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Santos Brasil Participações S.A.

Financial statements

December 31, 2016 and 2015

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Management Report

Dear shareholders,

We submit to your examination the Management report and the financial statements of

Santos Brasil Participações S.A. (Santos Brasil) for the year ended December 31, 2016.

Message from the Board

The deepening of the Brazilian economic recession and its consequences, particularly in

employment and consumption levels, had a strong impact on the Brazilian international

trade flows and, therefore, in he results of Santos Brasil in 2016. The Port of Santos

recorded a 3.9% drop in the total volume of containers handled and a 8.9% drop in import

containers, generating strong pressure on quay and storage operations.

The strategy adopted to face the competitive and challenging business environment at the

Port of Santos resulted in the market share recovery of Tecon Santos, which recorded a

volume growth of 9.0%, with 1.4 million TEUs handled, keeping the leadership with a

39.7% market share. In Vila do Conde, we recorded growth of 46.1%, with 103.6 thousand

TEUs handled, as a result of the commercial effort to attract new clients. We have handled

27.9 thousand TEUs at Tecon Imbituba, representing a decrease of 4.0% over the

previous year. The provision of bonded warehouse by the Logistics segment dropped

32.1%, directly affected by reduced imports of containerized cargo at the Port of Santos

and the increased competition in providing this type of service.

The economic crisis has greatly affected the Brazilian automotive industry, with direct

negative impact on integrated logistics services provided by Santos Brasil Logística, with

an important client portfolio within this industry. We have intensified the efforts for greater

efficiency, rescaling the capacity to the size of the operation, focusing logistics clients in

São Bernardo do Campo Distribution Center, in contrast to the closure of the distribution

center located in São Paulo.

Likewise, the fall in consumption recorded in the automotive industry also directly impacted

the handling of the Vehicle Terminal (TEV), which fell by 14.8% in the number of vehicles

handled in 2016. Exported vehicles accounted for 92.1% of the total of 179,888 units

handled in the period.

We ended the year with a net loss of R$19.9 million and consolidated EBITDA of R$87.4

million. The EBITDA margin declined, closing the year at 10.5%, mainly due to the

negative impacts caused by the macroeconomic scenario, pressing volumes and prices

within an industry with high fixed costs. However, under the financial perspective, the cash

flow arising from our operations and investments remained positive. We ended the year

with R$192.6 million in cash, despite paying a debt higher than R$100.0 million in the

same period. We closed 2016 with a net debt of R$40.1 million and with a leverage ratio

(Net Debt/EBITDA) of 0.5x. Consolidated total indebtedness was R$232.7 million.

In the first semester of 2016, we have developed the executive project detailing the

investment of approximately R$1.3 billion in the expansion of Tecon Santos, filed in

August in the Secretariat of Ports of the Ministry of Transport, Ports and Civil Aviation

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(MTPAC), but no deliberation of this government agency has been issued so far. The

request for early extension of Tecon Vila do Conde lease agreement is currently under

review. Despite not having its technical feasibility approved by ANTAQ until the end of

2016, we believe in the possibility of completing the extension application in 2017. The

goal of the investments is aligned with the strategy of preparing the Company for a new

cycle of investments to capture opportunities arising from the expansion of Panama Canal,

which will probably bring a new class of 366-meter long vessels to the Port of Santos,

besides boosting the increase of long-haul cargo in Para.

In June of this year, we filed a Request for the Recovery of Economic-Financial Balance of

Tecon Imbituba Lease Agreement with the Ministry of Transport, Ports and Civil Aviation

(MTPAC). In December, we obtained a favorable decision from MTPAC, through the

Secretariat of Ports, which granted injunction request to suspend the contractual obligation

relating to the payment of the contractual minimum handling (MMC) of Tecon Imbituba

Lease Agreement1.

Throughout the year, we improved our sustainability management with actions to improve

our indicators regarding Health and Safety, Greenhouse Gas Emissions, Waste and

Water. In line with the 10 principles of the Global Compact, an initiative that we supported

since 2013, the Company launched our Human Rights Policy in 2016, confirming the

practices that we encourage with our several stakeholders.

In 2017, although the confidence index has shown some improvement, based on more

positive expectations in relation to the year 2016, our prospects still require caution, given

the uncertain signs of recovery in the flow of international trade and resumption of global

growth. In the domestic market, our expectations are more positive, with more obvious

signs of recovery based on the appreciation of the Brazilian real and clearer investment

resumption initiatives. It should be noted that coastal shipping should also keep the same

growth levels observed over the past few years in 2017.

At the Company, we will intensify our quest for efficiency and productivity, focusing on

results, by readjusting the organizational structure and scaling operating and

administrative costs and expenses. The goal is to get maximum return on our assets in

order to ensure our competitiveness and also promote the competitiveness of our

stakeholders (shareholders, employees, clients and several partners).

We will continue offering our clients a complete portfolio of solutions and services that add

value to the supply chain and differentiate us in the market through excellence in service

delivery, in an ethical and transparent manner, respect to the environment, commitment to

human development and with safety in our operations.

1 On 01.19.2017, the Company was notified of the decision that gave suspensive effect to the administrative appeal filed

by SCPar Porto de Imbituba S.A., with the consequent suspension of the effects of such injunction, whose object should be again put to the appreciation of MTPAC based on the reasons presented by Santos Brasil under its rights of full defense.

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Santos Brasil

Santos Brasil is the leading company in the port container handling Brazilian market of,

with a presence in ports located in the Southeast, South and North of the country. It is

prepared to supply all the stages of the logistic chain, with transportation and distribution,

fostering operational synergy and providing customized solutions for clients.

It serves navigation companies, owners of ships and containers, as well as importation

and exportation clients in various areas of Brazilian industry, such as chemicals,

pharmaceuticals, food, auto parts, appliances, consumer goods and agribusiness.

The Company was founded in 1997 to participate in the auction for lease of the Santos

Container Terminal in Guarujá (SP). Today, besides the Tecon Santos in the State of São

Paulo (SP), its biggest single operation, the Company has four other port terminals, two of

them container terminals: Tecon Imbituba in the Port of Imbituba, State of Santa Catarina

(SC), and Tecon Vila do Conde in Barcarena, State of Pará (PA). It further has a vehicle

terminal (TEV) in Guarujá and a general cargo terminal in Imbituba (SC). It further has

units of Santos Brasil Logística in the cities of Santos, Guarujá, São Bernardo do Campo

and São Paulo, State of São Paulo

The Company did not participate in any mergers, acquisitions or spino-ffs during the

course of 2016, and presently has the following investments in subsidiaries:

CORPORATE STRUCTURE

Interest - % 2016 2015

Direct subsidiaries:

Santos Brasil Logística S.A. 100 100

Terminal de Veículos de Santos S.A. 100 100

Terminal Portuário de Veículos S.A. 100 100

Numeral 80 Participações S.A. 100 100

Pará Empreendimentos Financeiros S.A. 100 100

Indirect subsidiary:

Convicon Contêineres de Vila do Conde S.A. 100 100

The following tables break down the variation in investments over the course of the year:

Total: 100% Total: 100%

Total: 100%

Convicon - Contêineres de Vila do Conde S.A.

SANTOS BRASIL PARTICIPAÇÕES S.A.

Santos Brasil Logística S.A.Terminal de Veículos de

Santos S.A.Terminal Portuário de

Veículos S.A.Numeral 80 Participações

S.A.Pará Empreendimentos

Financeiros S.A.

Total: 100% Total: 100% Total: 100%

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(R$ million) 2016 2015 Var.% Direct subsidiaries:

Santos Brasil Logística S.A. 144.3 163.8 -11.9%

Terminal de Veículos de Santos S.A. 244.0 248.5 -1.8%

Terminal Portuário de Veículos S.A. 0.0 0.0 -

Numeral 80 Participações S.A. 0.1 0.0 -

Pará Empreendimentos Financeiros S.A. 12.0 12.7 -5.5%

Total 400.4 425.0 -5.8%

Indirect subsidiary:

Convicon Contêineres de Vila do Conde S.A. 12.0 12.6 -4.8%

(R$ million)

Equity in net income of

subsidiaries Capital transfer Dividends Other Total

Direct subsidiaries: Santos Brasil Logística S.A. (16.2) 0.0 (3.1) (0.2) (19.5)

Terminal de Veículos de Santos S.A. 7.5 0.0 (12.0) 0.0 (4.5)

Terminal Portuário de Veículos S.A. 0.0 0.0 0.0 0.0 0.0

Numeral 80 Participações S.A. (0.1) 0.2 0.0 0.0 0.1

Pará Empreendimentos Financeiros S.A. (0.8) 0.1 0.0 0.0 (0.7)

Total (9.6) 0.3 (15.1) (0.2) (24.6) Indirect subsidiary:

Convicon Contêineres de Vila do Conde S.A. (0.7) 0.0 0.0 0.1 (0.6)

Pará Empreendimentos Financeiros S.A. is the direct parent company of Convicon Contêineres de Vila do Conde S.A..

Market context

In 2016, according to data disclosed by the Ministry of Development, Industry and Foreign

Trade (MDIC), Brazil’s current balance of trade (sum of imports and exports) intensified

the drop already observed in the previous year, recording the lowest amount since 2009.

The variation was down 11.0% in relation to the previous period, ending 2016 with a

balance of US$322.8 billion. Both imports and exports negatively affected the nation’s

balance of trade, dropping 19.8% and 3.1%, respectively. The recent changes noted in

Brazil’s balance of trade directly affected Santos Brasil, because maritime navigation is the

principal logistical means used for importation or exportation of products. The sharper

cutback in imports reflects the economic recession that the country is experiencing,

increasing unemployment rate and thus reducing consumption.

With compound annual growth rate of 8.1% in the past 18 years, the Port of Santos felt the

impact of the cooling of Brazil’s economy and, for the first time since 2008, posted a

reduction in the number of containers handled with a drop of 3.9% in 2016. The largest

variations in the volume of containers handled were recorded in the import of full

containers and coastal shipping services, with falls of 8.9% and 6.1%, respectively. If we

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remove container reshipments from the basis for calculation, long-haul containers were

actually down 12.3% compared with the previous year.

Reports published by Companhia Docas do Estado de São Paulo (CODESP) recorded an

increase in market share of Tecon Santos, which ended the year with a market share of

39.7%. The recovery of market share is the result of the Company's business commitment

to the retention and attraction of new clients and to the quality of services rendered at the

terminal.

The number of vehicles handled at Santos dropped 20.9%. As a result of the Brazilian

economic recession, the flows of import and export of vehicles recorded declines of 67.0%

and 5.4%, respectively, in the year. Despite the worsening of operating indicators, TEV

maintained its market share over 90.0% in 2016.

Business strategy and model

Strategic management

In 2017, Santos Brasil, following its strategy aimed at promoting the competitiveness of its

clients, based on five pillars: (i) service rendering excellence; (ii) ethics and transparency;

(iii) human development; (iv) environment; and (v) security, will seek the maximum return

on its assets. The Company will intensify its quest for efficiency and productivity, focusing

on results, by readjusting the organizational structure and scaling operating and

administrative costs and expenses. The strategy for the units located in the North and

South regions of the country is based on a greater commercial effort to attract new clients.

In the Southeast, the Company awaits the decision of Tecon Santos executive expansion

project to assess the start of the projected investment in the extension of the terminal

concession term. In addition, we intend to maintain our market share in the Port of Santos,

besides competing for new services that prove to be competitive and that add value to our

portfolio, while Santos Brasil Logística will seek new clients offering storage load and

competitive prices.

Prospects and opportunities

After a turbulent year for the country, in addition to completing two consecutive years of

economic recession, with a drop in GDP of 3.8% in 2015 and cumulative decline of 4.0%

in the first nine months of 2016, also experiencing uncertainties in the political

environment, Santos Brasil starts 2017 attentive to the structuring of a new investment

cycle, which will make Tecon Santos more automated and will expand its current capacity

by 20.0%, preparing it to meet the expected demand of 366-meter long vessels in the

Brazilian coast, particularly with the expansion of the Panama Canal.

In 2016, the Company submitted an executive project that provides details about the

investment of about R$1.3 billion in the expansion of Tecon Santos to the examination of

Secretariat of Ports of the Ministry of Transport, Ports and Civil Aviation (MTPAC). The

aforementioned executive project has not yet been deliberated by the MTPAC and, only

after its approval may the Company request the necessary licenses for the expansion

works of the terminal. Additionally, the projected investment includes the acquisition of

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newer and more modern equipment to replace the equipment used today at Tecon Santos,

which will bring gains in efficiency and productivity, thereby reducing costs and operating

expenses.

Moreover, the Company is awaiting the decision to extend the contract of Tecon Vila do

Conde in 2017, extending its concession until 2033. The request is based on the

perspective of growth in container handling in the region, which has grown 72.6% in the

last two years. The contractual extension will allow the execution of an investment plan

aimed at increasing the terminal’s capacity in such a way that absorbs the demand,

providing service of excellence with a high standard of quality. The volume of traffic at Vila

do Conde today is led by cabotage services, but with the expansion of the Panama Canal

completed in 2016, there is also an increase in the long-haul shipping operated at the

terminal.

In addition to the request for a contractual extension for Tecon Vila do Conde, Santos

Brasil believes that the request to restore the economic and financial equilibrium of Tecon

Imbituba, filed with the MTPAC in June 2016, will have its merits definitively appraised in

2017. The request is anchored based on the elimination of the requirement of Minimum

Guaranteed Handling Volume (MMC) of the terminal, which would then pay port fees only

for containers actually handled.

The Vehicle Terminal and the Logistics segment have a high correlation with the Brazilian

automotive sector, which, in recent years, has seen its activity reduced vis-à-vis the

economic scenario. Policy measures taken to drive inflation towards the center of the

target (4.5%) have already had an effect, and inflation measured according to the IPCA

price index ended 2016 at 6.29% (below the upper limit of the target for inflation). Control

of inflation is expected to enable a reduction in the basic interest rate, which since October

2016 has already fallen 1.25 percentage points and is now at 13.0% per year. According to

the “Focus” bulletin (published weekly by the Central Bank of Brazil), it is believed that

2017 will close below 10.0%. The decrease in inflation and basic interest rate is expected

to increase levels of investment, employment and consumption and bring about an upturn

in the economy and, consequently, the automotive sector, which would require more

services from the Vehicle Terminal (TEV) and Santos Brasil Logística.

Economic and financial performance Operating performance

(Units) 2016 2015 Var. % PORT TERMINALS Quay operations - containers 1,016,394 919,922 10.5% Full containers 783,094 707,603 10.7%

Empty containers 233,300 212,319 9.9%

Quay Operations - General Cargo (t)

102,992 161,711 -36.3% Storage operations 119,640 110,965 7.8% LOGISTICS

Storage operations 35,946 52,911 -32.1%

VEHICLES TERMINAL Moved vehicles 179,888 211,150 -14.8%

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PORT TERMINALS

(Units) 2016 2015 Var. % PORT TERMINALS Full containers 783,094 707,603 10.7% Tecon Santos 734,631 666,082 10.3% Tecon Imbituba 13,899 15,176 -8.4% Tecon Vila do Conde 34,564 26,345 31.2% Empty containers 233,300 212,319 9.9% Tecon Santos 191,566 183,379 4.5% Tecon Imbituba 10,512 10,259 2.5% Tecon Vila do Conde 31,222 18,681 67.1% General Cargo (t) 102,992 161,711 -36.3% Tecon Santos - - - Tecon Imbituba 87,085 149,045 -41.6% Tecon Vila do Conde 15,907 12,666 25.6%

The economic crisis faced by the nation deepened in 2016 and, along with the shrinking

economy, registered a drop in consumption and employment rates. The handling of

containers through the Port of Santos showed reflections of the crisis, decreasing by 3.9%

in 2016. The downturn was mainly due to import and cabotage flow of goods, and was

partially offset by the increase in the volume of cargo exported and transshipments, a

service that has had a high representation since the increase in capacity that the Port

underwent in 2013.

The increase in the volume of containers handled at the Tecon Santos port was brought

about by the gain in market share, where the number of long-haul, transshipment and

cabotage cargo registered changes of different magnitudes. The operating indicators of

Tecon Santos referring to 2016 indicate growth of 3.8% and 20.4%, in the total number of

full containers for import and export, respectively. The handling of transshipment

containers, in turn, grew by 10.1%, while the total number of containers for cabotage

remained stable compared to the previous year.

The 7.8% growth in warehousing operations at the Company's port terminals was higher

than the increase in the number of full containers imported, and is a result of the

Company's strategy; given the 8.9% drop in full containers imported at the Port of Santos,

the company chose to relocate some customers from its Customs Logistics and Industrial

Centers (CLIAs) to Tecon Santos, primary zone.

Tecon Imbituba showed a 4.0% reduction in the number of containers handled in 2016.

The end of the docking of a long-haul service in July 2015 led to a gain in the participation

of cabotage operations in the mix of services provided by the terminal, which closed out

2016 with 95.2% of the total volume handled. Impacted by the economic crisis and the

consequent reduction in steel imports, the overall cargo handling decreased by 41.6% in

the Company's operation in the South of Brazil.

In 2016, Tecon Vila do Conde maintained the operational performance seen in previous

years, and ended the year with a 46.1% growth in container handling. Such performance is

due in part to two navigation services that operate on the routes to Europe and the

Caribbean and, since the end of January 2016, started docking at the terminal.

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The consolidation of the Company's three operations in the Port Terminals segment

resulted in a 10.5% growth in volume operated in 2016, with a total of 1,016,394

containers handled.

Full-empty mix of containers recorded in 2016 76.9% of full containers (77.0% in 2015).

The reduced imports of containerized cargo at the Port of Santos and the increased

competition in providing bonded warehouse services incurred a decrease of 32.1% in

storage segment operations in 2016. The economic crisis has greatly affected the Brazilian

automotive industry, with a positive impact on integrated logistics services provided by

Santos Brasil Logística. The downturn in the rendering of services of this nature increased

the Company’s search for efficiency in adjusting the capacity of its operations. The search

for synergies led to the concentration of logistics customers at the Distribution Center

located in São Bernardo do Campo.

The Vehicle Terminal also reflected the decreased consumption seen in the automotive

sector, and recorded a 14.8% drop in the number of vehicles handled in 2016. Exported

vehicles accounted for 92.1% of the total of 165,726 units handled in the period.

Financial performance

Gross income from services

(R$ million) 2016 2015 Var.% PORT TERMINALS 744.4 824.3 -9.7% Quay operations 450.1 504.1 -10.7%

Storage operations 294.3 320.2 -8.1%

LOGISTICS 184.9 243.9 -24.2% VEHICLES TERMINAL 42.9 58.5 -26.7% Eliminations -15.5 -17.4 -10.9% Consolidated 956.7 1,109.3 -13.8%

The decrease in the gross income recorded by the Port Terminals segment includes

extraordinary income in the amount of R$81.5 million as a partial reversal (in 2015) of a

provision referring to the proceedings related to the service of sorting, delivery and billing

of Bonded Warehouses (TRAs), as explained in Note 16 of the Company's Financial

Statements. By excluding the income from such reversal in 2015 from the calculation

basis, gross revenue from quay operations increased by 6.5% in 2016. As a result of

increased competition in the providing of bonded warehousing services, income from such

operations in the port terminals segment fell by 8.1% in the period.

Despite the reduction in the integrated logistics services provided in 2016, the Company’s

commercial efforts in the search for break-bulk cargo warehousing and higher added value

services, together with contract renegotiations, resulted in an increase of 11.6% in the

average revenue per container stored, reaching R$5,143.83 in 2016.

According to Brazil’s National Association of Automobile Manufacturers (ANFAVEA),

automobile production and licensing of imported automobiles fell 11.9% and 43.9%,

respectively, in 2016. The changes observed in vehicle production and consumption show

a drop in vehicle imports. Of all the vehicles handled by the Vehicle Terminal (TEV) in

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2016, only 7.9% were in the flow of imports (23.3% in 2015). The lower share of imported

vehicles in the services provided by TEV reduced the average income by 13.9%, to

R$238.48 in 2016.

Net income from services Consolidated net income totaled R$ 834.1 million, a decrease of 13.5% in relation to the R$964.3 million recorded in 2015. Cost of services rendered

(R$ million) 2016 2015 Var. % PORT TERMINALS

Movement costs 125.5 113.6 10.5%

Personnel costs 198.5 183.8 8.0% % Lease and infrastructure 71.5 65.5 9.2%

Depreciation and amortization 64.9 93.7 -30.7%

Other costs 82.7 68.1 21.4%

Total 543.1 524.7 3.5% LOGISTICS

Movement costs 37.1 39.7 -6.5%

Personnel costs 53.7 60.9 -11.8%

Depreciation and amortization 14.5 14.5 -

Other costs 39.8 44.7 -11.0%

Total 145.1 159.8 -9.2% VEHICLES TERMINAL

Movement costs 14.9 15.8 -5.7%

Lease and infrastructure 6.4 5.3 20.8%


Other costs 4.9 5.4 -9.3%

Total 35.2 35.5 -0.8% Eliminations -14.1 -15.6 -9.6% Consolidated 709.3 704.4 0.7%

PORT TERMINALS

The growth in operational performance shown in 2016, along with the increase in the costs

of container capturing, labor provisions and maintenance, as well as the adjustment of

costs on personnel and leases, resulted in an increase of 0.7% in average cost (excluding

depreciation and amortization) per container handled/stored at the port terminals, reaching

R$420.94 in 2016.

Cost of Handling (sundry manpower, TUP-channel rate and other variable costs): the

reduction of 11.6% in electricity expenses obtained from the purchase of energy at lower

prices was offset by the increase in the costs of container pick-up, service that increased

in 2016 with the increase in the provision of bonded warehousing services in Tecon

Santos.

Costs on Personnel: these were up 8.0%, as a result of the combination of: (i) collective

bargaining agreement executed into at the second quarter of 2016; (ii) the increase in the

provision relating to labor lawsuits, generated by the re-adaptation of the Company's staff

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of employees to the current operating environment; and (iii) the reversal of a provision for

employee’s profit sharing for the year.

Leasing and Infrastructure: The 9.2% increase comprises the contractual adjustment of the

lease installments and has included, since September 2015, a fee charged on the

minimum guaranteed volume of handling stipulated in the extension of the Tecon Santos

concession agreement.

Depreciation and Amortization: The reduction shown under this heading stems from the

extension of the Tecon Santos concession agreement, which changed the estimated

depreciation of the assets, which is made over the estimated useful life and is limited to

the new final concession period, in addition to the fact that amortization of the concession

is extended until 2047.

Other Costs: the increase reported in 2016 is due to increases in: (i) R$4.8 million in

maintenance expenses, focusing on Tecon Santos and Tecon Vila do Conde; (ii) R$4.5

million in third-party labor lawsuits; (iii) growth of R$2.1 million in equipment leasing; (iv)

R$0.9 million in spending on information technology; and (v) R$2.4 million in other costs.

LOGISTICS

Cost of Handling (Fuels, Freight and other variable costs): the reduction of variable costs

seen in 2016 was mitigated by the increases of 11.7% and 5.5% registered in freight and

toll costs, respectively.

Costs on Personnel: Despite the extraordinary labor costs of R$1.1 million generated by

the intensification of the process of resizing and adapting the logistics segment, costs on

personnel decreased by 11.8% in 2016.

Other Costs: Despite the extraordinary cost of R$1.9 million generated by the synergies

between the distribution center units recorded in the period, this item decreased due

mainly to the decrease of (i) R$2.1 million in maintenance; (ii) R$1.9 million in rent; (iii)

R$1.0 million in maintenance expenses; (iv) R$0.5 million with equipment rental and

leasing; and (v) R$1.3 million in other costs.

VEHICLES TERMINAL

With the reduction in the total number of vehicles handled by the Vehicle Terminal (TEV),

the average unit cost (excluding depreciation and amortization) increased 16.0%, to

R$145.65 in 2016. The increase in leasing and infrastructure costs stems from: (i) the

annual adjustment of the lease installments; and (ii) lower volume of vehicle handling

through TEV and consequent increase in the provision for payment of the Minimum

Guaranteed Handling Volume (MMC).

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Operating expenses

(R$ million) 2016 2015 Var. %

PORT TERMINALS Sales 38.5 83.8 -54.1%

General, administrative and other 12.9 50.0 -74.2%


Total 51.7 134.2 -61.5%

LOGISTICS

Sales 28.0 30.2 -7.3%



Total 35.5 40.2 -11.7%

VEHICLES TERMINAL

Sales 0.7 1.4 -50.0%

General, administrative and other -1.7 -0.1 1,600.0%


Total -1.0 1.3 -

CORPORATE



Total 47.2 69.2 -31.8%

Consolidated 133.4 244.9 -45.5%

PORT TERMINALS

Sales: Expenses on sales for 2015 include non-recurring events in the amount of R$58.2 million, out of which R$51.4 million are the provision for outstanding invoices stemming from the partial reversal of the provision in reference to the proceedings dealing with the rendering of services of sorting and immediate delivery of containers. The conservative position adopted by the Company in the face of the impacts of the economic recession incurred an extra provision of R$8.4 million in 2016.

General, administrative, and other expenses: Expenses for 2016 include R$7.3 million in extraordinary income arising from the recovery of taxes related to past fiscal years and reversal of labor lawsuits. General, administrative and other expenses for 2016 adjusted by non-recurring events decreased by 28.4% compared to the expenses for 2015 adjusted by the following extraordinary results: (i) R$8.8 million of income from correction of reversed provision, and (ii) R$30.6 million in loss stemming from Tecon Imbituba's impairment test. Among the main variations, we can highlight the reduction of R$11.2 million in administrative expenses on personnel made in 2016.

LOGISTICS

Sales: The reduction lower than the one seen in the operational indicators in 2016 is explained by the increase seen in the average sales of the containers stored, as a consequence of the greater participation of bonded warehouse services provided for break-bulk cargoes in the segment's mix of operations and income.

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VEHICLES TERMINAL

Thus, with the Port Terminal segment, in 2016, TEV presented R$3.0 million in extraordinary income arising from the recovery of taxes referring to past fiscal years.

CORPORATE

General, Administrative and other: As a result of the continuous pursuit of efficiency in management, corporate administrative expenses decreased by R$12.5 million and expenses on legal and personnel consultants decreased by R$5.1 million in 2016.

Depreciation and Amortization: The reduction shown under this heading stems from the

extension of the Tecon Santos concession agreement, which changed the estimated

depreciation of the assets, which is made over the estimated useful life and is limited to

the new final concession period, in addition to the fact that amortization of the concession

is extended until 2047.

The Company's expenses decreased by 45.5%, to R$133.4 million, in 2016. When

adjusting the expenses for the key events mentioned previously, the result of 2016

presents R$143.7 million in expenses, 6.4% lower than the 2015 adjusted.

EBITDA and EBITDA margin

(R$ million) 2016 Margin

2015 Margin Var.

(%) (%) (%)

PORT TERMINALS 126.3 19.3% 157.7 21.8% -19.9% Logistics -10.3 - 21.5 10.4% - Vehicles Terminal 11.4 31.1% 22.7 45.0% -49.8%

Corporate -40.0 - -55.3 - -27.7%

Consolidated 87.4 10.5% 146.6 15.2% -40.4%

In 2016, the Company recorded Consolidated EBITDA of R$87.4 million, with a margin of

10.5%.

It is worth noting that the Company's results presented extraordinary events that impacted

EBITDA and EBITDA margin. If we adjust the accounting results for 2016 for the following

extraordinary events: (i) R$3.2 million in costs and expenses relating to the search for

synergy in the logistics segment; (ii) R$9.4 million in income from the recovery of taxes

from prior years; (iii) expense of R$2.3 million referring to a retroactive agreement on the

container capturing service in Santos; (iv) R$8.4 million related to the change in the

provision for doubtful accounts; (v) R$2.8 million in reversal of labor provisions; and (vi)

R$5.9 million in commercial agreements referring to previous fiscal years, the recurring

EBITDA for 2016 would total R$95.0 million, with a margin of 11.3%.

The decrease in EBITDA margin stems from the following: (i) reduction of the volume of

containers imported at the Port of Santos; (ii) greater competition in providing bonded

warehousing services, both in the primary and secondary zones of the Port of Santos; (iii)

the change observed in the profile of the vehicles handled by TEV, which, in addition to

13

showing a reduction, were composed almost entirely of exports; and (iv) the impacts

caused by the macroeconomic scenario in operations, with a structure of high fixed costs.

The EBITDA posted by the Port Terminals segment dropped 19.9% in 2016, impacted by:

(i) the result generated by the reversal of the provision in the previous year; and (ii) the

intensification of competition in providing bonded warehousing services.

The Logistics segment suffered the impacts of the economic crisis that affected the

automotive sector, with which it has a positive correlation, and the impacts caused by the

restructuring and readjustment of the supply and presented negative EBITDA in 2016.

Reflecting the combination of lower number of vehicles and a higher share of export

vehicles in the operational mix, the Vehicle Terminal registered EBITDA of R$11.4 million,

with a margin of 31.1% in 2016.

Net income

(R$ million) 2016 2015 Var. % EBITDA 87.4 146.6 -40.0% Depreciation and amortization 96.0 131.6 -27.1% EBIT -8.6 15.0 - Financial income (loss) -13.6 -29.2 -53.4%

Income and social contribution 2.3 -3.9 - Income for the period -19.9 -18.1 9.9%

Santos Brasil is a company that is part of an industry that is capital-intensive and

correlated with international trade as well as domestic production and consumption, in

such a way that the effects of the crisis have been felt in all the segments in which it

operates. The Company’s profit was impacted by: (i) increased competition and lower

demand for bonded warehousing services; (ii) restructuring of the logistics segment with

demobilization of the operating unit; and (iii) reduction of the operational activity of TEV

with a change in the profile of services provided. In 2016, the Company accumulated a

net loss of R$19.9 million.

Under the Company’s bylaws, the following deductions or increases apply to the profit for

the year, in the following decreasing order:

(a) 5% (five percent) intended to formation of legal reserve which shall not exceed 20%

(twenty percent) of capital; The formation of legal reserve may be canceled during

the year of the reserve balance, plus capital reserve amount, exceeds 30% of

capital;

456.6

551.7528.0

292.9

146.687.4

40.6% 42.7%

38.3%

29.2%

15.2% 10.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2011 2012 2013 2014 2015 2016

EBITDA (in thousands of Reais) and Margin (%)

14

(b) Sum for the formation of the contingency reserve and reversal of the same reserve

formed in prior years;

(c) Earnings Reserve and Reversal of Earnings set up previously in this reserve that

have been realized in the year;

(d) 25% (twenty five percent) to the payment of minimum mandatory dividend; and

(e) the portion remaining from net profit, adjusted after payment of the mandatory

annual minimum dividend, will be allocated to the Investment and Expansion

Reserve, the purpose of which is to: (i) assure funds for investments in fixed assets,

without prejudice to retained earnings, in the manner provided by article 196 of Law

6404/76; and (ii) reinforce working capital; it may further (iii) be used for operations

involving redemption, reimbursement or acquisition of shares of the Company’s

capital stock, with the Shareholders’ General Meeting of empowered to waive

payment of dividends in addition to the mandatory minimum.

Debt and Cash

(R$ million) Currency 12.31.2016 12.31.2015 Var. %

Short term National 145.5 107.5 35.3%

Foreign 20.8 33.4 -37.7%

Long term National 59.7 169.4 -64.8%

Foreign 6.7 29.3 -77.1%

Total indebtedness 232.7 339.6 -31.5%

Cash and cash equivalents 192.6 231.6 -16.8%

Net debt 40.1 108.0 -62.9%

Despite having experienced a period of turmoil that reflects both operational and financial

performance, the cash flow of the Company's operations and investments remains

positive, causing Santos Brasil to close out 2016 with R$192.6 million in cash, even after

paying debts of over R$100.0 million in the same period. The Company closed 2016 with a

net debt of R$40.1 million and with a leverage ratio (Net Debt/EBITDA) of 0.5x.

Consolidated total indebtedness recorded as of December 31, 2016 reached the amount

of R$232.7 million.

246.6270.2

255.0

91.5

-18.1 -19.9

13.0

22.0

18.0

9.0

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-50.0

0.0

50.0

100.0

150.0

200.0

250.0

300.0

2011 2012 2013 2014 2015 2016

Net Income (R$ million) and Net Margin (%)

15

Investments

Santos Brasil invested R$14.7 million in 2016, with most of the funds invested going to

Tecon Santos and to Santos Brasil Logística. Out of the total invested during the course of

the year, the Company’s own funds were employed for 91.5% of the projects. For the

remaining 8.5%, the Company used financing for equipment and importation. Most of the

funds invested by the Company in 2016 were aimed at at improving productivity.

The total value had a decrease of 44.9% in relation to the R$26.7 million invested in 2015.

Investment R$

million Objective Sources of funds

PORT TERMINALS

Tecon Santos 9.5 Continuous improvement and increased operational performance

5.0 Productivity/Safety improvement Own

Purchase of hardware and software 3.3 Productivity improvement Own Civil construction 1.0 Productivity improvement Own Equipment 0.2 Adaptations in building structures Own

Tecon Imbituba 2.0

Equipment (Trucks) 1.1 Productivity improvement Own Acquis. of Overhead Crane CG Terminal 0.6 Productivity improvement Own Civil construction 0.2 Legal requirement Financing - FINAME 2016

Tecon Vila do Conde 0.5

Continuous improvement and increased operational performance

0.4 Productivity improvement Own

Civil construction 0.1 Productivity improvement Own LOGISTICS 2.4


1.5 Productivity/Safety improvement Own

Civil construction 0.4 Productivity improvement Own

Equipment 0.5 Continuous improvement and increased operational performance

Financing - FINIMP 2015

VEHICLES TERMINAL 0.2


0.2 Adaptations in building structures Own

CONSOLIDATED 14.7

Capital market

Corporate Governance

Santos Brasil is committed to continuously seek to improve its corporate governance

practices and relationships with shareholders, clients, suppliers, public bodies and

employees among other entities involved with its businesses. After 10 years listed under

the Level-2 segment, in August 2016 the Company completed the migration to the “Novo

Mercado”, the highest corporate governance segment of the São Paulo Stock Exchange

(BM&FBovespa), with the termination of the shareholders' agreement that had been in

force until that time. Now the “one-share-one-vote” model is in place.

The Company has adopted the criteria of transparency and security in the disclosure of

information, pursuant to the norms of the Brazilian Securities Commission (CVM) and

establishing rules for disclosure and maintenance of confidentiality regarding material

information.

Highest body of management and the Company's governance, the Board of Directors

consists currently of seven (7) members and their alternates for a term of two years,

reelection allowed. The Board of Directors is responsible, among other duties, for

deliberating on any transactions involving companies related to shareholders and to

related parties.

16

Besides the Board of Directors, the governance structure includes the Statutory Executive

Officers Committee and the Tax Council, a model that permits the performance of

management and its respective inspection.

Statutory Executive Board performs business management according to strategies and

guidelines defined by the Board of Directors. Currently, the Statutory Board is composed

of the following: (i) CEO and COO; (ii) Economic-Financial Director of Finances and

Relations with Investors; and (iii) Commercial Director, all of them elected by the Board of

Directors for two-year term, with reelection permitted.

The Company’s Bylaws impedes the President of the Board of Directors and CEO or the

Company's main executive to have many positions.

The Tax Council is currently made up of three full members and three alternates. The Tax

Council is a permanent body whose activities are independent of Management and the

Company's external auditors. The Board is responsible for overseeing all the acts of the

administrators and fulfillment of their legal and statutory duties, checking the quality and

integrity of the reports and financial information periodically prepared by the Company; and

examining and issuing their opinion on the financial statements for the year.

The Company, its shareholders, managers and members of the Tax Council undertake the

commitment to resolve, by means of arbitration, any and all dispute or controversy which

may arise among them, specially related or arising from the application, validity,

effectiveness, interpretation, violation and their effects, of the provisions included in Law

No. 6404/76, in the Company’s Bylaws, in the rules published by the National Monetary

Council, the Central Bank of Brazil and the Securities Commission, as well as in the other

rules applicable to the operation of the capital market in general, besides the ones present

in the “Novo Mercado” Corporate Governance Regulation, in the Agreement for the

Adoption of “Novo Mercado” Corporate Governance Differential Practices, and in the

Arbitration Regulation of the Arbitration Chamber of the Market.

Ethics and Integrity

Santos Brasil is underpinned by its ethics and transparency and, as a way of establishing

the rules of conduct that guide its internal and external relations, maintains its Code of

Ethics and Personnel Regulations updated regularly. Additionally, it has a compliance

system that includes a Compliance Policy, a Compliance Committee (autonomous and

composed of no fewer than two and no more than five members recommended by the

Company's statutory officers with a two-year term), and a Confidential Portal, for lodging

reports of misconduct, grievances, and suggestions. Managed by an independent

company, so as to ensure the anonymity and integrity of the information, the channel

recorded 239 reports in 2016, distributed as follows: (i) reports of misconduct: 44.3%; (ii)

grievances: 35.6%; and (iii) 20.1%.

Since 2012, the Company has had a Code of Conduct with the power of corporate policy

that deals with the issue of corruption, matters relating to human rights and emphasis on

17

ethical behavior on the part of all employees, aligned with the Company's culture in

behavioral and ethical issues. The document is signed by 100% of our employees on the

day they join our workforce, at which time they also receive a copy of the personnel

regulations and specific operational instructions for their area.

Evolution of shares

At the end of 2016, the book value per share was R$2.09, while the closing price traded on

the São Paulo Stock Exchange (BM&FBovespa) on December 29, 2016 was R$2.40

(R$2.52 in the previous year when the shares were traded in the form of units composed

of five shares, being four preferred shares and one common share, amounting to R$12.60

per unit), reaching a market value of R$1,598.6 million. For the year, the average daily

trading volume reached R$1.7 million.

Shareholders' rights

On August 22, 2016, the Company concluded the migration to the “Novo Mercado” special

segment of corporate governance of the São Paulo Stock Exchange (BMF&Bovespa). The

Company’s shares were then traded exclusively in the form of common shares (ONs). The

rights of the shares are established in article 5 of the Company's Articles of Incorporation,

which deals with the total share capital and the division thereof, as well as the Company’s

autonomy to increase its capital regardless of the decision of the Shareholders' Meeting up

to the limit of 2,000,001,000 (two billion, one thousand) common shares, upon resolution

of the Board of Directors.

80

90

100

110

120

130

140

150

160

Evolution of STBP3 x IBOV- 2016 (100 basis)

STBP3 IBOV

18

Independent Audit

The financial statements of Santos Brasil and its subsidiaries are audited by KPMG

Auditores Independentes.

The Company's policy for contracting services other than external audit intends to evaluate

the existence of conflict of interest. Thus, the following aspects are analyzed: the auditor

should not (i) audit his/her own work; (ii) perform managerial jobs in the client; and (iii)

promote his/her client's interest.

Accordingly, in the fiscal year ended December 31, 2016 other services were not

contracted.

Social performance

Human Capital

At the end of 2016, Santos Brasil had 3,160 regular employees, plus 50 apprentices and 6

trainees. Out of the total, the majority (87.0%) were males, which is justified owing to the

nature of the port business. In addition to receiving fixed income and benefits package that

includes life insurance and health insurance extended to employees’ dependents, among

others, according to the units, employees are part of the Profit Sharing Plan (PPR).

Training modules are also offered in various formats and platforms. During the year,

roughly 50 company employees took part in the second group of the Leadership Training

Program, involving 154 people. The course is conducted internally and taught by the

Company's leaders to train new staff members aligned with the internal culture. Around

100 coordinators and supervisors who are part of the program participated in the first

meetings of the Sustainability Academy, dedicated to disseminating concepts of

sustainability in everyday work routines. In the last five years, R$25.0 million were invested

in the training and development of people. In 2016, 16,159 hours of training sessions were

administered, which corresponds to an average of 11.5 hours per professional. One of

these initiatives was the Leader Formation Program, which, by the year 2018, should

involve 100% of the Company's leaders.

19

2016 2015 Number of employees 3,216 3,639

Turnover 5.23% 6.98%

Turnover per

geographical

location

São Paulo 4.81% 6.88%

Pará 9.32% 9.04%

Santa Catarina 4.15% 5.29%

Federal District 0.00% 0.00%

Investment in training (in thousands of Reais) R$0.60 R$0.97

Security funds Private

pension

Private

pension

Other social plans - -

Educational

level

No education 0 0

Incomplete Elementary School 58 61

Complete Elementary School 246 288

Incomplete High School 94 132

Complete High School 1,958 2,268

Technical training incomplete 9 17

Technical training complete 156 151

College/university not concluded 100 130

College/university degree 527 524

Post-graduation 67 66

Master's Degree 1 2

PhD 0 0

Health and safety

Santos Brazil adopts strict safety procedures, in line with the best practices in place at the

world’s foremost container terminals. This issue is one of the priorities of the Sustainability

Policy and is aligned with the UN’s Sustainable Development Goals.

A benchmark in port safety in Brazil, the Company works in a preventive way, continuously

investing in programs and training to promote this value. In 2016, Santos Brasil received a

series of benchmarking visits on the subject, including the federal police of Belgium,

Bolivia and Peru, as well as Brazilian Navy officers, the president of the National

Commission of Public Safety at Ports, Terminals and Waterways (Conportos), and the

State Commission of Public Safety at Ports, Terminals and Waterways (Cesportos).

Promoted in September by Companhia Docas do Estado de São Paulo (Codesp) and the

Mutual Aid Plan of the Port of Santos (PAM), in 2016 Tecon Santos held the largest

firefighting simulation at the Port of Santos, directly involving 250 people and sensitizing

another thousand .

With a focus on people’s safety at Santos Brazil, in 2016 the Company continued the

measures adopted in the course of operations, including: (i) quarterly Safety, Health and

Environmental conferences in order to disseminate the concepts companywide; (ii)

constant training, inspections and awareness campaigns; (iv) respiratory protective

equipment and protective clothing for fighting events involving smoke and chemicals; and

(v) maintaining Occupational Safety Technicians, Professional Firefighters and

Occupational Nursing Technicians at all units. The Company maintains the Port Terminals

20

Accident Prevention Commission (CPATP), composed of 68 employees from the container

and vehicle terminals and 40 employees from the logistics units, who participate on the

Internal Commission for the Prevention of Accidents (CIPA). The issue is addressed in

collective agreements signed with trade associations, covering 100% of the employees.

In addition to guaranteeing the integrity of everyone involved in its operations, Santos

Brasil complies with the customs regulations in force in customs-related areas, such as the

Port of Santos, and all Tecon Santos facilities are monitored with cameras 24 hours a day.

The Company also has the most modern software for cargo control available on the port

market, which directs the distribution of containers, sorting special cargoes as well as the

following: (i) emergency trailers that operate to sort loads in case of incidents; (ii)

emergency support vehicles, with hoses, nozzles, respiratory protection equipment,

signaling cones and safety strip tape, in addition to two emergency containers; and (iii) an

Emergency Response Plan for all types of cargo.

Environmental performance

A signatory to the UN Global Compact and aligned with the Sustainable Development

Goals (SDGs), Santos Brasil is committed to reducing CO2 emissions, water consumption,

and waste generation. Actions in this regard are monitored by the Sustainability

Committee based on indicators that allow us to assess whether goals have been achieved

as well as identify progress and opportunities for improvement.

In 2016, these goals were strengthened and the ties with the academia were fostered

through the return to the “Business for the Climate” platform of the Center for Sustainability

Studies (GVCes) at the Getúlio Vargas Foundation’s School of Business Administration.

The Company is involved regionally with Agenda 21, a plan of action to be adopted by

governments and civil society in all areas where human actions impact the environment,

participating in the Program’s forum in Guarujá.

Issues

Emissions of greenhouse gases (GHG) are measured by TEU handled, in port operations;

per pallet handled, in logistics activities; and per kilometer traveled, in road transport. All

results are presented in kilograms of CO2 equivalent.

In 2016 the total volume of emissions from the Company's business units was 30,624.2

metric tons of CO2e, 0.3% lower than the figure for 2015, when emissions totaled 30,720.5

metric tons of CO2e. The company recorded a reduction in emissions per TEU handled

based on the optimization of the operations and consequent reduction of the diesel

consumption per unit handled. Santos Brasil closed out 2016 with 15.2 KgCO2e per TEU

handled, 5.6% lower than the 16.1 KgCO2e / TEU recorded in 2015. Emissions per pallet

handled fell from 1.1 KgCO2e to 0.7 KgCO2e. In road transport, the index fell from 0.96

KgCO2e per kilometer travelled to 0.95 KgCO2e / km.

There was progress in the installation of LED lighting in the offices, a technology capable

of reducing emissions by up to 64.3% compared to common light bulbs, and with the

Sustainable Driver program, which encourages and guides employees to adopt good

safety practices and Rational use of resources, meaning less emissions of polluting gases.

21

In 2016, the initiative reached an average of 2.7 kilometers driven per liter of fuel. The

result is 17.0% better than that of January 2014, at the beginning of the Program, when

2.3 km per liter were recorded. In the accumulated total for the period of 2016, 6,717,511

kilometers were travelled, with 2,605,966.2 liters of fuel.

The Sustainable Driver initiative is part of the Green Fleet Program, which since late 2014

already accounts for the reduction of 8.3% of gas emissions per kilometer travelled. The

program includes investments in the modernization of the fleet, a process called Green

Purchasing.

Water

During the year, the Company's water consumption, measured in cubic meters per

employee, was 1.7, a decrease of 5.6% in relation to the index of 1.8 recorded in 2015. In

volume, water consumption totaled 84,748 m3, 4.2% lower than the previous year.

The Company has sought innovative solutions, such as the water reuse system installed at

CLIA Santos, where rainwater is collected, treated and used in the washing of the unit's

machines.

Two years ago, the dry cleaning system for road transport vehicles and equipment was

adopted, and this measure saved 5.9 million liters of water by the end of 2016. This is

because, compared to the conventional way, dry cleaning of a truck, for example, saves

1,5 thousand liters of water. Since the beginning, 3,924 were made.

Waste

In 2016, Santos Brasil engaged itself in structuring the Waste Management Program and,

in parallel, directed its focus to the Procurement department, reviewing all waste

destination contracts and analyzing the possibility of developing a process of composting

at Tecon Santos as early as 2017. The strategy for this issue is to concentrate efforts on

the source of the waste, which means reducing the volume consumed and, consequently,

of purchases.

São Paulo, February 08, 2017

The Management

22

Independent auditors' report on individual and consolidated financial statements To the Shareholders and Board of Directors of Santos Brasil Participações S.A. São Paulo - SP Opinion We have examined the individual and consolidated financial statements of Santos Brasil Participações S.A. (“Company”), identified as Parent Company and Consolidated, respectively, comprising the balance sheet as of December 31, 2016 and the related statements of income, comprehensive income, changes in shareholder´s equity and cash flows, for the year then ended, as well as the corresponding notes, comprising the significant accounting policies and other explanatory notes. In our opinion, the aforementioned financial statements, in all material respects of the individual and consolidated financial position of Santos Brasil Participações S.A. as of December 31, 2016, the individual and consolidated of its operations and financial cash flows, individual and consolidated for the year then ended, in accordance with the accounting practices adopted in Brazil and the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Basis for opinion Our audit was conducted in accordance with Brazilian and International Standards on Auditing. Our responsibilities, according to such standards, are described in the following section, entitled “Auditor’s responsibility for the audit of the individual and consolidated financial statements”. We are independent of the Company and its subsidiaries, according to the relevant ethical principles established in the Accountant’s Code of Professional Ethics and the professional standards issued by the Federal Accounting Council, and comply with other ethical responsibilities according to such standards. We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our opinion.

23

Emphasis Inquiry to regulatory agency We call attention to Note 3e to the individual and consolidated financial statements, which explains that on March 1, 2016, Company Management filed an inquiry with Brazil’s Securities Commission (CVM) in reference to the divergence of opinion between Company Management and the preceding independent auditors, object of a modification to their report on the financial statements of December 31, 2015, dated March 8, 2016, regarding the revision and extension of the useful lives of fixed and intangible assets due to the extension of the lease period for an additional 25 years obtained by the Company on September 30, 2015, according to the Fifth Term of Rectification, Ratification and Addendum to Lease Agreement PRES/69.97, dated November 28, 1997. To date, the Brazilian Securities Commission (CVM) had not issued a statement with respect to this inquiry. Our opinion is not qualified in relation to this matter. Key audit matters Key audit matters are those that, in our professional judgment, were of most significant in our audit of the current year. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and, therefore, we do not express a separate opinion on these matters. Provision for tax, labor and civil risks - (Note 16) - Parent Company and Consolidated Provisions for legal and administrative claims are made by the Company and its subsidiaries to cover probable losses on matters relating to taxes, labor and civil matters. The Company and its subsidiaries, with the help of internal and external legal counsel, exercise significant judgment in determining the amount of provisions to be made and the disclosure of non-provisioned lawsuits, if the likelihood of loss is considered possible. Due to the relevance of the amounts involved to the financial statements as a whole, the significant judgments exercised by the Company and its subsidiaries to establish the reserves, and the required disclosures, we consider this issue as significant in our audit work. How our audit did conduct this matter We asked people responsible for the legal area about their understanding of the stage in which we found main tax, labor and civil matters of the Company and its subsidiaries. We obtained the list of legal advisors representing the Company and its subsidiaries in legal and administrative proceedings. We evaluated responses to mail sent to external and internal legal advisors containing information on amounts involved and evaluation of risk of loss for relevant ongoing tax, labor and civil matters. In addition, we analyzed loss probability attributed to each relevant matter, existing documentation and information related to main matters. In addition, with the support of our legal specialists, we consider that adequate classification is probable, possible or remote loss for lawsuits related to (i) tax assessment notice on use of goodwill amortization and (ii) billing of TRA - Customs Warehouse Terminals, respectively. We also considered adequacy of disclosures made in accounting statements.

24

Recoverable value of fixed and intangible assets including goodwill - (Note 13) Parent Company and Consolidated Accounting statements include values of property, plant and equipment and intangible assets, including Goodwill, whose realization is supported by estimated future earnings based on business plan prepared by the Company. Due to uncertainties inherent to the process of determining estimates of future earnings of cash generating units for evaluation of these assets’ impairment, which involve assumptions as discount rate, inflation rate, among others, and to complexity of process, which required significant judgment by the Company, we consider this a significant matter in our audit work. How our audit did conduct this matter We understood the process for preparation and review of business plan, budgets and analysis of impairment of cash generating units where property, plant and equipment and intangible assets, including goodwill, were recognized. We evaluated reasonability of estimated values in use prepared by the Company, determination of Cash Generating Units (CGU), and methodology used for impairment test. With the help of our specialists in corporate finance, we evaluated assumptions and methodologies used by the Company for preparation of the model and compared it with data obtained from external sources, such as projected economic growth, cost inflation and discount rates, and conducted a sensitivity analysis of these assumptions. We also assessed adequacy of disclosures made by the Company. Post-employment benefit - (Note 26) - Parent Company and Consolidated Significant estimates are made for evaluation of actuarial liabilities related to supplementary health care of some professionals that will be entitled to post-employment benefit. Assumptions or estimates used to valuate this social security liability, such as discount rate, inflation rate and expected mortality/life may have a relevant effect on the Company’s financial statements and, therefore, we consider that this matter is relevant to our audit. How our audit did conduct this matter With the support of our actuarial specialists, we evaluated main assumptions used to calculate liabilities, such as discount rate, inflation rate and expected mortality/life. This included comparison of key assumptions against data obtained from external sources. We also evaluated data used to determine this obligation, such as number of employees and average health care values. We also considered adequacy of disclosures regarding this matter in accounting statements. Other issues Statements of added value We have also examined the individual and consolidated statements of added value (DVA) for the year ended December 31, 2016, prepared under responsibility of Company's management and presented as a supplementary information for IFRS purposes, and were subject to audit procedures carried out with the audit of Company’s financial statements. To form our opinion, we evaluated whether these statements are reconciled with the financial statements and accounting records, as applicable, and whether their form and content are in accordance with the criteria established in Technical Pronouncement CPC 09 - Statement of Added Value. In our opinion, these statements of added value were duly prepared, in all material respects, according to the criteria established in such Technical Pronouncement and are consistent with the individual and consolidated financial statements taken as a whole.

25

Corresponding individual and consolidated values The individual and consolidated financial statements for the year ended December 31, 2015, shown as corresponding values in the financial statements for the current year were previously audited by other independent auditors that issued a qualified report dated March 8, 2016 regarding the extent of useful life of fixed and intangible assets, in relation to the extension of Tecon Vila do Conde lease agreement of the branch Tecon Santos. Other information that accompanying the individual and consolidated financial statements and the auditor’s report The Company’s management is responsible for such other information, which comprise the Management Report. Our opinion on the individual and consolidated financial statements do not include the Management Report, and we do not express any type of audit conclusion on such report. In connection with the audit of the individual and consolidated financial statements, our responsibility is to read the Management Report, and, when doing so, consider whether such report is, in material respects, inconsistent with the financial statements or with the knowledge, we obtained in the audit, or seem otherwise materially misstated. If, based on the work carried out, we conclude that there is material misstatement in the Management Report; we are required to report such fact. We do not have anything to report on this respect. Responsibility of management and governance for the individual and consolidated financial statements The Company's management is responsible for the preparation and adequate presentation of the individual financial statements in accordance with the accounting practices adopted in Brazil and of the consolidated financial statements in accordance with the accounting practices adopted in Brazil and International Financial Reporting Standards (IFRS) issued by issued by the International Accounting Standards Board - IASB, as well as for the internal controls that it deemed necessary to enable the preparation of financial statements free of significant distortions, regardless of whether the latter were caused by fraud or error. In the preparation of the individual and consolidated financial statements, management is responsible for assessing the Company’s ability to continue as going concern, disclosing, when applicable, the matters related to its going concern, and the use of this accounting basis in the preparation of the financial statements, unless the management intends to liquidate the Company and its subsidiaries, or cease their operations, or do not have any realistic alternative to avoid the discontinuance of operations. Those charged with governance of the Company and its subsidiaries are those with responsibility for supervising the process of preparation of the financial statements. Responsibilities of the auditor for the audit of individual and consolidated statements Our aims are to obtain reasonable assurance about whether the individual and consolidated financial statements, taken as a whole, are free from material misstatement, whether due to fraud or error, and issue an audit report containing our opinion. Reasonable assurance is a high assurance level, but not a guarantee that the audit performed according to the Brazilian and International Standards on Auditing always detect any existing material misstatements. Misstatements may arise from fraud or error, and are considered material when, individually or in aggregate, may influence, from a reasonable perspective, the economic decisions of users taken based on such financial statements.

26

As part of an audit performed according to the Brazilian and International Standards on Auditing, we exercise professional judgment and keep professional skepticism throughout the audit. In addition:

• We identify and assess risks of material misstatements in the individual and consolidated financial statements, whether due to fraud or error, plan and perform audit procedures in response to such risks, as well as obtain appropriate and sufficient audit evidence to base our opinion. The risk of not detecting material misstatement resulting from fraud is higher than the one resulting from error, once fraud may involve the act of cheating internal controls, collusion, falsification, omission or intentional misrepresentations.

• We obtain understanding of the internal controls relevant to the audit for planning audit procedures appropriate to the circumstances, but not with the aim to express opinion on the effectiveness of the internal controls of the Company and its subsidiaries.

• We evaluate the adequacy of the adopted accounting policies and the reasonableness of the accounting estimates and the respective disclosures made by management.

• We arrive at a conclusion on the adequacy of the use, by management, of the going concern basis of accounting, and based on the obtained audit evidences, whether there is material uncertainty in relation to events or conditions that may raise significant doubts on the Company’s and its subsidiaries’ ability to continue as going concern. If we conclude that there is material uncertainty, we shall draw attention in our audit report to the respective disclosures in the individual and consolidated financial statements or include modification in our opinion, should the disclosures be inadequate. Our conclusions are based on the audit evidences obtained through the date of our report. However, future events or conditions may cause the Company and its subsidiaries to no longer continue as going concern.

• We evaluate the overall presentation, structure and content of the financial statements, including the disclosures and whether the individual and consolidated financial statements represent the corresponding transactions and events in a way compatible with the fair presentation objective.

• We obtained appropriate and sufficient audit evidence regarding the financial information of the group’s entities or business activities to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the group, and, consequently, the audit opinion. We communicate with those charged with governance about, among other aspects, the planned scope, audit timing and significant findings of the audit, including any significant deficiencies in the internal controls that we identify during our works. We also provide to those charged with governance a statement that we fulfill the relevant ethical requirements, including the applicable independence requirements, and communicate all of the possible relations or matters that could considerably affect our independence, including, when applicable, the respective disclaimers.

27

Of the matters that were communicated to those charged with governance, we determined those that were considered as the most significant in the audit of the financial statements for the current year, and that, accordingly, comprise the key audit matters. We described these matters in our audit report, unless the laws or regulations have precluded public disclosure about the matter, or when, in extremely rare circumstances, we determine that the matter shall not be reported in our report because the adverse consequences of such reporting may, from a reasonable perspective, outweigh the benefits of communication for public interest. São Paulo, February 08, 2017 KPMG Auditores Independentes CRC 2SP014428/O-6 Original report in Portuguese signed by Wagner Petelin Accountant CRC 1SP142133/O-7

SANTOS BRASIL PARTICIPAÇÕES S.A. AND SUBSIDIARIES

BALANCE SHEETS AS OF DECEMBER 31, 2016 AND 2015(Amounts expressed in thousands of reais - R$)

ASSETS Note 12.31.2016 12.31.2015 12.31.2016 12.31.2015 LIABILITIES AND SHAREHOLDERS’ EQUITY Note 12.31.2016 12.31.2015 12.31.2016 12.31.2015

CURRENT ASSETS CURRENT LIABILITIESCash and cash equivalents 6 113.406 189.258 192.557 226.115 Loans and financing 14 68.415 78.625 78.056 91.593 Accounts receivable 7 53.236 69.799 85.999 93.142 Debentures 15 85.358 49.309 85.358 49.309 Inventories 8 19.999 19.539 23.187 22.554 Suppliers 54.014 41.015 73.514 59.885 Current tax assets 10 2.010 11.119 6.568 16.146 Salaries and social charges 27.574 30.210 34.691 38.365 Dividends receivable 1.758 4.439 - - Taxes, rates and contributions 5.427 6.625 9.752 10.907 Derivative financial instruments 27.b.1) - 4.540 - 5.525 Dividends and interest on own capital payable 113 3.826 113 3.826

Other assets 7.389 6.559 10.152 10.555 Derivative financial instruments 27.b.1) 1.997 - 2.859 -

Total current assets 197.798 305.253 318.463 374.037 Loan payable 5.a) - 70.427 - -

Allowance for loss with investments 11 - 3 - -

NON-CURRENT ASSETS Other liabilities 46 46 46 46

Judicial deposits 16 233.219 219.077 241.310 228.908 Total current liabilities 242.944 280.086 284.389 253.931

Deferred tax assets 24.b) - - 523 442

Court-ordered debt payments receivable 9 - - 5.136 4.783 NON-CURRENT LIABILITIES

Derivative financial instruments 27.b.1) 34 - 37 - Loans and financing 14 2.056 45.309 9.295 64.116

Other assets 20.031 18.468 20.593 19.141 Debentures 15 57.125 134.530 57.125 134.530

Investments 11 400.357 425.007 - - Suppliers 16.(f) 15.021 15.021 15.021 15.021

Property, plant and equipment 12 779.038 820.079 919.616 981.261 Provision to tax, labor, civil risks 16 35.440 35.685 41.371 46.358

Intangible assets 13 187.255 199.641 388.165 409.879 Deferred tax liabilities 24.b) 21.810 26.997 33.919 46.878

Total non-current assets 1.619.934 1.682.272 1.575.380 1.644.414 Actuarial liabilities - Complementary health care 26 17.128 11.754 21.006 14.318 Taxes on income - TRA 16.(c) 37.076 30.925 37.076 30.925

Other liabilities - - 5.509 5.156

Total non-current liabilities 185.656 300.221 220.322 357.302

SHAREHOLDERS' EQUITYCapital 18.a) 1.071.077 1.071.077 1.071.077 1.071.077 Capital reserve 18.b) 74.933 70.666 74.933 70.666 Profit reserve 18.c) 245.354 265.264 245.354 265.264

Equity valuation adjustment 18.e) (2.232) 211 (2.232) 211

Total shareholders' equity 1.389.132 1.407.218 1.389.132 1.407.218

TOTAL ASSETS 1.817.732 1.987.525 1.893.843 2.018.451 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1.817.732 1.987.525 1.893.843 2.018.451

The accompanying notes are an integral part of these financial statements.

Parent company Consolidated Parent company Consolidated

28


(Amounts expressed in thousands of reais, except earnings per share)

Note 12.31.2016 12.31.2015 12.31.2016 12.31.2015

NET INCOME 19 594.852 676.149 834.101 964.320

COST OF SERVICES RENDERED 20 (481.733) (477.415) (709.311) (704.407)

GROSS INCOME 113.119 198.734 124.790 259.913

OPERATING (EXPENSES) INCOMESales expenses 20 (37.113) (83.208) (67.197) (115.460) General and administrative expenses 20 (66.981) (96.535) (77.444) (112.337) Amortization of goodwill 20 (6.945) (13.449) (6.945) (13.449) Equity in net income of subsidiaries 11 (9.679) 9.736 - -

Other operating income 21 13.405 27.108 20.042 29.553

Other operating expenses 21 (869) (31.380) (1.879) (33.196)

Total (108.182) (187.728) (133.423) (244.889)

4.937 11.006 (8.633) 15.024

FINANCIAL INCOME (LOSS)Financial income 22 25.815 43.199 36.065 52.664 Financial expenses 22 (49.190) (79.234) (49.711) (81.907)

Total financial income (23.375) (36.035) (13.646) (29.243)

(18.438) (25.029) (22.279) (14.219)

INCOME AND SOCIAL CONTRIBUTION TAXESIncome and social contribution taxes - current 24.a) (5.538) - (9.410) (7.860) Income and social contribution taxes - deferred 24.a) 4.066 6.900 11.779 3.950 Total income and social contribution taxes (1.472) 6.900 2.369 (3.910)

LOSS FOR THE YEAR (19.910) (18.129) (19.910) (18.129)

BASIC LOSS PER SHARE – R$Common 25 (0,03017) (0,02747) (0,03017) (0,02747)

Preferred shares 25 - (0,02747) - (0,02747)

DILUTED LOSS PER SHARE - R$Common 25 (0,03008) (0,02747) (0,03008) (0,02747)

Preferred shares 25 - (0,02747) - (0,02747)


STATEMENTS OF INCOME FOR YEARS ENDED DECEMBER 31, 2016 AND 2015

Parent company Consolidated

OPERATING LOSS BEFORE FINANCIAL INCOME (LOSS)

LOSS BEFORE INCOME AND SOCIAL CONTRIBUTION TAXES

29


(Amounts expressed in thousands of reais - R$)

Note 12.31.2016 12.31.2015 12.31.2016 12.31.2015

LOSS FOR THE YEAR (19.910) (18.129) (19.910) (18.129)

OTHER COMPREHENSIVE INCOMESupplementary health care 26 (2.173) 2.922 (2.443) 3.228 Equity on supplementary health care 26 (270) 306 - - Total supplementary health care 26 (2.443) 3.228 (2.443) 3.228

TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR

(22.353) (14.901) (22.353) (14.901)



STATEMENTS OF COMPREHENSIVE INCOME FOR YEARS ENDED DECEMBER 31, 2016 AND 2015

30



Stock Additional Equity Total option Repurchase dividend Retained valuation shareholders'

Note Capital plan Other Legal Investment of shares proposed earnings adjustment equity

BALANCES AT DECEMBER 31, 2014 1.071.077 45.814 18.897 54.446 253.050 (19.844) 8.738 - (3.017) 1.429.161

Dividends paid - - - - - - (8.738) - - (8.738)

26 - - - - - - - - 3.228 3.228 Stock option plan 23 - 5.955 - - - - - - - 5.955 Loss for the year - - - - - - - (18.129) - (18.129) Use of income:

Interest on own capital credited 18.d) - - - - (4.259) - - - - (4.259) Absorption of loss 18.c) - - - - (18.129) - - 18.129 - -

BALANCES AT DECEMBER 31, 2015 1.071.077 51.769 18.897 54.446 230.662 (19.844) - - 211 1.407.218

Actuarial liabilities – health expenses – Company and subsidiaries 26 - - - - - - - - (2.443) (2.443)

Stock option plan 23 - 4.267 - - - - - - - 4.267 Loss for the year - - - - - - - (19.910) - (19.910) Use of income:

Absorption of loss 18.c) - - - - (19.910) - - 19.910 - -

BALANCES AT DECEMBER 31, 2016 1.071.077 56.036 18.897 54.446 210.752 (19.844) - - (2.232) 1.389.132


Actuarial liabilities – health expenses – Company and subsidiaries

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Capital reserveParent company and Consolidated

Profit reserve

31



12.31.2016 12.31.2015 12.31.2016 12.31.2015

CASH FLOW FROM OPERATING ACTIVITIESLoss before income and social contribution taxes (18.438) (25.029) (22.279) (14.219)

Monetary and exchange variations 890 10.301 210 14.037 Depreciation and amortization 64.344 100.493 96.022 131.587 Losses due to depreciation of assets - 30.639 - 30.639 Formation (reversal) of provision for contingencies 10.264 (72.918) 12.509 (73.042) Allowance (reversal) for doubtful accounts and bad debt losses 9.554 56.167 11.849 56.945 Equity in net income of subsidiaries 9.679 (9.736) - - Stock option plan 4.221 5.878 4.267 5.955 Write-offs and income in the sale of permanent assets 497 117 91 1.406 Supplementary health care 2.080 2.391 2.986 3.140 Interest on debentures 23.941 17.843 23.941 17.843 Recognized Interest on Loans 11.525 22.409 12.766 24.342

Interest on recognized loans 3.902 8.080 - -

122.459 146.635 142.362 198.633

(Increase) decrease in operating assets: Accounts receivable 7.009 (20.499) (4.706) (14.604) Inventories (460) (186) (633) (1.007) Current tax assets 9.109 4.011 9.578 263 Judicial deposits (14.142) (19.839) (12.402) (20.366) Other assets (2.393) (2.251) (1.402) (2.696)

Increase (decrease) in operating liabilities: Suppliers 12.999 5.400 13.629 8.734 Salaries and social charges (2.636) 9.894 (3.674) 4.904 Taxes, rates and contributions (653) 140 (316) (1.071) Accounts payable - - 353 473 Taxes on income - TRA 6.151 18.118 6.151 18.118

Other liabilities - - - (2)

137.443 141.423 148.940 191.379

Income and social contribution taxes paid (5.539) - (9.706) (8.897)

Write-off of contingencies with payment (10.509) (13.958) (17.496) (14.925)

Cash and cash equivalents generated by operational activities 121.395 127.465 121.738 167.557

CASH FLOW FROM INVESTMENT ACTIVITIES

Acquisition of fixed assets (11.412) (12.028) (14.435) (26.711)

Disposal of property, plant and equipment - 36 1.688 36

Increase in investments in subsidiaries (330) (13.054) - -

Increase in intangible assets (1) (94) (7) (105)

Dividends and interest on own capital received 17.755 40.381 - - Granted loan (4.307) (926) - - Loan principal received 4.601 7.057 - - Interest on received loans 85 46 - -

Interest on capitalized loans 10 - 72 151

Cash and cash equivalents generated (invested in) investment activities 6.401 21.418 (12.682) (26.629)

CASH FLOW FROM FINANCING ACTIVITIESLoans obtained - 114.202 1.734 121.616 Raised loan - 21.350 - - Payments of loans (93.784) (159.577) (107.606) (175.056) Loan payments (73.745) (26.559) - - Receipt of derivative financial instruments 840 5.363 675 6.418 Interest paid on debentures/loans (31.738) (29.647) (33.159) (31.623) Interest paid on loan (963) (1.869) - -

Dividends and interest on own capital paid (4.258) (54.577) (4.258) (54.577)

Cash and cash equivalents invested in financing activities (203.648) (131.314) (142.614) (133.222)

(75.852) 17.569 (33.558) 7.706

Cash and cash equivalents at the beginning of the year 189.258 171.689 226.115 218.409

Cash and cash equivalents at the end of the year 113.406 189.258 192.557 226.115

(75.852) 17.569 (33.558) 7.706


NET INCREASE IN BALANCE OF CASH AND CASH EQUIVALENTS REPRESENTED BY


STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

Adjustments to reconcile the income before income and social contribution taxes with the cash and cash equivalents from operating activities:

INCREASE IN CASH AND CASH EQUIVALENTS FROM CONTINUED OPERATIONS

32



12.31.2016 12.31.2015 12.31.2016 12.31.2015

INCOME (EXPENSES)Sale of merchandise, products and services 659.656 753.293 939.719 1.089.497 Other income 13.405 27.108 20.041 29.552

Allowance (reversal) for doubtful accounts and bad debt losses (9.554) (56.167) (11.849) (56.945)

663.507 724.234 947.911 1.062.104

INPUTS ACQUIRED FROM THIRD PARTIES Cost of products, goods, and services sold (149.062) (136.501) (198.096) (184.805) Materials, energy, outsourced services and other (109.202) (116.083) (183.230) (194.390) Losses due to depreciation of assets - (30.639) - (30.639)

Other (869) (742) (1.879) (2.557)

(259.133) (283.965) (383.205) (412.391)

GROSS ADDED VALUE 404.374 440.269 564.706 649.713

DEPRECIATIONS, AMORTIZATIONS AND DEPLETION (64.344) (100.493) (96.022) (131.587)

NET ADDED VALUE PRODUCED BY THE COMPANY 340.030 339.776 468.684 518.126

ADDED VALUE RECEIVED AS TRANSFEREquity in net income of subsidiaries (9.679) 9.736 - -

Financial income 25.815 43.199 36.065 52.664

16.136 52.935 36.065 52.664

TOTAL ADDED VALUE PAYABLE 356.166 392.711 504.749 570.790

DISTRIBUTION OF ADDED VALUE 356.166 392.711 504.749 570.790

Personnel:Direct remuneration 162.813 172.202 221.631 235.376 Benefits 39.116 36.476 61.625 61.170

FGTS 10.847 9.511 17.507 14.638

212.776 218.189 300.763 311.184

Taxes, rates and contributions:Federal 52.731 51.836 79.914 100.126 State 59 68 5.808 6.026

Municipal 20.164 23.200 29.074 33.506

72.954 75.104 114.796 139.658

Third parties’ capital remunerationInterest 49.190 79.234 49.711 81.906

Rents 41.156 38.313 59.389 56.171

90.346 117.547 109.100 138.077

Remuneration of own capital:

Retained losses (19.910) (18.129) (19.910) (18.129)

(19.910) (18.129) (19.910) (18.129)



STATEMENTS OF ADDED VALUE FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015

33

34


NOTES TO THE FINANCIAL STATEMENTS INDIVIDUAL AND CONSOLIDATED FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 (Amounts expressed in thousands of reais - R$)

1. OPERATIONS

Santos Brasil Participações S.A. (Company), domiciled in Brazil, headquartered in São Paulo, is engaged in holding interest, as partner or shareholder, in the capital of other Brazilian or foreign entities and in consortium, as well as the commercial exploration of integrated port and logistics solutions, with the movement of containers and alike, that are carried out by operating branches: Tecon Santos and Tecon Imbituba.

On August 22, 2016, units traded under ticker STBP11 in accordance with Corporate Governance Practices – Level 2 were cancelled, total preferred shares were converted into common shares that started to be traded in the New Market of São Paulo Stock Exchange (BM&FBovespa), under ticker STBP3.

a) Operations of operating branch Tecon Santos

Operating branch Tecon Santos is engaged in the commercial exploration of port facilities of Santos Port Containers Terminal - Tecon 1, under lease agreement valid from November 1997 to November 2022, through operations with containers and similar equipment that involve the recovery of existing facilities and its technological and managerial updating, as well as the expansion of said facilities with improvements, following legal and contractual standards of the respective Port and the Union, pursuant to the terms of Bid Notice PND/MT/CODESP nº 01/97.

On September 30, 2015, the Company entered into an agreement with the Federal Government, through the Secretary of Ports of the Presidency of Republic, with the intervention of the ANTAQ and CODESP, for the Fifth Rectification, Ratification and Amendment to the Lease Agreement PRES/69.97 of November 28, 1997, related to the operating branch Tecon Santos. The Fifth Amendment extends the lease agreement period through November 28, 2047.

b) Operations of the operating branch Tecon Imbituba (“Tecon Imbituba”)

Operating branch Tecon Imbituba is engaged in the commercial exploration of port facilities of Imbituba Port Containers Terminal, under lease agreement valid from April 2008 to April 2033, through operations with containers or similar equipment that involve the recovery of existing facilities and its technological and managerial updating, as well as the expansion of said facilities with improvements, following legal and contractual standards of the respective Port and the Union, pursuant to the terms of Bid Notice 2 of Public Bidding nº 01/07 - Port Management.

35

That branch also includes the operations of General Cargo Terminal of the Port of Imbituba, under a lease contract and its addendum No.1, in effect from February 2007 through February 2032, through operation, conservation and improvement and expansion of its bonded patio and warehouse facilities, and with preferential docking at a berth near Tecon Imbituba berths.

c) Operations of the subsidiary Santos Brasil Logística S.A. (“Santos Brasil Logística”)

The subsidiary Santos Brasil Logística engages in the provision of integrated logistics and customized logistics solution development services and related services. It operates containers and bulk cargo in import and export transactions and is authorized to receive cargo under different customs systems, especially bonded warehouse, at its two Customs Logistics Centers (CLIAs).

d) General information on subsidiary Terminal de Veículos de Santos S.A. (“TVS”)

In January 2010 the subsidiary TVS, through its branch in the Guarujá municipality, assumed the operations of the Vehicle Export Terminal under a lease agreement valid through January 2035. The subsidiary's purpose is the management, operation and investment in the port's vehicle handling and storage facilities used for importing, exporting and coastal shipping, under a lease agreement entered into on that date.

There is a possibility of expanding the vehicle export terminal, already provided in lease contract, considering about 27,500 m² by obtaining approval from the port management.

e) Operations of the subsidiary Convicon Contêineres de Vila do Conde S.A. (“Convicon”)

Indirect subsidiary Convicon's purpose is the commercial exploitation of the port facilities of Vila do Conde container terminal, located in the municipality of Barcarena, in the state of Pará, from May 2005 through September 2018. It assumed the terminal lease under Addendum No. 2 of Agreement No. 14/03. The lease was previously held by Transnav Ltda., since September 2003. The activities are the implementation and exploitation of the container and vehicle storage and handling patio, technological and managerial modernization, facilities expansion and improvement, granting of right of way on the bridge leading to the piers, and use of public berth No. 301, with observation of federal and port regulations and contractual rules.

In November 2014, the Company filed with Special Secretary of Ports - SEP the proposal for early extension of the CDP Lease Agreement 14/2003.

f) Main commitments arising from the Container Terminal No. 1 Exploitation Agreement entered into with Companhia Docas do Estado de São Paulo (CODESP)

Operating branch Tecon Santos, besides the initial disbursement made when the auction was held, assumed a commitment corresponding to the bid amount, totaling R$74,312, payable in monthly and quarterly installments of lease for commercially operating the area over the term of the agreement (25 years, renewable for an equal period, as provided for in the initial agreement), adjusted for inflation using the General Market Price Index (IGP-M), which are recognized on the accrual basis of accounting, as it is an operating lease.

36

The branch also makes monthly payments for services provided by CODESP based on specific tables established by port authorities.

There is a commitment whereby Minimum Contractual Handling (MMC) in loading and unloading vessels is provided for. Failure to comply the conditions set forth under the MMC commitment, or breach of any other contractual clause, is subject to penalty of up to 2% of the sum of monthly and quarterly installments due in the 12 months prior to the default.

In view of the Fifth Amendment to the original agreement, the Company undertook to invest, until the end of 2020, the amount of R$1,276,859 in works and other interventions to ensure the consolidation of a terminal that reaches a minimum dynamic capacity of 1,500,000 containers per year. The executive project relating to the approved investments shall be submitted to the Special Secretary of Ports (SEP) through September 29, 2016. If the amount invested is lower than the amount committed, the difference shall be paid in a bullet payment to CODESP. An area of 13,346 m2 will be incorporated into the lease agreement of the operating branch Tecon Santos, through the completion of the extension of the public quay by 220 m².

Such amendment changes the commitment of Minimum Contractual Handing (MMC), starting October 1, 2015, which requires the payments of amounts if the MMC is not reached or is exceeded, as mentioned in note 17.b). By the end of 2020 or the completion of the estimated investments, the MMC will be changed from 513,000 containers per year to 590,000 containers per year.

The facilities being commercially operated and the assets belonging to CODESP that have been used by the branch must be kept in perfect conditions of use. All improvements made in these facilities, such as any equipment and software, information systems and computers, communication and security systems and systems used to control the port area, which are required for container operations, will be transferred to CODESP at the end or termination of the agreement.

g) Main commitments under Tecon Imbituba operating agreement with SCPAR Porto de Imbituba S.A. (SCPAR), successor of Companhia Docas de Imbituba (CDI)

Operating branch Tecon Imbituba, as part of the fixed portion of the lease, makes monthly payments for the use of the leased area, as shown in note 17.b).

The commitment for minimum investments considers works for expanding the back area, and construction of an administrative area, gates, warehouse, berth reinforcement and containment works and a 120 meter expansion of the berth. It also included the acquisition of pieces of equipment for harbors, and the port retro-docking area, which are compatible with facilities, that is, mobile cranes (Mobile Harbor Crane (MHC)), reach stackers, tow trucks and forklifts. New harbor equipment and also equipment for the port retro-docking area are expected to be purchased to replace the existing ones and expand the Terminal’s handling capacity.

As part of the variable portion of the lease, there is a commitment to make monthly payments for the use of the land infrastructure, as shown in note 17.b).

37

There is also a commitment for a minimum handling of 65,000 containers in the Terminal in the first year of activity, 150,000 containers in the second year of activity, 280,000 containers in the third year of activity and 360,000 containers from the fourth year of activity. Failure to meet this minimum handling volume shall require the entity to pay an additional amount, as shown in note 17.b).

Operating standards were established whereby Tecon Imbituba shall perform at least 6 handling activities per hour per trio, when resources other than MHC are used, and at least 15 handling activities per hour, when MHC is used.

On 1 July 2016, we filed a Request for the Recovery of Economic-Financial Balance of Tecon Imbituba Lease Agreement with the Ministry of Transport, Ports and Civil Aviation (MTPAC).

h) Main commitments under the General Cargo Terminal operating agreement with SCPAR, successor of CDI

Operating branch Tecon Imbituba - General Cargo Terminal is required to make minimum investments that include the expansion of the warehouse by 1,500 m², construction of a new warehouse of 3,000 m², repairs in pavement, streets, fences and gates, implementation of facilities and networks of services and expansion of refrigerated containers’ capacity. In addition, the agreement requires the entity to implement the ISPS Code and a Port Public Security Plan (PSPP) for Port of Imbituba and purchase its own general cargo handling equipment.

Terminal is required to pay per tonne handled, on a monthly basis, as compensation for the leased area, and per tonne per vessel, as compensation for using the land infrastructure, as shown in note 17.b).

Terminal has a commitment to handle at least 120,000 tonnes of general cargo in the first year of activity, 140 thousand tones in the second year of activity, 180,thousand tones in the third year of activity, and 200thousand tones from the fourth year of activity until the end of the agreement. Failure to meet this minimum handling volume shall require the entity to pay an additional amount, as shown in note 17.b).

i) Main commitments under TEV operating agreement with CODESP

TVS has a commitment to handle at least 182,931 vehicles in 2011, 214,147 vehicles in 2012, 250,691 vehicles in 2013, 293,470 vehicles in 2014 and 300,000 vehicles as of 2015. Failure to meet this minimum handling volume shall require the entity to pay an additional amount, as shown in note 17.b).

The investment commitment primarily includes the construction of external accesses to the Terminal and the public harbor and the construction of a gate and a gatehouse for internal access to the Terminal.

As part of the monthly lease payment, the entity is required to pay for the use of the total leased area and infrastructure. There is also a commitment to pay per vehicle handled, as shown in note 17.b).

38

j) Main commitments under Convicon operating agreement with Companhia Docas do Pará (CDP)

Convicon has the commitment to provide pavement, fences and lighting for at least 20,000 m² of lot A and purchase the equipment required for it to be capable of handling at least 30,000 containers after the fifth year of signature of the agreement.

As part of the compensation guaranteed to CDP for the commercial operation by Convicon, the subsidiary is required to make payments of amounts per container handled and tonne handled of unitized cargo, as show in note 17.b). The facilities being commercially operated and the assets belonging to CDP that have been used by Convicon must be kept in perfect conditions of use. All improvements made in these facilities, such as any equipment and software, information systems and computers, communication and security systems and systems used to control the port area, which are required for container operations, will be transferred to CDP at the end or termination of the agreement.

Convicon has the contractual commitment to pay CDP a compensation for the operation by Convicon over the term of the agreement (15 years) in monthly lease payments plus inflation adjustment, every September of each year, based on IGP-M.

2. LIST OF SUBSIDIARIES

The consolidated financial statements include the Company's information and the following whole-owned subsidiaries:

Interest - % 12.31.2016 12.31.2015

Direct subsidiaries: Terminal Portuário de Veículos S.A. (“TPV”) 100 100 Pará Empreendimentos Financeiros S.A. (“Pará Empreendimentos”) 100 100 Terminal de Veículos de Santos S.A. (“TVS”) 100 100 Numeral 80 Participações S.A. (“Numeral 80”) 100 100 Santos Brasil Logística S.A. (“Santos Brasil Logística”) 100 100

Indirect subsidiary: Convicon Contêineres de Vila do Conde S.A. (“Convicon”) 100 100

3. PREPARATION BASIS

a) Statement of compliance

These individual and consolidated statements were prepared according to the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (IASB) and also in accordance with accounting practices adopted in Brazil.

The issue of individual and consolidated financial statements was authorized by the Executive Board on February 8, 2017.

All relevant information in accounting statements, and only them, are being evidenced and correspond to that used by Management.

39

b) Functional currency and presentation

These individual and consolidated financial statements are presented in Brazilian Reais (R$), which is the Company’s and subsidiaries’ functional currency. All financial information presented in Brazilian Reais has been rounded to the nearest value, except otherwise indicated.

c) Basis of preparation

The individual and consolidated financial statements were prepared based on the historical cost, except for the following items recognized in the balance sheets:

• Derivative financial instruments measured at fair value.

• Non-derivative financial instruments measured at fair value through profit or loss.

d) Use of estimates and judgments

The preparation of these financial statements, individual and consolidated, Management used judgments, estimates and assumptions that affect the application of accounting principles of the Company and subsidiaries, and the reported values of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and assumptions are reviewed in a continuous manner. Reviews of estimates are recognized on a prospective basis.

Information about judgment referring to the adoption of accounting policies which impact significantly the amounts recognized in the financial statements are included in the following notes: • Note 2 - Consolidation: determination in case the Company effectively holds the

control;

• Note 17 - classification of leases. Information on uncertainties as to assumptions and estimates that pose a high risk of resulting in a material adjustment within the year to end at December 31, 2017 are included in the following notes: • Note 13 – impairment test: main assumptions in relation to recoverable values;

• Note 16 – Recognition and Measurement of provision for tax, labor and civil risks;

• Note 24 - recognition of deferred tax assets: availability of future taxable income;

• Note 26 – measurement of benefit obligations: main actuarial assumptions. Measurement of fair value

Several of the Company’s accounting policies and disclosures require the measurement of the fair value of both financial assets and financial liabilities and nonfinancial assets and liabilities.

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The Company and its subsidiaries established a control framework related to measurement of fair values. This includes an evaluation and general responsibility of reviewing all significant fair value measurements, including Level 3 fair values, which are reported directly to the CFO. Significant non-observable data are regularly reviewed, as well as valuation adjustments. If third-party information, such as broker quotes or pricing services, is used to measure fair value, evidences obtained from the third parties are analyzed to support the conclusion that such valuations meet the CPC / IFRS requirements, including the level in the fair value hierarchy in which such valuations should be classified. When measuring fair value of an asset or liability, the Company and its subsidiaries use market observable data as much as possible. Fair values are classified at different levels according to hierarchy based on information (inputs) used in valuation techniques, as follows: • Level 1: Prices quoted (not adjusted) in active markets for identical assets and liabilities.

• Level 2: Inputs, except for quoted prices, included in Level 1 which are observable for assets or liabilities, directly (prices) or indirectly (derived from prices).

• Level 3: Inputs, for assets or liabilities, which are not based on observable market data (non-observable inputs).

The Company and its subsidiaries recognize transfers between fair value hierarchic levels at the end of the financial statements period in which changes occurred.

Additional information on the assumptions adopted in the measurement of fair values is included in the following notes:

• Note 23 - Stock option plan; and

• Note 27 – Derivative or non-derivative financial instruments.

e) Change in accounting estimate

Beginning October 1, 2015, leasehold improvements and cargo handling equipment, presented in note 12, as well as operating rights and goodwill on acquisition of shares of Santos-Brasil S.A., presented in note 13, had, for accounting purposes, their useful lives adjusted due to the extension of the lease agreement term (to November 28, 2047) of the operating branch Tecon Santos, through the Fifth Amendment to the Lease Agreement, on September 30, 2015.

The Company applied the change in accounting estimate based on: (i) the legal opinion issued by Prof. Dr. Sebastião Botto de Barros Tojal (renowned attorney and professor of public law of São Paulo University - USP), which ratifies the Company’s understanding regarding the change of the effective term of the lease agreement for the operational branch Tecon Santos; (ii) the technical accounting opinion issued by Prof. Dr. Luiz Nelson Guedes de Carvalho (accountant, opinion-writer, USP professor and former CVM director), which ratifies the Company’s understanding regarding the review of the useful life of the property, plant and equipment and intangible assets; and (iii) the concurrence with the position formalized in such opinions by the members of the Company’s Tax Council.

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On March 1, 2016, the Company filed a formal inquiry with CVM in order to obtain a position on the application of the change in accounting estimate. Up to issuance of these accounting statements, the Company remained waiting for response to consultation.

4. MAIN ACCOUNTING POLICIES

The accounting policies described in detail below have been consistently applied by the Company and its subsidiaries to all the years presented in these individual and consolidated financial statements.

a) Consolidation basis

Subsidiaries

The financial information of the subsidiaries is included in the consolidated financial statements as from the date the Company starts have control, until the date such control ceases. The accounting policies of the subsidiaries are aligned with the policies adopted by the Company. The financial information of the parent company is recognized under the equity method in the individual financial statements of the subsidiary. The financial information of the subsidiaries on the same base date of submittal of the financial information is used to calculate equity in the earnings and consolidation. Investments in entities are accounted for under the equity method

The Company’s investments in entities accounted for at the equity method include interests in subsidiaries and subsidiaries. Transactions eliminated in the consolidation

The balances and transactions among the Company and its subsidiaries, and any unrealized income or expenses derived from transactions among these companies, are eliminated in the preparation of the consolidated financial statements. Unrealized gains originating from transactions with investees recorded using the equity method are eliminated against the investment in the proportion of the Company's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only up to the point where there is no evidence of loss due to impairment.

b) Foreign currency

Transactions in foreign currency are translated into the respective functional currency of the Company and its subsidiaries at the exchange rates on the dates of the transactions. Monetary assets and liabilities denominated and calculated in foreign currencies on the reporting date of financial statements are reconverted into the functional currency at the exchange rate determined on that dates. Exchange gain or loss in monetary items is the difference between the amortized cost of the functional currency at the beginning of the year, adjusted by interest and effective payments during the year, and the amortized cost in foreign currency at the exchange rate at the end of the presentation year.

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c) Operating income

Service income is recognized in profit or loss as services are provided and is related, mainly, to harbor, bonded warehouse and logistics operations. Harbor operations refer basically to the loading and unloading of containers from vessels and are recognized in profit or loss as operations of each vessel is completed. Bonded warehouse operations are related to the storage of import or export loads. Storage revenue is recognized upon customs clearance and withdrawal of the imported cargo by the importing company or upon shipping the exported cargo into the vessel. Logistics operations refer mainly to the transport and storage in the Distribution Centers. Storage income is recognized in the income, semimonthly or monthly, according to the customer agreement, and freight revenue is recognized when there is a delivery of stored goods.

d) Financial and equity instruments

Non-derivative financial assets and liabilities – recognition and derecognition

The Company and its subsidiaries recognize the loans and receivables on the date that they are originated. All other financial assets and liabilities are recognized on the date of the negotiation, which is the date that the Company and its subsidiaries become a party to the contractual provisions of the instrument. The Company and its subsidiaries fail to derecognize a financial asset when the contractual rights to the cash flows of the asset expire, or when the Company and its subsidiaries transfer the rights to reception of the contractual cash flows on a financial asset in a transaction in which substantially all the risks and benefits of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained is recognized as a separate asset or liability. The Company and its subsidiaries derecognize a financial liability when its contractual obligations are discharged or canceled or expired. Financial assets and liabilities are offset and the net value reported in the balance sheet only when the Company and its subsidiaries are legally enforceable right to set off and there is intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. Non-derivative financial assets - measurement

Financial assets measured at fair value through profit or loss

A financial asset is classified as measured at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. The transaction costs are recognized in income (loss) as incurred. These assets are measured at fair value and changes in the fair value, including gains with interest and dividends, are recognized in the income (loss) for the year.

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Loans and receivables

Such assets are initially measured at fair value plus any transaction costs directly assignable. After their initial recognition, loans and receivables are maintained at amortized cost using the effective interest rate method. Cash and cash equivalents

Cash and cash equivalents comprise balances of cash and cash equivalents, banks checking account and interest earning bank deposits with original maturities of three months or less as of the contracting date, which are subject to an insignificant risk of change in fair value and are used by the Company and its subsidiaries to manage short-term obligations.

Non-derivative financial liabilities – Recognition, write-off and measuring

A financial liability is classified as measured at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. The transaction costs are recognized in income (loss) as incurred. Financial liabilities recorded at fair value through profit or loss are measured at fair value and changes in the fair value of such liabilities, including gains with interest and dividends, are recognized in the income for the year. Other non-derivative financial liabilities are initially measured at fair value less any transaction costs directly assignable. After their initial recognition, these financial liabilities are measured at amortized cost using the effective interest rate method. Derivative financial instruments

The Company and its subsidiaries hold derivative financial instruments to hedge its exposure to foreign currency and interest rate. Derivatives are initially recognized at their fair value and any attributable transaction costs are recognized in income (loss) when incurred. After the initial recognition, derivatives are measured at fair value and changes are recorded in profit or loss. Capital - Common shares

Common shares are classified as shareholders' equity. Additional costs directly attributable to the issue of shares are recognized as reduction in the shareholders’ equity. The compulsory minimum dividends, as established in the By-laws, are recognized as liabilities. Equity instruments

The repurchase of the Company’s own equity instruments is recognized and directly deducted from equity. No gain or loss is recognized in the income (loss) from purchase, sale, issuance or cancellation of own equity instruments of the Company.

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e) Adjustment to present value

Accounts subject to adjustment to present value are trade accounts receivable and trade accounts payable. They have not been stated at present value as maturities are in less than 60 days.

f) Inventories

Inventories are mainly represented by maintenance items, which are stated at the average cost that does not exceed the market value.

g) Investments

Investments in subsidiaries and affiliated companies and in other companies that are part of the same group or are under a common control are evaluated under the equity method in the individual financial statements.

h) Property, plant and equipment

Recognition and measurement

Property, plant and equipment items are stated at historical acquisition or construction cost, net of accumulated depreciation and impairment losses, when required.

Purchased software that is integral to the functionality of a piece of equipment is capitalized as part of that equipment.

When parts of a property, plant and equipment item have different useful lives, they are accounted for as separate items (major components) of PP&E.

Gains and losses on disposal of a property, plant and equipment item are determined by comparing the proceeds from disposal with the carrying amount of Property, plant and equipment and are recognized net within "Other income" in the income statement.

Subsequent costs

The replacement cost of a component of an item of property, plant and equipment is recognized in the carrying value of the item when it is probable that the future economic benefits embodied in the component will flow to the Company and its subsidiaries and cost can be reliably measured. The book value of the component that is replaced is written off. Costs of normal maintenance on property, plant and equipment are charged to the income (loss) as incurred.

Depreciation

It is recognized in the income statement using the straight-line method over the estimated useful life of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term or the estimated useful life of the asset, unless it is reasonably certain that the ownership will be obtained at the end of the lease term.

The useful estimated lives for the current and comparative periods are shown in the note 12.

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The depreciation methods, useful lives and residual values are reviewed at each year closing, and potential adjustments will be recognized as a change in accounting estimates.

i) Intangible assets and goodwill

Goodwill

Goodwill arising from the acquisition of subsidiaries is included in intangible assets in the consolidated financial statements.

Concession intangible assets are measured at cost and amortized over the concession term. The concession intangible assets are tested, net of impairment loss, if necessary.

The concession intangible assets are generated in the acquisitions of entities holding exploitation rights and amortized within the term of the agreement and the agreement renewal is not considered.

Public service concessions

The Company's branches and subsidiaries, Tecon Santos, Tecon Imbituba, TVS and Convicon, have concessions of public services under the lease agreements, as per notes 1 and 15. These branches and subsidiaries operate under a concession, however, their activities do not meet the requirements of the Technical Interpretations ICPC No. 1 and No. 17 - Concession Agreements (International Financial Reporting Interpretations Committee IFRIC No. 12), since the price of services rendered is not regulated and / or controlled by the Concession Grantor.

Other intangible assets

Other intangible assets acquired with defined useful lives are carried at cost, less accumulated amortization and accumulated impairment losses.

Subsequent expenses

They are capitalized only when they increase the future economic benefits embodied in the specific assets to which they relate. All other expenditures are recognized in profit or loss as incurred.

Amortization

It is calculated over the cost of the asset, less its residual value.

Amortization is recognized in income (loss) on a straight-line basis over the estimated useful lives of the intangible assets, except for the goodwill with no defined useful life, as of the date they are available for use.

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j) Leased assets

Leases of fixed assets that substantially transfer to the Company and its subsidiaries all ownership risks and benefits are classified as financial lease. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognized in the balance sheet of the Company and its subsidiaries. Lease payments

Payments for operating lease are charged to income on the straight-line basis over the lease period. Incentives received are recognized as an integral part of total lease expenses, over the lease agreement period. Minimum lease payments made under financial leasing are apportioned as financial expenses and reduction of the liability payable. Financial expenses are allocated in each period over the lease period in order to produce a continuous and periodic compounding interest rate over the remaining liability balance.

k) Impairment

Non-derivative financial assets

Financial assets not measured at fair value through profit or loss, including investments calculated under the equity method of accounting are assessed at each reporting date for objective evidence of impairment loss. Objective evidences of financial assets’ impairment include: • debtor’s default or delays;

• restructuring of an amount owed to the Group under conditions that would not be accepted as normal conditions;

• indications that the debtor or issuer will face bankruptcy/court-ordered reorganization;

• negative changes in payment situation of debtors or issuers;

• the disappearance of an active market for an instrument; or

• observable data indicating that expected cash flow measurement of a group of financial assets decreased.

Financial assets measured at amortized cost

The Company and its subsidiaries consider as evidence of impairment of assets measured by amortized cost both individually and on an aggregate basis. All individually significant receivables are assessed for impairment. Those identified as non-impaired on an individual basis are collectively assessed for any impairment loss not yet identified. Assets that are not

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individually significant are assessed on an aggregate basis in relation to impairment by grouping the assets with similar risk characteristics. When assessing impairment on an aggregate basis the Company and its subsidiaries make use of historical trends of the recovery term and the amounts of losses incurred, adjusted to reflect the management's judgment if the current economic and credit conditions are such that the actual losses will probably be higher or lower than those suggested by historical trends. An impairment is calculated as the difference between the asset's book value and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The losses are recognized in income and reflected in an account for allowance for losses. When the Company and its subsidiaries consider that it is not possible to reasonably expect recovery, amounts are written-off. When a subsequent event causes the amount of the impairment loss to decrease, the impairment loss is reversed through profit or loss. Investees calculated under the equity method

A loss by a reduction to recoverable value referring to an investee recognized under the equity method is measured by comparing the investment’s recoverable value to its book value. An impairment loss is recognized in the statement of income and is reversed if there has been a favorable change in the estimates used to determine the recoverable value.

Non-financial assets

The carrying amounts of the non-financial assets of the Company and its subsidiaries, except for inventories and deferred income and social contribution tax assets are reviewed at each reporting date for indication of impairment. If such indication exists, the asset's recoverable amount is determined. For goodwill and intangible assets with an undefined useful life, the recoverable value is estimated on an annual basis. The recoverable value of an asset or CGU (cash generating unit) is the greater of its value in use and its fair value less selling expenses. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessment as to the recoverability period of capital and specific risks of the asset or cash generating unit. An impairment loss is recognized when the book value or its CGU exceeds its recoverable value. A loss of value is reversed if there has been a change in estimates used to determine the recoverable value. An impairment loss is reversed only with the condition that the book value of the asset does not exceed the book value that would have been calculated, net of depreciation or amortization, if the value loss had not been recognized.

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l) Employee benefits

Share-based payment transactions

The fair value of share-based agreement date is recognized at the grant date, as personnel expenses, with a corresponding increase in shareholders' equity, over the period when employees become unconditionally entitled to the premiums. The amount recognized as an expense is adjusted to reflect the actual number of stock options for which the related service and non-market vesting conditions are expected to be met, so that the amount ultimately recognized as an expense is based on the actual number of shares actually meeting service conditions and non-market vesting conditions at vesting date. For share-based payment awards with non-vesting conditions, the fair value at grant date of share-based payment is measured to reflect such conditions and no further adjustments are made for differences between expected and actual results.

Post-employment benefits

Post-employment benefits are recognized as an expense when is provenly committed, without the possibility of retraction, to a formal detailed plan to terminate the employment contract before the normal retirement date, or to provide employment termination benefits as a result of an offer made to encourage voluntary dismissals. Post-employment benefits arising from voluntary dismissals are recognized as an expense when had made a voluntary dismissal offer, it is probable that the offer will be accepted, and the number of employees who will adhere to the program can be reliably estimated. Should the benefits be payable for more than twelve months from the reporting date of financial statements, they are discounted to their present values.

Short-term employee benefits

Obligations for short-term employee benefits are measured on a non-discounted basis and incurred as expenses as the related service is rendered.

The liability is recognized at the expected amount to be paid under the cash-bonus or short- -term profit share plans when the Company has a legal or constructive obligation to pay such amount as a result of the past service provided by an employee, and such obligation can be reliably estimated.

Defined contribution plan

The Company and its subsidiaries provide to its employees benefits that basically comprise a private pension plan with defined contribution administered by BrasilPrev, as note 5.f).

Supplementary health care

Health care expenses on retirement are recognized under the Projected Credit Unit approach based on an actuarial valuation performed annually at the reporting dates. Past service cost is recognized immediately on a straight-line basis over the average period until the benefits become vested.

Obligations relating to health care benefits recognized in the statement of financial position represent the present value of the obligation with the benefits defined, adjusted for actuarial losses and gains and for the cost of past services, as mentioned in note 26.

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m) Provisions

A provision is recognized when the Association has a legal or constituted obligation as a result of a past event and it is probable that an outflow of economic resources will be required to settle the obligation and a reliable estimate of the amount can be made.

n) Financial income and expenses

Financial income mostly comprises income from interest on interest earning financial investments, recognized in the income (loss), under the effective interest rate method.

Financial expenses include basically loan interest expenses. Borrowing costs which are not directly attributable to the acquisition, construction, or production of a qualifying asset are accounted for in profit or loss using the effective interest rate method.

o) Income and social contribution taxes

The income and social contribution taxes, both current and deferred, are calculated based on the rates of 15%, plus a surcharge of 10% on taxable income in excess of R$240 thousand for income tax and 9% on taxable income for social contribution on net income, and consider the offsetting of tax loss carry forward and negative basis of social contribution limited to 30% of the annual taxable income.

Current tax is the expected tax payable or receivable on taxable profit or loss for the year at tax rates that have been enacted or substantially enacted by the end of the reporting period and any adjustment to taxes payable in relation to prior years.

Deferred taxes on tax losses, negative basis of social contribution and temporary differences are recognized in relation to the temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the related amounts used for taxation purposes. Deferred taxes are not accounted for on the following temporary differences: the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss, and differences related to investments in subsidiaries and controlled entities when it is probable that they will not be reversed in the foreseeable future. In addition, deferred taxes are not recognized for taxable temporary differences arising from the initial recognition of goodwill. Deferred tax is measured at the rates that are expected to be applied on temporary differences when they reverse, based on the laws that have been enacted or substantially enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legal enforceable right to set off current tax assets and liabilities, and the latter relate to income taxes levied by the same tax authority on the same taxable entity.

A deferred asset for income and social contribution taxes is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable income will be available against which the unused tax losses and credits can be utilized.

Deferred income and social contribution tax assets are reviewed at each reporting date of financial statements and will be reduced when their realization is no longer probable.

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p) Earnings per share

Basic earnings per share are calculated based on the income for the year attributable to the Company's controlling shareholders and the weighted average of outstanding common shares in the respective year. The diluted earnings per share are calculated based on the mentioned average of outstanding shares, adjusted by instruments that can potentially be converted into shares, with a dilution effect, in the years presented, pursuant to Technical Pronouncement CPC 41- Earnings per share and IAS 33 - Earnings per share.

q) Segment information

An operating segment is a component of the Company and its subsidiaries which engage in business activities from which it may earn income and incur expenses, including income and expenses relating to transactions with other components. All operating income of the operating segments are frequently reviewed, jointly with the managers and reported to the Statutory Board; thus, are presented in Board of Directors’ meetings for decisions regarding the resources to be allocated to the segment to be taken and to assess their performance, for which individual financial information is available.

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The unallocated items include mostly the institutional assets (mainly the Company's head office) and income and social contribution tax assets and liabilities.

r) Statements of cash flows

The Company has elected to classify interest paid and received as cash flow from financing activity, and dividends and interest on capital received as cash flow from investing activity, an option provided for in technical pronouncement CPC 03 (R2) - Statement of Cash Flows.

s) Statements of added value

The Company prepared individual and consolidated statements of added value in accordance with the rules of technical pronouncement CPC 9 - Statement of Added Value, which are presented as an integral part of the financial statements under BRGAAP applicable to publicly-held companies, whereas under IFRS they represent additional financial information.

t) New standards and interpretations not yet adopted

Several new standards or amendments to standards and interpretations will be effective for the years started after January 1, 2017. The Company and its subsidiaries did not adopt these changes in the preparation of these financial statements. The Company and its subsidiaries do not plan to adopt these standards in advance.

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Pronouncement Description Maturity

IFRS 9 – Financial instruments It refers to replacement project of

IAS 39 - Financial Instruments: Recognition and measurement.

Years started as of or after January 1, 2018.

IFRS 15 – Income from clients Refers to the convergence of the IASB on the recognition of income.


IFRS 16 - Lease Refers to bookkeeping of leases in balance sheets.


Amendments to IAS 7 / CPC 26 - Presentation of financial statements

Disclosure initiative Years started as of or after January 1, 2017.

The Company’s management started a preliminary evaluation and understands that application of said pronouncements to be adopted in its accounting statements at required dates may have some effect on previously reported balances, mainly considering application of IFRS 16 on leases. However, it is not possible to provide a reasonable estimate of this effect until a detailed review is made for the time of their adoption.

The Accounting Pronouncement Committee has not yet issued any accounting pronouncement or amendments in current pronouncements corresponding to all new IFRSs. Therefore, early adoption of these IFRS’s is not permitted for entities that disclose its accounting information in accordance with accounting practices adopted in Brazil.

5. RELATED PARTY TRANSACTIONS

a) Loan agreements – Parent company

Average rates 12.31.2016 12.31.2015 % CDI

Current liabilities: Terminal de Veículos de Santos S.A. 99.96 - 70,427 Remuneration was equivalent to earnings from financial investments held by the creditor, and was settled on June 30, 2016.

b) Dividends receivable - parent company

12.31.2016 12.31.2015 Current assets: Dividends receivable: Santos Brasil Logística S.A. - 1,022 Terminal de Veículos de Santos S.A. 1,758 3,417 Total 1,758 4,439

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c) Other significant balances

Parent company Consolidated (*) 12.31.2016 12.31.2015 12.31.2016 12.31.2015

Assets Trade accounts receivable (I) 202 321 2,646 1,242 Administrative shared services (II) - 1,725 - 1,725 Checking accounts (III) 879 880 879 880

1,081 2,926 3,525 3,847

Current 1,081 2,926 3,525 3,847

Liabilities Suppliers 2,444 921 2,646 1,242 Administrative shared services (II) - - - 1,725 Checking accounts (III) - - 879 880

2,444 921 3,525 3,847

Current 2,444 921 3,525 3,847

(*) Values eliminated in the consolidation

(I) The Company and its subsidiaries provide port and transportation services to each other, as explained in note 5.d);

(II) Refer to debt notes related to expenses with shared administrative services provided by the Company to its subsidiaries;

(III) Refer to provision of expenses with shared administrative services provided by the Company to its subsidiaries Dec-16.

d) Rendering of port services

Operating branch Tecon Santos provided, in the period from January to December 2016, port services to the subsidiary Santos Brasil Logística concerning: (i) immediate delivery of containers, in the amount of R$604 (R$1,632 as of December 31, 2015), referring to 3,605 containers moved (11,043 containers as of December 31, 2015); (ii) non-invasive inspection of containers, in the amount of R$802 (R$1,946 as of December 31, 2015), referring to 4,973 containers (12,068 containers as of December 31, 2015); (iii) positioning for import inspection, in the amount of R$3, referring to 8 containers; and (iv) storage of imported containers, in the amount of R$59, referring to 13 containers. As of December 31, 2016, out of these outstanding services, the amount of R$202.

On the same period, the subsidiary Santos Brasil Logística provided to the operating branch Tecon Santos: (i) container transportation services, in the amount of R$14,048 (R$13,671 as of December 31, 2015), referring to 18,360 containers (18,118 containers as of December 31, 2015); and (ii) cargo agency services, in the amount of R$8 (R$18 as of December 31, 2015), referring to 306 containers (693 containers as of December 31, 2015). As of December 31, 2016, out of these outstanding services, the amount of R$2,444.

In the same period, subsidiary Santos Brasil Logística provided to subsidiary Convicon Road transportation services in the amount of R$8.

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e) Remuneration of key personnel

Parent company Parent company 12.31.2016 12.31.2015

Board of Directors

Executive board

Board of Directors

Executive board

Short-term benefits 2,185 12,523 1,971 17,497 Other benefits - 469 - 480 Stock option plan - 4,166 - 5,758 Total 2,185 17,158 1,971 23,735

Consolidated Consolidated 12.31.2016 12.31.2015

Board of Directors

Executive board

Board of Directors

Executive board

Short-term benefits 2,207 12,909 1,993 17,921 Other benefits - 469 - 480 Stock option plan - 4,186 - 5,818 Total 2,207 17,564 1,993 24,219 Statutory directors and other directors are included in the executive board's amounts.

Certain directors are signatories to the Confidentiality and non-Competition Agreement, approved by the Board of Directors. Upon termination, no benefits and obligations set out in this agreement.

Directors have 0.36% of the Company's voting shares.

f) Benefits to collaborators - Consolidated

The Company and its subsidiaries provide to its employees benefits that basically comprise a private pension plan with defined contribution administered by BrasilPrev, life insurance, health care, food and meal vouchers and ready meals. On December 31, 2016, benefits above totaled the expense of R$49,614 (R$48,183 as of December 31, 2015), corresponding to 5.95% and 5.00% of consolidated net operating income, respectively.

Operating branch Tecon Santos and subsidiaries Santos Brasil Logística and Terminal de Veículos include the Profit Sharing Plan (PPR) in its human resources policies, and all employees with formal employment relationship not included in any other variable remuneration program offered by those companies are eligible. The goals and criteria for distribution of funds and awards are agreed to between the parties, including unions representing employees, with the goals of increased productivity, competitiveness and motivation and engagement among participants. As of December 31, 2016, only operating branch Tecon Santos and subsidiaries Santos Brasil Logística and Terminal de Veículos had recorded a provision of R$4,510 (R$7,190 as of December 31, 2015).

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g) Sureties and guarantees

The Company has guaranteed certain obligations of its subsidiaries as follows:

• Letter of Guarantee referring to Contract with Cia. de Docas do Pará - CDP, to Convicon, in the amount of R$429;

• Surety for the acquisition of semi-trailers to Santos Brasil Logística, in the amount of R$2,648;

• Surety for the acquisition of trucks to Convicon, in the amount of R$361.

6. CASH AND CASH EQUIVALENTS AND TYPE OF INTEREST EARNING BANK DEPOSITS

a) Cash and cash equivalents

Parent company Consolidated 12.31.2016 12.31.2015 12.31.2016 12.31.2015

Cash and balance in banks 22,597 25,373 27,840 32,398 Interest earnings bank deposits 90,809 163,885 164,717 193,717 Total 113,406 189,258 192,557 226,115

b) Nature of interest earning bank deposits

Average rates - Parent company

% CDI Maturity 12.31.2016 12.31.2015

Investments held for trading:

Investment funds 99.77 Undetermined 90,809 163,885 Total 90,809 163,885

Average rates - Consolidated

% CDI Maturity 12.31.2016 12.31.2015

Investments held for trading: Investment funds (*) 100.19 Undetermined 164,717 193,717 Total 164,717 193,717

(*) Non-exclusive fund

Highly liquid short-term interest earning bank deposits are promptly convertible into a known sum of cash and subject to an insignificant risk of change of value. Average investment rates presented above refer to remunerations obtained in the period

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from January to December 2016 and are related to the CDI (Interbank Deposit Certificate) rate.

7. TRADE ACCOUNTS RECEIVABLE

Current Parent company

12.31.2016 12.31.2015

Domestic 66,167 82,189 Related parties 202 2,046 (-) Allowance for doubtful accounts (13,133) (14,436) Total 53,236 69,799

Consolidated

12.31.2016 12.31.2015

Domestic 101,794 108,305 (-) Allowance for doubtful accounts (15,795) (15,163) Total 85,999 93,142

As of December 31, 2016, the amount of R$2,646 (R$2,967 as of December 31, 2015) was eliminated for consolidation purposes; such amount refers to amounts receivable between the Company and its subsidiaries and derives from billing of service rendering and shared administrative services, as explained in note 5.c).

The table below summarizes the balances receivable by maturity:

Parent company

12.31.2016 12.31.2015 Loans falling due 33,553 35,737 Past due receivables - up to 60 days 15,243 23,563 Past due receivables - from 61–90 days 4,440 2,814 Past due receivables - from 91–180 days 2,964 5,843 Past due receivables - from 181–360 days 2,548 7,641 Past due receivables for more than 361 days 7,621 8,637 Total 66,369 84,235

Consolidated

12.31.2016 12.31.2015

Loans falling due 56,212 53,490 Past due receivables - up to 60 days 24,995 27,655 Past due receivables - from 61–90 days 4,792 3,227 Past due receivables - from 91–180 days 3,587 7,211 Past due receivables - from 181–360 days 3,326 8,223 Past due receivables for more than 361 days 8,882 8,499 Total 101,794 108,305

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Impairment

The allowance for doubtful accounts is formed based on amounts overdue for more than 90 days.

When comparing with December 31, 2015, we verified an increase in consolidated allowance for doubtful accounts of R$632 (R$5,266 as of December 31, 2015), mainly related to adjustment to a more conservative criterion for provisions to clients previously listed as not presenting credit risk.

In the year ended December 31, 2016, securities were directly written off at the consolidated income (loss) for the year in the amount of R$11,217 (R$51,679 as of December 31, 2015). The total effect on income (loss) for the year was R$11,849 (R$56,945 as of December 31, 2015).

8. INVENTORIES


Maintenance material 18,703 18,269 21,432 20,843 Administrative material 283 284 400 379 Security material 230 210 408 396 Other 783 776 947 936

19,999 19,539 23,187 22,554

Materials maintained in inventory are used mainly for maintenance of operating equipment and are recognized in income for the year, when used.

9. COURT-ORDERED DEBT PAYMENTS ("PRECATÓRIOS) - CONSOLIDATED

12.31.2016 12.31.2015

Non-current assets:

Court-ordered debt payments receivable 5,136 4,783

Non-current liabilities: Court-ordered debts to be transferred to shareholders, net of legal

fees 4,109 3,826

(*) The court-ordered debts are classified in the statement of financial position in line item “Other payables”, under non-current liabilities.

In 1993, the subsidiary Santos Brasil Logística filed a collection lawsuit referring to storage services provided to and not paid by State Finance Department of São Paulo. In 2001, said lawsuit was finally judged valid to be received in ten annual installments and, on December 31, 2016, only one installment remained to be received, adjusted to inflation according to legal debt adjustment rate of the São Paulo State Court of Justice and recognized in assets.

57

In the year ended December 31, 2016, the noncurrent liability amount was adjusted principally considering the inflation adjustment mentioned in the paragraph above. The acquisition contract of Santos Brasil Logística provides that the received amounts of court-ordered debt payments should be transferred to the former shareholders. These amounts are transferred net of legal fees associated with them.

10. CURRENT TAX ASSETS

Parent company

12.31.2016 12.31.2015

Withholding income tax – IRRF 330 4,661 Income Tax (IRPJ) and Social Contribution

on Net Income (CSLL) 1,656 4,952 Social integration program / contribution for the financing of social

security - PIS / COFINS credits - 1,478 Other 24 28 Total current 2,010 11,119

Consolidated

12/31/2016 12/31/2015

Withholding income tax – IRRF 1,227 5,826 Income Tax (IRPJ) and Social Contribution

on Net Income (CSLL) 1,929 7,340 Social integration program / contribution for the financing of social

security - PIS / COFINS credits 2,704 2,441 Other 708 539 Total current 6,568 16,146 Consolidated withheld income tax (IRRF) credits, in the amount of R$1,227 (R$5,826 as of December 31, 2015) referred mainly to the Company and its subsidiary Santos Brasil Logística, deriving mainly from financial investments.

Consolidated corporate income tax (IRPJ) and social contribution on net income (CSLL), in the amount of R$1,929 (R$7,340 as of December 31, 2015), referred mainly to the Company and derived from advanced monthly calculations. These credits will be offset in future year calculations.

Consolidated PIS and COFINS (taxes on revenue) credits, in the amount of R$2,704 (R$2,441 as of December 31, 2015), referred mainly to subsidiary TVS and derive from credit on amortization of that Company’s exploration rights. These credits are being offset in monthly calculations of contributions themselves.

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11. INVESTMENTS - PARENT COMPANY

a) Composition of balances

12.31.2016 12.31.2015 Non-current assets: Interest in subsidiaries 400,357 425,007 Current liabilities: Allowance for loss with investments - (3)

Total 400,357 425,004

b) Changes in balances - as from December 31, 2015

Numeral 80 Participações

S.A.

Terminal Portuário de

Veículos S.A.

Pará Empreendimentos Financeiros S.A. (Consolidated)

Santos Brasil

Logística S.A.

Terminal de Veículos de Santos S.A. Total

Balance at December 31, 2015 (2) 5 12,667 163,783 248,551 425,004

Capital transfer 180 30 120 - - 330 Equity in net income of subsidiaries (120) (27) (791) (16,145) 7,404 (9,679) Additional dividend as Annual Shareholder's Meeting on April 15, 2016 - - - (3,066) (10,251) (13,317) Minimum compulsory dividends - - - - (1,758) (1,758) Share option Program - - 26 20 - 46 Actuarial liability - - 17 (294) 8 (269) Balance at December 31, 2016 58 8 12,039 144,298 243,954 400,357

c) Changes in balances - as from December 31, 2014


S.A.


Veículos S.A.


Santos Brasil

Logística S.A.

Terminal de Veículos de Santos S.A. Total

Balance at December 31, 2014 89 16 8,313 175,310 251,463 435,191 Capital transfer 30 20 13,004 - - 13,054 Equity in net income of subsidiaries (121) (31) (8,802) 4,303 14,387 9,736 Additional dividend as Annual

Shareholder's Meeting on April 27, 2015 - - - (15,013) (13,908) (28,921)

Minimum compulsory dividends - - - (1,022) (3,417) (4,439) Share option Program - - 17 61 - 78 Actuarial liability - - 135 144 26 305 Balance at December 31, 2015 (2) 5 12,667 163,783 248,551 425,004

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d) Information of the subsidiaries - Position as of December 31, 2016


S.A.


Veículos S.A.


Santos Brasil Logística

S.A.

Terminal de Veículos de Santos S.A.

Capital 710 350 84,134 126,374 201,051 Number of shares held:

Common 490,042 349,999 84,134,349 115,935,256 204,269,217 Preferred 219,958 - - 115,935,255 -

(Loss) income for the year (120) (27) (791) (16,145) 7,404 Shareholders' equity 58 8 12,039 144,298 243,954 Participation in capital - % 100 100 100 100 100 Interest in the shareholders' equity 58 8 12,039 144,298 243,954 Current assets 62 13 12,803 28,903 84,167 Non-current assets - - 14,570 174,835 166,398 Total assets 62 13 27,373 203,738 250,565 Current liabilities 4 5 9,449 30,760 6,510 Non-current liabilities - - 5,885 28,680 101 Total liabilities 4 5 15,334 59,440 6,611 Net income - - 61,121 155,729 36,494 (Loss) income for the year (120) (27) (791) (16,145) 7,404

12. PROPERTY, PLANT AND EQUIPMENT

Parent company

Annual rate of depreciation - %

Accumulated depreciation

Net value Net value Cost 12.31.2016 12.31.2015

Leasehold improvements 4.1 861,950 (337,161) 524,789 549,354 Cargo moving equipment 8.4 539,167 (356,165) 183,002 199,120 Construction in process (*) - 17,211 - 17,211 13,168 IT equipment 20 38,374 (30,554) 7,820 9,585 Lands - 31,504 - 31,504 31,504 Machinery, equipment and accessories 10 26,876 (15,200) 11,676 13,452 Facilities, furniture and fixtures 10 9,370 (6,715) 2,655 3,142 Vehicles 20 2,788 (2,445) 343 707 Other items 10 252 (214) 38 47 Total 1,527,492 (748,454) 779,038 820,079

Consolidated Annual rate of

depreciation - % Accumulated depreciation

Net value Net value Cost 12.31.2016 12.31.2015

Leasehold improvements 4.1–16.8 890,083 (356,911) 533,172 561,391 Cargo moving equipment 8.4–12.9 637,203 (410,231) 226,972 244,837 Construction in process (*) - 26,536 - 26,536 29,778 IT equipment 20 46,937 (37,737) 9,200 11,632 Lands - 57,930 - 57,930 57,930 Machinery, equipment and accessories 10 43,726 (25,023) 18,703 23,001 Facilities, furniture and fixtures 10 55,073 (28,003) 27,070 31,731 Vehicles 20 3,004 (2,645) 359 742 Real estate 2.2 25,181 (5,578) 19,603 20,109 Other items 10 632 (561) 71 110 Total 1,786,305 (866,689) 919,616 981,261

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Changes in property, plant and equipment are shown in the table below:


Net opening balances 820,079 884,771 981,261 1,054,088

Additions/transfers: Leasehold improvements 2,845 10,262 3,791 9,947 Cargo moving equipment 1,514 504 10,081 1,754 Construction in process (*) 4,359 (8,135) (2,921) 2,466 IT equipment 1,727 3,704 2,069 3,772 Lands - 2,533 - 2,533 Machinery, equipment and accessories 599 2,367 624 2,808 Facilities, furniture and fixtures 292 602 715 3,239 Vehicles 76 159 76 159 Other items - 32 - 33

Total additions/transfers 11,412 12,028 14,435 26,711

Write-offs (497) (153) (1,779) (1,431) Reclassifications (3) (43) (9) (51) Depreciations (51,953) (76,524) (74,292) (98,056)

Closing net balances 779,038 820,079 919,616 981,261

(*) The value of additions in “Construction in progress” caption, is net of transfers, upon entry of assets into the groups that represent them.

Consolidated loans and financing costs capitalized in year ended December 31, 2016 were R$72, at average interest rate of 3.8% (R$151 as of December 31, 2015, at average interest rate of 3.6%) and refer to financing directly attributable to property, plant and equipment acquisitions.

The Company and its subsidiaries have some of its equipment in guarantee of own equipment financing of the respective purchases (FINAME - Financing of machinery and equipment and Import Financing - FINIMP). The acquisition value of these assets was R$75,933. In addition to these guarantees, the Company also has a Rubber Tyred Gantry - RTG pledged in guarantee of ongoing labor lawsuit no. 369/03 which, on December 31, 2016, was stated as R$879.

13. INTANGIBLE ASSETS Parent company

Annual rate of amortization - % Cost

Accumulated amortization

Net value Net value 12.31.2016 12.31.2015

Defined useful life: Rights to exploit: (a)

Tecon Santos 3.1 129,791 (94,031) 35,760 36,917 Tecon Imbituba 4 91,061 (40,354) 50,707 53,808 General Load Terminal 4 7,395 (2,824) 4,571 4,871

Goodwill in acquisitions: (b) Shares of Santos-Brasil S.A. 3.1 321,264 (244,408) 76,856 79,342 Pará Empreendimentos 9.8 37,760 (31,708) 6,052 9,683 General Load Terminal 4.5 18,983 (6,289) 12,694 13,522

Software: Data processing systems 20 22,005 (21,390) 615 1,498

Total 628,259 (441,004) 187,255 199,641

Consolidated

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Parent company







Defined useful life: Rights to exploit: (a)

Tecon Santos 3.1 129,791 (94,031) 35,760 36,917 Tecon Imbituba 4 91,061 (40,354) 50,707 53,808 General Load Terminal 4 7,395 (2,824) 4,571 4,871 Export Terminal of Vehicles 4 223,493 (62,578) 160,915 169,855

Goodwill in acquisitions: (b) Shares of Santos-Brasil S.A. 3.1 321,264 (244,408) 76,856 79,342 Pará Empreendimentos 9.8 37,760 (31,708) 6,052 9,683 General Load Terminal 4.5 18,983 (6,289) 12,694 13,522

Software: Data processing system 20 30,889 (29,744) 1,145 2,416

860,636 (511,936) 348,700 370,414 Undefined useful life:

Goodwill in acquisitions: (c) Santos Brasil Logística (*) - 47,576 (8,111) 39,465 39,465

47,576 (8,111) 39,465 39,465 Total 908,212 (520,047) 388,165 409,879

(*) Accumulated amortization up to December 31, 2008.

Changes in intangible assets are shown in the table below:


12.31.2016 12.31.2015 12.31.2016 12.31.2015

Net opening balances 199,641 254,112 409,879 473,904

Additions/transfers: Software 1 94 7 105 Losses due to depreciation of assets (d) - (30,639) - (30,639) Write-offs - - - (12) Reclassifications 4 43 9 52 Amortization (12,391) (23,969) (21,730) (33,531) Closing net balances 187,255 199,641 388,165 409,879

(a) Rights to exploit

Exploration rights refer to the installments composing the amounts paid for the commercial exploitation of the following port facilities, Tecon 1 Santos, from November 29, 1997 (note 1.a)), Tecon Imbituba, from April 7, 2008 (note 1.b)) and General Cargo Terminal of Imbituba, from February 13, 2006 (note 1.b)) and are amortized within the term of their respective lease agreements.

As per note 1.d), subsidiary TVS, was declared to be the winner of the bid of TEV and, at the execution of the agreement, made the initial payment of R$133,495, plus the bid costs amounting to R$4,711, and made the final payment on January 4, 2010 in the amount of R$85,287, assuming on that same date the operations of TEV through the Deed of Delivery Receipt of the Area.

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(b) Goodwill on acquisitions - with definite useful life

In 2006, former shareholders of subsidiary Santos-Brasil granted options to purchase its shares, which were exercised by third parties, with a goodwill of R$321,264. In the same year, the subsidiary Santos-Brasil at the time proceeded to reverse merger of those companies acquiring purchase options, including said goodwill which was amortized up to December 31, 2008 based on its tax use in five years, according to applicable law. From January 1, 2009, according to technical guidance OCPC 2 - Clarifications on the Financial Statements of 2008, the goodwill based on expected future profitability for the term of the lease agreement of Tecon 1 Santos (note 1-a)) was considered with a definite useful life and its amortization will follow the residual term of the lease agreement.

The acquisition of Convicon was executed on April 9, 2008 - through its subsidiary Nara Valley - for the amount of R$45,000, which compared to the net book equity on the acquisition date, generated a goodwill of R$37,760. This transaction took place through the acquisition of 75% of the shares representing the capital stock of Pará Empreendimentos Financeiros S.A., which holds 100% of the shares representing the capital stock of Convicon.

The economic basis of goodwill on the acquisition of Convicon is the expectation of future profitability during the term of the lease agreement of Vila do Conde Container Terminal (note 1.e)) and is being amortized over the remaining term of the agreement.

The acquisition of 100% of the common shares representing the capital of the Union, at the time, leaseholder of General Cargo Terminal of Imbituba - through the subsidiary Tremarctos Participações S.A., was agreed by the amount of R$25,000, generating a goodwill of R$18,983.

The economic basis of goodwill on the acquisition of General Cargo Terminal is the expectation of future profitability for the duration of the lease agreement of terminal abovementioned and is being amortized over the remaining term of the agreement.

(c) Goodwill on acquisitions - with indefinite useful life

The acquisition of Santos Brasil Logística, formerly named Mesquita, (note 1-c)) was executed on November 1, 2007, for the amount of R$95,000, which compared to the net book equity, generated a goodwill of R$47,575.

The economic basis of goodwill on the acquisition of Santos Brasil Logística is the expectation of future profitability and, until December 31, 2008, was amortized based on their tax use in 5 years, pursuant to the applicable laws. From January 1, 2009, its amortization was ceased due to the fact that related operations do not have any definite term; however, its recovery is tested annually and when necessary a provision is recorded.

For purposes of impairment test, goodwill was allocated to the segment of the logistics business - Santos Brasil Logística, since it corresponds to the lowest level of the cash generating unit. The goodwill is followed for purposes of the internal Management, never above the Company's operating segments.

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As of December 31, 2016 the recovery was tested, based on present value of expected future cash flows (value in use) of CGU, considering the annual budget for the year of 2017 and a long term planning up to 2026, prepared for the subsidiary Santos Brasil Logística, which represents the logistics business segment with the following most relevant assumptions:

• Volume growth of customs warehousing following the market growth, until reaching the installed capacity.

2017 2018 2019 2020 2021

Growth rate for the next 5 years: 17.50% 2.00% 3.00% 3.00% 3.00%

• Volume growth in the business of Distribution Centers and Transportation.

• Obtaining gains of scale in the increase of fixed costs.

• Discount actual rate applied in the concept of discounted cash flow, and having EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) as inflow of funds and value in use of fixed and intangible assets as outflow.

• On the base date at December 31, 2016, the amount of operating assets was recorded, in which net value of goodwill is included.

12.31.2016 12.31.2015

Discount rate: 8.43% 7.55% Growth rate in perpetuity: 5.00% 5.00%

The discount rate was estimated after the taxes, using the historical weighted average rate of capital cost of the CGU operates. The cash flow projections included specific estimates for five years and a perpetuity growth rate after this period. Growth rate at perpetuity was determined based on estimated annual rate comprised of long-term LAJIDA growth, which Management believes to be consistent with assumptions a market member would use.

The estimated recoverable value of logistic unit is higher than the value of operating assets as of December 31, 2016, in which goodwill is included. Based on the assumptions adopted/used in the calculation, the Management does not estimate any impact in recoverable value.

(d) Losses due to depreciation of assets

As of December 31, 2016 the recovery was tested, in Tecon Imbituba CGU, based on present value of expected future cash flows (value in use) of CGU, considering the annual budget for the year of 2017 and a long term planning up to 2034, prepared for the operating branch Tecon Imbituba, with the following most relevant assumptions:

• Volume growth of quay and customs warehousing operations following the market growth, until reaching the installed capacity.

64

2017 2018 2019 2020 2021

Growth rate for the next 5 years: 1.90% 0.00% 325.30% 114.40% 46.50%

• Obtaining gains of scale in the increase of fixed costs.

• Discount actual rate applied in the concept of discounted cash flow, and having EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) as inflow of funds and value in use of fixed and intangible assets as outflow.

• On the base date at December 31, 2016, the amount of operating assets was recorded, in which net value of exploration right is included.

12.31.2016 12.31.2015

Discount rate: 8.85% 7.55% Growth rate in perpetuity: 0.00% 0.00%

The discount rate was estimated after the taxes, using the historical weighted average rate of capital cost of the CGU. The cash flow projections included specific estimates for five years and a perpetuity growth rate after this period. Growth rate at perpetuity was determined based on estimated annual rate comprised of long-term LAJIDA growth, which Management believes to be consistent with assumptions a market member would use. As of December 31, 2015, the estimated recoverable in the operating branch Tecon Imbituba was lower than R$30,639 at the value of operating assets of R$412,076, in which the exploration right is included. As of December 31, 2016, the estimated recoverable in the operating branch Tecon Imbituba was higher than the value of operating assets in which the exploration right is included, net of the adjustment made in 2015. Based on the assumptions adopted/used in the calculation, the Management does not estimate any impact in recoverable value. As of December 31, 2016, other CGU’s, Tecon Santos, TVS and Convicon were also tested, based on the same calculation methodology presented previously, and the result was that estimated recoverable value is higher than these assets’ value.

14. LOANS AND FINANCING

Parent company Transaction

currency Interest Monetary

connections Amortization 12.31.2016 12.31.2015 Local currency:

FINAME 4% p.a.%–5.5% p.a. URTJLP Monthly 562 389 R$

NCE – Safra 1.29% p.a. CDI Semi-annual 120,000 120,000 R$ (-) Funding costs (429) (360) Net value raised 119,571 119,640 Recognized interest and

costs 46,439 39,059 (-) Debt amortization (120,425) (99,395)

45,585 59,304

65

NCE - BB 1.29% p.a. CDI Quarterly 30,000 30,000 R$ (-) Funding costs (90) (90) Net value raised 29,910 29,910 Recognized interest and

costs 12,409 10,105 (-) Debt amortization (32,315) (20,011)

10,004 20,004

Leases 0.84% p.m. - Monthly - 487 R$ 56,151 80,184 Foreign currency:

FINIMP LIBOR +1.84%–4.65% p.a.

Foreign exchange variation

Semi-annual

14,320 43,039 US$ Darby Brazil Mezzanine - Foreign

exchange variation

-

- 711 US$ 14,320 43,750 Total 70,471 123,934

(-) Short term installments (68,415) (78,625) Long term installments 2,056 45,309

Consolidated

Transaction currency Interest

Monetary connections Amortization 12.31.2016 12.31.2015

Local currency: FINAME From 3% p.a. to

6% p.a. URTJLP Monthly

6,495 11,333 R$ NCE 1.29% p.a. CDI Semi-

annual 55,589 79,308 R$ Leases 0.84% p.m. - Monthly - 487 R$ Working capital 113% of CDI CDI Monthly 572 1,946 R$

62,656 93,074 Foreign currency:

FINIMP LIBOR + from 1.84% to 4.72%

p.a.


Monthly/ quarterly/

semi-annual 19,936 54,257 US$ FINIMP EURIBOR

+ from 2.5% to 2.8% p.a.


Monthly/ quarterly/

semi-annual 4,759 7,667 € Darby Brazil Mezzanine - Foreign

exchange variation

-

- 711 US$ 24,695 62,635 Total 87,351 155,709 (-) Short term installments (78,056) (91,593) Long term installments 9,295 64,116

Loans and financing in foreign currency have increased the interest of the Withholding Income Tax on consignment as contractual provision.

The Company, through its solicitors, requested from DARBY PRIVATE EQUITY a financial

66

position involving the Company. Request informed that, pursuant to the terms of prevailing civil law1, non-compliance within 48 hours would imply the understanding that there are no outstanding debts involving the Company.

In September 2016, the Company wrote-off Darby Brazil Mezzanine loan transaction balance because its request was not met.

Loans and financing do not have covenants.

Guarantees

• Guarantees granted

Maturity Currency Guarantees FINAME June 2021 R$ Equipment object of transaction (a) FINIMP April 2019 US$/€ Equipment object of transaction (a) NCE - Banco Safra May 2017 R$ Receivables limited to 33.33% of debt

balance (a) As note 12.

• Obtained guarantees

On the base date of December 31, 2016, the Company did not have any warranty from outstanding transactions or any other existing operation.

On December 31, 2016, the long-term debt had the following maturity structure:

Parent company 2018 2019 2020 2021 Total

FINAME 205 75 75 38 393 FINIMP 1,663 - - - 1,663 Total 1,868 75 75 38 2,056

Consolidated 2018 2019 2020 2021 Total

FINAME 1,942 474 75 37 2,528 FINIMP 6,621 146 - - 6,767 Total 8,563 620 75 37 9,295

1Article 111 of the Civil Code: Silence implies consent, when circumstances or uses thus authorize, and declaration of express will is not required.

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15. DEBENTURES

Interest Monetary

connections Amortization

Parent company and Consolidated

12.31.2016 12.31.2015

Debentures 2014: 2.00% p.a. CDI Semi-annual 100,000 100,000

(-) Costs of debentures (504) (504) Net value raised 99,496 99,496 (+) Recognized interest and

costs 26,311 20,313 (-) Amortization of principal

and interest (104,938) (57,434) 20,869 62,375

Debentures 2015: 2.40% p.a. CDI Semi-annual 115,000 115,000

(-) Costs of debentures (1,731) (791) Net value raised 113,269 114,209 (+) Recognized interest and

costs 26,052 7,255 (-) Amortization of principal

and interest (17,707) - 121,614 121,464 Total 142,483 183,839 (-) Short term installments (85,358) (49,309) Long term installments 57,125 134,530 On March 14, 2014, the Company’s Board of Directors approved the fund raising through the issuance of simple debentures. The debentures will be subject to the public offer with restrict placement efforts, as set forth in Law 6385, of December 17, 1976, CVM Instruction 476, of January 16, 2009, and other applicable legal and regulatory provisions. The funds raised from the transaction settled on April 2, 2014 amounted to R$100,000 and were allocated to increase the Company’s working capital, subject to interest of 100% of CDI plus a surcharge of 0.96% p.a., falling due within three years as from the issuance date.

On July 29, 2015, the Board of Directors approved the proposal to raise funds for the Company through the issue of simple nonconvertible debentures. After transaction settlement on August 28, 2015, the Company raised R$115,000, subject to interest equivalent to 100% of the CDI, plus a surcharge of 1.40% per year, and maturing within three years from the issue date. Raised funds were intended to increase the Company’s working capital.

In view of downgrading of the Company’s corporate risk classification by two or more scores at national scale, Board of Directors’ meeting held on March 23, 2016 and Annual Debentureholders Meeting held on March 28, 2016, approved the following new issuance characteristics:

1. Change in clause 6.14, item II, of Second Issuance Deed to contemplate Surplus increase, which became:

68

(i) 0.96% p.a., basis of 252 business days, from issuance date to March 31, 2016; and

(ii) 2.00% p.a., basis of 252 business days, from March 31, 2016 to maturity date.

2. Change in clause 6.14, item II, of Third Issuance Deed to contemplate Surplus increase, which became:

(i) 1.40% p.a., basis of 252 business days, from issuance date to March 31, 2016; and

(ii) 2.40% p.a., basis of 252 business days, from March 31, 2016 to maturity date.

3. Clause 6.24.2 of Second Issuance Deed and clause 6.26.2 of Third Issuance Deed had a XIIIth item added to include financial index (covenants) resulting from division of net Debt by EBITDA, which must be equal to or less than 2.5 times.

This index must be calculated on a quarterly basis using the Company’s consolidated accounting statements. As of December 31, 2016, the index (“covenants”) was being addressed.

Consolidated 12.31.2016 Assets

Cash and cash equivalents 192,557 Derivative financial instruments 37

192,594 Liabilities

Loans and financing 87,351 Debentures 142,483 Derivative financial instruments 2,859

232,693 Net debt 40,099 EBITDA in the last 4 quarters 87,389 Net debt / EBITDA equal or less than 2.5 times 0.5

16. PROVISION TO TAX, LABOR, CIVIL RISKS AND JUDICIAL DEPOSITS

The Company and its subsidiaries are exposed to certain risks represented in tax lawsuits and labor and civil claims for which there is a provision recognized in the financial statements, as they were evaluated as of remote likelihood of success. The procedure for determining the provisioned proceedings is were considered by Management as adequate based on several factors, including (but not limited to) the opinion of the legal advisors of the Company and its subsidiaries, nature of lawsuits and historic experience.

Provisioned amounts for contingencies being discussed in court are as follows:

69

Parent company 12.31.2016 12.31.2015

Labor provision (a) 22,210 25,011 Provision for Prevention of Accidents Factor (“FAP”) proceeding (b) 8,566 7,173 Other proceedings (d) 4,664 3,501 Total 35,440 35,685

Consolidated

12.31.2016 12.31.2015

Labor provision (a) 25,754 33,711 Provision for FAP lawsuit (b) 10,695 8,929 Other proceedings (d) 4,922 3,718 Total 41,371 46,358 The values of judicial deposits:

Parent company 12.31.2016 12.31.2015

Relating to contingencies:

Labor lawsuits (a) 2,825 8,678 Accidents Prevention Factor (FAP) Proceeding (b) 4,902 4,469 CADE Lawsuit - fine (c) 2,102 1,978 CADE Lawsuit - billing TRA (c) 166,203 150,817 Other proceedings (d) 1,073 1,073 Other judicial deposits (e) 41,031 36,979

Subtotal 218,136 203,994

Regarding the supplier: SCPar Porto de Imbituba S.A. (“SCPar”) (f) 15,083 15,083

Subtotal 15,083 15,083 Total 233,219 219,077

Consolidated 12.31.2016 12.31.2015

Relating to contingencies:

Labor lawsuits (a) 4,138 11,956 Accidents Prevention Factor (FAP) Proceeding (b) 6,156 5,593 CADE Lawsuit - fine (c) 2,102 1,978 CADE Lawsuit - billing TRA (c) 166,203 150,817 Other proceedings (d) 1,073 1,073 Other judicial deposits (e) 46,555 42,408

Subtotal 226,227 213,825 Regarding the supplier:

SCPar (f) 15,083 15,083 Subtotal 15,083 15,083 Total 241,310 228,908

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(a) Refers to lawsuit under the responsibility of: (i) operating branch Tecon Santos, for which

a provision of R$22,210 was recognized and escrow deposits of R$2,825 were made, besides 5 insurance contracts guaranteeing the amount of R$12,780; (ii) subsidiary Santos Brasil Logística, for which a provision of R$1,281 was recognized and escrow deposits of R$411 were made; and (iii) subsidiary Convicon, for which a provision of R$2,263 was recorded and escrow deposits of R$902 were made, besides 3 insurance contracts guaranteeing the amount of R$4,650.

(b) The provision refers to the administrative objections presented before the National Social Security Institute (INSS) regarding the new social contribution calculation system based on the creation of a multiplying index denominated FAP (Accidents Prevention Factor, calculated based mainly on the number of occupational accidents occurred in the Company and employee terminations, in comparison with companies that are engaged in the same economic activity (CNAE). As the charge was maintained, a Preliminary Injunction was filed requesting authorization for the judicial deposit and suspension of the tax credit payment of the FAP of 2010. The injunction was accepted authorizing the full deposit of the Parent company's and its subsidiaries' credit of R$4,902, comprised of: (i) R$1,174 - Santos Brasil Logística; (ii) R$57 - Convicon; and (iii) R$23 – Vehicles Terminal. Subsequently, the Company filed a civil lawsuit challenging the FAP’s constitutionality and legality. Also, common shares were claimed regarding the 2011 FAP of Santos Brasil Logística and 2012 FAP of Santos Brasil Participações S.A., aiming at the suspension of requirement of credit by means of judicial deposits.

(c) Deposits related to CADE (Administrative Council of Economic Defense) refer to the lawsuit filed in the agency on the charge of possible actions not complying with the economic order, involving several companies exploring leased quays or private management, including operating branch Tecon Santos.

The matter under discussion referred to the legality of the charge made to Customs Port Terminal (TRAs) by container separation and delivery services. This lawsuit was judged and the Company was convicted to: (i) pay a pecuniary fine and (ii) discontinue the charge made to TRA's. Operating branch Tecon Santos filed a lawsuit and obtained an injunction to resume the charge through judicial deposits for the full charged amount and a deposit of the full pecuniary fine amount applied by CADE, resulting in judicial deposits in the amount of R$119,618 and R$2,102, respectively. Operating branch Tecon Santos filed two other lawsuits to cancel the payment of taxes arising from billing: (i) a lawsuit filed in Federal Courts, referring to PIS, COFINS, Income and Social Contribution taxes; and (ii) the other lawsuit filed in the Courts of Guarujá, referring to Service Tax (ISSQN), with total value already deposited of R$46,585. Taxes levied on TRA billing, in the amount of R$37,076 (R$30,925 as of December 31, 2015), are stated in non-current liabilities.

Said lawsuit was judged on September 4, 2013, and the lower court judge partially granted our claim canceling the collection interdiction abusively made by the CADE, but maintaining the fine imposed, because the court understood that the CADE acted under its jurisdiction, as regards the fine only. As to the collection interdiction, the court nullified the CADE’s decision since the ANTAQ has exclusive jurisdiction on the port industry. This jurisdiction was correctly enforced by CODESP, through decisions DIREXE 371.2005 and 50.2006, setting the maximum prices of the services addressed by the lawsuit.

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The Company filed a motion for clarification to request a decision on the continuity of the deposit in escrow of collected services until a final and unappealable court decision is reached and the deposit of taxes thereon in escrow, as well as other related impacts. The motion for clarification was judged and a decision was issued on November 4, 2013 that only authorizes the deposit in escrow of taxes on collected services but that does not authorize the deposit of invoices issued by the Company in escrow.

This decision had the following impacts on the Company: (i) started to have access to the billed amounts that are no longer deposited in escrow; (ii) collected retroactively invoices that had been suspended; and (iii) requested in court the withdrawal of the service escrow deposits. The legal counsel also started to classify the lawsuit as a “probable favorable outcome” until a final and unappealable decision is reached, especially taking into account that the lower court decided that the CADE does not have jurisdiction on the matter.

The lower court judge decided against the withdrawal of the billed and received services escrow deposits for the following reasons, a decision maintained by the Regional Federal Court (TRF) by overruling the advanced relief of the Interlocutory Appeal because the court understood that currently there is no “periculum in mora”: (i) both parties can still appeal against the court’s decision; and (ii) the lack of these amounts does not affect the Company’s liquidity.

Thus, for the reasons above and taking into account the services provided to the three TRAs, two of which are parties to the lawsuit and the third is challenging the collection in courts, in 2013 the Company reversed part of the provision for contingencies recognized until the court decision, excluding from this reversal the amounts related to these TRAs.

On March 26, 2015, the decision issued by the Fourth Panel of the Federal Regional Court of the Third Region of the State of São Paulo considered the necessary reconsiderations (judge’s appeal) and the appeals filed by the parties and, by unanimous decision, resolved to: (i) accept the official remittance, partially accept the Company’s appeal to annul CADE’s decision and the subsequent fine imposition; (ii) not accept CADE’s appeals; (iii) accept the Federal Government’s appeal to be excluded from the lawsuit; and (iv) consider hampered the request included in the initial petition against CODESP.

Accordingly, based on the above-mentioned facts and considering the remote likelihood of loss by its external legal counsel, the Company reversed the remaining portion of the provision for risks recognized in the year 2015 through the issue of the above-mentioned decision.

(d) The consolidated provision of R$4,922 refers mainly to: (i) the success clause provided for in the tax lawsuit defense agreement, which is classified as with a possible likelihood of a favorable outcome, related to the tax assessment notice and the jointly-liability notice issued by the Brazilian Federal Revenue Service and received on December 14, 2012, amounting to R$3,090; (ii) the Recourse Action filed by the insurer responsible for paying the claim to the customer, because of damages caused to the stored cargo, fully deposited and amounting to R$1,026; and (iii) other lawsuits in the amount of R$806.

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(e) Judicial deposits classified as Other, related to the Parent company, are comprised as follows: (i) deposit referring to the expansion of PIS and COFINS calculation basis in years from 1999 to 2003, in the amounts of R$1,397 and R$8,828, respectively, the provisions for which were reversed; (ii) discussion about CPMF on loan transfer during the merger, amounting to R$2,609; (iii) deposit referring to federal taxes that prevented the issuance of a Joint Tax Debt Certificate with Clearance Effects on Federal Taxes and Debts to the Federal Government, in the amount of R$15,332; (iv) INSS and IR on Voluntary Termination Plan (PDV) deposit and the Non-salary Fund of SINDESTIVA (Dockworkers Union of Santos, São Vicente, Guarujá and Cubatão) in the amount of R$1,685; and (v) other deposits in Tax and Civil spheres, in the amount of R$11,180. Judicial deposits classified as other, related to: (i) subsidiary Santos Brasil Logística, refer to fiscal executions of federal taxes that prevented obtaining the Tax Debt Clearance Certificate , in the amount of R$4,129, labor lawsuits in the amount of R$740 and court-ordered freezing in the amount of R$6; (ii) subsidiary Convicon, related to labor lawsuits totaling R$478 and courtblocked bank accounts totaling R$141; and (iii) subsidiary Vehicles Terminal, related to labor claims, in the amount of R$30.

(f) On November 26, 2012, the Federal Government and the State of Santa Catarina signed Delegation Arrangement 01/2012 under which the Federal Government delegates the management and operation of the Port of Imbituba to SCPar, a Special Purpose Entity (SPE), beginning December 25, 2012. The previous manager Companhia Docas de Imbituba S.A. filed a lawsuit against the ANTAQ and the Federal Government, claiming that its concession agreement is kept effective until December 2016. In light of such situation, the Company decided to settle its payables related to its operating agreements of the Container Terminal and General Cargo Terminal in that port, through escrow deposits related to the ongoing lawsuit, in the amount of R$23,774. In July 2014 SCPAR - Porto de Imbituba raised the amount of R$8,691, through court approval. As of December 31, 2016, these deposits totaled R$15,083. The amount of R$15,021 relating to such deposit is recognized in noncurrent liabilities, in line item “Trade payables”.

Lawsuits referring to subsidiary Santos Brasil Logística, mentioned in (a) item, the origin of which is prior to acquisition date, as contractual definition, will be the responsibility of its former shareholders. Accordingly, an amount of R$515 was recognized in noncurrent assets, in line item “Others assets”.

Changes in provisions for contingencies in the years ended December 31, 2016 and 2015 are shown in the tables below:

Parent company Balance at 12.31.2015 Additions

Payment of award

Other movements (*)

Balance at 12.31.2016

Labor provision 25,011 110 (10,509) 7,598 22,210 Provision for FAP (Accidents Prevention Factor) 7,173 1,393 - - 8,566 Other proceedings 3,501 1,189 - (26) 4,664 Total 35,685 2,692 (10,509) 7,572 35,440

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Balance at 12.31.2014 Additions

Payment of award

Other movements (*)


CADE Lawsuit - fine 1,863 25 - (1,888) - CADE Lawsuit - billing TRA 92,266 1,276 - (93,542) - Labor provision 18,575 254 (13,958) 20,140 25,011 Provision for FAP (Accidents Prevention Factor) 6,021 1,152 - - 7,173 Other proceedings 3,836 (306) - (29) 3,501 Total 122,561 2,401 (13,958) (75,319) 35,685

Consolidated


Payment of award

Other movements (*)


Labor provision 33,711 708 (17,496) 8,831 25,754 Provision for FAP (Accidents Prevention Factor) 8,929 1,766 - - 10,695 Other proceedings 3,718 1,297 - (93) 4,922 Total 46,358 3,771 (17,496) 8,738 41,371


Payment of award

Other movements (*)


CADE Lawsuit - fine 1,863 25 - (1,888) - CADE Lawsuit - billing TRA 92,266 1,276 - (93,542) - Labor provision 28,722 266 (14,925) 19,648 33,711 Provision for FAP (Accidents Prevention Factor) 7,495 1,672 - (238) 8,929 Other proceedings 3,979 (232) - (29) 3,718 Total 134,325 3,007 (14,925) (76,049) 46,358

(*) They basically refer to changes in contingencies or the likelihood of success, positively or negatively.

In addition to the lawsuits abovementioned, the Company and its subsidiaries have administrative and lawsuits in progress, and the evaluations carried out by legal advisors showed a likelihood of success in the amount of R$465,949, and in this case, no provision for loss was recorded in the financial statements.

Changes in possible lawsuits in the year ended December 31, 2016 are shown below:

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Nature of the lawsuit Balance at 12.31.2015 Additions Other movements


Customs 15,627 - (38) 15,589 Civil 21,001 1,189 1,336 23,526 Labor 35,839 29,604 (13,382) 52,061 Tax 372,650 10,950 (14,998) 368,602 Other 151 5,471 549 6,171 Total 445,268 47,214 (26,533) 465,949 On December 14, 2012, the Company and its subsidiary Numeral 80 were issued a tax assessment notice and a jointly-liability notice from the Brazilian Federal Revenue Service requiring the collection of IRPJ and CSLL in the amount of R$334,495, which were previously classified as having a tax nature, which, according to such tax notification, Numeral 80 would have failed to pay from 2006 to 2011, due to the amortization, for tax purposes, of the goodwill it recorded upon the merger by the acquiring companies of shares issued by Numeral 80, whose transaction was approved by Special Shareholders’ Meeting of Numeral 80 (then Santos Brasil S.A.) held on May 30, 2006 (merger).

The Management of the Company and its subsidiary Numeral 80 objected such tax assessment notice within the statutory term, reaffirming its understanding that the goodwill recorded on the acquisition of equity interests held in Numeral 80 (then Santos-Brasil S.A) and transferred thereto through the merger was recognized appropriately, strictly in compliance with the tax and corporate legislation.

On October 17, 2013, the Company received the notice on the decision handed down by the Federal Revenue Service in connection with the decision of the First DRJ Panel in São Paulo-I/SP, which partially recognized the challenges filed and reduced the tax assessment fine to 75%; therefore, the adjusted tax credits amounted to R$283,466, whose likelihood of loss is classified as possible by the Company’s outside legal counsel.

This notice also informed that the National Treasury filed an appeal relating to the debits disregarded, in the amount of R$69,328, whose likelihood of loss is classified as remote by the Company’s legal counsel.

The Management of the Company and its subsidiary Numeral 80 objected such tax assessment notice within the statutory term, which by majority of votes by the judges of the 2nd Ordinary Panel of the 3rd Chamber of the Administrative Council of Tax Appeals, was granted at session held on September 14, 2016. In the same session, an appeal to of National Treasury was denied.

On December 5, 2016, National Treasury filed a request for clarification that is pending judgment.

Time for conclusion on these contingencies is uncertain and depends on progress in legal courts.

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17. LEASE - CONSOLIDATED

a) Financial leases

The Company has assets linked to financial lease agreement. The contracts were effective for up to three years, containing call option clauses. As of December 5, 2016, they were settled.

Up to the settlement of contracts, the Company recognized as interest the amount of R$24, for financial expenses and R$263 for depreciation expenses.

b) Operational lease

The Company, by means of its branches, and its subsidiaries have concession agreements and lease installment to be recognized in the statement of income at the accrual method. These amounts will be adjusted on an annual basis using the General Market Price Index, as disclosed by Fundação Getúlio Vargas (IGP-M/FGV).

Agreements 2017 2018 2019 2020 - End of contract Total

Tecon Santos 37,899 37,899 37,899 1,058,011 1,171,708 Tecon Imbituba 3,229 3,229 3,229 43,060 52,747 General Load Terminal 12 12 12 144 180 Convicon 730 548 - - 1,278 Vehicles Terminal 3,807 3,807 3,807 57,417 68,838 Total 45,677 45,495 44,947 1,158,632 1,294,751 Validity period of contracts

Agreements Start of Contract Contract term

Tecon Santos November 1997 November 2047 Tecon Imbituba April 2008 April 2033 General Load Terminal June 2007 June 2032 Convicon September 2003 September 2018 Vehicles Terminal January 2010 January 2035 Guarantee insurance

Agreements Maturity

Tecon Santos April 2016–April 2017 Tecon Imbituba July 2016–July 2017 Vehicles Terminal July 2016–July 2017 The Company and its subsidiaries have in their lease payment commitments amounts based on their drives operating as shown below. These amounts were in effect as of December 31, 2016 and are adjusted for inflation annually based on the lease agreements using IGP-M:

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In reais - R$

Agreements

Cost by container handled

Cost by ton handled

Cost by vehicle handled

Tecon Santos (a) 16.60 - - Tecon Santos (b) 8.30 - - Tecon Santos (c) 36.99 - - Tecon Santos (d) 18.45 - - Tecon Imbituba (e) 86.11 - - General Load Terminal (f) - 2.72 - General Load Terminal (g) - 6.02 - General Load Terminal (h) - 3.63 - Convicon (i) 15.46 - - Convicon (j) 3.11 - - Convicon (k) - 1.54 - Vehicles Terminal (l) - - 16.90

(a) Amount due through September 30, 2015 when the movement exceeds twice the

Contractual Minimum Movement (MMC), until reaching three times the applicable minimum range.

(b) Amount due through September 30, 2015 when the movement exceeds three times the applicable minimum range.

(c) Amount due through October 1, 2015 when the MMC is not reached, limited to the MMC.

(d) Amount due through October 1, 2015 when the movement exceeds the MMC.

(e) Amount due for the use of the land infrastructure and also when the MMC is not reached, limited to the MMC.

(f) Amount due for the use of the leased area and also when the MMC is not reached, limited to the MMC.

(g) Amount due for the use of the land infrastructure (quay), related to the ship cargo movement.

(h) Amount due for the use of the land infrastructure (dock), related to the ship cargo movement from unitization and de-unitization of containers.

(i) Amount due for the full container and also when the MMC is not reached, limited to the MMC.

(j) Amount due for empty container.

(k) Amount due by ton.

(l) Amount due by vehicle and also when the MMC is not reached, limited to the MMC.

The Company and its subsidiaries have lease agreements which include minimum handling

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commitments that have not been met, thus generating a cost in the amount of R$28,651, as follows:

Agreements 12.31.2016 Tecon Santos 1,081 Tecon Imbituba 25,426 General Load Terminal 291 Convicon 6 Vehicles Terminal 1,847 Total 28,651 The Company and its subsidiaries also have lease agreements for administrative and operating areas (Distribution Centers of subsidiary Santos Brasil Logística) that, in the year ended December 31, 2016 generated expenses of R$10,422.

18. SHAREHOLDERS' EQUITY – PARENT COMPANY

a) Capital

Common shares Preferred shares 12.31.2016 12.31.2015 12.31.2016 12.31.2015 Issued/Authorized with no par

value 666,086,554 454,629,482 - 211,457,072 Out of the total shares, 658,841,043 are outstanding as of December 31, 2016, of which all are common shares.

The Company is authorized to increase its capital independently from a decision of the Shareholders' Meeting, up to the limit of 2,000,001,000 shares, through a resolution of the Board of Directors, which will establish issuance and placement conditions of said securities.

Each common share entitles holders to one vote on general meeting resolutions.

On June 17, 2016, at a Special Shareholders’ Meeting, the shareholders approved the conversion of all the preferred shares issued by the Company into common shares, so that a preferred share will be converted into a common share issued by the Company. This change became effective on August 22, 2016, when total preferred shares were cancelled and converted into common shares, and started to be traded in BM&FBovespa New Market.

b) Capital reserve

• Stock option plan

Represented by the book record of the stock option plan (note 23), totaling R$56,036 as of December 31, 2016 (R$51,769 as of December 31, 2015) in compliance with the determinations of Technical Pronouncement CPC 10 - Share-based payments.

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• Other

The merger of shares, the value of the shareholders’ equity of the former subsidiary Santos-Brasil S.A., on the base date of December 31, 2006, was recorded under parent company’s “Capital” caption, as provided in the Protocol and Justification Merger of Shares. The value of income for the year, shareholders’ equity in the former subsidiary Santos-Brasil S.A., represented by the results of its operations in the period between that date and the base date of the merger, in October 2007, net of distributions made to shareholders, R$28,923, was classified in “Capital Reserve” caption.

On April 30, 2010, the Company made the purchase of an indirect interest of its subsidiary Pará, in its direct subsidiary, Nara Valley, at the time, ranging from 75% shareholding to 87.67%. This operation resulted in the change in interest in the amount of R$4,548.

On April 20, 2011, subsidiary Nara Valley Participações S.A. acquired, pursuant to a share purchase and sales agreement and other covenants, 12.327% of shareholding interest of its direct subsidiary Pará Empreendimentos, for the amount of R$4,500, and it now holds 100% of interest. This operation resulted in the change in interest in the amount of R$5,478.

c) Profit reserve

• Legal reserve

In compliance with article 193 of Law 6404/76, the reserve is recorded at the rate of 5% of the net income (loss) for the year, up to the limit of 20% of the capital.

• Reserve for investment and expansion

Represented by Management proposals for the retention of net income for the year, and prior years, remaining balances, after retentions provided for in the law or approved by shareholders to face investment plans in subsidiaries' expansion, according to capital budgets.

• Repurchase of shares

On December 17, 2013, the meeting of the Board of Directors approved the Company’s shares buyback program, so as to maximize the generation of value to shareholders.

The program authorizes the purchase of up to 4,215,556 units, divided into 4,215,556 common shares and 16,862,225 preferred shares, and the deadline for the purchase of such shares is 365 days, beginning December 20, 2013 and ending December 20, 2014.

On August 22, 2016, with migration to BM&FBovespa New Market, units were cancelled and converted from preferred shares into common shares.

The table below shows the number of shares bought back by the Company:

Number of common shares Amount

Market value (*)

Price

Weighted average Minimum Maximum 6,138,745 19,844 14,733 3.23 2.90 3.70

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(*) Market value based on the last quotation prior to the year end.

d) Shareholders' compensation

Shareholders are entitled to annual minimum dividends of 25% of profit, adjusted in accordance with Corporate Law and the Company’s bylaws.

e) Equity evaluation adjustment

• Supplementary health care

Represented by the book record of the Actuarial calculation of supplementary health care (note 26), in compliance with the determinations of Technical Pronouncement CPC 33 (R1) - Employee Benefits.

19. OPERATING INCOME

We present below the reconciliation between gross income for tax purposes and the income presented in the statement of income for the years ended December 31, 2016 and 2015:


12.31.2016 12.31.2015 12.31.2016 12.31.2015

Gross income 671,546 770,507 956,675 1,109,320 Port Terminals 671,546 770,507 742,930 820,698 Logistics - - 170,818 230,173 Vehicles Terminal - - 42,927 58,449

Deductions from income: Sales taxes (64,804) (77,143) (105,620) (125,177) Other (11,890) (17,215) (16,954) (19,823)

Total 594,852 676,149 834,101 964,320

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20. OPERATING EXPENSES BY TYPE


12.31.2016 12.31.2015 12.31.2016 12.31.2015

Outsourced Labor (33,840) (32,816) (34,427) (33,156) Rates - Companhias Docas (65,373) (56,716) (70,637) (60,294) Leases and infrastructure - Companhias

Docas (44,693) (40,936) (49,943) (45,907) Electric power (9,926) (11,597) (11,809) (13,700) Fuels and lubricants (15,759) (14,157) (26,354) (25,156) Freight (13,128) (12,895) (20,958) (18,857) Vehicles movement - - (14,593) (15,500) Other services and materials (4,717) (2,552) (8,957) (8,562) Personnel expenses (221,729) (226,746) (313,813) (324,098) Consulting, advisory and audit (18,240) (32,343) (21,035) (34,606) Other third-party services (20,115) (18,872) (32,438) (32,027) Operating maintenance (26,171) (23,112) (35,143) (32,762) Depreciation and amortization (*) (64,344) (100,493) (96,022) (131,587) Rents/ condominium fees – operating

areas - - (8,495)

(10,293) Expenses from sales of services (20,107) (18,816) (44,762) (45,092) Allowance for doubtful accounts and non-

collectible losses (9,554)

(56,167) (11,849)

(56,945) Other expenses (25,076) (22,389) (59,662) (57,111) Total (592,772) (670,607) (860,897) (945,653)

Classified as:

Cost of assets and/or services sold (481,733) (477,415) (709,311) (704,407) Sales expenses (37,113) (83,208) (67,197) (115,460) General and administrative expenses

and amortization of goodwill (73,926) (109,984) (84,389) (125,786) Total (592,772) (670,607) (860,897) (945,653) (*) The period of 2016 contemplates Tecon Santos contract renewal in September 2015.

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21. OTHER OPERATING INCOME (EXPENSES)


12.31.2016 12.31.2015 12.31.2016 12.31.2015

Other operating income: Adjustment for dredging fund 638 846 638 846 Judicial deposits adjustment 8,271 9,985 8,380 10,087 Gain (loss) in the sale of assets 17 37 704 36 Reversal of monetary restatement for

provision for contingencies - 8,783 - 8,783 Recovery of electric power 51 3,971 51 3,971 Insurance reimbursement 45 71 47 897 Reversal of provision (CADE

proceeding) - 1,863 - 1,863 Adjustment of court-ordered debt

payments - - 353 473 Recovery of untimely PIS/COFINS 1,753 1,478 4,785 2,305 Recovery of INSS on cooperate

services 2,593 - 4,729 - Other income 37 74 355 292

Total 13,405 27,108 20,042 29,553 Other operating expenses:

Gains and losses in the sale of assets (126) (117) (407) (1,408) Adjustment of provisions (743) (624) (917) (770) Cost from sale of inventory material - - (272) - Court-ordered debt payments - - (283) (379) Provision for losses due to depreciation

of assets - (30,639) - (30,639) Total (869) (31,380) (1,879) (33,196)

22. FINANCIAL INCOME (EXPENSES)


12.31.2016 12.31.2015 12.31.2016 12.31.2015 Financial income:

Yield of interest earning bank deposit 14,790 17,955 21,474 22,694 Interest on loan 362 227 - - Exchange and monetary gains 5,868 17,862 9,193 22,209 Fair value of the swap transaction 875 1,547 1,207 1,854 Restatement of recoverable taxes 2,332 2,535 2,419 2,543 Judicial deposits adjustment 221 206 242 226 Other income 1,367 2,867 1,530 3,138

Total 25,815 43,199 36,065 52,664

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12.31.2016 12.31.2015 12.31.2016 12.31.2015 Financial expenses:

Interest (35,591) (39,088) (36,872) (41,146) Interest on loan (4,281) (8,307) - - Monetary and foreign exchange

variations in liabilities (6,758) (28,398) (9,415) (36,529) Tax on Financial Operations - IOF on

loan transactions (540) (1,230) (709) (1,342) Fair value of the swap transaction (891) (1,298) (1,212) (1,550) Other expenses (1,129) (913) (1,503) (1,340)

Total (49,190) (79,234) (49,711) (81,907)

23. STOCK OPTION PLAN - PARENT COMPANY

At the Special Shareholders’ Meeting held on September 22, 2006 the shareholders of the then subsidiary Santos-Brasil S.A. approved the Stock Option Plan (“Plan”) for administrators and employees. At a Special Shareholders’ Meeting, held on January 9, 2008, the Plan was transferred to the Company.

The Plan is managed by the Board of Directors or, at its discretion, by a Committee comprised of three members, provided that one of these members (effective or alternate) is also a member of the Board of Directors.

The Board of Directors or the Committee periodically create Stock Option Programs (“Programs”), grouped in units to determine the beneficiaries that will receive the options, the number of Company’s units that each beneficiary will be authorized to subscribe or acquire with the exercise of the option, the subscription price, the initial grace period, over which the option cannot be exercised, and the limit dates for total or partial exercise. Terms and conditions are defined in a Stock option plan agreement, entered into by the Company and each beneficiary.

Prices of Units to be acquired by beneficiaries upon option exercise (“strike price”) are equivalent to the average value of Units in the last 30 trading sessions of BM&FBOVESPA, prior to the option grant date, and may be added of monetary restatement based on a price index variation and also of interest, at the discretion of the Board of Directors or the Committee, which may also grant to Beneficiaries a discount of up to 15% in strike price.

The Company's Units that were acquired within the Plan may only be disposed of if the minimum unavailability period defined in the Program for each batch of Units, is complied with. This period should never be lower than three years, counting as of exercise date of each annual batch.

As of December 31, 2016, prevailing Programs were those listed in the table below:

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Programs

Strike prices - R$/units

(*)

Number of granted

units Grace

periods Exercise

terms Option value R$/units (*)

Number of exercised

units

Number of overdue /

expired units

Number of units -

balance

2006–2011 programs 4,456,789 1,975,336 2,481,453 -

01/31/2012 - Program 2012 23.19 849,476 6.48 86,685 521,633 241,158 1st Annual Lot 283,159 02/01/2013 02/01/2015 86,685 196,474 - 2nd Annual Lot 283,159 02/01/2014 02/01/2016 - 283,159 - 3rd Annual Lot 283,158 02/01/2015 02/01/2017 - 42,000 241,158

01/31/2013 - Program 2013 27.35 810,177 7.54 - 334,003 476,174 1st Annual Lot 270,059 02/01/2014 02/01/2016 - 270,059 - 2nd Annual Lot 270,059 02/01/2015 02/01/2017 - 31,972 238,087 3rd Annual Lot 270,059 02/01/2016 02/01/2018 - 31,972 238,087

02/06/2014 - Program 2014 15.70 2,087,682 3.15 - 211,846 1,875,836 1st Annual Lot 695,894 02/06/2015 02/06/2017 - 70,615 625,279 2nd Annual Lot 695,894 02/06/2016 02/06/2018 - 70,615 625,279 3rd Annual Lot 695,894 02/06/2017 02/06/2019 - 70,616 625,278

02/05/2015 - Program 2015 12.85 1,377,596 4.40 - 52,615 1,324,981 1st Annual Lot 459,199 02/05/2016 02/05/2018 - 17,538 441,661 2nd Annual Lot 459,199 02/05/2017 02/05/2019 - 17,538 441,661 3rd Annual Lot 459,198 02/05/2018 02/05/2020 - 17,539 441,659

Total options granted 9,581,720 2,062,021 3,601,550 3,918,149 (*) Original values on options grant programs' dates.

On March 2 and 3, 2016, Board of Directors’ meeting approved exercise price for the 2016 Stock Option Plan and decided to submit it to prior appreciation and recommendation of the Board of Directors’ Remuneration Committee to be subsequently analyzed and approved by the Board itself.

As of August 22, 2016, the units were canceled, as note 1.

With cancellation of units, in case program’s options are exercised, five common shares will be issued to the beneficiary.

As of December 15, 2016, the 2016 Share Option Program was approved in a Board of Directors’ Meeting.

Programs

Strike prices -

R$/shares

(*)

Number of shares

granted Grace

periods Exercise

terms Option value - R$/shares (*)

Number of exercised

shares

Number of overdue / expired shares

Number of shares - balance

03/02/2016 - Program 2016 2.29 2,897,395 1.18 - - 2,897,395 - 1st Annual Lot 965,798 03/02/2017 03/02/2019 - - 965,798 - 2nd Annual Lot 965,798 03/02/2018 03/02/2020 - - 965,798 - 3rd Annual Lot 965,799 03/02/2019 03/02/2021 - - 965,799 Total options granted 2,897,395 - - 2,897,395 (*) Original values on options grant programs' dates.

The grace periods reflect the conditions set forth in the Programs, based on which the options may be exercised in three annual lots, each one equivalent to 33.3333% of the total option granted in each Program.

The exercise prices of the annual lots are adjusted using the IGP-M/FGV, based on the shortest period permitted by law, up to the option exercise dates.

The exercise term reflects the 24-month period, counted as from the termination of the initial grace periods of the annual lots.

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The costs of the options granted are calculated over the respective grace periods, based on the option values, determined by the Black-Scholes evaluation method on the Program dates. As a result of low historic turnover of management and high-level employees that are the beneficiaries of stock option plan, 100% of options in said calculation are considered as vested.

As determined by Technical Pronouncement CPC 10, the Company and its subsidiaries recognized, to the extent services were provided in share-based payment transactions, the effect in the statement of income for the year ended December 31, 2016, in the amount of R$4,267 (R$5,955 on December 31, 2015).

With respect to the options effective by December 31, 2016, those exercised represented a reduction in shareholders’ interest of 1.56%; and those not exercised, if fully exercised under certain conditions provided for in the agreements, would represent a dilution in current shareholders’ interest of 3.27%.

24. INCOME AND SOCIAL CONTRIBUTION TAXES

a) Reconciliation of income (IRPJ) and social contribution taxes (CSLL) - Current and deferred

IRPJ and CSLL reconciliation recognized in income is as follows:


Loss before tax (18,438) (25,029) (22,279) (14,219) Exclusion of equity in investees 9,679 (9,736) - - Adjusted income before taxation (8,759) (34,765) (22,279) (14,219) I - Base value - IRPJ and CSLL: (3,002) (11,845) (7,597) (4,859)

Rates of 15% of IRPJ (Corporate Income Tax) and 9% of CSLL (Social contribution on net income) (2,102) (8,344) (5,347) (3,413) Additional rate of 10% IRPJ with deduction of R$240 (900) (3,501) (2,250) (1,446)

II - Effects of permanent additions of expenses and income 4,574 4,945 5,048 5,776

Permanent additions: Executive Board’s variable compensation 898 2,166 898 2,166 Stock option plan 1,435 1,999 1,451 2,025 Other 2,241 2,228 2,699 3,033

Permanent exclusions: Interest on own capital paid - (1,448) - (1,448)

III - Effects of tax incentives: (100) - (122) (62)

Tax incentives (100) - (122) (62) IV - Effective rate:

Adjusted IRPJ and CSLL (I + II + III) 1,472 (6,900) (2,671) 855 Effective rate (16.8)% 19.8% 12.0% (6.0)%

V - Effects of deferred IRPJ and CSLL: - - 182 2,894

Non-recognition of tax losses and temporary differences (*) - - 182 2,894 VI - Extraordinary adjustments: - - 120 161

Income and social contribution taxes - Prior year - - 120 161

Effect of IRPJ and CSLL on INCOE profit figures (IV + V +

VI) 1,472 (6,900) (2,369) 3,910

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Income and social contribution taxes - Current 5,538 - 9,410 7,860 Income and social contribution taxes - Deferred (4,066) (6,900) (11,779) (3,950) Total 1,472 (6,900) (2,369) 3,910

(*) Refer to subsidiaries Numeral 80, Santos Brasil Logística, TPV and Pará Empreendimentos, with respect to which deferred tax credits will be recorded on a conservative basis upon the generation of future profit.

b) Composition of deferred tax assets and liabilities

Parent company 12.31.2016 12.31.2015

Assets (liabilities) IRPJ CSLL IRPJ CSLL

Tax losses and the negative social contribution base 5,046 1,817 6,830 2,459 Temporary differences:

Allowance for doubtful accounts 3,283 1,182 3,609 1,299 Provision for contingencies 22,189 7,988 20,613 7,421 Amortization of goodwill (19,214) (6,917) (19,835) (7,141) Depreciation (45,615) (16,421) (47,800) (17,208) Loss due to depreciation of assets 7,218 2,598 7,660 2,757 Other 10,055 3,621 8,897 3,203

Actuarial losses 1,001 359 176 63 Total (16,037) (5,773) (19,850) (7,147)

Consolidated

12.31.2016 12.31.2015 Assets (liabilities) IRPJ CSLL IRPJ CSLL Tax losses and the negative social contribution base 10,848 3,906 6,830 2,459 Temporary differences:

Allowance for doubtful accounts 3,599 1,296 3,725 1,341 Provision for contingencies 23,238 8,366 21,445 7,721 Amortization of goodwill (29,080) (10,469) (29,702) (10,693) Depreciation (51,102) (18,397) (52,303) (18,829) Loss due to depreciation of assets 7,218 2,598 7,660 2,757 Other 11,161 4,018 9,475 3,413

Court-ordered debt payments receivable (1,282) (464) (1,194) (432) Actuarial losses 846 304 (80) (29) Total (24,554) (8,842) (34,144) (12,292) Assets 384 139 325 117 Liabilities (24,938) (8,981) (34,469) (12,409) As of December 31, 2016, deferred tax credits on temporary differences were recorded by the Company and its subsidiaries Santos Brasil Logística and TVS.

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25. INCOME PER SHARE

a) Basic earnings per share

The basic earnings per share was calculated with a basis on the Company’s income (loss) for the years ended December 31, 2016 and 2015 and the respective average number of outstanding common and preferred shares these years, according to the chart below:

12.31.2016 Common

Loss for the year (19,910) Weighted average of shares 659,947,809 Basic earnings per share (0.03017)

12.31.2015 Common Preferred Total

Loss for the year (12,455) (5,674) (18,129) Weighted average of shares 453,401,733 206,546,076 659,947,809 Basic earnings per share (0.02747) (0.02747) (0.02747) Basic earnings per units - basic (0.13735) (0.13735) (0.13735)

b) Diluted earnings per share

On the Company’s results for the periods ended December 31, 2016 and 2015, the diluted earning per share was calculated as follows:

12.31.2016 Common

Loss for the year (19,910) Weighted average of shares 659,947,809 Possible effects of stock option subscription 2,014,784 Diluted earnings per share (0.03008)

12.31.2015 Common Preferred Total

Loss for the year (12,455) (5,674) (18,129) Weighted average of shares 453,401,733 206,546,076 659,947,809 Diluted earnings per share (0.02747) (0.02747) (0.02747) Diluted earnings per units (0.13735) (0.13735) (0.13735) Diluted earnings per share are calculated by considering the instruments that may have a potential dilutive effect in the future. As of December 31, 2016 and 2015, the exercise prices of stock options vested of the plans in effect are below the average quotation for the year, and, therefore, the potential effect of these shares are not considered in the calculation of diluted earnings or loss.

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26. ACTUARIAL LIABILITIES - COMPLEMENTARY HEALTH CARE

Refer to a provision for medical assistance plan, which reflects the cost of health care to employees and statutory officers who will be entitled to the benefit in the post-retirement period, as prescribed by Law 9656/98 and technical pronouncement CPC 33, determined based on an actuarial study.

Actuarial calculations, carried out by independent actuary Ernst & Young Serviços Atuariais S/S, had the following basic assumptions for the year ended December 31, 2016 and 2015:

Assumptions 12.31.2016 12.31.2015

Economic assumptions: Discount rate 6.00% p.a. 7.00% p.a. Economic Inflation 5.60% p.a. 7.70% p.a. Health Care inflation (HCCTR) 3.00% p.a. 3.00% p.a. Aging factor 3.50% p.a. 3.50% p.a. Evolution of Medical Cost Economic Inflation + Medical

Inflation + Age Factor Economic Inflation + Medical

Inflation + Age Factor Evolution of the contribution Economic Inflation + Medical

Inflation Economic Inflation + Medical

Inflation Biometric assumptions

Mortality Table AT-2000, segregated by gender AT-2000, segregated by gender Turnover 16.3% (Santos Brasil Logística

S.A.) and 7.5% (other companies)

16.3% (Santos Brasil Logística S.A.) and 7.5% (other

companies) Age for retirement 65 years 65 years Hypotheses for Retirement 100% at 1st eligibility 100% at 1st eligibility Stay in Retirement 40% 40%

Other assumptions

Family Composition - For members in activity - 90%

married with 4-year younger spouses - For assisted members (retirees and terminated employees) real breakdown informed in master file is adopted

- For members in activity - 90% married with 4-year younger spouses - For assisted members (retirees and terminated employees) real breakdown informed in master file is adopted

Pursuant to the independent actuary’s reports prepared which contain the sums of the projected expenses, the Company and its subsidiaries recorded proportional provisions for the years ended December 31, 2016 and 2015:

Parent company

12.31.2016 12.31.2015 Present value of the actuarial obligations 2,080 2,391 Calculated actuarial losses 15,048 9,363 Total net actuarial liability to be provisioned 17,128 11,754

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Consolidated

12.31.2016 12.31.2015 Present value of the actuarial obligations 2,986 3,140 Calculated actuarial losses 18,020 11,178 Total net actuarial liability to be provisioned 21,006 14,318


12.31.2016 12.31.2015 12.31.2016 12.31.2015

Opening balance 11,754 13,790 14,318 16,067 Service cost 865 1,384 1,452 1,944 Interest on obligation 1,752 1,491 2,138 1,740 Benefits paid in the year (-) (537) (484) (604) (544) Actuarial (gain)/loss on defined benefit

obligations 3,294 (4,427) 3,702 (4,889) Closing balance 17,128 11,754 21,006 14,318

Actuarial (gain)/loss on defined benefit obligations 3,294

(4,427) 3,702 (4,889)

Deferred income and social contribution taxes on (gain)/loss (1,121) 1,505

(1,259) 1,661

Equity in the (gain)/loss 270 (306) - - Effect in shareholders’ equity 2,443 (3,228) 2,443 (3,228) Sensitivity analysis of actuarial liability


Effects 12.31.2016 12.31.2015 12.31.2016 12.31.2015

Discount rate -0.5% on nominal rate 18,659 12,696 22,887 15,502 Discount rate +0.5% on nominal rate 15,787 10,918 19,359 13,269 Mortality table -10% 17,765 12,209 21,796 14,873 Mortality table +10% 16,356 11,350 20,097 13,824 Medical costs + 1.0% on growth effective rate 20,489 13,826 25,137 16,926 Medical costs - 1.0% on growth effective rate 14,521 10,104 17,807 12,251

27. FINANCIAL INSTRUMENTS

These instruments are managed through operating strategies and internal controls, aimed at assuring liquidity, profitability and security. The contracting of financial instruments with the objective of offering protection is performed by means of a periodic analysis of the risk exposure that Management intends to cover (exchange rate, interest rate, etc., which is approved by the Board of Directors. The control consists of the continuous monitoring of the agreed conditions versus the conditions prevailing in the market. The Company and its subsidiaries do not invest in derivatives or any other risk assets on a speculative basis. The results obtained from such operations are consistent with the policies defined by Company's management.

The estimated realization values of financial assets and liabilities of the Company and its subsidiaries were determined through information available in the market and appropriate

89

valuation methodologies. Judgments were required for interpreting the market data, to arrive at the best estimates of the realizable values. Consequently, the following estimates do not necessary represent the amounts that could be realized on the current exchange market.

Derivatives are initially recognized at their fair value, and respective transaction costs are recognized in the result when incurred.

a) Classification of financial instruments


12.31.2016 12.31.2015 12.31.2016 12.31.2015

Assets: Loans and receivables:

Accounts receivable 53,236 69,799 85,999 93,142 Dividends receivable 1,758 4,439 - - Court-ordered debt payments receivable - - 5,136 4,783 Other receivables 5,976 5,064 5,976 5,064

60,970 79,302 97,111 102,989 Fair value through profit or loss (*):

Cash and cash equivalents 113,406 189,258 192,557 226,115 Derivative financial instruments 34 4,540 37 5,525

113,440 193,798 192,594 231,640 Liabilities:

Other financial liabilities: Measured at amortized cost:

Loans and financing 70,471 123,934 87,351 155,709 Debentures 142,483 183,839 142,483 183,839 Suppliers 69,035 56,036 88,535 74,906 Loan payable - 70,427 - - Dividends and interest on own

capital payable 113 3,826 113 3,826 Court-ordered debt payments payable (**) - - 4,109 3,826

282,102 438,062 322,591 422,106 Fair value through profit or loss:

Derivative financial instruments 1,997 - 2,859 - 1,997 - 2,859 -

(*) The amounts classified as fair value through profit or loss have the level 2 hierarchy.

(**) The court-ordered debts are classified in the statement of financial position in line item “Other payables”, under non-current liabilities.

b) Fair value

For financial assets without an active market or public quotation, Management established the fair value through valuation techniques. These techniques include the use of recent operations contracted with third parties, and reference to other instruments that are substantially similar, the analysis of discounted cash flows and the swap pricing model that makes the greatest possible use of information generated by the market and has the minimum amount of information possible generated by the management of the Company itself.

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b.1) Derivative financial instruments

The Company holds derivative financial instruments to hedge risks relating to interest rate and foreign exchange.

All derivative financial instruments held at December 31, 2016 were concluded in the market counter with counterparties of large financial institutions.

Derivative financial instruments are presented in the balance sheet at fair value in account asset or liability. Derivative financial instruments are classified as "fair value through profit or loss." The periodic variation of the quarterly fair value of derivatives is recognized as financial income or expense in the period in which they occur.

The fair value of derivatives is obtained by the model of future cash flows in accordance with the contractual rates, discounted to present value using market rates. We used information and forecasts for the dollar, LIBOR and CDI, disclosed by BM&FBOVESPA.

Transactions with existing derivative financial instruments or that produced financial effects for the year ended December 31, 2016 are as follows: Column “Receipts/Payments" shows the amounts received/paid for settlements made during the year ended December 31, 2016, and column “Income/Expense" shows the effect recognized in financial income (loss) associated to settlements and fair value variation of derivatives in this year:

Parent company

Nominal value

Receipt

(payments) Income Fair value Long

position Short

position Identification Maturity Purpose (expense) Dec 2016 Dec 2015

Safra 2016 - 1st Sem (*) Foreign exchange rate swap + Coupon - CDI

12,819 Jun/2016 Associated with

exchange variation

2,206 (1,064) - 3,403

Foreign exchange

+ exchange coupon

100% CDI

Itaú 2016 - 2nd Sem (*) Foreign exchange rate swap + Coupon - CDI 8,950 Dec./2016

Associated with exchange variation

(1,366) (2,469) - 1,137

Foreign exchange

+ exchange coupon

100% CDI

BTG 2017 - 1st Sem (*) Foreign exchange rate

swap + Coupon - CDI 7,526 Jun./2017 Associated with

exchange variation

- (1,586) (1,568) -

Foreign exchange

+ exchange coupon

100% CDI

Safra 2017 - 2nd Sem (*) Foreign exchange rate swap + Coupon - CDI 6,662 Dec./2017


- (522) (429) -

Foreign exchange

+ exchange coupon

100% CDI

Itaú 2018 - 1st Sem (*) Foreign exchange rate swap + Coupon - CDI 1,261 Jun./2018


- (7) 34 -

Foreign exchange

+ exchange coupon

100% CDI

_____ _______ _______ ______ Total 840 (5,648) (1,963) 4,540

(*) The Company uses financial instruments to protect the oscillations of short-term liabilities denominated in foreign currency loans and financing relating to such operations are not used for speculative purposes.

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Consolidated

Nominal value

Receipt

(payments)

Income Fair value Long

position Short

position Identification Maturity Purpose (expense

) Dec 2016 Dec 2015 Safra 2016 - 1st Sem (*)

Foreign exchange rate swap + Coupon - CDI 14,756 Jun./2016


2,577 (1,185) - 3,921

Foreign exchange

+ exchange coupon

100% CDI

Itaú 2016 - 2nd Sem (*) Foreign exchange rate swap + Coupon - CDI 12,627 Dec./2016


(1,902) (3,458) - 1,604

Foreign exchange

+ exchange coupon

100% CDI

BTG 2017 - 1st Sem (*) Foreign exchange rate swap + Coupon - CDI 10,717 Jun./2017


- (2,259) (2,239) -

Foreign exchange

+ exchange coupon

100% CDI

Safra 2017 - 2nd Sem (*) Foreign exchange rate swap + Coupon - CDI 9,513 Dec./2017


- (745) (620) -

Foreign exchange

+ exchange coupon

100% CDI

Itaú 2018 - 1st Sem (*) Foreign exchange rate swap + Coupon - CDI 3,772 Jun./2018


- (20) 37 -

Foreign exchange

+ exchange coupon

100% CDI

____ _______ _______ ______

Total

675 (7,667) (2,822) 5,525

(*) The Company uses financial instruments to protect the oscillations of short-term liabilities denominated in foreign currency loans and

financing relating to such operations are not used for speculative purposes.

b.2) Other financial instruments

Taking as a base the interest rate projections of BM&FBOVESPA, a pricing model was prepared applied individually to each transaction.

Loans, financing and debentures - We considered the future stream of payments based on contractual conditions and forecasts for currencies and interest rates of the BM&FBOVESPA, discounted to present value of fees obtained through the yield curve market, based on information obtained from the same sources mentioned above, the BM&FBOVESPA were not considered to own credit risk, as well as possible banking spread because they are considered irrelevant.

Accordingly, the market value of a security corresponds to its maturity value brought to present value by the discount factor (referring to the maturity date of the installment) obtained from the market interest curve in Reais.

Interest earning bank deposits - Investments in investment funds and are shown at their fair value, owed to their classification in the or fair value category based on results.

As of December 31, 2016, the market value from "non derivative" financial instruments, presented for statement purposes only, was:

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Parent company Consolidated 12.31.2016 12.31.2016

Book value

Fair value

Book value

Fair value

Assets: Cash and cash equivalents 113,406 113,406 192,557 192,557 Accounts receivable 53,236 53,236 85,999 85,999 Dividends receivable 1,758 1,758 - - Court-ordered debt payments receivable - - 5,136 5,136

Other receivables 5,976 5,976 5,976 5,976 Total 174,376 174,376 289,668 289,668 Liabilities:

Loans and financing 70,471 70,193 87,351 86,734 Debentures 142,483 151,513 142,483 151,513 Suppliers 69,035 69,035 88,535 88,535 Dividends and interest on own capital payable 113 113 113 113

Court-ordered debt payments payable - - 4,109 4,109

Total 282,102 290,854 322,591 331,004

c) Market risk

The Company’s market risk management policies include, among others, development studies and economic-financial analysis evaluating the impact of different scenarios in the market positions, and reports that monitor the risks to which the Company is subject.

The Company’s income is liable to variations due to effects of foreign exchange rate volatility and interest rate on financial instruments.

The Company maintains constant mapping of risks, threats and opportunities, with a basis on the projection of the scenarios and their impacts on the results. In addition, any other risk factors and the possibility of conducting hedge transactions for said risks is also analyzed.

c.1) Foreign exchange risk

Transactions liked to foreign currencies, US dollar and Euro, which closed the year ended December 31, 2016 depreciated in relation to Brazilian Real by 16.5% and 19.1%, respectively, in relation to December 31, 2015.

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Foreign exchange exposure

Parent company Transaction

currency Value (in R$) Loans and financing 14,320 US$ (-) Hedge instruments (14,379) US$ Net exposure (59)

Consolidated Transaction currency Value (in R$)

Loans and financing 4,759 € Loans and financing 19,936 US$ (-) Hedge instruments (22,471) US$ Net exposure 2,224 The Company's policy is to manage its exposures considering the flows expected for the next year, on average. Thus, the net exposure shown above relates to higher depreciation, the period stipulated in the policy.

Sensitivity analysis of foreign currency variations

The Company and its subsidiaries have loans financing denominated in foreign currency and Management considers them as the only financial instruments that may offer relevant coverage risks.

In the chart below we considered three risk scenarios for the currency indexes of these financial liabilities, whereas the probable scenario is that adopted by the Company and its subsidiaries. In addition to this scenario, Securities Commission (CVM), through Instruction nº 475/08, determined the presentation of another two scenarios with increase of 25% and 50% of the risk variables considered, for which December 31, 2016 was appointed the base date. Scenarios II and III were estimated as an additional devaluation of 25% and 50%, for rates in the probable scenario. While scenarios IV and V have estimated additional devaluation of 25% and 50%, for the probable scenario rates.

Parent company

Operation Risk Probable scenario I

Scenario II (+) 25%

Scenario III (+) 50%

Scenario IV (-) 25%

Scenario V (-) 50%

Equity balance Financial liabilities:

Loans and financing US$/€ 14,320 17,953 21,587 10,686 7,052 Swap - (gain) / loss US$/CDI 2,115 (1,504) (5,195) 5,769 9,424

Net balance 16,435 16,449 16,392 16,455 16,476

Rates: US$ 3.26 4.07 4.89 2.44 1.63 € 3.44 4.30 5.16 2.58 1.72

94

Consolidated


Scenario II (+) 25%


Scenario IV (-) 25%

Scenario V (-) 50%

Equity balance Financial liabilities:

Loans and financing US$/€ 24,695 30,939 37,182 18,452 12,209 Swap - (gain) / loss US$/CDI 3,024 (2,679) (8,383) 8,727 14,431

Net balance 27,719 28,260 28,799 27,179 26,640 Rates:

US$ 3.26 4.07 4.89 2.44 1.63 € 3.44 4.30 5.16 2.58 1.72

c.2) Interest rate risk

Balances exposed to interest rate volatility are as follows:


12.31.2016 12.31.2015 12.31.2016 12.31.2015

Assets: Cash and cash equivalents 113,406 189,258 192,557 226,115 Derivative financial instruments 34 4,540 37 5,525

Total 113,440 193,798 192,594 231,640 Liabilities:

Loans and financing 70,471 123,934 87,351 155,709 Debentures 142,483 183,839 142,483 183,839 Loan payable - 70,427 - - Derivative financial instruments 1,997 - 2,859 -

Total 214,951 378,200 232,693 339,548 Sensitivity analysis of variations in the interest rates

The Company manages this risk through the balance between fixed and floating rates. Such contracting is exposed to interest rate fluctuations due to the debt transactions subject to the CDI rate. The balance of cash and cash equivalents, indexed at CDI (Interbank deposit certificate) partially neutralizes the interest rate risk.

For the sensitivity analysis of interest rate variations, Management adopted, for the probable scenario, for the next year, the same rates used on the date of the quarterly information. Scenarios II and III were estimated with additional valuation of rates of 25% and 50% respectively for the next 12 months, while scenarios IV and V have estimated additional devaluation of 25% and 50%, respectively for the next 12 months, for the probable scenario.

95

Parent company


Scenario II (+) 25%


Scenario IV (-) 25%

Scenario V (-) 50%

Equity balances

Financial assets: Interest earnings bank deposits CDI 90,809 93,597 96,385 88,021 85,233

Financial liabilities:

Loans and financing CDI 55,589 56,999 58,408 54,180 52,770 Debentures 142,483 144,206 145,898 140,728 138,940 Net debt 107,263 107,608 107,291 106,887 106,477

Rates:

CDI 13.63 17.04 20.45 10.22 6.82

Consolidated


Scenario II (+) 25%


Scenario IV (-) 25%

Scenario V (-) 50%

Equity balances

Financial assets: Interest earnings bank deposits CDI 164,717 169,606 174,495 159,829 154,940

Financial liabilities:

Loans and financing CDI 56,161 57,572 58,982 54,750 53,338 Debentures 142,483 144,206 145,898 140,728 138,940 Net debt 33,927 32,172 30,385 35,649 37,338 Rates:

CDI 13.63 17.04 20.45 10.22 6.82

d) Credit risk

The credit policies determined by Management aim to minimize any problems arising from defaults by its clients. This objective is achieved by management through the careful selection of its client portfolio that considers the ability to pay (credit analysis) and diversification (spreading risk). The allowance for doubtful accounts as at December 31, 2016, was R$15,795, representing 15.52% of the outstanding balance of accounts receivable. As of December 31, 2015, this allowance was R$15,163, equivalent to 14.00%.

Management also seeks to minimize the credit risks tied to financial institutions, by diversifying its operations with top line institutions.

96


12.31.2016 12.31.2015 12.31.2016 12.31.2015

Assets: Cash and cash equivalents 113,406 189,258 192,557 226,115 Accounts receivable 53,236 69,799 85,999 93,142 Dividends receivable 1,758 4,439 - - Court-ordered debt payments receivable -

- 5,136

4,783

Other receivables 5,976 5,064 5,976 5,064 Total 174,376 268,560 289,668 329,104

e) Liquidity risk

The liquidity risk represents the possibility of mismatches between the maturity dates of assets and liabilities, which could result in the inability to comply with obligations on the dates established.

The Company's general policy calls for maintaining adequate liquidity levels to ensure its ability to meet present and future obligations and make use of opportunities.

Management considers that the Company has no liquidity risk, considering their ability to generate cash and its capital structure with low participation of third party capital.

Additionally, they mechanisms are periodically analyzed aiming to raise funds to reverse positions that could affect the liquidity of the Company.

Parent company

Book balance

Payment flow (in years)

Liabilities 12.31.2016 Expected

flow Up to 1 1–3

3–5

Loans and financing 70,471 74,710 72,440 2,148 122 Debentures 142,483 160,441 95,560 64,881 - Suppliers 69,035 69,035 54,014 15,021 - Dividends and interest on own

capital payable 113

113 113 - - Total 282,102 304,299 222,127 82,050 122

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Consolidated

Book

balance

Payment flow (in years)

Liabilities 12.31.2016 Expected

flow Up to 1 1–3

3–5

Loans and financing 87,351 92,554 82,593 9,839 122 Debentures 142,483 160,441 95,560 64,881 - Suppliers 88,535 88,535 73,514 15,021 - Dividends and interest on own

capital payable 113

113 113 - - Court-ordered debt payments

payable 4,109 4,109 - - 4,109 Total 322,591 345,752 251,780 89,741 4,231

f) Capital management

The policy of Management is to maintain a solid capital base to maintain the confidence of investors, creditors and market and the future development of the business. The Management monitors the return on capital invested, considering the results of the economic activities of operating segments, as well as the level of dividends for the holders of common and preferred shares.

Management strives to maintain a balance between the highest possible returns with more adequate levels of loans and the advantages and the assurance afforded by a healthy capital position. The objective is to achieve a return compatible with its capital cost reviewed annually through the WACC -Weighted Average Cost of Capital concept.

The debt in relation to the capital in the years ended December 31, 2016 and 2015 is as follows:

Parent company 12.31.2016 12.31.2015

Total current and non-current liabilities 428,600 580,307 (-) Cash and cash equivalents and other investments (113,406) (189,258) Net debt 315,194 391,049

Total shareholders' equity 1,389,132 1,407,218 Net debt ratio on shareholders’ equity 0.22690 0.27789

Consolidated

12.31.2016 12.31.2015

Total current and non-current liabilities 504,711 611,233 (-) Cash and cash equivalents and other investments (192,557) (226,115) Net debt 312,154 385,118 Total shareholders' equity 1,389,132 1,407,218 Net debt ratio on shareholders’ equity 0.22471 0.27367

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28. INSURANCE COVERAGE

As of December 31, 2016, the following insurance policies were valid:


Coverage Currency Maturity Branch - Tecon Imbituba Port Operator Insurance - SOP: March 2017

Civil liability 20,000 US$ Movable property and real estate 16,000 US$ Storage in canvas (vinilona) sheds 5,000 US$ Employer Civil Liability (RCE) 1,000 US$ Civil Liability – Moral damages 1,000 US$ Income Loss due to Blockage of Berth and Channel 600 US$ Electrical damages 250 US$

Vehicles fleet insurance (passenger vehicles): October 2017 Hull 100% FIPE table R$ Personal accidents of passengers - APPs 10 R$ Material damages to third parties 75 R$ Bodily injury to third-parties 100 R$ Moral damages 20 R$

Vehicles fleet insurance (trucks): October 2017 Material damages to third parties 500 R$ Bodily injury to third-parties 500 R$ Moral damages 100 R$

Branch - Tecon Santos SOP: March 2017

Civil liability 20,000 US$ Movable property and real estate 17,850 US$ RCE 1,000 US$ Civil Liability – Moral damages 1,000 US$ Transportation of goods 2,000 US$ Passenger Transportation in Vessels - RC and Pain

and Suffering 1,000 US$ Loss of income due to blockage of berth 4,000 US$ Electrical damages 250 US$


99


Coverage Currency Maturity Santos Brasil Logística SOP: March 2017

Civil liability 20,000 US$ Movable property and real estate 20,000 US$ RCE 1,000 US$ Civil Liability – Moral damages 1,000 US$ Transportation of goods 2,000 US$ Broad Civil Liability for CD - São Bernardo do

Campo 50,000 US$ Broad Civil Liability for CD Jaguaré 50,000 US$ Electrical damages 250 US$

Cargo Road Transportation - RCTR-C 10,000 R$ June 2017 Cargo Robbery and Deviation - RCF-DC 10,000 R$ June 2017 Vehicles fleet insurance (trucks): October 2017

Material damages to third parties 200 R$ Bodily injury to third-parties 700 R$ Moral damages 90 R$

Convicon SOP: March 2017

Civil liability 20,000 US$ Movable property and real estate 7,600 US$ RCE 1,000 US$ Civil Liability – Moral damages 1,000 US$ Income Loss due to Blockage of Berth and Channel 600 US$ Electrical damages 250 US$


Vehicles fleet insurance (trucks): October 2017 Material damages to third parties 500 R$ Bodily injury to third-parties 500 R$ Moral damages 100 R$

Vehicles Terminal SOP: March 2017

Civil liability 20,000 US$ Movable property and real estate 1,000 US$ RCE 1,000 US$ Civil Liability – Moral damages 1,000 US$

100


Coverage Currency Maturity

Income Loss due to Blockage of Berth and Channel 600 US$ Electrical damages 250 US$

Institutional

Civil liability - Management and Directors 40,000 R$ June 2017 Nominated Risks - Santos and São Paulo offices 5,513 R$ April 2017

29. CAPITAL COMMITMENT

As of December 31, 2016, there were requests (purchase orders) linked to the future acquisition of property, plant and equipment items in the amount of R$1,295 (R$1,073 as of December 31, 2015) which are not recorded in these financial statements.

30. OPERATING SEGMENTS

Information by operating segment is presented in the statements below that are part of this note, in compliance with CPC 22 - Segment Information.

The definition of operating segments and the structure of statements, follow the management model already used in monitoring the managers of business units, along with their managers and reporting to the Statutory Board; thus, are presented in Board of Directors’ meetings.

The accounting practices used in the segment information are the same used in the financial statements and consolidated, pursuant to note 4.

Operating segments

Container Port Terminals, representing the aggregation of results and capital employed business units: (a) Tecon Santos; (b) Tecon Imbituba, including the General Cargo Terminal; and (c) Tecon Vila do Conde, whose contexts are described in notes 1.a), 1.b) and 1.e). Their activities are a port operator to load and unload container ships and bonded in the primary zone including mainly the storage of cargoes handled in their docks.

The aggregation of container port terminals is performed by units to deal with similar economic characteristics, and also similar: (a) type of production proceedings; (b) type of category of its services’ clients; (c) methods used to provide services; and (d) nature of regulatory environment.

Logistics, with business units in Santos, Guarujá, São Bernardo do Campo, São Paulo and Imbituba, with operations described in note 1.c), includes also the activities of road, center distribution and transmission distribution, in synergy with the container port terminals.

Vehicle Terminal, with business unit at the Port of Santos and history described in note 1.d), comprises the activities of loading and unloading of vehicles on ships of the trade flow of export and import activities patio, especially customs warehousing.

101

Statements

Statement of Income to the EBITDA - Income before interest, taxes, depreciation and amortization EBITDA), representing the performance of operating units, portrayed by ledger accounts under the direct management of the administrators. In this statement, is also presented, the Earnings Before Interestand Taxes - EBIT.

Statement of Employed Capital, representing the financial accounts of the operating assets, net of liabilities related to the claims of the operation, under the direct management of the directors of the units.

In addition to the information of the operating segments are highlighted in its own column in the statements, the information of institutional activities that cannot be allocated to operating segments, i.e., related values: (a) central administration; (b) the financial management; and (c) to direct taxes on income.

The quoted statements for the years referred to in these financial statements are as follow:

Consolidated statement of income by operating segment – December 31, 2016

Accounts Port

Terminals Logistics Vehicles terminal Institutional Eliminations Consolidated

Gross operating income 744,398 184,882 42,927 - (15,532) 956,675 Deductions of the income (88,425) (29,153) (6,433) - 1,437 (122,574) Net operating income 655,973 155,729 36,494 - (14,095) 834,101 Cost of services rendered (543,113) (145,121) (35,172) - 14,095 (709,311) Variable/fixed costs (478,228) (130,553) (26,162) - 14,095 (620,848) Depreciation / amortization (64,885) (14,568) (9,010) - - (88,463) Gross income 112,860 10,608 1,322 - - 124,790 Operating expenses (51,732) (35,513) 1,023 (47,201) - (133,423) Sales expenses (38,482) (27,970) (692) - - (67,144) General and administrative expenses (24,552) (9,837) (1,339) (41,155) - (76,883) Depreciation / amortization (322) (58) - (7,179) - (7,559) Others 11,624 2,352 3,054 1,133 - 18,163 EBIT 61,128 (24,905) 2,345 (47,201) - (8,633) Depreciation / amortization 65,207 14,626 9,010 7,179 - 96,022 EBITDA 126,335 (10,279) 11,355 (40,022) - 87,389 Financial income (loss) - - - (13,646) - (13,646) Equity in net income of subsidiaries - - - (9,679) 9,679 - IRPJ/CSLL - - - 2,369 - 2,369 Net income N/A N/A N/A N/A N/A (19,910)

102

Consolidated statement of income by operating segment – December 31, 2015

Accounts Port


Gross operating income 824,275 243,970 58,449 - (17,374) 1,109,320 Deductions of the income (101,911) (36,945) (7,905) - 1,761 (145,000) Net operating income 722,364 207,025 50,544 - (15,613) 964,320 Cost of services rendered (524,610) (159,921) (35,489) - 15,613 (704,407) Variable/fixed costs (430,922) (145,391) (26,487) - 15,613 (587,187) Depreciation / amortization (93,688) (14,530) (9,002) - - (117,220) Gross income 197,754 47,104 15,055 - - 259,913 Operating expenses (134,168) (40,184) (1,311) (69,226) - (244,889) Sales expenses (83,812) (30,234) (1,348) - - (115,394) General and administrative expenses (42,284) (9,708) (788) (58,705) - (111,485) Depreciation / amortization (406) (75) - (13,886) - (14,367) Others (7,666) (167) 825 3,365 - (3,643) EBIT 63,586 6,920 13,744 (69,226) - 15,024 Depreciation / amortization 94,094 14,605 9,002 13,886 - 131,587 EBITDA 157,680 21,525 22,746 (55,340) - 146,611 Financial income (loss) - - - (29,243) - (29,243) Equity in net income of subsidiaries - - - 9,736 (9,736) - IRPJ/CSLL - - - (3,910) - (3,910) Net income N/A N/A N/A N/A N/A (18,129)

On December 31, 2016, the income from a client of the Port Terminal segment represented R$141,058 (R$170,295 on December 31, 2015), representing 18.9% of total consolidated gross income.

Consolidated statement of capital invested per operating segment - December 31, 2016

Accounts Port


Invested capital Current assets 90,177 22,157 8,071 201,583 (3,525) 318,463

Cash and cash equivalents - - - 192,557 - 192,557 Others 90,177 22,157 8,071 9,026 (3,525) 125,906

Non-current assets 1,090,516 169,182 165,875 550,164 (400,357) 1,575,380 Others 238,398 6,475 53 22,673 - 267,599 Investment - - - 400,357 (400,357) - Property, plant and equipment 760,391 122,793 4,904 31,528 - 919,616 Intangible assets 91,727 39,914 160,918 95,606 - 388,165

Current liabilities (92,208) (21,893) (4,292) (5,994) 3,525 (120,862) Suppliers (58,519) (14,095) (3,405) (141) 2,646 (73,514) Others (33,689) (7,798) (887) (5,853) 879 (47,348)

Non-current liabilities (90,083) (3,301) (81) (39,431) - (132,896) Suppliers (15,021) - - - - (15,021) Provision to tax, labor, civil risks (37,989) (3,301) (81) - - (41,371) Others (37,073) - - (39,431) - (76,504)

Total 998,402 166,145 169,573 706,322 (400,357) 1,640,085

103

Accounts Port


Capital sources Current liabilities - - - - - 163,527

Loans and financing - - - - - 163,414 Dividends/Interest on own

capital payable - - - - - 113 Non-current liabilities - - - - - 87,426

Loans and financing - - - - - 66,420 Actuarial liability - - - - - 21,006

Shareholders' equity - - - - - 1,389,132 Shareholders' equity - - - - - 1,391,364 Actuarial liability - - - - - (2,232)

Total N/A N/A N/A N/A N/A 1,640,085

Consolidated statement of capital invested per operating segment - December 31, 2015

Accounts Port


Invested capital Current assets 101,807 16,840 7,976 251,261 (3,847) 374,037

Cash and cash equivalents - - - 226,115 - 226,115 Others 101,807 16,840 7,976 25,146 (3,847) 147,922

Non-current assets 1,131,501 182,447 174,660 580,813 (425,007) 1,644,414 Others 225,384 6,114 51 21,725 - 253,274 Investment - - - 425,007 (425,007) - Property, plant and equipment 808,914 136,068 4,751 31,528 - 981,261 Intangible assets 97,203 40,265 169,858 102,553 - 409,879

Current liabilities (79,277) (25,583) (4,135) (4,058) 3,850 (109,203) Suppliers (42,944) (16,870) (2,996) (42) 2,967 (59,885) Others (36,333) (8,713) (1,139) (4,016) 883 (49,318)

Non-current liabilities (89,546) (2,685) (73) (52,034) - (144,338) Suppliers (15,021) - - - - (15,021) Provision to tax, labor, civil risks (43,600) (2,685) (73) - - (46,358) Others (30,925) - - (52,034) - (82,959)

Total 1,064,485 171,019 178,428 775,982 (425,004) 1,764,910

Capital sources Current liabilities - - - - - 144,728

Loans and financing - - - - - 140,902 Dividends/Interest on own

capital payable - - - - - 3,826 Non-current liabilities - - - - - 212,964

Loans and financing - - - - - 198,646 Actuarial liability - - - - - 14,318

Shareholders' equity - - - - - 1,407,218 Shareholders' equity - - - - - 1,407,007 Actuarial liability - - - - - 211

Total N/A N/A N/A N/A N/A 1,764,910

104

Board of Directors

Verônica Valente Dantas (President) Maria Amalia Delfim de Melo Coutrim (Vice-president)

Daniel Pedreira Dorea Eduardo de Britto Pereira de Azevedo

Ricardo Schenker Wajnberg Julio André Kogut (Independent)

Rodrigo Leonardo Anunciato (Independent)

Alternate members

Ana Carolina Silva Moreira Lima Ana Cláudia Coutinho de Brito

Bernardo Velloso de Souza Guterres Victor Bastos Almeida

Ricardo Canguçu Fontenelle Castorri Pedro Henrique Nogueira Damasceno

Roberto Knoepfelmacher

Executive board

Antonio Carlos Duarte Sepúlveda - Chief Executive Officer and Chief Operating Officer Daniel Pedreira Dorea - Economic-Financial Director of Finances and Relations with Investors

Marcos de Magalhães Tourinho - Commercial director

Tax Council

Gilberto Braga (President) Leonardo Guimarães Pinto

Antonio Carlos Pinto de Azeredo

Alternate members

Norberto Aguiar Tomaz Heldo Jorge dos Santos Pereira Junior

Roberto Francisco Silva

Milton Mazzo Júnior - CRC nº 1 SP 235131/O-5 Controllership Manager

105

The company is subject to arbitration in the court of arbitration of the market, pursuant to an arbitration clause contained in its bylaws.

In compliance with the Regulation on Differentiated Corporate Governance Practices (Novo Mercado) we present the following information (information not reviewed by the Independent Auditors):

In compliance with the Regulation on Differentiated Corporate Governance Practices (“New Market”), we present the following information (not reviewed by Independent Auditors):

1) Statement of shareholding position of each investor or shareholder that holds more than 5% of shares of each species and class, directly or indirectly, up to individual level on December 31, 2016.

BREAKDOWN OF CAPITAL OF LEGAL ENTITIES (COMPANY’S SHAREHOLDERS), UP TO THE LEVEL OF INDIVIDUAL.

Corporate name: SANTOS BRASIL PARTICIPAÇÕES S.A. Position as of 12.31.2016

(In unit - Shares)

Shareholder Common shares Total shares

Quantity % Quantity % INTERNATIONAL MARKETS INVESTMENTS C.V. 176,955,181 26.57 176,955,181 26.57

PW237 PARTICIPAÇÕES S.A. 149,382,595 22.43 149,382,595 22.43

MULTI STS PARTICIPAÇÕES S.A. 67,696,523 10.16 67,696,523 10.16

BRASIL TERMINAIS S.A. 54,384,869 8.16 54,384,869 8.16

DYNAMO* 53,552,875 8.04 53,552,875 8.04

Treasury shares 6,138,745 0.92 6,138,745 0.92

Others 157,975,766 23.72 157,975,766 23.72 Total 666,086,554 100.00 666,086,554 100.00

* Dynamo Administração de Recursos Ltda. and Dynamo Internacional Gestão de Recursos Ltda. (collectively, “Dynamo”) are not direct or indirect shareholders of the Company; they are investment fund managers and non-resident investors in Brazil that have similar interests and together own an ownership interest of 8.04% of the units issued by the Company traded on BM&FBOVESPA, and the funds managed by Dynamo now currently hold a total of 53,552,875 shares. Dynamo informed that with the acquisitions it does not intend to acquire the Company’s control; this investment is not intended to change the management or shareholding control or to regulate the operation of SBPar.


Corporate name: INTERNATIONAL MARKETS INVESTMENTS C.V. Position as of

12.31.2016 (In unit - Shares/quotas)

Shareholder / Quotaholder Common shares /

Quotas Preferred shares /

Quotas Total

Quantity % Quantity % Quantity % Opportunity Fund 99,999 99.999 - - 99,999 99.999 Vivremol S.A. 1 0.001 - - 1 0.01 Total 100,000 100.00 - - 100,000 100.00 The Opportunity Fund is a foreign investment fund headquartered in the Cayman Islands.

106


Corporate name: PW237 Participações S.A. Position as of




Quotas Total

Quantity % Quantity % Quantity % Dório Ferman 14,999 99.99 - - 14,999 99.99 Itamar Benigno Filho 1 0.01 - - 1 0.01 Total 15,000 100 - - 15,000 100


Corporate name: MULTI STS Participações S.A. Position as of




Quotas Total

Quantity % Quantity % Quantity % P&EK Participações S.A. 21,664,356 88.41 21,744,059 94.03 43,408,415 91.14 Richard Klien 1,876,132 7.66 558,843 2.42 2,434,975 5.11 Thomas Klien 380,494 1.55 324,385 1.40 704,879 1.48 Rosemarie Klien Vega 380,494 1.55 324,384 1.40 704,878 1.48 Andreas Klien 202,422 0.83 172,572 0.75 374,994 0.79 Renata Costa Klien 1,315 0.01 392 0.00 1,707 0.00 Total 24,505,213 100 23,124,635 100 47,629,848 100


Corporate name: P&EK Participações S.A. Position as of




Quotas Total

Quantity % Quantity % Quantity % Edith Franziska Katharina Klien 38,960,022 79.89 38,960,022 79.89 77,920,044 79.89 Paul Richard Klien 9,809,419 20.11 9,809,418 20.11 19,618,837 20.11 Total 48,769,441 100 48,769,440 100 97,538,881 100

BREAKDOWN OF CAPITAL OF LEGAL ENTITIES (COMPANY’S SHAREHOLDERS), UP TO THE LEVEL OF TO INDIVIDUAL.

Corporate name: Brasil Terminais S.A. Position as of

12.31.2016 (In unit - shares/quotas)


Quotas

Preferred shares / Quotas

Total

Quantity % Quantity % Quantity % Richard Klien 60,663,495 99.93 - - 60,663,495 99.93 Renata Costa Klien 42,529 0.07 - - 42,529 0.07 Total 60,706,024 100 - - 60,706,024 100

2) Securities held by Shareholders, Directors, members of the Board of Directors and members of the Tax Council of the Company, on December 31, 2016:

107

CONSOLIDATED SHAREHOLDING POSITION OF THE CONTROLLING SHAREHOLDERS AND DIRECTORS AND SHARES OUTSTANDING (Position as of 12.31.2016)

Shareholder Number of common

shares (In Units)

% Total number of

shares (In Units)

%

Controlling shareholders - - - - Directors

Board of Directors 305,941 0.05 305,941 0.05 Executive board 800,825 0.12 800,825 0.12 Tax Council - - - - Treasury shares 6,138,745 0.92 6,138,745 0.92 Other Shareholders 658,841,043 98.91 658,841,043 98.91 Total 666,086,554 100 666,086,554 100 Outstanding shares 658,841,043 98.91 658,841,043 98.91 3) We inform that, on December 31, 2016, the number of outstanding shares was 658,841,043, i.e., 98.91% of the total capital, which is comprised by all common shares.

Santos Brasil Participações S.A.

Attachment to the financial statements

As provided for in paragraph 1 of article 25 of CVM Instruction 480/09

Contents

Supervisory board’s report

Officers’ statement

TAX COUNCIL' OPINION

THE TAX COUNCIL of SANTOS BRASIL PARTICIPAÇÕES S.A., in exercise of its legal and statutory duties in accordance with the provisions of Article 163 of Law No. 6404/1976 examined the annual management report, financial statements and management proposal for the allocation of income, all for the fiscal year ended December 31, 2016. Based on reviewed documents, on performed analyses and explanations presented by the Company's representative, and also considering the Independent auditors' report on Individual and Consolidated Financial Statements, KPMG Auditores Independentes, dated February 8, 2017, drawing the attention to the “Emphasis” paragraph of the Auditors, that deals with the Inquiry to the Securities Commission (CVM) on different opinion between the Management and former independent auditors due to the extension of the lease term of Tecon Santos, the TAX COUNCIL, has the unanimous opinion that said documents are ready to be presented to the Annual Shareholders' Meeting for a release, indicating an approval.

São Paulo, February 8, 2017

Gilberto Braga President of the Tax Council

Leonardo Guimarães Pinto

Tax Council member

Antonio Carlos Pinto de Azeredo

Tax Council member

STATEMENT

In compliance with the provisions of Article 25, sub-item VI, of CVM

Instruction no. 480 of December 7, 2009, the Chief Executive Officer and

Operations Director and the Economic-Financial Director of Finances and

Relations with Investors of SANTOS BRASIL PARTICIPAÇÕES S.A.,

publicly-held corporation enrolled in the CNPJ (Corporate Taxpayer’s

Registry) under No. 02.762.121/0001-04, headquartered at Rua Dr. Eduardo

de Souza Aranha, no 387, 2o andar, parte, São Paulo, SP hereby state that

they reviewed, discussed, and agree with them presented financial

statements.

São Paulo, February 08, 2017. Antonio Carlos Duarte Sepúlveda Daniel Pedreira Dorea

Chief Executive Officer and Economic-Financial Director of Operations Director Finances and Relations with Investors

STATEMENT

In compliance with the provisions of Article 25, sub-item V, of CVM Instruction

no. 480 of December 7, 2009, the Chief Executive Officer and Operations

Director and the Economic-Financial Director of Finances and Relations with

Investors of SANTOS BRASIL PARTICIPAÇÕES S.A., publicly-held

corporation enrolled in the CNPJ (Corporate Taxpayer’s Registry) under No.

02.762.121/0001-04, headquartered at Rua Dr. Eduardo de Souza Aranha, no

387, 2o andar, parte, São Paulo, SP hereby state that they reviewed,

discussed, and agree with the opinions expressed in independent auditors'

report.

São Paulo, February 08, 2017. Antonio Carlos Duarte Sepúlveda Daniel Pedreira Dorea

Chief Executive Officer and Economic-Financial Director of Operations Director Finances and Relations with Investors

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