UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.  20549
 FORM 20-F  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934

   For the fiscal year ended:December 31, 2016
 Commission file number:001-36165 AMBEV S.A.(Exact name of Registrant as specified in its charter)Federative Republic of Brazil(Jurisdiction of incorporation or organization)Rua Dr. Renato Paes de Barros, 1017, 3rd floor04530-001 São Paulo, SP, Brazil(Address of principal executive offices)Ricardo Rittes de Oliveira Silva, Chief Financial and Investor Relations OfficerAddress: Rua Dr. Renato Paes de Barros, 1017, 3rd floor, 04530-001, São Paulo, SP, BrazilTelephone No.: +55 (11) 2122-1200e-mail: ir@ambev.com.br(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
 Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of each class

   Name of each exchange on which registeredAmerican Depositary Shares,evidenced by American DepositaryReceipts, each representing1 (one) common share*,no par value

   New York Stock Exchange
 *        Not for trading, but in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission. Securities registered or to be registered pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act:Title of each class

   Name of each exchange on which registeredGuaranty for the R$300,000,000 9.500% Notes due 2017 of AmBev International Finance Co. Ltd. by Ambev S.A.

   Not applicableIndicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.15,701,102,928 common shares, without par valueIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes x  No  ̈If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.Yes  ̈ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No  ̈Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*Yes  ̈ No  ̈* This requirement does not apply to the registrant in respect of this filing.Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer x

   Accelerated filer  ̈

   Non-accelerated filer   ̈Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S. GAAP   ̈

   International Financial Reporting Standards as issued by the International Accounting Standards Board  x

   Other   ̈If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.N/AItem 17  ̈  Item 18  ̈If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes  ̈ No x




TABLE OF CONTENTSPageINTRODUCTION

   iPRESENTATION OF FINANCIAL AND OTHER INFORMATION

   iMARKET DATA

   iCURRENCY TRANSLATION

   iiTRADEMARKS

   iiCAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

   iiiPART I

   1ITEM 1.

   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

   1ITEM 2.

   OFFER STATISTICS AND EXPECTED TIMETABLE

   2ITEM 3.

   KEY INFORMATION

   3ITEM 4.

   INFORMATION ON THE COMPANY

   25ITEM 4A.

   UNRESOLVED STAFF COMMENTS

   48ITEM 5.

   OPERATING AND FINANCIAL REVIEW AND PROSPECTS

   48ITEM 6.

   DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

   74ITEM 7.

   MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

   89ITEM 8.

   FINANCIAL INFORMATION

   98ITEM 9.

   THE OFFER AND LISTING

   106ITEM 10.

   ADDITIONAL INFORMATION

   111ITEM 11.

   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   133ITEM 12.

   DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

   139PART II

   141ITEM 13.

   DEFAULT, DIVIDENDS ARREARAGES AND DELINQUENCIES

   141ITEM 14.

   MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS ANDUSE OF PROCEEDS

   142ITEM 15.

   CONTROLS AND PROCEDURES

   143ITEM 15T.

   CONTROLS AND PROCEDURES

   145ITEM 16A.

   AUDIT COMMITTEE FINANCIAL EXPERT

   146ITEM 16B.

   CODE OF BUSINESS CONDUCT

   147ITEM 16C.

   PRINCIPAL ACCOUNTANT FEES AND SERVICES

   148ITEM 16D.

   EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

   150ITEM 16E.

   PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATEDPURCHASERS

   151ITEM 16F.

   CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

   153ITEM 16G.

   CORPORATE GOVERNANCE

   154ITEM 16H.

   MINE SAFETY DISCLOSURE

   155PART III

   156ITEM 17.

   FINANCIAL STATEMENTS

   156ITEM 18.

   FINANCIAL STATEMENTS

   157ITEM 19.

   EXHIBITS

   158


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Table of Contents
 INTRODUCTION This annual report on Form 20-F relates to the registered American Depositary Shares, or ADSs, of Ambev S.A., or Ambev, evidenced by American Depositary Receipts, or ADRs, each representing one common share, no par value, of Ambev. In this annual report, except as otherwise indicated or as the context otherwise requires, the “Company,” “Ambev,” “we,” “us” and “our” refers to Ambev S.A. and its subsidiaries and, unless the context otherwise requires, the predecessor companies that have been merged out of existence with and into it.  All references to “Old Ambev” refer to Companhia de Bebidas das Américas – Ambev, our former subsidiary that had common and preferred shares listed on the São Paulo Stock, Commodities and Futures Exchange (BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros), or the BM&FBOVESPA, and common and preferred ADSs listed on the New York Stock Exchange, or the NYSE, and that was merged out of existence with and into us in January 2014.  All references to CSD & NANC are to Carbonated Soft Drinks and Non-Alcoholic and Non-Carbonated Soft Drinks.  All references to “Brazil” are to the Federative Republic of Brazil, unless the context otherwise requires.  All references to the “Brazilian government” are to the federal government of Brazil.  All references to percent ownership interests in Ambev do not take into account treasury shares. PRESENTATION OF FINANCIAL AND OTHER INFORMATION We prepare our audited consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB.  The financial information and related discussion and analysis contained in this annual report on Form 20-F are presented inreais, except as otherwise specified. Unless otherwise specified, the financial information analysis in this annual report on Form 20-F is based on our consolidated financial statements as of December 31, 2016, 2015 and 2014 and for the three years ended December 31, 2016, included elsewhere in this document.  Percentages and some amounts in this annual report on Form 20-F have been rounded for ease of presentation.  Any discrepancies between totals and the sums of the amounts listed are due to rounding. Unless otherwise specified, volumes, as used in this annual report on Form 20-F, include both beer (including near-beer) and CSD & NANC volumes. In addition, unless otherwise specified, our volumes refer not only to the brands that we own or license, but also third-party brands that we brew or otherwise produce as a subcontractor, and third-party products that we sell through our distribution network. Our volume figures in this Form 20-F reflect 100% of the volumes of entities that we fully consolidate in our financial reporting. In addition, market share data contained in this annual report on Form 20-F refers to volumes sold. MARKET DATA Market information (including market share, market position and industry data for our operating activities and those of our subsidiaries or of companies acquired by us) or other statements presented in this Form 20-F regarding our position (or that of companies acquired by us) relative to our competitors largely reflect the best estimates of our management. These estimates are based upon information obtained from customers, trade or business organizations and associations, other contacts within the industries in which we operate and, in some cases, upon published statistical data. Except as otherwise stated, our market share data, as well as our management’s assessment of our comparative competitive position, has been derived by comparing our sales volumes for the relevant period to our management’s estimates of our competitors’ sales volumes for such period, as well as upon published statistical data, and, in particular the reports published and the information made publicly available by, among others, the local brewers’ associations and the national statistics bureaus in the various countries in which we sell our products. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect and believe and act as if they are reliable, we have not independently verified it.   i






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CURRENCY TRANSLATION In this annual report, references to “real,” “reais” or “R$” are to the legal currency of Brazil, references to “U.S. dollar” or “US$” are to the official currency of the United States and references to “Canadian dollar” or “C$” are to the legal currency of Canada. We maintain our books and records inreais.  However, solely for the convenience of the reader, we have translated certain amounts included in this annual report fromreaisinto U.S. dollars using the selling rate as reported by the Central Bank of Brazil (Banco Central do Brasil), or the Central Bank, as of December 31, 2016 of R$3.259 to US$1.00 or, where expressly indicated, at an average exchange rate prevailing during a certain period.  We have also translated some amounts from U.S. dollars and Canadian dollars intoreais.  All such currency translations should not be considered representations that any such amounts represent, or could have been, or could be, converted into, U.S. or Canadian dollars orreaisat that or at any other exchange rate.  See “Item 3. Key Information—A. Selected Financial Data—Exchange Rate Information—Exchange Controls” for more detailed information regarding the translation ofreaisinto U.S. dollars. TRADEMARKS This annual report includes the names of our products which constitute trademarks or trade names which we own or which are owned by others and are licensed to us for our use.This annual report also contains other brand names, trade names, trademarks or service marks of other companies, and these brand names, trade names, trademarks or service marks are the property of those other companies.


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION Some of the information contained in this annual report may constitute forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act.  We have based these forward-looking statements largely on our current expectations and projections about future events, industry and financial trends affecting our business. Many of these forward-looking statements can be identified by the use of forward-looking words such as “anticipate,” “project,” “may,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate,” “potential,” among others.  These statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief or current expectations.  Forward-looking statements are subject to certain risks and uncertainties that are outside our control and are difficult to predict.  These risks and uncertainties could cause actual results to differ materially from those suggested by forward-looking statements.  Factors that could cause actual results to differ materially from those contemplated by forward‐looking statements include, among others: greater than expected costs (including taxes) and expenses;the risk of unexpected consequences resulting from acquisitions, joint ventures, strategic alliances, corporate reorganizations or divestiture plans, and our ability to successfully and cost-effectively implement these transactions and integrate the operations of businesses or other assets that we acquire;our expectations with respect to expansion plans, projected asset divestitures, premium growth, accretion to reported earnings, working capital improvements and investment income or cash flow projections;lower than expected revenue;greater than expected customer losses and business disruptions;limitations on our ability to contain costs and expenses;local, regional, national and international economic conditions, including the risks of a global recession or a recession in one or more of our key markets, and the impact they may have on us and our customers and our assessment of that impact;the monetary and interest rate policies of central banks;continued availability of financing;market and financial risks, such as interest rate risk, foreign exchange rate risk, commodity risk, asset price risk, equity market risk, inflation or deflation;our ability to continue to introduce competitive new products and services on a timely, cost-effective basis;the effects of competition and consolidation in the markets in which we operate, which may be influenced by regulation, deregulation or enforcement policies;changes in pricing environments and volatility in commodity prices;


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regional or general changes in asset valuations;changes in consumer spending;the outcome of pending and future litigation and governmental proceedings and investigations;global political and economic developments;changes in government policies, international trade policies, applicable laws, regulations and taxes in jurisdictions in which we operate including the laws and regulations governing our operations, as well as actions or decisions of courts and regulators;natural and other disasters;any inability to economically hedge certain risks;inadequate impairment provisions and loss reserves;technological changes;our success in managing the risks involved in the foregoing;governmental intervention, resulting in changes to the economic, tax or regulatory environment in Brazil or other countries in which we operate;inflation, appreciation, depreciation and devaluation of thereal;the declaration or payment of dividends;the utilization of Ambev’s subsidiaries’ income tax loss carry forwards; andother factors or trends affecting our financial condition or results of operations, including those factors identified or discussed under “Item 3. Key Information—D. Risk Factors.” We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties.  Forward-looking statements reflect only our current expectations and are based on our management’s beliefs and assumptions and on information currently available to our management.  Actual results may differ materially from those in forward-looking statements as a result of various factors, including, without limitation, those identified under “Item 3. Key Information—D. Risk Factors” in this annual report.  As a result, investors are cautioned not to place undue reliance on forward-looking statements contained in this annual report when making an investment decision. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events. Investors should consider these cautionary statements together with any written or oral forward-looking statements that we may issue in the future.


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PART I ITEM 1.                IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not Applicable.


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 ITEM 2.                OFFER STATISTICS AND EXPECTED TIMETABLE Not Applicable.


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ITEM 3.                KEY INFORMATION
 A.            Selected Financial Data The following financial information of Ambev is only a summary and should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and related notes which are included elsewhere in this annual report on Form 20-F. The tables below represent the selected consolidated income statement and balance sheet data as at and for the years ended December 31, 2016, 2015, 2014, 2013 and 2012 that has been derived from our audited consolidated financial statements, which were prepared in accordance with IFRS as issued by the IASB. Selected Consolidated Income Statement Data Year Ended December 31,2016

   2015

   2014

   2013(1)

   2012(1)(restated)

   (restated)(in R$ million)Net sales

   45,602.6

   46,720.2

   38,079.8

   35,079.1

   32,478.3Cost of sales

   (16,678.0)

   (16,061.4)

   (12,814.6)

   (11,572.5)

   (10,607.8)Gross profit

   28,924.6

   30,658.8

   25,265.2

   23,506.6

   21,870.5Sales, marketing and distribution expenses

   (12,010.5)

   (11,177.9)

   (9,158.8)

   (8,059.9)

   (7,378.9)Administrative expenses

   (2,166.1)

   (2,281.3)

   (1,820.0)

   (1,748.3)

   (1,613.2)Other operating income/(expense)

   1,223.1

   1,936.1

   1,629.2

   1,761.6

   863.6Exceptional items

   1,134.3

   (357.2)

   (89.0)

   (29.2)

   (50.4)Income from operations

   17,105.4

   18,778.5

   15,826.6

   15,430.8

   13,691.6Net finance cost

   (3,702.0)

   (2,268.2)

   (1,475.4)

   (1,561.4)

   (893.3)Share of results of associates

   (5.0)

   3.1

   17.4

   11.4

   0.5Income tax expense

   (315.0)

   (3,634.2)

   (2,006.6)

   (2,481.4)

   (2,339.7)Net Income

   13,083.4

   12,879.2

   12,362.0

   11,399.4

   10,459.1Attributable to:Equity holders of Ambev

   12,546.6

   12,423.8

   12,065.5

   9,557.3

   6,345.7Non-controlling interests

   536.8

   455.4

   296.5

   1,842.1

   4,113.4
  (1)   We have applied retrospectively the predecessor basis of accounting to the January 2014 acquisition of control of Cerbuco Brewing Inc., or Cerbuco, the holding company that owns a controlling interest in Bucanero S.A., or Bucanero, consistent with the accounting policy for business combinations between entities under common control. Earnings per Share and Dividend per Share Year Ended December 31,2016

   2015

   2014

   2013

   2012(restated)

   (restated)(in R$, unless otherwise indicated)Earnings per common share and per ADS(1):- Basic

   0.80

   0.79

   0.77

   0.75

   0.65- Diluted

   0.79

   0.79

   0.76

   0.75

   0.64Dividends and interest on shareholders’ equity per share and per ADS (weighted average)(2):- Basic (R$)

   0.66

   0.73

   0.77

   0.58

   0.58- Basic (US$)

   0.20

   0.19

   0.29

   0.25

   0.28Weighted average number of shares (million shares)(3):- Basic

   15,697

   15,696

   15,683

   12,678

   9,694- Diluted

   15,823

   15,820

   15,820

   12,824

   9,840
  (1)   The calculation of basic earnings per share is based on the net income attributable to equity holders of Ambev and the proportional weighted average number of shares outstanding during the year. Diluted earnings per share is based on the net income attributable to equity holders of Ambev and by adjusting the weighted average number of shares outstanding  during the year to assume conversion of all potentially dilutive shares. (2)   Dividend and interest on shareholders’ equity per share information was calculated based on the amount paid during the year net of withholding tax. (3)   Ambev S.A. had 9,694 million common shares outstanding immediately after Anheuser-Busch InBev N.V./S.A.’s, or ABI’s,  contribution of its Old Ambev common and preferred shares to Ambev S.A. in June 2013.  These 9,694 million Ambev S.A. common shares were reflected retrospectively in 2012 as being outstanding both for purposes of the basic and diluted earnings per share figures shown in this table.  Later in 2013, Ambev S.A. issued another 5,969 million common shares in connection with the consummation of Old Ambev’s stock swap merger with Ambev S.A.  The Ambev S.A. common shares issued in connection with the aforementioned stock swap merger were considered from their issuance date and, therefore, represented only an additional 2,984 million common shares for purposes of calculating the weighted average number of Ambev S.A. common shares for 2013.


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Selected Consolidated Balance Sheet Data
 As at December 31,2016

   2015

   2014

   2013

   2012(restated)(1)

   (restated)(1)(in R$ million)Non-current assets

   59,954.6

   61,861.8

   51,414.8

   48,276.2

   45,592.5Property, plant and equipment

   19,153.8

   19,140.1

   15,740.1

   14,005.6

   12,413.7Goodwill

   30,511.2

   30,953.1

   27,502.9

   27,023.7

   26,647.5Intangible assets

   5,245.9

   5,092.2

   3,754.9

   3,214.0

   2,936.4Deferred tax assets

   2,268.2

   2,749.9

   1,392.5

   1,647.8

   1,428.7Taxes and contributions receivable

   347.7

   892.8

   1,161.2

   474.1

   375.0Trade and other receivables

   1,989.9

   2,191.6

   1,742.0

   1,797.2

   1,492.3Other

   437.9

   842.1

   121.2

   113.8

   298.9Current assets

   23.886,8

   28,314.5

   20,728.5

   20,809.0

   16,626.2Inventories

   4,347.1

   4,338.2

   3,411.3

   2,835.6

   2,505.5Trade and other receivables

   5,956.8

   6,946.1

   5,300.2

   4,749.6

   3,799.6Taxes and contributions receivable

   5,423.3

   3,194.9

   1,581.9

   1,397.0

   585.2Cash and cash equivalents

   7,876.8

   13,620.2

   9,722.1

   11,538.2

   9,259.3Investment securities

   282.8

   215.1

   713.0

   288.6

   476.6Total assets

   83,841.4

   90,176.3

   72,143.3

   69,085.2

   62,218.7Shareholders’ equity

   46,651.3

   50,333.7

   43,644.7

   44,224.7

   37,522.9Equity attributable to equity holders of Ambev

   44,825.0

   48,331.9

   42,221.6

   42,992.5

   25,397.9Non-controlling interests

   1,826.3

   2,001.8

   1,423.1

   1,232.2

   12,125.0Non-current liabilities

   8,416.5

   9,700.7

   6,673.8

   7,507.8

   9,046.8Interest-bearing loans and borrowings

   1,765.7

   2,316.9

   1,634.6

   1,865.2

   2,316.2Employee benefits

   2,137.7

   2,221.9

   1,757.0

   1,558.3

   1,780.9Deferred tax liabilities

   2,329.7

   2,473.6

   1,737.6

   2,095.7

   1,367.6Taxes and contributions payable

   681.4

   910.0

   610.9

   883.0

   779.3Trade and other payables

   736.6

   1,278.8

   390.5

   673.9

   2,284.7Provisions

   765.4

   499.5

   543.2

   431.7

   518.1Current liabilities (2)

   28,773.6

   30,141.9

   21,824.8

   17,352.7

   15,649.0Interest-bearing loans and borrowings

   3,630.6

   1,282.6

   988.1

   1,040.6

   837.8Trade and other payables

   20,692.0

   24,391.6

   17,054.7

   13,034.8

   11,591.7Taxes and contributions payable

   4,282.4

   4,342.1

   3,543.7

   3,132.3

   3,081.9Provisions

   168.6

   123.1

   139.2

   145.0

   137.5Bank overdraft

   0.0

   2.5

   99.1

   0.0

   0.1Total shareholders’ equity and liabilities

   83,841.4

   90,176.3

   72,143.3

   69,085.2

   62,218.7
  (1)We have applied retrospectively the predecessor basis of accounting to the January 2014 acquisition of control of Cerbuco, the holding company that owns a controlling interest in Bucanero, consistent with the accounting policy for business combinations between entities under common control. (2)The put option granted in the acquisition of a subsidiary is recorded under current liabilities, which impacted directly the working capital calculation.


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Other Data
 As at and for the Year Ended December 31,2016

   2015

   2014

   2013(1)

   2012(1)(restated)

   (restated)(in R$ million, except for operating data)Other Financial Data:Net working capital(2)

   (4,886.8)

   (1,827.4)

   (1,096.3)

   3,456.3

   977.2Cash dividends and interest on shareholders’ equity paid

   10,330.6

   11,490.2

   12,059.6

   7,333.7

   5,619.3Depreciation and amortization(3)

   3,512.0

   3,074.6

   2,392.5

   2,105.1

   1,953.1Capital expenditures(4)

   4,132.7

   5,261.2

   4,493.1

   3,810.3

   3,017.9Operating cash flows - generated(5)

   12,344.4

   23,580.8

   15,895.7

   15,314.8

   14,316.4Investing cash flows - used(5)

   (5,898.0)

   (5,997.0)

   (4,768.0)

   (3,811.3)

   (5,721.0)Financing cash flows - used(5)

   (11,645.1)

   (15,327.9)

   (13,143.8)

   (9,506.7)

   (7,825.3)Other Operating Data:Total production capacity -  million hl(6)

   280.4

   269.9

   292.3

   280.4

   279.6Total  volume sold - million hl(7)

   159.8

   169.1

   171.7

   166.5

   171.1Number of employees(8)

   53,250

   52,738

   51,871

   53,581

   51,888
  (1)   We have applied retrospectively the predecessor basis of accounting to the January 2014 acquisition of control of Cerbuco the holding company that owns a controlling interest in Bucanero consistent with the accounting policy for business combinations between entities under common control. (2)   Represents total current assets less total current liabilities. (3)   Includes depreciation of property, plant and equipment, amortization of intangible assets and impairment losses related to these assets. (4)   Represents cash expenditures for property, plant, equipment and intangible assets. (5)   Operating, investing and financing cash flow data is derived from our consolidated cash flow statements contained in our audited consolidated financial statements. (6)   Represents our available production capacity at year-end; capacity can vary from year to year depending on mix; “hl” is the abbreviation for hectoliters. (7)   Represents our full-year volumes. (8)   Includes all our production- and non-production-related employees. Exchange Rate Information Since 1999, the Central Bank has allowed thereal/U.S. dollar exchange rate to float freely, and during that period, thereal/U.S. dollar exchange rate has fluctuated considerably.  In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates.  We cannot predict whether the Central Bank or the Brazilian federal government will continue to let therealfloat freely or will intervene in the exchange rate market through a currency band system or otherwise.  Therealmay depreciate or appreciate against the U.S. dollar substantially in the future.  See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate.” Since March 2005, all foreign exchange transactions in Brazil started to be carried out through institutions authorized to operate in the consolidated market and are subject to registration with the electronic registration system of the Central Bank.  Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention. Therealmay depreciate or appreciate against the U.S. dollar substantially. See “—D. RiskFactors—Risks Relating to Brazil and Other Countries in Which We Operate— Our results of operations are affected by fluctuations in exchange rates, and devaluation of therealrelative to other currencies, including the U.S. dollar, may adversely affect our financial performance.”


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The following table sets forth the selling exchange rate, expressed inreaisper U.S. dollar, for the periods indicated.  The information in the “Average” column represents the average of the exchange rates on the last day of each month during the periods presented below.  Reaisper U.S. DollarYear

   High

   Low

   Average

   Period End2012

   2.112

   1.702

   1.955

   2.0442013

   2.446

   1.953

   2.174

   2.3432014

   2.740

   2.197

   2.360

   2.6562015

   4.195

   2.575

   3.388

   3.9052016

   4.156

   3.119

   3.483

   3.259
  Source:  Central Bank.  Reaisper U.S. DollarMonth

   High

   Low

   Average

   Period EndSeptember 2016

   3.333

   3.193

   3.256

   3.246October 2016

   3.236

   3.119

   3.186

   3.181November 2016

   3.445

   3.202

   3.342

   3.397December 2016

   3.465

   3.259

   3.352

   3.259January 2017

   3.273

   3.127

   3.197

   3.127February 2017

   3.148

   3.051

   3.104

   3.099March 2017 (through March 3, 2017)

   3.136

   3.098

   3.116

   3.136
  Source:  Central Bank. We pay cash dividends and make other cash distributions inreais.  Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by the holders of ADSs on conversion by the depositary of such distributions into U.S. dollars for payment to holders of ADSs.  Fluctuations in the exchange rate between therealand the U.S. dollar may also affect the U.S. dollar equivalent ofrealprice of our shares on the BM&FBOVESPA.  For further information on this matter see “—D. Risk Factors—Risks Relating to Our Common Shares and ADSs.” Exchange Controls There are no restrictions on ownership of the ADSs or the preferred shares or common shares by individuals or legal entities domiciled outside Brazil.  However, the right to convert dividend payments, interest on shareholders’ equity payments and proceeds from the sale of preferred shares or common shares into foreign currency and to remit such amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally requires, among other things, that relevant investments be registered with the Central Bank and theComissão de Valores Mobiliários(the Brazilian Securities Commission), or the CVM. Restrictions on the remittance of foreign capital abroad could hinder or prevent Banco Bradesco S.A., the custodian of Ambev’s ADS program, or the custodian, or holders who have exchanged Ambev’s ADSs for shares of Ambev, from converting dividend distributions, interest on shareholders’ equity or the proceeds from any sale of shares of Ambev into U.S. dollars and remitting such U.S. dollars abroad.  Holders of Ambev ADSs could be adversely affected by delays in or refusal to grant any required governmental approval for conversions ofrealpayments and remittances abroad. Under Brazilian law relating to foreign investment in the Brazilian capital markets, or the Foreign Investment Regulations, foreign investors registered with CVM, and acting through authorized custodial accounts managed by local agents may buy and sell shares on Brazilian stock exchanges without obtaining separate certificates of registration for each transaction.  Foreign investors may register their investment under Law No. 4,131/62, as amended, or Law No. 4,131, or Resolution No. 4,373, dated September 29, 2014, or Resolution No. 4,373, of theConselho Monetário Nacional(National Monetary Council), or the CMN.


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Law No. 4,131 is the main legislation concerning foreign capital and direct equity investments in Brazilian companies and it is applicable to any amount that enters the country in the form of foreign currency, goods and services.  Except for registration of the capital inflow/outflow with the Central Bank, non-resident investors directly investing in equity of Brazilian companies do not need any specific authorization to make such investments. Portfolio foreign investments are regulated by Resolution No. 4,373 and CVM Rule No. 560, as amended. Under Resolution No. 4,373, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled.  In accordance with Resolution No. 4,373, the definition of a foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad. In order to become a Resolution No. 4,373 investor, a foreign investor must: appoint at least one representative in Brazil, with powers to perform actions relating to its investment;

appoint an authorized custodian in Brazil for its investments, which must be a financial institution or entity duly authorized by the Central Bank or CVM;

appoint a tax representative in Brazil;

through its representative in Brazil, register itself as a foreign investor with the CVM; and

through its representative in Brazil, register its foreign investment with the Central Bank. In addition, an investor operating under the provisions of Resolution No. 4,373 must be registered with theReceita Federal do Brasil(the Brazilian Internal Revenue Service), or the RFB, pursuant to RFB Normative Instruction No. 1,548 of February 13, 2015, and RFB Normative Instruction No. 1,634 of May 6, 2016. Pursuant to the registration obtained by Ambev with the Central Bank in the name of The Bank of New York, as depositary for the ADS programs of Ambev, or the Depositary, with respect to the ADSs to be maintained by the custodian on behalf of the Depositary, the custodian and the Depositary will be able to convert dividends and other distributions with respect to the Ambev shares represented by ADSs into foreign currency and remit the proceeds outside Brazil.  In the event that a holder of ADSs exchanges such ADSs for Ambev shares, such holder will be entitled to continue to rely on the Depositary’s registration for only five business days after such exchange.  After that, such holder must seek to obtain its own registration pursuant to Law No. 4,131 or Resolution No. 4,373.  Thereafter, unless any such holder has registered its investment with the Central Bank, such holder may not convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, such Ambev shares. Under current legislation, the Brazilian government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments.  For approximately six months in 1989 and early 1990, the Brazilian government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors in order to conserve Brazil’s foreign currency reserves.  These amounts were subsequently released in accordance with Brazilian government directives.  We cannot assure you that the Brazilian government will not impose similar restrictions on foreign repatriations in the future.  See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate” and “—D. Risk Factors—Risks Relating to Our Common Shares and ADSs.” B.            Capitalization and Indebtedness Not applicable.


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C.            Reasons for the Offer and Use of Proceeds Not applicable. D.            Risk Factors Before making an investment decision, you should consider all of the information set forth in this annual report.  In particular, you should consider the special features applicable to an investment in Brazil and applicable to an investment in Ambev, including those set forth below.  In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of issuers in the United States. Risks Relating to Brazil and Other Countries in Which We Operate Economic and political uncertainty and volatility in Brazil, and the perception of these conditions in the international financial markets, may adversely affect our business. Our most significant market is Brazil, which has periodically experienced extremely high rates of inflation. Inflation, along with governmental measures to fight inflation and public speculation about possible future measures, has had significant negative effects on the Brazilian economy. The annual rates of inflation, as measured by theÍndice Nacional de Preços ao Consumidor(National Consumer Price Index), reached a hyper-inflationary peak of 2,489.1% in 1993. Brazilian inflation, as measured by the same index, was 6.2% in 2012, 5.6% in 2013, 6.2% in 2014, 11.3% in 2015 and 6.6% in 2016. Brazil may experience high levels of inflation in the future. While current levels of inflation are below those experienced in 2015, there can nevertheless be no assurance that levels of inflation in the future will continue the downward trend seen in 2016. Future governmental actions, including actions to adjust the value of thereal, may trigger increases in inflation.  We cannot assure you that inflation will not affect our business in the future.  In addition, any effort on the part of the Brazilian government to preserve economic stability, as well as any public speculation about possible future initiatives, may contribute significantly to economic uncertainty in Brazil and may heighten volatility in the Brazilian securities markets and securities issued abroad by Brazilian issuers.  It is also difficult to assess the impact that turmoil in the credit markets will have in the Brazilian economy, and as a result on our operations and financial results in the future. In addition, Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies. The recent economic and political instability in Brazil has contributed to a decline in market confidence in the Brazilian economy. Weak macroeconomic conditions in Brazil are expected to continue into 2017. In addition, in the context of the various ongoing investigations into allegations of money laundering and corruption being currently conducted by Brazilian Federal and State authorities the Brazilian economy and political environment have been negatively impacted. The potential outcome ofsuch corruption-related investigations is uncertain, but they have already impacted the general market perception of the Brazilian economy, political environment and the Brazilian capital market. We have no control over, and cannot predict, whether such investigations or allegations will lead to further political and economic instability. On August 31, 2016, following months of speculation and citizen protests throughout Brazil, the Senate approved the impeachment of president Dilma Rousseff, and she was replaced by Vice-President Michel Temer as Brazil’s new president.  Mr. Temer, has presented a reform agenda designed to achieve higher rates of economic growth and employment. We cannot predict which reforms, if any, will be adopted by the new Brazilian government and how these reforms will affect the economy or us. In addition, we cannot predict whether president Temer or any government official may be implicated in the ongoing corruption investigations and, if so, how any potential allegations would affect the popular support of the government, its reform agenda, Brazil’s economy and its political and social stability.


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Driven by the recent economic and political instability in Brazil, among other factors, Brazil has faced a series of economic and political difficulties throughout 2015 and 2016, including increasing unemployment rates, decreasing consumer and business confidence, falling industrial output, a deficit in Brazil’s primary accounts, shrinking gross domestic product, rising inflation, increasing uncertainties with regards to Congressional decisions and the significant devaluation and volatility of thereal.  Moreover, the political crisis in recent months could worsen economic conditions in Brazil, which may adversely affect our results of operations and financial condition.  All these factors contributed to Brazil’s loss of its investment grade rating and an ongoing economic recession.  It is also difficult to assess the impact that the Brazilian political scenario will have in the Brazilian economy, and as a result on our future operations and financial results. Consumption of beer, other alcoholic beverages and soft drinks in many of the jurisdictions in which we operate, including Brazil, is closely linked to general economic conditions, such that levels of consumption tend to rise during periods of rising per capita income and to fall during periods of declining per capita income. Additionally, per capita consumption is inversely related to the sale price of our products.  Besides moving in concert with changes in per capita income, consumption of beer and other alcoholic beverages also varies in accordance with changes in disposable income.  Any decrease in disposable income resulting from an increase in inflation, income taxes, cost of living, unemployment levels, political or economic instability or other factors would likely adversely affect the demand for beer, other alcoholic beverages and soft drinks, as well as our results of operations.  Moreover, the recent instability and uncertainty in the Brazilian economic and political scenario may adversely affect the demand for our products, which in turn may negatively impact our operations and financial results.  Our results of operations are affected by fluctuations in exchange rates, and devaluation of therealrelative to other currencies, including the U.S. dollar, which may adversely affect our financial performance. Most of our sales are inreais; however, a relevant portion of our debt is denominated in foreign currencies, including U.S. dollars.  In addition,a significant portion of our cost of sales in 2016, in particular those related to packaging such as cans and bottles made of polyethylene terephthalate, or PET, as well as sugar, hops and malt are also denominated in or linked to the U.S. dollar, which appreciated significantly against therealin recent years.  Therefore, any devaluation of therealwhen compared to those foreign currencies may increase our financial expenses and operating costs and could affect our ability to meet our foreign currency obligations.  Although our current policy is to hedge substantially all of our U.S. dollar-denominated debt and cost of sales against changes in foreign exchange rates, we cannot assure you that such hedging will be possible or available at reasonable costs at all times in the future. In addition, we have historically reported our consolidated results inreais. In 2016, we derived 45.3% of our net revenues from operating companies that have functional currencies that are not reais (that is, in most cases, the local currency of the respective operating company). Consequently, any change in exchange rates between our operating companies’ functional currencies andreaiswill affect our consolidated income statement and balance sheet. Decreases in the value of our operating companies’ functional currencies againstreaiswill tend to reduce those operating companies’ contributions in terms of our financial condition and results of operations. We also incur currency transaction risks whenever one of our operating companies enters into transactions using currencies other than their respective functional currencies, including purchase or sale transactions and the issuance or incurrence of debt. Although we have hedging policies in place to manage commodity price and foreign currency risks to mitigate our exposure to currencies other than our operating companies’ functional currencies, there can be no assurance that such policies will be able to successfully. The Brazilian currency has devalued frequently, including during the last two decades.  Throughout this period, the Brazilian government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations and periodic mini-devaluations, during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets.  There have been significant fluctuations in the exchange rates between Brazilian currency and the U.S. dollar and other currencies. For example, beginning in 2011, the U.S. dollar appreciated 12.5%, 8.9%, 14.6%, 13.4% and 47.0% against therealin 2011, 2012, 2013, 2014 and 2015, respectively, closing at R$3.905 per U.S. $1.00 as of December 31, 2015.  However, the U.S. dollar depreciated 16.5% against therealin 2016, closing at R$3.259 per U.S.$1.00 as of December 31, 2016. As of March 3, 2017, the exchange rate was R$3.136 per US$1.00.


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Devaluation of therealrelative to the U.S. dollar may create additional inflationary pressures in Brazil by generally increasing the price of imported products and requiring recessionary governmental policies to curb aggregate demand.  On the other hand, further appreciation of therealagainst the U.S. dollar may lead to a deterioration of the current account and the balance of payments, as well as dampen export-driven growth.  The potential impact of the floating exchange rate and measures of the Brazilian government aimed at stabilizing therealis uncertain.  In addition, a substantial increase in inflation may weaken investor confidence in Brazil, impacting our ability to finance our operations through the international capital markets. Increases in taxes levied on beverage products in Brazil and unfair competition arising from tax evasion may adversely affect our results and profitability. Increases in Brazil’s already high levels of taxation could adversely affect our profitability.  Increases in taxes on beverage products usually result in higher beverage prices for consumers.  Higher beverage prices generally result in lower levels of consumption and, therefore, lower net sales.  Lower net sales result in lower margins because some of our costs are fixed and thus do not vary significantly based on the level of production.  We cannot assure you that the Brazilian government will not increase current tax levels, at both state and/or federal levels, and that this will not impact our business.  In January 2015 the Brazilian federal government enacted Law No. 13,097, which introduced a new federal taxation model for beer and soft drinks. The law is a result of the combined efforts of the Brazilian federal government and beverage companies with a view to creating a less complex and more predictable tax system for the industry. The new tax model came into force on May 1, 2015. Among other changes, the new set of rules establishes that the Excise Tax (Imposto sobre Produtos Industrializados), or the IPI Excise Tax, the Social Integration Program Contribution (Programa de Integração Social), or the PIS Contribution and the Social Security Funding Contribution (Contribuição para Financiamento da Seguridade Social), or the COFINS, are due by manufacturers and wholesalers and shall be calculated based on the respective sales price (ad valorem). Under the previous legislation, the referred taxes were due exclusively by the manufacturer at fixed amounts per liter of beer or soft drink produced (ad rem). Moreover, in 2015 the States of São Paulo, Rio de Janeiro, Minas Gerais, Distrito Federal, Rio Grande do Sul, Ceará, Amapá, Rondonia, Amazonas, Tocantins, Piauí, Maranhão, Rio Grande do Norte, Bahia, Pernambuco, Paraíba, Alagoas, Sergipe and Mato Grosso do Sulincreased their ICMS Value-Added Tax rate applicable to beer and/or soft drinks.In 2016, the States of Rio de Janeiro and Acre also increased their respective ICMS Value-Added Tax rates, scheduled to take effect in early 2017.No assurance can be given that the Brazilian government, at both state and/or federal levels, will not consider further tax increases on beverages in the future. In addition, the Brazilian beverage industry experiences unfair competition arising from tax evasion, which is primarily due to the high level of taxes on beverage products in Brazil.  An increase in taxes may lead to an increase in tax evasion, which could result in unfair pricing practices in the industry.  In 2008, the federal government issued regulations requiring the mandatory installation of production (volume) control systems, known as “SICOBE,” in all Brazilian beer and carbonated soft drinks, or CSD, factories in order to assist governments to fight tax evasion in the beverage industry.  Though the objective of reducing tax evasion is being achieved for federal taxes, and while state governments have started using data from the SICOBE in order to identify potential state tax evasion, there can be no assurance that unfair competition arising from tax evasion will be eliminated from the Brazilian beverage industry.  The mandatory implementation of SICOBE was suspended in December 2016 and the Brazilian federal government and regulators are developing a new system with state-of-the-art technology, aimed to reduce costs. The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy; Brazilian economic and political conditions have a direct impact on our business. The Brazilian economy has been characterized by significant involvement on the part of the Brazilian government, which often changes monetary, credit and other policies to influence Brazil’s economy.  The Brazilian government’s actions to control inflation and affect other policies have often involved wage and price controls, the Central Bank’s base interest rates, as well as other measures, such as the freezing of bank accounts, which occurred in 1990.


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Actions taken by the Brazilian government concerning the economy may have important effects on Brazilian corporations and other entities, including Ambev, and on market conditions and prices of Brazilian securities.  Our financial condition and results of operations may be adversely affected by the following factors and the Brazilian government’s response to the following factors: devaluations and other exchange rate movements;inflation;investments;exchange control policies;employment levels and labor regulation;social instability;price instability;energy shortages;water rationing;interest rates and monetary policy;liquidity of domestic capital and lending markets;growth or downturn of the Brazilian economy;import and export controls;exchange controls and restrictions on remittances abroad;fiscal policy and changes in tax laws; andother political, diplomatic, social and economic developments in or affecting Brazil. Our Latin America South operations are subject to substantial risks relating to the businesses and operations conducted in Argentina and other South American countries. We own 100% of the total share capital of Latin America South Investment, S.L., or LASI, the net revenues from which in 2016 corresponded to 22.4% of our consolidated results of operations.  LASI is a holding company with operating subsidiaries in Argentina and other South American countries.  As a result, LASI’s financial condition and results of operations may be adversely affected by the political instability, fluctuations in the economy and governmental actions concerning the economy of Argentina and the other countries in which its subsidiaries operate and, consequently, affect our consolidated results. For example, in the early 2000s, Argentina experienced political and economic instability.  A widespread recession occurred in 2002, including a 10.9% decrease in real GDP, high unemployment and high inflation.  In the past, the Argentine economic and social situation has rapidly deteriorated, and may quickly deteriorate in the future; we cannot assure you that the Argentine economy will not rapidly deteriorate as in the past.  Additionally, in 2016 the Argentineanpesounderwent a significant devaluation, losing 46.7% of its value relative to thereal, impacting the net assets, results and cash flows of our Argentinean operations. The 2016 devaluation of the peso relative to thereal, and further devaluations of thepesoin the future, if any, may decrease our net assets in Argentina, with a balancing entry in our equity.  See “—Risks Relating to Our Operations—Our results of operations are affected by fluctuations in exchange ratesand devaluation of the real relative to other currencies, including the U.S. dollar, which may adversely affect our financial performance.”


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In addition, on July 30, 2014 Argentina entered into a selective default of its restructured debt and, in early 2016, U.S. courts ruled that Argentina must make full payments to the remaining holdout bondholders. The full consequences of the default on Argentina’s political and economic landscape, and on our operations there, are still unclear.  The devaluation of the Argentine peso, along with inflation and deteriorating macroeconomic conditions in Argentina, could have, and may continue to have, a material adverse effect on our Latin America South operations and their results, as well as in our ability to transfer funds from and within Argentina.  Despite the election of a new presidential government that seems more committed to fiscal responsibility, our liquidity and operations and our ability to access funds from Argentina could be adversely affected to the extent the economic or political situation in Argentina deteriorates, or if additional foreign exchange restrictions are implemented in Argentina. Risks Relating to Our Operations We are subject to Brazilian and other antitrust regulations. We have a substantial share of the beer market in Brazil and thus we are subject to constant monitoring by Brazilian antitrust authorities.  In addition, in connection with the 1999 business combination of Companhia Cervejaria Brahma, or Brahma, and Companhia Antarctica Paulista Indústria Brasileira de Bebidas e Conexos, or Antarctica, that shaped most of the Brazilian operations as currently conducted by us, we entered into a performance agreement with the Brazilian antitrust authorities, which required us to comply with a number of restrictions, including the divestment of certain assets.  Since July 28, 2008, we have been deemed to have complied with all those restrictions, according to Brazil’s highest antitrust authority, theConselho Administrativo de Defesa Econômica(Administrative Council for Economic Defense), or the CADE.  Nevertheless, we cannot assure you that Brazilian antitrust regulation will not affect our business in the future. Our participation in the Argentine beer market increased substantially following the acquisition of our interest in Quilmes Industrial Société Anonyme, or Quinsa.  Our operation in Argentina is subject to constant monitoring by Argentinean antitrust authorities.  We cannot assure you that Argentinean antitrust regulation will not affect our business in Argentina in the future, and therefore, impact the benefits that Ambev anticipates will be generated from this investment. We are subject to regulation on alcoholic and CSD beverages in the countries in which we operate. Our business is regulated by federal, state, provincial and local laws and regulations regarding such matters as licensing requirements, marketing practices and related matters.  We may be subject to claims that we have not complied with existing laws and regulations, which could result in fines and penalties.  Recently, the federal government as well as certain Brazilian states and municipalities in which we operate have enacted legislation restricting the hours of operations of certain points of sale, prohibiting the sale of alcoholic beverages at certain points of sale (e.g., highways and sales near schools), prohibiting the sale of CSDs in schools and imposing restrictions on advertisement of alcoholic beverages.  The Brazilian Congress is also evaluating proposed regulation imposing hygienic seals on beverage cans, as well as regulation on the consumption, sales and marketing of alcoholic beverages, including beer which, if enacted, may impose restrictions on the advertisement of alcoholic beverage products on television during specified times of the day and the hours of operation of certain points of sale, among other things.  In addition, there are legal proceedings pending before Brazilian courts that may lead to restrictions on advertisement of alcoholic beverages.  These rules and restrictions may adversely impact our results of operations.  For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation.” In addition, there is a global trend of increasing regulatory restrictions with respect to the sale of alcoholic and CSD beverages.  Compliance with such regulatory restrictions can be costly and may affect earnings in the countries in which we operate.


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If we do not successfully comply with applicable anti-corruption laws and regulations designed to combat governmental corruption in countries in which we sell our products, we could become subject to fines, penalties or other regulatory sanctions, as well as to adverse press coverage, which could cause our reputation and sales to suffer. Although we are committed to conducting business in a legal and ethical manner in compliance with local and international statutory requirements and standards applicable to our business, there is a risk that our management, employees or representatives may take actions that violate applicable laws and regulations prohibiting the making of improper payments to foreign government officials for the purpose of obtaining or keeping business, including laws relating to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions such as the U.S. Foreign Corrupt Practices Act, or the FCPA. In addition, on January 29, 2014, the Brazilian government enacted Law No. 12,846/13 imposing strict liability on companies for acts of corruption perpetrated by their employees, or the Brazilian Antibribery Act. According to the Brazilian Antibribery Act, companies found guilty of bribery could face fines of up to 20% of their gross annual income for the previous year or, if gross income cannot be estimated, such fines could range from R$6 thousand to R$60 million. Among other penalties, the Brazilian Antibribery Act also provides for the disgorgement of illegally obtained benefits, the suspension of corporate operations, asset confiscation and corporate dissolution. The adoption of an effective compliance program may be taken into consideration by Brazilian authorities when applying a penalty under the Brazilian Antibribery Act. Despite the new Brazilian Antibribery Act, Brazil still has a perceived elevated risk of public corruption, which may, to a certain degree, leave us exposed to potential violations of the FCPA or other anti-bribery laws.  For example, a number of high profile corporate corruption allegations have surfaced, principally since the beginning of 2014. See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate—Economic and political uncertainty and volatility in Brazil, and the perception of these conditions in the international financial markets, may adversely affect our business.” In that respect, Brazilian authorities currently investigating alleged corruption cases have in the past released a list of companies that had contracted consulting services from a firm part-owned by a former elected government official who has been convicted of corruption and racketeering by Brazil’s highest court.  Years ago, we retained the services of this consulting firm in connection with a specific matter and, thus, have been cited among these consultant’s clients.  We have reviewed our internal control and compliance procedures in relation to these services and have not identified any evidence of misconduct. Although we have implemented what we understand to be a very robust compliance and anti-corruption program to detect and prevent violations of applicable anti-corruption laws, which includes a strict requirement prohibiting our employees and agents from violating these laws, there remains some degree of risk that improper conduct could occur, thereby exposing us to potential liability and the costs associated with investigating potential misconduct.  Our existing internal controls and compliance procedures may not be sufficient to prevent or detect all inappropriate conduct, fraud or violations of applicable law by our employees, agents, and the companies to which we outsource certain of our business operations.  If we are not in compliance with anti-corruption laws, anti-money laundering laws and other laws governing the conduct of business with government entities, including under the FCPA and Brazilian Antibribery Act, we may be subject to criminal and civil penalties and other remedial measures, which could harm our brand and reputation and have a material adverse impact on our business, financial condition, results of operations and prospects. Another potential fallout from having our name or brands associated with any misconduct is adverse press coverage, which, even if unwarranted or baseless, could damage our reputation, brands and sales.  Therefore, if we become involved in any investigations, subpoenas or other proceedings under the FCPA, the Brazilian Antibribery Act or other applicable anti-corruption statutes, our business could be adversely affected. Volatility in commodities prices may adversely affect our financial performance. A significant portion of our cost of sales is comprised of commodities such as aluminum, sugar, corn, wheat and PET bottles, the prices of which fluctuated significantly in 2016.  An increase in commodities prices directly affects our consolidated operating costs.  Although our current policy is to mitigate our exposure risks to commodity prices whenever financial instruments are available, we cannot assure that such hedging will be possible or available at reasonable costs at all times in the future.


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Set forth below is a table showing the volatility in 2016 prices of the principal commodities we purchase: Commodity

   High Price

   Low Price

   Average in 2016

   FluctuationAluminum (US$/ton)

   1,778.00

   1,450.00

   1,610.69

   22.6%Sugar (US$ cents/pounds)

   23.81

   12.52

   18.20

   90.2%Corn (US$ cents/bushel)

   437.75

   301.50

   358.32

   45.2%Wheat (US$ cents/bushel)

   519.50

   361.00

   435.95

   43.9%PET (US$/ton)

   929.00

   778.75

   851.44

   19.3%
 Sources: Aluminum LME, Sugar ICE, Corn CBOT, Wheat CBOT and PET CMAI Contractual and legal restrictions to which Ambev and its subsidiaries are potentially or allegedly subject may be triggered upon the consummation of certain transactions involving our indirect controlling shareholder, Anheuser-Busch InBev N.V./S.A., or ABI, resulting in adverse limitations to our operations. Ambev and its subsidiaries are a party to certain joint venture, distribution and other agreements, guarantees and instruments that may contain restrictive provisions that our contractual counterparties may try to interpret as being triggered upon the consummation of certain unrelated transactions of ABI.  Some of those contracts may be material and, to the extent they may contain any such restrictive provisions, our counterparties may seek to enforce certain contractual remedies that may curtail material contractual rights and benefits that we have thereunder under the argument that ABI’s consummation of certain transactions has triggered the referred provisions.  Similarly, unrelated transactions consummated by ABI may subject us to further antitrust restrictions in the countries in which we already operate.  Any such restrictions may limit the amount and quality of business we conduct in each of those countries. Competition could lead to a reduction of our margins, increase costs and adversely affect our profitability. Globally, brewers compete mainly on the basis of brand image, price, quality, distribution networks and customer service. Consolidation has significantly increased the capital base and geographic reach of our competitors in some of the markets in which we operate, and competition is expected to increase further as the trend towards consolidation among companies in the beer industry continues. Competition may divert consumers and customers from our products.  Competition in our various markets could cause us to reduce pricing, increase capital investment, increase marketing and other expenditures, prevent us from increasing prices to recover higher costs, and thereby cause us to reduce margins or lose market share.  Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.  Innovation faces inherent risks, and the new products we introduce may not be successful, while competitors may be able to respond more quickly than we can to emerging trends. Additionally, the unfair pricing practices in some markets and the lack of transparency, or even certain illicit practices, such as tax evasion and corruption, may skew the competitive environment, with material adverse effects on our profitability or ability to operate. The ability of our foreign subsidiaries to distribute cash upstream may be subject to various conditions and limitations. Our foreign subsidiaries’ ability to distribute cash (to be used, among other things, to meet our financial obligations) through dividends, intercompany advances, management fees and other payments is, to a large extent, dependent on the availability of cash flows at the level of such foreign subsidiaries and may be restricted by applicable laws and accounting principles.  In particular, 45.3% (R$20.6 billion) of our total net revenues of R$45.6 billion in 2016 came from our foreign subsidiaries.  In addition, some of our subsidiaries are subject to laws restricting their ability to pay dividends or the amount of dividends they may pay. If we are not able to obtain sufficient cash flows from our foreign subsidiaries, this could negatively impact our business, results of operations and financial condition because the insufficient availability of cash at our company level may constrain us from paying all of our obligations.


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We rely on the reputation of our brands and damages to their reputation may have an adverse effect on our sales. Our success depends on our ability to maintain and enhance the image and reputation of our existing products and to develop a favorable image and reputation for new products.  The image and reputation of our products may be reduced in the future; concerns about product quality, even when unfounded, could tarnish the image and reputation of our products.  An event or series of events that materially damages the reputation of one or more of our brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business.  Restoring the image and reputation of our products may be costly or not possible. Moreover, our marketing efforts are subject to restrictions on the permissible advertising style, media and messages used.  In a number of countries, for example, television is a prohibited channel for advertising beer and other alcoholic products, and in other countries, television advertising, while permitted, is carefully regulated.  Any additional restrictions in such countries, or the introduction of similar restrictions in other countries, may constrain our brand building potential and thus reduce the value of our brands and related revenues. Negative publicity focusing on our products or on the way we conduct our operations may harm our business. Media coverage and publicity generally can exert significant influence on consumer behavior and actions.  If the social acceptability of beer, other alcoholic beverages or soft drinks were to decline significantly, sales of our products could materially decrease.  In recent years, there has been increased public and political attention directed at the alcoholic beverage and soft drink industries.  This attention is a result of public concern over alcohol-related problems, including drunk driving, underage drinking, drinking while pregnant and health consequences resulting from the misuse of beer (for example, alcoholism), as well as soft-drink related problems, including health consequences resulting from the excessive consumption of soft drinks (for example, obesity).  Factors such as negative publicity regarding the consumption of beer, other alcoholic beverages or soft drinks, publication of studies indicating a significant health risk from consumption of those beverages, or changes in consumer perceptions affecting them could adversely affect the sale and consumption of our products and harm our business, results of operations, cash flows or financial condition to the extent consumers and customers change their purchasing patterns. Key brand names are used by us, our subsidiaries, associates and joint ventures, and licensed to third-party brewers.  To the extent that we or one of our subsidiaries, associates, joint ventures or licensees are subject to negative publicity, and the negative publicity causes consumers and customers to change their purchasing patterns, it could have a material adverse effect on our business, results of operations, cash flows or financial condition.  As we continue to expand our operations into emerging and growth markets, there is a greater risk that we may be subject to negative publicity, in particular in relation to labor rights and local work conditions.  Negative publicity that materially damages the reputation of one or more of our brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business, which could adversely impact our business, results of operations, cash flows and financial condition. Demand for our products may be adversely affected by changes in consumer preferences and tastes. We depend on our ability to satisfy consumer preferences and tastes.  Consumer preferences and tastes can change in unpredictable ways due to a variety of factors, such as changes in demographics, consumer health concerns regarding obesity, product attributes and ingredients, changes in travel, vacation or leisure activity patterns, weather, negative publicity resulting from regulatory action or litigation against us or comparable companies or a downturn in economic conditions.  Consumers also may begin to prefer the products of competitors or may generally reduce their demand for products of our business segment.  Failure by us to anticipate or respond adequately to changes in consumer preferences and tastes could adversely impact our business, results of operations and financial condition.


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Seasonal consumption cycles and adverse weather conditions may result in fluctuations in demand for our products. Seasonal consumption cycles and adverse weather conditions in the markets in which we operate may have an impact on our operations.  This is particularly true in the summer months, when unseasonably cool or wet weather can affect sales volumes. If any of our products is defective or found to contain contaminants, we may be subject to product recalls or other liabilities. We take precautions to ensure that our beverage products and our associated packaging materials (such as bottles, crowns, cans and other containers) meet accepted food safety and regulatory standards. Such precautions include quality‐control programs for primary materials, the production process and our final products.  We have established procedures to correct issues or concerns detected. In the event that any failure to comply with accepted food safety and regulatory standards (such as a contamination or a defect) does occur in the future, it may lead to business interruptions, product recalls or liability, each of which could have an adverse effect on our business, reputation, prospects, financial condition and results of operations. Although we maintain insurance policies against certain product liability (but not product recall) risks, we may not be able to enforce our rights in respect of these policies, and, in the event that a defect occurs, any amounts that we recover may not be sufficient to offset any damage we may suffer, which could adversely impact our business, results of operations and financial condition. We may not be able to protect our intellectual property rights. Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights, including trademarks, patents, domain names, trade secrets and know-how.  We have been granted numerous trademark registrations and patents covering our brands and products and have filed, and expect to continue to file, trademark and patent applications seeking to protect newly developed brands and products.  We cannot be sure that trademark and patent registrations will be issued with respect to any of our applications.  There is also a risk that we could, by omission, fail to renew a trademark or patent on a timely basis or that our competitors will challenge, invalidate or circumvent any existing or future trademarks and patents issued to, or licensed by, us. Although we have put in place appropriate actions to protect our portfolio of intellectual property rights (including patent applications, trademark registration and domain names), we cannot be certain that the steps we have taken will be sufficient or that third parties will not infringe upon or misappropriate proprietary rights.  If we are unable to protect our proprietary rights against infringement or misappropriation, it could have a material adverse effect on our business, results of operations, cash flows or financial condition, and in particular, on our ability to develop our business. We rely on key third parties, including key suppliers, and the termination or modification of the arrangements with such third parties could negatively affect our business. We rely on third‐party suppliers for a range of raw materials for our beer and non-beer products, and for packaging material, including aluminum cans, glass, kegs and PET bottles.  We seek to limit our exposure to market fluctuations in the supply of these raw materials by entering into medium‐ and long-term fixed‐price arrangements.  We have a limited number of suppliers of aluminum cans, glass and PET bottles.  Consolidation of the aluminum can industry, glass and PET bottle industry in certain markets in which we operate has reduced local supply alternatives and increased the risk of disruption to aluminum can, glass and PET bottle supplies.  Although we generally have other suppliers of raw materials and packaging materials, the termination of or material change to arrangements with certain key suppliers, disagreements with those suppliers as to payment or other terms, or the failure of a key supplier to meet our contractual obligations or otherwise deliver materials consistent with current usage would or may require us to make purchases from alternative suppliers, in each case at potentially higher prices than those agreed with this supplier. Additionally, we may be subject to potential reputational damage if one of our suppliers violates applicable laws or regulations. These factors could have a material impact on our production, distribution and sale of beer, other alcoholic beverages and soft drinks, and have a material adverse effect on our business, results of operations, cash flows or financial condition.


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For certain packaging supplies, raw materials and commodities, we rely on a small number of important suppliers.  If these suppliers became unable to continue to meet our requirements, and we are unable to develop alternative sources of supply, our operations and financial results could be adversely affected. We are exposed to the risk of litigation. We are now and may in the future be party to legal proceedings and claims (including labor, tax and alcohol-related claims) and significant damages may be asserted against us.  See “Item 8. Financial Information—A. Consolidated Financial Statements and Other Financial Information—Legal Proceedings” and note 30 to our audited consolidated financial statements as of and for December 31, 2016, included elsewhere in this annual report, for a description of our material litigation contingencies.  Given the inherent uncertainty of litigation, it is possible that we might incur liabilities as a consequence of the proceedings and claims brought against us, including those that are not currently believed by us to present a reasonably possible chance of loss to us. Moreover, companies in the alcoholic beverage and soft drink industries are, from time to time, exposed to collective suits (class actions) or other litigation relating to alcohol advertising, alcohol abuse problems or health consequences from the excessive consumption of beer, other alcoholic beverages and soft drinks. As an illustration, certain beer and other alcoholic beverage producers from Brazil and Canada have been involved in class actions and other litigation seeking damages. If any of these types of litigation were to result in fines, damages or reputational damage to us or our brands, this could have a material adverse effect on our business, results of operations, cash flows or financial position. We may not be able to recruit or retain key personnel. In order to develop, support and market our products, we must hire and retain skilled employees with particular expertise.  The implementation of our strategic business plans could be undermined by a failure to recruit or retain key personnel or the unexpected loss of senior employees, including in acquired companies.  We face various challenges inherent in the management of a large number of employees over diverse geographical regions.  Key employees may choose to leave their employment for a variety of reasons, including reasons beyond our control.  The impact of the departure of key employees cannot be determined and may depend on, among other things, our ability to recruit other individuals of similar experience and skill at an equivalent cost.  It is not certain that we will be able to attract or retain key employees and successfully manage them, which could disrupt our business and have an unfavorable material effect on our financial position, income from operations and competitive position. Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business or operations, and water scarcity or poor quality could negatively impact our production costs and capacity. There is a growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters.  In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain agricultural commodities that are necessary for our products, such as barley, hops, sugar and corn.  In addition, public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs and may require us to make additional investments in facilities and equipment due to increased regulatory pressures.  As a result, the effects of climate change could have a long-term, material adverse impact on our business and results of operations. We also face water scarcity and quality risks.  The availability of clean water is a limited resource in many parts of the world, facing unprecedented challenges from climate change and the resulting change in precipitation patterns and frequency of extreme weather, overexploitation, increasing pollution, and poor water management.  We have implemented an internal strategy in order to considerably reduce the use of water in our operative plants.  However, as demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, we may be affected by increasing production costs or capacity constraints, which could adversely affect our business and results of operations.   17


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Our operations are subject to safety and environmental regulations, which could expose us to significant compliance costs and litigation relating to environmental issues. Our operations are subject to safety and environmental regulations by national, state and local agencies, including, in certain cases, regulations that impose liability without regard to fault.  These regulations can result in liability that might adversely affect our operations.  The environmental regulatory climate in the markets in which we operate is becoming stricter, with greater emphasis on enforcement. While we have budgeted for future capital and operating expenditures to maintain compliance with environmental laws and regulations, there can be no assurance that we will not incur substantial environmental liability or those applicable environmental laws and regulations will not change or become more stringent in the future. We operate a joint venture in Cuba, in which the Government of Cuba is our joint venture partner.  Despite the recent relaxation in U.S. foreign policy towards Cuba, this country is still targeted by broad and comprehensive economic and trade sanctions of the United States.  Our operations in Cuba may adversely affect our reputation and the liquidity and value of our securities. In January 2014, one of our wholly-owned subsidiaries acquired from ABI, a controlling interest of 50% in Cerveceria Bucanero S.A., or Bucanero, a Cuban company in the business of producing and selling beer.  The other 50% equity interest in Bucanero is owned by the Government of Cuba.  We have the right to appoint the general manager of Bucanero.  Bucanero’s main brands areBucaneroandCristal, but it also imports and sells in Cuba other brands produced by certain of our other subsidiaries. In 2016, Bucanero sold 1.7 million hectoliters of beer, representing about 1% of our total volume of 159.8 million hectoliters for the year.  Although Bucanero production is primarily sold in Cuba, a small portion of its production is exported to and sold by certain distributors in other countries outside Cuba (but not the United States). Based on U.S. foreign policy, the U.S. Treasury Department’s Office of Foreign Assets Control and the U.S. Commerce Department together administer and enforce broad and comprehensive economic and trade sanctions against Cuba.  Although our operations in Cuba are quantitatively immaterial, our overall business reputation may suffer or we may face additional regulatory scrutiny as a result of our activities in Cuba based on the fact that Cuba remains a target of U.S. economic and trade sanctions. In addition, there have in the past been initiatives by federal and state lawmakers in the United States, and certain U.S. institutional investors, including pension funds, to adopt laws, regulations or policies requiring the divestment from, or reporting of interests in, companies that do business with countries designated as state sponsors of terrorism.  Although the United States government ceased to identify Cuba as a state sponsor of terrorism in June 2015, this position may be revised by action of the U.S. government’s executive branch.  If U.S. government policy towards Cuba were to be reversed, with that country being once again designated as a state sponsor of terrorism, Cuba could return to being a target of possible restrictions for U.S. investment.  If U.S. investors decide to liquidate or otherwise divest their investments in companies that have operations of any magnitude in Cuba, the market in and value of our securities could be adversely impacted. In addition, the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (known as the “Helms-Burton Act”) authorizes private lawsuits for damages against anyone who traffics in property confiscated without compensation by the Government of Cuba from persons who at the time were, or have since become, nationals of the United States.  Although this section of the Helms-Burton Act is currently suspended by discretionary presidential action, the suspension may not continue in the future.  Claims accrue notwithstanding the suspension and may be asserted if the suspension is discontinued.  The Helms-Burton Act also includes a section that authorizes the U.S. Department of State to prohibit entry into the United States of non-U.S. persons who traffic in confiscated property, and corporate officers and principals of such persons, and their families.  In 2009, ABI received notice of a claim purporting to be made under the Helms-Burton Act relating to the use of a trademark by Bucanero, which is alleged to have been confiscated by the Cuban government and trafficked by ABI through their former ownership and management of us.  Although ABI and we have attempted to review and evaluate the validity of the claim, due to the uncertain underlying circumstances, we are currently unable to express a view as to the validity of such claim or as to the claimants’ standing to pursue it.


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Information technology failures could disrupt our operations. We increasingly rely on information technology systems to process, transmit, and store electronic information.  A significant portion of the communication between our personnel, customers, and suppliers depends on information technology.  As with all large systems, our information systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hacker attacks or other security issues.  These or other similar interruptions could disrupt our operations, cash flows or financial condition. We depend on information technology to enable us to operate efficiently and interface with customers, as well as to maintain in-house management and control.  The concentration of processes in shared services centers means that any disruption could impact a large portion of our business.  If we do not allocate, and effectively manage, the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions, or the loss of or damage to intellectual property through security breach.  As with all information technology systems, our system could also be penetrated by outside parties with the intent of extracting or corrupting information or disrupting business processes.  Such interruptions could disrupt our business and could have a material adverse effect on our business, results of operations, cash flows or financial condition. Natural and other disasters could disrupt our operations. Our business and operating results could be negatively impacted by social, technical or physical risks such as earthquakes, hurricanes, flooding, fire, power loss, loss of water supply, telecommunications and information technology system failures, cyber-attacks, political instability, military conflict and uncertainties arising from terrorist attacks, including a global economic slowdown, the economic consequences of any military action and associated political instability. Our insurance coverage may be insufficient to make us whole on any losses that we may sustain in the future. The cost of some of our insurance policies could increase in the future.  In addition, some types of losses, such as losses resulting from wars, acts of terrorism, or natural disasters, generally are not insured because they are either uninsurable or it is not economically practical to obtain insurance.  Moreover, insurers recently have become more reluctant to insure against these types of events.  Should a material uninsured loss or a loss in excess of insured limits occur, this could adversely impact our business, results of operations and financial condition. Risks Relating to Our Common Shares and ADSs The relative volatility and illiquidity of securities of Brazilian companies may substantially limit your ability to sell our common shares and ADSs at the price and time you desire. Investing in securities of companies in emerging markets, such as Brazil, involves greater risk than investing in securities of companies from more developed countries, and those investments are generally considered speculative in nature.  Brazilian investments, such as investments in our common shares and ADSs, are subject to economic and political risks, involving, among other factors: changes in the Brazilian regulatory, tax, economic and political environment that may affect the ability of investors to receive payment, in whole or in part, in respect of their investments; and


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restrictions on foreign investment and on repatriation of capital invested. The Brazilian securities markets are substantially smaller, less liquid and more concentrated and volatile than major U.S. and European securities markets.  They are also not as highly regulated or supervised as those other markets.  The relative illiquidity and smaller market capitalization of Brazilian securities markets may substantially limit your ability to sell the Ambev common shares and ADSs at the price and time you desire. Deterioration in economic and market conditions in other emerging market countries, as well as in developed economies, may adversely affect the market price of our common shares and ADSs. Economic and market conditions in other emerging market countries, especially those in Latin America, influence the market for securities issued by Brazilian companies as well as investors’ perception of economic conditions in Brazil.  Economic crises in emerging markets, such as in Southeast Asia, Russia and Argentina, have historically triggered securities market volatility in other emerging market countries, including Brazil.  For example, the deceleration of the Chinese economy in 2015 and 2016 resulted in the depreciation of the currencies of several emerging economies, including Brazil, and a drop in the stock indices of the stock exchanges of those countries, including the BM&FBOVESPA.  In addition, global financial crisis originating in developed economies, including the subprime debt crisis in the United States and the sovereign debt crisis in Europe, have had an impact on many economies and capital markets around the world, including Brazil, which may adversely affect investors’ interest in the securities of Brazilian issuers such as Ambev.  Therefore, the market value of our common shares and ADSs may be adversely affected by events occurring outside of Brazil. Our current controlling shareholders will be able to determine the outcome of our most significant corporate actions. Our two direct controlling shareholders, Interbrew International B.V., or IIBV, and AmBrew S.A., or AmBrew, both of which are subsidiaries of ABI, together withFundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência,or FAHZ, held in aggregate 72% of our total and voting capital stock (excluding treasury shares) as of December 31, 2016. ABI indirectly held shares in us representing 61.9% of our total and voting capital stock (excluding treasury shares) as of December 31, 2016.  ABI thus has control over us, even though (1) ABI remains subject to the Ambev shareholders’ agreement among IIBV, AmBrew and FAHZ dated April 16, 2013, or the Ambev Shareholders’ Agreement, and (2) ABI is controlled by Stichting Anheuser-Busch InBev (formerly Stichting InBev and Stichting Interbrew), or Stichting, a foundation organized under the laws of the Netherlands, which represents an important part of interests of Messrs. Jorge Paulo Lemann, Marcel Herrmann Telles and Carlos Alberto da Veiga Sicupira, or BRC, and the founding families that were the former controlling shareholders of Interbrew N.V./S.A. (as ABI was then called), or the Interbrew Founding Families.  For further information on these matters see “Item 4. Information on the Company—A. History and Development of the Company—The InBev-Ambev Transactions” and “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement.” Our controlling shareholders are able to elect the majority of the members of our Board of Directors and Fiscal Council, and generally determine the outcome of most other actions requiring shareholder approval, including dividend distributions, the consummation of corporate restructurings, issuances of new shares, sales of materials assets and bylaw amendments.  Under Brazilian Law No. 6,404/76, as amended, or the Brazilian Corporation Law, the protections afforded to non-controlling security holders may differ from, or be less comprehensive than, the corresponding protections and fiduciary duties of directors applicable in the U.S. or other jurisdictions.  See “—As a Brazilian company, Ambev is subject to different corporate laws and regulations than those typically applicable to U.S.-listed companies, which may result in Ambev’s shareholders having fewer or less well-defined shareholder rights than the shareholder rights of those companies.”


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Our shareholders may not receive any dividends. According to our bylaws, we generally pay our shareholders 40% of our annual adjusted net income, calculated and adjusted pursuant to Brazilian Corporation Law in accordance with the mechanisms described in our bylaws as presented in our consolidated financial statements prepared under IFRS.  The main sources for these dividends are cash flows from our operations and dividends from our operating subsidiaries.  Therefore, that net income may not be available to be paid out to our shareholders in a given year.  In addition, we might not pay dividends to our shareholders in any particular fiscal year upon the determination of the Board of Directors that any such distribution would be inadvisable in view of our financial condition.  While the law does not establish the circumstances rendering the payment of dividends inadvisable, it is generally agreed that a company need not pay dividends if such payment threatens its existence as a going concern or harms its normal course of operations.  Any dividends not distributed would be allocated to a special reserve account for future payment to shareholders, unless it is used to offset subsequent losses or as otherwise provided for in our bylaws.  It is possible, therefore, that our shareholders will not receive dividends in any particular fiscal year. Brazilian foreign exchange controls and regulations could restrict conversions and remittances abroad of the dividend payments and other shareholder distributions paid in Brazil inreaisin respect of the Ambev common shares (including shares underlying the Ambev ADSs). Brazilian law provides that whenever there is a serious imbalance in Brazil’s balance of payments or reasons to foresee such a serious imbalance, the Brazilian government may impose temporary restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil.  For example, for approximately six months in 1989 and early 1990 the Brazilian government froze all dividend and capital repatriations that were owed to foreign equity investors and had their remittance abroad withheld by the Central Bank in order to conserve Brazil’s foreign currency reserves at the time.  These amounts were subsequently released in accordance with Brazilian government directives.  Similar measures could be taken by the Brazilian government in the future. As a result, the Brazilian government may in the future restrict the conversion and remittance abroad, to ADS holders or holders of Ambev common shares residing outside Brazil, of dividend payments and other shareholder distributions paid in Brazil inreaisin respect of the Ambev common shares (including shares underlying the Ambev ADSs).  The likelihood that the Brazilian government would impose such restrictions may be affected by the extent of Brazil’s foreign currency reserves, the availability of foreign currency in the foreign exchange markets on the date a payment is due, the size of Brazil’s debt service burden relative to the economy as a whole and other factors.  We cannot assure you that the Central Bank will not modify its policies or that the Brazilian government will not institute restrictions or delays on cross-border remittances in respect of securities issued in the international capital markets.  For further information on this matter, see “—A. Selected Financial Data—Exchange Rate Information—Exchange Controls.” If you exchange your Ambev ADSs for the respective Ambev common shares underlying those ADSs, you risk losing some Brazilian tax and foreign currency remittance advantages. The Ambev ADSs benefit from the foreign capital registration that The Bank of New York Mellon, as depositary of Ambev’s ADS program, or the Depositary, has in Brazil, which permits it to convert dividends and other distributions with respect to the Ambev common shares underlying the Ambev ADSs into foreign currency and remit the proceeds of such conversion abroad.  If you exchange your Ambev ADSs for the respective Ambev common shares underlying those ADSs, you will be entitled to rely on the Depositary’s foreign capital registration for only five business days from the date of such exchange.  After this five-day period, you will not be able to remit abroad non-Brazilian currency unless you obtain your own foreign capital registration.  In addition, gains with respect to Ambev common shares will be subject to a less favorable tax treatment unless you obtain your own certificate of foreign capital registration or register your investment in the Ambev common shares with the Central Bank pursuant to Resolution No. 4,373.  For a more complete description of Brazilian restrictions on foreign investments and Brazilian foreign investment regulations, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Restrictions on Foreign Investment” and “—A. Selected Financial Data—Exchange Rate Information—Exchange Controls.”  For a more complete description of Brazilian tax regulations, including any potential risks regarding the possibility that the sale or disposition of ADSs by a Non-Brazilian Holder may be subject to capital gains tax in Brazil, see “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations.”


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As a Brazilian company, Ambev is subject to different corporate laws and regulations than those typically applicable to U.S.-listed companies, which may result in Ambev’s shareholders having fewer or less well-defined shareholder rights than the shareholder rights of those companies. Ambev’s corporate affairs are governed by its bylaws and the Brazilian Corporation Law, which may differ from the legal principles that would apply to Ambev if the company were incorporated in a jurisdiction in the United States, such as Delaware or New York, or in other jurisdictions outside of Brazil.  In addition, shareholder rights under the Brazilian Corporation Law to protect them from actions taken by the board of directors or controlling shareholders may be fewer and less well-defined than under the laws of jurisdictions outside of Brazil. Although insider trading and price manipulation are restricted under applicable Brazilian capital markets regulations and treated as crimes under Brazilian law, the Brazilian securities markets may not be as highly regulated and supervised as the securities markets of the United States or other jurisdictions outside Brazil.  In addition, rules and policies against self-dealing and for the preservation of shareholder interests may be less well-defined and enforced in Brazil than in the United States or other jurisdictions outside Brazil, potentially causing disadvantages to a holder of Ambev ADSs as compared to a holder of shares in a U.S. public company.  Further, corporate disclosures may be less complete or informative than required of public companies in the United States or other jurisdictions outside Brazil. Certain shareholder entitlements may not be available in the U.S. to holders of Ambev ADSs. Due to certain United States laws and regulations, U.S. holders of Ambev ADSs may not be entitled to all of the rights possessed by holders of Ambev common shares.  For instance, U.S. holders of Ambev ADSs may not be able to exercise preemptive, subscription or other rights in respect of the Ambev common shares underlying their Ambev ADSs, unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements thereunder is available. Holders of Ambev ADSs may be unable to fully exercise voting rights with respect to the Ambev shares underlying their ADSs. Under Brazilian law, only shareholders registered as such in the corporate books of Brazilian companies may attend shareholders’ meetings.  Because all the Ambev common shares underlying the Ambev ADSs are registered in the name of the Depositary (and not the ADS holder), only the Depositary (and not the ADS holder) is entitled to attend Ambev’s shareholders’ meetings.  A holder of Ambev ADSs is entitled to instruct the Depositary as to how to vote the respective Ambev common shares underlying their ADSs only pursuant to the procedures set forth in the deposit agreement for Ambev’s ADS program.  Accordingly, holders of Ambev ADSs will not be allowed to vote the corresponding Ambev common shares underlying their ADSs directly at an Ambev shareholders’ meeting (or to appoint a proxy other than the Depositary to do so), unless they surrender their Ambev ADSs for cancellation in exchange for the respective Ambev shares underlying their ADSs.  We cannot ensure that such ADS cancellation and exchange process will be completed in time to allow Ambev ADS holders to attend a shareholders’ meeting of Ambev. Further, the Depositary has no obligation to notify Ambev ADS holders of an upcoming vote or to distribute voting cards and related materials to those holders, unless Ambev specifically instructs the Depositary to do so.  If Ambev provides such instruction to the Depositary, it will then notify Ambev’s ADS holders of the upcoming vote and arrange for the delivery of voting cards to those holders.  We cannot ensure that Ambev’s ADS holders will receive proxy cards in time to allow them to instruct the Depositary as to how to vote the Ambev common shares underlying their Ambev ADSs.  In addition, the Depositary and its agents are not responsible for a failure to carry out voting instructions or for an untimely solicitation of those instructions. As a result of the factors discussed above, holders of Ambev ADSs may be unable to fully exercise their voting rights.


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Future equity issuances may dilute the holdings of current holders of Ambev common shares or ADSs and could materially affect the market price for those securities. We may in the future decide to offer additional equity to raise capital or for other purposes.  Any such future equity offering could reduce the proportionate ownership and voting interests of holders of our common shares and ADSs, as well as our earnings and net equity value per common share or ADS.  Any offering of shares and ADSs by us or our main shareholders, or a perception that any such offering is imminent, could have an adverse effect on the market price of these securities. Our status as a foreign private issuer allows us to follow local corporate governance practices and exempts us from a number of rules under the U.S. securities laws and listing standards, which may limit the amount of public disclosures available to investors and the shareholder protections afforded to them. We are a foreign private issuer, as defined by the Securities and Exchange Commission, or the SEC, for purposes of the Exchange Act.  As a result, we are exempt from many of the corporate governance requirements of stock exchanges located in the United States, as well as from rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act.  For example, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act.  Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.  Accordingly, there may be less publicly available information concerning us than there is for U.S. public companies. In addition, for so long as we remain as a foreign private issuer, we will be exempt from most of the corporate governance requirements of stock exchanges located in the United States.  Accordingly, you will not be provided with some of the benefits or have the same protections afforded to shareholders of U.S. public companies.  The corporate governance standards applicable to us are considerably different than the standards applied to U.S. domestic issuers.  For example, although Rule 10A-3 under the Exchange Act generally requires that a company listed in the United States have an audit committee of its board of directors composed solely of independent directors, as a foreign private issuer we are relying on an exemption from this requirement under Rule 10A-3(c)(3) of the Sarbanes-Oxley Act of 2002 that is available to us as a result of features of the Brazilian Corporation Law applicable to our Fiscal Council.  In addition, we are not required under the Brazilian Corporation Law to, among other things: have a majority of our Board of Directors be independent (though our bylaws provide that two of our directors must be independent and, in certain circumstances pursuant to the Brazilian Corporation Law, our minority shareholders may be able to elect members to our Board of Directors);

have a compensation committee, a nominating committee, or corporate governance committee of the Board of Directors (though we currently have a non-permanent Operations, Finance and Compensation Committee that is responsible for evaluating our compensation policies applicable to management);

have regularly scheduled executive sessions with only non-management directors (though none of our current directors hold management positions in us); or

have at least one executive session of solely independent directors each year. For further information on the main differences in corporate governance standards in the United States and Brazil, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Differences Between United States and Brazilian Corporate Governance Practices.”


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Foreign holders of our ADSs may face difficulties in serving process on or enforcing judgments against us and other persons. We are organized under the laws of Brazil and most of our directors and executive officers, as well as our independent registered public accounting firm, reside or are based in Brazil.  In addition, substantially all of our assets and those of these other persons are located in Brazil.  As a result, it may not be possible for foreign holders of our ADSs to expediently effect service of process upon us or those persons within the United States or other jurisdictions outside Brazil or to efficiently enforce against us or them judgments obtained in the United States or other jurisdictions outside Brazil.  Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain formal and procedural conditions are met (including non-violation of Brazilian national sovereignty, public policy and “good morals”), holders of our ADSs may face greater difficulties in protecting their interests in the context of legal, corporate or other disputes between them and us, our directors and/or our executive officers than would shareholders of a U.S. corporation.  In addition, a plaintiff (whether or not Brazilian) residing outside Brazil during the course of litigation in Brazil must provide a bond to guarantee court costs and legal fees if the plaintiff owns no real property in Brazil that could secure such payment.  The bond must have a value sufficient to satisfy the payment of court fees and defendant’s attorney fees, as determined by a Brazilian judge.  This requirement does not apply to the enforcement of foreign judgments that have been duly confirmed by the Brazilian Superior Court of Justice (Superior Tribunal de Justiça).  Furthermore, Brazil does not have a treaty with the United States to facilitate or expedite the enforcement in Brazil of decisions issued by a court in the United States. Judgments of Brazilian courts with respect to our shares will be payable only inreais. If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our common shares, we will not be required to discharge any such obligations in a currency other thanreais.  Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other thanreaismay only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and any such amounts are then adjusted to reflect exchange rate variations through the effective payment date.  The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of, or related to, our obligations under our common shares.


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ITEM 4.                INFORMATION ON THE COMPANY Ambev’s principal executive offices are located at Rua Dr. Renato Paes de Barros, 1017, 3rd floor, 04530‐001, São Paulo, SP, Brazil, and its telephone number and email are: +55 (11) 2122-1414 and ir@ambev.com.br. A.            History and Development of the Company Overview We are the successor of Brahma and Antarctica, two of the oldest brewers in Brazil.  Antarctica was founded in 1885.  Brahma was founded in 1888 as Villiger & Cia.  TheBrahmabrand was registered on September 6, 1888, and in 1904 Villiger & Cia. changed its name to Companhia Cervejaria Brahma.  However, the legal entity that has become Ambev S.A., the current NYSE-and BM&FBOVESPA-listed company, was incorporated on July 8, 2005 as a non-reporting Brazilian corporation under the Brazilian Corporation Law and is the successor of Old Ambev.  Until the stock swap merger of Old Ambev with Ambev S.A. approved in July 2013 (see “—Stock Swap Merger of Old Ambev with Ambev S.A.”), Ambev S.A. did not conduct any operating activities and had served as a vehicle for ABI to hold a 0.5% interest in Old Ambev’s capital stock. In the mid-1990s, Brahma started its international expansion into Latin America, and since then we have been buying assets in different parts of the continent including the South America, Central America and the Caribbean. In the late 1990s, Brahma obtained the exclusive rights to produce, sell and distribute Pepsi CSD products throughout Brazil, and since then we have been distributing these products throughout that country. Our PepsiCo franchise agreement for Brazil expires in December 31, 2017, and thereafter, will be automatically renewed for additional ten-year terms if certain conditions set forth in that agreement are met. See “Item 4. Information on the Company—B. Business Overview—Licenses—Pepsi.” In addition, certain of our subsidiaries have franchise agreements for Pepsi products in Argentina, Bolivia, Uruguay and the Dominican Republic. In the early 2000s, we acquired a 40.5% economic interest in Quinsa and the joint control of that entity, which we shared temporarily with Beverages Associates (BAC) Corp., or BAC, the former sole controlling shareholder of Quinsa.  This transaction provided us with a leading presence in the beer markets of Argentina, Bolivia, Paraguay and Uruguay, and also set forth the terms for our future acquisition of Quinsa’s full control from BAC.  In April 2006, we increased our equity interest in Quinsa to 91% of its total share capital, after which we started to fully consolidate Quinsa upon the closing of that transaction in August 2006. In August 2004, we and a Belgian brewer called Interbrew S.A./N.V. (as ABI was then called) completed a business combination that involved the merger of an indirect holding company of Labatt Brewing Company Limited, or Labatt, one of the leading brewers in Canada, into us.  At the same time, our controlling shareholders completed the contribution of all shares of an indirect holding company which owned a controlling stake in us to Interbrew S.A./N.V. in exchange for newly issued shares of Interbrew S.A./N.V.  After this transaction, Interbrew S.A./N.V. changed its company name to InBev S.A./N.V. (and, since 2008, to Anheuser-Busch InBev N.V./S.A.) and became our majority shareholder through subsidiaries and holding companies. (see “—The InBev-Ambev Transactions”). The InBev-Ambev Transactions The “InBev-Ambev transactions” consisted of two transactions negotiated simultaneously: (1) in the first transaction, BRC exchanged its Old Ambev shares for shares in Interbrew N.V./S.A. (as ABI was then called); and (2) in the second transaction, Old Ambev issued new shares to Interbrew N.V./S.A. in exchange for Interbrew’s 100% stake in Labatt.


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Exchange of Shares Between BRC and the Interbrew Founding Families In March 2004, various entities controlled by BRC entered into a contribution and subscription agreement with Interbrew N.V./S.A. (as ABI was then called) and various entities representing the interests of the Interbrew Founding Families to exchange their controlling interest in Old Ambev for newly issued voting shares of Interbrew N.V./S.A., which represented 24.7% of Interbrew N.V./S.A.’s voting shares. Upon closing of this transaction in August 2004, (1) BRC received approximately 44% of the voting interest in Stichting, which thereupon owned approximately 56% of Interbrew N.V./S.A.’s common shares, and (2) Interbrew N.V./S.A. received approximately a 53% voting interest and a 22% economic interest in Old Ambev.  Such voting interest was subject to our shareholders’ agreement at the time, as amended in connection with the InBev-Ambev transactions.  In addition, Interbrew N.V./S.A. changed its legal name to InBev N.V./S.A. (and, since its acquisition of Anheuser-Busch, Inc. in the U.S. in 2008, to Anheuser Busch-InBev N.V./S.A.). Acquisition of Labatt Pursuant to theincorporaçãoagreement dated March 3, 2004, Labatt Brewing Canada Holding Ltd., or Mergeco, was merged into Old Ambev by means of an upstream merger (incorporação)under the Brazilian Corporation Law, or theIncorporação.  Mergeco held 99.9% of the capital stock of Labatt Holding ApS, or Labatt ApS, a corporation organized under the laws of Denmark, and Labatt ApS owned all the capital stock of Labatt.  Upon completion of theIncorporação, Old Ambev held 99.9% of the capital stock of Labatt ApS, and, indirectly, of Labatt.  As consideration for the acquisition of Labatt, Old Ambev issued common and preferred shares to Interbrew N.V./S.A. (as ABI was then called). With the consummation of this transaction in August 2004, (1) Labatt became a wholly-owned subsidiary of Old Ambev, and (2) Interbrew N.V./S.A. (as ABI was then called) increased its stake in Old Ambev to approximately 68% of common shares and 34% of preferred shares. Ownership Structure of InBev N.V./S.A. and Old Ambev Upon Consummation of the InBev-Ambev Transactions InBev N.V./S.A. Upon closing the InBev-Ambev transactions, 56% of InBev N.V./S.A.’s voting shares were owned by Stichting, 1% was jointly owned by Fonds Voorzitter Verhelst SPRL and Fonds InBev-Baillet Latour SPRL, 17% were owned directly by entities and individuals associated with the Interbrew Founding Families and the remaining 26% constituted the public float. BRC became the holder of 44% of Stichting’s voting interests, while the Interbrew Founding Families held the remaining 56% of Stichting’s voting interests.  In addition, BRC and entities representing the interests of the Interbrew Founding Families entered into a shareholders’ agreement, providing for, among other things, joint and equal influence over the exercise of the Stichting voting rights in InBev N.V./S.A. (as ABI was then called). Old Ambev Upon closing of the InBev-Ambev transactions, InBev N.V./S.A. (as ABI was then called) became the owner of approximately 68% of Old Ambev’s voting shares, FAHZ retained approximately 16% of such shares, and the remaining shares were held by the public. Mandatory Tender Offer Pursuant to the Brazilian Corporation Law, InBev N.V./S.A. (as ABI was then called) was required to conduct, following the consummation of the InBev-Ambev transactions, a mandatory tender offer, or the MTO, for all remaining outstanding common shares of Old Ambev.  The MTO was completed in March 2005, and InBev N.V./S.A. (as ABI was then called) increased its stake in Old Ambev to approximately an 81% voting interest and a 56% economic interest in that company.  FAHZ did not tender its Old Ambev shares in the MTO.


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Stock Swap Merger of Old Ambev with Ambev S.A. On July 30, 2013, the minority shareholders of Old Ambev approved a stock swap merger of Old Ambev with us, according to which each and every issued and outstanding common and preferred share of Old Ambev not held by Ambev S.A. (including in the form of ADSs) was exchanged for five newly issued common shares of Ambev S.A. (including in the form of ADSs).  As a result of the stock swap merger, Old Ambev became a wholly-owned subsidiary of Ambev S.A., which continued the same operations of Old Ambev.  The ratio adopted for the stock swap merger did not result in any ownership dilution in the equity interest held in us by our minority shareholders, including our former non-voting preferred shareholders, who were granted a separate class vote on the transaction without the interference of our controlling shareholder. The stock swap merger combined our former dual-class capital structure, comprised of voting common shares and non-voting preferred shares, into a new, single-class capital structure, comprised exclusively of voting common shares.  The purpose of this transaction was to simplify our corporate structure and improve our corporate governance, with a view to increasing liquidity for all shareholders, eliminating certain administrative, financial and other costs and providing more flexibility for the management of our capital structure.  As a result of the stock swap merger, all shareholders of Old Ambev, including former holders of that company’s non-voting preferred shares, gained access to the same rights and privileges enjoyed by Old Ambev’s common shareholders, including full voting rights and the right to be included in a change-of-control tender offer under the Brazilian Corporation Law that ensures that holders of common stock are offered 80% of the price per share paid to a selling controlling shareholder in a change-of-control transaction. Upstream Merger of Old Ambev with and into Ambev S.A. In January 2014, and as a subsequent step of the stock swap merger, an upstream merger of Old Ambev and one of its majority-owned subsidiaries with and into Ambev S.A. was consummated.  This upstream merger had no impact on the shareholdings that our shareholders held in us.  As a result of this upstream merger, our corporate structure was simplified. Recent Acquisitions, Divestments and Strategic Alliances On May 11, 2012, we concluded a transaction to form a strategic alliance with E. León Jimenes S.A., which owned 83.5% of Cervecería Nacional Dominicana S.A., or CND, to create the leading beverage company in the Caribbean through the combination of our businesses in the region.  Our initial indirect interest in CND was acquired through a cash payment and the contribution of Ambev Dominicana.  Separately, we acquired an additional 9.3% stake in CND from Heineken N.V., when we became the owner of a total indirect interest of 51% in CND.  During 2012 and 2013, we acquired additional stakes in CND, as provided under the 2012 deal terms for our investment in that entity.  As of December 31, 2016, we owned an aggregate 55.0% indirect interest in CND. In January 2014, one of our wholly-owned subsidiaries acquired a controlling interest of 50% in Bucanero S.A. from ABI, a Cuban company in the business of producing and selling beer.  The other 50% equity interest in Bucanero is owned by the Government of Cuba. We have the right to appoint the general manager of Bucanero. Its main brands are Bucanero and Cristal. In March 2015, one of our subsidiaries acquired Wäls Brewery, a local craft brewer in the State of Minas Gerais.  In 2014, Wäls was awarded the best dubbel for its brand ‘Wäls Dubbel’ in the World Beer Cup. Also in March 2015, Ambev and Whirlpool created B.Blend, a joint venture to develop and commercialize the first all-in-one capsule-based beverage machine. In July 2015, one of our subsidiaries acquired Beertech Bebidas e Comestíveis Ltda., also known as Colorado, a traditional craft brewer from the city of Ribeirão Preto, in the state of São Paulo, that uses local ingredients in its productions.


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In October 2015, Labatt purchased the Mill Street Brewery, a craft brewer based in Toronto, with a portfolio of 70 unique and innovative beers. Founded in 2002, Mill Street is an award winning craft brewery and the largest producer of certified organic beer in Canada, with key brands such asMill Street Original Organic Lager,100th Meridian Amber Lager,Tankhouse AleandCobblestone Stout. Mill Street also operates popular brewpubs in Toronto and Ottawa. In December 2015, one of our subsidiaries acquired the majority of the shares of Banks Holdings Company, or BHL, a publicly-traded company in the Barbados Stock Exchange focused on the production and distribution of beers and non-alcoholic beverages.  BHL produces and sells the leading beers in Barbados, includingBanksandDeputy, and also soft drinks, juices and dairy products. In January 2016, our subsidiary in Canada acquired a range of ready-to-drink, cider and craft beer brands for the Canadian market from the Mark Anthony Group of Companies. These brand additions include recognized and innovative brands such asPalm Bay,Mike’s Hard LemonadeandOkanagan Cider, leveraging our near-beer platform by expanding our portfolio into the fast growing ready to drink and cider segments in Canada. The deal also included the Turning Point Brewery in British Columbia, which brews theStanley Parkfamily of brands. In April 2016, one of our subsidiaries in Canada acquired Archibald Microbrasserie, known for its local beers and seasonal specialties. Also in April 2016, one of our subsidiaries acquired the Brazilian juice company “Do Bem”, which sells a variety of juices, teas and cereal bars. In May 2016, we entered into an agreement with ABI, pursuant to which the we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador, in exchange for which ABI has agreed to transfer SABMiller plc’s, or SABMiller, Panamanian business to us. While ABI is our indirect controlling shareholder, the transaction was conducted at arms’ length on standard market terms, including having received a fairness opinion from Rothschild & Sons (Brazil).  Other than post-closing debt and/or cash adjustments, the transaction did not involve any cash payments and involved an exchange of shares of the aforementioned entities. The transaction was conditioned on the successful closing of the SABMiller and ABI merger, which closed in the fourth quarter of 2016. As a result of this transaction, on December 31, 2016, we ceased operations in Colombia, Peru and Ecuador and commenced operations in the beverages market of Panama. In December 2016, we acquired Cachoeiras de Macacu Bebidas Ltda. from Brasil Kirin Industria de Bebidas Ltda., a company that owns an operating industrial plant for the production and packaging of beer and non-alcohol  beverages  in the State of Rio de Janeiro. For further information on these and other acquisitions, divestments and strategic alliances, please see notes 1 and  31 to our audited financial statements as of and for the year ended December 31, 2016. B.            Business Overview Description of Our Operations We are the largest brewer in Latin America in terms of sales volumes and one of the largest beer producers in the world, according to our estimates.  We currently produce, distribute and sell beer, CSDs and other non-alcoholic and non-carbonated products in 18 countries across the Americas.  We are one of the largest PepsiCo independent bottlers in the world. We conduct our operations through three business segments, as follows: Latin America North, which includes our operations in Brazil, where we operate two divisions (the beer sales division and the CSD & NANC sales division), and our Central America and the Caribbean, or CAC, operations, which in the past we referred to as “HILA-Ex” operations, that currently includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica, Cuba, Guatemala (which also serves El Salvador, Honduras and Nicaragua) Barbados and, after December 31, 2016, Panama;


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Latin America South, or LAS, which includes our operations in Argentina, Bolivia, Paraguay, Uruguay, Chile and, prior to December 31, 2016, Colombia, Ecuador and Peru; and

Canada, represented by Labatt’s operations, which includes domestic sales in Canada and some exports to the U.S. market. The following map illustrates our three business segments as of December 31, 2016:  An analysis of our consolidated net sales by business segment is presented in the table below: Net Sales (in R$ million)Year Ended December 31,2016

   2015

   2014Sales

   % of Total

   Sales

   % of Total

   Sales

   % of TotalLatin America North

   28,927.8

   63.4%

   29,654.9

   63.5%

   26,470.7

   69.5%Brazil

   24,954.6

   54.7%

   26,326.1

   56.4%

   24,382.9

   64.0%Beer Brazil

   21,173.1

   46.4%

   22,441.3

   48.1%

   20,468.7

   53.8%CSD & NANC

   3,781.5

   8.3%

   3,884.8

   8.3%

   3,914.2

   10.3%CAC

   3,973.2

   8.7%

   3,328.8

   7.1%

   2,087.8

   5.5%Latin America South

   10,212.9

   22.4%

   11,255.6

   24.1%

   6,955.7

   18.3%Canada

   6,461.9

   14.2%

   5,809.7

   12.4%

   4,653.4

   12.2%Total

   45,602.6

   100.0%

   46,720.2

   100.0%

   38,079.8

   100.0%


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An analysis of our sales volume by business segment is presented in the table below: Sales Volumes (’000 hl)Year Ended December 31,2016

   2015

   2014Volume

   % of Total

   Volume

   % of Total

   Volume

   % of TotalLatin America North

   116,632,7

   73.0%

   123,463.4

   73.0%

   125,418.3

   73.0%Brazil

   106,961.4

   66.9%

   114,354.2

   67.6%

   117,508.9

   68.4%Beer Brazil

   79,670.1

   49.8%

   85,330.9

   50.5%

   86,903.9

   50.6%CSD & NANC

   27,291.3

   17.1%

   29,023.3

   17.2%

   30,605.0

   17.8%CAC

   9,671.3

   6.1%

   9,109.2

   5.4%

   7,909.4

   4.6%Latin America South

   32,934.5

   20.6%

   35,914.5

   21.2%

   36,826.4

   21.4%Canada

   10,254.5

   6.4%

   9,700.3

   5.7%

   9,520.9

   5.5%Total

   159,821.6

   100.0%

   169,078.2

   100.0%

   171,765.7

   100.0%
 Business Strategy We aim to continuously create value for our stockholders.  The main components of our strategy are: our people and culture;

top line growth;

building strong brands;

excellence in route to market;

permanent cost efficiency; and

financial discipline. Our People and Culture We believe highly qualified, motivated and committed employees are critical to our long-term success.  We carefully manage our hiring and training process with a view to recruiting and retaining outstanding professionals.  In addition, we believe that through our compensation program, which is based both on variable pay and stock ownership, we have created financial incentives for high performance and results.  Another core element of our culture is our distinguished managerial capability, which is characterized by (1) a hardworking ethos, (2) results-focused evaluations, (3) the encouragement of our executives to act as owners and not only as managers, (4) leadership by personal example, and (5) appreciation of field experience. Top Line Growth We are constantly seeking sustainable growth of our net revenues.  For instance, in Brazil we have focused our efforts behind five main commercial platforms, as follows: Elevate the core: we believe that building strong brands that create enduring bonds with our consumers is a fundamental prerequisite to assure the sustainability of our business in the future.  By connecting with our consumers through relevant marketing platforms and breakthrough experiences, we are able to drive a superior top line performance by balancing volume and price/mix growth in a sustainable way;

Accelerate Premium: premium volumes have been growing above mainstream in Brazil and there is a significant opportunity to accelerate this growth and to increase even further the weight of premium volumes within beer.  At Ambev, we are working towards leading this growth through our wide-ranging portfolio of domestic and international premium brands and by improving our route to market execution;


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Near-Beer: when looking at different consumption occasions, we have identified meaningful volumes opportunities that we are not capturing today with beer.  Through deep consumer insights, we have been developing new products with a different liquid profile, focusing on these opportunities.  With Skol Beats Senses, Skol Beats Spirit and Skol Beats Secrets in Brazil or Mixxtail in LAS, malt based beverages, with a stronger alcohol content and different flavors, we seek to win a bigger share of the total alcoholic beverage space mainly in the night out occasion.  With Brahma 0.0%, we have been expanding our presence in the non-alcoholic beverage space while building a new consumption habit in Brazil.  Going forward, innovation will be key to continue to increase our total share of throat through new liquids;

At Home: by better understanding consumption habits in our consumers’ own homes, we are able to capture significant volume opportunities through new liquids, new packaging or even new selling models, such as Emporiodacerveja.com.br, the biggest beer ecommerce in Brazil.  There is also significant room to enhance the beer category execution in different retail formats and regions in Brazil, including the opportunity to increase the penetration of returnable glass bottles in supermarkets, driving affordability in a profitable way; and

Out of Home: having a beer at aboteco, a traditional type of bar in Brazil, continues to be a strong part of Brazilian culture and part of Brazilian consumers’ day-to-day lives.  We deliver our brands to almost one million points of sale in Brazil, mainlybotecos, through our unique distribution system, always looking for ways to improve our execution and better serve our clients.  Along with that, we are constantly seeking ways to perfect the “out-of-home” experience to consumers, through different initiatives such as with, among others: Skol Draft, which allows us to deliver the amazingchoppexperience to more consumers in an affordable and profitable way; Skol Cube, an innovative cooler that keeps beer cold for one hour outside the refrigerator; Curtisom, our micro events platform, based on itinerant music stages developed for one night concerts at different bars every night; expansion of one liter returnable glass bottles; and driving affordability to consumers. Permanent Cost Efficiency Cost control is one of the top priorities of our employees.  Each of our departments must comply with its respective annual budget for fixed and variable costs.  As a means of avoiding unnecessary expenses, we have designed a management control system inspired on “zero-base budgeting” concepts that requires every manager to build from scratch an annual budget for his/her respective department. Financial Discipline Our focus is not only on volumes and operating performance, but also on the disciplined management of our working capital and our cash flow generation.  Our objective is to maximize the return to our shareholders through a combination of payments of dividends and interest on shareholders’ equity, while at the same time keeping our investment plans and holding an adequate level of liquidity to accommodate the seasonality of our business and cope with often volatile and uncertain financial market conditions.


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Seasonality Sales of beverages in our markets are seasonal.  Generally, sales are stronger during the summer and major holidays.  Therefore, in the Southern Hemisphere (Latin America North and Latin America South) volumes are usually stronger in the fourth calendar quarter due to early summer and year-end festivities.  In Canada, volumes are stronger in the second and third calendar quarters due to the summer season.  This is demonstrated by the table below, which shows our volumes by quarter and business segment: 2016 Quarterly Volumes(as a percentage of annual volumes)1st Quarter

   2nd Quarter

   3rd Quarter

   4th Quarter

   2016Latin America North

   24.9%

   22.7%

   24.2%

   28.3%

   100%Brazil

   25.1%

   22.6%

   24.0%

   28.4%

   100%Beer Brazil

   24.9%

   22.2%

   24.5%

   28.4%

   100%CSD & NANC

   25.4%

   23.7%

   22.5%

   28.4%

   100%CAC

   22.7%

   24.3%

   25.8%

   27.2%

   100%Latin America South

   27.4%

   18.8%

   23.4%

   30.4%

   100%Canada

   18.9%

   29.2%

   28.8%

   23.1%

   100%Total

   25.0%

   22.3%

   24.3%

   28.4%

   100%
 Description of the Markets Where We Operate Latin America North Brazil The Brazilian Beer Market In 2016, Brazil was one of the world’s largest beer markets in terms of volume, reaching 120.1 million hectoliters, according to our estimates.  Beer is predominantly sold in bars for on-premise consumption, in standardized, returnable 600-milliliter glass bottles.  The second favored packaging presentation is the 350-milliliter one-way aluminum can, which is predominantly sold in supermarkets for off-premise consumption. According to our estimates, in 2016 we had a 66.3% share of the Brazilian market in terms of beer sales volumes, mainly through our three major brands:Skol,BrahmaandAntarctica.  Our closest competitors in Brazil are: Cervejaria Petrópolis with a 13.6% market share; Heineken, with a 9.2% market share; and Brasil Kirin with an 8.6% market share, according to our estimates. Distribution represents an important feature in this market, as the retail channel is fragmented into almost one million points of sale.  Our distribution is structured under two separate branches, comprising (1) our network of exclusive third-party distributors, involving 139 operations, and (2) our proprietary direct distribution system, involving more than 112 distribution centers spanned over most Brazilian regions.  We have been focusing on direct distribution in large urban regions, while strengthening our third-party distribution system.  See “—Business Overview—Business Strategy.” Near-Beer Some of our recent innovations have stretched beyond typical beer consumption occasions, such asSkol Beats Senses,Skol Beats SpiritandSkol Beats Secret, which are sweeter beverages with higher alcohol content, and Brahma 0.0%, a non-alcoholic beer. These innovations are designed to grow the near-beer category and improve our market share of beverage categories other than beer, by addressing changing consumer trends and preferences.  At the end of 2016, this new segment created by Skol Beats Senses, Skol Beats Spirit and Skol Beats Secrets already accounted for 1.0% of our total beer volume in Brazil, while, according to our estimates, Brahma 0.0% is the leader in the Brazilian non-alcoholic beer segment and represents another 1.0% of our total beer volumes in the country.


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The Brazilian CSD & NANC Markets The CSD & NANC markets in Brazil are comprised of many different segments, including CSD, bottled water, isotonic beverages, energy drinks, coconut water, powdered juices and ready-to-drink teas.  The CSD segment is the most significant to our business representing approximately 95.2% of the volumes of our CSD & NANC unit. According to our estimates, the leading CSD flavors in Brazil are (1) cola (with 53% of the market in 2016), (2)guaraná, (3) orange, and (4) lime.  Most CSDs in Brazil are sold in supermarkets in two-liter non-returnable PET bottles for in-home consumption.  The 350-milliliter one-way aluminum can is also an important packaging format for our business and is mainly sold in supermarkets and restaurants. Our main competitor in this market is The Coca-Cola Company.  In 2016, according to our estimates, The Coca-Cola Company family of brands had a 60.6% market share in the Brazilian CSD market, while we had a 18.8% market share.  In addition to The Coca-Cola Company, we face competition from small regional bottlers that produce what are usually referred to as “B Brands.”  The B Brands compete mainly on price, usually being sold at a significantly lower price than our products. Our main CSD brands areGuaraná Antarctica(includingGuaraná Antarctica Black, a line extension ofGuaraná Antarcticalaunched in 2015), the leader in the “non-cola” flavor segment with a 10.4% market share in Brazil in 2016, andPepsi Colawith a 4.8% market share in that year, in each case according to our estimates.Pepsi Colais sold under our exclusive production and bottling agreements with PepsiCo.  Our CSD portfolio also includes such brands asGatoradein the isotonic market,H2OH!in the flavored water market, andLipton Iced Teain the ready-to-drink tea market, which are also sold under license from PepsiCo, andMonsterin the energy drinks market, under license from Monster Energy Company, and Fusion, a proprietary brand that became in 2016 the second largest brand in the energy drinks segment in Brazil. Also in 2016, we acquired  the Brazilian juice company “Do Bem,” which enjoys brand strength in health and wellness categories. Our CSD & NANC products are sold in Brazil through the same distribution system used for beer. CAC (Central America and the Caribbean) Central America In Guatemala, the main packaging presentations are the returnable, 12 ounce and 1-liter glass bottles, and the 12 ounce and the 16 ounce cans.  Our main competitor in Guatemala is Cerveceria Centro Americana, the market leader.  Cerveceria Centro Americana is a private company owned by local investors. In El Salvador, our main packaging presentation is the returnable one-liter glass bottle.  Our main competitor in El Salvador is Industrias La Constancia. In Nicaragua, our main packaging presentation is the returnable one-liter glass bottle.  Our main competitor in Nicaragua is the market leader, Compañía Cervecera de Nicaragua, which is a joint venture between Guatemala’s Cerveceria Centro Americana and Florida Ice & Farm Co, an investor group from Costa Rica. In Honduras, we are currently selling imported brands asBudweiserandBud Light.  Our main competitor in Honduras is Cerveceria Hondureña. In all of these markets, beer is predominantly sold in returnable bottles through small retailers.  We sell ourBrahva,Brahva Gold,Extra,Budweiser,Bud Light,Stella Artois,Corona,Modelo Especial,Beck, LeffeandHoegaardenbeer brands in Central America, which are distributed through the CBC distribution system, jointly with CBC’s CSD portfolio.  According to our estimates, the total annual sales volume of these beer markets was 1.0 million hectoliters in 2016.


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In May 2016, we entered into an agreement with ABI pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador.   In exchange, ABI has agreed to transfer SABMiller plc’s Panamanian business to us.  We formally began operations in Panama on December 31, 2016. According to our estimates, our share of the beer market in Panama was approximately 44% in 2016.  The main packaging presentation are 12 ounce and 1-litter glass bottles and our main beer brands in Panama areAtlasandBalba.The main competitor in the Panamanian beer market is Baru. Our Panamanian business also produces and commercializes soft drinks, under franchise, beingPepsi,Canada DryandSquirtthe main brands distributed. The Caribbean Beer Market In Cuba, our main packaging presentation is the 12 ounce can.  Our main competitor in Cuba is State Brewery.  We currently sell theBucanero,Cristal,MayabeandCaciquelocal beer brands in Cuba. According to our estimates, the total annual sales volume of the Cuban beer market was approximately 1.7 million hectoliters in 2016. In the Dominican Republic, the annual sales volume of the beer market was 4.0 million hectoliters in 2016, according to our estimates.  The main packaging presentation in the Dominican beer market consists of the returnable 650-milliliter and 1-liter glass bottles, which are predominantly sold in small retail stores.  We currently lead the beer market in the Dominican Republic after our acquisition of CND, with leading portfolio brands such asPresidente,Brahma Light,President Light,Bohemia,The One,Corona,Stella ArtoisandBudweiser.Our distribution system in the Dominican Republic is comprised mainly of direct distribution operations. In Barbados, the annual sales volume of the beer market was 0.2 million hectoliters in 2016, according to our estimates. We are the market leader with brands such asBanksandDeputy, which are produced locally by BHL.  In 2016, our brands held an approximate 86% market share in Barbados, according to our estimates.  The growth in the Barbados beer market in the past three years was driven by imported and domestic value brands.  The main packaging presentation in Barbados is the 250-milliliter and 275-milliliter returnable glass bottles. The Caribbean CSD Market According to our estimates, the annual sales volume of the Dominican CSD market was 1.5 million hectoliters in 2016.  The main packaging presentation in the Dominican CSD market is the returnable half-liter bottle, in either glass or PET format, which is predominantly sold in small retail stores.  The Coca-Cola Company, represented by Bepensa, has the leadership of the Dominican CSD Market, followed by Ajegroup, which adopts a low price strategy.  We are currently the third player in that market. Our main CSD brands in the Dominican Republic areRed Rock,Pepsi-ColaandSeven Up, all of which are marketed under an exclusive bottling agreement with PepsiCo.  Our distribution system in the Dominican Republic is comprised of direct distribution operations and third-party distributors. In Barbados, the annual sales volume of the CSD market was 0.2 million hectoliters in 2016, according to our estimates. Barbados Bottling Co. Ltd., a wholly owned subsidiary of BHL, is the market leader for CSD with a market share of approximately 75% in 2016, according to our estimates.  BHL produces and distributesCokeand its allied brands under franchise along with own proprietary brandFrutee, which is comprised of ten flavors.  BHL, through other subsidiaries, also produces and commercializes juices and dairy products in Barbados. Latin America South Argentina Argentina is one of our most important regions, second only to Brazil in terms of volume. We serve more than 300 thousand points of sale throughout Argentina both directly and through our exclusive third-party distributors.


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The Argentine Beer Market According to our estimates, the annual sales volume of the Argentine beer market was 16.5 million hectoliters in 2016.  With a population of approximately 44 million, Argentina is Latin America South’s largest and most important beer market. Beer consumption in Argentina has grown in recent years, but experienced a slight decrease in 2016, reaching an annual per capita consumption of 37.5 liters.  Since 2000, beer has become the number one selling alcoholic beverage in Argentina in terms of hectoliters sold, according to our estimates. In Argentina, 35% of our beer volume is distributed directly by us and 65% is distributed through exclusive third-party distributors.  Our main package presentation in Argentina is the 1-liter returnable glass bottles, which accounted for 89% of our sales in 2016. According to our estimates, on-premise consumption represented 15% of beer volumes in Argentina in 2016, and supermarkets sales represented 14% of beer volumes.  The main channels of volume consumption in Argentina are through kiosks and small grocery stores. Our most important beer brands in Argentina areQuilmes Cristal,BrahmaandStella Artois.  We are the leading beer producers in Argentina with 75.6% market share in 2016, according to our estimates.  Our main competitor in Argentina is Compañía Cervecerías Unidas S.A. which held an approximate 20% market share in 2016 according to our estimates. The Argentine CSD Market According to our estimates, in 2016, annual sales volume of the Argentine CSD market was 43.7  million hectoliters.  In Argentina, 50% of our CSD volume is distributed directly by us and 50% is distributed through exclusive third-party distributors.  Non-returnable bottles represented 86% of our CSD sales in that country in 2016. We are the exclusive Pepsi bottlers in Argentina and our most important CSD brand in that country isPepsi.  We had a 20% share of the Argentine CSD market in 2016, according to our estimates, and were second in that market only to The Coca-Cola Company. Bolivia The Bolivian Beer Market According to our estimates, the annual sales volume of the Bolivian beer market was 3.5 million hectoliters in 2016.  The Bolivian market is strongly influenced by macroeconomic trends and governmental regulatory and fiscal policies. In Bolivia, 98% of our beer volumes is directly distributed by us and 2% is distributed through exclusive third-party distributors.  Our main package presentation in Bolivia is the 620-milliliter returnable glass bottle, which accounted for 33% of our sales in 2016. Our most important beer brands in Bolivia arePaceña,TaquiñaandHuari.  We are the leading beer producer in Bolivia with a 96% market share in 2016, according to our estimates. The Bolivian CSD Market In March 2009, we, through Quinsa, acquired from SABMiller 100% of Bebidas y Aguas Gaseosas Occidente S.R.L., becoming the exclusive bottler of Pepsi in Bolivia. According to our estimates, in 2016, the annual sales volume of the Bolivian CSD market was 6.4 million hectoliters. 44% of our CSD volumes in Bolivia is directly distributed by us and 56% is distributed through exclusive third-party distributors, while 99% of our CSD sales in that country in 2016 were through non-returnable bottles.


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Chile According to our estimates, the annual sales volume of the Chilean beer market was 9 million hectoliters in 2016.  Beer consumption in Chile has increased every year since 2009.  Our most important beer brands in Chile areBecker,Corona,BálticaandStella Artois, where our market share has been growing in the last years. In 2015, we became the exclusive distributors of theCoronabrand in Chile, and since January 2016 we also started to import and distributeBudweiserin Chile. Paraguay According to our estimates, the annual sales volume of the Paraguayan beer market was 3.7 million hectoliters in 2016, excluding contraband. The market for beer in Paraguay has traditionally distinguished itself from those in the southern cone countries in certain respects because (1) beer has not faced significant competition from wine as an alternative alcoholic beverage; (2) the domestic beer market has faced significant competition from imported beer, which accounted for a far higher market share in Paraguay than in neighboring countries; and (3) the seasonality of our products is lower due to warmer conditions throughout the year. In Paraguay, 70% of our beer volumes is directly distributed by us and 30% is distributed through exclusive third-party distributors.  Our main package presentation in Paraguay is the can, which accounted for 42% of our sales in 2016. Our most important beer brands in Paraguay areBrahmaandOuro Fino, with our market share in that country reaching 76.4% in 2016, according to our estimates.  In March 2009, we also became the exclusive distributors of theBudweiserbrand in Paraguay. Uruguay The Uruguayan Beer Market According to our estimates, the annual sales volume of the Uruguayan beer market was 0.9 million  hectoliters in 2016.  Our Latin America South business unit manages both the beer and CSD businesses in Uruguay out of a facility based in that country. In Uruguay, 25% of our beer volumes is directly distributed by us and 75% is distributed through exclusive third-party distributors.  Our main package presentation in Uruguay is the 1-liter returnable glass bottle, which accounted for 79% of our sales in 2016. Our most important beer brands in Uruguay arePilsenandPatricia, with our market share reaching 95.3%  in 2016, according to our estimates. The Uruguayan CSD Market According to our estimates, in 2016, the annual sales volume of the Uruguayan CSD market was 3.5 million hectoliters. In Uruguay, 38% of our CSD volume is directly distributed by us and 62% is distributed through exclusive third-party distributors.  Non-returnable bottles account for 87% of our sales in that country in 2016.  Our most important brand in Uruguay is Pepsi, with The Coca-Cola Company being our main competitor.


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Colombia In May 2016, we entered into an agreement with ABI pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador.  As a result of this sale, which closed on December 31, 2016, we no longer maintain any operations in Colombia. According to our estimates, our share of the Colombian beer market was approximately 0.6% in 2016. In Colombia, 100% of our beer volumes were distributed through third-party distributors.  Our main package presentation in Colombia was the 355-milliliter non-returnable bottle, which accounted for approximately 73.2% of our sales in 2016, and our most important beer brands in Colombia were premium brands, likeCoronaandBudweiser. Ecuador In May 2016, we entered into an agreement with ABI pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador.  As a result of this transaction, which closed on December 31, 2016, we no longer maintain any operations in Ecuador. According to our estimates, our share of the Ecuadorian beer market was approximately 6.3% in 2016.  The main packaging presentation in the Ecuadorian beer market was the returnable, 600-milliliter glass bottle, predominantly sold in small retail stores.  The market leader of the Ecuadorian beer market was SABMiller. Our main beer brands in Ecuador wereBrahmaandBudweiser, and our distribution system in Ecuador was comprised of direct distribution operations in Guayaquil and Quito, and third-party distributors around the country. Peru In May 2016, we entered into an agreement with ABI pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador.  As a result of this transaction, which closed on December 31, 2016, we no longer maintain any operations in Peru. According to our estimates, our share of the beer market in Peru was approximately 2.4% in 2016.  The main packaging presentation was the returnable, 630-milliliter glass bottle, predominantly sold in small retail stores.  The market leader of the Peruvian beer market was SABMiller. Our main beer brands in Peru wereBrahma Löwenbräu,Corona,andStella Artoisand the distribution system used for our beer business was also used for our CSD sales, and was comprised of direct distribution operations and third-party distributors. Canada - Labatt The Canadian Beer Market Our Canada business segment is represented by the Labatt operations, which sells domestic and ABI beer brands, a portfolio of ready-to-drink and cider brands, and exports theKokaneebeer brand to the United States. According to our estimates, the annual sales volume in the Canadian beer market was 22.3 million hectoliters in 2016, of which Labatt, the market leader, had a volume share of 42.9%.  The main packaging presentation in that country is the returnable, 341-milliliter glass bottle, and the 355-milliliter aluminum can, which is predominantly sold in privately owned and government owned retail stores in addition to privately owned on-trade establishments.  Our main competitor in Canada is Molson Coors, but we also compete with smaller brewers, such as Sleeman Breweries Ltd., or Sleeman, and Moosehead Breweries Ltd. Our main brands in Canada areBudweiserandBud Light(brewed and sold under license from ABI’s subsidiary Anheuser-Busch, Inc., or Anheuser-Busch), along withCorona,Labatt Blue,Alexander Keith’s, Stella ArtoisandKokanee.  Our distribution system in Canada is structured in different ways across the country, as further explained below.


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In January 2016, we, through our subsidiaries, acquired Mark Anthony Group’s ready-to-drink, cider and craft beer business in the Canadian market, and in April 2016, a subsidiary of Labatt Brewing Company Limited, one of our wholly-owned subsidiaries, acquired Archibald Microbrasserie, known for its local beers and seasonal specialties. Distribution in Ontario In Ontario, the province with the largest beer consumption in Canada, we own together with other brewers a distribution and retail company incorporated in 1927 named Brewers Retail Inc., the retail component of which carries out business as The Beer Store, or TBS.  In 2015, we finalized a new Master Framework Agreement, or MFA, with the government of the Province of Ontario that specifies TBS’s role as a retailer and distributor of beer. Under the new MFA, TBS will continue, until 2025, to be the dominant retailer for pack sizes larger than six bottles or cans of beer.  The Liquor Control Board of Ontario, or LCBO, a chain of liquor stores owned by the government of the Province of Ontario, will continue to have the ability to sell beer.  Most LCBO stores are limited to selling pack sizes of six bottles or cans of beer or less.  Under the new MFA up to 450 grocery stores may also be granted a license to sell beer in pack sizes of six bottles or cans or less. TBS ownership is now available to all qualifying Ontario-based brewers.  TBS’s new 15-member Board of Directors will be made up of the following members:  four directors nominated by Labatt;  four directors nominated by Molson Coors;  four independent directors nominated by a selection committee jointly represented by the Province of Ontario, Labatt and Molson-Coors; two directors nominated by larger brewers with TBS sales greater than 50,000 hectoliters per year; one director nominated by small Ontario-based brewers who sell less than 50,000 hectoliters per year through TBS. TBS operates on a cost recovery model under which it charges volume-based fees for services it provides to the brewers.  The nature of TBS’s business requires compliance with laws and regulations and oversight by the Province of Ontario.  The Liquor Control Act, the Liquor License Act and the Alcohol and Gaming Regulation and Public Protection Act are administered by the Minister of Finance or the Attorney General, which maintains control of the beverage alcohol sectors through the Liquor Control Board of Ontario and the Alcohol and Gaming Commission of Ontario. Distribution in Quebec Quebec is the province in Canada with the second largest beer consumption.  In this province there are no exclusive rights for the sales of beer, and both the on-premise and off-premise sales channels are mostly comprised of privately owned stores.  The SAQ, a government-operated liquor store, sells a select few beer brands that are not available in the private retail system. We (as well as our competitors) sell our products in Quebec through a direct sales and distribution system. Distribution in the Western Provinces Molson and Labatt are each a shareholder in Brewers Distributors Limited, which operates a distribution network for beer in the four western provinces of British Columbia, Alberta, Manitoba and Saskatchewan, as well as three territories (Yukon, the Northwest Territories and Nunavut).  In Alberta, some volume is also sold through a third-party wholesaler.  In these Western Provincial markets, there are both privately controlled retail stores (such as in Alberta and British Columbia) and government-controlled retail stores (such as in British Columbia, Manitoba and Saskatchewan).


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Distribution in the Atlantic Provinces We distribute and sell our products in the Atlantic Provinces (including New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island) through (1) distribution and retail networks controlled by the government in the provinces of Nova Scotia, New Brunswick and Prince Edward Island; and (2) private distributors in Newfoundland. Exports to the United States As a result of the U.S. antitrust review of the transaction involving InBev N.V./S.A. (as ABI was then called) and Anheuser-Busch, in February 2009 InBev N.V./S.A.’s subsidiary InBev USA, LLC ceased to act as the exclusive importer of Labatt branded beer in the U.S. for Labatt.  At that time, KPS Capital Partners, LP, or KPS received from Labatt the perpetual license to brew Labatt branded beer in the United States or Canada solely for sale for consumption in the United States and to use the relevant trademarks and intellectual property to do so.  Further, Labatt agreed to continue to brew and supply the Labatt branded beer for KPS on a provisional basis until March 2012.  During 2011 and the first quarter of 2012, KPS volumes were phased out to Molson Coors Canada as part of the production agreement signed in August 2010.  Separately, in order to ensure that we are adequately compensated, ABI also agreed to indemnify us in connection with certain events related to the perpetual license.  See “Item 4. Information on the Company—B. Business Overview—Licenses—Licensing Agreements with ABI.” Beer and CSD Production Process The basic brewing process for most beers is straightforward, but significant know-how is involved in quality and cost control.  The most important stages are brewing and fermentation, followed by maturation, filtering and packaging.  Although malted barley (malt) is the primary ingredient, other grains such as unmalted barley, corn, rice or wheat are sometimes added to produce different beer flavors.  The proportion and choice of other raw materials varies according to regional taste preferences and the type of beer. The first step in the brewing process is making wort by mixing malt with warm water and then gradually heating it to approximately 75°C in large mash turns to dissolve the starch and transform it into a mixture, called “mash,” of maltose and other sugars.  The spent grains are filtered out and the liquid, now called “wort,” is boiled.  Hops are added at this point to give a special bitter taste and aroma to the beer, and help preserve it.  The wort is boiled for one to two hours to sterilize and concentrate it, and extract the flavor from the hops.  Cooling follows, using a heat exchanger.  The hopped wort is saturated with air or oxygen, essential for the growth of the yeast in the next stage. Yeast is a micro-organism that turns the sugar in the wort into alcohol and carbon dioxide.  This process of fermentation takes five to eleven days, after which the wort finally becomes beer.  Different types of beer are made using different strains of yeast and wort compositions.  In some yeast varieties, the cells rise to the top at the end of fermentation.  Ales and wheat beers are brewed in this way.  Pilsen beers are made using yeast cells that settle to the bottom. During the maturation process the liquid clarifies as yeast and other particles settle.  Further filtering gives the beer more clarity.  Maturation varies by type of beer and can take as long as three weeks.  Then the beer is ready for packaging in kegs, cans or bottles. CSDs are produced by mixing water, flavored concentrate and sugar or sweetener.  Water is processed to eliminate mineral salts and filtered to eliminate impurities.  Purified water is combined with processed sugar or, in the case of diet CSDs, with artificial sweeteners and concentrate.  Carbon dioxide gas is injected into the mixture to produce carbonation.  Immediately following carbonation, the mixture is packaged.  In addition to these inputs, delivery of the product to consumers requires packaging materials such as PET bottles, aluminum cans, labels and plastic closures. For information on our production facilities, see “—D. Property, Plant and Equipment.”


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Sources and Availability of Raw Materials Beer The main raw materials used in our production are malt, non-malted cereals, hops and water. Barley and Malt Malt is widely available and our requirements are met by domestic and international suppliers as well as our own malting facilities.  In the case of our beer operations in Brazil, approximately 80% of our malt needs are supplied by our own malting facilities located in the south of Brazil, Argentina and Uruguay. For the rest of our needs, our most significant malt supplier is Cooperativa Agroindustrial Agraria in Brazil.  Market prices for malt are volatile, and depend on the quality and the level of production of the barley crop across the world, as well as on the intensity of demand. We purchase barley for our malting facilities directly from South America farmers.  Barley prices depend on the quality of the barley crop and on the prices for wheat on the main boards of trade across the world.  We enter into future contracts or financials instruments to avoid the impact of short-term volatility in barley and malt prices on our production costs.  See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” Hops There are two types of hops used in our beer production: hops used to give beer its distinctive bitter flavor, which we generally import from the United States, and hops used to give beer its distinctive aroma, which we generally import from Europe.  The supply of hops is concentrated into a few international companies, namely the Barth-Haas Group, Hopsteiner, Kalsec and HVG. Non-malted Cereals Corn syrup is purchased from Ingredion, Cargill and Tereos Syral.  Corn is purchased to produce grits in-house in some plants and corn grits and rice are purchased in other plants from local suppliers and are generally widely available. Water Water represents a small portion of our raw material costs.  We obtain our water requirements from several sources, such as: lakes and reservoirs, deep wells located near our breweries, rivers adjoining our plants and public utility companies.  We monitor the quality, taste and composition of the water we use, and treat it to remove impurities and to comply with our high quality standards and applicable regulations.  As a result of advances in technology, we have continuously reduced our water consumption per hectoliter produced. CSDs The main raw materials used in our production are: concentrate (including guaraná extract), sugar, sweetener, juices, water and carbon dioxide gas.  Most of these materials are obtained from local suppliers. Guaraná Berries We have a 1,070 hectare farm that provides us with 29 tons of guaraná seeds (berries) per year, or about 10.0% of our requirements, with the remainder purchased directly from independent farmers in the Amazon region as well as other guaraná available regions in Brazil.  The focus of our own farm is to provide Guaraná seedlings for local producers and promote the sustainable cultivation of Guaraná in the Amazon Region.  Approximately 50 thousand seedlings are donated per year.


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Concentrates We have a concentrate facility in the north of Brazil which produces the concentrates to meet our requirements for the production of our proprietary brandGuaraná Antarcticaamong others.  The concentrate for Pepsi CSD products is purchased from PepsiCo. Sugar Sugar is widely available and is purchased by our regional sourcing entity.  We enter into derivative instruments to avoid the impact of short-term volatility in sugar prices on our production costs.  See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.” Juices Orange, lemon, lime and grape are purchased only in Brazil. Our main suppliers are Louis Dreyfus Commodities, Dohler, Citrus Juice, Citrosuco, Golden and Tecnovin. Other We buy all of the fruit juice, pulp and concentrate that we use in the manufacture of our fruit-flavored CSDs. Packaging Packaging costs are comprised of the cost of glass and PET bottles, aluminum cans, plastic film (shrink and stretch), paper labels, plastic closures, metal crowns and paperboard.  We enter into derivative instruments to mitigate the risks of short-term volatility in aluminum prices on our production costs; for further information on this matter see “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”  For other materials, we usually set a fixed price for the period in accordance with the prevailing macroeconomic conditions. In April 2008, we started operating a glass bottle producing facility in Rio de Janeiro, which we expanded in November 2015.  This unit now has a yearly production capacity of 205 thousand tons of glass. Our main aluminum can suppliers are Ball and Crown.  Our main external glass bottles suppliers are Verallia (part of St. Gobain group), Owens-Illinois Glass Containers and Vidroporto in addition to our vertical operations at our Rio de Janeiro glass bottle facility.  We obtain the labels for our beer and CSD primarily from local suppliers; in Brazil, the majority of our requirements are met by a printing house that belongs to FAHZ and is operated by us pursuant to a lease agreement.  Plastic closures are principally purchased from Videolar-Inova and CSI.  PET pre-forms are principally purchased from Lorenpet group (CPR, Centralpet, LEB and Lorenpet), and Amcor.  Crown caps in Brazil are mainly sourced from our vertical operation in Manaus (Arosuco), but part of the volume used is produced by Aro.  These producers also supply some of our CAC operations as well as Mecesa, Tapon Corona and Allucaps (Mexico), Pelliconi (USA), Tapas Antillanas (Dominican Republic) and Fadesa (Ecuador). Regulation All our operations are subject to local governmental regulation and supervision, including (1) labor laws; (2) social security laws; (3) public health, consumer protection and environmental laws; (4) securities laws; and (5) antitrust laws.  In addition, regulations exist to (1) ensure healthy and safe conditions in facilities for the production, bottling, and distribution of beverages and (2) place restrictions on beer consumption. Environmental laws in the countries where we operate are mostly related to (1) the conformity of our operating procedures with environmental standards regarding, among other issues, the emission of gas and liquid effluents and (2) the disposal of one-way packaging.


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Governmental restrictions on beer consumption in the markets where we operate vary from one country to another, and in some instances, from one local region to another.  The most relevant restrictions are: each country has a minimum legal drinking age that is established by the government; the beer legal drinking age varies from 18 to 21 years;

some local and federal governments require that retail stores own special licenses for the sale of alcohol; this is the case in some regions of Argentina and Canada;

some local governments in Canada establish a minimum price for beer sales, which is named Social Reference Price, or SRP.  There is a specific SRP for each different packaging presentation.  The SRP may vary from one province to another;

beer sales in the off-premise channel in the Canadian provinces of New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island and Saskatchewan are restricted to specific government-owned stores; and

beer sales in the off-premise channel in Canada in the Province of Ontario are restricted to two chains of retail stores.  One of them is the LCBO, which is government owned, and the other is TBS, jointly owned by Labatt, Molson and Sleeman.  The Alcohol and Gaming Commission of Ontario regulates the alcohol industry. Many governments also impose restrictions on beer advertisement, which may affect, among other issues, (1) the media channels used, (2) the contents of advertising campaigns, and (3) the time and places where beer can be advertised. Marketing Our marketing initiatives are concentrated in off-trade and on-trade initiatives.  Off-trade initiatives comprise mass media vehicles, such as television, radio, magazines and internet websites.  On-trade initiatives include banners, and all types of enhancements to the point of sale, such as branded coolers and decorated furniture. Licenses Pepsi We have had a long-term agreement with PepsiCo since 1997 whereby we have been granted the exclusive right to bottle, sell and distribute certain brands of PepsiCo’s portfolio of CSDs in Brazil, includingPepsi-Cola,Seven Up,Gatorade,H2OH!, andLipton Ice Tea.  The agreements will expire on December 31, 2017, and, thereafter, will be automatically renewed for an additional ten-year term if certain conditions set in that agreement are met. We also have agreements with PepsiCo to manufacture, bottle, sell, distribute and market some of its brands in the Dominican Republic.  We are also, through our subsidiaries, PepsiCo’s bottler for Argentina, Uruguay, Bolivia and Dominican Republic.  In 2016, sales volumes of PepsiCo products represented approximately 34% of our total CSD & NANC sales volumes in Brazil, nearly 71% of our total CSD & NANC sales volumes in the Dominican Republic and all of our CSD & NANC sales volumes in Argentina, Bolivia and Uruguay. Licensing Agreements with ABI Effective January 1998, Labatt entered into long-term licensing agreements with Anheuser-Busch whereby Labatt was granted the exclusive right and license to manufacture, bottle, sell, distribute and market some of Anheuser-Busch’s brands, including theBudweiserandBud Lightbrands, in Canada, including the right to use Anheuser-Busch’s trademarks for those purposes.  The agreements expire in January 2098 and are renewable by either party for a second term of 100 years.  In 2016, the Anheuser-Busch brands sold by Labatt represented approximately 56% of Labatt’s total sales volumes.  According to our estimates, theBudweiserbrand is currently the largest selling brand, whileBud Lightis the third largest selling brand, in Canada in terms of volume.


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We also have a licensing agreement with Anheuser-Busch which allows us to exclusively produce, distribute and marketBudweiserin Brazil.  We also have certain arrangements to sell and distributeBudweiserproducts in Paraguay, Guatemala, Dominican Republic, El Salvador, Nicaragua, Uruguay and Chile, andCoronain Argentina, Bolivia, Paraguay, Uruguay, Chile, Guatemala, El Salvador, Panama, Nicaragua and Canada. We also have a cross-licensing agreement with ABI through which we are allowed to produce, bottle, sell and distribute beer under theStella Artoisbrand in Latin America and Canada on an exclusive basis, and ABI is allowed to produce, bottle, sell and distribute beer under the brandBrahmain Europe, Asia, Africa and the United States on an exclusive basis.  Ambev has agreed not to directly or indirectly produce, bottle, distribute, sell or resell (or have an interest in any of these), any other European premium branded beer in Latin America, and ABI has agreed to be bound by the same restrictions relating to any other Latin American premium branded beer in Europe, Asia, Africa and the United States. As a result, in June 2005 we launchedStella Artoisin Brazil and, since March 2005, ABI has been distributingBrahmabeer in the United States and several countries such as the United Kingdom, Spain, Sweden, Finland and Greece. Labatt and ABI have an arrangement through which Labatt distributes certain ABI beer brands in Canada. We also have ABI’s subsidiary, Metal Container Corp., as one of our can suppliers. We have also a licensing agreement with Grupo Modelo, S.A.B. de C.V., a subsidiary of ABI, to import, promote and resell Corona products (Corona Extra,Corona Light,Coronita,PacificoandNegra Modelo) in Latin America countries, including Brazil, as well as in Canada. Taxation Beer Taxation on beer in the countries where we operate is comprised of different taxes specific to each jurisdiction, such as an excise tax and a value-added tax.  The amount of sales tax charged on our beer products in 2016, represented as a percentage of gross sales, was: 46.9% in Brazil; 21.3% in Canada; 13% in Central America; 31.6% in Ecuador; 44.4% in Peru; 41% in the Dominican Republic; 25.6% in Argentina; 31.5% in Bolivia; 31.5% in Chile; 16% in Paraguay; and 31.4%  in Uruguay. CSD & NANC Taxation on CSD & NANC in the countries where we operate is comprised of taxes specific to each jurisdiction, such as an excise tax and a value-added tax.  The amount of taxes charged on our CSD & NANC products in 2016, represented as a percentage of gross sales, was 39.9% in Brazil; 18% in the Dominican Republic; 23.6% in Argentina; 22.7%  in Bolivia; and 30.0% in Uruguay. Changes to Brazilian Taxes on Beverages In November 2008, the Brazilian Congress approved changes (effective as of January 1, 2009) to the taxable amount and tax rates for (1) the IPI Excise Tax, (2) the PIS Contribution and (3) the COFINS.  Under the previous system, these taxes were paid as a fixed rate per hectoliter by all taxpayers.  Under the system approved in 2008, higher priced brands pay higher taxes per hectoliter than lower priced brands based on a consumer price reference table.  The taxable amount is calculated through the application of a rate to the consumer price established in the respective consumer price reference table.  In recent years, taxes on the beverage industry were increased at the Brazilian federal and state levels.  In April 2013, an aggregate increase of 2% was approved with respect to the rates of the IPI Excise Tax, the PIS Contribution and the COFINS on beer sales.  In addition, in 2014 the IPI Excise Tax, the PIS Contribution and the COFINS were subject to another aggregate increase of 4% in April and 2% in October with respect to beer sales.  Moreover, in January 2015 the Brazilian federal government enacted Law No. 13,097, which introduced a new federal taxation model for beer and soft drinks.  The law is a result of the combined efforts of the Brazilian federal government and beverage companies with a view to creating a less complex and more predictable tax system for the industry.  The new tax model came into force on May 1, 2015. Among other changes, the new set of rules establishes that the IPI Excise Tax, the PIS Contribution and the COFINS are due by manufacturers and wholesalers, and shall be calculated based on the respective sales price (ad valorem).  Under the previous legislation, the referred taxes were due exclusively by the manufacturer at fixed amounts per liter of beer or soft drink produced (ad rem).


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In 2012, the following six Brazilian states increased their rates for ICMS Value-Added Tax applicable to beer: Minas Gerais, Sergipe, Amazonas, Mato Grosso, Bahia and the Federal District.In addition, in 2015 the States of São Paulo, Rio de Janeiro, Minas Gerais, Distrito Federal, Rio Grande do Sul, Ceará, Amapá, Rondonia, Amazonas, Tocantins, Piauí, Maranhão, Rio Grande do Norte, Bahia, Pernambuco, Paraíba, Alagoas, Sergipe and Mato Grosso do Sul increased their ICMS Value-Added Tax rate applicable to beer and soft drinks.In 2016, two Brazilian states, Rio de Janeiro and Acre, increased their respective ICMS Value-Added Tax rates applicable to beer, scheduled to take effect in 2017. C.            Organizational Structure Our two direct controlling shareholders, IIBV and AmBrew, both of which are subsidiaries of ABI, together with FAHZ, held in aggregate 72% of our total and voting capital stock (excluding treasury shares) as of December 31, 2016. ABI indirectly holds shares in us representing 61.9% of our total and voting capital stock (excluding treasury shares) as of December 31, 2016.  ABI thus has control over us, even though (1) ABI remains subject to the Ambev Shareholders’ Agreement and (2) ABI is controlled by Stichting that represents an important part of interests of BRC and the Interbrew Founding Families.  For further information on these matters see “Item 4. Information on the Company—A. History and Development of the Company—The InBev-Ambev Transactions” and “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders —Ambev Shareholders’ Agreement.”


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We conduct the bulk of our operations in Brazil directly.  We also indirectly control Labatt and the operations conducted by our CAC and Latin America South units.  The following chart illustrates the ownership structure of our principal subsidiaries as of December 31, 2016 based on total share capital owned. Organizational Structure  D.            Property, Plant and Equipment Our properties consist primarily of brewing, soft drink production, malting, bottling, distribution and office facilities in the countries where we operate. As of December 31, 2016, our aggregate beer and CSD production capacity was 280.4 million hectoliters per year. In 2016, the total production at the facilities set forth below was equal to 159.7 million hectoliters.


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The following is a list of our principal production facilities as of December 31, 2016:  Latin America NorthPlant

   

   Type of PlantBrazilAgudos, São Paulo

   

   BeerEquatorial, Maranhão

   

   BeerJacareí, São Paulo

   

   BeerLages, Santa Catarina

   

   BeerNatal, Rio Grande do Norte

   

   BeerGuarulhos, São Paulo

   

   BeerSete Lagoas, Minas Gerais

   

   BeerUberlândia, Minas Gerais

   

   BeerPetrópolis, Rio de Janeiro

   

   BeerPonta Grossa, Paraná

   

   BeerWals/Belo Horizonte, Minas Gerais

   

   BeerColorado/Ribeirão Preto, São Paulo

   

   BeerJoão Pessoa, Paraiba

   

   BeerÁguas Claras, Sergipe

   

   MixedAquiraz, Ceará

   

   MixedCamaçari, Bahia

   

   MixedCebrasa, Goiás

   

   MixedCuiabá, Mato Grosso

   

   MixedJaguariéna, São Paulo

   

   MixedCachoeiras de Macacu, Rio de Janeiro

   

   MixedItapissuma, Pernambuco

   

   MixedNova Rio, Rio de Janeiro

   

   MixedManaus, Amazonas

   

   MixedMinas, Minas Gerais

   

   MixedTeresina, Piauí

   

   MixedÁguas Claras do Sul, Rio Grande do Sul

   

   MixedPiraí, Rio de Janeiro

   

   MixedCuritibana, Paraná

   

   Soft drinksContagem, Minas Gerais

   

   Soft drinksJundiaí, São Paulo

   

   Soft drinksSapucaia, Rio Grande do Sul

   

   Soft drinksSão Paulo, São Paulo

   

   LabelsManaus, Amazonas

   

   Crown CapCampo Grande, Rio de Janeiro

   

   Glass BottleManaus, Amazonas

   

   ConcentrateMaltaria Navegantes, Rio Grande do Sul

   

   MaltMaltaria Passo Fundo, Rio Grande do Sul

   

   MaltCACAmbev Centroamerica, Guatemala

   

   BeerSanto Domingo, Dominican Republic

   

   BeerHato Nuevo, Dominican Republic

   

   Soft drinksSaint Vincent

   

   MixedDominica

   

   MixedCuba

   

   BeerBarbados

   

   MixedPanama

   

   Mixed


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Latin America SouthPlant

   Type of PlantCympay, Uruguay

   MaltMusa, Uruguay

   MaltMalteria Pampa, Argentina

   MaltQuilmes, Argentina

   BeerCorrientes, Argentina

   MixedLa Paz, Bolivia

   BeerSanta Cruz, Bolivia

   BeerCochabamba, Bolivia

   BeerHuari, Bolivia

   BeerTarija, Bolivia

   BeerSantiago, Chile

   BeerMinas, Uruguay

   BeerYpane, Paraguay

   BeerZarate, Argentina

   BeerMendoza, Argentina

   MixedMontevideo, Uruguay

   MixedCordoba, Argentina

   Soft DrinksTrelew, Argentina

   Soft DrinksBuenos Aires South, Argentina

   Soft Drinks and JuicesTucuman, Argentina

   Soft DrinksTres Arroyos, Argentina

   MaltLlavallol, Argentina(1)

   MaltAcheral, Argentina

   BeerCoroplas, Argentina

   Crown CapFPV, Paraguay

   BottlesSacaba, Bolivia

   Soft DrinksEl Alto, Bolivia

   Soft DrinksEnalbo, Bolivia

   Cans__________________________(1) This malting facility has been leased to third parties for 10 years as from 2007.  CanadaPlant

   

   Type of PlantSt. John’s

   

   BeerHalifax

   

   BeerMontreal

   

   BeerLondon

   

   BeerEdmonton

   

   BeerCreston

   

   BeerMill Street

   

   BeerTurning Point

   

   BeerArchibald

   

   BeerAlexander Keith

   

   Beer


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ITEM 4A.             UNRESOLVED STAFF COMMENTS Not applicable. ITEM 5.                OPERATING AND FINANCIAL REVIEW AND PROSPECTS A.            Operating Results Introduction The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statements included elsewhere in this annual report on Form 20-F.  This annual report contains forward-looking statements that involve risks and uncertainties.  Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors including, without limitation, those set forth in “Cautionary Statement Regarding Forward-Looking Information” and the matters set forth in this annual report generally. We have prepared our audited consolidated financial statements as of December 31, 2016, 2015 and 2014 and for the three years ended December 31, 2016 inreaisand in accordance with IFRS as issued by the IASB. The financial information and related discussion and analysis contained in this item are in accordance with IFRS as issued by the IASB.  The amounts are in millionreais, unless otherwise stated. Critical Accounting Policies The preparation of financial statements in conformity with IFRS requires our management to make judgments, estimates and assumptions that affect the application of accounting practices and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on past experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for decision making regarding the judgments about carrying amounts of assets and liabilities that are not readily evident from other sources. Actual results may differ from these estimates. Notes 3 and 4 to our audited consolidated financial statements includes a summary of the critical accounting policies applied in the preparation of these financial statements.  The estimates and assumptions are reviewed on a regular basis. Changes in accounting estimates may affect the period in which they are realized, or future periods. Goodwill Goodwill arises on the acquisition of subsidiaries, associates and joint arrangements. Goodwill is determined as the excess (i) of the consideration paid; (ii)  of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired at the date of acquisition. All business combinations are accounted for by applying the purchase method. In conformity with IFRS 3 Business Combinations, goodwill is carried at cost and is not amortized, but tested for impairment at least annually, or whenever there are indications that the cash generating unit to which the goodwill has been allocated may be impaired. Impairment losses recognized on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is expressed in the functional currency of the subsidiary or joint operation to which it relates and translated to Reais using the year-end exchange rate.


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Regarding associates and joint ventures, goodwill is included in the carrying amount of the investment in the associate/joint ventures. If our interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized exceeds the cost of the business combination such excess is recognized immediately in the income statement. Expenditure on internally generated goodwill is expensed as incurred. Goodwill includes the effects of the predecessor basis of accounting. Business Combinations Between Entities Under Common Control Business combinations between entities under common control have not been addressed by IFRS’s. The IFRS 3 is the pronouncement that shall be applied to business combinations, however it explicitly excludes business combinations between entities under common control from its scope. Therefore, in accordance with IAS 8, Management has adopted an accounting practice which is consistent with United States Generally Accepted Accounting Principles (USGAAP) and United Kingdom Generally Accepted Accounting Principles (UKGAAP), the predecessor basis of accounting to record the carrying amount of the asset received, as recorded by the parent company. Under the predecessor basis of accounting, when accounting for a transfer of assets or a swap of shares between entities under common control, the entity that receives the net assets or the equity interests (the acquirer) shall initially record the assets and liabilities transferred at their parent book value at the transfer date. If the book value of assets and liabilities transferred by the parent are different from the historical cost registered by the controlling entity of the entities under common control (the ultimate parent), the financial statements of the acquirer shall reflect the assets and liabilities transferred at the same cost of the ultimate parent. Regarding transactions between entities under common control that involve the disposal or transfer of assets from the subsidiary to its parent company, i.e. - above the level of our consolidated financial statement –, the Company assess the existence of (i) conflict of interests and (ii) economic substance and purpose. Having fulfilled these assumptions, the Company adopted as a policy the concepts of IAS 16 in order to provide adequate visibility and fair impact on the amount of the distributable results to our shareholders, specially the minority shareholders. This policy also includes assets acquired through the swap of non-cash assets, or swap with a combination of cash and non-cash assets. The assets subject to the swap may be of equal or different nature. The cost of such asset is measured at fair value, unless (i) the swap transaction is not commercial in nature, or (ii) the fair value of the asset received (and the asset assigned) cannot be reliably measured. The acquired asset is measured through this way even if the assignor entity cannot immediately exclude the asset from its books. If the acquired asset is not measurable at fair value, its cost is determined by the book value of the assigned asset. Whenever there is a distribution of assets that is not recorded as cash, the asset, before its distribution, is registered at fair value in the income account. This procedure is applicable to the distributions in which the assets are equal in nature and therefore treated equitably. However, similarly to IFRIC 17, in the absence of a specific accounting practice for transactions under common control, we apply this procedure in our accounting practice. Also, we apply the same procedure to sales (products, supplies, etc.) we perform to our controlling entity, where the positive result of the sale is recognized in the income account. Joint Arrangements Joint arrangements are all entities over which we share control with one or more parties. Joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. ****


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#### Employee Benefits

Post-employment benefits



Post-employment benefits include pensions managed in Brazil by Instituto Ambev de Previdência Privada, or the IAPP, post-employment dental benefits and post-employment medical benefits managed by FAHZ. Usually, pension plans are funded by payments made by both us and our employees, taking into account the recommendations of independent actuaries. Post-employment dental benefits and post-employment medical benefits are maintained by the return on FAHZ’s plan assets. If necessary, we may contribute some of its profit to FAHZ. We manage defined benefit and defined contribution plans for employees of its companies located in Brazil and in its subsidiaries located in the Dominican Republic, Uruguay, Bolivia and Canada. We maintain funded and unfunded plans. Defined Contribution Plans A defined contribution plan is a pension plan under which we pay fixed contributions into a fund. We have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees for the benefits relating to employee service in the current and prior periods. The contributions of these plans are recognized as expense in the period they are incurred. Defined Benefit Plans Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. For defined benefit plans, expenses are assessed separately for each plan using the projected credit unit method. The projected credit unit method takes into account each period of service as giving rise to an additional unit of benefit to measure each unit separately. Under this method, the cost of providing pensions is charged to the income statement during the period of service of the employee. The amounts charged to the income statement consist of current service cost, interest cost, past service costs and the effect of any settlements and curtailments. The obligations of the plan recognized in the balance sheet are measured at the present value of the estimated future cash outflows using a discount rate equivalent to the government’s bond rates with maturity terms similar to those of the obligation and the fair value of the plan assets. Past service costs result from the introduction of a new plan or changes to an existing plan. They are recognized immediately in the income statement, at the earlier of when: (i) the settlements / curtailments occurs, or (ii) we recognize related restructuring or termination costs, unless those changes are conditioned to the employee’s continued employment, for a specific period of time (the period in which the right is acquired). In such case, the past services costs are amortized using the straight-line method during the period in which the right was acquired. Actuarial gains and losses consist of the effects of differences between the previous actuarial assumptions and what has actually occurred, and the effects of changes in actuarial assumptions. Actuarial gains and losses are fully recognized in carrying value adjustments. Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling and the return on plan assets, both excluding net interest, are recognized in full in the period in which they occur in the statement of comprehensive income. Re-measurements are not reclassified to profit or loss in subsequent periods. When the amount of the defined benefit obligation is negative (an asset), we recognize those assets (prepaid expenses), to the extent of the value of the economic benefit available to us either from refunds or reductions in future contributions. Other Post-Employment Obligations We and our subsidiaries provide post-employment medical benefits, reimbursement of certain medication expenses and other benefits to certain retirees through FAHZ. These benefits are not granted to new retirees. The expected costs of these benefits are recognized over the period of employment, using an accounting methodology similar to that for defined benefit plans, including actuarial gains and losses.


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Termination Benefits Termination benefits are recognized as an expense at the earlier of: (i) when we are demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date, and (ii) when we recognize costs for a restructuring. Bonuses Bonuses granted to employees and managers are based on pre-defined company and individual target achievement. The estimated amount of the bonus is recognized as an expense in the period the bonus is earned. The bonus that is settled in shares are accounted for as share-based payments. Share-Based Payments Different share and share option programs allow our management and other members appointed by the Board of Directors to acquire our shares. The fair value of the share options is estimated at the grant date, using an option pricing model that is most appropriate for the respective option. Based on the expected number of options that will be exercised, the fair value of the options granted is recognized as an expense over the vesting period with a credit to equity. When the options are exercised, equity is increased by the amount of the proceeds received. Provisions Provisions, except for the mentioned on item disputes and litigation, are recognized when: (i) we have a present obligation (legal or constructive) as a result of past events; (ii) it is likely that a future disbursement will be required to settle the current obligation; and (iii) a reliable estimate of the amount of the obligation can be made. Provisions are determined by the current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase accruals are recognized as finance expense. Deferred and Current Income Tax and Social Contribution Income tax and social contribution for the year comprises current tax and deferred tax. Income tax and social contribution are recognized in the income statement, unless they relate to items recognized directly in comprehensive income or other equity accounts. In these cases the tax effect is also recognized directly in comprehensive income or equity account except interest on shareholder’s equity (see note 3 (p) to our consolidated financial statements). The current tax expense is the expectation of payment on the taxable income for the year, using tax rates enacted, or substantially enacted, at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred taxes are recognized using the balance sheet liability approach. This means that a deferred tax liability or asset is recognized for all taxable and tax deductible temporary differences between the tax and accounting basis of assets and liabilities. Under this method, a provision for deferred taxes is also calculated on the differences between the fair value of assets and liabilities acquired in a business combination and their tax basis. IAS 12 prescribes that no deferred tax liability on goodwill recognition, and no deferred tax asset/liability is recorded: (i) at the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss and (ii) on differences related to investments in subsidiaries to the extent that they are not reversed in the foreseeable future. The amount of deferred tax provided is based on the expectation of the realization or settlement of the temporary difference, using currently or substantially enacted tax rates.


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Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously. The deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available. The deferred income tax asset is reduced to the extent that it is no longer probable that the future taxable benefit will occur. Our aggregate weighted nominal tax rate applicable for the years ended December 31, 2016, 2015 and 2014 was 30.2%, 31.6% and 32.0%, respectively.  For the years ended December 31, 2016, 2015 and 2014, our IFRS effective tax rate was 2.4%, 22.0% and 14.0%, respectively. The main events that impacted the effective tax rate in 2016 were: non-taxable net financial and other income, considering the movement perceived in this line is related to incomes and expenses in subsidiaries, which occurs mainly due to foreign exchange variation;

government subsidies on sales taxes: we have state tax incentives within certain industrial development programs in the form of financing, deferral of tax payments or partial reductions of the amount due. Such investment subsidies arising from deferred and presumed ICMS credits are deductible for income tax purposes;

additional income tax of foreign associates taxed in Brazil: the reduction in this line, which is related to our subsidiaries foreign profits taxation in Brazil, is the outcome of a better management of our capital structure;

results of intercompany transactions taxed/deductible in Brazil: in this line are recorded the foreign exchange variation effect and the interest generated by intercompany transactions, between companies based in different jurisdictions. The main cause of the variation is related to foreign exchange;

deductible interest on net equity: Under Brazilian law, companies have the option to distribute interest on equity, or JCP, calculated based on the long-term interest rate, or TJLP, which are deductible for income tax purposes under the applicable legislation, whose approximate amount distributed in the year is R$5.4 billion;

withholding tax on dividends: variation explained by the reversal of a provision related to withholding tax on undistributed results of Argentine subsidiaries due to a change in the legislation that exempts from withholding tax the payment of dividends, the amount of which approximately R$300 million, as opposed to the constitution of provision and exchange variation effect in the approximate amount of R$672 million in the same prior period; and

recognition of deferred assets on tax loss carryforwards: this effect is mainly due to the recognition of deferred assets on tax loss carryforwards incurred in subsidiaries abroad in prior periods, which are now considered recoverable due to expectation of future profits (Paragraph 19 of IAS 12) and better management of the group's capital structure. We also benefit from Brazilian state tax incentive programs to promote industrial and social development including the deferral of payment of taxes. These state-based programs are to promote long-term increases in employment, industrial decentralization, as well as complement and diversify the industrial states. These incentives are recorded as income on an accrual basis and allocated at year-end to the tax incentive reserve account.


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Derivative Financial Instruments We use derivative financial instruments in order to mitigate against risks related to foreign currency, interest rates and commodity prices. Derivative financial instruments that, although contracted for hedging purposes, do not meet all hedge accounting criteria are recognized at fair value in the income statement. Derivative financial instruments are recognized initially at fair value. Fair value is the amount an asset could be realized and a liability settled, between knowledgeable parties, in an arm’s length transaction. The fair value of derivative financial instruments may be obtained from quoted market prices or from pricing models that take into account current market rates, and also credit risk quality of the counterpart. Subsequent to initial recognition, derivative financial instruments are re-measured to their fair value at the balance sheet date. Changes in fair value of derivative financial instruments are recognized in the income statement, except when they are designated as hedge instruments, when any effective portion of gain or loss is recognized directly in other comprehensive income. Cash flow, net investment or fair value hedge accounting is applied to all hedges that qualify for hedge accounting under IAS 39, including the required hedge documentation and hedge effectiveness tests. Cash Flow Hedge Accounting When a derivative financial instrument hedges the variability in cash flows of a recognized asset or liability, the foreign currency risk and the fluctuation of commodity prices associated with a highly probable forecasted transaction, the effective portion of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (cash flow hedging reserve). The ineffective portion of any resulting gain or loss is recognized in the income statement. When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss (at that point) remains in other comprehensive income and is reclassified in accordance with the above policy when the hedged transaction occurs. If the hedged transaction is no longer probable, the cumulative gain or loss recognized in other comprehensive income is recycled into the income statement immediately. Net Investment Hedge Accounting When a derivative financial instrument hedges the net investment in foreign operations, the effective part of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (translation reserve) , while any gains or losses relating to the ineffective portion are recognized in the income statement. On disposal of a foreign operation, the cumulative gains or losses recognized directly in other comprehensive income is transferred to the income statement. Fair Value Hedge Accounting When a derivative financial instrument hedges the variability in fair value of a recognized asset or liability or a firm commitment, any resulting gain or loss on the hedging instrument is recognized in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in the income statement. We do not apply the fair value hedge accounting when the hedge item expires, was sold or exercised.


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Derivative financial instruments at fair value through profit or loss



Certain derivative financial instruments do not qualify for hedge accounting purposes. Changes in fair value of such derivatives financial instruments are immediately recognized in income statement. Exceptional Items Exceptional items are those that, in our management’s judgment, need to be disclosed separately by virtue of their size or incidence. In determining whether an event or transaction is special, our management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence, and the potential of impact on the variation of profit or loss. These items are disclosed in the income statement or separately disclosed in the notes to the financial statements. Transactions that may give rise to exceptional items are principally restructuring activities, acquisition of subsidiaries, impairment losses, and gains or losses on disposal of assets and investments. Year Ended December 31, 2016 Compared to Year Ended December 31, 2015 In the periods discussed below, we conducted our operations through three business segments as follows: Latin America North,which includes our operations in Brazil, where we operate two divisions (the beer sales division and the CSD & NANC sales division), and our CAC operations, which includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica, Cuba, Guatemala (which also serves El Salvador, Honduras and Nicaragua), Barbados and, beginning on December 31, 2016, Panama.

Latin America South, which includes our operations in Argentina, Bolivia, Paraguay, Uruguay and Chile, and until December 31, 2016, Colombia, Ecuador and Peru.

Canada, represented by Labatt’s operations, which includes domestic sales in Canada and some exports to the U.S. market. The table below sets forth certain of our operating highlights for the years presented: Consolidated Financial Highlights2016

   2015

   % Change(in R$ million, except volume amounts,percentages and per share amounts)Sales volume—’000 hectoliters

   159,821.6

   169,078.2

   (5.5%)Net sales

   45,602.6

   46,720.2

   (2.4%)Net revenue per hectoliter—R$/hl

   285.3

   276.3

   3.3%Cost of sales

   (16,678.0)

   (16,061.4)

   3.8%Gross profit

   28,924.6

   30,658.8

   (5.7%)Gross margin (%)

   63.4%

   65.6%

   -Sales, marketing and distribution expenses

   (12,010.5)

   (11,177.9)

   7.4%Administrative expenses

   (2,166.1)

   (2,281.3)

   (5.0%)Other operating income/(expenses)

   1,223.1

   1,936.1

   (36.8%)Exceptional items

   1,134.3

   (357.2)

   417.6%Income from operations

   17,105.4

   18,778.5

   (8.9%)Operating margin (%)

   37.5%

   40.2%

   -Net income

   13,083.4

   12,879.2

   1.6%Net margin (%)

   28.7%

   27.6%

   -
 Margin Analysis The following table sets forth certain line items of our income statement expressed as percentages of net sales for the years ended December 31, 2016 and 2015: Year Ended December 31,2016

   2015(%)

   (%)Net sales

   100.0

   100.0Cost of sales

   (36.6)

   (34.4)Gross profit

   63.4

   65.6Sales, marketing and distribution expenses

   (26.3)

   (23.9)Administrative expenses

   (4.7)

   (4.9)Other operating income/(expenses)

   2.7

   4.1Exceptional items

   2.5

   (0.8)Income from operations

   37.5

   40.2


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Selected Financial Data by Business Segment The following table sets forth selected financial data by business segment, and business operations of Latin America North, for the years ended December 31, 2016 and 2015: Year Ended December 31,2016

   2015Brazil(1)

   CAC(1)

   LAS

   Canada

   Total

   Brazil(1)

   CAC(1)

   LAS

   Canada

   Total(in R$ million)Net sales

   24,954.6

   3,973.2

   10,212.9

   6,461.9

   45,602.6

   26,326.1

   3,328.8

   11,255.6

   5,809.7

   46,720.2Cost of sales

   (9,071.8)

   (1,798.6)

   (3,685.4)

   (2,122.2)

   (16,678.0)

   (8,358.3)

   (1,563.0)

   (4,306.8)

   (1,833.3)

   (16,061.4)Gross profit

   15,882.8

   2,174.6

   6,527.5

   4,339.7

   28,924.6

   17,967.8

   1,765.8

   6,948.8

   3,976.4

   30,658.8Sales, marketing, distribution and administra­tive expenses

   (8,084.5)

   (1,038.3)

   (2,697.4)

   (2,356.4)

   (14,176.6)

   (7,667.5)

   (905.9)

   (2,770.4)

   (2,115.4)

   (13,459.2)Other operating income/ (expenses)

   1,274.1

   9.6

   (39.0)

   (21,6)

   1,223.1

   1,871.6

   (0.1)

   60.4

   4.2

   1,936.1Exceptional items

   1,196.7

   (13,5)

   (41.5)

   (7,4)

   1,134.3

   (265.5)

   (8.4)

   (39.9)

   (43.4)

   (357.2)Income from operations

   10,269.1

   1,132.4

   3,749.6

   1,954.3

   17,105.4

   11,906.4

   851.4

   4,198.9

   1,821.8

   18,778.5
  (1)   The Latin America North business segment is comprised of Brazil and CAC. Net Sales Net sales decreased by 2.4% in 2016, to R$45,602.6 million from R$46,720.2 million in 2015, as shown in tables set forth below: Net SalesYear Ended December 31,2016

   2015

   % ChangeSales

   % of Total

   Sales

   % of Total(in R$ million, except percentages)Latin America North

   28,927.8

   63.4%

   29,654.9

   63.5%

   (2.5%)... Brazil

   24,954.6

   54.7%

   26,326.1

   56.4%

   (5.2%)Beer Brazil

   21,173.1

   46.4%

   22,441.3

   48.1%

   (5.7%)CSD & NANC

   3,781.5

   8.3%

   3,884.8

   8.3%

   (2.7%)CAC

   3,973.2

   8.7%

   3,328.8

   7.1%

   19.4%Latin America South

   10,212.9

   22.4%

   11,255.6

   24.1%

   (9.3%)Canada

   6,461.9

   14.2%

   5,809.7

   12.4%

   11.2%Total

   45,602.6

   100.0%

   46,720.2

   100.0%

   (2.4%)
  Sales VolumesYear Ended December 31,2016

   2015

   % ChangeVolume

   % of Total

   Volume

   % of Total(in thousands of hectoliters, except percentages)Latin America North

   116,623.7

   73.0%

   123,463.4

   73.0%

   (5.5%)... Brazil

   106,961.4

   66.9%

   114,354.2

   67.6%

   (6.5%)Beer Brazil

   79,670.1

   49.8%

   85,330.9

   50.5%

   (6.6%)CSD & NANC

   27,291.3

   17.1%

   29,023.3

   17.2%

   (6.0%)CAC

   9,671.3

   6.1%

   9,109.2

   5.4%

   6.2%Latin America South

   32,934.5

   20.6%

   35,914.5

   21.2%

   (8.3%)Canada

   10,254.5

   6.4%

   9,700.3

   5.7%

   5.7%Total

   159,821.6

   100.0%

   169,078.2

   100.0%

   (5.5%)


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Net Revenue per HectoliterYear Ended December 31,2016

   2015

   % Change(in R$, except percentages)Latin America North

   248.0

   240.2

   3.3%Brazil

   233.3

   230.2

   1.3%Beer Brazil

   265.8

   263.0

   1.1%CSD & NANC

   138.6

   133.9

   3.5%CAC

   410.8

   365.4

   12.4%Latin America South

   310.1

   313.4

   (1.1%)Canada

   630.2

   598.9

   5.2%Total

   285.3

   276.3

   3.3%
 Latin America North Operations Brazilian Operations Total net sales from our Brazilian operations decreased by 5.2% in 2016, to R$24,954.6 million from R$26,326.1 million in 2015. Our net sales of beer in Brazil decreased by 5.7% in 2016, to R$21,173.1 million from R$22,441.3 million in 2015 mainly as a consequence of a 6.6% decrease in sales volume, partially offset by a 1.1% increase in net revenue per hectoliter in 2016, reaching R$265.8 in that year. This decrease in sales volume was mainly due to (1) adverse macroeconomic environment that led to the retraction in domestic consumption and (2) a market share loss from 67.5% in 2015 to 66.3% in 2016. Meanwhile, the increase in net revenue per hectoliter in 2016 resulted mainly from our revenue management initiatives, negatively impacted by state tax increases and a less favorable product mix. As part of our revenue management strategy, we used our full portfolio of packs and brands to achieve more attractive consumer prices, including, through our efforts to increase the use of 300-milliliter returnable glass bottles that accounted for 23% of our supermarket volumes in 2016. Our net sales of CSD & NANC in Brazil decreased by 2.7% in 2016, to R$3,781.5 million from R$3,884.8 million in 2015, mainly due to a 6.0% decline in sales volume mainly driven by the adverse macroeconomic environment that led to the retraction in domestic consumption, partially offset by a 3.5% increase in net revenue per hectoliter, reaching R$138.6 in 2016, mainly as a result of our revenue management initiatives. CAC Operations Net sales from our CAC operations increased by 19.4% in 2016, to R$3,973.2 million from R$3,328.8 million in 2015, mainly driven by (1) a 6.2% increase in sales volume, reflecting the significant increase of beer consumption relative to other alcohol consumption in the Dominican Republic as well as market share gains in Guatemala and (2) a higher net revenue per hectoliter. Net revenue per hectoliter grew 12.4% in 2016, reaching R$410.8 in that year, driven mainly by revenue management initiatives together with the positive impact from currency translation due to the appreciation of the local currencies, mainly the Dominican Peso,  relative to therealover the period.


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Latin America South Operations Net sales from our Latin America South operations decreased by 9.3% in 2016, to R$10,212.9 million from R$11,255.6 million in 2015 mainly due to a 8.3% decrease in volume sold, which was primarily driven by the adverse macroeconomic conditions in Argentina that put negative pressure on consumption in this country. However, such impact was partially offset by the strong performance in other key markets in the region, such as Bolivia, Chile and Paraguay. Net revenue per hectoliter decreased 1.1%, reaching R$310.1 in the year, as our revenue management strategy was largely impacted by the negative currency translation due to the weakening of the Argentine peso over the period. Canada Operations Net sales from our Canadian operations increased by 11.2% in 2016, to R$6,461.9 million from R$5,809.7 million in 2015.  This result was mainly due to (1) the 5.7% volume growth, benefiting from our recent strategic acquisitions in the craft, ready-to-drink and cider categories, (2) our focused revenue management initiatives, (3) the increased participation of premium and craft brands in the mix of products sold and (4) the positive impact from currency translation reflecting the strength of the Canadian dollar over the period. Cost of Sales Cost of sales increased by 3.8% in 2016, to R$16,678.0 million from R$16,061.4 million in 2015.  As a percentage of our net sales, total cost of sales increased to 36.6% in 2016 from 34.4% in 2015. The table below sets forth information on cost of sales per hectoliter for the periods presented: Cost of Sales per HectoliterYear Ended December 31,2016

   2015

   % Change(in R$, except percentages)Latin America North

   93.2

   80.4

   16.0%Brazil

   84.8

   73.1

   16.0%Beer Brazil

   92.1

   79.2

   16.3%CSD & NANC

   63.5

   55.2

   15.1%CAC

   186.0

   171.6

   8.4%Latin America South

   111.9

   119.9

   (6.7%)Canada

   206.9

   189.0

   9.5%Total

   104.4

   95.0

   9.9%
 Latin America North Operations Brazilian Operations Total cost of sales for our Brazilian operations increased by 8.5% in 2016, to R$9,071.8 million from R$8,358.3 million in 2015. On a per hectoliter basis, our Brazilian operations’ cost of sales increased by 16.0% in 2016, to R$84.8 from R$73.1 in 2015. Cost of sales for our Brazilian beer operations increased by 8.6% in 2016, to R$7,339.9 million from R$6,757.6 million in 2015, mainly explained by the devaluation of therealin 2015, which impacted our costs in 2016, as the impact of fluctuations on our currency hedges are typically postponed to the subsequent period, partially offset by the cost-saving benefits derived from the greater mix of returnable glass bottles in our product portfolio together with procurement savings and our commodities hedges.  On a per hectoliter basis, cost of sales for our Brazilian beer operations increased by 16.3%, to R$92.1 in 2016 from R$79.2 in 2015, mainly as result of the same factors. Cost of sales for our Brazilian CSD & NANC segment increased 8.2% in 2016, to R$1,731.9 million from R$1,600.7 million in 2015, mainly due to (1) an increase in depreciation costs as a result of increased investments in property, plant and equipment in recent years and (2) an increase in foreign exchange hedges, which were partially offset by procurement savings. The cost of sales per hectoliter increased 15.1% in 2016, totaling R$63.5 from R$55.2 in 2015, mainly as a result of the same factors.


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CAC Operations Cost of sales for our CAC operations increased 15.1% in 2016, to R$1,798.7 million from R$1,563.0 million in 2015, mainly due to (1) the corresponding increase of sales volumes in the region over the same period, (2) the negative currency translation impact due to the strengthening of the Dominican Peso over the period and (3) increased costs for certain raw materials and packaging costs mainly due to inflation. On a per hectoliter basis, our cost of sales per hectoliter for our CAC operations increased by 8.4% in 2016, to R$186.0 from R$171.6 in 2015, mainly as a result of the same factors. Latin America South Operations Cost of sales for our Latin America South operations decreased by 14.4% in 2016, to R$3,685.4 million in 2016 from R$4,306.8 million in 2015 mainly due to (1) higher inflation in Argentina, driving up costs and (2) unfavorable foreign exchange transactional impacts as a result of our costs denominated in U.S. dollars, which was partially offset by the positive impact of currency translation reflecting the depreciation of the Argentine peso over the periodtogether with benefits derived from our currency and commodities hedges and procurement initiatives. On a per hectoliter basis, our cost of sales for our Latin America South operations decreased by 6.7% in 2015, to R$111.9 from R$119.9 in 2015, mainly as a result of the same factors. Canada Operations Cost of sales for our Canadian operations increased by 15.8% in 2016, to R$2,122.2 million from R$1,833.3 million in 2015, mainly due to (1) the corresponding increase in sales volume over the period, (2) a negative product mix driving up costs, (3) increased costs of certain raw materials and packaging mainly due to inflation, and (4) the negative impact of currency translation reflecting the strengthening of the Canadian dollar over the period. Cost of goods sold per hectoliter increased 9.5% in 2016, to R$206.9 in 2016 from R$189.0 in 2015, mainly as a result of the same factors. Gross Profit As a result of the foregoing, gross profit decreased by 5.7% in 2016, to R$28,924.6 million from R$30,658.8 million in 2015.  The table below sets forth the contribution of each business segment to our consolidated gross profit: Gross Profit2016

   2015Amount

   % of Total

   Margin

   Amount

   % of Total

   Margin(in R$ million, except percentages)Latin America North

   18,057.4

   62.4%

   62.4%

   19,733.6

   64.4%

   66.5%Brazil

   15,882.8

   54.9%

   63.6%

   17,967.8

   58.6%

   68.3%Beer Brazil

   13,833.2

   47.8%

   65.3%

   15,683.7

   51.2%

   69.9%CSD & NANC

   2,049.6

   7.1%

   54.2%

   2,284.1

   7.4%

   58.8%CAC

   2,174.6

   7.5%

   54.7%

   1,765.8

   5.8%

   53.0%Latin America South

   6,527.5

   22.6%

   63.9%

   6,948.8

   22.6%

   61.7%Canada

   4,339.7

   15.0%

   67.2%

   3,976.4

   13.0%

   68.4%Total

   28,924.6

   100.0%

   63.4%

   30,658.8

   100.0%

   65.6%
 Sales, Marketing, Distribution and Administrative Expenses Our sales, marketing, distribution and administrative expenses increased by 5.3% in 2016, to R$14,176.6 million from R$13,459.2 million in 2015.  An analysis of sales and marketing and administrative expenses for each business segment is set forth below.


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Latin America North Operations Brazilian Operations Total sales, marketing, distribution and administrative expenses in Brazil increased by 5.4% in 2016, to R$8,084.5 million from R$7,667.5million in 2015. Sales, marketing, distribution and administrative expenses for our Brazilian beer operations increased 4.6% in 2016, to R$7,095.9 million from R$6,786.8 million in 2015.  The principal drivers for the increase in these expenses for our Brazilian beer operations were (1) higher sales and marketing expenses as we continued to invest behind our brands, (2) mid-single digit increase in distribution costs, mainly driven by inflation and the increased weight of returnable glass bottles in the off premise channel direct distribution, and (3) higher depreciation. These were partially offset by lower administrative expenses due to efficiency gains. Sales, marketing, distribution and administrative expenses for the CSD & NANC segment in Brazil increased by 12.2% in 2016, to R$988.6 million from R$880.7 million in 2015, mainly due to changes in our logistics and administrative expenses allocation between Brazilian beer and CSD & NANC operations to better reflect the size of our CSD & NANC segment in Brazil, which were partially offset by lower depreciation. CAC Operations Sales, marketing, distribution and administrative expenses for our CAC operations increased by 14.6% in 2016, to R$1,038.3 million from R$905.9 million in 2015, mainly as a result of (1) currency translation effects driven by the appreciation of the Dominican Peso over the period, (2) higher sales and marketing expenses, as we continued to invest behind our brands, (3) higher distribution expenses corresponding to higher sales volumes and (4) higher depreciation, which were partially offset by low single-digit increases of administrative expenses due to efficiency gains. Latin America South Operations Sales, marketing, distribution and administrative expenses for our Latin America South operations decreased by 2.6% in 2016, to R$2,697.4 million from R$2,770.4 million in 2015, primarily driven by positive currency translation effect resulting from the depreciation of the Argentine Peso over the period. Canada Operations Sales, marketing, distribution and administrative expenses for our Canadian operations increased by 11.4% in 2016, to R$2,356.4 million from R$2,115.4 million in 2015, mainly as a result of (1) a negative currency translation effect resulting from the appreciation of the Canadian Dollar over the period, (2) higher sales and marketing and administrative expenses, as we continued to invest in our brands, and (3) higher depreciation. Other Operating Income (Expense) Other net operating income decreased by 36.8% in 2016, to R$1,223.1 million from R$1,936.1 million in 2015, mainly explained by (1) a decline in government grants as a result of overall lower volumes and revenues in addition to changes in the geographic mix of our revenues as we have different plants throughout Brazil with different state-based tax incentive programs, and (2) an increase in net other operating income in 2015 with no corresponding benefit in 2016. Exceptional Items Exceptional items amounted to a R$1,134.3 million profit in 2016 compared to a R$357.2 million expense recorded in 2015.  Such increase is explained mainly by a non-cash gain on stocks swap  recorded in the last quarter of 2016 as a result of the agreement with Anheuser-Busch InBev SA/NV, or ABI, pursuant to which the we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador, in exchange for which ABI has agreed to transfer SABMiller’s Panamanian business to us. See “Item 4. Information on the Company—A. History and Development of the Company—Recent Acquisitions, Divestments and Strategic Alliances.”


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Income from Operations As a result of the foregoing, income from operations decreased by 8.9% in 2016, to R$17,105.4 million from R$18,778.5 million in 2015. Net Finance Cost Our net financial cost increased by 63.2% in 2016, to R$3,702.0 million from R$2,268.2 million in 2015.  This result is mainly explained by (1) higher net interest expenses, including non-cash expenses related to the put options associated with our investment in the Dominican Republic, (2) higher losses on derivative instruments mainly driven by the carry cost of our currency hedges, primarily linked to our cost of goods sold exposure in Brazil and Argentina and non-cash gains or losses related to the mark to market of our hedges, and (3) higher interest on contingencies. Our total year-end indebtedness increased by R$1,796.8 million in 2016, while our cash and cash equivalents less bank overdrafts and current investment securities decreased by R$5,673.1 million in that year. Income Tax Expense Our consolidated income tax and social contribution on profits decreased by 91.3% in 2016, to R$315.0 million from R$3,634.2 million in 2015.  The effective tax rate in 2016 was 2.4%, compared to 22.0% in the previous year.  Such decrease in our effective tax rate in 2016 was primarily due to a R$1,539.3 million gain on other tax adjustments of which: (1) around R$400 million is explained by a reversion of withholding tax provisions in July 2016, related to unremitted earnings from Argentina as legislation in Argentina was enacted revoking a withholding tax over dividend remittance that was created in 2013  and  (2) recognition of R$800 million in deferred tax assets on carried losses related to international subsidiaries due to the improvement of our capital structure outside of Brazil. Net Income As a result of the foregoing, net income increased by 1.6% in 2015, to R$13,083.4 million from R$12,879.2 million in 2015. Year Ended December 31, 2015 Compared to Year Ended December 31, 2014 In the periods discussed below, we conducted our operations through three business segments as follows: Latin America North,which includes our operations in Brazil, where we operate two divisions (the beer sales division and the CSD & NANC sales division), and our CAC operations, which includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica, Cuba, Guatemala (which also serves El Salvador, Honduras and Nicaragua).

Latin America South, which includes our operations in Argentina, Bolivia, Paraguay, Uruguay, Chile, Ecuador, Peru and, starting in 2015, Colombia.

Canada, represented by Labatt’s operations, which includes domestic sales in Canada and some exports to the U.S. market.


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The table below sets forth certain of our operating highlights for the years presented: Consolidated Financial Highlights2015

   2014

   % Change(in R$ million, except volume amounts,percentages and per share amounts)Sales volume—’000 hectoliters

   169,078.2

   171,765.7

   (1.6)%Net sales

   46,720.2

   38,079.8

   22.7%Net revenue per hectoliter—R$/hl

   276.3

   221.7

   24.6%Cost of sales

   (16,061.4)

   (12,814.6)

   25.3%Gross profit

   30,658.8

   25,265.2

   21.3%Gross margin (%)

   65.6%

   66.3%

   -Sales, marketing and distribution expenses

   (11,177.9)

   (9,158.8)

   22.0%Administrative expenses

   (2,281.3)

   (1,820.0)

   25.3%Other operating income/(expenses)

   1,936.1

   1,629.2

   18.8%Exceptional items

   (357.2)

   (89.0)

   301.3%Income from operations

   18,778.5

   15,826.6

   18.7%Operating margin (%)

   40.2%

   41.6%

   -Net income

   12,879.2

   12,362.0

   4.2%Net margin (%)

   27.6%

   32.5%

   -
 Margin Analysis The following table sets forth certain line items of our income statement expressed as percentages of net sales for the years ended December 31, 2015 and 2014: Year Ended December 31,2015

   2014(%)

   (%)Net sales

   100.0

   100.0Cost of sales

   (34.4)

   (33.7)Gross profit

   65.6

   66.3Sales, marketing and distribution expenses

   (23.9)

   (24.1)Administrative expenses

   (4.9)

   (4.8)Other operating income/(expenses)

   4.1

   4.3Exceptional items

   (0.8)

   (0.2)Income from operations

   40.2

   41.6


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Selected Financial Data by Business Segment The following table sets forth selected financial data by business segment, and business operations of Latin America North, for the years ended December 31, 2015 and 2014: Year Ended December 31,2015

   2014Brazil(1)

   CAC(1)

   LAS

   Canada

   Total

   Brazil(1)

   CAC(1)

   LAS

   Canada

   Total(in R$ million)Net sales

   26,326.1

   3,328.8

   11,255.6

   5,809.7

   46,720.2

   24,382.9

   2,087.8

   6,955.7

   4,653.4

   38,079.8Cost of sales

   (8,358.3)

   (1,563.0)

   (4,306.8)

   (1,833.3)

   (16,061.4)

   (7,833.2)

   (974.3)

   (2,607.3)

   (1,399.8)

   (12,814.6)Gross profit

   17,967.8

   1,765.8

   6,948.8

   3,976.4

   30,658.8

   16,549.7

   1,113.5

   4,348.4

   3,253.6

   25,265.2Sales, marketing, distribution and administra­tive expenses

   (7,667.5)

   (905.9)

   (2,770.4)

   (2,115.4)

   (13,459.2)

   (7,055.9)

   (596.9)

   (1,676.4)

   (1,649.5)

   (10,978.7)Other operating income/ (expenses)

   1,871.6

   (0.1)

   60.4

   4.2

   1,936.1

   1,623.9

   (3.0)

   11.6

   (3.3)

   1,629.2Exceptional items

   (265.5)

   (8.4)

   (39.9)

   (43.4)

   (357.2)

   (11.6)

   (38.6)

   (28.8)

   (10.0)

   (89.0)Income from operations

   11,906.4

   851.4

   4,198.9

   1,821.8

   18,778.5

   11,106.1

   475.0

   2,654.8

   1,590.8

   15,826.6
 __________________ (1)   The Latin America North business segment is comprised of Brazil and CAC. Net Sales Net sales increased by 22.7% in 2015, to R$46,720.2 million from R$38,079.8 million in 2014, as shown in the tables set forth below: Net SalesYear Ended December 31,2015

   2014

   % ChangeSales

   % of Total

   Sales

   % of Total(in R$ million, except percentages)Latin America North

   29,654.9

   63.5%

   26,470.7

   69.5%

   12.0%Brazil

   26,326.1

   56.4%

   24,382.9

   64.0%

   8.0%Beer Brazil

   22,441.3

   48.1%

   20,468.7

   53.8%

   9.6%CSD & NANC

   3,884.8

   8.3%

   3,914.2

   10.3%

   (0.8)%CAC

   3,328.8

   7.1%

   2,087.8

   5.5%

   59.4%Latin America South

   11,255.6

   24.1%

   6,955.7

   18.3%

   61.8%Canada

   5,809.7

   12.4%

   4,653.4

   12.2%

   24.8%Total

   46,720.2

   100.0%

   38,079.8

   100.0%

   22.7%
  Sales VolumesYear Ended December 31,2015

   2014

   % ChangeVolume

   % of Total

   Volume

   % of Total(in thousands of hectoliters, except percentages)Latin America North

   123,463.4

   73.0%

   125,418.3

   73.0%

   (1.6)%Brazil

   114,354.2

   67.6%

   117,508.9

   68.4%

   (2.7)%Beer Brazil

   85,330.9

   50.5%

   86,903.9

   50.6%

   (1.8)%CSD & NANC

   29,023.3

   17.2%

   30,605.0

   17.8%

   (5.2)%CAC

   9,109.2

   5.4%

   7,909.4

   4.6%

   15.2%Latin America South

   35,914.5

   21.2%

   36,826.4

   21.4%

   (2.5)%Canada

   9,700.3

   5.7%

   9,520.9

   5.5%

   1.9%Total

   169,078.2

   100.0%

   171,765.7

   100.0%

   (1.6)%


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Net Revenue per HectoliterYear Ended December 31,2015

   2014

   % Change(in R$, except percentages)Latin America North

   240.2

   211.1

   13.8%Brazil

   230.2

   207.5

   10.9%Beer Brazil

   263.0

   235.5

   11.7%CSD & NANC

   133.9

   127.9

   4.7%CAC

   365.4

   263.9

   38.5%Latin America South

   313.4

   188.9

   65.9%Canada

   598.9

   488.8

   22.5%Total

   276.3

   221.7

   24.6%
 Latin America North Operations Brazilian Operations Total net sales from our Brazilian operations increased by 8.0% in 2015, to R$26,326.1 million from R$24,382.9 million in 2014. Our net sales of beer in Brazil increased by 9.6% in 2015, to R$22,441.3 million from R$20,468.7 million in 2014 mainly as a consequence of a 11.7% increase in net revenue per hectoliter in 2015, reaching R$263.0 in that year, more than offsetting a 1.8% volume decline. The increase in net revenue per hectoliter in 2015 resulted mainly from (1) our revenue management initiatives, (2) the increased weight of direct distribution of beer sold in Brazil, which provides us with more revenue per hectoliter on a constant package mix when compared to third-party distribution arrangements, and (3) increased participation of premium brands in the mix of products sold. Our net sales of CSD & NANC in Brazil decreased by 0.8% in 2015, to R$3,884.8 million from R$3,914.2 million in 2014, mainly due to declining sales volume.  Volumes were down 5.2% in 2015, with market share gains partially offsetting a high single digit industry decline.  Net revenues per hectoliter for our Brazilian CSD & NANC business was up by 4.7% in 2015, reaching R$133.9 in that year, mainly as a result of (1) our revenue management initiatives and (2) the increased direct distribution of CSD & NANC sold in Brazil, which provides us with more revenue per hectoliter on a constant package mix when compared to third-party distribution arrangements, partially offset by a negative impact from price mix throughout the year. CAC Operations Net sales from our CAC operations increased by 59.4% in 2015, to R$3,328.8 million from R$2,087.8 million in 2014.  The main reason for this increase was 15.2% volume increase, benefiting from a double digits volume growth in all of the main countries we operate in the region, coupled with a net revenue per hectoliter growth of 38.5% in 2015, reaching R$365.4 in that year, driven mainly by (1) revenue management initiatives and (2) a positive impact from currency translation. Latin America South Operations Net sales from our Latin America South operations increased by 61.8% in 2015, to R$11,255.6 million from R$6,955.7 million in 2014 mainly due to a 65.9% increase in net revenue per hectoliter, reaching R$313.4 in the year, driven by (1) our revenue management initiatives in the region, (2) the increased participation of premium brands in the mix of products sold, and (3) a positive impact from currency translation.  In 2015, LAS total volumes were down 2.5% mainly driven by our alliance with CBC in Peru announced in July 2015, pursuant to which we are no longer reporting CSD volumes in Peru, partially offset by a volume increase in the beer segment in the region. Canada Operations Net sales from our Canadian operations increased by 24.8% in 2015, to R$5,809.7 million from R$4,653.4 million in 2014.  This result was mainly due to our solid revenue management initiatives, also benefiting from the increased participation of premium brands in the mix of products sold, a positive impact from currency translation and the 1.9% volume growth, which was driven by favorable weather and market share gains.


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Cost of Sales Cost of sales increased by 25.3% in 2015, to R$16,061.4 million from R$12,814.6 million in 2014.  As a percentage of our net sales, total cost of sales increased to 34.4% in 2015 from 33.7% in 2014. The table below sets forth information on cost of sales per hectoliter for the periods presented: Cost of Sales per HectoliterYear Ended December 31,2015

   2014

   % Change(in R$, except percentages)Latin America North

   80.4

   70.2

   14.4%Brazil

   73.1

   66.7

   9.6%Beer Brazil

   79.2

   70.9

   11.7%CSD & NANC

   55.2

   54.6

   1.0%CAC

   171.6

   123.2

   39.3%Latin America South

   119.9

   70.8

   69.4%Canada

   189.0

   147.0

   28.5%Total

   95.0

   74.6

   27.3%
 Latin America North Operations Brazilian Operations Total cost of sales for our Brazilian operations increased by 6.7% in 2015, to R$8,358.3 million from R$7,833.2 million in 2014.  On a per hectoliter basis, our Brazilian operations’ cost of sales increased by 9.6% in 2015, to R$73.1 from R$66.7 in 2014. Cost of sales for our Brazilian beer operations increased by 9.7% in 2015, to R$6,757.6 million from R$6,162.4 million in 2014.  On a per hectoliter basis, cost of sales for our Brazilian beer operations increased by 11.7% in 2015, to R$79.2 from R$70.9 in 2014, mainly driven by (1) higher depreciation, as a result of increased investments in property, plant and equipment, (2) unfavorable foreign exchange transactional impacts, (3) higher inflation in Brazil, and (4) product mix, mainly driven by the increased weight of premium products in beer, all of which were partially offset by procurement savings and our currency and commodities hedges. Cost of sales for our Brazilian CSD & NANC segment decreased 4.2% in 2015, to R$1,600.7million from R$1,670.8million in 2014, also impacted by volumes decrease.  The cost of sales per hectoliter increased 1.0% in 2015, totaling R$55.2 from R$54.6 in 2014, impacted by (1) higher depreciation, as a result of increased investments in property, plant and equipment, (2) unfavorable foreign exchange transactional impacts, and (3) higher inflation in Brazil, which were almost fully offset by procurement savings and our currency and commodities hedges. CAC Operations Cost of sales for our CAC operations increased 60.4% in 2015, to R$1,563.0 million from R$974.3 million in 2014.  On a per hectoliter basis, our cost of sales per hectoliter for our CAC operations increased by 39.3% in 2015, to R$171.6 from R$123.2 in 2014 mainly due to currency translation, along with inflation of certain raw materials and packaging costs. Latin America South Operations Cost of sales for our Latin America South operations increased by 65.2% in 2015, to R$4,306.8 million from R$2,607.3 million in 2014.  On a per hectoliter basis, cost of sales for our Latin America South operations increased by 69.4% in 2015, to R$119.9 from R$70.8 in 2014, mainly driven by currency translation, higher inflation in Argentina and unfavorable foreign exchange transactional impacts, all of which were partially offset by the benefit from our currency and commodities hedges.


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Canada Operations Cost of sales for our Canadian operations increased by 31.0% in 2015, to R$1,833.3 million from R$1,399.8 million in 2014.  Cost of goods sold per hectoliter increased 28.5% in 2015, to R$189.0 from R$147.0 in 2014, mainly explained by currency translation, the incremental costs from distributing Corona and other imported Modelo brands and unfavorable foreign exchange transactional impacts, which were partially offset by currency and commodities hedges. Gross Profit As a result of the foregoing, gross profit increased by 21.3% in 2015, to R$30,658.8 million from R$25,265.2 million in 2014.  The table below sets forth the contribution of each business segment to our consolidated gross profit: Gross Profit2015

   2014Amount

   % of Total

   Margin

   Amount

   % of Total

   Margin(in R$ million, except percentages)Latin America North

   19,733.6

   64.4%

   66.5%

   17,663.2

   69.9%

   66.7%Brazil

   17,967.8

   58.6%

   68.3%

   16,549.7

   65.5%

   67.9%Beer Brazil

   15,683.7

   51.2%

   69.9%

   14,306.3

   56.6%

   69.9%CSD & NANC

   2,284.1

   7.4%

   58.8%

   2,243.4

   8.9%

   57.3%CAC

   1,765.8

   5.8%

   53.0%

   1,113.5

   4.4%

   53.3%Latin America South

   6,948.8

   22.6%

   61.7%

   4,348.4

   17.2%

   62.5%Canada

   3,976.4

   13.0%

   68.4%

   3,253.6

   12.9%

   69.9%Total

   30,658.8

   100.0%

   65.6%

   25,265.2

   100.0%

   66.3%
 Sales, Marketing, Distribution and Administrative Expenses Our sales, marketing, distribution and administrative expenses increased by 22.6% in 2015, to R$13,459.2 million from R$10,978.7 million in 2014.  An analysis of sales and marketing and administrative expenses for each business segment is set forth below. Latin America North Operations Brazilian Operations Total sales, marketing, distribution and administrative expenses in Brazil increased by 8.7% in 2015, to R$7,667.5 million from R$7,055.9million in 2014. Sales, marketing, distribution and administrative expenses for our Brazilian beer operations increased 9.1% in 2015, to R$6,786.8 million from R$6,221.8 million in 2014.  The principal drivers for the increase in these expenses for our Brazilian beer operations were (1) high single digits increase in logistics costs, mainly driven by inflation and the increased weight of direct distribution, (2) an increase in administrative costs in line with increased inflation in Brazil in 2015, (3) mid-single digit increase in sales and marketing expenses, as we continued to invest behind our brands but benefited from efficiency gains and an easy comparable base given the investments made during the 2014 FIFA World Cup, and (4) higher depreciation, as a result of higher investments in property, plant and equipment. Sales, marketing, distribution and administrative expenses for the CSD & NANC segment in Brazil increased by 5.6% in 2015, to R$880.7 million from R$834.1 million in 2014, mainly as a result of higher distribution costs, higher inflation in Brazil in 2015 and higher depreciation, as a result of higher investments in property, plant and equipment.


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CAC Operations Sales, marketing, distribution and administrative expenses for our CAC operations increased by 51.8% in 2015, to R$905.9 million from R$596.9 million in 2014, mainly as a result of currency translation effect and higher depreciation. Latin America South Operations Sales, marketing, distribution and administrative expenses for our Latin America South operations increased by 65.3% in 2015, to R$2,770.4 million from R$1,676.4 million in 2014, primarily driven by negative currency translation effect and higher transportation and labor costs, caused mainly by heightened inflation in Argentina. Canada Operations Sales, marketing, distribution and administrative expenses for our Canadian operations increased by 28.2% in 2015, to R$2,115.4 million from R$1,649.5 million in 2014, as a result of a negative currency translation effect, higher sales and marketing and administrative expenses, along with higher inflation in Canada. Other Operating Income (Expense) Other net operating income increased by 18.8% in 2015, to R$1,936.1 million from R$1,629.2 million in 2014, mainly explained by a growth of government grants related to state long-term ICMS Value-Added Tax incentives in Brazil. Exceptional Items Exceptional items amounted to a R$357.2 million expense in 2015, representing a 301.3% increase from the R$89.0 million expense recorded in 2014.  Such increase is explained mainly by an administrative expense recorded in the second quarter of 2015 related to the agreement reached between Ambev and the CADE, the Brazilian antitrust authority, to definitively settle the lawsuit associated with the “Tô Contigo” program. Income from Operations As a result of the foregoing, income from operations increased by 18.7% in 2015, to R$18,778.5 million from R$15,826.6 million in 2014. Net Finance Cost Our net financial cost increased by 53.7% in 2015, to R$2,268.2 million from R$1,475.4 million in 2014.  This result is mainly explained by (1) higher net interest expenses, of which approximately R$600 million relates to a non-cash expense in connection with the put option associated with our investment in CND, and (2) higher losses on derivative instruments mainly driven by the carry cost of our currency hedges, primarily linked to ourcost ofgoods sold exposure in Brazil and Argentina, partly offset by carry gains from our foreign cash position hedged toreais. Our total year-end indebtedness increased by R$976.8 million in 2015, while our cash and cash equivalents less bank overdrafts and current investment securities increased by R$3,496.7 million in that year, reflecting our strong cash generation in 2015.


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Income Tax Expense Our consolidated income tax and social contribution on profits increased by 81.1% in 2015, to R$3,634.2 million from R$2,006.6 million in 2014.  The effective tax rate in 2015 was 22.0%, compared to 14.0% in the previous year.  Such increase in our effective tax rate in 2015 was primarily due to (1) higher non-taxable net financial and other income mainly due to therealdevaluation, (2) a non-deductible expense reported in the second quarter of 2015 related to the R$229.1 million agreement reached between Ambev and the CADE, the Brazilian antitrust authority, to definitively settle the lawsuit associated to the “Tô Contigo” program, (3) higher foreign taxable income in Brazil due to therealdevaluation and, mainly, the new Brazilian legislation on taxation of foreign profits, (4) slightly lower positive impact from interest on shareholders’ equity accrual when compared to 2014, and (5) a R$615.8 million negative other tax adjustment due to (i) R$350.0 million one-time impact from intercompany loans, as a result of taxable profits generated through these transactions in certain affiliates, which were not offset by equivalent deductible losses due to the lack of sufficient taxable profits in the corresponding affiliates, coupled with (ii) higher withholding tax provision due to currency variation associated with unremitted earnings from international subsidiaries, given the significant devaluation of therealagainst the currencies of the countries in which these subsidiaries are based. Net Income As a result of the foregoing, net income increased by 4.2% in 2015, to R$12,879.2 million from R$12,362.0 million in 2014, mainly driven by a higher operational results partially offset by higher net financial costs and a lower effective tax rate in 2015. B.            Liquidity and Capital Resources Sources and Uses The information in this section refers to 2016 and 2015.  Our primary sources of liquidity have historically been cash flows from operating activities and borrowings.  Our material cash requirements have included the following: debt service;

capital expenditures;

payments of dividends and interest on shareholders’ equity;

increases in ownership of our consolidated subsidiaries or companies in which we have equity investments; and

investments in companies participating in the brewing, CSD & NANC and malting industries. Our cash and cash equivalents and current investment securities at December 31, 2016 and 2015 were R$8,159.6 million and R$13,835.3 million, respectively. We believe that cash flows from operating activities, available cash and cash equivalents and current investment securities, along with our derivative instruments and our access to borrowing facilities, will be sufficient to fund our capital expenditures, debt service and dividend payments going forward. Cash Flows Operating Activities Cash flows from our operating activities decreased by 47.7% in 2016, to R$12,344.4 million from R$23,580.8 million in 2015, mainly as a result of (1) a 2.4% decrease in net sales coupled with 2.9% increase in cost of sales (excluding depreciation and amortization) and a growth of 4.0% in sales, marketing, distribution and administrative expenses (excluding depreciation and amortization) that led us to lower operational results, (2) a significant worsening in working capital during 2016, which decreased by R$5,601.5 million in 2016 mainly as a result of R$5,648.4 million decrease in trade and other payables, mainly driven by operational deleveraging as a result of lower volumes; and (3) a significant increase in income taxes paid.


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Investing Activities Cash flows used in our investing activities decreased by 1.7% in 2016, to R$5,898.0 million from R$5,997.0 million in 2015, mainly explained bythe lower level of capital expenditures in property, plant and equipment and intangible assets that was partially offset by higher acquisitions of subsidiaries, net of cash acquired. Financing Activities Cash flows used in our financing activities decreased by 24.0% in 2016, to an outflow of R$11,645.1 million from a R$15,327.9 million cash outflow in 2015, mainly driven by (1) lower repayment of borrowings, (2) a  decrease in payment of dividends and interest on shareholders’ equity, (3) cash expended in connection with share repurchases in 2015 with no corresponding expenditures in 2016, partially offset by lower proceeds from borrowings and higher outflows related to cash net of finance costs other than interests.


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The table below shows the profile of our debt instruments: Maturity Schedule of Debt Portfolio as of December 31, 2016Debt Instrument

   2017

   2018

   2019

   2020

   2021

   Thereafter

   Total(in R$ million, except percentages)BNDES Currency Basket Debt Floating Rate:Currency Basket Debt Floating Rate

   22.7

   -

   -

   -

   -

   -

   22.7UMBNDES + Average Pay Rate

   1.7%

   -

   -

   -

   -

   -

   1.7%International Debt:Other Latin America Currency Floating Rate

   -

   -

   -

   4.9

   -

   -

   4.9Average Pay Rate

   -

   -

   -

   2.7%

   -

   -

   2.7%Other Latin America Currency Fixed Rate

   114.0

   193.7

   -

   -

   -

   39.3

   347.0Average Pay Rate

   9.4%

   9.5%

   -

   -

   -

   4.3%

   8.9%US$ Fixed Rate

   -

   -

   11.5

   -

   -

   -

   11.5Average Pay Rate

   -

   -

   6.0%

   -

   -

   -

   6.0%US$ Floating Rate

   1,508.7

   329.3

   22.1

   -

   -

   -

   1,860.1Average Pay Rate

   1.3%

   2.2%

   1.5%

   -

   -

   -

   1.5%CAD Floating Rate

   1,259.1

   -

   -

   -

   -

   -

   1,259.1Average Pay Rate

   1.6%

   -

   -

   -

   -

   -

   1.6%ReaisDenominated Debt Floating Rate – TJLP:Notional Amount

   216.2

   163.2

   73.7

   9.0

   9.9

   142.8

   614.8TJLP + Average Pay Rate

   9.5%

   9.3%

   8.6%

   -

   -

   -

   6.8%ReaisDebt - ICMS Fixed Rate:Notional Amount

   33.6

   112.1

   35.0

   32.1

   35.5

   129.8

   378.2Average Pay Rate

   6.4%

   2.6%

   6.1%

   4.2%

   3.5%

   4.5%

   4.1%ReaisDebt - Fixed Rate:Notional Amount

   476.3

   134.3

   97.6

   27.0

   124.2

   38.8

   898.1Average Pay Rate

   9.0%

   5.6%

   6.0%

   4.5%

   12.5%

   3.7%

   8.3%Total Debt

   3,630.6

   932.5

   239.9

   73.0

   169.6

   350.7

   5,396.3
 Borrowings Most of our borrowings are for general use, based upon strategic capital structure considerations.  Although seasonal factors affect the business, they have little effect on our borrowing requirements.  We accrue interest based on different interest rates, the most significant of which are: (1) fixed, for the 2017 notes and 2021 debentures; and (2) Currency Basket, or the UMBNDES, andTaxa de Juros de Longo Prazo(Long-Term Interest Rate),or the TJLP, for loans of the Brazilian Economic and Social Development Bank (Banco Nacional de Desenvolvimento Economico e Social), or the BNDES.  For further information, see note 22 of our audited consolidated financial statements.


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The following table sets forth our net cash consolidated position as of December 31, 2016 and 2015: Net Cash Consolidated PositionAs of December 31,2016

   2015LC(1)

   FC(2)

   Total

   LC(1)

   FC(2)

   Total(in R$ million)Short-term debt

   (726.0)

   (2,904.6)

   (3,630.6)

   (594.0)

   (688.6)

   (1,282.6)Long-term debt

   (1,165.2)

   (600.5)

   (1,765.7)

   (1,560.7)

   (756.2)

   (2,316.9)Total

   (1,891.2)

   (3,505.1)

   (5,396.3)

   (2,154.7)

   (1,444.8)

   (3,599.5)Cash and cash equivalents (net of bank overdrafts)

   

   

   7,876.8

   

   

   13,617.6Investment securites

   

   

   282.8

   

   

   215.1Net cash position

   

   

   2,763.3

   

   

   10,233.2
  (1)   LC refers to our local currency indebtedness. (2)   FC refers to our foreign currency indebtedness. Short-term Debt As of December 31, 2016, our short-term debt totaled R$3,630.6 million, 80.0% of which was denominated in foreign currencies. As of December 31, 2015, our short-term debt totaled R$1,282.6 million, 53.7% of which was denominated in foreign currencies. Long-term Debt As of December 31, 2016, our long-term debt, excluding the current portion of long-term debt, totaled R$1,765.7 million, of which R$1,165.3 million, or 66.0%, was denominated in local currency.  As of December 31, 2015, our long-term debt, excluding the current portion of long-term debt, totaled R$2,316.9 million, of which R$1,560.7 million was denominated in local currency. The table below shows a breakdown of our long-term debt by year: As of December 31, 2016Long-term Debt Maturity in:

   (in R$ million)2018

   (932.5)2019

   (239.9)2020 and Later

   (593.3)Total

   (1,765.7)
 In accordance with our foreign currency risk management policy, we have entered into forward and cross-currency interest rate swap contracts in order to mitigate currency and interest rate risks.  See “Item 11. Quantitative and Qualitative Disclosures About Market Risk” for our policy with respect to mitigating foreign currency and interest rate risks through the use of financial instruments and derivatives. On July 24, 2007, AmBev International Fund Ltd., or Ambev International, issued R$300 million in notes with a fixed interest of 9.500% per annum and a maturity date of July 24, 2017, or the 2017 notes, to qualified institutional buyers pursuant to Rule 144A under the Securities Act, and outside the United States to non-U.S. persons in reliance on Regulation S, fully guaranteed by Ambev.  The 2017 notes are unsecured and unsubordinated obligations of Ambev International and are fully and unconditionally guaranteed by us.  The guarantee ranks equally in right of payment with all of Ambev’s other unsecured and unsubordinated debt obligations (except for statutorily preferred credits set forth in Brazilian bankruptcy laws).  The 2017 notes are denominated inreais, but both principal and interest are paid in U.S. dollars at the prevailing exchange rate at the applicable payment date.  Interest is paid semiannually in arrears, starting January 24, 2008.  The net proceeds of the offering were used for the repayment of short-term debt and for general corporate purposes by Ambev and its subsidiaries.  In February 2009, we completed a SEC-registered exchange offer for these notes.  We may from time to time seek to retire or repurchase our outstanding debt, including our 2017 notes, through cash repurchases and/or exchanges for other securities, in open market purchases, privately negotiated transactions or otherwise.  Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.  The amounts involved may be material, and notes repurchased may be cancelled or resold, but will only be resold in compliance with relevant registration requirements or available exemptions under applicable securities laws.


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On October 30, 2015, Ambev issued R$1.0 billion in Brazilian debentures with a maturity date of October 30, 2021, or the 2021 debentures, to qualified investors as defined by applicable CVM regulations.  The 2021 debentures bear interest at a rate of 14.476% per annum, payable semi-annually in arrears.  This rate is subject to upper or downward adjustments in accordance with upgrades or downgrades to the credit rating of the Company, respectively, as set forth in the respective indenture.  The 2021 debentures are unsecured and unsubordinated obligations of Ambev (except for statutorily preferred credits set forth in Brazilian bankruptcy laws).  The 2021 debentures are denominated and payable inreais.  The net proceeds of the offering are being used for capital expenditure investments and, therefore, the 2021 debentures enjoy certain Brazilian federal income tax incentives pursuant to Law 12,431/11. As of December 31, 2016, our local currency long-term debt borrowings consisted primarily of the 2021 debentures and BNDES debts.  Long-term local currency also includes long-term plant expansion and other loans from governmental agencies and special BNDES credit lines and programs, such as the Fund for Financing the Acquisition of Industrial Machinery and Equipment (FINAME) and the Enterprise Financing Program (FINEM). Secured Debt Certain loans provided by the BNDES are secured by some of our facilities and some of our equipment (mainly coolers). Sales Tax Deferrals and Other Tax Credits Many States in Brazil offer tax benefits programs to attract investments to their regions.  We participate in ICMS Value-Added Tax Credit Programs offered by various Brazilian States which provide (1) tax credits to offset ICMS Value-Added Tax payables and (2) ICMS Value-Added Tax deferrals.  In return, we are required to meet certain operational requirements including, depending on the State, production volume and employment targets, among others.  All of these conditions are included in specific agreements between Ambev and the State governments.  In the event that we do not meet the program’s targets, future benefits may be withdrawn.  The total amount deferred (financing) as of December 31, 2016 was R$131.9 million with a current portion of R$35.6 million, and R$96.3million as non-current.  Percentages deferred typically range from 50% to 92% over the life of the program.  Balances deferred generally accrue interest and are partially inflation indexed, with adjustments generally set at 60% to 80% of a general price index.  The grants (tax waivers) are received over the lives of the respective programs.  In the years ended December 31, 2016 and 2015, we recorded R$1,543.13 million and R$1,360.6 million, respectively, of tax credits as gains on tax incentive programs. Capital Investment Program In 2016, consolidated capital expenditures on property, plant and equipment and intangible assets totaled R$4,132.7 million consisting of R$2,450.1 million for our Latin America North business segment, R$1,365.5 million related to investments in our Latin America South operations and R$317.1  million related to investments in Canada.  These expenditures primarily included investments in capacity expansion, quality controls, automation, modernization and replacement of packaging lines, innovations, warehousing for direct distribution, coolers, expenditures for the replacement of bottles and crates, market assets from former dealers, and continued investments in information technology. In 2015, consolidated capital expenditures on property, plant and equipment and intangible assets totaled R$5,261.2 million consisting of R$3,321.3 million for our Latin America North business segment, R$1,654.1 million related to investments in our Latin America South operations and R$285.8 million related to investments in Canada.  These expenditures primarily included investments in capacity expansion, quality controls, automation, modernization and replacement of packaging lines, innovations, warehousing for direct distribution, coolers, expenditures for the replacement of bottles and crates, market assets from former dealers, and continued investments in information technology.


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C.            Research and Development We maintain a research and development center in the city of Guarulhos, State of São Paulo, in order to assure continuous product innovation and yearly increases in efficiency. In August 2014, we announced the construction of a new development center in the city of Rio de Janeiro, State of Rio de Janeiro, in order to accelerate product innovation by developing new liquids and most modern packaging.  The investment is approximately R$180 million and the development center is expected to start its operations throughout 2017. D.            Trend Information For detailed information regarding the latest trends in our business, see “—A. Operating Results—Year Ended December 31, 2016 Compared to Year Ended December 31, 2015” and “Item 4. Information on the Company—B. Business Overview—Description of the Markets Where We Operate.” E.            Off-balance Sheet Arrangements We have a number of off-balance sheet items which have been disclosed elsewhere in this annual report, under “Item 4. Information on the Company—B. Business Overview—Beer and CSD Production Process—Sources and Availability of Raw Materials,” under “Item 4. Information on the Company—B. Business Overview—Beer and CSD Production Process—Packaging” and under “Item 17. Financial Statements,” note 29 to our consolidated financial statements, “Collateral and contractual commitments with suppliers, advances from customers and other.”  Off-balance sheet items include future commitments of R$4,319.2 million as of December 31, 2016, as set forth in the table below: Contractual Obligation

   As of December 31, 2016(in R$ million)Purchase commitments with respect to property, plant and equipment

   273.2Purchase commitments with respect to raw materials

   717.2Purchase commitments with respect to packaging materials

   2,657.9Other commitments

   670,9Total

   4,319.2
 F.            Commitments and Contingencies (Tabular Disclosure of Contractual Obligations) The following table and discussion provide additional disclosure regarding our material contractual obligations and commercial commitments as of December 31, 2016: Payments Due by PeriodContractual Obligations

   Total

   Less Than 1 Year

   1-3 Years

   3-5 Years

   More Than5 Years(in R$ million)Short-term and long-term debt*

   6,157.4

   3,800.2

   1,329.0

   357.5

   670.7Finance leasing liabilities

   25.6

   3.4

   22.2

   -

   -Trade and other payables

   23,249.5

   21,359.4

   608.0

   171.8

   1,110.2Sales tax deferrals

   730.8

   135.8

   256.0

   142.4

   196.6Total contractual cash commitments

   30,163.3

   25,298.9

   2,215.2

   671.1

   1,977.5
  *      The long-term debt amounts presented above differ from the amounts presented in the financial statements in that they include our best estimates on future interest payable (not yet accrued) in order to better reflect our future cash flow position. Long-term debt amounts presented above also include other unsecured debts.


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The above table does not reflect contractual commitments discussed above in “Off-Balance Sheet Arrangements.” We are subject to numerous commitments and contingencies with respect to tax, labor, distributors and other claims.  To the extent that we believe it is probable that these contingencies will be realized, they have been recorded in the balance sheet.  We have estimated the total exposures of possible (but not probable) losses, which are not recorded as liabilities, to be R$52,450.5 million as of December 31, 2016.  These are not considered commitments.  Our estimates are based on reasonable assumptions and management assessments, but should the worst case scenario develop, subjecting us to losses in all cases, our expected net impact on the income statement would be an expense for this amount.


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ITEM 6.                DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A.            Directors and Senior Management The Board of Directors oversees Ambev’s executive officers.  The Board of Directors is currently comprised of eleven effective members and one alternate member, and provides the overall strategic direction of Ambev.  Directors are elected at general shareholders’ meetings for a three-year term, re-election being permitted.  Day-to-day management is delegated to the executive officers of Ambev, of which there are currently eleven.  The Board of Directors appoints executive officers for a three-year term, re-election being permitted.  The Ambev Shareholders’ Agreement regulates the election of directors of Ambev by the controlling shareholders.  See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement—Management of Ambev.” Directors The following table sets forth information with respect to the current directors of Ambev: Board of Directors(1) Name

   Age

   Position

   Director Since(2)

   TermExpires(3)Victorio Carlos De Marchi

   78

   Co-Chairman and Director

   1999

   2017Carlos Alves de Brito

   56

   Co-Chairman and Director

   2006

   2017Marcel Herrmann Telles

   67

   Director

   1999

   2017Roberto Moses Thompson Motta

   59

   Director

   2008

   2017José Heitor Attilio Gracioso

   85

   Director

   1999

   2017Vicente Falconi Campos

   76

   Director

   1999

   2017Luis Felipe Pedreira Dutra Leite

   51

   Director

   2005

   2017Paulo Alberto Lemann

   48

   Director

   2011

   2017Álvaro Antonio Cardoso de Souza

   68

   Director

   2012

   2017Antonio Carlos Augusto Ribeiro Bonchristiano

   49

   Director (Independent)

   2014

   2017Marcos de Barros Lisboa

   52

   Director (Independent)

   2014

   2017João Mauricio Giffoni de Castro Neves

   49

   Director (Alternate)

   2015

   2017
  (1)   Victorio Carlos De Marchi, Co-Chairman of the Board of Directors of Ambev, was appointed by FAHZ, the former controlling shareholder of Antarctica, while Carlos Alves de Brito was appointed by ABI and is also the Chief Executive Officer of ABI.  ABI appointed five additional directors: Marcel Herrmann Telles, Roberto Moses Thompson Motta, Luis Felipe Pedreira Dutra Leite, Vicente Falconi Campos and Paulo Alberto Lemann in addition to the alternate director João Mauricio Giffoni de Castro Neves.  FAHZ appointed two additional directors: José Heitor Attílio Gracioso and Álvaro Antonio Cardoso de Souza.  The two independent directors Antonio Carlos Augusto Ribeiro Bonchristiano and Marcos de Barros Lisboa were appointed jointly by ABI and FAHZ. (2)   Directors first elected to our board of directors prior to 2013 were originally appointed as directors of Old Ambev.  Directors first elected to our board of directors on or after 2013 were originally elected as directors of Ambev S.A. (3)   Annual Shareholders’ General Meeting to be held on April 28, 2017. The following are brief biographies of each of Ambev’s directors: Victorio Carlos De Marchi.  Mr. De Marchi is Co-Chairman of the Board of Directors of Ambev.  Mr. De Marchi joined Antarctica in 1961 and held various positions during his tenure, including Chief Executive Officer from 1998 to April 2000.  Mr. De Marchi was also president of the Brewing Industry National Association (Sindicerv) until February 2002 and is a member of the Orientation Committee of FAHZ.Mr. De Marchi has a degree in economics fromFaculdade de Economia, Finanças e Administracão de São Pauloand a law degree fromFaculdade de Direito de São Bernardo do Campo.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.


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Carlos Alves de Brito.Mr. Brito is Co-Chairman of the Board of Directors of Ambev.  He has also served, since December 2005, as Chief Executive Officer of ABI.  He joined Brahma in 1989 and has held various management positions during his tenure.  He served as Chief Operating Officer of Ambev from 1999 to 2003, as Chief Executive Officer for Latin America in 2004 and as Chief Executive Officer for North America in 2005.  Mr. Brito holds a degree in mechanical engineering from theUniversidade Federal do Rio de Janeiroand an MBA from Stanford University.  His principal business address is Brouwerijplein 1, 3000, Leuven, Belgium. Marcel Herrmann Telles.  Mr. Telles is a member of the Board of Directors of Ambev.  He served as Chief Executive Officer of Brahma from 1989 to 1999.  Currently, he is also a member of the Board of Directors of ABI.  Mr. Telles has a degree in economics fromUniversidade Federal do Rio de Janeiroand attended the Owners/Presidents Management Program at Harvard Business School.  His principal business address is Redingstrasse 4, 4th floor, CH-9000, St. Gallen, Switzerland. Roberto Moses Thompson Motta.  Mr. Thompson is a member of the Board of Directors of Ambev.  He is also a board member of ABI and Lojas Americanas S.A., a retail company.  He holds a degree in engineering fromPontifícia Universidade Católica do Rio de Janeiro, and an MBA from the Wharton School of the University of Pennsylvania.  His principal business address is 600 Third Avenue, 37th floor, New York, NY, USA. José Heitor Attílio Gracioso.  Mr. Gracioso is a member of the Board of Directors of Ambev.  Mr. Gracioso joined Antarctica in 1946 and held various positions during his tenure.  In 1994, Mr. Gracioso was elected to Antarctica’s Board of Directors and, in 1999, he was elected Chairman of the Board of Directors, a position held until April 2000.  He holds a degree in marketing fromEscola Superior de Propaganda de São Paulo, a degree in business administration fromFundação Getulio Vargasand a degree in law fromFaculdade de Direito de São Bernardo do Campo.  His principal business address is Av. Brig. Faria Lima, 3900, 11th floor, São Paulo, SP, Brazil. Vicente Falconi Campos.  Mr. Campos is a member of the Board of Directors of Ambev.  He is also a member of the Institutional Council ofInstituto de Desenvolvimento Gerencial - INDG. Mr. Campos is also a consultant for the Brazilian government and Brazilian and multinational companies such as Grupo Gerdau, Grupo Votorantim and Mercedes-Benz.  He holds a degree in Mining and Metal Engineering fromUniversidade Federal de Minas Gerais, and M.Sc. and Ph.D. degrees from the Colorado School of Mines.  His principal business address is Rua Senador Milton Campos, 35, 7th floor, Nova Lima, MG, Brazil. Luis Felipe Pedreira Dutra Leite.Mr. Dutra is a member of the Board of Directors of Ambev.  He has also served, since January 2005, as Chief Financial Officer of ABI.  He joined Brahma in 1990 and has held numerous positions during his tenure, including that of Chief Financial Officer and Investor Relations Officer of Ambev.  Mr. Dutra holds a degree in economics fromUniversidade Cândido Mendesand an MBA in financial management fromUniversidade de São Paulo.  His principal business address is Brouwerijplein 1, 3000, Leuven, Belgium. Paulo Alberto Lemann.  Mr. Lemann is a member of the Board of Directors of Ambev.  He is also the co-founder of Pollux Capital, an asset management firm.  Mr. Lemann has been managing hedge funds since 1997.  Previously, he was co-founder of Synergy Fund, a fund of funds headquartered in New York.  He was also an analyst at Dynamo Administração de Recursos, an asset management firm.  Currently, he is a member of the Board of Directors of ABI and Lojas Americanas S.A., a retail company, a member of the International Board of Lone Capital Pine LLC, an asset management firm and theFundação Lemann, which main purpose is to improve public education in Brazil. Mr. Lemann holds a degree in economics fromUniversidade Cândido Mendes. His principal business address is Rua Visconde de Pirajá, 250, 7th floor, Ipanema, Rio de Janeiro, RJ, Brazil. Álvaro Antonio Cardoso de Souza.  Mr. Souza is a member of Ambev’s Board of Directors.  He served as a member of Ambev’s Fiscal Council from 2005 to March 2012, and since then has been a member of the Board of Directors of this Company. Mr. Souza holds degrees in economics and business administration fromPontifícia Universidade Católica de São Paulo. His principal business address is Avenida Presidente Juscelino Kubitschek 1726, 7th floor, part 71, São Paulo, SP, Brazil.


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Antonio Carlos Augusto Ribeiro Bonchristiano.Mr. Bonchristianois an independent member of the Board of Directors of Ambev. He has also acted as a member of the Board of Directors of several companies, including San Antonio Internacional, Ltd., LBR – Lácteos Brasil S.A., BRZ Investimentos S.A., Estácio Participações S.A., BHG S.A. – Brazil Hospitality Group, BR Properties S.A., Equatorial Energia S.A., GP Investments, Ltd., ALL – América Latina Logística S.A., Companhia Energética do Maranhão – CEMAR, Hopi Hari S.A., Contax Participações S.A., Gafisa S.A. and Magnesita Refratários S.A.  He was also a member of the Board of Directors and Chief Executive Officer of Submarino S.A. Mr.Bonchristianohas a degree in politics, philosophy and economics from the University of Oxford.  His principal business address is Avenida Brig. Faria Lima, 3900, 7th floor, São Paulo, SP, Brazil. Marcos de Barros Lisboa. Mr. Lisboais an independent member of the Board of Directors of Ambev. He has also acted as Executive Officer of Unibanco S/A and Vice-President of Operational Insurance, Controls and Support of Itaú Unibanco S/A, both companies with main activities in the financial segment.  Further, between 2003 and 2005, he acted as Secretary of Economic Politics of Federal Revenue Office (Ministério da Fazenda). Mr. Lisboa has a degree and a masters in economics fromUniversidade Federal do Rio de Janeiroand a Ph.D. in economics from the University of Pennsylvania.  Since the end of the 80s, he has developed activities in the faculty of several teaching institutions in Brazil and abroad.His principal business address is Rua Quatá, 300, São Paulo, SP, Brazil. João Maurício Giffoni de Castro Neves.Mr. Castro Neves is an alternate member of the Board of Directors of Ambev. He began working for Brahma in 1996, where he served in various departments, such as mergers and acquisitions, treasury, investor relations, business development, technology and shared services, and carbonated soft drinks and non-alcoholic non-carbonated beverages. He has also held the position of Chief Financial Officer and Investor Relations Officer, he was Quinsa’s Chief Executive Officer from 2007 to 2008 and Ambev’s Chief Executive Officer from 2009 to 2014. He has a degree in engineering fromPontificia Universidade Católica do Rio de Janeiro, and holds an MBA from the University of Illinois. His principal business address is Brouwerijplein 1, 3000 Leuven, Belgium. Executive Officers The following table sets forth information with respect to the current executive officers of Ambev: Name

   Age

   Position

   Executive Officer Since(1)

   TermExpires(2)Bernardo Pinto Paiva

   48

   Chief Executive Officer

   2015

   2019Ricardo Rittes de Oliveira Silva

   42

   Chief Financial Officer and Investor Relations Officer

   2016

   2019Pedro de Abreu Mariani

   50

   General Counsel and Corporate Affairs Executive Officer

   2005

   2019Ricardo Morais Pereira de Melo

   45

   Sales Executive Officer

   2016

   2019Fernando Dias Soares

   37

   Soft Drinks Executive Officer

   2016

   2019Mauricio Soufen(3)

   43

   Supply Executive Officer and Logistics Executive Officer

   2016

   2019Cassiano De Stefano(4)

   48

   BU Premium and High End Executive Officer

   2017

   2019Fábio Vieira Kapitanovas

   39

   People and Management Executive Officer

   2015

   2019Paula Nogueira Lindenberg

   41

   Marketing Executive Officer

   2015

   2019Gustavo Pimenta Garcia

   49

   Shared Services and Information Technology Executive Officer

   2016

   2019Rodrigo Figueiredo de Souza

   41

   Procurement Executive Officer

   2015

   2019
  (1)   Executive officers first appointed to our board of executive officers prior to 2013 were originally appointed as executive officers of Old Ambev.  Executive officers first appointed to our board of executive officers on or after 2013 were originally appointed as executive officer of Ambev S.A. (2)   Until May 11, 2019. (3)   Though Mr. Mauricio Soufen has been an executive officer of Ambev since 2016, he assumed the additional role of Logistics Executive Officer on January 1, 2017. (4)   Though Mr. Cassiano De Stefano was elected BU Premium and High End Executive Officer on January 1, 2017, he has been an executive officer of Ambev since 2016.


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The following are brief biographies of each of Ambev’s executive officers: Bernardo Pinto Paiva.  Mr. Pinto Paiva is Ambev’s Chief Executive Officer.  He joined Ambev in 1991 as a management trainee and during his career at our company has held leadership positions in Sales, Supply, Distribution and Finance. He was appointed Zone President North America in January 2008, Zone President Latin America South in January 2009 and Chief Sales Officer of ABI in January 2012.He holds a degree in Engineering fromUniversidade Federal do Rio de Janeiroand an Executive MBA fromPontifícia Universidade Católica do Rio de Janeiro.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Ricardo Rittes de Oliveira Silva.Mr. Rittes is Ambev’s Chief Financial Officer and Investor Relations Executive Officer.  He joined the Company in 2005 and has held the positions of Treasury Manager for Ambev and ABI and has acted as Shared Services and Information Technology Executive Officer from 2012 until 2015. Mr. Rittes holds a degree in production engineering fromEscolaPolitécnica de São Paulo, in addition to an MBA from the University of Chicago.His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Pedro de Abreu Mariani.Mr. Mariani is Ambev’s General Counsel and Corporate Affairs Executive Officer.  He joined the Company in 2004.  He holds a law degree fromPontifícia Universidade Católica do Rio de Janeiroand an LL.M. from the London School of Economics and Political Science.His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Ricardo Morais Pereira de Melo.Mr. Melo is Ambev’s Sales Executive Officer. Since he joined the Company in 1996, Mr. Melo held various sales positions, including Sales Manager, Commercial Manager in Salvador and in São Paulo, Regional Sales Executive Officer in the Northeast and in Rio de Janeiro, as well as Sales Vice-President of Ambev operations in Canada and Sales Strategy Vice-President at Anheuser-Busch InBev, in the United States. He holds a degree in civil engineering fromUniversidade Católica de Pernambucoand a Corporate MBA from Ambev.His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Fernando Dias Soares.Mr. Soares is Ambev’s Soft Drinks Executive Officer. Since 2002, when he joined the Company as a trainee, he held various positions in the commercial area. Between 2011 and 2012 he was National Soft Drinks Manager and thereafter he was National Auto-Service Channel Executive Officer. Mr. Soares holds a degree in business administration fromPontifícia Universidade Católica de São Paulo,a post-graduation fromFundação Getúlio Vargasand a Corporate MBA from Ambev.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Mauricio Soufen.  Mr. Soufen is Ambev’s Supply Executive Officer and Logistics Executive Officer.  Since he joined the Company in 1996 as a Production Supervisor, he held positions of Brewery Manager in Scotia and Belgium – where he was the only foreigner that has led the historical Stella Artois brewery, in Leuven. When Mr. Soufen returned to Brazil, served as Regional Director for the North /Central-West region and Director of our Engineering Center based in Jacareí, State of São Paulo. Along with the title of brewmaster, Mr. Soufen has a degree in mechatronics engineering fromEscola Politécnica da Universidade de São Pauloand an MBA from MIT - Sloan School of Management. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.


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Cassiano De Stefano. Mr. De Stefano is Ambev’s BU Premium and High End Executive Officer. Since 2000, when he joined the Company as a trainee, he held various positions, including Commercial Manager in São Paulo, Manaus and in Salvador, Ambev National Sales Manager, Regional Executive Officer in Russia, Logistics Executive Officer in Latin America North, Regional Executive Officer in the Northeast and in São Paulo as well as Logistics Executive Officer. Mr. De Stefano holds a civil engineering degree fromUnicamp – Universidade Estadual de Campinas, a Corporate MBA from Ambev and a specialization from INSEAD and Kellogg.His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Fábio Vieira Kapitanovas.Mr. Kapitanovas is Ambev’s People and Management Executive Officer. Since 2000, when he joined the Company as a trainee, he held several positions, including Regional Industrial Officer – South/SPI, Corporate Executive Officer of Logistics Projects and Executive Officer of the Shared Services Center.  He has a degree in mechanical engineering fromPolitécnica de São Paulo, in addition to a Corporate MBA from Ambev.  He participated in the AIGLE Program (Insead – Wharton Alliance) and in the Global Supply Chain Logistics Program, from MIT.His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Paula Nogueira Lindenberg. Ms. Lindenberg is Ambev’s Marketing Executive Officer.  She joined Ambev in 2001 and has held various positions both with the Company and ABI in the marketing area, including Marketing Officer for Brahma, Antarctica and premium portfolio in Brazil and Insights Global Officer. She holds a bachelor degree in business administration fromFundação Getúlio Vargasand a Corporate MBA from Ambev.  Her principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Gustavo Pimenta Garcia. Mr. Garcia is Ambev’s Shared Services and Information Technology Executive Officer. After joining the Company as a trainee in 1990, Mr. Garcia has held various positions, including Beer Manager in Argentina, Malting Facilities Executive Officer, Executive Officer of operations in Paraguay and Guatemala. He also headed sales projects in China and held the position of Soft Drinks, Non-Alcoholic and Procurement Vice-President in South America, as well as Shared Services and Information Technology Executive Officer in Europe. Mr. Garcia holds a degree in business administration fromUniversidade Federal do Rio de Janeiroand a MBA fromFundação Getúlio Vargas.His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. Rodrigo Figueiredo de Souza.Mr. Souza is Ambev’s Procurement Executive Officer. Over the past five years, Mr. Souza held various positions in the Company, including Facility Regional Executive Officer and Logistics Executive Officer in Latin America North. He holds a graduation degree in civil engineering fromPolitécnica de São Paulo. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil. B.            Compensation The aggregate remuneration of all members of the Board of Directors and Executive Officers of Ambev in 2016 for services in all capacities amounted to R$59.6 million (fixed and variable remuneration and share-based payment), as presented below: Management’s RemunerationYear Ended December 31, 2016(inR$ million, except where otherwise indicated)Number of Members

   Fixed Remuneration

   Variable Remuneration

   Post-Employ-ment Benefits

   Termi-nation Benefits

   Share-based Payment

   TotalFees

   Direct and Indirect Benefits

   Remunera-tion for Sitting on Committees

   Others

   Bonus

   Profit Sharing

   Remune-ration for Attending Meetings

   Com-mis-sions

   OthersBoard of Directors

   12.0

   5.1

   -

   -

   1.0

   -

   -

   -

   -

   -

   -

   -

   11.6

   17.7Fiscal Council

   6.0

   1.5

   -

   -

   0.3

   -

   -

   -

   -

   -

   -

   -

   -

   1.8Executive Officers

   11.0

   12.2

   0.9

   -

   2.5

   -

   -

   -

   -

   -

   -

   -

   24.6

   40.1Total

   29.0

   18.8

   0.9

   -

   3.8

   -

   -

   -

   -

   -

   -

   -

   36.2

   59.6


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In addition, the executive officers and members of the Board of Directors received some additional benefits provided to all Ambev S.A. employees and their beneficiaries and covered dependents, such as health and dental care.  Such benefits were provided through FAHZ.  These executive officers and directors also received benefits pursuant to Ambev’s pension and stock ownership plan.  For a description of these plans, see notes 23 and 24 to our audited consolidated financial statements. On various dates in 2016, pursuant to the terms and conditions of our stock ownership plan, we acquired from our directors and executive officers a total of 758,157 shares of Ambev for R$14.3 million.  Such amounts were calculated and paid taking into consideration the closing market price on the day of the transaction. The table below sets forth the minimum, maximum and average individual compensation figures attributable to our directors, executive officers and Fiscal Council members for each of the indicated periods: Year Ended December 31,2016

   2015

   2014(inR$ million, except where otherwise indicated)Number of Members

   Minimum

   Average

   Maximum

   Number of Members

   Minimum

   Average

   Maximum

   Number of Members

   Minimum

   Average

   MaximumBoard of Directors

   12.0

   0.4

   2.0

   8.3

   12.0

   0.4

   1.5

   10.1

   12.0

   0.3

   1.3

   6.0Fiscal Council

   6.0

   0.1

   0.3

   0.4

   6.0

   0.2

   0.2

   0.4

   6.0

   0.2

   0.3

   0.4Executive Officers

   11.0

   1.2

   3.6

   14.9

   11.0

   1.9

   4.7

   21.4

   10.0

   2.3

   5.0

   22.5
 Ambev Stock Ownership Plan Under the Ambev Stock Option Plan dated as of July 30, 2013, or the Plan, senior employees and management of either Ambev or its direct or indirect subsidiaries are eligible to receive stock options for Ambev common shares, including in the form of ADSs.  As of December 31, 2016, there were outstanding rights under the Plan providing for the acquisition of 131.3 million Ambev common shares by approximately 600 people (including executive management and employees). The Plan establishes the general conditions for granting options, the criteria for defining the strike price and other general terms and conditions of these stock options.  Restrictions apply to the divestment of the shares acquired through the Plan, which also defines the various duties and responsibilities of the Board of Directors as Plan Administrator, which may also be a committee. Pursuant to the Plan, the Board of Directors is conferred with ample powers for the organization and management of the Plan in compliance with its general terms and conditions.  The Board of Directors grants stock options and establishes the terms and conditions applicable to each grant through Stock Option Programs, or the Programs, which may define the relevant beneficiaries, the applicable number of Ambev common shares covered by the grant, the respective strike price, the exercise periods and the deadline for exercising the options, as well as the rules regarding option transfers and possible restrictions on the acquired shares, in addition to penalties.  Additionally, targets may be set for Ambev’s performance, with the Board of Directors also being empowered to define specific rules for Ambev employees who are transferred to other countries or to other companies of the group, including to ABI. Beneficiaries to whom stock options are granted must sign Stock Option Agreements, or the Agreements, with Ambev, according to which those beneficiaries have the option to purchase lots of Ambev common shares in compliance with the terms and conditions of the Plan, the corresponding Program and such Agreement. There are currently two models of stock options that may be granted under the Plan.  Under the first model, beneficiaries may choose between allocating 30%, 40%, 60%, 70% or 100% of the amounts received by them as profit sharing during the year to the immediate exercise of options, thereby allowing them to acquire the corresponding amount of Ambev shares.  Under this model, a substantial part of the shares acquired are to be delivered only within five years from the corresponding option grant date.  During such five-year period, the beneficiary must remain employed at Ambev or any other company of its group.  Under the second model, the beneficiary may exercise the options granted only after a period of five years from the corresponding grant date.


Vesting of the options granted under the second model is not subject to company performance measures; however, the right to exercise such options may be forfeited in certain circumstances, including the beneficiary’s resignation or dismissal prior to the options’ vesting.


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Before our adoption of the two stock options models that we currently grant, as described above, six Programs were approved by the Board of Directors from 2006 to 2009 that allowed their beneficiaries to choose between allocating 50%, 75% or 100% of the amounts received by them as profit sharing during the year to the immediate exercise of options, thereby permitting them to acquire the corresponding amount of Ambev shares. Company performance measures applied in order for those stock options to vest and the right to exercise them could be forfeited in certain circumstances, including the beneficiary’s resignation or dismissal prior to the options’ vesting.  Rights for the acquisition of a significant number of Ambev shares under this previous stock option model remain outstanding. As a means ofcreating a long term incentive (wealth incentive) for certain senior employees and members of management considered as having “high potential,”share appreciation rightsin the form of phantom stocks have been granted to those employees, pursuant to which the beneficiary shall receive two separate lots of phantom stock – Lot A and Lot B – subject to lock-up periods of five and ten years, respectively.  On the fifth or tenth anniversary of the granting of such lots, as the case may be, a beneficiary still employed with us shall receive, in cash, the amount corresponding to the BM&FBOVESPA closing price of the relevant Ambev shares (or NYSE closing price in the case of ADSs), on the trading session immediately preceding such anniversary, with each phantom stock corresponding to one share (or ADS, as the case may be).  Suchshare appreciation rightsshall not give the beneficiary the right to actually receive any Ambev shares or ADSs; those securities shall merely serve as basis for the calculation of the cash incentive to be received by such beneficiary.  Although not subject to performance measures, the right to receive the cash incentive deriving from the phantom stocks may be forfeited in certain circumstances, including the beneficiary’s resignation or dismissal prior to the relevant anniversary of the share appreciation right. We implemented a Share Based Payment Plan, or the Share Plan, dated as of April 29, 2016. Under the Share Plan, employees and management of Ambev or its direct or indirect subsidiaries are eligible to receive Ambev shares, including in the form of ADRs. The shares which are subject to the Share Plan are designated as Restricted Shares. Pursuant to the Share Plan, the Board of Directors is conferred with ample powers for the organization and management of the Share Plan in compliance with its general terms and conditions. The Board of Directors may appoint a committee to assist its members in the management of the Share Plan. The Board of Directors or the committee establishes the terms and conditions applicable to each Share Based Payment Programs, or the Share Plan Programs, which defines the relevant beneficiaries, the applicable number of Restricted Shares subject to the Share Plan Program, the Restricted Shares’ transference procedure and periods, and any possible penalties. Under the Share Plan, up to 0.3% of the shares corresponding to Ambev’s corporate capital may be granted in total. The delivery of the Restricted Shares is free of charges. The reference price per Restricted Share for the purpose of this Share Plan will correspond to the price of the shares of the Company at BM&FBOVESPA at the trading day immediately before the granting of the Restricted Shares. Beneficiaries of the Share Plan must sign a Share Based Payment Agreement, or the Share Based Agreements, with Ambev, according to which, those beneficiaries have the right to receive a maximum number of Ambev Shares or ADRs (“Cap”), as applicable, provided that the terms and conditions set forth in the Share Plan, Share Plan Programs and in the Share Based Agreements are complied with.


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ABI Exceptional Stock Option Grants To encourage its and its subsidiaries’ employees to help with its deleveraging efforts, ABI granted a series of stock options to its executives, including Ambev executives, that had their vesting subject to, among other things, ABI’s net debt-to-EBITDA ratio falling below 2.5 before December 31, 2013.  Such condition had been complied with at that date.  Specific forfeiture rules relating to these ABI option grants apply in case of employment termination.  Such grants were confirmed on April 28, 2009 by ABI’s annual general shareholders’ meeting.  Though the exercise of these ABI exceptional stock options will not cause any dilution to Ambev, we record an expense in connection with them on our income statement. On November 25, 2008, ABI’s board of directors had approved a grant of approximately 28 million of these exceptional stock options to several executives, including approximately 7 million options granted to Ambev executives.  Each option gave its beneficiary the right to purchase one existing common share of ABI at an exercise price of EUR 10.32, which corresponded to their fair value at the time of granting of the options.  Half of the options had a term of 10 years as from granting and became exercisable on January 1, 2014.  The other half had a term of 15 years as from granting and will become exercisable on January 1, 2019. On April 30, 2009, ABI granted another approximate 4.9 million of these stock options to approximately 50 executives of the ABI group, including approximately 1.8 million options granted to Ambev executives.  Each option gave its beneficiary the right to purchase one existing common share of ABI at an exercise price of EUR 21.94, which corresponded to their fair value at the time of granting of the options.  The options have a term of 10 years as from granting and became exercisable on January 1, 2014. On December 18, 2009, ABI granted another approximate 1.6 million exceptional stock options to its executives, including approximately 97.8 thousand options granted to Ambev executives.  Each option gave its beneficiary the right to purchase one existing common share of ABI at an exercise price of EUR 35.90 and became exercisable on December 18, 2014. Ambev Pension Plan Ambev’s pension plans for employees in Brazil are administered by the IAPP.  The IAPP operates both a defined benefit pension plan (closed to new participants since May 1998) and a defined contribution plan, which supplements benefits that the Brazilian government’s social security system provides to our employees.  The defined contribution plan covers substantially all new employees.  The IAPP was established solely for the benefit of our employees and its assets are held independently. The IAPP is managed by a Governing Board (Conselho Deliberativo), which has three members, two of whom are appointed by Ambev, and one member represents active and retired employees.  The IAPP also has an Executive Board (Diretoria Executiva) containing three members, all of whom are appointed by IAPP’s Council Board.  The IAPP also has a Fiscal Council with three members, two of whom appointed by Ambev and one member represents active and retired employees. Any employee upon being hired may opt to join the defined contribution plan.  When pension plans members leave Ambev before retirement, but having contributed at least three years to the IAPP plan, they have some options such as: (a) having their contributions refunded, (b) transferring their contributions to a bank or insurance company, (c) keeping their investment in IAPP to be paid in installments, and (d) continuing to IAPP for future retirement under the existing terms.  In the event the employee leaves the Company prior to completing three years as a participant, such employee will only be entitled to refund his/her contributions to the plan. As of December 31, 2016, we had 5,689 participants in our pension plans, including 620 participants in the defined benefit plan, 5,069 participants in the defined contribution plan, and 1,081 retired or assisted participants. Plan assets are comprised mainly of equity securities, government and corporate bonds and real estate properties.  All benefits are calculated and paid in inflation-indexedreais. Labatt provides pension plan benefits in the defined contribution model and in the defined benefit model to its employees, as well as certain post-retirement benefits.


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For information on amount recorded by us on December 31, 2016 as liabilities for pension plan benefits, see note 23 to our audited consolidated financial statements, included elsewhere in this annual report on Form 20-F. Profit-Sharing Plan Employees’ performance-based variable bonuses are determined on an annual basis taking into account the achievement of corporate, department or business-unit and individual goals, established by the Board of Directors. The distribution of these bonuses is subject to a three-tier system in which Ambev must first achieve performance targets approved by the Board of Directors.  Following that, each department or business segment must achieve its respective targets. Finally, individuals must achieve their respective performance targets. For employees involved in operations, we have a collective award for production sites and distribution centers with outstanding performances.  The bonus award at the distribution centers and production sites is based on a ranking between the different distribution centers and production sites (as the case may be), which, based on their relative ranking, may or may not receive the bonus. We provisioned R$188.0 million under these programs for the year ended December 31, 2016, R$531.8 million for the year ended December 31, 2015 and R$243.4 million for the year ended December 31, 2014. C.            Board Practices During 2016, our management held individual and group meetings with shareholders, investors and analysts to talk about the performance of our business and our opportunities for growth both in the short-term as well as in the future.  We also participated in conferences and road shows in Brazil, the United States, Mexico, Japan and Europe.  We hosted quarterly conference calls, transmitted simultaneously on the Internet, to clarify financial and operating results as well as answered questions from the investment community. Fiscal Council(Conselho Fiscal) Ambev’s Fiscal Council is a permanent body.  At our annual shareholders’ meeting held on April 29, 2016, the following members of the Fiscal Council were appointed for a term expiring upon the annual general shareholders’ meeting of 2017: James Terence Coulter Wright, José Ronaldo Vilela Rezende and Paulo Assunção de Sousa, and, as alternates, Emanuel Sotelino Schifferle, Ary Waddington and Vinicius Balbino Bouhid (the latter of whom serves as alternate only to Paulo Assunção de Sousa).  All of them are “independent” members as per Rule 10A-3(c)(3) of the Sarbanes-Oxley Act of 2002. The responsibilities of the Fiscal Council include supervision of management, performing analyses and rendering opinions regarding our financial statements and performing other duties in accordance with the Brazilian Corporation Law and its charter.  None of the members of the Fiscal Council is also a member of the Board of Directors or of any committee of the Board. Minority holders representing at least 10% of our common shares are entitled to elect one member and respective alternate to the Fiscal Council without the participation of the controlling shareholders. We have relied on the exemption provided for under Rule 10A-3(c)(3) of the Sarbanes-Oxley Act of 2002, which enables us to have our Fiscal Council perform the duties of an audit committee for the purposes of such Act, to the extent permitted by Brazilian law.  We do not believe that reliance on this exemption would materially adversely affect the ability of our Fiscal Council to act independently and to satisfy the other requirements of such Act. The Board of Directors Most of our Board members have been in office for several years, originally as directors of Old Ambev, and were elected to the Board of Directors of Ambev at the Company’s extraordinary general shareholders’ meeting held on January 2, 2014 and the Company’s Board meeting held on September 25, 2014, for a term expiring at the annual general shareholders’ meeting to be held in 2017.  These Board members use their extensive knowledge of our business to help ensure that we reach our long-term goals, while maintaining our short-term competitiveness.  Another objective of the Board of Directors is to encourage us to pursue our short-term business goals without compromising our long-term sustainable growth, while at the same time trying to make sure that our corporate values are observed.


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 Under our bylaws, at least two members of the Board of Directors shall be independent directors.  For the applicable director independence criteria, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Board of Directors.” Ambev’s Co-Chairmen of the Board of Directors and the Chief Executive Officer are separate positions that must be held by different individuals. The Board of Directors is supported in its decision-making by the following committees: Operations, Finance and Compensation Committee The Operations, Finance and Compensation Committee is the main link between the policies and decisions made by the Board of Directors and Ambev’s management team.  The Operations, Finance and Compensation Committee’s responsibilities include: to present medium and long-term planning proposals to the Board of Directors;

to analyze and issue an opinion on the decisions of the Board of Directors regarding the compensation policies for the Board of Directors and Executive Management, including their individual compensation packages, to help ensure that the members of the Board and executive management are being adequately motivated to reach an outstanding performance in consideration for proper compensation;

to monitor the investors relations strategies and the performance of our rating, as issued by the official rating agencies;

to monitor the evaluation of the executive officers, senior management and their respective succession plans;

to analyze, monitor and propose to the Board of Directors suggestions regarding legal, tax and relevant regulatory matters;

to analyze and monitor our annual investment plan;

to analyze and monitor growth opportunities;

to analyze and monitor our capital structure and cash flow; and

to analyze and monitor the management of our financial risk, as well as budgetary and treasury policy. The current members of the Committee are Messrs. Victorio Carlos De Marchi (Chairman), Luis Felipe Pedreira Dutra Leite, Marcel Herrmann Telles and Roberto Moses Thompson Motta.  The members of this committee are elected by the Board of Directors.


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Antitrust Compliance and Related Parties Committee The Antitrust Compliance and Related Parties Committee’s responsibilities are to assist the Board of Directors with the following matters: related party transactions;

any general conflict of interest situations that may arise between the Company and related parties;

compliance, by the Company, with legal, regulatory and statutory provisions concerning related party transactions;

compliance, by the Company, with legal, regulatory and statutory provisions concerning antitrust matters; and

other matters the Board of Directors may consider relevant and in the interest of the Company. The current members of the Antitrust Compliance and Related Parties Committee are Messrs. Victorio Carlos De Marchi (Chairman), José Heitor Attilio Gracioso, Álvaro Antônio Cardoso de Souza, Bolívar Moura Rocha and Everardo de Almeida Maciel.  The members of this committee are elected by the Board of Directors. Differences Between United States and Brazilian Corporate Governance Practices In November 2003, the SEC approved the new corporate governance rules that had been adopted by the NYSE pursuant to the Sarbanes-Oxley Act of 2002.  According to those governance rules, foreign private issuers that are listed on the NYSE must disclose the significant differences between their corporate governance practices and those required by the NYSE’s regulations for U.S. companies. In Brazil, the CVM has provided guidance to the market with a set of recommendations on differentiated corporate governance practices which are not required but recommended. Additionally, the BM&FBOVESPA and the IBGC-Brazilian Institute of Corporate Governance have developed guidelines for corporate governance best practices. On November 16, 2016, the Brazilian Corporate Governance Code, which provides corporate governance practices guidelines for publicly-held companies, was released by an institution formed by several entities, such as ABRAPP, ABRASCA, ANBIMA, ABVCAP, AMEC, APIMEC, BM&FBOVESPA, BRAIN, IBGC, IBRI and Instituto IBMEC, after the contribution and comments made by the CVM. The CVM submitted for public hearing, in December 2016, a draft of a new regulation creating rules in order to implement the provisions set forth in the Brazilian Corporate Governance Code. The principal differences between the NYSE corporate governance standards and our corporate governance practices are as follows: Independence of Directors and Independence Tests NYSE corporate governance standards require listed companies to have a majority of independent directors and set forth the principles by which a listed company can determine whether a director is independent. “Controlled companies,” such as Ambev, need not to comply with these requirements.  Nonetheless, our bylaws require that at least two of our directors be independent.  In addition, our bylaws set forth that directors elected by a separate ballot vote of minority shareholders holding at least 10% of our capital stock shall be deemed independent. As of the date of this annual report on Form 20-F, all of our directors, including the independent ones, had been appointed by our controlling shareholders. The Brazilian Corporation Law and the CVM establish rules in relation to certain qualification requirements and restrictions, compensation, duties and responsibilities of a company’s officers and directors.


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Executive Sessions NYSE corporate governance standards require non-management directors of a listed company to meet at regularly scheduled executive sessions without management. According to the Brazilian Corporation Law, up to one-third of the members of the Board of Directors can also hold executive officer positions.  However, none of our directors holds an executive officer position in us at this time and, accordingly, we believe we would be in compliance with this NYSE corporate governance standard if we were a U.S. company. Nominating/Corporate Governance and Compensation Committees NYSE corporate governance standards require that a listed company have a nominating/corporate governance committee and a compensation committee each composed entirely of independent directors with a written charter that addresses certain duties.  “Controlled companies” such as Ambev need not to comply with this requirement. In addition, we are not required under the Brazilian Corporation Law to have, and accordingly we do not have, a nominating committee or corporate governance committee.  According to the Brazilian Corporation Law, Board committees may not have any specific authority or mandate since the exclusive duties of the full Board of Directors may not be delegated.  The role of the corporate governance committee is generally performed by either our Board of Directors or our executive officers. Audit Committee and Audit Committee Additional Requirements NYSE corporate governance standards require that a listed company have an audit committee composed of a minimum of three independent members that satisfy the independence requirements of Rule 10A-3 under the Exchange Act, with a written charter that addresses certain duties. We maintain a permanent Fiscal Council, which is a body contemplated by the Brazilian Corporation Law that operates independently from our management and from our registered independent public accounting firm.  Its principal function is to examine the annual and quarterly financial statements and provide a formal report to our shareholders.  We are relying on the exemption provided by Rule 10A-3(c)(3) and believe that our reliance on this exemption will not materially affect the ability of the Fiscal Council to act independently and to satisfy the other requirements of Rule 10A-3. Shareholder Approval of Equity Compensation Plans NYSE corporate governance standards require that shareholders of a listed company must be given the opportunity to vote on all equity compensation plans and material revisions thereto, subject to certain exceptions. Under Brazilian Corporation Law, shareholder pre-approval is required for the adoption and revision of any equity compensation plans. Our existing stock ownership plans were approved by our extraordinary general shareholders’ meetings held on July 30, 2013 and on April 29, 2016. Corporate Governance Guidelines NYSE corporate governance standards require that a listed company must adopt and disclose corporate governance guidelines that address certain minimum specified standards, which include, director qualification standards, director responsibilities, director access to management and independent advisors, director compensation, director orientation and continuing education, management succession and annual performance evaluation of the Board. We believe the corporate governance guidelines applicable to us under the Brazilian Corporation Law are consistent with the guidelines established by the NYSE.  We have adopted and observe our Manual on Disclosure and Use of Information and Policies for Trading with Securities issued by Ambev which deals with the public disclosure of all relevant information as per CVM’s guidelines, as well as with rules relating to transactions involving the dealing by our management and controlling shareholders in our securities.


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Code of Business Conduct NYSE corporate governance standards require that a listed company must adopt and disclose a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or officers. Each code of business conduct and ethics should address the following matters: (1) conflicts of interest; (2) corporate opportunities; (3) confidentiality; (4) fair dealing; (5) protection and proper use of company assets; (6) compliance with laws, rules and regulations (including insider trading laws); and (7) encouraging the reporting of any illegal or unethical behavior. We have adopted a Code of Business Conduct that applies to all directors, officers and employees. Our code of businessconductis available onour websiteat www.ri.ambev.com.br. The information included on our website or that might be accessed through our website is not included in this annual report and is not incorporated into this annual report by reference. There are no waivers to our Code of Business Conduct. Certification Requirements NYSE corporate governance standards require that each listed company’s chief executive officer certify to the NYSE each year that he or she is not aware of any violation by the company of the NYSE corporate governance standards. As required by Section 303A.12(b) of the NYSE corporate governance standards, our Chief Executive Officer will promptly notify the NYSE in writing after our executive officer becomes aware of any material non-compliance with any applicable provisions of the NYSE corporate governance standards. D.            Employees As of December 31, 2016, we and our subsidiaries had a total of 53,250 employees, approximately 51% of whom were engaged in production, 44% in sales and distribution and 5% in administration.


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The following table sets forth the total number of our employees as of the end of the periods indicated: As of December 31,2016

   2015

   201453,250

   52,738

   51,871
 The following table shows the geographical distribution of our employees as of December 31, 2016: Geographical Distribution of Ambev Employees as of December 31, 2016Location

   Numberof EmployeesLatin America North

   40,416Brazil

   33,788Dominican Republic

   4,179Cuba

   776Guatemala

   244Panama

   1,429Latin America South

   9,421Argentina

   5,718Bolivia

   2,001Uruguay

   698Paraguay

   592Chile

   412Canada

   3,413Total

   53,250
 Industrial Relations All of our employees in Brazil are represented by labor unions, but only less than 5% of our employees in Brazil are actually members of labor unions.  The number of administrative and distribution employees who are members of labor unions is not significant.  Salary negotiations are conducted annually between the workers’ unions and us.  Collective bargaining agreements are negotiated separately for each facility or distribution center.  Our Brazilian collective bargaining agreements have a one- or two-year term, and we usually enter into new collective bargaining agreements on or prior to the expiration of the existing agreements.  We conduct salary negotiations with labor unions in accordance with local law for our employees located in our CAC, Latin America South and Canadian operations. Health and Severance Benefits In addition to wages, our employees receive additional benefits.  Some of these benefits are mandatory under Brazilian law, some are provided for in collective bargaining agreements and others are voluntarily granted.  The benefits packages of our employees in Brazil consist of benefits provided both directly by the Company and through FAHZ, which provides medical, dental, educational and social assistance to current and retired employees of Ambev and their beneficiaries and covered dependents, either for free or at a reduced cost.  We may voluntarily contribute up to 10% of our consolidated net income towards the support of FAHZ in connection with these benefits, as determined pursuant to the Brazilian Corporation Law and our bylaws. We are required to contribute 8% of each Brazilian employee’s gross pay to an account maintained in the employee’s name with the Brazilian government’s Severance Indemnity Fund (Fundo de Garantia por Tempo de Serviço), or the FGTS.  Under Brazilian law, we are also required to pay termination benefits to Brazilian employees dismissed without cause equal to 40% (plus 10% to the Brazilian government) of the accumulated contributions made by us to the terminated employee’s FGTS account throughout the employee’s period of service, among other mandatory termination fees.


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We provide health and benefits in accordance with local law for our employees located in our CAC, Latin America South and Canadian operations. E.            Share Ownership The following table shows the amount and percentage of our shares held by members of our Board of Directors and by executive officers as of March 3, 2017: Name

   Amount and Percentageof Common SharesVictorio Carlos De Marchi(1)

   *Carlos Alves de Brito

   *Marcel Herrmann Telles(1)(2)

   *Roberto Moses Thompson Motta

   *José Heitor Attílio Gracioso(1)

   *Vicente Falconi Campos

   *Luis Felipe Pedreira Dutra Leite

   *Paulo Alberto Lemann

   *Álvaro Antonio Cardoso de Souza

   *Antonio Carlos Augusto Ribeiro Bonchristiano

   *Marcos de Barros Lisboa

   *João Mauricio Giffoni de Castro Neves

   *Bernardo Pinto Paiva(1)

   *Pedro de Abreu Mariani

   *Fábio Vieira Kapitanovas

   *Mauricio Soufen

   *Paula Nogueira Lindenberg

   *Ricardo Rittes de Oliveira Silva

   *Ricardo Morais de Melo

   *Fernando Dias Soares

   *Cassiano De Stefano

   *Gustavo Pimenta Garcia

   *Rodrigo Figueiredo de Souza

   *
  *      Indicates that the individual holds less than 1% of the class of securities. (1)   These Board members are also trustees of FAHZ.  For information regarding the shareholdings of FAHZ in Ambev, see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders.” (2)   Does not include shares beneficially owned by Mr. Telles through his interest in ABI.  Mr. Telles is part of the controlling group of ABI.  See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement.”


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ITEM 7.                MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A.            Major Shareholders Introduction Ambev has only one class of shares (i.e., voting common shares), including in the form of ADSs (evidenced by ADRs), with each ADS representing one Ambev common share.  The Ambev common shares and ADSs are registered under the Exchange Act.  As of March 3, 2017, Ambev had 15,699,872,992 shares outstanding.  As of March 3, 2017, there were 1,339,100,579 Ambev ADSs outstanding (representing 1,339,100,579 Ambev shares, which corresponds to 8.5% of the total Ambev shares outstanding).  The Ambev shares held in the form of ADSs under the Ambev ADS facilities are deemed to be the shares held in the “host country” (i.e., the United States) for purposes of the Exchange Act.  In addition, as of March 3, 2017, there were 123 registered holders of Ambev ADSs. Control Our two direct controlling shareholders, IIBV and AmBrew, both of which are subsidiaries of ABI, together with FAHZ, held in aggregate 72.1% our total and voting capital stock (excluding treasury shares) as of March 3, 2017. ABI indirectly holds shares in us representing 61.9% of our total and voting capital stock (excluding treasury shares) as of March 3, 2017.  ABI thus has control over us, even though (1) ABI remains subject to the Ambev Shareholders’ Agreement and (2) ABI is controlled by Stichting that represents an important part of interests of BRC and the Interbrew Founding Families. For further information on these matters see “Item 4. Information on the Company—A. History and Development of the Company—The InBev-Ambev Transactions” and “—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement.” Share Buyback Program Between March 1, 2017 and March 3, 2017, we acquired 64,874 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$1.1 million. In February 2017, we acquired 36,522 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$0.6 million. In January 2017, we acquired 3,690,690 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$61.9 million. In 2016, we acquired 3,196,848 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$59.4 million. On April 24, 2016, we terminated our share buyback program that we had commenced on August 28, 2015.  Over the course of this share buyback program, we repurchased 5,454,202 common shares at market price at the time of acquisition in the total amount of R$102.9 million. The repurchased shares were held in treasury for cancellation and/or subsequent disposition. In 2015, we had acquired 48,949,937 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$928.1 million. In 2014, we acquired 11,630,364 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$184.8 million. For a further description of our share buyback programs, see “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.”


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Ambev’s Major Shareholders The following table sets forth information as of March 3, 2017, with respect to any person known to us to be the beneficial owner of 5% or more of our outstanding shares: Shareholder

   Amount and Percentageof Common SharesThe Bank of New York Mellon – ADR Department(1)

   1,339,100,579

   8.5%Interbrew International B.V

   8,441,956,047

   53.8%AmBrew S.A

   1,284,309,014

   8.2%FAHZ(2)

   1,596,475,601

   10.2%
  (1)   Represents the number of shares held in the form of ADSs.  The Bank of New York Mellon is the depositary of Ambev shares in accordance with the deposit agreement entered into with Ambev and the owners of Ambev ADSs. (2)   Mr. Marcel Herrmann Telles, who is ABI-appointed director of Ambev, and Messrs. Victório Carlos De Marchi and José Heitor Attílio Gracioso, who are FAHZ-appointed directors of Ambev, are also trustees of FAHZ. For a description of our major shareholders’ voting rights, see “—Ambev Shareholders’ Agreement.” Ambev Shareholders’ Agreement On April 16, 2013, ABI (through IIBV and AmBrew) and FAHZ executed a shareholders’ agreement to be applicable to Ambev, or the Ambev Shareholders’ Agreement.  The Ambev Shareholders’ Agreement will be effective up to and including July 1, 2019, and will be replaced by a new shareholders’ agreement, or the 2019 Shareholders’ Agreement, to be effective starting on July 2, 2019, as long as at that time FAHZ holds at least 1,501,432,405 Ambev common shares, adjusted for any future share dividends, stock-splits and reverse stock-splits (see “—The 2019 Shareholders’ Agreement”). The parties to the Ambev Shareholders’ Agreement are IIBV and AmBrew, which represent ABI’s beneficial interest in Ambev, and FAHZ, as well as Ambev, as intervening party, and ABI, as intervening third-party beneficiary.  Among other matters, the Ambev Shareholders’ Agreement governs the voting of the Ambev common shares subject to the agreement and the voting by Ambev of the shares of its majority-owned subsidiaries.  The following discussion relates to the Ambev Shareholders’ Agreement. Management of Ambev Although each Ambev common share entitles its holder to one vote in connection with the election of Ambev’s Board of Directors, Ambev’s direct controlling shareholders (i.e., FAHZ, IIBV and AmBrew) have the ability to elect the majority of Ambev’s directors. If cumulative voting is exercised together with the separate ballot vote of minority shareholders, thereby resulting in the number of directors so elected being equal to or greater than the number of directors elected by Ambev’s controlling shareholders, those controlling shareholders are entitled to elect the same number of Board members elected by minority shareholders plus one additional director, regardless of the maximum number of directors provided for in Ambev’s bylaws. Presently, under the Ambev Shareholders’ Agreement each of FAHZ, IIBV and AmBrew are represented on the Board of Directors of Ambev and its majority-owned subsidiaries and, in addition to the members and respective alternates that they are entitled to appoint, each of FAHZ, on the one hand, and IIBV and AmBrew, on the other, may appoint up to two observers without voting rights to attend Ambev’s Board meetings.  The Boards of Directors of Ambev and its majority-owned subsidiaries are to be composed of at least three and no more than 15 regular members and the same number of alternates, with a term of office of three years with reelection being permitted.


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FAHZ will have the right to appoint four directors and their respective alternates to the Boards of Directors of Ambev and its majority-owned subsidiaries, as long as it maintains ownership of at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits).  FAHZ held 1,501,432,405 Ambev common shares immediately after the Old Ambev-Ambev S.A. stock swap merger approved in July 2013.  Under the Ambev Shareholders’ Agreement, FAHZ is not entitled to appoint more than four members to Ambev’s Board of Directors in the event that its holding of Ambev common shares increases.  FAHZ will always be entitled to appoint at least one member to Ambev’s Board of Directors, as long as it holds a minimum of 10% of the Ambev common shares.  IIBV and AmBrew have the right to appoint members and respective alternates to the Boards of Directors of Ambev and its majority-owned subsidiaries in a number proportionate to the number of members appointed by FAHZ.  Such proportion is based on the ratio between FAHZ’s holding and the joint holding of IIBV and AmBrew in the Ambev common shares. The Ambev Shareholders’ Agreement provides that Ambev will have two Co-Chairmen with identical rights and duties, with one being appointed by FAHZ and the other jointly by IIBV and AmBrew.  In the event of a deadlock, neither of the Co-Chairmen has a deciding vote on matters submitted to Ambev’s Board of Directors. Each of FAHZ, IIBV and AmBrew may remove a director that it has appointed to the Board of Directors of Ambev or its majority-owned subsidiaries, and each also has the right to appoint the respective replacement or a new alternate, if the originally appointed alternate is confirmed for the vacant position. The Ambev Shareholders’ Agreement establishes that the shareholders may, by consensus, establish committees of the Board with the purpose of looking into specific matters, the analyses of which require that their members have specific technical knowledge. Preliminary Meetings and Exercise of Voting Right On matters submitted to a vote of the shareholders or their representatives on the Board of Directors of Ambev or its majority-owned subsidiaries, FAHZ, IIBV and AmBrew have agreed to endeavor to first reach a consensus with respect to voting their common shares of each of Ambev and its majority-owned subsidiaries, and have agreed on the manner to direct their representatives to vote on the matter being submitted.  The Ambev Shareholders’ Agreement provides that the parties shall hold a preliminary meeting in advance of all meetings of shareholders or the Board of Directors of Ambev or of its majority-owned subsidiaries, with the purpose of discussing and determining a consensus position to be taken by the parties in such meetings. If the parties fail to reach a consensus with respect to a particular matter, the position to be adopted by the parties to the Ambev Shareholders’ Agreement will be determined by the shareholders or group of shareholders holding a majority of the Ambev common shares, which currently is constituted of IIBV and AmBrew.  However, this rule does not apply in connection with the election of members of the Board of Directors, as described above under “—Management of Ambev,” and with respect to matters that require unanimous approval by FAHZ, IIBV and AmBrew, as follows: any amendment to the bylaws of Ambev and/or any of its majority-owned subsidiaries with the purpose of amending:  (1) the corporate purpose, (2) the term of duration, and/or (3) the composition, powers and duties of management bodies;

the approval of the annual investment budget of Ambev and/or any of its majority-owned subsidiaries when the amount of the investments exceeds 8.7% of the net sales of Ambev foreseen for the same fiscal year;

the designation, dismissal and substitution of the Chief Executive Officer (Diretor Geral) of Ambev;

the approval of, or amendment to, the compensation policy for the Board of Directors and the executive officers of Ambev, as well as of its majority-owned subsidiaries;


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the approval of stock ownership plans for the directors, executive officers and employees of Ambev and/or its majority-owned subsidiaries;

a change in the dividend policy of Ambev and/or any of its majority-owned subsidiaries;

increases in the capital of Ambev and/or any of its majority-owned subsidiaries, with or without preemptive rights, through subscription, creation of a new share class, or changes in the characteristics of existing shares, as well as decreases of capital, issuances of debentures (whether or not convertible into shares), warrants and the creation of founders’ shares by Ambev and/or any of its majority-owned subsidiaries, except when such legal businesses are carried out between Ambev and its majority-owned subsidiaries or between the majority-owned subsidiaries;

amalgamations, spin-offs, transformations, mergers, acquisitions, and divestments involving Ambev and/or any of its majority-owned subsidiaries, in the latter case (1) when such transaction involves a company that is not a subsidiary, directly or indirectly, of Ambev and (2) provided that the transaction in question results in the reduction in the average dividend paid by Ambev in the past five years, adjusted by the General Market Price Inflation Index (Índice Geral de Preços ao Mercado), or the IGP-M index, published by the Getulio Vargas Foundation (Fundação Getulio Vargas) as of the date of payment;

the creation, acquisition, assignment, transfer, establishment of an encumbrance on and/or disposal of shares, quotas and/or any securities issued by any of Ambev’s majority-owned subsidiaries, under any title or form, except for the benefit of Ambev and/or another subsidiary;

the incurrence by Ambev and/or any of its majority-owned subsidiaries of a debt transaction that results in a net debt/equity ratio greater than 1.5:1;

the execution, amendment, termination, renewal or cancellation of any contracts, agreements or the like involving the registered or deposited trademarks of Ambev or its majority-owned subsidiaries;

the extension of loans or the offer of guarantees of any kind by Ambev and/or any of its majority-owned subsidiaries to any third party in an amount greater than 1% of Ambev’s shareholders’ equity as set forth in the last audited balance sheet prepared in accordance with Brazilian GAAP, except in favor of employees of Ambev and its majority-owned subsidiaries or in favor of the majority-owned subsidiaries themselves;

the election of members to committees of Ambev’s Board of Directors;

the cancellation of the registration of Ambev and/or any of its majority-owned subsidiaries as publicly traded companies;

the execution of a petition for an arrangement with creditors (recuperação judicial) or acknowledgment of bankruptcy by Ambev and/or any of its majority-owned subsidiaries;

the liquidation or dissolution of Ambev and/or any of its majority-owned subsidiaries; and

the appointment of the external auditors of Ambev and/or any of its majority-owned subsidiaries. The Ambev Shareholders’ Agreement provides that whenever the parties fail to reach a consensus in a preliminary meeting as to any matter listed above, they will exercise their voting rights so as not to approve such matter.  The Ambev Shareholders’ Agreement provides that any votes cast by FAHZ, IIBV and AmBrew, or by any of the directors appointed by each of them, in violation of the provisions of the agreement will be deemed null, void and ineffective.


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FAHZ, IIBV and AmBrew, as well as any member appointed by them to the Board of Directors of Ambev or any of its majority-owned subsidiaries, are not required to observe decisions reached at preliminary meetings when deciding on the following matters: analysis and approval of management accounts of Ambev and its majority-owned subsidiaries;

analysis and approval of the financial statements and management reports of Ambev and its majority-owned subsidiaries;

any matters or actions typified as abuse of control, as set forth in the first paragraph of Section 117 of the Brazilian Corporation Law; and

actions and practices relating to management’s diligence, loyalty and other related duties, as established in Sections 153 to 158 of the Brazilian Corporation Law. Transfer of Shares The Ambev Shareholders’ Agreement contains the following provisions concerning the transfer of the Ambev common shares subject to the agreement: FAHZ, IIBV and AmBrew have agreed (1) not to dispose of their Ambev common shares, directly or indirectly, during the term of the agreement, whether through private trades, on the stock market or on the over-the-counter market, including by way of tender offers, either voluntary or mandatory, except as permitted in Section VI of the Ambev Shareholders’ Agreement and (2) not to create any type of encumbrance on their Ambev common shares, in either of the above cases without the prior written consent of FAHZ, in the case of IIBV and AmBrew, and of IIBV and AmBrew, in the case of FAHZ;

if the Ambev common shares owned by FAHZ, on the one hand, and by IIBV and AmBrew, on the other, become subject to seizure, attachment, judicial surety or any other restrictive measure, and such restriction is not lifted or waived within 30 days after its imposition, the shares subject to the restriction shall be automatically deemed offered for sale to the other party.  The price for the relevant Ambev common shares will be the lesser of either (1) the book value per Ambev common share, as per the latest audited balance sheet of Ambev adjusted by the IGP-M index from the date the restrictive measure is imposed until the date a petition is filed to require that the restriction be lifted or waived or (2) the average quoted market price of the Ambev common shares on stock exchanges in the 20-day period prior to the petition for lifting or waiving the restriction, provided that the Ambev common shares were traded during such period.  If the obligations in respect of such restriction exceed the above-mentioned price, the party whose shares have been subject to the restriction will be liable for the difference that the other party may be required to deposit in order to acquire the relevant Ambev common shares.  If the obligations in respect of such restriction were lower than the price for the Ambev common shares as described above, then the party whose shares have been subject to the restriction will be entitled to receive the difference between the price for the Ambev common shares and the obligations in respect of such restriction; and

if either FAHZ, on the one hand, and IIBV or AmBrew, on the other, does not exercise its subscription rights relating to Ambev common shares it holds, then each such party must first offer such rights to the other party at market value, which such other party will then decide, within the following 10 days, on whether to exercise its right of first refusal to subscribe the new shares to be issued.  If such other party elects not to acquire the subscription right offered, then the offering shareholder may dispose of its subscription rights to third parties. The Ambev Shareholders’ Agreement provides that any transfer of shares or subscription rights or creation of encumbrances in which the foregoing provisions on rights of first refusal are not observed will be deemed null, void and ineffective.  Ambev’s management is also prohibited from reflecting any such events in its corporate books, as permitted by the Brazilian Corporation Law.


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Specific Performance The obligations of the parties under the Ambev Shareholders’ Agreement will be subject to specific performance under applicable Brazilian law. The 2019 Shareholders’ Agreement The 2019 Shareholders’ Agreement was executed on April 16, 2013 by IIBV, AmBrew and FAHZ, as well as Ambev, as intervening party.  It will become effective on July 2, 2019, as long as at that time FAHZ holds at least 1,501,432,405 Ambev common shares, adjusted for any future share dividends, stock-splits and reverse stock-splits.  After becoming effective, the 2019 Shareholders’ Agreement will be terminated at any time upon FAHZ ceasing to hold at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits) or if FAHZ decides to early terminate it.  Among other matters, the 2019 Shareholders’ Agreement governs the voting of the Ambev common shares subject to the agreement and the voting by Ambev of the shares of its majority-owned subsidiaries. Management of Ambev The 2019 Shareholders’ Agreement establishes that Ambev will be managed by a Board of Directors and by an Executive Committee.  Ambev’s Board of Directors will no longer be chaired by two Co-Chairmen. Under the 2019 Shareholders’ Agreement, FAHZ will be entitled to appoint two directors and their respective alternates to the Board of Directors of Ambev, provided that it holds at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits).  One of the FAHZ-appointed directors shall have the right to also be appointed as a member of Ambev’s Operations, Finance and Compensation Committee and of the Antitrust Compliance and Related Parties Committee, as well as any other committee that may be established by Ambev’s Board of Directors.  Furthermore, the shareholders shall use their best efforts to allow one of the FAHZ-appointed directors to participate as an observer in meetings of Ambev’s Fiscal Council, whenever such body is installed in lieu of the audit committee required by the Sarbanes-Oxley Act of 2002. FAHZ may remove a director that it has appointed to the Board of Directors of Ambev, and also has the right to appoint the respective replacement or a new alternate, if the originally appointed alternate is confirmed for the vacant position. The foregoing provisions of the 2019 Shareholders’ Agreement regarding Ambev’s management bodies do not apply to the management bodies of Ambev’s majority-owned subsidiaries. Preliminary Meetings and Exercise of Voting Rights The 2019 Shareholders’ Agreement replicates the provisions of the Ambev Shareholders’ Agreement concerning preliminary meetings, including the need for consensus between FAHZ, IIBV and AmBrew, and applicable procedures when consensus is not reached, in respect to matters that will be resolved at shareholders’ or Board of Directors meetings of Ambev and its majority-owned subsidiaries. If the parties fail to reach a consensus with respect to a particular matter, the position to be adopted by the parties to the 2019 Shareholders’ Agreement will be determined by the shareholder or group of shareholders holding a majority of Ambev common shares.  The following matters are not subject to the foregoing rule: (1) election of members to the Board of Directors or to any committee of the Board of Directors, which shall follow the specific election procedure described above under “—Management of Ambev” and (2) matters that require unanimous approval by FAHZ, IIBV and AmBrew, as follows: any amendment to the bylaws of Ambev and/or any of its majority-owned subsidiaries with the purpose of changing: (1) the corporate purpose of those companies with a view to causing them to cease the production, commercialization and distribution of beverages, (2) the allocation of Ambev’s results of operations, as set forth in its bylaws, or other similar provisions in the bylaws of Ambev’s majority-owned subsidiaries that are meant to provide financial support to FAHZ, (3) the minimum mandatory dividend of 40% of Ambev’s adjusted net income, and/or (4) any other provision that affects FAHZ’s rights under the 2019 Shareholders’ Agreement; and


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the transformation of Ambev into a different form of legal entity. FAHZ, IIBV and AmBrew, as well as any member appointed by them to the Board of Directors of Ambev or any of its majority-owned subsidiaries, are not required to observe decisions reached at preliminary meetings when deciding on the following matters: analysis and approval of management accounts of Ambev and its majority-owned subsidiaries;

analysis and approval of the financial statements and management reports of Ambev and its majority-owned subsidiaries;

any matters or actions typified as abuse of control, as set forth in the first paragraph of Section 117 of the Brazilian Corporation Law; and

actions and practices relating to management’s diligence, loyalty and other related duties, as established in Sections 153 to 158 of the Brazilian Corporation Law. Transfer of Shares The 2019 Shareholders’ Agreement’s provisions regarding transfer of shares differ substantially from the equivalent provisions contained in the Ambev Shareholders’ Agreement.  Under the 2019 Shareholders’ Agreement, the following rules shall apply: in the event of a transfer of Ambev common shares subject to the 2019 Shareholders’ Agreement (1) by IIBV and/or AmBrew, where such transfer results in these entities jointly holding a total equity interest in Ambev represented by less than 50% plus one Ambev common share, and/or (2) by FAHZ upon making one and only one eligible transfer of at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits) to a single buyer and subject to the first offer obligations described below, then, in either of those cases, the Ambev common shares subject to those transfers shall remain bound by the 2019 Shareholders’ Agreement.  Only in those two cases shall a third party acquiring the Ambev common shares in those transfers be able to adhere to the 2019 Shareholders’ Agreement in order for the transfer to be effective;

at any time FAHZ may elect to release its Ambev common shares subject to the 2019 Shareholders’ Agreement for the exclusive purpose of selling them in the stock market or over-the-counter market, provided that (1) it maintains at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits) subject to the 2019 Shareholders’ Agreement, and (2) it observes the first offer obligations described below; and

in the event FAHZ intends to execute the above-referenced one and only one eligible transfer or release, it shall first offer the Ambev common shares to the remaining parties to the 2019 Shareholders’ Agreement for their average quoted market price on the 20 trading sessions immediately prior to the date of the relevant first offer (or the last 40 trading sessions if no Ambev common shares were negotiated in at least half of the 20 immediately preceding trading sessions).  The offerees will have five days, as of the first offer date, to accept or refuse the offer, and, if expressly or tacitly refused (or in the event the offerees fail to timely pay the applicable purchase price), then FAHZ may either proceed with such transfer or release its Ambev common shares from the 2019 Shareholders’ Agreement and thereafter sell them to third parties within ten days.


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Specific Performance The obligations of the parties under the 2019 Shareholders’ Agreement will be subject to specific performance under applicable Brazilian law. B.            Related Party Transactions Overview We have executed and may in the future execute related party transaction with certain of our significant shareholders or other related parties and certain of their affiliates. These transactions include, but are not limited to: (i) the purchase and sale of raw material with affiliated entities, (ii) entering into distribution, cross-licensing, transfer pricing, indemnification, service and other agreements with affiliated entities, (iii) import agreements with affiliated entities, and (iv) royalty agreements with affiliated entities.   These transactions have been entered into only on an arm’s length basis in accordance with our best interests and customary market practices at the time of their execution.  In addition, the Antitrust Compliance and Related Parties Committee is responsible for assisting the Board in reviewing, analyzing and deciding on these transactions to help ensure that their terms are reasonable and that they comply with all applicable laws and regulations, as well as our corporate governance and best practices principles.  See “Item 6. Directors, Senior Management and Employees—C. Board Practices—The Board of Directors—Antitrust Compliance and Related Parties Committee.”  Set forth below is a discussion of our material related party transactions.  For further information on our related party transactions, see note 33 to our audited consolidated financial statements. Ambev and FAHZ Medical, Dental and Social Assistance One of the activities of FAHZ, as described in its bylaws, is to provide medical and dental assistance and other benefits both to active and certain of our retired employees and executive officers (including their dependents). Label Production We have entered into a lease agreement with FAHZ, pursuant to which we have leased and are operating FAHZ’s assets used to produce our labels for R$63,328 for a period of ten years, maturing on March 31, 2018. Lease on Commercial Properties We have a lease of two commercial properties from FAHZ involving annual lease payments in the amount of R$3.3 million. This lease agreement is scheduled to expire in January 2020. Ambev and Employees Before January 1, 2003, Old Ambev had deferred payment stock option plans that allowed their beneficiaries to pay the exercise price over a four-year period, with the possibility of a three-year extension, subject to an 8% interest rate accruing on the unpaid balance and monetary correction for inflation.  Only 10% of the exercise price had to be paid upon the exercise of those deferred payment stock option plans.  With the enactment of the Sarbanes-Oxley Act in 2002, which, among other things, generally prohibited the extension of personal loans to company directors and executive officers, we discontinued the granting of these deferred payment stock option plans.  Nevertheless, deferred payment for the stock option plans granted prior to 2003 was grandfathered by Ambev’s current stock ownership plan and such options may still be exercised with payment deferral of their respective exercise price.


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Ambev and Certain ABI Controlling Shareholders (Messrs. Lemann, Sicupira and Telles) We entered into a service agreement with B2W - Companhia Digital, or B2W, a Brazilian e-commerce company controlled by Messrs. Lemann, Sicupira and Telles, who are part of the controlling group of ABI, our indirect controlling shareholder.  According to this service agreement, B2W manages our e-commerce-platform called “Parceiro Ambev” (Ambev Business Partner). Ambev and ABI Licensing Agreements See “Item 4. Information on the Company—B. Business Overview—Licenses—Licensing Agreements with ABI.” Special Goodwill Reserve As a result of the merger of InBev Holding Brasil S.A., or InBev Brasil, into us in July 2005, we acquired tax benefits resulting from the partial amortization of the special premium reserve pursuant to article 7 of CVM Rule No. 319/99.  Such amortization will be carried out within the next ten years following the merger.  As permitted by CVM Rule No. 319/99, the Protocol and Justification of this merger, as entered into between ourselves, InBev Brasil and InBev N.V./S.A. (as ABI was then called) on July 7, 2005, established that 70% of the goodwill premium, which corresponded to the tax benefit resulting from the amortization of the tax goodwill derived from the merger, would be capitalized by us to the benefit of our controlling shareholder, with the remaining 30% being capitalized by us without the issuance of new shares to the benefit of all shareholders.  Since 2005, pursuant to the Protocol and Justification of this merger, we have carried out, with shareholder approval, capital increases through the partial capitalization of the goodwill premium reserve.  Accordingly, IIBV and AmBrew, which are subsidiaries of ABI, have subscribed shares corresponding to 70% of the goodwill premium reserve and our minority shareholders have been entitled to participate in these share issuances through the exercise of preemptive rights under the Brazilian Corporation Law. The remaining 30% of the tax benefit has been capitalized by us without issuance of new shares to the benefit of all shareholders.  The Protocol and Justification of this merger also provides, among other matters, that ABI shall indemnify us for any undisclosed liabilities of InBev Brasil. Bucanero In January 2014, one of our wholly-owned subsidiaries acquired from ABI a 50% equity interest in Bucanero, a Cuban company in the business of producing and selling beer.  See “Item 4. Information on the Company—A. History and Development of the Company—Recent Acquisitions and Strategic Alliances in Latin America.” Transfer of Operations in Colombia, Peru, Ecuador and Panama In May 2016, we entered into an agreement with ABI, pursuant to which the we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador, in exchange for which ABI has agreed to transfer SABMiller plc’s, or SABMiller, Panamanian business to us. Other than post-closing debt and/or cash adjustments, the transaction did not involve any cash payments and involved an exchange of shares of the aforementioned entities. The transaction was conditioned on the successful closing of the SABMiller and ABI merger, which closed in the fourth quarter of 2016. As a result of this transaction, on December 31, 2016, we ceased operations in Colombia, Peru and Ecuador and commenced operations in the beverages market of Panama. C.            Interests of Experts and Counsel Not applicable.


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ITEM 8.                FINANCIAL INFORMATION A.            Consolidated Financial Statements and Other Financial Information Consolidated Financial Statements See “Item 17. Financial Statements.” Legal Proceedings We are subject to numerous claims with respect to tax, labor, civil and other matters (consisting of antitrust, environmental and other proceedings that do not fit in the other categories).  Such proceedings involve inherent uncertainties including, but not limited to, as a result of court rulings, negotiations between affected parties and governmental actions, and, consequently, our management cannot at this stage estimate with certainty how and when these matters will be resolved. To the extent that we believe contingencies arising from these proceedings will probably be realized, they have been recorded in the balance sheet.  Our provisions for legal contingencies were R$934.0 million as of December 31, 2016. We have estimated the total exposures of possible (but not probable) losses, which are not recorded as liabilities, to be R$52.5 billion as of December 31, 2016. Our estimates are based on reasonable assumptions and management assessments, but should the worst case scenario develop, subjecting us to losses in all cases classified as possible (but not probable), our net impact on our results of operations would be an expense for this amount.  Except as set forth herein, there are no legal proceedings to which we are a party, or to which any of our properties are subject which, either individually or in the aggregate, may have a material adverse effect on our results of operations, liquidity or financial condition.  For more information, see notes 26 and 30 to our audited consolidated financial statements. Tax Matters As of December 31, 2016, we had several tax claims pending against us, including judicial and administrative proceedings.  Most of these claims relate to ICMSValue-Added Tax, IPI Excise Tax, and income tax and social contributions.  As of December 31, 2016, we had made provisions of R$570.6 million in connection with those tax proceedings for which we believe there is a probable chance of loss. Among the pending tax claims, there are claims filed by us against Brazilian tax authorities alleging that certain taxes are unconstitutional.  Such tax proceedings include claims for income taxes, ICMS Value-Added Tax, IPI Excise Tax and taxes on revenues, such as the Social Integration Program Contribution (Programa de Integração Social), or the PIS Contribution and the Social Security Funding Contribution (Contribuição para Financiamento da Seguridade Social), or COFINS.  As these claims are contingent on obtaining favorable judicial decisions, the corresponding assets which might arise in the future are only recorded once it becomes certain that we will receive the amounts previously paid or deposited. As of December 31, 2016, we were party to tax proceedings with a total estimated possible risk of loss of R$47.8 billion. Approximately R$28.9 billion of this figure is related to controversies related to payment of income tax and social contribution, and approximately R$16.0 billion is related to controversies involving the payment of ICMS value-added and IPI Excise taxes. The most significant proceedings are discussed below. ICMS Value-Added Tax, IPI Excise Tax and Taxes on Net Sales We have been party to legal proceedings with the State of Rio de Janeiro where we are challenging the State’s attempt to assess ICMS Value-Added Tax with respect to unconditional discounts granted by us from January 1996 to February 1998.  In 2015, these proceedings were before the Brazilian Superior Court of Justice and the Brazilian Supreme Court (Supremo Tribunal Federal).  In October 2015 and January 2016, we paid the amounts related to the State of Rio de Janeiro’s proceedings with discounts under an incentive tax payment program granted by such State in the total amount of R$271.0 million. In 2013, 2014 and 2015, we received similar tax assessments issued by the States of Pará and Piauí relating to the same issue, which are currently under discussion. Our management estimates the amount involved in these proceedings to be approximately R$559.5 million as of December 31, 2016, reflecting the payments made in October 2015 and January 2016. We have classified this as a possible loss and, therefore, for which no provision has been made.


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Goods manufactured within the Manaus Free Trade Zone (Zona Franca de Manaus) intended for remittance elsewhere in Brazil are exempt from the IPI Excise Tax.  We have been registering IPI Excise Tax presumed credits upon the acquisition of exempted inputs manufactured in the Manaus Free Trade Zone.  Since 2009, we have been receiving a number of tax assessments from the RFB relating to the disallowance of such presumed tax credits, which are under discussion before the Brazilian Supreme Court.  Management estimates the possible losses in relation to these assessments to be R$2.0 billion as of December 31, 2016.  We have not recorded any provision in connection with these assessments.  See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sales Tax Deferrals and Other Tax Credits.” In addition, over the years, we have received tax assessments from the Brazilian Federal Tax Authorities charging federal taxes that they considered unduly offset with the disallowed IPI excise tax credits which are under discussion in other proceedings.  We are currently challenging those charges in the courts. Our management estimates the possible losses related to these assessments to be approximately R$735.5 million as of December 31, 2016.  We have not recorded any provision in connection with these assessments. In 2014, we received tax assessments from the RFB relating to IPI Excise Tax allegedly due over remittances of manufactured goods to other related factories. Our management estimates the possible losses related to these assessments to be approximately R$1.5 billion as of December 31, 2016. In June 2015, we received a tax assessment issued by the State of Pernambuco, relating to ICMS Value-Added Tax differences, based on alleged non-compliance with a state tax incentive agreement, PRODEPE, stemming from February 2014.  In 2015, we were notified of new tax assessments related to the same matter. In March 2016, we achieved a partial victory relating to one of the tax assessments, where the respective fine was definitively annulled by the administrative court.  Our management estimates the possible losses related to this matter to be approximately R$404.1 million as of December 31, 2016. We have recorded provisions in the total amount of R$2.6 million in relation to the proceedings for which we consider the chances of loss to be probable considering specific procedural issues. Over the years, we have received tax assessments relating to supposed ICMS differences that some States considered due in the tax substitution system in cases where the price of certain products sold by a factory reached levels close to or above the price table basis established by such States.  We are currently challenging those charges before the courts.  In 2015, we received new tax assessments related to the same issue, in the approximate amount of R$332 million. In August 2016, we received a new assessment, issued by the State of Minas Gerais, in the amount of R$1.4 billion, regarding the same matter. Considering this new assessment and others received in 2016, our management estimates the amount related to this issue to be approximately R$4.5 billion as of December 31, 2016, classified as a possible loss and, therefore, for which we have made no provision. We have recorded provisions in the total amount of R$1.7 million for proceedings where we consider the chances of loss to be probable considering specific procedural issues. State Tax Incentives of theConselho Nacional de Política Fazendária(National Council on Fiscal Policy), or CONFAZ Many states in Brazil offer tax incentive programs to attract investments to their respective regions, pursuant to the rules of the National Council on Fiscal Policy, or CONFAZ, a council formed by the Treasury Secretaries from each of the 27 Brazilian States.  We participate in ICMS Value-Added Tax Credit Programs offered by various Brazilian States which provide (1) tax credits to offset ICMS Value-Added Tax payables and (2) ICMS Value-Added Tax deferrals.  In return, we are required to meet certain operational requirements, including, depending on the State, production volume and employment targets, among others.  All of these conditions are included in specific agreements between us and the relevant state governments.


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There is an ongoing dispute regarding whether these benefits are constitutional when granted without the prior approval of each Brazilian State participating in the CONFAZ.  Some States and Public Prosecutors have filed Direct Actions of Unconstitutionality (Ação Direta de Inconstitucionalidade) before the Brazilian Supreme Court to challenge the constitutionality of certain state laws granting tax incentive programs unilaterally, without the prior approval of the CONFAZ. Since 2007, we have received tax assessments from the States of São Paulo, Rio de Janeiro, Minas Gerais and other States, challenging the legality of tax credits arising from existing tax incentives received by us in other States. As of December 31, 2016, the aggregate amount of these assessments was R$1.8 billion. We consider these proceedings to have a possible (but not probable) risk of loss.  Such estimate is based on management assessments, but should we lose such proceedings, the expected net impact on our income statement would be an expense for this amount.  Moreover, we cannot rule out the possibility of other Brazilian States issuing similar tax assessments against us in the future relating to other state tax incentive programs of which we avail ourselves.  In 2011, the Brazilian Supreme Court ruled that 14 state laws granting tax incentives without the prior approval of the CONFAZ to be unconstitutional, including one granting incentives to us in the Federal District, from which we have ceased to benefit from since such decision was issued. In a meeting held on September 30, 2011, the CONFAZ issued a resolution suspending the right of the States to claim the return of the tax incentives incurred by the beneficiaries of the state laws declared unconstitutional.  There are a number of other lawsuits before the Brazilian Supreme Court challenging the constitutionality of incentives laws offered by some states without the prior approval of the CONFAZ, which may impact our state tax incentives. In 2012, the Brazilian Supreme Court issued a binding precedent proposal (Proposta de Súmula VinculanteNo. 69/2012), which would automatically declare as unconstitutional all tax incentives granted without prior unanimous approval of the CONFAZ.  In order to become effective, such proposal must be approved by two-thirds of the members of the Supreme Court.  We do not expect that the Supreme Court will vote on this matter before Congress votes a bill of law aimed at regulating this issue. There are currently a number of different proposals before Congress, which generally provide for (1) existing tax incentives to be grandfathered for a number of years; (2) new tax incentives to be approved by a majority of the States (rather than unanimously); and (3) a reduction on interstate ICMS Value-Added taxes in order to decrease the relevance of tax benefits on interstate transactions.  However, no assurance can be given that the Brazilian Supreme Court will not vote on the binding precedent proposal before the matter is ultimately regulated by Congress. It is also unclear whether the Supreme Court decision would forgive the already availed incentives or establish a transition period. Profits Generated Abroad During the first quarter of 2005, certain of our subsidiaries received a number of assessments from the RFB relating to profits obtained by subsidiaries domiciled abroad.  In December 2008, an administrative tax court rendered a decision on one of these tax assessments relating to foreign profits.  This decision was partially favorable to us, and we filed an appeal to the Upper House of the Administrative Tax Court, which was denied in full in March 2017. Such decision is likely to be published in 2017 and while we may continue to pursue a motion of clarification in the Administrative Court, we nevertheless intend to seek recourse in the judicial courts for this tax assessment. With respect to another tax assessment relating to earnings of our foreign subsidiaries, an administrative tax court rendered a definitive decision favorable to us in September 2011.  We received two new tax assessments related to this matter in December 2013 and December 2016.  As of December 31, 2016, we estimated our exposure to possible losses in relation to these assessments to be R$4.9 billion and our exposure to probable losses to be R$41.6 million, for which we have recorded a provision in the corresponding amount. The recent administrative decision does not change the chances of loss. Income Tax - Tax Loss Offset We and certain of our subsidiaries received a number of assessments from the RFB relating to the offset of tax loss carry forwards arising in the context of business combinations.  In February 2016, we were notified of the end of the administrative phase and, consequently, we filed lawsuits on the matter. In September 2016, we received the first favorable court decision. Our management estimates the total exposures of possible losses in relation to these assessments to be R$522.9 million as of December 31, 2016.  We have not recorded any provision in connection with these disputes.


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Special Goodwill Reserve In December 2011, we received a tax assessment from the RFB related to the goodwill amortization resulting from Inbev Brasil’s merger referred to under “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ambev and ABI—Special Goodwill Reserve.”  In June 2012 we filed an appeal against the unfavorable first level administrative decision. In November 2014, the lower Administrative Court rendered a partially favorable decision, and we presented a motion to clarify the decision to the Administrative Court.  The motion was admitted in September 2016 and we are currently awaiting the court’s ruling on this clarification.  In June 2016, we received a new tax assessment charging the remaining value of the goodwill amortization between 2011 to 2013, related to InBev Brazil’s merger with Ambev.  We have not recorded any provisions for this matter and our management estimates possible losses in relation to this assessment to be approximately R$7.8 billion as of December 31, 2016.  In the event we are required to pay these amounts, ABI will reimburse us in the amount proportional to the benefit received by ABI pursuant to the merger protocol, as well as related costs. In October 2013, we also received a tax assessment related to the goodwill amortization resulting from the merger of Beverage Associate Holding into us. We filed our defense in November 2013 and the lower Administrative Tax Court issued an unfavorable decision against us in November 2014. We filed an appeal on December 2, 2014 and are awaiting the decision of the Appeals Administrative Tax Court. Management estimates the amount of possible losses in relation to this assessment to be approximately R$1.5 billion as of December 31, 2016. We have not recorded any provision in connection with this assessment. Disallowance of Expenses and Deductibility of Losses In December 2014, we received a tax assessment from the RFB related to disallowance of alleged non-deductible expenses and certain loss deductions mainly associated with financial investments and loans.  Our defense was presented on January 28, 2015. In July 2016, we were notified of an unfavorable administrative first level decision and filed an appeal to the Upper Administrative Court. In December 2015 and December 2016, we also received two new tax assessments related to the same matter.  We estimate our exposure to possible losses in relation to these assessments to be approximately R$5.6 billion as of December 31, 2016. We have not recorded any provision in connection with those assessments. Disallowance of Taxes Paid Abroad Between 2014 and 2016, we received tax assessments from the RFB related to the disallowance of deductions associated with alleged unproven taxes paid abroad, for which the decision from the Upper House of the Administrative Tax Court is still pending.As of December 31, 2016, our management estimated the exposure of approximately R$2.8 billion as a possible risk, and accordingly we have not recorded a provision for such amount, and estimated approximately R$194.0 million as a probable loss for which we recorded a provision in the same amount. Presumed Profit In April 2016, our subsidiary Arosuco received a tax assessment regarding the use of presumed profit method for the calculation of income tax and the social contribution on net profit instead of the real profit method. Arosuco has filed a defense and awaits the first level administrative decision. Arosuco management estimates the amount of possible losses in relation to this assessment to be approximately R$569.6 million as of December 31, 2016. In December 2016, our subsidiary CRBS received a tax assessment regarding the use of presumed profit method for the calculation of income tax and social contribution on net profit instead of the real profit method.


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CRBS has filed a defense and awaits the first level administrative decision. CRBS estimates that the possible losses related to this matter are approximately R$3.6 billion. Social Contributions In December 2015, Ambev received a tax assessment issued by the Brazilian federal tax authorities, relating to amounts allegedly due under Integration Program / Social Security Financing Levy (PIS/COFINS) over bonus products granted to its customers in the first quarter of 2011. In 2016, Ambev received new assessments related to the same issue, for the subsequent periods. Ambev management estimates the possible losses related to these assessments to be, approximately, R$1.5 billion as of December 31, 2016. Ambev filed defenses against these assessments and currently awaits judgment. No related provision has been made. Labor Matters We are involved in more than 25,000 labor claims.  Most of the labor claims we face relate to our Brazilian operations.  In Brazil, it is not unusual for a large company to be named as a defendant in such a significant number of claims.  As of December 31, 2016, we made provisions totaling R$165.7 million in connection the above labor claims involving former, current and outsourced employees relating mainly to overtime, dismissals, severance, health and safety premiums, supplementary retirement benefits and other matters, all of which are awaiting judicial resolution and have probable chance of loss. As of December 31, 2016, there were approximately 51 claims between us and the Brazilian National Institute for Social Security (Instituto Nacional de Seguridade Social) with an aggregate exposure of R$15.7 million.  These claims are classified as having a possible chance of loss and allege, among other things, that we should have paid social security contributions in relation to bonus payments and payments to third-party service providers. Civil Claims As of December 31, 2016, we were involved in more than 7,800 civil claims that were pending, including third-party distributors and product-related claims. We have established provisions totaling R$43.9 million reflecting applicable adjustments, such as accrued interest, as of December 31, 2016 in connection with civil claims. Subscription Warrants In 2002, we decided to request a ruling from the CVM in connection with a dispute between Old Ambev and some of its warrant holders regarding the criteria used in the calculation of the strike price of certain Old Ambev warrants.  In March and April 2003, the CVM ruled that the criteria used by Old Ambev to calculate the strike price were correct.  In response to the CVM’s final decision and seeking to reverse it, some of the warrant holders filed separate lawsuits before the courts of São Paulo and Rio de Janeiro. Although the warrants expired without being exercised, the warrant holders claim that the strike price should be reduced to take into account the strike price of certain stock options granted by Old Ambev under its then-existing stock ownership program, as well as for the strike price of other warrants issued in 1993 by Brahma. We are aware of at least seven claims in which the plaintiffs argue that they would be entitled to those rights. One of these cases was settled. Two of them were ruled favorably to us by the appellate court of the State of São Paulo. Both decisions were confirmed by the Superior Court of Justice. The plaintiffs have appealed to the Special Court of the Superior Court of Justice and such appeals are pending. Of the four other claims, we received a favorable ruling in one claim by a first level court in Rio de Janeiro, and the appellate court of the State of Rio de Janeiro ruled against us in another three claims. We have appealed to the Brazilian Superior Court of Justice with respect to the final decisions issued by the appellate court of the state of Rio de Janeiro. In 2016, we received a favorable ruling in one of such appeals, to which the plaintiffs filed an appeal of their own, which is currently pending judgment. In the beginning of 2017, the Superior Court of Justice ruled two of the appeals in our favor, but the plaintiffs may appeal such decision to the Special Court. The remaining appeal is still pending final disposition.


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The warrant holders of both claims that were denied by the appellate court of the State of São Paulo have also appealed to the Superior Court of Justice. The Superior Court of Justice decided both cases in our favor although the decisions are subject to appeal. In the event the plaintiffs prevail in the above six pending proceedings, we believe that the corresponding economic dilution for the existing shareholders would be the difference between the market value of the shares at the time they are issued and the value ultimately established in liquidation proceedings as being the subscription price pursuant to the exercise of the warrants.  We believe the warrants object of those six proceedings represented, on December 31, 2016, 172,831,574 Ambev common shares that would be issued at a value substantially below fair market value, should claimants ultimately prevail.  The plaintiffs also claim they should receive past dividends related to these shares in the amount of R$761.7 million as of December 31, 2016. Based on management assessments, our chances of receiving unfavorable final decisions in this matter are either possible or remote, and therefore we have not established a provision for this litigation in our audited consolidated financial statements.  As these disputes are based on whether we should receive as a subscription price a lower price than the price that we consider correct, a provision of amounts with respect to these proceedings would only be applicable with respect to legal fees and past dividends. Antitrust Matters We currently have no antitrust matters pending against us before Brazilian antitrust authorities and Brazilian courts. Environmental Matters Riachuelo In 2004, an environmental complaint was initiated by certain neighbors residing in the Riachuelo Basin against the State of Argentina, the Province of Buenos Aires, the city of Buenos Aires and more than 40 corporate entities (including our Argentinean subsidiary) with premises located in the Riachuelo Basin or that discharge their waste into the Riachuelo River.  In this complaint, the Argentine Supreme Court of Justice ruled that the State of Argentina, the Province of Buenos Aires and the city of Buenos Aires remain primarily responsible for the remediation of the environment, and further resolved that the Riachuelo Basin Authority, an environmental authority created in 2006 pursuant to the Argentine Law No. 26,168, would be responsible for the implementation of a Remediation Plan for the Riachuelo Basin.  The Argentine Supreme Court of Justice also decided that any claim on damages should be initiated before a civil court. No further claims were initiated against our Argentinean subsidiary. Lawsuit Against the Brazilian Beer Industry On October 28, 2008, the Brazilian Federal Prosecutor’s Office (Ministério Público Federal) filed a suit for damages against us and two other brewing companies claiming total damages of approximately R$2.8 billion (of which approximately R$2.1 billion are claimed against us).  The public prosecutor alleges that: (1) alcohol causes serious damage to individual and public health, and that beer is the most consumed alcoholic beverage in Brazil; (2) defendants have approximately 90% of the national beer market share and are responsible for heavy investments in advertising; and (3) the advertising campaigns increase not only the market share of the defendants but also the total consumption of alcohol and, hence, cause damage to society and encourage underage consumption. Shortly after the above lawsuit was filed, a consumer-protection association applied to be admitted as a joint-plaintiff.  The association has made further requests in addition to the ones made by the Public Prosecutor, including the claim for “collective moral damages” in an amount to be ascertained by the court; however, it suggests that it should be equal to the initial request of R$2.8 billion (therefore, doubling the initial amount involved).  The court has admitted the association as joint-plaintiff and has agreed to hear the new claims. After the exchange of written submissions and documentary evidence, the case was dismissed by the Lower Court Judge, which denied all the claims submitted against Ambev and the other defendants. The Prosecutor’s Office to appealed to the Federal Court, but based on management assessments, we believe that our chances of loss are remote and, therefore, we have not made any provision with respect to such claim.


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Class Action Canada (Brewers Retail Inc. Litigation) On December 12, 2014, a lawsuit was commenced in the Ontario Superior Court of Justice against the Liquor Control Board of Ontario (LCBO), Brewers Retail Inc. (known as The Beer Store or “TBS”), and the owners of Brewers Retail Inc. (Molson Coors Canada, Sleeman Breweries Ltd. and Labatt Breweries of Canada LP (the “Brewers”).  The lawsuit was brought in Canada pursuant to the Ontario Class Proceedings Act, and sought, among other things: (1) to obtain a declaration that the defendants conspired with each other to allocate markets for the supply of beer sold in Ontario since June 1, 2000; (2) to obtain a declaration that the Brewers conspired to fix, increase and/or maintain prices charged to Ontario licensees (on-trade) for beer and the fees charged by TBS to other competitive brewers who wished to sell their products through TBS; and (3) damages for unjust enrichment.  As part of this third allegation, the plaintiffs allege illegal trade practices by Brewers.  They are seeking damages not exceeding C$1.4 billion (approximately R$3.9 billion); punitive, exemplary and aggravated damages of C$5 million (R$14.1 million); and changes/repeals of the affected legislation.  We have not recorded any provision in connection therewith. A motion for summary judgment has been filed by the defendants and should be heard in the fourth quarter of 2017.  A hearing related to the class certification and trial on the merits is not expected to be held before 2018. Dividend Policy The timing, frequency and amount of future dividend payments, if any, will depend upon various factors that our Board of Directors may consider relevant, including our earnings and financial condition.  Our bylaws provide for a minimum mandatory dividend of 40% of our adjusted annual net income, if any, as determined under IFRS at our unconsolidated financial statements.  Brazilian companies are permitted to make limited distributions to shareholders in the form of interest accrued on share capital, commonly referred to as “interest on shareholders’ equity,” and treat such payments as a deductible financial expense for purposes of Brazilian income tax and social contribution on profits.  This notional interest distribution is treated for accounting purposes as a deduction from shareholders’ equity in a manner similar to a dividend.  The benefit from the tax deductible interest on shareholders’ equity is recorded in the income statement.  The minimum mandatory dividend includes amounts paid as interest on shareholders’ equity.  However, payment of such interest on shareholders’ equity is subject to Brazilian withholding income tax, whereas no such withholding is required in connection with dividends paid.  For further information on this matter see “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations—Income Tax.” Annual adjusted net income not distributed as dividends or interest on shareholders’ equity may be capitalized, used to absorb losses or otherwise appropriated as allowed under the Brazilian Corporation Law and our bylaws.  Therefore, annual adjusted net income amounts may not necessarily be available to be paid as dividends.  We may also not pay dividends to our shareholders in any particular fiscal year upon the determination of the Board of Directors that such distribution would be inadvisable in view of our financial condition at the time.  Any such dividends not distributed would be allocated to a special reserve account for future payment to shareholders, unless used to offset subsequent losses.  For further information on this matter, see “Item 3. Key Information— D. Risk Factors—Risks Relating to Our Common Shares and ADSs—Our shareholders may not receive any dividends.” For further information on provisions of the Brazilian Corporation Law relating to required reserves and payment of dividends or interest on shareholders’ equity, as well as specific rules applicable to the payment of dividends by us under our bylaws, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Reserves.”


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Ambev S.A. The following table shows the cash dividends paid by Ambev to holders of Ambev’s common shares inreaisand in U.S. dollars (translated fromreaisat the commercial exchange rate as of the date of payment).  The amounts include interest on shareholders’ equity, net of withholding tax.  The last distribution of dividends approved, which relates to the second half of the 2016 fiscal year, was scheduled for first payment by Ambev on February 23, 2017.  Date of Approval

   First Payment Date

   ReaisperShares(1)

   U.S. Dollar Equivalent per Share at Payment Date(1)(2)First half 2014

   April 25, 2014

   0.130

   0.058Second half 2014

   August 28, 2014

   0.060

   0.027August 28, 2014

   0.085

   0.038November 13, 2014

   0.220

   0.085January 14, 2015

   0.111

   0.042January 30, 2015

   0.082

   0.030First half 2015

   March 31, 2015

   0.077

   0.024June 29, 2015

   0.085

   0.027Second half 2015

   September 28, 2015

   0.150

   0.036December 30, 2015

   0.128

   0.032First half 2016

   February 29, 2016

   0.111

   0.028July 29, 2016

   0.130

   0.040Second half 2016

   November 25, 2016

   0.160

   0.047December 29, 2016

   0.187

   0.057February 23, 2017

   0.070

   0.023
  (1)   The amounts set forth above are amounts actually received by shareholders, which are net of withholding tax.  The financial statements present the amounts actually disbursed, including the withholding tax on interest on shareholders’ equity, which was paid by Ambev on behalf of shareholders.  The dividends set forth above are calculated based on the number of outstanding shares at the date the distributions were declared.  See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.” (2)   Translated to U.S. dollars at the exchange rate in effect at the first scheduled payment date. For more information on rules and procedures for shareholder distributions under our bylaws, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Reserves.” B.            Significant Changes Except as otherwise disclosed in our audited consolidated financial statements and in this annual report, there have been no significant changes in our business, financial conditions or results in December 31, 2016.


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ITEM 9.                THE OFFER AND LISTING A.            Offer and Listing Details Not applicable.  Information regarding the price history of the stock listed as required by Item 9.A.4 is set forth below in “—C. Principal Market and Trading Market Price Information.” B.            Plan of Distribution Not applicable. C.            Principal Market and Trading Market Price Information We are registered as a publicly held company with the CVM.  Our common shares are listed on the BM&FBOVESPA under the symbol “ABEV3” and our ADSs are listed on the NYSE under the symbol “ABEV”.  Our shares and ADSs began trading on the BM&FBOVESPA and the NYSE, respectively, on November 11, 2013.  The shares and ADSs of Old Ambev ceased all trading activities on those stock exchanges on the close of business of November 8, 2013. Ambev has only one class of shares (i.e., voting common shares), including in the form of ADSs (evidenced by ADRs), with each ADS representing one Ambev common share.  The Ambev common shares and ADSs are registered under the Exchange Act.  As of March 3, 2017, Ambev had 15,699,872,992 shares outstanding.  As of March 3, 2017, there were 1,339,100,579 Ambev ADSs outstanding(representing 1,339,100,579 Ambev shares, which corresponds to 8.5% of the total Ambev shares outstanding).  The Ambev shares held in the form of ADSs under the Ambev ADS facilities are deemed to be the shares held in the “host country” (i.e., the United States) for purposes of the Exchange Act.  In addition, as of March 3, 2017 there were 123 registered holders of Ambev ADSs. Ambev S.A. Shares The table below shows the quoted high and low closing sales prices inreaisof our shares on BM&FBOVESPA for the indicated periods.




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Trading Prices on the BM&FBOVESPA: Ambev Common Shares*Per Common ShareHigh

   Low(in reais)Annual2016

   19.53

   15.612015

   19.39

   14.572014

   16.08

   13.812013 (starting November 11)

   15.56

   14.46Quarterly2016Fourth quarter

   19.24

   15.76Third quarter

   19.53

   18.16Second quarter

   18.97

   17.61First quarter

   18.72

   15.612015Fourth quarter

   19.39

   16.96Third quarter

   18.87

   16.98Second quarter

   18.67

   17.31First quarter

   17.68

   14.57Monthly2017February

   18.59

   16.79January

   17.32

   16.242016December

   16.46

   15.76November

   18.01

   16.76October

   19.24

   18.34September

   19.48

   18.92
   *      Historical pricing adjusted to reflect interest on shareholders’ equity and dividend distributions. ADSs The table below shows the quoted high and low closing sales prices in U.S. dollars of our ADSs on the NYSE for the indicated periods.


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Trading Prices on the NYSE: Ambev ADSs*Per ADSHigh

   Low(in reais)Annual2016

   6.12

   3.732015

   6.38

   4.232014

   7.13

   5.25Quarterly2016Fourth quarter

   6.10

   4.68Third quarter

   6.12

   5.49Second quarter

   5.72

   4.85First quarter

   5.10

   3.732015Fourth quarter

   4.97

   4.23Third quarter

   5.91

   4.37Second quarter

   6.27

   5.41First quarter

   6.38

   5.24Monthly2017February

   6.01

   5.34January

   5.48

   5.042016December

   4.93

   4.68November

   5.56

   4.87October

   6.10

   5.75September

   6.09

   5.67
  *      Historical pricing adjusted to reflect interest on shareholders’ equity and dividend distributions. Old Ambev The Old Ambev stock and ADS quotes below are based on the historical capital structure of Old AmBev, which was comprised of voting common shares and non-voting preferred shares.  Therefore, they do not take into account the 1:5 splitting effect that resulted from the exchange of five new Ambev common shares for each and every Old Ambev common and preferred share surrendered in the 2013 stock swap merger of Old Ambev with us (see “Item 4. Information on the Company—A. History and Development of the Company—Stock Swap Merger of Old Ambev with Ambev S.A.”). Shares The table below shows the quoted high and low closing sales prices inreaison the BM&FBOVESPA for preferred and common shares of Old Ambev for the indicated periods, considering the last date of trading of those shares on November 8, 2013. Trading Prices on the BM&FBOVESPA: Old Ambev Common and Preferred SharesPer Common Share

   Per Preferred ShareHigh

   Low

   High

   Low(in reais)

   (in reais)Annual2013 (until November 8)

   89.74

   75.11

   90.96

   74.682012

   86.24

   49.03

   88.94

   61.14


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ADSs The information presented in the table below represents, for the indicated periods, the reported high and low closing sales prices of Old Ambev’s ADSs quoted in U.S. dollars on the NYSE, considering the last date of trading of those shares on November 8, 2013. Trading Prices on the NYSE: Old Ambev Common and Preferred ADSsPer Common ADS

   Per Preferred ADSHigh

   Low

   High

   Low(in US$)

   (in US$)Annual2013 (until November 8)

   45.53

   33.14

   47.06

   33.732012

   41.76

   26.49

   43.09

   33.23
 Regulation of the Brazilian Securities Market The Brazilian securities market is regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, as well as by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.  The Brazilian securities market is governed primarily by Law No. 6,385 dated December 7, 1976, as amended, or the Brazilian Securities Law, and by the Brazilian Corporation Law, as amended and supplemented.  These laws and regulations, among others, provide for disclosure requirements, restrictions on insider trading and price manipulation, and protection of minority shareholders.  They also provide for licensing and oversight of brokerage firms and governance of Brazilian stock exchanges.  However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets. Under the Brazilian Corporation Law, a company is either publicly held (listed), such as Ambev, whose shares are publicly traded on the BM&FBOVESPA, or privately held (unlisted).  All listed companies are registered with the CVM and are subject to reporting and regulatory requirements.  The Brazilian Corporation Law allows the CVM to classify listed companies according to the kind of securities they issue.  A company registered with the CVM may trade its securities either on the Brazilian stock exchanges or in the Brazilian over-the-counter market.  Shares of companies like Ambev traded on the BM&FBOVESPA may not simultaneously be traded on the Brazilian over-the-counter market.  The shares of a listed company, including Ambev, may also be traded privately subject to several limitations.  To be listed on the BM&FBOVESPA, a company must apply for registration with the CVM and the BM&FBOVESPA. The trading of securities on the Brazilian stock exchanges may be halted at the request of a company in anticipation of a material announcement.  Companies may be required by law to request such suspension.  Trading may also be suspended on the initiative of a Brazilian stock exchange or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or a stock exchange. Trading on the Brazilian Stock Exchanges BM&FBOVESPA is the only Brazilian stock exchange on which private equity and private debt may be traded. BM&FBOVESPA trading sessions are from 10:00 a.m. to 5:00 p.m., São Paulo time.  Equity trading is executed fully electronically through an order-driven trading system called “PUMA Trading System,” or “PUMA.”  Additionally, the home broker system through the Internet has been established allowing retail investors to transmit orders directly to the BM&FBOVESPA.  BM&FBOVESPA also permits trading from 5:30 p.m. to 6:00 p.m. on an online system connected to PUMA and Internet brokers called the “after-market”.  The after-market session is restricted to certain stocks that were traded through the electronic system.  Trading on the after-market is subject to regulatory limits on price volatility and on the volume of shares transacted through Internet brokers.  CVM has discretionary authority to suspend trading in shares of a particular issuer under specific circumstances.  Securities listed on the BM&FBOVESPA may also be traded off the exchange under specific circumstances, but such trading is very limited.


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Settlement of transactions is effected three business days after the trade date, without any adjustment.  Delivery of and payment for shares are made through the facilities of separate clearinghouses for each exchange, which maintain accounts for the member brokerage firms.  The seller is ordinarily required to deliver the shares to the exchange on the second business day following the trade date.  The BM&FBOVESPA Equities Clearing is responsible for the registration, settlement and risk management of trades with shares through the PUMA Trading System. In order to better control volatility, BM&FBOVESPA has adopted a “circuit breaker” mechanism pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the index of the stock exchange falls 10% or 15%, respectively, compared to the previous day’s closing index.  If the market falls more than 20% compared to the previous day, the BM&FBOVESPA may determine the suspension of trading in all markets for a defined period, at its sole discretion, and such decision must be disclosed to the market through the News Agency (ABO –Operações).  The “circuit breaker” is not allowed to be started during the last 30 minutes of the trading session. Although the Brazilian equity market is Latin America’s largest in terms of market capitalization, it is smaller, more volatile and less liquid than the major U.S. and European securities markets.  As of December 31, 2016, the aggregate market capitalization of all companies included in the IBOVESPA index of the BM&FBOVESPA was equivalent to approximately R$2.5 trillion.  Although all of the outstanding shares of a listed company are actually available for trading by the public, in most cases fewer than half of the listed shares are actually traded by the public because the remainders of a listed company’s shares are usually held by small groups of controlling persons, by governmental entities or by one principal shareholder.  For this reason, data showing the total market capitalization of Brazilian stock exchanges tend to overstate the liquidity of the Brazilian equity securities market. There is also significantly greater concentration in the Brazilian securities markets.  For example, as of December 31, 2016 the ten shares with greatest representation on the IBOVESPA index of the BM&FBOVESPA accounted for 59.8% of the total weight of all companies included in that stock index. Trading on Brazilian stock exchanges by non-residents of Brazil is subject to limitations under Brazilian foreign investment legislation.  See “Item 3. Key Information—A. Selected Financial Data—Exchange Rate Information—Exchange Controls” and “Item 10. Additional Information—B. Memorandum and Articles of Association—Restrictions on Foreign Investment.” D.            Selling Shareholders Not applicable. E.            Dilution Not applicable. F.            Expenses of the Issue Not applicable.


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ITEM 10.              ADDITIONAL INFORMATION A.            Share Capital Not applicable. B.            Memorandum and Articles of Association Below is a brief summary of the material provisions concerning our common shares, bylaws and the Brazilian Corporation Law.  In Brazil, the principal governing document of a corporation is its bylaws (Estatuto Social).  This description is qualified in its entirety by reference to the Brazilian Corporation Law and our bylaws.  An English translation of our bylaws has been filed with the SEC as an exhibit to this annual report.  A copy of our bylaws (together with an English translation) is also available for inspection at the principal office of the depositary and at our website (www.ri.ambev.com.br).  Information on ownership of our shares is set forth under “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.” As of March 3, 2017, our capital stock was equal to R$57,614,139,847.33 divided into 15,717,615,419 issued common shares, without par value, of which 17,742,427 were treasury shares.  We are authorized to increase our capital up to 19,000,000,000 shares upon the decision of our Board of Directors, without the need to amend our bylaws.  We have a single-class share structure, comprised exclusively of voting common shares, and there are no classes or series of preferred shares outstanding. Pursuant to the Brazilian Corporation Law, we are allowed to sell in the open market any Ambev common shares that have been subscribed but not paid in full within the applicable deadline set forth in our bylaws or the applicable subscription bulletin under which those shares were issued.  If an open market sale is impractical, any subscribed but unpaid Ambev common shares may be forfeited. Each common share entitles the holder thereof to one vote at our shareholders’ meetings.  Holders of common shares are not entitled to any preference upon our liquidation. The Board of Directors does not vote on compensation payable to them or any of their members.  For more information on management compensation, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—The Board of Directors—Operations, Finance and Compensation Committee.” There is no age limit for retirement applicable to the members of our Board of Director in our bylaws. General Our registered name is Ambev S.A. and our registered office is in São Paulo, São Paulo, Brazil.  Our registration number with the São Paulo Commercial Registry is 35,300,368,941.  Our principal corporate purposes include the production and sale of beer, CSDs and other beverages.  A more detailed description of our purposes can be found in Chapter I, Article 3 of our bylaws. Rights of the Ambev Common Shares Each of our common shares is indivisible and entitles its holder to one vote at any shareholders’ meeting of Ambev.  In accordance with our bylaws and the Brazilian Corporation Law, shareholders have the right to receive dividends or other distributions in proportion to their equity interest in our share capital.  For additional information regarding the payment of dividends and other distributions relating to our common shares, see “Item 8. Financial Information—A. Consolidated Financial Statements and Other Financial Information—Dividend Policy.”  In addition, our shareholders may freely transfer their shares and are entitled to be included in a statutory change of control tender offer upon a disposition of our control.


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Also, upon our liquidation, and after the discharge of all our liabilities, our common shares entitle its holders to a participation in our remaining assets as capital reimbursement in proportion to their equity interest in our share capital.  Holders of our common shares have the right, but not the obligation, to subscribe for our future capital increases. Moreover, pursuant to the Brazilian Corporation Law, neither our bylaws nor actions taken at a shareholders’ meeting may deprive a shareholder of the following rights: the right to participate in our profit distributions;the right to participate in our remaining assets in proportion to its equity interest in our share capital in the event of our liquidation;preemptive rights to subscribe for our common shares, convertible debentures and warrants, except in certain circumstances under the Brazilian Corporation Law, as described in “—Preemptive Rights”;the right to inspect and monitor our management, in accordance with the Brazilian Corporation Law;the right to vote at shareholders’ meetings; andthe right to exercise appraisal rights and withdraw from the Company in the cases provided under the Brazilian Corporation Law, as described in “—Appraisal Rights.” Shareholders’ Meetings Pursuant to the Brazilian Corporation Law, shareholders, during shareholders’ meetings regularly called and convened, are generally empowered to pass resolutions relating to our corporate purpose as they may deem necessary.  Shareholders’ meetings may be ordinary, such as the annual meeting, or extraordinary.  Shareholders at the annual shareholders’ meeting, which is required to be held within four months of the end of our fiscal year, have the exclusive power to approve our financial statements and to determine the allocation of our adjusted net income and the distribution of dividends with respect to the fiscal year ended immediately prior to the relevant annual meeting.  Extraordinary shareholders’ meetings are convened to approve the remaining matters within their competency as provided by law and/or our bylaws.  An extraordinary shareholders’ meeting may be held concurrently with an ordinary meeting. A shareholders’ meeting is convened by publishing a meeting call notice no later than 15 days prior to the scheduled meeting date, on first call, and no later than eight days prior to the date of the meeting, on second call, and no fewer than three times, in theDiário Oficial do Estado de São Pauloand in a newspaper with general circulation in São Paulo, where we have our registered office.  In certain circumstances, however, the CVM may require that the first notice be published no later than 30 days prior to the meeting.  At the shareholders’ meeting held on March 1, 2013, our shareholders designatedValor Econômico, a newspaper with general circulation in São Paulo for this purpose.   The call notice must contain the date, time, place and agenda of the meeting, and in case of amendments to the bylaws, the indication of the relevant matters.  CVM Rule No. 481 of December 17, 2009, also requires that additional information be disclosed in the meeting call notice for certain matters.  For example, in the event of an election of directors, the meeting call notice shall also disclose the minimum percentage of equity interest required from a shareholder to request the adoption of cumulative voting procedures.  All documents in connection with the shareholders’ meeting’s agenda shall be made available to shareholders either within at least one month prior to the meeting or upon publication of the first meeting call notice, as the case may be, except if otherwise required by law or CVM regulations. A shareholders’ meeting may be held if shareholders representing at least one quarter of the voting shares are present, except in some cases provided by law, such as in meetings seeking to amend the Company’s bylaws, which requires the presence of shareholders representing at least two-thirds of the voting shares.  If no such quorum is present, an eight-day prior notice must be given in the same manner as described above, and a meeting may then be convened without any specific quorum requirement, subject to the minimum quorum and voting requirements for specific matters, as discussed below.


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Except as otherwise provided by law, resolutions of a shareholders’ meeting are passed by a simple majority vote of the shares present or represented at the meeting, abstentions not being taken into account.  Under the Brazilian Corporation Law, the approval of shareholders representing at least a majority of the issued and outstanding voting shares is required for the types of actions described below (among others): creating preferred shares or increasing disproportionately an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by the bylaws;

modifying a preference, privilege or condition of redemption or amortization conferred upon one or more classes of preferred shares, or creating a new class with greater privileges than those of the existing classes of preferred shares;

reducing the minimum mandatory dividend;

merging Ambev with another company or consolidating or executing a spin-off of Ambev;

changing our corporate purpose; and

dissolving Ambev or ceasing its liquidation status. Shareholders may not exercise voting rights whenever they are contributing assets in a capital increase paid in kind or with respect to the approval of their own accounts, as well as in those resolutions that may favor those shareholders specifically, or whenever there is a conflicting interest with the Company.  Mergers between affiliated parties are subject to a special statutory valuation procedure intended to determine whether the exchange ratio is adequate for all parties involved. Shareholders’ meetings may be called by our Board of Directors.  Under the Brazilian Corporation Law, meetings may also be convened by our shareholders as follows:  (1) by any shareholder, if the directors take more than 60 days to convene a shareholders’ meeting after the date they were required to do so under applicable laws and our bylaws, (2) by shareholders holding at least 5% of our total capital stock, if our Board of Directors fails to call a meeting within eight days after receipt of a justified request to call a meeting by those shareholders indicating the proposed agenda, (3) by shareholders holding at least 5% of our voting capital stock, if the directors fail to call a general meeting within eight days after receipt of a request to call a shareholders’ meeting for purpose of assembling a Fiscal Council, and (4) by our Fiscal Council, if the Board of Directors fails to call an annual shareholders’ meeting within 30 days after the mandatory date for such call.  The Fiscal Council may also call an extraordinary shareholders’ meeting if it believes that there are important or urgent matters to be addressed. To attend a shareholders’ meeting, shareholders or their legal representatives willing to attend the meeting shall present proof of ownership of their Company shares, including identification and/or pertinent documentation that evidences their legal representation of such shareholder.  A shareholder may be represented at a general meeting by an attorney-in-fact appointed no more than one year before the meeting, who must be another shareholder, a company officer or a lawyer. Notwithstanding the above, the CVM decided on November 4, 2014 that shareholders that are legal entities may be represented at general meetings by their legal representatives or by a duly appointed attorney-in-fact, pursuant to the bylaws and related corporate instruments of the legal entities and pursuant to the Brazilian Civil Code.  For a publicly-held company, the attorney-in-fact may also be a financial institution.  Investment funds must be represented by their investment fund officer. The participation and remote voting in general shareholders' meetings of publicly-held companies are regulated by CVM Rule No. 561, which aims to facilitate the participation of shareholders in general meetings either through the vote or through the submission of proposals, as well as to enhance the corporate governance instruments available in the Brazilian market.  For this purpose, this regulation provided the following:


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the creation of a remote voting bulletin through which shareholders may exercise their right to vote prior to the date the general meeting is held;

the possibility of inclusion of candidates and proposals of deliberation of minority shareholders in that bulletin, with due observance of certain percentages of equity interest, in order to facilitate shareholders’ participation in general meetings; and

the deadlines, procedures and ways of sending this bulletin, which may be forwarded by the shareholder: (a) to the custodian (if the shares held by the shareholder are kept at a centralized deposit) or; (b) to the book-entry agent of the shares issued by the company (if such shares are not kept at a centralized deposit); or (c) directly to the company. The application of CVM Rule No. 561 became mandatory on January 1, 2017 for companies that on April 9, 2015 had at least one share class included either on the Index Brasil 100 or the IBOVESPA index of the BM&FBOVESPA, such as Ambev. Board of Directors In accordance with the Brazilian Corporation Law, any matters subject to the approval of our Board of Directors can be approved by the affirmative vote of a majority of our Board members present at the relevant meeting, except as provided in our Shareholders’ Agreement. Under our bylaws, at least two members of our Board of Directors shall be independent directors.  According to our bylaws, for a director to be considered independent he or she may not:  (1) be a controlling shareholder, or a spouse or relative to the second degree of a controlling shareholder, (2) have been, within the last three years, an employee or executive officer of (a) Ambev or of any of our controlled companies or (b) our controlling shareholder or entities under common control with Ambev, (3) directly or indirectly, supply to, or purchase from, us, our controlled companies, controlling shareholder or entities under common control, any products or services, to such an extent as would cause that director to cease being independent, (4) be an employee or administrator of any corporation or entity that offers products or services to, or receives products or services from, us, our controlled companies, controlling shareholder or entities under common control, to such an extent as would cause that director to cease being independent, (5) be a spouse or relative to the second degree of any member of management of Ambev, its controlled companies, controlling company or entity under common control, or (6) receive any other compensation from Ambev, its controlled companies, controlling shareholder or entities under common control, aside from compensation for duties as a board member (gains arising from ownership of our stock are excluded from this restriction).  Our bylaws also set forth that directors elected by a separate ballot vote of minority shareholders holding at least 10% of our capital stock, as provided in paragraphs 4 and 5 of Section 141 of the Brazilian Corporation Law, shall be deemed independent regardless of compliance with the above mentioned criteria. According to the general principles of the Brazilian Corporation Law, if a director or an executive officer has a conflict of interest with a company in connection with any proposed transaction, the director or executive officer may not vote in any resolution of the Board of Directors or of the board of executive officers regarding such transaction and must disclose the nature and extent of the conflicting interest for purposes of recording such information in the minutes of the meeting.  In any case, a director or an executive officer may not transact any business with a company, including any borrowings, except on reasonable or fair terms and conditions that are identical to the terms and conditions prevailing in the market or offered by third parties.  Any transaction in which a director or executive officer may have an interest can only be approved if carried out on an arm’s-length basis. Since the enactment of Brazilian Law No. 12,431/11, which amended Section 146 of the Brazilian Corporation Law, directors no longer need to be shareholders to serve on the board of directors of a Brazilian corporation.


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Election of Directors Each Ambev common share represents one vote at any shareholders’ meeting in connection with the election of the Board of Directors of Ambev. Common shareholders holding at least 10% of our capital may elect one member and respective alternate to the Board of Directors without the participation of the controlling shareholders.  To exercise these minority rights, shareholders must prove their continuous ownership of their Ambev common shares for at least three months prior to the shareholders’ meeting convened to elect board members.  If that prerogative is exercised with the adoption of cumulative voting procedures, as described below, the controlling shareholder will always have the right to elect the same number of members appointed by minority shareholders plus one, regardless of the number of directors provided in our bylaws. Shareholders holding shares representing at least 10% of our capital, or a smaller applicable percentage according to a sliding scale determined by the CVM and based on a company’s capital stock (currently 5% of the Ambev common shares, pursuant to the CVM’s sliding scale), have the right to request that cumulative voting procedures be adopted.  Under such procedures, each of our common shares shall entitle as many votes as the number of director positions to be filled, and each shareholder may cast all of his or her votes for a single candidate or distribute them among various candidates. On April 7, 2015, the CVM issued Rule No. 561/15, pursuant to which publicly-held companies shall adopt the following measures regarding voting process: (1) inform the market of the adoption of cumulative voting process in annual meetings immediately upon the receipt of the first valid requirement; (2) disclose the voting final summary statements, as well as any voting statement presented by shareholders at the annual meetings; and (3) register in the minutes of the annual shareholders’ meeting the number of approving, rejecting or abstaining votes for each item of the agenda, including the votes received by each member of the Board of Directors and/or Fiscal Council elected in such annual shareholders’ meeting. Under our bylaws and applicable law, the number of directors may be reduced to a minimum of three.  Since our Shareholders’ Agreement provides that, as long as FAHZ maintains a minimum shareholding in our capital stock, it shall have the right to appoint four members to our Board of Directors, any reduction in the number of such members to fewer than four would be subject to FAHZ’s prior approval.  After 2019, however, FAHZ shall have the right to appoint only two members to our Board of Directors. The current members of our Board of Directors were elected by our controlling shareholders.  Board members, regardless of the shareholder they represent, owe fiduciary duties to the Company and all of our shareholders.  At the same time, any director appointed by shareholders bound by a shareholders’ agreement is also bound by the terms of that agreement. For more information on our shareholders’ agreements, see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders.” Dividends The discussion below summarizes the main provisions of the Brazilian Corporation Law regarding the establishment of reserves by corporations and rules with respect to the distribution of dividends, including provisions regarding interest on shareholders’ equity. Calculation of Distributable Amounts At each annual shareholders’ meeting, our Board of Directors is required to propose how Ambev’s net income for the preceding fiscal year is to be allocated.  For purposes of the Brazilian Corporation Law, a company’s net income after income taxes and social contribution on profits for the immediately preceding fiscal year, net of any accumulated losses from prior fiscal years and amounts allocated to employees’ and management’s participation in earnings, represents its “adjusted net income” for such preceding fiscal year.  In accordance with the Brazilian Corporation Law, an amount equal to such adjusted net income, which is also referred to in this section as the distributable amount, will be available for distribution to shareholders in any particular year.  Such distributable amount is subject to:


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reductions that may be caused by amounts contributed for the purpose of meeting the charges of the assistance foundation for employees and management of the Company and its controlled companies, with due regard for the rules established by the Board of Directors to this effect; up to 10% of the distributable amount may be contributed under this concept;

reductions caused by amounts allocated to the Legal Reserve or Contingency Reserves (see “—Reserves”); and

increases caused by reversals of reserves constituted in prior years. Minimum Mandatory Dividend We are required by our bylaws to distribute to shareholders as dividends in respect to each fiscal year ending on December 31 a minimum mandatory dividend equivalent to no less than 40% of the distributable amount.  In addition to the minimum mandatory dividend, the Board of Directors may recommend payment of additional dividends to shareholders.  The limit for dividend payment is the distributable amount plus the balance available in our statutory “Investment Reserve,” to which we allocate distributable amounts from previous fiscal years not paid as dividends.  See “—Reserves.”  Furthermore, the Board of Directors may also resolve on the distribution of interim dividends and/or interest on shareholders’ equity based on the accrued profits or existing profits reserves presented in the latest annual or six-month balance sheet.  Interim dividends and interest on shareholders’ equity is always counted as an advancement towards the minimum mandatory dividend. In addition, the minimum mandatory dividend, whether the full amount or only a portion thereof, may not be distributed in any given year should the Board of Directors consider that such payment is incompatible with the Ambev’s financial situation, subject to shareholder approval.  While the law does not establish the circumstances in which distribution of the minimum mandatory dividend is incompatible with a company’s financial situation, it is generally agreed that a company is allowed to refrain from paying the minimum mandatory dividend if such payment threatens its existence as a going concern or harms its normal course of operations.  The Fiscal Council must opine on the nonpayment of minimum mandatory dividends, and management must submit to the CVM a report explaining the reasons considered by the Board of Directors to withhold the payment of the minimum mandatory dividend no later than five business days after such a decision is taken. Any postponed payment of minimum mandatory dividends must be allocated to a special reserve.  Any remaining balance in such reserve not absorbed by losses in subsequent fiscal years must be paid to shareholders as soon as the Company’s financial situation allows. Payment of Dividends Under the Brazilian Corporation Law any holder of record of shares at the time of a dividend declaration is entitled to receive such dividends, which are generally required to be paid within 60 days following the date of such declaration, unless otherwise resolved by the shareholders’ meetings, which, in either case, must occur prior to the end of the fiscal year in which such dividends were declared.  Our bylaws do not provide for a time frame for payment of dividends.  The minimum mandatory dividend is satisfied through payments made both in the form of dividends and interest on shareholders’ equity, which, from an economic perspective, is equivalent to a dividend but represents a tax efficient alternative to distribute earnings to shareholders because it is deductible for income tax purposes up to a certain limit established by Brazilian tax laws (see “—Interest on Shareholders’ Equity”).  Shareholders have a three-year period from the dividend payment date to claim the payment of dividends, after which we are no longer liable for such payment. Shareholders who are not residents of Brazil must register their investment with the Central Bank in order for dividends, sales proceeds or other amounts to be eligible for remittance in foreign currency outside of Brazil.  Our common shares underlying the Ambev ADSs will be deposited with the Brazilian custodian, Banco Bradesco S.A., which acts on behalf of and as agent for the Depositary, which is registered with the Central Bank as the fiduciary owner of those common shares underlying our ADSs.  Payments of cash dividends and distributions on our common shares will be made inreaisto the custodian on behalf of the Depositary.  The custodian will then convert those proceeds into U.S. dollars and will deliver those U.S. dollars to the Depositary for distribution to ADS holders.  If the custodian is unable to immediately convert dividends inreaisinto U.S. dollars, ADS holders may be adversely affected by devaluations of therealor other exchange rate fluctuations before those dividends can be converted into U.S. dollars and remitted abroad.  Fluctuations in the exchange rate between therealand the U.S. dollar may also affect the U.S. dollar equivalent of the trading price of our common shares inreaison the BM&FBOVESPA.


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Interest on Shareholders’ Equity Brazilian companies are permitted to distribute earnings to shareholders under the concept of an interest payment on shareholders’ equity, calculated based on specific Ambev’s shareholders’ equity accounts multiplied by the TJLP rate.  The TJLP is the official interest rate defined by the Central Bank and used as reference in long-term loans provided by the BNDES. Amounts distributed by Ambev to its shareholders as interest on shareholders’ equity is deductible for purposes of income tax and social contribution applicable to our profits.  The amount of the deduction may not exceed the greater of: 50% of net income (after the deduction of social contribution on net income but before taking into consideration the provision for corporate income tax and the amounts attributable to shareholders as interest on shareholders’ equity) for the period in respect of which the payment is made; or50% of the sum of retained profits and profit reserves as of the date of the beginning of the period in respect of which the payment is made. Interest on shareholders’ equity is treated similarly to dividends for purposes of distribution of profits.  The only significant difference is that a 15% withholding income tax is due by nonexempt shareholders, resident or not of Brazil, upon receipt of such interest payment, which tax must be withheld by us on behalf of our shareholders when the distribution is implemented.  If the shareholder is not a Brazilian resident, and is resident or domiciled in a tax-haven jurisdiction, withholding income tax is due at a 25% rate.  The amount shareholders receive as interest on shareholders’ equity net of taxes is deducted from the minimum mandatory dividend owed to shareholders. For further information on the taxation of interest on shareholders’ equity, including the concept of tax haven jurisdiction for such purposes, see “—E. Taxation—Brazilian Tax Considerations—Income Tax—Distributions of Interest on Shareholders’ Equity.” Reserves General The Brazilian Corporation Law provides that all discretionary allocations of adjusted net income, including the Unrealized Income Reserve and the Investment Reserve, are subject to shareholder approval and may be added to capital (except for the amounts allocated to the Unrealized Income Reserve) or distributed as dividends in subsequent years.  In the case of Tax Incentive Reserve and the Legal Reserve, they are also subject to shareholder approval; however, the use of their respective balances is limited to having those balances added to capital or used to absorb losses.  They cannot be used as a source for income distribution to shareholders. Legal Reserve Under the Brazilian Corporation Law, corporations are required to maintain a “Legal Reserve” to which they must allocate 5% of their adjusted net income for each fiscal year until the balance of the reserve equals 20% of their share capital.  However, corporations are not required to make any allocations to their legal reserve in a fiscal year in which the Legal Reserve, when added to other established capital reserves, exceeds 30% of their share capital.  Accumulated losses, if any, may be charged against the Legal Reserve.  Other than that, the Legal Reserve can only be used to increase a company’s share capital.


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Contingency Reserve Under the Brazilian Corporation Law, a portion of a corporation’s adjusted net income may also be discretionally allocated to a “Contingency Reserve” for an anticipated loss that is deemed probable in future years.  Any amount so allocated in a prior year must be either reversed in the fiscal year in which the loss was anticipated if that loss does not in fact occur or is not charged off in the event that the anticipated loss occurs. Investment Reserve Under Brazilian Corporation Law, we are permitted to provide for the allocation of part of our net income to discretionary reserve accounts that may be established in accordance with our bylaws. The allocation of our net income to discretionary reserve accounts may not be made if it serves to prevent the distribution of the minimum mandatory distributable amount. According to our bylaws, a portion of our adjusted net income may be allocated to an “Investment Reserve” for the expansion of our activities, including to be capitalized by us or for our investment in new business ventures. Pursuant to our bylaws, the Investment Reserve balance is not allowed to be greater than 80% of our share capital.  In case such limit is reached, shareholders may resolve to use the exceeding amount for conversion into share capital or to be distributed as dividends. Unrealized Income Reserve Pursuant to the Brazilian Corporation Law, the amount by which the minimum mandatory dividend exceeds the “realized” portion of net income for any particular year may be allocated to the Unrealized Income Reserve.  The realized portion of net income is the amount by which the adjusted net income exceeds the sum of: our net positive results, if any, from the equity method of accounting for earnings and losses of our subsidiaries and certain affiliates; and

the net profits, net gains or net return obtained on transactions or on accounting of assets and liabilities based on their market value, to be completed after the end of the following fiscal year. Tax Incentive Reserve Under the Brazilian Corporation Law, a portion of the adjusted net income may also be allocated to a general “Tax Incentive Reserve” in amounts corresponding to reductions in a company’s income tax generated by credits for particular government-approved investments.  This reserve is available only in connection with the acquisition of capital stock of companies undertaking specific government-approved projects. Goodwill Premium from Shares Issued Pursuant to the Brazilian Corporation Law, the amount received from subscription of shares in excess of the average book value of the shares must be allocated to this reserve.  The amount can be used for future capital increases without the issuance of new shares or to support an approved share buyback program. Fiscal Benefit of Goodwill Premium Amortization (CVM Rule No. 319/99) Pursuant to CVM Rule No. 319/99, when a reporting company merges with its parent company, while remaining a reporting company, the goodwill previously paid by the parent company on its acquisition is deductible for purposes of income tax and social contribution on profits.  This future tax benefit is recorded as a capital reserve by the reporting company.  As this benefit is realized, the company increases its share capital proportionally to the benefit, and is able to issue new shares to the parent company, pursuant to the terms of the merger agreement.


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Liquidation In the event of our liquidation, an extraordinary general shareholders’ meeting shall determine the form of liquidation and appoint a committee to supervise the process during the liquidation period.  A liquidator shall be appointed by the Board of Directors. Restrictions on Foreign Investment There are no restrictions on ownership or voting rights in respect of our common shares owned by individuals or legal entities domiciled outside Brazil.  For a description of voting rights, see “—Rights of the Ambev Common Shares” and “—Shareholders’ Meetings.”  The right to convert payments of dividends (including interest on shareholders’ equity) and proceeds from the sale of our common shares into foreign currency and to remit those amounts outside Brazil, however, is subject to exchange control and foreign investment legislation.  For a description of these exchange control restrictions and foreign investment legislation, see “Item 3. Key Information—A. Selected Financial Data—Exchange Rate Information—Exchange Controls.” Appraisal Rights Under the Brazilian Corporation Law, dissenting shareholders have appraisal rights that allow them to withdraw from the Company and be reimbursed for the value of their Ambev common shares, whenever a decision is taken at a shareholders’ meeting by a qualified quorum of shareholders representing at least 50% of the total voting capital to (among others): create preferred shares or increase disproportionately an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by our bylaws;

modify a preference, privilege or condition of redemption or amortization conferred upon one or more classes of preferred shares, or create a new class with greater privileges than the existing classes of preferred shares;

reduce the minimum mandatory dividend;

merge or consolidate us with another company;

change our corporate purpose;

conduct a spin-off of Ambev, if the new entities resulting from the spin-off have different primary corporate purposes or a lower minimum mandatory dividend or such spin-off causes us to join a group of companies (as defined in the Brazilian Corporation Law);

transform us into another corporate type;

conduct a stock swap merger of Ambev with another company, so that Ambev becomes a wholly-owned subsidiary of that company; or

approve the acquisition of control of another company, the price of which exceeds the limits set forth in the Brazilian Corporation Law. In cases where Ambev merges with another company or participates in a group of companies (as defined in the Brazilian Corporation Law), our shareholders will not be entitled to exercise appraisal rights if their Ambev common shares are (1) liquid, defined as being part of the IBOVESPA Index or another traded stock exchange index (as defined by the CVM) and (2) widely-held such that the controlling shareholder or companies under its control holds less than 50% of the referred common shares.


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Appraisal rights expire within 30 days after publication of the minutes of the relevant shareholders’ meeting that approved the transaction.  We are entitled to reconsider any action triggering appraisal rights within 10 days following the expiration of the 30-day appraisal rights exercise period if the redemption of our common shares held by dissenting shareholders would jeopardize our financial stability. Any shareholder that exercises appraisal rights is, in general, entitled to receive the amount equivalent to its shares’ book value as per the last balance sheet approved by our shareholders.  If the resolution giving rise to appraisal rights is approved within more than 60 days after the date of the last shareholder-approved balance sheet of Ambev, dissenting shareholders may require that the value of their shares be calculated on the basis of an updated balance sheet (balanço especial) dated no less than 60 days before the resolution date.  In this case, we must (1) immediately advance 80% of the book value of the shares to be redeemed according to the most recent balance sheet approved by our shareholders and (2) pay the remaining balance within 120 days after the date of the resolution of the shareholders’ meeting.  However, if the advanced payment of 80% of the book value of the shares to be redeemed is greater than the actual appraisal rights value per share determined by the updated balance sheet, then the amount in excess advanced by the Company shall be refunded to us by the dissenting shareholders who exercised appraisal rights. As a general rule, shareholders who acquire their shares after the publishing of a first meeting call notice or the relevant press release concerning the meeting will not be entitled to appraisal rights. Preemptive Rights Each shareholder of Ambev generally has preemptive rights to subscribe for new shares of Ambev in our capital increases (including in the issuance of stock purchase warrants or convertible bonds) in proportion to its shareholdings.  A minimum 30-day period following the publication of the capital increase notice is given for the exercise of preemptive rights.  Preemptive rights may be purchased and sold by shareholders.  Our bylaws provide that if the Board of Directors decides to increase our share capital within the limit of the authorized capital through sales in stock exchanges, public offerings or public tender offers, no preemptive rights will apply.  In addition, Brazilian law provides that the grant or the exercise of stock options pursuant to certain stock option plans, such as our Stock Option Plan, is not subject to preemptive rights. Inspection of Corporate Records Shareholders that own 5% or more of our outstanding share capital have the right to inspect our corporate records, including shareholders’ lists, corporate minutes, financial records and other documents, if (1) Ambev or any of its officers or directors have committed any act contrary to Brazilian law or our bylaws or (2) there are grounds to suspect that there are material irregularities in the Company.  However, in either case, shareholders desiring to inspect our corporate records must obtain a court order authorizing the inspection. Form and Transfer Brazilian law provides that ownership of shares issued by a Brazilian corporation shall generally be evidenced only by a record of ownership maintained by either the corporation or an accredited intermediary, such as a bank, acting as a registrar for the shares.  Banco Bradesco S.A. currently maintains our share ownership records. Because our common shares are in registered book-entry form, a transfer of those shares is made under the rules of the Brazilian Corporation Law, which provides that a transfer of shares is effected by an entry made by the registrar for our shares in its books, by debiting the share account of the transferor and crediting the share account of the transferee. Transfers of shares by a foreign investor are made in the same way and executed by that investor’s local agent on the investor’s behalf, except that, if the original investment was registered with the Central Bank pursuant to foreign investment regulations, the foreign investor should also seek, through its local agent, an amendment of the corresponding electronic registration to reflect the new ownership, if necessary.


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The BM&FBOVESPA operates a central clearing system.  A holder of our common shares may choose, at its discretion, to participate in this system, and all shares elected to be transferred to this system will be deposited in custody with the stock exchange through a Brazilian institution that is duly authorized to operate by the Central Bank and maintains a clearing account with the stock exchange.  Our common shares that are subject to custody with the stock exchange will be reflected in our registry of shareholders.  Each participating shareholder will, in turn, be registered in our register of beneficial shareholders maintained by the stock exchange and will be treated in the same way as registered shareholders. Disclosure of Principal Shareholders Under Brazilian law, shareholders owning more than 5% of a company’s voting shares must publicly disclose their shareholder ownership, as well as disclose any 5% increase or decrease. With the issuance of CVM Rule 568/15, the CVM has amended CVM Rule No. 358/02 dealing with disclosure requirements of significant interests in Brazilian corporations.  These amendments provided for, among other things: (1) the change in the form of calculation of trades of relevant equity interests to determine when a disclosure obligation of those trades is triggered, and (2) the regulation of individual investment plans. Individual investment plans for direct or indirect controlling shareholders, members of any statutory governing bodies of a corporation, as well as any persons who, due to their responsibility, function or position in a listed company, its controlling company, subsidiaries or affiliates have potential access to insider information, are now allowed, subject to certain requirements, to trade in the company’s shares during certain periods during which such trading was previously prohibited. CVM Rule No. 568/15 amended CVM Rule No. 358/02 in order to also require publicly held corporations to disclose monthly information of trades in their own securities executed by them or their affiliates. Other Significant Provisions of the Brazilian Corporation Law The Brazilian Corporation Law, as applicable to us, also requires the following: upon a disposition of our control, the acquirer is required to launch a tender offer to purchase all minority voting shares at a price equal to at least 80% of the price per share paid for the controlling stake;

our delisting is subject to an administrative proceeding before the CVM, having as a condition the launching of a tender offer by the controlling shareholder or us for the acquisition of all our outstanding shares (defined as those owned by shareholders other than the controlling shareholder, officers and directors) at their fair value, as determined by an independent appraiser.  Shareholders holding more than two-thirds of the free float of shares must accept the tender offer or must expressly agree with the delisting (for this purpose, the free float of shares must be considered those held by shareholders that have either accepted the delisting or the offer);

in addition, if a controlling shareholder or group of controlling shareholders acquires additional shares in excess of one-third of the free float of shares in any class, a mandatory tender offer to ensure share dispersion is required for all the outstanding shares in that class.  The same requirement applies whenever (1) a shareholder or group of shareholders representing the same interest and holding more than 50% of the shares in any class from March 7, 2002 (when CVM Rule No. 361/02 became effective, except for public companies existing in September 5, 2000, in which case this date will prevail), acquires a further interest of 10% or more of that same class of shares within a 12-month period and (2) the CVM determines, within six months after being informed, that the acquisition restricts the liquidity of the shares;


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upon the occurrence of a tender offer aimed at delisting a company or through which the controlling shareholders will acquire more than one-third of the free float shares, the purchase price shall be equal to the fair value of the shares considering the total number of outstanding shares;

members of our Board of Directors elected by noncontrolling shareholders have the right to veto the choice of the independent appraiser by the Board;

our controlling shareholders, the shareholders that elect members to our Board of Directors or Fiscal Council, the members of our Board of Directors and Fiscal Council, and our executive officers are required to disclose any purchase or sale of our shares to the CVM and to the BM&FBOVESPA; and

the chairman of any shareholders’ meeting or directors shall disregard any vote that is rendered against provisions of any shareholders’ agreement if that shareholders’ agreement has been duly filed with us, as is the case with our Shareholders’ Agreement. C.            Material Contracts In addition to the contracts described in other sections of this annual report, the following is a summary of the material contracts to which we are a party. Shareholders’ Agreement See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement” and “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—The 2019 Shareholders’ Agreement.” Acquisitions, Dispositions and Joint Ventures We have discussed the details of some material acquisitions and agreements related thereto in “Item 4. Information on the Company—A. History and Development of the Company.” Licensing Agreements Pepsi See “Item 4. Information on the Company—B. Business Overview—Licenses—Pepsi.” Licensing Agreements with ABI See “Item 4. Information on the Company—B. Business Overview—Licenses—Licensing Agreements with ABI.” Tax Benefits Many States in Brazil offer tax benefits programs to attract investments to their regions.  We participate in ICMS Value-added Tax Credit Programs offered by various Brazilian states which provide (1) tax credits to offset ICMS Value-Added Tax payables and (2) ICMS Value-Added Tax deferrals.  In return, we are required to meet certain operational requirements including, depending on the State, production volume and employment targets, among others.  All of these conditions are included in specific agreements between Ambev and the State governments.  In the event that we do not meet the program’s targets, future benefits may be withdrawn.  Also, the State of São Paulo has challenged, in the Brazilian Supreme Court, State laws upon which certain of the above benefits have been granted, on the basis that they constitute tax benefits created without certain approvals required under Brazilian tax laws and regulations, which would render such State laws unconstitutional.  There is also a controversy regarding whether these benefits are constitutional when granted without the approval of every State of the country.  Although the Brazilian Supreme Court has already declared part of Pará State’s benefit law unconstitutional, almost every State has specific legislation on this topic and even the State of Pará may still grant benefits which were not included in this decision.  Accordingly, as far as the tax benefits are granted based on the state legislation, most companies apply for and use those benefits when granted.  See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sales Tax Deferrals and Other Tax Credits” and “Item 3. Key Information—D. Risk Factors.”


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Material Financing Agreements For a discussion of our 2017 notes and 2021 debentures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Borrowings—Long-term Debt.” D.            Exchange Controls and other Limitations Affecting Security Holders See “Item 3. Key Information—A. Selected Financial Data—Exchange Rate Information—Exchange controls.” E.            Taxation The following summary contains a description of the material Brazilian and U.S. federal income tax consequences of acquiring, holding and disposing of common shares or ADSs issued by us.  This discussion is not a comprehensive discussion of all the tax considerations that may be relevant to a decision to purchase, hold or dispose of our common shares or ADSs and is not applicable to all categories of investors, some of which may be subject to special rules.  Each prospective purchaser is urged to consult its own tax advisor about the particular Brazilian and U.S. tax consequences to it of an investment in our common shares or ADSs. The summary is based upon tax laws of Brazil and the U.S. and the regulations thereunder, as in effect on the date hereof, which are subject to change (possibly with retroactive effect).  Although there is at present no income tax treaty between Brazil and the U.S., the tax authorities of the two countries have entered into a Tax Information Exchange Agreement and have had discussions that may culminate in a treaty.  No assurance can be given, however, as to whether or when a treaty will enter into force or of how it will affect the U.S. Holders of our common shares or ADSs.  This summary is also based on representations of the depositary and on the assumption that each obligation in the Deposit Agreement relating to our ADSs and the related documents will be performed in accordance with its terms. Brazilian Tax Considerations The following discussion summarizes the material Brazilian tax consequences of the acquisition, ownership and disposition of our common shares or ADSs by a holder that is not deemed to be domiciled in Brazil for purposes of Brazilian taxation and, in the case of a holder of common shares, which has registered its investment in such securities with the Central Bank as a U.S. dollar investment (in each case, a “Non-Brazilian Holder”). The discussion does not purport to be a comprehensive description of all tax considerations that may be relevant to a decision to purchase our common shares or ADSs.  The discussion below is based on Brazilian law as currently in effect.  Any change in such law may change the consequences described below.  The following discussion does not specifically address all of the Brazilian tax considerations applicable to any particular Non-Brazilian Holder, and each Non-Brazilian Holder should consult his or her own tax advisor concerning the Brazilian tax consequences of an investment in our common shares or ADSs. Income Tax Taxation of Dividends Dividends paid by us to The Bank of New York Mellon in respect of the common shares underlying the respective ADSs, or to a Non-Brazilian Holder with respect to our common shares, generally will not be subject to Brazilian withholding income tax.


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Taxation of Gains Gains realized outside Brazil by a Non-Brazilian Holder on the disposition of assets located in Brazil, including our common shares, to a Brazilian resident or to a non-resident in Brazil, are subject to Brazilian withholding income tax. Gains realized by a Non-Brazilian Holder on a sale or disposition of our common shares carried out on the Brazilian stock exchange, which includes the transactions carried out on the organized over-the-counter market, are: exempt from income tax when realized by a Non-Brazilian Holder that (1) has registered its investment in Brazil with the Central Bank under the rules of CMN Resolution No. 4,373/2014, or a 4,373 Holder, and (2) is not resident or domiciled in a tax haven jurisdiction, as defined below; or

in all other cases, subject to income tax at a rate of up to 25%. In addition, a withholding tax  of 0.005% of the sale value shall be applicable and withheld by the intermediary institution (i.e., a broker) that receives the order directly from the Non-Brazilian Holder, which can be later offset against any income tax due on the capital gain earned by the Non-Brazilian Holder. Any other gains assessed on a sale or disposition of the shares that is not carried out on a Brazilian stock exchange are subject to withholding tax at a rate of up to 25%. If these gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, a withholding tax of 0.005% on the sale value will also apply and can be used to offset the income tax due on the capital gain. As of January 2017, Law No. 13,259/2016 increased the income tax rates applicable to gains realized by Brazilian resident individuals on sale or disposition of shares not carried out on a Brazilian stock exchange from a flat tax rate of 15.0% to progressive rates varying from 15% up to 22.5%. The income tax rates recognized by Brazilian individuals’ capital gains would be: (i) 15% for the part of the gain that does not exceed R$5 million, (ii) 17.5% for the part of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the part of the gain that exceeds R$10 million but does not exceed R$30 million and (iv) 22.5% for the part of the gain that exceeds R$30 million. These increased income tax rates may also affect Non-Brazilian Holders, except for 4,373 Holders that are not resident or domiciled in tax haven jurisdictions and that carry out a sale or disposition of our common shares in a stock exchange environment, including over-the-counter market, which are still exempt from income tax. The statutory definition of a tax-haven jurisdiction for the purpose of income taxation on gains should differ depending on whether or not the investment in our common shares or ADSs is registered under CMN Resolution No. 4,373 or under Law No. 4,131.  In the case of gains arising from an investment registered under Resolution No. 4,373, a country or location should be defined as a tax-haven jurisdiction when such country or location (a) does not tax income, or (b) taxes income at a rate lower than 20%.  In turn, in the case of gains arising from an investment under Law No. 4,131, in addition to criteria (a) and (b) above for the definition of a tax-haven jurisdiction, a country or location should also be considered a tax-haven jurisdiction if the laws of such country or location do not allow access to information related to shareholding composition, to the ownership of investments, or to the identification of the beneficial owner of earnings that are attributed to non-residents. On November 28, 2014, the Finance Ministry issued Ordinance No. 488 reducing to 17% the maximum income tax rate that may be imposed by a given jurisdiction for characterization of a tax haven jurisdiction for income tax purposes, as long as the jurisdiction complies with international tax transparency standards. The RFB subsequently issued Normative Instruction No. 1,530/14 providing that compliance with such standards requires: (a) signature of or conclusion of negotiation to sign a treaty or agreement allowing the exchange of information related to identification of income beneficiaries, corporate structure, ownership of goods or rights or economic transactions; and (b) commitment to the criteria defined in international anti-tax evasion forums of which Brazil is a member.


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The RFB regularly issues a list of jurisdictions which are considered tax-haven jurisdictions, the “black-list”. Such list is currently set forth in Normative Instruction No. 1,037/10, as amended.1 We understand that ADSs are not assets located in Brazil for the purposes of the above-mentioned taxation on gains.  However, we are unable to predict how Brazilian courts would view this issue, and to date, we are not aware of any judicial or administrative precedent on this specific matter.  The withdrawal of ADSs in exchange for shares is not subject to Brazilian income tax.  The deposit of the shares in connection with the issuance of ADSs is not subject to Brazilian tax, provided that the shares are registered under Resolution No. 4,373 and the investor is not located in a tax-haven jurisdiction, considering the definition described above.  There is a special taxation system applicable to Non-Brazilian Holders (provided investments are duly registered under Resolution No. 4,373 and with the CVM and other conditions are fulfilled).  Upon receipt of the underlying shares, a Non-Brazilian Holder who qualifies under Resolution No. 4,373 will be entitled to register the U.S. dollar value of such shares with the Central Bank as described below. The “gain realized” as a result of a transaction on a Brazilian stock exchange is the difference between the amount in Brazilian currency realized on the sale or exchange of the shares and their acquisition cost, without any correction for inflation. The “gain realized” as a result of a transaction with shares which are registered under a Law No. 4,131 certificate of registration of investment will be calculated based on the foreign investment amount registered with the Central Bank and will accordingly be subject to tax at a rate of up to 25%.  There can be no assurance that the current preferential treatment for holders of ADSs and Non-Brazilian Holders of shares under Resolution No. 4,373 will continue in the future or that it will not be changed in the future.  Reductions in the tax rate provided for by Brazil’s tax treaties (except for the tax treaty signed between Japan and Brazil) do not apply to tax on gains realized on sales or exchanges of shares. Any exercise of preemptive rights relating to the Ambev common shares or ADSs will not be subject to Brazilian taxation.  Gains on the sale of preemptive rights relating to the shares will be treated differently for Brazilian tax purposes depending on (1) whether the sale is made by The Bank of New York Mellon or the investor and (2) whether the transaction takes place on a Brazilian stock exchange.  Gains on sales made by the depositary on a Brazilian stock exchange are not taxed in Brazil, but gains on other sales may be subject to tax at rates of up to 25%, if the ADSs were to be considered assets located in Brazil by the Brazilian tax authorities.   1The countries currently included in this list, according to Article 1 of RFB Normative Instruction No. 1,037/10 are: Andorra, Anguilla, Antigua e Barbuda, Aruba, Ascension Islands, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Brunei, Campione D’Italia, Channel Islands (Jersey, Guernsey, Alderney and Stark), Cayman Island, Curaçao, Cyprus, Singapore, the Cook Islands, Costa Rica, Djibouti, Dominica, United Arab Emirates, Gibraltar, Grenada, Hong Kong, Ireland, Kiribati, Lebanon, Libya, Liberia, Liechtenstein, Macau, Madeira Island, Maldives, Man Island, Marshall Island, Mauritius Island, Monaco, Montserrat Island, Nauru, Niue Island, Norfolk Island, Panama, Pitcairn Island, American French Polynesia, Qeshm Island, American Samoa, Western Samoa, San Marino, Saint Helena Island, Santa Lucia, Federation of Saint Christopher and Nevis, Saint Martin, Saint-Pierre e Miquelon, Saint Vincent and the Grenadines, Seychelles, Solomon Island, Swaziland, Sultanate of Oman, Tonga, Tristan da Cunha, Turks and Caicos Islands, Vanuatu and Virgin Islands. In addition, in Article 2 of RFB Normative Instruction No. 1,037/10, U.S. state LLCs held by non-residents and not subject to federal income tax in the U.S. and holding companies without substantial economic activity domiciled in Denmark and Netherlands are listed as tax privileged domiciled entities, as well as: (1) Financial Investment Companies of Uruguay (Sociedades Financeiras de Inversão), (2) Holding companies domiciled in Denmark, Netherlands and Austria, which do not develop “substantial economic activities,” as defined by the single paragraph of Article 2; (3) International Trading Company (ITC) domiciled in Iceland, (4) Entidad de Tenencia de Valores Extranjeros (ETVEs) of Spain, (5) the International Trading Companies (ITC) and International Holding Companies (IHC) domiciled in Malta, (6) Limited Liability Company (LLC) of United States of America and (7) the Holding Company, Domiciliary Company, Auxiliary Company, Mixed Company and Administrative Company domiciled in Switzerland subject to Federal, Cantonal and Municipal income tax at a combined rate lower than 20%. Netherlands was temporarily removed from the list, in 2010, and then re-included in the list, in 2015. The effects of the inclusion of the ETVE regime in the list were suspended by RFB Declaratory Act No. 22/2010, due to a review request presented by the Spanish government to Brazilian authorities.


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Distributions of Interest on Shareholders’ Equity In accordance with Law No. 9,249, dated December 26, 1995, Brazilian corporations may make payments to shareholders characterized as distributions of interest on their shareholders’ equity.  Such interest is limited to the shareholders’ equity multiplied by the TJLP, as determined by the Central Bank from time to time. Distributions of interest on shareholders’ equity in respect of the Ambev common shares paid to shareholders who are either Brazilian residents or non-Brazilian residents, including holders of ADSs, are subject to Brazilian withholding tax at the rate of 15% or 25% if the payee is domiciled in a tax-haven jurisdiction.  In this case, of interest on shareholders’ equity, a payee’s country or location should be deemed a tax-haven jurisdiction when (a) such country or location does not tax income, (b) such country or location taxes income at a rate lower than 20%, or (c) the laws of such country or location do not allow access to information related to shareholding composition, to the ownership of investments, or to the identification of the beneficial owner of earnings that are attributed to non-residents.  As explained in “—Taxation of Gains,” the RFB reduced to 17% the maximum income tax rate that may be imposed by a given jurisdiction for the purpose of characterization of a tax-haven jurisdiction, as long as the country complies with international tax transparency standards. The amounts paid as distribution of interest on shareholders’ equity are deductible from the taxable basis of the corporate income tax and social contribution on net profits, both of which are taxes levied on our profits, as long as the payment of a distribution of interest is approved at a general meeting of shareholders of the Company.  The amount of such deduction cannot exceed the greater of: 50% of net income (after social contribution on net profits, and before taking such distribution and any deductions for corporate income tax into account) for the period in respect of which the payment is made; or50% of the sum of retained earnings and profit reserves as of the initial date of the period in respect of which the payment is made. The distribution of interest on shareholders’ equity may be determined by the Board of Directors.  No assurance can be given that the Board of Directors will not determine that future distributions of profits may be made by means of interest on shareholders’ equity instead of by means of dividends.  These payments of interest on shareholders’ equity may be included, at their net value, as part of any mandatory dividend. To the extent payment of interest on shareholders’ equity is so included, the corporation may be required to distribute to shareholders an additional amount to ensure that the net amount received by them, after payment of the applicable withholding income tax, plus the amount of declared dividends is at least equal to the mandatory dividend. There are discussions in Congress regarding possible changes to the tax treatment of interest on shareholders’ equity from time to time.  In particular, a recent provisional measure (Provisional Measure No. 694) that was not timely voted by Congress for conversion into definitive legislation proposed to reduce the deductibility limits of interest on shareholders’ equity and increase the withholding income tax rate on interest on shareholders’ equity paid or credited to Non-Brazilian Holders located outside a tax haven jurisdiction. There can be no assurance that another provisional measure will not be issued seeking to implement similar changes as those proposed by expired Provisional Measure No. 694. Other Relevant Brazilian Taxes There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of shares or ADSs by a Non-Brazilian Holder except for gift and inheritance taxes which may be levied by some states of Brazil.  There currently are no Brazilian stamp, issue, registration or similar taxes or duties payable by holders of shares or ADSs. Brazilian law imposes a Tax on Foreign Exchange Transactions, or “IOF/Exchange,” on the conversion ofreaisinto foreign currency and on the conversion of foreign currency intoreais.  As from October 7, 2014, the general IOF/Exchange rate applicable to almost all foreign currency exchange transactions was increased from zero to 0.38%, although other rates may apply in particular operations, such as:


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inflow related to transactions carried out in the Brazilian financial and capital markets, including investments in our common shares by investors which register their investment under Resolution No. 4,373, zero;

outflow related to the return of the investment mentioned under the first bulleted item above, zero; and

outflow related to the payment of dividends and interest on shareholders’ equity in connection with the investment mentioned under the first bulleted item above, zero. Notwithstanding these rates of the IOF/Exchange, in force as of the date hereof, the Minister of Finance is legally entitled to increase the rate of the IOF/Exchange to a maximum of 25% of the amount of the currency exchange transaction, but only on a prospective basis. Tax on Transactions Involving Bonds and Securities, or “IOF/Bonds” may be levied on transactions involving shares, even if the transactions are effected on Brazilian stock, futures or commodities exchanges.  IOF/Bonds may also be levied on transactions involving ADSs if they are considered assets located in Brazil by the Brazilian tax authorities.  As mentioned in the above discussion on taxation of gains, we are unable to predict how Brazilian courts would view this issue, and to date, we are not aware of any judicial or administrative precedent on this specific matter.  As from December 24, 2013, the IOF/Bonds levies at a rate of zero percent on the transfer (cessão) of shares traded in a Brazilian stock exchange environment with the specific purpose of enabling the issuance of depositary receipts to be traded outside Brazil.  Previously, a rate of 1.5% was applied to the product of (a) the number of shares which are transferred, multiplied by (b) the closing price for such shares on the date prior to the date of the transfer.  If no closing price was available on that date, the last available closing price was adopted.  The rate of IOF/Bonds with respect to other transactions related to shares and ADSs (if applicable) is currently zero.  The Minister of Finance, however, has the legal power to increase the rate to a maximum of 1.5% of the amount of the taxed transaction per each day of the investor’s holding period, but only on a prospective basis. Tax Regime Created by Law No. 12,973 in 2014 Provisional Measure 627/13 was converted into Law No. 12,973, enacted on May 13, 2014, which revoked the so-called transitional tax regime (Regime Tributário de Transição - RTT) and introduced a new tax regime, in line with the current Brazilian accounting standards (IFRS).  According to Law No. 12,973, companies, such as us, that elected to be taxed under the new regime starting on January 1, 2014, as opposed to January 1, 2015, will not be subject to taxation on dividend distributions based on 2014 profits, as established by RFB Normative Instruction No. 1,397/13, as amended by RFB Normative Instruction No. 1,492/14.  Furthermore, dividends paid by us based on profits are generally not subject to withholding income tax (see “—Income Tax—Taxation of Dividends”). United States Federal Income Tax Considerations The following discussion is a summary of the U.S. federal income tax considerations relating to the ownership, sale or disposition of our common shares or ADSs.  This summary is based on the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing final, temporary and proposed U.S. Treasury Regulations, rulings and judicial decisions, all as currently in effect and all of which are subject to prospective and retroactive changes and differing interpretations. This summary does not purport to address all U.S. federal income tax consequences that may be relevant to a particular holder and you are urged to consult your tax advisor regarding your specific tax situation.  The summary applies only to holders who hold our common shares or ADSs as “capital assets” for U.S. federal income tax purposes (generally, property held for investment).  This summary does not address the tax consequences that may be relevant to holders subject to special treatment, including, for example:


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insurance companies;

tax-exempt organizations;

dealers in securities or currencies;

traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

banks, mutual funds and other financial institutions;

partnerships or other pass-through entities treated as such for U.S. federal income tax purposes;

a person whose functional currency is not the U.S. dollar;

certain former citizens or long-term residents of the United States;

S corporations and small business investment companies;

real estate investment trusts and regulated investment companies;

holders that hold our common shares or ADSs as part of a  hedge, straddle, conversion or other integrated transaction, for U.S. federal income tax purposes;

holders that own, directly, indirectly or constructively, 10% or more of the total combined voting power of our stock; or

holders that acquired their Ambev common shares or ADSs as compensation. This summary assumes that we are not a passive foreign investment company, or PFIC, for U.S. federal income tax purposes.  For further information, see the discussion under “—Taxation of U.S. Holders—Passive Foreign Investment Company (PFIC) Rules” below. Further, this summary does not address the 3.8% Medicare tax on certain investment income, the alternative minimum tax consequences of holding Ambev common shares or ADSs, or the indirect consequences to holders of equity interests in entities that own such common shares or ADSs.  In addition, this summary does not address the state, local, foreign or other tax consequences, if any, of holding Ambev common shares or ADSs. You should consult your tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences of acquiring, owning and disposing of our common shares or ADSs in your particular circumstances. Taxation of U.S. Holders For purposes of this summary, you are a “U.S. Holder” if you are a beneficial owner of Ambev common shares or ADSs and you are for U.S. federal income tax purposes: a citizen or resident of the United States;

an entity treated as a corporation for U.S. federal income tax purposes created or organized in or under the laws of the United States or any state thereof, or the District of Columbia;

an estate the income of which is subject to U.S. federal income tax regardless of its source; or


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a trust if (1) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) the trust has in effect a valid election to be subject to tax as a U.S. person. If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds or disposes of Ambev common shares or ADSs, the tax treatment of a partner in that partnership will generally depend upon the status of the partner and the activities of the partnership.  A partner in a partnership holding or disposing of Ambev common shares or ADSs should consult its tax advisor regarding the U.S. federal income tax consequences to it of holding or disposing of our securities. A “Non-U.S. Holder” is a beneficial owner of our common shares or ADSs that is not a U.S. Holder and that is not an entity treated as a partnership for U.S. federal income tax purposes. The discussion below assumes that the representations contained in the ADS deposit agreement are true and that the obligations in the ADS deposit agreement and any related agreements will be complied with in accordance with their terms.  In general, for U.S. federal income tax purposes, U.S. Holders who own ADSs will be treated as the beneficial owners of the underlying common shares represented by those ADSs.  Accordingly, the surrender of ADSs in exchange for common shares (or vice versa) will not result in the realization of gain or loss for U.S. federal income tax purposes.  The rest of this discussion assumes that a holder of an ADS will be treated for U.S. federal income tax purposes as directly holding the underlying common shares. Distributions on the Ambev Common Shares or ADSs Subject to the discussion below under “—Taxation of U.S. Holders—Passive Foreign Investment Company (PFIC) Rules," the gross amount of distributions paid by us to a U.S. Holder (including amounts withheld to pay Brazilian withholding taxes, if any) with respect to our common shares or ADSs (including distributions of interest on shareholders’ equity) will generally be taxable to such U.S. Holder as ordinary dividend income or qualified dividend income (as further described below) to the extent that such distribution is treated as paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes).  Distributions in excess of our current or accumulated earnings and profits will be treated as a non-taxable return of capital reducing such U.S. Holder’s tax basis in our common shares or ADSs, as applicable.  Any distribution in excess of such tax basis will be treated as capital gain and will be either long-term or short-term capital gain depending upon whether the U.S. Holder held our common shares or ADSs, as applicable, for more than one year at the time of the distribution. We do not calculate our earnings and profits under U.S. federal income tax principles.  Therefore a U.S. Holder should expect that the entire amount of a distribution will generally be treated as a dividend even if the distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above. Dividends received by a U.S. Holder will generally be taxed at ordinary income tax rates.  However, a non-corporate U.S. Holder will generally be taxed at the lower rate applicable to qualified dividend income, provided that (1) our common shares or ADSs are “readily tradable on an established securities market in the United States,” (2) we are not a PFIC (as discussed below) for either the taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period and other requirements are satisfied.  For purposes of clause (1) above, we expect the ADSs to be treated as readily tradable on an established securities market in the United States.  Consequently, we expect dividends paid with respect to ADSs to constitute “qualified dividend income” provided that the other requirements set forth above are satisfied.  The Ambev common shares, however, are not expected to be treated as readily tradable on an established securities market in the United States.  U.S. Holders are urged to consult their tax advisors regarding the availability of the lower rate for any dividends paid with respect to such shares. A U.S. Holder may be entitled, subject to a number of complex rules and limitations, to claim a U.S. foreign tax credit in respect of any Brazilian withholding taxes imposed on distributions received on our common shares or ADSs.  U.S. Holders that do not elect to claim a foreign tax credit may instead be entitled to claim a deduction in respect of any such withholdings.  Dividends received with respect to our common shares or ADSs will generally be treated as foreign-source income and will generally constitute “passive income” for U.S. foreign tax credit limitation purposes.  The rules relating to the foreign tax credit are complex and U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.


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Dividends received by a U.S. Holder generally will not be eligible for the dividends received deduction available to certain corporate U.S. Holders. For U.S. federal income tax purposes, the amount of any cash distribution paid in Brazilian currency will equal the U.S. dollar value of the distribution, calculated by reference to the exchange rate in effect at the time the distribution is received by the depositary (in the case of ADSs) or by the U.S. Holder (in the case of Ambev common shares held directly by such U.S. Holder), regardless of whether the payment is in fact converted to U.S. dollars at that time.  A U.S. Holder should not recognize any foreign currency gain or loss if such Brazilian currency is converted into U.S. dollars on the date received.  If the Brazilian currency is not converted into U.S. dollars on the date of receipt, however, gain or loss may be recognized upon a subsequent sale or other disposition of the Brazilian currency.  Such foreign currency gain or loss, if any, will generally be U.S.-source ordinary income or loss. Sale, Exchange or Other Taxable Disposition of Ambev Common Shares or ADSs Subject to the discussion below under “—Taxation of U.S. Holders—Passive Foreign Investment Company (PFIC) Rules," a U.S. Holder will generally recognize capital gain or loss upon the sale, exchange or other taxable disposition of our common shares or ADSs, measured by the difference between the U.S. dollar value of the amount realized and the U.S. Holder’s tax basis in those common shares or ADSs.  If Brazilian tax is withheld on the sale or disposition, the amount realized by a U.S. Holder will include the gross amount of the proceeds of that sale or disposition before deduction of the Brazilian tax.  Any gain or loss will be long-term capital gain or loss if our common shares or ADSs have been held for more than one year at the time of the sale, exchange or other taxable disposition.  Long-term capital gains recognized by individuals are currently subject to reduced rates of taxation.  The deductibility of capital losses is subject to limitations.  Capital gain or loss, if any, realized by a U.S. Holder on the sale, exchange or other taxable disposition of an Ambev common share or ADS, will generally be treated as U.S.-source income or loss for U.S. foreign tax credit purposes.  Consequently, in the case of a disposition of an Ambev common share that is subject to Brazilian tax imposed on the gain, or in the case of a deposit of Ambev common shares in exchange for an Ambev ADS that is not registered pursuant to Resolution No. 4,373 on which a Brazilian capital gains tax is imposed (see “—Brazilian Tax Considerations—Income Tax—Taxation of Gains”), as the case may be, the U.S. Holder may not be able to benefit from the foreign tax credit for that Brazilian tax, unless the U.S. Holder can apply (subject to applicable limitations) the credit against U.S. tax payable on other income from foreign sources in the appropriate income category.  Alternatively, a U.S. Holder may be entitled to take a deduction for the Brazilian tax if such U.S. Holder elects to deduct all of its foreign income taxes.  Any Brazilian tax paid by a U.S. Holder that is not eligible for a credit or deduction will be treated as a reduction in the amount of cash received by the U.S. Holder on the sale, exchange or other taxable disposition of our common shares or ADSs and will generally reduce the amount of gain (if any) recognized by the U.S. Holder.  The rules relating to the foreign tax credit are complex and U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances. Passive Foreign Investment Company (PFIC) Rules Special U.S. federal income tax rules apply to U.S. Holders owning shares of a PFIC.  In general, a foreign corporation is a PFIC if, for any taxable year in which the U.S. Holder holds stock in the foreign corporation, at least 75% of such corporation’s gross income is passive income or at least 50% of the value of such corporation’s assets (determined on the basis of a quarterly average) produce passive income or are held for the production of passive income.  The determination of whether our common shares or ADSs constitute shares of a PFIC is a factual determination made annually and thus may be subject to change.  Subject to certain exceptions, once a U.S. Holder’s Ambev common shares or ADSs, as applicable, are treated as shares in a PFIC, they remain shares in a PFIC.  In addition, dividends received by a U.S. Holder from a PFIC will not constitute qualified dividend income. If we are treated as a PFIC, a U.S. Holder would generally be subject to special rules with respect to (a) any gain realized on the sale or other disposition of Ambev common shares or ADSs and (b) any “excess distribution” by us to the U.S. Holder (generally, the part of the distribution during a taxable year that exceeds 125% of the average annual distributions the U.S. Holder received on those common shares or ADSs during the preceding three taxable years or, if shorter, the U.S. Holder’s holding period for such common shares or ADSs).  In addition, if we are classified as a PFIC for any taxable year during which a U.S. Holder owns our common shares or ADSs and any of our non-U.S. subsidiaries is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of each such non-U.S. subsidiary classified as a PFIC for purposes of the application of these rules.


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Based upon the nature of our current and projected income, assets and activities, we do not believe that we are a PFIC for U.S. federal income tax purposes for the taxable year ended December 31, 2016 and do not anticipate becoming a PFIC in the foreseeable future.  However, we cannot assure you that we will not be considered a PFIC in current or future years.  The determination as to whether or not we are a PFIC is a factual determination and cannot be made until the close of the applicable tax year.  If we are currently a PFIC or were to become a PFIC, U.S. Holders would be subject to special rules and a variety of potentially adverse tax consequences under the Code. If we are treated as a PFIC, certain elections may be available to mitigate the adverse U.S. federal income tax consequences of owning stock in a PFIC.  In particular, a U.S. Holder may elect mark-to-market treatment for its common shares or ADSs, provided those common shares or ADSs constitute “marketable stock” as defined in U.S. Treasury Regulations.  In addition, certain information reporting rules may apply if we are treated as a PFIC, such as the requirement to file IRS Form 8621 regarding distributions received on the common shares or ADSs and any gain realized on the disposition of the common shares or ADSs.  U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to an investment in our common shares or ADSs. Reporting Obligations for Certain U.S. Holders Certain U.S. Holders that hold certain specified foreign financial assets, including stock in a foreign corporation, with values in excess of certain thresholds are required to file IRS Form 8938 with their federal income tax return.  Such Form requires disclosure of information concerning such foreign assets, including the value of the assets.  Failure to file the form when required is subject to penalties.  An exemption from reporting applies to foreign assets held through a U.S. financial institution, generally including a non-U.S. branch or subsidiary of a U.S. institution and a U.S. branch of a non-U.S. institution.  U.S. Holders are encouraged to consult their tax advisors regarding the possible application of this disclosure requirement to their investment in our common shares or ADSs. THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.  ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF AMBEV COMMON SHARES OR ADSs, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW. E.            Dividends and Paying Agents Not applicable. F.            Statement by Experts Not applicable. G.            Where You Can Find More Information (Documents on Display) We are subject to the informational reporting requirements of the Exchange Act, and file with or furnish to the SEC, as applicable, the following documents that apply to foreign private issuers: annual reports on Form 20-F;

certain other reports on Form 6-K containing the information that we make public under Brazilian law, file with the Brazilian stock exchanges or distribute to shareholders; and

other information.


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You may read and copy any reports or other information that we file at the SEC’s public reference rooms at 100 F Street, NE, Washington, D.C. 20549, and at the SEC’s regional offices located at Brookfield Place, 200 Vesey Street, Suite 400 New York, New York 10281-1022 and 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604.  You may obtain information on the operation of the SEC’s public reference rooms by calling the SEC at 1-800-SEC-0330.  Electronic filings made through the Electronic Data Gathering, Analysis and Retrieval System are also publicly available through the SEC’s website on the Internet at www.sec.gov.  In addition, material filed by us may also be inspected at the offices of the NYSE at 20 Broad Street, New York, New York 10005. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements and will not be required to file proxy statements with the SEC, and its officers, directors and principal shareholders will be exempt from the reporting and “short swing” profit recovery provisions contained in Section 16 of the Exchange Act. You may obtain documents from us by requesting them in writing, at the following addresses or by telephone: Attention:

   Telephone numbers:

   

   Fax:

   Email:

   Ambev S.A.Investor Relations Department

   (55-11) 2122-1415

   (55-11) 2122-1414

   (55-11) 2122-1526

   ir@ambev.com.br
 You may obtain additional information about us on our website at www.ri.ambev.com.br.  The information contained therein is not part of this annual report. I.             Subsidiary Information Not applicable.


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ITEM 11.              QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our activities expose us to various market risks, including changes in foreign currency exchange rates and interest rates and changes in the prices of certain commodities, including malt, aluminum, sugar and corn.  Market risk is the potential loss arising from adverse changes in market rates and prices.  We enter into derivatives and other financial instruments, in order to manage and reduce the impact of fluctuations in commodity prices, in foreign currency exchange rates and in interest rates.  We have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial activities.  Decisions regarding hedging are made according to our risk management policy, taking into consideration the amount and duration of the exposure, market volatility and economic trends. These instruments are accounted for based on their characteristics.  See notes 3 and 27 to our audited consolidated financial statements for a discussion of the accounting policies and information on derivative financial instruments. In order to minimize the credit risk of its investments, we have cash allocation and investment policies, taking into consideration financial institution credit limits and ratings, not allowing credit concentration. Thus, the credit risk is monitored and minimized because the negotiations are carried out only with a select group of highly qualified counterparties. The definition of financial institutions authorized to operate as a counterparty for us is described in our policy, which establishes maximum exposure limits for each counterparty based on each counterparty’s risk rating and capitalization. Enterprise Risk Management (ERM) We have implemented a management strategy to promote enterprise-wide risk management (ERM), through an integrated framework that considers the impact on our business of not only market risks but also of compliance, strategic and operational risks.  We believe that such integrated framework, which accounts for different kinds of business risks, enables us to improve management’s ability to evaluate risks associated with our business. The risk management department is responsible for reviewing and following up with management the risk factors and related mitigating initiatives consistent with our corporate strategy. Market risks, such as exposure in foreign currency, interest rates, commodity prices,liquidity and credit risk arise during the normal course of our business. We analyze each of these risks both individually and on an interconnected basis, defining strategies for managing the economic impact on its performance in line with our financial risk management policy. Commodity Risk We use a large volume of agricultural goods to produce our products, including malt and hops for our beer and sugar, guaraná, other fruits and sweeteners for our CSDs.  See “Item 4. Information on the Company—B. Business Overview—Sources and Availability of Raw Materials.”  We purchase a significant portion of our malt and all of our hops outside of Brazil.  We purchase the remainder of our malt and our sugar, guaraná and other fruits and sweeteners locally.  Ambev also purchases substantial quantities of aluminum cans. We produce approximately 80% of our consolidated malt needs.  The remainder and all other commodities are purchased from third parties.  We believe that adequate supplies of the commodities we use are available at the present time, but we cannot predict the future availability of these commodities or the prices we will have to pay for such commodities.  The commodity markets have experienced and will continue to experience price fluctuations.  We believe that the future price and supply of agricultural materials will be determined by, among other factors, the level of crop production, weather conditions, export demand, and government regulations and legislation affecting agriculture, and that the price of aluminum and sugar will be largely influenced by international market prices.  See “Item 4. Information on the Company—B. Business Overview—Sources and Availability of Raw Materials.”


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All of the hops we purchase in the international markets outside of South America are paid for in U.S. dollars.  In addition, although we purchase aluminum cans and sugar in Brazil, their prices are directly influenced by the fluctuation of international commodity prices. As of December 31, 2016, our derivative activities consisted of sugar, wheat, aluminum, heating oil, natural gas, corn and resin derivatives.  The table below provides information about our significant commodity risk sensitive instruments as of December 31, 2016.  The contract terms of these instruments have been categorized by expected maturity dates and are measured at market prices. Maturity Schedule of Commodities Derivatives as of December 31, 2016Derivatives Instruments

   2017

   2018

   2019

   2020

   2021

   There­after

   Total

   Fair Value(in R$ million, except price per ton/gallon/barrel/gigajoule)Sugar Derivatives:Notional Amount

   162.7

   116.3

   -

   -

   -

   -

   279.0

   52.6Average Price (R$/ton)

   981.1

   1,476.8

   -

   -

   -

   -

   1,140.6Wheat Derivatives:Notional Amount

   82.6

   -

   -

   -

   -

   -

   82.6

   (5.4)Average Price (R$/ton)

   523.0

   -

   -

   -

   -

   -

   523.0Aluminum Derivatives:Notional Amount

   825.6

   -

   -

   -

   -

   -

   825.6

   54.0Average Price (R$/ton)

   4,798.4

   -

   -

   -

   -

   -

   4,798.4Heating Oil Derivatives:Notional Amount

   41.1

   -

   -

   -

   -

   -

   41.1

   10.4Average Price (R$/gallon)

   7.9

   -

   -

   -

   -

   -

   7.9Natural Gas:Notional Amount

   5.1

   -

   -

   -

   -

   -

   5.1

   0.3Average Price (R$/GJ)

   8.8

   -

   -

   -

   -

   -

   8.8Corn Derivatives:Notional Amount

   45.5

   -

   -

   -

   -

   -

   45.5

   (6.7)Average Price (R$/ton)

   544.9

   -

   -

   -

   -

   -

   544.9Resin Derivatives:Notional Amount

   280.4

   -

   -

   -

   -

   -

   280.4

   (12.4)Average Price (R$/ton)

   3,194.7

   -

   -

   -

   -

   -

   3,194.7
 Interest Rate Risk We use interest rate swap instruments to manage interest risks associated with changing rates.  The differential to be paid or received is accrued as interest rates change and is recognized in interest income or expense, respectively, over the life of the particular contracts.  We are exposed to interest rate volatility with respect to our cash and cash equivalents, current investment securities and fixed and floating rate debt.  Our U.S. dollar-denominated cash equivalents generally bear interest at a floating rate. We are exposed to interest rate volatility with regard to existing issuances of fixed rate debt, existing issuances of floating rate debt, currency future and forward swaps agreements, cash and cash equivalents and current investment securities.  We manage our debt portfolio in response to changes in interest rates and foreign currency rates by periodically retiring, redeeming and repurchasing debt and using derivative financial instruments.


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The table below provides information about our significant interest rate sensitive instruments.  For variable interest rate debt, the rate presented is the weighted average rate calculated as of December 31, 2016.  The contract terms of these instruments have been categorized by expected maturity dates: Maturity Schedule of Debt Portfolio as of December 31, 2016Debt Instrument

   2017

   2018

   2019

   2020

   2021

   Thereafter

   Total(in R$ million, except percentages)BNDES Currency Basket Debt Floating Rate:Currency Basket Debt Floating Rate

   22.7

   -

   -

   -

   -

   -

   22.7UMBNDES + Average Pay Rate

   1.7%

   -

   -

   -

   -

   -

   1.7%International Debt:Other Latin America Currency Floating Rate

   -

   -

   -

   4.9

   -

   -

   4.9Average Pay Rate

   -

   -

   -

   2.66%

   -

   -

   2.66%Other Latin America Currency Fixed Rate

   114.0

   193.7

   -

   -

   -

   39.3

   347.0Average Pay Rate

   9.4%

   9.5%

   -

   -

   -

   4.3%

   8.9%US$ Fixed Rate

   -

   -

   11.5

   -

   -

   -

   11.5Average Pay Rate

   -

   -

   6.0%

   -

   -

   -

   6.0%US$ Floating Rate

   1,508.7

   329.3

   22.1

   -

   -

   -

   1,860.1Average Pay Rate

   1.3%

   2.2%

   1.5%

   -

   -

   -

   1.5%CAD Floating Rate

   1,259.1

   -

   -

   -

   -

   -

   1,259.1Average Pay Rate

   1.6%

   -

   -

   -

   -

   -

   1.6%ReaisDenominated Debt Floating Rate – TJLP:Notional Amount

   216.2

   163.2

   73.7

   9.0

   9.9

   142.8

   614.8TJLP + Average Pay Rate

   9.5%

   9.3%

   8.6%

   -

   -

   -

   6.8%ReaisDebt - ICMS Fixed Rate:Notional Amount

   33.6

   112.1

   35.0

   32.1

   35.5

   129.8

   378.2Average Pay Rate

   6.4%

   2.6%

   6.1%

   4.2%

   3.5%

   4.5%

   4.1%ReaisDebt - Fixed Rate:Notional Amount

   476.3

   134.3

   97.6

   27.0

   124.2

   38.8

   898.1Average Pay Rate

   9.0%

   5.9%

   6.0%

   4.5%

   12.5%

   3.7%

   8.3%Total Debt

   3,630.6

   932.5

   239.9

   73.0

   169.6

   350.7

   5,396.3


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Maturity Schedule of Cash Instruments as of December 31, 2016Cash Instrument

   2017

   2018

   2019

   2020

   2021

   Thereafter

   Total(in R$ million, except percentages)US$-Denominated Cash and Cash Equivalents:Notional

   1,439.4

   

   

   

   

   

   1,439.4Average Interest Rate

   0.5%

   

   

   

   

   

   0.5%Reais-Denominated Cash and Cash Equivalents:Notional

   2,675.4

   

   

   

   

   

   2,675.4Average Interest Rate

   9.8%

   

   

   

   

   

   9.8%C$-Denominated Cash and Cash Equivalents:Notional Amount

   776.8

   

   

   

   

   

   776.8Average Pay Rate

   0.8%

   

   

   

   

   

   0.8%Other Latin American Currency investments:Notional Amount

   2,985.3

   

   

   

   

   

   2,985.3Total

   7,876.8

   

   

   

   

   

   7,876.8
  Maturity Schedule of Interest Rate Derivatives as of December 31, 2016Derivatives Instrument(1)

   2017

   2018

   2019

   2020

   2021

   Thereafter

   Total

   Fair Value(in R$ million, except percentages)BM&F DI Futures:Notional Amount

   -

   -

   (150.0)

   (250.0)

   -

   -

   (400.0)

   (0.1)Average Interest Rate

   -

   -

   11.2%

   11.2%

   -

   -

   11.2%FIXED x CDIIRS(2):Notional Amount

   300.0

   -

   -

   -

   110.0

   -

   410.0

   7.1Average Interest Rate

   13.6%

   -

   -

   -

   13.6%

   -

   13.6%FIXED x TJLP:Notional Amount

   -

   -

   -

   -

   -

   97.4

   97.4

   0.0Average Interest Rate

   -

   -

   -

   -

   -

   7.5%

   7.5%FIXED x TR:Notional Amount

   -

   -

   -

   -

   -

   166.4

   166.4

   (4.0)Average Interest Rate

   -

   -

   -

   -

   -

   0.2%

   0.2%
  (1)   Negative notional amounts represent an excess of liabilities over assets at any given moment. (2)   Interest rate swap. Part of the floating rate debt accrues interest at TJLP.  During the period set forth below the TJLP was: 2016

   2015

   20144th Quarter

   7.50

   7.00

   5.003rd Quarter

   7.50

   6.50

   5.002nd Quarter

   7.50

   6.00

   5.001st Quarter

   7.50

   5.50

   5.00
 We have not experienced, and do not expect to experience, difficulties in obtaining financing or refinancing existing debt.


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Foreign Exchange Risk We are exposed to fluctuations in foreign exchange rate movements because a significant portion of our operating expenses, in particular those related to hops, malt, sugar, aluminum and corn, are also denominated in or linked to the U.S. dollar.  We enter into derivative financial instruments to manage and reduce the impact of changes in foreign currency exchange rates in respect of our U.S. dollar-denominated debt.  From January 1, 2014, until December 31, 2016, the U.S. dollar appreciated 39.1% against thereal, and, as of December 31, 2016, the commercial market rate for purchasing U.S. dollars was R$3.259 per US$1.00.  The U.S. dollar appreciated against therealby 13.4% in 2014 and 47.0% in 2015.  In 2016, the U.S. dollardepreciated 16.5% against thereal. Our foreign currency exposure gives rise to market risks associated with exchange rate movements, mainly against the U.S. dollar.  Foreign currency-denominated liabilities at December 31, 2016, included debt of R$3,505.1 million. As of December 31, 2016, derivative activities consisted of foreign currency forward contracts, foreign currency swaps and future contracts.  The table below provides information about our significant foreign exchange rate risk sensitive instruments as of December 31, 2016.  The contract terms of these instruments have been categorized by expected maturity dates. Maturity Schedule of Foreign Exchange Derivatives as of December 31, 2016Derivatives Instruments(1)

   2017

   2018

   2019

   2020

   2021

   Thereafter

   Total

   Fair Value(in R$ million, except percentages)BM&F Dollar Futures:Notional Amount

   1,945.7

   -

   -

   -

   -

   -

   1,945.7

   (12.8)Average Unit Price

   3.3

   -

   -

   -

   -

   -

   3.3

   -BM&F Euro Futures:Notional Amount

   41.2

   -

   -

   -

   -

   -

   41.2

   (0.1)Average Unit Price

   3.5

   -

   -

   -

   -

   -

   3.5

   -NDF US$ x R$:Notional Amount

   3,298.2

   -

   -

   -

   -

   -

   3,298.2

   (458.6)Average Unit Price

   3.6

   -

   -

   -

   -

   -

   3.6

   -FDF C$ x US$:Notional Amount

   888.1

   -

   -

   -

   -

   -

   888.1

   23.9Average Unit Price

   1.3

   -

   -

   -

   -

   -

   1.3

   -NDF C$ x INR:Notional Amount

   12.8

   -

   -

   -

   -

   -

   12.8

   0.8Average Unit Price

   0.0

   -

   -

   -

   -

   -

   0.0

   -FDF C$ x EUR:Notional Amount

   135.2

   -

   -

   -

   -

   -

   135.2

   (4.7)Average Unit Price

   1.5

   -

   -

   -

   -

   -

   1.5

   -NDF MXN x R$:Notional Amount

   36.1

   -

   -

   -

   -

   -

   36.1

   (4.9)Average Unit Price

   0.2

   -

   -

   -

   -

   -

   0.2

   -NDF ARS x US$:Notional Amount

   446.2

   -

   -

   -

   -

   -

   446.2

   (5.7)Average Unit Price

   16.5

   -

   -

   -

   -

   -

   16.5

   -NDF CLP x US$:Notional Amount

   553.6

   -

   -

   -

   -

   -

   553.6

   (14.0)Average Unit Price

   691.6

   -

   -

   -

   -

   -

   691.6

   -NDF UYU x US$:Notional Amount

   126.5

   -

   -

   -

   -

   -

   126.5

   (8.8)Average Unit Price

   33.3

   -

   -

   -

   -

   -

   33.3

   -
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Maturity Schedule of Foreign Exchange Derivatives as of December 31, 2016Derivatives Instruments(1)

   2017

   2018

   2019

   2020

   2021

   Thereafter

   Total

   Fair Value(in R$ million, except percentages)NDF BOB x US$:Notional Amount

   187.1

   -

   -

   -

   -

   -

   187.1

   (2.8)Average Unit Price

   7.1

   -

   -

   -

   -

   -

   7.1

   -NDF PYG x US$:Notional Amount

   376.9

   -

   -

   -

   -

   -

   376.9

   (18.5)Average Unit Price

   6,078.8

   -

   -

   -

   -

   -

   6,078.8

   -NDF PYG x R$:Notional Amount

   3.4

   -

   -

   -

   -

   -

   3.4

   0.2Average Unit Price

   1,617.4

   -

   -

   -

   -

   -

   1,617.4

   -NDF EUR x R$:Notional Amount

   -

   -

   -

   -

   -

   -

   -

   (70.1)Average Unit Price

   -

   -

   -

   -

   -

   -

   -

   -NDF MXN x US$:Notional Amount

   183.2

   -

   -

   -

   -

   -

   183.2

   (4.1)Average Unit Price

   0.1

   -

   -

   -

   -

   -

   0.1

   -NDF MXN x CLP:Notional Amount

   139.9

   -

   -

   -

   -

   -

   139.9

   (16.1)Average Unit Price

   34.7

   -

   -

   -

   -

   -

   34.7

   -
   (1)   Negative notional amounts represent an excess of liabilities over assets at any given moment.


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ITEM 12.              DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES A.            Debt Securities Not Applicable. B.            Warrants and Rights Not Applicable. C.            Other Securities Not Applicable. D.            American Depositary Shares The Bank of New York Mellon, or the Depositary, is the depositary of the Ambev shares in accordance with the Deposit Agreement, dated July 9, 2013, entered into among Ambev, The Bank of New York Mellon, as depositary, and all owners from time to time of ADSs of Ambev, or the Depositary Agreement.  A copy of this Depositary Agreement is filed as an exhibit to this annual report on Form 20−F. The Depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.  The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.  The Depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them.  The Depositary may collect any of its fees by deduction from any cash distribution payable to ADS holders that are obligated to pay those fees.  The Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.  Pursuant to the Depositary Agreement, holders of our ADSs may have to pay to The Bank of New York Mellon, either directly or indirectly, fees or charges up to the amounts set forth in the table below. Persons depositing or withdrawingshares or ADS holders must pay:

   

   For:US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)

   

   issuance of ADSs, including issuances resulting from a distribution of shares, rights or other property; and

   cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates.US$0.02 (or less) per ADS

   

   any cash distribution to ADS holders.A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs

   

   distribution of securities distributed to holders of deposited securities which are distributed by the Depositary to ADS holders.US$0.02 (or less) per ADSs per calendar year

   

   depositary services.Registration or transfer fees

   

   transfer and registration of shares on Ambev’s share registry to or from the name of the Depositary or its agent when you deposit or withdraw shares.Expenses of the Depositary

   

   cable, telex and facsimile transmissions (when expressly provided in the deposit agreement); and

   converting foreign currency to U.S. dollars.Taxes and other governmental charges the Depositary or the Custodian may have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes or stamp duty (which currently are inapplicable in Brazil) or withholding taxes

   

   as necessary.Any charges incurred by the Depositary or its agents for servicing the deposited securities

   

   as necessary.


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In performing its duties under the Deposit Agreement, the Depositary may use brokers, dealers or other service providers that are affiliates of the Depositary and that may earn or share fees or commissions. Subject to certain terms and conditions, the Depositary has agreed to reimburse us for certain expenses it incurs that are related to establishment and maintenance expenses of the ADS program, including the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls.  There are limits on the amount of expenses for which the Depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors. The Depositary has made payments to us in the amount of US$2.9 million during 2016.  These amounts were used for general corporate purposes such as the payment of costs and expenses associated with (1) the preparation and distribution of proxy materials, (2) the preparation and distribution of marketing materials and (3) consulting and other services related to investor relations.


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PART II ITEM 13.              DEFAULT, DIVIDENDS ARREARAGES AND DELINQUENCIES Not Applicable.


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ITEM 14.              MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not Applicable.


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ITEM 15.              CONTROLS AND PROCEDURES A.            Disclosure Controls and Procedures The Company has carried out an evaluation, as of December 31, 2016, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures under the supervision and with the participation of the Company’s management, which is responsible for the management of the internal controls, including the Chief Executive Officer and Chief Financial Officer.  While there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures, the Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. As a result of the material weakness related to controls over the accounting and presentation of complex, non-routine transactions detailed below, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that, as of December 31, 2016, the disclosure controls and procedures were not effective at the reasonable assurance level and, accordingly, are not (1) effective in ensuring that information required to be disclosed in the reports that are filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Commissions’ rules and forms and (2) effective in ensuring that information to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to the management of the Company, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure. B.            Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Internal control over financial reporting is defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the audited consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect material misstatements.  Therefore, effective control over financial reporting cannot, and does not, provide absolute assurance of achieving our control objectives. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The effectiveness of our internal control over financial reporting as of December 31, 2016, is based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on the assessment performed by our management, as of December 31, 2016, our management has identified a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness in internal control over financial reporting that our management identified relates to our management’s review controls and other controls over the accounting and presentation of complex, non-routine transactions that were not adequately designed and documented. In 2016, the complex, non-routine transaction that exposed the material weakness was a stock swap recorded in the last quarter of 2016 as a result of the agreement with ABI pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador, in exchange for which ABI agreed to transfer SABMiller’s Panamanian business to us. See “Item 4. Information on the Company—A. History and Development of the Company—Recent Acquisitions, Divestments and Strategic Alliances.” Specifically, our management identified that our controls lacked sufficient specificity and a formal plan detailing the extent of procedures to be performed to ensure sufficient consideration of the evaluation of all relevant accounting standards and practices and to address the completeness and accuracy of key assumptions and other data used in the analysis of the transactions important to the underlying accounting and presentation.The material weakness described above did not result in misstatements to our consolidated financial statements and, accordingly, no adjustments are required to our financial statements as a result of such weakness. However, these deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis. Remediation Plan for the Material Weakness Our management is actively engaged in the planning for, and implementation of, remediation efforts to address the material weakness identified specifically relating to the accounting and presentation of complex, non-routine transactions. Our management will undertake the following changes to remediate the material weakness described above: -strengthenthe detailed framework for the treatment of such complex non-routine transaction; -formalize all the required steps to be taken in connection with the analysis of the applicable accounting practices for such transactions; and -formalize the other procedures to be undertaken when reviewing the key assumptions and other data relating to complex, non-routine that may impact the accounting record of such transactions. Our management believes that these actions will remediate the material weakness in internal control over financial reporting described above and the timescale for implementing the remediation plan will be until the next management internal control over financial report, when the Company expects the design review process to be concluded. C.            Attestation Report of the Registered Public Accounting Firm  The effectiveness of our internal control over financial reporting as of December 31, 2016, has been audited by Deloitte Touche Tohmatsu Auditores Independentes, the Company’s independent registered public accounting firm. Their audit report and their report on management’s assessment of internal control over financial reporting are included in our audited consolidated financial statements included in this Form 20-F. Their report on management’s assessment of internal control over financial reporting expresses an adverse opinion on the effectiveness of our internal control over financial reporting as of December 31, 2016.


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D.            Changes in Internal Control over Financial Reporting During the period covered by this Form 20-F, we have not made any change to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


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ITEM 15T.           CONTROLS AND PROCEDURES Not applicable.


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ITEM 16A.           AUDIT COMMITTEE FINANCIAL EXPERT We have relied on the exemption provided for under Rule 10A-3(c)(3) of the Exchange Act, pursuant to  Section 301 of the Sarbanes-Oxley Act of 2002, which enables us to have the Fiscal Council perform the duties of an audit committee for the purposes of such Act, to the extent permitted by Brazilian law.  In accordance with the charter of our Fiscal Council, at least one of its members has to fulfill the requirements of the Sarbanes-Oxley Act of 2002 for the purposes of qualifying as an audit committee financial expert.  Accordingly, our Fiscal Council is comprised of one “audit committee financial expert” within the meaning of this Item 16A, namely José Ronaldo Vilela Rezende, who has an extensive work-related finance background and who is “independent” as set forth in Rule 10A-3(c)(3) of the Sarbanes-Oxley Act of 2002.


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ITEM 16B.           CODE OF BUSINESS CONDUCT We have adopted a code of business conduct (as defined under the rules and regulations of the SEC) that applies to our principal executive officer, principal financial officer and principal accounting officer, among others.  Our code of business conduct has been incorporated by reference to this annual report and was approved by our Board of Directors on August 30, 2013 (though Old Ambev already had a Board-approved code of business conduct since 2003).  If the provisions of the code that apply to our principal executive officer, principal financial officer or principal accounting officer are amended, or if a waiver is granted, we will disclose such amendment or waiver.


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ITEM 16C.           PRINCIPAL ACCOUNTANT FEES AND SERVICES Auditor Fees Deloitte Touche Tohmatsu Auditores Independentes, or Deloitte, acted as our independent auditor for the fiscal years ended December 31, 2016 and 2015.  The table below sets forth the total amount we were billed by Deloitte in 2016 and 2015 for services performed in those years, and breaks down the amount by category of service: Year Ended

   December 31, 2016

   Year Ended

   December 31, 2015(in R$ thousand)Audit fees

   4,532

   7,316.1Audit-related fees

   3,512

   -Tax fees

   1,103

   568.9All other fees

   20

   113.2Total

   9,167

   7,998.2
 PricewaterhouseCoopers Auditores Independentes acted as our independent auditor for the fiscal year ended December 31, 2014.  The table below sets forth the total amount we were billed by PricewaterhouseCoopers Auditores Independentes in 2014 for services performed in that year, and breaks down these amounts by category of service: Year Ended December 31, 2014(in R$ thousand)Audit fees

   5,952.1Audit-related fees

   -Tax fees

   645.2All other fees

   -Total

   6,597.3
 Audit Fees Audit fees are fees billed for the audit of our audited consolidated financial statements and for the reviews of our quarterly financial statements in connection with statutory and regulatory filings or engagements (including audit of our subsidiaries for consolidated purpose). Audit-Related Fees Audit-related fees consisted of fees billed for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements or that were traditionally performed by the external auditor. Tax Fees Tax fees in 2016, 2015 and 2014 were related to tax compliance services. All Other Fees All other services consist primarily of fees billed for certain compliance reports to be filed with local regulators and certain comfort letters issued in connection with the issuance of debt.


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Independent Registered Public Accounting Firm Our audited consolidated financial statements as of and for the years ended December 31, 2016 and 2015 have been audited by Deloitte Touche Tohmatsu Auditores Independentes, São Paulo, Brazil, independent registered public accounting firm.  The offices of Deloitte Touche Tohmatsu Auditores Independentes are located at Rua Henri Dunant, 1383, 9o andar, Chácara Flora, São Paulo, SP, Brazil.  They are members of the São Paulo State Regional Board of Accountants (Conselho Regional de Contabilidade) and their registration number is2 SP 011.609/0-8. Our audited consolidated financial statements as of and for the years ended December 31, 2014, 2013, 2012, 2011 and 2010 have been audited by another independent registered public accounting firm. Pre-Approval Policies and Procedures We have adopted pre-approval policies and procedures under which all audit and non-audit services provided by contracted external auditors must be pre-cleared by the Fiscal Council, which performs the duties of an audit committee for the purposes of the Sarbanes-Oxley Act of 2002, in accordance with Rule 10A-3(c)(3).  The Fiscal Council adopts a list of services and amount limits for contracting for each external auditor under terms included in a “basic list,” which is in turn approved by the Board of Directors.  Any services provided from such list are deemed “pre-approved” for purposes of the Sarbanes-Oxley Act of 2002.  The Board of Directors and the Fiscal Council periodically receive from our chief financial officer a summary report on the progress of the pre-approved services rendered and the corresponding fees duly authorized.  Any services which are not included in such require a prior favorable opinion of our Fiscal Council.  Our policy also contains a list of services which cannot be rendered by our external auditors.


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ITEM 16D.           EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES NYSE corporate governance standards require that a listed company have an audit committee composed of three independent members that satisfy the independence requirements of Rule 10A-3 under the Exchange Act, with a written charter that addresses certain duties. The Fiscal Council is a permanent body which operates independently from our management and from our registered independent public accounting firm.  Its principal function is to examine the financial statements of each fiscal year and provide a formal report to our shareholders.  We are relying on the exemption provided for in Rule 10A-3(c)(3) and believe that our reliance on this exemption will not materially affect the ability of the Fiscal Council to act independently and to satisfy the other requirements of Rule 10A-3.  In accordance with the charter of our Fiscal Council, at least one of its members has to fulfill the requirements of the Sarbanes-Oxley Act of 2002 for the purposes of qualifying as an audit committee financial expert.  Accordingly, our Fiscal Council has designated one financial expert, namely José Ronaldo Vilela Rezende.


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ITEM 16E.           PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS As disclosed under “Major Shareholders—Share Buyback Program,” we have purchased a number of our shares during the period covered by this annual report. Ambev S.A. Share Repurchases Set forth below, in tabular format, is some disclosure on the repurchases of Ambev S.A. shares for the periods indicated.  Shares not purchased under publicly announced programs include those purchased from employees when no publicly announced program was in place and those bought from employees who were dismissed, in both cases, pursuant to the terms and conditions of our stock ownership plan. Month

   Total Numberof SharesPurchased

   Average PricePaid per Share

   Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms(1)

   Maximum Number ofShares that May BePurchased Under Publicly Announced Plans or ProgramsFebruary-2017

   36,522

   17.11

   Not Specified

   Not SpecifiedJanuary-2017

   3,690,690

   16.78

   Not Specified

   Not SpecifiedDecember-2016

   170,024

   16.49

   Not Specified

   Not SpecifiedNovember-2016

   166,797

   17.83

   Not Specified

   Not SpecifiedOctober-2016

   108,375

   18.71

   Not Specified

   Not SpecifiedSeptember-2016

   202,158

   19.66

   Not Specified

   Not SpecifiedAugust-2016

   351,594

   19.53

   Not Specified

   Not SpecifiedJuly-2016

   24,400

   19.22

   Not Specified

   Not SpecifiedJune-2016

   180,981

   18.77

   Not Specified

   Not SpecifiedMay-2016

   985,389

   18.88

   Not Specified

   Not SpecifiedApril-2016

   369,266

   18.80

   Not Specified

   Not SpecifiedMarch-2016

   231,646

   18.70

   Not Specified

   Not SpecifiedFebruary-2016

   76,999

   17.69

   Not Specified

   Not SpecifiedJanuary-2016

   329,219

   17.28

   Not Specified

   Not SpecifiedDecember-2015

   263,393

   18.52

   Not Specified

   Not SpecifiedNovember-2015

   497,438

   18.67

   Not Specified

   Not SpecifiedOctober-2015

   347,578

   19.79

   Not Specified

   Not SpecifiedSeptember-2015

   3,338,663

   19.04

   Not Specified

   Not SpecifiedAugust-2015

   7,889,279

   19.16

   Not Specified

   Not SpecifiedJuly-2015

   8,981,400

   19.23

   Not Specified

   Not SpecifiedJune-2015

   9,885,614

   18.65

   Not Specified

   Not SpecifiedMay-2015

   7,976,601

   19.04

   Not Specified

   Not SpecifiedApril-2015

   5,457,010

   19.16

   Not Specified

   Not SpecifiedMarch-2015

   3,520,223

   18.31

   Not Specified

   Not SpecifiedFebruary-2015

   756,819

   18.18

   Not Specified

   Not SpecifiedJanuary-2015

   35,919

   16.48

   Not Specified

   Not SpecifiedDecember-2014

   616,348

   15.38

   Not Specified

   Not SpecifiedNovember-2014

   124,674

   16.73

   Not Specified

   Not SpecifiedOctober-2014

   7,301,666

   15.76

   Not Specified

   Not SpecifiedSeptember-2014

   1,541,686

   15.88

   Not Specified

   Not SpecifiedAugust-2014

   538,198

   16.46

   Not Specified

   Not SpecifiedJuly-2014

   63,729

   16.47

   Not Specified

   Not Specified


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Month

   Total Numberof SharesPurchased

   Average PricePaid per Share

   Total Number ofShares Purchased asPart of PubliclyAnnounced Plans orPrograms(1)

   Maximum Number ofShares that May BePurchased Under Publicly Announced Plans or ProgramsJune-2014

   244,181

   15.67

   Not Specified

   Not SpecifiedMay-2014

   634,029

   16.67

   Not Specified

   Not SpecifiedApril-2014

   346,665

   17.20

   Not Specified

   Not SpecifiedMarch-2014

   154,648

   16.73

   Not Specified

   Not SpecifiedJanuary-2014

   64,540

   12.66

   Not Specified

   Not Specified
  (1)   May differ from total number of shares purchased as they do not include all shares acquired from employees under the stock ownership program.


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ITEM 16F.           CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT Not applicable.


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ITEM 16G.          CORPORATE GOVERNANCE The principal differences between the NYSE corporate governance standards and our corporate governance practices are referred to in “Item 6. Directors, Senior Management and Employees—C. Board Practices—Differences Between the United States and Brazilian Corporate Governance Practices.”


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ITEM 16H.          MINE SAFETY DISCLOSURE Not Applicable.


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PART III ITEM 17.              FINANCIAL STATEMENTS Our audited consolidated financial statements, together with the audit report of the Independent Registered Public Accounting Firm thereon, are filed as part of this annual report, starting on page F-1 hereto, following the signature pages.


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ITEM 18.              FINANCIAL STATEMENTS See “Item 17.—Financial Statements.”


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ITEM 19.              EXHIBITS 1.1

   Restated Bylaws of Ambev S.A. (English-language translation) (incorporated by reference to the report on Form 6-K furnished by Ambev on April 30, 2015).2.1

   Deposit Agreement among Ambev S.A., The Bank of New York Mellon, as Depositary, and all Owners and Holders from time to time of American Depositary Shares, representing Common Shares (incorporated by reference to Exhibit 4.1 to Form F-4 filed by Ambev on June 28, 2013).2.2

   Indenture, dated July 24, 2007, between AmBev International Finance Co. Ltd., Deutsche Bank Trust Company Americas, as Trustee, and Deutsche Bank Luxembourg S.A., as Luxembourg Paying and Transfer Agent, relating to the US$300,000,000 9.5% Notes due 2017 (incorporated by reference to Exhibit 4.1 to Form F-4 filed by Ambev on September 19, 2008).2.3

   Form of Note (contained in Exhibit 2.2).2.4

   Guaranty, dated July 24, 2007, between Companhia de Bebidas das Américas – Ambev, as Guarantor, and Deutsche Bank Trust Company Americas, as Trustee (incorporated by reference to Exhibit 4.4 to Form F-4 filed by Ambev on July 8, 2013).2.5

   First Amendment to Guaranty, dated as of January 2, 2014, between Ambev,as successor company by merger of Companhia de Bebidas das Américas – Ambev, and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 2.5 to Form 20-F filed by Ambev on March 25, 2014).2.6

   Indenture, date September 9, 2015, as amended, between Ambev S.A. and Simplific Pavarini Distribuidora de Títulos e Valores Mobiliários Ltda., as Trustee, relating to the R$1,000,000,000 14.476% Non-Convertible Debentures of Ambev S.A. due 2021.3.1

   Shareholders’ Agreement of Ambev S.A., dated April 16, 2013, effective as from the approval of the Stock Swap Merger until July 1, 2019, among Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência, Interbrew International B.V., AmBrew S.A., Ambev S.A. and Anheuser-Busch InBev N.V./S.A. (English-language translation) (incorporated by reference to Exhibit 9.1 to Form F-4 filed by Ambev on June 28, 2013).3.2

   Shareholders’ Agreement of Ambev S.A., dated April 16, 2013, to be effective starting on July 2, 2019, among Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência, Interbrew International B.V., AmBrew S.A. and Ambev S.A. (English-language translation) (incorporated by reference to Exhibit 9.2 to Form F-4 filed by Ambev on June 28, 2013).3.3

   First Amendment to the Shareholders’ Agreement of Companhia de Bebidas das Américas - Ambev, dated as of March 3, 2004, among Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência, Braco S.A., Empresa de Administração e Participações S.A., Companhia de Bebidas das Américas - Ambev, Jorge Paulo Lemann, Marcel Herrmann Telles, Carlos Alberto da Veiga Sicupira and Interbrew S.A. (English-language translation) (incorporated by reference to Exhibit 9.3 to Form F-4 filed by Ambev on June 28, 2013).3.4

   Instrument of Accession to the Shareholders’ Agreement of Companhia de Bebidas das Américas – Ambev, dated July 28, 2005, between Interbrew International B.V. and AmBrew S.A. (incorporated by reference to Exhibit 9.4 to Form F-4 filed by Ambev on June 28, 2013).3.5

   Shareholders’ Voting Rights Agreement and other Covenants of S-Braco Participações S.A., or S-Braco, dated August 30, 2002, among Santa Judith Participações S.A., Santa Irene Participações S.A., Santa Estela Participações S.A. and Santa Prudência Participações S.A., with Jorge Paulo Lemann, Carlos Alberto da Veiga Sicupira and Marcel Herrmann Telles as intervening parties, and S-Braco, Braco S.A., Empresa deAdministração e Participações S.A. – ECAP and Companhia de Bebidas das Américas - Ambev as acknowledging parties (English-language translation) (incorporated by reference to Exhibit 9.5 to Form F-4 filed by Ambev on June 28, 2013).


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3.6

   New Shareholders’ Agreement, dated December 18, 2014, among BRC S.à.R.L., Eugénie Patri Sébastien S.A., EPS Participations S.à.R.L., Rayvax Société d’Investissements S.A. and Stichting Anheuser-Busch InBev (incorporated by reference to Exhibit 2.34 to Schedule 13D/A filed by Ambev on December 30, 2014).3.7

   Shareholders’ Agreement, dated October 17, 2008, between Stichting Administratiekantoor InBev, Fonds Inbev Baillet Latour and Fonds President Verhelst (incorporated by reference to Exhibit 9.7 to Form F-4 filed by Ambev on June 28, 2013).4.2

   Protocol and Justification of Stock Swap Merger of Companhia de Bebidas das Américas - Ambev (Protocolo e Justificação de Incorporação de Ações), dated May 10, 2013, between the Management of Companhia de Bebidas das Américas - Ambev and the Members of the Board of Directors of Ambev S.A. (English-language translation) (incorporated by reference to Exhibit 2.1 to Form F-4 filed by Ambev on July 8, 2013).8.1

   List of Material Subsidiaries of Ambev S.A.11.1

   Code of Business Conduct dated August 30, 2013 (English-language translation) (incorporated by reference to Exhibit 11.1 to Form 20-F filed by Ambev on March 25, 2014).11.2

   Manual on Disclosure and Use of Information and Policies for Trading with Securities issued by Ambev dated March 1, 2013 and amended on August 27, 2014 and on March 28, 2016 (English-language translation) (incorporated by reference).12.1

   Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.12.2

   Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.13.1

   Principal Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.13.2

   Principal Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


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Table of Contents
 SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf. AMBEV S.A.  By:/s/ Bernardo Pinto PaivaName:    Bernardo Pinto PaivaTitle:       Chief Executive Officer  By:/s/ Ricardo Rittes de Oliveira SilvaName:    Ricardo Rittes de Oliveira SilvaTitle:       Chief Financial Officer  Date: March 22, 2017.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the Board of Directors and Shareholders ofAmbev S.A. and SubsidiariesSao Paulo, Brazil





We have audited the accompanying consolidated balance sheets of Ambev S.A. and subsidiaries (the "Company") as of December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express anopinionon these financial statements based on our audit.





We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.





In ouropinion, such consolidated financial statements present fairly, in all material respects, the financial position of Ambev S.A. and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for the years then ended in conformity with International Financial Reporting Standards – IFRS, as issued by the International Accounting Standards Board – IASB.





We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2016, based on the criteria established inInternal Control — Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 22, 2017 expressed an adverseopinionon the Company's internal control over financial reporting due to a material weakness.





/s/DELOITTE TOUCHE TOHMATSUAuditores Independentes





Sao Paulo, BrazilMarch 22, 2017












F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Ambev S.A. and Subsidiaries Sao Paulo, Brazil We have audited internal control over financial reporting of Ambev S.A. and subsidiaries (the "Company") as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management ́s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.  The following material weakness has been identified and included in management’s assessment:  the Company ́s management review controls and other controls over the accounting and presentation of complex, non-routine transactions were not adequately designed and documented.  Specifically, the Company ́s controls lacked specificity regarding the degree and extent of procedures that should be performed by key accounting and finance personnel to ensure sufficient consideration and evaluation of all relevant accounting standards and practices and to address the completeness and accuracy of key assumptions and other data used in the analysis of the transactions important to the underlying accounting and presentation. These deficiencies did not result in misstatements to the Company ́s consolidated financial statements.  However, these deficiencies create a reasonable possibility that a material misstatement to the consolidated financial statements will not be prevented or detected on a timely basis.  This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2016, of the Company and this report does not affect our report on such financial statements. In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We do not express an opinion or any other form of assurance on management's statements regarding Remediation Plan for the Material Weakness as described in Management’s Annual Report on Internal Control over Financial Reporting. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2016, of the Company and our report dated March 22, 2017 expressed an unqualified opinion on those financial statements. /s/DELOITTE TOUCHE TOHMATSU Auditores Independentes São Paulo, Brazil March 22, 2017





F-2

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Report of Independent Registered Public Accounting Firm   Tothe Board of Directors and Shareholders of Ambev S.A.  In our opinion, the consolidated income statement, statement of comprehensive income, statement of changes in equity and cash flow statements for the year ended December 31, 2014 present fairly, in all material respects, the results of operations and cash flows of Ambev S.A. and its subsidiaries for the year ended December 31, 2014, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.  We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.   \s\ PricewaterhouseCoopers Auditores Independentes    São Paulo - Brazil March 24, 2015





F-3

---



AMBEV S.A. FINANCIAL STATEMENTS  Consolidated Income Statements Years ended December 31, 2016, 2015 and
2014 (Expressed in millions of Brazilian Reais)  Note
    2016
    2015
    2014Net sales
    6
    45,602.6
    46,720.2
    38,079.8Cost of sales
    
    (16,678.0)
    (16,061.4)
    (12,814.6)Gross profit
    
    28,924.6
    30,658.8
    25,265.2Distribution expenses
    
    (6,085.5)
    (5,833.2)
    (4,847.3)Commercial expenses
    
    (5,925.0)
    (5,344.7)
    (4,311.5)Administrative expenses
    
    (2,166.1)
    (2,281.3)
    (1,820.0)Other operating income/(expenses),
net
    7
    1,223.1
    1,936.1
    1,629.2Exceptional items
    8
    1,134.3
    (357.2)
    (89.0)Income from operations
    
    17,105.4
    18,778.5
    15,826.6Finance cost
    11
    (4,597.9)
    (3,562.4)
    (2,648.6)Finance income
    11
    895.9
    1,294.2
    1,173.2Net finance cost
    
    (3,702.0)
    (2,268.2)
    (1,475.4)Share of results of associates
    
    (5.0)
    3.1
    17.4Income before income tax
    
    13,398.4
    16,513.4
    14,368.6Income tax expense
    12
    (315.0)
    (3,634.2)
    (2,006.6)Net income
    
    13,083.4
    12,879.2
    12,362.0Attributable to:Equity holders of Ambev
    
    12,546.6
    12,423.8
    12,065.5Non-controlling interests
    
    536.8
    455.4
    296.5Basic earnings per share – common -
R$
    21
    0.80
    0.79
    0.77Diluted earnings per share – common -
    R$
    21
    0.79
    0.79
    0.76
   The accompanying notes are an integral
part of these consolidated financial statements.


F-4

---



Consolidated Statements of Comprehensive
Income Years ended December 31, 2016, 2015 and
2014 (Expressed in millions of Brazilian
Reais)  2016
    2015
    2014Net income
    13,083.4
    12,879.2
    12,362.0Items that will not be reclassified to
      profit or loss:Full recognition of actuarial
      gains
    (129.6)
    (24.5)
    (165.9)Items that may be reclassified
      subsequently to profit or loss:Exchange differences on translation of
      foreign operations (gains/(losses)Investment hedge in foreign
      operations
    23.3
    (1,859.4)
    (330.9)Investment hedge - put option granted
      on subsidiary
    707.8
    (1,071.0)
    (175.2)Gains/losses on translation of other
      foreign operations
    (4,858.8)
    6,344.6
    1,116.4Gains/losses on translation of foreign
      operations
    (4,127.7)
    3,414.2
    610.3Cash flow hedge -
      gains/(losses)Recognized in Equity (Hedge
      reserve)
    (579.3)
    1,634.6
    385.2Removed from Equity (Hedge reserve) and
      included in profit or loss
    (494.0)
    (970.0)
    (251.2)Total cash flow hedge
    (1,073.3)
    664.6
    134.0Other comprehensive
      (loss)/income
    (5,330.6)
    4,054.3
    578.4Total comprehensive
      income
    7,752.8
    16,933.5
    12,940.4Attributable to:Equity holders of Ambev
    7,610.4
    16,086.5
    12,522.2Non-controlling interest
    142.4
    847.0
    418.2
   The accompanying notes are an integral
part of these consolidated financial statements. The consolidated statements of
comprehensive income are presented net of income tax. The income tax effects of
these items are disclosed in note 17 -Deferred income tax and social
contribution.


F-5

---



Consolidated Balance
Sheets As at December 31, 2016 andDecember 31, 2015 (Expressed in millions of Brazilian
Reais)  Assets
    Note
    2016
    2015Property, plant and equipment
    13
    19,153.8
    19,140.1Goodwill
    14
    30,511.2
    30,953.1Intangible assets
    15
    5,245.9
    5,092.2Investments in associates
    
    300.1
    714.9Investment securities
    16
    104.3
    118.6Deferred tax assets
    17
    2,268.2
    2,749.9Employee benefits
    23
    33.5
    8.6Derivative financial instruments
    27
    16.3
    51.4Income tax and social contributions
      recoverable
    
    4.5
    557.4Other taxes receivable
    
    343.2
    335.4Other assets
    
    1,973.6
    2,140.2Non-current assets
    
    59,954.6
    61,861.8Investment securities
    16
    282.8
    215.1Inventories
    18
    4,347.1
    4,338.2Trade receivable
    19
    4,368.1
    4,165.7Derivative financial instruments
    27
    196.6
    1,512.4Income tax and social contributions
      recoverable
    
    4,693.7
    2,398.6Other taxes recoverable
    
    729.6
    796.3Cash and cash equivalents
    20
    7,876.8
    13,620.2Other assets
    
    1,392.1
    1,268.0Current assets
    
    23,886.8
    28,314.5Total assets
    
    83,841.4
    90,176.3


F-6

---



Consolidated Balance Sheets
(continued) As at December 31, 2016 andDecember 31, 2015 (Expressed in millions of Brazilian
Reais)  Equity and
      liabilities
    Note
    2016
    2015Equity
    21Issued capital
    
    57,614.1
    57,614.1Reserves
    
    64,230.0
    62,574.8Carrying value adjustments
    
    (77,019.1)
    (71,857.0)Equity attributable to equity holders of
      Ambev
    
    44,825.0
    48,331.9Non-controlling interests
    
    1,826.3
    2,001.8Total Equity
    
    46,651.3
    50,333.7Interest-bearing loans and borrowings
    22
    1,765.7
    2,316.9Employee benefits
    23
    2,137.7
    2,221.9Derivative financial instruments
    27
    27.0
    145.1Deferred tax liabilities
    17
    2,329.7
    2,473.6Taxes and contributions payable
    
    681.4
    910.0Trade payables
    25
    237.8
    110.1Provisions
    26
    765.4
    499.5Put option granted on subsidiary and other
      liabilities
    
    471.8
    1,023.6Non-current liabilities
    
    8,416.5
    9,700.7Bank overdrafts
    20
    -
    2.5Interest-bearing loans and borrowings
    22
    3,630.6
    1,282.6Wages and salaries
    
    686.6
    915.6Dividends and interest on shareholder ́s equity
      payable
    
    1,714.4
    598.6Derivative financial instruments
    27
    686.4
    4,673.0Income tax and social contribution
      payable
    
    904.2
    1,245.3Taxes and contributions payable
    
    3,378.2
    3,096.8Trade payables
    25
    10,868.8
    11,833.7Provisions
    26
    168.6
    123.1Put option granted on subsidiary and other
      liabilities
    
    6,735.8
    6,370.7Current liabilities
    
    28,773.6
    30,141.9Total liabilities
    
    37,190.1
    39,842.6Total equity and liabilities
    
    83,841.4
    90,176.3
   The accompanying notes are an integral
part of these consolidated financial statements.


F-7

---



Consolidated Statements of Changes in
Equity (Expressed in millions of Brazilian
Reais)  Attributable to equity holders of
      AmbevCapital
    Capital reserves
    Net income reserves
    Retained earnings
    Carrying value
      adjustments
    Total
    
    Non-controlling
      interests
    Total equityAt January 1, 2016
    57,614.1
    54,373.6
    8,201.2
    -
    (71,857.0)
    48,331.9
    
    2,001.8
    50,333.7Net Income
    -
    -
    -
    12,546.6
    -
    12,546.6
    
    536.8
    13,083.4Comprehensive income:Gains/(losses) on translation of foreign
      operations
    -
    -
    -
    -
    (3,728.8)
    (3,728.8)
    
    (398.9)
    (4,127.7)Cash flow hedges
    -
    -
    -
    -
    (1,076.7)
    (1,076.7)
    
    3.4
    (1,073.3)Actuarial gain/(losses)
    -
    -
    -
    -
    (130.7)
    (130.7)
    
    1.1
    (129.6)Total comprehensive income
    -
    -
    -
    12,546.6
    (4,936.2)
    7,610.4
    
    142.4
    7,752.8Put option granted on subsidiary
    -
    -
    -
    -
    (144.1)
    (144.1)
    
    -
    (144.1)Gains/(losses) of controlling interest ́s
      share
    -
    -
    -
    -
    (2.8)
    (2.8)
    
    37.6
    34.8Transaction of stock exchange
    -
    -
    -
    -
    (3.1)
    (3.1)
    
    -
    (3.1)Dividends distributed
    -
    -
    -
    (5,651.8)
    -
    (5,651.8)
    
    (355.5)
    (6,007.3)Interest on shareholder ́s equity
    -
    -
    (2,039.2)
    (3,454.2)
    -
    (5,493.4)
    
    -
    (5,493.4)Acquired shares and result on treasury
      shares
    -
    94.8
    -
    -
    -
    94.8
    
    -
    94.8Share-based payment
    -
    61.5
    -
    -
    -
    61.5
    
    -
    61.5Prescribed dividends
    -
    -
    -
    21.6
    -
    21.6
    
    -
    21.6Accounting reversal effect of predecessor
      cost:Reversal effect revaluation of fixed assets under
      the predecessor basis accounting
    -
    -
    -
    75.9
    (75.9)
    -
    
    -
    -Reserves destination:Fiscal incentive reserve
    -
    -
    1,819.5
    (1,819.5)
    -
    -
    
    -
    -Additional Interest on shareholder ́s
      equity
    -
    -
    -
    -
    -
    -
    
    -
    -Investments reserve
    -
    -
    1,718.6
    (1,718.6)
    -
    -
    
    -
    -At December 31, 2016
    57,614.1
    54,529.9
    9,700.1
    -
    (77,019.1)
    44,825.0
    
    1,826.3
    46,651.3
   The accompanying notes are an integral
part of these consolidated financial statements.


F-8

---



Consolidated Statements of Changes in
Equity (continued) (Expressed in millions of Brazilian
Reais)  Attributable to equity holders of
      AmbevCapital
    Capital reserves
    Net income reserves
    Retained earnings
    Carrying value
      adjustments
    Total
    
    Non-controlling
      interests
    Total equityAt January 1, 2015
    57,582.4
    55,023.3
    4,883.8
    -
    (75,267.9)
    42,221.6
    
    1,423.1
    43,644.7Net Income
    -
    -
    -
    12,423.8
    -
    12,423.8
    
    455.3
    12,879.1Comprehensive income:Gains/(losses) on translation of foreign
      operations
    -
    -
    -
    -
    3,018.9
    3,018.9
    
    395.3
    3,414.2Cash flow hedges
    -
    -
    -
    -
    666.2
    666.2
    
    (1.5)
    664.7Actuarial gain/(losses)
    -
    -
    -
    -
    (22.4)
    (22.4)
    
    (2.1)
    (24.5)Total comprehensive income
    -
    -
    -
    12,423.8
    3,662.7
    16,086.5
    
    847.0
    16,933.5Capital increase
    31.7
    (22.6)
    -
    -
    -
    9.1
    
    -
    9.1Put option of a subsidiary interest
    -
    -
    -
    -
    (189.4)
    (189.4)
    
    -
    (189.4)Gains/(losses) of controlling interest ́s
      share
    -
    -
    -
    -
    13.5
    13.5
    
    (7.9)
    5.6Dividends distributed
    -
    -
    -
    (2,352.4)
    -
    (2,352.4)
    
    (260.4)
    (2,612.8)Interest on shareholder ́s equity
    -
    -
    (1,979.8)
    (4,866.3)
    -
    (6,846.1)
    
    -
    (6,846.1)Acquired shares and result on treasury
      shares
    -
    (817.0)
    -
    -
    -
    (817.0)
    
    -
    (817.0)Share-based payment
    -
    189.9
    -
    -
    -
    189.9
    
    -
    189.9Prescribed dividends
    -
    -
    -
    16.2
    -
    16.2
    
    -
    16.2Accounting reversal effect of predecessor
      cost:Reversal effect revaluation of fixed assets under
      the predecessor basis accounting
    -
    -
    -
    75.9
    (75.9)
    -
    
    -
    -Reserves destination:Fiscal incentive reserve
    -
    -
    1,143.6
    (1,143.6)
    -
    -
    
    -
    -Additional Interest on shareholder ́s
      equity
    -
    -
    2,039.2
    (2,039.2)
    -
    -
    
    -
    -Investment reserve
    -
    -
    2,114.4
    (2,114.4)
    -
    -
    
    -
    -At December 31, 2015
    57,614.1
    54,373.6
    8,201.2
    -
    (71,857.0)
    48,331.9
    
    2,001.8
    50,333.7
   The accompanying notes are an integral
part of these consolidated financial statements.


F-9

---



Consolidated Statements of Changes in
Equity (continued) (Expressed in millions of Brazilian
Reais)  Attributable to equity holders of
      AmbevCapital
    Capital reserves
    Net income reserves
    Retained earnings
    Carrying value
      adjustments
    Total
    
    Non-controlling
      interests
    Total equityAt January 1, 2014
    57,000.8
    55,362.4
    5,857.8
    -
    (75,228.6)
    42,992.4
    
    1,232.2
    44,224.6Net Income
    -
    -
    -
    12,065.5
    -
    12,065.5
    
    296.5
    12,362.0Comprehensive
      income:Gains/(losses) on translation of
      foreign operations
    -
    -
    -
    -
    488.7
    488.7
    
    121.6
    610.3Cash flow hedges - gains /
      (losses)
    -
    -
    -
    -
    133.6
    133.6
    
    0.3
    133.9Actuarial gain / (losses)
    -
    -
    -
    -
    (165.6)
    (165.6)
    
    (0.2)
    (165.8)Total comprehensive income
    -
    -
    -
    12,065.5
    456.7
    12,522.2
    
    418.2
    12,940.4Prior year adjustment
      (i)
    -
    -
    -
    (24.1)
    89.4
    65.3
    
    -
    65.3Capital increase
    581.6
    (423.9)
    -
    -
    -
    157.7
    
    -
    157.7Expenses on issue of shares
    -
    (0.9)
    -
    -
    -
    (0.9)
    
    -
    (0.9)Amount paid ABI -
      Bucanero
    -
    -
    -
    -
    (505.3)
    (505.3)
    
    -
    (505.3)Gains/(losses) of controlling
      interest ́s share
    -
    -
    -
    -
    (4.2)
    (4.2)
    
    (7.4)
    (11.6)Dividends
distributed
    -
    -
    (1,591.2)
    (5,492.2)
    -
    (7,083.4)
    
    (219.9)
    (7,303.3)Interest on shareholder ́s
      equity
    -
    -
    (2,412.2)
    (1,569.2)
    -
    (3,981.4)
    
    -
    (3,981.4)Accrued interest on shareholder ́s
      equity to distribute
    -
    -
    -
    (2,042.6)
    -
    (2,042.6)
    
    -
    (2,042.6)Share-based payment
    -
    154.3
    -
    -
    -
    154.3
    
    -
    154.3Acquired shares and result on
      treasury shares
    -
    (68.6)
    -
    -
    -
    (68.6)
    
    -
    (68.6)Prescribed dividends
    -
    -
    -
    16.1
    -
    16.1
    
    -
    16.1Accounting reversal effect of
      predecessor cost:Reversal effect revaluation of fixed
      assets under the predecessor basis accounting
    -
    -
    -
    75.9
    (75.9)
    -
    
    -
    -Reserves destination:Fiscal incentive reserve
    -
    -
    1,022.7
    (1,022.7)
    -
    -
    
    -
    -Additional Interest on shareholder ́s
      equity
    -
    -
    1,508.4
    (1,508.4)
    -
    -
    
    -
    -Investment reserve
    -
    -
    498.3
    (498.3)
    -
    -
    
    -
    -At December 31,
    2014
    57,582.4
    55,023.3
    4,883.8
    -
    (75,267.9)
    42,221.6
    
    1,423.1
    43,644.7
  (i) In order to consolidate its distributors,
subsidiaries in Canada, the Company used to adopt the proportional
consolidation method. Aligned with IFRS 11(R), the Company has adopted the
Equity Method.  The accompanying notes are an integral
part of these consolidated financial statements.


F-10

---



Consolidated Cash Flow
Statements Years ended December 31, 2016, 2015 and
2014 (Expressed in millions of Brazilian
Reais)  Note
    2016
    2015
    2014Net income
    
    13,083.4
    12,879.2
    12,362.0Depreciation, amortization and
    impairment
    
    3,512.0
    3,074.6
    2,392.5Impairment losses on receivables and
      inventories
    
    196.5
    97.7
    99.6Additions in provisions and employee
      benefits
    
    347.1
    483.1
    169.1Net finance cost
    11
    3,702.0
    2,268.2
    1,475.4Losses/(gain) on sale of property, plant and
      equipment and intangible assets
    
    (70.9)
    (27.9)
    (33.9)Losses/(gain) on sale of operations in
      subsidiaries
    
    -
    (25.1)
    -Gains on stock exchange
    
    (1,240.0)
    -
    -Equity-settled share-based payment
      expense
    24
    170.3
    197.1
    161.1Income tax expense
    12
    315.0
    3,634.2
    2,006.6Share of result of associates
    
    5.0
    (3.1)
    (17.4)Other non-cash items included in the
      profit
    
    (737.4)
    (1,305.7)
    (320.1)Cash flow from operating activities before changes
      in working capital and use of provisions
    
    19,283.0
    21,272.3
    18,294.9(Increase)/decrease in trade and other
      receivables
    
    (578.4)
    (380.8)
    (502.6)(Increase)/decrease in inventories
    
    (437.1)
    (681.5)
    (589.0)Increase/(decrease) in trade and other
      payables
    
    (565.1)
    5,083.2
    1,577.4Cash generated from operations
    
    17,702.4
    25,293.2
    18,780.7Interest paid
    
    (724.9)
    (257.3)
    (699.6)Interest received
    
    597.7
    656.2
    349.4Dividends received
    
    111.0
    14.8
    21.0Income tax paid
    
    (5,341.8)
    (2,126.1)
    (2,555.8)Cash flow from operating
    activities
    
    12,344.4
    23,580.8
    15,895.7Proceeds from sale of property, plant and equipment
      and intangible assets
    
    133.6
    99.8
    152.0Proceeds from sale of subsidiaries
      operations
    
    -
    94.3
    -Acquisition of property, plant and equipment and
      intangible assets
    
    (4,132.7)
    (5,261.2)
    (4,493.1)Acquisition of subsidiaries, net of cash
      acquired
    
    (1,824.2)
    (1,212.2)
    (10.7)Acquisition of other investments
    
    (37.6)
    (123.5)
    -Investment in short term debt securities and net
      proceeds/(acquisition) of debt securities
    
    (37.1)
    403.8
    (445.7)Net proceeds/(acquisition) of other
      assets
    
    -
    2.0
    29.5Cash flow from investing
    activities
    
    (5,898.0)
    (5,997.0)
    (4,768.0)Capital increase
    
    -
    9.9
    157.6Proceeds/(repurchase) of treasury
    shares
    
    0.4
    (824.2)
    (74.2)Proceeds from borrowings
    
    3,792.0
    4,964.6
    1,005.2Repayment of borrowings
    
    (1,896.2)
    (5,653.0)
    (1,790.3)Cash net of finance costs other than
      interests
    
    (3,207.8)
    (2,326.9)
    (380.9)Payment of finance lease liabilities
    
    (2.9)
    (8.1)
    (1.6)Dividends and Interest on shareholder ́s equity
      paid
    
    (10,330.6)
    (11,490.2)
    (12,059.6)Cash flow from financing
    activities
    
    (11,645.1)
    (15,327.9)
    (13,143.8)Net increase/(decrease) in cash and cash
      equivalents
    
    (5,198.7)
    2,256.0
    (2,016.1)Cash and cash equivalents less bank overdrafts at
      beginning of year (i)
    
    13,617.7
    9,623.0
    11,538.2Effect of exchange rate fluctuations
    
    (542.2)
    1,738.7
    100.9Cash and cash equivalents less bank overdrafts at
      end of year (i)
    
    7,876.8
    13,617.7
    9,623.0
  (i) Net of bank overdrafts.  The accompanying notes are an integral
part of theseconsolidated financial statements.


F-11

---



Notes to the consolidated financial
statements: 1.
    Corporate
      information2.
    Statement of
      compliance3.
    Summary of significant accountingpolicies4.
    Use of estimates and
      judgments5.
    Segment reporting6.
    Net sales7.
    Other operating income/(expenses)8.
    Exceptional items9.
    Payroll and related benefits10.
    Additional information on operating expenses by
      nature11.
    Finance cost and income12.
    Income tax and social contribution13.
    Property, plant and equipment14.
    Goodwill15.
    Intangible assets16.
    Investment securities17.
    Deferred income tax and social
      contribution18.
    Inventories19.
    Trade receivables20.
    Cash and cash equivalents21.
    Changes in equity22.
    Interest-bearing loans and
  borrowings23.
    Employee benefits24.
    Share-based payments25.
    Trade payables26.
    Provisions27.
    Financial instruments and risks28.
    Operating leases29.
    Collateral and contractual commitments with
      suppliers, advances from customers and other30.
    Contingencies31.
    Acquisition and disposals of
    subsidiaries32.
    Non - cash items33.
    Related parties34.
    Group companies35.
    Insurance


F-12

---



1.CORPORATE
INFORMATION  (a)Description of
business  Ambev S.A. (referred to as the “Company” or “Ambev
S.A.”),headquartered in São Paulo, Brazil, produces and sells
beer, draft beer, soft drinks, other non-alcoholic beverages, malt and food in
general.  The Company’s shares and ADRs (American Depositary
Receipts) are listed on the Stock Exchange and Mercantile & Futures Exchange
(BM&FBOVESPA S.A.) as “ABEV3” and on the New York Stock Exchange (NYSE) as
“ABEV”.  The Company’s direct controlling shareholders are
Interbrew International B.V. (“IIBV”), AmBrew S.A. (“Ambrew”), both subsidiaries
of Anheuser-Busch InBev N.V. (“AB InBev”) and Fundação Antonio e Helena
Zerrenner Instituição Nacional de Beneficência (“Fundação
Zerrenner”).  The financial statementswere approved by the Board of Directors on February
21st, 2017.  (b)Major corporate
events in 2014, 2015 and 2016: In December 2016, we acquired Cachoeira de Macacu Bebidas
Ltda. from Brasil Kirin Indústria de Bebidas Ltda., a company that owns an
operating industrial plant for the production and packaging of beer and
non-alcohol  beverages  in the State of Rio de Janeiro for R$478.6.  On May 12, 2016, Ambev and its controlling shareholder,
AB InBev, entered into an agreement for the exchange of shareholdings (“Swap”).
The execution of the Swap was conditional on the implementation of the merger of
the activities of AB InBev and SABMiller Plc (“SABMiller”), which occurred on
October 10, 2016. Subsequently, on December 31, 2016, after the implementation
of certain preparatory corporate acts, the Swap was effected. Based on the
agreement described above, Ambev transferred to AB InBev the equity interest in
Keystone Global Corporation - KGC, which held shares in companies domiciled in
Colombia, Peru and Ecuador. On the other hand, AB InBev transferred to Ambev its
interest in Cerveceria Nacional S. de R.L., a subsidiary domiciled in Panama,
which had previously been acquired as a third party.  For Ambev, the incorporation of the Panama operation into
its structure represents an already established cash-generating unit with
potential synergies with the Company’s other operations in Central America. On
the other hand, AB InBev was market leader, from the unification of activities
with SABMiller, in the countries provided by Ambev (Colombia, Peru and
Ecuador).


F-13

---



The value attributed to the transaction is based on a
fairness opinion prepared by a specialized company and duly approved by the
Board of Directors of Ambev, with abstention from the vote of the directors
appointed by AB InBev.  Regarding the accounting aspects of the transaction, we
point out that:  Historically, the exchange contract, although it has a
substitutive character, resembles a complex contract, operating “at the same
time two real sales, serving things exchanged of price and reciprocal
compensation”, in the traditional definition contained in the Brazilian
Commercial Code (at this point no longer in force as positive law, but valid as
conceptual reference of the institute).  Transactions for the exchange of interests between
companies under common control have not yet been specifically addressed by the
accounting practices adopted by the international financial reporting standards
(“IFRS”). Accordingly, pursuant to paragraph 11 of IAS 8, the Company considered
the applicability of the requirements and the guidance of Pronouncements,
Interpretations and Guidelines that deal with similar and related
matters.  In a swap between the subsidiary and the parent company,
the gain realized by the subsidiary on the “sale” made to the parent company
(decomposing the exchange, as was done by the Commercial Code, into two sale
operations), must be carried over to the subsidiary’s results, if the book value
of the good given in exchange is different from the value of the good received
in exchange, if recognized at fair value, in accordance with the applicable
accounting principles.  Swap transactions are treated specific by IAS due to the
absence of guidance in IFRS for swap exchanges by IFRS, the company applied such
concepts analogously. According to IAS 16, a fixed assets can be acquired
through a exchange for non-monetary asset, or a aggregate of monetary and
non-monetary assets. The assets exchanged can be of the same nature or of a
different one. The cost of such item are measured at fair value, unless the swap
operation does not have a commercial nature or the fair value of the asset
received and the assets transferred cannot be measured safely. The asset
acquired is measured even if the entity cannot write off immediately. If the
asset acquired is not measurable at fair value, its cost is determined by book
value of the asset ceded.  Considering that Cerveceria Nacional S. de R.L. was
acquired by AB Inbev in a recent transaction between independent parties, the
best information that reflects the fair value of this asset is the acquisition
cost recorded by AB Inbev. The difference between the carrying amount of
Cerveceria and the previous carrying amount of the equity interest in KGC ceded
was registered as income in profit and loss. IFRIC 17 determines that the
distribution of assets not as cash requires that such asset must be measured at
fair value in return of a profit and loss account. Although the application is
referred to the distributions that are given to the same shareholders of equity
instruments, by analogy, in the absence of an accounting practice specifies for transactions under
common control, the Company considered this instruction by the definition of
accounting practice.


F-14

---



The result of the transaction above mentioned was
R$1,236.8, of which R$1,240.0 was recognized in the income statement on
exceptional items. The allocations and disposals are  properly presented in
Note 31 –Acquisition and disposals of
subsidiaries.  On April, 2016, the Company, through
its wholly-owned subsidiary Labatt Breweries, in Canada, acquired the
company Archibald Microbrasserie, known for its local beers and seasonal
specialties. Furthermore, in Brazil, acquired 66% of the company Sucos do Bem,
which has a range of juices, teas and cereal bars. The acquisition amount added
was approximately R$155 million. On January, 2016, Ambev S.A. through
its wholly-owned subsidiaries, CRBS S.A. and Ambev Luxembourg, acquired
companies to a range of primarily spirit­-based beers and ciders from Mark
Anthony Group, by R$1.4 billion.  During 2015 the Company, through its subsidiaries,
effected the purchase of companies Wals (“Tropical Juice”), Colorado
(“Beertech Bebidas”), Bogota Beer Company (“BBC”), Cervecería BBC SAS
(“Cerveceria BBC”), Mill Street Brewery (“Mill St. Brewery”) and Banks Holdings
Limited (“BHL”). Along with Whirpool has initiated the setting-up
of the one joint venture, named B. Blend, being the first platform
beverages in capsules all-in-one of the world.  The main acquisitions and disposal details are disclosed
in Note 31-Acquisitions and disposals of
subsidiaries. On January 2, 2014,BSA Bebidas Ltda. was merged with and into Ambev Brasil
Bebidas S.A. and, immediately after,theupstream mergers of Old Ambev andAmbev Brasil Bebidas S.A. with and into Ambev S.A. was
approved by the shareholders of each company inExtraordinary General Meeting (EGM) held on such date. As
a result, Ambev S.A. received Old Ambev and Ambev Brasil Bebidas S.A.’s assets,
rights and liabilities for theircarryng amounts. Such companies wereextinguished, had their shares cancelled, and Ambev S.A.
became their successor, according to the law.  On October 1, 2014, Londrina Bebidas Ltda. (“Londrina
Beverages”) was merged with and into Ambev S.A in Extraordinary General Meeting
(“EGM”) held on such date.  As a result, the Company. received Londrina Beverages’s
assets, rights and liabilities for their carryng amounts. Such companies were
extinguished, had their shares cancelled, and Ambev S.A. became their successor,
according to the law.


F-15

---



The net assets incorporated by the Company is as
follow: Companhia de Bebidas das Américas
      S.A.
    Ambev Brasil Bebidas
      S.A.
    BSA Bebidas
      Ltda.
    Londrina Bebidas
      Ltda.01/01/2014
    01/01/2014
    01/01/2014
    10/01/2014AssetsCurrent
assets
    11,027.6
    1,133.5
    61.3
    519.6Non-current
      assets
    47,220.2
    4,906.1
    2.7
    737.7Total
    assets
    58,247.8
    6,039.6
    64.0
    1,257.3LiabilitiesCurrent
      liabilities
    10,258.1
    3,059.1
    24.7
    304.1Non-current
      liabilities
    12,630.6
    912.7
    5.8
    578.8Total
      liabilities
    22,888.7
    3,971.8
    30.5
    882.9Net
Assets
    35,359.1
    2,067.8
    33.5
    374.4
  On January, 2014, Ambev Luxembourg, a wholly-owned
subsidiary of the Company, acquired ABI’s equity interest in Cerbuco Brewing
Inc. (“Cerbuco”), which owns a controlling interest in Bucanero S.A.
(“Bucanero”), leader company in the Cuban beer business.  The company accounted for its
acquisition in Cerbuco as a common control transfer and reflected
retrospectively the consolidation of the subsidiary at ABI’s carrying value. The
difference between the amount paid and ABI’s net assets acquired was accounted
in equity.  On March 1, 2014, ABI and the Company entered, through
its subsidiaries, into licensing agreements by which the Company's subsidiaries
related to Canada’s operations acquired the exclusive rights to import, sell,
distribute and marketCoronabranded products and related brands, including but not
limited toCorona Extra,Corona Light,Coronita,PacificoandNegra Modeloas well as the exclusive license to use the brands
related to these products in Canada. The Company recorded an intangible asset
with definite useful life in the amount of R$150.9 in exchange for consideration
transferred.  2.STATEMENT OF
COMPLIANCE  The consolidated financial statements have been prepared
using the accounting basis of going concern and are being presented in
accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board (“IASB”) that were effective as
of December 31, 2016.


F-16

---



3.SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  There were no significant changes in accounting policies
and calculation methods used for the financial statements as of December 31,
2016 in relation to those presented in the financial statements for the year
ended December 31, 2015 and 2014.  (a)Basis of
preparation and measurement  Thefinancial statements are presented inmillionof Brazilian Real (“R$”),unless
otherwise indicated, rounded to the nearestmillionindicated. The measurement basis used in
preparing the financial statements is historical cost, net realizable value,
fair value or recoverable amount.  (b)Recently issued
IFRS  The reporting standards below were published and are
mandatoryfor future annualreportingperiods. There were no early adoption of standards and
amendments to standards however the Company is in the evaluation phase of the
revised standards and does not expect significant impacts.  IFRS 9 Financial Instruments  The IFRS 9, which will replace IAS 39, introduces a
logical approach for the classification of financial assets, which is driven by
cash flow characteristics and the business model in which an asset is held;
defines a new expected-loss impairment model that will require more effective
recognition; and introduces a substantially-reformed model for hedge accounting,
with enhanced disclosures about risk management activity. The new hedge
accounting model represents a significant overhaul that aligns the accounting
treatment with risk management activities. IFRS 9 also reduces the volatility in
profit or loss that was caused by changes in the credit risk of liabilities
elected to be measured at fair value. IASB issued IFRS 9, which will be
effective for annual periods beginning on or after January 1st, 2018. The early
adoption is not permitted by the brazilian Accounting Pronouncements
Committee.  IFRS 15 Revenue from Contracts with Customers  IFRS 15 requires revenue recognition to depict the
transfer of goods or services to customers in amounts that reflect the
consideration (that is, payment) to which the company expects to be entitled in
exchange for those goods or services. The new standard will also result in
enhanced disclosures about revenue, provide guidance for transactions that were
not previously addressed comprehensively and improve guidance for
multiple-element arrangements. IASB issued IFRS 15, which will be effective for
annual periods beginning on or after January 1st, 2018. The early adoption is
not permitted by the brazilian Accounting Pronouncements
Committee.


F-17

---



IFRS 16 – Leases  The
IFRS 16, which supersedes IAS 17, replaces the existing lease accounting
requirements and represents a significant change in the accounting introducing
the standardization of accounting recognition for the lessee and will require
the recognition of the right to use and a lease liability. IASB issued IFRS 16,
which will be effective for annual periods beginning on or after January 1st,
2019, with earlier adoption. Other standards, interpretations and amendments to
standards  Other new standards, amendments and interpretations
mandatory to the financial statements for annual periods beginning after January
1st, 2016 were not listed above because of either their
non-applicability to or their immateriality to Ambev S.A.’s consolidated
financial statements.  (c)Consolidated financial
statements  The
financial statements of Ambev S.A subsidiaries, joint arrangements and
associates used in its consolidated financial statements are prepared for the
same reporting period as Ambev S.A., using consistent accounting
policies.  All
intercompany transactions, balances and unrealized gains and losses on
transactions between group companies have been eliminated.  Subsidiaries  The
Company controls an entity when it is exposed to or has rights to variable
returns due to its involvement with the organization and is able to affect those
returns through its power over the entity. In assessing control, potential
voting rights are taken into account. Control is presumed to exist where the
Company owns, directly or indirectly, more than one half of the voting rights
(which does not always equate to economic ownership), unless it can be
demonstrated that such ownership does not constitute control.  Subsidiaries are consolidated as from the date in which
control is obtained to the Company, except when the predecessor basis of
accounting is applied for common control transfers. Consolidation is
discontinued as from the date control ceases.  Ambev
S.A. uses the purchase method to account for business combinations. The
consideration transferred for the acquisition of a subsidiary is the fair value
of the assets transferred, the liabilities incurred and the equity interest
issued by Ambev S.A.. The consideration transferred includes the fair value of
any asset or liability resulting from a contingent consideration agreement, when
applicable. Costs related to the acquisition are recognized in income, as
incurred. Assets, liabilities and contingent liabilities acquired/assumed in a business combination are recognized
initially at their fair values at the acquisition date. Ambev S.A. recognizes
the non-controlling interest in the acquiree, either at fair value or at the
non-controlling interest’s proportionate share of the net assets acquired. The
measurement of non-controlling interest to be recognized is determined for each
acquisition.


F-18

---



The
excess: (i) of the consideration paid; (ii) of the amount of any non-controlling
interests in the acquiree (when applicable); and (iii) of the fair value, at
acquisition date, of any previous equity interest in the acquiree, over the fair
value of the net identifiable assets acquired, at the date of acquisition, is
recorded as goodwill. When the consideration transferred is less than the fair
value of net assets acquired, the difference is recognized directly in
income.  All intercompany transactions, balances and unrealized
gains and losses on transactions between group companies have been eliminated.
Unrealized losses are eliminated in the same way as unrealized gains, but only
to the extent that there is no evidence of impairment.  Joint
arrangements  Joint
arrangements are all entities over which the Company shares control with one or
more parties. Joint arrangements are classified as either joint operations or
joint ventures depending on the contractual rights and obligations of each
investor.  Business combination
between entities under common control  Business combinations between entities under common
control have not been addressed by IFRS’s. The IFRS 3 is the pronouncement that
shall be applied to business combinations, however it explicitly excludes
business combinations between entities under common control from its
scope.  Therefore, in accordance with IAS 8, Management has
adopted an accounting practice which is consistent with United States Generally
Accepted Accounting Principles (USGAAP) and United Kingdom Generally Accepted
Accounting Principles (UKGAAP), the predecessor basis of accounting to record
the carrying amount of the asset received, as recorded by the parent
company.  Under the predecessor basis of accounting, when
accounting for a transfer of assets or a swap of shares between entities under
common control, the entity that receives the net assets or the equity interests
(the acquirer) shall initially record the assets and liabilities transferred at
their parent book value at the transfer date. If the book value of assets and
liabilities transferred by the parent are different from the historical cost
registered by the controlling entity of the entities under common control (the
ultimate parent), the financial statements of the acquirer shall reflect the assets and
liabilities transferred at the same cost of the ultimate
parent.


F-19

---



Regarding transactions between entities under common
control that involve the disposal or transfer of assets from the subsidiary to
its parent company, i.e. - above the level of our consolidated financial
statement –, the Company assess the existence of (i) conflict of interests and
(ii) economic substance and purpose. Having fulfilled these assumptions, the
Company adopted as a policy the concepts of IAS 16 in order to provide adequate
visibility and fair impact on the amount of the distributable results to our
shareholders, specially the minority shareholders. This policy also includes
assets acquired through the swap of non-cash assets, or swap with a combination
of cash and non-cash assets. The assets subject to the swap may be of equal or
different nature. The cost of such asset is measured at fair value, unless (i)
the swap transaction is not commercial in nature, or (ii) the fair value of the
asset received (and the asset assigned) cannot be reliably measured. The
acquired asset is measured through this way even if the assignor entity cannot
immediately exclude the asset from its books. If the acquired asset is not
measurable at fair value, its cost is determined by the book value of the
assigned asset.  Whenever there is a distribution of assets that is not
recorded as cash, the asset, before its distribution, is registered at fair
value in the income account. This procedure is applicable to the distributions
in which the assets are equal in nature and therefore treated equitably.
However, similarly to IFRIC 17, in the absence of a specific accounting practice
for transactions under common control, we apply this procedure in our accounting
practice. Also, we apply the same procedure to sales (products, supplies, etc.)
we perform to our controlling entity, where the positive result of the sale is
recognized in the income account.


F-20

---



(d)Foreign currency
translation  Functional and presentation
currency  The items included in the financial statements of each
subsidiary of the Company are measured using the currency of the primary
economic environment in which the entity operates (“functional
currency”).  The functional and presentation currency of the Company
financial statements is the Brazilian Real.  Transactions and balances  Foreign currency transactions are accounted for at
exchange rates prevailing at the date of the transactions. Monetary assets and
liabilities denominated in foreign currencies are translated at the balance
sheet date rate. Non-monetary assets and liabilities denominated in foreign
currencies are translated at the foreign exchange rate prevailing at the date of
the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated at exchange rates ruling
at the dates the fair value was determined. Gains and losses arising from the
settlement of transactions in foreign currencies and resulting from the
conversion of assets and liabilities denominated in foreign currencies are
recognized in the income statement.  The foreign exchange gains and losses related to loans
and cash and cash equivalents are presented in the income statement as finance
cost or finance income.  Conversion of the financial statements of subsidiaries
located abroad  Assets and liabilities of subsidiaries located abroad are
translated at foreign exchange rates prevailing at the balance sheet date, while
amounts from income statement and cash flows are translated at average exchange
rates for the year and the changes in equity are translated at historical
exchange rates of each transaction.The translation adjustments arising from the difference
between the average exchange rates and the historical rates are recorded
directly in Carrying value adjustments.  On consolidation, exchange differences arising from
translation of equity in foreign operations and borrowings and other currency
instruments designated as net investment hedges are recognized in Carrying value
adjustments, an equity reserve, and included in Other comprehensive
income.  The goodwill and fair value adjustments arising from the
acquisition of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.


F-21

---



Net investment in a foreign
operation ****
 An entity may have a monetary item that is receivable
from or payable to a foreign operation which settlement is neither planned nor
likely to occur in the foreseeable future and do not include trade receivables
or trade payables. Exchange differences arising shall be recognized initially in
other comprehensive income and reclassified from equity to profit or loss on
disposal of the net investment.  Exchange rates  The most significant exchange rates used in the
preparation of the Company’s financial statements are as
follows: Closing rate
    
    Average rateCurrency
    Name
    Country
    2016
    2015
    2014
    
    2016
    2015
    2014CAD
    Canadian Dollars
    Canada and Cuba
    2.4214
    2.8124
    2.2932
    
    2.6348
    2.5661
    2.1372DOP
    Dominican Pesos
    Dominican republic
    0.0700
    0.0860
    0.0601
    
    0.0755
    0.0725
    0.0540USD
    US Dollar
    Ecuador, Panama and
Cuba(i)
    3.2591
    3.9048
    2.6562
    
    3.4749
    3.2596
    2.3488GTQ
    Quetzal
    Guatemala
    0.4343
    0.5129
    0.3508
    
    0.4570
    0.4265
    0.3042PEN
    Novo Sol
    Peru
    0.9720
    1.1440
    0.8934
    
    1.0269
    1.0396
    0.8285ARS
    Argentinean Peso
    Argentina
    0.2056
    0.3003
    0.3106
    
    0.2354
    0.3581
    0.2893BOB
    Bolivian Peso
    Bolivia
    0.4683
    0.5610
    0.3816
    
    0.4993
    0.4683
    0.3375PYG
    Guarani
    Paraguai
    0.0006
    0.0007
    0.0006
    
    0.0006
    0.0006
    0.0005UYU
    Uruguayan Peso
    Uruguay
    0.1114
    0.1304
    0.1090
    
    0.1166
    0.1197
    0.1012CLP
    Chilean Peso
    Chile
    0.0049
    0.0055
    0.0044
    
    0.0051
    0.0050
    0.0041COP
    Peso colombiano
    Colômbia
    0.0011
    0.0012
    -
    
    0.0011
    0.0012
    -BBD
    Barbadian Dollar
    Barbados
    1.6296
    -
    -
    
    1.7375
    -
    -
  (i) The functional currency of Cuba, the Cuban convertible
peso (“CUC”), has a fixed parity with the dollar (“USD”) at balance sheet
date.


F-22

---



(e)Segment reporting  Reportable segments are identified based on internal
reports regularly reviewed by the chief operating decision maker of the Company
for purposes of evaluating the performance of each segment and allocating
resources to those segments. Accordingly, segment information is presented on
geographical areas, since the risks and rates of return are affected
predominantly by the fact that the Company operates in different regions. The
Company’s management structure and the information reported to the chief
decision are structured the same way.  The performance information by business units (Beer and
Soft drink (“CSD”) and Non-alcoholic and non-carbonated (“NANC”)), is also used
by the decision maker for the Company and is presented as additional
information, even though it does not qualify as a reportable segment.
Internally, the Company’s management uses performance indicators, such as
earnings of consolidated operation before interest and taxes (EBIT) and
normalized earnings of consolidated operation before interest, taxes,
depreciation and amortization (normalized EBITDA) as measures of segment
performance to make decisions about resource allocation and performance analysis
of consolidated operation. These indicators are reconciled to the profit of the
segment in the tables on Note 5– Segment reporting.  The Company operates its business through three zones
identified as reportable segments:  ▪ Latin America North, which includes our operations (a)
in Brazil and Luxembourg, where we operate two business sub units: (i) beer and
(ii) CSD and NANC; and (b) in Central America Operations, excluding Latin
America South (“CAC”), which includes our operations in the Dominican Republic(which also serves the islands of the Caribbean: Saint
Vincent, Dominica, Antigua and Barbados),Guatemala (which also serves El Salvador and Nicaragua),
Cuba and Panama;  ▪Latin America South, which includes our operations in
Argentina, Bolivia, Paraguay, Uruguay, Chile, Ecuador, Peru and
Colombia.  ▪Canada, represented by Labatt’s operations.  (f)Revenue
recognition  The Company recognizes revenue when the amount of revenue
can be measured reliably and it is probable that economic benefits associated
with the transaction will flow to the Company.  Revenue comprises the fair value of the amount received
or receivable upon selling products or rendering services in the ordinary course
of business. Revenue is presented net of taxes, returns, rebates and discounts,
as well as net of elimination of sales between group
companies.


F-23

---



Goods sold  In relation to the sale of goods, revenue is recognized
when the significant risks and rewards of ownership have been transferred to the
buyer, and no significant uncertainties remain regarding recovery of the
consideration due, the costs associated with the possible return of the
products, and when there is no continuing management involvement with the goods.
Revenue from the sale of goods is measured at the fair value of the
consideration (price) received or receivable, net of returns, commercial
deductions and discounts.  As part of its commercial policy, the Company provides
unconditional discounts to its customers, which are recorded as sales
deductions.  Finance income  Finance income consists of interest received or
receivable on funds invested, foreign exchange gains, gains on currency hedging
instruments offsetting currency losses, gains on hedging instruments that are
not part of a hedge accounting relationship, gains on financial assets
classified as held for trading, as well as any gains from hedge
ineffectiveness.  Interest income is recognized on an accrual basis unless
collectability is in doubt.  (g)Expenses  Royalty expenses  Royalties are classified as cost of goods
sold.  Finance costs  Finance costs comprise interest payable on borrowings,
calculated using the effective interest rate method, foreign exchange losses,
losses on currency hedging instruments offsetting currency gains, results on
interest rate hedging instruments, losses on hedging instruments that are not
part of a hedge accounting relationship, losses on financial assets classified
as held for trading, impairment losses on financial assets classified as
available for sale, as well as any losses from hedge ineffectiveness.  All interest costs incurred in connection with borrowings
or financial transactions are expensed as incurred as part of finance costs,
except when capitalized. Any difference between the initial amount and the
maturity amount of interest bearing loans and borrowings, such as transaction
costs and fair value adjustments, are recognized in the income statement over
the expected life of the instrument on an effective interest rate method. The
interest expense component of finance lease payments is also recognized in the
income statement using the effective interest rate method.


F-24

---



(h)Exceptional
items  Exceptional items are those that in Management’s judgment
need to be disclosed separately by virtue of their size or incidence. In
determining whether an event or transaction is special, Management considers
quantitative as well as qualitative factors such as the frequency or
predictability of occurrence, and the potential of impact on the variation of
profit or loss. These items are disclosed in the income statement or separately
disclosed in the notes to the financial statements. Transactions that may give
rise to exceptional items are principally restructuring activities, acquisition
of subsidiaries, impairment losses, and gains or losses on disposal of assets
and investments.  (i)Income tax and social
contribution  Income tax and social contribution for the year comprises
current tax and deferred tax. Income tax and social contribution are recognized
in the income statement, unless they relate to items recognized directly in
comprehensive income or other equity accounts. In these cases the tax effect is
also recognized directly in comprehensive income or equity account (except
interest on shareholder’s equity. See Note 3 (p)).  The current tax expense is the expectation of payment on
the taxable income for the year, using tax rates enacted, or substantially
enacted, at the balance sheet date, and any adjustment to tax payable in respect
of previous years.  The deferred taxes are recognized using the balance sheet
liability approach. This means that a deferred tax liability or asset is
recognized for all taxable and tax deductible temporary differences between the
tax and accounting basis of assets and liabilities. Under this method, a
provision for deferred taxes is also calculated on the differences between the
fair value of assets and liabilities acquired in a business combination and
their tax basis. IAS 12 prescribes that no deferred tax liability on goodwill
recognition, and no deferred tax asset/liability is recorded: (i) at the initial
recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor
taxable profit or loss; and (ii) on differences related to investments in
subsidiaries to the extent that they are not reversed in the foreseeable future.
The amount of deferred tax provided is based on the expectation of the
realization or settlement of the temporary difference, using currently or
substantially enacted tax rates.  Deferred tax assets and liabilities are offset if there
is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable
entity, or on different taxable entities which intend either to settle current
tax liabilities and assets on a net basis, or to realize the assets and settle
the liabilities simultaneously.


F-25

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The deferred tax asset is recognized only to the extent
that it is likely that future taxable profits will be available. The deferred
income tax asset is reduced to the extent that it is no longer probable that the
future taxable benefit will occur.  (j)Property, plant and
equipment  Property, plant and equipment are measured at cost less
accumulated depreciation and impairment losses. The cost includes the purchase
price, borrowing cost incurred during the construction period and any other
costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management
(e.g. nonrefundable tax, transport and the costs of dismantling and removal and
site restoration, if applicable). The cost of a self-constructed asset is
determined using the same principles as for an acquired asset. The depreciation
methods, residual value, as well as the useful lives are reassessed and adjusted
if appropriate, annually.  Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets are capitalized as part of the
cost of such assets.  Land is not depreciated since it is deemed to have an
indefinite life.  Property, plant and equipment, and depreciation include
the effects of the predecessor basis of accounting, according the Note 1 -Corporate information.  Subsequent expenditures  The Company recognizes in the carrying amount of an item
of property, plant and equipment the cost of replacing a component of such an
item if it is probable that the future economic benefits embodied with the item
will flow to the Company and the cost of the item can be measured reliably. All
other costs are expensed as incurred.  Depreciation  The depreciable amount is the cost of an asset less its
residual value. Residual values, if not insignificant, are reassessed annually.
Depreciation is calculated from the date the asset is available for use, using
the straight-line method over the estimated useful lives of the
assets.  The estimated useful lives of major property, plant and
equipment classes as follows:  Buildings
    25 yearsPlant and equipment
    15 yearsFixtures
    10 yearsFittings
    10 yearsExternal use assets
    2 - 5
  years


F-26

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The assets residual values and useful lives are reviewed
at least annually. Management uses judgment to assess and ascertain the useful
lives of these assets.  Gains and losses on sale  Gains and losses on sales are determined by comparing the
results with the carrying amount and are recognized in Other operating
income/(expenses) in the income statement.  (k)Goodwill  Goodwill arises on the acquisition of subsidiaries,
associates and joint arrangements.  Goodwill is determined as the excess (i) of the
consideration paid; (ii)  of the amount of any non-controlling interests in
the acquiree (when applicable); and (iii) of the fair value, at acquisition
date, of any previous equity interest in the acquiree, over the fair value of
the net identifiable assets acquired at the date of acquisition. All business
combinations are accounted for by applying the purchase
method.  In
conformity with IFRS 3Business Combinations,
goodwill is carried at cost and is not amortized, but tested for impairment at
least annually, or whenever there are indications that the cash generating unit
to which the goodwill has been allocated may be impaired.Impairment losses recognized on goodwill are not
reversed. Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.  Goodwill is expressed in the functional currency of the
subsidiary or joint operation to which it relates and translated toReaisusing the year-end exchange rate.  Regarding associates and joint ventures, goodwill is
included in the carrying amount of the investment in the associate/joint
ventures.  If the Company’s interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities recognized exceeds
the cost of the business combination such excess is recognized immediately in
the income statement.  Expenditure on internally generated goodwill is expensed
as incurred.  Goodwill includes the effects of the predecessor basis of
accounting.


F-27

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(l)Intangible assets  Brands  When part of the consideration paid in a business
combination is related to brands, these are recognized in a specific Intangible
Assets account and measured at fair value at the acquisition date. Subsequently,the value of brands can be reduced in case of impairment
losses.Internally generated expenditures for developing a brand
are recognized as expenses.  Software  Purchased software is measured at cost less accumulated
amortization.  Amortization related to software is included in cost of
sales, distribution and sales expenses, marketing expenses or administrative
expenses based on the activity the software supports.  Other intangible assets  Other intangible assets, acquired by the Company, are
stated at acquisition cost less accumulated amortization and impairment
losses.  Other intangible assets also include multi-year
sponsorship rights acquired by the Company. These are initially recognized at
the present value of the future payments and subsequently measured at cost less
accumulated amortization and impairment losses.  Amortization  Intangible assets with definite useful lives are
amortized based on the straight-line method over their estimated useful lives.Licenses, supply and distribution rights are amortized
over the period in which the rights exist. Brands are considered to have an
indefinite lifeand, therefore, are not amortized.Software and capitalized development cost related to
technology are amortized over 3 to 5 years.  Items that are not amortized are tested for impairment on
an annual basis.


F-28

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(m)Inventories  Inventories are valued at the lower of cost and net
realizable value. Cost includes expenditure incurred in acquiring the
inventories and bringing them to their existing location and condition. The
weighted average method is used in determining the cost of
inventories.  The cost of finished products and work in progress
comprises raw materials, other production materials, direct labor, other direct
costs, gains and losses with derivative financial instruments, and an allocation
of fixed and variable overhead based on normal operating capacity. Net
realizable value is the estimated selling price in the ordinary course of
business, less the cost for bringing inventories to sales conditions and selling
costs.  Inventories have their amount reduced on a case-by-case
basis if the anticipated net realizable value declines below its carrying
amount. The calculation of the net realizable value takes into consideration
specific characteristics of each inventory category, such as expiration date,
remaining shelf life, slow-moving indicators, amongst others.  (n)Trade
receivables  Accounts receivable are initially recognized at fair
value and subsequently at amortized cost, less provision for losses on doubtful
accounts. An allowance for impairment of trade receivables is established when
there is objective evidence that the Company will not be able to collect all
amounts due according to the original terms of the receivables. An allowance for
impairment loss is recorded for an amount considered sufficient by management to
cover probable losses upon the realization of receivables. The amount of the
allowance is the difference between the asset’s carrying amount and the present
value of the estimated future cash flows. The allowance for impairment loss is
recognized in the income statement, as are subsequent recoveries of previous
impairments. Historically,nosignificant losses in trade receivables have been
experienced.  (o)Cash and cash
equivalents  Cash and cash equivalents include all cash balances, bank
deposits, and short-term highly liquid investments with original maturities of
three months or less with insignificant risks of changes in
value,andreadily convertible into cash.They are stated at face value, which approximates their
fair value.  For the purpose of the cash flow statement, cash and cash
equivalents are presented net of bank overdrafts, when
applicable.


F-29

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(p)Equity  Issued capital  The Company's issued capital consists only of common
shares.  Repurchase of shares  When the Company buys back its own shares, the amount
paid, including any additional costs directly attributable is recognized as a
deduction from equity attributable to shareholders, in “Treasury shares” line
item.  Share issuance costs  Incremental costs directly attributable to the issuance
of new shares or options are presented in equity as a deduction, net of tax,
from the proceeds.  Dividends and Interest on shareholder’s
equity  Dividends and interest on shareholder’s equity are
recognized in the liability on the date that are approved on Board of Directors
Meeting, except the minimum statutory dividends provided by the Company’s
bylaws, that are recognized as a liability when applicable, at the end of each
fiscal year.  The expense of interest attributable to capital to
shareholders is recognized in income for calculation of Brazilian income and
social contribution tax and after are reclassified from shareholders' equity for
presentation purposes in financial statements.  (q)Interest-bearing
loans and borrowings  Interest-bearing loans and borrowings are recognized
initially at fair value less attributable transaction costs. Subsequent to
initial recognition, interest-bearing loans and borrowings are stated at
amortized cost with any difference between the initial and maturity amount being
recognized in the income statement over the expected life of
theinstrument on an effective interest rate basis. The
Company has interest-bearing loans and borrowings covered by a hedge structure
(Note 22 –Interest-bearing loans and borrowings).  Borrowing costs directly related to the acquisition,
construction or production of a qualifying asset, that requires a substantial
period of time to get ready for its intended use or sale, are capitalized as
part of the cost of that asset when it is probable that future economic benefits
associated with the item will flow to the Company and costs can be measured
reliably. The other borrowing costs are recognized as finance costs in the
period in which they are incurred.


F-30

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(r)Employee benefits  Post-employment benefits  Post-employment benefits include pensions managed in
Brazil by Instituto Ambev de Previdência Privada – IAPP, post-employment dental
benefits and post-employment medical benefits managed by Fundação Zerrenner.
Usually, pension plans are funded by payments made by both the Company and its
employees, taking into account the recommendations of independent actuaries.
Post-employment dental benefits and post-employment medical benefits are
maintained by the return on Fundação Zerrenner’s plan assets. If necessary, the
Company may contribute some of its profit to the Fundação
Zerrenner.  The Company manages defined benefit and defined
contribution plans for employees of its companies located in Brazil and in its
subsidiaries located in Dominican Republic, Uruguai, Bolivia and
Canada.  The Company maintains funded and unfunded plans.  r.1) Defined contribution plans  A defined contribution plan is a pension plan under which
the Company pays fixed contributions into a fund. The Company has no legal or
constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees for the benefits relating to employee
service in the current and prior periods.  The contributions of these plans are recognized as
expense in the period they are incurred.  r.2) Defined benefit plans  Typically, defined benefit plans define an amount of
pension benefit that an employee will receive on retirement, usually dependent
on one or more factors such as age, years of service and
compensation.  For defined benefit plans, expenses are assessed
separately for each plan using the projected credit unit method. The projected
credit unit method takes into account each period of service as giving rise to
an additional unit of benefit to measure each unit separately. Under this
method, the cost of providing pensions is charged to the income statement during
the period of service of the employee. The amounts charged to the income
statement consist of current service cost, interest cost, past service costs and
the effect of any settlements and curtailments. The obligations of the plan
recognized in the balance sheet are measured at the present value of the
estimated future cash outflows using a discount rate equivalent to the
government ́s bond rates with maturity terms similar to those of the obligation
and the fair value of the plan assets.


F-31

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Past service costs result from the introduction of a new
plan or changes to an existing plan. They are recognized immediately in the
income statement, at the earlier of when: (i) the settlements / curtailments
occurs, or (ii) the Company recognizes related restructuring or termination
costs, unless those changes are conditioned to the employee’s continued
employment, for a specific period of time (the period in which the right is
acquired). In such case, the past services costs are amortized using the
straight-line method during the period in which the right was
acquired.  Actuarial gains and losses consist of the effects of
differences between the previous actuarial assumptions and what has actually
occurred, and the effects of changes in actuarial assumptions. Actuarial gains
and losses are fully recognized in Carrying value adjustments.  Re-measurements, comprising of actuarial gains and
losses, the effect of the asset ceiling and the return on plan assets, both
excluding net interest, are recognized in full in the period in which they occur
in the statement of comprehensive income. Re-measurements are not reclassified
to profit or loss in subsequent periods.  When the amount of the defined benefit obligation is
negative (an asset), the Company recognizes those assets (prepaid expenses), to
the extent of the value of the economic benefit available to the Company either
from refunds or reductions in future contributions.  Other post-employment obligations  The Company and its subsidiaries provide post-employment
medical benefits, reimbursement of medication expenses and other benefits to
certain retirees through Fundação Zerrenner. These benefits are not granted to
new retirees. The expected costs of these benefits are recognized over the
period of employment, using an accounting methodology similar to that for
defined benefit plans, including actuarial gains and losses.  Termination benefits  Termination benefits are recognized as an expense at the
earlier of: (i) when the Company is demonstrably committed, without realistic
possibility of withdrawal, to a formal detailed plan to terminate employment
before the normal retirement date, and (ii) when the Company recognizes costs
for a restructuring.  Bonuses  Bonuses granted to employees and managers are based on
pre-defined company and individual target achievement. The estimated amount of
the bonus is recognized as an expense in the period the bonus is earned. The
bonus that is settled in shares are accounted for as share-based
payments.


F-32

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(s)Share-based
payments  Different share and share option programs allow
management and other members appointed by the Board of Directors to acquire
shares of the Company. The fair value of the share options is estimated at grant
date, using an option pricing model that is most appropriate for the respective
option. Based on the expected number of options that will be exercised, the fair
value of the options granted is recognized as an expense over the vesting period
with a credit to equity. When the options are exercised, equity is increased by
the amount of the proceeds received.  (t)Trade payables  Trade payables are recognizedinitially at fair value and subsequently at amortized
cost using the effective interest method.  (u)Provisions  Provisions are recognized when: (i) the Company has a
present obligation (legal or constructive) as a result of past events; (ii) it
is likely that a future disbursement will be required to settle the current
obligation; and (iii) a reliable estimate of the amount of the obligation can be
made.  Provisions, except for the mentioned on itemdisputes and litigation,are determined by the current market assessments of the
time value of money and, where appropriate, the risks specific to the liability.
The increase accruals are recognized as finance expense.  Restructuring  A provision for restructuring is recognized when the
Company has approved a detailed restructuring plan, and the restructuring has
either commenced or has been announced. Costs relating to the ongoing and future
activities of the Company are not provided for, but recognized when expenses are
incurred.. The provision includes the benefit commitments in connection with
early retirement and redundancy schemes.  Disputes and Litigations  A provision for disputes and litigation is recognized
when it is more likely than not that the Company will be required to make future
payments as a result of past events. Such items may include but are not limited
to, several claims, suits and actions filed by or against the Company relating
to antitrusts laws, violations of distribution and license agreements,
environmental matters, employment-related disputes, claims from tax authorities,
and other litigation matters.


F-33

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(v)Financial assets
and liabilities  Classification  The Company classifies its financial assets and
liabilities in the following categories: (1) at fair value through profit or
loss, (2) loans and receivables, (3) held to maturity  and (4) available
for sale. The classification depends on the purpose for which the financial
instruments were acquired. Management determines the classification of its
financial assets at initial recognition.  1) Financial assets and liabilities at fair value through
profit or loss  Financial assets and liabilities at fair value through
profit or loss are financial instruments held for trading. A financial asset is
classified in this category if acquired principally for the purpose of being
sold in the short term. Derivatives are also categorized as held for trading
unless they are designated as hedges.  In general, financial instruments of this category are
classified as short-term investments securities, on current assets. Investments
with maturities beyond one year may be classified as short-term based on
Management's intent and ability to withdraw them within less than one year, as
well as, considering their highly liquid nature and the fact that they represent
cash available to fund current operations.  2) Loans and receivables  Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than 12
months after the end of the reporting period (these are classified as
non-current assets).  3) Investments held to maturity  Investmentsheld tomaturityare financial assets acquired with the intention and
financial ability to hold them in the portfolio until
maturity.  4) Available-for-sale financial
assets  Available-for-sale financial assets are non-derivative
financial assets not classified in any other category. Available-for-sale
financial assets are classified as non-current assets, unless Management intends
to dispose of the investment within 12 months of the end of the reporting
period.  Investments in debt and equity securities are classified
in this category. Equity instruments are undertakings in which the Company does
not have significant influence or control.


F-34

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Recognition and measurement  Purchases and sales of financial assets and liabilities
are recognized on the trade date - the date on which the Company undertakes to
buy or sell the asset.  Financial assets and liabilities are realized when the
rights to receive cash flows from investments have expired or have been
transferred, in this case, when the Company has transferred substantially all
risks and benefits of ownership.  1) Financial assets and liabilities at fair value through
profit or loss  Financial assets and liabilities at fair value through
profit and loss are initially recognized at fair value and transaction costs are
charged to the income statement. Subsequently, they are carried at fair value.
Gains or losses arising from changes in the fair value of financial instruments
at fair value through profit or loss are presented in the income statement in
the period in which they arise.  2) Loans and receivables  Loans and receivables are carried at amortized cost using
the effective interest rate.  3) Investments held to maturity  Investments held to maturity are initially recognized at
fair value plus any directly attributable transaction costs. After initial
recognition, investments held to maturity are measured at amortized cost using
the effective interest method, reduced by any on loss
impairment.  4) Available-for-sale financial
assets  Available-for-sale financial assets are initially
measured at fair value. Interest and inflation monetary adjustments are
recognized in income. Subsequently, available-for-sale financial assets are
measured at fair value, with changes in fair value recognized in other
comprehensive income, and interests (measured using the effective interest rate
method), recognized in income statement.  When available-for-sale financial assets are settled or
become impaired, the accumulated fair value adjustments recognized in other
comprehensive income are included in the income statement.  The fair values of investments with public quotations are
based on current bid prices. If the market for a financial asset (and for
unlisted securities on the stock exchange) is not active, the Company
establishes fair value by using valuation techniques. These techniques include
the use of recent transactions with third parties, reference to other
instruments that are substantially similar, analysis of discounted cash flows
and option pricing models making maximum use of information from the market and
with the least possible information generated by the Company's
management.


F-35

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Impairment of financial assets  Management assesses at the end of each reporting period
whether there is objective evidence that a financial asset or group of financial
assets is impaired. If any such indication exists, the asset’s recoverable
amount is estimated. A financial asset or a group of financial assets is
impaired and an impairment loss is recorded only if there is objective evidence
of impairment as a result of one or more events that occurred after the initial
recognition of the asset (“loss event”) and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated.  Offsetting of financial instruments  Financial assets and liabilities are offset and the net
amount presented in the balance sheet when there is a legally enforceable right
to offset the recognized amounts and there is an intention to settle on a net
basis or realize the asset and settle the liability
simultaneously.  (w)Impairment of
non-financial assets  The carrying amounts of non-financial assets, such as
property, plant and equipment, goodwill and intangible assets are reviewed, at
least, at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, the asset’s recoverable amount is
estimated.  Goodwill, intangible assets that are not yet available
for use and intangibles with an indefinite useful life are tested for impairment
at least annually at the business unit level (which is one level below the
reportable segment) or whenever there is any indication of impairment.  An impairment loss is recognized whenever the carrying
amount of an asset or the related cash-generating unit exceeds its recoverable
amount. Impairment losses are recognized in the income statement. Intangible
assets with an indefinite useful life are tested on a fair value approach
applying multiples that reflect current market transactions to indicators that
drive the profitability of the asset or the royalty stream that could be
obtained from licensing the intangible asset to another party in an arm’s length
transaction.  The recoverable amount of other assets is determined as
the higher of their fair value less costs to sell and value in use. For an asset
that does not generate largely independent cash inflows, the recoverable amount
is determined for the cash-generating unit to which the asset belongs. The
recoverable amount of the cash-generating units to which the goodwill and the intangible assets with indefinite useful life
belong is based on a discounted free cash flow approach, using a discount rate
that reflects current valuation models of the time value of money and the risks
specific to the asset. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other
available fair value indicators.


F-36

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In assessing value in use, the estimated future cash
flows are discounted to their present value using a discount rate before taxes
that reflects current market assessments of the time value of money and the
risks specific to the asset.  Non-financial assets, except by goodwill are reviewed for
possible reversal of the impairment at the reporting date. Impairment losses are
reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized.  (x)Derivative
financial instruments  The Company uses derivative financial instruments in
order to mitigate against risks related to foreign currency, interest rates and
commodity prices. Derivative financial instruments that, although contracted for
hedging purposes, do not meet all hedge accounting criteria are recognized at
fair value in the income statement.  Derivative financial instruments are recognized initially
at fair value. Fair value is the amount an asset could be realized and a
liability settled, between knowledgeable parties, in an arm’s length
transaction. The fair value of derivative financial instruments may be obtained
from quoted market prices or from pricing models that take into account current
market rates, and also credit risk quality of the counterpart.  Subsequent to initial recognition, derivative financial
instruments are re-measured to their fair value at the balance sheet date.
Changes in fair value of derivative financial instruments are recognized in the
income statement, except when they are designated as hedge instruments, when any
effective portion of gain or loss is recognized directly in other comprehensive
income.  Cash flow, net investment or fair value hedge accounting
is applied to all hedges that qualify for hedge accounting under IAS 39,
including the required hedge documentation and hedge effectiveness
tests.  Cash flow hedge accounting  When a derivative financial instrument hedges the
variability in cash flows of a recognized asset or liability, the foreign
currency risk and the fluctuation of commodity prices associated with a highly
probable forecasted transaction, the effective portion of any resulting gain or
loss on the derivative financial instrument is recognized directly in other
comprehensive income (cash flow hedging reserve). The
ineffective portion of any resulting gain or loss is recognized in the income
statement.


F-37

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When a hedging instrument or hedge relationship is
terminated but the hedged transaction is still expected to occur, the cumulative
gain or loss (at that point) remains in other comprehensive income and is
reclassified in accordance with the above policy when the hedged transaction
occurs. If the hedged transaction is no longer probable, the cumulative gain or
loss recognized in other comprehensive income is recycled into the income
statement immediately.  Fair value hedge accounting  When a derivative financial instrument hedges the
variability in fair value of a recognized asset or liability or a firm
commitment, any resulting gain or loss on the hedging instrument is recognized
in the income statement. The hedged item is also stated at fair value in respect
of the risk being hedged, with any gain or loss being recognized in the income
statement. The Company does not apply the fair value hedge accounting when the
hedge item expires, was sold or exercised.  Net investment hedge accounting  When a derivative financial instrument hedges the net
investment in foreign operations, the effective part of any resulting gain or
loss on the derivative financial instrument is recognized directly in other
comprehensive income (translation reserve) , while any gains or losses relating
to the ineffective portion are recognized in the income
statement  On disposal of a foreign operation, the cumulative gains
or losses recognized directly in other comprehensive income is transferred to
the income statement.  Derivative financial instruments at fair value through
profit or loss Certain derivative financial instruments do not qualify
for hedge accounting purposes. Changes in fair value of such derivatives
financial instruments are immediately recognized in income
statement.  (y)Accounting for
operating leases  Leases of assets under which all the risks and rewards of
ownership are substantially retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to the income statement
on a straight-line basis over the term of the lease.


F-38

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When an operating lease is terminated before the lease
period has expired, any payment required to be made to the lessor by way of
penalty is recognized as an expense in the period in which termination takes
place.  (z)Government grants  The Company has benefits from Brazilian state tax
incentive programs to promote industrial development including the deferral of
payment of taxes. These State programs are to promote long-term increases in
employment, industrial decentralization, as well as complement and diversify the
industrial states.  In the case of these States, the tax terms are foreseen
in tax law. When conditions to obtain these grants exist, they are under the
Company's control. The benefits for the postponement in the payment of such
taxes are recorded in the income statement, on an accrual
basis.  The interest rates and (or) terms of
these loans are advantageous over the market conditions, such financing 
are considered as subsidized loans as determined by IAS 20. The referred subsidy
consists of the gain verified when comparing the value of these operations in
market to the value agreed in contract. Thereby, upon funding the subsidy
calculated is recorded in Other operating income, following the treatment for
the other ICMS subsidies. Management reviews annually the market conditions
prevailing in the year to assess such subsidies.  Monthly, taking into account the value
of the consideration, the period to maturity, the financing contract interest
rate and the above mentioned discount rate, the reduction in present value
adjustment is allocated to financial income, so as to bring the balance to zero
by the time of settlement of each consideration.  4.USE OF ESTIMATES AND
JUDGMENTS  The
preparation of financial statements in conformity with IFRS requires Management
to make judgments, estimates and assumptions that affect the application of
accounting practices and the reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on past
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for decision making
regarding the judgments about carrying amounts of assets and liabilities that
are not readily evident from other sources. Actual results may differ from these
estimates. The
estimates and assumptions are reviewed on a regular basis. Changes in accounting
estimates may affect the period in which they are realized, or future
periods. Although each of its significant accounting policies
reflects judgments, assessments or estimates, the Company believes that the
following accounting practices reflect the most critical judgments, estimates and
assumptions that are important to its business operations and the understanding
of its results:


F-39

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(i)
predecessor basis of accounting (Note 3 (c)); (ii)
business combinations (Note 3 (c) and (k); (iii)
impairment (Note 3 (v) and (w)); (iv)
provisions (Note 3 (u)); (v)
share-based payments (Note 3 (s)); (vi)
employee benefits (Note 3 (r)); (vii)
current and deferred tax (Note 3 (i)); (viii) joint arrangements (Note 3 (c));
e (ix)
measurement of financial instruments, including derivatives (Note 3 (v) and
(x)).  The fair values of acquired identifiable intangibles are
based on an assessment of future cash flows. Impairment analyses of goodwill and
indefinite-lived intangible assets are performed at least annually and whenever
a triggering event occurs, in order to determine whether the carrying value
exceeds the recoverable amount.  The company uses its judgment to select a variety of
methods including the discounted cash flow method and option valuation models
and makes assumptions about the fair value of financial instruments that are
mainly based on market conditions existing at each balance sheet
date.  Actuarial assumptions are established to anticipate
future events and are used in calculating pension and other long-term employee
benefit expense and liability. These factors include assumptions with respect to
interest rates, rates of increase in health care costs, rates of future
compensation increases, turnover rates, and life expectancy.  The company is subject to income tax in numerous
jurisdictions. Significant judgment is required in determining the worldwide
provision for income tax. There are some transactions and calculations for which
the ultimate tax determination is uncertain. Some subsidiaries within the
Company are involved in tax audits usually in relation to prior years. These
audits are ongoing in various jurisdictions at the balance sheet date and, by
their nature, these can take considerable time until its conclusion.


F-40

---



5.SEGMENT REPORTING   (a)Reportable segments – Years ended
December 31st: Latin America - north
      (i)
    Latin America - south
      (ii)
    Canada
    Consolidated2016
    2015
    2014
    2016
    2015
    2014
    2016
    2015
    2014
    2016
    2015
    2014Net sales
    28,927.8
    29,654.9
    26,470.7
    10,212.9
    11,255.6
    6,955.7
    6,461.9
    5,809.7
    4,653.4
    45,602.6
    46,720.2
    38,079.8Cost of sales
    (10,870.4)
    (9,921.3)
    (8,807.5)
    (3,685.4)
    (4,306.8)
    (2,607.3)
    (2,122.2)
    (1,833.3)
    (1,399.8)
    (16,678.0)
    (16,061.4)
    (12,814.6)Gross profit
    18,057.4
    19,733.6
    17,663.2
    6,527.5
    6,948.8
    4,348.4
    4,339.7
    3,976.4
    3,253.6
    28,924.6
    30,658.8
    25,265.2Distribution expenses
    (3,965.4)
    (3,709.6)
    (3,299.2)
    (979.6)
    (1,047.5)
    (681.7)
    (1,140.5)
    (1,076.1)
    (866.4)
    (6,085.5)
    (5,833.2)
    (4,847.3)Sales and marketing expenses
    (3,671.1)
    (3,264.0)
    (2,954.8)
    (1,317.6)
    (1,294.8)
    (740.1)
    (936.3)
    (785.9)
    (616.6)
    (5,925.0)
    (5,344.7)
    (4,311.5)Administrative expenses
    (1,486.3)
    (1,599.8)
    (1,398.8)
    (400.2)
    (428.0)
    (254.6)
    (279.6)
    (253.4)
    (166.6)
    (2,166.1)
    (2,281.3)
    (1,820.0)Other operating income/(expenses)
    1,283.7
    1,871.5
    1,620.9
    (39.0)
    60.3
    11.6
    (21.6)
    4.2
    (3.3)
    1,223.1
    1,936.1
    1,629.2Exceptional items
    1,183.2
    (273.9)
    (50.2)
    (41.5)
    (39.9)
    (28.8)
    (7.4)
    (43.4)
    (10.0)
    1,134.3
    (357.2)
    (89.0)Income from operations(EBIT)
    11,401.5
    12,757.8
    11,581.1
    3,749.6
    4,198.9
    2,654.8
    1,954.3
    1,821.8
    1,590.7
    17,105.4
    18,778.5
    15,826.6Net finance cost
    (3.694,5)
    (1.842,9)
    (972,1)
    (439,0)
    (868,6)
    (540,6)
    431,5
    443,3
    37,3
    (3,702.0)
    (2,268.2)
    (1,475.4)Share of result of associates
    (6,8)
    1,9
    11,3
    -
    -
    -
    1,8
    1,2
    6,1
    (5.0)
    3.1
    17.4Income before income tax
    7.700,2
    10.916,8
    10.620,3
    3.310,6
    3.330,3
    2.114,2
    2.387,6
    2.266,3
    1.634,1
    13,398.4
    16,513.4
    14,368.6Income tax expense
    1.100,1
    (1.884,7)
    (845,2)
    (814,0)
    (1.154,1)
    (733,7)
    (601,1)
    (595,5)
    (427,7)
    (315.0)
    (3,634.2)
    (2,006.6)Net income
    8.800,3
    9.032,1
    9.775,1
    2.496,6
    2.176,2
    1.380,5
    1.786,5
    1.670,8
    1.206,4
    13,083.4
    12,879.2
    12,362.0Normalized EBITDA(iii)
    12.805,0
    15.274,6
    13.422,7
    4.501,7
    4.877,8
    3.098,7
    2.176,4
    2.057,3
    1.754,5
    19,483.1
    22,209.7
    18,275.9Exceptional items
    1.183,2
    (273,9)
    (50,2)
    (41,5)
    (39,9)
    (28,8)
    (7,4)
    (43,4)
    (10,0)
    1,134.3
    (357.2)
    (89.0)Depreciation, amortization and impairment excluding
      exceptional items
    (2.586,7)
    (2.242,9)
    (1.791,4)
    (710,6)
    (639,0)
    (415,1)
    (214,7)
    (192,1)
    (153,8)
    (3,512.0)
    (3,074.0)
    (2,360.3)Net finance costs
    (3.694,5)
    (1.842,9)
    (972,1)
    (439,0)
    (868,6)
    (540,6)
    431,5
    443,3
    37,3
    (3,702.0)
    (2,268.2)
    (1,475.4)Share of results of associates
    (6,8)
    1,9
    11,3
    -
    -
    -
    1,8
    1,2
    6,1
    (5.0)
    3.1
    17.4Income tax expense
    1.100,1
    (1.884,7)
    (845,2)
    (814,0)
    (1.154,1)
    (733,7)
    (601,1)
    (595,5)
    (427,7)
    (315.0)
    (3,634.2)
    (2,006.6)Net income
    8.800,3
    9.032,1
    9.775,1
    2.496,6
    2.176,2
    1.380,5
    1.786,5
    1.670,8
    1.206,4
    13,083.4
    12,879.2
    12,362.0Normalized EBITDA margin in %
    44,3%
    51,5%
    50,7%
    44,1%
    43,3%
    44,5%
    33,7%
    35,4%
    37,7%
    42.7%
    47.5%
    48.0%Acquisition of property, plant and
      equipment
    2,352.0
    3,442.0
    3,430.8
    1,365.5
    1,654.1
    903.4
    317.9
    285.8
    183.3
    4,035.4
    5,381.9
    4,517.5Segment assets
    50,935.0
    47,282.3
    42,504.5
    11,149.0
    12,757.7
    9,323.0
    9,245.8
    9,264.6
    7,024.7
    71,329.8
    69,304.6
    58,852.2Intersegment elimination
    
    
    
    
    
    
    
    
    
    (3,968.1)
    (1,996.3)
    (1,618.1)Non-segmented assets
    
    
    
    
    
    
    
    
    
    16,479.7
    22,868.0
    14,909.2Total assets
    
    
    
    
    
    
    
    
    
    83,841.4
    90,176.3
    72,143.3Segment liabilities
    22,958.9
    20,998.7
    16,564.8
    5,576.4
    5,093.9
    3,836.6
    3,275.7
    3,608.6
    2,665.9
    31,811.0
    29,701.2
    23,067.3Intersegment elimination
    
    
    
    
    
    
    
    
    
    (3,968.1)
    (1,996.3)
    (1,618.1)Non-segmented liabilities
    
    
    
    
    
    
    
    
    
    55,998.5
    62,471.4
    50,694.1Total liabilities
    
    
    
    
    
    
    
    
    
    83,841.4
    90,176.3
    72,143.3
  (i) Latin America – North: includes
operations in Brazil, Luxembourg  and CAC (El Salvador, Guatemala,
Nicaragua, Dominican Republic, Saint Vincent, Dominica, Antigua, Cuba and
Barbados).  (ii) Latin America – South: includes
operations in Argentina, Bolivia, Chile, Colombia, Paraguay, Uruguay, Ecuador
and Peru.  (iii) Normalized EBITDA is calculated
excluding of the net income the following effects: (i)Income tax expense, (iii)Share of results of associates, (iii)Net finance result, (iv) Exceptional items, and (v)
Depreciation, amortization and impairment of property, plant and
equipment.


F-41

---



(b)Additional information – by Business
unit – Years ended December 31st: Latin America -
    northCAC
    Brazil
    Total2016
    2015
    2014
    2016
    2015
    2014
    2016
    2015
    2014Net sales
    3.973,2
    3.328,8
    2.087,8
    24.954,6
    26.326,1
    24.382,9
    28.927,8
    29.654,9
    26.470,7Cost of sales
    (1.798,6)
    (1.563,0)
    (974,3)
    (9.071,8)
    (8.358,3)
    (7.833,2)
    (10.870,4)
    (9.921,3)
    (8.807,5)Gross profit
    2.174,6
    1.765,8
    1.113,5
    15.882,8
    17.967,8
    16.549,7
    18.057,4
    19.733,6
    17.663,2Distribution
expenses
    (409,9)
    (357,4)
    (220,3)
    (3.555,5)
    (3.352,2)
    (3.078,9)
    (3.965,4)
    (3.709,6)
    (3.299,2)Sales and marketing
    expenses
    (456,7)
    (390,1)
    (271,4)
    (3.214,4)
    (2.873,9)
    (2.683,4)
    (3.671,1)
    (3.264,0)
    (2.954,8)Administrative expenses
    (171,7)
    (158,3)
    (105,2)
    (1.314,6)
    (1.441,4)
    (1.293,6)
    (1.486,3)
    (1.599,7)
    (1.398,8)Other operating
      income/(expenses)
    9,6
    (0,2)
    (3,0)
    1.274,1
    1.871,6
    1.623,9
    1.283,7
    1.871,4
    1.620,9Exceptional items
    (13,5)
    (8,4)
    (38,6)
    1.196,7
    (265,5)
    (11,6)
    1.183,2
    (273,9)
    (50,2)Income from operations(EBIT)
    1.132,4
    851,4
    475,0
    10.269,1
    11.906,4
    11.106,1
    11.401,5
    12.757,8
    11.581,1Net finance cost
    (9,2)
    42,8
    25,4
    (3.685,3)
    (1.885,7)
    (997,5)
    (3.694,5)
    (1.842,9)
    (972,1)Share of result of
    associates
    19,0
    -
    -
    (25,8)
    1,9
    11,3
    (6,8)
    1,9
    11,3Income before income tax
    1.142,2
    894,2
    500,4
    6.558,0
    10.022,6
    10.119,9
    7.700,2
    10.916,8
    10.620,3Income tax expense
    (318,8)
    (269,4)
    (95,9)
    1.418,9
    (1.615,3)
    (749,3)
    1.100,1
    (1.884,7)
    (845,2)Net income
    823,4
    624,8
    404,5
    7.976,9
    8.407,3
    9.370,6
    8.800,3
    9.032,1
    9.775,1Normalized EBITDA
      (i)
    1.483,8
    1.173,9
    697,7
    11.321,2
    14.100,7
    12.725,0
    12.805,0
    15.274,6
    13.422,7Exceptional items
    (13,5)
    (8,4)
    (38,6)
    1.196,7
    (265,5)
    (11,6)
    1.183,2
    (273,9)
    (50,2)Depreciation. amortization and
      impairment excluding exceptional items
    (338,0)
    (314,1)
    (184,1)
    (2.248,7)
    (1.928,8)
    (1.607,3)
    (2.586,7)
    (2.242,9)
    (1.791,4)Net finance costs
    (9,2)
    42,8
    25,4
    (3.685,3)
    (1.885,7)
    (997,5)
    (3.694,5)
    (1.842,9)
    (972,1)Share of results of
      associates
    19,0
    -
    -
    (25,8)
    1,9
    11,3
    (6,8)
    1,9
    11,3Income tax expense
    (318,8)
    (269,4)
    (95,9)
    1.418,9
    (1.615,3)
    (749,3)
    1.100,1
    (1.884,7)
    (845,2)Net income
    823,3
    624,8
    404,5
    7.977,0
    8.407,3
    9.370,6
    8.800,3
    9.032,1
    9.775,1Normalized EBITDA margin in
      %
    37,3%
    35,3%
    33,4%
    45,4%
    53,6%
    52,2%
    44,3%
    51,5%
    50,7%
  (i) Normalized EBITDA is calculated
excluding of the net income the following effects: (i)Income tax expense, (iii)Share of results of associates, (iii)Net finance result, (iv) Exceptional items, and (v)
Depreciation, amortization and impairment of property, plant and
equipment.


F-42

---



BrazilBeer
    Soft drink and
      Non-alcoholic and
      non-carbonated
    Total2016
    2015
    2014
    2016
    2015
    2014
    2016
    2015
    2014Net sales
    21.173,1
    22.441,3
    20.468,7
    3.781,5
    3.884,8
    3.914,2
    24.954,6
    26.326,1
    24.382,9Cost of sales
    (7.339,9)
    (6.757,6)
    (6.162,4)
    (1.731,9)
    (1.600,7)
    (1.670,8)
    (9.071,8)
    (8.358,3)
    (7.833,2)Gross profit
    13.833,2
    15.683,7
    14.306,3
    2.049,6
    2.284,1
    2.243,4
    15.882,8
    17.967,8
    16.549,7Distribution
expenses
    (2.891,7)
    (2.754,0)
    (2.516,5)
    (663,8)
    (598,2)
    (562,4)
    (3.555,5)
    (3.352,2)
    (3.078,9)Sales and marketing expenses
    (3.044,0)
    (2.691,3)
    (2.493,4)
    (170,4)
    (182,6)
    (190,0)
    (3.214,4)
    (2.873,9)
    (2.683,4)Administrative expenses
    (1.160,2)
    (1.341,5)
    (1.211,8)
    (154,4)
    (99,9)
    (81,8)
    (1.314,6)
    (1.441,4)
    (1.293,6)Other operating income/(expenses)
    969,8
    1.551,2
    1.329,6
    304,3
    320,4
    294,3
    1.274,1
    1.871,6
    1.623,9Exceptional items
    1.014,3
    (265,2)
    (11,4)
    182,4
    (0,3)
    (0,2)
    1.196,7
    (265,5)
    (11,6)Income from operations(EBIT)
    8.721,4
    10.182,9
    9.402,8
    1.547,7
    1.723,5
    1.703,3
    10.269,1
    11.906,4
    11.106,1Net finance cost
    (3.685,3)
    (1.885,7)
    (997,5)
    -
    -
    -
    (3.685,3)
    (1.885,7)
    (997,5)Share of result of associates
    (25,8)
    1,9
    11,3
    -
    -
    -
    (25,8)
    1,9
    11,3Income before income tax
    5.010,3
    8.299,1
    8.416,6
    1.547,7
    1.723,5
    1.703,3
    6.558,0
    10.022,6
    10.119,9Income tax expense
    1.418,9
    (1.615,3)
    (749,3)
    -
    -
    -
    1.418,9
    (1.615,3)
    (749,3)Net income
    6.429,2
    6.683,8
    7.667,3
    1.547,7
    1.723,5
    1.703,3
    7.976,9
    8.407,3
    9.370,6Normalized EBITDA
      (i)
    9.618,6
    12.038,9
    10.744,5
    1.702,6
    2.061,8
    1.980,5
    11.321,2
    14.100,7
    12.725,0Exceptional items
    1.014,3
    (265,2)
    (11,4)
    182,4
    (0,3)
    (0,2)
    1.196,7
    (265,5)
    (11,6)Depreciation, amortization and
      impairment excluding exceptional items
    (1.911,5)
    (1.590,8)
    (1.330,3)
    (337,3)
    (338,0)
    (277,0)
    (2.248,8)
    (1.928,8)
    (1.607,3)Net finance costs
    (3.685,3)
    (1.885,7)
    (997,5)
    -
    -
    -
    (3.685,3)
    (1.885,7)
    (997,5)Share of results of associates
    (25,8)
    1,9
    11,3
    -
    -
    -
    (25,8)
    1,9
    11,3Income tax expense
    1.418,9
    (1.615,3)
    (749,3)
    -
    -
    -
    1.418,9
    (1.615,3)
    (749,3)Net income
    6.429,2
    6.683,8
    7.667,3
    1.547,7
    1.723,5
    1.703,3
    7.976,9
    8.407,3
    9.370,6Normalized EBITDA margin in %
    45,4%
    53,6%
    52,5%
    45,0%
    53,1%
    50,6%
    45,4%
    53,6%
    52,2%
  (i) Normalized EBITDA is calculated
excluding of the net income the following effects: (i)Income tax expense, (iii)Share of results of associates, (iii)Net finance result, (iv) Exceptional items, and (v)
Depreciation, amortization and impairment of property, plant and
equipment.  6.NET SALES  The reconciliation between gross sales and net sales is
as follows:  2016
    2015
    2014Gross sales(i)
    79,551.1
    97,214.2
    80,213.5Excise duty
    (16,345.2)
    (17,471.7)
    (14,530.5)Discounts(i)
    (17,603.3)
    (33,022.3)
    (27,603.2)45,602.6
    46,720.2
    38,079.8
  (i)Variance resulting from the change in
the billing method with direct effect on Gross sales and
Discounts.  Services provided by distributors, such
as the promotion of our brands and logistics services are considered as expense
when separately identifiable.  7.OTHER
OPERATING INCOME / (EXPENSES)  2016
    2015
    2014Government grants/NPV of long term fiscal
      incentives
    1,166.5
    1,755.7
    1,479.9Additions to provisions
    (132.9)
    (106.1)
    (32.2)Gains/(losses) on disposal of property, plant and
      equipment and intangible assets
    70.9
    53.0
    33.9Other operating income/(expenses),
net
    118.6
    233.4
    147.61,223.1
    1,936.0
    1,629.2


F-43

---



Government grants are not recognized until there is
reasonable assurance that the Company will meet related conditions and that the
grants will be received. Government grants are systematically recognized in
income during the periods in which the Company recognizes as expenses the
related costs that the grants are intended to offset.  8.EXCEPTIONAL ITEMS  The Company opted to exclude these items when measuring
segment-based performance, as per Note 5 –Segment reporting.  Theexceptionalitems included in the income statement
are detailed below:  2016
    2015
    2014Result through stock
      exchange(i)
    1,240.0
    -
    -Restructuring
    (79.8)
    (63.3)
    (48.9)Administrative lawsuit
    -
    (239.2)
    -Costs through business combinations
    (29.8)
    (48.9)
    -Fixed asset impairment
    -
    -
    (32.3)Others
    3.9
    (5.8)
    (7.8)1,134.3
    (357.2)
    (89.0)
  (i) It refers to result of transaction of stock exchange,
as mentioned in Note 1 (b).  9.PAYROLL AND RELATED
BENEFITS  2016
    2015
    2014Wages and salaries
    3.038.9
    3.086.5
    2,262.7Social security contributions
    727.2
    756.1
    538.7Other personnel cost
    613.8
    561.3
    522.8Increase in liabilities for defined benefit
      plans
    151.7
    142.3
    121.3Share-based payment
    189.3
    209.4
    167.7Contributions to defined contribution
      plans
    25.3
    19.0
    26.64.746.2
    4.774.6
    3,639.8
  The result with payroll and related benefits are
presented in the income statement as below:  2016
    2015
    2014Cost of sales
    1,912.3
    1,890.2
    1,346.6Distribution expenses
    780.8
    722.1
    533.6Sales and marketing expenses
    989.8
    980.8
    823.6Administrative expenses
    970.3
    1,154.0
    853.9Net finance cost
    95.9
    27.5
    76.9Exceptional items
    (2.9)
    -
    5.24,746.2
    4,774.6
    3,639.8


F-44

---



10.ADDITIONAL INFORMATION ON OPERATING
EXPENSES BY NATURE  Depreciation, amortization and impairment expenses are
included in the following income statement accounts for the years 2016, 2015 and
2014: Depreciation and impairment of
      property, plant and equipment
    
    Amortization of intangible
      assets2016
    2015
    2014
    
    2016
    2015
    2014Cost of sales
    2,283.3
    2,053.2
    1,593.9
    
    4.3
    3.2
    1.7Distribution expenses
    200.9
    177.9
    144.5
    
    -
    -
    -Sales and marketing expenses
    538.0
    431.5
    310.5
    
    222.9
    162.5
    127.3Administrative expenses
    182.5
    165.8
    133.7
    
    95.8
    81.5
    60.5Exceptional items
    -
    -
    32.3
    
    -
    -
    -3,204.7
    2,828.4
    2,214.9
    
    323.0
    247.2
    189.5
  11.FINANCE COST AND INCOME  (a)Finance costs  2016
    2015
    2014Interest expense
    (1,547.3)
    (1,062.6)
    (750.1)Capitalized borrowings
    3.9
    26.0
    52.7Net Interest on pension plans
    (105.6)
    (97.6)
    (80.6)Losses on hedging instruments
    (1,575.1)
    (1,267.0)
    (857.3)Interest on provision for contingencies
    (619.5)
    (120.1)
    (228.5)Exchange variation
    (310.4)
    (721.8)
    (320.2)Losses on non-derivative financial instrument (fair
      value through profit or loss)
    -
    -
    (178.4)Tax on financial transactions
    (224.6)
    (146.4)
    (78.1)Bank guarantee expenses
    (87.1)
    (80.8)
    (73.1)Other financial results
    (132.2)
    (92.1)
    (135.0)(4,597.9)
    (3,562.4)
    (2,648.6)
  Interest expenses are presented net of
the effect of interest rate derivative financial instruments which mitigate
Ambev S.A. interest rate risk (Note 27 –Financial instruments and
risks). The interest expense are as
follows:  2016
    2015
    2014Financial liabilities measured at amortized
      cost
    (545.6)
    (423.1)
    (393.2)Liabilities at fair value through profit or
      loss
    (961.0)
    (601.3)
    (325.2)Fair value hedge - hedged items
    (49.3)
    (22.4)
    (31.4)Fair value hedge - hedging
instruments
    8.6
    (15.8)
    (0.3)(1,547.3)
    (1,062.6)
    (750.1)
  (b)Finance income  2016
    2015
    2014Interest income
    513.6
    575.5
    399.4Gains on derivative
    113.5
    428.3
    687.3Financial assets at fair value through profit or
      loss
    247.5
    261.4
    66.6Other financial results
    21.3
    29.0
    19.9895.9
    1,294.2
    1,173.2


F-45

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Interest income arises from the
following financial assets: 2016
    2015
    2014Cash and cash equivalents
    241.5
    425.9
    226.2Investment securities held for
trading
    51.1
    149.6
    173.2Other receivables
    221.0
    -
    -513.6
    575.5
    399.4
  12.INCOME TAX AND SOCIAL
CONTRIBUTION Income taxes reported in the income
statement are analyzed as follows: 2016
    2015
    2014Income tax expense - current
    (413.9)
    (1,227.8)
    (2,057.2)Deferred tax expense on temporary
      differences
    (732.5)
    (2,192.4)
    (178.5)Deferred tax over taxes losses carryforwards
      movements in the current period
    831.4
    (214.0)
    229.1Total deferred tax
    (expense)/income
    98.9
    (2,406.4)
    50.6Total income tax expenses
    (315.0)
    (3,634.2)
    (2,006.6)
  The reconciliation from the weighted
nominal to the effective tax rate is summarized as follows: 2016
    2015
    2014Profit before tax
    13,398.4
    16,513.4
    14,368.7Adjustment on taxable basisNon-taxable income
    (392.0)
    (999.9)
    (550.0)Government grants related to sales taxes
    (1,528.6)
    (1,360.7)
    (1,196.8)Share of results of associates
    5.0
    (3.1)
    (17.4)Non-deductible expenses
    539.3
    415.9
    150.5Complement of income tax of foreign subsidiaries
      due in Brazil
    148.0
    1,965.2
    246.8Intragroup transactions taxed only in
      Brazil
    640.7
    (1,313.2)
    110.212,810.8
    15,217.6
    13,112.0Aggregated weighted nominal tax rate
    30.16%
    31.59%
    32.04%Taxes payable – nominal rate
    (3,864.0)
    (4,806.9)
    (4,200.9)Adjustment on tax expenseRegional incentives - income taxes
    264.5
    257.8
    43.7Deductible interest on shareholders
      equity
    1,867.7
    1,646.1
    1,729.8Tax savings from goodwill amortization on tax
      books
    142.0
    142.4
    202.2Withholding tax over undistributed
      profits
    153.1
    (672.4)
    (239.4)Recognition of deferred assets on tax loss
      carryforwards
    796.7
    138.1
    25.9Others with reduced taxation
    325.0
    (339.3)
    432.1Income tax and social contribution
      expense
    (315.0)
    (3,634.2)
    (2,006.6)Effective tax rate
    2.35%
    22.01%
    13.96%
  The main events that impacted the effective tax rate in
the period were: Non-taxable net financial and other income: The
  movement perceived in this line is related to incomes and expenses in
  subsidiaries, which occurs mainly due to foreign exchange
  variation;Government subsidy
  on sales taxes: The Company has state tax incentives within certain industrial
  development programs in the form of financing, deferral of tax payments or partial reductions of the
  amount due. Such investment subsidies arising from deferred and presumed ICMS
  credits are deductible for income tax purposes.


F-46

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Additional income
  tax of foreign associates taxed in Brazil: The reduction in this line, which
  is related to Ambev subsidiaries foreign profits taxation in Brazil, is the
  outcome of a better management of our capital
  structure;Results of
  intercompany transactions taxed/deductible in Brazil: In this line are
  recorded the foreign exchange variation effect and the interest generated by
  intercompany transactions, between companies based in different
  jurisdictions. The main cause of the variation is related to foreign
  exchange;Deductible Interest
  on net equity: Under Brazilian law, companies have the option to distribute
  interest on equity (“JCP”), calculated based on the long-term interest rate
  (“TJLP”), Which are deductible for income tax purposes under the applicable
  legislation, whose approximate amount distributed in the year is R$5.4
  billion.Withholding tax on
  dividends: Variation explained by the reversal of a provision related to
  withholding tax on undistributed results of Argentine subsidiaries due to a
  change in the legislation that exempts from withholding tax the payment of
  dividends, the amount of which approximate R$300 million, as opposed to the
  constitution of provision and exchange variation effect in the approximate
  amount of R$672 million in the same prior period;Recognition of
  deferred assets on tax loss carryforwards: This effect is mainly due to the
  recognition of deferred assets on tax loss carryforwards incurred in
  subsidiaries abroad in prior periods, which are now considered recoverable due
  to expectation of future profits (Paragraph 19 of IAS 12) and better
  management of the group's capital structure.


The Company has been granted income tax incentives by the
Brazilian Government in order to promote economic and social development in
certain areas of the North and Northeast. These incentives are recorded as
income on an accrual basis and allocated at year-end to the tax incentive
reserve account.





F-47

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13.PROPERTY, PLANT AND
EQUIPMENT  2016Land and buildings
    Plant and equipment
    Fixtures and fittings
    Under construction
    TotalAcquisition costBalance at end of previous year
    7,718.3
    22,369.6
    4,465.1
    2,132.6
    36,685.6Effect of movements in foreign
    exchange
    (474.7)
    (1,528.0)
    (427.4)
    (222.6)
    (2,652.7)Acquisitions through business
      combinations
    283.4
    360.4
    56.0
    0.6
    700.4Acquisitions through stock exchange
    221.2
    185.0
    -
    27.7
    433.9Disposals through stock exchange
    (121.0)
    (344.3)
    (101.3)
    (4.8)
    (571.4)Acquisitions
    8.4
    819.4
    276.0
    2,905.5
    4,009.3Disposals
    (106.0)
    (693.1)
    (210.3)
    (3.3)
    (1,012.7)Transfer to other asset categories
    800.6
    1,595.3
    526.1
    (3,095.0)
    (173.0)Balance at end
    8,330.2
    22,764.3
    4,584.2
    1,740.7
    37,419.4Depreciation and ImpairmentBalance at end of previous year
    (2,244.0)
    (12,562.6)
    (2,738.9)
    -
    (17,545.5)Foreign exchange effects
    95.6
    804.8
    236.7
    -
    1,137.1Disposals through stock exchange
    52.8
    241.7
    51.4
    -
    345.9Depreciation
    (277.8)
    (2,117.6)
    (688.4)
    -
    (3,083.8)Impairment losses
    (0.1)
    (120.7)
    (0.1)
    -
    (120.9)Disposals
    95.3
    646.0
    187.5
    -
    928.8Transfer to other asset categories
    -
    21.7
    39.7
    -
    61.4Others
    -
    11.4
    -
    -
    11.4Balance at end
    (2,278.2)
    (13,075.3)
    (2,912.1)
    -
    (18,265.6)Carrying amount:December 31, 2015
    5,474.3
    9,807.0
    1,726.2
    2,132.6
    19,140.1December 31, 2016
    6,052.0
    9,689.0
    1,672.1
    1,740.7
    19,153.8
  2015Land and buildings
    Plant and equipment
    Fixtures and
    fittings
    Under construction
    TotalAcquisition costBalance at end of previous
      year
    6,521.0
    18,713.8
    3,314.1
    1,828.8
    30,377.7Effect of movements in foreign
      exchange
    490.7
    1,277.4
    226.1
    64.9
    2,059.1Acquisitions through business
      combinations
    6.3
    91.4
    16.9
    8.9
    123.5Disposals through business
      combinations
    (10.5)
    (111.4)
    (24.0)
    -
    (145.9)Acquisitions
    11.7
    1,150.7
    241.7
    3,887.0
    5,291.1Disposals
    (7.2)
    (717.5)
    (108.0)
    (0.4)
    (833.1)Transfer to other asset
      categories
    706.3
    1,965.2
    798.3
    (3,656.5)
    (186.7)Others
    -
    -
    -
    (0.1)
    (0.1)Balance at end
    7,718.3
    22,369.6
    4,465.1
    2,132.6
    36,685.6Depreciation and
      ImpairmentBalance at end of previous
      year
    (1,898.4)
    (10,649.5)
    (2,089.7)
    -
    (14,637.6)Foreign exchange effects
    (125.2)
    (788.9)
    (152.6)
    -
    (1,066.7)Disposals through business
      combinations
    3.4
    75.2
    13.0
    -
    91.6Depreciation
    (233.6)
    (1,927.4)
    (556.7)
    -
    (2,717.7)Impairment losses
    (0.9)
    (106.6)
    (3.2)
    -
    (110.7)Disposals
    2.2
    660.5
    99.8
    -
    762.5Transfer to other asset
      categories
    8.5
    158.5
    (49.5)
    -
    117.5Others
    -
    15.6
    -
    -
    15.6Balance at end
    (2,244.0)
    (12,562.6)
    (2,738.9)
    -
    (17,545.5)Carrying amount:December 31, 2014
    4,622.6
    8,064.3
    1,224.4
    1,828.8
    15,740.1December 31, 2015
    5,474.3
    9,807.0
    1,726.2
    2,132.6
    19,140.1
  Leases, capitalizes interests and fixed assets provided
as security are not material.


F-48

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14.GOODWILL  2016
    2015Balance at end of previous year
    30,953.1
    27,502.9Effect of movements in foreign
    exchange
    (2,388.9)
    2,858.6Acquisitions through business combinations
      (i)
    1,947.0
    591.6Balance at the end of year
    30,511.2
    30,953.1
  (i) It refers mainly to the acquisition of Mark Anthony
and Cerveceria Nacional in the transaction of stock exchange, as presented in
Note 31 -Acquisitions and disposals of
subsidiaries.  The carrying amount of goodwill was
allocated to the different cash-generating units as follows:  Functional currency
    2016
    2015LAN:Brazil
    BRL
    17,424.6
    17,414.8Goodwill
    
    102,667.2
    102,657.4Non-controlling transactions
      (ii)
    
    (85,242.6)
    (85,242.6)Dominican Republic
    DOP
    3,224.9
    3,838.9Cuba (iii)
    USD
    3.6
    4.4Panama
    PAB
    1,060.1
    -LAS:Argentina
    ARS
    518.0
    756.3Bolivia
    BOB
    1,152.8
    1,381.2Chile
    CLP
    42.7
    48.3Colombia
    COP
    -
    165.9Ecuador
    USD
    -
    6.0Paraguay
    PYG
    753.7
    898.6Peru
    PEN
    -
    63.5Uruguay
    UYU
    165.8
    193.4NA:Canada
    CAD
    6,165.0
    6,181.830,511.2
    30,953.1
  (ii) It refers to the stock exchange operation occurred
in 2013 as a result of the adoption of the predecessor basis of
accounting.  (iii) The functional currency of Cuba, the Cuban
convertible peso (CUC), has a fixed parity with the dollar (USD) at balance
sheet date.  Annual impairment testing Goodwill allocated to each cash-generating unit (CGU)
must be tested for impairment to check the need for reduction to its recoverable
amount. The test consists of comparing the CGU carrying amount (including the
goodwill) with its recoverable amount and must be made at least annually or
whenever that there is an indication of impairment.  At the end of 2016, Ambev S.A. completed its annual
impairment testing and concluded, based on the assumptions described below, that
no impairment charge was warranted. The Company cannot predict whether an event that triggers
impairment will occur, when it will occur or how it will affect the asset values
reported. Ambev S.A. believes that all of its estimates are reasonable, since they are consistent with
the internal reporting and reflect management’s best estimates. However,
inherent uncertainties exist that management may not be able to control.


F-49

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Goodwill impairment testing relies on a number of
critical judgments, estimates and assumptions. Goodwill, which accounted for
approximately 36% of total assets as of December 31, 2016 (34% as of December
31, 2015) is tested for impairment at the cash-generating unit level (that is
one level below the reporting segments). The cash-generating unit level is the
lowest level at which goodwill is monitored for internal management purposes.
Whenever a business combination occurs, goodwill is allocated as from the
acquisition date, to each of business units that are expected to benefit from
the synergies of the combination The Company’s impairment testing methodology is in
accordance with IAS 36, in which a fair-value-less-cost-to-sell and value in use
approaches are taken into consideration. This consists in applying a discounted
cash flow approach based on acquisition valuation models for its major business
units and the business units showing high capital amounts invested in earnings
before interest, taxes, depreciation and amortization (“EBITDA”) multiples. The
ratio between invested capital and EBITDA is basis for selecting the cash
generating units to be tested. The key judgments, estimates and assumptions used in the
discounted free cash flow calculations are generally as follows: The first year of the model is based
  on management's best estimate of the free cash flow outlook for the current
  year;In the second to fourth years of the model, free cash
  flows are based on ABInBev's strategic plan as approved by key
  management.  AB InBev's strategic plan is prepared per country and
  is based on external sources in respect of macro-economic assumptions,
  industry, inflation and foreign exchange rates, past experience and identified
  initiatives in terms of market share, revenue, variable and fixed cost,
  capital expenditure and working capital assumptions;From the fifth to the tenth year of the model, as well
  as for perpetuity, the cash flows are extrapolated using expected long-term
  consumer price indices and the growth of the beer market, based on external
  sources;Projections are made in the functional currency of the
  business unit and discounted at the unit's weighted average cost of capital
  (“WACC”), considering sensitivities on this metric.Cost to sell is assumed to reach 1.5% of the entity
  value based on historical precedents.


F-50

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Projections are made in the functional currency of the
business unit and discounted at the unit's WACC, considering the sensitivity of
this metric. The weighted average cost of capital in nominal dollars, for the
impairment testing of goodwill performed varied as follows:  2016
    2015Latin America North
    from 8.39% to
      10.27%
    from 8.28% to
      10.04%Latin America South
    -
    11.07%Canada
    -
    6.55%
  Although Ambev S.A. believes that its
judgments, assumptions and estimates are appropriate, actual results may differ
from these judgments.  For Latin America South and Canada there
was no need to apply the impairment test.  15.INTANGIBLE ASSETS  2016DistributionBrands
    contracts
    Software
    Others
    TotalAcquisition costBalance at end of previous year
    3,908.2
    2,387.4
    788.4
    356.8
    7,440.8Effect of movements in foreign
    exchange
    (645.9)
    (68.3)
    (50.3)
    (93.6)
    (858.1)Acquisitions
    3.0
    -
    4.1
    19.0
    26.1Disposal
    -
    -
    (0.4)
    (0.3)
    (0.7)Acquisitions through business
    combination
    1,043.1
    -
    -
    30.7
    1,073.8Acquisitions through stock exchange
    228.1
    -
    20.6
    -
    248.7Disposals through stock exchange
    (58.0)
    -
    (9.4)
    (0.1)
    (67.5)Transfers to other assets categories
    (317.7)
    0.3
    135.5
    (24.1)
    (206.0)Other
    -
    -
    -
    172.3
    172.3Balance at end of year
    4,160.8
    2,319.4
    888.5
    460.7
    7,829.4Amortization and Impairment losses
      (i)Balance at end of previous year
    (1.9)
    (1,622.2)
    (539.7)
    (184.8)
    (2,348.6)Foreing exchange effects
    -
    9.9
    29.0
    40.9
    79.8Amortization
    -
    (148.6)
    (94.4)
    (80.0)
    (323.0)Disposal
    -
    -
    0.1
    -
    0.1Disposals through stock exchange
    -
    -
    8.0
    0.1
    8.1Transfers to other assets categories
    -
    0.1
    -
    -
    0.1Balance at end of year
    (1.9)
    (1,760.8)
    (597.0)
    (223.8)
    (2,583.5)Carrying amount:December 31, 2015
    3,906.3
    765.2
    248.7
    172.0
    5,092.2December 31, 2016
    4,158.9
    558.6
    291.5
    236.9
    5,245.9
  (i) The period of amortization of
intangible assets of definite useful life is five years and amortization is
calculated at the rate of 20% and recognized in income on a straight-line
method.


F-51

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2015DistributionBrands
    contracts
    Software
    Others
    TotalAcquisition costBalance at end of previous
      year
    2,683.6
    2,193.2
    672.2
    289.5
    5,838.5Effect of movements in foreign
      exchange
    861.4
    54.7
    13.1
    25.0
    954.2Acquisitions
    268.4
    143.4
    4.3
    55.0
    471.1Disposal
    -
    (2.4)
    -
    -
    (2.4)Acquisitions through business
      combination
    94.9
    -
    0.1
    15.4
    110.4Transfers to other assets
      categories
    (0.1)
    (1.5)
    98.7
    (28.2)
    68.9Other
    -
    -
    -
    0.1
    0.1Balance at end of year
    3,908.2
    2,387.4
    788.4
    356.8
    7,440.8Amortization and Impairment losses
      (i)Balance at end of previous
      year
    (1.9)
    (1,472.1)
    (448.4)
    (161.2)
    (2,083.6)Foreign exchange effects
    -
    3.3
    (9.2)
    (13.2)
    (19.1)Amortization
    -
    (154.6)
    (82.1)
    (10.4)
    (247.1)Disposal
    -
    1.2
    -
    -
    1.2Balance at end of year
    (1.9)
    (1,622.2)
    (539.7)
    (184.8)
    (2,348.6)Carrying amount:December 31, 2014
    2,681.7
    721.1
    223.8
    128.3
    3,754.9December 31, 2015
    3,906.3
    765.2
    248.7
    172.0
    5,092.2
  (i) The period of amortization of
intangible assets of definite useful life is five years and amortization is
calculated at the rate of 20% and recognized in income on a straight-line
method.  The Company is the owner of some of the world’s leading
brands in the beer industry. As a result, brands are expected to generate
positive cash flows for as long as the Company owns the brands and accordingly
have been assigned indefinite lives. The most representative brands that have
been registered as result of fair value determination of past acquisitions areQuilmesin Argentina,Pilsenin Paraguay and Bolivia andPresidenteandPresidente Lightin Dominican Republic. The carrying value of intangible assets
with indefinite useful lives classified as brands was allocated to the following
countries: 2016
    2015Argentina
    373.5
    522.7Bolivia
    558.7
    669.4Brazil
    575.5
    -Canada
    205.6
    217.4Chile
    63.1
    71.4Luxembourg
    419.1
    -Paraguay
    429.4
    511.8Dominican Republic
    1,422.4
    1,783.0Uruguay
    111.6
    130.64,158.9
    3,906.3
  Intangible assets with indefinite useful lives have been
tested for impairment at a cash-generating unit level basis consistent with the
same approach described in Note 14 –Goodwill.


F-52

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16.INVESTMENT
SECURITIES  2016
    2015Debt held-to-maturity
    104.3
    118.6Non-current investments
securities
    104.3
    118.6Financial asset at fair value through profit or
      loss-held for trading
    282.8
    215.1Current investments securities
    282.8
    215.1Total
    387.1
    333.7
  17.DEFERRED INCOME TAX AND SOCIAL
CONTRIBUTION  Deferred taxes for income tax and social contribution
taxes are calculated on tax losses, the negative tax basis of social
contributions and the temporary differences between the tax bases and the
carrying amount in the financial statement of assets and liabilities. The rates
of these taxes in Brazil, currently set for the determination of deferred taxes,
are 25% for income tax and 9% for social contribution. For the other regions,
with operational activity, applied rates, are as follow:  Central America and the Caribbean
    from 23% to 31%Latin America
    from 14% to 35%Canada
    26%
  Deferred tax assets are recognized to
the extent that it is probable that future taxable profit will be available to
be used to offset temporary differences / loss carry forwards based on
projections of future results prepared and based on internal assumptions and
future economic scenarios which may therefore change.  The amount of deferred income tax and
social contribution by type of temporary difference is detailed as
follows:  2016
    
    2015Assets
    Liabilities
    Net
    
    Assets
    Liabilities
    NetInvestment securities
    9.0
    -
    9.0
    
    9.1
    -
    9.1Intangible assets
    0.7
    (733.9)
    (733.2)
    
    5.8
    (774.7)
    (768.9)Employee benefits
    467.6
    -
    467.6
    
    570.3
    -
    570.3Trade payables - exchange rate
    977.4
    (531.3)
    446.1
    
    2,138.4
    (357.1)
    1,781.3Trade receivable
    42.7
    -
    42.7
    
    38.5
    -
    38.5Derivatives
    71.1
    (110.7)
    (39.6)
    
    59.3
    (131.7)
    (72.4)Interest-bearing loans and borrowings
    -
    (1.4)
    (1.4)
    
    -
    (0.7)
    (0.7)Inventories
    267.4
    (13.8)
    253.6
    
    223.5
    (66.5)
    157.0Property, plant and equipment
    -
    (905.7)
    (905.7)
    
    -
    (737.3)
    (737.3)Withholding tax over undistributed
      profits
    -
    (684.8)
    (684.8)
    
    -
    (1,027.6)
    (1,027.6)Investments in associates
    -
    (421.6)
    (421.6)
    
    -
    -
    -Loss carryforwards
    1,139.9
    -
    1,139.9
    
    308.4
    -
    308.4Provisions
    448.9
    (44.6)
    404.3
    
    251.2
    (32.0)
    219.2Other items
    (15.1)
    (23.3)
    (38.4)
    
    -
    (200.6)
    (200.6)Gross deferred tax assets /
      (liabilities)
    3,409.6
    (3,471.1)
    (61.5)
    
    3,604.5
    (3,328.2)
    276.3Netting by taxable entity
    (1,141.4)
    1,141.4
    -
    
    (854.6)
    854.6
    -Net deferred tax assets /
      (liabilities)
    2,268.2
    (2,329.7)
    (61.5)
    
    2,749.9
    (2,473.6)
    276.3


F-53

---



The Company only offsets the balances of
deferred income tax and social contribution assets against liabilities when they
are within the same entity and are expected to be realized in the same
period. Tax losses and negative bases of social contribution and
temporary deductible differences in Brazil, on which the deferred income tax and
social contribution were calculated, have no expiry date.  At December 31, 2016 the assets and
liabilities deferred taxes related to combined tax losses has an expected
utilization/settlement by temporary differences as follows:  2016Deferred taxes not related to tax
      losses
    to be realized until 12
      months
    to be realized after 12
      months
    TotalInvestment securities
    -
    9.0
    9.0Intangible assets
    -
    (733.2)
    (733.2)Employee benefits
    10.8
    456.8
    467.6Trade payables - exchange rate
    713.0
    (266.9)
    446.1Trade receivable
    40.8
    1.9
    42.7Derivatives
    (39.6)
    -
    (39.6)Interest-bearing loans and borrowings
    -
    (1.4)
    (1.4)Inventories
    253.6
    -
    253.6Property, plant and equipment
    (74.9)
    (830.8)
    (905.7)Withholding tax over undistributed
      profits
    -
    (684.8)
    (684.8)Investments in associates
    -
    (421.6)
    (421.6)Provisions
    95.2
    309.1
    404.3Other items
    (8.1)
    (30.3)
    (38.4)Total
    990.8
    (2,192.2)
    (1,201.4)
  Deferred tax related to tax
      losses
    2016
    20152016
    -
    18.02017
    286.9
    25.62018
    245.3
    21.42019
    158.5
    26.22020
    99.9
    31.6Apart from 2021(i)
    349.3
    185.6Total
    1,139.9
    308.4
  (i) There is no expected realization that exceed the
period of 10 years.  As at December 31, 2016, deferred tax assets in the
amount of R$455.6 (R$902.1 as at December 31, 2015) related to tax losses and
temporary differences of subsidiaries abroad were not recorded as the
realization is not probable.  Major part of the fiscal losses amount do not have a
carryforward limit for utilization and the tax losses carried forward in
relation to them are equivalent to R$2,285.2 in December 31, 2016 (R$4,103.6 in
December 31, 2015).


F-54

---



The net change in deferred income tax
and social contribution is detailed as follows:  At December 31, 2014
    (345.1)Remeasurement of postemployment
      benefits
    5.9Investment hedge
    954.4Investment hedge - put option of a
      subsidiary interest
    551.7Cash flow hedge -
      gains/(losses)
    (335.9)Gains/losses on translation of
      other foreign operations
    1,864.2Recognized in other comprehensive
      income
    3,040.3Recognized in income
      statement
    (2,406.4)Changes directly in balance
      sheet
    (12.5)Recognized in deferred
taxOthers
    (12.5)At December 31, 2015
    276.3Full recognition of actuarial gains/(losses)
    57.7Investment hedge
    (12.0)Investment hedge - put option of a subsidiary
      interest
    (364.6)Cash flow hedge - gains/(losses)
    536.2Gains/(losses) on translation of other foreign
      operations
    (578.2)Recognized in other comprehensive
      income
    (360.9)Recognized in income statement
    98.9Changes directly in balance sheet
    (75.8)Recognized in deferred tax
    (21.6)Acquisitions through stock exchange
    (46.7)Sale through business stock exchange
    25.1Recognized in other group of balance
      sheet
    (54.2)At December 31, 2016
    (61.5)
  18.INVENTORIES  2016
    2015Finished goods
    1,445.5
    1,572.5Work in progress
    328.5
    304.7Raw material
    1,962.7
    1,857.4Consumables
    50.0
    50.6Spare parts and other
    447.2
    420.4Prepayments
    234.5
    239.4Impairment losses
    (121.3)
    (106.8)4,347.1
    4,338.2
  Write-offs/losses on inventories
recognized in the income statement amounted toR$114.4 in2016 (R$15.0in2015).  19.TRADE RECEIVABLES  2016
    2015Trade receivables
    4,774.5
    4,499.8Bad debt provision
    (443.7)
    (418.7)Net, trade receivables
    4,330.8
    4,081.1Related parties
    37.3
    84.6Current trade receivables
    4,368.1
    4,165.7


F-55

---



The aging of our current trade
receivables, net of impairment losses, is detailed as follows:  Net carrying amount as of December
      31,
    No past due
    Past due – until 30
    days
    Past due – between 31 - 60 days
    Past due – between 61 - 90
      days
    Past due – between 91 - 180
      days
    Past due – between 181 - 360
      days
    Past due 360 daysTrade receivables
    4,774.5
    4,093.6
    187.9
    28.4
    43.7
    30.0
    38.9
    352.0Bad debt provision
    (443.7)
    (6.9)
    (1.9)
    (4.1)
    (9.9)
    (30.0)
    (38.9)
    (352.0)2016
    4,330.8
    4,086.7
    186.0
    24.3
    33.8
    -
    -
    -Trade receivables
    4,499.7
    3,694.3
    323.3
    43.5
    44.0
    23.4
    39.1
    332.1Bad debt provision
    (418.7)
    (9.2)
    -
    (6.8)
    (9.0)
    (22.5)
    (39.1)
    (332.1)2015
    4,081.0
    3,685.1
    323.3
    36.7
    35.0
    0.9
    -
    -
  Impairment losses on trade receivables recognized in the
income statement in 2016 amount toR$82.1(R$79.0 in 2015). Company’s exposure to credit risk, currency and interest
rate risks is disclosed in Note 27 -Financial instruments and risks.  20.CASH AND CASH
EQUIVALENTS  2016
    2015Short term bank deposits
    (i)
    4,027.6
    8,534.9Current bank accounts
    3,467.3
    4,628.1Cash
    381.9
    457.2Cash and cash equivalents
    7,876.8
    13,620.2Bank overdrafts
    -
    (2.5)Cash and cash equivalents less bank
      overdraft
    7,876.8
    13,617.7
  (i) The balance refers mostly to Bank
Deposit Certificates - CDB, high liquidity, which are readily convertible into
known amounts of cash and which are subject to an insignificant risk of change
in value.  21.CHANGES IN EQUITY  (a) Capital stock  2016
    
    2015Million of commom shares
    Million of Real
    
    Million of commom shares
    Million of RealBeginning balance as per statutory
    books
    15,717.6
    57,614.1
    
    15,712.6
    57,582.3Share issued
    -
    -
    
    5.0
    31.815,717.6
    57,614.1
    
    15,717.6
    57,614.1


F-56

---



(b) Capital reserves  Capital ReservesTreasury shares
    Share Premium
    Others capital reserves
    Share-based Payments
    TotalAt January 1, 2015
    (172.8)
    53,662.8
    700.9
    832.4
    55,023.3Capital Increase
    (13.7)
    -
    -
    (8.9)
    (22.6)Acquire shares and result on treasury shares
    (817.0)
    -
    -
    -
    (817.0)Share-based payments
    -
    -
    -
    189.9
    189.9At December 31, 2015
    (1,003.5)
    53,662.8
    700.9
    1,013.4
    54,373.6Acquire shares and result on treasury shares
    94.8
    -
    -
    -
    94.8Share-based payments
    -
    -
    -
    61.5
    61.5At December 31, 2016
    (908.7)
    53,662.8
    700.9
    1,074.9
    54,529.9
  (b.1) Treasury
shares The treasury shares comprise own issued
shares reacquired by the Company and the result on treasury shares that refers
to gains and losses related to share-based payments transactions and
others. Follows the changes of treasury
shares:  Acquire /realization
      shares
    
    Result on Treasure
      Shares
    
    Total Treasure
      SharesThousands shares
    
    Thousands Brazilian
    Real
    
    Thousands shares
    
    Thousands Brazilian
    RealAt January 1, 2015
    0.5
    
    (6.8)
    
    (166.0)
    
    (172.8)Changes during the year
    32.1
    
    (610.7)
    
    (220.1)
    
    (830.7)At December 31, 2015
    32.6
    
    (617.5)
    
    (386.1)
    
    (1,003.5)Changes during the year
    (16.0)
    
    304.7
    
    (209.9)
    
    94.8At December 31, 2016
    16.6
    
    (312.7)
    
    (596.0)
    
    (908.7)
  (b.2) Share
premium  The share premium refers to the
difference between subscription price that the shareholders paid for the shares
and theirs nominal value. Since this is a capital reserve, it can only be used
to increase capital, offset losses, redeem, reimbursement or repurchase
shares. (b.3) Share-based
payment There are different share-based payment programs and
stock option plans which allow the senior management from Ambev S.A. economic
group to receive or acquire shares of the Company. The share-based payment reserve recorded a charge ofR$170.3 in2016 (R$197.1 and R$161.0 in 2015 and 2014,
respectively) (Note 24 –Share-based payments).


F-57

---



(c) Net income
reserves  Net income
reservesInvestment reserve
    Statutory reserve
    Fiscal incentive
    Interest on capital and dividends
      proposed
    TotalAt January 1, 2015
    498.3
    4.5
    2,872.6
    1,508.4
    4,883.8Interest on shareholder ́s equity
    (471.5)
    -
    -
    (1,508.4)
    (1,979.9)Reserves destination:Fiscal incentive reserve
    -
    -
    1,143.6
    -
    1,143.6Interest on shareholder ́s equity
    proposed
    -
    -
    -
    2,039.2
    2,039.2Destination of net income
    2,114.4
    -
    -
    -
    2,114.4At December 31, 2015
    2,141.2
    4.5
    4,016.2
    2,039.2
    8,201.1Interest on shareholder ́s equity
    -
    -
    -
    (2,039.2)
    (2,039.2)Reserves destination:Destination of net income
    1,718.6
    -
    1,819.5
    -
    3,538.1At December 31, 2016
    3,859.9
    4.5
    5,835.7
    -
    9,700.1
  (c.1) Investments
reserve From net income after deductions
applicable, will be aimed no more than 60% (sixty per cent) to investment
reserve to support future investments. (c.2) Statutory
reserve From net income, 5% will be applied
before any other allocation, to the statutory reserve, which cannot exceed 20%
of capital stock. The Company is not required to supplement the statutory
reserve in the year when the balance of this reserve, plus the amount of capital
reserves, exceeds 30% of the capital stock. (c.3) Tax
incentives The Company has tax incentives framed in
certain state and federal industrial development programs in the form of
financing, deferred payment of taxes or partial reductions of the amount due.
These state programs aim to promote the expansion of employment generation,
regional decentralization, complement and diversify the industrial base of the
States. In these states, the grace periods, enjoyment and reductions are
permitted under the tax law. (c.4) Interest on shareholders’ equity /
Dividends Brazilian companies are permitted to
distribute interest attributed to shareholders’ equity calculated based on the
long-term interest rate (TJLP), such interest being tax-deductible, in
accordance with the applicable law and, when distributed, may be considered part
of the minimum mandatory dividends. As determined by its By-laws, the
Company is required to distribute to its shareholders, as a minimum mandatory
dividend in respect of each fiscal year ending on December 31, an amount not
less than 40% of its net income determined under Brazilian law, as adjusted in
accordance with applicable law, unless payment of such amount would be
incompatible


F-58

---



with Ambev S.A.’s financial situation.
The minimum mandatory dividend includes amounts paid as interest on
shareholder’s equity. Events during the year ended
2016: Event
    Approval
    Type
    Date of payment
    Year
    Type of share
    Amount per share
    Total amountBoard of Directors Meeting
    01/15/2016
    Interest on shareholder ́s equity
    02/29/2016
    2015
    ON
    0.1300
    2,039.2Board of Directors Meeting
    06/24/2016
    Dividends
    07/29/2016
    2016
    ON
    0.1300
    2,040.8Board of Directors Meeting
    10/19/2016
    Dividends
    11/25/2016
    2016
    ON
    0.1600
    2,511.9Board of Directors Meeting
    12/01/2016
    Interest on shareholder ́s equity
    12/29/2016
    2016
    ON
    0.2200
    3,454.2Board of Directors Meeting
    12/22/2016
    Dividends
    02/23/2017
    2016
    ON
    0.0700
    1,099.111,145.2
  Events during the year ended
2015: Event
    Approval
    Type
    Date of payment
    Type of share
    Ammount per share
    Total amountBoard of Directors Meeting
    02/23/2015
    Interest on shareholder ́s
    equity
    03/31/2015
    ON
    0.0300
    471.5
    (i)Board of Directors Meeting
    02/23/2015
    Interest on shareholder ́s
    equity
    03/31/2015
    ON
    0.0600
    943.0Board of Directors Meeting
    05/13/2015
    Interest on shareholder ́s
    equity
    06/29/2015
    ON
    0.1000
    1,570.6Board of Directors Meeting
    08/28/2015
    Dividends
    09/28/2015
    ON
    0.1500
    2,352.4Board of Directors Meeting
    12/01/2015
    Interest on shareholder ́s
    equity
    12/30/2015
    ON
    0.1500
    2,352.77,690.2
  (i) These dividends refer to the total amount approved
for distribution in the period, and were accrued in investments
reserves.  Events during the year ended
2014:  Event
    Approval
    Type
    Date of payment
    Type of share
    Ammount per share
    Total amountBoard of Directors Meeting
    01/06/2014
    Interest on shareholder ́s
    equity
    01/23/2014
    ON
    0.1540
    2,412.2Board of Directors Meeting
    01/06/2014
    Dividends
    01/23/2014
    ON
    0.1000
    1,566.4Board of Directors Meeting
    03/25/2014
    Dividends
    04/25/2014
    ON
    0.0600
    940.0
    (i)Board of Directors Meeting
    03/25/2014
    Dividends
    04/25/2014
    ON
    0.0700
    1,096.6Board of Directors Meeting
    07/14/2014
    Interest on shareholder ́s
    equity
    08/28/2014
    ON
    0.1000
    1,569.3Board of Directors Meeting
    07/14/2014
    Dividends
    08/28/2014
    ON
    0.0600
    941.5Board of Directors Meeting
    10/15/2014
    Dividends
    11/13/2014
    ON
    0.2200
    3,454.1Board of Directors Meeting
    12/22/2014
    Interest on shareholder ́s
    equity
    01/14/2015
    ON
    0.1300
    2,042.6Board of Directors Meeting
    12/31/2014
    Interest on shareholder ́s
    equity
    01/30/2015
    ON
    0.0960
    1,508.415,530.8
  (i) These dividends refer to the total amount approved
for distribution in the period, and were accrued in investments
reserves


F-59

---



(d)
Carrying value adjustments   Carrying value adjustmentsTranslation
    reserves
    Cash flow hedge
    Actuarial gains/
      (losses)
    Put option granted on
      subsidiary
    Gains/(losses) of non-controlling
      interest ́s share
    Business
    combination
    Accounting adjustments for
      transactions between shareholders
    TotalAt January 1, 2015
    453.3
    266.0
    (1,109.1)
    (2,057.3)
    2,110.1
    156.1
    (75,087.0)
    (75,267.9)Comprehensive
      income:
    
    
    
    
    
    
    
    -Gains/(losses) on translation of foreign
      operations
    3,018.9
    -
    -
    -
    -
    -
    -
    3,018.9Cash flow hedges
    -
    666.2
    -
    -
    -
    -
    -
    666.2Actuarial gains/(losses)
    -
    -
    (22.4)
    -
    -
    -
    -
    (22.4)Total Comprehensive income
    3,018.9
    666.2
    (22.4)
    -
    -
    -
    -
    3,662.7Put option granted on
      subsidiary
    -
    -
    -
    (189.4)
    -
    -
    -
    (189.4)Gains/(losses) of controlling
      interest ́s share
    -
    -
    -
    -
    13.5
    -
    -
    13.5Accounting reversal effect of
      predecessor cost:Reversal effect revaluation of
      fixed assets under the predecessor basis accounting
    -
    -
    -
    -
    -
    -
    (75.9)
    (75.9)At December 31, 2015
    3,472.2
    932.2
    (1,131.5)
    (2,246.7)
    2,123.6
    156.1
    (75,162.9)
    (71,857.0)Comprehensive
      income:Gains/(losses) on translation of
      foreign operations
    (3,728.7)
    -
    -
    -
    -
    -
    -
    (3,728.7)Cash flow hedges
    -
    (1,076.7)
    -
    -
    -
    -
    -
    (1,076.7)Actuarial gains/(losses)
    -
    -
    (130.7)
    -
    -
    -
    -
    (130.7)Total Comprehensive income
    (3,728.7)
    (1,076.7)
    (130.7)
    -
    -
    -
    -
    (4,936.1)Put option granted on
      subsidiary
    -
    -
    -
    (144.2)
    -
    -
    -
    (144.2)Gains/(losses) of controlling
      interest ́s share
    -
    -
    -
    -
    (2.8)
    -
    -
    (2.8)Transaction of stock
    exchange
    (33.0)
    -
    -
    -
    29.9
    -
    -
    (3.1)Accounting reversal effect of
      predecessor cost:Reversal effect revaluation of
      fixed assets under the predecessor basis accounting
    -
    -
    -
    -
    -
    -
    (75.9)
    (75.9)At December 31, 2016
    (289.5)
    (144.5)
    (1,262.2)
    (2,390.9)
    2,150.7
    156.1
    (75,238.8)
    (77,019.1)


F-60

---



(d.1) Translation reserves  The translation reserves comprise all foreign currency
exchange differences arising from the translation of the financial statements
with a functional currency different from the Real. The translation reserves also comprise the portion of the
gain or loss on the foreign currency liabilities and on the derivative financial
instruments determined to be effective net investment hedges in conformity with
IAS 39.  (d.2) Cash flow hedge reserves  The hedging reserves comprise the effective portion of
the cumulative net change in the fair value of cash flow hedges to the extent
the hedged risk has not yet impacted profit or loss (For additional information,
see Note 27 –Financial instruments and risks).  (d.3) Actuarial gains and losses The actuarial gains and losses include expectations with
regards to the future pension plans obligations. Consequently, the results of
actuarial gains and losses are recognized on a timely basis considering best
estimate obtained by Management. Accordingly, the Company recognizes on a
monthly basis the results of these estimated actuarial gains and losses
according to the expectations presented based on an independent actuarial
report. (d.4)Put optiongranted onsubsidiary As part of the shareholders agreement between the Ambev
S.A. and ELJ, an option to sell (“put”) and to purchase (“call”) was issued,
which may result in an acquisition by Ambev S.A. of the remaining shares of CND,
for a value based on EBITDA from operations, the “put” exercisable annually
until 2019 and the “call” from 2019. On December 31, 2016 the put option held by
ELJ is valued at R$4,878.5 (R$5,558.6 on December 31, 2015) and the liability
categorized as “Level 3”, as the Note 27 (b) and in accordance with the IFRS 3.
No value has been assigned to the call option held by the Company. The fair
value of this consideration deferred was calculated by using standard valuation
techniques (present value of the principal amount and future interest rates,
discounted by the market rate). The criteria used are based on market
information and from reliable sources and the fair value is revaluated on an
annual basis.  As part of the agreement to acquire the remaining shares
of Sucos do Bem, the Company has a put option determined by gross revenue of its
products and exercisable from 2019. On December 31, 2016 the option is valued at
R$127.7.  As part of the acquisition agreement of all shares of the
company Tropical Juice, the Company has a put option exercisable from 2018. On
December 31, 2016 the option is valued at R$23.4.


F-61

---



The reconciliation of changes in these options is
presented in Note 27– Financial instruments and risks.  (d.5) Accounting for acquisition of non-controlling
interests In transactions with non-controlling
interests of the same business, even when performed at arm's length terms,
that present valid economic grounds and reflect normal market conditions, will
be consolidated by the applicable accounting standards as occurred within the
same accounting entity. As determined by IFRS 10, any difference between the
amount paid (fair value) for the acquisition of non-controlling interests and
are related to carrying amount of such non-controlling interest shall be
recognized directly in controlling shareholders’ equity. The acquisition of
non-controlling interest related to Old Ambev, the above mentioned adjustment
was recognized in the Carrying value adjustments when
applicable.  (e)Earnings per share  Basic and diluted earnings per
share The calculation of basic earnings per share is based on
the net income attributable to equity holders of Ambev S.A. and the proportional
weighted average number of shares outstanding during the year. Diluted earnings per shareis based on the net income attributable to equity holders
of Ambev S.A. and theadjusting the weighted average number of shares
outstandingduring the yearto assume conversion of all potentially dilutive
shares, as follows:  Million shares
    2016
    
    2015
    
    2014Common
    
    Common
    
    CommonIssued shares at December 31, net of treasury
      shares (i)
    15,696.6
    
    15,696.1
    
    15,682.9Effect of shares options
    126.5
    
    124.0
    
    136.9Weighted average number of shares (diluted) at
      December 31
    15,823.1
    
    15,820.1
    
    15,819.8
  (i) Not considered treasury shares.


F-62

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The tables below present the calculation of earnings per
share (“EPS”):  2016
    
    2015
    
    2014Common
    
    Common
    
    CommonIncome attributable to equity holders of Ambev
    12,546.6
    
    12,423.8
    
    12,065.5Weighted average number of shares (non
      diluted)
    15,696.6
    
    15,696.1
    
    15,682.9Basic EPS (i)
    0.80
    
    0.79
    
    0.77Income attributable to equity holders of Ambev
    12,546.6
    
    12,423.8
    
    12,065.5Weighted average numbers of shares (diluted)
    15,823.2
    
    15,820.1
    
    15,819.9Diluted EPS (i)
    0.79
    
    0.79
    
    0.76
  (i) Expressed in Brazilian Reais.  (f) Destinations  At December 31, 2016, the Company has
done the appropriations to retained earnings, in accordance with the Brazilian
Corporate law and the Company’s bylaws.The dividends payments made until
December 2016 were approved at the Board of Directors’ Meeting. Regarding the basis for dividends, the
Company believes that the predecessor basis of accounting, as well as its
presentation for comparative purposes, will not affect the determination of the
minimum mandatory dividend. Therefore, the Company intends to adjust the
calculation basis of the minimum mandatory dividend to delete any current and
future impacts on net income resulting from the adoption of this accounting
practice, related to the amortization/depreciation of surplus assets or even a
possible impairment of goodwill.  2016
    
    2015
    
    2014Net income, attributable to equity holders of
      Ambev
    12,546.6
    
    12,423.8
    
    12,065.5Prescribed dividends
    21.6
    
    16.2
    
    16.1Reversal effect of revaluation of fixed assets by
      predecessor
    75.9
    
    75.9
    
    75.9Prior year adjustment
    -
    
    -
    
    (24.1)Retained earnings basis for dividends and
      destinations
    12,644.1
    
    12,515.9
    
    12,133.4Dividends distributed and accrued to
      distributeDividends and Interest on capital paid based on
      profit
    5,651.8
    
    7,218.7
    
    7,061.4Interest on capital approved for
      distribution
    3,454.2
    
    2,039.2
    
    3,551.0Total of dividends
    9,106.0
    
    9,257.9
    
    10,612.4Percentage of distributed profit
    72%
    
    74%
    
    87%


F-63

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22.INTEREST-BEARING LOANS AND
BORROWINGS  2016
    2015Secured bank loans
    665.8
    672.6Unsecured bank loans
    609.9
    1,076.0Debentures and unsecured bond issues
    100.8
    374.4Other unsecured loans
    356.2
    163.5Financial leasing
    33.0
    30.4Non-current liabilities
    1,765.7
    2,316.9Secured bank loans
    1,381.4
    320.0Unsecured bank loans
    1,910.1
    925.9Debentures and unsecured bond issues
    296.4
    -Other unsecured loans
    33.5
    34.3Financial leasing
    9.2
    2.4Current liabilities
    3,630.6
    1,282.6
  Additional information regarding the exposure of the
Company to the risks of interest rate and foreign currency are disclosed on Note
27 –Financial instruments and
risks.  At December 31, 2016 and 2015 debts
presented the following interest rates:  2016
    
    
    2015Debt instruments
    Average rate %
    Current
    Non-current
    
    Average rate %
    Current
    Non-currentDebt denominated in USD fixed rate
    6.00%
    -
    11.5
    
    6.00%
    -
    15.7Debt denominated in US dollars floating
      rate
    1.55%
    1,508.8
    351.1
    
    1.78%
    379.7
    472.8Debt denominated in CAD dollars floating
      rate
    1.62%
    1,259.1
    -
    
    -
    -
    -BNDES basket debt floating rate
    (UMBNDES)
    1.70%
    22.7
    -
    
    1.74%
    131.8
    27.2Other latin american currency fixed
    rate
    8.86%
    114.1
    233.0
    
    9.31%
    177.1
    240.5Other latin american currency floating
      rate
    2.66%
    -
    4.9
    
    -
    -
    -TJLP BNDES denominated floating rate
      (TJLP)
    9.66%
    216.2
    398.6
    
    9.79%
    426.6
    403.9Reais debt - ICMS fixed rate
    4.13%
    33.4
    344.7
    
    4.61%
    34.3
    147.7Reais debt - debentures floating rate %
      CDI
    13.63%
    52.9
    -
    
    -
    -
    -Reais debt - fixed rate
    7.64%
    423.4
    421.9
    
    7.71%
    133.1
    1,009.13,630.6
    1,765.7
    
    
    1,282.6
    2,316.9
  Terms and debt repayment schedule – December 31,
2016 Total
    Less than 1 year
    1-2 years
    2-3 years
    3-5 years
    More than 5 yearsSecured bank loans
    2,047.2
    1,381.4
    329.1
    85.8
    69.3
    181.6Unsecured bank loans
    2,520.0
    1,910.1
    524.4
    85.5
    -
    -Debentures and unsecured bond issues
    397.2
    296.4
    -
    -
    100.8
    -Unsecured other loans
    389.7
    33.5
    64.1
    50.5
    72.5
    169.1Finance lease liabilities
    42.2
    9.2
    14.9
    18.1
    -
    -5,396.3
    3,630.6
    932.5
    239.9
    242.6
    350.7


F-64

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Terms and debt repayment schedule –
December 31, 2015 Total
    Less than 1 year
    1-2 years
    2-3 years
    3-5 years
    More than 5 yearsSecured bank loans
    992.6
    320.0
    268.9
    78.9
    111.0
    213.8Unsecured bank loans
    2,001.9
    925.9
    788.7
    202.6
    84.7
    -Debentures and unsecured bond issues
    374.4
    -
    275.5
    -
    -
    98.9Unsecured other loans
    197.8
    34.3
    34.4
    31.1
    34.5
    63.5Finance lease liabilities
    32.8
    2.4
    4.8
    3.8
    21.8
    -3,599.5
    1,282.6
    1,372.3
    316.4
    252.0
    376.2
  Contract clauses
(covenants) As at December 31, 2016, the Company's loans had equal
rights to payment without subordination clauses. Except for the credit lines due
to FINAME contracted by the Company with Banco Nacional de Desenvolvimento
Econômico e Social – BNDES (“BNDES”), where collateral were provided on assets
acquired with the credit granted which serve as collateral; other loans and
financing contracted by the Company predicted only guarantees as personal
collateral or are unsecured. The most loan contracts contained financial
covenants including: • Financial covenants, including limitation on new
indebtedness; • Going-concern; • Maintenance, in useor in good condition for the business, ofthe Company's properties and assets; • Restrictions on acquisitions, mergers, sale or disposal
of its assets; •Disclosure of financial statements under Brazilian GAAP
and IFRS; and/or • Noprohibition related to new real
guaranteesfor loans contracted, except if: (i) expressly
authorized under the aforementioned loan agreement, (ii) new loans contracted
from financial institutions linked to the Brazilian government - including the
BNDES or foreign governments; - or foreign governments, multilateral financial
institutions (eg World Bank) or located in jurisdictions in whichthe Companyoperates; These clauses apply to the extent that the events
mentioned produce material adverse effects onthe Companyand / or its subsidiaries or the rights of its creditors,
and, in the event of any of the events provided in the
clauses, it may have been granted to the Company a grace period
to cure such default. Additionally, all agreements entered into with the BNDES
are subject to certain “provisions applicable to agreements entered into with
the BNDES” (“Provisions”). Such Provisions require the borrower, to obtain prior
consent of BNDES if they, for instance, wish to: (i) raise


F-65

---



new loans (except for loans described in the Provisions);
(ii) give preference and/or priority to other debts; and/or (iii) dispose of or
encumber any item of their fixed assets (except as provided for in the
Provisions). As at December 31, 2016, the Company was in compliance
with all its contractual obligations for its loans and
financings.  23.EMPLOYEE BENEFITS The Companysponsors pension plans to defined benefit to employees
in Brazil and subsidiaries located in the Dominican Republic, Uruguay, Bolivia
and Canada based on employees' salaries and length of service. The entities are
governed by local regulations and practices of each individual country as well
as the relationship withthe Company’s pension funds and their composition. Ambev S.A. provides post-employment
benefits, including pension benefits and medical and dental care.
Post-employment benefits are classified as either defined contribution or
defined benefit plans. The defined benefit plans and the other
post-employment benefits are not granted to new retirees. Defined contribution plans These plans are funded by the
participants and the sponsor, and are managed by administered pension funds.
During 2016, the Company contributedR$25.3 (R$19.0during 2015) to these funds, which were
recorded as an expense. Once the contributions have been paid, the Company has
no further payment obligations.


F-66

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Defined benefit
plans At December 31, 2016 the net liability
for defined benefit plans consists of the following: 2016
    2015
    2014Present value of funded obligations
    (4,592.1)
    (4,646.4)
    (4,156.4)Fair value of plan assets
    3,845.2
    3,781.4
    3,550.1Present value of net obligations
    (746.9)
    (865.0)
    (606.3)Present value of unfunded obligations
    (741.3)
    (756.6)
    (651.6)Present value of net obligations
    (1,488.2)
    (1,621.6)
    (1,257.9)Asset ceiling
    (532.2)
    (534.5)
    (453.3)Net liability
    (2,020.4)
    (2,156.1)
    (1,711.2)Other long term employee benefits
    (83.8)
    (57.2)
    (33.0)Total employee benefits
    (2,104.2)
    (2,213.3)
    (1,744.2)Employee benefits amount in the balance
      sheet:Liabilities
    (2,137.7)
    (2,221.9)
    (1,757.0)Assets
    33.5
    8.6
    12.8Net liabilities
    (2,104.2)
    (2,213.3)
    (1,744.2)
  The changes in the present value of the
defined benefit obligations were as follows: 2016
    2015
    2014Defined benefit obligation at January 1
      st
    (5,403.0)
    (4,808.0)
    (5,325.9)Acquisitions through stock exchange
    (67.3)
    -
    -Prior year adjustment
    -
    -
    1,054.6Service cost
    (43.1)
    (42.4)
    (36.8)Interest cost
    (320.5)
    (308.2)
    (283.0)Gains and (losses) on settlements or reductions in
      benefits
    2.2
    1.1
    (1.5)Contributions by plan participants
    (5.2)
    (5.2)
    (3.6)Actuarial gains and (losses) - geographical
      assumptions
    (20.1)
    -
    9.1Actuarial gains and (losses) - financial
      assumptions
    (321.1)
    182.5
    (293.9)Experience adjustment
    (182.8)
    (10.6)
    (111.6)Reclassifications
    11.1
    -
    -Exchange differences
    599.6
    (805.1)
    (152.8)Benefits paid
    416.8
    392.9
    337.4Defined benefit obligation at December,
      31
    (5,333.4)
    (5,403.0)
    (4,808.0)
  The present value of funded obligations
includeR$683.4(R$494.1 in 2015 and R$559.1 in 2014)
of two health care plans for which the benefits are provided directly by
Fundação Zerrenner. Fundação Zerrenner is a legally distinct entity whose main
goal is to providethe Company’s current and retired employees and
managers with health care and dental assistance, technical and superior
education courses, maintaining facilities for assisting and helping elderly
people, among other things, through direct initiatives or through financial
assistance agreements with other entities.


F-67

---



The changes in the fair value of plan
assets are as follows: 2016
    2015
    2014Fair value of plan assets at January 1
      st
    3,781.4
    3,550.1
    4,088.6Prior year adjustment
    -
    -
    (919.1)Interest Income
    274.7
    259.5
    234.4Administrative costs
    (3.7)
    (3.4)
    (2.8)Expected Return excluding interest
    income
    269.8
    (173.2)
    313.3Acquisition through business
    combination
    73.5
    -
    -Contributions by employer
    175.9
    107.6
    91.2Contributions by plan participants
    5.6
    5.2
    3.6Exchange differences
    (315.3)
    428.5
    78.3Benefits paid excluding costs of
      administration
    (416.7)
    (392.9)
    (337.4)Fair value of plan assets at December,
      31
    3,845.2
    3,781.4
    3,550.1
  The real return on plan assets generated in 2016 was a
gain ofR$544.5 (gain of R$86.3 in 2015). At December 31, 2016, the Company
recorded R$33.5 (R$8.6 at December 31, 2015) up to the asset ceiling not
exceeding the present value of future benefits. The changes in the asset ceiling not
exceeding the present value of future benefits are as follow: 2016
    2015
    2014Asset ceiling impact at January 1
      st
    8.6
    12.8
    23.5Acquisitions through stock exchange
    10.4
    -
    -Interest income/(expenses)
    1.3
    1.1
    1.3Change in asset ceiling excluding amounts included
      in interest income/(expenses)
    15.8
    (5.3)
    (3.9)Prior year adjustment
    -
    -
    (8.1)Effect of exchange rate fluctuations
    (2.6)
    -
    -Asset ceiling impact at December 31
    33.5
    8.6
    12.8
  The income/(expense) recognized in the
income statement with regard to defined benefit plans is detailed as
follows: 2016
    2015
    2014Current service costs
    (43.1)
    (42.4)
    (36.4)Administrative costs
    (3.7)
    (3.4)
    (2.8)(Gains) losses on settlements and
      curtailments
    0.7
    1.1
    (1.5)Income from operations
    (46.1)
    (44.7)
    (40.7)Financial cost
    (105.6)
    (97.6)
    (80.6)Total expense for employee
    benefits
    (151.7)
    (142.3)
    (121.3)


F-68

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The employee benefit revenue/(expenses) are included in
the following line items in the income statement: 2016
    2015
    2014Cost of sales
    (24.5)
    (19.3)
    (20.2)Sales and marketing expenses
    (9.5)
    (7.9)
    (7.9)Administrative expense
    (10.2)
    (17.5)
    (12.6)Financial expenses
    (105.6)
    (97.6)
    (80.6)Exceptional items
    (1.9)
    -
    -(151.7)
    (142.3)
    (121.3)
  The assumptions used in the calculation of the
obligations are as follows:  2016
    2015
    2014Discount rate
    6.3%
    6.2%
    6.2%Inflation
    3.0%
    2.7%
    2.8%Future salary increases
    3.1%
    3.5%
    3.6%Future pension increases
    3.0%
    2.8%
    3.0%Medical cost trend rate
    7,4% p.a. reducing to 6,4%
    7.0% p.a. reducing to 5.7%
    7.2% p.a. reducing to 6.0%Dental claims trend rate
    4.5%
    4.5%
    4.5%Life expectation for an over 65 years old male
    83
    84
    84Life expectation for an over 65 years old
      female
    86
    86
    87
  Through its defined benefit pension plans and
post-employment medical plans, the Company is exposed to a number of risks, the
most significant are detailed below:  Asset volatility  The plans liabilities are calculated using a discount
rate set with reference to high quality corporate yields; if plan assets
underperform this yield, the Company’s net defined benefit obligation may
increase. Most of the Company’s funded plans hold a significant proportion of
equities, which are expected to outperform corporate bonds in the long-term
while providing volatility and risk in the short-term. As the plans mature, the
Company usually reduces the level of investment risk by investing more in assets
that better match the liabilities.  Changes in bond
yields  A decrease in corporate bond yields will increase plan
liabilities, although this will be partially offset by an increase in the value
of the plans’ bond holdings.  Inflation risk  Some of the Company’s pension obligations are linked to
inflation, and higher inflation will lead to higher liabilities. The majority of
the plan’s assets are either unaffected by or loosely correlated with inflation, meaning that an increase in
inflation could potentially increase the Company’s net benefit
obligation.


F-69

---



Life expectancy  The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities.  Investment strategy  In case of funded plans, the Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension schemes. Within this framework, the Company’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency.  The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is: 2016

   

   2015

   

   2014In millions of Brazilian Reais

   Change in assumption

   Increase in assumption

   Decrease in assumption

   

   Increase in assumption

   Decrease in assumption

   

   Increase in assumption

   Decrease in assumptionMedical cost trend rate

   100 bases points

   (104.7)

   90.2

   

   (77.5)

   67.4

   

   (86.7)

   74.7Discount rate

   50 bases points

   292.6

   (311.5)

   

   262.5

   (280.1)

   

   233.2

   (252.6)Future salary increase

   50 bases points

   (16.6)

   15.3

   

   (13.3)

   12.5

   

   (13.8)

   12.8Longevity

   One year

   (175.9)

   172.9

   

   (135.1)

   131.1

   

   (134.1)

   128.6
  The data presented in these tables are purely hypothetical and are based on changes in individual assumptions holding all other assumptions constant: economic conditions and changes therein always affect the other assumptions at the same time and its effects are not linear. Therefore, the above information is not necessarily a reasonable representation of future results.  The plans assets at December 31, 2016, 2015 and 2014 consist of the following: 2016

   

   2015

   

   2014Rated

   Unrated

   Total

   

   Rated

   Unrated

   Total

   

   Rated

   Unrated

   TotalGovernment bonds

   41%

   -

   41%

   

   29%

   -

   29%

   

   30%

   -

   30%Corporate bonds

   13%

   -

   13%

   

   23%

   -

   23%

   

   10%

   -

   10%Equity instruments

   18%

   -

   18%

   

   15%

   -

   15%

   

   28%

   -

   28%Property

   -

   -

   -

   

   -

   1%

   1%

   

   -

   1%

   1%Cash

   1%

   -

   1%

   

   -

   -

   -

   

   -

   -

   -Others

   27%

   -

   27%

   

   32%

   -

   32%

   

   31%

   -

   31%


F-70

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The overall expected rate of return is calculated by
weighting the individual rates in accordance with the anticipated share in the
total investment portfolio.  Ambev S.A. expects to contribute approximatelyR$37.9to its defined benefit plans in 2017.  24.SHARE-BASED
PAYMENTS  There are different share-based payment programs and
stock option plans which allow the senior management from the Company and its
subsidiaries to receive or acquire sharesof the Company. For all option plans, the fair value is estimated at
grant date, using the Hull binomial pricing model, modified to reflect the IFRS
2 requirement that assumptions about forfeiture before the end of the vesting
period cannot impact the fair value of the option.  This current model of share based
payment includes two types of grants: Grant 1: the beneficiary may choose to
allocate 30%, 40%, 60%, 70% or 100% of the amount related to the profit share he
received in the year, at the immediate exercise of options, thus acquiring the
corresponding shares of the Company, and the delivery of a substantial part of
the acquired shares is conditioned to the permanency in the Company for a period
of five-years from the date of exercise; Grant 2: the beneficiary may exercise
the options after a period of five years. Additionally, as a means of creating a
long term incentive (wealth incentive) for certain senior employees and members
of management considered as having “high potential,” the company issue share
appreciation rights in the form of phantom stocks or stocks to future delivery
to those employees, pursuant to which the beneficiary shall receive two separate
lots – Lot A and Lot B – subject to maturation periods of five and ten years,
respectively. The weighted average fair value of the
options and assumptions used in applying theAmbev S.A.option pricing model for the “Grant 2”
of 2016, 2015 and 2014 grants are as follows:  In R$, except when otherwise
      indicated
    2016
    (i)
    2015
    (i)
    2014
    (i)Fair value of options
    granted
    6.21
    
    7.84
    
    5.20Share price
    17.18
    
    18.41
    
    15.93Exercise price
    17.18
    
    18.41
    
    15.93Expected volatility
    27.0%
    
    27.5%
    
    32.5%Vesting year
    5
    
    5
    
    5Expected dividends
    5%
    
    5%
    
    5%Risk-free interest rate
    12.4%
    (ii)
    15.9%
    (ii)
    2.2% to 12.4%
    (ii)
  (i)Information based on weighted average
plans granted, except for the expected dividends and risk-free interest
rate.  (ii) The percentages include the grants of stock options and
ADRs during the period, in which the risk-free interest rate of ADRs are
calculated in U.S. dollar.


F-71

---



The total number of outstanding options developed as
follows: Thousand options
    2016
    
    2015
    
    2014Options outstanding at January
      1st
    121,770
    
    126,149
    
    147,718Options issued during the
      period
    24,806
    
    16,568
    
    17,045Options exercised during the
      period
    (11,613)
    
    (19,975)
    
    (34,760)Options forfeited during the
      period
    (3,719)
    
    (972)
    
    (3,854)Options outstanding at ended
      year
    131,244
    
    121,770
    
    126,149
  The range of exercise prices of the outstanding options
is betweenR$0.02(R$0.35 as of December 31, 2015 and R$1.06 as of
December 31, 2014) andR$28.32(R$26.57 as of December 31, 2015 and R$19.14 as of
December 31, 2014) and the weighted average remaining contractual life is
approximately5.96years (6.30 years as of December 31, 2015 and 6.87 years
as of December 31, 2014).  Of the 131,444 thousand outstanding options (121,770
thousand as of December 31, 2015), 52,780 thousand options are vested as at
December 31, 2016 (48,723 thousand as of December 31, 2015).  The weighted average exercise price of
the options is as follows: In R$ per share
    2016
    
    2015
    
    2014Options outstanding at January 1st
    12.36
    
    10.07
    
    6.30Options issued during the
      period
    17.18
    
    18.42
    
    16.02Options forfeited during the
      period
    12.83
    
    20.35
    
    11.28Options exercised during the
      period
    2.52
    
    5.05
    
    3.84Options outstanding at ended
      period
    13.87
    
    12.36
    
    10.07Options exercisable at ended
      period
    3.66
    
    3.29
    
    2.96
  For the options exercised during 2016, the weighted
average share price on the exercise date was R$18.41 (R$18.95 as of December 31,
2015).  To settle the exercised stock options,the
Companymay use
treasury shares. The current limit of authorized capital is considered
sufficient to meet all stock option plans if the issue of new shares is required
to meet the grants awarded in the Programs. During the period,AmbevS.A. issued 7,329 thousand (2,692
thousand in 2015) deferred stock units related to exercise of the options in the
model “Grant 1”. These deferred stock units are valued at the share price of the
day of grant, representing a fair value of approximately R$133,9 (R$47,5 in
2015), and cliff vest after five years.


F-72

---



The total number of shares purchased
under the plan of shares by employees, whose grant is deferred to a future time
under certain conditions (deferred stock), is shown below:  Thousand deferred
    shares
    2016
    
    2015
    
    2014Deferred shares outstanding at January
      1st
    19,056
    
    17,490
    
    15,588New deferred shares during the
      period
    7,329
    
    2,692
    
    5,198Deferred shares granted during the
      period
    (6,118)
    
    (804)
    
    (2,312)Deferred shares forfeited during the
      period
    (1,007)
    
    (322)
    
    (984)Deferred shares outstanding at ended
      year
    19,260
    
    19,056
    
    17,490
  Additionally, certain employees and directors of the
Company receive options to acquire ABI shares, the compensation cost of which is
recognized in the income statement against equity. These share-based payments generated an expense ofR$189.3in the year ended December 31, 2016 (R$209.4 and R$167.7
for the year ended December 31, 2015 and 2014, respectively), recorded as
administrative expenses.  25.TRADE PAYABLES 2016
    2015Trade payables
    237.8
    110.0Non-current
    237.8
    110.0Trade payables
    9,793.0
    11,109.1Related Parties
    1,075.8
    724.6Current
    10,868.8
    11,833.7Total
    11,106.6
    11,943.7
  26.PROVISIONS (a) Provision changes Balance as of December 31,
      2015
    Effect of changes in foreign
      exchange rates
    Stock exchange
    Additions
    Provisions used and
      reversed
    Balance as of December 31,
      2016Restructuring
    10.0
    (1.3)
    -
    -
    (1.3)
    7.4ContingenciesTaxes on sales
    38.4
    (0.1)
    -
    573.6
    (364.7)
    247.2Income tax
    184.0
    (4.0)
    -
    207.8
    (64.4)
    323.4Labor
    179.8
    (4.9)
    (2.5)
    177.9
    (184.5)
    165.8Civil
    31.5
    (2.0)
    (2.3)
    97.2
    (80.5)
    43.9Others
    178.9
    (26.3)
    (0.5)
    78.4
    (84.2)
    146.3Total
    612.6
    (37.3)
    (5.3)
    1,134.9
    (778.3)
    926.6Total provisions
    622.6
    (38.6)
    (5.3)
    1,134.9
    (779.6)
    934.0


F-73

---



(b)Disbursement
expectative  Balance as of December 31, 2016
    1 year or less
    1-2 years
    2-5 years
    Over 5 yearsRestructuring
    7.4
    6.7
    0.7
    -
    -ContingenciesTaxes on sales
    247.2
    25.7
    198.6
    5.6
    17.3Income tax
    323.4
    33.6
    236.5
    53.3
    -Labor
    165.8
    77.4
    45.8
    33.3
    9.3Civil
    43.9
    17.3
    21.0
    3.4
    2.2Others
    146.3
    7.9
    35.9
    99.2
    3.3Total
    926.6
    161.9
    537.8
    194.8
    32.1Total provisions
    934.0
    168.6
    538.5
    194.8
    32.1
  Balance as of December 31, 2015
    1 year or less
    1-2 years
    2-5 years
    Over 5 yearsRestructuring
    10.0
    9.0
    1.0
    -
    -ContingenciesTaxes on sales
    38.4
    9.4
    25.8
    0.4
    2.8Income tax
    184.0
    30.6
    26.3
    127.1
    -Labor
    179.8
    40.9
    70.3
    55.6
    13.0Civil
    31.5
    5.3
    22.7
    3.1
    0.4Others
    178.9
    27.9
    106.8
    37.7
    6.5Total
    612.6
    114.1
    251.9
    223.9
    22.7Total provisions
    622.6
    123.1
    252.9
    223.9
    22.7
   The expected settlement of provisions was based on
management’s best estimate at the balance sheet date. Main lawsuits with probable likelihood of
loss: (a) Income and Sales taxes  In Brazil, the Company and its
subsidiaries are involved in several administrative and judicial proceedings
related to Income tax, ICMS, IPI, PIS and COFINS taxes. Such proceedings
include, among others, tax offsets, credits and judicial injunctions exempting
tax payment.  (b) Labor The Company and its subsidiaries are
involved in labor proceedings with former employees or former employees of
service providers. The main issues involve overtime and related effects and
respective charges.


F-74

---



(c) Civil The Company is involved in several
lawsuits brought by former distributors, mainly in Brazil, which are mostly
claiming damages resulting from the termination of their
contracts.  The processes with possible
probabilities are disclosed in Note 30- Contingencies.  27.FINANCIAL INSTRUMENTS AND RISKS  Risk factors The Company is exposed to foreign
currency,interest rate,commodity price,liquidityandcredit riskin theordinary course of
business. The Companyanalyzeseach of theserisksboth individually andas a whole to definestrategiesto managetheeconomicimpactonCompany’sperformanceconsistentwithitsFinancial Risk Management
Policy.  The Company’s use of derivatives strictly follows its
Financial Risk Management Policy approved by the Board of Directors. The purpose
of the policy is to provide guidelines for the management of financial risks
inherent to the capital markets in which Ambev S.A. carries out its operations.
The policy comprises four main aspects: (i) capital structure, financing and
liquidity, (ii) transactional risks related to the business, (iii) financial
statements translation risks and (iv) credit risks of financial
counterparties. The policy establishes that all the financial assets and
liabilities in each country where Ambev S.A. operates must be denominated in
their respective local currencies. The policy also sets forth the procedures and
controls needed for identifying, measuring and minimizing market risks, such as
variations in foreign exchange rates, interest rates and commodities (mainly
aluminum, wheat, corn and sugar) that may affect Ambev S.A.’s revenues, costs
and/or investment amounts. The policy states that all the known risks (e.g.
foreign currency and interest) shall be hedged by contracting derivative
financial instruments. Existing risks not yet recorded (e.g. future contracts
for the purchase of raw material or property, plant and equipment) shall be
mitigated using projections for the period necessary for the Company to adapt to
the new costs scenario that may vary from ten to fourteen months, also through
the use of derivative financial instruments. Most of the translation risks are
not hedged. Any exception to the policy must be approved by the Board of
Directors.  Derivative financial
Instruments  Derivative financial instruments authorized by theFinancial Risk Management Policyare futures contracts traded on exchanges, full
deliverable forwards, non-deliverable forwards, swaps and options. At December
31, 2016, the Company and its subsidiaries had no target forward, swaps with
currency verification or any other derivative operations representing a risk
level above the nominal value of their contracts. The
derivative operations are classified by strategies according to their purposes,
as follows:


F-75

---



i) Cash flow hedge derivative instruments –The highly probable forecast transactions contracted in
order to minimize the Company's exposure to fluctuations of exchange rates and
prices of raw materials, investments, equipment and services to be procured,
protected by cash flow hedges that shall occur at various different dates during
the next fourteen months. Gains and losses classified as hedging reserve in
equity are recognized in the income statement in the period or periods when the
forecast and hedged transaction affects the income statement.  ii) Fair value hedge derivative instruments – operations
contracted with the purpose of mitigating the Company’s net indebtedness against
foreign exchange and interest rate risk. Cash net positions and foreign currency
debts are continually assessed for identification of new exposures.  The results of these operations, measured according to
their fair value, are recognized in financial results.  iii) Netinvestment hedgederivative instruments–transactions entered intoin ordertominimizeexposureof the exchange differencesarisingfromconversionofnet investmentin the Company's subsidiarieslocatedabroadfortranslation accountbalance. The effective portionof thehedgeisallocatedtoequityandtheineffectivenessportionis recordeddirectlyin financial results.  The following tables summarize the
exposure of the Company that were identified and protected in accordance with
the Company's Risk Policy. The following denominations have been
applied:  Operational Hedge: Refers to the
exposures arising from the core business of Ambev S.A., such as: purchase of
inputs, purchase of fixed assets and service contracts linked to foreign
currency, which is protected through the use of derivatives.  Financial Hedge: Refers to the exposures arising from
cash and financing activities, such as: foreign currency cash and foreign
currency debt, which is protected through the use of derivatives.  Investment hedge abroad: Refers mainly to exposures
arising from cash hold in foreign currency in foreign subsidiaries whose
functional currency is different from the consolidation currency.  Investment hedge -Put optiongranted onsubsidiary: As detailed in Note 21 (d.4) the
Company constituted a liability related to acquisition of Non-controlling
interest in the Dominican Republic operations. This financial
instrument is denominated in Dominican Pesos and is recorded in a Company which
functional currency is the Real. The Company assigned this financial instrument
as a hedging instrument for part of its net assets located in the Dominican
Republic, in such manner the hedge result can be recorded in other comprehensive
income of the group, following the result of the hedged
item.


F-76

---



Transactions protected by derivative financial
instruments in accordance with the Financial Risk Management
Policy  2016Fair Value
    
    Gain / (Losses)Exposure
    
    Risk
    
    
    Notional
    
    Assets
    Liability
    
    Finance Result
    Operational Result
    EquityCost
    
    
    (8,807.6)
    
    8,624.1
    
    190.7
    (582.8)
    
    (1,397.5)
    737.4
    (873.3)Commodity
    (1,742.8)
    
    1,559.3
    
    136.5
    (43.7)
    
    (5.4)
    (97.0)
    90.3American Dollar
    (6,566.9)
    
    6,566.9
    
    36.0
    (491.3)
    
    (1,392.6)
    782.2
    (909.0)Euro
    (135.2)
    
    135.2
    
    -
    (4.7)
    
    3.2
    56.1
    (42.1)Mexican Pesos
    (359.2)
    
    359.2
    
    18.2
    (43.3)
    
    (2.9)
    (4.3)
    (13.2)Brazilian Real
    (3.5)
    
    3.5
    
    -
    0.2
    
    0.2
    0.4
    0.7Fixed Assets
    
    
    (523.1)
    
    523.1
    
    3.0
    (76.1)
    
    (187.0)
    -
    -American Dollar
    (430.3)
    
    430.3
    
    3.0
    (5.8)
    
    (119.0)
    -
    -Euro
    (92.8)
    
    92.8
    
    -
    (70.3)
    
    (68.0)
    -
    -Expenses
    
    
    (103.7)
    
    103.7
    
    0.8
    (1.1)
    
    47.6
    5.8
    (134.2)American Dollar
    (90.9)
    
    90.9
    
    -
    (1.1)
    
    (3.0)
    5.8
    (29.4)Euro
    -
    
    -
    
    -
    -
    
    (0.3)
    -
    0.7Canadian Dollar
    -
    
    -
    
    -
    -
    
    50.9
    -
    (106.3)Rupee
    (12.8)
    
    12.8
    
    0.8
    -
    
    -
    -
    0.8Cash
    
    
    1,043.8
    
    (1,043.8)
    
    -
    7.8
    
    (3.7)
    -
    -American Dollar
    592.3
    
    (592.3)
    
    -
    7.8
    
    (55.8)
    -
    -Euro
    51.5
    
    (51.5)
    
    -
    0.1
    
    11.6
    -
    -Interest rate
    400.0
    
    (400.0)
    
    -
    (0.1)
    
    40.5
    -
    -Debts
    
    
    (2,547.9)
    
    2,000.2
    
    18.4
    (61.2)
    
    (50.7)
    -
    -American Dollar
    (1,874.2)
    
    1,326.5
    
    2.6
    (48.5)
    
    (28.7)
    -
    -Interest rate
    (673.7)
    
    673.7
    
    15.8
    (12.7)
    
    (22.0)
    -
    -Foreign Investments
    
    
    -
    
    -
    
    -
    -
    
    (1.2)
    -
    35.4American Dollar
    -
    
    -
    
    -
    -
    
    (0.9)
    -
    37.2Euro
    -
    
    -
    
    -
    -
    
    -
    -
    1.7Canadian Dollar
    -
    
    -
    
    -
    -
    
    (0.3)
    -
    (3.5)As of December 31,
    2016
    
    
    (10,938.5)
    
    10,207.3
    
    212.9
    (713.4)
    
    (1,592.5)
    743.2
    (972.1)


F-77

---



2015Fair Value
    
    Gain / (Losses)Exposure
    
    Risk
    
    
    Notional
    
    Assets
    Liability
    
    Finance Result
    Operational Result
    EquityCost
    
    
    (12,234.8)
    
    12,234.8
    
    585.2
    (443.6)
    
    (1,163.0)
    1,305.7
    2,476.8Commodity
    (2,355.0)
    
    2,355.0
    
    75.9
    (368.7)
    
    (12.5)
    (375.5)
    (307.8)American Dollar
    (8,808.4)
    
    8,808.4
    
    461.0
    (46.1)
    
    (1,135.5)
    1,621.5
    2,678.1Euro
    (635.6)
    
    635.6
    
    23.5
    4.3
    
    (9.7)
    93.6
    133.5Mexican Pesos
    (435.8)
    
    435.8
    
    24.8
    (33.1)
    
    (5.3)
    (33.9)
    (27.0)Fixed Assets
    
    
    (2,236.5)
    
    2,236.5
    
    79.5
    (15.7)
    
    328.5
    -
    -American Dollar
    (1,875.8)
    
    1,875.8
    
    76.4
    (11.4)
    
    162.4
    -
    -Euro
    (360.7)
    
    360.7
    
    3.1
    (4.3)
    
    165.1
    -
    -Pounds
    -
    
    -
    
    -
    -
    
    1.0
    -
    -Expenses
    
    
    4,920.3
    
    (4,920.3)
    
    290.9
    (2,974.4)
    
    (22.3)
    -
    (1,713.0)American Dollar
    1,050.0
    
    (1,050.0)
    
    252.1
    (1,052.7)
    
    43.5
    -
    (1,006.6)Euro
    (16.2)
    
    16.2
    
    10.4
    (16.7)
    
    (4.8)
    -
    (7.1)Canadian Dollar
    3,886.5
    
    (3,886.5)
    
    28.4
    (1,905.0)
    
    (83.3)
    -
    (613.4)Brazilian Real
    -
    
    -
    
    -
    -
    
    22.3
    -
    (85.9)Cash
    
    
    (1,048.6)
    
    1,048.6
    
    164.9
    (1,175.5)
    
    1,507.2
    -
    -American Dollar
    (841.1)
    
    841.1
    
    146.1
    (1,122.3)
    
    1,597.8
    -
    -Euro
    37.5
    
    (37.5)
    
    18.2
    (52.9)
    
    (22.4)
    -
    -Interest rate
    (245.0)
    
    245.0
    
    0.6
    (0.3)
    
    (68.2)
    -
    -Debts
    
    
    (1,595.5)
    
    743.9
    
    3.0
    910.9
    
    (51.2)
    -
    -American Dollar
    (1,005.9)
    
    154.3
    
    3.0
    949.5
    
    (35.4)
    -
    -Interest rate
    (589.6)
    
    589.6
    
    -
    (38.6)
    
    (15.8)
    -
    -Foreign Investments
    
    
    141.9
    
    (141.9)
    
    440.3
    (1,119.8)
    
    407.9
    -
    (2,817.3)American Dollar
    132.9
    
    (132.9)
    
    62.6
    (978.2)
    
    329.8
    -
    (2,109.2)Euro
    9.0
    
    (9.0)
    
    11.1
    (26.1)
    
    4.8
    -
    (53.7)Canadian Dollar
    -
    
    -
    
    366.6
    (115.5)
    
    73.3
    -
    (654.4)As of December 31,
    2015
    
    
    (12,053.2)
    
    11,201.6
    
    1,563.8
    (4,818.1)
    
    1,007.1
    1,305.7
    (2,053.5)


F-78

---



I.Market
risk  a.1) Foreign currency
risk The Companyis exposed to foreign currency risk on borrowings,
investments, purchases, dividends and/or interest expense/income whenever they
are denominated in a currency other than the functional currency of the
subsidiary. The main derivatives financial instruments used to manage foreign
currency risk are futures contracts, swaps, options, non deliverable forwards
and full deliverable forwards.  a.2) Commodity
Risk A significant portion of the Company inputs comprises
commodities, which historically have experienced substantial price fluctuations.
The Company therefore uses both fixed price purchasing contracts and derivative
financial instruments to minimize its exposure to commodity price volatility.
The Company has important exposures to the following commodities: aluminum,
sugar, wheat and corn. These derivative financial instruments have been
designated as cash flow hedges.  a.3) Interest rate
risk The Companyapplies a dynamic interest rate hedging approach whereby
the target mix between fixed and floating rate debt is reviewed periodically.
The purpose of the Company’s policy is to achieve an optimal balance between cost
of funding and volatility of financial results, taking into account market
conditions as well asthe Company’s overall business strategy and this strategy is
reviewed periodically.  The table below demonstrates the
Company’s exposure related to debts, before and after interest rates hedging
strategy.  2016Pre - Hedge
    
    Post - HedgeInterest rate
    Amount
    
    Interest rate
    AmountBrazilian Real
    10.0%
    667.7
    
    12.6%
    2,375.6American Dollar
    1.5%
    1,882.3
    
    2.2%
    565.7Canadian Dollar
    1.6%
    1,259.1
    
    1.6%
    1,259.1Barbadian Dollar
    2.7%
    4.9
    
    2.7%
    4.9Interest rate
    postfixed
    
    3,814.0
    
    
    4,205.3Brazilian Real
    6.8%
    1,223.5
    
    6.2%
    841.9Dominican Peso
    9.7%
    288.8
    
    9.7%
    288.8American Dollar
    6.0%
    11.6
    
    6.0%
    1.8Guatemala ́s Quetzal
    8.0%
    9.9
    
    8.0%
    10.0Barbadian Dollar
    4.3%
    48.5
    
    4.3%
    48.5Interest rate pre-set
    
    1,582.3
    
    
    1,191.0


F-79

---



2015Pre - Hedge
    
    Post - HedgeInterest rate
    Amount
    
    Interest rate
    AmountBrazilian Real
    9.4%
    1,055.1
    
    11.2%
    1,386.5American Dollar
    1.8%
    994.8
    
    1.8%
    835.8Interest rate
    postfixed
    
    2,049.9
    
    
    2,222.3Brazilian Real
    7.1%
    1,099.6
    
    8.2%
    927.2Working Capital in Argentinean Peso
    24.0%
    2.5
    
    24.0%
    2.5Dominican Peso
    9.5%
    394.9
    
    9.5%
    394.9American Dollar
    6.0%
    15.8
    
    6.0%
    15.8Guatemala ́s Quetzal
    7.8%
    9.7
    
    7.8%
    9.7Colombian Peso
    2.9%
    29.6
    
    2.9%
    29.6Interest rate pre-set
    
    1,552.1
    
    
    1,379.7
  Sensitivity
analysis The Company mitigates risks arising from non-derivative
financial assets and liabilities substantially, through derivativefinancialinstruments. In this context, the Company has identified
the main risk factors that may generate losses from these derivative financial
instruments and has developed a sensitivity analysis based on three scenarios,
which may impact the Company’s future results and/or cash flow, as described
below:  1 – Probable scenario: Management
expectations of deterioration in each transaction’s main risk factor. To measure
the possible effects on the results of derivative transactions, the Company uses
parametric Value at Risk – VaR. is a statistical measure developed through
estimates of standard deviation and correlation between the returns of several
risk factors. This model results in the loss limit expected for an asset over a
certain time period and confidence interval. Under this methodology, we used the
potential exposure of each financial instrument, a range of 95% and horizon of
21 days after December 31, 2016 for the calculation, which are presented in the
module.  2 – Adverse scenario: 25% deterioration in each
transaction’s main risk factor as compared to the level observed on December 31,
2016.  3 – Remote scenario: 50% deterioration in each
transaction’s main risk factor as compared to the level observed on December 31,
2016.


F-80

---



Transaction
    Risk
    Fair value
    Probable
scenario
    Adverse scenario
    RemotescenarioCommodities
hedge
    Decrease on commodities
      price
    92.8
    (94.0)
    (297.1)
    (686.9)Input purchase
    (92.8)
    66.0
    251.2
    595.2Foreign exchange
      hedge
    Foreign currency
      decrease
    (484.9)
    (1,084.9)
    (2,251.0)
    (4,017.2)Input purchase
    484.9
    1,084.9
    2,251.0
    4,017.2Costs effects
    
    -
    (28.0)
    (45.9)
    (91.7)Foreign exchange
      hedge
    Foreign currency
      decrease
    (73.1)
    (118.0)
    (203.9)
    (334.6)Capex Purchase
    73.1
    118.0
    203.9
    334.6Fixed assets
    effects
    
    -
    -
    -
    -Foreign exchange
      hedge
    Foreign currency
      decrease
    (0.3)
    (9.6)
    (26.2)
    (52.2)Expenses
    0.3
    9.6
    26.2
    52.2Expenses effects
    
    -
    -
    -
    -Hedge cambial
    Foreign currency
      increase
    7.9
    (53.5)
    (153.0)
    (314.0)Cash
    (7.9)
    53.5
    153.0
    314.0Interest Hedge
    Decrease in interest rate
    (0.1)
    (0.2)
    (0.3)
    (0.3)Interest revenue
    0.1
    0.2
    0.3
    0.3Cash effects
    
    -
    -
    -
    -Hedge cambial
    Foreign currency
      decrease
    (45.9)
    (182.8)
    (377.5)
    (709.1)Debt
    45.9
    126.3
    240.6
    435.3Interest Hedge
    Increase in interest
      rate
    3.1
    (154.9)
    (185.1)
    (208.9)Interest expenses
    (3.1)
    154.9
    185.1
    208.9Debt effects
    
    -
    (56.5)
    (136.9)
    (273.8)-
    (84.5)
    (182.8)
    (365.5)


F-81

---



As of December 31, 2016 the Notional and Fair Value amounts per instrument and maturity were as follows:  Notional ValueExposure

   Risk

   2017

   2018

   2019

   2020

   >2020

   TotalCost

   

   8,507.8

   116.3

   -

   -

   -

   8,624.1Commodity

   1,443.0

   116.3

   -

   -

   -

   1,559.3American Dollar

   6,566.9

   -

   -

   -

   -

   6,566.9Euro

   135.2

   -

   -

   -

   -

   135.2Mexican Peso

   359.2

   -

   -

   -

   -

   359.2Brazilian Real

   3.5

   -

   -

   -

   -

   3.5Fixed asset

   

   523.1

   -

   -

   -

   -

   523.1American Dollar

   430.3

   -

   -

   -

   -

   430.3Euro

   92.8

   -

   -

   -

   -

   92.8Expenses

   

   103.7

   -

   -

   -

   -

   103.7American Dollar

   90.9

   -

   -

   -

   -

   90.9Rupee

   12.8

   -

   -

   -

   -

   12.8Cash

   

   (643.8)

   -

   (150.0)

   (250.0)

   -

   (1,043.8)American Dollar

   (592.3)

   -

   -

   -

   -

   (592.3)Euro

   (51.5)

   -

   -

   -

   -

   (51.5)Brazilian Real

   -

   -

   (150.0)

   (250.0)

   -

   (400.0)Debt

   

   1,626.5

   -

   -

   -

   373.7

   2,000.2American Dollar

   1,326.5

   -

   -

   -

   -

   1,326.5Brazilian Real

   300.0

   -

   -

   -

   373.7

   673.710,117.3

   116.3

   (150.0)

   (250.0)

   373.7

   10,207.3
  Fair ValueExposure

   Risk

   2017

   2018

   2019

   2020

   >2020

   TotalCost

   

   (380.9)

   (11.2)

   -

   -

   -

   (392.1)Commodity

   104.0

   (11.2)

   -

   -

   -

   92.8American Dollar

   (455.3)

   -

   -

   -

   -

   (455.3)Euro

   (4.7)

   -

   -

   -

   -

   (4.7)Mexican Peso

   (25.1)

   -

   -

   -

   -

   (25.1)Brazilian Real

   0.2

   -

   -

   -

   -

   0.2Fixed asset

   

   (73.1)

   -

   -

   -

   -

   (73.1)American Dollar

   (2.8)

   -

   -

   -

   -

   (2.8)Euro

   (70.3)

   -

   -

   -

   -

   (70.3)Expenses

   

   (0.3)

   -

   -

   -

   -

   (0.3)American Dollar

   (1.1)

   -

   -

   -

   -

   (1.1)Rupee

   0.8

   -

   -

   -

   -

   0.8Cash

   

   7.9

   -

   (0.1)

   -

   -

   7.8American Dollar

   7.8

   -

   -

   -

   -

   7.8Euro

   0.1

   -

   -

   -

   -

   0.1Interest rate

   -

   -

   (0.1)

   -

   -

   (0.1)Debt

   

   (54.6)

   -

   -

   -

   11.8

   (42.8)American Dollar

   (45.9)

   -

   -

   -

   -

   (45.9)Interest rate

   (8.7)

   -

   -

   -

   11.8

   3.1(501.0)

   (11.2)

   (0.1)

   -

   11.8

   (500.5)


F-82

---



II.Credit
Risk  Concentration of credit risk on trade
receivables A substantial part of the Company’s
sales is made to distributors, supermarkets and retailers,within a broad distribution network.
Credit risk is reduced because of the widespread number of customers and control
procedures used to monitor risk. Historically, the Company has not experienced
significant losses on receivables from customers. Concentration of credit risk on
counterpart In order to minimize the credit risk of
its investments, the Company has adopted procedures for the allocation of cash
and investments, taking into consideration limits and credit analysis of
financial institutions, avoiding credit concentration, i.e., the credit risk is
monitored and minimized to the extent that negotiations are carried out only
with a select group of highly rated counterparties.  The selection process of financial
institutions authorized to operate as the Company’s counterparty is set forth in
our Credit Risk Policy. This Credit Risk Policy establishes maximum limits of
exposure to each counterparty based on the risk rating and on each
counterparty's capitalization.  In order to minimize the risk of credit
with its counterparties on significant derivative transactions, the Company has
adopted bilateral “trigger” clauses. According to these clauses, where the fair
value of an operation exceeds a percentage of its notional value (generally
between 10% and 15%), the debtor settles the difference in favor of the
creditor.  As of December 31, 2016, the Company held its main
short-term investments with the following financial institutions: Banco do
Brasil, Bradesco, Bank Mendes Gans, Caixa Econômica Federal, Citibank, Itaú, JP
Morgan Chase, Merrill Lynch, Santander e Toronto Dominion Bank. The Company had
derivative agreements with the following financial institutions: Banco Bisa,
Barclays, BNB, BNP Paribas, Bradesco, Bank Mendes Gans, Citibank, Deutsche Bank,
Itaú, Goldman Sachs, JP Morgan Chase, Macquarie, Merrill Lynch, Morgan Stanley,
Santander, ScotiaBank e TD Securities. The carrying amount of cash and cash equivalents,
investment securities, trade receivables excluding prepaid expenses, recoverable
taxes and derivative financial instruments are disclosed net of provisions for
impairment and represents the maximum exposure of credit risk as of December 31,
2016. There was no concentration of credit risk with any counterparties as of
December 31, 2016.


F-83

---



III.Liquidity
Risk  The Companybelieves thatcash flowsfrom operating
activities,cashandcashequivalentsandshort-term
investments, togetherwiththe derivativefinancial instruments and access to loan
facilities are sufficient to finance capital expenditures, financial liabilities
and dividend payments in the future.  IV.Capital management  Ambev S.A. is continuously optimizing its capital
structure targeting to maximize shareholder value while keeping the desired
financial flexibility to execute the strategic projects. Besides the statutory
minimum equity funding requirements that apply to the Company’s subsidiaries in
the different countries, Ambev S.A. is not subject to any externally imposed
capital requirements. When analyzing its capital structure, the Company uses the
same debt ratings and capital classifications as applied in the Company’s
financial statements.  Financial instruments  (a)Financial instruments categories  Managementof the financialinstruments held by the Company iseffected throughoperational strategiesand internal controlsto assureliquidity,profitabilityand transaction security.Financial instrumentstransactions areregularly reviewedfor the effectivenessoftherisk exposurethatmanagementintendsto cover(foreign exchange,interest rate,etc.). The table below shows all financial instruments
recognized in the financial statements,segregatedbycategory: 2016Loans and
      receivables
    Held for trading
    Financial assets/liabilities at
      fair value through profit or loss
    Derivatives
hedge
    Financial liabilities through
      amortized cost
    TotalFinancial assetsCash and cash
      equivalents
    7.876,8
    -
    -
    -
    -
    7.876,8Investment
securities
    -
    104,3
    282,8
    -
    -
    387,1Trade receivables excluding
      prepaid expenses
    6.962,5
    -
    -
    -
    -
    6.962,5Financial instruments
      derivatives
    -
    -
    18,4
    194,5
    -
    212,9Total
    14.839,3
    104,3
    301,2
    194,5
    -
    15.439,3Financial
      liabilitiesTrade payables and put option
      granted on subsidiary and other liabilities
    -
    -
    5.106,1
    -
    13.208,1
    18.314,2Financial instruments
      derivatives
    -
    -
    49,9
    663,5
    -
    713,4Interest-bearning loans and
      borrowings
    -
    -
    -
    -
    5.396,3
    5.396,3Total
    -
    -
    5.156,0
    663,5
    18.604,4
    24.423,9


F-84

---



2015Loans and
      receivables
    Held for trading
    Financial assets/liabilities at
      fair value through profit or loss
    Derivatives
hedge
    Financial liabilities through
      amortized cost
    TotalFinancial assetsCash and cash
      equivalents
    13,620.2
    -
    -
    -
    -
    13,620.2Investment
securities
    -
    118.6
    215.1
    -
    -
    333.7Trade receivables excluding
      prepaid expenses
    6,556.8
    -
    -
    -
    -
    6,556.8Financial instruments
      derivatives
    -
    -
    449.4
    1,114.4
    -
    1,563.8Total
    20,177.0
    118.6
    664.5
    1,114.4
    -
    22,074.5Financial
      liabilitiesTrade payables and put option
      granted on subsidiary and other liabilities
    -
    -
    5,558.6
    -
    13,779.6
    19,338.2Financial instruments
      derivatives
    -
    -
    3,975.9
    842.2
    -
    4,818.1Interest-bearning loans and
      borrowings
    -
    -
    -
    -
    3,599.5
    3,599.5Total
    -
    -
    9,534.5
    842.2
    17,379.1
    27,755.8
  (b) Classification of financial
instruments by type of fair value measurement IFRS 13 defines fair value as the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.  Also pursuant to IFRS 13, financial
instruments measured at fair value shall be classified within the following
categories:  Level 1 – quoted prices (unadjusted) in
active markets for identical assets or liabilities that the entity can access at
the measurement date valuation;  Level 2 – inputs other than quoted
prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly; and Level 3 – unobservable inputs for the
asset or liability.


F-85

---



2016
    
    2015Level 1
    Level 2
    Level 3
    Total
    
    Level 1
    Level 2
    Level 3
    TotalFinancial assetsFinancial asset at fair value through profit or
      loss
    282.8
    -
    -
    282.8
    
    215.1
    -
    -
    215.1Derivatives assets at fair value through profit or
      loss
    2.6
    15.8
    -
    18.4
    
    161.8
    287.6
    -
    449.4Derivatives - operational hedge
    83.6
    110.9
    -
    194.5
    
    177.2
    497.4
    -
    674.6Derivatives - net investment hedge
    -
    -
    -
    -
    
    63.1
    376.7
    -
    439.8369.0
    126.7
    -
    495.7
    
    617.2
    1,161.7
    -
    1,778.9Financial liabilitiesFinancial liabilities at fair value through profit
      and loss(i)
    -
    -
    5,106.1
    5,106.1
    
    -
    -
    5.558,6
    5.558,6Derivatives liabilities at fair value through
      profit or loss
    9.9
    40.0
    -
    49.9
    
    139,5
    3.836,4
    -
    3.975,9Derivatives - operational hedge
    78.9
    575.9
    -
    654.8
    
    121,7
    333,9
    -
    455,6Derivatives - fair value hedge
    -
    8.7
    -
    8.7
    
    -
    28,3
    -
    28,3Derivatives - net investment hedge
    -
    -
    -
    -
    
    74,4
    283,9
    -
    358,388.8
    624.6
    5,106.1
    5,819.5
    
    335,6
    4.482,5
    5.558,6
    10.376,7
  (i) Refers to the put option granted on subsidiary as
described in Note 21 d(4).  Reconciliation of changes in the categorization of Level
3  Financial liabilities at December 31, 2015
      (i)
    5,558.6Acquisition of investments
    220.6Total gains and losses in the year
    (673.1)Losses recognized in net income
    399.3Gain recognized in equity
    (1,072.4)Financial liabilities at December 31, 2016
      (i)
    5,106.1
  (i) The liability was recorded under “Trade payables and
put option granted on subsidiary and other liabilities” on the balance
sheet.   (c) Fair value of financial liabilities
measured at amortized cost  The Company’s liabilities,
interest-bearing loans and borrowings, trade payables excluding tax payables,
are recorded at amortized cost according to the effective rate method, plus
indexation and foreign exchange gains/losses, based on closing indices for each
exercise.  Had the Company recognized its financial
liabilities measured at amortized at cost, at fair value, it would have recorded
an additional gain, before income tax and social contribution, of approximately
R$2.7 on December 31, 2016 (loss of R$5.5 on December 31, 2015), related to Bond
2017. The other financial instruments recorded at amortized cost are similar to
the fair value and are not material for disclosure.  The criteria used to determine the fair
value of the debt securities was based on quotations of investment brokers, on
quotations of banks which provide services to Ambev S.A. and on the secondary
market value of bonds as of December 31, 2016, being approximately 97.91% for
Bond 2017 (93.66% at December 31, 2015).


F-86

---



Calculation of fair value of derivatives The Company measures derivative financial instruments by calculating their present value, through the use of market curves that impact the instrument on the computation dates. In the case of swaps, both the asset and the liability positions are estimated independently and brought to present value, where the difference between the result of the asset and liability amount generates the swaps market value. For the traded derivative financial instruments, the fair value is calculated according to the adjusted exchange-listed price.  Margins given in guarantee  In order to comply with the guarantee requirements of the derivative exchanges and/or counterparties in certain operations with derivativefinancialinstruments, as of December 31, 2016 the Company held R$486.8in highly liquid financial investments or in cash,classified as cash and cash equivalents and investment securities (R$924.0 on December 31, 2015).  Offsetting of financial assets and liabilities  For financial assets and liabilities subject to settlement agreements by the net or similar agreements, each agreement between the Company and the counterparty allows this type of settlement when both parties make this option. In the absence of such election, the assets and liabilities will be settled by their amounts, but each party shall have the option to settle on net, in case of default by the counterparty. 28.OPERATING LEASES The Company primarily leases warehouses and offices. Lease terms are normally over a period of five to ten years, with renewal options.  Operating leases mature as follows:  2016

   2015Less than 1 year

   26.7

   29.9Between 1 and 5 years

   61.4

   63.0More than 5 years

   66.5

   82.9154.6

   175.8
  In 2016, the operating lease expense in the income statement amounted toR$43.4(R$58.7 and R$43.5 in 2015 and 2014, respectively).


F-87

---



29.COLLATERAL AND CONTRACTUAL COMMITMENTS
WITH SUPLLIERS, ADVANCES FROM CUSTOMERS AND OTHER  2016
    2015Collateral given for own liabilities
    1,051.5
    1,538.3Other commitments
    754.3
    798.81,805.8
    2,337.1Commitments with suppliers
    4,019.2
    9,062.8Commitments - Bond 2017
    300.0
    300.04,319.2
    9,362.8
  The collateral provided for liabilities
totaled approximately R$1,805.8 as at December 31, 2016 (R$2,337.1 as at
December 31, 2015), includingR$571.3 (R$620.2 as at December 31,
2015)of cash guarantees. The deposits in
cash used as guarantees are presented as part of other assets. To meet the
guarantees required by derivative exchanges and/or counterparties contracted in
certain derivative financial instrument transactions, Ambev S.A. maintained as
at December 31, 2016,R$486.8 (R$924.0 as at December 31,
2015)in highly liquid financial investments
or in cash,classified as cash and cash equivalents
and investment securities(Note 27 –Financial instruments and
risks). Most of the balance relates to commitments with suppliers
of packaging. The Ambev S.A. is guarantor of the Bond 2017 issued by
Ambev International, in amount of R$300,0, remunerated at 9.5% per year, with
semiannual interest payments and final maturity in July 2017. Ambev
International is a 100% owned finance subsidiary of the Company. The
AmbevS.A. has fully and unconditionally guaranteed the Bond
2017.  Future contractual commitments as at
December 31, 2016 and 2015 are as follows:  2016
    2015Less than 1 year
    3,325.7
    6,105.5Between 1 and 2 years
    420.8
    2,269.5More than 2 years
    572.7
    987.84,319.2
    9,362.8
  30.CONTINGENCIES  The Company has
contingent liabilities arising from lawsuits in the normal course of its
business.Due to their nature, such legal proceedings
and tax matters involve inherent uncertainties including, but not limited to,
court rulings, negotiations between affected parties and governmental actions,
and as a consequence the Company’s management cannot at this stage estimate the
likely timing of the resolution of these matters.


F-88

---



Contingent
liabilities with a probable likelihood of loss are fully recorded as liabilities
(Note 26 –Provisions).  The Company also has lawsuits related to tax, civil and
labor, for which the likelihood of loss classified by management as possible and
for which there are no provisions. Estimates of amounts of possible losses are
as follows:  2016
    2015IRPJ and CSLL
    28,934.8
    16,358.8PIS and COFINS
    1,971.1
    860.3ICMS and IPI
    16,046.9
    10,379.1Labor
    222.0
    188.8Civil
    4,417.6
    5,054.1Others
    858.1
    502.352,450.5
    33,343.4
  Principal lawsuits witha likelihood ofpossible loss: Brazilian Federal Taxes Special goodwill reserve In December 2011, the Company received a tax assessment
related to the goodwill amortization resulting from Inbev Holding Brasil S.A. In
November 2014 the Lower Administrative Court concluded the judgment. The
decision was partly favorable, Ambev was notified in August 2015 and presented a
motion to clarify the decision to the Administrative Court. This motion was
admitted in September 2016 and Ambev waits for the clarified decision.  In June 2016, Ambev received a new tax assessment
charging the remaining value of the goodwill amortization, related to InBev
Brazil’s merger with Ambev, from 2011 to 2013. Ambev management estimates possible losses in relation to
the total amortization period (2005-2013) to be approximately R$7.8 billion
(R$4.6 billion as of 31 December 2015), classified as possible loss, and,
therefore, no provision was made by the Company in this matter. In the event
Ambev is required to pay these amounts, AB Inbev will reimburse Ambev the amount
proportional (70%) to the benefit received by the company pursuant to the merger
protocol, as well as the related costs.  Goodwill BAH In October 2013, we also received a tax assessment
related to the goodwill amortization resulting from the merger of Beverage
Associates Holding Limited (“BAH”) into Ambev. In December 2014, Ambev filed an
appeal against the unfavorable first level administrative decision published
in November 2014. Ambev Management estimates the amount
of possible losses in relation to this assessment to be approximately R$1.5
billion (R$1.3 billion as of December 31, 2015). We have not recorded any
provision in connection with this assessment.


F-89

---



Profits earned abroad During the first quarter of 2005,
certain of our subsidiaries received a number of assessments from the RFB
relating to profits obtained by subsidiaries domiciled abroad.  In December
2008, the Administrative Court handed down a decision on one of the tax
assessments relating to earnings of our foreign subsidiaries.  This
decision was partially favorable to us, and in connection with the remaining
part, we filed an appeal to the Appellate Division of the Administrative Court
and are awaiting its decision. In December 2013 and 2016, the Company received
two new tax assessments related to the matter. We have not recorded any
provision in connection with those assessments. We estimate our exposure to
possible losses in relation to these assessments to be R$4.9 billion (R$4.5
billion at December 31, 2015) and to probable losses to be R$41.6 million as of
that date, for which we have recorded a provision in the corresponding amount
(R$38.2 million at December 31, 2015).  Utilization of tax loss on mergers The Companyand its subsidiarieshave received tax assessments from the Brazilian Tax
authorities, from certain tax credits arising from alleged
non-compliance with the Brazilian tax regulation concerning accumulated tax
losses by companies in their final year of existence, following a
merger. In February 2016, Ambev was notified of the closure of
the administrative phase and filed lawsuits to discuss the matter. In September
2016, Ambev received the first favorable court decision. No provisions have been made for these cases as it
believes that no express legal grounds exist that limit the use of tax losses in
cases where legal entities are extinguished (including in the case of mergers),
and that therefore the tax inspector’s interpretation in these tax assessments
does not apply.  The Company estimates the possible exposure to losses on
these assessments at approximatelyR$522.9million (R$454.6 million at December 31,
2015).  Disallowance of Expenses and Deductible
Losses  On December 29, 2014, Ambev received a tax assessment
from the Brazilian Federal Tax Authorities related to the disallowance of
alleged non-deductible expenses and the deduction of certain losses mainly associated to financial investments
and loans, in the amount of approximately R$1.3
billion.


F-90

---



In December 2015 and in December 2016, Ambev also
received other tax assessments related to the same matter. Ambev Management
estimates the amount of possible losses in relation to this assessment to be
approximately R$5.6 billion as of December 31, 2016 (R$1.7 billion as of
December 31, 2015).  Disallowance of taxes paid abroad  During 2014 and the first quarter of 2015, Ambev received
tax assessments from the Brazilian Federal Tax Authorities related to the
disallowance of deductions associated with alleged unproven taxes paid
abroad.  The Company filed a defense for all cases and awaits a
decision in the first instance for the cases received in 2015 and 2016 and by
the Administrative Court Management for the others.  In
June 2016, Ambev received new tax assessments from the Brazilian federal tax
authorities related to the disallowance of deductions associated with alleged
unproven taxes paid abroad. Ambev management estimates an amount of
approximately R$2.8 billion (R$1.9 billion as of 31 December 2015) as possible
loss and R$194 million as probable loss. Presumed Profit In
April 2016, Arosuco (subsidiary of Ambev) received a tax assessment regarding
the use of Presumed Profit Method for the calculation of income tax and the
social contribution on net profit instead of Real Profit method. Arosuco filed a
defense and awaits for the first level administrative decision. Arosuco
management estimates the amount of possible losses in relation to this
assessment to be approximately R$569.6 million. In
December 2016, CRBS (a subsidiary of Ambev) received a tax assessment regarding
the use of Presumed Profit Method for the calculation of income tax and social
contribution on net profit instead of the Real Profit method. CRBS has filed a
defense and awaits the First Administrative Judgment. CRBS estimates that the
possible losses related to this matter are approximately R$3.6
billion. PIS
and COFINS PIS/COFINS over bonus
products In
December 2015, Ambev received a tax assessment issued by the Brazilian federal
tax authorities, relating to amounts allegedly due under
Integration Programme/Social Security Financing Levy (PIS/COFINS) over bonus
products granted to its. In 2016, Ambev received new assessments related to the
same issue. Ambev filed defenses against these assessments and currently awaits
judgment. Ambev management estimates the possible losses related to these
assessments to be approximately R$1.5 billion (R$342,7 million as of 31 December
2015).


F-91

---



ICMS
and IPI ICMS-ST Unconditional Discounts  Ambev has been party to legal proceedings with the State
of Rio de Janeiro where it is challenging such State’s attempt to assess ICMS
with respect to unconditional discounts granted by Ambev from January 1996 to
February 1998. In 2015, these proceedings were before the Superior Court of
Justice and the Brazilian Supreme Court. In 2013, 2014 and 2015, Ambev received
similar tax assessments issued by the State of Pará and Piauí, relating to the
same issue, which are currently under discussion. In October 2015 and January
2016, Ambev paid the debts related to the assessments issued by the State of Rio
de Janeiro under an incentive tax payment program with discounts granted by such
State, in the total amount of approximately R$271 million. After these payments,
Ambev management estimates the amount involved in these proceedings to be
approximately R$559.5 million (R$861.6 million as of 31 December 2016),
classified as possible loss.  ICMS fiscal war Ambev is currently challenging tax assessments from the
States of São Paulo, Rio de Janeiro, Minas Gerais and other States, which
question the legality of tax credits arising from existing tax incentives
received by Ambev in other States. Ambev management estimates the possible
losses related to these assessments to be approximately R$1.8 billion (R$1.7
billion as of December 31, 2015)classified as possible loss.  ICMS – PRODEPE  In June 2015, Ambev received a tax assessment issued by
the State of Pernambuco, relating to ICMS differences, based on alleged
non-compliance with a state tax incentive agreement (“PRODEPE”), related to the
period of February 2014. In 2015, Ambev was notified of a new tax assessments
related to the same matter.In March, 2016, Ambev had a partial victory concerning
one of the tax assessments, of which the respective fine was cancelled at the
administrative court, in a definitive decision. Ambev management estimates the
possible losses related to this issue to be approximately R$404,1 million
Brazilian real (R$665,9 million as of 31 December 2015).Ambev has recorded provisions in the total amount of
R$2.6 million in relation to the proceedings for which it considers the chances of
loss to be probable, considering specific procedural
issues.


F-92

---



ICMS-ST Trigger  Over the years, Ambev has received tax assessments
relating to supposed ICMS differences considered due when the price of the
products sold by the company reaches levels close to or above the price table
basis established by States. Ambev is currently challenging those charges before
Courts.  In August 2016, Ambev received a new assessment, issued
by the State of Minas Gerais, in the amount of R$1.4 billion, regarding the same
matter. Considering this new assessment and others received in this quarter,
Ambev management estimates the total possible losses related to this issue to be
approximately R$4.5 (R$796 million as of 31 December 2015). Ambev has recorded
provisions in the total amount of R$1.7 million in relation to the proceedings
for which it considers the chances of loss to be probable, considering specific
procedural issues.  Manaus Free Trade Zone - IPI  Goods manufactured within the Manaus Free Trade Zone –
ZFM intended for consumption elsewhere in Brazil are exempt from the IPI. Our
units have been registering IPI presumed credits upon the acquisition of
exempted inputs manufactured therein.  Since 2009 we have been receiving a
number of tax assessments from the RFB relating to the disallowance of such
presumed credits, which are under discussion before the Brazilian Supreme Court.
Management estimates possible losses in relation to these assessments to be
R$2.0 billion (R$1.8 billion as of December 31, 2015).  In addition, over the years, Ambev has received tax
assessments from the Brazilian Federal Tax Authorities charging federal taxes
considered unduly offset with the disallowed IPI excise tax credits which are
under discussion in other proceedings. Ambev is challenging those charges before
Courts. Ambev management estimates the possible losses related to these
assessments to be approximately R$735.5 million (R$660 million as of 31 December
2015). IPI Excise Tax In 2014 and 2015, we received tax assessments from
Brazilian Federal Tax Authorities related to IPI exercise tax, supposedly due
over remittances of manufactured goods to other related factories. Management
estimates the possible losses related to these assessments to be approximately
R$1.5 billion (R$1.3 billion as of December 31, 2015).


F-93

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Civil
 Subscription Warrants Certain holders of warrants issued by Old Ambev in 1996
for exercise in 2003 have filed lawsuits to be able to subscribe the
corresponding shares for an amount lower than what the Company considers to have
been established at the time of the issuance of the warrants. The warrants
object of those six proceedings represented, on December 31, 2016, 172.8 million
Ambev common shares that would be issued at a value substantially below fair
market value, should claimants ultimately prevail.  The plaintiffs also
claim they should receive past dividends related to these shares in the amount
of R$761.7 million (R$648 million on December 31, 2015).The Company believes that the loss of this lawsuit is
possiblehas not recorded any provision in connection
therewith. Lawsuit  against Brewers Retail
Inc.  On 12 December 2014, claimants in Canada brought a
lawsuit against the Liquor Control Board of Ontario (“LCBO”), Brewers Retail
Inc. (“The Beer Store”) and the owners of The Beer Store (Molson Coors Canada,
Sleeman Breweries Ltd. and Labatt Breweries of Canada LP). The lawsuit, brought
pursuant to the Ontario Class Proceedings Act in the Ontario Superior Court of
Justice, seeks a declaration that LCBO andThe Beer Storeagreed with each to allocate sales, territories,
customers or markets for the supply of beer sold in Ontario since June 1, 2000,
and a declaration that the owners of The Beer Store agreed to fix. The claimants
are seeking damages not exceeding R$3.4 billion (R$3,9 billion as of December
31, 2015), for all mentioned parts. Considering that The Beer Store operates
according to the rules established by the Government of Ontario and that 
prices at The Beer Store are independently set by each brewer, the Company
believes that there are strong defenses and, accordingly, has not recorded any
provision in connection therewith.  Contingent assets  According to IAS 37, contingent assets
are not recorded in consolidated financial statements, except when the
realization of income is virtually certain.  31.ACQUISITION AND DISPOSALS OF
SUBSIDIARIES  As mentioned on Note 1 –Corporate information, the following table summarizes the main acquisitions as
the consideration paid and the provisional allocation of the assets acquired and
liabilities assumed as recognized on the date:


F-94

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2016Aquisitions
    
    DisposalsMark Anthony
    
    Banks Holding Limited
    
    Cachoeiras de Macacu
    
    Cerveceria Nacional (i)
    
    Keystone Global Corporation
      (ii)Cash and cash equivalents
    0,1
    
    50,2
    
    48,4
    
    52,4
    
    (106,1)Investment securities
    -
    
    -
    
    -
    
    -
    
    -Derivative financial
      instruments
    -
    
    -
    
    -
    
    0,5
    
    -Trade and other
    receivables
    -
    
    36,7
    
    -
    
    75,3
    
    (62,8)Inventories
    19,4
    
    54,5
    
    12,4
    
    58,1
    
    (66,5)Income tax and social
      contributions recoverable
    -
    
    -
    
    -
    
    41,4
    
    (7,1)Other assets
    3,0
    
    13,8
    
    -
    
    31,2
    
    (220,4)Current assets
    22,5
    
    155,2
    
    60,8
    
    258,9
    
    (462,9)Deferred tax assets
    -
    
    16,3
    
    -
    
    -
    
    4,0Employee benefits
    -
    
    10,3
    
    -
    
    -
    
    -Property, plant and
      equipment
    115,2
    
    325,2
    
    233,6
    
    433,9
    
    (225,5)Intangible assets
    419,1
    
    176,8
    
    485,8
    
    248,7
    
    (59,4)Goodwill
    -
    
    -
    
    -
    
    1.060,1
    
    (168,7)Investments in
      associates
    -
    
    245,8
    
    -
    
    -
    
    -Other assets
    -
    
    -
    
    -
    
    11,9
    
    -Non-current
    assets
    534,3
    
    774,4
    
    719,4
    
    1.754,6
    
    (449,6)Trade payables
    (31,6)
    
    (17,1)
    
    (0,3)
    
    (151,7)
    
    163,4Derivative financial
      instruments
    -
    
    -
    
    -
    
    (2,9)
    
    19,9Interest-bearing loans and
      borrowings
    -
    
    (11,3)
    
    2,1
    
    (7,1)
    
    0,1Wages and salaries
    (4,3)
    
    (3,1)
    
    (2,4)
    
    (11,9)
    
    8,9Dividends payables
    -
    
    (4,4)
    
    -
    
    (11,3)
    
    -Income tax and social contribution
      payable
    -
    
    (1,3)
    
    -
    
    (17,2)
    
    0,2Taxes and contributions
      payable
    4,4
    
    (7,5)
    
    (52,6)
    
    (15,9)
    
    6,1Other liabilities
    (0,2)
    
    (7,6)
    
    -
    
    (23,6)
    
    214,7Current
    liabilities
    (31,7)
    
    (52,3)
    
    (53,2)
    
    (241,6)
    
    413,3Interest-bearing loans and
      borrowings
    -
    
    (35,6)
    
    (248,4)
    
    (12,7)
    
    2,3Deferred tax
    liabilities
    -
    
    -
    
    -
    
    (40,0)
    
    21,1Provisions
    -
    
    -
    
    -
    
    -
    
    4,9Employee benefits
    -
    
    (3,3)
    
    -
    
    (11,5)
    
    -Non-current
      liabilities
    -
    
    (38,9)
    
    (248,4)
    
    (64,2)
    
    28,3Transferred consideration
    525,1
    
    838,4
    
    478,6
    
    1.707,7
    
    (470,9)Goodwill on
    acquisition
    872,0
    
    122,9
    
    -
    
    -
    
    -Gain on swap of shares recognized in
      profit or loss
    -
    
    -
    
    -
    
    (1.240,0)
    
    -Losses on swap of shares recognized in
      equity
    -
    
    -
    
    -
    
    3,1
    
    -Non-controlling interests
      share
    -
    
    (86,5)
    
    -
    
    -
    
    -Non-cash consideration
    -
    
    -
    
    -
    
    (470,9)
    
    470,9Trade payables
    -
    
    -
    
    (432,9)
    
    -
    
    -Prior year payments
    -
    
    (554,4)
    
    -
    
    -
    
    -Cash
    (acquired)/disposed
    (0,1)
    
    (50,2)
    
    (48,4)
    
    (52,4)
    
    106,1Net cash outflow /
      (inflow)
    1.397,0
    
    270,2
    
    (2,7)
    
    (52,5)
    
    106,1
  (i) Includes the operations in Panama, as per Note 1
(b). (ii) Includes the operations in Colombia, Peru and
Ecuador, as per Note 1 (b).


F-95

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32.NON-CASH ITEMS  The Company carried out the following
investment and financing activities not involving cash:  2016
    2015
    2014Federal amnesty
    -
    -
    223.3Acquisition of property, plant and
      equipment
    -
    105.6
    -Acquisition of investments
      payables
    208.7
    -
    -Cash financing cost other than
      interests
    37.7
    1,752.3
    770.0Reclassification of finance cash flow
      to operational cash flow
    205.1
    144.6
    178.4Others
    -
    41.1
    0.2
  33.RELATED PARTIES Policies and practices regarding the
realization of transactions with related parties The Company adopts corporate governance
practices and those recommended and/or required by the applicable
law.  Under the Company’s bylaws the Board of
Directors is responsible for approving any transaction or agreements between the
Company and/or any of its subsidiaries, directors and/or shareholders (including
shareholders, direct or indirect shareholders of the Company). The Antitrust
Compliance and Related Parties Committee of the Company is required to advise
the Board of Directors of the Company in matters related to transactions with
related parties.  Management is prohibited from
interfering in any transaction in which conflict exists, even in theory, with
the Company interests. It is also not permitted to interfere in decisions of any
other management member, requiring documentation in the Minutes of Meeting of
the Board any decision to abstain from the specific
deliberation.  The Company’s guidelines with related
parties follow reasonable or commutative terms, similar to those prevailing in
the market or under which the Company would contract similar transactions with
third parties. These are clearly disclosed in the financial statements as
reflected in written contracts.  Transactions with management
members: In addition to short-term benefits
(primarily salaries), the management members are entitled to participate in
Stock Option Plan (Note 24 –Share-based payments).


F-96

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Total expenses related to the Company’s
management members are as follows:  2016
    2015
    2014Short-term benefits(i)
    21.7
    32.1
    22.2Share-based payments
      (ii)
    36.2
    39.0
    39.3Total key management remuneration
    57.9
    71.1
    61.5
  (i) These correspond substantially to
management’s salaries and profit sharing (including performance
bonuses).  (ii) These correspond to the
compensation cost of stock options and restricted stocks granted to management.
These amounts exclude remuneration paid to members of the Fiscal
Council.  Excluding the above mentioned plan (Note
24 –Share-based payments), the Company no longer has any type of
transaction with the Management members or pending balances receivable or
payable in its balance sheet. Transactions with the Company's
shareholders: a) Medical,dentaland otherbenefits The Fundação Antonio e Helena Zerrenner
Instituição Nacional de Beneficiência (“Fundação Zerrenner) is one of Ambev
S.A.’s shareholders, and at December 31, 2016 held 10.0% of total share capital.
Fundação Zerrenner is also an independent legal entity whose main goal is to
provide Ambev S.A.’s employees, both active and retirees, with health care and
dental assistance, technical and superior education courses, facilities for
assisting elderly people, through direct initiatives or through financial
assistance agreements with other entities. On December 31, 2016 and 2015,
actuarial responsibilities related to the benefits provided directly by Fundação
Zerrenner are fully funded by plan assets, held for that purpose, which
significantly exceeds the liabilities at these dates. Ambev S.A. recognizes the
assets (prepaid expenses) of this plan to the extent of amounts from economic
benefits available to the Company, arising from reimbursements or future
contributions reduction. The expenses incurred by Fundação
Zerrenner in providing these benefits totaledR$266.7(R$235.5 as of December 31, 2015), of
whichR$231.9(R$208.2 as of December 31, 2015)
related to active employees andR$34.8(R$27.3 as of December 31, 2015)
related to retirees. b) Leasing  The Ambev S.A., through its subsidiary
BSA (labeling), has an asset leasing agreement with Fundação Zerrenner, for
R$63,328 for ten years, maturing on March 31, 2018.


F-97

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c) Leasing – Ambev S.A. head
office Ambev S.A. has a leasing agreement of
two commercial sets with Fundação Zerrenner in the annual amount of R$3.3,maturing on January,
2020.  d) Licensing agreement  The Company maintains a licensing agreement with
Anheuser-Busch, Inc., to produce, bottle, sell and distribute Budweiser products
in Brazil, Canada, Ecuador, Guatemala, Dominican Republic, Paraguay, El
Salvador, Nicaragua, Peru, Uruguay and, starting in 2016, Chile. In addition,
the Company produces and distributes Stella Artois products under license to ABI
in Brazil and Canada and, by means of a license granted to ABI, it also
distributes Brahma’s product in the United States and several countries such as
the United Kingdom, Spain, Sweden, Finland and Greece. The amount recorded was
R$2.0 (R$52.8 as of December 31, 2015) and R$374.0 (R$434.8 as of December 31,
2015) as licensing income and expense, respectively.  Ambev S.A. has licensing agreements with the Group
Modelo, subsidiaries of ABI, for to import, promote and sell products Corona
(Corona Extra,Corona Light,Coronita,PacificoandNegra Modelo) in countries of the Latin America and the
Canada. e) Platform e-commerce The Company currently has an agreement with the company
B2W - Companhia Digital S.A. to manage the of e-commerce called “Partner Ambev”.
The contract has as object to trade Ambev S.A. products to the partners of Ambev
through the websitehttp://www.parceiroambev.com.br/.  Transactions with related
parties  2016Current
    Trade receivables (i)
    Other Trade receivables (i)
    Trade payables (i)
    Other Trade payables (i)
    Borrowings and interest
      payable
    Dividends payablesAB InBev
    6.3
    13.4
    (308.9)
    (0.7)
    -
    -AB Package
    -
    -
    (31.3)
    -
    -
    -AB Services
    0.3
    15.2
    -
    (3.1)
    -
    -AB USA
    19.7
    18.6
    (247.4)
    (1.7)
    -
    -Ambev Peru
    7.1
    -
    (4.7)
    -
    -
    -Ambrew
    -
    -
    -
    -
    -
    (89.9)Bogotá Beer
    -
    211.0
    -
    (211.0)
    -
    -Cervecería Modelo
    1.1
    -
    (444.1)
    -
    -
    -Inbev
    0.2
    17.6
    (17.5)
    (0.2)
    -
    -ITW International
    -
    -
    -
    (209.4)
    (30.5)
    (590.9)Modelo
    -
    1.0
    (15.7)
    (54.5)
    -
    -Others
    2.6
    7.3
    (6.2)
    (14.4)
    -
    -37.3
    284.1
    (1,075.8)
    (495.0)
    (30.5)
    (680.8)


F-98

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2015Current
    Trade receivables (i)
    Other Trade receivables (i)
    Trade payables (i)
    Other Trade payables (i)
    Borrowings and interest
      payable
    Dividends payablesAB InBev
    67.5
    18.6
    (159.6)
    -
    -
    -AB Package
    -
    -
    (48.8)
    -
    -
    -AB USA
    15.6
    32.1
    (164.8)
    (0.5)
    -
    -Ambrew
    -
    -
    -
    -
    -
    (0.7)Cervecería Modelo
    0.6
    -
    (246.4)
    -
    -
    -Inbev
    -
    19.5
    (14.1)
    -
    -
    -ITW International
    -
    -
    -
    (250.9)
    (5.5)
    -Modelo
    -
    0.8
    (85.8)
    (62.7)
    -
    -Others
    0.9
    6.6
    (5.1)
    (5.3)
    -
    -84.6
    77.6
    (724.6)
    (319.4)
    (5.5)
    (0.7)
   (i) The amount represents the marketing operations
(purchase and sale) and the reimbursement between the companies of the
group.  The tables below represent the transactions with related
parties, recognized in the income statement:  2016Company
    Buying / Service fees /
      Rentals
    Sales
    Royalties / Benefits
    Net finance costAB Package
    (32.8)
    -
    -
    -AB USA
    (206.0)
    52.3
    (292.8)
    -Cervecería Modelo
    (596.0)
    2.0
    (46.9)
    -InBev
    (77.0)
    -
    -
    -ITW International
    -
    -
    -
    (26.0)Modelo
    (63.0)
    -
    -
    -SAB Group
    (3.5)
    23.5
    -
    -Others
    (45.6)
    0.3
    (32.2)
    -(1,023.9)
    78.1
    (371.9)
    (26.0)
  2015Company
    Buying / Service fees /
      Rentals
    Sales
    Royalties/ BenefitsAB Inbev
    (55.3)
    -
    (35.5)AB Package
    -
    -
    -AB USA
    (124.9)
    49.0
    (288.1)Cervecería Modelo
    (257.7)
    1.1
    (52.9)InBev
    (73.3)
    0.1
    -Modelo
    (356.9)
    -
    -Others
    (74.0)
    0.6
    (1.1)(942.1)
    50.8
    (377.6)
  2014Company
    Buying / Service fees /
      Rentals
    Sales
    Royalties/ Benefits
    Net finance costAB Inbev
    (41.0)
    -
    (24.4)
    -AB Package
    (16.2)
    -
    -
    -AB USA
    (87.2)
    31.2
    (228.4)
    -Cervecería Modelo
    -
    -
    (33.1)
    -InBev
    (50.7)
    -
    -
    -ITW International
    -
    -
    -
    (3.7)Modelo
    (208.6)
    -
    -
    -Others
    (36.0)
    2.5
    (1.6)
    -(439.6)
    33.7
    (287.5)
    (3.7)


F-99

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Denomination used in the tables above:  Anheuser-Busch InBev N.V. (“AB
  InBev”)Anheuser-Busch Packaging Group Inc.(“AB Package”)Anheuser-Busch Inbev Services LLC (“AB
      Services”)Anheuser-Busch Inbev USA LLC (“AB
    USA”)Compañia Cervecera Ambev Peru S.A.C. (“Ambev
      Peru”)Ambrew S.A. (“Ambrew”)Bogotá Beer Company BBC S.A.S. (“Bogotá Beer”)Cervecería Modelo de Mexico S. de R.L. de C.V.
      (“Cervecería Modelo”)Inbev Belgium N.V. (“Inbev”)Interbrew International B.V. (“ITW
      International”)Cervecería Modelo de Guadalajara S.A.
      (“Modelo”)Bavaria S.A. (“SAB
Group”)
  34.GROUP
COMPANIES  Listed below are the main group companies.  ArgentinaCERVECERIA Y MALTERIA QUILMES SAICA Y G
      Charcas 5160 – Buenos Aires
    99,75%BoliviaCERVECERIA BOLIVIANA NACIONAL
S.A.
      Avenida Montes 400 e Rua Chuquisaca 121 - La
      Paz
    85,67%BrazilAMBEV S.A.
      Rua Dr. Renato Paes de Barros, 1.017, 3o andar,
      Itaim Bibi, São Paulo
    Consolidating companyAROSUCO AROMAS E SUCOS LTDA.
      Avenida Buriti, 5.385, Distrito Industrial - Manaus
      - AM
    100,00%CRBS S.A.
      Avenida Antarctica, 1.891, Fazenda Santa Úrsula –
      Jaguariúna – SP
    100,00%CERVEJARIA Z.X.
      Avenida Antarctica, 1.891, Fazenda Santa Ursula –
      Jaguariúna - SP
    86,42%


F-100

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CanadaLABATT BREWING COMPANY LIMITED
      207 Queens Quay West, Suite 299 - M5J 1A7 -
      Toronto
    100,00%ChileCERVECERIA CHILE S.A.
      Avenida Presidente Eduardo Frei Montalva, 9.600 -
      Comuna de Quilicura - Santiago
    100,00%Dominican RepublicCERVECERÍA NACIONAL DOMINICANA,
      S.A.
      Autopista 30 de Mayo, Distrito
      Nacional
    55,00%EspanhaJALUA SPAIN, S.L.
      Juan Vara Terán, 14 – Ilhas Canárias
    100,00%LuxembourgAMBEV LUXEMBOURG
      15 Breedewues - L1259 -
      Sennngerberg
    100,00%GuatemalaINDUSTRIAS DEL ATLÁNTICO, SOCIEDAD
      ANÓNIMA
      KM 122 Ruta al Atlantico – C.P 01012 Teculutan,
      Zacapa
    50,00%ParaguayCERVECERIA PARAGUAYA S.A.
      Ruta Villeta KM 30 - Ypané
    87,35%UruguayLINTHAL S.A.
      25 de Mayo 444, office 401 -
      Montevideo
    100,00%CERVECERIA Y MALTERIA PAYSSANDÚ
      S.A.
      Rambla Baltasar Brum, 2.933 – 11800 -
      Payssandu
    99,93%MONTHIERS SOCIEDAD ANÓNIMA
      Cesar Cortinas, 2.037 - Montevideo
    100,00%PanamaCervecería Nacional S. de R.L.
      Planta Pasadena, vía Ricardo J Alfaro y Simón
      Bolívar, ciudad de Panamá, Rep. De Panamá
    100,00%


F-101

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35.INSURANCE  The Company has a program of risk management in order to
hire coverage compatible with its size and operation. Coverage was contracted
for amounts considered sufficient by management to cover possible losses,
considering the nature of its activity, the risks involved in their operations
and the orientation of its insurance advisors.




F-102

---