BRFS BRF SA

In May 2009 was celebrated an Association Agreement between Perdigão and Sadia which resulted in the creation of BRF Brasil Foods S.A. (GRI 2.9).
This association, one of the year’s main operations in the capital market, has established itself as a lasting mark on the Brazilian and world food industry.
The initial step of the process which culminated in the creation of the argest global proteins company by market capitalization was the change in corporate denomination from Perdigão to BRF – Brasil Foods S.A. and the Company’s registered offices moving from São Paulo (SP) to Itajaí (SC).
The well-succeeded corporate structuring by merger of shares was realized in two stages: the first one took place in July, when it was incorporated the shares from HFF Participações S/A, which hold most of Sadia’s common shares.

In August, the second stage of unification was concluded with the incorporation of common and preferred shares from Sadia by BRF.
The Company’s bylaws were amended in line with BRF’s good corporate governance practices, culminating in the new structure
for the Board of Directors, presided by two co-chairmen.
The market’s positive reaction to the new Company was manifested in the success of the primary share offering amounting to R$ 5.3 billion, a green shoe clause being exercised for a supplementary lot of 15% in view of strong investor interest.
Recognized for the quality of its products, its distribution network nationwide and the penetration of its brands, BRF combines the attributes of innovation, quality and reliability to become one of the most admired companies in the world.

BRF – Brasil Foods S.A. is the world’s largest exporter of poultry and the largest global proteins Company by market capitalization. In addition, it is one of the leading companies in Brazil in milk catchment and dairy product processing. (GRI 2.1, 2.6, 2.8)
A Company on an international scale with head office in Itajaí (SC), it has 60 industrial units in Brazil and three more overseas (Argen tina, United Kingdom and the  Netherlands). BRF exports its products to more than 110 countries and has a product portfolio of more than 3,000 items (SKUs), distributed among the meats, dairy products, margarines, pastas, frozen meals, frozen vegetables segments, among others. (GRI 2.3, 2.4, 2.5, 2.8)
Through a broad-based and complex structure, specializing in the  delivery of chilled and frozen products along a distribution chain which includes 36 distribution centers, the company is present in the households of customers nationwide as well as in Europe, Asia, Africa and the United Arab Emirates. (GRI 2.3, 2.7, 2.8)
In the domestic market - 58% of its total sales – the Company operates under such branded names as Perdigão, Sadia, Batavo,

Elegê, C hester, Rezende, Confiança, Fiesta, Wilson, Miss Daisy, Qualy, Doriana and Becel (through a strategic joint venture with Uni lever) and Turma da Mônica (under license). In export markets which take the remaining 42% of the Company’s output, the leading  brands are Perdix, Sadia, Hilal, Halal, Batavo, Fazenda, Borella, Corcovado and Confidence. (GRI 2.2)
BRF’s shares are listed on the São Paulo Stock Exchange (BM&FBOVESPA) and the New York Stock Exchange (NYSE) through a Level III ADR program. Since 2006, the Company has also been listed on the New Market (Novo Mercado), a segment reserved for companies adhering to the strictest level of corporate governance.
BRF’s securities are also components of the Ibovespa stock index, considered the most important indicator of average price performance in the Brazilian market. For the fifth consecutive year, BRF has been included in the portfolio making up the Corporate Sustainability Stock Index (ISE), a select group of companies committed to corporate, envi-
ronmental and social responsibility, besides other important indexes of BM&FBOVESPA.

Reliability

Simplicity

We are reliable, ethical and transparent. We do what we promise and, in so doing, build a relationship of mutual respect with our customers, suppliers, co-workers and shareholders.

We believe in operational simplicity and we put this approach into practice in the way we work. We solve our problems in a speedy and practical manner.

People

Quality

We develop, prioritize and are committed to the team spirit and on this basis we build the future for our Company.

We have an obsession with quality and food safety. We seek to be in the vanguard of innovation and contribute to the well-being of our consumers worldwide.

Efficiency

Participation

We pra ctice a management style which focuses on efficiency and profitability, avoiding waste and in this way we respect our shareholders.

We strive passionately to be one of the best global food companies. We a re committed to what we do and we do it with perseverance, single-mindedness and determination.

Socio-environmental Responsibility

We play, and will increasingly play, an important role as a catalyst for social development in the communities where we operate.

MESSAGE FROM THE
MANAGEMENT
Fiscal year 2009 will certainly be remembered as one of the mos t important in the 75 years of our Company’s existence.
The association between Perdigão and Sadia, which resulted in the creation of BRF – Brasil Foods, is being viewed as one of the most significant mergers in Brazil given the magnitude of the business involved. It originated the constitution of a company which is a leader in international transactions in animal protein, the largest exporter in the world in poultry meat and the planet’s tenth largest food company.
These rankings make us both proud and, at the same time, conscious of our responsibility. They represent the opportunity and the challenge for further increasing the dynamism of our domestic operations as well as expanding our presence in export markets without ever losing sight of our commitment to the sustainability of the business and also
for ensuring the creation of value for all our stakeholders.
In accordance with the ruling by CADE (Administrative Council for Economic Defense), with which we signed a Transaction Reversibility Preservation Agreement (APRO), we have maintained the administrative, productive and commercial structures separate, until CADE’s final decision, initially integrating only the financial area, the in natura meats foreign and domestic trade business and the acquisition of raw materials and services, which was permited.
In conjunction with consultants, we are examining all opportunities for improvements arising from integration and planning the necessary steps for obtaining economies of scale and synergies.

Clearly, this is a complex task which demands considerable effort. However, the two companies already have a track record in the field of mergers and acquisitions, standing both of them in good stead for
overcoming with equilibrium and tranquility all the challenges which lie ahead.
Our confidence in th e future of this operation stems not only from the process with which the business has grown stronger over the past decades, but also the positive reaction from the market, expressed in the success of the primary share issue in 2009, and through which we raised R$ 5.3 billion.
Designed to enhance the feasibility of BRF’s operations and consolidate the Company’s financial equilibrium, the initial issue of 115 million shares was expanded through the exercising of the issue’s green shoe clause for an additional lot of 15%, such was the level of investor interest. It is worth recalling that these results were achieved at a point in time when the world market was still laboring under the affects of the 2008 crisis.
However, paradoxically, the Company’s stellar performance in 2009 from the strategic point of view, combined with a difficult year in terms of earnings - in large part due to the rupture in foreign trade flows and translating into a decline in exports. In the light of this scenario, we adopted a series of austerity measures, notably in the form of a  budgetary review and cost cutting, as well as production adjustments, with output diverted to the domestic market to offset weaker demand from export markets.
Despite the scenario, we successfully complied with our commitments and continued to pursue our strategy of expanding activities through diversification of the product portfolio and spreading our risks.

Set against the background of this adverse business climate, net sales totaled R$ 20.9 billion in 2009, equivalent to a 5% drop in relation to 2008. In operational terms, EBITDA was R$ 1.2 billion, 47% down on 2008.
In 2010, we face the twin challenges of reversing this result while continuing the structuring of the new Company. For this, we are counting on the endeavor of our employees, all of whom have displayed pride and a will to  work towards this new phase which awaits us on the horizon.
We are aware that these financial and operational results will only carry the seal of approval over the years to come if they are achieved together with respect for the human being and the environment. At BRF, we believe that dialog and generation of value for all our stakeholders are fundamental to ensure the sustainability of the business. For this reason, our operations are based on the constant search for economic, social and environmental equilibrium. (GRI 1.1)
We shall maintain our goal of achieving operational excellence and focus on the consolidation of the business concluded in recent years, at the same time without ceasing to analyze the opportunities that we may identify going forward.

The association with Sadia in 2009 repre sented one of the most important steps taken by BRF on the strategic path in the direction of 2020, especially with respect to the growth and expansion of operations globally, to be the best choice anywhere and to become a world cl ass company.
Once fully implemented, the association between the two Companies giants will transform the Company into a player with a global dimension and a size and competitive edge to consolidate its leadership in the
Brazilian market and to enhance its potential for expanding international business.
As a result of this operation, the Company

has maintained its goal of creating share holder value by investing in growth by acqui sition and focusing on business opportunities which are complementary to the production chain, besides accelerating the process of internationalization of the Company.
Despite the movement generated by the association with Sadia, BRF continued to pursue its policy of diluting the risks of its businesses with the effective integration of Eleva, in the first quarter concluding the im plementation of the information technology s ystem (SAP) for all operations, the Company already seeing the benefits of the capture of the related synergies in 2009.

merger of the shareholding bases of Perdigão and Sadia and the primary offering, the Company in 2010 is to focus on the merger of operations, implementing the best practices of each organization and resulting in a bigger and better company.
In 2010, BRF should resume its growth trajectory, benefiting principally from the improved climate for the conclusion of inter national agreements in world markets where the Company still has no footprint as well as from the consolidation of markets where it already has ongoing operations.
The first stage in this new cycle will be the definition of the necessary management structure to support the new operations and to put into practice the BRF strategic plan, also expected to be finalized in 2010.

For better comprehension, the pro-forma data for the investments in BRF and Sadia have been consolidated as if the merger of the shares had taken place on January 1 2008.
Under this criterion, total capital expen diture in fixed assets for the year was R$ 1.2 billion, of which R$ 368 million was allocated to poultry and hog breeder stock.
The investment of resources was also di rected especially to funding Sadia’s new meat processing units in pre-operational phase and located in Lucas do Rio Verde (MT) and Vitória de Santo Antão (PE). Investments were also made in the specialty poultry units in Mineiros (GO) and in the new dairy product units in Bom Conselho (PE) and Três de Maio (RS).
Among the resources used in improve ments and to increase productivity, special mention should be made of the investment in the expansion of production capacity and modernization of the Lajeado (RS) plant to which the meat production activities at the Cavalhada unit, located in the greater Porto Alegre (RS) area, were transferred.

Prospects for 2010 are for export markets to report a gradual improvement in demand. The domestic market is also expected to grow, driven by increased household consumption, fuller employment and higher real incomes
together with an expanding GDP.
After the successful completion of the

The international eco nomic environmen t in 2009 was characterized by a disruption in foreign trade flows. Under the threat of more severe impacts on their economies, the ma jority of countries took steps to protect their indigenous markets in an attempt to attenu ate the effects of the international financial crisis on consumption and output.
However, government stimulus policies adopted worldwide only began to produce positive effects in the second half of 2009, when several macroeconomic indicators showed incipient signs of recovery, bringing a degree of relief to the markets.
In Brazil, government-inspired policies saw the launch of economic stimulus packages such as the reduction in the IPI excise tax on cars and the introduction of looser monetary measures such as cutting bank reserve re quirements and the basic Selic rate of interest. As a result, Brazil was one of the few to report a good economic performance in 2009, gen erating a positive balance in employment and attracting an inflow of foreign capital.

Physical chicken meat export sales in 2009 held steady. Export volumes fell drastically in regions severely hit by the economic melt down, Europe being a prime example (a 6% decline in shipped volume), but offset by the
increase in physical shipments to the Middle East (an increase of 22.7%) and Africa (up by 22,2%). However, average export prices in US dollars were marked down heavily, falling by 16%.
Beef exports posted a decline both by volume as well as by value due to global economic weakness. Export volumes in 2009 fell 10% compared with 2008, while average prices were off by 14%.
The pork meat market recorded a 15% increase in exported volume, a good perfor mance reflecting demand from Russia, which increased its purchases year on year by 18% and accounted for 43% of all export sales of Brazilian pork by volume. However, average prices failed to follow the same trajectory, recording a fall of 28% in 2009 compared with 2008.

The unemployment rate in metropolitan regions as measured by the IBGE (the govern ment statistics office), reached 9% in March 2009, declining to 6.8% in December, the same level prevailing at the end of 2008.
Average real incomes between January and November 2009 reported an increase of 2.8% in relation to the same period in the preced ing year.

While Brazilian corn production in 2009 was close to 2008 levels, with a slight increase of 0.7%, inventory carried over from previous crops and more plentiful supplies in the inter national markets had a positive impact for the Company, leading to a year on year fall in the average price in local currency of 15%.
On the other hand, soybean prices rose, grains by an annual average of 2%, and 17%  in the case of soybean meal, driven by greater demand from China and lower output by such important suppliers as Argentina.

Due to weakening export demand in the light of the adverse international scenario and the downsizing of inventory at the importing end of the business, BRF cut meat production destined for the overseas market by 20% in volume during the first quarter of 2009.
This adjustment resulted in higher production costs, technical stoppages and employee vacation shutdowns at these units.
In spite of this reduction, with the consolidation of Sadia’s results in the third quarter, poultry slaughter saw a growth of 39.0%, while hog/beef cattle slaughter rose 64.1%. On a pro-forma comparative basis, there was a downward adjustment of 8.3% in poultry slaughter, a 5.6% increase in hog/ cattle slaughter and a decline of 2.3% in meat production.
On March 21 2009, there was a fire of moderate proportions at the industrial

installations at Rio Verde (GO), damage at the distribution center adjacent to the complex being the most serious. The Company’s just- in-time process was upgraded to respond to the greater demand, finished products immediately being transferred to ports, customers and third party warehouses, the loss of storage space thus being successfully co mpensated. Supplies to customers from this plant were partially redirected to other units to satisfy demand and there were no adverse financial impacts for the Company, covered by insurance.

Sales revenue and volume were 73.5% and 57.4% higher than in 2008, (also incorporating Sadia’s revenues), the domestic meats market generated an increase of 8.1% in revenue, a 2.3% rise in volume and a 5.8% improvement in average prices on a pro-forma basis .
Results from this market reflect a combi nation of factors, notably: the migration of in-natura meat volumes originally destined for export, with the corresponding difficulty of passing on price increases to processed products; the repositioning of brands such as Avipal and Batavo, with the focus on profit argins; lower frozen product volume due to the accident at the plant in Rio Verde (GO).

In the face of weaker international markets and the need to absorb commodity-type products originally destined for export, the domestic market experi enced oversupply and lower prices. This situation was aggravated by

sudden appreciation of the Real against the US Dollar between March and September. Export performance was also affected by pressure from higher costs along the production chain and expenses due to instability in the mar kets, which maintained inventory at elevated levels, leading to a decline in prices and a
disorganized rise in supplies of commodity type products on the part of competitors.
During the year, average prices in FOB -  Free on Board US dollars fell by about 16%, while the average appreciation in the foreign exchange rate in the same period was ap proximately 9%, both reflected in a significant erosion of sales revenue in Reais. These factors, together with a fall in volumes and an increase in costs/expenses, undermined performance in this market.

Dairy product volume posted a decline of 10.5% in relation to 2008 and sales revenue off by 6.4%, albeit set against a price adjust ment of 4.1%. However, the more effective management of sales of in-natura milk sales saw this segment become more profitable with an improvement in results, especially grocery store products.

Other processed products posted year on year sales revenue and volumes 119% and 140% respectively higher (on the basis of the criterion of Brazilian corporate law) and 8.7% and 7.0% up respectively on a pro-forma ba sis. The segment posted a good performance on the back of sales from the portfolio which includes: pastas, pizzas, margarines, snacks, frozen vegetables, cheese bread, among others.

The Company reported an increase in meat volumes and sales revenue 48.1% and 35.0% higher, respectively. In pro-forma terms, there was a decline of 12.1% in sales revenue and 5.5% in volume during the year. Average prices in Reais were 8.3% less due to the fall in dollar denominated p rices with no offsetting
adjustment in foreign exchange rates. This combined with higher average costs and expenses saw export margins move sharply narrower.

Far East – This market suffered the most from the international financial crisis in the beginning of the year. There was a recovery, albeit with volatility of prices and volumes due to oversupply of griller chicken.

Dairy product shipments were significantly down, volumes falling 75.0% and sales rev enue by 83.5%, reflecting weaker interna tional demand and high inventory in other producing regions such as New Zealand. The currency translation effect depressed average prices by 31%, forcing the Company to revise planned export volumes with the partial transfer of production to the domestic market.

Eurasia – Suffering equally from the adverse international scenario, the Eurasian market posted negative margins, more especially in pork meat sales to Russia. In addition to the unfavorable global situation, import quotas for Brazilian meats were cut.

Africa, Americas and Other Countries – Increased business with these markets came principally from South Africa, Angola and Venezuela.

Europe – The European market continued to reflect the fall-out from the international financial crisis, reporting a fall in demand for meats, more especially in the processed prod ucts segment and turkey meat, i nventories of which remained at high levels also due to the priority given to local production.

Middle East – Exports to the region were most affected, particularly in the early part of the year, thereafter showing some recovery in the second half, albeit with continuing price and volume volatility due to oversupply of griller chicken.

chain without a compensating growth in volumes and prices. In addition, the rise in cost of sales was largely driven by the following factors: (i) a 20% cut in production for export in the first quarter; (ii) idle capacity in the production chain due to new industrial plants at a pre-operational phase; (iii) the diversion of production from the Rio Verde (GO) plant to other industrial units due to an incident which partially affected operations at this industrial complex.

expenses which contributed to the reduction in operating margins for the year.
Administrative expenses represent the structures of the  two companies which are to be maintained independent of one another.

Net sales for the year were R$ 15.9 billion, 39.6% higher, reflecting the consolidation of Sadia’s results, while registering a decline of 5.4% on a pro-forma basis due to conditions in markets to which the Company sells.
In pro-forma terms, the domestic market reported net sales of R$ 12.2 billion with growth of 3.7%, representing 58.1% of total net sales. On the other hand, sales to the export market recorded a share of 41.9% of net sales, equivalent to R$ 8.8 billion, and 15.6% down for the year, reflecting the complexity of the scenario in the principal importing markets with the onset of the international crisis.

Operating income before financial ex penses was R$ 350.1 million, equivalent to a 2.2% operating margin as opposed to 6.2% in the preceding year. This same item was 71.4% lower using pro-forma figures as a comparative base, reaching R$ 416.3 million, and representing a 2.0% operating margin against 6.6% recorded in the preceding year. These results correspond to the weak performance resulting from the effects of the economic scenario and the impact of foreign exchange volatility on exports, as well as reduced volumes registered in some markets and an increase in production costs and com mercial expenses.

Gross profit totaled R$ 3.6 billion, 31.8% higher than in 2008, factoring in the results for Sadia. This result reflects a combination of an adverse export performance against an expansion in domestic market business. Gross margin was 22.9% against 24.2% in 2008, a decline of 15.8%. On a pro-forma comparative basis, gross profit was R$ 4.7 billion, representing a margin of 22.6% against 25.4% for the preceding year.

The increase in the cost of sales of 42.1% in the year, proportionally greater than sales revenue, contributed to the squeeze on margins compared with 2008. The cost of sales totaled R$ 12.3 billion, corresponding to 77.1% of net operating revenue against 75.8% in the preceding year. On a pro-forma basis, the cost of sales fell 1.8%, although sales revenue posted a fall of 5.4%, thus also contributing to narrower margins when performance is viewed on this basis.
The increase in annual costs particularly reflects the fixed structure of the production

The impact of poorer market performance was also reflected in higher operating ex penses, relative to the fixed structure of the production chain and the increases reported in distribution, freight, warehousing and investments in marketing campaigns. As a result, operating expenses rose 60.2% during the year, a 3.6% increase in pro-forma terms, more especially due to growth in commercial

the one prevailing in 2008.
Net debt increased 14.4% compared with December 31 2008, while on a comparative pro-forma basis, outstanding debt was offset against the drawdown of funds generated from the primary share issue totaling R$ 5.3 billion.
Of this amount, R$ 2.2 billion was injected into Sadia in order to liquidate expensive short-term debt. The net debt/EBITDA ratio was 3.2 times due to lower cash generation in the year, in spite of an adequate level of net debt. Consolidated currency exposure was US$ 1.1 billion - within the Company’s established parameters.
On January 21 2010, a subsidiary of the Company, BFF In ternational Ltd., issued ten-year bonds for a total value of US$750 million maturing on January 28 2020, with a coupon of 7.250% per year (yield to maturity

7.375%). The bonds become due and payable semi-annually as from July 28 2010. The funds raised from the offering will be allocated to the lengthening of the debt maturity profile and for corporate requirements in general.

Relates to the cost of idle capacity – in particular the result of new plants still at a pre-operational phase.

With the incorporation of Perdigão Agroindustrial S.A., a total of R$ 132 million of existing tax losses carried forward, and the negative base for calculation of the social contribution of this company were recognized by BRF during the year. As a result, the income tax and social contribution item reported a
negative R$ 65.2 million against a positive

against a loss of R$ 2.4 billion in the preceding year – reflecting the financial loss on derivative instruments recorded in Sadia’s balance sheet. If the fiscal loss on the incorporation of Perdigão Agroindustrial is  excluded, then the accumulated net result for 2009 would be R$ 360 million.

the primary share offering which resulted in the raising of R$ 5.3 billion and allocated for the purpose of stabilizing our consolidated capital structure. In addition, a further two capital increases were made through the incorporation of shares amounting to R$ 3.9 billion.

The operating performance as indicated by EBITDA (operating income before financial expenses, taxes and depreciation) was R$ 911.5 million, 21.4% less for the year and corresponding to an EBITDA margin of 5.7%, in particular, the result of pressure on margins due to the negative export performance. Consequently, in pro-forma terms, the year reported a decline of 47.4% in the EBITDA, reaching R$ 1.2 billion and an EBITDA margin of 5.8%.

The accounting and fiscal treatment with respect to the association agreement was measured in accordance with current practices, allocation being made to property, plant and equipment or non-current assets under the “intangible” item and subject to annual impairment  test (non-recoverability) appraisal.

Consolidated adjusted net income totaled R$ 252.5 million and the net income excluding the adjustment for the incorporation of the Agroindustrial subsidiary totaled R$ 120.4 million against R$ 54.4 million reported in 2008. These contrasting results reflect the impact of the adverse international market and the benefits of the financial gain due to the appreciation of the Real against the US dollar on our outstanding currency position.
Viewed from the pro-forma standpoint, the  C ompany posted a net income of R$ 227.6 million

Shareholders’ Equity was R$ 13.1 billion against R$ 4.1 billion on December 31 2008, a 220.4% increase. This includes the results of

In 2006, as the first company in the food sector to list on BM&FBOVESPA’s New Market (Novo Mercado), BRF is characterized by a widely-held shareholding structure, providing protective mechanisms and equal rights to shareholders.
In 2009, for the second consecutive year, the Company was ranked by IR Magazine Awards as the Best Brazilian Company in Corporate Governance. This accolade recognizes BRF’s policy of pursuing planned and transparent operations, an example being the successful conclusion of th e association with Sadia, an operation which will capture synergies and bring benefits to all shareholders.
The Company has two corporate credit ratings with the two highest classifications in its business sector: BB+ (PE), assigned by Standard & Poor`s and BA1 (PE) - Global Local Currency Corporate Family from Moody´s Investor Service.

All BRF’s principles and values are enshrined in its Code of Ethics and Conduct which establishes guidelines and provides orientation on decisions and attitudes to employees both with respect to one and other as well as to customers, suppliers and other stakeholders. Non-compliance with such guidelines is subjec t to legal penalties and can lead to the rescission of contracts (labor and commercial) in the event of violation of ethical principles. (GRI 4.8)

The Company adopts a policy of widely disseminating its results and initiatives, maintaining an investors’ relations website through which stakeholders can access the principal corporate decisions taken and closely monitor management processes. Transparency in relation to the investors is underscored through one-on-one meetings,

conference calls, public meetings (APIMECs and financial institutions), roadshows and in loco conferences.
The Company also adopts a policy for securities trading and for disclosing material facts to all its employees and stakeholders as a whole.
In 2009, investor attendance reported year on year growth of 104% reflecting the association with Sadia.

Although BRF’s is a widely held company, shareholders’ meetings are customarily held with a quorum of more than 70%. Participa tion in the meetings is stimulated through a direct approach to the investors as well as through the distribution of a reference manual. This explains in detail the reasons for the meeting, the importance of taking part as well as general guidance for participation.

BRF’s Board of Directors is made up of eleven members, the majority of them independent, and enjoying a two-year term of office. This body operates on a strategic basis, defining the business and capital expenditures plan, overseeing the Company’s established projects, deciding and assessing guidelines and the performance of the Com pany and its officers. (GRI 4.1, 4.3)
In accordance with best corporate governance practice, the members of the Board of Directors have no executive role in the activities of the Board of Executive Of ficers. Members receive a fixed compensation conditional on their participation in board meetings. (GRI 4.2, 4.5)
Meetings are held monthly and whenever necessary. In 2009, the Board met on 24 occa sions. (GRI 4.9).
All information on the Board’s activities can be accessed from the specific Management website, this ensuring integration of the corporate organs and the necessary support for analyses and decision-making.

Mechanical Engineer, with a postgraduate degree in Finance and a doctorate in Economics. He is a member of the Board of Directors of Weg, Ultrapar Participações, Suzano Papel e Celulose and Iochpe Maxion. He was an executive officer at the National Economic and Social Development
Bank - BNDES, at the Iochpe-Maxion Group and president of the Brazilian Association of Chicken Exporters - ABEF. He was Chief Executive Officer of Perdigão from 1994 to 2008.

Mechanical Engineer, with a postgraduate degree in Business Management. He has held the positions of Production Director, Regional Director and Sales Director at Empresas Weg. He is also currently Chairman of Weg.

Economist and specialist in marketing. He worked for 37 years at Unilever, heading up various teams around the world. He was chairman of Unilever Brasil and for twelve years sat on the company’s Latin American board of directors. He is currently a business consultant and has a seat on various boards.

Civil Engineer, with a degree from the Uni versidade Federal de Alagoas and a graduate in Law from the Maceió Higher Education Center. He concluded a specialization course in Strategic Management for Corporate Direc tors at INSEAD Business School, France; he has an MBA in Corporate Finance from PUC-Rio de Janeiro and a  postgraduation degree in Economics and Management of Labor Relations from PUC-SP. He also concluded the Advanced Management Program - Harvard Business School. A bank officer since 1978, he is currently also Administration Director of PREVI (a pension fund).

Economist with a postgraduate degree in Environmental and Economic Development and a master’s degree in Economics. He was Finance Secretary in the municipal govern ments of São Paulo, Campinas and Santo André.

Chemical Engineer, with a degree in Business Administration and specialization in Financial Management. He was Minister for Develop ment, Industry and Foreign Trade in the Federal Government. At Sadia, he sat on the Board of Directors, accumulating the function of Investor Relations Officer, and also holding the position of Executive Vice President. In 2008 he resumed his position as Chairman of the Board of Sadia.

Business Administrator with a postgraduate qualification in Economic Engineering and an MBA in Finance. He has 32 years of experi ence at Companhia Vale do Rio Doce. He is currently Investment and Finance Director of Fundação Vale do Rio Doce de Seguridade Social-VALIA and is also National Investments C ommittee Coordinator - ABRAPP.

Business Administrator, with specialization in Capital Markets. He was a  Vice President  at Citibank, and worked as an Institutional Customers Officer at Banco BMC. He is cur rently Investments and Finance Director at
Sistel (a pension fund) as well as a Member of the Board of Directors of CPFL and GTD Participações.

The Fiscal Council is made up of three independent members, one of them holding the position of financial specialist, meeting on a monthly basis and, whenever necessary, deliberating jointly with the Board of Direc tors. (GRI 4.1) Pursuant with United States legislation, the Fiscal Council also exercises the functions of Audit Committee. (GRI 4.4)

BRF’s governance model also prioritizes administrative efficiency and the professionalism of the Company’s managers. Within this structure, the committees play a fundamental role in integrating the Board of Directors and the Board of Executive Officers. (GRI 4.4)
Made up of members of the Board of Directors and the Board of Executive Officers, the Company has three advisory committees: Governance, Sustainability and Strategy; Finance, Policy and Risks; Management Compensation and Executive Development.  In addition, the Company also has a Disclosure Committee  as called for under the Sarbanes-Oxley Act.

Production Engineer, and has an MBA in Business Management with International Extension. He was Chief Executive Officer for Eleva Alimentos S.A. He worked for over ten years in the financial market and was a partner at Galeazzi & Associados and Finance
Director for the Estado de São Paulo Group and Eleva S/A.

Engineer, with a master’s degree in Business Sciences. He was Finance Director of the BNDES Employees’ Association – AFBNDE, Rio de Janeiro. Currently, he sits on the Board of Directors of Brasil Ferrovias S.A. and is a Member of the Fiscal Council/Audit Commit tee of BRF - Brasil Foods with the functions of Financial Specialist.

Business Administrator, graduating from EAESP – Fundação Getulio Vargas - FGV, with specialization in Advanced Management from the Fundação Dom Cabral and the INSEAD Business School, France; in Entrepreneurship from the Babson College; in Corporate Gov ernance. He was Co-founder of the Brazilian Corporate Governance Institute - IBGC and an Associate Member of IBEF–Brazilian Institute of Financial Executives and the IEF–Family Company Institute. He was an Executive Of ficer, Shareholder and Member of the Board of Directors of Metal Leve S.A. and Chairman of the CVM–Brazilian Securities and Exchange Commission in 1992.

Engineer, with a postgraduate degree in Finance and Industrial Economics, and a mas ter’s degree in Business Management. At the BNDES he headed up various departments as well as being Head of the Industrial Opera tions, Commerce and Services areas and the Industrial Area. He has extensive experience as a board director.

Economist, with a postgraduation degree in Economics with specialization in Marketing Administration from the FGV. Member of the Board of Directors of the newspaper ‘O Estado de São Paulo’ since 1999, Member of the Board of Directors of ALGAR – Algar S.A. Empreendimentos e Participações since 2005, Member of the Board of Directors of WTorre Empreendimentos Imobiliários S.A. since 2007. He was Chairman of the Board and Chief Executive Officer of Sadia S.A.

Accountant with a doctorate in Business Management. He was Planning Director of Accor Brasil, Audit Manager at  Pricewater houseCoopers and currently Managing- Partner of Baker Tilly Brasil Auditores Inde pendentes S/S.

Transactions in the Company’s securities were boosted by keen investor interest following the announcement of the association between Perdigão and Sadia, combined with the additional liquidity resulting from the primary offering and the incorporation of shares. Average daily financial volume traded on the BMF&Bovespa and the New York Stock Exchange – NYSE reached US$ 39.2 million in 2009, against US$ 26.8 million in 2008, corresponding to an increase of 45.9%.
In spite of the unfavorable international scenario, share performance reported growth of 52.6% during the year while the ADRs appreciated 98.5%. This performance accounted for 70% of the transactions involving the Company’s sector on the BM&FBOVESPA in 2009, and the total number of ADR operations for the sector on the NYSE.

During a period when the world market was still subject to the effects of the financial meltdown, BRF’s share performance is indicative of the level of investor confidence in the new cycle set in motion with the merger of Sadia.

At a meeting held on December 17 2009, the Board of Directors ap proved shareholder remuneration of R$ 100 million, corresponding to R$ 0.22998533 per share with payout on February 26 2010 in the form of interest on shareholders’equity, with retention of withholding tax at source in accordance with current legislation. The amount distributed to shareholders for fiscal year 2009 represented 39.7% of adjusted net income reported in the period.

Company to measure risks and opportunities, f acilitating a rapid response in the face of scenarios of economic turmoil.

More than just meeting specific legislation in the regions where it has operations, BRF has a policy of anticipating environmental demands, establishing targets for various indicators at levels that go beyond the re quirements of the environmental protection agencies.

BRF adopts a series of pre-established measures for maintaining the inherent risks to its business under the most rigorous con trol. The dilution of risk is deemed as one of the aspects in the strategic plan which is key to the Company’s good performance and the generation of value for all stakeholders.

BRF adopts a conservative posture in relation to currency dealing, maintaining an oversold position equivalent to approxi mately four  months of exports.

All BRF’s units carry property insurance for material damages, loss of profits and civil liability. The Company’s operations are also insured against all aspects involving the warehousing and product distribution stages.

The Company’s credit controls are con ducted through an advanced on-line system  which monitors information flow in real time. Specific limits are established for each sales office under the system, compliance with which is the responsibility of the Credit Com mittee.

BRF invests permanently in processes for improving sanitary controls to minimize and These frequently, precautions to eliminate can be seen risks at of all this stages kind. The precautions canbe seen at all stages of the Company’s businesses, from the choice of site for its plants to monitoring the processes which are the responsibility of the integrated outgrowers. Strategically distributed in different regions of Brazil, the slaughtering units are geographically dispersed to minimize the impact on performance of the businesses in the event of trade bans on products from a specific region of the country.

BRF has a formal policy for management of financial risks, approved by the Board of Directors and permanently monitored by the Strategies and Finance Committee. Among the norms established under this policy is that the Company does not operate in the leveraged derivatives market. BRF’s cash posi tion is entirely invested with first class banks in instruments of guaranteed liquidity.

Specialized in chilled and frozen products, BRF’s logistics chain is one of the most comprehensive and complex in Brazil and accounts for a significant percentage of the country’s refrigerated truck fleet. The logisti cal network consists of 36 distribution centers covering all the nation’s territory.
In 2009, the Company focused its efforts in this area on the integration of the dairy product supply chain and on targets for reducing warehousing and freight costs.
In the domestic market, this focus has translated into the reduction of logistical operating points – distribution centers and transit points, the restructuring of which has been made possible through the capture of synergies in the dairy product businesses.
Agility and quality of service have also been pivotal to the Company’s activities. Four regional management areas have been set up (São Paulo, Rio de Janeiro, Espírito Santo and Belo Horizonte) to ensure greater customer focus, identifying and anticipating consumer requirements.
A start has also been made on adjusting the emphasis which the Company places the various transportation modals. In 2009 for example, the use of the railway modal for shipping BRF’s production grew by 830% over 2008. The initiative for expanding this transportation modal is a component part of the Company’s strategy for boosting exports.
On the overseas front, the Company

BRF has the capacity to trace all the items produced at its units from breeder stock to the final product, including stages such those involving the application of medications as well as the type of feed consumed by the animals. All this data can be quickly accessed allowing corrective  measures to be taken in the event of emergencies during any one of the production stages.

The Company remains aligned to market requirements through the continuous moni toring of tendencies and macroeconomic scenarios. This enables it to respond in an agile and focused manner in the event of adverse situations and thus minimize the impacts on the results of its operations.

The Company adopts protective mecha nisms for guaranteeing supplies required throughout the year in the knowledge of the impact that corn and soybean commodity price volatility has on the performance of its business. Among these measures, particularly important are the geographic location of the plants, strategically sited in regions with readily available raw materials, maintenance of strategic buffer stocks as well as daily market monitoring of prices. BRF is equipped to conduct hedging operations at times of major volatility, when  necessary.

At the heart of BRF’s corporate policy is to guarantee creation of value and a return to shareholders. All the Company’s investments are based on detailed analysis of the pros pects for effective returns through the use of the EVA® (Economic Value Added) guidelines which are the basis for the structuring of the More Value system.

The Board of Executive Officers in conjunction with its various  committees is responsible for the day-to-day monitoring of the financial markets. This enables the

One of the first initiatives in this context was the creation of the BRF Producers’ Club. The Club’s purpose is to increase competitive ness in the market for milk through transfers of dairy farming technology to small and medium-size producers in the Company’s supplier portfolio, at the same time helping reduce costs.
Another important focus of technological upgrading in 2009 was the implementation of projects for identifying alternatives for nutritional improvements and animal wellbe ing, both of which have a direct  impact on company productivity.
BRF is the first Company in Brazil to invest in animal wellbeing in line with the best in ternational practices and in compliance with the most rigorous foreign trade requirements.
In partnership with some of Brazil’s most renowned universities, BRF’s Technology Center maintained its average annual output of 100 scientific studies for developing and anticipating solutions of questions related to the market in which the Company operates.
In all, 8 of BRF’s units are certified according to ISO 14001  standards.

successfully achieved a reduction in product delivery times. In 2009, BRF also completed the standardization of all logistical processes with the implementation of the SAP system at all units, including those abroad.
The logistical structure’s effective capacity for adjustment and decision was proven in 2009, when a fire of moderate proportions damaged the plant in Rio Verde (GO), affecting the distribution center adjacent to the industrial complex. The just-in-time system on which operations are based was decisive in the immediate transfer of  finished products to the ports, customers and third party warehouses which made up the loss of proprietary warehousing space. Supplies
to customers normally attended by this plant were also redirected, ensuring uninterrupted service to the points of sale.

responsibility, BRF prioritizes the develop ment of local suppliers, so contributing to economic growth and income distribution in regions where the Company has its opera tions. Approximately 80% of the Company’s purchases is regional, particularly in the case of the state of Goiás, which accounts for the supply of more than 95% of the requirements used by BRF in its operations in the state.
Rather than simply demanding compli ance with the regulations, BRF encourages and provides assistance to its suppliers in the adoption of responsible and sustainable practices.

BRF’s intangible attributes provide a solid competitive base contributing decisively to the execution of the strategic plan and facili tating the implementation of the Company’s plans for expansion and internationalization. Stakeholder trust in relation to the intangible
assets is preserved by the Company through permanent investments in enhancing this capital.
In order to maintain its reputation, which has been built up since its foundation, BRF periodically measures the degree of con sumer  satisfaction with its brand names. The Company also undertakes consumer percep tion surveys on the qualities of its products.

Unceasing technological innovation is one of the key pillars upon which BRF’s solid growth has been achieved over the years. The adoption of technological tools and advanced systems are part of the corporate process whereby decisions on the suitability of instal lations are considered and implemented in line with the Company’s strategic vision of
expansion and sustained growth.
In 2009, the technology area included among its functions the definition and adaptation of procedures and methods to be employed in agricultural issues related to milk production. This represents a further step forward in the process of integrating the Eleva business.

BRF’s quest for efficiency and integration of the logistics chain includes procurement which is structured into five main categories (raw materials, materials, animals, services and permanent assets).
Rigid criteria are employed in the ratifica tion of suppliers and involve requirements of an ethical and socio-environmental nature, in addition to strict compliance with the legislation.
In line with its commitment to social

BRF’s two leading brands (Perdigão and Sadia) are among the most valuable in Brazil according to the consultancy, Brand Finance. With more than half a century of tradition, both names transmit reliability and value to

achieving a competitive edge in the market. Through a complex integrated warehousing and distribution model, the Company serves customers ranging from small retailers to major supermarket chains.
  The Company has successfully built one of the best product supply systems in the coun try thanks to the synergies between product lines and the high degree of penetration of its distribution network combined with modern management systems.

The Company has introduced a com munication plan specifically directed to employees, maintaining them informed on progress involving the association with Sadia, as well as ensuring workplace peace of mind during the transition period.
BRF’s objective is to develop a diversified team, promoting the professional develop ment of employees, at the same time at tracting market professionals to be a part of a structure of dynamic and innovative people.

All BRF’s operations are supported by internationally tried and tested management tools, duly adapted to the realities of each region where the Company operates. This facilitates access to information as well as decision making both from the production and also the  administrative points of view. Among these tools it is worth highlighting
More Value, Total Service, Total Quality and the Shared Services Center.

BRF has established and, through con tinual upgrading, developed one of the most efficient chilled and frozen product distribu tion systems in Brazil as part of its objective of

One of the BRF’s principles has always been that a concern for the economic, environmental and social impacts of its busi nesses should always go hand in hand with production processes. The Company adopts a structured policy of sustainability based on best international practices.
In concrete terms this policy translates into actions which are practiced in the day-to-day routine and manifested in aspects involving personnel management, the responsible use of non- renewable natural resources and

proactive involvement in relation to the com munities of which the Company is a part.
In order to structure these commitments and practices in 2009, BRF set up a Working Group (GT) made up of managers from various areas, and an Executive Sustainability Committee on which the principal officers of the Company sit.
Following the merger between Perdigão and Sadia and on the cusp of a new growth cycle, the Company reaffirms its commitment to continue focused on the challenges of

sustainability. BRF is of the firm belief that by contributing to the preservation of natural resources, the communities and workforce, in the final analysis it is also preserving and enhancing the integrity of its business.

sexual orientation. The Company has hotlines in place specifically for receiving allegations of discrimination thus ensuring equality of
treatment among all its employees. Infringe ments of the Code of Ethics and Conduct is subject to the applicable legal penalties. No incidents of discrimination were registered at BRF and Sadia. (GRI HR4)
An example of the importance placed on diversity is the Capinzal plant’s program run specifically for the social inclusion of people living on the Cacique Doble (RS) indian reserve situated 81 km from the plant. Nine members of the reserve’s inhabitants have been hired by BRF. In 2009, there was no record of any violation involving the rights of indigenous people at any of the locations where the Company has installations. (GRI HR9)

and Criminal Responsibility. (GRI HR3)
During the year, Sadia ran a lecture on “Hu man Rights in the Corporate Environment”, at an in-house workshop for Sustainability Working Groups with the participation of 35 employees.
Brasil Foods requires that all companies providing security and surveillance services substantiate that their employees have un dergone skills training or recycling courses, including aspects  with respect to human rights.
The Federal Police, the body which regu lates private security companies in Brazil, is responsible for an official handout used in the courses. This publication contains a specific chapter on human rights. (GRI HR8)