EX-99.1 2 ex99-1.htm EX-99.1

BRF_Pos_Hor

BRF S.A.

Publicly-Held Company

CNPJ 01.838.723/0001-27

NIRE 42.300.034.240

PROPOSAL OF THE BOARD OF DIRECTORS FOR THE ORDINARY AND EXTRAORDINARY GENERAL SHAREHOLDERS’ MEETING TO BE HELD ON APRIL 27, 2021

Dear Shareholders,

In compliance with Instruction No. 481/2009 of the Brazilian Securities and Exchange Commission, (local acronym CVM), we present below the management proposal (“Proposal”) of BRF SA (“Company” or “BRF”), containing the information and documents related to the matters to be resolved at the Ordinary and Extraordinary General Shareholders’ Meeting of the Company, to be held on April 27, 2021, at 11:00 a.m. (“AGOE”), exclusively under virtual format, by means of the digital platform Chorus Call (“Digital Platform”):

I. ORDINARY GENERAL SHAREHOLDERS’ MEETING

(i) To take the Management’s accounts, examine, discuss and vote on the Management Report, the Financial Statements and other documents related to the fiscal year ended December 31, 2020, including the absorption of the profit of such year by the balance of accumulated losses;

Management Proposal: Approve the management accounts and the financial statements of the Company for the fiscal year ended on December 31, 2020 (“Fiscal Year 2020”), accompanied by the management report, the explanatory notes, the report of the independent auditors, the opinion of the Fiscal Council, the summarized annual report of the Audit and Integrity Committee, the Managers’s comments on the Company’s financial situation, in accordance with Item 10 of the Company’s Reference Form, pursuant to Appendix I to this Proposal, as required by article 9 of CVM Instruction No. 481/2009.

We emphasize that the profit for the financial year of 2020, n the amount of R$ 1,383,563,620.46 was fully used to offset the accumulated losses balance, in accordance with the provisions of article 189 of Law No. 6.404/1976 (“Brazilian Corporation Law. In any case, the Company presents Appendix 9-1-II to CVM Instruction No. 481/2009 under the Appendix II to this Proposal.

(ii) To set the annual global compensation of the Company’s management for the year 2021.

Management Proposal: Pursuant to Article 17 of the Bylaws, approve the annual global compensation for the fiscal year 2021 for the members of the Board of Directors and of the Board of Officers in the amount of up to R$ 103,368,000.00. Such amount refers to the proposed limit for fixed compensation (salary or pro-labore, direct and indirect benefits) and benefits motivated by the termination of the position, as well as variable remuneration (profit sharing) and related values the Stock Option Plan and the Company’s Restricted Stocks Plan, as summarized below:

	Approved 2020	Accomplished 2020	Proposal 2021
Board of Directors (in thousands of reais)
Fees + Charges and Benefits	15,447	14,407	15,456
Share-based compensation	5,997	5,727	5,997
Total Board of Directors	21,444	*20,134*	*21,453*
Board of Officers (in thousands of reais)
Fees + Charges and Benefits	43,858	30,418	38,751
Share-based compensation	15,131	18,845	20,167
Profit Sharing	22,936	19,812	22,997
Total Board of Officers	81,924	*69,075*	*81,915*

TOTAL Board of Directors and Statutory Board	103,368	*89,209*	*103,368*

The amount proposed for Exercise 2021 is similar to that proposed for Exercise 2020.

It is important to note that, differently from what we presented in previous years, the proposal for management compensation for 2021 does not take social charges into consideration, according to a Circular recently published by CVMs´ Superintendence of Business Relations (Circular CVM/SEP/Nº 1/2021 - Proceeding No. 19957.007457 / 2018-10).

Thus, we hereby inform you that the present annual global compensation proposal for the Company's management already excludes the amounts related to social charges, both in the 2021 proposal and in the information on what was approved and carried out in 2020.

Appendix III to this Proposal contains the information related to Item 13 of the Company’s Reference Form, as required by article 12 of CVM Instruction 481/2009.

(iii) To elect the members of the Fiscal Council .

Management Proposal: Considering that the operation of the Company’s Fiscal Council ends at the first Ordinary General Shareholders’ Meeting after its election, as provided in article 161, paragraph 5 of Law No. 6.404/1976, and that article 30 of the Bylaws establishes that the Company will have a Fiscal Council with permanent functioning, the Management proposes, for a term of office until the Ordinary General Shareholders’ Meeting to be held in the fiscal year 2021, the election of the following members and alternate members of the Fiscal Council, namely:

Effective Members

Alternate Members

Atílio Guaspari

Maria Paula Soares Aranha

Marcus Vinicius Dias Severini

Monica Hojaij Carvalho Molina

André Vicentini

Valdecyr Maciel Gomes

It should be noted that the candidates Maria Paula Soares Aranha (holder) and Mônica Hojaij Carvalho Molina (alternate) were appointed by the shareholder Caixa de Previdência dos Funcionários do Banco do Brasil – Previ and the candidates André Vicentini and Valdecyr Maciel Gomes by the shareholder Fundação Petrobras de Seguridade Social – PETROS.

Appendix IV to this Proposal contains the information regarding the candidates for members of the Company's Fiscal Council, pursuant to Items 12.5 to 12.10 of the Company's Reference Form, as required by article 10 of CVM Instruction 481/2009.

(iv) To establish the compensation of the members of the Fiscal Council for the fiscal year 2021.

Management Proposal: Pursuant to article 16, item V, of the Bylaws, to approve the compensation for the fiscal year 2021 for the effective members of the Company’s Fiscal Council in an amount corresponding to 10% (ten percent) of the average value of the compensation attributed to the Company’s Officers (not considering benefit not counted, representation fees and profit sharing), pursuant to article 162, paragraph 3, of the Brazilian Corporation Law, considering the maximum amount as summarized below:

	Approved 2020	Accomplished 2020	Proposal 2021
Fiscal Council
Fees + Charges	798	533	798
Total Fiscal Council	798	533	798

Appendix III to this Proposal contains the information related to Item 13 of the Company’s Reference Form, as required by article 12 of CVM Instruction No. 481/09.

II. EXTRAORDINARY GENERAL SHAREHOLDERS’ MEETING

(i) To resolve on the following amendments to the Company’s Bylaws, as detailed in the draft with revision marks contained in the Proposal disclosed to the market:

(a) Amend Article 3 of the Company’s Bylaws, in order to include, in the corporate purpose:

the (i) manufacture by its own or on demand, commercialization, export and import of pharmochemical products derived from animal slaughter; (ii) manufacture and commercialization of organic chemical products derived from animal slaughter; and (iii) manufacture, distribution and export of pharmaceutical ingredients derived from animal slaughter; and

(b) Amend Article 33 of the Company’s Bylaws, in order to (1) establish that the Coordinator of the Audit and Integrity Committee will be chosen by the Board of Directors and not by the members of the Audit and Integrity Committee; (2) establish that Audit and Integrity Committee’s regular meetings shall have a bimonthly periodicity and no longer monthly; and (3) exclude the obligation that the meetings between the Audit and Integrity Committee Coordinator and the members of the Board of Directors and the Fiscal Council be held quarterly;

Management Proposal: Approve the amendments (i) of article 3 of the Bylaws in order to include, in the corporate purpose: the (i) manufacture by its own or on demand, commercialization, export and import of pharmochemical products derived from animal slaughter; (ii) manufacture and commercialization of organic chemical products derived from animal slaughter; and (iii) manufacture, distribution and export of pharmaceutical ingredients derived from animal slaughter; and (ii) Article 33 of the Bylaws to insert new rules regarding the operation of the Audit and Integrity Committee.

Appendix V to this Proposal contains the version of the Company’s Bylaws with the proposed amendments incorporated and highlighted and Appendix VI contains the proposed amendments to the bylaws in the form of a comparative table, with the indication of the justification for the change and the analysis of the legal and economic effects, as required by article 11 of CVM Instruction No. 481/09.

(ii) Consolidate the Company’s Bylaws with the approved changes.

Management Proposal: If the proposals object of item II (i) above are approved, the Company’s Management proposes the approval of the consolidation of the Bylaws, in order to reflect, in a single document, the wording in force, under the terms of the document contained in the Appendix V to this Proposal.

(iii) To resolve on the following changes to the Restricted Stocks Plan of the Company (“Restricted Stocks Plan”): (a) Exclude the concepts of “Parity Actions”, “Total Shareholder Return - TSR” and “Funds Committed”, and, therefore change items 1.1, 5.3, 5.3.1 and 7.1 and exclude itens 5.3.2 and 7.2 of the Restricted Stocks Plan; (b) Insert the possibility for the Company, at its sole discretion and subject to any restrictions and procedures provided for in the applicable legislation and regulation, to grant restricted shares in the form of American Depositary Receipts - ADRs, with the consequent inclusion of a new item 6.2 in the Restricted Stocks Plan; (c) Consolidate the competence of the Board of Directors to establish the effects of the Beneficiary's termination in relation to “Restricted Stock Not Fully Acquired”, with the consequent amendment of item 8.1 and the exclusion of the current items 8.2 and 8.3 of the Restricted Stocks Plan; and (d) Implement wording adjustments, without material change of

content, and consequently change items 1.1 (concepts of “Restricted Stock Not Fully Acquired” and “Committee”), 2.1, 3.1, 3.2, 4.1, 4.2 (d), 4.3, 6.1, 7.3, 7.4, 10.2 and 10.3 and the exclusion of the current item 6.2 of the Restricted Stocks Plan.

Management Proposal : To approve all the proposed changes to the Restricted Stocks Plan of the Company (“Restricted Stocks Plan”), which, in general, aim to give greater flexibility to the Board of Directors in the management of the Restricted Stocks Plan, allowing it to be able to establish, in each specific situation, the conditions that it deems most appropriate to regulate the granting of shares restricted to the management and other employees of the Company.

The table below shows the change to be made in the Restricted Stocks Plan:

Item	Current	Proposed
1.1. Definitions	“Parity Actions” means the Company's stocks acquired by the Beneficiary for participation in the Plan with the resources of Authorized Funds.	“Parity Actions” means the Company's stocks acquired by the Beneficiary for participation in the Plan with the resources of Authorized Funds.
1.1. Definitions	"Restricted Stock Not Fully Acquired" means the Restricted Stock not fully acquired in accordance with item 7.1 below;	“ Restricted Shares Not Fully Acquired” means the Restricted Stock in relation to which the necessary condition ~~not fully acquired in accordance with~~ item 7.1 below has not yet been fulfilled;
1.1. Definitions	“Committee” means the committee established to advise the Board of Directors of the Plan, pursuant to item 4.1 below;	“Committee” means the committee established to advise the Board of Directors on the management of the Plan, pursuant to item 4.1 below;

1.1. Definitions	“TSR” means the “Total Shareholder Return” - indicator of total return to shareholders, calculated from the price of the Company's shares on the last business day of each fiscal year, plus the dividends per share paid by the Company from the Grant Date, with the premise that dividends will be reinvested in Company itself, and such indicator obtained through consultation to information from Bloomberg news agency or, failing that, for an equivalent; and	“TSR” means the “Total Shareholder Return” - indicator of total return to shareholders, calculated from the price of the Company's shares on the last business day of each fiscal year, plus the dividends per share paid by the Company from the Grant Date, with the premise that dividends will be reinvested in Company itself, and such indicator obtained through consultation to information from Bloomberg news agency or, failing that, for an equivalent; and
1.1. Definitions	“Funds Committed” means the profits, hiring bonuses and other resources (not including salary) authorized by the Board of Directors for investment by the beneficiary in the acquisition of the Company's shares.	“Funds Committed” means the profits, hiring bonuses and other resources (not including salary) authorized by the Board of Directors for investment by the beneficiary in the acquisition of the Company's shares.
2.1. Objectives of the Plan	The Plan aims to allow the grant of Restricted Shares to Eligible Persons selected by the Board of Directors, in order to: (a) stimulating the expansion, success and the achievement of social objectives of the Company; (b) aligning the interests of shareholders of the Company to the Eligible Persons; and (c) allow the Company or other companies under its control, attract and retain tied the Eligible Persons.	The Plan aims to allow the grant of Restricted Shares to Eligible Persons selected by the Board of Directors, in order to: (a) stimulating the expansion, success and the achievement of social objectives of the Company; (b) aligning the interests of shareholders of the Company to the Eligible Persons; and (c) allow the Company, or other companies under its control, attract and retain tied the Eligible Persons.
3.1. Eligible Persons	May be elected as Restricted Stock Beneficiaries under the Plan members of the Board of Directors, officers, statutory or not, and others occupying positions of Company or other companies under its control.	May be elected as ~~Restricted Stock~~ Beneficiaries under the Plan members of the Board of Directors, officers, statutory or not, and others occupying positions of in the Company or in other companies under its control.
3.2. Eligible People	Nevertheless, members of the Board of Directors who are also members of the Board of Officers shall only receive the Company’s Restricted Stocks grants in the quality of officers.	Nevertheless, members of the Board of Directors who are also members of the Board of Officers shall only receive the ~~Company’s~~ Restricted Stocks grants in the quality of officers.

4.1.Plan Administration	The Plan will be managed by the Board of Directors, which may, in observance of the provisions of the Company’s Bylaws and the current applicable legislation, respecting the limits of the global annual compensation of the managers, constitute a Committee specially created to advise it in the administration of the Plan.	The Plan will be managed by the Board of Directors, which may, in observance of the provisions of the Company’s Bylaws and the current applicable legislation, respecting the limits of the global annual compensation of the managers, be assisted by the People, Governance, Organization and Culture Committee and/or another group/collegiate, defined by it ~~constitute a Committee specially created to advise it in the administration of the Plan~~.
4.2.Plan Administration	(d) approve the Grant Agreements to be entered into between the Company and each Beneficiary, subject to the provisions of the Plan.	(d) approve the terms and conditions of the Grant Agreements to be entered into between the Company and the ~~each~~ Beneficiary, subject to the provisions of the Plan.
4.3.Plan Administration	In exercising its authority, the Board of Directors will be subject only to the limits of the law and the regulations of the Securities and Exchange Commission and the terms of the Plan, it being understood that the Board of Directors may treat differently administrators and employees or subsidiaries that are in a similar situation and is not bound by any rule of equality or analogy to extend to all Beneficiaries the conditions that it deems applicable only to one or some in its sole discretion. The Board of Directors may also establish special treatment for exceptional cases for the effectiveness of each right of the Restricted Shares, provided that the rights already granted are not affected to the Beneficiaries or the basic principles of the Plan. Such exceptional circumstance shall not constitute a precedent for other Beneficiary.	In exercising its authority, the Board of Directors will be subject only to the limits of the law and the regulations of the Securities and Exchange Commission and the terms of the Plan, it being understood that the Board of Directors may treat differently administrators and employees from the Company or from companies under its control ~~subsidiaries~~ that are in a similar situation and is not bound by any rule of equality or analogy to extend to all Beneficiaries the conditions that it deems applicable only to one or some in its sole discretion. The Board of Directors may also establish special treatment for exceptional cases for the effectiveness of each right of the Restricted Shares, provided that the rights already granted are not affected to the Beneficiaries or the basic principles of the Plan. Such exceptionality ~~circumstance~~ shall not constitute a precedent for other Beneficiariesy.

5.3.

Grant of Restricted Stocks

The Board of Directors will determine the grant of Restricted Stock for investment by the Beneficiary in the acquisition of Parity Stock as provided in Section 5.3.1 below or any other criteria for granting that deems appropriate, and such Parity Stocks shall be subject to the rules set out in section 7.2 below. Additionally, the Board of Directors may make the acquisition of rights related to the Restricted Stocks to other conditions, and impose restrictions on transfer, and may also reserve for the Company repurchase options and/or preemptive rights in case of sale by such Beneficiary same Restricted Stock.

The Board of Directors will determine the grant of Restricted Stock for investment by the Beneficiary in the acquisition of Parity Stock as provided in Section 5.3.1 below or any other criteria for granting that deems appropriate, and such Parity Stocks shall be subject to the rules set out in section 7.2 below. Additionally, the Board of Directors may make the acquisition of rights related to the Restricted Stocks to any ~~other~~ conditions, that deems convenient and impose restrictions on transfer, and may also reserve for the Company repurchase options and/or preemptive rights in case of sale by such Beneficiary same Restricted Stock.

5.3.1.

Grant of Restricted Stocks

At the discretion of the Board of Directors, the number of Restricted Stock to be granted to the Beneficiaries may be calculated as follows:

(a) To the Beneficiaries who invest 25% (twenty five percent) to 50% (fifty percent) of the net value of the Funds Authorized, will be granted the equivalent of one (1) Restricted Stock for each Parity Stock.

(b) To the Beneficiaries who invest more than 50% (fifty percent) limited to 100% (a hundred percent) of the net value of the Funds Authorized, will be granted the equivalent of two (2) Restricted Stock for each Parity Stock.

At the discretion of the Board of Directors, the number of Restricted Stock to be granted to the Beneficiaries may be calculated as follows:

Without prejudice to other conditions that the Board of Directors deems convenient, pursuant to item 5.3 above, the acquisition Restricted Stocks rights may, at the discretion of the Board of Directors, be either wholly or partially subject to the Company’s achievement of certain performance rates. Measurement of performance rates and their effects on the acquisition of Restricted Stocks rights shall be defined by the Board of Directors and should be reflected in the Grant Agreements.

5.3.2.

Grant of Restricted Shares

5.3.2. The Beneficiary, following the acquisition of Parity Stocks on B3, must prove the acquisition of such Parity Stock by delivery to the Company of the respective brokerage notes.

6.1.

Stocks subjected to the Plan

The total number of Restricted Stock that may be granted under this Plan, added to the total number of shares that may be acquired under the Stock Option Plan will not exceed 2.5% (two and a half percent) of the common, registered, book-entry shares with no par value, representing the Company’s total capital stock, corresponding, on this date, to 20,311,831 (twenty million, three hundred and eleven thousand, eight hundred and thirty-one) common, registered, book-entry shares with no par value issued by the Company.

The total number of Restricted Stock that may be granted under this Plan, added to the total number of shares that may be acquired under the Stock Option Plan ~~will~~ shall not exceed 2.5% (two and a half percent) of the common, registered, book-entry shares with no par value, representing the Company’s total capital stock, corresponding, on this date, to 20,311,831 (twenty million, three hundred and eleven thousand, eight hundred and thirty-one) common, registered, book-entry shares with no par value issued by the Company.

6.2.

Stocks subjected to the Plan

In order to meet the grant of Restricted Stock under the Plan, the Company, subject to applicable laws and regulations, will sell treasury shares through a private transaction at no cost to the beneficiaries.

The Board of Directors, at its sole discretion, may choose to grant to Beneficiaries some or all of the Restricted Stocks to which they are entitled in the form of ADRs - American Depositary Receipts backed by stocks issued by the Company, subject to the limits established in item 6.1 above, as well as any restrictions and procedures provided for in the applicable legislation and regulation.

7.1.

Acquisition of Rights Related to Restricted Stock

(a) the Beneficiaries remain continuously connected as an administrator or employee of the Company for the period to be defined by the Board of Directors; and

(b) is obtained by the Company a TSR to be set by the Board of Directors in their respective Grant Agreements, which must be determined at the end of each anniversary of the Grant Date during the all the period to be defined by the Board of Directors, under the terms of item (a) above.

Without prejudice to other terms and conditions set forth in the respective Grant Agreements, the rights of beneficiaries in respect of Restricted Stock will only be fully acquired if ~~is checked, all of the following conditions: (a)~~ the Beneficiaries remain continuously connected, as an administrator or employee of the Company for the period to be defined by the Board of Directors and established in each Grant Agreement~~; and~~

7.2. Acquisition of Rights Related to Restricted Stock	While the rights of Restricted Stock are not fully acquired under the terms and conditions set out in item 7.1 above, the Beneficiary may not engage, sell, assign, sell or transfer, directly or indirectly, the Parity Stocks.	While the rights of Restricted Stock are not fully acquired under the terms and conditions set out in item 7.1 above, the Beneficiary may not engage, sell, assign, sell or transfer, directly or indirectly, the Parity Stocks. Once the condition established in item 7.1 above is met, and pursuant to the legal requirements and applicable regulations, the Company shall either transfer the relevant Restricted Stocks or the equivalent financial amount to the Beneficiary, at no cost to the Beneficiary.
7.3. Acquisition of Rights Related to Restricted Stock	Once the condition established in item 7.1 above is met, and pursuant to the legal requirements and applicable regulations, the Company shall transfer the relevant Restricted Stocks to the Beneficiary, at no cost to the Beneficiary.	No change in wording, only renumbered to 7.2
7.4. Acquisition of Rights Related to Restricted Stock	The Restricted Stock fully acquired under the Plan will maintain all the rights of their species, except for the prohibition periods trading in shares as provided by law and applicable regulations, as well as possible as otherwise determined by the Board of Directors.	(Renumbered to 7.3) The Restricted Stock fully acquired under the Plan will maintain all the rights inherent to the condition of shareholders of the Company ~~of their species~~, except for the prohibition periods trading in shares as provided by law and applicable regulations, as well as possible as otherwise determined by the Board of Directors.
8.1. Hypothesis of Termination and its Effects	Except as provided below, the Beneficiary's severance of hypotheses, the Restricted Stocks Not Fully Acquired shall be automatically canceled by operation of law, without prior warning or notice, and without any right to compensation.	Except ~~as provided below,~~ otherwise defined by the Board of Directors and established in the respective Grant Agreements, the Beneficiary's severance of hypotheses, the Restricted Stocks Not Fully Acquired shall be automatically canceled by operation of law, without prior warning or notice, and without any right to compensation.

8.2. Hypothesis of Termination and its Effects	In case of Termination event for Beneficiary's death, the Restricted Stocks Not Fully Acquired in the Termination date will have their vesting period anticipated and, subject to the applicable legal and regulatory requirements, the Company will transfer to the beneficiary of the estate's name, or if this ended to the Beneficiary's legal successors, their Restricted Stock at no cost to the beneficiary or their heirs and successors in title.	In case of Termination event for Beneficiary's death, the Restricted Stocks Not Fully Acquired in the Termination date will have their vesting period anticipated and, subject to the applicable legal and regulatory requirements, the Company will transfer to the beneficiary of the estate's name, or if this ended to the Beneficiary's legal successors, their Restricted Stock at no cost to the beneficiary or their heirs and successors in title.
8.3. Hypothesis of Termination and its Effects	Nevertheless the above, the Board of Directors may, at its sole discretion, whenever it deems that social interests are better served by such a measure, fails to observe the rules laid down in the above items, giving special treatment to a particular Beneficiary.	Nevertheless the above, the Board of Directors may, at its sole discretion, whenever it deems that social interests are better served by such a measure, fails to observe the rules laid down in the above items, giving special treatment to a particular Beneficiary.
10.2. General Provisions	This Plan and related Grant Agreements (i) do not create any rights other than those expressly provided for in its own terms, (ii) do not give stability or guarantee employment or stay in the condition of administrator or employee, (iii) or harm the right of the Company or other companies under its control, at any time and as appropriate, terminate the employment contract or to terminate the mandate or the relationship with the Beneficiary, (iv) do not guarantee the right to re-election or reappointment functions in the Company or other companies under its control.	This Plan and related Grant Agreements (i) do not create any rights other than those expressly provided for in its own terms, (ii) do not give stability or guarantee employment or stay in the condition of administrator or employee, (iii) or harm the right of the Company or other companies under its control, at any time and as appropriate, terminate the employment contract or to terminate the mandate or the relationship with the Beneficiary, (iv) do not guarantee the right to re-election or reappointment functions in the Company or other companies under its control. (adjustments in Portuguese only in order to better adequate language)
10.3. General Provisions	Each Beneficiary shall expressly adhere to the terms of the Plan, by written declaration, without any exception, as defined by the Board of Directors.	Each Beneficiary shall expressly adhere to the terms of the Plan, by signing the agreement ~~written declaration~~, without any exception, as defined by the Board of Directors.

Appendix VII to this Proposal contains the version of the Restricked Stocks Plan with the proposed amendments incorporated and highlighted.

This is what the Board of Directors had to propose and expects to be evaluated and approved by Messrs. shareholders.

* * *

The Company’s shareholders interested in accessing the information or raising questions related to the above proposals should contact the Investor Relations area, by calling +55 (11) 2322-5377 or via e-mail: acoes@brf-br.com . All documents pertinent to this AGOE are available to shareholders on the following websites https://ri.brf-global.com/, www.b3.com.br and www.cvm.gov.br.

São Paulo, March 26, 2021.

INDEX

Appendixes to the Management Proposal for the Ordinary and Extraordinary General Shareholders’ Meeting of BRF S.A., to be held on April 27, 2020

Appendix I - Management comments on the Company’s financial situation (Item 10 of the Company’s Reference Form, pursuant to CVM Instruction No. 480, of December 7, 2009). p. 15

Appendix II - Information on the allocation of net income (Appendix 9-1-II of CVM Instruction No. 481, of December 17, 2009). p. 83

Appendix III - Information on the compensation of the Management and of the Fiscal Council (Item 13 of the Reference Form, according to CVM Instruction No. 480, of December 7, 2009). p. 86

Appendix IV - Information on candidates for the positions of members of the Fiscal Council (Items 12.5 to 12.10 of the Reference Form, according to CVM Instruction No. 480, of December 7, 2009). p. 125

Appendix V - Copy of the Company’s Bylaws highlighting the proposed amendments (Article 11, item I, of CVM Instruction No. 481, of December 17, 2009). p. 130

Appendix VI - Comparative table of the proposed amendment to the Company’s Bylaws with an indication of justification for the changes and alanysis of their legal and economic effects. (Article 11, item II, of CVM Instruction No. 481, of December 17, 2009). p. 161

Appendix VII - Copy of the Company’s Restricted Stocks Plan, highlighting the proposed amendments. p. 165

* * *

BRF S.A.

Appendix I - Management’s Comments on the Company’s Financial Situation (Item 10 of the Company’s Reference Form, according to CVM Instruction No. 480, of December 7, 2009)

10. Directors’ comments

The following information presented has been evaluated and commented on by the Company´s Directors:

10.1 - Financial conditions and general assets

a. Financial conditions and general assets

The Company has sufficient financial and equity conditions to continue its business plan and fulfill its short and long-term obligations, including loans from third parties, as well as to meet the financing of its activities and cover its need for resources.

The table below shows the evolution of the main financial indicators of the Company, considering its consolidated financial statements:

Ratios In thousands of R$	2020	2019	2018
Current Assets¹	22,725,959	14,946,182	15,704,595
Current Liabilities¹	15,418,610	13,324,005	13,357,111
Current Liquidity	1.47	1.12	1.18
Current Assets¹	22,725,959	14,946,182	15,704,595
Long-term Receivables	9,308,366	9,455,356	7,549,076
Current Liabilities¹	15,418,610	13,324,005	13,357,111
Non-current Liabilities	25,411,044	20,228,277	20,361,960
Overall Liquidity	0.78	0.73	0.69
Leverage (Net Debt² / Adjusted EBITDA³)	2.73	2.50	5.12

______________________

⁽¹⁾

The assets held for sale and liabilities directly associated with these assets were not considered for the calculation of the current and overall liquidity ratios.

⁽²⁾

The Company calculates net debt as the balance of loans and financing and derivative financial liabilities, net of cash and cash equivalents, marketable securities, restricted cash and derivative financial assets. Net debt is a financial measure and not an accountant measure in accordance with IFRS or US GAAP. For 2018, a Pro-Forma⁴ Net Debt was used for the calculation of the leverage.

⁽³⁾

EBITDA, defined as the earnings before interest, tax, depreciation and amortization, is used as a means of measuring the performance of the Company by the management. For 2017 a pro-forma⁵ EBITDA was used for the calculation of the leverage. Adjusted EBITDA is a metric that arises from EBITDA and has adjustments to approximate to the potential of gross operational generation of cash. Both metrics are used as performance measures by the Company’s management.

⁽⁴⁾

Pro-forma Net Debt, including the sale of the assets in Argentina (R$564,000 thousand), Europe and Thailand (R$1,138,000 thousand), the plant in Várzea Grande- MT (R$100,000 million), the non-used portion of the FIDC in 2018 (R$200,000 thousand) and the foreign exchange adjustment related to the forecasted R$/US$ at the moment of the announcement of the Operating and Financial Restructuring dated of June 29, 2018 (R$203,000 thousand).

2020

BRF ended the challenging year of 2020 with consistent value generation, caring for people, reinforcing its culture, evolving in the brand recognition, also the corporate restructuring announced in June 2018 was successfully concluded. This journey, amid the complex and extraordinary event occurred in 2020, evidenced our strength, our capacity and BRF’s joint efforts to execute and deliver the assumed commitments.

The Company has worked hard to implement a culture of high performance, internally called " BRF Essence " - a set of concepts guiding its decisions and actions, based on its history, legacy, values and vision of the future. BRF Essence has also guided the Company throughout the pandemic. During the pandemic, the Company, with agility and sensitivity, took care of its people and the communities in which it operates, through various actions that the Company has reported over the past quarters. The implementation of the BRF Essence was reflected in the increase of the Company's engagement, the result of a recent survey involving more than 44 thousand respondents who answered 43 questions covering subjects such as leadership, well-being, career, diversity, safety, quality, integrity, among others. Of the total surveyed, 86% of employees responded favorably to the questions. There was an evolution in all categories, with emphasis on “confidence in the decisions taken by senior management”, which reached 95% satisfaction in the survey. These levels of engagement are comparable to the levels of the best companies composing the high-performance global market^[1] and, in general, above the levels of companies in the above the global market of non-durable consumer goods. The Company is also a reference (benchmark) in terms of quality, transparency, diversity, leadership, career, and development compared to companies of the highperformance global market.

The Company, in its understanding, managed to combine growth and profitability by optimizing our channels, improving the mix of products, practicing intellectual leadership, promoting excellent commercial execution, and through customer support of its iconic brands. The Company also reinforced one of its most competitive advantages: its brands. Sadia is the most valuable brand within Brazil’s food segment valued at US$1.8 billion, according to Exame/Brand Finance. Sadia is recognized as the most remembered brand in 2020 and most preferred by consumers in the protein segment. Still according to that research, Perdigão is the fastest-growing food brand over the last few years and conquered the preference of new consumers in 2020. Qualy is the most preferred margarine brand and the most memorable by over 50% of Brazilians, making it an absolute leader in this category. Banvit became the preferred brand among Turkish consumers, with a 54% preference, like Sadia in the Halal market, with a 38% preference according to the Ipsos institute.

The Company had a consolidated net revenue from continuing operations of R$39,469,699 (18.0% above 2019). The operating results, measured by the income before financial results and income taxes, was R$2,846,792, with a net profit of R$ 1,390,069.

The Company's net debt stood at R$14,152,414, 6.7% higher than 2019, impacted mainly by (i) non-cash effects over gross debt, such as the exchange rate variation and liabilities derivatives^[2], (ii) appropriation of interest rates, net of payment, (iii) share buyback in 2020; and (iv) free cash generation.

The Company’s net leverage, measured by net debt/Adjusted EBITDA in the last 12 months, reached 2.73x in 2020. Early in 2020, the Company reviewed its net leverage guidance to the level between 2.35 – 2.75x for 2020. So the net leverage reached this interval, with a solid lengthening of indebtedness average term.

¹According to Willis Towers Watson methodology

2 Derivatives relating to the operational result exposure in the next 12 months (hedge accounting), which impacts the item “Other Comprehensive Income” under shareholders’ equity.

Net financial expenses totaled R$1,698,996 in 2020, 8.9% lower compared to the same period of the previous year.

As of December 31, 2020, the Company’s shareholders’ equity totaled R$ 8,813,534, above the R$ 8,148,349 recorded on December 31, 2019.

2019

With solid financial results and record profitability, BRF ended 2019 back with profits. A strong management and excellent execution were essential to achieve these results. In 2019, BRF reviewed its fundamentals, improved its strategy, heightened the value of its brands, enhanced its operating capacity, invested in new product launches, and diligently executed the divestment and strategic plans it laid out in 2018

Its long-term strategy included, for the year 2019, a reversal of the declining trend of its profitability. BRF surpassed this objective by increasing its gross margin, from 16.1% in 2018 to 24.1% in 2019, as a result of the growth of its net revenue by more than R$3.258.559 million or 10.8% in the period.

The Company’s financial performance in 2019 consolidated the reduction in net financial leverage, measured by the ratio between net debt and Adjusted EBITDA. The free cash flow generated in 2019, associated with resources from asset sales in Argentina, Europe and Thailand, reduced net debt from R$15.6 billion in 2018 to R$13.3 billion in 2019, with an average term for 4.6 years. Adjusted EBITDA from continuing operations, in turn, expanded from R$2.5 billion to R$5.3 billion in the period, an increase of 116.0%. Consequently, the net leverage indicator was reduced to 2.50x, below the 5.12x reported at the end of 2018 and approaching the long-term target of 1.5x to 2.0x. Even if the effects arising from the adoption of IFRS 16 on 2019 Adjusted EBITDA were excluded, the Company’s net financial leverage would have reached 2.83x. This performance allowed the prospects for the Company’s credit ratings to be raised by the rating agencies S&P and Moody’s.

In Brazil, the Company’s performance has evolved since early 2019 and in 4Q19 on the back of successful commercial execution, a reduction in out-of-stock levels due to improved logistics efficiency, strict control of inventory levels, product mix optimization, and the profitability of sales channels. The commemorative season campaign posted its best performance since 2015.

In the Halal market, the Company continue to face hurdles that have affected us since 3Q19: shipping restrictions from Turkey to Iraq, impacting our Banvit subsidiary, and halted operations at the Abu Dhabi food processing plant that serves the Saudi market. The Company promptly redirected volumes to adjacent markets, sustaining the added volume sold in the Halal market. On February 16, 2020, the Company received news that Saudi Arabia’s sanitary authority temporarily halted operations at our plants in the State of Paraná, Dois Vizinhos and Francisco Beltrão. The Company promptly began our protocol to redirect production to five other licensed plants to serve Saudi Arabia; at the same time, the company conducted negotiations with Saudi representatives to clarify any questions and reverse this decision. The Company remain committed to pursuing growth and leadership in this market, as evidenced by another food processing plant (as announced in October 2019), which is set to receive an investment totaling approximately US$120 million. These measures will help us consolidate our footprint and create value in the region.

In Other International Markets, the company sustained the favorable dynamics from the 3Q19, mainly deriving from Asian demand due to the advance of African swine fever. In 2019, the Company advanced our initiatives to expand to other markets with a highlight to the plants approved to serve China – Lucas do Rio Verde/MT (poultry and swine), Lajeado/RS (swine) and Campos Novos/SC (piglet).

The Company had a consolidated net revenue from continuing operations of R$33,446,980 (10.8% above 2018). The growth is related to the better performance in all regions. The operating results, measured by the Income before financial results and income taxes, was R$2,952,773, with a net profit of R$1,213,261. Including the results of the discontinued operations the consolidated net profit was R$297,452

The Company's net debt stood at R$13,268,963, 15.4% lower than 2018, impacted by the cash provided by operating activities, partially offset by non-cash effects (foreign exchange) and by the effect of the discontinuation of the divested companies in 2019.

Net financial expenses totaled R$1,865,399 in 2019, 16.8% lower compared to the same period of the previous year.

As of December 31, 2019, the Company’s shareholders’ equity totaled R$8,148,349, above the R$7,531,777 recorded on December 31, 2018, due to the accumulated profit and other comprehensive income earned in the period.

2018

2018 was the most challenging year in BRF's 10-year history and tested its ability to react and respond. It was also the year in which the company carried out one of the largest sets of management, assets and financial adjustments in our history, laying the foundations for the Company's recovery.

Protectionist measures that closed important import markets, the pressure of costs in a domestic market where it was not possible to transfer prices and the strike of the truck drivers are among the main external elements of this period. The problems in our governance, the extensive de-structuring of teams, systems and processes and a second phase of a federal police investigation were other elements to compose this challenging scenario. The most visible consequences in our business that the Company had to face during 2018 were the fall in our margins, a high increase in our indebtedness and the constitution of much higher Inventory of raw material than the desirable level. If the Company exclude these non-recurring factors, our negative result would be much lower.

The Company recognize that the results of 2018 were far from expected. They evidently do not reflect our vision on the maximum potential of value creation for the Company and its shareholders. But, even so, 2018 was a key year for the Company's rebuilding as well as the beginning of its recovery because it was when the seeds of structural change were planted regarding strategy and operation.

The Company had a consolidated net revenue of R$30,188.4 million (6.6% above 2017), with emphasis on commercial units in Brazil and Halal. The operating result, measured by EBIT, was R$206.3 million, with a net loss of R$2,114.5 million. If the result of discontinued operations were included, the consolidated net loss would be R$4,466.2 million, mainly due to the result of the impairment of discontinued operations and Várzea Grande, in the amount of R$2,533 million.

The Company’s net debt totaled R$15,610.0 million, 17.3% above that recorded in 2017, impacted by the financial effects of gross debt, as well as free cash consumption in 2018. This increase resulted in a net debt pro-forma on 5.12x 12-month adjusted EBITDA at the end of the 2018 period.

Net financial expenses totaled R$2,241.5 million in 2018, 19.1% higher than in the same period last year.

As of December 31, 2018, the Company’s shareholders’ equity totaled R$7,531.8 million, compared to the R$11,712.8 million recorded on December 31, 2017, due to the accumulated loss for the year, as well as the lower reserve profit in the period.

Analysis of the impacts of COVID-19

As described in the risk factor contained in item 4.1 of this Reference Form, entitled "Pandemics or outbreaks of human diseases, such as the new coronavirus (COVID-19), can cause changes in consumption and trade patterns, in supply chains and in production processes, as well as causing interruptions in production and product shipments, which may significantly impact the Company's operations and operating results", as well as detailed in item 10.9 the Company's business, operations and financial conditions may be materially and adversely affected by the spread of epidemics, pandemics or other public health crises, including the new coronavirus (COVID-19).

b. Capital structure

On December 31, 2020, the Company's capital structure comprised 28% of own capital¹ and 72% of third-party capital.

On December 31, 2019, the Company's capital structure comprised 30% of own capital¹ and 70% of third-party capital.

On December 31, 2018, the Company's capital structure comprised 25% of own capital and 75% of third-party capital.

The Company's financing model is based on the use of its own resources and the capital of third parties, this latter consisting of loans from financial institutions or issues on the debt market. More information about the Company´s use of capital from third parties can be obtained from item 10.1.f below.

__________________

⁽¹⁾The representativeness of the own capital is measured by the relation between Shareholders’ Equity and the total Indebtedness plus Shareholders’ Equity.

c. Payment capacity in relation to financial commitments

Considering that 93.7% of gross indebtedness in 2020 was long-term and that the Company maintains cash and cash equivalents of R$8.235.361 thousand compared to its short-term financial commitments, equivalent to R$1.444.953 thousand, the Company assesses its capacity of payment as comfortable. In addition, cash and cash equivalents are sufficient to pay financial commitments until 2025.

The Company’s debt maturity schedule as of December 31, 2020 is as follows:

		Consolidated (thousands of R$)
		12.31.20
2021		1,059,984
2022		2,114,622
2023		2,569,063
2024		1,782,687
2025		599,266
2026 onward		14,278,804
		22,404,426

d. Sources of financing for working capital and investments in non-current assets

The Company’s main sources of liquidity have been the generation of cash from its operating activities, loans and other financing. In the last three financial years, the Company raised funds through loan and financing operations with the financial and capital markets, which were used to finance its working capital needs and short and long-term investments (see item 10.1 .f for details on relevant loan and financing contracts).

e. Financing sources for working capital and investments in non-current assets that intends to use for coverage of liquidity shortfalls

The Company will contract new loans and financing from the financial and capital markets when it identifies the need for additional resources to finance the long-term investment plan or with the objective of continuing to improve its debt profile. Whenever possible, the Company will prioritize long-term funding and attractive costs for specific purposes.

The Company believes that these sources of financing will be sufficient to cover its working capital and investment needs in the normal course of its business.

f. Debt levels and characteristics of such debts

The Company’s main source of indebtedness is the raising of funds to finance its investments in Property, plant and equipment and working capital. In 2020, the Company’s loans and financing amounted to R$ 22,404.4 million, of which R$ 6,665.3 million were denominated in local currency and R$ 15,739.1 million in foreign currency, primarily in US dollars. In 2019, the Company’s loans and financing totaled R$ 18,620.3 million, of which R$ 7,613.8 million were denominated in local currency and R$ 11,006.5 million in foreign currency, primarily in US dollars. In 2018, the Company’s loans and financing totaled R$ 22,165.4 million, of which R$ 10,627.1 million were denominated in local currency and R$ 11,538.3 million in foreign currency, primarily in US dollars.

The Company uses the net resources obtained through financing for capital expenditures, expenses associated with the production process and for maintaining available liquidity. The table below shows the Company’s indebtedness (according to the type of debt and currency) net of cash, cash equivalents and negotiable securities for the indicated financial years:

	On December 31
	Short term on December 31, 2020	Long-term on December 31, 2020	2020	2019	2018
	(in thousands of Reais)
Total debt	(1,059,984)	(21,344,442)	(22,404,426)	(18,620,279)	(22,165,444)
Derivative financial assets and liabilities, net	(7,213)	(493)	(7,706)	91,700	(52,696)
Cash, cash equivalents and marketable securities:
Local currency	4,091,829	39,401	4,460,763	2,050,956	5,341,288
Foreign currency	3,798,955	329,533	3,798,955	3,208,657	1,187,555
Total	7,890,784	368,934	8,259,718	5,259,613	6,528,843
Net Debt	6,823,587	(20,976,001)	(14,152,414)	(13,268,966)	(15,689,297)

The following table presents an additional breakdown of the Company´s debt by type:

	Short-Term Debt as of December 31, 2020 (1)	Long-Term Debt as of December 31, 2020	Total Debt as of December 31, 2020	Total as of December 31, 2019	Total as of December 31, 2018
	(In thousands of Reais)
Credit Lines from Development Banks	-	-	-	45,516	264,545
Debentures	52,087	2,969,918	3,022,005	755,760	-
Export Credit Lines	20,845	2,387,852	2,408,697	1,612,365	1,625,327
Working Capital Credit Lines	368,681	-	368,681	3,312,639	5,863,023
PESA Loan	-	-	-	284,308	273,426
Agribusiness Receivables Certificate	(1,592)	822,685	821,093	1,597,447	2,597,502
Fiscal Incentives	44,816	-	44,816	5,720	3,317
Local currency	484,837	6,180,455	6,665,292	7,613,755	10,627,140

Export Credit Lines	132,801	259,835	392,636	407,275	1,383,192
Bonds	215,218	14,614,775	14,829,993	10,407,484	9,746,446
Currency contract advances	-	-	-	-	214,192
Working Capital Credit Lines	227,128	289,377	516,505	191,765	194,474
Foreign currency	575,147	15,163,987	15,739,134	11,006,524	11,538,304

Total:	1,059,984	21,344,442	22,404,426	18,620,279	22,165,444

⁽¹⁾ The negative amount refers to deferred issuance costs.

The following tables present selected information on the Company’s debt value in the last three financial years:

Current and Non-current Loans and Financing 2020-2019

(R$ thousands)

										Consolidated
	Charges (p.a.)	Weighted average interest rate (p.a.)	PMPV ⁽¹⁾	Balance 12.31.19	Taken	Amortization	Interest paid	Appropriate interest	Var. Exchange	Balance 12.31.20
Local currency
Working capital	Fixed / CDI	3.25% (6.07% on 12.31.19)	0.6	3,312,639	1,200,000	(3,947,237)	(340,227)	143,506	-	368,681
Agribusiness Receivables Certificate	CDI / IPCA	10.21% (6.73% on 12.31.19)	3.0	1,597,447	-	(780,000)	(100,932)	104,578	-	821,093
Credit lines from development banks	Fixed / Selic / TJLP	(5.09% on 31.12.19)	-	45,516	-	(45,470)	(427)	381	-	-
Debentures	CDI / IPCA	8.28% (7.40% on 12.31.19)	7.7	755,760	2,124,725	-	(38,339)	179,859	-	3,022,005
Export Facility Lines	CDI	3.69% (5.83% on 12.31.19)	6.8	1,612,365	1,490,809	(1,113,176)	(111,498)	152,968	377,229	2,408,697
PESA Loan	IGPM	(12.22 on 31.12.19)	-	284,308	-	(287,621)	(5,142)	8,455	-	-
Fiscal Incentives	Fixed	2.40% (2.40% on 12.31.19)	-	5,720	73,671	(34,609)	(667)	701	-	44,816
				7,613,755	4,889,205	(6,208,113)	(597,323)	590,448	377,229	6,665,292
Foreign currency
Bonds	Fixed + USD and EUR	4.81% (4.36% on 12.31.19)	12.4	10,407,484	4,282,961	(3,010,421)	(760,879)	881,137	3,029,711	14,829,993
Export credit lines	LIBOR + USD	3.13% (5.77% on 12.31.19)	2.2	407,275	-	(118,113)	(20,686)	17.,627	106,533	392,636
Currency contract advances	Fixed + USD	-	-	-	529,211	(529,210)	-	-	(1)	-
Working capital	Fixed + TRY	10.98% (16.56% on 12.31.19)	1.2	191,765	718,956	(381,502)	(42,742)	46,704	(16,676)	516,505
				11,006,524	5,531,128	(4,039,246)	(824,307)	945,468	3,119,567	15,739,134
				18,620,279	10,420,333	(10,247,359)	(1,421,539)	1,535,916	3,496,796	22,404,426
Short Term				3,132,029	-	-	-	-	-	1,059,984
Long-Term				15,488,250	-	-	-	-	-	21,344,442

Current and Non-current Loans and Financing 2019-2018

(R$ thousands)

										Consolidated
	Charges (p.a.)	Weighted average interest rate (p.a.)	PMPV ⁽¹⁾	Balance 12.31.18	Taken	Amortization	Interest paid	Appropriate interest	Var. Exchange	Balance 12.31.19
Local currency
Working capital	Fixed / CDI	6.07% (7.78% on 12.31.18)	1.2	5,863,023	1,193,616	(3,745,967)	(421,600)	423,567	-	3,312,639
Agribusiness Receivables Certificate	CDI / IPCA	6.73% (6.08% on 12.31.18)	2.5	2,597,502	-	(999,905)	(139,633)	139,483	-	1,597,447

Credit lines from development banks	Fixed / Selic / TJLP	5.09% (6.16% on 12.31.18)	0.3	264,545	-	(223,077)	7,005	11,053	-	45,516
Debentures	CDI / IPCA	7.90	6.2	-	742,250	(15)	(16,372)	29,897	-	755,760
Export Facility Lines	CDI	5.83% (9.02% on 12.31.18)	8.7	1,625,327	(22,403)	31,700	(108,845)	149,986	-	1,612,365
PESA Loan	IGPM	12.22% (12.45 on 12.31.18)	0.2	273,426	-	-	8,554	19.436	-	284,308
Fiscal Incentives	Fixed	2.40% (2.40% on 12.31.18)	-	3,317	70,203	(67,805)	(570)	575	-	5,720

				10,627,140	1,983,666	(5,068,469)	(702,579)	773,997	-	7,613,755
Foreign currency
Bonds	Fixed + USD and EUR	4.36% (4.07% 12.31.18)	6.0	9,746,446	3,082,040	(2,906,635)	(504,774)	648,991	341,416	10,407,484
Export credit lines	LIBOR + USD	5.54% (2.47% on 12.31.18)	3.2	1,383,192	-	(948,646)	(31,277)	28,937	(24,931)	407,275
Currency contract advances	Fixed + USD	(4.67% on 12.31.18)	-	214,192	92,750	(327,469)	10,249	12,831	17,945	-
Working capital	Fixed + TRY	16.56% (21.91% on 12.31.18)	1.1	194,474	240,702	(229,919)	(41,974)	42,237	(13,755)	191,765
				11,538,304	3,415,492	(4,412,669)	(588,274)	732,996	320,675	11,006,524
				22,165,444	5,399,158	(9,481,138)	(1,290,853)	1,506,993	320,675	18,620,279
Short Term				-4.547.389 -17.618.055	-	-	-	-	-	3,132,029
Long-Term				-	-	-	-	-	-	15,488,250

Current and Non-Current Loans and Financing 2018-2017

(R$ thousands)

															Consolidated
	Charges(p.a.)	Weighted average interest rate (p.a.)	PMPV ⁽¹⁾	Current	Non-current	Balance 12.31.18	operations	Lib Apl	Amort / Resg	Interest paid / Received	Appropriate interest	Sum of fair value	Var. Cab.	Var. Monet.	Balance 12.31.17
Local currency
Working capital	Fiza Rate / 118% of CDI (7.78% on 12.31.17)	7.78% (7.78% on 12.31.17)	1.7	1,695,390	4,167,633	5,863,023		4,431,145	(1,235,896)	(149,702)	262,113	-	-	-	2,555,363
Credit export facility	109.45% of the CDI (100.35% on 12.31.17)	9.02% (6.91% on 12.31.17)	3.2	39,294	1,586,033	1,625,327		1,621,124	(1,850,000)	(188,743)	153,747	-	-	-	1,889
Credit lines from development banks	Fixed Rate / Selic / TJLP + 1.25% (Selic / Fixed Rate / TJLP + 1.48% on 12.31.17)	6.16% (6.78% on 12.31.17)	1.1	220,414	264,198	264,545		-	(315,113)	(20,346)	29.929	-	-	-	570,082
Bonds	7.75% (7.75% on 12.31.17)	7.75% (7.75 on 12.31.17)	0.1	-	-	-		-	(500,000)	(19,375)	15,573	-	-	-	503,802
PESA Loan	Fixed Rate / IGPM + 4.90% (Fixed Rate / IGPM + 4.90% on 12.31.17)	12.45% (4.36 on 12.31.17)	1.4	3.761	269,665	273,426		-	-	8,101.	32,161	-	-	-	249,366
Fiscal Incentives	2.40% (2.40% on 12.31.17)	2.40 (2.40% on 12.31.17)	0.5	3,317	-	3,317		57,246	(57,500)	(445)	451	-	-	-	3,566
Agribusiness Receivables Certificate	96.40% OF cdi / ipca + 5.897% (96.5 CDI / IPCA 5.897 on 12.31.17)	6.08% (7.41% on 12.31.17)	1.6	1,114,904	1,482,598	2,597,502		-	(996,985)	(223,143)	245,978	-	-	-	3,571,652
				3,077,080	7,550,060	10,627,140		6,109,515	(4,955,500)	(609,855)	739,951	-	-	-	9,343,030
Foreign currency
Bonds	4.07% (4.08% 31.12.17) + u UR$, EUR and ARS	4.07% (4.08% 31.12.17) + u UR$, EUR and ARS	4.8	99,568	9,646,878	9,746,446	(87,113)	-	(14,791)	(466,552)	506,484	-	1,278,498	-	8,529,919
Export credit lines	Libor + 0.25% (LIBOR = 1.85% on 12.31.17) + u UR$	2.47% (3.35% on 12.31.17) + u UR$	0.8	998,730	384,462	1,383,192		8,395	(1,067,367)	(75,878)	67,621	-	299,692	-	2,150,727
Working capital	0.00% (23.10% 31.12.17) + vc ARS / + vc USD	0.00% (23.10% 31.12.17) + vc ARS / + vc USD	-	-	-	-	(68,660)	813,279	(898,283)	3,623	46.025	-	(56,616)	-	167,888
Credit lines from development banks	-	0.00% (6.22% on 12.31.17) + vc US$ and other currencies	-	-	-	-		-	3,850	(192)	471	-	-	-	3,572
Other guaranteed debts and leases	0.00% (0.00% 31.12.17) + vc ARS	0.00% (0.00% 31.12.17) + vc ARS	-	-	-	-		-	-	-	-	-	-	-	-
Currency contract advances	(4.67% + vc UR$)	(4.67% + US$ VC)	0.8	214,192	-	214,192		208,474	-	-	1.077	-	4,641	-	-
Working capital	21.91% + VC try (15.95% vc TRY on 12.31.17)	21.91% + vc TRY (15.95% + vc TRY on 12.31.17)	0.7	157,819	36,655	194,474		193,058	(216,610)	(21,057)	35,934	-	(46,091)	-	249,240
				1,470,309	10,067,995	11,538,304	(155,773)	1,223,206	(2,220,902)	(567,311)	657,612	-	1,480,123	-	11,101,346

4,547,389

17,618,055

22,165,444

(155,773)

7,332,721

(7,156,402)

(1,177,166)

1,397,563

1,480,123

20,444,376

i. Relevant loan and financing contracts

The main debt instruments in effect at December 31, 2020 are described below.

Debt in Domestic Currency

Development Bank Credit Lines

BNDES FINEM Credit Lines. During the year of 2020, the Company had outstanding obligations with the BNDES, including loans obtained under the FINEM program . Loans with BNDES were signed to finance the acquisition of machinery and equipment, as well as the construction, improvement and expansion of production facilities. The principal and interest on these loans were generally paid monthly. The principal amount of the loans was denominated in reais with interest rates subject to variations in the TJLP and Selic. These loans are included in the “Development bank credit line - Local currency” line in the tables above. All credit lines with development banks were liquidated during the year 2020.

Working Capital Credit Lines

Rural Credit Financing. The Company has short-term loans in the amount of R$ 368,681 thousand as of December 31, 2020 with commercial banks that, under a Federal Government program, offer attractive interest rates focused on encouraging rural activities with maturities in 2021. The proceeds of these loans are generally applied and are included in the “Working capital - Local currency” line of the tables above. For 2020, the Company prepaid part of these loans, totaling R$ 2,200,000 thousand. These credit lines are included in the “Working capital - local currency” line in the table above.

Export Credit Lines

Export pre-financing lines. The Company has an export pre-financing line with a total balance of R$ 2,408,696 thousand as of December 31, 2020. Indebtedness under these credit lines is denominated in reais with maturity dates between 2022 and 2028. These loans are included in the line “Export credit line - Local currency” in the tables above.

Fiscal Incentives

State Fiscal Incentives. The Company also has credits offered under state tax incentive programs to promote investment in these states, with a balance of R$ 44.8 million on December 31, 2020. Under these programs, the Company was granted credit proportional to the ICMS payment generated by investments in the construction or expansion of production units in these states. These credits have a 20-year term and fixed interest rates. These credit lines are included in the “Fiscal Incentives - Local currency” line in the tables above.

Agribusiness Receivables Certificate ("CRA")

On December 16, 2016, the Company concluded the issuance of CRA linked to the public offering for distribution of the 1st and 2nd Series of the 1st Issue of Vert Companhia Securitizadora, in the amount of R$ 1,500,000, net of interest. The 1st Series issue totaled R$ 780 million at the cost of 96.00% of the Interbank Deposit rate, with the principal maturing in a single installment on December 16, 2020 and interest paid every 8 months. The issue of the 2nd Series, in turn, totaled R$ 720 million, at a cost of 5.8970% pa adjusted by the IPCA variation, with the principal maturing in a single installment on December 18, 2023 and interest paid every 16 or 18 months. The CRAs are backed by credits arising from the Company’s exports contracted with BRF Global GmbH and BRF Foods GmbH and were assigned and / or pledged to the said securitizer. On August 15, 2017, the CRA related to the 1st. Series were transferred to the company SHB Comércio e Indústria de Alimentos SA (“SHB”), a subsidiary of the Company, based on exports between SHB and BRF Foods GmbH. The conditions negotiated on the issue date remain in effect. On December 31, 2018, the CRAs of the 1st Series were transferred to BRF, due to the merger of the company SHB Comércio e Indústria de Alimentos SA This operation is included in the line “Certificate of Agribusiness Receivables - Local currency” in the tables above . As of December 31, 2020, the outstanding balance of this line totaled R$ 821.094 thousand.

1st Issuance of Debentures (“Debentures”)

On April 30, 2019, 750,000 Debentures with a nominal unit value of R$ 1,000.00 were subscribed, totaling the amount of R$ 750,000 thousand, being issued in 3 series. Debentures are simple, not convertible into shares, unsecured and with restricted efforts. The 1st series has an amount of R$ 70,000 thousand, remunerated at CDI + 0.80% with payment of semiannual interest and single maturity of principal in 2022. The 2nd series has an amount of R$ 411,732 thousand, remunerated at IPCA + 5.50% with semiannual interest payment and principal maturing in 2025 and 2026. The 4th series has an amount of R$268,268 thousand remunerated at CDI + 1.45% with semiannual interest payment and maturity of principal in 2025 and 2026. The balances for the 1st, 2nd and 4th series totaled, respectively, R$ 70,105 thousand, R$ 432,626 thousand and R$ 268,406 thousand, on December 31, 2020.

2st Issuance of Debentures (“Debentures”)

On July 14, 2020, 2,200,000 Debentures with a nominal unit value of R$ 1,000.00 were subscribed, totaling R$ 2,200,000 thousand, being issued in 2 series. Debentures are simple, not convertible into shares, unsecured and with restricted efforts. The 1st series has an amount of R$ 705,000 thousand remunerated at IPCA + 5.30% with semiannual interest payment and single maturity of principal in 2027. The 2nd series has an amount of R$ 1,495,000 thousand remunerated at IPCA + 5.60 % with semiannual interest payments and maturity of principal in 2028, 2029 and 2030. The balances for the 1st and 2nd series totaled, respectively, R$ 724,110 thousand and R$ 1,526,757 thousand, on December 31, 2020.

Debt in Foreign Currency

Export Credit Lines

Export Prepayment facilities. The Company has one export pre-financing line, with a total balance of R$ 392.636 thousand, as of December 31, 2020. Indebtedness under this credit line is generally denominated in US dollars, with maturity dates between 2021 and 2023. The interest on these lines accrues in the period of six and twelve months and is equivalent to LIBOR plus spread. Within this line, the Company received a loan from one or more creditors guaranteed by receivables related to the export of its products to specific customers, as in all operations of this nature.

Working Capital Credit Lines

Working capital in foreign currency . These are funds obtained from international financial institutions, used mainly as working capital mainly from subsidiaries located in Turkey, in the amount of R$ 516.504 thousand and with maturities throughout 2021, 2022 and 2023. These credit lines are included in the “Working capital - foreign currency” line of the tables above.

Titles - Bonds

Senior Notes BRF 2022: On June 6, 2012, the Company issued Senior Notes in the total notional amount of US$ 500.0 million, nominal interest rate of 5.88% pa, effective rate of 6.00% pa and maturity on June 6, 2022. On June 26, 2012, the Company raised an additional US$ 250.0 million, with a nominal interest rate of 5.88% pa and an effective rate of 5.50% pa On May 28, 2015, the Company concluded a repurchase offer in the amount of US$ 577,130 thousand, so that the remaining balance totaled US$ 172,870 thousand, with the premium paid on the transaction, net of interest, in the amount of US$ 79,355 thousand (equivalent to R$ 251,936 thousand). On September 14, 2016, the Company finalized a repurchase offer in the amount of US$ 54.208 thousand, with the transaction premium, net of interest, in the amount of US$ 5.692 thousand (equivalent to R$ 18.933 thousand). On September 18, 2019, the Company finalized a repurchase offer in the amount of US$ 9,350 thousand, with the premium paid US$ 362 thousand (equivalent to R$ 1,484 thousand), net of interest. On July 24, 2020, the Company finalized a repurchase offer in the amount of US$ 27.190 thousand, with the premium paid US$ 1.360 thousand (equivalent to R$ 7.089 thousand), net of interest. On September 21, 2020, the Company finalized a repurchase offer in the amount of US$ 11,194 thousand, with the premium paid US$ 672 thousand (equivalent to R$ 3,742 thousand), net of interest. This premium, paid to the holders of existing securities, was recorded as a financial expense. As of December 31, 2020, there were US$ 70,928 thousand (equivalent to R$ 368,591 thousand) outstanding of these securities.

Senior Notes BRF 2023: On May 15, 2013, the Company made a 10-year bond offering abroad, in the total amount of US$ 500.0 thousand, with the principal maturing on May 22, 2023 (“Senior Notes BRF 2023”), Issued with a coupon (interest) of 3.95% per year (yield to maturity 4.135%), paid semi-annually, as of November 22, 2013. On September 18, 2019, the Company finalized a repurchase offer in the amount of US$ 154.0 million, with the premium paid US$ 1.7 million (equivalent to R$ 7.1 million), net of interest. On July 24, 2020, the Company finalized a repurchase offer in the amount of US$ 60.6 million, with the premium paid US$ 1.1 million (equivalent to R$ 5.8 million), net of interest. On September 21, 2020, the Company finalized a repurchase offer in the amount of US$ 51.4 million, with the premium paid US$ 1.9 million (equivalent to R$ 10.4 million), net of interest. This premium, paid to the holders of existing securities, was recorded as a financial expense. As of December 31, 2020, there were US$ 234.0 million (equivalent to R$ 1,216.2 million) outstanding on these securities.

Senior Notes BRF 2024: On May 15, 2014, the Company concluded an offer of Senior Notes 10 years, in the total amount of US$ 750.0 million, with the principal maturing on May 22, 2024 (Senior Notes BRF 2024”), Issued with a coupon (interest) of 4.75% per year (yield to maturity 4.952%), to be paid semi-annually, as of November 22, 2014. On September 18, 2019, the Company finalized a repurchase offer in the amount of US$ 232.1 million, with the premium paid US$ 9.2 million (equivalent to R$ 37.9 million), net of interest. On July 24, 2020, the Company finalized a repurchase offer in the amount of US$ 64.1 million, with the premium paid US$ 2.0 million (equivalent to R$ 10.4 million), net of interest. On September 21, 2020, the Company finalized a repurchase offer in the amount of US$ 158.4 million, with the premium paid US$ 10.4 million (equivalent to R$ 57.7 million), net of interest. This premium, paid to the holders of existing securities, was recorded as a financial expense. As of December 31, 2020, there was US$ 295,363 thousand (equivalent to R$ 1,534,913 thousand) outstanding on these securities.

Senior Notes BRF 2022: On May 29, 2015, the Company concluded a Senior Notes offer of seven years, totaling EUR500.0 million, with the principal due on May 3, 2022, with a coupon (interest) of 2.75% a year (yield to maturity of 2.822%), payable annually, from June 3, 2016. On September 18, 2019, the Company concluded a tender offer in the amount of EUR175.2 million, with a premium paid EUR8.5 million, net of interest. On July 24, 2020, the Company finalized a repurchase offer in the amount of EUR119,061 thousand, with the premium paid EUR 1,786 thousand (equivalent to R$ 10,836 thousand), net of interest. On September 21, 2020, the Company finalized a repurchase offer in the amount of EUR39,048 thousand, with the premium paid EUR937 thousand (equivalent to R$ 6,092 thousand), net of interest. This premium, paid to the holders of existing securities, was recorded as a financial expense. As of December 31, 2020, there were EUR166,672 thousand (equivalent to R$ 1,063,017 thousand) outstanding on these securities.

Senior Notes BRF 2026: On September 29, 2016, the Company, through its wholly owned subsidiary BRF GmbH, concluded the offer of Senior Notes of 10 (ten) years, in the total amount of US$ 500,0, with the principal due on September 29, 2026, with a coupon (interest) of 4.35% p.a. (yield to maturity of 4.625%), to be paid semi-annually, as of March 29, 2017. On September 14, 2020, the Company finalized a repurchase offer in the amount of US$ 718 thousand, with the premium paid US$ 28 thousand (equivalent to R$ 151 thousand), net of interest. This premium, paid to holders of existing securities, was recorded as a financial expense. As of December 31, 2020, there was US$ 499,282 thousand (equivalent to R$ 2,594,619 thousand) the outstanding on these securities.

Senior Notes BRF 2030: On September 24, 2019, the Company concluded the offering of Senior Notes in the total amount of US$ 750.0 million, with the principal maturing on January 24, 2030, issued with a coupon (interest) of 4.875% per year. As of December 31, 2020, there was US$ 750.0 million (equivalent to R$ 3,897.5 million) outstanding of these securities.

Senior Notes BRF 2050: On September 21, 2020, the Company concluded the offering of Senior Notes in the total amount of US$ $ 500.0 million, with the principal maturing on September 21, 2050, issued with a coupon (interest) of 5.75% per year. On October 24, 2020, the Company issued an adicional amount of US$ 300.000 thousand issued with a coupon (interest) of 5.75% per year. As of December 31, 2020, there was US$ 800.0 million (equivalent to R$ 4,157.4 million) outstanding on these securities.

Derivatives

Within the scope of the Financial Risk Management Policy, in order to protect the Company against the uncertainties in the prices of risk factors (currencies, commodities and interest), the Company entered into currency derivative contracts that had a fair value receivable of R$ 151,000 thousand, commodity derivative contracts that had a fair value payable of R$ 144,057 thousand and interest derivative contracts that had a fair value payable of R$ 14,649 thousand on December 31, 2020 with several financial institutions on different maturity dates. These transactions do not require additional guarantees.

Other credit lines

Revolving lines of credit In order to maintain a prudent and sustainable short-term liquidity position and in continuity with the strategy of extending the average maturity and reducing the cost of its debts, on December 27, 2019, the Company contracted a revolving credit line with Banco do Brasil in the amount of up to R$ 1,500,000, maturing in three years. On October 28, 2020, the Company contracted a second revolving credit line with Banco do Brasil in the amount of up to R$ 1,500,000, maturing in three years. These credit lines may be disbursed in full or in part at the discretion of the Company, when necessary. As of December 31, 2020, said credit lines were available, but had not been used.

ii. Other long-term relationships with financial institution

The Company has agreements with financial institutions whose objective is to facilitate access to credit for its partner rural producers for the construction of aviaries, farms and adjustments.

It also has agreements that seek to facilitate access to credit for its suppliers who wish to prepay receivables from the Company.

Finally, the Company has operations with derivatives that aim to hedge against exchange rate variations, commodity prices and interest rates, with no speculative purposes. These operations are accounted for at their market value, in accordance with the accounting methodology of hedge accounting.

iii. Degree of debt subordination

There is no degree of contractual subordination between the Company’s unsecured financial debts. Currently, the Company does not has financial debts that have real guarantees.

iv. Any restrictions imposed on the issuer, in particular, in relation to indebtedness limits and contracting new debt, distribution of dividends, disposal of assets, issuance of new securities and the disposal of controlling interest

The Company’s debts described in item 10.1 (f) have, as the case may be, covenants usual non-financial contracts entered into in the financial and capital markets, which may cause the early maturity of one or more contracts due, for example: (i) the default by the Company, within defined limits, as the case may be; (ii) the cross-default , from defined limits, as the case may be; (iii) restrictions on the distribution of dividends, in the event of default; (iv) the restriction on the sale of assets, within

certain limits, excluding types of assets and operations, as the case may be; (v) the sale of corporate control, etc. Such obligations are being met in accordance with the contractual requirements. The Company does not have covenants in its contracts.

g. Limits on contracted financing and percentages already used

All financing contracts signed by the Company have been fully disbursed, except for the Revolving Credit Facilities, mentioned above, which remained available according to an initial balance of R$3,000.0 million, but not disbursed.

h. Significant alterations in each item of the financial statements

Financial year ended on December 31, 2020 compared with the financial year ended on December 31, 2019

The following table presents audited financial information for the financial years ended December 31, 2020 and December 31, 2019.

The results and cash flows from discontinued operations are presented separately from the results of the Company’s continued operations. Comparative periods have been re-presented.

In section 10.3, “ Events with relevant effects, occurred and expected, in the financial statements ”, The results of discontinued operations are shown.

(In thousands of R$, except when %)	12.31.20 (1)	AV-% 31.12.20 (2)	12.31.19 (1)	AV. 12.31.19 (2)	% Change 2020 X 2019
Continuing operations
NET INCOME	39,469,700	100.0%	33,446,980	100.0%	18.0%
Cost of the Goods Sold	(29,998,822)	-76.0%	(25,370,042)	-75.9%	18.2%
GROSS PROFIT	9,470,878	24.0%	8,076,938	24.1%	17.3%
OPERATIONAL INCOME (EXPENSES)
Sales	(5,587,488)	-14.2%	(4,911,666)	-14.7%	13.8%
General and administrative	(770,282)	-2.0%	(615,683)	- 1.8%	25.1%
Losses due to non-recoverability of assets	(12,137)	0.0%	(23,899)	-0.1%	-49.2%
Other operating income (expenses), net	(254,178)	-0.6%	428,820	1.3%	-159.3%
Income (loss) from associates and joint ventures	-	-	(1,737)	0.0%	-100.0%
Profit (loss) before financial result	2,846,793	7.2%	2,952,773	8.8%	-3.6%
Financial expenses	(1,889,454)	-4.8%	(3,096,716)	-9.3%	-39,0%
Financial income	420,757	1.1%	1,304,187	3.90%	-67,7%
Foreign exchange and monetary variations	(230,298)	-0.6%	(72,870)	-0.20%	216,0%
INCOME (LOSS) BEFORE INCOME AND CONTRIBUTION TAXES SOCIAL SECURITY OF CONTINUED OPERATIONS	1,147,798	2.9%	1,087,374	3.3%	5.6%
Income tax and social contribution	242,271	0.6%	125,887	0.4%	92.5%
Net Income from Continued Operations	1,390,069	3.5%	1,213,261	3.6%	14.6%
Discontinued Operations
Net Income from Discontinued Operations	-	-	(915,809)	-2.7%	-100.0%
NET INCOME (LOSS) FOR THE YEAR	1,390,069	3.5%	297,452	0.9%	367.3%
Net Income (Loss) Continued Operations Attributable to
Controlling shareholders	1,383,564	3.5%	1,202,240	3.6%	15.1%
Non-controlling shareholders	6,505	0.0%	11,021	0.0%	-41.0%
	1,390,069	3.5%	1,213,261	3.6%	14.6%

⁽¹⁾ Information extracted from the Consolidated Financial Statements of December 31, 2020 and 2019.

⁽²⁾ Representativeness in relation to Net Revenue.

Net Revenue

	12.31.20	12.31.19	Restated 12.31.18
Net revenue from sales
Brazil
In natura	5,014,250	4,635,597	3,998,483
Poultry	3,738,560	3,692,377	3,198,356
Pork and others	1,275,690	943,220	800,127
Processed	15,944,162	12,808,408	12,274,681
Other sales	26,707	45,474	19,372
	20,985,119	17,489,479	16,292,536
Internacional
In natura	14,570,620	12,605,846	10,905,155
Poultry	12,246,499	11,262,954	10,021,923
Pork and others	2,324,121	1,342,892	883,232
Processed	2,366,204	2,119,918	1,850,614
Other sales	303,370	173,630	312,902
	17,240,194	14,899,394	13,068,671
Other segments
Others	1,244,387	1,058,107	827,214
	39,469,700	33,446,980	30,188,421

The Company’s consolidated net revenue increased R$6,022,720 thousand, or 18.0%, from R$33,446,980 thousand in 2019 to R$39,469,700 thousand in 2020, mainly due to:

1. Brazil - Net revenue increased by R$3,495,640 thousand or 20.0%, from R$17,489,479 thousand in 2019 to R$20,985,119 thousand in 2020. Such increase is the result of investments in the Company brands, expansion of the portfolio of higher added value products, growth in new distribution channels and strengthening of those, which the Company were being present, besides improvement of our level of services to your customers.

2. International - Net revenue increased by R$2,340,800 thousand or 15.7%, from R$14,899,394 thousand in 2019 to R$17,240,194 thousand in 2020. The main factors were: (i) an increase in the participation of higher added value products; (ii) an increased number of licensed plants, with the intention of maximizing markets where the Company operate, as well as the possibility of entering into new geographies and products; (iii) higher demand from the Asian market on account of the African swine fever; and (iv) the depreciation of the Real against the US Dollar has favoured the prices in Reais.

3. Other segments - In 2020, net revenue increased by R$186,280 thousand or 17.6%, from R$1,058,107 thousand in 2019 to R$1,244,387 thousand in 2020R$, mainly due to better prices for the Ingredients business and higher volumes sold through our Global Desk.

Cost of Goods Sold

In 2020, the cost of goods sold totaled R$29,998,822 thousand, an increase of 18.2% or R$4,268,780 thousand compared to 2019, which was of R$25,370,042 thousand. The increase is mainly due to to increase in average price of grains, as well as the exchange rate devaluation which impacted the acquisition cost for inputs and supplies.

Gross profit

In 2020, the gross profit was of R$9,470,878 thousand, an increase of 17.3% or R$1,393,940 thousand compared to 2019, which was of R$8,076,938 thousnad. Gross margin remained stable in 24.1% in 2019 and 24.0% in 2020, due to better operating results both in the Brazil and International segments.

Operating expenses

In 2020, operating expenses increased R$818,659 thousand or 14.7%, as a result of: (i) expenditures related to prevention and control of the Covid-19 effects in our operations; (ii) higher expenses denominated in Reais, in the International Market, due to exchange rate devaluation; and (iii) freight expenses in Brazil, as a result of greater supply and demand for trucks. In relative terms, operating expenses represented 16.1% of net revenue in 2020, compared to 16.6% in 2019, as a result of a strict control of expenditures in the period.

Other operating income (expenses), net

In 2020, the Company had an expense of R$254,178 thousand, representing a decrease of R$682,998 thousand compared to 2019. In 2019 this revenue was mainly due to gains from lawsuits related to the exclusion of ICMS from the PIS / COFINS calculation basis (explanatory note 9.2 to the financial statements of 2020).

Equity in earnings

In 2020, the Company have not recorded income from associates and joint ventures and in 2019 the Company have recorded a loss of R$1,737 thousand. This variation was due to the sale of the participation in the affiliate SATS BRF Food in Singapore in 2019.

Operating income

In 2020, due to the factors described above, the operating result was a profit of R$2,846,793 thousand, a decrease of R$105,980 thousand compared to 2019. The table below presents the operating results by segment.

(In thousands of R$)	12.31.20	12.31.19
Brazil	2,081,150	1,818,813
Internacional	1,100,212	1,275,285
Other segments	197,233	109,138
Subtotal	3,378,595	3,203,236
Corporate	(531,802)	(250,463)
	2,846,793	2,952,773

Net financial results

In 2020, net financial expense totaled R$1,698,995 thousand, a decrease of 8.9% or R$166,404 thousand compared to 2019, which was of R$1,865,399 thousand, mainly due to: (i) positive impact of the measurement of the put option written in the context of a business combination (put option Banvit) which was R$579,946 thousand, and (ii) lower net interest on rights and obligations.

Income tax and social contribution

In 2020, our income tax and social contribution amounted to a revenue of R$242,271 thousand, an increase of 92.5% or R$116,384 thousand compared to 2019. The effective tax rate in 2020 was (21.1)% compared to an effective rate of (11.6)% in 2019. This variation was primarily due to effects of differences in tax rates on results of foreign subsidiaries, effect of foreign exchange variation in subsidiaries with different functional currencies and deferred tax assets not recognized in 2020.

Net income

In 2020, the total profit from continuing operations was R$1,390,069 thousand, registering an increase of R$176,808 thousand compared to a profit of R$1,213,261 thousand in 2019. In 2019 considering discontinued operations, the total profit was R$297,452 thousand.

Comparison of the positions on December 31, 2020 and on December 31, 2019 of the statement of financial position accounts

(In thousands of R$, except when %)	12.31.20 (1)	AV -% 12.31.20	12.31.19 (1)	AV. 12.31.19	% Change 2020 X 2019
CURRENT ASSETS
CURRENT ASSETS
Cash and cash equivalents	7,576,625	15.3%	4,237,785	10.2%	78.8%
Marketable securities	314,158	0.6%	418,182	1.0%	-24.9%
Trade and other receivables	4,136,421	8.3%	3,090,691	7.4%	33.8%
Inventories	6,802,759	13.7%	3,887,916	9.3%	75.0%
Biological assets	2,129,010	4.3%	1,603,039	3.8%	32.8%
Recoverable taxes	899,120	1.8%	473,732	1.1%	89.8%
Recoverable income taxes	43,840	0.1%	152,486	0.4%	-71.2%
Derivative financial instruments	377,756	0.8%	195,324	0.5%	93.4%
Restricted cash	1	0.0%	296,294	0.7%	-100.0%
Assets held for sale	186,025	0.4%	99,245	0.2%	87.4%
Other current assets	446,269	0.9%	590,733	1.4%	-24.5%
Total current assets	22,911,984	46.1%	15,045,427	36.1%	52.3%
NON-CURRENT ASSETS
LONG-TERM
Marketable securities	344,577	0.70%	307,352	0.7%	12.1%
Trade and other other receivables	49,864	0.10%	71,029	0.2%	-29.8%
Recoverable taxes	4,868,198	9.80%	5,169,547	12.4%	-5.8%
Recoverable income taxes	54,859	0.10%	269,263	0.6%	-79.6%
Deferred income taxes	2,109,064	4.20%	1,845,862	4.4%	14.3%
Judicial deposit	553,341	1.10%	575,750	1.4%	-3.9%
Biological assets	1,221,749	2.50%	1,081,025	2.6%	13.0%
Derivative financial instruments	234	0.00%	49,991	0.1%	-99.5%
Restricted cash	24,357	0.00%	-	0.0%	0.0%
Other non-current assets	82,123	0.20%	85,537	0.2%	-4.0%
Long-term assets	9,308,366	18.70%	9,455,356	22.7%	-1.6%
Investments	8,874	0.00%	14,880	0.0%	-40.4%
Property, plant and equipment	12,215,580	24.60%	12,276,889	29.4%	-0.5%
Intangible	5,220,102	10.50%	4,908,079	11.8%	6.4%
Total non-current assets	26,752,922	53.90%	26,655,204	63.9%	0.4%
TOTAL ASSETS	49,664,906	100.00%	41,700,631	100.0%	19.1%

⁽¹⁾ Information extracted from the Consolidated Financial Statements of December 31, 2020 and 2019.

Current Assets

Current assets totaled R$22,911,984 thousand on December 31, 2020 and R$15,045,427 thousand on December 31, 2019, an increase of R$7,866,557 thousand or 52.3%. As of December 31, 2020, current assets represented 46.1% of total assets, compared to 36.1% in the previous year. The main effects are described below:

Cash and cash equivalents

Cash and cash equivalents increased by R$3,338,840 thousand or 78.8%, from R$4,237,785 thousand on December 31, 2019 to R$7,576,625 thousand on December 31, 2020, mainly due to the strategy of increasing liquidity in a scenario of uncertainties and high volatilities in operational and market risks.

Trade and Other Receivables

Trade and other receivables totaled R$4,136,421 thousand on December 31, 2020, an increase of R$1,045,730 thousand or 33.8% compared to December 31, 2019, which was of R$3,090,691 thousand. This variation is mainly due to lower sale of receivables to FIDC BRF as of December 31, 2020 and to the effect of the devaluation of the Real on the receivables in foreign currencies.

Inventory

Inventories increased from R$3,887,916 thousand on December 31, 2019 to R$6,802,759 thousand on December 31, 2020, increasing by R$2,914,843 thousand, or 75.0%. The increase is mainly due to the strategic decision to continue increasing inventories levels specially of raw materials in anticipation to the movement of increase in prices of grains.

Non-current assets

Non-current assets totaled R$26,752,922 thousand on December 31, 2020 and R$26,655,204 thousand on December 31, 2019, an increase of R$97,718 thousand, or 0.4%. The main effects are described below.

Recoverable Taxes

Recoverable Taxes decreased from R$5,169,547 thousand on December 31, 2019 to R$4,868,198 thousand on December 31, 2020, a decrease of R$301,349 thousand or 5.8%. The main causes for the decrease are: (i) higher amounts of tax credits compensated; and (ii) transfer of IPI credits to Other Current Assets and Other Non-Current Assets, in consequence of precatories issued by the Federal Union.

Deferred income taxes

Deferred income taxes increased R$263,202 thousand or 14.3%, from R$1,845,862 thousand on December 31, 2019 to R$2,109,064 thousand on December 31, 2020. The increase is mainly due to the recognition of deferred tax assets on tax losses carryforwards in 2020.

Biological assets

Biological assets increased R$140,724 thousand or 13.0% from R$1,081,025 thousand on December 31, 2019 to R$1,221,749 thousand on December 31, 2020. The increase is due to the Company’s regular operating cycle and to the increase in formation costs of the animals.

( In thousands of R$, except when% )	12.31.20 (1)	AV -% 12.31.20	12.31.19 (1)	AV. 12.31.19	% Change 2020 X 2019
LIABILITIES
CURRENT
Loans and financing	1,059,984	2.1%	3,132,029	7.5%	-66.2%
Suppliers	8,996,206	18.1%	5,784,419	13.9%	55.5%
Supply chain finance	1,452,637	2.9%	842,037	2.0%	72.5%
Lease liability	383,162	0.8%	376,628	0.9%	1.7%
Salaries, social obligations and participations	940,816	1.9%	825,254	2.0%	14.0%
Tax Liabilities	395,630	0.8%	517,208	1.2%	-23.5%
Derivative financial instruments	384,969	0.8%	153,612	0.4%	150.6%
Provision for tax, civil and labor risks	865,338	1.7%	1,084,308	2.6%	-20.2%
Employee benefits	125,230	0.3%	95,919	0.2%	30.6%
Liabilities directly associated with assets held for sale	21,718	0.0%	-	0.0%	0.0%
Other current liabilities	814,638	1.6%	512,591	1.2%	58.9%
Total current liabilities	15,440,328	31.1%	13,324,005	32.0%	15.9%
NON-CURRENT
Loans and financing	21,344,442	43.0%	15,488,250	37.1%	37.8%
Suppliers	13,781	0.0%	12,347	0.0%	11.6%
Lease liability	2,153,519	4.3%	2,054,552	4.9%	4.8%
Tax Liabilities	141,252	0.3%	190,257	0.5%	-25.8%
Provision for tax, civil and labor risks	837,382	1.7%	710,061	1.7%	17.9%
Deferred income taxes	26,527	0.1%	85,310	0.2%	-68.9%
Employee benefits	651,325	1.3%	593,555	1.4%	9.7%
Derivative financial instruments	727	0.0%	3	0.0%	24,133.3%
Other non-current liabilities	242,089	0.5%	1,093,942	2.6%	-77.9%
Total non-current liabilities	25,411,044	51.2%	20,228,277	48.5%	25.6%
NET EQUITY
Share capital	12,460,471	25.1%	12,460,471	29.9%	0.0%
Capital reserves	142,080	0.3%	192,845	0.5%	-26.3%
Accumulated losses	(2,594,028)	-5.2%	(3,996,985)	-9.6%	-35.1%
Treasury stock	(123,938)	-0.2%	(38,239)	-0.1%	224.1%
Other comprehensive income	(1,298,801)	-2.6%	(722,469)	-1.7%	79.8%
Controlling shareholders’ equity	8,585,784	17.3%	7,895,623	18.9%	8.7%
Non-controlling equity interests	227,750	0.5%	252,726	0.6%	-9.9%
Total shareholders’ equity	8,813,534	17.7%	8,148,349	19.5%	8.2%
TOTAL LIABILITIES AND NET EQUITY	49,664,906	100.0%	41,700,631	100.0%	19.1%

⁽¹⁾ Information extracted from the Consolidated Financial Statements of December 31, 2020 and 2019.

Current Liabilities

Current liabilities totaled R$15,440,328 thousand on December 31, 2020 and R$13,324,005 thousand on December 31, 2019, an increase of R$2,116,323 thousand or 15.9%. As of December 31, 2020, current liabilities represented 31.1% of total liabilities and equity, compared to 32.0% in the previous year. The main effects are described below:

Loans and Financing

The short-term component of our loans and financing amounted to R$1,059,984 thousand on December 31, 2020 and R$3,132,029 thousand on December 31, 2019, representing a reduction of R$2,072,045

thousand or 66.2%. This decrease is mainly due to the extension of the average term of our loans and financing during 2020.

Trade accounts payable and supply chain finance

The total balance of suppliers and supply chain finance totaled R$10,448,843 thousand on December 31, 2020, while on December 31, 2019 the balance was R$6,626,456 thousand, representing an increase of 57.7% or R$3,822,387 thousand. The increase is mainly due to an increase in days payable outstanding combined to the strategy of increasing inventories.

Provision for tax, civil and labor risks

The current component of provision for tax, civil and labor risks of the Company was R$865,338 thousand on December 31, 2020 and R$1,084,308 thousand on December 31, 2019, representing a decrease of R$218,970 thousand or 20.2%. The decrease is mainly due to the settlement of liabilities related to the “ICMS Cesta Básica” processes and tax amnesty programs granted by the states.

Non-current liabilities

Non-current liabilities totaled R$25,411,044 thousand on December 31, 2020 and R$20,228,277 thousand on December 31, 2019, representing an increase of R$5,182,767 thousand or 25.6%. The main effects are described below:

Loans and Financing

Our long-term loans and financing amounted to R$21,344,442 thousand on December 31, 2020 and R$15,488,250 thousand on December 31, 2019, representing an increase of R$5,856,195 thousand or 37.8%. The increase is mainly due to the effect of the devaluation of the Brazilian Real on the foreign currency liabilities, in addition to the execution of the strategy to increase de liquidity of the Company.

Other non-current liabilities

Other non-current liabilities amounted to R$242,089 thousand on December 31, 2020, while on December 31, 2019 representing amounted to R$1,093,942 thousand, representing a decrease of 77.9% or R$851,853 thousand. The decrease is mainly due to the subsequente measurement of the put option written in the contexto of a business combination (explanatory note 24.8.1 of the financial statements of 2020) and its reclassification to current liabilities.

Equity

Equity was R$8,813,534 thousand on December 31, 2020 and R$8,148,349 thousand on December 31, 2019. There was an increase of R$665,185 thousand or 8.2%, mainly due to the profit for the year, partially offset by the effect of other comprehensive income arising from the exchange rate variation on the operations designated for cash flow hedge accounting.

Financial year ended on December 31, 2019 compared with the financial year ended on December 31, 2018

The following table presents audited financial information for the financial years ended December 31, 2019 and December 31, 2018. On 01.01.19, the Company adopted CPC 06 (R2) / IFRS 16 - Leasing - and opted for the modified retrospective approach without restating comparative periods. Accordingly, all balances related to the financial year ended on December 31, 2018 are presented in accordance with the prerogatives existing in the accounting policies previously in force CPC 06 (R1) / IAS 17.

The results and cash flows from discontinued operations are presented separately from the results of the Company’s continued operations. Comparative periods have been re-presented.

In section 10.3, “ Events with relevant effects, occurred and expected, in the financial statements ”, The results of discontinued operations are shown.

( In thousands of R$, except when% )	12.31.19 (1)	AV-% 31.12.19 (2)	12.31.18 (1)	AV. 12.31.18 (2)	% Change 2019 X 2018
Continuing operations
NET INCOME	33,446,980	100.0%	30,188,421	100.0%	10.8%
Cost of the Goods Sold	(25,370,042)	75 ± 9	(25,320,753)	-83.9%	0.2%
GROSS PROFIT	8,076,938	24.1%	4,867,668	16.1%	65.9%
OPERATIONAL INCOME (EXPENSES)
Sales	(4,911,666)	-14.7%	(4,513,594)	-15,0%	8.8%
General and administrative	(615,683)	- 1.8%	(551,165)	- 1.8%	11.7%
Losses due to non-recoverability of assets	(23,899)	-0.1%	46,269	-0.2%	-48.3%
Other operating income (expenses), net	428,820	1.3%	19,311	0.1%	2,120.6%
Equity method	(1,737)	0.0%	17,715	0.1%	-109.8%
Profit (loss) before financial result	2,952,773	8.8%	(206,334)	-0.7%	-1,531.1%
Financial expenses	(3,613,051)	-10.8%	(3,891,106)	12-9.	-7.1%
Financial income	1,747,652	5.2%	1,649,632	5.5%	5.9%
INCOME (LOSS) BEFORE INCOME AND CONTRIBUTION TAXES SOCIAL SECURITY OF CONTINUED OPERATIONS	1,087,374	3.3%	(2,447,808)	-8.1%	-144.4%
Income tax and social contribution	125,887	0.4%	333,302	1.1%	-62.2%
Net Income from Continued Operations	1,213,261	3.6%	(2,114,506)	-7.0%	-157.4%
Discontinued Operations
Net Income from Discontinued Operations	(915,809)	-2.7%	(2,351,740)	-7.8%	-61.1%
NET INCOME (LOSS) FOR THE YEAR	297,452	0.9%	(4,466,246)	-14.8%	-106.7%
Net Income (Loss) Continued Operations Attributable to
Controlling shareholders	1,202,240	3.6%	(2,114,968)	-7.0%	-156.8%
Non-controlling shareholders	11,021	0.0%	462	0.0%	2,285.5%
	1,213,261	3.6%	(2,114,506)	-7.0%	-157.4%

⁽¹⁾ Information extracted from the Consolidated Financial Statements of December 31, 2019 and 2018.

⁽²⁾ Representativeness in relation to Net Revenue.

Net Revenue

	12.31.19	Restated 31.12.18	Restated 31.12.17
Net revenue from sales
Brazil
In natura	4,635,597	3,998,483	3,489,846
Poultry	3,692,377	3,198,356	2,697,462
Pork and others	943,220	800,127	792,384
Processed	12,839,008	12,274,681	11,681,579
Other sales	14,874	19,372	17,187
	17,489,479	16,292,536	15,188,612
Internacional
In natura	12,605,846	10,905,155	7,681,223
Poultry	11,262,954	10,021,923	7,059,104
Pork and others	1,342,892	883,232	622,119
Processed	2,119,918	1,850,614	2,929,037
Other sales	173,630	312,902	1,639,588
	14,899,394	13,068,671	12,249,848
Other segments
Others	1,058,107	827,214	875,700
	33,446,980	30,188,421	28,314,160

The Company’s consolidated net revenue increased R$3,258,559, or 10.8%, from R$30,188,421 in 2018 to R$33,446,980 in 2019, mainly due to:

1. Brazil - Net revenue increased by R$1,196,943 or 7.3%, from R$16,292,536, in 2018 to R$17,489,479, in 2019. Such increase is the result of price readjustments and readjustment of investments in bonuses for retail, raising average prices.

2. International - Net revenue increased by R$1,830,723 or 14.0%, from R$13,068,671, in 2018 to R$14,899,394, in 2019. The main factors were: (i) price increases in Saudi Arabia, due to the restricted supply of products; (ii) price increases in Turkey; (iii) greater demand in the Asian market, due to the African Swine Fever; and (iv) an increase in the volume exported, due to the greater number of plants enabled by the Company.

3. Other segments - In 2019, net revenue increased by R$230,893 or 27.9%, to R$1,058,107, in 2019 from R$827,214 in 2018, mainly due to the better performance of BRF Ingredients.

Cost of Goods Sold

In 2019, the cost of product sold totaled R$25,370,042, remaining practically stable, with an increase of only 0.2%, or R$49,289 in relation to 2018, which was R$25,320,753. This increase is explained due to higher personnel, energy, maintenance and freight expenses, partially offset by the gains generated by the Zero Base Budget program.

Gross profit

In 2019, gross profit totaled R$8,076,938, registering an increase of 65.9%, or R$3,209,270, compared to 2018, which was R$4,867,668. Gross margin increased from 16.1% in 2018 to 24.1% in 2019, due to the better operating result both in the Brazil and international segments. Throughout the year, the company continued with its strategy of making the operation profitable through sustainable price management, better commercial execution and optimization of the mix of channels, products and countries.

Operating expenses

In 2019, operating expenses increased R$440,220 or 8.6%, as a result of: (i) higher investments in marketing to strengthen the Company brands; (ii) higher freight expenses in the international market due to the exchange devaluation; and (iii) expenses with legal provisions in the Brazil segment. In relative terms, operating expenses represented 16.6% of net revenue in 2019, compared to 16.9% in 2018, as a result of better operating leverage.

Other operating income (expenses), net

In 2019, the Company had revenue in this item equivalent to R$428,820, representing an increase of R$409,509, compared to 2018. This revenue was mainly due to gains from lawsuits related to the exclusion of ICMS from the PIS / COFINS calculation basis.

Result of equity pick-up

In 2019, the equity income result totaled a negative amount of R$1,737, showing a reduction of R$19,452 in relation to 2018, which was a positive R$17,715. This variation was due to the sale of the stake in the affiliate SATS BRF Food in Singapore.

Operating income

In 2019, the operating result reached a profit of R$2,952,773, representing an increase of R$3,159,107. The table below shows the operating results by segment.

	12.31.19	12.31.18
Brazil	1,818,813	590,416
Internacional	1,275,285	23,778
Other segments	109,138	89,311
Subtotal	3,203,236	703,505
Corporate	(250,463)	(909,839)
	2,952,773	(206,334)

Net financial results

In 2019, net financial expense totaled R$1,865,399, representing a decrease of 16.8% or R$376,075, compared to 2018, which was R$2,241,474, mainly due to: (i) gains from exchange variation in the

period, and (ii) a gain of R$4,526 with the derivative Total Return Swap in 2019, compared to a loss of R$213,847, in 2018.

Income tax and social contribution

In 2019, income tax and social contribution totaled revenue of R$125,887, representing a reduction of 62.2%, or R$207,415 compared to 2018. The effective rate in 2019 was (11.6%) compared to the effective rate of 13.6% in 2018. This variation was mainly due to the partial non-recognition of deferred tax assets, due to the inability of future realization.

Net income

In 2019, the total profit from continuing operations was R$1,213,261, representing an increase of R$3,327,767 compared to 2018, when a loss of R$2,114,506 was recorded. Considering discontinued operations, total profit was R$297,452 in 2019 compared to a loss of R$4,466,246 recorded in 2018.

Comparison of the positions on December 31, 2019 and on December 31, 2018 of the statement of financial position accounts

( In thousands of R$, except when% )	12.31.19 (1)	AV -% 12.31.19	12.31.18 (1)	AV. 12.31.18	% Change 2019 X 2018
CURRENT ASSETS
CURRENT ASSETS
Cash and cash equivalents	4,237,785	10.2%	4,869,562	11.5 %	-13.0%
Marketable securities	418,182	1.0%	507,035	1.2%	17% 5%
Accounts receivable from customers and other receivables	3,090,691	7.4%	2,720,041	6.4%	13.6%
Inventory	3,887,916	9,3%	3,877,294	9.1%	0.3%
Biological assets	1,603,039	3.8%	1,513,133	3.6%	5.9%
Taxes to be Recovered	473,732	1.1%	560,389	1.3%	15 5
Income tax and social contribution recoverable	152,486	0.4%	506,483	1.2%	69:9.
Derivative financial instruments	195,324	0.5%	182,339	0.4%	7.1%
Restricted Cash	296,294	0.7%	277,321	0.7%	6.8%
Assets held for sale	99,245	0.2%	3,326,305	7.8%	97%
Other current assets	590,733	1.4%	690,998	1.6%	-14.5%
Total current assets	15,045,427	36.1%	19,030,900	44.9%	20/9
NON-CURRENT ASSETS
LONG-TERM
Marketable securities	307,352	0.7%	290,625	0.7%	5.8%
Accounts receivable from customers and other receivables	71,029	0.2%	96,922	0.2%	20.6 7.6*
Taxes to be Recovered	5,169,547	12.4%	3,142,547	7.4%	64.5%
Income tax and social contribution recoverable	269,263	0.6%	7,246	0.0%	3,616
Deferred income taxes	1,845,862	4.4%	1,519,652	3.6%	21.5%
Judicial Deposit	575,750	1.4%	669,098	1.6%	0-14
Biological assets	1,081,025	2.6%	1,061,314	2.5%	1.9%
Derivative financial instruments	49,991	0.1%	-	0.0%	0.0%
Restricted Cash	-	0.0%	584,300	1.4%	-100.0%
Other non-current assets	85,537	0.2%	177,372	0.4%	51.8%
Long-term assets	9,455,356	22.7%	7,549,076	17.8%	25.3%
Investments	14,880	0.0%	86,005	0.2%	-82.7%
Property, plant and equipment	12,276,889	29.4%	10,696,998	25.2%	14.8%
Intangible	4,908,079	11.8%	5,019,398	11.8%	-2.2%
Total non-current assets	26,655,204	63.9%	23,351,477	55.1%	14.1%
TOTAL ASSETS	41,700,631	100.0%	42,382,377	100.0%	-1,6%

⁽¹⁾ Information extracted from the Consolidated Financial Statements of December 31, 2019 and 2018.

Current Assets

Current assets totaled R$15,045,427 on December 31, 2019 and R$19,030,900 on December 31, 2018, representing a decrease of R$3,985,473, or 20.9%, mainly due to the sale of operations in Argentina, Europe and Thailand. As of December 31, 2019, current assets represented 36.1% of total assets, compared to 44.9% in the previous year.

Cash and cash equivalents

The caption cash and cash equivalents decreased by R$631,777, or 13.0%, from R$4,869,562 on December 31, 2018 to R$4,237,785 on December 31, 2019, with this reduction mainly due to the consumption of cash in financing activities, with the repurchase of bonds and debt pre-settlement.

Marketable securities

Securities decreased compared to December 31, 2018, from R$507,035 to R$418,182 on December 31, 2019, that is, representing a decrease of R$88,853, or 17.5%. The reduction is due to redemptions made over the period to fulfill obligations.

Trade and Other Receivables

Trade and other receivables totaled R$3,090,691, on December 31, 2019, presenting an increase of R$370,650, or 13.6%, in relation to December 31, 2018, which was of R$2,720,041. This variation is mainly due to the increase of revenues in the last months of 2019, associated to the factors presented on net revenue item.

Inventory

Inventories went from R$3,877,294 on December 31, 2018 to R$3,887,916 on December 31, 2019, increasing by R$10,622, or 0.3%. The increase is mainly due to the increase in inventories of secondary materials, merchandise for resale and advances to suppliers.

Taxes to be Recovered

The Taxes to be Recovered item decreased compared to December 31, 2018, from R$560,389 to R$473,732 on December 31, 2019, representing a decrease of R$86,657, or 15.5%. This decrease is due to compensations and changes in the period.

Derivative financial instruments

The item of derivative financial instruments increased compared to December 31, 2018, from R$182,339 to R$195,324 on December 31, 2019, representing an increase of R$12,985, or 7.1%. This increase is mainly due to the increase in the fair value of derivatives for commodities and coins.

Restricted Cash

The restricted cash account increased compared to December 31, 2018, from R$277,321 to R$296,294 on December 31, 2019, representing an increase of R$18,973, or 6.8%. This increase is due to the interest appropriated to the certificates given as guarantee for the loan obtained through the PESA Loan (“ PESA ”).

Assets held for sale

Assets held for sale totaled R$99,245 as of December 31, 2019, showing a reduction of R$3,227,060, or 97.0%, compared to December 31, 2018, which was R$3,326,305. This reduction is due to the sale located in Argentina, Europe and Thailand in 2019.

Non-current assets

Non-current assets totaled R$26,655,204 on December 31, 2019 and R$23,351,477 on December 31, 2018, representing an increase of R$3,303,727, or 14.1%. The increase was mainly due to the items of taxes recoverable and Property, plant and equipment.

Marketable securities

Bonds and securities increased compared to December 31, 2018, from R$290,625 to R$307,352 on December 31, 2019, representing an increase of R$16,727, or 5.8%. This increase is due to the appropriation of interest on financial investments.

Taxes to be Recovered

The Taxes to be Recovered item increased compared to December 31, 2018, from R$3,142,547 to R$5,169,547 on December 31, 2019, representing an increase of R$2,027,000, or 64.5%. This increase is due to the cause gains obtained by the Company, allowing the exclusion of ICMS from the PIS and COFINS calculation basis.

Deferred income and social contributions taxes

Deferred income and social contributions taxes increased R$326,210 or 21.5%, going from R$1,519,652 on December 31, 2018 to R$1,845,862 on December 31, 2019. The increase is due to the recognition of deferred income assets on tax losses.

Biological assets

The biological assets item increased by R$19,711, or 1.9%, from R$1,061,314 on December 31, 2018 to R$1,081,025 on December 31, 2019. The increase is due to the Company’s regular operating cycle.

Restricted Cash

The restricted cash balance was null on December 31, 2019, compared to R$584,300 on December 31, 2018. The variation is due to the transaction agreement signed with Lactalis do Brasil - Comércio, Importação e Exportação de Laticínios Ltda. (“Lactalis”), which instituted the release of the total account balance retained in escrow.

Other non-current assets

The caption of other non-current assets decreased compared to December 31, 2018, from R$177,372 to R$85,537 on December 31, 2019, representing a reduction of R$91,835 million, or 51.8%. This reduction is due to the decrease in deposit balances and other rights.

Investments

The caption Investments decreased compared to December 31, 2018, from R$86,005 to R$14,880 on December 31, 2019, representing a reduction of R$71,125, or 82.7%. This reduction is due to the sale and participation of the Company in SATS BRF Food in Singapore.

Property, plant and equipment

Property, plant and equipment increased R$1,579,891, or 14.8%, from R$10,696,998 on December 31, 2018 to R$12,276,889 on December 31, 2019. The increase is due to the initial adoption of CPC 06 (R2) / IFRS 16.

Intangible Assets

Intangible assets decreased R$111,319, or 2.2%, from R$5,019,398 on December 31, 2018 to R$4,908,079 on December 31, 2019. The decrease is mainly due to the amortization occurred in the period.

( In thousands of R$, except when% )	12.31.19 (1)	AV -% 12.31.19	12.31.18 (1)	AV. 12.31.18	% Change 2019 X 2018
LIABILITIES
CURRENT
Loans and financing	3,132,029	7.5%	4,547,389	10.7%	-31.1%
Suppliers	5,784,419	13.9%	5,487,205	12.9%	5.4%
Supply chain finance	842,037	2.0%	875,300	2.1%	-3.8%
Lease operations	376,628	0.9%	75,712	0.2%	397.4%
Salaries, social obligations and participations	825,254	2.0%	618,669	1.5%	33.4%
Tax Liabilities	517,208	1.2%	402,971	1.0%	28,3%
Derivative financial instruments	153,612	0.4%	235,035	0.6%	-34.6%
Provision for tax, civil and labor risks	1,084,308	2.6%	495,584	1.2%	118.8%
Employee benefits	95,919	0.2%	94,728	0.2%	1.3%
Liabilities directly associated with assets held for sale	-	0.0%	1,131,529	2.7%	-100.0%
Other current liabilities	512,591	1.2%	524,518	1.2%	-2.3%
Total current liabilities	13,324,005	32.0%	14,488,640	34.2%	−8.0%
NON-CURRENT
Loans and financing	15,488,250	37.1%	17,618,055	41.6%	-12.1%
Suppliers	12,347	0.0%	12,803	0.0%	-3.6%
Lease operations	2,054,552	4.9%	167,041	0.4%	1,130
Tax Liabilities	190,257	0.5%	162,239	0.4%	17.3%
Provision for tax, civil and labor risks	710,061	1.7%	854,667	2.0%	16 ± 9
Deferred income taxes	85,310	0.2%	65,774	0.2%	29.7%
Employee benefits	593,555	1.4%	373,423	0.9%	58(9%)
Derivative financial instruments	3	0.0%	-	0.0%	-
Other non-current liabilities	1,093,942	2.6%	1,107,958	2.6%	-1.3%
Total non-current liabilities	20,228,277	48.5%	20,361,960	48.0%	-0.7%
NET EQUITY
Share capital	12,460,471	29.9%	12,460,471	29.4%	0.0%
Capital reserves	192,845	0.5%	115,354	0.3%	67.2%
Accumulated losses	(3,996,985)	-9.6%	(4,279,003)	-10.1%	-6.6%
Treasury stock	(38,239)	-0.1%	(56,676)	-0.1%	-32.5%
Other comprehensive income	(722,469)	-1.7%	(1,275,519)	-3.0%	-43.4%
Controlling shareholders’ equity	7,895,623	18.9%	6,964,627	16.4%	13.4%
Non-controlling equity interests	252,726	0.6%	567,150	1.3%	-55.4%
Total shareholders’ equity	8,148,349	19.5%	7,531,777	17.8%	8.2%
TOTAL LIABILITIES AND NET EQUITY	41,700,631	100.0%	42,382,377	100.0%	-1,6%

⁽¹⁾ Information extracted from the Consolidated Financial Statements of December 31, 2019 and 2018.

Trade accounts payable

The balance of suppliers totaled R$5,784,419 on December 31, 2019, while on December 31, 2018 the balance was R$5,487,205, representing an increase of 5.4%, or R$297,214. The increase is mainly due to improvements in the financial cycle in 2019.

Supply chain finance

The supply chain finance totaled R$842,037 on December 31, 2019, while on December 31, 2018 the balance was R$875,300, a decrease of 3.8% or R$33,263. The reduction is due to the Company's regular operating cycle.

Lease liability

The lease liability totaled R$376,628 on December 31, 2019, while on December 31, 2018 the balance was R$75,712, representing an increase of 397.4%, or R$300,916. The increase is due to the adoption of CPC 06 (R2) / IFRS 16 and the Company opted for the modified retrospective approach without presenting comparative periods. Therefore, the balances related to December 31, 2018 are presented according to the prerogatives existing in the accounting policies previously in force: CPC 06 (R1) / IAS 17.

Payroll, related charges and employee profit sharing

The payroll, related charges and employee profit sharing totaled R$825,254 on December 31, 2019, while on December 31, 2018 the balance was R$618,669, representing an increase of 33.4%, or R$206,585. The increase is mainly due to a higher management and employees profit sharing provision.

Derivative financial instruments

The heading of derivative financial instruments decreased compared to December 31, 2018, from R$235,035 to R$153,612 on December 31, 2019, representing a reduction of R$81,423, or 34.6%. This decrease is mainly due to index / currency exchange contracts (Swap).

Liabilities directly related to the assets held for sale

The balance of liabilities directly related to assets held for sale totaled R$1,131,529 as of December 31, 2018, this balance was due to the transfer of the balances of discontinued operations. With the conclusion of the sale of operations destined for sale in Argentina, Europe and Thailand, the balance was settled.

Non-current liabilities

Non-current liabilities totaled R$20,228,277 on December 31, 2019 and R$20,361,960 million on December 31, 2018, representing a decrease of R$133,683, or 0.7%. This decrease was mainly due to the variation in the item of loans and financing and provision for tax, civil and labor risks.

Loans and Financing (non-current)

Our long-term debts with financial institutions amounted to R$15,488,250 on December 31, 2019 and R$17,618,055 on December 31, 2018, representing a reduction of R$2,129,805, or 12.1%. This reduction is mainly due to pre-settlements and debt amortizations carried out in the period.

Provision for tax, civil and labor risks

The balance of provision for tax, civil and labor risks totaled R$ 710,061 on December 31, 2019, while on December 31, 2018 the balance was R$ 854,667, representing a decrease of 16.9%, or R$ 144,606. The reduction is due to the decrease in non-current labor and tax contingencies.

Shareholders´ equity

Shareholders’ equity on December 31, 2019 was R$8,148,349 and R$7,531,777 on December 31, 2018. There was an increase of R$616,572, or 8.2%, mainly due to the profit earned in the period.

Financial year ended on December 31, 2018 compared with the financial year ended on December 31, 2017

The following table presents audited financial information for the years ended December 31, 2018 and December 31, 2017 restated for accounting purposes, in accordance with accounting pronouncement CPC 31 - Non-current assets held for sale and discontinued operations, due to discontinued operations mentioned in section 8.1 - Extraordinary Business.

As a procedure, the results of the exercise of discontinued operations are presented separately from the results of the Company's continued operations and are restated for comparative periods. However, for the balance sheet, the reclassification of assets held for sale is a prospective date on which the conditions are met, maintaining the past as presented.

In section 10.3, “Events with relevant effects, occurred and expected, in the financial statements”, the results of discontinued operations are shown.

(In mullions of R$, except when %)	12.31.18 (1)	AV% 12.31.18 (2)	12.31.17 (1)	AV% 12.31.17 (2)	Variation % 2018 x 2017
CONTINUED OPERATIONS
NET REVENUE	30,188.4	100.0%	28,314.2	100.0%	6.6%
Cost of goods sold	(25,320.7)	-83.9%	(22,601.2)	-79.8%	12.0%
GROSS PROFIT	4,867.7	16.1%	5,712.9	20.2%	-14.8%
OPERATING REVENUES (EXPENSES)
Sales	(4,513.6)	-15.0%	(4,208.7)	-14.9%	7.2%
General and administrative	(551.1)	- 1.8%	(462.5)	-1.6%	19.2%
Impairment loss on trade and other receivables	(46.3)	-0.2%	(67.5)	-0.2%	-31.4%
Other operating expenses, net	19.3	0.1%	(333.4)	-1.2%	-105.8%
Equity income	17,7	0,1%	22,4	0,1%	-21,0%
PROFIT BEFORE FINANCIAL RESULT	(206.3)	-0.7%	663.2	2.3%	-131.1%
Financial expenses	(3,891.1)	-12.9%	(3,445.5)	-12.2%	12.9%
Financial revenues	1,649.6	5.5%	1,563.7	5.5%	5.5%
LOSS BEFORE INCOME TAX AND SOCIAL CONTRIBUTION	(2,447.8)	-8.1%	(1,218.6)	-4.3%	100.9%
Current income tax and social contribution	(6.8)	0.0%	41.2	0.1%	-116.5%
Deferred income tax and social contribution	340.1	1.1%	210.6	7.0%	61.5%
NET RESULT OF CONTINUED OPERATIONS	(2,114.5)	-7.0%	(966.8)	-3.4%	118.7%
DISCONTINUED OPERATIONS
NET RESULT OF DISCONTINUED OPERATIONS	(2,351.7)	-7.8%	(132.1)	-0.5%	1,680.4%
NET LOSS FOR THE YEAR	(4,466.2)	-14.8%	(1,098.9)	-3.9%	306.4%
Attributable to
Controlling shareholders	(2,115.0)	-7.0%	(984.3)	-3.5%	114.9%
Non-controlling shareholders	0.5	0.0%	17.5	0.1%	-97.4%
	(2,114.5)	-7.0%	(966.8)	-3.4%	118.7%

⁽¹⁾ Information taken from the Consolidated Financial Statements of December 31, 2018 and 2017.

⁽²⁾ Variation in relation to the net revenues.

Net Revenue

	12.31.18	Restated 12.31.17	Restated 12.31.16
Net sales
Brazil
In-natura	3,998.5	3,489.9	3,109.0
Poultry	3,198.4	2,697.5	2,410.3
Pork and other	800.1	792.4	698.7
Processed	12,274.7	11,681.6	11,600.8
Other	19.4	17.1	98.2
	16,292.5	15,188.6	14,808.0
Halal
In-natura	6,685.1	5,588.8	5,584.3
Poultry	6,632.9	5,554.4	5,542.1
Pork and other	52.2	34.4	42.2
Processed	1,295.6	909.7	642.3
Other	320.8	195.5	-
	8,301.5	6,694.0	6,226.6
International
In-natura	4,213.5	4,736.9	5,125.2
Poultry	3,382.4	3,401.4	4,106.5
Pork and other	831.1	1,335.5	1,018.7
Processed	553.4	654.0	863.7
Other	0.3	222.6	11.2
	4,767.2	5,613.5	6,000.1
Other segments
Ingredients	436.2	269.2	-
Other	391.0	548.8	849.2
	827.2	818.0	849.2
	30,188.4	28,314.1	27,883.9

The Company´s consolidated net revenues increased by R$1,874,261 thousand or 6.6%, from R$28,314,160 thousand in 2017 to R$30,188,421 thousand in 2018, mainly due to great sales volumes in the Brazilian segment, which increased by 7.1% in relation to 2017 and in the Halal segment, which increases 23.9% in relation to 2017, as well as due to a greater average price in both segments.

1. Brazil – Accumulated net revenues increased in R$1,096,152 thousand, or 7.2%, from R$15,188,612 thousand in 2017 to R$16,284,764 thousand in 2018. This increase is the result mainly of the increase in the sales volume (7.1%), combined by a slight increase in the average price of the products sold in this segment.

2. Halal – In 2018, the net revenues were of R$8,293,271 thousand, representing an increase of 23.9% in relation to 2017, which closed in R$6,694,036 thousand, reflecting a prices scenario more favorable that in 2018, influenced by a better balance between the offer and the demand of the products and the consolidation of Banvit from June 2018.

3. International - In 2018, the net revenues were of R$4,767,146 thousand, representing a reduction of R$846,354 thousand or 15.1% in relation to 2017, which was of R$5,613,500 thousand. The main factors that impacted the result were: (i) the restriction in the Russian market; (ii) the offer excess in the Japanese market; (iii) the temporary Chinese antidumpimg tariff; and (iv) the saturation of the Hong Kong market. Additionally, the increase in the seeds price and the change in the mix of channels and products outweighted the economies raised within the Restructuring Plan. Sales volumes in pork meat to China increased due Russia's partial ban on pork imports from Brazil.

4. Other segments – In 2018, the net revenues increased in R$25,228 thousand or 3.1%, to R$843,240 thousand in 2018 from R$818,012 thousand in 2017, mainly due to a better performance of BRF Ingredients.

Cost of Goods Sold

In 2018, the cost of goods sold totaled R$25,320,753 thousand, registering an increase of 12.0%, or R$2,719,538 thousand in relation to 2017, which was of R$22,601,215 thousand. This increase is explained mainly by a greater seed price, greater idle capacity and changes to the mix of products with expansion of in natura products. In addition, other non- recurring factors negatively influenced cost of sales, including: (i) R$403,000 thousand related to the Trapaça/Carne Fraca Operations; (ii) R$196,000 thousand from the Operating and Financial Restructuring Plan; and (iii) R$73,000 thousand resulting from the Brazilian truck drivers’ strike.

Gross Profit

In 2018, the Company’s gross profit totaled R$4,867,668 thousand, reflecting a reduction of 14.8% or R$845,277 thousand, in relation to the year 2017, which was of R$5,712,945 thousand. This decrease was primarily driven by the operating challenges that impacted or business chain, such as higher grain prices, antidumping measures imposed by China and adjustments to the production process to meet the new non-stunning requirements of Saudi Arabia. In addition, the Company had a negative impact of R$184,000 thousand related to the effects of hedge accounting of export debt (established upon its contracting), as announced by the Company in the latest quarters.

Operating Expenses

In 2018, the Company registered operating expenses increased 0.5%, or R$24,241 thousand.

In percentage terms, due the Company's growth, operating represented 16.8% of net revenues in comparison to 17.8% registered in 2017. This increase was mainly driven by (i) higher logistics expense as a result of the expansion of our logistics network to serve a higher average number of points of sale; (ii) increases in inflation; and (iii) exchange rate variation in our international operations.

Impairment loss on trade receivables

Impairment loss on trade receivables decreased to R$46,300 thousand in 2018 (R$67,500 thousand in 2017), mainly as a result of initial IFRS 9 adoption.

Other Operating Expenses, Net

In 2018, the Company registered a revenue in this line equivalent to R$19,300 thousand, representing an increase in R$352,800 thousand, in comparison to 2017. This increase in the result mainly of the decrease in provisions for civil contingencies and the recognition of tax credits after a favorable court decision regarding the exclusion of the ICMS from the PIS/COFINS calculation basis.

Result of Equity Pick-Up

In 2018, the result of the equity pick-up totaled R$17,715 thousand, representing a slight reduction of R$4,668 thousand or 20,9% in relation to the year 2017, which was of R$22,383 thousand. This variation occurred due to the termination of the UP Alimentos Ltda.’s activities combined with increase in profits of STAS BRF.

Operating Income

In 2018, the operating income reached R$206,334 thousand negative, representing a decrease of R$869,518 thousand. The table below shows the operating results by segment.

(In millions of R$, except when %)	12.31.18	Restated 12.31.17
Brazil	589.5	960.7
Halal	323.9	7.5
International	(287.5)	46.1
Other segments	77.6	71.9
Ingredients	115.0	52.1
Other	(37.4)	19.8
Subtotal	703.5	1,086.2
Corporate	(909.8)	(423.0)
	(206.3)	663.2

Net Financial

In 2018, the net financial expenses amounted to R$2,241,474 thousand, representing an increase of 19.1%, ot R$359,716 thousand in comparison to 2017, which was of R$1,881,758 thousand mainly attributable to the negative impact of (i) a higher foreign exchange rate variation on assets and liabilities denominated in foreign currency; and (ii) the mark-to-market of the Total Return Swap derivative instrument, which expense totaled R$214,000 thousand for 2018.

Income Tax and Social Contribution

In 2018, the income tax and social contribution amounted to R$333,302 thousand, representing an increase of 32.4%, or R$81,493 thousand, in comparison to 2017, which occurred due to the increase in deferred tax.

In 2018, the income tax and social contribution totaled a result of R$333,302 thousand (R$251,809 thousand in 2017). The effective rate in 2018 was 13.6%, compared to an effective rate of of 20.7% in 2017. This variation is primarily attributable to the increase in losses in 2018, deferred income tax assets related to tax losses and negative basis, not being recognized because the realization is not probable, exchange variation on investments, result of the Company's subsidiaries abroad and write-off of tax unrealized asset due to the incorporation of SHB in the Company.

Net Loss

In 2018, the net loss from continuing operations was of R$2,114,506 thousand, representing an increase of 118.7%, in comparison to 2017. Taking into account the discontinued operations, the net loss amounted to R$4,466,246 thousand in 2018 in comparison to R$1,098,854 thousand in 2017.

Comparison of the positions on December 31, 2018 and on December 31, 2017 of the equity accounts

( In millions of R $, except when% )	12.31.18 (1)	AV -% 12.31.18	12.31.17 (1)	AV. 12.31.17	% Change 2018 X 2017
ASSETS
CURRENT ASSETS
CURRENT ASSETS
Cash and cash equivalents	4.869,6	11,5%	6.010,8	13,3%	-19,0%
Marketable securities	507,0	1,2%	228,4	0,5%	122,0%
Accounts receivable from customers	2.604,9	6,1%	3.919,0	8,7%	-33,5%
Notes receivable	115,1	0,3%	113,1	0,3%	1,8%
Interest on shareholders' equity	7,3	0,0%	6,2	0,0%	18,1%
Inventory	3.877,3	9,1%	4.948,2	10,9%	-21,6%
Biological assets	1.513,1	3,6%	1.510,5	3,3%	0,2%
Taxes to be Recovered	560,4	1,3%	728,9	1,6%	-23,1%
Income tax and social contribution recoverable	506,5	1,2%	499,3	1,1%	1,4%
Derivative financial instruments	182,4	0,4%	90,5	0,2%	101,5%
Restricted Cash	277,3	0,7%	127,8	0,3%	117,0%
Other current assets	683,7	1,6%	961,1	2,1%	-28,9%
	15,704.6	37,1%	19.143,8	42,3%	-18,0%
Assets held for sale	3,326.3	7,8%	41,6	0,1%	7901,5%
Total current assets	19,030.9	44,9%	19.185,4	42,4%	-0,8%
NON-CURRENT ASSETS
Marketable securities	290,6	0,7%	568,8	1,3%	-48,9%
Accounts receivable from customers	8,0	0,0%	6,3	0,0%	27,2%
Notes receivable	89,0	0,2%	116,4	0,3%	-23,5%
Taxes to be Recovered	3.142,5	7,4%	2.418,2	5,3%	30,0%
Income tax and social contribution recoverable	7,2	0,0%	20,0	0,0%	-63,8%
Deferred income taxes	1.519,7	3,6%	1.369,4	3,0%	11,0%
Judicial Deposit	669,1	1,6%	688,9	1,5%	-2,9%
Biological assets	1.061,3	2,5%	903,7	2,0%	17,4%
Restricted Cash	584,3	1,4%	407,8	0,9%	43,3%
Other non-current assets	177,4	0,4%	87,2	0,2%	103,4%
Investments	86,0	0,2%	68,2	0,2%	26,1%
Property, plant and equipment	10.697,0	25,2%	12.190,6	27,0%	-12,3%
Intangible	5.019,4	11,8%	7.197,6	15,9%	-30,3%
Total non-current assets	23.351,5	55,1%	26.043,1	57,6%	-10,3%
TOTAL ASSETS	42.382,4	100,0%	45.228,5	100,0%	-6,3%

(1) Information taken from the Consolidated Financial Statements of December 31, 2018 and 2017.

Current Assets

The recurring assets accounted R$19,030,900 thousand, on December 31, 2018 and R$19,185,523 thousand on December 31, 2017, representing a decrease of R$154,623 thousand, or 0.8%. On December 31, 2018, the recurring assets represented 44.9% of the total assets compared to 42.4% in the previous year.

Cash and cash equivalents

Cash and cash equivalents presented a reduction of R$1,141,267 thousand, or 19.0%, going from R$6,010,829 thousand on December 31, 2017 to R$4,869,562 on December 31, 2018. This reduction is mainly due to consumption of cash in operations and investment activities. The Company has had as its primary source of cash the cash flow from operating activities, loans and other financing, share offers and the sale of financial investments. Despite having a substantial part of the debt that will mature in the coming years, the Company believes in a solid cash position and cash equivalent, together with the cash flow from operating activities and the extension of the maturity of a part of the debt will be sufficient. to cover the Company's working capital needs and comply with indebtedness in the normal course of its business.

Marketable securities

Marketable securities increased compared to December 31, 2017, from R$ 228,430 thousand to R$ 507,035 thousand on December 31, 2018, that is, an increase of R$ 278,605 thousand, or 122.0%. The increase is due to operations carried out over the period.

Accounts Receivables from Customers

Accounts receivables from customers totaled R$2,604,928 thousand, on December31, 2018, presenting a reduction of R$1,314,094 thousand, or 33.5%, in relation to December 31, 2017, which was of R$3,919,022 thousand. This reduction is mainly due to the receipt of invoices, the constitution of the Credit Rights Fund in Brazil ("FIDC") and the transfer of clients’ receivables in the country and of third parties’ receivables from overseas due to the result of the discontinued operations.

Inventory

The inventories went from R$4,948,168 thousand, on December 31, 2017 to R$3,877,294 thousand on December 31, 2018, representing a reduction of R$1,070,874 thousand, or 21.6%. The decrease is mainly due to the reduction in inventories of frozen raw materials and finished goods.

Taxes to be recovered

Taxes to be recovered decreased in comparioson with December 31, 2017 from R$728,918 thousand to R$560,389 thousand on December 31, 2018 a decrease of R$168,529 thousand, or 23.1%. This decrease is mainly regarding the exclusion of the ICMS from the PIS/COFINS calculation basis from 1992 to 2009 of its incorporated Perdigão Agroindustrial.

Derivative financial instruments

Derivative financial instruments increased compared to December 31, 2017, from R$90,536 thousand to R$182,339 thousand on December 31, 2018, representing an increase of R$ 91,803 thousand, or 101.5%. This increase is mainly due to the increase in currency forward contracts (NDF); currency option contracts; corn forward contracts (NDF) and index / currency exchange contracts (Swap).

Restricted cash

Restricted cash increased compared to December 31, 2017, from R$127,821 thousand to R$277,321 thousand on December 31, 2018, representing an increase of R$149,500 thousand, or 117.0%. This increase is due to the certificates maturing in 2020 given as guarantee for the loan obtained through the Special Asset Sanitation Program (“PESA”); deposit linked to international market operations and Time Deposit linked to Export Credit Note (NCE) operations.

Assets held for sale

Assets held for sale totaled R$3,326,305 thousand on December 31, 2018, representing an increase of R$ 3,284,700 thousand, or 7901.5%, compared to December 31, 2017, which was R$41,571 thousand. This increase is mainly due to the assets destined to sale located in Argentina, Europe and Tailand and the assets related to the Varzea Grande plant.

Non current assets

The non-current assets totaled R$23,351,477 thousand on December 31, 2018 and R$26,042,958 thousand on December 31, 2017, representing a reduction of R$2,691,481 thousand or 10.3%. The reduction is mainly due to the fixed assets and the intangible assets lines.

Marketable Securities

The marketable securities decreased in comparison to December 31, 2017, going from R$ R$568,805 thousand to R$290,625 thousand on December 31, 2018, in other words, there was a decrease of R$278,180 thousand, or 48.9%. This difference reflects that Company’s strategy to make more efficient use of available resources.

Taxes to be recovered

Taxes to be recovered increased compared with December 31, 2017, from R$2,418,155 thousand to R$3,142,547 thousand on December 31, 2018, representing an increase of R$ 724,392, or 30.0%. This increase is mainly due to the recognition of PIS and COFINS credit related to the Company's right to exclude the ICMS from the PIS/COFINS calculation basis from 1992 to 2009 of its incorporated Perdigão Agroindustrial.

Deferred income taxes

The deferred income tax item increased by R$150,286 thousand, or 11.0%, from R$1,369,366 thousand on December 31, 2017 to R$1,519,652 thousand on December 31, 2018. The increase is due to constitution of deferred tax assets on the tax loss for the period.

Biological assets

The biological assets item increased by R$157,660 thousand, or 17.4%, from R$903,700 thousand on December 31, 2017 to R$ 1,061,314 thousand on December 31, 2018. The increase is due to the incorporation of SHB by BRF S.A.

Restricted cash

The restricted cash increased compared to December 31, 2017, from R$407,803 thousand to R$ 584,300 thousand on December 31, 2018, representing an increase of R$176,497 thousand, or 43.3%. This increase is due to the deposit given as a guarantee for the sale of the dairy segment to Groupe Lactalis (“Parmalat”), maturing in 2021, for the total return swap transaction, maturing in 2019 (note 4.4.ii.d. of the Statements Consolidated Financial Institutions) and the sale of the company Gale due in 2020.

Other non-current assets

The other non-current assets increased compared to December 31, 2017, from R$ 87,157 thousand to R$177,372 thousand on December 31, 2018, representing an increase of R$90,215 thousand, or 103.4%. This increase is due to prepaid expenses and other rights.

Investments

The investments increased compared to December 31, 2017, from R$68,195 thousand to R$86,005 thousand on December 31, 2018, representing an increase of R$17,810 thousand, or 26.1%. This increase is due to investments by BRF S.A. and BRF GmbH.

Property, plant and equipment, net

The property, plant and equipment decreased by R$1,493,585 thousand, or 12.3%, from R$12,190,583 thousand on December 31, 2017 to R$10,696,998 thousand on December 31, 2017. The decrease was due to the transfer of the assets held for sale in connection with the Company’s operations in Argentine, Europe and Tailand and other assets.

Intangible assets

The intangible assets decreased by R$2,178.238 thousand, or 30.3%, from R$7,197,636 thousand on December 31, 2017 to R$5,019,398 thousand on December 31, 2018. The decrease was due to the transfer of the assets held for sale in connection with the Company’s operations in Argentine, Europe and Tailand.

( In millions of R $, except when% )	12.31.18 ⁽¹⁾	AV% 12.31.18 ⁽²⁾	12.31.17 ⁽¹⁾	AV% 12.31.17	Variation % 2018 x 2017
LIABILITIES
CURRENT LIABILITIES Short-term debt	4,547.4	10.7%	5,031.4	11.1%	-9.6%
Trade accounts payable	5,552.4	13.1%	6,445.5	14.3%	-13.9%
Supply chain finance	885,8	2.1%	715.2	1.6%	23.9%
Payroll and related charges	555.0	1.3%	635.1	1.4%	-12.6%
Tax payable	403.0	1.0%	426.0	0.9%	-5.4%
Interest on shareholders' equity	6.2	0.0%	1.9	0.0%	226.0%
Employee and management profit sharing	63.7	0.2%	95.9	0.2%	-33.6%
Derivative financial instruments	235.0	0.6%	299.5	0.7%	-21.5%
Provision for tax, civil and labor risks	495.6	1.2%	536.1	1.2%	-7.6%
Pension and other post-employment plans	94.7	0.2%	85.2	0.2%	11.2%
Other current liabilities	518.3	1.2%	602.6	1.3%	-14.0%
	13,357.1	31.5%	14,874.4	32.9%	-10.2%
Liabilities directly associated with the assets held for sale	1,131.5	2.7%	-	0.0%	0.0%
Total current liabilities	14,488.6	34.2%	14,874.4	32.9%	-2.6%

NON-CURRENT LIABILITIES
Long-term debt	17,618.1	41.6%	15,413.0	34.10%	14.3%
Trade accounts payable	179.8	0.4%	196.8	0.40%	-8.6%
Tax payable	162.2	0.4%	171.2	0.40%	-5.3%
Provision for tax, civil and labor risks	854.7	2.0%	1,237.1	2.70%	-30.9%
Deferred income and social contribution taxes	65.8	0.2%	155.3	0.30%	-57.6%
Employee benefits plans	373.4	0.9%	343.1	0.80%	8.8%
Other non-current liabilities	1,108.0	2.6%	1,124.8	2.50%	-1.5%
Total non-current assets	20,362.0	48.0%	18,641.3	41.20%	9.2%

EQUITY
Capital	12,460.5	29.4%	12,460.5	27.6%	0.0%
Capital reserves	115.3	0.3%	115.1	0.3%	0.2%
Income reserves	-	0.0%	101.4	0.2%	-100.0%
Loss accumulates	(4,279.0)	-10.1%	-	0.0%	0.0%
Treasury shares	(56.7)	-0.1%	(71.5)	-0.2%	-20.7%
Accumulated other comprehensive loss	(1,275.5)	-3.0%	(1,405.2)	-3.1%	-9.2%
Equity attributable to interest of controlling shareholders	6,964.6	16.4%	11,200.3	24.8%	-37.8%
Equity attributable to non-controlling interest	567.2	1.3%	512.5	1.1%	10.7%
Total equity	7,531.8	17.8%	11,712.8	25.9%	-35.7%
TOTAL LIABILITIES AND EQUITY	42,382.4	100.0%	45,228.5	100.0%	-6.3%

(1) Information taken from the Consolidated Financial Statements of December 31, 2018 and 2017.

Trade accounts payable

The suppliers item totaled R$5,552,434 thousand on December 31, 2018 compared to R$6.445.486 thousand on December 31, 2017, representing a decrease of 13.9%, or R$893,052 thousand. This decrease is mainly due to the the transfer of the results of the discontinued operations and by the reduction of the payment deadlines before its suppliers.

Supply chain finance

The balance of supply chain finance totaled R$885,783 thousand on December 31, 2018, while on December 31, 2017 the balance was R$715,189 thousand, an increase of 23.9%, or R$170,594 thousand. The increase is mainly due to the incorporation of SHB.

Payroll related charges

The balance of payroll related charges totaled R$555,016 thousand on December 31, 2018, while on December 31, 2017 the balance was R$635,097 thousand, a decrease of 12.6%, or R$80,100 thousand. The decrease is due to the reduction in the equity balances of these accounts.

Interest on shareholders' equity

The balance of interest on shareholdres’ equity and dividends payable totaled R$62,500 thousand on December 31, 2018, while on December 31, 2017 the balance was R$1,900 thousand, an increase of 226.3%, or R$4,300 thousand. The increase is due to the UP! Alimentos Ltda.

Derivative financial instruments

The derivative financial instruments decreased compared to December 31, 2017, from R$299,491 thousand to R$235,035 thousand on December 31, 2018, representing a decrease of R$64,456 thousand, or 21.5%. This decrease is mainly due to the index / currency exchange contracts (Swap).

Liabilities directly related to the assets held for sale

The liabilities directly related to the assets held for sale totaled R$1,131,529 thousand on December 31, 2018. This result is due transfer of discontinued operations.

Non-current liabilities

The non recurring liabilities totaled R$20,361,960 thousand on December 31, 2018 and R$18,641,322 million on December 31, 2017, representing a decrease of R$1,720,638 thousand, or 9.2%. This decrease was mainly due the variation in the loans and financings.

Loans and financing (non-current)

The Company’s long-term debts with financial institutions totaled R$17,618,055 thousand on December 31, 2018 and R$15,413,027 thousand on December 31, 2017, representing an increase of R$2,205,028 thousand, or 14.3%. This increase is mainly due the attainment of rural credit for working capital.

Provision for tax, civil and labor risks

The balance of provision for tax, civil and labor risks totaled R$854,667 thousand on December 31, 2018, while on December 31, 2017 the balance was R$1,237,116 thousand, a decrease of 30.9%, or R$382,449 thousand. The reduction is due to the decrease in contingencies.

Equity

Equity on December 31, 2018 was R$7,531,777 thousand and R$11,712,782 thousand on December 31, 2017. This reduction of R$4,181,005 million, or 35.7%, is due to the loss registered in the period by means of the results of the accumulated losses.

Comparison of Cash Flow positions as of December 31, 2020 and 2019, respectively

The following table presents certain consolidated cash flow information for the periods indicated:

	Year ended December 31,
	2020	2019
Cash Flow	(In thousands of Brazilian Reais)
Net cash provided by operating activities	4,417,630	2,521,230
Net cash provided by (used in) investing activities	(1,430,989)	1,443,106
Net cash used in financing activities	(587,042)	(4,817,102)
Exchange variation effect on cash and cash equivalents	939,241	54,540
Net increase (decrease) in cash and cash equivalents	3,338,840	(798,226)

Cash Flows Provided by (Used in) Operating Activities

The Company recorded net cash flows provided by operating activities of R$4,417,630 thousand in 2020, compared to cash flows provided by operating activities of R$2,521,230 thousand in 2019. The increase of R$1,896,400 thousand is mainly due to a decrease of R$294,522 thousand in the payment of tax, civil and labor provisions, representing a decrease of R$130,686 thousand in the interests paid and an increase in the derivative financial instruments received of R$1,249,195 thousand.

Cash Flows Provided by (Used in) Investing Activities

The Company recorded net cash flows used in investing activities of R$1,430,989 thousand in 2020, compared to cash flows provided by investing activities of R$1,443,106 thousand in 2019. The decrease of R$2,874,095 thousand is mainly due to the proceeds from the sale of The Company operations located in Europe, Thailand and Argentina in the amount of R$1,664,073 thousand and the price adjustment from the sale of our then dairy segment in the amount of R$242,051 thousand, both happened in 2019. Additionally, there were increases in the investments in biological assets of R$168,292 thousand and in property, plant and equipment of R$387,444 thousand in 2020.

Cash Flows Provided by (Used in) Financing Activities

The Company recorded cash flows used in financing activities of R$587,042 thousand in 2020, compared to cash flows used in financing activities of R$4,817,102 thousand in 2019, mainly due to to our strategy of refinancing and increase in liquidity for 2020. The amount of proceeds from debt issuance net of repayments in 2020 was of R$172,974 thousand, compared to R$4,081,980 thousand of repayments net of debt issuance in 2019.

Comparison of Cash Flow positions as of December 31, 2019 and 2018, respectively

The following table presents certain consolidated cash flow information for the periods indicated:

	Year ended 31st December
	2019	2018
Cash Flow	(In thousands of Brazilian Reais)
Net cash provided by operating activities	2,521,230	295,685
Net cash provided by (used in) investing activities	1,443,106	(1,415,879)
Net cash provided by (used in) investing activities	(4,817,102)	73,924
Exchange variation effect on cash and cash equivalents ....................................... .................................................. .........	54,540	71,452
Increase (decrease) in net cash and cash equivalents	(798,226)	(974,818)

Cash Flows Provided by (Used in) Operating Activities

The Company recorded net cash flows generated from operating activities of R$ 2,521,230 thousand in 2019, compared to cash flows generated from operating activities of R$ 295,685 in 2018. The increase of R$2,225,545 thousand is mainly due to an increase in net income to R$ 1,213,261 thousand in the year ended December 31, 2019 (compared to a net loss of R$2,114,506 thousand registered in the year ended December 31, 2018), adjusted by the effects of inflows that do not affect cash of R$ 4,057,897 thousand in the year ended December 31, 2019 (compared to the effects of inflows that do not affect cash of R$4,425,222 thousand in the year ended as of December 31, 2018), added to the reduction in the average financial cycle by 9.3 days in 2019.

Cash Flows Provided by (Used in) Investing Activities

The Company recorded net cash flows generated R$1,443,106 thousand in investment activities in 2019, compared to a net cash flows used in of R$1,415,879 thousand in 2018. An increase of R$2,858,985 thousand, is mainly due to there was receipt for the sold of operations located in Argentina, Europe and Thailand, in addition to releasing of restricted cash related to operation with Lactalis in 2019.

Cash Flows Provided by (Used in) Financing Activities

The Company recorded cash flows used in financing activities of R$4,817,102 thousand in 2019, compared to cash flows generated by financing activities of R$73,924 thousand in 2018. In 2019 the amount of repayment of debts, net of proceeds, which was R$4,081,980 thousand, compared to an amount of proceeds of R$276,139 thousand net of repayments in 2018.

Comparison of Cash Flow positions as of December 31, 2018 and 2017, respectively

The following table presents certain consolidated cash flow information for the periods indicated:

	Year ended 31st December
		2018	2017
Cash flow		(in millions of Brazilian Reais)
Net cash generated by operating activities		295.7	649.4
Net cash used in investment activities		(1,415.9)	(2,134.5)
Net cash from financing activities		73,9	1,057.1
Exchange variation effect on cash and cash equivalents		71.5	81.9
Increase (decrease) in net cash and cash equivalents		(974.8)	(346.1)

Cash Flows Provided By (Used In) Operating Activities

The Company recorded net cash flows generated in continued operating activities of R$428.4 million in 2018, compared to cash flows generated in continued operating activities of R$669.8 million in 2017. The decrease of R$241.4 million is mainly due to an increase in net loss to R$2,114.5 million in the year ended December 31, 2018 (compared to a net loss of R$966.8 million in the year ended December 31, 2018) December 2017), adjusted by the effects of inflows that do not affect cash of R$4,425.2 million in the year ended December 31, 2018 (compared to the effects of inflows that do not affect cash of R$3,752.6 million in the year ended as of December 31, 2017), mainly related to the financial result of R$2,241.5 million, partially offset by R$340.1 million of deferred income tax.

The Company recorded net cash flows from discontinued operating activities of R$132.7 million in 2018, compared to cash flows from discontinued operating activities of R$20.4 million in 2017, resulting in net cash flows generated from operating activities. consolidated (continued and discontinued) of R$295.7 million in 2018, compared to net cash flows generated from consolidated operating activities (continued and discontinued) of R$649.4 million in 2017.

Cash Flows Provided by (Used in) Investing Activities

The Company invested R$1,326.7 million of cash in continued investment activities in 2018, compared to R$2,050.4 million in 2017, representing a reduction of R$723.7 million, mainly because the Company did not use any cash in business combinations. in 2018. In 2018, cash invested in investment activities consisted mainly of R$578.0 million in capital expenditure on Property, plant and equipment, R$845.3 million in the acquisition and formation of breeding stock and R$249.4 million in restricted cash. The Company recorded net cash flows invested in discontinued investment activities of R$89.2 million in 2018, compared to cash flows invested in discontinued investment activities of R$84.1 million in 2017, resulting in net cash flows invested in consolidated investment activities (continued and discontinued) of R$1,415.9 million in 2018, compared to net cash flows invested in consolidated investment activities (continued and discontinued) of R$2,134.5 million in 2017.

Cash Flows Generated in Financing Activities

The Company recorded cash flows generated by continued financing activities of R$173.7 million in 2018, compared to cash flows generated by continued financing activities of R$1,047.7 million in 2017. In 2018, the Company received funds from the issuance of debt securities in the amount of R$6,500.1 million, which was partially offset by the amortization of debt in the amount of R$6,224.0 million. The Company recorded net cash flows from discontinued financing activities of R$99.8 million in 2018, compared to net cash flows from discontinued financing activities of R$9.4 million in 2017, resulting in net cash flows generated in consolidated financing activities (continued and discontinued) of R$73.9 million in 2018, compared to net cash flows generated in consolidated financing activities (continued and discontinued) of R$1,057.1 million in 2017.

10.2 Operating and Financial Income

The following information was evaluated and commented on by the Company’s Officers:

a. Results of the issuer’s operations

i. description of any important components of revenue

The following is a breakdown of our Goods Sold in Brazil and to international customers:

Meat products consisting of meat in natura chilled and / or frozen, which the Company define as whole and cut chicken, pork and beef cuts;

Processed Food Products, including the following:

Whole and cut chickens, frozen, marinated (sold under the brand name Chester ^® ) and turkeys;

Specialty meats, such as sausages, ham products, bologna, sausages frankfurter, salami, bacon and other smoked products; and

Frozen processed meats, such as hamburgers, steaks , breaded, kibes and meatballs;

Other Processed Products , including the following:

Margarine, butter and cream cheese; and

Main dishes prepared frozen, such as lasagna, pizzas and desserts, as well as other frozen foods; and

Plant-based products, such as nuggets, pies, vegetables and hamburgers; and

Frozen desserts;

Others , consisting of soy bran, refined soy flour and animal feed.

Before the divestments made under the Operational and Financial Restructuring Plan, released in June 2018, other processed products included mayonnaise, mustard and ketchup.

The charts below show the Company’s revenue in 2020 divided into products and business units:

ii. Factors that materially affect operating results

The Company’s operating results, financial condition and liquidity have been and will continue to be influenced by a wide range of factors, including:

Economic conditions in Brazil and abroad;
Concerns related to Covid-19, the African swine fever, avian influenza and other diseases of human and animal origin;
The effect of trade barriers and other import restrictions;
The sensitivity of the domestic market to changes in global demand, including the effect of the actions of the main Brazilian competitors and temporary increases in the supply of producers in other countries;
Changes in prices of commodities;
Fluctuations in the exchange rate and inflation;
Interest rates; and
Freight costs.

Seasonal factors and volatility that affect both raw material prices and sales prices may materially affect the Company’s results.

The Company’s production cost is mainly dependent on the price and supply of corn and soybean meal. Among other raw materials, there are soybeans, pork and beef, for example. The sale prices of the Company’s products are determined by constant changes in supply and demand that may fluctuate significantly, in addition to other external factors that the Company is unable to control, such as fluctuations in the levels of global domestic production of poultry, pork and beef , changes in environmental regulations, changes in the economic situation, climatic conditions, diseases in animals and crops and costs linked to exchange rates. Additionally, the prices of the main raw materials, including corn, soybean meal and soybeans (in grain), are being affected by the trade dispute between the USA and China. There is no certainty about the resolution horizon, as well as the long-term effects on global economic and political conditions. Any change in the price or availability of raw materials necessary for the production of our products caused by these or other factors may impact the Company.

The economic sector in which the Company operates is also characterized by cyclical periods, where prices and profitability fluctuate due to levels of supply and demand. There is no certainty that the Company will be able to adapt adequately to cyclical periods or volatility, as they may have adverse effects on our operations or financial results.

Natural disasters, pandemics or extreme climatic variations, including floods, droughts, excessive heat or cold, hurricanes or other storms, as well as any interruption in our plants that require the temporary relocation of functions to other facilities can impair the growth and health of live animals or interfere in our operations due to power outages, damage to our production and processing facilities or interruption of channels or information systems. The outbreak of COVID-19 (“Coronavirus”), Which originated in China in late 2019 and was declared a global pandemic by the World Health Organization on March 11, 2020, could adversely affect the Company’s business and operations, including the extent to which estimated deliveries of products may be made. substantially delayed either as a result of the further spread of the virus or as a result of preventive measures implemented by governments or companies to limit its spread. In addition, the Company’s operations include global production and distribution facilities and, in the event of a Coronavirus outbreak at its facilities or in the communities where the

Company operates and distributes its products, their distribution, operation, employees, suppliers, consumers and distribution channels may be severely affected. The referred pandemic could also have an adverse impact on consumer demand, commodity prices, the economy and financial markets in several countries, resulting in an economic slowdown that could affect the demand for the Company’s products and cause a material adverse effect on the result of its operations. For more information on the risks and preventive measures adopted by the Company, see item 5.6 – Other relevant information and 10.9 – Other factors with relevant influence - “Analysis of the impacts of COVID-19 on the Company's activities” of this Reference Form, as well as the risk factor contained in item 4.1 of this Reference Form, entitled "Pandemics or outbreaks of human diseases, such as the new coronavirus (COVID-19), can cause changes in consumption and trade patterns, in supply chains and in production processes, as well as causing interruptions in production and product shipments, which may significantly impact the Company's operations and operating results".

Below, the Company presents more details on these factors:

World and Brazilian economic situation

The National Monetary Council set the inflation target in Brazil at 3.75% for 2020, with a possible variation of 1.5 percentage points up or down. The inflation rate, which was below the target at 2.95% e 4.31% in 2018 e 2019, respectively, increased to 4.5% in 2020. Price increases generally reduce consumers’ purchasing power, especially among the lower income classes and end up limiting consumption.

The Brazilian labor market registered an average unemployment rate of 14.1% in 2020, according to the IBGE’s National Household Sample Survey (“PNAD”), which represents a slight deterioration when compared to 11.8% in 2019. In addition, after dropping to 91.6 points in 2019, Brazilian consumer confidence dropped to 978.5 points in December 2020, according to a Consumption Survey by the Getúlio Vargas Foundation (FGV).

Brazil’s real GDP increased at an average annual rate of 9.0% from 2005 to 2020. After increasing 0.5% in 2014, Brazilian GDP decreased by 3.5% for two consecutive years, in 2015 and in 2016. Reacting to this weak economic situation, the Central Bank reduced the SELIC rate, the basic short-term interest rate. Overall, the long-term trend in interest rates continues to decline, from 9.75% on December 31, 2005 to 2.00% on December 31, 2020. In 2020, GDP retracted 4.1% compared to 2019.

The real depreciated 4.29% against the US dollar in 2020, from R$4.03 for US$ 1.00 in 2019 to R$ 5.19 for US$ 1.00 in 2020.

Tariff barriers and other barriers (classic form and from commercial defense processes)

Global demand for Brazilian poultry and pork products is significantly affected by trade barriers, including: (i) tariff barriers, or high import tariffs that protect certain domestic markets; (ii) non-tariff barriers, mainly import quotas, sanitary barriers and religious / technical barriers. In addition, some countries employ subsidies for production and exports, which tend to distort international trade and interfere with the Company’s business. The Company continuously monitors trade barriers and other import restrictions in the chicken, pork and beef markets around the world directly or from specialized consulting firms, as these restrictions significantly affect the demand for our products and the level of our exports.

The European Union (since 2007), Russia (since 2012) and Mexico (since 2013) protect their local meat industries by applying import quotas and charging (sometimes prohibitive) tariffs for volumes exported outside the EU. determined quota.

In September 2013, South Africa increased import tariffs for chicken products from all countries except the European Union (due to a free trade agreement between them that establishes zero tariffs for poultry products) . Tariffs increased to 82% for whole chicken, 12% for boneless cuts and 37% for bone cuts. In 2020, the South African government announced increases in import tariffs, applied to imports of bone cuts (from 37% to 62%) and boneless cuts (12% to 42%), which had a negative impact on the competitiveness and profitability of the Company in that country.

In December 2016, Saudi Arabia increased import tariffs for products derived from chicken from 5% to 20%, which was followed, in 2020, by an increase in the value added tax (VAT) applicable to whole chicken and in parts, from 5% to 15%.

In August 2017, the Chinese government initiated an investigation into practices anti-dumping in Brazilian exports of whole chicken and in parts, including BRF exports. In a preliminary determination in June 2018, Chinese authorities imposed a provisional application of import tariffs on Brazilian chicken. The investigation ended in February 2019 and Brazilian exporters agreed to accept a minimum selling price to China.

In August 2018, Iraq decided to apply an extra tariff on imports, increasing the tariff on chicken products from 10% to 60%.

Non-tariff barriers

Import Quotas

In 2005, Brazil obtained a favorable result in a panel against the European Union at the WTO in relation to the reclassification (and increase in the tariff) of exports of salted chicken breast meat. In return, the European Union introduced quotas for imports of certain tariff codes, notably for salted chicken breast, marinated turkey breast and processed chicken, and in July 2007, Brazil was granted a majority of these quotas.

Russia, has used quotas to control its imports of pork, beef and poultry. As part of the negotiations to join the World Trade Organization (“ WTO ”), From 1 January 2020, Russia has abolished the quota of Pork. Currently, any company can import pork by paying a fixed import tariff of 25%.

The following quotas are applied to chicken imports: an intracota tariff of 25% and an extracota of 80%. The total volume of quotas is 364 thousand tons divided into 100 thousand tons of boneless cuts, in which 80 thousand tons are allocated to the European Union and 20 thousand tons to other countries; 250 thousand tons of bone-in meat, without geographic discrimination; and for turkeys, 14,000 tons of boneless and / or bone-in meat, without geographic discrimination. However, not all codes can be imported within quotas, e.g. grillers and whole boneless chickens (shawarma) are subject to an 80% tax according to Russia’s internal customs regulations.

For cattle, the quotas applied for imports are: 15% intra-quota tariffs and 50% extra-quota tariffs. Quotas for chilled meat - 40 thousand tons, of which 29 thousand tons are for the EU and 11 thousand for the other countries. Quotas for frozen meat - 530 thousand tons, of which 60 thousand were allocated to the European Union, 60 thousand to the USA, 3 thousand to Costa Rica and 407 thousand tons to other countries.

In December 2017, Mexico renewed its import quota for chicken meat of 300 thousand tons until 2019, and in October of that year it expired. As a result, in 2020, the Company was unable to export chicken to Mexico due to the absence of import quotas.

Additionally, the Saudi Arabian government has announced the adoption of an import licence system, which has not been implemented yet. Once it is implemented, Saudi Arabia may have the ability to strengthen its control over imported volumes and set limitations.

Sanitary barriers

Despite progress in negotiations, several important markets (in spite of progress in negotiations for trade opening) are not yet open for Brazilian meat products due to sanitary barriers. These are the cases of the European Union and Colombia for pork; and Taiwan and Panama for chicken.

As a result of Trapaça Operation, on March 5, 2018, the Company received from the Ministry of Agriculture, Environment and Supply (“MAPA”) a notification that immediately suspended exports of plants from Rio Verde / GO, Carambei / PR and Mineiros / GO to 13 countries that had specific health requirements related to the control of Salmonella spp . MAPA temporarily suspended exports of ten other BRF plants to the European Union on March 15, 2018, but revoked that suspension on April 18, 2018. On May 14, 2018, the European Union issued a decision to remove 12 of our plants from Brazil from the list that enabled the import of animal products to European Union countries. The European Union usually has more stringent requirements related to Salmonella levels and other food safety standards compared to Brazil and the markets in which the Company operate.

Given the ban on imports of our plants, the Company are no longer able to sell our products produced in embargoed plants to the European Union and the Company have to redirect our production capacity to other markets, which can operate with different levels of prices and margins.

Between April 29 and April 30, 2020, our plant located in Rio Verde, Goiás, was temporarily suspended as determined by the Federal Inspection Service (“SIF”), due to deviations found in the local water supply system.

In 2020, China’s General Customs Administration suspended the authorization for chicken and pork exports from two BRF plants, located in Dourados (SIF 18) and Lajeado (SIF 3975), including the Lajeado Minuano (SIF 1661) plant, a partnership between BRF and Cia Minuano de Alimentos. The suspension was due to alleged concerns over COVID-19 in Brazil. The Dourados plant has had its suspensions reversed by the Chinese authorities and the plants located in Lajeado has received a videoaudit by the Chinese authorities that reversed its suspension in December.

In 2020, the Philippines imposed a temporary ban on poultry meat imports from Brazil after two cities in China found traces of COVID-19 in cargoes of imported frozen food, including chicken wings, from Brazil. The Philippines lifted the embargo on imports of Brazilian chicken products in December 2020. Since no other countries followed the Philippine government’s embargo and the Company have not been notified, whether directly or through the Brazilian government, of other countries adopting a similar position, the Company believe that it is unlikely that other similar embargos will occur.

Technical barriers

In the short term, the Company have to respond quickly to any imposition of any new restrictions, including temporary health restrictions by redirecting to other markets or changing product specifications, in order to meet new requirements to minimize the effects of our net exports . In the long run, these restrictions may affect the growth rate of our business.

In January 2018, Saudi Arabia instituted the requirement for non-stunning for the animal slaughter process. Saudi Arabia considered that the slaughter practices of Brazilian companies violated Halal principles, due to the use of an electric shock to stun birds. BRF and other Brazilian companies, for this reason, needed to migrate their production processes to slaughter non-stunning so that they could supply the Saudi market. The Company incurred, and expects to incur, in additional costs related to these requests for export to Saudi Arabia. In January 2019, the Saudi Arabian health authority published a report qualifying 25 Brazilian establishments as chicken meat exporters to that country. BRF now has eight of the twenty-five plants authorized to export chicken meat to Saudi Arabia, and one of the plants that BRF exported (Lajeado / RS / SIF 1449) is not on the new list. However, the eight qualified plants have sufficient capacity to meet the demand in that market. Although the Company continue to redirect chicken production to Saudi Arabia to enabled factories without significant disruptive changes in shipments to this market, these changes may result in reduced revenues and increased expenses.

In 2020, Saudi Arabia continued its practice of creating import barriers, such as by suspending imports from the Francisco Beltrão (SIF 2518) and Dois Vizinhos (SIF 1985) plants in February 2020 without providing technical justifications, increasing the costs of Halal certification by requiring accreditation at the SFDA Halal Center, and adopting import licenses to control the volume of imports. The import license requirements have not yet been fully implemented, and the Company do not know if the Saudi

government will use this tool as a trade barrier. Saudi Arabia also imposed an informal import ban in 2020 against products originating from Turkey, which affected your subsidiary Banvit’s exports.

Additionally, since 2018, the government of South Africa has threatened to launch an anti-dumping investigation against Brazil related to certain protein cuts allegedly being exported at lower prices than those in the South African domestic market.

In 2020, the Indonesian government appealed a WTO decision in a case filed by the Brazilian government against chicken import restrictions imposed by Indonesia. The WTO’s appellate body’s activities are suspended waiting the appointment of judges to the appellate body. As a result, the Company unable to estimate when this case will be resolved. In 2020, the Company also observed increased efforts in Malaysia in enforcement activities concerning the Halal certificate regulations, resulting in increased difficulty in fulfilling all the requirements. Although as of the date of this annual report the Company was able to overcome these difficulties for cargo release, the Company anticipate that this trend may continue in Malaysia, with the imposition of trade barriers.

Angola also imposed certain controls over the issuance of import licenses in 2020 as a way of reducing imports. Angola is facing a foreign currency shortage, mainly U.S. dollars, which has impacted their import volumes. Additionally, also in 2020, Iraq imposed technical barriers by means of a ban on importing poultry parts. In 2019, Iraq had already banned the imports of whole poultry.

In Turkey, there is a risk related to the expiration and non-renewal of the license referent to the validity of transgenic events, which would impact Turkish imports of transgenic soybeans, thereby affecting, therefore, the cost of our production in Turkey.

Consequences of outbreaks and / or cases of animal diseases of economic and public health interest

Avian Influenza (Avian Influenza, IA)

Avian influenza has attracted the attention of the international community over the years, with outbreaks in poultry, having serious consequences, both in subsistence and in international trade in many countries. In addition, although most avian influenza viruses do not infect humans, some, such as H5N1 and H7N9 avian influenza, are well known to the public due to possibility of serious and sometimes fatal infections in people.

The demand for Company products can be significantly affected by outbreaks of diseases in animals, such as avian influenza. If a significant number of new cases of avian influenza occur in humans, even if it is not in any of its markets, the demand for its poultry products both inside and outside Brazil may be negatively affected and the extent of the effect for the Company will not be affected. can be predicted. Even isolated cases of avian influenza in humans can negatively impact their business due to public sensitivity to the disease.

Brazil has not yet had a documented case of bird flu, although there are concerns that an outbreak of bird flu may occur in the country in the future. Any outbreak of avian influenza in Brazil could lead to the necessary disposal of the Company’s poultry crops, which would result in decreased sales in the poultry sector, prevent the recovery of costs incurred in the creation or purchase of birds and would result in additional expenses for disposal of birds. In addition, any outbreak of avian influenza in Brazil would likely lead to immediate restrictions on the export of some of its products to the main export markets. Preventive measures adopted by the Brazilian authorities, if any, may not be effective in preventing the spread of avian influenza in Brazil. In addition, any future significant outbreak of avian influenza in Brazil could lead to pressure for the disposal of Pork, even though no relation between cases of influenza and pork consumption is proven. Any such disposal of swine by the Company of this nature would result in reduced sales of pork, prevent the recovery of costs incurred in the creation or purchase of swine and would result in additional expenses for the disposal of swine. Accordingly, any spread of avian influenza or increased concerns about this disease can have a substantial and adverse effect on the Company.

Other animal diseases

Likewise, demand in the Company’s export markets may be influenced by other illnesses. For example, pork imports from most Brazilian states were banned from Russia from 2005 to 2007, due to cases of foot-and-mouth disease in the states of Mato Grosso do Sul and Paraná. The Company do not raises Pork in the states of Mato Grosso do Sul and Paraná. However, the ban affected Brazilian imports to Russia in general and, at the time, required the Company to transfer pig production to the Russian market to Rio Grande do Sul, the only Brazilian state that was not subject to the ban, until Russia lifted import restrictions from eight other Brazilian states in December 2007.

More recently, a viral disease called swine epidemic diarrhea has been diagnosed in North America and Asia. The main clinical signs are enteric symptoms, short stature and high mortality. In these regions, the disease was responsible for a significant reduction of animals in the process of termination and a consequent increase in prices due to the reduction in supply. There is still no vaccination to prevent the disease, but biosafety and management procedures can reduce its impacts.

Outbreaks of African Swine Fever have been reported since August 2018. The Chinese market changed its purchases as a result of these outbreaks. As a result, our volumes of pork cuts sold to China have increased. As a result of the outbreaks of African Swine Flu in China, MAPA suspended the importation of natural pork gut from China. This measure was preventive and has already been suspended.

Although all of our hogs are sourced in Brazil from zones free of Classical Swine Fever (“GSC”), there have been a number of recent outbreaks outside of these zones. In October 2018, an outbreak of Classical Swine Fever was confirmed in the Brazilian State of Ceará. Additionally, in 2019, a case of Classical Swine Fever was confirmed in the Brazilian States of Alagoas and Piauí. In 2020, two additional cases were reported in the state of Piauí. Brazil has two zones regarding the sanitary status of Classical Swine Fever, the free zone that is comprised of 16 Brazilian states and includes more than 95% of the Brazilian commercial pork production and a non-free zone, located in the north of Brazil. All three states with confirmed cases of Classical Swine Fever are located outside the Classical Swine Fever-free zone. The Brazilian government also took action to contain the outbreak. No formal commercial embargoes were announced as a result of this outbreak.

Effect of export market demand on the domestic market

Fluctuations in demand for poultry, pork and beef products in our export markets generally affect the prices for supply and sale of these products in the Brazilian market. Brazilian exporters generally redirect products from the international market to the domestic market, increasing the supply of these products domestically and, often, negatively affecting the sale price. Consequently, this affects our net sales in the domestic market.

For example, in 2017, Russia embargoed pork imports from Brazil, alleging the presence of ractopamine in the animals’ feed. As a result, almost 259.4 thousand tons per year had to be redirected to other markets, which ended up generating excess supply in the domestic market and contributed to the decrease in the price of pork carcass in 2018.

In August 2017, the Chinese government initiated an investigation into anti-dumping regarding Brazilian exports of whole chicken and chicken cuts, including BRF exports. In the preliminary determination released in June 2018, Chinese authorities imposed provisional import taxes on poultry products imported from Brazil. The investigation ended in February 2019 and Brazilian exporters agreed to certain minimum export prices on sales to China.

In addition, in April 2018, Saudi Arabia instituted a requirement that animals not be stunned in the slaughter process. Saudi Arabia claimed that Brazilian companies’ chicken slaughtering practices violated halal practices due to the use of electric shock to stun birds. BRF and other Brazilian companies were then forced to migrate their production processes to slaughterhouses that do not use stunning animal practices to be able to supply the Saudi market.

In 2019, Chinese demand for imported proteins grew significantly due to African Swine Fever, a deadly virus that drastically reduced the local supply of pork and, consequently, increased the local and global protein price. In 2019, China enabled 9 chicken plants, six pig plants and twenty-two Brazilian cattle plants to improve import volume and reduce its protein deficit.

The Company monitors the actions of its national competitors, since they are also impacted by changes in the foreign market and can redirect their products to the domestic or foreign market. In addition, it monitors fluctuations in supply generated by producers in China, the USA, the European Union and other regions, as increased production in these markets may lead to greater supply in other countries.

Shipping cost

The cost of transporting the Company’s products throughout its domestic distribution network and to its customers abroad is significant, being affected by fluctuations in the price of oil. In 2019, 2018 and 2017, freight costs represented approximately 5.0%, 5.5% and 5.0% of net revenues from continuing operations. The Company sends its export products by ships and, in the great majority, through CFR ( cost and freight ) or DDP ( delivered duty paid ), which require it to pay for freight and insurance costs. In 2019, transportation companies included the adjustment factor of bunker (the fuel used by ships) in their agreements due to uncertainty about future fuels as a result of political instability in the Middle East. In 2019, shipping companies also began to prepare for the implementation of the International Maritime Organization’s (or “IMO”) low-sulfur regulations, which took effect on January 1, 2020. As a result of the new regulation, the Company’s freight levels increased approximately 11%, due to the higher cost of bunker VLSFO, which creates lower sulfur emissions compared to the IFO bunker. The new IMO regulation is expected to affect all players in the maritime sector. The new IMO regulation has affected all agents in the shipping industry. Similarly, between March and May 2020, due to uncertainties regarding the effects of the COVID-19 pandemic, oil prices dropped drastically, and sea freight was adjusted incurred by the Company as well using the abovementioned Bunker clause. Oil prices had partly recovered by year-end 2020.

Global demand for proteins is also expected to push freight levels and restrict container availability due to African Swine Fever in China, especially on sea routes with restricted capacities, such as from South America to Asia. Due to the uncertainty of the size of the growth in global demand and the need for bilateral agreements between producing countries and China, the Company is currently unable to estimate the possible effects on freight levels.

For information on the impact of commodities and the effects of changes in the exchange rate, inflation and interest rates on the Company’s revenue, see item 10.2.c below.

b. Revenue variations due to changes in prices, exchange rates, inflation, changes in volumes and introduction of new products and services:

The information for this item is provided in item 10.2.c below.

c. Impact of inflation, changes in prices of key inputs and products, exchange and interest rates on operating results and financial results of the issuer, where relevant

Commodity prices

Several of the Company’s raw materials are commodities whose prices fluctuate constantly in response to market forces of supply and demand. The Company purchases large quantities of soybean meal, soybeans (grain) and corn, used substantially in the production of all its own animal feed. For the most part, prices of commodities that the Company purchases are expressed in reais. Although input costs are denominated in reais, prices of commodities tend to follow international prices and are influenced by fluctuations in exchange rates. Purchases of corn, soy meal and soy represented approximately 32.3% of the Company’s cost of sales in 2020, compared to 28.1% in 2019. Although the Company produces most of the pig herd it uses in its pork products, the Company also bought Pork on the spot market in 2020 (4.8% of the total pig slaughter)

In addition, the selling prices of many of their products, including all of their products for the international market, are highly sensitive to the market price of these products. commodities and fluctuate with that price. In 2020, the average corn price in Brazil was 29.95% higher than 2019. Additionally, the price of corn in December 2020 was 38,74% higher than 2018. In 2019, the average price of soybean meal in Brazil was 36.5% higher than the average price in 2019 . Comparing December 2020 with December 2019, the price of soybean meal in Brazil was 47.07% higher. The effect of the fall or increase in raw material prices on the Company’s gross margin is greater with respect to products of a nature more similar to fresh products than for products with higher added value.

The Company’s ability to pass on increases in the price of raw materials at its selling prices is limited by the prevailing prices of Goods Sold in its domestic and international markets, especially for fresh products.

Effects of exchange rate variations and inflation

The table below shows, in the periods indicated, the fluctuation of the real against the US dollar, the average daily and period-end exchange rates and Brazilian inflation measured by the National Consumer Price Index (“ INPC ”), Extended National Consumer Price Index (“ IPCA ”) And General Market Price Index (“ IGP-M ”).

	2020	2019	2018
Depreciation of the real against the U.S. dollar	(28.93%)	4.02	17.14
Period-end exchange rate (US$ 1.00)	R$5.19	R$ 4.03	R$ 3.87
Average (daily) exchange rate ($ 1.00) ⁽¹⁾	R$5.16	R$ 3.95	R$ 3.66
Period-end Basic interest rate SELIC^{( (2)}	2.00%	4.50	6.50
Inflation (INPC) ⁽³⁾	5.45%	4.48%	3.43
Inflation (IPCA) ⁽⁴⁾	4.52%	4,31	3.75
Inflation (IGP-M) ⁽⁵⁾	23.14%	7.30	7.55

Source : IBGE, Fundação Getúlio Vargas and Central Bank of Brazil.

(1) The (daily) average exchange rate is the sum of the daily exchange rates based on the PTAX 800 Option 5 transaction, divided by the number of business days in the period.

(2) The SELIC (Special Custody Settlement System) interest rate is the main Brazilian reference interest rate.

(3) INPC is published by IBGE and measures inflation for families with an income between one and eight minimum monthly wages in 11 metropolitan regions of Brazil

(4) The IPCA is published by IBGE and measures inflation for families with an income between one and 40 minimum monthly wages in 11 metropolitan regions of Brazil

(5) The IGP-M attributes different weights to the consumer, wholesale prices and construction prices. The IGP-M is published by Fundação Getúlio Vargas, a private foundation.

The Company’s operating results and financial situation are significantly affected by changes in the exchange rate of the real against the US dollar, the euro and the pound sterling. The Company’s sales in international markets are billed mainly in US dollars and, in Europe, in euros and pounds sterling, but its operating results are recorded in reais. The appreciation of the real against these currencies reduces the amount the Company received in reais, thereby reducing the Company’s net sales related to international markets, the opposite being the case when the real depreciates in relation to other currencies.

The prices of soy meal and soy, important ingredients of the Company’s animal feed, are directly linked to the US dollar. The price of corn, another important feed ingredient, is also indexed, but at lower levels than soybean and soybean meal. In addition to soybean meal, soybeans and corn, the Company purchases from its suppliers located abroad sausage casings, mineral nutrients for feed, packaging and other raw materials, as well as equipment for use in its production units, which are paid in dollars or other foreign currencies. When the real depreciates against the dollar, the cost in reais of the Company’s raw materials and equipment tied to the United States currency increases, and such increases may have a negative and material impact on its operating results. On the other hand, the appreciation of the real has a positive effect on its costs since part of them are fixed in dollars, however this reduction does not immediately affect its operating results because of the length of its poultry and pork production cycle.

On December 31, 2020, the Company had debt obligations in foreign currency in the total amount of R$ 15,739,134 thousand, representing, on the date, 70.3% of its total consolidated debt. Despite managing a portion of its foreign exchange risks through derivatives and future cash flows from exports in US dollars and other foreign currencies, the Company’s foreign currency debt obligations are not fully protected. A sharp depreciation of the real against the dollar or other currencies would increase the amount in reais that would be required to meet the debt service requirements of its foreign currency obligations. The Company aims to protect the cash flow from revenues and costs denominated or with an important influence of the exchange variation, based on limits established in its Financial Risk Management Policy, in order to avoid a distortion of its margins by the appreciation of the real against the US dollar. In the event of a devaluation of the real against the US dollar, the favorable effect on these margins is partially mitigated by the volume of hedge operations contracted with effect in the time horizon determined by the Financial and Financial Risk Management Policy. For further details on the Company's operational exposure to foreign exchange, see items 4.2.iv.b - “Operating Result Exposure” and 5.2.b - “Foreign Exchange Risks” above.

Historically, the Company’s operating results and financial situation have been affected by inflation rates in Brazil. The demand for its products in the domestic market is sensitive to consumer price inflation, as reflected in variations in INPC and IPCA, and the Company’s costs and expenses are mostly incurred in reais. Due to the fact that long-term contracts with suppliers and customers are not customary in the Company’s sector and prices are generally negotiated monthly or quarterly, increases in inflation have an immediate impact on its net sales and costs.

The IGP-M index is generally used to negotiate prices that the Company pays to its suppliers as a reference for inflation. In addition, the Company purchases electricity to operate its production units through long-term contracts that include periodic inflation adjustments in accordance with the IGP-M index.

In terms of personnel costs, wages are adjusted only once a year, based on collective agreements between employers ‘unions and workers’ unions. Generally, workers’ unions follow the INPC as a parameter for their negotiations.

Effects of interest rates

The Company's financial expenses are affected by movements in Brazilian and foreign interest rates. As of December 31, 2020, 29.7% of its total debt of R$ 22.4 billion was (1) denominated in reais (or in swap interest rates) and was subject to interest indexed to Brazilian floating interest rates, such as the TJLP, the interest rate used in its financing agreements with the BNDES, or the CDI, the rate of the interbank deposit certificate applied to its credit agreements. swap exchange rate and some of its other debts denominated in reais, or IPCA or (2) denominated in dollars, indexed to a floating interest rate based on LIBOR. Any increase in the CDI, TJLP or LIBOR may have an adverse effect on the Company's financial expenses and operating results.

The table below shows the average interest rates to which the Company was exposed in the following years:

	Average interest for the year ended December 31, 2020
	2020	2019	2018
	(%)	(%)	(%)
CDI	2.8	4.4	6.4
LIBOR six-month rate	0.7	1.9	2.9

10.3 - Events with significant, occurred and expected effects in the financial statements

The following information was evaluated and commented on by the Company’s Officers:

a. introduction or disposal of operating segment

An operating segment is a component of the Company that develops business activities to obtain revenues and incur in expenses. The operating segments reflects the way in which the Company’s management reviews the financial information for decision making. In 2020 there was no introduction or disposal of operating segments, which are presented in the explanatory note 25 to our financial statements of 2020.

b. constitution, acquisition or disposal of equity interest

On August 20, 2019, the Company’s wholly-owned subsidiary Badi Limited executed a share purchase agreement with Al Takamul International Company for Commercial Investment Limited for the purchase of the remaining 25% of the capital stock owned by non-controlling shareholders in Al Wafi Al Takamul International Company for Food Products Limited (“Al Wafi”), a company incorporated in the Kingdom of Saudi Arabia responsible for distributing BRF products in that country. The transaction closed on April 21, 2020 for an amount equivalent to R$100,390 thousand (USD19,000 thousand), at which point Al Wafi became a wholly-owned subsidiary of Badi Limited. The amount paid is presented in the Financing Activities on the Statement of Cash Flows and the difference between the amount paid and the book value of the participation in the subsidiary was recorded in Capital Reserves, in the amount of R$50,945 thousand.

On May 07, 2020, the Company executed a share purchase agreement with Hungry Bunny Limited and others, establishing the terms and conditions for the acquisition of 100% of the capital stock of Joody Al Sharqiya Food Production Factory, a food processing company in Saudi Arabia. The transaction closed on January 18, 2021 (note 35.1 to our financial statements of 2020).

On June 24, 2020, our wholly owned subsidiary BRF Foods GmbH agreed to sell 70% of the shares of FFM Further Processing Sdn. Bhd. company incorporated in Malaysia and owner of a food processing unit in that country, to FFM Berhad, which previously held the remaining 30% of these shares. The transaction was completed on the same date and BRF Foods GmbH received a purchase price equivalent to R$ 38,546 thousand (US$ 7,350 thousand).

On December 17, 2020, the Nutrinvestment BV e a Banvit Bandirma Vitaminli Yem Sanayii AS, companies indirectly controlled by the Company executed a share purchase agreement with Aaylex System Group S.A., providing for the terms and conditions for the sale of 100% of the shares held in Banvitfoods SRL by the amount equivalent to R$129,471 thousand (EUR 20,300 thousand). The requirements for the classification of the investment as held for sale were met (note 3.9) and all assets, in the amount of R$151,189 thousand, and liabilities related to this subsidiary, in the amount of R$21,718 thousand, were reclassified to Assets Held for Sale and Liabilities Directly Associated with Assets Held for Sale, and were measured at the lower of the book value and the fair value less costs to sell. Such measurement resulted in an impairment of R$55,242 thousand, recorded in Other Operating Income (Expenses). The results and cash flow of this subsidiary remain classified under the Continuing Operations of the Company since the subsidiary does not represent a separate major line of business or geographic area of operations.

c. unusual events or operations

On July 17, 2020, 2,200,000 (two million, two hundred thousand) Debentures were subscribed with a notional value of R$ 1,000.00 (one thousand Brazilian Reais), in a total amount of R$2,200,000 thousand, in two series as shown in the table below. The Debentures are simple, not convertible into shares, unsecured and for private placement. The Debentures were privately placed with VERT Companhia Securitizadora, to back its forty-sixth issuance of Agribusiness Receivables Certificates, in two series, which were object of public distribution with restricted placement efforts. The issuance costs of R$75,275 thousand are recognized on the statement of income over the term of the debt according to the effective interest rate method.

BRF S.A. made international offerings of senior notes on September 21, 2020 in the amount equivalent to R$2,722,000 thousand (USD500,000 thousand), at 98.247% of the principal amount, and on October 26, 2020 in the amount equivalent to R$1,689,840 (USD300,000), at 98.242% of the principal amount,

under the same indenture. The notes will happen on September 21, 2050 and the interests are paid semi-annually at the rate of 5.750% p.a. The Company incurred in issuance expenses of R$41,645 thousand related to commissions and other costs, which, together with the R$86,869 thousand of the issuance discount, are recognized on the statement of income over the term of the notes according to the effective interest rate method. The Company used and will keep using the proceeds for general corporate purposes, which include the payment of the other loans.

The Company executed two tender offers between July 17 and July 24, 2020 and between September 21 and October 9, 2020 for the following senior notes: (i) (a) 5.875% Senior Notes due 2022, (b) 2.750% Senior Notes due 2022, (c) 3.950% Senior Notes due 2023 and (d) 4.750% Senior Notes due 2024 all issued by BRF; and (ii) 4.350% Senior Notes due 2026, issued by BRF GmbH and guaranteed by BRF. The Company paid the amount equivalent to R$3,160,274 for the repurchase of these liabilities, which includes notional, interest, premium and taxes. The Company incurred in financial expenses with the repurchases in the amount of R$112,206 with the premium paid, R$19,675 thousand with taxes and R$16,900 thousand with the write-off of the costs of issuance.

10.4 - Significant changes in accounting practices - Provisions and emphasis on the auditor’s opinion

a. Significant changes in accounting practices

In the financial year ended on December 31, 2020 there were no significant changes in accounting practices issued by the Brazilian Securities and Exchange Commission (“ CVM ”) And in the pronouncements and interpretations of the Accounting Pronouncements Committee (“ CPC ”), Which are in line with international accounting standards (“ IFRS ”) Issued by International Accounting Standards Board (“ IASB ”).

The CPC 15 / IFRS 3 has changed the definition of a business, applicable from January 01, 2020. This change did not generate impacts in accounting practices nor the financial statements of Company. The CPC 06(R2) / IFRS 16 has been modified for the inclusion of an optional practical expedient related to benefits granted on lease agreements due to the COVID-19 pandemic, effective for periods beginning on or after June 1, 2020. The Company was not granted benefits in leases related to the pandemic and, therefore, has not adopted this expedient.

In the financial years ended on December 31, 2019 and 2018there was the adoption of ICPC22 / IFRIC 23 - Uncertainty regarding the treatment of taxes on profit and CPC 06 (R2) / IFRS 16 - Leases on 01.01.2019 and the adoption of CPC 48 / IFRS 09 - Financial Instruments and CPC 47 / IFRS 15 - Revenue from Contract with Client on 01.01.2018. For these adopted standards, there was no restatement of comparative balances, so that the exercises presented in these Financial Statements have different practices.

b. Significant effects of amendments in accounting practices

The Company’s Officers understand that in the financial statements for the financial year ended December 31, 2020, there were no significant effects of amendments in accounting practices.

The effects to the years of 2019 and 2018 are presented in the financial statements of 2019 (note 3).

c. Reservations and points raised in the auditor´s report

In the last three financial years, there were no reservations in the reports of the Company’s independent auditors. In the financial years ended December 31, 2020, December 31, 2019 and December 31, 2018, the following emphasis werep resented in on our Financial Statements:

December 31, 2020

“The Company draw attention to note 1.2 to the financial statements, which describe the investigations involving the Company, as well as its current and potential developments. At the current stage of the investigations, it is not possible to determine the potential financial and non-financial impacts for the Company as a result of them and their potential consequences and, consequently, to record potential losses which could have a material adverse effect on the Company’s financial position. , its results and cash flows in the future. Our opinion is not limited to this matter”.

December 31, 2019

“The Company draw attention to explanatory notes 1.2 and 1.3 to the financial statements, which describe the investigations involving the Company, as well as their current and potential developments. In the current stage of the investigations, it is not possible to determine the potential financial and non-financial impacts on the Company resulting from them and of their potential developments and, consequently, to record potential losses which could have a material adverse effect on the Company´s financial position, results of operations and cash flows in the future. Our opinion is not modified in respect to this matter”.

December 31, 2018

“The Company draw attention to explanatory notes 1.2 and 1.3 to the financial statements, which describe the investigations involving the Company in the context of the Brazilian Federal Police operations named “Carne Fraca” and “Trapaça”, as well as their current and potential developments, such as the Responsibility Administrative Process (“PAR - Processo Administrativo de Responsabilização”) issued by the Brazilian Office of the Comptroller General (“CGU - Controladoria Geral da União”) in light of Law 12,846/2013 (“Anti-corruption Law”) and the class action in the United States of America. In the current stage of the investigations and actions, it is not possible to determine the potential financial and non-financial impacts on the Company resulting from them and of their potential developments and, consequently, to record additional potential losses which could have a material adverse effect on the Company´s financial position, results of operations and cash flows in the future. Our opinion is unmodified in respect of this matter”.

10.5 - Critical accounting policies

The preparation of the Company’s consolidated financial statements requires the use of critical accounting judgments, estimates and assumptions. Management evaluates these estimates and judgments periodically, based on historical experiences and on numerous other factors considered reasonable under such circumstances. However, uncertainties related to these judgments, assumptions and estimates could lead to results that require a significant adjustment to the book value of certain assets and liabilities in future years.

All the relevant accounting practices adopted by the Company are disclosed in the explanatory note 3 to the financial statements of 2020.

In the opinion of the Company’s Management, the critical accounting policies adopted, summarized below, adequately reflect the conditions of its business.

Financial instruments:

Financial instruments are contracts that give rise to a financial asset for one entity and a financial liability or equity instrument for another. Their presentation in the statement of financial position and explanatory notes takes place according to the characteristics of each contract.

Financial Assets

Financial assets are recognized when the entity becomes party to the contractual provisions of the instrument and classified based on the characteristics of its cash flows and on the management model for the asset. The table below shows financial assets are classified and measured:

Category

Initial Measurement

Subsequent measurement

Amortized cost

Accounts receivable from customers and other receivables: billed amount adjusted to present value and, when applicable, minus expected credit losses

For other assets: Fair value less costs directly attributable to its issue

Interest, changes in amortized cost and expected credit losses recognized in income.

Fair Value through Profit and Loss (“FVTPL”)

Fair value.

Changes in fair value recognized in profit or loss.

Fair Value through Other Comprehensive Income (“FVTOCI”).

Fair value less costs directly attributable to its issue.

Changes in fair value recognized in other comprehensive income. Upon settlement or transfer, accumulated gains or losses are directly reclassified to the caption Retained earnings or accumulated losses.

For debt instruments, expected credit losses are recognized directly in income.

The Company evaluates expected credit losses in each reporting period for instruments measured at amortized cost and for debt instruments measured at Fair Value through Other Comprehensive Income. Losses and reversals of losses are recorded in the income statement.

The interests of financial assets are recorded on Financial Income (Expenses), net.

A financial asset is only derecognized when contractual rights expire or are effectively transferred.

Cash and cash equivalents: comprises the balances of cash, banks and securities of immediate liquidity whose maturities, at the time of acquisition, are equal to or less than 90 days, readily convertible into

a known amount of cash and which are subject to an insignificant risk of change in value. Securities classified in this group, by their very nature, are measured at fair value through profit or loss.

Expected credit losses in Accounts receivable from customers and other receivables: the Company regularly assesses the historical losses on the customer portfolios it has in each region, taking in consideration the dynamics of the markets in which it operates and instruments it has for reducing credit risks, such as: letters of credit, insurance and collateral, as well as identifying specific customers whose risks are significantly different than the portfolio, which are treated according to individual expectations.

Based on these assessments, estimated loss factors are generated by portfolio and aging class, which, applied to the amounts of accounts receivable, generate the expected credit losses. Additionally, the Company evaluates macroeconomic factors that may influence these losses and, if necessary, adjusts the calculation model.

Securities receivable with legal proceedings in place are reclassified to noncurrent as well as the related estimated credit losses. The securities are written off against the estimated loss when the Management considers that they are no longer recoverable after taking all appropriate actions to collect them.

Financial liabilities

Financial liabilities are recognized when the entity becomes party to the contractual provisions of the instrument. The initial measurement is at fair value and subsequently at amortized cost using the effective interest rate method. The interests of financial liabilities are recorded on Financial Income (Expenses), net.

A financial liability is only derecognized when the contractual obligation expires, is settled or canceled.

Adjustment to present value

The Company measures the adjustment to present value on short and long-term balances of accounts receivable, suppliers and other obligations, being recognized as a deduction in the asset accounts against the financial result. The Company adopts the weighted average cost of capital to determine the adjustment to present value of the mentioned assets and liabilities, which corresponds to 9.8% per year on December 31, 2020 (11.3% p.a. on December 31, 2019).

Hedge accounting

Cash flow hedge: the effective portion of the gain or loss on the hedge instrument is recognized under Other Comprehensive Income and the ineffective portion in the Financial result. Accumulated gains and losses are reclassified to the Income statement or statement of financial position when the hedge object is recognized, adjusting the item in which the hedge object was accounted for.

When the instrument is designated in a cash flow hedge relationship, changes in the fair value of the future element of the forward contracts and the time value of the options are recognized under Other Comprehensive Income. When the instrument is settled, these hedge costs are reclassified to the income statement together with the intrinsic value of the instruments.

Fair value hedge: the effective portion of the hedge instrument’s gain or loss is recognized in the Income Statement or statement of financial position, adjusting the item under which the hedge object is or will be recognized. The hedge object, when designated in this relationship, is also measured at fair value.

Net investment hedge: the effective result of the exchange variation of the instrument is recorded under Other Comprehensive Income, in the same item in which the accumulated translation adjustments of the investments (hedge objects) are recognized. Only when the hedged investments are sold, the accumulated amount is reclassified to the income statement, adjusting the gain or loss on the sale.

Reference interest rate reform

The Company does not have relationship designated for hedge accounting that involve operations indexed to the reference interest rates object from reform. Additionally, existing liabilities indexed to the reference interest rates have contractual arrangements foreseeing the replacement for similar rates. Thus, no relevant impact is expected for the Company if such interest rates cease to exist or are replaced.

Revenue from contracts with customers

Sales revenues are recognized and measured observing the following steps: (i) identification of the contracts with customers, formalized through sales orders; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) revenue recognition as it satisfies the performance obligations.

Revenues are recognized by the amount that reflects the Company’s expectation to receive for the sale of products, net of applicable taxes, returns, rebates and discounts.

The sales process begins with sales orders. The discounts and rebates may be negotiated on a spot basis or may have its conditions formally defined in the agreements, generally signed with large retail and wholesale chains. In all cases, the performance condition is satisfied when the control of the goods is transferred to the client.

The Company has sales with immediate and deferred payments, for which the adjustment to present value is recognized for the financial component (note 3.19.3 to the financial statements of 2020).

Inventories

Inventories are measured at the lower of the average cost of acquisition or production of finished products and the net realizable value. The cost of finished products includes purchased raw materials, labor, production costs, transportation and storage, which are related to all the processes necessary for bringing the products to sales conditions. Write-down to net realizable value due to obsolescence, impaired items, slow-moving and realizable value through sale are evaluated and recorded in each reporting period, as appropriate. Normal production losses are included in the production cost for the respective month, while abnormal losses, if any, are expensed in Cost of sales without movement through inventories.

Income taxes

In Brazil, the income tax (“IRPJ“) and social contribution on profit (“CSLL“), are calculated monthly based on taxable profit, after offsetting tax losses and negative social contribution base, limited to 30% of the taxable income, applying the rate of 15% plus an additional 10% for the IRPJ and 9% for the CSLL.

The results obtained from foreign subsidiaries are subject to taxation by the countries where they are based, according to applicable rates and legislation. In Brazil, these results suffer the effects of taxation on universal basis established by the Law No. 12,973 / 14. The Company analyzes the results of each subsidiary for the application of its Income Tax legislation, in order to respect the treaties signed by Brazil and avoid double taxation.

Deferred taxes represent credits and debits on unused tax losses carried forward and negative CSLL base, as well as temporary differences between the tax and accounting bases. Deferred income tax assets and liabilities are classified as non-current. When the Company’s internal studies indicate that the future use of these credits over a 10-year horizon is not probable, the asset is derecognized (note 10.3 to the financial statements of 2020).

Deferred tax assets and liabilities are presented net if there is enforceable legal right to be offset, and if they are under the responsibility of the same tax authority and under the same taxable entity.

Deferred tax assets and liabilities must be measured at the rates applicable in the period in which the asset is realized or the liability is settled, based on the rates (and tax legislation) that are in force on the financial position date.

In compliance with the interpretation ICPC 22 / IFRIC 23, the Company analyzed relevant tax decisions of higher courts and whether they conflict in any way with the positions adopted by the Company. Regarding the known uncertain tax positions, the Company reviewed the corresponding legal opinions and jurisprudence and did not identify impacts to be recorded, since it concluded that the tax authorities are not likely to reject the positions adopted.

The Company periodically evaluates the positions assumed in which there are uncertainties about the adopted tax treatment and will set up a provision when applicable.

Property, plant and equipment

Property, plant and equipment are measured by the cost of acquisition, formation, construction or dismantling, less accumulated depreciation. Loans and borrowings costs are recorded as part of the costs of property, plant and equipment in progress, considering the weighted average rate of loans and borrowings effective on the capitalization date.

Depreciation is recognized based on the estimated economic useful life of each asset using the straight-line method. The estimated useful life, residual values and depreciation methods are reviewed annually and the effects of any changes in estimates are accounted for prospectively. Land is not depreciated.

The Company annually performs an impairment analysis for its cash-generating units, which include the balances of property, plant and equipment (note 13 to the financial statements of 2020).

Gains and losses on disposal of property, plant and equipment are determined by comparing the sale value with the residual book value and are recognized in the statement of income on the date of sale under Other operating income (expense).

Leasing

A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether:

the contract involves the use of an identified asset, which may be explicit or implicit, and may be physically distinct or represent substantially the entire capacity of a physically distinct asset. If the supplier has a substantial right to replace the asset, then the asset is not identified;

the Company has the right to obtain substantially all the economic benefits from using the asset throughout the period of use; and

the Company has the right to direct the use of the asset throughout the period of use, which occurs in either of the following situations:

the Company has the right to direct how and for what purpose the asset is used, or

the conditions are predetermined so as the Company has the right to operate the asset or has designed the asset in a way that predetermined how and for what purpose it will be used.

At the beginning of the contract, the Company recognizes a right-of-use asset and a lease liability, which represents the obligation to make payments related to the underlying asset of the lease.

The right-of-use asset is initially measured at cost and comprises: the initial measurement of the lease liability adjusted for any payment made at or before the commencement date, less any incentive received; any initial direct costs incurred; and an estimate of costs in dismantling and removing the asset, restoring the site on which it is located or restoring the asset to the condition required by the terms of the lease. Renewal or early termination options are analyzed individually considering the type of asset involved as well as its relevance in the Company’s production process.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date until the end of the useful life of the right-of-use asset or until the end of the period of the lease. The estimated useful life of the right-of-use asset is determined on the same methodology used for the assets owned by the Company (note 3.11). Additionally, the right-of-use asset is adjusted by the subsequent measurement of the lease liability and when applicable, an impairment is recognized.

The lease liability is initially measured at the present value of the future lease payments using the incremental borrowing rate, and subsequently, measured at amortized cost using the effective interest method.

The liability is remeasured when there is a change in (i) future payments resulting from a change in index or rate, (ii) the amount expected to be payable under a residual value guarantee, or (iii) the assessment of whether the Company will exercise the purchase, renewal or termination option.

When the lease liability is remeasured, the corresponding adjustment is recorded in the book value of the right-of-use asset, or in the statement of income if the book value of the right-of-use asset has been reduced to zero.

The Company does not apply lease accounting model to: leases with a term of 12 months or less and that do not contain a purchase option; and leases for which the underlying asset is of low value. For these exemptions, the lease payments are recognized as an expense on a straight-line basis over the lease term.

Additionally, contracts with indefinite term and no fixed payments are expensed as incurred.

The IFRS 16 has been modified for the inclusion of an optional practical expedient related to benefits granted on lease agreements due to the COVID-19 pandemic, effective for periods beginning on or after June 1, 2020. The Company was not granted benefits in leases related to the pandemic and, therefore, has not adopted this expedient.

Intangible assets

Acquired intangible assets are measured at cost at initial recognition, while those arising from a business combination are recognized at fair value on the acquisition date. After initial recognition, are presented at cost less accumulated amortization and impairment losses, when applicable. Internally generated intangible assets, excluding development costs, are not capitalized and the expense is recognized in the income statement when incurred.

Intangible assets with definite useful lives are amortized on a straight-line basis over their economic useful lives. The amortization period and method for an intangible asset with definite life are reviewed at least at the end of each year, and any changes observed are applied prospectively. The amortization of intangible assets with finite lives is recognized in the income statement in the expense category related to their use.

Intangible assets with indefinite useful lives are not amortized, but are tested annually for impairment, being allocated to the cash-generating units (note 14 to the financial statements of 2020). The Company records in this subgroup mainly goodwill and brands, which are expected to contribute indefinitely to its cash flows.

Business combination

Business combinations are recorded according to the acquisition method, which determines that the cost of an acquisition is measured by the sum of the consideration transferred, assessed based on the fair value on the acquisition date, and the value of any non-controlling interest in the acquired company. The Company measures the non-controlling interest based on its participation in the net assets identified in the acquired company. Costs directly attributable to the acquisition are recorded as expense when incurred.

Business combinations with related parties are recognized using the acquisition method when the agreements have a substance and at cost when no substance is observed in the transaction.

In the acquisition of a business, Management assesses the acquired assets and liabilities assumed in order to classify and allocate them in accordance with the contractual terms, economic circumstances and relevant conditions on the acquisition date.

Initially, goodwill is measured as the excess of the consideration transferred over the fair value of the net assets acquired (identifiable assets and liabilities assumed, net).

After the initial recognition, goodwill is measured at cost less any accumulated impairment losses. For purposes of testing the recoverable amount, goodwill is allocated to each of the cash-generating units that will benefit from the acquisition.

The CPC 15 / IFRS 3 has changed the definition of a business, applicable from January 01, 2020. This change did not generate impacts in accounting practices nor the financial statements of Company.

Provision for tax, civil and labor risks and contingent liabilities

The provisions are recognized when the Company has a present obligation, formalized or not, as a result of a past event, the outflow of resources to settle the obligation is likely to occur and a reliable estimate can be made.

The Company is involved in several legal and administrative procedures, mainly in Brazil. Assessments of the likelihood of loss in these lawsuits include an analysis of the available evidences, the hierarchy of laws, the available jurisprudence, the most recent court decisions and their relevance in the legal system, as well as the assessment of outside lawyers. Provisions are reviewed and adjusted to reflect changes in circumstances, such as the applicable limitation period, conclusions of tax inspections or additional exposures identified based on new matters or court decisions.

In cases where there are a large number of lawsuits and the amounts are not individually relevant, the Company use historical studies to determine the probability and amounts of losses.

Contingent liabilities from business combinations are recognized if they arise from a present obligation that arose from past events and if their fair value can be measured reliably. The initial measurement is done by the fair value and subsequent measurements by the higher value between: the fair value on its acquisition date; and the amount by which the provision would be recognized.

10.6 - Items not acknowledged in finance demonstrations

a. The assets and liabilities held by the Company, directly or indirectly, which do not appear on its balance sheet, i.e. the off-balance sheet items, such as:

In the normal course of its business, the Company enters into contracts with third parties for the acquisition of raw materials, mainly corn and soybean meal, in which the agreed prices can be fixed or to be fixed. The Company also enters into other commitments, such as the supply of electricity, packaging, construction of real estate, among others, to supply its manufacturing activities. The firm purchase commitments are shown below:

		Consolidated (R$ thousands)
		12.31.20
Total current		5,293,415
Total non-current		1,504,551
2022		401,777
2023		271,022
2024		244,654
2025		175,982
2026 onward		411,116
		6,797,966

b. Other items not presented in the financial statements

The Company has no relevant items not evidenced in the financial statements that have or are likely to have effects on its financial condition, income and expenses, results of operations, liquidity, capital expenditures that are material for investors.

10.7 - Items not acknowledged in finance demonstrations

a. how such items change or may change revenues, expenses, operating results, financial expenses or other items in the financial statements of the issuer

The commitments presented in item 10.6.a are part of the business of the Company and when the recognition criteria is met, they will be recognized as assets, liabilities and expenses, according to the Accounting practices of the Company, compatible to the international accounting standards.

B. Nature and purpose of the operation

Such operations arise from the normal course of business and are comprised of agreements with third parties for the purchase of raw material, mainly corn and soymeal for which agreed prices in these agreements can be fixed or variable, besides other commitments such as electricity supply, packaging supplies, construction of buildings and others for the supply of its manufacturing activities.

c. nature and amount of obligations assumed and rights generated in favor of the issuer as a result of the operation

The Company’s management does not expect material effects on the operations described in item 10.6 of this Reference Form and not evidenced in the financial statements that may change the revenues, expenses, operating results, financial expenses or other items of the Company’s accounting information.

For a description of the nature of each transaction, as well as the amount of obligations assumed and the rights generated in favor of the Company as a result of transactions not shown in our financial statements, see item 10.6 of this Reference Form.

10.8 - Business Plan

A. Investments

i. Quantitative and qualitative description of investments in progress of planned investments. The table below establishes the Company’s capital expenditures in the last three financial years.

Investments	2020	2019	2018
In R$ Millions
Fixed Assets	782,9	412,2	533,6
Biological Assets	1.006,2	809,1	877,2
Acquisitions and other investments	576,4	143,8	200,7
Intangible Assets	96,2	64,3	20,6
Total	2.461,7	1.429,3	1.631,7

Expected Investments:

2021

For 2021, investments are planned on a larger scale for growth, including increased volume of line items and investments in innovation, aiming at gaining market share and generating revenue, aligned with the Company's Strategic Planning. In addition, the Company intends to intensify investments that address items related to the development of the digital journey related to processes and optimization of its activities, an item that is also contemplated in the medium and long-term planning vision. In addition, investments related to the theme ESG, operational efficiency, compliance and internal controls will also have relevance in the investment pipeline of the organization indicated for this exercise.

As described in item 11.1 of this Reference Form, the Company estimates investments of approximately R$ 55 billion over the next ten years, with the establishment of a prudential limit on net financial leverage (ratio between net debt and Adjusted EBITDA of the 12 previous months) up to 3 times. For more information on Projections, see item 11 of this Reference Form.

2020

Investments made in 2020 totaled R$ 2,461.7 thousand. In such exercise, the Company resumed investments related to growth and innovation, with investments in the Seropédica (RJ), Mineiros (GO), Tatuí (SP) and Uberlândia (MG) plant as highlights. In addition, resources were allocated for projects related to process digitization, aiming at a higher level of internal controls and operational efficiency, having as examples projects related to S & OP processes, Quality, Operations, Human Resources, among others.

2019

Investments made in 2019 totaled R$ 1,429 million, disregarding the accounting impact related to the adoption of IFRS 16, which represents a 12% reduction in relation to the previous year, of which R$ 411 million was allocated for growth, efficiency and support; R$ 809 million for biological assets and R$ 208 million for leasing and others. Considering the accounting impact related to the adoption of IFRS 16, the total amount of CAPEX is R$ 1,877 million. As a highlight, the Company had the projects: (i) execution of projects to meet the demand of industrialized products in the Internal Market at the Seropédica Factory (RJ), (ii) implement the concepts of Industry 4.0 in slaughterhouses for chicken, (iii) systems for optimization of production and sales planning processes, and (iv) process Improvements and Human Resources management.

The main capital expenditures in 2020 are described below:

Demand. Despite the challenging scenario resulting, among other factors, from the COVID-19 pandemic in 2020, the Company continued expansion projects with increased pig slaughter capacity for the foreign and Brazilian markets, adding value in the product mix, mainly in chicken proteins, as well as invested in cold and embedded categories for the domestic market and innovation items.

Efficiency. In 2020, in addition to finalizing the projects resulting from previous periods, investments were also started in projects for improvement in the integrated planning system, optimization in the process for the use of raw materials, automations in industrial units and process digitization.

Quality, people and sustainability. In 2020, the Company focused on projects for improvement and control of production processes in refrigerators, feed and farm factories, modernization of laboratories and product quality, as well as compliance and corporate governance items.

ii. Investment financing sources

The Company has funds from operating cash generation, as well as credit lines with financial and development institutions, including loans to encourage rural activities and issue debt securities in the local and international capital markets (see item 10.1 .f for details on relevant loan and financing contracts).

iii. relevant divestitures in progress and planned divestitures

In 2020, the Company made disinvestments totaling R$ 126,540 related to the sale of non-strategic assets related to the annual disinvestment plan.

b. if already disclosed, indicate the acquisition of plants, equipment, patents or other assets that may materially affect the issuer's production capacity

In May 2020, the subsidiary of Companhia Badi Limited signed with Hungry Bunny Limited and others, the Share Purchase Agreement, establishing the terms and conditions for the acquisition of 100% of the share capital of Joody Al Sharqiya Food Production Factory, a food processing company. The transaction considered an enterprise value of SAR 29.7 million (twenty nine million seven hundred thousand Saudi riyals)

c. new products and services

i. Description of ongoing research already released

In 2020, 282 new products were launched for consumers, of which 139 were launched in the Brazilian market and 143 in the international market. Among the launches on the international market, 48 were in the Asia region, 36 in the Halal market and 59 in other operations with direct exports.

The Company’s Research, Development and Innovation (“R & D & I”) activities comprise agricultural research and innovation and the research and development of products and processes. The Product Research and Development team is located in Jundiaí, in the State of São Paulo, where BRF is located Innovation Center (“BIC”). From BIC, all products destined for the National Market are developed and exported from Brazil’s production platform. Research and Development activities also involve the development and optimization of primary and secondary packaging, as well as the application of graphic arts and technical information on products.

The agricultural RD&I area currently has researchers dedicated to the activities of innovation and production support, of which some are doctors, others masters and many have specialization in the area of animal production. In addition to corporate researchers, the Company has a wide range of veterinarians, agronomists and zootechnicians working directly in the production system.

The Company develops an excellent trainee and internship program, as well as encouraging its employees to take postgraduate courses. In 2019, the Company started a new program called “Doutores do Agro”, under which five PhD vacancies were created in order to develop specific projects

in different areas: nutrition, animal breeding, animal health, swine production and animal husbandry management birds. As a result, one of these doctors have already been incorporated into the Company's staff.

The Company has one of the largest experimental research facilities for poultry and Pork in the world, with an experimental feed factory and 19 experimental warehouses, which are distributed in four experimental farms, located in the State of Santa Catarina, with a total of 1,380 stalls experimental tests to assess the impact characteristics in the production chain. In addition, the Company has six bromatological laboratories and five animal laboratories that support research and operation activities. In addition, the Company has seven bromatological laboratories, seven laboratories with near infrared spectroscopy (NIRS - Near Infrared Spectroscopy) for receiving grains and five animal health laboratories that support the research and operation activities. For the year 2021, the Company are expanding our capacity with a new animal health laboratory in Toledo/PR.

In 2019, in line with the pig consumption development strategy in Brazil, the Company launched a robust protein portfolio with cuts for the daily Sadia, seasoned cuts for barbecue Perdigão Na Brasa and commemorative seasoned cuts for Christmas Sadia.

Reflecting its leadership position as the most innovative brand, in 2020 several products were launched under the Sadia brand that bring more convenience to the daily life of the consumer, such as: Mac’n Cheese line, a young and pioneering concept in Brazil of frozen ready dish that it is ready in 5 minutes in the microwave; new line of products ‘’Sadia Na Receita’’, portfolio of pre-prepared chicken as shredded, cubed and strips, to assist in the preparation of recipes and the Sadia Marinados line, with chicken cuts lightly seasoned with ingredients such as salt, onion and garlic. The Company also launched Sadia Veg & Tal, our line focused on vegan and vegetarian consumers, which offers a portfolio of products such as vegetable burgers, frozen vegetables and frozen pies. In addition, the Sadia Speciale sub-brand was launched, with a higher added value portfolio, such as parma ham, and the new raw ham and pepper-edged salami. Under the Ouro Perdigão brand, the mini sausage line was launched, in continuity with the portfolio expansion process in the appetizer and snack category. The Perdigão frozen pizza portfolio was also launched, which will ensure the brand’s increased visibility in the main market of the category. With the Qualy brand, the Qualy Vita line was launched, made with vegetable oils and a source of Omega 6, an essential nutrient for heart care. Finally, the Company also expanded the Qualy brand portfolio with butter, cream cheese and frozen Brazilian cheese breads.

ii. Total amounts spent by the issuer on research for the development of new products or services

The Company invested R$65.168 thousand, R$ 67.846 thousand and R$ 53.476 thousand and in 2020, 2019 and 2018, respectively, in R & D & I activities. In the years from 2015 to 2018, the Company also considered as R & D & I expenses the amounts of fixed expenses recorded in the cost centers of the managements linked to these activities, as well as the amounts spent as consumable material in experimental research tests and field research. of agricultural R & D & I projects, which is why there is an increase in value in such exercises.

The Company believes that investing in R & D & I is a key factor in maintaining its competitive advantages, whether to optimize its production chain, improving sustainability, as well as launching innovative products, meeting the expectations and needs of consumers, customers and markets.

iii. Projects under development already disclosed

The Company has its own pig breeding program, which is competitive with the programs of international genetic companies. This program currently serves, by option, 70% of the Company’s production. The program has six core farms in the State of Santa Catarina, with a staff of 135 employees, a farm in the State of Goiás, with a staff of 40 employees, in addition to a farm backup in Minas Gerais. Today the Company has a tissue bank with more than 580 thousand samples of genetic material and a series of works have been carried out to incorporate genomic evaluation into the selection process in 2020. To make this technological leap feasible, the Company established partnerships with six centers of the

Brazilian Agricultural Research Corporation - EMBRAPA, research centers, universities and research and development agencies (BNDES, Finep, CNPq and FAPESP) and formed a team with seven geneticists.

In recent years, research partnerships have been established in projects financed by EMBRAPA, FINEP, CNPq, BNDES, and, since 2009, the Company has benefited from the tax recovery by Lei do Bem, in the years when it calculates taxable profit. This law introduces a tax incentive related to Research, Development and Technological Innovation. The law defines “technological innovation” as the creation of a new product or production process, as new features or characteristics that bring about improvements and effective gains in quality or productivity, resulting in stronger market competitiveness. The main feature of the mechanism of this tax incentive is the exclusion of expenses to determine the amount of income tax and social contribution that is charged to net income.

The Company’s integrated agricultural innovation process starts from interfaces with companies and research centers, characterized by the sharing of the use of physical structures and technical staff, to solve the main demands for the development of joint work, but mainly resulting in the feedback of new proposals of innovation from the technological development network itself.

BIC’s R & D & I team works together with the Quality Assurance area in adopting international quality assurance practices, food safety and food fraud, in addition to the development of monitoring systems for monitoring industrial products and processes.

In March 2021, the Company signed a Memorandum of Understanding (“MOU”) with Aleph Farms, Ltd, an Israeli startup that develops proteins in the laboratory, from animal cells. The agreement aims at: (i) the development and production of meat grown using the patented production of Aleph Farms (BioFarm ™); and (ii) the distribution of proteins grown by Aleph Farms, exclusively in Brazil.

In line with its “Vision 2030” plan, in which one of the growth avenues mentioned is “meat substitutes”, this partnership will strengthen the generation and diversification of businesses to meet the growing consumer demands for a greater variety of alternative proteins . In addition to the commercial potential in the Brazilian market, this partnership will also reinforce the sustainability, innovation and food security commitments adopted by the two companies.

iv. total amounts spent by issuer on development of new products or services

The Company invested R$ 65,168 thousand, R$ 67,846 thousand and R$ 53,476 thousand in Research, Development and Innovation activities in 2020, 2019 and 2018, respectively.

Reflecting its leadership position as the most innovative brand, in 2020 several products were launched under the Sadia brand that bring more convenience to the daily life of the consumer, such as: Mac’n Cheese line, a young and pioneering concept in Brazil of frozen ready dish that it is ready in 5 minutes in the microwave; new line of products Sadia Na Receita, portfolio of pre-prepared chicken as shredded, cubed and strips, to assist in the preparation of recipes and the Sadia Marinados line, with chicken cuts lightly seasoned with ingredients such as salt, onion and garlic. The Company also launched Sadia Veg & Tal, our line focused on vegan and vegetarian consumers, which offers a portfolio of products such as vegetable burgers, frozen vegetables and frozen pies. In addition, the Sadia Speciale sub-brand was launched, with a higher added value portfolio, such as parma ham and the novelties raw ham and pepper-edged salami. Under the Ouro Perdigão brand, the mini sausage line was launched, in continuity with the portfolio expansion process in the appetizer and snack category. The Perdigão frozen pizza portfolio was also launched, which will ensure the brand’s increased visibility in the main market of the category. With the Qualy brand, the Qualy Vita line was launched, made with vegetable oils and a source of Omega 6, an essential nutrient for heart care. Finally, the Company also expanded the Qualy brand portfolio with frozen butter, cream cheese and frozen Brazilian cheese breads.

10.9 - Other factors with relevant influence

The Company was the target of two external investigations called “Operation Carne Fraca” in 2017 and “Trapaça Operation” in 2018, as detailed below. The BRF Audit and Integrity Committee conducted independent investigations in conjunction with the Independent Investigation Committee, made up of external members and external legal advisors, in Brazil and abroad, with respect to allegations involving BRF employees and former employees. On February 25, 2021, the Executions Division of the Securities and Exchange Commission (“SEC”) issued a letter to the Company, declaring, among other matters, that it concluded an investigation against BRF and that, based on the information it had until that date , does not intend to recommend any enforcement action by the SEC against the Company with respect to Carne Fraca Operation and Trapaça Operation.

The main impacts observed as result of the referred investigations were recorded in other operating expenses in the amount of R$28,004 for the year ended on December 31, 2020 (R$79,207 for the year ended on December 31, 2019) mostly related to expenditures with lawyers, legal advisors and consultants.

Detailed information about such investigations and its potential impacts to the financial statements are presented in the explanatory note 1.2 to the financial statements of 2020.

Analysis of the impacts of COVID-19 on the Company's activities

As described in the risk factor contained in item 4.1 of this Reference Form, entitled "entitled "Pandemics or outbreaks of human diseases, such as the new coronavirus (COVID-19), can cause changes in consumption and trade patterns, in supply chains and in production processes, as well as causing interruptions in production and product shipments, which may significantly impact the Company's operations and operating results", the Company's business, operations and financial conditions can be materially and adversely affected by the spread of epidemics, pandemics or other public health crises, including the new coronavirus (COVID-19).

On January 31, 2020 the World Health Organization (OMS) announced that the COVID-19 is a global health emergency and on March 11, 2020 declared it a global pandemic. The outbreak has triggered significant decisions from governments and private sector entities, which, in turn, negatively impacted consumption patterns, supply chains and production processes on a global scale, including those related to the Company's business, specifically in relation to product shipments.

In addition, as a result of the social distance measures imposed by the competent authorities, customers from regions where the Company operates are being impacted, mainly by restrictions on meetings or face-to-face contacts, which may result in a reduction in the acquisition of the Company's products. One of the consequences of the pandemic may also be the destabilization of commodities prices or economies and financial markets in many countries, resulting in an economic slowdown that can affect the demand for the Company's products and, thus, generate a material adverse effect on operating results of BRF. Any deterioration in the credit cycle of the Company's customers, as a result of the pandemic or of the measures implemented to deal with it, may adversely affect BRF's results and cash flows.

The Company's operations include global production and distribution facilities and if there are many cases of COVID-19 contamination at the facilities or communities where the Company operates and distributes its products, productions, operations, employees, suppliers, customers and distribution channels. can be impacted. In addition, ports and other channels of entry may be closed or operate with a small part of the capacity, since workers may be banned or even unable to attend work, as well as the transport of products within regions or regions. Countries may also be limited in view of potential transportation restrictions related to quarantines or travel bans.

Furthermore, the countries to which the Company exports its products may restrict the import of BRF products; of products produced by its partners; or in all or some food products in Brazil, based on concerns related to COVID-19.

From the beginning of the pandemic until the moment of the release of this form, BRF has operated and continues to operate its industrial complexes, distribution centers, logistics, supply chain and support offices, although temporarily and partially in a remote work regime in some corporate locations and even though it closed the Lajeado plant for a week in May 2020 and the Rio Verde plant for 14 days in June 2020, as a result of cases of COVID-19 contamination. This way, until the date of approval of this information, there was no material change in its production, operation and / or marketing schedule. Additionally, management has developed and implemented several contingency plans for the maintenance of its operations and monitors the effects of the pandemic through a permanent multidisciplinary monitoring committee, formed by executives, specialists in the field of infectious diseases and contracted consultants.

Due to the pandemic, the Company has incurred in direct and incremental expenditures, such as transportation, personnel, prevention, control and donations, which are presented in the statement of income (loss) within the following line items:

		Consolidated (R$ thousands)
		20.12.31
Cost of sales		(356,960)
Selling expenses		(56,307)
General and administrative expenses		(86,032)
		(499,299)

The Company approved the donation of food, medical supplies and other support to research and social development funds, in the approximate amount of R$ 50 million, in order to contribute to efforts to combat the effects of the COVID-19 pandemic, including support for hospitals, philanthropic entities, social assistance organizations and health professionals from the states and municipalities in which it operates.

Aiming to preventively strengthen its liquidity level, the Company contracted and withdrew credit facilities with financial institutions in Brazil with funding in the aggregate amount of R$2,429,211 and average term of approximately one year, without any financial covenants clauses. During July and August of 2020, the Company prepaid part of the referred credit facilities in the aggregated notional and interest amount of R$2,094,555 (note 15.5 of the 2020 financial statements).

The Company adopted several guidelines as part of its Financial Risk Management Policy to ensure the maintenance of an adequate level of liquidity, establishing minimum cash and liquidity requirements, in accordance with expectations and future obligations. The current liquidity position is considered adequate by the Company taking into account the payment obligations, including through the capital expenditure plans, in line with its Vision 2030 Plan. However, BRF recognizes that unfavorable operating results may have an adverse impact on its financial metrics, such as leverage. At the same time, there may be increases in general customer default rates in relation to the pandemic and, as a result, an increase in bad debt losses. The possible deterioration in the credit cycle of its customers may adversely affect the Company's results, financial position and cash flows in the future.

The recent increase in the volatility of market risks has significantly affected the fair value of the Company's assets and liabilities, mainly considering the large variations in exchange rates. In addition, the increased uncertainty of the projections increased the challenge of accurately measuring some of the assets and liabilities. However, the method used was not significantly changed and the financial statements were prepared in a timely manner. The Company's management took into account the effects and uncertainties related to the pandemic in the projections of its results and cash flows.

The management considered in its projections of results and cash flows, to the best of its knowledge, the effects and uncertainties regarding the pandemic. As described in note 14.1 of the 2020 financial

statements, no impairment was recognized to the cash generating units. Due to the high volatility and uncertainty around the length and the impact of the pandemic, the Company will continue to monitor the situation and evaluate the impacts on assumptions and estimates used in preparing our financial reporting.

For more information about the risks and measures adopted by the Company in relation to the COVID-19 pandemic, see item 4.1 of this Reference Form, entitled "Pandemics or outbreaks of human diseases, such as the new coronavirus (COVID-19), may cause changes in consumption and trade patterns, supply chains and production processes, as well as causing interruptions in the production and shipment of products, which can significantly affect the Company's operations and operating results ", item 10.1.a - General Financial and Equity Conditions and item 5.6 - Other relevant information.

BRF S.A.

Appendix II - Information on the allocation of net income (Appendix 9-1-II to CVM Instruction No. 481, of December 17, 2009)

1. Inform net income for the year

Net income for the year was R$1.383.563.620,46.

2. Inform the global amount and the value per share of dividends, including prepaid dividends and interest on equity already declared

Not applicable.

3. Inform the percentage of net income for the year distributed:

The profit determined in the fiscal year ended on 12.31.2020 was fully used to offset the accumulated losses balance, in accordance with the provisions of article 189 of Law No. 6,404 / 1976.

4. Inform the global amount and the value per share of dividends distributed based on profit from previous years

Not applicable.

5. Inform, deducting the anticipated dividends and interest on equity already declared:

a. The gross amount of dividends and interest on equity, segregated, per share of each type and class

Not applicable.

b. The form and term of payment of dividends and interest on equity

Not applicable.

c. Eventual restatement and interest on dividends and interest on equity

Not applicable.

d. Date of declaration of payment of dividends and interest on equity considered for identification of shareholders who will be entitled to receive them

Not applicable.

6. If there has been a declaration of dividends or interest on equity based on profits determined in half-yearly balance sheets or in shorter periods

a. Inform the amount of dividends or interest on equity already declared

Not applicable.

b. Inform the date of the respective payments

Not applicable.

7. Provide a comparative table indicating the following values per share of each type and class:

a. Net income for the year and the 3 (three) previous years

	2020	2019	2018	2017
Amount per share (R$)	1.71	0.37	(5.48)	(1.39)

b. Dividend and interest on own capital distributed in the 3 (three) previous years

	2019	2018	2017
Dividends	N/A	N/A	N/A
Interest on actual capital	N/A	N/A	N/A

8. If profits are allocated to the legal reserve

a. Identify the amount allocated to the legal reserve

Not applicable.

b. Detail how to calculate the legal reserve

Not applicable.

9. If the company has preferred shares entitled to fixed or minimum dividends

a. Describe how fixed or minimum dividends are calculated