NOTICE TO THE MARKET: MANAGEMENT COMPENSATION

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October 31st, 2016 – The ASSOCIATION OF CAPITAL MARKET INVESTORS – Amec – hereby informs the capital market’s participants that its Technical Commission and Board of Directors approved the publishing of this notice in the above-mentioned date.

Amec is concerned about the recurring abuses related to the contracting and compensation of senior executives in listed companies. Some recent examples include:

  • Resolution to accelerate debt maturities in the event the executive is dismissed;
  • Indemnity agreements with virtually no limit, which means the executive is practically non-imputable in the civil sphere;
  • Non-equitable contract conditions that ensure high compensations even when the executive leaves the company – further aggravated by high turnover at the top;
  • High salaries incompatible with the function or professional experience, as decided by the Brazilian Securities and Exchange Commission – CVM – on July, 2015 in the RJ2011/5211 (Electro Aço Altona) Administrative Sanctioning Procedure (PAS);
  • Lack of transparency in payments made through affiliated companies, contrary to what is expected from a listed company;
  • Repricing of options without the shareholders’ approval;
  • Non-compliance with the rules on the disclosure of compensation data as set forth by CVM.

Based on the aforementioned, Amec makes the following suggestions:

  1. Investors are advised to carefully analyze compensation proposals submitted to the General Shareholders’ Meetings that may present problems, including but not limited to the above-mentioned examples. We also suggest that investors consider the possibility of voting against the election of board candidates that approve compensation conditions that can negatively affect the Company;
  1. CVM must continue the great work started with the RJ 2011/5211 PAS, establishing limits on abusive situations;

We invite all market’s participants to take part in the Workshop that will be addressing the Management Compensation topic, to be held in São Paulo, on November 17th, 2016. Further details about the workshop will be disclosed in the near future.