Annual Report

2008

There is one thing that is devastating when lacking but, if developed and encouraged, has the potential of breeding unprecedented success in all dimensions of life. This thing is trust.

No chain can be stronger than its weakest link. JBS supports the sustainable development of the livestock chain.

Indicators
Net Profit . R$ million EBITDA . R$ million Consolidated Gross Profit . R$ million
158 1,156.1 31,106 -165 25 547.8 602 14,727

4,749

06

07

08

06

07

08

06

07

08

Total Assets . R$ million

Cash Flow Final Balance . R$ million

Net Debt/EBITDA 2008

16,096

2,292

2.89x

2.77x 2.31x

8,448

1,382

1.95x

3,464 261

06

07

08

06

07

08

1 tri

2 tri

3 tri

4 tri

.2.

Mission, Creed and Values

The Mission of JBS S.A.
Maximise the value of each animal in a sustainable way.

Company Creed
As we believe that one of the main competitive differences is the quality of our people, and as we believe that, no matter how simple the position may be, well-prepared and motivated personnel make the difference, we consider Human Capital as the main asset of our company. Mainly through our people we manage to innovate, create, improve and grow. This capital, when well used and with adequate support, enables us to achieve the results necessary for the perpetuation of JBS.

Our Values
: : : : : : Planning Determination Discipline Availability Frankness Simplicity

.3.

History of JBS

The history of JBS has been marked by the acquisition of more than 30 units over the last 15 years, with appropriate capital and management structure.

Inalca ITA Swift Foods Co. EUA/AUST. Maring (Amambai) BR Berazategui (Rio Platense) ARG Colonia Caroya ARG SB Holdings EUA JV Beef Jerky BRA/EUA

Barra do Garas (Sadia) BR

Barretos (Anglo) BR Pres. Epitcio (Bordon) BR Campo Grande (Bordon) BR

Rio Branco BR Cacoal 1 BR Cacoal 2 BR Porto Velho BR Vilhena (Frigovira) BR

Tasman AUST Smithfield Beef EUA Five Rivers EUA Venado ARG Tuerto ARG Pontevedra ARG (CEPA) ARG

19.8
Cceres (Frigosol) BR Iturama (Frigosol) BR Pedra Preta (Frigo Marca) BR Rosrio (Swift) ARG San Jose (Swift) ARG

Goinia (Anglo) BR

Andradina (Sadia) BR

Araputanga (Frigoara) BR

12.7

Anpolis (Bordon) BR

0.3

0.4

0.4

0.5

0.5

0.4

0.7

1.2

1.5

1.9

93

96

97

99

00

01

02

03

04

05

06

07*

08**

R$/US$ exchange rate at the end of the year. Source: JBS * Pro forma JBS S.A. LTM Dec07 (includes JBS USA) ** Pro Forma JBS S.A. LTM Dec08 (includes JBS USA, Tasman and 50% of Inalca); Smithfield Beef LTM Dec08

R$/US$: 2,337 2.337

Growth in Slaughtering Capacity (head/day)

65,700 51,400

22,600 5 53 500 70 02 5,800 06 07 08

Acquisitions ensure an increase in slaughtering capacity

.4.

index annual report 2008

JBS Historical Overview JBS Today Who JBS Is Message from the President Message from the Board of Directors Segments of Activity Acquisitions Corporate Governance Operations and Commercial Relationships Financial Performance Consolidated Brands Sustainability Corporate Information Financial Statements
.5.

.6. .7. . 14 . . 16 . . 18 . . 20 . . 27 . . 30 . . 39 . . 46 . . 49 . . 53 . . 65 . . 67 .

JBS Overview
55 years of important acquisitions and strong international presence
1953 1968

JBS have expanded the Company business based on the business spirit in management, the vocation for leadership and the quality of employees and collaborators. Innovative actions have turned this company into the largest world producer of meat and the largest Brazilian food company.

1970

1981 a 2002

Jos Batista Sobrinho starts operation of a small slaughterhouse in the city of Anpolis (GO), with a capacity of handling five heads of cattle per day.

Acquisition of the first slaughtering unit in Planaltina (DF).

With the purchase of another cattle-slaughtering unit in Luzinia (GO), production soars to 500 heads a day.

Significant expansion of the Brazilian operation through the purchase of slaughtering units and also units producing fresh and industrialised meat, as also as investments in increasing the production capacity. In this period, the slaughtering capacity reaches 5.8 thousand heads per day.

2005

2007

2008

Internationalization. Acquisition of Swift Argentina.

IPO. Acquisition of Swift EUA. Start of globalization

Consolidation of globalization. Constant search for efficiency.

.6.

JBS TODAY
JBS is now the largest beef producer in the world, with a capacity to slaughter 65.7 thousand heads of cattle per day. The Company is also the largest world exporter of beef, with access to all world markets, and also has production platforms in the four largest world producers, namely Brazil, Argentina, Australia and the United States. The Company produces both fresh and processed beef, ready meals, preserved vegetables, beef by-products, and also fresh pork meat. The Company is market leader for beef on the Brazilian, Argentinean and Australian markets, and also the third largest beef-producing company on the American market. With a slaughtering capacity of 48.5 thousand heads per day, JBS has become the third largest producer of pork in the United States. The Company operations are carried out in several different units in Brazil, Argentina, the United States, Italy and Australia, and this has provided access to all the consumer markets of the world, operational flexibility in production, low transport costs, both for transporting the cattle to the units and for transporting the products to the end clients, and a lower risk of phytosanitary problems. JBS has a structure of low cost, efficient operating cycle and high-quality products. All platforms have a sustainable and long-term relationship with clients around the world. JBS Brazil serves these clients through the Companys 22 Production Units, with a capacity to slaughter 18,900 heads of cattle per day and with a total workforce of 16,900 employees in Brazil. In JBS Argentina, there are six slaughterhouses with a total capacity of 6,700 heads/day as well as production of industrialised products and one tin packaging factory, with a total of 5 thousand employees in that country. The operations in the United States have a total of 17,900 employees and production is distributed among 18 units with a total slaughtering capacity of 28,600 heads of bovine cattle per day, 48,500 pigs per day, 4,500 small animals per day, and 11 confinement pens with a static capacity to fatten 820,000 thousand heads of cattle. The JBS operations in Australia are distributed among 10 plants with a total capacity to slaughter 8,500 heads of cattle per day and 15,000 small animals daily. In Italy, Inalca JBS has more than 2 thousand employees, 8 production plants and the capacity to slaughter 3,000 heads of bovine cattle per day. This Company has an additional distribution platform in countries such as the United Kingdom, Russia, Angola, the Congo, Algeria, the Democratic Republic of the Congo and Poland.

Distribution of Production Units in 2008

Brazil Australia USA Argentina Italy
8

22

18 10

.7.

JBS WORLDWIDE
Globalized production and distribution platform

JBS NO MUNDO Slaughterhouse (Beef) Slaughterhouse and Industry Distribution Center Vegetable Canning Plant Beef Canning Plant JBSBeef NO MUNDO Jerky Plant (Beef Snacks) Slaughterhouse (Pork) Abatedouro Slaughterhouse (Lamb) Abatedouro ePork Indstria Beef and Processing Plant Centros de Distribuio Wet Blue Processing Plant Indstria de Vegetais em Conserva Headquarters Office Indstria de Carne Enlatada Feed Lot Indstria de beef Jerky (Beef Snacks) Package Industry Indstria de Carne Suna Inland Container Terminal Indstria de Carne Ovina Commercial Office Processamento de Carne Bovina e Suna Curtume Sede Administrativa Confinamento Indstria de Embalagens

.8.

JBS Brazil

Description
:  The operations of JBS Brazil are carried out by 22 production units, with a total capacity of slaughtering 18,900 heads of cattle per day, and more than 16,900 employees; :  The clients of JBS in Brazil are essentially sellers, restaurants and leather tanning units (curtumes). The current client portfolio of JBS includes more than 6,000 companies on the internal market; and :  JBS is the largest Brazilian exporter of bovine products, with a turnover of US$1.1 billion in 2007, according to the Secretariat for Foreign Trade (SECEX). The Company is also the 22nd largest exporter in Brazil, considering all segments.

:  19 slaughtering units situated in Brazil, in the States of Acre, Gois, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Rondnia, So Paulo and Paran, five of which also have the capacity to produce industrialised products; : One plant for tin packaging, in the State of Rio de  Janeiro, Brazil; :  One plant for tin packaging for vegetables, in Minas Gerais, Brazil; : One plant for jerked beef in So Paulo, Brazil; and  :  One confinement site in the State of So Paulo, Brazil.

Clients
In 2008, a total of 11,240 clients were served on the domestic market, and 436 on the overseas market, in more than 100 countries, especially Russia, the United Kingdom, Iran, Hong Kong and Saudi Arabia.

Platform
At this moment, the Company plants are distributed as follows:

AC

AC

RO

ROMT

JBS IN BRAZIL Slaughterhouses JBS NO BRASIL Slaughterhouses and Industry Distribuition Centres Units Abatedouros for Preserved Vegetables Units Abatedouros for Preserved Beef e Indstria Administrative Centros Office de Distribuio Container Yard de Vegetais em Conserva Indstria Confinement Unit

GO MT MS SP PR

MG

GO MS

RJ

MG

SP PR

RJ

Indstria de Carne em Conserva Sede Administrativa Ptio de Containers Confinamento

: total kill capacity: 18,900 heads of cattle/day. : 16,900 employees. : amount of plants: 22

.9.

JBS argentina

Description
:  In 2005, JBS acquired Swift, now known as JBS  Argentina, with a capacity to slaughter 6,700 heads of cattle per day and more than 5,000 collaborators; :  The Company was the first packaging industry in  Argentina to receive the ISO 9001:2000 certification for the whole process of production of processed meats; :  In Argentina, the Company is absolute market leader  in the segment of industrialised meats for the internal market, with a market participation of 77% of all sales of 2007. The client portfolio consists of 786 companies; and :  Last year, JBS Argentina was responsible for 87% of  all the industrialised beef sold in the country, which exported to the United States, Europe and about 190 other clients.

Platform
At this moment, the Company plants in Argentina are distributed as follows: :  Six slaughtering units in Four provinces (Buenos Aires,  Entre Ros, Santa F and Crdoba), of which five also have the capacity to produce industrialised meats; :  One plant for tin packaging, in the province of  Buenos Aires.

Clients
JBS Argentina has a total of more than 650 clients internally and 140 clients on the export market, serving 43 countries, especially the European Union, the United States, Uruguay, Israel and Canada.

SF CO
CO SF

ER
ER

BA
BA

JBS NA ARGENTINA JBS IN ARGENTINA Abatedouros Slaughterhouses Abatedouros e Indstria Slaughterhouses and Industry Escritrio Administrative Office
: total kill capacity: 6,700 heads of cattle/day. : 5,000 employees. : amount of plants: 7

. 10 .

JBS United States

Description
:  The operations of JBS USA are carried out by 18 production units, with a total capacity of slaughtering 28,100 heads of cattle per day, 47,900 pigs per day, and 4,000 heads of sheep per day, as well as 11 confinement units with a total capacity of fattening 820,000 heads of cattle. :  The operation has more than 24,200 employees; and :  The Company has been well known as a supplier of prime-quality beef and pork for more than 150 years.

:  3 pig-slaughtering plants in Minnesota, Iowa and Kentucky; :  1 sheep-slaughtering plant in the state of Colorado; :  1 leather tanning unit in Texas; :  2 units for production of preserved meat (jerked beef) in Minnesota and Texas; :  2 grease units in Pennsylvania; and :  11 confinement units in the states of Colorado, Texas, Oklahoma, Kansas, Ohio and Idaho.

Platform
At this moment, the Company plants in the United States are distributed as follows: :  8 slaughtering units in the states of Colorado, Utah, Texas, Nebraska, Wisconsin, Michigan, Pennsylvania and Arizona;

Clients
JBS Argentina has a total of more than 3,900 clients in the United States and some 500 clients on the export market, serving 37 countries, especially Mexico, Canada, Taiwan, South Korea and Hong Kong.

MN

MN
WL IA

WL
IL IA KY IL

CT NJ

NE CA UT AZ UT CO

CT NJ

NE CO

CA

KY

AZ
TX FL

JBS IN EUA Cattle Slaughterhouses JBS NOS EUA Distribution Centres Pig Slaughterhouses Abatedouros Bovinos Pig and Cattle Slaughterhouses Centros de Distribuio Sheep Slaughterhouses Abatedouro Bovino e Suno Administrative Headquarters Abatedouro Suno Offices

TX

FL

: total kill capacity: 80,000 heads of cattle/day. : 24,200 employees. : amount of plants: 18.

Abatedouro Ovino Sede Administrativa Case Ready (pratos prontos)

. 11 .

JBS Australia

Description
:  The operations of JBS Australia are carried out by 10 production units, with a total capacity of slaughtering 8,500 heads of cattle per day and 16,500 heads of sheep and pigs. In addition, the Company has some 6,900 employees; :  TBS Australia is the largest meat processor and exporter on the Australian market, having a commercial relationship with more than 30 countries, mostly on the Pacific coast and in North America.

Platform
At this moment, in Australia, the Company plants are distributed as follows: :  10 slaughtering units for cattle, sheep and pigs; and :  5 confinement units in Queensland and New South Wales.

Clients
JBS Australia has a total of 185 clients in the United States and some 400 clients on the export market, serving 35 countries, especially South Korea, China, Japan, Taiwan and Indonesia.

Queensland Western Australia

Queensland
Southn Australia New South Wales

Western Australia

Southn Australia

Victoria

New South Wales

Victoria
JBS IN AUSTRALIA Cattle Slaughterhouses Distribution Centres Administrative Headquarters Confinement Units
. 12 .

: total kill capacity: 25,000 heads of cattle/day. : 6,900 employees. : amount of plants: 10

JBS NA AUSTRLIA

Abatedouros Centros de Distribuio

Inalca JBS Italy

Description
:  The Italian operation is responsible for the  production of fresh bovine meat, as also as processed and smoked meats and snacks, through a jointventure with the Cremonini Group; :  Turnover of US$1,039 million and assets of US$771  million; :  The production division is responsible for two  companies: NALCA SpA and Montana Alimentari SpA; :  Largest producer of beef in Italy;  :  Largest producer of industrialised beef in Europe;  :  Largest producer of hamburgers in Italy;  :  The Company is the only non-American supplier of  McDonalds; :  Capillarity in distribution throughout Europe, Africa  and Russia; :  Benchmark in technology in the market for cattle  slaughtering; :  10 production plants;  :  Production capacity of 800,000 heads of cattle per year;  :  40,000 tonnes of hamburgers per year; and  :  2,019 collaborators. 

Distribution
:  Moscow (Russia)  :  St. Petersburg (Russia)  :  Luanda (Angola)  :  Lobito (Angola)  :  Melangie (Angola)  :  Brazzaville (Congo)  :  Point-Noire (Congo)  :  Algiers (Algeria) 

Production Units
:  Poland Slaughterhouse  :  Moscow Logistics and Distribution 

Clients
INALCA JBS has a base of more than 8,000 clients internally and also 660 on the external market, serving 65 countries, especially France, Spain, Greece, England and Germany.

JBS IN ITALY Slaughterhouses BS NA

ITLIA
. 13 .

: total kill capacity: 800,000 heads of cattle/day. : 2,019 employees. : amount of plants: 10

Abatedouros

Who JBS is
Pioneerism has been the mark of the path trailed by JBS
The success of the Company is backed up by business spirit and by a pioneer approach, both very strongly present in JBS management. JBS S.A. was the first company to be structured professionally, in the meat industry in Brazil. The strategic vision, focused on an expansion policy, started the internationalisation of the Company in 2005 with the purchase of Swift Argentina. The following year, the Company became a sociedade annima (like a PLC in the United Kingdom) and, in March 2007, promotes a new milestone on the So Paulo Stock Exchange. With the opening of the Companys capital in 2007, JBS strengthened its pioneer spirit, being the first company in the meat-packing segment to trade its shares on the Stock Exchange. The opening of the Companys capital shows the advances made by JBS, which thus consolidates the best practices of Corporate Governance which the Company has always practiced, making the market more transparent.

The year of 2007 has been important in the history of JBS as the start of the globalisation of the Company, while the year of 2008 has seen the consolidation of this movement. In 2007, JBS purchased the Swift Foods Company, in the USA, with units in that country and also in Australia, now known as JBS USA and JBS Australia. In 2008, JBS announced the completion of purchase of a 50% stake in Inalca, the largest producer of beef in Italy, as also of Smithfield Beef Group, Inc. and the Tasman Group, the former being situated in the United States and the latter in Australia. The acquisitions in 2008 have consolidated the globalisation of the Company and also strengthen the JBS strategy of geographical diversification of their production and distribution units, thereby reaffirming the Companys global presence in the main meat-producing countries, and with access to 100% of the consumer markets. This production platform makes JBS a company that holds global leadership in the beef segment, and which exports to the most important importing countries in this segment. The JBS management style also includes a search for modernity, quality of products and raw materials, construction of relationships with partners, clients, collaborators and society in general, satisfaction of shareholders, and a commitment to issues of social and environmental responsibility. JBS is dedicated to the production of fresh and chilled beef, processed beef, fresh and chilled pork, and also beef and pork by-products.

. 14 .

JBS is present in all the worlds consumer markets thanks to its productive strategy, with plants in the main beef-producing countries Brazil, Argentina, the United State, Italy and Australia and also leadership in terms of exports, serving 110 countries. JBS also has, as their strategy for the consolidation of global presence, a strong and well-structured policy of acquisitions. In 2008, they tightened their grip on the North American market with the purchase of Australian company Tasman for some US$150 million, and also the takeover of Smithfield Beef, which operates in the United States. JBS analyses companies throughout the world, to identify those that have good market potential but which are not able to establish an efficient management system. On takeover, the companies go through a period of financial cleansing and then the JBS standards of management are enforced. This means that there has been the start of a process of optimisation of the results of these production units and also the unification of Company culture. Nowadays, JBS is active in the food and transport segments, and, in all the countries where the Company is present, has a total of 48.9 thousand collaborators which contribute towards the success of the Company. The JBS operations are structured in five segments: :  JBS Brazil  :  JBS Argentina  :  JBS United States  :  JBS Australia  :  JBS Italy (Inalca) 

Volume sold . thousand tonnes 2008 Domestic Market (1,343)

Fresh Processed Others
6.9% 2.4%

90.7%

Volume sold . thousand tonnes 2008 Export Market (419)

Fresh Processed
6.2%

93.8%

. 15 .

Message from the President

Joesley Mendona Batista
President of JBS S.A. We kept at 2008 the same growing rate that characterized Companys management on last years, with worldwide presence in the main producer and customer markets for our products. Our global production platform is consolidated, with many challenges as our culture implantation in those unities, processes integration and costs structure revision, that resulted in efficiency and improvement increasing we optimize our resources on production processes managing, speed up our production unities supplying and fresh products delivery, with quality to our customers. Company attitudes were a preparation for worldwide economic crisis. With the turnover in worldwide credit market and lower funding lines availability on international financial markets, we turn our focus to the Company economic health, rather than to continue growing, as was occurring to this moment. Between adversities we were in face of there are strong increase on cattle prices, low cattle availability due a cyclic herd deterioration and the high appreciation of Brazilian currency, Real, in the first half of year - that prejudices our products competitiveness on international market. Although in face of this scenario, we close 2006 with R$ 30.3 billion of net income, that represents more tan two times last year income, a 114.5% growing and R$ 1.2 billion of EBITDA, 95.6% higher than 2007. Not less important, at 2008 JBS retaken the newly USAS purchased company results, between fixed costs reduction, operational efficiency improvement, larger scale and focus on details. Those points, due they are inside factors not exposed to market conditions created a scenario to Company continue presenting sustainable results. Positive results were ensured thanks to excellent JBS positioning on its main markets. EBITDA margin maintenance in the 4% rate probes JBS solidity and risk management capacity. Company also work on is de-leverage, reducing the relation between liquid debt on EBITDA from 3.64 at 2007 to 1.95 at 2008. Worked with debt basically funding its working capital, not having problem to refund its short time debts in the moments of low liquidity market. At 2008 also began to balance geographically its debt, with incomes generation on each operation country. The Company belief in its values reflect on management attitudes, as the adoption of additional corporative governance practices in relation to that is required by law and the own regulation of New Market from BM&FBovespa, as the existence of audit, Finances, People Management and Enterprise Strategy committees,. On this last comittee, a detach for Sustainability quaestions. We have sustainability programs suitable to each production unities, that includes environment, natural resources use, wastes treatment and social actions.

. 16 .

With conservative management and a focus on results, JBS envisages opportunities amid moments of turbulence

Although pointing to 2009 as a year to conservative business management movements, JBS demonstrates that its growing strategy has been being correct. Company is taking advantage of opportunities as firms acquisitions, where its management model, between efficiency improvement and costs reduction, can increase its resuls. At 2008 we incorporate to our portfolio Inalca operations, Italian firm responsible by fresh beef, manufactured, smoked and snacks production, between Association with Cremonini group, Tasman Australian group, and Smithfield Group beef unity (Smithfield Beef), in United States, and its confining operations known as Five Rivers, are now respectively named as: JBS Packerland and JBS Five Rivers. Those acquisitions represents the conclusion of investments plan to build a slaughtering, production and trading platform sustainable, on EUA and Australia, that began at July, 2007, between Swift & Company acquisition. The next years, we believe, Will be marked by JBS distribution global platform integration and expansion, to consolidate each more our strategy to create the largest world company of direct distribution of beef, cooled and freeze dairy products. This report shows JBSS management solidity and the trust that company entrust on its more than 48.9 thousand employees around the world.

. 17 .

Message from the Board of Directors

Constant growth, and solidity
Ever since the Company was set up in 1951, with a slaughtering capacity of five heads a day, until reaching 60 thousand heads per day, with units on six continents, JBS has always trailed a path of excellence in business management, administration of human resources and risk assessment. Nowadays these qualities are more important than ever before. The world is changing, and business scenarios are more and more volatile. JBS is structured to grow by replicating its business model and taking opportunities that place the Company closer to the supplier markets and producers. The Company is therefore in an excellent position to take on the current phase of the world economy, with solid financial health and a conservative management in the main markets. JBS has its main asset in its team of collaborators. The innovation capacity and the ability to meet even the strictest consumer expectations have led JBS to levels of excellence which make the Company look to the future with confidence. Even with the negative factor of the world financial crisis, which hit the markets as from October 2008, JBS managed to build a solid base to make their business permanent. The geographical expansion has ensured presence close to the clients, thereby bringing significant reductions of operational and logistics costs. The Company has been keeping up its margins, this clearly showing that it is possible to establish performance targets and to have security in business. The Management of JBS in 2008 has shown itself to be competent and conservative in the light of a scenario of turbulence, and this has reaffirmed its excellence of management, and credibility before the market.

. 18 .

Globalisation
Cattle is the most important commodity in the state of Colorado, and is responsible for more than 60% of our agricultural income. JBS brings an international perspective to this industrial segment, which will benefit the producers and also make agriculture in Colorado feasible in years to come.

Betsy Markey
Congresswoman from the Fourth District of Colorado

. 19 .

Segment of Activity
JBS is active in the production and commercialisation of beef, and is present in the largest producing and consumer markets of this segment
The year 2008 was marked by the global financial crisis. As from September 2008, the world felt the pinch with the effects of this scenario. The speculations about the duration and the impact of the current global crisis have led to a high volatility as yet unseen in the capital markets. For JBS, this situation of instability was regarded as an opportunity to prove the solidity of the Company and also the ability to manage risks, which gave the Company reasonable financial stability even in the most adverse conditions. The experience of JBS in statistical studies on elasticity have shown that, during previous global crises the consumption of bovine protein was not reduced, meaning that the Company believed that the demand for their products would continue to grow and that there would be good results at the end of 2008. Some effects of this crisis, such as exchange rate operations, brought important benefits. This movement led to the financial deleverage of JBS, as currently more than 80% of cash flow is in American currency while almost all the debt in Brazilian Reais. It also provided operational gains through the global production and distribution platform, directing Company resources between the markets for each region. In 2008, the first impact on business came in the form of suspension of credit lines for exports. JBS, well positioned with the main producing and consumer markets, sought to strengthen their activities in the domestic markets where they have their units. In this way, the Company reduced its dependence on international markets when there was lack of credit for importers. Once again, the strategy of expanding Company business throughout the world and getting closer to the main markets proved to be correct. Lower costs and improvement to efficiency were key factors for the success of the Company.
. 20 .

The position of JBS on the markets in the United States and in Australia were important factors for the Company business not being contaminated by the world financial crisis. The United States are the largest world market for beef, while Australian has strategic closeness to the Asian markets. In the United States, the Company also has strong operations with pigs as well as cattle, this being a diversification that also helped to ensure positive results in the year. JBS obtained satisfactory results in 2008. The Company closed the year with a positive performance. The third quarter, for example, had the best quarterly result consolidated in the history of the Company, with an EBITDA of R$470.5 million, a net turnover of R$7,771.5 million, and a net profit of R$694.0 million. In this same period, JBS USA, considering its activities in the beef segment, also obtained its best historical result and confirmed the expected increase in EBITDA margin, from 5.1% in 2Q08 to 5.6% in 3Q08. The year 2008 was important for JBS to confirm its stability and leadership in the beef segment, even in the light of an adverse scenario. The year has also been relevant because JBS has confirmed its stability and leadership in the beef segment

and also for the full retaken of the results obtained by JBS USA. In addition to the good results obtained on the American market, exports have stood out through the strong global demand. The turnaround of operations in the USA has once again proved the experience and the competence of the Management of JBS, guided by your efficient strategy of seeking opportunities in purchases. In 2008, JBS thus consolidated the Companys globalisation and also confirmed to the market its capacity for management.

Production
Brazil has the 2nd largest bovine herd and In terms of the herd commercially used, Brazil has the largest cattle herd in the world, by number of cattle heads. In the ranking of world production of beef, Brazil is in nd 2 position, behind the United States which yonder USA are the largest consumer of this product. Australia is the second largest exporter of beef as it has many productive advantages: exceptional sanitary conditions, as it is a large island without borders onto any other countries, which means there is no risk of infection by animals from other countries; good weather conditions; and proximity to Asia, an important consumer market for beef. Argentina is the fourth largest beef producer. Argentinean meat is in itself a very strong brand on the international market through its tradition, native pastures and also its climate similar to that of Europe. These benefits allow the development of a product which is highly competitive on the European market.

Brazilian Macroeconomic Scenario Growth in GDP Inflation (IGP M) Inflation (IPCA M) Selic (Official Interest Rate)
Sources: IBGE and FGV

2007 3,7 3,8 3,1 15,0

2008 5,4 1,76 4,47 11,25

. 21 .

Total Scenario - Herd & Production - 1960 to 2009

Total Herd Production (equivalent carcass weight)

1,200.0 1,100.0 Herd . million head 1,000.0 900.0 800.0 700.0 600.0 60
Source: USDA

70.0 Production . million tonnes 60.0 50.0 40.0 30.0 20.0 10.0 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08

Main Beef Exporters

Brazil Australia United States India New Zealand Canada Argentina Uruguay European Union Others
1 5 6 6

Main Beef Importers

United States Russia Japan Mexico European Union South Korea Canada Venezuela Egypt Others
26 29

11

18

15 3 17 10 12 4 4 5 6 6 10

. 22 .

Consumption
Beef is an important source of protein, and for this reason it is the third most commonly eaten meat in the world, after pork and chicken. USDA statistics show that the consumption of beef has been rising steadily since 1960. The same source shows that since 2001 the world consumption of beef has grown at a rate of 1.1% per year, on average. For the next few years, we expect a steady growth in the world consumption of beef, as a result of the population growth, mainly in countries like China, Brazil, other Latin American countries, the Middle East and Eastern Europe. The maintenance in the growth of the population in developed markets and the constant growth of population in the emerging markets show a strong demand for the Companys products in both the short and the long term.

Expectations of steady growth in consumption of beef

World Population Growth and Consumption of Beef

Population of Developed Countries Population of Developing Countries Consumption of Beef*

10,000.0 8,000.0 Population . million 6,000.0 4,000.0 2,000.0 0.0 60 65 70 75 80 85 90 95 00 05 10* 15* 20* 25* 30* 35* 40* 45* 50*
Source: United Nations and USDA * UN Estimate ** Trend for beef consumption considering CAGR of 2% per annum (between 1960 and 2009)

140.0 CAGR 2.0% Consumption . million tonnes 120.0 100.0 80.0 60.0 40.0 20.0 -

. 23 .

Consumption of Beef per caput . in kilos per year

65.6 52.4 40.7 37.3

34.7

31.7 24.1 15.9 16.3 9.4 4.7

Argentina

Uruguay

USA

Brazil

Australia

Canada

Mexico

EU

Russia

Japan

China

Commerce
The United States, even as the largest beef producer in the world, has a shortage of production of lower-value cuts, in contrast to a surplus of high-value cuts, which makes the USA the largest importer of subgrade beef (as the production does not meet the high demand of the country) and an important exporter of choice and prime cuts. The countrys exports fall after 2003, in the wake of the outbreak of BSE (popularly known as mad cow disease), but started an important recovery as from 2008, suggesting that the volumes exported should return to the levels of before 2003. In Australia, export of beef is a strong activity. The country has been one of the leaders in this segment for more than a decade now. About 75% of the exports of Australian beef have been made to Japan, South Korea, Russia, Taiwan and Mexico, among other countries, and this figure is developing further, so that there may be a record growth in 2009.

In the export ranking, Brazil has been in the lead since 2004, mainly thanks to the increase of the national herd and also efficiency in livestock husbandry, together with the occurrence of BSE in some beef-exporting countries this being an illness which does not affect the national herd, and which therefore opened the markets formerly covered by these countries to the export of Brazilian meat. Argentina has been significantly increasing their exports in recent years. The beef industry in the country has obtained great success through the international marketing made with the aim of placing the countrys meat with a prime perception by the international market.

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Beef Deficit and Surplus . thousand tonnes

1999 2009*
Brazil

The Beef Industry: Brazil, Argentina, the United States and Australia
With the largest beef herd for commercial purposes, Brazil has also become the largest world exporter of beef, thanks to the stepping up of production, characterized by low cost, which allows the widening of the range of destination markets for exports. The reduction of sanitary and commercial barriers has also played a part in bringing about the average growth of 25.5% in Brazilian beef exports since the year 2000. In 2008, considering the total between January and October, Brazil exported just over 1.89 million tonnes of fresh beef equivalent, with a turnover of US$4.67 million. Compared with the same period for 2007, we see that there has been a rise in turnover by 26%, in contrast to a 13% fall in volume. The largest buyer of Brazilian fresh beef has been Russia, with 38% participation, followed by Venezuela (9%), Iran (7%), Hong Kong (5%), Egypt (5%), Algeria (4%) and Israel (4%). For processed meats, 20% of the total exported goes to the United States, followed by the United Kingdom (14%), Italy (6%), the Netherlands (6%), Germany (2%), Belgium (1%) and Jamaica (1%). The according to data released by the Brazilian Meat Exporting Industries Association (ABIEC). This year, with the tightening of European restrictions on fresh Brazilian meat, there was a significant rise in the sales of processed meats (sales of fresh beef fell), even in the case of Europe itself. More specifically, at the end of 2008, the international financial crisis has had a negative impact on shipments, particularly in the case of Russia. The restrictions set by the Argentinean Government on beef exports in 2008 removed the country from the 4th place among the largest world exporters, bringing it down to 7th place. In 2005, Argentina was the 3rd largest world exporter of beef. The crisis between the Government and the rural beef producers had an important impact on the segment. This scenario was made even worse as from September, when the world financial crisis broke out.

Argentina

Australia

United States

China

European Union

Russia

South Korea

Japan

(-1,500)
Production - Consumption Source: USDA Estimate for 2009

(-500)

500

1,500

2,500

Global Leadership of JBS

: Production platform which leads in countries with production surplus. : Leader in exports to the most important beef-importing countries. : Access to 100% of beef consumer markets. : Sustainable and long-term relationship with global clients.

. 25 .

The JBS operations are in conformity with laws and regulations of the markets where the company is active

The United States are the largest world producer of beef, even though the country has only the third largest commercial herd. The country is also the largest world consumer of beef, with significant consumption of cheaper cuts and a lower consumption of prime cuts. In this way, the country stands out for exports of prime and choice beef and, at the same time, is the largest importer of second-grade beef. For JBS, the United States is the most strategic market of their operations, as this is the most important consumer centre and also a producer of beef protein. This is also a market which warrants lots of attention, through seasonality and also due to the high competitivity of the segment in the country. Australia is now the second largest beef exporter in the world. Australia has kept its position as leader in beef exports to Asia, making the most of the excellent economic performance of this region, and China is the main target, destination of two thirds of Australias production.

Regulation of the Segment

The production and commercialization of beef is subject to extensive regulation from Government authorities at municipal, state and federal level and also foreign institutions, with regard to the processing packaging, storage, distribution, advertising and labelling of the products, including food safety requirements. Recently, practices and procedures for food safety in the beef processing industry have subjected the companies to a more intense analysis and supervision. JBS seeks to remain aligned with the requirements set by the Governments and also by the regulatory bodies in the countries where the Company is active, to make sure that the Company operations comply with all laws and regulations regarding food safety.

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Growth
I have followed the trajectory of JBS Group for over four decades now. From a humble origin, this company grew to gigantic proportions in the scenario of its state, of Brazil and overseas through its competence and the earnestness it always faced its commitments with. JBS Groups trump card is the solidity in its commercial transactions; its credibility, therefore, is above dispute. In conclusion, we can it is a company that inspires confidence, which is an edge in the globalized world.
Iris Rezende
Mayor of Goinia

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Acquisitions
The purchases made in 2008 have consolidated the globalisation of the Company
JBS has constructed a solid business management model in the food segment. The Company seeks to expand its presence on the global market through a strategy of assessment of opportunities and acquisition of companies that could benefit from a management shock based on the JBS model. In this way, the Company has sought to consolidate a position of leadership in strategic markets and ensure god results for the Companys investments. The Company started its internationalisation in 2005 with the purchase of Swift Armour, an Argentinean company, and then, as from 2007, JBS embarked on an expansion and globalisation plan, moving towards the largest producing and consuming markets for their products. In 2007, the purchase of Swift Foods, of the United States, in an operation worth US$1.4 billion, consolidated the Companys position as the largest world producer of beef and the third largest producer of pork. In 2008, with the purchases of the JBS operations in Australia, Italy and the United States, the Company consolidated its globalisation process. In March 2008, the Company clinched an agreement with Cremonini SpA (Cremonini), for the acquisition of a 50% stake in the capital stock of Inalca SpA (Inalca), one of the most important beef producers in Europe, for a total of 225 million Euros, based on an enterprise value for Inalca set at 600 million Euros. The acquisition of Inalca, which now bears the name of Inalca JBS, established important synergies between products and sales channels of JBS and Cremonini, both leaders in their respective markets. On the one hand, JBS with its production and distribution in the markets of South America, the United States and Australia, and, on the other hand, Cremonini, through Inalca, with its presence in Europe, Russia and Africa. For JBS, this operation was a unique opportunity to access, through Inalca, new markets and clients, including large multinationals in the fast-food business, producers of processed foods, large retail chains, and food service companies. This alliance also offered JBS access to Inalcas cutting-edge technology, widely acclaimed, as also to the products with highest added value, traded under the Montana brand name. For Cremonini, this transaction gave privileged access to the main world sources of supply of beef, as well as strengthening its supply chain. This Association in Italy, together with the acquisitions made in the United States and in Australia, have confirmed the global leadership enjoyed by JBS. The acquisitions of the American company Smithfield Beef and Australian company Tasman were closed at R$565 million and US$150 million respectively.

. 28 .

In March 2008, JBS announced the purchase of the Tasman Group, an Australian company, and also of Smithfield Beef, an American company. The confirmation that authorization had been received from the Australian Competition & Consumer Commission (ACCC), the Australian regulator, for the purchase of the Tasman Group was received by JBS on 23 April 2008. The new structure gave JBS Australia an additional 5,000 employees and 15 units, including slaughterhouses for bovines and small animals (sheep and calves) with a capacity of slaughtering 8,500 heads of cattle per day and also 16,500 small animals per day. As part of JBSs globalisation strategy, the acquisition of Smithfield Beef in 2008 was an important step in the completion of the investment plan for the construction of a sustainable slaughtering platform, and also the production and commercialization of beef, in the United States and Australia, which started in July 2007 with the purchase of Swift & Co. This purchase shall increase JBSs capacity to meet specific demands made by the clients, and shall also provide economies of scale and operational efficiency, thereby generating value for the shareholders.

The acquisition of Smithfield Beef Processing included 100% of the shares issued by subsidiary Five Rivers Ranch. With the purchase of Smithfield Beef Processing, JBS USA started to have four more slaughtering units in that country, located in Green Bay (Wisconsin), Plainwell (Michigan), Souderton (Pennsylvania) and Tolleson (Arizona); a greaseproducing unit in Elroy (Pennsylvania) and a bovine confinement unit in South Charleston (Ohio); and a transport company, with some 120 refrigerated lorries. Five Rivers has ten confinement units for bovines, with a total capacity of 811,000 heads, in the states of Colorado, Idaho, Kansas, Oklahoma and Texas. With the purchases in the United States, currently this platform accounts for about 75% of the consolidated net turnover of JBS. With these operations, JBS, which were already leaders in beef production, also became the leader in the sale of beef-based products. The Company obtained a significant advantage with the proximity to the largest beefproducing and consuming markets in the world. After this business integration, JBS had 14% of world beef production, and a capacity to kill 15 million heads per year, as well as 31% of meat sales on the international market.

The integration of the Tasman Group , Smithfield Beef and the confinement units of Five Rivers have increased the production platform and introduced synergies that have reduced costs
. 29 .

Trust
The Argentinean Beef Industry has added power to its activities with the participation of Brazilian capital. The significant development of the JBS Friboi Group , the owner of 8 industrial plants in the country, clearly express the decision taken by this business group , a leader in the segment, to boost and enhance the Argentinean beef industry, which shall bring concrete benefits for the country, for the workers and also for the technology of the sector.
Dr. Mario Dario Ravettino
President | Consortium of Argentinean Beef Exporters (ABC)

. 30 .

Corporate Governance
JBS conducts its business in a transparent and ethical manner, this being the base of the companys Corporate Governance
JBS follows a model of Corporate Governance with the aim of implementing the best practices in the Company, that should be reflected in transparency and trust from a range of publics, and also ensure the best products and services to the Company clients, solidity to suppliers, satisfactory yield for shareholders, and the certainty of a better future, for all collaborators. Corporate Governance is the very essence of the Company, which makes use of best market practices and also acts in line with currently effective laws, in a natural way. Governance is a reality within JBS, something dynamic and natural, which is part of the daily activities of the Company. The conduct of JBS is represented by the pillars of corporate governance. This means that the view of organizational behaviour based on Governance guides JBS in the strict compliance with laws and also respect for all segments of the public.

Corporate Governance in the Essence of JBS

The corporative responsibility of JBS is shown in the transparency and equity with which the Company carries out its business. JBS believes that, through collaborators who are both committed and motivated, the Company may constantly grow and innovate, thus achieving the desired results. JBS believes that people are the same, anywhere on the planet and in any business environment, regardless of their social, intellectual or hierarchical level, and only brings to the Company those people who enjoy prosperity, who seeks firm commitment to work, availability, learning, growth and expansion. For JBS, after all, their greatest asset is human capital. Indeed, it is the capacity of human work that makes a success of the Company and also sustains all possibilities for future growth and innovation.

. 31 .

In terms of operational focus, JBS believes that everything starts at the plants, as the harmony and the precision of the quality of the cattle raw material, together with the capacity of human work, make a success of the Company and also back up and prop up the possibilities of growth and investment in the future. JBS monitors external factors to make strategic decisions and always focuses on what is within their reach and what can be controlled. The Company is obstinate in controlling costs, in increasing the slaughtering and production capacity, and also in the steady improvement of yield and the guarantee of the best quality of their products. Risk control identifies and classifies the events that cause strategic risks to JBS business, according to the probability thereof, and establishes the respective control procedures. The Company conscientiously deals with possible risks that could involve the Companys segments of activity, and sets targets and guidelines for the management thereof. The Company creates and sustains different Commissions to ensure correct implementation of all Company activities. At present, JBS has Audit, Finance, People Management and Corporate Strategy Commissions. For example, the Corporate Commission manages sustainability at JBS. JBS believes that its development and corporate growth must be associated to the sustainability of Company actions. With this belief, JBS supports and invests in the improvement of the production chain to which it belongs. JBS shares are traded on the New Market, a segment of Bovespa made up of companies which have committed themselves, on a voluntary basis, to the adoption of corporate government policies in addition to those required by relevant legislation.

Information Appraisal Policy

The policy for disclosure of information is another key issue in meeting the rules for transparency and the requirements of regulators of the financial market, such as the Brazilian Central Bank, the Securities Commission (CVM) and the So Paulo Stock Exchange

(Bovespa). JBS S.A. discloses relevant facts and notifications as per CVM instructions, which requires that the data about Company business are published in a way that gives investors and the market enough time to make decisions concerning their investments. JBS also, through press releases, makes the Companys quarterly results available to the market and also holds a conference for investors and market analysts, as also a press conference every three months to comment on Company performance, events and also shed light on possible doubts shown by the market. Commitment to efficient corporate governance is reflected in the option to register the Company in the listing segment of the New Market of the So Paulo Stock Exchange (Bovespa), which has a strict commitment to good practices of corporate governance. JBS shows its commitment to transparency and also quality in business management through public commitments inherent to the New Market, namely: :  Grant to all shareholders the right to joint sale (tag along), in cases of alienation of the share control of the Company, in which case the acquirer of the control should make a public offering of share purchase to the other shareholders; :  Take up supply procedures that favour scattering of shares; :  Comply with minimum standards for quarterly disclosure of information; :  Follow stricter disclosure procedures with regard to deals made by the controlling shareholders of the Company, as also Board Members and Directors, involving securities of their issuance; :  Submit any existing shareholder agreements and programmes with share purchase options to Bovespa; :  Prepare annual financial statements, including cash flow statements, in the English language, as according to international accounting standards like the Generally Accepted Accounting Principles (GAAP) of the USA, or the International Financial Reporting Standards (IFRS);

. 32 .

:  Use exclusively the arbitration rules of Bovespa, by which Bovespa, the Company, the controlling shareholder, the managers, and the members of the Fiscal Board of the Company, if installed, agree to solve any dispute or controversy concerning the listing regulations through arbitration; and To ensure correct conduct in all JBS activities, in addition to the Tax and Management Commission, JBS also has Audit, Finance, People Management and Corporate Strategy commissions. Each of these commissions plays a relevant role in the guarantee of JBS management processes.

:  Give an opinion on the proposal for distribution of dividends and tax planning; :  Monitor quarterly results; and :  Seek to protect the internal financial control systems.

People Management Commission

:  Help the Board of Directors with issues regarding remuneration and identification of directors; :  Give an opinion on the mechanisms for variable remuneration and long-term incentives; :  Help with the process of executive appraisal; :  Give support to the Board of Directors, for the management of the executive succession plan; :  Monitor the Company policy for retaining talent; and :  Give opinions about the organizational structure of the Company and also the general Human Resources policies.

Audit Commission
:  Give opinions about hirings, remuneration, retaining and replacement of the external auditor; :  Contribute to the preparation of the scope and the schedule of the annual auditing activities and also to the review of current internal risk controls, seeking to improve the quality of the information supplied to the Board of Directors; :  Identify and suggest actions in support of the monitoring of the activities of the internal and external auditors, and establish a channel of communication between internal institutions for accounting controls and the Board of Directors; and :  Try to solve possible controversies between the Auditors, Board and Fiscal Commission about the financial statements of accounts.

Corporate Strategy Commission

:  Mr. Marcus Vinicius Pratini de Moraes is the current president; :  Develop, and propose to the Board, policies regarding corporate strategy and the sustainability of the Company operations; :  Advise the Board of Directors in all matters concerning sustainability, by means of identification, addressing and treatment of critical issues that amount to risks, or which could have a negative impact on business; :  Make recommendations to the Board of Directors, and accompany the implementation of policies, strategies and actions that concern the sustainability of business at the Company; and :  Assess the proposals for strategic investments of the Company from the standpoint of sustainability, and make recommendations to the Board of Directors regarding making decisions about these investments.

Finance Commission
:  Give an opinion about the appropriate capital structure, and prepare studies about market capital costs vis--vis costs of Company debts; :  Study the projects for investments and adaptation of the Companys financial structure in depth;

. 33 .

Board of Directors
The Board of Directors is the highest institution of Company management and is responsible, among other points, for establishment of policies and guidelines for Company business. The Board of Directors also supervises the Management and also oversees the implementation, by the Management, of the policies and guidelines regularly established by the Board of Directors. The Administration Committee of JBS currently consists of seven members, three of which are independent committee members. The term of the first Administration Committee after the opening of capital, which occurred in 2007, is three years. This means that the term of the current members of the Administration Committee is due to expire in 2009. As from 2009, the members of the Administration Committee shall be voted for a unified term of two years, with the right to unlimited re-elections. The Administration Committee meets once a quarter, or at any moment when a special meeting is called by the President or by any other member. Joesley Mendona Batista: Mr. Joesley Batista is the current President of the Administration Committee, having been elected to this post on 2 January 2007, and has more than 20 years of experience with the production of beef within the JBS Group. He is also the Executive President of JBS S.A. Joesley Batista has worked for the JBS Group since 1988 and is one of the sons of Mr. Jos Batista Sobrinho, founder of the JBS Group, and brother of Mr. Jos Batista Jnior and Mr. Wesley Mendona Batista. Wesley Mendona Batista: Mr. Wesley Batista is the current Vice-President of our Board of Directors, having been elected to this post on 2 January 2007, and also has more than 20 years of experience with the production of beef within the JBS Group. He is also a Member of the Board, and has worked for the JBS Group since 1987. He is one of the sons of Mr. Jos Batista Sobrinho, founder of the JBS Group, and brother of Mr. Jos Batista Jnior and Mr. Joesley Mendona Batista.

Jos Batista Sobrinho: Mr. Jos Batista is a member of our Board of Directors and is the founder of the JBS Group. He has experience in beef production in the JBS Group spanning more than half a century. Mr. Jos Batista was elected to this position on 2 January 2007. Mr. Jos Batista is the father of Mr. Joesley Mendona Batista, Mr. Wesley Mendona Batista and Mr. Jos Batista Jr. Jos Batista Junior: Mr. Batista is a member of our Board of Directors, having been elected to this post on 2 January 2007, having more than 25 years of experience in beef production within the JBS Group. Mr. Batista is one of the sons of Mr. Jos Batista, the founder of the JBS Group, and brother of Mr. Joesley Mendona Batista and Mr. Wesley Mendona Batista. Marcus Vinicius Pratini de Moraes: Mr. Pratini de Moraes has been a member of our Independent Administration Committee since 2 January 2007. He is an Economics graduate from the Faculty of Economic Science of the University of Rio Grande do Sul (1963), with graduate studies in Public Administration from the Deutsche Stiftung fr Entwicklungslnder, in Berlin, Germany (1965) and in Business Administration by Pittsburgh University & Carnegie Tech Carnegie Institute of Technology (1966). Mr. Pratini de Moraes held the posts of Interim Minister of Planning and General Coordination (1968-1969), Minister for Industry and Commerce (1970-1974), Minister of Mines and Energy (1992) and Minister for Agriculture, Livestock and Supplies (1999-2002). Demsthenes Marques: Born in Passo Fundo, Rio Grande do Sul, he is a graduate in Civil Engineering from the Federal University of Santa Maria, and completed post-graduate studies in Urban Development by the Cndido Mendes Integrated Faculties, a specialist in Audits of Public Works from the University of Braslia (UnB) and in Geographical Information Systems by the Federal University of So Carlos (UFSCar). He has been an Investments Director at FUNCEF since July 2004. He has been an employee of the Brazilian Federal Savings Bank (Caixa Econmica Federal) since 1989, and at this institution he carried out executive roles in the areas of Urban Development and also Social and Economic Development. Post Held President Vice-President Board Member Board Member Board Member Board Member Deputy Member Date elected 2/1/2007 2/1/2007 2/1/2007 2/1/2007 2/1/2007 11/4/2008 11/4/2008 Term ends August 2009 August 2009 August 2009 August 2009 August 2009 August 2009 August 2009

Members of the Board of Directors Joesley Mendona Batista Wesley Mendona Batista Jos Batista Sobrinho Jos Batista Jr. Marcus Vinicius Pratini de Moraes(1) Demsthenes Marques(1) Humberto Pires Grault Vianna de Lima(1)
(1) Independent Board Member

. 34 .

He has also been a Board Member at Litel S/A (the holding company of the society structure controlled by Vale do Rio Doce), Brazil Railways (Brasil Ferrovias), Ferronorte, Ferroban, Novoeste and ALL Amrica Latina Logstica. Humberto Pires Grault Vianna de Lima: Brazilian, graduated in Economics at the Faculty of Political and Economic Science in Rio de Janeiro, in 1979. He also has post-graduate studies in Economics from the Economic Research Institute Foundation (FIPE) of the University of So Paulo (USP), and in Economics from the School of Economics of the Getlio Vargas Foundation (FGV), between January 1990 and December 1991. He simultaneously holds the posts of Manager of New Projects and that of Participations Manager, at the Petrobrs Social Security Foundation (Petros), since March 2008.

Wesley Mendona Batista: Mr. Wesley Batista is the current Vice-President of our Board of Directors, having been elected to this post on 2 January 2007. He has more than 20 years of experience with the production of beef within the JBS Group. He is also a Member of the Board, and has worked for the JBS Group since 1987. He is one of the sons of Mr. Jos Batista Sobrinho, founder of the JBS Group, and brother of Mr. Jos Batista Jnior and Mr. Joesley Mendona Batista. Francisco de Assis: Francisco has been on the Management Team since 2 January 2007. He is a qualified lawyer, qualified from the Catholic Pontifical University of Paran. He took a lato sensu post-graduate course in Environmental Law, at the Catholic Pontifical University of Paran; also a lato sensu post-graduate course in Company Law, at the Mackenzie University in So Paulo; a masters degree course (stricto sensu), at the Mackenzie University in So Paulo and the Catholic Pontifical University of Paran, in the areas of State Law, with a masters dissertation on Constitutional Tax System, with all the credits for a Doctorate; he also took an MBA course at the University of So Paulo (USP) in Labour Economics. He has carried out his professional activities at the JBS Group since December 2001. Srgio Longo: Mr. Longo was the Financial Director at JBS between 2003 and January 2009, when he resigned. In April 2009, he was elected as a member of the Fiscal Commission at JBS S.A. Mr. Longo has more than 25 years of experience working in financial institutions, and before joining our Company, worked for 18 years at the Sudameris Bank and four years at the Rural Bank. Jeremiah Alphonsus OCallaghan: Mr. OCallaghan was born in Cork, Republic of Ireland, in 1953. He read Engineering at UCC (University College Cork) and immigrated to Brazil in 1979. He entered the meat industry in 1983, developing global commerce for the Brazilian beef segment. He first worked at Mouran (1983 to 1989), then at Bordon (1989 to 1995) and finally joined JBS in 1996, to develop the area of International Business.

Management Team
The Management Team at JBS is its executive institution. The executive directors are their legal representatives and are also responsible for internal organization, decision-making process, daily operations, and implementation of policies and general guidelines as established at regular intervals by the Board of Directors. The members of the Management Team of the Company are elected by the Board of Directors for terms of three years, and are entitled to be re-elected. The Management Team of JBS meets whenever called up to do so, either by the President or by the majority of its members. Joesley Mendona Batista: Mr. Joesley Batista is the current President of the Board of Directors, having been elected to this post on 2 January 2007. He has more than 20 years of experience with the production of beef within the JBS Group, and is also the Executive President of JBS S.A. Joesley Batista has worked for the JBS Group since 1988 and is one of the sons of Mr. Jos Batista Sobrinho, founder of the JBS Group, and brother of Mr. Jos Batista Jnior and Mr. Wesley Mendona Batista.

Directors Joesley Mendona Batista Wesley Mendona Batista Francisco de Assis Srgio Longo Jeremiah OCallaghan

Post Held President Executive Operations Manager Legal Affairs Manager Financial Manager Investor Relations Manager

Date Elected 2/1/2007 2/1/2007 2/1/2007 2/1/2007 14/5/2008

Term Ends 2/1/2010 2/1/2010 2/1/2010 2/1/2010 2/1/2010

. 35 .

Strategies and Competitive Advantages

The solid performance from JBS and the Companys growing productivity indices allow the Company to show constant growth, and also present steady improvement of their operational margins. The aim so the strategies adopted by JBS are the following: : Stay as market leader in the beef segment; : Boost profitability and also financial solidity; : Make the Company business perennial.  To ensure that this goal is achieved, JBS has adopted a strategy based on the following principles: : Search for opportunities for investments and  acquisitions; : Sound financial structure; : An experienced and efficient management team; : Constant search for cost reduction; : Increase in productivity and expansion of participation in  products that bring higher yield and have higher added value, thus maximising financial returns for the Company; : Search for better margins; and : Diversification of production platforms.

Risk Management
JBS anticipates possible problems that could affect the segment of production and commercialization of beef, especially concerning trade barriers. The Companys strategy of expanding their operations in units located in different Brazilian states is fundamental to protect the Company against risks comcerning phytosanitary barriers in the international beef trade. Should there be any commercial or sanitary blocks against bovine-origin food produced in certain regions, JBS can keep up the export of their products through production in areas that are not under the effects of the embargo. Another factor that helps with Risk Management related to commercial barriers of a political or phytosanitary area is the internationalisation of production, with plants scattered around other countries (Argentina, United States, Italy and Australia).

JBS NO MUNDO

Abatedouro Abatedouro e Indstria Centros de Distribuio Indstria de Vegetais em Conserva Indstria de Carne Enlatada Indstria de beef Jerky (Beef Snacks) Indstria de Carne Suna Indstria de Carne Ovina Processamento de Carne Bovina e Suna Curtume Sede Administrativa Confinamento Indstria de Embalagens Ptio de Containers Escritrios Comerciais

Mitigate potential risks such as sanitary barriers and seasonality.

Create geo g dive raph rsit y i

l ca

pportunities Seek o vestments n i r o f cquisitions a d n a

ial an c Fin cture u str n a ge ment team

Examples: Frigorficos Brasileiros SwiftArmour Swift & Company Inalca Tasman SmithfieldBeef

er B et t rgins ma

GENERATE SATISFACTORY AND CONSISTENT RETURN TO THE SHAREHOLDERS

e Red reas tion duc uce costs, inc c tivity rodu lue of p d a n n a a d p ex pro dv d uct s with greatest adde

pro

Ma

Administration with more than 50 years of experience in the beef industry.

. 36 .

With the uncertainties of the international money markets, the pressure of foreign exchange rates in Brazil, with the volatility of the Brazilian Real during 2008, JBS has been active in minimising the Companys exposure to financial risks. Conservative governance principles have enabled the Company to face the reduction of the global supply of credit with minimum impact, and keep their consolidated margins.

Environmental Policy
JBS is a Company that has its success largely based on the management of products with environmental responsibility

JBS adopts a responsible stand regarding the use of natural resources, thereby ensuring the feasibility of the companys business

For the Company, the environment shall be seen as a factor of business stability and, as such, treated in a sustainable fashion. For the Company, the excellence in environmental management shall be based on economic feasibility and ecological correctness. The JBS units are evolving in their management of natural resources. For this purpose, they act in a responsible fashion when using the materials, and have issues related to mitigation of global warming in their internal policies, so much so that this is the first company from this segment to succeed in approving a carbon-credit programme in accordance with the rules established by the Kyoto Protocol. The treatment of residue in all JBS units is considered a priority issue, both from the environmental standpoint as in terms of public health. JBS invests in technologies to make their industrial residues inert and minimize the impact on the environment. The Company has programmes in place for the reduction of water consumption, and treats its effluents so the water may be returned to nature within the standards of quality required by normative institutions. There are also programmes for reduction of use of energy and for the search for alternative sources of energy, that reduce the impact of the Company on the need to generate electricity in the countries where the Company is active.

Capital Markets
The Company shares traded on Bovespa, under the code JBSS3, in 2008 had a performance of -15.5%, while the overall Bovespa index had a performance of -40,2%. JBS believes that the good performance of their shares compared with the overall index is a consequence of the acknowledgement of the Companys solidity and transparency, by the general market. The Company has become established as the largest producer and exporter of beef in the world, with the market capitalization having exceeded the level of R$7.6 billion. At the end of 2008, the total free float available for trading on the stock market was a total of 683,167,775 shares, corresponding to 47.5% of the Company capital. In December 2007, the free float stood at 36.4%. In line with the expansion that has been observed, mainly in the American market, this being the region where the Company makes most of its income, in 2008 JBS completed its programme for American Depositary Receipt (ADR) Level I, aiming at the increase of liquidity and visibility of the Company shares. The Level I ADRs are traded under the code JBSAY. .
. 37 .

JBSS3 vs. Ibovespa

JBSS32009* Ibovespa Index
Announcement of acquisitions of Smithfield Beef, National Beef and Tasman Group, and increase of capital stock by R$ 2.5 billion Ibovespa: Payment of R$ 17.5 million in dividends

200 180 160 140 120 100 80 60 40 jan/08

Public Meetings with Investors: So Paulo New York

Publication of Results for 3Q08

Publication of Results for 2007

Publication of Results for 1Q08

Announcement of ADR Programme

feb/08

mar/08

apr/08

may/08

june/08

july/08

aug/08

sep/08

oct/08

nov/08

dec/08

Source: Bloomberg (base 100 = 02/01/08)

Shareholders on 31 December 2008 Shareholders J&F Participaes S/A ZMF Investment Fund Participation Shares held by the treasury Shares in circulation BNDES Participations S/A BNDESPAR FRDT FP Minority Shareholders Total Shares in circulation TOTAL no. of Shares 632,781,603 87,903,348 34,226,200 186,891,800 205,365,101 290,910,874 683,167,775 1,438,078,926 13.0% 14.3% 20.2% 47.5% 100.0% % 44.0% 6.1% 2.4%

. 38 .

pride
This important family group , operating on a world scale, is a matter of pride for Argentina, a country which has eight plants and investments totalling US$400 million. I am proud for this, and am grateful for the trust. These busines speople have been able to conciliate the interests of the internal and the export market, and I must congratulate them on this. We would like all companies in Argentina to be like this, just like the company of the Batista family.
Cristina Kirchner
President of Argentina

. 39 .

Operations and Commercial Relationships

With a focus on growth and on geographical expansion of Company activities, JBS distributes its operations among 22 units in nine Brazilian States, six units in Argentina, 18 in the United States and 10 in Australia. The acquisition of all the units reflected the strategy of being active in regions with heavy presence of livestock and, in so doing, manage to get operational flexibility for production, reduction of the costs of transporting the livestock and also the ready product, as also the reduction of phytosanitary risks. The strategic location of the units is one of the factors that place the Company at an advantage on the market, as this provides a production strategy with low costs and operational efficiency. In Brazil the suppliers of livestock on the JBS portfolio are a total of 15,000 breeders. Following the principles of guarantee of the security of the livestock and the quality of the meat, the cattle breeders are located within a radius of 500 kilometres of the slaughtering units.

With a production platform with more than 60 units and globalised distribution, JBS has access to 100% of the consumer markets for beef
. 40 .

In the Argentinean operations, the livestock is purchased in specialised fairs, from a total of some 1,600 breeders that are within a radius of 350 kilometres from the slaughtering units. The suppliers of JBS USA make up a select portfolio, with breeding confinements centres that are part of the largest meat suppliers in that country. In the Australian operations, the cattle are purchased from a portfolio of more than 10,000 suppliers. In all operations, JBS has a team specialised in the purchase of cattle. The breeders are selected through strict criteria, including the requirement for documents that show the quality of the operations, and also confirmation that the use of antibiotics and agricultural pesticides follows the respective standards established by the industry.

JBS Brazil
The Company exploits the segment of the slaughtering and cold storage of bovines, as also processing of meats, preserves, fats, animal feed and derived products, with industrial units situated in the states of So Paulo, Gois, Mato Grosso, Mato Grosso do Sul, Rondnia, Minas Gerais, Acre, Rio de Janeiro and Paran. The Company produces a wide range of produdcts industrialised products and also prime cuts of beef, with significant penetration in both Brazilian and international markets.

The whole production process follows strict quality control and also meets international phytosanitary standards. The handling of the beef is made in climatised rooms, while the cold storage chambers or freezer compartments have temperatures controlled by fully computerised systems. Control programmes for Cleansing and Hygiene (PPHO Standardised Operational Hygiene Programme), Personnel Training (GMP Good Manufacture Practice), Analysis of Hazard Points and Critical Control Points (HACCP Hazard Analysis and Critical Control Points), as well as the Friboi Total Quality Programme (TQF), are carried out on a permanent basis, to make sure of the quality of the products. In addition, the carcases are inspected by veterinary doctors from the Federal Inspection Service of the Ministry for Agriculture (SIF), for the issuance of the authorisation for production and processing. As a complement to the accompaniment of the sanity and trackability of raw materials, the processes are subjected to a control process made by modern laboratories and experienced technicians, at the JBS industrial units. In 2008, JBS Brazil closed the year with 22 units to serve their clients, with a total capacity to slaughter 18,900 heads of cattle/day and 16,900 collaborators in Brazil.

JBS Brazil

Fresh Meat

tailored products

Processed Meat

Matured

Organic Beef

Friboi

Swift

Anglo

. 41 .

JBS Argentina
The JBS Argentina was established with the purchase of Swift Armour S/A, a company which had been founded in 1907 and which in 2005 was purchased by JBS, being composed of six industrial units: Rosrio, Venado Tuerto, So Jos, Pontevedra, Berazategui and Col-Car, as well as one unit for production of tin packaging, in Zarate. The JBS Argentina is dedicated to the exploitation of the cattle slaughtering and cold storage industries, as also meat processing, preserves, fats, animal feed and derived products, with industrial units in the provinces of Buenos Aires, Entre Rios, Santa F and Crdoba. JBS Argentina has three subsidiaries, of which two were purchased in 2007, a slaughter and cold-storage unit in the town of Berezategui (Consignaciones Rurales), a tin factory situated in Zarate (Argenvases), both in the province of Buenos Aires, and one purchased in 2008, a slaughtering and cold-storage unit in Crdoba (Col-car). JBS Argentina enjoys leadership in the production of meat-based foodstuffs in the country, and is also the first in beef exports, being well renowned for the high quality of the products, not only by the demanding Argentinean internal market, as also by the international market. The total volume slaughtered by JBS Argentina was 474 thousand heads in 2008, compared with 608 thousand in 2007, which is a rise of 22%.

The productive units are distributed in a strategic manner, in the provinces which have the highest production of livestock. They also have modern technology in the processing of chilled and frozen meats and also industrialised products. The purpose of JBS Argentina is to develop, produce and commercialise meat-based foods with high added value, which are healthy, safe and tasty. The main publics are final consumers and also large food companies. JBS seeks quality in all stages of its processes. With this in mind, the Company makes use of trackability of the animals and also strict systems for sanitary and quality control, as well as special care with the packaging, which not only ensures the quality of the products in transport but also reinforces the Company image of competence, as regarded by the clients. JBS Argentina closed 2008 with six slaughtering plants, with a slaughtering capacity of 6,700 heads of cattle per day, and also production of processed meats and one factory to produced tin packaging, and has more than five thousand collaborators in that country.

jbs Argentina

Fresh Meat

tailored products

Processed Meat

Cabaa Las Lilas

Plate

Swift

Swift

Exeter

La Blanca

ACE

. 42 .

JBS USA
Since 2007, JBS has been the largest Company operating with bovine products in the North American market. This was possible with the purchase, in July of that year, of Swift Foods & Company, a Company which is well known for supplying beef and pork products of high quality over more than 150 years. Swift & Company, now known as JBS USA, is the leader in world beef exports, and the focus of the Companys activities is on the development and supply of beef-based and pork-based foods with practicality and flavour. Aside from supplying the largest world consumer of meats and industrialised dishes. The JBS USA is also a diversification of the operations of the Company, with the opportunity to exploit the pork segment. The total number of head slaughtered in 2008, at the USA Business Strategy Unity of JBS USA, was 12,576 thousand, which is an increase of 4.02% when compared with 2007, when it came to 12,071 thousand. In the United States JBS carries out company operations through eight beef processing units, three units for processing pork meat, one unit for lamb slaughter, selected beef and pork products processing unity, one leather tanning unit, seven rented centres for regional distribution, two units for grease production, and 11 farms for fattening cattle, operated by JBS Five Rivers. At the end of 2008, the operations in the United States had 17,900 employees and production is distributed among 18 units with a total slaughtering capacity of 28,600 head of cattle/day. 48,500 pigs/day, 4,500 head of small animals/ day, and 11 confinement units, with a static fattening capacity of 820,000 head of cattle.

jbs EUA

Cattle

Pork

G.F Swift 1855 Brand Black Angus TM

Swift Premium

Black Angus

Swift Angus Select

Swifts Angus Guaranteed Tender

Swift Premium

Guaranteed Tender

Swift Natural Fresh Pork

. 43 .

JBS Australia
With nine slaughtering units and another five units for cattle confinement in Australia, JBS stands in one of the main beef-producing markets in the world. This contributes towards the consolidation of the Companys world leadership. JBS Australia is the largest and most encompassing beef processor and exporter in Australia. It has commercial relationships with more than 30 countries. The Companys activities in the markets of the Pacific Coast and North America is worthy of mention. The sophisticated care about hygiene and health have made possible a significant expansion towards new clients around the world. At the end of 2008, the operations of JBS Australia were distributed among 10 production plants, with a total slaughtering capacity of 8,500 cattle/day and 15,000 small animals/day.

JBS Austrlia

Cattle

Swift

Fed

AMH

Middle Fed

Long Fed e Marbling Scores

Beef City

. 44 .

Inalca JBS
Inalca JBS in Italy already has more than 2 thousand employees, 8 production plants, and the capacity to kill 3,000 bovines per day. The Company also has an additional distribution platform in the United Kingdom, Russia, Angola, the Congo, Algeria, the Democratic Republic of the Congo and Poland. The acquisition of Inalca, now known as Inalca JBS, created important synergies between products and sales channels of JBS and Cremonini, both leaders in their respective segments. On the one hand, JBS, with their production and distribution in markets such as South America, the United States and Australia, and on the other hand Cremonini, through Inalca, with presence in Europe, Russia and Africa.

INALCA JBS

JBS

CREMONINI

50%

50%

INALCA JBS

Cattle

Inalca

Ibise

Montana

. 45 .

Sales and Market

Internal Markets Brazil

Sales and Market

Domestic Market Export

32%

JBS clients in Brazil are retailers, restaurants and also leathers, distributors and food industry. The Company has created the Swift Butcher (Aougue Swift) programme, to establish a solid relationship with clients and also to consolidate the brand among the end consumers. JBS is also actively investing in the Swift, Maturatta and Friboi brands, as also in the publicising of the concept of Organic Beef, with traders and consumers. Currently, JBS Brazil has a book with small, mean and large customers.

68%

Argentina
In Argentina, JBS commercialises own brands and also those of third parties, including: Swift, Cabaa Las Lilas, Armour, Plate, Fray Bentos, Safra, Exeter and Corte Buona. The client portfolio in Argentina consists of several companies, including the most important hypermarket and supermarket chains in the country, as well as wholesalers and distributors which are present in the whole country.

USA
Distribution of Income by Business Unit
Beef - Italy Beef - Argentina Beef - Brazil Beef - United States Pork - United States Beef - Australia
12% 5% 3%

JBS USA commercialises brands that are well known at a global level for the high quality of the products, always focused on innovation to add value to the clients sales by making available tasty and practical products for the consumers. The client portfolio is made up of large retail networks, some of which are present in many countries. From the portfolio of wholesalers, the main clients account for a significant part of Company sales, all well consolidated in their respective segments of activity.

Australia
19%

In Australia, the domestic market is strategically relevant and shows great growth potential. JBS is present in this market with strong brands and diversified products, aimed at a demanding consumer public, growing and with a high consumption power.

14%

47%

. 46 .

Export Market Brazil

JBS is the largest beef-exporting Company in Brazil, according to data released by SECEX (Development Ministry Foreign trade Secretariat), and also holds an important position among the most important Brazilian exporters, considering all segments. As in the case of domestic business, there is no market concentration.

Exportations JBS 12M08 US$ 5.6 bilhes

Mexico Russia EU Japan Canada MIddle East Hong Kong South Korea Taiwan USA China Others

Argentina
In Argentina, JBS is also in first place for beef exports. In the last business year, JBS Argentina was responsible for most of the exports of industrialised beef in the country, with the main destination markets being the United States and Europe, which have a base of some 172 clients.

15%

USA
For the export market, JBS USA offers products with the same standard of quality and brand recognition, as shown in the domestic market. At 2008, JBS USA exported 50% more than American industry average. Main USA firm exportation customers were Mxico, Canada, Japan, South Chorea and Hong Kong.
3% 3% 4% 4% 5%

18%

13%

Australia
The leadership in beef exports is also repeated in Australia, which obtained a high yield in the products traded on the foreign market in 2008. Have a strong share on Asian market, which supplies customised products.

7% 8% 9%

11%

. 47 .

Financial Performance
In 2008, the results of JBS reinforce the companys growth strategy
Net Turnover
In 2008, the consolidated Net Turnover came to R$30,340 million, which is a growth of 114.5% compared with the R$14,141.6 million of 2007. Ebitda . R$ million Ebitda Margin . %
Ebitda Margin Ebitda
14,2% 9,6% 564.9 345.1 4.0% 3.8% 602.3 1,156.1

05

06

07

08

Net Turnover . R$ billion

30.3 114.5% 14.1 4.0

EBITDA
The EBITDA came to R$1,156.1 million, 91.9% more than the EBITDA of 2007, which came to R$602.3 million. The EBITDA margin for the period was 3.8%.
3.6

05

06

07

08

. 48 .

Expenses
The operational expenses came to a total of R$2,907 million in 2008, which is an increase of 45.1% compared with 2007, when they came to R$1,596 million. This increase occurred due to the strong growth of the Company over this period. Sales expenses rose by R$730 million, strengthening the relationship channels with the clients and also with prospective clients of JBS.

Debt
The total debt of JBS in 2008 came to R$5,616 million, of which 60.6% is long-term debt with the extension of liquidation until 2016. With available funds equivalent to R$2,291.6 million, the net debt of the Company comes to R$3,324.9 million, which represents a debt over EBITDA ratio (last twelve months pro-forma) of 1.95 times.

Net Profit
In 2008, there was a net pro-forma profit of R$1.05 billion, when adjusted by the exchange rate variation for investments abroad and after the amortisation of the agio is excluded.

Investments
The total value of the capital expenditure incurred by JBS in goods, industry and equipment, not including purchases, was R$994.1 million in 2008. This total sum was invested during the year in maintenance and also in improvements to the distribution platform.

The pro-forma profit in 2008 came to R$1.05 billion, if adjusted by the exchange rate variation for investments abroad, and if the amortisation of the agio is excluded

. 49 .

QUality
The partnership between the Batista family and the family of the Australian beef industry and its dedicated collaborators has proved to be a formidable force, to provide reliable products of high quality for consumers around the world. In addition, these two groups seek to be the best in everything they propose to do.
Don Heatley
Chairman Meat & Livestock Australia, North Queensland cattle producer.

. 50 .

Quality, Innovation and Strong Brands

Focus on Innovation and Quality of Products
Having been on the market for five decades, JBS has always stood out for the excellence of their products, the satisfaction of the needs of clients and also the final consumers around the world. With this in mind, the Company knows that it is necessary to take care of all details of all processes, of each stage, and of all operational segments of the different Company units. This means the need to constantly invest in the collaborators, in machinery and technology to develop what is most modern in the food segment, to meet the specific demands of each client in a customised way, and innovate through the launch of products that meet the needs of the final consumer. In the Companys platform in Brazil, the service to the clients is provided by the 22 production units, with a total slaughtering capacity of 18,900 heads of cattle per day and more than 16,900 collaborators. The clients of this platform include points of sale, wholesalers, supermarkets, industrial firms, production of foodstuffs which have its composition, restaurants, leather tanning units, and others. The current client portfolio of JBS in Brazil has more than 11,240 clients on the internal market and 436 on the export market. Through customised products and brands, or own brands such as Friboi, Swift, Friboi Grill, Anglo, Organic Beef and Maturatta, JBS Brazil serves the domestic market and also exports to more than 100 countries, especially Russia, Hong Kong, the European Union and Saudi Arabia. The focus on excellence of quality can also be perceived in JBS Argentina. In this country, the Company was the first packaging industry to earn the ISO 9001:2000 certification for the whole process of production of processed meats. Through six slaughtering plants, of which five producing processed meats and one producing tin packaging, JBS Argentina develops its portfolio of innovative products with brands that are well known on the market, such as Plate, Cabaa Las Lilas and Swift, to serve a client base comprising more than 650 clients on the domestic market and some 140 clients abroad. JBS USA has been recognised as a provider of high quality beef and pork meat for more than 150 years. With brands such as Swift & Company, Angus Select, Premium Black, Hereford, La Herencia, Swift Premium, 1885, among others, in the United States JBS serves more than 3,900 domestic clients as well as 500 clients in 37 countries, especially Mexico, Canada, Taiwan, South Korea and Hong Kong.

. 51 .

With a production platform based in Italy, Poland and also in Moscow, Inalca, an Italian company in which JBS has a 50% stake, is recognised in Europe for its high technology and product innovation. This operation is responsible for the production of fresh beef, as well as processed and smoked meats and snacks. For its quality, Inalca JBS is considered by the whole world as a benchmark in technology within the market for slaughter of bovines and meat processing. Inalca JBS serves a base of 8 thousand clients on the Italian market and also 660 clients abroad, with the Montana, Inalca and Ibis brands. With 185 clients internally and 400 abroad, JBS Australia stands out as the largest beef processor and exporter on the Australian market. JBS Australia offers the following brands to the market: Seattle Meat, Beef City, Royal, Your Choice, AMH and Tasman Meats, among others. On all JBS production platforms, the Company recognises the importance of keeping the standard procedure, from the choice of raw materials, through the industrial processes, for hygiene, training and care with refrigerated transport. In all countries, there is a Quality Assurance area and also a department for Research and Development of products, responsible for the study of possible launches and for preparing the standards of quality for all items offered to the clients. Focused on innovation and excellence of quality, JBS seeks to be recognised by clients and consumers as a Company which serves with full credibility. For this purpose, JBS has customised brands or own brands to serve each client, with respect for cultural and religious considerations of the variety of regions where the Company products are consumed.

JBS and its brands

JBS seeks to strengthen its brands with highest added value and profitability. This is a strategy that enables the maintenance of operational results. The Company is structured to offer high-quality products focused on the preferences of local consumers.

Product Lines
JBS is a food company focused on the production of fresh and processed beef, handled within strict standards of hygiene and commercialised in practical and hygienic packaging, in portions appropriate for consumption. All JBS platforms produce beef Argentina, Brazil, Italy, Australia and the USA. Fresh Beef: chilled or frozen cuts, including picanha, ribs, filet mignon, front cuts and beef giblets, among others. Processed Beef: meat products such as cooked and frozen meats, preserved meat and meat extracts, as well as industrialised meats (beefburgers, kibe, sausages and mortadella) and ready meals. With installations and processes well suited to the international market, JBS exports processed meat to all five continents and is market leader for global beef exports. The Company is also present in the pork and lamb segments through the Company operations in the United States, where 47,900 pigs are slaughtered every day. There are three pork slaughtering units in the United States, in Minnesota, Iowa and Kentucky. JBS is also active in the slaughter of small animals, in the United States and in Australia. Some 20,500 of these animals are killed daily, including 4,000 lambs at JBS USA at a plant in Colorado, and 16,500 heads at JBS Australia.

. 52 .

JBS Brands: worldwide recognition

. 53 .

sanitary standards are considered part of the business structure

Management Tools and Excellence of Quality
To ensure the quality of the final product, JBS has an efficient system for controlling the origin of the cattle, as also transport and industrial production with sanitary care and hygiene. From the purchase of raw materials through to commercialisation, the products with the JBS brand go through efficient processes of industrialisation, preservation and transport. JBS invests in the trackability of the animals, which are processed in their units as a way of ensuring the application of strict health procedures and control of origin, including environmental and social concerns.

The excellence of JBS products also has fundamental tools: a logistic and information technology structure for data management and optimisation of processes.

JBS Quality Policy

To conquer recognition and trust in the JBS brands, through the quality of the products and also the perfect service to the clients, thereby ensuring the morale of the collaborators and the security of the consumers, with respect for the law and for the environment. The excellence in JBS activities in their markets of interest has arisen from an attention focused on the interests of the clients, the heavy investment in quality programmes, the permanent monitoring of their installations with strict criteria for hygiene and sanitary controls, permanent physical, chemical and microbiological analyses and quality control, that accompany the product from the entry in the units until delivery to the clients. The requirements assessed by JBS go well beyond just the compliance with the legislation of each country where the Company is present. The Company considers that sanitary guarantees are a structural part of the business, such as the implementation of specific Quality Programmes such as: Allergens, Genetically Modified Organisms (GMO), Specific Risk Materials, Animal Welfare and so forth; certification by the British Retail Consortium (BRC), World Technical Standards for food; and others. To make sure of the quality and the food safety of the products, JBS internally disseminates programmes and procedures such as Best Production Practice, Standard Procedures for Operational Hygiene, Operational Sanitary Procedures, and Analysis of Hazards and Critical Control.

. 54 .

Sustainability
The Argentine Refrigeration Industry strengthened its activities with the participation of Brazilian capital investments. The substantial development of Grupo Frigorfico JBS Friboi, which owns eight industrial plants in the country, express a decision of this industry-leading corporate group to boost and improve the Argentinean refrigeration industry, which will result in concrete benefits to the country, the workers and technology of the sector.
Dr. Mario Dario Ravettino
President | Argentinean Beef Exporters Consortium: A.B.C

. 55 .

Sustainability
JBS believes that perennial company activity is associated to sustainable development
For JBS, whose corporate governance includes concepts of social responsibility, respect for the environment, ethical conduct and economic performance, sustainability is an important value. The Company believes that its development and corporate growth may be linked to sustainability of actions. Thus, JBS follows best governance practices and uses, as master lines, the transparency before all segments of the public that the Company has a relationship with, constantly investing in the improvement of the production chain in its units, with a focus on the reduction of environmental impact, as well as seeking ways of establishing closer relationships with collaborators, family members and also the community in general, through social initiatives.
. 56 .

JBS has a sustainability policy, as the Company is well aware of its responsibility as the largest beef-producing company in the world, and of all the impact generated by its operations in each region. Thus, the Company has a sustainability programme suited to each of the Companys units, including Environmental Policy, Procedures Adopted, Information Policy, Relationships and Investments, Usage of Natural Resources, social and environmental actions and treatment of residue. The premises of sustainability, including those of being ecologically feasible and correct, socially fair and culturally accepted, have always been part of the development and growth of JBS in all the countries where the Company is active. The vast experience of the Company proves the importance of the reduction of the environmental impact to keep up a close relationship with the communities where the Company is present. In its activities, JBS prioritises the sustainable use of materials, the climactic factors, treatment of residues, partnerships with fair organisations, for health, ethics and quality of life.

JBS is the first and the only company from this segment to have registered an MDL project at the United Nations Convention on Climate Change (UNFCCC). The project is currently being assessed by a designated authority.

Ethical Behaviour
With regard to ethics, JBS adopts this behaviour in all Company decisions and relationships. For this reason, since 2004 the Company has had a manual, well aligned with the principles of sustainability, which reflects the ethical activity of JBS S.A. in the Companys relationships with strategic segments of the public. This manual has guidelines to help to make integrity the nucleus of everything that JBS proposes to do. For JBS, integrity shall not be an ideal but rather a real process, live and dynamic, and active within the Company. The Ethical Conduct Manual of JBS, updated five years ago, also seeks to shed light on, and avoid, situations that could lead to doubts or raise suspicion about procedures adopted in Company operations, thus seeking to make it easier to communicate cases that may be, or come to be, conflicting with the ethical conduct expected by the Company. Among all formative principles, JBS believes that none is as important as ethics, as they consider that this is the base for prolonged success and also the main ingredient in the construction and maintenance of relationships based on trust, both internally and externally. For JBS, trust and ethics are essential to do business. The Manual highlights JBS ethical standards, the personal responsibilities of each collaborator, the policy of non-retaliation, instructions about what the employees should do when faced with a possible violation of some ethical standard, guidance about communication with the media, company assets, treatment of confidential information, including information with exclusive rights and commercial secrets. The material also addresses the use of the Internet and the Intranet, as well as other electronic media, maintenance and storage of records, conflicts of interests, relationships with suppliers and third parties, minimum age for hiring mainly with regard to child labour, support for the balance between work and personal life, diversity in the workplace to provide equal opportunities of employment, harassment in the workplace, policies about presents and entertainment, prohibition

of bribes, rewards, illegal payments and other corrupt practices, among other themes. The full content of the ethical conduct manual may be found on the Companys institutional website (www.jbs.com.br) and also in the Investor Relations website (www.jbs.com.br/ri).

Relationship with the Internal Public

For JBS, the valuing of the Companys collaborators is a creed, and the policy of people management is structured in a way that sustains the business. JBS believes that well-prepared and motivated professional people make the difference in a Company, so that the Company may constantly grow and innovate. The morale of the employees, as also their participation and the sense of participation in the Company are essential so that the Company may attain targets and overcome challenges. The importance that JBS assigns to its Human Capital can be proved through a transparent relationship of mutual growth. Nowadays, JBS is active in different countries through communication tools, provision of lectures and events; disseminates the organisational culture for all business platforms, thus implementing and strengthening the Companys way of being and management culture. The values, creeds and conducts of JBS are informed to all collaborators. In this way, as soon as a Company is purchased, JBS carries out a process of integration so that the organisational culture may be implemented and followed by all business units, thus preserving and strengthening the Company guidelines, which JBS calls the DNA. Human Resources Management at JBS is focused on the development of policies that allow the attraction, development and retaining of talent, thus setting up a highly motivated team, committed to results. The main aim of HR policies is to integrate the employees at units throughout the world with the culture of the Company so that they may be part of the JBS family, thus creating their way of being.

. 57 .

Selection, Development and Retaining of Talent Selection

JBS promotes the recruitment and selection of candidates on a local basis, thus generating jobs in the regions where the Company is present. In 2008, JBS employed a total of 12,103 people in the United States, 2,109 in Italy, 6,995 in Australia, 16,993 in Brazil and 5,059 in Argentina, giving a total of 48,991 direct jobs. The policy at JBS prioritises internal recruitment, thus giving opportunities to the professional people who already work at the Company, regardless of the country or the state that has an available vacancy. In this way, the Company offers a wide Opportunity Plan for their collaborators, who have the chance to migrate to another area or even to another country. JBS believes that if the collaborator has the values of the Company, then he or she is able to learn any technical skill. This shows that JBS firmly believes in its collaborators and prioritises internal recruitment to thus offer opportunities to the Companys Human Capital.

Development and Retention

Seeking professional development, JBS promotes training sessions, giving priority to internal recruitment, gives grants and offers other benefits according to the needs of each business platform medical assistance, food, crche assistance and transport. For the Company, the sustainable growth of JBS S.A. is linked to the human development with regard to quality of life, prosperity in the profession, commitment to work, learning and growth. In this way, JBS establishes with their collaborators in Brazil, Argentina, Italy, Australia and the United States a partnership in which each of the parties complies with its duties and is guaranteed its rights. A responsible form of activity in Human Resources, with respect for individual rights and the labour legislation, and also constructing a work environment which is safe and healthy, based on equal opportunities. To hold on to the Company collaborators, JBS often carries out internal surveys to assess the motivation of the collaborators. This mensuration is made among all collaborators, so that JBS may make the necessary adjustments to keep the high motivation which is a feature of the Companys team of 48.991 collaborators throughout the world.

In 2008, the Company launched a distinctive Programme for selection and training in Brazil. Through participation in University career fairs and also through holding lectures, JBS selects and recruits young University students or recent graduates to participate in the Our People Programme. The initiative consists of three months of training at one of the 22 units of JBS Brazil. The training is theoretical and also practical, and JBS seeks to train specialists in the meat packing segment. The aim of the Company is to focus on the formation and development of professionals starting their career (recent graduates) who have been identified as having a potential future in the Preparation of Successors; Professionalisation of the Workforce and filling vacancies for new collaborators in Brazil or in the other countries where JBS is active. This project was piloted in Brazil and, in 2008, produced 140 collaborators. The intention is now to migrate this idea to all the JBS platforms throughout the world.

. 58 .

Benefits Offered
JBS offers remuneration compatible with market levels, as well as benefits offered by the law in each country where the Company is active. JBS also plans additional assistance as a way of valuing the relationship with employees and construction of a healthy work environment, as well as keeping good relations with institutions representing the workers.

Relationships with Suppliers

JBS has sustainable partnerships with suppliers in all platforms where the Company is active, whether in Argentina, Brazil, the United States, Australia or Italy. The Company has adopted the internal procedure of assessment of suppliers with regard to criteria related to quality, punctuality, sustainability and trust in products and services. This posture seeks to ensure that the global production chain for beef is sustainable in all aspects, and offers the end clients a product with guaranteed origin and that respects best practices. JBS cultivates transparency between the Company and its cattle suppliers in the United States, Australia, Argentina, Italy and Brazil, as a way of promoting the long-term growth in the segment, through the strengthening of the livestock production chain, including industry and the distributor. The Company seeks to offer the livestock farmer conditions to commercialise the livestock, so that the supplier may plan sales in advance, making negotiations easier and optimising results. The relationship policy includes a programme of visits to industrial units and accompaniment of production, as also advice on sanitary issues, animal nutrition or sale of livestock. To ensure transparency in the acquisition process, JBS S.A. publicises and makes clear to the suppliers that they have commercial relationships with companies that have commitment and engagement with the social and environmental issues that affect the chain. The JBS conduct is constantly publicised to the suppliers through the Ethical Conduct of the Company and also environmental practices. In all countries where JBS is active, the Company seeks to encourage best practices from the suppliers. Based on programmes, JBS discloses, encourages and supports their suppliers in the adoption of sustainable conduct.

Training and Health and Safety Policy

JBS invests in the professional enhancement of the Company employees, with the adoption of a training policy that is well aligned with Company Culture. The activities are planned in line with demand. The quest for the health of the employees in all countries where JBS is active is also incorporated into the Companys daily routine, with initiatives that seek improvement in the quality of life in the work environment, as also encouragement of changes in habits, that bring positive results from the behaviour standpoint. With regard to the initiatives that seek to guarantee security in the workplace, JBS seeks to promote preventive action, such as collective awareness-building in search for a safe work environment, discipline for the use of Personal Protection Equipment, and for work safety regulations. The good practices for health and safety include labour gymnastics for prevention of repetitive strain injury (RSI) and other osteomolecular disorders related to work. The collaborators have Personal Protection Equipment and also a process of awareness building, concerning behavioural security, in an attempt to mitigate incidents. The presence of security technicians in the factory increases the positive feeling of each worker at the necessary moment of minimising risk problems within the work environment.

. 59 .

One example is the Friboi Quality Farms Programme of JBS, set up to support the mission of JBS to be the best in everything they propose to do, and is an example of valuing suppliers. In yet another initiative, it was the first Brazilian meat producer to implement a tool for quality management on the farms that supply the animals. Friboi Quality Farms seek to prepare producers for the Global Gap/EurepGAP (Eurep Euro-Retailer Produce Working Group and GAP Good Agricultural Practice) and ensure 100% of acquisitions involving certified animals. The normative document is based on best agricultural practices. The aim here is to ensure the integrity, transparency and harmony of global standards. The food shall be produced with respect for health, safety and also the well-being of the employees, without forsaking the care for the animals and for the environment.

then contacted and, when they agree to participate in the Friboi Quality Farms programme, they are put through a preliminary audit and then the adaptation work is started. The Global Gap/EurepGAP is a management tool that gives information about strong points of the property and also points that warrant further attention. Thus, it makes it possible to have efficient planning, together with reallocation of resources and allocation of gains, thereby strengthening the business. With this programme, JBS seeks the joining for forces in favour of the supply of meat produced ethically and professionally. The Friboi Quality Farms programme means that the Brazilian products can be competitive on the market, adding value to the producers and ensuring quality to clients and the satisfaction of the end consumer.

Relationships with Clients and Consumers

Working in transparent fashion with suppliers is part of JBS culture

The trend is for markets, especially those abroad, to seek more and more products with the certainty that they have been produced within the strictest regulations and ethical and quality standards, accepted throughout the world. JBS has qualified a team of professionals qualified to guide and train livestock farmers to that they may be entitled to request certification. The pre-selected farms are

Active in the most important and largest platforms for beef production in the world Brazil, Argentina, the United States, Italy and Australia JBS S.A. ensures that the global clients are served with quality. This geographical activity enables the Company to have some flexibility, so that possible external factors, whether commercial or sanitary, among others, do not affect the service to clients, this because JBS has mobility to produce in different platforms, and thus ensure that the clients demands are met. Having close relationships with clients, JBS manages to observe needs with greater ease and thus develop specific products and services for each region, thus respecting the habits and customs of each country. To keep this close relationship, the Company participates in trade fairs and events in the beef segment, on a global level; these fairs include SIAL, Anuga and Gulfood. Apart from these events, JBS includes invitation to events that may interest the clients, and visits to industrial plants in the United States, Australia, Brazil, Argentina and Italy, so that these may be fully aware of the JBS global operations. To measure the satisfaction of this external public, the sales team is in constant contact with the clients to measure the rate of satisfaction and also look into possible improvements. It is worth pointing out that for JBS the cultivation of a good relationship starts with the efficient care of all production stages, to ensure the quality of the final product the main tool for the Company to attain the highest levels of satisfaction and trust by the clients and consumers and ensure the preference and loyalty for the Company brands.

. 60 .

In the relationship with the end consumer, JBS complies with all legal requirements for production and commercialisation, making product information available on the labels, which describe the correct methods of handling, as also ingredients and origin. With the end consumer, the Company make global surveys to identify needs and food habits of the public, and thus develop products that meet this demand. In addition, at regular intervals special publicity campaigns and promotions are launched, with a focus on the approximation and identification of JBS brands by the consumer. The Company keeps contact with consumers through channels on all business platforms, such as the Client Service Hotline (SAC), sites, telephone lines, publicity announcements, informative leaflets and action at the points of sale.

In its relationship with authorities, the Company has a strict principle of transparency, and does not get involved in any activities which could lead to mistaken interpretations. JBS gives value to relationships based on mutual respect, compliance with the laws, and ethical commitments.

Investor Relations
For JBS, the base of any relationship is trust, and this is the kind of relationship that the Company establishes with its investors. To serve the investor, JBS has an area for Investor Relations structured to inform the shareholders and market analysts in a swift and transparent manner, and also to keep a close relationship with this public. The Company has public meetings to present its results, in institutions like the Association of Investment Analysts and Professionals of the Capital Markets (APIMEC). In 2008, JBS held a public meeting with a total of 80 participants. The Company calls the market over every quarter to show the Company results, when the Executive President presents the results obtained by JBS and also the outlook for the segment, in public. In 2008, JBS held these meetings on a regular basis to make the figures public. There were also two roadshows with banks and shareholders. At the end of 2008, eight financial institutions were accompanying and disclosing the performance of JBS S.A.

Relationship with the Government

JBSs conduct before the Government has the principle of spreading the best practices that the Company has adopted in the light of compliance with legislation in all the countries where the Company is present (Italy, the United States, Brazil and Australia). JBS S.A. has a commitment to the execution of its labour, tax and environmental obligations as established by the legislation of each country. JBS has activities in several countries around the world. The Companys relationships with the governments of these countries is based on strict ethical standards. In addition, the Company seeks to understand the cultural characteristics of each people, so as to respect the local values and laws applicable to Company activities in each country. Being a global company, JBS keeps a permanent watch on the political and social demands of each country where the Company is active and to where it exports. In this way, the Company is always prepared to respond to changes in regulations and keep their products and units within strict criteria of legality, whether in relation to environmental, labour, social or tax issues.

Relationships with the Press

With the Press, has a relationship of transparency, ethics and professional respect. For JBS, the media is essential so that the market and society in general may be informed about everything that happens with regard to Company actions. The relationship with the press is the base on which the news can be taken to the final public in a correct and truthful manner. Through the Press Relations Department of JBS, the communication media is served globally, and are always brought up to date about all actions and news concerning the

. 61 .

Company in real time. JBS makes use of communication tools to take a clear stand, efficiently and objectively, with the vehicles of communication, whether through press releases, press conferences, interviews with the Company spokespeople, and disclosure of news on the company website, where there is a dedicated space for journalists. For the Company, the means of communications are essential to ensure transparency in relationships between companies and communities. For this reason, JBS has a transparent, ethical and professional relationship with journalists and vehicles. For JBS, the means of communication are the link through which the market and society in general may be informed about all events with regard to the actions of the Company. The relationship with the press is the base so that the relevant information may be taken to the public and also all the Company stakeholders in a correct and truthful manner. To make sure that the media and journalists have access to all the information about JBS, the Company has a professional structure for dealing with the Press. This structure is active in an ethical manner and is firmly committed to the truth, so that they can offer relevant information in reasonable time, so that the general public, clients, suppliers and shareholders may always be informed about the JBS actions and commitments, in all markets where the Company is active. The relationship between JBS and the press makes use of the more traditional disclosure methods, including press releases, a specific area on the Company website, press conferences, interviews with spokespeople and other means necessary to make the relevant information public for society and for the Company. This relationship follows principles of transparency, clarity and objectivity in the flow of information.

An ethical relationship with the Press is the guarantee of quality communication with the shareholders
JBS also helps towards the development of the regions where the Company is active, employing thousands of people throughout the world. Currently the total workforce is more than 55 thousand, if we add together the collaborators in Brazil, Argentina, the USA, Australia and Italy.

Relationship with the Community

Well aware of its role, JBS carries out a range of activities with the communities surrounding the factory units, whether supporting cultural events or charity institutions, carrying out social actions or volunteer programmes to meet the needs of society, or giving lectures about environmental awareness.

Environment
All productive JBS units in Brazil and around the world are in conformity with applicable environmental Laws and Regulations. This means that all the units have an environmental licence in accordance with regulations currently in force. To control the environmental impact of the Company operations, JBS has a programme of preventive maintenance of machines, equipment and also gas filtering systems, as also programmes for the efficient use of water, energy and recycling of materials used in the routine activities of the Company. At regular intervals, the environmental impact of products, processes, operations and services are assessed, to identify possible factors causing relevant environmental damage, as well as developing and implementing sustainable processes.

. 62 .

Initiatives of Social and Environmental Responsibility taken up by JBS S.A. JBS Brazil
Social and Environmental Activities :  Physical Activities: Stretching exercises are performed by the collaborators before the start of their work activities; :  Health Care: Access to a private health insurance plan at reduced prices, including preventive medical examinations and several prevention campaigns; :  Crisis Management Commission: To deal with accidents of any kind; :  Environmental Education Programme: Aimed at the collaborators through different types of informative campaigns; :  Selective Refuse Collection: The Company has a programme for selective refuse collection, to educate the collaborators; :  5S Quality Control Programme (Tidiness, Orderliness, Cleanliness, Standards and Self-Discipline) Treatment of Residues
Monitoring with indicators Use of reuse targets Use of recycling targets Use of programmes to reduce generation Use of selective collection or unitary treatment Investment in technology to reduce generation Use of process to reduce environmental impact Use of guarantee of legal conformity in handling, transport and destination

Solid Waste

Effluents

Emissions

Noise and Vibrations

JBS Argentina
Social and Environmental Activities :  Gymnastics programme implemented in all units; :  Injury Prevention programme; :  First Aid Units in all business units; :  The Company carries out medical examinations and check-ups once a year (clinical examination, blood, urine, X-rays, hearing and sight) on all employees; :  Vaccination of all employees against certain diseases; :  Incentive Programmes for people to stop smoking; :  The Company is a founder member of an NGO known as Food Bank which donates food to those in need; :  5S Quality Control Programme (Tidiness, Orderliness, Cleanliness, Standards and Self-Discipline). Treatment of Residues
Monitoring with indicators Use of reuse targets Use of recycling targets Use of programmes to reduce generation Use of selective collection or unitary treatment Investment in technology to reduce generation Use of process to reduce environmental impact Use of guarantee of legal conformity in handling, transport and destination

Solid Waste

Effluents

Emissions

Noise and Vibrations

. 63 .

JBS United States

Social and Environmental Activities : The Company has implemented guidance classes for all new employees, and has also organised stretching classes; : Insurance available for all full-time employees; : Direct communication so that the collaborators may get in contact with the corporate offices and also industrial managers; :  JBS Swift recycles most of the waste generated. Each unit has its own mechanism for management of waste, according to the kind of waste that is generated. These programmes are based on the selective management of the flow of solid waste; :  The Company has partnerships with United Way, Relay for Life, American Cancer, Hob for Life, Boy/Girl Scouts, state schools and local food banks. Treatment of Residues
Monitoring with indicators Use of reuse targets Use of recycling targets Use of programmes to reduce generation Use of selective collection or unitary treatment Investment in technology to reduce generation Use of process to reduce environmental impact Use of guarantee of legal conformity in handling, transport and destination

Solid Waste

Effluents

Emissions

Noise and Vibrations

JBS Australia
Social and Environmental Activities : Collaborators are given special reduced prices for use of the Gym; : The Company offers an on-site medical team to solve illnesses or other health problems that the Collaborators may have; : Access to a private health insurance plan at reduced rates; : There is a formal procedure with the OHS Manual, which deals with management of injuries at the workplace; : Crisis Management Training for all collaborators; : There is a programme for collaborator guidance, in addition to selective refuse collection; :  Partnership with Healthy Waterways Partnership, dedicated to improvement of the health of the river systems in Southeastern Queensland; : Member of the Fitzroy Basin Association in Rockhampton, seeking the sustainable development of the Fitzroy Basin. Treatment of Residues
Monitoring with indicators Use of reuse targets Use of recycling targets Use of programmes to reduce generation Use of selective collection or unitary treatment Investment in technology to reduce generation Use of process to reduce environmental impact Use of guarantee of legal conformity in handling, transport and destination

Solid Waste

Effluents

Emissions

Noise and Vibrations

. 64 .

Corporate Information
JBS S.A.
Av. Brigadeiro Faria Lima, 2.391 2 andar, conjunto 22, sala 2 postcode: 01452-000 So Paulo SP Brasil Telephone: (+ 55 11) 3144-4000 www.jbs.com.br

Investor Relations
Director: Jerry OCallaghan Manager: Rodrigo Gagliardi Av. Marginal Direita do Tiet, 500 postcode: 05118-100 So Paulo SP Brasil Telephone: (+ 55 11) 3144-4055 E-mail: ir@jbs.com.br

Shareholder Relations
Banco Bradesco BBI S/A Avenida Paulista, 1.450, 3 andar So Paulo SP www.shopinvest.com.br

Independent Auditors
Terco Grant Thornton Auditores Independentes Av. das Naes Unidas, 13.797, Bloco II, 18 andar postcode 04794-000 So Paulo SP Telephone: (+ 55 11) 3054-0007

. 65 .

Credits

Published by the Investment Relations Department and Corporate Communication Department

Published By
Corporate Communication Department JBS S.A.

Printing Design
TheMediaGroup Financial Communication and Sustainability

Imagens
JBS Image Bank

. 66 .

financial statements

.2. .4. .6. .8. . 10 . 12 . . 14 .

Report of Independent Auditors Balance Sheets Statements of Income Statements of Changes in Shareholders Equity Statements of Cash Flows Economic Value Added Notes to the Financial Statements

. 67 .

report of independent auditors

To the Board of Directors and Shareholders of JBS S.A.: 1. We have audited the individual (Company) and consolidated balance sheets of JBS S.A
and controlled companies (Companies) as of December 31, 2008 and the respective individual (Company) and consolidated statements of income, changes in shareholders equity, cash flows and value added for the year then ended, prepared under the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements. The financial statements of JBS Argentina S.A., an indirectlycontrolled company, and of JBS USA Inc., a directly-controlled company, were reviewed by other independent auditors, member firms of BDO network. The financial statements of Inalca JBS S.p.A , JBS Global A/S (Denmark) and SB Holdings, Inc,. directly-controlled companies, were audited by other independent auditors. Our opinion, insofar as it relates to the carrying value of the investments in these companies and the equity in their earnings, is based on the report of those other auditors. As from October 23, 2008, the financial statements of JBS USA include the accounts of JBS Parkland (formerly Smithfield) and JBS Five Rivers (formerly Five Rivers).

2. Our audit was conducted in accordance with auditing standards in Brazil and comprised:
(a) planning of the work, taking into consideration the significance of the balances, volume of transactions, and the accounting and internal control systems of the Companies, (b) checking, on a test basis, the evidence and records that support the amounts and accounting information disclosed, and (c) evaluating the significant accounting practices and estimates adopted by management, as well as the presentation of the financial statements taken as a whole.

. 68 .

3. In our opinion, based on our audits and on the opinion of other independent auditors, as
mentioned in paragraph 1, the financial statements referred to in that paragraph present fairly, in all material respects, the individual and consolidated financial position of JBS S.A. and controlled companies as of December 31, 2008, and the results of its operations, the changes in shareholders equity, the cash flows and value added to its operations for the year then ended, in conformity with Brazilian accounting practices.

4. The audit of the financial statements for the year ended December 31, 2007, originally
prepared before the adjustments resulting from the changes in accounting practices described in note 2, was conducted under the responsibility of other independent auditors, who issued an unqualified report on March 10, 2008 emphasizing the presentation of the statement of cash flows as supplementary information and the early application of procedures to recognize exchange variations of foreign investments, pursuant to Technical Pronouncement No. 2 issued by the Committee of Technical Pronouncements, whose application is expected for the fiscal years ending as from December 2008, in accordance with Brazilian Securities and Exchange Commission (CVM) Resolution No. 534. In connection with our audit of the financial statements for the year ended December 31, 2008, we also analyzed the adjustments resulting from the changes in accounting practices described in note 2. In our opinion, these adjustments were adequate and properly made, considering all significant aspects. We were engaged only to analyze the adjustments described in note 2 and not to evaluate, review or apply any other procedures to the financial statements for the year ended December 31, 2007, and therefore we do not issue an opinion on these financial statements. As mentioned in note 2, the Brazilian accounting practices have been changed as from January 1, 2008. The financial statements for the year ended December 31, 2007, presented together with the 2008 financial statements, were prepared in accordance with Brazilian accounting practices in effect until December 31, 2007 and, as allowed by CPC Technical Pronouncement No. 13 Initial Adoption of Law No. 11,638/07 and Executive Act No. 449/08, are not being republished with the adjustments for purposes of comparison between the years. Ribeiro Preto, February 16th, 2009.

BDO Trevisan Auditores Independentes CRC 2SP013439/O-5

Estefan George Haddad Partner Accountant CRC 1DF008320/O-5 S SP

. 69 .

Balance sheets
as of december 31, 2008 and 2007 (in thousands of Reais)
company assets CURRENT ASSETS Cash and cash equivalents (Note 5) Trade accounts receivable, net (Note 6) Inventories (Note 7) Recoverable taxes (Note 8) Prepaid expenses Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Long-term assets Credits with related parties (Note 9) Judicial deposits and others Deferred income taxes (Note 19) Recoverable taxes (Note 8) Total long-term assets Permanent assets Investments in subsidiaries (Note 10) Other investments Property, plant and equipment, net (Note 11) Intangible assets, net (Note 12) Deferred charges Total Permanent TOTAL NON-CURRENT ASSETS TOTAL ASSETS
The accompanying notes are an integral part of the finantial statements

consolidated 2008 2007

2008

2007

1,522,973 552,991 539,510 447,343 1,754 166,275 3,230,846

869,784 444,218 604,225 351,677 4,388 30,612 2,304,904

2,291,617 2,232,300 2,549,674 623,022 70,881 493,372 8,260,866

1,381,703 1,236,148 1,511,595 482,918 44,468 102,910 4,759,742

1,700,868 16,378 22,626 37,632 1,777,504 3,803,669 10 1,804,833 959,230 6,567,742 8,345,246 11,576,092

60,306 8,249 16,251 31,442 116,248 2,149,919 10 1,328,015 9,615 3,487,559 3,603,807 5,908,711

54,569 102,779 481,485 65,307 704,140 5,722 4,918,671 2,205,347 1,603 7,131,343 7,835,483 16,096,349

17,461 41,443 23,758 44,205 126,867 829,975 10 2,536,098 193,917 1,596 3,561,596 3,688,463 8,448,205

. 70 .

company LIABILITIES AND SHAREHOLDERS EQUITY CURRENT LIABILITIES Trade accounts payable (Note 13) Loans and financings (Note 14) Payroll, social charges and tax obligation (Note 15) Declared dividends (Note 16) Other current liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Loans and financings (Note 14) Deferred income taxes (Note 19) Provision for contingencies (Note 17) Debit with third parties for investment (Note 18) Other non-current liabilities TOTAL NON-CURRENT LIABILITIES MINORITY INTEREST SHAREHOLDERS EQUITY (Note 20) Capital stock Capital reserve Revaluation reserve Profit reseve Valuation adjustments of shareholders equity Accumulated exchange conversion adjustments TOTAL SHAREHOLDERS EQUITY TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
The accompanying notes are an integral part of the finantial statements

consolidated 2008 2007

2008

2007

383,979 1,494,690 62,722 51,127 76,772 2,069,290

355,510 858,975 93,158 17,465 50,294 1,375,402

2,077,844 2,214,788 337,238 51,127 248,344 4,929,341

1,099,385 2,384,836 203,613 17,465 70,536 3,775,835

2,991,344 83,453 48,244 210,480 38,870 3,372,391 -

1,341,313 59,642 45,979 31,787 1,478,721 -

3,401,709 884,927 57,637 210,480 480,302 5,035,055 (2,458)

1,364,800 99,755 55,681 101,702 1,621,938 (4,156)

4,495,581 769,463 118,178 1,297 (2,920) 752,812 6,134,411 11,576,092

1,945,581 985,664 123,343 3,054,588 5,908,711

4,495,581 769,463 118,178 1,297 (2,920) 752,812 6,134,411 16,096,349

1,945,581 985,664 123,343 3,054,588 8,448,205

. 71 .

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (in thousands of Reais)
COMPANY 2008 GROSS OPERATING REVENUE Sales of products Domestic Sales Foreign Sales SALES DEDUCTIONS Returns and discounts Sales taxes 2007 2008 CONSOLIDATED 2007

2,971,842 2,424,375 5,396,217 (206,162) (323,649) (529,811) 4,866,406 (3,957,624) 908,782 (137,568) (470,620) (263,633) 211,876 (179,867) (35,693) 10,098 (865,407) 43,375 3,336 (20,772) (17,436)

2,118,600 2,321,456 4,440,056 (191,932) (252,282) (444,214) 3,995,842 (2,915,674) 1,080,168 (74,188) (374,469) (276,283) (276,591) (74,824) (67,082) (171) (1,143,608) (63,440) (101,793) 201 (101,592)

20,787,532 10,318,077 31,105,609 (369,178) (396,176) (765,354) 30,340,255 (27,347,753) 2,992,502 (570,147) (1,517,591) (612,176) (179,867) (35,693) 7,731 (2,907,743) 84,759 (52,246) (9,975) (62,221)

8,974,879 5,752,224 14,727,103 (273,556) (311,976) (585,532) 14,141,571 (12,609,093) 1,532,478 (275,594) (786,630) (403,113) (74,853) (67,082) 11,206 (1,596,066) (63,588) (107,104) 2,201 (104,903)

NET SALE REVENUE Cost of goods sold GROSS INCOME OPERATING INCOME (EXPENSE) General and administrative expenses Selling expenses Financial income (expense), net (Note 21) Equity in subsidiaries (Note 10) Goodwill amortization (Note 12) Non-recurring expenses (Note 22) Other (expense) income, net INCOME (LOSS) BEFORE TAXES Current income taxes Deferred income taxes

. 72 .

COMPANY 2008 INCOME (LOSS) BEFORE MINORITY INTEREST Minority interest (expense) income NET INCOME (LOSS) Net Income (Loss) per Thousand Shares Statement of EBITDA (Earnings before income taxes, interest, depreciation and amortization and non-operating income) (expense), net Income (loss) before taxes Financial income (expense), net (Note 21) Depreciation and amortization Equity in subsidiaries (Note 10) Non-recurring expenses (Note 22) Goodwill Amortization (Note 12) AMOUNT OF EBITDA
The accompanying notes are an integral part of the finantial statements

CONSOLIDATED 2008 22,538 3,401 25,939 2007 (168,491) 3,459 (165,032)

2007 (165,032) (165,032) -153,18

25,939 25,939 18,48

43,375 263,633 71,157 (211,876) 35,693 179,867 381,849

(63,440) 276,283 56,626 276,591 67,082 74,824 687,966

84,759 612,176 243,591 35,693 179,867 1,156,086

(63,588) 403,113 120,807 67,082 74,853 602,267

. 73 .

STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (in thousands of Reais)

Capital stock

Valuation Capital Profit adjustments Revaluation reserve reserve of reserve goodwill mandatory shareholders equity

Accumulated exchange conversion adjustments

Retained earnings

Total

BALANCE AS OF DECEMBER 31, 2006 Capital Increase Goodwill in shares issue Realization of revaluation reserve Loss for the year Declared dividends (R$16,21 to one thousand of shares) (Note16) Loss absorption BALANCE AS OF DECEMBER 31, 2007

52,524 1,893,057

130,521 (7,178) -

183,045

- 1,893,057 - 1,160,983 7,178 (165,032) (165,032)

- 1,160,983 -

(17,465) (157,854)

157,854

(17,465) -

1,945,581

985,664

123,343

3,054,588

Adjustments to initial adoption of Law 11.628/2007 and Executive Act 449/08 (Note 2)

(87)

(87)

. 74 .

Capital stock

Valuation Capital Profit adjustments Revaluation reserve reserve of reserve goodwill mandatory shareholders equity

Accumulated exchange conversion adjustments

Retained earnings

Total

BALANCE ADJUSTED AS OF JANUARY 1, 2008 Capital Increase Goodwill in shares issue Realization of revaluation reserve Treasury Shares Valuation adjustments in subsidiaries shareholders equity Accumulated exchange conversion adjustments in subsidiaries shareholders equity Investiments exchange rate variations, net Net income Proposal for destination of the net income Mandatory Declared dividends (R$36,42 to one thousand of shares) (Note 16) BALANCE AS OF DECEMBER 31, 2008

1,945,581 2,550,000 -

985,664 279 (195,073)

123,343 (5,165) -

(87)

3,054,501

- 2,550,000 5,165 279 (195,073)

(2,920)

(2,920)

4,794 748,018 -

25,939

4,794 748,018 25,939

1,297

(1,297)

(21,407)

(29,720)

(51,127)

4,495,581

769,463

118,178

1,297

-2,920

752,812

6,134,411

. 75 .

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (in thousands of Reais)
COMPANY 2008 Cash flow from operating activities Net income (loss) of the year Adjustments to reconcile net income (loss) to cash provided Depreciation and amortization Allowance for doubtful accounts Goodwill amortization Minority interest Equity in subsidiaries Write-off of fixed assets Deferred income taxes Current and non-current financial charges Provision for contingencies Adjustment to present value of assets and liabilities Variation in operating assets and liabilities Decrease (increase) in trade accounts receivable Decrease (increase) in inventories Decrease (increase) in recoverable taxes Decrease (increase) in other current and non-current assets Decrease (increase) in credits with related parties Increase (decrease) in trade accounts payable Increase (decrease) in other current and non-current liabilities Net cash provided by (used in) operating activities 71,157 4,423 179,867 (211,876) 2,949 20,771 487,668 2,265 339 583,502 (1,512) 64,715 (103,038) (141,158) (1,178,154) 18,521 194,960 (562,164) 56,626 1,819 74,824 276,591 2,412 (201) 107,134 (1,228) 352,945 49,304 (40,290) 65,951 41,975 30,686 95,617 49,236 645,424 243,591 10,393 179,867 (3,401) 9,964 9,975 758,914 (1,074) 339 1,234,507 (169,660) (294,794) (135,969) (329,459) (22,395) (170,440) 849,785 961,575 120,807 1,589 74,853 (3,459) 3,310 (2,201) 100,689 2,676 133,232 (726,332) (863,281) 71,167 (111,738) (17,460) 807,020 269,925 (437,467) 2007 2008 CONSOLIDATED 2007

25,939

(165,032)

25,939

(165,032)

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COMPANY 2008 Cash flow used in investing activities Additions to property, plant and equipment and intangible assets Increase in investments Net effect of the working capital of acquired company Net cash used in investing activities Cash flow from financing activities Loans and financings Payments of loans and financings Increase in capital stock and goodwill in subscription  eclared dividends / distribution of D retained earnings Shares acquisition of own emission Valuation adjustments of shareholders equity Net cash provided by financing activities Effect of exchange rates on Cash and cash equivalents Net increase (decrease) in cash Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year
The accompanying notes are an integral part of the finantial statements

CONSOLIDATED 2008 2007

2007

(806,687) (1,511,441) (2,318,128)

(487,877) (2,216,321) (2,704,198)

(1,237,702) (3,645) (1,721,877) (2,963,224)

(1,748,088) (904,828) (2,652,916)

3,147,323 (1,917,921) 2,550,279 (51,127) (195,073) 3,533,481 653,189 869,784 1,522,973

1,325,046 (1,632,784) 3,054,040 (17,465) 2,728,837 670,063 199,721 869,784

3,614,242 (3,926,026) 2,550,279 (51,127) (195,073) 749,725 2,742,020 169,543 909,914 1,381,703 2,291,617

4,987,313 (3,812,873) 3,054,040 (17,465) 4,211,015 1,120,632 261,071 1,381,703

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economic value added

for the year ended december 31, 2008 (in thousands of Reais)
company Revenue Sales of goods and services Other income Own assets building income Goods Cost of services and goods sold Materials, energy, services from third parties and others Losses/Recovery of amounts Other costs 5,190,054 10,098 (4,423) 5,195,729 (3,236,824) (1,049,273) 852 (4,285,245) 910,484 (71,157) 839,327 consolidated 30,736,430 7,611 (9,364) 30,734,677 (22,458,475) (4,341,198) 50,443 852 (26,748,378) 3,986,299 (243,591) 3,742,708

Gross added value Depreciation and Amortization Net added value generated by the Company Net added value by the Company Equity in subsidiaries Financial income Others Net added value to distribution

211,876 1,546,876 (176,689) 2,421,390

1,700,735 (174,743) 5,268,700

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company DISTRIBUTION OF ADDED VALUE Labor Salaries Benefits F.G.T.S (Brazilian Social Charge) Taxes and contribution Federal State Municipal Capital remuneration from third parties Interests Rents Others Owned capital remuneration Dividends Minority interests participation on retained income

consolidated

378,937 33,449 21,711 434,097 108,265 45,540 1,966 155,771 1,573,678 14,666 217,239 1,805,583 25,939 25,939 2,421,390

2,173,072 464,479 21,847 2,659,398 190,526 74,480 3,162 268,168 2,061,032 32,346 225,218 2,318,596 25,939 (3,401) 22,538 5,268,700

ADDED VALUE DISTRIBUTED

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NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007 (Expressed in thousand of reais)

1 OPERATING ACTIVITIES
JBS S.A (Company) is a listed company in the Novo Mercado segment, which requires the highest level of corporate governance in the Brazilian market and its shares are traded on the BM&F Bovespa S.A. Stock Exchange, Commodity and Forward. The operations of the Company and its subsidiaries consists of:

a) Activities in Brazil
The Company operates slaughterhouses, cold storage and food processing operations for the production of beef, canned goods, fat, animal rations and beef by-products, which are produced in the manufacturing units located in the States of So Paulo, Gois, Mato Grosso, Mato Grosso do Sul, Rondnia, Minas Gerais, Acre and Rio de Janeiro. The Company distributes its products through distribution centers located in the State of So Paulo, and a container terminal for export in the city of Santos. In order to minimize transportation costs, the Company is responsible for the transportation of cattle to its slaughterhouses and the transportation of its export products. Mouran Alimentos Ltda.(Mouran) is a subsidiary which conducts slaughterhouse and cold storage business operations for the production of beef, canned goods, fat, animal rations and beef by-products in its facilities located in the State of So Paulo. JBS Embalagens Metlicas Ltda. (JBS Embalagens) produces metallic cans in its plant located in the State of So Paulo, which are purchased by the Company. The subsidiary JBS Confinamento Ltda. (JBS Confinamento), located in Castilho, State of So Paulo, renders fattening service of bovine for slaughter. Beef Snacks do Brasil Indstria e Comrcio de Alimentos Ltda. (Beef Snacks), an indirect subsidiary of the Company, located in Santo Antnio da Posse, State of So Paulo, in operation since August 2007 produces Beef Jerky. Beef Snacks purchases meat in the local market and exports to the United States of America.

b) Foreign activities
The Company has indirect subsidiaries located in England and Egypt, which are responsible for the sales and distribution of the Companys products in Europe, Asia, and Africa. JBS Argentina S.A. (JBS Argentina), an indirect wholly-owned subsidiary of the Company, operates slaughterhouses and cold storage facilities for the production of beef, canned goods, fat, animal food and by-products, with industrial units located in the province of Buenos Aires, Entre Rios, Santa F and Crdoba.

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JBS Argentina has three subsidiaries, beeing two acquired in 2007, one meat-packing slaughterhouse in Berezategui (Consignaciones Rurales) and other can factory located in Zavate (Argenvases), both located in the province of Buenos Aires, and one acquired in 2008, one meat-packing slaughterhouse in Cordoba (Col-car). SB Holdings, Inc. (SB Holdings) and its subsidiaries, Tupman Thurlow Co., Inc. (Tupman) and Astro Sales International, Inc. (Astro) located in the United States and acquired by the Company in January 2007, sale processed beef products in the North-American market. Jerky Snacks Brands, Inc (Jerky Snacks), an indirect wholly-owned subsidiary of the Company, located in the United States of America, produces and sells meat snacks (Beef Jerky, Smoked Meat Sticks, Kippered Beef Steak, Meat&Cheese, Turkey Jerky and Hunter Sausage). Jerky Snacks purchases meat from Brazil and in the local market and its sales are mainly in the United States of America. Global Beef Trading Sociedade Unipessoal Ltda. (Global Beef Trading), an indirect wholly-owned subsidiary of the Company, located in Ilha da Madeira, Portugal, sells bovine meat, birds and porks products. Global Beef Trading imports the products from Latin America and exports to several countries, in Europe, Africa and Asia. In July 2007, the Company acquired Swift Foods Company, presently known as JBS USA Holdings Inc. (JBS USA). JBS USA has feedlots and processes, packages and delivers fresh, further processed and value-added beef and pork in natura products for sale to customers in the United States and international markets. The fresh meat products prepared by JBS USA include refrigerated beef and pork processed to standard industry specifications. In the United States, JBS USA operates eight beef processing facilities, three pork processing facilities, one lamb slaughter facility, one value-added facility for pork and eleven confinement. In Australia, JBS USA operates ten beef and small animals processing facilities and JBS USA in Australia operates five feedlots that provide grain-fed cattle for its processing operations. JBS USA completed in October of 2008 the acquisition of the cattle meat unit of Smithfield group and also the fattening confinement operations known as Five Rivers. Smithfield, actually JBS Packerland, own four cattle units and one confinement cattle unit, and Five Rivers, known as JBS Five Rivers, own ten cattle confinement units. JBS USA divides its business into three segments: Swift Beef, through which it conducts its U.S. domestic beef processing business; Swift Pork, through which it conducts its U.S. domestic pork processing business; and JBS Australia, through which it conducts its Australian beef and small animals, the last business in Australia since May 2008, with the acquisition of Tasman, which operates six beef and small animals slaughterhouses and one cattle feedlot unit. Since January 2008, the Company owns 50% of Inalca S.p.A. social capital, presently known as Inalca JBS S.p.A, (Inalca JBS). Inalca S.p.A. is Italys leading beef company and one of the main operators in the European processing beef sector. It produces and markets a complete range of fresh and frozen meat, packed under vacuum or portioned in a protective atmosphere, canned meat, ready-to-serve products, fresh and frozen hamburger, minced meats and, pre-cooked products. Inalca JBS owns six facilities in Italy, specialized by production line, and nine foreign facilities in Europe and Africa. The integral subsidiary Montana Alimentari S.p.A. (Montana) is one of the leading Italian companies in the production, marketing and distribution of cured meats, snack and ready-to-eat products with over 230 products. Montana owns the well-known brands Montana and IBIS, and Montana owns four facilities, specialized by type of production and located in the area distinguished by the Protected Denomination of Origin (P .D.O.) and Protected Geographic Indication (P .G.I.) brands. Montana is also one of the main operators in the Italian canned meat market and pre-sliced products.

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2 Elaboration and Presentation of financial information and initial adoption to Law n 11.638/07 and Executive Act n 449/08
The individual and consolidated financial statements, were prepared in accordance with the generally accepted accounting principles in Brazil, that embraces the corporate Brazilian legislation, the Pronouncements, Orientations and Interpretations emitted by the Brazilian Accounting Pronouncements Committee CPC and approved by the Brazilian Securities and Exchange Commission (Comisso de Valores Mobilirios CVM). In the elaboration of the individual and consolidated financial statements of 2008 the Company adopted, by the first time, the alterations in the corporate legislation introduced by the Law n 11.638 approved on December 28, 2007, with the respective modifications introduced by the Executive Act n 449, of December 3, 2008. The conclusion authorization for these financial statements was given by the Board of Directors on February 18, 2009. The Company included in the financial statements the Economic Added Value (EVA) report. The objective of this report is to demonstrate the wealth generated by the Company, and the distribution of this wealth among the elements that contributed to its generation, such as employees, lenders, shareholders, government and others, as well as the wealth portion not distributed. According to the choose option foreseen in the pronouncement CPC 13 the Company is presenting the Economic Value Added exclusively for the year ended on December 31, 2008. Initial adoption of the Law n 11.638/07 and Executive Act n 449/08 According to the Deliberation CVM no. 565, of December 17, 2008, that approved the accounting pronouncement CPC 13 Initial Adoption of the Law no. 11.638/07 and of the Executive Act no. 449/08, the Company established the transition date for the adoption of the new accounting practices on January 1, 2008, being the transition date for the adoption of the changes in the accounting practices adopted in Brazil, representing the preparation date of the initial financial statements adjusted by the referred changes. The Company chose the option foreseen in pronouncement CPC 13 and reflected the adjustments related to the changes of accounting practice directly in the retained earnings on January 1, 2008. The financial statements referring the year ended on December 31, 2007, presented with the financial statements of 2008, were prepared according to the effective accounting practices adopted in Brazil until December 31, 2007, and, as allowed by the pronouncement CPC 13 Initial Adoption of the Law no 11.638/07 and of the Executive Act no 449/08, are not being restated with the adjustments for comparison purposes between the years. The balance sheet adjustments in the transition date due to the initial adoption of the Law no 11.638/07 and Executive o Act n 449/08, the summary of profit & loss effects in 2008, and the effects in the shareholders equity as of December 31, 2008 due to the adoption of the referred legislation are presented below: Balance sheet adjustments in the transition date company Trade accounts receivable (a) Recoverable taxes Current (a) Recoverable taxes Long Term (a) Investiments in subsidiaries (b) Intangible (b) Trade accounts payable (a) Retained earnings Dec 31, 2007 Adjustments 444,218 (738) 351,677 (196) 31,442 (1,056) 2,149,919 (823,666) 9,615 823,666 355,510 1,903 (87) Consolidated Jan 1, 2008 1,235,410 482,722 43,149 1,023,892 1,101,288 (87)

Jan 1, 2008 Dec 31, 2007 Adjustments 443,480 1,236,148 (738) 351,481 482,918 (196) 30,386 44,205 (1,056) 1,326,253 829,975 (829,975) 833,281 193,917 829,975 357,413 1,099,385 1,903 (87) (87)

(a) Adjustment to present value (b) Goodwill in investments acquisition

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Effects in the profit & loss of 2008 and in the shareholders equity as of December 31, 2008 Net income of the year Through Law 11.638/07 and Executive Act 449/07 Exchange variation in foreign investments, net Equity in subsidiaries Adjustment to present value of assets and liabilities Valuation adjustments in subsidiaries shareholders equity Orders of sales exchange variation Income taxes due to the adjustments above Through effective accounting principles in 2007 Company 25,939 748,018 97,501 (339) 2,920 (77,896) 26,600 822,743 Consolidated 25,939 845,519 (339) 2,920 (77,896) 26,600 822,743 shareholders equity Company 6,134,411 (252) (77,896) 26,600 6,082,863 Consolidated 6,134,411 (252) (77,896) 26,600 6,02,863

There was no tax effect due to the adjustments of the adoption of the Law n 11.638/07 and Executive Act n 449/08

3 significant accounting policies a) Profit and loss calculation

The operations results is in conformity with the accounting regime of competence.

b) Accounting Estimates
The preparation of financial statements in accordance with generally accepted accounting principles in Brazil requires the Companys management to (i) make estimates and assumptions that affect the reported amounts of assets and liabilities and (ii) disclose (a) contingent assets and liabilities as of the date of the financial statements and (b) the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

c) Financial instruments
The financial instruments are recognized in the moment that the Company becomes part of the contractual dispositions of the instrument. When a financial asset or liability is initially recognized, it is registered by the fair value, added by the transaction costs that are directly attributable to the acquisition or emission of the financial asset or liability. In case of financial assets and liabilities classified in the category of fair value through the result, the transaction costs are directly accounted in the profit and loss of the exercise. The subsequent measurement of the financial instruments happens in each date of the financial statements according to the rules established for each classification of financial assets and liabilities in: (i) assets and liabilities measured to the fair value through the result, (ii) maintained until the expiration date, (iii) loans and receivables (iv) available for sale.

d) Allowance for Doubtful Accounts

Allowance for doubtful accounts is computed based on the probable loss, the profile of the customers, overall economic and financial condition and specific risks relating to the relevant customers. The Companys management believes that the allowance for doubtful accounts is sufficient to cover the exposure to possible losses.

e) Inventories
The Companys inventories are valued based on their cost of acquisition, creation or production, which cost is lower than the market or net realizable value.

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f) Investiments
The Companys investments in subsidiaries are accounted according to the equity method.

g) Property, plant and equipment, net

Property, plant and equipment are stated at an amount equivalent to the sum of their historical acquisition cost and the amount resulting from the increase in the value of these assets as determined by revaluations performed by independent appraisal firms until December 31, 2007. Depreciation is computed pursuant to the straight-line method, using rates described in Note 11, which take into account the useful and economic lives of the assets.

h) Intangible assets
The intangible assets are demostrated by the acquisition or formation cost, deducted by the amortization. The intangible assets with indefinite usefull life are not amortized.

i) Reduction to recovery amount (Impairment)

The items of property, plant and equipment, intangible assets and deferred charges are tested by its recoverability amounts, at least, annually, in case there are indications of loss of value. The goodwill and the intangible assets with indefinite useful life are tested annually independently of there is (or not) indication of loss of value.

j) Other Current and Long-term Assets

Current and long-term assets are accounted for at their realization value, including, if applicable, the related income, charges and monetary variations.

k) Currrent Liabilities and Long-term Liabilities

Current and long-term liabilities are accounted for at their known or computed amounts, including, if applicable, the related income, charges and monetary variations.

l) Contingent assets and liabilities

Contingent assets are recognized only when there are final judgements or favorable judicial decisions rendered. Contingent assets with probable gain are only published in accompanying notes. Contingent liabilities are provisioned when the losses are appraised as probable and the involved amounts are measurable with enough certainty. The contingent liabilities appraised as possible losses are only published in accompanying notes and the contingent liabilities appraised as remote losses are not provisioned and not published.

m) Income Tax and Social Contribution

Current taxes Provisions for income tax and social contribution are based on rates and laws and regulations in force. Deferred taxes The Company records deferred income tax assets and liabilities based on temporary differences between the carrying amounts on the Companys financial statements and the tax basis of assets and liabilities.

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n) Profit by share
The profit by share is calculated based on the shares in circulation on the date of the financial statements.

o) Consolidation
All assets and liabilities of JBS S.A. and its subsidiaries and revenues and expenses from transactions between JBS S.A. and its subsidiaries were eliminated. No inter-company profits were recorded on the consolidated balance sheet of the Company. Accordingly, the shareholders equity of JBS S.A. individually is equal to its consolidated shareholders equity. The financial statements of the subsidiaries of JBS S.A. located outside of Brazil were originally prepared using the local currency of the country in which they are located. Subsequently, these amounts were converted into Reais using the applicable commercial exchange rates reported by the Central Bank of Brazil on the date of the consolidated balance sheet for assets and liabilities, and the average exchange rate of the period to revenues and expenses. The gains and losses due to the conversion are recognized in the shareholders equity in 2008 and in the financial income (loss) in 2007. With respect to the Companys investment in JBS Argentina and its subsidiaries and Inalca JBS and its subsidiaries, we have compared the generally accepted accounting principles in Argentina and Italy with the corresponding principles in Brazil applied by the Company, and we have noted that there were no material differences. The accounting principles adopted by Tupman and Astro, both subsidiaries of SB Holdings, located in the United States of America, do not differ significantly from those adopted in Brazil. The accounting practices adopted in the United States of America by JBS USA (US GAAP) are adjusted to Brazilian GAAP , according to the following differences: Finished goods inventories: valued using market price, and are adjusted to production average cost method;  Permanent assets: includes R$794,059 related to intangible assets and fixed assets goodwill, calculated according to applicable purchasing accounting, and it was adjusted reducing the shareholders equity. The subsidiary companies included in the consolidation are mentioned in the Note 10.

p) Adjustments to present value of assets and liabilities

The financial long term assets and liabilities are adjusted by its present value, and the short term, when the effect is considered relevant in the financial statements. The adjustment to present value is calculated considerating the contractual cash flows and the market interest rate.

4 Acquisitions of Swift Foods Company (presently JBS USA) and Inalca S.p .A (presently Inalca JBS)
In July of 2007, the Company acquired 100% of Swift Foods Company (presently JBS USA Holdings, Inc.) and since January 2008 the Company owns 50% of Inalca S.p.A. social capital, presently Inalca JBS S.p.A, (Inalca JBS). Due to the significance of these investments in the consolidation in the financial statements of the Company for years ended as of December 31, 2008, and the comparability loss with previous periods, we are presenting below the combined income statements to allow a comparison of the consolidated financial statements before the investment in JBS USA and Inalca JBS, and we are presenting these referred financial statements.

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balance sheet
2008 assets Cash, cash equivalents and short-term investments Trade accounts receivable, net Inventories Other current and non current assets Investments in subsidiaries Property, plant and equipment, net Other permanent assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERSS EQUITY Trade accounts payable Loans and financings Other current and non current liabilities Minority interest Shareholders equity TOTAL LIABILITIES AND SHAREHOLDERS EQUITY Consolidated 2,291,617 2,232,300 2,549,674 1,891,415 4,918,671 2,212,672 16,096,349 INALCA JBS 83,539 229,530 274,053 60,733 732,839 46,450 1,427,143 JBS and other subsidiaries 2,208,078 2,002,770 2,275,621 1,830,682 600,167 4,185,832 2,166,222 15,269,372 2007 JBS and other subsidiaries 1,381,703 1,236,148 1,511,595 757,163 829,975 2,536,098 195,523 8,448,205

2,077,844 5,616,497 2,270,055 (2,458) 6,134,411 16,096,349

277,994 418,241 127,173 3,568 600,167 1,427,143

1,799,850 5,198,256 2,142,882 (6,026) 6,134,411 15,269,372

1,099,385 3,749,636 548,752 (4,156) 3,054,588 8,448,205

INCOME STATEMENTS
2008 Consolidated 30,340,255 (27,347,753) 2,992,502 (2,087,738) (612,176) (179,867) (27,962) (62,221) 3,401 25,939 1,156,086 JBS USA 22,680,498 (20,877,360) 1,803,139 (1,190,824) (206,119) (1,985) (54,982) 349,229 715,041 INALCA JBS 1,544,249 (1,384,410) 159,839 (124,224) (32,080) (1,112) (4,043) 1,508 (114) 78,558 JBS and other subsidiaries 6,115,508 (5,085,983) 1,029,525 (772,690) (373,977) 349,116 (179,867) (24,865) (3,196) 1,893 25,939 362,487 2007 JBS and other subsidiaries 4,891,944 (3,709,197) 1,182,747 (569,706) (369,962) (160,976) (141,935) (5,217) 3,459 (61,589) 692,453

Net sales revenue Cost of goods sold GROSS INCOME General, administrative and selling expenses Financial income (expense), net Equity in subsidiaries Goodwill amortization Other (expenses) income Income taxes Minority interest (expense) income NET INCOME (LOSS) AMOUNT OF EBITDA

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5 cash and cash equivalents and short-term investments

Cash, bank accounts and short-term investments are the items of the balance sheet presented in the statements of the cash flows as cash and cash equivalents and are described as below: Company Cash and cash equivalents Certificates of bank deposits CDB-DI Investment funds 2008 236,432 1,147,326 139,215 1,522,973 2007 109,221 339,029 421,534 869,784 2008 975,194 1,150,604 165,819 2,291,617 Consolidated 2007 323,709 348,472 709,522 1,381,703

Certificates of bank deposits CDB-DI, with first-line banks, are fixed income securities that provide yields of approximately 100% of the Brazilian interbank rate. The Investment Funds are supported by investments in Multi-Market funds, to the qualified public.

6 trade accounts receivable, net

Company Receivables not yet due Overdue receivables From 1 to 30 days From 31 to 60 days From 61 to 90 days Above 90 days Adjustment to present value Allowance for doubtful accounts 2008 505,910 35,802 6,277 6,589 7,875 (1,191) (8,271) 47,081 552,991 2007 427,746 7,904 4,941 4,978 2,497 (3,848) 16,472 444,218 Consolidated 2008 1,654,871 449,001 71,726 24,236 63,050 (1,191) (29,393) 577,429 2,232,300 2007 990,611 154,709 71,993 10,513 17,516 (9,194) 245,537 1,236,148

7 Inventories
Company Finished products Work-in-progress Raw-materials Livestock Warehouse spare parts 2008 489,953 674 1,978 46,905 539,510 2007 513,492 745 55,242 34,746 604,225 Consolidated 2008 1,770,199 157,745 70,213 282,591 268,926 2,549,674 2007 1,072,732 71,514 68,688 171,552 127,109 1,511,595

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8 recoverable taxes
Company Value-added tax on sales services (ICMS/IVA/VAT) Excise tax IPI Social contribution and taxation on billings PIS and Cofins Income tax withheld at source IRRF Others Adjustment to present value Current and Long-term: Current Non-current 2008 379,678 51,657 19,330 25,556 9,936 (1,182) 484,975 447,343 37,632 484,975 2007 295,362 39,920 42,427 4,072 1,338 383,119 351,677 31,442 383,119 Consolidated 2008 476,761 111,447 32,957 29,612 38,734 (1,182) 688,329 623,022 65,307 688,329 2007 353,100 97,805 55,623 7,485 13,110 527,123 482,918 44,205 527,123

Value-added tax on sales and services (ICMS / IVA / VAT)

Brazilian law authorizes manufacturers of goods to set off the ICMS tax paid upon the purchase of raw materials against the taxes charged upon the sale of the finished goods manufactured with such raw materials. Recoverable ICMS derives from tax credits received by the Company in connection with ICMS taxes paid upon its purchase of raw-materials, packaging materials and other goods, which are offset against ICMS taxes resulting from the sale of the Companys products. As export sales are exempt from ICMS and a relevant portion of the Companys sales are export sales, a tax credit is generated. The Tax Authority of the State of So Paulo (Secretaria da Fazenda do Estado de So Paulo) filed administrative proceedings against the Company challenging the amount of the Companys ICMS tax credits arising from the purchase of cattle by the Company in other Brazilian states. The Tax Authority of the State of So Paulo claims that the tax incentives granted by such other states were not based upon an agreement with the State of So Paulo, and accordingly, the Tax Authority of the State of So Paulo only recognizes the Companys ICMS tax credits up to the amount of the ICMS tax paid in such other states.The Companys management believes that its accounting of the ICMS tax credit is in accordance with Brazilian law, and expects to be reimbursed of such credits.

PIS and COFINS (social contribution on net income)

PIS and COFINS tax credits are generated as a result of PIS/COFINS taxes paid by the Company upon its purchase of raw-materials, packaging and other materials used in the manufacturing of its products against the PIS/COFINS taxes paid by Company upon the sale of its finished products. Similarly to ICMS and IPI, as exports of the Companys products are exempt from such taxes, a tax credit is created.

IRRF (withholding income tax)

IRFF corresponds to withholding income tax levied upon the redemption of marketable securities by the Company. The Company expects to set off such withholding income taxes against income taxes on net income paid for the applicable period.

General comments
Based upon final administrative decisions by the Cmara Superior do Conselho de Contribuintes and on the opinion of its legal counsels, the Company and JBS Embalagens has performed a monetary adjustment of its tax credits of PIS, COFINS and IPI based on the SELIC rate (which is the reference rate published by the Central Bank of Brazil). After such monetary adjustments, the total PIS, COFINS and IPI tax credits totaled R$134,073. During the exercise of 2008 was received an amount of R$17,045, remaining receivable an amount of R$117,028.

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9 related parties transactions

Balances between related parties in the balance sheet and income statement are the following: Trade accounts Trade accounts Sales of Credits december 31, 2008 receivable payable Purchase Products (Debits) 5,719 Mouran Alimentos Ltda. JBS Confinamento Ltda. 215 8 17,537 408 14,959 JBS Embalagens Metlicas Ltda. 2,735 49,734 57,282 JBS Global Beef Company SU Ltda. (54,920) JBS Global (UK) Limited 24,625 165,589 JBS Argentina S.A. 677 13,165 The Tupman Thurlow Co. 34,258 715 69,322 18,488 JBS Global A/S (Dinamarca) (531) Global Beef Trading SU Ltda. 20,943 Beef Snacks Brasil Ind.Com.Alimento Ltda. 5 24 14,941 72,135 Beef Snacks International BV 4,463 Inalca JBS S.p.A 6,798 24,568 JBS USA, Inc. 1,580,340 JBS Agropecuria Ltda. 143 7,540 52,704 3,072 Flora Produtos de Higiene e Limpeza S.A. 1,813 83 855 93,620 Marr Russia L.L.C . 21,049 2,933 JBS Banco S.A. 61 5 SARL Inalca Algerie 129 2,027 J&F Participaes S.A. 1 1 6 Frimo S.A.M. 4 2,370 Swift & Company Trade Group 893 68,048 11,763 134,019 418,813 1,700,868 Trade accounts Trade accounts receivable payable 401 2,346 8,667 11,554 595 25,900 609 587 805 84 47,914 3,634 Sales of Products 10,164 11,418 72,382 44,784 70,770 2,527 4,890 216,935 Credits (Debits) 69,695 (41,626) 22,095 10,142 60,306

december 31, 2007 Mouran Alimentos Ltda. JBS Embalagens Metlicas Ltda. JBS Global Beef Company SU Ltda. Friboi Egypt Company L.L.C. JBS Global (UK) Limited JBS Argentina S.A. The Tupman Thurlow Co. Global Beef Trading SU Ltda. Beef Snacks Brasil Ind.Com.Alimento Ltda. Beef Snacks International BV

Purchase 2,292 63,559 6,569 9 72,429

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The Company and its subsidiaries mantain comecial transaction between then, mainly sales operations, realized wtith normal price and market conditions, when existing. The credits and debits are presented, mainly, by mutual contracts which are calculated interests and exchange rate variation. The parent company J&F participaes S.A warranty Eurobonds loans caption operation of the Company in the amount of US$200 million which the longest due is in 2011.

10 investments in subsidiaries a) Relevant information about subsidiaries

december 31. 2008 JBS Embalagens Metlicas Ltda. JBS Global Investments S.A. JBS Holding Internacional. S. A. JBS Global A/S (Dinamarca) Mouran Alimentos Ltda. JBS USA, Inc. SB Holdings, Inc JBS Confinamento Ltda. Inalca JBS S.p.A

Companys share quantity (Thousand) 10,002 93,000 679,153 1,232 120 0,1 20 30,001 280,000 Companys share quantity (Thousand) 10,000 23,000 535,128 212 84 100.0 20 30,001

Participation 99.00% 100.00% 100.00% 100.00% 70.00% 100.00% 100.00% 100.00% 50.00%

Capital Shareholders Stock equity 2 38,949 217,341 109,421 679,153 582,180 103,370 137,865 120 (21,699) 2,212,940 2,301,887 23 4,170 30,001 29,420 1,132,326 1,200,334

Net income (loss) (896) (84,893) (38,725) (8,205) (6,247) 349,229 425 (581) (227)

december 31. 2007 JBS Embalagens Metlicas Ltda. JBS Global Investments S.A. JBS Holding Internacional. S. A. JBS Global A/S (Dinamarca) Mouran Alimentos Ltda. JBS USA, Inc. SB Holdings, Inc JBS Confinamento Ltda.

Participation 99.00% 100.00% 100.00% 100.00% 70.00% 100.00% 100.00% 100.00%

Capital Shareholders Stock equity 2 39,844 40,740 40,908 535,128 385,831 71,648 108,106 120 (15,452) 880,186 719,210 18 2,751 30,001 30,001

Net income (loss) (1,011) (6,804) (95,015) (5,362) (11,595) (160,976) 684 -

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b) Investments movement
Equity in subsidiaries December 31, 2007 JBS Embalagens Metlicas Ltda. JBS Global Investments S.A. JBS Holding Internacional. S. A. JBS Global A/S (Dinamarca) Mouran Alimentos Ltda. JBS USA, Inc. SB Holdings, Inc JBS Confinamento Ltda. Inalca JBS S.p.A Transfer to Other current liabilities (Negative equity Mouran) Goodwill transfered to Intangible Total 39,446 40,909 385,831 108,106 (10,816) 719,210 2,750 30,001 10,816 823,666 2,149,919 Addition Exchange Shareholders (disposal) rate variation Equity 118,599 58,056 (23,250) 144,025 91,049 11,052 29,469 (2,557) 772,223 509,121 (47,896) 879 116 465,542 150,327 (15,588) Income Statements (887) (84,893) (38,725) (8,205) (4,373) 349,229 425 (581) (114) December 31, 2008 38,559 109,421 582,180 137,865 (15,189) 2,301,887 4,170 29,420 600,167 15,189 3,803,669

1,511,441

747,852

1,874

211,876

11 Property, plant and equipment, net

company Annual Depreciation Rates 4% 10% 10% 20% 20% 10 to 20% Accumulated Cost Revaluation Depreciation 407,162 116,742 (37,235) 107,469 9,352 307,603 45,846 (68,135) 93,523 21,815 (22,318) 14,856 736 (7,629) 84,817 215 (43,658) 759,028 20,071 3,883 (9,310) 1,794,529 198,589 (188,285) 2008 486,669 116,821 285,314 93,020 7,963 41,374 759,028 14,644 1,804,833 net amount 2007 387,867 114,004 229,619 79,614 8,162 35,777 459,809 13,163 1,328,015 net amount Annual Accumulated Depreciation Rates Cost Revaluation Depreciation 3 to 20% 1,643,770 116,742 (187,648) 637,186 9,352 (14,408) 8 to 10% 1,963,331 45,846 (674,611) 10% 98,625 21,815 (23,151) 20 to 100% 71,715 736 (35,405) 14 to 50% 136,356 215 (56,470) 1,090,190 10 to 100% 117,618 3,883 (47,016) 5,758,791 198,589 (1,038,709) 2008 1,572,864 632,130 1,334,566 97,289 37,046 80,101 1,090,190 74,485 4,918,671 2007 862,953 233,226 691,535 84,393 40,395 54,043 526,422 43,131 2,536,098

Buildings Land Machinery & equipment Installations Computer equipment Vehicle and Airplanes Construction in progress Others

consolidated

Buildings Land Machinery & equipment Installations Computer equipment Vehicle and Airplanes Construction in progress Others

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Until December 2007, supported by appraisal reports from SETAPE Servios Tcnicos de Avaliaes do Patrimnio e Engenharia S/C Ltda., the Company made an appraisal of its facilities, resulting in an increase in the value of these assets, and the creation of the revaluation reserve and the related deferred income tax and social contribution provisions. As of December 31 2008, the balance of the Companys revaluation of fixed assets account was R$198,589, the balance of the Company revaluation reserve account was R$118,178, and the balance of the Company income tax and social contribution account was R$56,306. The Company recorded accrued depreciation of R$24,105 with respect to the Companys revaluation of fixed assets as of December 31, 2008.

12 Intangible assets, net

company Goodwill Other intangible assets 2008 949,615 9,615 959,230 2007 9,615 9,615 consolidated 2008 1,331,283 874,064 2,205,347 2007 170,656 23,261 193,917

a) Goodwill
In the Company In July 2007 the Company acquired 100% of the capital stock of Swift Foods Company, actual JBS USA Holdings, Inc., and paid a goodwill of R$877,609, based on the expectation of future profitability. The goodwill will be amortized as long as such profits are earned, during a period of five years. During the year ended December 31, 2008 the goodwill was amortized in the amount of R$175,522, and the actual accumulated goodwill amortization is R$248,656. In January 2007 the Company acquired 100% of the capital stock of SB Holdings, Inc., and paid a goodwill of R$21,725 based on the expectation of future profitability of the subsidiary. The goodwill will be amortized as long as such profits are earned, during a period not exceeding ten years. During the year ended December 31, 2008 the goodwill was amortized in the amount of R$4,345 and the actual accumulated goodwill amortization is R$6,035. In March of 2008 the Company acquired 50% of the capital stock of Inalca S.p.A., presently known as Inalca JBS, and paid a goodwill of EUR 94,181, which correspond as of December 31, 2008 to R$304,972, based on the expectation of future profitability. The goodwill will be amortized as long as such profits are earned, during a period not exceeding ten years. As described in note 20 d), the Company intends to exclude permanently the goodwill amortization from the dividends calculation base. In Subsidiary In 2007, JBS Holding International S.A., through its subsidiaries JBS Argentina S.A. and JBS Mendoza S.A., acquired 100% of the capital stock of Consignaciones Rurales S.A. and Argenvases S.A.I.C. and in 2008, through the same subsidiaries, acquired 100% of the capital stock of Colcar S.A., with a total goodwill in these acquisition of $53,341 thousand argentinean pesos, that corresponds as of December 31, 2008 to R$36,133. These goodwill are based on the expectation of future profitability and it will be amortized during the period and extension of the projections that determined it, not to exceed 10 years. JBS USA has a goodwill in the amount of US$147,855 thousand, corresponding as of December 31, 2008 to R$345,537 represented, mainly, by the acquisition in 2008 of Smithfield, Tasman and Five Rivers, preliminary calculated and subject to adjustments. The goodwill is represented by the excess of the aggregate purchase price over the fair value of the net identifiable assets acquired in the purchase business combination.

b) Other intangible assets

Represented, mainly, by customers list, trademarks and patents, commercialization rights, and others, of the subsidiary JBS USA.

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13 trade accounts payable

Company Commodities Materials and services Finished products Adjustment to present value 2008 313,316 70,586 2,024 (1,947) 383,979 2007 242,688 109,078 3,744 355,510 consolidated 2008 1,044,142 916,293 119,356 (1,947) 2,077,844 2007 588,230 470,830 40,325 1,099,385

14 loans and financings a) Company

modality Financing for purchase of fixed assets FINAME / FINEM Enterprise financing Loans for working capital purposes ACC Exchange advance contracts EXIM BNDES export credit facility Fixed Rate Notes with final maturity in February 2011 (Eurobonds) Working Capital Export prepayment Fixed Rate Notes with final maturity in February 2016 (144-A) NCE / COMPROR Total Loans and Financings Current and Long-term Current Non-current Long-term installments have the following maturities: 2009 2010 2011 2012 2013 2016 Exchange rate variation and interest rate LIBOR + 1.00% TJLP and interest rate of 3.0% Interest rate of 9.375% CDI and interest rate of 6.0% Exchange rate variation and interest rate of Libor + 1.0% Exchange rate variation and Interest rate of 10.5% CDI and interest rate of 2.0% 591,990 177,407 651,713 51,113 516,838 731,569 1,533,704 4,254,334 4,486,034 1,494,690 2,991,344 4,486,034 636,327 1,122,953 298,308 232,656 701,100 2,991,344 288,761 426,891 494,338 167,810 554,638 40,289 1,972,727 2,200,288 858,975 1,341,313 2,200,288 180,121 105,744 519,210 4,848 531,390 1,341,313 Annual average rate of interest and commissions TJLP-UMBNDES index rate and interest rate of 3.0% 2008 2007

231,700 231,700

227,561 227,561

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b) Consolidated
modality Financing for purchase of fixed assets FINAME / FINEM Enterprise financing Notes Payable Loans for working capital purposes ACC Exchange advance contracts EXIM BNDES export credit facility Fixed Rate Notes with final maturity in February 2011 (Eurobonds) Working Capital American Dollars Working Capital Australian Dollars Working Capital Euro Working Capital Reais Export prepayment Fixed Rate Notes with final maturity in February 2016 (144-A) NCE / COMPROR Total Current and Long-term Current Non-current Exchange rate variation and interest rate Libor + 1.00% TJLP and interest rate of 3.0% Exchange rate variation and interest rate of 9.375% Libor + Interest rate of 1.1% to 3.2% BBSY + 0,975% to 1.60% Euribor + Interests 0.15% 1.75% CDI and interest rate of 6.0% Exchange rate variation and Interest rate of Libor + 1.0% CDI and Interest Rate of 10.5% CDI and Interest Rate of 2.0% 714,885 177,407 651,713 377,253 160,166 418,241 51,113 516,838 731,569 1,559,232 5,358,417 5,616,497 340,879 426,891 494,338 1,402,371 47,030 167,810 554,638 68,793 3,502,750 3,749,636 Annual average rate of interest and commissions TJLP-UMBNDES index rate and interest rate of 3.0% Interest rate Libor + 1.75% and interests of 3.0% to 7.25% 2008 2007

231,700 26,380 258,080

227,561 19,325 246,886

2,214,788 3,401,709 5,616,497

2,384,836 1,364,800 3,749,636

Long-term installments have the following maturities: 2009 2010 2011 2012 2013 2016

797 666,020 1,416,958 322,770 248,111 747,053 3,401,709

184,379 110,004 520,840 6,477 543,100 1,364,800

Exchange Contract Advances (ACCs) are credits funded by financial institutions to JBS S.A. and subsidiary, amounting to US$302,844 thousands on December 31, 2008 (US$192,446 thousands as of December 31, 2007) and are used to finance the Companys export sales. Outstanding amounts of export pre-payment loans were US$221,155 thousands on December 31, 2008 (US$94,738 thousands on December 31, 2007). Such loans were funded by financial institutions.

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NCE (Notas de Crdito Exportao)/COMPROR are an export finance credit facility linked to COMPROR used to finance the purchase of raw materials used in the Companys export products. EUROBONDS JBS S.A. issued 9.375% fixed rate notes due in 2011 in total aggregate amounts of US$200 million on February 6, 2006 and US$75 million on February 14, 2006. These notes are guaranteed by JBS S.A. and J&F Participaes S.A. 144-A JBS S.A. also issued the 10.5% fixed rate notes due on 2016 in the total aggregate amount of US$300 million on July 28, 2006. These notes are also guaranteed by the Company.

15 payroll, social charges and tax obligation

Company Payroll and related social charges Accrual for labor liabilities Income Tax Social contribution ICMS/VAT taxes payable Others 2008 23,240 28,590 3,088 7,804 62,722 2007 35,638 27,125 8,727 2,298 15,504 3,866 93,158 Consolidated 2008 86,157 182,521 15,960 119 3,095 49,386 337,238 2007 55,577 94,502 8,727 2,298 15,513 26,996 203,613

16 declared dividends
Company Declared dividends 2008 51,127 51,127 2007 17,465 17,465 Consolidated 2008 51,127 51,127 2007 17,465 17,465

The Company, considering that it has generate positive EBITDA, deliberated that for the dividends calculation base the goodwill in investments acquisition of JBS USA and SB Holdings will be permanently excluded. Based on the above, the Company declared dividends of R$51,127 (R$17,465 in 2007), that will be submitted to the General Assembly of the Shareholders for approval, as calculation demonstrated below:

Net income (Loss) of the year Mandatory reserve (5%) Investments exchange rate variations Investments amortization JBS USA Investments amortization SB Holdings Adjusted base for dividends calculation: Declared dividends (25%)

2008 25,939 (1,297) 175,522 4,345 204,509 51,127

2007 (165,032) 160,030 73,134 1,690 69,822 17,465

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17 provision for contingencies

The Company and its subsidiaries are parties in several legal and administrative proceedings arising from the ordinary course of their respective businesses, including labor proceedings, civil proceedings and tax proceedings based on the estimative of its legal advisors. The Company has established provisions in its financial statements for the contingencies arising from these proceedings based on the estimates provided by its legal advisors. The table below sets forth the main information about the legal and administrative proceedings as of December 31, 2008: company Type of Proceedings Labor Civil Tax Total Number of lawsuits/ administrative proceedings 1,268 503 191 1,962 Provision 5,799 15,663 26,782 48,244 consolidated Provision 9,208 21,216 27,213 57,637

Tax Proceedings
 ) ICMS Value Added Tax (Imposto sobre Operaes Relativas Circulao de Mercadorias e sobre a a Prestao de Servios de Transporte Interestadual e Intermunicipal e de Comunicao) The Tax Authority of the State of So Paulo (Secretaria da Fazenda do Estado de So Paulo) filed several administrative proceedings against the Company, under which the Tax Authority challenges the amount of the Companys ICMS tax credits arising from the purchase of cattle and meat transfer by the Company in other Brazilian states. The Tax Authority of the State of So Paulo claims that the tax incentives should be approved by Confaz , and are known as a Tax War. The Tax Authority of the State of So Paulo does not recognize the Companys ICMS tax credits up to the amount of the ICMS tax paid in such other states. The Company estimates that the claims under these administrative proceedings amount to R$118,000 in the aggregate. In addition to presenting its defense in such administrative proceedings, the Company has filed legal proceedings seeking the payment of damages from such other states if the Tax Authority of the State of So Paulo prevails in these administrative proceedings. The legal proceedings filed by the Company suspended the requirements of the State of So Paulo. Based on the opinion of the Companys legal counsels, the Companys management established a provision for losses arising from such administrative and legal proceedings in the amount of R$826. The Tax Authority of the State of Gois filed other administrative proceedings against the Company, due to interpretation divergences of the Law concerning the export VAT credits. Based on the opinion of the Companys external legal counsel, the management of the Company believes the Company will prevail in most of these proceedings. The Companys management has recorded a provision for losses arising from such administrative proceedings in the amount of R$4,185. b) PIS (Programa de Integrao Social) and COFINS (Contribuio para Financiamento da Seguridade Social) The Company has filed administrative proceedings challenging the calculation method used in the assessment of PIS and COFINS by the Federal Tax Authority (Secretaria da Receita Federal). The Companys management estimates that the contingencies arising from these legal proceedings amount to R$6,969 in the aggregate. Based on the opinion of the Companys legal counsels and recent decisions granted by the Brazilian Federal Supreme Court (Supremo Tribunal Federal), the Companys management has recorded a provision for losses arising from such legal proceedings in the amount of R$3,793. c) CSLL Social contribution on net income (Contribuio Social sobre o Lucro Lquido) Based on an amendment to the Brazilian Federal Constitution that exempted profits from exports from federal contributions, the Company has filed a lawsuit against the Federal Tax Authority (Secretaria da Receita Federal) seeking to exclude its profits from exports from the calculation of the Social Contribution on Net Income (Contribuio Social Sobre o

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Lucro Lquido CSLL) payable by the Company. The management believes, based on the opinion of the Companys legal counsels, that it will obtain success in the claim. Accordingly, the management of the Company has not established any provision for contingencies arising from these proceedings. d) INSS - National Social Security Institute (Instituto Social de Seguridade Social) In September 2002, the INSS filed two administrative proceedings (autos de infrao) against the Company, seeking to collect certain social security contributions (which are referred to as contributions to the Rural Workers Assistance Fund (NOVO FUNRURAL) in the aggregate amount of R$69,194, that the Company should have allegedly withheld in connection with purchases of cattle from individual ranchers. As a result of a decision by a lower court in a proceeding to adjudicate a writ of mandamus action filed by the Company in order to challenge the constitutionality of such social security contributions, the administrative proceedings have been stayed and the INSS has been enjoined from collecting these social security contributions from the Company. The INSS has not timely appealed from this decision and, accordingly, the proceeding has been submitted to the review of the Regional Federal Court of the 3rd Region as a matter of law. Currently, the proceedings await a ruling by such appellate court. Based on the opinion of the Companys legal counsel supported by precedents of the Federal Supreme Court in a similar case, the Companys management believes that the Company will prevail in these proceedings. Accordingly, the Company has not established any provision for contingencies arising from these proceedings. In order to preserve its claims under the administrative proceeding and to avoid the lapse of the applicable statute of limitations period relating to these claims, the INSS sent the Company tax default notices (notificaes fiscais de lanamento de dbito) with respect to the contributions allegedly owed by the Company for the period from January 1999 to December 2003 in the aggregate amount of R$69,194. In its defense to these default notices, the Company argued that it did not pay the contributions with respect to the period described in such notices in light of the favorable decision issued by the trial court reviewing the writ of mandamus action, which ordered the stay of the administrative proceedings and enjoined the INSS from collecting the contributions from the Company until a final decision is reached under such action. An ongoing legal proceeding arguing as to the unconstitutionality of the contribution to the Rural Workers Assistance Fund, with issues and factual circumstances similar to the writ of mandamus action is currently under review by the Brazilian Federal Supreme Court (Supremo Tribunal Federal). Up to the present moment, five of the ten judges opining on this proceeding have voted to declare this contribution unconstitutional and no judge has issued a dissenting opinion on this matter. Based on this and other precedents and on the opinions of its external legal counsel, the Companys management believes the Company will prevail in these proceedings. Accordingly, the Companys management has not established any provision for contingencies arising from these proceedings. Currently, the Company is not forced to proceed any discount, or pay the amount. In case any discount is made, due to commercial negociation, the Company proceeds the discount and deposits it in Judgement, accomplishing the judicial decision. Social Security Contributions Third-party Entities. The INSS filed several administrative proceedings against the Company with claims totaling approximately R$11,000, seeking to collect certain social security contributions with respect to third-party entities (contribuies previdencirias terceiras entidades) allegedly owed by the Company. These proceedings are based on a wrongful interpretation by the INSS of the Social Security Fund Code (Cdigo do Fundo de Previdncia e Assistncia Social). Based on the opinion of the Companys external legal counsel, the management of the Company believes the Company will prevail in these proceedings. Accordingly, the management of the Company has not established any provision for contingencies arising from these proceedings. e) Other Tax Proceedings The Company is also party to 100 other tax lawsuits and administrative proceedings. Contingencies arising from these proceedings are not material to the Company if considered on an individual basis. We highlight the proceedings with probable risk of loss, which have been provisioned for in the aggregate amount of R$17,978.

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Labor Proceedings
As of December 31, 2008 the Company was part in 1,050 labor proceedings, 218 tax proceedings filed by the work regional police stations and 2 proceedings established by the work public prosecution service, involving the total value in discussion of R$34,020. Based on the opinion of the Companys external legal counsel, the Companys management recorded a provision in the amount of R$5,606 for losses arising from such proceedings. Most of these lawsuits were filed by former employees of the Company seeking overtime payments and payments relating to their exposure to health hazards.

civil Proceedings
a) Slaughterhouse at Araputanga In 2001, the Company (formerly known as Friboi Ltda.), entered into a purchase agreement for the acquisition of one slaughterhouse located in the City of Araputanga, State of Mato Grosso, from Frigorfico Araputanga S.A. (Frigorfico Araputanga). As a result of the payment of the purchase price by the Company and the acknowledgement by Frigorfico Araputanga of compliance by the Company with its obligations under the purchase agreement, a public deed reflecting the transfer of title of the slaughterhouse from Frigorfico Araputanga to the Company was registered with the applicable real estate notary. As (i) Frigorfico Araputanga was a beneficiary of certain tax benefits granted by the Federal Government through an agency responsible for fostering the development of the northern region of Brazil (Superintendncia de Desenvolvimento da Amaznia SUDAM) and (ii) the slaughterhouse sold to the Company was granted by Frigorfico Araputanga to SUDAM as collateral for these tax benefits the consent of SUDAM was required for the registration of the public deed with the applicable real estate notary. In June 2004, Frigorfico Araputanga S.A. filed a lawsuit against the Company in a state court located in the City of Araputanga, State of Mato Grosso, alleging that the Company breached the purchase agreement and seeking an injunction to prevent the Company from finalizing the transfer of the slaughterhouse and a declaratory judgment that the purchase agreement and the public deed registered with the real estate notary were null and void. In the lawsuit, Frigorfico Araputanga claimed that the sale of the slaughterhouse should be nullified as the Company did not obtain the consent of SUDAM in order to register the public deed with the applicable real estate notary. In January 2005, the court of appeals (Tribunal de Justia do Mato Grosso) held that the Company had complied with all material terms of the purchase agreement. The lawsuit was subsequently submitted to the review of the Federal Court of Cceres, under no 2005.36.01.001618-8, in light of the inclusion of the Federal Government as a party to the lawsuit. The Company obtained the consent of Unidade de Gerenciamento dos Fundos de Investimento UGFIN, the successor of SUDAM, according to the Federal Regional Court of the 1st Region (Tribunal Federal da 1 Regio) decision, under Proceedings no 2006.01.00.024584-7. The parties are waiting for ruling following a judicial expert appraisal favorable to the company, that after evaluating the payments made by Agropecuria Friboi, the appraisal concluded that the debit was already paid. The judicial appeal number 2006.01.00.024584-7 was judged favorably to the Company, when the TRF Regional Federal Court declared valid the purchase tittle deeds of the property, object of discussion. Based on the Companys legal advisers opinion and based on Brazilian jurisprudence management of the Company believes that their arguments will prevail and no provision was registered. b) Trademark Infringement In July 2005, Frigorfico Araputanga filed a lawsuit against the Company seeking damages in the amount of R$26,938 and punitive damages in the amount of R$100,000 for the use by the Company of the trademark Frigoara without Frigorfico Araputangas consent. The amounts of the claim were based upon a report presented by Frigorfico Araputanga to the trial court, which appraised the value of the trademark Frigoara at R$315,000. The Company presented its defense against this lawsuit alleging that (i) the lawsuit should be analyzed and reviewed together with the lawsuit relating to the purchase of the slaughterhouse from Frigorfico Araputanga by the Company, (ii) the trademark Frigoara was used by the Company for a limited period of time, with the written consent and upon the request of Frigorfico Araputanga (the use of the trademark by the Company was a requirement of SUDAM to consent to the registration of the public deed contemplating the transfer of the slaughterhouse from Frigorfico Araputanga to the Company) and (iii) the amount of any damages under the lawsuit should be limited to a percentage of products sold by the Company under the

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trademark Frigoara, pursuant to article 208 of the Intellectual Property Law. Almost all of the products manufactured by the Company were marketed under the trademark Friboi. The only product marketed by the Company under the trademark Frigoara was minced meat, in limited amounts. In light of the foregoing, the Companys management established a provision for losses arising from this lawsuit in the amount of R$600. Following a determination of the judge of the trial court, the lawsuit was submitted to the review of the Federal Court of Cceres on January 17, 2007. The judge of the Federal Court of Crceres determined that this lawsuit be joined with the lawsuit relating to the purchase of the slaughterhouse by the Company from Frigorfico Araputanga. The Federal Government will be notified to issue an opinion on the matter under discussion in this lawsuit. Based on the Companys legal counsel opinion supported by precedents of the Federal Brazilian Supreme Court (Supremo Tribunal Federal) and the Brazilian Superior Court of Justice (Superior Tribunal de Justia), the Companys management believes that the Company will prevail in these proceedings. c) Others The Company is party in several civil lawsuits, mainly, pursuant to which certain of the Companys former and current employees are seeking damages from accidents that occurred in the workplace, in amounts varying based on their salaries. Based on the opinion of the Companys legal counsel, the Companys management recorded a provision for losses arising from these lawsuits in the amount of R$15,063 as of December 31, 2008.

18 debit with third parties for investment

Refers to the amount of 65 million Euros that will be increased in Inalcas purchase price in case the Company achieves at least one of the following economic targets: EBITDA average over business year 2008, 2009 and 2010 equal or greater than Euro 75 million, or alternatively, EBITDA over business year 2010 equal or greater than Euro 90 million. In case none of these economical objectives is reached, the debit will be reverted against the goodwill of the acquisition.

19 income taxes
Income tax and social contribution are recorded based on taxable net income pursuant to the rates set forth in the applicable laws. Deferred income tax and social contribution are recorded based on the temporary differences between the carrying amounts on the Companys financial statements and the tax basis of assets and liabilities, as well as on the tax loss carry forward credits.

a) Reconciliation of income tax and social contribution of the Comnpany

2008 43,375 (9,671) (61,092) (27,388) 61,092 (20,772) 2007 (63,440) 362,311 590 299,461 (101,793) (101,793) (590) 201

Income before income tax and social contribution Addition (Exclusion), NET: Permanent differences (Mainly equity in subsidiaries) Temporary differences Calculation basis for income tax and social contribution Income tax and CSLL Temporary differences Deferred income tax and social contribution

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b) Deferred income tax and social contribution

company 2008 Assets: Over tax losses and temporary differences Liabilities: Over revaluation reserve 22,626 22,626 83,453 83,453 2007 16,251 16,251 59,642 59,642 consolidated 2008 481,485 481,485 884,927 884,927 2007 23,758 23,758 99,755 99,755

The Company and its subsidiaries have a track record of future taxable net income. The Company expects to recover the tax credits arising there from within eight years due to the termination of the causes of their contingencies.

20 Shareholders equity a) Capital Stock

Through the Extraordinary Shareholders Meeting held on January 2, 2007, shareholders approved amendments of the by-laws and the deployment of the 52,523,990 existing shares into 350,000,000 common shares and without nominal value. Through the Extraordinary Shareholders Meeting held on March 7, 2007, the shareholders approved a new amendment of the by-laws and the deployment of these 350,000,000 shares into 700,000,000. On March 28, 2007, the Company increased its Capital Stock through an initial public offering of 150,000,000 of ordinary common shares at the share price of R$8.00 per share, being the amount of R$39,224 considered as capital increase and R$1,160,776 considered as capital reserve (premium on shares issued). Through the Extraordinary Shareholders Meeting held on June 29, 2007 shareholders approved the subscription of 227,400,000 new common shares, nominative, without nominal value by at the share price of R$8.1523 per share, corresponding to R$1,853,833 generating a capital reserve of R$207. BNDES Participaes S.A. BNDESPAR (BNDESPAR) subscribed to a significant portion of the new common shares representing the Companys capital. The subscription of the shares by BNDESPAR occurred through an assignment of a portion of the preemptive rights of the shareholders of J&F and/ or ZMF in the subscription of new shares. Through the Extraordinary General Meeting of April 11, 2008 shareholders approved the private issue of 360,678,926 new common, registered shares, without par value, at the price of R$7.07 per share, corresponding to R$2,550,000, generating a capital reserve of R$279. BNDES Participaes S.A. - BNDESPAR (BNDESPAR) and PROT Fundo de investimentos em Participaes (PROT) issued a significant portion of these new common shares. The subscription of shares by BNDESPAR and PROT occured through the cession of part of the preference right of the shareholders J&F and ZMF in the subscription of those new shares, pursuant to an investment agreement executed on March 18, 2008. The Social Capital, subscribed and integralized on December 31, 2008 is represented by 1,438,078,926 ordinary shares, without nominal value. From the total shares, as described in letter e) below, 34,226,200 shares are maintained in treasury. The Company is authorized to increase its capital by more 22,600,000 ordinary nominative shares.

b) Retained earnings reserves

Mandatory Computed based on 5% of the net income of the year. Reserve for expansion It refers to the remaining balance of the net income after the computation of mandatory reserve and dividend distribution. The purpose of this reserve is to provide funds to investment in assets.

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c) Revaluation reserve
Revaluation reserve reflects the appraisal effected by the Company, net of tax effects that are progressively offset against retained earnings to the same extent that the increase in value of the revalued property is realized through depreciation, disposal or retirement.

d) Dividends
Mandatory dividends correspond to 25% of the adjusted net income of the year, according to article 202 of Law 6.404/76. The Company, considering that it has generate positive EBITDA, deliberated that for the dividends calculation base the goodwill in investments acquisition of JBS USA and SB Holdings will be permanently excluded.

e) Treasury Shares
The Board of Directors of the Company, based on the amendment of its by-laws and according to the normative instructions of CVM numbers 10/80, 268/97 and 390/03, authorized the acquisition of, not more, 41,113,898 shares of own emission for maintenance in treasury and subsequent cancel or alienation without reduction of the social capital. On December 31, 2008, the Company maintained 34,226,200 treasury shares, with an average unit cost of R$5.70, and the minimum and maximum acquisition prices were R$2.68 and R$8.54, respectively, not having happened alienation of the acquired shares. The market value of the shares according to the negotiation as of December 31, 2008 was R$4.93.

21 fincancial income (expense), net

company Exchange variation Results on derivatives Interest Loss Interest Gain Taxes, contribution, tariff and others 2008 (86,013) 56,401 (435,481) 228,605 (27,145) (263,633) 2007 87,544 (180,877) (220,422) 68,041 (30,569) (276,283) consolidated 2008 (223,595) (30,383) (553,370) 236,757 (41,585) (612,176) 2007 14,506 (180,678) (283,681) 85,102 (38,362) (403,113)

The financial income for year ended ended December 31, 2007 is negatively affected, by a significant amount, by exchange variation rate of the permanent investments in foreign currency. The impact of the referred exchange variation rate in the compay financial income is R$82,809 (R$160,030 in the consolidated) and did not affect the EBITDA. In 2008 the exchange variation rate of the permanent investments in foreign currency is beeing registered em specific account in the shareholders equity.

22 non-recurring expenses
company BONDS Expenses CADE Agreement Initial public offering 2008 (35,693) (35,693) 2007 (13,769) (53,313) (67,082) consolidated 2008 (35,693) (35,693) 2007 (13,769) (53,313) (67,082)

In 2008 refers to non-recurring expenses referring to the consent solicitation process of the EURO BONDS and notes of the 144-A rule, as described in note 14. In 2007 refers to non-recurring expenses with the initial public offering in Mew Market and payment to CADE.

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23 managements compensation
For the years ended December 31, 2008 and 2007, the aggregate compensation paid by the Company to the Companys management was R$3,000.

24 insurance coverage
The Company adopts the policy of maintaining insurance coverage for property, plant and equipment and inventories that are subject to risks, in the amounts considered sufficient to cover any loss arising from such risks. Due to the multi-location aspect of its business, the Company contracts insurance covering the maximum possible loss per operational unit. The insurance covers the following events: fire, flooding and landslide. As of December 31, 2008 the maximum individual coverage was R$99,000, considering all types of risks. The insurance coverage related to the controlled company JBS Argentina has the same characteristics as explained above, and the maximum coverage as of December 31, 2008 was US$32 million (equivalent to R$74,784). The insurance coverage related to the controlled Company JBS USA, Inc. has the same characteristics as explained above, and the maximum coverage as of December 31, 2008 was US$200 million (equivalent to R$467,400). The insurance coverage related to the controlled Company Inalca JBS has the same characteristics as explained above, and the maximum coverage as of December 31, 2008 was Euros 141 million (equivalent to R$456,579).

25 risk management and derivative instruments

The Companys operations are exposed to market risks primarily related to exchange rates, the credit worthiness of its customers, interest rates and cattle prices and uses derivatives financial instruments to reduce the expositure to those risks. The Company has a formal risk administration politics, controled by the administration treasury department, that uses control instruments through appropriate systems and qualified professionals in the risk measurement, analysis and administration, that make possible the reduction of the daily risk exhibition. Additionally, operations with speculative financial instruments character are not allowed. This politics is permanently monitored by the financial committee and for Directors of the Company, that have the responsibility of the strategy definition to the risk administration, determining the position limits and exhibition.

a) Exchange Rate and Interest Rate Risk

The exchange rate and interest rate risks related to financings and loans, and accounts receivable from clients denominated in foreign currencies, inventories, are hedged on a transaction by transaction basis, through derivative instruments, such as swap contracts (dollar to CDI or LIBOR to fixed interest rates or vice-versa), futures contracts traded on the Bolsa de Mercadorias e Futuros BM&F and forward contracts. The notional value of the contracts is only accounted for in memorandum accounts. The results of over-the-counter trades in the futures market and daily adjustments of currency future contracts are made realized and liquidated; on the BM&F, and are recognized as financial income or expense, in the profit and loss accounts.

b) Credit Risks
The Company is exposed to credit risks in respect of accounts receivable, which are partially mitigated through the diversification of the credit profile of the Companys portfolio. The Company does not have a client that represents more than 10% of its combined net sales revenue, and its clients have good financial and operating indicators.

c) Purchase Price of Cattle

The Company is exposed to volatility with respect to the price of cattle, caused by climate factors, supply, transportation cost and agricultural policies. According to its inventory policy, the Company maintains individual physical control of its livestock, which includes anticipated purchases combined with operations on the future markets.

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d) Estimated Market Value

The financial assets and liabilities of the Company are accounted in the balance sheet based on their respective acquisition cost, and the related classification of revenue and expenses in the income statement is accounted for based on its expected realization or liquidation value. The market amount of the financial instruments not derivatives and derivatives contracts were estimate based on the available market information.

e) Financial instriments information

Below are presented the assets and liabilities exposed to risks, which are subject to derivative instruments, as well as, the effects of those accounts in the income statements of the year ended on December 31, 2008: income statements effects Exchange variation Derivatives 112,875 77,895 190,770 392,153 (666,975) (1,961) (276,783) (86,013) (108,462) 5,464 (164,832) (267,830)

exposure operating Accounts receivable US$ / / Investments US$ / Inventories destined to export @ cattle Order of sales US$ / / Subtotal FINANCIAL Credits with subsidiaries US$ / Loans and financings US$ Imports payable US$ Amounts receivable (payable) of forward contracts, NET Subtotal TOTAL

2008 321,068 3,892,644 53,960 442,583 4,710,255

2007 263,700 1,694,641 71,903 405,917 2,436,161

1,550,774 (9,389) (2,740,319) (2,040,064) (4,816) (3,537) 60,205 538 (1,134,156) (2,052,452) 3,576,099 383,709

324,231 324,231 56,401

Investments Was deliberated, in the Council of Administration meeting, that the Hedge of the investments in overseas companies should not be done. Order of sales The notional is not registered in the balance sheet. Starting from the year of 2008, according to the methodology denominated hedge accounting, introduced by the pronouncement CPC 14, the Company started to account the sales orders exchange variation to oppose the effects of the hedge of these same orders.

f) Sensibility analysis
Considering that the Company is subject, mainly, to the exchange rates and interests risks on your assets and liabilities in foreign currency, and uses derivative instruments for protection of these referred assets and liabilities, the variations of sceneries are followed by the respective protection objects, generating almost null effects.

26 acquisition contract in progress National Beef

In March 4, 2008, the Company executed the Membership Interest Purchase Agreement (National Beef Agreement), to acquire all of the membership interests representing the entire ownership of National Beef, a limited liability company organized under the laws of the state of Delaware, United States of America, which slaughters and trades boxed beef, case-ready beef and beef by-products. Closing of the transaction contemplated in the National Beef Agreement is subject to customary regulatory approvals and other customary closing conditions. The Department of Justice of the United States filed a complaint in the Federal District Court challenging the acquisition. The Company look forward to defending this matter in court.

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National Beef owns (i) three beef slaughter plants, one located in Dodge City, Kansas, one in Liberal, Kansas and the other in Brawley, California; (ii) two case-ready beef processing plants, specializing in products for sale to retailers destined to the end consumer, located in Hummels Wharf, Pennsylvania, and Moultrie, Georgia; (iii) one plant located in Kansas City, Kansas specializing in portioned products for commercial establishments and end consumers; and (iv) one transportation company, with approximately 1,200 vehicles including refrigerated transportation and transportation of live stock, headquartered in Liberal, Kansas. Pursuant to the agreement, the Company shall pay US$560 million to the members of National Beef, approximately US$465 million of which shall be paid in cash and US$95 million with JBS existing shares. At closing, the Company shall assume the debt and other liabilities of National Beef, resulting in an enterprise value of approximately US$970 million. JBS intends to use shares held in treasury to effect the payment of the portion of the acquisition price to be paid with shares, and, for this reason.

executive management
Joesley Mendona Batista Chief Executive Officer Jeremiah Alphonsus OCallaghan Investor Relations Director Wesley Mendona Batista Chief Operation Officer Francisco de Assis e Silva Legal Director

Jos Paulo da Silva Filho Accountant CRC: 1PE011318/O-0 'T' SP

Board of directors
Joesley Mendona Batista Board President Jos Batista Sobrinho Marcus Vinicius Pratini de Moraes Wesley Mendona Batista Vice-President Jos Batista Jnior Demsthenes Marques

report of fiscal council

The Infra-signed members of JBS S.A.S Fiscal Council, in the exercise of its legal and statutory attributions, having examined the Report of the Directors and the Financial Statements of the year ended on December 31, 2008, and based on the Audit Report of Terco Grant Thornton Independent Auditors, expressing an unqualified opinion, have an opinion that the mentioned financial statements, audited based on the Corporate legislation in place, presents fairly JBS S.A.s financial position, approved by the Ordinary General Meeting. So Paulo, February 19, 2009. Divino Aparecido dos Santos Ricardo Antunes Agostini Florisvaldo Caetano de Oliveira

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