Profile: Odebrecht Family Brazil 19 Oct 2016 | Odebrecht Engenharia E Construção, Odebrecht Óleo E Gás, Braskem

PROFILE: ODEBRECHT FAMILY BRAZIL 19 OCT 2016 | ODEBRECHT ENGENHARIA E CONSTRUÇÃO, ODEBRECHT ÓLEO E GÁS, BRASKEM

 The Odebrecht family controls Latin America’s largest con- Shareholder-related risk struction company, Odebrecht Engenharia & Construção

(OEC), its largest petrochemical producer, Braskem and Succession While the family is relatively large, offshore driller Odebrecht Óleo e Gás (OOG). Risk the business has been led by one person in each generation. With Marcelo Ode- Risk associated Moderate  Marcelo Odebrecht was sentenced in March to 19 years in with generational brecht jailed, the family’s management prison for bribery, money laundering, and organized crime transfer of wealth resources are uncertain due to a lack and management of other leaders in his generation. in connection to his role in a bid-rigging cartel for contracts with Petrobras. The group’s close ties with politicians Political  OOG is in talks with holders of its bonds due 2021 and Risk and executives of state-owned 2022, and missed a March coupon on its perpetual Political exposure High companies, most notably Petrobras, due to government have contributed to its legal and bond; ethanol producer Odebrecht Agroindustrial relationships concluded a BRL 11bn restructuring in July. financial problems.

 Odebrecht’s entire 38% controlling stake in Braskem Legal and Odebrecht companies have been hob- has been pledged as collateral for restructured bank Regulatory Risk bled by prosecutions and sanctions, with loans, including at the holding-company level. Risk associated High its former CEO imprisoned, numerous with lawsuits, prosecutions ongoing, and its companies prosecution and regulatory sanctions banned from public contracts. CONTENTS PAGE Transparency Family Structure 3 The family’s main companies are held Risk in a transparent fashion, but the group Corporate Structure (Part 1) 4 Risk due to opaque Moderate has been accused by prosecutors of using Corporate Structure (Part 2) 5 corporate ownership and offshore networks of offshore shell companies Affiliations 6 holding structures for laundering bribe money.

Risk factors 8 News 10 Governance Risk Despite being exposed as the leader of a Risk associated bribery cartel, the group has a generally with corporate Moderate good reputation for corporate govern- INTRODUCTION governance, fraud ance with respect to its treatment of and corruption The fortunes of the Odebrecht Group, which includes Latin America’s minority shareholders and creditors. largest contractor, reflect the rewards and risks of a business model that embraces corruption as a necessity. In a country where bribery and Expansion Risk While the Odebrecht Group is diversi- kickbacks are commonplace, the group – controlled by the Odebrecht Risk from growth Moderate fied and global, its main focus remains and diversification family – has been accused of engineering a system for doling out on engineering-related industries. bribes to government officials that formed the basis of an industry- wide graft network. Its privileged spot at the convergence of Brazilian Multiple Odebrecht companies are at Credit History risk of default due to business disruptions business and government helped Odebrecht grow into one of Latin Risk America’s largest conglomerates, but may also be its undoing. stemming from corruption investigations. Bankruptcy or Low However, the family’s companies do default risk related not appear to have a history of bank- Odebrecht has been the most prominent corporate target of Brazil’s to shareholder Lava Jato (“Car Wash”) investigation, which has exposed a bribery and history ruptcy or contentious relations with creditors. money-laundering cartel involving contractors and state-owned oil company Petrobras. The group’s head, Marcelo Odebrecht, was sen- Ratings indicate the probability of business disruption or loss of investment value. tenced in March to 19 years in prison, while its companies struggle High = over 50% or already occurring; Low = minimal concern in the foreseeable future. to win enough new contracts to service their debt. An expected plea bargain by Marcelo – known to be close to the investigation’s ultimate Under Odebrecht SA, the group’s main constituents are Odebrecht targets, ex-Presidents Dilma Rousseff and Luiz Inácio Lula da Silva – Engenharia e Construção, Odebrecht Óleo e Gás, Odebrecht Transport, failed to materialize before his conviction, although there have been Odebrecht Agroindustrial, Odebrecht Ambiental (which is in the reports of a pending deal that could allow his early release. process of being sold), Enseada Indústria Naval, and Braskem, a petrochemical JV with Petrobras. In 2015 the group had BRL 124.1bn This is not the first time that the Odebrecht family has been implicated in revenue, BRL 109.9bn in debt and BRL 24.8bn in cash, according to in a corruption cartel. In 1993, the group was investigated for allegedly Moody’s. OEC provided 46% of revenue, Braskem 38%, and other orchestrating kickbacks among companies and government officials. subsidiaries a total of 16%. CONTINUES

Page 1 PROFILE: ODEBRECHT FAMILY BRAZIL 19 OCT 2016 | ODEBRECHT ENGENHARIA E CONSTRUÇÃO, ODEBRECHT ÓLEO E GÁS, BRASKEM

GROUP HISTORY Odebrecht Group bond overview The Odebrecht family is descended from German immigrant Emil Odebrecht, who arrived in Brazil in the 1850s, and has been involved in construction and infrastructure since the mid-19th century. The group Odebrecht SA and its subsidiaries had roughly BRL 110bn in total debt as of Dec 2015. This includes near- credits Norberto Odebrecht (1920-2014) with founding its modern ly USD 4bn in bonds from OOG, USD 3bn from OEC incarnation in 1944 after taking over an established, though indebted, Odebrecht SA and over USD 4bn from Braskem. The group has family business that already had ties with government officials and said that its companies do not intend to file for banks. The Bahia-based company, which Norberto renamed after him- bankruptcy. Law firm E. Munhoz Avogados is advising self, grew rapidly in the post-war period thanks to what the company’s Odebrecht in its talks with banks and bondholders. website calls “a healthy, interdependent relationship” with politicians and lenders during a period of rapid development in the mostly poor and rural northeastern state. A key landmark for Odebrecht was the OEC is seeking a leniency agreement with Brazilian founding in 1953 of Petrobras, with which the contractor immediately authorities that would allow it to bid for govern- developed a close relationship, according to Odebrecht Informa Online, Odebrecht ment contracts. OEC is current on its bonds but its an in-house publication. Engenharia project backlog has shrunk and it has slowed work Acquisitions and JVs played a key role in Odebrecht’s expansion. e Construção SA on existing projects to reduce cash burn. Its perpetual In the 1980s, Odebrecht acquired two major Brazilian contractors: bonds have traded recently in the 50s, and its 2042, Companhia Brasileira de Projetos e Obras (CBPO) and Técnica Nacional 2029 and 2025 bonds in the 40s and 50s. de Engenharia (Tenenge). Expansion into new sectors has been facilitated by collaboration with Japanese companies, including a petrochemical JV OOG missed a March 2016 coupon on its 7% unse- in the 1970s with Marubeni and Ishikawajima (now IHI Corp) and current JVs with Mitsui (in urban rail transit) and Kawasaki Heavy Industries cured perpetual notes and failed to pay within the 30-day grace period. Its due-2022 bonds backed by (in shipbuilding). Overseas business has accounted for a significant part of Odebrecht’s revenues since the 1980s, when domestic business drilling vessel contracts fell into default after one of diminished as Brazil suffered from recession and hyperinflation. the contracts was cancelled by Petrobras, forcing Odebrecht OOG to seek a forbearance. None of the bondholder While the Odebrecht family is relatively large, the business has been Óleo e Gás SA groups have shown a desire to accelerate, and the led by a single dominant individual in each generation, with other company has continued to negotiate with creditors family members maintaining low profiles. Norberto Odebrecht ran and with Petrobras. A potential exchange offer for the group from 1944 to 1991, when his eldest son Emilio took over the 2022 bonds has been discussed. OOG’s perpetual as president. From 2002 to 2009, non-family executive Pedro Novis bonds recently traded at 6 its 2022 notes at around held the top management job. Marcelo, the eldest son of Emilio, took 20, and 2021 notes around 30. over in 2009 and was the group’s dominant figure until he was arrested and jailed in 2015. Emilio no longer holds an executive position, and Braskem has been relatively unaffected by the the only family member on group company boards is his daughter Braskem SA group’s troubles, and its bonds trade above par. Mônica, who has not played a prominent public role. While the company emphasizes the decentralized management system and “entrepreneurial technology” developed by Norberto, it has never Debtwire reported on 4 October that OEC expected to secure a leni- been without strong family guidance. With Marcelo imprisoned and ency deal by year-end. Such a deal would not only allow Odebrecht Emilio in his 70s, the group faces a potential leadership vacuum. to resume bidding on government contracts in Brazil, but also reduce uncertainties that have made it difficult for the group to win private IMPACT ON BUSINESS and overseas contracts. A majority of group’s revenues are generated Although the depth of Odebrecht’s involvement in bribery and money abroad, and public works in Brazil last year represented only about 6%. laundering has been exposed, the ultimate impact of the scandal on its business is still unclear. Corruption investigations – which despite ex- Estado de S. Paulo reported on 8 October that Emilio Odebrecht was posing massive wrongdoing, also have a partisan and populist element – personally leading negotiations with prosecutors. Meanwhile, the group have continued to expand, raising the possibility of further allegations has been negotiating with creditors and divesting assets, most notably against Odebrecht companies. In addition to Marcelo, over 50 non-fam- agreeing to sell waste-treatment company Odebrecht Ambiental for a ily executives have been implicated in the scandal. The damage will reported BRL 5.3bn. Additional cash was raised in September via an depend to a large extent on how severely authorities choose to penalize extraordinary dividend from Braskem. The ability of Odebrecht com- the group, and how long it takes to reach a settlement. Valor Econom- panies to avoid bankruptcy – and the family’s hopes of retaining control ico reported on 5 October, without citing sources, that Odebrecht was of its holdings – will depend on how courts weigh the importance of close to finalizing a leniency agreement with the Attorney General’s punishing corruption against the damage caused by protracted inves- Office requiring the group to pay a fine of BRL 7bn over 15 years. tigations during a time of economic and political crisis.

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FAMILY STRUCTURE

Odebrecht Family

Norberto Odebrecht 1920-2014 Wife: Yolanda Alves

Founded the group's flagship construction company in 1944; was head of Odebrecht group until 1991

Eduardo Odebrecht Emilio Alves Odebrecht Ilka Odebrecht Peltier Queiróz Martha Odebrecht Queiroz Wife: Maria Gloria Novis Norberto Odebrecht Junior b. 1945 Husb: Francisco Peltier Queiróz Wife: Regina Bahia Odebrecht

Head of Odebrecht SA from 1991 to 2002 Former shareholder of Odebrecht SA Former shareholder of Odebrecht SA Former shareholder of Odebrecht SA Shareholder of Odebrecht SA

Marcelo Bahia Odebrecht b. 1968 Francisco Peltier Queiróz Filho Eduardo Odebrecht de Queiróz Juliana Novis Odebrecht

Former CEO of Odebrecht; sentenced in March 2016 to 19 years in prison for Executive president of Odebrecht bribery, money laundering and organized Shareholder of Odebrecht SA Shareholder of Odebrecht SA Foundation; shareholder of Odebrecht SA crime

Mônica Bahia Odebrecht Iolanda Peltier Queiróz Neves da Paulo Odebrecht de Queiróz Norberto Odebrecht Neto Rocha

Director of Odebrecht SA and OEC; only third-generation family member remaining Shareholder of Odebrecht SA Shareholder of Odebrecht SA Shareholder of Odebrecht SA on Odebrecht boards

Marcia Bahia Odebrecht Emilio Odebrecht Peltier Queiroz Alexandre Odebrecht de Queiróz Solange Novis Odebrecht

Shareholder of Odebrecht SA Shareholder of Odebrecht SA Shareholder Odebrecht SA Shareholder of Odebrecht SA

Maurício Bahia Odebrecht Cristina Odebrecht de Queiróz Verônica Novis Odebrecht

Shareholder of Odebrecht SA and CEO of Shareholder Odebrecht SA Shareholder of Odebrecht SA EAO Empreendimentos Agropecuários e Obras SA

Note: This chart is based on publicly available information and is not intended to be comprehensive. It includes only individuals relevant to the family business as executives or shareholders.

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CORPORATE STRUCTURE

Odebrecht Family Corporate Structure (Part 1)

Agencia Nacional de Energia Eletrica (ANEEL) 2016 ANEEL2016 Braskem2014 Cape Patrimonial Ltda – Eduardo Odebrecht de Queiróz 25%; Paulo Odebrecht de Queiróz 25%; Kieppe Patrimonial Ltda Alexandre Odebrech de Queiróz 25%; Cristina Odebrecht de Queiróz 25% Kieppe Serviços Ltda Riocon Patrimonial Ltda – Juliana Novis Odebrecht 25%; Norberto Odebrecht Neto 25%; Solange Cape Patrimonial Ltda 15.27%; Novis Odebrecht 25%; Veronica Novis Odebrecht 25% Riocon Patrimonial Ltda 21.36%; Norberto Norberto Odebrecht Jr Patrimonial Ltda – Norberto Odebrecht Junior 100% Odebrecht Jr Patrimonial Ltda 21.36%; IPQ IPQ Patrimonial Ltda – Francisco Peltier Queiróz 33.34%; Iolanda Peltier de Queiróz Neves da Patrimonial 21.36%; EAO Patrimonial Rocha 33.33%; Emilio Odebrecht Peltier Queiroz 33.33% Kieppe Patrimonial Ltda 100% 20.65% EAO Patrimonial Ltda – Marcelo Odebreecht 25%; Mônica Odebrecht 25%; Marcia Odebrecht 25%; Maurício Odebrecht 25%

ANEEL2016, Braskem2016 ANEEL2016, Braskem2015 AR2015, Braskem2016 AR2015 Kieppe Participações e Odbinv SA Enseada Indústria Naval Administração Ltda Oderbrecht SA Director: Mônica Odebrecht Participações SA Director: Emilio Alves Odebrecht Director: Mônica Odebrecht

Odebrecht SA 50% Kieppe Patrimonial Ltda 99.89% Kieppe Participações e Administração Ltda OAS SA 25% Kieppe Serviços Ltda 0.11% 55.13%; Graal Participações 20.98% Odbinv SA 100% UTC Engenharia SA 25%

Holding Companies Construction Transportation Infrastructure Waste & Water Management Oil & Gas AR2015 AR2015 AR2015 AR2015

Odebrecht Engenharia & Odebrecht Ambiental SA Odrebrecht Óleo e Gás SA Odebrecht Transport SA Construção SA [sale pending to Brookfield Asset Dir: Mônica Odebrecht Management] Odebrecht SA 81.43% Odebrecht SA 59.39% Temasek Holdings (via Atlantic Oil Services FI-FGTS 30% Odebrecht SA 70% BV) 13.57%; Gávea Investimentos 5% Subsidiary of Oderbrecht SA BNDESPar 10.61% FI-FGTS 30%

Urban Rail DW AR2015 AR2015 Odebrecht Oil & Gas Finance Ltd Construtora Norberto (Cayman Islands) Odebrecht SA Odebrecht Mobilidade SA Odebrecht Utilities SA Odrebrecht Óleo and Gás SA 100%

Odebrecht Engenharia & Construção SA USD 550m 7% sr unsec perp notes 100% Odebrecht Transport SA 60% Odebrecht Ambiental SA 82.76% Mitsui & Co Ltd 40% Funcef 12.24%

AR2015 Highways Property Development DW Odebrecht Engenharia & AR2015 AR2015 Construção Internacional SA Odebrecht Oil & Gas GmbH Odebrecht Realizações Odebrecht Rodovias SA (Austria) Imobiliárias e Participações SA Odebrecht Engenharia & Construção SA 100% Odrebrecht Óleo and Gás SA 100% Odebrecht SA 85.5% Odebrecht Transport 100% Gávea Investimentos 14.5% DW

Odebrecht Finance Ltd (Cayman Infrastructure (LatAm) DW Islands) [financing for AR2016 Odebrecht Offshore Drilling construction business] Finance Ltd (Cayman Islands) Odebrecht Latinvest SA Odebrecht SA 100% Subsidiary of OOG GmbH USD 73m 7% sr unsec notes 2020 Odebrecht Participações e Investimentos USD 143m 5.125% sr unsec notes 2022 100% USD 1.5bn 6.75% sr sec notes 2022 USD 102m 6% sr unsec notes 2023 USD 540m 6.625% sr sec notes 2022 USD 519m 4.375% sr unsec notes 2025 USD 500m 5.25% sr unsec notes 2029 DW USD 840m 7.125% sr unsec notes 2042 DW USD 750m 7.5% sr unsec perp notes Odebrecht Drilling Norbe VIII/IX Ltd (Cayman Islands) Odebrecht Oil & Gas GmbH 100% USD 1.23bn 6.35% sr unsec notes 2021

Note: This organizational chart is based on public information. It contains key companies but is not intended to be comprehensive. Shareholders and USD-denominated bonds are indicated for each company, with family members and family companies in italics. Companies are domiciled in Brazil unless otherwise noted.

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CORPORATE STRUCTURE

Odebrecht Family Corporate Structure (Part 2)

Agencia Natcional de Energia Eletrica (ANEEL) 2016 ANEEL2016 Braskem2014 Cape Patrimonial Ltda – Eduardo Odebrecht de Queiróz 25%; Paulo Odebrecht de Queiróz 25%; Kieppe Patrimonial Ltda Alexandre Odebrech de Queiróz 25%; Cristina Odebrecht de Queiróz 25% Kieppe Serviços Ltda Riocon Patrimonial Ltda – Juliana Novis Odebrecht 25%; Norberto Odebrecht Neto 25%; Solange Cape Patrimonial Ltda 15.27%; Novis Odebrecht 25%; Veronica Novis Odebrecht 25% Riocon Patrimonial Ltda 21.36%; Norberto Norberto Odebrecht Jr Patrimonial Ltda – Norberto Odebrecht Junior 100% Odebrecht Jr Patrimonial Ltda 21.36%; IPQ IPQ Patrimonial Ltda – Francisco Peltier Queiróz 33.34%; Iolanda Peltier de Queiróz Neves da Patrimonial 21.36%; EAO Patrimonial Rocha 33.33%; Emilio Odebrecht Peltier Queiroz 33.33% Kieppe Patrimonial Ltda 100% 20.65% EAO Patrimonial Ltda – Marcelo Odebreecht 25%; Mônica Odebrecht 25%; Marcia Odebrecht 25%; Maurício Odebrecht 25%

Holding Companies Energy Petrochemical Sugar & Ethanol Shipbuilding Odebrecht Energia 2015 Mkt cap BRL 20.8bn AR2015, DW8Aug2016 AR2015 AR2015

Braskem SA Odebrecht Energia SA Odebrecht Agroindustrial SA Enseada Indústria Naval SA [BOVESPA: BRKM5]

Odebrecht SA 38.32% Enseada Indústria Naval Participações SA Odebrecht SA 100% Petrobras 36.08% Odebrecht SA 100% 70%; Kawasaki Heavy Industries Ltd 30%

USD 72m 8% sr unsec notes 2017 Defense Technology Odebrecht Energia 2015 DW 8Aug2016 BraskemFilings AR2015 Braskem Finance Ltd Odebrecht Energia Empreendimentos Agropecuários Odebrecht Defesa (Cayman Islands) Participações SA e Obras SA e Tecnologia SA Braskem SA 100% USD 234m 7.25% sr sec notes 2018 Odebrecht Energía SA USD 400m 7% sr sec notes 2020 Owned by the Odebrecht family Odebrecht SA 100% USD 1bn 5.75% sr sec notes 2021 USD 500m 5.375% sr sec notes 2022 Odebrecht Energia 2015 USD 750m 6.45% sr sec notes 2024 Medical Research USD 700m 7.375% sr sec perp notes Diário Oficial do Estado de São Paulo 2014 Odebrecht Energias Alternativas SA DW 8Aug2016 Recepta Biopharma SA Braskem America (US) Empreendimentos Agropecuários Odebrecht Energía SA Braskem SA 100% e Obras SA USD 750m 7.125% sr unsec notes 2041

Odebrecht Energia 2015

Odebrecht Energia Renovável SA

Odebrecht Energía SA

Odebrecht Energia 2015

Odebrecht Comercializadora de Energia SA

Odebrecht Energía SA

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AFFILIATIONS Relationships with individuals and institutions that may have an impact on the family’s business

Affiliation Notes

A non-profit foundation established by Jeb Bush received money from Odebrecht´s Florida subsidiary in 1995, Orlando Weekly reported in 1998. The Foundation for Florida's Future was created by Bush after his unsuccessful gubernatorial campaign in 1994, and served as a vehicle for his successful 1998 campaign. Odebrecht Contractors of Florida was the Jeb Bush foundation's largest donor in 1995, providing USD 70,000. The foundation claimed the money was used to fund a book co-authored by Bush titled "Profiles in Character". Bush's refusal to disclose the donor's identity became an issue during the 1998 campaign, and Odebrecht's donation was ultimately revealed by the media. The Miami Herald reported in 2013 that Odebrecht had won public contracts in Florida worth more than USD 4bn since 1991.

Government-owned Brazilian National Development Bank (BNDES) has been a major source of financing for Odebrecht companies. Via its equity arm BNDESPar, it held a 10.61% stake in Odebrecht Transport as of June 2016. BNDES is currently BNDES facing a government audit of its lending practices which has yielded allegations of preferential lending causing losses to the government, according to press reports.

Odebrecht was awarded numerous contracts in Venezuela during the presidency of Hugo Chavez from 1999 to 2013. Many of these projects were not awarded through a normal tender process, according to El Nuevo Herald. Hugo Chavez Odebrecht funded a book on Simon Bolivar that Chavez distributed, according to the Miami Herald. In 2015, Transparency International announced it was investigating Odebrecht contracts in Venezuela.

Odebrecht Overseas Ltd donated between USD 50,000 and USD 100,000 to the Clinton Foundation in 2014, according to a Clinton Foundation list of donors released by the foundation.

The former president of Brazil (2003-2011) was questioned by Brazilian police in March 2016 on suspicion of having illegally received payments and luxury real estate, including from Odebrecht, in connection with Petrobras deals. He has also been accused of illegally lobbying on behalf of Odebrecht in numerous countries. On 10 October he was charged, Luiz Inácio together with Marcelo Odebrecht, with involvement in alleged bribery related to contracts in Angola. Prosecutors claim Lula da Silva Lula helped Odebrecht obtain financing from BNDES in return for kickbacks. Lula also faces charges in other cases, one for allegedly interfering with Petrobras corruption investigations and another for allegedly receiving bribes from construction company OAS SA. He has denied wrongdoing.

Gavea Investimentos, which as of 2016 held a 5% stake in Odebrecht Óleo e Gás and a 14.5% stake in Odebrecht Realizações Gavea Investimentos Imobiliárias, was founded by former central bank president Arminio Fraga and acquired in 2010 by JPMorgan subsidiary Highbridge Capital Management.

Geisel (1907-1996) was Brazil’s president from 1974 to 1979, during a period of military dictatorship. Before that, he was General the head of Petrobras. Norberto Odebrecht was “aligned” with Geisel and won major Petrobras projects under military rule, Ernesto Geisel according to the Wall Street Journal.

The Gradin family owns a 20.98% stake in Odbinv SA, a holding company that wholly owns Odebrecht SA. Victor Gradin was a long-time Odebrecht executive, serving as its CFO from 1974, while his sons Bernardo and Miguel headed Braskem and Odebrecht Oil & Gas. The families have been involved in a dispute since 2010, when the Odebrecht family attempted to exercise an option to buy the Gradin stake for the equivalent of USD 1.5bn, and the Gradin family refused to sell and Gradin Family requested court assistance to send the matter to arbitration. Odebrecht claimed the shareholding agreement's arbitration clause was vague and non-binding, but in Dec 2015 the Superior Court of Justice ruled that the clause was valid. Gradin family members have resigned from Odebrecht companies and their business is now focused on the alternative energy sector. The Gradin family’s stake is Odbinv SA is held via Graal Participações.

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AFFILIATIONS Relationships with individuals and institutions that may have an impact on the family’s business

Affiliation Notes

FI-FGTS is an infrastructure fund managed by Brazilian state-owned bank Caixa Econômica Federal. It held a 30% stake in FI-FGTS Fund infrastructure contractor Odebrecht Transport and a 30% stake in Odebrecht Ambiental as of June 2016.

Funcef, one of Brazil's largest pension funds, manages assets for state-owned bank Caixa Econômica Federal. It holds a Funcef 12.24% stake in Odebrecht Utilities SA. The ongoing “Greenfield” investigation into fraud at state-owned pension funds has resulted in allegations that Funcef and other funds had acquired equity and debt of certain companies at inflated prices.

Kawasaki Heavy Tokyo-listed Kawasaki Heavy Industries Ltd owns a 30% stake in Odebrecht-controlled shipbuilder Enseada Indústria Naval SA. Industries

Guido Mantega was Brazil's Minister of Finance from 2006 to 2015. Folha reported in May 2015 that Marcelo Odebrecht told Guido Mantega prosecutors that Mantega and former BNDES president Luciano Coutinho had pressured construction companies to make campaign donations to Dilma Rousseff in exchange for loans from BNDES. Mantega and Coutinho denied the accusations.

Tokyo-listed Mitsui & Co owns 40% of Odebrecht Mobilidade, a rail-focused subsidiary of infrastructure contractor Mitsui & Co Odebrecht Transport.

OAS SA, one of Brazil's largest contractors, filed for bankruptcy in 2015 after being implicated in the Petrobras scandal. OAS SA It holds a 25% stake in Enseada Indústria Naval Participações SA, which has a 70% stake in shipbuilder Enseada Indústria Naval. The other shareholders in the holding company are Odebrecht S.A. (50%) and UTC Engenharia (25%).

Brazil's former finance minister (2003-2006) under Luiz Inácio Lula da Silva and chief of staff (2011) under Dilma Rousseff was accused by Lava Jato prosecutors of having received bribes from Odebrecht, according to press reports. He was Antonio Palocci temporarily detained in September on allegations of receiving BRL 128m from Odebrecht on behalf of the Workers’ Party, and of supporting legislation to benefit Braskem, according to O Estado de S. Paulo. Palocci denied the allegations.

In addition to having been a major contractor of Petrobras over several decades, Odebrecht Group is also the state-owned Petrobras oil company's JV partner in Braskem. Braskem was 38.32% owned by Odebrecht SA and 36.08% by Petrobras as of June 2016, with Odebrecht having 50.1% voting control.

The Odebrecht Group's relationship with impeached ex-president Dilma Rousseff has been under scrutiny in the Lava Jato investigation. Marcelo Odebrecht was a major campaign donor to Rousseff and predecessor Luiz Inácio Lula da Silva. Dilma Rousseff According to press reports, Odebrecht was expected to detail illegal campaign donations as part of a plea bargain, but he chose not to collaborate with prosecutors. Rousseff has denied wrongdoing.

Singapore government-owned investment fund Temasek Holdings paid USD 400m for a 14.3% stake in Odebrecht Óleo Temasek Holdings e Gás in 2010. It held a 13.57% stake as of June 2016.

UTC Engenharia holds a 25% stake in Enseada Indústria Naval Participações, which has a 70% stake in shipbuilder Enseada UTC Engenharia SA Indústria Naval. The other shareholders in the holding company are Odebrecht SA (50%) and OAS SA (25%). Both UTC and OAS have been implicated in the Lava Jato scandal.

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RISK FACTORS Legal issues, controversies, conflicts and other difficulties that may affect the family’s companies

Risk Factor (by country) Notes

Brazilian prosecutors accused Odebrecht in 2014 of “human trafficking” of Brazilian workers on a biofuel plant Angola: construction project in Angola, the BBC reported. Odebrecht, which is Angola’s largest private-sector employer, allegedly human trafficking kept the workers in “slave-like conditions”, and prosecutors demanded BRL 500m in compensation plus a fine of up to and bribery allegations 20% of annual revenues, according to the report. More recently, Brazilian police have investigated possible bribery and money laundering related to Odebrecht’s contracts in Angola, according to press reports.

Odebrecht executives allegedly acquired a controlling stake in Meinl Bank Antigua in 2010 and used the offshore lender Antigua: for money-laundering purposes, Antigua’s Daily Observer reported in July 2016, citing testimony by bank employee money laundering Vinicius Borin. The bank was used by Odebrecht executives to move USD 1.6bn through more than 40 accounts, allegations according to the report.

Brazilian prosecutors investigating Petrobras said in February 2016 that they suspected former Argentinian transport Argentina: secretary Ricardo Jaime of having received bribes from Odebrecht, the Buenos Aires Herald reported in August. bribery allegations Prosecutors said that a document seized from Odebrecht's offices mentioned payments to Argentinian authorities via an offshore entity.

In a 1993 case with parallels to the Lava Jato scandal, Odebrecht was accused of heading a cartel of contractors that Brazil: channelled bribes to officials in exchange for government contracts. Investigators said they seized documents detailing a 1993 bribery sophisticated corruption scheme from the house of an Odebrecht construction company director. The scandal sparked a cartel allegations stock market selloff and fears of a military coup. Odebrecht denied wrongdoing.

Marcelo Odebrecht was sentenced in March 2016 to 19 years and four months in prison for money laundering, corruption and organized crime. He is the most important executive to have been convicted in the Lava Jato investigation into corruption related to Petrobras contracts. Odebrecht was arrested in June 2015 and held in "preventive detention" during the trial. According to the court, Odebrecht was the head of a contractor cartel that rigged bids and channelled bribes through a network of offshore accounts, resulting in billions of BRL in losses to the Brazil: state-owned oil company. Numerous other Odebrecht Group executives have also been charged in connection with Marcelo Odebrecht the case. According to Folha de S. Paulo, the group has been trying to arrange plea bargains for 53 of its employees. prison sentence in While Marcelo Odebrecht has denied any intention to seek a plea bargain, citing his innocence and family values, Lava Jato investigation there have been numerous media reports that a deal is being negotiated. Folha de S. Paulo reported that Odebrecht has met with prosecutors repeatedly and provided information on politicians including Dilma Rousseff, Luiz Inácio Lula da Silva and current president Michel Temer. Brazil’s Attorney-General’s Office (PGR) submitted a proposal to Odebrecht’s lawyers on 3 October offering a reduction of the sentence to four years, further reduced by 16 months for time already served, according to the report, which noted that Odebrecht and the PGR declined to comment.

Odebrecht has been accused in numerous ongoing corruption investigations. Marcelo Odebrecht and ex-president Luiz Inácio Lula da Silva have been charged in a Federal District court with corruption in relation to Odebrecht contracts in Brazil: Angola, according to O Estado de S. Paulo. São Paulo state prosecutors are investigating allegations of corruption related other investigations to Odebrecht Group subway and bus contracts. Odebrecht’s waste-processing contracts with the city of São Paulo are the subject of a civil investigation, according to the same report.

Colombia: Odebrecht began paying fines of COP 20.86m per day in June 2016 after failing to find a company to take over its USD fines for 849.7m, 87% stake in a project to deepen the Magdalena River in Colombia, according to Reuters. Odebrecht project delays exercised a clause allowing it to transfer the stake in extraordinary circumstances.

Page 8 PROFILE: ODEBRECHT FAMILY BRAZIL 19 OCT 2016 | ODEBRECHT ENGENHARIA E CONSTRUÇÃO, ODEBRECHT ÓLEO E GÁS, BRASKEM

RISK FACTORS Legal issues, controversies, conflicts and other difficulties that may affect the family’s companies

Risk Factor (by country) Notes

The awarding of a Dominican Republic power-plant project to Odebrecht in 2013 was criticized for lack of transparency Dominican Republic: and alleged lobbying by former Brazil President Luiz Inácio Lula da Silva, according to press reports. The CEO of power plant controversy Odebrecht’s Dominican operations was declared a fugitive after failing to report to a court hearing. The scandal is seen as potentially destabilizing for the administration of Dominican President Danilo Medina, according to press reports.

The government of Ecuador expelled Odebrecht from the country in 2008 and sent troops to seize its projects, which included two hydroelectric plants and an airport, according to press reports. The incident led to a diplomatic Ecuador: dispute Ecuador and Brazil, with Brazil recalling its ambassador and freezing bilateral projects. Ecuador accused expulsion from country Odebrecht of fraud related to faulty construction on a dam, and threatened not to repay a Brazilian Development Bank (BNDES) loan that financed the project. Odebrecht and Ecuador reached a settlement in 2010, and the company resumed operations there.

Peruvian presidents have been accused of receiving illicit donations from Odebrecht. Alejandro Toledo (president from 2001 to 2006) was charged in 2016 with money laundering in connection with the purchase of a USD 4.6m home and office in Lima that prosecutors claim was funded with bribes from Odebrecht and fellow Peru: Brazilian contractor Camargo Correa, according to Peru Reports. Toledo was also investigated, along with current bribery allegations president Pedro Pablo Kuczynski, for promoting a bill that favored Odebrecht. Ollanta Humala (president from 2006 to 2011) is also suspected by Brazilian investigators of having received bribes from Odebrecht, based on documents seized from Odebrecht in the Lava Jato investigation, according to Reuters. All three presidents have denied wrongdoing.

Odebrecht generated controversy in Florida because of its involvement in projects with the Cuban government, in particular the development of Mariel port near Havana. In 2012, the Florida legislature passed a law - widely seen as targeting Odebrecht - prohibiting local governments from doing business with companies that operate in Cuba or Syria. US: Odebrecht's US subsidiary sued the state of Florida, claiming the law was unconstitutional. According to the lawsuit, Florida controversy Odebrecht USA had won 35 government contracts worth USD 3.9bn in Florida since 1990. The Florida law was struck over Cuban ties down by a federal court. However, a key Odebrecht project in Florida - the Airport City development at Miami International Airport - was stalled and eventually cancelled due in part to Cuban exile politicians' opposition to Odebrecht's involvement, according to press reports.

US: A Florida JV in which Odebrecht was a partner was fined USD 4m for environmental violations in 2000, according to the Garcon Point Bridge St. Augustine Record. The company pleaded guilty to dumping debris in Pensacola Bay when building the Garcon Point environmental Bridge. The bridge, along with a bond issue financing it, had been promoted by a state legislator who was later jailed violations for tax evasion.

A class action lawsuit was filed against Braskem S.A. on 1 July 2015 by investor Douglas Peters in the U.S. District Court US: for the Southern District of New York. Peters claimed that Braskem had made false statements about the shareholder lawsuit effectiveness of its internal controls, resulting in its ADRs trading at inflated prices. Petrobras officials admitted against Braskem to having received bribes from Braskem in exchange for discounts on raw materials. Former CEO Bernardo Gradin was named as a co-defendant.

Page 9 PROFILE: ODEBRECHT FAMILY BRAZIL 19 OCT 2016 | ODEBRECHT ENGENHARIA E CONSTRUÇÃO, ODEBRECHT ÓLEO E GÁS, BRASKEM

NEWS Date Headline 14 Oct 2016 Odebrecht ex-CEO, Brazilian ex-President Lula become defendants in corruption proceeding (translated) 14 Oct 2016 OOG bondholders work on counterproposal 12 Oct 2016 Brazil’s BNDES suspended payments for 25 projects by companies implicated in Petrobras probe (translated) 11 Oct 2016 Odebrecht under investigation over bribery allegations in subway and bus contracts (translated) 11 Oct 2016 Petrobras probe: prosecutors reject Odebrecht ex-director’s plea bargain deal – report (translated) 11 Oct 2016 Petrobras probe: Odebrecht plea bargains expected to generate more than 100 new investigations – report (translated) 11 Oct 2016 Brazil's MPF charges Marcelo Odebrecht, former president Lula da Silva with corruption re Angola contracts 08 Oct 2016 Grupo NC to acquire two wind energy assets from Odebrecht subsidiary Odebrecht Energias Alternativas 07 Oct 2016 Petrobras task force proposes Marcelo Odebrecht spend four years in jail—report (translated) 05 Oct 2016 Odebrecht close to leniency agreement with Brazilian authorities, includes fine of BRL 7bn - report (translated) 05 Oct 2016 Odebrecht may be investigated for alleged bribery in Sao Paulo subway, bus and waste-collection contracts – reported rumor (translated) 04 Oct 2016 Braskem orders investigation of bribery allegations involving Brazil’s former Chief of Staff Antonio Palocci 04 Oct 2016 Petrobras probe: police oppose new plea bargain deals – report (translated) 04 Oct 2016 OEC counting on leniency agreement by year-end to renew backlog 03 Oct 2016 Odebrecht in negotiations with two bidders to sell its 30.6% stake in Rio airport - report (translated) 30 Sep 2016 OEC backlog down 8.9% in 2Q16; no new contracts added 30 Sep 2016 Odebrecht suspected of paying bribes over Sao Paulo real estate project (translated) 29 Sep 2016 Petrobras probe: Odebrecht entering final stage of cooperation agreement negotiations – report (translated) 29 Sep 2016 Brazil police start new bribery investigation into 38 Odebrecht projects (translated) 27 Sep 2016 Petrobras probe: Odebrecht accused of paying USD 39.4m in bribes to Workers’ Party in 6 years (translated) 26 Sep 2016 Petrobras probe: former Chief of Staff arrested on accusation of taking bribes from Odebrecht (translated) 25 Sep 2016 Odebrecht's real estate unit to speed up sales of assets to reduce debt (translated) 23 Sep 2016 Petrobras aims to sell stake in Braskem before December 2018 22 Sep 2016 Petrobras probe taskforce starts investigation into corruption at Comperj (translated) 21 Sep 2016 Odebrecht close to selling Odebrecht Ambiental to Brookfield for BRL 5bn - report 21 Sep 2016 Odebrecht's Navelena has until 23 November to comply with concession financing requirements 20 Sep 2016 Odebrecht to pay an average of BRL 15m to each executive providing information on Lava Jato probe - report (translated) 19 Sep 2016 OOG audit found no evidence of unlawful benefits to Petrobras employees (translated) 19 Sep 2016 Petrobras probe: Brazilian IRS to charge over USD 3.1bn from construction firms (translated) 16 Sep 2016 Odebrecht Offshore Drilling Finance downgraded to 'CCC' from 'CCC+' on expected tighter liquidity - S&P 15 Sep 2016 Odebrecht ex-CEO indicted in BNDES corruption probe (translated) 12 Sep 2016 Petrobras corruption probe expected to continue for two more years (translated) 07 Sep 2016 Odebrecht's GSP sale to Sempra-Techint consortium supported by Peruvian government 07 Sep 2016 OOG working to present proposal to bondholders within two weeks 06 Sep 2016 Odebrecht Ambiental nears sale to Brookfield - report (translated) 05 Sep 2016 Petrobras probe taskforce finds further evidence of former Odebrecht CEO’s implication in bribery (translated) 01 Sep 2016 Odebrecht: Brazilian Supreme Court lifts freeze on BRL 2.1bn of company funds (translated) 31 Aug 2016 OOG bondholders grant temporary waiver allowing capital expenditure from permit project receipts 30 Aug 2016 Odebrecht's Navelena presents timeline and plan for Magdalena River project 29 Aug 2016 OOG bondholders grant waiver allowing use of USD 10.4m to partially fund 1 September debt payment 28 Aug 2016 Odebrecht: Rio airport does not generate enough revenue to make federal government payments, consortium may lose concession (translated) 28 Aug 2016 Medina negotiates purchase of Maracana Odebrecht concession - report (translated) 27 Aug 2016 Odebrecht: Swiss court rejects company request to stop Swiss Prosecutor's Office from sending documents to Brazil authorities (translated) 26 Aug 2016 Sempra/Techint consortium seeking exclusive talks to acquire GSP 55% stake from Odebrecht - reported (translated) 22 Aug 2016 Odebrecht Finance's senior unsecured notes downgraded to B3; OEC downgraded to B3 - Moody's 18 Aug 2016 Brazilian TCU freezes BRL 2.1bn in assets of Odebrecht, OAS on overpriced works at Petrobras' refinery (translated)

Disclaimer: We have obtained the information provided in this report in good faith from sources that we consider to be reliable, but we do not independently verify the information. The information is not intended to provide tax, legal or investment advice. We shall not be liable for any mistakes, errors, inaccuracies or omissions in, or incompleteness of, any information contained in this report. All such liability is excluded to the fullest extent permitted by law. Data has been derived from corporate disclosures, regulatory announcements, government publications, media reports, press releases, presentations and Debtwire intelligence. Page 10