EX-1 2 exhibit_01.htm EXHIBIT_01

BRF S.A.
Publicly Held Company
CNPJ 01.838.723/0001-27
NIRE 42.300.034.240

MANAGEMENT PROPOSAL FOR THE EXTRAORDINARY GENERAL
SHAREHOLDERS’ MEETING TO BE HELD ON DECEMBER 12, 2018

Dear Shareholders,

In view of Instruction Nº 481/2009 of the Brazilian Securities and Exchange Commission – CVM of December 17, 2009 (“CVM Instruction No. 481/09”), we hereby present the following management proposal (“Proposal”) of BRF S.A. (“Company” or “BRF”), containing the information and documents related to the subjects to be decided at the

Extraordinary General Shareholders’ Meeting of the Company, as described below, to be held on December 12, 2018 at 11:00 a.m. (“General Meeting”), at the head office of the Company, located at Rua Jorge Tzachel, 475, Bairro Fazenda, in the city of Itajaí, State of Santa Catarina:

I. To review, discuss, and approve the terms and conditions of the protocol and justification of the merger of SHB Comércio e Indústria de Alimentos S.A. (“SHB”) with and into the Company (“Merger”), executed by the management of the Company and of SHB (“Protocol and Justification”);

II. To ratify the appointment of the specialized company KPMG Auditores Independentes, enrolled with CNPJ under No. 57.755.217/0001-29, to prepare the appraisal report of SHB’s net equity, at book value (“Appraisal Report”);

III. To approve the Appraisal Report;

IV. To approve the Merger, with the consequent winding-up of SHB, under the terms and conditions provided for in the Protocol and Justification;

V. To authorize the management of the Company to perform any and all necessary acts to the Merger.

Management Proposal: The Board of Directors proposes that the Shareholders approve all matters that will be submitted to the General Meeting, which exclusively intend for SHB to be incorporated into its sole shareholder, the Company, with the aim to unify and centralize the business activities of the BRF group related to halal product business, in order to streamline operations, optimize the corporate and management structure, and

reduce the group’s operating costs, through economies of scale, which consequently results in benefits to the Companies’ shareholders. The main terms of the Merger are described in Exhbit I attached to this Proposal according to article 20-A of CVM Instruction No. 481/09.

We request that the Merger be carried out so that the Company receives, by its corresponding book amounts, all SHB’s properties, rights, and obligations (including the real estate properties indicated in the Appraisal Report described below), which shall be winded-up, and the Company shall succeed SHB, as set forth by law, based on the elements included in the balance sheet of SHB, obtained in September 30, 2018 (“Reference Date”).

The changes in equity assessed as of the Reference Date and until the date on which the Merger is consummated shall be appropriated by the Company.

The Company’s management engaged KPMG Auditores Independentes (CNPJ under No. 57.755.217/0001-29) (“Specialized Firm”) to prepare with the valuation of SHB’s net equity to be transferred to the Company due to the Merger (“Appraisal Report”). The information required by article 21 of CVM Instruction No. 481/09 can be found attached hereto as Exhibit II.

The Merger will not result in an increase or reduc tion in BRF’s net equity or corporate capital, since all shares of SHB’s corporate capital are held by BRF, and SHB’s net equity is already fully reflected on the net equity of BRF, as a result of the equity equivalence method. Therefore, according to article 10 of the Brazilian Securities and Exchange Commission – CVM Instruction No. 565/2015 (“ICVM 565”), the obligations pr ovided for in Chapter III of ICVM 565 are not applicable.

Furthermore, considering that BRF is the sole shareholder of SHB, there will be no dissident shareholder or right to withdrawal in view of the Merger, pursuant to article 137 of Law No. 6,404/76.

In accordance with the decision rendered by CVM’s Resolution, on February 15, 2018 in the Electronic Information System (SEI) process 19957.011351/2017-21, the obligation provided in article 264 of Law No. 6,404/1976 shall be dismissed for the purposes of this Merger, since it is a merger of a wholly owned subsidiary, and there are no non-controlling shareholders in SHB.

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

* * *

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The Company’s shareholders that are interested in accessing information or solving any doubts related to the proposals described above shall contact the Company's Investor Relations or Corporate Governance through the phones +55 (11) 2322-5991/5011/5951/4438/5355 or by email: acoes@brf-br.com. All documents related to this General Meeting are available to the shareholders at the websites http://ri.brf-global.com; www.b3.com.br; and www.cvm.gov.br.

São Paulo, November 9, 2018.

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E XHIBIT I – I NFORMATION A BOUT THE M ERGER
(according to Exhibit 20-A of CVM Instruction No. 481/09)

In compliance with the provisions of article 20-A of CVM Instruction No. 481/09, BRF provides the following information to hold the General Meeting:

1. Protocol and justification of the transaction pursuant to articles 224 and 225 of Law No. 6,404 of 1976.

The protocol and justification of the merger of SHB Comércio e Indústria de Alimentos S.A. (“SHB”) by BRF S.A. (“BRF” or “Company”) can be found in Exhibit I.1. of this Proposal (“Protocol and Justification”).

2. Other agreements, contracts, and pre-contracts governing the exercise of the voting right or the transfer of shares issued by the surviving companies or resulting from the transaction are to be filed at the company’s head office.

There are no other agreements, contracts, and pre-contracts.

3. The description of the transaction includes:

(a) Terms and conditions:

The transaction comprises the merger of SHB with and into BRF, for SHB’s net equity, at book value, based on the elements included in the balance sheet of SHB, obtained in September 30, 2018, with the consequent winding up of SHB and succession, by BRF, of all its properties, rights, and obligations (“Merger”).

All shares representing SHB’s corporate capital, held by BRF, shall be extinguished as set forth in article 226, paragraph 1st of Law No. 6,404/76.

The Merger shall not result in increase or reduction of BRF’s net equity, as all shares representing SHB’s corporate capital are held by BRF and it already holds the consolidated registrations of SHB in its consolidated financial statements. Additionally, to replace the shares currently recorded in BRF’s consolidated financial statements, SHB’s assets, after the Merger, shall be directly accounted for as the Company’s assets.

Thus, as a result of the intended Merger, the investment account regarding the ownership interest in SHB’s corporate capital shall be replaced, in BRF’s accounting records, for the assets a nd liabilities included in SHB’s balance sheet, without changing the Company’s corporate capital.

(b) Obligations to indemnify: (i) the managers of any of the companies involved; (ii) if the transaction is not conducted.

There are no obligations to indemnify.

(c) Table comparing the rights, advantages, and restrictions on the shares of the

companies involved or resulting therefrom, before and after the transaction.

There will be, before and after the Merger, only common shares issued by BRF, which shall have the sa me rights and advantages listed below. The shares representing SHB’s corporate capital shall be extinguished as a result of the Merger.

BRF: |  |
Right to dividends: |  | Right to the minimum mandatory dividend, in each fiscal year, equivalent to 25% of the net profit adjusted pursuant to article 202 of the Brazilian Corporation Law.
Voting right: |  | Full
Description of the restricted vote: |  | Not applicable.
Convertibility: |  | No.
Convertibility condition and effects on the corporate capital: |  | Not applicable.
Right to capital reimbursement: |  | Yes.
Description of the capital reimbursement characteristics: |  | In case the withdrawal right is exercised, the shareholders shall be entitled to receive the book value of their shares, based on the last balance sheet approved by the General Meeting. If the resolution giving rise to the withdrawal right has, however, occurred more than 60 days of the date of the last balance sheet approved, the dissenting shareholder may request assessment of a special balance sheet verified on a date not earlier than 60 days prior the resolution, to assess the value of their shares. In this case, the Company shall immediately pay 80% of the reimbursement amount calculated by reference to the last balance sheet approved by its shareholders and the remaining balance within 120 days of the date of the resolution issued by the General Meeting giving rise to the withdrawal right based on the new balance sheet.
Restriction on circulation: |  | No.
Description of the restriction: |  | Not applicable.
Redeemable: |  | No.

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Conditions to amend the rights ensured by such securities: |  | The rights ensured to the shares may only be changed upon approval in a general shareholders’ meeting.
Other relevant characteristics: |  | See item 18.2 for the events where there a public offering is required to purchase shares issued by the Company.

(d) Possible need for approval of debenture holders or other creditors.

It is not required the previous approval by the creditors.

(e) Assets and liabilities, which will form each component of the equity, in case of spin-off.

Not applicable, since BRF will keep its registration as a publicly held company in Category A.

(f) Intention of the resulting companies to obtain registration as issuer of securities.

Not applicable, as BRF will hold its registration as a publicly-held company under Category A.

4. Plans to conduct the corporate business, especially with respect to specific corporate events intended to be held.

BRF will continue to focus on general food production and trade. BRF’s corporate purpose will not be changed, as the companies have similar corporate purposes and SHB does not develop any activity different than those already included in the Company’s, corporate purpose. Given the provisions above, there is no need to change BRF’s Bylaws.

5. Analysis of the following aspects of the transaction:

(a) Description of the main benefits expected, including: (i) synergies, (ii) tax benefits, and (iii) strategic advantages.

With the Merger, they seek to consolidate and centralize the business activities developed by BRF group, related to the halal-product business, as to streamline transactions, optimize the corporate and administrative structure, and reduce the group’s operating costs through economies of scale. We understand that the Merger will benefit both BRF and SHB and, consequently, their shareholders, taking into account the increasingly costs to maintain different corporate structures.

(b) Costs.

It is estimated that the costs for the Merger are of approximately R$2,500,000.00 (two million and fifty hundred thousand reais), including the expenses of publicity, appraisers,

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attorneys, and other professionals hired to advise on the transaction.

(c) Risk factors.

They seek, with the Merger, to consolidate the corporates’ businesses and use the synergies from this consolidation. This integration process may result in operating, regulatory, commercial, financial, and contractual difficulties, which may cause the expected synergies not to be used or imply not expected losses or expenses. The management of BRF may, therefore, not to be able to successfully implement the intended consolidation or obtain the investment returns regarding this Merger.

(d) If it is a transaction with a related party, any alternatives that could have been used to reach the same goals, indicating the reasons why these alternatives were rejected.

They seek to wind up SHB for the abovementioned reasons, with succession, by BRF, of all its properties, rights, and obligations. Accordingly, there are no reasons to adopt another corporate structure, other than the Merger, to conduct the intended transaction.

(e) Exchange ratio.

Not applicable, since, as a result of the Merger, no new Company’s shares shall be issued and the shares representing SHB’s corporate capital shall be extinguished according to article 226, paragraph 1 of Law No. 6,404/76. Additionally, considering that BRF holds all SHB’s shares, the Merger shall not result in increase or reduction of the net equity or BRF’s corporate capital, to the extent that SHB’s net equity is already fully reflected on BRF’s net equity, as a result of the application of the equity method of accounting.

(f) Transactions involving controlling and controlled companies or companies under common control:

(i) Share exchange ratio calculated, according to art. 264 of Law No. 6,404 of 1976.

Not applicable, since no new shares will be issued to exchange SHB’s shares, which will be extinguished as a result of the Merger.

Additional ly, considering the decision rendered by CVM’s Resolution, on February 15, 2018, in proceeding SEI 19957.011351/2017-21, the appraisal provided in article 264 of Law No. 6,404/1976 shall be dismissed, since it is a merger of a wholly-owned subsidiary, and SHB has no non-controlling shareholders.

(ii) Detailed description of the exchange ratio trading process and other terms and conditions of the transaction.

Not applicable.

(iii) If the transaction has been preceded, in the last twelve (12) months, by

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an acquisition of control or acquisition of interest in a control block: (a) comparative analysis of the exchange ratio and price paid in the acquisition of control; and (b) reasons supporting any assessment differences in the different transactions.

All shares represent ing SHB’s corporate capital were acquired by the Company on September 1, 2018, pursuant to the Share Purchase Agreement entered into by and between the Company, as purchaser, and BRF Foods GMBH and One Foods Holdings Limited (subsidiaries of the Company), as sellers.

Nevertheless, we understand that this item is not applicable, as no new shares shall be issued to exchange SHB’s shares, which shall be extinguished as a result of the Merger, as mentioned above.

(iv) A supporting document explaining why the exchange ratio is commutative, describing the procedures and criteria used to ensure the transaction commutativity or, if the exchange ratio is not commutative, payment breakdown or measures equivalent to ensure proper compensation.

Not applicable.

6. A copy of the minutes of all meetings of the board of directors, audit committee, and special committees where the transaction was discussed, including any dissenting votes.

The minutes discussing the Merger can be found in Exhibit I.6. to this Proposal.

7. A copy of the studies, presentations, reports, opinions, or appraisal reports of the companies involved in the transaction, made available to controlling shareholder in any stage of the transaction.

The Appraisal Report can be found on Exhibit I.7. to this Proposal.

7.1. Identification of any conflicts of interest between the financial institutions, companies, and professionals that prepared the documents referred to in item 7 and the companies involved in the transaction.

None.

8. Bylaws projects or statutory changes in the companies resulting from the transaction.

None, BRF’s Bylaws will not be amended because of the Merger.

9. Financial statements used for purposes of the transaction, pursuant to the specific rule.

SHB’s financial statements of September 30, 2018 can be found on Exhibit I of the Appraisal Report.

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10. Pro-forma financial statements prepared for purposes of the transaction, pursuant to the specific rule.

Not applicable, considering that the Merger shall be made with no dilution of the current shareholders of BRF, applying, therefore, the exception provided for in article 10 of CVM Instruction 565/15.

11. Document containing information on the companies directly involved and that are not publicly-held companies.

(a) Risk factors pursuant to items 4.1 and 4.2 of the reference form.

SHB’s risk factors are already reflected in items 4.1 and 4.2 of BRF’s Reference Form.

(b) Description of the main changes to the risk factors during the previous year and the expectations regarding the reduction or increase in the risk exposure as a result of the transaction, pursuant to item 5.4 of the reference form.

Not applicable, considering that after the Merger, SHB will be winded up.

(c) Description of its activities, pursuant to items 7.1, 7.2, 7.3, and 7.4 of the reference form.

7.1 Briefly describe the activities developed by the issuer and its subsidiaries.

SHB has as its main corporate purpose the following activities, developed in Brazil and abroad:

- General food industrialization, trading, in retail and wholesale, and exploitation;
- The industrialization and commercialization of animal feed, nutrients and animal feed

supplements;

- The provision of food services in general;
- The industrialization, refining and commercialization of vegetable oils;
- The exploitation, conservation, storage, ensilage and commercialization of grains,

their derivatives and by-products.

7.2 Regarding each operating segment that has been disclosed in the last financial statements for the fiscal year or, if it is the case, in the consolidated financial statements, to provide the following information:

(a) products and services offered.

Production and commercialization of whole birds and cuts in natura.

(b) revenue from the segment an d its interest in the issuer’s net revenue and profit or loss from the segment and its interest in the issuer’s net profit.

SHB’s net revenue on 2017 was of R$6.515.681 thousand (19,47% - percentage with regards to the consolidation).

SHB’s net profit on 2017 was of R$44.055 thousand (4,01% - percentage with regards

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to the consolidation).

7.3 Regarding the products and services corresponding to the operating segments provided for in item 7.2, to provide:

(a) the characteristics of the manufacturing process.

SHB sells halal food, prepared according to Muslim culture. In order to meet the halal market, the products marketed by SHB must undergo a specific religious/technical procedure of slaughter and processing, ensuring that they were produced according to the law of Islam and that they had no contact with food and forbidden ingredients. Additional information on the distribution process is reflected in item 7.3 (a) of the BRF Reference Form.

(b) the characteristics of the distribution process.

Not applicable, since all the products marketed by SHB are sold directly to BRF and BRF Foods GmbH, which are responsible for the distribution of the products. Additional information on the distribution process is reflected in item 7.3 (b) of the BRF Reference Form.

(c) the characteristics of the target markets, especially (i) interest in each one of the markets; and (ii) competition conditions in the markets.

SHB basically sells to the group companies, whether BRF, to resell in the markets in which it operates, or to BRF Foods to sell in the Halal market. Additional information on the distribution process is reflected in item 7.3 (c) of the BRF Reference Form.

(d) any seasonality.

SHB is impacted by seasonality due to Ramadan, which is the sacred month of the Muslim Calendar. The beginning of Ramadan depends on the beginning of the lunar cycle and therefore may vary each year.

(e) main inputs and raw materials, providing: (i) a description of the relationships kept with suppliers, including if they are subject to governmental control or regulation, indicating the bodies and relevant applicable laws and regulations; (ii) any dependence of few suppliers; and (iii) any volatility in their prices.

SHB follows BRF's strategy regarding to supplier relationships and is subject to the same controls, in this sense, information related to this item is available in item 7.3 (e) of the BRF Reference Form.

7.4 To identify if there are clients responsible for more than 10% of the Company’s total net revenue, providing:

Yes, SHB sells only to BRF and BRF Foods GmbH.

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(d) A description of the economic group, pursuant to item 15 of the reference form.

Items 15.1 and 15.2 of the reference form.

SHB Comércio e Indústria de Alimentos S.A.

BRF S.A.

See information in item 12 below.

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Item 15.3 of the reference form.
SHB

There are no outstanding shares.
Item 15.4 of the reference form.

Item 15.5 of the reference form.

There is no shareholders’ agreement filed at SHB’s head office.

Item 15.6 of the reference form.

Not applicable.

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Item 15.7 of the reference form.

None.

Item 15.8 of the reference form.

There is no other material information on SHB.

(e) Description of the corporate capital, pursuant to item 17.1 of the reference form.

SHB’s corporate capital is R$1,479,049,565.00, fully subscribed and paid up, represented by 1,479,049,565 registered shares, with no par value, fully held by the Company.

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12. Description of the capital and control structure after the transaction, pursuant to item 15 of the reference form.

Items 15.1 and 15.2 of the reference form.

BRF S.A.

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Item 15.3 of the reference form.
BRF

Outstanding Shares

Outstanding shares correspond to all Company’s shares, except for those held by the parent company, persons bound thereto, management of the Company, and shares held in treasury.

Item 15.4 of the reference form.

Item 15.5 of the reference form.

The Company has no shareholders’ agreement filed at its head office.

Item 15.6 of the reference form.

There are no material changes in the interests of the members of the control group and management of the Company.

Item 15.7 of the reference form.

Item 15.8 of the reference form.

There is no other material information on the Company.

13. Number, class, and type of the securities of each company involved in the transaction, held by any other companies involved in the transaction or by persons related to these companies, as defined by the rules addressing the public offering for purchasing shares.

The Company holds, on the date hereof, 1,479,049,565 registered shares, with no par value, issued by SHB, representing 100% its capital stock.

14. Exposure of any of the companies involved in the transaction or persons bound thereto, as defined by the rules addressing the public offering for purchasing shares, in derivatives referred to as securities issued by the other companies involved in the transaction.

Not applicable.

15. Report including all businesses conducted in the last six (6) months by the persons indicated below, with securities issued by the companies involved in the transaction:

(a) Companies involved in the transaction:

(i) Private purchase transactions:

Acquisition, by the Company, of SHB’s shares held by BRF Foods GmbH

Acquisition by the Company of SHB’s shares held by OneFoods Holdings Limited

(ii) Private sale transactions; (iii) Purchase transactions in regulated markets; and (iv) Sale transactions in regulated markets:

Not applicable.

(b) Parties related to companies involved in the transaction: (i) Private purchase transactions; (ii) Private sale transactions; (iii) Purchase transactions in regulated markets; (iv) Sale transactions in regulated markets:

Not applicable.

16. Document through which the Special Independent Committee submitted its recommendations to the Board of Directors, if the transaction has been negotiated under CVM Opinion No. 35 of 2008.

Not applicable.

** ** **

Exhibit I.1. Protocol and justification of the transaction pursuant to articles 224 and 225 of Law No. 6,404 of 1976.

PROTOCOL AND JUSTIFICATION OF THE MERGER OF SHB COMÉRCIO E
INDÚSTRIA DE ALIMENTOS S.A. BY BRF S.A.

A. The management of SHB COMÉRCIO E INDÚSTRIA DE ALIMENTOS S.A., a closely-held company with head office in the city of Itajaí, State of Santa Catarina, at Rua Jorge Tzachel, No. 475, 1st floor, suite 02, Zip Code (CEP) 88301-600, enrolled with CNPJ/MF under No. 26.176.436/0001-20 (“SHB”); and

B. The management of BRF S.A., a publicly-held company with head office in the city of Itajaí, State of Santa Catarina, at Rua Jorge Tzachel, No. 475, Zip Code (CEP) 88301-600, enrolled with the CNPJ/MF under No. 01.838.723/0001-27 (“BRF” and, jointly with SHB, the “Companies”).

Due to the reasons and for the purposes detailed hereinafter, the parties agree to enter into this protocol and justification of SHB’s merger into BRF (“Merger” and “Protocol and Justification”, respectively), which shall be submitted for the approval of (i) BRF, as the sole shareholder of SHB; and (ii) the shareholders of BRF, at an Extraordinary General Meeting, pursuant to the following terms and conditions:

1. Justification of the Merger.

1.1. The Merger aims at unifying and centralizing the business activities of the group BRF related to halal products business, in order to induce simplification, efficiency, and transparency of the group’s organizational structure. The Merger shall benefit the Companies and, consequently, its shareholders, taking into account the increasing costs of maintaining distinct corporate structures.

1.2. The Companies’ intention is for the Merger to be carried out so that BRF receives, by its corresponding book amounts, all SHB’s properties, rights, and obligations (including the real estate properties appointed and reproduced in the Appraisal Report defined below) considering the elements set forth in SHB’s balance sheet, prepared on September 30, 2018 (“Reference Date”).

1.3. After the Merger, BRF shall continue to be dedicated to the production and trade of general food, keeping its enrollment as a publicly-held company.

2. Merger.

2.1. BRF’s management engaged KPMG Auditores Independentes (CNPJ under No. 57.755.217/0001-29) (“Specialized Firm”) to prepare the valuation and determine the book value of SHB’s net equity to be transferred to BRF due to the Merger, whose result is the purpose of the appraisal report attached hereto as Schedule I (“Appraisal Report”).

2.1.1. The appointment of the Specialized Firm shall be submitted to the ratification by the Shareholders Meeting of BRF that will analyze this Protocol and Justification, in accordance with article 227, paragraph 1 of Law No. 6,404/76.

2.1.2. The Specialized Firm represented that (i) there is no conflict or community of interests, current of potential, with BRF, with BRF’s shareholders, or, in addition, with regards to the Merger; and (ii) BRF, its shareholders, and/or the Companies' managers did not direct, limit, cause difficulties or perform any acts that have or may have impaired the access, use, or knowledge of information, assets, documents or methodology of the work relevant to the quality of its conclusions.

2.2. The Merger will not result in an increase or reduction in BRF’s net equity or corporate capital, since all shares of SHB’s corporate capital are held by BRF, and that SHB’s net equity is already completely reflected on BRF’s net equity as a result of the equity equivalence method. Therefore, according to article 10 of the Brazilian Securities and Exchange Commission – CVM Inst ruction No. 565/2015 (“ICVM 565”), the obligations provided for in Chapter III of ICVM 565 are not applicable.

2.2.1. The totality of the shares representing the corporate capital of SHB, owned by BRF, will be cancelled, pursuant to article 226, paragraph 1st of Law No. 6,404/76.

2.2.2. In view of the provision above, BRF’s corporate capital will not be amended and no shares will be issued.

2.2.3. BRF’s corporate purpose will also remain the same, considering that the Companies have similar corporate purposes and since SHB does not develop any different activity from those listed in BRF’s corporate purpose. Therefore, there will be no need to amend BRF’s Bylaws.

2.3. The equity variations that follow the Reference Date shall be entered in BRF by virtue of the Merger, and the entries shall be registered in the accounting and tax books.

2.4. Furthermore, considering that BRF is the sole shareholder of SHB, there will be no dissident shareholder or right to withdrawal in view of the Merger, pursuant to article 137 of Law No. 6,404/76.

2.5. In accordance with CVM’s Resolution, on February 15, 2018 in the Electronic Information System (SEI) process 19957.011351/2017-21, the appraisal provided in article 264 of Law No. 6,404/1976 shall be dismissed, since it is a merger of a wholly-owned subsidiary and there are no non-controlling shareholders in SHB.

3. Corporate Approvals.

3.1. The consummation of the Merge shall be subject to the performance of the following acts, all interdependent:

(i) Extraordinary general meeting of SHB to (a) approve this Protocol and Justification; (b) approve the Merger; and (c) authorize the performance, by its management, of the acts necessary to the Merger; and

(ii) Extraordinary general meeting of BRF to (a) approve this Protocol and Justification; (b) ratify the appointment of the Specialized Firm; (c) approve the Appraisal Report; (d) approve the Merger, with the consequent cancellation of SHB; and (e) approve the performance, by its management, of all acts necessary to the Merger.

4. Miscellaneous.

4.1. The consummation of the Merger shall result in the cancellation of SHB, which shall be succeeded by BRF in all of their assets, rights, obligations, liabilities and responsibilities, pursuant to the applicable provisions of Law No. 6,404/76.

4.2. The management of BRF shall be responsible to perform all necessary acts to implement the Merger, including to carry out the filing and publication of all acts related to the Merger and conduct the cancelation of SHB’s registrations before the federal, state, and municipal agencies, as well as the maintenance of the accounting books during the legal term.

4.3. This Protocol and Justification may only be amended through written instrument and shall be governed by the laws of the, with the waiver of any other court, regardless of being more privileged.

4.4. All documents referred to in this Protocol and Justification shall be available for BRF’s shareholders in its head office as of the date hereof and in BRF’s Investor Relations website (ri.brf-global.com), as well as in the websites of the Brazilian Securities and Exchange Commission – CVM and B3 S.A. – Brasil, Bolsa, Balcão.

IN WITNESS WHEREOF, the Companies execute this Protocol and Justification in 6 originals of identical form and content, with the same effect, in the presence of 2 witnesses identified below.

São Paulo, October 26, 2018.

(Remainder of the page intentionally left blank. Signature page below).

[signature page of the Protocol and Justification of the Merger of SHB Comércio e Indústria de Alimentos S.A. by BRF S.A.]

Management of SHB Comércio e Indústria de Alimentos S.A.

Vinicius Guimarães Barbosa |  | Elcio Mitsuhiro Ito
Chief Executive Officer |  | Officer
Marcelo Schmeider |  |
Officer |  |

Management of BRF S.A.

Pedro Pullen Parente |  | Vinícius Guimarães Barbosa
Global Chief Executive Officer and Chairman of the Board of Directors |  | Officer
Lorival Nogueira Luz Junior |  | Elcio Mitsuhiro Ito
Officer |  | Chief Financial Officer and Investor Relations
|  | Officer
Francisco Petros Oliveira Lima |  | Luiz Fernando Furlan
Papathanasiadis |  | Member of the Board of Directors
Member of the Board of Directors |  |

[signature page of the Protocol and Justification of the Merger of SHB Comércio e Indústria de Alimentos S.A by BRF S.A.]

Flávia Buarque de Almeida |  | Augusto Marques da Cruz Filho
Member of the Board of Directors |  | Vice-Chairman of the Board of Directors
Dan Ioschpe |  | Walter Malieni Júnior
Member of the Board of Directors |  | Member of the Board of Directors
José Luiz Osório de Almeida Filho |  | Roberto Antônio Mendes
Member of the Board of Directors |  | Member of the Board of Directors
Roberto Rodrigues |  |
Member of the Board of Directors |  |

Witnesses:

1. |  |  | 2. |
Name: |  |  | Name: |
RG (ID): |  |  | RG (ID): |
Individual Taxpayer’s Enrollment Number |  | Individual Taxpayer’s Enrollment Number
(CPF): |  |  | (CPF): |

SCHEDULE I

APPRAISAL REPORT

See Exhibit I.7. of the present Proposal

Anexo I.6. A copy of the minutes of all meetings of the board of directors, audit committee, and special committees where the transaction was discussed, including any dissenting votes.

BRF S.A.
Publicly Held Company
CNPJ 01.838.723/0001-27
NIRE 42.300.034.240
CVM 1629-2

MINUTES OF THE ORDINARY MEETING OF THE BOARD OF DIRECTORS
HELD ON OCTOBER 26, 2018

1. Date, Time and Place: Meeting held on October 26, 2018, at 09:00 a.m., in São Paulo City, São Paulo State, at the BRF S.A. (“Company”) office located at Avenida das Nações Unidas 8501, 1st floor, Pinheiros, Zip Code 05425-000.

2. Summons and Presence: Summons duly held pursuant to Article 21 of the Company’s Bylaws considering the presence of the majority of members of the Board of Directors: Mr. Pedro Pullen Parente (“Mr. Pedro Parente”), Mr. Augusto Marques da Cruz Filho (“Mr. Augusto Cruz”), Mr. Dan Ioschpe (“Mr. Dan Ioschpe”), Mrs. Flávia Buarque de Almeida (“Mrs. Flávia Almeida”), Mr. Francisco Petros Oliveira Lima Papathanasiadis, (“Mr. Francisco Petros”), Mr. José Luiz Osório (“Mr. José Osório”), Mr. Luiz Fernando Furlan (“Mr. Luiz Furlan”), Mr. Roberto Antonio Mendes (“Mr. Roberto Mendes”) and Mr. Walter Malieni Jr. (“Mr. Walter Malieni”).

3. Presiding Board: Chairman: Pedro Pullen Parente. Secretary: Cristiana Rebelo Wiener.

4. Agenda: (i) Approval and Execution of the Protocol and Justification of Merger of SHB/Call Notice of an Extraordinary General Shareholders’ Meeting to resolve on the Merger of SHB; and (ii) Approval of the Policy of Competence.

5. Resolutions: The members approved, by unanimous votes and with no restrictions, the drawing up of the present minutes in summary form. Once the agenda had been examined, the following matters were discussed and the following resolutions were taken:

5.1. Approval and Execution of the Protocol and Justification of Merger of SHB/Call Notice of an Extraordinary General Shareholders’ Meeting to resolve on the Merger of SHB. The totality of the members of the Board of Directors present at the meeting approved and executed the Protocol and Justification of Merger of the wholly-owned subsidiary SHB Comércio e Indústria de Alimentos S.A. (“SHB”) by the Company (“Protocol and Justification” and “Merger”, respectively) as well as approved, subsequently, the call notice of an Extraordinary General Shareholders’ Meeting of the Company to: (i) review, discuss, and approve the terms and conditions of the Protocol and Justification; (ii) ratify the appointment of the specialized firm KPMG Auditores Independentes to

prepare the appraisal report for SHB’s net equity, at book value (“Appraisal Report”); (iii) approve the Appraisal Report; (iv) approve the Merger, with the consequent winding-up of SHB, under the terms and conditions provided for in the Protocol and Justification; and (v) authorize the management of the Company to perform any and all necessary acts to the Merger.

5.2. Approval of the Policy of Competence. The totality of the members of the Board of Directors present at the meeting, under the terms of article 23, item (xxiii) of the Bylaws, approved, by unanimous votes, the proposed minutes for the Company’s Policy of Competence, which shall enter into force immediately after the Extraordinary General Shareholders’ Meeting to be held on November 5th, 2018, in case the proposal of revision of the financial competences of the Company’s

Board of Directors and of the Board of Officers is approved, by means: (i) of the amendment to article 23, current items xvi, xxiv, xxvii, xxviii, xxix, xxx, xxxii, xxxiii, xxxvi and xxxvii; and to article 25, item iv; and (ii) of the exclusion of paragraphs 1 and 2 of article 23; and of current items vii and viii of article 25, with the purpose of allowing the Board of Directors itself to establish the Company's Competence Policy.

6. Documents Filed at the Company: The documents related to the agenda that supported the resolutions taken by the members of the Board of Directors or information presented during the meeting were filed at the Company’s head office.

7. Closure: There being no other matters to be discussed, the Chairman declared the meeting closed, during which time the present minutes were drawn up in summary form by electronic processing and, having been read and found correct by all those present, were signed.

I certify that the above text is a faithful copy of the minutes which are filed in Book No. 6, pages 72 to 74, of the Minutes of the Ordinary and Extraordinary Meetings of the Company´s Board of Directors.

São Paulo, October 26, 2018.
______________________________
Cristiana Rebelo Wiener
Secretary

BRF S.A.
Publicly Held Company
CNPJ 01.838.723/0001-27
NIRE 42.300.034.240
CVM 1629-2

MINUTES OF THE ORDINARY MEETING OF THE FISCAL COUNCIL
HELD ON NOVEMBER 06, 2018

1. Date, Time and Place: Meeting held on November 06th, 2018, at 11:00 a.m., in São Paulo City, São Paulo State, at the office of BRF S.A. (“Company”) located at Avenida das Nações Unidas 8501, 1st floor, Pinheiros, Zip Code 05425-000.

2. Summons and Presence: Summons duly held pursuant to the Bylaws of the Fiscal Council, with the presence of the majority of members of the Fiscal Council: Messrs. Attílio Guaspari (“Mr. Attílio Guaspari”) and Marcus Vinicius Dias Severini (“Mr. Marcus Severini”).

3. Presiding Board: Chairman: Attílio Guaspari. Secretary: Cristiana Rebelo Wiener.

4. Agenda: (i) Opinion on the Proceeding of Merger of SHB with and into the Company.

5. Resolutions: Once the agenda had been examined, the following matter was discussed:

5.1. Opinion on the Proceeding of Merger of SHB with and into the Company. The members of the Fiscal Council appreciated the proposal of merger of SHB Comércio e Indústria de Alimentos S.A. with and into the Company and did not present any objection to it.

6. Documents Filed at the Company: The documents related to the agenda that supported the resolutions taken by the members of the Fiscal Council or information presented during the meeting were filed at the Company’s head office, which were previously provided at the Corporate Governance Portal.

7. Closure: There being no other matters to be discussed, the Chairman declared the meeting closed, during which time the present minutes were drawn up and, having been read and found correct by all those present, were signed.

São Paulo, November 06, 2018.

______________________________
Cristiana Rebelo Wiener
Secretary

Exhibit I.7. A copy of the studies, presentations, reports, opinions, or appraisal reports of the companies involved in the transaction, made available to controlling shareholder in any stage of the transaction

ANEXO I - Balanço Patrimonial da SHB Comércio e Indústria de Alimentos S.A. em 30 de setembro de 2018

1. BASE DE ELABORAÇÃO E PRÁTICAS CONTÁBEIS

Os saldos constantes no laudo de acervo líquido foram elaboradas de acordo com as práticas contábeis adotadas no Brasil.

Os valores estão expressos em Reais (“R$”).

O referido laudo tem por objetivo atender requisitos societários necessários ao processo incorporação do patrimônio líquido da SHB Comércio e Indústria de Alimentos S.A. por sua acionista controladora BRF S.A.

As principais práticas contábeis estão descritas abaixo.

Caixa e equivalentes de caixa: compreende os saldos de caixa, bancos e aplicações financeiras de liquidez imediata em títulos cujos vencimentos, quando de sua aquisição, eram iguais ou inferiores a 90 dias, prontamente conversíveis em um montante conhecido de caixa e que estão sujeitos a um risco insignificante de mudança de valor. As aplicações financeiras classificadas nesse grupo, por sua própria natureza, estão mensuradas a valor justo por meio do resultado.

Instrumentos financeiros: os ativos e os passivos financeiros são reconhecidos inicialmente pelo valor justo deduzidos ou somados de quaisquer custos de transação diretamente atribuíveis, quando aplicável.

Ativos financeiros serão subsequentemente mensurados ao custo amortizado, ou valor pelo resultado de acordo com o modelo de negócio da Companhia assim como por suas características de fluxo de caixa contratos. Ativos financeiros mantidos ao custo amortizado são ajustados ao seu valor recuperável quando necessário.

Após o reconhecimento inicial os passivos financeiros são mensurados pelo custo amortizado.

Os instrumentos financeiros denominados em moeda estrangeira serão ajustado para refletir as variações câmbio até o período de reporte.

Estoques: são avaliados ao custo médio de aquisição ou formação e inferiores aos valores de mercado. O custo dos produtos acabados inclui matérias-primas adquiridas, mão-de-obra, custo de produção, transporte e armazenagem, que estão relacionados a todos os processos necessários para a colocação dos produtos em condições de venda. Provisões para obsolescência, ajustes a valor líquido de realização, itens deteriorados e estoques de baixa movimentação são registrados quando necessário.

Ativos biológicos: Os ativos biológicos consumíveis e para produção (animais vivos) e as florestas estão avaliados pelo seu valor justo, sendo aplicada a técnica de abordagem de custo aos animais vivos e abordagem de receita para as florestas. Na apuração do valor justo dos animais vivos já estão computadas todas as perdas inerentes ao processo de criação.

Ativo imobilizado: apresentado pelo custo de aquisição, formação, construção ou desmontagem, deduzido da depreciação acumulada e perda por redução ao valor recuperável, quando aplicável, que é o maior valor entre o de uso e o de venda menos os custos de vender. Os custos de empréstimos e financiamentos são registrados como parte dos custos do imobilizado em andamento de acordo com a Deliberação CVM nº 672/11, considerando a taxa média ponderada de empréstimos e financiamentos vigente na data da capitalização.

A depreciação é reconhecida com base na vida útil econômica estimada de cada ativo pelo método linear. A vida útil estimada, os valores residuais e os métodos de depreciação são revisados anualmente e os efeitos de quaisquer mudanças nas estimativas são contabilizados prospectivamente. Os terrenos não sofrem depreciação.

A Companhia realiza anualmente a análise de indícios de perda no valor recuperável do ativo imobilizado, a qual envolve a adoção de premissas e julgamentos.

A Companhia apresenta anexo a este laudo a composição do saldo de terrenos (Anexo II).

Ativo intangível: os ativos intangíveis adquiridos são mensurados ao custo no momento do seu reconhecimento inicial. O custo de ativos intangíveis adquiridos em uma combinação de negócios corresponde ao valor justo na data de aquisição. Após o reconhecimento inicial, os ativos intangíveis são apresentados ao custo, menos amortização acumulada e perdas por redução do valor recuperável, quando aplicável. Ativos intangíveis gerados internamente, excluindo custo de desenvolvimento, não são capitalizados e o gasto é refletido na demonstração do resultado no exercício em que foi incorrido.

Ativos intangíveis com vida definida são amortizados ao longo da vida útil econômica e avaliados em relação à perda por redução ao valor recuperável sempre que houver indício de perda de seu valor econômico. O período e o método de amortização para um ativo intangível com vida definida são revisados no mínimo ao final de cada exercício social.

Ativos intangíveis com vida útil indefinida não são amortizados, mas são testados anualmente em relação a perdas por redução ao valor recuperável, individualmente ou no nível da unidade geradora de caixa.

A recuperação dos ágios foi testada em 2018 não sendo identificados ajustes para refletir perda no valor recuperável. A realização do teste envolveu a adoção de premissas e julgamentos.

Impostos e contribuições sobre o lucro: compreende o imposto de renda (“IRPJ”) e a contribuição social sobre o lucro (“CSLL”), que são calculados mensalmente com base no lucro tributável, após compensação de prejuízos fiscais e base negativa de contribuição social, limitada a 30% do lucro real, aplicando-se a essa base a alíquota de 15% acrescida do adicional de 10% para o IRPJ e 9% para a

CSLL.

Impostos diferidos representam diferenças temporárias entre a base fiscal e a contábil. Os ativos e passivos de impostos e contribuições diferidos são classificados como não circulante conforme requerido pela Deliberação CVM nº 676/11. Quando os estudos internos da Companhia indicarem que a utilização futura desses créditos não é provável a Companhia irá baixar os respectivos ativos.

Os impostos diferidos ativos e passivos são apresentados líquidos se existir um direito legal exequível de compensar os passivos fiscais com os ativos fiscais, e se estiverem relacionados aos impostos lançados pela mesma autoridade fiscal sob a mesma entidade tributável.

Os ativos e passivos fiscais diferidos devem ser mensurados pelas alíquotas que se espera que sejam aplicáveis no período em que o ativo for realizado ou o passivo liquidado, com base nas alíquotas (e legislação fiscal) que estejam em vigor na data do balanço.

Provisão para riscos tributários, cíveis e trabalhistas e passivos contingentes: as provisões são reconhecidas quando a Companhia tem uma obrigação presente, formalizada ou não, em consequência de um evento passado e é provável que benefícios econômicos sejam requeridos para liquidar a obrigação e uma estimativa confiável do valor desta possa ser feita.

A Companhia é parte de diversos processos judiciais e administrativos. As avaliações das probabilidades de perdas destes processos incluem a análise das evidências disponíveis, a hierarquia das leis, as jurisprudências disponíveis, as decisões mais recentes nos tribunais e sua relevância no ordenamento jurídico, bem como a avaliação dos advogados externos. As provisões são revisadas e ajustadas para refletir alterações nas circunstâncias, tais como prazo de prescrição aplicável, conclusões de inspeções fiscais ou exposições adicionais identificadas com base em novos assuntos ou decisões de tribunais.

Julgamentos, estimativas e premissas contábeis: a Administração fez os seguintes julgamentos que têm efeito significativo sobre os valores reconhecidos no laudo de acervo liquido:

- análise anual do valor recuperável de ativos não financeiros;
- perdas esperadas em créditos de liquidação duvidosa;
- provisão para ajuste a valor realizável dos estoques;
- valor justo dos ativos biológicos;
- análise anual do valor recuperável de impostos;
- vida útil dos bens do ativo imobilizado e intangíveis com vida útil definida;
- provisão para riscos tributários, cíveis e trabalhistas; e
- transferência do controle dos produtos para reconhecimento da receita.
- Companhia revisa anualmente as premissas utilizadas em suas estimativas

contábeis. O efeito das revisões das estimativas contábeis é reconhecido nos saldos contábeis no período em que tais revisões são efetuadas.

• E XHBIT II – I NFORMATION A BOUT THE APPRAISERS

(according to article 21 of CVM Instruction No. 481/09)

1. List the appraisers recommended by the management.
KPMG Auditores Independentes (CNPJ/MF sob o nº 57.755.217/0001-29).
2. Describe the qualification of the recommended appraisers.
The rendering of independent audit services, aimed at strengthening the accuracy of information prepared by clients for its use by investors, creditors and other stakeholders, is based on a methodology developed to comply with international and local auditing standards — International Financial Reporting Standards (IFRS) —, including exclusive computerized techniques of KPMG International and tools which assist the teams in accessing knowledge for them to suitably perform their duties, in an effective and efficient manner.
3. Provide a copy of the work and compensation proposals of the recommended appraisers.
Refer to the proposal which is attached hereto as Exhibit II.3.
4. Describe any relevant relation in the last three (3) years between the recommended appraisers and the parties related to the company, as defined by the accounting rules addressing this subject.
Not applicable.

* * *

Exhbit II.3. Proposta KPMG