013, we filed an appeal with the Brazilian Federal Revenue Service.

 

In August 2014, we became aware of the decision accepting the Company’s appeal against the tax assessment notice issued by the Brazilian Federal Revenue Service. This is a first administrative instance decision and The Public prosecutor filed a mandatory appeal. The claim is pending a final decision from the Tax Federal Administrative Court (Conselho Administrativo de Recursos Fiscais). Based on the position of our internal and external legal advisors, the likelihood of loss is possible and no provision has been recorded with respect thereto.

 

IRPJ/CSLL — Fibria Trading International, NORMUS and FOH

 

In June 2014, a new tax assessment in the amount of R$272 million, was issued by the RFB against us, with respect to IRPJ, and CSLL, during the period from 2010. The main discussion is the taxation of the profits earned by the Controlled Companies FTI (Fibria Trading International), Normus and FOH (Fibria Overseas Holding) in Brazil. The amount of the assessment was R$323 million up to December 31, 2015.

 

On July 28 2014, we filed an appeal with the Brazilian Federal Revenue Service.

 

In April 2015, we became aware of the decision accepting the Company’s appeal against the tax assessment notice issued by the Brazilian Federal Revenue Service. This is a first administrative instance decision and The Public prosecutor filed a mandatory appeal. The claim is pending a final decision from the Tax Federal Administrative Court (Conselho Administrativo de Recursos Fiscais). Based on the position of our internal and external legal advisors, the likelihood of loss is possible and no provision has been recorded with respect thereto.

 

IRPJ/CSLL — Fibria Overseas Holding

 

In October 2014, a tax assessment in the amount of R$73 million, was issued by the Brazilian Federal Tax Authority (*Receita Federal do Brasil* or RFB), against us, with respect to Corporate Income Taxes (*Imposto de Renda Pessoa Jurídica*), or IRPJ, and Social Contribution on Net Income (*Contribuição Social Sobre o Lucro Líquido*), or CSLL. The main discussion is the taxation of the profits earned in the fiscal year of the 2009 by the subsidiary FOH (Fibria Overseas Holding) in Brazil. The amount of the assessment was R$84 million up to December 2015.

 

On November 28, 2014, we filed an appeal with the Brazilian Federal Revenue Service.

 

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In October 2015, we became aware of the decision accepting the Company’s appeal against the tax assessment notice issued by the Brazilian Federal Revenue Service. The Company has not acknowledge the existence of any appeal filed by the Public prosecutor through the current date. Based on the position of our internal and external legal advisors, the likelihood of loss is possible and no provision has been recorded with respect thereto.

 

IRPJ/CSLL — Fibria Celulose

 

In December 2015, a new tax assessment in the amount of R$549 million, was issued by the RFB, against us, with respect to IRPJ and CSLL. The main argument of the assessment is the non-deductibility of depreciation, amortization and depletion expenses, during the fiscal year 2010. The Company will present the applicable appeal. Based on the position of our internal and external legal advisors, the likelihood of loss is possible and no provision has been recorded with respect thereto.

 

IRPJ/CSLL — Fibria Trading International e FAF

 

In December 2015, a new tax assessment in the amount of R$52 million, was issued by the RFB, against us, with respect to IRPJ and CSLL. The main discussion is the taxation of the profits earned in the fiscal year of 2011 by the subsidiary FTI (Fibria Trading International) and FAF (Fibria International GMBH) in Brazil. The Company will present the applicable appeal. Based on the position of our internal and external legal advisors, the likelihood of loss is possible and no provision has been recorded with respect thereto.

 

Other Tax liabilities

 

Fibria has more than 454 legal cases for individual amounts of less than R$100 million with probability of loss classified as possible. The amount involved in all of these legal cases is R$3.1 billion. The average value of each case is R$6.9 million. Additionally the Company has over 93 legal cases for individual amounts of less than R$100 million with probability of loss classified as remote. The total amount for all of these legal cases is R$801 million. The average value of each case is R$8.6 million.

 

***Labor Proceedings***

 

We are a party to approximately 5,751 labor lawsuits filed by former employees, third parties and unions, claiming the payment of severance pay, health and safety premiums, overtime, commuting time, occupational illnesses and workers’ compensation, tangible and moral damages, understated indexation on the fine of 40% of the Government Severance Indemnity Fund for Employees (FGTS).

 

***Civil Proceedings***

 

We are a party to approximately 1,230 civil lawsuits, most of which refer to claims for compensation by former employees or third parties for alleged occupational illnesses and workers’ compensation, collection lawsuits and bankruptcy situations, reimbursement of funds claimed from delinquent landowners and possessory actions filed in order to protect our equity. We have insurance for public liability that covers, within the limits set in the policy, unfavorable sentences in the civil courts for claims for compensation of losses.

 

Comments regarding civil proceeding case

 

In June 2012, a Public Civil Action was filed by the Federal Public Ministry to prohibit the Company ́s trucks from using federal highways above weight restrictions and alleged damage to federal highways, the environment and economic order. The updated amount of R$1,256,463 thousand as at December 31, 2015, was given by the Federal Public Ministry for the proceeding. The Company successfully appealed against the decision and also filed appeal for the other matters of the Action. The proceeding is in its initial stage.

 

Remaining judicial deposits (consolidated)

 

The Company has judicial escrow deposits at December 31, 2015 the amount of R$144,954 thousand (R$135,640 thousand in December 31, 2014) for cases classified by external legal advisors as of remote or possible loss, for which no provision have been recorded. The contingencies refer to PIS, COFINS, Income taxes and to contributions to the INSS, among other of smaller amounts. The deposits also include R$38,639 thousand of the credit balance of REFIS - “Profits Abroad”, as detailed in Notes 24 and 25 to our 2015 consolidated financial statements.

 

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***Administrative Proceeding***

 

Land Disputes

 

In April and October, 2006 and in December 2009, the Brazilian Institute for Land Reform (INCRA) published Public Notes informing that Technical Identification Reports issued by commissions set up by INCRA concluded that approximately 34,430 hectares of land located in the State of Espírito Santo are considered the territory of the *Comunidades Quilombolas de Linharinho, São Jorge e São Domingos*. From that total area, approximately 25,330 hectares are legitimate property and possession of us. The cases are still underway with no final decision by INCRA. We are confident that the acquisition of this area by us was made in compliance with the legislation and was registered in the appropriate government offices.

 

In July 2015, Fibria received a letter from INCRA informing about the publication of the Notice of Identification and Delimitation Technical Report from Quilombola territory of Linharinho community, located in Conceição da Barra municipality, with 3,133 hectares for Fibria and 374 hectares for third parties.

 

Civil Litigation

 

Fibria was cited in March 2014 of the filing of a civil action by the Federal Public Prosecutor’s Office in the municipality of São Mateus (Espírito Santo State) in respect of land deeds acquired by the Company in the northern of the state of Espírito Santo. An injunction was issued blocking around 6,000 hectares of Fibria’s land in São Mateus, and requiring that BNDES suspend any law or indirect or mixed financing in favor of Fibria or for the planting of eucalyptus pulp in the municipalities of São Mateus and Conceição da Barra (Espírito Santo State).

 

Fibria has responded through the defense and Interlocutory Appeal, which suspended the effects of the granted injunction. The Federal Public Prosecutor’s Office filed an appeal, and was successful, restoring the injunction. Fibria position is that the acquisition of land was made in accordance with applicable laws and practices used at the time and the matter is still being disputed judicially.

 

In September 2015, Fibria was cited in a new civil action filed by Federal Public Prosecutor’s Office. It was granted an injunction blocking about 5,601 hectares of Fibria’s lands in the municipalities of São Mateus and Conceição da Barra.Fibria presented administrative and judicial defense.

 

Veracel

 

We and Stora Enso each own 50% of Veracel, the joint ownership governed by a shareholders’ Agreement. In May 2014, we commenced an arbitration against Stora Enso for alleged breach of its obligations on certain provisions of the Shareholder’s Agreement.

 

**Commitments**

 

The significant contractual obligations and commitments that affect our liquidity are short-term debt, long term debt, take-or-pay contracts, leases and capital expenditures.

 

Fibria entered into Take or Pay long-term agreements with suppliers of power, transport, diesel fuel and chemical products for the average period of 9 years. These agreements contain termination and suspension clauses of supply due to non-compliance with material obligations. The contractual obligations assumed on December 31, 2015 represented R$260 million p.a. (R$202 million as of December 31, 2014). See Note 27 to our 2015 consolidated financial statements.

 

**Dividends**

 

***General***

 

Under the Brazilian corporate law, we must allocate 5% of our annual net income to a legal reserve (used only to offset any accumulated deficit or to increase the corporate capital) that shall not exceed the amount equivalent to 20% of the company’s capital.

 

In addition, according to the Brazilian corporate law, after the allocation of any amounts to the legal reserve, we may, subject to shareholders’ approval, make allocations from the remaining balance to a contingency reserve against future losses.

 

As determined by the Brazilian corporate law and reflected in our by-laws, at the end of each fiscal year, all shareholders are entitled to receive a mandatory dividend, also known as the Mandatory Distribution. The company must distribute at least 25% of its net income after taxes, after deducting the accumulated losses and after deducting any amounts allocated to employee’s and management participation, and as reduced or increased, as the case may be, by the following amounts:

 

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·                  the amount allocated to the legal reserve; and

 

·                  the amount allocated to the contingency reserve and any amount written off in respect of the contingency reserve accumulated in previous fiscal years.

 

Dividends must be distributed within 60 days, from the annual shareholders’ meeting in which the distribution was approved, unless a shareholders’ resolution determines another date, not later than the end of the fiscal year in which such dividend was declared.

 

The Brazilian corporate law permits, however, a company to suspend the mandatory distribution of dividends if the Board of Directors reports to the shareholders’ meeting that the distribution would be incompatible with the financial condition of the company, subject to approval by the shareholders’ meeting and review by the Fiscal Council. Net income not distributed due to the suspension mentioned here must be attributed to a special reserve and, if not absorbed by subsequent losses, must be paid as dividends as soon as the financial situation of the company permits. The rules regarding suspension apply to the holders of ADSs.

 

The amounts available for distribution are determined on the basis of financial statements prepared in accordance with the requirements of the Brazilian corporate law. In addition, amounts arising from tax incentive benefits or rebates are appropriated to a separate capital reserve in accordance with the Brazilian corporate law. This investment incentive reserve is not normally available for distribution, although it can be used to absorb losses under certain circumstances, or be capitalized. Amounts appropriated to this reserve are not available for distribution as dividends.

 

The Brazilian corporate law permits a company to pay interim dividends out of preexisting and accumulated profits for the preceding fiscal year or semester, based on financial statements approved by its shareholders. We may prepare financial statements semiannually or for shorter periods. Our Board of Directors may declare a distribution of dividends based on the profits reported in semiannual financial statements. The Board of Directors may also declare a distribution of interim dividends based on profits previously accumulated or in profits reserve which are reported in such financial statements or in the last annual financial statement approved by resolution taken at a shareholders’ meeting.

 

In general, shareholders who are not Brazilian residents must register their equity investment with the Central Bank to have dividends, sales proceeds or other amounts with respect to their shares eligible to be remitted outside of Brazil. The common shares underlying the ADSs are held in Brazil by Banco Itaú S.A., also known as the custodian, as agent for the depositary, which is the registered owner on the records of the registrar for our shares.

 

Payments of cash dividends and distributions, if any, are made in Brazilian *Reais* to the custodian on behalf of the depositary, which then converts such proceeds into U.S. Dollars and causes such U.S. Dollars to be delivered to the depositary for distribution to holders of ADSs. In the event that the custodian is unable to convert immediately the Brazilian currency received as dividends into U.S. Dollars, the amount of U.S. Dollars payable to holders of ADSs may be adversely affected by devaluations of the Brazilian currency that occur before the dividends are converted. Under the current Brazilian corporate law, dividends paid to persons who are not Brazilian residents, including holders of ADSs, will not be subject to Brazilian withholding tax, except for dividends declared based on profits generated prior to December 31, 1995, which will be subject to Brazilian withholding income tax at varying tax rates. See “Item 10. Additional Information — E. Taxation —Brazilian tax consequences.”

 

Brazilian law allows the payment of dividends only in *Reais* limited to the inappropriated retained earnings in our financial statements prepared in accordance with IFRS. At December 31, 2015, in our financial statements prepared in accordance with IFRS, we had unappropriated retained earnings —Reserve for Investments of R$25.1 million. Inappropriated retained earnings as reported in accordance with IFRS may be used to make additional discretionary dividend payments, but we cannot assure you that we will make dividend payments out of these inappropriated retained earnings in the foreseeable future. No dividend distribution can be made if an accumulated deficit is reported in accordance with IFRS, unless the negative balance is eliminated by the reversal of other reserves.

 

In 2015 Fibria launched a Dividend Policy, approved by the Board of Directors and are available at our website. One of its main purposes is to indicate to the market that the Management will base its dividend payment proposal on our cash flow generation, with respect to its indebtedness and liquidity policies, maintaining its commitment to investment-grade status, and considering its strategic plan. Given these conditions, the possibility of paying dividends in addition to the mandatory minimum will be announced at the annual financial statements. Throughout the year, if our financial situation exceed the envisaged scenario, management may propose an extraordinary dividends.

 

***Payment of dividends***

 

In 2009, in addition to the factors described above and in view of the Aracruz Acquisition, the resulting increase of our level of indebtedness, the liability management program and our long term business plan and as permitted by the applicable statutes of Brazilian corporate law, our Board of Directors recommended that no dividends or interest attributable to capital be paid with respect to the reported results of 2009. The General Shareholders’ Meeting held on April 30, 2010 approved to omit such payment.

 

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For the year ended December 31, 2010, our Board of Directors proposed to the General Shareholders’ Meeting held on April 28, 2011 the distribution of dividends relative to the fiscal year ended on December 31, 2010 in the amount of R$0.30 per share, totaling R$142 million and also the payment of the dividends related to the fiscal year ended on December 31, 2009 considering that our financial situation permitted such dividend. This dividend reflected only the mandatory minimum dividend established in our by-laws and as determined by the Brazilian corporate law.

 

For the years ended December 31, 2013 and 2012, our Board of Directors recommended that no dividend or interest attributable to capital be paid with respect to the reported results of 2013 and 2012 because of loss recorded in these periods.

 

For the year 2014, with respect to the reported net income of R$163 million, following the Brazilian Corporate Law and our Bylaws, the amount of R$37 million was distributed as minimum compulsory dividend corresponding to 25% of the adjusted net income; and the amount of R$111 million was distributed as additional dividend.

 

Also, in line with the Dividend Policy launched, the Company has approved, on November 30, 2015, the distribution of additional dividends declared and paid against the Company’s account of Reserve for Investments, in the total amount of R$2.0 billion.

 

For the year 2015, with respect to the reported net income of R$357 million, following the Brazilian Corporate Law and our Bylaws, the minimum dividends to be paid totals R$81 million, corresponding to 25% of the adjusted net income. Moreover, considering the Dividend Policy the management is also proposing the distribution of R$219 million as additional dividend.

 

**B.**                                    **Significant Changes**

 

No significant changes or events have occurred after the close of the balance sheet date at December 31, 2015, other than the events already described in this annual report.

 

**ITEM 9.  THE OFFER AND LISTING**

 

**A.**                                    **Offer and Listing Details**

 

The ADSs are listed on the New York Stock Exchange under the trading symbol “FBR.” Our common shares trade on the São Paulo Stock Exchange under the symbol “FIBR3” (prior to November 18, 2009 we traded under the symbol “VPCA4”). At December 31, 2014, we had approximately 12,100 shareholders of record at the BM&FBOVESPA.

 

**Market Price Information**

 

The table below sets forth, for the periods indicated, the reported high and low closing sale prices in nominal *Reais* for each preferred share (until August 12, 2009) and common shares (from August 12, 2009 on) on the São Paulo Stock Exchange, not considering share prices adjusted by dividends. The table also sets forth, for the periods indicated, the reported high and low sales prices per ADS at the last day of each respective quarter. See “Item 3 — Key Information — A. Selected Financial Data — Exchange Rates” for information with respect to exchange rates applicable during the periods set forth below:

 

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| ** **                                    | ** ** | ** **                                          | ** ** | **Reais per   Share (Preferred share until   August 12, 2009,   and Common Shares   thereafter)** | ** ** | **U.S. Dollars   per ADS** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                    | ** ** | ** **                                          | ** ** | **High**                                                                                                                                  | ** ** | **Low**                              | ** ** | **High** | ** ** | **Low** | ** ** |
|                                          |       |                                                |       |                                                                                                                                      |       |                                 |       |   |   |   |   |
| 2011                                          |       | Annual                                              |       | 27.95                                                                                                                                     |       | 12.57                                |       | 16.78 |   | 6.68 |   |
|                                          |       |                                                |       |                                                                                                                                      |       |                                 |       |   |   |   |   |
| 2012                                          |       | Annual                                              |       | 23.60                                                                                                                                     |       | 12.37                                |       | 11.50 |   | 6.01 |   |
|                                          |       |                                                |       |                                                                                                                                      |       |                                 |       |   |   |   |   |
| 2013                                          |       | Annual                                              |       | 29.45                                                                                                                                     |       | 20.98                                |       | 13.15 |   | 10.37 |   |
|                                          |       |                                                |       |                                                                                                                                      |       |                                 |       |   |   |   |   |
| 2014                                          |       | First Quarter                                       |       | 27.65                                                                                                                                     |       | 23.82                                |       | 11.68 |   | 10.11 |   |
|                                          |       | Second Quarter                                      |       | 25.83                                                                                                                                     |       | 20.10                                |       | 11.38 |   | 9.14 |   |
|                                          |       | Third Quarter                                       |       | 27.05                                                                                                                                     |       | 20.91                                |       | 11.47 |   | 9.48 |   |
|                                          |       | Fourth Quarter                                      |       | 33.13                                                                                                                                     |       | 24.38                                |       | 12.38 |   | 10.03 |   |
|                                          |       | Annual                                              |       | 33.13                                                                                                                                     |       | 20.10                                |       | 12.38 |   | 9.14 |   |
|                                          |       |                                                |       |                                                                                                                                      |       |                                 |       |   |   |   |   |
| 2015                                          |       | First Quarter                                       |       | 45.20                                                                                                                                     |       | 29.14                                |       | 14.13 |   | 11.30 |   |
|                                          |       | Second Quarter                                      |       | 45.50                                                                                                                                     |       | 40.35                                |       | 14.71 |   | 13.38 |   |
|                                          |       | Third Quarter                                       |       | 57.80                                                                                                                                     |       | 39.66                                |       | 14.75 |   | 12.49 |   |
|                                          |       | Fourth Quarter                                      |       | 57.23                                                                                                                                     |       | 48.80                                |       | 14.77 |   | 12.42 |   |
|                                          |       | Annual                                              |       | 57.80                                                                                                                                     |       | 29.14                                |       | 14.77 |   | 11.30 |   |
|                                          |       |                                                |       |                                                                                                                                      |       |                                 |       |   |   |   |   |
| Share Price for   the most recent six months: |       |                                                |       |                                                                                                                                      |       |                                 |       |   |   |
|                                          |       |                                                |       |                                                                                                                                      |       |                                 |       |   |   |   |   |
|                                          |       | September                                           |       | 57.80                                                                                                                                     |       | 51.60                                |       | 14.75 |   | 13.38 |   |
|                                          |       | October                                             |       | 56.30                                                                                                                                     |       | 51.45                                |       | 14.48 |   | 13.52 |   |
|                                          |       | November                                            |       | 57.23                                                                                                                                     |       | 51.36                                |       | 14.77 |   | 13.52 |   |
|                                          |       | December                                            |       | 52.24                                                                                                                                     |       | 48.80                                |       | 13.55 |   | 12.42 |   |
|                                          |       | January                                             |       | 51.89                                                                                                                                     |       | 42.30                                |       | 12.69 |   | 10.32 |   |
|                                          |       | February (through February 11, 2016) |       | 41.80                                                                                                                                     |       | 38.30                                |       | 10.50 |   | 9.49 |   |

 

**B.**                                    **Plan of Distribution**

 

Not applicable.

 

**C.**                                    **Markets**

 

**Trading on the São Paulo Stock Exchange**

 

Settlement of transactions conducted on the São Paulo Stock Exchange is effected three business days after the trade date. Delivery of, and payment for, shares is made through the facilities of separate clearinghouses for each exchange, which maintain accounts for member brokerage firms. The seller is ordinarily required to deliver the shares to the clearinghouse on the second business day following the trade date. The clearinghouse for the São Paulo Stock Exchange is *Companhia Brasileira de Liquidação e Custódia*, or CBLC.

 

In order to better control volatility, the São Paulo Stock Exchange has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the indices of these stock exchanges fall below the limits of 10% and 15%, respectively, in relation to the index registered in the previous trading session.

 

The São Paulo Stock Exchange is less liquid than the New York Stock Exchange or other major exchanges in the world. At December 31, 2015, the aggregate market capitalization of the 60 companies listed on the São Paulo Stock Exchange Index (Ibovespa) was equivalent to approximately U.S.$408 billion, and the ten largest companies listed on the São Paulo Stock Exchange Index represented approximately 62% of the market capitalization in the year. Although any of the outstanding shares of a listed company may trade on a Brazilian stock exchange, in most cases fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, by governmental entities or by one principal shareholder. On December 31, 2015, we accounted for approximately 2% of the market capitalization of the companies listed on the Ibovespa Index.

 

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Trading on the São Paulo Stock Exchange by non-residents of Brazil is subject to certain limitations under Brazilian foreign investment and tax legislation See “Item 10 - Additional Information — E. Taxation” and “Item 10. Additional Information — D. Exchange Controls.”

 

**São Paulo Stock Exchange Corporate Governance Standards**

 

The São Paulo Stock Exchange has three listing segments:

 

·                                          Level 1;

 

·                                          Level 2; and

 

·                                          Novo Mercado (New Market)

 

These listing segments have been designed for the trading of shares issued by companies that voluntarily undertake to abide by corporate governance practices and disclosure requirements in addition to those already required under the Brazilian Corporation Law. The inclusion of a company in any of the new segments requires adherence to a series of corporate governance rules. These rules are designed to increase shareholders’ rights and enhance the quality of information provided by Brazilian corporations.

 

After being listed on the Level 1 of Corporate Governance since November 14, 2001, on May 20, 2010 we agreed to comply with heightened corporate governance and disclosure requirements established by the São Paulo Stock Exchange in order to qualify for a differentiated listing qualification as a company admitted to the “Novo Mercado level of Corporate Governance Requirements.”

 

As a result we have agreed, among other things, to: (i) maintain a share capital structure composed exclusively of common shares; (ii) ensure that shares representing 25% of our total outstanding share capital are held by investors other than our directors, executive officers and any controlling shareholders; (iii) adopt offering procedures that favor widespread ownership of shares whenever making a public offering; (iv) comply with minimum quarterly disclosure standards; (v) follow stricter disclosure policies with respect to transactions involving our securities made by any controlling shareholders and our directors and executive officers; (vi) make a schedule of corporate events available to our shareholders; (vii) offer tag-along rights to minority shareholders (meaning that, upon the acquisition of a controlling interest, the purchaser must also agree to purchase the shares of minority shareholders for the same price paid for the shares in the controlling stake); (viii) in the event of a delisting of shares, conduct a public tender offer for our common shares at a price at least equal to the economic value determined pursuant to an appraisal; (ix) present an annual balance sheet prepared in accordance with, or reconciled to, generally accepted accounting principles in the United States or International Financial Reporting Standards; (x) establish a two-year term for all members of the Board of Directors; (xi) require that at least 20% of our Board of Directors consist of independent directors; and (xii) submit to arbitration by the Market Arbitration Chamber (*Câmara de Arbitragem do Mercado*) all controversies and disputes involving us, members of our Board of Directors, Board of Executive Officers, Fiscal Council or shareholders relating to the application, validity, efficacy, interpretation, violation or effect of the Novo Mercado listing agreement and regulations, our bylaws, the Brazilian Corporation Law or the rules of the CMN, the Central Bank, the CVM or the Market Arbitration Chamber or other rules within the jurisdiction of the Market Arbitration Chamber.

 

All members of our Board of Directors, our Executive Board and our Fiscal Council have signed a management compliance statement (Termo de Anuência dos Administradores) under which they take personal responsibility for compliance with the Novo Mercado listing agreement, the rules of the Market Arbitration Chamber and the regulations of the Novo Mercado.

 

**Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards**

 

See “Item 16G. Corporate Governance — Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards.”

 

**D.**                                    **Selling Shareholders**

 

Not applicable.

 

**E.**                                    **Dilution**

 

Not applicable.

 

**F.**                                     **Expenses of the Issue**

 

Not applicable.

 

**ITEM 10.  ADDITIONAL INFORMATION**

 

**A.**                                    **Share Capital**

 

Not applicable.

 

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**B.**                                    **Memorandum and Articles of Association**

 

Our by-laws are filed as Exhibit 1 to this annual report and contain the new address of the Company approved at our Shareholders ́ General Meeting held on November 10, 2014. The information otherwise contemplated by this Item has previously been reported in our registration statement on Form F-4 filed with the Commission on October 28, 2009 (Reg. No. 333-162703). This description does not purport to be complete and is qualified in its entirety by reference to our Bylaws, the Brazilian Corporation Law and the rules and regulations of the CVM.

 

**C.**                                    **Material Contracts**

 

**Shareholders’ Agreement of Fibria**

 

Under the terms of the Investment Agreement entered into between BNDESPar, Votorantim S.A. and ourselves (as an intervening party), Votorantim S.A. and BNDESPar have entered into the First Amendment to shareholders’ agreement of Fibria, executed on October 29, 2014, under which the approval of certain matters will depend on the affirmative vote of BNDESPar in a Pre-Meeting including:

 

(a)                                 decrease of Company’s capital stock, except for absorption of losses;

 

(b)                                 approval of annual budget of Company and/or its Controlled Companies, so long as the ratio of Net Debt to Adjusted EBITDA remains above 3.5 (three point five);

 

(c)                                  proposal of an extrajudicial restructuring plan, filing of judicial restructuring or bankruptcy by the Company or Controlled companies;

 

(d)                                 liquidation or dissolution of Company or of any subsidiary;

 

(e)                                  a reduction or the non-payment of the compulsory dividend be the Company;

 

(f)                                   participation of Company in an group of companies;

 

(g)                                  decrease of the level of listing with BM&FBOVESPA or delisting of Company as public company;

 

(h)                                 change of By-Laws implying change of corporate purpose, Fiscal Council, diffuse control and maintenance of dispersion of share basis;

 

(i)                                     transformation, merger, spin-off or incorporation, including of shares, involving the Company and its Controlled Companies, including the performance of exchange or payment in kind using shares;

 

(j)                                    increase of capital stock, issuance of share or any security convertible or exchangeable in share, including determination of issuance price of shares to be issued and the price of security convertible or exchangeable in share;

 

(k)                                 operations between Company and/or its Controlled Companies, on one side, and any Related Parties, on the other side, in any amount above R$20,000,000 (twenty million reais) per year, excluding any agreements (i) for commercialization of electric energy with a global annual value up to R$200,000,000 (two hundred million reais); (ii) of shared services (such administrative, financial, logistic and information technology services) with a global annual up to R$25,000,000 (twenty five million reais); (iii) financial investments at market conditions up to R$200,000,000 (two hundred million reais); and (iv) agreements for protection of cash flow with global exposure in an amount equivalent in national currency up to U$220,000,000 (two hundred and twenty million United States Dollars) the limit applies to the value of reference of the agreement — national value);

 

(l)                                     disposal or encumbrance, by the Company and/or its Controlled Companies, of fixed assets that, individually or cumulatively have, in a period of twelve(12) months, an amount higher than five per cent (5%) of total assets, calculated based on the most recent ITR;

 

(m)                             any proposal for the creation of reserves, provisions or change of accounting criteria with value, individually or cumulatively have, in a period of twelve (12) months, an amount higher than five per cent (5%) of total assets, calculated based on the most recent ITR;

 

(n)                                 entering into agreements of any nature, with individual value above R$700,000,000 (seven hundred million reais), by the Company and/or its Controlled Companies, with exception of the agreements provided for in other items of this Section;

 

(o)                                 capital investments not included in the business plan or budget approved by Company’s Board of Directors and provided they have an individual amount above R$700,000,000 (seven hundred million reais);

 

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(p)                                 acquisition by the Company of relevant interest, as defined in applicable legislation, not contemplated in the business plan or budget approved by Company’s Board of Directors, and provided their individual value is above R$700,000,000 (seven hundred million reais);

 

(q)                                 the matters provided for in letters (k), (n), (o) and (p) of this Section 5.3 in the event such matters result in a ration Net Debt to Adjusted EBITDA with a level above 3.5 (three point five);

 

(r)                                    providing any lien or guarantees by the Company and/or its Controlled companies to guarantee third-party obligations, except for the obligations of Controlled Companies;

 

(s)                                   acquisition of any equity interest in companies which main activity is not provided for the corporate purpose of Company, or investments in business that are nor related to the corporate purpose of Company; and

 

(t)                                    any proposal of distribution of dividend or interests on equity, where the decrease of Company’s cash and/or the cash of its controlled companies would result in an increase of the ratio of Net Debt to Adjusted EBITDA with a level above 3.5 (three point five).

 

**Agreements filed as Exhibits**

 

The representations, warranties and covenants granted by us in any agreement that is filed as an exhibit to this report were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to others. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

 

For additional information on our material contracts, see “Item 5 - Operating and Financial Review and Prospects — B. Liquidity and Capital Resources.”

 

**D.**                                    **Exchange Controls**

 

There are no restrictions on ownership of our common shares by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of common shares into foreign currency and to remit such amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally require, among other things, obtaining an electronic registration with the Central Bank.

 

Under Resolution No. 2,689, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that some requirements are fulfilled. In accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities that are domiciled or headquartered abroad.

 

Investors under Resolution No. 2,689 who are not a Tax Haven Holder or a country that does not impose income tax or in which the maximum income tax rate is lower than 20%, are entitled to favorable tax treatment. See “Material Tax Considerations—Material Brazilian Tax Considerations.”

 

Resolution No. 1,927 provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. An application was filed to have the ADSs approved by the Central Bank and the CVM under Annex V, and we received final approval before the ADSs Offering.

 

An electronic registration, which replaced the amended Certificate of Registration, was issued in the name of the depositary with respect to the ADSs and is maintained by the Custodian on behalf of the Depositary. This electronic registration was carried on through the SISBACEN. Pursuant to the electronic registration, the Custodian and the Depositary are able to convert dividends and other distributions with respect to the common shares represented by the ADSs into foreign currency and remit the proceeds outside Brazil. In the event that a holder of ADSs exchanges the ADSs for common shares, the holder will be entitled to continue to rely on the Depositary’s electronic registration for only five business days after the exchange. Thereafter, a holder must seek to obtain its own electronic registration. Unless the common shares are held pursuant to Resolution No. 2,689 by a duly registered investor or a holder of common shares who applies for and obtains a new electronic registration, that holder may not be able to obtain and remit abroad U.S. Dollars or other foreign currencies upon the disposition of the common shares, or distributions with respect thereto. In addition, if

 

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the foreign investor resides in a tax haven jurisdiction or is not an investor registered pursuant to Resolution No. 2,689, the investor will also be subject to less favorable tax treatment.

 

**Preemptive Rights**

 

Each of our shareholders has a general preemptive right to subscribe for shares or convertible securities in any capital increase, in proportion to its shareholding, except (i) in the event of the grant and exercise of any stock option to acquire or subscribe for shares of our capital stock; and (ii) in the context of a capital increase derived from merger, merger of shares and/or spin-off implemented according to Brazilian Corporate Law. A minimum period of 30 days following the publication of notice of the issuance of shares or convertible securities is allowed for exercise of the right, and the right is negotiable. However, according to our by-laws, our Board of Directors can eliminate this preemptive right or reduce the 30-day period in case we issue debentures that are convertible into shares, warrants (*bônus de subscrição*) or shares within the limits authorized by the by-laws: (i) through a stock exchange or through a public offering or (ii) through an exchange of shares in a public offering to acquire control of another publicly-held company.

 

Except as described above, in the event of a capital increase that would (i) maintain the proportion of capital represented by common and preferred shares, the holders of common and preferred shares would have preemptive rights to subscribe to our newly issued shares in proportion to their shareholdings in each class of shares; (ii) modify the proportion of capital represented by common and preferred shares, the holders of common and preferred shares would have preemptive rights to subscribe to our newly issued common and preferred shares, respectively, in proportion to their shareholdings, and to the other class of shares only to the extent necessary to prevent dilution of their interest in their shares; and (iii) create a new class or type of shares, all shareholders have preemptive rights to subscribe to our newly issued shares of such new class or type, in proportion to their shareholdings. You may not be able to exercise the preemptive rights relating to the preferred shares underlying your ADSs unless a registration statement under the Securities Act is effective with respect to the shares to which the rights relate or an exemption from the registration requirements of the Securities Act is available and the ADS depositary determines to make the rights available to you. See “Item 3. Key Information — D. Risk Factors —Holders of our ADSs may not be able to exercise the preemptive rights relating to the shares.”

 

**Right of Withdrawal**

 

The Brazilian corporate law provides that, under certain circumstances, a shareholder has the right to withdraw its equity interest from the company and to receive payment for the portion of shareholders’ equity attributable to its equity interest. Such right of withdrawal may be exercised by a dissenting or non-voting shareholder, if a vote of at least 50% of voting shares authorizes us:

 

·                  to establish new shares or to disproportionately increase an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by the by-laws (our by-laws currently authorize such action);

 

·                  to modify a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or to create a new class with greater privileges than the existing classes of preferred shares;

 

·                  to reduce the mandatory distribution of dividends;

 

·                  to change our corporate purpose;

 

·                  to merge with another company (including if we are merged into one of our controlling companies) or to consolidate, except as described in the fourth paragraph following this list;

 

·                  to transfer all of our shares to another company or in order to make us a wholly owned subsidiary of such company, known as an *incorporação de ações*, except as described in the fourth paragraph following this list;

 

·                  to approve the acquisition of control of another company at a price which exceeds certain limits set forth in the Brazilian corporate law, except as described in the fourth paragraph following this list;

 

·                  to approve our participation in a centralized group of companies, as defined under the Brazilian corporate law, and subject to the conditions set forth therein, except as described in the fourth paragraph following this list; or

 

·                  to conduct a spin-off that results in (a) a change of our corporate purposes, except if the assets and liabilities of the spun-off company are contributed to a company that is engaged in substantially the same activities, (b) a reduction in the mandatory dividend or (c) any participation in a centralized group of companies, as defined under Brazilian corporate law.

 

In addition, in the event that the entity resulting from *incorporação de ações,*or a merger of shares,, a consolidation or a spin-off of a listed company fails to become a listed company within 120 days of the shareholders’ meeting at which such decision was taken, the dissenting or non-voting shareholders may also exercise their withdrawal rights.

 

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Only holders of shares adversely affected by the changes mentioned in the first and second items above may withdraw their shares. The right of withdrawal lapses 30 days after publication of the minutes of the relevant shareholders’ meeting. In the first two cases mentioned above, however, the resolution is subject to confirmation by the preferred shareholders, which must be obtained at a special meeting held within one year. In those cases, the 30 day term is counted from the date the minutes of the special meeting are published. We would be entitled to reconsider any action giving rise to appraisal rights within 10 days following the expiration of such rights if the withdrawal of shares of dissenting shareholders would jeopardize our financial stability.

 

The Brazilian corporate law allows companies to redeem their shares at their economic value as set forth in the Brazilian corporate law, subject to certain requirements. Because our by-laws currently do not provide that our shares be subject to withdrawal at their economic value, our shares would be subject to withdrawal at their book value, determined on the basis of the last balance sheet approved by the shareholders. If the shareholders’ meeting giving rise to appraisal rights occurs more than 60 days after the date of the last approved balance sheet, a shareholder may demand that its shares be valued on the basis of a new balance sheet that is of a date within 60 days of such shareholders’ meeting.

 

Pursuant to the Brazilian corporate law, in events of consolidation, merger, *incorporação de ações*, participation in a group of companies, and acquisition of control of another company, the right to withdraw does not apply if the shares meet certain tests relating to liquidity and dispersal of the type or class of shares in question on the market. In these cases, shareholders will not be entitled to withdraw their shares if the shares are a component of a general securities index in Brazil or abroad admitted to trading on the securities markets, as defined by the Brazilian Securities Commission, and the shares held by persons unaffiliated with the controlling shareholder represent more than half of the outstanding shares of the relevant type or class.

 

**E.**                                    **Taxation**

 

*The following discussion contains a description of the material Brazilian and United States federal income tax consequences of the purchase, ownership and disposition of preferred shares or ADSs but does not purport to be a comprehensive description of all the tax considerations that may be relevant to these matters based upon the particular circumstances of a holder.*

 

This summary is based upon tax laws of Brazil and the federal income tax laws of the United States as in effect on the date of this annual report*,* which are subject to change, possibly with retroactive effect, and to differing interpretations. You should consult your own tax advisors as to the Brazilian, United States or other tax consequences of the purchase, ownership and disposition of common shares or ADSs, including, in particular, the effect of any U.S. federal estate, gift, or alternative minimum taxes, and non U.S., state or local tax laws.

 

Although there is presently no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty. No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. holders of common shares or ADSs.

 

For purposes of Brazilian taxation, there are two types of Non-Brazilian Holders of common shares or ADSs: (a) Non-Brazilian Holders that are not resident or domiciled in a tax haven jurisdiction (i.e., a country or location that does not impose income tax or where the maximum income tax rate is lower than 20% or where the internal legislation imposes restrictions to disclosure of shareholding composition or the ownership of the investment), and that, in the case of holders of common shares, are registered before the Central Bank and the CVM to invest in Brazil in accordance with Central Bank Resolution No. 2.689; and (b) other Non-Brazilian Holders, which include any and all non-residents of Brazil who invest in equity securities of Brazilian companies through any other means and all types of investors that are located in tax haven jurisdiction*s.* The investors mentioned in item (a) above are subject to a favorable tax regime in Brazil, as described below.

 

**Brazilian Tax Considerations**

 

The following discussion summarizes the material Brazilian tax consequences of the acquisition, ownership and disposition of our common shares or ADSs by a holder that is not domiciled in Brazil for purposes of Brazilian taxation and, in the case of common shares, which has registered its investment in such securities with the Central Bank as a U.S. Dollar investment (in each case, a Non-Brazilian Holder).

 

Central Bank Resolution No. 2.689 permits foreign investors, defined to include individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad may invest in almost all financial assets and to engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain legal and regulatory requirements are fulfilled. The foreign investors must: (a) appoint at least one representative in Brazil with powers to perform actions relating to the foreign investment; (b) complete the appropriate foreign investor registration form; (c) register as a foreign investor with the Brazilian securities commission; and (d) register the foreign investment with the Central Bank.

 

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Securities and other financial assets held by foreign investors pursuant to Resolution No. 2.689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading is restricted to transactions carried out in the stock exchanges or organized over-the-counter markets licensed by the CVM, except for transfers resulting from a corporate reorganization, occurring upon the death of an investor by operation of law or will or as a consequence of the delisting of the relevant shares from a stock exchange and the cancellation of the registration with the CVM.

 

**Taxation of dividends**

 

As a result of tax legislation adopted on December 26, 1995, dividends based on profits generated after January 1, 1996, including dividends paid in kind, payable by us in respect of common shares, are exempt from withholding tax. Stock dividends with respect to profits generated before January 1, 1996 are not subject to Brazilian tax, provided that the stock is not redeemed by us or sold in Brazil within five years after distribution of such stock dividends. Dividends relating to profits generated prior to January 1, 1996 are subject to Brazilian withholding tax at either the 15% or 25% rate, depending on the year in which the profits were generated.

 

**Taxation of gains**

 

**Transactions conducted outside of a Brazilian stock, future or commodity exchange (or similar entities)**

 

Non Brazilian holders are generally subject to income tax imposed at a rate of 15% on gains realized on disposal or exchanges of common shares if the transaction is carried out outside any Brazilian stock, future or commodities exchange (and also in case of redemption of shares in a transaction occurring outside of a stock exchange), except for a Tax Haven Holder which, in this case, is subject to income tax at a rate of 25%. If these gains are related to transactions conducted on the Brazilian over-the-counter market with intermediation (or in case of transactions carried out on markets subject to future liquidation), the withholding income tax of 0.005% of the gross proceeds shall also be applicable and can be offset against the eventual income tax due on the capital gains.

 

**Transactions conducted within a Brazilian stock, future or commodity exchange (or similar entities):**

 

***Disposal of securities:***

 

****ADSs:**

 

Gains realized outside Brazil by a non Brazilian holder on the disposition of assets located in Brazil to another non-Brazilian holder were not subject to Brazilian tax through December 29, 2003. However, according to Law No. 10.833, enacted on that date, capital gains realized on the disposition of these assets by a Non-Brazilian Holder are subject to taxation in Brazil (at a 15% or 25% rate, depending on the case), regardless of whether the sale or the disposition is made by a Non-Brazilian Holder to another non-Brazilian resident or to a Brazilian resident. At the present time no definitive jurisprudence has been established with respect to this matter. There are grounds to sustain that the gains realized by a Non-Brazilian Holder on the disposition of ADSs to another non-Brazilian resident are not taxed in Brazil, based on the argument that ADSs would not constitute assets located in Brazil for purposes of Law No. 10,833/03. However, we cannot assure you how Brazilian courts would interpret the definition of assets located in Brazil in connection with the taxation of gains realized by a Non- Brazilian Holder on the disposition of ADSs to another non-Brazilian resident.

 

As a result, gains on a disposition of ADSs by a Non-Brazilian Holder to Brazilian resident, or even to Non-Brazilian Holder in the event that courts determine that ADSs would constitute assets located in Brazil, may be subject to income tax in Brazil according to the rules described above. It is important to clarify that, for purposes of Brazilian taxation, the income tax rules on gains related to disposition of common shares or ADSs vary depending on the domicile of the Non-Brazilian Holder, the form by which such Non-Brazilian Holder has registered its investment before the Central Bank and/or how the disposition is carried out, as described below.

 

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****Common Stock:**

 

With respect to the disposition of common shares, as they are assets located in Brazil, the Non-Brazilian Holder will be subject to income tax on the gains assessed, following the rules described below, regardless of whether the disposition is conducted in Brazil or with a Brazilian resident. Gains assessed on the disposition of the common shares carried out on the Brazilian stock exchange (which, in principle, should also include the transactions carried out on the organized over-the-counter market) are:

 

·                  Exempt from income tax, when assessed by a Non-Brazilian Holder that (1) has registered its investment in Brazil before the Central Bank under the rules of Resolution No. 2,689/00 (“2,689 Holder”) and (2) is not a Tax Haven Holder; or

 

·                  Subject to income tax at a rate of 15% in any other case, including the gains assessed by a Non-Brazilian Holder that is not a 2,689 Holder or is a Tax Haven Holder. In these cases, a withholding income tax of 0.005% shall also be applicable on the gross proceeds and can be offset with the eventual income tax due on the capital gain.

 

**Exchange of securities via deposit**

 

The deposit of common shares in exchange for ADSs may be subject to Brazilian capital gain tax at the rate of 15%, if the amount previously registered with the Central Bank as a foreign investment in the common shares is lower than (1) the average price per preferred share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of deposit; or (2) if no common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of common shares were sold in the 15 trading sessions immediately preceding such deposit. In this case, the difference between the amount previously registered and the average price of the common shares, calculated as above, shall be considered a capital gain (although there are grounds to challenge this taxation). On receipt of the underlying common shares, the non-Brazilian holder registered under Resolution No. 2,689 will be entitled to register the U.S. Dollar value of such shares with the Central Bank as described below in “—Registered Capital.” However, if this non Brazilian holder does not register under Resolution No. 2,689, it will be subject to the less favorable tax treatment described below.

 

**Exercise of preemptive rights**

 

Any exercise of preemptive rights relating to the common shares will not be subject to Brazilian taxation. However, any gain on the disposition or assignment of preemptive rights relating to common shares by a holder of common shares, or by the depositary on behalf of holders of the ADSs, will be subject to Brazilian taxation at the same rate applicable to the sale or disposition of common shares.

 

**Interest attributed to capital**

 

Distribution of a notional interest charge attributed to capital in respect of the preferred or common shares as an alternative form of dividend payment to shareholders or depositary agents who are either Brazilian residents or non-Brazilian residents is subject to Brazilian withholding income tax at the rate of 15% (except for those shareholders or beneficiaries resident in tax havens or low tax jurisdictions -see further discussion below). Such payments, subject to certain limitations, are deductible for Brazilian income tax and for social contribution purposes as long as the payment of a distribution of interest is credited to a shareholder’s account and approved at our general meeting of shareholders and is calculated by reference to the TJLP interest rate determined by the Central Bank from time to time and cannot exceed the greater of:

 

· 50% of net income (after the deduction of social contribution on profits and before taking such distribution and the provision for income tax into account) for the period from which the payment is being made; or

 

· 50% of the sum of retained profits and profit reserves that exist as of the beginning of the period from which the payment is being made.

 

Current Brazilian corporate law establishes that a notional interest charge attributed to shareholders’ equity can either be accounted for as part of the mandatory dividend or not. In case the payment of such interest is accounted for as part of the mandatory dividend, we would be required to pay an additional amount to ensure that the net amount received by the shareholders, after the income tax, is at least equal to the mandatory dividend. The distribution of interest attributed to capital would be proposed by our Board of Directors and subject to subsequent declaration by the shareholders at a general meeting.

 

**Beneficiaries resident or domiciled in tax havens or low tax jurisdictions**

 

Law No. 9.779/99, in effect as of January, 1999, states that, with the exception of certain prescribed circumstances, income derived from operations by a beneficiary, resident or domiciled in a country considered as a tax haven, is subject to withholding income tax at a rate of 25%. Accordingly, if the distribution of interest attributed to capital is made to a beneficiary resident or domiciled in a tax haven, the income tax rate applicable will be 25% instead of 15%. A tax haven jurisdiction is considered to be, for this purpose, any country or location, which does not impose income tax or imposes income tax at a maximum rate lower than 20%

 

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(there is also an interpretation according to which the definition of tax haven for this purpose also encompasses a country or location where internal legislation imposes restrictions on the disclosure of the shareholding composition or beneficial owners of investments).

 

Currently, said countries / location considered to be a tax haven are listed within the Brazilian tax regulation.

 

**Other Relevant Brazilian taxes**

 

There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of common shares or ADSs by a non Brazilian holder. However, some Brazilian states may impose gift and estate taxes on gifts made or inheritances bestowed by individuals or entities not resident or domiciled within such state to individuals or entities residing or domiciled within such state in Brazil. There are no Brazilian stamp, issue, registration, or similar taxes or duties payable by holders of common shares or ADSs.

 

***Taxation of foreign exchange transactions (IOF/Exchange Rate)***

 

Pursuant to Decree Law 6.306/07, the conversion into foreign currency or the conversion into Brazilian currency of the proceeds received or remitted by a Brazilian entity from a foreign investment in the Brazilian securities market, including those in connection with the investment by the Non-Brazilian Holder in the common shares and ADSs may be subject to the Tax on Foreign Exchange Transaction (“IOF/Exchange”). Currently, for most exchange transactions related to this type of investment, the rate of IOF/Exchange is zero, however the Minister of Finance has the legal power to increase at any time the rate to a maximum of 25%, but only on a prospective basis.

 

***Tax on bonds and securities transactions (IOF/ Financial securities)***

 

Pursuant to Decree Law 6.306/07, the Tax on Bonds and Securities Transactions (the IOF/Financial securities) may be imposed on any transactions involving bonds and securities, even if these transactions are performed on Brazilian stock, futures or commodities exchanges. The applicable rate for variable income transactions is currently 0%, but the Minister of Finance has the legal power to increase at any time the rate to a maximum of 1.5% per day of the transaction’s value, but only on a prospective basis.

 

***Tax on ADS issuance transactions (IOF/ Issuance)***

 

Pursuant to Decree Law 6.306/07, since December 24, 2013 the Tax on Financial Transactions levied over the issuance of ADSs that are backed by shares traded on the Brazilian stock exchange, was reduced to a zero tax rate. However, the Minister of Finance has the legal power to increase this tax rate at any time.

 

**Registered capital**

 

The amount of an investment in common shares held by a non-Brazilian holder who qualifies under Resolution No. 2,689 and obtains registration with the CVM, or by the depositary representing such holder, is eligible for registration with the Central Bank; such registration (the amount registered is referred to as registered capital) allows the remittance of foreign currency outside Brazil, converted at the commercial market rate, acquired with the proceeds of distributions on, and amounts realized with respect to dispositions of, such common shares. The registered capital for each preferred share purchased as part of the international offering, or purchased in Brazil after that date, and deposited with the Depositary will be equal to its purchase price in U.S. Dollars. The registered capital for a preferred share that is withdrawn upon surrender of an ADS will be the U.S. Dollar equivalent of (i) the average price of a preferred share on the Brazilian stock exchange on which the greatest number of such shares was sold on the day of withdrawal, or (ii) if no common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of common shares was sold in the 15th trading session immediately preceding such withdrawal. The U.S. Dollar value of the common shares is determined on the basis of the average commercial market rates quoted by the Central Bank on such date (or, if the average price of common shares is determined under clause (ii) above, the average of such quoted rates on the same 15 dates used to determine the average price of the common shares).

 

A non Brazilian holder of common shares may experience delays in effecting such registration, which may delay remittances abroad. Such a delay may adversely affect the amount in U.S. Dollars received by the non-Brazilian holder.

 

**U.S. federal income tax considerations**

 

The following discussion summarizes the principal U.S. federal income tax considerations relating to the purchase, ownership and disposition of common shares or ADSs by a U.S. holder (as defined below) holding such common shares or ADSs as capital assets (generally, property held for investment). This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations, administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) and to differing interpretations. This summary does not describe any implications under state, local or non-U.S. tax law, or any aspect of U.S. federal tax law other than income taxation.

 

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This summary does not purport to address all the material U.S. federal income tax consequences that may be relevant to the U.S. holders of the common shares or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as tax-exempt entities, banks or other financial institutions, insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real estate investment trusts, U.S. expatriates, investors liable for the alternative minimum tax, partnerships and other pass-through entities, investors that own or are treated as owning 10% or more of our voting stock, investors that hold the common shares or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or other integrated transaction and U.S. holders (as defined below) whose functional currency is not the U.S. Dollar) may be subject to special tax rules.

 

As used below, a “U.S. holder” is a beneficial owner of common shares or ADSs that is, for U.S. federal income tax purposes:

 

(i)                                     an individual citizen or resident of the United States;

 

(ii)                                  a corporation (or entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

(iii)                               an estate the income of which is subject to U.S. federal income tax regardless of its source; or

 

(iv)                              a trust if (A) a court within the U.S. is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

 

If a partnership or other entity taxable as a partnership holds common shares or ADSs, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partners of partnerships holding common shares or ADSs should consult their tax advisors.

 

In general, for U.S. federal income tax purposes, holders of American Depositary Receipts evidencing ADSs will be treated as the beneficial owners of the common shares represented by those ADSs.

 

**Taxation of Distributions**

 

In general, distributions with respect to the common shares or ADSs, as described above under “Brazilian Tax Considerations” will, to the extent made from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes. If a distribution exceeds the amount of our current and accumulated earnings and profits, as determined under U.S. federal income tax principles, it is generally treated as a non-taxable return of capital to the extent of the U.S. holder’s tax basis in the common shares or ADSs, and thereafter as capital gain. However, we have not maintained and do not expect to keep a record of our earnings and profits in accordance with U.S. federal income tax principles. Accordingly, it is unlikely that U.S. Holders will be able to establish that a distribution by the Company is in excess of its current and accumulated earnings and profits (as computed under U.S. federal income tax principles). Therefore, you should expect that a distribution by the Company will generally be treated as taxable in its entirety as a dividend for U S federal income tax purposes.

 

The gross amount of any dividends (including amounts withheld in respect of Brazilian taxes) paid with respect to the common shares or ADSs generally will be subject to U.S. federal income taxation as ordinary income and will not be eligible for the dividends received deduction allowed to corporations. Dividends paid in Brazilian currency will be included in the gross income of a U.S. holder in a U.S. Dollar amount calculated by reference to the exchange rate in effect on the date the dividends are received by the U.S. holder, or in the case of dividends received in respect of ADSs, on the date the dividends are received by the depositary or its agent, whether or not converted into U.S. Dollars. A U.S. holder will have a tax basis in any distributed Brazilian currency equal to its U.S. Dollar amount on the date of receipt, and any gain or loss recognized upon a subsequent disposition of such Brazilian currency generally will be foreign currency gain or loss that is treated as U.S. source ordinary income or loss. If dividends paid in Brazilian currency are converted into U.S. Dollars on the day they are received by the U.S. holder or the depositary or its agent, as the case may be, U.S. holders generally should not be required to recognize foreign currency gain or loss in respect of the dividend income. U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any Brazilian currency received by the U.S. holder or the depositary or its agent is not converted into U.S. Dollars on the date of receipt.

 

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Subject to certain exceptions for short-term and hedged positions, the U.S. Dollar amount of dividends received by an individual with respect to the ADSs will generally be subject to U.S. federal income taxation at a maximum rate of 20% if the dividends represent “qualified dividend income.” Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States, (ii) the U.S. holder meets the holding period requirement for the ADSs (generally more than 60 days during the 121-day period that begins 60 days before the ex-dividend date), and (iii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a passive foreign investment company (“PFIC”). The ADSs are listed on the New York Stock Exchange, and should qualify as readily tradable on an established securities market in the United States so long as they are so listed. However, no assurances can be given that the ADSs will be or remain readily tradable. Based on our audited consolidated financial statements as well as relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2015 taxable year. In addition, based on our audited consolidated financial statements and current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2016 taxable year. Because these determinations are based on the nature of our income and assets from time to time, and involve the application of complex tax rules, no assurances can be provided that we will not be considered a PFIC for the current (or any past or future tax year).

 

Based on existing guidance, it is not entirely clear whether dividends received with respect to the common shares (to the extent not represented by ADSs) will be treated as qualified dividend income, because the common shares are not themselves listed on a U.S. exchange. In addition, the U.S. Treasury Department has announced that the IRS is continuing to study procedures pursuant to which holders of ADSs or preferred stock and intermediaries through whom such securities are held will be able to determinate whether dividends are treated as qualified dividends. Because such procedures have not yet been issued, we are not certain that we will be able to comply with them. U.S. holders of ADSs and common shares should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.

 

Dividends paid by us generally will constitute income from non-U.S. sources and will be subject to various classification and other limitations for U.S. foreign tax credit purposes. Subject to generally applicable limitations under U.S. federal income tax law, Brazilian withholding tax imposed on such dividends, if any, will be treated as a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability (or at a U.S. holder’s election if it does not elect to claim a foreign tax credit for any foreign taxes paid during the taxable year, all foreign income taxes paid may instead be deducted in computing such U.S. holder’s taxable income). In general, special rules will apply to the calculation of foreign tax credits in respect of dividend income that is subject to preferential rates of U.S. federal income tax. U.S. holders should be aware that the IRS has expressed concern that parties to whom ADSs are transferred may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. holders of ADSs. Accordingly, the discussion above regarding the creditability of Brazilian withholding tax on dividends could be affected by future actions that may be taken by the IRS.

 

**Taxation of Capital Gain**

 

Deposits and withdrawals of common shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.

 

In general, gain or loss, if any, realized by a U.S. holder upon a sale or other taxable disposition of common shares or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized on the sale or other taxable disposition and such U.S. holder’s adjusted tax basis in the common shares or ADSs. Such capital gain or loss will be long-term capital gain or loss if at the time of sale or other taxable disposition the common shares or ADSs have been held for more than one year. Under current U.S. federal income tax law, net long-term capital gain of certain U.S. holders is eligible for taxation at preferential rates (generally 20% for non-corporate U.S. holders). The deductibility of capital losses is subject to certain limitations under the Code. Gain, if any, realized by a U.S. holder on the sale or other taxable disposition of common shares or ADSs generally will be treated as U.S. source gain for U.S. foreign tax credit purposes. Consequently, if a Brazilian withholding tax is imposed on the sale or disposition of common shares or ADSs, a U.S. holder may not be able to derive effective U.S. foreign tax credit benefits in respect of such Brazilian withholding tax. Alternatively, a U.S. holder may take a deduction for all foreign income taxes paid during the taxable year if it does not elect to claim a foreign tax credit for any foreign taxes paid during the taxable year. U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, common shares or ADSs.

 

**Passive Foreign Investment Company Rules**

 

If 75% or more of our gross income in any taxable year (including our pro rata share of the gross income of any company treated as a corporation for U.S. federal income tax purposes, U.S. or foreign, in which we are considered to own, directly or indirectly, 25% or more of the shares by value) is passive income, or alternatively, if 50% or more of our assets in any taxable year (averaged quarterly over the year and ordinarily determined based on fair market value and including our pro rata share of the assets of any company treated as a corporation for U.S. federal income tax purposes, U.S. or foreign, in which we are considered to own,

 

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directly or indirectly, 25% or more of the shares by value) are held for the production of, or produce, passive income, then we will be a PFIC.

 

Based upon our current and projected income, assets and activities, we do not expect the common shares or ADSs to be considered shares of a PFIC for our current fiscal year or for future fiscal years. However, because the determination of whether the common shares or ADSs constitute shares of a PFIC will be based upon the composition of our income and assets, and the composition of income and assets of entities in which we hold at least a 25% interest from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that the common shares or ADSs will not be considered shares of a PFIC for any fiscal year. If the common shares or ADSs were shares of a PFIC for any fiscal year, U.S. holders (including certain indirect U.S. holders) will generally be subject to adverse tax consequences. A U.S. Holder that holds shares of a PFIC is taxed at ordinary income rates on any gain realized on the sale or exchange of the shares and on any “excess distributions” received. Excess distributions are amounts received by a U.S. person with respect to its shares in any taxable year that exceed 125% of the average distributions received by the U.S. Holder in the shorter of either the three previous years or the U.S. Holder’s holding period for the shares before the current taxable year. Such U.S. holders would also be subject to the imposition of an interest charge on gains or excess distributions allocable to prior years in the U.S. holder’s holding period during which we were determined to be a PFIC. If we are deemed to be a PFIC for a taxable year, dividends on our common shares or ADSs would not be “qualified dividend income” subject to preferential rates of U.S. federal income taxation. In addition, if we are a PFIC, U.S. holders would generally be required to comply with annual reporting requirements. U.S. holders should consult their own tax advisors regarding the application of the PFIC rules to the common shares or ADSs.

 

**U.S. Backup Withholding and Information Reporting**

 

A U.S. holder of common shares or ADSs may, under certain circumstances, be subjected to information reporting and “backup withholding” with respect to certain payments to such U.S. holder, such as dividends paid by us or the proceeds of a sale or other taxable disposition of common shares or ADSs, unless such U.S. holder (i) is a corporation or comes within certain other exempt categories, and demonstrates this fact when so required, or (ii) in the case of backup withholding, provides a correct taxpayer identification number, certifies that it is a U.S. person and that it is not subject to backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amount withheld under these rules will be creditable against a U.S. holder’s U.S. federal income tax liability or may be refunded, provided the requisite information is timely furnished to the IRS.

 

Under U.S. federal income tax law and the Treasury regulations, certain categories of U.S. holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, the U.S. tax authorities generally impose tax return disclosure obligations (and related penalties) on U.S. holders that hold certain specified foreign financial assets in excess of $50,000. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U. S. holders may be subject to these reporting requirements unless their common stock or ADSs are held in an account at a domestic financial institution. Penalties for failure to file certain of these information returns are substantial. U.S. holders should consult with their own tax advisers regarding the requirements of filing information returns, and, if applicable, filing obligations relating to the PFIC rules.

 

**Medicare Taxes**

 

In addition to regular U.S. federal income tax, certain U.S. Holders that are individuals, estates or trusts are subject to a 3.8% tax on all or a portion of their “net investment income,” which may include all or a portion of their income arising from a distribution with respect to the common shares or ADSs and net gain from the sale, exchange or other disposition of the common shares or ADSs. Each U.S. Holder should consult its own tax advisor regarding the application of this tax.

 

**F.**            **Dividends and Paying Agents**

 

Not applicable.

 

**G.**            **Statements by Experts**

 

Not applicable.

 

**H.**            **Documents on Display**

 

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We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, pursuant to which we file reports and other information with the Commission. These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549-2521. Copies of the materials may be obtained from the Public Reference Room of the Commission at 100 F Street, N.E., Washington, D.C. 20549-2521 at prescribed rates. The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1 800 SEC-0330. In addition, the SEC maintains an internet website at www.sec.gov from which you can electronically access these materials. Furthermore, material we filed can be inspected at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005, on which our ADSs are listed.

 

We also file electronically financial statements and other periodic reports with the CVM. The CVM website is www.cvm.gov.br.

 

Copies of our annual reports on Form 20-F and accompanying documents and our by-laws will be available for inspection at our headquarters or our website at www.fibria.com.br/ir. The information on our website is however, not incorporated by reference in, and shall not be considered a part of this annual report.

 

**I.**             **Subsidiary Information**

 

Not required.

 

**ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates and interest rates. Also see Note 4.2.1.(a) of our 2015 consolidated financial statements.

 

**General**

 

We have established a strict framework of internal policies with respect to our currency exposure, commodity prices, interest rate, counterparty risk, cash investments and indebtedness and liquidity. These policies are continuously revised by our Finance Committee in response to different macroeconomic scenarios. The compliance with these policies is monitored by an independent GRC (Governance, Risk and Compliance) department, which reports directly to our CEO and to the Statutory Audit Committee.

 

We also use conventional instruments, mainly options, Zero Cost Collar (ZCC) and swaps to mitigate the volatility of foreign exchange rate fluctuations on our revenue. For a portion of our revenue we enter into forward contracts or mainly currency options effectively fixing some revenues in Brazilian *Reais* to match our budget and goals. The unrealized gains and losses on these contracts are recorded on our balance sheet as assets or liabilities and in our statement of operations in “Results of derivative financial instruments”.

 

We use cross-currency interest rate swap contracts in the market to reduce our foreign currency exposure and also take into account the natural hedge, matching our revenue and debt. Other financial instruments have also been used extensively as part of a defined financial strategy designed to optimize opportunities in the Brazilian foreign exchange and interest rate markets. Like many other Brazilian exporters, we have had access to U.S. Dollar-denominated sources of long-term financing. Opportunities may arise between the lower interest rates payable on the U.S. Dollar-denominated export credits compared to the Brazilian interest rate.

 

Our foreign currency debt reflects a strategy to continue borrowing funds in U.S. Dollars. We have succeeded in lengthening the average maturity of our debt over time. The percentage of our short-term debt (i.e., the debt, including the current portion of long-term debt, maturing within 12 months) compared to our total debt was 8.4% at December 31, 2015 and 11.6% at December 31, 2014.

 

**Foreign currency risk**

 

Our foreign currency exposure gives rise to market risks associated with exchange rate movements against the U.S. Dollar. The vast majority of our debt is denominated in U.S. Dollars. Our revenues are either denominated in U.S. Dollars or linked to U.S. Dollars (domestic pulp sales are denominated in *Reais* but linked to U.S. Dollar prices), thus our U.S. Dollar denominated debt works to a certain extent as a natural hedging for this exposure. In our Consolidated Statement of Profit or Loss, revenues are translated into *Reais* at the prevailing exchange rate at the time of the sale. On the other hand, our debt is translated into *Reais* taking into account the closing foreign currency rate. The difference between those rates may generate a mismatch from the conversion of our revenues and debt into *Reais*. In order to minimize the effect of the currency mismatch on our financial covenants measurement, we were able to amend those contracts under which those covenants are established to perform these measurements in U.S. Dollar terms.

 

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The following table presents the carrying amount of our assets and liabilities denominated in U.S. Dollars:

 
| ** **                        | ** ** | **2015** | ** ** | **2014** | ** ** |
|-----------------------------------|------------|----------|------------|----------|------------|
|                              |       |     |       |     |       |
| Assets in   foreign currency      |       |     |       |     |       |
| Cash and cash   equivalents       |       | 1,068    |       | 280      |       |
| Marketable   securities           |       |     |       | 61       |       |
| Trade accounts   receivable       |       | 674      |       | 496      |       |
|                              |       |     |       |     |       |
|                              |       | 1,742    |       | 837      |       |
|                              |       |     |       |     |       |
| Liabilities in   foreign currency |       |     |       |     |       |
| Loans and   financing             |       | 10,215   |       | 6,280    |       |
| Trade payables                    |       | 76       |       | 72       |       |
| Derivative   instruments          |       | 1,082    |       | 538      |       |
|                              |       |     |       |     |       |
|                              |       | 11,373   |       | 6,891    |       |
|                              |       |     |       |     |       |
| Liability   exposure              |       | (9,631   | )          | (6,054   | )          |

 

***Sensitivity Analysis***

 

Our significant risk factor, considering the period of three months for the evaluation is our U.S. Dollar exposure. We adopted as the probable scenario the fair value considering the market yield as at December 31, 2015.

 

To calculate the probable scenario the closing exchange rate at the date of these consolidated financial statement was used (R$ x USD = 3.9048). As the amounts are already recognized in the consolidated financial statement, there are no additional effects in the Consolidated Statement of Profit or Loss in this scenario. In the “Possible” and “Remote” scenarios, the U.S. dollar is deemed to appreciate/depreciate by 25% and 50%, respectively, before tax, when compared to the probable scenario.  Therefore, the following table presents the change in the fair value of derivatives, loans and marketable securities, in the above mentioned adverse exchange rate scenarios:

 
| ** **                                | ** ** | **Impact of an appreciation/depreciation of the Real against the   U.S. Dollar on the fair value — absolute amounts** | ** ** |
|-------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| **(in millions of Reais)** | ** ** | **Possible (25%)**                                                                                                                                                                                    | ** ** | **Remote (50%)** | ** ** |
| Derivative instruments                    |       | 785                                                                                                                                                                                                        |       | 1,656 |   |
| Loans and   financing                     |       | 2,371                                                                                                                                                                                                      |       | 4,742 |   |
| Marketable   securities                   |       | 219                                                                                                                                                                                                        |       | 439 |   |

 

**Cash flow and****interest rate risk**

 

Our net income and operating cash flows are substantially independent of changes in market interest rates because we have no significant interest-bearing assets. Our cash, cash equivalents and marketable securities are mostly denominated in *Reais* and are based on the CDI rate. On December 31, 2015 the CDI rate was 14.14% p.a. and on December 31, 2014, the CDI rate was 11.57% p.a.

 

Our interest rate risk arises from our debt. Our debt is primarily denominated in U.S. Dollar and to a lesser extent to Brazilian *Reais*. The U.S. Dollar-denominated debt has exposure to fixed rates (mainly the Notes issued by Fibria — Notes 2024) and Libor rates (mainly Export Prepayment Agreements). The *Real*-denominated debt has exposure to fixed rates, to the Brazilian Interbank Deposit Rate*or CDI* and to the Brazilian Long Term Interest Rate or TJLP.

 

The table below provides information about our significant interest rate-sensitive instruments and classify our exposures by currency and type of interest rate (floating or fixed).

 

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| **(in millions of Reais)**        | ** ** | **2016** | ** ** | **2017** | ** ** | **2018** | ** ** | **After   2018** | ** ** | **Total** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|------------------|------------|-----------|------------|
| Assets:                                          |       |     |       |     |       |     |       |             |       |      |       |
| Cash and cash   equivalents                      |       | 1,078    |       | —   |       | —   |       | —           |       | 1,078     |       |
| Fixed-rate   denominated in *Reais*              |       | 8        |       |     |       |     |       |             |       | 8         |       |
| Floating-rate   denominated in *Reais*           |       | 2        |       | —   |       | —   |       | —           |       | 2         |       |
| Fixed-rate   denominated in U.S. Dollars         |       | 1,068    |       | —   |       | —   |       | —           |       | 1,068     |       |
| Marketable   securities                          |       | 706      |       | 439      |       | 6        |       | 329              |       | 1,480     |       |
| Floating-rate   denominated in *Reais*           |       | 706      |       | 439      |       | 6        |       | 329              |       | 1,480     |       |
| Fixed-rate   denominated in U.S. Dollars         |       | —   |       | —   |       | —   |       | —           |       | —    |       |
| Total exposed   assets                           |       | 1,784    |       | 439      |       | 6        |       | 329              |       | 2,558     |       |
|                                             |       |     |       |     |       |     |       |             |       |      |       |
| Liabilities:                                     |       |     |       |     |       |     |       |             |       |      |       |
| Floating-rate   debt denominated in *Reais*      |       | 296      |       | 443      |       | 365      |       | 1,269            |       | 2,373     |       |
| Floating-rate   debt denominated in U.S. Dollars |       | 674      |       | 583      |       | 1,468    |       | 4,743            |       | 7,468     |       |
| Fixed-rate debt   denominated in *Reais*         |       | 42       |       | 44       |       | 31       |       | 39               |       | 156       |       |
| Fixed-rate debt   denominated in U.S. Dollars    |       | 61       |       | —   |       | —   |       | 2,686            |       | 2,747     |       |
| Total exposed liabilities                        |       | 1,073    |       | 1,070    |       | 1,864    |       | 8,737            |       | 12,744    |       |

 

**Derivative Instruments**

 

Most of our revenue is denominated in U.S. Dollars. We have currency options (zero cost collars) to protect our short-term cash flow from unfavorable exchange rate movements. We also have interest rate swaps and cross-currency swaps to hedge our indebtedness. Our interest rate swaps hedge the LIBOR and our cross-currency swaps hedge, swapping such debt to U.S. Dollar-denominated debt. See Notes 2.6 and 2.7 to our 2015 consolidated financial statements for a discussion of the accounting policies for derivatives and other financial instruments.

 

At December 31, 2015, derivatives held by us are as follows:

 

(i)             Swaps in which we receive three month LIBOR and pay fixed interest rate, with notional amount of U.S.$623 million and last maturity date on December 2019. This swap was contracted to fix the cost of the underlying loan and reduce our cash flow risk. As of December 31, 2015, the sum of the fair values of these swaps resulted in a net liability of R$9 million.

 

(ii)            Cross-currency swaps in which we receive *CDI* (Brazilian Interbank Rate in *Reais*) and pay U.S. Dollar fixed rate. The purpose of the swaps is to hedge a *Real* denominated debt, converting it to a U.S. Dollar-denominated debt. The notional amount is US$359 million and, the longest maturity is August 2020. As of December 31, 2015, the sum of the fair values of these swaps resulted in a net liability of R$648 million.

 

(iii)           Cross-currency swaps in which we receive *TJLP* (Brazilian Long Term Interest Rate) in Brazilian *Real*and pay U.S. Dollar fixed rate. The total notional amount is U.S.$98 million, and the longest maturity is December 2017. As of December 31, 2015, the sum of the fair values of those swaps resulted in a net liability of R$230 million.

 

(iv)          Cross-currency swaps in which we receive Brazilian *Real* fixed rate and pay U.S. Dollar fixed rate. The notional amount is US$112 million, with longest maturity of July 2019. As of December 31, 2015, the sum of the fair values of those swaps resulted in a net liability of R$186 million.

 

(v)           An option based strategy known as Zero Cost Collar, which provides a floor and a cap to the foreign currency rate between U.S. Dollar and Brazilian *Real*. The instrument is used to protect our U.S. Dollar revenue below a given threshold in Brazilian *Real*terms. As of December 31, 2015, the notional amount was US$310 million, and the sum of the fair values resulted in a net liability of R$9 million.

 

(vi)          An embedded derivative, in which we receive a fixed U.S. Dollar rate and pay a floating U.S. Dollar rate (U.S. Consumer Price Index). The embedded derivative arises from the Forestry Partnership and Standing Timber Supply Agreements with Parkia. Since the signing of the Agreements was in December 30, 2013, the fair value of the embedded

 

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derivative on December 31, 2015 was R$254 million. See “Item 4. Information on Fibria — A. History and Development of Fibria — *Disposition of forestry assets and land*”. Also, see Note 11. (a) of our 2015 consolidated financial statements.

 

The following procedures were adopted for the derivatives contract valuations as of December 31, 2015:

 

(i)             Swaps: were evaluated by the future cash flow, considering the contractual or projected rates, up to maturity dates, discounted to present value using market rates, in each currency, from BM&FBOVESPA and Bloomberg, taking into account both the risk credit of the Company and the risk of the counterparty;

 

(ii)            Currency Options: were calculated using the Garman-Kohlhagen option pricing formula, a Black and Scholes formula variation, taking into account both the risk credit of the Company and the risk of the counterparty. The volatility is obtained from BM&FBOVESPA option market rates.

 

(iii)           U.S. CPI Swap (Embedded derivative) — the liability leg future cashflows were projected by the U.S. CPI swap curve (constructed with the Treasury Inflation-Protected Securities (TIPS) — published by Bloomberg). The asset leg cashflows were evaluated by the fixed rate established in the beginning of the embedded derivative. The fair value of the embedded derivative is the present value of the difference between the two legs.

 

Our derivatives counterparties are all financial institutions, most of them, with rating equal or better than BBB+ / Ba1 (from Fitch, S&P or Moody’s) or brAA- / Aa3.br.

 

The following table provides the notional and the fair value of our financial derivatives as of December 31, 2015:

 
| ** **                                | ** ** | **Notional amount**                | ** ** | **Fair value as of   December 31, 2015** | ** ** |
|-------------------------------------------|------------|-----------------------------------------|------------|-------------------------------------------------------------------|------------|
|                                      |       | **(in millions of U.S.** |       | **(in millions of Reais)**                         |       |
|                                      |       | **Dollars)**                            |       |                                                              |       |
|                                      |       |                                    |       |                                                              |       |
| Swap CDI x USD                            |       | 359                                     |       | (648                                                              | )          |
| Swap LIBOR 3M x   Fixed                   |       | 623                                     |       | (9                                                                | )          |
| Swap TJLP x USD                           |       | 98                                      |       | (230                                                              | )          |
| Swap BRL x USD                            |       | 112                                     |       | (186                                                              | )          |
| Zero Cost Collar                          |       | 310                                     |       | (9                                                                | )          |
| Swap USD x   US-CPI (embedded derivative) |       | 858                                     |       | 254                                                               |       |
|                                      |       |                                    |       | (828                                                              | )          |

 

For further information concerning risks associated with the foregoing, see Note 4 of our 2015 consolidated financial statements filed herewith.

 

**ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES**

 

Citibank, N.A., as depositary, has agreed to reimburse us for expenses it incurs that are related to the establishment and maintenance of our ADS program. The depositary has agreed to reimburse us for our continuing and annual stock exchange listing fees. It has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, and to reimburse us annually for certain investor relations programs or special promotional activities. In certain instances, the depositary has agreed to provide additional payments to us based on any applicable performance indicators relating to the ADR facility. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors. During calendar year 2015 the depositary reimbursed us in the amount of U.S.$1,903 thousand (net of tax).

 

The depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect is annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them.

 

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** **

**PART II**

 

**ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES**

 

See discussion at “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Covenants”.

 

**ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS**

 

None.

 

**ITEM 15.  CONTROLS AND PROCEDURES**

 

*Disclosure Controls and Procedures*: Management, with the participation of our chief executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the U.S. Securities Exchange Act of 1934 under Rules 13a-15(e)) as of the end of the period covered by this annual report, has concluded that, as of that date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

 

*Management’s Report on Internal Control over Financial Reporting*: Fibria’s management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Fibria’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of Fibria’s internal control over financial reporting as of December 31, 2015. In making this assessment, management used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management concluded that, as of December 31, 2015, Fibria’s internal control over financial reporting is effective based on those criteria.

 

*Changes in internal controls*. There was no change in our internal control over financial reporting that occurred in the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

*Attestation Report of the Registered Public Accounting Firm.*The effectiveness of our internal control over financial reporting as of December 31, 2015 has been audited by PricewaterhouseCoopers Auditores Independentes, an independent registered public accounting firm, as stated in their attestation report which appears herein.

 

**ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT**

 

Our Board of Directors has determined that Mr. Julio Sergio de Souza Cardozo, a member of our Board of Directors and of our Statutory Audit Committee, is an audit committee financial expert within the meaning of Sarbanes-Oxley and related regulations.

 

**ITEM 16B.  CODE OF CONDUCT**

 

Our Board of Directors has adopted a code of conduct (“Code of Conduct”) that applies to all Fibria’s Board members, suppliers and employees, including the members of our financial department, our chief executive officer, our chief financial officer and our chief accounting officer. No waivers, either explicit or implicit, of provisions of the Code of Conduct were granted to our chief executive officer, chief financial officer or chief accounting officer in 2015. A copy of our Code of Conduct has been filed as Exhibit 11.1 to this annual report.

 

Our Code of Conduct addresses, among others, the following topics:

 

·                  honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

·                  full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us;

 

·                  compliance with applicable governmental laws, rules and regulations; and

 

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·                  the prompt internal reporting of breaches related to Fibria ́s Code to the Ombudsman.

 

In order to keep the highest governance standards, every two years Fibria reviews its Code of Conduct to assure the document is up to date with best practices and regulations. In 2014 a revision was approved by our Board. Some topics were updated and new ones were included in the new version, such as “Corruption”, in order to make even clearer our standards regarding integrity issues. The updates in the document were communicated through several internal channels. Besides, the Ombudsman Department personally presented and discussed the updates with employees during 7 presentations that took in place in all Fibria ́s Units in the beginning of the year. During 2015, every employee once more confirmed their commitment with the directives of the Code by signing again the Term of Agreement attached to the document. Furthermore, we conducted several awareness actions in order to enforce the importance of business integrity, compliance and the governance instruments - the Code of Conduct and the Ombudsman. Trainings regarding business ethics and Fibria Code of Conduct were applied to team leaders and an internal “Ethics and Ombudsman” website was implemented and released, bringing guidance on how to use the whistleblowing channel properly, presenting practical examples of correct and incorrect conducts of business, FAQ, among other measures. In addition, important Policies that support the Integrity and the Compliance Programs have been updated: the Ombudsman Policy - document that set up the guidelines to the Ombudsman Channel operations and governance - and also the Commission of Ethics and Conduct Policy.

 

In 2013 we implemented a specific policy for the prevention of corruption, approved by our Board of Directors.  The rules for the conduct of our employees, including those outsourced, management and shareholders in the case of donations, gifts and presents, and entertainment, for example, have been clarified in this policy, with a view to maintaining the conduct of our business always within the highest levels of integrity and transparency. The policy emphasizes also our intolerance for irregular conduct, the application of disciplinary measures for proven improper acts and also highlights the liability of all in reporting any suspect activity to the Ombudsman. In addition, in 2014 we expanded live training sessions to all employees regarding these matters. Among several important training initiatives, we highlight the revision of anti-corruption and antitrust policies, the code of conduct and the supply chain due diligence process considering these rules. We also discussed and distributed a compliance program manual and handbook for all employees. Furthermore, channels to identify new obligations through the business areas for positive evidence were established.

 

**ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES**

 

The following table sets forth by category of service the total fees for services performed by PricewaterhouseCoopers Auditores Independentes during the fiscal years ended December 31, 2015 and 2014.

 
| **Year Ended December 31** | ** ** | **2015**                                | ** ** | **2014**   | ** ** |
|-------------------------------------------|------------|-----------------------------------------|------------|------------|------------|
| ** **                                | ** ** | **(In thousands of   Reais)** | ** ** | ** ** | ** ** |
| Audit Fees                                |       | 4,013                                   |       | 4,653      |       |
| Tax Fees                                  |       | —                                  |       | 150        |       |
| Audit-Related   Fees                      |       | 295                                     |       | 947        |       |
| Total                                     |       | 4,308                                   |       | 5,750      |       |

 

**Audit Fees**

 

Audit fees in 2015 and 2014 consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes in connection with the integrated audit of our annual financial statements, reviews of quarterly financial statements, statutory audits of our subsidiaries, the bond offers and of our internal control over financial reporting, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

**Tax Fees**

 

Tax fees in 2014 consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes in connection with tax services related to the audit procedures. Includes fees charged in connection with the review of the income tax returns of Fibria Celulose S.A. and the tax credit calculation basis of Befiex.

 

**Audit-Related Fees**

 

Audit-related fees consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes to the consulting in the implementation of GRC/SAP systems.

 

**Pre-Approval Policies and Procedures**

 

Our Statutory Audit Committee pre-approves all audit, audit-related, tax and other services provided by PricewaterhouseCoopers Auditores Independentes. Any services provided by PricewaterhouseCoopers Auditores Independentes that are not specifically included within the scope of the audit must be pre-approved by our Board of Directors in advance of any

 

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engagement. Under the Sarbanes Oxley Act of 2002, audit and risk committees are permitted to approve certain fees for audit-related, tax and other services pursuant to a *de minimis* exception prior to the completion of an audit engagement. In 2015 and 2014 none of the fees paid to PricewaterhouseCoopers Auditores Independentes were approved pursuant to the *de minimis* exception.

 

**ITEM 16D.  EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES**

 

Not applicable.

 

**ITEM 16E.  PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS**

 

Treasury shares transactions and additional paid-in capital:

 

(i)            On March 23, 2010 we repurchased 309,451 of our own shares at an average price of R$33.99 per share regarding the agreement between VCP and Suzano Bahia Sul Papel e Celulose S.A. for the acquisition of a controlling interest in Ripasa established in November 2004 (Note 25(c) to our 2011 consolidated financial statements).

 

(ii)           On July 2, 2009, certain shareholders exercised the right of withdrawal of 36,670 preferred shares regarding the Aracruz Acquisition. Based on the redemption amount of R$20.61 per share, the amount due to dissenting shareholders was R$0.756 million (Note 26(a) to our 2011 consolidated financial statements).

 

(iii)          On June 1, 2015, three shareholders exercised their rights of withdrawal of 1,218 common shares as a consequence of by-law changes.

 

**ITEM 16F.  CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT**

 

Not applicable.

 

**ITEM 16G.  CORPORATE GOVERNANCE**

 

**Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards**

 

We are subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies. Under the NYSE rules, we are required only to: (i) have an audit committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our chief executive officer of any material noncompliance with any corporate governance rules, and (iii) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

 

***Majority of Independent Directors***

 

The NYSE rules require that a majority of the board must consist of independent directors. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Brazilian law does not have a similar requirement. Under Brazilian law, neither our Board of Directors nor our management is required to test the independence of directors before their election to the Board. However, both the Brazilian Corporate Law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. We do not have a majority of independent directors serving on its Board of Directors.

 

***Executive Sessions***

 

NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management. The Brazilian Corporate Law does not have a similar provision. According to the Brazilian Corporate Law, up to one third of the members of the Board of Directors can be elected from management. In our case, none of them occupies both an executive and director position. The directors are not expressly empowered to serve as check on management and there is no requirement that our directors meet regularly without management. As a result, our directors do not typically meet in executive sessions.

 

***Nominating/Corporate Governance Committee***

 

NYSE rules require that listed companies have a Nominating/Corporate Governance Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set

 

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of corporate governance principles applicable to the company. We are not required under applicable Brazilian law to have a Nominating Committee/Corporate Governance Committee, and accordingly, to date, have not established such a committee. The directors are elected by our shareholders at a general shareholders’ meeting. Our corporate governance practices are adopted by the entire board.

 

***Compensation Committee***

 

NYSE rules require that listed companies have a Compensation Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to CEO compensation, evaluating CEO performance and approving CEO compensation levels and recommending to the board non CEO compensation, incentive compensation and equity based plans. We are not required under applicable Brazilian law to have a Compensation Committee, although we have established an advisory committee (that is not comprised entirely of Board members) to advise on certain of these matters. Under the Brazilian Corporate Law, the total amount available for compensation of our directors and executive officers and for profit sharing payments to our executive officers is established by our shareholders at the annual general meeting. The Board of Directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members. In making such determination, the board reviews the performance of each executive officer and each of the goals they were supposed to achieve during the year.

 

***Statutory Audit Committee***

 

Under NYSE Rule 303A.06 and the requirements of Rule 10A-3 of the Securities and Exchange Commission, domestic listed companies are required to have an audit committee consisting entirely of independent directors that otherwise complies with Rule 10A-3. In addition, the audit committee must have a written charter that addresses the matters outlined in NYSE Rule 303.A.06(c), have an internal audit function and otherwise fulfill the requirements of the NYSE and Rule 10A-3. There is no requirement for an audit committee under Brazilian law and there are features of Brazilian law that require adaptation of the independent audit committee rule to local practice, as permitted by NYSE Rule 303A.06 and Rule 10A-3. As a foreign private issuer, Fibria is in compliance with Rule 303A.06 and Rule 10A-3. Our audit committee, which is equivalent to a U.S. audit committee, was installed at the meeting of our Board of Directors held on December 18, 2009 and became a statutory corporate body by resolution of the Extraordinary General Meeting held on April 26, 2013. It complies with all of such requirements and provides assistance to our Board of Directors in matters involving our accounting, internal controls, financial reporting and compliance. Our audit committee recommends the appointment of our independent auditors to our Board of Directors and reviews the compensation of, and coordinates with, our independent auditors. Our audit committee also evaluates the effectiveness of our internal financial and legal compliance controls.

 

***Shareholder Approval of Equity Compensation Plans***

 

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions. Under the Brazilian Corporate Law, shareholders must approve all stock option plans. In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval. We have no equity compensation plans.

 

***Corporate Governance Guidelines***

 

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. We have not adopted any formal corporate governance guidelines beyond those required by applicable Brazilian law. We believe that the corporate governance guidelines applicable to us under Brazilian corporate law are consistent with the guidelines established by the NYSE.

 

***Code of Business Conduct and Ethics***

 

NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not have a similar requirement. However, we have amended our code of conduct to comply with the requirements of the Sarbanes-Oxley Act and the NYSE rules. We believe our code, as amended, substantially addresses the matters required to be addressed by the NYSE rules. A copy of our Code of Conduct has been filed as Exhibit 11.1 to this annual report. For a further discussion of our Code of Conduct, see “Item 16B. — Code of Conduct.”

 

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***Internal Audit Function***

 

NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control. Brazilian law does not require that companies maintain an internal audit function. However, as a best practice, we maintain an internal audit function. Our internal audit function is under the supervision of the Statutory Audit Committee. The Internal Audit is responsible for independently evaluating corporate, forest and industrial processes, verifying compliance with standards and policies adopted by the company and analyzing possible cases of irregularities, such as fraud, bribery, corruption, conflicts of interest, insider information, embezzlement and damage to property.

 

The internal audit is based on the Risk Matrix, the Internal Controls Matrix and on the views of management and members of the Statutory Audit Committee. The audit results are reported to the CEO and the Statutory Audit Committee.

 

**ITEM 16H.  MINE SAFETY DISCLOSURE**

 

Not applicable.

 

**PART III**

 

**ITEM 17.  FINANCIAL STATEMENTS**

 

Not applicable.

 

**ITEM 18.  FINANCIAL STATEMENTS**

 

The following consolidated financial statements are filed as part of this annual report, together with the report of Independent Registered Public Accounting Firm:

 
| Management’s Report on Internal Control Over Financial Reporting                   |   | F-2    |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|
|                                                                                                                       |   |   |
| Report of Independent Registered Public Accounting   Firm                                                                  |   | F-4    |
|                                                                                                                       |   |   |
| Consolidated Balance Sheets as of December 31,   2015, 2014 and 2013                                                  |   | F-8    |
|                                                                                                                       |   |   |
| Consolidated Statement of profit and loss for the   years ended December 31, 2015, 2014 and 2013                      |   | F-10   |
|                                                                                                                       |   |   |
| Consolidated Statement of Comprehensive Income for the   years ended December 31, 2015, 2014 and 2013                 |   | F-11   |
|                                                                                                                       |   |   |
| Consolidated Statement of Changes in Shareholders’   Equity for the years ended December 31, 2015, 2014 and 2013 |   | F-12   |
|                                                                                                                       |   |   |
| Consolidated Statement of Cash Flows for the years   ended December 31, 2015, 2014 and 2013                           |   | F-13   |
|                                                                                                                       |   |   |
| Notes to the Consolidated Financial Statements                                                                             |   | F-15   |

 

All schedules for which provision is made in the applicable accounting regulations of the Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

 

**ITEM 19.  EXHIBITS**

 
| **Exhibit   Number**   | ** ** | **Description**                                                                                                                                                                                                                                                 |
|------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |       |                                                                                                                                                                                                                                                            |
| 1#                     |       | English translation of   the By-laws                                                                                                                                                                                                                            |
|                   |       |                                                                                                                                                                                                                                                            |
| 2.(a)(1)**             |       | Form of Amended   and Restated Deposit Agreement dated as of August 12, 2009 among us,   Citibank, N.A., as depositary, and the Owners and Beneficial Owners of   American Depositary Receipts, including the form of American Depositary   Receipts. |
|                   |       |                                                                                                                                                                                                                                                            |
| 2.(a)(2) ******** |       | Free translation of the   Novo Mercado Listing Rules                                                                                                                                                                                                            |

 

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| 2.(b)(1)****       |   | Indenture, dated   June 24, 2005, among Voto-Votorantim Overseas Trading Operations IV   Limited, as issuer, The Bank of New York, as trustee, The Bank of New York,   as transfer agent, paying agent and registrar, The Bank of Tokyo-Mitsubishi   Ltd., London Branch, as principal paying agent, and Votorantim Participações   S.A., Votorantim Celulose e Papel S.A., Cimento Rio Branco S.A., and   Companhia Níquel Tocantins, as guarantors. |
|--------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.(b)(2) ++++ |   | 2024 Notes Indenture,   dated as of May 12, 2014 among Fibria Overseas Finance Ltd., Fibria   Celulose S.A. and Deutsche Bank Trust Company Americas                                                                                                                                                                                                                                                                                                                 |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 2.(b)(3)           |   | The Company agrees to   furnish to the Commission upon its request any instrument relating to   long-term debt issued by the Company or any subsidiary where the total amount   of securities authorized under                                                                                                                                                                                                                                                            |
|               |   | that instrument does   not exceed 10% of the Company’s consolidated assets.                                                                                                                                                                                                                                                                                                                                                                                          |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.1.+++++          |   | Investment Agreement,   dated January 19, 2009, among us, VID, BNDESPar and VPar                                                                                                                                                                                                                                                                                                                                                                                     |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.2##              |   | Form of   Shareholders’ Agreement, dated October 29, 2009, among us, VID, BNDESPar   and VPar                                                                                                                                                                                                                                                                                                                                                              |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.3***             |   | First Amendment to the   Shareholders’ Agreement, dated October 29, 2014.                                                                                                                                                                                                                                                                                                                                                                                       |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.1+               |   | Exchange Agreement   dated September 19, 2006 by and between Votorantim Celulose e Papel S.A.   and International Paper Investments (Holland) B.V.                                                                                                                                                                                                                                                                                                                   |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.2+++             |   | Financing Agreement   dated July, 2008 through credit facility of R$540 million by and between the   National Bank of Economic and Social Development — BNDES, VCP                                                                                                                                                                                                                                                                                                   |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.3###             |   | Share Purchase Agreement   and Other Covenants dated as of November 15, 2013 between the Company   and Parkia Participações S.A. and First Amendment to the Share Purchase   Agreement and Other Covenants dated as of December 30, 2013.                                                                                                                                                                                                             |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 6                  |   | See Note 35 to our 2014   consolidated financial statements for information explaining how earnings per   share were calculated.                                                                                                                                                                                                                                                                                                                                          |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 8                  |   | See Note 2 and 17 to   our 2014 consolidated financial statements for information regarding our   subsidiaries.                                                                                                                                                                                                                                                                                                                                                           |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 11.1++             |   | English translation of   Code of Conduct.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 12.1‡         |   | Rule 13a-14(a)/15(d)-14(a) Certificate   of Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                             |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 12.2‡         |   | Rule 13a-14(a)/15(d)-14(a) Certificate   of the Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                         |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 13.1‡         |   | Section 1350   Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                              |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 13.2‡         |   | Section 1350   Certification of the Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                                                          |
|               |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 23.01‡        |   | Consent of Independent   Registered Public Accounting Firm                                                                                                                                                                                                                                                                                                                                                                                                                |

 

----

**                                                                    Incorporated herein by reference to our registration statement on Form F-6 furnished on June 24, 2009 (File No. 160187).

 

***                                                             Incorporated herein by reference to our submission on Form 6-K furnished on November 3, 2014 (File No. 001-15018).

 

****                                                      Incorporated herein by reference to our annual report on Form 20-F filed on June 29, 2006 (File No. 001-15018).

 

********                          Incorporated herein by reference to our annual report on Form 20-F filed on February 29, 2012 (File No. 001-15018)

 

+                                                                           Incorporated herein by reference to our annual report on Form 20-F filed on February 1, 2007 (File No. 001-15018).

 

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++                                                                    Incorporated herein by reference to our submission on Form 6-K furnished on February 24, 2015 (File No. 001-15018).

 

+++                                                             Incorporated herein by reference to our annual report on Form 20-F filed on June 30, 2009 (File No. 001-15018).

 

++++                                                      Incorporated herein by reference to Exhibit 4.2 to our submission on Form 6-K furnished on May 12, 2014 (File No. 001-15018).

 

+++++                                               Incorporated herein by reference to our submission on Form 6-K furnished on January 27, 2011 (File No. 001-15018).

 

##                                                                    Incorporated herein by reference to Exhibit 3.1.10 to Exhibit 3.1 to our submission on Form 6-K furnished on January 27, 2011 (File No. 001-15018).

 

#                                                                           Incorporated herein by reference to our submission on Form 6-K furnished on May 26, 2012 (File No. 001-15018).

 

###                                                             Incorporated herein by reference to our annual report on Form 20-F filed on February 28, 2014 (File No. 001-15018).

 

±                                                                           Incorporated herein by reference to our annual report on Form 20-F filed on February 27, 2013 (File No. 001-15018).

 

‡                                                                           Filed herewith.

 

**Fibria Celulose S.A.**

**Consolidated financial statements at**

**December 31, 2015 and report of independent registered public accounting firm**

 

*       *        *

 

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**SIGNATURES**

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

 
|                            |   | FIBRIA CELULOSE S.A.              |
|---------------------------------|--------|-----------------------------------|
|                            |   |                              |
|                            | By:    | /s/ Marcelo Strufaldi Castelli    |
|                            |   | Name:                             | Marcelo Strufaldi Castelli |
|                            |   | Title:                            | Chief   Executive Officer |
|                            |   |                              |   |
|                            |   |                              |   |
|                            | By:    | /s/ Guilherme Perboyre Cavalcanti |
|                            |   | Name:                             | Guilherme Perboyre Cavalcanti |
|                            |   | Title:                            | Chief   Financial Officer |
|                            |   |                              |   |
| Date:   February 24, 2016. |   |                              |   |

 

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**Fibria Celulose S.A.**

**Consolidated financial statements at**

**December 31, 2015 and report of independent registered public accounting firm**

 

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**Management’s Report on Internal Control over Financial Reporting**

 

1 The management of Fibria Celulose S.A. and subsidiaries (the “Company”) is responsible for establishing and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.

 

2 The Company’s internal control over financial reporting is a process designed by, or under the supervision of, the Company’s Statutory Audit Committee, principal executive and principal financial officers, and effected by the Company’s Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS as approved by the IASB, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

 

3 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

4 The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015, is based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment, management has concluded that as of December 31, 2015 the Company’s internal control over financial reporting is effective.

 

São Paulo, January 27, 2016

 

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| /s/ Marcelo Strufaldi Castelli |   | /s/ Guilherme Perboyre Cavalcanti                        |
|--------------------------------|--------|----------------------------------------------------------|
| Marcelo Strufaldi Castelli     |   | Guilherme Perboyre Cavalcanti                            |
| Chief Executive Officer        |   | Chief Financial Officer and   Investor Relations Officer |

** **

F-3

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** **

**Report of independent registered public accounting firm**

 

To the Board of Directors and Shareholders

Fibria Celulose S.A.

 

1                                        In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of profit or loss, comprehensive income, changes in shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Fibria Celulose S.A. and its subsidiaries at December 31, 2015 and December 31, 2014 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and International Standards on Auditing. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

 

2                                        A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,

 

F-4

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and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

 

3                                        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

 

/s/ PricewaterhouseCoopers

Auditores Independentes

 

São Paulo, Brazil, January 27, 2016

 

F-5

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Table of Contents

 

**Index**

 
| Financial statements                                             |                                                                                  |
|------------------------------------------------------------------|---------------------------------------------------------------------------------------|
| Consolidated balance sheet                                       | 8                                                                                     |
| Consolidated statement of profit or loss                         | 10                                                                                    |
| Consolidated statement of comprehensive income                   | 11                                                                                    |
| Consolidated statement of changes in shareholders’   equity | 12                                                                                    |
| Consolidated statement of cash flows                             | 13                                                                                    |
|                                                             |                                                                                  |
| Notes to the consolidated financial statements                   |                                                                                  |
| 1                                                                | Operations   and current developments                                                 | 15 |
| 2                                                                | Presentation   of financial statements and summary of significant accounting policies | 18 |
|                                                             | 2.1                                                                                   | Financial   statements - basis of preparation | 18 |
|                                                             | 2.2                                                                                   | Consolidation | 19 |
|                                                             | 2.3                                                                                   | Segregation   of assets and liabilities between current and non-current | 20 |
|                                                             | 2.4                                                                                   | Foreign   currency translation | 20 |
|                                                             | 2.5                                                                                   | Cash   and cash equivalents | 21 |
|                                                             | 2.6                                                                                   | Financial   assets | 21 |
|                                                             | 2.7                                                                                   | Derivative   financial instruments and hedging activities | 23 |
|                                                             | 2.8                                                                                   | Trade   accounts receivable | 23 |
|                                                             | 2.9                                                                                   | Inventory | 24 |
|                                                             | 2.10                                                                                  | Current   and deferred income tax and social contribution | 24 |
|                                                             | 2.11                                                                                  | Intangible   assets | 24 |
|                                                             | 2.12                                                                                  | Property,   plant and equipment | 26 |
|                                                             | 2.13                                                                                  | Leases | 26 |
|                                                             | 2.14                                                                                  | Biological   assets | 26 |
|                                                             | 2.15                                                                                  | Business   combination | 27 |
|                                                             | 2.16                                                                                  | Impairment   of non-financial assets, other than goodwill | 27 |
|                                                             | 2.17                                                                                  | Trade   payables | 27 |
|                                                             | 2.18                                                                                  | Loans   and financing | 27 |
|                                                             | 2.19                                                                                  | Employee   benefits | 27 |
|                                                             | 2.20                                                                                  | Contingent   assets and liabilities | 29 |
|                                                             | 2.21                                                                                  | Asset   retirement obligations | 29 |
|                                                             | 2.22                                                                                  | Revenue   recognition | 30 |
|                                                             | 2.23                                                                                  | Dividend   distribution | 30 |
|                                                             | 2.24                                                                                  | Non-current   assets held for sale | 31 |
|                                                             | 2.25                                                                                  | New   standards, amendments and interpretations issued by IASB |   |
| 3                                                                | Critical   accounting estimates and assumptions                                       | 32 |
| 4                                                                | Risk   management                                                                     | 34 |
|                                                             | 4.1                                                                                   | Social   and environmental risks | 34 |
|                                                             | 4.2                                                                                   | Financial   risks | 35 |
| 5                                                                | Sensitivity   analysis                                                                | 40 |
| 6                                                                | Fair   value estimates                                                                | 41 |
|                                                             | 6.1                                                                                   | Fair   value of loans and financing | 43 |
|                                                             | 6.2                                                                                   | Fair   value measurement of derivative financial instruments (including embedded   derivative) | 44 |
| 7                                                                | Financial   instruments by category                                                   | 45 |
| 8                                                                | Credit   quality of financial assets                                                  | 46 |
| 9                                                                | Cash   and cash equivalents                                                           | 47 |
| 10                                                               | Marketable   securities                                                               | 47 |

 

F-6

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| 11     | Derivative   financial instruments (including embedded derivative) | 48     |
|--------|--------------------------------------------------------------------|--------|
| 12     | Trade   accounts receivable                                        | 51     |
| 13     | Inventory                                                          | 52     |
| 14     | Recoverable   taxes                                                | 53     |
| 15     | Income   taxes                                                     | 54     |
| 16     | Significant   transactions and balances with related parties       | 57     |
| 17     | Investments                                                        | 63     |
| 18     | Biological   assets                                                | 64     |
| 19     | Property,   plant and equipment                                    | 66     |
| 20     | Intangible   assets                                                | 67     |
| 21     | Finance   and operating lease agreements                           | 68     |
| 22     | Advances   to suppliers - forestry partnership programs            | 69     |
| 23     | Loans   and financing                                              | 70     |
| 24     | Contingencies                                                      | 74     |
| 25     | Tax   Amnesty and Refinancing Program (“REFIS”)          | 78     |
| 26     | Asset   retirement obligations                                     | 78     |
| 27     | Long-term   commitments                                            | 78     |
| 28     | Shareholders’   equity                                        | 79     |
| 29     | Employee   benefits                                                | 80     |
| 30     | Compensation   program based on shares                             | 82     |
|   |                                                               |   |
| 31     | Revenue                                                            | 84     |
| 32     | Financial   results                                                | 85     |
| 33     | Expenses   by nature                                               | 86     |
| 34     | Insurance                                                          | 87     |
| 35     | Earnings   per share                                               | 87     |
| 36     | Non-current   assets held for sale                                 | 88     |
| 37     | Impairment   tests                                                 | 88     |
| 38     | Subsequent   events                                                | 89     |

 

F-7

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Consolidated balance sheet at December 31**

**In thousands of Reais**

 
| ** **                                        | ** ** | **2015**   | ** ** | **2014**   | ** ** |
|---------------------------------------------------|------------|------------|------------|------------|------------|
|                                              |       |       |       |       |       |
| **Assets**                                        |       |       |       |       |       |
|                                              |       |       |       |       |       |
| Current                                           |       |       |       |       |       |
| Cash and cash   equivalents (Note 9)              |       | 1,077,651  |       | 461,067    |       |
| Marketable   securities (Note 10)                 |       | 1,411,864  |       | 682,819    |       |
| Derivative   financial instruments (Note 11)      |       | 26,795     |       | 29,573     |       |
| Trade accounts   receivable, net (Note 12)        |       | 742,352    |       | 538,424    |       |
| Inventory (Note   13)                             |       | 1,571,146  |       | 1,238,793  |       |
| Recoverable   taxes (Note 14)                     |       | 462,487    |       | 162,863    |       |
| Other assets                                      |       | 168,283    |       | 147,638    |       |
|                                              |       |       |       |       |       |
|                                              |       | 5,460,578  |       | 3,261,177  |       |
|                                              |       |       |       |       |       |
| Non-current                                       |       |       |       |       |       |
| Marketable   securities (Note 10)                 |       | 68,142     |       | 51,350     |       |
| Derivative   financial instruments (Note 11)      |       | 273,694    |       | 161,320    |       |
| Related parties   receivables (Note 16)           |       | 11,714     |       | 7,969      |       |
| Recoverable   taxes (Note 14)                     |       | 1,511,971  |       | 1,752,101  |       |
| Advances to   suppliers (Note 22)                 |       | 630,562    |       | 695,171    |       |
| Judicial   deposits (Note 24)                     |       | 195,344    |       | 192,028    |       |
| Deferred taxes   (Note 15)                        |       | 2,399,213  |       | 1,190,836  |       |
| Assets held for   sale (Note 1(b) / Note 36) |       | 598,257    |       | 598,257    |       |
| Other assets                                      |       | 92,714     |       | 91,208     |       |
|                                              |       |       |       |       |       |
| Investments   (Note 17)                           |       | 137,771    |       | 79,882     |       |
| Biological   assets (Note 18)                     |       | 4,114,998  |       | 3,707,845  |       |
| Property, plant   and equipment (Note 19)         |       | 9,433,386  |       | 9,252,733  |       |
| Intangible   assets (Note 20)                     |       | 4,505,634  |       | 4,552,103  |       |
|                                              |       |       |       |       |       |
|                                              |       | 23,973,400 |       | 22,332,803 |       |
|                                              |       |       |       |       |       |
| Total assets                                      |       | 29,433,978 |       | 25,593,980 |       |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-8

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| **Fibria Celulose S.A.**                      |   |            |
|----------------------------------------------------|--------|-----------------|
|                                               |   |            |
| **Consolidated balance sheet at December 31** |   |            |
| **In thousands of Reais**                          |   | **(continued)** |

 
| ** **                                                                        | ** ** | **2015**   | ** ** | **2014**   | ** ** |
|-----------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                                              |       |       |       |       |       |
| **Liabilities and shareholders’ equity**                      |       |       |       |       |       |
|                                                                              |       |       |       |       |       |
| Current                                                                           |       |       |       |       |       |
| Loans and   financing (Note 23)                                                   |       | 1,072,877  |       | 965,389    |       |
| Derivative   financial instruments (Note 11)                                      |       | 302,787    |       | 185,872    |       |
| Trade payables                                                                    |       | 668,017    |       | 593,348    |       |
| Payroll, profit   sharing and related charges                                     |       | 170,656    |       | 135,039    |       |
| Taxes payable                                                                     |       | 564,439    |       | 56,158     |       |
| Dividends   payable                                                               |       | 86,288     |       | 38,649     |       |
| Other payables                                                                    |       | 90,235     |       | 124,775    |       |
|                                                                              |       |       |       |       |       |
|                                                                              |       | 2,955,299  |       | 2,099,230  |       |
|                                                                              |       |       |       |       |       |
| Non-current                                                                       |       |       |       |       |       |
| Loans and   financing (Note 23)                                                   |       | 11,670,955 |       | 7,361,130  |       |
| Derivative   financial instruments (Note 11)                                      |       | 825,663    |       | 422,484    |       |
| Deferred taxes   (Note 15)                                                        |       | 270,996    |       | 266,528    |       |
| Provision for   legal proceeds (Note 24)                                          |       | 165,325    |       | 144,582    |       |
| Liabilities related   to the assets held for sale (Note 1(b) / Note 36) |       | 477,000    |       | 477,000    |       |
| Other payables                                                                    |       | 253,420    |       | 207,321    |       |
|                                                                              |       |       |       |       |       |
|                                                                              |       | 13,663,359 |       | 8,879,045  |       |
|                                                                              |       |       |       |       |       |
| Total   liabilities                                                               |       | 16,618,658 |       | 10,978,275 |       |
|                                                                              |       |       |       |       |       |
| Shareholders’   equity (Note 28)                                             |       |       |       |       |       |
| Share capital                                                                     |       | 9,729,006  |       | 9,729,006  |       |
| Share capital   reserve                                                           |       | 15,474     |       | 3,920      |       |
| Treasury shares                                                                   |       | (10,378    | )          | (10,346    | )          |
| Statutory   reserves                                                              |       | 1,639,901  |       | 3,228,145  |       |
| Other reserves                                                                    |       | 1,378,365  |       | 1,613,312  |       |
|                                                                              |       |       |       |       |       |
| Equity   attributable to shareholders of the Company                         |       | 12,752,368 |       | 14,564,037 |       |
|                                                                              |       |       |       |       |       |
| Equity   attributable to non-controlling interests                                |       | 62,952     |       | 51,668     |       |
|                                                                              |       |       |       |       |       |
| Total   shareholders’ equity                                                 |       | 12,815,320 |       | 14,615,705 |       |
|                                                                              |       |       |       |       |       |
| Total   liabilities and shareholders’ equity                                 |       | 29,433,978 |       | 25,593,980 |       |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-9

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Consolidated statement of profit or loss**

**Years ended December 31**

**In thousand of Reais, except for the income per shares**

 
| ** **                                                         | ** ** | **2015**   | ** ** | **2014**   | ** ** | **2013**   | ** ** |
|--------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                               |       |       |       |       |       |       |       |
| Revenues (Note   31)                                               |       | 10,080,667 |       | 7,083,603  |       | 6,917,406  |       |
| Cost of sales   (Note 33)                                          |       | (5,878,209 | )          | (5,545,537 | )          | (5,382,688 | )          |
|                                                               |       |       |       |       |       |       |       |
| **Gross   profit**                                                 |       | 4,202,458  |       | 1,538,066  |       | 1,534,718  |       |
|                                                               |       |       |       |       |       |       |       |
| **Operating   income (expenses)**                                  |       |       |       |       |       |       |       |
| Selling expenses   (Note 33)                                       |       | (437,253   | )          | (365,214   | )          | (347,538   | )          |
| General and   administrative (Note 33)                             |       | (265,621   | )          | (265,077   | )          | (284,214   | )          |
| Equity in   results of joint-venture                               |       | 393        |       | (622       | )          |       |       |
| Other operating   income and expense, net (Note 33)                |       | 24,347     |       | 749,462    |       | 807,481    |       |
|                                                               |       |       |       |       |       |       |       |
|                                                               |       | (678,134   | )          | 118,549    |       | 175,729    |       |
|                                                               |       |       |       |       |       |       |       |
| **Income   before financial income and expenses**                  |       | 3,524,324  |       | 1,656,615  |       | 1,710,447  |       |
|                                                               |       |       |       |       |       |       |       |
| Financial income   (Note 32)                                       |       | 221,679    |       | 133,950    |       | 110,723    |       |
| Financial   expenses (Note 32)                                     |       | (569,793   | )          | (1,040,597 | )          | (1,016,526 | )          |
| Result of   derivative financial instruments, net (Note 32)        |       | (830,128   | )          | (6,236     | )          | (215,313   | )          |
| Foreign exchange   loss and indexation charges, net (Note 32) |       | (2,507,023 | )          | (721,842   | )          | (932,907   | )          |
|                                                               |       |       |       |       |       |       |       |
|                                                               |       | (3,685,265 | )          | (1,634,725 | )          | (2,054,023 | )          |
|                                                               |       |       |       |       |       |       |       |
| **Income   (loss) before income taxes**                            |       | (160,941   | )          | 21,890     |       | (343,576   | )          |
|                                                               |       |       |       |       |       |       |       |
| Income taxes                                                       |       |       |       |       |       |       |       |
| Current (Note   15)                                                |       | (684,246   | )          | (46,280    | )          | (619,606   | )          |
| Deferred (Note   15)                                               |       | 1,202,172  |       | 186,942    |       | 265,600    |       |
|                                                               |       |       |       |       |       |       |       |
| **Net   income (loss) for the year**                               |       | 356,985    |       | 162,552    |       | (697,582   | )          |
|                                                               |       |       |       |       |       |       |       |
| **Attributable   to**                                              |       |       |       |       |       |       |       |
| Shareholders of   the Company                                      |       | 342,185    |       | 155,584    |       | (706,422   | )          |
|                                                               |       |       |       |       |       |       |       |
| Non-controlling interest                                           |       | 14,800     |       | 6,968      |       | 8,840      |       |
|                                                               |       |       |       |       |       |       |       |
| **Net   income (loss) for the year**                               |       | 356,985    |       | 162,552    |       | (697,582   | )          |
|                                                               |       |       |       |       |       |       |       |
| Basic earnings   (loss) per share (in Reais) (Note 35)             |       | 0.62       |       | 0.28       |       | (1.28      | )          |
|                                                               |       |       |       |       |       |       |       |
| Diluted earnings   (loss) per share (in Reais) (Note 35)           |       | 0.62       |       | 0.28       |       | (1.28      | )          |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-10

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Consolidated statement of comprehensive income**

**Years ended December 31**

**In thousand of Reais**

 
| ** **                                                                             | ** ** | **2015** | ** ** | **2014** | ** ** | **2013** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                   |       |     |       |     |       |     |       |
| **Net   income (loss) for the year**                                                   |       | 356,985  |       | 162,552  |       | (697,582 | )          |
|                                                                                   |       |     |       |     |       |     |       |
| **Other   comprehensive income**                                                       |       |     |       |     |       |     |       |
| Items that will   not be reclassified to profit or loss                                |       |     |       |     |       |     |       |
| Actuarial   gains/(loss) on post-employment benefit obligations (Note 29(c))           |       | 8,721    |       | (7,288   | )          | 22,605   |       |
| Tax effect   thereon                                                                   |       | (2,963   | )          | 2,478    |       | (7,686   | )          |
| Share of other   comprehensive income - Veracel post-employment actuarial (Note 29(c)) |       | (291     | )          |     |       | (1,183   | )          |
| Tax effect   thereon                                                                   |       | 99       |       |     |       | 402      |       |
|                                                                                   |       |     |       |     |       |     |       |
|                                                                                   |       | 5,566    |       | (4,810   | )          | 14,138   |       |
|                                                                                   |       |     |       |     |       |     |       |
| Items that may   be subsequently reclassified to profit or loss                        |       |     |       |     |       |     |       |
| Foreign exchange   effect on available-for-sale financial assets - Ensyn (Note 17)(b)) |       | 31,853   |       | 5,837    |       | 5,251    |       |
| Tax effect   thereon                                                                   |       | (10,830  | )          | (1,985   | )          | (1,785   | )          |
|                                                                                   |       |     |       |     |       |     |       |
|                                                                                   |       | 21,023   |       | 3,852    |       | 3,466    |       |
|                                                                                   |       |     |       |     |       |     |       |
| **Total   other comprehensive income (loss) for the year, net of taxes**               |       | 26,589   |       | (958     | )          | 17,604   |       |
|                                                                                   |       |     |       |     |       |     |       |
| **Total   comprehensive income (loss) for the year, net of taxes**                     |       | 383,574  |       | 161,594  |       | (679,978 | )          |
|                                                                                   |       |     |       |     |       |     |       |
| **Attributable   to**                                                                  |       |     |       |     |       |     |       |
| Shareholders of   the Company                                                          |       | 368,774  |       | 154,626  |       | (688,818 | )          |
|                                                                                   |       |     |       |     |       |     |       |
| Non-controlling   interest                                                             |       | 14,800   |       | 6,968    |       | 8,840    |       |
|                                                                                   |       |     |       |     |       |     |       |
|                                                                                   |       | 383,574  |       | 161,594  |       | (679,978 | )          |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-11

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Statement of changes in shareholders’ equity**

**Years ended December 31, 2015, 2014 and 2013**

**In thousands of Reais**

 
| ** **                                               | ** ** | **Capital** | ** ** | ** **                               | ** ** | ** **                  | ** ** | **Other reserves**     | ** ** | **Statutory reserves**              | ** ** | **Retained** | ** ** | ** **      | ** ** | ** **                                        | ** ** | ** **                                   | ** ** |
|----------------------------------------------------------|------------|-------------|------------|------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|------------------------------------------|------------|--------------|------------|-----------------|------------|---------------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                               | ** ** | **Capital** | ** ** | **Share    issuance    costs** | ** ** | **Capital    reserve** | ** ** | **Treasury    shares** | ** ** | **Other    comprehensive   income** | ** ** | **Legal**    | ** ** | **Investments** | ** ** | **Additional    dividends    proposed** | ** ** | **earnings   (accumulated    deficit)** | ** ** | **Total** | ** ** | **Non- controlling    interest** | ** ** | **Total** | ** ** |
|                                                     |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| **As at January 1, 2013**                           |       | 9,740,777   |       | (11,771                                  | )          | 2,688                       |       | (10,346                     | )          | 1,596,666                                |       | 303,800      |       | 3,511,784       |       |                                              |       |                                         |       | 15,133,598 |   | 37,209 |   | 15,170,807 |   |
|                                                     |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| Net income (loss)                                        |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       | (706,422                                     | )          | (706,422 | ) | 8,840 |   | (697,582 | ) |
| Other comprehensive income                               |       |        |       |                                     |       |                        |       |                        |       | 17,604                                   |       |         |       |            |       |                                              |       |                                         |       | 17,604 |   |   |   | 17,604 |   |
|                                                     |       |        |       |                                     |       |                        |       |                        |       | 17,604                                   |       |         |       |            |       |                                              |       | (706,422                                     | )          | (688,818 | ) | 8,840 |   | (679,978 | ) |
| Transactions with shareholders                           |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| Unclaimed dividends forfeited                            |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       | 119             |       |                                              |       |                                         |       | 119 |   |   |   | 119 |   |
| Capital increase of non-controlling interest (Portocel)  |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   | 2,405 |   | 2,405 |   |
| Dividends declared - non-controlling interest (Portocel) |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   | (2,099 | ) | (2,099 | ) |
| Investment reserve appropriation                         |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       | (706,422        | )          |                                              |       | 706,422                                      |       |   |   |   |   |   |   |
|                                                     |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| **As at December 31, 2013**                         |       | 9,740,777   |       | (11,771                                  | )          | 2,688                       |       | (10,346                     | )          | 1,614,270                                |       | 303,800      |       | 2,805,481       |       |                                              |       |                                         |       | 14,444,899 |   | 46,355 |   | 14,491,254 |   |
|                                                     |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| Net income                                               |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       | 155,584                                      |       | 155,584 |   | 6,968 |   | 162,552 |   |
| Other comprehensive income                               |       |        |       |                                     |       |                        |       |                        |       | (958                                     | )          |         |       |            |       |                                              |       |                                         |       | (958 | ) |   |   | (958 | ) |
|                                                     |       |        |       |                                     |       |                        |       |                        |       | (958                                     | )          |         |       |            |       |                                              |       | 155,584                                      |       | 154,626 |   | 6,968 |   | 161,594 |   |
| Transactions with shareholders                           |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| Unclaimed dividends forfeited                            |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       | 231             |       |                                              |       |                                         |       | 231 |   |   |   | 231 |   |
| Stock option program                                     |       |        |       |                                     |       | 1,232                       |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       | 1,232 |   |   |   | 1,232 |   |
| Dividends declared - non-controlling interest (Portocel) |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   | (1,655 | ) | (1,655 | ) |
| Minimum mandatory dividend - 25% (Note 28)               |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       | (36,951                                      | )          | (36,951 | ) |   |   | (36,951 | ) |
| Legal reserve (Note 28)                                  |       |        |       |                                     |       |                        |       |                        |       |                                     |       | 7,779        |       |            |       |                                              |       | (7,779                                       | )          |   |   |   |   |   |   |
| Investment reserve appropriation                         |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       | 110,854         |       |                                              |       | (110,854                                     | )          |   |   |   |   |   |   |
|                                                     |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| **As at December 31, 2014**                         |       | 9,740,777   |       | (11,771                                  | )          | 3,920                       |       | (10,346                     | )          | 1,613,312                                |       | 311,579      |       | 2,916,566       |       |                                              |       |                                         |       | 14,564,037 |   | 51,668 |   | 14,615,705 |   |
|                                                     |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| Net income                                               |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       | 342,185                                      |       | 342,185 |   | 14,800 |   | 356,985 |   |
| Other comprehensive income                               |       |        |       |                                     |       |                        |       |                        |       | 26,589                                   |       |         |       |            |       |                                              |       |                                         |       | 26,589 |   |   |   | 26,589 |   |
|                                                     |       |        |       |                                     |       |                        |       |                        |       | 26,589                                   |       |         |       |            |       |                                              |       | 342,185                                      |       | 368,774 |   | 14,800 |   | 383,574 |   |
| Transactions with shareholders                           |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| Unclaimed dividends forfeited                            |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       | 158             |       |                                              |       |                                         |       | 158 |   |   |   | 158 |   |
| Repurchase of shares                                     |       |        |       |                                     |       |                        |       | (32                         | )          |                                     |       |         |       |            |       |                                              |       |                                         |       | (32 | ) |   |   | (32 | ) |
| Stock option program                                     |       |        |       |                                     |       | 11,554                      |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       | 11,554 |   |   |   | 11,554 |   |
| Dividends declared - non-controlling interest (Portocel) |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   | (3,516 | ) | (3,516 | ) |
| Dividends distributed (Note 28)                          |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       | (2,110,854      | )          |                                              |       |                                         |       | (2,110,854 | ) |   |   | (2,110,854 | ) |
| Minimum mandatory dividend - 25% (Note 28)               |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       | (81,269                                      | )          | (81,269 | ) |   |   | (81,269 | ) |
| Additional dividend proposed (Note 28)                   |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       | 218,731                                           |       | (218,731                                     | )          |   |   |   |   |   |   |
| Legal reserve (Note 28)                                  |       |        |       |                                     |       |                        |       |                        |       |                                     |       | 17,110       |       |            |       |                                              |       | (17,110                                      | )          |   |   |   |   |   |   |
| Investment reserve appropriation (Note 28)               |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       | 25,075          |       |                                              |       | (25,075                                      | )          |   |   |   |   |   |   |
|                                                     |       |        |       |                                     |       |                        |       |                        |       |                                     |       |         |       |            |       |                                              |       |                                         |       |   |   |   |   |   |   |
| **As at December 31, 2015**                         |       | 9,740,777   |       | (11,771                                  | )          | 15,474                      |       | (10,378                     | )          | 1,639,901                                |       | 328,689      |       | 830,945         |       | 218,731                                           |       |                                         |       | 12,752,368 |   | 62,952 |   | 12,815,320 |   |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-12

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Consolidated statement of cash flows**

**Years ended December 31**

**In thousand of Reais**

 
| ** **                                                                                        | ** ** | **2015**  | ** ** | **2014**  | ** ** | **2013**  | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
|                                                                                              |       |      |       |      |       |      |       |
| **Income   (loss) before income taxes**                                                           |       | (160,941  | )          | 21,890    |       | (343,576  | )          |
|                                                                                              |       |      |       |      |       |      |       |
| **Adjusted   by**                                                                                 |       |      |       |      |       |      |       |
| Depreciation,   depletion and amortization                                                        |       | 1,827,097 |       | 1,790,628 |       | 1,751,947 |       |
| Depletion of   timber resources from forestry partnership programs                                |       | 65,141    |       | 83,366    |       | 111,214   |       |
| Foreign exchange   losses, net                                                                    |       | 2,507,023 |       | 721,842   |       | 932,907   |       |
| Change in fair   value of derivative financial instruments                                        |       | 830,128   |       | 6,236     |       | 215,313   |       |
| Equity in   results of joint-venture                                                              |       | (393      | )          | 622       |       |      |       |
| Gain on sale of   land and building - Asset Light project (Note 1(d))                             |       |      |       |      |       | (799,040  | )          |
| Gain on sale of   others investments                                                              |       |      |       |      |       | (3,201    | )          |
| (Gain) loss on   disposal of property, plant and equipment and biological assets, net (Note   33) |       | (135,347  | )          | 68,297    |       | 220,936   |       |
| Interest and   gain/losses from marketable securities                                             |       | (128,825  | )          | (83,055   | )          | (90,014   | )          |
| Interest expense                                                                                  |       | 470,139   |       | 475,780   |       | 575,877   |       |
| Change in fair   value of biological assets (Note 18 / Note 33)                                   |       | (184,583  | )          | (51,755   | )          | (102,265  | )          |
| Financial   charges on Bonds upon partial repurchase                                              |       |      |       | 498,583   |       | 350,295   |       |
| Impairment of   recoverable taxes - ICMS                                                          |       | 247,870   |       | 88,444    |       | 91,192    |       |
| Tax credits                                                                                       |       |      |       | (849,520  | )          | (91,017   | )          |
| Provision for   impairment of investments                                                         |       |      |       | 6,716     |       |      |       |
| Provision   (reversal) for contingencies and release of judicial deposits, net                    |       | (1,968    | )          | 545       |       | (116,042  | )          |
| Stock option   program                                                                            |       | 11,554    |       | 1,232     |       |      |       |
| Provisions and   other                                                                            |       | 10,092    |       | 23,159    |       | 50,526    |       |
|                                                                                              |       |      |       |      |       |      |       |
| **Decrease   (increase) in assets**                                                               |       |      |       |      |       |      |       |
| Trade accounts   receivable                                                                       |       | 207,542   |       | (84,515   | )          | 446,371   |       |
| Inventory                                                                                         |       | (213,897  | )          | 77,870    |       | (62,662   | )          |
| Recoverable   taxes                                                                               |       | (261,544  | )          | (172,337  | )          | (144,192  | )          |
| Other   assets/advances to suppliers                                                              |       | (85,573   | )          | 121,814   |       | (3,642    | )          |
|                                                                                              |       |      |       |      |       |      |       |
| **Increase   (decrease) in liabilities**                                                          |       |      |       |      |       |      |       |
| Trade payables                                                                                    |       | (67,037   | )          | (19,569   | )          | 106,817   |       |
| Taxes payable                                                                                     |       | (100,509  | )          | (49,130   | )          | (18,464   | )          |
| Payroll, profit   sharing and related charges                                                     |       | 35,617    |       | 5,653     |       | 603       |       |
| Other payables                                                                                    |       | (18,159   | )          | (16,142   | )          | (35,402   | )          |
|                                                                                              |       |      |       |      |       |      |       |
| **Cash   provided by operating activities**                                                       |       | 4,853,427 |       | 2,666,654 |       | 3,044,481 |       |
|                                                                                              |       |      |       |      |       |      |       |
| Interest received                                                                                 |       | 107,532   |       | 80,220    |       | 144,486   |       |
| Interest paid                                                                                     |       | (405,546  | )          | (491,173  | )          | (602,112  | )          |
| Income taxes   paid                                                                               |       | (76,395   | )          | (28,945   | )          | (423,325  | )          |
|                                                                                              |       |      |       |      |       |      |       |
| **Net   cash provided by operating activities**                                                   |       | 4,479,018 |       | 2,226,756 |       | 2,163,530 |       |

 

F-13

----

Table of Contents

 
| **Fibria Celulose S.A.**            |   |            |
|------------------------------------------|--------|-----------------|
|                                     |   |            |
| **Consolidated statement of cash flows** |   |            |
| **Years ended December 31**         |   |            |
| **In thousand of Reais**                 |   | **(continued)** |

 
| ** **                                                                       | ** ** | **2015**   | ** ** | **2014**   | ** ** | **2013**   | ** ** |
|----------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                             |       |       |       |       |       |       |       |
| **Cash   flows from investing activities**                                       |       |       |       |       |       |       |       |
| Proceeds from   sale of land and building - Asset Light project (Note 1(d))      |       |       |       | 902,584    |       | 500,000    |       |
| Acquisition of   property, plant and equipment and intangible assets and forests |       | (2,357,307 | )          | (1,539,883 | )          | (1,189,716 | )          |
| Advances for   acquisition of timber from forestry partnership program           |       | (608       | )          | (51,119    | )          | (96,968    | )          |
| Subsidiary   incorporation - Fibria Innovations                                  |       | (11,630    | )          |       |       |       |       |
| Marketable   securities, net                                                     |       | (714,065   | )          | 408,577    |       | 1,204,356  |       |
| Acquisition of   interest in subsidiary                                          |       |       |       | (6,716     | )          |       |       |
| Installments   paid for additional acquisition of investment                     |       | (19,593    | )          | (26,947    | )          |       |       |
| Proceeds from   sale of property, plant and equipment                            |       | 207,643    |       | 4,845      |       | 36,543     |       |
| Advances   received on disposal of assets (Losango) (Note 1(b))                  |       |       |       | 7,000      |       |       |       |
| Derivative   transactions settled (Note 11(c))                                   |       | (419,631   | )          | (53,099    | )          | (24,065    | )          |
| Others                                                                           |       | (9         | )          | (1,260     | )          | 3,699      |       |
|                                                                             |       |       |       |       |       |       |       |
| **Net   cash provided by (used in) investing activities**                        |       | (3,315,200 | )          | (356,018   | )          | 433,849    |       |
|                                                                             |       |       |       |       |       |       |       |
| **Cash   flows from financing activities**                                       |       |       |       |       |       |       |       |
| Borrowings                                                                       |       | 3,087,989  |       | 4,345,609  |       | 1,279,414  |       |
| Repayments of   principal                                                        |       | (1,800,670 | )          | (6,636,153 | )          | (3,320,157 | )          |
| Premium paid on   Bond repurchase transaction                                    |       |       |       | (365,351   | )          | (236,536   | )          |
| Dividends paid                                                                   |       | (2,147,840 | )          |       |       |       |       |
| Others                                                                           |       | 7,879      |       | 11,902     |       | 1,288      |       |
|                                                                             |       |       |       |       |       |       |       |
| **Net   cash used in financing activities**                                      |       | (852,642   | )          | (2,643,993 | )          | (2,275,991 | )          |
|                                                                             |       |       |       |       |       |       |       |
| Effect of   exchange rate changes on cash and cash equivalents                   |       | 305,408    |       | (37,430    | )          | 6,508      |       |
|                                                                             |       |       |       |       |       |       |       |
| **Net   increase (decrease) in cash and cash equivalents**                       |       | 616,584    |       | (810,685   | )          | 327,896    |       |
|                                                                             |       |       |       |       |       |       |       |
| **Cash   and cash equivalents at beginning of year**                             |       | 461,067    |       | 1,271,752  |       | 943,856    |       |
|                                                                             |       |       |       |       |       |       |       |
| **Cash   and cash equivalents at end of year**                                   |       | 1,077,651  |       | 461,067    |       | 1,271,752  |       |

 

The accompanying notes are an integral part of these consolidated financial statements.

 

F-14

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements**

**at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**1**                                        **Operations and current developments**

 

**(a)**                                **General information**

 

Fibria Celulose S.A. is incorporated under the laws of the Federal Republic of Brazil, as a publicly-held company. Fibria Celulose S.A. and its subsidiaries are referred to in these consolidated financial statements as the “Company”, “Fibria”, or “we”. We have the legal status of a corporation, operating under Brazilian corporate law. Our headquarters and principal executive office is located in São Paulo, SP, Brazil.

 

We are listed on the Brazilian stock exchange (BM&FBOVESPA S.A. - Bolsa de Valores, Mercadorias e Futuros) and the New York Stock Exchange (NYSE) and we are subject to the regulatory requirements of the Brazilian *Comissão de Valores Mobiliários* (CVM) and the U.S. Securities and Exchange Commission (SEC).

 

Our activities are focused on the growth of renewable and sustainable forests and the manufacture and sale of bleached eucalyptus kraft pulp. Forests in formation are located in the states of São Paulo, Mato Grosso do Sul, Minas Gerais, Rio de Janeiro, Espírito Santo, Bahia and Rio Grande do Sul.

 

We operate in a single operating segment, which is the production and sale of short fiber pulp from our pulp production facilities located in the cities of Aracruz (State of Espírito Santo), Três Lagoas (State of Mato Grosso do Sul), Jacareí (State of São Paulo) and Veracel (State of Bahia) (jointly-controlled entity).

 

The pulp produced for export is delivered to customers by sea, under long-term contracts with shipping companies, through the ports of Santos, located in the State of São Paulo (operated under a concession from the Brazilian Federal Government which expires in 2017) and Barra do Riacho, located in the State of Espírito Santo (operated by our subsidiary Portocel - Terminal Especializado Barra do Riacho S.A.).

 

On December 9, 2015, we participated in the public auction no 03/2015, promoted by “*Agência Nacional de Transportes Aquaviários - ANTAQ”*, a regulatory agency, for the leasing of the public areas and infrastructures for handling and storage of paper, pulp and general cargo. The Company was awarded the contract based on its proposal for the Macuco Terminal (STS07), located in the port of Santos, State of São Paulo, in the amount of R$ 115,047. The Company is awaiting the approval of the results of the public auction and the adjudication of the object by the Concession Authority, which is expected to be granted during the first quarter of 2016. Once approval is received, we will have 45 days to fulfill the requirements stated in the auction notice and at which time, the Concession Authority will invite us to sign the lease contract.

 

**(b)**                                **Non-current assets held for sale**

 

**Losango project assets**

 

On December 28, 2012, the Company and CMPC Celulose Riograndense Ltda. (“CMPC”) signed the definitive Purchase and Sale Agreement for the sale of all of the Losango project assets, comprising approximately 100 thousand hectares of land owned by Fibria and approximately 39 thousand hectares of planted eucalyptus and leased land, all located in the state of Rio Grande do Sul, in the amount of R$615 million. On December 28, 2012 the first installment of the purchase price of R$ 470 million was paid to us. On November 2014, we received an additional R$ 7 million as an advance from CMPC. The second installment of R$ 140 million was deposited in an escrow account and will be released to us once appropriate government approvals are obtained. The final installment of R$ 5 million is payable to us

 

F-15

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

upon the completion of the transfer of the existing land lease contracts and the applicable government approvals are obtained. The sale and purchase agreement established a period of 48 months, which was renewed at the option of CPMC for an additional 48 months (through to 2020), to obtain the required government approvals. If this approval is ultimately not obtained after this 96 month period, we will be required to return to CMPC the amount paid to us, plus interest, and the escrow deposits will revert to CMPC. We have recorded the amount received as a liability under “Advances received in relation to assets held for sale”.

 

Since the signing of agreement with CMPC, we have taken action to obtain the approvals needed, such as the fulfillment of all conditions precedent, the partial renewal of the area operating license and filing the documentation required by the government agencies. We are confident that approval will be granted.

 

We have concluded that these assets should remain classified as “assets held for sale” as non-current assets as at December 31, 2015. However, the completion of the sale is not under our sole control and depends on various government approvals, which have been slower than expected.

 

The Losango assets did not generate any significant impact in the years 2015, 2014 and 2013, since that at this moment, the result of the transaction has not been recognized.

 

**(c)**                                 **Approval of the expansion plan of the Três Lagoas Unit**

 

On May 14, 2015, the Board of Directors approved the Horizonte 2 Project for the construction of the second Três Lagoas pulp production line.

 

The Horizonte 2 Project, the construction of which has already started, consists of a new bleached eucalyptus pulp production line with a capacity of 1.85 million tons per year and an estimated investment of US$ 2.2 billion. The startup of the line is projected for the fourth quarter of 2017. At December 31, 2015, virtually all Horizonte 2 Project supply agreements for delivery and installation of equipment and related services had been contracted.

 

The Project is expected to be financed from the Company’s operating cash flows and financing agreements under negotiation with financial institutions, within the parameters established by the Company ́s Indebtedness Management Policy.

 

**(d)**                                **Asset Light project**

 

On November 15, 2013, the Company (through the Parent Company Fibria Celulose S.A. and its subsidiary Fibria-MS Celulose Sul Mato-Grossense Ltda.) entered into a Share Purchase Agreement and Other Covenants with the company Parkia Participações S.A. (“Parkia”), for the sale of certain land located in the states of São Paulo, Mato Grosso do Sul, Bahia and Espírito Santo, for a total of approximately 210 thousand hectares.

 

On December 30, 2013, after obtaining the mandatory regulatory approvals as well as the completion of an audit by Parkia, the First Amendment to the Share Purchase Agreement and Other Covenants was concluded and signed, under which the total area subject to the transaction was adjusted to approximately 206 thousand hectares of land, for the total amount of R$ 1,402,584, of which R$ 500,000 has been received by the Company upon signing the agreement. The remaining balance, in the amount of R$ 902,584, was received by us during the first quarter of 2014, after the fulfillment of certain obligations and legal registers performed by the Company.

 

F-16

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

An additional amount, not to exceed R$ 247,515, may be received by the Company in three separated payments, of up to one third of the value each payment, on the 7th, 14th and 21st anniversaries of the agreement. The collection of this value is contingent upon the appreciation of the land in each of the anniversaries, measured according to predefined measurement assumptions established in the agreement and adjusted by the variation of the IGP-M index through the actual payment dates.

 

On December 30, 2013, the Company also signed with the Parkia’s subsidiaries (“Counterparty”) a Forestry Partnership Agreement and a Standing Timber Supply Agreement, both with a term up to 24 years (or four harvesting cycles of approximately seven years), during which the Company will continue to operate its forests located in the sold areas. The agreement does not provide any renewal or extension provisions to its original term.

 

In exchange for the right to use the land by the Company for its forestry activities, the forestry partnership agreement grants to the Counterparty and land owner, the right to receive 40% of the volume of wood (in cubic meters — m3), produced by the Company on the land during each harvesting cycle, limited to a “cap” contractually established.

 

As established in the standing timber supply agreement, the Company will acquire the 40% wood volume that the Counterparty has the right to pursuant to the forestry partnership agreement at an m3 price established in each agreement. The m3 price is determined in USD and will be readjusted based on the consumer price index of the U.S. economy - US-CPI index. The payments will be due on a quarterly basis. At the end of each harvesting cycle, any difference between the total quarterly payments paid by the Company and the equivalent to 40% of the actual timber harvested during the harvesting cycle will be settled, only in the event that the quarterly payments made by the Company were higher than the equivalent to 40% of the actual timber harvested at the end of the harvesting cycle, in which case the Company will be reimbursed for the excess amount.

 

The Share Purchase Agreement has a clause that allows Parkia to withdraw up to 30% of the total land subject to the forestry partnership agreement and the standing timber supply agreement, pursuant to a pre-defined withdrawal schedule. Additionally, in relation to the areas not subject to the withdrawal,  Fibria has a first refusal right to acquire the land at market value in the event Parkia receives an offer to sell the land to a third party.

 

In case of the sale of any portion of land for a third party, regarding the land not included in the 30% mentioned above, the new land owner is committed with all rights and obligations of the agreements signed between Fibria and former land owner until the end of the period of the Forestry Partnership Agreement.

 

The Share Purchase Agreement does not provide the Company with a right to repurchase the land during or at the end of the term of the agreement.

 

*Accounting treatment of the transaction*

 

The share purchase agreement, the forestry partnership and standing timber supply agreements result in a quarterly payment obligation by the Company towards the Counterparty for the right to use of the land, with a settlement provision based on the pre-cutting wood inventory counts. The final settlement amount payable is limited to the “cap” defined in the agreements. The annual estimated payment by the Company under the transaction is approximately US$ 46 million. Fibria has the contractual right to use the land or direct others to use the land during the term of the agreement in a manner it determines while ultimately retaining 100% of the harvested timber in such land, through the 60% that Fibria will

 

F-17

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

contractually retain and the remaining 40% will be purchased from the Counterparty.

 

Based on the above, for accounting purposes, and according to IFRIC 4, Determining whether an Arrangement Contains a Lease, the contracts are deemed to be within the scope of the technical pronouncement International Accounting Standard - IAS 17 (R1) - Leases. Therefore, the Company accounts for this transaction as a sale leaseback transaction. The lease is considered to be an operating by nature, with exclusively contingent payments.

 

The transaction contains an embedded derivative embedded in the standing timber supply agreement, corresponding to the U.S. Dollar m3 price which is adjusted by the U.S.CPI index, that is not closely related to the economic environment where the areas are located.

 

The Company did not recognize separately the fair value of the embedded derivative corresponding to the price in U.S. Dollar from the standing timber supply agreement due to the fact of the functional currency of the Counterparty is the U.S. Dollar and, consequently, the embedded derivative is considered to be closely related to the host agreement.

 

*Gain on sale*

 

The Company recognized a gain on sale, as described in the following table:

 
| Sale amount (excluding the contingent asset amount)                    |   | 1,402,584 |   |
|------------------------------------------------------------------------|--------|-----------|--------|
| (-) Cost of net assets   derecognized                                  |   |      |   |
| Fixed Assets — Land and   improvements (Note 19)                  |   | (596,528  | )      |
| (-) Others                                                             |   | (7,016    | )      |
|                                                                   |   |      |   |
| (=) Gain on sale before income   tax and social contribution           |   | 799,040   |   |
|                                                                   |   |      |   |
| (-) Income tax and social   contribution expense                       |   | (271,674  | )      |
|                                                                   |   |      |   |
| (=) Gain on sale, net of income   tax and social contribution, in 2013 |   | 527,366   |   |

 

**2**                                        **Presentation of financial statements and summary of significant accounting policies**

 

**2.1**                              **Financial statements - basis of preparation**

 

The financial statements have been prepared under the historical cost convention, as modified by available-for-sale financial assets, other assets and financial liabilities (including derivative instruments) measured at fair value

 

**(a)**                                **Accounting policies adopted**

 

The Company’s consolidated financial statements have been prepared and are being presented in accordance with and in compliance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

 

F-18

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(b)**                                **Approval of the financial statements**

 

The consolidated financial statements were approved by the Board of Directors and Fibria’s Management on January 27, 2016.

 

**2.2**                              **Consolidation**

 

**2.2.1**                    **Consolidated financial statements**

 

Intercompany transactions, balances and unrealized gains and losses on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of a loss of value (impairment) of the asset transferred. Accounting policies of subsidiaries have been modified where necessary to ensure consistency with the policies adopted by the Company.

 

**(a)**                                **Subsidiaries**

 

Subsidiaries are all entities (including special-purpose entities) over which the Fibria has the power to govern the financial and operating policies of the entity, generally through a majority voting stake. The Company controls an entity when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether Fibria controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to Fibria and de-consolidated from the date that control ceases.

 

The exclusive controlled investment fund is consolidated.

 

**(b)**                                **Joint operations**

 

Veracel Celulose S.A. (“Veracel”), Asapir Produção Florestal e Comércio Ltda. (“Asapir”) and VOTO — Votorantim Overseas Trading Operations IV Limited (“VOTO IV”) are joint operations, accordingly, assets, liabilities, revenue and expenses are recognized in relation to the interest in the joint operation.

 

None of the jointly-operated entities have publicly traded shares.

 

The Company does not have any significant restrictions or commitments with regards to its jointly-operated entities.

 

The balance of assets, liabilities and net revenue at December 31, 2015 and 2014 of the jointly-operations are separately presented (Note 17(a)).

 

**(c)**                                 **Associated companies and joint ventures**

 

Associates are all entities over which the Company has significant influence but not control or joint control, generally with an ownership percentage between 20% and 50% through voting rights.

 

Investments in associates and joint ventures are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition.

 

F-19

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

Currently the Company has a 50% share in the joint venture F&E Technologies LLC, a US incorporated entity.

 

**(d)**                                **Subsidiaries and jointly-operated entities**

 

The subsidiaries and jointly-operated entities included in the consolidation are as follows:

 
| ** **                                                           | ** ** | **Percentage of total capital** | ** ** |
|----------------------------------------------------------------------|------------|------------------------------------------------|------------|
| ** **                                                           | ** ** | **2015**                                       | ** ** | **2014** | ** ** |
| ** **                                                           | ** ** | **Direct**                                     | ** ** | **Indirect** | ** ** | **Total** | ** ** | **Total** | ** ** |
|                                                                 |       |                                           |       |   |   |   |   |   |   |
| Companies located in Brazil                                          |       |                                           |       |   |   |   |   |   |   |
| Asapir Produção Florestal e   Comércio Ltda. (i) |       | 50                                             |       |   |   | 50 |   | 50 |   |
| Bahia Produtos de Madeira S.A.                                       |       | 33.33                                          |       | 66.67 |   | 100 |   | 100 |   |
| Fibria-MS Celulose Sul   Mato-Grossense Ltda.                   |       | 100                                            |       |   |   | 100 |   | 100 |   |
| Fibria Terminais   Portuários S.A.                         |       | 100                                            |       |   |   | 100 |   | 100 |   |
| F&E Participações Ltda.                                |       | 100                                            |       |   |   | 100 |   |   |   |
| F&E Tecnologia do Brasil S.A.                                    |       |                                           |       | 100 |   | 100 |   |   |   |
| Portocel - Terminal Especializado   de Barra do Riacho S.A.     |       | 51                                             |       |   |   | 51 |   | 51 |   |
| Projetos Especiais e   Investimentos S.A.                       |       | 100                                            |       |   |   | 100 |   | 100 |   |
| Veracel Celulose S.A. (i)                                       |       | 50                                             |       |   |   | 50 |   | 50 |   |
| WOP — Wood Participações Ltda.                        |       | 100                                            |       |   |   | 100 |   | 100 |   |
|                                                                 |       |                                           |       |   |   |   |   |   |   |
| Companies located abroad                                             |       |                                           |       |   |   |   |   |   |   |
| Fibria (Europe) S.A.                                            |       |                                           |       | 100 |   | 100 |   | 100 |   |
| Fibria Celulose (USA) Inc.                                           |       | 100                                            |       |   |   | 100 |   | 100 |   |
| Fibria Innovations Inc.                                              |       | 100                                            |       |   |   | 100 |   |   |   |
| Fibria International Celulose   GmbH.                                |       | 100                                            |       |   |   | 100 |   | 100 |   |
| Fibria International Trade GmbH.                                     |       |                                           |       | 100 |   | 100 |   | 100 |   |
| Fibria Overseas Finance Ltd.                                         |       | 100                                            |       |   |   | 100 |   | 100 |   |
| Fibria Overseas Holding KFT                                          |       | 100                                            |       |   |   | 100 |   | 100 |   |
| Fibria Trading International KFT                                     |       | 48.3                                           |       | 51.7 |   | 100 |   | 100 |   |
| Green Parrot BV                                                      |       |                                           |       | 100 |   | 100 |   | 100 |   |
| VOTO - Votorantim Overseas   Trading Operations IV Limited (i)       |       | 50                                             |       |   |   | 50 |   | 50 |   |

 

----

(i)        Jointly-operated entities, as detailed in Note 2.2.1(b).

 

**2.3**                              **Segregation of assets and liabilities between current and non-current**

 

Current assets or liabilities those for which expectation for realization or disbursement is no more than 12 months after the balance sheet date.

 

**2.4**                              **Foreign currency translation**

 

**(a)**                                **Functional and presentation currency**

 

The Brazilian Real (“Real”, “Reais” or “R$”) is the functional and presentation currency.

 

**(b)**                                **Transactions and balances**

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or the date of valuation when re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end

 

F-20

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

exchange rates of monetary assets and liabilities denominated in foreign currencies are presented as “Foreign exchange gain (loss)” in the Statement of profit or loss.

 

**2.5**                              **Cash and cash equivalents**

 

Cash and cash equivalents include cash, bank deposits, and highly liquid short-term investments, which have original maturities up to 90 days and are readily convertible into a known amount of cash and subject to an immaterial risk of change in value.

 

**2.6**                              **Financial assets**

 

**2.6.1**                    **Classification, recognition and measurement**

 

The Company classifies its financial assets in the following categories: (a) at fair value through profit or loss (b) held-to-maturity investments, (c) loans and receivables, and (d) available for sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

 

Regular purchases and sales of financial assets are recognized on the trade date - the date on which Fibria commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred but only if Fibria has transferred substantially all risks and rewards of ownership.

 

**(a)**                                **Financial assets at fair value through profit or loss**

 

Financial assets at fair value through profit or loss comprise the financial assets held for trading and the derivative financial instruments, including embedded derivatives and are initially recognized at fair value, and the transaction costs are recorded in the Statement of profit or loss. Changes in fair value are recognized in the profit or loss under “Financial income” or “Financial expenses”, depending of the results obtained, for non-derivative instruments, and under “Result of derivative financial instruments” for derivative instruments.

 

**(b)**                                **Held-to-maturity investments**

 

The held-to-maturity investments comprise the investments in non-derivative instruments that the Company has the ability and intention to hold until maturity and are measured initially at fair value, including cost of the transaction and subsequently at amortized cost. The Company evaluates whether there is objective evidence that a financial asset or a group of financial assets is registered above its recovery value.

 

**(c)**                                 **Loans and receivables**

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, comprise the “Trade account receivables”, “Related parties receivables” and “Cash and cash equivalents” and are carried at amortized cost using the effective interest method.

 

F-21

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(d)**                                **Available-for-sale financial assets**

 

Available-for-sale financial assets are non-derivative instruments that are either designated in this category or not classified in any of the other categories. The changes in the fair value of the available for sale financial asset are recognized as follow: (i) the effect of foreign currency exchange and changes in the fair value of the investment are recognized directly in “Other comprehensive income” in equity; and (ii) the effect of foreign currency exchange and changes in the fair value of the warrant of acquire shares are recognized in profit or loss of the year.

 

**2.6.2**                    **Offsetting financial instruments**

 

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

 

**2.6.3**                    **Impairment of financial assets**

 

**(a)**                                **Assets carried at amortized cost**

 

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired only if there is objective evidence of an impairment as a result of one or more events that occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

 

The criteria that the Company uses to determine whether there is objective evidence of an impairment loss include:

 

·             significant financial difficulty of the issuer or debtor;

 

·             a breach of contract, such as a default or delinquency in interest or principal payments;

 

·             where Fibria, for economic or legal reasons relating to the borrower’s financial difficulty, grants to the borrower a concession that the lender would not otherwise receive;

 

·             it becomes probable that the borrower will enter bankruptcy or other financial reorganization;

 

·             the disappearance of an active market for that financial asset because of financial difficulties;

 

·             observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio.

 

The amount of an impairment loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If the financial asset is impaired the carrying amount of the asset is reduced and a loss is recognized in the Statement of profit or loss.

 

If, in a subsequent period, the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the reversal of the previously recognized impairment loss is recognized in the Statement of profit

 

F-22

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

or loss.

 

**(b)**                                **Assets classified as available for sale**

 

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of investments classified as available for sale, a significant or prolonged decline in the fair value of the equity below its cost is also evidence that the assets are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized other comprehensive income — will be recognized in profit or loss.

 

**2.7**                              **Derivative financial instruments and hedging activities**

 

Derivatives are initially recognized at fair value on the date the derivative contract is entered into and are subsequently re-measured at fair value. Changes in fair value are recorded in “Result of derivative financial instruments” in the Statement of profit or loss.

 

Embedded derivatives in non-derivative host contracts are required to be separated when their risks and characteristics are not-closely related to those of host contracts and these are not measured at fair value through profit or loss.

 

Non-option embedded derivative are separated from the host contracts in accordance with its stated or implied substantive terms, so that they have zero fair value on initial recognition.

 

Even though the Company uses derivatives to mitigate risks, hedge accounting has not been applied in the periods presented. The fair value of derivative instruments is disclosed in Note 11.

 

**2.8**                              **Trade accounts receivable**

 

Trade accounts receivable correspond to the amounts receivable from sales made in the course of the Company’s normal business, less a provision for impairment, if necessary.

 

The calculation of the provision is based on a reasonable estimate to cover expected probable losses on the realization of receivables, considering the situation of each customer and the respective guarantees.

 

In performing such analysis of impairment our Treasury Department, examines on a monthly basis the maturity of receivables from domestic and foreign customers and identifies those customers with overdue balances assessing the specific situation of each client including the risk of loss, the existence of contracted insurance, letters of credit, collateral and the customer’s financial situation and the legal processes in the event of execution. As a result of this analysis management determines the amount to be recorded as an impairment.

 

The recognition and reversal of a provision for trade receivables is recorded as “Selling expenses” in the Statement of profit or loss.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**2.9**                              **Inventory**

 

Inventory is stated at the lower of average purchase or production cost and the net realizable value. Finished products and work-in-process consist of raw materials, direct labor, other direct costs and general production expenses.

 

The raw materials derived from biological assets are measured based on their fair value less cost to sell at the point of harvest, when transferred from biological assets to inventory.

 

Imports in transit are stated at the accumulated cost of each import. The net realizable value is the estimated sales price in the normal course of business, less selling expenses.

 

**2.10**                       **Current and deferred income tax and social contribution**

 

Taxes on income comprise current and deferred tax. Tax is recognized in the Statement of profit or loss, except to the extent that it relates to items recognized in other comprehensive income. In this case the tax is recognized directly in shareholders’ equity in other comprehensive income.

 

The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

 

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

 

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by Fibria and it is probable that the temporary difference will not be reversed in the foreseeable future.

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

 

**2.11**                       **Intangible assets**

 

**(a)**                                **Goodwill**

 

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Company’s interest in the net fair value of identifiable assets, liabilities and contingent liabilities acquired and the fair value of the non-controlling interest in the acquired. Goodwill is recorded in intangible assets. Goodwill impairment reviews are undertaken annually or more

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs to sell. An impairment charge is recognized immediately as an expense and is not subsequently reversed. Gains and losses on sale of subsidiaries include the accounting value of the goodwill related to the subsidiary sold.

 

Goodwill is allocated to Cash Generating Units (“CGUs”) or groups of CGUs. The allocation is made to the CGUs or group of CGUs which will benefit/from the business combination originating the goodwill. Each CGU or group of CGUs to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

 

**(b)**                                **Database**

 

The database represents the technical knowledge accumulated over several years and the database of forestry and industrial technologies originating from the Aracruz Celulose S.A. (“Aracruz”) acquisition. These assets are the bases for improvements in the productivity per hectare of eucalyptus and also in the industrial process of pulp production.

 

The database was recognized at fair value at the acquisition date; it has a definite useful life and is recorded at cost less accumulated amortization. The amortization is calculated on a straight-line basis, at the annual rate of 10%, and recorded in the Statement of profit or loss in “Other operating income (expenses), net”.

 

**(c)**                                 **Patent**

 

A registered patent was acquired in the Aracruz business combination and corresponds to the pulp process for a specific application and customer and has been fully amortized.

 

**(d)**                                **Relationship with suppliers**

 

This relates to the contracts that the Company has for the supply of chemical products, arising from the Aracruz acquisition.

 

This asset was recorded at fair value on the acquisition date, it has a definite useful life and is subsequently recorded at cost less accumulated amortization. Amortization is calculated on a straight-line basis, at the annual rates of 6.3%.

 

**(e)**                                 **Development and implementation of systems (software)**

 

The costs directly attributable to the development and testing of identifiable and unique software, controlled by Fibria, are recognized as intangible assets when the following criteria are met: (i) it is technically feasible to complete the software for it to be available for use; (ii) management intends to complete the software and use or sell it; (iii) there is an ability to use or sell the software product; (iv) it will provide probable future benefits that can be demonstrated; (v) suitable technical, financial and other resources are available to conclude its development and to use or sell it; (vi) the attributable expenditure during its development can be reliably measured.

 

Software development costs are amortized over their estimated useful lives at an annual rate of 20%.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**2.12**                       **Property, plant and equipment**

 

Property, plant and equipment are stated at cost and depreciated on a straight-line basis, in accordance with the estimated economic useful lives of the related assets. Annual depreciation rates are described in Note 19. Land is not depreciated.

 

The cost of major renovations is capitalized if the future economic benefits exceed the performance standard initially estimated for the asset. Renovations are depreciated over the remaining useful life of the related asset.

 

Repairs and maintenance are expensed when incurred.

 

Loans and financing costs are capitalized during the period necessary to execute and prepare the asset for its intended use (Note 19).

 

The residual values and useful lives of assets are reviewed and adjusted, if appropriate, at the end of each year.

 

An asset’s book value is immediately written down to its recoverable amount if it is greater than its estimated recoverable amount.

 

Gains and losses on disposals are determined by comparing the proceeds with the book value and are recognized as “Other operating income (expenses), net” in the Statement of profit or loss.

 

**2.13**                       **Leases**

 

At the inception of an agreement the Company determines whether a contract or set of contracts is or contains a lease when: (i) the performance of the contract is dependent upon the use of that specified asset and, (ii) the contract gives the Company the right of use of the asset.

 

Leases of property, plant and equipment in which the Company assumes substantially all the risks and benefits of ownership are classified as finance leases. Finance leases are recorded as a financed purchase, initially recognized as property, plant and equipment with a corresponding leasing liability.

 

Leases in which substantially all of the ownership risks and benefits are retained by the lessor are classified as operating leases.

 

The minimum payments for operating leases (net of any incentives received from the lessor) are expensed on the straight-line method over the lease term. The contingent values of payment (those that are not a fixed amount but are based in the future amount of a factor such as volume of standing timber) are accounted in the periods where they are incurred.

 

Operational leases are recognized in profit and loss except for those related to land leased for forest plantations which are capitalized as part of the cost of biological assets.

 

**2.14**                       **Biological assets**

 

Biological assets are measured semi-annually (June and December) at fair value, net of estimated costs to sell. Depletion is calculated based on the total volume harvested. The counter entry to the valuation is recorded in “Other operating income (expenses), net”.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

Biological assets consist of eucalyptus forests exclusively from renewable plantations and intended for the production of bleached pulp. The cycle of harvesting following replanting occurs between six and seven years.

 

**2.15**                       **Business combination**

 

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured by the sum of consideration transferred, measured at fair value on the acquisition date. The costs directly attributable to the acquisition are recorded as expense when incurred.

 

Initially, the goodwill is measured as the surplus of the consideration transferred in relation to the net assets acquired at fair value. After initial recognition, the goodwill is measured at cost, less any accumulated impairment.

 

**2.16**                       **Impairment of non-financial assets other than goodwill**

 

Assets that are subject to amortization are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

 

**2.17**                       **Trade payables**

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers and are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. In practice, they are usually recognized at the invoiced amount.

 

**2.18**                       **Loans and financing**

 

Loans and financing are initially recognized at fair value, net of transaction costs incurred and are subsequently stated at amortized cost. Any difference between the proceeds and the redemption value is recognized in the Statement of profit or loss over the period of the loans and financing using the effective interest rate method.

 

The financial charges in the repurchase of Bond are presented as financing activities in the Statement of Cash Flows.

 

**2.19**                       **Employee benefits**

 

**(a)**                                **Pension obligations**

 

The Company participates in pension plans, managed by a private pension entity, which provide post-employment benefits to employees, classified as defined contribution plans to which the Company pays fixed contributions and for which it has no legal liability to make additional contributions if the fund does not have sufficient assets to honor the benefits due to employees for service in the current and prior periods.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

Contributions represent net costs and are recorded in the Statement of profit or loss in the period in which they are due.

 

**(b)**                                **Health care (post-retirement)**

 

Some of Fibria’s subsidiaries used to provide post-retirement health care benefits in the form of a lifetime benefit to a specific group of employees which has since been discontinued and closed to new participants from July 2007.

 

The liability related to the health care plan for retired employees is stated at the present value of the obligation. Management’s estimate of the defined benefit obligation is calculated annually together with an independent qualified actuaries. The present value of the defined benefit obligation is determined through an estimate of discounted future cash outflows (Note 29(c)).

 

Changes in the present value of the liabilities of the plan regarding the interest accrued are immediately recognized in the Statement of profit or loss. The changes in the present value of the liabilities of the plan regarding the actuarial gain and loss are recognized directly in shareholder’s equity, in “Other comprehensive income”.

 

**(c)**                                 **Profit-sharing and bonus plans**

 

As from 2015, the provisions for bonuses and profit-sharing programs are calculated based on qualitative and quantitative targets established by management and are recorded with a charge to the Statement of profit or loss under “Other operating income (expenses), net”.

 

The lines of “Administrative expenses” and “Other operating income (expenses), net” of 2014 and 2013 were adjusted in the amount of R$ 20,001 and R$ 15,917, respectively, for comparison purposes.

 

**(d)**                                **Share-based compensation**

 

**(i)**                                   **Phantom Stock Options Plan**

 

The Company offers a compensation plan in which the amount of the benefit is determined based on changes in the quoted market price of its shares, based on a predetermined floor price and an established measurement date. The plan consists of cash payments, not involving the issue and/or delivery of shares for purposes of the plan. The Company’s CEO and statutory and non-statutory officers are eligible for the plan.

 

The provisions are recorded with a charge to the Statement of profit or loss under “Other operating income (expenses), net”, based on the fair value of the benefits granted and the vesting period. The fair value of this liability is re-measured at each reporting period.

 

**(ii)**                               **Stock Options Plan**

 

The Company operates an equity-settled arrangement under which it receives services from employees as consideration for equity instruments (stock options) of the Company. The fair value of the employee services received in exchange for the grant of the options is recognized in the Statement of profit or loss under “Other operating income (expenses), net”, against to the capital reserve. The Company’s CEO, statutory and non-statutory officers and general managers are eligible for the plan.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

The total amount expensed is determined by reference to the fair value of the options granted, including any market performance conditions and the impact of any non-vesting conditions and excluding the impact of any service and non-market performance vesting conditions. Non-market performance and service conditions include assumptions about the number of options that are expected to vest.

 

The total expense is recognized over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.

 

At the end of each reporting period, the Company revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. If necessary, we recognize the impact of the revision to original estimates in the Statement of profit or loss, with a corresponding adjustment to shareholders’ equity.

 

The assumptions and model used to estimate the fair value of share-based compensation plans are presented in Note 30(ii).

 

**2.20**                       **Contingent assets and liabilities**

 

(a)                                Assets, previously treated as contingent, are recognized only when there is evidence that realization is virtually certain, generally when favorable, final and unappealable court decisions have been obtained and for which the value can be measured. Contingent assets, for which such conditions are not met, are only disclosed in the notes to the financial statements when material.

 

(b)                                Contingent liabilities are provided to the extent that the Company expects that is probable that it will disburse cash and the amount can be reliably estimated. Tax and civil proceedings are accrued when losses are assessed as probable and the amounts involved can be reliably measured. When the expectation of loss is possible, a description of the processes and amounts involved is disclosed in the notes to the financial statements. Labor proceedings are provisioned based on the historical percentage of disbursements. Tax and civil contingent liabilities assessed as remote losses are neither accrued nor disclosed.

 

**2.21**                       **Asset retirement obligations**

 

These primarily relate to future costs for the decommissioning of industrial landfill and related assets. A provision is recorded as a long-term obligation against fixed assets. The provision and the corresponding asset are initially recorded at fair value, based on the present value of estimated cash flows for future cash payments discounted by an adjusted risk-free rate. The long-term obligation accrues interest using a long-term discount rate. The asset is depreciated on a straight-line basis over the useful life of the principal. Depreciation is recorded in the Statement of profit or loss.

 

**2.22**                       **Revenue recognition**

 

Fibria recognizes revenue when: (i) the amount of revenue can be reliably measured; (ii) it is probable that future economic benefits will flow to the entity; and (iii) when specific sales criteria have been met including transfer of property and transfer of the risk of the product to the client.  The latter is based on “Incoterm” (pre-defined commercial terms published by the International Chamber of Commerce) parameters and confirmation of available credit by the customer in order for the sale to be consummated. Revenue is the net amount after deduction of taxes, discounts and sales returns.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(a)**                                **Sale of products**

 

The recognition of revenue for domestic and export pulp sales is based on the following principles:

 

(i)                                    Domestic market - sales are mainly made on credit. Revenue is recognized when the customer receives the product, whether on the carrier’s premises or at its own premises, at which point risk and rewards of ownership are transferred.

 

(ii)                                 Export market - export orders are normally supplied from third party warehouses located near strategic markets; sales are mainly made on credit. Revenue is recognized as per the “Incoterm” parameters.

 

**(b)**                                **Financial income**

 

Financial income is recognized on an accrual basis, using the effective interest method, and to the extent that realization is probable.

 

**2.23**                       **Dividend distribution**

 

Dividend distribution to the Company’s shareholders is recognized as a liability based on the Company’s by-laws and in the dividend policy. Any amount that exceeds the minimum mandatory dividend is highlighted in the statement of changes in shareholders’ equity as “Additional dividends proposed”, but only is provisioned on the date when it was approved by the shareholders at the general meeting.

 

**2.24**                       **Non-current assets held for sale**

 

The Company records assets held for sale as non-current assets when the asset (or disposal group of assets) is available for immediate sale in its present condition and subject only to terms that are usual and customary for sales of such assets and the sale is highly probable.

 

The Company measures the assets held for sale (or group of assets) at the lower of its carrying amount and fair value less costs to sell. If the carrying amount exceeds the fair value less costs to sell an impairment loss is recognized in the Statement of profit or loss. Any subsequent reversal of impairment is recognized only to the extent of the loss previously recognized.

 

The depreciation of an asset (or group of assets) stops when it is classified as held for sale. The assets and liabilities of a disposal group classified as held for sale are presented separately and are not offset and presented as a single amount.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**2.25**                       **New standards, amendments and interpretations issued by IASB**

 

The standards below have been issued and are effective for future periods, as from January 1, 2016. We have not early adopted these standards.

 
| **Standard**                   | ** ** | **Effective   date** | ** ** | **Main points introduced by the   standard**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **Impacts of the   adoption**                                                                                                                                                                                     |
|--------------------------------|------------|----------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| IFRS 9 - Financial Instruments |       | January 1, 2018 |       | The main change is that, in cases where the fair   value option is taken for financial liabilities, the part of a fair value   change which is due to an entity’s own credit risk is recorded in Other   comprehensive income rather than the Statement of profit or loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       | The Company is currently assessing the impacts of   the adoption.                                                                                                                                                           |
| IFRS 15 - Revenue recognition  |       | January 1, 2018 |       | This accounting standard establishes the accounting   principles to determine and measure revenue and when the revenue should be   recognized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       | The Company is currently assessing the impacts of   the adoption.                                                                                                                                                           |
| IAS 41 - Agriculture           |       | January 1, 2016 |       | The “bearer plants” are to be accounted for as   property, plant and equipment (IAS 16), i.e., at cost less depreciation or   impairment provision. “Bearer plants” are defined as those used to produce   fruit/ regenerate for several years, but the plant itself, once mature, does   not suffer significant changes.                                                                                                                                                                                                                                                                                                                                                                                                                                       |       | The Company has evaluated and concluded that the   revision of the standard will not impact its measurement and presentation of   its biological assets since they do not meet the definition of “bearer plants”. |
| IFRS 16 - Leases               |       | January 1, 2019 |       | This accounting standard replaces the previous   leases standard, IAS 17 Leases, and related interpretations and sets out   the principles for the recognition, measurement, presentation and disclosure   of leases for both parties to a contract, i.e., the customers (‘lessees’) and   the suppliers (‘lessor’).   Lessees are required to recognize a lease liability reflecting future lease   payments and a ‘right-of-use asset’ for virtually all lease contracts, except   for certain short-term leases and leases of low-value assets. For lessors,   the accounting stays almost the same and continues to classify its leases as   operating leases or finance leases, and to account for those two types of   leases differently. |       | The Company is currently assessing the impacts of   the adoption.                                                                                                                                                           |

 

There are no other IFRSs or IFRIC interpretations that are not yet effective that the Company expects to have a material impact on the Company’s financial position and results of operations.

 

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**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**3**                                        **Critical accounting estimates and assumptions**

 

The Company makes estimates concerning the future based on assumptions. The resulting accounting estimates will, by definition, seldom equal the related actual results. Management believes that the estimates and assumptions that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are those addressed below.

 

**(a)**                                **Income tax and social contribution**

 

The Company recognizes deferred tax assets and liabilities based on the temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. If we or one of our subsidiaries operate at a loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, our deferred tax asset could be reduced and, then the effective tax rate would increase.

 

The Company has had a history of recurring taxable income, which has recently been offset by net operating loss carryforward assets. The Company’s management believes, based on projections of income approved at the appropriate levels, that it is probable the deferred tax asset will be fully realized.

 

**(b)**                                **Employee benefits**

 

The current value of the obligations under the healthcare plan depends on a number of factors that are determined based on actuarial calculations using various assumptions. The discount rate is one of the assumptions used in determining the net cost (revenue) of the actuarial obligations due, which is based on returns offered by Brazilian Government Bonds, which are denominated in the currency in which the benefits will be paid and that have terms to maturity similar to the terms of the obligations of the healthcare plan (Note 29).

 

The liability for share-based compensation regarding to Phantom Stock Options plan is recorded at its estimated fair value which is calculated by the Company using the Binomial Tree model-Trinomial.

 

The fair value of each option granted under the Stock Option plan is estimated at the grant date based on the Black & Scholes option pricing model.

 

Any changes in the assumptions used for calculating the liability will affect the amount recorded at the balance sheet date.

 

**(c)**                                 **Fair value of derivatives and other financial instruments**

 

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. Fibria uses judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period. The Company also uses its judgment to define scenarios and the assumptions for sensitivity analyses (Note 5).

 

Any changes to the assumptions used for calculations involving the fair value of financial instruments could significantly affect the financial position of the Company.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(d)**                                **Biological assets**

 

The calculation of the fair value of biological assets takes into consideration various assumptions which require a high degree of judgment. Any changes in these assumptions, would have an impact on the discounted cash flow result, resulting in an appreciation or devaluation of these assets (Note 18).

 

The main assumptions used by Management to calculate the fair value of the biological assets and the correlation between changes in such premises and the fair value of the biological assets, are described as follows:

 
| **Assumptions used**                   | ** ** | **Impact on fair value of the biological assets** |
|---------------------------------------------|------------|--------------------------------------------------------------------------------------|
|                                        |       |                                                                                 |
| Actual planted area (hectare)               |       | Increase of the premise, increase the fair value                                     |
| Average annual growth (IMA) - m3/hectare    |       | Increase of the premise, increase the fair value                                     |
| Net average sale price - R$/m3              |       | Increase of the premise, increase the fair value                                     |
| Remuneration of own contributory assets - % |       | Increase of the premise, decrease the fair value                                     |
| Discount rate - %                           |       | Increase of the premise, decrease the fair value                                     |

 

**(e)**                                 **Allowance for doubtful accounts**

 

The allowance for doubtful accounts is recorded in an amount we consider sufficient to cover any probable losses on realization of our accounts receivable from our customers and is included in selling expenses. Our accounting policy for establishing the allowance for doubtful accounts reserve requires that all invoices be individually reviewed.

 

**(f)**                                  **Review of the useful lives and recoverability of long-lived assets**

 

The Company reviews its long-lived assets to be held and used in its activities, for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset or group of assets may not be recoverable on the basis of future cash flows. The Company reduces the net book value if the carrying amount exceeds the recoverable amount (Note 37).

 

**(g)**                                **Contingent assets, contingent liabilities and legal obligations**

 

The Company is currently involved in certain labor, civil and tax proceedings. The provision for legal proceeds is recorded based on Management’s evaluation and on the advice of internal and external legal counsel, and are subject to a high level of judgment (Note 24).

 

**(h)**                                **Goodwill impairment**

 

The Company performs impairment tests at least annually, or more frequently when events or changes in circumstances may indicate that the carrying amount of cash-generating units to which goodwill has been allocated might not be recoverable (Note 2.16). The recoverable amount of CGUs is determined based on calculations of the value in use, which involves significant estimates (Note 37(a)).

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**4**                                        **Risk management**

 

The Company’s activities expose it to a variety of risks.  Management classifies the risks inherent to its business in the following categories:

 

(a)                                Financial risks - corresponds to inadequate cash management, use of resource in new operations, unknown risks, with greater complexity and/or high risk (items 4.2.1(a), 4.2.1(b) and 4.2.1(c)).

 

(b)                                Compliance risk - corresponds to legal or regulatory penalties, financial losses or reputational damage that the Company may face due to regulatory noncompliance and include social and environmental, labor and tax risk assessments.

 

(c)                                 Operational risk - results from the lack of consistency or adequacy of information systems, processing and operational controls, asset management failures, or cash flow management, or from potential frauds that affect the activities of the Company.

 

(d)                                Strategic risk - results from internal and external events that affect the reputation and sustainability of the Company, such as the risks related to the lack of capability or ability by the Company in response to changes that can impact the achievement of the strategic subjects.

 

**4.1**                              **Social and environmental risks**

 

**(a)**                                **Risks associated with climate changes**

 

Our activities are exposed to the potential effects of climate changes, which may affect the equilibrium of the ecosystems, the productivity of the forest and the availability of water and energy.

 

Fibria manages and operates its forest and industrial activities through the adoption of controls and monitoring tools, such as agronomic studies, genetic improvement for the production of eucalyptus that contemplate genetic modifications to  adapt to different climatic conditions, monitoring of water consumption in forested areas, among others.

 

**(b)**                                **Environmental risks**

 

(i)                                    Management of water resources - Fibria constantly monitors the situation in the watersheds where it operates with respect to water quantity and quality that might affect the Company’s forest management. Use of water by the industrial plants is governed by the environmental legislation of each location and the licensing requirements of each plant. All our facilities operate under proper and valid licenses.

 

(ii)                               Forest protection - protection of the forests against pests, disease, weeds and fires is based on a strategy involving continuous cycles of prevention, monitoring and control. The Company has ongoing efforts to select and plant increasingly resistant plant strains, and is also concerned with preserving an ecological balance and acquiring know-how to improve its forest management.

 

(iii)                            Biodiversity - the Company’s forestry activities are licensed by the relevant regulatory bodies and socio- environmental planning activities are performed. Areas of native forest species are interspersed with eucalyptus plantations. Fibria strives to maintain its protected areas to conform to the Legal Reserves, Permanent Preservation Areas (APPs) and Private Natural Heritage Reserves (RPPNs) through the protection, restoration, management and integration of those areas with its forest activities. The Company also seeks to minimize external and degradation elements that may affect these areas.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

(iv)                           Waste - Fibria is undertaking efforts to recycle pulp production waste by transforming them in products that can be used in the forestry area. This practice generates both environmental and economic benefits, with reduction in disposal of waste in landfills and replacing supplies with recycled waste in the silviculture operations.

 

**(c)**                                 **Impacts on communities**

 

Fibria is committed to support communities with different economic, social and cultural backgrounds, which are affected positively or negatively and in different degrees, by the cultivation of eucalyptus trees. In order to maintain a healthy relationship with all communities, the Company has developed a plan to monitor these neighboring populations and classified them based on their degree of relationship with the Company. The relationship model has been implemented in all the forestry operations with respect to the silviculture and harvest activities.

 

**(d)**                                **Contracting with suppliers**

 

In order to mitigate the risk of our suppliers hiring child or forced labor, we require suppliers to provide a formal confirmation with respect to this matter.

 

Two other mandatory requirements to engage our suppliers are compliance with the environmental policies of Fibria and with the criteria for safe transportation (Safe Road Program). All contracts with suppliers and other business partners incorporate our Code of Conduct or refer to it. The Code reinforces the prohibition of discriminatory practices or violation of existing legislation. The process to certify approval of suppliers is renewed every two years.

 

**4.2**                              **Financial risks**

 

**4.2.1**                    **Factors of financial risks**

 

Fibria’s activities expose it to a number of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk, price risk and commodity price risk), credit risk and liquidity risk. The majority of sales are denominated in U.S. Dollars, while costs/expenses are predominantly incurred in Reais. Accordingly, there is a currency mismatch between costs/expenses and revenues.

 

Our overall risk management program focuses on minimizing, mitigating or transferring exposures to market risks. In this context, derivatives are used exclusively for economic hedge purposes as follows: (i) cash flow hedge against currency mismatching; (ii) cash flow hedge of debt and interest payments against interest and exchange rate volatility; and (iii) hedge against volatility in the price of pulp or other risk factors.

 

The execution of the operations to mitigate market risks is carried out by a central Treasury department following policies approved by the Board of Directors. The control of risks and monitoring of compliance with the policies is performed by the General Governance, Risks and Compliance (“GRC”) department, which reports directly to the CEO and to the Finance Committee (an advisory committee to the Board of Directors) and is sufficiently independent to report non-compliance with the policies, to measure and assess market risks. The GRC department monitors all market risk exposures and ensures compliance with our policies. The Treasury department identifies, evaluates and hedges financial risks following the policies established. The Board of Directors reviews on an annual basis the policies and principles for the

 

F-35

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

overall risk management, definition of the areas involved, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

 

**Policies for the use of derivative financial instruments**

 

On August 27, 2015, the Company’s Board of Directors approved the revision of the Market Risk Management Policy. The use of derivative financial instruments should follow such policy. The use of derivative financial instruments is in the view of management conservative. Every derivative contracted should be matched to an underlying risk, generated by a hedged item which in turn results from operational transactions that expose the Company to risks related to changes in the price of commodities or risks arising from debt. Accordingly, derivative transactions are only permitted if related to an existing exposure (hedge); leveraged financial instruments are not allowed.

 

**(a)**                                **Market risk**

 

This is related to changes in prices or rates including interest rates, exchange rates and commodities prices. These changes may affect the expected return of an investment, a financial investment, revenue from probable sales, the cash flow and fair value of principal and interest on loans. Indicators and an internal assessment tool were developed to measure these risks. An internal tool was also developed to assess the impacts of stressed scenarios and to perform sensitivity analysis and analysis of gaps.

 

**(i)**                                   **Foreign exchange risk**

 

The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, mainly with respect to the U.S. Dollar.

 

The Company’s financial policy establishes that the purpose of its operations with derivatives is to reduce costs, mitigate cash flows volatility, hedge foreign exchange exposure and avoid currency mismatches.

 

The following table presents the carrying amount of the assets and liabilities denominated in U.S. Dollars:

 
| ** **                                   | ** ** | **2015**   | ** ** | **2014**   | ** ** |
|----------------------------------------------|------------|------------|------------|------------|------------|
|                                         |       |       |       |       |       |
| Assets in foreign currency                   |       |       |       |       |       |
| Cash and cash equivalents (Note   9)         |       | 1,068,180  |       | 279,664    |       |
| Marketable securities (Note 10)              |       |       |       | 61,352     |       |
| Trade accounts receivable (Note   12)        |       | 674,224    |       | 496,493    |       |
|                                         |       |       |       |       |       |
|                                         |       | 1,742,404  |       | 837,509    |       |
|                                         |       |       |       |       |       |
| Liabilities in foreign currency              |       |       |       |       |       |
| Loans and financing (Note 23)                |       | 10,215,115 |       | 6,280,545  |       |
| Trade payables                               |       | 76,304     |       | 72,263     |       |
| Derivative financial instruments   (Note 11) |       | 1,081,533  |       | 538,451    |       |
|                                         |       |       |       |       |       |
|                                         |       | 11,372,952 |       | 6,891,259  |       |
|                                         |       |       |       |       |       |
| Liability exposure                           |       | (9,630,548 | )          | (6,053,750 | )          |

 

F-36

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

The Company calculates its net exposure to each risk factor. When the risk factor is an exposure to the U.S. Dollar or Euro, maximum hedge limits are determined for exposure of up to 18 months. Hedging the exposure of transactions for periods between 12 and 18 months requires a recommendation by the Finance Committee. Exceptionally, during the construction phase of the Horizonte 2 Project, the cash flow hedges can reach the maximum limit of 36 months.

 

The Company’s exposure to foreign currency generates market risks associated with changes in the exchange rates. Liabilities in foreign currency include loans obtained, mainly, in U.S. Dollars. The majority of the Company’s sales abroad are denominated in U.S. Dollars, while the sales of pulp in Brazil are in Reais. Accordingly, the Company’s liabilities act as a natural hedge for currency exposure in relation to export revenue, mitigating the mismatch between assets and liabilities over the long term.

 

**(ii)**                               **Cash flow and fair value interest rate risk**

 

As Fibria has no significant interest-bearing assets, its net income and operating cash flows are substantially independent of changes in market interest rates on such assets.

 

Interest rates risk from loans and financing contracted at variable interest rates exposes the Company to cash flow risk. Loans and financing contracted at fixed rates expose Fibria to fair value interest rate risk.

 

Fibria’s policy on the use of derivatives establishes that, with respect to interest rate risk, transactions with terms and amounts matching the corresponding hedged debt may be entered into. The Company must maintain at least 50% of its debt subject to fixed interest rates. Fibria manages its cash flow interest rate risk by using swaps following the terms and conditions established by the approved policies.

 

**(iii)**                           **Commodity price risk**

 

This risk is related to the volatility in the price of pulp, which is considered a commodity. Prices fluctuate depending on demand, productive capacity, inventories, commercial strategies adopted by the major forestry companies, paper producers, and availability of substitutes for these products in the market.

 

This risk is managed through different strategies. The Company has a specialized team, which continuously monitors the price of pulp and analyses future trends, adjusting Fibria’s estimates, in order to assist in the process of taking preventive actions to best deal with the various scenarios. There is no liquidity in the market to sufficiently mitigate a substantive portion of the risk to which Fibria’s operations are exposed. Pulp price derivatives available in the market are characterized by their low liquidity and volume and as a result prices may be subject to significant distortion.

 

Currently, the Company executes no derivatives to hedge against the fluctuation of the pulp price.

 

**(b)**                                **Credit risk**

 

Credit risk is the risk of one counterparty failing to discharge its obligation.

 

For every type of credit exposure and type of agreement a specific model is developed in order to evaluate the risks, identifying the exposure and performing sensitivity analysis of credit limits.

 

A monthly report is prepared by the Governance, Risk and Compliance area quantifying credit risk exposure arising from all Fibria relationships.

 

F-37

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

Credit risk is managed on a consolidated basis. Credit risk arises from cash equivalents (including bank deposits), derivative financial instruments, instruments recorded under marketable securities (Brazilian Federal Government securities, Bank Deposit Certificates (CDBs), Fixed Income Box (CDB Box), reverse repurchase agreements), letters of credit, insurance companies, customers (considering the payment terms agreed), suppliers (with respect to advances made for new projects) and others.

 

**(i)**                                   **Banks and financial institutions**

 

Quantitative measures of credit risk were developed for exposures with banks and financial institutions (investments, current accounts and derivative financial instruments). The expected value of the exposure “Expected Credit Exposure (ECE)” and the worst case expected exposure “Worst Credit Exposure (WCE)” of all exposures with counterparties are measured (Note 8).

 

Fibria has a policy of contracting with private entities which have a minimum credit rating issued by one of the following rating agencies: Fitch, Moody’s or Standard & Poor’s. The minimum rating required for the counterparties at the local level (Brazil), is “AA-” (or “Aa3”) or “BBB+” (or “Baa1”) at the global level. The exposure to a single private counterparty cannot exceed any of the following limits: 20% of Fibria’s total cash and cash equivalents plus marketable securities, 10% of the shareholders’ equity of the counterparty (based on the most recent information published by the counterparty), or 15% of the Company’s shareholders’ equity (based on the most recent information available). Any exceptions would be approved by the Board of Directors, after recommendation of the Finance Committee.

 

**(ii)**                               **Clients and advance to suppliers**

 

In the case of credit risk arising from customer credit exposure, Fibria assesses, through the Credit Committee, the credit quality of the customer, taking into account mainly past experience and defines individual credit limits, which are continuously monitored.

 

Fibria’s major customers are large highly-rated companies most of which have had a relationship with the Company for over 20 years, reducing the credit risk.

 

Credit analyses are performed on a regular basis and when considered necessary, and letters of credit or credit insurance coverage is obtained to protect the Company. The majority of export sales to Europe and Asia are covered by letters of credit or credit insurance with the *Compagnie Française d’ Assurance pour le Commerce Extérieur*(COFACE)*.*

 

The allowance for doubtful accounts is recorded at an amount sufficient to cover expected losses on the collection of trade accounts receivable and charged to “Selling expenses” (Note 12).

 

**(c)**                                 **Liquidity risk**

 

With respect to liquidity risk, the Company’s policy is to maintain balances of cash and financial investments of at least an amount equivalent to the operational cash outflow for the following 12 months plus debt service for a period of 12 months.

 

Surplus cash is invested in highly-liquid instruments; approved policies allow for a minor portion to be invested in instruments with maturity not exceeding 365 days.

 

All derivative instruments are over-the-counter derivatives and do not demand post margin deposits as collateral.

 

F-38

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

The table below presents Fibria’s financial liabilities into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and, therefore, differ from the amounts presented in the consolidated balance sheet.

 
| ** **                         | ** ** | **Less than   one year** | ** ** | **Between   one and   two years** | ** ** | **Between   two and   five years** | ** ** | **Over five   years** | ** ** |
|------------------------------------|------------|------------------------------------|------------|---------------------------------------------|------------|----------------------------------------------|------------|----------------------------|------------|
|                               |       |                               |       |                                        |       |                                         |       |                       |       |
| **At   December 31, 2015**    |       |                               |       |                                        |       |                                         |       |                       |       |
| Loans and financing                |       | 1,358,138                          |       | 4,451,707                                   |       | 7,326,394                                    |       | 2,817,802                  |       |
| Derivative   financial instruments |       | 319,954                            |       | 560,572                                     |       | 902,136                                      |       |                       |       |
| Trade and other   payables         |       | 758,252                            |       | 68,327                                      |       | 44,902                                       |       | 39,556                     |       |
|                               |       |                               |       |                                        |       |                                         |       |                       |       |
|                               |       | 2,436,344                          |       | 5,080,606                                   |       | 8,273,432                                    |       | 2,857,358                  |       |
|                               |       |                               |       |                                        |       |                                         |       |                       |       |
| **At   December 31, 2014**    |       |                               |       |                                        |       |                                         |       |                       |       |
| Loans and financing                |       | 1,156,951                          |       | 2,105,192                                   |       | 4,353,071                                    |       | 2,203,134                  |       |
| Derivative   financial instruments |       | 178,964                            |       | 142,662                                     |       | 504,133                                      |       | 74,545                     |       |
| Trade and other   payables         |       | 725,123                            |       | 36,927                                      |       | 30,546                                       |       | 34,087                     |       |
|                               |       |                               |       |                                        |       |                                         |       |                       |       |
|                               |       | 2,061,038                          |       | 2,284,781                                   |       | 4,887,750                                    |       | 2,311,766                  |       |

 

**4.2.2**                    **Capital risk management**

 

Management monitors indebtedness on the basis of a consolidated indebtedness ratio. This ratio is calculated as net debt divided by adjusted EBITDA (as defined below). Net debt represents total loans, less cash and cash equivalents and marketable securities and the fair value of derivative financial instruments.

 

Adjusted EBITDA is defined by the Company as net income before interest, income taxes including social contribution, depreciation and amortization and other items including non-cash fair value adjustments for biological assets.

 

The Company aims to maintain a minimum cash balance in order to minimize the risk that cash flow mismatches affect the ability of the Company to meet its commitments. The minimum cash balance is defined as the sum of: (i) the minimum operating cash used during the cash conversion cycle of the Company; plus (ii) the cash needs to meet financial debt obligation (principal and interest) for the next 12 months. In addition, the Company may seek additional liquidity, through revolving credit facilities, to meet the minimum cash balance required by the rating agencies’ methodologies. Fibria’s liquidity is mainly monitored through 12-month projected cash flows. Cash flow projections comprise stress tests considering exogenous market risk factors such as changes in foreign exchange rates, interest rates and pulp prices, as well as endogenous factors.

 

Management of debt and liquidity takes into account the contractual financial covenants, maintaining a safety margin in order to avoid breaching these parameters.

 

F-39

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

The Company prioritizes funding in the same currency as its primary source of cash generation, thus seeking a natural currency hedge over the long term for its cash flows. All sources of funds are required to be approved pursuant to internal policies and procedures.

 

Treasury is responsible for developing contingency plans, which should specify all actions to address potential non-compliance. The plans are submitted to the Finance Committee and monitored by all parties involved in this process.

 

The Company continues to focus on actions including reductions in fixed and variable costs, selling expenses, capital expenditure and improvements in working capital. We have also focused on actions that may result in additional liquidity through the disposal of non-strategic assets. These actions are intended to maintain the capital structure of the Company, resulting in an improved Net Debt to Adjusted EBITDA ratio.

 

**5**                                        **Sensitivity analysis**

 

*Sensitivity analysis - changes in foreign currency exchange rates*

 

The evaluation of the Company’s significant risk factor of the U.S. Dollar exposure uses the period of three months, consistent with our policy. We considered as the probable scenario the fair value considering the market yield as at December 31, 2015.

 

The probable scenario is the closing exchange rate at the date of these consolidated financial statement (R$ x USD = 3.9048). As the amounts have already been recognized in the consolidated financial statement, there are no additional effects in the Statement of profit or loss in this scenario. In the “Possible” and “Remote” scenarios, the U.S. Dollar is deemed to appreciate/depreciate by 25% and 50%, before tax, when compared to the “Probable” scenario:

 
| ** **                       | ** ** | **Impact of an appreciation/depreciation of   the Real agains****t ****the ****U.S. Dollar****on the fair value - absolute amounts** | ** ** |
|----------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                       | ** ** | **Possible (25****%)**                                                                                                                                                                                     | ** ** | **Remote (50****%)** | ** ** |
|                             |       |                                                                                                                                                                                                            |       |   |   |
| Derivative financial instruments |       | 785,042                                                                                                                                                                                                         |       | 1,656,342 |   |
| Loans and financing              |       | 2,370,968                                                                                                                                                                                                       |       | 4,741,937 |   |
| Marketable securities            |       | 219,348                                                                                                                                                                                                         |       | 438,696 |   |

 

*Sensitivity analysis - changes in interest rates*

 

We adopted as the probable scenario the fair value considering the market yield as at December 31, 2015. As the amounts have already been recognized in the consolidated financial statement, there are no additional effects in the Statement of profit or loss in this scenario. In the “Possible” and “Remote” scenarios, the interest rates are deemed to increase/decrease by 25% and 50%, respectively, before tax, when compared to the “Probable” scenario:

 

F-40

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                            | ** ** | **Impact of an increase/decrease of the interest** | ** ** |
|---------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                            | ** ** | **rate on the fair value - absolute amounts** | ** ** |
| ** **                            | ** ** | **Possible (25****%)**                                                      | ** ** | **Remote (50****%)** | ** ** |
|                                  |       |                                                                             |       |   |   |
| Loans and financing                   |       |                                                                             |       |   |   |
| LIBOR                                 |       | 558                                                                              |       | 1,241 |   |
| Currency basket                       |       | 2,254                                                                            |       | 4,508 |   |
| TJLP                                  |       | 1,897                                                                            |       | 3,535 |   |
| Interbank Deposit Certificate   (CDI) |       | 1,514                                                                            |       | 2,986 |   |
|                                  |       |                                                                             |       |   |   |
| Derivative financial instruments      |       |                                                                             |       |   |   |
| LIBOR                                 |       | 19,808                                                                           |       | 38,962 |   |
| TJLP                                  |       | 2,523                                                                            |       | 4,393 |   |
| Interbank Deposit Certificate   (CDI) |       | 13,597                                                                           |       | 26,537 |   |
|                                  |       |                                                                             |       |   |   |
| Marketable securities (a)             |       |                                                                             |       |   |   |
| Interbank Deposit Certificate   (CDI) |       | 2,920                                                                            |       | 5,623 |   |

 

----

(a)         Only marketable securities indexed to post-fixed rate were considered in the sensitivity analysis above.

 

*Sensitivity analysis - changes in the U.S. Consumer Price Index*

 

To calculate the “Probable” scenario, we used the US-CPI index at December 31, 2015 . The “Probable” scenario was stressed considering an additional increase/decrease of 25% and 50% in the US-CPI.

 

 
| ** **                                                                         | ** ** | **Impact of an increase/decrease of********US-CPI on the fair value - absolute amounts** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **Possible (25****%)**                                                                                                                     | ** ** | **Remote (50****%)** | ** ** |
|                                                                               |       |                                                                                                                                            |       |   |   |
| Embedded derivative in forestry   partnership andstanding timber supply agreements |       | 138,675                                                                                                                                         |       | 285,447 |   |

 

**6**                                        **Fair value estimates**

 

The assets and liabilities measured at fair value in the balance sheet are classified based on the following fair value hierarchy Levels:

 

(a)                                Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities. Only the Brazilian Federal Government securities are classified as Level 1, recognized as marketable securities.

 

(b)                                Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

 

(c)                                 Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

 

Specific valuation techniques used to calculate the fair value of the assets and liabilities are:

 

F-41

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

·             quoted market prices or dealer quotes for similar instruments;

 

·             the fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves;

 

·             the fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted back to present value;

 

·             other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining assets and liabilities.

 

·             the fair value of future contracts on the inflation rate (such as embedded derivative contained in contracts accounted for as capital leases), based on future inflation rates at the balance sheet date, with the resulting value discounted to present value.

 

The table below presents the assets and liabilities measured at fair value as at December 31, 2015 and 2014:

 
| ** **                                            | ** ** | **2015**         | ** ** |
|-------------------------------------------------------|------------|------------------|------------|
| ** **                                            | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|                                                  |       |             |       |   |   |   |   |   |   |
| **Recurring fair   value measurements**               |       |             |       |   |   |   |   |   |   |
| Assets                                                |       |             |       |   |   |   |   |   |   |
| At fair value through profit and   loss               |       |             |       |   |   |   |   |   |   |
| Derivative financial instruments   (Note 11)          |       |             |       | 300,489 |   |   |   | 300,489 |   |
| Warrant to acquire Ensyn’s shares   (Note 17(b)) |       |             |       |   |   | 11,949 |   | 11,949 |   |
| Marketable securities (Note 10)                       |       | 40,364           |       | 1,365,478 |   |   |   | 1,405,842 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Available for sale   financial assets                 |       |             |       |   |   |   |   |   |   |
| Other investments - fair value   method (Note 17(b))  |       |             |       |   |   | 125,071 |   | 125,071 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Biological asset (Note 18) (*)                        |       |             |       |   |   | 4,114,998 |   | 4,114,998 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Total assets                                          |       | 40,364           |       | 1,665,967 |   | 4,252,018 |   | 5,958,349 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Liabilities                                           |       |             |       |   |   |   |   |   |   |
| At fair value through profit and   loss               |       |             |       |   |   |   |   |   |   |
| Derivative financial instruments   (Note 11)          |       |             |       | (1,128,450 | ) |   |   | (1,128,450 | ) |
|                                                  |       |             |       |   |   |   |   |   |   |
| Total liabilities                                     |       |             |       | (1,128,450 | ) |   |   | (1,128,450 | ) |

 

F-42

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                            | ** ** | **2014**         | ** ** |
|-------------------------------------------------------|------------|------------------|------------|
| ** **                                            | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|                                                  |       |             |       |   |   |   |   |   |   |
| **Recurring fair   value measurements**               |       |             |       |   |   |   |   |   |   |
| Assets                                                |       |             |       |   |   |   |   |   |   |
| At fair value through profit and   loss               |       |             |       |   |   |   |   |   |   |
| Derivative financial instruments   (Note 11)          |       |             |       | 190,893 |   |   |   | 190,893 |   |
| Warrant to acquire Ensyn’s shares   (Note 17(b)) |       |             |       |   |   | 11,791 |   | 11,791 |   |
| Marketable securities (Note 10)                       |       | 193,131          |       | 489,688 |   |   |   | 682,819 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Available for sale   financial assets                 |       |             |       |   |   |   |   |   |   |
| Other investments - fair value   method (Note 17(b))  |       |             |       |   |   | 67,733 |   | 67,733 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Biological asset (Note 18) (*)                        |       |             |       |   |   | 3,707,845 |   | 3,707,845 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Total assets                                          |       | 193,131          |       | 680,581 |   | 3,787,369 |   | 4,661,081 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Liabilities                                           |       |             |       |   |   |   |   |   |   |
| At fair value through profit and   loss               |       |             |       |   |   |   |   |   |   |
| Derivative financial instruments   (Note 11)          |       |             |       | 608,356 |   |   |   | 608,356 |   |
|                                                  |       |             |       |   |   |   |   |   |   |
| Total liabilities                                     |       |             |       | 608,356 |   |   |   | 608,356 |   |

 

----

(*) See the changes in the fair value of the biological assets in Note 18.

 

There were no transfers between Levels 1, 2 and 3 during the years presented.

 

**6.1**                              **Fair value of loans and financing**

 

The fair value of loans and financing, which are measured at amortized cost in the balance sheet, is estimated as follows: (i) bonds, for which fair value is based on the observed quoted price in the market (based on an average of closing prices provided by Bloomberg), and (ii) for the other financial liabilities that do not have a secondary market, or for which the secondary market is not active, fair value is estimated by discounting the future contractual cash flows by current market interest rates, also considering the Company’s credit risk. The fair value of loans and financing are classified as Level 2 on the fair value hierarchy. The following table presents the fair value of loans and financing:

 

F-43

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                                | ** ** | **Yield used to**     | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|---------------------------------|------------|------------|------------|------------|------------|
| ** **                                | ** ** | **discount (*)**           | ** ** | **2015**   | ** ** | **2014**   | ** ** |
|                                      |       |                            |       |       |       |       |       |
| Quoted in the secondary market            |       |                            |       |       |       |       |       |
| In foreign   currency                     |       |                            |       |       |       |       |       |
| Bonds - VOTO IV                           |       |                            |       | 387,939    |       | 292,188    |       |
| Bonds - Fibria   Overseas                 |       |                            |       | 2,237,193  |       | 1,598,708  |       |
| Estimated based on discounted   cash flow |       |                            |       |       |       |       |       |
| In foreign currency                       |       |                            |       |       |       |       |       |
| Export credits                            |       | LIBOR USD                       |       | 6,831,364  |       | 3,824,319  |       |
| Export credits   (ACC/ACE)                |       | DDI                             |       | 46,445     |       | 260,345    |       |
| Export credits   (Finnvera)               |       | LIBOR USD                       |       |       |       |       |       |
| In local   currency                       |       |                            |       |       |       |       |       |
| BNDES — TJLP                         |       | Brazilian interbank rate (DI 1) |       | 809,793    |       | 1,072,412  |       |
| BNDES — Fixed   rate                 |       | Brazilian interbank rate (DI 1) |       | 107,797    |       | 77,980     |       |
| BNDES — Selic                        |       | Brazilian interbank rate (DI 1) |       | 11,110     |       |       |       |
| Currency basket                           |       | Brazilian interbank rate (DI 1) |       | 549,246    |       | 400,233    |       |
| CRA                                       |       | Brazilian interbank rate (DI 1) |       | 658,573    |       |       |       |
| FINEP                                     |       | Brazilian interbank rate (DI 1) |       | 2,063      |       | 2,675      |       |
| FINAME                                    |       | Brazilian interbank rate (DI 1) |       | 4,951      |       | 9,457      |       |
| NCE in Reais                              |       | Brazilian interbank rate (DI 1) |       | 694,859    |       | 707,872    |       |
| Midwest Fund                              |       | Brazilian interbank rate (DI 1) |       | 21,303     |       | 32,304     |       |
|                                      |       |                            |       |       |       |       |       |
|                                      |       |                            |       | 12,362,636 |       | 8,278,493  |       |

 

----

(*) Used to calculate the present value of the loans.

 

**6.2**                              **Fair value measurement of derivative financial instruments (including embedded derivative)**

 

The Company estimates the fair value of its derivative financial instruments and acknowledges that it may differ from the amounts payable/receivable in the event of early settlement of the instrument. This difference results from factors such as liquidity, spreads or the intention of early settlement from the counterparty, among others. The amounts estimated by management are also compared with the Mark-to-Market (MtM) provided as reference by the banks (counterparties) and with the estimates performed by an independent financial advisor.

 

A summary of the methodologies used for purposes of determining fair value by type of instrument is presented below.

 

·             Swap contracts - the present value of both the asset and liability components are estimated through the discount of forecasted cash flows using the observed market interest rate for the currency in which the swap is denominated, considering both of Fibria’s and the counterpart’s credit risk. The contract fair value is the difference between the asset and liability.

 

·             Options (Zero Cost Collar) - the fair value was calculated based on the Garman-Kohlhagen model, considering both Fibria’s and the counterparty credit risk. Volatility information and interest rates are observable and obtained from BM&FBOVESPA exchange information to calculate the fair values.

 

·             Swap US-CPI - the cash flow of the liability position is projected using the yield of the US-CPI index, obtained through the implicit rates of US securities indexed to inflation (TIPS), disclosed by Bloomberg. The cash flow of the asset position is projected using the fixed rate implicit in the embedded derivative instrument. The fair value of the embedded derivative instrument is the present

 

F-44

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

value of the difference between both positions.

 

The yield curves used to calculate the fair value in December 31, 2015 are as follows:

 
| **Interest rate curves** | ** ** | ** **                                     | ** ** | ** **             | ** ** |
|------------------------------------|------------|------------------------------------------------|------------|------------------------|------------|
| **Brazil**                         | ** ** | **United States**                         | ** ** | **Dollar coupon** | ** ** |
| **Vertex**                         | ** ** | **Rate (p.a****.****)**** - %** | ** ** | **Vertex**             | ** ** | **Rate (p.a****.) - %** | ** ** | **Vertex** | ** ** | **Rate (p.a****.****)**** - %** | ** ** |
|                               |       |                                           |       |                   |       |   |   |   |   |   |   |
| 1M                                 |       | 14.33                                          |       | 1M                     |       | 0.43 |   | 1M |   | -30.07 |   |
| 6M                                 |       | 15.18                                          |       | 6M                     |       | 0.71 |   | 6M |   | -2.54 |   |
| 1Y                                 |       | 15.87                                          |       | 1Y                     |       | 0.87 |   | 1Y |   | 1.21 |   |
| 2Y                                 |       | 16.53                                          |       | 2Y                     |       | 1.18 |   | 2Y |   | 2.81 |   |
| 3Y                                 |       | 16.71                                          |       | 3Y                     |       | 1.44 |   | 3Y |   | 3.21 |   |
| 5Y                                 |       | 16.62                                          |       | 5Y                     |       | 1.77 |   | 5Y |   | 3.73 |   |
| 10Y                                |       | 16.52                                          |       | 10Y                    |       | 2.25 |   | 10Y |   | 4.16 |   |

 

**7**                                        **Financial instruments by category**

 
| ** **                                            | ** ** | **2015**   | ** ** | **2014**  | ** ** |
|-------------------------------------------------------|------------|------------|------------|-----------|------------|
|                                                  |       |       |       |      |       |
| Assets                                                |       |       |       |      |       |
| Loans and receivables                                 |       |       |       |      |       |
| Cash and cash equivalents (Note   9)                  |       | 1,077,651  |       | 461,067   |       |
| Trade accounts receivable (Note   12)                 |       | 742,352    |       | 538,424   |       |
| Other                                                 |       | 260,997    |       | 238,846   |       |
|                                                  |       |       |       |      |       |
|                                                  |       | 2,081,000  |       | 1,238,337 |       |
|                                                  |       |       |       |      |       |
| At fair value through profit and   loss               |       |       |       |      |       |
| Derivative financial instruments   (Note 11)          |       | 300,489    |       | 190,893   |       |
| Warrant to acquire Ensyn’s shares   (Note 17(b)) |       | 11,949     |       | 11,791    |       |
| Marketable securities (Note 10)                       |       | 1,406,092  |       | 682,819   |       |
|                                                  |       |       |       |      |       |
|                                                  |       | 1,718,530  |       | 885,503   |       |
|                                                  |       |       |       |      |       |
| Held-to-maturity investments                          |       |       |       |      |       |
| Marketable securities (Note 10)                       |       | 73,914     |       | 51,350    |       |
|                                                  |       |       |       |      |       |
| Available for sale   financial assets                 |       |       |       |      |       |
| Other investments - fair value   method (Note 17(b))  |       | 125,071    |       | 67,733    |       |
|                                                  |       |       |       |      |       |
| Liabilities                                           |       |       |       |      |       |
| At amortized cost                                     |       |       |       |      |       |
| Loans and financing (Note 23)                         |       | 12,743,832 |       | 8,326,519 |       |
| Trade and other payables                              |       | 1,011,672  |       | 925,444   |       |
|                                                  |       |       |       |      |       |
|                                                  |       | 13,755,504 |       | 9,251,963 |       |
|                                                  |       |       |       |      |       |
| At fair value through profit and   loss               |       |       |       |      |       |
| Derivative financial instruments   (Note 11)          |       | 1,128,450  |       | 608,356   |       |

 

F-45

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**8**                                        **Credit quality of financial assets**

 

The credit quality of financial assets can be assessed by reference to external credit ratings (when available) or to historical information about counterparty default rates, analysis of its financial position and information about negative credit events. With respect to credit quality of counterparties that are financial institutions (such as amounts recorded in cash and cash equivalents, marketable  securities and derivative financial instruments) the Company considers the lowest rating of the counterparty as rated by the three main international agencies (Moody’s, Fitch and Standard & Poor’s) in accordance with the internal policy of market risk management:

 
| ** **                                                                  | ** ** | **2015**  | ** ** | **2014**  | ** ** |
|-----------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                                        |       |      |       |      |       |
| Trade accounts receivable                                                   |       |      |       |      |       |
| Counterparties with external   credit rating                                |       |      |       |      |       |
| AA-                                                                         |       | 28,665    |       | 18,031    |       |
| A                                                                           |       | 147,798   |       | 84,131    |       |
| BBB+                                                                        |       | 20,588    |       | 26,975    |       |
| BBB                                                                         |       | 4,358     |       | 2,508     |       |
| BBB-                                                                        |       |      |       | 5,707     |       |
| BB+                                                                         |       | 36,912    |       | 28,365    |       |
| BB                                                                          |       | 3,522     |       | 8,366     |       |
| BB-                                                                         |       | 1,429     |       | 8,476     |       |
| B+                                                                          |       |      |       | 21,271    |       |
| B                                                                           |       | 40,847    |       |      |       |
| B-                                                                          |       | 1,324     |       |      |       |
|                                                                        |       |      |       |      |       |
| Counterparties without external   credit rating                             |       |      |       |      |       |
| A - Low risk                                                                |       | 113,280   |       | 120,079   |       |
| B - Average risk                                                            |       | 265,937   |       | 187,027   |       |
| C - Average to high risk                                                    |       | 77,692    |       | 27,488    |       |
| D - High risk                                                               |       | 7,153     |       | 8,798     |       |
|                                                                        |       |      |       |      |       |
| Total trade accounts receivable   (Note 12)                                 |       | 749,505   |       | 547,222   |       |
|                                                                        |       |      |       |      |       |
| Cash and cash equivalents and   marketable securities                       |       |      |       |      |       |
| brAAA                                                                       |       | 1,582,621 |       | 1,029,165 |       |
| brAA+                                                                       |       | 419,590   |       | 5,335     |       |
| brAA                                                                        |       | 107,923   |       | 42,640    |       |
| brAA-                                                                       |       | 1,502     |       |      |       |
| A+                                                                          |       | 78,306    |       |      |       |
| A                                                                           |       | 172,130   |       | 2         |       |
| BBB+                                                                        |       | 195,585   |       |      |       |
| BBB (ii)                                                                    |       |      |       | 31,370    |       |
| BBB- (ii)                                                                   |       |      |       | 56,680    |       |
| Other (i)                                                                   |       |      |       | 30,044    |       |
|                                                                        |       |      |       |      |       |
| Total cash and cash equivalents   and marketablesecurities (Notes 9 and 10) |       | 2,557,657 |       | 1,195,236 |       |
|                                                                        |       |      |       |      |       |
| Assets - derivative financial   instruments                                 |       |      |       |      |       |
| brAAA                                                                       |       | 6,158     |       | 58,506    |       |
| Others                                                                      |       | 40,759    |       | 11,399    |       |
|                                                                        |       |      |       |      |       |
|                                                                        |       | 46,917    |       | 69,905    |       |

 

----

(i)             Includes counterparties with no external credit rating from the three main rating agencies.

(ii)          Transaction approved by the Finance Committee, an advisory body to the Board of Directors.

 

F-46

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

None of the financial assets that are fully performing has been renegotiated in the last year. None of the loans to related parties is past due or impaired.

 

**9**                                        **Cash and cash equivalents**

 
| ** **           | ** ** | **Average********yield - %** | ** ** | **2015**  | ** ** | **2014** | ** ** |
|----------------------|------------|----------------------------------------|------------|-----------|------------|----------|------------|
|                 |       |                                   |       |      |       |     |       |
| Cash and banks       |       |                                   |       | 196,274   |       | 122,515  |       |
| Fixed-term deposits  |       |                                   |       |      |       |     |       |
| Local currency       |       | 99 of CDI                              |       | 3,985     |       | 157,883  |       |
| Foreign currency (i) |       | 0.21                                   |       | 877,392   |       | 180,669  |       |
|                 |       |                                   |       |      |       |     |       |
|                 |       |                                   |       | 1,077,651 |       | 461,067  |       |

 

----

(i) Mainly Time Deposits maturing within 90 days.

 

**10**                                 **Marketable securities**

 
| ** **                                   | ** ** | **Average********yield p.a.- %** | ** ** | **2015**  | ** ** | **2014** | ** ** |
|----------------------------------------------|------------|--------------------------------------------|------------|-----------|------------|----------|------------|
|                                         |       |                                       |       |      |       |     |       |
| In local currency                            |       |                                       |       |      |       |     |       |
| Brazilian Federal provision fund             |       | 81 of CDI                                  |       | 250       |       | 30       |       |
| Brazilian Federal Government   securities    |       |                                       |       |      |       |     |       |
| At fair value through profit and   loss      |       | 119.78 of CDI                              |       | 40,364    |       | 193,101  |       |
| Held to maturity (i)                         |       | 6 and 119.78 of CDI                        |       | 73,914    |       | 51,350   |       |
| Private securities (repurchase   agreements) |       | 101.41 of CDI                              |       | 1,365,478 |       | 428,336  |       |
|                                         |       |                                       |       |      |       |     |       |
| In foreign currency                          |       |                                       |       |      |       |     |       |
| Private securities (repurchase   agreements) |       | 0.93                                       |       |      |       | 61,352   |       |
|                                         |       |                                       |       |      |       |     |       |
| Marketable securities                        |       |                                       |       | 1,480,006 |       | 734,169  |       |
|                                         |       |                                       |       |      |       |     |       |
| Current                                      |       |                                       |       | 1,411,864 |       | 682,819  |       |
|                                         |       |                                       |       |      |       |     |       |
| Non-Current                                  |       |                                       |       | 68,142    |       | 51,350   |       |

 

----

(i)        The yield of 6% p.a. refers to the agrarian debt bonds and the yield of 119.78% of CDI refers to the investment fund - Pulp.

 

F-47

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**11**                                 **Derivative financial instruments****(including embedded derivative)**

 

**(a)**                                **Derivative financial instruments by type**

 
| ** **                                                                             | ** ** | **Reference value   (notional) - in U.S Dollars** | ** ** | **Fair value** | ** ** |
|----------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------|------------|---------------------|------------|
| **Type of derivative**                                                       | ** ** | **2015**                                                                   | ** ** | **2014**            | ** ** | **2015** | ** ** | **2014** | ** ** |
|                                                                                   |       |                                                                       |       |                |       |   |   |   |   |
| Instruments contracted of   economic hedge strategy                                    |       |                                                                       |       |                |       |   |   |   |   |
| Operational hedge                                                                      |       |                                                                       |       |                |       |   |   |   |   |
| Cash flow hedges of exports                                                            |       |                                                                       |       |                |       |   |   |   |   |
| Zero cost collar                                                                       |       | 310,000                                                                    |       | 1,465,000           |       | (8,627 | ) | (19,443 | ) |
|                                                                                   |       |                                                                       |       |                |       |   |   |   |   |
| Hedges of debts                                                                        |       |                                                                       |       |                |       |   |   |   |   |
| Hedges of interest rates                                                               |       |                                                                       |       |                |       |   |   |   |   |
| Swap LIBOR x Fixed (USD)                                                               |       | 622,907                                                                    |       | 538,207             |       | (8,902 | ) | 3,353 |   |
|                                                                                   |       |                                                                       |       |                |       |   |   |   |   |
| Hedges of foreign currency                                                             |       |                                                                       |       |                |       |   |   |   |   |
| Swap DI x US$ (USD)                                                               |       | 358,607                                                                    |       | 405,269             |       | (648,052 | ) | (215,654 | ) |
| Swap TJLP x US$ (USD)                                                             |       | 98,287                                                                     |       | 180,771             |       | (230,433 | ) | (196,818 | ) |
| Swap Pre x US$ (USD)                                                              |       | 112,107                                                                    |       | 191,800             |       | (185,519 | ) | (109,889 | ) |
|                                                                                   |       |                                                                       |       |                |       |   |   |   |   |
|                                                                                   |       |                                                                       |       |                |       | (1,081,533 | ) | (538,451 | ) |
|                                                                                   |       |                                                                       |       |                |       |   |   |   |   |
| Embedded derivative in forestry   partnership andstanding timber supply agreements (*) |       |                                                                       |       |                |       |   |   |   |   |
| Swap of US-CPI                                                                         |       | 857,710                                                                    |       | 902,267             |       | 253,572 |   | 120,988 |   |
|                                                                                   |       |                                                                       |       |                |       |   |   |   |   |
|                                                                                   |       |                                                                       |       |                |       | (827,961 | ) | (417,463 | ) |
|                                                                                   |       |                                                                       |       |                |       |   |   |   |   |
| Classified                                                                             |       |                                                                       |       |                |       |   |   |   |   |
| In current assets                                                                      |       |                                                                       |       |                |       | 26,795 |   | 29,573 |   |
| In non-current assets                                                                  |       |                                                                       |       |                |       | 273,694 |   | 161,320 |   |
| In current liabilities                                                                 |       |                                                                       |       |                |       | (302,787 | ) | (185,872 | ) |
| In non-current liabilities                                                             |       |                                                                       |       |                |       | (825,663 | ) | (422,484 | ) |
|                                                                                   |       |                                                                       |       |                |       |   |   |   |   |
| Total, net                                                                             |       |                                                                       |       |                |       | (827,961 | ) | (417,463 | ) |

 

----

(*)    The embedded derivative is a swap of the US-CPI changes during the term of the Forestry Partnership and Standing Timber Supply Agreements.

 

F-48

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(b)**                                **Derivative financial instruments of economic****hedge strategy by type and broken down by****nature of the exposure**

 
| ** **                                | ** ** | **Reference value (notional) -** | ** ** | ** **          | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|-------------------------------------------------|------------|---------------------|------------|------------|------------|
| **Type of derivative and** | ** ** | **in currency of origin**        | ** ** | **Fair value** | ** ** |
| **protected risk**                   | ** ** | **Currency**                                    | ** ** | **2015**            | ** ** | **2014**   | ** ** | **2015** | ** ** | **2014** | ** ** |
|                                      |       |                                            |       |                |       |       |       |   |   |   |   |
| Swap contracts - Hedge of debts           |       |                                            |       |                |       |       |       |   |   |   |   |
| Asset                                     |       |                                            |       |                |       |       |       |   |   |   |   |
| LIBOR to fixed                            |       | US$                                             |       | 622,907             |       | 538,207    |       | 2,308,517 |   | 1,352,345 |   |
| Real CDI to USD                           |       | R$                                              |       | 698,559             |       | 788,208    |       | 1,058,346 |   | 1,082,215 |   |
| Real TJLP to USD                          |       | R$                                              |       | 159,938             |       | 293,676    |       | 153,963 |   | 279,328 |   |
| Real Pre to USD                           |       | R$                                              |       | 236,072             |       | 395,697    |       | 182,240 |   | 323,898 |   |
| Liability                                 |       |                                            |       |                |       |       |       |   |   |   |   |
| LIBOR to fixed                            |       | US$                                             |       | 622,907             |       | 538,207    |       | (2,317,419 | ) | (1,348,992 | ) |
| Real CDI to USD                           |       | US$                                             |       | 358,607             |       | 405,269    |       | (1,706,398 | ) | (1,297,868 | ) |
| Real TJLP to USD                          |       | US$                                             |       | 98,287              |       | 180,771    |       | (384,396 | ) | (476,146 | ) |
| Real Pre to USD                           |       | US$                                             |       | 112,107             |       | 191,800    |       | (367,759 | ) | (433,788 | ) |
|                                      |       |                                            |       |                |       |       |       |   |   |   |   |
| Total of swap contracts                   |       |                                            |       |                |       |       |       | (1,072,906 | ) | (519,008 | ) |
|                                      |       |                                            |       |                |       |       |       |   |   |   |   |
| Options - Cash flow hedge                 |       |                                            |       |                |       |       |       |   |   |   |   |
| Zero cost collar                          |       | US$                                             |       | 310,000             |       | 1,465,000  |       | (8,627 | ) | (19,443 | ) |
|                                      |       |                                            |       |                |       |       |       |   |   |   |   |
|                                      |       |                                            |       |                |       |       |       | (1,081,533 | ) | (538,451 | ) |

 

**(c)**                                 **Derivative financial instruments by type of****economic hedge strategy contracts**

 
| ** **                       | ** ** | **Fair value** | ** ** | **Value (paid) or received** | ** ** |
|----------------------------------|------------|---------------------|------------|---------------------------------------------|------------|
| **Type of derivative** | ** ** | **2015**            | ** ** | **2014**                                    | ** ** | **2015** | ** ** | **2014** | ** ** |
|                             |       |                |       |                                        |       |   |   |   |   |
| Operational hedge                |       |                |       |                                        |       |   |   |   |   |
| Cash flow hedge of exports       |       | (8,627              | )          | (19,443                                     | )          | (125,107 | ) | (13 | ) |
| Hedge of debts                   |       |                |       |                                        |       |   |   |   |   |
| Hedge of interest rates          |       | (8,902              | )          | 3,353                                       |       | (15,333 | ) | (5,445 | ) |
| Hedge of foreign currency        |       | (1,064,004          | )          | (522,361                                    | )          | (279,191 | ) | (47,641 | ) |
|                             |       |                |       |                                        |       |   |   |   |   |
|                             |       | (1,081,533          | )          | (538,451                                    | )          | (419,631 | ) | (53,099 | ) |

 

F-49

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(d)**                                **Fair value by maturity date****of economic hedge strategy contracts**

 
| ** ** | ** ** | **2015**   | ** ** | **2014** | ** ** |
|------------|------------|------------|------------|----------|------------|
|       |       |       |       |     |       |
| 2015       |       |       |       | (158,095 | )          |
| 2016       |       | (281,423   | )          | (99,947  | )          |
| 2017       |       | (396,982   | )          | (134,814 | )          |
| 2018       |       | (280,340   | )          | (87,208  | )          |
| 2019       |       | (76,408    | )          | (35,401  | )          |
| 2020       |       | (46,380    | )          | (22,986  | )          |
|       |       |       |       |     |       |
|       |       | (1,081,533 | )          | (538,451 | )          |

 

Fair value does not necessarily represent the cash required to immediately settle each contract, as such disbursement will only be made on the date of maturity of each transaction, when the final settlement amount will be determined.

 

The outstanding contracts at December 31, 2015 are not subject to margin calls or accelerated liquidation clauses resulting from mark-to-market variations. All operations are over-the-counter and registered at CETIP (a clearing house).

 

A description of the types of contracts and risks being hedged:

 

**(i)**                                   **LIBOR versus fixed rate swap**

 

The Company has plain-vanilla swaps of quarterly LIBOR versus fixed rates with the objective of hedging debt carrying interest based on LIBOR against any increase in LIBOR.

 

**(ii)**                               **DI versus U.S. Dollar swap**

 

The Company has plain-vanilla swaps of Interbank Deposit (DI) versus the U.S. Dollar with the objective of changing our debt exposure in Reais, subjected to DI into a debt in U.S. Dollars with fixed interest. The swaps are matched to debt with respect to underlying amounts, maturity dates and cash flows.

 

**(iii)**                           **TJLP versus U.S. Dollar swap**

 

The Company has plain-vanilla swaps of Long-term Interest Rate (TJLP) versus the U.S. Dollar with the objective of changing our debt exposure in Reais subject to interest based on TJLP, to debt in U.S. Dollars with fixed interest. The swaps are matched to the related debt with respect to underlying amounts, maturity dates and cash flows.

 

**(iv)**                            **Zero cost collar**

 

The Company entered into zero cost collar (an option to purchase (put) U.S. Dollars and an option to sell (call) U.S. Dollars) with no leverage, with the objective of protecting our exposure to export sales denominated in U.S. Dollar, with a strike price of the put (floor) and the call (ceiling) results in a floor and cap of the dollar exchange rate.

 

**(v)**                                **Pre fixed rates versus U.S. Dollar swap**

 

The Company has plain-vanilla swaps to transform fixed interest debt in Reais to a debt in U.S. Dollar

 

F-50

----

Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

with fixed rate. The swaps are matched to debt with respect to underlying amounts, maturity dates and cash flows.

 

**12**                                 **Trade accounts receivable**

 

**(a)**                                **Breakdown of the balance by type of customer**

 
| ** **                      | ** ** | **2015** | ** ** | **2014** | ** ** |
|---------------------------------|------------|----------|------------|----------|------------|
|                            |       |     |       |     |       |
| Domestic customers              |       | 75,281   |       | 50,729   |       |
| Export customers                |       | 674,224  |       | 496,493  |       |
|                            |       |     |       |     |       |
|                            |       | 749,505  |       | 547,222  |       |
|                            |       |     |       |     |       |
| Allowance for doubtful accounts |       | (7,153   | )          | (8,798   | )          |
|                            |       |     |       |     |       |
|                            |       | 742,352  |       | 538,424  |       |

 

In 2015, we concluded factoring transactions without recourse for certain customers’ receivables, in the amount of R$ 1,788,970 (R$ 1,230,143 at December 31, 2014), that were derecognized from accounts receivable in the balance sheet.

 

**(b)**                                **Breakdown of the balance by maturity and allowance for doubtful accounts**

 

The following table presents a breakdown of trade receivables by maturity:

 
| ** **               | ** ** | **2015** | ** ** | **2014** | ** ** |
|--------------------------|------------|----------|------------|----------|------------|
|                     |       |     |       |     |       |
| Not past due             |       |     |       |     |       |
| Up to two months         |       | 338,548  |       | 277,007  |       |
| Two to six   months      |       | 313,650  |       | 192,199  |       |
| Six months to   one year |       | 7,672    |       |     |       |
|                     |       |     |       |     |       |
| Past due                 |       |     |       |     |       |
| Up to two months         |       | 82,482   |       | 69,218   |       |
|                     |       |     |       |     |       |
|                     |       | 742,352  |       | 538,424  |       |

 

At December 31, 2015, trade accounts receivable of R$ 82,482 (R$ 69,218 at December 31, 2014) were past due but not considered to be impaired. Management has a process to manage collections and does not expect to recognize any losses on these receivables. The receivables are related to several unrelated customers for whom there is no recent history of default.

 

At December 31, 2015, trade accounts receivable of R$ 7,153 (R$ 8,798 at December 31, 2014) were impaired and included in the allowance for doubtful accounts. The individually impaired trade accounts receivable mainly relate to customers under judicial collection with a low probability of recovery.

 

F-51

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

Changes in the allowance for doubtful accounts are as follows:

 
| ** **                   | ** ** | **2015** | ** ** | **2014** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
|                         |       |     |       |     |       |
| At the beginning of the year |       | (8,798   | )          | (12,158  | )          |
| Reversal                     |       | 1,645    |       | 3,360    |       |
|                         |       |     |       |     |       |
| At the end of the year       |       | (7,153   | )          | (8,798   | )          |

 

**(c)**                                 **Main customers**

 

In the year ended December 31, 2015, the Company had three customers that represent 54% of the Company’s net revenue (48% in 2014 and 50% in 2013, represented by three customers).

 

**(d)**                                **Breakdown of the balance by currency**

 

Fibria’s trade accounts receivable are denominated in the following currencies:

 
| ** **  | ** ** | **2015** | ** ** | **2014** | ** ** |
|-------------|------------|----------|------------|----------|------------|
|        |       |     |       |     |       |
| Real        |       | 68,128   |       | 41,931   |       |
| U.S. Dollar |       | 666,727  |       | 488,445  |       |
| Euro        |       | 7,497    |       | 8,048    |       |
|        |       |     |       |     |       |
|        |       | 742,352  |       | 538,424  |       |

 

**(e)**                                 **Guarantees in Compror operations**

 

The Company is a guarantor in factoring Compror operations, performed with selected customers in Brazil. The amount guaranteed to the sales financing agents by Fibria at December 31, 2015 was R$ 3,926 (R$ 28,005 at December 31, 2014). Fair value of these guarantees is not significant considering the high credit quality of those selected customers; there has been no history of default.

 

**13**                                 **Inventory**

 
| ** **                          | ** ** | **2015**  | ** ** | **2014**  | ** ** |
|-------------------------------------|------------|-----------|------------|-----------|------------|
|                                |       |      |       |      |       |
| Finished goods at plants/warehouses |       |      |       |      |       |
| Brazil                              |       | 155,286   |       | 137,741   |       |
| Abroad                              |       | 731,498   |       | 515,522   |       |
| Work in process                     |       | 12,935    |       | 16,942    |       |
| Raw materials                       |       | 520,445   |       | 402,293   |       |
| Supplies                            |       | 150,838   |       | 161,758   |       |
| Imports in transit                  |       | 144       |       | 4,537     |       |
|                                |       |      |       |      |       |
|                                |       | 1,571,146 |       | 1,238,793 |       |

 

F-52

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**14**                                 **Recoverable taxes**

 
| ** **                                                                                         | ** ** | **2015**  | ** ** | **2014**  | ** ** |
|----------------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                                                               |       |      |       |      |       |
| Withholding tax and prepaid   Income Tax (IRPJ) and Social Contribution (CSLL)                     |       | 762,743   |       | 680,927   |       |
| Value-added Tax on Sales and   Services (ICMS) on purchasesof property, plant and equipment        |       | 26,235    |       | 19,465    |       |
| Value-added Tax on Sales and   Services (ICMS and IPI) on purchases of rawmaterials   and supplies |       | 978,399   |       | 896,460   |       |
| Federal tax credits                                                                                |       | 356,058   |       | 444,906   |       |
| Credit related to Reintegra   Program (a)                                                          |       | 91,145    |       | 37,027    |       |
| Social Integration Program (PIS)   and Social Contribution on Revenue (COFINS)Recoverable          |       | 727,210   |       | 570,333   |       |
| Provision for the impairment of   ICMS credits                                                     |       | (967,332  | )          | (734,154  | )          |
|                                                                                               |       |      |       |      |       |
|                                                                                               |       | 1,974,458 |       | 1,914,964 |       |
|                                                                                               |       |      |       |      |       |
| Current                                                                                            |       | 462,487   |       | 162,863   |       |
|                                                                                               |       |      |       |      |       |
| Non-current                                                                                        |       | 1,511,971 |       | 1,752,101 |       |

 

Based on the budget approved by the Company’s management, the non-current tax credits are expected to be realized as follows:

 
| ** **   | ** ** | **Amount** | ** ** |
|--------------|------------|------------|------------|
|         |       |       |       |
| In 2016      |       | 462,487    |       |
| In 2017      |       | 756,447    |       |
| In 2018      |       | 637,405    |       |
| In 2019      |       | 7,100      |       |
| As from 2020 |       | 111,019    |       |
|         |       |       |       |
|         |       | 1,974,458  |       |

 

Changes in the provision for impairment of the Company’s recoverable taxes are as follows:

 
| ** **                   | ** ** | **2015** | ** ** | **2014** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
|                         |       |     |       |     |       |
| At the beginning of the year |       | (734,154 | )          | (658,308 | )          |
| Provision for impairment     |       | (233.178 | )          | (75,846  | )          |
|                         |       |     |       |     |       |
| At the end of the year       |       | (967.332 | )          | (734,154 | )          |

 

Fibria has been accumulating ICMS credits in the States of Espírito Santo, Bahia and Mato Grosso do Sul since its sales are mostly to foreign customers. The Company’s management revises on a monthly basis the estimates for the realization of such credits and recognized an impairment provision: (a) for the full amount for the Mato Grosso do Sul and Bahia units due to the low probability of realization; and (b) for the Espírito Santo unit, 80% until September, 2015 and 100% as from October, 2015 of the total amount of the credits due to the difficulties for the realization.

 

The provision and reversal of the provision for impaired ICMS credits related to the current year were recorded in the Statement of profit or loss under “Cost of sales”. The increment of the provision for 100% of the ICMS credits from Espírito Santo unit mentioned above, in the total amount of R$ 165,085, was recorded in the Statement of profit or loss under “Other operating expenses, net”, since it was related to prior years (Note 33).

 

F-53

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(a)**                                **Reintegra Special Tax Regime**

 

Fibria is beneficiary of the Special Tax Refund Regime for Exporting Companies (known as Reintegra) instituted by Law 13.043/2014.

 

From February 27, 2015, the percentage to be applied over the export revenue for calculation of the tax credit was changed from 3% to 1% between March 1, 2015 and November 30, 2015 and 0.1% between December 1, 2015 and December 31, 2015. In 2017, the percentage to be used will be 2% and in 2018, 3% over the export revenue.

 

During 2015, the Company recognized Reintegra credits of R$ 68,169 (R$ 37,027 in 2014), under “Cost of sales” in the Statement of profit or loss.

 

**15**                                 **Income taxes**

 

The Company and the subsidiaries located in Brazil are taxed based on their taxable income. The subsidiaries located outside of Brazil use methods established by the respective local jurisdictions. Income taxes have been calculated and recorded considering the applicable statutory tax rates enacted at the balance sheet date.

 

The Company still believes in the previsions of the International Double Taxation Treaties. However, as the final decision regarding its applicability is still pending on the Supreme Court (*Supremo Tribunal Federal — STF*), nowadays the Company taxes the foreign profits according to the Law 12,973/14.

 

The Law 12,973/14 revoked the article 74 of Provisional Measure 2,158/01. The law determines that the adjustment in the value of the investment, in the direct or indirect controlled company, domiciled abroad, equivalent to its profits before tax, except for the foreign exchange, must be computed in the taxation basis of the corporate income tax and social contribution over profits of  the controller company domiciled in Brazil, at the end of the fiscal year. The repatriation of these profits in subsequent years will not be subject to taxation in Brazil. The Company has provisions regarding the Corporate Income Tax of the subsidiaries on an accrual basis.

 

F-54

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(a)**                                 **Deferred taxes**

 
| ** **                                                                           | ** ** | **2015**  | ** ** | **2014**  | ** ** |
|--------------------------------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                                                 |       |      |       |      |       |
| Tax loss carryforwards (i)(ii)                                                       |       | 54,888    |       | 192,647   |       |
| Provision for legal proceeds (ii)                                                    |       | 119,924   |       | 111,799   |       |
| Sundry provisions (impairment,   operational and other) (ii)                         |       | 637,176   |       | 447,273   |       |
| Results of derivative contracts -   payable on a cash basis for tax purposes (ii)    |       | 281,507   |       | 141,938   |       |
| Exchange losses (net) - payable   on a cash basis for tax purposes (ii)              |       | 2,396,243 |       | 913,219   |       |
| Tax amortization of the assets   acquired in the business combination - Aracruz (ii) |       | 99,196    |       | 102,335   |       |
| Actuarial gains on medical   assistance plan (SEPACO) (ii)                           |       | 3,743     |       | 6,609     |       |
| Provision for tax on investments   in foreign-domiciled subsidiaries                 |       | (338,315  | )          | (25,977   | )          |
| Tax accelerated depreciation                                                         |       | (7,324    | )          | (9,889    | )          |
| Reforestation costs already   deducted for tax purposes                              |       | (387,568  | )          | (348,398  | )          |
| Fair values of biological assets                                                     |       | (174,450  | )          | (153,020  | )          |
| Effects of business combination -   acquisition of Aracruz                           |       |      |       | (3,165    | )          |
| Tax benefit of goodwill - goodwill   not amortized for accounting purposes           |       | (536,752  | )          | (447,293  | )          |
| Other provisions                                                                     |       | (20,051   | )          | (3,770    | )          |
|                                                                                 |       |      |       |      |       |
| Total deferred taxes asset, net                                                      |       | 2,128,217 |       | 924,308   |       |
|                                                                                 |       |      |       |      |       |
| Deferred taxes - asset (net by   entity)                                             |       | 2,399,213 |       | 1,190,836 |       |
|                                                                                 |       |      |       |      |       |
| Deferred taxes - liability (net   by entity)                                         |       | 270,996   |       | 266,528   |       |

 

----

(i)           The balance as at December 31, 2015 is presented net of R$ 346,291 (R$ 263,297 in 2014) related to the provision for impairment for foreign tax losses, as detailed in item (e) below.

 

(ii)        Total gross deferred tax assets at December 31, 2015 were R$ 3,592,677, which are expected to be realized as below.

 

Tax loss carryforwards and deferred tax credits from temporary differences are likely to be realized in accordance with the following schedule:

 
| ** **            | ** ** | **Amount** | ** ** |
|-----------------------|------------|------------|------------|
|                  |       |       |       |
| In the next 12 months |       | 624,201    |       |
| In 2017               |       | 445,321    |       |
| In 2018               |       | 658,362    |       |
| In 2019               |       | 846,270    |       |
| In 2020               |       | 215,917    |       |
| Between 2021 to 2022  |       | 237,759    |       |
| Between 2023 to 2024  |       | 51,873     |       |
| After 2025            |       | 512,974    |       |
|                  |       |       |       |
|                  |       | 3,592,677  |       |

 

Over the next 12 months, the Company expects to realize R$ 89,358 related to deferred tax liabilities.

 

F-55

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

Changes in the net balance of deferred income tax are as follows:

 
| ** **                                                           | ** ** | **2015**  | ** ** | **2014** | ** ** |
|----------------------------------------------------------------------|------------|-----------|------------|----------|------------|
|                                                                 |       |      |       |     |       |
| At the beginning of the year                                         |       | 924,308   |       | 732,220  |       |
| Tax loss carryforwards                                               |       | (137,759  | )          | 20,128   |       |
| Temporary differences from   provisions                              |       | 198,028   |       | 23,261   |       |
| Provision for tax on investments   in foreign-domiciled subsidiaries |       | (312,338  | )          | (25,977  | )          |
| Derivative financial instruments   taxed on a cash basis             |       | 139,569   |       | (15,933  | )          |
| Amortization of goodwill                                             |       | (92,598   | )          | (98,063  | )          |
| Reforestation costs                                                  |       | (36,605   | )          | (36,804  | )          |
| Exchange losses (net) taxed on a   cash basis                        |       | 1,483,024 |       | 266,933  |       |
| Fair value of biological assets                                      |       | (21,430   | )          | 46,841   |       |
| Actuarial losses on medical   assistance plan (SEPACO)               |       | (2,866    | )          | 2,478    |       |
| Other                                                                |       | (13,116   | )          | 9,224    |       |
|                                                                 |       |      |       |     |       |
| At the end of the year                                               |       | 2,128,217 |       | 924,308  |       |

 

----

(*) Deferred taxes related to the other comprehensive income.

 

**(b)**                                 **Reconciliation of taxes on income**

 
| ** **                                                                            | ** ** | **2015** | ** ** | **2014** | ** ** | **2013** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                  |       |     |       |     |       |     |       |
| Income (loss) before tax                                                              |       | (160,941 | )          | 21,890   |       | (343,576 | )          |
|                                                                                  |       |     |       |     |       |     |       |
| Income tax and social   contribution benefit (expense)at statutory nominal rate - 34% |       | 54,720   |       | (7,443   | )          | 116,816  |       |
|                                                                                  |       |     |       |     |       |     |       |
| Reconciliation to effective   expense                                                 |       |     |       |     |       |     |       |
|                                                                                  |       |     |       |     |       |     |       |
| Tax Amnesty and Refinancing   Program - REFIS (Note 25(a))                            |       |     |       |     |       | (560,454 | )          |
| Equity in results of   joint-venture                                                  |       | 134      |       | (212     | )          |     |       |
| Credit from Reintegra Program   (Note 14(a))                                          |       | 23,178   |       | 12,589   |       |     |       |
| Benefit - Tax on net income (*Imposto sobre o Lucro Líquido - ILL*)              |       |     |       | 32,117   |       |     |       |
| Taxes on earnings of foreign   subsidiaries                                           |       |     |       | (7,739   | )          | (15,306  | )          |
| Difference in tax rates of   foreign subsidiaries                                     |       |     |       |     |       | 4,446    |       |
| Foreign exchange effects on   foreign subsidiaries (i)                                |       | 457,790  |       | 122,748  |       | 114,181  |       |
| Other, mainly non-deductible provisions                                               |       | (17,896  | )          | (11,398  | )          | (13,689  | )          |
|                                                                                  |       |     |       |     |       |     |       |
| Income tax and Social   Contribution benefit (expense) for the year                   |       | 517,926  |       | 140,662  |       | (354,006 | )          |
|                                                                                  |       |     |       |     |       |     |       |
| Effective rate - %                                                                    |       | 321.8    |       | (642.6   | )          | (103.0   | )          |

 

----

(i)             Relates to net foreign exchange gains recognized by our foreign subsidiaries that use the Real as the functional currency. As the Real is not used for tax purposes in the foreign country, this net foreign exchange gain is not recognized for tax purposes in the foreign country nor will it be subject to tax in Brazil.

 

F-56

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(c)**                                  **Transitional Tax System (RTT)**

 

The Company adopted the provisions of the Transitional Tax Regime-RTT in Brazil for 2014 and 2013. The RTT permitted that the accounting effects of Law 11,638/07 and Law 11,941/09 (basis for the adoption of the IFRS) be excluded from the taxable income by reconciling items in the Taxable Income Assessment Book (LALUR) and auxiliary records.

 

Law 12,973/14 repealed the RTT and regulated the taxation of earnings of offshore entities. The Law defines the adjustments which must be made in the tax registers and in the statutory books and the books and records to replace the RTT. The replacement of the RTT for the new provisions was optional for 2014 and is mandatory in 2015.

 

**(d)**                                 **Income tax on business combinations**

 

The Company has taxable temporary differences associated with a gain on bargain purchase option resulting from the asset exchange with International Paper, for which a deferred tax liability, in the amount of R$ 605,540, was not recognized, since the realization of such gain is under the control of management and there are no plans for realizing such gain in the foreseeable future.

 

Tax goodwill resulting from the acquisition of Aracruz has been attributed to expectation of future profitability and amounts to R$ 833,193, representing a tax benefit for income tax and social contribution of R$ 283,286, to be recognized over the next 38 months.

 

**(e)**                                  **Recoverability of tax loss carryforwards**

 

A valuation allowance was recorded in 2011 of Hungarian Forint HUF 25,752 (equivalent to R$ 346,291 as of December 31, 2015, and R$ 263,297 as of December 31, 2014).

 

Changes in the provision for impairment of the Company’s foreign tax credits are as follows:

 
| ** **                     | ** ** | **2015** | ** ** | **2014** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|
|                           |       |     |       |     |       |
| At the beginning   of the year |       | (263,297 | )          | (278,486 | )          |
| Exchange   gain/loss           |       | (82,994  | )          | 15,189   |       |
|                           |       |     |       |     |       |
| At the end of   the year       |       | (346,291 | )          | (263,297 | )          |

 

**16**                                 **Significant transactions and balances with related parties**

 

**(a)**                                 **Related parties**

 

The Company is governed by a Shareholders Agreement entered into between Votorantim Industrial S.A. (“VID”), which holds 29.42% of our shares, and BNDES Participações S.A. (“BNDESPAR”), a Brazilian Federal Government economic development bank, which holds 29.08% of our shares (together the “Controlling shareholders”).

 

The Company’s commercial and financial transactions with its subsidiaries, companies of the

 

F-57

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

Votorantim Group and other related parties are carried out at normal market prices and conditions, based on usual terms and rates applicable to third parties. Balances and transactions with related parties are as follows:

 

**(i)**                                    **Balances recognized in assets and liabilities**

 
| ** **                                                          | ** ** | **Balances receivable (payable)** | ** ** |
|---------------------------------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                                          | ** ** | **Nature**                                  | ** ** | **2015** | ** ** | **2014** | ** ** |
|                                                                |       |                                        |       |   |   |   |   |
| Transactions with controlling   shareholders                        |       |                                        |       |   |   |   |   |
| Votorantim Industrial S.A.   (VID)                             |       | Rendering of services                       |       | (9 | ) | (172 | ) |
| Votorantim Industrial S.A.   (VID)                             |       | Land leases                                 |       | (851 | ) |   |   |
| Banco Nacional de Desenvolvimento   Econômico e Social (BNDES) |       | Financing                                   |       | (1,851,408 | ) | (1,756,133 | ) |
|                                                                |       |                                        |       |   |   |   |   |
|                                                                |       |                                        |       | (1,852,268 | ) | (1,756,305 | ) |
|                                                                |       |                                        |       |   |   |   |   |
| Transactions with VotorantimGroup companies                         |       |                                        |       |   |   |   |   |
| Votorantim Participações S.A.                             |       | Financing                                   |       | 11,714 |   | 7,969 |   |
| Votener - Votorantim   Comercializadora e Energia                   |       | Energy supplier                             |       | 6,937 |   | 20,719 |   |
| Banco Votorantim S.A.                                          |       | Investments                                 |       | 32,806 |   |   |   |
| Banco Votorantim S.A.                                          |       | Financial instruments                       |       | (1,066 | ) | (8,237 | ) |
| Votorantim Cimentos S.A.                                       |       | Energy supplier                             |       | 517 |   |   |   |
| Votorantim Cimentos S.A.                                       |       | Input supplier                              |       | (50 | ) | (269 | ) |
| Polimix Concreto Ltda.                                              |       | Input supplier                              |       | (143 | ) |   |   |
| Votorantim Siderurgia                                               |       | Standing wood supplier                      |       | (4,164 | ) |   |   |
| Pedreira Pedra Negra                                                |       | Input supplier                              |       | (21 | ) |   |   |
| Votorantim Metais Ltda.                                             |       | Chemical products supplier                  |       | (277 | ) |   |   |
| Votorantim Metais Ltda.                                             |       | Land leases                                 |       |   |   | (773 | ) |
| Companhia Brasileira de Alumínio   (CBA)                       |       | Land leases                                 |       | (695 | ) | (39 | ) |
|                                                                |       |                                        |       |   |   |   |   |
|                                                                |       |                                        |       | 45,558 |   | (19,370 | ) |
|                                                                |       |                                        |       |   |   |   |   |
| Net                                                                 |       |                                        |       | (1,806,709 | ) | (1,736,935 | ) |
|                                                                |       |                                        |       |   |   |   |   |
| Presented in the following lines                                    |       |                                        |       |   |   |   |   |
| In assets                                                           |       |                                        |       |   |   |   |   |
| Marketable securities (Note 10)                                     |       |                                        |       | 32,806 |   |   |   |
| Related parties - non-current                                       |       |                                        |       | 11,714 |   | 7,969 |   |
| Other assets - current                                              |       |                                        |       | 7,454 |   | 20,719 |   |
| In liabilities                                                      |       |                                        |       |   |   |   |   |
| Loans and financing (Note 23)                                       |       |                                        |       | (1,851,408 | ) | (1,756,133 | ) |
| Derivative financial instruments   (Note 11)                        |       |                                        |       | (1,066 | ) | (8,237 | ) |
| Suppliers                                                           |       |                                        |       | (6,209 | ) | (1,253 | ) |
|                                                                |       |                                        |       |   |   |   |   |
|                                                                |       |                                        |       | (1,806,709 | ) | (1,736,935 | ) |

 

F-58

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(ii)**                                **Amounts transacted in the year**

 
| ** **                                                          | ** ** | **Amounts transacted** | ** ** |
|---------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                          | ** ** | **Nature**                  | ** ** | **2015** | ** ** | **2014** | ** ** | **2013** | ** ** |
|                                                                |       |                        |       |   |   |   |   |   |   |
| Transactions   with controlling shareholders                        |       |                        |       |   |   |   |   |   |   |
| Votorantim   Industrial S.A. (VID)                             |       | Rendering of services       |       | (11,320 | ) | (13,009 | ) | (10,682 | ) |
| Votorantim Industrial S.A.   (VID)                             |       | Land leases                 |       | (7,373 | ) |   |   |   |   |
| Votorantim   Industrial S.A. (VID)                             |       | Sale of land                |       | 171,700 |   |   |   |   |   |
| Votorantim   Industrial S.A. (VID)                             |       | Land purchased              |       | (451,700 | ) |   |   |   |   |
| Banco Nacional   de Desenvolvimento Econômico e Social (BNDES) |       | Financing                   |       | (348,240 | ) | (181,658 | ) | (165,774 | ) |
|                                                                |       |                        |       |   |   |   |   |   |   |
|                                                                |       |                        |       | (646,933 | ) | (194,667 | ) | (176,456 | ) |
|                                                                |       |                        |       |   |   |   |   |   |   |
| Transactions with subsidiary   Bahia Produtos de Madeira S.A.       |       | Sales of wood               |       |   |   | 9,709 |   | 11,332 |   |
|                                                                |       |                        |       |   |   |   |   |   |   |
| Transactions   with Votorantim Group Companies                      |       |                        |       |   |   |   |   |   |   |
| Votorantim Participações S.A.                             |       | Financing                   |       | 3,745 |   | 1,259 |   |   |   |
| Votener -   Votorantim****Comercializadora de   Energia             |       | Energy supplier             |       | 84,945 |   | 101,565 |   | (40,425 | ) |
| Banco   Votorantim S.A.                                        |       | Investments                 |       | 2,825 |   |   |   | 5,101 |   |
| Banco   Votorantim S.A.                                        |       | Financial instruments       |       | (7,236 | ) | (604 | ) | (7,564 | ) |
| Banco   Votorantim S.A.                                        |       | Rendering of services       |       | (649 | ) |   |   |   |   |
| Votorantim CTVM   Ltda.                                        |       | Rendering of services       |       | (283 | ) |   |   |   |   |
| Votorantim   Cimentos S.A.                                          |       | Energy supplier             |       | 6,536 |   | 6,648 |   | 7,753 |   |
| Votorantim   Cimentos S.A.                                          |       | Input supplier              |       | (189 | ) | (1,310 | ) | (503 | ) |
| Votorantim   Cimentos S.A.                                          |       | Sales of wood               |       | 126 |   |   |   |   |   |
| Votorantim   Cimentos S.A.                                          |       | Land leases                 |       |   |   | (2,095 | ) |   |   |
| Polimix Concreto Ltda.                                              |       | Rendering of services       |       | (143 | ) |   |   |   |   |
| Votorantim   Siderurgia S.A.                                        |       | Standing wood supplier      |       | (4,164 | ) |   |   |   |   |
| Votorantim   Siderurgia S.A.                                        |       | Sale of waste               |       |   |   |   |   | 83 |   |
| Sitrel   Siderurgia Três Lagoas                                |       | Energy supplier             |       | 4,710 |   | 4,120 |   | 1,034 |   |
| Pedreira Pedra Negra                                                |       | Input supplier              |       | (363 | ) |   |   |   |   |
| Votorantim   Metais Ltda.                                           |       | Chemical products supplier  |       | (4,387 | ) | (87 | ) | (4,363 | ) |
| Votorantim Metais   Ltda.                                           |       | Land leases                 |       | (2,318 | ) | (9,072 | ) | (9,164 | ) |
| Companhia   Brasileira de Alumínio (CBA)                       |       | Land leases                 |       | (2,669 | ) | (458 | ) | (441 | ) |
|                                                                |       |                        |       |   |   |   |   |   |   |
|                                                                |       |                        |       | 80,486 |   | 199,966 |   | (48,489 | ) |

 

**(iii)**                            **Comments on the main transactions and contracts with related parties**

 

**·****                ****Controlling shareholders**

 

The Company has a contract with VID related to services provided by the Votorantim Shared Service Center, which provides outsourcing of operational services relating to administrative activities, personnel, back office, accounting, taxes and the information technology infrastructure shared by the companies of the Votorantim Group. The contract provides for an overall remuneration of R$ 11 million and has a one-year term, with annual renewal upon formal confirmation by the parties.

 

Additionally, VID provide various services related to technical advice, training, including management improvement programs. These services are also provided to the entire Votorantim Group and the Company reimburses VID at cost for the charges related to the services used.

 

F-59

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

As from August 2015, due to the assignments of the land lease contracts made by Votorantim Metais and CBA to VID in July 2015, we have land lease contract with VID, with original maturities up to 2023, in the amount of R$ 80,558. The contracts were canceled in December 2015, after the purchase of these lands as mentioned below.

 

On December 28, 2015, we have executed private instruments of irrevocable and irreversible real estate purchase and sale commitment with VID, for: (i) the selling by us of the rural real estate located in the cities of Votorantim and Sorocaba, in the State of São Paulo, totaling 5,042 hectares, for the amount of R$ 171,700 and (ii) the purchase from VID of the rural real estate located in Capão Bonito and Itapeva, also in the State of São Paulo, totaling 33,994 hectares, for the amount of R$451,700. The amounts of the rural real state purchased and sold were negotiated between the parties based on independent appraisals. The operation was settled on the same date.

 

The Company has financing contracts with BNDES, the majority shareholder of BNDESPAR, for the purpose of financing investments in infrastructure and the acquisition of equipment and machines, as well as the expansion and modernization of its plants (Note 23).

 

Management believes that these transactions were contracted at terms consistent with those entered with independent parties, based on technical studies performed when these contracts were executed.

 

**·****                ****Votorantim Group companies**

 

The Company, through its VOTO IV joint-operation had an account receivable of US$ 3,000 thousand with Votorantim Participações S.A., which matured in July 2016 resulting in a receipt of R$11,714.

 

The Company has a commitment to purchase energy from Votener - Votorantim Comercializadora de Energia Ltda. to supply our units in Jacareí, Aracruz and Três Lagoas. Since these units already generate their own energy, the contract has the purpose of optimizing the energy matrix. The amount to be paid or received upon the sale of energy changes based on plant energy requirements. The total amount contracted is approximately R$ 700 for the services of energy to be rendered by Votener, maturing in 30 months, through December 31, 2015, renewable by agreement between the parties. In the event of early termination of the contract, that party is required to pay all obligations incurred up to effective date of termination of the contract.

 

In April 2015, Fibria-MS placed a marketable security investment with Banco Votorantim, maturing in April 2016 with an average annual interest rate of 102.1% of the CDI.

 

The Company has a derivative instrument contract with Banco Votorantim S.A. The Shareholders’ Agreement limits the intercompany investments to R$ 200 million for securities and R$ 220 million of notional value for derivative instruments.

 

Banco Votorantim had rendered advisory services to us during the process of issuance of the Agribusiness Credit Receivable Certificates by Fibria-MS, where we paid the total amount of R$ 649 regarding the fees for the structuring, distribution and success processes.

 

The Company contracted Votorantim CTVM Ltda. to render services related to the bid for the port of Santos terminal in the amount of R$ 80. Furthermore, the Votorantim CTVM Ltda. rendered services to us during the process of issuance of the Agribusiness Credit Receivable Certificates by Fibria-MS, where we paid distribution fees of R$ 203.

 

F-60

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

Votorantim Cimentos has an agreement with the Company for the supply of road construction supplies, such as rock and calcareous rock, in the amount of R$ 189 through January 2016.

 

The Company had an agreement with Votorantim Cimentos to sell 25,101 cubic meters of wood, signed in March 2014, in the amount of R$ 126, which was paid in September 2015.

 

In November 2015, the Company contracted Polimix Concreto Ltda. for rendering concreting services, in the amount of R$ 143.

 

On December 23, 2015, we signed a cession of rights and obligations agreement with Votorantim Siderurgia S.A. (“VS”) for the cession to us of the first cycle of rotation of the eucalyptus forests regarding existing contracts signed with rural producers from the State of Minas Gerais. As a consequence, we agreed with the payment in the amount of R$ 4,164 corresponding to the reimbursement of the value already paid in advance by VS to the rural producers regarding the existing contracts. The payment will be made as follows: 90% of the total within 20 days from signing of the cession and the remaining balance up to 20 days after the harvest.

 

The Company has an agreement with Pedreira Pedra Negra Ltda. for the supply of road construction supplies, such as rock and gravel, in the amount of R$ 363 through January 5, 2016.

 

The Company has an agreement to purchase sodium sulfate and sulfuric acid from Votorantim Metais, in the amount of R$ 6,438, for the supply of 4,000 metric tons of sodium sulfate and 11,000 tons of sulfuric acid, up to April 2016.

 

Until July 2015, the Company had land lease agreements, for approximately 22,400 hectares, with Votorantim Metais Ltda., with original maturity in 2019, totaling R$ 76,496, which was assigned by Votorantim Metais to VID, on the same conditions previously established.

 

Until July 2015, the Company had land lease agreements, for approximately 2,062 hectares, with Companhia Brasileira de Alumínio - CBA, with original maturity in 2023, totaling R$ 4,062, which were assigned by CBA to VID, on the same conditions previously established.

 

The Company also has a non-onerous assignment agreement with CBA through May 2016, for Terminal 32 in the Port of Santos which is used to export our pulp production.

 

In the years ended December 31, 2015 and 2014, no provision for impairment was recognized on assets involving related parties.

 

F-61

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(b)**                                 **Remuneration of officers and directors**

 

The remuneration expenses of the Fibria’s officers and directors, including all benefits, are summarized as follows:

 
| ** **                                                                 | ** ** | **2015** | ** ** | **2014** | ** ** | **2013** | ** ** |
|----------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                       |       |     |       |     |       |     |       |
| Benefits to officers and   directors                                       |       | 52,301   |       | 42,473   |       | 31,904   |       |
| Benefit program - Phantom Stock   Options and Stock Option plans (Note 30) |       | 15,931   |       | 7,934    |       | 5,425    |       |
|                                                                       |       |     |       |     |       |     |       |
|                                                                       |       | 68,232   |       | 50,407   |       | 37,329   |       |

 

Benefits include fixed compensation (salaries and fees, vacation pay and 13th month salary), social security contributions to the National Institute of Social Security (INSS), to the Government Severance Indemnity Fund for Employees (FGTS) and the variable compensation program.

 

Benefits to key management do not include the compensation for the Statutory Audit Committee, Finance, Compensation and Sustainability Committees’ members of R$ 1,154 for the year ended December 31, 2015 (R$ 1,354 for the year ended December 31, 2014 and R$ 1,286 for the year ended December 31, 2013).

 

The Company does not have any other post-employment plans and does not offer any other benefits, such as additional paid leave for time of service.

 

The balances to be paid to the Company’s officers and directors are recorded as follows:

 
| ** **                                    | ** ** | **2015** | ** ** | **2014** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|
|                                          |       |     |       |     |       |
| Current liability                             |       |     |       |     |       |
| Payroll, profit sharing and   related charges |       | 37,563   |       | 18,748   |       |
|                                          |       |     |       |     |       |
| Non-current liability                         |       |     |       |     |       |
| Other payables                                |       | 9,401    |       | 13,665   |       |
|                                          |       |     |       |     |       |
| Shareholders’ equity                     |       |     |       |     |       |
| Capital reserve                               |       | 9,329    |       | 918      |       |
|                                          |       |     |       |     |       |
|                                          |       | 56,293   |       | 33,331   |       |

 

F-62

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**17**                                  **Investments**

 
| ** **                                                  | ** ** | **2015** | ** ** | **2014** | ** ** |
|-------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                        |       |     |       |     |       |
| Investment in associate and   joint-venture - equity method |       | 14,380   |       | 13,987   |       |
| Provision for impairment of   investments                   |       | (13,629  | )          | (13,629  | )          |
| Other investments — at fair value   (b)                |       | 137,020  |       | 79,524   |       |
|                                                        |       |     |       |     |       |
|                                                        |       | 137,771  |       | 79,882   |       |

 

**(a)**                                 **Selected financial information of subsidiaries and joint-operations**

 
| ** **                                                       | ** ** | **Total********assets** | ** ** | **Total   liabilities** | ** ** | **Net********revenue** | ** ** |
|------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|------------------------|------------|
|                                                             |       |                    |       |                    |       |                   |       |
| Subsidiaries                                                     |       |                    |       |                    |       |                   |       |
| Direct                                                           |       |                    |       |                    |       |                   |       |
| Fibria Celulose (USA) Inc.                                       |       | 363,162                 |       | 227,410                 |       | 2,465,703              |       |
| Fibria Innovations Inc.                                          |       | 21,908                  |       | 544                     |       |                   |       |
| Fibria International Celulose   GmbH.                            |       | 2,173,017               |       | (2                      | )          |                   |       |
| Fibria Overseas Financial Ltd.                                   |       | 2,346,128               |       | 2,329,773               |       |                   |       |
| Fibria Overseas Holding KFT                                      |       | 2,322,618               |       | 12                      |       |                   |       |
| Fibria Terminais Portuários S.A.                       |       | 392                     |       | 2                       |       |                   |       |
| Fibria Trading International KFT.                                |       | 4,491,997               |       | (5                      | )          |                   |       |
| Fibria-MS Celulose Sul   Mato-Grossense Ltda.               |       | 7,390,030               |       | 2,520,272               |       | 1,598,514              |       |
| F&E Participações Ltda.                       |       | 200                     |       |                    |       |                   |       |
| Portocel - Terminal Especializado   Barra do Riacho S.A.    |       | 160,111                 |       | 31,637                  |       | 128,134                |       |
| Projetos Especiais e   Investimentos Ltda.                  |       | 5,370                   |       | 1,964                   |       |                   |       |
|                                                             |       |                    |       |                    |       |                   |       |
| Indirect                                                         |       |                    |       |                    |       |                   |       |
| F&E Tecnologia do Brasil S.A.                                |       | 200                     |       |                    |       |                   |       |
| Fibria (Europe) S.A.                                             |       | 3,539                   |       | 395                     |       |                   |       |
| Fibria International Trade GmbH.                                 |       | 12,798,063              |       | 10,625,096              |       | 8,845,901              |       |
| Green Parrot BV                                                  |       | 5                       |       | 1                       |       |                   |       |
|                                                             |       |                    |       |                    |       |                   |       |
| Joint-operations (*)                                             |       |                    |       |                    |       |                   |       |
| Asapir Produção Florestal e   Comércio Ltda. |       | 2,067                   |       | 774                     |       |                   |       |
| Veracel Celulose S.A.                                       |       | 1,942,842               |       | 511,725                 |       | 495,869                |       |
| Votorantim Overseas Trading   Operations Limited IV              |       | 660,771                 |       | 372,174                 |       |                   |       |

 

----

(*) Corresponding to our 50% interest.

 

None of the subsidiaries or the joint-operations entity has publicly traded shares.

 

The provisions and contingent liabilities related to the entities of the Company are described in Note 24.

 

Additionally, the Company does not have any significant restriction or commitments with regards to its associates and joint-operations.

 

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(b)**                                 **Other investments**

 

In December 2015, we acquired 176,803 common shares issued by Ensyn Corporation (“Ensyn”), a company incorporated and domiciled in the United States. The acquisition was settled with the payment in cash in the amount of US$ 5 million (equivalent then to R$ 19,593) plus the delivery for cancellation of 79,026 warrants held by us.

 

After the acquisition, we hold 12.62% of Ensyn’s capital and still have certain rights, which, if exercised, would allow us to subscribe an additional US$ 10 million in its capital.

 

We performed an assessment regarding the rights related to these shares and concluded that we do not have significant influence over Ensyn, and, thus, this investment does not meet the definition of an investment in an associate.

 

See below the changes in the investment for the year ended December 31, 2015 and 2014:

 
| ** **                                                                                       | ** ** | **2015** | ** ** | **2014** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                                             |       |     |       |     |       |
| At the beginning of the year                                                                     |       | 79,524   |       | 46,922   |       |
|                                                                                             |       |     |       |     |       |
| Acquisition of   ownership                                                                       |       | 19,593   |       | 25,967   |       |
| Fair value of   the warrants, recognized in the profit and loss (*)                              |       | 356      |       | (361     | )          |
| Foreign exchange   gains of the warrants, recognized in the profit and loss                      |       | 5,694    |       | 1,159    |       |
| Foreign exchange   gains of the shares, recognized in the “Other comprehensive income” |       | 31,853   |       | 5,837    |       |
|                                                                                             |       |     |       |     |       |
| At the end of   the year                                                                         |       | 137,020  |       | 79,524   |       |

 

----

(*)         The fair value of the warrants was calculated based on the discounted cash flow of the investment, considering the following main assumptions: future currency exchange rate, price of heating oil in the United States, oil gas WTI and any relevant change in the business plan of the investment.

 

**18**                                  **Biological assets**

 
| ** **                            | ** ** | **2015**   | ** ** | **2014**  | ** ** |
|---------------------------------------|------------|------------|------------|-----------|------------|
|                                  |       |       |       |      |       |
| At the beginning of the year          |       | 3,707,845  |       | 3,423,434 |       |
|                                  |       |       |       |      |       |
| Additions                             |       | 1,344,355  |       | 1,190,349 |       |
| Harvests in the year (depletion)      |       | (1,102,725 | )          | (959,251  | )          |
| Change in fair value - step up        |       | 184,583    |       | 51,755    |       |
| Disposals / provision for   disposals |       | (19,063    | )          | 1,817     |       |
| Transfer (i)                          |       | 3          |       | (259      | )          |
|                                  |       |       |       |      |       |
| At the end of   the year              |       | 4,114,998  |       | 3,707,845 |       |

 

----

(i) Includes transfers between biological assets and property, plant and equipment.

 

In determining the fair value of biological assets, the discounted cash flow model (“DCF”) was used, with projections based on a single scenario, with productivity and area of plantation (eucalyptus trees) for a harvest cycle of approximately seven years.

 

F-64

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

The projected cash flows are consistent with the project areas’ growing cycle. The volume of production of eucalyptus trees to be harvested was estimated considering the average productivity in cubic meters of wood from each plantation per hectare at the time of harvest, which is impacted by the distance between the farms and the mills. The average productivity index varies according to the genetic material, climate and soil conditions and the forestry management programs. This projected volume is based on the average annual growth by region.

 

The average net sales price was projected based on the estimated price for eucalyptus in the local market, through a market study and research of actual transactions, adjusted to reflect the price of standing timber by region. The average estimated cost contemplates expenses for selling, chemicals, control of growth, ant and other pest control, composting, road maintenance, inputs and labor services. Tax effects based on current rates, as well as the contribution of other assets, such as property, plant and equipment and land were considered in the estimated of average rates of return for those assets, based on the average of the existing lease agreements.

 

The valuation model considers the net cash flows after income taxes. The discount rate used also considers the tax effects.

 

Main inputs considered in estimating the fair value of biological assets were:

 
| ** **                                    | ** ** | **2015** | ** ** | **2014** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|
|                                          |       |     |       |     |       |
| Actual planted area (hectare)                 |       | 445,359  |       | 459,487  |       |
| Average annual growth (IMA) - m3/hectare      |       | 39       |       | 40       |       |
| Remuneration of own contributory   assets - % |       | 5.6      |       | 5.6      |       |
| Discount rate - %                             |       | 7.39     |       | 6.65     |       |

 

The prices used in the estimating of the fair value of biological assets, denominated in Reais/m3, are obtained through the prices of the Company’s transactions of wood purchasing with third parties and, when applicable and available, through market prices, disclosed by specialized company.

 

The increase in the fair value of biological assets during the year ended December 31, 2015 was the result of the combined fluctuation of the inputs presented above which resulted in a gain of R$ 184,583. The changes in the fair value of the biological assets are recognized in the profit and loss, within “Other operating income (expenses)” (Note 33).

 
| ** **                                            | ** ** | **2015** | ** ** | **2014** | ** ** |
|-------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                  |       |     |       |     |       |
| Fair value of the renovation of   forests in the year |       | (211,293 | )          | (197,088 | )          |
| Growing of plantation (IMA, area   and age)           |       | 28,086   |       | 69,153   |       |
| Variation of price and discount   rate                |       | 367,790  |       | 179,690  |       |
|                                                  |       |     |       |     |       |
|                                                  |       | 184,583  |       | 51,755   |       |

 

Fair values of biological assets as of December 31, 2015 and 2014 were estimated by management.

 

The Company has no biological assets pledged as of December 31, 2015.

 

F-65

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**19**                                  **Property, plant and equipment**

 
| ** **                                   | ** ** | **Land**  | ** ** | **Buildings** | ** ** | **Machinery,   equipment   and facilities** | ** ** | **Property, plant   and equipment   in progress (i)** | ** ** | **Other** | ** ** | **Total**  | ** ** |
|----------------------------------------------|------------|-----------|------------|---------------|------------|--------------------------------------------------|------------|---------------------------------------------------------------------------|------------|-----------|------------|------------|------------|
|                                         |       |      |       |          |       |                                             |       |                                                                      |       |      |       |       |       |
| At December 31, 2013                    |       | 1,249,332 |       | 1,426,592     |       | 6,902,717                                        |       | 215,346                                                                   |       | 30,517    |       | 9,824,504  |       |
| Additions                                    |       |      |       | 18            |       | 6,325                                            |       | 341,436                                                                   |       | 1,715     |       | 349,494    |       |
| Disposals                                    |       | (57,202   | )          | (10,140       | )          | (44,467                                          | )          | (3,726                                                                    | )          | (11,306   | )          | (126,841   | )          |
| Depreciation                                 |       |      |       | (128,368      | )          | (657,191                                         | )          |                                                                      |       | (12,081   | )          | (797,640   | )          |
| Transfers and others (ii)                    |       | 8,382     |       | 70,614        |       | 250,403                                          |       | (335,429                                                                  | )          | 9,246     |       | 3,216      |       |
|                                         |       |      |       |          |       |                                             |       |                                                                      |       |      |       |       |       |
| At December 31, 2014                    |       | 1,200,512 |       | 1,358,716     |       | 6,457,787                                        |       | 217,627                                                                   |       | 18,091    |       | 9,252,733  |       |
| Additions                                    |       | 453,775   |       | 335           |       | 3,640                                            |       | 553,291                                                                   |       | 1,903     |       | 1,012,944  |       |
| Disposals                                    |       | (17,367   | )          | (6,056        | )          | (16,005                                          | )          |                                                                      |       | (887      | )          | (40,315    | )          |
| Depreciation                                 |       |      |       | (112,005      | )          | (653,595                                         | )          |                                                                      |       | (14,368   | )          | (779,968   | )          |
| Acquisition of assets - Fibria   Innovations |       |      |       |          |       | 4,212                                            |       |                                                                      |       |      |       | 4,212      |       |
| Transfers and others (ii)                    |       |      |       | 50,294        |       | 184,508                                          |       | (303,900                                                                  | )          | 52,878    |       | (16,220    | )          |
|                                         |       |      |       |          |       |                                             |       |                                                                      |       |      |       |       |       |
| At December 31, 2015                    |       | 1,636,920 |       | 1,291,284     |       | 5,980,547                                        |       | 467,018                                                                   |       | 57,617    |       | 9,433,386  |       |
|                                         |       |      |       |          |       |                                             |       |                                                                      |       |      |       |       |       |
| At December 31, 2014                    |       |      |       |          |       |                                             |       |                                                                      |       |      |       |       |       |
| Cost                                         |       | 1,200,512 |       | 2,683,585     |       | 13,256,939                                       |       | 217,627                                                                   |       | 168,474   |       | 17,527,137 |       |
| Accumulated depreciation                     |       |      |       | (1,324,869    | )          | (6,799,152                                       | )          |                                                                      |       | (150,383  | )          | (8,274,404 | )          |
| Net                                          |       | 1,200,512 |       | 1,358,716     |       | 6,457,787                                        |       | 217,627                                                                   |       | 18,091    |       | 9,252,733  |       |
|                                         |       |      |       |          |       |                                             |       |                                                                      |       |      |       |       |       |
| At December 31, 2015                    |       |      |       |          |       |                                             |       |                                                                      |       |      |       |       |       |
| Cost                                         |       | 1,636,920 |       | 2,723,578     |       | 13,360,212                                       |       | 467,018                                                                   |       | 218,881   |       | 18,406,609 |       |
| Accumulated depreciation                     |       |      |       | (1,432,294    | )          | (7,379,665                                       | )          |                                                                      |       | (161,264  | )          | (8,973,223 | )          |
| Net                                          |       | 1,636,920 |       | 1,291,284     |       | 5,980,547                                        |       | 467,018                                                                   |       | 57,617    |       | 9,433,386  |       |

 

----

(i)             Includes the amount of R$ 265,929 for the Horizonte 2 Project.

 

(ii)          Includes transfers between property, plant and equipment, biological assets, intangible assets and inventory.

 

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Table of Contents

 

**Fibria Celulose S.A.**

** **

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

The annual average depreciation rates for property plant and equipment as of December 31, 2015 and 2014, based on their useful life, are as follow:

 
| ** **                            | ** ** | **Average rates** | ** ** |
|---------------------------------------|------------|------------------------|------------|
|                                  |       |                   |       |
| Buildings                             |       | 4%                     |       |
| Machinery, equipment and   facilities |       | 5.5%                   |       |
| Others                                |       | 10% to 20%             |       |

 

The balance of property, plant and equipment in progress is comprised mainly of expansion and optimization projects of the Company’s industrial units, being R$ 28,036 in the Jacareí unit, R$ 40,032 of forest area projects, R$321,038 of Fibria-MS, R$ 47,446 in the Aracruz unit and R$ 13,159 in Veracel.

 

Borrowing costs capitalized were calculated based on the weighted average cost of the eligible loans. During 2015 the average rate applied was 15.32% p.a.

 

Property, plant and equipment given as collateral are disclosed in Note 23(i).

 

The Company currently does not have items of fixed assets for which it expects to abandon or dispose or for which provision for asset retirement obligations would be required.

 

**20**                                 **Intangible assets**

 
| ** **                                                         | ** ** | **Annual**             | ** ** | **2015**   | ** ** | **2014**         | ** ** |
|--------------------------------------------------------------------|------------|------------------------|------------|------------|------------|------------------|------------|
| ** **                                                         | ** ** | **amortization**       | ** ** | ** ** | ** ** | **Accumulated**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                         | ** ** | **rate - %** | ** ** | **Cost**   | ** ** | **amortization** | ** ** | **Net** | ** ** | **Net** | ** ** |
|                                                               |       |                   |       |       |       |             |       |   |   |   |   |
| Goodwill — Aracruz                                            |       |                   |       | 4,230,450  |       |             |       | 4,230,450 |   | 4,230,450 |   |
| Systems development and   deployment                               |       | 20                     |       | 178,146    |       | (149,469         | )          | 28,677 |   | 26,703 |   |
| Intangible assets acquired in the   business combination - Aracruz |       |                   |       |       |       |             |       |   |   |   |   |
| Databases                                                          |       | 10                     |       | 456,000    |       | (319,200         | )          | 136,800 |   | 182,400 |   |
| Patents                                                            |       | 15.9                   |       | 129,000    |       | (129,000         | )          |   |   | 5,160 |   |
| Relationship with suppliers                                        |       |                   |       |       |       |             |       |   |   |   |   |
| Chemical products                                                  |       | 6.3                    |       | 165,000    |       | (72,188          | )          | 92,812 |   | 103,125 |   |
| Other                                                              |       |                   |       | 17,516     |       | (621             | )          | 16,895 |   | 4,265 |   |
|                                                               |       |                   |       |       |       |             |       |   |   |   |   |
|                                                               |       |                   |       | 5,176,112  |       | (670,478         | )          | 4,505,634 |   | 4,552,103 |   |

 

F-67

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Table of Contents

 

**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(a)**                                **Roll forward of net book value**

 
| ** **                   | ** ** | **2015**  | ** ** | **2014**  | ** ** |
|------------------------------|------------|-----------|------------|-----------|------------|
|                         |       |      |       |      |       |
| At the beginning of the year |       | 4,552,103 |       | 4,634,265 |       |
| Additions                    |       | 8         |       | 40        |       |
| Amortization                 |       | (76,021   | )          | (90,854   | )          |
| Disposals                    |       | (67       | )          | (20       | )          |
| Transfers and others (*)     |       | 29,611    |       | 8,672     |       |
|                         |       |      |       |      |       |
| At the end of the year       |       | 4,505,634 |       | 4,552,103 |       |

 

----

(*) Includes transfers between property, plant and equipment and intangible assets.

 

Amortization of intangible assets was recorded in “General and administrative expenses” and “Other operating income (expenses), net”.

 

The impairment test for the goodwill related to the Aracruz is described in Note 37.

 

**21**                                 **Finance and operating lease agreements**

 

**(a)**                                **Financial leases**

 

Financial leases correspond to the purchase of forestry equipment for harvesting trees and transporting timber as also for purchase of industrial equipment for processing of chemicals and oxygen. The financial lease agreements have purchase options at the end of the lease term.

 

The assets are recognized substantially under “Machinery, equipment and facilities” within property, plant and equipment and the respective obligations under “Other payables”.

 
| ** **                       | ** ** | **2015**   | ** ** | **2014**         | ** ** |
|----------------------------------|------------|------------|------------|------------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **Accumulated**  | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                       | ** ** | **Cost**   | ** ** | **depreciation** | ** ** | **Net** | ** ** | **Net** | ** ** |
|                             |       |       |       |             |       |   |   |   |   |
| Forestry equipment               |       | 1,813      |       | (1,813           | )          |   |   | 8 |   |
| Oxygen and   chemical facilities |       | 88,990     |       | (38,341          | )          | 50,649 |   | 56,329 |   |
|                             |       |       |       |             |       |   |   |   |   |
|                             |       | 90,803     |       | (40,154          | )          | 50,649 |   | 56,337 |   |

 

Present value and future minimum payments:

 
| **Years**    | ** ** | **Present value** | ** ** | **Future ****v****alue** | ** ** |
|--------------|------------|------------------------|------------|-------------------------------|------------|
|         |       |                   |       |                          |       |
| 2016         |       | 11,656                 |       | 18,895                        |       |
| 2017 to 2021 |       | 47,978                 |       | 94,473                        |       |
| After 2021   |       | 16,919                 |       | 42,512                        |       |
|         |       |                   |       |                          |       |
|         |       | 76,553                 |       | 155,880                       |       |

 

There are no restrictions imposed by financial lease agreements.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

** **

**(b)**                                **Operating leases**

 

***(i)***                                   ***Minimum non-cancellable payments***

 

·             Land leases - the Company leases land for planting forests based on third-party operational leases supplementing raw materials for its production. The leases are for a period of up to 21 years. Lease payments, equivalent to market value are made according to the contract. The land lease agreements have renewal options of the lease period at market value.

 

·             Coastal transportation - the Company has 20-year coastal freight service contracts, ending in 2023, for the domestic transportation by sea of raw materials utilizing maritime barges from the Caravelas (BA) to Portocel (ES) Terminals.

 

·             Ocean transportation - the Company has 25-year sea freight services contracts, ending in 2039, with STX Pan Ocean Co. Ltd. for transportation of pulp from Brazil to several ports in Europe, North America and Asia.

 

At December 31, 2015, minimum payments of future operating leases are as follows:

 
| ** **   | ** ** | ** **           | ** ** | **Coastal**   | ** ** | **Ocean**     | ** ** |
|--------------|------------|----------------------|------------|---------------|------------|---------------|------------|
| **Years**    | ** ** | **Land leases** | ** ** | **transport** | ** ** | **transport** | ** ** |
|         |       |                 |       |          |       |          |       |
| 2016         |       | 119,427              |       | 65,544        |       | 146,315       |       |
| 2017 to 2018 |       | 220,637              |       | 131,089       |       | 292,630       |       |
| 2019 to 2021 |       | 336,561              |       | 196,633       |       | 438,945       |       |
| After 2022   |       | 407,267              |       | 131,089       |       | 2,404,443     |       |
|         |       |                 |       |          |       |          |       |
|         |       | 1,083,892            |       | 524,355       |       | 3,282,333     |       |

 

***(ii)***                               ***Contingent payments***

 

·             *Forestry partnership agreements* — on December 30, 2013, the Company entered into a forestry partnership and a standing timber supply agreement for a maximum term of 24 years, with contingent payments related to the repurchase of the standing timber that the counterparty has the right to receive. The purchase price is established in U.S. Dollars, as defined in the contract, and adjusted according to the US-CPI index.

 

Since there is not a mandatory volume of timber determined by the forestry partnership agreement that could guarantee a minimum payment to the counterparty, there are no minimum future payments to be disclosed by the Company.

 

**22**                                 **Advances to suppliers - forestry partnership programs**

 

The program, which commenced in 1990, in the States of Espírito Santo and expanded to the States of Bahia, Minas Gerais, São Paulo, Mato Grosso do Sul, Rio Grande do Sul and Rio de Janeiro, is directed towards planting eucalyptus forests on the land of partners. Under the program, the Company provides technology, technical assistance, inputs and funding depending on the type of agreement, and is guaranteed wood for its pulp production. These advances will be settled through delivery of wood by forest producers.

 

F-69

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 
| ** **                   | ** ** | **2015** | ** ** | **2014** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
|                         |       |     |       |     |       |
| At the beginning of the year |       | 695,171  |       | 726,064  |       |
| Advances made                |       | 30,084   |       | 116,717  |       |
| Wood harvested               |       | (65,141  | )          | (83,366  | )          |
| Transfers to forests         |       | (29,552  | )          | (64,244  | )          |
|                         |       |     |       |     |       |
| At the end of the year       |       | 630,562  |       | 695,171  |       |

 

**23**                                 **Loans and financing**

 

**(a)**                                **Breakdown by type of loan**

 
| ** **                            | ** ** | **Interest** | ** ** | **Average********annual********interest** | ** ** | **Current** | ** ** | **Non-current** | ** ** | **Total**  | ** ** |
|---------------------------------------|------------|--------------|------------|-------------------------------------------|------------|-------------|------------|-----------------|------------|------------|------------|
| **Type/purpose**                      | ** ** | **rate**     | ** ** | **rate - %**                    | ** ** | **2015**    | ** ** | **2014**        | ** ** | **2015**   | ** ** | **2014** | ** ** | **2015** | ** ** | **2014** | ** ** |
|                                  |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
| In   foreign currency                 |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
| BNDES   - currency basket             |       | UMBNDES      |       | 6.4                                       |       | 78,632      |       | 62,307          |       | 652,610    |       | 409,594 |   | 731,242 |   | 471,901 |   |
| Bonds   - US$ (*)                |       | Fixed        |       | 5.6                                       |       | 15,801      |       | 11,154          |       | 2,686,105  |       | 1,825,189 |   | 2,701,906 |   | 1,836,343 |   |
| Export   credits (prepayment)         |       | LIBOR        |       |                                      |       | 595,795     |       | 190,707         |       | 6,141,049  |       | 3,518,474 |   | 6,736,844 |   | 3,709,181 |   |
| Export   credits (ACC/ACE)            |       | Fixed        |       | 2.8                                       |       | 45,123      |       | 263,120         |       |       |       |   |   | 45,123 |   | 263,120 |   |
|                                  |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
|                                  |       |         |       |                                      |       | 735,351     |       | 527,288         |       | 9,479,764  |       | 5,753,257 |   | 10,215,115 |   | 6,280,545 |   |
|                                  |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
| In   Reais                            |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
| BNDES                                 |       | TJLP         |       | 10.3                                      |       | 186,937     |       | 320,838         |       | 776,421    |       | 870,720 |   | 963,358 |   | 1,191,558 |   |
| BNDES                                 |       | Fixed        |       | 5.5                                       |       | 29,745      |       | 16,654          |       | 100,460    |       | 76,020 |   | 130,205 |   | 92,674 |   |
| BNDES                                 |       | Selic        |       | 2.4                                       |       | 18          |       |            |       | 26,585     |       |   |   | 26,603 |   |   |   |
| FINAME                                |       | TJLP/Fixed   |       | 3.8                                       |       | 3,236       |       | 4,978           |       | 2,226      |       | 5,451 |   | 5,462 |   | 10,429 |   |
| CRA                                   |       | CDI          |       | 16.2                                      |       | 16,687      |       |            |       | 659,275    |       |   |   | 675,962 |   |   |   |
| NCE                                   |       | CDI          |       | 16.6                                      |       | 88,855      |       | 83,507          |       | 613,177    |       | 630,742 |   | 702,032 |   | 714,249 |   |
| Midwest   Region Fund (FCO and FINEP) |       | Fixed        |       | 8.1                                       |       | 12,048      |       | 12,124          |       | 13,047     |       | 24,940 |   | 25,095 |   | 37,064 |   |
|                                  |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
|                                  |       |         |       |                                      |       | 337,526     |       | 438,101         |       | 2,191,191  |       | 1,607,873 |   | 2,528,717 |   | 2,045,974 |   |
|                                  |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
|                                  |       |         |       |                                      |       | 1,072,877   |       | 965,389         |       | 11,670,955 |       | 7,361,130 |   | 12,743,832 |   | 8,326,519 |   |
|                                  |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
| Interest                              |       |         |       |                                      |       | 94,172      |       | 51,957          |       | 109,658    |       | 65,710 |   | 203,830 |   | 117,667 |   |
| Short-term   borrowing                |       |         |       |                                      |       | 44,905      |       | 262,739         |       |       |       |   |   | 44,905 |   | 262,739 |   |
| Long-term   borrowing                 |       |         |       |                                      |       | 933,800     |       | 650,693         |       | 11,561,297 |       | 7,295,420 |   | 12,495,097 |   | 7,946,113 |   |
|                                  |       |         |       |                                      |       |        |       |            |       |       |       |   |   |   |   |   |   |
|                                  |       |         |       |                                      |       | 1,072,877   |       | 965,389         |       | 11,670,955 |       | 7,361,130 |   | 12,743,832 |   | 8,326,519 |   |

 

----

| (*) | Includes   US$ 600 million (equivalent then to R$ 2,359,280 as at December 31,   2015), regarding Fibria 2024 issued by Fibria Overseas Finance Ltd., fully   and unconditionally guaranteed by the Company. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

The average rates were calculated based on the forward yield curve of benchmark rates to which the loans are indexed, weighted through the maturity date for each installment, including the issuing/contracting costs, when applicable.

 

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**Fibria Celulose S.A.**

 

**Notes to the consolidated financial statements  at December 31, 2015**

**In thousands of Reais, unless otherwise indicated**

 

**(b)**                                **Breakdown by maturity**

 

Non-current portion of the debt at December 31, 2015:

 
| ** **                          | ** ** | **2017**  | ** ** | **2018**  | ** ** | **2019**  | ** ** | **2020**  | ** ** | **2021**  | ** ** | **2022** | ** ** | **2023** | ** ** | **2024**  | ** ** | **Total**  | ** ** |
|-------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|-----------|------------|----------|------------|----------|------------|-----------|------------|------------|------------|
|                                |       |      |       |      |       |      |       |      |       |      |       |     |       |     |       |      |       |       |       |
| In   foreign currency               |       |      |       |      |       |      |       |      |       |      |       |     |       |     |       |      |       |       |       |
| BNDES   - currency basket           |       | 90,068    |       | 80,467    |       | 65,354    |       | 179,567   |       | 188,974   |       | 43,035   |       | 5,145    |       |      |       | 652,610    |       |
| Bonds   - US$                       |       |      |       |      |       |      |       | 372,732   |       |      |       |     |       |     |       | 2,313,373 |       | 2,686,105  |       |
| Export   credits (prepayment)       |       | 493,339   |       | 1,387,564 |       | 2,947,810 |       | 434,071   |       | 878,265   |       |     |       |     |       |      |       | 6,141,049  |       |
|                                |       |      |       |      |       |      |       |      |       |      |       |     |       |     |       |      |       |       |       |
|                                |       | 583,407   |       | 1,468,031 |       | 3,013,164 |       | 986,370   |       | 1,067,239 |       | 43,035   |       | 5,145    |       | 2,313,373 |       | 9,479,764  |       |
|                                |       |      |       |      |       |      |       |      |       |      |       |     |       |     |       |      |       |       |       |
| In   Reais                          |       |      |       |      |       |      |       |      |       |      |       |     |       |     |       |      |       |       |       |
| BNDES   - TJLP                      |       | 162,010   |       | 117,616   |       | 87,967    |       | 153,299   |       | 164,678   |       | 53,433   |       | 25,084   |       | 12,334    |       | 776,421    |       |
| BNDES   - Fixed rate                |       | 31,175    |       | 30,406    |       | 24,302    |       | 12,410    |       | 2,000     |       | 167      |       |     |       |      |       | 100,460    |       |
| BNDES   - Selic                     |       |      |       |      |       |      |       |      |       |      |       | 1,129    |       | 13,543   |       | 11,913    |       | 26,585     |       |
| FINAME                              |       | 2,059     |       | 167       |       |      |       |      |       |      |       |     |       |     |       |      |       | 2,226      |       |
| CRA                                 |       |      |       |      |       |      |       |      |       | 659,275   |       |     |       |     |       |      |       | 659,275    |       |
| NCE                                 |       | 279,143   |       | 247,585   |       | 43,225    |       | 43,224    |       |      |       |     |       |     |       |      |       | 613,177    |       |
| Midwest   Region Fund (FCO e FINEP) |       | 11,893    |       | 659       |       | 495       |       |      |       |      |       |     |       |     |       |      |       | 13,047     |       |
|                                |       |      |       |      |       |      |       |      |       |      |       |     |       |     |       |      |       |       |       |
|                                |       | 486,280   |       | 396,433   |       | 155,989   |       | 208,933   |       | 825,953   |       | 54,729   |       | 38,627   |       | 24,247    |       | 2,191,191  |       |
|                                |       |      |       |      |       |      |       |      |       |      |       |     |       |     |       |      |       |       |       |
|                                |       | 1,069,687 |       | 1,864,464 |       | 3,169,153 |       | 1,195,303 |       | 1,893,192 |       | 97,764   |       | 43,772   |       | 2,337,620 |       | 11,670,955 |       |

 

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**(c)**                                 **Breakdown by currency**

 
| ** **      | ** ** | **Currency** | ** ** |
|-----------------|------------|--------------|------------|
| ** **      | ** ** | **2015**     | ** ** | **2014** | ** ** |
|            |       |         |       |   |   |
| Real            |       | 2,502,114    |       | 2,045,974 |   |
| U.S. Dollar     |       | 9,483,873    |       | 5,808,644 |   |
| Selic           |       | 26,603       |       |   |   |
| Currency basket |       | 731,242      |       | 471,901 |   |
|            |       |         |       |   |   |
|            |       | 12,743,832   |       | 8,326,519 |   |

 

**(d)**                                **Amortization of transaction costs**

 

Annual effects of the amortization of transaction costs on the effective interest rate method:

 
| ** **                  | ** ** | **2015** | ** ** |
|-----------------------------|------------|----------|------------|
| **Descri****pti****o****n** | ** ** | **2016** | ** ** | **2017** | ** ** | **2018** | ** ** | **2019** | ** ** | **2020** | ** ** | **After   2021** | ** ** | **Total** | ** ** |
|                        |       |     |       |   |   |   |   |   |   |   |   |   |   |   |   |
| BNDES                       |       | 401      |       | 401 |   | 401 |   | 395 |   | 358 |   | 755 |   | 2,711 |   |
| Bond - USD                  |       | 4,592    |       | 4,592 |   | 4,592 |   | 4,592 |   | 4,049 |   | 11,978 |   | 34,395 |   |
| CRA                         |       | 2,696    |       | 2,696 |   | 2,695 |   | 2,696 |   | 2,696 |   | 2,246 |   | 15,725 |   |
| Export credits (prepayment) |       | 8,708    |       | 8,708 |   | 8,371 |   | 6,071 |   | 5,117 |   | 200 |   | 37,175 |   |
|                        |       |     |       |   |   |   |   |   |   |   |   |   |   |   |   |
|                        |       | 16,397   |       | 16,397 |   | 16,059 |   | 13,754 |   | 12,220 |   | 15,179 |   | 90,006 |   |

 

The capitalization of transaction costs for loans and financing increases the average effective cost of the debt by 0.08% p.a.

 

**(e)**                                 **Roll forward**

 
| ** **                                | ** ** | **2015**   | ** ** | **2014**   | ** ** |
|-------------------------------------------|------------|------------|------------|------------|------------|
|                                      |       |       |       |       |       |
| At the beginning   of year                |       | 8,326,519  |       | 9,773,097  |       |
| Borrowings                                |       | 3,118,475  |       | 4,382,345  |       |
| Interest expense                          |       | 479,287    |       | 475,780    |       |
| Foreign exchange   losses                 |       | 3,037,653  |       | 690,271    |       |
| Repayments -   principal amount           |       | (1,800,670 | )          | (6,636,153 | )          |
| Interest paid                             |       | (405,546   | )          | (491,173   | )          |
| Bond early   redemption transaction costs |       |       |       | 133,233    |       |
| Additional   transaction costs            |       | (30,486    | )          | (36,736    | )          |
| Other (*)                                 |       | 18,600     |       | 35,855     |       |
|                                      |       |       |       |       |       |
| At the end of   the year                  |       | 12,743,832 |       | 8,326,519  |       |

 

----

(*)                                 Includes amortization of transactions costs.

 

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**(f)**                                  **Significant operations contracted in the year**

 

*Export credits - ACC*

 

In 2015, the Company, through its jointly-operation Veracel, entered into export contracts (ACC) in the amount of US$ 54 million (equivalent then to R$ 167,696), which matures through February 2016 and accrue a fixed interest rate between 1.02% and 1.30% p.a.

 

*BNDES*

 

In 2015, the Company drew down R$ 253,897 from BNDES  with maturities between 2015 and 2024, accruing interest between TJLP plus 2.00% p.a. and 3.42% p.a., UMBNDES plus 2.42% p.a. and 2.48% p.a. and fixed interest rate between 4.00% and 10.00%. The proceeds were used in industrial, forestry and IT projects.

 

*Export credits (prepayments)*

 

In August 2015, the Company, through its subsidiary Fibria International Trade GMBH, signed an amendment to the export prepayment contract in the amount of US$ 400 million (equivalent then to R$ 1,390,040). The releases were made in three installments, being (i) the first in the amount of US$ 98 million, maturing through 2019 and interest rate of 1.30% p.a. over the quarterly LIBOR; (ii) the second in the amount of US$ 144 million, maturing through 2019 and interest rate of 1.40% p.a. over the quarterly LIBOR and, (iii) the third in the amount of US$ 158 million, maturing through 2021 and interest rate of 1.55% p.a. over the quarterly LIBOR. This line is intended to finance the Horizonte 2 Project.

 

*Agribusiness Credit Receivable Certificates - CRA*

 

In September 2015, the Company concluded the public distribution of 675 thousand Agribusiness Credit Receivable Certificates to be issued by Eco Securitizadora de Direitos Creditórios do Agronegócio S.A. in the total amount of R$ 675 million, with an interest rate of 99% of CDI, payments of interest semi-annually and final maturity for the principal in October 2021. The funding will be used for the purchase of goods and hiring of services in connection with Horizonte 2 Project. The Agribusiness Credit Receivable Certificates are backed by agribusiness credit rights assigned by Itaú Unibanco S.A., from the Export Credit Note to be issued by Fibria-MS, guaranteed by the Company. The funds were received by the Company on October 23, 2015.

 

**(g)**                                **Covenants**

 

Some of the financing agreements of the Company contain covenants establishing indebtedness ceilings and leverage indices, as well as minimum coverage of outstanding amounts.

 

The Company’s debt financial covenants are measured based on consolidated information translated into U.S. Dollars. The covenants specify that the indebtedness ratio (Net debt to Adjusted EBITDA, as defined (Note 4.2.2)) cannot exceed 4.5x.

 

The Company is in full compliance with the covenants established in the financial contracts at December 31, 2015.

 

The loan indentures with debt financial covenants also present the following events of default:

 

·             Non-payment, within the stipulated period, of the principal or interest.

 

·             Inaccuracy of any declaration, guarantee or certification provided.

 

·             Cross-default and cross-judgment default, subject to an agreed.

 

·             Subject to certain periods for resolution, breach of any obligation under the contract.

 

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·             Certain events of bankruptcy or insolvency of the Company, its main subsidiaries or Veracel.

 

**(h)**                                **Loans and financing guarantees**

 

At December 31, 2015, certain loans and financing are guaranteed mainly by property, plant and equipment items from the Jacareí and Aracruz units, with a net book value of R$ 3,633,149 (December 31, 2014 - R$ 6,541,124, from the Três Lagoas, Jacareí and Aracruz units), considered sufficient to cover the corresponding loans and financing amounts.

 

**(i)**                                   **Unused credit lines**

 
| **Credit lines**       | ** ** | **Entities**                     | ** ** | **Amount**           | ** ** | **Maturity** | ** ** | **Cost**                                    | ** ** | **Commission**             |
|-----------------------------|------------|----------------------------------|------------|----------------------|------------|--------------|------------|---------------------------------------------|------------|----------------------------|
|                        |       |                             |       |                 |       |         |       |                                        |       |                       |
| Revolving credit   facility |       | Fibria Celulose S.A.             |       | R$300 million        |       | 2018         |       | 100% of CDI plus 2.1% p.a.                  |       | 0.35% p.a.                 |
| Revolving credit   facility |       | Fibria Celulose S.A.             |       | R$250 million        |       | 2018         |       | 100% of CDI plus 2.1% p.a.                  |       | 0.33% p.a.                 |
| Revolving credit   facility |       | Fibria International Trade GMBH. |       | US$ 280 million |       | 2018         |       | 1.55% p.a. to 1.70% p.a. plus LIBOR 3M |       | 35% of the agreed *spread* |
| Stand by facility           |       | Fibria Celulose S.A.             |       | R$300 million        |       | 2018         |       | Semi-annual of CDI plus 1.50% p.a.          |       | 0.50% p.a.                 |

 

The Company has not used these credits facilities. The value related to the commissions is recorded as a current liability under “Other payable”.

 

The total amount paid related to unused credit lines at December 31, 2015 was R$ 8,448 (R$ 5,493 as at December 31, 2014).

 

**24**                                 **Contingencies**

 
| ** **       | ** ** | **2015**                | ** ** | **2014**      | ** ** |
|------------------|------------|-------------------------|------------|---------------|------------|
| ** **       | ** ** | **Judicial   deposits** | ** ** | **Provision** | ** ** | **Net** | ** ** | **Judicial   deposits** | ** ** | **Provision** | ** ** | **Net** | ** ** |
|             |       |                    |       |          |       |   |   |   |   |   |   |   |   |
| Nature of claims |       |                    |       |          |       |   |   |   |   |   |   |   |   |
| Tax              |       | 96,997                  |       | 106,571       |       | 9,574 |   | 88,858 |   | 100,604 |   | 11,746 |   |
| Labor            |       | 64,429                  |       | 201,561       |       | 137,132 |   | 52,304 |   | 174,179 |   | 121,875 |   |
| Civil            |       | 18,918                  |       | 37,537        |       | 18,619 |   | 16,400 |   | 27,361 |   | 10,961 |   |
|             |       |                    |       |          |       |   |   |   |   |   |   |   |   |
|             |       | 180,344                 |       | 345,669       |       | 165,325 |   | 157,562 |   | 302,144 |   | 144,582 |   |

 

The Company has tax and civil claims arising in the normal course of business that are assessed as possible (but not probable) losses by Management, as supported by outside legal counsel. No provision has been recorded to cover possible unfavorable outcomes from these claims. At December 31, 2015, these claims amount to: tax R$ 6,830,705 (item (b) below) (R$ 5,470,144 as at December 31, 2014) and civil R$ 1,540,725 (item (d) below) (R$ 1,234,542 as at December 31, 2014).

 

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The change in the provision for legal proceeds is as follows:

 
| ** **                   | ** ** | **2015** | ** ** | **2014** | ** ** |
|------------------------------|------------|----------|------------|----------|------------|
|                         |       |     |       |     |       |
| At the beginning of the year |       | 302,144  |       | 280,512  |       |
| Settlement                   |       | (16,334  | )          | (7,280   | )          |
| Reversal                     |       | (38,196  | )          | (37,458  | )          |
| New litigation               |       | 37,089   |       | 17,723   |       |
| Accrual of financial charges |       | 60,966   |       | 48,647   |       |
|                         |       |     |       |     |       |
| At the end of the year       |       | 345,669  |       | 302,144  |       |

 

**(a)**                                **Probable tax contingencies**

 

The tax claims representing probable loss reflect discussions related to federal, state and municipal taxes, for which, substantially, there are judicial deposits as collateral, so there is no material exposure.

 

**(b)**                                **Possible tax contingencies**

 
| ** **                                                                                                              | ** ** | **Estimated   Amount** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|
|                                                                                                                    |       |                   |       |
| Tax incentive - ADENE development   agency (i)                                                                          |       | 121,970                |       |
| IRPJ/CSL - partial approval (ii)                                                                                        |       | 196,908                |       |
| IRPJ/CSLL - Newark (iii)                                                                                                |       | 256,937                |       |
| Income tax assessment - IRPJ/CSLL   - swap of industrial and forestry assets (iv)                                       |       | 1,633,796              |       |
| Income tax assessment - IRPJ/CSLL   - Fibria Trading International (v)                                                  |       | 336,945                |       |
| Income tax assessment - IRPJ/CSLL   - Fibria Trading International II (vi)                                              |       | 323,027                |       |
| Income tax assessment - IRPJ/CSLL   - Fibria Overseas Holding (vii)                                                     |       | 84,083                 |       |
| Income tax assessment - IRPJ/CSLL   - disallowance of depreciation, amortization and depletion expenses - 2010   (viii) |       | 548,958                |       |
| Income tax assessment - IRPJ/CSLL   - FTI and FIT 2011 (ix)                                                             |       | 52,404                 |       |
| Other tax liabilities (x)                                                                                               |       | 3,275,677              |       |
|                                                                                                                    |       |                   |       |
| Total possible tax contingencies                                                                                        |       | 6,830,705              |       |

 

----

(i)            Tax incentive - Agency for the Development of Northeastern Brazil (ADENE)

 

In 2002 the Company was granted its request by the Brazilian Federal Revenue Service (*Receita Federal do Brasil*) to benefit from reductions in corporate income tax and non-refundable surcharges calculated on operating profits (as defined) for Aracruz plants A and B (period from 2003 to 2013) and plant C (period from 2003 to 2012), when the qualification reports for the tax reductions are approved by ADENE.

 

In 2004, the Company was served an Official Notice by the liquidator of the former Superintendence for the Development of the Northeast (SUDENE), who reported that, the right to use the benefit previously granted is unfounded and will be cancelled. In 2005, the Brazilian Federal Revenue Service served the Company an assessment notice requiring the payment of the amounts of the tax incentive used, plus interest. After administrative discussion, the assessment notice was partially upheld and recognized the Company’s right to the tax incentive through 2003.

 

The Company’s Management, supported by its legal counsel, believes that the decision to cancel the tax benefits is erroneous and should not prevail, either with respect to benefits already used, or with respect to benefits not used until the corresponding final periods.

 

Currently, the claim is under discussion in the judicial level, where it is pending of judgment 

 

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regarding the appeal presented by the Company.

 

(ii)        Income tax/CSLL - partial approval

 

The Company requested approval to offset 1997 tax losses with amounts owing to the tax authorities. The authorities approved only R$ 83 million, which generated a difference of R$ 51 million (R$ 197 million updated as at December 31, 2015). The Company has appealed the rejection of the tax credits and obtained a partially favorable decision and the final decision is under discussion in the judicial level.

 

(iii)    Income tax/CSLL - Newark

 

In December 2007 and December 2010, Fibria received two tax assessments totaling R$ 237 million alleging that Newark Financial Inc., an offshore subsidiary of VCP Exportadora e Participações Ltda. (a Fibria predecessor subsidiary) had underpaid taxes in 2005. The updated value of these two tax assessments is R$ 257 million. Based on advice from internal and external counsel the probability of loss for the first tax assessment (December 2007 - R$ 137 million) is remote and the probability of loss for the second tax assessment (December 2010 - R$ 120 million) is possible.

 

(iv)     Tax assessment - IRPJ/CSLL - Swap of industrial and forestry assets

 

In December 2012, the Company received a tax assessment for the collection of income tax and social contribution, alleging unpaid tax on a capital gain in February 2007, when the Company executed an agreement with International Paper for the swap of industrial and forestry assets.

 

On March 4, 2015, at the administrative level, the Tax Federal Administrative Court (*CARF - Conselho Administrativo de Recursos Fiscais*), declared partially in favor of tax assessment, reducing the fines from 150% to 75%. Following the decision, the updated amount involved was reduced from R$ 1,957 million to R$ 1,633 million, of which R$ 557 million refers to the principal, R$ 417 million to fines and R$ 659 million to interest, as at December 31, 2015.

 

Against the decision, the Company presented the applicable appeals, for which judgment is pending. The authorities also appealed to reduce the qualified fine; however, the appeal was not received, making definitive the decision that reduced the fines from 150% to 75%. In the event its position does not prevail at the administrative level, the Company will discuss the debt at the judicial level. Management’s assessment of this matter is that a loss is possible. A ruling at the administrative level was issued in January 2016 (Note 38).

 

(v)        Tax assessment - IRPJ/CSLL - Fibria Trading International

 

In October 2013, the Company received a tax assessment with respect to its share of 2010 earnings in Fibria Trading International which had been recognized on the equity method. We obtained a favorable decision in the first administrative level, subject to appeal. The tax authorities presented appeal, which was judged unfounded in December 2015, and is awaiting the period for presenting the special appeal by the tax authorities.

 

(vi)     Tax assessment - IRPJ/CSLL - Fibria Trading International II

 

In June 2014, the Company received a tax assessment notice with respect to the 2010 Fibria Trading International equity earnings which was recognized by Fibria’s former subsidiary Normus (merged by the Company in June 2013). We received favorable decision in the administrative instance and are awaiting the judgment for the appeal presented by the tax authorities.

 

(vii)Tax assessment - IRPJ/CSLL - Fibria Overseas Holding

 

In October 2014, the Company received a tax assessment for the 2009 equity earnings of Fibria Overseas Holding recognized by Fibria’s former subsidiary Normus. This assessment did not reflect the accumulated losses in previous years. The period was included by us in the Tax Amnesty and 

 

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Refinancing Program (REFIS). We presented an appeal which was judged favorable and is awaiting the period for presenting the appeal by the tax authorities.

 

(viii)Tax assessment - IRPJ/CSLL - disallowance of depreciation, amortization and depletion expenses - 2010

 

In December 2015, we received a tax assessment requiring the payment of IRPJ and CSLL, questioning the deductibility of depreciation, amortization and depletion expenses of 2010 included by us in the calculation of income tax expense. We will present administrative appeal on the legal period.

 

(ix) Tax assessment - IRPJ/CSLL - FTI and FIT 2011

 

In November 2015, the Company received a tax assessment with respect to its share of 2011 earnings in Fibria Trading International and Fibria International Trade GmbH, which had been recognized under the equity method.

 

However, this assessment did not reflect the accumulated losses of Fibria Trading International. The payment of the amount regarding the Fibria International Trade GmbH has been included on the REFIS.

 

(x)        Others tax liabilities with probability of loss classified as possible

 

Fibria has over 681 legal cases for individual amounts of less than R$ 100 million. The total estimated possible loss for theses legal cases is R$ 3,275,677. The average estimated for each case is R$ 4,8 million.

 

**(c)**                                 **Comments on labor/civil proceedings**

 

The Company is a party to approximately 5,751 labor lawsuits filed by former employees, third parties and unions, claiming the payment of health and safety premiums, overtime, commuting time, occupational illnesses and workers’ compensation, tangible and moral damages, understated indexation on the fine of 40% of the Government Severance Indemnity Fund for Employees (FGTS), severance pay of employees of thirty parties. The Company also has 1,230 civil lawsuits, most of which refer to claims for compensation by former employees or third parties for alleged occupational illnesses and workers’ compensation, collection lawsuits and bankruptcy situations, reimbursement of funds claimed from delinquent landowners and possessory actions filed in order to protect the Company’s equity. The Company has insurance for public liability that covers, within the limits set in the policy, unfavorable sentences in the civil courts for claims for compensation of losses.

 

*(i)*                                    *Changing in the inflation indexation of labor related liabilities*

 

In August 2015, the Superior Labor Court (*Tribunal Superior do Trabalho - TST*) declared unconstitutional the interest rate applied to labor liabilities based on the TR rate (*Taxa de juros referencial - TR*). The recommended rate was the consumer price index (IPCA-E) and should to be applied retroactively from June 30, 2009 over the processes in progress.

 

By applying the IPCA-E, the Company’s labor liabilities were impacted by R$ 25,283, adjusted against the line “Foreign exchange losses and monetary adjustment, net”, in the Statement of profit or loss.

 

On October 14, 2015, the Supreme Court (*Supremo Tribunal Federal - ST*F), issued an injunction suspending the effects of the TST’s decision. However, the Company decided to keep the IPCA-E index to update the processes in progress until the final decision of the matter.

 

**(d)**                                **Civil proceedings**

 

In June 2012, a Public Civil Action was filed by the Federal Public Prosecutor to prohibit the Company ́s trucks from using federal highways above certain weight limits alleging damage to federal highways, the 

 

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environment and economic order. The updated amount penalty of R$ 1,256,463 as at December 31, 2015, was indicated by the Federal Public Prosecutor. The Company successfully appealed the decision and filed suit for the others matters against the Action. The proceedings are in their initial stage.

 

**(e)**                                 **Judicial deposits**

 

The Company has judicial escrow deposits at December 31, 2015 of R$ 144,954 (R$ 135,640 in December 31, 2014) for cases classified by external legal advisors as being remote or possible loss, for which no provision have been recorded. The contingencies refer to PIS, COFINS, income taxes and INSS, among other amounts. The deposits also include R$ 38,639 of the credit balance of REFIS (Note 25).

 

**25**                                 **Tax Amnesty and Refinancing Program (“REFIS”)**

 

**Law 11,941/09**

 

In November 2009, the Company elected to join a REFIS program and in 2011 agreed the amount of the eligible liabilities after meeting all formal requirements established in the legislation.

 

After taking into account the legal right to offset judicial deposits related to the liabilities it was determined that the deposits exceed the outstanding liabilities (after the reductions established by the program) and hence the remaining balance was in favor of the Company. At December 31, 2015 the balance is R$ 38,639, and it is presented within non-current assets under “Judicial deposits”.

 

**26**                                 **Asset retirement obligations**

 

The Company uses judgment and various assumptions when determining the asset retirement obligations. Environmental obligations relate to future obligations to restore/recover the environment arising from the right of use of the asset, which causes environmental damages as a result of the activities of the project or from regulatory requirements of the environmental agencies, and which are required to be compensated.

 

The dismantling and retirement of an asset occurs when it is permanently retired, through its shutdown, sale or disposal. This future long term obligation accrues interest which is recorded as a financial expense in profit and loss and it is also adjusted for inflation. Depreciation expense of the asset retirement obligation asset is recorded in the Statement of profit or loss.

 

In 2015, we recognized financial expenses in the amount of R$ 552 adjusting the provision for asset retirement.

 

The balance of the provision for asset retirement obligations as of December 31, 2015 amounted to R$10,630 and it is included in non-current “Other payables” (R$ 12,946 as of December 31, 2014).

 

**27**                                 **Long-term commitments**

 

**Take or pay arrangements**

 

The Company entered into long-term take-or-pay agreements with power, transportation, diesel, and chemical and natural gas suppliers effective for an average period of nine years. These agreements contain termination and supply interruption clauses in the event of default of certain essential obligations. Generally, the Company purchases the minimum agreed under the agreements, hence there is no liability recorded at December 31, 2015. The contractual obligations assumed at December 31, 2015 correspond to R$ 260,354 per year (R$ 202,361 at December 31, 2014).

 

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**28**                                 **Shareholders’ equity**

 

**(a)**                                **Capital**

 

The Company is authorized to increase its capital up to 150,000,000 new common shares, by resolution of the Board of Directors, which will decide the price and the number of shares to be issued, as well as the term and conditions of payment.

 

At December 31, 2015 and 2014, fully subscribed and paid-up capital is represented by 553,934,646 nominative common voting shares without par value.

 

**(b)**                                **Dividends**

 

The Company’s by-laws provide for a minimum annual dividend of 25% of net income, adjusted by the changes in reserves, as determined by Brazilian Corporate Law.

 
| ** **                                                   | ** ** | **2015** | ** ** | **2014** | ** ** |
|--------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                         |       |     |       |     |       |
| Net income attributable to the   shareholders of the Company |       | 342,185  |       | 155,584  |       |
| (-) Legal reserve (5%)                                       |       | (17,110  | )          | (7,779   | )          |
|                                                         |       |     |       |     |       |
| Calculation basis                                            |       | 325,075  |       | 147,805  |       |
|                                                         |       |     |       |     |       |
| Minimum mandatory dividends (25%)                            |       | 81,269   |       | 36,951   |       |

 

The Annual and Extraordinary General Meeting held on April 28, 2015, approved the distribution as dividends of the total adjusted net income of 2014, in the amount of R$ 147,805, where R$ 36,951 was distributed as mandatory dividends and R$ 110,854 as additional dividends. The payment of the dividends approved was made on May 14, 2015.

 

On October 22, 2015, the Board of Directors approved a dividend policy that is based on its ability to generate cash flow, respecting its indebtedness and liquidity policies, maintaining its commitment to its investment grade as well as considering its strategic planning.

 

In continuous act of the Board of Directors and based on the new dividend policy, the distribution of intermediate dividends extraordinarily was recommended in the amount of R$ 2 billion, to be paid against reserves for investments. The proposal is aligned with the dividend policy and was driven by the low leverage, low average cost of debt and the fact that the funding for Horizonte 2 Project are already solved, in line with our commitment to maintain the capital discipline.

 

The proposal was approved at the Extraordinary General Meeting held on November 30, 2015 and the dividends were paid on December 9, 2015.

 

On December 17, 2015, the Board of Directors approved the proposal of dividends to be distributed in the amount of R$ 300,000, corresponding to R$ 0.5419 per share, to be submitted to the approval in the Annual General Meeting in April 2016. Thus, considering the minimum mandatory dividends, in the amount of R$ 81,269, the additional dividends proposed will be R$ 218,731.

 

**(c)**                                 **Statutory reserves**

 

The legal reserve is constituted under Brazilian corporate law through the appropriation of 5% of the net income for the year.

 

The investment reserve, corresponding to the balance of retained earnings, after the appropriation of the legal reserve, mainly relates to earnings reserved to meet the investment plans, upgrading and maintenance of plants, as approved by the Statutory Audit Committee and the Board of Directors.

 

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**(d)**                                **Treasury shares**

 

As at December 31, 2015, the Company holds in treasury 344,042 (342,824 as at December 31, 2014) common shares with a unit value of R$ 30.16 per share, which corresponds to R$ 10,378.

 

**(e)**                                 **Other reserves**

 

The amount of R$ 1,639,901 as at December 31, 2015 (R$ 1,613,312 as at December 31, 2014) refers, mainly, to the effects of the fair value uplift of the prior interest of Votorantim Celulose e Papel S.A. (“VCP”) (predecessor company) in Aracruz, at the time of the 2009 business combination.

 

**(f)**                                  **Share-based payments**

 

Share options are granted to Company’s CEO, statutory and non-statutory Officers and General Managers. The exercise price of the granted options is equal to the share’s weighted average price in the three months prior to the date of the grant, without discount or indexation. Options are conditional on the beneficiaries completing three years’ service (the vesting period) from the grant date, subject to the group achieving its target. The options have a contractual option term of six years. The Company has no legal or constructive obligation to repurchase or settle the options in cash (Note 30(ii)).

 

Share options outstanding at the end of the year have the following expiry date and exercise prices:

 
| **Grant date** | ** ** | **Expiration date** | ** ** | **Exercise price********per share options** | ** ** | **2015** | ** ** | **2014** | ** ** |
|---------------------|------------|--------------------------|------------|------------------------------------------------------------|------------|----------|------------|----------|------------|
|                |       |                     |       |                                                       |       |     |       |     |       |
| 01/01/2014          |       | 31/12/2016               |       | 27.90                                                      |       | 7,607    |       | 1,232    |       |
| 01/01/2015          |       | 31/12/2017               |       | 28.60                                                      |       | 5,179    |       |     |       |
|                |       |                     |       |                                                       |       |     |       |     |       |
|                |       |                     |       |                                                       |       | 12,786   |       | 1,232    |       |

 

**29**                                 **Employee benefits**

 

**(a)**                                **Variable remuneration program**

 

The Company maintains a performance based bonus program for its employees, which is tied to its performance plans and the attainment of specific objectives based on cash generation, which are established and agreed upon at the beginning of each year. The amount recorded as expenses for the year ended December 31, 2015 was R$ 95,954 (December 31, 2014 - R$ 69,573 and December 31, 2013 - R$ 55,742).

 

**(b)**                                **Defined contribution pension plan**

 

In 2000, the Company became a sponsor of the Senador José Ermírio de Moraes Foundation (FUNSEJEM), a not-for-profit pension fund for the employees of the Votorantim Group. Under the fund’s regulations, the Company matches employees’ contributions to FUNSEJEM, which may range from 0.5% to 6% of nominal salary. The Company’s contributions for the year ended December 31, 2015 amounted to R$ 9,682 (R$ 9,288 as of December 31, 2014 and R$ 8,829 as of December 31, 2013).

 

**(c)**                                 **Medical assistance provided to retirees**

 

The Company entered into an agreement with the São Paulo State Pulp and Paper Industry Workers’ Union to provide the funding for a lifetime medical assistance plan (SEPACO) for all of the Company’s employees covered in this agreement, their dependents, until they come of age, and their spouses, for life.

 

The Company’s policy determines that the cost of the benefit be allocated from the date of hiring to the date on which the employee becomes eligible to receive the medical assistance benefit. The amount recorded as expenses for the year ended December 31, 2015 was R$ 6,940 (R$ 7,567 as of December 31, 2014 and R$ 4,065 as of December 31, 2013).

 

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The actuarial methods are based on economic and biometric assumptions, as follows:

 
| ** **                                                  | ** ** | **Actuarial assumptions** | ** ** |
|-------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **2015**                       | ** ** | **2014** | ** ** |
|                                                        |       |                           |       |   |   |
| Discount rate - %                                           |       | 7.3                            |       | 6.0 |   |
| Real growth rate of medical costs   - %                     |       | 3.0                            |       | 3.0 |   |
| Rate of increase of utilization   of medical assistance - % |       | 3.0                            |       | 3.0 |   |
| Long-term inflation - %                                     |       | 5.7                            |       | 5.0 |   |
| Biometric table of general   mortality                      |       | AT-2000                        |       | AT-2000 |   |
| Biometric table of general   mortality for invalids         |       | IAPB 57                        |       | IAPB 57 |   |

 

The sensitivity analysis of the obligation related to the healthcare plan regarding changes in the main assumptions is the follows:

 
| ** **                        | ** ** | **Change in    assumptions** | ** ** | **Increase in    assumptions** | ** ** | **Decrease in    assumptions** | ** ** |
|-----------------------------------|------------|----------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
|                              |       |                                   |       |                                     |       |                                     |       |
| Discount rate -   %               |       | 0.50%                                  |       | Decrease of 5.1%                         |       | Increase of 5.6%                         |       |
| Trend rate of   medical costs - % |       | 0.50%                                  |       | Increase of 6.0%                         |       | Decrease of 5.5%                         |       |
| Mortality                         |       | 1 year                                 |       | Increase of 4.1%                         |       | Decrease of 4.0%                         |       |

 

The sensitivity analysis is based on changes in just one assumption while the other assumptions remain unchanged.

 

The actuarial obligation, recorded under “Other payables”, is as follows:

 
| ** **                                                              | ** ** | **2015** | ** ** | **2014** | ** ** |
|-------------------------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                                    |       |     |       |     |       |
| Reconciliation of liabilities                                           |       |     |       |     |       |
| Present value of actuarial   obligations at beginning of the year       |       | 91,434   |       | 76,579   |       |
| Cost of current service from:                                           |       |     |       |     |       |
| Interest on actuarial obligations                                       |       | 10,339   |       | 12,697   |       |
| Benefits paid                                                           |       | (4,656   | )          | (3,945   | )          |
| Actuarial (gain) losses in the “Other   comprehensive income” |       | (8,430   | )          | 7,288    |       |
| Others                                                                  |       | 1,257    |       | (1,185   | )          |
|                                                                    |       |     |       |     |       |
| Present value of actuarial   obligations at end of the year             |       | 89,944   |       | 91,434   |       |

 

**(d)**                                **Employee benefits expenses**

 
| ** **                                    | ** ** | **2015** | ** ** | **2014** | ** ** | **2013** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                          |       |     |       |     |       |     |       |
| Payroll, profit   sharing and related charges |       | 654,984  |       | 589,472  |       | 501,453  |       |
| FGTS and other   rescission indemnifications  |       | 38,428   |       | 35,886   |       | 37,972   |       |
| INSS                                          |       | 17,078   |       | 14,985   |       | 17,888   |       |
| Others                                        |       | 32,703   |       | 29,105   |       | 24,801   |       |
|                                          |       |     |       |     |       |     |       |
|                                          |       | 743,193  |       | 669,448  |       | 582,114  |       |

 

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**30**                                 **Compensation program based on shares**

 

**(i)**                                   **Phantom Stock Options (PSO)**

 

The program is based on the PSO concept, which consists of an award in cash based on the appreciation, of the shares of the Company, as compared to a predetermined price during a predetermined period. The awards cannot be settled in shares. The Company’s CEO and the statutory and non-statutory Officers are eligible for the plan.

 

At the time of each award, the participants under the plan will receive a quantity of PSO, to be defined based on a target reward and on the expectation of an increase in the value of the Company. The target for the appreciation of the shares of the Company is established by the Board of Directors and the number of PSO awarded will be calculated in such a manner that, if the appreciation target is attained, the resulting reward will be equal to the target value.

 

The PSOs can only be exercised after a vesting period of three years, as from the award date established in the contracts, and the maximum period for the exercise of the option is five years since granted. Exceptionally, the first award, denominated as the Program 2009, has a graded vesting period.

 

The exercise price of the options at the award date is calculated by reference to the average price of the FIBR3 shares, in accordance with the volume traded in the three months prior to the date of the award.

 

The Programs awarded up to December 31, 2015 are presented below:

 

**Programs**

 
| **Program** | ** ** | **Award date** | ** ** | **Vesting    period** | ** ** | **Expiration    date** | ** ** | **Options** | ** ** | **Exercise    price** | ** ** |
|-------------|------------|---------------------|------------|----------------------------|------------|-----------------------------|------------|-------------|------------|----------------------------|------------|
|        |       |                |       |                       |       |                        |       |        |       |                       |       |
| 2009        |       | 08/26/2010          |       | 08/27/ 2010                |       | 12/31/ 2016                 |       | 17,889      |       | 27.55                      |       |
| 2009        |       | 08/26/ 2010         |       | 12/26/ 2010                |       | 12/31/ 2016                 |       | 17,889      |       | 27.55                      |       |
| 2009        |       | 08/26/ 2010         |       | 10/27/ 2011                |       | 12/31/ 2016                 |       | 17,889      |       | 27.55                      |       |
| 2010        |       | 08/26/ 2010         |       | 08/28/ 2013                |       | 12/31/ 2017                 |       | 37,997      |       | 27.55                      |       |
| 2011        |       | 01/02/ 2012         |       | 01/02/ 2014                |       | 12/31/ 2018                 |       | 44,471      |       | 28.31                      |       |
| 2013        |       | 01/02/ 2013         |       | 01/02/ 2016                |       | 12/31/ 2020                 |       | 241,032     |       | 20.37                      |       |

 

**Assumptions and calculation of fair value of options granted**

 

The pricing of options was based on the Binominal Trinomial Trees (BTT) model, due to its easy implementation, validation and consideration of the specific terms of the program. This BTT model is a numerical approximation of the risk-neutral or equivalent martingale methodology which is frequently utilized in the valuation of instruments that cannot have a closed-form pricing formula.

 

The following economic assumptions were used at December 31 of each year:

 
| ** **                                                | ** ** | **2015**       | ** ** | **2014**       | ** ** |
|-----------------------------------------------------------|------------|----------------|------------|----------------|------------|
|                                                      |       |           |       |           |       |
| Annualized volatility of share   price - % (i)            |       | 3.34           |       | 3.69           |       |
| Risk free return rate - % (ii)                            |       | 14.13 to 16.71 |       | 11.57 to 13.02 |       |
| Average price of shares (average   of three prior months) |       | 53.23          |       | 27.17          |       |
| Options exercise price                                    |       | 23.05          |       | 19.55          |       |
| Weighted-average term of vesting   of option (months)     |       | 0.04           |       | 4.37           |       |
| Weighted-average term of life of   option (months)        |       | 47.42          |       | 59.74          |       |
| Fair value of option resulting   from the model (average) |       | 35.22          |       | 10.90          |       |

 

----

(i)            Based on the daily volatility price for a three-month period.

(ii)         The curve of fixed-DI interest rate (Brazil) at the measurement date was utilized.

 

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As result of the increase in the quoted market price of the FIBR3 shares in 2015 the fair value of the options as of December 31, 2015 was R$ 11,940 (R$ 7,016 as of December 31, 2014), recorded in the Statement of profit or loss under “Other operating (expenses) income” and the liability, under “Other payables”.

 

The settlement of this benefit plan for executives will be made by the Company in cash when the options are exercised.

 

The change in the number of PSO and their corresponding weighted average prices for the period are presented below:

 
| ** **                                   | ** ** | **2015**                       | ** ** | **2014**                                                                                                    | ** ** |
|----------------------------------------------|------------|--------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|
| ** **                                   | ** ** | **Number of    PSO** | ** ** | **Weighted    average price    for exercise of    options - Reais** | ** ** | **Number of    PSO** | ** ** | **Weighted    average price    for exercise of    options - Reais** | ** ** |
|                                         |       |                           |       |                                                                                                        |       |   |   |   |   |
| Outstanding at   the beginning of the year   |       | 679,075                        |       | 19.45                                                                                                       |       | 679,075 |   | 19.55 |   |
| Payments                                     |       | (301,909                       | )          | 15.18                                                                                                       |       |   |   |   |   |
|                                         |       |                           |       |                                                                                                        |       |   |   |   |   |
| Outstanding at   the end of the year         |       | 377,166                        |       | 23.05                                                                                                       |       | 679,075 |   | 19.55 |   |
|                                         |       |                           |       |                                                                                                        |       |   |   |   |   |
| Exercisable   options at the end of the year |       | 376,726                        |       | 23.05                                                                                                       |       | 597,782 |   | 19.45 |   |

 

**(ii)**                               **Stock Options**

 

The Program consists of a plan to grant Options to purchase shares. The Company’s CEO, statutory and non-statutory Officers and General Managers are eligible for the plan.

 

The Stock Option plan is managed by the Board of Directors of the Company, that establishes grant programs annually, and is responsible for defining: (i) the beneficiaries of the options, (ii) the total number of options of each grant, and the number of each type of options to which each Beneficiary will be entitled individually, (iii) the goals related to performance to establish criteria for the selection of beneficiaries and determining the number of options to be granted to each beneficiary, and (iv) the form and time of payment of the exercise price of the options.

 

The Stock Option plan can only be exercised after a vesting period of three years, as from the grant date established in the contracts, and the maximum period for the exercise of the option is six years since granted.

 

The exercise price of the options at the award date is calculated by reference to the average price of the FIBR3 shares, in accordance with the volume traded in the three months prior to the date of the award.

 

**Assumptions and calculation of fair value of options granted**

 

The fair value of each option granted was estimated at the grant date based on the Black & Scholes option pricing model. The significant inputs into the model were:

 
| ** **  | ** ** | ** **        | ** ** | ** **                         | ** ** | ** **                 | ** ** | ** **                                  | ** ** | **Fair value assumptions** | ** ** |
|-------------|------------|-------------------|------------|------------------------------------|------------|----------------------------|------------|---------------------------------------------|------------|--------------------------------------|------------|
| **Grant**   | ** ** | **Expectations**  | ** ** | **Free**                           | ** ** | ** **                 | ** ** |
| **Program** | ** ** | **Grant-   date** | ** ** | **Number of    options** | ** ** | **Exercise    price** | ** ** | **Fair value    of options** | ** ** | **Dividends**                        | ** ** | **Volatility** | ** ** | **interest    rate risk** | ** ** | **Term    maturity** | ** ** |
|        |       |              |       |                               |       |                       |       |                                        |       |                                 |       |   |   |   |   |   |   |
| 2014        |       | 01/01/2014        |       | 349,091                            |       | 27.90                      |       | 10.59                                       |       | —                               |       | 36.27 | % | 12.26% p.a. |   | 3 years |   |
| 2015        |       | 01/01/2015        |       | 338,749                            |       | 28.60                      |       | 13.90                                       |       | —                               |       | 33.03 | % | 12.43% p.a. |   | 3 years |   |

 

The settlement of this benefit plan for executives will be made by the Company in shares when the options are exercised.

 

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Changes in the number of share options outstanding and their related weighted average exercise prices are as follows:

 
| ** **                   | ** ** | **2015**                                                                   | ** ** | **2014**    | ** ** |
|------------------------------|------------|----------------------------------------------------------------------------|------------|-------------|------------|
| ** **                   | ** ** | **Average exercise    price per share    option** | ** ** | **Options** | ** ** | **Average exercise    price per share    option** | ** ** | **Options** | ** ** |
|                         |       |                                                                       |       |        |       |   |   |   |   |
| At the beginning of the year |       | 27.90                                                                      |       | 349,091     |       |   |   |   |   |
| Granted                      |       | 28.60                                                                      |       | 338,749     |       | 27.90 |   | 349,091 |   |
|                         |       |                                                                       |       |        |       |   |   |   |   |
| At the end of the year       |       | 28.24                                                                      |       | 687,840     |       | 27.90 |   | 349,091 |   |

 

In 2015, the compensation expense with the options to purchase shares was R$ 11,554 (R$1,232 in 2014), charged to the Statement of profit or loss under “Other operating (expenses) income” and the corresponding provision made against the “Capital reserve”.

 

**31**                                 **Revenue**

 

**(a)**                                **Reconciliation**

 
| ** **                | ** ** | **2015**   | ** ** | **2014**   | ** ** | **2013**   | ** ** |
|---------------------------|------------|------------|------------|------------|------------|------------|------------|
|                      |       |       |       |       |       |       |       |
| Gross amount              |       | 12,895,290 |       | 8,762,454  |       | 8,053,038  |       |
| Sales taxes               |       | (201,210   | )          | (152,719   | )          | (130,175   | )          |
| Discounts and returns (*) |       | (2,613,413 | )          | (1,526,132 | )          | (1,005,457 | )          |
|                      |       |       |       |       |       |       |       |
| **Net   revenues**        |       | 10,080,667 |       | 7,083,603  |       | 6,917,406  |       |

 

----

(*)    Related mainly to trade discounts.

 

**(b)**                                **Information about markets**

 
| ** **      | ** ** | **2015**   | ** ** | **2014**  | ** ** | **2013**  | ** ** |
|-----------------|------------|------------|------------|-----------|------------|-----------|------------|
|            |       |       |       |      |       |      |       |
| Revenue         |       |       |       |      |       |      |       |
| Export market   |       | 9,168,894  |       | 6,412,432 |       | 6,341,772 |       |
| Domestic market |       | 818,680    |       | 590,773   |       | 503,649   |       |
| Services        |       | 93,093     |       | 80,398    |       | 71,985    |       |
|            |       |       |       |      |       |      |       |
|            |       | 10,080,667 |       | 7,083,603 |       | 6,917,406 |       |

 

**(c)**                                 **Information by geographic areas**

 
| ** **        | ** ** | **2015**   | ** ** | **2014**  | ** ** | **2013**  | ** ** |
|-------------------|------------|------------|------------|-----------|------------|-----------|------------|
|              |       |       |       |      |       |      |       |
| Europe            |       | 4,311,769  |       | 2,935,260 |       | 2,679,705 |       |
| North America     |       | 2,467,956  |       | 1,706,428 |       | 1,930,893 |       |
| Asia              |       | 2,389,476  |       | 1,768,974 |       | 1,708,368 |       |
| Brazil and others |       | 911,466    |       | 672,941   |       | 598,440   |       |
|              |       |       |       |      |       |      |       |
|              |       | 10,080,667 |       | 7,083,603 |       | 6,917,406 |       |

 

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**32**                                 **Financial results**

 
| ** **                                           | ** ** | **2015**   | ** ** | **2014**   | ** ** | **2013**   | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                 |       |       |       |       |       |       |       |
| Financial expenses                                   |       |       |       |       |       |       |       |
| Interest on loans and financing   (i)                |       | (470,139   | )          | (475,780   | )          | (575,877   | )          |
| Loan commissions                                     |       | (10,773    | )          | (23,955    | )          | (22,118    | )          |
| Financial charges upon partial   repurchase of Bond  |       |       |       | (498,583   | )          | (350,295   | )          |
| Others                                               |       | (88,881    | )          | (42,279    | )          | (68,236    | )          |
|                                                 |       |       |       |       |       |       |       |
|                                                 |       | (569,793   | )          | (1,040,597 | )          | (1,016,526 | )          |
|                                                 |       |       |       |       |       |       |       |
| Financial income                                     |       |       |       |       |       |       |       |
| Financial investment earnings                        |       | 131,641    |       | 91,299     |       | 96,942     |       |
| Others (ii)                                          |       | 90,038     |       | 42,651     |       | 13,781     |       |
|                                                 |       |       |       |       |       |       |       |
|                                                 |       | 221,679    |       | 133,950    |       | 110,723    |       |
|                                                 |       |       |       |       |       |       |       |
| Gains (losses) on derivative   financial instruments |       |       |       |       |       |       |       |
| Gain                                                 |       | 665,554    |       | 379,965    |       | 376,750    |       |
| Losses                                               |       | (1,495,682 | )          | (386,201   | )          | (592,063   | )          |
|                                                 |       |       |       |       |       |       |       |
|                                                 |       | (830,128   | )          | (6,236     | )          | (215,313   | )          |
|                                                 |       |       |       |       |       |       |       |
| Foreign exchange and losses                          |       |       |       |       |       |       |       |
| Loans and financing                                  |       | (3,033,221 | )          | (690,271   | )          | (910,316   | )          |
| Other assets and liabilities (iii)                   |       | 526,198    |       | (31,571    | )          | (22,591    | )          |
|                                                 |       |       |       |       |       |       |       |
|                                                 |       | (2,507,023 | )          | (721,842   | )          | (932,907   | )          |
|                                                 |       |       |       |       |       |       |       |
| Net financial result                                 |       | (3,685,265 | )          | (1,634,725 | )          | (2,054,023 | )          |

 

----

(i)        Does not include the amount of R$ 9,147 as at December 31, 2015, related to capitalized financing costs.

 

(ii)     Includes interest accrual of the tax credits.

 

(iii) Includes the effect of foreign currency exchange on cash and cash equivalents, trade accounts receivable, trade payable and others.

 

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**33**                                 **Expenses by nature**

 
| ** **                                                                   | ** ** | **2015**   | ** ** | **2014**   | ** ** | **2013**   | ** ** |
|------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
|                                                                         |       |       |       |       |       |       |       |
| Cost of sales                                                                |       |       |       |       |       |       |       |
| Depreciation, depletion and   amortization                                   |       | (1,866,052 | )          | (1,848,202 | )          | (1,833,548 | )          |
| Freight                                                                      |       | (912,647   | )          | (810,061   | )          | (774,851   | )          |
| Labor expenses                                                               |       | (497,910   | )          | (460,741   | )          | (412,624   | )          |
| Variable costs (raw and   consumable materials)                              |       | (2,601,600 | )          | (2,426,533 | )          | (2,361,665 | )          |
|                                                                         |       |       |       |       |       |       |       |
|                                                                         |       | (5,878,209 | )          | (5,545,537 | )          | (5,382,688 | )          |
|                                                                         |       |       |       |       |       |       |       |
| Selling expenses                                                             |       |       |       |       |       |       |       |
| Labor expenses                                                               |       | (29,152    | )          | (25,372    | )          | (19,881    | )          |
| Selling expenses (i)                                                         |       | (373,336   | )          | (313,741   | )          | (299,979   | )          |
| Operating leases                                                             |       | (1,879     | )          | (2,165     | )          | (1,758     | )          |
| Depreciation and amortization   charges                                      |       | (9,977     | )          | (8,481     | )          | (6,957     | )          |
| Other expenses                                                               |       | (22,909    | )          | (15,455    | )          | (18,963    | )          |
|                                                                         |       |       |       |       |       |       |       |
|                                                                         |       | (437,253   | )          | (365,214   | )          | (347,538   | )          |
|                                                                         |       |       |       |       |       |       |       |
| General and administrative and   directors’ compensation expenses       |       |       |       |       |       |       |       |
| Labor expenses                                                               |       | (99,321    | )          | (93,217    | )          | (106,306   | )          |
| Third-party services (consulting,   legal and others)                        |       | (105,652   | )          | (107,470   | )          | (111,480   | )          |
| Depreciation and amortization   charges                                      |       | (16,209    | )          | (17,311    | )          | (22,656    | )          |
| Donations and sponsorship                                                    |       | (7,359     | )          | (7,978     | )          | (5,690     | )          |
| Taxes and contributions                                                      |       | (5,687     | )          | (6,608     | )          | (5,851     | )          |
| Operating leases and insurance                                               |       | (9,197     | )          | (9,245     | )          | (9,198     | )          |
| Other expenses                                                               |       | (22,196    | )          | (23,248    | )          | (23,033    | )          |
|                                                                         |       |       |       |       |       |       |       |
|                                                                         |       | (265,621   | )          | (265,077   | )          | (284,214   | )          |
|                                                                         |       |       |       |       |       |       |       |
| Other operating   income, net                                                |       |       |       |       |       |       |       |
| Program of variable compensation   to employees                              |       | (119,448   | )          | (90,118    | )          | (71,659    | )          |
| Capital gain on land and   buildings sold - Asset Light Project(Note   1(d)) |       |       |       |       |       | 799,040    |       |
| Tax credits                                                                  |       | 7,383      |       | 852,291    |       | 107,459    |       |
| Increment of the provision for   impairment of the ICMS credits              |       | (165,085   | )          |       |       |       |       |
| Gain (loss) on disposal of   property, plant and equipment                   |       | 135,347    |       | (68,297    | )          | (220,936   | )          |
| Change in fair value of   biological assets (Note 18)                        |       | 184,583    |       | 51,755     |       | 102,265    |       |
| Provision (reversal) for   contingencies                                     |       | (13,716    | )          | 14,230     |       | 116,042    |       |
| Others                                                                       |       | (4,717     | )          | (10,399    | )          | (24,730    | )          |
|                                                                         |       |       |       |       |       |       |       |
|                                                                         |       | 24,347     |       | 749,462    |       | 807,481    |       |

 

----

(i)            Includes handling expenses, storage and transportation expenses and sales commissions, among others.

 

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**34**                                 **Insurance**

 

The Company has insurance coverage for operational risks, with a maximum coverage of R$ 6,200,000. Additionally, the Company has insurance coverage for civil general liabilities in the amount of US$ 25 million corresponding to R$ 97.6 million on December 31, 2015.

 

Fibria’s management considers these amounts to be sufficient to cover any potential liability, risks and damages to its assets and loss of profits.

 

The Company does not have insurance coverage for its forests. To mitigate the risk of fire, the Company maintains internal fire brigades, a watchtower network, and a fleet of fire trucks. There is no history of material losses from forest fires.

 

The Company has a domestic and international (import and export) transportation insurance policy effective through July 31, 2016, renewable for additional 12 months.

 

In addition, Fibria has insurance coverage for civil responsibility of its directors and officers for amounts considered to be adequate by management.

 

**35**                                 **Earnings per share**

 

**(a)**                                **Basic**

 

The basic earnings per share is calculated by dividing net income (loss) attributable to the Company’s shareholders by the weighted average of the number of common shares outstanding during the period, excluding the common shares purchased by the Company and maintained as treasury shares.

 
| ** **                                                          | ** ** | **2015**    | ** ** | **2014**    | ** ** | **2013**    | ** ** |
|---------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
|                                                                |       |        |       |        |       |        |       |
| **Numerator**                                                       |       |        |       |        |       |        |       |
| Net income (loss) attributable to   the shareholders of the Company |       | 342,185     |       | 155,584     |       | (706,422    | )          |
|                                                                |       |        |       |        |       |        |       |
| **Denominator**                                                     |       |        |       |        |       |        |       |
| Weighted average number of common   shares outstanding              |       | 553,591,112 |       | 553,591,822 |       | 553,591,822 |       |
|                                                                |       |        |       |        |       |        |       |
| **Basic earnings   (loss) per share (in Reais)**                    |       | 0.62        |       | 0.28        |       | (1.28       | )          |

 

The weighted average number of shares in the period is represented by a total number of shares of 553,934,646 issued and outstanding for the year ended December 31, 2015 and 2014, excluding the 344,042 treasury shares of shares in the year ended December 31, 2015 (342,824 as at December 31, 2014). During the years 2015 and 2014 there were no changes in the number of shares of Company.

 

**(b)**                                **Diluted**

 

Diluted earnings per share are calculated by dividing net income attributable to the Company’s shareholders common shares by the weighted average number of common shares available during the year plus the weighted average number of common shares that would be issued when converting all potentially dilutive common shares into common shares:

 

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| ** **                                                                                    | ** ** | **2015**    | ** ** | **2014**    | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|
|                                                                                          |       |        |       |        |       |
| **Numerator**                                                                                 |       |        |       |        |       |
| Net income attributable to the   shareholders of the Company                                  |       | 342,185     |       | 155,584     |       |
|                                                                                          |       |        |       |        |       |
| **Denominator**                                                                               |       |        |       |        |       |
| Weighted average number of common   shares outstanding                                        |       | 553,591,112 |       | 553,591,822 |       |
| Dilution effect                                                                               |       |        |       |        |       |
| Stock options                                                                                 |       | 687,840     |       | 349,091     |       |
| Weighted average number of common   shares outstanding adjusted according todilution   effect |       | 554,278,952 |       | 553,940,913 |       |
|                                                                                          |       |        |       |        |       |
| **Diluted earnings   per share (in Reais)**                                                   |       | 0.62        |       | 0.28        |       |

 

There was no dilutive effect in 2013.

 

**36**                                 **Non-current assets held for sale**

 
| ** **                                           | ** ** | **2015** | ** ** | **2014** | ** ** |
|------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                 |       |     |       |     |       |
| Losango Project                                      |       |     |       |     |       |
| Biological assets                                    |       | 284,217  |       | 284,217  |       |
| Property, plant and equipment -   substantially land |       | 305,632  |       | 305,632  |       |
| Others                                               |       | 8,408    |       | 8,408    |       |
|                                                 |       |     |       |     |       |
|                                                 |       | 598,257  |       | 598,257  |       |

 

Upon classification as assets held for sale, the carrying amount of the assets held for sale was compared to their estimated fair values less cost of sale, and no impairment losses were recognized.

 

The Company assumed indemnification commitments with respect to potential losses, as agreed in the corresponding sale agreements which have specific limits, period for the indemnification commitments and procedures for the other party to require the indemnification.

 

**37**                                 **Impairment testing**

 

As of December 31, 2015, the Company performed its annual impairment test of the CGUs to which goodwill is allocated as described in item (a) below. As a result, as described in item (b) below, the Company performed an impairment analysis of its long lived assets.

 

**(a)**                                **CGUs with goodwill allocated - Aracruz**

 

In December 2015, the Company determined the need to perform an impairment analysis of the carrying amount of goodwill based on the value in use of the group of CGUs where goodwill was allocated. Value in use was estimated using a discounted cash flow model for the group of CGUs. The process of estimating the value in use involves assumptions, judgments and estimates for future cash flows which represent the Company’s best estimate approved by management. The impairment test did not result in the need to recognize an impairment loss.

 

Goodwill allocated to the group of CGUs (Aracruz, Portocel and Veracel) amounted to R$ 4,230,450 at December 31, 2015.

 

Cash flows for a period of ten years were considered and an additional amount was calculated for the perpetuity of the cash flow of the tenth year, discounted to present value using the WACC (Weighted Average Cost of Capital) rate. This rate takes into consideration the various components of financing,debt and own capital used by the Company to finance its activities. The cost of capital of the CGU was determined using the Company’s own capital cost through the Capital Asset Pricing Model.

 

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The main assumptions used in determining value in use at December 31, 2015, are as follows:

 
| ** **                                             | ** ** | **Assumptions** | ** ** |
|--------------------------------------------------------|------------|-----------------|------------|
|                                                   |       |            |       |
| Average pulp   price - U.S. Dollar/ton                 |       | 573             |       |
| Average exchange   rate in the period - R$/U.S. Dollar |       | 3.11            |       |
| Discount rate -   WACC (nominal and real) - %          |       | 12.35 and 7.39  |       |

 

Management determined the gross margin based on its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports.

 

Management believes it to be reasonably possible that future changes in the pulp price combined with changes in the exchange rate may result in the recoverable amount of the UGCs to be different.

 

The recoverable value of the UGC as per the impairment test exceeds its book value (headroom) by R$8.2 billion.

 

For purposes of the sensitivity analysis, we evaluated that even with a combined reduction of 10% in the pulp price and in the exchange rate (U.S. Dollar) over the next four years of discounted cash flows, the recoverable amount will still being higher than its value in use.

 

**(b)**                                **Company’s long lived assets**

 

At December 31, 2015, the Company assessed whether the value in use of its long lived assets exceeded its carrying amount. Value in use was measured using the discounted cash flows method. The processes to estimate the value in use followed the same assumptions and judgments described in item (a). The impairment test did not result in the need to recognize an impairment loss.

 

**38**                                 **Subsequent events**

 

On January 19, 2016, the Tax Federal Administrative Court (*CARF — Conselho Administrativo de Recursos Fiscais*) rejected the appeal filed by the Company in the administrative process regarding the tax assessment received on the swap of industrial and forestry assets with International Paper, as mentioned in Note 24(b)(iv). The appeal was rejected as per the casting vote of CARF’s President.

 

The Company is analyzing whether it would be appropriate to challenge the referred ruling in the administrative level. If the filing of an appeal in the administrative level is not advisable, the discussion will continue in judicial courts, with financial impact only corresponding to the payment of the required judicial guarantee.

 

The Company maintain its position to not constitute provisions for contingencies, based on the Company’s and its external legal advisors’ opinion that the probability of loss on this case is possible.

 

*          *          *

 

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