*Table
            of Contents*





**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**






**FORM
        20-F/A**






**(Mark
                one)**o
            **REGISTRATION
                STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE
                ACT
                OF 1934****OR**x
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
                ACT OF 1934****For
                the fiscal year ended December 31, 2006****OR**o
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****Commission
                file number: 1-1519**





**COMPANHIA
                DE BEBIDAS DAS AMÉRICAS
                -
                AMBEV***(Exact
                name of Registrant as specified in its charter)***American
                Beverage Company - AmBev***(Translation
                of Registrant’s name into English)***Federative
                Republic of Brazil***(Jurisdiction
                of incorporation or organization)***Rua
                Dr. Renato Paes de Barros, 1017, 4o andar****04530-001
                São Paulo, SP, Brazil***(Address
                of principal executive offices)***Securities
                registered or to be registered pursuant to Section 12(b) of the
                Act:****Title
                of each class**
            **Name
                of each exchange on which registered****American
                Depositary Shares,**
              **evidenced
                by American Depositary**
              **Receipts,
                each representing**
              **100
                Common Shares**
            **New York
                Stock Exchange****Common
                Shares, no par value*****American
                Depositary Shares,**
              **evidenced
                by American Depositary**
              **Receipts, each
                representing**
              **100
                Preferred Shares**
            **New York
                Stock Exchange****Preferred
                Shares, no par value***





*
            Not
                for trading but only in connection with the registration of the 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:
                None











Securities
      for which there is a reporting obligation pursuant to Section 15(d) of the
      Act:




10.5%
      Notes due December 2011




8.75%
      Notes due September 2013




The
      number of total 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
      was:




34,466,344,933
      Common Shares




29,253,047,729
      Preferred Shares




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.




Yesx
            Noo




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.




Yeso
            Nox




Note-Checking
      the box above will not relieve any registrant required to file reports pursuant
      to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their
      obligations under those Sections.




Indicate
      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.




Yesx
            Noo




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 filerx
            Accelerated
                Filero
            Non-accelerated
                filero




Indicate
      by check mark which financial statement item the registrant has elected to
      follow.




Item 17o
            
            Item 18x




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).




Yeso
            Nox




*Table
          of Contents*




***EXPLANATORY
          NOTE***
 
 This
            Annual Report on Form 20-F/A is being filed as Amendment Number 1 to
            our Annual
            Report on Form 20-F which was originally filed with the Securities and
            Exchange
            Commission on July 9, 2007.
 
 This
            Form
            20-F/A amends and restates only certain information in the following
            sections:
 
 Part
            I -
            Item 5. Operating and Financial Review and Prospects
 Part
            II -
            Item 15. Controls and Procedures
 Part
            II -
            Item 18. Financial Statements
 
 In
            addition, we are also including currently dated Section 302 and Section
            906
            certifications of the Chief Executive Officers and Chief Financial Officer
            that
            are attached to this Form 20-F/A as Exhibits 12.1, 12.2, 12.3, 13.1,
            and
            13.2.
 
 For
            the
            convenience of the reader, this Form 20-F/A sets forth the entire Form
            20-F
            which was prepared and relates to the Company as of December 31, 2006.
             However, this Form 20-F/A only amends and restates the Items described
            above and no attempt has been made to modify or update other disclosures
            presented in our Form 20-F for the year ended December 31, 2006.


*Table
            of Contents*


**TABLE
      OF CONTENTS**




**Page**INTRODUCTION
            iACCOUNTING
                PERIODS AND PRINCIPLES
            iCURRENCY
                TRANSLATION
            iTRADEMARKS
            iCAUTIONARY
                STATEMENT REGARDING FORWARD-LOOKING
                INFORMATION
            iiItem
                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
            19Item
                5.
            Operating
                and Financial Review and
                Prospects
            39Item
                6.
            Directors,
                Senior Management and
                Employees
            62Item
                7.
            Major
                Shareholders and Related Party
                Transactions
            73Item
                8.
            Financial
                Information
            79Item
                9.
            The
                Offer and Listing
            85Item
                10.
            Additional
                Information
            88Item
                11.
            Quantitative
                and Qualitative Disclosures About Market
                Risk
            106Item
                12.
            Description
                of Securities Other than Equity
                Securities
            110Item
                13.
            Defaults,
                Dividend Arrearages and
                Delinquencies
            111Item
                14.
            Material
                Modifications to the Rights of Security Holders
                and Use of Proceeds
            112Item
                15.
            Controls
                and Procedures
            113Item
                16.
            ReservedItem
                16A.
            Audit
                committee financial expert
            114Item
                16B.
            Code
                ofBusiness
                Conduct
            115Item
                16C.
            Principal
                Accountant Fees and Services
            116Item
                16D.
            Exemptions
                from the Listing Standards for Audit
                Committees
            117Item
                16E.
            Purchases
                of Equity Securities by the Issuer and
                Affiliated Purchasers
            118Item
                17/18.
            Financial
                Statements
            120Item
                19.
            Exhibits
            121SIGNATURES
            123




*Table
          of Contents*




**INTRODUCTION**




This
      annual report on Form 20-F relates to the two classes of registered American
      Depositary Shares (“ADSs”) of Companhia de Bebidas das Américas — AmBev
      evidenced by American Depositary Receipts (“ADRs”) representing 100 preferred
      shares of AmBev and ADSs evidenced by ADRs representing 100 common shares of
      AmBev, the U.S.$500 million 10.5% notes due 2011 of AmBev (the “2011 notes”) and
      the U.S.$500 million 8.75% notes due 2013 of AmBev (the “2013 notes”, and
      together with the “2011 notes”, the “notes”).




In
      this
      annual report, except as otherwise indicated or as the context otherwise
      requires, the “Company”, “AmBev”, “we”, “us” and “our” refers to Companhia de
      Bebidas das Américas - AmBev and its subsidiaries.




**ACCOUNTING
      PERIODS AND PRINCIPLES**




We
      have
      prepared our audited annual consolidated financial statements as of
      December 31, 2006, 2005 and 2004, and for the three years ended
      December 31, 2006 in Brazilian *Reais* in
      accordance with accounting practices adopted in Brazil (“Brazilian GAAP”), which
      are based on Brazilian Corporate Law (Law No. 6,404 of December 15, 1976, as
      amended, which we refer to as “Brazilian Corporate Law”), the rules and
      regulations issued by the *Comissão
      de Valores Mobiliários* (“CVM”),
      the Brazilian Securities Commission, and the accounting standards issued by
      the *Instituto
      dos Auditores Independentes do Brasil* (“IBRACON”),
      or the Brazilian Institute of Independent Accountants, as applied by us in
      preparing our statutory financial statements and annual report and accounts,
      which differ in certain significant respects from accounting principles
      generally accepted in the United States (“U.S. GAAP”). The audited financial
      statements included in this annual report have been prepared in accordance
      with
      Brazilian GAAP and include a reconciliation of net income and shareholders’
equity to U.S. GAAP. In addition to the reconciliation of these key balances,
      the financial statements also include a discussion of the reconciling
      differences in accounting principles and the presentation of the U.S. GAAP
      condensed balance sheets and statement of operations in Brazilian *Reais* .
      The
      financial information contained in this annual report is in accordance with
      Brazilian GAAP, except as otherwise noted.




Percentages
      and some amounts in this annual report have been rounded for ease of
      presentation. Any discrepancies between totals and the sums of the amounts
      listed are due to rounding.




**CURRENCY
      TRANSLATION**




In
      this
      annual report, references to “ *Real* ”,
      “ *Reais* ”
or
“R$”
      are to the legal currency of Brazil, references to “U.S. dollar” or “U.S.$” are
      to the legal currency of the United States and references to “Canadian dollar”
or “C$” are to the legal currency of Canada. We have translated some of the
      Brazilian currency amounts contained in this annual report into U.S. dollars.
      We
      have also translated some amounts from U.S. dollars and Canadian dollars into *Reais.* All
      financial information relating to us that is presented in U.S. dollars in this
      annual report has been translated from *Reais* at the
      period end exchange rate or average exchange rate prevailing during the period,
      as published by the Central Bank of Brazil (“Central Bank”), unless the context
      otherwise requires. The exchange rate on April 30, 2007 was R$2.0339 to
      U.S.$1.00, as published by the Central Bank. The U.S. dollar equivalent
      information presented in this annual report is provided solely for the
      convenience of the readers of this annual report and should not be construed
      as
      implying that the Brazilian currency amounts represent, or could have been
      or
      could be converted into, U.S. dollars at such rates or at any rate. See “Key
      Information—Exchange Rate Information—Exchange Controls” for more detailed
      information regarding the translation of *Reais* into
      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.


-i-
 *Table
          of Contents*




**CAUTIONARY
      STATEMENT REGARDING**


**FORWARD-LOOKING
      INFORMATION**




We
      make
      forward-looking statements in this annual report that are subject to risks
      and
      uncertainties. These statements are based on the beliefs and assumptions of
      our
      management, and on information currently available to us. Forward-looking
      statements include statements regarding the intent, belief or current
      expectations of AmBev or its directors or executive officers with respect to,
      but not limited to:





•
            The
                declaration or payment of dividends;•
            The
                direction of future operations;•
            The
                implementation of principal operating strategies, including existing,
                potential acquisition or joint venture transactions or other investment
                opportunities;•
            The
                implementation of AmBev’s financing strategy and capital expenditure
                plans;•
            The
                utilization of AmBev’s subsidiaries’ income tax losses;•
            The
                factors or trends affecting AmBev’s financial condition, liquidity or
                results of operations; and•
            The
                implementation of the measures required under AmBev’s performance
                agreement entered into with the*Conselho
                Administrativo de Defesa Econômica*(“CADE”).




Forward-looking
      statements also include information concerning possible or assumed future
      results of operations of AmBev set forth under “Information on the Company—AmBev
      Business Overview” and “Financial Information” as well as statements preceded
      by, followed by, or that include, the words “believes”, “may”, “will”,
“continues”, “expects”, “anticipates”, “intends”, “plans”, “estimates” or
      similar expressions.




Forward-looking
      statements are not guarantees of performance. They involve risks, uncertainties
      and assumptions because they relate to future events and therefore depend on
      circumstances that may or may not occur in the future. The future results and
      shareholder values of AmBev may differ materially from those expressed in or
      suggested by these forward-looking statements. Many of the factors that
      determine these results and values are beyond our ability to control or predict.
      Investors are cautioned not to put undue reliance on any forward-looking
      statements.




Investors
      should understand that the following important factors, in addition to those
      discussed in this annual report, could affect the future results of AmBev and
      could cause results to differ materially from those expressed in such
      forward-looking statements:




·
            General
                economic conditions in the principal geographic markets of AmBev,
                such as
                the rates of economic growth, fluctuations in exchange rates or
                inflation;




·
            Governmental
                intervention, resulting in changes to the economic, tax or regulatory
                environment in Brazil or other countries in which we
                operate;




·
            Industry
                conditions, such as the strength of product demand, the intensity
                of
                competition, pricing pressures, the introduction of new products
                by AmBev,
                the introduction of new products by competitors, changes in technology
                or
                in the ability of AmBev to obtain products and equipment from suppliers
                without interruption and at reasonable prices, and the financial
                conditions of the customers and distributors of AmBev;
                and




·
            Operating
                factors, such as the continued success of sales, manufacturing and
                distribution activities of AmBev and the consequent achievement of
                efficiencies.




-ii-
 *Table
          of Contents*




**PART
      I**




**ITEM
              1.**
            **IDENTITY
                OF DIRECTORS, SENIOR MANAGEMENT AND
                ADVISERS**




Not
      Applicable.




-1-
 *Table
          of Contents*




**ITEM
              2.**
            **OFFER
                STATISTICS AND EXPECTED
                TIMETABLE**




Not
      Applicable.





-2-
 *Table
            of Contents*




**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, the audited
      annual consolidated financial statements of AmBev and the related notes which
      are included in this annual report.




Our
      selected historical financial data prepared under Brazilian GAAP and U.S. GAAP
      set forth below as of and for each of the years ended December 31, 2006,
      2005, 2004, 2003 and 2002 have been derived from AmBev’s consolidated financial
      statements as of and for the periods then ended. Brazilian GAAP differs
      significantly from U.S. GAAP and you should read the financial information
      in
      conjunction with our audited financial statements, as well as “Operating and
      Financial Review and Prospects”.




In
      October 2002, AmBev’s subsidiary Companhia Brasileira de Bebidas (“CBB”)
      completed an exchange offer of the U.S.$500 million 10.5% notes due 2011, in
      the
      U.S. securities markets. Also, in September 2003, CBB issued
      U.S.$500 million 8.75% notes due 2013 in a transaction exempt from
      registration under the U.S. Securities Act of 1933, as amended. In September
      2004, CBB completed an exchange offer of such notes in the U.S. securities
      markets. AmBev fully and unconditionally guaranteed these two issuances, and
      following CBB’s merger into AmBev in May 2005, succeeded CBB in all its
      rights and obligations under the indenture governing these notes.




In
      January 2003, AmBev completed a business combination with Quilmes Industrial
      (Quinsa), Société Anonyme (“Quinsa”), through which AmBev acquired an initial
      40.5% economic interest in Quinsa and joint control of Quinsa along with
      Beverages Associates Corp. (“BAC”) establishing a leading presence in the beer
      markets of Argentina, Bolivia, Paraguay and Uruguay. In August 2005, AmBev,
      BAC
      and Quinsa entered into an agreement pursuant to which Quinsa agreed to acquire
      BAC’s 5.32% equity interest in Quinsa’s subsidiary Quilmes International
      (Bermuda) Ltd. (“QIB”) for approximately U.S.$ 119 million. The transaction
      closed on June 28, 2006. As a result of such transaction, Quinsa increased
      its
      interest in QIB to 92.95%, while AmBev owned the remaining 7.05%. See “Interest
      in Quinsa”. On April, 13, 2006, AmBev entered into an agreement with BAC
      pursuant to which BAC agreed to sell all its remaining shares in Quinsa to
      AmBev. Upon the closing of the transaction, AmBev’s equity interest in Quinsa
      increased to approximately 91% of its total share capital with AmBev paying
      to
      BAC approximately U.S.$ 1,252.6 million. The results of operations for Quinsa
      have been fully consolidated since July 31, 2006 in our audited financial
      statements.




In
      August
      2004, AmBev completed the transactions contemplated by an agreement (the
“ *Incorporação* Agreement”) with Interbrew S.A./N.V., now known as InBev S.A./N.V. (“InBev”),
      Labatt Brewing Company Ltd. (“Labatt”) and Labatt Brewing Canada Holding Ltd.,
      then a wholly owned subsidiary of InBev (“Mergeco”), which indirectly held 99.9%
      of the capital stock of Labatt. Pursuant to the *Incorporação* Agreement, Mergeco was merged into AmBev by means of an *incorporação* under
      Brazilian law. Mergeco held 99.9% of the capital stock of Labatt Holding
      ApS (“Labatt ApS”), a corporation organized under the laws of Denmark, and
      Labatt ApS owns all the capital stock of Labatt. Upon completion of the *incorporação* ,
      AmBev
      held 99.9% of the capital stock of Labatt ApS, and indirectly, of
      Labatt. The results of operations for Labatt have been fully consolidated
      since August 27, 2004 in our audited financial statements.


-3-
 *Table
            of Contents*




**B.**
            **Statement
                of Operations Data**




**As
                of or for the year ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002*****(R$
                in millions, except for per share amounts,***
              ***number
                of shares and other operating data)*****Brazilian
                GAAP**Gross
                sales, before taxes, discounts and returns
            
            
            32,487.8
            
            
            28,878.7
            
            
            23,297.6
            
            
            17,143.5
            
            
            14,279.9Net
                sales
            
            
            17,613.7
            
            
            15,958.6
            
            
            12,006.8
            
            
            8,683.8
            
            
            7,325.3Cost
                of sales
            
            
            (5,948.7
            )
            
            (5,742.3
            )
            
            (4,780.5
            )
            
            (4,044.2
            )
            
            (3,341.7
            )Gross
                profit
            
            
            11,665.0
            
            
            10,216.3
            
            
            7,226.3
            
            
            4,639.6
            
            
            3,983.6Selling,
                General and Administrative(1)
            
            
            (5,408.7
            )
            
            (4,998.4
            )
            
            (3,611.1
            )
            
            (2,333.6
            )
            
            (1,932.7
            )6,256.3
            
            
            5,217.9
            
            
            3,615.2
            
            
            2,306.1
            
            
            2,050.9Provision
                for contingencies and other
            
            
            111.8
            
            
            (71.5
            )
            
            (260.2
            )
            
            (187.9
            )
            
            (123.7
            )Other
                operating expenses, net
            
            
            (955.1
            )
            
            (1,075.4
            )
            
            (420.9
            )
            
            (240.1
            )
            
            199.4Financial
                income
            
            
            168.4
            
            
            95.3
            
            
            468.6
            
            
            601.8
            
            
            2,530.3Financial
                expenses
            
            
            (1,246.7
            )
            
            (1,182.0
            )
            
            (1,244.9
            )
            
            (508.7
            )
            
            (3,277.3
            )Equity
                in Investees
            
            
            1.4
            
            
            2.0
            
            
            5.6
            
            
            (6.2
            )
            
            -**Operating
                income**(2)
            
            
            **4,336.1**
            
            
            **2,986.2**
            
            
            **2,163.4**
            
            
            **1,964.9**
            
            
            **1,379.6**Non-operating
                income (expense), net
            
            
            (28.8
            )
            
            (234.3
            )
            
            (333.9
            )
            
            (100.7
            )
            
            (72.2
            )Income
                tax benefit (expense)
            
            
            (1,315.3
            )
            
            (1,020.2
            )
            
            (511.8
            )
            
            (426.1
            )
            
            280.6Income
                before equity in affiliates, profit sharing and minority
                interest
            
            
            2,992.0
            
            
            1,731.7
            
            
            1,317.6
            
            
            1,438.1
            
            
            1,588.0Profit
                sharing and contributions
            
            
            (194.4
            )
            
            (202.8
            )
            
            (152.4
            )
            
            (23.6
            )
            
            (125.1
            )Minority
                interest
            
            
            8.7
            
            
            16.8
            
            
            (3.7
            )
            
            (2.9
            )
            
            47.4**Net
                income**
            
            
            **2,806.3**
            
            
            **1,545.7**
            
            
            **1,161.5**
            
            
            **1,411.6**
            
            
            **1,510.3**Net
                income per 1,000 shares (excluding treasury shares) at year
                end(3)
            
            
            44.04
            
            
            23.65
            
            
            21.26
            
            
            37.23
            
            
            39.48Net
                income per ADS(4)at
                year end
            
            
            4.40
            
            
            2.37
            
            
            2.13
            
            
            3.72
            
            
            3.95Dividends
                and interest attributable to shareholders’ equity per 1,000 shares
                (excluding treasury shares)(3)(5)(6)(20)Common
                shares
            
            
            17.77
            
            
            23.07
            
            
            20.86
            
            
            23.15
            
            
            12.40Preferred
                shares
            
            
            19.54
            
            
            25.37
            
            
            22.95
            
            
            25.46
            
            
            13.64Number
                of shares outstanding at year end, excluding treasury shares (in
                thousands)Common
                shares
            
            
            34,466,345
            
            
            34,488,943
            
            
            23,497,514
            
            
            15,631,332
            
            
            15,694,772Preferred
                shares
            
            
            29,253,048
            
            
            30,857,271
            
            
            31,129,892
            
            
            22,281,302
            
            
            22,551,143


-4-
 *Table
            of Contents*




**As
                  of or for the year ended December 31,****2006**
              
              **2005**
              
              **2004**
              
              **2003**
              
              **2002*****(R$
                  in millions, except for per share amounts,***
                ***number
                  of shares and other operating data)*****U.S.
                  GAAP**Net
                  sales
              
              
              16,945.4
              
              
              14,836.7
              
              
              10,936.7
              
              
              7.929.4
              
              
              7,310.4Operating
                  income
              
              
              6,177.8
              
              
              4,478.3
              
              
              2,856.6
              
              
              2,038.2
              
              
              1,569.2Net
                  income
              
              
              4,096.7
              
              
              2,711.0
              
              
              1,472.7
              
              
              1,689.4
              
              
              1,642.2Net
                  income per 1,000 shares (weighted average)(3)(7)-
                  BasicCommon
                  shares
              
              
              65.24
              
              
              45.78
              
              
              29.56
              
              
              39.46
              
              
              37.93Preferred
                  shares
              
              
              71.76
              
              
              50.36
              
              
              32.52
              
              
              43.41
              
              
              41.72-
                  DilutedCommon
                  shares
              
              
              65.13
              
              
              45.68
              
              
              29.40
              
              
              39.05
              
              
              37.65Preferred
                  shares
              
              
              71.64
              
              
              50.24
              
              
              32.34
              
              
              42.95
              
              
              41.37Net
                  income per ADS(4)-
                  BasicCommon
                  shares
              
              
              6.52
              
              
              4.58
              
              
              2.96
              
              
              3.95
              
              
              3.79Preferred
                  shares
              
              
              7.18
              
              
              5.04
              
              
              3.25
              
              
              4.34
              
              
              4.17-
                  DilutedCommon
                  shares
              
              
              6.51
              
              
              4.57
              
              
              2.94
              
              
              3.91
              
              
              3.77Preferred
                  shares
              
              
              7.16
              
              
              5.03
              
              
              3.23
              
              
              4.30
              
              
              4.14Dividends
                  and interest attributable to shareholders’ equity per 1,000 shares
                  (weighted average)(3)(5)(6)-
                  BasicCommon
                  shares
              
              
              28.81
              
              
              38.55
              
              
              11.21
              
              
              22.16
              
              
              4.53Preferred
                  shares
              
              
              31.69
              
              
              42.40
              
              
              12.33
              
              
              24.38
              
              
              4.99-
                  DilutedCommon
                  shares
              
              
              28.76
              
              
              38.46
              
              
              11.15
              
              
              21.93
              
              
              4.50Preferred
                  shares
              
              
              31.63
              
              
              42.30
              
              
              12.26
              
              
              24.12
              
              
              4.94Weighted
                  average number of shares (thousands)(3)(7)(8)(19)-
                  BasicCommon
                  shares
              
              
              29,098,108
              
              
              25,584,256
              
              
              22,345,110
              
              
              18,664,356
              
              
              18,908,907Preferred
                  shares
              
              
              30,632,954
              
              
              30,574,965
              
              
              24,970,421
              
              
              21,952,196
              
              
              22,173,258-
                  DilutedCommon
                  shares
              
              
              29,114,195
              
              
              25,584,256
              
              
              22,388,341
              
              
              18,733,355
              
              
              18,962,604Preferred
                  shares
              
              
              30,713,387
              
              
              30,699,336
              
              
              25,186,577
              
              
              22,299,692
              
              
              22,441,743





-5-
 *Table
            of Contents*




**C.**
            **Balance
                Sheet Data**




**As
                  of or for the year ended December 31,****2006**
              
              **2005**
              
              **2004**
              
              **2003**
              
              **2002*****(R$
                  in millions, except for per share amounts,***
                ***number
                  of shares and other operating data)*****Brazilian
                  GAAP**Balance
                  Sheet Data:Cash,
                  cash equivalents and short term investments
              
              
              1,765.0
              
              
              1,096.3
              
              
              1,505.4
              
              
              2,534.2
              
              
              3,290.0Total
                  current assets
              
              
              6,817.4
              
              
              5,474.7
              
              
              5,379.7
              
              
              5,500.5
              
              
              5,571.4Prepaid
                  pension benefit cost
              
              
              17.0
              
              
              20.0
              
              
              20.6
              
              
              22.0
              
              
              21.6Investments
              
              
              17,990.4
              
              
              16,727.1
              
              
              18,218.7
              
              
              1,711.4
              
              
              637.3Property,
                  plant and equipment, net
              
              
              5,723.9
              
              
              5,404.6
              
              
              5,531.7
              
              
              4,166.3
              
              
              3,330.6Deferred
                  income tax - non-current
              
              
              3,566.7
              
              
              4,183.5
              
              
              2,216.6
              
              
              1,831.8
              
              
              1,558.4Total
                  assets
              
              
              35,645.1
              
              
              33,401.8
              
              
              32,802.6
              
              
              14,830.1
              
              
              12,381.5Short-term
                  debt(9)
              
              
              2,104.6
              
              
              1,209.4
              
              
              3,443.1
              
              
              1,976.1
              
              
              607.4Total
                  current liabilities
              
              
              6,844.4
              
              
              5,052.3
              
              
              8,771.7
              
              
              4,720.0
              
              
              2,833.6Long-term
                  debt(10)
              
              
              7,462.0
              
              
              5,994.2
              
              
              4,367.6
              
              
              4,004.3
              
              
              3,879.3Accrued
                  liability for contingencies
              
              
              663.3
              
              
              1,037.1
              
              
              1,471.0
              
              
              1,232.9
              
              
              989.3Sales
                  tax deferrals and other tax credits
              
              
              687.7
              
              
              698.9
              
              
              711.9
              
              
              768.7
              
              
              803.1Post-retirement
                  benefit(11)
              
              
              326.6
              
              
              584.6
              
              
              646.0
              
              
              72.9
              
              
              53.4Total
                  long-term liabilities
              
              
              9,160.0
              
              
              8,209.7
              
              
              6,822.5
              
              
              5,605.5
              
              
              5,339.1Minority
                  interest
              
              
              222.7
              
              
              122.6
              
              
              212.5
              
              
              196.4
              
              
              79.1Subscribed
                  and paid-up capital
              
              
              5,716.1
              
              
              5,691.4
              
              
              4,742.8
              
              
              3,124.1
              
              
              3,046.2Shareholders’
                  equity
              
              
              19,268.1
              
              
              19,867.3
              
              
              16,995.9
              
              
              4,308.2
              
              
              4,129.6**U.S.
                  GAAP**Total
                  assets
              
              
              39,732.0
              
              
              35,447.5
              
              
              34,069.0
              
              
              13,766.0
              
              
              11,584.6Shareholders’
                  equity
              
              
              21,107.7
              
              
              20,601.9
              
              
              17,876.3
              
              
              4,382.9
              
              
              3,960.6




-6-
 *Table
          of Contents*


**D.**
            **Other
                Data**





**As
                of or for the year ended December 31,****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002*****(R$
                in millions, except for per share amounts,***
              ***number
                of shares and other operating data)*****Brazilian
                GAAP**Other
                Financial Information:Net
                working capital(12)
            
            
            (27.0
            )
            
            422.4
            
            
            (3,392.1
            )
            
            780.5
            
            
            2,737.7Cash
                dividends paid(5)
            
            
            1,790.8
            
            
            2,272.0
            
            
            602.9
            
            
            1,026.9
            
            
            335.6Depreciation
                and amortization of deferred charges(13)
            
            
            1,188.4
            
            
            1,087.5
            
            
            922.2
            
            
            766.3
            
            
            659.5Capital
                expenditures(14)
            
            
            1,425.7
            
            
            1,369.5
            
            
            1,273.7
            
            
            862.2
            
            
            544.7Operating
                cash flows - generated (used)(15)
            
            
            5,985.3
            
            
            4,149.6
            
            
            3,418.7
            
            
            2,527.6
            
            
            3,595.0Investing
                cash flows - generated (used)(15)
            
            
            (3,785.3
            )
            
            (1,619.3
            )
            
            110.7
            
            
            (2,014.7
            )
            
            (1,603.1
            )Financing
                cash flows-generated (used)(15)
            
            
            (1,468.6
            )
            
            (2,974.0
            )
            
            (3,433.8
            )
            
            (346.7
            )
            
            (2,912.2
            )Other
                Operating Data:Total
                production capacity - beer(16)
            
            
            143.8
                million hl
            
            
            120.9
                million hl
            
            
            114.2
                million hl
            
            
            88.3
                million hl
            
            
            89.7
                million hlTotal
                production capacity - CSD & NANC(16)
            
            
            65.5
                million hl
            
            
            42.4
                million hl
            
            
            43.9
                million hl
            
            
            45.7
                million hl
            
            
            37.3
                million hlTotal
                beer volume sold(17)
            
            
            98.0
                million hl
            
            
            76.7
                million hl
            
            
            63.9
                million hl
            
            
            56.9
                million hl
            
            
            62.0
                million hlTotal
                CSD & NANC volume sold(17)
            
            
            36.3 million
                hl
            
            
            23.6
                million hl
            
            
            22.8
                million hl
            
            
            19.2
                million hl
            
            
            19.6
                million hlNumber
                of employees(18)
            
            
            35,090
            
            
            28,567
            
            
            25,974
            
            
            18,890
            
            
            18.570




**Footnotes
      to selected financial information**




(1)
            General
                and administrative expenses include director’s fees.




(2)
            Operating
                income under Brazilian GAAP is presented after financial income and
                financial expense.




(3)
            The
                information is provided per thousand shares because AmBev common
                and
                preferred shares are generally traded on the São Paulo Stock Exchange in
                blocks of one thousand shares.




(4)
            Each
                ADS represents either 100 common shares or 100 preferred shares.




(5)
            Includes
                dividends and interest on shareholders’ equity (including withholding
                tax paid by AmBev in respect thereof). The dividend and interest on
                shareholders equity per 1,000 shares for Brazilian GAAP purposes
                is
                calculated net of withholding tax and therefore represents the amounts
                received as disclosed in “Dividends”. We changed the criteria for
                reporting this amount in 2002 and therefore the dividends per share
                disclosed in the years prior to 2002 do not conform to those disclosed
                in
                our annual report on Form 20-F for the year ended December 31, 2002.




(6)
            Brazilian
                GAAP and U.S. GAAP differ on the recognition of declared / proposed
                dividends, specifically with regard to when the dividend should be
                recognized. The executive officers are required to propose a dividend
                at
                year end, which is subject to ratification by the shareholders at
                a
                general meeting, and must be recognized under Brazilian GAAP. However,
                under U.S. GAAP, the proposed dividends may be modified or ratified
                by the
                shareholders at a general meeting and are treated as a deduction
                from
                shareholders’ equity only when ratified.




(7)
            In
                the U.S. GAAP selected financial data only, earnings per share are
                calculated dividing the net income by the weighted average number
                of
                common and preferred shares outstanding during the relevant periods.
                In
                the Brazilian GAAP selected financial information section, earnings
                per
                share are calculated by dividing by the number of shares outstanding
                at
                the year end. AmBev’s preferred shares are entitled to dividends 10%
                greater than the dividends paid to common shares.




(8)
            Under
                U.S. GAAP we have included the net assets of FAHZ, one of our controlling
                shareholders, on our balance sheet as of December 31, 2006, 2005,
                2004,
                2003 and 2002. As a result, AmBev shares owned by FAHZ are treated
                as
                treasury shares, rather than outstanding shares, thereby reducing
                the
                number of our weighted average outstanding shares and increasing
                our
                earnings or loss per share. For further information, please refer
                to our
                consolidated financial statements contained within this annual report.




(9)
            Includes
                current portion of long-term debt.




(10)
            Excludes
                current portion of long-term debt.




-7-
 *Table
          of Contents*


(11)
            Consistent
                with accounting practice under Brazilian GAAP, following the issuance
                of
                accounting standard NPC No. 26, we record actuarial obligation for
                pension
                liabilities and post-retirement benefits, including medical benefits
                to
                retirees in our financial statements.




(12)
            Represents
                total current assets less total current liabilities.




(13)
            Includes
                depreciation of property, plant and equipment and amortization of
                deferred
                charges.




(14)
            Represents
                cash expenditures for property, plant and equipment.




(15)
            Operating,
                Investing and Financing cash flows data is derived from our consolidated
                financial statements.




(16)
            Represents
                available production capacity of AmBev and its respective subsidiaries,
                domestic and international, including Quinsa’s total capacity (through
                2005, Quinsa’s capacity is not considered; hl is the abbreviation for
                hectoliters; CSD & NANC is the abbreviation for Carbonated Soft Drinks
                and Non Alcoholic and Non Carbonated Soft Drinks).




(17)
            Represents
                full-year volumes of AmBev and its respective subsidiaries. Quinsa
                and its
                subsidiaries are included in 2006 numbers and excluded through 2005.
                Labatt’s volumes for 2004 were consolidated from August 27
                onwards.




(18)
            Includes
                all production- and non-production-related employees of AmBev and
                its
                respective subsidiaries. Quinsa and its subsidiaries are included
                in 2006
                numbers and excluded through 2005.




(19)
            In
                the U.S. GAAP selected financial data only, earnings per share have
                been
                restated to give retroactive effect to the share dividend distributed
                by
                AmBev on May 31, 2005.





(20)
            The
                amounts do not consider the dividend paid on March 31st, 2007 as
                interest
                attributable to shareholders’ equity (“JCP”), related to the period of
                December of 2006 to March of 2007, deducted from the investments
                reserve
                and attributed to minimum mandatory dividends for the year of 2007,
                at
                R$5.600 (Net distribution of R$4.7600) per lot of thousand common
                shares
                and R$6.1600 (Net distribution of R$5.2360) per lot of thousand preferred
                shares.





-8-
 *Table
            of Contents*




**E.**
            **Dividends**




**Dividend
      Policy**




The
      timing, frequency and amount of future dividend payments, if any, will depend
      upon various factors the Board of Directors of AmBev considers relevant,
      including the earnings and the financial condition of AmBev. AmBev’s bylaws
      provide for a mandatory dividend of 35% of its adjusted annual net income,
      if
      any, as determined and adjusted under Brazilian GAAP and Brazilian Corporate
      Law
      (“adjusted income”). The mandatory dividend includes amounts paid as interest on
      shareholders’ equity, which is equivalent to a dividend but is a more tax
      efficient way to distribute earnings because they are deductible by companies
      for Brazilian income tax purposes up to a certain limit established in Brazilian
      tax laws. However, shareholders (including holders of ADSs) have to pay
      Brazilian withholding tax on the amounts received as interest on shareholders’
equity, whereas no such payment is required in connection with dividends
      received.




Adjusted
      income not distributed as dividends or as interest on shareholders’ equity may
      be capitalized, used to absorb losses or otherwise appropriated as allowed
      under
      Brazilian Corporate Law; therefore, any adjusted income may no longer be
      available to be paid as dividends. AmBev may also not pay dividends to its
      shareholders in any particular fiscal year, upon the determination by the Board
      of Directors that such distributions would be inadvisable in view of AmBev’s
      financial condition. Any such dividends not distributed would be allocated
      to a
      special reserve account for future payment to shareholders, unless it is used
      to
      offset subsequent losses. For further information on this matter see “Risk
      Factors—Risks Relating to our Securities—AmBev shareholders may not receive any
      dividends”. Any dividends payable on AmBev’s preferred shares must be 10%
      greater than those payable on AmBev’s common shares. See “Additional
      Information—Memorandum and Articles of Association—Dividends and
      Reserves—Dividend Preference of Preferred Shares”.




For
      further information on Brazilian Corporate Law provisions 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 AmBev, see
“Additional Information—Memorandum and Articles of Association—Dividends and
      Reserves”.




**AmBev
      - Dividends and Interest on Shareholders’ Equity**




The
      following table shows the cash dividends paid by AmBev to its preferred and
      common shareholders since November 2002 in *Reais* and in
      U.S. dollars (translated from *Reais* at the
      commercial exchange rate as of the date of payment). The amounts include
      interest on shareholders’ equity, net of withholding tax. See “Additional
      Information—Memorandum and Articles of Association—Dividends and
      Reserves—Interest Attributable to Shareholders’ Equity”. In addition, in
      May 2005, AmBev distributed a share dividend to each shareholder of AmBev
      at a rate of one AmBev common share for every five preferred
      and/or common shares held by such shareholder at that date. See
“Information on the Company—History and Development of the
      Company”.


**Earnings
                  generated**
              
              **First
                  payment date**
              
              ***Reais*****per thousand****(1)****shares****(2)**
              
              **U.S.
                  dollar equivalent per**
                **thousand****(1)****shares at payment date****(3)**First
                  half 2002
              
              
              November
                  25, 2002
              
              
              4.37
              
              
              (preferred
              )
              
              1.153.97
              
              
              (common
              )
              
              1.04Second
                  half 2002
              
              
              February
                  28, 2003
              
              
              9.27
              
              
              (preferred
              )
              
              2.608.43
              
              
              (common
              )
              
              2.37First
                  half 2003
              
              
              October
                  13, 2003
              
              
              18.70
              
              
              (preferred
              )
              
              6.5917.00
              
              
              (common
              )
              
              5.99Second
                  half 2003
              
              
              March
                  25, 2004
              
              
              6.75
              
              
              (preferred
              )
              
              2.306.14
              
              
              (common
              )
              
              2.09First
                  half 2004
              
              
              October
                  8, 2004
              
              
              5.80
              
              
              (preferred
              )
              
              2.055.28
              
              
              (common
              )
              
              1.87Second
                  half 2004
              
              
              February
                  15, 2005
              
              
              17.15
              
              
              (preferred
              )
              
              6.6615.59
              
              
              (common
              )
              
              6.05First
                  half 2005
              
              
              September
                  30, 2005
              
              
              10.69
              
              
              (preferred
              )
              
              4.829.72
              
              
              (common
              )
              
              4.38Second
                  half 2005
              
              
              December
                  29, 2005
              
              
              8.36
              
              
              (preferred
              )
              
              3.577.60
              
              
              (common
              )
              
              3.25March
                  31, 2006
              
              
              
              
              
              6.32
              
              
              (preferred
              )
              
              2.915.75
              
              
              (common
              )
              
              2.65First
                  half 2006
              
              
              June
                  30, 2006
              
              
              6.08
              
              
              (preferred
              )
              
              2.815.53
              
              
              (common
              )
              
              2.56October
                  30, 2006
              
              
              
              
              
              6.08
              
              
              (preferred
              )
              
              2.835.53
              
              
              (common
              )
              
              2.57Second
                  half 2006
              
              
              December
                  28, 2006
              
              
              7.39
              
              
              (preferred
              )
              
              3.466.72
              
              
              (common
              )
              
              3.14First
                  half 2007
              
              
              March
                  30, 2007(4
              )
              
              7.27
              
              
              (preferred
              )
              
              3.546.61
              
              
              (common
              )
              
              3.22June
                  29, 2007
              
              
              3.03
              
              
              (preferred
              )
              
              1.572.75
              
              
              (common
              )
              
              0.91


-9-
 *Table
            of Contents*


(1)
            The
                information is provided per thousand shares because AmBev common
                and
                preferred shares are generally traded on the São Paulo Stock Exchange in
                blocks of one thousand.


(2)
            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 per thousand shares set forth above are calculated
                based on
                the number of outstanding shares at the date the distributions were
                declared.


(3)
            Translated
                to U.S. dollars at the exchange rate in effect at the date of
                payment.


(4)
            The
                amount paid on March 31st, 2007 consists of: (i) dividends, deducted
                from
                the investments reserve and attributed to minimum mandatory dividends
                for
                the year of 2007, at R$ 1.8500 per lot of thousand common shares
                and R$
                2.0350 per lot of thousand preferred shares, without withholding
                income
                tax, as provided for by the prevailing laws; and (ii) interest on
                shareholders’ equity , related to the period of December of 2006 to March
                of 2007, deducted from the investments reserve and attributed to
                minimum
                mandatory dividends for the year of 2007, at R$ 5.600 (Net distribution
                of
                R$ 4.7600) per lot of thousand common shares and R$ 6.1600 (Net
                distribution of R$ 5.2360) per lot of thousand preferred shares.




**F.**
            **Exchange
                Rate Information**




There
      were previously two foreign exchange markets in Brazil. With the enactment
      of
      National Monetary Council Resolution No. 3,265, of March 14, 2005, the foreign
      exchange markets were consolidated to form one exchange market. All transactions
      involving foreign currency in the Brazilian market, whether carried out by
      investors resident or domiciled in Brazil or investors resident or domiciled
      abroad, must now be conducted on this exchange market, through institutions
      authorized by the Central Bank, subject to the rules of the Central
      Bank.




The
      following tables set forth commercial market rates for the purchase of U.S.
      dollars for the periods indicated. Foreign exchange transactions were carried
      out on either the commercial rate exchange market or the floating rate exchange
      market. Rates in the two markets were generally the same. The table uses the
      commercial selling rate prior to March 14, 2005.





**Exchange
                Rates of*****Reais*****per U.S.$1.00****2006**
            
            **2005**
            
            **2004**
            
            **2003**
            
            **2002**Low
            
            
            R$2.0586
            
            
            R$2.1633
            
            
            R$2.6544
            
            
            R$2.8219
            
            
            R$2.2709High
            
            
            2.3711
            
            
            2.7621
            
            
            3.2051
            
            
            3.6623
            
            
            3.9552Average(1)
            
            
            2.1679
            
            
            2.4125
            
            
            2.9257
            
            
            3.0600
            
            
            2.9983Period
                End
            
            
            2.1380
            
            
            2.3407
            
            
            2.6544
            
            
            2.8892
            
            
            3.5333





*Source* :
      Central
      Bank




(1)
            Represents
                the average of the month-end exchange rates during the relevant
                period.






**Monthly
                Exchange Rates of*****Reais*****per U.S.$1.00****2007****June**
            
            **May**
            
            **April**
            
            **March**
            
            **February**
            
            **January**Low
            
            R$1.9638
            
            
            R$2.0309
            
            
            R$2.0231
            
            
            R$2.0504
            
            
            R$2.0766
            
            
            R$2.1247High
            
            1.9047
            
            
            1.9289
            
            
            2.0478
            
            
            2.1388
            
            
            2.1182
            
            
            2.1556





*Source* :
      Central
      Bank




We
      will
      pay any cash dividends and make any other cash distributions in *Reais* .
      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 the *Real* and the
      U.S. dollar may also affect the U.S. dollar equivalent of *Real* price of
      our shares on the São Paulo Stock Exchange (“Bovespa”). For further information
      on this matter see “Risk Factors—Risks Relating to Our Shares”.


-10-
 *Table
          of Contents*




**G.**
            **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 of
      Brazil.




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.
      Restrictions on the remittance of foreign capital abroad could hinder or prevent
      Banco Itaú S.A. (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 of *Real* payments
      and remittances abroad.




Under
      Brazilian law relating to foreign investment in the Brazilian capital markets
      (“Foreign Investment Regulations”), foreign investors registered with the CVM
      and acting through authorized custody 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 or Resolution No. 2,689/00
      of
      the National Monetary Council (“Resolution No. 2,689”).




Under
      Resolution No. 2,689, 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. 2,689,
      the
      definition of a foreign investor includes individuals, legal entities, mutual
      funds and other collective investment entities, domiciled or headquartered
      abroad. Securities and other financial assets held by a Resolution No. 2,689
      investor must be registered or maintained in deposit accounts or under the
      custody of an entity duly licensed by the Central Bank or the CVM. In addition,
      any transfer of securities held under Resolution No. 2,689 must be carried
      out
      on the stock exchanges or through organized over-the-counter markets licensed
      by
      the CVM, except for specific types of transfers.




Pursuant
      to the registration obtained by AmBev with the Central Bank in the name of
      The
      Bank of New York with respect to the AmBev ADSs to be maintained by the
      custodian, Banco Itaú S.A., on behalf of The Bank of New York, the
      custodian and The Bank of New York will be able to convert dividends and
      other distributions with respect to the AmBev shares represented by AmBev ADSs
      into foreign currency and remit the proceeds outside of Brazil. In the event
      that a holder of AmBev ADSs exchanges such ADSs for AmBev shares, such holder
      will be entitled to continue to rely on The Bank of New York’s registration
      for only five business days after such exchange, after which such holder must
      obtain its own registration pursuant to Law No. 4,131/62 or Resolution No.
      2,689. Any such holder may not be able to obtain and remit abroad U.S. dollars
      or other hard currencies upon the disposition of the shares or distributions
      with respect to such disposition, unless such holder qualifies under the Foreign
      Investment Regulations and obtains its own registration, and such holder
      generally will be subject to less favorable Brazilian tax treatment than a
      holder of AmBev ADSs. For further information on this matter see “Additional
      Information—Taxation—Brazilian Tax Considerations”.




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
      “Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate”
and “Risk Factors—Risks Relating to Our Shares”. 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.




**H.**
            **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.




For
      purposes of this section, when we state that a risk, uncertainty or problem
      may,
      could or would have an “adverse effect” on us, we mean that the risk,
      uncertainty or problem may, could or would have an adverse effect on our
      business, financial condition, liquidity, results of our operations or
      prospects, except as otherwise indicated or as the context may otherwise
      require. You should view similar expressions in this section as having a similar
      meaning.


-11-
 *Table
          of Contents*




***Risks
      Relating To Brazil and other Countries in Which We
      Operate***




**Economic
      uncertainty and volatility in Brazil 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 the National Consumer Price Index ( *Índice
      Nacional de Preços ao Consumidor* ),
      have
      reached in the not-so-distant past a hyper-inflationary peak of 2,489.1% in
      1993. Brazilian inflation, as measured by the same index, was 14.7% in 2002,
      10.4% in 2003, 6.1% in 2004, 5.7% in 2005 and 3.14% in 2006. Brazil may
      experience high levels of inflation in the future. There can be no assurance
      that recent lower levels of inflation will continue. Future governmental
      actions, including actions to adjust the value of the *Real* ,
      may
      trigger increases in inflation. We cannot assure you that inflation will not
      affect our business in the future. In addition, any Brazilian government’s
      actions to maintain economic stability, as well as public speculation about
      possible future actions, may contribute significantly to economic uncertainty
      in
      Brazil and may heighten volatility in the Brazilian securities markets and
      securities issued abroad by Brazilian issuers.




The
      Brazilian currency has devalued frequently during the last four 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, the U.S. *Real* /dollar
      exchange rate depreciated from R$ 2.3204 per U.S.$ 1.00 at December 31, 2001
      to
      R$ 3.5333 at December 31, 2002. The exchange rate reached R$ 3.9552 per
      U.S.$1.00 in October 2002. However, the *Real* has
      appreciated against the U.S. dollar in recent years. The *Real* had an
      appreciation of 22.3% in 2003, resulting in an exchange rate of R$ 2.8892 per
      U.S.$1.00 as of December 31, 2003, an 8.8% appreciation in 2004, resulting
      in an
      exchange rate of R$ 2.6544 per U.S.$ 1.00 as of December 31, 2004, a 13.4%
      appreciation in 2005, resulting in an exchange rate of R$ 2.3407, and a further
      9.5% appreciation in 2006, resulting in an exchange rate of R$ 2.1380 per U.S.$
      1.00 as of December 31, 2006.




Devaluation
      of the *Real* relative
      to the U.S. dollar would 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, appreciation
      of the *Real* against
      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 the *Real* is
      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.




**Devaluation
      of the** ***Real*** **relative to the U.S. dollar may adversely affect our financial
      performance**




Most
      of
      our sales are in *Reais* ;
      however, a significant portion of our debt is denominated in or indexed to
      U.S.
      dollars. In addition, a significant portion of our operating expenses, in
      particular those related to packaging such as aluminum and iron cans and PET
      bottles, as well as sugar, hops and malt are also denominated in or linked
      to
      U.S. dollars. Therefore, the devaluation of the *Real* increases our financial expenses and operating costs and could affect our
      ability to meet our foreign currency obligations. Although for the last four
      years the *Real* has
      appreciated against the U.S. dollar, we cannot assure you that it will continue
      to do so in the future. Our current policy is to hedge substantially all of
      our
      U.S. dollar-denominated debt and operating expenses against adverse changes
      in
      foreign exchange rates; however, we cannot assure you that such hedging will
      be
      possible at all times in the future.




**Increases
      in taxes levied on beverage products in Brazil and high levels of 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
      government will not increase current tax levels, at both state and/or federal
      levels, and that this will not impact our business.




In
      addition, the Brazilian beverage industry experiences high levels of 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. We proposed to the
      federal government regulations requiring the mandatory installation of flow
      meters in all Brazilian beer and carbonated soft drinks (“CSD”) factories in
      order to help the federal and state governments fight against tax evasion in
      the
      beverage industry. Though the federal government issued this regulation in
      2004
      with respect to the beer industry only, it issued similar regulations with
      respect to the carbonated soft-drinks industry in 2006. We cannot assure you
      that these regulations will have the expected impact.


-12-
 *Table
          of Contents*




**Quinsa
      is subject to substantial risks relating to its business and operations in
      Argentina and other countries in which it operates**




We
      own
      approximately 91% of Quinsa’s total share capital whereas Quinsa’s net revenues
      in 2006 corresponded to 11.4% of AmBev’s consolidated results. Quinsa is a
      brewing company with a substantial portion of its operations in Argentina and
      other South American countries. As a result, Quinsa’s financial conditions 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 it operates and, consequently, affect
      our consolidated results. For example, Argentina has recently experienced
      political and economic instability. Commercial and financial activities were
      virtually paralyzed in 2002, further aggravating the economic recession that
      precipitated the above-mentioned crisis. A widespread recession followed in
      2002, including a 10.9% decrease in real GDP, high unemployment and high
      inflation, which have led to a reduction of disposable income and of wages
      in
      real terms and resulted in changes in consumer behavior across all class sectors
      of the Argentine population. Argentina began to stabilize in 2003 and continued
      to exhibit signs of stability in 2004, 2005 and 2006, with real GDP growth
      at 9%
      for 2004, 9.2% for 2005 and 8.5% for 2006, moderate inflation and stable peso
      nominal exchange rate during 2006, with variations of 9.1% and -1.0%,
      respectively. There was also improvement in the employment situation. The
      unemployment rate reached 8.7% during the fourth quarter of 2006, compared
      to
      10.1% during the fourth quarter of 2005 and 12.1% for the same period in
      2004.




Notwithstanding
      the current continued stabilization, the Argentine economic and social situation
      has quickly deteriorated in the past, and may quickly deteriorate in the future,
      and we cannot assure you that the Argentine economy will continue its sustained
      growth. The devaluation of the Argentine peso and the macroeconomic conditions
      prevailing in Argentina could have, and may continue to have, a material adverse
      effect on Quinsa’s, and indirectly on our, results of operations.




**U.S.
      investors may not be able to effect service of process upon, or to enforce
      judgments against us**




We
      are
      organized under the laws of the Federative Republic of Brazil. Substantially
      all
      of our directors and executive officers and the experts named in this annual
      report are residents of countries other than the United States. All or a
      substantial portion of the assets of such non-U.S. residents and of AmBev are
      located outside the United States. As a result, it may not be possible for
      investors to effect service of process within the United States upon such
      persons or AmBev, or to enforce against them in U.S. courts judgments obtained
      in such courts based upon civil liability provisions of the Federal securities
      laws of the United States or otherwise.




**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.




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;




·
            Exchange
                control policies;




·
            Social
                instability;




·
            Price
                instability;




·
            Energy
                shortages;




·
            Interest
                rates;




·
            Liquidity
                of domestic capital and lending markets;




·
            Tax
                policy; and




·
            Other
                political, diplomatic, social and economic developments in or affecting
                Brazil.




-13-
 *Table
          of Contents*




***Risks
      Relating To AmBev***




**We
      are subject to Brazilian and other antitrust regulations**




We
      have a
      substantial beer market share in Brazil and thus we are subject to constant
      monitoring by Brazilian antitrust authorities. In addition, in connection with
      the combination of Brahma and Antarctica for the operation of AmBev in 1999,
      we
      entered into a performance agreement with the Brazilian antitrust authorities,
      which required us to comply with a number of restrictions. We are also party
      to
      other antitrust legal proceedings. For further information on this matter see
      “Financial Information—Consolidated Financial Statements and Other Financial
      Information—Legal Proceedings—Antitrust matters”. We cannot assure you that
      Brazilian antitrust regulation will not affect our business in the
      future.




AmBev’s
      participation in the Argentine beer market increased substantially after the
      acquisition of our interest in Quinsa. Quinsa is subject to constant monitoring
      by Argentinean antitrust authorities. For further information on this matter
      see
“Information on the Company—History and Development of the Company—Interest in
      Quinsa”. We cannot assure you that Argentinean antitrust regulation will not
      affect Quinsa’s business in the future, and therefore, impact the benefits that
      AmBev anticipates will be generated from this investment.




**Volatility
      in commodities prices may adversely affect our financial
      performance**




A
      significant portion of our operating expenses are related to commodities such
      as
      aluminum, sugar, hops and barley. Therefore, an increase in the commodities
      prices affects our operating costs. Our current policy is to hedge substantially
      all of our commodities exposure against adverse changes in the market; however,
      we cannot assure you that such hedging will be possible at all times in the
      future.




**We
      are subject to regulation on alcoholic 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. Recently, certain Brazilian states and
      municipalities in which we operate have enacted legislation restricting the
      hours of operations of certain points of sale, imposing seals on beverage cans,
      prohibiting the sale of alcoholic beverages on highway points of sale and
      prohibiting the sale of CSDs in schools. In addition, the Brazilian Congress
      is
      evaluating proposed 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 is a global trend of increasing regulatory restrictions with
      respect to commercialization of alcoholic beverages. Compliance with such
      regulatory restrictions can be costly and may affect earnings in the countries
      in which we operate.




These
      restrictions may adversely impact our results of operations. For further
      information, please refer to “Information on the Company—Business
      Overview—Regulation”.




***Risks
      Relating to our Shares***




**The
      relative volatility and illiquidity of securities of Brazilian companies may
      substantially limit your ability to sell our securities 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
      such investments are generally considered speculative in nature.




Brazilian
      investments, such as investments in our securities, are subject to economic
      and
      political risks, involving, among others:


·
            Changes
                in the 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




·
            Restrictions
                on foreign investment and on repatriation of capital invested.




The
      Brazilian securities markets are substantially smaller, less liquid, more
      concentrated and more volatile than major U.S. and European securities markets,
      and are not as highly regulated or supervised as these markets. The relatively
      small market capitalization and illiquidity of the Brazilian securities markets
      may substantially limit your ability to sell the securities at the price and
      time you desire.


-14-
 *Table
          of Contents*




**Deterioration
      in economic and market conditions in other emerging market countries may
      adversely affect the market price of AmBev’s securities**




Economic
      and market conditions in other emerging market countries, especially those
      in
      Latin America, influence the market for securities issued by Brazilian companies
      and investors’ perception of economic conditions in Brazil. Past economic crisis
      in emerging markets, such as in Southeast Asia, Russia and Argentina, triggered
      securities market volatility in Brazil and other emerging market countries’
securities markets. In the recent past, Argentina, Venezuela, Uruguay and
      Paraguay experienced a significant economic downturn. The market value of our
      securities may therefore be adversely affected by events occurring outside
      of
      Brazil, especially in other emerging market countries.




**Our
      controlling shareholders are able to determine the outcome of many corporate
      actions without the approval of non-controlling
      shareholders**




The
      controlling shareholders of AmBev, Interbrew International B.V., and AmBrew
      S.A., which are both subsidiaries of InBev, and Fundação Antonio e Helena
      Zerrenner Instituição Nacional de Beneficência (“FAHZ”), together hold
      approximately 89.6% of AmBev’s common shares, as of April 30, 2007.




InBev
      indirectly holds shares of AmBev common stock that represent approximately
      73.5%
      of the total voting power of AmBev’s capital stock, as of April 30, 2007. InBev
      thus has control over AmBev, even though (i) InBev remains subject to the AmBev
      shareholders’ agreement with FAHZ and (ii) InBev is jointly controlled by
      Messrs. Lemann, Sicupira and Telles and Interbrew’s former controlling
      shareholders. For further information on these matters see “Information on the
      Company—InBev-AmBev Transactions” and “Major Shareholders and Related Party
      Transactions—Major Shareholders—AmBev Shareholders’ Agreement”.




The
      controlling shareholders are able to elect the majority of the members of the
      Board of Directors of AmBev and generally determine the outcome of other actions
      requiring the approval of AmBev’s shareholders. Under Brazilian Corporate Law,
      the protections afforded to non-controlling security holders and the fiduciary
      duties of directors may, in some respects, be less comprehensive than in the
      United States or other jurisdictions.




**AmBev
      shareholders may not receive any dividends**




According
      to our current bylaws, AmBev must generally pay its shareholders 35% of its
      annual adjusted net income . The main sources for these dividends are AmBev’s
      operations and AmBev’s operating subsidiaries’ dividends. The adjusted income
      may be capitalized, used to absorb losses or otherwise appropriated as allowed
      under Brazilian GAAP and Brazilian Corporate Law; therefore, adjusted income
      may
      not be available to be paid as dividends in a certain year. AmBev might not
      pay
      dividends to its shareholders in any particular fiscal year, upon the
      determination of the Board of Directors that such distributions would be
      inadvisable in view of AmBev’s 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 the existence of the company as a going concern or harms its normal
      course of operations.




It
      is
      possible, therefore, that shareholders of AmBev will not receive dividends
      in
      any particular fiscal year. 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.




**Controls
      and restrictions on foreign currency remittance could harm the ability of AmBev
      to transfer dividend payments offshore**




Brazilian
      law provides that whenever there is a serious imbalance in Brazil’s balance of
      payments or reasons to foresee 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 held by
      the
      Central Bank in order to conserve Brazil’s foreign currency reserves. 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 companies such
      as
      AmBev from paying amounts denominated in foreign currencies or require that
      any
      such payments be made in Brazilian *Reais* .
      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, Brazil’s policy toward the International Monetary Fund 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 payments
      by Brazilian issuers in respect of securities issued in the international
      capital markets to date. For further information on this matter see “—Exchange
      Controls”.


-15-
 *Table
          of Contents*




**If
      you exchange the AmBev ADSs for AmBev shares, you risk losing some foreign
      currency remittance and Brazilian tax advantages**




The
      AmBev
      ADSs benefit from the foreign capital registration that The Bank of New York
      (as
      depositary) has in Brazil, which permits The Bank of New York to convert
      dividends and other distributions with respect to the AmBev shares into foreign
      currency and remit the proceeds abroad. If you exchange your AmBev ADSs for
      AmBev shares, you will be entitled to rely on The Bank of New York’s foreign
      capital registration for only five business days from the date of 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 shares will be subject to less favorable tax
      treatment unless you obtain your own certificate of foreign capital registration
      or you obtain your own registration with the Central Bank pursuant to Resolution
      No. 2,689. For a more complete description of Brazilian restrictions on foreign
      investments and the foreign investment regulations, see “Additional
      Information—Memorandum and Articles of Association—Restrictions on Foreign
      Investment” and “Key Information—Exchange Rate Information—Exchange Controls”.
      For a more complete description of Brazilian tax regulations, see “Additional
      Information—Taxation—Brazilian Tax Considerations”.




**AmBev
      ADSs have fewer and less well defined shareholders’ rights as compared to
      shareholders’ rights of similar U.S. companies**




AmBev’s
      corporate affairs are governed by AmBev’s bylaws and Brazilian Corporate 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,
      your rights or the rights of holders of the AmBev shares and ADSs under
      Brazilian Corporate Law to protect your interests relative to actions taken
      by
      AmBev’s Board of Directors or controlling shareholders may be fewer and less
      well-defined than under the laws of those other jurisdictions outside of
      Brazil.




Although
      Brazilian law imposes restrictions on insider trading and price manipulation,
      the Brazilian securities markets may not be as highly regulated and supervised
      as the U.S. securities markets or markets in other jurisdictions. In addition,
      rules and policies against self-dealing and regarding the preservation of
      shareholder interests may be less well-defined and enforced in Brazil than
      in
      the United States, potentially causing disadvantages to holders of the AmBev
      shares and ADSs. Corporate disclosures may be less complete or informative
      than
      what may be expected of a U.S. public company.




**Some
      entitlements are not available to U.S. holders of AmBev shares and
      ADSs**




Due
      to
      various Brazilian and United States laws and regulations, United States holders
      of AmBev shares or ADSs may not be entitled to all of the rights possessed
      by
      Brazilian holders of AmBev shares. For instance, U.S. holders of AmBev shares
      may not be able to exercise any preemptive or preferential rights relating
      to
      their shares unless a registration statement under the Securities Act is
      effective with respect to such rights or an exemption from the registration
      requirements thereunder is available.




**Holders
      of preferred sh** **ares
      have limited voting rights**




Of
      our
      two classes of shares outstanding, only our common shares have full voting
      rights. Our preferred shares will be entitled to unlimited voting rights only
      in
      certain limited circumstances, such as in the event that we fail to pay
      statutory dividends for a period of three consecutive years. As a result,
      holders of our preferred shares generally will not be able to influence any
      corporate decision requiring a shareholder vote, including the declaration
      of
      dividends. See “Additional information — Voting Rights.”




**Holders
      of ADSs are not entitled to attend shareholders’ meetings and may only vote
      through the depositary**




Under
      Brazilian law, only shareholders registered as such in our corporate books
      may
      attend shareholders’ meetings. All preferred shares underlying the ADSs are
      registered in the name of the depositary. A holder of ADSs is entitled to
      instruct the depositary as to how to vote the preferred shares represented
      by
      ADSs, in accordance with procedures provided for in the deposit agreement,
      but a
      holder of ADSs will not be able to vote the underlying preferred shares directly
      at a shareholders’ meeting or to appoint a proxy to do so.






***Risks
      Relating to the Notes***




**Possible
      extension of the expected maturity of the notes**




Under
      the
      terms of the notes and the indenture, if, on the expected maturity date for
      the
      notes, the insurance policy is in effect or certain funds are on deposit in
      the
      reserve account and certain specified events have occurred and are continuing
      relating to the imposition of currency exchange controls in Brazil, the date
      for
      the repayment of the notes will automatically be extended until the earlier
      to
      occur of: (i) twenty-four calendar months from the expected maturity date;
      (ii)
      the latest date for which funds are available in the reserve account or under
      the letter of credit and under the insurance policy to pay interest on the
      notes
      or (iii)


-16-
 *Table
          of Contents*




the
      thirtieth day after any such currency exchange control event has ended.
      Accordingly, you should not rely, in making your investment decision, on
      receiving repayment in full of the notes on the initial expected maturity
      date.




Any
      such
      extension of the expected maturity date could, depending on changes in the
      financial conditions of AmBev, ultimately affect the ability of the noteholders
      to receive all amounts due to them under the notes and the related
      indentures.




**Judgments
      of Brazilian courts enforcing our obligations under the notes or the indenture
      would be expressed only in Brazilian currency**




Any
      judgment obtained in a court in Brazil in case judicial proceedings were brought
      in Brazil seeking to enforce our obligations under the notes or the indenture
      would be expressed in Brazilian currency equivalent to the amount of foreign
      currency of such sum at the prevailing exchange rate: (i) at the date in which
      the judicial suit was filed, in which case the inflation adjustment of the
      amount due should be made in accordance with the indexes established by the
      court; or (ii) at the date of the payment, as determined by the court. Upon
      the
      rendering of such a judgment, we would be able to satisfy our obligations (i)
      upon payment in Brazil, in Brazilian currency, or (ii) upon remittance abroad
      of
      the foreign currency equivalent amount to the amount in Brazilian currency
      expressed in said judgment, converted according to the exchange rate prevailing
      at the date of such remittance, subject to the validity of the registration
      of
      the notes with the Central Bank.




**Controls
      and restrictions on foreign currency remittance could impede our ability to
      make
      payments under the notes**




Brazilian
      law provides that whenever there is a serious imbalance in Brazil’s balance of
      payments or reasons to foresee a serious imbalance, the Brazilian government
      may
      impose temporary restrictions on the remittance to foreign investors of the
      proceeds of their investments in Brazil. See “—Controls and restrictions on
      foreign currency remittance could harm the ability of AmBev to transfer dividend
      payments offshore”.




We
      cannot
      assure you that mechanisms for the transfer of *Reais* and
      conversion into U.S. dollars will continue to be available at the time we are
      required to perform our obligations under the notes or that a more restrictive
      control policy, which could affect our ability to make payments under the notes
      in U.S. dollars, will not be instituted in the future. If such financial
      mechanisms are not available, we will have to rely on a special authorization
      from the Central Bank to make payments under the notes in U.S. dollars. We
      cannot assure you that any such Central Bank approval would be obtained or
      that
      such approval would be obtained on a timely basis.




In
      the
      event that no such additional authorizations are obtained or obtainable from
      the
      Central Bank for the payment by AmBev of amounts owed under the indenture or
      the
      notes, as the case may be, AmBev may be able to lawfully pay the amounts due
      under the notes through an international transfer of *Reais* .
      Through
      the international transfer of *Reais* mechanism, payments made in *Reais* by AmBev
      will be deposited in non-resident accounts held by AmBev, which would then
      purchase U.S. dollars through the exchange market, as defined in “—Exchange Rate
      Information” and “—Exchange Controls”, and remit U.S. dollars to the relevant
      agent for payment of the notes. No assurance can be given that the international
      transfer of *Reais* or the
      exchange market will remain legally or commercially available to Brazilian
      residents.




**Book-entry
      registration**




Because
      transfers and pledges of global notes can be effected only through book entries
      at the Depository Trust Company (“DTC”), the liquidity of any secondary market
      for global notes may be reduced to the extent that some investors are unwilling
      to hold notes in book-entry form in the name of a DTC participant. The ability
      to pledge global notes may be limited due to the lack of a physical certificate.
      Beneficial owners of global notes may, in certain cases, experience delay in
      the
      receipt of payments of principal and interest since such payments will be
      forwarded by the paying agent to DTC who will then forward payment to the
      respective DTC participants, who will thereafter forward payment directly,
      or
      indirectly through Euroclear or Clearstream, to beneficial owners of the global
      notes. In the event of the insolvency of DTC or of a DTC participant in whose
      name global notes are recorded, the ability of beneficial owners to obtain
      timely payment and (if the limits of applicable insurance coverage by the
      Securities Investor Protection Corporation are exceeded, or if such coverage
      is
      otherwise unavailable) ultimate payment of principal and interest on global
      notes may be impaired.




**Subordination
      to certain statutory liabilities**




Under
      Brazilian law, our obligations under the notes and the indenture are
      subordinated to certain statutory preferences. In the event of our bankruptcy,
      and according to the Brazilian bankruptcy law, such statutory preferences,
      such
      as claims for salaries and wages (up to 150 minimum wages, per plaintiff),
      social security and other taxes, court fees and expenses, will have preference
      over any other claims, including claims by any investor in respect of the
      notes.


-17-
 *Table
          of Contents*




**Possible
      voluntary cancellation of the insurance policy and the letter of credit and
      refunding of amounts on deposit in the reserve account**




Subject
      to certain conditions precedent relating to the rating of the notes, AmBev
      may
      request the trustee to cancel the insurance policy, refund all amounts on
      deposit in the reserve account and allow the letter of credit to be cancelled
      after the third anniversary of the closing date. Any such cancellation and
      withdrawal may significantly affect the ability of noteholders to receive
      payments under their notes during a currency exchange control event occurring
      after any such cancellation, withdrawal and refund.




**Payments
      under the insurance policy of our notes are subject to several conditions,
      limitations and exclusions and the insurer may not be obligated or may not
      be
      able to make such payments**




The
      insurance policy covers certain risks related to inconvertibility or
      non-transferability of amounts which we may be obligated to pay under the notes
      in the event that the Brazilian government imposes limitations on the conversion
      of *Reais* to U.S.
      dollars. However, any such payment by the insurer is subject to certain
      conditions, limitations and exclusions as set forth in the indenture. Therefore,
      note holders might not be able to timely receive payments under the insurance
      policy, or not be entitled to receive any payments at all, as a result of such
      conditions, limitations and exclusions. In addition, payments under the
      insurance policy are subject to the financial soundness of insurer and its
      affiliates, which may limit the ability of note holders to receive payments
      from
      such entities.


-18-
 *Table
          of Contents*




**ITEM
              4.**
            **INFORMATION
                ON THE COMPANY**




AmBev’s
      principal executive offices are located at Rua Dr. Renato Paes de Barros, 1017,
      4th floor, CEP 04530-001, São Paulo, SP, Brazil, tel.: (5511) 2122-1415, e-mail:
      ir@ambev.com.br.




**A.**
            **History
                and Development of the
                Company**




***Overview***




Companhia
      de Bebidas das Américas - AmBev is the successor of Companhia Cervejaria Brahma
      (“Brahma”) and Companhia Antarctica Paulista Indústria Brasileira de Bebidas e
      Conexos (“Antarctica”), two of the oldest brewers in Brazil. Antarctica was
      founded in 1885. Brahma was founded in 1888 as Villiger & Cia. The *Brahma* brand
      was registered on September 6, 1888, and in 1904 Villiger & Cia. changed its
      name to Companhia Cervejaria Brahma.




In
      1997,
      Brahma acquired Pepsi-Cola Engarrafadora Ltda. and PCE Bebidas Ltda., PepsiCo
      bottlers in southern and southeastern Brazil, and at the same time acquired
      the
      exclusive rights to produce, sell and distribute Pepsi CSD products in
      northeastern Brazil. In 1999, Brahma obtained the exclusive rights to produce,
      sell and distribute Pepsi CSD products throughout Brazil.




AmBev,
      a
      Brazilian *sociedade
      anônima,* was
      incorporated as Aditus Participações S.A. (“Aditus”) on September 14, 1998.
      AmBev is a publicly held corporation incorporated under the laws of the
      Federative Republic of Brazil.




In
      July
      1999, the controlling shareholders of Brahma and Antarctica contributed all
      of
      their common and preferred shares in Brahma and Antarctica in exchange for
      shares of the same type and class of AmBev (the “controlling shareholders’
contribution”).




In
      October 2000, following the combination of Brahma and Antarctica, AmBev entered
      into a new franchise agreement with PepsiCo which terminated the Brahma
      franchise agreement and granted us exclusive bottler and distributor rights
      for
      Pepsi CSD products in Brazil. In January 2002, we expanded our partnership
      with
      PepsiCo to include the production, sale and distribution of *Gatorade* .
      Our
      PepsiCo franchise agreement expires in 2017, automatically extended for
      additional ten-year terms.




In
      March
      2001, Brahma was merged into Antarctica, and Antarctica changed its name to
      CBB.
      These transactions had no effect on AmBev’s consolidated financial statements
      because both entities were wholly owned by AmBev.




In
      January 2003, AmBev completed a business combination with Quinsa, through which
      AmBev acquired an initial 40.5% economic interest in Quinsa and joint control
      of
      Quinsa along with BAC, establishing a leading presence in the beer markets
      of
      Argentina, Bolivia, Paraguay and Uruguay.




During
      2003 and the first quarter of 2004, AmBev expanded its presence in the north
      of
      Latin America through a series of acquisitions by which it established a
      foothold in several beverage markets, such as Central America, Peru, Ecuador
      and
      the Dominican Republic.




In
      August
      2004, AmBev and InBev, a Belgian brewer, completed a business combination that
      involved the merger of an indirect holding company of Labatt, one of the leading
      brewers in Canada, into AmBev. At the same time, controlling shareholders of
      AmBev completed the contribution of all shares of an indirect holding company
      of
      AmBev to InBev in exchange for newly issued shares of InBev. After this
      transaction, InBev became the majority shareholder of AmBev through subsidiaries
      and holding companies, one of which was InBev Holding Brasil S.A. (“InBev
      Brasil”).




In
      May
      2005, CBB was merged into AmBev, a transaction which simplified AmBev’s
      corporate structure and in July 2005, InBev Brasil was merged into AmBev. See
      “Material Related Party Transactions”.




On
      April
      13, 2006, AmBev entered into an agreement with BAC pursuant to which BAC agreed
      to sell all its remaining shares in Quinsa to AmBev. Upon the closing of the
      transaction, AmBev’s equity interest in Quinsa increased to approximately 91% of
      its total share capital. This transaction closed on August 8, 2006 and AmBev
      paid to BAC approximately U.S.$ 1,252.6 million.




On
      January 25, 2007, AmBev launched a voluntary offer, through its wholly-owned
      subsidiary Beverages Associates Holding Ltd. (“BAH”), to purchase up to
      6,872,480 Class A shares (corresponding to approximately 1.1% of the outstanding
      class A shares) and up to 8,661,207 Class B shares (including Class B shares
      held as ADSs) corresponding to approximately 18.4% of the outstanding class
      B
      shares of Quinsa, which represent the outstanding capital stock that are not
      owned by AmBev or its subsidiaries. On April, 19, 2007, the offer expired and
      the minimum tender condition of the offer, which required that 3,939,387 Class
      B
      shares (including Class B shares held as ADSs) be validly tendered and not
      validly withdrawn, was not satisfied and as a result, the offer expired and
      was
      withdrawn without BAH purchasing any Class A shares or Class B shares (including
      Class B shares held as ADSs).


-19-
 *Table
          of Contents*




On
      February 1, 2007, AmBev announced that its subsidiary Labatt entered into a
      Support Agreement with Lakeport Brewing Income Fund (“Lakeport”). Under this
      agreement, Labatt agreed to offer a price of C$28.00 per unit of Lakeport for
      a
      total value of C$201.4 million. The Canadian Competition Bureau stated that
      it
      required five months to complete its review of the transaction and was not
      prepared to provide clearance at the end of the 42-day statutory minimum review
      period. The Bureau brought an action before the Competition Tribunal, an
      independent court, challenging Labatt’s right to close immediately following
      this minimum period. The Tribunal found in Labatt’s favour and allowed the
      transaction to close. The transaction was therefore concluded on March 29,
      2007,
      when the holders of trust units of Lakeport holding in the aggregate 6,578,080
      units, representing approximately 91% of the units on a fully-diluted basis,
      tendered their units and all of the conditions of the offer were satisfied.
      Subsequent to the compulsory acquisition of the non-tendered units, Lakeport
      became wholly-owned by Labatt and has now been fully integrated into Labatt’s
      business. The Competition Bureau filed a notice of appeal of the Tribunal’s
      decision on April 10, 2007. The grounds for the appeal have not yet been
      disclosed, It is unlikely the appeal will have any effect on the Lakeport
      transaction, however, it is worth noting that under Canadian law the
      Commissioner of Competion may challenge any merger the Bureau has not cleared
      for a period of up to three years.




On
      March
      28, 2007, AmBev announced the signing of a purchase and sale agreement with
      respect to the acquisition of 100% of Goldensand Comércio e Serviços Lda.
      (“Goldensand”), the controlling shareholder of Cervejarias Cintra Indústria e
      Comércio Ltda. (“Cintra”), Brazil’s fifth largest brewer. The total
      transaction value was approximately U.S.$150 million. This transaction closed
      on
      April 17, 2007. Pursuant to the purchase and sale agreement, until October
      28,
      2007, Mr. José Cintra, the former controling shareholder of Goldensand, has the
      right to transfer the Cintra brands ( *Cintra* and *Mulata* )
      and the
      related distribution assets to any third party. Should that not occur, AmBev
      is
      required to acquire such assets for U.S.$ 10 million. This transaction is still
      subject to CADE’s approval. On May 16, 2007, AmBev agreed with CADE that it
      would not take any action which could result in a decrease of capacity or
      efficiency of Cintra’s plants, as well as to continue to invest in the Cintra
      brands consistent with past practices and market share, in both cases until
      a
      final analysis of the transaction is made by CADE or until the brand is sold
      to
      a third party. In addition, in March 2007, Cervejaria Petrópolis S.A. filed a
      law suit against Mr. Cintra in an attempt to prevent the sale of Cintra.




***The
      Brahma-Antarctica Combination—Creation of AmBev and Brazilian Antitrust
      Approval***




*Creation
      of AmBev*




Brahma
      was a company engaged in the production and sale of beverages, primarily beer
      and CSDs. Brahma was controlled by Messrs. Jorge Paulo Lemann, Marcel Herrmann
      Telles and Carlos Alberto da Veiga Sicupira through certain holding companies
      (the “Braco Group”), who collectively held a 55.1% voting stake in Brahma prior
      to the Brahma-Antarctica transaction. The remaining shares of Brahma were
      publicly held.




Antarctica
      was also a company engaged in the production and sale of beverages, primarily
      beer and CSDs. Antarctica was controlled by FAHZ, which held an 88.1% voting
      interest in Antarctica before the Brahma-Antarctica transaction took place.
      The
      remaining shares of Antarctica were publicly held.




The
      Brahma-Antarctica transaction consisted of the combination of Brahma and
      Antarctica and was carried out over the course of 1999 and 2000. The combination
      led to the formation of AmBev, a holding company that had Brahma and Antarctica
      as its subsidiaries, and was performed in three steps.




First,
      in
      July 1999 the Braco Group and FAHZ contributed their shares in Brahma and
      Antarctica, respectively, to AmBev in exchange for AmBev shares. As a result
      of
      such contributions, (i) AmBev became the owner of 55.1% of Brahma’s voting
      shares and 88.1% of Antarctica’s voting shares, and (ii) the Braco Group and
      FAHZ each owned, respectively, 76% and 24% of AmBev’s voting shares, as
      illustrated below.









Second,
      in September 1999, Antarctica’s minority shareholders’ exchanged their shares in
      Antarctica for AmBev shares, causing Antarctica to become a wholly-owned
      subsidiary of AmBev, as shown below.


-20-
 *Table
          of Contents*









Third,
      in
      September 2000, Brahma’s minority shareholders’ exchanged their shares in Brahma
      for AmBev shares, which resulted in Brahma also becoming a wholly-owned
      subsidiary of AmBev.









*Brazilian
      antitrust approval*




Brazilian
      antitrust authorities have the power to investigate any transaction that may
      limit or impair competition, or result in a dominant market position, including
      transactions that result in the concentration of a market share equal to or
      greater than 20% of any relevant market or which involves, among other factors,
      any company with annual gross sales of R$ 400 million or more. The transfer
      of
      control of Brahma and Antarctica to AmBev through the controlling shareholders’
contribution resulted in a market share for AmBev as of that date in excess
      of
      70% of the Brazilian beer market and 20% of the Brazilian CSDs market. Brazilian
      antitrust authorities therefore reviewed the transaction to determine whether
      it
      would negatively impact competitive conditions in the relevant markets, or
      whether it would negatively affect consumers.




CADE,
      an
      independent agency of the Brazilian Ministry of Justice, is the principal
      Brazilian antitrust authority. In April 2000, CADE approved the controlling
      shareholders’ contribution subject to restrictions designed to prevent AmBev
      from exercising excessive control over the Brazilian beer market. CADE imposed
      no restrictions in connection with CSDs or other beverages produced by AmBev.
      Also in April 2000, AmBev entered into a performance agreement with CADE
      pursuant to which AmBev agreed to comply with the restrictions imposed by CADE.
      The principal terms of the performance agreement included:




·
            Distribution
                network:
                For a period of four years, we had to share our distribution network
                with
                at least one regional Brazilian beer company, which could not have
                a
                market share in excess of 5% of its respective regional market, in
                each of
                the five regions of Brazil as defined by CADE. In September 2001,
                after a
                public bidding process, AmBev signed an agreement for the sharing
                of
                AmBev’s distribution network with Eduardo Bier Comercial de Produtos
                Alimentícios (“Dado Bier”);




·
            Plants:
                For a period of four years, had AmBev decided to close or dispose
                of any
                of its beer plants, it had to first offer such plant for sale in
                a public
                auction;




·
            Dismissals:
                For a period of five years, if AmBev or any of its subsidiaries had
                dismissed any employee as a result of the restructuring process related
                to
                the combination and other than for cause, AmBev had to attempt to
                place
                the employee in a new job, and provide the employee with retraining,
                as
                appropriate;




·
            Exclusivity:
                We and our distributors could not demand that points of sale operate
                on an
                exclusive basis, except in certain circumstances, including where
                our
                investments and improvements were equivalent to a preponderant portion
                of
                the assets of the point of sale; and




·
            Bavaria:
                A
                requirement that we sell the*Bavaria*brand and related assets
                (“Bavaria”).






In
      November 2000, we entered into an agreement with Molson Inc. (which has since
      merged with Adolph Coors Company to form Molson Coors Brewing Company, “Molson”)
      for the sale of Bavaria pursuant to the terms of our performance agreement
      with
      CADE. CADE approved this agreement in December 2000, and the sale was completed
      shortly thereafter. The agreement also provided for the sharing of our
      distribution network for a period of six years, renewable for an additional
      two-year period at the option of the purchaser. In April 2002, however, Molson
      decided to terminate the distribution agreement in order to enter into a
      distribution agreement with The Coca-Cola Company.


-21-
 *Table
          of Contents*




Non-compliance
      with any obligation under the performance agreement may trigger a minimum daily
      fine of R$ 10.3 thousand per occurrence. This daily fine could be increased
      up
      to a maximum of R$ 206,105 per occurrence. In the event of non-compliance,
      CADE
      may also appoint a judicial officer to enforce compliance. CADE has the
      authority to revoke its approval of the controlling shareholders’ contribution
      and to file an administrative proceeding against us if we do not comply with
      our
      obligations. CADE also has the general authority to order other remedial
      measures as provided by law and as established under the performance agreement.
      Pursuant to the terms of the performance agreement, AmBev had to file with
      CADE
      half yearly reports attesting compliance with its terms and conditions. AmBev
      filed the tenth and last report in August 2005. CADE has analyzed all reports
      up
      to the tenth report and except for the obligations in connection with
      exclusivity agreements, all other obligations under the agreement have been
      considered fulfilled up to the date of such reports.




***Interest
      in Quinsa***




In
      January 2003, AmBev consummated the acquisition of an interest in Quinsa, an
      indirect holding company of Cervecería y Maltería Quilmes S.A.I.C.A. y G., the
      largest Argentine brewer, and in QIB, Quinsa’s subsidiary which is the holding
      company for all Quinsa’s operating subsidiaries. Quinsa then owned an 85%
      interest in QIB. This transaction involved an initial acquisition of 37.5%
      of
      the total capital of Quinsa and 8.6% of the shares of QIB, resulting in a total
      ownership of 40.5% of Quinsa’s economic interest. The transaction
      included:




·
            The
                purchase of 230.9 million Quinsa Class A shares from BAC for R$ 1,222.6
                million (U.S.$346.4 million);




·
            The
                contribution of AmBev’s brewery assets located in Argentina, Uruguay and
                Paraguay, with a book value (determined under Brazilian GAAP) of
                R$ 300.7
                million (U.S.$ 85.2 million), in exchange for 26.4 million new Class
                B
                shares issued by Quinsa; and




·
            The
                purchase of 8 million QIB shares from Heineken International Beheer
                B.V.C.
                (“Heineken”), a subsidiary of Heineken N.V., for R$ 206.5 million (U.S.$
                58.5 million).






During
      2003, we acquired an additional 12 million Quinsa Class B shares in the open
      market for a total consideration of R$ 243.7 million (U.S.$82.7 million),
      increasing our total economic interest in Quinsa to 49.7% as of December 31,
      2003. During 2004 and 2005, Quinsa conducted certain share repurchases pursuant
      to its share buyback program, increasing our total economic interest in Quinsa
      to approximately 59.2% as of December 31, 2005.




This
      acquisition granted AmBev access to leading positions in the Argentine,
      Bolivian, Uruguayan and Paraguayan markets, as well as to Quinsa’s operations in
      Chile.




The
      acquisition of AmBev’s interest in Quinsa was approved with certain restrictions
      by the *Comision
      Nacional de Defensa de la Competencia* (“CNDC”), the Argentine antitrust authority. The main restrictions imposed
      were:




·
            Quinsa
                and AmBev were required to sell the*Bieckert*,*Palermo*and*Imperial*brands (and, at the option of the prospective purchaser, the*Norte*brand),
                as well as the brewery located in Luján, where the*Brahma*brand used to be produced, to an independent brewery, which had to
                be
                financially sound and which did not produce beer in the Argentine
                market
                (the “Purchaser”);




·
            Sale
                or lease of Llavallol malting plant to a third party different from
                the
                Purchaser;




·
            Quinsa
                and AmBev were required to submit documentation to the CNDC, evidencing
                their commitment to allow the Purchaser, for a period of seven years
                starting on the date of the sale of the assets to the Purchaser,
                to have
                access to Quinsa’s distribution network in Argentina; and




·
            Quinsa
                and AmBev must commit to produce the*Bieckert*,*Palermo*and*Imperial*brands in its own plants on behalf of the Purchaser, for a two-year
                period, as from the date on which such assets were sold.


Companies
        that produce beer in Argentina were not allowed to purchase the assets we
        were
        required to sell pursuant to the CNDC's decision. A subsidiary of Compañía
        Cervecerías Unidas S.A. ("CCU") filed a lawsuit to be able to participate in any
        such sale and our compliance with the restrictions was suspended in March
        2003
        until a final decision was issued by the Argentine Supreme Court. In April
        2006,
        after the Argentine Supreme Court rejected CCU's claim, we were able to sell
        the
        assets pursuant to the CNDC decision. On October 12, 2006, AmBev announced
        that
        Quinsa had selected Inversora Cervecera S.A., a consortium headed by Mr.
        Ernesto
        Gutiérrez, to acquire the *Palermo* , *Bieckert* and *Imperial* brands,
        and the Lujan brewery. The sale of the three brands and the plant was concluded
        in December 2006. Furthermore, in January 2007, the Llavallol malting plant
        was
        leased to
        Tai
        Pai Malting  for
        a
        period of 10 years. The CNDC formally approved the fulfillment of the conditions
        set forth above on December 12, 2006.


In
        April
        2006, AmBev agreed to acquire BAC’s remaining shares in Quinsa. Upon the closing
        of the transaction, which took place on August 8, 2006, AmBev’s equity interest
        in Quinsa increased to approximately 91% of its total share capital. The
        adjusted purchase price was approximately U.S.$1,252.6 million. Accordingly,
        AmBev acquired the control of Quinsa, fully consolidating Quinsa numbers
        under
        Brazilian GAAP and U.S. GAAP. For the period covered by this annual report,
        in
        Brazilian GAAP, Quinsa is proportionally consolidated through July 31, 2006,
        and
        under U.S. GAAP Quinsa is accounted for under the equity
        method.


-22-
 *Table
          of Contents*




On
      January 25, 2007, AmBev launched a voluntary offer, through its wholly-owned
      subsidiary BAH, to purchase up to 6,872,480 Class A shares and up to 8,661,207
      Class B shares (including Class B shares held as ADSs) of Quinsa. On April,
      19,
      2007, the offer expired and the minimum tender condition of the offer was not
      satisfied and as a result, the offer was withdrawn without BAH purchasing any
      Class A shares or Class B shares (see“— Information on the Company - History and
      Development of the Company - Overview”).




***Expansion
      into the North of Latin America***




Starting
      in late 2002 , we extended our presence in Latin America through a series of
      transactions in the northern region of the continent.




*Central
      America*




In
      October 2002, AmBev and The Central America Bottling Corporation (“CabCorp”),
      PepsiCo’s anchor bottler in Central America, agreed to establish a 50⁄50 joint
      venture company to collaborate in, among other things, the production,
      importation, distribution, marketing and sale of AmBev’s products, especially
      beer, in Guatemala and other Central American countries. The joint venture,
      AmBevCentroamerica, built a brewing facility in 2003 in the region of Tecolután,
      Guatemala. In August 2003, AmBev’s subsidiary Monthiers S.A. (“Monthiers”),
      subscribed for 573,092 shares of common stock of Industrias Del Atlántico S.A.
      (“AmBevCentroamerica”), a Guatemalan company formerly controlled by CabCorp,
      representing 50% plus one share of the outstanding issued and outstanding common
      stock of AmBevCentroamerica. As consideration, Monthiers contributed to
      AmBevCentroamerica U.S.$7.2 million in debt of AmBevCentroamerica relating
      to
      credits that CBB held against AmBevCentroamerica in connection with the import
      by AmBevCentroamerica of certain goods and equipment from CBB in connection
      with
      the construction of the brewery and that had been transferred to Monthiers.
      AmBevCentroamerica started to produce beer in September 2003, when the *Brahva* brand,
      an extension of AmBev’s *Brahma* brand,
      was launched in Guatemala. In 2004, the sales of *Brahva* were
      extended to Nicaragua, and in the beginning of 2005, to El Salvador. *Brahva* is sold
      in these three countries through CabCorp’s distribution network.




*Peru*




In
      October 2003, we agreed to purchase, through our Peruvian subsidiary AmBevPeru,
      certain production and distribution assets from Embotelladora Rivera, including
      two CSDs bottling plants, for a consideration of R$ 86.7 million (approximately
      U.S.$ 30 million). Among the assets acquired were the franchise for Pepsi
      products in Lima and northern Peru. In connection with our expansion in Peru,
      in
      May 2005 we finalized a brewing and CSDs bottling facility in the region of
      Lima, with an estimated investment of approximately R$ 92.1 million
      (approximately U.S.$ 37 million), and we launched the *Brahma* brand in
      the local market.




On
      March
      8, 2006, AmBev entered into an agreement for the sale of 25% of the capital
      stock of AmBevPeru to Ransa Comercial S.A., a company of the Romero business
      group (“Romero Group”) for an amount of approximately U.S.$3.7 million. The
      Romero Group is a Peruvian business group that is active in several segments
      of
      the Peruvian economy, including the food industry, logistics and financial
      services. The transaction closed on July 17, 2006, and on September 22, 2006,
      Ransa acquired an additional 5% interest in AmBevPeru, increasing its stake
      to
      30%.




*Ecuador*




In
      December 2003, we acquired an 80% interest in Cerveceria Suramericana, the
      owner
      of a brewing facility in the city of Guayaquil, with an annual production
      capacity of 900,000 hectoliters. This company was valued at an amount equivalent
      to its existing debt (approximately U.S.$ 45 million), and was renamed Compañía
      Cervecera AmBev Ecuador S.A. (“AmBevEcuador”). In October 2004, we launched the *Brahma* brand in
      the local market. Under the stock purchase agreement, the previous controlling
      shareholder had a put to sell to AmBev the remaining 20% of AmBevEcuador. The
      put right was exercised on February 12, 2007 and closed on March 5, 2007. AmBev
      paid approximately US$11 million, including the repayment of a shareholder
      loan.




*Dominican
      Republic*




In
      February 2004, AmBev entered into definitive agreements for the acquisition
      of a
      66% stake in Embotelladora Dominicana, C. por A (currently AmBevDominicana),
      the
      Pepsi bottler in the Dominican Republic. AmBev agreed to pay R$ 204.9 million
      (approximately U.S.$60 million) for 51% of AmBevDominicana’s total capital, with
      AmBev’s participation increasing to 66% through an asset contribution to
      AmBevDominicana consisting of U.S.$ 10 million and a brewing facility in the
      region of Santo Domingo, which started operations in August
      2005.


-23-
 *Table
          of Contents*




**The
      InBev-AmBev transactions**




The
      “InBev-AmBev transactions” consisted of two transactions negotiated
      simultaneously: (i) in the first transaction, the Braco Group exchanged its
      AmBev shares for shares in Interbrew S.A./N.V. (“Interbrew”); and (ii) in the
      second transaction, AmBev issued shares to Interbrew in exchange for Interbrew’s
      100% stake in Labatt.




*Ownership
      of AmBev and Interbrew prior to the InBev-AmBev transactions*




*AmBev*




Immediately
      prior to the InBev-AmBev transactions, AmBev was a public company traded on
      the
      Bovespa and on the New York Stock Exchange, controlled by the Braco Group and
      the FAHZ in accordance with the terms of the AmBev Shareholders’ Agreement. The
      Braco Group held approximately 53% of AmBev’s common shares while FAHZ owned
      approximately 24% of AmBev’s common shares. The remaining 23% of AmBev’s common
      shares were publicly held.




*Interbrew*




Interbrew
      was also a public company listed on Euronext - Brussels, and was controlled
      by
      Stichting Interbrew (the “Stichting”), which owned approximately 64% of
      Interbrew’s common shares. Two charitable foundations, Fund Voorzitter Verhelst
      and the Fund InBev-Baillet Latour (the “InBev Foundations”), owned approximately
      2% of Interbrew’s common shares. The remainder of Interbrew’s common shares were
      held in the market. Interbrew owned, through certain holding companies, 100%
      of
      Labatt.




The
      chart
      below illustrates the shareholding structure of both AmBev and Interbrew prior
      to the InBev-AmBev transactions.










(1)
            Illustratively
                includes affiliated foundations


(2)
            Reorganizd
                holdings of current BRACO Control
                Group




*Exchange
      of shares between Braco Group and Interbrew Founding Families*




In
      March
      2004, various entities controlled by the Braco Group entered into an agreement
      (the “Contribution and Subscription Agreement”) with Interbrew and various
      entities representing the interests of the Interbrew Founding Families to
      exchange their controlling interest in AmBev for newly-issued voting shares
      of
      Interbrew, which represented 24.7% of Interbrew’s voting shares.




Upon
      closing of this transaction in August 2004, (i) the Braco Group received
      approximately 44% of the voting interest in the Stichting, which thereupon
      owned
      approximately 56% of Interbrew’s common shares, and (ii) Interbrew received
      approximately a 53% voting interest and a 22% economic interest in AmBev. Such
      voting interest was subject to the pre-existing AmBev Shareholders’ Agreement,
      as amended in connection with the InBev-AmBev transactions. In addition,
      Interbrew was renamed InBev.


-24-
 *Table
          of Contents*




*Acquisition
      of Labatt*




Also
      in
      March 2004, AmBev entered into the *Incorporação* Agreement through which an indirect holding company of Labatt would be merged
      into AmBev. As consideration for the acquisition of Labatt, AmBev issued AmBev
      common and preferred shares to Interbrew.




With
      the
      consummation of this transaction in August 2004, (i) Labatt became a
      wholly-owned subsidiary of AmBev, and (ii) Interbrew increased its stake in
      AmBev to approximately 68% of common shares and 34% of preferred
      shares.




*Ownership
      structure of InBev and AmBev upon consummation of the InBev-AmBev
      transactions*




*InBev*




With
      the
      closing of the InBev-AmBev transactions, Interbrew was renamed InBev and, 56%
      of
      InBev’s voting shares were owned by the Stichting, 1% was owned by the InBev
      Foundations, 17% were owned directly by entities and individuals associated
      with
      the Interbrew Founding Families and the remaining 26% constituted the public
      float.




The
      Braco
      Group became the holder of 44% of the Stichting’s voting interests, while the
      Interbrew Founding Families held the remaining 56% of the Stichting’s voting
      interests. In addition, the Braco Group and entities representing the interests
      of the Interbrew Founding Families entered into a shareholders’ agreement (the
“InBev Shareholders’ Agreement”) providing for, among other things, joint and
      equal influence over the exercise of the Stichting voting rights in InBev.




*AmBev*




With
      the
      closing of the InBev-AmBev transactions, InBev became the owner of approximately
      68% of AmBev’s voting shares, FAHZ retained approximately 16% of such shares,
      and the remaining shares were held by the public.




The
      chart
      below illustrates the shareholding structure of both AmBev and InBev after
      the
      InBev-AmBev transactions.












(*)
            Pursuant
                to the InBev Shareholders’ Agreement, the Braco Group and the Interbrew
                Founding Families enjoy a 50/50 control over the
                Stichting.


-25-
 *Table
          of Contents*




**Mandatory
      Tender Offer**




Pursuant
      to Brazilian Corporate Law, InBev was required to conduct, following the
      consummation of the InBev-AmBev transactions, a mandatory tender offer (the
      “MTO”) for all remaining outstanding common shares of AmBev. The MTO was
      completed in March 2005, and InBev acquired an additional 2,960,070,177 common
      shares, increasing its stake in AmBev to approximately an 81% voting interest
      and a 56% economic interest. FAHZ did not tender its AmBev shares in the
      MTO.




**AmBev
      common stock dividend**




The
      subsequent change to AmBev’s ownership structure resulted from the payment by
      AmBev of a common stock dividend in May 2005. Pursuant to the stock dividend
      transaction, AmBev increased its capital by 10,941,151 thousand common shares
      and paid a stock dividend to its shareholders of one common share for each
      five
      shares owned (preferred or common). After the stock dividend was paid, InBev’s
      voting interest in AmBev decreased to approximately 73%, FAHZ’s voting stake
      decreased to approximately 13.5% and the voting interest held by AmBev’s public
      shareholders increased to approximately 13.5%.




***Investment
      Grade Status***




In
      December 2004, Standard & Poor’s raised AmBev’s risk rating denominated in
      foreign currency from BB- to BBB-. In January 2006, Fitch also raised AmBev’s
      risk rating in foreign currency to BBB-, making AmBev the first Brazilian
      company to receive such ratings from Standard & Poor’s and Fitch. In 2006
      both Standard & Poor’s and Fitch raised AmBev’s risk rating in foreign
      currency to BBB, two notches above the current Brazilian government’s sovereign
      risk.




***Merger
      of CBB into AmBev***




On
      May
      31, 2005, in order to simplify AmBev’s corporate structure, CBB was merged into
      AmBev. AmBev held 99.99% of CBB, and issued 26,585 new AmBev common shares
      to
      CBB minority shareholders, representing an increase in AmBev’s shareholders’
equity of approximately R$ 4,000.




***Merger
      of InBev Brasil into AmBev***




In
      July
      2005, InBev Brasil was merged into AmBev. See “Major Shareholders and Related
      Party Transactions - Material Related Party Transactions - AmBev and InBev”.




***Lakeport
      Acquisition***




On
      February, 1, 2007, AmBev announced that its subsidiary Labatt had entered into
      a
      Support Agreement with Lakeport. Upon closing of the transaction, Lakeport
      became wholly-owned by Labatt (see “— Information on the Company - History and
      Development of the Company - Overview”).




***Cintra
      Acquisition***




On
      March
      28, 2007, AmBev announced the signing of a purchase and sale agreement with
      respect to the acquisition of 100% of Goldensand, the controlling shareholder
      of
      Cintra. The transaction closed on April, 17, 2007. (see “— Information on the
      Company - History and Development of the Company - Overview”).




***Merger
        of BAH***
  On
        June
        26, 2007, in order to simplify AmBev’s corporate structure, our
        subsidiary Beverage Associates Holding Ltd. (“BAH”) was merged into
        AmBev. AmBev held 100% of BAH. There were no changes to AmBev’s capital
        stock.




**B.**
            **Business
                Overview**




***Description
      of the Company***




We
      are
      the largest brewer in Latin America in terms of sales volumes and the fifth
      largest beer producer in the world, according to our estimates. We produce,
      distribute and sell beer, CSDs and other non-alcoholic and non-carbonated
      products in 14 countries across the Americas. We are PepsiCo’s largest bottler
      outside the United States.




We
      conduct our operations through three business units:




·
            Brazil,
                which includes three divisions: (i) beer sales (“Beer Brazil”); (ii)
                carbonated soft drinks and non-alcoholic non-carbonated sales (“CSD &
                NANC”); and (iii) sales of malt and by-products to third parties (“Other
                Products”);




·
            Hispanic
                Latin America (“HILA”), which includes AmBev’s stake in Quinsa, and the
                operations of our subsidiaries in the Dominican Republic, Ecuador,
                Guatemala (which also serves Nicaragua and El
                Salvador),




-26-
 *Table
          of Contents*




Peru
      and
      Venezuela. We refer to our HILA operations, excluding Quinsa and its
      subsidiaries, as “HILA-ex”; and




·
            North
                America, represented by Labatt’s operations, which includes domestic sales
                in Canada and beer exports to the United States. The following map
                illustrates the main locations where our business units
                operate:











The
      following table presents a breakdown of our net revenues by business
      division:




**Net
                Revenues (R$ millions)****Year
                ended December 31,****2006**
            
            **2005**
            
            **2004****Brazil**
            
            
            **10,963.1**
            
            
            **62.2**
            **%**
            
            **9,902.8**
            
            
            **62.1**
            **%**
            
            **8,525.9**
            
            
            **71.0**
            **%**Beer
                Brazil
            
            
            9,045.0
            
            
            51.4
            %
            
            8,119.1
            
            
            51.0
            %
            
            6,907.4
            
            
            57.5
            %CSD
                & NANC
            
            
            1,806.4
            
            
            10.3
            %
            
            1,648.7
            
            
            10.3
            %
            
            1,462.8
            
            
            12.2
            %Other
                Products
            
            
            111.6
            
            
            0.6
            %
            
            135.0
            
            
            0.8
            %
            
            155.8
            
            
            1.3
            %**HILA**
            
            
            **2,762.4**
            
            
            **15.7**
            **%**
            
            **2,080.3**
            
            
            **13.0**
            **%**
            
            **1,922.1**
            
            
            **16.0**
            **%**Quinsa(1)
            
            
            2,004.3
            
            
            11.4
            %
            
            1,299.9
            
            
            8.1
            %
            
            1,153.0
            
            
            9.6
            %HILA-ex
            
            
            758.1
            
            
            4.3
            %
            
            780.4
            
            
            4.9
            %
            
            769.1
            
            
            6.4
            %**North
                America**(2)
            
            
            **3,888.2**
            
            
            **22.1**
            **%**
            
            **3,975.5**
            
            
            **24.9**
            **%**
            
            **1,558.8**
            
            
            **13.0**
            **%****AmBev
                Consolidated**
            
            
            **17,613.7**
            
            
            **100.0**
            **%**
            
            **15,958.6**
            
            
            **100.0**
            **%**
            
            **12,006.8**
            
            
            **100.0**
            **%**





(1)
            Quinsa’s
                net revenues in proportion to AmBev’s economic stake in
                Quinsa.


(2)
            2004
                net revenues consists of the results of Labatt’s operations from August
                27, 2004 through December 31, 2004.




*Source* :
      AmBev


-27-
 *Table
            of Contents*




The
      following table presents a breakdown of AmBev’s sales volumes by business
      division:




**Sales
                Volumes (‘000 hl)****Year
                ended December 31,****2006**
            
            **2005**
            
            **2004****Brazil**
            
            
            **87,727.0**
            
            
            **65.3**
            **%**
            
            **82,743.1**
            
            
            **66.0**
            **%**
            
            **76,884.9**
            
            
            **70.7**
            **%**Beer
                Brazil
            
            
            65,654.7
            
            
            48.9
            %
            
            62,486.4
            
            
            49.9
            %
            
            57,776.8
            
            
            53.1
            %CSD
                & NANC
            
            
            22,072.3
            
            
            16.4
            %
            
            20,256.7
            
            
            16.1
            %
            
            19,108.2
            
            
            17.6
            %Other
                Products
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —**HILA**
            
            
            **35,675.9**
            
            
            **26.6**
            **%**
            
            **31,678.6**
            
            
            **25.3**
            **%**
            
            **28,333.2**
            
            
            **26.0**
            **%**Quinsa(1)
            
            
            28,781.9
            
            
            21.4
            %
            
            24,997.5
            
            
            19.9
            %
            
            22,145.9
            
            
            20.3
            %HILA-ex
            
            
            6,894.0
            
            
            5.1
            %
            
            6,681.1
            
            
            5.4
            %
            
            6,187.2
            
            
            5.7
            %**North
                America****(**2)
            
            
            **10,962.9**
            
            
            **8.2**
            **%**
            
            **10,891.6**
            
            
            **8.7**
            **%**
            
            **3,621.3**
            
            
            **3.3**
            **%****AmBev
                Consolidated**
            
            
            **134,365.8**
            
            
            **100.0**
            **%**
            
            **125,313.3**
            
            
            **100.0**
            **%**
            
            **108,839.4**
            
            
            **100.0**
            **%**





(1)
            Includes
                100% of the sales volumes of
                Quinsa.


(2)
            2004
                figures consists of the results of Labatt’s operations from August 27,
                2004 through December 31, 2004.




*Source* :
      AmBev




***Business
      Strategy***




We
      aim to
      continuously improve economic value. Based on this strategy our main drivers
      are:




·
            Our
                people and culture;




·
            Top
                line growth;




·
            Distribution
                efficiency and execution;




·
            Permanent
                cost and expense reduction; and




·
            Financial
                discipline.




*Our
      People and Culture*




We
      are
      aware of the value and importance of highly qualified, motivated and committed
      employees. We carefully manage our hiring and training process with a view
      to
      maintaining outstanding professionals among our ranks. In addition, we believe
      that we have created through our compensation program, which is based on both
      variable payment and stock ownership, financial incentives for high performance
      and results. See “Directors, Senior Management and Employees - Compensation -
      Stock Ownership Plan,” and “Directors, Senior Management and Employees -
      Compensation - Profit Sharing Plan”.




Another
      core element of our culture is our distinguished managerial capabilities, which
      is summarized by: (i) hardworking ethos; (ii) results focused evaluations;
      (iii)
      the encouragement of our executives to act as owners, not only managers; (iv)
      leadership through personal example and (v) appreciation for field
      experience.




*Top
      Line Growth*




We
      are
      constantly seeking sustainable growth in our net revenues, primarily through
      four different initiatives:




·
            *Portfolio
                management*:
                we constantly pursue increased sales of premium, higher-priced and
                more
                profitable products in our sales mix;




·
            *Maximize
                share of consumer expenditure*:
                we seek to maximize our share of the consumer’s expenditure in our
                products;




·
            *Market
                share*:
                we are committed to maintaining and strengthening our leading position
                in
                the markets where we operate, as well as to evaluating opportunities
                to
                establish a presence in new markets across the Americas where we
                currently
                do not operate; and




·
            *Increase
                per capita consumption*:
                based on proprietary research focused on consumer behavior and occasions
                of consumption, we aim to increase per capita consumption in the
                markets
                where we operate.





-28-
 *Table
            of Contents*




*Distribution
      Efficiency and Execution*




Delivering
      our beer brands to almost one million points of sale in Brazil is a very complex
      feature of our business. In recent years, we have been focusing on direct
      distribution in major cities while still strengthening our third-party
      distribution system. In Brazil, for instance, instead of operating three
      inherited, parallel, single-brand systems (each of them dedicated to one of
      our
      major brands, *Skol* , *Brahma* and *Antarctica* ),
      we are
      shifting towards a multi-brand network of distributors committed to handling
      all
      of our brands.




In
      addition, we are constantly seeking to improve our point of sale execution
      through new and creative measures. One of our key marketing initiatives was
      the
      introduction into the Brazilian market of our custom-made beer refrigerators
      designed and built to chill beer at the optimal temperature for on-premise
      consumption. These refrigerators also work as effective marketing tools, as
      they
      are decorated with images related to our core brands.




*Permanent
      Cost and Expense Reduction*




Cost
      and
      expense control is one of our employees’ top priorities. Each of our departments
      must comply with its respective annual budget for fixed and variable costs;
      the
      employees of those departments which exceed the budget are not entitled to
      bonuses.




As
      a
      measure to avoid unnecessary expenses, we have designed a management control
      system inspired in zero-base budgeting procedures. That system demands that
      every manager builds the annual budget for his or her respective department
      from
      scratch.




*Financial
      Discipline*




We
      have a
      policy of not retaining unnecessary cash. Through a combination of dividends
      and
      share buy-backs, we have returned to our shareholders the cash flow generated
      by
      our operations, after allocating funds for our operational needs and investment
      plans.




***Seasonality***




Sales
      of
      beverages in our markets are seasonal. Generally, sales are stronger during
      the
      summer and major holidays. Therefore, in the Southern Hemisphere (Brazil and
      HILA) volumes are usually stronger in the fourth quarter due to early summer
      and
      year-end festivities. In North America, volumes are stronger in the second
      and
      third quarters due to the summer season. This is demonstrated by the table
      below, which sets forth our volumes by quarter and business
      division:




**2006
                Quarterly Volumes**
              *(As
                a percentage of annual volumes)***1st
                Quarter**
            
            **2nd
                Quarter**
            
            **3rd
                Quarter**
            
            **4th
                Quarter**
            
            **2006****Brazil**
            
            
            **24.5**
            **%**
            
            **22.1**
            **%**
            
            **23.1**
            **%**
            
            **30.3**
            **%**
            
            **100.0**
            **%**Beer
                Brazil
            
            
            24.5
            %
            
            22.1
            %
            
            23.0
            %
            
            30.4
            %
            
            100.0
            %CSD
                & NANC
            
            
            24.2
            %
            
            22.1
            %
            
            23.5
            %
            
            30.2
            %
            
            100.0
            %**HILA**
            
            
            **26.4**
            **%**
            
            **20.2**
            **%**
            
            **22.6**
            **%**
            
            **30.8**
            **%**
            
            **100.0**
            **%**Quinsa
            
            
            26.9
            %
            
            19.0
            %
            
            22.1
            %
            
            32.0
            %
            
            100.0
            %HILA-ex
            
            
            24.2
            %
            
            25.2
            %
            
            24.6
            %
            
            26.0
            %
            
            100.0
            %**North
                America**
            
            
            **19.1**
            **%**
            
            **28.8**
            **%**
            
            **27.6**
            **%**
            
            **24.5**
            **%**
            
            **100.0**
            **%****AmBev
                Consolidated**
            
            
            **24.5**
            **%**
            
            **22.1**
            **%**
            
            **23.4**
            **%**
            
            **30.0**
            **%**
            
            **100.0**
            **%**




***Description
      of The Markets Where We Operate***




**Brazil**




The
      Brazilian beer market




In
      2006,
      Brazil was the world’s third largest beer market in terms of volume, reaching
      95.3 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 most important packaging presentation is the 350
      milliliter one-way aluminum can, which is predominantly sold in supermarkets
      for
      off-premise consumption.




As
      of
      April 2007, according to Nielsen, we had a 67.2% market share in terms of beer
      sales volumes, mainly through our three major brands, *Skol* , *Brahma* and *Antarctica* .
      Our
      closest competitors in Brazil are: Grupo Schincariol with a 12.3% market share;
      Cervejaria Petrópolis S.A. with an 8.1% market share; and Fomento Economico
      Mexicano S.A. with an 8.0% market share in April 2007, according to Nielsen’s
      public data.


-29-
 *Table
          of Contents*




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. One of them is our network of exclusive
      third-party distributors, involving more than 200 operators. The other branch
      is
      our proprietary direct distribution system, involving more than 40 distribution
      centers spanned over most regions of Brazil. We have been focusing on direct
      distribution in large urban regions, while still strengthening our third-party
      distribution system. See “—Business Overview—Business Strategy”.




The
      Brazilian CSD & NANC markets




The
      CSD
& NANC markets in Brazil are comprised of
      many
      different segments, including CSD, bottled water, isotonics and iced teas.
      The
      CSD segment is the most relevant one for us, representing more than 90% of
      the
      profits of our CSD & NANC business unit. In 2006 we also sold isotonics,
      iced tea and bottled water.




The
      main
      flavors of CSD in Brazil are (i) black cola, (ii) guaraná, (iii) orange, and
      (iv) lime. Most of the CSDs in Brazil are sold in supermarkets in 2-liter
      one-way PET bottles, for off-premise consumption. Specifically for our
      portfolio, the 350 milliliter one-way aluminum can is also an important
      packaging presentation, and is mainly sold in supermarkets.




Our
      main
      competitor in this market is The Coca-Cola Company, which operates in Brazil
      through approximately 20 bottlers. As of April 2007, according to Nielsen,
      The
      Coca-Cola Company family of brands had a 55.7% market share in the Brazilian
      CSDs market, while we had a market share of 17%. Apart from The Coca-Cola
      Company, we face competition from small regional producers that produce what
      are
      usually referred to as “B Brands”. The B Brands compete mainly in price, usually
      being sold at a significantly lower price than our products.




Our
      main
      CSD brands are *Guaraná
      Antarctica* ,
      the
      leader in the guaraná flavor segment, and *Pepsi
      Cola* ,
      which
      is sold under the exclusive bottling agreements with PepsiCo. We also have
      in
      our portfolio the brands *Gatorade* ,
      in the
      isotonics market, H2OH! in the flavored water market, and *Lipton
      Ice Tea* ,
      in the
      iced tea market, which are also sold under license.




Our
      CSD
& NANC products are sold through the same distribution system used for
      beer.




***HILA***




Quinsa




**Argentina**




The
      Argentine beer market




According
      to our estimates, the Argentine beer market annual sales volume was 14.8 million
      hectoliters in 2006.





With
      a
      population of approximately 38 million, Argentina is Quinsa’s largest and most
      important market for beer. Quinsa is the largest beer producer in the country,
      according to Nielsen INB.





According
      to Nielsen INB, on-premise consumption declined from approximately 22% in 1999
      to approximately 18.6% in 2006. This decline reflects the changes that occurred
      in consumer behavior as a result of the difficult economic circumstances
      existing in Argentina. Total sales of beer in supermarkets declined from
      approximately 18% to approximately 8.7% of total beer sales in Argentina over
      the same period, according to Quinsa management estimates.




The
      Argentine CSD market





According
      to our estimates, in 2006, the Argentine CSD market annual sales volume was
      48.1
      million hectoliters. Per capita consumption grew from 117 liters in 2005 to
      126
      liters in 2006. We serve more than 270,000 points of sale in all Argentina.
      Approximately 35% of our CSD volumes is directly distributed and 65% is
      distributed through exclusive third party distributors. 80% of our sales are
      through non-returnable bottles. Our most important brand in Argentina is *Pepsi* ,
      being
      The Coca-Cola Company our main competitor.




**Bolivia**




According
      to our estimates, the Bolivian beer market annual sales volume was 2.8 million
      hectoliters in 2006. Bolivian market is strongly influenced by macroeconomic
      trends and governmental, regulatory and fiscal policies. Market volumes have
      been increasing in the last years, fueled by a combination of factors, such
      as
      (i) economic growth, as the economy posted the strongest GDP growth in five
      years, due in part to the high prices obtained for the country’s commodity
      exports, principally


-30-
 *Table
          of Contents*




soybean
      and tin; (ii) very favorable -warmer, drier- weather conditions; and (iii)
      a
      better social climate after the elections that were won by Mr. Evo
      Morales.




**Chile**




According
      to our estimates, the Chilean beer market annual sales volume was 5.5 million
      hectoliters in 2006.




Quinsa
      originally entered the Chilean market with the expectation that it would be
      participating in a growing market but this growth did not occur as expected,
      and
      from 1998 until 2002, consumption decreased on a per capita basis. However,
      consumption has increased since then. Since the entry of the Chilean brewer
      CCU
      to the Argentine market, our presence in Chile has taken on a strategic
      significance, since we are both competing in each other’s principal
      market.




**Paraguay**




According
      to our estimates, the Paraguayan beer market annual sales volume was 2.3 million
      hectoliters in 2006.




The
      market for beer in Paraguay has traditionally distinguished itself from those
      in
      the southern cone countries in certain respects. First, beer has not faced
      significant competition from wine as an alternative alcoholic beverage. Second,
      domestic beer has faced significant competition from imported beer, which
      accounted for a far higher market share in Paraguay than in neighboring
      countries. Third, the seasonality of our products is lower due to warmer
      conditions throughout the year.




**Uruguay**




The
      Uruguayan beer market




According
      to our estimates, the Uruguayan beer market annual sales volume was 0.8 million
      hectoliters in 2006. Quinsa manages both beer and CSD businesses out of the
      brewery in Uruguay.




Due
      to a
      crisis in Uruguay’s economy, and consequently, beer market volumes in Uruguay
      declined by 10% to 466,000 hectoliters in 2003. However, improvements in
      Uruguay’s economy resulted in a significant increase in market volumes through
      2006.




The
      Uruguayan CSD market




According
      to our estimates, in 2006, the Uruguayan CSD market annual sales volume was
      2.8
      million hectoliters. The market growth in 2006 was a result of a recovery in
      the
      economy and also of higher market investments coming from the B-brands. Per
      capita consumption reached 86.7 liters in 2006 according to our
      estimates.




We
      serve
      more than 20,000 points of sale in all Uruguay, being 8,000 in Montevideo.
      Approximately 52% of our CSD volumes is directly distributed and 48% is
      distributed through exclusive third party distributors. More than 70% of our
      sales are through non-returnable bottles. Our most important brand in Uruguay
      is *Pepsi* ,
      being
      The Coca-Cola Company our main competitor.




HILA-ex




**Central
      America (including Guatemala, El Salvador and Nicaragua)**




In
      El
      Salvador, the main packaging presentation is the returnable, 12 oz. glass
      bottle. Our main competitor in El Salvador is the market leader, a local
      subsidiary of SAB Miller.




In
      Guatemala, the main packaging presentations are the returnable, 12 oz. and
      1
      liter glass bottles. Our main competitor in Guatemala is Cerveceria Centro
      Americana, the market leader. Cerveceria Centro Americana is a private company
      held by local investors.




In
      Nicaragua, the main packaging presentation is the returnable, 1.0 liter glass
      bottle. Our main competitor in Nicaragua is the market leader, which is a joint
      venture among Guatemala’s Cerveceria Centro Americana and a Costa Rican investor
      group named Florida Ice & Farm Co..




In
      all
      three of these markets, beer is predominantly sold in returnable bottles in
      small retail stores, and we sell our *Brahva* brand,
      which is distributed through CabCorp’s distribution system, jointly with
      CabCorp’s CSDs portfolio.




**The
      Dominican Republic**




The
      Dominican beer market


-31-
 *Table
          of Contents*




According
      our estimates, the Dominican beer market annual sales volume was 3.6 million
      hectoliters in 2006. The main packaging presentation in that country is the
      returnable, 650 milliliter glass bottle, which is predominantly sold in small
      retail stores. Currently, the market leader is Cerveceria Nacional Dominicana,
      which is owned by local investors and markets the *Presidente* brand.




In
      connection with our expansion in the Dominican CSD market, we built a brewing
      and CSDs bottling facility in the region of Santo Domingo, which started
      operations in August 2005. We sell beer in the Dominican Republic through the
      same distribution system used in the CSD business.




The
      Dominican CSD market




According
      to our estimates, the  Dominican
      CSD market annual sales volume was 2.7 million hectoliters in 2006. The main
      packaging presentation is the returnable, half-liter glass bottle, which is
      predominantly sold in small retail stores. We are the leading player in that
      market, and compete with The Coca-Cola Company, represented by its local
      bottler.




We
      entered the Dominican CSD market in February 2004. Our main brands in that
      country are *Red
      Rock* , *Pepsi-Cola* and *Seven
      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.




**Ecuador**




According
      to our estimates, the Ecuadorian beer market annual sales volume was 3 million
      hectoliters in 2006. The main packaging presentation in that country is the
      returnable, 578 milliliter glass bottle, predominantly sold in small retail
      stores. The leading player in that market is SABMiller.




We
      entered the Ecuadorian beer market in December 2003, which had by that time
      less
      than 5% market share through its own *Biela* brand.
      In October 2004, the *Biela* brand
      was
      discontinued and we launched the *Brahma* brand.




Our
      distribution system in Ecuador is comprised of direct distribution operations
      and third-party distributors.




**Peru**




The
      Peruvian beer market




According
      to our estimates, the Peruvian beer market annual sales volume was 6.3 million
      hectoliters in 2006. The main packaging presentation in that country is the
      returnable, 650 milliliter glass bottle, which is predominantly sold in small
      retail stores. The market leader is SABMiller.




In
      connection with our expansion in the Peruvian CSD market, we finalized in May
      2005 a brewing and CSDs bottling facility in the region of Lima, which allowed
      us to start selling the *Brahma* beer
      brand in that country.




The
      same
      distribution system used in Peru for our CSD business is also used for the
      beer
      sales.




The
      Peruvian CSD market




According
      to our estimates,  the
      Peruvian CSD market annual sales volume was 14 million hectoliters in 2006.
      The
      main packaging presentation in the country is the 3 liter one-way PET bottle,
      which is predominantly sold in small retail stores. The leading player in that
      market is The Coca-Cola Company, represented by its local network of bottlers.
      We also face competition from small B Brands regional producers, which compete
      mainly in price, usually being sold for a significantly lower price than our
      products.




We
      entered the Peruvian CSD market in November 2003. The main brands that we sell
      in Peru are *Concordia* , *Pepsi-Cola* and *Triple
      Kola* ,
      all of
      which are sold under exclusive bottling agreement with PepsiCo.




Our
      distribution system in Peru is comprised of direct distribution operations
      and
      third-party distributors.




**Venezuela**




According
      to our estimates, the Venezuelan beer market annual sales volume was 23 million
      hectoliters in 2006. The main packaging presentation in that country is the
      returnable, 222 milliliter glass bottle, which is predominantly sold in small
      retail stores. We compete in Venezuela with Cervecería Polar, the market leader,
      and Cervecería Regional, the second largest player.


-32-
 *Table
          of Contents*




Our
      main
      brands in Venezuela are *Brahma
      Chopp* and *Brahma
      Light* ,
      and our
      distribution system is comprised of direct distribution operations and
      third-party distributors.




*North
      America*




Our
      North
      America business unit is represented by the Labatt operations, which sells
      domestic and InBev beer brands as well as Brahma in Canada and exports Canadian
      brands to the United States. The US operations also sell Brahma in the United
      States.




On
      February, 1, 2007, AmBev announced that its subsidiary Labatt had entered into
      a
      Support Agreement with Lakeport. Upon closing of the transaction, Lakeport
      became wholly-owned by Labatt (see “— Information on the Company - History and
      Development of the Company - Overview”). Lakeport has approximately 3% of beer
      market share in Canada.




According
      to our estimates, the annual sales volume in the beer market in Canada was
      22.7
      million hectoliters in 2006. The main packaging presentation in that country
      is
      the returnable, 341 milliliter glass bottle, which is predominantly sold in
      privately owned and government owned retail stores. Our main competitor in
      Canada is Molson, which has a market share slightly lower (approximately 40%)
      than ours (approximately 43%, including Lakeport). We also compete with smaller
      local brewers, such as Sleeman Breweries Ltd. (“Sleeman”) and Moosehead
      Breweries Ltd.




Our
      main
      brands in Canada are *Budweiser* and *Bud
      Light* (brewed
      and sold under license from Anheuser-Busch, Inc.) (“Anheuser-Busch”), *Labatt
      Blue* , *Alexander
      Keith’s* and *Kokanee* .
      Our
      distribution system is structured in different ways across the country:




Distribution
      in Ontario




In
      Ontario, the province with the largest beer consumption in Canada, we own
      together with Molson and Sleeman a distribution and retail company named Brewers
      Retail Inc., a company incorporated in 1927, the retail component of which
      carries out business as The Beer Store (“TBS”). TBS and the Liquor Control Board
      of Ontario, a chain of liquor stores owned by the government of the Province
      of
      Ontario (“LCBO”), own the exclusive rights to sell beer for off-premise
      consumption in Ontario. TBS also has the exclusive rights to supply
      domestic-produced beer to the LCBO.




Domestic
      brewers are entitled to hire the distribution and retail services of TBS, which
      charges a one-off listing fee for the registration of each stock keeping unit
      in
      its portfolio, plus a fee for service for each case delivered to the LCBO or
      sold in its proprietary stores. TBS also serves points of sale in Ontario where
      beer is consumed on premise. Any brewer can sell its products directly to points
      of sale where beer is consumed on premise.




Brewers
      Retail Inc., operating as The Beer Store, is owned by three
      brewers: Labatt, Molson and Sleeman.  TBS has been the
      primary distribution and sales channel for beer in Ontario for 80
      years.  TBS operates on a cost recovery model under which it charges
      volume based fees for services it provides to the Brewers.  TBS receives no
      retail margin or profit on its sales of Beer
      Inventory. The  nature of TBS’s business requires compliance
      with laws and regulations and oversight by the Province of
      Ontario.  The Liquor Control Act and the Liquor License Act are
      administered by the Minister of Consumer and Business Services, which maintains
      control of the beverage alcohol sectors through the Liquor Control Board of
      Ontario and the Alcohol and Gaming Commission of Ontario.




Control
      of TBS is governed by a shareholders agreement among Labatt, Molson and
      Sleeman.




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
      system.




Distribution
      in the Western Provinces




Molson
      and Labatt are each shareholders in Brewers Distributors Limited (“BDL”), which
      operates a distribution network for beer in the for western
      provinces of British Columbia, Alberta, Manitoba and
      Saskatchewan . the
      Yukon
      and the Northwest Territories. In Alberta, some volume is also sold through
      a
      third-party wholesaler. In these Western Provincial markets there are both
      private (Alberta, British Columbia) and government-controlled retail stores
      (British Columbia, Manitoba, Saskatchewan).


-33-
 *Table
          of Contents*




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
      distribution and retail networks controlled by the government.




Exports
      to the United States




We
      sell
      some of our brands in the United States, including *Labatt
      Blue* and *Kokanee* ,
      through
      InBev USA L.L.C., a subsidiary of InBev. See “Major Shareholders — Material
      Related Party Transactions”.




***Beer
      and CSD Production Process***




Beer
      production involves several raw material and production stages. The main
      ingredient in beer is malt, which is produced by germinating and roasting barley
      in a process called “malting”. Malt is mixed with water, hops and adjuncts (corn
      syrup, grits or rice, for instance) in the proportions necessary to obtain
      the
      desired taste. The resulting mixture is called “wort”. Wort is fermented with
      selected yeasts to produce beer, which is then filtered and packaged. In
      addition to these inputs, delivery of the product to consumers requires
      packaging materials such as bottles, aluminum or steel cans, labels and crown
      caps.




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 or steel
      cans, labels and plastic closures.




For
      information on our production facilities, see “— Property, Plant and
      Equipment”.




*Sources
      and Availability of Raw Materials*




*Beer*




The
      main
      raw materials used in our production are malting barley, malt, grits, corn
      syrup, rice, 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 90% 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 suppliers are Canada Malting,
      Soufflet, Boortmalt and Malterias Unidas. 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 farmers resident in
      Brazil, Argentina and Uruguay. 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.




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 by few international companies,
      namely the Barth-Haas Group, Yakima Chief, Inc., Hopsteiner and HVG
      Hopfenverwertungsgenossenschaft.




Adjuncts




Corn
      syrup, grits and rice are purchased locally by each one of our operations 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. We do not
      foresee any shortage in our current water supply.


-34-
 *Table
          of Contents*




*CSDs*




The
      main
      raw materials used in our production are: concentrate (including guaraná
extract), sugar, sweetener, water and carbon dioxide gas. Most of these
      materials are obtained from local suppliers.




Guaraná
      fruit




We
      have a
      505 hectare farm that provides us with 20 tons of guaraná berries per year, or
      about 10% of our requirements, with the remainder purchased directly from
      independent farmers in the Amazon region.




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 brands. The
      concentrate for Pepsi CSD products is purchased from PepsiCo.




Sugar




Sugar
      is
      widely available and is purchased locally by each of our operations. We enter
      into derivative instruments to avoid the impact of short-term volatility in
      sugar prices on our production costs. See “Quantitative and Qualitative
      Disclosure about Market Risk”.




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 and steel
      cans, plastic film (shrink and stretch), paper labels, plastic closures, metal
      crowns and paperboard. We enter into derivative instruments to avoid the impact
      of short-term volatility in aluminum prices on our production costs; for further
      information on this matter see “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.




We
      started the construction of a glass bottle producing facility in Rio de Janeiro,
      which will be ready in 2007. The new unit will have a yearly production capacity
      of 100 thousand tons of glass, approximately 450 million bottles.




Our
      main
      can suppliers are Rexam, Latapack Ball, Metalic and Crown-Cork. We generally
      purchase all of the glass bottles used in the packaging of our products from
      St.
      Gobain Emballage, Owens-Illinois Glass Containers and Companhia Industrial
      de
      Vidros. 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. Plastic closures are principally purchased from
      Alcoa Alumínio and Crown-Cork. PET pre-forms are principally purchased from
      Amcor. Crown caps are sourced locally by each of our operations. In Brazil
      and
      some of our HILA-ex operations, a significant part of our crown caps
      requirements are met by our facility in the north of Brazil.




***Regulation***




All
      our
      operations are subject to local governmental regulation and supervision,
      including (i) labor laws; (ii) social security laws; (iii) public health,
      consumer protection and environmental laws; (iv) securities laws; and (v)
      antitrust laws. In addition, regulations exist to (i) ensure healthy and safe
      conditions in facilities for the production, bottling, and distribution of
      beverages and (ii) place restrictions on beer consumption.




Environmental
      laws in the countries where we operate are mostly related to (i) the conformity
      of our operating procedures with environmental standards regarding, among other
      issues, the emission of gas and liquid effluents and (ii) the disposal of
      one-way packaging.




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 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 Venezuela,
                some
                regions of Argentina and Canada;  -35-
 *Table
            of Contents*




·
            Some
                local governments in Canada establish a minimum price for beer sales,
                which is named Social Reference Price (“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 AmBev,
                Molson
                and Sleeman. The Alcohol and Gaming Commission of Ontario regulates
                the
                alcohol industry and recently the Government of Ontario has established
                an
                independent panel to review beverage alcohol policies in Ontario,
                and as
                part of this exercise TBS is undergoing heightened government scrutiny.
                It
                is difficult to determine the approach that the Government of Ontario
                will
                take.




Many
      governments also impose restrictions on beer advertisement, which may affect,
      among other issues, (i) the media channels used, (ii) the contents of
      advertising campaigns; and (iii) the time and places where beer can be
      advertised.




***Marketing***




AmBev’s
      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 includes banners, and
      all
      types of enhancements to the point of sale, such as branded coolers and
      decorated furniture.




***Licenses***




AmBev
      entered into long-term agreements with PepsiCo whereby AmBev was granted the
      exclusive right to bottle, sell and distribute certain brands of PepsiCo’s
      portfolio of CSDs in Brazil, including *Pepsi-Cola* , *Seven
      Up* and *Gatorade* .
      The
      agreements will expire on December 31, 2017. See “Additional
      Information—Material Contracts”. AmBev also has agreements with PepsiCo to
      manufacture, package, sell, distribute and market some of its brands in the
      Dominican Republic and in some regions of Peru, including the north and the
      Lima
      regions. Through Quinsa, AmBev is also PepsiCo’s bottler for Argentina and
      Uruguay. In 2006, sales volumes of PepsiCo products represented 39% of our
      total
      CSD & NANC sales volumes in Brazil, 97.9% of our total CSD & NANC sales
      volumes in the Dominican Republic, all of our CSD & NANC sales volumes in
      Peru and Uruguay and nearly all of our CSD & NANC sales volumes in
      Argentina.




Effective
      January 1, 1998, Labatt entered into long-term licensing agreements with
      Anheuser-Busch whereby Labatt was granted the exclusive right and license to
      manufacture, package, sell, distribute and market some of Anheuser-Busch’s
      brands, including the *Budweiser* and *Bud
      Light* brands,
      in Canada, including the right to use Anheuser-Busch’s trademarks for those
      purposes. The agreements expire January 1, 2098 and are renewable by either
      party for a second term of 100 years. In 2006, the Anheuser-Busch brands sold
      by
      Labatt represented 37.4% of Labatt’s total sales volumes. According to AmBev’s
      estimates, the *Budweiser* brand is
      currently the largest selling brand in terms of volume in Canada.




In
      March
      2005, AmBev and InBev entered into a 10-year cross-licensing agreement through
      which AmBev is allowed to produce, package, market and distribute beer under
      the
      brands *Stella
      Artois* and *Beck’s* in Latin
      America (except Argentina and Cuba) on an exclusive basis, and InBev is allowed
      to produce, package, market and distribute beer under the brand *Brahma* in
      Europe, Asia, Africa, Cuba and the United States on an exclusive basis. Since
      March 2005, InBev has launched the *Brahma* brand in
      the United States and in a number of European countries such as the United
      Kingdom, France, the Benelux, Ukraine and Russia. We announced the launch of
      the *Stella
      Artois* brand in
      Brazil in June 2005. Labatt and InBev have an arrangement through which Labatt
      distributes *Stella
      Artois* branded
      beer in Canada. In addition, InBev distributes *Labatt Blue, Blue Light, Blue Dry, Labatt Canadian Ale* and *Kokanee* in the
      U.S, under a distribution agreement entered into with Labatt.




***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 taxes charged on our beer products in 2006 represented as a
      percentage of gross sales was: 36.2% in Brazil; 26.5% in Canada; 13.6% in
      Central America; 35.4% in Ecuador; 46.4% in Peru; 44.5% in the Dominican
      Republic; 23.3% in Venezuela; 31.5% in Argentina; 16% plus US$0.2 per liter
      in
      Bolivia; 34% in Chile; 18% in Paraguay; and 23%
      plus
      US$23.57 per hectoliter 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 sales taxes charged on our CSD & NANC products in 2006 represented
      as a


-36-
 *Table
          of Contents*




percentage
      of gross sales was: 28% in Brazil; 13% in the Dominican Republic; 29.6% in
      Peru;
      27.5% in Argentina; and 23%
      plus
      US$23.57 per hectoliter in
      Uruguay.




**C.**
            **Organizational
                Structure**




The
      controlling shareholders of AmBev, Interbrew International B.V., and AmBrew
      S.A., which are both subsidiaries of InBev, and FAHZ, together hold
      approximately 89.6% of AmBev’s common shares, as of April 30, 2007. InBev
      indirectly holds shares of AmBev common stock that represent approximately
      73.5%
      of the total voting power of AmBev’s capital stock. InBev thus has control over
      AmBev, even though (i) InBev remains subject to the AmBev Shareholders’
Agreement with FAHZ, and (ii) InBev is jointly controlled by Messrs. Lemann,
      Sicupira and Telles and Interbrew’s former controlling shareholders. For further
      information on these matters see “—AmBev Shareholders’ Agreement” and
“Information on the Company—InBev-AmBev Transactions”.




Since
      the
      merger of CBB into AmBev in May 2005, AmBev conducts the bulk of its operations
      in Brazil directly. It is also indirectly controls Labatt, the operations of
      HILA-ex and our stake in Quinsa and QIB. The following chart illustrates the
      ownership structure of AmBev’s principal subsidiaries as of June 30, 2007
      on total share capital owned. For a list of our material subsidiaries, see
      Exhibit 8.1 to this annual report.









**D.**
            **Property,
                Plant and Equipment**




Our
      properties consist primarily of brewing, malting, bottling, distribution and
      office facilities in Argentina, Bolivia, Brazil, Canada, Chile, the Dominican
      Republic, Ecuador, Guatemala (from which we also serve the beer markets of
      El
      Salvador and Nicaragua), Paraguay, Peru, Uruguay and Venezuela. In 2006, we
      closed a brewery in Toronto, Ontario, Canada.


In
        2006,
        our aggregate beer and CSD production capacity was 209.3 million hectoliters
        per
        year. Our total annual beer production capacity was 143.8 million hectoliters.
        Our total CSD production capacity was 65.5 million hectoliters. In 2006,
        the
        production of these facilities totaled 98 million hectoliters for beer
        and 36.3 million hectoliters for CSD. These figures include facilities
        operated by Quinsa’s subsidiaries. The recently acquired Cintra plants have
        approximately 4.2 million hectoliters of beer capacity and 2.8 million
        hectoliters of CSDs capacity.


-37-
 *Table
          of Contents*




The
      following is a list of our principal production facilities as of April 30,
      2007:





**Brazil**
            **HILA**
            **North
                America****Plant**
            **Type**
              **of
                Plant**
            **Plant**
            **Type**
              **of
                Plant**
            **Plant**
            **Type**
              **of
                Plant**Agudos,
                São Paulo
            Beer
            HILA-ex
            St.
                John’s
            BeerBrasília,
                Federal District
            Beer
            Brahma
                Venezuela, Venezuela
            Beer
            Halifax
            BeerCuritiba,
                Paraná
            Beer
            AmBevCentroamerica,
                Guatemala
            Beer
            Montreal
            BeerEquatorial,
                Maranhão
            Beer
            AmBevEcuador,
                Ecuador
            Beer
            London
            BeerGoiânia,
                Goiás
            Beer
            Hato
                Nuevo, Dominican Republic
            Beer
            Edmonton
            BeerJacareí,
                São Paulo
            Beer
            
            
            Creston
            BeerLages,
                Santa Catarina
            Beer
            Huachipa,
                Peru
            Mixed
            Hamilton
            BeerNatal,
                Rio Grande do Norte
            BeerGuarulhos,
                São Paulo
            Beer
            San
                Martín, Dominican, Republic
            Soft
                DrinksSullana,
                Peru
            Soft
                DrinksÁguas
                Claras, Sergipe
            MixedAquiraz,
                Ceará
            Mixed
            Cympay,
                Uruguay
            MaltCamaçari,
                Bahia
            Mixed
            MUSA,
                Uruguay
            MaltCebrasa,
                Goiás
            Mixed
            Maltería
                Pampa, Argentina
            MaltCuiabá,
                Mato Grosso
            Mixed
            QuinsaJaguariúna,
                São Paulo
            Mixed
            Quilmes,
                Argentina
            BeerJoão
                Pessoa, Paraíba
            Mixed
            Corrientes,
                Argentina
            BeerNordeste,
                Pernambuco
            Mixed
            La
                Paz, Bolivia
            BeerNova
                Rio, Rio de Janeiro
            Mixed
            Santa
                Cruz , Bolivia
            BeerManaus,
                Amazonas
            Mixed
            Taquiña,
                Bolivia
            BeerMinas,
                Minas Gerais
            Mixed
            Huari,
                Bolivia
            BeerTeresina,
                Piauí
            Mixed
            Tarija,
                Bolivia
            BeerÁguas
                Claras do Sul, Rio Grande do Sul
            Mixed
            Santiago,
                Chile
            BeerPiraí,
                Rio de Janeiro
            Mixed
            Minas,
                Uruguay
            BeerMogi
                Mirim, São Paulo
            Mixed
            Ypané,
                Paraguay
            Beer/
                Glass bottleCuritibana,
                Paraná
            Soft
                drinks
            Zárate,
                Argentina
            MixedContagem,
                Minas Gerais
            Soft
                drinks
            Mendoza,
                Argentina
            MixedJundiaí,
                São Paulo
            Soft
                drinks
            Montevideo,
                Uruguay
            MixedSapucaia,
                Rio Grande do Sul
            Soft
                drinksCórdoba,
                Argentina
            Soft
                DrinksManaus,
                Amazonas
            Crown
                Cap
            Trelew,
                Argentina
            Soft
                DrinksManaus,
                Amazonas
            Concentrate
            Buenos
                Aires South, Argentina
            Soft
                Drinks and JuicesMaltaria
                Navegantes, Rio Grande do Sul
            Malt
            Tucumán,
                Argentina
            Soft
                Drinks/ BottlingMontegrande,
                Argentina
            IsotonicsTres
                Arroyos, Argentina
            MaltLlavallol,
                Argentina1
            Malt





1
            This
                malting facility has been leased to third parties for 10
                years.




Please
      see “Liquidity and Capital Resources-Secured Debt”, for more information about
      encumbrances in our plants and equipments.





-38-
 *Table
            of Contents*




**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 financial
      statements included in this annual report. 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 included in this annual
      report in *Reais* in
      accordance with Brazilian GAAP, which differs in certain significant respects
      from U.S. GAAP. The audited financial statements included elsewhere in this
      annual report include a reconciliation of net income and shareholders’ equity to
      U.S. GAAP, a discussion of the reconciling differences in accounting principles,
      and the presentation of the U.S. GAAP condensed balance sheets and statements
      of
      operations in *Reais* .




AmBev’s
      discussion and analysis of its financial condition and results of operations
      are
      based upon its primary financial statements. As a result, the financial
      information and related discussion and analysis contained in this Item are
      in
      accordance with Brazilian GAAP and figures are in *Reais* ,
      unless
      otherwise stated.




**Critical
      Accounting Policies**




The
      SEC
      has defined a critical accounting policy as a policy for which there is a choice
      among alternatives available under U.S. GAAP, and for which choosing a
      legitimate alternative would yield materially different results. We believe
      that
      the following are our critical accounting policies. We consider an accounting
      policy to be critical if it is important to our financial condition and results
      of operations and requires significant or complex judgments and estimates on
      the
      part of our management. For a summary of all of our significant accounting
      policies, see Note 2 to our consolidated financial statements included herewith.




***Accounting
      for Business combinations and Impairment of Goodwill and Intangible
      Assets***




We
      have
      made acquisitions that included a significant amount of goodwill and other
      intangible assets, including the acquisition of Labatt and of Quinsa.




Under
      Brazilian GAAP, goodwill is the difference between the purchase consideration
      and the book value of the net assets acquired. Intangible assets are not
      separately recognized. Goodwill is amortized over defined finite periods, as
      disclosed in Note 2(k) to our financial statements, and tested for impairment
      when an event or change in circumstances indicate that the book value of the
      investment will not be recoverable.




Under
      U.S. GAAP, goodwill is calculated as the difference between the purchase
      consideration and the fair value of the net assets acquired. SFAS No. 142,
      “Goodwill and Other Intangible Assets,” became effective for acquisitions after
      June 30, 2001. This standard requires that goodwill no longer be amortized
      but
      tested annually for impairment, and we therefore ceased to amortize goodwill
      as
      from January 1, 2002. Our intangible assets with definite useful lives continue
      to be amortized over the estimated useful lives of these assets.




We
      exercise significant judgment in the process of identifying tangible and
      intangible assets and liabilities, valuing such assets and liabilities and
      in
      determining their remaining useful lives. We generally engage third party
      valuation firms to assist in valuing the acquired assets and liabilities. The
      valuation of these assets and liabilities is based on the assumptions and
      criteria which include in some cases estimated of future cash flows discounted
      at the appropriate rates. The use of different assumptions used for valuations
      purposes including estimates of future cash flows or discount rates may have
      resulted in different estimates of value of assets acquired and liabilities
      assumed.




We
      test
      our goodwill and other long-lived assets for impairment annually or whenever
      events and circumstances indicate that the undiscounted cash flows estimated
      to
      be generated by those assets are less than the carrying amount of those items.
      Our cash flow estimates are based on historical results adjusted to reflect
      our
      best estimate of future market and operating conditions. Our estimates of fair
      values used to determine the resulting impairment loss, if any, represent our
      best estimate based on forecasted cash flows, industry trends and reference
      to
      market rates and transactions. Impairments can also occur when we decide to
      dispose of assets.




***Pension
      and other Post-Retirement Benefits***




We
      account for all benefit obligations provided by us, including those in relation
      to FAHZ and Labatt, in accordance with the IBRACON Accounting Standard and
      Procedure NPC No. 26, “Pensions and Post-retirement benefits”. This standard
      requires


-39-
 *Table
          of Contents*




the
      comprehensive recording of pension obligations and expenses on an actuarial
      basis. We recognize in our income a charge to pensions and post-retirement
      benefits to reflect the change in the actuarial obligation, less the fair value
      of plan assets and the effect of deferrals.




Plan
      assets of the *Instituto
      AmBev de Previdência Privada* - IAPP
      (the “AmBev Pension Fund”) include amounts contributed by AmBev and its
      employees and amounts earned from investing the contributions, less benefits
      paid. Although the plan assets of IAPP are considered to be in excess of that
      required to meet the projected benefit obligation, because Brazilian pension
      regulations currently provide no means for returning this surplus to the
      sponsor, a valuation allowance of R$ 302.4 million in 2006 and R$ 240.3
      million in 2005 was recorded against the excess plan assets based on the amount
      AmBev will be able to reduce future employer contributions to the minimum
      permitted by law.




Under
      US
      GAAP, as of December 31, 2006 we have adopted SFAS No. 158, Employer’s
      Accounting for Defined Benefit Plans and Other Post Retirement Benefits - an
      amendment of SFAS No. 87, 88, 106 and 132(R). Under SFAS No. 158 the Company
      recognized the funded status of each of its defined pension and post-retirement
      benefit plans as a net asset or liability in its balance sheet with an
      offsetting amount in other accumulated comprehensive income. As required by
      SFAS
      No. 158, its provisions were applied on a prospective basis as from December
      31,
      2006; therefore prior periods presented have not been restated. We have recorded
      an accrued liability, based on independent actuarial reports at the end of
      each
      period which include the pension and other post-retirement obligations payable
      by AmBev, Labatt and FAHZ.




We
      do not
      record a valuation allowance on the pension plan assets of IAPP as it is not
      appropriate as confirmed by the AICPA International Practices Task Force on
      November 25, 2002.




We
      use
      several statistical data and other factors which attempt to anticipate future
      events in calculating the expense and liability related to our pension and
      employee benefit plans. These factors include assumptions about the discount
      rate, expected return on plan assets and rate of future compensation increases
      as determined by us, within certain guidelines. In addition, our actuarial
      consultants also use subjective factors, such as withdrawal, turnover and
      mortality rates. The actuarial assumptions we use may differ materially from
      our
      actual results, due to changing market and economic conditions, regulatory
      events, judicial rulings, higher or lower withdrawal rates or longer or shorter
      life spans of participants.




***FAHZ
      Net Assets***




FAHZ
      provides medical, dental, educational and social assistance to our current
      and
      retired employees, as well as their beneficiaries and dependents, as discussed
      in Note 12 (b) to the audited financial statements included elsewhere in this
      report. As of April 30, 2007, FAHZ owned approximately 16% of AmBev’s
      outstanding voting shares and approximately 8.8% of AmBev’s total outstanding
      shares. See “Major Shareholders and Related Party Transactions”.




Under
      Brazilian GAAP, FAHZ is a legally distinct entity and we do not include the
      assets and liabilities of FAHZ within our financial statements.




Under
      U.S. GAAP, the net assets of FAHZ are included in the determination of
      shareholders’ equity and net income of AmBev, as such assets are not considered
      to be plan assets as defined by SFAS No. 106, “Employers’ Accounting for
      Post-retirement Benefits Other than Pensions”, and subsequent amendments, since
      they are not segregated and restricted between active and retired employees.
      The
      AmBev shares held by FAHZ are accounted for as treasury shares and impact our
      earnings per share calculation as they reduce our outstanding number of shares.
      We believe no alternative recognition and accounting methods are available
      to
      us.




***Contingencies***




The
      preparation of our financial statements requires our management to make
      estimates and assumptions regarding contingencies which affect the valuation
      of
      assets and liabilities at the date of the financial statements and the revenues
      and expenses during the reported period.




We
      disclose material contingent liabilities unless the possibility of any loss
      arising is considered remote, and material contingent assets where the inflow
      of
      economic benefits is probable. We discuss our material contingencies in Note
      13
      to our financial statements.




Under
      both Brazilian GAAP and U.S. GAAP, we record a provision for a loss contingency
      when it is probable that a future event will confirm that a liability has been
      incurred at the date of the financial statements, and the amount of the loss
      can
      be reasonably estimated. In particular, given the uncertain nature of Brazilian
      tax legislation, the assessment of potential tax liabilities requires
      significant management judgment. By their nature contingencies will only be
      resolved when one or more future events occur or fail to occur - and typically
      those events will occur a number of years in the future.




Total
      provision for contingencies recorded in our balance sheet as at December 31,
      2006 and 2005 totaled R$ 663.3 million and R$ 1,037.1 million, respectively.


-40-
 *Table
          of Contents*




We
      have
      estimated the total exposures of possible losses, which are not recorded as
      liabilities, to be R$ 5,877.0 million at December 31, 2006 (R$ 4,557.0 million
      -
      2005).




***Deferred
      tax***




We
      recognize deferred tax effects of tax loss carryfowards and temporary
      differences between the financial statement carrying amounts and the tax basis
      of our assets and liabilities. We estimate our income taxes based on regulations
      in the various jurisdictions where we conduct business. This requires us to
      estimate our actual current tax exposure and to assess temporary differences
      that result from different treatment of certain items for tax and accounting
      purposes. These differences result in deferred tax assets and liabilities,
      which
      we record on our consolidated balance sheet. We regularly review the deferred
      tax assets for recoverability and will only recognize these if we believe that
      it is probable (under Brazilian GAAP) or more likely than not (under U.S. GAAP)
      that there will be sufficient taxable profit against any temporary differences
      that can be utilized, based on historical taxable income, projected future
      taxable income, and the expected timing of the reversals of existing temporary
      differences. Pursuant to CVM regulations, under Brazilian GAAP, we must
      demonstrate that we will recover the tax assets discounted to present value
      based on expected realization dates, within a 10-year period, even though these
      credits have no prescription period for Brazilian tax law purposes.




In
      the
      event we or one of our subsidiaries operate at a loss or are unable to generate
      sufficient future taxable income, or if there is a material change in the actual
      effective tax rates or time period within which the underlying temporary
      differences become taxable or deductible, we evaluate the need to establish
      a
      valuation allowance against all or a significant portion of our deferred tax
      assets resulting in an increase in our effective tax rate.




We
      do not
      record deferred tax liabilities on the earnings generated by our foreign
      subsidiaries. Based on the advice of external counsel, we concluded that these
      earnings are not taxable on remittance to Brazil. The Brazilian tax authorities
      introduced new legislation in the third quarter of 2001 to, among other
      measures, subject offshore earnings to income tax in Brazil from December 31,
      2002, regardless of whether earnings have been remitted to Brazil. Although
      we
      have received a number of assessments in connection with such matter, as
      described under “—off-Balance Arrangements”, we continue to believe that the
      current tax initiatives that we are undertaking will not result in taxes on
      these earnings, based on the advice of external counsel and we have not
      therefore recorded a liability for such taxes in our financial
      statements.




Certain
      other tax assets arising from the Brazilian GAAP purchase accounting adjustments
      at the time of the Brahma and Antarctica combination and the subsequent
      downstream merger of Antarctica have not been recorded as recovery is not
      presently considered probable.




***Accounting
      for derivatives***




We
      enter
      into foreign currency forward, swap and future contract agreements (principally
      for U.S. dollars) to mitigate foreign exchange risk on U.S. dollar-denominated
      debt, financing of imports and payables to foreign suppliers.




These
      agreements are marked-to-market and recorded at the lower of cost plus interest
      and market value. The unrealized gains and losses on these financial instruments
      are reported in the statement of operations and included in “Financial income”
and “Financial expenses”.




Brazilian
      GAAP requires us to disclose the fair value of financial instruments at the
      balance sheet date but does not require us to record the unrealized
      marked-to-market fair value gains in income in the year.




Under
      Brazilian GAAP, financial instruments designated as hedges for accounting
      purposes are recorded at cost plus accrued interest (“yield curve”) and gains or
      losses are deferred and recorded in income when the underlying transaction
      has
      occurred. Financial instruments which have not been designated as hedges for
      accounting purposes are recorded at the lower of cost or market and recorded
      in
      earnings as financial income or expenses when incurred.




Under
      U.S. GAAP, all derivative financial instrument agreements not designated as
      hedges are marked-to-market and the realized and unrealized gains and losses
      on
      these financial instruments used to manage foreign currency exposures are
      reported in the statement of operations and included in “Financial income” and
“Financial expenses”. Financial instruments designated as hedges are accounted
      the same as Brazilian GAAP.




The
      estimated fair value amounts have been determined by us using available market
      information and appropriate valuation methodologies. However, considerable
      judgment is necessarily required in interpreting market data to develop the
      estimates of fair value.




We
      believe that swap quotations obtained are reasonable when compared with
      information on similar financial instruments traded in the *Bolsa
      de Mercadorias & Futuros* (“BM&F”) and that the internally developed valuation methodology is
      consistent with methodologies used by other participants in the swap market
      in
      Brazil and its results reasonably reflect the amount that would be paid or
      received to settle the swap on the valuation date.


-41-
 *Table
          of Contents*




Although
      our intention is to maintain these instruments through maturity, they may be
      realized at our discretion. Should these instruments be settled only on their
      respective maturity dates, any effect between the market value and estimated
      yield curve of the instruments would be totally eliminated. Had we been able
      to
      adopt the same criterion to recognize its financial liabilities at market value,
      it would have recorded an additional loss, before income taxes, of R$ 580.9
      million, on December 31, 2006 (loss of R$ 523.4 million in 2005 and a loss
      of R$
      602.6 million in 2004), as follows:




**Financial
                liabilities**
            
            **Book value**
            
            **Market value**
            
            **Difference**“Bonds”
                - AmBev 11 and AmBev 13
            
            
            2,175.9
            
            
            2,575.4
            
            
            (399.5
            )Series
                A Notes (i)
            
            
            345.1
            
            
            350.4
            
            
            (5.3
            )Series
                B Notes (ii)
            
            
            91.8
            
            
            93.8
            
            
            (2.0
            )Senior
                Notes - BRI (iii)
            
            
            163.0
            
            
            183.7
            
            
            (20.7
            )Other
                currency international financing (iv)
            
            
            2,311.1
            
            
            2,311.1
            
            
            —Financing
                in R$ (iv)
            
            
            948.8
            
            
            1,147.3
            
            
            (198.5
            )BNDES/FINEP/EGF
                (iv)
            
            
            498.8
            
            
            498.8
            
            
            —Res.
                63/ Compror 63
            
            
            901.0
            
            
            855.9
            
            
            45.1Debentures
                (2009 and 2012)
            
            
            2,131.1
            
            
            2,131.1
            
            
            —9,566.6
            
            
            10,147.5
            
            
            (580.9
            )


***Acquisition
      of Labatt***




We
      accounted for our transaction with Labatt as an acquisition of Labatt by AmBev
      for both Brazilian GAAP and U.S. GAAP reporting. Although InBev is the
      controlling shareholder of AmBev under EITF 96-16, the U.S. GAAP reporting
      was
      based on the analysis of paragraph 17 of SFAS 141, Business Combinations, which
      points to AmBev as the accounting acquirer of Labatt. See note 23.a) (v) to
      our
      consolidated financial statements included herewith.




***Accounting
      for less than majority owned subsidiaries***




Under
      Brazilian GAAP, we record joint-ventures, including investees in which we share
      control through our participation in a shareholders’ agreement under the
      proportional consolidation method. Our results of operation through July 31,
      2006 include our proportionate share in Quinsa. We have consolidated Quinsa’s
      results beginning August 1, 2006.




For
      purposes of U.S. GAAP, the subsidiaries that are accounted for under Brazilian
      GAAP on a proportional consolidation basis are recorded as equity in affiliates
      under the equity method of accounting as we do not hold a financial controlling
      interest in their operations.




We
      believe our accounting for our investment in Quinsa through July 31, 2006 to
      be
      consistent with SFAS No. 94 “Consolidation of All Majority-Owned Enterprises”
and APB Opinion No. 18, “The Equity Method of Accounting for Investments in
      Common Stock” and, therefore, no alternative accounting method to be available
      to us. We have acquired full control of Quinsa and therefore fully consolidated
      its balance sheet and results of operations beginning August 9,
      2006.




We
      do not
      have any variable interest entities at December 31, 2006 or 2005 which would
      be
      required to be consolidated under the provisions of FASB’s Financial
      Interpretation Fin 46-R “Consolidation of Variable Interest Entities (revised
      December 2003)”.




**Effect
      of Direct Distribution on Results of Operations**




Historically,
      both Brahma and Antarctica distributed their products through exclusive
      third-party distribution networks. In the second half of 1997, Brahma began
      to
      implement the direct distribution of its products.




As
      the
      proportion of our net sales made through direct distribution rises, our results
      of operations are affected as follows:




·
            Net
                sales increases.
                Net sales made through direct distribution are greater than net sales
                made
                through third parties. Under direct distribution, we receive a higher
                price for our products since we are selling directly to retail stores,
                capturing the gross margin previously retained by
                distributors;




·
            We
                incur transportation costs.
                When we sell our products directly, we incur freight costs in transporting
                our products between our plant and the point of sale, which are included
                in our cost of sales under U.S. GAAP and in our direct distribution
                expenses under Brazilian GAAP; and  -42-
 *Table
            of Contents*




·
            Our
                sales, general and administrative expenses increase.
                Under the third-party distribution system, the salesperson is an
                employee
                of the distributor, while under direct distribution, the salesperson
                is
                our employee. As direct distribution grows, we incur additional direct
                distribution expenses from the hiring of additional employees which
                are
                offset by the increase in net
                sales.




**Foreign
      Currency Effects**




We
      have
      significant amounts of U.S. dollar-denominated assets and liabilities and
      operating expenses denominated in or linked to U.S. dollars. However, a
      substantial majority of our revenues are generated in currencies which exchange
      rate to the U.S. dollar may present significant volatility.




Fluctuations
      in the exchange rate to the U.S. dollar of currencies in which our revenues
      are
      generated may cause the following impact on our results of
      operations:




·
            Increases
                in our cost of sales and operating expenses, negatively impacting
                our
                profit margins. Historically, we have been able to raise prices to
                partially offset cost and expenses increases. However, during periods
                of
                rapid devaluation or when the rate of devaluation significantly exceeds
                that of inflation, we may not be able to raise prices at a rate sufficient
                to offset our cost and expenses increases, or to recover such cost
                and
                expenses increases in future periods. For risk management purposes,
                we may
                decide to hedge the whole or part of our cost and expenses exposure
                in
                U.S. dollars in order to avoid short-term volatility in our results;
                and




·
            Volatility
                in our financial results, for the effects of fluctuations in exchange
                rates on our U.S. dollar transactions (i.e., cash, cash equivalents,
                short-term investments, investments abroad, loans and the unrealized
                gains
                and losses from foreign currency and interest rate swap contracts,
                among
                others) are recorded as financial income, financial expense and operating
                income (expense), net in our statements of
                operations.




We
      have
      policies designed to manage commodity and currency risks to protect our U.S.
      dollar-denominated transactions and net assets from the significant devaluations
      of the currencies in which we operate. We may enter into commodity and
      cross-currency interest rate swap contracts to offset gains or losses generated
      by our U.S. dollar denominated transactions and loans. According to Brazilian
      accounting principles, liabilities must be recorded on an accrual basis rather
      than at market value, while assets must be recorded at the lower of their market
      value or accrual value.




**Commodities
      Price Effects**




AmBev
      has
      a significant exposure to fluctuations in the price of aluminum, which increased
      by approximately 24.5% during 2006, increasing our cost of sales. For risk
      management purposes, we entered into hedging agreements during 2006, which
      had a
      negative impact on our results in 2006. Another significant exposure relates
      to
      fluctuations in the price of sugar, which decreased approximately 19.6% during
      2006.




**Taxes**




**Taxes
      on income**




Income
      taxes in Brazil are comprised of federal income tax and social contribution
      (which is an additional federal income tax). The composite statutory rate
      applicable for the year ended on December 31, 2006, 2005 and 2004 was 34%.
      For
      the years of 2006, 2005 and 2004, our Brazilian GAAP effective tax rate was
      a
      charge of 32% in 2006, a charge of 40% in 2005 and a charge of 30.5% in
      2004.




The
      major
      reasons for the differences between the effective tax rates and the Brazilian
      composite statutory rates have been: (i) benefits arising from tax-deductible
      payments of interest on shareholder’s equity without an interest charge in
      pre-tax income; (ii) certain non-deductible expenses; (iii) earnings from
      offshore companies not subject to different foreign tax rates; (iv) valuation
      allowances against net operating losses and reversals; (v) non-taxable benefits
      arising from state value-added incentive programs; (vi) amortization of goodwill
      according to Brazilian tax legislation; (vii) tax losses carryforwards; (viii)
      re-filings of tax returns following changes in interpretation of certain
      deductions; and (ix) currency fluctuations.




***Tax
      losses available for offset***




We
      had
      recorded tax loss carryforward assets available for offset of R$ 869.3 millions
      as of December 31, 2006. Income tax losses available for offset in Brazil do
      not
      expire; however, the annual offset is limited to 30% of pretax
      income.


-43-
 *Table
          of Contents*




**Year
      ended December 31, 2006 Compared with Year ended December 31,
      2005**




AmBev’s
      consolidated results are the sum of the three following business
      units:




·
            **Brazil**,
                consisting of:




·
            Beer
                Brazil;




·
            CSD
                & NANC Brazil - carbonated soft drinks and non-alcoholic,
                non-carbonated segments; and




·
            Other
                products - consists on the sale of malt and byproducts, such as malt
                spent
                grains, residual yeast from beer production and pulp from bottle
                labels.




·
            **Hispanic
                Latin America - HILA**,
                consisting of:




·
            Quinsa
                - represents AmBev’s stake in Quinsa (approximately 91% as of December 31,
                2006, yielding a consolidation of 100%), which operates in Argentina,
                Bolivia, Chile, Paraguay and Uruguay; and




·
            HILA-ex
                - represents AmBev’s other operations in Latin America, where we produce
                and sell beer (Peru, Ecuador, Guatemala, El Salvador, Nicaragua,
                Dominican
                Republic and Venezuela) and CSDs (Dominican Republic and Peru).




·
            **North
                America**,
                consisting of Labatt’s operations, including domestic sales in Canada and
                exports to the United States.






The
      following table sets forth the consolidated financial highlights of AmBev for
      the years ended December 31, 2006 and 2005:


**Consolidated
                  Financial Highlights****2005**
              
              **2004**
              
              **%
                  Change**Brazilian
                  GAAP
              
              *(R$
                  in millions, except volume amounts, percentages and per share
                  amounts)*Sales
                  volume—000 hectoliters(1)
              
              
              125,313
              
              
              108,841
              
              
              15.1
              %Net
                  sales
              
              
              15,958.6
              
              
              12,006.8
              
              
              32.9
              %Net
                  revenue per hectoliter—R$/hl
              
              
              139.4
              
              
              122.2
              
              
              14.1
              %Cost
                  of sales
              
              
              (5,742.3
              )
              
              (4,780.5
              )
              
              20.1
              %Gross
                  profit
              
              
              10,216.2
              
              
              7,226.3
              
              
              41.4
              %***Gross
                  margin (%)***
              
              
              *64.0*
              *%*
              
              *60.2*
              *%*Selling,
                  general and administrative expenses
              
              
              (4,998.4
              )
              
              (3,611.1
              )
              
              38.4
              %Provisions
                  for contingencies
              
              
              (71.5
              )
              
              (260.2
              )
              
              -72.5
              %Other
                  operating income (expenses), net
              
              
              (1,075.3
              )
              
              (420.9
              )
              
              155.5
              %Equity
                  in results of subsidiaries
              
              
              2.0
              
              
              5.6
              
              
              -64.3
              %Net
                  financial income (expenses)
              
              
              (1,086.7
              )
              
              (776.4
              )
              
              40.0
              %Operating
                  income(2)
              
              
              2,986.2
              
              
              2,163.3
              
              
              38.0
              %***Operating
                  margin (%)***
              
              
              *18.7*
              *%*
              
              *18.0*
              *%*Net
                  income
              
              
              1,545.7
              
              
              1,161.5
              
              
              33.1
              %***Net
                  margin***
              
              
              *9.7*
              *%*
              
              *9.7*
              *%****Earnings
                  per share - R$/000 shares******(3)***
              
              
              *23.65*
              
              
              *21.26*
              
              
              *11.2*
              *%*





*Amounts
      may not add due to rounding.*




(1)
            Total
                beverage sales volume combines AmBev’s own beverage volume with total
                volume in Quinsa.


(2)
            Under
                Brazilian GAAP, operating income includes net financial
                expense.


(3)
            Calculated
                based on year-end number of shares, excluding treasury shares.




-44-
 *Table
          of Contents*




**Margin
      Analysis**




The
      following table sets forth certain items in our statement of operations
      expressed as percentages of net sales for the years ended December 31, 2006
      and
      2005:




**Year
                ended December 31,****2006**
            
            **2005***(%)*
            
            *(%)*Net
                sales
            
            
            100.0
            
            
            100.0Cost
                of sales
            
            
            (33.8
            )
            
            (36.0
            )Gross
                profit
            
            
            66.2
            
            
            64.0SG&A
            
            
            (30.7
            )
            
            (31.3
            )Provision
                for contingencies
            
            
            0.6
            
            
            (0.4
            )Other
                operating income (expenses), net
            
            
            (5.4
            )
            
            (6.7
            )Net
                financial income (expenses)
            
            
            (6.1
            )
            
            (6.8
            )Operating
                income (expenses)(1)
            
            
            24.6
            
            
            18.7





(1)
            Under
                Brazilian GAAP, operating income includes net financial expense.




**Financial
      Highlights by Business Segment**




The
      following table sets forth certain financial highlights by business segment
      for
      the years ended December 31, 2006 and 2005:





**Year
                ended December 31,****2006**
            
            **2005***(R$
                in millions)***Brazil**
            
            **HILA**
            
            **North
                America**
            
            **Brazil**
            
            **HILA**
            
            **North
                America**Net
                sales
            
            
            10,963.1
            
            
            2,762.4
            
            
            3,888.2
            
            
            9,902.8
            
            
            2,080.3
            
            
            3,975.5Cost
                of sales
            
            
            (3,492.2
            )
            
            (1,266.2
            )
            
            (1,190.2
            )
            
            (3,488.9
            )
            
            (953.1
            )
            
            (1,300.3
            )Gross
                profit
            
            
            7,470.9
            
            
            1,496.2
            
            
            2,697.9
            
            
            6,413.9
            
            
            1,127.1
            
            
            2,675.2Selling,
                general and administrative expenses
            
            
            (3,038.3
            )
            
            (955.6
            )
            
            (1,414.8
            )
            
            (2,767.0
            )
            
            (764.7
            )
            
            (1,466.7
            )




***Net
      Sales***




Net
      sales
      increased by 10.4% for the year ended December 31, 2006 to R$17,613.7 million
      from R$15,958.6 million in the same period in 2005.




**Sales
                Volumes**
              **Year
                ended December 31,****2006**
            
            **2005**
            
            **2004***(Thousands
                of hectoliters, except percentages)***Brazil**
            
            
            **87,727.0**
            
            
            **65.3**
            **%**
            
            **82,743.1**
            
            
            **66.0**
            **%**
            
            **76,884.9**
            
            
            **70.7**
            **%**Beer
                Brazil
            
            
            65,654.7
            
            
            48.9
            %
            
            62,486.4
            
            
            49.9
            %
            
            57,776.8
            
            
            53.1
            %CSD
                & NANC
            
            
            22,072.3
            
            
            16.4
            %
            
            20,256.7
            
            
            16.1
            %
            
            19,108.2
            
            
            17.6
            %Other
                Products
            
            
            —
            
            
            
            
            
            —
            
            
            
            
            
            —
            
            
            —**HILA**
            
            
            **35,675.9**
            
            
            **26.5**
            **%**
            
            **31,678.6**
            
            
            **25.3**
            **%**
            
            **28,333.2**
            
            
            **26.0**
            **%**Quinsa(1)
            
            
            28,781.9
            
            
            21.4
            %
            
            24,997.5
            
            
            19.9
            %
            
            22,145.9
            
            
            20.3
            %HILA-ex
            
            
            6,894.0
            
            
            5.1
            %
            
            6,681.1
            
            
            5.4
            %
            
            6,187.2
            
            
            5.7
            %**North
                America**(2)
            
            
            **10,962.9**
            
            
            **8.2**
            **%**
            
            **10,891.6**
            
            
            **8.7**
            **%**
            
            **3,621.3**
            
            
            **3.3**
            **%****AmBev
                Consolidated**
            
            
            **134,365.8**
            
            
            **100.0**
            **%**
            
            **125,313.3**
            
            
            **100.0**
            **%**
            
            **108,839.4**
            
            
            **100.0**
            **%**





(1)
            Represents
                total Quinsa’s sale volumes.


(2)
            2004
                figures consists of the results of Labatt’s operations from August 27,
                2004 through December 31, 2004




*Source* :
      AmBev




*Brazilian
      Operations*




Net
      sales
      from our Brazilian operations increased by 10.7% for the year ended December
      31,
      2006 to R$ 10,936.1 million from R$ 9,902.8 million in the same period in 2005,
      primarily as a result of growth in beer and CSD & NANC sales.  -45-
 *Table
            of Contents*




Beer
      Brazil .
      Net
      sales of beer in Brazil increased by 11.4% for the year ended December 31,
      2006
      to R$ 9,045.0 million from R$ 8,119.1 million in the same period in 2005. This
      was due to a 5.1% increase in volumes sold as a result of an increase in the
      Brazilian beer market, and a higher market share in the period (68.8% in the
      year ended December 31, 2006 compared to 68.3% in the same period in 2005).
      Net
      sales per hectoliter increased by 6% to R$ 137.8/hl in 2006 from R$ 129.9/hl
      in
      2005, mainly as a result of a price adjustments implemented in December 2005,
      greater contribution in the sales mix from our direct sale operation and
      increase in the premium segment (our premium brands, *Bohemia* and *Original* grew
      volumes by 19.7% and 38.3% respectively).




CSD
      & NANC .
      Net
      sales increased by 9.6% for the year ended December 31, 2006 to R$ 1,806.4
      million from R$ 1,648.7 million in the same period in 2005 mainly as a result
      of
      a 9% increase in CSD & NANC volume for the year ended December 31, 2006 and
      a 0.6% increase in net sales per hectoliter for CSDs for the year ended December
      31, 2006 compared with the same period in 2005, mainly as a result of price
      adjustments implemented during 2006, greater contribution in the sales mix
      from
      our direct sale operation and higher share of multi serve package within our
      mix, which has a negative effect on net revenues per hectoliter.




Other
      Products .
      Net
      sales decreased by 17.3% for the year ended December 31, 2006 to R$ 111.6
      million from R$ 135.0 million in the same period in 2005.




*HILA
      Operations*




Net
      sales
      increased by 32.8% for the year ended December 31, 2006 to R$ 2,762.4 million
      from R$ 2,080.3 million in the same period in 2005. Quinsa’s performance and
      increased consolidation were the main reasons for such increase.




Quinsa .
      AmBev’s
      stake in Quinsa contributed R$ 2,004.3 million to our consolidated revenues,
      yielding a growth of 54.2%. The main reasons for the increased revenues were
      beer and CSDs volume growth of 9.8% and 25.5%, respectively; consolidated volume
      growth of 15.1%; reduction of 3.5% in revenues per hectoliter, reaching R$
      88.6;
      and a higher consolidation of Quinsa’s results into AmBev (as of December 31,
      2006: 100%; as of December 31, 2005: 59.2%).




HILA-ex .
      AmBev’s
      operations in HILA-ex presented a revenue decrease of 2.9% in 2006, accumulating
      R$ 758.1 million. The main reasons for the decrease were a volume growth of
      3.2%
      and a drop of 5.9% in net revenues per hectoliter, as a consequence of a
      difficult competitive scenario and appreciation of the *Real* against
      other currencies from HILA-ex countries.




*North
      America*




Labatt’s
      operations in North America contributed R $3,888.2 million to AmBev’s
      consolidated revenues, a reduction of 2.2%. This result is mainly explained
      by
      an increasing sales volume in the local market (0.6%) and export market (0.8%),
      growth of 0.6% in net revenues per hectoliters for domestic sales in Canadian
      Dollars, reduction of 4.6% in net revenues per hectoliter for export sales
      in
      Canadian Dollars and the appreciation of the *Real* against
      the Canadian Dollar.




***Cost
      of Sales***




Total
      cost of sales increased by 3.6% for the year ended December 31, 2006 to R$
      5,948.7 million from R$ 5,742.3 million in the same period in 2005.




As
      a
      percentage of our net sales, total cost of sales decreased to 33.8% in 2006
      from
      36% in 2005.




*Brazilian
      Operations*




Total
      cost of sales for our Brazilian operations increased by 0.1% for the year ended
      December 31, 2006 to R$ 3,492.2 million from R$ 3,488.9 million in the same
      period in 2005.




On
      a per
      hectoliter basis, our Brazilian operations’ cost of sales decreased by 5.6% for
      the year ended December 31, 2006 to R$ 39.8/hl from R$ 42.2/hl in the same
      period in 2005.




Beer
      Brazil .
      Cost of
      sales for our Brazilian beer operations decreased by 0.1% for the year ended
      December 31, 2006 to R$ 2,573.6 million from R$2,575.3 million in the same
      period in 2005. On a per hectoliter basis, cost of sales for our Brazilian
      Beer
      operations decreased by 4.9% for the year ended December 31, 2006, to R$ 39.2/hl
      from R$ 41.2/hl in the same period in 2005. This decrease was a result of (i)
      a
      higher dilution of the fixed costs, which was possible due to sales volume
      growth; (ii) the productivity gains and corresponding production cost decreases
      resulting from AmBev’s continuous program of manufacturing industry excellence;
      and (iii) gains from better exchange rate in the purchase of inputs that are
      sensitive to U.S. dollar fluctuation.




CSD
      & NANC .
      Cost of
      sales for our Brazilian CSD & NANC operations increased by 3.1% for the year
      ended December 31, 2006 to R$ 877.8 million from R$ 851.7 million in the same
      period in 2005. On a per hectoliter basis, cost of sales decreased 5.4% for
      the
      year ended December 31, 2006 to R$ 39.8/hl from R$ 42.0/hl in the same period
      in
      2005. Similar to the


-46-
 *Table
          of Contents*




beer
      operations, factory efficiency gains, as well as a greater dilution of
      production fixed costs, more than offset the increase in exchange rate for
      the
      purchase of raw materials.




Other
      Products .
      The
      cost of sale of other products in Brazil decreased 34.1% for the year ended
      December 31, 2006 to R$ 40.8 million from R$ 61.9 million for the same period
      in
      2005.




*HILA
      Operations*




Cost
      of
      sales for our HILA operations increased 32.9% for the year ended December 31,
      2006 to R$ 1,266.2 million from R$ 953.1 million in the same period in 2005.
      On
      a per hectoliter basis, cost of sales for our HILA operations decreased by
      6.2%
      for the year ended December 31, 2006 to R$ 42.9/hl from R$ 45.7/hl in the same
      period in 2005.




Quinsa .
      The
      consolidation of Quinsa’s cost of sales into AmBev added R$ 808.8 million in
      2006, representing a 50.7% growth. The main factors explaining this increase
      are
      (i) a 15.1% increase in the volume sold, reaching 28,782 million hectoliters
      and
      (ii) higher consolidation of Quinsa (as of December 31, 2006: 100%; as of
      December 31, 2005: 59.2%).




HILA-ex .
      The
      cost of sales in AmBev’s HILA-ex operations rose 9.8%, reaching R$ 457.4
      million. The main factor leading to this increase is a 3.2% growth in the volume
      sold, reaching 6,894 million hectoliters.




*North
      America*




Cost
      of
      sales for Labatt decreased 8.5% for the year ended December 31, 2006 to R$
      1,190.2 million from R$ 1,300.3 million in the same period in 2005. In Canadian
      Dollars, the cost of sales dropped 5.3%. The main factor contributing to such
      reduction was a 5.9% decrease in production costs per unit in Canadian
      Dollars.




***Gross
      Profit***




Gross
      profit increased by 14.2% for the year ended December 31, 2006 to R$ 11,665.0
      million from R$ 10,216.2 million in the same period in 2005. Gross margin as
      a
      percentage of sales increased to 66.2% in 2006 from 64% in 2005. The table
      below
      sets forth the contribution of each business unit to AmBev’s consolidated gross
      profit.





**Gross
                Profit****2006**
            
            **2005***(R$
                in millions, except percentages**)*Amount%
            
            
            
            **Margin**
            
            Amount%
            
            
            
            **Margin****Brazil**
            
            
            **7,470.9**
            
            
            **64.1**
            **%**
            
            **68.1**
            **%**
            
            **6,413.9**
            
            
            **62.8**
            **%**
            
            **64.8**
            **%**Beer
                Brazil
            
            
            6,471.5
            
            
            55.5
            %
            
            71.5
            %
            
            5,543.8
            
            
            54.3
            %
            
            68.3
            %CSD
                & NANC
            
            
            928.5
            
            
            8.0
            %
            
            51.4
            %
            
            797.0
            
            
            7.8
            %
            
            48.3
            %Other
                Products
            
            
            70.9
            
            
            0.6
            %
            
            63.5
            %
            
            73.1
            
            
            0.7
            %
            
            54.2
            %**HILA**
            
            
            **1,496.2**
            
            
            **12.8**
            **%**
            
            **54.2**
            **%**
            
            **1,127.1**
            
            
            **11.0**
            **%**
            
            **54.2**
            **%**Quinsa(1)
            
            
            1,195.5
            
            
            10.2
            %
            
            59.6
            %
            
            763.2
            
            
            7.5
            %
            
            58.7
            %HILA-ex
            
            
            300.7
            
            
            2.6
            %
            
            39.7
            %
            
            364.0
            
            
            3.5
            %
            
            46.6
            %**North
                America**
            
            
            **2,697.9**
            
            
            **23.1**
            **%**
            
            **69.4**
            **%**
            
            **2,675.2**
            
            
            **26.2**
            **%**
            
            **67.3**
            **%****AmBev
                Consolidated**
            
            
            **11,665.0**
            
            
            **100.0**
            **%**
            
            **66.2**
            **%**
            
            **10,216.2**
            
            
            **100.0**
            **%**
            
            **64.0**
            **%**





(1)
            Calculated
                based on our proportional share of the results of operations of Quinsa.




***Selling,
      General and Administrative Expenses***




AmBev’s
      sales, general and administrative expenses amounted to R$ 5,408.7 million for
      the year ended December 31, 2006, a 8.2% increase over the same period in 2005.
      The analysis of such expenses at each business unit is shown below.




*Brazil*




Sales,
      general and administrative expenses in Brazil amounted to R$ 3,038.3 million
      for
      the year ended December 31, 2006, an increase of 9.8% over the same period
      in
      2005.




Beer
      Brazil .
      Sales,
      general and administrative expenses reached R$ 2,549.7 million for the year
      ended December 31, 2006, climbing 9.2% over the same period in 2005. The main
      elements that resulted in the increase in such operating expenses were: the
      higher sales volume of AmBev’s direct distribution structure and a 5.1% increase
      of sales volume.


-47-
 *Table
          of Contents*




CSD
      & NANC .
      Sales,
      general and administrative expenses for the CSD & NANC segment accumulated
      R$ 485.2 million for the year ended December 31, 2006, an increase of 12.9%
      over
      the same period in 2005. The main elements that generated the increase of such
      operating expenses were: the higher sales volume of AmBev’s direct distribution
      structure and a 9.0% increase in sales volume.




Other
      Products .
      Other
      Products sales generated sales, general and administrative expenses of R$ 3.4
      million for the year ended December 31, 2006, increasing 10.1% over the same
      period in 2005.




*HILA*




Sales,
      general and administrative expenses for the HILA business unit amounted to
      R$
      955.6 million for the year ended December 31, 2006, increasing 25% over the
      same
      period in 2005. A more detailed analysis of the development of these expenses
      is
      shown below.




Quinsa .
      Sales,
      general and administrative expenses consolidated into AmBev, through its stake
      in Quinsa, accumulated R$485 million for the year ended December 31, 2006,
      increasing 49.5% over the same period in 2005. This increase is mostly explained
      by AmBev’s higher consolidation of Quinsa’s results (as of December 31, 2006:
      100%; as of December 31, 2005: 59.2%).




HILA-ex .
      Sales,
      general and administrative expenses for AmBev’s operations in HILA-ex amounted
      to R$ 470.6 million for the year ended December 31, 2006, increasing 6.9% over
      the same period in 2005.




*North
      America*




Labatt’s
      sales, general and administrative expenses amounted to R$ 1,414.8 million for
      the year ended December 31, 2006. In Canadian Dollars, sales, general and
      administrative expense were stable in comparison with 2005.




***Provisions
      for contingencies***




Provisions
      for contingencies and others recorded a gain of R$ 111.8 million for the year
      ended December 31, 2006. The main entry is a reversion of R$ 316.0 million
      related to PIS and COFINS claims. For more information about major lawsuit
      regarding this reversion, see “Legal Proceedings—Tax Matters—Value Added Tax,
      Excise Tax and Taxes on Net Sales”.




***Other
      operating income (expense), net***




The
      net
      balance of other operating income and expenses for the year ended December
      31,
      2006 represented a loss of R$ 955.1 million, 11.2% lower in relation to the
      loss
      recorded in 2005. The breakdown of the main entries is shown as follows: (i)
      a
      gain of R$ 165.4 million referring to assets increase resulting from fiscal
      incentives granted to AmBev’s subsidiaries in Brazil; (ii) a gain of R$ 79.4
      million derived from exchange rate variation on our investments abroad; (iii)
      a
      gain of R$ 39.9 million related to negative goodwill on ICMS tax incentive
      credit; (iv) a gain of R$ 24 million referring to the recovery in Brazil of
      PIS
      and COFINS tax credits; (v) an expense of R$ 971.4 million resulting from the
      goodwill amortization related to AmBev’s investment in Labatt; (vi) an expense
      of R$ 103.3 million resulting from the goodwill amortization related to AmBev’s
      investments in Quinsa; (vii) an expense of R$ 85.5 million resulting from the
      goodwill amortization related to Quinsa’s investments in Latin America; and
      (viii) an expense of R$ 122.7 million resulting from other goodwill
      amortization.




***Net
      Financial Income (Expenses)***




Our
      financial income consists of realized and unrealized gains from financial
      instruments, foreign exchange gains (losses) on investments, financial income
      on
      cash equivalents and others. Our financial expenses consist of foreign exchange
      gains (losses) on loans, realized and unrealized losses from financial
      instruments, interests and charges on loans, taxes on financial transactions,
      interest on contingencies and others.




We
      enter
      into hedging transactions to address AmBev’s Brazilian foreign currency debt
      exposure, which involve cash investments in U.S. dollar-linked assets, as well
      as the use of swaps and derivatives. As a result of Brazilian accounting
      requirements, volatility in the *Real* /U.S.
      dollar exchange rate and interest rates can cause significant variations in
      financial income and expenses.




Financial
      income for the year ended December 31, 2006 was R$ 168.4 million compared to
      financial income of R$95.3 million in the same period in 2005.




Financial
      expenses for the year ended December 31, 2006 were R$ 1,246.7 million compared
      to R$ 1,182.0 million in the same period in 2005. This difference can be
      explained by a higher debt balance.




Net
      Financial Results for the year ended December 31, 2006 were a loss of R$ 1,078.3
      million, compared to a loss of R$ 1,086.7 million in the same period of
      2005.




-48-
 *Table
          of Contents*




***Operating
      income***




Operating
      income increased by 45.2% for the year ended December 31, 2006 to R$ 4,336.1
      million from R$2,986.2 million in the same period in 2005.




***Non-Operating
      income (expense), net***




The
      net
      balance of other non-operating income and expenses resulted in a loss of R$
      28.8
      million for the year ended December 31, 2006, compared to a loss of R$ 234.3
      million in the same period in 2005. The main reason for the decrease are two
      entries that occurred in 2005 and were not verified in 2006:




(i)
            A
                loss of R$ 158.2 million related to the provision recorded for Labatt’s
                brewery shutting down in Toronto. The accrued items are the following:
                (a)
                loss of property, plant and equipment (R$ 46.7 million); (b) supplement
                for the provision of employee benefits (R$ 69.9 million); and (c)
                employee
                dismissal costs (R$ 41.6 million);
                and




(ii)
            A
                loss of R$ 65.6 million related to AmBev’s investment in Quinsa, as a
                result of the buy-back of its own shares in the market carried out
                by
                Quinsa during 2005.




***Income
      tax benefit (expense)***




Our
      consolidated income tax and social contribution for the year ended December
      31,
      2006 was a charge of R$ 1,315.3 million, up 28.9% from R$ 1,020.2 million
      in 2005. At the nominal tax rate of 34%, income tax for the year ended December
      31, 2006 would have amounted to R$ 1,398.4 million. Our effective income tax
      rate in the year ended December 31, 2006 was positively affected by the benefit
      from tax deductible distribution of interest on shareholder’s equity (R$ 500.9
      million) and negatively affected by non tax-deductible goodwill amortization
      (R$
      355 million).




***Profit
      sharing and contributions***




Provisions
      for employee and management profit sharing decreased to R$ 194.4 million for
      the
      year ended December 31, 2006 from R$ 202.8 million in the same period in 2005.
      Both in 2006 and 2005, as AmBev’s corporate goals were met, our employees were
      entitled to bonuses under our profit sharing plan. See “Directors, Senior
      Management and Employees—Compensation—Profit Sharing Plan”.




***Minority
      interest***




Minority
      shareholders in our subsidiaries shared a loss of R$ 8.7 million for the year
      ended December 31, 2006 compared to a loss of R$ 16.8 million in
      2005.




***Net
      Income***




Net
      income increased by 81.5% for the year ended December 31, 2006 to R$ 2,806.3
      million from R$ 1,545.7 million in the same period in 2005.


-49-
 *Table
          of Contents*




**Year
      ended December 31, 2005 Compared with Year ended December 31,
      2004**




AmBev’s
      consolidated results are the sum of the three following business
      units:




·
            **Brazil**,
                consisting of:




·
            Beer
                Brazil;




·
            CSD
                & NANC Brazil - carbonated soft drinks and non-alcoholic,
                non-carbonated segments; and




·
            Other
                products - consists on the sale of malt and byproducts, such as malt
                spent
                grains, residual yeast from beer production and pulp from bottle
                labels.




·
            **Hispanic
                Latin America - HILA**,
                consisting of:




·
            Quinsa
                - represents AmBev’s stake in Quinsa (59.2% as of December 31, 2005),
                which operates in Argentina, Bolivia, Chile, Paraguay and Uruguay;
                and




·
            HILA-ex
                - represents AmBev’s other operations in Latin America, where we
                distribute beer (Peru, Ecuador, Guatemala, El Salvador, Nicaragua,
                Dominican Republic and Venezuela), CSDs (Dominican Republic and Peru).




·
            **North
                America**,
                consisting of Labatt’s operations, including domestic sales in Canada and
                exports to the USA.






The
      following table sets forth the consolidated financial highlights of AmBev for
      the years ended December 31, 2005 and 2004:





**Consolidated
                Financial Highlights****2005**
            
            **2004**
            
            **%
                Change**Brazilian
                GAAP
            
            *(R$
                in millions, except volume amounts, percentages and per share
                amounts)*Sales
                volume—000 hectoliters(1)
            
            
            125,313
            
            
            108,841
            
            
            15.1Net
                sales
            
            
            15,958.6
            
            
            12,006.8
            
            
            32.9Net
                revenue per hectoliter—R$/hl
            
            
            139.4
            
            
            122.2
            
            
            14.1Cost
                of sales
            
            
            (5,742.3
            )
            
            (4,780.5
            )
            
            20.1Gross
                profit
            
            
            10,216.2
            
            
            7,226.3
            
            
            41.4***Gross
                margin (%)***
            
            
            *64.0*
            *%*
            
            *60.2*
            *%*Selling,
                general and administrative expenses
            
            
            (4,998.4
            )
            
            (3,611.1
            )
            
            38.4Provisions
                for contingencies
            
            
            (71.5
            )
            
            (260.2
            )
            
            -72.5Other
                operating income (expenses), net
            
            
            (1,075.3
            )
            
            (420.9
            )
            
            155.5Equity
                in results of subsidiaries
            
            
            2.0
            
            
            5.6
            
            
            -64.3Net
                financial income (expenses)
            
            
            (1,086.7
            )
            
            (776.4
            )
            
            40.0Operating
                income(2)
            
            
            2,986.2
            
            
            2,163.3
            
            
            38.0***Operating
                margin (%)***
            
            
            *18.7*
            *%*
            
            *18.0*
            *%*Net
                income
            
            
            1,545.7
            
            
            1,161.5
            
            
            33.1***Net
                margin***
            
            
            *9.7*
            *%*
            
            *9.7*
            *%****Earnings
                per share - R$/000 shares******(3)***
            
            
            *23.65*
            
            
            *21.26*
            
            
            *11.2*





*Amounts
      may not add due to rounding.*




(1)
            Total
                beverage sales volume combines AmBev’s own beverage volume with total
                volume in Quinsa.


(2)
            Under
                Brazilian GAAP, operating income includes net financial
                expense.


(3)
            Calculated
                based on year-end number of shares, excluding treasury shares.





-50-
 *Table
            of Contents*




**Margin
      Analysis**




The
      following table sets forth certain items in our statement of operations
      expressed as percentages of net sales for the years ended December 31, 2005
      and
      2004:




**Year
                ended December 31,****2005**
            
            **2004***(%)*
            
            *(%)*Net
                sales
            
            
            100.0
            
            
            100.0Cost
                of sales
            
            
            (36.0
            )
            
            (39.8
            )Gross
                profit
            
            
            64.0
            
            
            60.2SG&A
            
            
            (31.3
            )
            
            (30.1
            )Provision
                for contingencies
            
            
            (0.4
            )
            
            (2.2
            )Other
                operating income (expenses), net
            
            
            (6.7
            )
            
            (3.5
            )Net
                financial income (expenses)
            
            
            (6.8
            )
            
            (6.5
            )Operating
                income (expenses)(1)
            
            
            18.7
            
            
            18.0


(1)
            Under
                Brazilian GAAP, operating income includes net financial expense.




**Financial
      Highlights by Business Segment**




The
      following table sets forth certain financial highlights by business segment
      for
      the years ended December 31, 2005 and 2004:





**Year
                ended December 31,****2005**
            
            **2004***(R$
                in millions)***Brazil**
            
            **HILA**
            
            **North
                America**
            
            **Brazil**
            
            **HILA**
            
            **North
                America****(1)**Net
                sales
            
            
            9,902.8
            
            
            2,080.3
            
            
            3,975.5
            
            
            8,525.9
            
            
            1,922.1
            
            
            1,558.8Cost
                of sales
            
            
            (3,488.9
            )
            
            (953.1
            )
            
            (1,300.3
            )
            
            (3,368.6
            )
            
            (909.5
            )
            
            (502.4
            )Gross
                profit
            
            
            6,413.9
            
            
            1,127.1
            
            
            2,675.2
            
            
            5,157.3
            
            
            1,012.5
            
            
            1,056.4Selling,
                general and administrative expenses
            
            
            (2,767.0
            )
            
            (764.7
            )
            
            (1,466.7
            )
            
            (2,416.8
            )
            
            (638.4
            )
            
            (556.1
            )





(1)
            North
                America’s results reflect the consolidation of Labatt’s operating results
                since August 27, 2004.




***Net
      Sales***




Net
      sales
      increased by 32.9% for the year ended December 31, 2005 to R$ 15,958.6 million
      from R$ 12,006.8 million in the same period in 2004.




**Sales
                Volumes**
              **Year
                ended December 31,****2005**
            
            **2004**
            
            **2003***(Thousands
                of hectoliters, except percentages)***Brazil**
            
            
            **82,743.1**
            
            
            **66.0**
            **%**
            
            **76,884.9**
            
            
            **70.7**
            **%**
            
            **74,058.4**
            
            
            **78.5**
            **%**Beer
                Brazil
            
            
            62,486.4
            
            
            49.9
            %
            
            57,776.8
            
            
            53.1
            %
            
            55,260.2
            
            
            58.6
            %CSD
                & NANC
            
            
            20,256.7
            
            
            16.1
            %
            
            19,108.2
            
            
            17.6
            %
            
            18,798.3
            
            
            19.9
            %Other
                Products
            
            
            —
            
            
            
            
            
            —
            
            
            —
            
            
            —
            
            
            —**HILA**
            
            
            **31,678.6**
            
            
            **25.3**
            **%**
            
            **28,333.2**
            
            
            **26.0**
            **%**
            
            **20,301.3**
            
            
            **21.5**
            **%**Quinsa(1)
            
            
            24,997.5
            
            
            19.9
            %
            
            22,145.9
            
            
            20.3
            %
            
            18,514.6
            
            
            19.6
            %HILA-ex
            
            
            6,681.1
            
            
            5.4
            %
            
            6,187.2
            
            
            5.7
            %
            
            1,786.7
            
            
            1.9
            %**North
                America**(2)
            
            
            **10,891.6**
            
            
            **8.7**
            **%**
            
            **3,621.3**
            
            
            **3.3**
            **%**
            
            —
            
            
            —**AmBev
                Consolidated**
            
            
            **125,313.3**
            
            
            **100.0**
            **%**
            
            **108,839.4**
            
            
            **100.0**
            **%**
            
            **94,359.7**
            
            
            **100.0**
            **%**





(1)
            Represents
                total Quinsa’s sale volumes.


(2)
            2004
                net revenues consists of the results of Labatt’s operations from August
                27, 2004 through December 31, 2004.




*Source* :
      AmBev


-51-
 *Table
            of Contents*




*Brazilian
      Operations*




Net
      sales
      from our Brazilian Operations increased by 16.1% for the year ended December
      31,
      2005 to R$ 9,902.8 million from R$ 8,525.9 million in the same period in 2004,
      primarily as a result of growth in beer and CSD & NANC sales.




Beer
      Brazil .
      Net
      sales of beer in Brazil increased by 17.5% for the year ended December 31,
      2005
      to R$ 8,119.1 million from R$ 6,907.4 million in the same period in 2004. This
      was due to an 8.2% increase in volumes sold as a result of an increase in the
      Brazilian beer market, and a higher market share in the period (68.3% in the
      year ended December 31, 2005 compared to 66.2% in the same period in 2004).
      Net
      sales per hectoliter increased by 8.7% to R$ 129.9/hl in 2005 from R$ 119.6/hl
      in 2004, mainly as a result of price adjustments implemented during 2005,
      greater contribution in the sales mix from our direct sale operation and
      increase in the premium segment.




CSD
      & NANC .
      Net
      sales increased by 12.7% for the year ended December 31, 2005 to R$ 1,648.7
      million from R$ 1,462.8 million in the same period in 2004 mainly as a result
      of
      a 6% increase in CSD & NANC volume for the year ended December 31, 2005 and
      a 6.3% increase in net sales per hectoliter for CSDs for the year ended December
      31, 2005 compared with the same period in 2004, mainly as a result of price
      repositioning implemented during 2005 and greater contribution in the sales
      mix
      from our direct sales operation.




Other
      Products .
      Net
      sales decreased by 13.3% for the year ended December 31, 2005 to R$ 135.0
      million from R$ 155.8 million in the same period in 2004.




*HILA
      Operations*




Net
      sales
      increased by 8.2% for the year ended December 31, 2005 to R$ 2,080.3 million
      from R$ 1,922.1 million in the same period in 2004. Both Quinsa’s performance
      and our HILA-ex operations contributed to this result.




Quinsa .
      AmBev’s
      stake in Quinsa contributed R$ 1,299.9 million to our consolidated revenues,
      yielding a growth of 12.7%. The main reasons for the increased revenues were
      beer and CSDs volume growth of 7.1% and 26%, respectively; consolidated volume
      growth of 12.9%; growth of 10.4% in revenues per hectoliter, reaching US$ 38.2;
      and a higher AmBev stake in Quinsa’s capital (as of December 31, 2005: 59.2%; as
      of December 31, 2004: 54.8%).




HILA-ex .
      AmBev’s
      operations in HILA-ex presented a revenue increase of 1.5% in 2005, accumulating
      R$ 780.4 million. The main reasons for the increased revenue were consistent
      growth of AmBev’s operations in Venezuela; the *Brahma* launch
      in Peru and the Dominican Republic; and the first full year of Brahma sales
      in
      Ecuador. HILA-ex revenues were affected negatively by a difficult competitive
      scenario for beer in Central America and for CSDs in both Peru and Dominican
      Republic.




*North
      America*




Labatt’s
      operations in North America contributed R$ 3,975.5 million to AmBev’s
      consolidated revenues. The pro forma comparison with Labatt’s full year of 2004,
      in local currency (Canadian dollars), yielded a decrease in revenues of 1.2%.
      This result is mainly explained by Labatt’s sales volume decrease in the
      Canadian market due to higher competition from the low price segment; exports
      of
      Labatt Blue to the USA dropped, caused by intense competition from the US wine
      and liquor market, as well as imports of Mexican, European and Asian beer
      brands; and a substantial reduction in volumes of custom-made production
      contracted by Diageo USA (Guinness production in glass bottles for sale in
      the
      USA); this measure was taken by Labatt as part of its streamlining of its
      production structure, which included the shutting down of two plants in Canada
      (New Westminster and Toronto).




***Cost
      of Sales***




Total
      cost of sales increased by 20.1% for the year ended December 31, 2005 to R$
      5,742.3 million from R$ 4,780.5 million in the same period in 2004. During
      most
      of 2005 and 2004, we had currency hedge agreements in place to manage our
      exposure to variable U.S. dollar-linked costs, such as costs associated with
      aluminum cans, malt, hops, sugar and PET resin.




As
      a
      percentage of our net sales, total cost of sales decreased to 36% in 2005 from
      39.8% in 2004.




*Brazilian
      Operations*




Total
      cost of sales for our Brazilian operations increased by 3.6% for the year ended
      December 31, 2005 to R$ 3,488.9 million from R$ 3,368.6 million in the same
      period in 2004.




On
      a per
      hectoliter basis, our Brazilian operations’ cost of sales decreased by 3.6% for
      the year ended December 31, 2005 to R$ 42.2/hl from R$ 43.8/hl in the same
      period in 2004.




Beer
      Brazil .
      Cost of
      sales for our Brazilian Beer operations increased by 4.4% for the year ended
      December 31, 2005 to R$ 2,575.3 million from R$ 2,467.0 million in the same
      period in 2004. On a per hectoliter basis, cost of sales for our
      Brazilian


-52-
 *Table
          of Contents*




Beer
      operations decreased by 3.5% for the year ended December 31, 2005, to R$ 41.2/hl
      from R$ 42.7/hl in the same period in 2004. This decrease was a result of (i)
      a
      higher dilution of the fixed costs, which was possible due to sales volume
      growth and (ii) the productivity gains and corresponding production cost
      decreases resulting from AmBev’s continuous program of manufacturing industry
      excellence which more than offset the 2.7% increase in the effective exchange
      rate used by AmBev in the purchase of inputs that are sensitive to U.S. dollar
      fluctuation (the average exchange rate in 2005 was R$ 3.02/U.S.$, compared
      to R$
      2.94/U.S.$ in 2004).




CSD
      & NANC .
      Cost of
      sales for our Brazilian CSD & NANC operations increased by 3.8% for the year
      ended December 31, 2005 to R$ 851.7 million from R$ 820.5 million in the same
      period in 2004. On a per hectoliter basis, cost of sales decreased 2.1% for
      the
      year ended December 31, 2005 to R$ 42/hl from R$ 42.9/hl in the same period
      in
      2004. Similar to the beer operations, factory efficiency gains, as well as
      a
      greater dilution of production fixed costs, more than offset the increase in
      exchange rate for the purchase of raw materials.




Other
      Products .
      The
      cost of sale of Others Products in Brazil decreased 23.7% for the year ended
      December 31, 2005 to R$61.9 million from R$81.1 million for the same period
      in
      2004.




*HILA
      Operations*




Cost
      of
      sales for our HILA operations increased 4.8% for the year ended December 31,
      2005 to R$ 953.1 million from R$ 909.5 million in the same period in 2004.
      On a
      per hectoliter basis, cost of sales for our HILA operations decreased by 10.7%
      for the year ended December 31, 2005 to R$ 45.7/hl from R$ 51.2/hl in the same
      period in 2004.




Quinsa .
      The
      consolidation of Quinsa’s cost of sales into AmBev accumulated R$ 536.7 million
      in 2005, representing a 5.2% growth. The main factors explaining this increase
      are (i) a 12.9% increase in the volume sold, reaching 24,997 million hectoliters
      and (ii) AmBev’s increased stake in Quinsa’s capital (as of December 31, 2005:
      59.2%; as of December 31, 2004: 54.8%).




HILA-ex .
      The
      cost of sales in AmBev’s HILA-ex operations rose 4.3%, reaching R$ 416.4
      million. The main factor leading to this increase is an 8% growth in the volume
      sold, reaching 6,681 million hectoliters.




*North
      America*




Labatt’s
      cost of goods sold recorded R$ 1,300.3 million for the year ended December
      31,
      2005. The pro forma comparison, in local currency, with Labatt’s results for the
      year ended December 31, 2004 shows a decrease in the cost of goods sold of
      6.5%.
      The main factor contributing to such reduction was a 2.9% decrease in production
      costs per unit.




***Gross
      Profit***




Gross
      profit increased by 41.4% for the year ended December 31, 2005 to R$ 10,216.2
      million from R$ 7,226.3 million in the same period in 2004. Gross margin as
      a
      percentage of sales increased to 64% in 2005 from 60.2% in 2004. The table
      below
      sets forth the contribution of each business unit to AmBev’s consolidated gross
      profit.





**Gross
                Profit****2005**
            
            **2004***(R$
                in millions, except percentages**)*Amount%
            
            
            
            **Margin**
            
            Amount%
            
            
            
            **Margin****Brazil**
            
            
            **6,413.9**
            
            
            **62.8**
            **%**
            
            **64.8**
            **%**
            
            **5,157.3**
            
            
            **71.4**
            **%**
            
            **60.5**
            **%**Beer
                Brazil
            
            
            5,543.8
            
            
            54.3
            %
            
            68.3
            %
            
            4,440.3
            
            
            61.5
            %
            
            64.3
            %CSD
                & NANC
            
            
            797.0
            
            
            7.8
            %
            
            48.3
            %
            
            642.2
            
            
            8.9
            %
            
            43.9
            %Other
                Products
            
            
            73.1
            
            
            0.7
            %
            
            54.2
            %
            
            74.7
            
            
            1.0
            %
            
            48.0
            %**HILA**
            
            
            **1,127.1**
            
            
            **11.0**
            **%**
            
            **54.2**
            **%**
            
            **1,012.5**
            
            
            **14.0**
            **%**
            
            **52.7**
            **%**Quinsa(1)
            
            
            763.2
            
            
            7.5
            %
            
            58.7
            %
            
            642.7
            
            
            8.9
            %
            
            55.7
            %HILA-ex
            
            
            364.0
            
            
            3.5
            %
            
            46.6
            %
            
            369.9
            
            
            5.1
            %
            
            48.1
            %**North
                America**(2)
            
            
            **2,675.2**
            
            
            **26.2**
            **%**
            
            **67.3**
            **%**
            
            **1,056.4**
            
            
            **14.6**
            **%**
            
            **67.8**
            **%****AmBev
                Consolidated**
            
            
            **10,216.2**
            
            
            **100.0**
            **%**
            
            **64.0**
            **%**
            
            **7,226.3**
            
            
            **100.0**
            **%**
            
            **60.2**
            **%**





(1)
            Calculated
                based on our proportional share of the results of operations of Quinsa.


(2)
            2004
                net revenues consists of the results of Labatt’s operations from August
                27, 2004 through December 31, 2004.




***Selling,
      General and Administrative Expenses***




In
      2005,
      AmBev revised how it reports its selling, general and administrative expenses,
      no longer providing the breakdown of: (i) selling and marketing; (ii) direct
      distribution; and (iii) general and administrative expenses.
      Accordingly,


-53-
 *Table
          of Contents*




AmBev’s
      sales, general and administrative expenses amounted to R$ 4,998.4 million
      for the year ended December 31, 2005, a 38.4% increase over the same period
      in
      2004. The analysis of such expenses at each business unit is shown
      below.




*Brazil*




Sales,
      general and administrative expenses in Brazil amounted to R$ 2,766.9
      million for the year ended December 31, 2005, an increase of 14.5% over the
      same
      period in 2004.




Beer
      Brazil .
      Sales,
      general and administrative expenses reached R$ 2,334.1 million for the year
      ended December 31, 2005, climbing 13.4% over the same period in 2004. The main
      elements that resulted in the increase in such operating expenses were: (i)
      the
      higher sales volume of AmBev’s direct distribution structure; and (ii) an
      increase in AmBev’s billing to some clients, which we maintain agreements with,
      referring to a proportional contribution of funds in trading
      activities.




CSD
      & NANC .
      Sales,
      general and administrative expenses for the CSD & NANC segment accumulated
      R$ 429.8 million for the year ended December 31, 2005, an increase of 20.8%
      over the same period in 2004. The main elements that generated the increase
      of
      such operating expenses were: (i) higher sales volume through AmBev’s direct
      distribution structure; and (ii) planned and significant increase in sales
      and
      marketing budget for CSD & NANC in 2005, offsetting 2004 budgetary
      restrictions, a year in which the absolute priority for AmBev’s Brazilian
      operations was to recover its beer market share.




Other
      Products .
      Other
      Products sales generated sales, general and administrative expenses of R$ 3.1
      million for the year ended December 31, 2005, increasing 7.5% over the same
      period in 2004.




*HILA*




Sales,
      general and administrative expenses for the HILA business unit amounted to
      R$
      764.7 million for the year ended December 31, 2005, increasing 19.8% over the
      same period in 2004. A more detailed analysis of the development of these
      expenses is shown below.




Quinsa .
      Sales,
      general and administrative expenses consolidated into AmBev, through its stake
      in Quinsa, accumulated R$ 324.4 million for the year ended December 31, 2005,
      increasing 6.9% over the same period in 2004. This increase is mostly explained
      by AmBev’s higher stake in Quinsa’s capital (as of December 31, 2005: 59.2%; as
      of December 31, 2004: 54.8%).




HILA-ex .
      Sales,
      general and administrative expenses for AmBev’s operations in HILA-ex amounted
      to R$ 440.4 million for the year ended December 31, 2005, increasing 31.5%
      over
      the same period in 2004. The main reason for higher expenses was expenditures
      related to *Brahma* ’s
      launch
      in Peru and the Dominican Republic, both in promotion and
      distribution.




*North
      America*




Labatt’s
      sales, general and administrative expenses amounted to R$ 1,466.7 million for
      the year ended December 31, 2005. The pro forma comparison in local currency
      with Labatt results in 2004 presented a decrease of 6.3% for such expenses,
      driven primarily by successful initiatives to reduce expenditures implemented
      by
      AmBev throughout the year.




***Provisions
      for contingencies***




Net
      expenses with provisions for contingencies and others recorded R$ 71.5 million
      for the year ended December 31, 2005. The main entries that comprise this total
      are (i) a provision of R$ 113.3 million related to labor claims and (ii) a
      reversal of R$ 56.3 million related to ICMS and IPI tax claims.




***Other
      operating income (expense), net***




The
      net
      balance of other operating income and expenses for the year ended December
      31,
      2005 represented a loss of R$ 1,075.3 million, 155.5% higher in relation to
      the
      loss recorded in 2004. The breakdown of the main entries is shown as follows:
      (i) a gain of R$ 151.8 million referring to assets increase resulting from
      fiscal incentives granted to AmBev’s subsidiaries in Brazil; (ii) a gain of R$
      52.2 million referring to the recovery in Brazil of PIS and COFINS tax credits;
      (iii) an expense of R$ 923.5 million resulting from the goodwill amortization
      related to AmBev’s investment in Labatt; (iv) an expense of R$ 184.3 million
      derived from the goodwill amortization related to Labatt’s investments in North
      America; (v) an expense of R$ 164.6 million resulting from the goodwill
      amortization related to AmBev’s investments in Latin America; and (vi) an
      expense of R$ 74.1 million derived from exchange rate variation on our
      investments abroad.


-54-
 *Table
          of Contents*




***Net
      Financial Income (Expenses)***




Our
      financial income consists of realized and unrealized gains from financial
      instruments, foreign exchange gains (losses) on investments, financial income
      on
      cash equivalents and others. Our financial expenses consist of foreign exchange
      gains (losses) on loans, realized and unrealized losses from financial
      instruments, interests and charges on loans, taxes on financial transactions,
      interest on contingencies and others.




We
      enter
      into hedging transactions to address AmBev’s Brazilian foreign currency debt
      exposure, which involve cash investments in U.S. dollar-linked assets, as well
      as the use of swaps and derivatives. As a result of Brazilian accounting
      requirements, volatility in the *Real* /U.S.
      dollar exchange rate and interest rates can cause significant variations in
      financial income and expenses.




In
      2005,
      AmBev revised how it reports its financial income and financial losses to better
      reflect the actual effect of each financial instrument. The new reports create
      no changes on Net Financial Results.




Financial
      income for the year ended December 31, 2005 was R$ 95.3 compared to
      financial income of R$ 468.5 million in the same period in 2004.




Financial
      expenses for the year ended December 31, 2005 were R$ 1,182.0 million
      compared to R$ 1,244.9 million in the same period in 2004. This difference
      can
      be explained by a higher debt balance.




Net
      Financial Results for the year ended December 31, 2005 were a loss of R$ 1,086.7
      million, compared to a loss of R$ 776.3 million in the same period of
      2004.




***Operating
      income***




Operating
      income increased by 29.9% for the year ended December 31, 2005 to
      R$ 2,986.2 million from R$ 2,163.3 million in the same period in 2004.




***Non-Operating
      income (expense), net***




The
      net
      balance of other non-operating income and expenses resulted in a loss of R$
      234.3 million for the year ended December 31, 2005, compared to a loss of R$
      333.8 million in the same period in 2004. The breakdown of the main entries
      is
      the following:




(i)
      A
      loss of R$ 158.2 million related to the provision recorded for Labatt’s brewery
      shutting down in Toronto. The accrued items are the following: (a) loss of
      property, plant and equipment (R$ 46.7 million); (b) supplement for the
      provision of employees benefits (R$ 69.9 million); and (c) employee dismissal
      costs (R$ 41.6 million); and




(ii)
      A
      loss of R$ 65.6 million related to AmBev’s investment in Quinsa, as a result of
      the buy-back of its own shares in the market carried out by Quinsa during
      2005.




***Income
      tax benefit (expense)***




Our
      consolidated income tax and social contribution for the year ended December
      31,
      2004 was a charge of R$ 1,020.2 million, up 99.4% from R$ 511.7 million in
      2004. At the nominal tax rate of 34%, income tax for the year ended December
      31,
      2004 would have amounted to R$ 866.7 million. Our effective income tax rate
      in the year ended December 31, 2004 was positively affected by the benefit
      from
      tax deductible distribution of interest on shareholder’s equity (R$ 253 million)
      and negatively affected by (i) non-taxable equity gains attributable to
      subsidiaries (R$ 174.1 million) and (ii) non tax-deductible goodwill
      amortization (R$ 211.4 million).




***Profit
      sharing and contributions***




Provisions
      for employee and management profit sharing increased to R$ 202.8 million for
      the
      year ended December 31, 2005 from R$ 152.4 million in the same period in 2004.
      Both in 2005 and 2004, as AmBev’s corporate goals were met, our employees were
      entitled to bonuses under our profit sharing plan. See “Directors, Senior
      Management and Employees—Compensation—Profit Sharing Plan”.




***Minority
      interest***




Minority
      shareholders in our subsidiaries shared a loss of R$ 16.8 million for the year
      ended December 31, 2005 compared to gains of R$ 3.8 million in
      2004.


-55-
 *Table
          of Contents*




***Net
      Income***




Net
      income increased by 33.1% for the year ended December 31, 2005 to R$ 1,545.7
      million from R$ 1,161.5 million in the same period in 2004.




**B.**
            **Liquidity
                and Capital Resources**




The
      information in this section refers to the years 2006, 2005 and 2004. Our primary
      sources of liquidity have historically been cash flows from operating activities
      and borrowings. Our material cash requirements have included the
      following:




·
            The
                servicing of our indebtedness;




·
            Capital
                expenditures;




·
            Our
                share buyback program;




·
            Payments
                of dividends and interest on shareholders’ equity;




·
            Increases
                in ownership of our subsidiaries or companies in which we have equity
                investments; and




·
            Investments
                in companies participating in the brewing, CSD and malting
                industries.






Our
      cash
      and cash equivalents and short-term investments at December 31, 2006, 2005,
      and
      2004 were R$ 1,765 million, R$1,096.3 million, and R$1,505.4 million,
      respectively. The increase in the amount in our cash position at the end of
      2006
      compared to the end of 2005 was mainly increasing indebtedness and stronger
      cash
      flow from operations.




In
      connection with the Quinsa transaction, as described in the section “History and
      development of the Company —Interest in Quinsa”, announced on April 13, 2006, we
      raised debt in *Reais* by
      issuing approximately R$2,065 million in debentures on August 3, 2006. See
      “Liquidity and Capital Resources —Borrowings” and “Material Contracts - Debt
      Issuance”.




We
      believe that cash flows from operating activities, available cash and cash
      equivalents and short-term investments, 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***




Our
      cash
      flows from operating activities increased 44.2% to R$ 5,985.3 million for the
      year ended December 31, 2006 from R$ 4,149.5 million for the same period in
      2005
      due to operational growth in our Brazilian, HILA and North American
      operations.




Our
      cash
      flows from operating activities increased 21.4% to R$ 4,149.5 million for the
      year ended December 31, 2005 from R$ 3,418.6 million for the same period in
      2004
      due to operational growth in our Brazilian and HILA operations, as well as
      the
      inclusion of a full twelve months of cash flows from our North American
      operations, as opposed to only four months of cash flows in 2004.




***Investing
      activities***




Cash
      flows used in our investing activities for the year ended December 31, 2006
      totaled R$ 3,785.3 million, compared to cash flows generated in investing
      activities of R$ 1,619.3 million for the same period in 2005. This was due
      mainly to (i) acquisition of fixed assets and (ii) investment in
      Quinsa.




Cash
      flows used in our investing activities for the year ended December 31, 2005
      totaled R$ 1,619.3 million, compared to cash flows generated in investing
      activities of R$ 110.7 million for the same period in 2004. This was due mainly
      to (i) acquisition of fixed assets and (ii) our decision to reduce our positions
      in securities in 2004.




***Financing
      activities***




Cash
      flows used in financing activities for the year ended December 31, 2006 amounted
      to R$ 1,468.6 million compared to R$ 2,973.9 million for the same period in
      2005. This was principally due to dividend payments and share buybacks. Cash
      flows used in financing activities for the year ended December 31, 2005 amounted
      to R$ 2,973.9 million compared to R$ 3,433.9 million for the same period in
      2004. This was also mainly due to dividend payments and share
      buybacks.


-56-
 *Table
          of Contents*




As
      of
      December 31, 2006, our outstanding debt totaled R$ 9,566.6 million (of which
      R$
      2,104.6 million was short-term debt). Our debt consisted of R$ 3,578.7 million
      of *Real* -denominated
      debt and R$ 5,987.9 million of foreign currency-denominated debt.




The
      table
      below shows the profile of our debt instruments:


**AmBev’s
                  Profile as of December 31, 2006****Debt
                  Instruments**
              
              **2007**
              
              **2008**
              
              **2009**
              
              **2010**
              
              **2011**
              
              **There-after**
              
              **Total***(R$
                  in millions, except percentages)***U.S.
                  Dollar Denominated Debt Fixed Rate**Notional
                  Amount
              
              
              317.0
              
              
              
              
              
              
              
              
              
              
              
              1,069,0
              
              
              1,069,0
              
              
              2,455.0Average
                  Pay Rate
              
              
              2.01
              %
              
              
              
              
              
              
              
              
              
              
              10.50
              %
              
              8.75
              %
              
              9.42
              %**BNDES
                  Currency Basket Debt Floating Rate**Currency
                  Basket Denominated Debt Floating Rate
              
              
              31.3
              
              
              23.4
              
              
              10.9
              
              
              10.2
              
              
              0.9
              
              
              
              
              
              76.7UMBNDES
                  + Average Pay Rate
              
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %**Yen
                  Denominated Debt Fixed Rate**Notional
                  Amount
              
              
              622.0
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              622.0Average
                  Pay Rate
              
              
              3.68
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3.68
              %**International
                  Debt**U.S.
                  Dollar Denominated Debt Fixed Rate
              
              
              345.6
              
              
              382.0
              
              
              3.0
              
              
              26.6
              
              
              0.4
              
              
              320.7
              
              
              1,078.4Average
                  Pay Rate
              
              
              6.81
              %
              
              6.61
              %
              
              5.59
              %
              
              7.27
              %
              
              5.52
              %
              
              7.27
              %
              
              6.89
              %**International
                  Debt**Reais
                  Denominated DebtFixed Rate
              
              
              63.8
              
              
              
              
              
              
              
              
              
              
              
              619.5
              
              
              
              
              
              683.3Average
                  Pay Rate
              
              
              15.88
              %
              
              
              
              
              
              
              
              
              
              
              15.88
              %
              
              
              
              
              15.88
              %**International
                  Debt**CAN
                  Dollar Denominated Debt Fixed Rate
              
              
              16.0
              
              
              91.8
              
              
              
              
              
              
              
              
              768.8
              
              
              
              
              
              876.6Average
                  Pay Rate
              
              
              5.71
              %
              
              6.07
              %
              
              
              
              
              
              
              
              5.29
              %
              
              
              
              
              5.37
              %**International
                  Debt**Other
                  Latin American Currency Denominated
                Fixed
                  Rate
              
              
              372.4
              
              
              194.2
              
              
              68.6
              
              
              100.4
              
              
              101.0
              
              
              42.7
              
              
              879.3Average
                  Pay Rate
              
              
              9.60
              %
              
              8.69
              %
              
              7.20
              %
              
              6.92
              %
              
              8.54
              %
              
              11.44
              %
              
              8.82
              %**Reais
                  Denominated Debt Floating Rate—TJLP**Notional
                  Amount
              
              
              167.1
              
              
              155.4
              
              
              92.7
              
              
              79.2
              
              
              4.4
              
              
              
              
              
              498.8TJLP
                  + Average Pay Rate
              
              
              3.45
              %
              
              3.45
              %
              
              3.45
              %
              
              3.45
              %
              
              3.45
              %
              
              
              
              
              3.45
              %**Reais
                  Debt—ICMS Fixed Rate**Notional
                  Amount
              
              
              103.6
              
              
              4.3
              
              
              
              
              
              
              
              
              
              
              
              157.6
              
              
              265.5Average
                  Pay Rate
              
              
              4.55
              %
              
              4.55
              %
              
              
              
              
              
              
              
              
              
              
              4.55
              %
              
              4.55
              %**Reais
                  Debt—Debêntures Floating Rate - CDI**Notional
                  Amount
              
              
              65.9
              
              
              
              
              
              817.1
              
              
              
              
              
              
              
              
              1,248.0
              
              
              2,131.0Average
                  Pay Rate %CDI
              
              
              102.2
              %
              
              
              
              
              101.8
              %
              
              
              
              
              
              
              
              102.5
              %
              
              102.2
              %**Total**
              
              
              **2,104.6**
              
              
              **851.3**
              
              
              **992.3**
              
              
              **216.4**
              
              
              **2,564.0**
              
              
              **2,838.0**
              
              
              **9,566.6**


As
      of
      December 31, 2005, our outstanding debt totaled R$ 7,203.6 million (of which
      R$
      1,209.4 million was short-term debt). Our debt consisted of R $794.7 million
      of *Real* -denominated
      debt and R$ 6,408.9 million of foreign currency-denominated debt.




As
      of
      December 31, 2004, our outstanding debt totaled R$ 7,810.7 million (of which
      R$
      3,443.1 million was short-term debt, including R$ 1,289.3 million of the current
      portion of long-term debt). Our debt consisted of R$ 1,000.9 million of *Real* -denominated
      debt and R$ 6,809.8 million of foreign currency-denominated debt.




***Restrictions
      on the transfer of funds from subsidiaries***




Certain
      of Labatt’s debt agreements contain clauses that restrict the transfer of funds
      to related companies, including AmBev. Under the terms of these agreements,
      Labatt may not distribute cash in the following situations:




(i)  If
      the
      Leverage Ratio (aggregate indebtedness to EBITDA) exceeds 3 to 1 after such
      payment; or




(ii)  Payments
      exceed 100% of accumulated net income, excluding extraordinary gains and losses,
      and unusual or non-recurring items from April 1, 2004.




Labatt’s
      current leverage ratio does not exceed 3 to 1. We do not expect these
      restrictions to affect our ability to meet our cash
      obligations.


-57-
 *Table
          of Contents*




***Borrowings***




Most
      of
      our borrowings are for general use, based upon strategic capital structure
      concerns. Although seasonal factors affect the business, they have little effect
      on our borrowing requirements. We are linked to different interest rates, the
      most relevant being fixed - for the 2011 notes and 2013 notes, TJLP for BNDES
      loans and Canadian Banker’s acceptance for Canadian Debt. For further
      information, please refer to Note 9 of our Consolidated Financial Statements.
      The following tables set forth our net debt consolidated position as of December
      31, 2006, 2005 and 2004:





**Net
                Debt Consolidated Position****2006**
            
            **2005**
            
            **2004****LC****(1)**
            
            **FC****(2)**
            
            **Total**
            
            **LC****(1)**
            
            **FC****(2)**
            
            **Total**
            
            **LC****(1)**
            
            **FC****(2)**
            
            **Total***(R$
                in million)*Short-term
                debt(3)
            
            
            400.4
            
            
            1,704.2
            
            
            2,104.6
            
            
            195.1
            
            
            1,014.3
            
            
            1,209.4
            
            
            503.2
            
            
            2,939.9
            
            
            3,443.1Long-term
                debt
            
            
            3,178.3
            
            
            4,283.7
            
            
            7,462.0
            
            
            599.6
            
            
            5,394.6
            
            
            5,994.2
            
            
            497.7
            
            
            3,869.9
            
            
            4,367.6Total
            
            
            3,578.7
            
            
            5,987.9
            
            
            9,566.6
            
            
            794.7
            
            
            6,408.9
            
            
            7,203.6
            
            
            1,000.9
            
            
            6,809.8
            
            
            7,810.7Cash
                and equivalents
            
            
            
            
            
            
            
            
            1,765.0
            
            
            
            
            
            
            
            
            1,096.3
            
            
            
            
            
            
            
            
            1,505.4Net
                Debt
            
            
            
            
            
            
            
            
            7,801.6
            
            
            
            
            
            
            
            
            6,107.3
            
            
            
            
            
            
            
            
            6,305.3





*Amounts
      may not add due to rounding.*




(1)
            LC
                = Local Currency.


(2)
            FC
                = Foreign Currency.


(3)
            Includes
                the current portion of long-term debt.




***Short-term
      debt***




As
      of
      December 31, 2006, our short-term debt totaled R$ 2,104.6 million, 80.1% of
      which was denominated in foreign currencies. As of December 31, 2005, our
      short-term debt totaled R$ 1,209.4 million, 83.7% of which was denominated
      in
      foreign currencies. As of December 31, 2004, our short-term debt totaled R$
      3,443.1 million, 86.7% of which was denominated in foreign currencies.




***Long-term
      Debt***




As
      of
      December 31, 2006, our long-term debt, excluding the current portion of
      long-term debt, totaled R$ 7,462.0 million, of which R$ 3,178.3 million was
      denominated in *Reais* .
      As of
      December 31, 2005, our long-term debt, excluding the current portion of
      long-term debt, totaled R$ 5,994.2 million, of which R$ 599.6 million was
      denominated in *Reais* .
      As of
      December 31, 2004, our long-term debt, excluding the current portion of
      long-term debt, totaled R$ 4,367.6 million, of which R$ 497.7 million was
      denominated in *Reais* .
      In all
      three cases, the remainder was denominated primarily in U.S.
      dollars.




**Long
                Term**
              **Debt
                Maturity****(1)**2008
            
            
            851.22009
            
            
            992.32010
            
            
            216.52011
            
            
            2,564.02012
            
            
            1,610.02013
            
            
            1,070.42014
                and later
            
            
            157.6**Total**
            
            
            **7,462.0**





*Amounts
      may not add due to rounding.*




(1)
            Excludes
                the current portion of long-term
                debt.




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 “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.




In
      December 2001, CBB issued U.S.$500 million 10.5% Notes due 2011, fully
      guaranteed by AmBev. This offering significantly increased the average maturity
      of our outstanding debt. In October 2002, we completed a SEC registered exchange
      offer for these notes. These notes contain certain covenants and events of
      default which, if triggered, cause accelerated amortization. In September 2003,
      CBB issued U.S.$500 million 8.75% Notes due 2013, fully guaranteed by AmBev.
      These notes also contain certain covenants and events of default which, if
      triggered, cause accelerated amortization. In September 2004,
      we


-58-
 *Table
          of Contents*




completed
      a SEC registered exchange offer for these notes. In both cases, the proceeds
      the
      notes issued were used principally to repay short-term debt, but also to finance
      part of AmBev’s capital expenditure program, and also for general corporate
      purposes. In May 2005, upon the completion of the merger of CBB into AmBev,
      AmBev became the successor to CBB under the indentures governing both the 2011
      notes and the 2013 notes. Neither of these notes have any financial covenants
      that might limit AmBev’s ability to take on additional debt.




On
      June
      8, 2006, our Board of Directors approved a public offering of debentures
      denominated in *Reais* in the
      Brazilian market of up to R$ 2,600 million. The issuance was registered with
      the
      CVM and its final amount was approximately R$ 2,065 million. Proceeds of such
      issuance, which closed on August 3, 2006, were used totally to finance the
      purchase of shares in Quinsa. See “History and Development of the Company
—Interest on Quinsa” and “Capital Investment Program”.




As
      of
      December 31, 2006, our local currency long-term debt borrowings consisted
      primarily of the debentures issued for the purchase of shares in Quinsa.
      Long-term local currency also includes long-term plant expansion and other
      loans
      from governmental agencies including the Brazilian Economic and Social
      Development Bank (“BNDES”), and BNDES programs, including the Fund for Financing
      the Acquisition of Industrial Machinery and Equipment (“FINAME”), and the
      Financing Fund for Studies and Projects (“FINEP”).




A
      substantial portion of the financings incurred by Quinsa’s subsidiaries in
      Argentina is denominated in U.S. dollars. The devaluation of the Argentine
      Peso
      and the economic crisis in Argentina, mainly in 2002, restricted the ability
      of
      these subsidiaries to generate sufficient cash flows to meet the obligations
      falling due on the dates originally determined for liabilities denominated
      in
      foreign currency. The management of Quinsa and its subsidiaries renegotiated
      the
      maturity terms with financial institutions.


As
        of
        December 31, 2004, we reclassified approximately U.S.$ 4.7 million of Quinsa’s
        long-term debt, with respect to which Quinsa was not in compliance with certain
        covenants, to current liabilities. At December 31, 2003, Quinsa was in default
        of certain loan covenants. Quinsa’s management concluded the process of
        renegotiating the terms of the affected loans and Quinsa is no longer in
        default
        of any loan covenants.




***Secured
      debt***




Certain
      loans, provided by BNDES and FINEP, are secured by some of our facilities and
      some of our equipment (mainly refrigerators).




***Sales
      tax deferrals and other tax credits***




We
      currently participate in several programs by which a portion of payments of
      ICMS
      tax due from sales generated by specific production facilities are deferred
      for
      periods of generally five years from their original due date. The total amount
      deferred as of December 31, 2006, including ICMS financing, was R$ 687.7
      million, as disclosed in Note 11 to our financial statements. Percentages
      deferred typically range from 40% to 100% 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 amount
      of
      sales taxes deferred as of December 31, 2006, R$ 422.2 million, included a
      current portion of R$ 16.5 million (classified under other taxes and
      contributions payable), and R$ 405.7 million payable thereafter. The remaining
      R$ 265.5 million relates to ICMS financing. We also participate in ICMS
      value-added tax credit programs offered by various Brazilian states which
      provide tax credits to offset ICMS value-added tax payable. In return, we are
      committed to meeting certain operational requirements including, depending
      on
      the state, production volume and employment targets, among others. The grants
      are received over the lives of the respective programs. In the years ended
      December 31, 2006 and 2005, we recorded R$ 165.4 million and R$ 151.8 million,
      respectively, of tax credits as gains on tax incentive programs. The benefits
      granted are not subject to withdrawal in the event that we do not meet the
      program’s targets; however, future benefits may be withdrawn.




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. While there has been no decisions by the Brazilian Supreme
      Court declaring any such state laws unconstitutional, no assurance can be given
      that the above sales tax deferrals and tax credit programs would not be
      suspended in the future as a result of an adverse decision of the Brazilian
      Supreme Court. Furthermore, we received in October 2006 and May 2007 two tax
      assessments from the State of São Paulo in the aggregate amount of approximately
      R$ 23 million, challenging the legality of tax credits arising from an existing
      tax incentive of the Company in the State of Santa Catarina. We have treated
      this proceeding as a possible (but not probable) loss. Such estimate is based
      on
      reasonable assumptions and assessments of external counsel but should we lose
      such proceedings the net impact on our statement of operations would be an
      expense for this amount. Nevertheless, we have discontinued the use of the
      tax
      incentive subject to the challenge, in connection with transfers to the State
      of
      São Paulo. Moreover, we cannot rule out the possibility of other Brazilian
      states issuing similar tax assessments related to the Company’s tax incentive
      granted by the State of Santa Catarina.


-59-
 *Table
          of Contents*


***Capital
      Investment Program***




In
      2006,
      consolidated capital expenditures on property, plant and equipment totaled
      R$
      1,425.7 million consisting of R$ 979.3 million in Brazil and HILA-ex, R$ 265.4
      million related to our proportional consolidation of Quinsa and R$ 181 million
      related to investments in North America. These expenditures primarily included
      investments in quality controls, automation, modernization and replacement
      of
      packaging lines, warehousing for direct distribution, coolers, expenditures
      for
      the replacement of bottles and crates, and continued investments in information
      technology.




In
      2005,
      consolidated capital expenditures on property, plant and equipment totaled
      R$
      1,369.5 million consisting of R$ 924.1 million in Brazil and HILA-ex, R$ 166.6
      million related to our proportional consolidation of Quinsa and R$ 278.8 million
      related to the investments in North America. These expenditures primarily also
      included investments in quality controls, automation, modernization and
      replacement of packaging lines, warehousing for direct distribution, coolers,
      expenditures for the replacement of bottles and crates, and continued
      investments in information technology.




As
      of
      December 31, 2004, our investments in subsidiaries and affiliates, including
      acquisitions of intangible assets net of cash, totaled R$ 170.2 million. These
      investments are primarily related to the acquisition of our economic interest
      in
      Embodom (currently AmBevDominicana).




We
      continually evaluate possible acquisitions, products and technologies that
      are
      complementary to our business and any such acquisitions or investments may
      be
      financed with additional debt and/or cash flow, which has been the case
      historically. For instance, we invested approximately U.S.$50 million in the
      Dominican Republic, including the acquisition of 51% of the capital of
      AmBevDominicana that included a CSD facility and distribution network, as well
      as the construction of a beer facility in Santo Domingo. We also built a brewery
      in Peru, with total investments amounting to approximately U.S.$38.4 million
      including production facilities, working capital and pre-operating
      expenses.




On
      April
      13, 2006 AmBev announced that it has entered into an agreement with BAC pursuant
      to which BAC has agreed to sell all its remaining shares in Quinsa to AmBev.
      The
      acquisition closed on August 8, 2006 and was financed through a mix of internal
      and external sources, a combination of cash flow and the issuance of debt in
      the
      local market. See “Liquidity and Capital Resources —Borrowings” and “Material
      Contracts - Debt Issuance”. With the closing of the transaction, AmBev’s equity
      interest in Quinsa increased from approximately 56% to approximatel 91% of
      its
      total share capital. The adjusted price paid to BAC was approximately
      U.S.$1,252.5 million. See “Information on the Company—History and Development of
      the Company—Interest in Quinsa”.




Also
      in
      2006 we have started the construction of a glass bottle producing facility
      in
      Rio de Janeiro, which will be ready in the second half of 2007. The new unit
      will have an yearly production capacity of 100,000 tons of glass, approximately
      450 million bottles. The investment for the plant is expected to be
      approximately R$ 160 million (U.S.$ 80 million).




On
      February 1, 2007, AmBev announced that its subsidiary Labatt had entered into
      a
      Support Agreement with Lakeport. Under this agreement, Labatt agreed to offer
      a
      price of C$28.00 per unit of Lakeport for a total value of C$ 201.4 million.
      Upon closing of the transaction, Lakeport became wholly-owned by Labatt (see
“—
Information on the Company - History and Development of the Company -
      Overview”). On March 28, 2007, AmBev announced the signing of a purchase and
      sale agreement with respect to the acquisition of 100% of Goldensand (see “—
Information on the Company - History and Development of the Company -
      Overview”). The total transaction value was approximately U.S.$ 150
      million..




**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.




**D.**
            **Trend
                Information**




For
      detailed information regarding the latest trends in our business, please refer
      to “Year ended December 31, 2006 Compared with Year ended December 31,
      2005”




**E.**
            **Off-balance
                Sheet Arrangements**




We
      have a
      number of off-balance sheet items which have been disclosed elsewhere in this
      annual report. They include the following:




·
            Future
                commitments with suppliers of R$ 1,738.8 million, related primarily
                to
                industrial and distribution system
                investments




·
            As
                described in “—Critical Accounting Policies”, for Brazilian GAAP purposes
                we do not include the assets and liabilities of FAHZ, although we
                do so
                for U.S. GAAP purposes. While we record the benefit obligation for
Brazilian
                GAAP, the remaining assets and liabilities are off-balance sheet
                for the
                purposes of Brazilian GAAP financial statements. See Note 15(c) of
                our
                consolidated financial statements for more information.


-60-
 *Table
          of Contents*




We
      have
      no special purpose vehicles or other unconsolidated interests in which we have
      material commitments, guarantees or contingencies.




**F.**
            **Commitments
                and contingencies (tabular disclosure of contractual
                obligation)**




The
      following table and discussion provide additional disclosure regarding our
      material contractual obligations and commercial commitments as of December
      31,
      2006:


Payments
                      due by periodLess
                      than 1
                  
                  
                  
                  
                  
                  More
                      thanContractual
                      Obligations
                  
                  Total
                  
                  year
                  
                  1-3
                      years
                  
                  4-5
                      years
                  
                  5
                      years(in
                      millions of Reais )Long
                      Term Debt*
                  
                  
                  11,382.7
                  
                  
                  786.7
                  
                  
                  4,168.5
                  
                  
                  5,060.6
                  
                  
                  1,366.9Sales
                      tax deferrals
                  
                  
                  422.2
                  
                  
                  16.5
                  
                  
                  109.1
                  
                  
                  56.0
                  
                  
                  240.6Pension
                      plan
                  
                  
                  1,832.0
                  
                  
                  160.5
                  
                  
                  334.8
                  
                  
                  353.5
                  
                  
                  983.2Other
                      post-retirement liabilities
                  
                  
                  556.2
                  
                  
                  50.1
                  
                  
                  104.3
                  
                  
                  109.1
                  
                  
                  292.7Total
                      contractual cash commitments
                  
                  
                  14,193.1
                  
                  
                  1,013.8
                  
                  
                  4,716.7
                  
                  
                  5,579.2
                  
                  
                  2,883.4





*
              The
                    long-term debt amounts presented above differ from the amounts
                    presented
                    in the financial statements in that they include the Company's
                    best
                    estimates on future interest payable (not yet accrued) in order
                    to better
                    reflect the Companys's future cash flow
                    position.




We
      are
      subject to numerous commitments and contingencies with respect to tax, labor,
      distributors and other claims. To the extent that we believe these contingencies
      will probably 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$ 5,877.0 million as of December 31, 2006.
      These are not considered commitments. Our estimates are based on reasonable
      assumptions and assessment of external legal counsel, but should the worst
      case
      scenario develop, subjecting us to losses in all cases, our net impact on the
      statement of operations would be an expense for this amount.


-61-
 *Table
          of Contents*




**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
      comprised of three to 15 members who must be shareholders of AmBev 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, who
      must
      number at least two but no more than 15. 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 “Major Shareholders and Related Party
      Transactions—AmBev Shareholders’ Agreement—Management of AmBev”.




**Directors**




The
      following table sets forth information with respect to the directors of
      AmBev:




**Board
      of Directors** **(1)**





**Name**
            
            **Age****(2)**
            
            **Position**
            
            **Director
                of**
              **AmBev
                Since**
            
            **Term**
              **Expires****(3)**Victório
                Carlos De Marchi
            
            68
            
            Co-Chairman
                and Director
            
            1999
            
            2008Carlos
                Alves de Brito
            
            47
            
            Co-Chairman
                and Director
            
            2006
            
            2008Marcel
                Herrmann Telles
            
            57
            
            Director
            
            1999
            
            2008Carlos
                Alberto da Veiga Sicupira
            
            59
            
            Director
            
            1999
            
            2008José
                Heitor Attilio Gracioso
            
            75
            
            Director
            
            1999
            
            2008Roberto
                Herbster Gusmão
            
            84
            
            Director
            
            1999
            
            2008Vicente
                Falconi Campos
            
            66
            
            Director
            
            1999
            
            2008Luis
                Felipe Pedreira Dutra Leite
            
            41
            
            Director
            
            2005
            
            2008Johan
                M.J.J. Van Biesbroeck
            
            50
            
            Director
            
            2005
            
            2008**Alternate
                Members**Jorge
                Paulo Lemann
            
            67
            
            Alternate
                Director
            
            1999
            
            2008Roberto
                Moses Thompson Motta
            
            49
            
            Alternate
                Director
            
            1999
            
            2008





(1)
            Victório
                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 InBev and is also a Chief
                Executive
                Officer of InBev. InBev appointed five additional directors—Marcel
                Herrmann Telles, Carlos Alberto da Veiga Sicupira, Luis Felipe Pedreira
                Dutra Leite, Johan M.J.J. Van Biesbroeck and Vicente Falconi Campos.
                FAHZ
                appointed two additional directors—José Heitor Attílio Gracioso and
                Roberto Herbster Gusmão. The alternate members of the Board of Directors
                of AmBev are appointed in order to replace, if and when necessary,
                any of
                the directors.


(2)
            Age
                as at May 31, 2007.


(3)
            Annual
                General Meeting to be held in 2008.




The
      following are brief biographies of each of AmBev’s directors:




**Victório
      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. He is also
      a
      board member of Quinsa. Mr. De Marchi has a degree in economics from *Faculdade
      de Economia, Finanças e Administracão de São Paulo* and a
      law degree from *Faculdade
      de Direito de São Bernardo do Campo* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017,
      4th floor, São Paulo, Brazil.




**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 InBev. 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 the *Universidade
      Federal do Rio de Janeiro* and an
      MBA from Stanford University. His principal business address is Brouwerijplein
      1, 3000 city of Leuven, Belgium.


-62-
 *Table
          of Contents*




**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 InBev and Lojas Americanas S.A.. Mr. Telles has a
      degree in economics from *Universidade
      Federal do Rio de Janeiro* and
      attended the Owners/Presidents Management Program at Harvard Business School.
      His principal business address is 800, Third Avenue, 38th floor, New York,
      USA..




**Carlos
      Alberto da Veiga Sicupira.** Mr.
      Sicupira is a member of the Board of Directors of AmBev. He also served as
      a
      member of the Board of Directors of Brahma from 1990 until 1999. He is also
      a
      board member of InBev, Quinsa and Lojas Americanas S.A. He is also a member
      of
      the Board of Associates of Harvard Business School since 1988. Mr. Sicupira
      has
      a degree in business administration from the *Universidade
      Federal do Rio de Janeiro* and a
      degree from the Harvard Business School. His principal business address is
      800,
      Third Avenue, 38th floor, New York, 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 from *Escola
      Superior de Propaganda de São Paulo* ,
      a
      degree in business administration from *Fundação
      Getúlio Vargas* and a
      degree in law from *Faculdade
      de Direito de São Bernardo do Campo* .
      His
      principal business address is Av. Brig. Faria Lima, 3900, 11th floor, São Paulo,
      Brazil




**Roberto
      Herbster Gusmão.** Mr.
      Gusmão is a member of the Board of Directors of AmBev. He was previously
      Vice-Chairman of the Board of Directors of Antarctica from 1998 until April
      2000. Mr. Gusmão was Chief Executive Officer of Cervejaria Antarctica-Niger S.A.
      from 1968 to 1982, and from 1986 to 1997. He was the Brazilian Minister for
      Trade and Industry from 1985 to 1986 and Chief Executive Officer of *Banco
      de Desenvolvimento do Estado de São Paulo* from
      1982 to 1983. Mr. Gusmão was also a professor and founder of graduation and
      post-graduate programs at *Fundação
      Getulio Vargas* from
      1954 to 1969. Mr. Gusmão has a law degree from *Faculdade
      de Direito da Universidade de Minas Gerais* .
      His
      principal business address is Av. Brig. Faria Lima, 3900, 11th floor, São Paulo,
      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 of *Instituto
      de Desenvolvimento Gerencial* (“INDG”)
      and is a member of the Board of Directors of Sadia. 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 from *Universidade
      Federal de Minas Gerais, and M.Sc.* and
      Ph.D. degrees from the Colorado School of Mines. His principal business address
      is Av. do Contorno, 7962, 10th floor, Belo Horizonte, 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 InBev. 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 from *Universidade
      Cândido Mendes* and
      an
      MBA in financial management from *Universidade
      de São Paulo* .
      His
      principal business address is Brouwerijplein 1, 3000 city of Leuven,
      Belgium.




**Johan
      M.J.J. Van Biesbroeck.** Mr. Van
      Biesbroeck is a member of the Board of Directors of AmBev. He has been working
      with Interbrew (now InBev) since 1978. He is currently a member of the InBev
      Executive Board of Management, holding the position of Chief Sales Officer,
      also
      being a member of the Convergence Committee and holding different Board mandates
      with other InBev affiliates. Mr. Van Biesbroeck has a degree in economics from
      Katholieke Universiteit Leuven. His principal business address is Brouwerijplein
      1, 3000 Leuven, Belgium.




**Jorge
      Paulo Lemann.** Mr.
      Lemann is an alternate member of the Board of Directors of AmBev and a Board
      member of InBev. He has also served as a member of the Board of Directors of
      Brahma from 1990 to 1999. He is a member of the International Advisory Board
      of
      DaimlerChrysler, a board member of *Fundação
      Estudar* and a
      member of the Harvard Business School’s Board of Dean’s Advisors. Mr. Lemann
      holds a BA degree from Harvard University. His address is Rua Rebhalde, 35,
      Jona, Switzerland.




**Roberto
      Moses Thompson Motta.** Mr.
      Thompson is an alternate member of the Board of Directors of AmBev. He is also
      a
      board member of InBev and Lojas Americanas S.A. He holds a degree in engineering
      from *Pontifícia
      Universidade Católica do Rio de Janeiro* ,
      and an
      MBA from the Wharton School of the University of Pennsylvania. His principal
      business address is Av. Brig. Faria Lima, 3729, 7th floor, São Paulo,
      Brazil.


-63-
 *Table
          of Contents*




**Executive
      Officers**




The
      following table sets forth information with respect to the executive officers
      of
      AmBev:




**Name**
            
            **Age****(1)**
            
            **Position**
            
            **Election
                Date**
            
            **Term**
              **Expires****(4)**Luiz
                Fernando Ziegler de Saint Edmond(2)
            
            41
            
            Chief
                Executive Officer for Latin America
            
            2005
            
            2007Miguel
                Nuno da Mata Patricio(3)
            
            41
            
            Chief
                Executive Officer for North America
            
            2006
            
            2007Graham
                David Staley
            
            51
            
            Chief
                Financial Officer and Investor Relations Officer
            
            2007
            
            2007Bernardo
                Pinto Paiva
            
            38
            
            Sales
                Executive Officer
            
            2005
            
            2007Carlos
                Eduardo Klützenschell Lisboa
            
            37
            
            Marketing
                Executive Officer
            
            2005
            
            2007Nicolás
                Ernesto Bamberg
            
            50
            
            Industrial
                Executive Officer
            
            2007
            
            2007Francisco
                de Sá Neto
            
            41
            
            Soft
                Drinks Executive Officer
            
            2005
            
            2007Milton
                Seligman
            
            55
            
            Corporate
                Affairs Executive Officer
            
            2005
            
            2007Pedro
                de Abreu Mariani
            
            40
            
            General
                Counsel
            
            2005
            
            2007





(1)
            Age
                as of May 31, 2007.




(2)
            Mr.
                Edmond has been an Executive Officer since 2004; he was appointed
                Chief
                Executive Officer for Latin America in 2005.




(3)
            Mr.
                Miguel Patricio has been at the Company since 1999; he was appointed
                Chief
                Executive Officer for North America in
                2006.




(4)
            December
                31, 2007.




The
      following are brief biographies of each of AmBev’s executive officers:




**Luiz
      Fernando Ziegler de Saint Edmond.** Mr.
      Edmond is AmBev’s Chief Executive Officer for Latin America. He joined the
      Company in 1990 in the first group of trainees of Brahma and held various
      positions in the Distribution, Commercial and Direct Distribution Departments.
      He was Sales Officer from 2002 to 2004. Mr. Edmond has an engineering degree
      from *Universidade
      Federal do Rio de Janeiro* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor,
      São Paulo, Brazil.




**Miguel
      Nuno da Mata Patricio.** Mr.
      Patricio is the Chief Executive Officer for North America. He joined the Company
      in 1999. Mr. Patricio has a degree in business administration from *Fundação
      Getúlio Vargas* in São
      Paulo. His principal business address is Rua Dr. Renato Paes de Barros, 1017,
      4th floor, São Paulo, Brazil.




**Graham
      David Staley.** Mr.Staley
      is AmBev’s Chief Financial Officer and Investor Relations Officer. He joined the
      Company in 2005 in the position of CFO for Labatt. Mr.Staley also held the
      position of CFO of Interbrew’s (today InBev) US brewing business. Mr. Staley
      joined Interbrew after the Company acquired the brewing operations of Bass
      Plc.
      Mr. Staley joined Bass in 1980 and served in various positions in the brewing,
      leisure and hotel industries. He holds a degree in Commerce from Liverpool
      University in England and is a Fellow of the Institute of Chartered Accountants
      (FCA) in England & Wales. His principal business address is Rua Dr. Renato
      Paes de Barros, 1017, 4th floor, São Paulo, Brasil.




**Bernardo
      Pinto Paiva.** Mr.
      Paiva is AmBev’s Sales Executive Officer. He joined Brahma as a trainee in 1991
      and has held various positions in the Financial, Marketing and Sales
      departments. He was Regional Officer in Rio de Janeiro and Logistics and Supply
      Executive Officer. He has a degree in production engineering from *Universidade
      Federal do Rio de Janeiro* .
      He also
      holds a post-graduate degree in marketing from *Pontifícia
      Universidade Católica do Rio de Janeiro* and an
      executive graduate diploma from London Business School. His principal business
      address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo,
      Brazil.




**Carlos
      Eduardo Klützenschell Lisboa.** Mr.
      Lisboa is AmBev’s Marketing Executive Officer. He joined the Company in 1993 and
      has held the positions of Regional Marketing Manager, Domestic Operating Manager
      and *Skol* ’s
      Marketing Manager. He has a degree in business administration and a postgraduate
      degree in marketing from *Universidade
      Católica de Pernambuco* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor,
      São Paulo, Brazil.




**Nicolás
      Ernesto Bamberg.** Mr.Bamberg is AmBev’s Chief Industrial Officer. He joined the Company in 2007,
      after 14 years working for *Cervecería
      y Maltería Quilmes* ,
      where
      he served in the position of Industrial Manager for Quinsa Group and previously
      as Plant Manager for Quilmes and Zárate units. Mr. Bamberg has a degree in
      Industrial Engeneering from *Universidad
      Católica Argentina* ,
      in *The
      Executive Program* from *University
      of Virginia* and
      in *Supply
      Chain Management* from *Stanford
      University* ,
      USA.
      His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th
      floor, São Paulo, Brazil.


-64-
 *Table
          of Contents*




**Francisco
      de Sá Neto.** Mr. Sá
Neto is AmBev’s CSD Executive Officer. He joined the Company in 1998 and has
      held various positions in the areas of Sales and Direct Distribution. He was
      also the Regional Officer in Southern Brazil. He has a degree in civil
      engineering from *Universidade
      Federal da Bahia* and
      holds an MBA from the University of California, Berkeley. His principal business
      address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo,
      Brazil.




**Milton
      Seligman.** Mr.
      Seligman is AmBev’s Corporate Affairs Executive Officer. He joined the Company
      in 2001 and has held the positions of Governmental Relations Officer and
      Communication Officer. Mr. Seligman served, among others, as Chairman and member
      of the BNDES, as well as Minister of Development, Industry and Foreign Trade
      (Interim Substitute Minister) from 1999 to 2000. He has a degree in electrical
      engineering from *Universidade
      Federal de Santa Maria* .
      His
      principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor,
      São Paulo, Brazil.




**Pedro
      de Abreu Mariani.** Mr.
      Mariani is the General Counsel of AmBev. He joined the Company in 2004. He
      holds
      a law degree from *Pontifícia
      Universidade Católica do Rio de Janeiro* and a
      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,
      Brazil.




**B.**  **Compensation**




The
      aggregate remuneration of all members of the Board of Directors and Executive
      Officers of AmBev in 2006 for services in all capacities amounted to R$ 22.9
      million, including variable pay (bonuses). In addition, the members of the
      Board
      of Directors and Executive Officers received some additional benefits provided
      to all AmBev employees and their beneficiaries and covered dependents, such
      as
      medical assistance, educational expenses and supplementary social security
      benefits. Such benefits were provided through FAHZ. The Board of Directors
      and
      Executive Officers also received benefits pursuant to AmBev’s pension and stock
      ownership plan, which is not included in the amount above. For a description
      of
      these plans see below.




On
      various dates in 2006, pursuant to the terms and conditions of the stock
      ownership plan still in place, we acquired from the Directors and Officers
      a
      total of 15.3 million common shares (R$ 12.6 million) and 97.5 million preferred
      shares (R$ 92.3 million). Such amounts were calculated and paid taking into
      consideration the average market price on the day of the closing of the
      transaction or other specific rules of the stock ownership plan (e.g. cases
      of
      resignation etc.).




There
      are
      no benefits in kind provided to the AmBev’s Officers or Directors, nor are there
      agreements between AmBev and any of its Directors and Executive Officers.




***Stock
      Ownership Plan***




We
      have a
      stock ownership plan (the “Plan”) designed to attract and retain the services of
      qualified directors, executives and key employees (the “Participants”). As of
      December 31, 2006, the Plan had outstanding and exercisable rights to acquire
      271.3 million shares of AmBev, and included 222 participants. The Plan was
      amended at our general shareholders’ meeting held on April 27, 2007. The
      following description relates to the Plan, as amended by such general
      shareholders’ meeting. The Plan relates to preferred shares only and is
      administered by the Board of Directors.




According
      to the Plan, 50% of the Participants’ bonus under our Profit-Sharing Plan (as
      further described below) shall be granted in the form of our preferred shares
      or
      ADSs (“Tranch A shares”) at an exercise price corresponding to the average
      closing price of such shares in the 30-day period prior to the grant. Tranch
      A
      shares are subject to a 3-year lock-up. In addition, Participants under the
      Plan
      who apply 25% or 50% of their bonus in the purchase of our preferred shares
      or
      ADSs (the “Tranch B shares”) are entitled to 2.3 or 4.6 options per share
      acquired (the “Options”), respectively. The exercise price of the Tranch B
      shares corresponds to the price of Tranch A shares with a ten percent discount.
      Tranch B shares are subject to a 5-year lock-up. The vesting of the Options
      is
      subject to the following conditions being met:




·
            The
                Participant shall hold the Tranch B shares for at least five years;
                and




·
            We
                shall meet certain performance measures.




The
      right
      to exercise the Options is forfeited in certain circumstances, such as
      resignation or dismissal prior to the vesting of the Options. The Options expire
      if not exercised within five years from vesting (i.e., ten years from the grant
      date).




For
      plans
      granted prior to 2003, the subscription price of the shares could be deferred,
      for a period normally not exceeding four years and at an interest rate of 8%
      per
      annum over a designated general price index. These deferred payment rights
      are
      guaranteed by the shares which will be acquired under the plan. Due to the
      enactment of Sarbanes-Oxley Act of 2002, we have ceased to grant such deferred
      payment rights for any subsequent stock ownership plans. Nevertheless, advances
      granted prior to 2003 to Participants are grandfathered. At December 31, 2006
      the outstanding balance of the advances to Participants under U.S. GAAP amounted
      to R$ 72.7 million and is classified as an asset under Brazilian GAAP and a
      deduction from shareholders’ equity under U.S. GAAP.


-65-
 *Table
          of Contents*




***AmBev
      Pension Plan***




AmBev’s
      pension plans are administered by the AmBev Pension Fund  Entity
      (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 social security system provides to our employees.
      The  IAPP was established solely for the benefit of our employees
      and its assets are held independently. IAPP is managed by the IAPP Council
      Board
      (Conselho Deliberativo), which has four members, three of which are appointed
      by
      AmBev, and  and one member is elected by the employees and
      retired employees.The IAPP Executive Board (Diretoria Executiva), which has
      three members, all of which are appointed by the IAPP Council Board. IAPP also
      has a Fiscal Council with three members, two of which are appointed by 
  AmBev   and one  member  is elected by the
      employees and retired employees.




The
      AmBev
      Pension Fund is available to both active and retired employees.  Any
      employee after being hired  may opt to join the defined contribution
      plan.  When members leave Ambev, without retirement, and
      with  at least 3 years in IAPP`s plan, they  have some options
      such as : a) have their contributions refunded, b) may transfer
      their contributions to a bank or insurance company , c) keep
      their investment in IAPP to be paid in installments. In the event the
      employee leaves the Company prior to completing three years as a participant,
      such employee will only be entitled to a refund of his/her contributions to
      the
      plan




As
      of
      December 31, 2006, we had 5,771 participants in our pension plans, 3,161
      participants in the defined benefit plan, including 2,255 retired participants,
      and 2,610 participants in the defined contribution plan, including 55 retired
      participants.




Prior
      to
      May 1998, when the defined contribution plan was launched, there was only a
      defined benefit plan. The defined benefit plan is closed to new participants
      as
      of that date. New employees of AmBev can only join the defined contribution
      plan. At the time of adoption of the defined contribution plan, active
      participants were given the option either to remain in the defined benefit
      plan,
      or transfer their accumulated benefits to the defined contribution plan. The
      defined contribution plan covers substantially all new employees.




AmBev’s
      contributions to IAPP for the year ended December 31, 2006 were approximately
      R$5.7 million compared to R$4.8 million in 2005.




The
      plan
      assets are comprised mainly of time deposits and equity securities (including
      9,595,170 preferred shares and 1,919,034 common shares of AmBev with a
      total market value of R$ 11.9 million as of December 31, 2006), government
      securities and properties. All benefits are calculated and paid in inflation
      indexed *Reais* .




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.




As
      at
      December 31, 2006, AmBev had liabilities deriving from pension plan benefits
      obligations in the amount of R$ 555.3 million. See Note 12(a) to the Financial
      Statements.




***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.




All
      employees are eligible to variable compensation. 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 unit must achieve its targets. In addition, a ranking
      system is in place, meaning that not all employees will receive bonus
      payments.




Our
      annual targets may be changed by the Board of Directors. 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.




Expenses
      of AmBev provisioned under these programs amounted to R$194.4 million for the
      year ended December 31, 2006, R$202.8 million for the year ended December 31,
      2005 and R$152.4 million for the year ended December 31, 2004.




**C.**
            **Board
                Practices**




In
      2006,
      we held numerous meetings with investors and analysts. We also participated
      in
      conferences and road shows in Brazil, the United States and Europe. We hosted
      quarterly conference calls, transmitted simultaneously on the Internet, to
      clarify financial and operating results as well as answer questions from the
      investment community. We also organized site visits for investors and
      analysts.


-66-
 *Table
          of Contents*




***Conselho
      Fiscal***




At
      AmBev’s general and extraordinary shareholders’ meeting held in April 2005, we
      approved an amendment of our bylaws to make the *Conselho
      Fiscal* a
      permanent body. The following members were appointed to the *Conselho
      Fiscal* at
      AmBev’s general and extraordinary meeting held on April 27, 2007, for a term
      expiring upon the general shareholders’ meeting of 2008: Alcides Lopes Tápias,
Álvaro Antônio Cardoso de Souza and Aloisio Macário Ferreira de Souza, and, as
      alternates, respectively, Ary Waddington, Emmanuel Sotelino Schifferle and
      Ernesto Rubens Gelbcke. All of them are “independent” members as per Rule
      10A-3(c)(v) of the Sarbanes-Oxley Act of 2002.




The
      responsibilities of the *Conselho
      Fiscal* include
      supervision of management, performing analyses and rendering opinions regarding
      AmBev’s financial statements and performing other duties in accordance with
      Brazilian Corporate Law and its charter. None of the members of the *Conselho
      Fiscal* is also
      a member of the Board of Directors or of any Committee thereof.




In
      addition, we have relied on the exemption provided for under Rule 10A-3(c)
      of
      the Sarbanes-Oxley Act of 2002, which enables us to have the *Conselho
      Fiscal* 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 *Conselho
      Fiscal* to act
      independently and to satisfy the other requirements of such Act.




***The
      Board of Directors***




Most
      of
      the Board members have been in office for several years, with current members’
term lasting until the general shareholders’ meeting of 2008. The Board members
      use their extensive knowledge of the business to ensure that AmBev reaches
      its
      long-term goals and maintains its short-term competitiveness. Moreover, the
      Board of Directors ensures that AmBev pursues its short-term business goals
      without compromising our long-term growth, while at the same time ensuring
      that
      AmBev’s corporate values are practiced.




The
      Company’s Co-Chairmen of the Board of Directors and the Chief Executive Officers
      are separate positions held by different people. The Board of Directors is
      supported in its decision-making by the following committees:




***Operations
      and People Committee***




The
      Operations and People Committee is the main link between the policies and
      decisions made by the Board of Directors and AmBev’s management team. The
      Operations and People Committee’s explicit responsibilities are:




·
            To
                present medium and long-term planning proposals to the Board of Directors;




·
            To
                propose and monitor AmBev’s annual performance targets and the budgets
                needed to attain the projected goals;




·
            To
                monitor the Company’s standing through analysis of its results, market
                developments and permanent internal and external benchmarking;




·
            To
                analyze and propose uniform best practice rules;




·
            To
                monitor the performance of the Company’s trademarks and innovation
                strategies;




·
            To
                opine in matters involving recruiting programs, variable compensation
                and
                the spreading of the Company’s culture;
                and




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






Current
      members of the Committee are Messrs. Victório Carlos De Marchi (Chairman),
      Marcel Herrmann Telles, Carlos Alberto da Veiga Sicupira, Luis Felipe Pedreira
      Dutra Leite and Carlos Brito. Throughout the year, the Operations and People
      Committee holds at least six meetings. The members of the Committee are elected
      by the Board of Directors, with term of office until the general shareholders’
meeting of 2008.




***Compliance
      Committee***




The
      Compliance Committee’s responsibilities are to assist the Board of Directors in
      the following matters:




·
            Related
                party transactions;




·
            Any
                general conflict of interest situations;  -67-
 *Table
            of Contents*




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




·
            Monitoring
                and analysis of the internal controls of the Company;




·
            Monitoring
                and analysis of the fiscal profile of the Company; and




·
            Other
                matters the Board of Directors may consider relevant and in the interest
                of the Company.




Current
      members of the Compliance Committee are Messrs. Victório Carlos De Marchi
      (Chairman), José Heitor Attílio Gracioso, Carlos Alves de Brito, Vicente Falconi
      Campos and Luis Felipe Pedreira Dutra Leite. Throughout the year, the Compliance
      Committee holds at least four meetings. The members of the Committee are elected
      by the Board of Directors, with term of office until the general shareholders’
meeting of 2008.




***Finance
      Committee***




The
      Finance Committee’s purpose is to assist the Board of Directors on the following
      matters:




·
            To
                analyze and monitor the Company’s annual investment
                plan;




·
            To
                analyze and monitor growth
                opportunities;




·
            To
                analyze and monitor the Company’s capital structure and cash flow; and




·
            To
                analyze and monitor the management of the Company’s financial risk, as
                well as budgetary and treasury policy.




Current
      members of the Finance Committee are Messrs. Luis Felipe Pedreira Dutra Leite
      (Chairman), Marcel Herrmann Telles, Victório Carlos de Marchi, Carlos Alberto da
      Veiga Sicupira and Roberto Moses Thompson Motta. The members of the Committee
      are elected by the Board of Directors, with term of office until the general
      shareholders’ meeting of 2008.




Throughout
      the year, the Finance Committee holds at least four meetings, in which are
      discussed, among other matters: budget; financial risk analysis; treasury policy
      and merger and acquisition opportunities.




***Consulting
      Committee***




The
      Consulting Committee was formed in 2003 and is composed of three independent
      members appointed by the Board of Directors for terms of three years. The
      Consulting Committee has the following functions:




·
            To
                opine at the General Shareholders’ meetings and the Board of Directors,
                with respect to acts of the directors and officers and the fulfillment
                of
                their duties, pursuant to the law and the bylaws, as well as regarding
                the
                annual report and any propositions to be submitted to the
                shareholders;




·
            To
                provide economic, industry and commercial data to the Board of Directors
                related to the Company’s main business purposes, including opinions and
                recommendations; and




·
            To
                make recommendations concerning new business and general issues submitted
                to their consultation.




Current
      members of the Consulting Committee are Messrs. José de Maio Pereira da Silva,
      Paulo Cézar Castello Branco Chavez de Aragão and Ary Oswaldo Mattos Filho.




***Differences
      Between the United States and the Brazilian Corporate Governance
      Practices***




The
      SEC
      approved in November 2003 the new corporate governance rules established by
      the
      NYSE. According to these rules, foreign private issuers that are listed on
      the
      NYSE must disclose the significant ways in which their corporate governance
      practices differ from the corporate governance standards established by the
      NYSE.




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 Bovespa and the IBGC-Brazilian
      Institute of Corporate Governance have developed guidelines to help with the
      dissemination of corporate governance practices.


-68-
 *Table
          of Contents*




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 comply with this requirement.




The
      Brazilian Corporate Law and our bylaws require that our directors be elected
      by
      our shareholders at a general shareholders’ meeting, cumulative voting being
      applicable if requested by 5% of the common shareholders. Moreover, the
      Brazilian Corporate Law grants minority shareholders and/or preferred
      shareholders the right to elect a director if they so require in the general
      shareholders’ meeting called for the election of the Board of Directors.
      Currently, all of our directors are appointed by our controlling shareholders;
      minority shareholders are represented through one seat in our *Conselho
      Fiscal* .




The
      Brazilian Corporate Law and the CVM establish rules in relation to certain
      qualification requirements and restrictions, investiture, compensation, duties
      and responsibilities of a company’s executives and directors.




***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 Corporate Law, up to one-third of the members of the Board
      of
      Directors can also hold management positions. However, none of our directors
      holds a management position at this time and, accordingly, we believe we would
      be in compliance with this NYSE corporate governance standard.




***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 comply with this
      requirement.




In
      addition, we are not required under the Brazilian Corporate Law to have, and
      accordingly we do not have, a nominating committee, corporate governance
      committee or compensation committee. According to the Brazilian Corporate Law,
      board committees may have any specific authority or mandate since the role
      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. With respect to compensation, under the Brazilian
      Corporate Law, the shareholders determine the total or individual compensation
      of a company’s directors and executive officers, including benefits and
      allowances at a general shareholder’s meeting.




***Audit
      Committee and Audit Committee Additional Requirements***




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 Securities Exchange Act of 1934, as amended
      (the “Exchange Act”), with a written charter that addresses certain
      duties.




We
      maintain a permanent *Conselho
      Fiscal* ,
      which
      is a body allowed for by the Brazilian Corporate Law that 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 by Rule 10A-3(c)(3) and believe that our reliance on this
      exemption will not materially affect the ability of the *Conselho
      Fiscal* 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.




Our
      existing stock ownership plan was amended and restated by the general
      shareholders’ meeting held on April 27, 2007.




***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


-69-
 *Table
          of Contents*




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
      Corporate 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.




***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.




We
      have
      adopted a Code of Business Conduct that applies to all officers and employees.
      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 Officers will promptly notify the NYSE in writing after any
      of
      our executive officers becomes aware of any material non-compliance with any
      applicable provisions of the NYSE corporate governance
      standards.


-70-
 *Table
          of Contents*




**D.**
            **Employees**




As
      of
      December 31, 2006, AmBev and its subsidiaries had 35,090 employees,
      approximately 55% of whom were engaged in production, 30% of whom were engaged
      in sales and distribution and 16% of whom were engaged in
      administration.




The
      following table sets forth the number of employees of AmBev and its subsidiaries
      as of the end of the years indicated:





**Employees
                a****s
                of December 31,**(1)**200****6**
            
            **2005**
            
            **2004**35,090
            
            
            28,567
            
            
            25,974





(1)
            Through
                2005, not including Quinsa and its
                subsidiaries.




The
      following table shows the geographical distribution of AmBev’s employees as of
      December 31, 2006:




**Geographical
                Distribution of AmBev Employees****Location**
            
            **Number
                of Employees**Brazil
            
            
            20,083Canada
            
            
            3,080Dominican
                Republic
            
            
            1,898Venezuela
            
            
            1,013Peru
            
            
            1,224Ecuador
            
            
            277Guatemala
            
            
            175Argentina
            
            
            4,849Paraguay
            
            
            663Uruguay
            
            
            597Chile
            
            
            382Bolivia
            
            
            849**Total**
            
            
            35,090




***Industrial
      Relations***




All
      of
      AmBev’s employees in Brazil are represented by labor unions, but only
      approximately less than 10% of its 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 AmBev. Collective bargaining agreements
      are negotiated separately for each facility or distribution center. AmBev’s
      collective bargaining agreements have a term of one year, and AmBev usually
      enters 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 HILA and North
      American operations.




***Health
      and Severance Benefits***




In
      addition to wages, AmBev’s 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 AmBev’s employees in Brazil consist of benefits provided both by AmBev
      directly 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.
      AmBev may voluntarily contribute up to 10% of its consolidated net income,
      as
      determined in accordance with Brazilian Corporate Law and AmBev’s bylaws, to
      support FAHZ in this regard.




AmBev
      is
      required to contribute 8% of each Brazilian employee’s gross pay to an account
      maintained in the employee’s name in the Government Severance Indemnity Fund
      (“FGTS”). Under Brazilian law, AmBev is also required to pay termination
      benefits to Brazilian employees dismissed without just cause, equal to 50%
      of
      the accumulated contributions made by AmBev to the FGTS during the employee’s
      period of service.




We
      provide health and benefits in accordance with local law for our employees
      located in our HILA and North American operations.


-71-
 *Table
          of Contents*




**E.**
            **Share
                Ownership**




The
      following table shows the amount, type and percentage of class of our equity
      securities held by members of our Board of Directors and by executive officers
      as of April 30, 2007:





**Name**
            
            **Amount
                and Percentage**
              **of
                Common Shares**
            
            **Amount
                and Percentage**
              **of
                Preferred Shares**Victório
                Carlos De Marchi(1)
            
            *
            
            *Carlos
                Alves de Brito
            
            *
            
            *Marcel
                Herrmann Telles(2)
            
            *
            
            *Carlos
                Alberto da Veiga Sicupira(3)
            
            *
            
            *José
                Heitor Attílio Gracioso(4)
            
            *
            
            *Roberto
                Herbster Gusmão(5)
            
            *
            
            *Vicente
                Falconi Campos
            
            *
            
            *Luis
                Felipe Pedreira Dutra Leite
            
            *
            
            *Johan
                M.J.J. Biesbroeck
            
            *
            
            *Jorge
                Paulo Lemann(6)
            
            *
            
            *Roberto
                Moses Thompson Motta
            
            *
            
            *Luiz
                Fernando Ziegler de Saint Edmond
            
            *
            
            *Miguel
                Nuno da Mata Patricio
            
            *
            
            *Graham
                David Staley
            
            *
            
            *Bernardo
                Pinto Paiva
            
            *
            
            *Carlos
                Eduardo Klützenschell Lisboa
            
            *
            
            *Nicolás
                Ernesto Bamberg
            
            *
            
            *Francisco
                de Sá Neto
            
            *
            
            *Milton
                Seligman
            
            *
            
            *Pedro
                de Abreu Mariani
            
            *
            
            *





*
            Indicates
                that the individual holds less than 1% of the class of securities.


(1)
            Mr.
                De Marchi is a trustee of FAHZ. For information regarding the shareholding
                of FAHZ, see “Major Shareholders and Related Party Transactions—AmBev’s
                Major Shareholders”.


(2)
            Does
                not include shares owned through interest in InBev. Mr. Telles is
                part of
                the controlling group of InBev, and is also an intervening party
                to the
                AmBev Shareholders’ Agreement. See “Major Shareholders and Related Party
                Transactions—Major Shareholders—AmBev Shareholders’ Agreement”. Mr. Telles
                is also a trustee of FAHZ. For information regarding the shareholdings
                of
                FAHZ, see “Major Shareholders and Related Party Transactions— Major
                Shareholders—AmBev’s Major Shareholders”.


(3)
            Does
                not include shares owned through interest in InBev. Mr. Sicupira
                is part
                of the controlling group of InBev, and is also an intervening party
                to the
                AmBev Shareholders’ Agreement. See “Major Shareholders and Related Party
                Transactions—Major Shareholders—AmBev Shareholders’ Agreement”.


(4)
            Mr.
                Gracioso is a trustee of FAHZ. For information regarding the shareholding
                of FAHZ, see “Major Shareholders and Related Party Transactions— Major
                Shareholders—AmBev’s Major Shareholders”.


(5)
            Mr.
                Gusmão is a trustee of FAHZ. For information regarding the shareholding
                of
                FAHZ, see “Major Shareholders and Related Party Transactions— Major
                Shareholders—AmBev’s Major Shareholders”.


(6)
            Does
                not include shares owned through interest in InBev. Mr. Lemann is
                part of
                the controlling group of InBev, and is also an intervening party
                to the
                AmBev Shareholders’ Agreement. Mr. Lemann is also a trustee of FAHZ. See
                “Major Shareholders and Related Party Transactions—Major
                Shareholders—AmBev Shareholders’ Agreement”.





-72-
 *Table
            of Contents*




**ITEM
              7.**
            **MAJOR
                SHAREHOLDERS AND RELATED PARTY
                TRANSACTIONS**




**A.**
            **Major
                Shareholders**




**Introduction**




As
      of
      April 30, 2007, AmBev had 34,429,161,852 common voting shares and 28,205,233,353
      preferred shares outstanding. AmBev has registered two classes of ADSs pursuant
      to the Securities Act: ADSs evidenced by ADRs representing 100 preferred shares,
      and ADSs evidenced by ADRs representing 100 common shares. As of April 30,
      2007,
      there were 61,040,704 preferred ADSs outstanding (representing 6,104,070,400
      preferred shares) and 4,518,764 common ADSs outstanding (representing
      451,876,400 common shares). AmBev ADRs are issuable by The Bank of New York
      pursuant to deposit agreements for common and preferred shares.


At
        an
        extraordinary shareholders’ meeting held on June 29, 2007, shareholders approved
        a reverse stock split of our common and preferred shares at a ratio of 1/100.
        As
        a result, each ADS represents one common or preferred share, as the case
        may be.
        In this sense, the number of the Company’s shares was amended to 345,054,728
        common shares and 279,362,507 preferred shares.




**Control**




The
      controlling shareholders of AmBev, Interbrew International B.V., and AmBrew
      S.A., which are both subsidiaries of InBev, and FAHZ, together hold
      approximately 89.6% of AmBev’s common shares, as of April 30, 2007.




InBev
      indirectly holds shares of AmBev common stock that represent approximately
      73.5%
      of the total voting power of AmBev’s capital stock. InBev thus has control over
      AmBev, even though (i) InBev remains subject to the AmBev Shareholders’
Agreement with FAHZ, and (ii) InBev is jointly controlled by Messrs. Lemann,
      Sicupira and Telles and Interbrew’s former controlling shareholders. For further
      information on these matters see “—AmBev Shareholders’ Agreement” and
“Information on the Company—InBev-AmBev Transactions”.




**Share
      Buyback Programs**




In
      2006,
      we acquired 1,759.7 million preferred and 80.8 million common shares in
      connection with share buyback programs, at a cost of R$ 1,740.4 million. In
      2005, we acquired 547.7 million preferred shares in connection with share
      buyback programs, at a cost of R$ 487.2 million. In 2004, we acquired 2,605.0
      million preferred shares in connection with share buyback programs, at a cost
      of
      R$ 1,609.6 million.




In
      accordance with CVM rules, share buyback programs may be conducted through
      the
      issuance of put and call options (provided that the volume of such options
      issued multiplied by their respective strike prices does not exceed the limit
      established for the plan), and the amount of shares to be kept in treasury
      may
      not exceed the equivalent to 10% of the free float of each class of shares.
      The
      following table summarizes the share buyback programs approved by our Board
      of
      Directors in 2005, 2006 and 2007, and the number of shares purchased under
      each
      such program until May 8, 2007. For a further description of the programs,
      see
“—Purchases of Equity Securities by the Issuer and Affiliated
      Purchasers”.





**Approval
                Date**
            
            **Shares****Repurchased**
            
            **Amount
                Repurchased***(R$
                in thousands****)***
            
            **Date
                program was finalized**November
                7, 2005
            
            
            (preferred)
            
            
            547,694,270
            
            
            487,176
            
            
            February
                22, 2006February
                22, 2006
            
            
            (preferred)
            
            
            416,118,966
            
            
            373,008
            
            
            August
                8, 2006(common)
            
            
            21,371,944
            
            
            17,095August
                8, 2006
            
            
            (preferred)
            
            
            602,244,396
            
            
            586,932
            
            
            November
                14, 2006(common)
            
            
            15,857,275
            
            
            13,554November
                14, 2006
            
            
            (preferred)
            
            
            833,914,269
            
            
            870,161
            
            
            February
                5, 2007(common)
            
            
            43,469,400
            
            
            40,666February
                5, 2007
            
            
            (preferred)
            
            
            701,144,633
            
            
            796,504
            
            
            May
                8, 2007(common)
            
            
            131,461,018
            
            
            140,534May
                8, 2007
            
            
            (preferred)
            
            
            —
            
            
            —
            
            
            Not
                Finalized(common)
            
            
            —
            
            
            —
            
            
            Not
                Finalized**Total**
            
            
            
            
            
            **3,281,561,621**
            
            
            **3,325,630**
            
            
            **N/A**




**AmBev’s
      Major Shareholders**




The
      following table sets forth information as of April 30, 2007 with respect to
      any
      person known to AmBev to be the beneficial owner of 5% or more of AmBev’s
      outstanding shares:


-73-
 *Table
          of Contents*




**Amount
                and Percentage**
              **of
                Common Shares**
            
            **Amount
                and Percentage**
              **of
                Preferred Shares**The
                Bank of New York - ADR Department(1)
            
            
            451,876,400
            
            
            1.31
            %
            
            6,104,070,400
            
            
            21.18
            %Interbrew
                International B.V.
            
            
            22,395,606,318
            
            
            65.05
            %
            
            10,139,452,582
            
            
            35.95
            %AmBrew
                S.A.
            
            
            2,924,717,044
            
            
            8.49
            %
            
            1,608,833,598
            
            
            5.70
            %FAHZ(2)
            
            
            5,522,991,293
            
            
            16.04
            %
            
            763
            
            
            0.00
            %Caixa
                da Previdência dos Funcionários do Banco Central do Brasil -
                PREVI
            
            
            537,731,371
            
            
            1.56
            %
            
            2,564,156,855
            
            
            9.09
            %





(1)
            Represents
                the number of shares held in the form of ADSs. The Bank of New York
                is the
                depositary of AmBev shares in accordance with the deposit agreement
                entered into with AmBev and the owners of AmBev ADSs.


(2)
            Messrs.
                Telles, Lemann, De Marchi, Gracioso and Gusmão, directors of AmBev, are
                also trustees of FAHZ.




For
      a
      description of our major shareholders’ voting rights, see “—AmBev Shareholders’
Agreement”.




**AmBev
      Shareholders’ Agreement**




InBev
      (through AmBrew S.A. and InterBrew International B.V.), FAHZ, as well as AmBev
      and Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, the latter
      four as intervening parties, are part of a shareholders’ agreement (the “AmBev
      Shareholders’ Agreement”) with respect to the voting of the shares of AmBev and
      the voting by AmBev of the shares of its subsidiaries, among other
      matters.




The
      AmBev
      Shareholders’ Agreement was originally signed in July 1999 and amended in March
      2004.




The
      following discussion relates to the AmBev Shareholders’ Agreement, as modified
      by the first amendment.




***Management
      of AmBev***




Although
      each common share of AmBev entitles shareholders to one vote in connection
      with
      the election of AmBev’s Board of Directors, AmBev’s controlling shareholders,
      FAHZ, AmBrew S.A. and Interbrew International B.V., have the ability to elect
      the majority of AmBev’s directors. Because the election of any director by
      minority (non-controlling) shareholders would require, under Law 6,404/76,
      at
      the time of execution of the AmBev Shareholders’ Agreement, the adoption of a
      cumulative vote procedure, the provisions of the AmBev Shareholders’ Agreement
      on the management of AmBev were based on the assumption that no directors will
      be elected by minority shareholders of AmBev.




Due
      to
      the changes introduced by Law No. 10,303/01, minority shareholders holding
      at
      least 15% of voting capital and preferred shareholders (whose shares are not
      entitled to vote or are entitled to a restricted voting right) holding at least
      10% of AmBev’s total capital may each elect one member of the Board of Directors
      and its alternate member. Additionally, if neither the minority shareholders
      nor
      the preferred shareholders (whose shares are not entitled to vote or are
      entitled to a restricted voting right) achieve such percentages as mentioned
      above, they can jointly appoint one member of the Board of Directors and its
      alternate member once they represent, together, at least 10% of AmBev’s total
      capital. In order to exercise these rights, any of these shareholders must
      prove
      that it has uninterruptedly held the corresponding shares for at least three
      months prior to the shareholders’ meeting, where the election of the Board of
      Directors shall take place.




If
      such
      prerogative is exercised collectively with the adoption of a cumulative voting
      procedure, the controlling shareholders are entitled to elect the same number
      of
      members plus one, independently of the number of directors.




Presently,
      under the AmBev Shareholders’ Agreement, as amended, each of FAHZ, AmBrew S.A.
      and Interbrew International B.V. will have representation on the Board of
      Directors of AmBev and its subsidiaries and, in addition to the members and
      respective alternates they are entitled to appoint, each of FAHZ, on the one
      hand, and AmBrew S.A. and Interbrew International B.V., on the other hand,
      may
      appoint up to two observers to attend AmBev’s board meetings, without voting
      rights. The boards of directors of AmBev and its subsidiaries will each be
      comprised 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 and reelection being
      permitted.




FAHZ
      will
      have the right to appoint four directors and their respective alternates to
      the
      boards of directors of AmBev and its subsidiaries, so long as it maintains
      ownership of common shares that FAHZ held as of July 1, 1999, when the AmBev
      Shareholders’ Agreement was entered into (adjusted for share dividends, splits
      and stock grouping). At that time FAHZ held 459,521,728 common shares, which
      was
      adjusted for the five-for-one stock split that took effect in October 2000
      and
      for the share dividend that took effect in May 2005. FAHZ appointed three of
      our
      directors. FAHZ is not allowed under the AmBev Shareholders’ Agreement to
      appoint more than four directors in the event that its holding of AmBev common
      shares increases. FAHZ will always be entitled to appoint at least one director
      as long as it holds a minimum of 10% of AmBev’s voting shares.


-74-
 *Table
          of Contents*




AmBrew
      S.A. and Interbrew International B.V. have the right to appoint members and
      its
      alternates to the boards of directors of AmBev and its 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 AmBrew S.A.
      and Interbrew International B.V. in the voting capital of AmBev.




The
      AmBev
      Shareholders’ Agreement provides that AmBev will have two Co-Chairmen with
      identical rights and duties, one appointed by FAHZ and the other jointly by
      AmBrew S.A. and Interbrew International B.V. In the event of a deadlock, neither
      of the Co-Chairmen has a deciding vote on matters submitted to the Board of
      Directors of AmBev.




Each
      of
      FAHZ, AmBrew S.A. and Interbrew International B.V., may remove a director that
      it has appointed to the Board of Directors of AmBev or its 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.




Each
      of
      FAHZ, AmBrew S.A. and Interbrew International B.V. has agreed to exercise its
      voting rights in the shareholders’ meetings of AmBev and its subsidiaries in
      such a way that it may elect the largest possible number of directors in each
      of
      AmBev and its subsidiaries. FAHZ, AmBrew S.A. and Interbrew International B.V.
      will agree on the method of casting their votes in order to accomplish this
      purpose in the event of the adoption of a cumulative vote procedure under
      Brazilian law, under which each common share is entitled to as many votes as
      there are directors to be elected.




The
      AmBev
      Shareholders’ Agreement establishes that the shareholders may, by consensus,
      establish committees within AmBev’s Board of Directors, with the purpose of
      looking into specific matters, which analyses require that their members have
      specific technical knowledge. The Compliance Committee, the Operations and
      People Committee and the Finance Committee have already been created. See
“Directors, Senior Management and Employees—Board Practices”.




***Preliminary
      Meetings and Exercise of Voting Right***




On
      matters submitted to a vote of the shareholders or their representatives in
      the
      Board of Directors of AmBev or its subsidiaries, FAHZ, AmBrew S.A. and Interbrew
      International B.V. have agreed to endeavor first to reach a consensus with
      respect to voting their common shares of each of AmBev and its 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
      boards of directors of AmBev or of its 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 all parties to the agreement will be determined by
      the
      group holding the greatest number of AmBev voting common shares, which currently
      is constituted of AmBrew S.A. and Interbrew International B.V. However, this
      rule does not apply in connection with the election of members of Board of
      Directors, as described above under “Management of AmBev”, and with respect to
      matters which require unanimous approval by FAHZ, AmBrew S.A. and Interbrew
      International B.V., as follows:




·
            Any
                amendment to the bylaws of AmBev and/or any of its subsidiaries with
                the
                purpose of amending: (i) the corporate purposes, (ii) the term of
                duration, and/or (iii) the composition, powers and duties of the
                management bodies;




·
            Approval
                of the annual investment budget of AmBev and/or any of its subsidiaries
                when the amount of the investments exceed 8.7% of net sales of AmBev
                foreseen for the same fiscal year;




·
            Designation,
                dismissal and substitution of the Chief Executive Officers of
                AmBev;




·
            Approval
                of or amendment to the compensation policy for the Board of Directors
                and
                of the executive officers of AmBev, as well as of its
                subsidiaries;




·
            Approval
                of stock ownership plans for the directors, executive officers and
                key
                employees of AmBev and/or its
                subsidiaries;




·
            Change
                in the dividend policy of AmBev and/or any of its
                subsidiaries;




·
            Increases
                in the capital of AmBev and/or any of its subsidiaries, with or without
                preemptive rights, through subscription, creation of a new class
                of
                shares, or changes in the characteristics of the 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 subsidiaries except when such legal businesses
                are carried out between AmBev and its subsidiaries or between the
                subsidiaries;




·
            Amalgamations,
                spin-offs, transformations, mergers, acquisitions, and divestments
                involving AmBev and/or any of its subsidiaries, in the latter case
                (a)
                when such operation involves a company that is not a subsidiary,
                directly
                or indirectly, of AmBev and (b) 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 IGP-M published by*Fundação
                Getúlio Vargas*as
                of the date of payment;




-75-
 *Table
          of Contents*




·
            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 subsidiaries, under any title or form, except in
                the benefit of AmBev and/or another
                subsidiary;




·
            The
                incurrence by AmBev and/or any of its subsidiaries of a debt transaction
                that results in a net debt/equity ratio greater than
                1.5;




·
            The
                execution, amendment, termination, renewal or cancellation of any
                contracts, agreements or the like involving the registered or deposited
                trademarks of AmBev or its
                subsidiaries;




·
            The
                extension of loans or the offer of guarantees of any kind by AmBev
                and/or
                any of its subsidiaries to any third parties 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 subsidiaries, or in favor of the subsidiaries
                themselves;




·
            Election
                of members of committees of AmBev’s Board of
                Directors;




·
            Cancellation
                of the registration of AmBev and/or any of its subsidiaries as publicly
                traded companies;




·
            Petition
                for an arrangement with creditors (“*concordata*”)
                or acknowledgment of bankruptcy by AmBev and/or any of its
                subsidiaries;




·
            Liquidation
                or dissolution of AmBev and/or any of its subsidiaries;
                and




·
            Appointment
                of the external auditors of AmBev and/or any of its
                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, AmBrew S.A. and
      Interbrew International B.V., 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.




***Transfer
      of Shares***




The
      AmBev
      Shareholders’ Agreement contains the following provisions concerning the
      transfer of shares:




·
            FAHZ,
                AmBrew S.A. and Interbrew International B.V. have agreed (i) not
                to
                dispose, directly or indirectly, of their shares, during the term
                of the
                agreement, 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 provided for in Section VI of the
                AmBev
                Shareholders’ Agreement, and (ii) not to create any type of encumbrance on
                their shares, without the prior written consent of FAHZ, in the case
                of
                AmBrew S.A. and Interbrew International B.V., and without the prior
                written consent of AmBrew S.A. and Interbrew International B.V.,
                in the
                case of FAHZ;




·
            In
                the event that the shares of AmBev owned by FAHZ, on the one hand,
                and by
                AmBrew S.A. and Interbrew International B.V., on the other hand,
                become
                subject to seizure, attachment, judicial surety or any other restrictive
                measure, and such restriction is not removed 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. This offer
                will
                remain open for 30 days, and the price for the AmBev shares will
                be the
                lesser of either (i) the book value of the AmBev shares, as per the
                latest
                audited balance sheet of AmBev, prepared in accordance with Brazilian
                GAAP, and adjusted by the IGP-M inflation index or (ii) the average
                quoted
                market price of the AmBev shares on stock exchanges in the 20 days
                prior
                to the petition for removal or waiver of the restriction. If the
                obligations in respect of such restriction exceed the above 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 shares. If the obligations in respect of such restriction
                were
                lower than the price for the AmBev 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 shares
                and the
                obligations in respect of such restriction;
                and




·
            If
                any of FAHZ, on the one hand, and AmBrew S.A. and Interbrew International
                B.V., on the other hand, intends to dispose of subscription rights
                relating to AmBev shares that it holds, it must first offer such
                rights to
                the other party, who will then be required to exercise its right
                of first
                refusal to subscribe the new shares to be issued, within 10
                days.




-76-
 *Table
          of Contents*




The
      Shareholders’ Agreement provides that any transfer of shares or subscription
      rights or creation of encumbrances in which the aforementioned 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 Corporate
      Law.




***Specific
      Performance***




Obligations
      of the parties under the AmBev Shareholders’ Agreement will be subject not only
      to specific performance but will also bind third parties to the terms of the
      agreement, in effect declaring null and void any action taken in breach to
      it so
      long as rights and obligations of third parties stem from the agreement.




**B.**
            **Related
                Party Transactions**




**Material
      Related Party Transactions**




***AmBev
      and Affiliated Entities***




We
      engage
      in (i) the purchase and sale of raw material with affiliated entities and (ii)
      intercompany loans and guarantees, which effects are eliminated on our
      consolidated financial statements, with the exception of entities under common
      control (which are proportionally consolidated), as described in Note 5 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 to employees and executive officers (including dependants)
      of
      AmBev and its subsidiaries.




*Purchase
      of labels from FAHZ*




In
      April
      2002, CBB and FAHZ executed an agreement for the industrialization of products
      (labels), using raw materials supplied by AmBev. The prices vary in accordance
      with the order, and are determined under arm’s length conditions.




***AmBev
      and Employees***




Before
      January 1, 2003, AmBev had deferred payment stock option plans. See “Directors,
      Senior Management and Employees—Employees—Stock Ownership Plan”. Such an option,
      however, has been removed from the stock ownership plans approved subsequent
      to
      the enactment of the Sarbanes-Oxley Act. Nevertheless, deferred payment for
      the
      stock ownership plans granted prior to 2003 are grandfathered and may be
      requested. The current Stock Ownership Plan is the result of a revised text
      approved in AmBev’s Extraordinary General Meeting of April 27, 2007, updating
      the plan approved on September 14, 2000.




***InBev
      and LBCL***




In
      August
      2004, in connection with the consummation of the merger of Labatt into AmBev,
      LBCL and InBev entered into a cross-services agreement with a view
      to:




·
            terminating
                the then existing services agreement among those entities before
                the*Incorporação*;




·
            LBCL
                providing to InBev, on an hourly basis, certain administrative services
                such as tax support services, internal audit services and legal services;
                and




·
            InBev
                providing to LBCL, on an hourly basis, administrative services such
                as
                internal audit services, legal advice and IT
                support.




*Brands*




We
      distribute some of our brands in the United States, including Labatt Blue and
      Kokanee, through InBev USA L.L.C. (previously Labatt USA, L.L.C.), a subsidiary
      of InBev, under a distribution agreement between InBev and Labatt.




*Labatt
      Tax Reassessments*




In
      March
      2005, due to a notice of reassessment in respect of LBCL’s 1998 taxation year
      issued by the Canada Revenue Agency in December 2004, and other notices that
      could be issued, and in view of the indemnification provisions set forth in
      the *Incorporação* Agreement,
      InBev, LBCL and AmBev agreed that LBCL should pay the relevant tax authorities
      the full amounts due under any such notices, and InBev would reimburse any
      such
      amounts, including increased interest expenses as a result of LBCL’s increased
      leverage ratios, on an annual basis or at each time that LBCL has a credit
      with
      InBev over U.S.$ 40 million. On December 31, 2006, the outstanding amount due
      under this agreement from InBev is approximately C$ 88.8 million.




-77-
 *Table
          of Contents*




*Transfer
      Pricing*




In
      August
      2004, InBev, AmBev and LBCL entered into agreements relating to the transfer
      prices and policy for all beer product transfers between InBev and the LCBL
      companies. The companies confirmed that the Interbrew Transfer Pricing Policy
      shall continue to be the transfer pricing policy in effect between the
      InBev companies and the LBCL companies for beer product transfers between
      and among them, except as provided for in the agreement. In addition, the
      agreement confirms certain terms of the distribution agreement which governs
      the
      transfer pricing principles for the transfer of beer and other products between
      LBCL and InBev USA L.L.C.




***AmBev
      and InBev***




In
      March
      2005, AmBev and InBev entered into a cross-license agreement through which
      AmBev
      is allowed to produce, package, market and distribute beer under the brands *Stella
      Artois* and *Beck’s* in Latin
      America (except Argentina and Cuba), on an exclusive basis, and InBev is allowed
      to produce, package, market and distribute beer under the brand *Brahma* in
      Europe, Asia, Africa, Cuba and the United States on an exclusive basis. AmBev
      has agreed not to directly or indirectly produce, package, market, distribute,
      sell or resell (or have an interest in any of these), directly or indirectly,
      any other European premium branded beer in Latin America, and InBev has agreed
      to be bound by the same restrictions relating to any other Latin American
      premium branded beer in Europe, Asia, Africa, Cuba and the United States. No
      royalties will be due in the first year, but royalties will be increased
      annually by 1.75% of net sales up to 7%, which will be the amount of royalties
      due after the fourth year. Since March 2005, InBev has been distributing *Brahma* beer in
      the United States and in a number of European countries such as the United
      Kingdom, France, the Benelux, Ukraine and Russia.  We announced the launch
      of *Stella
      Artois* in
      Brazil in June 2005. Labatt and InBev have an arrangement through which Labatt
      distributes certain InBev beer brands in Canada. In addition, InBev distributes
      Labatt Blue, Blue Light, Blue Dry, Labatt Canadian Ale and Kokanee in the U.S.
      under a distribution agreement entered into with Labatt.




In
      July
      2005, InBev Brasil was merged into AmBev pursuant to the terms and conditions
      of
      a merger protocol entered into between AmBev, InBev Brasil and InBev. Pursuant
      to the terms of the merger protocol, the capitalization by InBev of the tax
      benefit deriving from the amortization of the goodwill resulting from the merger
      will be limited to 70% of the corresponding capital reserve, with the remaining
      30% being distributed to the shareholders of AmBev, to the extent dividends
      are
      available for distribution. Such amortization will be carried out within the
      next ten years, in accordance with CVM Instruction 319/99. The merger protocol
      also provides, among other matters, that InBev shall indemnify AmBev for any
      undisclosed liabilities of InBev Brasil.





In
      April
      2005, AmBev and InBev entered into two Services Agreements in order that one
      company renders to the other (including to its subsidiaries) services as such
      as: internal audit support services, IT support, procurement, marketing and
      sales support, tax support, among others. Those services agreements are
      effective until December 31, 2010, unless terminated earlier by any party upon
      three months’ prior written notice. Such agreements may also be extended by
      mutual written consent of the parties.




***InBev
      and AmBev with BT and IBM***




In
      June
      2005, BT Limited, Belgian Branch and InBev entered into a Global Services
      Agreement for the provision, by BT, to certain affiliates of InBev, including
      AmBev, of telecommunication services for the IT infrastructure efficiency
      programme carried out by InBev called Global Infrastructure and Services
      Efficiency Programme (GIEP).




***InBev
      and Intra-group Companies***




In
      January 2005, InBev and certain intra-group companies executed an International
      Intra-Group Data Protection Agreement pursuant to which they agreed to provide
      adequate safeguards with respect to the protection of privacy and fundamental
      rights and freedoms of individuals in the transfer of personal information.


-78-
 *Table
          of Contents*




**ITEM
              8.**
            **FINANCIAL
                INFORMATION**




**A.**
            **Consolidated
                Financial Statements and Other Financial
                Information**




**Consolidated
      Financial Statements**




See
      “Financial Statements”.




**Legal
      Proceedings**




Except
      as
      set forth below, there are no legal proceedings to which we are 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 further details, see Note 11 of our
      consolidated financial statements.




***Tax
      matters***




As
      of
      April 30, 2007, we had approximately 2,950 tax claims pending, including
      judicial and administrative proceedings. Most of these claims relate to the
      ICMS
      value added tax and the IPI excise tax. We have made provisions of R$ 421
      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 AmBev against Brazilian tax
      authorities alleging that certain taxes are unconstitutional. Such tax
      proceedings include claims for income taxes, ICMS, IPI and revenue taxes (“PIS”
and “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.




*Value
      added tax, excise tax and taxes on net sales*




During
      1999, legislation came into effect requiring Brazilian companies to pay PIS
      and
      COFINS not only on sales and services net sales, but also on financial income.
      We have not been paying PIS and COFINS as required by such law, as we have
      obtained injunctions permitting the non-payment of these additional taxes on
      the
      basis that the such legislation is unconstitutional. In November 2005, a leading
      case unrelated to AmBev was adjudicated by the Brazilian Supreme Court in favor
      of taxpayers. During 2006, we obtained favorable final and non-appealable
      decisions in connection with such PIS and COFINS claims which allowed us to
      revert R$ 314 million of previously recorded provisions. As of December 2006,
      we
      had provisions in connection with cases still pending in the amount of R$ 88
      million.




We
      are
      currently parties to legal proceedings with the State of Rio de Janeiro where
      we
      are challenging such State’s attempt to assess ICMS with respect to irrevocable
      discounts granted by the Company in January 1996 and February 1998. These
      proceedings are currently before the Superior Court of Justice and the Brazilian
      Supreme Court, and involve the amount of approximately R$ 247 million as of
      April 30, 2007, which we have treated as a possible (but not probable) loss.
      Such estimate is based on reasonable assumptions and assessments of external
      counsel but should we lose such proceedings the net impact on our statement
      of
      operations would be an expense for this amount.




We
      received in October 2006 a tax assessment from the State of São Paulo in the
      amount of approximately R$ 14 million, challenging the legality of tax credits
      arising from an existing tax incentive of the Company in the State of Santa
      Catarina. We have treated this proceeding as a possible (but not probable)
      loss.
      Such estimate is based on reasonable assumptions and assessments of external
      counsel but should we lose such proceedings the net impact on our statement
      of
      operations would be an expense for this amount. Moreover, we cannot rule out
      the
      possibility of other Brazilian states issuing similar tax assessments related
      to
      the Company’s tax incentive granted by the State of Santa Catarina.




Moreover,
      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. While there has been no decision by the Brazilian Supreme
      Court declaring any such state laws unconstitutional, no assurance can be given
      that the above sales tax deferrals and tax credit programs would not be
      suspended in the future as a result of an adverse decision of the Brazilian
      Supreme Court.




*Income
      tax and social contribution*




Beginning
      in 1997, an amendment to the tax laws confirmed the deductibility of interest
      on
      shareholders’ equity for social contribution and income tax purposes. Brahma
      filed a lawsuit with the Federal Courts of Rio de Janeiro requesting the
      recovery of social contribution taxes previously paid for the fiscal year of
      1996. The Federal Court granted Brahma an injunction recognizing the
      deductibility of payment of interest on shareholders’ equity and, as a result,
      allowed Brahma to suspend the payment of social contribution amounts owed in
      1999 up to the amount not deducted in 1996 (approximately R$ 40.1
      million).


-79-
 *Table
          of Contents*


Notwithstanding
      the aforesaid suspension of social contribution’s payment, the tax authority
      filed an administrative proceeding against Brahma claiming the payment of such
      amount. Brahma presented its defense and is waiting for a final decision by
      the
      administrative court. Meanwhile, in April 2001, the Federal Appellate Court
      reverted the Federal Court’s injunction. Though we appealed to the Brazilian
      Supreme Court in April 2002, our appeal was denied, and, therefore, should
      we
      lose on the administrative proceeding, we will be required to pay approximately
      R$40.1 million plus interest.




During
      the first quarter of 2005, we received a number of assessments from Brazilian
      federal tax authorities relating to earnings of our foreign subsidiaries, in
      the
      total amount of approximately R$ 2.9 billion. Based on the advice of external
      counsel, we believe that such assessments are without merit and, accordingly,
      we
      have not recorded any provision in connection therewith. We have estimated
      the
      total exposures of possible (but not probable) losses, which are not recorded
      as
      liabilities, to be of approximately R$ 2.9 billion in connection with those
      assessments, and the remaining is estimated to be a remote loss. Our estimates
      are based on reasonable assumptions and assessments of external legal counsel,
      but should the worst case scenario develop, subjecting us to losses in all
      cases, the net impact on the statement of operations would be an expense for
      the
      amount of R$2.9 billion (excluding the claims which are estimated as
      remote).




In
      order
      to carry out certain activities, including obtaining BNDES financings, certain
      tax incentives or registering the sale of real estate, we, like other Brazilian
      corporations, are required to obtain federal and state tax and social security
      good standing certificates, which are normally valid for six months. In
      circumstances in which such certificates are not issued by the competent
      authority on the basis of the existence of tax claims that we believe are
      without merit or need further information, we have sought court injunctions
      requesting such certificates to be issued. As of April 30, 2007, we had court
      bonds ( *cartas
      de fiança* )
      issued
      in connection with such injunctions in the amount of approximately R$ 669
      million.




***Labor
      matters***




We
      are
      involved in approximately 10,200 legal proceedings with former and current
      employees, mainly relating to overtime, dismissals, severance, health and safety
      premiums, supplementary retirement benefits and other matters, all of which
      are
      awaiting judicial resolution. We have made provisions totalling R$ 233.4 million
      as of April 30, 2007, in connection with all labor proceedings in which we
      believe there is a probable chance of loss. In Brazil, it is not unusual for
      a
      company to be a defendant in a large number of labor claims.




We
      have
      approximately 12 claims made by the National Institute for Social Security
      with
      an aggregate exposure of R$ 57 million. These claims are classified as possible
      and argue, among other things, that the Company should have paid social security
      contributions in relation to bonus payments and payments to third party service
      providers. We can provide no assurance that in the future we will not receive
      claims from the National Institute for Social Security.




***Civil
      claims***




As
      of
      April 30, 2007 we had 4,049 civil claims pending, including distributors and
      product-related claims. We are the plaintiff in 1,574 and the defendant in
      2,475
      of these claims. We have established provisions totalling R$ 96.4 million as
      of
      April 30, 2007 in connection with civil claims in which we believe there is
      a
      probable chance of loss.




AmBev
      is
      a party to a tortious interference claim brought by Schincariol whereby
      Schincariol seeks damages in the range of R$ 100 million from
      AmBev, arguing that AmBev signed up singer Zeca Pagodinho while he was
      still contractually bound with Schincariol. It is too early to predict the
      outcome of such litigation and the actual amount of damages, if any. As a
      result, based on the advice of outside counsel, we have not constituted a
      provision in connection with such proceeding.





InBev
      U.S.A. L.L.C., Labatt Brewing Company Limited, and numerous other US, Canadian
      and European beer and alcohol producers have been named in a putative class
      action lawsuit seeking damages and injunctive relief over alleged marketing
      of
      alcoholic beverages to underage consumers. Lawsuits have been filed in various
      states to date, predominantly by the same firm. The lawsuits are all essentially
      similar in nature. InBev USA L.L.C. and Labatt Brewing Company Limited were
      named in several of the suits, however the parties agreed in April 2006 to
      voluntarily dismiss foreign defendants, including Labatt Brewing Company
      Limited. The dismissal requires certain document preservation by Labatt and
      allows refiling of the lawsuits in limited circumstances. The Company will
      vigorously defend this litigation. It is not possible at this time to estimate
      the possible range of loss, if any, of these lawsuits.




**Warrants** ****




In
      2002,
      AmBev decided to request a ruling from the CVM in connection with a dispute
      between AmBev and some of its warrant holders regarding the criteria used in
      the
      calculation of the strike price of certain AmBev warrants. In March and April
      2003, the CVM ruled that the criteria used by AmBev to calculate the strike
      price was 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.


-80-
 *Table
          of Contents*


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 AmBev to its officers and employees since 1996 to
      acquire shares of AmBev, as well as for the strike price of other stock purchase
      warrants issued in 1993 by Brahma. The warrant holders requested preliminary
      injunctions for (i) the immediate issuance by AmBev of the shares corresponding
      to the total amount of warrants held by the plaintiffs and (ii) the right to
      subscribe for these shares at the substantially lower subscription price
      described above.




We
      have
      been notified of six claims from 11 holders arguing that they would be entitled
      to those rights, five of which claims are still awaiting rulings by the appelate
      courts of the States of São Paulo or Rio de Janeiro, as the case may be. Of the
      six claims, three judicial decisions were issued in favor of AmBev in the State
      of Rio de Janeiro lower courts and two were issued in favor of AmBev in the
      State of São Paulo lower courts, all of them denying the warrant holders’ right
      to subscribe for the shares at the lower price intended. One lower court
      decision was issued against AmBev in the State of São Paulo, recognizing the
      right of three warrant holders to subscribe for the shares at the lower price.
      AmBev reached an agreement with the three plaintiffs of such claim.




In
      the
      event the plaintiffs prevail in the above five 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 values in the table below, multiplied by the number of shares
      involved. However, should the Company prevail in the counterclaims described
      further below, the Company has estimated that the aggregate subscription price
      of all the relevant shares for the pending proceedings should be R$ 524.3
      million, based on a strike price of R$ 0.90977 per preferred share and R$
      0.91595 per common share and warrants entitling its holders to subscribe for
      22,413,325 common shares and 553,691,920 preferred shares. The table below
      summarizes the alleged preferred and common share strike price, as well as
      the
      number of preferred and common shares involved, in the five pending
      claims.




**Number
                of claims**
            
            **Alleged
                preferred**
              **share
                strike price (R$)**
            
            **Number
                of preferred**
              **shares
                involved**
            
            **Alleged
                common**
              **share
                strike price (R$)**
            
            **Number
                of common**
              **shares
                involved**2
            
            0.11267
            
            435,563,170
            
            0.18508
            
            12,414,0701
            
            0.02872
            
            103,160,745
            
            0.03352
            
            5,022,8251
            
            Lowest
                exercise of stock options (to be calculated in judicial
                proceedings).
            
            10,108,205
            
            Lowest
                exercise of stock options (to be calculated in judicial
                proceedings).
            
            4,976,4301
            
            0.38116
            
            4,859,800**Total**
            
            
            
            **553,691,920**
            
            
            
            **22,413,325**







AmBev
      has
      filed counterclaims to these lawsuits, three of which were granted in the State
      of Rio de Janeiro, and two of which were rejected in the State of São Paulo. In
      addition, one warrant holder filed a lawsuit for damages against AmBev before
      the courts of the State of São Paulo. This holder claims that our setting of a
      high strike price caused such holder damages by not allowing such holder to
      exercise his warrants at a lower strike price. The lower court issued a decision
      denying such holders’ request. The warrant holder appealed against such
      decision,  but
      before the appellate court ruling, the parties settled the dispute in January
      2007, which has already been accepted by the court.




Based
      on
      advice from our external counsel, we believe it is possible that we will prevail
      on the claims from the holders and the counterclaims filed against the
      holders . We  have
      not
      made any provisions in connection with these claims. However, no assurance
      can
      be given that favorable decision that we obtained will be upheld by the
      Appellate Courts. As these disputes are based on whether we should receive
      as a
      subscription price a lower price than the price that we consider correct,
      without any contingent liability (except for legal fees), a provision of amounts
      with respect to these proceedings is not applicable.




***Distributors
      and product-related claims***




Numerous
      claims have been filed against us by former distributors whose contracts were
      terminated. Most claims are still under review by first instance and state
      Appellate Courts, and a few are currently being reviewed by the Superior Court
      of Justice and the Federal Supreme Court.




The
      aggregate amount of these claims was R$ 630.5 million as of April 30, 2007.
      AmBev has established provisions in the amount of R$ 39.2 million in connection
      with these claims as of April 30, 2007, based on the advice of outside legal
      counsel. We intend to continue a program of increasing our direct distribution
      and expect this program to result in additional lawsuits.


-81-
 *Table
          of Contents*


In
        1997,
        our former distributor Natalense Comercial de Bebidas Ltda. filed a damages
        claim against us resulting from an alleged breach of contract on our part.
        The
        lower courts of the State of Rio Grande do Norte ruled in favor of Natalense,
        and on appeal the judgment was affirmed. We have filed an appeal with the
        Superior Court of Justice asking that the appellate court decision be overruled
        on the merits. It is also worth noting that in a provisional ascertainment
        proceeding in the lower court, a court-appointed expert calculated a relief
        of
        R$ 558 million. Such appraisal has not yet been confirmed by the lower court
        judge, and we also challenged the expert opinion and the independence of
        the
        expert. On June 25, 2007, the lower court judge issued a decision dismissing
        the
        court apppointed expert on the grounds of bias. Based on the advice of outside
        counsel, we believe that the chance of loss is probable as to the merits;
        however, we do not believe that the amount ascertained by the expert will
        be
        confirmed.


There
      is
      one administrative proceeding against us, which was commenced by distributors
      who challenge the legality of our market practices. See “Antitrust Matters—The
      Combination” below.




***Antitrust
      matters***




*Investigations*




We
      currently have a number of antitrust investigations pending against us before
      Brazilian antitrust authorities.




In
      February 2002 the Brazilian Association of Antarctica Distributors (“ABRADISA”)
      filed a complaint challenging the legality of exclusivity provisions in our
      distribution agreements. This dispute was settled in March 2003, with ABRADISA
      filing a petition in November 2003 before the Brazilian antitrust authorities
      stating that the settlement agreement was fully complied with by all its parties
      and that ABRADISA had no interest in continuing with this proceeding. In
      December 2005, in response to a request from the SDE (Secretariat of Economic
      Development) we stated that no further evidence was technically required in
      these proceedings, which we asked be dismissed. This proceeding is awaiting
      the
      issuance of an opinion by the SDE.




In
      April
      2003, Cervejaria Braumeister, a small Brazilian brewer with which we had
      executed five exclusivity agreements (one for each store), filed a complaint
      with the Brazilian antitrust authorities alleging that we had breached the
      performance agreement signed with CADE by imposing exclusivity on them. In
      October 2003, we presented our defense alleging that there was no imposition
      of
      exclusivity, but that the exclusivity was negotiated between the parties. To
      date, the case is in its judgment phase. We expect this complaint to be
      dismissed as there are three lower court judicial decisions which were granted
      in our favor.




In
      February 2004, the Labor Union of the Food and Beverages Industry Workers
      ( *Sindicato
      dos Trabalhadores nas Indústrias de Alimentação e Bebidas* )
      of the
      city of Jacareí, State of São Paulo, filed a claim with the Brazilian antitrust
      authorities in connection with the lay-off of employees in our beer plant in
      Jacareí. In this claim, this union alleges that we breached our performance
      agreement signed with CADE pursuant to which we committed to maintain the level
      of employment in our plants. On May 3, 2007, in response to a request from
      the
      SDE, we asked that this claim be dismissed given that CADE stated that we have
      complied with the employment requirements at our plants.




In
      2004,
      Schincariol, which is currently one of our largest competitors in Brazil, filed
      a complaint with the Brazilian antitrust authorities asking them to investigate
      whether our loyalty program named Tô Contigo complies with Brazilian antitrust
      laws and alleging that AmBev had not complied with the performance agreement
      signed with CADE due to AmBev’s conduct in the market. On March 13, 2007, the
      SDE issued an opinion stating that (i) there was no violation of the performance
      agreement with CADE and (ii) that the *Tô Contigo* program should be
      deemed anticompetitive absent certain adjustments . **** This
      complaint has been forwarded to CADE, which will review the matter and issue
      its
      final ruling.




In
      Canada
      42 Canadian brewers are party to an Industry Standard Bottle Agreement (“ISBA”)
      whereby the parties have agreed to use only a particular type of bottle which
      are then recycled to ISBA signatories on a proportionate basis for re-use.
      Brick
      Brewing Company, a small Ontario brewer that is not an ISBA signatory, commenced
      litigation in 2002 and obtained an injunction pending determination of Brick’s
      continued right of access to industry bottles. This litigation is ongoing.
      Brick
      also took its position to the Canadian Competition Bureau. The Competition
      Bureau discontinued its investigation in September 2006, without any adverse
      findings.




*Merger
      Control*




Brahma’s
      joint venture with Miller was required to be submitted to CADE for approval.
      Its
      license agreement was approved in 1997 and the performance agreement entered
      into with CADE in connection with such transaction led to the execution of
      a
      production agreement with Dado Bier, which expired in December 2005. In December
      2006, CADE ratified the accomplishment of the aforesaid performance agreement.




As
      a
      result of PepsiCo’s acquisition of Gatorade and subsequent licensing of the
      trademark to us, CADE analyzed the isotonic products market and in July 2004
      approved the transaction with restrictions through a performance agreement,
      including the sale of Marathon, which took place on April 13, 2006.


-82-
 *Table
          of Contents*




On
      March
      28, 2007, AmBev announced the signing of a purchase and sale agreement with
      respect to the acquisition of 100% of Goldensand, the controlling shareholder
      of
      Cintra, Brazil’s fifth largest brewer. The transaction was submitted for CADE
      review on April 19, 2007. (see “— Information on the Company - History and
      Development of the Company - Overview”). On May 16, 2007, AmBev agreed with CADE
      that it would not take any action which could result in a decrease of capacity
      or efficiency of Cintra’s plants, as well as to continue to invest in the Cintra
      brand consistent with past practices and market share, in both cases until
      a
      final analysis of the transaction is made by CADE or until the brand is sold
      to
      a third party pursuant to the terms of the purchase and sale
      agreement.




In
      connection with Labatt’s acquisition of Lakeport, the Canadian Commissioner of
      Competition applied to the Canadian Competition Tribunal for more time to review
      Labatt’s take over bid, which was scheduled to close on March 29, 2007
      immediately following expiry of the 42-day statutory waiting period. The
      transaction was subject to review by the Competition Bureau. The Bureau
      indicated it needed approximately five months to complete its review. Labatt
      offered to close the transaction into a “hold separate” arrangement to allow the
      Bureau to complete its review and the deal to close, which the Bureau rejected.
      The Tribunal rendered its decision on March 28, 2007 allowing Labatt to close
      on
      March 29, 2007 and without the need for a hold separate arrangement. The Bureau
      filed a notice of appeal of the Tribunal decision, but appeal documents have
      not
      yet been served. It is unlikely the appeal will have any affect on the completed
      Lakeport transaction, while the Bureau completes its merger review. It is worth
      noting however, that under Canadian law the Commissioner of Competion may
      challenge any merger the Bureau has not cleared for a period of up to three
      years.




***CVM***




*Caixa
      de Previdencia dos Funcionarios do Banco do Brasil -* PREVI,
      a
      Brazilian pension fund which is one of our largest minority shareholders, filed
      an administrative complaint against AmBev with the CVM in April 2004 alleging
      abuse of position by AmBev’s controlling shareholders and breach of fiduciary
      duty by AmBev’s directors in connection with the approval of the InBev-AmBev
      Transactions, appropriation of commercial opportunity and inadequate disclosure.
      The complaint requested, among other things, that CVM render an opinion
      contesting the legality of the transactions and intervene to prevent the closing
      of the *Incorporação* .
      In May
      2004, AmBev filed a response to the complaint with the CVM, which was supported
      by several opinions of renowned Brazilian legal scholars. The CVM ruled in
      December 2004 that (i) there was no basis to conclude that there had been an
      abuse of position by the controlling shareholders or conflict of interests
      in
      relation to them, and (ii) that there was no indication of an appropriation
      of a
      commercial opportunity by the directors of AmBev, without prejudice to any
      further investigation that the staff of the CVM might conduct, as appropriate.
      Moreover, the CVM expressed its opinion that directors involved in the
      InBev-AmBev Transactions could not have intervened in the AmBev board
      resolutions related thereto, recommending that the staff investigate any
      possible violation of the fiduciary obligations of one specific director who
      was
      a shareholder of Braco and ECAP, the direct controlling shareholders of AmBev
      at
      the time and took part in AmBev’s board resolution. There would be a quorum to
      approve the relevant resolutions even without the vote of such director. The
      CVM
      recommended also that the staff investigate the adequacy of the disclosure
      proceeding of the transactions. So far, we have not been informed of any
      specific administrative action in relation thereto.




Following
      the announcement of the InBev-AmBev Transactions, we were notified by the CVM
      that it detected what it perceived to be unusual trading patterns in shares
      of
      AmBev in the weeks preceding the announcement. The CVM, in accordance with
      what
      we understand to be its standard procedures, requested a list of all directors,
      officers, employees, accountants, lawyers, investment bankers and other
      consultants involved in the InBev-AmBev Transactions. That information has
      been
      supplied to the CVM. According to certain public statements of staff members
      and
      commissioners of the CVM, the CVM is investigating the possibility that the
      trading of AmBev shares based on insider information occurred. We believe that
      CVM’s investigation is pending; however, we have no indication of when the
      investigation will be concluded.




***Environmental
      matters***




In
      August
      2003, Oliveira Comércio de Sucatas filed a complaint with the Public Attorney of
      the city of Pedreira, in the State of São Paulo, alleging that CBB was using the
      waste disposal site of the city as a disposal for toxic garbage. In September
      2003, we presented our response with all the evidences we had.  This
      case is still in the discovery phase.




The
      Public Attorney of the State of Rio de Janeiro has requested the initiation
      of a
      civil investigation to investigate anonymous reports of the pollution allegedly
      caused by Nova Rio, AmBev’s beer plant located in the city of Rio de Janeiro.
      Currently this investigation is in the discovery phase. We expect this
      investigation to be dismissed as we have presented several expert opinions,
      including one from the State environmental agency (“FEEMA”), showing lack of
      environmental damages. Simultaneously, the police of Rio de Janeiro have
      requested the initiation of a criminal investigation to investigate the author
      of the crime, which is also in the discovery phase. We expect this investigation
      will be dismissed concurrently with the civil investigation mentioned above.
      Due
      to the wide repercussion of this matter in the media, the Legislative Branch
      initiated a Parliamentary Commission of Investigation ( *Comissão
      Parlamentar de Inquérito* - “CPI”)
      to investigate the facts. We expect the CPI to be dismissed since we have
      presented expert opinions showing the lack of any environmental damages.


-83-
 *Table
          of Contents*




In
      April
      17, 2007, the Public Attorney ( *Promotoria* )
      of
      Viamão, State of Rio Grande do Sul requested the initiation of a civil
      investigation to investigate reports made by local population of pollution
      around the plant. AmBev reached a settlement with the Public Attorney
      ( *Promotoria* )
      of
      Viamão on June 12, 2007. The formal agreement basically requires AmBev to
      develop a recycling program as well as to donate approximately US$ 75,000.00
      (seventy five thousand U.S. dollars) to the Environmental Authority Board of
      Viamão, which we are currently pursuing.




**Dividend
      Policy**




For
      information regarding our dividend policy, see “Key Information—Selected
      Financial Data—Dividends—Dividend Policy”.




**B.**
            **Significant
                Changes**




Except
      as
      otherwise described in our annual financial statements and in this annual
      report, there have been no significant changes in our business, financial
      conditions or results since December 31, 2006.


-84-
 *Table
          of Contents*




**ITEM
              9.**
            **THE
                OFFER AND LISTING**




**A.**
            **Principal
                Market and Trading Market Price
                Information**




We
      are
      registered as a publicly held company with the CVM and are listed on the Bovespa
      under the symbols “AMBV3” (common shares) and “AMBV4” (preferred shares).




In
      May
      2005, AmBev’s shareholders approved a stock bonus at an extraordinary general
      meeting, granting one common share for each five shares (whether common or
      preferred) owned by each shareholder. Moreover, we will hold an extraordinary
      shareholders’ meeting on June 29, 2007 to deliberate a reverse stock split of
      our common and preferred shares at a ratio of 1/100. Should the reverse stock
      split be approved by our shareholders, each ADS will represent one common or
      preferred share, as the case may be.




**Shares**




The
      table
      below shows the quoted high and low closing sales prices in *Reais* on
      Bovespa for preferred and common shares for the indicated periods. All shares
      prices have been restated to reflect AmBev’s stock bonus described in the
      preceding paragraph.





**Trading
                Prices on the Bovespa: Common and Preferred
                Shares****Per
                1,000 Common Shares**
            
            **Per
                1,000 Preferred Shares****High**
            
            **Low**
            
            **High**
            
            **Low**(in*Reais*)
            
            (in*Reais*)**Annual**2006
            
            
            R$
            
            
            945
            
            
            R$
            
            
            740
            
            
            R$
            
            
            1,054
            
            
            R$
            
            
            8042005
            
            
            
            
            
            1,168
            
            
            
            
            
            500
            
            
            
            
            
            902
            
            
            
            
            
            5572004
            
            
            
            
            
            1,183
            
            
            
            
            
            529
            
            
            
            
            
            693
            
            
            
            
            
            4372003
            
            
            
            
            
            533
            
            
            
            
            
            346
            
            
            
            
            
            629
            
            
            
            
            
            4032002
            
            
            
            
            
            408
            
            
            
            
            
            292
            
            
            
            
            
            468
            
            
            
            
            
            333**Quarterly**2007*First
                Quarter*
            
            
            R$
            
            
            1,073
            
            
            R$
            
            
            923
            
            
            R$
            
            
            1,134
            
            
            R$
            
            
            1,025*Second
                Quarter*
            
            
            
            
            
            1,418
            
            
            
            
            
            1,073
            
            
            
            
            
            1,430
            
            
            
            
            
            1,1312006*First
                Quarter*
            
            
            R$
            
            
            818
            
            
            R$
            
            
            740
            
            
            R$
            
            
            948
            
            
            R$
            
            
            860*Second
                Quarter*
            
            
            
            
            
            910
            
            
            
            
            
            744
            
            
            
            
            
            1,014
            
            
            
            
            
            804*Third
                Quarter*
            
            
            
            
            
            883
            
            
            
            
            
            780
            
            
            
            
            
            990
            
            
            
            
            
            862*Fourth
                Quarter*
            
            
            
            
            
            945
            
            
            
            
            
            830
            
            
            
            
            
            1,054
            
            
            
            
            
            9152005*First
                Quarter*
            
            
            R$
            
            
            1,168
            
            
            R$
            
            
            875
            
            
            R$
            
            
            702
            
            
            R$
            
            
            557*Second
                Quarter*
            
            
            
            
            
            792
            
            
            
            
            
            500
            
            
            
            
            
            753
            
            
            
            
            
            587*Third
                Quarter*
            
            
            
            
            
            680
            
            
            
            
            
            582
            
            
            
            
            
            835
            
            
            
            
            
            725*Fourth
                Quarter*
            
            
            
            
            
            772
            
            
            
            
            
            615
            
            
            
            
            
            902
            
            
            
            
            
            750**Monthly**2007*January*
            
            
            R$
            
            
            987
            
            
            R$
            
            
            923
            
            
            R$
            
            
            1,104
            
            
            R$
            
            
            1,025*February*
            
            
            
            
            
            1,039
            
            
            
            
            
            968
            
            
            
            
            
            1,132
            
            
            
            
            
            1,030*March*
            
            
            
            
            
            1,073
            
            
            
            
            
            990
            
            
            
            
            
            1,134
            
            
            
            
            
            1,027*April*
            
            
            
            
            
            1,181
            
            
            
            
            
            1,073
            
            
            
            
            
            1,220
            
            
            
            
            
            1,131*May*
            
            
            
            
            
            1,321
            
            
            
            
            
            1,190
            
            
            
            
            
            1,335
            
            
            
            
            
            1,215*June*
            
            
            
            
            
            1,418
            
            
            
            
            
            1,320
            
            
            
            
            
            1,430
            
            
            
            
            
            1,3132006*December*
            
            
            R$
            
            
            917
            
            
            R$
            
            
            850
            
            
            R$
            
            
            1,025
            
            
            R$
            
            
            951*November*
            
            
            
            
            
            945
            
            
            
            
            
            900
            
            
            
            
            
            1,054
            
            
            
            
            
            993









**ADRs**




AmBev
      has
      registered two classes of ADSs pursuant to the Securities Exchange Act: ADSs
      evidenced by ADRs representing 100 preferred shares, and ADSs evidenced by
      ADRs
      representing 100 common shares. The ADSs have been listed on the New York Stock
      Exchange since September 15, 2000 and trade under the symbols “ABV.c” (ADSs
      representing AmBev common shares) and “ABV” (ADSs representing AmBev preferred
      shares).


-85-
 *Table
          of Contents*




As
      of
      April 30, 2007, there were 14 registered holders of our common ADSs, with
      4,518,764 ADS outstanding. As of April 30, 2007, there were 17 registered
      holders of our preferred ADSs, with 61,040,704 ADS outstanding.




The
      information presented in the table below represents, for the indicated periods,
      the reported high and low closing sales prices of ADRs quoted in U.S. dollars
      on
      the New York Stock Exchange. All shares prices have been restated to reflect
      AmBev’s stock bonus issued on May 31, 2005.





**Trading
                Prices on the New York Stock Exchange: ADRs Representing 100 Common
                and
                Preferred Shares****Per
                1,000 Common Shares****ADR**
            
            **Per
                1,000 Preferred Shares ADR****High**
            
            **Low**
            
            **High**
            
            **Low**(*in
                U.S.$*)
            
            (*in
                U.S.$*)**Annual**2006
            
            
            U.S.$
            
            
            44.06
            
            
            U.S.$
            
            
            31.59
            
            
            U.S.$
            
            
            49.14
            
            
            U.S.$
            
            
            34.022005
            
            
            
            
            
            43.75
            
            
            
            
            
            21.45
            
            
            
            
            
            40.43
            
            
            
            
            
            20.992004
            
            
            
            
            
            43.38
            
            
            
            
            
            17.08
            
            
            
            
            
            24.49
            
            
            
            
            
            14.012003
            
            
            
            
            
            17.17
            
            
            
            
            
            9.94
            
            
            
            
            
            22.05
            
            
            
            
            
            11.242002
            
            
            
            
            
            15.63
            
            
            
            
            
            8.48
            
            
            
            
            
            18.58
            
            
            
            
            
            9.25**Quarterly**2007*First
                Quarter*
            
            
            U.S.$
            
            
            52.15
            
            
            U.S.$
            
            
            42.67
            
            
            U.S.$
            
            
            54.96
            
            
            U.S.$
            
            
            47.75*Second
                Quarter*
            
            
            
            
            
            74.59
            
            
            
            
            
            52.15
            
            
            
            
            
            75.12
            
            
            
            
            
            54.962006*First
                Quarter*
            
            
            U.S.$
            
            
            37.70
            
            
            U.S.$
            
            
            33.25
            
            
            U.S.$
            
            
            44.35
            
            
            U.S.$
            
            
            38.54*Second
                Quarter*
            
            
            
            
            
            43.84
            
            
            
            
            
            31.59
            
            
            
            
            
            48.57
            
            
            
            
            
            34.02*Third
                Quarter*
            
            
            
            
            
            40.50
            
            
            
            
            
            34.95
            
            
            
            
            
            45.90
            
            
            
            
            
            38.71*Fourth
                Quarter*
            
            
            
            
            
            44.06
            
            
            
            
            
            38.55
            
            
            
            
            
            49.14
            
            
            
            
            
            42.572005*First
                Quarter*
            
            
            U.S.$
            
            
            43.75
            
            
            U.S.$
            
            
            35.00
            
            
            U.S.$
            
            
            26.55
            
            
            U.S.$
            
            
            20.99*Second
                Quarter*
            
            
            
            
            
            25.50
            
            
            
            
            
            21.45
            
            
            
            
            
            31.24
            
            
            
            
            
            23.26*Third
                Quarter*
            
            
            
            
            
            30.11
            
            
            
            
            
            23.65
            
            
            
            
            
            37.29
            
            
            
            
            
            29.30*Fourth
                Quarter*
            
            
            
            
            
            34.70
            
            
            
            
            
            27.15
            
            
            
            
            
            40.43
            
            
            
            
            
            33.27**Monthly**2007*January*
            
            
            U.S.$
            
            
            46.54
            
            
            U.S.$
            
            
            42.67
            
            
            U.S.$
            
            
            51.96
            
            
            U.S.$
            
            
            47.83*February*
            
            
            
            
            
            49.33
            
            
            
            
            
            45.67
            
            
            
            
            
            54.13
            
            
            
            
            
            48.33*March*
            
            
            
            
            
            52.15
            
            
            
            
            
            45.88
            
            
            
            
            
            54.96
            
            
            
            
            
            47.75*April*
            
            
            
            
            
            57.99
            
            
            
            
            
            52.15
            
            
            
            
            
            60.02
            
            
            
            
            
            54.96*May*
            
            
            
            
            
            67.86
            
            
            
            
            
            57.30
            
            
            
            
            
            68.60
            
            
            
            
            
            59.10*June*
            
            
            
            
            
            74.59
            
            
            
            
            
            66.38
            
            
            
            
            
            75.12
            
            
            
            
            
            66.162006*November*
            
            
            U.S.$
            
            
            42.38
            
            
            U.S.$
            
            
            39.44
            
            
            U.S.$
            
            
            47.37
            
            
            U.S.$
            
            
            44.03*December*
            
            
            
            
            
            44.06
            
            
            
            
            
            41.31
            
            
            
            
            
            49.14
            
            
            
            
            
            46.00









**B.**
            **Regulation
                of the Brazilian Securities
                Market**




The
      Brazilian securities markets are 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 markets are governed by Law No. 6,385 dated December 7,
      1976 (the “Brazilian Securities Law”), and by Brazilian Corporate 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
      Brazilian Corporate Law, a company is either publicly held (listed), such as
      AmBev, whose shares are publicly traded on the Bovespa, or privately held
      (unlisted). All listed companies are registered with the CVM and are subject
      to
      reporting and regulatory requirements. The Brazilian Corporate 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 Bovespa 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 Bovespa a company must apply for registration with the CVM and the
      Bovespa.


-86-
 *Table
          of Contents*




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
      are
      sometimes 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**




Bovespa
      is the only Brazilian stock exchange on which private equity and private debt
      may be traded. Bovespa is a not-for-profit entity owned by its member brokerage
      firms. Trading on Bovespa is limited to member brokerage firms.




Bovespa
      trading sessions are from 10:00 a.m. to 5:00 p.m., São Paulo time. During
      daylight saving time in the United States, the sessions are held from 9:00
      a.m.
      to 4:00 p.m., São Paulo time (closing call is from 4:55 p.m. to 5:00 p.m.).
      Equity trading is executed fully electronically through an order-driven trading
      system called *Megabolsa* .
      Additionally, the home broker system through the Internet has been established
      allowing retail investors to transmit orders directly to the Bovespa. Bovespa
      also permits trading from 5:45 p.m. to 7:00 p.m. on an online system connected
      to *Megabolsa* 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 Bovespa may also be traded off the
      exchange under specific circumstances, but such trading is very limited.




Settlement
      of transactions is effected three business days after the trade date, without
      adjustment for inflation. 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 clearing house for Bovespa is *Companhia
      Brasileira de Liquidação e Custódia* (“CBLC”), which is owned by Bovespa and its members.




In
      order
      to better control volatility, Bovespa 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 15% compared to the previous day no more pauses are taken. 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, 2006, the aggregate market
      capitalization of all the companies listed on Bovespa was equivalent to
      approximately R$1,545,000 million. 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 remainder 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.
      During the year ended December 31, 2006, the ten most actively traded issues
      represented approximately 46.8% of the total volume of shares traded on Bovespa,
      comparable to the 51.3% of total volume in 2005.




Trading
      on Brazilian stock exchanges by non-residents of Brazil is subject to
      limitations under Brazilian foreign investment legislation. See “Key
      Information—Exchange Rate Information—Exchange Controls” and “Additional
      Information—Memorandum and Articles of Association—Restrictions on Foreign
      Investment”.


-87-
 *Table
          of Contents*




**ITEM
              10.**
            **ADDITIONAL
                INFORMATION**




**A.**
            **Memorandum
                and Articles of
                Association**




Set
      forth
      below is a brief summary of the material provisions concerning our preferred
      shares, common shares, bylaws and the Brazilian Corporate Law. In Brazil, the
      principal governing document of a corporation is the company’s bylaws
      (“ *Estatuto
      Social* ”).
      This
      description is qualified in its entirety by reference to Brazilian Corporate
      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.ambev-ir.com). Information on the trading
      market for our preferred shares is set forth under “The Offer and
      Listing—Principal Market and Trading Market Price Information” and information
      on ownership of our shares is set forth under “Major Shareholders and Related
      Party Transactions—Major Shareholders”.




Our
      capital stock is comprised of preferred shares and common shares, all without
      par value. At April 30, 2007, there were 28,205,233,353 total preferred shares
      outstanding and 34,429,161,852  total common shares outstanding, excluding
      the shares held in treasury. We are authorized to increase our capital upon
      the
      decision of our Board of Directors, without the need to amend our bylaws, up
      to
      70,000,000,000 shares. There are no other classes or series of preferred shares
      outstanding.




Each
      common share entitles the holder thereof to one vote at meetings of our
      shareholders. Holders of common shares are not entitled to any preference
      relating to our dividends or other distributions or any preference upon our
      liquidation.




Each
      preferred share is non-voting, may not be converted into a common share, and
      is
      entitled to:




(i)
            priority
                in the reimbursement of capital in case of company’s liquidation;
                and




(ii)
            the
                right to receive dividends in an amount per share at least 10% higher
                than
                the amount per share paid to holders of common
                shares.




See
      “Voting Rights” for more information regarding the voting rights of our
      preferred shares.




Although
      Law No. 10,303/01 amended the Brazilian Corporate Law to establish that the
      number of non-voting shares or shares with limited voting rights, such as our
      preferred shares, may not exceed half (50%) of the total number of issued
      shares, since AmBev was incorporated prior to the enactment of Law No.
      10,303/01, it is allowed by law to keep the existing proportion between
      common shares and preferred shares - i.e., the number of its non-voting shares
      may not exceed two-thirds of the total number of its shares.




The
      current members of our Board of Directors were elected by the controlling
      shareholders of our common shares. Board members, regardless of the shareholder
      they represent, owe fiduciary duties towards the Company and all of its
      shareholders. At the same time, any director appointed by shareholders bound
      by
      a shareholders’ agreement is also bound by the terms of such agreement. For
      further information on this matter see “Major Shareholders and Related Party
      Transactions—Major Shareholders—AmBev Shareholders’ Agreement”.




**General**




Our
      registered name is Companhia de Bebidas das Américas - AmBev and our registered
      office is in São Paulo, SP, Brazil. Our registration number with the São Paulo
      Commercial Registry is 35,300,157,770. AmBev’s principal corporate purposes
      include the production and sale of beer, CSDs and other beverages. A more
      detailed description of AmBev’s purposes can be found in Chapter I, Article 3 of
      AmBev’s bylaws.




**Board
      of Directors**




In
      accordance with the Brazilian Corporate 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
      AmBev’s Shareholders’ Agreement.




According
      to the general principles of the Brazilian Corporate Law, if a director or
      an
      executive officer has a conflict of interest with the company in connection
      with
      any proposed transaction, the director or executive officer may not vote in
      any
      decision 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 transcription in the minutes of the meeting. In any
      case, a director or an executive officer may not transact any business with
      the
      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 may
      have
      an interest can only be approved if carried out on an arm’s-length
      basis.


-88-
 *Table
          of Contents*




Our
      bylaws and the Brazilian Corporate Law require that our directors be
      shareholders of the Company. Ownership of one share is sufficient to satisfy
      this condition.




**Dividends
      and Reserves**




The
      discussion below summarizes the main provisions of the Brazilian Corporate
      Law
      regarding the establishment of reserves by corporations and rules with respect
      to the distribution of dividends, including provisions regarding the interest
      on
      shareholders’ equity.




***Calculation
      of Distributable Amounts***




At
      each
      Annual Shareholders’ meeting, our Board of Directors is required to propose how
      the Company’s net earnings for the preceding fiscal year are to be allocated.
      For purposes of Brazilian Corporate Law, a company’s net income after income
      taxes and social contribution taxes for such 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 income” for such
      fiscal year. In accordance with the Brazilian Corporate Law, an amount equal
      to
      such “adjusted income” (which we will refer to as the “distributable amount”)
      will be available for distribution to shareholders in any particular year.
      Such
      distributable amount is subject to:




·
            Reductions
                that may be caused by amounts contributed for the purpose of meeting
                the
                charges of the assistance foundation (in our case, FAHZ) 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.




***Mandatory
      Dividend***




AmBev
      is
      required by its bylaws to distribute to shareholders as dividends in respect
      to
      each fiscal year ending on December 31 an amount not less than 35% of the
      distributable amount (mandatory dividend). In addition to the 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, dividend payments may be implemented in advance,
      during the fiscal year to which it is related, upon the decision of the Board
      of
      Directors. Any amount paid as a dividend in advance will be considered by the
      end of the fiscal year as part of the mandatory dividend owed to
      shareholders.




In
      addition, the mandatory dividend, either the full amount or a portion thereof,
      may not be paid in any given year should the Board of Directors consider that
      such payment is incompatible with the company’s financial situation, subject to
      shareholder approval. While the law does not establish the circumstances in
      which payment of the mandatory dividend is “incompatible” with a company’s
      financial situation, it is generally agreed that a company is allowed not to
      pay
      the mandatory dividend if such payment threatens the existence of the company
      as
      a going concern or harms its normal course of operations. Our *Conselho
      Fiscal* must
      opine on the non-payment of mandatory dividends, and the Company’s management is
      supposed to provide to the CVM, no later than five business days after such
      a
      decision is taken, a report explaining the reasons considered by the Board
      of
      Directors.




Any
      postponed payment of mandatory dividends must be allocated as a special reserve.
      Any remaining balance of such reserve not absorbed by losses in subsequent
      fiscal years must be paid to shareholders as soon as the Company’s financial
      situation allows.




***Dividend
      Preference of Preferred Shares***




Pursuant
      to AmBev’s bylaws, preferred shares are entitled to dividends 10% greater than
      the dividends to be paid to common shares.




***Payment
      of Dividends***




Under
      Brazilian Corporate Law any holder of record of shares at the time of a dividend
      declaration is entitled to receive dividends, which are generally required
      to be
      paid within 60 days following the date of such declaration, unless a
      shareholders’ resolution sets forth another date of payment, which, in either
      case, must occur prior to the end of the fiscal year in which such dividends
      were declared. AmBev’s bylaws do not provide for a time frame for payment of
      dividends. The mandatory dividend is satisfied through payments made in the
      form
      of dividends and interest on shareholders’ equity, which is equivalent, from an
      economic perspective, to a dividend, but is usually a tax maximizing way to
      distribute earnings to our shareholders, as it is


-89-
 *Table
          of Contents*




generally
      deductible for income tax purposes (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 have no liability 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. The preferred and common
      shares underlying our ADSs are held in Brazil by the custodian, Banco Itaú S.A.,
      as agent for the depositary (The Bank of New York), which is the registered
      owner of such AmBev shares. Payments of cash dividends and distributions, if
      any, on common and preferred shares will be made in *Reais* to the
      custodian on behalf of the depositary. The custodian will then convert such
      proceeds into U.S. dollars and will deliver such U.S. dollars to the depositary
      for distribution to the holders of ADSs. In the event that the custodian is
      unable to immediately convert the dividends in *Reais* into
      U.S. dollars, holders of the preferred and common ADSs may be adversely affected
      by devaluations or other exchange rate fluctuations before such dividends can
      be
      converted and remitted. Fluctuations in the exchange rate between the *Real* and the
      U.S. dollar may also affect the U.S. dollar equivalent of the *Real* price of
      the preferred and common shares on the Bovespa.




***Interest
      on Shareholders’ Equity***




Since
      1996 Brazilian companies are permitted to distribute earnings to shareholders
      under the concept of interest on shareholders’ equity. The amounts paid under
      this concept are generally deductible for AmBev’s income tax purposes and, as of
      the beginning of 1998, they also became deductible for social contribution
      purposes. The interest on equity is a tax deductible expense for AmBev,
      calculated using the Company’s shareholder’s equity multiplied by the *Taxa
      de Juros de Longo Prazo* (“TJLP”)
      limited in respect of any particular year to the maximum of (i) 50% current
      net
      income before the tax deduction of the interest on equity; or (ii) 50% of
      retained earnings plus any statutory earnings reserve. The TJLP is the official
      interest rate defined by the Central Bank and used as reference in long-term
      loans provided by the BNDES.




Interest
      on shareholders’ equity is treated exactly as dividends for purposes of income
      distribution. The only significant difference is that a 15% withholding tax
      is
      due by non-exempt shareholders upon receipt of such interest payment, which
      tax
      is collected by the Company on behalf of its shareholders when the distribution
      is implemented. If the shareholder is not a Brazilian resident, and is resident
      or domiciled in a low tax jurisdiction according to Brazilian tax legislation,
      the withholding tax is due at a 25% rate. According to Brazilian tax
      legislation, a jurisdiction that does not tax income, or that taxes it at a
      rate
      lower than 20%, or if the jurisdiction has rules that prevent the disclosure
      of
      the names of the equity holders in entities resident or domiciled therein,
      are
      considered low tax jurisdictions. The Brazilian Revenue Service periodically
      issues an exhaustive list naming low tax jurisdictions.




The
      net
      amount shareholders receive as interest on shareholders’ equity is deducted from
      the mandatory dividend owed to shareholders.




***Reserves***




*General*




Brazilian
      Corporate Law provides that all discretionary allocations of “adjusted income”,
      including the Unrealized Income Reserve and the Investment Reserve, are subject
      to shareholder approval and may be added to capital or distributed as dividends
      in subsequent years. In the case of Tax Incentive Reserve and the Legal Reserve,
      they are also subject to shareholders approval; however, the use of their
      respective balances is restricted to being added to capital or the absorption
      of
      losses. They cannot be used as a source for income distribution to
      shareholders.




*Legal
      Reserve*




Under
      Brazilian Corporate Law, corporations are required to maintain a “Legal Reserve”
to which they must allocate 5% of their “adjusted income” for each fiscal year
      until the balance of the reserve equals 20% of their paid-in 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
      capital.




*Contingency
      Reserve*




Under
      the
      Brazilian Corporate Law, a portion of our “adjusted 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
      such
      loss does not in fact occur or is not charged off in the event that the
      anticipated loss occurs.




*Investment
      Reserve*




Under
      Brazilian Corporate Law, a portion of a corporation’s “adjusted income” may be
      allocated for discretionary appropriations for plant expansion and other fixed
      or working capital investment projects, including share buyback programs.
      The


-90-
 *Table
          of Contents*




amounts
      appropriated in such reserves are based on a capital budget previously presented
      by management and approved by shareholders.




Pursuant
      to the Brazilian Corporate Law, the Investment Reserve balance is not allowed
      to
      be greater than a company’s capital. In the case such limit is reached,
      shareholders may vote for the amount in excess to be converted into capital
      or
      distributed as dividends.




*Unrealized
      Income Reserve*




Pursuant
      to Brazilian Corporate Law, the amount by which the mandatory dividend exceeds
      the “realized” portion of net profits for any particular year may be allocated
      to the unrealized income reserve. The “realized” portion of net profits is the
      amount by which “adjusted income” exceeds the sum of:




(i)
            Our
                net positive results, if any, from the equity method of accounting
                for
                earnings and losses of our subsidiaries and certain affiliates;
                and




(ii)
            The
                profits, gains or return obtained on transactions to be completed
                after
                the end of the following fiscal
                year.




*Tax
      Incentive Reserve*




Under
      Brazilian tax laws, a portion of “adjusted 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. The reserve is available only in connection with the acquisition
      of
      capital stock of companies undertaking specific government-approved projects.




**Voting
      Rights**




Each
      common share entitles its holder to one vote at AmBev’s shareholders’ meetings.
      Holders of preferred shares are not ordinarily entitled to vote at AmBev’s
      shareholders’ meetings.




Brazilian
      Corporate Law provides that non-voting preferred shares entitled to receive
      minimum or fixed dividends acquire full voting rights in the event that a
      company fails to pay the minimum or fixed dividends to which such shares are
      entitled for the period established by such company’s bylaws, which may not
      exceed three consecutive fiscal years. Such voting rights continue until payment
      of dividends is resumed (or until all dividends due are paid, in the case of
      preferred shares with the right to receive dividends cumulatively). The same
      rule applies to preferred shares with restricted voting rights, causing the
      suspension of the restrictions in place. Our by-laws include a similar
      provision applicable to preferred stock with minimum dividends,  if
      and when issued. Our preferred stock do not have minimum or fixed dividends
      and, therefore, our preferred shares are not entitled to receive minimum or
      fixed dividends.




**Election
      of Directors**




Each
      common share of AmBev represents one vote at any shareholders’ meeting in
      connection with the election of the Board of Directors of AmBev. Common
      shareholders holding at least 15% of voting capital or preferred shareholders
      holding at least 10% of total capital may each elect one member of the Board
      of
      Directors and its alternate member. Additionally, if such shareholders do not
      achieve such percentage, they can jointly appoint one member of the Board of
      Directors and its alternate member once they represent, together, at least
      10%
      of total capital. In order to exercise these minority rights, shareholders
      must
      prove that they have held the shares for at least the last three months. If
      such
      prerogative is exercised with the adoption of a cumulative voting procedure,
      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 the Company’s bylaws.




Shareholders
      holding shares representing at least 10% of the shares entitled to vote in
      the
      shareholders’ meeting, or such smaller percentage applicable according to a
      sliding scale determined by the CVM and based on the capital of the company
      (5%
      of the voting shares, in the case of AmBev), have the right to request that
      a
      cumulative voting procedure be adopted. Under such procedure, each voting share
      shall have as many votes as there are positions of directors to be filled,
      and
      each shareholder may cast all the votes for a single candidate or distribute
      them among various candidates.




Under
      AmBev’s bylaws and applicable law, the number of directors may be reduced to a
      minimum of three. Because the AmBev Shareholders’ Agreement provides that, as
      long as FAHZ maintains a minimum shareholding in AmBev, FAHZ shall have the
      right to appoint four members of the Board of Directors, any reduction in the
      number of such members to fewer than four would be subject to FAHZ’s
      approval.


-91-
 *Table
          of Contents*




**Liquidation**




In
      the
      event of liquidation of the Company, a general shareholders' meeting shall
      determine the form of liquidation and appoint a committee to supervise the
      process during the liquidation period. A liquidator will be appointed by the
      Board of Directors.




Upon
      liquidation, the preferred shares have an absolute preference over the common
      shares. In the event of a liquidation, the assets available for distribution
      to
      AmBev’s shareholders would be distributed first to the preferred shareholders in
      an amount equal to their pro rata share of the Company’s capital stock (AmBev’s
      capital as of May 8, 2007 was R$5,976,873,467.09), prior to making any
      distributions to AmBev’s common shareholders. In the event that the assets to be
      so distributed are insufficient to fully compensate AmBev’s preferred
      shareholders, the preferred shareholders would each receive a pro rata amount
      (based on their pro rata share of the Company’s capital stock excluding the
      common shares in such calculation) of any available assets.




Although
      FAHZ’s net assets are included for the purposes of U.S. GAAP, in the event of
      liquidation the creditors of AmBev would not have access to the assets of
      FAHZ.




**Shareholders’
      Meeting**




A
      general
      meeting is convened by publishing, no later than 15 days prior to the scheduled
      meeting date and no fewer than three times, a notice in the *Diário
      Oficial do Estado de São Paulo* and in a
      newspaper with general circulation in São Paulo, where AmBev has its registered
      office. The shareholders of AmBev have previously designated *Gazeta
      Mercantil* ,
      a local
      newspaper of the city of São Paulo for this purpose. Such notice must contain
      the agenda for the meeting.




A
      general
      meeting may be held if shareholders representing at least one-quarter of the
      voting shares are present, except in some cases provided for by law, such as
      for
      the amendment of a company’s bylaws, which requires the presence of shareholders
      representing at least two-thirds of the voting shares. If no such quorum is
      present, 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. Shareholders without voting rights may attend
      a
      general meeting and take part in the discussion of matters submitted for
      consideration.




Except
      as
      otherwise provided by law, resolutions of a general meeting are passed by a
      simple majority vote of the shares present or represented at the meeting,
      abstentions not being taken into account. Under Brazilian Corporate 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,
      as well as, in the case of items (a) and (b), the approval of shareholders
      representing a majority of the issued and outstanding preferred shares of the
      affected class in a separate special meeting held no later than one year after
      the resolution is approved:




(a)
            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;




(b)
            Modifying
                a preference, privilege or condition of redemption or amortization
                conferred on one or more classes of preferred shares, or creating
                a new
                class with greater privileges than those of the existing classes
                of
                preferred shares;




(c)
            Reducing
                the mandatory dividend;




(d)
            Merging
                AmBev with another company or consolidating or splitting
                it;




(e)
            Participating
                in a centralized group of companies (as defined under Brazilian Corporate
                Law);




(f)
            Changing
                the corporate purpose of AmBev;




(g)
            Creating
                founders’ shares; and




(h)
            Dissolving
                AmBev or ceasing its liquidation
                status.




General
      meetings can be called by the Board of Directors of AmBev. Under the Brazilian
      Corporate Law, meetings can also be convened by AmBev’s shareholders as follows:
      (i) by any shareholder if, under certain circumstances set forth in the
      Brazilian Corporate Law, the directors take more than 60 days to convene a
      general shareholders’ meeting; (ii) by shareholders holding at least 5% of
      AmBev’s total capital stock if, after a period of eight days, the directors fail
      to call a general shareholders’ meeting that has been justifiably requested by
      such shareholders; and (iii) by shareholders holding at least 5% of either
      AmBev’s voting capital stock or AmBev’s non-voting capital stock if, after a
      period of eight days, the directors fail to call a general meeting for the
      purpose of installing a *Conselho
      Fiscal* that has
      been requested by such shareholders. Additionally, under
      certain


-92-
 *Table
          of Contents*




circumstances
      set forth in the Brazilian Corporate Law, meetings can also be convened by
      AmBev’s *Conselho
      Fiscal* .
      For
      further information regarding AmBev’s *Conselho
      Fiscal* ,
      see
“Directors, Senior Management and Employees—Directors—Board
      Practices”.




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 a shareholder,
      a
      company officer or a lawyer. For a public company such as AmBev, the
      attorney-in-fact may also be a financial institution.




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 such 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
      the parties involved, without preventing the approval of the resolution for
      lack
      of the statutory quorum.




**Restrictions
      on Foreign Investment**




There
      are
      no restrictions on ownership or voting rights in respect of capital stock of
      AmBev owned by individuals or legal entities domiciled outside Brazil. For
      a
      description of voting rights, see “—Voting Rights”. The right to convert
      dividend (including interest on shareholders’ equity) payments and proceeds from
      the sale of preferred or common shares into foreign currency and to remit such
      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 “Key Information—Exchange Rate
      Information—Exchange Controls”.




**Withdrawal
      Rights**




Under
      Brazilian Corporate Law, a dissenting shareholder has the right to withdraw
      from
      AmBev and be reimbursed for the value of the common or preferred shares held,
      whenever a decision is taken at a shareholders’ meeting by a qualified quorum of
      shareholders representing at least 50% of the total outstanding voting capital
      to:




·
            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 AmBev’s
                bylaws;




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




·
            Reduce
                the mandatory dividend;




·
            Merge
                or consolidate AmBev with another
                company;




·
            Participate
                in a centralized group of companies (as defined by the Brazilian
                Corporate
                Law);




·
            Change
                the corporate objectives of AmBev;




·
            Split
                AmBev, if the new entities resulting from the split have different
                principal corporate purposes, a lower minimum mandatory dividend
                or
                participate in a centralized group of
                companies;




·
            Transform
                AmBev into another corporate type;




·
            Transform
                AmBev into a wholly-owned subsidiary of another company;
                or




·
            Approve
                the acquisition of another company, the price of which exceeds the
                limits
                set forth in Brazilian Corporate
                Law.




Furthermore,
      if a governmental entity acquires control of AmBev through expropriation of
      shares, shareholders will have the right to withdraw from AmBev and be
      reimbursed for the value of the shareholders’ equity attributable to their
      equity interest.




The
      withdrawal rights lapse 30 days after publication of the minutes of the relevant
      shareholders’ meeting in the Brazilian press. AmBev would be entitled to
      reconsider any action triggering withdrawal rights within 10 days following
      the
      expiration of such rights if the redemption of shares of dissenting shareholders
      would jeopardize the financial stability of AmBev. Shares to be purchased by
      AmBev from the dissenting shareholders exercising withdrawal rights will be
      valued at an amount equal to the ratable portion attributable to such shares
      of
      the shareholders’ equity of AmBev as shown on the last balance sheet approved at
      a general meeting of the shareholders (book value). However, if more than 60
      days have elapsed since the date of such balance sheet, dissenting shareholders
      may require that the value of their shares be calculated on the basis of a
      new
      balance sheet.
      As
      a general rule, shareholders who acquire their shares after the first notice
      convening the shareholders’ meeting or after the relevant press release
      concerning the meeting are published will not be entitled to withdrawal
      rights.




-93-
 *Table
          of Contents*




**Preemptive
      Rights**




Each
      shareholder of AmBev generally has a preemptive right to subscribe for shares
      in
      capital increases (including in the issuance of stock purchase warrants or
      convertible bonds) in proportion to its shareholdings. A minimum period of
      30
      days following the publication of notice of the capital increase is allowed
      for
      the exercise of the right, and the right is negotiable. In the event of a
      capital increase which would maintain or increase the proportion of capital
      represented by preferred or common shares, holders of preferred ADSs or common
      ADSs, as the case may be, would have preemptive rights to subscribe only to
      newly issued preferred shares or common shares, as applicable. In the event
      of a
      capital increase which would reduce the proportion of capital represented by
      preferred shares or common shares, holders of preferred ADSs or common ADSs,
      as
      the case may be, would have preemptive rights to subscribe for common shares
      or
      preferred shares, as applicable, in proportion to their shareholdings only
      to
      the extent necessary to prevent dilution of their interest in AmBev. AmBev’s
      bylaws provide that if our Board of Directors decides to increase our share
      capital within the limit of our authorized capital through sale in stock
      exchanges, public offerings or public tender offers, no preemptive rights 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 ownership
      plan, is not subject to preemptive rights.




**Form
      and Transfer**




Brazilian
      law provides that ownership of shares of capital stock of 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 Itaú S.A. currently maintains
      AmBev’s share ownership records.




Because
      the preferred shares and common shares are in registered book-entry form, a
      transfer of such preferred and common shares is made under the rules of the
      Brazilian Corporate Law, which provides that a transfer of shares is effected
      by
      an entry made by the registrar for AmBev’s shares in its books, by debiting the
      share account of the transferor and crediting the share account of the
      transferee.




Transfers
      of preferred and common shares by a foreign investor are made in the same way
      and executed by such investor’s local agent on the investor’s behalf except
      that, if the original investment was registered with the Central Bank pursuant
      to the foreign investment regulations, the foreign investor should also seek
      amendment, if necessary, through its local agent, of the corresponding
      electronic registration to reflect the new ownership.




The
      Bovespa operates a central clearing system. A holder of our shares may choose,
      at its discretion, to participate in this system, and all shares elected to
      be
      put into the 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). The
      fact
      that these shares 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,
      such as the holders of AmBev’s common shares, must publicly disclose their
      shareholder ownership, as well as disclose any 5% increase or
      decrease.




**Other
      Significant Provisions of Brazilian Corporate Law**




Brazilian
      Corporate Law also requires the following:




·
            Upon
                a sale of control, the acquiror 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;




·
            If
                provided for in the bylaws, disputes among our shareholders will
                be
                subject to arbitration. Our bylaws currently do not provide for
                arbitration;




·
            De-listing
                of a public company is subject to an administrative proceeding before
                the
                CVM, having as a condition the conduction of a tender offer by the
                controlling shareholder or the corporation itself for the acquisition
                of
                all outstanding shares (defined as those owned by shareholders other
                than
                the controlling shareholder, officers and directors) at a fair price,
                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 de-listing (for this purpose, the free
                float
                of shares must be considered those held by shareholders that have
                either
                accepted the de-listing 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 is required
                for all
                the outstanding shares in that class. The same requirement applies
                whenever (i) 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’s Normative Ruling No. 361 became effective, except for
                public companies existing in September 5, 2000, in which case this
                initial
                date will prevail), acquires a further interest of 10% or more of
                that
                same class of shares within a 12-month period; and (ii) the CVM
                determines, within six months after being informed, that the acquisition
                restricts the liquidity of the
                shares;




-94-
 *Table
          of Contents*




·
            Upon
                the occurrence of a tender offer aiming at delisting the Company
                or
                through which our controlling shareholders 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 the non-controlling shareholders
                have
                the right to veto the choice of the independent accountant by the
                Board;




·
            Our
                controlling shareholders, the shareholders that elect members to
                our Board
                of Directors and to the*Conselho
                Fiscal*,
                the members of our Board of Directors and*Conselho
                Fiscal*and our executive officers are required to disclose any purchase
                or sale
                of our shares to the CVM and to the Bovespa;
                and




·
            The
                chairman of any shareholders’ or Board of Directors’ meeting shall
                disregard any vote that is rendered against provisions of any
                shareholders’ agreement if that shareholders’ agreement has been duly
                filed with us. The AmBev Shareholders’ Agreement has been duly filed with
                us.




**B.**
            **Material
                Contracts**




Except
      for 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**




The
      agreement originally between the shareholders of Brahma and Antarctica to form
      AmBev, including the amendments inserted in connection with the transaction
      between, among others, AmBev and InBev, and the other amendments is discussed
      in
“Major Shareholders Related and Party Transactions—Major Shareholders—AmBev
      Shareholders’ Agreement.”




**Acquisitions,
      Dispositions and Joint Ventures**




We
      have
      discussed the details of some material acquisitions and agreements related
      thereto in “Information on the Company—InBev-AmBev Transactions” and
“Information on the Company—Interest in Quinsa”. In addition, we are a party to
      the following material acquisitions, dispositions and joint ventures:




***Pepsi***




In
      1997,
      we acquired Pepsi-Cola Engarrafadora Ltda. and PCE Bebidas Ltda., PepsiCo
      bottlers in southern and southeastern Brazil, and at the same time acquired
      the
      exclusive rights to produce, sell and distribute Pepsi CSD products in
      northeastern Brazil. In 1999, we obtained the exclusive rights to produce,
      sell
      and distribute Pepsi CSD products throughout Brazil. In October 2000, following
      the combination, we entered into a new franchise agreement with PepsiCo which
      terminated the Brahma franchise agreement and granted us sole bottler and
      distributor rights for Pepsi CSD products in Brazil. In January 2002, we
      expanded our partnership with PepsiCo to include the production, sale and
      distribution of *Gatorade* .
      The *Gatorade* agreement was submitted for CADE’s review. CADE approved the transaction with
      certain restrictions, including the sale of the trademark *Marathon* ,
      which
      was concluded on April 13, 2006. See “Consolidated Financial Statements and
      Other Financial Information—Legal Proceedings—Joint Ventures and Alliances”. Our
      PepsiCo franchise agreement expires in 2017, and, thereafter, will be
      automatically renewed for additional ten-year terms absent two years’ prior
      notice by either party of its intent not to renew the contract following the
      expiration of the initial or any subsequent term.




In
      October 2003, by acquiring certain assets of Embotelladora Rivera, AmBev became
      PepsiCo’s exclusive bottler for northern Peru and Lima. See “Material Contracts
      - Acquisitions, Dispositions and Joint Ventures - AmBevPeru.”




In
      February 2004, we acquired a 66% stake in Embodom (currently AmBevDominicana),
      the Pepsi bottler in the Dominican Republic. See “Additional Information -
      Material Contracts - Acquisitions, Dispositions and Joint Ventures -
      AmBevDominicana.”




***Quinsa***




On
      August
      8, 2006 AmBev announced that it had acquired from BAC all the remaining shares
      in Quinsa for a total purchase price of approximately US$1,252.5 million. The
      acquisition was financed through a combination of cash flow and the issuance
      of
      debt in the local market. See “Additional Information—Debt Issuances”. As a
      result of the transaction, AmBev’s equity interest in Quinsa increased to
      approximately 91% of its total share capital. On January 25, 2007, AmBev’s
      subsidiary BAH launched a voluntary offer to purchase up to 6,872,480 Class
      A
      shares and up to 8,661,207 Class B shares (including Class B shares held as
      ADSs) of Quinsa. The offer expired on April 19, 2007, and since the minimum
      tender condition of the offer was not satisfied, the offer was withdrawn without
      BAH purchasing any Class A shares or Class B shares (see“— Information on the
      Company - History and Development of the Company - Overview”).




-95-
 *Table
          of Contents*




**The
      Antitrust Performance Agreement**




We
      are
      currently subject to one antitrust performance agreement in Brazil. See
“Financial Information—Consolidated Financial Statements and Other Financial
      Information—Legal Proceedings”. This agreement was signed with CADE and relates
      to the Brahma and Antarctica combination.




**Debt
      Issuances**




In
      December 2001, CBB issued U.S.$500 million 10.5% notes due December 2011 in
      a
      transaction exempted from registration under the U.S. Securities Act of 1933,
      fully guaranteed by AmBev. This offering significantly increased the average
      maturity of AmBev outstanding debt. The transaction was priced at 98.56% of
      the
      nominal principal amount with a coupon rate of 10.5%. On October 4, 2002, we
      consummated an SEC registered exchange offer. These notes contain certain
      covenants and events of default which, if triggered, may cause accelerated
      amortization.




In
      September 2003, CBB issued U.S.$500 million 8.75% notes due September 2013
      in a
      transaction exempted from registration under the U.S. Securities Act of 1933,
      fully guaranteed by AmBev. The transaction was priced at 99.67% of the nominal
      principal amount with a coupon rate of 8.75%.  We consummated an SEC
      registered exchange offer on September 15, 2004. These notes contain certain
      covenants and events of default which, if triggered, may cause accelerated
      amortization.




With
      the
      merger of CBB into AmBev in May 31, 2005, AmBev succeeded in all rights and
      obligations of CBB under the 2011 notes and the 2013 notes.




On
      June
      8, 2006, our Board of Directors approved a public offering of unsecured
      non-convertible debentures denominated in *Reais* in the
      Brazilian market of up to R$2,600 million. The issuance was registered with
      the
      CVM and its final amount was approximately R$2,065.0 million. Proceeds of such
      issuance, which was closed on August 7, 2006, were used to finance the purchase
      of shares in Quinsa. See “History and Development of the Company —Interest on
      Quinsa” and “Capital Investment Program”.




**License
      Agreements**




We
      have a
      number of important license agreements, including a cross-license agreement
      with InBev that allows us to exclusively produce, distribute and market the *Stella
      Artois* and *Beck’s* brands
      in most of Latin America, and allows InBev to exclusively produce, distribute
      and market the *Brahma* brand in
      Europe, Asia, Africa, Cuba and the United States, in addition to a license
      agreement among us and InBev and according to which we may distribute *Stella
      Artois* branded
      beer in Canada. See “Information on the Company—Licenses”. See also, for the
      AmBev-InBev cross-license agreement, “Major Shareholders and Related Party
      Transactions—Material Related Party Transactions”, and for the exclusive
      bottling agreements with PepsiCo, “—Material Contracts—Acquisitions,
      Dispositions and Joint Ventures—Pepsi”.




**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 taxes payable and (2) ICMS deferrals. In return, we are committed
      to
      meeting 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. While there has been no decisions by the Brazilian
      Supreme Court declaring any such state laws unconstitutional, no assurance
      can
      be given that the above sales tax deferrals and tax credit programs would not
      be
      suspended in the future as a result of an adverse decision of the Brazilian
      Supreme Court. See “Operating and Financial Review and Prospects—Sales tax
      deferrals and other tax credits” and “Key Information—Risk Factors—The pending
      tax reform in Brazil may increase our tax burden”.




**C.**
            **Exchange
                Controls and other Limitations Affecting Security
                Holders**




There
      are
      no restrictions on ownership of our ADSs or capital stock by individuals or
      legal entities domiciled outside Brazil. However, the right to convert dividend
      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
      restrictions under foreign investment legislation which generally requires,
      among other things, that the relevant investment be registered with the Central
      Bank. These restrictions on the remittance of foreign capital abroad could
      hinder or prevent the custodian for the preferred shares or common shares
      represented by ADSs, or holders who have exchanged ADSs for preferred shares
      or
      common shares, from converting dividends, distributions or the proceeds from
      any
      sale of preferred shares or common shares, as the case may be, into U.S. dollars
      and remitting such U.S. dollars abroad. Delays in, or refusal to grant, any
      required government approval for conversions of Brazilian currency payments
      and
      remittances abroad of amounts owed to holders of ADSs could adversely affect
      holders of ADRs.




-96-
 *Table
          of Contents*




Under
      Resolution No. 2,689 of the National Monetary Council, 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. 2,689, the
      definition of foreign investor includes individuals, legal entities, mutual
      funds and other collective investment entities, domiciled or headquartered
      outside Brazil.




Under
      Resolution No. 2,689, 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;




·
            Complete
                the appropriate foreign investor registration
                form;




·
            Register
                as a foreign investor with the CVM;
                and




·
            Register
                its foreign investment with the Central
                Bank.




Securities
      and other financial assets held by foreign investors pursuant to Resolution
      No.
      2,689 must be registered or maintained in deposit accounts or under the custody
      of an entity duly licensed by the Central Bank and the CVM. In addition,
      securities trading is restricted to transactions carried out on stock exchanges
      or through organized over-the-counter markets licensed by the CVM, except for
      subscription, share dividends, conversion of debentures into shares, securities
      indexes, purchase and sale of investment funds quotas and, if permitted by
      the
      CVM, going private transactions, canceling or suspension of trading. Moreover,
      the offshore transfer or assignment of the securities or other financial assets
      held by foreign investors pursuant to Resolution No. 2,689 are prohibited,
      except for transfers resulting from a corporate reorganization, or occurring
      upon the death of an investor by operation of law or will.




Resolution
      No. 1,927 of the National Monetary Council, which is the restated and amended
      Annex V to Resolution No. 1,289 of the National Monetary Council, which we
      call
      the Annex V Regulations, provides for the issuance of depositary receipts in
      foreign markets in respect of shares of Brazilian issuers. It provides that
      the
      proceeds from the sale of ADSs by holders of ADRs outside Brazil are free of
      Brazilian foreign investment controls and holders of ADSs who are not resident
      in a tax-haven jurisdiction, as defined below (see “—Taxation”), will be
      entitled to favorable tax treatment. See “—Brazilian Tax Considerations” for
      more information on the Brazilian tax implications on the acquisition, ownership
      and disposition of our securities.




An
      electronic registration has been issued by the custodian in the name of The
      Bank
      of New York, the depositary, with respect to the ADSs. Pursuant to this
      electronic registration, the custodian and the depositary are able to convert
      dividends and other distributions with respect to the preferred shares or common
      shares represented by ADSs into foreign currency and to remit the proceeds
      outside Brazil. If a holder exchanges ADSs for preferred shares or common
      shares, the holder may continue to rely on the custodian’s electronic
      registration for only five business days after the exchange. After that, the
      holder must seek to obtain its own electronic registration with the Central
      Bank
      under Law No. 4,131 or Resolution No. 2,689. Thereafter, unless the 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 preferred shares or common shares.
      A
      holder that obtains an electronic registration generally will be subject to
      less
      favorable Brazilian tax treatment than a holder of ADSs. See
“—Taxation”.




There
      were previously two foreign exchange markets in Brazil. Currently, with the
      enactment of National Monetary Council Resolution No. 3,265 of March 4, 2005,
      the foreign exchange markets have been consolidated to form one exchange market.
      All transactions involving foreign currency in the Brazilian market, whether
      carried out by investors resident or domiciled in Brazil or investors resident
      or domiciled abroad, must now be conducted in such exchange market, through
      institutions authorized by the Central Bank, subject to the Central Bank rules.
      See “Key Information—Exchange Rates Information”.




Under
      Brazilian law, whenever there is a serious imbalance in Brazil’s balance of
      payments or reasons to foresee a serious imbalance, the Brazilian government
      may
      impose temporary restrictions on the remittance to foreign investors of the
      proceeds of their investments in Brazil, and on the conversion of Brazilian
      currency into foreign currencies. Such restrictions may hinder or prevent the
      custodian or holders who have exchanged ADSs for underlying preferred shares
      or
      common shares from converting distributions or the proceeds from any sale of
      such shares, as the case may be, into U.S. dollars and remitting such U.S.
      dollars abroad.




-97-
 *Table
          of Contents*




**D.**
            **Taxation**




The
      following discussion summarizes the principal Brazilian and U.S. Federal income
      tax consequences of acquiring, holding and disposing of notes, preferred shares,
      preferred ADSs, common shares or common ADSs. This discussion is not a
      comprehensive discussion of all the tax considerations that may be relevant
      to a
      decision to purchase, hold or dispose notes, preferred shares or preferred
      ADSs,
      common shares or common 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 the preferred shares or
      preferred ADSs or common shares or common 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 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 any of the notes, preferred shares, preferred ADSs,
      common shares or common ADSs. This summary is also based on representations
      of
      the depositary and on the assumption that each obligation in the Deposit
      Agreement relating to the preferred ADSs and common ADSs, as applicable, and
      the
      related documents will be performed in accordance with its terms.




**Brazilian
      Tax Considerations**




The
      following discussion summarizes the principal Brazilian tax consequences of
      the
      acquisition, ownership and disposition of preferred shares, preferred ADSs,
      common shares, or common 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
      preferred or 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 preferred shares,
      preferred ADSs, common shares or common ADSs. It 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 preferred shares,
      preferred ADSs, common shares or common ADSs.




Taxation
      of Dividends .
      Dividends, including dividends in kind, paid by AmBev to The Bank of New York
      in
      respect of the preferred or common shares underlying the respective ADSs, or
      to
      a Non-Brazilian Holder with respect to preferred or common shares, generally
      will not be subject to Brazilian withholding tax.




Taxation
      of Gains .
      Gains
      realized outside Brazil by a Non-Brazilian Holder on the disposition of assets
      located in Brazil, including preferred or common shares, to a Brazilian resident
      or to a non-resident of Brazil are subject to Brazilian tax. In this case,
      gains
      would be subject to a 15% withholding tax rate, except if the Non-Brazilian
      Holder is located in a tax-haven jurisdiction, as defined by Brazilian law,
      in
      which case the applicable rate would be 25%. A tax-haven jurisdiction is defined
      as a jurisdiction which does not tax income or which has an income tax rate
      lower than 20%, and the Brazilian tax authorities regularly issue a list of
      jurisdictions which are considered tax-haven jurisdictions. 1




We
      understand that ADSs are not assets located in Brazil for the purposes of the
      above-mentioned taxation. However, we are unable to predict how Brazilian courts
      would view this issue, and to date, there is no judicial or administrative
      precedent on this specific matter. The withdrawal of preferred or common ADSs
      in
      exchange for preferred or common shares is not subject to Brazilian tax. The
      deposit of AmBev’s preferred or common shares in connection with the issuance of
      preferred or common ADSs is not subject to Brazilian tax, provided that the
      preferred or common shares are registered under the Foreign Investment
      Regulations —Resolution No. 2,689—and the investor is not located in a tax-haven
      jurisdiction. There is a special taxation system applicable
      to Non-Brazilian Holders (provided investments are duly registered under the
      Foreign Investment Regulations—Resolution No. 2,689—and with the CVM and other
      conditions are fulfilled). Upon receipt of the underlying preferred or common
      shares, a Non-Brazilian Holder who qualifies under the Foreign Investment
      Regulations will be entitled to register the U.S. dollar value of such shares
      with the Central Bank as described below.




Non-Brazilian
      Holders are generally subject to withholding tax at a rate of 15% on gains
      realized on sales or exchanges in Brazil of preferred or common shares that
      occur on a Brazilian stock exchange, unless (a) such a sale is made within
      five
      business days of the withdrawal of such preferred or common shares in exchange
      for ADSs and the proceeds of such sale are remitted abroad within such five-day
      period and the investor is not located in a tax-haven jurisdiction, or (b)
      such
      a sale is made under the Foreign Investment Regulations—Resolution No. 2,689—by
      Non-Brazilian Holders which register with the CVM, in which cases such gains
      are
      exempt. If the foreign investor is located in a tax-haven jurisdiction, it
      will
      be subject to the same general taxation rules applicable to Brazilian residents.
      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.









1
                The
                    countries currently included in this list, according to Normative
                    Instruction of the Brazilian Federal Revenue Service No. 188/02,
                    are:
                    American Samoa, Andorra, Anguilla, Antigua and Barbuda, Aruba,
                    Bahamas,
                    Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Campione
                    D’Italia, Cayman Islands, Channel Islands (Jersey, Guernsey, Alderney
                    and
                    Sark), Cook Islands, Costa Rica, Cyprus, Djibouti, Dominica,
                    Gibraltar,
                    Grenada, Hong Kong, Isle of Man, Lebanon, Lebuan, Liberia, Liechtenstein,
                    Luxembourg (only to holding companies governed by Law dated 7/31/1929),
                    Macau, Madeira Islands, Maldives, Malta, Marshall Islands, Mauritius,
                    Monaco, Montserrat, Nauru, Netherland Antilles, Niue, Oman, Panama,
                    Saint
                    Kitts and Nevis, Saint Lucia, Saint Vincent and The Grenadines,
                    San
                    Marino, Seychelles, Singapore, Tonga, Turks and Caicos Islands,
                    United
                    Arab Emirates, US Virgin Islands, Vanuatu and Western
                    Samoa.




-98-
 *Table
          of Contents*




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 currency amount registered with the Central Bank and will
      accordingly be subject to tax at a rate of 15% (or 25% if domiciled in a
      tax-haven jurisdiction). There can be no assurance that the current preferential
      treatment for holders of ADSs and Non-Brazilian Holders of preferred and common
      shares under the Foreign Investment Regulations 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 preferred
      or common shares.




Any
      exercise of preemptive rights relating to the preferred or common shares or
      preferred or common ADSs of AmBev will not be subject to Brazilian taxation.
      Any
      exercise of preemptive rights relating to the common shares or ADSs will not
      be
      subject to Brazilian taxation. Gains on the sale of preemptive rights relating
      to the common shares will be treated differently for Brazilian tax purposes
      depending on (i) whether the sale is made by The Bank of New York or the
      investor and (ii) 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 15%, if the ADSs were to be considered assets located in Brazil by
      the
      tax authorities.




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
      a company’s shareholders’ equity. Such interest is limited to the shareholders’
equity multiplied by the TJLP, as determined by the Central Bank from time
      to
      time, and cannot exceed the greater of:




·
            50%
                of net income (before taking such distribution and any deductions
                for
                income taxes into account) for the period in respect of which the
                payment
                is made; or




·
            50%
                of retained earnings.




Distributions
      of interest on shareholders’ equity in respect of the preferred or 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% (25% if the payee is domiciled in a tax-haven jurisdiction)
      and shall be deductible by AmBev as long as the payment of a distribution of
      interest is approved in a general meeting of shareholders of AmBev. The
      distribution of interest on shareholders’ equity may be determined by the Board
      of Directors of AmBev. No assurance can be given that the Board of Directors
      of
      AmBev will not determine that future distributions of profits may be made by
      means of interest on shareholders’ equity instead of by means of dividends.




The
      amounts paid as distribution of interest on shareholders’ equity are deductible
      for corporate income tax and social contribution on profit, both of which are
      taxes levied on AmBev’s profits.




**Other
      Relevant Brazilian Taxes**




There
      are
      no Brazilian inheritance, gift or succession taxes applicable to the ownership,
      transfer or disposition of preferred or common shares or preferred or common
      ADSs by a Non-Brazilian Holder except for gift and inheritance taxes which
      are
      levied by some states of Brazil on gifts made or inheritances bestowed by
      individuals or entities not resident or domiciled in Brazil or domiciled within
      the state to individuals or entities resident or domiciled within such state
      in
      Brazil. There is no Brazilian stamp, issue, registration or similar taxes or
      duties payable by holders of preferred or common shares or preferred or common
      ADSs.




A
      financial transaction tax, or the “IOF” tax, may be imposed on a variety of
      transactions, including the conversion of Brazilian currency into foreign
      currency ( *e.g.* ,
      for
      purposes of paying dividends and interest). The IOF tax rate on such conversions
      is currently 0%, but the Minister of Finance has the legal power to increase
      the
      rate to a maximum of 25%. Any increase will be applicable only
      prospectively.





If
      the
      ADSs were considered assets located in Brazil by the tax authorities, the IOF
      tax may also be levied on transactions involving bonds or securities, even
      if
      the transactions are effected on Brazilian stock, futures or commodities
      exchanges.  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, there is no judicial or administrative precedent on this specific
      matter. The rate of this tax with respect to common shares and common ADSs
      and
      preferred shares and preferred ADSs is currently 0%. 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 to the extent there is a gain realized on the transaction and only
      on a
      prospective basis.




-99-
 *Table
          of Contents*




CPMF .
      Financial transfers are taxed by the CPMF (Temporary Contribution over Financial
      Transactions), at a rate of 0.38%. Transactions conducted through the Brazilian
      stock exchanges in current accounts specified for stock exchange transactions
      are exempt from the CPMF tax. Further, Brazilian holders may elect to make
      investments through a special investment account, which is free from CPMF.
      In
      this case, the tax only applies upon the transfer of funds from the banking
      account to the investment account. Once deposited in this account, funds may
      be
      withdrawn without the CPMF. However, funds deposited in the investment account
      must only be bound for investments.




Registered
      Capital .
      The
      amount of an investment in preferred or common shares held by a Non-Brazilian
      Holder who qualifies under the Foreign Investment Regulations and obtains
      registration with the CVM, or by The Bank of New York, as the depositary
      representing such holder, is eligible for registration with the Central Bank.
      Such registration allows the remittance outside of Brazil of any proceeds of
      distributions on the shares, and amounts realized with respect to disposition
      of
      such shares. The amounts received in Brazilian currency are converted into
      foreign currency through the use of the market rate. The registered capital
      for
      preferred shares purchased in the form of a preferred ADS or common shares
      purchased in the form of a common ADS or purchased in Brazil, and deposited
      with
      The Bank of New York in exchange for a preferred or common ADS, will be equal
      to
      their purchase price (in U.S. dollars) to the purchaser. The registered capital
      for preferred or common shares that are withdrawn upon surrender of preferred
      or
      common ADSs, as applicable, will be the U.S. dollar equivalent of the average
      price of the preferred or common shares, as applicable, on the Brazilian stock
      exchange on which the greatest number of such preferred or common shares, as
      applicable, was sold on the day of withdrawal. If no preferred or common shares,
      as applicable, were sold on such day, the registered capital will refer to
      the
      average price on the Brazilian stock exchange on which the greatest number
      of
      preferred or common shares, as applicable, was sold in the 15 trading sessions
      immediately preceding such withdrawal. The U.S. dollar value of the preferred
      or
      common shares, as applicable, is determined on the basis of the average market
      rate quoted by the Central Bank on such date or, if the average price of
      preferred or common shares is determined under the last preceding sentence,
      the
      average of such average quoted rates on the same 15 dates used to determine
      the
      average price of the preferred or common shares.




A
      Non-Brazilian Holder of preferred or common shares may experience delays in
      effecting such action which may delay remittances abroad. Such a delay may
      adversely affect the amount, in U.S. dollars, received by the Non-Brazilian
      Holder.




**Brazilian
      Taxation on the Notes**




This
      summary is limited to noteholders that are non-residents in Brazil and is based
      on the tax regulations presently in force, thus not contemplating any possible
      changes in Brazilian tax legislation in the future.




Interest
      on the notes (including any additional amount) paid, credited, delivered, used
      or remitted to non-residents is subject to a 15% withholding income tax or
      a
      lower rate if so provided for in the applicable double taxation treaty signed
      between Brazil and the country where the recipient of the note is domiciled.
      The
      rate is increased to 25% if both of the following situations occur: (i) the
      beneficiary of the payment is domiciled in a tax-haven jurisdiction, and (ii)
      if
      any portion of principal under any such debt obligation is repaid in a way
      that
      the average maturity of the debt obligation becomes less than 96 months from
      the
      disbursement date. In this case, payments made by the obligor to those
      beneficiaries in respect of interest and other additional amounts will be
      retroactively subject to a withholding tax of 25% plus an interest penalty
      for
      late payment, calculated from the disbursement date onwards.




Brazilian
      tax law expressly authorizes that the payment of this withholding income tax
      be
      borne by the Brazilian paying entity, allowing the payment of the remuneration
      free of any tax. Under the terms of the indentures related to the notes, all
      payments of or in respect of principal and interest on the notes shall be made
      free and clear of, and without withholding or deduction for or on account of,
      any present or future taxes, penalties, fines, duties, assessments or other
      governmental charges of whatever nature.




In
      our
      view, the notes do not fall within the definition of assets located in Brazil
      for purposes of assessing whether a taxable transaction took place between
      two
      non-residents. However, we are unable to predict how Brazilian courts would
      view
      this issue, and to date there is no judicial or administrative precedent on
      this
      specific matter.




**Material
      United States Federal Income Tax Considerations**




The
      following summary describes the material U.S. Federal income tax consequences
      of
      holding preferred shares, preferred ADSs, common shares or common ADSs. This
      summary is based on the Internal Revenue Code of 1986, as amended (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 rulings and changes.




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
      own tax advisor regarding your specific tax situation. The summary applies
      only
      to holders who hold preferred shares, preferred ADSs, common shares or common
      ADSs as “capital assets” (generally, property held for investment) under the
      Code. This summary does not address the tax consequences that may be relevant
      to
      holders in special tax situations including, for example:




-100-
 *Table
          of Contents*




·
            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 or other financial
                institutions;




·
            United
                States holders whose functional currency for tax purposes is not
                the
                United States dollar;




·
            United
                States expatriates;




·
            An
                S corporation or small business investment
                company;




·
            Real
                estate investment trusts;




·
            Investors
                in a pass-through entity;




·
            Holders
                of preferred shares, preferred ADSs, common shares or common ADSs
                as part
                of a hedge, straddle, conversion or other integrated transaction,
                for tax
                purposes;




·
            Holders
                who own, directly, indirectly or constructively, 10% or more of the
                total
                combined voting power of our stock (including by way of owning preferred
                shares, preferred ADSs, common shares or common ADSs);
                or




·
            Holders
                who acquired their preferred shares, preferred ADSs, common shares
                or
                common ADSs as compensation.




This
      summary assumes that we are not a passive foreign investment company (“PFIC”)
      for U.S. Federal income tax purposes. Please see the discussion under “—Taxation
      of U.S. Holders—Passive Foreign Investment Company Rules” below.




Further,
      this summary does not address the alternative minimum tax consequences of
      holding preferred shares, preferred ADSs, common shares or common ADSs or the
      indirect consequences to holders of equity interests in entities that own our
      preferred shares, preferred ADSs, common shares or common ADSs. In addition,
      this summary does not address the state, local, foreign or other tax
      consequences, if any, of holding our preferred shares, preferred ADSs, common
      shares or common ADSs.




You
      should consult your own tax advisor regarding the U.S. Federal, state, local
      and
      foreign and other tax consequences of acquiring, owning and disposing of
      preferred shares, preferred ADSs, common shares or common 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 preferred shares, preferred ADSs, common shares or common ADSs and you are
      for U.S. Federal income tax purposes:




·
            A
                citizen or resident of the United
                States;




·
            A
                corporation, or any other entity taxable as a corporation, created
                or
                organized in or under the laws of the United States or any state
                thereof,
                including the District of Columbia;




·
            An
                estate the income of which is subject to U.S. Federal income tax
                regardless of its source; or




·
            A
                trust if a court within the United States is able to exercise primary
                supervision over its administration and one or more United States
                persons
                have the authority to control all substantial decisions of the
                trust.




If
      a
      partnership holds preferred shares, preferred ADSs, common shares or common
      ADSs, the tax treatment of a partner will generally depend upon the status
      of
      the partner and upon the activities of the partnership. A partner of a
      partnership holding preferred shares, preferred ADSs, common shares or common
      ADSs should consult its own tax advisor.




A
      “Non-U.S. Holder” is a beneficial owner of preferred shares, preferred ADSs,
      common shares or common ADSs who or which is not a U.S. Holder and that is
      not
      an entity or arrangement treated as a partnership for U.S. Federal income tax
      purposes.




-101-
 *Table
          of Contents*




For
      U.S.
      Federal income tax purposes, a U.S. Holder of an ADS will be treated as the
      beneficial owner of the preferred shares or common shares represented by the
      applicable ADS.


**E.**
              **Preferred
                  Shares, Preferred ADSs, Common Shares, Common
                  ADSs**




***Distributions
      on preferred shares, preferred ADSs, common shares or common
      ADSs.***




Subject
      to the discussion below concerning PFICs, the gross amount of distributions
      paid
      by us to a U.S. Holder (including amounts withheld to pay Brazilian withholding
      taxes) with respect to preferred shares, preferred ADSs, common shares or common
      ADSs (including distributions of interest on shareholders’ equity) generally
      will 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 paid, actually or constructively, 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 first as a non-taxable return of capital reducing (on
      a
      dollar-for-dollar basis) such U.S. Holder’s tax basis in the preferred shares,
      preferred ADSs, common shares or common 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
      the preferred shares, preferred ADSs, common shares or common ADSs, as
      applicable, for more than one year.




Dividends
      received by a U.S. Holder will generally be taxed at ordinary income tax rates.
      However, pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003,
      in the case of dividends that constitute qualified dividend income and are
      received by an individual U.S. Holder during the tax years beginning after
      2002
      and before 2011, such dividends will be taxed at the same rate that is
      applicable to long-term capital gains. For this purpose, qualified dividend
      income includes any dividends paid with respect to stock in a foreign
      corporation if such stock is “readily tradable on an established securities
      market in the United States”. Based upon United States Internal Revenue Service
      Notice 2003-71, the preferred ADSs and common ADSs will, but the preferred
      shares and common shares will not, be treated as readily tradable on an
      established securities market in the United States.




A
      U.S.
      Holder generally will be entitled, subject to a number of complex rules and
      limitations, to claim a United States foreign tax credit in respect of any
      Brazilian withholding taxes imposed on distributions received on preferred
      shares, preferred ADSs, common shares or common ADSs. U.S. Holders who do not
      elect to claim a foreign tax credit may instead claim a deduction in respect
      of
      such withholdings. Dividends received with respect to the preferred shares,
      preferred ADSs, common shares or common ADSs will be treated as foreign source
      income and generally will constitute “passive income” for U.S. foreign tax
      credit limitation purposes. We urge all holders to consult their tax advisors
      regarding the availability of the foreign tax credit under their particular
      circumstances.




Dividends
      paid by us generally will not be eligible for the dividends received deduction
      generally available to certain U.S. corporate shareholders.




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 preferred shares or 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, generally will be U.S.
      source ordinary income or loss.




Section
      305 of the Code provides special rules for the tax treatment of preferred stock.
      According to the U.S. Treasury Regulations under that section, the term
      preferred stock generally refers to stock which enjoys certain limited rights
      and privileges (generally associated with specified dividend and liquidation
      priorities) but does not participate in corporate growth to any significant
      extent. While our preferred shares have some preferences over our common shares,
      the preferred shares are not fixed as to dividend payments or liquidation value;
      thus, although the matter is not entirely clear, we believe and have taken
      and
      intend to continue to take the position, that the preferred shares should be
      treated as “common stock” within the meaning of Section 305 of the Code. If the
      preferred shares are treated as “common stock” for purposes of Section 305 of
      the Code, distributions to U.S. Holders of additional shares of such “common
      stock” or preemptive rights relating to such “common stock” with respect to
      their preferred shares or preferred ADSs that are made as part of a pro rata
      distribution to all shareholders in most instances will not be subject to U.S.
      Federal income tax. On the other hand, if the preferred shares are treated
      as
“preferred stock” within the meaning of Section 305 of the Code, and if the
      U.S. Holder receives a distribution of additional shares or preemptive rights
      as
      described in the preceding sentence, such distributions (including amounts
      withheld in respect of any Brazilian taxes) will be treated as dividends that
      can be included in the U.S. Holder’s gross income to the same extent and in the
      same manner as distributions payable in cash. In that event, the amount of
      such
      distribution (and the basis of the new shares or preemptive rights so received)
      will equal the fair market value of the shares or preemptive rights on the
      date
      of distribution.




-102-
 *Table
          of Contents*




***Sale,
      exchange or other disposition of preferred shares, preferred ADSs, common shares
      or common ADSs.***




A
      U.S.
      Holder will generally recognize capital gain or loss upon the sale, exchange
      or
      other disposition of preferred shares, preferred ADSs, common shares or common
      ADSs, as applicable, measured by the difference between the U.S. dollar value
      of
      the amount received and the U.S. Holder’s tax basis (determined in U.S. dollars)
      in the preferred shares, preferred ADSs, common shares or common ADSs, as
      applicable. If a Brazilian tax is withheld on the sale or disposition of a
      share, 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 the preferred shares,
      preferred ADSs, common shares or common ADSs have been held for more than one
      year. Your ability to deduct capital losses is subject to limitations. Capital
      gain or loss, if any, realized by a U.S. Holder on the sale, exchange or other
      disposition of a common share, common ADS, preferred share or preferred ADS,
      as
      applicable, generally will be treated as United States source income or loss
      for
      U.S. foreign tax credit purposes. Consequently, in the case of a disposition
      of
      a common share or preferred share that is subject to Brazilian tax imposed
      on
      the gain (or, in the case of a deposit, in exchange for a common ADS or
      preferred ADS of a common share or preferred share, as the case may be, that
      is
      not registered pursuant to Resolution No. 2,689/00, on which a Brazilian capital
      gains tax is imposed (see “—Brazilian Tax Considerations—Taxation of Gains”)),
      the U.S. Holder may not be able to benefit from the foreign tax credit for
      that
      Brazilian tax unless it can apply (subject to applicable limitations) the credit
      against U.S. tax payable on other income from foreign sources in the appropriate
      income category, or, alternatively, it may 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 disposition of preferred shares,
      preferred ADSs, common shares or common ADSs and will generally reduce the
      amount of gain (if any) recognized by the U.S. Holder.




***Passive
      Foreign Investment Company (“PFIC”) rules.***




Based
      upon the nature of its current and projected income, assets and activities,
      we
      do not believe that we are, and we do not expect the preferred shares, preferred
      ADSs, common shares or common ADSs to be considered shares of, a PFIC for U.S.
      Federal income tax purposes. 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 the preferred shares,
      preferred ADSs, common shares or common 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 preferred shares or common shares,
      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, contrary to the discussion above, a U.S. Holder would be
      subject to special rules with respect to (a) any gain realized on the sale
      or
      other disposition of common shares, common ADSs, preferred shares or preferred
      ADSs and (b) any “excess distribution” by us to the U.S. Holder (generally, any
      distribution during a taxable year in which distributions to the U.S. Holder
      on
      the common shares, common ADSs, preferred shares or preferred ADSs exceed 125%
      of the average annual taxable distribution the U.S. Holder received on the
      common shares, common ADSs, preferred shares or preferred ADSs during the
      preceding three taxable years or, if shorter, the U.S. Holder’s holding period
      for the common shares, common ADSs, preferred shares or preferred ADSs). Under
      those rules (a) the gain or excess distribution would be allocated ratably
      over
      the U.S. Holder’s holding period for the common shares, common ADSs, preferred
      shares or preferred ADSs, (b) the amount allocated to the taxable year in which
      the gain or excess distribution is realized and to taxable years before the
      first day we became a PFIC would be taxable as ordinary income, (c) the amount
      allocated to each other year (with certain exceptions) would be subject to
      tax
      at the highest tax rate in effect for that year, and the interest charge
      generally applicable to underpayments of tax would be imposed in respect of
      the
      tax attributable to each such year.




A
      U.S.
      Holder who owns common shares, common ADSs, preferred shares or preferred ADSs
      during any year we are a PFIC must file Internal Revenue Service Form 8621.
      In
      general, if we are treated as a PFIC, the rules described in the second
      paragraph of this section can be avoided by a U.S. Holder that elects to be
      subject to a mark-to-market regime for stock in a PFIC. A U.S. Holder may elect
      mark-to-market treatment for its common shares, common ADSs, preferred shares
      or
      preferred ADSs, provided
      the common shares, common ADSs, preferred shares or preferred ADSs, for purposes
      of the rules, constitute “marketable stock” as defined in U.S. Treasury
      Regulations. A U.S. Holder electing the mark-to-market regime generally would
      treat any gain recognized under mark-to-market treatment or on an actual sale
      as
      ordinary income and would be allowed an ordinary deduction for any decrease
      in
      the value of common shares, common ADSs, preferred shares or preferred ADSs
      in
      any taxable year and for any loss recognized on an actual sale, but only to
      the
      extent, in each case, of previously included mark-to-market income not offset
      by
      previously deducted decreases in value. A U.S. Holder’s basis in common shares,
      common ADSs, preferred shares or preferred ADSs would increase or decrease
      by
      gain or loss taken into account under the mark-to-market regime. A
      mark-to-market election is generally irrevocable. Another election to treat
      the
      Company as a qualified electing fund would not be available because we do not
      currently plan to provide holders with information sufficient to permit any
      holder to make such election.




-103-
 *Table
          of Contents*




***Deposits
      and Withdrawals***




Deposits
      or withdrawals of preferred shares or common shares in exchange for preferred
      ADSs or common ADSs, as applicable, will not result in the realization of any
      gain or loss for U.S. Federal income tax purposes.




**Taxation
      of Non-U.S. Holders**




***Preferred
      Shares, Preferred ADSs, Common Shares or Common ADSs.***




Non-U.S.
      Holders generally will not be subject to U.S. Federal income or withholding
      tax
      on dividends received from us with respect to preferred shares, preferred ADSs,
      common shares or common ADSs, unless such income is considered effectively
      connected with the Non-U.S. Holder’s conduct of a United States trade or
      business (and, if required by an applicable income tax treaty, the income is
      attributable to a permanent establishment or, in the case of an individual
      Non-U.S. Holder, a fixed base maintained in the United States).




Non-U.S.
      Holders generally will not be subject to U.S. Federal income tax on any gain
      realized upon the sale, exchange or other disposition of preferred shares,
      preferred ADSs, common shares or common ADSs unless (i) the gain is effectively
      connected with the Non-U.S. Holder’s conduct of a United States trade or
      business and, if required by an applicable income tax treaty, the income is
      attributable to a permanent establishment or, in the case of an individual
      Non-U.S. Holder, a fixed base maintained in the United States or (ii) such
      Non-U.S. Holder is an individual who is present in the United States for 183
      days or more during the taxable year of such sale, exchange or other disposition
      and certain other conditions are met. If the first exception applies, the
      Non-U.S. Holder will be subject to U.S. Federal income tax as if such Non-U.S.
      Holder were a U.S. Holder, as described above. On the other hand, if the second
      exception applies, then, generally speaking, Non-U.S. Holder will be subject
      to
      U.S. Federal income tax at a rate of 30% on the amount by which such Non-U.S.
      Holder’s U.S.-source capital gains exceed such Non-U.S. Holder’s U.S.-source
      capital losses.




In
      addition, any effectively connected dividends or gains realized by a Non-U.S.
      Holder that is a corporation for U.S. Federal income tax purposes may also,
      under certain circumstances, be subject to an additional branch profits tax
      at a
      rate of 30% (or such lower rate as may be specified by an applicable income
      tax
      treaty).




**Backup
      Withholding and Information Reporting**




In
      general, payments of dividends on preferred shares, preferred ADSs, common
      shares or common ADSs and payments of the proceeds of a sale, exchange,
      retirement or other disposition of preferred shares, preferred ADSs, common
      shares or common ADSs, may be subject to information reporting to the United
      States Internal Revenue Service (“IRS”) and, possibly, United States backup
      withholding. Backup withholding will not apply, however, to a holder who
      furnishes a correct taxpayer identification number or certificate of foreign
      status and makes any other required certification on IRS Form W-9. Non-U.S.
      Holders generally will not be subject to United States information reporting
      or
      backup withholding. However, Non-U.S. Holders may be required to provide
      certification of non-U.S. status in connection with payments received in the
      United States or through certain U.S.-related financial intermediaries. Amounts
      withheld as backup withholding may be credited against a holder’s U.S. Federal
      income tax liability, and a holder may obtain a refund of any excess amounts
      withheld under the backup withholding rules by filing the appropriate claim
      for
      refund with the IRS and furnishing any required information.




THE
      PRECEDING DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES IS
      FOR
      GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH INVESTOR
      SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
      CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF PREFERRED SHARES, PREFERRED
      ADSs, COMMON SHARES OR COMMON ADSs, INCLUDING THE APPLICABILITY AND EFFECT
      OF
      ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF ANY PROPOSED CHANGES IN
      APPLICABLE LAW.




**F.**
            **Where
                You Can Find More
                Information**




AmBev
      is
      subject to the informational reporting requirements of the United States
      Securities Exchange Act of 1934, as amended, and files with the
      SEC:




·
            Annual
                reports;




·
            Certain
                other reports that we make public under Brazilian law, file with
                the
                Brazilian stock exchanges or distribute to shareholders;
                and




·
            Other
                information.




You
      may
      read and copy any reports or other information that AmBev files at the SEC’s
      public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549, and
      at
      the SEC’s regional offices located at the Woolworth Building, 233 Broadway,
      New York, New York 10279 and Citicorp Center, 500 West Madison
      Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
      1-800-SEC-0330 for further information on the public reference rooms. Electronic
      filings made through the Electronic Data Gathering, Analysis and Retrieval
      System are also publicly available through the Securities and Exchange
      Commission’s website on the Internet at *www.sec.gov* .
      In
      addition, material filed by AmBev may also be inspected at the offices of the
      New York Stock Exchange at 20 Broad Street, New York,
      New York 10005.




-104-
 *Table
          of Contents*




As
      a
      foreign private issuer, AmBev is 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 AmBev by requesting them in writing, at the following
      addresses or by telephone:





Companhia
                de Bebidas das Américas - AmBevAttention:
            Investor
                Relations DepartmentTelephone
                numbers:
            (55-11)
                2122-1415(55-11)
                2122-1414Fax:
            (55-11)
                2122-1526Email:
            *ir@ambev.com.br*




You
      may
      obtain additional information about AmBev on its website at *www.ambev-ir.com* .
      The
      information contained therein is not part of this annual
      report.


-105-
 *Table
          of Contents*




**ITEM
              11.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK**




We
      are
      exposed 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 and sugar. Market risk is the potential loss arising
      from adverse changes in market rate 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 Note 2(g)
      to
      our audited consolidated financial statements for a discussion of the accounting
      policies and information on derivative financial instruments.




We
      have a
      policy of entering into contracts only with parties that have high credit
      ratings. The counterparties to these contracts are major financial institutions,
      and we do not have significant exposure to any single counterparty. We do not
      anticipate a credit loss from counterparty non-performance. Our short-term
      investments consist mainly of fixed-term obligations and government
      securities.




**Commodity
      Risk**




We
      use a
      large volume of agricultural materials to produce our products, including malt
      and hops for our beer and sugar, guaraná, other fruits and sweeteners for our
      CSDs. See “Information on the Company—AmBev Business Overview—Production 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 90% of our malt. 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 “Information on
      the Company—AmBev Business Overview—Production and Availability of Raw
      Materials”.




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, the price is directly influenced by the fluctuation of
      international commodity prices.




As
      of
      December 31, 2006, our derivative activities consisted of sugar, wheat and
      aluminum futures. The table below provides information about our significant
      commodity risk sensitive instruments as of December 31, 2006. The contract
      terms
      of these instruments have been categorized by expected maturity
      dates.




**Principal
                Maturity Periods****(1)****2007**
            
            **2008**
            
            **2009**
            
            **2010**
            
            **2011**
            
            **Thereafter**
            
            **Total**
            
            **Fair
                Value****(2)***(R$
                million, except price per ton)***Derivatives
                Instruments****Sugar
                Futures (NYBOT)**Notional
                Amount (ton)
            
            
            180,552
            
            
            48,973
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            229,525
            
            
            (35.03
            )Average
                Price (R$/ton)
            
            
            547.32
            
            
            566.56
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            551.5**Wheat
                Futures (CBOT)**Notional
                Amount (ton)
            
            
            (195,272
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (195,272
            )
            
            (9.94
            )Average
                Price (R$/ton)
            
            
            393.58
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            393.58**Aluminum
                Futures (LME)**Notional
                Amount (ton)
            
            
            68,475
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            68,475
            
            
            29.62Average
                Price (R$/ton)
            
            
            5,834.96
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            5,834.96**Corn
                Futures (BM&F)**Notional
                Amount (ton)
            
            
            6,750
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            6,750
            
            
            0.03Average
                Price (R$/ton)
            
            
            330.33
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            330.33**Total**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (15.32
            )





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


(2)
            For
                cash and debt instruments, total represents the carrying value of
                those
                instruments within the balance sheet and is therefore directly comparable
                with the fair value of the instrument, included within the fair value
                column. For derivative instruments, total represents the total value
                of
                derivative instrument contracts (notional value) within the forward,
                future and swap portfolio, and not a balance sheet value. The unrealized
                gain or loss on the instrument at the balance sheet date is included
                within the financial statements at fair value and is therefore represented
                under the fair value column.





-106-
 *Table
            of Contents*




**Interest
      Rate Risk**




We
      use
      interest rate swap agreements 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, short-term investments 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 short-term investments. 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.




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, 2006. The contract terms of these
      instruments have been categorized by expected maturity dates.


**Principal
                  Maturity Periods(1)****2007**
              
              **2008**
              
              **2009**
              
              **2010**
              
              **2011**
              
              **Thereafter**
              
              **Total(2)**
              
              **Fair****Value(2)***(R$
                  in millions, except percentages)***U.S.
                  Dollar Denominated Debt (Fixed Rate)**Notional
                  Amount
              
              
              (317.0
              )
              
              
              
              
              
              
              
              
              
              
              (1,069,0
              )
              
              (1,069,0
              )
              
              (2,455.0
              )
              
              (2,809.3
              )Average
                  Pay Rate
              
              
              2.01
              %
              
              
              
              
              
              
              
              
              
              
              10.50
              %
              
              8.75
              %
              
              9.42
              %**BNDES
                  Currency Basket Debt (Floating Rate)**Currency
                  Basket Denominated Debt (Floating Rate)
              
              
              (31.3
              )
              
              (23.4
              )
              
              (10.9
              )
              
              (10.2
              )
              
              (0.9
              )
              
              
              
              
              (76.7
              )
              
              (76.7
              )UMBNDES+Average
                  Pay Rate
              
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %
              
              3.20
              %**Yen
                  Denominated Debt**
                **(Fixed
                  Rate)**Notional
                  Amount
              
              
              (622.0
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (622.0
              )
              
              (622.0
              )Average
                  Pay Rate
              
              
              3.68
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3.68
              %**International
                  Debt**U.S.
                  Dollar Denominated Debt (Fixed Rate)
              
              
              (345.6
              )
              
              (382.0
              )
              
              (3.0
              )
              
              (26.6
              )
              
              (0.4
              )
              
              (320.7
              )
              
              (1,078.4
              )
              
              (1,083.8
              )Average
                  Pay Rate
              
              
              6.81
              %
              
              6.61
              %
              
              5.59
              %
              
              7.27
              %
              
              5.52
              %
              
              7.27
              %
              
              6.89
              %**International
                  Debt**Reais
                  Denominated Debt
                (Fixed
                  Rate)
              
              
              (63.8
              )
              
              
              
              
              
              
              
              
              
              
              (619.5
              )
              
              
              
              
              (683.3
              )
              
              (881.8
              )Average
                  Pay Rate
              
              
              15.88
              %
              
              
              
              
              
              
              
              
              
              
              15.88
              %
              
              
              
              
              15.88
              %**International
                  Debt**CAN
                  Dollar Denominated Debt (Fixed Rate)
              
              
              (16.0
              )
              
              (91.8
              )
              
              
              
              
              
              
              
              (768.8
              )
              
              
              
              
              (876.6
              )
              
              (899.3
              )Average
                  Pay Rate
              
              
              5.71
              %
              
              6.07
              %
              
              
              
              
              
              
              
              5.29
              %
              
              
              
              
              5.37
              %**International
                  Debt**Other
                  Latin American Currency Denominated
                (Fixed
                  Rate)
              
              
              (372.4
              )
              
              (194.2
              )
              
              (68.6
              )
              
              (100.4
              )
              
              (101.0
              )
              
              (42.7
              )
              
              (879.3
              )
              
              (879.3
              )Average
                  Pay Rate
              
              
              9.60
              %
              
              8.69
              %
              
              7.20
              %
              
              6.92
              %
              
              8.54
              %
              
              11.44
              %
              
              8.82
              %**Reais
                  Denominated Debt (Floating Rate—TJLP)**Notional
                  Amount
              
              
              (167.1
              )
              
              (155.4
              )
              
              (92.7
              )
              
              (79.2
              )
              
              (4.4
              )
              
              
              
              
              (498.8
              )
              
              (498.8
              )TJLP
                  + Average Pay Rate
              
              
              3.45
              %
              
              3.45
              %
              
              3.45
              %
              
              3.45
              %
              
              3.45
              %
              
              
              
              
              3.45
              %**Reais
                  Debt—ICMS (Fixed Rate)**Notional
                  Amount
              
              
              (103.6
              )
              
              (4.3
              )
              
              
              
              
              
              
              
              
              
              
              (157.6
              )
              
              (265.5
              )
              
              (265.5
              )Average
                  Pay Rate
              
              
              4.55
              %
              
              4.55
              %
              
              
              
              
              
              
              
              
              
              
              4.55
              %
              
              4.55
              %**Reais
                  Debt—Debêntures**
                **(Floating
                  Rate - CDI)**Notional
                  Amount
              
              
              (65.9
              )
              
              
              
              
              (817.1
              )
              
              
              
              
              
              
              
              (1,248.0
              )
              
              (2,131.0
              )
              
              (2,131.0
              )Average
                  Pay Rate %CDI
              
              
              102.2
              %
              
              
              
              
              101.8
              %
              
              
              
              
              
              
              
              102.5
              %
              
              102.2
              %**Cash
                  Instruments****Cash
                  and Cash Equivalent Denominated in U.S. dollar**Notional
                  Amount
              
              
              283.9
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              283.9
              
              
              283.9Average
                  Interest Rate
              
              
              3.14
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3.14
              %**Cash
                  and Cash Equivalent Denominated in Reais**Notional
                  Amount
              
              
              188.0
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              188.0
              
              
              188.0Average
                  Interest Rate %CDI
              
              
              58.0
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              58.0
              %**Cash
                  and Cash Equivalent Denominated in CAN dollar**Notional
                  Amount
              
              
              55.5
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              55.5
              
              
              55.5**U.S.
                  Long-Term Investments Denominated in U.S. dollar**Notional
                  Amount
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              57.4
              
              
              66.7
              
              
              124.1
              
              
              124.1Average
                  Interest Rate
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              10.00
              %
              
              10.25
              %
              
              10.13
              %**U.S.
                  Short-Term Investments Denominated in U.S. dollar**Notional
                  Amount
              
              
              12.0
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              12.0
              
              
              12.0Average
                  Interest Rate
              
              
              5.00
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              5.00
              %
  -107-
 *Table
              of Contents*
 **Brazilian
                  Short-Term Investments Denominated in Reais**Notional
                  Amount
              
              
              390.7
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              390.7
              
              
              390.7Average
                  Interest Rate %CDI
              
              
              101.5
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              101.5
              %**Brazilian
                  Long-Term Investments Denominated in Reais**Notional
                  Amount
              
              
              
              
              
              43.3
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              43.3
              
              
              43.3Interest
                  Rate %
              
              
              
              
              
              12.57
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              12.57
              %**International
                  Cash and Cash Equivalent Denominated in Other Latin American
                  Currency**Notional
                  Amount
              
              
              667.5
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              667.5
              
              
              667.5**Derivatives
                  Instruments****BM&F
                  DDI Future**Notional
                  Amount
              
              
              89.2
              
              
              31.9
              
              
              (1.8
              )
              
              45.6
              
              
              (168.2
              )
              
              (237.8
              )
              
              (241.1
              )
              
              1.6Average
                  Interest Rate
              
              
              3.59
              %
              
              5.45
              %
              
              5.59
              %
              
              5.65
              %
              
              5.84
              %
              
              6.46
              %
              
              5.71
              %**BM&F
                  Dollar Future**Notional
                  Amount
              
              
              (559.2
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (559.2
              )
              
              2.4**U.S.$
                  x R$ Cross Currency****Interest
                  Rate Swap**Notional
                  Amount
              
              
              457.9
              
              
              503.9
              
              
              
              
              
              
              
              
              1,593.7
              
              
              1,331.4
              
              
              3,886.9
              
              
              (171.6
              )Average
                  Interest Rate
              
              
              6.85
              %
              
              5,41
              %
              
              
              
              
              
              
              
              11.53
              %
              
              10.29
              %
              
              9.76
              %**Yen
                  x R$ Cross Currency****Interest
                  Rate Swap**Notional
                  Amount
              
              
              622.0
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              622.0
              
              
              (8.0
              )Average
                  Interest Rate
              
              
              3.68
              %
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3.68
              %**EUR
                  x R$ Futures**Notional
                  Amount
              
              
              84.6
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              84.6
              
              
              (1.9
              )Average
                  Unit Price - Reais
              
              
              2.84
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2.84**C$
                  Pre Fixed Rate x****Canadian
                  Bankers Acceptance**Notional
                  Amount
              
              
              194.5
              
              
              155.6
              
              
              
              
              
              194.5
              
              
              
              
              
              
              
              
              544.6
              
              
              (5.9
              )Average
                  Interest Rate
              
              
              4.25
              %
              
              5.28
              %
              
              
              
              
              4.67
              %
              
              
              
              
              
              
              
              4.69
              %**C$
                  x U.S.$ Cross Currency****Interest
                  Rate Swap**Notional
                  Amount
              
              
              
              
              
              
              
              
              346.4
              
              
              
              
              
              
              
              
              
              
              
              346.4
              
              
              (88.5
              )Average
                  Interest Rate
              
              
              
              
              
              
              
              
              6.05
              %
              
              
              
              
              
              
              
              
              
              
              6.05
              %**C$
                  x R$ Cross Currency****Interest
                  Rate Swap**Notional
                  Amount
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              716.6
              
              
              
              
              
              716.6
              
              
              169.8Average
                  Interest Rate
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              15.88
              %
              
              
              
              
              15.88
              %**NDF
                  Peru Soles x U.S.$**Notional
                  Amount
              
              
              78.3
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              78.3
              
              
              (0.1
              )Average
                  Unit Price - Soles
              
              
              3.19
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              3.19







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


(2)
            For
                cash and debt instruments, total represents the carrying value of
                those
                instruments within the balance sheet, and is therefore directly comparable
                with the fair value of the instrument included within the “Fair Value”
                column. For derivative instruments, the total represents the total
                value
                of derivative instrument contracts (notional value) within the forward,
                future and swap portfolio, and not a balance sheet value. The unrealized
                gain or loss on the instrument at the balance sheet date is included
                within our financial statements at fair value, and is therefore
                represented under the “Fair Value”
column.




Part
      of
      the floating rate debt accrues interest at TJLP. During the period set forth
      below the TJLP was:





**200****7**
            
            **2006**
            
            **2005**
            
            **2004**1st
                Quarter
            
            
            6.50
            
            
            9.00
            
            
            9.75
            
            
            10.002nd
                Quarter
            
            
            6.50
            
            
            8.15
            
            
            9.75
            
            
            9.753rd
                Quarter
            
            
            —
            
            
            7.50
            
            
            9.75
            
            
            9.754th
                Quarter
            
            
            —
            
            
            6.85
            
            
            9.75
            
            
            9.75




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




**Foreign
      Exchange Risk**




We
      are
      exposed to fluctuations in foreign exchange rate movements because a significant
      portion of our Brazilian operations’ debt is denominated in or indexed to
      foreign currencies, particularly the U.S. dollar. In addition, a significant
      portion of our operating expenses, in particular those related to hops, malt,
      sugar and aluminum, are also denominated in or linked to the


-108-
 *Table
          of Contents*




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, 2002 until December 31, 2006, the *Real* appreciated by 7.9% against the U.S. dollar, and, as of December 31, 2006,
      the
      commercial market rate for purchasing U.S. dollars was R$2.138 per U.S.$1.00.
      The U.S. dollar depreciated against the *Real* by 8.7%
      during 2006.




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, 2006 included debt of R$5,987.9
      million.




**Current
      Exposure**




As
      of
      December 31, 2006, 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, 2006. The contract terms of these instruments
      have been categorized by expected maturity dates.




**Principal
                Maturity Periods****(1)****2007**
            
            **2008**
            
            **2009**
            
            **2010**
            
            **2011**
            
            **Thereafter**
            
            **Total****(2)**
            
            **Fair
                Value****(2)***(R$
                in millions, except percentages)***Derivatives
                Instruments****BM&F
                DDI Future**Notional
                Amount
            
            
            89.2
            
            
            31.9
            
            
            (1.8
            )
            
            45.6
            
            
            (168.2
            )
            
            (237.8
            )
            
            241.1
            
            
            1.6Average
                Interest Rate
            
            
            3.59
            %
            
            5.45
            %
            
            5.59
            %
            
            5.65
            %
            
            5.84
            %
            
            6.46
            %
            
            5.71
            %**BM&F
                Dollar Future**Notional
                Amount
            
            
            (559.2
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (559.2
            )
            
            2.4**U.S.$
                x R$ Cross Currency****Interest
                Rate Swap**Notional
                Amount
            
            
            457.9
            
            
            503.9
            
            
            
            
            
            
            
            
            1,593.7
            
            
            1,331.4
            
            
            3,886.9
            
            
            (171.6
            )Average
                Interest Rate
            
            
            6.85
            %
            
            5,41
            %
            
            
            
            
            
            
            
            11.53
            %
            
            10.29
            %
            
            9.76
            %**Yen
                x R$ Cross Currency****Interest
                Rate Swap**Notional
                Amount
            
            
            622.0
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            622.0
            
            
            (8.0
            )Average
                Interest Rate
            
            
            3.68
            %
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3.68
            %**EUR
                x R$ Futures**Notional
                Amount
            
            
            84.6
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            84.6
            
            
            (1.9
            )Average
                Unit Price - Reais
            
            
            2.84
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2.84**C$
                Pre Fixed Rate x****Canadian
                Bankers Acceptance**Notional
                Amount
            
            
            194.5
            
            
            155.6
            
            
            
            
            
            194.5
            
            
            
            
            
            
            
            
            544.6
            
            
            (5.9
            )Average
                Interest Rate
            
            
            4.25
            %
            
            5.28
            %
            
            
            
            
            4.67
            %
            
            
            
            
            
            
            
            4.69
            %**C$
                x U.S.$ Cross Currency****Interest
                Rate Swap**Notional
                Amount
            
            
            
            
            
            
            
            
            346.4
            
            
            
            
            
            
            
            
            
            
            
            346.4
            
            
            (88.5
            )Average
                Interest Rate
            
            
            
            
            
            
            
            
            6.05
            %
            
            
            
            
            
            
            
            
            
            
            6.05
            %**C$
                x R$ Cross Currency****Interest
                Rate Swap**Notional
                Amount
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            716.6
            
            
            
            
            
            716.6
            
            
            169.8Average
                Interest Rate
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            15.88
            %
            
            
            
            
            15.88
            %**NDF
                Peru Soles x U.S.$**Notional
                Amount
            
            
            78.3
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            78.3
            
            
            (0.1
            )Average
                Unit Price - Soles
            
            
            3.19
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3.19**Total**
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            **(102.2**
            **)**





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


(2)
            For
                cash and debt instruments, total represents the carrying value of
                those
                instruments within the balance sheet and is therefore directly comparable
                with the fair value of the instrument, included within the “Fair Value”
                column. For derivative instruments, total represents the total value
                of
                derivative instrument contracts (notional value) within the forward,
                future and swap portfolio, and not a balance sheet value. The unrealized
                gain or loss on the instrument at the balance sheet date is included
                within our financial statements at fair value and is therefore represented
                under the “Fair Value” column.





-109-
 *Table
            of Contents*




**ITEM
              12.**
            **DESCRIPTION
                OF SECURITIES OTHER THAN EQUITY
                SECURITIES**




Not
      applicable.


-110-
 *Table
          of Contents*




**PART
      II**




**ITEM
              13.**
            **DEFAULTS,
                DIVIDEND ARREARAGES AND
                DELINQUENCIES**




Not
      applicable.




-111-
 *Table
          of Contents*




**ITEM
              14.**
            **MATERIAL
                MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
                PROCEEDS**




Not
      applicable.





-112-
 *Table
            of Contents*




**ITEM
              15.**
            **CONTROLS
                AND PROCEDURES**


***Disclosure
          Controls and Procedures***
 
 The
          Company has carried out an evaluation 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, and who includes
          the
          Chief Executive Officers and Chief Financial Officer. 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. Accordingly, even effective
          disclosure controls and procedures can only provide reasonable assurance
          of
          achieving their control objectives. Based upon the Company’s evaluation, as of
          the end date of the period covered by this report, the Chief Executive
          Officers
          and Chief Financial Officer of the Company have concluded that the disclosure
          controls and procedures are (i) effective in ensuring that information
          required
          to be disclosed in the reports that are filed or submitted under the U.S.
          Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
          and reported within the time periods specified in the Commission's rules
          and
          forms and (ii) 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 principal
          executive
          and principal financial officers, to allow timely decisions regarding required
          disclosure.




***Management’s
      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.




The
      Company’s internal control over financial reporting is 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 accounting principles generally accepted. The 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 accounting principles generally accepted in the United States,
      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 consolidated financial
      statements.




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect material misstatements on a timely basis. Therefore even
      those
      systems determined to be effective can provide only reasonable assurance with
      respect to financial statement preparation and presentation.  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
        Company restated its 2005 and 2004 US GAAP reconciliation as a result of
        errors
        identified during the review of our internal controls for the 2006 US GAAP
        financial reporting process.
 
 These
        errors were identified as a result of an improved internal control process
        which
        the Company believes provides reasonable assurance of mitigating the possibility
        of errors in the future.
  Management
        assessed the effectiveness of the Company’s internal control over financial
        reporting as of December 31, 2006, based on the criteria established in Internal
        Control - Integrated Framework issued by the Committee of Sponsoring
        Organizations - COSO - of the Treadway Commission. Based on that assessment
        management has concluded that as of December 31, 2006 the Company’s internal
        control over financial reporting is effective.




Management’s
      assessment of the effectiveness of the Company’s internal control over financial
      reporting as of December 31, 2006 has been audited by Deloitte Touche Tohmatsu
      Auditores Independentes, the Company’s independent registered public accounting
      firm, which opinion is stated in their report, included herein.




***Changes
        in internal controls***
  There
        was
        no change in our internal control over financial reporting that occurred
        in the
        period covered by this annual report that has materially affected, or is
        reasonably likely to materially affect, our internal control over financial
        reporting.


. ***Report of Independent Registered Public Accouting Firm in Internal Control
        over
        Financial Reporting***
 To
        the
        Board of Directors and Stockholders of
 Companhia
        de Bebidas das Américas - AmBev
 
 1.
            We
                have audited management’s assessment, included in the accompanying
                Management's Report on Internal Control over Financial Reporting,
                that
                Companhia de Bebidas das Américas - AmBev and subsidiaries (the “AmBev”)
                maintained effective internal control over financial reporting as
                of
                December 31, 2006, based on criteria established in Internal
                Control-Integrated Framework issued by the Committee of Sponsoring
                Organizations - COSO - of the Treadway Commission. AmBev’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. Our responsibility is to express an opinion
                on
                management’s assessment and an opinion on the effectiveness of AmBev’s
                internal control over financial reporting based on our
                audit  2.
            We
                conducted our audit in accordance with the standards of the Public
                Company
                Accounting Oversight Board (United States of America). 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, evaluating
                management’s assessment, testing and evaluating the design and operating
                effectiveness of internal control, and performing such other procedures
                as
                we considered necessary in the circumstances. We believe that our
                audit
                provides a reasonable basis for our
                opinions.  3.
            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 consolidated financial statements.  4.
            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.  5.
            In
                our opinion, management’s assessment that AmBev maintained effective
                internal control over financial reporting as of December 31, 2006,
                is
                fairly stated, in all material respects, based on the criteria established
                in Internal Control—Integrated Framework issued by the Committee of
                Sponsoring Organizations - COSO - of the Treadway Commission. Also
                in our
                opinion, AmBev maintained, in all material respects, effective internal
                control over financial reporting as of December 31, 2006, based on
                the
                criteria established in Internal Control-Integrated Framework issued
                by
                the Committee of Sponsoring Organizations - COSO - of the Treadway
                Commission.  6.
            We
                have also audited, in accordance with the standards of the Public
                Company
                Accounting Oversight Board (United States of America), the consolidated
                financial statements as of and for the year ended December 31, 2006
                of
                AmBev and our report dated February 26, 2007, except for the Notes
                23 and
                24 as to which the date is July 4, 2007, expressed an unqualified
                opinion
                on those financial statements.  /s/
        Deloitte Touche Tohmatsu Auditores Independentes
  Deloitte
        Touche Tohmatsu Auditores Independentes
  São
        Paulo, Brazil
  February
        26, 2007, except for the control activities related to the Notes 23 and 24
        of
        the AmBev’s financial statements as to which the date is July 4,
        2007.




-113-
 *Table
          of Contents*




**ITEM
              16A.**
            **AUDIT
                COMMITTEE FINANCIAL EXPERT**


We
        have
        relied on the exemption provided for under Rule 10A-3(c) of the Exchange
        Act, as added by Section 301 of the Sarbanes-Oxley Act of 2002, which enables
        us
        to have the *Conselho
        Fiscal* 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 *Conselho
        Fiscal* ,
        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 *Conselho
        Fiscal* is
        comprised of one “audit committee financial expert” within the meaning of this
        Item 16A, namely Mr. Álvaro
        Antônio Cardoso de Souza ,
        with an
        extensive work-related finance background, who is “independent” as allowed per
        Rule 10A-3(c) of the Sarbanes-Oxley Act of 2002.




-114-
 *Table
          of Contents*




**ITEM
              16B.**
            **CODE
                OF BUSINESS CONDUCT**




We
      have
      adopted a code of business conduct (as defined under the rules and regulations
      of the SEC, and formerly called Code of Ethics) that apply to our principal
      executive officers, principal financial officer and principal accounting
      officer, among others. The code became effective in 2003; it was last amended
      on December 11, 2006 and is attached to this annual report as an
      Exhibit. 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.




-115-
 *Table
          of Contents*




**ITEM
              16C.**
            **PRINCIPAL
                ACCOUNTANT FEES AND
                SERVICES**




Deloitte
      Touche Tohmatsu Auditores Independentes acted as our independent auditor for
      the
      fiscal years ended December 31, 2006, 2005 and 2004. The chart below sets forth
      the total amount billed to us by Deloitte Touche Tohmatsu Auditores
      Independentes for services performed in the years 2006 and 2005 and breaks
      down
      these amounts by category of service:





**2006**
            
            **2005***(R$
                thousands)*
            
            *(R$
                thousands)*Audit
                Fees
            
            
            2,921,272
            
            
            2,125,927Audit-Related
                Fees
            
            
            484,848
            
            
            1,174,800Tax
                Fees
            
            
            —
            
            
            —All
                Other Fees
            
            
            119,670
            
            
            160,699Total
            
            
            3,525,790
            
            
            3,461,426


**Audit
      Fees**




Audit
      fees are fees billed for the audit of our annual financial statements and for
      the reviews of our quarterly financial statements in connection with statutory
      and regulatory filings or engagements.




**Audit-Related
      Fees**




Audit-related
      fees in 2006 and 2005 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**




During
      2006 and 2005 there were no fees related to services for tax compliance, tax
      planning and tax advice from the independent auditors hired to audit our
      reports.




**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.




**Independent
      Registered Public Accounting Firm**




The
      audited financial statements herein 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 José Guerra, 127, 04719-030 São
      Paulo, SP, Brazil. They are members of the *Conselho
      Regional de Contabilidade* (Regional Board of Accountants of São Paulo) and their registration number is
      CRC2.SP.011609/O-8. On April 9, 2007, KPMG Auditores Independentes substituted
      Deloitte Touche Tohmatsu Auditores Independentes as the Company’s independent
      auditor.




**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 *Conselho
      Fiscal* ,
      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). The *Conselho
      Fiscal* 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 *Conselho
      Fiscal* periodically receive from the 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 *Conselho
      Fiscal* and the
      approval of our Board of Directors. Our policy also contains a list of services
      which cannot be rendered by our external auditors.


-116-
 *Table
          of Contents*




**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 *Conselho
      Fiscal* 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-(c) and believe that our reliance on this exemption will not
      materially affect the ability of the *Conselho
      Fiscal* to act
      independently and to satisfy the other requirements of Rule 10A-3. In accordance
      with the charter of our *Conselho
      Fiscal* ,
      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 *Conselho
      Fiscal* is
      comprised of one financial expert, namely Mr. Álvaro Antônio Cardoso de
      Souza.


-117-
 *Table
          of Contents*




**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 report.




Below,
      in
      tabular format, is a disclosure of our repurchases, including those made
      pursuant to publicly announced plans or programs, for the periods
      indicated.




*Preferred
      Shares Repurchases*




**Period**
            
            **Total**
              **number**
              **of
                shares**
              **purchased**
            
            **Average**
              **price**
              **paid**
              **per
                share**
            
            **Total
                number of shares purchased as part of publicly announced**
              **plans
                or programs(1)**
            
            **Maximum
                number of shares**
              **that
                may be purchased under**
              **the
                plans or programs**January
                2006
            
            
            294,179,743
            
            
            903.54
            
            
            294,179,743
            
            
            1,428,400,078February
                2006
            
            
            46,487,835
            
            
            880.34
            
            
            43,369,937
            
            
            940,617,310March
                2006
            
            
            71,693,104
            
            
            897.97
            
            
            66,217,532
            
            
            874,399,778April
                2006
            
            
            79,942,781
            
            
            969.41
            
            
            77,032,519
            
            
            797,367,259May
                2006
            
            
            6,535,926
            
            
            702.06
            
            
            —
            
            
            797,367,259June
                2006
            
            
            —
            
            
            —
            
            
            —
            
            
            797,367,259July
                2006
            
            
            229,096,142
            
            
            868.63
            
            
            227,773,988
            
            
            569,593,271August
                2006
            
            
            59,278,399
            
            
            935.05
            
            
            59,278,399
            
            
            3,742,713,742September
                2006
            
            
            267,205,030
            
            
            962.22
            
            
            263,938,223
            
            
            3,478,775,519October
                2006
            
            
            284,536,591
            
            
            977.92
            
            
            279,027,774
            
            
            3,199,747,745November
                2006
            
            
            100,114,468
            
            
            999.03
            
            
            100,114,468
            
            
            3,581,162,534December
                2006
            
            
            350,446,730
            
            
            1,030.62
            
            
            348,746,730
            
            
            3,232,415,804January
                2007
            
            
            329,934,380
            
            
            1,058.73
            
            
            329,934,380
            
            
            2,902,481,424February
                2007
            
            
            158,448,446
            
            
            1,084.43
            
            
            153,934,847
            
            
            Not
                specifiedMarch
                2007
            
            
            188,989,811
            
            
            1,079.44
            
            
            188,289,811
            
            
            Not
                specifiedApril
                2007
            
            
            416,472,698
            
            
            1,161.77
            
            
            407,707,823
            
            
            Not
                specifiedMay
                2007
            
            
            327,083,230
            
            
            1,285.57
            
            
            327,083,230
            
            
            Not
                specifiedJune
                2007
            
            
            211,027,546
            
            
            1,372.39
            
            
            211,027,546
            
            
            Not
                specified**Total**
            
            
            **2,883,362,085**
            
            
            **1,010.34**
            
            
            **2,839,546,175**





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


(2)
            The
                plans approved on and after February 2007, there was no maximum amount
                of
                shares that could be purchased under the program, but a maximum monetary
                amount. Please see table
                below.


-118-
 *Table
          of Contents*




*Common
      Shares Repurchases*





**Period**
            
            **Total**
              **number**
              **of
                shares**
              **purchased**
            
            **Average**
              **price**
              **paid**
              **per
                share**
            
            **Total
                number of shares purchased as part of publicly announced plans or
                programs(1)**
            
            **Maximum
                number of shares that may be purchased under the plans or
                programs(2)**January
                2006
            
            
            269,487
            
            
            785.90
            
            
            —
            
            
            —February
                2006
            
            
            10,370,860
            
            
            756.28
            
            
            9,701,569
            
            
            368,420,142March
                2006
            
            
            5,498,372
            
            
            767.91
            
            
            4,403,258
            
            
            364,016,884April
                2006
            
            
            6,573,879
            
            
            847.65
            
            
            6,573,879
            
            
            357,443,005May
                2006
            
            
            1,034,650
            
            
            689.93
            
            
            —
            
            
            357,443,005June
                2006
            
            
            —
            
            
            —
            
            
            —
            
            
            357,443,005July
                2006
            
            
            873,019
            
            
            722.01
            
            
            608,588
            
            
            356,834,417August
                2006
            
            
            2,443,310
            
            
            823.17
            
            
            2,443,310
            
            
            367,953,743September
                2006
            
            
            1,308,360
            
            
            673.76
            
            
            655,000
            
            
            367,298,743October
                2006
            
            
            13,860,728
            
            
            829.20
            
            
            12,758,965
            
            
            354,539,778November
                2006
            
            
            4,145,530
            
            
            902.17
            
            
            4,145,530
            
            
            320,861,794December
                2006
            
            
            22,501,064
            
            
            913.18
            
            
            22,161,064
            
            
            298,700,730January
                2007
            
            
            17,383,190
            
            
            961.37
            
            
            17,383,190
            
            
            281,317,540February
                2007
            
            
            13,289,271
            
            
            955.40
            
            
            12,394,416
            
            
            Not
                specifiedMarch
                2007
            
            
            44,012,453
            
            
            1,032.27
            
            
            43,866,628
            
            
            Not
                specifiedApril
                2007
            
            
            81,355,505
            
            
            1,048.69
            
            
            76,002,990
            
            
            Not
                specifiedMay
                2007
            
            
            941,890
            
            
            1,227.37
            
            
            941,890
            
            
            Not
                specifiedJune
                2007
            
            
            1,830,829
            
            
            1,348.92
            
            
            1,830,829
            
            
            Not
                specified**Total**
            
            
            **224,919,678**
            
            
            **969.35**
            
            
            **213,098,387**


(1)
              May
                  differ from total number of shares purchased as they do not include
                  all
                  shares acquired from employees under the stock ownership
                  program.
 (2)
              The
                  plans approved on and after February 2007, there was no maximum
                  amount of
                  shares that could be purchased under the program, but a maximum
                  monetary
                  amount. Please see table below.




The
      publicly announced programs referenced in the above tables are the
      following:





**Approval
                Date**
            
            **Period**
            
            **Common
                or**
              **Preferred
                shares**
            
            **Maximum
                number**
              **of
                Preferred shares**
            
            **Maximum
                Number**
              **of
                Common Shares**
            
            **Maximum
                amount**
              **(R$
                thousand)**September
                14, 2004
            
            365
                days
            
            Preferred
            
            1,000,000,000
            
            0
            
            500,000November
                7, 2005
            
            365
                days
            
            Preferred
            
            1,975,588,915
            
            0
            
            500,000February
                22, 2006
            
            180
                days
            
            Common
                and Preferred
            
            983,987,247
            
            378,121,711
            
            500,000August
                8, 2006
            
            360
                days
            
            Common
                and Preferred
            
            3,801,992,141
            
            370,397,053
            
            1,000,000November
                14, 2006
            
            360
                days
            
            Common
                and Preferred
            
            3,681,277,002
            
            325,007,324
            
            1,000,000February
                7, 2007
            
            360
                days
            
            Common
                and Preferred
            
            Not
                specified
            
            Not
                specified
            
            1,000,000May
                8, 2007
            
            360
                days
            
            Common
                and Preferred
            
            Not
                specified
            
            Not
                specified
            
            1,000,000




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 that were dismissed, in both cases, pursuant to the terms and
      conditions of the Company’s stock ownership plan.




-119-
 *Table
            of Contents*




**PART
      III**




**ITEM
              18.**
            **FINANCIAL
                STATEMENTS**




***Companhia
                de Bebidas******das
                Américas - AmBev****Consolidated
                Financial Statements as of*
              *December
                31, 2006 and 2005 and for*
              *the
                Years then Ended and Report of Independent*
              *Registered
                Public**Accounting
                Firm*Deloitte
                Touche Tohmatsu Auditores
                Independentes







-120-
 *Table
          of Contents*




REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To
        the
        Board of Directors and Stockholders of
 Companhia
        de Bebidas das Américas - AmBev
 São
        Paulo - SP - Brazil
  1.
              We
                  have audited the accompanying consolidated balance sheets of Companhia
                  de
                  Bebidas das Américas - AmBev and its subsidiaries (the “Company” or
                  “AmBev”) as of December 31, 2006, and 2005, and the related consolidated
                  statements of income, changes in stockholders’ equity, changes in
                  financial position, and cash flows for each of the three years
                  in the
                  period ended December 31, 2006, all expressed in Brazilian reais.
                  These
                  consolidated financial statements are the responsibility of Company’s
                  management. Our responsibility is to express an opinion on the
                  consolidated financial statements based on our audits. We did not
                  audit
                  the financial statements of Labatt Brewing Company Limited (“Labatt”) (a
                  wholly-owned subsidiary of AmBev), which statements reflect total
                  assets
                  constituting 7.3 percent of consolidated total assets as of December
                  31,
                  2005 and total revenues constituting 24.9 percent and 13 percent
                  of
                  consolidated total revenues for the years ended December 31, 2005
                  and
                  2004, respectively. Such financial statements were audited by other
                  auditors whose report has been furnished to us, and our opinion,
                  insofar
                  as it relates to the amounts included for such subsidiary, is based
                  solely
                  on the report of such other
                  auditors.
  2.
              We
                  conducted our audits in accordance with the standards of the Public
                  Company Accounting Oversight Board (United States of America).
                  Those
                  standards require that we plan and perform the audit to obtain
                  reasonable
                  assurance about whether the consolidated financial statements are
                  free of
                  material misstatement. An audit also includes examining, on a test
                  basis,
                  evidence supporting the amounts and disclosures in the consolidated
                  financial statements, assessing the accounting principles used
                  and
                  significant estimates made by management, as well as evaluating
                  the
                  overall financial statement presentation. We believe that our audits
                  provide a reasonable basis for our
                  opinion.
  3.
              In
                  our opinion, such consolidated financial statements present fairly,
                  in all
                  material respects, the consolidated financial position of Companhia
                  de
                  Bebidas das Américas - AmBev and its subsidiaries as of December 31, 2006
                  and 2005, and the consolidated results of their operations, changes
                  in
                  stockholders’ equity, their financial position and their cash flow for
                  each of the three years in the period ended December 31, 2006,
                  in
                  conformity with accounting practices adopted in
                  Brazil.
  F-1
  4.
              Accounting
                  practices adopted in Brazil vary in certain significant respects
                  from
                  accounting principles generally accepted in the United States of
                  America
                  (U.S. GAAP). The Company has presented the nature and effect of
                  such
                  differences in Note 23 to the consolidated financial
                  statements.
  5.
                We
                    have also audited, in accordance with the standards of the Public
                    Company
                    Accounting Oversight Board (United States of America), the effectiveness
                    of AmBev’s internal control over financial reporting as of December 31,
                    2006, based on the criteria established in Internal Control-Integrated
                    Framework issued by the Committee of Sponsoring Organizations
                    - COSO - of
                    the Treadway Commission and our report dated February 26, 2007,
                    except for
                    the control activities related to Notes 23 and 24 as to which
                    the date is
                    July 4, 2007, expressed an unqualified opinion on management’s assessment
                    of the effectiveness of AmBev’s internal control over financial reporting
                    and an unqualified opinion on the effectiveness of AmBev’s internal
                    control over financial reporting.
  DELOITTE
          TOUCHE TOHMATSU
 Auditores
            Independentes
  São
            Paulo, Brazil
 February
            26, 2007, except for Notes 23 and 24 as to which the date is July 4,
            2007.
  F-2
 *Table
            of Contents*
  REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  To
        the
        Board of Directors of
 Labatt
        Brewing Company Limited
 Toronto
        - Canada
  We
        have
        audited the accompanying balance sheets of Labatt Brewing Company Limited
        (the
“Company”) as of December 31, 2005 and 2004, and the related statements of
        operations, deficit and contributed surplus and changes in financial position
        for the year ended December 31, 2005 and the period from August 28, 2004
        to
        December 31, 2004, all expressed in Canadian dollars. These financial statements
        are the responsibility of Company’s management. Our responsibility is to express
        an opinion on these financial statements based on our audits.
  We
        conducted our audits 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. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audit included consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that appropriate
        in the circumstances, but not for the purposes of expressing an opinion on
        the
        effectiveness of the Company’s internal control over financial reporting.
        Accordingly, we express no such opinion. 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, as well as evaluating the overall financial statement
        presentation. We believe that our audits provide a reasonable basis for our
        opinion.
  In
        our
        opinion, such financial statements presents fairly, in all material respects,
        the financial position of the Company as of December 31, 2005 and 2004, and
        the
        results of its operations and changes in the stockholders’ equity for the years
        ended December 31, 2005 and the period from August 28, 2004 to December 31,
        2004, in conformity with accounting practices adopted in Brazil.
  Accounting
        practices adopted in Brazil vary in certain significant respects from accounting
        principles generally accepted in the United States of America (U.S. GAAP).
        The
        Company has presented the nature and effect of such differences in Note 20
        to
        the financial statements.
  /s/KPMG,
        LLP
 
 Chartered
        Accountants, Licensed Public Accountants
 Toronto
        -
        Canada
 
 February
        3, 2006, except as to Note 22, which is as of July 4, 2007
  F-3
 *Table
            of Contents*
  COMPANHIA
        DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
        BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005
 (Expressed
        in millions of Brazilian reais)
  ASSETS
              
              2006
              
              2005CURRENT
                  ASSETSCash
                  and cash equivalents
              
              
              1,538.9
              
              
              837.3Short-term
                  investments
              
              
              226.1
              
              
              259.0Trade
                  accounts receivable, net
              
              
              1,542.7
              
              
              1,331.8Recoverable
                  Taxes
              
              
              687.7
              
              
              545.5Deferred
                  income and social contribution taxes
              
              
              610.0
              
              
              543.4Inventories
              
              
              1,363.9
              
              
              1,178.1Other
              
              
              848.1
              
              
              779.6Total
                  current assets
              
              
              6,817.4
              
              
              5,474.7NON-CURRENT
                  ASSETSLONG-TERM
                  ASSETSDeferred
                  income and social taxes
              
              
              3,566.7
              
              
              4,183.5Escrow
                  and compulsory deposits and tax incentives
              
              
              437.2
              
              
              431.4Properties,
                  machinery and equipment held for sale
              
              
              86.0
              
              
              104.5Financed
                  sale of shares
              
              
              72.8
              
              
              114.7Other
              
              
              486.0
              
              
              376.1Total
                  non-current assets
              
              
              4,648.7
              
              
              5,210.2PERMANENT
                  ASSETSInvestmentsGoodwill
                  and negative goodwill
              
              
              17,986.2
              
              
              16,722.2Other
              
              
              39.8
              
              
              41.4Property,
                  plant and equipment
              
              
              5,723.9
              
              
              5,404.6Deferred
                  charges
              
              
              429.1
              
              
              548.7Total
                  permanent assets
              
              
              24,179.0
              
              
              22,716.9TOTAL
              
              
              35,645.1
              
              
              33,401.8
 LIABILITIES
                    AND SHAREHOLDERS’ EQUITY
                
                2006
                
                2005CURRENT
                    LIABILITIESSuppliers
                
                
                1387.4
                
                
                1,065.4Accrued
                    payroll and related charges
                
                
                480.3
                
                
                447.7Loans
                    and financing
                
                
                2,038.7
                
                
                1,209.4Debentures
                
                
                65.9
                
                
                -Other
                    taxes payable
                
                
                1,239.0
                
                
                1,030.8Unrealized
                    loss on derivatives
                
                
                405.3
                
                
                129.8Dividends
                    payable
                
                
                109.0
                
                
                25.9Income
                    and social contribution taxes payable
                
                
                366.3
                
                
                244.5Others
                
                
                752.5
                
                
                898.8Total
                    current liabilities
                
                
                6,844.4
                
                
                5,052.3LONG-TERM
                    LIABILITIESLoans
                    and financing
                
                
                5,396.9
                
                
                5,994.2Accrued
                    liability for contingencies
                
                
                663.3
                
                
                1,037.1Sales
                    tax deferrals
                
                
                405.7
                
                
                352.6Debentures
                
                
                2,065.1
                
                
                -Other
                
                
                629.0
                
                
                825.8Total
                    long term liabilities
                
                
                9,160.0
                
                
                8,209.7DEFERRED
                    INCOME
                
                
                149.9
                
                
                149.9MINORITY
                    INTEREST
                
                
                222.7
                
                
                122.6SHAREHOLDERS’
                    EQUITYSubscribed
                    and paid-up capital
                
                
                5,716.1
                
                
                5,691.4Capital
                    reserve
                
                
                12,870.6
                
                
                13,889.5Profit
                    reserves
                
                
                1,622.1
                
                
                679.8Treasury
                    shares
                
                
                (940.7
                )
                
                (393.4
                )Total
                    shareholders’ equity
                
                
                19,268.1
                
                
                19,867.3TOTAL
                
                
                35,645.1
                
                
                33,401.8
  The
        accompanying notes are an integral part of the consolidated financial
        statements.
  F-4
 *Table
            of Contents*
  COMPANHIA
        DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
        STATEMENTS OF INCOME
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 (Expressed
        in millions of Brazilian reais, except for earnings per thousand
        shares)
  2006
              
              2005
              
              2004GROSS
                  REVENUES
              
              
              32,487.8
              
              
              28,878.7
              
              
              23,297.6Value-added
                  and other taxes, discounts and returns
              
              
              (14,874.1
              )
              
              (12,920.1
              )
              
              (11,290.8
              )NET
                  SALES
              
              
              17,613.7
              
              
              15,958.6
              
              
              12,006.8Cost
                  of sales
              
              
              (5,948.7
              )
              
              (5,742.4
              )
              
              (4,780.5
              )GROSS
                  PROFIT
              
              
              11,665.0
              
              
              10,216.2
              
              
              7,226.3OPERATING
                  INCOME (EXPENSES)Selling
                  and marketing
              
              
              (3,866.7
              )
              
              (3,499.9
              )
              
              (2,451.7
              )General
                  and administrative
              
              
              (771.2
              )
              
              (830.6
              )
              
              (617.9
              )Depreciation
                  and amortization
              
              
              (770.8
              )
              
              (667.9
              )
              
              (541.5
              )Provision
                  for contingencies and other
              
              
              111.8
              
              
              (71.5
              )
              
              (260.2
              )Financial
                  income (expenses), net
              
              
              (1,078.3
              )
              
              (1,086.7
              )
              
              (776.3
              )Other
                  operating income (expenses), net
              
              
              (955.1
              )
              
              (1,075.4
              )
              
              (420.9
              )Equity
                  in results of affiliates
              
              
              1.4
              
              
              2.0
              
              
              5.6(7,328.9
              )
              
              (7,230.0
              )
              
              (5,062.9
              )OPERATING
                  INCOME
              
              
              4,336.1
              
              
              2,986.2
              
              
              2,163.4Non-operating
                  income (expenses), net
              
              
              (28.8
              )
              
              (234.3
              )
              
              (333.9
              )INCOME
                  BEFORE INCOME TAXES, PROFIT SHARING AND MINORITY INTEREST
              
              
              4,307.3
              
              
              2,751.9
              
              
              1,829.5Provision
                  for Income and social contribution taxesCurrent
              
              
              (688.8
              )
              
              (757.1
              )
              
              (740.6
              )Deferred
              
              
              (626.5
              )
              
              (263.1
              )
              
              228.8INCOME
                  BEFORE PROFIT SHARING AND MINORITY INTEREST
              
              
              2,992.0
              
              
              1,731.7
              
              
              1,317.7Employees
                  and management profit sharing
              
              
              (194.4
              )
              
              (202.8
              )
              
              (152.4
              )INCOME
                  BEFORE MINORITY INTEREST
              
              
              2,797.6
              
              
              1,528.9
              
              
              1,165.3Minority
                  interest
              
              
              8.7
              
              
              16.8
              
              
              (3.8
              )NET
                  INCOME
              
              
              2,806.3
              
              
              1,545.7
              
              
              1,161.5NUMBER
                  OF SHARES OUTSTANDING AT YEAR-END, EXCLUDING TREASURY SHARES
                  (THOUSANDS)
              
              
              63.719.393
              
              
              65.346.214
              
              
              54,627,407EARNINGS
                  PER THOUSAND SHARES AT YEAR END (WHOLE*REAIS*)
                  -
                  R$
              
              
              44,04
              
              
              23,65
              
              
              21.26
  The
        accompanying notes are an integral part of the consolidated financial
        statements.
  F-5
 *Table
            of Contents*
   COMPANHIA
        DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
        STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 (Expressed
        in millions of Brazilian reais)
  Revenue
                  reservesSubscribed
                and paid-in
                capital
              
              Capital
                reserve
              
              Legal
                reserve
              
              Future
                capital
                increase
              
              Statutory
                investments
              
              Treasury
                shares
              
              Retained
                earnings
              
              TotalBALANCES
                  AT DECEMBER 31, 2003
              
              
              3,124.1
              
              
              16.6
              
              
              208.7
              
              
              26.1
              
              
              1,271.2
              
              
              (338.5
              )
              
              -
              
              
              4,308.2Employee
                  stock ownership plan purchases
              
              
              18.0
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              18.0Capital
                  increase upon incorporation of Labatt
              
              
              1,600.7
              
              
              12,840.3
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              14,441.0Repurchase
                  of own shares for treasury
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,609.6
              )
              
              -
              
              
              (1,609.6
              )Premium
                  on stock option sold
              
              
              -
              
              
              2.5
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2.5Cancellation
                  of treasury shares
              
              
              -
              
              
              -
              
              
              -
              
              
              (26.1
              )
              
              (882.0
              )
              
              908.1
              
              
              -
              
              
              -Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,161.5
              
              
              1,161.5Appropriation
                  of net income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (164.2
              )
              
              -
              
              
              164.2
              
              
              -Interim
                  dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (344.4
              )
              
              (344.4
              )Supplemental
                  dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (982.7
              )
              
              (982.7
              )Dividends
                  and interest attributed to shareholders’ equity prescribed
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1.4
              
              
              1.4BALANCES
                  AT DECEMBER 31, 2004
              
              
              4,742.8
              
              
              12,859.4
              
              
              208.7
              
              
              -
              
              
              225.0
              
              
              (1,040.0
              )
              
              -
              
              
              16,995.9Capital
                  increase upon capitalization of reserves
              
              
              948.6
              
              
              (948.6
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Downstream
                  merger - InBev Brasil
              
              
              -
              
              
              2,883.3
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,883,3Repurchase
                  of own shares for treasury
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (437.3
              )
              
              -
              
              
              (437.3
              )Cancellation
                  of treasury shares
              
              
              -
              
              
              (868.1
              )
              
              -
              
              
              -
              
              
              -
              
              
              868.1
              
              
              -
              
              
              -Transfer
                  of treasury shares to stockownership
                  plan
              
              
              -
              
              
              (94.4
              )
              
              -
              
              
              -
              
              
              -
              
              
              192.5
              
              
              -
              
              
              98.1Disposal
                  of treasury shares
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              23.3
              
              
              -
              
              
              23.3Subsidy
                  of financing and fiscal incentives
              
              
              -
              
              
              57.9
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              57.9Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,545.7
              
              
              1,545.7Appropriation
                  of net incomeStatutory
                  reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              246.1
              
              
              -
              
              
              (246.1
              )
              
              -Interim
                  dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (556.2
              )
              
              (556.2
              )Interim
                  interest attributed to shareholders’ equity
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (744.0
              )
              
              (744.0
              )Dividends
                  and interest attributed to shareholders’ equity prescribed
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              0.6
              
              
              0.6BALANCES
                  AT DECEMBER 31, 2005
              
              
              5,691.4
              
              
              13,889.5
              
              
              208.7
              
              
              -
              
              
              471.1
              
              
              (393.4
              )
              
              -
              
              
              19,867.3Capital
                  increase upon capitalization of exercises of options of stock ownership
                  plan
              
              
              3.4
              
              
              (3.4
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Capital
                  increase upon capitalization of reserves
              
              
              21.3
              
              
              (21.3
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Advance
                  for future capital increase related to stock ownership
                  plan
              
              
              -
              
              
              3.4
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3.4Repurchase
                  of own shares for treasury
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,762.3
              )
              
              -
              
              
              (1,762.3
              )Cancellation
                  of treasury shares
              
              
              -
              
              
              (1,046.2
              )
              
              -
              
              
              -
              
              
              -
              
              
              1,046.2
              
              
              -
              
              
              -Transfer
                  of treasury shares to stock ownership plan
              
              
              -
              
              
              (67.2
              )
              
              -
              
              
              -
              
              
              -
              
              
              168.8
              
              
              -
              
              
              101.6Subsidy
                  of financing and fiscal incentives
              
              
              -
              
              
              115.8
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              115.8Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,806.3
              
              
              2,806.3Appropriation
                  of net income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Statutory
                  reserve
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,333.2
              
              
              -
              
              
              (1,333.2
              )
              
              -Interim
                  interest attributed to shareholders’ equity
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,473.1
              )
              
              (1,473.1
              )Supplemental
                  dividends
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (390.9
              )
              
              -
              
              
              -
              
              
              (390.9
              )BALANCES
                  AT DECEMBER 31, 2006
              
              
              5,716.1
              
              
              12,870.6
              
              
              208.7
              
              
              -
              
              
              1,413.4
              
              
              (940.7
              )
              
              
              
              
              19,268.1
  The
        accompanying notes are an integral part of the consolidated financial
        statements.
  F-6
 *Table
            of Contents*
  COMPANHIA
        DE BEBIDAS DAS AMÉRICAS - AMBEV
  STATEMENTS
        OF CHANGES IN FINANCIAL POSITION
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 (Expressed
        in millions of Brazilian reais)
  2006
              
              2005
              
              2004FINANCIAL
                  RESOURCES WERE PROVIDED BYFrom
                  Operations:Net
                  income
              
              
              2,806.3
              
              
              1,545.7
              
              
              1,161.5Items
                  not affecting working capital:Equity
                  in results of affiliates
              
              
              (1.4
              )
              
              (2.0
              )
              
              (5.6
              )Deferred
                  income and social contribution taxes
              
              
              626.5
              
              
              263.1
              
              
              (228.8
              )Amortization
                  of goodwill and negative goodwill, net
              
              
              1,283.0
              
              
              1,343.0
              
              
              803.6Gain
                  on the settlement of tax incentives
              
              
              (39.9
              )
              
              (28.3
              )
              
              (21.9
              )Depreciation
                  and amortization
              
              
              1,188.4
              
              
              1,087.5
              
              
              922.2Accrued
                  liability for contingencies and other
              
              
              (111.8
              )
              
              71.5
              
              
              260.1Interest
                  expense on accrued liability for contingencies
              
              
              36.7
              
              
              52.7
              
              
              49.8Financial
                  charges on long-term loans, net
              
              
              (470.3
              )
              
              (501.2
              )
              
              278.0Foreign
                  exchange loss (gain) on subsidiaries abroad
              
              
              (79.4
              )
              
              289.3
              
              
              (213.8
              )Loss
                  arising from changes in holdings in subsidiaries
              
              
              (6.1
              )
              
              64.8
              
              
              80.7Minority
                  interest
              
              
              (8.7
              )
              
              (16.8
              )
              
              3.8Net
                  book value of disposal of property, plant and equipment and
                  investments
              
              
              288.6
              
              
              150.4
              
              
              168.7Interest
                  and charges on advances to employees for purchase of
                  shares
              
              
              (10.0
              )
              
              (13.3
              )
              
              (41.9
              )Provision
                  for losses on permanent assets
              
              
              8.7
              
              
              116.8
              
              
              (6.7
              )Total
                  from operations
              
              
              5,510.6
              
              
              4,423.2
              
              
              3,209.7From
                  shareholders:Employee
                  stock ownership plan purchases
              
              
              -
              
              
              -
              
              
              18.0Premium
                  on the placement options to repurchase own shares
              
              
              -
              
              
              -
              
              
              2.6Disposal
                  of treasury shares
              
              
              105.3
              
              
              132.5
              
              
              -Advances
                  to employees for the purchase of shares
              
              
              78.5
              
              
              73.3
              
              
              101.2From
                  third parties:Increase
                  in long-term liabilities and decrease in non-current
                  assetsLoans
                  and financing
              
              
              -
              
              
              2,233.7
              
              
              -Sales
                  taxes deferred
              
              
              268.4
              
              
              115.5
              
              
              167.9Deferred
                  charges
              
              
              -
              
              
              12.0
              
              
              -Debentures
              
              
              2,065.1
              
              
              -
              
              
              -Other
                  recoverable taxes
              
              
              66.6
              
              
              543.4
              
              
              -Other
                  accounts receivable
              
              
              -
              
              
              78.5
              
              
              -Other
              
              
              4.3
              
              
              0.5
              
              
              17.3Total
                  working capital funds provided
              
              
              8,098.8
              
              
              7,612.6
              
              
              3,516.7
 (Continues)
  F-7
 *Table
            of Contents*
  COMPANHIA
        DE BEBIDAS DAS AMÉRICAS - AMBEV
  STATEMENTS
        OF CHANGES IN FINANCIAL POSITION
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
  (Expressed in millions of Brazilian
                  reais)
                (Continuation)
  2006
              
              2005
              
              2004FINANCIAL
                  RESOURCES WERE USED FORIncrease
                  in non-current assets and decrease in long-term
                  liabilities:Restrict
                  deposits for legal proceedings
              
              
              61.4
              
              
              72.2
              
              
              52.7Receivables
                  from proportionally consolidated companies
              
              
              -
              
              
              8.2
              
              
              5.9Recoverable
                  taxes
              
              
              -
              
              
              8.3
              
              
              20.7Other
                  assets
              
              
              57.8
              
              
              4.3
              
              
              -Accrued
                  liability for contingencies
              
              
              264.3
              
              
              224.1
              
              
              87.0Loans
                  and financing
              
              
              185.9
              
              
              -
              
              
              -Other
                  liabilities
              
              
              176.6
              
              
              30.0
              
              
              71.9Permanent
                  assets:
              
              
              -
              
              
              -Investments
              
              
              2,731.0
              
              
              190.4
              
              
              345.9Property,
                  plant and equipment
              
              
              1,425.7
              
              
              1,169.4
              
              
              1,267.2Deferred
                  charges
              
              
              18.7
              
              
              265.4
              
              
              101.9Repurchase
                  of own shares for treasury
              
              
              1,762.3
              
              
              438,0
              
              
              1,609.6Increase
                  of minority interest in subsidiaries
              
              
              -
              
              
              -
              
              
              114.8Proposed
                  and declared dividends
              
              
              1,864.0
              
              
              1,299.6
              
              
              1,394.1Change
                  in the capital of minority shareholders
              
              
              0.5
              
              
              88.3
              
              
              31.9Financings
              
              
              -
              
              
              -
              
              
              2,585.7Total
                  working capital funds used
              
              
              8,548.2
              
              
              3,798.2
              
              
              7,689.3INCREASE
                  (DECREASE) IN WORKING CAPITAL
              
              
              (449.4
              )
              
              3,814.4
              
              
              (4,172.6
              )REPRESENTED
                  BYCurrent
                  assets:At
                  end of year
              
              
              6,817.4
              
              
              5,474.7
              
              
              5,379.7At
                  beginning of year
              
              
              5,474.7
              
              
              5,379.7
              
              
              5,500.61,342.7
              
              
              95.0
              
              
              (120.9
              )Current
                  liabilitiesAt
                  end of year
              
              
              6,844.4
              
              
              5,052.3
              
              
              8,771.7At
                  beginning of year
              
              
              5,052.3
              
              
              8,771.7
              
              
              4,720.01,792.1
              
              
              (3,719.4
              )
              
              4,051.7INCREASE
                  (DECREASE) IN WORKING CAPITAL
              
              
              (449.4
              )
              
              3,814.4
              
              
              4,172.6
  The
        accompanying notes are an integral part of the consolidated financial
        statements.
  F-8
 *Table
            of Contents*
  COMPANHIA
        DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 (Expressed
        in millions of Brazilian reais)
  2006
              
              2005
              
              2004CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  income
              
              
              2,806.3
              
              
              1,545.7
              
              
              1,161.5Adjustments
                  to net income:Deferred
                  income and social contribution
              
              
              626.5
              
              
              263.1
              
              
              (228.8
              )Amortization
                  of goodwill and negative goodwill, net
              
              
              1,283.0
              
              
              1,343.0
              
              
              803.6Depreciation
                  and amortization
              
              
              1,188.4
              
              
              1,087.5
              
              
              922.2Accrued
                  liabilities for contingencies and other
              
              
              (111.8
              )
              
              71.5
              
              
              260.2Interest
                  expenses on accrued liability for contingencies
              
              
              36.7
              
              
              52.7
              
              
              49.8Gain
                  on the settlement of tax incentives
              
              
              (39.9
              )
              
              (28.3
              )
              
              (21.9
              )Provision
                  (reversal) for losses on inventories and permanent assets
              
              
              11.8
              
              
              58.6
              
              
              (6.5
              )Reversal
                  of allowance for losses on investments
              
              
              (22.0
              )Provision
                  for restructuring
              
              
              18.8
              
              
              114.9
              
              
              182.7Unrealized
                  losses (gains) on derivatives
              
              
              221.6
              
              
              (239.5
              )
              
              407.3Interest
                  and charges on advances to employees for purchase of
                  shares
              
              
              (10.0
              )
              
              (13.3
              )
              
              (41.9
              )Interest
                  and charges on taxes and contributions
              
              
              1.4
              
              
              5.2
              
              
              (5.1
              )Interest
                  and foreign exchange losses on loans
              
              
              424.2
              
              
              281.0
              
              
              329.2Unrealized
                  exchange rate variation and gains on financial assets
              
              
              13.4
              
              
              
              
              
              37.1Loss
                  on disposal of property, plant e equipment, net
              
              
              163.4
              
              
              102.5
              
              
              116.3Recovery
                  of tax credits
              
              
              (24.0
              )(Gain)
                  Loss arising from changes in holdings in subsidiaries
              
              
              (5.5
              )
              
              64.8
              
              
              80.8Foreign
                  exchange gains on subsidiaries not affecting cash, net
              
              
              (116.7
              )
              
              (67.6
              )
              
              (355.6
              )Minority
                  interest
              
              
              (8.7
              )
              
              (16.8
              )
              
              3.8Equity
                  in results of affiliates
              
              
              (1.4
              )
              
              (2.0
              )
              
              (5.6
              )(Increase)
                  decrease in assetsTrade
                  accounts receivable, net
              
              
              (166.2
              )
              
              (246.9
              )
              
              (141.4
              )Recoverable
                  taxes
              
              
              (14.5
              )
              
              87.1
              
              
              (241.8
              )Inventories
              
              
              (142.8
              )
              
              93.2
              
              
              (199.1
              )Restrict
                  deposits for legal proceedings
              
              
              (63.2
              )
              
              (130.0
              )
              
              (50.7
              )Other
              
              
              (169.3
              )
              
              106.1
              
              
              (105.9
              )Increase
                  (decrease) in liabilities:Trade
                  accounts payable
              
              
              286.8
              
              
              1.1
              
              
              110.0Accrued
                  payroll, profit sharing and related charges
              
              
              20.7
              
              
              118.0
              
              
              188.5Income
                  and social contribution taxes and other taxes
              
              
              36.9
              
              
              (383.1
              )
              
              175.3Disbursements
                  related to liability for contingencies
              
              
              (268.2
              )
              
              (101.6
              )
              
              (88.0
              )Other
              
              
              9.6
              
              
              (17.3
              )
              
              82.7Cash
                  provided by operating activities
              
              
              5,985.3
              
              
              4,149.6
              
              
              3,418.7
  (Continues)
  F-9
 *Table
            of Contents*
  COMPANHIA
        DE BEBIDAS DAS AMÉRICAS - AMBEV
  CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 FOR
        THE
        YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
  (Expressed in millions of Brazilian
                  reais)
                (Continuation)
  2006
              
              2005
              
              2004CASH
                  FLOWS FROM INVESTING ACTIVITIESShort-term
                  investments (maturity over 90 days)
              
              
              180.6
              
              
              (52.4
              )
              
              1,322.2Investment
                  in affiliates and subsidiaries, net of cash acquired
              
              
              (2,639.2
              )
              
              (97.3
              )
              
              (170.3
              )Securities
                  and collateral
              
              
              0.1
              
              
              (15.4
              )
              
              27.2Acquisition
                  of property, plant and equipment
              
              
              (1,425.7
              )
              
              (1,369.5
              )
              
              (1,273.7
              )Proceeds
                  from disposal of property, plant and equipment
              
              
              117.6
              
              
              49.6
              
              
              52.4Expenditures
                  on deferred charges
              
              
              (18.7
              )
              
              (47.8
              )
              
              (101.9
              )Repurchase
                  of own shares by affiliated companies
              
              
              -
              
              
              (87.5
              )
              
              (179.3
              )Pay-off
                  of investments
              
              
              -
              
              
              1.0
              
              
              0.5Cash
                  in the subsidiary’s initial consolidation
              
              
              -
              
              
              -
              
              
              433.6Net
                  cash provided by (used in) investing activities
              
              
              (3,785.3
              )
              
              (1,619.3
              )
              
              110.7CASH
                  FLOWS FROM FINANCING ACTIVITIESLoans
                  and financing:Issuances
              
              
              9,344.8
              
              
              8,917.4
              
              
              6,152.2Repayments,
                  including interest
              
              
              (7,386.3
              )
              
              (9,361.1
              )
              
              (7,466.5
              )Capital
                  subscription
              
              
              3.4
              
              
              -
              
              
              15.6Repurchase
                  of own shares for treasury
              
              
              (1,765.1
              )
              
              (363.1
              )
              
              (1,609.6
              )Dividends
                  paid
              
              
              (1,790.8
              )
              
              (2,272.0
              )
              
              (602.9
              )Advance
                  to employee for purchase of shares, net of repayments
              
              
              72.5
              
              
              53.8
              
              
              103.2Premium
                  of repurchase of shares
              
              
              -
              
              
              91.7
              
              
              2.6Other
              
              
              53.0
              
              
              (40.7
              )
              
              (28.4
              )Cash
                  used in financing activities
              
              
              (1,468.5
              )
              
              (2,974.0
              )
              
              (3,433.8
              )EFFECT
                  OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
              
              
              (29.8
              )
              
              (10.0
              )
              
              (0.8
              )NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              701.7
              
              
              (453.7
              )
              
              94.8CASH
                  AND CASH EQUIVALENTS AT BEGINNING OF YEAR
              
              
              837.3
              
              
              1,291.0
              
              
              1,196.1CASH
                  AND CASH EQUIVALENTS AT END OF YEAR
              
              
              1,539.0
              
              
              837.3
              
              
              1,290.9SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW INFORMATIONCash
                  paid during the year for:Interest,
                  net of capitalized interest
              
              
              605.7
              
              
              719.4
              
              
              472.2Taxes
                  on income
              
              
              584.8
              
              
              836.1
              
              
              639.5NONCASH
                  INVESTING AND FINANCING TRANSACTIONSIssuance
                  of shares related to the Labatt transaction
              
              
              -
              
              
              -
              
              
              16,683.3Downstream
                  merger - InBev Brasil
              
              
              -
              
              
              2,883.3
              
              
              -
  The
        accompanying notes are an integral part of the consolidated financial
        statements.
  F-10
 *Table
            of Contents*
 
  Companhia
        de Bebidas das Américas - AmBev
 COMPANHIA
        DE BEBIDAS DAS AMÉRICAS - AMBEV
  NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 AS
        OF
        DECEMBER 31, 2006, 2005 AND 2004
 (Amounts
        in millions of Brazilian reais - R$, unless otherwise indicated; Amounts
        in
        Canadian dollars are in millions of Canadian dollars)
  1.
              OUR
                  GROUP AND OPERATIONS
  (a)
        Companhia de Bebidas das Américas - AmBev (the “Company”, “AmBev” or “we”) is a
        publicly-held company incorporated under the laws of the Federative Republic
        of
        Brazil, headquartered in São Paulo, Brazil. AmBev and its subsidiaries produce,
        sell and distribute beer, draft beer, malt, soft drinks and other non-alcoholic
        beverages, such as isotonic sport drinks, iced tea and water, in Brazil and
        elsewhere in the Americas.
  (b)
        The
        Company is the result of a merger between *Companhia
        Cervejaria Brahma* (“Brahma”) and *Indústrias
        de Bebidas e Conexos Antarctica Paulista S/A* (“Antarctica”), which we refer below as the Brahma-Antarctica transaction.
  Brahma
        was a company engaged in the production and sale of beverages (primarily
        beer
        and soft drinks). Brahma was controlled by Messrs. Jorge Paulo Lemann, Marcel
        Herrmann Telles and Carlos Alberto da Veiga Sicupira through certain holding
        companies (the “Braco Group”), who collectively held a 55.1% voting stake in
        Brahma prior to the Brahma-Antarctica transaction. The remaining shares of
        Brahma were publicly held.
  Antarctica
        was also a company engaged in the production and sale of beverages, primarily
        beer and soft drinks. Antarctica was controlled by a foundation named *Fundação
        Antônio e Helena Zerrener* (“FAHZ”), which held an 88.1% voting interest in Antarctica before the
        Brahma-Antarctica transaction took place. The remaining shares of Antarctica
        were publicly held.
  The
        Brahma-Antarctica transaction consisted of the combination of Brahma and
        Antarctica and was carried out over the course of 1999 and 2000. The combination
        led to the formation of AmBev, a holding company that had Brahma and Antarctica
        as its subsidiaries, and was performed in three steps.
  *First* ,
        in July
        1999 the Braco Group and FAHZ contributed their shares in Brahma and Antarctica,
        respectively, to AmBev in exchange for AmBev shares. As a result of such
        contributions, (i) AmBev became the owner of 55.1% of Brahma’s voting shares and
        88.1% of Antarctica’s voting shares, and (ii) the Braco Group and FAHZ each
        owned, respectively, 76% and 24% of AmBev’s voting shares.
  *Second,* in
        September 1999, Antarctica’s minority shareholders’ exchanged their shares in
        Antarctica for AmBev shares, causing Antarctica to become a wholly-owned
        subsidiary of AmBev.
  *Third* ,
        in
        September 2000, Brahma’s minority shareholders’ exchanged their shares in Brahma
        for AmBev shares, which resulted in Brahma also becoming a wholly-owned
        subsidiary of AmBev.
  F-11
 *Table
            of Contents*
   (c)
        AmBev
        has a franchise agreement with PepsiCo International, Inc. (“PepsiCo”) to
        bottle, sell and distribute Pepsi products in Brazil and in other Latin American
        countries, including Lipton Ice Tea and Gatorade, the isotonic sports drink.
  (d)
        The
        Company maintains a licensing agreement with Anhenser-Busch, Inc., through
        its
        subsidiary Labatt Canada, to produce, bottle, sell and distribute Budweiser
        products in Canada. In addition, the Company produces and distributes Stella
        Artois under license of Interbrew International B.V. (“InBev”) in Brazil and
        Canada and, by means of a license granted to InBev, it distributes Brahma
        in the
        United States and in certain countries of Europe, Asia and Africa.
  (e)
        AmBev
        shares are traded on the São Paulo Stock Exchange - BOVESPA, and the New York
        Stock Exchange - NYSE, as American Depositary Receipts (ADRs).
  MAIN
        EVENTS THAT OCCURRED IN 2006 AND 2005
  I.
        Acquisition of control in Quilmes Industrial S.A. (“Quinsa”)
 As
            part
            of the share purchase agreement of Quinsa entered into in May 2002 (the
“SPA”),
            the other joint controlling shareholders of Quinsa, Beverage Associates
            Corp.
            (“BAC”), had the right to exchange their 373.5 million class A shares of Quinsa
            for shares of AmBev (the “BAC Option”), in periods specified in each year
            beginning April 2003, or at any moment in which there was a change in
            the
            ownership structure of AmBev. In addition, BAC granted AmBev the option,
            exercisable in April of each year starting in 2009, to require BAC to
            exchange
            its class A shares of Quinsa for shares issued by AmBev (the “AmBev
            Option”).
  On
            April
            13, 2006, the Company entered into an agreement (the “BAC Agreement”) whereby
            (i) BAC agreed to sell all of its shares in Quinsa to AmBev for US$1,223.9
            million (subject to certain adjustments) in lieu of shares issued by
            AmBev as
            originally provided for in the AmBev Option, (ii) BAC would not be permitted
            to
            exercise the BAC Option, and AmBev would not be permitted to exercise
            the AmBev
            Option, and (iii) the SPA would be terminated upon closing of the BAC
            Agreement.
  On
            August
            8, 2006, the Company closed the transaction with BAC under the BAC Agreement
            and
            acquired all the shares of Beverage Associates Holding LTD (“BAH”) for the total
            amount of R$2,738.8 (equivalent to US$1.25 billion), resulting in goodwill
            in
            the amount of R$2,331.1. With the closing of the operation, AmBev’s interest in
            Quinsa’s capital increased from 59.77% to 91.18%.
  This
            agreement represents the last stage of the transaction started in May
            2002, by
            which AmBev acquired an initial interest in Quinsa.
 II.
        Alliance with Romero Group
  On
        March
        9, 2006, the Company announced an alliance with the business group Romero,
        entered into by means of a sale agreement of 25% of the capital of its indirect
        subsidiary Compañia Cervecera AmBev Perú S.A.C. (“AmBev Perú”) to Ransa
        Comercial S.A., a company of the Romero Group. On July 14, 2006, the Company
        closed the transaction for the amount of R$8.2.
  F-12
 *Table
            of Contents*
  The
        agreement of purchase and sale of shares set forth that the conclusion of
        the
        transaction would be subject to the corporate restructuring of AmBev Perú and
        the execution of a shareholders’ agreement. The shareholders’ agreement
        executed, provided for the granting, by AmBev, of an additional call option
        in
        favor of Romero Group for 5% of the capital of AmBev Perú.
 
 On
        September 22, 2006, the call option of 5% of the capital was exercised in
        the
        amount of R$1.7, and the interest of Romero Group in the capital of AmBev
        Perú
increased from 25% to 30%.
  III.
        Merger of the parent company InBev Holding Brasil S.A. (“InBev
        Brasil”)
  The
        Extraordinary Shareholders’ meeting on July 28, 2005 approved the merger of
        InBev Brasil into AmBev.
  The
        referred merger aims at simplifying the corporate structure of which InBev
        Brasil, AmBev and its subsidiaries are part and it will result in future
        financial benefits to AmBev and consequently, to its shareholders and InBev
        Brasil’s shareholders, as presented below.
  ·
              The
                  goodwill originally recorded by InBev Brasil is attributed to future
                  profitability of AmBev and is derived from: (i) the acquisition
                  of shares
                  issued by AmBev at the time of the mandatory tender offer held
                  on March
                  29, 2005 totaling R$ 1,351.1; and (ii) the contribution to InBev
                  Brasil of shares previously held by Interbrew International B.V.
                  (“IIBV”),
                  totaling R$ 7,159.0, which will be, following the merger, amortized
                  by AmBev for Brazilian income tax purposes in a period not exceeding
                  ten
                  years, in accordance with the applicable tax legislation in Brazil
                  and
                  with no impact on AmBev’s dividends
                  flow.
  ·
              InBev
                  Brasil, in compliance with CVM Instruction 349, recorded a provision
                  prior
                  to its merger into AmBev, totaling R$ 5,616.7, corresponding to the
                  difference between the goodwill amount and the tax benefit derived
                  from
                  its amortization, so that AmBev merged only the assets corresponding
                  to
                  the tax benefit resulting from the fact that the goodwill amortization
                  is
                  deductible for tax purposes. The referred provision shall be reverted
                  in
                  the same proportion that the goodwill is amortized by AmBev; thus,
                  not
                  affecting its results of
                  operations.
  ·
              The
                  goodwill special reserve recorded at AmBev, as a result of such
                  merger,
                  pursuant to provisions in paragraph 1 of Article 6 of CVM Instruction
                  319,
                  at the end of each fiscal year and to the extent that the tax benefit
                  to
                  be obtained by AmBev, as a result of goodwill amortization represent
                  an
                  effective reduction of taxes paid by AmBev, shall be the object
                  of
                  capitalization by AmBev to the benefit of InBev Brasil’s shareholders,
                  without any prejudice to the preemptive right assured to AmBev’s other
                  shareholders in the capital increase subscription resulting from
                  such
                  capitalization, in accordance with the terms of the Article 7,*caput*and Paragraphs 1 and 2 of CVM Instruction 319.
  F-13
 *Table
            of Contents*
 
  ·
              InBev,
                  parent company of InBev Brasil, undertook by itself and by its
                  direct or
                  indirect subsidiaries to capitalize only seventy percent (70%)
                  of the
                  goodwill special reserve value it is entitled to at the end of
                  each fiscal
                  year, verified in accordance with provisions of item III of Article
                  6 of
                  the CVM Instruction 319, subject to the limits of effective decrease
                  of
                  taxes paid by AmBev mentioned above. The value equivalent to the
                  thirty
                  per cent (30%) non-capitalized balance of reserve, which will benefit
                  AmBev and its shareholders, will be used for distribution to its
                  shareholders as dividends or interest attributed to shareholders’ equity,
                  whenever possible and observing AmBev’s
                  interests.
  ·
              The
                  balance of contingent liabilities for the Brazilian Social Integration
                  Program (“PIS”) and Contribution for Social Security Financing (“COFINS”)
                  totaling R$ 10.2 related to the legal discussion regarding the
                  calculation basis increase of such contributions existing in the
                  balance
                  sheet of InBev Brasil as at May 31, 2005, as they represent the
                  contingent
                  liabilities on that date, they were recorded upon merger, against
                  the
                  goodwill special reserve previously mentioned. If, during the goodwill
                  amortization period, AmBev is ultimately ordered to pay such
                  contributions, the benefit to be capitalized in favor of InBev
                  Brasil’s
                  current shareholders referred to in item (b) above will be reduced
                  by the
                  amount equivalent to the amount monetarily restated of contributions
                  effectively paid. On the other hand, if the referred contingencies
                  are not
                  purpose of a final ruling, until the last capitalization to be
                  carried out
                  in favor of InBev Brasil’s shareholders, the amount of such contingencies,
                  duly restated will be deducted from the amount to be
                  capitalized.
  ·
              The
                  merger of InBev by AmBev on July 28, 2005, resulted in an increase
                  of
                  shareholders’ equity of the Company, corresponding to the special goodwill
                  reserve as described in Note 16 (f) as
                  follows:
  Current
                  Assets
              
              
              9.9Goodwill
                  (*)
              
              
              2,893.4Deferred
              
              
              2.4Current
                  Liabilities
              
              
              (12.2
              )Contingencies
                  Liabilities
              
              
              (10.2
              )Total
                  Net Assets
              
              
              2,883.3
  (*)  Represented
        by the net amount of future benefit of income tax credit over goodwill
        balance.
  IV.
        Merger of the subsidiary Companhia Brasileira de Bebidas (“CBB”)
  The
        Company’s shareholders approved at an Extraordinary Shareholders’ Meeting held
        on May 31, 2005, the merger of the subsidiary CBB into AmBev.
  The
        referred merger aims at simplifying the corporate structure comprised by
        AmBev
        and its subsidiaries, as well as to allow that the amount of R$702.7 of the
        goodwill originally recorded in AmBev, derived from purchase of shares of
        CBB,
        attributed to the expectation of future profitability, after the merger may
        be
        fiscally amortized within ten years, in accordance with the applicable tax
        legislation.
  As
        CBB’s
        financial statements were already consolidated by AmBev, the referred merger
        of
        CBB’s assets and liabilities into AmBev, recorded at book value, did not have
        any effect on the consolidated financial statements.
  F-14
 *Table
            of Contents*
  V.
        InBev
        - AmBev transactions
  The
        “InBev-AmBev transactions” consisted of two transactions negotiated
        simultaneously: (i) in the first transaction, the Braco Group exchanged its
        AmBev shares for shares in Interbrew S.A./N.V. (“Interbrew”); and (ii) in the
        second transaction, AmBev issued shares to Interbrew in exchange for Interbrew’s
        100% stake in Labatt Brewing Company Ltd. (“Labatt”).
 
 *Ownership
        of AmBev and Interbrew prior to the InBev-AmBev transactions*
 
 *AmBev*
 
 Immediately
        prior to the InBev-AmBev transactions, AmBev was a public company traded
        on the
        São Paulo Stock Exchange and on the New York Stock Exchange, controlled by
        the
        Braco Group and the FAHZ in accordance with the terms of the AmBev Shareholders’
Agreement. The Braco Group held approximately 53% of AmBev’s common shares while
        FAHZ owned approximately 24% of AmBev’s common shares. The remaining 23% of
        AmBev’s common shares were publicly held.
 
 *Interbrew*
 
 Interbrew
        was also a public company listed on Euronext - Brussels, and was controlled
        by
        Stichting Interbrew (the “Stichting”), which owned approximately 64% of
        Interbrew’s common shares. Two charitable foundations Fund Voorzitter Verhelst
        and the Fund InBev-Baillet Latour (the “InBev Foundations”) owned approximately
        2% of Interbrew’s common shares. The remainder of Interbrew’s common
        shares was held in the market. The Stichting represented the interests of
        the Interbrew Founding Families. Interbrew owned, through certain holding
        companies, 100% of Labatt.
 
 *Exchange
        of shares between Braco Group and Interbrew Founding Families*
 
 In
        March
        2004, various entities controlled by the Braco Group entered into an agreement
        (the “Contribution and Subscription Agreement”) with Interbrew and various
        entities representing the interests of the Interbrew Founding Families to
        exchange their controlling interest in AmBev for newly-issued voting shares
        of
        Interbrew, which represented 24.7% of Interbrew’s voting shares.
 
 Upon
        closing of this transaction in August 2004, (i) the Braco Group received
        approximately 44% of the voting interest in the Stichting, which thereupon
        owned
        approximately 56% of Interbrew’s common shares, and (ii) Interbrew received
        approximately a 53% voting interest and a 22% economic interest in AmBev.
        Such
        voting interest was subject to the pre-existing AmBev Shareholders’ Agreement,
        as amended in connection with the InBev-AmBev transactions. In addition,
        Interbrew was renamed InBev S.A./N.V. (“InBev”).
  F-15
 *Table
            of Contents*
  
 *Acquisition
        of Labatt*
 
 Also
        in
        March 2004, AmBev entered into an agreement (the “ *Incorporação* Agreement”) through which an indirect holding company of Labatt would be merged
        into AmBev. As consideration for the acquisition of Labatt, AmBev issued
        AmBev
        common and preferred shares to Interbrew.
 
 With
        the
        consummation of this transaction also in August 2004, (i) Labatt became a
        wholly-owned subsidiary of AmBev, and (ii) Interbrew increased its stake
        in
        AmBev to approximately 68% of common shares and 34% of preferred
        shares.
 
 *Ownership
        structure of InBev and AmBev upon consummation of the InBev-AmBev
        transactions*
 
 *InBev*
 
 With
        the
        closing of the InBev-AmBev transactions, 56% of InBev’s voting shares were owned
        by the Stichting, 1% was owned by the InBev Foundations, 17% were owned directly
        by entities and individuals associated with the Interbrew Founding Families
        and
        the remaining 26% constituted the public float.
 
 The
        Braco
        Group became the holder of 44% of the Stichting’s voting interests, while the
        Interbrew Founding Families held the remaining 56% of the Stichting’s voting
        interests. In addition, the Braco Group and entities representing the interests
        of the Interbrew Founding Families entered into a shareholders’ agreement (the
“InBev Shareholders’ Agreement”) providing for, among other things, joint and
        equal influence over the exercise of the Stichting voting rights in InBev.
 
 *AmBev*
 
 With
        the
        closing of the InBev-AmBev transactions, InBev became the owner of approximately
        68% of AmBev’s voting shares, FAHZ retained approximately 16% of such shares,
        and the remaining 15% were held by the public.
 
 *Mandatory
        Tender Offer*
  Pursuant
        to Brazilian corporate law, InBev was required to conduct, following the
        consummation of the InBev-AmBev transactions, a mandatory tender offer (the
        “MTO”) for all remaining outstanding common shares of AmBev. The MTO was
        completed in March 2005, and InBev acquired an additional 2,960,070,177 AmBev
        common shares, increasing its stake in AmBev to approximately an 81% voting
        interest and a 56% economic interest.
  FAHZ
        did
        not tender its AmBev shares in the MTO.
  F-16
 *Table
            of Contents*
 
 *AmBev
        common stock dividend*
 
 The
        subsequent change to AmBev’s ownership structure resulted from the payment by
        AmBev of a common stock dividend in May 2005. Pursuant to the stock dividend
        transaction, AmBev increased its capital by 10,941,151 thousand common shares
        and paid a stock dividend to its shareholders of one common share for each
        5
        shares owned (preferred or common). After the stock dividend was paid, InBev’s
        voting interest in AmBev decreased to approximately 73%, FAHZ’s voting stake
        decreased to approximately 13.5% and the voting interest held by AmBev’s public
        shareholders increased to approximately 13.5%.
  *Integration
        of Labatt ́s Operations*
  The
        total
        amount of the transaction consisting of the merger of Labatt Canada’s
        operations, through the wholly-owned subsidiary, Labatt Holding ApS (“Labatt
        ApS”), described above, represented R$ 14,441.0, and was recorded as
        follows: (a) AmBev’s capital stock increase, in the amount of R$ 1,600.7;
        and (b) increase of goodwill reserve, recorded as a capital reserve in
        shareholders’ equity, in the amount of R$ 12,840.3.
  2.
              SUMMARY
                  OF OUR SIGNIFICANT ACCOUNTING
                  POLICIES
  a)
              Basis
                  of presentation of our financial
                  statements
  Our
        financial statements are presented in Brazilian reais and have been prepared
        in
        accordance with accounting practices adopted in Brazil, or Brazilian GAAP,
        which
        is based on the Brazilian Corporate Law (Law No. 6,404/76, as amended), the
        rules and regulations issued by the “ *Comissão
        de Valores Mobiliários* ”
-
        CVM,
        or the Brazilian Securities Commission, and the accounting standards issued
        by
        the IBRACON - “Instituto dos Auditores Independentes do Brasil”, or the
        Brazilian Institute of Independent Auditors.
  These
        financial statements differ from our Brazilian GAAP financial statements
        due to
        certain reclassifications and changes in terminology, and additional explanatory
        notes added to conform more closely to financial reporting practices in the
        United States of America. The statement of cash flows conforms to International
        Accounting Standard No. 7, Cash Flow Statements and IBRACON NPC Standard
        No. 20, Cash Flow Statements.
  Certain
        accounting practices adopted by the Company and its subsidiaries that conform
        to
        Brazilian GAAP may not conform with accounting principles generally accepted
        in
        the United States of America (US GAAP) (Note 23).
  b)
              Consolidation
                  principles
  The
        consolidated financial statements include the financial statements, prepared
        at
        the same dates, of the subsidiaries either directly or indirectly controlled
        by
        the Company.
  F-17
 *Table
            of Contents*
   For
        the
        subsidiaries, the totality of assets, liabilities and results have been
        consolidated, and the interest of minority shareholders in the shareholders’
equity and results of operations for the year of the subsidiaries is presented
        separately in the consolidated balance sheets and statements of
        income.
  Investments
        in subsidiaries and their shareholders’ equities, as well as intercompany
        assets, liabilities, income and expenses, have been eliminated in consolidation.
        Also, unrealized results arising from the purchase of raw materials and products
        from subsidiaries and associated companies, included in the balance of inventory
        at the end of each period, as well as other transactions between the Company’s
        subsidiaries, are eliminated.
  c)
              Foreign
                  currency translation
  The
        financial statements of our subsidiaries operating outside Brazil are translated
        using the year-end exchange rate. Income and expense accounts are translated
        and
        maintained in Brazilian reais at average exchange rates for the period. The
        difference between the net result determined at the exchange rates at the
        balance sheet date and the net result determined at average exchange rates
        for
        the period, is recorded in other operating income. In addition, the financial
        statements of the subsidiaries abroad include the foreign exchange gains
        or
        losses on assets and liabilities denominated in foreign currency.
  The
        financial statements for C.A. Cevecera Nacional S.A. (CACN) in Venezuela
        include
        inflation accounting adjustments based on local price index variations (measured
        by Consumer Price Index - IPC), which were recorded in other operating income
        (Note 20).
  In
        the
        cases of Maltería Pampa S.A. (Maltería Pampa), Maltería Uruguay S.A. (Maltería
        Uruguay) and Cervecería y Maltería Paysandu S.A. (Cympay), the U.S. dollar is
        considered to be the currency of their economic environment as their selling
        prices and cash flows are primarily linked the U.S. dollar. The following
        translation methodology was applied for these companies, which adopt the
        U.S.
        dollar as the functional currency: (i) inventories, property, plant and
        equipment, accumulated depreciation and shareholders’ equity accounts were
        translated into U.S. dollars at historical exchange rates and translated
        into
        Brazilian reais at current rates; (ii) monetary assets and liabilities were
        translated at current rates; (iii) depreciation was determined based on the
        U.S. dollar value of the assets, (iv) other income accounts were converted
        at the average exchange rates in the period; and (v) translation gains and
        losses are included in income for the period.
  F-18
 *Table
            of Contents*
  d)
              Cash
                  and cash equivalents
  Cash
        equivalents consist primarily of time deposits and other short-term investments
        held through private mutual funds denominated in Brazilian reais, having
        a ready
        market and an original maturity of 90 days or less, and which have insignificant
        early withdrawal penalty clauses and are recorded at acquisition cost, plus
        interest incurred up to the date of the balance and adjusted, when applicable,
        to its equivalent market value. We also invest in money market instruments
        and
        private mutual funds denominated in U.S. dollars through our off-shore
        subsidiaries.
  e)
              Short-term
                  investments
  We
        buy
        and sell debt securities with the main objective of mitigating our consolidated
        exposure to currency and interest rate risks. These securities, substantially
        represented by notes and securities, government securities, and bank deposit
        certificates, including those denominated in foreign currency, are recorded
        at
        cost, adding, when applicable, the interest income earned “pro rata temporis”;
        if necessary, a provision is recorded for reduction to market values. In
        addition, investment fund quotas are measured at market values, and when
        applicable, a provision is recorded to defer the variable unrealized income
        of a
        variable nature.
  The
        balance of short-term investments at December 31, 2006 includes bank deposits
        and short-term investments given as guarantee, in connection with the issuance
        of foreign debt securities of subsidiaries, in the amount of R$34.6 (R$16.3
        in
        2005).
  f)
              Trade
                  accounts receivable
  Trade
        accounts receivable are stated at cost. The consolidated allowance for doubtful
        accounts receivable is recorded at an amount deemed sufficient by management
        to
        cover probable losses on realization of receivables and totals R$185.6 at
        December 31, 2006 (R$169.7 in 2005).
  g)
              Inventories
  Inventories
        are recorded at the average cost of purchases or production, adjusted by
        a
        provision for reduction to realizable values when necessary. On December
        31,
        2006, the consolidated provision for losses, to reduce inventories to net
        realizable value amounted to R$15.8 (R$27.3 in 2005).
  h)
              Other
                  current assets and long-term
                  receivables
  Other
        current assets and long-term receivables are recorded at cost, including,
        when
        applicable, accrued interest. A provision for reduction to market values
        is
        recorded when necessary.
  i)
              Property,
                  plant and equipment
  Property,
        plant and equipment are stated at cost and include the interest incurred
        in
        financing during the construction phase of certain qualified assets. Property,
        plant and equipment are depreciated using the straight-line method, considering
        the useful lives of the assets, at the annual rates listed in
        Note 9.
  F-19
 *Table
            of Contents*
  Expenditures
        for maintenance and repairs are charged to expense when incurred. Costs incurred
        in connection with developing or obtaining internal-use software are capitalized
        and depreciated over the useful lives of the software.
  Management
        reviews long-lived assets, primarily buildings and equipment to be held and
        used
        in the business, for the purpose of determining and measuring impairment
        on a
        recurring basis or when events or changes in circumstances indicate that
        the
        carrying value of an asset or group of assets may not be recoverable through
        operating activities. Write-down of the carrying value of assets or groups
        of
        assets is made if and when appropriate.
  Returnable
        bottles during the production are recorded as cost of sales. We maintain
        a small
        number of bottles for sale to distributors to replace bottles broken in the
        distribution network. These bottles are recorded in inventory and are not
        used
        during our day-to-day operations. They are not subject to
        depreciation.
  Assets
        held for sale include land and buildings and are reported at the lower of
        their
        carrying amounts or their fair values less cost to sell.
  j)
              Deferred
                  charges
  The
        Company defers certain charges related primarily to acquisition and
        implementation of software, pre-operation expenses incurred in the construction
        or expansion of a new plant until the plant begins operations and goodwill
        on
        acquisition of subsidiaries subsequently merged. Deferred charges are amortized
        on a straight line basis over a period of five years to ten years from the
        beginning of operations, when related to pre-operation expenses and from
        the
        following month to the acquisition, when referring to goodwill.
  k)
              Goodwill
                  and negative goodwill
  Goodwill
        and negative goodwill recorded on the acquisition of a company is computed
        as
        the difference between the purchase consideration and the underlying book
        value
        (usually the tax basis) of the investment acquired. Goodwill is allocated
        between the write-up of tangible assets at market value and estimated future
        profitability; each component is amortized over the remaining lives of the
        tangible assets or the period of the projected profitability, generally ten
        years. Negative goodwill is only amortized upon realization of the related
        asset
        through sale or disposal, unless losses are expected. Generally, goodwill
        is not
        tax deductible until the assets are sold or measures are taken to restructure
        the assets. Goodwill amortization is recorded as other operating expenses
        in our
        statement of operations (Note 20).
  l)
              Pension
                  and other post-retirement benefits
  The
        cash
        contributions paid by the Company to the pension and employee welfare
        foundations (Note 15) prior to December 31, 2001 were determined by independent
        actuaries and treated as operating expenses, although the actuarial obligation
        was not accrued. Since January 1, 2002 the pension obligation is recorded
        on an
        accrual basis.
  Unrealized
        actuarial gains and losses are deferred and recognized in income when exceeding
        the higher of (a) 10% of the present value of the actuarial liability and
        (b) 10% of the fair value of the plan’s assets, over the average future
        working life of the plan’s members.
  F-20
 *Table
            of Contents*
  m)
              Compensated
                  absences
  The
        liability for future compensation for employee vacations is fully accrued
        as
        earned.
  n)
              Deferred
                  income taxes
  The
        tax
        effects of net operating loss carryforwards expected to be recovered through
        offset against taxable income are recorded as deferred tax assets on our
        balance
        sheet. Pursuant to CVM Deliberation No. 273/98 and CVM Instruction
        No. 371/02 only tax losses which are estimated to be recovered within a
        ten-year period based on a discounted cash flow model are recorded as assets.
        In
        the event realization of deferred tax assets is not considered more likely
        than
        not, no such assets are recorded.
  Deferred
        income tax asset as of December 31, 2006 includes the total effect of tax
        losses
        of Brazilian subsidiaries, which have no expiration dates and are available,
        at
        the 30% rate on future taxable income. Part of the tax benefit corresponding
        to
        the tax losses of foreign subsidiaries was not recorded as an asset, as
        management cannot determine whether its realization is more likely than
        not.
  A
        deferred tax liability arises in the case of an excess of net assets recorded
        for financial reporting purposes over the tax basis of these net assets.
  Current
        and non-current deferred tax assets and liabilities are presented
        separately.
  o)
              Stock
                  ownership plan and advances to employees for purchase of
                  shares
  AmBev
        operates a stock ownership plan. The rights to acquire AmBev’s shares granted to
        employees, officers or directors under the stock ownership plans do not generate
        a charge to income.
  p)
              Warrants
                  and stock option premiums
  The
        net
        premium received on the placement of options and warrants is recognized in
        a
        capital reserve in shareholders’ equity.
  q)
              Treasury
                  shares
  We
        acquire our own shares to be held in treasury and record them at cost of
        acquisition, as a deduction from shareholders’ equity. Cancellations of treasury
        shares are recorded as a transfer from Treasury shares to Revenue
        reserves.
  r)
              Interest
                  attributed to shareholders’ equity
  Interest
        attributed to shareholders’ equity is recorded as a deduction from
        unappropriated retained earnings. As required by law, we pay the related
        withholding tax on behalf of our shareholders (Note 16(e)).
  s)
              Revenues
                  and expenses
  Sales
        revenues and the corresponding cost of sales are recorded upon delivery of
        products to the corresponding customers. No reserve for expected returns
        is
        recorded, as such amounts are insignificant. Other expenses and costs are
        recognized on accrual basis.
  F-21
 *Table
            of Contents*
  Selling
        and marketing expenses include costs of advertising and other marketing
        activities, including promotional materials and these expenses totalized
        R$ 871.2, R$ 845.5 and R$ 912.6 for the years ended December 31,
        2006, 2005 and 2004, respectively.
  In
        addition to our third-party distribution networks, we operate a direct
        distribution system which distributes our products directly to points of
        sale.
        Direct distribution expenses include product delivery charges and delivery
        personnel cost.
  Expenditures
        relating to ongoing environmental programs are charged to income as incurred.
        Ongoing programs are designed to minimize the environmental impact of our
        operations and to manage any potential environmental risks of our activities.
        Provisions with respect to such costs are recorded at the time the obligation
        is
        considered to be probable and reasonably estimable.
  t)
              Profit
                  sharing and related charges
  The
        year-end provision of our profit-sharing program is an estimate made by our
        management. Amounts paid with respect to the program may differ from the
        liability accrued.
  u)
              Earnings
                  per share
  Earnings
        per share are calculated based on the number of shares outstanding at the
        end of
        each year, net of treasury shares.
  v)
              Financial
                  instruments and derivatives
  Forwards
        and cross-currency interest rate swaps:
  The
        Company enters into derivative financial instruments to mitigate its
        consolidated exposure to currency and interest rate risks. Accordingly, as
        determined by the CVM rules, financial instruments “not designated as hedges for
        accounting purposes” are measured at the lower of cost based on the contractual
        conditions between the Company and counterparties (“yield curve”) or market
        value and accounted for as "Unrealized gain on derivatives" or "Unrealized
        loss
        on derivatives". Financial Instruments are recorded at amortized
        cost.
  The
        notional amount of cross-currency interest rate swap and forward operations
        are
        not recorded in the balance sheet.
  Forward
        and swap instruments in commodities:
  The
        Company enters into derivative financial instruments to mitigate its
        consolidated exposure to the costs of raw material to be purchased, denominated
        in foreign currency and subject to prices fluctuation of
        commodities.
  The
        net
        results of such derivative instruments, designated as hedges for accounting
        purposes, are measured at cost plus accrued interest, equivalent to their
        market
        value, deferred and recorded in the Company's balance sheet under "Other
        Assets
        and Liabilities", and recognized in the earnings under “Cost of sales” when the
        product is sold.
  F-22
 *Table
            of Contents*
  w)
              Tax
                  incentives
  Certain
        states in Brazil provide indirect tax incentives in the form of deferrable
        tax
        payments and partial or complete tax rebates in order to promote investments
        in
        their regions (Note 12). The recognition of these benefits occurs only when
        the
        gain is definite and all conditions have been met and is recognized against
        Other operating income (Note 20). The benefits granted are not subject to
        claw
        back provisions in the event we do not meet the program target; however,
        future
        benefits may be withdrawn. Amounts recognized during 2006 totaled R$ 165.4
        (R$ 151.8 in 2005 and R$ 193.3 in 2004).
  x)
              Accrued
                  liabilities for legal proceedings
  Provision
        for contingencies are recorded and updated to current values for labor, tax,
        civil and commercial claims at the administrative and judicial levels, based
        on
        the estimated losses established by the independent legal counsel of the
        Company
        and of its subsidiaries, for lawsuits in which such losses are considered
        probable.
  Expected
        tax savings obtained based on court decisions resulting from claims filed
        by the
        Company and its subsidiaries against tax authorities, if recognized in income,
        are subject to a provision until the right is assured through a final and
        unappealable decision in favor of the Company and its subsidiaries.
  y)
              Other
                  current and long-term liabilities
  These
        are
        recorded based on known or estimated value, increased, when applicable, by
        the
        corresponding charges and monetary variations incurred through the year-end
        date
        of the financial statements.
  z)
              Intercompany
                  transactions
 
 Intercompany
        transactions are carried out under usual market conditions and include, among
        others, the purchase and sale of raw materials such as malt, concentrates,
        labels, corks and various finished products.
 
 Loan
        agreements among the Company's subsidiaries in Brazil have undetermined duration
        and are subject to market financial charges, except for certain agreements
        with
        subsidiaries, in which the Company holds 100% of capital, which are not subject
        to financial charges.
 
 Agreements
        involving the Company's foreign subsidiaries are generally monetarily adjusted
        based on the US dollar variation, plus annual interest of up to
        10%.
  aa)
              Use
                  of accounting estimates
  The
        preparation of consolidated financial statements in conformity with Brazilian
        GAAP requires management to make estimates that affect the reported amounts
        of
        certain assets, liabilities and other transactions. Thus, various estimates
        are
        included in the financial statements referring to the useful lives of property,
        plant and equipment, the provisions necessary to reduce assets to the
        realization amount and for contingent liabilities and the determination of
        provision for income tax, which are based on the best estimates of the Company’s
        management; however, actual results could differ from those estimates. Estimates
        are used for, but not limited to: accounting for allowance for doubtful
        accounts, asset impairments, depreciable lives of assets, useful lives of
        intangible assets, recognition of deferred taxes and contingencies. The
        Company’s management periodically reviews these estimates and believes that
        significant differences do not exist.
  F-23
 *Table
            of Contents*
  ab)
              Proportionally
                  consolidated financial statements
  The
        assets and liabilities, income and expenses of entities which are
        jointly-controlled through a shareholders’ agreement have been proportionally
        consolidated based on the Company’s total ownership in the capital stock of the
        respective jointly-controlled subsidiary. Amounts corresponding to the
        proportional assets, liabilities, income and expenses, arising from
        inter-company transactions, were eliminated in the proportional
        consolidation.
  Since
        August 2006, the Company fully consolidated Quinsa’s financial statements, which
        were until then proportionally consolidated (Note 1-I).
  The
        net
        assets of Quinsa, Agrega Inteligência em Compras Ltda. (“Agrega”) and Ice Tea do
        Brasil Ltda. (“ITB”), proportionally consolidated in the Company’s financial
        statements, are as follows:
  December
                  31, 2006Agrega (i)
              
              ITB (i)
              
              TotalCurrent
                  assets
              
              
              1.9
              
              
              0.4
              
              
              2.3Long-term
                  receivables
              
              
              -
              
              
              4.8
              
              
              4.8Permanent
                  assets
              
              
              0.4
              
              
              0.9
              
              
              1.3Current
                  liabilities
              
              
              (2.2
              )
              
              0.1
              
              
              (2.1
              )Long-term
                  liabilities
              
              
              -
              
              
              (12.0
              )
              
              (12.0
              )Total
                  net assets (liabilities)
              
              
              0.1
              
              
              (5.8
              )
              
              (5.7
              )
  (i)  50%
        ownership interest.
  F-24
 *Table
            of Contents*
   December
                  31, 2005Quinsa (i)
              
              Agrega (ii)
              
              ITB (ii)
              
              TotalCurrent
                  assets
              
              
              523.8
              
              
              1.4
              
              
              0.4
              
              
              525.6Long-term
                  receivables
              
              
              115.1
              
              
              -
              
              
              5.1
              
              
              120.2Permanent
                  assets
              
              
              1,180.0
              
              
              0.4
              
              
              0.9
              
              
              1,181.3Current
                  liabilities
              
              
              (531.6
              )
              
              (1.8
              )
              
              -
              
              
              (533.4
              )Long-term
                  liabilities
              
              
              (477.7
              )
              
              -
              
              
              (11.1
              )
              
              (488.9
              )Minority
                  interest
              
              
              (103.7
              )
              
              -
              
              
              -
              
              
              (103.7
              )Total
                  net assets (liabilities)
              
              
              705.9
              
              
              -
              
              
              (4.7
              )
              
              701.1
  (i)  59.2%
        ownership interest.
  (ii)  50%
        ownership interest.
 
 Quinsa’s,
        Agrega’s and ITB’s results, proportionally consolidated in the Company’s
        financial statements, are as follows:
  Year
                  ended December 31, 2006Quinsa
                  (i)
              
              Agrega
                  (ii)
              
              ITB
                  (ii)
              
              TotalNet
                  sales
              
              
              492.6
              
              
              1.3
              
              
              -
              
              
              493.9Cost
                  of products and services sold
              
              
              (211.9
              )
              
              -
              
              
              -
              
              
              (211.9
              )Gross
                  profit
              
              
              280.7
              
              
              1.3
              
              
              -
              
              
              282.0Operating
                  expenses
              
              
              (174.1
              )
              
              (3.4
              )
              
              (1.8
              )
              
              (179.3
              )Operating
                  income (loss)
              
              
              106.6
              
              
              (2.1
              )
              
              (1.8
              )
              
              102.7Non-operating
                  income
              
              
              1.2
              
              
              -
              
              
              -
              
              
              1.2Provision
                  for income tax
              
              
              (40.4
              )
              
              -
              
              
              0.6
              
              
              (39.8
              )Statutory
                  interest
              
              
              (15.3
              )
              
              -
              
              
              -
              
              
              (15.3
              )Minority
                  interest
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  income (loss) for the year
              
              
              52.1
              
              
              (2.1
              )
              
              (1.2
              )
              
              48.8
  (i)  Since
        August, 2006 Quinsa has been fully consolidated (Note 1-I).
  (ii)  50%
        ownership interest.
 
 Year
                  ended December 31, 2005Quinsa
                  (i)
              
              Agrega
                  (ii)
              
              ITB
                  (ii)
              
              TotalNet
                  sales
              
              
              1,299.9
              
              
              1.2
              
              
              -
              
              
              1,301.1Cost
                  of products and services sold
              
              
              (536.7
              )
              
              -
              
              
              -
              
              
              (536.7
              )Gross
                  profit
              
              
              763.2
              
              
              1.2
              
              
              -
              
              
              764.4Operating
                  expenses
              
              
              (457.7
              )
              
              (3.1
              )
              
              (1.0
              )
              
              (461.8
              )Operating
                  income (loss)
              
              
              305.5
              
              
              (1.9
              )
              
              (1.0
              )
              
              302.6Non-operating
                  income
              
              
              (9.0
              )
              
              -
              
              
              -
              
              
              (9.0
              )Provision
                  for income tax
              
              
              (113.8
              )
              
              -
              
              
              0.4
              
              
              (113.4
              )Statutory
                  interest
              
              
              (20.1
              )
              
              -
              
              
              -
              
              
              (20.1
              )Minority
                  interest
              
              
              (39.0
              )
              
              -
              
              
              -
              
              
              (39.0
              )Net
                  income (loss) for the year
              
              
              123.6
              
              
              (1.9
              )
              
              (0.6
              )
              
              121.1
  (i)  59.2%
        ownership interest.
  (ii)  50%
        ownership interest.
  F-25
 *Table
            of Contents*
 
  ac)
              Reclassifications
  Certain
          reclassifications have been made to the financial statements for the years
          ended
          December 31, 2005, and 2004, presented for comparative purposes, to conform
          them
          to CVM Resolutions No. 488 and 489. In addition, other reclassifications
          have
          been made with the purpose of improving the presentation of certain amounts
          and
          transactions, as well as maintaining comparability between the periods.
          The
          Company made the following reclassifications: (i) in Note 17 (e) between
          financial income and expenses; (ii) from Deferred charges, the balance
          of
          goodwill on the merger of InBev Brasil and its respective provision for
          realization, to “Deferred Income and Social Contribution Taxes” in current and
          noncurrent. In income, from amortizations and depreciations to the result
          of the
          current income and social contribution taxes the portion related to the
          realization of goodwill and the provision for the merger of InBev Brasil; (iii)
          judicial (or escrow) deposits made by the Company in connection with ongoing
          litigation (with a probable likelihood of loss), which would be used to
          pay
          opposing parties in the event the Company is unsuccessful in such litigation,
          have been deducted from “Accrued Liability for Contingencies”, as further
          detailed in Note 13(a) to these financial statements.”
  3.
              TRADE
                  ACCOUNTS RECEIVABLE, NET
  Trade
        accounts receivable relate primarily to sales to Beer and soft drinks customers.
        Credit risk is minimized by the large customer base and control procedures
        through which we monitor the creditworthiness of customers. Changes in the
        allowance for doubtful accounts were as follows:
  2006
              
              2005
              
              2004At
                  beginning of year
              
              
              169.7
              
              
              175.9
              
              
              182.3Provision
              
              
              21.1
              
              
              21.6
              
              
              1.5Write-offs,
                  net of recoveries
              
              
              (8.4
              )
              
              (12.5
              )
              
              (45.9
              )Labatt
              
              
              0.4
              
              
              0.4
              
              
              -Quinsa
                  (i)
              
              
              4.3
              
              
              (15.7
              )
              
              38.0At
                  end of year
              
              
              187.1
              
              
              169.7
              
              
              175.9
 
 (i)  Since
        August, 2006 Quinsa has been fully consolidated (Note 1 - I).
  4.
              INVENTORIES
  2006
              
              2005Finished
                  products
              
              
              319.2
              
              
              322.2Work
                  in process
              
              
              69.6
              
              
              67.8Raw
                  materials
              
              
              618.7
              
              
              515.1Production
                  materials
              
              
              235.6
              
              
              186.6Supplies
                  and others
              
              
              136.6
              
              
              113.7Provision
                  for losses
              
              
              (15.8
              )
              
              (27.3
              )1,363.9
              
              
              1,178.1
  F-26
 *Table
            of Contents*
  5.
              TRANSACTIONS
                  WITH RELATED PARTIES
  The
        main
        transactions of the Company with related parties are listed in the following
        table:
  2006Balances
              
              TransactionsCompanies
              
              Accounts
                receivable
              
              Accounts
                payable
              
              Inter-company
                loans
              
              Net
                sales
              
              Net
                financial
                resultsAmBev
              
              
              791.5
              
              
              (1,678.2
              )
              
              (1,378.7
              )
              
              398.3
              
              
              (76.6
              )Fratelli
              
              
              4.0
              
              
              (6.0
              )
              
              149.9
              
              
              21.6
              
              
              (17.0
              )Jalua
                  Spain S.L.
              
              
              -
              
              
              -
              
              
              (87.3
              )
              
              -
              
              
              46.1Monthiers
                  S.A.
              
              
              1,437.1
              
              
              -
              
              
              1,495.3
              
              
              -
              
              
              (36.7
              )Arosuco
              
              
              8.6
              
              
              (0.3
              )
              
              470.5
              
              
              549.1
              
              
              0.3Dunvegan
                  S.A.
              
              
              131.2
              
              
              (1.1
              )
              
              (422.1
              )
              
              -
              
              
              88.6Cympay
              
              
              76.8
              
              
              (0.1
              )
              
              1.5
              
              
              98.1
              
              
              0.2Maltaria
                  Uruguay S.A.
              
              
              33.3
              
              
              (34.1
              )
              
              -
              
              
              135.3
              
              
              -Maltaria
                  Pampa S.A.
              
              
              12.0
              
              
              (0.1
              )
              
              0.4
              
              
              118.7
              
              
              -CRBS
                  S.A
              
              
              122.7
              
              
              -
              
              
              (22.3
              )
              
              -
              
              
              -CACN
              
              
              0.3
              
              
              (14.6
              )
              
              81.0
              
              
              74.6
              
              
              (1.7
              )Eagle
              
              
              -
              
              
              (868.1
              )
              
              (1.8
              )
              
              -
              
              
              -Aspen
              
              
              -
              
              
              -
              
              
              (143.4
              )
              
              -
              
              
              0.7Labatt
                  Canada (i)
              
              
              1.1
              
              
              (10.1
              )
              
              -
              
              
              -
              
              
              -Other
                  - Brazil
              
              
              8.0
              
              
              (6.6
              )
              
              (114.9
              )
              
              1.5
              
              
              (1.8
              )Other
                  - Abroad
              
              
              4.3
              
              
              (7.6
              )
              
              (24.2
              )
              
              14.8
              
              
              (1.0
              )TOTAL
              
              
              2,630.9
              
              
              (2,626.9
              )
              
              3.9
              
              
              1,412.0
              
              
              1.1
 
 2005Balances
              
              TransactionsCompanies
              
              Accounts
                receivable
              
              Accounts
                payable
              
              Inter-company
                loans
              
              Net
                sales
              
              Net
                financial
                resultsAmBev
              
              
              804.3
              
              
              (1,748.0
              )
              
              (1,559.2
              )
              
              366.7
              
              
              (324.2
              )CBB
                  (iii)
              
              
              -
              
              
              -
              
              
              -
              
              
              113.8
              
              
              108.4Fratelli
                  (ii)
              
              
              -
              
              
              (11.2
              )
              
              133.3
              
              
              6.7
              
              
              (6.1
              )IBA-Sudeste
                  (ii)
              
              
              -
              
              
              -
              
              
              -
              
              
              44.5
              
              
              399.0Jalua
              
              
              -
              
              
              -
              
              
              (40.8
              )
              
              -
              
              
              (51.3
              )Monthiers
              
              
              1,526.2
              
              
              -
              
              
              1,421.9
              
              
              -
              
              
              (68.6
              )Arosuco
              
              
              4.5
              
              
              -
              
              
              384.5
              
              
              511.6
              
              
              -Dunvegan
              
              
              216.7
              
              
              -
              
              
              (417.5
              )
              
              -
              
              
              36.3Cympay
              
              
              0.5
              
              
              -
              
              
              16.8
              
              
              98.2
              
              
              0.4Malteria
                  Pampa
              
              
              8.3
              
              
              -
              
              
              -
              
              
              145.5
              
              
              -Maltería
                  Uruguai
              
              
              1.2
              
              
              -
              
              
              -
              
              
              98.0
              
              
              -CRBS
              
              
              122.7
              
              
              -
              
              
              -
              
              
              -
              
              
              -Eagle
              
              
              -
              
              
              (868.1
              )
              
              -
              
              
              -
              
              
              -Aspen
              
              
              -
              
              
              -
              
              
              (153.1
              )
              
              -
              
              
              5.7Labatt
                  Canada (i)
              
              
              -
              
              
              -
              
              
              0.5
              
              
              -
              
              
              -CACN
              
              
              -
              
              
              (34.1
              )
              
              25.7
              
              
              77.4
              
              
              0,1Other
                  - Brazil
              
              
              63.4
              
              
              (9.2
              )
              
              233.3
              
              
              1.3
              
              
              2.9Other
                  - Abroad
              
              
              2.8
              
              
              (68.1
              )
              
              (60.9
              )
              
              0.1
              
              
              (2.9
              )TOTAL
              
              
              2,750.5
              
              
              (2,738.7
              )
              
              (15.5
              )
              
              1,463.8
              
              
              99.7
  F-27
 *Table
            of Contents*
  (i)
              Labatt
                  Canada maintains a service agreement with InBev, through which
                  the
                  services rendered or incurred expenses are refunded on behalf of
                  the other
                  party. On December 31, 2006, Labatt Canada maintains accounts receivable
                  at the amount of R$38.2 (R$6.6 on December 31, 2005) and accounts
                  payable
                  at the amount of R$7.5 (R$3.5 on December 31,
                  2005).
  (ii)
              On
                  November 30, 2005, Fratelli incorporated IBA-Sudeste.
  (iii)
              As
                  described in Note 1(b)(iv), CBB was incorporated by AmBev on May
                  31,
                  2005.
  Names
        used:
  ·
              Arosuco
                  Aromas e Sucos Ltda. (“Arosuco”)
  ·
              Aspen
                  Equities Corporation (“Aspen”)
  ·
              Cervecería
                  y Maltería Paysandú - Cympay
                  (“Cympay”)
  ·
              Compañia
                  Brahma Venezuela S.A. (“CACN”)
  ·
              Eagle
                  Distribuidora de Bebidas S/A
                  (“Eagle”)
  ·
              Fratelli
                  Vita Bebidas S.A. (“ Fratelli”)
  ·
                Indústria
                    de Bebidas Antarctica do Sudeste S.A.
                    (“IBA-Sudeste”)
  Transactions
        with related parties are carried out under usual market conditions and include,
        among other operations, the purchase and sale of raw materials such as malt,
        concentrates, labels, corks and several finished products, eliminated in
        the
        Company’s consolidated financial statements, except for the non-consolidated
        portion of operations with jointly-controlled entities (recorded based on
        the
        proportional consolidation method) and related parties.
  Loan
        agreements between the Company’s subsidiaries in Brazil have undetermined
        duration and some are assessed market financial charges. The agreements that
        involve the Company’s subsidiaries headquartered abroad are usually monetarily
        indexed based on the US dollar exchange rate plus interest of up to 10% p.a..
        Intercompany loans are consolidated based on the same criteria described
        above.
  F-28
 *Table
            of Contents*
   6.
              OTHER
                  ASSETS
  2006
              
              2005Current
                  assets:Deferred
                  income from commodities, swap and forward operations, net
              
              
              66.9
              
              
              75.6Refund
                  of marketing expenses
              
              
              88.4
              
              
              45.6Prepaid
                  expenses
              
              
              316.8
              
              
              296.0Advances
                  to suppliers and others
              
              
              22.8
              
              
              23.1Accounts
                  receivables from related parties
              
              
              185.4
              
              
              265.4Other
                  accounts receivable
              
              
              167.8
              
              
              73.9848.1
              
              
              779.6Non
                  current assetsOther
                  taxes and charges recoverable
              
              
              158.9
              
              
              130.8Prepaid
                  expenses
              
              
              134.3
              
              
              126.5Investments
                  in debt securities
              
              
              1.7
              
              
              69.4Prepaid
                  pension benefit cost
              
              
              17.0
              
              
              20.0Other
                  receivables with related parties
              
              
              97.4
              
              
              4.8Other
                  accounts receivable
              
              
              76.7
              
              
              24.6486.0
              
              
              376.1
 
  7.
              INVESTMENTS
                  - SIGNIFICANT DIRECT AND INDIRECT
                  SUBSIDIARIES
  Percentage
                  interest
                (total shares)
              
              Shareholders’
                  equity
                (capital deficiency)
              
              Net
                  income (loss)Fully
                  consolidated
              
              2006
              
              2005
              
              2006
              
              2005
              
              2006
              
              2005
              
              2004Arosuco
              
              
              99.7
              
              
              99.7
              
              
              457.4
              
              
              373.2
              
              
              294.9
              
              
              273.2
              
              
              219.8CACN
              
              
              51.0
              
              
              50.2
              
              
              8.4
              
              
              (22.2
              )
              
              (31.1
              )
              
              (35.0
              )
              
              (47.2
              )CBB
              
              
              -
              
              
              -
              
              
              -
              
              
              
              
              
              -
              
              
              
              
              
              948.3Cerveceria
                  Suramericana (Cervesursa)
              
              
              80.0
              
              
              80.0
              
              
              16.2
              
              
              55.7
              
              
              (34.8
              )
              
              (38.5
              )
              
              (31.4
              )Compañia
                  Cervecera AmBev Peru A.C. (AmBev Peru)
              
              
              70.0
              
              
              100.0
              
              
              (22.1
              )
              
              (32.3
              )
              
              (75.9
              )
              
              (54.8
              )
              
              (9.2
              )Eagle
                  Distribuidora de Bebidas S.A (Eagle)
              
              
              100.0
              
              
              100.0
              
              
              2,216.3
              
              
              2,376.1
              
              
              (159.8
              )
              
              (284.4
              )
              
              (24.0
              )Hohneck
              
              
              50.7
              
              
              50.7
              
              
              1,085.3
              
              
              1,165.4
              
              
              (80.1
              )
              
              (80.2
              )
              
              (69.6
              )IBA
                  Sudeste
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (78.9
              )Fratelli
              
              
              99.4
              
              
              99.4
              
              
              491.4
              
              
              401.7
              
              
              64.0
              
              
              28.2
              
              
              -Industria
                  del Atlántico (Atlántico)
              
              
              50.0
              
              
              50.0
              
              
              20.0
              
              
              45.1
              
              
              (21.3
              )
              
              (10.6
              )
              
              17.2Jalua
              
              
              100.0
              
              
              100.0
              
              
              3,106.0
              
              
              3,282.2
              
              
              (176.3
              )
              
              (310.8
              )
              
              (16.9
              )Labatt
                  Holding ApS
              
              
              100.0
              
              
              100.0
              
              
              13,279.1
              
              
              14,132.0
              
              
              (142.1
              )
              
              (292.0
              )
              
              276.7Labatt
                  Canada
              
              
              100.0
              
              
              100.0
              
              
              1,068.8
              
              
              
              
              
              738.7
              
              
              
              
              
              54.0Maltería
                  Pampa
              
              
              100.0
              
              
              60.0
              
              
              196.5
              
              
              196.9
              
              
              43.6
              
              
              23.3
              
              
              22.4Monthiers
              
              
              100.0
              
              
              100.0
              
              
              3,189.4
              
              
              3,318.9
              
              
              (129.5
              )
              
              (257.1
              )
              
              42.3Quinsa
                  (i)
              
              
              91.2
              
              
              -
              
              
              1,301.7
              
              
              -
              
              
              232.7
              
              
              123.5
              
              
              (86.4
              )Proportionally
                  consolidated companiesAgrega
              
              
              50.0
              
              
              50.0
              
              
              0.1
              
              
              0.1
              
              
              (4.5
              )
              
              (3.8
              )ITB
              
              
              50.0
              
              
              50.0
              
              
              (5.8
              )
              
              (4.7
              )
              
              (1.2
              )
              
              (0.6
              )Quinsa
                  (i)
              
              
              -
              
              
              56.2
              
              
              -
              
              
              705.7
              
              
              -
              
              
              123.5
   (i)
              Since
                  August, 2006 Quinsa has been fully consolidated (Note 1 -
                  I).
  F-29
 *Table
            of Contents*
  8.
              GOODWILL
                  AND NEGATIVE GOODWILL
  2006
              
              2005Expected
                  future profitability:Labatt
                  Canada (ii)
              
              
              16,383.3
              
              
              16,383.3QIB
              
              
              93.4
              
              
              93.4BAH
              
              
              2,331.1
              
              
              -Quinsa
              
              
              1,029.9
              
              
              1,029.8Cympay
              
              
              26.6
              
              
              26.6Embodom
              
              
              224.1
              
              
              224.1Malteria
                  Pampa
              
              
              28.1
              
              
              28.1Indústrias
                  Del Atlântico
              
              
              5.1
              
              
              5.1Cervejaria
                  Miranda Corrêa S.A.
              
              
              5.5
              
              
              5.5Labatt
                  Canada’ subsidiaries (ii)
              
              
              3,033.2
              
              
              3,323.9Quinsa’s
                  subsidiaries (consolidated) (iii)
              
              
              1,025.9
              
              
              622.2Total
                  goodwill
              
              
              24,186.1
              
              
              21,742.0Accumulated
                  amortization (i)
              
              
              (6,174.9
              )
              
              (4,997.2
              )Total
                  goodwill, net
              
              
              18,011.2
              
              
              16,744.82006
              
              
              2005Negative
                  goodwill:Cervesursa
              
              
              (12.3
              )
              
              (14.4
              )Incesa
                  (consolidated)
              
              
              (12.7
              )
              
              (8.2
              )Total
                  negative goodwill
              
              
              (25.0
              )
              
              (22.6
              )Goodwill,
                  net
              
              
              17,986.2
              
              
              16,722.2
  (i)
              The
                  balance of the accumulated amortization referring to the goodwill
                  of
                  Labatt ApS in Labatt Canada totals R$2,004.7 (R$1,034.9 as of December
                  31,
                  2005).
  (ii)
                The
                    balance of the accumulated amortization referring to the goodwill
                    existing
                    in Labatt Canada totals R$3,003.4 as of December 31, 2006 (R$3,289.7
                    as of
                    December 31, 2005).
  (iii)
              Increase
                  mainly results from the change from proportional consolidation
                  to full
                  consolidation (Note 1 (I)).
  Changes
        in the goodwill and negative goodwill, net are as follows:
  2006
              
              2005At
                  beginning of year, net
              
              
              16,722.2
              
              
              18,170.4Goodwill
                  on new acquisitions
              
              
              2,331.1
              
              
              5.1Reclassification
                  to deferred charge and PP&E
              
              
              -
              
              
              (198.8
              )Labatt
                  and subsidiaries
              
              
              (1.4
              )
              
              (12.0
              )Quinsa
                  and subsidiaries (proportionally consolidated)
              
              
              219.7
              
              
              96.4Amortization
              
              
              (1,283.0
              )
              
              (1,342.9
              )Negative
                  goodwill realized
              
              
              (2.4
              )
              
              -Goodwill
                  realized - Note 1 (iv)
              
              
              -
              
              
              (13.6
              )Adjustment
                  of goodwill - Note 1 (iv)
              
              
              -
              
              
              17.7At
                  the end of year, net
              
              
              17,986.2
              
              
              16,722.2
  F-30
 *Table
            of Contents*
 
 9.
              PROPERTY,
                  PLANT AND EQUIPMENT
  2006
              
              2005
              
              Annual
                depreciation
                rates - %Land
              
              
              324.8
              
              
              309.9Buildings
                  and constructions
              
              
              2,815.5
              
              
              2,602.6
              
              
              4Machinery
                  and equipment
              
              
              9,081.5
              
              
              8,242.5
              
              
              10
                  (i
              )Offsite
                  equipment
              
              
              2,110.7
              
              
              1,723.2
              
              
              10
                  (i
              )Other
                  assets and intangibles
              
              
              1,448.3
              
              
              1,262.2
              
              
              19.9
                  (ii
              )Construction
                  in progress
              
              
              478.7
              
              
              442.116,259.5
              
              
              14,582.5Accumulated
                  depreciation
              
              
              (10,535.6
              )
              
              (9,177.9
              )5,723.9
              
              
              5,404.6
   (i)
              The
                  rates may increase from 50% to 100%, due to the number of production
                  shifts in which the asset is used.
  (ii)
              Weighted
                  average depreciation rate on December 31, 2006 and 2005.
                  .
  As
        of
        December 31, 2006, the Company and its subsidiaries held properties for sale
        at
        the carrying amount of R$86.0 in the Consolidated (R$104.5 on December 31,
        2005), which are classified under long-term assets, net of a provision for
        potential losses on realization, at the amount of R$50.4 (R$66.3 on December
        31,
        2005).
  Due
        to
        bank loans taken by the Company and its subsidiaries, on December 31, 2006
        there
        are assets and property - accounting net balance at the amount of R$454.3
        (R$538.9 in December 31, 2005), which were granted as guarantee of bank loans.
        Such restriction has no impact on the use of such assets and on the Company's
        operations.
  10.
              DEFERRED
                  CHARGES
  2006
              
              2005ExpensesPre-operating
              
              
              250.1
              
              
              243.1Implementation
                  and expansion
              
              
              53.5
              
              
              53.5Goodwill
                  - Future profitability (i)
              
              
              811.9
              
              
              811.9Other
              
              
              206.7
              
              
              202.11,322.2
              
              
              1,310.6Accumulated
                  amortization
              
              
              (893.1
              )
              
              (761.9
              )429.1
              
              
              548.7
  (i)
              The
                  goodwill reclassified to deferred charges (resulting from merged
                  subsidiaries) is based on the future profitability of operations
                  sustaining its generation.
 
 F-31
 *Table
            of Contents*
  11.  LOANS
        AND
        FINANCING
  Final
              
              Annual
              
              
              
              Current
              
              Long-termmaturity
              
              financial charges
              
              Currency
              
              2006
              
              2005
              
              2006
              
              2005Brazilian*reais*:ICMS
                  sales tax incentives
              
              
              Aug/2016
              
              
              4.55
              %
              
              R$
              
              
              103.6
              
              
              89.5
              
              
              161.9
              
              
              237.3Acquisition
                  of equipment
              
              
              Aug/2011
              
              
              TJLP+3.86
              %
              
              R$
              
              
              167.1
              
              
              104.2
              
              
              331.7
              
              
              362.3Working
                  capital / secured account
              
              
              Jun/2011
              
              
              15.88
              %
              
              R$
              
              
              63.8
              
              
              1.4
              
              
              619.5
              
              
              -334.5
              
              
              195.1
              
              
              1,113.1
              
              
              599.6In
                  foreign currencyWorking
                  capital
              
              
              Oct/2011
              
              
              5.46
              %
              
              USD
              
              
              118.2
              
              
              673.7
              
              
              94.1
              
              
              103.0Working
                  capital
              
              
              Mar/2007
              
              
              3.64
              %
              
              YEN
              
              
              901.0
              
              
              -
              
              
              -
              
              
              -Working
                  capital
              
              
              Oct/2011
              
              
              BA+0.45
              %
              
              CAD
              
              
              16.0
              
              
              4.8
              
              
              605.8
              
              
              1,408.2Working
                  capital
              
              
              Jan/2007
              
              
              7.50
              %
              
              ARS
              
              
              37.8
              
              
              27.9
              
              
              -
              
              
              -Working
                  capital
              
              
              May/2007
              
              
              6.50
              %
              
              UYU
              
              
              10.9
              
              
              -
              
              
              -
              
              
              -Working
                  capital
              
              
              Sep/2008
              
              
              8.94
              %
              
              VEB
              
              
              57.9
              
              
              30.8
              
              
              87.5
              
              
              117.4Working
                  capital
              
              
              Jan/2008
              
              
              10.62
              %
              
              DOP
              
              
              80.6
              
              
              51.0
              
              
              10.0
              
              
              32.4Working
                  capital
              
              
              Aug/2011
              
              
              7.40
              %
              
              GTQ
              
              
              19.5
              
              
              27.5
              
              
              44.8
              
              
              37.8Working
                  capital
              
              
              Oct/2010
              
              
              6.75
              %
              
              PEN
              
              
              49.3
              
              
              28.8
              
              
              183.9
              
              
              158.6Working
                  capital
              
              
              May/2007
              
              
              7.50
              %
              
              BOB
              
              
              22.7
              
              
              -
              
              
              -
              
              
              -Bond
                  2011
              
              
              Dec/2011
              
              
              10.50
              %
              
              USD
              
              
              5.5
              
              
              6.0
              
              
              1,069.0
              
              
              1,170.3Bond
                  2013
              
              
              Sep/2013
              
              
              8.75
              %
              
              USD
              
              
              32.4
              
              
              35.1
              
              
              1,069.0
              
              
              1,170.3Import
                  financing
              
              
              Oct/2011
              
              
              6.03
              %
              
              USD
              
              
              41.9
              
              
              4.6
              
              
              8.1
              
              
              58.1Acquisition
                  of equipment
              
              
              Mar/2012
              
              
              9.04
              %
              
              USD
              
              
              149.5
              
              
              70.5
              
              
              379.3
              
              
              341.3Acquisition
                  of equipment
              
              
              Dec/2012
              
              
              10.75
              %
              
              DOP
              
              
              -
              
              
              -
              
              
              62.0
              
              
              -Acquisition
                  of equipment
              
              
              Aug/2008
              
              
              10.64
              %
              
              ARS
              
              
              106.3
              
              
              -
              
              
              19.4
              
              
              -Acquisition
                  of equipment
              
              
              Jan/2011
              
              
              8.75
              %
              
              UMBNDES
              
              
              31.3
              
              
              16.0
              
              
              45.4
              
              
              63.5Notes
                  - Series A
              
              
              Jul/2008
              
              
              6.56
              %
              
              USD
              
              
              -
              
              
              -
              
              
              345.1
              
              
              379.2Notes
                  - Series B
              
              
              Jul/2008
              
              
              6.07
              %
              
              CAD
              
              
              -
              
              
              -
              
              
              91.8
              
              
              100.6Senior
                  Notes - BRI
              
              
              Dec/2011
              
              
              7.50
              %
              
              CAD
              
              
              -
              
              
              -
              
              
              163.0
              
              
              178.6Other
              
              
              Jun/2008
              
              
              5.57
              %
              
              USD
              
              
              18.9
              
              
              37.6
              
              
              0.3
              
              
              75.3Other
              
              
              Aug/2008
              
              
              9.48
              %
              
              ARS
              
              
              4.5
              
              
              -
              
              
              5.3
              
              
              -1,704.2
              
              
              1,014.3
              
              
              4,283.8
              
              
              5,394.6Total
                  loans and financing
              
              
              
              
              
              
              
              
              
              
              
              2,038.7
              
              
              1,209.4
              
              
              5,396.9
              
              
              5,994.2Debentures
                  2009
              
              
              Jul/2009
              
              
              101.75%
                  CDI
              
              
              R$
              
              
              25.9
              
              
              -
              
              
              817.1
              
              
              -Debentures
                  2012
              
              
              Jul/2012
              
              
              102.50%
                  CDI
              
              
              R$
              
              
              40.0
              
              
              -
              
              
              1,248.0
              
              
              -65.9
              
              
              -
              
              
              2,065.1
              
              
              -Total
                  Indebtedness
              
              
              
              
              
              
              
              
              
              
              
              2,104.6
              
              
              1,209.4
              
              
              7,462.0
              
              
              5,994.2
  Abbreviations
        used:
  ·
              USD
                  - United States Dollar
 ·
              CAD-
                  Canadian Dollar
 ·
              YEN
                  - Japanese Yen
 ·
              ARS
                  - Argentine Peso
 ·
              BOB
                  - Bolivian Peso
 ·
              VEB
                  - Venezuelan Bolivar
 ·
              DOP
                  - Dominican Peso
 ·
              GTQ
                  - Guatemalan Quetzal
 ·
              PEN
                  - Peruvian Nuevo Sol
 ·
              UYU
                  - Uruguayan Peso
 ·
              TJLP
                  - Long-Term Interest Rate - Corresponding to 6.85% p.a. as of
                  12/31/2006
 ·
              ICMS
                  - Value-Added Tax on Sales and Services
 ·
              BA
                  - Bankers Acceptance
 ·
              CDI
                  - Interbank Certificates of Deposit - corresponding to 13.17% p.a.
                  as of
                  12/31/2006
  F-32
 *Table
            of Contents*
  ·
              UMBNDES
                  - Rate on BNDES financing pegged to Currency
                  Basket
  a)  Principal
        loan contracts and programs
  (i)  ICMS
        (state VAT) incentives
 
 The
        loans
        relate to programs offered by certain states in Brazil through which a
        percentage of the monthly ICMS due is financed by Government related agencies,
        generally over a five year period (Note 12).
  The
        amount of R$ 422.2 (R$ 372.1 as of December 31,) of “Sales tax
        deferrals” includes a current portion of R$ 16.5 (R$ 19.5 in 2005)
        classified under “Other taxes and contributions payable”.
  The
        remaining amounts refer to the financed deferrals of ICMS due for periods
        of up
        to twelve years, as part of industrial incentive programs. The deferred
        percentages may be fixed during the program or vary regressively, from 75%
        in
        the first year to 40% in the final year. The deferred amounts are partially
        indexed at 60% to 80% of a general price index.
  (ii)  Notes
        issued on the international market
  In
        September 2003, the Company issued US$500 million in foreign securities (Bond
        2013). These Notes incur interest of 8.75% p.a., amortized semiannually
        beginning March 2004, with final maturity in September 2013. On August 10,
        2004,
        the Company registered Bond 2013 with the SEC (Securities and Exchange
        Commission) under the U.S. Securities Act of 1933 and subsequent amendments
        thereto. In addition, Bond 2013 was registered with the Luxembourg Stock
        Exchange for settlement through the Depository Trust Company (“DTC”), Euroclear
        and Clearstream.
  In
        December 2001, the Company issued US$500 million in foreign securities (Bond
        2011), incurring interest of 10.5% p.a., amortized semiannually beginning
        June
        2002, and final maturity in December 2011. On October 4, 2002 the Company
        filed
        Bond 2011 with the SEC .
  b)  Mortgages
        and collateral
  Loans
        and
        financing for expansion, construction of new plants and purchases of equipment
        are guaranteed by mortgages on the plant properties and financial liens on
        equipment. AmBev’s subsidiaries, except for North America operations, hold debt
        and loans for the purchase of raw materials guaranteed by collaterals of
        AmBev,
        which at December 31, 2006 totaled R$ 185.6 (R$ 108.4 in
        2005).
  c)  Breach
        of
        covenant
  As
        of
        December 31, 2006, the Company and its subsidiaries are in compliance with
        debt
        and liquidity ratio covenants in connection with obtaining the
        loans.
  F-33
 *Table
            of Contents*
  d)  Maturities
  At
        December 31, 2006, the Company’s long-term loans, by year of maturity, are the
        following:
  2008
              
              
              851.22009
              
              
              992.32010
              
              
              216.52011
              
              
              2,564.02012
                  onwards
              
              
              2,838.07,462.0
  e)  Labatt
        Canada
  (i)
              Working
                  capital
  On
        October 12, 2005, Labatt Canada entered into a forward loan agreement at
        the
        amount of CAD 1.2 billion with a syndicated bank, of which CAD 700 million
        is a
        term loan and CAD 500 million is a revolving credit facility with maturity
        dated
        on October 12, 2010, and interest at the bankers acceptance rate, plus
        applicable margin, the ceiling of which is 0.75% per annum. On December 31,
        2005, the bankers’ acceptance average rate on the debt was 4.5% p.a. and the
        applicable margin was 0.45% per annum (3.106% and 0.35%, respectively, as
        of
        December 31, 2005). On October 5, 2006, the date of the transaction was extended
        to October 13, 2011.
  (ii)
              Senior
                  notes
  On
        July
        23, 1998, Labatt Canada entered into a loan agreement of US$ 162 million,
        represented by Series A Bank Notes (“Notes - Series A”) and CAD 50 million
        in Series B Bank Notes (“Notes - Series B”), contracted with a group of
        institutional investors. The Notes are subject to the following interest
        rates:
        (a) 6.56% p.a., over the portion in US dollars; and (b) 6.07% p.a. over the
        Canadian dollars. The Notes mature on July 23, 2008.
  On
        June
        15, 2001, Brewers Retail Inc. (“BRI”), a company proportionally consolidated by
        Labatt Canada, entered into a loan agreement for CAD 200 million, by means
        of
        Senior Notes (“Senior Notes - BRI”), with a group of institutional investors.
        The Notes are subject to fixed interest rates of 7.5% p.a. and the maturity
        date
        is June 15, 2011.
  F-34
 *Table
            of Contents*
  e)  Debentures
  On
        July
        1, 2006, the Company issued two series of simple debentures, non-convertible
        into shares: the first series (“Debenture 2009) at the equivalent amount of
        R$817.0, incurring 101.75% interest of CDI p.a., amortized quarterly as from
        October 1, 2006, and with final maturity in July 2009 and the second series
        (“Debenture 2012”) at the equivalent amount of R$1,248.0, incurring 102.50%
        interest of CDI p.a., amortized quarterly as from October 1, 2006, and with
        final maturity in July 2012.
  The
        funds
        raised with the issuance of debentures were used to pay the acquisition of
        BAC’s
        shares issued by Quinsa, according to Note 1 - I.
  12.
              SALES
                  TAX DEFERRALS AND ICMS TAX INCENTIVE
                  PROGRAMS
  We
        currently participate in programs whereby a percentage of payments of ICMS,
        due
        from sales generated by specific production facilities, are deferrable (financed
        by a state related financial agent) for periods of generally five years from
        their original due date.
  Sales
        tax
        deferrals arise from programs under which percentages deferrable usually
        range
        from 40% to 75% over the life of the program. Amounts deferrable under these
        programs are unlimited, except in certain states with which we have specific
        agreements. Balances deferred generally accrue interest and are only partially
        inflation-indexed.
  Description
              
              2006
              
              2005Short-term
                  liabilities:Loans
                  and financings (Note 11)
              
              
              103.6
              
              
              89.5Sales
                  tax deferrals (included in Other taxes payable)
              
              
              16.5
              
              
              19.4120.1
              
              
              108.9Long-term
                  liabilities:Loans
                  and financings (Note 11)
              
              
              161.9
              
              
              237.3Sales
                  tax deferrals
              
              
              405.7
              
              
              352.6567.6
              
              
              589.9
  13.
              COMMITMENTS
                  AND CONTINGENCIES
  a)
              Tax
                  and legal claims
  We
        are
        contesting the payment of certain taxes and contributions and have made judicial
        escrow deposits (Judicial deposits) of equivalent or lesser amounts pending
        final judicial decisions. Our management believes that the accrued liability
        for
        contingencies, including interest, is sufficient to meet probable and reasonably
        estimable losses in the event of unfavorable rulings.
  F-35
 *Table
            of Contents*
 The
        following probable losses have been identified based on the advice of outside
        legal counsel and have been provided as liabilities in our financial
        statements:
  Description
              
              2005
              
              Provisions
              
              Payments
              
              Reversals
              
              Reclassi-fications
              
              Monetaryrestatement
              
              2006PIS
                  and COFINS
              
              
              394.5
              
              
              1.1
              
              
              (316.0
              )
              
              (4.6
              )
              
              -
              
              
              23.7
              
              
              98.7ICMS
                  and IPI
              
              
              221.4
              
              
              62.2
              
              
              (52.2
              )
              
              (54.5
              )
              
              -
              
              
              11.2
              
              
              188.1IRPJ
                  and CSLL
              
              
              73.1
              
              
              5.7
              
              
              (6.6
              )
              
              (5.2
              )
              
              -
              
              
              0.5
              
              
              67.5Labor
                  claims
              
              
              278.4
              
              
              114.2
              
              
              (76.5
              )
              
              (72.9
              )
              
              4.7
              
              
              (2.4
              )
              
              245.5Distributors
                  and resellers
              
              
              43.7
              
              
              28.3
              
              
              (16.2
              )
              
              (11.5
              )
              
              3.4
              
              
              (1.9
              )
              
              45.8Other
              
              
              117.1
              
              
              178.4
              
              
              (30.2
              )
              
              (119.5
              )
              
              11.4
              
              
              (6.3
              )
              
              151.0Total
                  Contingencies
              
              
              1,128.2
              
              
              389.9
              
              
              (497.7
              )
              
              (268.2
              )
              
              19.6
              
              
              24.8
              
              
              796.6Escrow
                  deposits
              
              
              (91.1
              )
              
              (63.7
              )
              
              32.6
              
              
              2.1
              
              
              -
              
              
              (13.2
              )
              
              (133.3
              )1,037.1
              
              
              326.2
              
              
              (465.1
              )
              
              (266.1
              )
              
              19.6
              
              
              11.6
              
              
              663.3
  Abbreviations
        used:
  ·
              IRPJ
                  - Corporate Income Tax
 ·
              CSLL
                  - Social Contribution on Net Income
 ·
              PIS
                  - Social Integration Program
 ·
              COFINS
                  - Contribution for Social Security
                  Financing
 ·
              IPI
                  - federal VAT
 
 AmBev
        may
        be exposed to additional possible risks, based on the opinion of legal counsel,
        estimated at R$5,877.0 (R$ 4,557.0 in 2005) which have not been accrued
        for. Although there can be no assurance that AmBev will prevail in every
        case,
        management does not believe that the ultimate disposition of these legal
        contingencies will have a material effect on AmBev’s financial position or
        results of operations.
  During
        the year ended on December 31, 2005, possible contingencies increased by
        approximately R$ 3,316.0, mainly due to new tax deficiency notices received
        by the Company and its subsidiaries related to tax authorities’ understanding
        about the Brazilian laws dealing with taxation in Brazil of profits obtained
        by
        subsidiaries or affiliated companies incorporated abroad.
  Based
        on
        its external consultants’ opinions, the Company understands that such tax
        deficiency notices were made based on incorrect analysis of the laws mentioned
        above, because, among other factors: (i) it considers the assumption of
        availability, which did not exist in prevailing laws in the period related
        to
        the deficiency notice; (ii) it disregards the existence of a treaty entered
        into between Brazil and Spain to avoid double taxation; and (iii) errors in
        the determination of amounts supposedly due.
  F-36
 *Table
            of Contents*
  The
        Company, based on the opinion of its external consultants did not recorded
        any
        provisions in relation to the tax deficiency notices received in the period,
        as
        well as those previous ones related to the same matter, amounting to R$4,131.6
        as the Company understands these are not justified. Nevertheless, as the
        related
        laws had not been subjected to examination at the highest level by the Judiciary
        Branch, the Company, based on the opinion of its legal consultants considered
        the probability of loss as possible in the amount of R$2,804.4 and as remote,
        in
        the amount of R$1,327.2.
  As
        of
        December 31, 2006, the Company and its subsidiaries do not have contingent
        assets whose probability of success is probable to be disclosed.
 
 Principal
        liabilities related to tax claims and provisions for contingencies are:
  (i)
              PIS
                  and COFINS
  The
        Company and its subsidiaries proposed specific lawsuits with the purpose
        of
        ensuring the right to pay PIS and COFINS on billings, exonerating it from
        the
        payment of this contribution on other revenues under the terms provided for
        by
        Law 9718/98. Some lawsuits were judged definitively by the Federal Supreme
        Court
        and provisions related to these lawsuits already solved, at the amount of
        R$316.0 were reverted in 2006.
  Following
        the enactment of Law no. 10,637/03 as of December 31, 2002, which established
        new rules for calculating PIS, with effects as from December 1, 2002, the
        Company and its subsidiaries began to pay such contribution on other revenues,
        as prescribed by prevailing laws.
  Following
        the enactment of Law no. 10,833, as of December 29, 2003, which established
        the
        new rules to calculate COFINS, effectively as from February 1, 2004 the Company
        and its subsidiaries began to pay these taxes, as established by prevailing
        laws.
  (ii)
              ICMS
                  and IPI
  This
        legal proceeding relates mainly to tax disputes to extemporaneous ICMS credits
        on purchases of property, plant and equipment prior to 1996.
  The
        Company has zero-rated IPI credits, totaling R$ 228.1 as of December 31,
        2006 (R$ 228.1 as of December 31, 2005), which was reclassified to the
        account "Other assets - other recoverable taxes and charges" of long-term
        assets, as mentioned in note 2 (w).
  (iii)
              Income
                  tax and social contribution
  This
        provision relates substantially to the recognition of the deductibility of
        interest attributed to shareholders’ equity in the calculation of social
        contribution for the year 1996.
  F-37
 *Table
            of Contents*
  (iv)
              Labor
                  claims
  These
        provisions relate to claims from former employees for supplemental compensation.
        As of December 31, 2006, escrow deposits for labor claims (classified as
        possible, probable and remote loss) made by the Company and its subsidiaries,
        monetarily adjusted based on official indexes, amounted to R$195.9, of which
        R$113.8 refers to claims whose risk of loss is probable (total debts of R$151.2
        as of December 31, 2005).
  (v)
              Claims
                  from distributors and resellers
  We
        have
        several claims filed against us by former distributors whose contracts were
        terminated due to their failure to meet our guidelines and a general
        restructuring of our distribution network. We have provisions for probable
        losses of R$ 45.7, based on advice of outside legal counsel (R$ 43.7
        in 2005 and R$ 47.2 in 2004).
  (vi)
              Other
                  provisions
  These
        provisions relate substantially to issues involving the National Social Security
        Institute (INSS), products and suppliers.
  (vii)
              Labatt
                  Canada
  Certain
        beer and alcoholic beverage producers of the United States, Canada and Europe
        were involved in class action suits for seeking damages over the alleged
        marketing of alcoholic beverages to underage consumers. Labatt Canada was
        involved in three of these lawsuits, and for two of them it was excluded
        as a
        defendant. Labatt will continue to vigorously defend these lawsuits and,
        at this
        time, it is not possible to estimate the loss probability or estimate its
        amount.
  Labatt
        was assessed by the Canadian Government disputing the interest rate used
        in
        certain contracts with related parties existing in the past. The total amount
        of
        the assessment may reach CAD 200.0 equivalent to R$367.2 as of December 31,
        2006
        (R$ 402.4 as of December 31, 2005).
  Should
        Labatt be requested to pay this amount, AmBev will be fully reimbursed by
        InBev.
  The
        balance of the provision recorded in Labatt is CAD 66.7 million, equivalent
        to
        R$ 122.4 as of December 31, 2006 (CAD 61.9 million, equivalent to R$ 124.6
        as of
        December 31, 2005), classified as “reserve for income tax contingencies”, in
        Other Liabilities. AmBev has recorded accounts receivable from InBev in the
        amount of R$183.2, equivalent to CAD 88.9 million as of December 31, 2006
        (R$
        173.0 equivalent to CAD 86.0 million as of December 31, 2005) in the account
        “Other accounts receivable”.
  F-38
 *Table
            of Contents*
  b)
              Commitments
  We
        do not
        have commitments for construction under contract at December 31, 2006 and
        2005.
  The
        Company has agreements with certain suppliers to acquire certain quantities
        of
        materials that are important for the production and packaging processes,
        such as
        plastics for PET bottles, aluminum, natural gas and property, plant and
        equipment.
 
 The
        Company has commitments assumed with suppliers for 2007, 2008 and 2009, already
        contracted as of December 31, 2006, in the approximate amounts of R$1,051.8,
        R$457.9 and R$229.3, respectively (R$533.4 for 2007 and R$3.3 for 2008, as
        of
        December 31, 2005).
  c)
              Environmental
                  issues
  We
        are
        subject to federal, state and local environmental laws. These laws generally
        provide for control of air emissions and require responsible parties to
        undertake remediation of hazardous waste disposal sites. Civil penalties
        may be
        imposed for noncompliance.
  We
        provide for remediation costs and penalties when a loss is probable and the
        amount is reasonably determinable. It is not presently possible to estimate
        the
        amount of all remediation costs that might be incurred or penalties that
        may be
        imposed. Our management does not presently anticipate that such costs and
        penalties, to the extent not previously provided for, will have a material
        adverse effect on our consolidated financial position, results of operations
        or
        cash flows.
  At
        present we believe there are no unasserted environmental claims or assessments.
        We have made substantial capital expenditures to bring existing facilities
        into
        compliance with various environmental laws.
  Recent
        environmental expenditures are as follows:
  UnauditedYear
                  ended December 31
              
              Property, plant
                and
                  equipment
              
              Waste
                treatment
              
              Total2006
              
              
              36.7
              
              
              42.7
              
              
              79.42005
              
              
              17.2
              
              
              47.1
              
              
              64.32004
              
              
              12.9
              
              
              36.1
              
              
              49.0
  F-39
 *Table
            of Contents*
  14.
              OTHER
                  LIABILITIES
  2006
              
              2005Current
                  liabilitiesDeposits
                  for returnable package (i)
              
              
              67.7
              
              
              79.1Provision
                  for restructuring (ii)
              
              
              41.0
              
              
              106.5Provision
                  for commercial intangible
              
              
              12.2
              
              
              48.5Provision
                  for income tax contingency (Note 13 (a)(vii))
              
              
              122.4
              
              
              124.5Marketing
                  accounts payable
              
              
              204.1
              
              
              151.7Deferred
                  net income from commodities swap and forward
              
              
              9.7
              
              
              41.2Provision
                  for royalties payment
              
              
              33.5
              
              
              33.9Accounts
                  payable for share repurchase of treasury shares
              
              
              3.3
              
              
              74.2Other
                  accounts payable
              
              
              258.6
              
              
              239.2752.5
              
              
              898.8Long-term
                  liabilitiesProvision
                  for medical assistance benefits and others (Note 15(b))
              
              
              326.6
              
              
              584.6Deferred
                  income and social contribution taxes ( Note 18(b))
              
              
              131.4
              
              
              94.6Deferred
                  income of debt swap operations, net
              
              
              88.4
              
              
              95.9Provision
                  for restructuring (ii)
              
              
              22.4
              
              
              -Other
                  accounts payable
              
              
              60.2
              
              
              50.7629.0
              
              
              825.8
  (i)
              Such
                  deposits are made by points of sale in Canada at the time the beer
                  is
                  sold, as a guarantee for the bottles, and reimbursed when the bottles
                  are
                  returned.
  (ii)
              Labatt
                  Canada announced, in 2004 and in 2005, the shutting down of two
                  plants as
                  well as the restructuring of the work force with the purpose of
                  reducing
                  the fixed personnel cost by 20%. As a consequence of this process,
                  the
                  Company still maintains in its consolidated balance sheet the amount
                  of
                  R$63.4 equivalent to CAD34.6 million (R$106.5 equivalent to CAD52.9
                  million in December 2005).
  15.
              SOCIAL
                  PROGRAMS
  a)
              IAPP
                  - Instituto AmBev de Previdência Privada (AmBev Private Pension Plan
                  Institute)
  AmBev
        sponsors a defined-benefit pension plan (closed to new participants since
        May
        1998) and a defined-contribution plan, which supplement benefits that the
        Brazilian government’s social security system provides to our employees and
        those of our Brazilian subsidiaries. Contributions by AmBev under the plan
        are
        determined based on a percentage of participant salaries.
  These
        plans are administered by the AmBev Pension Fund, Instituto AmBev de Previdência
        Privada (IAPP). In the year ended December 31, 2006, the Company contributed
        R$ 5.7 (R$ 4.8 in 2005 and R$ 3.9 in 2004) to IAPP. The IAPP was
        established solely for the benefit of our employees, and its assets are held
        independently. We nominate the three directors of IAPP. At December 31, 2006
        we
        had 5,771 participants in our plan (5,582 in 2005), of which 3,161 (3,279
        in
        2005) participated in the defined-benefit plan.
  F-40
 *Table
            of Contents*
  Based
        on
        the independent actuarial reports, the funded status of AmBev’s plans at
        December 31 is determined as follows:
  2006
              
              2005Fair
                  value of plan assets
              
              
              857.7
              
              
              725.5Present
                  value of actuarial liability
              
              
              (555.3
              )
              
              (485.2
              )Funded
                  status
              
              
              302.4
              
              
              240.3
  The
        surplus of assets of IAPP is recognized by the Company in its consolidated
        financial statements under “Surplus assets - Instituto AmBev”, in the amount of
        R$ 17.0 (R$ 20.0 in 2005), estimated as the maximum limit of its
        future use, also taking into account the legal restrictions that prevent
        the
        return of a possible remaining actuarial surplus, not used in the payment
        of
        private security benefits, in the event of a winding up of IAPP.
  b)
              Post-retirement
                  benefits and others
  The
        Company directly provides medical assistance, reimbursement of medicine expenses
        and other benefits to certain retired pensioners.
  Labatt
        Canada, the Company’s indirectly-owned subsidiary, 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; Labatt Canada
        also
        provides certain post-retirement pension benefits to certain distributors.
        On
        December 31, 2006 liabilities deriving from these obligations are recorded
        in
        the Company’s financial statements in the account “Provision for employee
        benefits” in the following amounts:
  Pension
                Plan
              
              Post-retirement
                BenefitsLabatt
              
              Labatt
              
              AmBev
              
              TotalPresent
                  value of the actuarial liability
              
              
              2,040.5
              
              
              248.4
              
              
              146.1
              
              
              2,435.0Assets
                  fair value
              
              
              (1,641.5
              )
              
              -
              
              
              -
              
              
              (1,641.5
              )Plan’s
                  Deficit
              
              
              399.0
              
              
              248.4
              
              
              146.1
              
              
              793.5Non-amortized
                  actuarial adjustments
              
              
              (365.1
              )
              
              (89.4
              )
              
              (58.7
              )
              
              (513.2
              )Subtotal
              
              
              33.9
              
              
              159.0
              
              
              87.4
              
              
              280.3Distributors
                  plan (i)
              
              
              -
              
              
              -
              
              
              -
              
              
              46.3Total
              
              
              33.9
              
              
              159.0
              
              
              87.4
              
              
              326.6
  (i)
        The
        liability related to the distributors’ plan represents Labatt Canada’s pro rata
        interest on the liabilities of these plans, which will be financed by Labatt
        Canada through the allocation of service costs of these affiliated
        companies.
  F-41
 *Table
            of Contents*
  Change
        in
        the provision for employee benefits, according to the independent actuary’s
        report:
  AmBev
              
              Labatt
              
              TotalBalance
                  on December 31, 2005
              
              
              84.4
              
              
              500.2
              
              
              584.6Financial
                  charges/incurred expenses
              
              
              13.7
              
              
              67.4
              
              
              81.1Exchange
                  rate variation
              
              
              -
              
              
              (43.7
              )
              
              (43.8
              )Actuarial
                  adjustment
              
              
              -
              
              
              (12.5
              )
              
              (12.5
              )Payment
                  of benefits
              
              
              (10.7
              )
              
              (272.2
              )
              
              (282.9
              )Balance
                  on December 31, 2006
              
              
              87.4
              
              
              239.2
              
              
              326.6
  c)
              Fundação
                  Antônio e Helena Zerrenner Instituição Nacional de Beneficência (Zerrenner
                  Foundation)
  The
        employees and retirees of the Company in Brazil receive health care and dental
        assistance from the FAHZ, one of our shareholders.
  The
        changes in the provision for these benefits of FAHZ, based on independent
        actuarial reports, were as follows:
  2006
              
              2005January
                  1, 2005
              
              
              193.6
              
              
              177.0Interest
                  charges
              
              
              44.0
              
              
              40.5Benefits
                  paid
              
              
              (21.8
              )
              
              (23.9
              )December
                  31, 2006
              
              
              215.8
              
              
              193.6
  The
        actuarial liabilities related to the benefits provided by the Zerrenner
        Foundation as of December 31, 2006 were fully offset by its assets as of
        the
        same date, and the excess assets were not recorded by the Company in its
        financial statements, due to the possibility of their use for purposes other
        than those exclusively related to the payment of benefits.
  In
        accordance with NPC No. 26, the Company recognized the actuarial liability
        related to the obligation for the benefits provided directly by AmBev, but
        not
        for benefits provided by the FAHZ. The assumption is that this obligation
        will
        not be legally imputed to the Company and will be covered by the contributions
        made annually to the FAHZ (up to 10% of the net income of each year), which
        are
        recognized through the statement of operations.
  d)
              Actuarial
                  assumptions
  The
        medium and long-term assumptions adopted by the independent actuary, in the
        calculation of the actuarial liability were the following:
  Percentage
                  per year (in nominal terms)AmBev
              
              Labatt2006
              
              2005
              
              2006
              
              2005Discount
                  rate
              
              
              10.8
              
              
              10.8
              
              
              5.0
              
              
              5.0Expect
                  long-term rate of return on assets
              
              
              13.9
              
              
              14.9
              
              
              7.4
              
              
              8.0Increase
                  in the remuneration factor
              
              
              7.1
              
              
              7.2
              
              
              3.0
              
              
              3.0Increase
                  of medical services costs
              
              
              6.5
              
              
              7.2
              
              
              2.5
              
              
              -
  F-42
 *Table
            of Contents*
  16.
              SHAREHOLDERS’
                  EQUITY
  a)
              Capital
                  and shareholders’ rights
  (i)
              Subscribed
                  and paid-up capital
  As
        of
        December 31, 2006, the Company’s capital, in the amount of R$5,716.1 (R$5,691.4
        as of December 31, 2005), was represented by 64,458,212 thousand shares
        (65,876,074 thousand shares as of December 31, 2005), of which 34,501,039
        thousand are common shares and 29,957,173 thousand are preferred shares
        (34,499,423 thousand and 31,376,651 thousand, respectively, as of December
        31,
        2005), all of which are registered shares without par value.
  On
        October 11, 2006, the Company increased its capital in the amount of R$1.9,
        by
        means of capitalization of the tax incentive reserve - Reinvestment of Income
        Tax, related to calendar years 1991 and 1992, pursuant to Article 19 of Law
        No.
        8167/91, thus increasing the Company’s capital from R$5,714.2 to
        R$5,716.1.
  On
        August
        8, 2006, the Company increased its capital in the amount of R$3.4, through
        the
        issue of 3,655 thousand common shares and 717 thousand preferred shares,
        subscribed in cash by minority shareholders.
  On
        June
        27, 2006, the Company increased its capital in the amount of 11,515 thousand
        common shares and 5,275 thousand preferred shares, in the amount of R$13.5,
        paid
        up by means of partial capitalization of the tax benefit earned by the Company
        through the partial amortization of the special goodwill reserve in
        2005.
  On
        April
        20, 2006, the Company increased its capital in the amount of R$5.8,
        corresponding to the capitalization of 30% of the tax benefit earned by the
        Company, with the partial amortization of the special goodwill reserve in
        2005,
        without the issue of new shares.
  On
        May
        31, 2005, AmBev’s capital stock increased by 27 thousand common shares in the
        amount of R$ 0.004 attributed to CBB’s minority shareholders, merged by the
        Company, as mentioned in note 1 (b)(ii).Additionally, on the same date, the
        Company increased the capital stock by 10,941,151 thousand common shares
        in the
        amount of R$ 948.6, by capitalization of goodwill reserve, the shareholders
        being entitled to bonus at the ratio of 1 common share for each 5 shares
        (common
        shares or preferred shares).
  (ii)
              Share
                  rights
  Our
        preferred shares are non-voting but have priority in the return of capital
        in
        the event of liquidation. Our common shares have the right to vote at
        shareholder meetings. Under our by-laws, we are required to distribute to
        shareholders as a mandatory dividend in respect of each fiscal year ending
        on
        December 31 an amount not less than 35 % of our net income determined under
        Brazilian GAAP, as adjusted in accordance with such law, unless payment of
        such
        amount would be incompatible with AmBev’s financial situation. The mandatory
        dividend includes amounts paid as interest attributed to shareholders’ equity
        (item (e)). Preferred shares are entitled to a dividend premium of 10 % over
        that received by the common shareholders.
  F-43
 *Table
            of Contents*
  (iii)
              Share
                  activity (in thousands of shares)
  2006
              
              2005
              
              2004Preferred
                  shares:At
                  beginning of year
              
              
              31,376,651
              
              
              32,719,497
              
              
              22,801,455Employee
                  stock ownership plan purchases
              
              
              -
              
              
              -
              
              
              55,727Acquisition
                  of Labatt
              
              
              -
              
              
              -
              
              
              11,398,181Capital
                  Increase
              
              
              5,993
              
              
              -
              
              
              -Cancellation
                  of shares
              
              
              (1,425,471
              )
              
              (1,342,846
              )
              
              (1,535,866
              )At
                  end of year
              
              
              29,957,173
              
              
              31,376,651
              
              
              32,719,497Common
                  shares:At
                  beginning of year
              
              
              34,499,423
              
              
              23,558,245
              
              
              15,735,878Labatt
                  transaction
              
              
              -
              
              
              -
              
              
              7,866,182Capital
                  Increase
              
              
              15,170
              
              
              -
              
              
              -Share
                  bonus
              
              
              -
              
              
              10,941,151
              
              
              -Minorities
                  from CBB
              
              
              -
              
              
              27
              
              
              -Cancellation
                  of shares
              
              
              (13,554
              )
              
              -
              
              
              (43,815
              )At
                  end of year
              
              
              34,501,039
              
              
              34,499,423
              
              
              23,558,245
  b)
              Appropriation
                  of net income for the year and transfers to statutory
                  reserves
  The
        Company’s Bylaws provide for the following allocation of net income for the
        year, after the deductions provided for by law:
  (i)
              Legal
  35%
        as
        payment of mandatory dividends to all its shareholders. Pursuant to Law,
        preferred shares are entitled to a dividend 10% higher compared to common
        shares.
  (ii)
              Investments
  An
        amount
        not higher than 68.875% of net income, to be recorded in the investments
        reserve, for the purpose of financing the expansion of the activities of
        the
        Company and its subsidiaries, including subscription of capital increases
        or the
        establishment of new projects. This reserve cannot exceed 80% of capital.
        Should
        it reach this limit, a Shareholders’ Meeting must decide on the balance, either
        distributing it to shareholders or increasing the Company’s
        capital.
  (iii)
              Employee
                  profit sharing of up to 10% of net income for the year, based on
                  predetermined criteria. Sharing is attributed to management up
                  to the
                  maximum legal limits. Profit sharing is conditioned to the achievement
                  of
                  collective and individual targets, which are previously established
                  by the
                  Board of Directors at beginning of
                  year.
  F-44
 *Table
            of Contents*
  c)
              Treasury
                  shares
  At
        December 31, 2006 the Company held in treasury 704,125 thousand common shares
        and 34,694 thousand preferred shares in the total amount of
        R$ 940.7.
  The
        Board
        of Directors has successively approved the repurchase of shares, and the
        Company
        is authorized, during renewable periods of up to 90 days, to acquire shares
        within certain limits.
  Changes
        in the Company’s treasury shares during the year were as follows:
  2006
              
              2005
              
              2004Preferred
                  shares:At
                  beginning of year
              
              
              519,380
              
              
              1,589,604
              
              
              520,153Repurchase
                  of shares
              
              
              1,791,076
              
              
              530,615
              
              
              2,605,318Transfer
                  to stock ownership plan
              
              
              (180,860
              )
              
              (257,993
              )
              
              -Cancellation
                  of shares
              
              
              (1,425,471
              )
              
              (1,342,846
              )
              
              (1,535,867
              )At
                  end of year
              
              
              704,125
              
              
              519,380
              
              
              1,589,604Common
                  shares:At
                  beginning of year
              
              
              10,480
              
              
              60,731
              
              
              104,546Repurchase
                  of shares
              
              
              68,878
              
              
              16,869
              
              
              -Transfer
                  to stock ownership plan
              
              
              (31,110
              )
              
              (6,389
              )
              
              -Shares
                  sold on MTO
              
              
              -
              
              
              (60,731
              )
              
              -Cancellation
                  of shares
              
              
              (13,554
              )
              
              -
              
              
              (43,815
              )At
                  end of year
              
              
              34,694
              
              
              10,480
              
              
              60,731
  During
        the year ended December 31, 2006, the Company acquired in the market 1,611,089
        thousand shares, at the weighted average price of R$0.93, with a minimum
        price
        of R$0.81 and a maximum price of R$1.0.
 
 Additionally,
        the Company transferred 211,970 thousand treasury shares to employees who
        exercised their right to acquire shares under the Stock Ownership Plan, for
        an
        amount of R$101.6. The cost of acquisition of these shares totaled R$168.9,
        resulting in a loss of R$67.2, which was recorded against the capital reserve.
 
 In
        August
        2006, the Company launched a new program to acquire common and preferred
        shares
        issued by it, up to the amount of R$1,000.0, pursuant to CVM Instruction
        No.
        10/80 and subsequent amendments thereto. During the next 360 days the Company
        may repurchase up to 9.74% of the outstanding common shares and 3.79% of
        the
        outstanding preferred shares in each class. This program was terminated on
        November 14, 2006.
  F-45
 *Table
            of Contents*
  In
        February 2006, the Company launched a new program to acquire common and
        preferred shares issued by it, in the amount of R$500.0, pursuant to CVM
        Instruction No. 10/80 and subsequent amendments thereto. During the period
        of
        180 days after the data of launching, the Company may repurchase up to 5.47%
        and
        9.72% of the outstanding preferred shares and ordinary shares, respectively
        in
        each class. This program was terminated on August 8, 2006.
  d)
              Proposed
                  dividends and contributions
  Calculation
        of the percentage of dividends approved by the Board of Directors on net
        income
        for the years ended December 31:
  2006
              
              2005Net
                  income for the period
              
              
              2,806.3
              
              
              1,545.7Legal
                  reserve (5%) (i)
              
              
              -
              
              
              -Dividends
                  calculation basis
              
              
              2,806.3
              
              
              1,545.7Interim
                  dividends
              
              
              -
              
              
              480.9Interim
                  dividends as Interest attributed to shareholders’ equity
              
              
              1,473.1
              
              
              219.8Supplementary
                  dividends
              
              
              -
              
              
              75.4Supplementary
                  dividends as Interest attributed to shareholders’ equity
              
              
              -
              
              
              524.2Subtotal
              
              
              1,473.1
              
              
              1,300.3Withholding
                  income tax onInterest
                  attributed to shareholders’ equity
              
              
              (220.9
              )
              
              (111.6
              )Total
                  of proposed dividends - current year
              
              
              1,252.2
              
              
              1,188.7Supplementary
                  dividends 2006 - 2005 Basis
              
              
              -
              
              
              390.9Total
                  proposed dividends
              
              
              1,252.2
              
              
              1,579.6Percentage
                  of dividends on the calculation basis - %
              
              
              44.62
              
              
              102.182006
              
              
              2005Dividends
                  net of income tax per thousand outstanding shares(excluding
                  treasury shares) at the end of the period - R$Common
                  (ii)
              
              
              17.77
              
              
              23.07Preferred
                  (ii)
              
              
              19.54
              
              
              25.38
  (i)
              The
                  legal reserve was no longer recorded, pursuant to corporate legislation,
                  which establishes that such reserve may stop being recognized when,
                  together with the capital reserves, they exceed 30% of the Company’s
                  capital.
 (ii)
              Dividends
                  per thousand shares outstanding (excluding treasury shares) at
                  yearend,
                  before withholding income tax (IRRF): common - R$20.90 and preferred
                  -
                  R$22.99 (common - R$24.70 and preferred - R$27.17 as of December
                  31,
                  2005).
  F-46
 *Table
            of Contents*
  e)
              Interest
                  on capital
 
 Companies
        legally have the option to distribute to shareholders interest on capital
        based
        on the TJLP, and such interest, which is tax deductible, can be considered
        part
        of the mandatory dividends when distributed. Although such interest is recorded
        in income for tax purposes, it is reclassified to shareholders' equity and
        presented as dividends, to reflect the essence of the transaction.
 
 Interest
        on capital and dividends not requested within 3 years, from the beginning
        date
        of payment, expire and are reversed in favor of the Company (Law No. 6404/76,
        Article 287, item II a).
  f)
              Special
                  goodwill reserve
  As
        mentioned on Note 1(iii), as a result of the merger of InBev Brasil into
        AmBev
        on July 28, 2005, the Company recorded a special goodwill reserve (a capital
        reserve) in the amount of R$ 2,883.3 equivalent to the amount of the future
        tax benefit arising from the deductibility of the goodwill
        amortization.
  g)
              Stock
                  ownership option plan
  AmBev
        maintains a plan for the purchase of shares by qualified employees, with
        the
        purpose of aligning the interests of shareholders and employees. The Plan
        was
        revised at the Extraordinary Shareholders’ Meeting on April 27, 2007. The Plan
        is managed by the Board of Directors. The Board of Directors periodically
        creates stock ownership programs, defining the terms and categories of employees
        to be benefited, and determines the price for which the shares will be
        purchased.
  The
        strike price of the options of the shares to be acquired by the participants
        in
        the Plan will be the average of the closing prices of the shares of the same
        type for the 30 days prior to the grant date, negotiated at the São Paulo Stock
        Exchange (BOVESPA) or, in specific cases (e.g. for Labatt employees), the
        average of the closing price of ADRs in the same period, negotiated at the
        New
        York Stock Exchange (NYSE) (“exercise price”) or in accordance with specific
        determination of the Program.
  The
        Company may opt to issue new shares, or transfer its treasury shares to the
        employee. There is no expiration date for the purchase of the shares for
        the
        options granted through 2004. Under the revised Plan, the options have a
        ten
        year term.
  The
        Company has the right of first refusal on shares issued under the program
        if (i)
        the employee decides to sell the shares or (ii) the employee ceases to be
        employed by the Company, automatically forfeiting the purchase rights. The
        Company has the right to repurchase any shares subscribed by the employee
        at a
        price equal to: (i) the price paid by the employee, adjusted by inflation,
        should the shares be sold within the first 30 months following the purchase;
        (ii) 50% at the price paid, adjusted by inflation, and another 50% at the
        market
        price, if the employee sells the shares after the first 30 months but before
        the
        60th month following the purchase; or (iii) at market price if sold at least
        60
        months following the purchase.
  F-47
 *Table
            of Contents*
  For
        plans
        granted prior to 2004, the Company provided advances to employees for the
        purchase of shares. Financing arrangements were normally for periods of no
        more
        than four years and accrued 8% interest per annum above the “Índice Geral de
        Preços - Mercado” - IGP-M (Note 2(o)). These advances are guaranteed by the
        shares. On December 31, 2006 these advances totaled R$ 72.7 (R$ 114.9
        in 2005) and are included in the balance sheet as non-current assets. For
        plans
        granted beginning in 2003, the Company no longer provides these
        advances.
  The
        changes in outstanding stock call options for the years ended December 31
        are as
        follows:
  2006
              
              2005Outstanding
                  (in thousands of shares):At
                  beginning of year
              
              
              438,121
              
              
              651,036Granted
              
              
              
              
              
              -Exercised
              
              
              (186,663
              )
              
              (264,382
              )Bonus
                  shares
              
              
              69,506
              
              
              80,636Cancelled
              
              
              (49,661
              )
              
              (29,169
              )At
                  year end - outstanding and exercisable
              
              
              271,303
              
              
              438,121
  17.
              TREASURY
  a)
              General
                  considerations
  The
        Company and its subsidiaries hold certain amounts of cash and cash equivalents
        in foreign currency, and enter into cross-currency, interest rate and
        commodities swaps and currency forward contracts to hedge against the effects
        of
        exchange variations on the consolidated exposure to foreign currency, interest
        rate fluctuations, and changes in raw materials prices, particularly aluminum,
        sugar and wheat.
 
 The
        instruments mentioned above are contracted for hedge purpose, which does
        not
        prevent redemptions from occurring at any time, although the Company actually
        intends to hold them to maturity of operation to be hedged.
  b)
              Derivatives
  Volatility
        of interest rates, exchange rates and commodity prices are the principal
        market
        risks to which we are exposed and which we manage through derivative instruments
        to mitigate exposure to risk.
  We
        monitor and evaluate our derivative positions on a daily basis and adjust
        our
        strategy in response to market conditions. We also periodically review the
        credit limits and creditworthiness of our counter parties in these transactions.
        In view of our policies and practices established for derivatives, management
        considers the occurrence of non-measurable risk situations as
        unlikely.
  The
        notional outstanding amounts do not represent amounts exchanged by the parties
        and, thus, are not a measure of our exposure through the use of derivatives.
        The
        amounts exchanged during the term of the derivatives are calculated on the
        basis
        of the notional amounts and the other contractual conditions of the derivatives,
        which relate to interest rates and foreign currency exchange rates.
  F-48
 *Table
            of Contents*
  The
        estimated fair value amounts of our derivatives exposures as of December
        31,
        were as follows:
  Financial
                  instrument
              
              2006
              
              2005Currency
                  hedgeReais/US$
              
              
              3,086.5
              
              
              3,610.5Argentine
                  Peso/US$
              
              
              -
              
              
              206.0Reais/Yen
              
              
              622.0
              
              
              -Peruvian
                  Sol/US$
              
              
              78.3
              
              
              210.7CAD/US$
              
              
              249.1
              
              
              240.5CAD/R$
              
              
              825.4
              
              
              -Interest
                  rate hedgeCDI
                  x Fixed Rate
              
              
              (137.5
              )
              
              (186.3
              )Fixed
                  Rate / Canadian BA
              
              
              508.4
              
              
              367.2Commodities
                  hedgeAluminum
              
              
              314.2
              
              
              119.6Sugar
              
              
              126.6
              
              
              31.4Wheat
              
              
              (76.8
              )
              
              16.1Corn
              
              
              2.2
              
              
              -5,598.4
              
              
              4,615.7
  (i)
              Market
                  Value of Financial Instruments - currency and interest rate
                  hedge
  Interest
        rate risk mainly relate to debt borrowed at floating rates. The foreign currency
        debt is largely subject to fluctuations in the LIBOR. The portion of local
        currency denominated debt that is subject to floating rates is linked to
        the
        TJLP. We use derivative instruments to mitigate the effects of volatility
        of the
        LIBOR rate.
  As
        of
        December 31, 2005, unrealized gains on variable earnings from financial
        instruments were limited to the lower value between the instrument’s yield curve
        and their relative market value, in accordance with the Brazilian Corporation
        Law.
  F-49
 *Table
            of Contents*
  Had
        the
        Company recorded its derivative instruments at market value, it would have
        recorded, for the period ended December 31, 2006, an additional gain of R$
        141.8
        (R$ 44.4 on December 31, 2005), as presented below:
  Financial
                  instruments
              
              Bookvalue
              
              Market
              
              Unrealized
                  variablegainsPublic
                  bonds
              
              
              241.6
              
              
              261.6
              
              
              20.0Swaps/forwards
              
              
              (218.4
              )
              
              (213.0
              )
              
              5.4Forward
                  R$ x CAD Labatt Canada
              
              
              48.7
              
              
              160.2
              
              
              111.5Cross
                  Currency Swap Labatt Canada (*)
              
              
              (88.4
              )
              
              (83.5
              )
              
              4.9(16.5
              )
              
              125.3
              
              
              141.8
  (*)
        Swaps
        for the conversion of the Notes issued at fixed interest in US dollars to
        fluctuating interest in Canadian dollars.
  The
        fair
        values of investments are estimated based on quoted market prices. For
        investments for which there are no quoted market prices, fair values are
        derived
        from available yield curves for investments of similar maturity and
        terms.
  (ii)
              Currency
                  and commodities hedge
  At
        December 31, 2006, losses totaling R$ 57.2 (losses of R$ 34.4 in
        2005), arising from these instruments obtained for the specific purpose of
        mitigating our exposure to fluctuations in foreign currencies and the prices
        of
        raw materials to be purchased, were deferred, and will be recognized in income
        when corresponding product is sold or at the moment when the corresponding
        expense is recognized in earnings.
  During
        the years ended December 31, 2006 and 2005, the following effects arising
        from
        such instruments were recorded in Cost of sales:
  Gain
                  (loss) recorded
                in cost of salesDescription
              
              2006
              
              2005Currency
              
              
              (84.6
              )
              
              (268.1
              )Sugar
              
              
              (16.4
              )
              
              15.3Wheat
                  and corn
              
              
              0.8
              
              
              (0.5
              )Aluminum
              
              
              (4.6
              )
              
              3.8(104.8
              )
              
              (249.5
              )
  c)
              Financial
                  liabilities
  The
        Company’s financial liabilities, mainly represented by the foreign debt
        securities and import financing transactions, are recorded at cost, monetarily
        adjusted at initial interest rates contracted, plus monetary and exchange
        variations, according to the closing indexes for each period.
 
 Had
        the
        Company been able to use a method in which its financial liabilities could
        be
        recognized at fair value, it would have recorded an additional loss, before
        income and social contribution taxes, of R$580.9 as of December 31, 2006
        (R$523.4 as of December 31, 2005), as presented in the table below:
  F-50
 *Table
            of Contents*
  Financial
                  liabilities
              
              Book value
              
              Market value
              
              DifferenceSeries
                  A Notes (i)
              
              
              345,1
              
              
              350,4
              
              
              (5,3
              )Series
                  B Notes (ii)
              
              
              91,8
              
              
              93,8
              
              
              (2,0
              )Senior
                  Notes - BRI (iii)
              
              
              163,0
              
              
              183,7
              
              
              (20,7
              )International
                  financings (other currencies) (iv)
              
              
              2.311,1
              
              
              2.311,1
              
              
              -Financings
                  in Reais
              
              
              948,8
              
              
              1.147,3
              
              
              (198,5
              )BNDES/FINEP/EGF
                  (iv)
              
              
              498,8
              
              
              498,8
              
              
              -Resolution
                  63 / Compror 63
              
              
              901,0
              
              
              855,9
              
              
              45,1Bond
                  2011 and Bond 2013
              
              
              2.175,9
              
              
              2.575,4
              
              
              (399,5
              )Debentures
                  - 2009 and 2011
              
              
              2.131,1
              
              
              2.131,1
              
              
              -9.566,6
              
              
              10.147,5
              
              
              (580,9
              )
 
 (i)
              Series
                  A Bank Notes entered into by Labatt Canada in US
                  dollars.
 
 (ii)
              Series
                  B Bank Notes entered into by Labatt Canada in Canadian
                  dollars.
 
 (iii)
              Private
                  Bonds entered into by Brewers Retail Inc. (BRI) and proportionally
                  consolidated by Labatt Canada in Canadian
                  dollars.
 
 (iv)
              Loans
                  for which book value and fair value are
                  similar.
  The
        criterion used to determine the fair value of the debt instruments was based
        on
        quotations of investment brokers, quotations of banks that provide services
        to
        AmBev and Labatt Canada, and the secondary market value of securities as
        of the
        balance sheet date of December 31, 2006, approximately 120.75% of face value
        for
        Bond 2011 and 117.13% for Bond 2013 (124.50% and 117.50%, respectively, as
        of
        December 31, 2005) and the Series A Notes and Series B Notes of Labatt Canada,
        the prices were calculated based on the discounted cash flow to present value,
        using market rates available for Labatt Canada for similar
        instruments.
  d)
              Concentration
                  of credit risk
  A
        substantial portion of the Company’s sales is to distributors, supermarkets and
        retailers, within a broad distribution network. Credit risk is reduced because
        of the large number of customers and control procedures to monitor this risk.
        Historically, the Company has not had significant losses on trade accounts
        receivable.
 
 To
        minimize the credit risk of its investments, the Company has adopted procedures
        for the allocation of cash and investments, taking into consideration loan
        limits and evaluations of financial institutions, not allowing credit
        concentration, i.e., the credit risk is monitored and minimized since the
        negotiations are carried out only with a select group of highly qualified
        counterparties. At Labatt Canada, compensation agreements are entered into
        with
        its counterparties, allowing it to realize derivative financial assets and
        liabilities in the event of default.
  F-51
 *Table
            of Contents*
  e)
              Financial
                  income (expense)
  Consolidated2006
              
              2005Financial
                  incomeExchange
                  variation on financial investments
              
              
              (15,5
              )
              
              (36,7
              )Interest
                  on cash and cash equivalents
              
              
              111,1
              
              
              91,5Financial
                  charges on taxes, contributions and judicial deposits
              
              
              29,9
              
              
              6,6Interest
                  on advances to employees for purchase of shares
              
              
              10,0
              
              
              13,3Interest
                  and exchange variation on loans
              
              
              -
              
              
              0,1Other
              
              
              32.9
              
              
              20.5168,4
              
              
              95,3Financial
                  expensesExchange
                  variation on financings
              
              
              254,7
              
              
              308,5Net
                  losses on derivative instruments
              
              
              (585,1
              )
              
              (625,8
              )Interest
                  on debt in foreign currency
              
              
              (485,1
              )
              
              (456,0
              )Interest
                  on debt in reais
              
              
              (191,5
              )
              
              (122,4
              )Interest
                  and exchange variation on loans
              
              
              (1,8
              )
              
              (5,7
              )Taxes
                  on financial transactions
              
              
              (131,8
              )
              
              (141,9
              )Financial
                  charges on contingencies and other
              
              
              (59,8
              )
              
              (77,6
              )Other
              
              
              (46,3
              )
              
              (61,1
              )(1.246,7
              )
              
              (1.182,0
              )Financial
                  income, net
              
              
              (1.078,3
              )
              
              (1.086,7
              )
  18.
              INCOME
                  AND SOCIAL CONTRIBUTION TAXES
  a)
              Tax
                  rates
  Income
        taxes in Brazil comprise federal income tax (25%) and social contribution
        (9%)
        (a federal tax on income) which, combined, provide a composite statutory
        rate of
        34%. There are no taxes levied by state or local authorities on income in
        Brazil. The Company is subject to taxes from its operations in foreign
        jurisdictions.
  F-52
 *Table
            of Contents*
  b)
                Income
                    tax reconciliation
  2006
              
              2005Consolidated
                  net income before income andsocial
                  contribution taxes
              
              
              4,307.3
              
              
              2,751.9Statutory
                  profit sharing and contributions
              
              
              (194.4
              )
              
              (202.8
              )Consolidated
                  net income before income and socialcontribution
                  taxes and minority interest
              
              
              4,112.9
              
              
              2,549.1Expense
                  on income and social contribution taxes atnominal
                  rates (34%)
              
              
              (1,398.4
              )
              
              (866.7
              )Adjustments
                  to obtain effective rate, resulting from permanent
                  differences:Interest
                  on capital
              
              
              500.9
              
              
              253.0Equity
                  gains in subsidiaries
              
              
              62.1
              
              
              51.6Foreign
                  subsidiaries’ income not subject to taxation (iii)
              
              
              4.2
              
              
              (174.1
              )Goodwill
                  amortization, nondeductible portion (i)
              
              
              (355.0
              )
              
              (327.0
              )Future
                  profitability goodwill - CBB merger (ii)
              
              
              -
              
              
              103.4Withholding
                  taxes (iv)
              
              
              (68.3
              )
              
              -Exchange
                  variation on investments
              
              
              (43.7
              )
              
              (44.3
              )Other
                  permanent additions and deductions
              
              
              (17.1
              )
              
              (16.1
              )Income
                  and social contribution tax expenses on income
              
              
              (1,315.3
              )
              
              (1,020.2
              )
  (i)
              The
                  nondeductible goodwill amortization includes the goodwill amortization
                  effects of Labatt ApS in Labatt Canada, totaling R$969.8 in the
                  year ended
                  December 31, 2006 (R$923.5 as of December 31, 2005), generating
                  a tax
                  effect as it is not deductible, totaling R$329.7 (R$314.0 as of
                  December
                  31, 2005).
 
 (ii)
              This
                  amount refers to the tax credit resulting from AmBev’s future goodwill
                  deductibility in CBB as a result of the merger of CBB into AmBev
                  (Note
                  1(iv)).
 
 (iii)
              Included
                  the tax effect protection on the exchange variation of loans and
                  fixed
                  rate notes contracted abroad. The amount protected is US$496.6
                  as of
                  December 31, 2006 and the tax gain of this protection in the period
                  is
                  R$123.9.
 
 (iv)
              On
                  dividends received by Labatt ApS.
  F-53
 *Table
            of Contents*
  Composition
        of benefit (expense) of Income Tax and CSLL:
  2006
              
              2005
              
              2004Current
              
              
              (688.8
              )
              
              (757.1
              )
              
              (740.6
              )Deferred
              
              
              (626.5
              )
              
              (263.1
              )
              
              228.8Total
              
              
              (1,315.3
              )
              
              (1,020.2
              )
              
              (511.8
              )
  The
        major
        components of the deferred tax asset and liability accounts are as
        follows:
  2006
              
              2005Current
                  assetsTax
                  losses carryforwards
              
              
              98.3
              
              
              46.8Temporary
                  differences:Goodwill
                  future profitability - Mergers
              
              
              350.8
              
              
              350.8Provision
                  for interests attributed to shareholders’ equity
              
              
              22.1
              
              
              -Provision
                  for restructuring
              
              
              26.8
              
              
              46.4Provision
                  for employees profit sharing
              
              
              57.4
              
              
              47.8Provision
                  for marketing and sales expenses
              
              
              54.6
              
              
              51.6610.0
              
              
              543.4Long-term
                  assetsTax
                  losses carryforwards
              
              
              771.0
              
              
              850.1Temporary
                  differences:Deductible
                  provisions
              
              
              307.0
              
              
              422.7Provision
                  for losses on tax incentives (CSSL)
              
              
              7.6
              
              
              7.5Goodwill
                  future profitability - Mergers
              
              
              2,115.7
              
              
              2,466.5Provision
                  for health care benefits
              
              
              82.2
              
              
              165.9Provision
                  for losses on assets held for sale
              
              
              17.2
              
              
              22.5Provision
                  for losses on hedge
              
              
              130.9
              
              
              116.9Allowance
                  for doubtful accounts
              
              
              11.2
              
              
              10.4Others
              
              
              123.9
              
              
              120.83,566.7
              
              
              4,183.3Long-term
                  liabilitiesTemporary
                  differencesAccelerated
                  depreciation
              
              
              47.8
              
              
              59.9Other
              
              
              83.6
              
              
              34.7131.4
              
              
              94.6
  c)
              Net
                  operating loss carryforwards
  Deferred
        tax assets are limited to the amount for which offset is supported by profit
        projections for the next ten years, discounted to present value, according
        to
        CVM Instructions No. 273/98 and No. 271/02.
  Net
        deferred income tax assets comprise Brazilian net operating losses, which
        have
        no expiration dates, available for offset against future taxable income.
        Brazilian carryforward losses are available for offset of up to 30% of annual
        income before tax in any year. Tax losses are not inflation-indexed.
  F-54
 *Table
            of Contents*
  Based
        on
        projections of generation of future taxable income of the Company and its
        domestic and foreign subsidiaries, the estimated recovery of the consolidated
        deferred income and social contribution taxes on tax loss carryforwards is
        as
        follows:
  In
                  nominal amounts2008
              
              
              183.02009
              
              
              291.02010
              
              
              297.0771.0
  The
        asset
        recorded is limited to the amounts for which offset is supported by taxable
        income projections, discounted to present value, realized by the Company
        within
        the next 10 years, also considering that tax loss carryforwards are limited
        to
        30% of annual taxable income, determined according to Brazilian tax
        laws.
 
 The
        balance of deferred income tax assets as of December 31, 2006 includes the
        total
        effect of tax loss carryfowards of Brazilian subsidiaries, which have no
        expiration dates and are available for offset against future taxable income.
        Part of the tax benefit corresponding to the tax loss carryforwards of foreign
        subsidiaries was not recorded as assets, as Management cannot determine whether
        its realization is probable.
 
 It
        is
        estimated that the balance of deferred taxes on temporary differences as
        of
        December 31, 2006 will be realized by fiscal year 2011. However, it is not
        possible to accurately estimate when such temporary differences will be
        realized, because most of them depend on legal decisions, over which the
        Company
        has no control, nor any means of anticipating exactly when a final decision
        will
        be reached.
 
 The
        projections of future taxable income include various estimates on the
        performance of the Brazilian and global economy, the determination of foreign
        exchange rates, sales volume, sales prices, tax rates, and other factors
        that
        may differ from the data and actual amounts.
 
 As
        income
        and social contribution taxes derive not only from taxable income but also
        from
        the Company’s tax and corporate structure, the existence of nontaxable income,
        nondeductible expenses, tax exemptions and incentives, and other variables,
        there is no relevant correlation between Company’s net income and the
        determination of income and social contribution taxes. Therefore, we recommend
        that the tax loss carryforward not be taken as an indicator of the Company’s
        future profits.
  19.
              COMMITMENTS
                  WITH SUPPLIERS
  The
        Company has agreements with certain suppliers to acquire certain quantities
        of
        materials that are important for the production and packaging processes,
        such as
        malt, plastics for PET bottles, aluminum and natural gas.
  The
        Company has commitments assumed with suppliers for 2007, 2008 and 2009,
        already contracted on December 31, 2006 at the amount of approximately
        R$ 1,051.8, R$ 458.0 and R$ 229.0, respectively.
  F-55
 *Table
            of Contents*
  20.
              OTHER
                  OPERATING INCOME (EXPENSES), NET
  2006
              
              2005
              
              2004Operating
                  incomeFiscal
                  incentive on subsidiaries
              
              
              165.3
              
              
              151.8
              
              
              193.3Exchange
                  variation of subsidiary abroad
              
              
              79.4
              
              
              74.1
              
              
              252.4Gain
                  on tax incentive settlement (ICMS)
              
              
              39.9
              
              
              28.3
              
              
              21.9Reversal
                  of provision for investment loss
              
              
              21.9
              
              
              -
              
              
              -Tax
                  recovery
              
              
              24.0
              
              
              52.6
              
              
              14.2Other
                  operating income
              
              
              12.7
              
              
              3.6
              
              
              22.9343.2
              
              
              310.4
              
              
              504.7Operating
                  expensesGoodwill
                  amortization
              
              
              (1,283.0
              )
              
              (1,343.0
              )
              
              (803.6
              )Taxes
                  on other income
              
              
              (4.4
              )
              
              (3.5
              )
              
              (67.5
              )Other
                  operating expenses
              
              
              (10.9
              )
              
              (39.3
              )
              
              (54.5
              )(1,298.3
              )
              
              (1,385.8
              )
              
              (925.6
              )Operating
                  income (expenses), net
              
              
              (955.1
              )
              
              (1,075.4
              )
              
              (420.9
              )
  21.
              NON-OPERATING
                  INCOME (EXPENSES), NET
 
 2006
              
              2005
              
              2004Non-operating
                  income:Reversal
                  of provision for loss on property, plant and equipment
              
              
              16.3
              
              
              -
              
              
              13.2Gain
                  on disposal of property, plant and equipment
              
              
              4.7
              
              
              6.0
              
              
              53.5Other
              
              
              5.7
              
              
              15.6
              
              
              9.126.7
              
              
              21.6
              
              
              75.8Non-operating
                  expenses:Asset
                  impairments, miscellaneous investment write-offs and other
              
              
              (18.0
              )
              
              (58.6
              )
              
              (10.4
              )Provision
                  for restructuring (i)
              
              
              (18.8
              )
              
              (114.9
              )
              
              (198.7
              )Loss
                  of interest ownership in subsidiaries
              
              
              -
              
              
              (64.9
              )
              
              (80.8
              )Loss
                  on disposal of property, plant and equipment
              
              
              (0.3
              )
              
              -
              
              
              (97.8
              )Other
              
              
              (18.4
              )
              
              (17.5
              )
              
              (22.0
              )(55.5
              )
              
              (255.9
              )
              
              (409.7
              )Non-operating
                  income (expenses), net
              
              
              (28.8
              )
              
              (234.3
              )
              
              (333.9
              )
  (i)
        Provisions arising from the restructuring process described in Note 14
        (ii).
  22.
              INSURANCE
  At
        December 31, 2006 the main assets of the Company and its subsidiaries, such
        as
        property, plant and equipment and inventories, are insured against fire and
        other risks, at replacement value. Insurance coverage is higher than the
        book
        values.
  F-56
 *Table
            of Contents*
  23.
              SUMMARY
                  OF PRINCIPAL DIFFERENCES BETWEEN BRAZILIAN GAAP AND US
                  GAAP
  a)
              Description
                  of the GAAP differences
  The
        Company’s accounting policies comply with and its consolidated financial
        statements have been prepared in accordance with accounting principles set
        forth
        in Brazilian GAAP. The Company has elected to use its Brazilian GAAP financial
        statements as its primary financial statements.
  A
        summary
        of the Company’s principal accounting policies that differ significantly from US
        GAAP is set forth below.
  (i)
              Supplementary
                  inflation restatement in 1996 and 1997 for US
                  GAAP
  Under
        Brazilian GAAP, inflation accounting was discontinued effective January 1,
        1996.
        Prior to that date, Brazilian GAAP statements included indexation adjustments
        which partially accounted for the effect of inflation on property, plant
        and
        equipment, investments, deferred charges (collectively referred to as “Permanent
        assets”) and shareholders’ equity, and reported the net charge or credit in the
        statement of operations. However, under US GAAP, Brazil ceased to be treated
        as
        a highly inflationary economy only from January 1, 1998. Therefore the financial
        information for purposes of US GAAP for the two-year period ended December
        31,
        1997 include additional inflation restatement adjustments made by applying
        the
        IGP-M to permanent assets and shareholders’ equity.
  Shareholders’
        equity under US GAAP was increased by R$ 36.1, R$ 45.9 and
        R$ 62.8 at December 31, 2006, 2005 and 2004, respectively, due to the
        additional inflation restatement adjustments, net of depreciation.
  (ii)
              Reversal
                  of inflation restatement adjustment on foreign
                  subsidiaries
  Under
        Brazilian GAAP, the financial statements of our subsidiaries operating in
        Argentina and Venezuela include inflation accounting adjustments for certain
        periods. For purposes of US GAAP, neither of these countries was considered
        to
        be highly inflationary for the years presented and, accordingly, amounts
        are
        reported based on nominal local currency balances translated to Brazilian *reais* at the
        period-end exchanges rates for balance sheet accounts and average rates for
        the
        year for statements of operations and cash flows.
  Shareholders’
        equity under US GAAP was reduced by R$ 25.3, R$ 21.4 and R$ 13.0
        at December 2006, 2005 and 2004, respectively, due to the reversal of the
        inflation restatement adjustments.
  F-57
 *Table
            of Contents*
  (iii)
              Property,
                  plant and equipment
  ·
              Capitalized
                  interest
  Under
        Brazilian GAAP, prior to January 1, 1997, there was no accounting standard
        requiring capitalization of interest as part of the cost of the related assets.
        Under US GAAP, capitalization of the financial costs of borrowed funds,
        excluding foreign exchange losses, during construction of major facilities
        is
        recognized as part of the cost of the related assets.
  For
        reconciliation purposes, an increase in shareholders’ equity due to capitalized
        interest, net of amortization effects was recorded in the amount of R$9.3
        in
        2006, R$10.2 in 2005 and R$10.9 in 2004.
  ·
              Impairment
  Under
        Brazilian GAAP, companies are required to determine if operating income is
        sufficient to absorb the depreciation of long-lived assets in order to assess
        potential asset impairment. In the event such operating income is insufficient
        to recover the depreciation, the assets, or groups of assets, are written
        down
        to recoverable values, preferably, based on the projected discounted cash
        flows
        of future operations. In the event of a planned substitution of assets prior
        to
        the end of the original estimated useful life of the asset, depreciation
        of such
        asset is accelerated to ensure that the asset is depreciated according to
        estimated net realizable values at the estimated date of
        substitution.
  Under
        US
        GAAP, SFAS No. 144, *Accounting
        for the Impairment or Disposal of Long-lived Assets* ,
        requires companies to evaluate the carrying value of long-lived assets to
        be
        held and used, and for long-lived assets to be disposed of, when events and
        circumstances require such a review. The carrying value of long-lived assets
        is
        considered impaired when the expected undiscounted cash flow from identified
        asset groups, representing the lowest level for which identifiable cash flow
        are
        largely independent of the cash flows of other groups of assets, is less
        than
        their carrying value. In that event, a loss is recognized based on the amount
        by
        which the carrying value exceeds the fair market value of the assets or
        discounted cash flows generated by the assets.
  During
        2006, no impairment has been recognized under either Brazilian GAAP or US
        GAAP a
        result of these reviews.
  (iv)
              Deferred
                  charges
  Brazilian
        GAAP permits deferral of acquisition and implementation of software, payments
        made to distributors (recorded as Other intangible assets) and pre-operating
        expenses incurred in the construction or expansion of a new facility until
        the
        facility begins operations.
  F-58
 *Table
            of Contents*
  For
        US
        GAAP reconciliation purposes, deferred amounts related to pre-operating expenses
        incurred in the construction or expansion of a new facility do not meet the
        conditions established for deferral and accordingly have been charged to
        income.
  For
        reconciliation purposes, deferred charges expensed under US GAAP, net of
        amortization effects, amounted to R$ 77.2 in 2006, R$ 100.1 in 2005 and
        R$ 143.9 in 2004.
  (v)
              Business
                  combinations
  Under
        Brazilian GAAP, goodwill arises from the difference between the amount paid
        and
        the Brazilian GAAP book value (normally also the tax basis) of the net assets
        acquired. This goodwill is normally attributed to the difference between
        the
        book value and the market value of assets acquired or justified based on
        expectation of future profitability and is amortized over the remaining useful
        lives of the assets or up to ten years. Negative goodwill arises under Brazilian
        GAAP when the book value of assets acquired exceeds the purchase consideration;
        negative goodwill is not generally amortized but is realized upon disposal
        of
        the investment.
  Under
        US
        GAAP, fair values are assigned to acquired assets and liabilities in business
        combinations, including identifiable assets. Any residual amount is allocated
        to
        goodwill. Under US GAAP goodwill is not amortized but, instead, is assigned
        to
        an entity’s reporting unit and tested for impairment at least annually. The
        differences in relation to Brazilian GAAP arise principally from the measurement
        of the consideration paid under US GAAP using the fair value of shares and
        put
        options issued, and the effects of amortization which are no longer recorded
        for
        US GAAP purposes.
  For
        Brazilian GAAP purposes, the net balance of goodwill at December 31, 2006
        was
        R$ 18,011.2 (R$ 16,744.8 in 2005), which is being amortized to income
        over a period of up to 10 years; negative goodwill at December 31, 2006 was
        R$ 25.0 (R$ 22.6 in 2005). During 2005, the negative goodwill on
        investment in the subsidiary CBB was reclassified to “deferred income”, as a
        result of the merger of the net assets of this subsidiary into
        AmBev.
  For
        US
        GAAP purposes, the net balance of goodwill at December 31, 2006 is
        R$ 16,540.9 (R$ 13,467.7 in 2005). The 2005 balance excludes the
        goodwill arising from the acquisition of Quinsa, which was accounted for
        under
        the equity method until we acquired its control in August 2006.
  During
        2004, as a result of the decision from the Brazilian antitrust authorities
        that
        AmBev must sell its Marathon brand, we recorded an impairment provision totaling
        R$ 26.1. No impairment charge was recorded in our Brazilian GAAP records.
  F-59
 *Table
            of Contents*
  The
        following significant business combinations have generated differences in
        accounting between Brazilian GAAP and US GAAP:
  2006
              
              2005
              
              2004Differences
                  in net income:The
                  Labatt transaction:US
                  GAAP adjustments other than those related to purchase accounting,
                  net
                  after tax
              
              
              (56.5
              )
              
              139.0
              
              
              58.1Depreciation
                  of purchase accounting adjustmentsallocated
                  to tangible and intangible assets acquired
              
              
              (57.5
              )
              
              (63.1
              )
              
              (23.5
              )Employee
                  future benefits
              
              
              86.7
              
              
              44.2
              
              
              26.5Income
                  tax effect on purchase accounting adjustments
              
              
              (9.9
              )
              
              6.4
              
              
              (1.0
              )Goodwill
                  adjustments
              
              
              969.8
              
              
              923.5
              
              
              405.0Cumulative
                  translation adjustment
              
              
              (160.3
              )
              
              (164.5
              )
              
              (75.3
              )772.3
              
              
              885.5
              
              
              389.8The
                  Quinsa transaction:US
                  GAAP adjustments other than those related to purchase accounting,
                  net
                  after tax
              
              
              54.4
              
              
              45.5
              
              
              (11.1
              )Depreciation
                  of purchase accounting adjustmentsallocated
                  to tangible and intangible assets acquired
              
              
              (35.1
              )
              
              (29.8
              )
              
              (57.9
              )Fair
                  value adjustment of put option
              
              
              -
              
              
              (209.2
              )
              
              (97.0
              )Income
                  tax effect on purchase accounting adjustments
              
              
              11.9
              
              
              81.3
              
              
              43.4Goodwill
                  adjustments
              
              
              200.5
              
              
              168.9
              
              
              268.5Cumulative
                  translation adjustment
              
              
              74.3
              
              
              97.0
              
              
              76.6306.0
              
              
              153.7
              
              
              222.5The
                  Antarctica transaction:Amortization
                  of goodwill
              
              
              -
              
              
              35.3
              
              
              84.7Amortization
                  of goodwill allocated to tangible assets and deferred
                  charges
              
              
              84.0
              
              
              49.4
              
              
              -Depreciation
                  of purchase price adjustments
              
              
              19.2
              
              
              19.2
              
              
              19.2Amortization/write-off
                  of US GAAP intangibles
              
              
              (9.4
              )
              
              (10.2
              )
              
              (11.9
              )93.8
              
              
              93.7
              
              
              92.0Other
                  acquisitions (principally reversal of amortization)
              
              
              55.1
              
              
              30.8
              
              
              21.7Business
                  combinations adjustments (Note 23 b(i))
              
              
              1,227.2
              
              
              1,163.7
              
              
              726.0Differences
                  in shareholders’ equity:The
                  Labatt transaction:US
                  GAAP adjustments other than those related to purchase
                  accounting, net after tax
              
              
              2,090.8
              
              
              2,405.2
              
              
              2,624.5Goodwill
                  adjustments
              
              
              (4,024.9
              )
              
              (5,248.5
              )
              
              (5,950.0
              )Fair
                  value adjustments of tangible and intangible assets
              
              
              4,861.0
              
              
              5,405.2
              
              
              5,603.2Employee
                  future benefits
              
              
              (17.9
              )
              
              (229.2
              )
              
              (277.5
              )Cumulative
                  translation adjustments
              
              
              (47.0
              )
              
              (54.0
              )
              
              (306.7
              )Income
                  tax effect on adjustments
              
              
              (1,623.7
              )
              
              (1,734.6
              )
              
              (1,784.0
              )1,238.3
              
              
              544.1
              
              
              (90.5
              )
  F-60
 *Table
            of Contents*
  2006
              
              2005
              
              2004The
                  Quinsa transaction:Fair
                  value adjustment of tangible and intangible assets
              
              
              110.4
              
              
              (85.9
              )
              
              20.6Fair
                  value adjustment of put option
              
              
              (441.4
              )
              
              (441.4
              )
              
              (232.2
              )Income
                  tax effect on adjustment
              
              
              (135.7
              )
              
              29.1
              
              
              (42.8
              )Goodwill
                  adjustment
              
              
              757.0
              
              
              556.6
              
              
              244.0Cumulative
                  translation adjustment
              
              
              32.2
              
              
              11.5
              
              
              12.2322.5
              
              
              69.9
              
              
              1.8The
                  Antarctica transaction:Goodwill
              
              
              28.6
              
              
              28.6
              
              
              (355.4
              )Fair
                  value of tangible and intangible assets
              
              
              (81.2
              )
              
              (174.8
              )
              
              115.5(52.6
              )
              
              (146.2
              )
              
              (239.9
              )Roll-up
                  of Brahma minority shareholders
              
              
              149.9
              
              
              149.9
              
              
              149.9Other
                  acquisitions
              
              
              127.6
              
              
              72.4
              
              
              41.6277.5
              
              
              222.3
              
              
              191.5Business
                  combinations adjustments (Note 23 b(ii))
              
              
              1,785.7
              
              
              690.1
              
              
              (137.1
              )
   ·
              The
                  Labatt transaction
  *Description
        of the transaction*
  As
        described in Note 1, on March 3, 2004, AmBev entered into an agreement through
        which an indirect holding company of Labatt was merged into AmBev. AmBev
        issued
        to InBev, the former owner of Labatt, approximately 7.9 billion AmBev common
        shares and 11.4 billion AmBev preferred shares.
  On
        August
        27, 2004, with the completion of these transactions, Labatt became a
        wholly-owned subsidiary of AmBev;
  *Brazilian
        GAAP accounting treatment*
  Under
        Brazilian GAAP, the incorporation of Labatt was accounted for as a pooling
        of
        interest. AmBev incorporated a holding company, Labatt ApS at fair value.
        The
        only significant asset of Labatt ApS was its investment in Labatt
        Canada.
  For
        Brazilian GAAP purposes, AmBev issued shares in an amount equivalent to the
        fair
        value of Labatt ApS. Goodwill arising from the acquisition of Labatt totaled
        R$
        16,383.3 at August 27, 2004.
  F-61
 *Table
            of Contents*
  *US
        GAAP accounting treatment*
  The
        AmBev-Labatt transaction constitutes a business combination as defined in
        SFAS
        141, Business
        Combinations (SFAS
        141). In accordance with SFAS 141, we were required to identify the acquiring
        entity, AmBev or Labatt, in order to apply the purchase method of accounting
        to
        the other entity. Paragraph 17 of SFAS 141 lists specific criteria that should
        be considered in determining the acquiring entity; all facts and circumstances
        are to be considered, with no one criterion determinative.
 
  The
        paragraph 17 criteria relevant to our identification of the acquiring entity
        were: (1) which group of former owners retained or acquired the larger portion
        of the voting rights in the combined entity (with consideration given to
        the
        existence of any unusual or special voting arrangements), (2) which group
        of
        owners has the ability to elect or appoint a voting majority of the governing
        body of the combined entity, (3) which entity’s senior management dominates the
        combined entity, and (4) which entity paid a premium over market value for
        the
        securities of the other entity. AmBev must identify the acquiring entity
        through
        an analysis of the specified factors under paragraph 17. The Company ́s analysis
        of the relevant factors follows:
  (i)  InBev,
        the former shareholder of Labatt, acquired a majority of the voting interest
        in
        AmBev. However, two special voting arrangements exist. First, the Braco Group,
        comprised of former shareholders of AmBev before the transaction (Messrs.
        Lemann, Telles and Sicupira), became an interest holder in the Stichting
        and a
        party to the InBev Shareholders’ Agreement with the Interbrew Founding Families.
        Under this agreement, both the Braco Group and the Interbrew Founding Families
        have equal influence over the activities of the Stichting, which controls
        the
        manner in which InBev’s majority voting interest in AmBev is voted. Each of the
        Braco Group and the Interbrew Founding Families is entitled to appoint four
        members to the Stichting board of directors and four members to InBev’s board of
        directors (with the four to six remaining members of InBev’s board of directors
        being independent directors). Any action of the Stichting board of directors
        requires the affirmative vote of a majority of the directors present, including
        at least two directors appointed by the Braco Group and two directors appointed
        by the Interbrew Founding Families. All matters submitted to the approval
        of
        InBev's board of directors (including the appointment of AmBev board members)
        will be decided by a simple majority of the board. However, if during a board
        meeting it becomes apparent that the non-independent directors are deadlocked
        with respect to such matters, such non-independent directors will meet
        separately to try and reach a consensus. If consensus is not reached, then
        an
        alternating casting vote mechanism comes into play, and the Braco Group and
        the
        Interbrew Founding Families should flip a coin to determine which group of
        non-independent directors should cast the first casting vote.
  F-62
 *Table
            of Contents*
  As
        a
        result of the above, the Company believes that the former shareholders of
        both
        AmBev and Labatt have similar influence on the voting of the majority interest
        of InBev in AmBev. Therefore, notwithstanding the majority voting interest
        held
        by InBev, the rights conveyed by the InBev Shareholders’ Agreement to former
        AmBev shareholders would suggest that voting rights are a neutral indicator.
        However, we also considered certain approval rights under the AmBev
        Shareholders’ Agreement held by the FAHZ, an AmBev shareholder before the
        transaction. These rights are relevant in assessing the ability of former
        AmBev
        shareholders to influence the governance of AmBev after the transaction.
        The
        most important of these approval rights relate to the designation, dismissal
        and
        substitution of the Co-Chief Executive Officers, as well as approval of or
        amendment to the compensation policy for AmBev’s board of executive officers,
        including the Co-Chief Executive Officers. On the whole, the Company concluded
        that the rights conveyed by the AmBev Shareholders’ Agreement to the FAHZ point
        toward AmBev as the accounting acquirer.
  (ii)  InBev
        has
        the ability to appoint the majority of the members of our Board of Directors.
        However, through the Stichting and the InBev Shareholders’ Agreement, the Braco
        Group, former AmBev shareholders, share joint and equal influence with the
        Interbrew Founding Families, former Labatt shareholders, with respect to
        shares
        owned by InBev that comprise the majority voting interest in AmBev.
  In
        addition, FAHZ, an AmBev shareholder prior to the transaction, has the right
        to
        appoint up to four directors to our board. Accordingly, as of the latest
        general
        shareholders’ meeting held on April 12, 2005, InBev appointed eight directors to
        our board (six permanent members and two alternates) and FAHZ appointed three
        directors, in all cases for a three year term expiring in 2008. However,
        9 of
        the 11 board members had previous affiliations with AmBev or FAHZ prior to
        the
        AmBev-Labatt transaction (including Messrs. Lemann, Telles and Sicupira),
        and
        two were previously affiliated with Interbrew. In addition, on March 7, 2006
        one
        board member with previous affiliation with Interbrew resigned and was
        substituted by the Chief Executive Officer of InBev, who was the Chief Executive
        Officer of AmBev prior to the AmBev-Labatt transaction. Similar proportions
        existed on the board of directors immediately after the AmBev-Labatt
        transaction. This criterion indicates that AmBev is the accounting acquirer.
  (v)  The
        third
        criterion indicates AmBev is the accounting acquirer because the senior
        management of AmBev subsequent to the transaction is substantially the same
        as
        that of AmBev prior to the transactions. As mentioned above, 10 of our 11
        board
        members have previous affiliations with AmBev or FAHZ prior to the AmBev-Labatt
        transaction. In addition, 9 of 11 members of our senior executive management
        were affiliated with AmBev prior to the AmBev-Labatt transactions.
  (vi)  A
        premium
        was paid to the former shareholders of AmBev as measured by the fair value
        of
        the AmBev shares prior to the transaction compared to the consideration
        received. This criterion indicates that Labatt is the accounting
        acquirer.
  Based
        on
        consideration of each of the various factors, the Company concluded that
        the
        preponderance of the evidence indicates that AmBev was the accounting acquirer
        of Labatt.
  F-63
 *Table
            of Contents*
  The
        purchase consideration of R$ 14,243.8 was determined based on the fair
        value of the shares issued by AmBev at March 3, 2004 which was considered
        to be
        the measurement date for this transaction.
  Goodwill
        arising from the acquisition of Labatt under US GAAP totaled
  R$ 12,950.5
        and will be tested for impairment on an annual basis or whenever events or
        circumstances indicates that a goodwill impairment test is
        necessary.
  The
        following fair value adjustments were made to the US GAAP book value of Labatt’s
        net assets:
  August 27,2004Book
                  value of our interest in Labatt
              
              
              477.7Allocation
                  of fair value:Property,
                  plant and equipment
              
              
              372.7Contractual
                  agreements
              
              
              3,367.0Trademarks
              
              
              1,887.1Contingencies
                  to be reimbursed by InBev
              
              
              275.4Pension
                  and other post-retirement benefits
              
              
              (382.7
              )Reversal
                  of goodwill from previous acquisitions
              
              
              (2,920.9
              )Deferred
                  tax effect on fair value adjustments
              
              
              (1,783.0
              )Fair
                  value of investment in Labatt
              
              
              1,293.3Total
                  purchase consideration
              
              
              14,243.8Fair
                  value of subsidiary acquired
              
              
              1,293.3Goodwill
              
              
              12,950.5
  Registered
        trademarks are not subject to amortization. Contractual agreements are amortized
        over their maturity date., primarily 100 years.
  The
        following summary presents the Company’s unaudited pro forma consolidated
        results of operations for the years ended December 31, 2004, in accordance
        with
        accounting principles generally accepted in the United States, as if the
        Labatt
        acquisition had been completed at the beginning of that period.
   F-64
 *Table
            of Contents*
  The
        pro
        forma information is presented for comparative purposes only and does not
        purport to be indicative of what would have occurred had the acquisition
        actually been made at such date, nor is it necessarily indicative of future
        operating results:
  2004(Unaudited)Net
                  sales
              
              
              12,380.5Operating
                  income
              
              
              3,605.4Net
                  income
              
              
              1,761.8Net
                  earnings per thousand AmBev shares (R$):Basic:Common
              
              
              35.37Preferred
              
              
              38.90Diluted:Common
              
              
              35.17Preferred
              
              
              38.69
   ·
              The
                  Quinsa transaction
  The
        acquisition of Quinsa happened in a “two step transaction”. First, in January
        2003, consideration paid to BAC of R$ 1,950.2 was comprised of: (i) cash
        paid totaling R$ 1,672.7; (ii) the fair value of our assets contributed to
        Quinsa of R$ 191.5 ; (iii) the fair value of the put option granted to BAC
        of R$ 69.0; and (iv) other costs associated to the acquisition totaling
        R$ 17.0. The fair value of the net assets acquired included R$ 830.9
        in Quinsa’s net assets and the fair value of the call option received from BAC
        of R$ 68.1, resulting in goodwill of R$ 1,051.2. In addition, during
        2004 and 2005 Quinsa repurchased some of its own shares, thus increasing
        our
        economic interest in Quinsa from 49.66% to 59.77%. Under US GAAP, these
        repurchases were accounted for using the purchase method.
  Second,
        on April 8, 2006, as part of an integrated transaction (already established
        in
        the 2003 agreement (Note 1)), AmBev acquired the remaining shares of BAC
        in
        Quinsa and as a result, the control of its operations for a total amount
        of
        R$2,738.3 equivalent to US$1.25 billion. With the closing of the operation,
        AmBev’s interest in Quinsa’s capital increased from 59.77% to
        91.18%.
  Under
        Brazilian GAAP, the acquisitions of interest in Quinsa in 2003 and 2006
        generated goodwill of R$ 1,029.9 and R$ 2,331.1, respectively, arising from
        the difference between total consideration paid and the book value of net
        assets
        acquired, which were attributed to expected future profitability, to be
        amortized over ten years.
  Under
        US
        GAAP, we accounted for these transactions as they were independent, and in
        each
        case we compared the total purchase consideration with the fair value of
        net
        assets acquired, measuring the fair value for the net assets of Quinsa at
        each
        acquisition date for the respective interest acquired.
  F-65
 *Table
            of Contents*
  We
        reviewed our purchase accounting of Quinsa during 2004, and, as a result,
        our
        goodwill was increased by R$ 92.2. The measurement date of January 31, 2003
        was used for purposes of determining the fair value of assets contributed.
  In
        2006,
        consideration paid to BAC was R$ 2,738.3 (Note 1). The fair value of the
        net assets acquired were R$ 686.6. As part of the 2006 acquisition, the
        amounts of the put and call options and the related tax impact, for a total
        net
        amount R$ (291.4) were included in the determination of goodwill, which totaled
        R$1,742.8.
  The
        following fair value adjustments were made to the US GAAP book value of Quinsa’s
        net assets:
  August
                  1,
              
              January 31,2006
              
              2003Book
                  value of our interest in Quinsa
              
              
              269.1
              
              
              585.1Allocation
                  of fair value:Property,
                  plant and equipment
              
              
              247.9
              
              
              536.2Trademarks
              
              
              449.1
              
              
              153.6Reversal
                  of goodwill from previous acquisitions
              
              
              (48.6
              )
              
              (317.4
              )Deferred
                  tax effect on fair value adjustments
              
              
              (230.9
              )
              
              (126.6
              )Fair
                  value of investment in Quinsa
              
              
              686.6
              
              
              830.9Purchase
                  consideration
              
              
              2,738.3
              
              
              1,881.2Fair
                  value of put option
              
              
              (509.5
              )
              
              69.0Fair
                  value of call option
              
              
              68.1
              
              
              (68.1
              )Deferred
                  tax asset on the put and call options
              
              
              150.0
              
              
              -Total
                  purchase consideration
              
              
              2,446.9
              
              
              1,882.1Fair
                  value of subsidiary acquired
              
              
              686.6
              
              
              830.9Goodwill
              
              
              1,760.3
              
              
              1,051.2
  The
        put
        option granted in 2003 was recognized at fair value in our balance sheet
        as a
        non-current liability with changes in fair value, totaling R$ 509.5 in 2005
        and R$ 300.3 in 2004, recognized in income as Financial expenses under US
        GAAP. The call option is recorded at cost and was tested for impairment at
        each
        year end. The put and call option totaled R$ 509.5 and R$ 68.1 at December
        31,
        2005, respectively.
  Consistent
        with Accounting Principles Board Opinion No. 18, *The
        Equity Method of Accounting for Investment in Common Stock* ,
        the
        carrying value of our investments in Quinsa was tested for impairment by
        comparing it to the December 31, 2005 market value of Quinsa’s ADRs. No
        impairment charge was recognized.
  F-66
 *Table
            of Contents*
  AmBev
        has
        fully consolidated Quinsa beginning August 1, 2006. The results from January
        1 st ,
        through
        July 31, 2006 have been presented in our income statement as earnings from
        investees accounted for under the equity method.
  The
        Antarctica transaction
  Under
        Brazilian GAAP, the transaction was treated as a merger (similar to a
        pooling-of-interest under US GAAP) whereby the controlling shareholders of
        Brahma and Antarctica each contributed their shares at the Brazilian GAAP
        book
        values of their corresponding net assets.
  Under
        Brazilian GAAP, the net assets of Antarctica were adjusted to be consistent
        with
        the accounting principles of Brahma, resulting in goodwill on the combination
        of
        R$ 815.6. This goodwill was attributed to property, plant and equipment
        (R$ 144.6) and future profitability (R$ 671.0) and will be amortized
        over the useful lives of the property, plant and equipment, and in the case
        of
        future profitability, over 10 years.
  Under
        US
        GAAP, the combination of Brahma and Antarctica was accounted for using the
        purchase method as defined by U.S. Accounting Principles Board Opinion (APB)
        No. 16, Business Combinations, in which Brahma was the accounting
        acquirer.
  The
        excess purchase price was allocated based on independent fair value appraisals
        to complement tangible assets (US$ 130.1 million) and the remainder to
        trademarks, distribution networks, software and others. The fair value allocated
        to tangible assets is being depreciated over an estimated average useful
        life of
        ten years, the fair value allocated to trademarks is being depreciated over
        40
        years, the distribution network over 30 years and the software over five
        years.
  During
        2005, the Company merged the net assets of its subsidiary CBB at book value
        as
        mentioned in note 1 (b) (ii). As a result, the goodwill originally recorded
        at
        AmBev for Brazilian GAAP, attributed to property, plant and equipment fair
        value
        excess and expectation of future profitability was allocated to tangible
        and
        intangible assets, respectively. As a result, there was a reclassification
        of
        the amortization adjustment from goodwill to tangible and deferred
        charges.
  ·
              Roll-up
                  of Brahma minorities
  At
        Brahma’s Extraordinary Shareholders’ meeting on September 14, 2000, Brahma’s
        common shareholders approved the combination by which all outstanding shares
        of
        Brahma not yet exchanged for AmBev shares were converted (rolled up) into
        shares
        of the same type and class of AmBev.
  The
        adjustment of R$ 149.9 to shareholders’ equity for all periods presented
        relates to the reversal of the negative goodwill under Brazilian
        GAAP.
  F-67
 *Table
            of Contents*
  ·
              Other acquisitions
  Under
        Brazilian GAAP we acquired Embodom during 2004 with goodwill of R$ 214.5,
        based on future profitability, to be amortized over ten years.
  As
        mentioned in Note 1 (iv), during 2005 the goodwill balance was reduced by
        R$
        17.7 due to the recalculation of accumulated depreciation and by the amount
        of
        R$ 13.6 as a result of the sale by Embodom of the Red Rock soft
        drink.
  Under
        US
        GAAP, as adjustment of depreciation **** mentioned
        in the preceding paragraph was recorded in a period over one year, this amount
        was recorded directly in income.
  Under
        Brazilian GAAP we acquired Cervesursa in 2003 with a negative goodwill of
        R$ 18.5, based on expectations of future losses, to be amortized over ten
        years.
  Under
        US
        GAAP, we recorded a write-off of Cervesursa’s property and equipment in the
        amount of R$ 18.5.
  A
        number
        of acquisitions in prior years were treated differently under Brazilian GAAP
        compared to US GAAP. These differences arose primarily from bases for
        determining purchase considerations, fair values, allocation of excess purchase
        prices, goodwill, amortization periods and cases of step-acquisition
        accounting.
  For
        US
        GAAP reconciliation purposes, additional credits of R$ 55.2 were recognized
        in income under US GAAP in the year ended December 31, 2006 (R$ 30.8 in
        2005 and R$ 21.8 in 2004).
  (vi)  FAHZ
        net
        assets
  FAHZ
        is a
        legally distinct entity for statutory purposes in Brazil. Under Brazilian
        GAAP,
        AmBev does not include the assets of FAHZ in its financial
        statements.
  For
        US
        GAAP purposes, the net assets of FAHZ, excluding the actuarial liability
        detailed below (see item vii), and its operating expenses, are included in
        the
        determination of shareholders’ equity and net income under US GAAP of AmBev
        because such assets are not considered to be plan assets as defined by SFAS
        No. 106, *Employers’
        Accounting for Post-retirement Benefits Other than Pensions* since
        they are not segregated and restricted between active and retired employees.
        The
        cash and cash equivalents of the FAHZ are presented as Restricted cash in
        the US
        GAAP condensed consolidated balance sheet. A substantial portion of the assets
        is represented by shares in AmBev and has been reflected as treasury shares,
        thereby reducing the number of outstanding shares and affecting the
        determination of earnings per share.
  F-68
 *Table
            of Contents*
  The
        net
        assets and results of operations, after elimination adjustments of FAHZ as
        of
        and for the years ended December 31, 2006, 2005 and 2004 are as
        follows:
  2006
              
              2005
              
              2004Current
                  assets:Restricted
                  cash
              
              
              247.9
              
              
              239.8
              
              
              271.4Other
              
              
              8.5
              
              
              8.0
              
              
              13.1Property
                  and equipment
              
              
              110.6
              
              
              101.3
              
              
              87.1Other
                  assets
              
              
              2.6
              
              
              2.3
              
              
              2.3Current
                  liabilities
              
              
              (0.7
              )
              
              (3.1
              )
              
              (8.2
              )Non-current
                  liabilities
              
              
              (23.1
              )
              
              (55.4
              )
              
              (32.1
              )Net
                  assets
              
              
              345.8
              
              
              292.9
              
              
              333.6Operating
                  expenses
              
              
              (105.0
              )
              
              (98.8
              )
              
              (92.5
              )Loss
                  from operations
              
              
              (85.3
              )
              
              (54.4
              )
              
              (84.0
              )Net
                  loss
              
              
              (19.7
              )
              
              (44.4
              )
              
              (34.0
              )
  (vii)  Pension
        and other post-retirement benefits
  In
        determining the pension and other post-retirement benefit obligations for
        Brazilian GAAP purposes, NPC No. 26 became effective for financial
        statements ended December 31, 2001. As permitted by the Standard, the
        transitional gain or loss (being the difference between the plan net assets
        and
        the projected benefit obligation - PBO) at that date was fully recognized
        as a
        direct credit to retained earnings.
 Under
          US
          GAAP, on December 31, 2006 the Company adopted the recognition and disclosure
          provision of SFAS No. 158, *Employer’s
          Accounting for Defined Benefit Plans and Other Post Retirement Benefits
          - an
          amendment of SFAS No. 87, 88, 106 and 132(R).* Under
          SFAS No. 158 the Company recognized the funded status of each of its defined
          pension and post-retirement benefit plans as an asset or liability in its
          balance sheet with a corresponding adjustment to other accumulated comprehensive
          income, net of tax.
  The
          adjustment to accumulated other comprehensive income at adoption represents
          the
          net unrecognized actuarial losses, unrecognized prior service cost and
          unrecognized transition obligation remaining from the initial adoption
          of SFAS
          No. 87 and SFAS No. 106, all of which were previously netted against the
          plans
          funded status in the Company’s condensed statement of financial position
          pursuant to the Company’s to the provisions of SFAS No. 87 and SFAS No. 106.
          These amounts will be subsequently recognized as net periodic pension cost
          pursuant to the Company’s historical accounting policy for amortizing such
          amounts. Further, actuarial gains and losses that arise in subsequent periods
          and are not recognized as net periodic pension cost in the same period
          will be
          recognized as a component of other comprehensive income.
  The
          net
          effect of the adoption of SFAS No. 158 on accumulated other comprehensive
          income
          was R$ 194.2, net of taxes.
  Under
        Brazilian GAAP, the Company does not record the liability related to medical,
        dental, educational and social assistance provided by FAHZ, as they are
        considered legally separate entities and under current welfare foundation
        regulation, the surplus of assets over liabilities of FAHZ at December 31,
        2006
        cannot be returned to the Company. Under US GAAP those liabilities are recorded
        as post-retirement benefits. FAHZ provides such benefits to current and retired
        employees of AmBev in Brazil and their beneficiaries and covered dependents
        (approximately 53,300 beneficiaries and dependents at December 31, 2006 and
        47,800 in 2005).
  F-69
 *Table
            of Contents*
  Plan
        assets of AmBev’s Pension Plan in Brazil include amounts contributed by AmBev
        and its employees and amounts earned from investing the contributions, less
        benefits paid. Based on the actuarial review of the defined benefit plan
        which
        had been closed to new participants, net assets at December 31, 2006 were
        considered to be in excess of that required to meet the projected benefit
        obligation. Although AmBev will reduce future employer contributions to the
        minimum permitted by law, Brazilian pension regulations currently provide
        no
        means for returning this surplus to the sponsor. In view of this uncertainty,
        AmBev included in the actuarial determination of the pension obligation at
        December 31, 2006 a valuation allowance of R$ 302.4 against the plan assets
        (R$ 240.2 in 2005). This allowance impacts the determination of the pension
        charge/benefit.
  Under
        US
        GAAP, as confirmed by a meeting of the AICPA International Practices Task
        Force
        on November 25, 2002, recording a valuation allowance against a pension asset
        is
        not appropriate. Accordingly, the valuation allowance was reversed and included
        in the actuarial gain or loss calculation for purposes of reconciliation
        to US
        GAAP.
  Based
        on
        the report of our independent actuary, the funded status and amounts recorded
        in
        our US GAAP condensed balance sheets and statements of operations as of and
        for
        the years ended December 31, 2006, 2005 and 2004 for our pension and welfare
        obligations to retirees in accordance with SFAS No. 132, *Employer’s
        Disclosures about Pensions and other Post-retirement Benefits* ,
        are as
        follows:
 Pension
                    Benefits
                
                Benefits
                    other than Pension2006
                
                2005
                
                2006
                
                2005Change
                    in benefit obligation:Projected
                    benefit obligation:At
                    beginning of year
                
                
                3,340.5
                
                
                3,188.4
                
                
                812.3
                
                
                707.4Plan
                    participants contribution
                
                
                3.6
                
                
                4.8
                
                
                0.1
                
                
                0.1Service
                    cost
                
                
                44.5
                
                
                43.7
                
                
                12.0
                
                
                8.6Interest
                    cost
                
                
                179.6
                
                
                193.6
                
                
                67.8
                
                
                65.2Net
                    increase in notional account balance
                
                
                0.1.
                
                
                0.1
                
                
                -
                
                
                -Prior
                    service cost
                
                
                -
                
                
                0.2
                
                
                -
                
                
                -Actuarial
                    loss
                
                
                56.9
                
                
                278.5
                
                
                4.4
                
                
                103.4Translation
                    gain
                
                
                (215.7
                )
                
                (244.1
                )
                
                (26.9
                )
                
                (27.5
                )Gross
                    benefits paid
                
                
                (346.0
                )
                
                (184.1
                )
                
                (48.5
                )
                
                (45.6
                )Special
                    termination benefits
                
                
                11.4
                
                
                34.8
                
                
                -
                
                
                -Curtailments
                
                
                (3.0
                )
                
                (7.9
                )
                
                -
                
                
                0.7Amendments
                
                
                16.3
                
                
                32.5
                
                
                (49.4
                )
                
                -Projected
                    benefit obligation at endof
                    year
                
                
                3,088.2
                
                
                3,340.5
                
                
                771.8
                
                
                812.3Accumulated
                    benefit obligation
                
                
                3,024.9
                
                
                2,632.8Change
                    in plan assetsFair
                    value of plan assetsAt
                    beginning of year
                
                
                2,890.4
                
                
                2,750.6
                
                
                -
                
                
                -Actual
                    return on plan assets
                
                
                409.6
                
                
                281.9
                
                
                -
                
                
                -Employer
                    contributions
                
                
                260.6
                
                
                166.3
                
                
                15.8
                
                
                13.6Employee
                    contributions
                
                
                4.4
                
                
                5.6
                
                
                -
                
                
                -Actuarial
                    loss (gain)
                
                
                22.2
                
                
                55.1
                
                
                -
                
                
                -Translation
                    loss
                
                
                (158.6
                )
                
                (184.9
                )
                
                -
                
                
                -Gross
                    benefits paid
                
                
                (346.0
                )
                
                (184.1
                )
                
                (15.8
                )
                
                (13.6
                )Fair
                    value of plan assets at end of year
                
                
                3.082.6
                
                
                2,890.4
                
                
                -
                
                
                -Funded
                    status at end of year
                
                
                (5.6
                )
                
                (450.1
                )
                
                (771.8
                )
                
                (812.3
                )Unrecognized
                    netactuarial
                    (gain) loss
                
                
                -
                
                
                125.6
                
                
                -
                
                
                315.8Unrecognized
                    prior service cost
                
                
                -
                
                
                37.1
                
                
                -
                
                
                -Unrecognized
                    net transition obligation
                
                
                -
                
                
                16.5
                
                
                -
                
                
                11.6Net
                    amount recognized at end of year
                
                
                (5.6
                )
                
                (270.9
                )
                
                (771.8
                )
                
                (484.9
                )Long-term
                
                
                (459.0
                )
                
                (722.6
                )
                
                (771.8
                )
                
                (484.9
                )Prepaid
                    pension asset
                
                
                453.4
                
                
                160.0Intangible
                    assets
                
                
                -
                
                
                30.3
                
                
                -
                
                
                -Other
                  comprehensive income
                
                
                -
                
                
                261.4
                
                
                -
                
                
                -Net
                    amount recognized at end of year
                
                
                (5.6
                )
                
                (270.9
                )
                
                (771.8
                )
                
                (484.9
                )Other
                    comprehensive income
                
                
                33.2
                
                
                -
                
                
                261.1
                
                
                -Total
                    impact on equity
                
                
                (27.6
                )
                
                (270.9
                )
                
                (510.7
                )
                
                (484.9
                )
   F-70
 *Table
            of Contents*
  The
        charge in the statement of operations is comprised as follows:
  Pension
                    benefits
                
                Benefits other than pension2006
                
                2005
                
                2004
                
                2006
                
                2005
                
                2004Components
                    of net periodic benefit cost (NPPC)Service
                    cost
                
                
                44.5
                
                
                43.7
                
                
                20.2
                
                
                12.0
                
                
                8.6
                
                
                2.3Interest
                    cost
                
                
                179.6
                
                
                193.6
                
                
                97.2
                
                
                67.8
                
                
                65.2
                
                
                48.0Expected
                    return on assets
                
                
                (270.1
                )
                
                (250.8
                )
                
                (126.1
                )
                
                -
                
                
                -
                
                
                -Amortization
                    of:Transition
                    obligation (asset)
                
                
                2.2
                
                
                -
                
                
                0.2
                
                
                1.5
                
                
                1.5
                
                
                1.5Prior
                    service cost
                
                
                7.1
                
                
                7.2
                
                
                4.9
                
                
                -
                
                
                -
                
                
                0.1Actuarial
                    (gain) loss
                
                
                (11.1
                )
                
                (8.1
                )
                
                (2.5
                )
                
                13.7
                
                
                7.5
                
                
                11.3Employee
                    contributions
                
                
                (0.8
                )
                
                (0.7
                )
                
                (0.9
                )
                
                -
                
                
                -
                
                
                -Termination
                    benefits
                
                
                11.4
                
                
                34.8
                
                
                41.9
                
                
                -
                
                
                -
                
                
                -Settlement
                
                
                30.7
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Curtailment
                    cost
                
                
                -
                
                
                0.8
                
                
                2.9
                
                
                -
                
                
                0.6
                
                
                -Total
                    net periodic benefit cost (benefit)
                
                
                (6.5
                )
                
                20.5
                
                
                37.8
                
                
                95.0
                
                
                83.4
                
                
                63.2
  F-71
 *Table
            of Contents*
 
  Pension
                  Benefits
              
              Benefits
                  other than Pension2006
              
              2005
              
              2006
              
              2005January
                  1,
              
              
              (270.9
              )
              
              (467.2
              )
              
              (484.9
              )
              
              (473.2
              )NPPC
              
              
              6.5
              
              
              (20.4
              )
              
              (95.0
              )
              
              (83.4
              )Employer
                  contribution
              
              
              260.6
              
              
              166.3
              
              
              48.5
              
              
              45.6Translation
                  Adjustment for the period (CTA)
              
              
              31.3
              
              
              50.4
              
              
              20.7
              
              
              26.1Accumulated
                  Other Comprehensive Income
              
              
              (33.1
              )
              
              -
              
              
              (261.1
              )
              
              -December
                  31,
              
              
              (5.6
              )
              
              (270.9
              )
              
              (771.8
              )
              
              (484.9
              )
 
 The
        adjustment for FAS No. 158 affected our Consolidated balance sheet as
        follows:
 2006Before
                    application of FAS No. 158Prepaid
                    pension cost
                
                
                27.7Other
                    post retirement liabilities
                
                
                (510.7
                )AdjustmentsPrepaid
                    pension cost
                
                
                (33.1
                )Other
                    post retirement liabilities
                
                
                (261.1
                )Deferred
                    tax asset
                
                
                100.0Accumulated
                    other comprehensive income, net of tax
                
                
                194.2After
                    application of FAS No. 158Prepaid
                    pension cost
                
                
                (5.6
                )Other
                    post retirement liabilities
                
                
                (771.8
                )Deferred
                    tax asset
                
                
                100.0Accumulated
                    other comprehensive income, net of tax
                
                
                194.2
  The
        amounts recognized in accumulated other comprehensive income at December
        31,
        2006, as a result of the implementation of SFAS No. 158, are as
        follows:
 Pension
                
                Benefits
                    otherthan
                    pension
                
                Total
                
                Total
                  after
                    taxTransition
                    obligationBeginning
                    of year
                
                
                
                
                
                (11.6
                )
                
                (11.6
                )
                
                (7.7
                )During
                    the year
                
                
                
                
                
                50.3
                
                
                50.3
                
                
                33.2Prior
                    service cost
                
                
                (53.5
                )
                
                
                
                
                (53.5
                )
                
                (35.3
                )Beginning
                    of year
                
                
                9.0
                
                
                
                
                
                9.0
                
                
                5.9During
                    the yearNet
                    actuarial (gain) lossBeginning
                    of year
                
                
                (125.6
                )
                
                (315.8
                )
                
                (441.4
                )
                
                (291.3
                )During
                    the year
                
                
                137.0
                
                
                16.1
                
                
                153.0
                
                
                101.0Accumulated
                    other comprehensive income
                
                
                
                
                
                
                
                
                (294.2
                )
                
                (194.2
                )
   F-72
 *Table
            of Contents*
  Assumed
        health care cost trend rates have a significant effect on the amounts reported
        for the welfare plans. A one-percentage-point change in assumed health care
        cost
        trend rates would have the following effects (all other assumptions have
        been
        held constant):
 
 AmBev
                  and Labatt’s Plans
              
              One-percentage-
                point
                  increase
              
              One-percentage-point
                  decrease2006
              
              2005
              
              2004
              
              2006
              
              2005
              
              2004Sensitivity
                  of retiree welfare resultsOn
                  total service and interest cost components
              
              
              4.6/1.9
              
              
              5.1
                  / 3.6
              
              
              5.2/1.3
              
              
              (3.9)
                  / (1.6
              )
              
              (4.4)
                  / (3.0
              )
              
              (4.4)
                  / (1.0
              )On
                  post-retirement benefit obligation
              
              
              43.1/27.0
              
              
              43.2
                  / 47.9
              
              
              40.0
                  / 12.8
              
              
              (36.6)
                  / (24.3
              )
              
              (36.9)
                  / (41.4
              )
              
              (34.1)
                  / (11.3
              )
 Under
        US
        GAAP, we recognized an additional liability related to other post-retirement
        benefits totaling R$ 877.4 in 2006 and R$ 476.2 in 2005.
  Under
        US
        GAAP we recognized an additional pension plan asset of R$ 476.4 in 2006 and
        R$ 140.0 in 2005.
  AmBev’s
        pension plan weighted-average assets allocation at December 31, 2006, 2005
        and
        2004, by asset category, is as follows:
  Labatt
              
              AmBevQuebec
                  Plan
              
              National
                  and
                salaried
                  Plans2006
              
              2005
              
              2004
              
              2006
              
              2005
              
              2004
              
              2006
              
              2005
              
              2004Fixed
                  income
              
              
              42
              %
              
              40
              %
              
              41
              %
              
              36
              %
              
              35
              %
              
              36
              %
              
              76
              %
              
              78
              %
              
              62
              %Real
                  estate
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5
              %
              
              5
              %
              
              5
              %Equity
                  securities
              
              
              58
              %
              
              60
              %
              
              59
              %
              
              64
              %
              
              65
              %
              
              64
              %
              
              19
              %
              
              17
              %
              
              33
              %Total
              
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %
              
              100
              %
   F-73
 *Table
            of Contents*
  The
        Company’s investment strategy for its pension plan is to maximize the long-term
        rate of return on plan assets within an acceptable level of risk in order
        to
        minimize the cost of providing pension benefits while maintaining adequate
        funding levels. The Company’s practice is to conduct a review of its assets
        allocation strategy every year.
  Included
        within the fair value of the IAPP plan assets as of December 31, 2006 are
        1,919
        thousand of our preferred shares and 9,595 thousand of our common shares
        with a
        total fair value at December 31, 2006 of R$ 11.1 (R$ 8.9 in
        2005).
  F-74
 *Table
            of Contents*
  Assumptions
        applied were as follows:
  (i)  Weighted
        average assumptions to determine benefit obligations for years ended December
        31, 2006, 2005 and 2004:
  AmBev
                  PlansPension benefits
              
              Benefits
                  other
                than
                  pension2006
              
              2005
              
              2004
              
              2006
              
              2005
              
              2004Discount
                  rate
              
              
              10.8
              %
              
              10.8
              %
              
              10.9
              %
              
              10.8
              %
              
              10.8
              %
              
              10.9
              %Projected
                  annual inflation rate
              
              
              4.0
              %
              
              4.1
              %
              
              4.1
              %
              
              4.0
              %
              
              4.1
              %
              
              4.1
              %Rate
                  of compensation increase
              
              
              7.1
              %
              
              7.2
              %
              
              7.3
              %
              
              -
              
              
              -
              
              
              -Health
                  care cost trend on covered charges
              
              
              -
              
              
              -
              
              
              -
              
              
              6.5
              %
              
              7.1
              %
              
              7.3
              %
 
  Labatt
                  PlansPension
                   benefits
              
              Benefits
                  other
                than
                  pension2006
              
              2005
              
              2004
              
              2006
              
              2005
              
              2004Discount
                  rate
              
              
              5.0
              %
              
              5.0
              %
              
              5.7
              %
              
              5
              %
              
              5.0
              %
              
              5.7
              %Projected
                  annual inflation rate
              
              
              2.0
              %
              
              2.0
              %
              
              2.0
              %
              
              2.0
              %
              
              2.0
              %
              
              2.0
              %Rate
                  of compensation increase
              
              
              3.0
              %
              
              3.0
              %
              
              3.0
              %
              
              -
              
              
              -
              
              
              -Health
                  care cost trend on covered charges
              
              
              -
              
              
              -
              
              
              -
              
              
              9.5
              %
              
              9.5
              %
              
              10.0
              %
   F-75
 *Table
            of Contents*
  (ii)
              Weighted
                  average assumptions to determine net periodic benefit cost for
                  years ended
                  December 31, 2006, 2005 and
                  2004:
  AmBevPension benefits
              
              Benefits
                  other
                than
                  pension2006
              
              2005
              
              2004
              
              2006
              
              2005
              
              2004Discount
                  rate
              
              
              10.8
              %
              
              10.8
              %
              
              10.9
              %
              
              10.8
              %
              
              10.8
              %
              
              10.9
              %Projected
                  annual inflation rate
              
              
              4.0
              %
              
              4.1
              %
              
              4.1
              %
              
              4.0
              %
              
              4.1
              %
              
              4.1
              %Expected
                  return long-term rate of return on plan assets (i)
              
              
              13.9
              %
              
              14.9
              %
              
              15.0
              %
              
              -
              
              
              -
              
              
              -Rate
                  of compensation increase
              
              
              7.1
              %
              
              7.2
              %
              
              7.3
              %
              
              -
              
              
              -
              
              
              -Health
                  care cost trend on covered charges
              
              
              -
              
              
              -
              
              
              -
              
              
              6.5
              %
              
              7.2
              %
              
              7.3
              %
 
  F-76
 *Table
            of Contents*
   LabattPension
                   benefits
              
              Benefits
                  other
                than
                  pension2006
              
              2005
              
              2004
              
              2006
              
              2005
              
              2004Discount
                  rate
              
              
              5.0
              %
              
              5.7
              %
              
              6.2
              %
              
              5.0
              %
              
              5.7
              %
              
              6.2
              %Projected
                  annual inflation rate
              
              
              2.0
              %
              
              2.0
              %
              
              2.0
              %
              
              2.0
              %
              
              2.0
              %
              
              2.0
              %Expected
                  return long-term rate of return on plan assets (i)
              
              
              8.0
              %
              
              8.0
              %
              
              8.0
              %
              
              -
              
              
              -
              
              
              -Rate
                  of compensation increase
              
              
              3.0
              %
              
              3.0
              %
              
              3.0
              %
              
              -
              
              
              -
              
              
              -Health
                  care cost trend on covered charges
              
              
              -
              
              
              -
              
              
              -
              
              
              9.5
              %
              
              9.5
              %
              
              10.0
              %
  (i)
              The
                  overall expected long-term rate of return on assets was calculated
                  based
                  on the contractual rates (fixed income and real state) or historical
                  return for equity securities.
  F-77
 *Table
            of Contents*
  Expected
        cash flows:
  Information
        about the expected benefit payments for the Company’s defined benefit plan and
        other post-retirement benefits is as follows:
  AmBev’s
                  PlansBenefitsLabatt’s
              
              Pension
              
              other thanplans
              
              Benefits
              
              pension
              
              Total2007
              
              
              138.3
              
              
              35.9
              
              
              36.4
              
              
              210.62008
              
              
              142.1
              
              
              37.0
              
              
              37.4
              
              
              216.52009
              
              
              146.1
              
              
              38.0
              
              
              38.4
              
              
              222.52010
              
              
              150.0
              
              
              39.0
              
              
              39.3
              
              
              228.32011
              
              
              154.2
              
              
              39.8
              
              
              40.2
              
              
              234.22012-2016
              
              
              853.2
              
              
              212.7
              
              
              210.2
              
              
              1,276.11,583.9
              
              
              402.4
              
              
              401.9
              
              
              2,388.2
 The
        Company’s contributions expected to be paid during the year end December 31,
        2006 is R$ 307.0.
  F-78
 *Table
            of Contents*
  (iii)
              Earnings
                  per share
  Under
        Brazilian GAAP, earnings per share are calculated on the number of shares
        outstanding at the balance sheet date; no information is disclosed on diluted
        earnings per share. Information is disclosed per lot of one thousand shares,
        because generally this is the minimum number of shares that can be traded
        on the
        Brazilian stock exchanges.
  Under
        US
        GAAP, because the preferred and common shareholders have different voting
        and
        liquidation rights, Basic and Diluted earnings per share have been calculated
        using the “two-class” method, pursuant to SFAS No. 128, *Earnings
        per Share which provides computation* ,
        presentation and disclosure requirements for earnings per share. The “two-class”
method is an earnings allocation formula that determines earnings per share
        for
        preferred and common stock according to the dividends to be paid as required
        by
        the Company’s bylaws and participation rights in undistributed earnings. Basic
        earnings per common share are computed by dividing net income by the weighted
        average number of common and preferred shares outstanding during the period.
  The
        table
        below presents the determination of net income available to common and preferred
        shareholders and weighted average common and preferred shares outstanding
        used
        to calculate basic and diluted earnings per share for each of the years
        presented.
  F-79
 *Table
            of Contents*
  The
        inclusion of the net assets of FAHZ has had the effect of reducing the number
        of
        outstanding shares.
  For
        purposes of computing diluted earnings per share, stock granted in the stock
        ownership plan are assumed to be converted into preferred or common shares
        as of
        the date of issuance of the security using the treasury stock
        method.
  Earnings
        per share for the periods ended December 31, 2004 have been calculated giving
        retroactive effect for the share dividend distribution of 1 common share
        for
        each 5 common or preferred shares held which was paid on May 31,
        2005.
  F-80
 *Table
            of Contents*
  Companhia
          de Bebidas das Américas - AmBev
  2006
              
              2005
              
              2004Preferred
              
              Common
              
              Total
              
              Preferred
              
              Common
              
              Total
              
              Preferred
              
              Common
              
              TotalBasic
                  numerator:Actual
                  dividends declared
              
              
              970.7
              
              
              838.2
              
              
              1,808.9
              
              
              1,296.5
              
              
              986.2
              
              
              2,282.7
              
              
              307.9
              
              
              250.4
              
              
              558.3Basic
                  allocated undistributed earnings
              
              
              1,227.7
              
              
              1,060.1
              
              
              2,287.8
              
              
              243.3
              
              
              185.0
              
              
              428.3
              
              
              504.2
              
              
              410.2
              
              
              914.4Allocated
                  net income available for common and preferred shareholders
              
              
              2,198.4
              
              
              1,898.3
              
              
              4,096.7
              
              
              1,539.8
              
              
              1,171.2
              
              
              2,711.0
              
              
              812.1
              
              
              660.6
              
              
              1,472.7Basic
                  denominator (in thousand of shares):Weighted
                  average shares - AmBev
              
              
              30,723,586
              
              
              34,487,060
              
              
              65,210,646
              
              
              30,970,863
              
              
              29,909,181
              
              
              60,880,045
              
              
              25,375,493
              
              
              26,139,315
              
              
              51,514,808Weighted
                  average shares held by FAHZ
              
              
              (90,632
              )
              
              (5,388,952
              )
              
              (5,479,584
              )
              
              (395,898
              )
              
              (4,324,925
              )
              
              (4,720,823
              )
              
              (405,072
              )
              
              (3,794,205
              )
              
              (4,199,277
              )Weighted
                  average outstanding shares, net
              
              
              30,632,954
              
              
              29,098,108
              
              
              59,731,062
              
              
              30,574,965
              
              
              25,584,256
              
              
              56,159,222
              
              
              24,970,421
              
              
              22,345,110
              
              
              47,315,531Basic
                  earnings per thousand shares - US GAAP (*) (whole*reais*)
                  -
                  R$
              
              
              71.76
              
              
              65.24
              
              
              
              
              
              50.36
              
              
              45.78
              
              
              
              
              
              32.52
              
              
              29.56Diluted
                  numerator:Actual
                  dividends declared
              
              
              971.6
              
              
              837.3
              
              
              1,808.9
              
              
              1,298.7
              
              
              984.0
              
              
              2,282.7
              
              
              308.8
              
              
              249.5
              
              
              558.3Diluted
                  allocated undistributed earnings
              
              
              1,228.8
              
              
              1,059.0
              
              
              2,287.8
              
              
              243.7
              
              
              184.6
              
              
              428.3
              
              
              505.7
              
              
              408.7
              
              
              914.4Allocated
                  net income available for common and preferred shareholders
              
              
              2,200.4
              
              
              1,896.2
              
              
              4,096.7
              
              
              1,542.4
              
              
              1,168.6
              
              
              2,711.0
              
              
              814.5
              
              
              658.2
              
              
              1,472.7Diluted
                  denominator:Stock
                  ownership plan
              
              
              80,433
              
              
              16,087
              
              
              96,520
              
              
              124,370
              
              
              -
              
              
              124,370
              
              
              216,156
              
              
              -
              
              
              216,156Diluted
                  weighted average shares (in thousands)
              
              
              30,713,387
              
              
              29,114,195
              
              
              59,827,582
              
              
              30,699,336
              
              
              25,584,256
              
              
              56,283,592
              
              
              25,186,577
              
              
              22,388,341
              
              
              47,574,918Diluted
                  earnings per thousand shares - US GAAP (*) (whole*reais*)
                  -
                  R$
              
              
              71.64
              
              
              65.13
              
              
              
              
              
              50.24
              
              
              45.68
              
              
              
              
              
              32.34
              
              
              29.40
  (*)
              Preferred
                  shareholders are entitled to receive per share dividends of at
                  least 10%
                  greater than the per share dividends paid to common shareholders.
                  Undistributed earnings, therefore, have been allocated to common
                  and
                  preferred shareholders on a 100 to 110 basis, respectively, based
                  upon the
                  weighted average number of shares outstanding during the period
                  to total
                  shares (allocation percentage). Common and preferred shareholders
                  share
                  equally in undistributed losses.
  F-81
 *Table
            of Contents*
  (viii)
              Foreign
                  exchange gain (loss) from translation of foreign
                  subsidiaries
  Under
        Brazilian GAAP, gains or losses arising from the translation of our foreign
        subsidiaries for purposes of consolidation are recorded in income.
  Under
        US
        GAAP, we record these gains or losses directly in our shareholders’ equity as
        cumulative translation adjustments, a component of other comprehensive
        income.
  (ix)
              Income
                  taxes
  Under
        Brazilian GAAP, the deferred income tax asset represents the probable estimated
        amount to be recovered. In addition, deferred income taxes are presented
        gross
        rather than being netted.
  Under
        US
        GAAP, deferred income taxes are recognized on all temporary tax differences.
        Valuation allowances are established when it is not more likely than not
        that
        tax losses will be recovered. Deferred tax assets and liabilities are classified
        as current or long-term based on the classification of the asset or liability
        underlying the temporary difference. Deferred income tax assets and liabilities
        are netted rather than presented gross.
  (x)
              Provision
                  for dividends and interest attributable to own
                  capital
  Under
        Brazilian GAAP, at each year-end, management is required to propose a dividend
        distribution from earnings and accrue for it in the financial statements.
        Under
        Brazilian GAAP, companies are permitted to distribute or capitalize an amount
        of
        interest, subject to certain limitations, calculated based on a government
        interest rate, on shareholders’ equity. Such amounts are tax-deductible and are
        presented as a deduction from shareholders’ equity.
  Under
        US
        GAAP, since proposed dividends may be ratified or modified at the annual
        Shareholders’ Meeting, such dividends should not be considered as declared at
        the balance sheet date and therefore should not be accrued. However, interim
        dividends paid or interest credited to shareholders as interest attributable
        to
        shareholders’ equity under Brazilian legislation should be considered as
        declared for US GAAP purposes.
  At
        December 31, 2006 the provision of R$ 65.0 (R$ 9.8 in 2005) for
        proposed dividends was reversed under US GAAP.
  F-82
 *Table
            of Contents*
  (xi)
              Stock
                  ownership plan
  Under
        Brazilian GAAP, the rights to acquire AmBev’s shares granted to employees,
        officers and directors under the stock ownership plan do not result in any
        expense being recorded. The purchase of the stock by the employees is recorded
        as an increase in capital stock in the amount of the purchase
        price.
  Under
        US
        GAAP, beginning in 2006, the Company adopted SFAS 123(R) - “Share-based
        Payment”.
  As
        the
        strike price of our awards granted until 2004 are indexed to the IGP-M (and
        adjusted by dividends paid), the employee share options have been accounted
        for
        as a liability under the terms of SFAS 123R. The liability-classified awards
        are
        remeasured at fair value at each reporting period until exercised. The fair
        value of these employee share options is estimated using the Black-Scholes
        option-pricing model.
  For
        options granted under the revised Plan (Note 16 (g)), the exercise price
        is no
        longer indexed, and as a result, these options are treated as equity instruments
        and the fair value of the shares under FAS 123R is not revised at each reporting
        date, except to adjust for forfeitures.
  Prior
        to
        the adoption of SFAS 123R, we accounted for our stock option plan for US
        GAAP
        purposes, in accordance with APB 25, *Accounting
        for Stock Issued to Employees* .
        Because
        of the indexation applied to the exercise price, these options were considered
        variable plans and the compensation cost arising from them was remeasured
        at
        each year end.
  We
        have
        adopted the modified prospective approach method to account for the
        implementation of SFAS 123 R which consists of recognizing costs of services
        rendered as from January 1, 2006 according to the grant-data fair value of
        stock
        option instruments, but does not require restatement of previous year financial
        statements. Because fair value of stock awards classified as liabilities
        is
        remeasured each year, the liability-classified awards were measured at fair
        value at January 1 st ,
        2006.
        The assumptions were: Risk-free - 14.57%; Maturity - 10 year; Volatility
        - 30%;
        Dividend yield - 5% and Vesting period - 5 years.
  The
        adoption of SFAS 123R resulted in a loss of R$ 15.1 being recorded as a
        cumulative effect in the change of an accounting principle.
  In
        addition, under US GAAP pro forma disclosures of net income and earnings
        per
        share are presented under the fair value method of accounting. Under this
        method, fair value is determined using a pricing model (Black - Scholes for
        the
        old Plan and Binomial for the revised Plan), which takes into account the
        stock
        price at the grant date, the purchase price, the expected life of the award,
        the
        volatility of the underlying stock, the expected dividends, and the risk-free
        interest rate over the expected life of the award.
  For
        reconciliation purposes, additional charges were recognized under US GAAP
        in the
        amounts of R$ 22.7 in 2006, R$ 85.6 in 2005 and R$ 14.3 in
        2004.
  F-83
 *Table
            of Contents*
  (xii)
              Advances
                  to employees for purchase of shares
  Under
        Brazilian GAAP, advances to employees for purchase of shares are recorded
        as an
        asset and interest accrued is credited to income.
  Under
        US
        GAAP, as the advances are collateralized by the stock issued under the stock
        ownership plan, the loan is reported as a deduction from shareholders’
equity.
  For
        reconciliation purposes, shareholders’ equity is reduced under US GAAP by
        R$ 72.7 in 2006 and R$ 114.9 in 2005.
  (xiii)
              Accounting
                  for derivative instruments
  Under
        Brazilian GAAP, derivative instruments are recorded at the lower of cost
        plus
        accrued interest and fair market value. Additionally, unrealized gains or
        losses
        arising from transactions, which are designated as hedge instruments, entered
        to
        mitigate risks on purchase of raw materials, are deferred and recognized
        in the
        statement of operations when realized.
  Under
        US
        GAAP, SFAS No. 133, *Accounting
        for Derivative Instruments and Hedging Activities* establishes accounting and reporting standards for derivative instruments
        and
        for hedging activities. It requires that an entity recognize all derivatives
        as
        either assets or liabilities and measure those instruments at fair
        value.
  For
        purposes of the reconciliation, we have recorded unrealized gain (losses)
        totaling R$ (9.0) in income under US GAAP, arising from the mark-to-market
        adjustment on our derivative instruments at December 31, 2006 (unrealized
        gain
        of R$ 11.0 in 2005 and unrealized gains (losses) of R$ (199.0) in
        2004).
  (xiv)
              Short-term
                  investments
  Under
        Brazilian GAAP, short-term investments are recorded at the balance sheet
        dates
        at the lower of cost plus interest and market value.
  For
        US
        GAAP purposes, our short-term investments in debt securities are classified
        under guidance of SFAS No.115 *Accounting
        for Certain Investments in Debt and Equity Securities* as
        either trading securities or available for sale securities.
  Our
        securities classified as Trading are measured at fair value at the balance
        sheet
        dates, and unrealized gains (losses) are included in income. During 2006,
        we
        recorded the amount of R$ (2.3).
  F-84
 *Table
            of Contents*
  Our
        securities classified as Available for Sale are measured at fair value at
        the
        balance sheet dates, interest is recorded in income as incurred and unrealized
        gains (losses) are included directly in shareholders’ equity as Other
        comprehensive income (loss). At December 31, 2006, the amount of R$ 2.6 was
        recorded in Other comprehensive income as Unrealized gain from
        available-for-sale debt securities (R$ 17.1 in 2005).
  (xv)  Fiscal
        incentive
  We
        have
        fiscal incentives granted by the Government in certain regions in Brazil
        which
        are accounted directly as a Capital reserve in shareholders’ equity for
        Brazilian GAAP purposes.
  Under
        USGAAP, these government grants are accounted in earnings as either tax on
        sales
        or income tax, depending on their nature. We have recorded R$ 113.6 as fiscal
        incentives in our US GAAP earnings during 2006.
  (xvi)
              Classification
                  of statement of operations line items
  Under
        Brazilian GAAP, in addition to the issues noted above, the classification
        of
        certain income and expense items is presented differently from US GAAP.
  We
        have
        recast our statement of operations under the Brazilian GAAP to present a
        condensed statement of operations in accordance with US GAAP (Note 23(d)(ii)).
  We
        have
        also incorporated the net income (loss) differences between Brazilian GAAP
        and
        US GAAP (Note 23 (b)(i)) in the statement of operations in accordance with
        US
        GAAP. The reclassifications are summarized as follows:
  ·
              Interest
                  income and interest expense, together with other financial charges,
                  are
                  displayed within operating income in the statement of operations
                  presented
                  in accordance with Brazilian GAAP. Such amounts have been reclassified
                  to
                  non-operating income and expenses in the condensed statement of
                  operations
                  in accordance with US GAAP.
 
 ·
              Under
                  Brazilian GAAP, gains and losses on the disposal or impairment
                  of
                  permanent assets are classified as non-operating income (expense).
                  Under
                  US GAAP, gains and losses on the disposal or impairment of property,
                  plant
                  and equipment are classified as an adjustment to operating income.
 
 ·
              Employee
                  profit sharing expenses have been classified after non-operating
                  expenses
                  in the consolidated statement of operations in accordance with
                  Brazilian
                  GAAP. Such amounts have been reclassified to operating expenses
                  in the
                  condensed consolidated statement of operations in accordance with
                  US GAAP.
  ·
              Under
                  Brazilian GAAP, certain credits arising from sales tax are recorded
                  in
                  operating income. Under US GAAP these credits are adjusted against
                  net
                  sales, as sales tax deduction.
  ·
              Under
                  Brazilian GAAP, charges arising from provision for contingencies
                  are
                  presented in a single line item in operating expense. Under US
                  GAAP,
                  provisions for contingencies are recorded in the statement of operations
                  based on the type of contingency.
 F-85
 *Table
              of Contents*
 ·
              Under
                  Brazilian GAAP, jointly controlled entities must be consolidated
                  using the
                  proportionate consolidation method. Proportionate consolidation
                  requires
                  that the share of the assets, liabilities, income and expenses
                  to be
                  combined on a line-by-line basis with similar items in the Company’s
                  financial statements. Under US GAAP, jointly controlled entities
                  are
                  recorded under the equity method. The prorated accounts of our
                  jointly
                  controlled affiliates have not been combined in the US GAAP condensed
                  consolidated balance sheet and statements of operations.
  ·
              Under
                  Brazilian GAAP, shipping and handling costs, representing R$ 570.0,
                  R$ 499.9 and R$ 409.2, for the years ended December 31, 2006,
                  2005 and 2004, respectively, are expensed as incurred and classified
                  as
                  selling expenses in the statement of operations. Under US GAAP,
                  pursuant
                  to the requirements of Emerging Issues Task Force - EITF Issue
                  No. 00-10, these expenses were reclassified to cost of sales.
  ·
              In
                  order to obtain more prominent and accessible shelf space for its
                  products, AmBev pays distributors and retailers to place our products
                  in
                  premium positions. The Company also pays bonuses and gives discounts
                  to
                  increase sales, normally processed in the form of cash payments.
                  Under
                  Brazilian GAAP, these costs are classified as selling and marketing
                  expenses. Under US GAAP, pursuant to EITF 01-09 these costs are
                  reclassified reducing net revenues.
  ·
              Under
                  Brazilian GAAP, unrealized gains or losses arising from foreign
                  currency
                  and commodities swaps entered to mitigate price and foreign exchange
                  risks
                  on purchase of raw material, designated as hedge instruments are
                  deferred
                  and recognized in the statement of operations as Cost of sales
                  upon
                  realization. For US GAAP, as these instruments do not meet the
                  qualifying
                  criteria for hedge accounting under SFAS No. 133 for the years ended
                  December 31, 2004, gains or losses, due to changes in fair value
                  of swaps,
                  were recorded as Financial income or Financial expense. The total
                  amount
                  reclassified were R$ 14.0, for the year ended December 31, 2004.
  (xvii)
              Classification
                  of balance sheet items
  Under
        Brazilian GAAP, the classification of certain balance sheet items is presented
        differently from US GAAP. We have eliminated the effects of the proportionate
        consolidation of our investment in Quinsa and certain other affiliates and
        reflected our investment in these affiliates on a single line item (Investment
        in affiliates) in the recast balance sheet under US GAAP.
  We
        have
        recast our consolidated balance sheet under Brazilian GAAP to present a
        condensed consolidated balance sheet in accordance with US GAAP (Note 23
        (d)(i)). The reclassifications are summarized as follows:
  ·
              Under
                  US GAAP certain deferred charges were reclassified to property,
                  plant and
                  equipment, according to their nature.
  ·
              Under
                  US GAAP certain property, plant and equipment were reclassified
                  to
                  intangible assets, according to their nature.
  F-86
 *Table
            of Contents*
  ·
              Under
                  Brazilian GAAP, deferred income taxes are not netted and assets
                  are shown
                  separately from liabilities. For US GAAP purposes, deferred tax
                  assets and
                  liabilities are netted and classified as current or long-term based
                  on the
                  classification of the underlying temporary difference.
  b)  Reconciliation
        of the differences between Brazilian GAAP and US GAAP
  (i)  Net
        income
  ****
              ****
              Ref. Note
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              23(a)
              
              2006
              
              2005
              
              2004
              ****Net
                  income under Brazilian GAAP
              ****
              ****
              ****
              ****
              ****
              2,806.3
              
              
              1,545.7
              
              
              1,161.5Depreciation
                  of additional indexation of property and equipment from 1995 to
                  1997
              ****
              ****
              (i
              )
              
              (9.8
              )
              
              (16.9
              )
              
              (57.3
              )Reversal
                  of inflation restatement adjustment on foreign
                  subsidiaries
              ****
              ****
              (ii
              )
              
              (3.9
              )
              
              (8.4
              )
              
              (6.2
              )Capitalized
                  interest, net of amortization
              ****
              ****
              (iii
              )
              
              (0.8
              )
              
              (0.7
              )
              
              3.3Deferred
                  charges, net of amortization
              ****
              ****
              (iv
              )
              
              22.8
              
              
              43.9
              
              
              (5.7
              )Business
                  combination adjustments, net after tax
              ****
              ****
              (v
              )
              
              1,227.2
              
              
              1,163.7
              
              
              726.0FAHZ
                  net assets
              ****
              ****
              (vi
              )
              
              (19.7
              )
              
              (44.4
              )
              
              (34.0
              )Pension
                  plan
              ****
              ****
              (vii
              )
              
              68.6
              
              
              48.2
              
              
              25.5Other
                  post-retirement benefits
              ****
              ****
              (vii
              )
              
              (27.1
              )
              
              (21.6
              )
              
              (18.7
              )Foreign
                  exchange gain (loss) from translation of foreign
                  subsidiaries
              ****
              ****
              (viii
              )
              
              30.9
              
              
              60.1
              
              
              (245.2
              )Share
                  based payment
              ****
              ****
              (xi
              )
              
              (62.6
              )
              
              (85.6
              )
              
              (14.3
              )Fair
                  value adjustment on derivative instruments
              ****
              ****
              (xiii
              )
              
              (9.0
              )
              
              11.0
              
              
              (199.0
              )Tax
                  incentive
              ****
              ****
              (xv
              )
              
              113.6
              
              
              57.9
              
              
              -Fair
                  value adjustment on trading securities
              ****
              ****
              (xiv
              )
              
              (2.3
              )
              
              2.6
              
              
              (6.5
              )Realized
                  gains from sale of available-for-sale securities
              ****
              ****
              ****
              ****
              ****
              -
              
              
              -
              
              
              43.7
              ****Minority
                  interest on adjustments above
              ****
              ****
              ****
              ****
              ****
              (2.5
              )
              
              8.7
              
              
              -Deferred
                  income tax on adjustments above
              ****
              ****
              ****
              ****
              ****
              (35.0
              )
              
              (53.2
              )
              
              99.6Net
                  income under US GAAP
              ****
              ****
              ****
              ****
              ****
              4,096.7
              
              
              2,711.0
              
              
              1,472.7
 
 F-87
 *Table
            of Contents*
  (ii)  Shareholders’
        equity
  ****
              Ref. Note23(a)
              
              2006
              
              2005
              
              2004Shareholders’
                  equity under Brazilian GAAP
              
              
              
              
              
              19,268.1
              
              
              19,867.3
              
              
              16,995.9Additional
                  indexation of property and equipment from 1995 to 1997,
                  net
              
              
              (i
              )
              
              36.1
              
              
              45.9
              
              
              62.8Reversal
                  of inflation restatement adjustment on foreign
                  subsidiaries
              
              
              (ii
              )
              
              (25.3
              )
              
              (21.4
              )
              
              (13.0
              )Capitalized
                  interest, net of amortization
              
              
              (iii
              )
              
              9.3
              
              
              10.2
              
              
              10.9Reversal
                  of deferred charges
              
              
              (iv
              )
              
              (77.2
              )
              
              (100.1
              )
              
              (143.9
              )Business
                  combination adjustments
              
              
              (v
              )
              
              1,785.7
              
              
              690.1
              
              
              (137.1
              )FAHZ
                  net assets
              
              
              (vi
              )
              
              345.7
              
              
              292.9
              
              
              333.6Pension
                  plan
              
              
              (vii
              )
              
              436.4
              
              
              140.0
              
              
              91.8Other
                  post-retirement benefits
              
              
              (vii
              )
              
              (372.0
              )
              
              (117.4
              )
              
              (95.8
              )Reversal
                  of dividends not yet declared
              
              
              (x
              )
              
              65.0
              
              
              9.8
              
              
              992.9Advances
                  to employees for purchase of shares
              
              
              (xii
              )
              
              (72.7
              )
              
              (114.9
              )
              
              (175.2
              )Fair
                  value adjustment on derivative instruments
              
              
              (xiii
              )
              
              5.4
              
              
              14.4
              
              
              3.4Unrealized
                  loss on derivative instruments
              
              
              (xiii
              )
              
              (57.2
              )
              
              (34.4
              )
              
              -Unrealized
                  gain on available for sale securities
              
              
              (xv
              )
              
              19.7
              
              
              17.2
              
              
              17.7Share-based
                  payments (FAS 123-R)
              
              
              (xi
              )
              
              (122.4
              )
              
              -
              
              
              -Fair
                  value adjustment on trading securities
              
              
              (xiv
              )
              
              0.3
              
              
              2.6
              
              
              -Minority
                  interest on adjustments above
              
              
              
              
              
              6.1
              
              
              8.7
              
              
              -Deferred
                  income tax on adjustments above
              
              
              
              
              
              (143.3
              )
              
              (109.0
              )
              
              (67.7
              )Shareholders’
                  equity under US GAAP
              
              
              
              
              
              21,107.7
              
              
              20,601.9
              
              
              17,876.3
  c)  US
        GAAP
        supplementary information
  (i)  Property,
        plant and equipment
  2006
              
              2005****
              ****
              ****
              ****
              ****Property,
                  plant and equipment
              
              
              12,268.2
              
              
              9,604.0Accumulated
                  depreciation
              
              
              (6,657.9
              )
              
              (5,408.7
              )Property,
                  plant and equipment, net
              
              
              5,610.3
              
              
              4,195.3
              ****
 
 F-88
 *Table
            of Contents*
  (ii)  Recent
        US
        GAAP accounting pronouncements
  (a)
        In
        February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
        Financial Instruments”. SFAS No. 155 amends FASB Statements No. 133, “Accounting
        for Derivative Instruments and Hedging Activities”, and No. 140, “Accounting for
        Transfers and Servicing of Financial Assets and Extinguishments of Liabilities”.
        SFAS 155 resolves issues addressed in Statement 133 Implementation Issue
        No. D1,
“Application of Statement 133 to Beneficial Interests in Securitized Financial
        Assets.” The main topics are described as follows: (i) Permits fair value
        remeasurement for any hybrid financial instrument that contains an embedded
        derivative that otherwise would require bifurcation; (ii) Clarifies which
        interest-only strips and principal-only strips are not subject to the
        requirements of SFAS No. 133; (iii) Establishes a requirement to evaluate
        interests in securitized financial assets to identify interests that are
        freestanding derivatives or that are hybrid financial instruments that contain
        an embedded derivative requiring bifurcation; (iv) Clarifies that concentrations
        of credit risk in the form of subordination are not embedded derivatives;
        and
        (v) Amends SFAS No. 140 to eliminate the prohibition on a qualifying special
        purpose entity from holding a derivative financial instrument that pertains
        to a
        beneficial interest other than another derivative financial
        instrument.
  This
        Statement is effective for all financial instruments acquired or issued after
        the beginning of an entity’s first fiscal year that begins after September 15,
        2006.
  (b)
        In
        March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
        Assets”. SFAS 156 amends SFAS No. 140, “Accounting for Transfers and Servicing
        of Financial Assets and Extinguishments of Liabilities”, which establishes,
        among other things, the accounting for all separately recognized servicing
        assets and servicing liabilities. SFAS 156 amends Statement 140 to require
        that
        all separately recognized servicing assets and servicing liabilities be
        initially measured at fair value, if practicable.
  SFAS
        156
        permits, but does not require, the subsequent measurement of separately
        recognized servicing assets and servicing liabilities at fair value. An entity
        that uses derivative instruments to mitigate the risks inherent in servicing
        assets and servicing liabilities is required to account for those derivative
        instruments at fair value.
  Under
        this Statement, an entity can elect subsequent fair value measurement to
        account
        for its separately recognized servicing assets and servicing liabilities.
        An
        entity shall adopt this Statement as of the beginning of its first fiscal
        year
        that begins after September 15, 2006. Earlier adoption is permitted in certain
        cases.
  The
        impact of adopting these new rules is dependent on events that could occur
        in
        future periods, and as such, an estimate of the impact cannot be determined
        until the event occurs in future periods.
  (c)
        In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS
        157 defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles (GAAP), and expands disclosures
        about
        fair value measurements.
  F-89
 *Table
            of Contents*
  This
        Statement applies under other accounting pronouncements that require or permit
        fair value measurements, the Board having previously concluded in those
        accounting pronouncements that fair value is the relevant measurement attribute.
        Accordingly, this Statement does not require any new fair value
        measurements.
  According
        to the Board, a single definition of fair value, together with a framework
        for
        measuring fair value, should result in increased consistency and comparability
        in fair value measurements.
  This
        Statement is effective for financial statements issued for fiscal years
        beginning after November 15, 2007.
  (d)
        In
        September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
        Benefit Pension and Other Postretirement Plans an amendment of FASB Statements
        No. 87, 88, 106, and 132(R)”.
  SFAS
        158
        requires an employer to recognize the overfunded or underfunded status of
        a
        defined benefit postretirement plan (other than a multiemployer plan) as
        an
        asset or liability in its statement of financial position and to recognize
        changes in that funded status in the year in which the changes occur through
        comprehensive income of a business entity or changes in unrestricted net
        assets
        of a not-for-profit organization. This Statement also requires an employer
        to
        measure the funded status of a plan as of the date of its year-end statement
        of
        financial position, with limited exceptions.
  This
        Statement requires an employer that is a business entity and sponsors one
        or
        more single-employer defined benefit plans to:
  Recognize
        the funded status of a benefit plan measured as the difference between plan
        assets at fair value (with limited exceptions) and the benefit obligation
        in its
        statement of financial position. For a pension plan, the benefit obligation
        is
        the projected benefit obligation; for any other postretirement benefit plan,
        such as a retiree health care plan, the benefit obligation is the accumulated
        postretirement benefit obligation.
  Recognize
        as a component of other comprehensive income, net of tax, the gains or losses
        and prior service costs or credits that arise during the period but are not
        recognized as components of net periodic benefit cost pursuant.
  Measure
        defined benefit plan assets and obligations as of the date of the employer’s
        fiscal year-end statement of financial position (with limited
        exceptions).
  Disclose
        in the notes to financial statements additional information about certain
        effects on net periodic benefit cost for the next fiscal year that arise
        from
        delayed recognition of the gains or losses, prior service costs or credits,
        and
        transition asset or obligation.
  This
        Statement amends the following Statements: SFAS No. 87 “Employers’ Accounting
        for Pensions”; SFAS No. 88 “Employers’ Accounting for Settlements and
        Curtailments of Defined Benefit Pension Plans and for Termination Benefits”;
        SFAS No. 106 “Employers’ Accounting for Postretirement Benefits Other Than
        Pensions”; and SFAS No. 132 (revised 2003) “Employers’ Disclosures about
        Pensions and Other Postretirement Benefits”.
  F-90
 *Table
            of Contents*
  An
        employer with publicly traded equity securities is required to initially
        recognize the funded status of a defined benefit postretirement plan and
        to
        provide the required disclosures as of the end of the fiscal year ending
        after
        December 15, 2006.
  (e)
        In
        June 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), “Accounting
        for Uncertainty in Income Taxes—an interpretation of FAS 109”. This
        Interpretation clarifies the accounting for uncertainty in income taxes
        recognized in an enterprise’s financial statements in accordance with FASB
        Statement No. 109, “Accounting for Income Taxes”.
  This
        Interpretation prescribes a (more-likely-than-not) recognition threshold
        and
        measurement attribute for the financial statement recognition and measurement
        of
        a tax position taken or expected to be taken in a tax return. This
        Interpretation also provides guidance on derecognition, classification, interest
        and penalties, accounting in interim periods, disclosure, and transition.
        This
        Interpretation does not change the classification requirements for deferred
        taxes. Previously recognized tax positions that no longer meet the
        more-likely-than-not recognition threshold should be derecognized in the
        first
        subsequent financial reporting period in which that threshold is no longer
        met.
        Also, following this Interpretation, the use of a valuation allowance as
        described in Statement 109 is not an appropriate substitute for the
        derecognition of a tax position. However, the requirement to assess the need
        for
        a valuation allowance for deferred tax assets based on the sufficiency of
        future
        taxable income is unchanged by this Interpretation.
  The
        Interpretation is effective for fiscal years beginning after December 15,
        2006
  (f)
          SAB
          No. 108, "Considering the Effects of Prior Year Misstatements When Quantifying
          Misstatements in Current Year Financial Statements" (SAB No. 108). In September
          2006 the SEC issued SAB No. 108, which provides interpretive guidance on
          how the
          effects of the carryover or reversal of prior year misstatements should
          be
          considered in quantifying a current year misstatement. Traditionally, there
          have
          been two widely-recognized approaches for quantifying the effects of financial
          statement misstatements. The income statement approach focuses primarily
          on the
          impact of a misstatement on the income statement--including the reversing
          effect
          of prior year misstatements--but its use can lead to the accumulation of
          misstatements in the balance sheet. The balance sheet approach, on the
          other
          hand, focuses primarily on the effect of correcting the period-end balance
          sheet
          with less emphasis on the reversing effects of prior year errors on the
          income
          statement. The SEC staff believes that registrants should quantify errors
          using
          both a balance sheet and an income statement approach (a "dual approach")
          and
          evaluate whether either approach results in quantifying a misstatement
          that,
          when all relevant quantitative and qualitative factors are considered,
          is
          material.
 
 SAB
          No.
          108 was effective for the Company’s year ending December 31, 2006. SAB No. 108
          permits existing public companies to initially apply its provisions either
          by
          (i) restating prior financial statements as if the "dual approach" had
          always
          been used or (ii), under certain circumstances, recording the cumulative
          effect
          of initially applying the "dual approach" as adjustments to the carrying
          values
          of assets and liabilities as of January 1, 2006 with an offsetting adjustment
          recorded to the opening balance of retained earnings. The adoption of SAB
          No.
          108 did not have any material impact on the Company’s consolidated results of
          operations, cash flows or financial position.
  (g)
          SFAS
          No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities"
          (SFAS No. 159). In February 2007, the FASB issued SFAS No. 159, which permits
          entities to choose to measure many financial instruments and certain other
          items
          at fair value. For the Company, SFAS No. 159 is effective as of January
          1, 2008
          and will have no impact on amounts presented for periods prior to the effective
          date. The Company cannot currently estimate the impact of SFAS No. 159
          on its
          consolidated results of operations, cash flows or financial position and
          has not
          yet determined whether or not it will choose to measure items subject to
          SFAS
          No. 159 at fair value.
  Management
        believes that adoption of these pronouncements will not have a material impact
        on the financial position and results of operations of the Company.
  F-91
 *Table
            of Contents*
  (iv)
              Additional
                  information - stock ownership plan
  2006
              
              2005
              
              2004Range
                  of purchase prices for outstanding awards
              
              
              96.19
                  - 568.65
              
              
              96.19
                  - 568.65
              
              
              70.93
                  - 568.65Weighted
                  average market price per share (based on quoted market value at
                  date of
                  grant) for awards granted during the year
              
              
              1,013.99
              
              
              -
              
              
              670.17Weighted
                  average exercise price of awards granted in the year
              
              
              1,013.99
              
              
              -
              
              
              568.65Weighted
                  average grant-date intrinsic value of awards granted during year
                  (difference between quoted market price and purchase
                  price)
              
              
              -
              
              
              -
              
              
              101.52Weighted
                  average purchase pricesAt
                  beginning of year
              
              
              509.57
              
              
              431.03
              
              
              421.09Granted
              
              
              1,013.99
              
              
              -
              
              
              568.65Exercised
              
              
              528.39
              
              
              380.13
              
              
              289.75Forfeited
              
              
              465.85
              
              
              471.37
              
              
              431.20At
                  end of year
              
              
              642.59
              
              
              509.57
              
              
              431.03
  Outstanding
        and exercisable
  Range
                  of
              
              Number of shares (thousands)
              
              Weighted
                  average
                purchase prices (*)purchase
                  prices (*)
              
              2006
              
              2005
              
              2004
              
              2006
              
              2005
              
              200470.93
                  - 96.18
              
              
              -
              
              
              -
              
              
              9,955
              
              
              -
              
              
              -
              
              
              94.3496.19
                  - 139.24
              
              
              -
              
              
              642
              
              
              5,573
              
              
              -
              
              
              122.97
              
              
              139.24139.25
                  - 196.93
              
              
              708
              
              
              -
              
              
              16,466
              
              
              191.94
              
              
              -
              
              
              184.62196.94
                  - 226.74
              
              
              -
              
              
              13,503
              
              
              79,584
              
              
              -
              
              
              204.03
              
              
              96.12226.75
                  - 477.30
              
              
              3,338
              
              
              -
              
              
              159,123
              
              
              467.14
              
              
              -
              
              
              474.53477.31
                  - 494.87
              
              
              135,781
              
              
              8,584
              
              
              371,335
              
              
              491.16
              
              
              489.03
              
              
              480.13494.88
                  - 568.65
              
              
              29,300
              
              
              342,371
              
              
              9,000
              
              
              508.84
              
              
              522.86
              
              
              568.65568.66
                  - 1,013.99
              
              
              68,351
              
              
              -
              
              
              -
              
              
              1,013.99
              
              
              -
              
              
              -237,478
              
              
              365,100
              
              
              651,036
              
              
              642.59
              
              
              509.57
              
              
              431.03
  (*)  Expressed
        in whole *reais* -
        R$.
  As
        described in Note 1. during 2005 the Company paid a stock dividend to its
        shareholders of one common share for each 5 shares owned (preferred or common).
        As a result, for each one option exercised under Plans granted prior to 2006,
        the Company will issue 0.2 common shares.
  (v)
              Pro
                  forma fair value effects of stock ownership plan
  We
        have
        calculated the pro forma effects on net income and earnings per share of
        accounting for the stock ownership plan in accordance with SFAS No. 123, *Accounting
        for Stock Based Compensation* related
        to options granted under the Company’s stock ownership plans in all periods
        presented prior to the adoption of SFAS No. 123R. Had compensation cost for
        the
        Plan been determined based on the fair value at the grant date in accordance
        with the provisions of SFAS No. 123, our US GAAP net income and earnings
        per thousand shares would have been as follows:
 
 2005
              
              2004Net
                  income - US GAAP
              
              
              2,711.0
              
              
              1,472.7(+)
                  Compensation cost under APB 25
              
              
              85.5
              
              
              14.2(-)
                  Compensation cost under SFAS No. 123
              
              
              (26.5
              )
              
              (27.4
              )Pro-forma
                  net income
              
              
              2,770.0
              
              
              1,459.5Earnings
                  per thousand shares - pro forma
                (whole*reais*)
                  -
                  R$:Basic:Preferred
              
              
              51.46
              
              
              32.23Common
              
              
              46.78
              
              
              29.30Diluted:Preferred
              
              
              51.34
              
              
              32.05Common
              
              
              46.67
              
              
              29.14
  F-92
 *Table
            of Contents*
  These
        pro
        forma results are not necessarily indicative of future amounts.
  During
        2005, no awards were granted. The fair value of each award granted in 2004
        was
        estimated on the date of grant using the Black - Scholes pricing model with
        the
        following weighted average assumptions used for grants : dividend yield -
        3.0%,
        expected volatility - 33%, risk-free interest rate-nominal terms - 18.7%
        and
        expected lives of three years for all periods.
  2005
              
              2004Fair
                  value of awards granted in the year measured using the Black &
                  Scholes pricing model (R$ per thousand shares)
              
              
              -
              
              
              307.7Total
                  fair value of awards granted in the year
              
              
              -
              
              
              2.8
  d)  US
        GAAP
        condensed financial information
  Based
        on
        the reconciling items and discussion above, the AmBev consolidated balance
        sheet, statement of operations, and statement of changes in shareholders’ equity
        under US GAAP have been recast in condensed format as follows:
  F-93
 *Table
            of Contents*
  (i)  Condensed
        balance sheets under US GAAP
  2006
              
              2005AssetsCurrent
                  assets:Cash
                  and cash equivalents
              
              
              1,530.6
              
              
              620.0Restricted
                  cash
              
              
              232.5
              
              
              256.1Short
                  term investments
              
              
              191.5
              
              
              242.7Trade
                  accounts receivable, net
              
              
              1,554.6
              
              
              1,289.3Recoverable
                  tax
              
              
              678.3
              
              
              518.2Inventories
              
              
              1,316.0
              
              
              1,018.9Other
              
              
              1,421.4
              
              
              628.76,924.9
              
              
              4,573.9Investments:Investment
                  in affiliates, including goodwill
              
              
              4.2
              
              
              1,894.4Other
              
              
              71.3
              
              
              146.075.5
              
              
              2,040.4Intangible
                  assetsGoodwill
              
              
              16,540.9
              
              
              13,467.7Other
                  intangible assets
              
              
              5,810.7
              
              
              5,379.422,351.6
              
              
              18,847.1Property,
                  plant and equipment, net
              
              
              5,610.3
              
              
              4,195.3Other
                  assets:Recoverable
                  sales and income tax
              
              
              171.4
              
              
              130.8Deferred
                  income tax
              
              
              3,281.6
              
              
              4,660.5Prepaid
                  pension asset
              
              
              453.4
              
              
              160.0Restricted
                  deposits for legal proceedings
              
              
              409.2
              
              
              480.7Assets
                  held for sale
              
              
              85.5
              
              
              104.2Other
              
              
              368.6
              
              
              254.6Total
                  assets
              
              
              39,732.0
              
              
              35,447.5
  F-94
 *Table
            of Contents*
 
 2006
              
              2005Liabilities
                and shareholders’ equityCurrent
                  liabilities:Suppliers
              
              
              1,411.0
              
              
              1,255.4Taxes
                  on income payable
              
              
              213.8
              
              
              89.8Other
                  taxes payable
              
              
              1,354.8
              
              
              1,162.8Short-term
                  debt
              
              
              1,548.9
              
              
              859.7Current
                  portion of long-term debt
              
              
              475.9
              
              
              211.1Other
              
              
              1,739.9
              
              
              1,114.46,744.3
              
              
              4,693.2Long-term
                  liabilities:Long-term
                  debt
              
              
              5,242.1
              
              
              5,421.7Debentures
              
              
              2,015.1
              
              
              -Accrued
                  liability for contingencies
              
              
              683.5
              
              
              1,151.1Sales
                  tax deferrals
              
              
              405.7
              
              
              352.6Pension
                  and Other Post-retirement benefits
              
              
              1,230.8
              
              
              1,207.5Other
              
              
              2,019.7
              
              
              1,971.311,596.9
              
              
              10,104.2Minority
                  interest
              
              
              283.1
              
              
              48.2Shareholders’
                  equity
              
              
              21,107.7
              
              
              20,601.9Total
                  liabilities and shareholders’ equity
              
              
              39,732.0
              
              
              35,447.5
 
 F-95
 *Table
            of Contents*
  (ii)  Condensed
        statements of operations under US GAAP
  2006
              
              2005
              
              2004Net
                  sales
              
              
              16,945.4
              
              
              14,836.7
              
              
              10,936.7Cost
                  of sales
              
              
              (6,159.6
              )
              
              (5,816.0
              )
              
              (4,796.7
              )Gross
                  profit
              
              
              10,785.8
              
              
              9,020.7
              
              
              6,140.0Operating
                  income (expenses):Selling
                  and marketing
              
              
              (3,093.1
              )
              
              (2,723.5
              )
              
              (1,821.1
              )General
                  and administrative
              
              
              (1,816.2
              )
              
              (1,927.3
              )
              
              (1,304.7
              )Other
                  operating expense, net
              
              
              301.3
              
              
              108.4
              
              
              (157.6
              )6,177.8
              
              
              4,478.3
              
              
              2,856.6Non-operating
                  income (expenses)Financial
                  income (expenses), net
              
              
              (1,006.1
              )
              
              (1,166.0
              )
              
              (961.4
              )Cumulative
                  impact of change in accounting
                policy
                  (FAS 123R)
              
              
              (15.1
              )
              
              -
              
              
              -Other
                  non-operating expense, net
              
              
              (94.5
              )
              
              (183.8
              )
              
              (250.3
              )(1,115.7
              )
              
              (1,349.8
              )
              
              (1,211.7
              )Income
                  before income tax, equity in affiliates and minority
                  interest
              
              
              5,062.1
              
              
              3,128.5
              
              
              1,644.9Income
                  tax benefit (expense):Current
              
              
              (506.1
              )
              
              (691.8
              )
              
              (230.9
              )Deferred
              
              
              (541.6
              )
              
              61.6
              
              
              (20.0
              )(1,047.7
              )
              
              (630.2
              )
              
              (250.9
              )Income
                  before equity in affiliates and minority interest
              
              
              4,014.4
              
              
              2,498.3
              
              
              1,394.0Equity
                  in earnings of affiliates
              
              
              79.6
              
              
              170.8
              
              
              68.1Minority
                  interest
              
              
              2.7
              
              
              41.9
              
              
              10.6Net
                  income
              
              
              4,096.7
              
              
              2,711.0
              
              
              1,472.7
  (iii)  Statement
        of comprehensive income
  Under
        Brazilian GAAP, the concept of comprehensive income is not
        recognized.
  Under
        US
        GAAP, SFAS No. 130, Reporting Comprehensive Income, requires the disclosure
        of comprehensive income. Comprehensive income is comprised of net income
        and
        other comprehensive income that include charges or credits directly to equity
        which are not the result of transactions with owners. For AmBev, the components
        of the comprehensive income are (i) the adjustment related to the gains and
        losses arising on the translation to Brazilian *reais* of the
        financial statements of foreign subsidiaries upon consolidation, and
        (ii) unrealized gains on available for sale securities, net of
        tax.
  F-96
 *Table
            of Contents*
  ****
                2006
                
                2005
                
                2004
                ********
                ****
                ****
                ****
                ****
                ****
                ****
                ****Net
                    income
                
                
                4,096.7
                
                
                2,711.0
                
                
                1,472.7Unrealized
                    gains on available for sale securities, net of tax
                
                
                3.4
                
                
                (0.3
                )
                
                (17.2
                )Unrealized
                    loss on derivative instruments, net of tax
                
                
                41.0
                
                
                (22.8
                )
                
                -Additional
                    minimum pension liability, net of tax
                
                
                36.1Foreign
                    exchange gain (loss) from translation of foreign
                    subsidiaries
                
                
                (187.4
                )
                
                (396.5
                )
                
                (102.2
                )Other
                    comprehensive income
                
                
                (106.9
                )
                
                (419.6
                )
                
                (119.4
                )Comprehensive
                    income
                
                
                3,989.8
                
                
                2,291.4
                
                
                1,353.3
  (iv)  Condensed
        statement of changes in shareholders’ equity under US GAAP
  2006
              
              2005
              
              2004At
                  beginning of the year
              
              
              20,601.8
              
              
              17,876.3
              
              
              4,382.9Capital
                  increase
              
              
              24.7
              
              
              1,920.7
              
              
              14,261.8Treasury
                  shares acquired
              
              
              (1,689.8
              )
              
              (515.2
              )
              
              (1,639.6
              )Transfer/Cancel
                  shares
              
              
              82.5
              
              
              1,165.6
              
              
              -Additional
                  paid-in capital
              
              
              (59.8
              )
              
              85.5
              
              
              14.2Premium
                  received on sale of options
              
              
              -
              
              
              -
              
              
              2.5Repayments
                  (advances) to employees for purchase of shares
              
              
              42.2
              
              
              60.3
              
              
              59.5Other
                  comprehensive income
              
              
              (106.9
              )
              
              (419.6
              )
              
              (119.4
              )Adjustment
                  to initially apply SFAS No. 158, net of tax
              
              
              (74.8
              )Net
                  income
              
              
              4,096.7
              
              
              2,711.0
              
              
              1,472.7Dividends
                  and interest attributed to shareholders’ equity declared
              
              
              (1,808.9
              )
              
              (2,282.7
              )
              
              (558.3
              )At
                  end of the year
              
              
              21,107.7
              
              
              20,601.9
              
              
              17,876.3
  24.
              SEGMENT
                  REPORTING
  Under
        Brazilian GAAP, no separate segment reporting is required.
  Under
        US
        GAAP, SFAS No. 131, *Disclosures
        about Segments of an Enterprise and Related Information* ,
        defines
        operating segments as components of an enterprise for which separate financial
        information is available and evaluated regularly as a means for assessing
        segment performance and allocating resources to segments. A measure of profit
        or
        loss, total assets and other related information are required to be disclosed
        for each operating segment. In addition, this standard requires the annual
        disclosure of information concerning revenues derived from the enterprise’s
        products or services, countries in which it earns revenues or hold assets,
        and
        major customers. AmBev’s business is comprised of four main segments: AmBev
        Brazil (divided into Brazil beer, Brazil carbonated soft drinks and
        non-alcoholic non-carbonated (NANC) beverages, and Brazil other products,
        Hispanic Latin America operations excluding Quinsa - HILA-Ex, Quinsa and
        North
        America (Labatt). We have reclassified prior periods to disclose our NANC
        segment together with our Carbonated soft drinks segment.
  F-97
 *Table
            of Contents*
  SFAS
        No. 131 requires that segment data be presented in the US GAAP financial
        statements on the basis of the internal information that is used by management
        for making operating decisions, including allocation of resources among
        segments, and segment performance. This information is derived from our
        statutory accounting records which are maintained in accordance with Brazilian
        GAAP. Certain expenses were not allocated to the segments. These unallocated
        expenses are corporate overheads, minority interests, income taxes and financial
        interest income and expense. Certain operating units do not separate operational
        expenses, total assets, depreciation and amortization. These amounts were
        allocated based on gross sales revenue.
  2006
              
              2005
              
              2004Net
                  sales:Beer
              
              
              9,045.1
              
              
              8,119.1
              
              
              6,907.4Carbonated
                  soft drinks and NANC
              
              
              1,806.4
              
              
              1,648.7
              
              
              1,462.8Other
              
              
              111.6
              
              
              135.0
              
              
              155.7AmBev
                  Brazil
              
              
              10,963.1
              
              
              9,902.8
              
              
              8,525.9Quinsa
              
              
              2,004.3
              
              
              1,299.9
              
              
              1,153.0HILA
                  - Ex
              
              
              758.1
              
              
              780.4
              
              
              769.1North
                  America
              
              
              3,888.2
              
              
              3,975.5
              
              
              1,558.8Total
                  consolidated
              
              
              17,613.7
              
              
              15,958.6
              
              
              12,006.8Cost
                  of sales:Beer
              
              
              (2,573.7
              )
              
              (2,575.4
              )
              
              (2,467.0
              )Carbonated
                  soft drinks and NANC
              
              
              (877.8
              )
              
              (851.7
              )
              
              (820.5
              )Other
              
              
              (40.8
              )
              
              (61.9
              )
              
              (81.1
              )AmBev
                  Brazil
              
              
              (3,492.3
              )
              
              (3,489.0
              )
              
              (3,368.6
              )Quinsa
              
              
              (808.8
              )
              
              (536.7
              )
              
              (510.3
              )HILA
                  - Ex
              
              
              (457.4
              )
              
              (416.4
              )
              
              (399.2
              )North
                  America
              
              
              (1,190.2
              )
              
              (1,300.3
              )
              
              (502.4
              )Total
                  consolidated
              
              
              (5,948.7
              )
              
              (5,742.4
              )
              
              (4,780.5
              )Selling,
                  marketing and distribution expenses:Beer
              
              
              (1,710.9
              )
              
              (1,516.1
              )
              
              (1,354.4
              )Carbonated
                  soft drinks and NANC
              
              
              (320.9
              )
              
              (289.9
              )
              
              (232.4
              )AmBev
                  Brazil
              
              
              (2,031.8
              )
              
              (1,806.0
              )
              
              (1,586.9
              )Quinsa
              
              
              (358.5
              )
              
              (234.9
              )
              
              (210.8
              )HILA
                  - Ex
              
              
              (320.0
              )
              
              (291.0
              )
              
              (215.4
              )North
                  America
              
              
              (1,156.4
              )
              
              (1,168.0
              )
              
              (438.6
              )Total
                  consolidated
              
              
              (3,866.7
              )
              
              (3,499.9
              )
              
              (2,451.7
              )
  F-98
 *Table
            of Contents*
  2006
              
              
              2005
              
              
              2004General
                  and administrative expenses:Beer
              
              
              (416.1
              )
              
              (445.0
              )
              
              (372.7
              )Carbonated
                  soft drinks and NANC
              
              
              (22.3
              )
              
              (16.4
              )
              
              (14.0
              )Other
              
              
              (3.4
              )
              
              (3.1
              )
              
              (2.9
              )AmBev
                  Brazil
              
              
              (441.8
              )
              
              (464.5
              )
              
              (389.6
              )Quinsa
              
              
              (66.3
              )
              
              (49.4
              )
              
              (50.0
              )HILA
                  - Ex
              
              
              (83.0
              )
              
              (92.9
              )
              
              (80.2
              )North
                  America
              
              
              (180.1
              )
              
              (223.8
              )
              
              (98.1
              )Total
                  consolidated
              
              
              (771.2
              )
              
              (830.6
              )
              
              (617.9
              )Depreciation
                  and amortization expenses (*):Beer
              
              
              (422.8
              )
              
              (375.2
              )
              
              (330.7
              )Carbonated
                  soft drinks and NANC
              
              
              (142.1
              )
              
              (121.3
              )
              
              (109.5
              )Other
              
              
              -
              
              
              -
              
              
              -AmBev
                  Brazil
              
              
              (564.9
              )
              
              (496.5
              )
              
              (440.2
              )Quinsa
              
              
              (60.1
              )
              
              (40.1
              )
              
              (42.8
              )HILA
                  - Ex
              
              
              (67.6
              )
              
              (56.4
              )
              
              (39.2
              )North
                  America
              
              
              (78.2
              )
              
              (74.9
              )
              
              (19.3
              )Total
                  consolidated
              
              
              (770.8
              )
              
              (667.9
              )
              
              (541.5
              )Less:Provisions
                  for contingencies and other
              
              
              111.8
              
              
              (71.5
              )
              
              (260.2
              )Other
                  operating expenses, net
              
              
              (955.1
              )
              
              (1,075.4
              )
              
              (420.9
              )Financial
                  income (expense), net
              
              
              (1,078.3
              )
              
              (1,086.7
              )
              
              (776.4
              )Non-operating
                  expenses, net
              
              
              (28.8
              )
              
              (234.3
              )
              
              (333.9
              )Income
                  tax expenses, net
              
              
              (1,315.3
              )
              
              (1,020.2
              )
              
              (511.8
              )Profit
                  sharing and contributions
              
              
              (194.4
              )
              
              (202.8
              )
              
              (152.4
              )Minority
                  interest
              
              
              8.7
              
              
              16.8
              
              
              (3.7
              )Equity
                  in results of Quinsa (proportionally consolidated)
              
              
              1.4
              
              
              2.0
              
              
              5.6Net
                  income
              
              
              2,806.3
              
              
              1,545.7
              
              
              1,161.5
 Revenues
        from no individual customer represented more than 10% of our net sales.
        Information on our geographic areas is as follows:
  2006
              
              2005
              
              2004Total
                  property, plant and equipment:AmBev
                  Brazil
              
              2,881.5
              
              2,746.4
              
              2,590.0Quinsa
              
              
              1,229.8
              
              
              770.4
              
              
              750.1HILA
                  - Ex
              
              
              623.6
              
              
              748.2
              
              
              951.5North
                  America
              
              
              989.0
              
              
              1,139.6
              
              
              1,240.15,723.9
              
              
              5,404.6
              
              
              5,531.7
  F-99
 *Table
            of Contents*
  2006
              
              2005
              
              2004Total
                  segment assets:Beer
              
              
              10,329.3
              
              
              9,129.8
              
              
              7,371.7Carbonated
                  soft drinks and NANC
              
              
              3,537.8
              
              
              3,358.6
              
              
              2,237.5Other
              
              
              825.7
              
              
              709.1
              
              
              786.6Quinsa
              
              
              3,119.2
              
              
              1,818.1
              
              
              942.7HILA
                  - Ex
              
              
              978.8
              
              
              1,230.0
              
              
              1,744.1North
                  America
              
              
              2,090.3
              
              
              2,895.9
              
              
              4,663.8General
                  corporate assets
              
              
              14,764.0
              
              
              14,260.3
              
              
              15,270.1Total
                  assets
              
              
              35,645.1
              
              
              33,401.8
              
              
              33,016.5Total
                  assets by location:Brazil
              
              
              29,456.8
              
              
              27,457.8
              
              
              25,665.9Quinsa
              
              
              3,119.2
              
              
              1,818.1
              
              
              942.7HILA
                  - Ex
              
              
              978.8
              
              
              1,230.0
              
              
              1,744.1North
                  America
              
              
              2,090.3
              
              
              2,895.9
              
              
              4,663.8Total
                  assets
              
              
              35,645.1
              
              
              33,401.8
              
              
              33,016.5
  (*)  Relates
        primarily to administrative assets and amortization of deferred charges;
        excludes depreciation of production assets and amortization of goodwill,
        included in Other operating income, net.




F-100
 *Table
          of Contents*




**ITEM
              19.**
            **EXHIBITS**





1.1
            Bylaws
                of Companhia de Bebidas das Américas - AmBev (English-language
                translation)1.2
            Minutes
                of the Extraordinary Shareholders’ Meeting held on May 18, 2004
                (incorporated by reference to Form 6-K filed by AmBev on May 20,
                2004).2.1
            Indenture
                dated December 19, 2001 between CBB and The Bank of New York as Trustee
                (incorporated by reference to Exhibit 4.1 to Form F-4 filed by AmBev
                on
                August 29, 2002).2.2
            Form
                of Note (contained in Exhibit 2.1).2.3
            Insurance
                Policy for Expropriation and Currency Inconvertibility dated December
                19,
                2001 between Steadfast Insurance Company and The Bank of New York
                (incorporated by reference to Exhibit 4.5 to Form F-4 filed by AmBev
                on
                August 29, 2002).2.4
            Agreement
                Regarding the Insurance Policy for Expropriation and Currency
                Inconvertibility dated December 19, 2001 among Steadfast Insurance
                Company, The Bank of New York, AmBev and CBB (incorporated by reference
                to
                Exhibit 4.6 to Form F-4 filed by AmBev on August 29,
                2002).2.5
            Indenture
                dated September 18, 2003 between CBB and The Bank of New York as
                Trustee
                (incorporated by reference to Exhibit 2.1 to Form 20-F filed by AmBev
                on
                June 30, 2004).2.6
            Form
                of Note (contained in Exhibit 2.5).2.7
            Agreement
                Regarding the Insurance Policy for Expropriation and Currency
                Inconvertibility by the Trustee, AmBev, CBB and the Insurer, dated
                September 18, 2003 (incorporated by reference to Exhibit 2.5 to Form
                20-F
                filed by AmBev on June 30, 2004).2.8
            Application
                for Political Risk Insurance for Capital Markets Transactions, executed
                by
                the Trustee (incorporated by reference to Exhibit 2.6 to Form 20-F
                filed
                by AmBev on June 30, 2004).3.1
            Amendment
                to the Shareholders' Agreement of Companhia de Bebidas das Américas -
                AmBev dated as of March 2, 2004 among FAHZ, Braco, ECAP, AmBev, Jorge
                Paulo Lemann, Marcel Herrmann Telles, and Carlos Alberto da Veiga
                Sicupira
                (English-language translation) (incorporated by reference to Exhibit
                2.16
                to Amendment No. 9 to Schedule 13D relating to Quinsa, filed by AmBev
                on
                March 9, 2004).3.2
            *Incorporação*Agreement dated March 3, 2004 (incorporated by reference to Exhibit
                2.13
                to Amendment No. 9 to Schedule 13D relating to Quinsa, filed by AmBev
                on
                March 9, 2004).3.3
            Shareholders’
                Voting Rights Agreement of S-Braco Participações S.A. dated as of August
                30, 2002 among Santa Judith, Santa Irene, Santa Estela 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, ECAP and AmBev as acknowledging parties (English-language
                translation) (incorporated by reference to Exhibit C to Amendment
                No. 2 to
                Schedule 13D relating to AmBev, filed by FAHZ, Braco and ECAP on
                November
                29, 2002).





4.1
            Performance
                Agreement between AmBev and the Conselho Administrativo de Defesa
                Econômica - CADE, dated April 19, 2000 (incorporated by reference to
                Exhibit 10.8 to the Form F-4 filed by AmBev on August 29,
                2000).


4.2
              Termination
                  of the Letter Agreement, dated June 22, 2004, between Labatt Holding,
                  B.V.
                  and Interbrew International, B.V. (incorporated by reference to
                  Exhibit
                  4.15 to Form 20-F filed by the Company on July 1,
                  2005).4.3
              Letter
                  from InBev to AmBev and Labatt, relating to Labatt Tax Reassessment,
                  dated
                  March 4, 2005 (incorporated by reference to Exhibit 4.16 to Form
                  20-F
                  filed by the Company on July 1, 2005).4.4
              Confirmation
                  of Intellectual Property and Hedging Arrangements, dated August
                  27, 2004,
                  to AmBev and Labatt from Interbrew S.A. (incorporated by reference
                  to
                  Exhibit 4.17 to Form 20-F filed by the Company on July 1,
                  2005).


-121-
 *Table
          of Contents*


4.5
                Executed
                    Letter Agreement dated July 22, 2004, to AmBev from Interbrew
                    regarding
                    the provision of certain information relating to each business
                    and its
                    affiliates (incorporated by reference to Exhibit 4.18 to Form
                    20-F filed
                    by the Company on July 1, 2005).4.6
                Labatt
                    Services Agreement, dated August 27, 2004, between Labatt Brewing
                    and
                    Interbrew S.A. regarding services until December 31, 2004 (incorporated
                    by
                    reference to Exhibit 4.19 to Form 20-F filed by the Company on
                    July 1,
                    2005).4.7
                Labatt
                    Services Agreement, dated August 27, 2004, between Interbrew
                    S.A. and
                    Labatt Brewing regarding services until December 31, 2004 (incorporated
                    by
                    reference to Exhibit 4.20 to Form 20-F filed by the Company on
                    July 1,
                    2005).4.8
                Transfer
                    Agreement, dated August 2004, among Interbrew S.A., Interbrew
                    International, AmBev and Jalua Spain S.L. (incorporated by reference
                    to
                    Exhibit 4.21 to Form 20-F filed by the Company on July 1,
                    2005)4.9
                License
                    Agreement, dated March 21, 2005, between AmBev and InBev (incorporated
                    by
                    reference to Exhibit 4.22 to Form 20-F filed by the Company on
                    July 1,
                    2005).4.10
                Letter
                    Agreement dated April 13, 2006, between AmBev, BAC and Quinsa
                    (incorporated by reference to Exhibit 2.4 to Amendment No. 14
                    to Schedule
                    13D relating to Quinsa, filed by AmBev on April 17,
                    2006).4.11
                Announcement
                    of commencement of the Public Offer of non-share convertible
                    and
                    subordinated debentures, dated August 3, 2006.4.12
                Announcement
                    of termination of the Public Offer of non-share convertible and
                    subordinated debentures, dated August 7, 2006.8.1
                List
                    of Material Subsidiaries of Companhia de Bebidas das Américas -
                    AmBev11.1
                Code
                    of Business Conduct (English-language version) (formerly Code
                    of Ethics)
                    dated December 11, 2006.12.1
                Principal
                    Executive Officer Certification pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002.12.2
                Principal
                    Executive Officer Certification pursuant to Section 302 of the
                    Sarbanes-Oxley Act of
                    2002.





12.3
              Principal Financial
                Officer Certification pursuant to Section
                302 of the Sarbanes-Oxley Act of 2002.13.1
              Principal
                  Executive Officers’ 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.





-122-
 *Table
          of Contents*




Pursuant
      to the requirements of Section 12 of the Securities Exchange Act of 1934, the
      registrant, Companhia de Bebidas das Américas - AmBev, 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 Form 20-F on its
      behalf.





**COMPANHIA
                DE BEBIDAS DAS AMÉRICAS -
                AMBEV**By:
            /s/
                Luiz Fernando Ziegler de Saint EdmondName:
            Luiz
                Fernando Ziegler de Saint EdmondTitle:
            Chief
                Executive Officer for Latin AmericaBy:
            /s/
                Miguel Nuno da Mata PatricioName:
            Miguel
                Nuno da Mata PatricioTitle:
            Chief
                Executive Officer for North America




Date: November
        22, 2007


-123-