BRF S.A. — Regulatory Filings 2011

May 16, 2011

FORM 6-K

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

dated May 16, 2011

Commission File Number 1-15148

BRF–BRASIL FOODS S.A.

(Exact Name as Specified in its Charter) N/A (Translation of Registrant’s Name)

760 Av. Escola Politecnica Jaguare 05350-000 Sao Paulo, Brazil

(Address of principal executive offices) (Zip code)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F X Form 40-F _ Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ] Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes _ No X_ If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Index*

Identification
Capital Stock Composition	1
Individual FS
Balance Sheet Assets	2
Balance Sheet Liabilities	3
Statement of Income	5
Statement of Comprehensive Income	6
Statement of Cash Flows	7
Statement of Changes in Shareholders' Equity
Statement of Changes in Shareholders' Equity - from 01/01/2011 to 03/31/2011	8
Statement of Changes in Shareholders' Equity - from 01/01/2010 to 03/31/2010	9
Statement Added Value	10
Consolidated FS
Balance Sheet Assets	11
Balance Sheet Liabilities	12
Statement of Income	14
Statement of Comprehensive Income	15
Statement of Cash Flows	16
Statement of Changes in Shareholders' Equity
Statement of Changes in Shareholders' Equity - from 01/01/2011 to 03/31/2011	17
Statement of Changes in Shareholders' Equity - from 01/01/2010 to 03/31/2010	18
Statement of Value Added	19
Management Report / Comments on the Performance	20
Explanatory Notes	43
Declarations and Opinion
Report of Special Review	113
Opinion of the Fiscal Council	115
Statatement of Executive Board on the Quarterly Information	116
Statatement of Executive Board on the Independent Auditor's Report	117

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Identification / Capital Stock Composition*

Number of Shares	Current quarter
(Units)	03/31/2011
Paid-in capital
Common	872.473.246
Preferred	0
Total	872.473.246
Treasury shares
Common	727.972
Preferred	0
Total	727.972

1

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS / Balance Sheet Assets*

*(in thousands of Brazilian Reais)*

| Account | | Current
Quarter | Previous
Year |
| --- | --- | --- | --- |
| Code | Account
Description | 03/31/2011 | 12/31/2010 |
| 1 | Total
Assets | 19,246,231 | 18,892,303 |
| 1.01 | Current
Assets | 4,153,244 | 4,093,850 |
| 1.01.01 | Cash and Cash
Equivalents | 130,699 | 211,159 |
| 1.01.02 | Marketable
Securities | 679,088 | 622,130 |
| 1.01.02.01 | Financial
Investments Valued at Fair Value | 679,061 | 622,103 |
| 1.01.02.01.01 | Held for
trading | 677,139 | 620,424 |
| 1.01.02.01.02 | Available for
sale | 1,922 | 1,679 |
| 1.01.02.02 | Marketable
Securities Valued at Amortized Cost | 27 | 27 |
| 1.01.02.02.01 | Held to
maturity | 27 | 27 |
| 1.01.03 | Trade Accounts
Receivable and Other Receivables | 1,064,724 | 1,116,458 |
| 1.01.03.01 | Trade Accounts
Receivable | 1,032,864 | 1,086,943 |
| 1.01.03.02 | Notes
Receivable | 31,860 | 29,515 |
| 1.01.04 | Inventories | 971,105 | 879,841 |
| 1.01.05 | Biological
Assets | 459,497 | 434,212 |
| 1.01.06 | Recoverable
Taxes | 478,588 | 471,367 |
| 1.01.06.01 | Current Tax
Recoverable | 478,588 | 471,367 |
| 1.01.07 | Prepaid
Expenses | 19,747 | 15,850 |
| 1.01.08 | Other Current
Assets | 349,796 | 342,833 |
| 1.01.08.02 | Assets of
Discontinued Operations | 5,891 | 3,226 |
| 1.01.08.03 | Others | 343,905 | 339,607 |
| 1.01.08.03.01 | Equity Interest
Receivable | 179,967 | 179,967 |
| 1.01.08.03.02 | Derivatives | 77,958 | 87,447 |
| 1.01.08.03.03 | Others | 85,980 | 72,193 |
| 1.02 | Noncurrent
Assets | 15,092,987 | 14,798,453 |
| 1.02.01 | Noncurrent
Assets | 1,332,849 | 1,400,225 |
| 1.02.01.03 | Trade Accounts
Receivable and Other Receivables | 90,500 | 100,086 |
| 1.02.01.03.01 | Trade Accounts
Receivable | 5,118 | 6,950 |
| 1.02.01.03.02 | Notes
Receivable | 85,382 | 93,136 |
| 1.02.01.05 | Biological
Assets | 165,515 | 159,022 |
| 1.02.01.06 | Deferred
Taxes | 485,051 | 556,837 |
| 1.02.01.06.01 | Income Tax and
Social Contribution | 485,051 | 556,837 |
| 1.02.01.07 | Prepaid
Expenses | 88 | 224 |
| 1.02.01.08 | Receivables from
related parties | 6,142 | 6,166 |
| 1.02.01.08.04 | Receivables from
related parties | 6,142 | 6,166 |
| 1.02.01.09 | Other Noncurrent
Assets | 585,553 | 577,890 |
| 1.02.01.09.03 | Judicial
Deposits | 101,890 | 93,025 |
| 1.02.01.09.04 | Recoverable
Taxes | 465,381 | 464,424 |
| 1.02.01.09.05 | Others | 18,282 | 20,441 |
| 1.02.02 | Investments | 8,984,916 | 8,674,306 |
| 1.02.02.01 | Investiments | 8,984,916 | 8,674,306 |
| 1.02.02.01.01 | Equity in
Affiliates | 8,984,082 | 8,673,472 |
| 1.02.02.01.04 | Other
Participations | 834 | 834 |
| 1.02.03 | Property, Plant
and Equipment, net | 3,175,006 | 3,134,634 |
| 1.02.03.01 | Fixed Asset in
Operation | 2,998,676 | 2,988,783 |
| 1.02.03.02 | Fixed Asset
Leased | 7,594 | 8,286 |
| 1.02.03.03 | Fixed Asset in
Construction | 168,736 | 137,565 |
| 1.02.04 | Intangible | 1,600,216 | 1,589,288 |
| 1.02.04.01 | Intangibles | 1,600,216 | 1,589,288 |
| 1.02.04.01.02 | Software | 74,952 | 63,968 |
| 1.02.04.01.03 | Goodwill | 1,520,488 | 1,520,488 |
| 1.02.04.01.04 | Others | 4,776 | 4,832 |

2

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS / Balance Sheet Liabilities*

*(in thousands of Brazilian Reais)*

| Account | | Current
Quarter | Previous
Year |
| --- | --- | --- | --- |
| Code | Account
Description | 03/31/2011 | 12/31/2010 |
| 2 | Total
Liabilities | 19.246.231 | 18.892.303 |
| 2.01 | Current
Liabilities | 3.323.717 | 3.305.635 |
| 2.01.01 | Social and Labor
Obligations | 85.250 | 87.601 |
| 2.01.01.01 | Social
Obligations | 44.647 | 45.599 |
| 2.01.01.02 | Labor
Obligations | 40.603 | 42.002 |
| 2.01.02 | Trade Accounts
Payable | 1.049.476 | 1.098.375 |
| 2.01.02.01 | Domestic
Suppliers | 1.015.655 | 1.060.671 |
| 2.01.02.02 | Foreign
Suppliers | 33.821 | 37.704 |
| 2.01.03 | Tax
Obligations | 64.165 | 68.868 |
| 2.01.03.01 | Federal Tax
Obligations | 19.278 | 29.761 |
| 2.01.03.01.02 | Other
Federal | 19.278 | 29.761 |
| 2.01.03.02 | State Tax
Obligations | 44.404 | 38.568 |
| 2.01.03.03 | Municipal Tax
Obligations | 483 | 539 |
| 2.01.04 | Short Term
Debts | 993.220 | 913.517 |
| 2.01.04.01 | Short Term
Debts | 993.220 | 913.517 |
| 2.01.04.01.01 | Local
Currency | 699.953 | 661.698 |
| 2.01.04.01.02 | Foreign
Currency | 293.267 | 251.819 |
| 2.01.05 | Other
Obligations | 943.763 | 971.880 |
| 2.01.05.01 | Liabilities with
Related Parties | 762.954 | 560.657 |
| 2.01.05.01.04 | Other Liabilities
with Related Parties | 762.954 | 560.657 |
| 2.01.05.02 | Others | 180.809 | 411.223 |
| 2.01.05.02.01 | Dividends Payable
and Interest on Shareholders' Equity | 2.120 | 193.098 |
| 2.01.05.02.04 | Derivatives | 72.537 | 80.488 |
| 2.01.05.02.05 | Management and
Employees Profit Sharing | 38.002 | 80.349 |
| 2.01.05.02.06 | Other
Obligations | 68.150 | 57.288 |
| 2.01.06 | Provisions | 187.843 | 165.394 |
| 2.01.06.01 | Provisions for
Tax, Civil and Labor Risks | 187.843 | 165.394 |
| 2.01.06.01.01 | Tax
Provisions | 8.215 | 8.094 |
| 2.01.06.01.02 | Labor and Social
Security Provisions | 33.565 | 32.339 |
| 2.01.06.01.04 | Provision for
Civil Risk | 3.123 | 3.420 |
| 2.01.06.01.05 | Provisões para
Férias e 13º Salário | 142.940 | 121.541 |
| 2.02 | Non-current
Liabilities | 1.909.597 | 1.957.701 |
| 2.02.01 | Long-term
Debt | 1.302.056 | 1.314.878 |
| 2.02.01.01 | Long-term
Debt | 1.302.056 | 1.314.878 |
| 2.02.01.01.01 | Local
Currency | 626.522 | 702.960 |
| 2.02.01.01.02 | Foreign
Currency | 675.534 | 611.918 |
| 2.02.02 | Other
Obligations | 13.788 | 25.999 |
| 2.02.02.02 | Others | 13.788 | 25.999 |
| 2.02.02.02.05 | Other
Obligations | 13.788 | 25.999 |
| 2.02.03 | Deferred
Taxes | 268.578 | 303.105 |
| 2.02.03.01 | Income Tax and
Social Contribution | 268.578 | 303.105 |
| 2.02.04 | Provisions | 325.175 | 313.719 |
| 2.02.04.01 | Provisions for
Tax, Civil and Labor Risks | 325.175 | 313.719 |
| 2.02.04.01.01 | Tax
Provisions | 178.693 | 174.563 |
| 2.02.04.01.02 | Labor and Social
Security Provisions | 5.731 | 5.802 |
| 2.02.04.01.03 | Provisions for
Employee Benefits | 115.461 | 110.403 |
| 2.02.04.01.04 | Provision for
Civil Risk | 25.290 | 22.951 |
| 2.03 | Shareholders'
Equity | 14.012.917 | 13.628.967 |
| 2.03.01 | Paid-in
Capital | 12.460.471 | 12.460.471 |
| 2.03.02 | Capital
Reserves | 72.625 | 69.353 |
| 2.03.02.01 | Cost of Shares
Issuance | 64.230 | 62.767 |
| 2.03.02.04 | Granted
Options | 8.395 | 6.586 |

3

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS / Balance Sheet Liabilities*

*(in thousands of Brazilian Reais)*

| Account | | Current
Quarter | Previous
Year |
| --- | --- | --- | --- |
| Code | Account
Description | 03/31/2011 | 12/31/2010 |
| 2.03.04 | Profit
Reserves | 1.064.000 | 1.063.949 |
| 2.03.04.01 | Legal | 111.215 | 111.215 |
| 2.03.04.02 | Statutory | 953.473 | 953.473 |
| 2.03.04.09 | Treasury
Shares | (688) | (739) |
| 2.03.05 | Accumulated
Earning/Losses | 383.468 | 0 |
| 2.03.08 | Other
Comprehensive Income | 32.353 | 35.194 |

4

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS / Statement of Income*

*(in thousands of Brazilian Reais)*

| | | Accumulated — Current
Year | Accumulated — Previous
Year |
| --- | --- | --- | --- |
| Account | Account
Description | 01/01/2011
to | 01/01/2010
to |
| Code | | 03/31/2011 | 03/31/2010 |
| 3.01 | Net
sales | 2.932.791 | 2.443.656 |
| 3.02 | Cost of
sales | (2.371.481) | (2.066.517) |
| 3.03 | Gross
profit | 561.310 | 377.139 |
| 3.04 | Operating income
(expenses) | (121.114) | (246.539) |
| 3.04.01 | Sales | (339.062) | (305.001) |
| 3.04.02 | General and
administrative | (50.192) | (38.980) |
| 3.04.04 | Other Operating
Income | 14.948 | 4.707 |
| 3.04.05 | Other operating
expenses | (66.897) | (47.869) |
| 3.04.06 | Equity interest in
income of subsidiaries | 320.089 | 140.604 |
| 3.05 | Profit before
Financial and Tax Results | 440.196 | 130.600 |
| 3.06 | Operating
income | (22.886) | (103.507) |
| 3.06.01 | Financial
income | 56.441 | 214.970 |
| 3.06.02 | Financial
expenses | (79.327) | (318.477) |
| 3.07 | Income before
taxes and participation of non-controlling shareholders' | 417.310 | 27.093 |
| 3.08 | Income and social
contribution tax expense | (33.842) | 34.026 |
| 3.08.02 | Deferred income
and social contribution tax expense (benefit) | (33.842) | 34.026 |
| 3.09 | Net
income | 383.468 | 61.119 |
| 3.11 | Net
income | 383.468 | 61.119 |
| 3.99 | Profit per share -
(Reais / Share) | | |
| 3.99.01.01 | Earnings per share
- basic | 0,44 | 0,07 |
| 3.99.02.01 | Earnings per share
- diluted | 0,44 | 0,07 |

5

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS / Statement of Comprehensive Income*

*(in thousands of Brazilian Reais)*

| | | Accumulated — Current
Year | Accumulated — Previous
Year |
| --- | --- | --- | --- |
| | | 01/01/2011
to | 01/01/2010
to |
| Account
Code | Account
Description | 03/31/2011 | 03/31/2010 |
| 4.01 | Net
income | 383.468 | 61.119 |
| 4.02 | Net income (loss)
recored directly in the shareholders' equity | (2.841) | 6.891 |
| 4.02.01 | Loss in foreign
currency translation adjustments | (161) | (5.362) |
| 4.02.02 | Unrealized gain
(loss) in available for sale marketable securities | 2.162 | 510 |
| 4.02.03 | Unrealized gains
(loss) in cash flow hedge | 3.714 | 3.147 |
| 4.02.04 | Actuarial
loss | (8.556) | 8.596 |
| 4.03 | Comprehensive
Income | 380.627 | 68.010 |

6

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS* / Statement of Cash Flows****

*(in thousands of Brazilian Reais)*

| | | Accumulated — Current
Year | Accumulated — Previous
Year |
| --- | --- | --- | --- |
| Account | | 01/01/2011
to | 01/01/2010
to |
| Code | Account
Description | 03/31/2011 | 03/31/2010 |
| 6.01 | Net Cash Provided
by Operating Activities | 187.383 | 1.191.004 |
| 6.01.01 | Cash from
Operations | 207.367 | 62.182 |
| 6.01.01.01 | Net Income for the
Year | 383.468 | 61.119 |
| 6.01.01.03 | Depreciation,
Amortization and Depletion | 91.460 | 79.889 |
| 6.01.01.04 | Gain on Permanent
Asset Disposals | (54) | 13.711 |
| 6.01.01.05 | Deferred Income
Tax | 33.839 | (34.025) |
| 6.01.01.06 | Provision/Reversal
for Contingencies | 24.349 | 20.910 |
| 6.01.01.07 | Other
Provisions | 2.460 | (15.746) |
| 6.01.01.08 | Exchange
Variations and Interest | (8.066) | 76.928 |
| 6.01.01.09 | Equity
pick-Up | (320.089) | (140.604) |
| 6.01.02 | Changes in
Operating Assets and Liabilities | (19.984) | 1.128.822 |
| 6.01.02.01 | Trade Accounts
Receivable | 57.802 | 392.736 |
| 6.01.02.02 | Inventories | (89.524) | 54.795 |
| 6.01.02.03 | Trade Accounts
Payable | (50.294) | (88.046) |
| 6.01.02.04 | Payment of
Provisions for Tax, Civil and Labor Risks | (12.013) | (13.572) |
| 6.01.02.05 | Payroll and
Related Charges | 145.949 | 585.408 |
| 6.01.02.06 | Investiment in
Trading Securities | (679.406) | (518.482) |
| 6.01.02.07 | Redemption of
Trading Securities | 637.876 | 768.545 |
| 6.01.02.10 | Other Financial
Assets and Liabilities | 1.538 | 4.496 |
| 6.01.02.11 | Interest
Paid | (31.912) | (57.058) |
| 6.02 | Net Cash Used in
Investing Activities | (151.865) | (99.275) |
| 6.02.03 | Additions to
Property, Plant and Equipment | (89.321) | (63.556) |
| 6.02.04 | Proceeds from
Disposals of Property, Plant and Equipment | 80 | 2.272 |
| 6.02.05 | Cash of Merged
Company | 0 | 1.960 |
| 6.02.06 | Additions to
Intangible | (12.289) | (430) |
| 6.02.07 | Additions to
Biological Assets | (50.335) | (39.521) |
| 6.03 | Net Cash (Used in)
Provided by Financing Activities | (113.554) | (1.151.960) |
| 6.03.01 | Proceeds from Debt
Issuance | 269.241 | 177.188 |
| 6.03.02 | Repayment of
Debt | (173.495) | (569.345) |
| 6.03.03 | Interest on
Shareholders' Equity Paid | (209.300) | (100.000) |
| 6.03.04 | Cost of Shares
Issuance | 0 | (803) |
| 6.03.05 | Advance for Future
Capital Increase | 0 | (659.000) |
| 6.04 | Effect of Exchange
Rate Variation on Cash and Cash Equivalents | (2.424) | 2.369 |
| 6.05 | Net (Decrease)
Increase in Cash | (80.460) | (57.862) |
| 6.05.01 | At the Beginning
of the Year | 211.159 | 223.434 |
| 6.05.02 | At the End of the
Year | 130.699 | 165.572 |

7

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS* / Statement of Changes in Shareholders' Equity for the Period from****

*01/01/2011 to 03/31/2011*

*(in thousands of Brazilian Reais)*

| | | | Capital
Reserves, — Granted
Options | | Retained | Other | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Account | | Capital | and
Treasury | Profit | earning | Comprehensive | Shareholders' |
| Code | Account
Description | Stock | Shares | Reserves | (losses) | Income | Equity |
| 5.01 | Opening
Balance | 12.460.471 | 68.614 | 1.064.688 | 0 | 35.194 | 13.628.967 |
| 5.03 | Opening Balance
Adjustment | 12.460.471 | 68.614 | 1.064.688 | 0 | 35.194 | 13.628.967 |
| 5.04 | Share-based
Payments | 0 | 3.323 | | 0 | 0 | 3.323 |
| 5.04.03 | Options
Ggranted | 0 | 3.272 | 0 | 0 | 0 | 3.272 |
| 5.04.05 | Treasury
Shares | 0 | 51 | 0 | 0 | 0 | 51 |
| 5.05 | Total
Comprehensive Income | 0 | 0 | 0 | 383.468 | (2.841) | 380.627 |
| 5.05.01 | Net Income for the
Year | 0 | 0 | 0 | 383.468 | 0 | 383.468 |
| 5.05.02 | Other
Comprehensive Income | 0 | 0 | 0 | 0 | (2.841) | (2.841) |
| 5.05.02.01 | Adjustments of
Financial Instruments | 0 | 0 | 0 | 0 | 7.133 | 7.133 |
| 5.05.02.02 | Tax Adjustments on
Financial Instruments | 0 | 0 | 0 | 0 | (3.419) | (3.419) |
| 5.05.02.03 | Gain (Loss) in
Foreign Currency Translation Adjustments | 0 | 0 | 0 | 0 | (161) | (161) |
| 5.05.02.06 | Unrealized Gain
(Loss) in Available for Sale Marketable Securities | 0 | 0 | 0 | 0 | 2.162 | 2.162 |
| 5.05.02.07 | Actuarial
loss, | 0 | 0 | 0 | 0 | (8.556) | (8.556) |
| 5.07 | Closing
Balance | 12.460.471 | 71.937 | 1.064.688 | 383.468 | 32.353 | 14.012.917 |

8

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS* / Statement of Changes in Shareholders' Equity for the Period from****

*01/01/2010 to 03/31/2010*

*(in thousands of Brazilian Reais)*

| | | | Capital
Reserves, — Granted
Options | | Retained | Other | Total |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Account | | Capital | and
Treasury | Profit | earning | Comprehensive | Shareholders' |
| Code | Account
Description | Stock | Shares | Reserves | (losses) | Income | Equity |
| 5.01 | Opening
Balance | 12.461.756 | 35.180 | 727.688 | (186.131) | (47.555) | 12.990.938 |
| 5.03 | Opening Balance
Adjustment | 12.461.756 | 35.180 | 727.688 | (186.131) | (47.555) | 12.990.938 |
| 5.04 | Share-based
Payments | (803) | 1.413 | 0 | 0 | 0 | 610 |
| 5.04.02 | Cost of Shares
Issuance | (803) | 0 | 0 | 0 | 0 | (803) |
| 5.04.05 | Treasury
Shares | 0 | 1.413 | 0 | 0 | 0 | 1.413 |
| 5.05 | Total
Comprehensive Income | 0 | 0 | 0 | 42.644 | 6.891 | 49.535 |
| 5.05.01 | Net Income for the
Year | 0 | 0 | 0 | 61.119 | 0 | 61.119 |
| 5.05.02 | Other
Comprehensive Income | 0 | 0 | 0 | (18.475) | 6.891 | (11.584) |
| 5.05.02.01 | Adjustments of
Financial Instruments | 0 | 0 | 0 | 0 | 4.767 | 4.767 |
| 5.05.02.02 | Tax Adjustments on
Financial Instruments | 0 | 0 | 0 | 0 | (1.620) | (1.620) |
| 5.05.02.03 | Gain (Loss) in
Foreign Currency Translation Adjustments | 0 | 0 | 0 | 0 | (5.362) | (5.362) |
| 5.05.02.06 | Unrealized Gain
(Loss) in Available for Sale Marketable Securities | 0 | 0 | 0 | 0 | 510 | 510 |
| 5.05.02.07 | Actuarial
loss, | 0 | 0 | 0 | (18.475) | 8.596 | (9.879) |
| 5.07 | Closing
Balance | 12.460.953 | 36.593 | 727.688 | (143.487) | (40.664) | 13.041.083 |

9

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Individual FS / Statement of Value Added*

*(in thousands of Brazilian Reais)*

| | | Accumulated — Current
Year | Accumulated — Previous
Year |
| --- | --- | --- | --- |
| Account | | 01/01/2011
to | 01/01/2010
to |
| Code | Account
Description | 03/31/2011 | 03/31/2010 |
| 7.01 | Revenues | 3.287.806 | 2.776.903 |
| 7.01.01 | Sales of Goods,
Products and Services | 3.248.216 | 2.729.853 |
| 7.01.02 | Other
Income | (38.387) | (9.269) |
| 7.01.03 | Revenue related to
construction of own assets | 79.472 | 58.340 |
| 7.01.04 | Allowance for
doubtful accounts reversal (provisions) | (1.495) | (2.021) |
| 7.02 | Raw Material
Acquired from Third Parties | (2.260.368) | (1.990.226) |
| 7.02.01 | Costs of Products
and Goods Sold | (1.934.471) | (1.626.660) |
| 7.02.02 | Materials, Energy,
Services of Third Parties and Others | (324.157) | (376.569) |
| 7.02.03 | Losses of Assets
Values | (1.740) | 13.003 |
| 7.03 | Gross Value
Added | 1.027.438 | 786.677 |
| 7.04 | Retentions | (91.460) | (79.889) |
| 7.04.01 | Depreciation and
Amortization | (91.460) | (79.889) |
| 7.05 | Net Value
Added | 935.978 | 706.788 |
| 7.06 | Received from
Third Parties | 376.543 | 355.613 |
| 7.06.01 | Equity on Interest
in Income of Associated Company | 320.089 | 140.604 |
| 7.06.02 | Financial
Income | 56.441 | 214.970 |
| 7.06.03 | Others | 13 | 39 |
| 7.07 | Added Value to be
Distributed | 1.312.521 | 1.062.401 |
| 7.08 | Distrbution of
Value Added | 1.312.521 | 1.062.401 |
| 7.08.01 | Payroll | 396.632 | 353.557 |
| 7.08.01.01 | Salaries | 324.980 | 290.861 |
| 7.08.01.02 | Benefits | 51.345 | 43.910 |
| | Government
Severance Indemnity Fund for employees | | |
| 7.08.01.03 | guarantee fund for
length of service - FGTS | 20.307 | 18.786 |
| 7.08.02 | Taxes and
Contribution | 428.133 | 311.850 |
| 7.08.02.01 | Federal | 254.741 | 143.185 |
| 7.08.02.02 | State | 169.212 | 165.680 |
| 7.08.02.03 | Municipal | 4.180 | 2.985 |
| 7.08.03 | Capital
Remuneration from Third Parties | 104.288 | 335.875 |
| 7.08.03.01 | Interests | 80.287 | 320.256 |
| 7.08.03.02 | Rents | 24.001 | 15.619 |
| 7.08.04 | Interest on Own
Capital | 383.468 | 61.119 |
| 7.08.04.03 | Retained
earnings | 383.468 | 61.119 |

10

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS* / Balance Sheet Assets****

*(in thousands of Brazilian Reais)*

| Account | | Current
Quarter | Previous
Year |
| --- | --- | --- | --- |
| Code | Account
Description | 03/31/2011 | 12/31/2010 |
| 1 | Total
Assets | 27.895.056 | 27.751.547 |
| 1.01 | Current
Assets | 10.226.511 | 10.020.699 |
| 1.01.01 | Cash and Cash
Equivalents | 2.093.783 | 2.310.643 |
| 1.01.02 | Marketable
Securities | 1.226.353 | 1.032.375 |
| 1.01.02.01 | Financial
Investments Valued at Fair Value | 1.190.068 | 1.013.768 |
| 1.01.02.01.01 | Held for
trading | 685.115 | 623.512 |
| 1.01.02.01.02 | Available for
sale | 504.953 | 390.256 |
| 1.01.02.02 | Marketable
Securities Valued at Amortized Cost | 36.285 | 18.607 |
| 1.01.02.02.01 | Held to
maturity | 36.285 | 18.607 |
| 1.01.03 | Trade Accounts
Receivable and Other Receivables | 2.402.199 | 2.606.696 |
| 1.01.03.01 | Trade Accounts
Receivable | 2.358.345 | 2.565.029 |
| 1.01.03.02 | Notes
Receivable | 43.854 | 41.667 |
| 1.01.04 | Inventories | 2.417.855 | 2.135.809 |
| 1.01.05 | Biological
Assets | 972.046 | 900.681 |
| 1.01.06 | Recoverable
Taxes | 727.716 | 695.892 |
| 1.01.06.01 | Current Tax
Recoverable | 727.716 | 695.892 |
| 1.01.07 | Prepaid
Expenses | 21.499 | 17.012 |
| 1.01.08 | Other Current
Assets | 365.060 | 321.591 |
| 1.01.08.02 | Assets of
Discontinued Operations | 64.910 | 62.245 |
| 1.01.08.03 | Others | 300.150 | 259.346 |
| 1.01.08.03.01 | Derivatives | 85.442 | 98.596 |
| 1.01.08.03.02 | Others | 214.708 | 160.750 |
| 1.02 | Noncurrent
Assets | 17.668.545 | 17.730.848 |
| 1.02.01 | Noncurrent
Assets | 4.301.609 | 4.399.259 |
| 1.02.01.02 | Marketable
Securities Valued at Amortized Cost | 190.972 | 209.084 |
| 1.02.01.02.01 | Held to
maturity | 190.972 | 209.084 |
| 1.02.01.03 | Trade Accounts
Receivable and Other Receivables | 90.500 | 100.086 |
| 1.02.01.03.01 | Trade Accounts
Receivable | 5.118 | 6.950 |
| 1.02.01.03.02 | Notes
Receivable | 85.382 | 93.136 |
| 1.02.01.05 | Biological
Assets | 381.536 | 377.684 |
| 1.02.01.06 | Deferred
Taxes | 2.446.079 | 2.487.612 |
| 1.02.01.06.01 | Income Tax and
Social Contribution | 2.446.079 | 2.487.612 |
| 1.02.01.07 | Prepaid
Expenses | 261 | 391 |
| 1.02.01.09 | Other Noncurrent
Assets | 1.192.261 | 1.224.402 |
| 1.02.01.09.03 | Judicial
Deposits | 211.469 | 234.085 |
| 1.02.01.09.04 | Recoverable
Taxes | 780.275 | 767.407 |
| 1.02.01.09.05 | Others | 200.517 | 222.910 |
| 1.02.02 | Investments | 19.531 | 17.494 |
| 1.02.02.01 | Investiments | 19.531 | 17.494 |
| 1.02.02.01.01 | Equity in
Affiliates | 18.637 | 16.467 |
| 1.02.02.01.04 | Other
Participations | 894 | 1.027 |
| 1.02.03 | Property, Plant
and Equipment, net | 9.104.964 | 9.066.831 |
| 1.02.03.01 | Fixed Asset in
Operation | 8.792.855 | 8.809.416 |
| 1.02.03.02 | Fixed Asset
Leased | 7.594 | 8.286 |
| 1.02.03.03 | Fixed Asset in
Construction | 304.515 | 249.129 |
| 1.02.04 | Intangible | 4.242.441 | 4.247.264 |
| 1.02.04.01 | Intangibles | 1.408.922 | 1.414.290 |
| 1.02.04.01.02 | Software | 109.102 | 100.339 |
| 1.02.04.01.03 | Brands | 1.256.000 | 1.256.000 |
| 1.02.04.01.04 | Others | 43.820 | 57.951 |
| 1.02.04.02 | Goodwill | 2.833.519 | 2.832.974 |

11

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS* / Balance Sheet Liabilities****

*(in thousands of Brazilian Reais)*

| Account | | Current
Quarter | Previous
Year |
| --- | --- | --- | --- |
| Code | Account
Description | 03/31/2011 | 12/31/2010 |
| 2 | Total
Liabilities | 27.895.056 | 27.751.547 |
| 2.01 | Current
Liabilities | 5.469.941 | 5.686.384 |
| 2.01.01 | Social and Labor
Obligations | 126.463 | 133.014 |
| 2.01.01.01 | Social
Obligations | 45.939 | 47.220 |
| 2.01.01.02 | Labor
Obligations | 80.524 | 85.794 |
| 2.01.02 | Trade Accounts
Payable | 2.038.982 | 2.059.196 |
| 2.01.02.01 | Domestic
Suppliers | 1.904.821 | 1.953.379 |
| 2.01.02.02 | Foreign
Suppliers | 134.161 | 105.817 |
| 2.01.03 | Tax
Obligations | 171.179 | 210.832 |
| 2.01.03.01 | Federal Tax
Obligations | 69.554 | 210.832 |
| 2.01.03.01.01 | Income Tax and
Social Contribution Payable | 17.914 | 0 |
| 2.01.03.01.02 | Other
Federal | 51.640 | 210.832 |
| 2.01.03.02 | State Tax
Obligations | 101.142 | 0 |
| 2.01.03.03 | Municipal
Tax | 483 | 0 |
| 2.01.04 | Short Term
Debts | 2.246.045 | 2.227.713 |
| 2.01.04.01 | Short Term
Debts | 2.246.045 | 2.227.713 |
| 2.01.04.01.01 | Local
Currency | 1.554.976 | 1.536.419 |
| 2.01.04.01.02 | Foreign
Currency | 691.069 | 691.294 |
| 2.01.05 | Other
Obligations | 450.251 | 736.147 |
| 2.01.05.02 | Others | 450.251 | 736.147 |
| 2.01.05.02.01 | Dividends Payable
and Interest on Shareholders' Equity | 2.120 | 193.098 |
| 2.01.05.02.04 | Derivatives | 77.592 | 82.164 |
| 2.01.05.02.05 | Management and
Employees Profit Sharing | 53.909 | 111.345 |
| 2.01.05.02.06 | Other
Obligations | 316.630 | 349.540 |
| 2.01.06 | Provisions | 437.021 | 319.482 |
| 2.01.06.01 | Provisions for
Tax, Civil and Labor Risks | 437.021 | 319.482 |
| 2.01.06.01.01 | Tax
Provisions | 55.355 | 9.928 |
| 2.01.06.01.02 | Labor and Social
Security Provisions | 53.380 | 48.362 |
| 2.01.06.01.04 | Provision for
Civil Risk | 36.607 | 6.848 |
| 2.01.06.01.05 | Provisões para
Férias e 13º Salário | 291.679 | 254.344 |
| 2.02 | Non-current
Liabilities | 8.401.548 | 8.428.645 |
| 2.02.01 | Long-term
Debt | 5.087.061 | 4.975.226 |
| 2.02.01.01 | Long-term
Debt | 5.087.061 | 4.975.226 |
| 2.02.01.01.01 | Local
Currency | 1.543.886 | 1.679.654 |
| 2.02.01.01.02 | Foreign
Currency | 3.543.175 | 3.295.572 |
| 2.02.02 | Other
Obligations | 457.930 | 489.504 |
| 2.02.02.02 | Others | 457.930 | 489.504 |
| 2.02.02.02.01 | Obrigações por
Pagamentos Baseados em Ações | 1.199 | 1.265 |
| 2.02.02.02.05 | Other
Obligations | 456.731 | 488.239 |
| 2.02.03 | Deferred
Taxes | 1.674.544 | 1.635.677 |
| 2.02.03.01 | Income Tax and
Social Contribution | 1.674.544 | 1.635.677 |
| 2.02.04 | Provisions | 1.182.013 | 1.328.238 |
| 2.02.04.01 | Provisões Fiscais
Previdenciárias Trabalhistas e Cíveis | 1.182.013 | 1.328.238 |
| 2.02.04.01.01 | Provisões
Fiscais | 820.723 | 850.019 |
| 2.02.04.01.02 | Provisões
Previdenciárias e Trabalhistas | 54.383 | 67.790 |
| 2.02.04.01.03 | Provisões para
Benefícios a Empregados | 286.591 | 274.498 |
| 2.02.04.01.04 | Provisões
Cíveis | 20.316 | 135.931 |
| 2.03 | Shareholders'
Equity | 14.023.567 | 13.636.518 |
| 2.03.01 | Paid-in
Capital | 12.460.471 | 12.460.471 |
| 2.03.02 | Capital
Reserves | 72.625 | 69.353 |
| 2.03.02.01 | Cost of Shares
Issuance | 64.230 | 62.767 |
| 2.03.02.04 | Granted
Options | 8.395 | 6.586 |
| 2.03.04 | Profit
Reserves | 1.064.000 | 1.063.949 |

12

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS* / Balance Sheet Liabilities****

*(in thousands of Brazilian Reais)*

| Account | | Current
Quarter | Previous
Year |
| --- | --- | --- | --- |
| Code | Account
Description | 03/31/2011 | 12/31/2010 |
| 2.03.04.01 | Legal | 111.215 | 111.215 |
| 2.03.04.02 | Statutory | 953.473 | 953.473 |
| 2.03.04.09 | Treasury
Shares | (688) | (739) |
| 2.03.05 | Accumulated
Earning/Losses | 383.468 | 0 |
| 2.03.08 | Other
Comprehensive Income | 32.353 | 35.194 |
| 2.03.09 | Non-controlling
interest | 10.650 | 7.551 |

13

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS* / Statement of Income****

*(in thousands of Brazilian Reais)*

| | | Accumulated — Current
Year | Accumulated — Previous
Year |
| --- | --- | --- | --- |
| Account | | 01/01/2011
to | 01/01/2010
to |
| Code | Account
Description | 03/31/2011 | 03/31/2010 |
| 3.01 | Net
sales | 6.020.494 | 5.047.371 |
| 3.02 | Cost of
sales | (4.474.918) | (3.922.557) |
| 3.03 | Gross
profit | 1.545.576 | 1.124.814 |
| 3.04 | Operating income
(expenses) | (1.020.582) | (914.214) |
| 3.04.01 | Sales | (854.954) | (788.405) |
| 3.04.02 | General and
administrative | (84.076) | (67.165) |
| 3.04.04 | Other Operating
Income | 57.349 | 28.710 |
| 3.04.05 | Other operating
expenses | (140.976) | (89.261) |
| 3.04.06 | Equity interest in
income of subsidiaries | 2.075 | 1.907 |
| 3.05 | Profit before
Financial and Tax Results | 524.994 | 210.600 |
| 3.06 | Operating
income | (52.264) | (151.828) |
| 3.06.01 | Financial
income | 157.728 | 392.167 |
| 3.06.02 | Financial
expenses | (209.992) | (543.995) |
| 3.07 | Income before
taxes and participation of non-controlling shareholders' | 472.730 | 58.772 |
| 3.08 | Income and social
contribution tax expense | (85.985) | 2.273 |
| 3.08.01 | Income and social
contribution tax expense | (4.775) | (12.709) |
| 3.08.02 | Deferred income
and social contribution tax expense (benefit) | (81.210) | 14.982 |
| 3.09 | Net
income | 386.745 | 61.045 |
| 3.11 | Net
income | 386.745 | 61.045 |
| 3.11.01 | BRF
shareholders | 383.468 | 61.119 |
| 3.11.02 | Non-controlling
shareholders | 3.277 | (74) |
| 3.99 | Profit per share -
(Reais / Share) | | |
| 3.99.01.01 | Earnings per share
- basic | 0,44 | 0,07 |
| 3.99.02.01 | Earnings per share
- diluted | 0,44 | 0,07 |

14

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS* / Statement of Comprehensive Income****

*(in thousands of Brazilian Reais)*

| | | Accumulated — Current
Year | Accumulated — Previous
Year |
| --- | --- | --- | --- |
| Account | Account
Description | 01/01/2011
to | 01/01/2010
to |
| Code | | 03/31/2011 | 03/31/2010 |
| 4.01 | Net
income | 386.745 | 61.045 |
| 4.02 | Net income (loss)
recored directly in the shareholders' equity | (2.841) | 6.891 |
| 4.02.01 | Loss in foreign
currency translation adjustments | (161) | (5.362) |
| 4.02.02 | Unrealized gain in
available for sale marketable securities | 2.162 | 510 |
| 4.02.03 | Unrealized gains
in cash flow hedge | 3.714 | 3.147 |
| 4.02.04 | Actuarial
loss | (8.556) | 8.596 |
| 4.03 | Comprehensive
Income | 383.904 | 67.936 |
| 4.03.01 | BRF
shareholders | 380.627 | 68.010 |
| 4.03.02 | Non-controlling
shareholders | 3.277 | (74) |

15

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS* / Statement of Cash Flows****

*(in thousands of Brazilian Reais)*

| | | Accumulated — Current
Year | Accumulated — Previous
Year |
| --- | --- | --- | --- |
| Account | | 01/01/2011
to | 01/01/2010
to |
| Code | Account
Description | 03/31/2011 | 03/31/2010 |
| 6.01 | Net Cash Provided
by Operating Activities | 62.237 | 248.643 |
| 6.01.01 | Cash from
Operations | 731.165 | 409.780 |
| 6.01.01.01 | Net Income for the
Year | 383.468 | 61.119 |
| 6.01.01.02 | Non-controlling
Shareholders | 3.277 | (74) |
| 6.01.01.03 | Depreciation,
Amortization and Depletion | 220.249 | 179.607 |
| 6.01.01.04 | Gain on Permanent
Asset Disposals | 19.157 | 36.077 |
| 6.01.01.05 | Deferred Income
Tax | 76.980 | (20.071) |
| 6.01.01.06 | Provision/Reversal
for Contingencies | 23.285 | 32.176 |
| 6.01.01.07 | Other
Provisions | 6.160 | (12.817) |
| 6.01.01.08 | Exchange
Variations and Interest | 664 | 135.670 |
| 6.01.01.09 | Equity
pick-Up | (2.075) | (1.907) |
| 6.01.02 | Changes in
Operating Assets and Liabilities | (668.928) | (161.137) |
| 6.01.02.01 | Trade Accounts
Receivable | 235.381 | (133.093) |
| 6.01.02.02 | Inventories | (280.856) | 36.233 |
| 6.01.02.03 | Trade Accounts
Payable | (27.797) | (122.365) |
| 6.01.02.04 | Payment of
Provisions for Tax, Civil and Labor Risks | (96.488) | (13.738) |
| 6.01.02.05 | Payroll and
Related Charges | (235.905) | (107.356) |
| 6.01.02.06 | Investiment in
Trading Securities | (684.634) | (573.382) |
| 6.01.02.07 | Redemption of
Trading Securities | 638.419 | 901.152 |
| 6.01.02.08 | Investment in
Available for Sale | (716.583) | (252.331) |
| 6.01.02.09 | Redemptions of
Available for Sale | 612.714 | 304.503 |
| 6.01.02.10 | Other Financial
Assets and Liabilities | 8.582 | 6.239 |
| 6.01.02.11 | Interest
Paid | (121.761) | (206.999) |
| 6.02 | Net Cash Used in
Investing Activities | (275.871) | (163.886) |
| 6.02.02 | Redemptions in
Marketable Securities | 1.956 | 2.068 |
| 6.02.03 | Additions to
Property, Plant and Equipment | (152.178) | (84.917) |
| 6.02.04 | Proceeds from
Disposals of Property, Plant and Equipment | 278 | 2.350 |
| 6.02.06 | Additions to
Intangible | (16.632) | (772) |
| 6.02.07 | Additions to
Biological Assets | (109.295) | (82.615) |
| 6.03 | Net Cash (Used in)
Provided by Financing Activities | 28.024 | (695.076) |
| 6.03.01 | Proceeds from Debt
Issuance | 610.034 | 1.768.315 |
| 6.03.02 | Repayment of
Debt | (372.710) | (2.362.588) |
| 6.03.03 | Interest on
Shareholders' Equity Paid | (209.300) | (100.000) |
| 6.03.04 | Cost of Shares
Issuance | 0 | (803) |
| 6.04 | Effect of Exchange
Rate Variation on Cash and Cash Equivalents | (31.250) | (13.160) |
| 6.05 | Net (Decrease)
Increase in Cash | (216.860) | (623.479) |
| 6.05.01 | At the Beginning
of the Year | 2.310.643 | 1.898.240 |
| 6.05.02 | At the End of the
Year | 2.093.783 | 1.274.761 |

16

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS / Statement of Changes in Shareholders' Equity for the Period from*

*01/01/2011 to 03/31/2011*

*(in thousands of Brazilian Reais)*

| | | | Capital
Reserves, — Granted
Options | | Retained | Other | Total
Parent — Company | Non- | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Account | | Capital | and
Treasury | Profit | earning | Comprehensive | Shareholders' | cotrolling | Shareholders' |
| Code | Account
Description | Stock | Shares | Reserves | (losses) | Income | Equity | Interest | Equity |
| 5.01 | Opening
Balance | 12.460.471 | 68.614 | 1.064.688 | 0 | 35.194 | 13.628.967 | 7.551 | 13.636.518 |
| 5.03 | Opening Balance
Adjustment | 12.460.471 | 68.614 | 1.064.688 | 0 | 35.194 | 13.628.967 | 7.551 | 13.636.518 |
| 5.04 | Share-based
Payments | 0 | 3.323 | | 0 | 0 | 3.323 | 0 | 3.323 |
| 5.04.03 | Options
granted | 0 | 3.272 | 0 | 0 | 0 | 3.272 | 0 | 3.272 |
| 5.04.05 | Treasury
Shares | 0 | 51 | 0 | 0 | 0 | 51 | 0 | 51 |
| 5.05 | Total
Comprehensive Income | 0 | 0 | 0 | 383.468 | (2.841) | 380.627 | 3.099 | 383.726 |
| 5.05.01 | Net Income for the
Year | 0 | 0 | 0 | 383.468 | 0 | 383.468 | 3.277 | 386.745 |
| 5.05.02 | Other
Comprehensive Income | 0 | 0 | 0 | 0 | (2.841) | (2.841) | (178) | (3.019) |
| 5.05.02.01 | Adjustments of
Financial Instruments | 0 | 0 | 0 | 0 | 7.133 | 7.133 | 0 | 7.133 |
| 5.05.02.02 | Tax Adjustments on
Financial Instruments | 0 | 0 | 0 | 0 | (3.419) | (3.419) | 0 | (3.419) |
| 5.05.02.03 | Gain (Loss) in
Foreign Currency Translation Adjustments | 0 | 0 | 0 | 0 | (161) | (161) | (178) | (339) |
| 5.05.02.06 | Unrealized Gain
(Loss) in Available for Sale Marketable Securities | 0 | 0 | 0 | 0 | 2.162 | 2.162 | 0 | 2.162 |
| 5.05.02.07 | Actuarial
Loss | 0 | 0 | 0 | 0 | (8.556) | (8.556) | 0 | (8.556) |
| 5.07 | Closing
Balance | 12.460.471 | 71.937 | 1.064.688 | 383.468 | 32.353 | 14.012.917 | 10.650 | 14.023.567 |

17

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS / Statement of Changes in Shareholders' Equity for the Period from*

*01/01/2010 to 03/31/2010*

*(in thousands of Brazilian Reais)*

| | | | Capital
Reserves, — Granted
Options | | Retained | Other | Total
Parent — Company | Non- | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Account | | Capital | and
Treasury | Profit | earning | Comprehensive | Shareholders' | cotrolling | Shareholders' |
| Code | Account
Description | Stock | Shares | Reserves | (losses) | Income | Equity | Interest | Equity |
| 5.01 | Opening
Balance | 12.461.756 | 35.180 | 727.688 | (186.131) | (47.555) | 12.990.938 | 4.721 | 12.995.659 |
| 5.03 | Opening Balance
Adjustment | 12.461.756 | 35.180 | 727.688 | (186.131) | (47.555) | 12.990.938 | 4.721 | 12.995.659 |
| 5.04 | Share-based
Payments | (803) | 1.413 | 0 | 0 | 0 | 610 | 0 | 610 |
| 5.04.02 | Cost of Shares
Issuance | (803) | 0 | 0 | 0 | 0 | (803) | 0 | (803) |
| 5.04.05 | Treasury
Shares | 0 | 1.413 | 0 | 0 | 0 | 1.413 | 0 | 1.413 |
| 5.05 | Total
Comprehensive Income | 0 | 0 | 0 | 42.644 | 6.891 | 49.535 | (518) | 49.017 |
| 5.05.01 | Net Income for the
Year | 0 | 0 | 0 | 61.119 | 0 | 61.119 | (74) | 61.045 |
| 5.05.02 | Other
Comprehensive Income | 0 | 0 | 0 | (18.475) | 6.891 | (11.584) | (444) | (12.028) |
| 5.05.02.01 | Adjustments of
Financial Instruments | 0 | 0 | 0 | 0 | 4.767 | 4.767 | 0 | 4.767 |
| 5.05.02.02 | Tax Adjustments on
Financial Instruments | 0 | 0 | 0 | 0 | (1.620) | (1.620) | 0 | (1.620) |
| 5.05.02.03 | Gain (Loss) in
Foreign Currency Translation Adjustments | 0 | 0 | 0 | 0 | (5.362) | (5.362) | (444) | (5.806) |
| 5.05.02.06 | Unrealized Gain
(Loss) in Available for Sale Marketable Securities | 0 | 0 | 0 | 0 | 510 | 510 | 0 | 510 |
| 5.05.02.07 | Actuarial
Loss | 0 | 0 | 0 | (18.475) | 8.596 | (9.879) | 0 | (9.879) |
| 5.07 | Closing
Balance | 12.460.953 | 36.593 | 727.688 | (143.487) | (40.664) | 13.041.083 | 4.203 | 13.045.286 |

18

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Consolidated FS / Statement of Value Added*

*(in thousands of Brazilian Reais)*

| | | Accumulated — Current
Year | Accumulated — Previous
Year |
| --- | --- | --- | --- |
| Account | | 01/01/2011
to | 01/01/2010
to |
| Code | Account
Description | 03/31/2011 | 03/31/2010 |
| 7.01 | Revenues | 6.804.475 | 5.716.083 |
| 7.01.01 | Sales of Goods,
Products and Services | 6.726.331 | 5.683.200 |
| 7.01.02 | Other
Income | (29.632) | (34.367) |
| 7.01.03 | Revenue related to
construction of own assets | 115.278 | 73.719 |
| 7.01.04 | Allowance for
doubtful accounts reversal (provisions) | (7.502) | (6.469) |
| 7.02 | Raw Material
Acquired from Third Parties | (4.315.287) | (3.820.161) |
| 7.02.01 | Costs of Products
and Goods Sold | (3.478.396) | (2.864.475) |
| 7.02.02 | Materials, Energy,
Services of Third Parties and Others | (836.415) | (963.263) |
| 7.02.03 | Losses of Assets
Values | (476) | 7.577 |
| 7.03 | Gross Value
Added | 2.489.188 | 1.895.922 |
| 7.04 | Retentions | (220.249) | (179.607) |
| 7.04.01 | Depreciation and
Amortization | (220.249) | (179.607) |
| 7.05 | Net Value
Added | 2.268.939 | 1.716.315 |
| 7.06 | Received from
Third Parties | 159.818 | 394.137 |
| 7.06.01 | Equity on Interest
in Income of Associated Company | 2.075 | 1.907 |
| 7.06.02 | Financial
Income | 157.728 | 392.167 |
| 7.06.03 | Others | 15 | 63 |
| 7.07 | Added Value to be
Distributed | 2.428.757 | 2.110.452 |
| 7.08 | Distrbution of
Value Added | 2.428.757 | 2.110.452 |
| 7.08.01 | Payroll | 829.231 | 715.706 |
| 7.08.01.01 | Salaries | 698.776 | 575.313 |
| 7.08.01.02 | Benefits | 93.098 | 101.960 |
| | Government
Severance Indemnity Fund for employees | | |
| 7.08.01.03 | guarantee fund for
length of service - FGTS | 37.357 | 38.433 |
| 7.08.02 | Taxes and
Contribution | 935.854 | 766.215 |
| 7.08.02.01 | Federal | 604.928 | 456.285 |
| 7.08.02.02 | State | 326.748 | 306.664 |
| 7.08.02.03 | Municipal | 4.178 | 3.266 |
| 7.08.03 | Capital
Remuneration from Third Parties | 276.927 | 567.486 |
| 7.08.03.01 | Interests | 210.952 | 549.298 |
| 7.08.03.02 | Rents | 65.975 | 18.188 |
| 7.08.04 | Interest on Own
Capital | 386.745 | 61.045 |
| 7.08.04.03 | Retained
earnings | 383.468 | 61.119 |
| 7.08.04.04 | Non-controlling
interest | 3.277 | (74) |

19

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

1st Quarter 2011

Dear Shareholders

BRF – Brasil Foods S.A. (BM&FBOVESPA: BRFS3 and NYSE: BRFS) first quarter 2011 financial results reflect a good performance thanks to the efforts at all the company’s business units as well as the capture of synergies which have already been incorporated since the anti-trust authority (CADE) gave us a degree of flexibility.

Net sales reached R$ 6.0 billion, a year-on-year growth of 19.3%, resulting in gross profit of R$ 1.5 billion, 37.4% higher, with a gross margin of 25.7%. EBITDA reached R$ 816.4 million, equivalent to a record EBITDA margin of 13.6%, reflecting a gain of 480 basis points. Net profit was 527.4% higher, amounting to R$ 383.5 million, representing a net margin of 6.4%.

This good operating result for 1Q11 was driven by the following factors: (i) successful strategy for the acquisition of inputs in a trading environment of higher commodity prices, offsetting the specific effects in the quarter, (ii) better management of the Company’s cost and expenses, (iii) continuing capture of synergies in areas authorized by the anti-trust agency and (iv) better performance in the export market, the division which most contributed to the 4.8 percentage point improvement in EBITDA margin.

Demand in the Brazilian market remains positive for food due to the favorable macroeconomic environment which is benefiting growth in the sale of processed products and consequently, improved profitability. Although representing a smaller relative share, the market for in-natura meat also reported a good performance.

On the external front, improved demand was an important factor in restoring profitability to historical levels, also supported by joint operations between BRF and Sadia.

In addition, Fitch Ratings assigned an investment grade rating to BRF, this being instrumental in providing the company with greater opportunity, visibility and ease of investor access and thus confirming the strategic focus of a world class company.

We are leading a new cycle of company growth within the limits laid down by the Transaction Reversibility Preservation Agreement (Apro) while we await a final decision from the Administrative Council for Economic Defense (CADE) on the merger.

20

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

During this transition period, we are continuing to grow in both domestic and export markets with efficiency, gaining in scale and profitability, as well as implementing our long-term strategic plan – BRF 15. In accordance with this strategic plan, we continue alert to the opportunities in the global food market in alignment with our strategy and confident in the world tendency for growth in the demand for our products.

São Paulo, May 2011.

José Antonio do Prado Fay

Chief Executive Officer

Luiz Fernando Furlan Co-Chairman of the Board of Directors Nildemar Secches Co-Chairman of the Board of Directors

21

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

FINANCIAL INFORMATION - 1Q 2011

Net sales totaled R$ 6.0 billion, a growth of 19.3%, result of the good performance reported for both the domestic and export markets.

Sales volumes of meats, dairy products and other processed products amounted 1.4 million tons, 6.2% higher, the domestic market spearheading this demand.

Gross profits amounted to R$ 1.5 billion, a 37.4% increase.

EBITDA reached R$ 816.4 million, an 83.8% higher than the first quarter in 2010, on the back of the good performance in our chosen markets and the incorporation of the first phase in the capture of synergies - this despite the pressure on costs of corn and soybean prices in the period.

Net income was R$ 383.5 million against a result of R$ 61.1 million posted in 1Q10, a reflection of the excellent operational performance.

Financial trading volume in the Company’s shares reached an average of US$ 62.3 million/day for the year, 37% better than 1Q10.

| HIGHLIGHTS - R$
Million | 1Q11 | 1Q10 | % Ch. |
| --- | --- | --- | --- |
| Net
Sales | 6,020 | 5,047 | 19 |
| Domestic
Market | 3,592 | 2,985 | 20 |
| Exports | 2,428 | 2,062 | 18 |
| Gross Sales | 1,546 | 1,125 | 37 |
| Gross
Margin | 25.7% | 22.3% | 340 bps |
| EBIT | 525 | 211 | 149 |
| Net Income | 383 | 61 | 527 |
| Net Margin | 6.4% | 1.2% | 520 bps |
| EBITDA | 816 | 444 | 84 |
| EBITDA
Margin | 13.6% | 8.8% | 480 bps |
| Earnings per
Share (1) | 0.44 | 0.07 | 527 |
| (1) Consolidated
earnings per share (in R$), excluding treasury shares and considering the
split stock (april/2010) | | | |

(The variations commented in this report are comparisons with the 1 st quarter 2011 in relation to the 1 st quarter 2010. Sadia’s results have been incorporated since July 2009. Consequently, all the Company’s results are fully consolidated).

22

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

SECTORAL PERFORMANCE

Global Economy – During 1Q11, the rate of growth in the world economy remained very close to that registered at the end of 2010, driven mainly by emerging market countries. One of the prime concerns during the period was inflation due to energy and foodstuffs costs increase. In this context, the central banks of Europe as well as countries such as China, India, Russia, Brazil and Chile all embarked on a process of monetary tightening.

Exports – Export volumes of Brazilian chicken meat during 1Q11 was 10.7% higher than for the same period last year. Physical shipments of pork and beef were down 2% and 16.6% respectively, on the same comparative basis. Average export prices rose significantly for these three segments (18% for chicken meat, 13% for pork and 39% in the case of beef) when compared with 1Q11 against 1Q10. As a result export revenues were higher than those registered in the first three months of 2010 - 31% for chicken meat, 11% for pork and 16%, beef.

Domestic Economy – Macro-prudential measures adopted by the outgoing government towards the end of 2010 combined with increases in the basic Selic interest rate in the first quarter of this year provoked the first signs of moderation in the rhythm of expansion of the Brazilian economy. The main concern of the new government was also to take steps towards countering high inflation rates driven by commodity prices, monitored prices (urban transportation, principally) and services (education, health, etc). Nevertheless, the consumer confidence index remained at a positive level in March (120.1 according to the São Paulo Commercial Association - ACSP) while the unemployment rate was 6.5% in March this year, below the 7.6% reported in March 2010 and thus keeping consumer optimistic.

Raw Materials – Between January and March 2011, average domestic corn prices were 69% higher than 1Q10, a similar trend being seen in average soybean prices (32%). Both commodities also registered increases of 10% and 1% respectively between 4Q10 and 1Q11, these increases similarly driven by the appreciation in the Real, the rise in oil prices, the tightening in the supply-demand binomial and excessive liquidity due to reduced rates of interest.

23

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

INVESTMENTS AND PROJECTS

Investments during the quarter amounted to R$ 278.1 million and were directed to projects involving improvements, replacements and productivity including investments in breeder stock amounting to R$ 109.3 million. Important to note that investments are currently restricted while a ruling from CADE is pending.

The principal investments involved the units of Santa Catarina, Paraná, Rio Grande do Sul and the Midwest, as well as investments in the logistics and the supply chain.

Hog slaughtering operations under the agreement signed with Cooperativa Coopercampos of Santa Catarina are scheduled to begin in 2Q11 with the focus on pork exports.

Investments – Proforma

1Q11: R$168.8 million

24

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

OPERATING PERFORMANCE

Production

Meat production recorded output 8% higher than the same period in 2010. The dairy product operation posted a growth of 13% and an even greater increase for UHT milk products.

PRODUCTION	1Q11	1Q10	Ch. %
Poultry
Slaughter (million heads)	426	385	11
Pork / Cattle Slaughter (thousand
heads)	2,650	2,526	5
Production (thousand
tons)			-
Meats	1,011	941	8
Dairy
Products	283	251	13
Other Processed
Products	111	107	3
Feed and Premix
(thousand tons)	2,682	2,599	3

Domestic Market

Net sales totaled R$ 3.6 billion, 20.4% higher than in 1Q10. The highlight for the quarter was in processed products which recorded growth of 16.8% with good profitability. The good first quarter performance confirms the capacity of our brands to hold their margins despite sharp increases in costs, principally those of grains. The markets for in-natura products remained strong with healthy margins.

The Company also reported an outstanding result in the Food Services businesses where there was a 28.4% increase in sales in relation to last year, the focus being on the growth in processed products and Global Accounts and above the market as a whole. Such a consistent performance was supported in the domestic market by the increase in disposable incomes and by increased food consumption in the away-from- home segment, driven by demand from the emerging class C population grouping. This performance was reflected in margins sustained at significant levels.

Meats – With sales rising 27.5%, volumes up 10.7% with a good improvement in sales mix and higher average prices, the highlights in this segment were a better processed product mix and an increase in the relative participation of in-natura sales of poultry and pork meats, more especially in the form of special cuts.

Dairy Products – Dairy product volumes were 8.7% higher while sales revenue was up by 16.2% against average prices 6.9% higher. Even though sales performance improved, prices paid by industry to producers pushed costs, and then the margins.

25

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

Other processed products – With sales 1.2% up and volumes down 6.7%, the other processed products segment turned in an adequate performance, principally in the case of pastas, pizzas and margarines.

| Domestic Market | THOUSAND
TONS — 1Q11 | 1Q10 | Ch. % | 1Q11 | R$ MILLION — 1Q10 | Ch. % |
| --- | --- | --- | --- | --- | --- | --- |
| Meats | 456 | 412 | 11 | 2,360 | 1,850 | 28 |
| In Natura | 102 | 83 | 23 | 546 | 362 | 51 |
| Poultry | 68 | 49 | 38 | 331 | 185 | 78 |
| Pork/Beef | 34 | 33 | 1 | 215 | 177 | 21 |
| Elaborated/Processed
(meats) | 355 | 330 | 8 | 1,814 | 1,488 | 22 |
| Dairy
Products | 280 | 257 | 9 | 628 | 540 | 16 |
| Milk | 226 | 207 | 10 | 432 | 370 | 17 |
| Dairy
Products/Juice/Others | 53 | 51 | 5 | 196 | 171 | 15 |
| Other
Processed | 100 | 108 | (7) | 471 | 466 | 1 |
| Soybean Products/
Others | 143 | 92 | 56 | 133 | 129 | 4 |
| Total | 980 | 869 | 13 | 3,592 | 2,985 | 20 |
| Processed | 508 | 488 | 4 | 2,481 | 2,124 | 17 |
| % Total
Sales | 52 | 56 | | 69 | 71 | |

Market Share - %

By Volume

| * A methodological change was made in the
AC Nielsen database in 2010 preventing comparison with the historical
data. |
| --- |
| Source: AC
Nielsen |

26

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

Marketing – The campaign run to broaden the Sadia brand’s international footprint among Brazilian consumers was very well accepted, serving to further consolidate the name. The Perdigão brand’s “One heart only” campaign gives the opportunity for corporate areas to relate directly with the client. The Batavo brand launched its refrigerator award campaign jointly with the launch of various dairy product lines, especially the Naturis line.

Exports

The international operation reported an excellent recovery in performance in 1Q11, despite the substantial increase in costs and the appreciation in the Real against the US dollar. Measures were taken in the direction of introducing more robust internal measures based on the structuring of an initiative for standardizing all the overseas offices and operations.

Export revenue increased 17.7%, to R$ 2.4 billion on a volume of 549.9 thousand tons (up 4%).

Meats – World demand for protein continued intense during 1Q11, largely due to the gradual recovery in the leading economies and the increasing importance of emerging powers such as China and South Africa. During the period, there were some shortfalls in production in several producing countries which further strengthened demand for Brazilian meat. As a result, and in spite of unfavorable exchange rates and grain prices, the Company was successfully able to implement its principal commercial initiatives, ensuring above expected returns.

Meat exports reached R$ 2.4 billion, 18.3% greater, with volumes 3.7% up on the year and average prices 14% more in Reais. In the food service segment, global accounts reported growth in consumption in such markets as the Middle East and Japan.

| EXPORTS | THOUSAND
TONS — 1Q11 | 1Q10 | Ch. % | R$ MILLION — 1Q11 | 1Q10 | Ch. % |
| --- | --- | --- | --- | --- | --- | --- |
| Meats | 546 | 527 | 4 | 2,416 | 2,043 | 18 |
| In Natura | 471 | 443 | 6 | 2,023 | 1,645 | 23 |
| Poultry | 409 | 376 | 9 | 1,664 | 1,305 | 27 |
| Pork/Beef | 62 | 67 | (7) | 359 | 340 | 6 |
| Elaborated/Processed
(meats) | 76 | 84 | (10) | 394 | 398 | (1) |
| Dairy
Products | 0 | 1 | - | 0 | 5 | - |
| Milk | 0 | 0 | - | 0 | 1 | - |
| Dairy
Products/Juice/Others | 0 | 1 | - | 0 | 4 | - |
| Other
Processed | 4 | 1 | 239 | 12 | 15 | (17) |
| Total | 550 | 529 | 4 | 2,428 | 2,063 | 18 |
| Processed | 79 | 85 | (7) | 406 | 417 | (3) |
| % Total
Sales | 14 | 16 | | 17 | 20 | |

27

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

During the quarter the leading markets performed as follows:

Europe – Just as in Brazil, grain costs are affecting European production (and consequently an increase in local product prices). This to a degree favors our activity in this market by allowing a consistent increase in prices. Since the beginning of the year, the focus has been on the qualification of the portfolio and the improvement in services rendered to our clients in the Industry segment. Results at Plusfood were satisfactory with market repositioning and management reorganization.

Middle East – The political situation in the region following the outbreak of several internal insurrections recommended some precaution although we have experienced no significant problems of an operational nature with our clients. Inventory in the region has been in equilibrium since 2H10 and demand strong and expected to be especially the case as from 2Q11 due to shipments to supply the Ramadan period when traditionally consumption rises. It is worth pointing out that among the specific objectives in the region, the Company is seeking to increasingly consolidate its brands, upgrade activities as a local distributor and continually improve our Halal slaughtering practices, fundamental if we are to export to Islamic countries.

Far East – BRF’s Rio Verde-GO industrial unit was approved for exports of pork to China, the largest market in the world for this meat, and the plant is now awaiting the appropriate certification. Additionally, our business in the Japanese market was unaffected in the period in spite of all the problems in the aftermath of the earthquake and tsunami.

Eurasia – Efforts are being channeled towards consolidating local distribution, increasing the participation of elaborated products in line with the Company’s general guideline for adding value in each chosen market. The issue of Russian trade embargoes on some processing plants could reduce the profitability of this market in 2Q11.

Africa, Americas and other countries – The Company has made an effort to adjust its product portfolio to the needs of this market, also endeavoring to find solutions for developing the sale of accessible processed products. The development of closer relations with the leading distributors in the region has also been pursued relentlessly by the Johannesburg office. In the Americas, BRF is standardizing all operational procedures of its proprietary distribution operations (Argentina, Uruguay, Chile and Peru), so reinforcing the current distribution model.

28

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

Exports by Region

(% net export revenue)

29

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

ECONOMIC AND FINANCIAL PERFORMANCE

Net Sales – With a growth of 19%, net sales reached R$ 6.0 billion in the quarter, driven by good domestic market performance and by exports.

Breakdown in Net Sales – (%)

Net operating revenue by market – (%)

Cost of Sales – Selling costs increased 14.1% to R$ 4.5 billion and less than the growth in revenue thanks to the successful strategy of acquiring inputs – thereby offsetting the impacts of raw material costs on results – improvement in the management of costs and expenses in addition to the synergies captured in areas permitted by the anti-trust authority, especially in the supply chain.

30

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

Gross Profit and Gross Margin – Gross Profit totaled R$ 1.5 billion, 37% more than 1Q10, reflecting a gain of 340 basis points in operating margin from 22.3% to 25.7% of Net Sales.

These results were possible thanks to an improvement in operating performance, principally in the export market and from gains in synergy – mitigating cost pressure from commodities.

Operating Expenses – Operating expenses before other results and equity income were 9.8% greater – representing a reduction from 17.0% to 15.6% of Net Sales.

Selling expenses totaled R$ 854.9 million, an increase of 140 basis points. In spite of the 20.5% increase in fixed expenses, variable expenses fell 2.7% following negotiations involving maritime transportation.

On the other hand, administrative expenses registered R$ 84.1 million, a year-on-year increase of 25.2% reflecting operating expenses with the implementation of IT systems, payment of consultancies for merger and due to necessary adjustments in structure in accordance with company requirements.

Other Operating Results – The amount of R$ 83.6 million for other operating results against the R$ 60.6 million in the preceding year reflects principally costs of idle capacity and due to the pre-operational phase of the new industrial units in Bom Conselho-PE, Lucas do Rio Verde-MT, Mineiros-GO and Três de Maio-RS. Additionally, profit sharing overheads are included in this account in line with IFRS requirements.

Operating Profit and Margin – The operating result was R$ 525.0 million against R$ 210.6 million in the same period in 2010, a 149.3% improvement on the back of the excellent performance recorded. As a percentage of Net Sales, the Company posted a margin of 8.7% against 4.2% in 1Q10.

Financial – Financial expenses amounted to R$ 52.3 million against R$ 151.8 million, a decline of 65.5% due to the lengthening of short-term debt and corresponding to an average reduction in interest rates as well as a function of results obtained from wholly-owned subsidiaries. Significant reductions in net currency exposure have been possible thanks to the use of non-derivative instruments (currency denominated debt) for foreign exchange protection in line with hedge accounting standards, generating substantial benefits through the matching of currency liabilities with export shipments. As a result of this process, there has been a reduction in the volatility of financial expenses on a monthly basis. BRF’s net debt registered a increase from R$ 3.6 billion to R$ 3.8 billion.

31

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

Debt Profile

| DEBT - R$
MILLION | CURRENT | 03.31.2011 — NONCURRENT | TOTAL | 03.31.2010 — TOTAL | % Ch. |
| --- | --- | --- | --- | --- | --- |
| Local
Currency | 1,555 | 1,544 | 3,099 | 3,216 | (4) |
| Foreing
Currency | 683 | 3,543 | 4,226 | 3,970 | 6 |
| Gross Debt | 2,238 | 5,087 | 7,325 | 7,187 | 2 |
| Cash
Investments | | | | | |
| Local
Currency | 1,048 | 64 | 1,113 | 1,059 | 5 |
| Foreing
Currency | 2,272 | 127 | 2,399 | 2,493 | (4) |
| Total Cash
Investments | 3,320 | 191 | 3,511 | 3,552 | (1) |
| Net Accounting
Debt | (1,082) | 4,896 | 3,814 | 3,634 | 5 |
| Exchange
Rate Exposure - US$ Million | | | (158) | 76 | - |

Income Tax and Social Contribution – Quarterly income tax and social contribution totaled R$ 86 million, representing 18.2% of the corporate tax base. In 1Q10, income tax and social contribution corresponded to a positive R$ 2.3 million due to weaker results posted for that period in the light of export market conditions.

Net Income and Net Margin – Net income of R$ 383.5 million was 527.4% higher, principally due to the results from both domestic and export markets as well as the capture and implementation of synergies with the accompanying reduction in costs and expenses.

EBITDA – Operating profits in the form of EBITDA (earnings before financial expenses, taxes and depreciations) was R$ 816.4 million, 83.8% higher. This increase in the profitability from operations is a reflection of good domestic market performance, an improving international market and the capture of synergies which accounted for a net R$ 62 million in 1Q11.

With this improvement in performance, the Company was able to report an increase of 480 basis points in the EBITDA margin from 8.8% to 13.6% in the quarter, 102 basis points of this corresponding to synergies achieved in 1Q11.

32

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

Breakdown of Ebitda

EBITDA - R$ Million	1Q11	1Q10	% Ch.
Net Income	383	61	527
Non Controlling
Shareholders	3	(0)	-
Income Tax and Social
Contribution	86	(2)	-
Net Financial	52	152	(66)
Equity Accounting and Other
Operating Result	71	53	34
Depreciation and
Amortization	220	180	22
=
EBITDA	816	444	84

Quarterly EBITDA – R$ million

Shareholders’ Equity – Shareholders’ Equity as at March 31 2011 was R$ 14.0 billion against R$ 13.6 billion on December 31 2010, a 2.8% increase and reflecting in an 11.2% return on annualized investment.

Combination of the Businesses – The accounting and fiscal treatment given to the association agreement was measured in line with the prevailing practices with allocation either to fixed assets or long-term assets, under the “Intangible” item and to be subject to annual evaluation using the impairment test (non- recoverability).

IFRS – BRF has adapted its procedures in full for evaluation of balance sheet items, changes in requirements for disclosure of information, and analysis of the economic essence of the transition to IFRS rules, in accordance with Brazilian accounting pronouncements – CPCs

33

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

34

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

STOCK MARKET

	Performance	1Q11	1Q10
●	Share price - R$*	30.83	23.95
	Traded Shares (Volume) -
Millions	132.9	148.5
	Performance	12.8%	5.6%
	Bovespa Index	(1.0%)	2.6%
	IGC (Brazil Corp. Gov.
Index)	(1.1%)	2.4%
	ISE (Corp.
Sustainability Index)	4.7%	0.7%
●	Share price - US$*	19.09	13.74
	Traded Shares (Volume) -
Millions	88.7	65.0
	Performance	13.1%	4.9%
	Dow Jones
Index	6.4%	4.1%
	*
Closing Price

Performance

The Company’s shares and ADRs outperformed the leading stock indices, the shares reporting a growth of 12.8% and the ADRs, 13%. The average daily financial volume traded on the BMF&Bovespa and the NYSE – New York Stock Exchange amounted to US$ 62.3 million in the quarter, equivalent to a 37% increase.

35

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

Share Performance

ADR Performance

36

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

| Financial Traded Volume –
1Q11 |
| --- |
| Average US$ 62.3 million /day – 37% higher |

Stock Split – The Annual and Extraordinary General Shareholders’ Meeting of March 31 2010 approved a stock split in the proportion of 100% with the issue of 1 new share for each existing share. The meeting also approved the change in the ADR (American Depositary Receipts) program, adjusting these securities on the same proportional basis, one share corresponding to one ADR.

37

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

SOCIAL BALANCE

Social Balance

BRF has a labor force of more than one hundred thousand working in the productive and commercial units and corporate divisions. The Company seeks to provide the most appropriate and safe occupational conditions for its employees through Safety, Health and Environment Management programs (SSMA) and career development schemes. We are also constantly pursuing a process of improvements in the quality of life of people as well as running several social outreach programs for the benefit of the communities in which we operate.

Stock Option Plan – Currently, the Company has 1,576,911 (one million, five hundred and seventy-six thousand, nine hundred and eleven) stock options granted to 35 executives with a maximum exercising validity of five years as established in the Compensation Plan Regulations approved by the AGM/EGM of March 31 2010.

Added Value – R$ million

| Added Value
Distribution | 1Q11 | 1Q10 | %Ch. |
| --- | --- | --- | --- |
| Human Resources | 829 | 716 | 16 |
| Taxes | 936 | 766 | 22 |
| Interest | 277 | 567 | (51) |
| Retention | 383 | 61 | 527 |
| Non-controlling
shareholders | 3 | (0) | - |
| Total | 2,429 | 2,110 | 15 |

38

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

CORPORATE GOVERNANCE

Rating – On April 6 2011, Fitch Ratings assigned a BBB- rating to BRF - Brasil Foods with a stable outlook. The classification of the rating of BRF as investment grade will allow greater opportunity, visibility and ease of access for investors, confirming the strategic focus of a world class company.

BRF also received revised ratings assigned by Standard & Poor´s (BB+) and Moody’s (Ba1) with a stable to positive Outlook.

Diffuse Control – Equal Rights

As at April 30 2011

Capital Stock – R$ 12.6 billion Number of Shares – 872,473,246

Management – On April 29 2011, the members of the Board of Directors were elected for a period of two years at the Annual and Extraordinary General Meeting at which shareholders representing 71.61% of the capital stock were represented. The meeting was held at the Company’s head office in Itajaí-SC and was transmitted to investors at the corporate offices in São Paulo. In addition to the election of the Board of Directors, the shareholders approved the Financial Statements for 2010 and elected the Fiscal Council/Audit Committee. The meeting was convened 30 days prior to the event, a Participation Instructions Manual being provided in addition to the other documentation pertinent to shareholders’ decisions.

39

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

Novo Mercado - BRF signed up to the BM&FBovespa’s Novo Mercado on April 12 2006 binding it to settle disputes through the Arbitration Panel according to the arbitration clause written into its bylaws and regulations.

Risk Management - BRF and its subsidiaries adopt a series of previously structured measures for maintaining the risks inherent to its businesses under rigorous control, details of which are shown in explanatory note 4 of the Financial Statements. Risks involving the markets in which the Company operates, sanitary controls, grains, nutritional safety and environmental protection, as well as internal controls and financial risks are all monitored.

Independent Audit – No disbursements of consultancy fees were made to the independent auditors during the period. The engagement of these services requires prior Board approval and adheres to the rules and restrictions established by the legislation, conditional on this not undermining the independence and objectivity of our auditors. The Company’s financial information shown herein is in accordance with accounting practices adopted in Brazil and is an integral part of the audited financial statements. Non-financial information as well as other operating information has not been subject to auditing on the part of our independent auditors.

Pursuant to CVM Instruction 480/09 at a meeting on May 13, 2011, the Board of Executive Officers declares it has discussed, reviewed and agreed both the opinions expressed in the report of the independent auditors and also the financial statements for the quarter ending on March 31 2011.

CADE - The Association Agreement has been submitted for the examination of the Administrative Council for Economic Defense – CADE. During the period in which the Brazilian anti-trust authorities are examining the Agreement, BRF and Sadia may be subject to certain specific commitments agreed with these authorities and designed to maintain the status quo in market conditions.

40

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

ATTACHMENT I

Balance Sheet - R$ Million	03.31.2011	12.31.2010	Ch. %
Assets	27,895	27,751	0.5
Current
Assets	10,226	10,021	2.1
Cash
Equivalents	2,094	2,311	(9.4)
Financial
Applications	1,226	1,032	18.8
Trade Accounts
Receivable	2,402	2,607	(7.8)
Inventories	2,418	2,136	13.2
Biological
Assets	972	901	7.9
Taxes
Recoverable	728	696	4.6
Prepaid
Expenses	21	17	26.4
Others Noncurrent
Assets	365	322	13.5
Noncurrent
Assets	17,669	17,730	(0.3)
Long Term
Assets	4,302	4,399	(2.2)
Investments	20	17	14.3
Property, Plant and
Equipment	9,105	9,066	0.4
Intangible	4,242	4,247	(0.1)
Liabilities	27,895	27,751	0.5
Current
Liabilities	5,470	5,686	(3.8)
Payroll and related
charges	127	133	(4.4)
Trade Accounts
Payable	2,039	2,059	(1.0)
Tax Payable	171	211	(18.8)
Short- Term
Debt	2,246	2,228	0.8
Other Current
Liabilities	450	736	(38.8)
Provisions	437	319	36.8
Non- Current
Liabilities	8,402	8,429	(0.3)
Short- Term
Debt	5,087	4,975	2.2
Other Non- Current
Liabilities	458	490	(6.5)
Deferred Income
Tax	1,675	1,636	2.4
Provisions	1,182	1,328	(11.0)
Shareholders'
Equity	14,023	13,636	2.8
Capital Stock
Restated	12,460	12,460	-
Reserves/Accumulated
earnings	1,520	1,134	34.0
Other
Results	32	35	(6.2)
Treasury
Shares	(1)	(1)	(3.4)
Non Controlling
Shareholders	11	8	41.0

41

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Management* Report / Comments on the Performance****

ATTACHMENT II

Income Statement - R$ Million	1Q11	1Q10	Ch. %
Net Sales	6,020	5,047	19
Domestic Market	3,592	2,984	20
Exports	2,428	2,062	18
Cost of Sales	(4,475)	(3,923)	14
Gross
Profit	1,546	1,125	37
Operating Expenses	(1,021)	(915)	12
Sales	(855)	(788)	8
General and
administrative	(84)	(67)	25
Other Operating
Results	(84)	(61)	38
Equity Accounting	2	2	9
Financial Expenses,
net	(52)	(152)	(66)
Income Before Financial Exp.
and Other Results	472	58	710
Income Tax and Social
Contribution	(86)	2	-
Non-Controlling
shareholders	(3)	0	-
Net Income	383	61	531
EBITDA	816	444	84

42

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

1. COMPANY’S OPERATIONS

Founded in 1934, in the State of Santa Catarina, BRF – Brasil Foods S.A. (“BRF”), formerly known as Perdigão S.A., and its subsidiaries (collectively “Company”) is one of Brazil’s largest companies in the food industry. With a focus on raising, producing and slaughtering of poultry, pork and beef, processing and/or sale of fresh meat, processed products, milk and dairy products, pasta, frozen vegetables and soybean derivatives, among which the following are highlighted:

• Frozen whole chicken and chicken, turkey, pork and beef cuts;
• Ham products, sausages, bologna, frankfurters and other smoked products;
• Hamburgers, breaded meat products, kibes and meatballs;
• Lasagnas, pizzas, vegetables, cheese breads, pies and frozen pastries;
• Milk, dairy products and desserts;
• Juices, soy milk and soy juices;
• Margarine; and
• Soy meal and refined soy flour, as well as animal feed.

The Company's activities are segregated into two operating segments, domestic and foreign markets.

Currently, the Company operates 44 meat processing plants, 15 milk and dairy products processing plants, 3 margarine processing plants, 4 pasta processing plants, 1 dessert processing plant, and 1 soybean crushing plant, all of them located near to the Company’s raw material suppliers or to the main consumer centers. In the foreign market, the Company has subsidiaries in the United Kingdom, Italy, Austria, Hungary, Japan, The Netherlands, Russia, Singapore and United Arab Emirates, Portugal, France, Germany, Turkey, China, Cayman Islands, Venezuela, Uruguay, Chile and 1 cheese processing plant in Argentina.

The wholly-owned subsidiary Plusfood Groep B.V. operates 2 meat processing plants located in the United Kingdom and The Netherlands.

The table below summarizes the direct and indirect ownership interests of the Company, as well as the activities in which these companies are engaged to:

43

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

1.1. Interest in subsidiaries

| Subsidiary | Main
activity | Country | 03.31.11 | 12.31.10 |
| --- | --- | --- | --- | --- |
| PSA Laboratório
Veterinário Ltda. | Veterinary
activities | Brazil | 88.00% | 88.00% |
| Sino dos Alpes Alimentos Ltda. | Industrialization
and commercialization of products | Brazil | 99.99% | 99.99% |
| PDF Participações
Ltda | Holding | Brazil | 1.00% | 1.00% |
| Sino dos Alpes Alimentos Ltda | Industrialization
and commercialization of products | Brazil | 0.01% | 0.01% |
| Vip S.A.
Emp.Part.Imobiliárias | Commercialization
of ow n ned real estate | Brazil | 65.49% | 65.49% |
| Estab. Levino Zaccardi y Cia. S.A. | Processing of
dairy products | Argentine | 10.00% | 10.00% |
| Avipal S.A.
Construtora e Incorporadora (a) | Construction and
real estate marketing | Brazil | 100.00% | 100.00% |
| Avipal
Centro-oeste S.A. (a) | Industrialization
and commercialization of dairy products | Brazil | 100.00% | 100.00% |
| Estab. Levino
Zaccardi y Cia. S.A. | Processing of
dairy products | Argentine | 90.00% | 90.00% |
| UP! Alimentos
Ltda | Industrialization
and commercialization of products | Brazil | 50.00% | 50.00% |
| Perdigão Trading
S.A. (a) | Holding | Brazil | 100.00% | 100.00% |
| PSA Laboratório Veterinário Ltda | Veterinary
activities | Brazil | 12.00% | 12.00% |
| PDF Participações Ltda | Holding | Brazil | 99.00% | 99.00% |
| Perdigão Export
Ltd. (a) | Import and export
of products | Cayman
Island | 100.00% | 100.00% |
| Crossban Holdings
GmbH | Holding | Áustria | 100.00% | 100.00% |
| Perdigão Europe Ltd | Import and export
of products | Portugal | 100.00% | 100.00% |
| Perdigão International Ltd | Import and export
of products | Cayman
Island | 100.00% | 100.00% |
| BFF International Ltd | Unrestricted
activities | Cayman
Island | 100.00% | 100.00% |
| Highline International (a) | Unrestricted
activities | Cayman
Island | 100.00% | 100.00% |
| Perdigão UK Ltd | Marketing and
logistics services | United
Kingdom | 100.00% | 100.00% |
| Plusfood Germany GmbH | Import and export
of products | Germany | 100.00% | 100.00% |
| Perdigão France SARL | Import and export
of products | France | 100.00% | 100.00% |
| Perdigão Holland B.V. | Administrative
services | The
Netherlands | 100.00% | 100.00% |
| Plusfood Groep B.V. | Holding | The
Netherlands | 100.00% | 100.00% |
| Plusfood
B.V. | Import and export
of products | The
Netherlands | 100.00% | 100.00% |
| Plusfood Wrexham | Import and export
of products | United
Kingdom | 100.00% | 100.00% |
| Plusfood Finance UK Ltd | Financial
fund-raising | United
Kingdom | 100.00% | 100.00% |
| Plusfood Iberia SL | Distribution of
food products | Spain | 100.00% | 100.00% |
| Plusfood Italy SRL | Import and export
of products | Italy | 67.00% | 67.00% |
| BRF Brasil Foods Japan KK | Import and export
of products | Japan | 100.00% | 100.00% |
| Brasil Foods PTE Ltd. | Marketing and
logistics services | Singapore | 100.00% | 100.00% |
| Plusfood Hungary Trade and Service LLC. | Import and export
of products | Hungary | 100.00% | 100.00% |
| Plusfood UK Ltd | Marketing and
logistics services | United
Kingdom | 100.00% | 100.00% |
| Acheron Beteiligung-sverwaltung GmbH (b) | Holding | Áustria | 100.00% | 100.00% |
| Xamol Consul. Serv. Ltda (a) | Import and export
of products | Portugal | 100.00% | 100.00% |
| Sadia
S.A. | Industrialization
and commercialization of products | Brazil | 100.00% | 100.00% |
| Sadia International Ltd. | Import and export
of products | Cayman
Island | 100.00% | 100.00% |
| Sadia Uruguay S.A. | Import and export
of products | Uruguay | 100.00% | 100.00% |
| Sadia Alimentos
S.A. | Import and export
of products | Argentine | 5.00% | 5.00% |
| Sadia Chile S.A. | Import and export
of products | Chile | 60.00% | 60.00% |
| Sadia Alimentos S.A. | Import and export
of products | Argentine | 95.00% | 95.00% |
| Sadia U. K. Ltd. | Commercialization
of real estate and others | United
Kingdom | 100.00% | 100.00% |
| Concórdia Foods Ltd. | Commercialization
of real estate and others | United
Kingdom | 100.00% | 100.00% |
| Vip S.A. Emp.Part.Imobiliárias | Commercialization
of real estate and others | Brazil | 34.51% | 34.51% |
| Estelar Participações Ltda (a) | Holding | Brazil | 99.90% | 99.90% |
| Sadia Industrial Ltda. | Industrialization
and commercialization of commodities | Brazil | 99.90% | 99.90% |
| Estelar Participações Ltda (a) | Holding | Brazil | 0.10% | 0.10% |
| Sadia Overseas Ltd. | Financial
fund-raising | Cayman
Island | 100.00% | 100.00% |
| Sadia GmbH | Holding | Áustria | 100.00% | 100.00% |
| Wellax Food Logistics C.P.A.S.U. Lda. | Import and export
of products | Portugal | 100.00% | 100.00% |
| Sadia Foods GmbH | Import and export
of products | Germany | 100.00% | 100.00% |
| BRF Foods Limitd Liability Company | Import and export
of products | Russia | 10.00% | 10.00% |
| Qualy B. V. (b) | Import and export
of products | The
Netherlands | 100.00% | 100.00% |
| Sadia Japan KK. | Import and export
of products | Japan | 100.00% | 100.00% |
| Badi Ltd. | Import and export
of products | Arab
Emirates | 100.00% | 100.00% |
| AL-Wafi | Import and export
of products | Saudi
Arab | 75.00% | 75.00% |
| BRF Foods Limitd Liability Company | Import and export
of products | Russia | 90.00% | 90.00% |
| Baumhardt Comércio e Participações Ltda. | Consulting | Brazil | 73.94% | 73.94% |
| Excelsior Alimentos S.A. | Slaughterhouse for
pork | Brazil | 25.10% | 25.10% |
| Excelsior Alimentos S.A. | Slaughterhouse for
pork | Brazil | 46.01% | 46.01% |
| K&S Alimentos S.A. | Industrialization
and commercialization of products | Brazil | 49.00% | 49.00% |

44

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

(a) Dormant subsidiaries.

(b) The wholly-owned subsidiary Acheron Beteiligung-sverwaltung GmbH owns 100 direct subsidiaries in Madeira Island, Portugal, with an investment of R$1,876 (R$616 on December 31, 2010), and the wholly-owned subsidiary Qualy B.V. owns 48 subsidiaries in the Netherlands, and the amount of this investment, as of March 31, 2011, is represented by a net capital deficiency of R$10,084 (R$8,913 on December 31, 2010), the purpose of these two subsidiaries is to operate in the European market to increase the Company’s share of this market, which is regulated by a system of poultry and turkey import quotas.

The Company has an advanced distribution system and uses 38 distribution centers, delivering its products to supermarkets, retail stores, wholesalers, food service stores and other institutional customers of the domestic market and exporting to more than 145 countries.

The BRF has a large number of brands, the principal of which are: Batavo, Claybon, Chester®, Confiança, Delicata, Doriana, Elegê, Fazenda, Nabrasa, Perdigão, Perdix, in addition to licensed brands such as Turma da Mônica. The main brands of the subsidiary Sadia are: Fiesta, Hot Pocket, Miss Daisy, Nuggets, Qualy, Rezende, Sadia, Speciale Sadia, Texas and Wilson.

The business combination with Sadia occurred on July 8, 2009 is still being reviewed by the Administrative Council for Economic Defense (“CADE"). On July 7, 2009, the Management of the Company and of Sadia entered into a Transaction Reversibility Preservation Agreement ("APRO") for the purpose of ensuring the reversibility of the operation until the final decision to be stated by CADE, by means of actions that maintain the competition during the assessment of the competitive effects of the merger. The results of Sadia were consolidated as from the date of the merger.

The quarterly information for the three month period ended on March 11, 2011 does not reflect impacts on possible corporate reorganizations, which can only be assessed after the approval by CADE.

1.2. Seasonality

The Company does not operate with any significant seasonality impact through the fiscal year. In general, during the fourth quarter the demand in the domestic market is slightly stronger than in the other quarters, mainly due to the year-end celebration such as Christmas and New Years Eve. The most sold products are: turkey, Chester® and ham.

45

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

2. MANAGEMENT’ STATEMENT AND BASIS OF PREPARATION AND PRESENTATION OF THE QUARTERLY FINANCIAL INFORMATION

The Company’s quarterly financial information are in accordance with the accounting practices adopted in Brazil which comprise the rules issued by the Brazilian Securities Commission (“CVM”) and the pronouncements and interpretations of the Brazilian Accounting Pronouncements Committee (“CPC”), which are in conformity with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”).

The Company’s individual quarterly financial information has been prepared in accordance with the accounting practices adopted in Brazil and for presentation purposes, are identified as (“BR GAAP”). Such quarterly financial information differs from IFRS in relation to the evaluation of investments in associates and joint ventures, which were measured and recorded based on the equity accounting method rather than at cost or fair value, as is required by IFRSs.

The Company’s individual and consolidated quarterly financial information, are expressed in thousands of Brazilian Reais, as well as, the amount of other currencies disclosed in the quarterly financial information, when applicable, were also expressed in thousands.

The preparation of the Company’s quarterly financial information requires Management to make judgments, use estimates and adopt assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, as well as the disclosures of contingent liabilities, as of the reporting date. However, the uncertainty inherent to these judgments, assumptions and estimates could lead to results requiring a material adjustment to carrying amount of the affected asset or liability in future periods.

The settlement of the transactions involving these estimates can result in amounts that significantly differ from those recorded in the quarterly financial information due to the lack of precision inherent to the estimation process. The Company reviews its judgments, estimates and assumptions on a quarterly basis.

The quarterly financial information was prepared based on the historical cost except for the following material items recognized in the balance sheet:

· derivative financial instruments measured at fair value;

· derivative financial instruments measured at fair value through the statement of income ;

· financial assets available for sale measured at fair value; and

46

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

· assets and liabilities of acquired companies from January 1, 2009 recorded initially at fair value.

3. SUMMARY OF ACCOUNTING PRACTICES

The quarterly financial information was prepared according to CVM Deliberation No. 581/09, which establishes the minimum content of interim financial statements and the principles for measurement and recognition of full set or condensed financial statements for an interim period.

The interim financial statements, in this case denominated as quarterly financial information, is aiming to provide updated information based on the last annual financial statements disclosed. Therefore, the quarterly financial information is focused on new activities, events and circumstances and do not duplicate the information previously disclosed, except in the case where Management judged that the maintenance of the information was relevant.

The current quarterly financial information was consistently prepared based on the accounting policies and estimates calculation methodology adopted in the preparation of the annual financial statements for the year ended December 31, 2010 (note 4). There were no changes of any nature related to such policies and estimates calculation methodology. As allowed by CVM Deliberation No. 581/09, Management decided not to disclose again the details of the accounting policies adopted by the Company, hence, it is necessary the reading of the quarterly financial information together with the annual financial statements for the year ended December 31, 2010, in order to allow the quarterly financial information users to enlarge its understanding regarding the Company’s capacity of profit and future cash flows generation as well as its financial conditions and liquidity.

4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

4.1. Overview

In the normal course of its business, the Company is exposed to market risks related mainly to the fluctuation of interest rates, foreign exchange rates and commodity prices. The Company utilizes hedging instruments to mitigate its exposure to these risks, based on a Financial Risk Management Policy (“Risk Policy”) under the management of the Financial Risk Management Committee, Board of Executive Officers and Board of Directors.

47

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

The Company has policies and procedures to manage such exposures and can use hedging instruments, provided they are approved by the Board of Directors, in order to reduce the impacts of these risks.

The Policy does not authorize the Company to contract leveraged transactions in derivative markets, and determines that individual hedge operations (notional) must be limited to 2.5% of the Company’s shareholders’ equity.

Considering the objective of hedging transactions to mitigate the risks and the uncertainties to which the Company is exposed, the results obtained in the three period ended on March 31, 2011 met the established objectives.

In the annual financial statements for the year ended December 31, 2010, Management provided the details about the workflow of the Risk Policy (note 5), which has not been changed during the three month period ended March 31, 2011, therefore, in the quarterly financial information and, therefore, only the balance sheet and statement of income figures of the financial instruments hired are presented.

4.2. Interest rate risk management

The interest rate risk is the risk of the Company suffering economic losses due to adverse changes in the interest rates.

The Company’s Risk Policy does not restrict exposure to the different interest rates and does not establish limits between fixed and floating rates either.

The Company’s indebtedness is essentially tied to the London Interbank Offered Rate (“LIBOR”), fixed coupon (Brazilian Reais e U.S. Dollars), Long Term Interest Rate (“TJLP”) and Brazilian National Development Bank Monetary Unit (“UMBNDES”) rates. In the event of adverse changes in the market that result in LIBOR hikes, the cost of the floating indebtedness rises and on the other hand, the cost of the fixed indebtedness decreases in relative terms. The same consideration is applicable to the TJLP.

Regarding to the Company's marketable securities investments, the main index is the Interbank Deposit Certificate (“CDI”) for investments in the domestic market and fixed coupon for investments in the foreign market.

The results obtained in relation to the objectives proposed by the Company concerning exposure to interest rates were attained in the three month period ended on March 31, 2011.

48

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.3. Foreign exchange risk management

Foreign exchange risk is the risk of fluctuations of foreign currency exchange rates causing the Company to incur unexpected losses, leading to a reduction of the values of assets or an increase of the amounts of obligations. The main exposures, to which the Company is subject, as regards foreign exchange variations, refer to the fluctuation of the U.S. Dollar (“US$” or “USD”) and also of the Euro and of the British Pound in relation to the Brazilian Real.

4.3.1. Breakdown of the balances of exposure in foreign currency

Foreign currency denominated assets and liabilities are shown as follows:

| | BR GAAP — Parent
company | | BR GAAP and
IFRS | Consolidated |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Cash and cash
equivalents and marketable securities | 93,047 | 166,691 | 2,398,571 | 2,493,006 |
| Trade accounts
receivable - third parties | 75,926 | 65,869 | 1,024,795 | 951,041 |
| Accounts
receivable from subsidiaries | 173,979 | 186,752 | 196 | - |
| Dollar futures
agreements | 139,442 | 121,336 | 139,442 | 121,336 |
| Inventory | 2,143 | 3,526 | 78,398 | 100,912 |
| Forward contracts
(NDF) (a) | - | - | (235,195) | (241,738) |
| Loans and
financing | (968,801) | (863,737) | (4,234,244) | (4,016,076) |
| Pre-payment
exports designated as hedge accounting | 749,952 | 803,955 | 749,952 | 803,955 |
| Trade accounts
payable | (33,821) | (37,704) | (134,161) | (105,817) |
| Advance
pre-payment from subsidiaries | (762,993) | (560,695) | - | - |
| Other operating
assets and liabilities, net | 1,359 | 1,433 | (45,603) | 35,093 |
| | (529,767) | (112,574) | (257,849) | 141,712 |
| Foreign exchange
exposure in R$ | (529,767) | (106,525) | (257,849) | 127,018 |
| Foreign exchange
exposure in US$ | (325,270) | (63,933) | (158,316) | 76,232 |
| (a) Offshore non-deliverable forwards (“NDFs”) not
designated as hedge accounting, impacting financial result and not shareholders' equity. | | | | |

(a) Offshore non-deliverable forwards (“NDFs”) not designated as hedge accounting, impacting financial result and not shareholders' equity.

The Company's total foreign exchange exposure is US$158,316 and is within the limit established by the Risk Policy.

49

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.3.2. Breakdown of the balances of derivative financial instruments

­

The consolidated positions of outstanding derivatives on March 31, 2011 and December 31, 2010 are as follows:

| | | | | | B R GA A P and IF R
S | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | C o nso lidated
03.31.11 | |
| | Subject to | | | | value | M
arket |
| Instrument | hedge | M aturity | R eceivable | P ayable | (no tio
nal) | value
(1) |
| NDF | Exchange
rate | From
04/2011to 02/2012 | R$ (Pre -
9.97%) | US$
(E.R.) | 734,544 | 53,568 |
| NDF | Exchange
rate | From
04/2011to 02/2012 | R$ (Pre -
9.40%) | EUR
(E.R.) | 469,519 | 12,073 |
| NDF | Exchange
rate | From
04/2011to 02/2012 | R$ (Pre -
9.34%) | GBP
(E.R.) | 125,626 | 7,920 |
| NDF | Exchange
rate | From
04/2011to 06/2011 | R$ (Pre -
7.15%) | US$
(E.R.) | 73,292 | 6,341 |
| NDF | Exchange
rate | 06/2011 | US$ (E.R.)
-0.47% | EUR
(E.R.) | 161,903 | (594) |
| Swap | Exchange
rate | 07/2013 | US$ (E.R.)
+7% | R$ (76%of
CDI) | 56,112 | (1,424) |
| Swap | Exchange
rate | From
04/2011to 12/2013 | US$ (E.R.) +LIBOR
3M +3.83% | R$ (97.50%of
CDI) | 330,750 | (40,130) |
| Swap | Interest
rate | From
04/2011to 08/2013 | US$ (E.R.) +LIBOR
3M +1.43% | US$ (E.R.)
+3.92% | 325,740 | (1,758) |
| Swap | Interest
rate | 05/2012 | US$ (E.R.) +LIBOR
3M +3.85% | US$ (E.R.)
+5.78% | 48,861 | (705) |
| Swap | Interest
rate | From
05/2011to 02/2019 | US$ (E.R.) +LIBOR
6M +1.61% | US$ (E.R.)
+4.66% | 1,038,413 | (20,923) |
| Swap | Interest
rate | 11/2012 | US$ (E.R.) +LIBOR
12M +0.71% | US$ (E.R.)
+3.70% | 162,870 | (6,341) |
| Options | Exchange
rate | From
04/2011to 05/2011 | R$ | US$
(E.R.) | 60,524 | 1,784 |
| Options | Live
cattle | From
07/2011to 11/2011 | R$ | R$ | 84,191 | (1,090) |
| NDF | Live
cattle | From
07/2011to 11/2011 | R$ | R$ | 17,378 | (618) |
| Future
contract | Exchange
rate | 05/2011 | US$
(E.R.) | R$ | 139,442 | (145) |
| Future
contract | Live
cattle | 10/2011 | R$ | R$ | 11,383 | (105) |
| | | | | | 3,840,548 | 7,853 |

50

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | | | | B R GA A P and IF R
S | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | C o nso lidated
12.31.10 | |
| | | | | | Reference | |
| | Subject
to | | | | value | Market |
| Instrument | hedge | Maturity | R
eceivable | Payable | (notional) | value
(1) |
| NDF | Exchange
rate | From
01/2011to 11/2011 | R$ (Pre -
9.66%) | US$
(E.R.) | 716,466 | 54,541 |
| NDF | Exchange
rate | From
01/2011to 11/2011 | R$ (Pre -
9.49%) | EUR
(E.R.) | 416,636 | 22,974 |
| NDF | Exchange
rate | From
01/2011to 11/2011 | R$ (Pre -
9.40%) | GBP
(E.R.) | 112,561 | 7,862 |
| NDF | Exchange
rate | From
01/2011to 06/2011 | R$ (Pre -
8.21%) | US$
(E.R.) | 241,738 | 11,149 |
| NDF | Exchange
rate | 03/2011 | US$ (E.R.) -
0.23% | EUR
(E.R.) | 100,260 | (1,677) |
| Swap | Exchange
rate | 07/2013 | US$ (E.R.)
+7% | R$ (76%of
CDI) | 56,112 | (756) |
| Swap | Exchange
rate | From
01/2011to 12/2013 | US$ +LIBOR 3M
+3.83% | R$ (97.50%of
CDI) | 330,750 | (42,793) |
| Swap | Interest
rate | From 01/2010
to 08/2013 | US$ +LIBOR 3M
+0.25% | US$
+2.37% | 172,230 | (3,951) |
| Swap | Interest
rate | 05/2012 | US$ +LIBOR 3M
+3.85% | US$
+5.78% | 62,787 | (886) |
| Swap | Interest
rate | From
01/2011to 08/2013 | US$ +LIBOR 6M
+0.80% | US$
+3.77% | 838,762 | (23,780) |
| Swap | Interest
rate | 11/2012 | US$ +LIBOR 12M
+0.71% | US$
+3.70% | 198,025 | (6,974) |
| Options | Exchange
rate | 01and
02/2011 | R$ | US$
(E.R.) | 85,461 | 2,068 |
| Options | Live
cattle | From
08/2011to 11/2011 | R$ | R$ | 44,039 | (225) |
| Future
contract | Exchange
rate | 02/2011 | US$
(E.R.) | R$ | 121,336 | (1,104) |
| Future
contract | Live
cattle | From
01/2011to 10/2011 | R$ | R$ | 4,422 | (17) |
| | | | | | 3,501,584 | 16,432 |

(1) The market value determination method used by the Company consists of calculating the future value based on the contracted conditions and determining the present value based on market curves, extracted from the database of Bloomberg and BM&F.

Management understands that the results obtained with these derivative operations are in full compliance with the Risk Policy adopted by the Company.

4.4. Breakdown of the balances of financial instruments designated for cash flow hedge accounting and export revenues

The impacts referring to the interest swap positions, cash flow hedge, export revenue hedge, are shown below:

51

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.4.1. Interest rate swap

| | | | | BR GAAP e
IFRS | |
| --- | --- | --- | --- | --- | --- |
| | | | Parenty company and
Consolidated | | |
| | | | | | 03.31.11 |
| Assets | Liabilities | | | Balance | Balance |
| (Hedged
object) | (Protected
risk) | Notional | Maturity
date | (contract
curve) | (MTM) |
| Libor 6M +1.75%
p.a. | 4.22%
p.a. | US$65,000 | 07/25/12 | (224) | (1,109) |
| Libor
6M | 4.06%
p.a. | US$75,000 | 07/22/13 | (497) | (4,005) |
| Ativo Libor 6M
+0.8% p.a. | 4.31%
p.a. | US$30,000 | 08/23/13 | (96) | (1,818) |
| Libor 6M+0.8%
p.a. | 4.36%
p.a. | US$20,000 | 07/19/13 | (169) | (1,263) |
| Libor 3M +0.5%
p.a. | 3.96%
p.a. | US$10,000 | 08/20/12 | (54) | (635) |
| Libor 3M
+0.5%p.a. | 3.96%
p.a. | US$20,000 | 08/15/12 | (128) | (1,280) |
| Libor 3M +0.5%
p.a. | 3.96%
p.a. | US$20,000 | 08/10/12 | (142) | (1,285) |
| Libor
6M | 3.82%
p.a. | US$20,000 | 03/20/13 | (26) | (955) |
| Libor
6M | 3.79%
p.a. | US$30,000 | 02/13/13 | (130) | (1,414) |
| Libor 6M +1.65%
p.a. | 4.15%
p.a. | US$25,000 | 10/05/13 | (302) | (1,019) |
| Libor 6M +0.6%
p.a. | 2.98%
p.a. | US$50,000 | 12/19/12 | (318) | (2,462) |
| Libor 6M
+0.6%p.a. | 2.99%
p.a. | US$50,000 | 11/26/12 | (445) | (2,368) |
| Libor 6M +1.55%
p.a. | 3.55%
p.a. | US$50,000 | 07/02/12 | (184) | (639) |
| Libor 12M +0.71%
p.a. | 3.57%
p.a. | US$50,000 | 11/19/12 | (568) | (2,977) |
| Libor 12M +0.71%
p.a. | 3.82%
p.a. | US$50,000 | 11/26/12 | (608) | (3,364) |
| Libor
3M | 0.78%
p.a. | US$50,000 | 08/03/12 | (51) | 31 |
| Libor
6M | 5.86%
p.a. | US$100,000 | 01/22/18 | - | (554) |
| Libor
6M | 5.47%
p.a. | US$100,000 | 06/18/18 | - | 1,412 |
| Libor
6M | 5.90%
p.a. | US$100,000 | 02/01/19 | (198) | (1,763) |
| Libor
6M | 5.88%
p.a. | US$100,000 | 02/01/19 | (197) | (1,554) |
| 7%
p.a. | 76%
CDI | US$35,000 | 07/15/13 | (105) | (1,424) |
| Libor 3M +
overlibor 2.50% p.a. | 92.5%
CDI | US$50,000 | 10/01/13 | (1,634) | (11,796) |
| Libor 3M +
overlibor 4.50% p.a. | 100%
CDI | US$100,000 | 12/23/13 | (389) | (28,335) |
| | | | | (6,465) | (70,576) |

52

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.4.2. NDF

| | | | | | | | | | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | | | | | Consolidated |
| | | | | | | | | | | | | 03.31.11 |
| NDF | R$ x USD | | | | R$ x EUR | | | | R$ x GBP | | | |
| Maturities | Curve | MTM (1) | Notional | Average US$ | Curve | MTM (1) | Notional | AverageEUR | Curve | MTM (1) | Notional | Average
GBP |
| April
2011 | 11,602 | 11,632 | 81,000 | 1.7787 | 2,053 | 2,212 | 26,000 | 2.3992 | 1,117 | 1,152 | 6,500 | 2.7974 |
| May
2011 | 8,524 | 8,559 | 60,000 | 1.7899 | 1,687 | 1,889 | 21,500 | 2.4162 | 1,175 | 1,229 | 6,000 | 2.8429 |
| June
2011 | 7,735 | 7,767 | 55,000 | 1.8029 | 1,323 | 1,592 | 23,500 | 2.4130 | 1,062 | 1,127 | 6,000 | 2.8456 |
| July
2011 | 6,774 | 6,758 | 50,000 | 1.8094 | 2,006 | 2,294 | 25,000 | 2.4553 | 1,034 | 1,069 | 6,000 | 2.8567 |
| August
2011 | 4,389 | 4,310 | 35,000 | 1.8091 | 976 | 1,368 | 27,000 | 2.4276 | 674 | 701 | 5,000 | 2.8355 |
| September
2011 | 3,401 | 3,285 | 30,000 | 1.8095 | 832 | 1,023 | 19,000 | 2.4466 | 657 | 708 | 4,500 | 2.8737 |
| October
2011 | 3,668 | 3,563 | 35,000 | 1.8138 | 815 | 1,131 | 18,000 | 2.4703 | 693 | 716 | 4,000 | 2.9179 |
| November
2011 | 3,111 | 3,300 | 30,000 | 1.8358 | (58) | 281 | 17,000 | 2.4365 | 449 | 503 | 4,000 | 2.8790 |
| December
2011 | 581 | 697 | 10,000 | 1.8055 | (501) | (302) | 9,000 | 2.3976 | 138 | 186 | 2,000 | 2.8611 |
| January
2011 | 1,865 | 2,209 | 35,000 | 1.8133 | 21 | 255 | 8,000 | 2.4838 | 232 | 289 | 2,000 | 2.9368 |
| February
2011 | 1,215 | 1,488 | 30,000 | 1.8140 | 18 | 330 | 9,000 | 2.4942 | 174 | 240 | 2,000 | 2.9307 |
| | 52,865 | 53,568 | 451,000 | 1.8031 | 9,173 | 12,073 | 203,000 | 2.4346 | 7,405 | 7,920 | 48,000 | 2.8585 |

53

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.4.3. PUT

| | | | | BR GAAP and
IFRS |
| --- | --- | --- | --- | --- |
| | | | | Consolidated |
| | | | | 03.31.11 |
| PUT | | | | R$ x
USD |
| Maturities | Curve | MTM | Notional | USD
Average |
| April
2011 | 968 | 596 | 17,000 | 1.6856 |
| May
2011 | 923 | 474 | 19,000 | 1.6773 |
| | 1,891 | 1,070 | 36,000 | 1.6812 |

4.4.4. PPEs

As authorized by CVM Deliberation No. 604/09, the Company uses the exchange rates variation of pre-export finance facilities contracts as a coverage instrument with the objective to protect the exchange rate risk applied to highly probable futures sales in foreign currency.

The position of the pre-export facilities designated as hedge accounting as of March 31, 2011, are as follows:

| | | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- |
| | | | | | Consolidated |
| | | | | | 03.31.11 |
| Hedge | Subject
to | Type of
risk | | | |
| instrument | hedge | hedged | Maturity | Notional
(US$) | MTM |
| | | | From
04/2011 | | |
| PPEs | Sales
ME | US$
(E.R.) | to
08/2013 | 460,460 | 749,952 |

54

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.5. Gains and losses of hedging derivative financial instruments

The amounts of realized and unrealized gains and losses of financial instruments recorded in for the three month period ended March 31, 2011 affected the Company’s net income in the accounts of financial income or expenses as well as shareholders’ equity, as shown below:

				BR GAAP
			Parent
company
	Shareholders'
equity		Statement of
income
	03.31.11	12.31.10	03.31.11	12.31.10
Derivatives
intended for protection
Exchange risks	36,079	46,024	(2,290)	-
Interest rate risk	(21,762)	(28,829)	(3,944)	-
	14,317	17,195	(6,234)	-
Derivatives
intended for financial results
Interest rate risk	-	-	(705)	-
Exchange risks	-	-	(145)	(2,183)
Market risk of live cattle	-	-	(1,813)	-
	-	-	(2,663)	(2,183)
	14,317	17,195	(8,897)	(2,183)
			BR GAAP and
IFRS
				Consolidated
	Shareholders'
equity		Statement of
income
	03.31.11	12.31.10	03.31.11	12.31.10
Derivatives
intended for protection
Exchange risks	36,079	46,024	(2,290)	-
Interest rate risk	(24,684)	(28,829)	(4,339)	-
	11,395	17,195	(6,629)	-
Derivatives
intended for financial results
Interest rate risk	-	-	(705)	-
Exchange risks	-	-	5,601	(1,207)
Market risk of live cattle	-	-	(1,813)	-
	-	-	3,083	(1,207)
	11,395	17,195	(3,546)	(1,207)

55

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.5.1. Breakdown by category of the balances of financial instruments – except derivatives:

						BR GAAP
					Parent company
03.31.11
	Loans
and	Available	Trading	Held
to	Financial
	receivables	for
sale	securities	maturity	Liabilities	Total
Assets
Amortized cost
Marketable securities	-	-	-	27	-	27
Trade accounts receivable	1,037,982	-	-	-	-	1,037,982
Credits notes	117,242	-	-	-	-	117,242
Fair value
Marketable securities	-	1,922	677,139	-	-	679,061
Liabilities
Amortized cost
Trade accounts payable	-	-	-	-	(1,049,476)	(1,049,476)
Loans and financing
Local currency	-	-	-	-	(1,326,475)	(1,326,475)
Foreign currency	-	-	-	-	(968,801)	(968,801)
	1,155,224	1,922	677,139	27	(3,344,752)	(1,510,440)
						BR GAAP
					Parent company
12.31.10
	Loans
and	Available	Trading	Held
to	Financial
	receivables	for sale	securities	maturity	Liabilities	Total
Assets
Amortized cost
Marketable securities	-	-	-	27	-	27
Trade accounts receivable	1,093,893	-	-	-	-	1,093,893
Credits notes	122,651	-	-	-	-	122,651
Fair value
Marketable securities	-	1,679	620,424	-	-	622,103
Liabilities
Amortized cost
Trade accounts payable	-	-	-	-	(1,098,375)	(1,098,375)
Loans and financing
Local currency	-	-	-	-	(1,364,658)	(1,364,658)
Foreign currency	-	-	-	-	(863,737)	(863,737)
	1,216,544	1,679	620,424	27	(3,326,770)	(1,488,096)

56

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | Consolidated
03.31.11 | |
| | Loans and | Available | Trading | Held to | Financial | |
| | receivables | for
sale | securities | maturity | Liabilities | Total |
| Assets | | | | | | |
| Amortized cost | | | | | | |
| Marketable securities | - | - | - | 227,257 | - | 227,257 |
| Trade accounts receivable | 2,363,463 | - | - | - | - | 2,363,463 |
| Credits notes | 129,236 | - | - | - | - | 129,236 |
| Fair value | | | | | | |
| Marketable securities | - | 504,953 | 685,115 | - | - | 1,190,068 |
| Liabilities | | | | | | |
| Amortized cost | | | | | | |
| Trade accounts payable | - | - | - | - | (2,038,982) | (2,038,982) |
| Loans and financing | | | | | | |
| Local currency | - | - | - | - | (3,098,862) | (3,098,862) |
| Foreign currency | - | - | - | - | (4,234,244) | (4,234,244) |
| | 2,492,699 | 504,953 | 685,115 | 227,257 | (9,372,088) | (5,462,064) |
| | | | | | BR GAAP and
IFRS | |
| | | | | | Consolidated
12.31.10 | |
| | Loans and | Available | Trading | Held to | Financial | |
| | receivables | for
sale | securities | maturity | Liabilities | Total |
| Assets | | | | | | |
| Amortized cost | | | | | | |
| Marketable securities | - | - | - | 227,691 | - | 227,691 |
| Trade accounts receivable | 2,571,979 | - | - | - | - | 2,571,979 |
| Credits notes | 134,803 | - | - | - | - | 134,803 |
| Fair value | | | | | | |
| Marketable securities | - | 390,256 | 623,512 | - | - | 1,013,768 |
| Liabilities | | | | | | |
| Amortized cost | | | | | | |
| Trade accounts payable | - | - | - | - | (2,059,196) | (2,059,196) |
| Loans and financing | | | | | | |
| Local currency | - | - | - | - | (3,216,073) | (3,216,073) |
| Foreign currency | - | - | - | - | (3,986,866) | (3,986,866) |
| | 2,706,782 | 390,256 | 623,512 | 227,691 | (9,262,135) | (5,313,894) |

4.6. Determination of the fair value of financial instruments

The Company discloses its financial assets and liabilities at fair value, based on the pertinent accounting pronouncements that define fair value, which refers to concepts of valuation and practices, and requires certain disclosures on the fair value.

Regarding to fair value disclosures, the Company applies the hierarchy requirements of CVM Deliberation No. 604/09, which were fully disclosed in the annual financial statements for the year ended December 31, 2010 (note 5.6), which have not been changed in the three month period ended March 31, 2011.

57

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.6.1. Comparison between book value and fair value of financial instruments

The comparison between book value and fair value of financial instruments is presented below:

				BR GAAP
				Parent
company
		03.31.11		12.31.10
	Book	Fair	Book	Fair
	value	value	value	value
Cash and cash
equivalents	130,699	130,699	211,159	211,159
Marketable
securities:
Available for sales	1,922	1,922	1,679	1,679
Trading securities	677,139	677,139	620,424	620,424
Held to maturity	27	27	27	27
Trade accounts
receivables, net	1,037,982	1,037,982	1,093,893	1,093,893
Notes
Receivable	117,242	117,242	122,651	122,651
Short and long
term debt	(2,295,276)	(2,295,276)	(2,228,395)	(2,228,395)
Trade accounts
payable	(1,049,476)	(1,049,476)	(1,098,375)	(1,098,375)
Other financial
assets	77,958	77,958	87,447	87,447
Other financial
liabilities	(72,537)	(72,537)	(80,488)	(80,488)
	(1,374,320)	(1,374,320)	(1,269,978)	(1,269,978)
			BR GAAP and
IFRS
				Consolidated
		03.31.11		12.31.10
	Book	Fair	Book	Fair
	value	value	value	value
Cash and cash
equivalents	2,093,783	2,093,783	2,310,643	2,310,643
Marketable
securities:
Available for sales	504,953	504,953	390,256	390,256
Trading securities	685,115	685,115	623,512	623,512
Held to maturity	227,257	234,435	227,691	236,067
Trade accounts
receivables, net	2,363,463	2,363,463	2,571,979	2,571,979
Trade accounts
payable	129,236	129,236	134,803	134,803
Short and long
term debt	(7,333,106)	(7,471,293)	(7,202,939)	(7,327,400)
Trade accounts
payable	(2,038,982)	(2,038,982)	(2,059,196)	(2,059,196)
Other financial
assets	85,442	85,442	98,596	98,596
Other financial
liabilities	(77,592)	(77,592)	(82,164)	(82,164)
	(3,360,431)	(3,491,440)	(2,986,819)	(3,102,904)

58

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.6.2. Fair value valuation hierarchy

The table below presents the financial assets and liabilities of the parent company and of the consolidated balance sheet, and the general classification of these instruments according with the valuation hierarchy.

				BR GAAP
			Parent
company
				03.31.11
	Level 1	Level 2	Level 3	Total
Assets
Financial assets:
Available for sale
Shares	1,922	-	-	1,922
Held for trading:
Bank deposit certificates	-	515,467	-	515,467
Financial treasury bills	161,672	-	-	161,672
Other financial assets
Derivatives designated as hedge	-	77,804	-	77,804
Derivatives not designated as hedge	-	154	-	154
	163,594	593,425	-	757,019
Liabilities
Financial
liabilities:
Other financial liabilities
Derivatives designated as hedge	-	(69,720)	-	(69,720)
Derivatives not designated as hedge	-	(2,817)	-	(2,817)
	-	(72,537)	-	(72,537)

59

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

				BR GAAP
				Parent company
				12.31.10
	Level 1	Level 2	Level 3	Total
Assets
Financial assets:
Available for sale
Shares	1,679	-	-	1,679
Held for trading:
Bank deposit certificates	-	557,455	-	557,455
Financial treasury bills	62,969	-	-	62,969
Other financial assets
Derivatives designated as hedge	-	87,445	-	87,445
Derivatives not designated as hedge	-	2	-	2
	64,648	644,902	-	709,550
Liabilities
Financial
liabilities:
Other financial liabilities
Derivatives designated as hedge	-	(78,254)	-	(78,254)
Derivatives not designated as hedge	-	(2,234)	-	(2,234)
	-	(80,488)	-	(80,488)

60

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- |
| | | | | Consolidated |
| | | | | 03.31.11 |
| | Level 1 | Level 2 | Level 3 | Total |
| Assets | | | | |
| Financial assets: | | | | |
| Available for sale | | | | |
| Purchase and sale commitments | - | 167,787 | - | 167,787 |
| Bank deposit certificates | - | 94,067 | - | 94,067 |
| Credit linked notes | - | 124,669 | - | 124,669 |
| Financial treasury bills | 54,340 | - | - | 54,340 |
| Brazilian foreign debt securities | 59,490 | - | - | 59,490 |
| Exclusive investment funds | - | 1,599 | - | 1,599 |
| Investment funds | 1,079 | - | - | 1,079 |
| Shares | 1,922 | - | - | 1,922 |
| Held for trading: | | | | |
| Bank deposit certificates | - | 523,444 | - | 523,444 |
| Financial treasury bills | 161,671 | - | - | 161,671 |
| Other financial assets | | | | |
| Derivatives designated as hedge | - | 77,804 | - | 77,804 |
| Derivatives not designated as hedge | - | 7,638 | - | 7,638 |
| | 278,502 | 997,008 | - | 1,275,510 |
| Liabilities | | | | |
| Financial
liabilities: | | | | |
| Other financial liabilities | | | | |
| Derivatives designated as hedge | - | (73,037) | - | (73,037) |
| Derivatives not designated as hedge | - | (4,555) | - | (4,555) |
| | - | (77,592) | - | (77,592) |

61

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- |
| | | | | Consolidated |
| | | | | 12.31.10 |
| | Level 1 | Level 2 | Level 3 | Total |
| Assets | | | | |
| Financial assets: | | | | |
| Available for sale | | | | |
| Purchase and sale commitments | - | 129,158 | - | 129,158 |
| Bank deposit certificates | - | 74,792 | - | 74,792 |
| Brazilian foreign debt securities | 61,287 | - | - | 61,287 |
| Financial treasury bills | 52,938 | - | - | 52,938 |
| Exclusive investment funds | - | 45,723 | - | 45,723 |
| Investment funds | 24,679 | - | - | 24,679 |
| Shares | 1,679 | - | - | 1,679 |
| Held for trading | | | | |
| Bank deposit certificates | - | 560,543 | - | 560,543 |
| Financial treasury bills | 62,969 | - | - | 62,969 |
| Other financial assets | | | | |
| Derivatives designated as hedge | - | 87,445 | - | 87,445 |
| Derivatives not designated as hedge | - | 11,151 | - | 11,151 |
| Total
assets | 203,552 | 908,812 | - | 1,112,364 |
| Liabilities | | | | |
| Financial
liabilities: | | | | |
| Other financial liabilities | | | | |
| Derivatives designated as hedge | - | (78,254) | - | (78,254) |
| Derivatives not designated as hedge | - | (3,910) | - | (3,910) |
| | - | (82,164) | - | (82,164) |

4.7. Credit management

The Company is potentially subject to the credit risk related to trade accounts receivable, financial investments and derivative contracts. The Company limits its risk associated with these financial instruments, allocating them to financial institutions selected by the criteria of rating and percentage of maximum concentration by counterparties.

The credit risk concentration of accounts receivable is minimized due to the diversification of the customer portfolio and concession of credit to customers with sound financial and operational conditions. The Company does not normally require collateral for credit sales, yet it has a contracted credit insurance policy for specific markets.

On March 31, 2011 , the Company maintained financial investments above R$10,000 at the following financial institutions: Santander, Itaú Unibanco, Banco do Brasil, Bradesco, Votorantim, Deutsche Bank, Safra, Credit Suisse, Standard, BTG Pactual, HSBC, Caixa Econômica Federal, Banco do Nordeste and Citibank.

62

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

The Company also held derivative contracts with the following financial institutions: Santander, Citibank, HSBC, Credit Suisse, Banco do Brasil, Itaú BBA, Rabobank, Merrill Lynch, Deutsche Bank, Votorantim, Bradesco, JP Morgan, Banco Espírito Santo, BNP, Barclays, Pactual and Morgan Stanley.

4.8. Liquidity risk management

Liquidity risk management aims to reduce the impacts caused by events which may affect the Company’s cash flow performance.

The table below summarizes the commitments and contractual obligations that may impact Company’s liquidity as of March 31, 2010.11:

63

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

					BR GAAP
					Parent
company
						03.31.11
	Book	Cash
flow	Up to
9					After
5
	value	contracted	months	2012	2013	2014	2015	years
Non derivatives
financial liabilities
Loans and financing	2,295,276	2,500,327	815,610	1,029,802	336,494	66,726	32,640	219,055
Trade accounts payable	1,049,476	1,049,476	1,049,476	-	-	-	-	-
Capital lease	8,735	9,371	4,586	3,614	939	180	52	-
Operational lease	-	229,825	57,822	66,685	44,067	31,260	29,991	-
Derivatives
financial liabilities
Designated as hedge accounting
Interest rate derivatives	68,703	125,557	34,368	41,096	50,092	-	-	-
Currency derivatives (NDF)	1,017	1,017	1,017	-	-	-	-	-
Not designated as hedge accounting
Currency derivatives ( NDF )	-	-	-	-	-	-	-	-
Currency derivatives (Future)	145	145	145	-	-	-	-	-
Interest rate derivatives	705	968	585	383	-	-	-	-
Commodities derivatives	1,967	1,967	1,967	-	-	-	-	-

64

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | | | | | BR GAAP and
IFRS | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | Consolidated | | |
| | | | | | | 03.31.11 | | |
| | Book | Cash
flow | Up to
9 | | | | | After
5 |
| | value | contracted | months | 2012 | 2013 | 2014 | 2015 | years |
| Non derivatives
financial liabilities | | | | | | | | |
| Loans and financing | 5,697,513 | 6,920,364 | 2,431,837 | 2,317,684 | 764,644 | 266,043 | 152,200 | 987,955 |
| Bonds BRF | 1,218,620 | 2,018,570 | 44,280 | 88,561 | 88,561 | 88,561 | 88,561 | 1,620,048 |
| Bonds Sadia | 416,973 | 570,141 | 27,091 | 27,091 | 27,091 | 27,091 | 27,091 | 434,686 |
| Trade accounts payable | 2,038,982 | 2,038,982 | - | - | - | - | - | - |
| Capital lease | 8,735 | 9,371 | 4,586 | 3,614 | 939 | 180 | 52 | - |
| Operational lease | - | 448,584 | 175,982 | 167,277 | 44,074 | 31,260 | 29,991 | - |
| Derivatives
financial liabilities | | | | | | | | |
| Designated as hedge accounting | | | | | | | | |
| Interest rate derivatives | 72,020 | 192,235 | 38,735 | 49,831 | 63,194 | 8,734 | 8,734 | 23,008 |
| Currency derivatives (NDF) | 1,017 | 1,017 | 1,017 | - | - | - | - | - |
| Currency derivatives (options) | - | - | - | - | - | - | - | - |
| Not designated as hedge accounting | | | | | | | | |
| Currency derivatives (NDF) | 1,738 | 1,738 | 1,738 | - | - | - | - | - |
| Currency derivatives (Future) | 145 | 145 | 145 | - | - | - | - | - |
| Interest rate derivatives | 705 | 968 | 585 | 383 | - | - | - | - |
| Commodities derivatives | 1,967 | 1,967 | 1,967 | - | - | - | - | - |

65

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

4.9. Commodity price risk management

In the normal course of its operations, the Company purchases commodities, mainly corn, soymeal and live hog, which are some of the individual components of production cost.

Aiming to protect Company against the exposure of price variation of live cattle, Management hired derivatives protection instruments which comprise the following categories: (i) cattle forward purchase, (ii) containment of own cattle, (iii) containment contract of cattle with partnership, and (iv) spot purchase of cattle which the objective to guarantee the slaughtering scale of cattle in the fallow.

The contracts are accounted for its fair value in the statement of income as financial income or expense, whenever is their maturity date.

On March 31, 2011 the Company held a short position in BM&F of 331 (137 on December 31, 2010) future contracts with maturity date through October 2011.In the over the counter market the Company held 530 short positions with maturity date between July and November 2011. Additionally, the Company also held 1.300 short positions of option contracts (700 short position of option contracts on December 31, 2010) (note 4.3.2).

4.10. Sensitivity analysis chart

The Company has loans, payables and receivables in foreign currency, and in order to mitigate the risks incurred through foreign exchange exposure it contracts derivative financial instruments.

The Company understands that the present interest rate fluctuations do not significantly affect its financial result since it opted to change to fixed rate a considerable part of its floating interest rates debts by using derivative transactions (interest rates swaps). Company designates such derivatives as hedge accounting and therefore adopts special accounting treatment proving the prospective and retrospective effectiveness of the hedge transaction.

Five scenarios are considered for the next twelve-month period in the table below, considering the percentage variations of the quotes of parity between the Brazilian Reais and U.S. Dollar, Brazilian Reais and Euro and Brazilian Reais and Pounds, whereas the most likely scenario is that adopted by the Company. The remaining scenarios are based on quoted prices from the Brazilian Central Bank as of March 31, 2010. The total of sales export analyzed corresponds to the total of derivative financial instruments and the amortization flow of PPEs for the following next 12 months designated as hedge accounting.

66

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| Parity - Brazilian Reais x
U.S. Dollar | | 1.7000 | 1.4658 | 1.2215 | 2.0359 | 2.4431 |
| --- | --- | --- | --- | --- | --- | --- |
| Transaction/Instrument | Risk | Scenario
I | Scenario
II | Scenario
III | Scenario
IV | Scenario
V |
| | | (probable) | (10%
appreciation) | (25%
appreciation) | (25%
devaluation) | (50%
devaluation) |
| NDF
( hedge
accounting) | Devaluation of
R$ | 46,498 | 152,108 | 262,290 | (104,982) | (288,618) |
| Options -
currencies | Devaluation of
R$ | (1,498) | 6,932 | 15,727 | (822) | (822) |
| Export pre -
payment | Devaluation of
R$ | 57,788 | 165,614 | 278,107 | (96,869) | (284,357) |
| Exports | Appreciation of
R$ | (66,576) | (219,342) | (378,720) | 154,431 | 420,061 |
| Net
effect | | 36,212 | 105,312 | 177,404 | (48,242) | (153,736) |
| Statement of income | | (822) | (822) | (822) | 13,837 | 28,495 |
| Shareholders' equity | | 37,033 | 106,134 | 178,225 | (62,079) | (182,231) |
| Parity - Brazilian Reais x
Euro | | 2.2100 | 2.0816 | 1.7347 | 2.8911 | 3.4694 |
| Transaction/Instrument | Risk | Scenario
I | Scenario
II | Scenario
III | Scenario
IV | Scenario
V |
| | | (probable) | (10%
appreciation) | (25%
appreciation) | (25%
devaluation) | (50%
devaluation) |
| NDF
EUR | Devaluation of
R$ | 45,599 | 71,663 | 142,090 | (92,669) | (210,049) |
| Exports | Appreciation of
R$ | (45,599) | (71,663) | (142,090) | 92,669 | 210,049 |
| Net
effect | | - | - | - | - | - |
| Statement of income | | - | - | - | - | - |
| Shareholders' equity | | - | - | - | - | - |
| Parity - Brazilian Reais x
Pound | | 2.6000 | 2.3555 | 1.9629 | 3.2715 | 3.9258 |
| Transaction/Instrument | Risk | Scenario
I | Scenario
II | Scenario
III | Scenario
IV | Scenario
V |
| | | (probable) | (10%
appreciation) | (25%
appreciation) | (25%
devaluation) | (50%
devaluation) |
| NDF
GBP | Devaluation of
R$ | 12,408 | 24,145 | 42,988 | (19,824) | (51,231) |
| Exports | Appreciation of
R$ | (12,408) | (24,145) | (42,988) | 19,824 | 51,231 |
| Net
effect | | - | - | - | - | - |
| Statement of income | | - | - | - | - | - |
| Shareholders' equity | | - | - | - | - | - |

67

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

5. SEGMENT INFORMATION

The operating segments are reported consistently with the management reports provided to the chief operating decision makers (Board of Directors and Officers) for purposes of appraising the performance of each segment and allocating resources.

The reportable segments identified primarily observe the division by geographical region of sales of the Company, as: domestic and foreign market. In turn, these segments are subdivided according to the nature of the products whose characteristics are described below:

· Fresh (in natura): involves the production and trade of whole birds and poultry cuts as well as pork and beef cuts.

· Prepared and processed: involves the production and trade of processed poultry, pork and beef derivative foods, margarines and soy vegetarian products.

· Dairy: involves the production and trade of pasteurized and UHT milk as well as milk derivatives, including flavored milk, yogurts, fruit juices, soy-based beverages, cheeses and desserts.

· Others: involves the production and trade of animal feed, soymeal and refined soy flour.

The net sales for each one of the reportable operating segments are presented below:

| | BR GAAP and
IFRS | |
| --- | --- | --- |
| | Consolidated | |
| | 03.31.11 | 03.31.10 |
| Net sales -
domestic market: | | |
| In natura products | 545,638 | 362,445 |
| Processed products | 1,813,919 | 1,487,609 |
| Dairy products | 627,810 | 540,316 |
| Other | 604,655 | 594,163 |
| | 3,592,022 | 2,984,533 |
| Net sales -
foreign market: | | |
| In natura products | 2,022,685 | 1,644,920 |
| Processed products | 393,554 | 397,831 |
| Dairy products | 5 | 5,291 |
| Other | 12,228 | 14,796 |
| | 2,428,472 | 2,062,838 |
| | 6,020,494 | 5,047,371 |

68

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

The operating results before financial income (expenses) and others for each one of the reportable operating segments are presented below:

| | BR GAAP and
IFRS | |
| --- | --- | --- |
| | Consolidated | |
| | 03.31.11 | 03.31.10 |
| Operating
income | | |
| Domestic market | 324,535 | 215,315 |
| Foreign market | 200,459 | (4,715) |
| | 524,994 | 210,600 |

No customer was individually responsible for more than 5% of the total revenue earned in the year ended March 31, 2010.

Export net revenue by region is presented below:

| | BR GAAP and
IFRS | |
| --- | --- | --- |
| | Consolidated | |
| | 03.31.11 | 03.31.10 |
| Export net
income per region: | | |
| Europe | 419,005 | 425,909 |
| Far East | 514,534 | 466,256 |
| Middle East | 816,011 | 605,486 |
| Eurasia (including Russia) | 234,970 | 236,587 |
| America / Africa / Other | 443,952 | 328,600 |
| | 2,428,472 | 2,062,838 |

The goodwill originating from the expectation of future profitability, as well as the intangible assets with indefinite useful life (trademarks and patents), were allocated to the reportable operating segments, taking into account the nature of the products manufactured in each segment (cash-generating unit), and the allocation is presented below:

| | | | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | | Consolidated |
| | Domestic
market | | Foreign
market | | | Total |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Goodwill due to
expectation | | | | | | |
| of future
profitability | 1,896,442 | 1,896,442 | 937,077 | 936,532 | 2,833,519 | 2,832,974 |
| Trademarks | 1,065,478 | 1,065,478 | 190,522 | 190,522 | 1,256,000 | 1,256,000 |
| Patents | 4,957 | 4,957 | 325 | 375 | 5,282 | 5,332 |
| | 2,966,877 | 2,966,877 | 1,127,924 | 1,127,429 | 4,094,801 | 4,094,306 |

Information referring to the total assets by reportable segments is not being presented, as it does not compose the set of information made available to the Company’s Management, which make investment decisions on a consolidated basis.

69

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

6. CASH AND CASH EQUIVALENTS

| | Average | BR GAAP — Parent
Company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- | --- |
| | rate
p.a. | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Cash and bank
accounts: | | | | | |
| U.S. Dollar | - | - | 583 | 69,028 | 70,334 |
| Brazilian Reais | - | 27,680 | 34,562 | 33,930 | 81,428 |
| Euro | - | - | - | 398 | 844 |
| Others | - | - | - | 1,186 | 4,701 |
| | | 27,680 | 35,145 | 104,542 | 157,307 |
| Highly liquid
investments: | | | | | |
| In Brazilian Reais: | | | | | |
| Investment
fund | 11.79% | 9,972 | 9,906 | 9,972 | 9,906 |
| | | 9,972 | 9,906 | 9,972 | 9,906 |
| In U.S.
Dollar: | | | | | |
| Interest bearing account | 0.05% | - | 11,012 | 330,095 | 345,700 |
| Fixed term deposit | 1.40% | 67,582 | 152,492 | 1,522,801 | 1,651,745 |
| Overnight | 0.13% | 23,963 | 2,604 | 70,722 | 64,358 |
| In
Euro: | | | | | |
| Deposit account | 0.31% | 1,502 | - | 42,468 | 74,272 |
| Overnight | 0.12% | - | - | 3,123 | 3,054 |
| Other
Currencies: | | | | | |
| Deposit account | 0.54% | - | - | 10,060 | 4,301 |
| | | 93,047 | 166,108 | 1,979,269 | 2,143,430 |
| | | 130,699 | 211,159 | 2,093,783 | 2,310,643 |

Financial investments classified as cash and cash equivalents are considered financial assets with the possibility of immediate redemption and are subject to an insignificant risk of change of value. Financial investments in foreign currencies refer mainly to Overnight and Time Deposit, remunerated at the prefixed rate.

70

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

7. MARKETABLE SECUTIRIES

| | | | | BR GAAP | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | Average
interest | Parent
company | | Consolidated | |
| | WAMT (*) | Currency | rate p.a. | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Available for
sale | | | | | | | |
| Purchase and sale commitments | - | R$ | 10.79% | - | - | 167,787 | 129,158 |
| Credit linked notes | - | US$ | 4.80% | - | - | 124,669 | - |
| Bank deposit certificates | - | R$ | 8.67% | - | - | 94,067 | 74,792 |
| Brazilian foreign debt securities | - | US$ | 10.26% | - | - | 59,490 | 61,287 |
| Brazilian financial treasury bill | - | R$ | 8.65% | - | - | 54,340 | 52,938 |
| Exclusive investment funds | - | US$ | 8.61% | - | - | 1,599 | 45,723 |
| Investment funds | - | R$ | 8.61% | - | - | 1,079 | 24,679 |
| Shares | - | R$ | - | 1,922 | 1,679 | 1,922 | 1,679 |
| | | | | 1,922 | 1,679 | 504,953 | 390,256 |
| Held for
trading | | | | | | | |
| Bank deposit certificates | 0.95 | R$ | 11.88% | 515,467 | 557,455 | 523,444 | 560,543 |
| Financial treasury bills | 3.56 | R$ | 11.67% | 161,672 | 62,969 | 161,671 | 62,969 |
| | | | | 677,139 | 620,424 | 685,115 | 623,512 |
| Held to
maturity | | | | | | | |
| Credit linked notes | 2.78 | US$ | 4.80% | - | - | 162,932 | 166,687 |
| National treasury certificates | 1.00 | R$ | 12.00% | - | - | 64,298 | 60,977 |
| Capitalization security | 0.08 | R$ | 5.19% | 27 | 27 | 27 | 27 |
| | | | | 27 | 27 | 227,257 | 227,691 |
| | | | | 679,088 | 622,130 | 1,417,325 | 1,241,459 |
| Current | | | | 679,088 | 622,130 | 1,226,353 | 1,032,375 |
| Non-current | | | | - | - | 190,972 | 209,084 |

(*) Weighted average maturity in years.

There were no changes in the nature and characteristics of the marketable securities categories presented above, as disclosed in the annual financial statements for the year ended December 31, 2010 (note 9).

The portfolio of financial operations of exclusive fund in foreign currency is shown below:

| | | BR GAAP and
IFRS |
| --- | --- | --- |
| | | Consolidated |
| | 03.31.11 | 12.31.10 |
| Structured
notes | - | 43,227 |
| Money
market | 1,599 | 2,496 |
| | 1,599 | 45,723 |
| Other accounts
(payable) receivable | - | (6,974) |
| | 1,599 | 38,749 |

The national treasury certificates and financial treasury bills classified in the held to maturity subgroup are pledged as a guarantee of the loan obtained by means of the Special Program for Asset Recovery (“PESA”), see note 19.

On March 31, 2011, of the total of marketable securities, R$64,446 were pledged as collateral for futures contract operations in U.S. dollars and live cattle, traded on the Futures and Commodities Exchange (“BMF”). On December 31, 2010 the guarantees corresponded to R$27,500.

71

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

On March 31, 2011, the maturities of the non-current marketable securities the consolidated balance sheet is as follow:

| | BR GAAP and
IFRS |
| --- | --- |
| Maturities | Consolidated |
| 2012 | - |
| 2013 | 126,672 |
| 2014 | - |
| 2015 onwards | 64,300 |
| | 190,972 |

The Company conducted an analysis of sensitivity to foreign exchange rate (note 4.10).

8. TRADE ACCOUNTS RECEIVABLE AND OTHER

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Current | | | | |
| Local third-parties | 777,559 | 825,824 | 1,365,702 | 1,636,694 |
| Local related parties | 20,437 | 21,108 | 3,738 | - |
| Foreign third parties | 75,494 | 65,426 | 1,020,698 | 948,389 |
| Foreign related parties | 173,979 | 186,752 | 196 | - |
| (-) Estimated losses with doubtful
accounts | (14,605) | (12,167) | (31,989) | (20,054) |
| | 1,032,864 | 1,086,943 | 2,358,345 | 2,565,029 |
| Credit
notes | 31,860 | 29,515 | 43,854 | 41,667 |
| | 1,064,724 | 1,116,458 | 2,402,199 | 2,606,696 |
| Non-current | | | | |
| Local third-parties | 32,016 | 33,825 | 33,523 | 47,955 |
| Foreign third parties | 432 | 443 | 4,097 | 2,652 |
| (-) Adjustment to present value | (792) | (872) | (792) | (872) |
| (-) Estimated losses with doubtful
accounts | (26,538) | (26,446) | (31,710) | (42,785) |
| | 5,118 | 6,950 | 5,118 | 6,950 |
| Credit
notes | 85,382 | 93,136 | 85,382 | 93,136 |
| | 90,500 | 100,086 | 90,500 | 100,086 |

The rollforward of estimated losses from doubtful accounts is presented below:

72

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Beginning
balance | 38,613 | 42,431 | 62,839 | 68,679 |
| Exchange rate variation | (10) | 203 | (10) | 179 |
| Additions | 9,333 | 21,583 | 18,528 | 41,317 |
| Increase (business combination) (1) | - | 3,183 | - | - |
| Reversals | (4,276) | (8,202) | (13,668) | (20,211) |
| Write-offs | (2,517) | (20,585) | (3,990) | (27,125) |
| Ending
balance | 41,143 | 38,613 | 63,699 | 62,839 |

(1) Merger of Avipal Nordeste S.A. em 03.31.10

The expense of the estimated losses on doubtful accounts was recorded under selling expenses in the statement of income. When efforts to recover accounts receivable prove fruitless, the amounts credited to estimated losses on doubtful accounts are generally reversed against the permanent write-off of the invoice.

Breakdown by maturity of overdue amounts and not included in estimated losses on doubtful accounts.

| | BR GAAP — Parent
company | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- |
| | 03.31.11 | 03.31.11 | 12.31.10 |
| 60 to 90
days | 402 | 1,080 | 9,252 |
| 90 to 120
days | 521 | 644 | 1,414 |
| 120 to 180
days | 4,139 | 4,355 | 2,765 |
| 180 to 360
days | 224 | 366 | 343 |
| Above 360
days | 1,145 | 1,430 | 2,815 |
| | 6,431 | 7,875 | 16,589 |

The receivables excluded from allowance for estimated losses on doubtful accounts are secured by letters of credit issued by financial institutions and by credit insurance contracted with insurance companies.

On December 31, 2010, parent company did not have overdue receivables excluded from the balance of estimated losses on doubtful accounts.

The breakdown of accounts receivable by maturity is as follows:

73

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Amounts falling
due | 1,021,201 | 1,090,982 | 2,214,686 | 2,377,713 |
| Overdue: | | | | |
| From 01 to 60 days | 16,478 | 6,320 | 148,411 | 182,012 |
| From 61 to 120 days | 6,797 | 3,251 | 17,220 | 17,851 |
| From 121 to 180 days | 5,254 | 1,583 | 7,718 | 6,872 |
| From 181 to 360 days | 2,263 | 3,380 | 6,792 | 6,860 |
| Above 360 days | 27,924 | 27,862 | 33,127 | 44,382 |
| (-) Adjustment to present value | (792) | (872) | (792) | (872) |
| (-) Estimated losses with doubtful
accounts | (41,143) | (38,613) | (63,699) | (62,839) |
| | 1,037,982 | 1,093,893 | 2,363,463 | 2,571,979 |

9. INVENTORIES

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Finished
goods | 570,509 | 493,103 | 1,390,691 | 1,159,129 |
| Goods for
resale | 7,530 | 6,140 | 21,043 | 20,518 |
| Work in
process | 67,763 | 54,090 | 107,255 | 123,279 |
| Raw
materials | 135,712 | 117,878 | 564,654 | 466,346 |
| Packaging
materials | 38,345 | 39,204 | 82,577 | 85,485 |
| Secondary
materials | 52,377 | 58,168 | 53,012 | 58,752 |
| Warehouse | 66,695 | 67,714 | 110,379 | 118,535 |
| Goods in
transit | - | 279 | 16,052 | 60,919 |
| Imports in
transit | 14,713 | 18,796 | 18,458 | 22,081 |
| Advances to
suppliers | 31,757 | 40,505 | 80,896 | 50,935 |
| (-) Provision for
adjustment to market value | (9,767) | (9,140) | (15,666) | (14,549) |
| (-) Provision for
inventory losses deteriorated | (2,843) | (4,694) | (7,073) | (10,591) |
| (-) Provision for
obsolescence | (1,686) | (2,202) | (4,423) | (5,030) |
| | 971,105 | 879,841 | 2,417,855 | 2,135,809 |

The amount of the write-offs of inventories recognized in the cost of sales on for the three month period ended on March 31, 2011 totaled R$2,371,481 at the parent company and R$4,474,918 in the consolidated quarterly information (on March 31, 2010 R$2,066,517 at the parent company and R$3,922,557) in the consolidated quarterly financial information, such amounts include the additions and reversals of inventory provisions presented in the table below:

	BR GAAP
	Parent
company
	12.31.10	Additions	Reversals	Write-offs	03.31.11
Provision for
inventory losses (a)	(9,140)	(4,933)	4,306	-	(9,767)
Provision for
inventory losses deteriorated	(4,694)	(692)	-	2,543	(2,843)
Provision for
obsolescence	(2,202)	-	516	-	(1,686)
	(16,036)	(5,625)	4,822	2,543	(14,296)

74

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | BR GAAP and
IFRS | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | Consolidated | | | | | |
| | | | | | Exchange
rate | |
| Provision for
inventory losses (a) | 12.31.10 | Additions | Reversals | Write-offs | variation | 03.31.11 |
| Provision for
inventory losses deteriorated | (14,549) | (6,430) | 5,199 | - | 114 | (15,666) |
| Provision for
obsolescence | (10,591) | (1,660) | 2,630 | 2,550 | (2) | (7,073) |
| | (5,030) | - | 607 | - | - | (4,423) |
| | (30,170) | (8,090) | 8,436 | 2,550 | 112 | (27,162) |

(a) Reversals occurred on account of the recovery of the sale price of inventories.

Additionally, on the three month period ended March 31, 2011 there were write-offs of inventories in the amount of R$9,799 at the parent company and R$10,148 in the consolidated (on March 31, 2010, R$10,466 at the parent company and R$12,228 in the consolidated), recorded under selling expenses referring to items suffering deterioration.

Management expects inventories to be recovered in a period of less than 12 months.

On March 31, 2011, the amount corresponding to R$60,307 (R$30,498 on December 31, 2010) of the balance of inventories of the parent company and consolidated was pledged as collateral for rural credit operations.

10. BIOLOGICAL ASSETS

The group of biological assets of the Company comprises living animals which are separated by the categories: poultry, swine and bovine. These animals were separated into consumable and for production. The evaluation criteria and the accounting practices adopted by the Company related to biological assets have not changed in the period of three month ended on March 31, 2011, when compared to the ones adopted in the preparation of the annual financial statements for the year ended December 31, 2010 (note12).

In Management’s opinion, the fair value of the biological assets is substantially represented by the cost of formation especially due to the short life cycle of the animals and due to the fact that a significant portion of the profitability of our products derives from the manufacturing process, not from the obtainment of unprocessed meat (raw materials / slaughter). This opinion is supported by an annual report of appraisal of fair value prepared by an independent specialist, which assessed an immaterial difference between the two methodologies. Therefore, the Management maintained the registration of the biological assets at formation cost.

During the first quarter Management has not identified any events that could have changed business conditions or severely affected the assumptions adopted, therefore, the appraisal report issued for December 31, 2010 was not updated.

75

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

The quantities and the accounting balances per category of biological asset are presented below:

	BR GAAP
	Parent
company
	03.31.11		12.31.10
	Quantity	Value	Quantity	Value
Consumable
biological assets:
Immature poultry	94,618	189,809	97,615	185,068
Immature pork	1,608	242,429	1,889	223,994
Immature bovine	24	27,259	24	25,150
Total current	96,250	459,497	99,528	434,212
Production
biological assets:
Immature poultry	3,820	43,404	3,750	40,186
Mature poultry	5,334	57,087	5,245	56,802
Mature pork	159	65,024	156	62,034
Total non-current	9,313	165,515	9,151	159,022
	105,563	625,012	108,679	593,234
	BR GAAP and
IFRS
	Consolidated
	03.31.11		12.31.10
	Quantity	Value	Quantity	Value
Consumable
biological assets
Immature poultry	184,144	418,039	187,101	394,689
Mature poultry	262	936	483	1,611
Immature pork	3,272	525,763	4,155	479,187
Mature pork	203	49	-	44
Immature bovine	24	27,259	24	25,150
Total current	187,905	972,046	191,763	900,681
Production
biological assets
Immature poultry	7,717	91,368	7,372	88,193
Mature poultry	11,595	137,196	11,559	140,482
Immature pork	169	23,562	169	22,601
Mature pork	396	129,410	386	126,408
Total non-current	19,877	381,536	19,486	377,684
	207,782	1,353,582	211,249	1,278,365

The rollforward of biological assets for the period is presented below:

76

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

	BR GAAP
	Parent
company
	Current				Non-current
	Poultry	Pork	Bovine	Total	Poultry	Pork	Total
Balance as of
12.31.10	185,068	223,994	25,150	434,212	96,988	62,034	159,022
Increase due to acquisition	13,378	102,046	8,374	123,798	4,590	11,879	16,469
Increase due to reproduction	114,417	4,965	1,359	120,741	33,321	545	33,866
Consumption of ration, medication
and remuneration of partnership	464,970	135,800	1,160	601,930	-	-	-
Accumulate depreciation	-	-	-	-	(34,408)	(9,434)	(43,842)
Reduction due to slaughtering	(588,024)	(224,376)	(8,784)	(821,184)	-	-	-
Balance as of
03.31.11	189,809	242,429	27,259	459,497	100,491	65,024	165,515
	BR GAAP and
IFRS
	Parent
company
	Current				Non-current
	Poultry	Pork	Bovine	Total	Poultry	Pork	Total
Balance as of
12.31.10	396,300	479,231	25,150	900,681	228,675	149,009	377,684
Increase due to acquisition	13,378	102,046	8,374	123,798	8,261	14,897	23,158
Increase due to reproduction	218,886	133,016	1,359	353,261	71,958	14,179	86,137
Consumption of ration, medication
and remuneration of partnership	1,041,962	319,693	1,160	1,362,815	-	-	-
Accumulate depreciation	-	-	-	-	(76,870)	(20,774)	(97,644)
Transfer between current
and non-current assets	3,460	4,339	-	7,799	(3,460)	(4,339)	(7,799)
Reduction due to slaughtering	(1,255,011)	(512,513)	(8,784)	(1,776,308)	-	-	-
Balance as of 03.31.11	418,975	525,812	27,259	972,046	228,564	152,972	381,536

The costs of the breeding animals are depreciated using the straight-line method for a period from 15 to 30 months.

11. ASSETS HELD FOR SALE

The balances rollforward of assets held for sale are presented below:

	BR GAAP
	Parent
company
		Transfers
from
		property,
plant and
	12.31.10	equipment	03.31.11
Land	1,537	1,201	2,738
Buildings and
improvements	1,489	1,441	2,930
Machinery and
equipment	200	11	211
Others	-	12	12
	3,226	2,665	5,891

77

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

			BR GAAP
			Consolidated
		Transfers
from
		property,
plant and
	12.31.10	equipment	03.31.11
Land	42,900	1,201	44,101
Buildings and
improvements	14,700	1,441	16,141
Machinery and
equipment	1,853	11	1,864
Facilities	2,167	6	2,173
Others	625	6	631
	62,245	2,665	64,910

12. RECOVERABLE TAXES

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| State ICMS
(VAT) | 269,989 | 254,632 | 690,031 | 646,978 |
| Withholding income
tax and social contribution | 210,927 | 235,613 | 246,541 | 257,096 |
| PIS and COFINS
(Federal Taxes to Fund Social Programs) | 479,316 | 463,598 | 601,659 | 577,853 |
| Import
duty | 660 | 218 | 9,766 | 9,108 |
| IPI (Federal
VAT) | 3,476 | 2,913 | 59,296 | 58,701 |
| Other | 831 | 831 | 8,008 | 6,673 |
| (-) Allowance for
losses | (21,230) | (22,014) | (107,310) | (93,110) |
| | 943,969 | 935,791 | 1,507,991 | 1,463,299 |
| Current | 478,588 | 471,367 | 727,716 | 695,892 |
| Non-current | 465,381 | 464,424 | 780,275 | 767,407 |

The provision for losses rollforward is presented below:

				BR GAAP
			Parent
company
		12.31.10	Reversals	03.31.11
Allowance for
losses - State ICMS (VAT)		(22,014)	784	(21,230)
		(22,014)	784	(21,230)
				BR GAAP
				Consolidated
	12.31.10	Additions	Reversals	03.31.11
Allowance for
losses - State ICMS (VAT)	(78,371)	(4,686)	784	(82,273)
Allowance for
losses - PIS and COFINS	(2,567)	(10,298)	-	(12,865)
Allowance for
losses - IPI (Federal VAT)	(12,172)	-	-	(12,172)
	(93,110)	(14,984)	784	(107,310)

During the three month period ended March 31, 2011, there were no changes that would affect the nature of the credits presented above, a detailed description of each recoverable tax was disclosed in the annual financial statements for the year ended December 31, 2010 (note 14).

78

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

13. INCOME TAX AND SOCIAL CONTRIBUTION

13.1. Deferred income tax and social contribution composition :

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Assets: | | | | |
| Tax losses
carryforwards (corporate income tax) | 171,488 | 166,924 | 568,443 | 564,705 |
| Negative
calculation basis (social contribution on net profits) | 70,961 | 68,154 | 219,967 | 216,677 |
| Temporary
differences: | | | | |
| Provisions for contingencies | 72,147 | 70,084 | 140,074 | 151,554 |
| Provision for doubtful accounts | 4,630 | 6,416 | 8,649 | 8,669 |
| Provision for attorney's fees | 4,765 | 4,804 | 4,765 | 4,804 |
| Provision for property, plant and equipment
losses | 369 | 369 | 4,798 | 3,588 |
| Provision for tax credits realization | 7,218 | 7,485 | 32,984 | 31,658 |
| Provision for other obligations | 17,608 | 19,465 | 47,870 | 57,199 |
| Employees' profit sharing | 12,871 | 26,163 | 17,746 | 35,847 |
| Provision for inventories | 4,861 | 5,452 | 5,221 | 5,713 |
| Employees' benefits plan | 39,257 | 37,537 | 97,441 | 93,329 |
| Amortization of fair value of business
combination | 5,746 | 6,285 | 10,369 | 10,908 |
| Business combination - Sadia | - | - | 1,179,441 | 1,129,947 |
| Provision for contractual indemnity | - | - | 3,635 | 3,400 |
| Unrealized losses on derivatives | 1,313 | 2,925 | 1,313 | 2,925 |
| Unrealized losses on inventories | - | - | 1,878 | 1,480 |
| Adjustments relating to the transition tax
regime | 59,594 | 124,370 | 73,052 | 139,557 |
| Provision for losses | 6,126 | 5,857 | 10,359 | 11,562 |
| Other temporary differences | 6,097 | 4,547 | 18,074 | 14,090 |
| | 485,051 | 556,837 | 2,446,079 | 2,487,612 |
| Liabilities: | | | | |
| Temporary
differences: | | | | |
| Revaluation reserve | 579 | 645 | 579 | 645 |
| Depreciation on rural activities | 449 | 463 | 71,459 | 76,567 |
| Adjustments relating to the transition tax
regime | 243,800 | 273,951 | 387,900 | 400,951 |
| Business combination - Sadia | - | - | 1,182,847 | 1,124,475 |
| Unrealized gains on derivatives | 22,011 | 28,045 | 22,011 | 28,045 |
| Other temporary differences | 1,739 | 1 | 9,748 | 4,994 |
| | 268,578 | 303,105 | 1,674,544 | 1,635,677 |

13.2. Estimated time of realization :

Management considers that deferred tax assets related to provisions for contingencies will be realized as the lawsuits are resolved and there are no estimates for the expected time of realization; thus, they are classified as non-current. The Company considers that deferred tax assets resulting from temporary differences of employee benefits will be realized at the payment of the projected obligations.

79

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

Management estimates that the deferred tax assets originating from tax losses carryforward and negative basis of social contribution are expected to be realized as set forth below:

| | BR GAAP | BR GAAP e
IFRS |
| --- | --- | --- |
| | Parent
company | Consolidated |
| Year | Value | Value |
| 2011 | 22,198 | 80,384 |
| 2012 | 23,664 | 85,693 |
| 2013 | 25,450 | 92,160 |
| 2014 | 27,131 | 98,246 |
| 2015
onwards | 144,006 | 431,927 |
| | 242,449 | 788,410 |

In assessing the likelihood of the realization of deferred tax assets, Management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected taxable income and tax-planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income, management believes that it is more likely than not that the Company will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

80

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

13.3. I ncome and social contribution taxes reconciliation :

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 03.31.10 | 03.31.11 | 03.31.10 |
| Income (loss)
before taxes and participations | 417,310 | 27,093 | 472,730 | 58,772 |
| Nominal tax rate | 34.0% | 34.0% | 34.0% | 34.0% |
| | (141,885) | (9,212) | (160,728) | (19,982) |
| Tax (expense) benefit at nominal rate | | | | |
| Adjustment of taxes and contributions on: | | | | |
| Equity pick-up | 90,331 | 59,182 | 706 | 648 |
| Exchange rate variation on foreign
investments | 12,641 | (11,385) | 3,300 | (3,574) |
| Difference of tax rates on foreign earnings from
subsidiaries | - | - | 74,005 | 29,794 |
| Foreign subsidiaries | - | - | (2,144) | - |
| Staturory profit sharing | (832) | (4,152) | (1,310) | (2,826) |
| Profit sharing | - | - | - | - |
| Donations | (68) | (90) | (989) | (90) |
| Penalties | (151) | (97) | (127) | (100) |
| Writt-off deffered income tax and social
contribution | - | - | - | (3,790) |
| Goodwill amortization | 5,859 | - | - | - |
| Other adjustments | 263 | (220) | 1,302 | 2,193 |
| | (33,842) | 34,026 | (85,985) | 2,273 |
| Current income tax | - | - | (4,775) | (12,709) |
| Deferred income tax | (33,842) | 34,026 | (81,210) | 14,982 |

The taxable income, current and deferred income tax from subsidiaries abroad is presented below:

| | BR GAAP and
IFRS | |
| --- | --- | --- |
| | | Consolidated |
| | 03.31.11 | 03.31.10 |
| Pre-tax book
income from foreign subsidiaries | 86,772 | 39,092 |
| Current income
taxes benefit (expense) of subsidiaries abroad | (2,962) | (2,582) |
| Deferred income
taxes benefit (expense) of subsidiaries abroad | 429 | 2,942 |

The Company determined that the total profit recorded in the books of its wholly-owned subsidiary Crossban will not be redistributed. Such resources will be used for investments in the subsidiary, and thus no deferred income taxes were recognized. The total of undistributed earnings corresponds to R$998,838 as of March 31, 2011 (R$928,885 as of December 31, 2010).

The Brazilian income tax returns are subject to a 5-year statute of limitation period, during which the tax authorities might audit and assess the company for additional taxes and penalties, in case inconsistencies are found. Subsidiaries located abroad are taxed in their respective jurisdictions, according to local regulations.

81

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

14. JUDICIAL DEPOSITS

The rollforward of the judicial deposits held by the Company are represented below:

					BR GAAP
					Parent
company
	12.31.10	Additions	Reversals	Write-offs	03.31.11
Tax	24,016	8,852	-	(1,946)	30,922
Labor	56,374	7,318	(3,830)	(1,600)	58,262
Civil, commercial
and other	12,635	71	-	-	12,706
	93,025	16,241	(3,830)	(3,546)	101,890

| | | | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- | --- |
| | | | | | | Consolidated |
| | | | | | Exchange | |
| | 12.31.10 | Additions | Reversals | Write-offs | rate
variation | 03.31.11 |
| Tax | 79,248 | 10,262 | - | (2,048) | - | 87,462 |
| Labor | 101,758 | 11,520 | (3,830) | (3,731) | - | 105,717 |
| Civil, commercial
and other | 53,079 | 2,099 | - | (36,882) | (6) | 18,290 |
| | 234,085 | 23,881 | (3,830) | (42,661) | (6) | 211,469 |

15. INVESTMENTS

15.1. Investment breakdown

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Investment in
subsidiaries | 5,278,089 | 4,984,710 | 18,637 | 16,467 |
| Fair value of
acquired assets, net | 2,412,075 | 2,394,844 | - | - |
| Goodwill | 1,293,818 | 1,293,818 | - | - |
| Advance for future
capital increase | 100 | 100 | - | - |
| Other
investments | 834 | 834 | 894 | 1,027 |
| | 8,984,916 | 8,674,306 | 19,531 | 17,494 |

82

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

15.2. Rollforward of the interest in direct subsidiaries – Parent Company

	PSA — Labor.	PDF — Partici-		UP! Ali-		VIP S.A. — Empr. E	Avipal — Centro-	Avipal	Establec. Crossban Perdigão
	Veter.	pações	Perdigão	mentos		Particip.	Oeste	Construtora	Levino	Holdings	Export	Total
	Ltda.	Ltda.	Trading .	S.A. Ltda	Sadia
S.A.	Imob.	S.A.	S.A.	Zaccardy	GMBH	Ltd.	03.31.11	12.31.10
a) Capital share March as of 31, 2011
% of share	88.00%	1.00%	100.00%	50.00%	100.00%	65.49%	100.00%	100.00%	90.00%	100.00%	100.00%
Total number of shares and
membership interests:	5,463,850	1,000	100,000	1,000	683,000,000	14,249,459	6,963,854	445,362	100	1	1
Number of shares and membership
interest held:	4,808,188	10	100,000	500	683,000,000	9,331,971	6,963,854	445,362	90	1	1
b) Subsidiaries' information on March 31,
2011
Capital stock	5,464	1	100	1	5,073,817	40,061	5,972	445	37	4,388	16
Shareholders' equity	10,968	1	1,902	16,261	4,219,718	48,097	263	52	854	1,013,017	-
Fair value		-	-	-	2,412,075	-	-	-	-	-	-
Goodw ill		-	-	-	1,293,818	-	-	-	-	-	-
Result of the period	219	-	29	4,862	225,101	87	-	-	318	38,127	-
c) Balance of investments on March 31,
2011										-
Balance of the investment in the
beginning of the year	9,459	-	1,873	5,699	7,691,833	31,442	263	51	(411)	933,163	-	8,673,372	9,085,572
Equity method	193	-	29	2,431	242,334	57	-	1	286	38,127	-	283,458	907,910
Unrealized profit in
inventory	-	-	-	-	-	-	-	-	(547)	-	-	(547)	(2,697)
Treasury shares	-	-	-	-	-	-	-	-	-	-	-	-	26,772
Foreign-exchange
variation	-	-	-	-	-	-	-	-	(30)	37,208	-	37,178	(107,382)
Other comprehensive
income	-	-	-	-	(8,556)	-	-	-	-	(923)	-	(9,479)	(46,543)
Capital increase	-	-	-	-	-	-	-	-	-	-	-	-	825,446
Dividends and interest on the
shareholders’ equity	-	-	-	-	-	-	-	-	-	-	-	-	(215,723)
Merger	-	-	-	-	-	-	-	-	-	-	-	-	(1,799,983)
Balance of investments as of March 31,
2011	9,652	-	1,902	8,130	7,925,611	31,499	263	52	(702)	1,007,575	-	8,983,982	8,673,372

83

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

The amounts of the gains resulting from foreign-exchange variation on the investments in subsidiaries abroad, whose functional currency is Brazilian Reais, in the amount of R$9,707 on March 31, 2011 (R$10,492 losses on March 31, 2011), are recognized in the revenues or financial expenses in the statement of income (note 32). The exchange variation resulting from the investment in the subsidiary Plusfood Groep B.V. and its controlled companies, whose functional currency is the Euro, was recorded in the equity evaluation adjustments, in the subgroup of shareholders’ equity.

1.1. Interest in affiliated companies

	UP! — 03.31.11	12.31.10	K&S — 03.31.11	12.31.10
Current
assets	30,461	22,673	12,499	14,975
Noncurrent
assets	36	-	17,585	17,335
Current
liabilities	(14,236)	(11,274)	(8,018)	(9,749)
Noncurrent
liabilities	-	-	(627)	(585)
Net
assets	16,261	11,399	21,439	21,976
	UP!		K&S
	03.31.11	03.31.10	03.31.11	03.31.10
Net
revenues	27,584	20,617	15,402	17,472
Net
income	4,862	3,569	(537)	247

84

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

16. PROPERTY, PLANT & EQUIPMENT

The property, plant and equipment rollforward is presented below:

							BR GAAP
							Parent
company
	Rate					Transfer to
held
	p.a. %	12.31.10	Acquisitions	Write-offs	Transfers	for sale	03.31.11
Cost
Land		140,422	-	(1)	79	(1,201)	139,299
Buildings and improvements		1,658,050	-	(588)	12,111	(4,113)	1,665,460
Machinery and equipment		2,287,259	5,066	(5,189)	34,730	(143)	2,321,723
Facilities		293,963	21	(938)	2,328	(7)	295,367
Furniture		46,345	291	(331)	758	-	47,063
Vehicles and aircrafts		19,004	263	(160)	42	(157)	18,992
Others		103,419	298	-	2,090	-	105,807
Construction in progress		137,565	79,472	-	(48,301)	-	168,736
Advances to suppliers		2,808	3,910	-	(4,009)	-	2,709
		4,688,835	89,321	(7,207)	(172)	(5,621)	4,765,156
Depreciation
Buildings and improvements	3.44	(470,586)	(13,139)	899	(715)	2,672	(480,869)
Machinery and equipment	6.08	(943,469)	(27,697)	5,168	267	132	(965,599)
Facilities	3.57	(83,790)	(3,056)	738	451	1	(85,656)
Furniture	6.25	(19,591)	(614)	263	12	-	(19,930)
Vehicles and aircrafts	14.29	(12,101)	(505)	113	(7)	151	(12,349)
Others	1.45	(24,664)	(1,083)	-	-	-	(25,747)
		(1,554,201)	(46,094)	7,181	8	2,956	(1,590,150)
		3,134,634	43,227	(26)	(164)	(2,665)	3,175,006

85

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | | | | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | | | Consolidated |
| | Rate | | | | | Transfer
to | Exchange | |
| | p.a.% | 12.31.10 | Acquisitions | Write-offs | Transfers | held for
sale | rate
variation | 03.31.11 |
| Cost | | | | | | | | |
| Land | | 617,434 | - | (82) | 86 | (1,201) | 19 | 616,256 |
| Buildings and improvements | | 4,669,143 | 1,383 | (2,891) | 17,051 | (4,113) | 440 | 4,681,013 |
| Machinery and equipment | | 5,232,486 | 5,007 | (23,880) | 74,862 | (143) | 2,232 | 5,290,564 |
| Facilities | | 1,309,899 | 343 | (1,304) | 11,069 | (7) | 9 | 1,320,009 |
| Furniture | | 81,492 | 408 | (545) | 210 | - | 194 | 81,759 |
| Vehicles and aircrafts | | 28,543 | 359 | (156) | 50 | (157) | (3) | 28,636 |
| Others | | 174,580 | 3,314 | (811) | 2,018 | - | - | 179,101 |
| Construction in progress | | 249,129 | 127,318 | 35 | (71,983) | - | 16 | 304,515 |
| Advances to suppliers | | 47,533 | 14,046 | 5 | (34,038) | - | - | 27,546 |
| | | 12,410,239 | 152,178 | (29,629) | (675) | (5,621) | 2,907 | 12,529,399 |
| | | 12,410,239 | 152,178 | (29,629) | (675) | (5,621) | 2,907 | 12,529,399 |
| Depreciation | | | | | | | | |
| Buildings and improvements | 3.00 | (1,036,285) | (33,354) | 1,933 | (755) | 2,672 | (315) | (1,066,104) |
| Machinery and equipment | 5.25 | (1,902,922) | (52,847) | 13,951 | 214 | 132 | (1,026) | (1,942,498) |
| Facilities | 3.41 | (327,028) | (10,726) | 1,074 | 511 | 1 | (2) | (336,170) |
| Furniture | 5.76 | (38,134) | (1,350) | 407 | 42 | - | (139) | (39,174) |
| Vehicles and aircrafts | 14.41 | (15,027) | (684) | 139 | (1) | 151 | 1 | (15,421) |
| Others | 1.42 | (24,012) | (1,680) | 623 | 1 | - | - | (25,068) |
| | | (3,343,408) | (100,641) | 18,127 | 12 | 2,956 | (1,481) | (3,424,435) |
| | | (3,343,408) | (100,641) | 18,127 | 12 | 2,956 | (1,481) | (3,424,435) |
| | | 9,066,831 | 51,537 | (11,502) | (663) | (2,665) | 1,426 | 9,104,964 |

86

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

The acquisition during the current quarter are substantially represented for construction in progress in the total amount of (R$127,318) and advances to suppliers (R$14,046) which comprise: (i) (R$14,952) expansion of the poultry slaughtering capacity of the cold warehouse in Lucas do Rio Verde plant; (ii) (R$13,950) expansion related to the transformation of the turkey production line to chicken in Carambei plant; (iii) (R$11,267) expansion of the production capacity of margarine in Uberlândia plant; (iv) (R$8,457) expansion of the production line of the “ escondidinho ” product; (v) (R$7,049) expansion with the construction of new plant to produce powder milk in Três de Maio in the state of Rio Grande do Sul; and (R$3,817) expenditure with replacement of fixed assets for Nova Mutum plant where a fire occurred in March 2011.

The disposals are mainly related to obsolete items in the total amount of R$10,806.

During the three month period ended on March 31, 2011, the Company capitalized interests in the approximately amount of R$3,296 (R$5,303 in March 31, 2010). The interest rate utilized to determine the amount to be capitalized was 5.70%.

On March 31, 2011 and 2009, the Company had no commitments assumed related to acquisition and/or construction of properties.

The property, plant and equipment that are held as collateral of transactions of different natures are presented below:

			BR GAAP
			Parent
Company
		03.31.11	12.31.10
		Book value
of	Book value
of
	Type of
collateral	the
collateral	the collateral
Land	Financial/Employment/Tax/Civil	50,163	51,591
Buildings and
improvements	Financial/Employment/Tax/Civil	641,062	648,956
Machinery and
equipment	Financial/Employment/Tax	740,185	728,233
Facilities	Financial/Employment/Tax	185,278	189,931
Furniture and
utensil	Financial/Employment/Tax/Civil	8,762	9,610
Vehicles and
aircrafts	Financial/Tax	982	913
Others	Financial/Employment/Tax/Civil	92,883	90,959
		1,719,315	1,720,193

87

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | BR GAAP and
IFRS | |
| --- | --- | --- | --- |
| | | | Consolidated |
| | | 03.31.11 | 12.31.10 |
| | | Book value
of | Book value
of |
| | Type of
collateral | the
collateral | the collateral |
| Land | Financial/Employment/Tax/Civil | 185,731 | 187,159 |
| Buildings and
improvements | Financial/Employment/Tax/Civil | 1,918,398 | 1,926,292 |
| Machinery and
equipment | Financial/Employment/Tax | 2,040,624 | 2,028,672 |
| Facilities | Financial/Employment/Tax | 696,350 | 701,003 |
| Furniture and
utensil | Financial/Employment/Tax/Civil | 16,610 | 17,458 |
| Vehicles and
aircrafts | Financial/Tax | 1,367 | 1,297 |
| Others | Financial/Employment/Tax/Civil | 150,563 | 148,639 |
| | | 5,009,643 | 5,010,520 |

The Company is not allowed to assign these assets as security for other transactions or to sell them.

17. INTANGIBLE

Intangible assets comprise of the following items:

					BR GAAP
				Parent
company
	Rate		Accumulated
	p.a.%	Cost	amortization	03.31.11	12.31.10
Goodwill	-	1,520,488	-	1,520,488	1,520,488
Software	20.00	88,581	(13,630)	74,951	63,968
Patents	10.00	3,057	-	3,057	3,057
Outgrowers
fidelization	12.50	1,775	(55)	1,720	1,775
		1,613,901	(13,685)	1,600,216	1,589,288
				BR GAAP and
IFRS
					Consolidated
	Rate		Accumulated
	p.a.%	Cost	amortization	03.31.11	12.31.10
Goodwill	-	2,833,519	-	2,833,519	2,832,974
Brands	-	1,256,000	-	1,256,000	1,256,000
Software	20.00	240,498	(131,396)	109,102	100,339
Relationship with
suppliers	42.00	135,000	(98,182)	36,818	50,844
Patents	10.00	5,632	(350)	5,282	5,332
Outgrowers
fidelization	12.50	1,775	(55)	1,720	1,775
		4,472,424	(229,983)	4,242,441	4,247,264

The intangible assets rollforward is presented below:

88

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

					BR GAAP
				Parenty
company
	12.31.10	Additions	Amortization	Transfers	03.31.11
Cost
Software	76,120	12,289	-	172	88,581
Patents	3,057	-	-	-	3,057
Outgrowers fidelization	1,775	-	-	-	1,775
Goodwill:	1,520,488	-	-	-	1,520,488
Eleva Alimentos	1,273,324	-	-	-	1,273,324
Batávia	133,163	-	-	-	133,163
Ava	49,368	-	-	-	49,368
Cotochés	39,590	-	-	-	39,590
Paraíso Agroindustrial	16,751	-	-	-	16,751
Perdigão Mato Grosso	7,636	-	-	-	7,636
Incubatório Paraíso	656	-	-	-	656
	1,601,440	12,289	-	172	1,613,901
Amortization
Software	(12,152)	(1,470)	-	(8)	(13,630)
Trademarks	-	(55)	-	-	(55)
	(12,152)	(1,525)	-	(8)	(13,685)
	1,589,288	10,764	-	164	1,600,216

| | | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- |
| | | | | | Consolidated |
| | | | | Exchange | |
| | 12.31.10 | Additions | Transfers | rate
variation | 03.31.11 |
| Cost | | | | | |
| Software | 223,191 | 16,632 | 675 | - | 240,498 |
| Relationship with suppliers | 135,000 | - | - | - | 135,000 |
| Patents | 5,632 | - | - | - | 5,632 |
| Trademarks | 1,256,000 | - | - | - | 1,256,000 |
| Outgrowers fidelization | 1,775 | - | - | - | 1,775 |
| Goodwill: | 2,832,974 | - | - | 545 | 2,833,519 |
| Sadia | 1,293,818 | - | - | - | 1,293,818 |
| Eleva Alimentos | 1,273,324 | - | - | - | 1,273,324 |
| Batávia | 133,163 | - | - | - | 133,163 |
| Ava | 49,368 | - | - | - | 49,368 |
| Cotochés | 39,590 | - | - | - | 39,590 |
| Paraíso Agroindustrial | 16,751 | - | - | - | 16,751 |
| Plusfood | 14,618 | - | - | 545 | 15,163 |
| Perdigão Mato Grosso | 7,636 | - | - | - | 7,636 |
| Sino dos Alpes | 4,050 | - | - | - | 4,050 |
| Incubatório Paraíso | 656 | - | - | - | 656 |
| | 4,454,572 | 16,632 | 675 | 545 | 4,472,424 |
| Amortization | | | | | |
| Software | (122,852) | (8,549) | (12) | 17 | (131,396) |
| Relationship with suppliers | (84,156) | (14,026) | - | - | (98,182) |
| Patents | (300) | (50) | - | - | (350) |
| Outgrowers fidelization | - | (55) | - | - | (55) |
| | (207,308) | (22,680) | (12) | 17 | (229,983) |
| | 4,247,264 | (6,048) | 663 | 562 | 4,242,441 |

89

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

The Company conducted the test of reduction to the recoverable value of assets based on fair value in use that was determined by a discounted cash flow model, in accordance with level of allocation of goodwill and intangibles to the group of cash generating units in the last quarter of 2010, during the three month period ended March 31, 2011, Management has not identified any event related to impairment factor of these assets and, therefore, no test was performed in the current quarter.

18. ACCOUNTS PAYABLE

| | BR GAAP | Parent
company | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Domestic
suppliers | | | | |
| Third parties | 1,003,855 | 1,053,902 | 1,900,330 | 1,952,056 |
| Related parties | 11,800 | 6,769 | 4,491 | 1,323 |
| | 1,015,655 | 1,060,671 | 1,904,821 | 1,953,379 |
| Foreign
suppliers | | | | |
| Third parties | 31,743 | 35,806 | 134,161 | 105,817 |
| Related parties | 2,078 | 1,898 | - | - |
| | 33,821 | 37,704 | 134,161 | 105,817 |
| | 1,049,476 | 1,098,375 | 2,038,982 | 2,059,196 |

Accounts payable to suppliers are not subject to the incidence of interest and are generally settled in average within 34 days.

The information on accounts payable involving related parties is presented in note 27.

90

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

19. LOANS AND FINANCING

					BR GAAP
					Parent
company
		Average
interest rate				Balance	Balance
	Charges
(p.a.)	(p.a.)	WAMT (*)	Short term	Long term	03.31.11	12.31.10
Local
currency
	6.74%	6.74%
Working capital	(6.74%on
12.31.10)	(6.74%on
12.31.10)	0.5	405,065	1,601	406,666	417,181
BNDES, FINEM, credit facilities of
development	TJLP
+2.89%	8.01%
banks and other secured debts	(TJLP +2.86%on
12.31.10)	(8.07%on
12.31.10)	1.7	156,114	357,796	513,910	549,291
	TJLP/CDI
+4.42%	10.42%
Export credit facility	(TR/TJLP/CDI
+4.42%on 12.31.10)	(10.42%on
12.31.10)	0.9	138,752	248,709	387,461	387,717
	IGPM
+1.63%	2.04%
Tax incentives	(IGPM +1.40%on
12.31.10)	(1.99%on
12.31.10)	9.0	22	18,416	18,438	10,469
				699,953	626,522	1,326,475	1,364,658
Foreign
currency
	LIBOR/CDI
+2.90%(LIBOR/CDI +2.84%
	on 12.31.10)
+e.r. (US$ and others	3.36%(3.30%on
12.31.10) +e.r.
Export credit facility	currencies)	(US$ and others
currencies)	2.0	276,840	643,479	920,319	809,745
BNDES, FINEM, credit facilities of
development	UM BNDES
+2.46%(UM BNDES +2.46%
	on 12.31.10)
+e.r. (US$ and others	6.58%(6.61%on
12.31.10) +e.r.
banks and other secured debts	currencies)	(US$ and others
currencies)	1.4	16,427	32,055	48,482	53,992
				293,267	675,534	968,801	863,737
				993,220	1,302,056	2,295,276	2,228,395

(*) Weighted average maturity date in years.

91

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | | | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | | | | | | Consolidated | |
| | | Average
interest rate | | | | Balance | Balance |
| | Charges (%
p.a.) | (%p.a.) | WAMT () | Short term | Long term | 03.31.11 | 12.31.10 |
| Local
currency | | | | | | | |
| | 6,74% | 6,74% | | | | | |
| Working capital | (6,75%on
12.31.10) | (6,81%on
12.31.10) | 0.5 | 852,377 | 11,600 | 863,977 | 881,300 |
| BNDES, FINEM, credit facilities of | | | | | | | |
| development banks and other secured | TJLP
+2,89% | 8,01% | | | | | |
| debts | (TJLP +2,86%on
12.31.10) | (8,45%on
12.31.10) | 1.7 | 561,415 | 1,265,160 | 1,826,575 | 1,934,187 |
| | TJLP / CDI
+4,42% | 10,42% | | | | | |
| Export credit facility | (TJLP/CDI
4,42%on 12.31.10) | (10,42%on
12.31.10) | 0.9 | 138,753 | 248,710 | 387,463 | 387,717 |
| | IGPM
+1,63% | 2,04% | | | | | |
| Tax incentives | (IGPM /1,40%on
12.31.10) | (3,00 %on
12.31.10) | 9.0 | 2,431 | 18,416 | 20,847 | 12,869 |
| | | | | 1,554,976 | 1,543,886 | 3,098,862 | 3,216,073 |
| Foreign currency | | | | | | | |
| | 7,83% | 7,38% | | | | | |
| Bonds | (7,13%on
12.31.10) | (7,13%on
12.31.10) | 9.0 | 24,841 | 1,610,751 | 1,635,592 | 1,688,919 |
| | LIBOR / CDI
+1,80%(LIBOR/CDI 2,24%on | 2,27%(2,30%on
12.31.10) +e.r. (US$ and | | | | | |
| Export credit facility | 12.31.10) +e.r.
(US$ and other currencies) | other
currencies) | 2.3 | 613,330 | 1,814,986 | 2,428,316 | 2,108,303 |
| BNDES, FINEM, credit facilities of | | | | | | | |
| development banks and other secured | UM BNDES
+2.46%(UM BNDES +2.46%on | (6,61%on
12.31.10) +e.v. (US$ and other | | | | | |
| debts | 12.31.10) +e.r.
(US$ and other currencies) | currencies) | 1.4 | 52,898 | 117,438 | 170,336 | 189,644 |
| | | | | 691,069 | 3,543,175 | 4,234,244 | 3,986,866 |
| | | | | 2,246,045 | 5,087,061 | 7,333,106 | 7,202,939 |
| ()
Weighted average maturity date in years. | | | | | | | |

92

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

During the three month period ended on March 31, 2011 the Company did not hired new types of loans and financing, and for this reason, the description with the main characteristics of the debts was not presented, the detailed information was provided in the annual financial statements for the year ended December 31, 2010 (note 21).

18.1. Loans and financing maturity schedule

The maturity schedule of the loans and financing balances is as follow:

| | BR GAAP | BR GAAP and
IFRS |
| --- | --- | --- |
| | Parent
company | Consolidated |
| | 03.31.11 | 03.31.11 |
| 2011 | 993,218 | 2,223,028 |
| 2012 | 702,900 | 1,692,622 |
| 2013 | 309,413 | 668,469 |
| 2014 | 54,503 | 206,486 |
| 2015 to
2044 | 235,242 | 2,542,501 |
| | 2,295,276 | 7,333,106 |

18.2. Guarantees

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 12.31.09 | 03.31.11 | 12.31.09 |
| Total of loans
and financing | 2,295,276 | 2,228,395 | 7,333,106 | 7,202,939 |
| Mortgage guarantees | 555,198 | 589,041 | 1,663,464 | 1,668,111 |
| Related to FINEM-BNDES | 482,139 | 525,282 | 1,425,052 | 1,438,823 |
| Related to FNE-BNB | - | - | 165,353 | 165,529 |
| Related to tax incentives and other | 73,059 | 63,759 | 73,059 | 63,759 |
| Statutory lien on assets purchased with
financing | 9,885 | 10,845 | 10,187 | 11,218 |
| Related to FINEM-BNDES | 9,861 | 10,801 | 9,861 | 10,801 |
| Related to FINAME-BNDES | - | - | 302 | 373 |
| Related to tax incentives and other | 24 | 44 | 24 | 44 |

The subsidiary Sadia is the guarantor of a loan obtained by Instituto Sadia de Sustentabilidade at the National Bank for Economic and Social Development (“BNDES”). This loan is aimed at the implementation of biodigesters on the properties of the rural producers taking part in the Sadia integration system, targeting the mechanism of clean development and reduction of greenhouse gas emission. The value of these sureties on March 31, 2011 totaled R$85,359 (R$83,899 on December 31, 2010).

Sadia is guarantor of loans related to a special program, which aimed the development of outgrowers in the central region of Brazil. The proceeds of such loans shall be utilized to improve farm conditions and will be paid in 10 years. The actual collateral is the land and equipment acquired by the outgrowers. The total of guarantee as of March 31, 2011 amounted R$545,609 (R$562,474 as of December 31, 2010).

93

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

On March 31, 2011, the Company contracted guarantees in the amount of R$435,419 (R$456,685 on December 31, 2010) offered mainly in litigation which were discussed the use of tax credits. These guarantees have an average cost of 1.16% p.a. (1.19% p.a. on December 31, 2010)

18.3. Committments

In the normal course of business, the Company enters into regular agreements with third parties for the purchase of raw materials, mainly corn, soymeal and pork, where the agreed prices can be fixed or to be fixed. On March 31, 2011, these firm purchase commitments totaled R$597.453 at the parent company and R$1,895,480 in the consolidated quarterly information (R$630,346 at the parent company and R$1,819,093 in the consolidated quarterly financial information on December 31, 2010), considering the market value of the commodities on the date of these quarterly financial information.

18.4. Covenants

During the quarter the Company amended the pre exporting payments agreements and as a consequence the financial covenants clauses were excluded.

94

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

19. OTHER FINANCIAL ASSETS AND LIABILITIES

| | | BR GAAP | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- | --- |
| | | Parent
company | | | Consolidated |
| | | 03.31.11 | 12.31.10 | 03.31.11 | 12.31.10 |
| Derivative
financial instruments | | | | | |
| Cash flow hedge | | | | | |
| Assets | | | | | |
| Currency forward contracts | (NDF) | 74,578 | 85,377 | 74,578 | 85,377 |
| Currency option contracts | | 1,784 | 2,068 | 1,784 | 2,068 |
| Swap / currency contracts | | 1,442 | - | 1,442 | - |
| | | 77,804 | 87,445 | 77,804 | 87,445 |
| Liabilities | | | | | |
| Currency forward contracts | (NDF) | (1,017) | - | (1,017) | - |
| Swap / currency contracts | | (68,703) | (78,254) | (72,020) | (78,254) |
| | | (69,720) | (78,254) | (73,037) | (78,254) |
| Derivatives not designated as hedge | | | | | |
| Assets | | | | | |
| Currency forward contracts | (NDF) | - | - | 7,484 | 11,149 |
| Live cattle forward contracts | | 34 | - | 34 | - |
| Live cattle option contracts | | 120 | 2 | 120 | 2 |
| | | 154 | 2 | 7,638 | 11,151 |
| Liabilities | | | | | |
| Currency forward contracts | (NDF) | - | - | (1,738) | (1,676) |
| Live cattle forward contracts | | (652) | - | (652) | - |
| Live cattle option contracts | | (1,210) | (227) | (1,210) | (227) |
| Swap contracts | | (705) | (886) | (705) | (886) |
| Dollars future contracts | | (145) | (1,104) | (145) | (1,104) |
| Live cattle future contracts | | (105) | (17) | (105) | (17) |
| | | (2,817) | (2,234) | (4,555) | (3,910) |
| Current
assets | | 77,958 | 87,447 | 85,442 | 98,596 |
| Current
liabilities | | (72,537) | (80,488) | (77,592) | (82,164) |

The collateral given in the transactions presented above are disclosed in note 7.

20. LEASING

The Company is lessee in several contracts, which can be classified as operating or capital lease.

20.1. Operating lease

The minimum future payments of operating lease agreements not cancelable, in total and for each of the following years, is presented below:

95

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | BR GAAP | BR GAAP and
IFRS |
| --- | --- | --- |
| | Parent
company | Consolidated |
| | 03.31.11 | 03.31.11 |
| 2011 | 57,822 | 175,982 |
| 2012 | 66,685 | 167,277 |
| 2013 | 44,067 | 44,074 |
| 2014 | 31,260 | 31,260 |
| 2015
onwards | 29,991 | 29,991 |
| | 229,825 | 448,584 |

The payments of lease agreements recognized as expense amount to R$65,813 on December 31, 2010 (R$59,629 on December 31, 2010).

20.2. Capital lease

The Company maintained control of the assets leased, reflected in the item of machines and equipment, whose amounts have the following balances:

| | | BR GAAP and
IFRS |
| --- | --- | --- |
| | | Consolidated |
| | 03.31.11 | 12.31.09 |
| Cost | 20,163 | 19,546 |
| Accumulated
depreciation (*) | (12,569) | (11,261) |
| Residual | 7,594 | 8,285 |

(*) The leased assets are depreciated using the rate defined in note 18 for machinery and equipment or according to the duration of the contract, whichever is lower, as determined by CVM Deliberation No. 554/08.

The minimum mandatory future payments below are separated by categories and were entered in the balance sheet as other obligations:

| | | | BR GAAP and
IFRS |
| --- | --- | --- | --- |
| | | | Consolidated |
| | Present value
of | | Minimum
future |
| | minimum
payments | Interest | payments |
| | 03.31.11 | 03.31.11 | 03.31.11 |
| 2011 | 4,316 | 270 | 4,586 |
| 2012 | 3,371 | 243 | 3,614 |
| 2013 | 851 | 88 | 939 |
| 2014 | 154 | 26 | 180 |
| 2015
onwards | 43 | 9 | 52 |
| | 8,735 | 636 | 9,371 |

Certain lease contracts have clauses of renewal practiced in the market and there is no clause of contingent payment.

96

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

21. SHARE BASED PAYMENT

The rules of the stock option plan granted to Company’s executives, as well as the assumptions adopted to measure the obligation amount were disclosed in the annual financial statements for the year ended December 31, 2010 (note 24) and have not changed in the current quarter.

A breakdown of the outstanding granted options is as follow:

| Date | | | Quantity | | Price of converted — share | | Share
price |
| --- | --- | --- | --- | --- | --- | --- | --- |
| | Beginning | End | Options | Outstanding | Granting | Updated | |
| Grant date | of the
year | of the
year | granted | options | date | INPC | 03.31.11 |
| 09/26/06 | 09/26/09 | 09/26/11 | 936,306 | 208,807 | 21.35 | 27.34 | 30.83 |
| 09/27/07 | 09/27/10 | 09/27/12 | 1,329,980 | 581,201 | 37.70 | 46.05 | 30.83 |
| 05/03/10 | 02/05/11 | 02/05/15 | 1,540,011 | 1,540,011 | 21.35 | 24.71 | 30.83 |
| 07/01/10 | 06/30/11 | 06/30/15 | 36,900 | 36,900 | 37.70 | 25.98 | 30.83 |

The weighted average of strike prices of the options is twenty-four Brazilian Reais and twenty-one cents (R$31.02), and the weighted average of the remaining contractual term is 36.32 months.

On March 31, 2011, the Company recognized in shareholders’ equity the fair value of the options in the amount of R$8,395 (R$6,586 on December 31, 2010). In the statement of income an expense in the amount of R$476 (R$1,100 expense reversal on March 31, 2010) was recorded.

During the quarter Sadia’s executives exercised the vested right related to the option previously granted by the subsidiary, in a total quantity of 53,200 shares, for the amount of R$1,556, with average price of R$29.27 (twenty nine Brazilian Reais and twenty seven cents). As a consequence, the treasury shares balance was reduced in R$50 and an increase in capital reserve of R$1,506 was recorded.

22. SUPPLEMENTARY PLAN OF RETIREMENT AND OTHER BENEFITS TO EMPLOYEES

The Company offers supplementary retirement plans and other benefits to their employees. In the annual financial statements for the year ended December 31, 2010 (nota 25) the characteristics of the supplementary retirement plan and of the other benefits were provided, no changes occurred in the current quarter.

The assets and actuarial liabilities and the effects in the statement of income are presented below:

97

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | | | BR GAAP and
IFRS | |
| --- | --- | --- | --- | --- |
| | | | | Consolidated |
| | | Liabilities | Statement of
income | |
| | 03.31.11 | 12.31.10 | 03.31.11 | 03.31.10 |
| Retirement
supplementary plan - PSPP | - | - | (1,950) | (65) |
| Retirement
supplementary plan - FAF | - | - | 12,963 | (14,969) |
| Medical
assistance | 69,549 | 67,205 | (2,344) | (774) |
| Penalty F.G.T.S.
(Government severance indemnity fund for | 144,333 | 137,878 | (6,455) | (5,111) |
| employees,
guarantee fund for length of service) | | | | |
| Reward for working
time | 49,769 | 47,374 | (2,395) | (1,608) |
| Indemnity for
termination | 8,010 | 7,655 | (355) | 17 |
| Indemnity for
retirement | 14,930 | 14,386 | (544) | 686 |
| | 286,591 | 274,498 | (1,080) | (21,824) |

23. PROVISION FOR TAX, CIVIL AND LABOR RISK

The Company and its subsidiaries are involved in certain legal proceedings arising from the regular course of business, which include civil, administrative, tax, social insurance and labor lawsuits.

The Company classifies the risk of adverse decisions in the legal suits as “remote”, “possible” or “probable”. The provisions recorded by the Company in its consolidated financial statements relating to such proceedings fairly reflect the probable losses as determined by the Company’s management, based on legal advice and for which the amount of probable losses is known or can be reasonably estimated.

The Company is involved in certain judicial proceedings for which the amount of probable losses is not known or cannot reasonably be estimated, especially in the civil area. The Company, with the assistance of its legal counsel, monitors the course of these claims and classifies the probability of losses in such cases as possible or remote.

The Company’s Management believes that the recorded provision for contingencies, according to CVM Deliberation No. 594/09 is sufficient to cover eventual losses related to its legal proceedings, as presented below:

23.1. Contingencies for probable losses

The rollforward of the provision for tax, labor and legal risks is summarized below:

98

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

						BR GAAP
					Parent
company
					Price
index
	12.31.10	Additions	Reversions	Payments	update	03.31.11
Tax	182,657	8,470	(3,972)	(2,144)	1,897	186,908
Labor	38,141	12,271	(3,630)	(9,311)	1,825	39,296
Civil, commercial
and other	26,371	1,949	(512)	(558)	1,163	28,413
	247,169	22,690	(8,114)	(12,013)	4,885	254,617
Current	43,853					44,903
Non-current	203,316					209,714
					BR GAAP and
IFRS
						Consolidated
					Price
index
	12.31.10	Additions	Reversions	Payments	update	03.31.11
Tax	281,454	16,889	(6,847)	(2,144)	2,233	291,585
Labor	110,152	20,229	(7,342)	(17,108)	1,832	107,763
Civil, commercial
and other	97,014	2,404	(12,364)	(31,471)	1,340	56,923
Contingent
liabilities	630,258	-	-	(45,765)	-	584,493
	1,118,878	39,522	(26,553)	(96,488)	5,405	1,040,764
Current	65,138					145,342
Non-current	1,053,740					895,422

During the three month period ended March 31, 2011, the were no changes in the nature of the main lawsuits which comprise the amounts presented above, a detailed description of the relevant claims was disclosed in the annual financial statements for the year ended December 31, 2010 (note 26).

23.2. Contingencies classified as a risk of possible loss

The Company is involved in other tax, civil, labor and social security contingencies, for which losses have been assessed as possible, based on the analysis of Company’s management and its legal counsels.

The tax contingencies amounted to R$3,779,473 (R$3,523,675 as of December 31, 2010), of which R$578,493 (R$578,493 as of December 31, 2010) relate to the corresponding estimated fair value of contingent liabilities resulting from the business combination with Sadia, according to paragraph 23 of CVM Deliberation No. 580/09, presented in the table above, item 24.1.

During the three month period ended March 31, 2011, the were no changes in the nature of the main lawsuits which comprise the amounts presented above, a detailed description of the relevant claims that the probability of loss was considered possible was disclosed in the annual financial statements for the year ended December 31, 2010 (note 26).

99

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

The subsidiary Sadia and some of its current and former executives were nominated as defendant in five class actions suits arising from investors of American Depositary Receipts (“ADR’s”) issued by Sadia and acquired between April 30, 2008 and September 26, 2008 (Class Period). These claims were filed in the Southern District of New York court in the United States of America, seeking remediation in accordance with Securities Exchange Act of 1934 arising from losses on foreign exchange derivative contracts. By order of the American court, the five class actions suits were consolidated into a single case (class action) on behalf of the Sadia’s investors group. As allowed by the CVM Deliberation No. 594/09, paragraph 92, the Company’s Management has not disclosed any additional information related to this legal suit because it could be harmful to its defense.

24. SHAREHOLDERS’ EQUITY

24.1. Capital social

On March 31, 2011, the capital subscribed and paid by the Company is R$12,553,417,953.36 (twelve billion, five hundred and fifty-three million, four hundred and seventeen thousand, nine hundred and fifty-three Brazilian Reais and thirty-six cents), composed of 872,473,246 book-entry shares of common stock without par value. The realized value of the capital stock in the balance sheet is net of the expenses with public offering in the amount of R$92,947.

The Company is authorized to increase the capital stock, irrespective of amendment to the bylaws, up to the limit of 1,000,000,000 shares of common stock, in book-entry form, and without par value.

24.2. Breakdown of capital stock

| | BR GAAP and
IFRS | |
| --- | --- | --- |
| | | Consolidated |
| | 03.31.11 | 12.31.10 |
| Common
shares | 872,473,246 | 872,473,246 |
| Treasury
shares | (727,972) | (781,172) |
| Outstanding
shares | 871,745,274 | 871,692,074 |

24.3. Treasury shares

The Company has 727,972 shares of treasury stock, acquired in previous fiscal years with funds from appropriated retained earnings, at the average cost of ninety-five cents of real (R$0.95) per share, for future disposal or cancellation. The decrease in the number of treasury stock took place because of the exercise of the stock options of Sadia executives.

100

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

24.4. Breakdown of the capital by owner

The shareholding position of the largest shareholders, management, members of the Board of Directors and Fiscal Council of the Company is presented below (not reviewed):

Shareholders	03.31.11 — Quantity	%	12.31.10 — Quantity	%
Main
shareholders
Shareholders’ that
take part of voting agreement	262,752,654	30.12	244,567,498	28.03
Tarpon	69,988,490	8.02	61,106,290	7.00
Management:		-		-
Board of directors	14,306,682	1.64	14,313,032	1.64
Executives	646	-	646	-
Treasury
shares	727,972	0.08	781,172	0.09
Others	524,696,802	60.14	551,704,608	63.24
	872,473,246	100.00	872,473,246	100.00

The shareholding position of the controlling shareholders that belong to the voting agreement and/or holders of more than 5% of the voting stock are presented below (not reviewed):

Shareholders	03.31.11 — Quantity	%	12.31.10 — Quantity	%
Caixa de Previd.
dos Func. do Banco do Brasil (¹)	111,309,520	12.76	110,846,320	12.70
Fundação Petrobrás
de Seguridade Social - Petros (¹)	90,014,526	10.32	87,560,126	10.04
Fundação Sistel de
Seguridade Social (¹)	13,127,812	1.50	13,127,812	1.50
Fundação Vale do
Rio Doce de Seg. Social - Valia (¹)	25,827,990	2.96	25,828,036	2.96
FPRV1 Sabiá FIM
Previdenciário (2)	6,523,204	0.75	7,205,204	0.83
Tarpon	69,988,490	8.02	61,106,290	7.00
	316,791,542	36.31	305,673,788	35.03
Others	555,681,704	63.69	566,799,458	64.97
	872,473,246	100.00	872,473,246	100.00

(1) The pension funds are controlled by employees that participate in the respective companies.

(2) Investment fund held solely by the Fundação de Assistência e Previdência Social of BNDES-FAPES. The shares of common stock currently held by this fund are tied to the voting agreement signed by the Pension Funds.

On February 24, 2011 the Company paid the interest on own capital, as an additional dividend related to the profit of 2010 fiscal year, in the amount of R$209,300, equivalent to R$0.2402 for each 1,000 shares.

The Company is associated with the arbitration of the Arbitration Chamber of the Market, according to the Arbitration Clause inserted in its Bylaws.

101

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

25. EARNING PER SHARE

	03.31.11	03.31.10
Basic
numerator:
Net income for the period attributable to BRF
shareholders	383,468	61,119
Basic
denominator:
Ordinary shares	872,473,246	872,473,246
Weighted average number of outstanding
shares
(except treasury shares)	871,710,398	870,105,066
Net earnings
(loss) per share - basic - R$	0.4399	0.0702

	03.31.11	03.31.10
Diluted
numerator:
Net income for the
period attributable to BRF shareholders	383,468	61,119
Diluted
denominator:
Weighted average number of outstanding shares -
basic
(except treasury shares)	871,710,398	870,105,066
Weighted average number of potential shares (stock
options)	1,767,394	1,587,008
Weighted average number of outstanding shares -
diluted	873,477,792	871,692,074
Net earnings
per share - diluted - R$	0.4390	0.0701

On March 31, 2011, the total quantity of 581,201 (992,166 on March 31, 2010) common stock options granted to Sadia’s executives were not considered in the calculation of the diluted earnings per share due to the fact that the strike price was higher than the average market price of the common shares during the year and, therefore, the effect could not be diluted.

26. RELATED PARTIES - PARENT COMPANY

During its operations, rights and obligations are contracted between related parties, resulting from transactions of purchase and sale of products, transactions of loan agreed on normal conditions of market for similar transactions, based on contract.

26.1. Transactions and balances

On March 31, 2011, the balances of the assets and liabilities and transactions are demonstrated below:

102

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

| | Balance
sheet — 03.31.11 | 12.31.10 |
| --- | --- | --- |
| Accounts
receivable | | |
| UP! Alimentos Ltda. | 3,294 | 3,592 |
| Perdigão Europe Lda. | 34,377 | 64,175 |
| Perdigão International Ltd. | 136,001 | 121,918 |
| Wellax Foods Logistics C. P. A. S. U. Lda. | - | 659 |
| Sadia S.A. | 20,744 | 17,516 |
| | 194,416 | 207,860 |
| Dividends and
interest on the shareholders’ equity receivable | | |
| Avipal S.A. Construtora e Incorporadora | 5 | 5 |
| Sadia S.A. | 179,962 | 179,962 |
| | 179,967 | 179,967 |
| Loans
contracts | | |
| Instituto Perdigão de Sustentabilidade | 6,066 | 5,892 |
| Perdigão Trading S.A. | (586) | (570) |
| Perdigão International Ltd. | (163) | - |
| Highline International Ltd. | (2,970) | (3,039) |
| Establecimiento Levino Zaccardi y Cia S.A. | 3,795 | 3,883 |
| | 6,142 | 6,166 |
| Trade accounts
payable | | |
| Sino dos Alpes Alimentos Ltda. | 85 | 85 |
| UP! Alimentos Ltda. | 4,491 | 1,323 |
| Perdigão International Ltd. | 1,920 | 1,898 |
| Sadia S.A. | 7,382 | 5,361 |
| | 13,878 | 8,667 |
| Advance for
future capital increase | | |
| PSA Laboratório Veterinário Ltda. | 100 | 100 |
| | 100 | 100 |
| Other rights
and obligations | | |
| BFF International | 971 | 971 |
| VIP S.A. Empreendimentos e Participações
Imobiliárias | 15 | (3) |
| Sino dos Alpes Alimentos Ltda. | 9 | - |
| Perdigão Trading S.A. | 410 | 410 |
| Perdigão International Ltd. () | (762,954) | (560,657) |
| Establecimiento Levino Zaccardi y Cia S.A. | 1,026 | 1,049 |
| Avipal Centro Oeste S.A. | (39) | (39) |
| Sadia S.A. | (10) | (1) |
| | (760,572) | (558,270) |
| () The amount
corresponds to advances for export pre-payment | | |

103

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

	Statem ent of income — 03.31.11	03.31.10
Revenue
Avipal Nordeste S.A.	-	45,049
UP! Alimentos Ltda.	1,233	1,822
Perdigão Europe Lda.	129,228	141,458
Perdigão International Ltd.	620,733	568,439
Sadia S.A.	106,897	36,776
	858,091	793,544
Costs of
goods
Avipal Nordeste S.A.	-	(89,168)
VIP S.A. Empreendimentos e Participações
Imobiliárias	-	(3)
UP! Alimentos Ltda.	(28,583)	(22,322)
Establecimiento Levino Zaccardi y Cia S.A.	(2,060)	(321)
Sadia S.A.	(35,246)	-
	(65,889)	(111,814)
Financial
income, net
Instituto Perdigão de Sustentabilidade	172	137
Avipal Nordeste S.A.	-	(5,197)
Perdigão Trading S.A.	(17)	65
Perdigão International Ltd.	(8,758)	(12)
	(8,603)	(5,007)

All the companies listed above are controlled by BRF, except for UP! Alimentos Ltda. and K&S Alimentos S.A. which are affiliates.

The BRF participates in loan transactions, please find below a summary of the balances and rates charged for the transactions in excess of R$10,000 on the date of closing of the quarterly financial information:

Counterparty — Creditor	Debtor	Balance — 03.31.11	Interest rate
BFF
International	Perdigão
International	675,754	1.8% p.a. + E.R. -
US$
BFF
International	Wellax Food
Comércio	459,633	8.0% p.a. + E.R. -
US$
Crossban
Holdings	Perdigão
International	185,457	Eurolibor + E.R. -
EURO
Perdix International
Foods	Perdigão Holland
BV	38,535	8.0% p.a. + E.R. -
EURO
Perdigão Holland
BV	Plusfood BV	18,503	6.0% p.a. + E.R. -
EURO

The Company has entered into an operational leasing agreement with FAF. The total rent expense for three month ended March 31, 2011 amounted toR$2,680 (R$2,680 on March 31, 2010), the lease monthly payments were established in an arms-length transaction basis.

The wholly-owned subsidiary Sadia entered into a loan with the Instituto Sadia de Sustentabilidade. As of March 31, 2011 the total of receivables amounted to R$15,379 (R$14,949 on March 31, 2010) the interest rate agreed is 12% p.a.

104

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

26.2. Granted guarantees

All the relationships between the Company and its subsidiaries were disclosed irrespective of the existence or not of transactions between these parties.

All the transactions and balances among the companies were eliminated in the consolidation and refer to commercial and/or financial transactions.

26.3. Management remuneration

The key personnel of management include the directors and officers, members of the executive committee and the chief of internal audit, on March 31, 2011, there were 24 professionals in the parent company and 37 professionals in the consolidated and on December 31, 2010, 24 professionals in parent company controllership and 41 professionals in consolidated

The total remuneration and benefits paid to these professionals are demonstrated below:

| | BR GAAP and
IFRS | |
| --- | --- | --- |
| | | Consolidated |
| | 03.31.11 | 03.31.10 |
| Salary and profit
sharing | 18,290 | 16,266 |
| Short-term
benefits of employees (a) | 381 | 375 |
| Post-employment
benefits | 43 | 40 |
| Termination
benefits | - | 600 |
| Stock-based
payment | 476 | - |
| | 19,190 | 17,281 |

(a) Comprises: Medical assistance, educational expenses and others.

The value of the participation in the results paid to each officer in any period is related especially to the net income of the Company and to the assessment of the performance of the director during the fiscal year by the Board of Directors.

The supplementary members of the Board of Directors and of the Audit Committee are compensated for each meeting that they attend to. The members of the Board of Directors and Fiscal Council have no employment connection with the Company or provide services of any kind.

When the management and employees attain the age of 61 years, retirement is mandatory.

105

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

27. REVENUES

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 03.31.10 | 03.31.11 | 03.31.10 |
| Gross
sales | | | | |
| Domestic sales | 2,329,086 | 1,908,669 | 4,370,644 | 3,686,324 |
| Foreign sales | 1,007,655 | 898,856 | 2,492,012 | 2,128,337 |
| | 3,336,741 | 2,807,525 | 6,862,656 | 5,814,661 |
| Sales
deductions | | | | |
| Sales tax | (315,425) | (286,197) | (706,436) | (635,830) |
| Returns and rebates | (88,525) | (77,672) | (135,726) | (131,460) |
| | (403,950) | (363,869) | (842,162) | (767,290) |
| | 2,932,791 | 2,443,656 | 6,020,494 | 5,047,371 |

28. RESEARCH AND DEVELOPMENT COSTS

Consists of expenditures with internal research and development of new products, recognized when incurred in the statement of income. The total expenditure with research and development in the year ended March 31, 2011 is R$4,020 at the parent company and R$5,403 in the consolidated statement (R$3,314 at the parent company and R$4,543 in the consolidated statement on March 31, 2010).

29. EXPENSES WITH EMPLOYEE’S REMUNERATION

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 03.31.10 | 03.31.11 | 03.31.10 |
| Salaries and
social charges | 255,007 | 220,378 | 570,536 | 497,330 |
| Social security
cost | 67,551 | 55,607 | 143,205 | 123,103 |
| Government
severance indemnity fund for | | | | |
| employees,
guarantee fund for length of service | 19,150 | 15,949 | 39,888 | 34,233 |
| Medical assistance
and outpacient care | 12,478 | 11,635 | 30,400 | 28,391 |
| Retirement
supplementary plan | 1,927 | 1,662 | 3,012 | 3,015 |
| Employees profit
sharing | 9,854 | 19,861 | 50,288 | 20,816 |
| Other
benefits | 28,397 | 42,033 | 52,082 | 86,606 |
| Provision for
contingencies | 8,648 | 6,796 | 12,853 | 7,128 |
| | 403,012 | 373,921 | 902,264 | 800,622 |

106

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

30. OTHER OPERATING REVENUES (EXPENSES), NET

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 03.31.10 | 03.31.11 | 03.31.10 |
| Revenues | | | | |
| Net gains from the disposal of property, plant end
equipement | 1,326 | 900 | - | 865 |
| Insurance indemnity | 5,721 | 3,562 | 5,803 | 3,378 |
| Benefit plan | - | - | 12,963 | 14,969 |
| Recovery of expenses | 7,819 | - | 30,797 | 6,131 |
| Scrap sales | - | - | 2,561 | 1,208 |
| Other | 82 | 245 | 5,225 | 2,159 |
| | 14,948 | 4,707 | 57,349 | 28,710 |
| Expenses | | | | |
| Net losses from the disposal of property, plant and
equipement | - | - | (2,344) | (578) |
| Idleness costs | (10,759) | (13,100) | (26,081) | (37,176) |
| Insurance claims costs | (6,892) | (3,493) | (6,897) | (3,568) |
| Employees profit sharing | (9,854) | (19,861) | (50,288) | (20,816) |
| Stock options plan | (1,809) | - | (1,809) | - |
| Managment profit sharing | (1,913) | - | (1,913) | - |
| Project cancellation | - | - | - | (3,454) |
| Indemnity contracts | - | - | - | (2,444) |
| Other employee benefits | (5,058) | (4,804) | (12,093) | (7,332) |
| Provision for tax risks | (28,535) | (4,286) | (28,535) | (6,742) |
| Other | (2,077) | (2,325) | (11,016) | (7,151) |
| | (66,897) | (47,869) | (140,976) | (89,261) |
| Other
operating expenses, net | (51,949) | (43,162) | (83,627) | (60,551) |

107

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

31. FINANCIAL INCOME (EXPENSES), NET

| | BR GAAP — Parent
company | | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 03.31.10 | 03.31.11 | 03.31.10 |
| Financial
revenues | | | | |
| Interest on marketable securities | 2,750 | 503 | 6,834 | 3,527 |
| Exchange rate variation on marketable
securities | 385 | 12,754 | - | 47,302 |
| Interest on assets | 8,160 | 1,715 | 13,343 | 2,377 |
| Exchange rate variation on assets | 2,758 | 39,311 | 3,738 | 40,410 |
| Monetary variation on assets | - | - | 2,798 | - |
| Interest of financial instruments classified
as: | 13,362 | 8,890 | 30,847 | 56,108 |
| Available for sale | - | - | 13,516 | 12,528 |
| Trading securities | 13,362 | 8,890 | 13,565 | 42,155 |
| Held
maturity | - | - | 3,766 | 1,425 |
| Gains from derivatives transactions | 2,040 | 6,120 | 2,040 | - |
| Interest on loans to related parties | 172 | 202 | 2,540 | 1,641 |
| Gains from the conversion of foreign
investments | - | - | 9,707 | 54,583 |
| Adjustment to present value | 2,148 | 10,407 | 2,149 | 27,131 |
| Exchange rate variation on loans and
financing | 20,702 | 62,145 | 59,789 | 62,181 |
| Exchange rate variation on other
liabilities | 3,964 | 68,577 | 13,867 | 74,253 |
| Financial revenues from the acquisition of raw
materials | - | 3,363 | - | 3,363 |
| Other | - | 983 | 10,076 | 19,291 |
| | 56,441 | 214,970 | 157,728 | 392,167 |
| Financial
expenses | | | | |
| Interest on loans and financing | (32,248) | (43,436) | (107,803) | (144,937) |
| Exchange rate variation on loans and
financing | (509) | (96,976) | (590) | (159,949) |
| Monetary variation on loans and financing | - | - | - | - |
| Interest on liabilities | (2,530) | (3,680) | (2,683) | (3,918) |
| Exchange rate variation on liabilities | (1,917) | (73,287) | (6,298) | (65,622) |
| Monetary variation on liabilities | - | - | (6,144) | - |
| Financial expenses on the acquisition of raw
materials | (6,589) | (16) | (6,589) | (16) |
| Losses from the conversion of foreign
investments | (18,092) | (28,153) | (19,855) | (27,671) |
| Losses from the conversion of investments
abroad | - | - | - | (65,075) |
| Interest expenses on loans to related
parties | (8,774) | (25,173) | (927) | - |
| Present value adjustments | (753) | (9,267) | (753) | (24,174) |
| Expense from foreign exchange variation on
investments | (2,809) | (10,377) | (49,330) | (8,854) |
| Expense from foreign exchange variation on other
assets | (2,575) | (25,739) | (3,648) | (27,244) |
| Other | (2,531) | (2,373) | (5,372) | (16,535) |
| | (79,327) | (318,477) | (209,992) | (543,995) |
| Financial
income (expense), net | (22,886) | (103,507) | (52,264) | (151,828) |

108

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

32. STATEMENT OF INCOME BY NATURE

The Company presents its statement of income by function and thus is presented below the statement of income by nature:

| | BR GAAP | Parent
company | BR GAAP and
IFRS — Consolidated | |
| --- | --- | --- | --- | --- |
| | 03.31.11 | 03.31.10 | 03.31.11 | 03.31.10 |
| Costs of
sales | | | | |
| Costs of inventories | 1,781,012 | 1,571,816 | 3,289,340 | 2,907,444 |
| Depreciation | 78,943 | 71,313 | 171,181 | 129,394 |
| Amortization | 218 | 12 | 3,096 | 12,488 |
| Salaries and employees benefits | 318,641 | 269,159 | 604,685 | 509,965 |
| Others | 192,667 | 154,217 | 406,616 | 363,266 |
| | 2,371,481 | 2,066,517 | 4,474,918 | 3,922,557 |
| Administrative
expenses | | | | |
| Depreciation | 590 | 823 | 836 | 726 |
| Amortization | 1,286 | 853 | 1,884 | 2,206 |
| Salaries and employees benefits | 29,835 | 19,137 | 47,415 | 30,496 |
| Others | 18,481 | 18,167 | 33,941 | 33,737 |
| | 50,192 | 38,980 | 84,076 | 67,165 |
| Commercial
expenses | | | | |
| Depreciation | 3,663 | 3,370 | 5,282 | 4,165 |
| Amortization | 17 | 7 | 3,585 | 4,086 |
| Salaries and employees benefits | 84,744 | 69,040 | 203,218 | 159,448 |
| Others | 250,638 | 232,584 | 642,869 | 620,706 |
| | 339,062 | 305,001 | 854,954 | 788,405 |

33. INSURANCE COVERAGE – CONSOLIDATED (NOT REVIEWED)

The Company adopts the policy of contracting insurance coverage for assets subject to risks in amounts sufficient to cover any claims, considering the nature of its activity. The assumptions and risks adopted, given their nature, are not part of the scope of an audit and, therefore, were not reviewed by our independent accountants.

109

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

			03.31.11
			Not
reviewed
		Values
at	Amount
of
Insured
property	Coverage	risk	coverage
	Fire, lightning,
explosion, windstorm, deterioration
Inventories and
property, plant and equipments	of refrigerated
products, breakdown of machinery,
	loss of profit and
others	20,587,307	1,365,900
National
transport	Road risk and
civil Liability of cargo carrier	8,879,171	51,257
International
transport exports	-	9,446,768	96,861
International
transport imports	-	9,446,768	96,861
General civil
liability and for directors and officers	Third party
complaints	47,330,027	206,509
Credit	Client
default	3,632,928	97,775

34. NEW RULES AND PRONOUCEMENTS NOT ADOPTED

The interpretations and amendments to the rules existent below, applicable to the following accounting periods, were published by IASB and its application to the financial statements of the Company to be filed with CVM (the Brazilian Securities Commission) only if there is a Deliberation by that agency, therefore, there was no anticipated adoption of these rules.

IAS 12 deferred taxes:

On December 2010, IASB issued a review of rule IAS 12. The amendment addresses aspects related to the determination of the manner expected of recovery of the deferred income tax when the ownership of the investment is measured by the model of fair value of IAS 40. This rule is effective for the fiscal years starting on or after January 1, 2012. The Management of the Company does not predict impacts resulting from the adoption of that amendment to its financial statements.

IFRS 9 financial instruments:

On October 2010, IASB issued a review of rule IFRS 9. The amendment to rule IFRS 9 introduced new requirements for the classification and measurement of financial assets. The rule will apply as from January 1, 2013. The company is assessing the effects of the application of that rule and possible differences in relation to IAS 39.

Improvements on IFRSs 2010:

In May 2010, IASB issued a review of rules IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34 and IFRIC 13. The amendment to rule IFRS 3 is effective for the yearly periods starting on/or after July 1, 2010. The other changes to the rules are effective for yearly periods starting on/or after January 1, 2011. The Company is assessing the impacts of the adoption of these changes of rules on its financial statements.

110

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

35. SUBSEQUENT EVENT

On May 10, 2011 as disclosed through the announcement to the market issued by the Company the Federal Government Attorney’s Office at the CADE has published a report PROCADE 8012.004423/2009-18 on the business combination transaction involving Sadia and BRF (previously denominated Perdigão).

PROCADE has suggested to the CADE that the transaction be approved, conditional to certain restrictions, considering:

(i) effectively permit a third economic entity to contrast the marketing power generated by BRF; and/or

(ii) allow BRF to share with consumers the efficiencies resulting from the transaction.

According to the Report, the hypothesis of rejection of the transaction would only arise should no alternative be found that meets the requirements indicated.

PROCADE’s report is neither final nor binding being a supporting document to the final ruling on the transaction to be issued by CADE, which is not limited to the terms of the report.

36. APPROVAL OF THE QUARTERLY FINANCIAL INFORMATION

The quarterly financial information for the three month period ended March 31, 2011, was approved and its disclosure authorized by the Board of Directors on May 13, 2011.

111

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*Explanatory Notes*

*(in thousands of Brazilian Reais)*

BOARD OF DIRECTORS
Co-Chairman	Nildemar Secches
Co-Chairman	Luiz Fernando Furlan
Vice-Chairman	Francisco Ferreira Alexandre
Board Members	Carlos Alberto Cardoso Moreira
Board Members	Manoel Cordeiro Silva Filho
Board Members	João Vinicius Prianti
Board Members	Décio da Silva
Board Members	Rami Naum Goldfajn
Board Members	Luís Carlos Fernandes Afonso
Board Members	Walter Fontana Filho
Board Members	Roberto Faldini

AUDIT COMMITTEE
Chairman and Financial Specialist	Attílio Guaspari
Committee Members	Decio Magno
Andrade Stochiero
Committee Members	Manuela
Cristina Lemos Marçal

BOARD OF EXECUTIVE OFFICERS
Chief Executive Officer	José
Antônio do Prado Fay
Vice President of Strategy and M&A	Nelson Vas
Hacklauer
Vice President of Finance, Administration and
Investor Relations	Leopoldo
Viriato Saboya
Vice President of Operations and
Technology	Nilvo
Mittanck
Vice President of Foreign Market	Antônio
Augusto de Toni
Vice President of Human Resources	Gilberto
Antônio Orsato
Vice President of Dairy Operations	Fábio
Medeiros M. da Silva
Vice President of Supply Chain	Luiz
Henrique Lissoni
Vice President of Corporate Affairs	Wilson
Newton de Mello Neto

Marcos Roberto Badollato

Controller

Renata Bandeira Gomes do Nascimento

Accountant - CRC 1SP 215231/O-3

112

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*INDEPENDENT AUDITOR’S REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION*

To the Board of Directors and Shareholders

BRF - Brasil Foods S.A.

Itajaí - SC

Introduction

We have reviewed the individual and consolidated interim financial information of BRF - Brasil Foods S.A. included in the Quarterly Financial Information referring to the quarter ended March 31, 2011, comprising the balance sheet and the statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the quarter then ended, including the explanatory notes.

Management is responsible for the preparation and fair presentation of these individual interim financial information in accordance with Committee for Accounting Pronouncements CPC 21 – Interim Financial Statements and the consolidated interim financial information in accordance with CPC 21 and the international standard IAS 34 – Interim Financial Reporting , as issued by the International Accounting Standards Board – IASB, and presented in a manner consistent with the rules of the Brazilian Securities and Exchange Commission applicable to the preparation of Quarterly Financial Information. Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of Review

We conducted our review in accordance with the Brazilian and International Standards on interim reviews (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively ). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Opinion on the individual quarterly financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information included in the Quarterly Financial Information described above were not prepared, in all material respects, in accordance with CPC 21 applicable to the preparation of the Quarterly Financial Information and presented in a manner consistent with the rules of the Brazilian Securities and Exchange Commission (CVM).

113

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*INDEPENDENT AUDITOR’S REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION*

Opinion on the consolidated quarterly financial information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim financial information included in the Quarterly Financial Information described above were not prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Financial Information and presented in a manner consistent with the rules of the CVM.

Emphasis of matters

Approval of Sadia S.A.’s business combination

As mentioned in note 1 and 36, on July 8, 2009, the Company acquired the control of Sadia S.A. This transaction is under analysis of the Administrative Counsel for Economic Defense (“CADE”) and involved the execution of an Agreement for the Preservation of the Operation Reversibility (“APRO”), until the implementation of the final decision by CADE.

Other matters

Statements of value added

We also examined the individual and consolidated statement of value added (DVA), prepared under management’s responsibility, for the quarter ended on March 31, 2011, for which the disclosure is required by Brazilian corporation laws applicable to publicly-held companies and is an additional information for the IFRS which does not require this disclosure. These statements were submitted to the same review procedures previously described and, based on our review, nothing has come to our attention that would lead us to believe that they have not been prepared, in all its material respects, in accordance with the Quarterly Financial Information taken as whole.

The accompanying financial information has been translated into English for the convenience of readers outside Brazil.

São Paulo, May 13, 2011

KPMG Auditores Independentes

CRC SC-000071/F-8

Danilo Siman Simões

Accountant CRC MG-058180/O-2 S-SC

114

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*OPINION OF THE FISCAL COUNCIL*

The Fiscal Council of BRF - Brasil Foods S.A., in fulfilling its statutory and corporate functions, examined:

(i) the special report issued without restrictions by KPMG Auditores Independentes;

(ii) the Report of Management; and

(iii) the quarterly financial information for the three month period ended on March 31, 2011.

Based on the documents examined and on the explanations provided, the members of the Fiscal Council, undersigned, issued an opinion for the approval of the quarterly financial information identified above.

São Paulo, May 13, 2011.

Attílio Guaspari

President and Financial Expert

Decio Magno Andrade Stochiero

Board Member

Manuela Cristina Lemos Marçal

Board Member

115

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*STATEMENT OF EXECUTIVE BOARD ON THE QUARTERLY INFORMATION*

In compliance with the provisions of sections V and VI of article 25 of CVM Instruction No. 480/09, the executive board of BRF - Foods Brazil SA, states:

(i) reviewed , discussed and agreed with the Company's quarterly financial statement for the three month period ended on March 31, 2011; and

(ii) reviewed, discussed and agreed with opinions expressed by the KPMG’s opinion of independent accountant for the Company's quarterly financial information for the three month period ended on March 31, 2011.

São Paulo, May 13, 2011.

José Antônio do Prado Fay

Chief Executive Officer Director

Nelson Vas Hacklauer

Strategy and M&A Executive Officer

Leopoldo Viriato Saboya

Chief Financial, Administrative and IR Officer

Nilvo Mittanck

Operations and Technology Executive Officer

Antônio Augusto de Toni

Export Market Executive Officer

Gilberto Antônio Orsatto

Human Resources Executive Officer

Fábio Medeiros Martins da Silva

Dairy Product Operations Executive Officer

Luiz Henrique Lissoni

Supply Chain Executive Officer

Wilson Newton de Mello Neto

Corporate Affairs Executive Officer

116

ITR – Quarterly Information – March 31, 2011 – BRF – BRASIL FOODS S.A.

*STATEMENT OF EXECUTIVE BOARD ON THE INDEPENDENT AUDITORS' REPORT*

In compliance with the provisions of sections V and VI of article 25 of CVM Instruction No. 480/09, the executive board of BRF - Foods Brazil SA, states:

(i) reviewed , discussed and agreed with the Company's quarterly financial statement for the three month period ended on March 31, 2011; and

(ii) reviewed, discussed and agreed with opinions expressed by the KPMG’s opinion of independent accountant for the Company's quarterly financial information for the three month period ended on March 31, 2011.

São Paulo, May 13, 2011.

José Antônio do Prado Fay

Chief Executive Officer Director

Nelson Vas Hacklauer

Strategy and M&A Executive Officer

Leopoldo Viriato Saboya

Chief Financial, Administrative and IR Officer

Nilvo Mittanck

Operations and Technology Executive Officer

Antônio Augusto de Toni

Export Market Executive Officer

Gilberto Antônio Orsatto

Human Resources Executive Officer

Fábio Medeiros Martins da Silva

Dairy Product Operations Executive Officer

Luiz Henrique Lissoni

Supply Chain Executive Officer

Wilson Newton de Mello Neto

Corporate Affairs Executive Officer

117

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 16 , 2011

By:
Name:	Leopoldo Viriato Saboya
Title:	Financial and Investor Relations Director