20-F

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2017

Commission file number: 001-36165

AMBEV S.A.
(Exact name of Registrant as specified in its charter)

Federative Republic of Brazil
(Jurisdiction of incorporation or organization)

Rua Dr. Renato Paes de Barros, 1017, 3rd floor
04530-001 São Paulo, SP, Brazil
(Address of principal executive offices)
Ricardo Rittes de Oliveira Silva, Chief Financial and Investor Relations Officer
Address: Rua Dr. Renato Paes de Barros, 1017, 3rd floor, 04530-001, São Paulo, SP, Brazil
Telephone No.: +55 (11) 2122-1200
e-mail: ir@ambev.com.br
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
American Depositary Shares,	New York Stock Exchange
evidenced by American Depositary
Receipts, each representing
1 (one) common share*,
no par value

*      Not for trading, but in connection with the registration of American Depositary Shares, pursuant to the         requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

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

Title of each class	Name of each exchange on which registered
Not applicable	Not applicable

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

15,710,221,382 common shares, without par value

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

Yes x  No 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes  No x

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.

Yes x No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*

Yes  No 

* This requirement does not apply to the registrant in respect of this filing.    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.  See definition of “accelerated filer,” “large accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x              Accelerated filer             Non-accelerated filer                     Emerging growth company 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP   International Financial Reporting Standards as issued by the International Accounting Standards Board  x                 Other  

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. N/A

Item 17   Item 18 

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  No x

 

TABLE OF CONTENTS

	Page
INTRODUCTION
PRESENTATION OF FINANCIAL AND OTHER INFORMATION	i
MARKET DATA	i
CURRENCY TRANSLATION	ii
TRADEMARKS	ii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION	ii
PART I	1
ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	1
ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE	2
ITEM 3.KEY INFORMATION	3
ITEM 4.INFORMATION ON THE COMPANY	25
ITEM 4A.UNRESOLVED STAFF COMMENTS	47
ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS	47
ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	71
ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	85
ITEM 8.FINANCIAL INFORMATION	94
ITEM 9.THE OFFER AND LISTING	102
ITEM 10.ADDITIONAL INFORMATION	107
ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	129
ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	135
PART II	137
ITEM 13.DEFAULT, DIVIDENDS ARREARAGES AND DELINQUENCIES	137
ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	138
ITEM 15.CONTROLS AND PROCEDURES	139
ITEM 15T.CONTROLS AND PROCEDURES	141
ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT	142
ITEM 16B.CODE OF BUSINESS CONDUCT	143
ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES	144
ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	146
ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	147
ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	148
ITEM 16G.CORPORATE GOVERNANCE	149
ITEM 16H.MINE SAFETY DISCLOSURE	150

 

PART III	151
ITEM 17.FINANCIAL STATEMENTS	151
ITEM 18.FINANCIAL STATEMENTS	152
ITEM 19.EXHIBITS	153

 

INTRODUCTION

This annual report on Form 20-F relates to the registered American Depositary Shares, or ADSs, of Ambev S.A., or Ambev, evidenced by American Depositary Receipts, or ADRs, each representing one common share, no par value, of Ambev.

In this annual report, except as otherwise indicated or as the context otherwise requires, the “Company,” “Ambev,” “we,” “us” and “our” refers to Ambev S.A. and its subsidiaries and, unless the context otherwise requires, the predecessor companies that have been merged out of existence with and into it.  All references to “Old Ambev” refer to Companhia de Bebidas das Américas – Ambev, our former subsidiary that had common and preferred shares listed on the São Paulo Stock, Commodities and Futures Exchange (B3 S.A. – Brasil, Bolsa, Balcão), or the B3 (previously named as BM&FBovespa S.A. – Bolsa de Valores, Mercadorias e Futuros), and common and preferred ADSs listed on the New York Stock Exchange, or the NYSE, and that was merged out of existence with and into us in January 2014.  All references to NAB are to the non-alcoholic beverages in our portfolio other than non-alcoholic beer.  All references to “Brazil” are to the Federative Republic of Brazil, unless the context otherwise requires.  All references to the “Brazilian government” are to the federal government of Brazil.  All references to percent ownership interests in Ambev do not take into account treasury shares.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

We prepare our audited consolidated financial statements in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB.  The financial information and related discussion and analysis contained in this annual report on Form 20-F are presented in reais, except as otherwise specified. Unless otherwise specified, the financial information analysis in this annual report on Form 20-F is based on our consolidated financial statements as of December 31, 2017, 2016 and 2015 and for the three years ended December 31, 2017, included elsewhere in this document.  Percentages and some amounts in this annual report on Form 20-F have been rounded for ease of presentation.  Any discrepancies between totals and the sums of the amounts listed are due to rounding.

Unless otherwise specified, volumes, as used in this annual report on Form 20-F, include both beer (including near-beer) and NAB volumes. In addition, unless otherwise specified, our volumes refer not only to the brands that we own or license, but also third-party brands that we brew or otherwise produce as a subcontractor, and third-party products that we sell through our distribution network. Our volume figures in this Form 20-F reflect 100% of the volumes of entities that we fully consolidate in our financial reporting. In addition, market share data contained in this annual report on Form 20-F refers to volumes sold.

MARKET DATA

Market information (including market share, market position and industry data for our operating activities and those of our subsidiaries or of companies acquired by us) or other statements presented in this Form 20-F regarding our position (or that of companies acquired by us) relative to our competitors largely reflect the best estimates of our management. These estimates are based upon information obtained from customers, trade or business organizations and associations, other contacts within the industries in which we operate and, in some cases, upon published statistical data. Except as otherwise stated, our market share data, as well as our management’s assessment of our comparative competitive position, has been derived by comparing our sales volumes for the relevant period to our management’s estimates of our competitors’ sales volumes for such period, as well as upon published statistical data, and, in particular the reports published and the information made publicly available by, among others, the local brewers’ associations and the national statistics bureaus in the various countries in which we sell our products. Although we have no reason to believe any of this information or these reports are inaccurate in any material respect and believe and act as if they are reliable, we have not independently verified it. 

i

 

CURRENCY TRANSLATION

In this annual report, references to “real,” “reais” or “R$” are to the legal currency of Brazil, references to “U.S. dollar” or “US$” are to the official currency of the United States and references to “Canadian dollar” or “C$” are to the legal currency of Canada.

We maintain our books and records in reais.  However, solely for the convenience of the reader, we have translated certain amounts included in this annual report from reais into U.S. dollars using the selling rate as reported by the Central Bank of Brazil (Banco Central do Brasil), or the Central Bank, as of December 31, 2017 of R$3.308 to US$1.00 or, where expressly indicated, at an average exchange rate prevailing during a certain period.  We have also translated some amounts from U.S. dollars and Canadian dollars into reais.  All such currency translations should not be considered representations that any such amounts represent, or could have been, or could be, converted into, U.S. or Canadian dollars or reais at that or at any other exchange rate.  See “Item 3. Key Information—A. Selected Financial Data—Exchange Rate Information—Exchange Controls” for more detailed information regarding the translation 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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Some of the information contained in this annual report may constitute forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act.  We have based these forward-looking statements largely on our current expectations and projections about future events, industry and financial trends affecting our business.

Many of these forward-looking statements can be identified by the use of forward-looking words such as “anticipate,” “project,” “may,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate,” “potential,” among others.  These statements appear in a number of places in this annual report and include, but are not limited to, statements regarding our intent, belief or current expectations.  Forward-looking statements are subject to certain risks and uncertainties that are outside our control and are difficult to predict.  These risks and uncertainties could cause actual results to differ materially from those suggested by forward-looking statements.  Factors that could cause actual results to differ materially from those contemplated by forward‑looking statements include, among others:

·greater than expected costs (including taxes) and expenses;

·the risk of unexpected consequences resulting from acquisitions, joint ventures, strategic alliances, corporate reorganizations or divestiture plans, and our ability to successfully and cost-effectively implement these transactions and integrate the operations of businesses or other assets that we acquire;

·our expectations with respect to expansion plans, projected asset divestitures, premium growth, accretion to reported earnings, working capital improvements and investment income or cash flow projections;

·lower than expected revenue;

·greater than expected customer losses and business disruptions;

·limitations on our ability to contain costs and expenses;

ii

 

·local, regional, national and international economic conditions, including the risks of a global recession or a recession in one or more of our key markets, and the impact they may have on us and our customers and our assessment of that impact;

·the monetary and interest rate policies of central banks;

·continued availability of financing;

·market and financial risks, such as interest rate risk, foreign exchange rate risk, commodity risk, asset price risk, equity market risk, inflation or deflation;

·our ability to continue to introduce competitive new products and services on a timely, cost-effective basis;

·the effects of competition and consolidation in the markets in which we operate, which may be influenced by regulation, deregulation or enforcement policies;

·changes in pricing environments and volatility in commodity prices;

·regional or general changes in asset valuations;

·changes in consumer spending;

·the outcome of pending and future litigation and governmental proceedings and investigations;

·global political and economic developments;

·changes in government policies, international trade policies, applicable laws, regulations and taxes in jurisdictions in which we operate including the laws and regulations governing our operations, as well as actions or decisions of courts and regulators;

·natural and other disasters;

·any inability to economically hedge certain risks;

·inadequate impairment provisions and loss reserves;

·technological changes;

·our success in managing the risks involved in the foregoing;

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

·inflation, appreciation, depreciation and devaluation of the real;

·the declaration or payment of dividends;

·the utilization of Ambev’s subsidiaries’ income tax loss carry forwards; and

·other factors or trends affecting our financial condition or results of operations, including those factors identified or discussed under “Item 3. Key Information—D. Risk Factors.”

We caution you that forward-looking statements are not guarantees of future performance and involve risks and uncertainties.  Forward-looking statements reflect only our current expectations and are based on our management’s beliefs and assumptions and on information currently available to our management.  Actual results may differ materially from those in forward-looking statements as a result of various factors, including, without limitation, those identified under “Item 3. Key Information—D. Risk Factors” in this annual report.  As a result, investors are cautioned not to place undue reliance on forward-looking statements contained in this annual report when making an investment decision.

iii

 

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them in light of new information or future developments or to release publicly any revisions to these statements in order to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

Investors should consider these cautionary statements together with any written or oral forward-looking statements that we may issue in the future.

iv

 

PART I

ITEM 1.                IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable.

1

 

ITEM 2.                OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable.

2

 

ITEM 3.                KEY INFORMATION

A.            Selected Financial Data

The following financial information of Ambev is only a summary and should be read in conjunction with, and is qualified in its entirety by reference to, our audited consolidated financial statements and related notes which are included elsewhere in this annual report on Form 20-F.

The tables below represent the selected consolidated income statement and balance sheet data as at and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 that has been derived from our audited consolidated financial statements, which were prepared in accordance with IFRS as issued by the IASB.

Selected Consolidated Income Statement Data

	Year Ended December 31,
	2017	2016	2015	2014	2013(1)
					(restated)
	(in R$ million)
Net sales	47,899.3	45,602.6	46,720.2	38,079.8	35,079.1
Cost of sales	(18,041.8)	(16,678.0)	(16,061.4)	(12,814.6)	(11,572.5)
Gross profit	29,857.5	28,924.6	30,658.8	25,265.2	23,506.6
Sales, marketing and distribution expenses	(11,915.5)	(12,010.5)	(11,177.9)	(9,158.8)	(8,059.9)
Administrative expenses	(2,623.8)	(2,166.1)	(2,281.3)	(1,820.0)	(1,748.3)
Other operating income/(expense)	1,217.3	1,223.1	1,936.1	1,629.2	1,761.6
Exceptional items	(108.7)	1,134.3	(357.2)	(89.0)	(29.2)
Income from operations	16,426.8	17,105.4	18,778.5	15,826.6	15,430.8
Net finance cost	(3,493.9)	(3,702.0)	(2,268.2)	(1,475.4)	(1,561.4)
Share of results of associates	(3.1)	(5.0)	3.1	17.4	11.4
Income tax expense	(5,079.3)	(315.0)	(3,634.2)	(2,006.6)	(2,481.4)
Net Income	7,850.5	13,083.4	12,879.2	12,362.0	11,399.4
Attributable to:
Equity holders of Ambev	7,332.0	12,546.6	12,423.8	12,065.5	9,557.3
Non-controlling interests	518.5	536.8	455.4	296.5	1,842.1

(1)We have applied retrospectively the predecessor basis of accounting to the January 2014 acquisition of control of Cerbuco Brewing Inc., or Cerbuco, the holding company that owns a controlling interest in Bucanero S.A., or Bucanero, consistent with the accounting policy for business combinations between entities under common control.

Earnings per Share and Dividend per Share

	Year Ended December 31,
	2017	2016	2015	2014	2013(1)
					(restated)
	(in R$, unless otherwise indicated)
Earnings per common share and per ADS(2):
- Basic	0.47	0.80	0.79	0.77	0.75
- Diluted	0.46	0.79	0.79	0.76	0.75
Dividends and interest on shareholders’ equity per share and per ADS (weighted average)(3):
- Basic (R$)	0.56	0.66	0.73	0.77	0.58
- Basic (US$)	0.17	0.20	0.19	0.29	0.25
Weighted average number of shares (million shares)(4):
- Basic	15,706	15,697	15,696	15,683	12,678
- Diluted	15,838	15,823	15,820	15,820	12,824

(1)We have applied retrospectively the predecessor basis of accounting to the January 2014 acquisition of control of Cerbuco Brewing Inc., or Cerbuco, the holding company that owns a controlling interest in Bucanero S.A., or Bucanero, consistent with the accounting policy for business combinations between entities under common control.

(2)The calculation of basic earnings per share is based on the net income attributable to equity holders of Ambev and the proportional weighted average number of shares outstanding during the year. Diluted earnings per share is based on the net income attributable to equity holders of Ambev and by adjusting the weighted average number of shares outstanding  during the year to assume conversion of all potentially dilutive shares.

3

 

(3)Dividend and interest on shareholders’ equity per share information was calculated based on the amount paid during the year net of withholding tax.

(4)Ambev S.A. had 9,694 million common shares outstanding immediately after Anheuser-Busch InBev SA/NV’s, or ABI’s,  contribution of its Old Ambev common and preferred shares to Ambev S.A. in June 2013.  Later in 2013, Ambev S.A. issued another 5,969 million common shares in connection with the consummation of Old Ambev’s stock swap merger with Ambev S.A.  The Ambev S.A. common shares issued in connection with the aforementioned stock swap merger were considered from their issuance date and, therefore, represented only an additional 2,984 million common shares for purposes of calculating the weighted average number of Ambev S.A. common shares for 2013. 

Selected Consolidated Balance Sheet Data

	As at December 31,
	2017	2016	2015	2014	2013
					(restated)(1)
	(in R$ million)
Non-current assets	62,133.9	59,954.6	61,861.8	51,414.8	48,276.2
Property, plant and equipment	18,822.3	19,153.8	19,140.1	15,740.1	14,005.6
Goodwill	31,401.9	30,511.2	30,953.1	27,502.9	27,023.7
Intangible assets	4,674.7	5,245.9	5,092.2	3,754.9	3,214.0
Deferred tax assets	2,279.3	2,268.2	2,749.9	1,392.5	1,647.8
Taxes and contributions receivable	2,537.7	347.7	892.8	1,161.2	474.1
Trade and other receivables	1,999.6	1,989.9	2,191.6	1,742.0	1,797.2
Other	418.4	437.9	842.1	121.2	113.8
Current assets	24,718.0	23,886.8	28,314.5	20,728.5	20,809.0
Inventories	4,319.0	4,347.1	4,338.2	3,411.3	2,835.6
Trade and other receivables	6,662.0	5,956.8	6,946.1	5,300.2	4,749.6
Taxes and contributions receivable	3,370.6	5,423.3	3,194.9	1,581.9	1,397.0
Cash and cash equivalents	10,354.5	7,876.8	13,620.2	9,722.1	11,538.2
Investment securities	11.9	282.8	215.1	713.0	288.6
Total assets	86,851.9	83,841.4	90,176.3	72,143.3	69,085.2
Shareholders’ equity	47,982.8	46,651.3	50,333.7	43,644.7	44,224.7
Equity attributable to equity holders of Ambev	46,008.8	44,825.0	48,331.9	42,221.6	42,992.5
Non-controlling interests	1,974.0	1,826.3	2,001.8	1,423.1	1,232.2
Non-current liabilities	10,180.6	8,416.5	9,700.7	6,673.8	7,507.8
Interest-bearing loans and borrowings	1,231.9	1,765.7	2,316.9	1,634.6	1,865.2
Employee benefits	2,310.7	2,137.7	2,221.9	1,757.0	1,558.3
Deferred tax liabilities	2,329.2	2,329.7	2,473.6	1,737.6	2,095.7
Taxes and contributions payable	3,189.6	681.4	910.0	610.9	883.0
Trade and other payables	606.6	736.6	1,278.8	390.5	673.9
Provisions	512.6	765.4	499.5	543.2	431.7
Current liabilities (2)	28,688.5	28,773.6	30,141.9	21,824.8	17,352.7
Interest-bearing loans and borrowings	1,321.1	3,630.6	1,282.6	988.1	1,040.6
Trade and other payables	21,702.8	20,692.0	24,391.6	17,054.7	13,034.8
Taxes and contributions payable	5,493.8	4,282.4	4,342.1	3,543.7	3,132.3
Provisions	169.0	168.6	123.1	139.2	145.0
Bank overdraft	1.8	0.0	2.5	99.1	0.0
Total shareholders’ equity and liabilities	86,851.9	83,841.4	90,176.3	72,143.3	69,085.2

(1)We have applied retrospectively the predecessor basis of accounting to the January 2014 acquisition of control of Cerbuco, the holding company that owns a controlling interest in Bucanero, consistent with the accounting policy for business combinations between entities under common control.

(2)The put option granted in the acquisition of a subsidiary is recorded under current liabilities, which impacted directly the working capital calculation.

4

 

Other Data

	As at and for the Year Ended December 31,
	2017	2016	2015	2014	2013(1)
					(restated)
	(in R$ million, except for operating data)
Other Financial Data:
Net working capital(2)	(3,970.5)	(4,886.8)	(1,827.4)	(1,096.3)	3,456.3
Cash dividends and interest on shareholders’ equity paid	8,819.8	10,330.6	11,490.2	12,059.6	7,333.7
Depreciation and amortization(3)	3,612.1	3,512.0	3,074.6	2,392.5	2,105.1
Capital expenditures(4)	3,203.6	4,132.7	5,261.2	4,493.1	3,810.3
Operating cash flows - generated(5)	17,874.1	12,344.4	23,580.8	15,895.7	15,314.8
Investing cash flows - used(5)	(3,073.0)	(5,898.0)	(5,997.0)	(4,768.0)	(3,811.3)
Financing cash flows - used(5)	(12,864.2)	(11,645.1)	(15,327.9)	(13,143.8)	(9,506.7)
Other Operating Data:
Total production capacity -  million hl(6)	276.5	280.4	269.9	292.3	280.4
Total  volume sold - million hl(7)	162.8	159.8	169.1	171.7	166.5
Number of employees(8)	51,432	53,250	52,738	51,871	53,581

(1)We have applied retrospectively the predecessor basis of accounting to the January 2014 acquisition of control of Cerbuco the holding company that owns a controlling interest in Bucanero consistent with the accounting policy for business combinations between entities under common control.

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

(3)Includes depreciation of property, plant and equipment, amortization of intangible assets and impairment losses related to these assets.

(4)Represents cash expenditures for property, plant, equipment and intangible assets.

(5)Operating, investing and financing cash flow data is derived from our consolidated cash flow statements contained in our audited consolidated financial statements.

(6)Represents our available production capacity at year-end; capacity can vary from year to year depending on mix; “hl” is the abbreviation for hectoliters.

(7)Represents our full-year volumes.

(8)Includes all our production- and non-production-related employees.

Exchange Rate Information

Since 1999, the Central Bank has allowed the real/U.S. dollar exchange rate to float freely, and during that period, the real/U.S. dollar exchange rate has fluctuated considerably.  In the past, the Central Bank has intervened occasionally to control unstable movements in foreign exchange rates.  We cannot predict whether the Central Bank or the Brazilian federal government will continue to let the real float freely or will intervene in the exchange rate market through a currency band system or otherwise.  The real may depreciate or appreciate against the U.S. dollar substantially in the future.  See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate.”

Since March 2005, all foreign exchange transactions in Brazil started to be carried out through institutions authorized to operate in the consolidated market and are subject to registration with the electronic registration system of the Central Bank.  Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention.

The real may depreciate or appreciate against the U.S. dollar substantially. See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate—Our results of operations are affected by fluctuations in exchange rates, and devaluation of the real relative to other currencies, including the U.S. dollar, may adversely affect our financial performance.”

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

5

 

	Reais per U.S. Dollar
Year	High	Low	Average	Period End
2013	2.446	1.953	2.174	2.343
2014	2.740	2.197	2.360	2.656
2015	4.195	2.575	3.388	3.905
2016	4.156	3.119	3.483	3.259
2017	3.381	3.051	3.193	3.308

Source:  Central Bank.

	Reais per U.S. Dollar
Month	High	Low	Average	Period End
September 2017	3.193	3.085	3.135	3.168
October 2017	3.280	3.132	3.191	3.277
November 2017	3.292	3.214	3.259	3.262
December 2017	3.333	3.232	3.292	3.308
January 201	3.270	3.139	3.211	3.162
February 2018	3.282	3.173	3.242	3.245
March 2018 (through March 6, 2018)	3.262	3.225	3.252	3.225

Source:  Central Bank.

We pay cash dividends and make 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 B3.  For further information on this matter see “—D. Risk Factors—Risks Relating to Our Common Shares and ADSs.”

Exchange Controls

There are no restrictions on ownership of the ADSs or the preferred shares or common shares by individuals or legal entities domiciled outside Brazil.  However, the right to convert dividend payments, interest on shareholders’ equity payments and proceeds from the sale of preferred shares or common shares into foreign currency and to remit such amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally requires, among other things, that relevant investments be registered with the Central Bank and the Comissão de Valores Mobiliários (the Brazilian Securities Commission), or the CVM.

Restrictions on the remittance of foreign capital abroad could hinder or prevent Banco Bradesco S.A., the custodian of Ambev’s ADS program, or the custodian, or holders who have exchanged Ambev’s ADSs for shares of Ambev, from converting dividend distributions, interest on shareholders’ equity or the proceeds from any sale of shares of Ambev into U.S. dollars and remitting such U.S. dollars abroad.  Holders of Ambev ADSs could be adversely affected by delays in or refusal to grant any required governmental approval for conversions of real payments and remittances abroad.

Under Brazilian law relating to foreign investment in the Brazilian capital markets, or the Foreign Investment Regulations, foreign investors registered with CVM, and acting through authorized custodial accounts managed by local agents may buy and sell shares on Brazilian stock exchanges without obtaining separate certificates of registration for each transaction.  Foreign investors may register their investment under Law No. 4,131/62, as amended, or Law No. 4,131, or Resolution No. 4,373, dated September 29, 2014, or Resolution No. 4,373, of the Conselho Monetário Nacional (National Monetary Council), or the CMN.

Law No. 4,131 is the main legislation concerning foreign capital and direct equity investments in Brazilian companies and it is applicable to any amount that enters the country in the form of foreign currency, goods and services.  Except for registration of the capital inflow/outflow with the Central Bank, non-resident investors directly investing in equity of Brazilian companies do not need any specific authorization to make such investments.

Portfolio foreign investments are regulated by Resolution No. 4,373 and CVM Rule No. 560, as amended.

Under Resolution No. 4,373, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled.  In accordance with Resolution No. 4,373, the definition of a foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad.

In order to become a Resolution No. 4,373 investor, a foreign investor must:

·appoint at least one representative in Brazil, with powers to perform actions relating to its investment;

6

 

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

·appoint a tax representative in Brazil;

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

·through its representative in Brazil, register its foreign investment with the Central Bank.

In addition, an investor operating under the provisions of Resolution No. 4,373 must be registered with the Receita Federal do Brasil (the Brazilian Internal Revenue Service), or the RFB, pursuant to RFB Normative Instruction No. 1,548 of February 13, 2015, and RFB Normative Instruction No. 1,634 of May 6, 2016.

Pursuant to the registration obtained by Ambev with the Central Bank in the name of The Bank of New York, as depositary for the ADS programs of Ambev, or the Depositary, with respect to the ADSs to be maintained by the custodian on behalf of the Depositary, the custodian and the Depositary will be able to convert dividends and other distributions with respect to the Ambev shares represented by ADSs into foreign currency and remit the proceeds outside Brazil.  Pursuant to CMN Resolution No. 4,373, in order for an investor to surrender ADSs for the purpose of withdrawing the shares represented thereby, the investor is required to appoint a Brazilian financial institution duly authorized by the Central Bank and the CVM to act as its legal representative, who shall be responsible, among other things, for keeping and updating the investors’ certificates of registrations with the Central Bank, which entitles registered foreign investors to trade the underlying shares directly on the B3.

Under current legislation, the Brazilian government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments.  For approximately six months in 1989 and early 1990, the Brazilian government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors in order to conserve Brazil’s foreign currency reserves.  These amounts were subsequently released in accordance with Brazilian government directives.  We cannot assure you that the Brazilian government will not impose similar restrictions on foreign repatriations in the future.  See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate” and “—D. Risk Factors—Risks Relating to Our Common Shares and ADSs.”

B.            Capitalization and Indebtedness

Not applicable.

C.            Reasons for the Offer and Use of Proceeds

Not applicable.

D.            Risk Factors

Before making an investment decision, you should consider all of the information set forth in this annual report.  In particular, you should consider the special features applicable to an investment in Brazil and applicable to an investment in Ambev, including those set forth below.  In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of issuers in the United States.

7

 

Risks Relating to Brazil and Other Countries in Which We Operate

Economic and political uncertainty and volatility in Brazil, and the perception of these conditions in the international financial markets, may adversely affect our business.

Our most significant market is Brazil, which has periodically experienced rates of inflation higher then expected. 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 Índice Nacional de Preços ao Consumidor (National Consumer Price Index), was 5.6% in 2013, 6.2% in 2014, 11.3% in 2015, 6.6% in 2016 and 2.1% in 2017. Brazil may experience high levels of inflation in the future. While current levels of inflation are below those experienced in 2016, there can nevertheless be no assurance that levels of inflation in the future will continue the downward trend seen in 2017. 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 effort on the part of the Brazilian government to preserve economic stability, as well as any public speculation about possible future initiatives, may contribute significantly to economic uncertainty in Brazil and may heighten volatility in the Brazilian securities markets and securities issued abroad by Brazilian issuers.  It is also difficult to assess the impact that turmoil in the credit markets will have in the Brazilian economy, and as a result on our operations and financial results in the future.

In addition, Brazil’s political environment has historically influenced, and continues to influence, the performance of the country’s economy. Political crises have affected and continue to affect the confidence of investors and the general public, which have historically resulted in economic deceleration and heightened volatility in the securities issued by Brazilian companies.

The recent economic and political instability in Brazil has contributed to a decline in market confidence in the Brazilian economy. Weak macroeconomic conditions in Brazil are expected to continue into 2018. In addition, in the context of the various ongoing investigations into allegations of money laundering and corruption being currently conducted by Brazilian Federal and State authorities the Brazilian economy and political environment have been negatively impacted. The potential outcome of  such corruption-related investigations is uncertain, but they have already impacted the general market perception of the Brazilian economy, political environment and the Brazilian capital market. We have no control over, and cannot predict, whether such investigations or allegations will lead to further political and economic instability.

On August 31, 2016, following months of speculation and citizen protests throughout Brazil, the Senate approved the impeachment of president Dilma Rousseff, and she was replaced by Vice-President Michel Temer as Brazil’s new president.

President Temer and his government have been implicated in several ongoing corruption investigations and, we cannot predict, how these allegations, or any additional allegations that may rise, will affect the popular support of the government, its proposed reform agenda, Brazil’s economy and its political and social stability. In May 2017, several motions for impeachment proceedings against President Temer were filed in Congress by opposition parties following the surfacing of allegations that Mr. Temer had appeared to endorse the bribing of a jailed politician. On June 26, 2017, Brazil’s chief prosecutor initiated criminal indictment proceedings against President Temer, which were then referred to Congress for an indictment decision. On August 2, 2017, Congress decided by a majority vote against criminally indicting President Temer on these charges, and the charges were dismissed for the remainder of his term in office. On an unrelated proceeding, on June 9, 2017, the Brazilian Supreme Court decided that there was insufficient evidence to rule against President Temer and former President Rousseff on charges relating to illegal campaign financing during President Temer and former President Rousseff’s 2014 election campaign. In September 2017, Brazil’s chief prosecutor initiated new criminal indictment proceedings against President Temer, which was, as in the previous proceeding, then referred to Congress for an indictment decision.  On September 25, 2017, Congress decided by a majority vote against criminally indicting President Temer on these charges, and the charges were dismissed for the remainder of his term in office. It is possible, however, that Brazil’s chief prosecutor may bring additional charges against President Temer in the future, and if any of these charges are decided against President Temer, they could ultimately result in his removal from office.

Driven by the recent economic and political instability in Brazil, among other factors, Brazil has faced a series of economic and political difficulties since 2014, including increasing unemployment rates, decreasing consumer and business confidence, falling industrial output, a deficit in Brazil’s primary accounts, shrinking gross domestic product, increasing uncertainties with regards to Congressional decisions and the significant devaluation and volatility of the real.  Moreover, the political crisis could worsen economic conditions in Brazil, which may adversely affect our results of operations and financial condition.  It is also difficult to assess the impact that the Brazilian political scenario will have in the Brazilian economy, including uncertainty regarding elections in Brazil to occur in 2018, and as a result on our future operations and financial results and on the confidence of investors and the general public.

8

 

Consumption of beer, other alcoholic beverages and soft drinks in many of the jurisdictions in which we operate, including Brazil, is closely linked to general economic conditions, such that levels of consumption tend to rise during periods of rising per capita income and to fall during periods of declining per capita income. Additionally, per capita consumption is inversely related to the sale price of our products.  Besides moving in concert with changes in per capita income, consumption of beer and other alcoholic beverages also varies in accordance with changes in disposable income.  Any decrease in disposable income resulting from an increase in inflation, income taxes, cost of living, unemployment levels, political or economic instability or other factors would likely adversely affect the demand for beer, other alcoholic beverages, soft drinks and other non-alcoholic beverages, as well as our results of operations.  Moreover, the recent instability and uncertainty in the Brazilian economic and political scenario may adversely affect the demand for our products, which in turn may negatively impact our operations and financial results.

Our results of operations are affected by fluctuations in exchange rates, and devaluation of the real relative to other currencies, including the U.S. dollar, which may adversely affect our financial performance.

Most of our sales are in reais; however, a relevant portion of our debt is denominated in foreign currencies, including U.S. dollars.  In addition, a significant portion of our cost of sales in 2017, in particular those related to packaging such as cans and bottles made of polyethylene terephthalate, or PET, as well as sugar, hops and malt are also denominated in or linked to the U.S. dollar, which was very volatile in recent years.  Therefore, any devaluation of the real when compared to those foreign currencies may increase our financial expenses and operating costs and could affect our ability to meet our foreign currency obligations.  Although our current policy is to hedge substantially all of our U.S. dollar-denominated debt and cost of sales against changes in foreign exchange rates, we cannot assure you that such hedging will be possible or available at reasonable costs at all times in the future.

In addition, we have historically reported our consolidated results in reais. In 2017, we derived 45.0% of our net revenues from operating companies that have functional currencies that are not reais (that is, in most cases, the local currency of the respective operating company). Consequently, any change in exchange rates between our operating companies’ functional currencies and reais will affect our consolidated income statement and balance sheet. Decreases in the value of our operating companies’ functional currencies against reais will tend to reduce those operating companies’ contributions in terms of our financial condition and results of operations.

We also incur currency transaction risks whenever one of our operating companies enters into transactions using currencies other than their respective functional currencies, including purchase or sale transactions and the issuance or incurrence of debt. Although we have hedging policies in place to manage commodity price and foreign currency risks to mitigate our exposure to currencies other than our operating companies’ functional currencies, there can be no assurance that such policies will be able to successfully hedge against the effects of such foreign exchange exposure, particularly over the long term.

The Brazilian currency has devalued frequently, including during the last two decades.  Throughout this period, the Brazilian government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations and periodic mini-devaluations, during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets.  There have been significant fluctuations in the exchange rates between Brazilian currency and the U.S. dollar and other currencies. For example, beginning in 2011, the U.S. dollar appreciated 12.5%, 8.9%, 14.6%, 13.4% and 47.0% against the real in 2011, 2012, 2013, 2014 and 2015, respectively, closing at R$3.905 per U.S. $1.00 as of December 31, 2015.  However, the U.S. dollar depreciated 16.5% against the real in 2016, closing at R$3.259 per U.S.$1.00 as of December 31, 2016, while in 2017, the U.S. dollar appreciated 1.5% against the real in 2017, closing at R$3.308 per U.S.$1.00 as of December 31, 2017. As of March 6, 2018, the exchange rate was R$3.225 per US$1.00.

9

 

Devaluation of the real relative to the U.S. dollar may create additional inflationary pressures in Brazil by generally increasing the price of imported products and requiring recessionary governmental policies to curb aggregate demand.  On the other hand, further appreciation of 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.

Increases in taxes levied on beverage products in Brazil and unfair competition arising from tax evasion may adversely affect our results and profitability.

Increases in Brazil’s already high levels of taxation could adversely affect our profitability.  Increases in taxes on beverage products usually result in higher beverage prices for consumers.  Higher beverage prices generally result in lower levels of consumption and, therefore, lower net sales.  Lower net sales result in lower margins because some of our costs are fixed and thus do not vary significantly based on the level of production.  We cannot assure you that the Brazilian government will not increase current tax levels, at both state and/or federal levels, and that this will not impact our business.  In January 2015 the Brazilian federal government enacted Law No. 13,097, which introduced a new federal taxation model for beer and soft drinks. The law is a result of the combined efforts of the Brazilian federal government and beverage companies with a view to creating a less complex and more predictable tax system for the industry. The new tax model came into force on May 1, 2015. Among other changes, the new set of rules establishes that the Excise Tax (Imposto sobre Produtos Industrializados), or the IPI Excise Tax, the Social Integration Program Contribution (Programa de Integração Social), or the PIS Contribution and the Social Security Funding Contribution (Contribuição para Financiamento da Seguridade Social), or the COFINS, are due by manufacturers and wholesalers and shall be calculated based on the respective sales price (ad valorem). Under the previous legislation, the referred taxes were due exclusively by the manufacturer at fixed amounts per liter of beer or soft drink produced (ad rem).

Moreover, in 2015 the States of São Paulo, Rio de Janeiro, Minas Gerais, Distrito Federal, Rio Grande do Sul, Ceará, Amapá, Rondonia, Amazonas, Tocantins, Piauí, Maranhão, Rio Grande do Norte, Bahia, Pernambuco, Paraíba, Alagoas, Sergipe and Mato Grosso do Sul increased their ICMS Value-Added Tax rate applicable to beer and/or soft drinks. In 2016, the States of Rio de Janeiro and Acre also increased their respective ICMS Value-Added Tax rates, scheduled to take effect in early 2017. In 2017, the States of Goiás and Amazonas increased their soft drinks and beer ICMS rates, respectively, which will become effective in early 2018.  No assurance can be given that the Brazilian government, at both state and/or federal levels, will not consider further tax increases on beverages in the future.

In addition, the Brazilian beverage industry experiences unfair competition arising from tax evasion, which is primarily due to the high level of taxes on beverage products in Brazil.  An increase in taxes may lead to an increase in tax evasion, which could result in unfair pricing practices in the industry.  In 2008, the federal government issued regulations requiring the mandatory installation of production (volume) control systems, known as “SICOBE,” in all Brazilian beer and carbonated soft drinks, or CSD, factories in order to assist governments to fight tax evasion in the beverage industry.  Though the objective of reducing tax evasion was achieved for federal taxes, and while state governments did start using data from the SICOBE in order to identify potential state tax evasion, there was still no assurance that unfair competition arising from tax evasion was, or would be, eliminated from the Brazilian beverage industry. Nonetheless, the mandatory implementation of SICOBE was suspended in December 2016 and the Brazilian federal government and regulators are developing a new system with state-of-the-art technology, aimed to reduce costs.  Despite many discussions with the Brazilian government regarding a new system for implementation, there is not yet any agreement on this subject.  

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.

10

 

Actions taken by the Brazilian government concerning the economy may have important effects on Brazilian corporations and other entities, including Ambev, and on market conditions and prices of Brazilian securities.  Our financial condition and results of operations may be adversely affected by the following factors and the Brazilian government’s response to the following factors:

·devaluations and other exchange rate movements;

·inflation;

·investments;

·exchange control policies;

·employment levels and labor regulation;

·social instability;

·price instability;

·energy shortages;

·water rationing;

·interest rates and monetary policy;

·liquidity of domestic capital and lending markets;

·growth or downturn of the Brazilian economy;

·import and export controls;

·exchange controls and restrictions on remittances abroad;

·fiscal policy and changes in tax laws; and

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

Our Latin America South operations are subject to substantial risks relating to the businesses and operations conducted in Argentina and other South American countries.

We own 100% of the total share capital of Latin America South Investment, S.L., or LASI, the net revenues from which corresponded to 22.5% of our consolidated results of operations in 2017.  LASI is a holding company with operating subsidiaries in Argentina and other South American countries.  As a result, LASI’s financial condition and results of operations may be adversely affected by the political instability, fluctuations in the economy and governmental actions concerning the economy of Argentina and the other countries in which its subsidiaries operate and, consequently, affect our consolidated results.

For example, in the early 2000s, Argentina experienced political and economic instability.  A widespread recession occurred in 2002, including a 10.9% decrease in real GDP, high unemployment and high inflation.  In the past, the Argentine economic and social situation has rapidly deteriorated, and may quickly deteriorate in the future; we cannot assure you that the Argentine economy will not rapidly deteriorate as in the past.  Additionally, in 2017 the Argentinean peso underwent a significant devaluation, losing 17.2% of its value relative to the real, impacting the net assets, results and cash flows of our Argentinean operations. The 2017 devaluation of the peso relative to the real, and further devaluations of the peso in the future, if any, may decrease our net assets in Argentina, with a balancing entry in our equity.  See “—Risks Relating to Our Operations—Our results of operations are affected by fluctuations in exchange rates and devaluation of the real relative to other currencies, including the U.S. dollar, which may adversely affect our financial performance.”

11

 

In addition, on July 30, 2014 Argentina entered into a selective default of its restructured debt and, in early 2016, U.S. courts ruled that Argentina must make full payments to the remaining holdout bondholders. The devaluation of the Argentine peso, along with inflation and weak macroeconomic conditions in Argentina, could have a material adverse effect on our Latin America South operations and their results, as well as in our ability to transfer funds from and within Argentina.  Despite the election of a new presidential government that seems more committed to fiscal responsibility, our liquidity and operations and our ability to access funds from Argentina could be adversely affected to the extent the economic or political situation in Argentina deteriorates, or if foreign exchange restrictions are implemented in the country.

Risks Relating to Our Operations

We are subject to Brazilian and other antitrust regulations.

We have a substantial share of the beer market in Brazil and thus we are subject to constant monitoring by Brazilian antitrust authorities.  In addition, in connection with the 1999 business combination of Companhia Cervejaria Brahma, or Brahma, and Companhia Antarctica Paulista Indústria Brasileira de Bebidas e Conexos, or Antarctica, that shaped most of the Brazilian operations as currently conducted by us, we entered into a performance agreement with the Brazilian antitrust authorities, which required us to comply with a number of restrictions, including the divestment of certain assets.  Since July 28, 2008, we have been deemed to have complied with all those restrictions, according to Brazil’s highest antitrust authority, the Conselho Administrativo de Defesa Econômica (Administrative Council for Economic Defense), or the CADE.  Nevertheless, we cannot assure you that Brazilian antitrust regulation will not affect our business in the future.

Our participation in the Argentine beer market increased substantially following the acquisition of our interest in Quilmes Industrial Société Anonyme, or Quinsa.  Our operation in Argentina is subject to constant monitoring by Argentinean antitrust authorities.  We cannot assure you that Argentinean antitrust regulation will not affect our business in Argentina in the future.

We are subject to regulation on alcoholic and CSD beverages in the countries in which we operate.

Our business is regulated by federal, state and municipal laws and regulations.  We may be subject to claims that we have not complied with existing laws and regulations, which could result in fines and penalties.  In addition, we may also be subject to laws and regulations aimed at reducing the availability of beer and carbonated soft drink, or CSD beverages, in some of our markets to address alcohol abuse, underage drinking, health concerns and other social issues.  For example, certain Brazilian states and small municipalities in which we operate have enacted legislation restricting the hours of operations of certain points of sale, prohibiting the sale of CSDs in schools and imposing restrictions on advertisement of alcoholic beverages.  The Brazilian Congress is also evaluating proposed regulation imposing hygienic seals on beverage cans, as well as regulation on the consumption, sales and marketing of alcoholic beverages, including beer which, if enacted, may impose restrictions on the advertisement of alcoholic beverage products on television during specified times of the day and the hours of operation of certain points of sale, among other things.  In addition, there are legal proceedings pending before Brazilian courts that may lead to restrictions on advertisement of alcoholic beverages.  These rules and restrictions may adversely impact our results of operations.  For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation.”

In addition, there is a global trend of increasing regulatory restrictions with respect to the sale of alcoholic and CSD beverages.  Compliance with such regulatory restrictions can be costly and may affect earnings in the countries in which we operate.

If we do not successfully comply with applicable anti-corruption laws and regulations designed to combat governmental corruption in countries in which we sell our products, we could become subject to fines, penalties or other regulatory sanctions, as well as to adverse press coverage, which could cause our reputation and sales to suffer. 

Although we are committed to conducting business in a legal and ethical manner in compliance with local and international statutory requirements and standards applicable to our business, there is a risk that our management, employees or representatives may take actions that violate applicable laws and regulations prohibiting the making of improper payments to foreign government officials for the purpose of obtaining or keeping business, including laws relating to the 1997 OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions such as the U.S. Foreign Corrupt Practices Act, or the FCPA.

12

 

In addition, on January 29, 2014, the Brazilian government enacted Law No. 12,846/13 imposing strict liability on companies for acts of corruption perpetrated by their employees, or the Brazilian Antibribery Act (Lei Anticorrupção Brasileira). According to the Brazilian Antibribery Act, companies found guilty of bribery could face fines of up to 20% of their gross annual income for the previous year or, if gross income cannot be estimated, such fines could range from R$6 thousand to R$60 million. Among other penalties, the Brazilian Antibribery Act also provides for the disgorgement of illegally obtained benefits, the suspension of corporate operations, asset confiscation and corporate dissolution. The adoption of an effective compliance program may be taken into consideration by Brazilian authorities when applying a penalty under the Brazilian Antibribery Act.

Despite the new Brazilian Antibribery Act, Brazil still has a perceived elevated risk of public corruption, which may, to a certain degree, leave us exposed to potential violations of the FCPA or other anti-bribery laws.  For example, a number of high profile corporate corruption allegations have surfaced, principally since the beginning of 2014. See “—D. Risk Factors—Risks Relating to Brazil and Other Countries in Which We Operate—Economic and political uncertainty and volatility in Brazil, and the perception of these conditions in the international financial markets, may adversely affect our business.” In that respect, Brazilian authorities currently investigating alleged corruption cases have in the past released a list of companies that had contracted consulting services from a firm part-owned by a former elected government official who has been convicted of corruption and racketeering by Brazil’s highest court.  Years ago, we retained the services of this consulting firm in connection with a specific matter and, thus, have been cited among these consultant’s clients.  We have reviewed our internal control and compliance procedures in relation to these services and have not identified any evidence of misconduct.

Although we have implemented what we understand to be a very robust compliance and anti-corruption program to detect and prevent violations of applicable anti-corruption laws, which includes a strict requirement prohibiting our employees and agents from violating these laws, there remains some degree of risk that improper conduct could occur, thereby exposing us to potential liability and the costs associated with investigating potential misconduct.  Our existing internal controls and compliance procedures may not be sufficient to prevent or detect all inappropriate conduct, fraud or violations of applicable law by our employees, agents, and the companies to which we outsource certain of our business operations.  If we are not in compliance with anti-corruption laws, anti-money laundering laws and other laws governing the conduct of business with government entities, including under the FCPA and Brazilian Antibribery Act, we may be subject to criminal and civil penalties and other remedial measures, which could harm our brand and reputation and have a material adverse impact on our business, financial condition, results of operations and prospects. Another potential fallout from having our name or brands associated with any misconduct is adverse press coverage, which, even if unwarranted or baseless, could damage our reputation, brands and sales.  Therefore, if we become involved in any investigations, subpoenas or other proceedings under the FCPA, the Brazilian Antibribery Act or other applicable anti-corruption statutes, our business could be adversely affected.

Volatility in commodities prices may adversely affect our financial performance.

A significant portion of our cost of sales is comprised of commodities such as aluminum, sugar, corn, wheat and PET bottles, the prices of which fluctuated significantly in 2017.  An increase in commodities prices directly affects our consolidated operating costs.  Although our current policy is to mitigate our exposure risks to commodity prices whenever financial instruments are available, we cannot assure that such hedging will be possible or available at reasonable costs at all times in the future.

Set forth below is a table showing the volatility in 2017 prices of the principal commodities we purchase:

Commodity	High Price	Low Price	Average in 2017	Fluctuation
Aluminum (US$/ton)	2,284.00	1,685.00	1,980.13	35.5%
Sugar (US$ cents/pounds)	21.18	12.55	15.78	68.8%
Corn (US$ cents/bushel)	392.25	329.50	359.22	19.0%
Wheat (US$ cents/bushel)	539.25	387.25	435.76	39.3%
PET (US$/ton)	1,045.63	892.50	970.91	17.2%

 Sources: Aluminum LME, Sugar ICE, Corn CBOT, Wheat CBOT and PET IHS (formerly CMAI).                                                                                                              

13

 

Contractual and legal restrictions to which Ambev and its subsidiaries are potentially or allegedly subject may be triggered upon the consummation of certain transactions involving our indirect controlling shareholder, Anheuser-Busch InBev SA/NV, or ABI, resulting in adverse limitations to our operations.

Ambev and its subsidiaries are a party to certain joint venture, distribution and other agreements, guarantees and instruments that may contain restrictive provisions that our contractual counterparties may try to interpret as being triggered upon the consummation of certain unrelated transactions of ABI.  Some of those contracts may be material and, to the extent they may contain any such restrictive provisions, our counterparties may seek to enforce certain contractual remedies that may curtail material contractual rights and benefits that we have thereunder under the argument that ABI’s consummation of certain transactions has triggered the referred provisions.  Similarly, unrelated transactions consummated by ABI may subject us to further antitrust restrictions in the countries in which we already operate.  Any such restrictions may limit the amount and quality of business we conduct in each of those countries.

Competition could lead to a reduction of our margins, increase costs and adversely affect our profitability.

We compete with both brewers and other beverages companies and our products compete with other beverages. Globally, brewers, as well as other players in the beverage industry, compete mainly on the basis of brand image, price, quality, distribution networks and customer service. Consolidation has significantly increased the capital base and geographic reach of our competitors in some of the markets in which we operate, and competition is expected to increase further as the trend towards consolidation among companies in the beverage industry continues.

Concurrently, competition in the beverage industry is expanding and the market is becoming more fragmented, complex and sophisticated as consumer preferences and tastes evolve. Competition may divert consumers and customers from our products.  Competition in our various markets could cause us to reduce pricing, increase capital investment, increase marketing and other expenditures, prevent us from increasing prices to recover higher costs, and thereby cause us to reduce margins or lose market share.  Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.  Innovation faces inherent risks, and the new products we introduce may not be successful, while competitors may be able to respond more quickly than we can to emerging trends.

Additionally, the unfair pricing practices in some markets and the lack of transparency, or even certain illicit practices, such as tax evasion and corruption, may skew the competitive environment, with material adverse effects on our profitability or ability to operate.

The ability of our foreign subsidiaries to distribute cash upstream may be subject to various conditions and limitations.

Our foreign subsidiaries’ ability to distribute cash (to be used, among other things, to meet our financial obligations) through dividends, intercompany advances, management fees and other payments is, to a large extent, dependent on the availability of cash flows at the level of such foreign subsidiaries and may be restricted by applicable laws and accounting principles.  In particular, 45.0% (R$21.5 billion) of our total net revenues of R$47.9 billion in 2017 came from our foreign subsidiaries.  In addition, some of our subsidiaries are subject to laws restricting their ability to pay dividends or the amount of dividends they may pay.

If we are not able to obtain sufficient cash flows from our foreign subsidiaries, this could negatively impact our business, results of operations and financial condition because the insufficient availability of cash at our company level may constrain us from paying all of our obligations.

We rely on the reputation of our brands and damages to their reputation may have an adverse effect on our sales.

Our success depends on our ability to maintain and enhance the image and reputation of our existing products and to develop a favorable image and reputation for new products.  The image and reputation of our products may be reduced in the future; concerns about product quality, even when unfounded, could tarnish the image and reputation of our products.  An event or series of events that materially damages the reputation of one or more of our brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business.  Restoring the image and reputation of our products may be costly or not possible. 

14

 

Moreover, our marketing efforts are subject to restrictions on the permissible advertising style, media and messages used.  In a number of countries, for example, television is a prohibited channel for advertising beer and other alcoholic products, and in other countries, television advertising, while permitted, is carefully regulated.  Any additional restrictions in such countries, or the introduction of similar restrictions in other countries, may constrain our brand building potential and thus reduce the value of our brands and related revenues.

Negative publicity focusing on our products or on the way we conduct our operations may harm our business.

Media coverage and publicity generally can exert significant influence on consumer behavior and actions.  If the social acceptability of beer, other alcoholic beverages or soft drinks were to decline significantly, sales of our products could materially decrease.  In recent years, there has been increased public and political attention directed at the alcoholic beverage and soft drink industries.  This attention is a result of public concern over alcohol-related problems, including drunk driving, underage drinking, drinking while pregnant and health consequences resulting from the misuse of beer (for example, alcoholism), as well as soft-drink related problems, including health consequences resulting from the excessive consumption of soft drinks (for example, obesity).  Factors such as negative publicity regarding the consumption of beer, other alcoholic beverages or soft drinks, publication of studies indicating a significant health risk from consumption of those beverages, or changes in consumer perceptions affecting them could adversely affect the sale and consumption of our products and harm our business, results of operations, cash flows or financial condition to the extent consumers and customers change their purchasing patterns.

Key brand names are used by us, our subsidiaries, associates and joint ventures, and licensed to third-party brewers.  To the extent that we or one of our subsidiaries, associates, joint ventures or licensees are subject to negative publicity, and the negative publicity causes consumers and customers to change their purchasing patterns, it could have a material adverse effect on our business, results of operations, cash flows or financial condition.  As we continue to expand our operations into emerging and growth markets, there is a greater risk that we may be subject to negative publicity, in particular in relation to labor rights and local work conditions.  Negative publicity that materially damages the reputation of one or more of our brands could have an adverse effect on the value of that brand and subsequent revenues from that brand or business, which could adversely impact our business, results of operations, cash flows and financial condition.

Demand for our products may be adversely affected by changes in consumer preferences and tastes.

We depend on our ability to satisfy consumer preferences and tastes.  Consumer preferences and tastes can change in unpredictable ways due to a variety of factors, such as changes in demographics, consumer health concerns regarding obesity, product attributes and ingredients, changes in travel, vacation or leisure activity patterns, weather, negative publicity resulting from regulatory action or litigation against us or comparable companies or a downturn in economic conditions.  Consumers also may begin to prefer the products of competitors or may generally reduce their demand for products of our business segment.  Failure by us to anticipate or respond adequately to changes in consumer preferences and tastes could adversely impact our business, results of operations and financial condition.

Seasonal consumption cycles and adverse weather conditions may result in fluctuations in demand for our products.

Seasonal consumption cycles and adverse weather conditions in the markets in which we operate may have an impact on our operations.  This is particularly true in the summer months, when unseasonably cool or wet weather can affect sales volumes.

15

 

If any of our products is defective or found to contain contaminants, we may be subject to product recalls or other liabilities.

We take precautions to ensure that our beverage products and our associated packaging materials (such as bottles, crowns, cans and other containers) meet accepted food safety and regulatory standards. Such precautions include quality‑control programs for primary materials, the production process and our final products.  We have established procedures to correct issues or concerns that are detected.

In the event that any failure to comply with accepted food safety and regulatory standards (such as a contamination or a defect) does occur in the future, it may lead to business interruptions, product recalls or liability, each of which could have an adverse effect on our business, reputation, prospects, financial condition and results of operations.

Although we maintain insurance policies against certain product liability (but not product recall) risks, we may not be able to enforce our rights in respect of these policies, and, in the event that a contamination or defect occurs, any amounts that we recover may not be sufficient to offset any damage we may suffer, which could adversely impact our business, results of operations and financial condition.

We may not be able to protect our intellectual property rights.

Our future success depends significantly on our ability to protect our current and future brands and products and to defend our intellectual property rights, including trademarks, patents, domain names, trade secrets and know-how.  We have been granted numerous trademark registrations and patents covering our brands and products and have filed, and expect to continue to file, trademark and patent applications seeking to protect newly developed brands and products.  We cannot be sure that trademark and patent registrations will be issued with respect to any of our applications.  There is also a risk that we could, by omission, fail to renew a trademark or patent on a timely basis or that our competitors will challenge, invalidate or circumvent any existing or future trademarks and patents issued to, or licensed by, us.

Although we have put in place appropriate actions to protect our portfolio of intellectual property rights (including patent applications, trademark registration and domain names), we cannot be certain that the steps we have taken will be sufficient or that third parties will not infringe upon or misappropriate proprietary rights.  If we are unable to protect our proprietary rights against infringement or misappropriation, it could have a material adverse effect on our business, results of operations, cash flows or financial condition, and in particular, on our ability to develop our business.

We rely on key third parties, including key suppliers, and the termination or modification of the arrangements with such third parties could negatively affect our business.

We rely on third‑party suppliers for a range of raw materials for our beer and non-beer products, and for packaging material, including aluminum cans, glass, kegs and PET bottles.  We seek to limit our exposure to market fluctuations in the supply of these raw materials by entering into medium- and long-term fixed‑price arrangements.  We have a limited number of suppliers of aluminum cans, glass and PET bottles.  Consolidation of the aluminum can industry, glass and PET bottle industry in certain markets in which we operate has reduced local supply alternatives and increased the risk of disruption to aluminum can, glass and PET bottle supplies.  Although we generally have other suppliers of raw materials and packaging materials, the termination of or material change to arrangements with certain key suppliers, disagreements with those suppliers as to payment or other terms, or the failure of a key supplier to meet our contractual obligations or otherwise deliver materials consistent with current usage would or may require us to make purchases from alternative suppliers, in each case at potentially higher prices than those agreed with this supplier. Additionally, we may be subject to potential reputational damage if one of our suppliers violates applicable laws or regulations. These factors could have a material adverse effect on our business, results of operations, cash flows or financial condition.

For certain packaging supplies, raw materials and commodities, we rely on a small number of important suppliers.  If these suppliers became unable to continue to meet our requirements, and we are unable to develop alternative sources of supply, our operations and financial results could be adversely affected.

16

 

We are exposed to the risk of litigation.

We are now and may in the future be party to legal proceedings and claims (including labor, tax and alcohol-related claims) and significant damages may be asserted against us.  See “Item 8. Financial Information—A. Consolidated Financial Statements and Other Financial Information—Legal Proceedings” and notes 26 and 30 to our audited consolidated financial statements as of and for December 31, 2017, included elsewhere in this annual report, for a description of our material litigation contingencies.  Given the inherent uncertainty of litigation, it is possible that we might incur liabilities as a consequence of the proceedings and claims brought against us, including those that are not currently believed by us to present a reasonably possible chance of loss to us.

Our tax contingency has grown in recent years mainly because their principal amount is adjusted on a monthly basis in accordance with the SELIC rate and because of the highly litigious environment in Brazil in connection with tax disputes. Such environment is caused, among other reasons, by the highly complex tax legislation in Brazil, which in many instances reduces certainty of interpretation, as well as impossibility of out of court settlements between the Brazilian IRS and taxpayers. As the administrative phase of our tax proceedings ends and the judicial proceedings begin, the Company will be required to guarantee the amounts under discussion, through insurance bonds, bank guarantees or bank deposits. We will continue to vigorously defend our position in connection with such disputes and we may take, as we have done in the past, the benefit of tax amnesty programs that from time to time are issued by the Federal or State Governments.

Moreover, companies in the alcoholic beverage and soft drink industries are, from time to time, exposed to collective suits (class actions) or other litigation relating to alcohol advertising, alcohol abuse problems or health consequences from the excessive consumption of beer, other alcoholic beverages and soft drinks. As an illustration, certain beer and other alcoholic beverage producers from Brazil and Canada have been involved in class actions and other litigation seeking damages. If any of these types of litigation were to result in fines, damages or reputational damage to us or our brands, this could have a material adverse effect on our business, results of operations, cash flows or financial position. 

We may not be able to recruit or retain key personnel.

In order to develop, support and market our products, we must hire and retain skilled employees with particular expertise.  The implementation of our strategic business plans could be undermined by a failure to recruit or retain key personnel or the unexpected loss of senior employees, including in acquired companies.  We face various challenges inherent in the management of a large number of employees over diverse geographical regions.  Key employees may choose to leave their employment for a variety of reasons, including reasons beyond our control.  The impact of the departure of key employees cannot be determined and may depend on, among other things, our ability to recruit other individuals of similar experience and skill at an equivalent cost.  It is not certain that we will be able to attract or retain key employees and successfully manage them, which could disrupt our business and have an unfavorable material effect on our financial position, income from operations and competitive position.

Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business or operations, and water scarcity or poor quality could negatively impact our production costs and capacity.

There is a growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters.  In the event that such climate change has a negative effect on agricultural productivity, we may be subject to decreased availability or less favorable pricing for certain agricultural commodities that are necessary for our products, such as barley, hops, sugar and corn.  In addition, public expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs and may require us to make additional investments in facilities and equipment due to increased regulatory pressures.  As a result, the effects of climate change could have a long-term, material adverse impact on our business and results of operations.

We also face water scarcity and quality risks.  The availability of clean water is a limited resource in many parts of the world, facing unprecedented challenges from climate change and the resulting change in precipitation patterns and frequency of extreme weather, overexploitation, increasing pollution, and poor water management.  We have implemented an internal strategy in order to considerably reduce the use of water in our operative plants.  However, as demand for water continues to increase around the world, and as water becomes scarcer and the quality of available water deteriorates, we may be affected by increasing production costs or capacity constraints, which could adversely affect our business and results of operations.

17

 

Our operations are subject to safety and environmental regulations, which could expose us to significant compliance costs and litigation relating to environmental issues.

Our operations are subject to safety and environmental regulations by national, state and local agencies, including, in certain cases, regulations that impose liability without regard to fault.  These regulations can result in liability that might adversely affect our operations.  The environmental regulatory climate in the markets in which we operate is becoming stricter, with greater emphasis on enforcement.

While we have budgeted for future capital and operating expenditures to maintain compliance with environmental laws and regulations, there can be no assurance that we will not incur substantial environmental liability or those applicable environmental laws and regulations will not change or become more stringent in the future.

We operate a joint venture in Cuba, in which the Government of Cuba is our joint venture partner.  Cuba is still targeted by broad and comprehensive economic and trade sanctions of the United States.  Our operations in Cuba may adversely affect our reputation and the liquidity and value of our securities.  

In January 2014, one of our wholly-owned subsidiaries acquired from ABI, a controlling interest of 50% in Cerveceria Bucanero S.A., or Bucanero, a Cuban company in the business of producing and selling beer.  The other 50% equity interest in Bucanero is owned by the Government of Cuba.  We have the right to appoint the general manager of Bucanero.  Bucanero’s main brands are Bucanero and Cristal, but it also imports and sells in Cuba other brands produced by certain of our other subsidiaries. In 2017, Bucanero sold 1.8 million hectoliters of beer, representing about 1.0% of our total volume of 162.8 million hectoliters for the year.  Although Bucanero production is primarily sold in Cuba, a small portion of its production is exported to and sold by certain distributors in other countries outside Cuba (but not the United States).

Based on U.S. foreign policy, the U.S. Treasury Department’s Office of Foreign Assets Control and the U.S. Commerce Department together administer and enforce broad and comprehensive economic and trade sanctions against Cuba.  These sanctions were strengthened by the Trump administration through a National Security Presidential Memorandum, issued on June 16, 2017, that, among other things, introduced prohibitions on certain financial transactions with certain entities and sub-entities identified by the U.S. Department of State. Although our operations in Cuba are quantitatively immaterial, our overall business reputation may suffer or we may face additional regulatory scrutiny as a result of our activities in Cuba based on the fact that Cuba remains a target of U.S. economic and trade sanctions.

In addition, there have in the past been initiatives by federal and state lawmakers in the United States, and certain U.S. institutional investors, including pension funds, to adopt laws, regulations or policies requiring the divestment from, or reporting of interests in, companies that do business with countries designated as state sponsors of terrorism.  Although the United States government ceased to identify Cuba as a state sponsor of terrorism in June 2015, this position may be revised by action of the U.S. government’s executive branch.  If U.S. government policy towards Cuba were to be reversed, with that country being once again designated as a state sponsor of terrorism, Cuba could return to being a target of possible restrictions for U.S. investment.  If U.S. investors decide to liquidate or otherwise divest their investments in companies that have operations of any magnitude in Cuba, the market in and value of our securities could be adversely impacted.

Also, the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (known as the “Helms-Burton Act”) authorizes private lawsuits for damages against anyone who traffics in property confiscated without compensation by the Government of Cuba from persons who at the time were, or have since become, nationals of the United States.  Although this section of the Helms-Burton Act is currently suspended by discretionary presidential action, the suspension may not continue in the future.  Claims accrue notwithstanding the suspension and may be asserted if the suspension is discontinued.  The Helms-Burton Act also includes a section that authorizes the U.S. Department of State to prohibit entry into the United States of non-U.S. persons who traffic in confiscated property, and corporate officers and principals of such persons, and their families.  In 2009, ABI received notice of a claim purporting to be made under the Helms-Burton Act relating to the use of a trademark by Bucanero, which is alleged to have been confiscated by the Cuban government and trafficked by ABI through their former ownership and management of us.  Although ABI and we have attempted to review and evaluate the validity of the claim, due to the uncertain underlying circumstances, we are currently unable to express a view as to the validity of such claim or as to the claimants’ standing to pursue it.

18

 

Information technology failures, including those that affect the privacy and security of sensitive customer and business information, could disrupt our operations.

We rely on information technology systems to process, transmit and store large amounts of electronic data, including personal information. A significant portion of the communication between our personnel, customers and suppliers depends on information technology. As with all large systems, our information systems may be vulnerable to a variety of interruptions due to events beyond our control, including, but not limited to, natural disasters, terrorist attacks, telecommunications failures, computer viruses, hackers attacks or other security issues.

We depend on information technology to enable us to operate efficiently and interface with customers, as well as to maintain in-house management and control. We also collect and store non-public personal information that customers provide to purchase products or services, including personal information and payment information. 

In addition, the concentration of processes in shared services centers means that any technology disruption could impact a large portion of our business within the operating regions we serve. Any transitions of processes to, from or within shared services centers as well as other transformational projects, could lead to business disruptions. If we do not allocate, and effectively manage, the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, loss of customers, operations disruptions, or the loss of or damage to intellectual property through a security breach. As with all information technology systems, our system could also be penetrated by outside parties with the purpose of extracting information, corrupting information or disrupting business processes.

We take various actions with the aim of minimizing potential technology disruptions but all of these protections may be compromised as a result of third-party security breaches, burglaries, cyberattack, errors by employees or employees of third-party vendors, of contractors, misappropriation of data by employees, vendors or unaffiliated third parties, or other irregularities that may result in persons obtaining unauthorized access to company data or otherwise disrupting our business. These or other similar technology disruptions can have a material adverse effect on our business, results of operations, cash flows or financial condition.

Natural and other disasters could disrupt our operations.

Our business and operating results could be negatively impacted by social, technical or physical risks such as earthquakes, hurricanes, flooding, fire, power loss, loss of water supply, telecommunications and information technology system failures, cyber-attacks, political instability, military conflict and uncertainties arising from terrorist attacks, including a global economic slowdown, the economic consequences of any military action and associated political instability.

Our insurance coverage may be insufficient to make us whole on any losses that we may sustain in the future.

The cost of some of our insurance policies could increase in the future.  In addition, some types of losses, such as losses resulting from wars, acts of terrorism, or natural disasters, generally are not insured because they are either uninsurable or it is not economically practical to obtain insurance.  Moreover, insurers recently have become more reluctant to insure against these types of events.  Should a material uninsured loss or a loss in excess of insured limits occur, this could adversely impact our business, results of operations and financial condition.

19

 

Risks Relating to Our Common Shares and ADSs

The relative volatility and illiquidity of securities of Brazilian companies may substantially limit your ability to sell our common shares and ADSs at the price and time you desire.

Investing in securities of companies in emerging markets, such as Brazil, involves greater risk than investing in securities of companies from more developed countries, and those investments are generally considered speculative in nature.  Brazilian investments, such as investments in our common shares and ADSs, are subject to economic and political risks, involving, among other factors:

·changes in the Brazilian regulatory, tax, economic and political environment that may affect the ability of investors to receive payment, in whole or in part, in respect of their investments; and

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

The Brazilian securities markets are substantially smaller, less liquid and more concentrated and volatile than major U.S. and European securities markets.  They are also not as highly regulated or supervised as those other markets.  The relative illiquidity and smaller market capitalization of Brazilian securities markets may substantially limit your ability to sell the Ambev common shares and ADSs at the price and time you desire.

Deterioration in economic and market conditions in other emerging market countries, as well as in developed economies, may adversely affect the market price of our common shares and ADSs.

Economic and market conditions in other emerging market countries, especially those in Latin America, influence the market for securities issued by Brazilian companies as well as investors’ perception of economic conditions in Brazil.  In addition, global financial crisis originating in developed economies, including the subprime debt crisis in the United States and the sovereign debt crisis in Europe, have had an impact on many economies and capital markets around the world, including Brazil, which may adversely affect investors’ interest in the securities of Brazilian issuers such as Ambev.  Therefore, the market value of our common shares and ADSs may be adversely affected by events occurring outside of Brazil.

Our current controlling shareholders will be able to determine the outcome of our most significant corporate actions.

Our two direct controlling shareholders, Interbrew International B.V., or IIBV, and AmBrew S.A., or AmBrew, both of which are subsidiaries of ABI, together with Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência, or FAHZ, held in aggregate 72.1% of our total and voting capital stock (excluding treasury shares) as of December 31, 2017.

ABI indirectly held shares in us representing 61.9% of our total and voting capital stock (excluding treasury shares) as of December 31, 2017.  ABI thus has control over us, even though (1) ABI remains subject to the Ambev shareholders’ agreement among IIBV, AmBrew and FAHZ dated April 16, 2013, or the Ambev Shareholders’ Agreement, and (2) ABI is controlled by Stichting Anheuser-Busch InBev (formerly Stichting InBev and Stichting Interbrew), or Stichting, a foundation organized under the laws of the Netherlands, which represents an important part of interests of Messrs. Jorge Paulo Lemann, Marcel Herrmann Telles and Carlos Alberto da Veiga Sicupira, or BRC, and the founding families that were the former controlling shareholders of Interbrew N.V./S.A. (as ABI was then called), or the Interbrew Founding Families.  For further information on these matters see “Item 4. Information on the Company—A. History and Development of the Company—The InBev-Ambev Transactions” and “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement.”

Our controlling shareholders are able to elect the majority of the members of our Board of Directors and Fiscal Council, and generally determine the outcome of most other actions requiring shareholder approval, including dividend distributions, the consummation of corporate restructurings, issuances of new shares, sales of materials assets and bylaw amendments.  Under Brazilian Law No. 6,404/76, as amended, or the Brazilian Corporation Law, the protections afforded to non-controlling security holders may differ from, or be less comprehensive than, the corresponding protections and fiduciary duties of directors applicable in the U.S. or other jurisdictions.  See “—As a Brazilian company, Ambev is subject to different corporate laws and regulations than those typically applicable to U.S.-listed companies, which may result in Ambev’s shareholders having fewer or less well-defined shareholder rights than the shareholder rights of those companies.”

20

 

Our shareholders may not receive any dividends.

According to our bylaws, we generally pay our shareholders 40% of our annual adjusted net income, calculated and adjusted pursuant to Brazilian Corporation Law in accordance with the mechanisms described in our bylaws as presented in our consolidated financial statements prepared under IFRS.  The main sources for these dividends are cash flows from our operations and dividends from our operating subsidiaries.  Therefore, that net income may not be available to be paid out to our shareholders in a given year.  In addition, we might not pay dividends to our shareholders in any particular fiscal year upon the determination of the Board of Directors that any such distribution would be inadvisable in view of our financial condition.  While the law does not establish the circumstances rendering the payment of dividends inadvisable, it is generally agreed that a company need not pay dividends if such payment threatens its existence as a going concern or harms its normal course of operations.  Any dividends not distributed would be allocated to a special reserve account for future payment to shareholders, unless it is used to offset subsequent losses or as otherwise provided for in our bylaws.  It is possible, therefore, that our shareholders will not receive dividends in any particular fiscal year.

Brazilian foreign exchange controls and regulations could restrict conversions and remittances abroad of the dividend payments and other shareholder distributions paid in Brazil in reais in respect of the Ambev common shares (including shares underlying the Ambev ADSs).

Brazilian law provides that whenever there is a serious imbalance in Brazil’s balance of payments or reasons to foresee such a serious imbalance, the Brazilian government may impose temporary restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil.  For example, for approximately six months in 1989 and early 1990 the Brazilian government froze all dividend and capital repatriations that were owed to foreign equity investors and had their remittance abroad withheld by the Central Bank in order to conserve Brazil’s foreign currency reserves at the time.  These amounts were subsequently released in accordance with Brazilian government directives.  Similar measures could be taken by the Brazilian government in the future.

As a result, the Brazilian government may in the future restrict the conversion and remittance abroad, to ADS holders or holders of Ambev common shares residing outside Brazil, of dividend payments and other shareholder distributions paid in Brazil in reais in respect of the Ambev common shares (including shares underlying the Ambev ADSs).  The likelihood that the Brazilian government would impose such restrictions may be affected by the extent of Brazil’s foreign currency reserves, the availability of foreign currency in the foreign exchange markets on the date a payment is due, the size of Brazil’s debt service burden relative to the economy as a whole and other factors.  We cannot assure you that the Central Bank will not modify its policies or that the Brazilian government will not institute restrictions or delays on cross-border remittances in respect of securities issued in the international capital markets.  For further information on this matter, see “—A. Selected Financial Data—Exchange Rate Information—Exchange Controls.”

If you exchange your Ambev ADSs for the respective Ambev common shares underlying those ADSs, you risk losing some Brazilian tax and foreign currency remittance advantages.

The Ambev ADSs benefit from the foreign capital registration that The Bank of New York Mellon, as depositary of Ambev’s ADS program, or the Depositary, has in Brazil, which permits it to convert dividends and other distributions with respect to the Ambev common shares underlying the Ambev ADSs into foreign currency and remit the proceeds of such conversion abroad.  If you exchange your Ambev ADSs for the respective Ambev common shares underlying those ADSs, you will be entitled to rely on the Depositary’s foreign capital registration for only five business days from the date of such exchange.  After this five business day period, you will not be able to remit abroad non-Brazilian currency unless you obtain your own foreign capital registration.  In addition, gains with respect to Ambev common shares will be subject to a less favorable tax treatment unless you obtain your own certificate of foreign capital registration or register your investment in the Ambev common shares with the Central Bank pursuant to Resolution No. 4,373.  For a more complete description of Brazilian restrictions on foreign investments and Brazilian foreign investment regulations, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Restrictions on Foreign Investment” and “—A. Selected Financial Data—Exchange Rate Information—Exchange Controls.”  For a more complete description of Brazilian tax regulations, including any potential risks regarding the possibility that the sale or disposition of ADSs by a Non-Brazilian Holder may be subject to capital gains tax in Brazil, see “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations.”

21

 

As a Brazilian company, Ambev is subject to different corporate laws and regulations than those typically applicable to U.S.-listed companies, which may result in Ambev’s shareholders having fewer or less well-defined shareholder rights than the shareholder rights of those companies.

Ambev’s corporate affairs are governed by its bylaws and the Brazilian Corporation Law, which may differ from the legal principles that would apply to Ambev if the company were incorporated in a jurisdiction in the United States, such as Delaware or New York, or in other jurisdictions outside of Brazil.  In addition, shareholder rights under the Brazilian Corporation Law to protect them from actions taken by the board of directors or controlling shareholders may be fewer and less well-defined than under the laws of jurisdictions outside of Brazil.

Although insider trading and price manipulation are restricted under applicable Brazilian capital markets regulations and treated as crimes under Brazilian law, the Brazilian securities markets may not be as highly regulated and supervised as the securities markets of the United States or other jurisdictions outside Brazil.  In addition, rules and policies against self-dealing and for the preservation of shareholder interests may be less well-defined and enforced in Brazil than in the United States or other jurisdictions outside Brazil, potentially causing disadvantages to a holder of Ambev ADSs as compared to a holder of shares in a U.S. public company.  Further, corporate disclosures may be less complete or informative than required of public companies in the United States or other jurisdictions outside Brazil.

Certain shareholder entitlements may not be available in the U.S. to holders of Ambev ADSs.

Due to certain United States laws and regulations, U.S. holders of Ambev ADSs may not be entitled to all of the rights possessed by holders of Ambev common shares.  For instance, U.S. holders of Ambev ADSs may not be able to exercise preemptive, subscription or other rights in respect of the Ambev common shares underlying their Ambev ADSs, unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements thereunder is available. 

Holders of Ambev ADSs may be unable to fully exercise voting rights with respect to the Ambev shares underlying their ADSs.

Under Brazilian law, only shareholders registered as such in the corporate books of Brazilian companies may attend shareholders’ meetings.  Because all the Ambev common shares underlying the Ambev ADSs are registered in the name of the Depositary (and not the ADS holder), only the Depositary (and not the ADS holder) is entitled to attend Ambev’s shareholders’ meetings.  A holder of Ambev ADSs is entitled to instruct the Depositary as to how to vote the respective Ambev common shares underlying their ADSs only pursuant to the procedures set forth in the deposit agreement for Ambev’s ADS program.  Accordingly, holders of Ambev ADSs will not be allowed to vote the corresponding Ambev common shares underlying their ADSs directly at an Ambev shareholders’ meeting (or to appoint a proxy other than the Depositary to do so), unless they surrender their Ambev ADSs for cancellation in exchange for the respective Ambev shares underlying their ADSs.  We cannot ensure that such ADS cancellation and exchange process will be completed in time to allow Ambev ADS holders to attend a shareholders’ meeting of Ambev.

Further, the Depositary has no obligation to notify Ambev ADS holders of an upcoming vote or to distribute voting cards and related materials to those holders, unless Ambev specifically instructs the Depositary to do so.  If Ambev provides such instruction to the Depositary, it will then notify Ambev’s ADS holders of the upcoming vote and arrange for the delivery of voting cards to those holders.  We cannot ensure that Ambev’s ADS holders will receive proxy cards in time to allow them to instruct the Depositary as to how to vote the Ambev common shares underlying their Ambev ADSs.  In addition, the Depositary and its agents are not responsible for a failure to carry out voting instructions or for an untimely solicitation of those instructions.

As a result of the factors discussed above, holders of Ambev ADSs may be unable to fully exercise their voting rights.

22

 

Future equity issuances may dilute the holdings of current holders of Ambev common shares or ADSs and could materially affect the market price for those securities.

We may in the future decide to offer additional equity to raise capital or for other purposes.  Any such future equity offering could reduce the proportionate ownership and voting interests of holders of our common shares and ADSs, as well as our earnings and net equity value per common share or ADS.  Any offering of shares and ADSs by us or our main shareholders, or a perception that any such offering is imminent, could have an adverse effect on the market price of these securities.

Our status as a foreign private issuer allows us to follow Brazilian corporate governance practices and exempts us from a number of rules under the U.S. securities laws and listing standards, which may limit the amount of public disclosures available to investors and the shareholder protections afforded to them.

We are a foreign private issuer, as defined by the Securities and Exchange Commission, or the SEC, for purposes of the Exchange Act.  As a result, we are exempt from many of the corporate governance requirements of stock exchanges located in the United States, as well as from rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act.  For example, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions under Section 16 of the Exchange Act.  Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.  Accordingly, there may be less publicly available information concerning us than there is for U.S. public companies.

In addition, for so long as we remain as a foreign private issuer, we will be exempt from most of the corporate governance requirements of stock exchanges located in the United States.  Accordingly, you will not be provided with some of the benefits or have the same protections afforded to shareholders of U.S. public companies.  The corporate governance standards applicable to us are considerably different than the standards applied to U.S. domestic issuers.  For example, although Rule 10A-3 under the Exchange Act generally requires that a company listed in the United States have an audit committee of its board of directors composed solely of independent directors, as a foreign private issuer we are relying on an exemption from this requirement under Rule 10A-3(c)(3) of the Sarbanes-Oxley Act of 2002 that is available to us as a result of features of the Brazilian Corporation Law applicable to our Fiscal Council.  In addition, we are not required under the Brazilian Corporation Law to, among other things:

·have a majority of our Board of Directors be independent (though our bylaws provide that two of our directors must be independent and, in certain circumstances pursuant to the Brazilian Corporation Law, our minority shareholders may be able to elect members to our Board of Directors);

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

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

·have at least one executive session of solely independent directors each year.

For further information on the main differences in corporate governance standards in the United States and Brazil, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Differences Between United States and Brazilian Corporate Governance Practices.”

Foreign holders of our ADSs may face difficulties in serving process on or enforcing judgments against us and other persons.

We are organized under the laws of Brazil and most of our directors and executive officers, as well as our independent registered public accounting firm, reside or are based in Brazil.  In addition, substantially all of our assets and those of these other persons are located in Brazil.  As a result, it may not be possible for foreign holders of our ADSs to expediently effect service of process upon us or those persons within the United States or other jurisdictions outside Brazil or to efficiently enforce against us or them judgments obtained in the United States or other jurisdictions outside Brazil.  Because judgments of U.S. courts for civil liabilities based upon the U.S. federal securities laws may only be enforced in Brazil if certain formal and procedural conditions are met (including non-violation of Brazilian national sovereignty, public policy and “good morals”), holders of our ADSs may face greater difficulties in protecting their interests in the context of legal, corporate or other disputes between them and us, our directors and/or our executive officers than would shareholders of a U.S. corporation.  In addition, a plaintiff (whether or not Brazilian) residing outside Brazil during the course of litigation in Brazil must provide a bond to guarantee court costs and legal fees if the plaintiff owns no real property in Brazil that could secure such payment.  The bond must have a value sufficient to satisfy the payment of court fees and defendant’s attorney fees, as determined by a Brazilian judge.  This requirement does not apply to (i) the enforcement of debt instruments or awards, including foreign judgments that have been duly recognized by the Brazilian Superior Court of Justice (Superior Tribunal de Justiça); (ii) counterclaims; and (iii) circumstances where the plaintiff or other intervening parties (regardless of citizenship) resides in a country that is a party to a treaty in force in Brazil that establishes that no security, bond or deposit of any kind is required by reason only of their foreign nationality (e.g., the Hague Convention on International Access to Justice).  Furthermore, Brazil does not have a treaty with the United States to facilitate or expedite the enforcement in Brazil of decisions issued by a state court in the United States, which shall necessarily be previously recognized by the Brazilian Superior Court of Justice in order to produce effects in Brazil. As to arbitral awards issued in the United States, it is important to note that Brazil has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Decree No. 4311/2002), and arbitral awards rendered outside of the Brazilian territory are enforceable if the requirements provided by such treaty are fulfilled, and the arbitral award is previously recognized by the Brazilian Superior Court of Justice.

23

 

Judgments of Brazilian courts with respect to our shares will be payable only in reais.

If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our common shares, we will not be required to discharge any such obligations in a currency other than reais.  Under Brazilian exchange control limitations, an obligation in Brazil to pay amounts denominated in a currency other than reais may only be satisfied in Brazilian currency at the exchange rate, as determined by the Central Bank, in effect on the date of the effective payment.  The then prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of, or related to, our obligations under our common shares. 

24

 

ITEM 4.                INFORMATION ON THE COMPANY

Ambev’s principal executive offices are located at Rua Dr. Renato Paes de Barros, 1017, 3rd floor, 04530‑001, São Paulo, SP, Brazil, and its telephone number and email are: +55 (11) 2122-1414 and ir@ambev.com.br.

A.            History and Development of the Company

Overview

We are the successor of Brahma and Antarctica, two of the oldest brewers in Brazil.  Antarctica was founded in 1885.  Brahma was founded in 1888 as Villiger & Cia.  The Brahma brand was registered on September 6, 1888, and in 1904 Villiger & Cia. changed its name to Companhia Cervejaria Brahma.  However, the legal entity that has become Ambev S.A., the current NYSE- and B3-listed company, was incorporated on July 8, 2005 as a non-reporting Brazilian corporation under the Brazilian Corporation Law and is the successor of Old Ambev.  Until the stock swap merger of Old Ambev with Ambev S.A. approved in July 2013 (see “—Stock Swap Merger of Old Ambev with Ambev S.A.”), Ambev S.A. did not conduct any operating activities and had served as a vehicle for ABI to hold a 0.5% interest in Old Ambev’s capital stock.

In the mid-1990s, Brahma started its international expansion into Latin America, and since then we have been buying assets in different parts of the continent including the South America, Central America and the Caribbean.

In the late 1990s, Brahma obtained the exclusive rights to produce, sell and distribute Pepsi CSD products throughout Brazil, and since then we have been distributing these products throughout that country.  In addition, certain of our subsidiaries have franchise agreements for Pepsi products in Argentina, Bolivia, Uruguay and the Dominican Republic.  See “Item 4. Information on the Company—B. Business Overview—Licenses—Pepsi.”

In the early 2000s, we acquired a 40.5% economic interest in Quinsa and the joint control of that entity, which we shared temporarily with Beverages Associates (BAC) Corp., or BAC, the former sole controlling shareholder of Quinsa.  This transaction provided us with a leading presence in the beer markets of Argentina, Bolivia, Paraguay and Uruguay, and also set forth the terms for our future acquisition of Quinsa’s full control from BAC.  In April 2006, we increased our equity interest in Quinsa to 91% of its total share capital, after which we started to fully consolidate Quinsa upon the closing of that transaction in August 2006.

In August 2004, we and a Belgian brewer called Interbrew S.A./N.V. (as ABI was then called) completed a business combination that involved the merger of an indirect holding company of Labatt Brewing Company Limited, or Labatt, one of the leading brewers in Canada, into us.  At the same time, our controlling shareholders completed the contribution of all shares of an indirect holding company which owned a controlling stake in us to Interbrew S.A./N.V. in exchange for newly issued shares of Interbrew S.A./N.V.  After this transaction, Interbrew S.A./N.V. changed its company name to InBev S.A./N.V. (and, since 2008, to Anheuser-Busch InBev SA/NV) and became our majority shareholder through subsidiaries and holding companies. (see “—The InBev-Ambev Transactions”).

The InBev-Ambev Transactions

The “InBev-Ambev transactions” consisted of two transactions negotiated simultaneously: (1) in the first transaction, BRC exchanged its Old Ambev shares for shares in Interbrew N.V./S.A. (as ABI was then called); and (2) in the second transaction, Old Ambev issued new shares to Interbrew N.V./S.A. in exchange for Interbrew’s 100% stake in Labatt.

Exchange of Shares Between BRC and the Interbrew Founding Families

In March 2004, various entities controlled by BRC entered into a contribution and subscription agreement with Interbrew N.V./S.A. (as ABI was then called) and various entities representing the interests of the Interbrew Founding Families to exchange their controlling interest in Old Ambev for newly issued voting shares of Interbrew N.V./S.A., which represented 24.7% of Interbrew N.V./S.A.’s voting shares.

25

 

Upon closing of this transaction in August 2004, (1) BRC received approximately 44% of the voting interest in Stichting, which thereupon owned approximately 56% of Interbrew N.V./S.A.’s common shares, and (2) Interbrew N.V./S.A. received approximately a 53% voting interest and a 22% economic interest in Old Ambev.  Such voting interest was subject to our shareholders’ agreement at the time, as amended in connection with the InBev-Ambev transactions.  In addition, Interbrew N.V./S.A. changed its legal name to InBev N.V./S.A. (and, since its acquisition of Anheuser-Busch, Inc. in the U.S. in 2008, to Anheuser Busch-InBev N.V./S.A.).

Acquisition of Labatt

Pursuant to the incorporação agreement dated March 3, 2004, Labatt Brewing Canada Holding Ltd., or Mergeco, was merged into Old Ambev by means of an upstream merger (incorporação) under the Brazilian Corporation Law, or the Incorporação.  Mergeco held 99.9% of the capital stock of Labatt Holding ApS, or Labatt ApS, a corporation organized under the laws of Denmark, and Labatt ApS owned all the capital stock of Labatt.  Upon completion of the Incorporação, Old Ambev held 99.9% of the capital stock of Labatt ApS, and, indirectly, of Labatt.  As consideration for the acquisition of Labatt, Old Ambev issued common and preferred shares to Interbrew N.V./S.A. (as ABI was then called).

With the consummation of this transaction in August 2004, (1) Labatt became a wholly-owned subsidiary of Old Ambev, and (2) Interbrew N.V./S.A. (as ABI was then called) increased its stake in Old Ambev to approximately 68% of common shares and 34% of preferred shares.

Ownership Structure of InBev N.V./S.A. and Old Ambev Upon Consummation of the InBev-Ambev Transactions

InBev N.V./S.A.

Upon closing the InBev-Ambev transactions, 56% of InBev N.V./S.A.’s voting shares were owned by Stichting, 1% was jointly owned by Fonds Voorzitter Verhelst SPRL and Fonds InBev-Baillet Latour SPRL, 17% were owned directly by entities and individuals associated with the Interbrew Founding Families and the remaining 26% constituted the public float.

BRC became the holder of 44% of Stichting’s voting interests, while the Interbrew Founding Families held the remaining 56% of Stichting’s voting interests.  In addition, BRC and entities representing the interests of the Interbrew Founding Families entered into a shareholders’ agreement, providing for, among other things, joint and equal influence over the exercise of the Stichting voting rights in InBev N.V./S.A. (as ABI was then called).

Old Ambev

Upon closing of the InBev-Ambev transactions, InBev N.V./S.A. (as ABI was then called) became the owner of approximately 68% of Old Ambev’s voting shares, FAHZ retained approximately 16% of such shares, and the remaining shares were held by the public.

Mandatory Tender Offer

Pursuant to the Brazilian Corporation Law, InBev N.V./S.A. (as ABI was then called) was required to conduct, following the consummation of the InBev-Ambev transactions, a mandatory tender offer, or the MTO, for all remaining outstanding common shares of Old Ambev.  The MTO was completed in March 2005, and InBev N.V./S.A. (as ABI was then called) increased its stake in Old Ambev to approximately an 81% voting interest and a 56% economic interest in that company.  FAHZ did not tender its Old Ambev shares in the MTO.

Stock Swap Merger of Old Ambev with Ambev S.A.

On July 30, 2013, the minority shareholders of Old Ambev approved a stock swap merger of Old Ambev with us, according to which each and every issued and outstanding common and preferred share of Old Ambev not held by Ambev S.A. (including in the form of ADSs) was exchanged for five newly issued common shares of Ambev S.A. (including in the form of ADSs).  As a result of the stock swap merger, Old Ambev became a wholly-owned subsidiary of Ambev S.A., which continued the same operations of Old Ambev.  The ratio adopted for the stock swap merger did not result in any ownership dilution in the equity interest held in us by our minority shareholders, including our former non-voting preferred shareholders, who were granted a separate class vote on the transaction without the interference of our controlling shareholder.

26

 

The stock swap merger combined our former dual-class capital structure, comprised of voting common shares and non-voting preferred shares, into a new, single-class capital structure, comprised exclusively of voting common shares.  The purpose of this transaction was to simplify our corporate structure and improve our corporate governance, with a view to increasing liquidity for all shareholders, eliminating certain administrative, financial and other costs and providing more flexibility for the management of our capital structure.  As a result of the stock swap merger, all shareholders of Old Ambev, including former holders of that company’s non-voting preferred shares, gained access to the same rights and privileges enjoyed by Old Ambev’s common shareholders, including full voting rights and the right to be included in a change-of-control tender offer under the Brazilian Corporation Law that ensures that holders of common stock are offered 80% of the price per share paid to a selling controlling shareholder in a change-of-control transaction.

Upstream Merger of Old Ambev with and into Ambev S.A.

In January 2014, and as a subsequent step of the stock swap merger, an upstream merger of Old Ambev and one of its majority-owned subsidiaries with and into Ambev S.A. was consummated.  This upstream merger had no impact on the shareholdings that our shareholders held in us.  As a result of this upstream merger, our corporate structure was simplified.

Recent Acquisitions, Divestments and Strategic Alliances

In January 2014, one of our wholly-owned subsidiaries acquired a controlling interest of 50% in Bucanero S.A. from ABI, a Cuban company in the business of producing and selling beer.  The other 50% equity interest in Bucanero is owned by the Government of Cuba. We have the right to appoint the general manager of Bucanero. Its main brands are Bucanero and Cristal. 

In March 2015, one of our subsidiaries acquired Wäls Brewery, a local craft brewer in the State of Minas Gerais.  In 2014, Wäls was awarded the best dubbel for its brand ‘Wäls Dubbel’ in the World Beer Cup.

Also in March 2015, Ambev and Whirlpool created B.Blend, a joint venture to develop and commercialize the first all-in-one capsule-based beverage machine.

In July 2015, one of our subsidiaries acquired Beertech Bebidas e Comestíveis Ltda., also known as Colorado, a traditional craft brewer from the city of Ribeirão Preto, in the State of São Paulo, that uses local ingredients in its productions.

In October 2015, Labatt purchased the Mill Street Brewery, a craft brewer based in Toronto, with a portfolio of 70 unique and innovative beers. Founded in 2002, Mill Street is an award winning craft brewery and the largest producer of certified organic beer in Canada, with key brands such as Mill Street Original Organic Lager, 100th Meridian Amber Lager, Tankhouse Ale and Cobblestone Stout. Mill Street also operates popular brewpubs in Toronto and Ottawa.

In December 2015, one of our subsidiaries acquired the majority of the shares of Banks Holdings Company, or BHL, a publicly-traded company in the Barbados Stock Exchange focused on the production and distribution of beers and non-alcoholic beverages.  BHL produces and sells the leading beers in Barbados, including Banks and Deputy, and also soft drinks, juices and dairy products.

In January 2016, our subsidiary in Canada acquired a range of ready-to-drink, cider and craft beer brands for the Canadian market from the Mark Anthony Group of Companies. These brand additions include recognized and innovative brands such as Palm Bay, Mike’s Hard Lemonade and Okanagan Cider, leveraging our near-beer platform by expanding our portfolio into the fast growing ready to drink and cider segments in Canada. The deal also included the Turning Point Brewery in British Columbia, which brews the Stanley Park family of brands.  

In April 2016, one of our subsidiaries in Canada acquired Archibald Microbrasserie, known for its local beers and seasonal specialties.

27

 

Also in April 2016, one of our subsidiaries acquired the Brazilian juice company “Do Bem”, which sells a variety of juices, teas and cereal bars.

In May 2016, we entered into an agreement with ABI, pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador, in exchange for which ABI has agreed to transfer ABI SAB Group Holding Limited’s (formerly SABMiller Limited and prior to that SABMiller plc), or SAB, Panamanian business to us. While ABI is our indirect controlling shareholder, the transaction was conducted at arms’ length on standard market terms, including having received a fairness opinion from Rothschild & Sons (Brazil).  Other than post-closing debt and/or cash adjustments, the transaction did not involve any cash payments and involved an exchange of shares of the aforementioned entities. The transaction was conditioned on the successful closing of the SAB and ABI merger, which closed in the fourth quarter of 2016. As a result of this transaction, on December 31, 2016, we ceased operations in Colombia, Peru and Ecuador and commenced operations in the beverages market of Panama.

In December 2016, we acquired Cachoeiras de Macacu Bebidas Ltda. from Brasil Kirin Industria de Bebidas Ltda., a company that owns an operating industrial plant for the production and packaging of beer and non-alcoholic beverages in the State of Rio de Janeiro. 

In September 2017, we entered into an agreement with ABI, pursuant to which our subsidiary Cervecería y Maltería Quilmes S.A., or Quilmes, agreed to transfer to a third-party, Compañia Cervecerías Unidas S.A. or its affiliates, or CCU, certain Argentinean brands (Norte, Iguana and Baltica) and related business assets as well as payment of US$50 million. In exchange, ABI has agreed to transfer to Quilmes the brewery of Cerveceria Argentina Sociedad Anonima Isenbeck, an Argentinean subsidiary of ABI. In addition, at closing ABI will license to Quilmes in perpetuity the Budweiser brand, among other North American brands, in Argentina upon ABI’s recovery of the distribution rights to such brands from CCU. The closing of the transaction is subject to the analysis and validation by the Argentinean antitrust authority (Comisión Nacional de Defensa de la Competencia) of the main documents that will be executed at the closing and other customary closing conditions. Rothschild acted as our exclusive financial advisor.

In December 2017, E. León Jimenes, S.A., or ELJ, the other shareholder together with us in Tenedora CND, S.A., or Tenedora – a holding company incorporated in the Dominican Republic, owner of almost the totality of Cervecería Nacional Dominicana, S.A. – partially exercised, in accordance with the shareholders’ agreement of Tenedora, its put option in connection with shares representing 30% of Tenedora’s capital stock.  The transaction was subject to certain conditions precedent and closed on January 18, 2018.  As a result of the partial exercise of such put option, at closing we paid to ELJ the amount of US$926.5 million and became the owner of approximately 85% of Tenedora, with ELJ remaining with 15%. In addition, in light of the strategic importance of the alliance with ELJ, our Board of Directors approved amending from 2019 to 2022 the term for the call option granted by ELJ to us to become exercisable. 

For further information on these and other acquisitions, divestments and strategic alliances, please see notes 1 to our audited financial statements as of and for the year ended December 31, 2017.

B.            Business Overview

Description of Our Operations

We are the largest brewer in Latin America in terms of sales volumes and one of the largest beer producers in the world, according to our estimates.  We currently produce, distribute and sell beer, CSDs and other non-alcoholic and non-carbonated products in 18 countries across the Americas.

We conduct our operations through three business segments, as follows:

·Latin America North, which includes our operations in Brazil, where we operate two divisions (the beer sales division and the NAB sales division), and our Central America and the Caribbean, or CAC, operations, which in the past we referred to as “HILA-Ex” operations, that currently includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica, Cuba, Guatemala (which also serves El Salvador, Honduras and Nicaragua) Barbados and Panama;

28

 

·Latin America South, or LAS, which includes our operations in Argentina, Bolivia, Paraguay, Uruguay, Chile; and

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

The following map illustrates our three business segments as of December 31, 2017:

An analysis of our consolidated net sales by business segment is presented in the table below:

	Net Sales (in R$ million) Year Ended December 31,
	2017		2016		2015
	Sales	% of Total	Sales	% of Total	Sales	% of Total
Latin America North	31,086.0	64.9%	28,927.8	63.4%	29,654.9	63.5%
Brazil	26,353.0	55.0%	24,954.6	54.7%	26,326.1	56.4%
Beer Brazil	22,509.3	47.0%	21,173.1	46.4%	22,441.3	48.1%
NAB	3,843.7	8.0%	3,781.5	8.3%	3,884.8	8.3%
CAC	4,733.0	9.9%	3,973.2	8.7%	3,328.8	7.1%
Latin America South	10,769.7	22.5%	10,212.9	22.4%	11,255.6	24.1%
Canada	6,043.5	12.6%	6,461.9	14.2%	5,809.7	12.4%
Total	47,899.3	100.0%	45,602.6	100.0%	46,720.2	100.0%

An analysis of our sales volume by business segment is presented in the table below:

	Sales Volumes (‘000 hl) Year Ended December 31,
	2017		2016		2015
	Volume	% of Total	Volume	% of Total	Volume	% of Total
Latin America North	118,631.8	72.9%	116,632.7	73.0%	123,463.4	73.0%
Brazil	106,360.0	65.3%	106,961.4	66.9%	114,354.2	67.6%
Beer Brazil	80,233.6	49.3%	79,670.1	49.8%	85,330.9	50.5%
NAB	26,126.4	16.0%	27,291.3	17.1%	29,023.3	17.2%
CAC	12,271.8	7.5%	9,671.3	6.1%	9,109.2	5.4%
Latin America South	34,062.0	20.9%	32,934.5	20.6%	35,914.5	21.2%
Canada	10,135.7	6.2%	10,254.5	6.4%	9,700.3	5.7%
Total	162,829.4	100.0%	159,821.6	100.0%	169,078.2	100.0%

29

 

Business Strategy

We aim to continuously create value for our stockholders.  The main components of our strategy are:

·our people and culture;

·our growth platforms;

·building strong brands;

·excellence in route to market;

·quality of our products;

·permanent cost efficiency; and

·financial discipline.

Our People and Culture

We believe highly qualified, motivated and committed employees are critical to our long-term success.  We carefully manage our hiring and training process with a view to recruiting and retaining outstanding professionals.  In addition, we believe that through our compensation program, which is based both on variable pay and stock ownership, we have created financial incentives for high performance and results.  Another core element of our culture is our distinguished managerial capability, which is characterized by (1) a hardworking ethos, (2) results-focused evaluations, (3) the encouragement of our executives to act as owners and not only as managers, (4) leadership by personal example, and (5) appreciation of field experience.

Growth Platforms

We are constantly seeking sustainable long term growth.  For instance, in Brazil we have focused our efforts behind our main growth platforms, as follows:

· Elevate the core: we believe that building strong brands that create enduring bonds with our consumers is a fundamental prerequisite to assure the sustainability of our business in the future.  By connecting with our consumers through relevant marketing platforms and breakthrough experiences, we are able to drive a superior top line performance by balancing volume and price/mix growth in a sustainable way;

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

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

· Out of Home: having a beer at a boteco, a traditional type of bar in Brazil, continues to be a strong part of Brazilian culture and part of Brazilian consumers’ day-to-day lives.  We deliver our brands to almost one million points of sale in Brazil, mainly botecos, through our unique distribution system, always looking for ways to improve our execution and better serve our clients.  Along with that, we are constantly seeking ways to perfect the “out-of-home” experience to consumers, through different initiatives such as with, among others: Curtisom, our micro events platform, based on itinerant music stages developed for one night concerts at different bars every night; expansion of one liter returnable glass bottles, driving affordability to consumers; and the improvement of the point of sales, including the distribution of new coolers and trade materials;

       30

 

· Excellence in Client Services: as a service-oriented company, we acknowledge that enhancing our relationship with our clients is an important lever to drive sustainable growth and, thus, a consistent evolution of our route to market and of our service level is at the core of our priorities.

· Better World: We dream of bringing people together for a better world. A dream that begins at the moments of celebration involving our beverages and is translated into five fronts where we believe we can contribute and make a greater impact: water, renewables & carbon, agriculture, circular packaging and smart drinking. To achieve our targets, we expanded our partnerships and involved our people. We engaged suppliers, customers and consumers to generate and share value. For instance, in the beginning of 2017, we launched AMA, a mineral water from which 100% of the profit goes to projects for access to potable water in the semi-arid region of Brazil, which has already benefited more than 6,000 people in one year. We also acted in road safety projects in partnership with the State of São Paulo and the Federal District government to develop a traffic accident information management system with digital reports that provide precise data on traffic accidents and information on the victims affected in the state on a monthly basis. We believe this allows the relevant authorities to make better informed decisions, such as repositioning police road checks, ordering the paving of specific stretches of roads and developing accident reduction plans.  We estimate that we have saved more than approximately 550 lives in both road safety projects.

Quality of our Products

We brew a wide variety of beers, including ales, lagers, clear, dark and full-bodied beers, amongst others, offering consumers a unique portfolio of high quality beers designed to satisfy different needs and tastes across different occasions.  We also produce a number of non-alcoholic products, such as soft drinks, energy drinks and juices. The quality of our products is at the forefront of our priorities. We have strict processes, with more than 1,300 controls and more than 370 tests across our production lines, as we aim to provide to our consumers products matching the highest possible standards.  Our R&D team is also constantly working to enhance our production process and the quality of our products.

Permanent Cost Efficiency

Cost control is one of the top priorities of our employees.  Each of our departments must comply with its respective annual budget for fixed and variable costs.  As a means of avoiding unnecessary expenses, we have designed a management control system inspired on “zero-base budgeting” concepts that requires every manager to build from scratch an annual budget for his/her respective department.

Financial Discipline

Our focus is not only on volumes and operating performance, but also on the disciplined management of our working capital and our cash flow generation.  Our objective is to maximize the return to our shareholders through a combination of payments of dividends and interest on shareholders’ equity, while at the same time keeping our investment plans and holding an adequate level of liquidity to accommodate the seasonality of our business and cope with often volatile and uncertain financial market conditions.

Seasonality

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

31

 

	2017 Quarterly Volumes (as a percentage of annual volumes)
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter
Latin America North	25.5%	21.9%	23.4%	29.2%
Brazil	25.9%	21.6%	23.2%	29.4%
Beer Brazil	25.6%	21.7%	23.0%	29.6%
NAB	26.6%	21.2%	23.7%	28.5%
CAC	22.8%	24.2%	25.2%	27.9%
Latin America South	26.7%	19.8%	22.9%	30.6%
Canada	19.0%	29.5%	28.3%	23.2%
Total	25.4%	21.9%	23.6%	29.1%

Description of the Markets Where We Operate

Latin America North

Brazil

The Brazilian Beer Market

In Brazil, beer is predominantly sold in bars for on-premise consumption, in standardized, returnable 600-milliliter glass bottles.  The second favored packaging presentation is the 350-milliliter one-way aluminum can, which is predominantly sold in supermarkets for off-premise consumption.

According to our estimates, in 2017 we were the market leader of the Brazilian market in terms of beer sales volumes, mainly through our three major brands: Skol, Brahma and Antarctica.  Our closest competitors in Brazil are: Heineken, particularly following its May 2017 acquisition of Brasil Kirin operations, and Cervejaria Petrópolis.

Distribution represents an important feature in this market, as the retail channel is fragmented into almost one million points of sale.  Our distribution is structured under two separate branches, comprising (1) our network of exclusive third-party distributors, involving 148 operations, and (2) our proprietary direct distribution system, involving more than 107 distribution centers spanned over most Brazilian regions.  We have been focusing on direct distribution in large urban regions, while strengthening our third-party distribution system.  See “—Business Overview—Business Strategy.”

Near-Beer

Some of our recent innovations have stretched beyond typical beer consumption occasions, such as Skol Beats Senses, Skol Beats Spirit and Skol Beats Secret, which are sweeter beverages with higher alcohol content, and Brahma 0.0%, a non-alcoholic beer. These innovations are designed to grow the near-beer category and improve our market share of beverage categories other than beer, by addressing changing consumer trends and preferences.  In 2017, this segment consisting of Skol Beats Senses, Skol Beats Spirit and Skol Beats Secrets accounted for 0.7% of our total beer volume in Brazil, while, according to our estimates, Brahma 0.0% is the leader in the Brazilian non-alcoholic beer segment and represents another 1.0%  of our total beer volumes in the country.

The Brazilian NAB Markets

The NAB markets in Brazil are comprised of many different segments, including CSD, bottled water, isotonic beverages, energy drinks, coconut water, powdered and natural juices and ready-to-drink teas.  The CSD segment is the most significant to our business representing approximately 61% of the volumes of our NAB unit.

According to our estimates, the leading CSD flavors in Brazil are (1) cola (with 52% of the market in 2017), (2) guaraná, (3) orange, and (4) lime.  Most CSDs in Brazil are sold in supermarkets in two-liter non- returnable PET bottles for in-home consumption.  The 350-milliliter one-way aluminum can is also an important packaging format for our business and is mainly sold in supermarkets and restaurants.

32

 

Our main competitor in this market is The Coca-Cola Company.  In addition to The Coca-Cola Company, we face competition from small regional bottlers that produce what are usually referred to as “B Brands.”  The B Brands compete mainly on price, usually being sold at a significantly lower price than our products.

Our main CSD brands are Guaraná Antarctica, the leader in the “non-cola” flavor segment, and Pepsi Cola.  Pepsi Cola is sold under our exclusive production and bottling agreements with PepsiCo.  Our NAB portfolio also includes such brands as Gatorade in the isotonic market, H2OH! in the flavored water market, and Lipton Iced Tea in the ready-to-drink tea market, which are also sold under license from PepsiCo, and Fusion, a proprietary brand that is today the third largest brand in the energy drinks segment in Brazil. Also in 2016, we acquired the Brazilian juice company “Do Bem,” which enjoys brand strength in health and wellness categories.

Our NAB products are sold in Brazil through the same distribution system used for beer.

CAC (Central America and the Caribbean)

Central America

In Guatemala, the main packaging presentations are the returnable, 12 ounce and 1-liter glass bottles, and the 12 ounce and the 16 ounce cans.  Our main competitor in Guatemala is Cerveceria Centro Americana, the market leader, which is a private company owned by local investors. According to our estimates, the total annual sales volume of the Guatemalan beer market was 3.8 million hectoliters in 2017.

In El Salvador, Honduras and Nicaragua, we are currently selling imported brands, and our main packaging presentation is the returnable one-liter glass bottle.

Specifically in Nicaragua, our main competitor is Compañía Cervecera de Nicaragua, the market leader, which is a joint venture between Guatemala's Cerveceria Centro Americana and Florida Ice & Farm Co, an investor group from Costa Rica

In all of these markets, beer is predominantly sold in returnable bottles through small retailers.  We sell our Brahva, Brahva Gold, Extra, Budweiser, Bud Light, Stella Artois, Corona, Modelo Especial, Beck, Leffe and Hoegaarden beer brands in Central America, which are distributed through the CBC distribution system, jointly with CBC’s CSD portfolio. 

In May 2016, we entered into an agreement with ABI pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador. In exchange, ABI has agreed to transfer SAB's Panamanian business to us. We formally began operations in Panama on December 31, 2016. According to our estimates, we currently lead the beer market in Panama. The main packaging presentation are 285-milliliter bottles and 355-milliliter cans and our main beer brands in Panama are Atlas Golden Light and Balboa Ice. The main competitor in the Panamanian beer market is Baru. Our Panamanian business also produces and commercializes soft drinks, under franchise, being Pepsi, Canada Dry and Squirt the main brands distributed.

The Caribbean Beer Market

In Cuba, our main packaging presentation is the 12 ounce can.  Our main competitor in Cuba is State Brewery.  We currently sell the Bucanero, Cristal, Mayabe and Cacique local beer brands in Cuba. According to our estimates, the total annual sales volume of the Cuban beer market was approximately 2.8 million hectoliters in 2017.

In the Dominican Republic, the annual sales volume of the beer market was 4.1 million hectoliters in 2017, according to our estimates.  The main packaging presentation in the Dominican beer market consists of the returnable 650-milliliter and 1-liter glass bottles, which are predominantly sold in small retail stores.  We currently lead the beer market in the Dominican Republic after our acquisition of CND,  with leading portfolio brands such as Presidente, Brahma Light, President Light, Bohemia, The One, Corona, Stella Artois and Budweiser.  Our distribution system in the Dominican Republic is comprised mainly of direct distribution operations.

33

 

In Barbados, the annual sales volume of the beer market was 0.2 million hectoliters in 2017, according to our estimates. We are the market leader with brands such as Banks and Deputy, which are produced locally by BHL. The growth in the Barbados beer market in the past several years had been driven by imported and domestic value brands. The main packaging presentation in Barbados is the 250-milliliter and 275-milliliter returnable glass bottles.

The Caribbean CSD Market

According to our estimates, the annual sales volume of the Dominican CSD market was 4.9 million hectoliters in 2017.  The main packaging presentation in the Dominican CSD market is the returnable half-liter bottle, in either glass or PET format, which is predominantly sold in small retail stores.  The Coca-Cola Company, represented by Bepensa, has the leadership of the Dominican CSD Market, followed by Ajegroup, which adopts a low price strategy.  We are currently the third player in that market.

Our main CSD brands in the Dominican Republic 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.

In Barbados, the annual sales volume of the CSD market was 0.2 million hectoliters in 2017, according to our estimates. Barbados Bottling Co. Ltd., a wholly owned subsidiary of BHL, is currently the market leader for CSD, according to our estimates. BHL produces and distributes Coke and its allied brands under franchise along with own proprietary brand Frutee, which is comprised of ten flavors. BHL, through other subsidiaries, also produces and commercializes juices and dairy products in Barbados.

Latin America South

Argentina

Argentina is one of our most important regions, second only to Brazil in terms of volume.

We serve more than 300 thousand points of sale throughout Argentina both directly and through our exclusive third-party distributors.

The Argentine Beer Market

According to our estimates, the annual sales volume of the Argentine beer market was 18.6 million hectoliters in 2017.  With a population of approximately 44 million, Argentina is Latin America South’s largest and most important beer market.

Beer consumption in Argentina has declined in recent years, but experienced an increase in 2017, reaching an annual per capita consumption of 42.4 liters, which represents a 4.8% growth compared to previous year.  Since 2000, beer has become the number one selling alcoholic beverage in Argentina in terms of hectoliters sold, according to our estimates.

In Argentina, 33% of our beer volume is distributed directly by us and 67% is distributed through exclusive third-party distributors.  Our main package presentation in Argentina is the 1-liter returnable glass bottles, which accounted for 81% of our sales in 2017.

According to our estimates, on-premise consumption represented 15% of beer volumes in Argentina in 2017, and supermarkets sales represented 13% of beer volumes.  The main channels of volume consumption in Argentina are through kiosks and small grocery stores.

Our most important beer brands in Argentina are Quilmes Clásica, Brahma and Stella Artois.  According to Nielsen, we are the leading beer producers in Argentina, and our main competitor in Argentina is Compañía Cervecerías Unidas S.A.

34

 

The Argentine CSD Market

According to our estimates, in 2017, annual sales volume of the Argentine CSD market was 43.4 million hectoliters.  In Argentina, 51% of our CSD volume is distributed directly by us and 49% is distributed through exclusive third-party distributors.  Non-returnable bottles represented 90% of our CSD sales in Argentina in 2017.

We are the exclusive Pepsi bottlers in Argentina and our most important CSD brand in that country is Pepsi.  According to Nielsen, we were second in the Argentine CSD market in 2017, only after The Coca-Cola Company.

Bolivia

The Bolivian Beer Market

According to our estimates, the annual sales volume of the Bolivian beer market was 3.3 million hectoliters in 2017.  The Bolivian market is strongly influenced by macroeconomic trends and governmental regulatory and fiscal policies.

In Bolivia, 3% of our beer volumes is directly distributed by us and 97% is distributed through exclusive third-party distributors.  Our main package presentation in Bolivia is the 620-milliliter returnable glass bottle, which accounted for 48% of our sales in 2017.

Our most important beer brands in Bolivia are Paceña, Taquiña and Huari.  We are the leading beer producer in Bolivia, according to Nielsen.

The Bolivian CSD Market

In March 2009, we, through Quinsa, acquired from SAB 100% of Bebidas y Aguas Gaseosas Occidente S.R.L., becoming the exclusive bottler of Pepsi in Bolivia.

According to our estimates, in 2017, the annual sales volume of the Bolivian CSD market was 13.5 million  hectoliters. Of our total CSD volumes in Bolivia in 2017, 45% was directly distributed by us and 55% was distributed through exclusive third-party distributors, while 99% of our CSD sales in that country in 2017 were through non-returnable bottles.

Chile

According to our estimates, the annual sales volume of the Chilean beer market was 8.8 million hectoliters in 2017.  Beer consumption in Chile has increased every year since 2009.  Our most important beer brands in Chile are Becker, Corona, Báltica and Stella Artois.

We are the second beer producers in Chile, according to Nielsen, and our main competitor and the leader in the country is Compañía Cervecerías Unidas S.A.

In 2015, we became the exclusive distributors of the Corona brand in Chile, and since January 2016 we also started to import and distribute Budweiser in Chile.

Paraguay

According to our estimates, the annual sales volume of the Paraguayan beer market was 4.3 million hectoliters in 2017, excluding contraband.

The market for beer in Paraguay has traditionally distinguished itself from those in the southern cone countries in certain respects because (1) beer has not faced significant competition from wine as an alternative alcoholic beverage; (2) the domestic beer market has faced significant competition from imported brands, which accounted for a far higher market share in Paraguay than in neighboring countries; and (3) the seasonality of our products is lower due to warmer conditions throughout the year.

35

 

In Paraguay, 71% of our beer volumes is directly distributed by us and 29% is distributed through exclusive third-party distributors.  Our main package presentation in Paraguay is the can, which accounted for 48% of our sales in 2017.

Our most important beer brands in Paraguay are Brahma and Ouro Fino, with a leader market position in the country in 2017, according to our estimates.  We are also the exclusive distributor of the Budweiser brand in Paraguay.

Uruguay

The Uruguayan Beer Market

According to our estimates, the annual sales volume of the Uruguayan beer market was 1.1 million hectoliters in 2017.  Our Latin America South business unit manages both the beer and CSD businesses in Uruguay out of a facility based in that country.

In Uruguay, 24% of our beer volumes is directly distributed by us and 76% is distributed through exclusive third-party distributors.  Our main package presentation in Uruguay is the 1-liter returnable glass bottle, which accounted for 72% of our sales in 2017.

Our most important beer brands in Uruguay are Pilsen and Patricia, with a leader market position in 2017, according to our estimates.

The Uruguayan CSD Market

According to our estimates, in 2017, the annual sales volume of the Uruguayan CSD market was 3.5 million hectoliters. 

In Uruguay, 36% of our CSD volume is directly distributed by us and 64% is distributed through exclusive third-party distributors.  Non-returnable bottles accounted for 89% of our sales in that country in 2017.  Our most important brand in Uruguay is Pepsi, with The Coca-Cola Company being our main competitor.

Canada - Labatt

The Canadian Beer Market

Our Canada business segment is represented by the Labatt operations, which sells domestic and ABI beer brands, a portfolio of ready-to-drink and cider brands, and exports the Kokanee beer brand to the United States.

According to our estimates, Labatt is the market leader in the Canadian beer market.  The main packaging presentation in that country are the returnable, 341-milliliter glass bottle, and the 355-milliliter aluminum can, which are predominantly sold in privately owned and government-owned retail stores in addition to privately owned on-trade establishments.  Our main competitor in Canada is Molson Coors, but we also compete with smaller brewers, such as Sleeman Breweries Ltd., or Sleeman, and Moosehead Breweries Ltd.

Our main brands in Canada are Budweiser and Bud Light (brewed and sold under license from ABI’s subsidiary Anheuser-Busch, Inc., or Anheuser-Busch), along with Corona, Labatt Blue, Alexander Keith’s, Stella Artois and Kokanee.  Our distribution system in Canada is structured in different ways across the country, as further explained below.

In January 2016, we, through our subsidiaries, acquired Mark Anthony Group’s ready-to-drink, cider and craft beer business in the Canadian market, and in April 2016, a subsidiary of Labatt Brewing Company Limited, one of our wholly-owned subsidiaries, acquired Archibald Microbrasserie, known for its local beers and seasonal specialties.

36

 

Distribution in Ontario

In Ontario, the province with the largest beer consumption in Canada, we own together with other brewers a distribution and retail company incorporated in 1927 named Brewers Retail Inc., operating as The Beer Store, or TBS.  In 2015, we finalized a new Master Framework Agreement, or MFA, with the government of the Province of Ontario that specifies TBS’s role as a retailer and distributor of beer.

Under the MFA, TBS will continue to be the primary retailer for pack sizes larger than six bottles or cans of beer.  The Liquor Control Board of Ontario, or LCBO, a chain of liquor stores owned by the government of the Province of Ontario, will continue to have the ability to sell beer.  Most LCBO stores are limited to selling pack sizes of six bottles or cans of beer or less.  Under the MFA up to 450 grocery stores may also be granted a license to sell beer in pack sizes of six bottles or cans or less.  The MFA came into force on January 1, 2016 and has an initial term of ten years, subject to renewal for successive five-year terms, unless the agreement is terminated after the initial term in accordance with the MFA.

TBS ownership is now available to all qualifying Ontario-based brewers.  TBS’s new 15-member Board of Directors is made up of the following members: four directors nominated by Labatt;  four directors nominated by Molson Coors; four independent directors nominated by a selection committee jointly represented by the Province of Ontario, Labatt and Molson-Coors; two directors nominated by larger brewers (other than Labatt and Molson-Coors) with TBS sales greater than 50,000 hectoliters per year; one director nominated by small Ontario-based brewers who sell less than 50,000 hectoliters per year through TBS.

TBS operates as a self-funding corporation on a break-even cash flow basis under which it charges volume-based fees for services it provides to the brewers.  The nature of TBS’s business requires compliance with laws and regulations and oversight by the Province of Ontario and its agents.  The Liquor Control Act, the Liquor License Act and the Alcohol and Gaming Regulation and Public Protection Act are administered by the Minister of Finance or the Attorney General, which maintains control of the beverage alcohol sectors through the Liquor Control Board of Ontario and the Alcohol and Gaming Commission of Ontario.

Distribution in Quebec

Quebec is the province in Canada with the second largest beer consumption.  In this province there are no exclusive rights for the sales of beer, and both the on-premise and off-premise sales channels are mostly comprised of privately owned stores.  The SAQ, a government-operated liquor store, sells a select few beer brands that are not available in the private retail system.

We (as well as our competitors) sell our products in Quebec through a direct sales and distribution system.

Distribution in the Western Provinces

Molson and Labatt are each a shareholder in Brewers Distributor Limited, which operates a distribution network primarily for beer in the four western provinces of British Columbia, Alberta, Manitoba and Saskatchewan, as well as three territories (Yukon, the Northwest Territories and Nunavut).  In Alberta, some volume is also sold through a third-party wholesaler.  In these Western Provincial markets, there are both privately controlled retail stores (such as in Alberta and British Columbia) and government-controlled retail stores (such as in British Columbia, Manitoba and Saskatchewan).

Distribution in the Atlantic Provinces

We distribute and sell our products in the Atlantic Provinces (including New Brunswick, Newfoundland, Nova Scotia and Prince Edward Island) through (1) distribution and retail networks controlled by the government in the provinces of Nova Scotia, New Brunswick and Prince Edward Island; and (2) private distributors in Newfoundland.

Beer and CSD Production Process

The basic brewing process for most beers is straightforward, but significant know-how is involved in quality and cost control.  The most important stages are brewing and fermentation, followed by maturation, filtering and packaging.  Although malted barley (malt) is the primary ingredient, other grains such as unmalted barley, corn, rice or wheat are sometimes added to produce different beer flavors.  The proportion and choice of other raw materials varies according to regional taste preferences and the type of beer.

37

 

The first step in the brewing process is making wort by mixing malt with warm water and then gradually heating it to approximately 75°C in large mash turns to dissolve the starch and transform it into a mixture, called “mash,” of maltose and other sugars.  The spent grains are filtered out and the liquid, now called “wort,” is boiled.  Hops are added at this point to give a special bitter taste and aroma to the beer, and help preserve it.  The wort is boiled for one to two hours to sterilize and concentrate it, and extract the flavor from the hops.  Cooling follows, using a heat exchanger.  The hopped wort is saturated with air or oxygen, essential for the growth of the yeast in the next stage.

Yeast is a micro-organism that turns the sugar in the wort into alcohol and carbon dioxide.  This process of fermentation takes five to eleven days, after which the wort finally becomes beer.  Different types of beer are made using different strains of yeast and wort compositions.  In some yeast varieties, the cells rise to the top at the end of fermentation.  Ales and wheat beers are brewed in this way.  Pilsen beers are made using yeast cells that settle to the bottom.

During the maturation process the liquid clarifies as yeast and other particles settle.  Further filtering gives the beer more clarity.  Maturation varies by type of beer and can take as long as three weeks.  Then the beer is ready for packaging in kegs, cans or bottles.

CSDs are produced by mixing water, flavored concentrate and sugar or sweetener.  Water is processed to eliminate mineral salts and filtered to eliminate impurities.  Purified water is combined with processed sugar or, in the case of diet CSDs, with artificial sweeteners and concentrate.  Carbon dioxide gas is injected into the mixture to produce carbonation.  Immediately following carbonation, the mixture is packaged.  In addition to these inputs, delivery of the product to consumers requires packaging materials such as PET bottles, aluminum cans, labels and plastic closures.

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

Sources and Availability of Raw Materials

Beer

The main raw materials used in our production are malt, non-malted cereals, hops and water.

Barley and Malt

Malt is widely available and our requirements are met by domestic and international suppliers as well as our own malting facilities.  In the case of our beer operations in Brazil, approximately 80% of our malt needs are supplied by our own malting facilities located in the south of Brazil, Argentina and Uruguay.

For the rest of our needs, our most significant malt supplier is Cooperativa Agroindustrial Agraria in Brazil.  Market prices for malt are volatile, and depend on the quality and the level of production of the barley crop across the world, as well as on the intensity of demand.

We purchase barley for our malting facilities directly from South America farmers.  Barley prices depend on local winter crop markets, wheat market prices on the main boards of trade across the world and on the barley quality during the harvest.  We enter into future contracts or financials instruments to avoid the impact of short-term volatility in barley and malt prices on our production costs.  See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

Hops

There are two types of hops used in our beer production: hops used to give beer its distinctive bitter flavor, which we generally import from the United States, and hops used to give beer its distinctive aroma, which we generally import from Europe.  The supply of hops is concentrated into a few international companies, namely the Barth-Haas Group, Hopsteiner, Kalsec and HVG.

38

 

Non-malted Cereals

Corn syrup is purchased from Ingredion, Cargill and Tereos Syral.  Corn is purchased to produce grits in-house in some plants and corn grits and rice are purchased in other plants from local suppliers and are generally widely available.

Water

Water represents a small portion of our raw material costs.  We obtain our water requirements from several sources, such as: lakes and reservoirs, deep wells located near our breweries, rivers adjoining our plants and public utility companies.  We monitor the quality, taste and composition of the water we use, and treat it to remove impurities and to comply with our high quality standards and applicable regulations.  As a result of advances in technology, we have continuously reduced our water consumption per hectoliter produced.

CSDs

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

Guaraná Berries

We have a 1,070 hectare farm that provides us with 29 tons of guaraná seeds (berries) per year, or about 10.0% of our requirements, with the remainder purchased directly from independent farmers in the Amazon region as well as other guaraná available regions in Brazil.  The focus of our own farm is to provide Guaraná seedlings for local producers and promote the sustainable cultivation of Guaraná in the Amazon Region.  Approximately 50 thousand seedlings are donated per year. 

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 brand Guaraná Antarctica among others.  The concentrate for Pepsi CSD products is purchased from PepsiCo.

Sugar

Sugar is widely available and is purchased by our regional sourcing entity.  We enter into derivative instruments to avoid the impact of short-term volatility in sugar prices on our production costs.  See “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”

Juices

Orange, lemon, grape and others are purchased only in Brazil. Our main suppliers are Louis Dreyfus Commodities, Cutrale, Dohler, Citrus Juice, Citrosuco, Golden and Tecnovin.

Other

We buy all of the fruit juice, pulp and concentrate that we use in the manufacture of our fruit-flavored CSDs.

Packaging

Packaging costs are comprised of the cost of glass and PET bottles, aluminum cans, plastic film (shrink and stretch), paper labels, plastic closures, metal crowns and paperboard.  We enter into derivative instruments to mitigate the risks of short-term volatility in aluminum prices on our production costs; for further information on this matter see “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”  For other materials, we usually set a fixed price for the period in accordance with the prevailing macroeconomic conditions.

39

 

In April 2008, we started operating a glass bottle producing facility in Rio de Janeiro, which we expanded in November 2015.  This unit’s capacity is of approximately 240 thousand tons of glass and in 2017 such unit attended to 44% of our glass needs.

We have supply contracts with respect to most packaging materials.

The choice of packaging materials varies by cost and availability in different regions, as well as consumer preferences and the image of each brand. We also use aluminum can sheet for the production of beverage cans and lids.

Our aluminum cans are mainly sourced regionally by global companies, while our glass containers are sourced by a variety of suppliers, both regionally and globally. We obtain the labels for our beer and CSD primarily from local suppliers; in Brazil, the majority of our requirements are met by a printing house that belongs to FAHZ and is operated by us pursuant to a lease agreement. Plastic closures are principally purchased regionally, and PET pre-forms are principally purchased regionally by both local and global companies.  Crown caps in Brazil are mainly sourced from our vertical operation in Manaus (Arosuco).  These producers also supply some of our CAC operations.

Regulation

All our operations are subject to local governmental regulation and supervision, including (1) labor laws; (2) social security laws; (3) public health, consumer protection and environmental laws; (4) securities laws; and (5) antitrust laws.  In addition, we may also be subject to regulations aimed at (1) ensuring healthy and safe conditions in facilities for the production, bottling, and distribution of beverages and (2) placing restrictions on beer and CSD consumption.

Environmental laws in the countries where we operate are mostly related to (1) the conformity of our operating procedures with environmental standards regarding, among other issues, the emission of gas and liquid effluents and (2) the disposal of one-way packaging.

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 or province has a minimum legal drinking age that is established by the government; the beer legal drinking age varies from 18 to 21 years;

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

· some local and federal governments (including Bolivia) prohibit the sale of alcoholic beverages within a certain distance from schools, hospitals and other designated areas, as well as place certain restrictions on the time of sale and consumption of these products in public places and private clubs;

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

· in some provinces in Canada the off-trade is restricted to government-owned or licensed stores. See “—Business Overview—Description of the Markets Where We Operate—Canada - Labatt.”; and

· beer sales in the off-premise channel in Canada in the Province of Ontario are restricted to three retail channels. One of them is the LCBO, which is government-owned.  The second retail channel is TBS, which is jointly owned by Labatt and 33 other brewers.  The third retail channel is eligible grocery. The Alcohol and Gaming Commission of Ontario regulates the alcohol industry.

40

 

Many governments also impose restrictions on beer advertisement, which may affect, among other issues, (1) the media channels used, (2) the contents of advertising campaigns, and (3) the time and places where beer can be advertised.

Marketing

Our marketing initiatives are concentrated in off-trade and on-trade initiatives.  Off-trade initiatives comprise mass media vehicles, such as television, radio, magazines and internet websites.  On-trade initiatives include banners, and all types of enhancements to the point of sale, such as branded coolers and decorated furniture.

Licenses

Pepsi

We have had a long-term agreement with PepsiCo  whereby we have been granted the exclusive right to bottle, sell and distribute certain brands of PepsiCo’s portfolio of CSDs in Brazil, including Pepsi-Cola, Gatorade, H2OH!, and Lipton Ice Tea.  We are also, through our subsidiaries, PepsiCo’s bottler for Argentina, Uruguay, Bolivia and Dominican Republic.  In 2017, sales volumes of PepsiCo products represented approximately 32% of our total NAB sales volumes in Brazil, nearly 62% of our total NAB sales volumes in the Dominican Republic and all of our NAB sales volumes in Argentina, Bolivia and Uruguay.

Licensing Agreements with ABI

Effective January 1998, Labatt entered into long-term licensing agreements with ABI whereby Labatt was granted the exclusive right and license to manufacture, bottle, sell, distribute and market some of ABI’s brands, including the Budweiser and Bud Light brands, in Canada, including the right to use ABI’s trademarks for those purposes.  The agreements expire in January 2098 and are renewable by either party for a second term of 100 years.  In 2017, the ABI brands sold by Labatt represented approximately 57% of Labatt’s total sales volumes. According to our estimates, the Budweiser brand is currently the largest selling brand, while Bud Light is the third largest selling brand, in Canada in terms of volume.

We also have a licensing agreement with ABI which allows us to exclusively produce, distribute and market Budweiser in Brazil.  We also have certain arrangements to sell and distribute Budweiser products in Paraguay, Guatemala, Dominican Republic, El Salvador, Nicaragua, Uruguay and Chile.

We also have a cross-licensing agreement with ABI through which we are allowed to produce, bottle, sell and distribute beer under the Stella Artois brand in Latin America and Canada on an exclusive basis, and ABI is allowed to produce, bottle, sell and distribute beer under the brand Brahma in Europe, Asia, Africa and the United States on an exclusive basis.  Ambev has agreed not to directly or indirectly produce, bottle, distribute, sell or resell (or have an interest in any of these), any other European premium branded beer in Latin America, and ABI has agreed to be bound by the same restrictions relating to any other Latin American premium branded beer in Europe, Asia, Africa and the United States. As a result, in June 2005 we launched Stella Artois in Brazil and, since March 2005, ABI has been distributing Brahma beer in the United States and several countries such as the United Kingdom, Spain, Sweden, Finland and Greece.

We also have ABI’s subsidiary, Metal Container Corporation, as one of our can suppliers.

We have also a licensing agreement with Grupo Modelo, S. de R.L. de C.V. (formerly Grupo Modelo, S.A.B. de C.V.),  a subsidiary of ABI, to import, promote and resell Corona products (Corona Extra, Corona Light, Coronita, Pacifico and Negra Modelo) in Latin America countries, including Brazil, as well as in Canada.

Taxation

Beer

Taxation on beer in the countries where we operate is comprised of different taxes specific to each jurisdiction, such as an excise tax and a value-added tax.  The amount of sales tax charged on our beer products in 2017, represented as a percentage of gross sales, was: 44.9% in Brazil;  21.5% in Canada; 18% in Central America; 41% in the Dominican Republic; 2% in Cuba; 10% in Barbados; 25.6% in Argentina; 31.5% in Bolivia; 31.5% in Chile; 16.0% in Paraguay; and 31.4% in Uruguay.

41

 

NAB

Taxation on NAB in the countries where we operate is comprised of taxes specific to each jurisdiction, such as an excise tax and a value-added tax.  The amount of taxes charged on our NAB products in 2017, represented as a percentage of gross sales, was: 38.5% in Brazil; 12% in the Dominican Republic; 23.6% in Argentina;  22.7%  in Bolivia; and 30.0% in Uruguay.

Changes to Brazilian Taxes on Beverages

In November 2008, the Brazilian Congress approved changes (effective as of January 1, 2009) to the taxable amount and tax rates for (1) the IPI Excise Tax, (2) the PIS Contribution and (3) the COFINS.  Under the previous system, these taxes were paid as a fixed rate per hectoliter by all taxpayers.  Under the system approved in 2008, higher priced brands pay higher taxes per hectoliter than lower priced brands based on a consumer price reference table.  The taxable amount is calculated through the application of a rate to the consumer price established in the respective consumer price reference table.  In recent years, taxes on the beverage industry were increased at the Brazilian federal and state levels.  In April 2013, an aggregate increase of 2% was approved with respect to the rates of the IPI Excise Tax, the PIS Contribution and the COFINS on beer sales.  In addition, in 2014 the IPI Excise Tax, the PIS Contribution and the COFINS were subject to another aggregate increase of 4% in April and 2% in October with respect to beer sales.  Moreover, in January 2015 the Brazilian federal government enacted Law No. 13,097, which introduced a new federal taxation model for beer and soft drinks.  The law is a result of the combined efforts of the Brazilian federal government and beverage companies with a view to creating a less complex and more predictable tax system for the industry.  The new tax model came into force on May 1, 2015. Among other changes, the new set of rules establishes that the IPI Excise Tax, the PIS Contribution and the COFINS are due by manufacturers and wholesalers, and shall be calculated based on the respective sales price (ad valorem).  Under the previous legislation, the referred taxes were due exclusively by the manufacturer at fixed amounts per liter of beer or soft drink produced (ad rem).  The new taxation model introduced by Law No. 13,097, Decree No. 8,442/2015 brought temporary reductions on the tax rates applicable to beers and soft drinks.  As of January 2018, such temporary reductions are no longer in force. Without such reduction, PIS Contribution and COFINS rates have increased between 5% and 12% over the previously reduced rates for breweries - except for special beers which have 75% or more of barley malt by weight on the original extract as a source of sugar.

In 2012, the following six Brazilian states increased their rates for ICMS Value-Added Tax applicable to beer: Minas Gerais, Sergipe, Amazonas, Mato Grosso, Bahia and the Federal District.  In addition, in 2015 the States of São Paulo, Rio de Janeiro, Minas Gerais, Distrito Federal, Rio Grande do Sul, Ceará, Amapá, Rondonia, Amazonas, Tocantins, Piauí, Maranhão, Rio Grande do Norte, Bahia, Pernambuco, Paraíba, Alagoas, Sergipe and Mato Grosso do Sul increased their ICMS Value-Added Tax rate applicable to beer and soft drinks. In 2017, two Brazilian states, Rio de Janeiro and Acre, increased their respective ICMS Value-Added Tax rates applicable to beer.  In 2018, the States of Goiás and Amazonas increased their respectively soft drinks and beer ICMS rates.

C.            Organizational Structure

Our two direct controlling shareholders, IIBV and AmBrew, both of which are subsidiaries of ABI, together with FAHZ, held in aggregate 72.1% of our total and voting capital stock (excluding treasury shares) as of December 31, 2017.

ABI indirectly holds shares in us representing 61.9% of our total and voting capital stock (excluding treasury shares) as of December 31, 2017.  ABI thus has control over us, even though (1) ABI remains subject to the Ambev Shareholders’ Agreement and (2) ABI is controlled by Stichting that represents an important part of interests of BRC and the Interbrew Founding Families.  For further information on these matters see “Item 4. Information on the Company—A. History and Development of the Company—The InBev-Ambev Transactions” and “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders —Ambev Shareholders’ Agreement.”

42

 

We conduct the bulk of our operations in Brazil directly.  We also indirectly control Labatt and the operations conducted by our CAC and Latin America South units.  The following chart illustrates the ownership structure of our principal subsidiaries as of December 31, 2017 based on total share capital owned. 

D.            Property, Plant and Equipment

Our properties consist primarily of brewing, soft drink production, malting, bottling, distribution and office facilities in the countries where we operate.

As of December 31, 2017, our aggregate beer and CSD production capacity was 276.5 million hectoliters per year. In 2017, the total production at the facilities set forth below was equal to 158.2 million hectoliters.

The following is a list of our principal production facilities as of December 31, 2017:

43

 

Latin America North
Plant	Type of Plant
Brazil
Agudos, São Paulo	Beer
Equatorial, Maranhão	Beer
Jacareí, São Paulo	Beer
Lages, Santa Catarina	Beer
Natal, Rio Grande do Norte	Beer
Guarulhos, São Paulo	Beer
Sete Lagoas, Minas Gerais	Mixed
Uberlândia, Minas Gerais	Beer
Petrópolis, Rio de Janeiro	Beer
Ponta Grossa, Paraná	Beer
Wals/Belo Horizonte, Minas Gerais	Beer
Colorado/Ribeirão Preto, São Paulo	Beer
João Pessoa, Paraíba	Beer
Águas Claras, Sergipe	Mixed
Aquiraz, Ceará	Mixed
Camaçari, Bahia	Mixed
Cebrasa, Goiás	Mixed
Cuiabá, Mato Grosso	Mixed
Jaguariúna, São Paulo	Mixed
Cachoeiras de Macacu, Rio de Janeiro	Soft drinks
Itapissuma, Pernambuco	Mixed
Nova Rio, Rio de Janeiro	Mixed
Manaus, Amazonas	Mixed
Minas, Minas Gerais	Mixed
Teresina, Piauí	Mixed
Águas Claras do Sul, Rio Grande do Sul	Mixed
Piraí, Rio de Janeiro	Mixed
Curitibana, Paraná	Soft drinks
Contagem, Minas Gerais	Soft drinks
Jundiaí, São Paulo	Soft drinks
Sapucaia, Rio Grande do Sul	Soft drinks
São Paulo, São Paulo	Labels
Manaus, Amazonas	Crown Cap
Campo Grande, Rio de Janeiro	Glass Bottle
Manaus, Amazonas	Concentrate
Maltaria Navegantes, Rio Grande do Sul	Malt
Maltaria Passo Fundo, Rio Grande do Sul	Malt
CAC
Ambev Centroamerica, Guatemala	Beer
Santo Domingo, Dominican Republic	Mixed
Hato Nuevo, Dominican Republic	Mixed

44

Latin America North
Plant	Type of Plant
Saint Vincent	Mixed
Dominica	Mixed
Cuba	Mixed
Barbados	Mixed
Panama	Mixed

Latin America South
Plant	Type of Plant
Cympay, Uruguay	Malt
Musa, Uruguay	Malt
Malteria Pampa, Argentina	Malt
Quilmes, Argentina	Beer
Corrientes, Argentina	Mixed
La Paz, Bolivia	Beer
Santa Cruz, Bolivia	Beer
Cochabamba, Bolivia	Beer
Huari, Bolivia	Beer
Tarija, Bolivia	Beer
Santiago, Chile	Beer
Minas, Uruguay	Beer
Ypane, Paraguay	Beer
Zarate, Argentina	Beer
Mendoza, Argentina	Mixed
Montevideo, Uruguay	Mixed
Cordoba, Argentina	Soft Drinks
Trelew, Argentina	Soft Drinks
Buenos Aires South, Argentina	Soft Drinks and Juices
Tucuman, Argentina	Soft Drinks
Tres Arroyos, Argentina	Malt
Llavallol, Argentina	Malt
Acheral, Argentina	Beer
Coroplas, Argentina	Crown Cap
FPV, Paraguay	Bottles
Sacaba, Bolivia	Soft Drinks
El Alto, Bolivia	Soft Drinks
Enalbo, Bolivia	Cans

45

 

Canada
Plant	Type of Plant
St. John’s	Beer
Halifax	Beer
Montreal	Beer
London	Beer
Edmonton	Beer
Creston	Beer
Mill Street	Beer
Turning Point	Beer
Archibald	Beer
Alexander Keith	Beer

46

 

ITEM 4A.             UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5.                OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.            Operating Results

Introduction

The following management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our audited consolidated financial statements included elsewhere in this annual report on Form 20-F.  This annual report contains forward-looking statements that involve risks and uncertainties.  Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors including, without limitation, those set forth in “Cautionary Statement Regarding Forward-Looking Information” and the matters set forth in this annual report generally.

We have prepared our audited consolidated financial statements as of December 31, 2017, 2016 and 2015 and for the three years ended December 31, 2017 in reais and in accordance with IFRS as issued by the IASB.

The financial information and related discussion and analysis contained in this item are in accordance with IFRS as issued by the IASB.  The amounts are in million reais, unless otherwise stated.

Critical Accounting Policies

The preparation of financial statements in conformity with IFRS requires our management to make judgments, estimates and assumptions that affect the application of accounting practices and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on past experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for decision making regarding the judgments about carrying amounts of assets and liabilities that are not readily evident from other sources. Actual results may differ from these estimates. Notes 3 and 4 to our audited consolidated financial statements includes a summary of the critical accounting policies applied in the preparation of these financial statements.  The estimates and assumptions are reviewed on a regular basis. Changes in accounting estimates may affect the period in which they are realized, or future periods.

Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint arrangements. Goodwill is determined as the excess (i) of the consideration paid; (ii)  of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired at the date of acquisition. All business combinations are accounted for by applying the purchase method.

In conformity with IFRS 3 Business Combinations, goodwill is carried at cost and is not amortized, but tested for impairment at least annually, or whenever there are indications that the cash generating unit to which the goodwill has been allocated may be impaired. Impairment losses recognized on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is expressed in the functional currency of the subsidiary or joint operation to which it relates and translated to Reais using the year-end exchange rate.

Regarding associates and joint ventures, goodwill is included in the carrying amount of the investment in the associate/joint ventures.

If our interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized exceeds the cost of the business combination such excess is recognized immediately in the income statement.

47

 

Expenditure on internally generated goodwill is expensed as incurred. Goodwill includes the effects of the predecessor basis of accounting.

Business Combinations Between Entities Under Common Control

Business combinations between entities under common control have not been addressed by IFRS’s. The IFRS 3 is the pronouncement that shall be applied to business combinations, however it explicitly excludes business combinations between entities under common control from its scope.

Therefore, in accordance with IAS 8, Management has adopted an accounting practice which is consistent with United States Generally Accepted Accounting Principles (USGAAP) and United Kingdom Generally Accepted Accounting Principles (UKGAAP), the predecessor basis of accounting to record the carrying amount of the asset received, as recorded by the parent company.

Under the predecessor basis of accounting, when accounting for a transfer of assets or a swap of shares between entities under common control, the entity that receives the net assets or the equity interests (the acquirer) shall initially record the assets and liabilities transferred at their parent book value at the transfer date. If the book value of assets and liabilities transferred by the parent are different from the historical cost registered by the controlling entity of the entities under common control (the ultimate parent), the financial statements of the acquirer shall reflect the assets and liabilities transferred at the same cost of the ultimate parent.

Regarding transactions between entities under common control that involve the disposal or transfer of assets from the subsidiary to its parent company, i.e. - above the level of our consolidated financial statement –, the Company assess the existence of (i) conflict of interests and (ii) economic substance and purpose. Having fulfilled these assumptions, the Company adopted as a policy the concepts of IAS 16 in order to provide adequate visibility and fair impact on the amount of the distributable results to our shareholders, especially non-controlling interests. This policy also includes assets acquired through the swap of non-cash assets, or swap with a combination of cash and non-cash assets. The assets subject to the swap may be of equal or different nature. The cost of such asset is measured at fair value, unless (i) the swap transaction is not commercial in nature, or (ii) the fair value of the asset received (and the asset assigned) cannot be reliably measured. The acquired asset is measured through this way even if the assignor entity cannot immediately exclude the asset from its books. If the acquired asset is not measurable at fair value, its cost is determined by the book value of the assigned asset.

Whenever there is a distribution of assets that is not recorded as cash, the asset, before its distribution, is registered at fair value in the income account. This procedure is applicable to the distributions in which the assets are equal in nature and therefore treated equitably. However, similarly to IFRIC 17, in the absence of a specific accounting practice for transactions under common control, we apply this procedure in our accounting practice. Also, we apply the same procedure to sales (products, supplies, etc.) we perform to our controlling entity, where the positive result of the sale is recognized in the income account.

Joint Arrangements

Joint arrangements are all entities over which we share control with one or more parties. Joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor.

Employee Benefits

Post-employment benefits

Post-employment benefits include pensions managed in Brazil by Instituto Ambev de Previdência Privada, or the IAPP, post-employment dental benefits and post-employment medical benefits managed by FAHZ. Usually, pension plans are funded by payments made by both us and our employees, taking into account the recommendations of independent actuaries. Post-employment dental benefits and post-employment medical benefits are maintained by the return on FAHZ’s plan assets. If necessary, we may contribute some of its profit to FAHZ.

48

 

We manage defined benefit and defined contribution plans for employees of its companies located in Brazil and in its subsidiaries located in the Dominican Republic, Panama, Uruguay, Bolivia and Canada.

We maintain funded and unfunded plans.

Defined Contribution Plans

A defined contribution plan is a pension plan under which we pay fixed contributions into a fund. We have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees for the benefits relating to employee service in the current and prior periods.

The contributions of these plans are recognized as expense in the period they are incurred.

Defined Benefit Plans

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

For defined benefit plans, expenses are assessed separately for each plan using the projected credit unit method. The projected credit unit method takes into account each period of service as giving rise to an additional unit of benefit to measure each unit separately. Under this method, the cost of providing pensions is charged to the income statement during the period of service of the employee. The amounts charged to the income statement consist of current service cost, interest cost, past service costs and the effect of any settlements and curtailments. The obligations of the plan recognized in the balance sheet are measured at the present value of the estimated future cash outflows using a discount rate equivalent to the government’s bond rates with maturity terms similar to those of the obligation and the fair value of the plan assets.

Past service costs result from the introduction of a new plan or changes to an existing plan. They are recognized immediately in the income statement, at the earlier of when: (i) the settlements / curtailments occurs, or (ii) we recognize related restructuring or termination costs, unless those changes are conditioned to the employee’s continued employment, for a specific period of time (the period in which the right is acquired). In such case, the past services costs are amortized using the straight-line method during the period in which the right was acquired.

Actuarial gains and losses consist of the effects of differences between the previous actuarial assumptions and what has actually occurred, and the effects of changes in actuarial assumptions. Actuarial gains and losses are fully recognized in carrying value adjustments.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling and the return on plan assets, both excluding net interest, are recognized in full in the period in which they occur in the statement of comprehensive income. Re-measurements are not reclassified to profit or loss in subsequent periods.

When the amount of the defined benefit obligation is negative (an asset), we recognize those assets (prepaid expenses), to the extent of the value of the economic benefit available to us either from refunds or reductions in future contributions.

Other Post-Employment Obligations

We and our subsidiaries provide post-employment medical benefits, reimbursement of certain medication expenses and other benefits to certain retirees through FAHZ. These benefits are not granted to new retirees. The expected costs of these benefits are recognized over the period of employment, using an accounting methodology similar to that for defined benefit plans, including actuarial gains and losses.

Termination Benefits

Termination benefits are recognized as an expense at the earlier of: (i) when we are demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date, and (ii) when we recognize costs for a restructuring.

49

 

Bonuses

Bonuses granted to employees and managers are based on pre-defined company and individual target achievement. The estimated amount of the bonus is recognized as an expense in the period the bonus is earned.

Share-Based Payments

Different share and share option programs allow our management and other members appointed by the Board of Directors to acquire our shares. The fair value of the share options is estimated at the grant date, using an option pricing model that is most appropriate for the respective option. Based on the expected number of options that will be exercised, the fair value of the options granted is recognized as an expense over the vesting period with a credit to equity. When the options are exercised, equity is increased by the amount of the proceeds received.

Provisions

Provisions, except for the mentioned on item disputes and litigation, are recognized when: (i) we have a present obligation (legal or constructive) as a result of past events; (ii) it is likely that a future disbursement will be required to settle the current obligation; and (iii) a reliable estimate of the amount of the obligation can be made.

Provisions, except for the mentioned on item disputes and litigation, are determined by discounting the expected future cash flows, to a pre-tax rate, that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase accruals are recognized as finance expense.

Deferred and Current Income Tax and Social Contribution

Income tax and social contribution for the year comprises current tax and deferred tax. Income tax and social contribution are recognized in the income statement, unless they relate to items recognized directly in comprehensive income or other equity accounts. In these cases the tax effect is also recognized directly in comprehensive income or equity account (except interest on shareholder’s equity – see note 3 (p) to our consolidated financial statements).

The current tax expense is the expectation of payment on the taxable income for the year, using tax rates enacted, or substantially enacted, at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred taxes are recognized using the balance sheet liability approach. This means that a deferred tax liability or asset is recognized for all taxable and tax deductible temporary differences between the tax and accounting basis of assets and liabilities. Under this method, a provision for deferred taxes is also calculated on the differences between the fair value of assets and liabilities acquired in a business combination and their tax basis. IAS 12 prescribes that no deferred tax liability on goodwill recognition, and no deferred tax asset/liability is recorded: (i) at the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss and (ii) on differences related to investments in subsidiaries to the extent that they are not reversed in the foreseeable future. The amount of deferred tax provided is based on the expectation of the realization or settlement of the temporary difference, using currently or substantially enacted tax rates.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously.

The deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available. The deferred income tax asset is reduced to the extent that it is no longer probable that the future taxable benefit will occur.  

Our aggregate weighted nominal tax rate applicable for the years ended December 31, 2017, 2016 and 2015 was 29.2%, 30.2% and 31.6%, respectively.  For the years ended December 31, 2017, 2016 and 2015, our IFRS effective tax rate was 39.3%, 2.4% and 22.0%, respectively.

50

 

The main events that impacted the effective tax rate in 2017 were:

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

·deductible interest on net equity: Under Brazilian law, companies have the option to distribute interest on equity, or JCP, calculated based on the long-term interest rate, or TJLP, which are deductible for income tax purposes under the applicable legislation, whose approximate amount distributed in the year is R$4,869.8 million, of which R$4,850.1 million are deductible and the tax impact is R$1,649 million;

·withholding tax on dividends: driven by two factors (i) reversal of the provision related to withholding tax on unremitted earnings of Argentinean subsidiaries in 2016 due to a change in the local law that exempts the payment of dividends from withholding tax; and (ii) constitution of provision and exchange variation effect related to withholding tax on unremitted earnings of Canadian subsidiaries of approximately R$ 145 million, as opposed to the approximated amount of R$ 5 million in the same period of the previous year;

·PERT 2017: Amongst the contingencies covered by the Federal Tax Amnesty Program, or PERT 2017, there was a tax assessment discussing the Presumed Profit method used by CRBS (one of Ambev’s subsidiaries in Brazil) to calculate its corporate income taxes (namely, “IRPJ” and “CSLL”). The total amount booked as an expense, after the conversion of the Provisional Measure No.783/2017 into law, was R$2,926 million (principal amount and fines), from which R$2,785 million was booked as non-recurring expenses under the corporate income tax and R$141 million under Financial Results.

Derivative Financial Instruments

We use derivative financial instruments in order to mitigate against risks related to foreign currency, interest rates and commodity prices. Derivative financial instruments that, although contracted for hedging purposes, do not meet all hedge accounting criteria are recognized at fair value in the income statement.

Derivative financial instruments are recognized initially at fair value. Fair value is the amount an asset could be realized and a liability settled, between knowledgeable parties, in an arm’s length transaction. The fair value of derivative financial instruments may be obtained from quoted market prices or from pricing models that take into account current market rates, and also credit risk quality of the counterpart.

Subsequent to initial recognition, derivative financial instruments are re-measured to their fair value at the balance sheet date. Changes in fair value of derivative financial instruments are recognized in the income statement, except when they are designated as hedge instruments, when any effective portion of gain or loss is recognized directly in other comprehensive income.

Cash flow, net investment or fair value hedge accounting is applied to all hedges that qualify for hedge accounting under IAS 39, including the required hedge documentation and hedge effectiveness tests.

Cash Flow Hedge Accounting

When a derivative financial instrument hedges the variability in cash flows of a recognized asset or liability, the foreign currency risk and the fluctuation of commodity prices associated with a highly probable forecasted transaction, the effective portion of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (cash flow hedging reserve). The ineffective portion of any resulting gain or loss is recognized in the income statement.

When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss (at that point) remains in other comprehensive income and is reclassified in accordance with the above policy when the hedged transaction occurs. If the hedged transaction is no longer probable, the cumulative gain or loss recognized in other comprehensive income is recycled into the income statement immediately.

51

 

Net Investment Hedge Accounting

When a derivative financial instrument hedges the net investment in foreign operations, the effective part of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (translation reserve) , while any gains or losses relating to the ineffective portion are recognized in the income statement.

On disposal of a foreign operation, the cumulative gains or losses recognized directly in other comprehensive income is transferred to the income statement.

Fair Value Hedge Accounting

When a derivative financial instrument hedges the variability in fair value of a recognized asset or liability or a firm commitment, any resulting gain or loss on the hedging instrument is recognized in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in the income statement. We do not apply the fair value hedge accounting when the hedge item expires, was sold or exercised.

Derivative financial instruments at fair value through profit or loss

Certain derivative financial instruments do not qualify for hedge accounting purposes. Changes in fair value of such derivatives financial instruments are immediately recognized in income statement.

Exceptional Items

Exceptional items are those that, in our management’s judgment, need to be disclosed separately by virtue of their size or incidence. In determining whether an event or transaction is special, our management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence, and the potential of impact on the variation of profit or loss. These items are disclosed in the income statement or separately disclosed in the notes to the financial statements. Transactions that may give rise to exceptional items are principally restructuring activities, acquisition of subsidiaries, impairment losses, and gains or losses on disposal of assets and investments.

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

In the periods discussed below, we conducted our operations through three business segments as follows:

·Latin America North, which includes our operations in Brazil, where we operate two divisions (the beer sales division and the NAB sales division), and our CAC operations, which includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica, Cuba, Guatemala (which also serves El Salvador, Honduras and Nicaragua), Barbados and beginning on December 31, 2016, Panama.  

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

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

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

52

 

	Consolidated Financial Highlights
	2017	2016	% Change
	(in R$ million, except volume amounts, percentages and per share amounts)
Sales volume—’000 hectoliters	162,829.4	159,821.6	1.9%
Net sales	47,899.3	45,602.6	5.0%
Net revenue per hectoliter—R$/hl	294.2	285.3	3.1%
Cost of sales	(18,041.8)	(16,678.0)	8.2%
Gross profit	29,857.5	28,924.6	3.2%
Gross margin (%)	62%	63%
Sales, marketing and distribution expenses	(11,915.5)	(12,010.5)	(0.8%)
Administrative expenses	(2,623.8)	(2,166.1)	21.1%
Other operating income/(expenses)	1,217.3	1,223.1	(0.5%)
Exceptional item	(108.7)	1,134.3	(109.6%)
Income from operations	16,426.8	17,105.4	(4.0%)
Operating margin (%)	34%	38%
Net income	7,850.5	13,083.4	(40.0%)
Net margin (%)	16%	29%

Margin Analysis

The following table sets forth certain line items of our income statement expressed as percentages of net sales for the years ended December 31, 2017 and 2016:

	Year Ended December 31,
	2017	2016
	(%)	(%)
Net sales	100.0	100.0
Cost of sales	(37.7)	(36.6)
Gross profit	62.3	63.4
Sales, marketing and distribution expenses	(24.9)	(26.3)
Administrative expenses	(5.5)	(4.7)
Other operating income/(expenses)	2.5	2.7
Exceptional items	(0.2)	2.5
Income from operations	34.3	37.5

Selected Financial Data by Business Segment

The following table sets forth selected financial data by business segment, and business operations of Latin America North, for the years ended December 31, 2017 and 2016:

	Year Ended December 31,
	2017					2016
	Brazil(1)	CAC(1)	LAS	Canada	Total	Brazil(1)	CAC(1)	LAS	Canada	Total
	(in R$ million)
Net sales	26,353.0	4,733.0	10,769.7	6,043.5	47,899.3	24,954.6	3,973.2	10,212.9	6,461.9	45,602.6
Cost of sales	(9,898.0)	(2,045.6)	(4,114.0)	(1,984.2)	(18,041.8)	(9,071.8)	(1,798.6)	(3,685.4)	(2,122.2)	(16,678.0)
Gross profit	16,455.0	2,687.4	6,655.7	4,059.4	29,857.5	15,882.8	2,174.6	6,527.5	4,339.7	28,924.6
Sales, marketing, distribution and administrative expenses	(8,472.8)	(1,330.0)	(2,484.3)	(2,252.2)	(14,539.3)	(8,084.5)	(1,038.3)	(2,697.4)	(2,356.4)	(14,176.6)
Other operating income/ (expenses)	1,092.7	77.8	41.2	5.6	1,217.3	1,274.1	9.6	(39.0)	(21.6)	1,223.1
Exceptional items	(33.0)	(23.1)	(41.3)	(11.3)	(108.7)	1,196.7	(13.5)	(41.5)	(7.4)	1,134.3
Income from operations	9,041.9	1,412.1	4,171.3	1,801.5	16,426.8	10,269.1	1,132.4	3,749.6	1,954.3	17,105.4

(1)The Latin America North business segment is comprised of Brazil and CAC.

53

  Net Sales

Net sales increased by 5.0% in 2017, to R$47,899.3 million from R$45,602.6  million in 2016, as shown in tables set forth below:

	Net Sales Year Ended December 31,
	2017		2016
	Sales	% of Total	Sales	% of Total	% Change
	(in R$ million, except percentages)
Latin America North.	31,086.0	64.9%	28,927.8	63.4%	7.5%
Brazil	26,353.0	55.0%	24,954.6	54.7%	5.6%
Beer Brazil	22,509.3	47.0%	21,173.1	46.4%	6.3%
NAB	3,843.7	8.0%	3,781.5	8.3%	1.7%
CAC	4,733.0	9.9%	3,973.2	8.7%	19.1%
Latin America South	10,769.7	22.5%	10,212.9	22.4%	5.5%
Canada	6,043.6	12.6%	6,461.9	14.2%	(6.5%)
Total	47,899.3	100.0%	45,602.6	100.0%	5.0%

	Sales Volumes Year Ended December 31,
	2017		2016
	Volume	% of Total	Volume	% of Total	% Change
	(in thousands of hectoliters, except percentages)
Latin America North.	118,631.8	72.8%	116,623.7	73.0%	1.7%
Brazil	106,360.0	65.3%	106,961.4	66.9%	(0.6%)
Beer Brazil	80,233.6	49.3%	79,670.1	49.8%	0.7%
NAB	26,126.4	16.0%	27,291.3	17.1%	(4.3%)
CAC	12,271.8	7.5%	9,671.3	6.1%	26.9%
Latin America South	34,062.0	20.9%	32,934.5	20.6%	3.4%
Canada	10,135.7	6.2%	10,254.5	6.4%	(1.2%)
Total	162,829.4	100.0	159,821.6	100.0%	1.9%

	Net Revenue per Hectoliter Year Ended December 31,
	2017	2016	% Change
	(in R$, except percentages)
Latin America North	262.0	248.0	5.7%
Brazil	247.8	233.3	6.2%
Beer Brazil	280.5	265.8	5.6%
NAB	147.1	138.6	6.2%
CAC	385.7	410.8	(6.1%)
Latin America South	316.2	310.1	2.0%
Canada	596.3	630.2	(5.4%)
Total	294.2	285.3	3.1%

54

 

Latin America North Operations

Brazilian Operations

Total net sales from our Brazilian operations increased by 5.6% in 2017, to R$26,353.0 million from R$24,954.6 million in 2016.

Our net sales of beer in Brazil increased by 6.3% in 2017, to R$22,509.3 million from R$21,173.1 million in 2016 mainly as a consequence of a 5.6% increase in net revenue per hectoliter in 2017, reaching R$280.5 that year, coupled with a 0.7% increase in sales volume. The increase in net revenue per hectoliter in 2017 resulted mainly from our revenue management initiatives, negatively impacted by a less favorable product mix. Although our sales volume increased in 2017, the Brazilian beer industry was slightly negative, mainly due to the continuing impact of the adverse macroeconomic environment and the retraction in domestic consumption, particularly in the first half of the year. 

Our net sales of NAB in Brazil increased by 1.6% in 2017, to R$3,843.7 million from R$3,781.5 million in 2016, mainly due to a 6.2% increase in net revenue per hectoliter, reaching R$147.1 in 2017, mainly as a result of our revenue management initiatives. This increase was partially offset by 4.3% decrease in sales volume mainly driven by the adverse macroeconomic environment that led to a retraction in domestic consumption.

CAC Operations

Net sales from our CAC operations increased by 19.1% in 2017, to R$4,733.0 million from R$3,973.2  million in 2016, mainly driven by a 26.9% increase in sales volume, reflecting mainly the benefits from our December 2016 transaction with ABI pursuant to which we acquired SAB’s Panama operations, partially offset by lower net revenue per hectoliter. Net revenue per hectoliter contracted by 6.1% in 2017, reaching R$385.7 that year, as our revenue management initiatives were negatively impacted by currency translation due to the depreciation of local currencies, primarily the Dominican Peso in relation to the real duringthe period.

Latin America South Operations

Net sales from our Latin America South operations increased by 5.5% in 2017, to R$10,769.7 million from R$10,212.9 million in 2016 mainly due to a 3.4% increase in volume sold, which was primarily driven by an improvement of macroeconomic conditions in Argentina that had a positive impact on consumption in this country coupled with strong performance in other key markets in the region, such as in Paraguay, led by the successful implementation of the 340ml returnable glass bottle strategy, and in Uruguay, due to execution improvements and favorable weather. In addition, net revenue per hectoliter increased by 2.0% in 2017, reaching R$316.2 that year, as our revenue management initiatives were largely impacted by the negative currency translation due to the weakening of the Argentine peso over the period.

Canada Operations

Net sales from our Canadian operations decreased by 6.5% in 2017, to R$6,043.6 million from R$6,461.9 million in 2016.  This result was mainly due to (1) the 1.2% volume reduction, reflecting the overall contraction of the Canadian beer industry driven by unfavorable weather during that year and (2) the 5.4% decrease in net revenues per hectoliter, at R$596.3 in 2017, as our focused revenue management initiatives and favorable product mix with increased participation of premium and craft brands was fully offset by the negative impact from currency translation reflecting the depreciation of the Canadian dollar relative to the real over the period.

Cost of Sales

Cost of sales increased by 8.2% in 2017, to R$18,041.8 million from R$16,678.0 million in 2016. As a percentage of our net sales, total cost of sales increased to 37.7% in 2017 from 36.6% in 2016.

The table below sets forth information on cost of sales per hectoliter for the periods presented:

55

 

	Cost of Sales per Hectoliter Year Ended December 31,
	2017	2016	% Change
	(in R$, except percentages)
Latin America North	100.7	93.2	8.0%
Brazil	93.0	84.8	9.7%
Beer Brazil	98.5	92.1	6.9%
NAB	76.4	63.5	20.4%
CAC	166.7	186.0	(10.4%)
Latin America South	120.8	111.9	7.9%
Canada	195.8	206.9	(5.4%)
Total	110.8	104.4	6.2%

Latin America North Operations

Brazilian Operations

Total cost of sales for our Brazilian operations increased by 9.0% in 2017, to R$9,889.5 million from R$9,071.8 million in 2016. On a per hectoliter basis, our Brazilian operations’ cost of sales increased by 9.6% in 2017, to R$93.0 from R$84.8 in 2016.

Cost of sales for our Brazilian beer operations increased by 7.6% in 2017, to R$7,895.1 million from R$7,339.9 million in 2016, mainly explained by the devaluation of the real in 2016, which impacted our costs in 2017, especially in the first half of the year, as the impact of fluctuations on our currency hedges are typically postponed to the subsequent period, partially offset by the cost-saving benefits derived from the greater mix of returnable glass bottles in our product portfolio together with procurement savings and our commodities hedges.  On a per hectoliter basis, cost of sales for our Brazilian beer operations increased by 6.8%, to R$98.4 in 2017 from R$92.1 in 2016, mainly as result of the same factors.

Cost of sales for our Brazilian NAB segment increased by 15.2% in 2017, to R$1,994.4 million from R$1,731.9 million in 2016, mainly due to (1) an increase in foreign exchange hedges for the same reasons described above in relation to our Brazilian beer operations in 2017, (2) higher sugar prices, increasing by almost 50% in the second half of the year, (3) lower dilution of fixed costs and (4) a negative mix, which were all partially offset by procurement savings. The cost of sales per hectoliter increased by 20.3% in 2017, totaling R$76.3 from R$63.5 in 2016, mainly as a result of the same factors.

CAC Operations

Cost of sales for our CAC operations increased by 13.7% in 2017, to R$2,045.6 million from R$1,798.7 million in 2016. Such result was below the corresponding increase of sales volumes in the region over the same period as the increased costs for certain raw materials and packaging costs mainly due to inflation were offset by the positive currency translation impact due to the weakening of local currencies, primarily the Dominican Peso, in relation to the real over the period. On a per hectoliter basis, our cost of sales per hectoliter for our CAC operations decreased by 10.8% in 2017, to R$166.7 from R$186.0 in 2016, mainly as a result of the same factors.

Latin America South Operations

Cost of sales for our Latin America South operations increased by 11.9% in 2017, to R$4,122.6 million in 2017 from R$3,685.4 million in 2016 mainly due to (1) higher inflation in Argentina, driving up costs, and (2) unfavorable foreign exchange transactional impacts as a result of our costs denominated in U.S. dollars, which was partially offset by the positive impact of currency translation reflecting the depreciation of the Argentine peso over the period together with benefits derived from our commodities hedges and procurement initiatives. On a per hectoliter basis, our cost of sales for our Latin America South operations increased by 8.2% in 2017, to R$121.0 from R$111.9 in 2016, mainly as a result of the same factors.

56

 

Canada Operations

Cost of sales for our Canadian operations decreased by 6.5% in 2017, to R$1,984.2 million from R$2,122.2 million in 2016, mainly due to (1) the corresponding decrease in sales volume over the period and (2) a positive impact of currency translation reflecting the weakening of the Canadian dollar in relation to real that were partially offset by a negative product mix and increased costs of certain raw materials and packaging mainly due to inflation. Cost of goods sold per hectoliter decreased by 5.4% in 2017, to R$195.8 in 2017 from R$206.9 in 2016, mainly as a result of the same factors.

Gross Profit

As a result of the foregoing, gross profit increased by 3.2% in 2017, to R$29,857.5 million from R$28,924.6 million in 2016.  The table below sets forth the contribution of each business segment to our consolidated gross profit:

	Gross Profit
	2017			2016
	Amount	% of Total	Margin	Amount	% of Total	Margin
	(in R$ million, except percentages)
Latin America North	19,142.4	64.1%	62%	18,057.4	62.4%	62.4%
Brazil	16,455.0	55.1%	62%	15,882.8	54.9%	63.6%
Beer Brazil	14,607.4	48.9%	65%	13,833.2	47.8%	65.3%
NAB	1,847.6	6.2%	48%	2,049.6	7.1%	54.2%
CAC	2,687.4	9.0%	57%	2,174.6	7.5%	54.7%
Latin America South	6,655.7	22.3%	62%	6,527.5	22.6%	63.9%
Canada	4,059.4	13.6%	67%	4,339.7	15.0%	67.2%
Total	29,857.5	100.0%	62%	28,924.6	100.0%	63.4%

Sales, Marketing, Distribution and Administrative Expenses

Our sales, marketing, distribution and administrative expenses increased by 2.6% in 2017, to R$14,539.3 million from R$14,176.6 million in 2016.  An analysis of sales and marketing and administrative expenses for each business segment is set forth below.

Latin America North Operations

Brazilian Operations

Total sales, marketing, distribution and administrative expenses in Brazil increased by 4.8% in 2017, to R$8,473.4 million from R$8,084.5 million in 2016.

Sales, marketing, distribution and administrative expenses for our Brazilian beer operations increased by 4.2% in 2017, to R$7,390.9 million from R$7,095.9 million in 2016.  The principal drivers for the increase in these expenses for our Brazilian beer operations were (1) higher administrative expenses that, along with inflation, were driven by variable compensation accruals, (2) an increase in distribution costs, mainly driven by inflation and the increased weight of returnable glass bottles in the off-trade channel direct distribution, and (3) higher depreciation. These were partially offset by lower sales and marketing expenses due to efficiency gains.

Sales, marketing, distribution and administrative expenses for the NAB segment in Brazil increased by 9.5% in 2017, to R$1,082.5 million from R$988.6 million in 2016, mainly due to (1) higher sales and marketing expenses as we continued to invest behind our brands, (2) an increase in administrative expenses, mainly due to variable compensation accruals and (3) higher distribution expenses, mainly driven by inflation, which were partially offset by lower depreciation.

57

 

CAC Operations

Sales, marketing, distribution and administrative expenses for our CAC operations increased by 28.1% in 2017, to R$1,330.0 million from R$1,038.3 million in 2016, reflecting the corresponding increase in sales volumes and the commencement of our operations in Panama, which were partially offset by (1) the currency translation effects driven by the depreciation of the Dominican Peso in relation to real over the period and (2) efficiency gains in sales, marketing and administrative expenses.

Latin America South Operations

Sales, marketing, distribution and administrative expenses for our Latin America South operations decreased by 7.9% in 2017, to R$2,483.7 million from R$2,697.4 million in 2016, primarily driven by positive currency translation effect resulting from the depreciation of the Argentine Peso over the period, that more than offset the higher inflation in the region.

Canada Operations

Sales, marketing, distribution and administrative expenses for our Canadian operations decreased by 4.4% in 2017, to R$2,252.2 million from R$2,356.4 million in 2016, mainly as a result of (1) a positive currency translation effect resulting from the depreciation of the Canadian Dollar over the period, and (2) lower sales and marketing expenses that more than offset the increase in distribution and administrative expenses, impacted by inflation and higher depreciation.

Other Operating Income (Expense)

Other net operating income decreased by 0.5% in 2017, to R$1,217.3 million from R$1,223.1 million in 2016, mainly explained by a decline in government grants related to state VAT long-term tax incentives in Brazil that were down year over year, due to the expiration of some VAT government grants' agreements in the last quarter of 2016.

Exceptional Items

Exceptional items amounted to a R$108.7 million expense in 2017 compared to a R$1,134.3 million profit recorded in 2016.  Such decrease is explained mainly by gains on stocks swap  recorded in the last quarter of 2016 as a result of the agreement with ABI, pursuant to which we transferred to ABI our businesses in Colombia, Peru and Ecuador, in exchange for SAB’s Panamanian business. The expenses recorded in 2017 were mainly in connection with restructuring costs, primarily linked to centralization and sizing projects in Brazil and LAS and the start of our operations in Panama.  See “Item 4. Information on the Company—A. History and Development of the Company—Recent Acquisitions, Divestments and Strategic Alliances.”

Income from Operations

As a result of the foregoing, income from operations decreased by 4.0% in 2017, to R$16,426.8 million from R$17,105.4 million in 2016.

Net Finance Cost

Our net finance cost decreased by 5.6% in 2017, to R$3,493.9 million from R$3,702.0 million in 2016. This result is mainly explained by lower losses on derivative instruments mainly driven by the carry cost of our currency hedges, primarily linked to the exposure of our cost of goods sold in Brazil and Argentina, which were partially offset by exceptional financial expenses in the amount of R$976.8 million, of which (1) R$835.7 million was related to foreign exchange translation losses on intragroup loans that were historically reported in equity and were recycled to profit and loss account, upon the reimbursement of these loans and (2) R$141.0 million was recorded in connection with our participation in the Brazilian Federal Tax Regularization Program (PERT).

Our total year-end indebtedness decreased by R$2,843.3 million in 2017, while our cash and cash equivalents less bank overdrafts and current investment securities increased by R$2,475.9 million in that year.

58

 

Income Tax Expense

Our consolidated income tax and social contribution on profits totaled R$5,079.3 million in 2017 from R$315.0 million in 2016. The effective tax rate in 2017 was 39.3%, compared to 2.4% in the previous year. Such increase in our effective tax rate in 2017 was primarily due to a tough comparable in 2016, lower accrued benefits from interest on shareholders' equity and R$3,294.7 million exceptional losses on tax adjustments of which: (1) R$2,784.7 million is linked to the Brazilian Federal Tax Regularization Program (PERT) adhered by the Company on September 29, 2017, which involved tax contingencies that were under dispute, including contingencies related to corporate income tax, and (2) R$510.0 million due to the tax effects on foreign exchange variation related to intragroup loans, as aforementioned under "-Net Finance Cost" above.

Net Income

As a result of the foregoing, net income decreased by 40% in 2017, to R$7,850.5 million from R$13,083.4 million in 2016.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

In the periods discussed below, we conducted our operations through three business segments as follows:

·Latin America North, which includes our operations in Brazil, where we operate two divisions (the beer sales division and the NAB sales division), and our CAC operations, which includes our operations in the Dominican Republic, Saint Vincent, Antigua, Dominica, Cuba, Guatemala (which also serves El Salvador, Honduras and Nicaragua), Barbados and, beginning on December 31, 2016, Panama. 

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

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

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

	Consolidated Financial Highlights
	2016	2015	% Change
	(in R$ million, except volume amounts, percentages and per share amounts)
Sales volume—’000 hectoliters	159,821.6	169,078.2	(5.5%)
Net sales	45,602.6	46,720.2	(2.4%)
Net revenue per hectoliter—R$/hl	285.3	276.3	3.3%
Cost of sales	(16,678.0)	(16,061.4)	3.8%
Gross profit	28,924.6	30,658.8	(5.7%)
Gross margin (%)	63.4%	65.6%	-
Sales, marketing and distribution expenses	(12,010.5)	(11,177.9)	7.4%
Administrative expenses	(2,166.1)	(2,281.3)	(5.0%)
Other operating income/(expenses)	1,223.1	1,936.1	(36.8%)
Exceptional items	1,134.3	(357.2)	417.6%
Income from operations	17,105.4	18,778.5	(8.9%)
Operating margin (%)	37.5%	40.2%	-
Net income	13,083.4	12,879.2	1.6%
Net margin (%)	28.7%	27.6%	-

Margin Analysis

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

59

 

	Year Ended December 31,
	2016	2015
	(%)	(%)
Net sales	100.0	100.0
Cost of sales	(36.6)	(34.4)
Gross profit	63.4	65.6
Sales, marketing and distribution expenses	(26.3)	(23.9)
Administrative expenses	(4.7)	(4.9)
Other operating income/(expenses)	2.7	4.1
Exceptional items	2.5	(0.8)
Income from operations	37.5	40.2

Selected Financial Data by Business Segment

The following table sets forth selected financial data by business segment, and business operations of Latin America North, for the years ended December 31, 2016 and 2015:

	Year Ended December 31,
	2016					2015
	Brazil(1)	CAC(1)	LAS	Canada	Total	Brazil(1)	CAC(1)	LAS	Canada	Total
	(in R$ million)
Net sales	24,954.6	3,973.2	10,212.9	6,461.9	45,602.6	26,326.1	3,328.8	11,255.6	5,809.7	46,720.2
Cost of sales	(9,071.8)	(1,798.6)	(3,685.4)	(2,122.2)	(16,678.0)	(8,358.3)	(1,563.0)	(4,306.8)	(1,833.3)	(16,061.4)
Gross profit	15,882.8	2,174.6	6,527.5	4,339.7	28,924.6	17,967.8	1,765.8	6,948.8	3,976.4	30,658.8
Sales, marketing, distribution and administrative expenses	(8,084.5)	(1,038.3)	(2,697.4)	(2,356.4)	(14,176.6)	(7,667.5)	(905.9)	(2,770.4)	(2,115.4)	(13,459.2)
Other operating income/ (expenses)	1,274.1	9.6	(39.0)	(21,6)	1,223.1	1,871.6	(0.1)	60.4	4.2	1,936.1
Exceptional items	1,196.7	(13,5)	(41.5)	(7,4)	1,134.3	(265.5)	(8.4)	(39.9)	(43.4)	(357.2)
Income from operations	10,269.1	1,132.4	3,749.6	1,954.3	17,105.4	11,906.4	851.4	4,198.9	1,821.8	18,778.5

(1)The Latin America North business segment is comprised of Brazil and CAC.

Net Sales

Net sales decreased by 2.4% in 2016, to R$45,602.6 million from R$46,720.2 million in 2015, as shown in tables set forth below:

	Net Sales Year Ended December 31,
	2016		2015
	Sales	% of Total	Sales	% of Total	% Change
	(in R$ million, except percentages)
Latin America North.	28,927.8	63.4%	29,654.9	63.5%	(2.5%)
Brazil	24,954.6	54.7%	26,326.1	56.4%	(5.2%)
Beer Brazil	21,173.1	46.4%	22,441.3	48.1%	(5.7%)
NAB	3,781.5	8.3%	3,884.8	8.3%	(2.7%)
CAC	3,973.2	8.7%	3,328.8	7.1%	19.4%
Latin America South	10,212.9	22.4%	11,255.6	24.1%	(9.3%)
Canada	6,461.9	14.2%	5,809.7	12.4%	11.2%
Total	45,602.6	100.0%	46,720.2	100.0%	(2.4%)

60

 

	Sales Volumes Year Ended December 31,
	2016		2015
	Volume	% of Total	Volume	% of Total	% Change
	(in thousands of hectoliters, except percentages)
Latin America North.	116,623.7	73.0%	123,463.4	73.0%	(5.5%)
Brazil	106,961.4	66.9%	114,354.2	67.6%	(6.5%)
Beer Brazil	79,670.1	49.8%	85,330.9	50.5%	(6.6%)
NAB	27,291.3	17.1%	29,023.3	17.2%	(6.0%)
CAC	9,671.3	6.1%	9,109.2	5.4%	6.2%
Latin America South	32,934.5	20.6%	35,914.5	21.2%	(8.3%)
Canada	10,254.5	6.4%	9,700.3	5.7%	5.7%
Total	159,821.6	100.0%	169,078.2	100.0%	(5.5%)

	Net Revenue per Hectoliter Year Ended December 31,
	2016	2015	% Change
	(in R$, except percentages)
Latin America North	248.0	240.2	3.3%
Brazil	233.3	230.2	1.3%
Beer Brazil	265.8	263.0	1.1%
NAB	138.6	133.9	3.5%
CAC	410.8	365.4	12.4%
Latin America South	310.1	313.4	(1.1%)
Canada	630.2	598.9	5.2%
Total	285.3	276.3	3.3%

Latin America North Operations

Brazilian Operations

Total net sales from our Brazilian operations decreased by 5.2% in 2016, to R$24,954.6 million from R$26,326.1 million in 2015.

Our net sales of beer in Brazil decreased by 5.7% in 2016, to R$21,173.1 million from R$22,441.3 million in 2015 mainly as a consequence of a 6.6% decrease in sales volume, partially offset by a 1.1% increase in net revenue per hectoliter in 2016, reaching R$265.8 in that year. This decrease in sales volume was mainly due to (1) adverse macroeconomic environment that led to the retraction in domestic consumption and (2) a market share loss from 67.5% in 2015 to 66.3% in 2016. Meanwhile, the increase in net revenue per hectoliter in 2016 resulted mainly from our revenue management initiatives, negatively impacted by state tax increases and a less favorable product mix. As part of our revenue management strategy, we used our full portfolio of packs and brands to achieve more attractive consumer prices, including, through our efforts to increase the use of 300-milliliter returnable glass bottles that accounted for 23% of our supermarket volumes in 2016.

Our net sales of NAB in Brazil decreased by 2.7% in 2016, to R$3,781.5 million from R$3,884.8 million in 2015, mainly due to a 6.0% decline in sales volume mainly driven by the adverse macroeconomic environment that led to the retraction in domestic consumption, partially offset by a 3.5% increase in net revenue per hectoliter, reaching R$138.6 in 2016, mainly as a result of our revenue management initiatives.

CAC Operations

Net sales from our CAC operations increased by 19.4% in 2016, to R$3,973.2 million from R$3,328.8 million in 2015, mainly driven by (1) a 6.2% increase in sales volume, reflecting the significant increase of beer consumption relative to other alcohol consumption in the Dominican Republic as well as market share gains in Guatemala and (2) a higher net revenue per hectoliter. Net revenue per hectoliter grew 12.4% in 2016, reaching R$410.8 in that year, driven mainly by revenue management initiatives together with the positive impact from currency translation due to the appreciation of the local currencies, mainly the Dominican Peso,  relative to the real over the period.

61

 

Latin America South Operations

Net sales from our Latin America South operations decreased by 9.3% in 2016, to R$10,212.9 million from R$11,255.6 million in 2015 mainly due to a 8.3% decrease in volume sold, which was primarily driven by the adverse macroeconomic conditions in Argentina that put negative pressure on consumption in this country. However, such impact was partially offset by the strong performance in other key markets in the region, such as Bolivia, Chile and Paraguay. Net revenue per hectoliter decreased 1.1%, reaching R$310.1 in the year, as our revenue management strategy was largely impacted by the negative currency translation due to the weakening of the Argentine peso over the period.

Canada Operations

Net sales from our Canadian operations increased by 11.2% in 2016, to R$6,461.9 million from R$5,809.7 million in 2015.  This result was mainly due to (1) the 5.7% volume growth, benefiting from our recent strategic acquisitions in the craft, ready-to-drink and cider categories, (2) our focused revenue management initiatives, (3) the increased participation of premium and craft brands in the mix of products sold and (4) the positive impact from currency translation reflecting the strength of the Canadian dollar over the period.

Cost of Sales

Cost of sales increased by 3.8% in 2016, to R$16,678.0 million from R$16,061.4 million in 2015.  As a percentage of our net sales, total cost of sales increased to 36.6% in 2016 from 34.4% in 2015.

The table below sets forth information on cost of sales per hectoliter for the periods presented:

	Cost of Sales per Hectoliter Year Ended December 31,
	2016	2015	% Change
	(in R$, except percentages)
Latin America North	93.2	80.4	16.0%
Brazil	84.8	73.1	16.0%
Beer Brazil	92.1	79.2	16.3%
NAB	63.5	55.2	15.1%
CAC	186.0	171.6	8.4%
Latin America South	111.9	119.9	(6.7%)
Canada	206.9	189.0	9.5%
Total	104.4	95.0	9.9%

Latin America North Operations

Brazilian Operations

Total cost of sales for our Brazilian operations increased by 8.5% in 2016, to R$9,071.8 million from R$8,358.3 million in 2015. On a per hectoliter basis, our Brazilian operations’ cost of sales increased by 16.0% in 2016, to R$84.8 from R$73.1 in 2015.

Cost of sales for our Brazilian beer operations increased by 8.6% in 2016, to R$7,339.9 million from R$6,757.6 million in 2015, mainly explained by the devaluation of the real in 2015, which impacted our costs in 2016, as the impact of fluctuations on our currency hedges are typically postponed to the subsequent period, partially offset by the cost-saving benefits derived from the greater mix of returnable glass bottles in our product portfolio together with procurement savings and our commodities hedges.  On a per hectoliter basis, cost of sales for our Brazilian beer operations increased by 16.3%, to R$92.1 in 2016 from R$79.2 in 2015, mainly as result of the same factors.

62

 

Cost of sales for our Brazilian NAB segment increased 8.2% in 2016, to R$1,731.9 million from R$1,600.7 million in 2015, mainly due to (1) an increase in depreciation costs as a result of increased investments in property, plant and equipment in recent years and (2) an increase in foreign exchange hedges, which were partially offset by procurement savings. The cost of sales per hectoliter increased 15.1% in 2016, totaling R$63.5 from R$55.2 in 2015, mainly as a result of the same factors.

CAC Operations

Cost of sales for our CAC operations increased 15.1% in 2016, to R$1,798.7 million from R$1,563.0 million in 2015, mainly due to (1) the corresponding increase of sales volumes in the region over the same period, (2) the negative currency translation impact due to the strengthening of the Dominican Peso over the period and (3) increased costs for certain raw materials and packaging costs mainly due to inflation. On a per hectoliter basis, our cost of sales per hectoliter for our CAC operations increased by 8.4% in 2016, to R$186.0 from R$171.6 in 2015, mainly as a result of the same factors.

Latin America South Operations

Cost of sales for our Latin America South operations decreased by 14.4% in 2016, to R$3,685.4 million in 2016 from R$4,306.8 million in 2015 mainly due to (1) higher inflation in Argentina, driving up costs and (2) unfavorable foreign exchange transactional impacts as a result of our costs denominated in U.S. dollars, which was partially offset by the positive impact of currency translation reflecting the depreciation of the Argentine peso over the period together with benefits derived from our currency and commodities hedges and procurement initiatives. On a per hectoliter basis, our cost of sales for our Latin America South operations decreased by 6.7% in 2015, to R$111.9 from R$119.9 in 2015, mainly as a result of the same factors.

Canada Operations

Cost of sales for our Canadian operations increased by 15.8% in 2016, to R$2,122.2 million from R$1,833.3 million in 2015, mainly due to (1) the corresponding increase in sales volume over the period, (2) a negative product mix driving up costs, (3) increased costs of certain raw materials and packaging mainly due to inflation, and (4) the negative impact of currency translation reflecting the strengthening of the Canadian dollar over the period. Cost of goods sold per hectoliter increased 9.5% in 2016, to R$206.9 in 2016 from R$189.0 in 2015, mainly as a result of the same factors.

Gross Profit

As a result of the foregoing, gross profit decreased by 5.7% in 2016, to R$28,924.6 million from R$30,658.8 million in 2015.  The table below sets forth the contribution of each business segment to our consolidated gross profit:

	Gross Profit
	2015			2014
	Amount	% of Total	Margin	Amount	% of Total	Margin
	(in R$ million, except percentages)
Latin America North	18,057.4	62.4%	62.4%	19,733.6	64.4%	66.5%
Brazil	15,882.8	54.9%	63.6%	17,967.8	58.6%	68.3%
Beer Brazil	13,833.2	47.8%	65.3%	15,683.7	51.2%	69.9%
NAB	2,049.6	7.1%	54.2%	2,284.1	7.4%	58.8%
CAC	2,174.6	7.5%	54.7%	1,765.8	5.8%	53.0%
Latin America South	6,527.5	22.6%	63.9%	6,948.8	22.6%	61.7%
Canada	4,339.7	15.0%	67.2%	3,976.4	13.0%	68.4%
Total	28,924.6	100.0%	63.4%	30,658.8	100.0%	65.6%

63

 

Sales, Marketing, Distribution and Administrative Expenses

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

Latin America North Operations

Brazilian Operations

Total sales, marketing, distribution and administrative expenses in Brazil increased by 5.4% in 2016, to R$8,084.5 million from R$7,667.5 million in 2015.

Sales, marketing, distribution and administrative expenses for our Brazilian beer operations increased 4.6% in 2016, to R$7,095.9 million from R$6,786.8 million in 2015.  The principal drivers for the increase in these expenses for our Brazilian beer operations were (1) higher sales and marketing expenses as we continued to invest behind our brands, (2) mid-single digit increase in distribution costs, mainly driven by inflation and the increased weight of returnable glass bottles in the off premise channel direct distribution, and (3) higher depreciation. These were partially offset by lower administrative expenses due to efficiency gains.

Sales, marketing, distribution and administrative expenses for the NAB segment in Brazil increased by 12.2% in 2016, to R$988.6 million from R$880.7 million in 2015, mainly due to changes in our logistics and administrative expenses allocation between Brazilian beer and NAB operations to better reflect the size of our NAB segment in Brazil, which were partially offset by lower depreciation.

CAC Operations

Sales, marketing, distribution and administrative expenses for our CAC operations increased by 14.6% in 2016, to R$1,038.3 million from R$905.9 million in 2015, mainly as a result of (1) currency translation effects driven by the appreciation of the Dominican Peso over the period, (2) higher sales and marketing expenses, as we continued to invest behind our brands, (3) higher distribution expenses corresponding to higher sales volumes and (4) higher depreciation, which were partially offset by low single-digit increases of administrative expenses due to efficiency gains.

Latin America South Operations

Sales, marketing, distribution and administrative expenses for our Latin America South operations decreased by 2.6% in 2016, to R$2,697.4 million from R$2,770.4 million in 2015, primarily driven by positive currency translation effect resulting from the depreciation of the Argentine Peso over the period.

Canada Operations

Sales, marketing, distribution and administrative expenses for our Canadian operations increased by 11.4% in 2016, to R$2,356.4 million from R$2,115.4 million in 2015, mainly as a result of (1) a negative currency translation effect resulting from the appreciation of the Canadian Dollar over the period, (2) higher sales and marketing and administrative expenses, as we continued to invest in our brands, and (3) higher depreciation.

Other Operating Income (Expense)

Other net operating income decreased by 36.8% in 2016, to R$1,223.1 million from R$1,936.1 million in 2015, mainly explained by (1) a decline in government grants as a result of overall lower volumes and revenues in addition to changes in the geographic mix of our revenues as we have different plants throughout Brazil with different state-based tax incentive programs, and (2) an increase in net other operating income in 2015 with no corresponding benefit in 2016.

64

 

Exceptional Items

Exceptional items amounted to a R$1,134.3 million profit in 2016 compared to a R$357.2 million expense recorded in 2015.  Such increase is explained mainly by a non-cash gain on stocks swap  recorded in the last quarter of 2016 as a result of the agreement with Anheuser-Busch InBev SA/NV, or ABI, pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador, in exchange for which ABI has agreed to transfer SAB’s Panamanian business to us. See “Item 4. Information on the Company—A. History and Development of the Company—Recent Acquisitions, Divestments and Strategic Alliances.”

Income from Operations

As a result of the foregoing, income from operations decreased by 8.9% in 2016, to R$17,105.4 million from R$18,778.5 million in 2015.

Net Finance Cost

Our net finance cost increased by 63.2% in 2016, to R$3,702.0 million from R$2,268.2 million in 2015.  This result is mainly explained by (1) higher net interest expenses, including non-cash expenses related to the put options associated with our investment in the Dominican Republic, (2) higher losses on derivative instruments mainly driven by the carry cost of our currency hedges, primarily linked to our cost of goods sold exposure in Brazil and Argentina and non-cash gains or losses related to the mark to market of our hedges, and (3) higher interest on contingencies.

Our total year-end indebtedness increased by R$1,796.8 million in 2016, while our cash and cash equivalents less bank overdrafts and current investment securities decreased by R$5,673.1 million in that year. 

Income Tax Expense

Our consolidated income tax and social contribution on profits decreased by 91.3% in 2016, to R$315.0 million from R$3,634.2 million in 2015.  The effective tax rate in 2016 was 2.4%, compared to 22.0% in the previous year.  Such decrease in our effective tax rate in 2016 was primarily due to a R$1,539.3 million gain on other tax adjustments of which: (1) around R$400 million is explained by a reversion of withholding tax provisions in July 2016, related to unremitted earnings from Argentina as legislation in Argentina was enacted revoking a withholding tax over dividend remittance that was created in 2013  and  (2) recognition of R$800 million in deferred tax assets on carried losses related to international subsidiaries due to the improvement of our capital structure outside of Brazil. 

Net Income

As a result of the foregoing, net income increased by 1.6% in 2016, to R$13,083.4 million from R$12,879.2 million in 2015.

B.            Liquidity and Capital Resources

Sources and Uses

The information in this section refers to 2017 and 2016.  Our primary sources of liquidity have historically been cash flows from operating activities and borrowings.  Our material cash requirements have included the following:

·debt service;

·capital expenditures;

·payments of dividends and interest on shareholders’ equity;

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

65

 

·investments in companies participating in the brewing, NAB and malting industries.

Our cash and cash equivalents and current investment securities at December 31, 2017 and 2016 were R$10,336.4 million and R$8,159.6 million, respectively.

We believe that cash flows from operating activities, available cash and cash equivalents and current investment securities, along with our derivative instruments and our access to borrowing facilities, will be sufficient to fund our capital expenditures, debt service and dividend payments going forward.

Cash Flows

Operating Activities

Cash flows from our operating activities increased by 44.8% in 2017, to R$17,874.1 million from R$12,344.4 million in 2016, mainly as a result of (1) a 5.0% increase in net sales coupled with a 8.8% increase in cost of sales (excluding depreciation and amortization) and a growth of 2.8% in sales, marketing, distribution and administrative expenses (excluding depreciation and amortization) that led us to improved operational results, (2) an improvement in working capital during 2017, which increased by R$1,145.4 million in 2017 and (3) a significant decrease in income taxes paid.

Investing Activities

Cash flows used in our investing activities decreased by 47.9% in 2017, to R$3,073.0 million from R$5,898.0 million in 2016, mainly explained by the lower level of capital expenditures in property, plant and equipment and intangible assets coupled with lower acquisitions of subsidiaries, net of cash acquired.

Financing Activities

Cash flows used in our financing activities increased by 10.5% in 2017, to an outflow of R$12,864.1 million from a R$11,645.1 million cash outflow in 2016, mainly driven by (1) higher repayment of borrowings and (2) lower proceeds from borrowings, partially offset by a decrease in payment of dividends and interest on shareholders’ equity and  lower outflows related to cash net of finance costs other than interests.

The table below shows the profile of our debt instruments:

	Maturity Schedule of Debt Portfolio as of December 31, 2017
Debt Instrument	2018	2019	2020	2021	2022	Thereafter	Total
	(in R$ million, except percentages)
BNDES Currency Basket Debt Floating Rate:
Currency Basket Debt Floating Rate	-	-	-	-	-	-	-
UMBNDES + Average Pay Rate	-	-	-	-	-	-	-
International Debt:
Other Latin America Currency Floating Rate	-	-	4.96	-	-	-	4.96
Average Pay Rate	-	-	2.3%	-	-	-	2.3%
Other Latin America Currency Fixed Rate	199.1	-	-	-	-	-	199.1
Average Pay Rate	9.3%	-	-	-	-	-	9.3%
US$ Fixed Rate	6.5	16.4	-	-	-	-	22.9
Average Pay Rate	2.2%	4.5%	-	-	-	-	3.8%
US$ Floating Rate	78.2	477.0	-	-	-	-	555.3
Average Pay Rate	4.0%	2.5%	-	-	-	-	2.7%
CAD Floating Rate	685.9	-	-	-	-	-	685.9
Average Pay Rate	2.1%	-	-	-	-	-	2.1%
Reais Denominated Debt Floating Rate – TJLP & TR:
Notional Amount	164.7	74.3	9.6	10.0	10.8	133.0	402.3
TJLP & TR + Average Pay Rate	9.1%	9.1%	9.4%	9.4%	9.4%	9.4%	9.2%
Reais Debt – ICMS Fixed Rate:
Notional Amount	38.4	27.0	19.7	7.8	3.8	33.2	129.9
Average Pay Rate	5.6%	5.6%	5.6%	5.6%	5.6%	5.6%	5.6%
Reais Debt – Fixed Rate:
Notional Amount	148.3	129.4	48.2	147.7	43.5	35.7	552.7
Average Pay Rate	5.6%	5.5%	4.0%	11.2%	3.5%	3.6%	6.6%
Total Debt	1,321.1	724.1	82.4	165.5	58.0	201.9	2,553.0

66

 

Borrowings

Most of our borrowings are for general use, based upon strategic capital structure considerations.  Although seasonal factors affect the business, they have little effect on our borrowing requirements.  We accrue interest based on different interest rates, the most significant of which are: (1) fixed, for the 2021 debentures; (2) Long-Term Interest Rate (Taxa de Juros de Longo Prazo), or the TJLP, for loans of the Brazilian Economic and Social Development Bank (Banco Nacional de Desenvolvimento Economico e Social), or the BNDES; (3) the Interest Rate Benchmark (Taxa Referencial), or TR, for Bank Credit Notes (Cédula de Crédito Bancário) and (4) floating for international loans.  For further information, see note 22 of our audited consolidated financial statements.

The following table sets forth our net cash consolidated position as of December 31, 2017 and 2016:

	Net Cash Consolidated Position As of December 31,
	2017			2016
	LC(1)	FC(2)	Total	LC(1)	FC(2)	Total
	(in R$ million)
Short-term debt	(351.4)	(969.7)	(1,321.1)	(726.0)	(2,904.6)	(3,630.6)
Long-term debt	(733.5)	(498.4)	(1,231.9)	(1,165.2)	(600.5)	(1,765.7)
Total	(1,084.9)	(1,468.1)	(2,553.0)	(1,891.2)	(3,505.1)	(5,396.3)
Cash and cash equivalents (net of bank overdrafts)			10,352.7			7,876.8
Investment securities			11.9			282.8
Net cash position			7,811.6			2,763.3

(1)LC refers to our local currency indebtedness.

(2)FC refers to our foreign currency indebtedness.

Short-term Debt

As of December 31, 2017, our short-term debt totaled R$1,321.1 million, 73% of which was denominated in foreign currencies. As of December 31, 2016, our short-term debt totaled R$3,630.6 million, 80.0% of which was denominated in foreign currencies. 

Long-term Debt

As of December 31, 2017, our long-term debt, excluding the current portion of long-term debt, totaled R$1,231.9 million, of which R$733.5 million was denominated in local currency.  As of December 31, 2016, our long-term debt, excluding the current portion of long-term debt, totaled R$1,765.7 million, of which R$1,165.3 million was denominated in local currency.  

67

 

The table below shows a breakdown of our long-term debt by year:

	As of December 31, 2017
Long-term Debt Maturity in:	(in R$ million)
2019	(724.1)
2020	(82.4)
2021 and Later	(425.5)
Total	(1,231.9)

In accordance with our foreign currency risk management policy, we have entered into forward and cross-currency interest rate swap contracts in order to mitigate currency and interest rate risks.  See “Item 11. Quantitative and Qualitative Disclosures About Market Risk” for our policy with respect to mitigating foreign currency and interest rate risks through the use of financial instruments and derivatives.

On October 30, 2015, Ambev issued R$1.0 billion in Brazilian debentures with a maturity date of October 30, 2021, or the 2021 debentures, to qualified investors as defined by applicable CVM regulations.  The 2021 debentures bear interest at a rate of 14.476% per annum, payable semi-annually in arrears.  This rate is subject to upper or downward adjustments in accordance with upgrades or downgrades to the credit rating of the Company, respectively, as set forth in the respective indenture.  The 2021 debentures are unsecured and unsubordinated obligations of Ambev (except for statutorily preferred credits set forth in Brazilian bankruptcy laws).  The 2021 debentures are denominated and payable in reais.  The net proceeds of the offering are being used for capital expenditure investments and, therefore, the 2021 debentures enjoy certain Brazilian federal income tax incentives pursuant to Law 12,431/11. 

As of December 31, 2017, our local currency long-term debt borrowings consisted primarily of the 2021 debentures and BNDES debts.  Long-term local currency also includes long-term plant expansion and other loans from governmental agencies and special BNDES credit lines and programs, such as the Fund for Financing the Acquisition of Industrial Machinery and Equipment (FINAME) and the Enterprise Financing Program (FINEM).

Secured Debt

Certain loans provided by the BNDES are secured by some of our facilities and some of our equipment (mainly coolers).  

Sales Tax Deferrals and Other Tax Credits

Many states in Brazil offer tax benefits programs to attract investments to their regions.  We participate in ICMS Value-Added Tax Credit Programs offered by various Brazilian states which provide (1) tax credits to offset ICMS Value-Added Tax payables and (2) ICMS Value-Added Tax deferrals.  In return, we are required to meet certain operational requirements including, depending on the state, production volume and employment targets, among others.  All of these conditions are included in specific agreements between Ambev and the state governments.  In the event that we do not meet the program’s targets, future benefits may be withdrawn.  The total amount deferred (financing) as of December 31, 2017 was R$129.9 million with a current portion of R$38.4 million, and R$91.5 million as non-current.  Percentages deferred typically range from 50% to 92% over the life of the program.  Balances deferred generally accrue interest and are partially inflation indexed, with adjustments generally set at 60% to 80% of a general price index.  The grants (tax waivers) are received over the lives of the respective programs.  In the years ended December 31, 2017 and 2016, we recorded R$1,869.35 million and R$1,543.13 million, respectively, of tax credits as gains on tax incentive programs.

Capital Investment Program

In 2017, consolidated capital expenditures on property, plant and equipment and intangible assets totaled R$3,203.7 million consisting of R$1,859.7 million for our Latin America North business segment, R$1,051.2 million related to investments in our Latin America South operations and R$292.8  million related to investments in Canada.  These expenditures primarily included investments in capacity expansion, quality controls, automation, modernization and replacement of packaging lines, innovations, warehousing for direct distribution, coolers, expenditures for the replacement of bottles and crates, market assets from former dealers, and continued investments in information technology.

68

 

In 2016, consolidated capital expenditures on property, plant and equipment and intangible assets totaled R$4,132.7 million consisting of R$2,450.1 million for our Latin America North business segment, R$1,365.5 million related to investments in our Latin America South operations and R$317.1 million related to investments in Canada.  These expenditures primarily included investments in capacity expansion, quality controls, automation, modernization and replacement of packaging lines, innovations, warehousing for direct distribution, coolers, expenditures for the replacement of bottles and crates, market assets from former dealers, and continued investments in information technology.

C.            Research and Development

We maintain an innovation, research and development center in the city of Rio de Janeiro, State of Rio de Janeiro,  at the Universidade Federal do Rio de Janeiro (UFRJ).  This new center (ZITEC – Zone Innovation and Technology Center) replaces the previous R&D structure based in Guarulhos.  ZITEC commenced operations in the final months of 2017 in order to accelerate product innovation by developing new liquids and the most modern packaging to assure continuous product differentiation and yearly increases in quality and efficiency.  The investment was approximately R$180 million in the last 3 years. 

D.            Trend Information

For detailed information regarding the latest trends in our business, see “—A. Operating Results—Year Ended December 31, 2017 Compared to Year Ended December 31, 2016” and “Item 4. Information on the Company—B. Business Overview—Description of the Markets Where We Operate.”

E.            Off-balance Sheet Arrangements

We have a number of off-balance sheet items which have been disclosed elsewhere in this annual report, under “Item 4. Information on the Company—B. Business Overview—Beer and CSD Production Process—Sources and Availability of Raw Materials,” under “Item 4. Information on the Company—B. Business Overview—Beer and CSD Production Process—Packaging” and under “Item 17. Financial Statements,” note 29 to our consolidated financial statements, “Collateral and contractual commitments with suppliers, advances from customers and other.”  Off-balance sheet items include future commitments of R$11,096.3 million as of December 31, 2017, as set forth in the table below:

Contractual Obligation	As of December 31, 2017
	(in R$ million)
Purchase commitments with respect to property, plant and equipment	148.4
Purchase commitments with respect to raw materials	494.6
Purchase commitments with respect to packaging materials	9,599.9
Other commitments	853.3
Total	11,096.3

69

 

F.            Commitments and Contingencies (Tabular Disclosure of Contractual Obligations)

The following table and discussion provide additional disclosure regarding our material contractual obligations and commercial commitments as of December 31, 2017:

	Payments Due by Period
Contractual Obligations*	Total	Less Than 1 Year	1-3 Years	3-5 Years	More Than 5 Years
	(in R$ million)
Short-term and long-term debt**	2,968.8	1,511.3	854.0	277.1	326.4
Finance leasing liabilities	20.6	2.3	18.3	-	-
Trade and other payables	21,030.6	19,005.6	656.5	147.7	1,220.7
Sales tax deferrals	892.9	172.4	192.3	212.8	315.4
Total contractual cash commitments	24,912.9	20,691.7	1,721.1	637.6	1,862.5

*      Contractual obligations referred to in the table above do not include tax payments to be made by the Company, except payments made in connection with tax benefits.

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

The above table does not reflect contractual commitments discussed above in “Off-Balance Sheet Arrangements.”

We are subject to numerous commitments and contingencies with respect to tax, labor, distributors and other claims.  To the extent that we believe it is probable that these contingencies will be realized, they have been recorded in the balance sheet.  We have estimated the total exposures of possible (but not probable) losses, which are not recorded as liabilities, to be R$60,520.0 million as of December 31, 2017.  These are not considered commitments.  Our estimates are based on reasonable assumptions and management assessments, but should the worst case scenario develop, subjecting us to losses in all cases, our expected net impact on the income statement would be an expense for this amount.

70

 

ITEM 6.                DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.            Directors and Senior Management

The Board of Directors oversees Ambev’s executive officers.  The Board of Directors is currently comprised of eleven effective members and two alternate members, and provides the overall strategic direction of Ambev.  Directors are elected at general shareholders’ meetings for a three-year term, re-election being permitted.  Day-to-day management is delegated to the executive officers of Ambev, of which there are currently eleven.  The Board of Directors appoints executive officers for a three-year term, re-election being permitted.  The Ambev Shareholders’ Agreement regulates the election of directors of Ambev by the controlling shareholders.  See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement—Management of Ambev.”

Directors

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

Board of Directors(1)
Name	Age	Position	Director Since(2)	Term Expires(3)
Victorio Carlos De Marchi	79	Co-Chairman and Director	1999	2020
Carlos Alves de Brito	57	Co-Chairman and Director	2006	2020
Milton Seligman	66	Director	1999	2020
Roberto Moses Thompson Motta	60	Director	2008	2020
José Heitor Attilio Gracioso	86	Director	1999	2020
Vicente Falconi Campos	77	Director	1999	2020
Luis Felipe Pedreira Dutra Leite	52	Director	2005	2020
Cecília Sicupira	36	Director	2017	2020
Álvaro Antonio Cardoso de Souza	69	Director	2012	2020
Antonio Carlos Augusto Ribeiro Bonchristiano	50	Director (Independent)	2014	2020
Marcos de Barros Lisboa	53	Director (Independent)	2014	2020
Michel Dimitrios Doukeris	44	Director (Alternate)	2015	2020
Nelson José Jamel	45	Director (Alternate)	2017	2020

(1)Victorio Carlos De Marchi, Co-Chairman of the Board of Directors of Ambev, was appointed by FAHZ, the former controlling shareholder of Antarctica, while Carlos Alves de Brito was appointed by ABI and is also the Chief Executive Officer of ABI.  ABI appointed five additional directors: Milton Seligman, Roberto Moses Thompson Motta, Luis Felipe Pedreira Dutra Leite, Vicente Falconi Campos and Cecília Sicupira in addition to the alternate directors Michel Dimitrios Doukeris and Nelson José Jamel.  FAHZ appointed two additional directors: José Heitor Attílio Gracioso and Álvaro Antonio Cardoso de Souza.  The two independent directors Antonio Carlos Augusto Ribeiro Bonchristiano and Marcos de Barros Lisboa were appointed jointly by ABI and FAHZ.

(2)Directors first elected to our board of directors prior to 2013 were originally appointed as directors of Old Ambev.  Directors first elected to our board of directors on or after 2013 were originally elected as directors of Ambev S.A.

(3)Annual Shareholders’ General Meeting to be held in 2020.

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

Victorio Carlos De Marchi.  Mr. De Marchi is Co-Chairman of the Board of Directors of Ambev.  Mr. De Marchi joined Antarctica in 1961 and held various positions during his tenure, including Chief Executive Officer from 1998 to April 2000.  Mr. De Marchi was also president of the Brewing Industry National Association (Sindicerv) until February 2002 and is a member of the Orientation Committee of FAHZ.  Mr. De Marchi has a degree in economics from Faculdade de Economia, Finanças e Administração 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, SP, 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 ABI.  He joined Brahma in 1989 and has held various management positions during his tenure.  He served as Chief Operating Officer of Ambev from 1999 to 2003, as Chief Executive Officer for Latin America in 2004 and as Chief Executive Officer for North America in 2005.  Mr. Brito holds a degree in mechanical engineering from the Universidade Federal do Rio de Janeiro and an MBA from Stanford University.  His principal business address is Brouwerijplein 1, 3000, Leuven, Belgium.

71

 

Milton Seligman.  Mr. Seligman is a member of the Board of Directors of Ambev.  He served as Corporate Affairs Officer of the Company from 2004 until 2013 (previously Old Ambev)  and was also a member of the Board of Directors of Tenedora from 2013 to 2016.  Mr. Seligman  has a degree in engineering  from Universidade Federal de Santa Maria (Rio Grande do Sul).  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Roberto Moses Thompson Motta.  Mr. Thompson is a member of the Board of Directors of Ambev.  He is also a board member of ABI and Lojas Americanas S.A., a retail company.  He holds a degree in engineering 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 600 Third Avenue, 37th floor, New York, NY, USA.

José Heitor Attílio Gracioso.  Mr. Gracioso is a member of the Board of Directors of Ambev.  Mr. Gracioso joined Antarctica in 1946 and held various positions during his tenure.  In 1994, Mr. Gracioso was elected to Antarctica’s Board of Directors and, in 1999, he was elected Chairman of the Board of Directors, a position held until April 2000.  He holds a degree in marketing from Escola Superior de Propaganda de São Paulo, a degree in business administration from Fundação Getulio 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, SP, Brazil.

Vicente Falconi Campos.  Mr. Campos is a member of the Board of Directors of Ambev.  He is also a member of the Institutional Council of Instituto de Desenvolvimento Gerencial - INDG. Mr. Campos is also a consultant for the Brazilian government and Brazilian and multinational companies such as Grupo Gerdau, Grupo Votorantim and Mercedes-Benz.  He holds a degree in Mining and Metal Engineering from Universidade Federal de Minas Gerais, and M.Sc. and Ph.D. degrees from the Colorado School of Mines.  His principal business address is Rua Senador Milton Campos, 35, 7th floor, Nova Lima, MG, Brazil.

Luis Felipe Pedreira Dutra Leite.  Mr. Dutra is a member of the Board of Directors of Ambev.  He has also served, since January 2005, as Chief Financial Officer of ABI.  He joined Brahma in 1990 and has held numerous positions during his tenure, including that of Chief Financial Officer and Investor Relations Officer of Ambev.  Mr. Dutra holds a degree in economics from Universidade Cândido Mendes and an MBA in financial management from Universidade de São Paulo.  His principal business address is Brouwerijplein 1, 3000, Leuven, Belgium.

Cecília Sicupira.  Ms. Sicupira is a member of the Board of Directors of Ambev.  Currently, she is an alternate member of the Board of Directors of São Carlos Empreendimentos e Participações S.A., a member of the Board of Directors of S-BR Global Investments Ltd., S-Velame Administração de Recursos e Participações S.A. (a holding company which holds an ownership interest in ABI), and a member of the Board of Directors of Restaurants Brands International Inc. Ms. Sicupira holds a degree in International Business Administration from the American University of Paris and attended the Harvard Business School’s Management Program. Her principal business address is Rua Dr. Renato Paes de Barros, 1017, 15th floor, São Paulo, SP, Brazil.

Álvaro Antonio Cardoso de Souza.  Mr. Souza is a member of Ambev’s Board of Directors.  He served as a member of Ambev’s Fiscal Council from 2005 to March 2012, and since then has been a member of the Board of Directors of this Company. Mr. Souza holds degrees in economics and business administration from Pontifícia Universidade Católica de São Paulo. His principal business address is Avenida Presidente Juscelino Kubitschek 1726, 7th floor, part 71, São Paulo, SP, Brazil.

Antonio Carlos Augusto Ribeiro Bonchristiano. Mr. Bonchristiano is an independent member of the Board of Directors of Ambev. He has also acted as a member of the Board of Directors of several companies, including San Antonio Internacional, Ltd., LBR – Lácteos Brasil S.A., BRZ Investimentos S.A., Estácio Participações S.A., BHG S.A. – Brazil Hospitality Group, BR Properties S.A., Equatorial Energia S.A., GP Investments, Ltd., ALL – América Latina Logística S.A., Companhia Energética do Maranhão – CEMAR, Hopi Hari S.A., Contax Participações S.A., Gafisa S.A. and Magnesita Refratários S.A.  He was also a member of the Board of Directors and Chief Executive Officer of Submarino S.A. Mr. Bonchristiano has a degree in politics, philosophy and economics from the University of Oxford.  His principal business address is Avenida Brig. Faria Lima, 3900, 7th floor, São Paulo, SP, Brazil.

72

 

Marcos de Barros Lisboa. Mr. Lisboa is an independent member of the Board of Directors of Ambev. He has also acted as Executive Officer of Unibanco S/A and Vice-President of Operational Insurance, Controls and Support of Itaú Unibanco S/A, both companies with main activities in the financial segment.  Further, between 2003 and 2005, he acted as Secretary of Economic Politics of Federal Revenue Office (Ministério da Fazenda). Mr. Lisboa has a degree and a masters in economics from Universidade Federal do Rio de Janeiro and a Ph.D. in economics from the University of Pennsylvania.  Since the end of the 80s, he has developed activities in the faculty of several teaching institutions in Brazil and abroad.  His principal business address is Rua Quatá, 300, São Paulo, SP, Brazil.

Michel Dimitrios Doukeris.  Mr. Doukeris is an alternate member of the Board of Directors of Ambev. Since he joined the company in 1996, he held various positions, including Global Chief Sales Officer of ABI and Operations General Manager for the APAC Zone (Asia Pacific) of ABI. Currently he is also Chief Executive Officer for the North America Zone at ABI. Mr. Doukeris holds a degree in chemical engineering from Universidade Federal Santa Catarina and a master’s degree in marketing from Fundação Getulio Vargas.  He has also completed post-graduate programs in marketing and marketing strategy from the Kellogg School of Management and Wharton Business School in the United States.

Nelson José Jamel. Mr. Jamel is an alternate member of the Board of Directors of Ambev. From 2007 to 2008, he held the position of Vice President of Finance for Western Europe of ABI. He was also Chief Financial Officer of Compañia Cervecera AmBev Dominicana, C. por A.. From 2009 to 2015, he held the position of Chief Financial and Investor Relations Officer of the Company (previously Old Ambev). Currently he is Chief Financial Officer of the North America Zone of Anheuser-Busch InBev N.V/S.A. Mr. Jamel holds a degree in production engineering from Universidade Federal do Rio de Janeiro from COPPE/UFRJ.  His principal business address is Brouwerijplein 1, 3000 Leuven, Belgium.

Executive Officers

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

Name	Age	Position	Executive Officer Since(1)	Term Expires(2)
Bernardo Pinto Paiva	48	Chief Executive Officer	2015	2019
Ricardo Rittes de Oliveira Silva	42	Chief Financial Officer and Investor Relations Officer	2016	2019
Pedro de Abreu Mariani	50	General Counsel and Corporate Affairs Executive Officer	2005	2019
Ricardo Morais Pereira de Melo	45	Sales Executive Officer	2016	2019
Eduardo Braga Cavalcanti de Lacerda	41	Soft Drinks Executive Officer	2017	2019
Mauricio Nogueira Soufen(3)	43	Supply Executive Officer and Logistics Executive Officer	2016	2019
Daniel Cocenzo	43	Premium and High End Executive Officer	2018	2019
Fábio Vieira Kapitanovas	39	People and Management Executive Officer	2015	2019
Paula Nogueira Lindenberg	41	Marketing Executive Officer	2015	2019
Fernando Maffessoni(4)	40	Shared Services and Information Technology Executive Officer	2018	2019
Rodrigo Figueiredo de Souza	41	Procurement Executive Officer	2015	2019

73

 

(1)Executive officers first appointed to our board of executive officers prior to 2013 were originally appointed as executive officers of Old Ambev.  Executive officers first appointed to our board of executive officers on or after 2013 were originally appointed as executive officer of Ambev S.A.

(2)Until May 11, 2019.

(3)Though Mr. Mauricio Soufen has been an executive officer of Ambev since 2016, he assumed the additional role of Logistics Executive Officer on January 1, 2017.

(4)Mr. Maffessoni's term as an officer will commence on April 1, 2018 and, accordingly, he was not an officer as of December 31, 2017.

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

Bernardo Pinto Paiva.  Mr. Pinto Paiva is Ambev’s Chief Executive Officer.  He joined Ambev in 1991 as a management trainee and during his career at our company has held leadership positions in Sales, Supply, Distribution and Finance. He was appointed Zone President North America in January 2008, Zone President Latin America South in January 2009 and Chief Sales Officer of ABI in January 2012. He holds a degree in Engineering from Universidade Federal do Rio de Janeiro and an Executive MBA from Pontifícia Universidade Católica do Rio de Janeiro.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Ricardo Rittes de Oliveira Silva. Mr. Rittes is Ambev’s Chief Financial Officer and Investor Relations Executive Officer.  He joined the Company in 2005 and has held the positions of Treasury Manager for Ambev and ABI and has acted as Shared Services and Information Technology Executive Officer from 2012 until 2015. Mr. Rittes holds a degree in production engineering from Escola Politécnica de São Paulo, in addition to an MBA from the University of Chicago.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Pedro de Abreu Mariani.  Mr. Mariani is Ambev’s General Counsel and Corporate Affairs Executive Officer.  He joined the Company in 2004.  He holds a law degree from Pontifícia Universidade Católica do Rio de Janeiro and an LL.M. from the London School of Economics and Political Science.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Ricardo Morais Pereira de Melo.  Mr. Melo is Ambev’s Sales Executive Officer. Since he joined the Company in 1996, Mr. Melo held various sales positions, including Sales Manager, Commercial Manager in Salvador and in São Paulo, Regional Sales Executive Officer in the Northeast and in Rio de Janeiro, as well as Sales Vice-President of Ambev operations in Canada and Sales Strategy Vice-President at Anheuser-Busch InBev, in the United States. He holds a degree in civil engineering from Universidade Católica de Pernambuco and a Corporate MBA from Ambev.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Eduardo Braga Cavalcanti de Lacerda.  Mr. Lacerda is Ambev’s Soft Drinks Executive Officer. Since 2001, when he joined the Company as a trainee, he held various positions, including as the Budget and Business Performance Officer of ABI, as head of Mergers and Acquisitions in Europe for ABI, as Financial Officer in Europe for ABI and as Chief Executive Officer of the CAC zone. Mr. Lacerda holds a degree in business administration from Pontifícia Universidade Católica do Rio de Janeiro.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Mauricio Nogueira Soufen.  Mr. Soufen is Ambev’s Supply Executive Officer and Logistics Executive Officer.  Since he joined the Company in 1996 as a Production Supervisor, he held positions of Brewery Manager in Scotia and Belgium – where he was the only foreigner that has led the historical Stella Artois brewery, in Leuven. When Mr. Soufen returned to Brazil, served as Regional Director for the North /Central-West region and Director of our Engineering Center based in Jacareí, State of São Paulo. Along with the title of brewmaster, Mr. Soufen has a degree in mechatronics engineering from Escola Politécnica da Universidade de São Paulo and an MBA from MIT - Sloan School of Management. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Daniel Cocenzo.  Mr. Cocenzo is Ambev’s Premium and High End Executive Officer. Since 1999, when he joined the Company, he held various positions, including People and Management Officer for the CAC zone, Sales Officer in Dominican Republic and Regional Sales Officer in Rio de Janeiro and Espírito Santo.  Mr. Cocenzo holds a bachelor degree in business administration from Pontifícia Universidade Católica do Rio de Janeiro, an MBA from IBMEC and a Corporate MBA from Ambev.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

74

 

Fábio Vieira Kapitanovas.  Mr. Kapitanovas is Ambev’s People and Management Executive Officer. Since 2000, when he joined the Company as a trainee, he held several positions, including Regional Industrial Officer – South/SPI, Corporate Executive Officer of Logistics Projects and Executive Officer of the Shared Services Center.  He has a degree in mechanical engineering from Politécnica de São Paulo, in addition to a Corporate MBA from Ambev.  He participated in the AIGLE Program (Insead – Wharton Alliance) and in the Global Supply Chain Logistics Program, from MIT.  His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Paula Nogueira Lindenberg. Ms. Lindenberg is Ambev’s Marketing Executive Officer.  She joined Ambev in 2001 and has held various positions both with the Company and ABI in the marketing area, including Marketing Officer for Brahma, Antarctica and premium portfolio in Brazil and Insights Global Officer. She holds a bachelor degree in business administration from Fundação Getulio Vargas and a Corporate MBA from Ambev.  Her principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Fernando Maffessoni.  Mr. Maffessoni’s term as Ambev’s Shared Services and Information Technology Executive Officer will commence on April 1, 2018. He joined Ambev in 1998 and held various leadership positions in Logistics and Shared Services. Mr. Maffessoni holds a bachelor degree in business administration from Pontifícia Universidade Católica do Rio Grande do Sul and a Corporate MBA from Ambev. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

Rodrigo Figueiredo de Souza. Mr. Souza is Ambev’s Procurement Executive Officer. Over the past five years, Mr. Souza held various positions in the Company, including Facility Regional Executive Officer and Logistics Executive Officer in Latin America North. He holds a graduation degree in civil engineering from Politécnica de São Paulo. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, SP, Brazil.

B.            Compensation

The aggregate remuneration of all members of the Board of Directors and Executive Officers of Ambev in 2017 for services in all capacities amounted to R$74.1 million (fixed and variable remuneration and share-based payment), as presented below:

	Management’s Remuneration Year Ended December 31, 2017
	(in R$ million, except where otherwise indicated)
		Fixed Remuneration				Variable Remuneration
	Number of Members	Fees	Direct and Indirect Benefits	Remuneration for Sitting on Committees	Others	Bonus	Profit Sharing	Remuneration for Attending Meetings	Commissions	Others	Post-Employment Benefits	Termination Benefits	Share-based Payment	Total
Board of Directors	13.0	5.4	-	-	1.1	2.1-	-	-	-	-	-	-	10.9	19.5
Fiscal Council	6.0	1.6	-	-	0.3	-	-	-	-	-	-	-	-	1.9
Executive Officers	11.0	11.0	0.9	-	2.2	10.7	-	-	-	-	-	-	28.0	52.8
Total	30.0	18.0	0.9	-	3.6	12.8	-	-	-	-	-	-	38.8	74.1

In addition, the executive officers and members of the Board of Directors received some additional benefits provided to all Ambev S.A. employees and their beneficiaries and covered dependents, such as health and dental care.  Such benefits were provided through FAHZ.  These executive officers and directors also received benefits pursuant to Ambev’s pension and stock ownership plan.  For a description of these plans, see notes 23 and 24 to our audited consolidated financial statements.

On various dates in 2017, pursuant to the terms and conditions of our stock ownership plan, we acquired from our directors and executive officers a total of 26,521 shares of Ambev for R$0.5 million.  Such amounts were calculated and paid taking into consideration the closing market price on the day of the transaction.

75

 

The table below sets forth the minimum, maximum and average individual compensation figures attributable to our directors, executive officers and Fiscal Council members for each of the indicated periods:

	Year Ended December 31,
	2017				2016				2015
	(in R$ million, except where otherwise indicated)
	Number of Members	Minimum	Average	Maximum	Number of Members	Minimum	Average	Maximum	Number of Members	Minimum	Average	Maximum
Board of Directors	13.0	0.4	2.2	10.3	12.0	0.4	2.0	8.3	12.0	0.4	1.5	10.1
Fiscal Council	6.0	0.2	0.3	0.4	6.0	0.1	0.3	0.4	6.0	0.2	0.2	0.4
Executive Officers	11.0	2.5	4.8	14.1	11.0	1.2	3.6	14.9	11.0	1.9	4.7	21.4

Ambev Stock Ownership Plan

Under the Ambev Stock Option Plan dated as of July 30, 2013, or the Plan, senior employees and management of either Ambev or its direct or indirect subsidiaries are eligible to receive stock options for Ambev common shares, including in the form of ADSs.  As of December 31, 2017, there were outstanding rights under the Plan providing for the acquisition of 135.2 million Ambev common shares by approximately 800 people (including executive management and employees).

The Plan establishes the general conditions for granting options, the criteria for defining the strike price and other general terms and conditions of these stock options.  Restrictions apply to the divestment of the shares acquired through the Plan, which also defines the various duties and responsibilities of the Board of Directors as Plan Administrator.

Pursuant to the Plan, the Board of Directors is conferred with ample powers for the organization and management of the Plan in compliance with its general terms and conditions.  The Board of Directors grants stock options and establishes the terms and conditions applicable to each grant through Stock Option Programs, or the Programs, which may define the relevant beneficiaries, the applicable number of Ambev common shares covered by the grant, the respective strike price, the exercise periods and the deadline for exercising the options, as well as the rules regarding option transfers and possible restrictions on the acquired shares, in addition to penalties.  Additionally, targets may be set for Ambev’s performance, with the Board of Directors also being empowered to define specific rules for Ambev employees who are transferred to other countries or to other companies of the group, including to ABI.

Beneficiaries to whom stock options are granted must sign Stock Option Agreements, or the Agreements, with Ambev, according to which those beneficiaries have the option to purchase lots of Ambev common shares in compliance with the terms and conditions of the Plan, the corresponding Program and such Agreement.

There are currently three models of stock options that may be granted under the Plan.  Under the first model, beneficiaries, in accordance with their internal category, may choose among allocating (i) 30% or 100%, (ii) 40% or 100%, (iii) 60% or 100%  of the amounts received by them as profit sharing during the year to the immediate exercise of options, thereby allowing them to acquire the corresponding amount of Ambev shares.  Under this model, a substantial part of the shares acquired is to be delivered only within five years from the corresponding option grant date.  During such five-year period, the beneficiary must remain employed at Ambev or any other company of its group.  Under the second model, the beneficiary may exercise the options granted only after a period of up to five years from the corresponding grant date.  Vesting of the options granted under the second model is not subject to company performance measures; however, the right to exercise such options may be forfeited in certain circumstances, including the beneficiary’s resignation or dismissal prior to the options’ vesting.  Under the third model, the beneficiaries, in accordance with their internal category, may choose among allocating (i) 30% or 100%, (ii) 40% or 100%, (iii) 60% or 100%, of the amounts received by them as profit sharing during the year to the immediate exercise of options, thereby allowing them to acquire the corresponding amount of Ambev shares.  The totality of the shares acquired is to be delivered to the beneficiary within forty-five days from the corresponding exercising date (which shall not be later than forty-five days from the option grant date). The beneficiaries are under a five-year lock-up period.

Before our adoption of the three stock options models that we currently grant, as described above, six Programs were approved by the Board of Directors from 2006 to 2009 that allowed their beneficiaries to choose between allocating 50%, 75% or 100% of the amounts received by them as profit sharing during the year to the immediate exercise of options, thereby permitting them to acquire the corresponding amount of Ambev shares.  Company performance measures applied in order for those stock options to vest and the right to exercise them could be forfeited in certain circumstances, including the beneficiary’s resignation or dismissal prior to the options’ vesting.  Rights for the acquisition of a significant number of Ambev shares under this previous stock option model remain outstanding.

76

 

As a means of creating a long term incentive (wealth incentive) for certain senior employees and members of management considered as having “high potential,” share appreciation rights in the form of phantom stocks have been granted to those employees, pursuant to which the beneficiary shall receive two separate lots of phantom stock – Lot A and Lot B – subject to lock-up periods of five and ten years, respectively.  On the fifth or tenth anniversary of the granting of such lots, as the case may be, a beneficiary still employed with us shall receive, in cash, the amount corresponding to the B3 closing price of the relevant Ambev shares (or NYSE closing price in the case of ADSs), on the trading session immediately preceding such anniversary, with each phantom stock corresponding to one share (or ADS, as the case may be).  Such share appreciation rights shall not give the beneficiary the right to actually receive any Ambev shares or ADSs; those securities shall merely serve as basis for the calculation of the cash incentive to be received by such beneficiary.  Although not subject to performance measures, the right to receive the cash incentive deriving from the phantom stocks may be forfeited in certain circumstances, including the beneficiary’s resignation or dismissal prior to the relevant anniversary of the share appreciation right.

We implemented a Share Based Payment Plan, or the Share Plan, dated as of April 29, 2016. Under the Share Plan, employees and management of Ambev or its direct or indirect subsidiaries are eligible to receive Ambev shares, including in the form of ADRs.  The shares which are subject to the Share Plan are designated as Restricted Shares.

Pursuant to the Share Plan, the Board of Directors is conferred with ample powers for the organization and management of the Share Plan in compliance with its general terms and conditions. The Board of Directors may appoint a committee to assist its members in the management of the Share Plan. The Board of Directors or the committee establishes the terms and conditions applicable to each Share Based Payment Programs, or the Share Plan Programs, which defines the relevant beneficiaries, the applicable number of Restricted Shares subject to the Share Plan Program, the Restricted Shares’ transfer procedure and vesting periods, and any possible penalties.

Under the Share Plan, up to 0.3% of the shares corresponding to Ambev’s corporate capital may be granted in total in an amount that may vary according to Ambev internal policies.  The delivery of the Restricted Shares is free of charges.  Such Restricted Shares shall vest within up to five years from the corresponding grant date, provided that the beneficiary remains employed at Ambev during such vesting period.

Beneficiaries of the Share Plan must sign a Share Based Payment Agreement, or the Share Based Agreements, with Ambev, according to which, those beneficiaries have the right to receive a maximum number of Ambev Shares or ADRs (“Cap”), as applicable, provided that the terms and conditions set forth in the Share Plan, Share Plan Programs and in the Share Based Agreements are complied with.

The Restricted Shares may entitle beneficiaries to receive additional shares with the same vesting conditions as compensation for dividends and interest on shareholders’ equity paid during the vesting period on the Restricted Shares. The right to receive the Restricted Shares and the additional shares may be totally or partially forfeited in certain circumstances, including the beneficiaries’ resignation or dismissal during the vesting period.

Pursuant to the outstanding programs under the Plan or the Share Plan, following the lock-up or vesting periods, as applicable, in the event beneficiaries intend to sell the Ambev shares or ADRs, beneficiaries must first offer such shares or ADRs to Ambev.

ABI Exceptional Stock Option Grants

To encourage its and its subsidiaries’ employees to help with its deleveraging efforts, ABI granted a series of stock options to its executives, including Ambev executives, that had their vesting subject to, among other things, ABI’s net debt-to-EBITDA ratio falling below 2.5 before December 31, 2013.  Such condition had been complied with at that date.  Specific forfeiture rules relating to these ABI option grants apply in case of employment termination.  Such grants were confirmed on April 28, 2009 by ABI’s annual general shareholders’ meeting.  Though the exercise of these ABI exceptional stock options will not cause any dilution to Ambev, we record an expense in connection with them on our income statement.

77

 

On November 25, 2008, ABI’s board of directors had approved a grant of approximately 28 million of these exceptional stock options to several executives, including approximately 7 million options granted to Ambev executives.  Each option gave its beneficiary the right to purchase one existing common share of ABI at an exercise price of EUR 10.32, which corresponded to their fair value at the time of granting of the options.  Half of the options had a term of 10 years as from granting and became exercisable on January 1, 2014.  The other half had a term of 15 years as from granting and will become exercisable on January 1, 2019.

On April 30, 2009, ABI granted another approximate 4.9 million of these stock options to approximately 50 executives of the ABI group, including approximately 1.8 million options granted to Ambev executives.  Each option gave its beneficiary the right to purchase one existing common share of ABI at an exercise price of EUR 21.94, which corresponded to their fair value at the time of granting of the options.  The options have a term of 10 years as from granting and became exercisable on January 1, 2014.

On December 18, 2009, ABI granted another approximate 1.6 million exceptional stock options to its executives, including approximately 97.8 thousand options granted to Ambev executives.  Each option gave its beneficiary the right to purchase one existing common share of ABI at an exercise price of EUR 35.90 and became exercisable on December 18, 2014.

Ambev Pension Plan

Ambev’s pension plans for employees in Brazil are administered by the IAPP.  The IAPP operates both a defined benefit pension plan (closed to new participants since May 1998) and a defined contribution plan, which supplements benefits that the Brazilian government’s social security system provides to our employees.  The defined contribution plan covers substantially all new employees.  The IAPP was established solely for the benefit of our employees and its assets are held independently. The IAPP is managed by a Governing Board (Conselho Deliberativo), which has three members, two of whom are appointed by Ambev, and one member represents active and retired employees.  The IAPP also has an Executive Board (Diretoria Executiva) containing three members, all of whom are appointed by IAPP’s Council Board.  The IAPP also has a Fiscal Council with three members, two of whom appointed by Ambev and one member represents active and retired employees.

Any employee upon being hired may opt to join the defined contribution plan.  When pension plans members leave Ambev before retirement, but having contributed at least three years to the IAPP plan, they have some options such as: (a) having their contributions refunded, (b) transferring their contributions to a bank or insurance company, (c) keeping their investment in IAPP to be paid in installments, and (d) continuing to IAPP for future retirement under the existing terms.  In the event the employee leaves the Company prior to completing three years as a participant, such employee will only be entitled to refund his/her contributions to the plan.

As of December 31, 2017, we had 6,310 participants in our pension plans, including 589 participants in the defined benefit plan, 5,721 participants in the defined contribution plan, and 1,055 retired or assisted participants.

Plan assets are comprised mainly of equity securities, government and corporate bonds and real estate properties.  All benefits are calculated and paid in inflation-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.

For information on amount recorded by us on December 31, 2017 as liabilities for pension plan benefits, see note 24 to our audited consolidated financial statements, included elsewhere in this annual report on Form 20-F.

Profit-Sharing Plan

Employees’ performance-based variable bonuses are determined on an annual basis taking into account the achievement of corporate, department or business-unit and individual goals, established by the Board of Directors.

78

 

The distribution of these bonuses is subject to a three-tier system in which Ambev must first achieve performance targets approved by the Board of Directors.  Following that, each department or business segment must achieve its respective targets. Finally, individuals must achieve their respective performance targets.

For employees involved in operations, we have a collective award for production sites and distribution centers with outstanding performances.  The bonus award at the distribution centers and production sites is based on a ranking between the different distribution centers and production sites (as the case may be), which, based on their relative ranking, may or may not receive the bonus.

We provisioned R$543.2 million under these programs for the year ended December 31, 2017, R$188.0 million for the year ended December 31, 2016 and R$531.8 million for the year ended December 31, 2015.

C.            Board Practices

During 2017, our management held individual and group meetings with shareholders, investors and analysts to talk about the performance of our business and our opportunities for growth both in the short-term as well as in the future.  We also participated in conferences and road shows in Brazil, the United States and Europe.  We hosted quarterly conference calls, transmitted simultaneously on the Internet, to clarify financial and operating results as well as answered questions from the investment community.

Fiscal Council (Conselho Fiscal)

Ambev’s Fiscal Council is a permanent body.  At our annual shareholders’ meeting held on April 28, 2017, the following members of the Fiscal Council were appointed for a term expiring upon the annual general shareholders’ meeting of 2018: James Terence Coulter Wright, José Ronaldo Vilela Rezende and Paulo Assunção de Sousa, and, as alternates, Emanuel Sotelino Schifferle, Ary Waddington and Vinicius Balbino Bouhid (the latter of whom serves as alternate only to Paulo Assunção de Sousa).  All of them are “independent” members as per Rule 10A-3(c)(3) of the Sarbanes-Oxley Act of 2002.

The responsibilities of the Fiscal Council include supervision of management, performing analyses and rendering opinions regarding our financial statements and performing other duties in accordance with the Brazilian Corporation Law and its charter.  None of the members of the Fiscal Council is also a member of the Board of Directors or of any committee of the Board.

Minority holders representing at least 10% of our common shares are entitled to elect one member and respective alternate to the Fiscal Council without the participation of the controlling shareholders.

We have relied on the exemption provided for under Rule 10A-3(c)(3) of the Sarbanes-Oxley Act of 2002, which enables us to have our Fiscal Council perform the duties of an audit committee for the purposes of such Act, to the extent permitted by Brazilian law.  We do not believe that reliance on this exemption would materially adversely affect the ability of our Fiscal Council to act independently and to satisfy the other requirements of such Act.

The Board of Directors

Most of our Board members have been in office for several years and were elected or reelected to the Board of Directors of Ambev at the Company’s extraordinary general shareholders’ meeting held on April 28, 2017 and the Company’s Board meetings held on May 16, 2017 and January 11, 2018, for a term expiring at the annual general shareholders’ meeting to be held in 2020.  These Board members use their extensive knowledge of our business to help ensure that we reach our long-term goals, while maintaining our short-term competitiveness.  Another objective of the Board of Directors is to encourage us to pursue our short-term business goals without compromising our long-term sustainable growth, while at the same time trying to make sure that our corporate values are observed.

Under our bylaws, at least two members of the Board of Directors shall be independent directors.  For the applicable director independence criteria, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Board of Directors.”

79

 

Ambev’s Co-Chairmen of the Board of Directors and the Chief Executive Officer are separate positions that must be held by different individuals. 

The Board of Directors is supported in its decision-making by the following committees:

Operations, Finance and Compensation Committee

The Operations, Finance and Compensation Committee is the main link between the policies and decisions made by the Board of Directors and Ambev’s management team.  The Operations, Finance and Compensation Committee’s responsibilities include:

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

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

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

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

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

·to analyze and monitor our annual investment plan;

·to analyze and monitor growth opportunities;

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

·to analyze and monitor the management of our financial risk, as well as budgetary and treasury policy.

The current members of the Committee are Messrs. Victorio Carlos De Marchi (Chairman), Luis Felipe Pedreira Dutra Leite and Roberto Moses Thompson Motta.  The members of this committee are elected by the Board of Directors.

Antitrust Compliance and Related Parties Committee

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

·related party transactions;

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

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

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

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

80

 

The current members of the Antitrust Compliance and Related Parties Committee are Messrs. Victorio Carlos De Marchi (Chairman), José Heitor Attilio Gracioso, Álvaro Antônio Cardoso de Souza, Bolívar Moura Rocha and Everardo de Almeida Maciel.  The members of this committee are elected by the Board of Directors.

Differences Between United States and Brazilian Corporate Governance Practices

In November 2003, the SEC approved corporate governance rules that had been adopted by the NYSE pursuant to the Sarbanes-Oxley Act of 2002.  According to those governance rules, foreign private issuers that are listed on the NYSE must disclose the significant differences between their corporate governance practices and those required by the NYSE’s regulations for U.S. companies.

In November 2016, the Brazilian Corporate Governance Code, which provides for corporate governance practices guidelines for publicly-held companies, was released by an institution formed by several entities, such as ABRAPP, ABRASCA, ANBIMA, ABVCAP, AMEC, APIMEC, B3, BRAIN, IBGC, IBRI and Instituto IBMEC, after the contribution and comments made by the CVM. In June 2017, the CVM approved a new rule, which establishes that companies must inform whether they will implement the provisions set forth in the Brazilian Corporate Governance Code, or otherwise justify the reasons for non-compliance with such practices.  Additionally, the B3 and the IBGC-Brazilian Institute of Corporate Governance have issued guidelines for corporate governance best practices.

The principal differences between the NYSE corporate governance standards and our corporate governance practices are as follows:

Independence of Directors and Independence Tests

NYSE corporate governance standards require listed companies to have a majority of independent directors and set forth the principles by which a listed company can determine whether a director is independent. “Controlled companies,” such as Ambev, need not to comply with these requirements.  Nonetheless, our bylaws require that at least two of our directors be independent.  In addition, our bylaws set forth that directors elected by a separate ballot vote of minority shareholders holding at least 10% of our capital stock shall be deemed independent.

As of the date of this annual report on Form 20-F, all of our directors, including the independent ones, had been appointed by our controlling shareholders.

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

Executive Sessions

NYSE corporate governance standards require non-management directors of a listed company to meet at regularly scheduled executive sessions without management.

According to the Brazilian Corporation Law, up to one-third of the members of the Board of Directors can also hold executive officer positions.  However, none of our directors holds an executive officer position in us at this time and, accordingly, we believe we would be in compliance with this NYSE corporate governance standard if we were a U.S. company.

Nominating/Corporate Governance and Compensation Committees

NYSE corporate governance standards require that a listed company have a nominating/corporate governance committee and a compensation committee each composed entirely of independent directors with a written charter that addresses certain duties.  “Controlled companies” such as Ambev need not to comply with this requirement.

In addition, we are not required under the Brazilian Corporation Law to have, and accordingly we do not have, a nominating committee or corporate governance committee.  According to the Brazilian Corporation Law, Board committees may not have any specific authority or mandate since the exclusive duties of the full Board of Directors may not be delegated.  The role of the corporate governance committee is generally performed by either our Board of Directors or our executive officers.

81

 

Audit Committee and Audit Committee Additional Requirements

NYSE corporate governance standards require that a listed company have an audit committee composed of a minimum of three independent members that satisfy the independence requirements of Rule 10A-3 under the Exchange Act, with a written charter that addresses certain duties.

We maintain a permanent Fiscal Council, which is a body contemplated by the Brazilian Corporation Law that operates independently from our management and from our registered independent public accounting firm.  Its principal function is to examine the annual and quarterly financial statements and provide a formal report to our shareholders.  We are relying on the exemption provided by Rule 10A-3(c)(3) and believe that our reliance on this exemption will not materially affect the ability of the Fiscal Council to act independently and to satisfy the other requirements of Rule 10A-3.

Shareholder Approval of Equity Compensation Plans

NYSE corporate governance standards require that shareholders of a listed company must be given the opportunity to vote on all equity compensation plans and material revisions thereto, subject to certain exceptions.

Under Brazilian Corporation Law, shareholder pre-approval is required for the adoption and revision of any equity compensation plans. Our existing stock ownership and share based payment plans were approved by our extraordinary general shareholders’ meetings held on July 30, 2013 and on April 29, 2016, respectively.

Corporate Governance Guidelines

NYSE corporate governance standards require that a listed company must adopt and disclose corporate governance guidelines that address certain minimum specified standards, which include, director qualification standards, director responsibilities, director access to management and independent advisors, director compensation, director orientation and continuing education, management succession and annual performance evaluation of the Board.

We believe the corporate governance guidelines applicable to us under the Brazilian Corporation Law are consistent with the guidelines established by the NYSE.  We have adopted and observe our Manual on Disclosure and Use of Information and Policies for Trading with Securities issued by Ambev which deals with the public disclosure of all relevant information as per CVM’s guidelines, as well as with rules relating to transactions involving the dealing by our management and controlling shareholders in our securities.

Code of Business Conduct

NYSE corporate governance standards require that a listed company must adopt and disclose a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or officers. Each code of business conduct and ethics should address the following matters: (1) conflicts of interest; (2) corporate opportunities; (3) confidentiality; (4) fair dealing; (5) protection and proper use of company assets; (6) compliance with laws, rules and regulations (including insider trading laws); and (7) encouraging the reporting of any illegal or unethical behavior.

We have adopted a Code of Business Conduct that applies to all directors, officers and employees. Our code of business conduct is available on our website at ir.ambev.com.br. The information included on our website or that might be accessed through our website is not included in this annual report and is not incorporated into this annual report by reference. There are no waivers to our Code of Business Conduct.

Certification Requirements

NYSE corporate governance standards require that each listed company’s chief executive officer certify to the NYSE each year that he or she is not aware of any violation by the company of the NYSE corporate governance standards.

82

 

As required by Section 303A.12(b) of the NYSE corporate governance standards, our Chief Executive Officer will promptly notify the NYSE in writing after our executive officer becomes aware of any material non-compliance with any applicable provisions of the NYSE corporate governance standards.

D.            Employees

As of December 31, 2017, we and our subsidiaries had a total of 51,432 employees, approximately 54% of whom were engaged in production, 40% in sales and distribution and 6% in administration.

The following table sets forth the total number of our employees as of the end of the periods indicated:

As of December 31,
2017	2016	2015
51,432	53,250	52,738

The following table shows the geographical distribution of our employees as of December 31, 2017:

Geographical Distribution of Ambev Employees as of December 31, 2017
Location	Number of Employees
Latin America North	38,651
Brazil	31,537
Dominican Republic	3,982
Cuba	859
Guatemala	229
Panama	2,044
Latin America South	9,120
Argentina	5,741
Bolivia	1,643
Uruguay	732
Paraguay	546
Chile	458
Canada	3,661
Total	51,432

Industrial Relations

All of our employees in Brazil are represented by labor unions, but only less than 5% of our employees in Brazil are actually members of labor unions.  The number of administrative and distribution employees who are members of labor unions is not significant.  Salary negotiations are conducted annually between the workers’ unions and us.  Collective bargaining agreements are negotiated separately for each facility or distribution center.  Our Brazilian collective bargaining agreements have a one- or two-year term, and we usually enter into new collective bargaining agreements on or prior to the expiration of the existing agreements.  We conduct salary negotiations with labor unions in accordance with local law for our employees located in our CAC, Latin America South and Canadian operations.

Health and Severance Benefits

In addition to wages, our employees receive additional benefits.  Some of these benefits are mandatory under Brazilian law, some are provided for in collective bargaining agreements and others are voluntarily granted.  The benefits packages of our employees in Brazil consist of benefits provided both directly by the Company and through FAHZ, which provides medical, dental, educational and social assistance to current and retired employees of Ambev and their beneficiaries and covered dependents, either for free or at a reduced cost.  We may voluntarily contribute up to 10% of our consolidated net income towards the support of FAHZ in connection with these benefits, as determined pursuant to the Brazilian Corporation Law and our bylaws.

83

 

We are required to contribute 8% of each Brazilian employee’s monthly gross pay to an account maintained in the employee’s name with the Brazilian government’s Severance Indemnity Fund (Fundo de Garantia por Tempo de Serviço), or the FGTS.  Under Brazilian law, we are also required to pay termination benefits to Brazilian employees dismissed without cause equal to 40% (plus 10% to the Brazilian government) of the accumulated contributions made by us to the terminated employee’s FGTS account throughout the employee’s period of service, among other mandatory termination fees.

We provide health and benefits in accordance with local law for our employees located in our CAC, Latin America South and Canadian operations.

E.            Share Ownership

The following table shows the amount and percentage of our shares held by members of our Board of Directors and by executive officers as of March 6, 2018:

Name	Amount and Percentage of Common Shares
Victorio Carlos De Marchi(1)	*
Carlos Alves de Brito	*
Milton Seligman	*
Roberto Moses Thompson Motta	*
José Heitor Attílio Gracioso(1)	*
Vicente Falconi Campos	*
Luis Felipe Pedreira Dutra Leite	*
Cecília Sicupira	*
Álvaro Antonio Cardoso de Souza	*
Antonio Carlos Augusto Ribeiro Bonchristiano	*
Marcos de Barros Lisboa	*
Michel Dimitrios Doukeris	*
Nelson José Jamel	*
Bernardo Pinto Paiva(1)	*
Pedro de Abreu Mariani	*
Fábio Vieira Kapitanovas	*
Mauricio Soufen	*
Paula Nogueira Lindenberg	*
Ricardo Rittes de Oliveira Silva	*
Ricardo Morais de Melo	*
Eduardo Braga Cavalcante de Lacerda	*
Daniel Cocenzo	*
Marcelo Guimarães Tardin(2)	*
Fernando Maffessoni(3)	*
Rodrigo Figueiredo de Souza	*

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

(1)These Board members are also trustees of FAHZ.  For information regarding the shareholdings of FAHZ in Ambev, see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders.”

(2)Mr. Tardin’s term as an officer will end on March 31, 2018.

(3)Mr. Maffessoni’s term as an officer will commence on April 1, 2018, and accordingly, he was not an officer as of December 31, 2017.

84

 

ITEM 7.                MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.            Major Shareholders

Introduction

Ambev has only one class of shares (i.e, voting common shares), including in the form of ADSs (evidenced by ADRs), with each ADS representing one Ambev common share.  The Ambev common shares and ADSs are registered under the Exchange Act.  As of March 6, 2018, Ambev had 15,711,205,090 shares outstanding.  As of March 6, 2018, there were 1,253,690,208 Ambev ADSs outstanding (representing 1,253,690,208 Ambev shares, which corresponds to 8% of the total Ambev shares outstanding).  The Ambev shares held in the form of ADSs under the Ambev ADS facilities are deemed to be the shares held in the “host country” (i.e, the United States) for purposes of the Exchange Act.  In addition, as of March 6, 2018, there were 121 registered holders of Ambev ADSs.

On May 16, 2017, our board of directors authorized us or our subsidiaries to enter into equity swap transactions, or Equity Swap Agreements, with an exposure of up to 80 million common shares (which may be, partially or totally, referenced in ADRs), limited to R$2.3 billion. Such Equity Swap Agreements have to be liquidated within 18 months from our board of directors’ approval. In addition, on December 21, 2017, our board of directors authorized us or our subsidiaries to enter into new equity swap transactions, or New Swap Agreements, without prejudice of the regular liquidation. The New Swap Agreements may cause an exposure of up to 44 million common shares (which may be, partially or totally, referenced in ADRs), limited to R$820 million. The New Swap Agreements considered together with the outstanding balance of the Equity Swap Agreements to be liquidated do not reach the threshold set forth in CVM Instruction No. 567/15.

Control

Our two direct controlling shareholders, IIBV and AmBrew, both of which are subsidiaries of ABI, together with FAHZ, held in aggregate 72.1% our total and voting capital stock (excluding treasury shares) as of March 6, 2018.

ABI indirectly holds shares in us representing 61.9% of our total and voting capital stock (excluding treasury shares) as of March 6, 2018.  ABI thus has control over us, even though (1) ABI remains subject to the Ambev Shareholders’ Agreement and (2) ABI is controlled by Stichting that represents an important part of interests of BRC and the Interbrew Founding Families. For further information on these matters see “Item 4. Information on the Company—A. History and Development of the Company—The InBev-Ambev Transactions” and “—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement.”

Share Buyback Program

In 2018, as of March 6, 2018, we acquired 616,587 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$13.9 million.

In 2017, we acquired 7,830,472 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$141.9 million.

In 2016, we acquired 3,196,848 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$59.4 million. On April 24, 2016, we terminated our share buyback program that we had commenced on August 28, 2015.  Over the course of this share buyback program, we repurchased 5,454,202 common shares at market price at the time of acquisition in the total amount of R$102.9 million. The repurchased shares were held in treasury for cancellation and/or subsequent disposition.

In 2015, we had acquired 48,949,937 Ambev shares in connection with preemptive rights related to stock ownership plans at a total cost of R$928.1 million.

For a further description of our share buyback programs, see “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.”

85

 

Ambev’s Major Shareholders

The following table sets forth information as of March 6, 2018, with respect to any person known to us to be the beneficial owner of 5% or more of our outstanding shares:

Shareholder	Amount and Percentage of Common Shares
The Bank of New York Mellon – ADR Department(1)	1,253,690,208	8.0%
Interbrew International B.V	8,441,956,047	53.7%
AmBrew S.A	1,285,261,445	8.2%
FAHZ(2)	1,605,713,901	10.2%

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

(2)Messrs. Victório Carlos De Marchi and José Heitor Attílio Gracioso, who are FAHZ-appointed directors of Ambev, are also trustees of FAHZ.

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

Ambev Shareholders’ Agreement

On April 16, 2013, ABI (through IIBV and AmBrew) and FAHZ executed a shareholders’ agreement to be applicable to Ambev, or the Ambev Shareholders’ Agreement.  The Ambev Shareholders’ Agreement will be effective up to and including July 1, 2019, and will be replaced by a new shareholders’ agreement, or the 2019 Shareholders’ Agreement, to be effective starting on July 2, 2019, as long as at that time FAHZ holds at least 1,501,432,405 Ambev common shares, adjusted for any future share dividends, stock-splits and reverse stock-splits (see “—The 2019 Shareholders’ Agreement”).

The parties to the Ambev Shareholders’ Agreement are IIBV and AmBrew, which represent ABI’s beneficial interest in Ambev, and FAHZ, as well as Ambev, as intervening party, and ABI, as intervening third-party beneficiary.  Among other matters, the Ambev Shareholders’ Agreement governs the voting of the Ambev common shares subject to the agreement and the voting by Ambev of the shares of its majority-owned subsidiaries.  The following discussion relates to the Ambev Shareholders’ Agreement.

Management of Ambev

Although each Ambev common share entitles its holder to one vote in connection with the election of Ambev’s Board of Directors, Ambev’s direct controlling shareholders (i.e, FAHZ, IIBV and AmBrew) have the ability to elect the majority of Ambev’s directors.

If cumulative voting is exercised together with the separate ballot vote of minority shareholders, thereby resulting in the number of directors so elected being equal to or greater than the number of directors elected by Ambev’s controlling shareholders, those controlling shareholders are entitled to elect the same number of Board members elected by minority shareholders plus one additional director, regardless of the maximum number of directors provided for in Ambev’s bylaws.

Presently, under the Ambev Shareholders’ Agreement each of FAHZ, IIBV and AmBrew are represented on the Board of Directors of Ambev and its majority-owned subsidiaries and, in addition to the members and respective alternates that they are entitled to appoint, each of FAHZ, on the one hand, and IIBV and AmBrew, on the other, may appoint up to two observers without voting rights to attend Ambev’s Board meetings.  The Boards of Directors of Ambev and its majority-owned subsidiaries are to be composed of at least three and no more than 15 regular members and the same number of alternates, with a term of office of three years with reelection being permitted.

FAHZ will have the right to appoint four directors and their respective alternates to the Boards of Directors of Ambev and its majority-owned subsidiaries, as long as it maintains ownership of at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits).  FAHZ held 1,501,432,405 Ambev common shares immediately after the Old Ambev-Ambev S.A. stock swap merger approved in July 2013.  Under the Ambev Shareholders’ Agreement, FAHZ is not entitled to appoint more than four members to Ambev’s Board of Directors in the event that its holding of Ambev common shares increases.  FAHZ will always be entitled to appoint at least one member to Ambev’s Board of Directors, as long as it holds a minimum of 10% of the Ambev common shares.  IIBV and AmBrew have the right to appoint members and respective alternates to the Boards of Directors of Ambev and its majority-owned subsidiaries in a number proportionate to the number of members appointed by FAHZ.  Such proportion is based on the ratio between FAHZ’s holding and the joint holding of IIBV and AmBrew in the Ambev common shares.

86

 

The Ambev Shareholders’ Agreement provides that Ambev will have two Co-Chairmen with identical rights and duties, with one being appointed by FAHZ and the other jointly by IIBV and AmBrew.  In the event of a deadlock, neither of the Co-Chairmen has a deciding vote on matters submitted to Ambev’s Board of Directors.

Each of FAHZ, IIBV and AmBrew may remove a director that it has appointed to the Board of Directors of Ambev or its majority-owned subsidiaries, and each also has the right to appoint the respective replacement or a new alternate, if the originally appointed alternate is confirmed for the vacant position.

The Ambev Shareholders’ Agreement establishes that the shareholders may, by consensus, establish committees of the Board with the purpose of looking into specific matters, the analyses of which require that their members have specific technical knowledge. 

Preliminary Meetings and Exercise of Voting Right

On matters submitted to a vote of the shareholders or their representatives on the Board of Directors of Ambev or its majority-owned subsidiaries, FAHZ, IIBV and AmBrew have agreed to endeavor to first reach a consensus with respect to voting their common shares of each of Ambev and its majority-owned subsidiaries, and have agreed on the manner to direct their representatives to vote on the matter being submitted.  The Ambev Shareholders’ Agreement provides that the parties shall hold a preliminary meeting in advance of all meetings of shareholders or the Board of Directors of Ambev or of its majority-owned subsidiaries, with the purpose of discussing and determining a consensus position to be taken by the parties in such meetings.

If the parties fail to reach a consensus with respect to a particular matter, the position to be adopted by the parties to the Ambev Shareholders’ Agreement will be determined by the shareholders or group of shareholders holding a majority of the Ambev common shares, which currently is constituted of IIBV and AmBrew.  However, this rule does not apply in connection with the election of members of the Board of Directors, as described above under “—Management of Ambev,” and with respect to matters that require unanimous approval by FAHZ, IIBV and AmBrew, as follows:

·any amendment to the bylaws of Ambev and/or any of its majority-owned subsidiaries with the purpose of amending:  (1) the corporate purpose, (2) the term of duration, and/or (3) the composition, powers and duties of management bodies;

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

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

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

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

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

87

 

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

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

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

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

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

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

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

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

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

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

·the appointment of the external auditors of Ambev and/or any of its majority-owned subsidiaries.

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

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

·analysis and approval of management accounts of Ambev and its majority-owned subsidiaries;

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

88

 

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

·actions and practices relating to management’s diligence, loyalty and other related duties, as established in Sections 153 to 158 of the Brazilian Corporation Law.

Transfer of Shares

The Ambev Shareholders’ Agreement contains the following provisions concerning the transfer of the Ambev common shares subject to the agreement:

·FAHZ, IIBV and AmBrew have agreed (1) not to dispose of their Ambev common shares, directly or indirectly, during the term of the agreement, whether through private trades, on the stock market or on the over-the-counter market, including by way of tender offers, either voluntary or mandatory, except as permitted in Section VI of the Ambev Shareholders’ Agreement and (2) not to create any type of encumbrance on their Ambev common shares, in either of the above cases without the prior written consent of FAHZ, in the case of IIBV and AmBrew, and of IIBV and AmBrew, in the case of FAHZ;

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

·if either FAHZ, on the one hand, and IIBV or AmBrew, on the other, does not exercise its subscription rights relating to Ambev common shares it holds, then each such party must first offer such rights to the other party at market value, which such other party will then decide, within the following 10 days, on whether to exercise its right of first refusal to subscribe the new shares to be issued.  If such other party elects not to acquire the subscription right offered, then the offering shareholder may dispose of its subscription rights to third parties.

The Ambev Shareholders’ Agreement provides that any transfer of shares or subscription rights or creation of encumbrances in which the foregoing provisions on rights of first refusal are not observed will be deemed null, void and ineffective.  Ambev’s management is also prohibited from reflecting any such events in its corporate books, as permitted by the Brazilian Corporation Law.

Specific Performance

The obligations of the parties under the Ambev Shareholders’ Agreement will be subject to specific performance under applicable Brazilian law.

The 2019 Shareholders’ Agreement

The 2019 Shareholders’ Agreement was executed on April 16, 2013 by IIBV, AmBrew and FAHZ, as well as Ambev, as intervening party.  It will become effective on July 2, 2019, as long as at that time FAHZ holds at least 1,501,432,405 Ambev common shares, adjusted for any future share dividends, stock-splits and reverse stock-splits.  After becoming effective, the 2019 Shareholders’ Agreement will be terminated at any time upon FAHZ ceasing to hold at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits) or if FAHZ decides to early terminate it.  Among other matters, the 2019 Shareholders’ Agreement governs the voting of the Ambev common shares subject to the agreement and the voting by Ambev of the shares of its majority-owned subsidiaries.

89

 

Management of Ambev

The 2019 Shareholders’ Agreement establishes that Ambev will be managed by a Board of Directors and by an Executive Committee.  Ambev’s Board of Directors will no longer be chaired by two Co-Chairmen.

Under the 2019 Shareholders’ Agreement, FAHZ will be entitled to appoint two directors and their respective alternates to the Board of Directors of Ambev, provided that it holds at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits).  One of the FAHZ-appointed directors shall have the right to also be appointed as a member of Ambev’s Operations, Finance and Compensation Committee and of the Antitrust Compliance and Related Parties Committee, as well as any other committee that may be established by Ambev’s Board of Directors.  Furthermore, the shareholders shall use their best efforts to allow one of the FAHZ-appointed directors to participate as an observer in meetings of Ambev’s Fiscal Council, whenever such body is installed in lieu of the audit committee required by the Sarbanes-Oxley Act of 2002.

FAHZ may remove a director that it has appointed to the Board of Directors of Ambev, and also has the right to appoint the respective replacement or a new alternate, if the originally appointed alternate is confirmed for the vacant position.

The foregoing provisions of the 2019 Shareholders’ Agreement regarding Ambev’s management bodies do not apply to the management bodies of Ambev’s majority-owned subsidiaries.

Preliminary Meetings and Exercise of Voting Rights

The 2019 Shareholders’ Agreement replicates the provisions of the Ambev Shareholders’ Agreement concerning preliminary meetings, including the need for consensus between FAHZ, IIBV and AmBrew, and applicable procedures when consensus is not reached, in respect to matters that will be resolved at shareholders’ or Board of Directors meetings of Ambev and its majority-owned subsidiaries.

If the parties fail to reach a consensus with respect to a particular matter, the position to be adopted by the parties to the 2019 Shareholders’ Agreement will be determined by the shareholder or group of shareholders holding a majority of Ambev common shares.  The following matters are not subject to the foregoing rule: (1) election of members to the Board of Directors or to any committee of the Board of Directors, which shall follow the specific election procedure described above under “—Management of Ambev” and (2) matters that require unanimous approval by FAHZ, IIBV and AmBrew, as follows:

·any amendment to the bylaws of Ambev and/or any of its majority-owned subsidiaries with the purpose of changing: (1) the corporate purpose of those companies with a view to causing them to cease the production, commercialization and distribution of beverages, (2) the allocation of Ambev’s results of operations, as set forth in its bylaws, or other similar provisions in the bylaws of Ambev’s majority-owned subsidiaries that are meant to provide financial support to FAHZ, (3) the minimum mandatory dividend of 40% of Ambev’s adjusted net income, and/or (4) any other provision that affects FAHZ’s rights under the 2019 Shareholders’ Agreement; and

·the transformation of Ambev into a different form of legal entity.

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

·analysis and approval of management accounts of Ambev and its majority-owned subsidiaries;

90

 

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

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

·actions and practices relating to management’s diligence, loyalty and other related duties, as established in Sections 153 to 158 of the Brazilian Corporation Law.

Transfer of Shares

The 2019 Shareholders’ Agreement’s provisions regarding transfer of shares differ substantially from the equivalent provisions contained in the Ambev Shareholders’ Agreement.  Under the 2019 Shareholders’ Agreement, the following rules shall apply:

·in the event of a transfer of Ambev common shares subject to the 2019 Shareholders’ Agreement (1) by IIBV and/or AmBrew, where such transfer results in these entities jointly holding a total equity interest in Ambev represented by less than 50% plus one Ambev common share, and/or (2) by FAHZ upon making one and only one eligible transfer of at least 1,501,432,405 Ambev common shares (adjusted for any future share dividends, stock-splits and reverse stock-splits) to a single buyer and subject to the first offer obligations described below, then, in either of those cases, the Ambev common shares subject to those transfers shall remain bound by the 2019 Shareholders’ Agreement.  Only in those two cases shall a third party acquiring the Ambev common shares in those transfers be able to adhere to the 2019 Shareholders’ Agreement in order for the transfer to be effective;

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

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

Specific Performance

The obligations of the parties under the 2019 Shareholders’ Agreement will be subject to specific performance under applicable Brazilian law.

B.            Related Party Transactions

Overview

We have executed and may in the future execute related party transaction with certain of our significant shareholders or other related parties and certain of their affiliates. These transactions include, but are not limited to: (i) the purchase and sale of raw material with affiliated entities, (ii) entering into distribution, cross-licensing, transfer pricing, indemnification, service and other agreements with affiliated entities, (iii) import agreements with affiliated entities, and (iv) royalty agreements with affiliated entities.   These transactions have been entered into only on an arm’s length basis in accordance with our best interests and customary market practices at the time of their execution.  In addition, the Antitrust Compliance and Related Parties Committee is responsible for assisting the Board in reviewing, analyzing and deciding on these transactions to help ensure that their terms are reasonable and that they comply with all applicable laws and regulations, as well as our corporate governance and best practices principles.  See “Item 6. Directors, Senior Management and Employees—C. Board Practices—The Board of Directors—Antitrust Compliance and Related Parties Committee.”  Set forth below is a discussion of our material related party transactions.  For further information on our related party transactions, see note 33 to our audited consolidated financial statements.

91

 

Ambev and FAHZ

Medical, Dental and Social Assistance

One of the activities of FAHZ, as described in its bylaws, is to provide medical and dental assistance and other benefits both to active and certain of our retired employees and executive officers (including their dependents).

Label Production

We have entered into a lease agreement with FAHZ, pursuant to which we have leased and are operating FAHZ’s assets used to produce our labels for R$63,328 for a period of ten years, maturing on March 31, 2018.  We are currently renegotiating the extension of this agreement.

Lease on Commercial Properties

We have a lease of two commercial properties from FAHZ involving annual lease payments in the amount of R$3.3 million. This lease agreement is scheduled to expire in January 2020.

Ambev and ABI

Licensing Agreements

See “Item 4. Information on the Company—B. Business Overview—Licenses—Licensing Agreements with ABI.”

Special Goodwill Reserve

As a result of the merger of InBev Holding Brasil S.A., or InBev Brasil, into us in July 2005, we acquired tax benefits resulting from the partial amortization of the special premium reserve pursuant to article 7 of CVM Rule No. 319/99.  Such amortization will be carried out within the next ten years following the merger.  As permitted by CVM Rule No. 319/99, the Protocol and Justification of this merger, as entered into between ourselves, InBev Brasil and InBev N.V./S.A. (as ABI was then called) on July 7, 2005, established that 70% of the goodwill premium, which corresponded to the tax benefit resulting from the amortization of the tax goodwill derived from the merger, would be capitalized by us to the benefit of our controlling shareholder, with the remaining 30% being capitalized by us without the issuance of new shares to the benefit of all shareholders.  Since 2005, pursuant to the Protocol and Justification of this merger, we have carried out, with shareholder approval, capital increases through the partial capitalization of the goodwill premium reserve.  Accordingly, IIBV and AmBrew, which are subsidiaries of ABI, have subscribed shares corresponding to 70% of the goodwill premium reserve and our minority shareholders have been entitled to participate in these share issuances through the exercise of preemptive rights under the Brazilian Corporation Law. The remaining 30% of the tax benefit has been capitalized by us without issuance of new shares to the benefit of all shareholders.  The Protocol and Justification of this merger also provides, among other matters, that ABI shall indemnify us for any undisclosed liabilities of InBev Brasil.

Transfer of Operations in Colombia, Peru, Ecuador and Panama

In May 2016, we entered into an agreement with ABI, pursuant to which we agreed to transfer to ABI our businesses in Colombia, Peru and Ecuador, in exchange for which ABI has agreed to transfer SAB’s Panamanian business to us. Other than post-closing debt and/or cash adjustments, the transaction did not involve any cash payments and involved an exchange of shares of the aforementioned entities. The transaction was conditioned on the successful closing of the SAB and ABI merger, which closed in the fourth quarter of 2016. As a result of this transaction, on December 31, 2016, we ceased operations in Colombia, Peru and Ecuador and commenced operations in the beverages market of Panama. 

92

 

Quilmes Perpetual Licensing Agreement

In September 2017, we entered into an agreement with ABI, pursuant to which our subsidiary Cervecería y Maltería Quilmes S.A., or Quilmes, agreed to transfer to a third-party, Compañia Cervecerías Unidas S.A. or its affiliates, or CCU, certain Argentinean brands (Norte, Iguana and Baltica) and related business assets as well as payment of US$50 million. In exchange, ABI has agreed to transfer to Quilmes the brewery of Cerveceria Argentina Sociedad Anonima Isenbeck, an Argentinean subsidiary of ABI. In addition, at closing ABI will license to Quilmes in perpetuity the Budweiser brand, among other North American brands, in Argentina upon ABI’s recovery of the distribution rights to such brands from CCU. The closing of the transaction is subject to the analysis and validation by the Argentinean antitrust authority (Comisión Nacional de Defensa de la Competencia) of the main documents that will be executed at the closing and other customary closing conditions. Rothschild acted as our exclusive financial advisor.

Ambev and Certain Shareholders (E. León Jimenes, S.A. or ELJ)

In December 2017, E. León Jimenes, S.A., or ELJ, the other shareholder together with us in Tenedora CND, S.A., or Tenedora – a holding company incorporated in the Dominican Republic, owner of almost the totality of Cervecería Nacional Dominicana, S.A. – partially exercised, in accordance with the shareholders’ agreement of Tenedora, its put option in connection with shares representing 30% of Tenedora’s capital stock.  The transaction was subject to certain conditions precedent and closed in January 2018.  As a result of the partial exercise of such put option, we paid to ELJ the amount of US$926.5 million and became the owner of approximately 85% of Tenedora, with ELJ remaining with 15%. In addition, in light of the strategic importance of the alliance with ELJ, our Board of Directors approved amending from 2019 to 2022 the term for the call option granted by ELJ to us to become exercisable.

C.            Interests of Experts and Counsel

Not applicable.

93

 

ITEM 8.                FINANCIAL INFORMATION

A.            Consolidated Financial Statements and Other Financial Information

Consolidated Financial Statements

See “Item 17. Financial Statements.”

Legal Proceedings

We are subject to numerous claims with respect to tax, labor, civil and other matters (consisting of antitrust, environmental and other proceedings that do not fit in the other categories).  Such proceedings involve inherent uncertainties including, but not limited to, as a result of court rulings, negotiations between affected parties and governmental actions, and, consequently, our management cannot at this stage estimate with certainty how and when these matters will be resolved.

To the extent that we believe contingencies arising from these proceedings will probably be realized, they have been recorded in the balance sheet.  Our provisions for legal contingencies were R$681.5 million as of December 31, 2017. We have estimated the total exposures of possible (but not probable) losses, which are not recorded as liabilities, to be R$60.5 billion as of December 31, 2017. Our estimates are based on reasonable assumptions and management assessments, but should the worst case scenario develop, subjecting us to losses in all cases classified as possible (but not probable), our net impact on our results of operations would be an expense for this amount.  Except as set forth herein, there are no legal proceedings to which we are a party, or to which any of our properties are subject which, either individually or in the aggregate, may have a material adverse effect on our results of operations, liquidity or financial condition.  For more information, see notes 26 and 30 to our audited consolidated financial statements.

Tax Matters

As of December 31, 2017, we had several tax claims pending against us, including judicial and administrative proceedings.  Most of these claims relate to ICMS Value-Added Tax, IPI Excise Tax, and income tax and social contributions.  As of December 31, 2017, we had made provisions of R$383.3 million in connection with those tax proceedings for which we believe there is a probable chance of loss.

Among the pending tax claims, there are claims filed by us against Brazilian tax authorities alleging that certain taxes are unconstitutional.  Such tax proceedings include claims for income taxes, ICMS Value-Added Tax, IPI Excise Tax and taxes on revenues, such as the Social Integration Program Contribution (Programa de Integração Social), or the PIS Contribution and the Social Security Funding Contribution (Contribuição para Financiamento da Seguridade Social), or COFINS.  As these claims are contingent on obtaining favorable judicial decisions, the corresponding assets which might arise in the future are only recorded once it becomes certain that we will receive the amounts previously paid or deposited.

As of December 31, 2017, we were party to tax proceedings with a total estimated possible risk of loss of R$56.2 billion. Approximately R$31.8 billion of this figure is related to controversies related to payment of income tax and social contribution, and approximately R$19.8 billion is related to controversies involving the payment of ICMS value-added and IPI Excise taxes. The most significant proceedings are discussed below.

ICMS Value-Added Tax, IPI Excise Tax and Taxes on Net Sales

We have been party to legal proceedings with the State of Rio de Janeiro where we are challenging the state’s attempt to assess ICMS Value-Added Tax with respect to unconditional discounts granted by us from January 1996 to February 1998. In October 2015 and January 2016, we paid the amounts related to the State of Rio de Janeiro’s proceedings with discounts under an incentive tax payment program granted by such state in the total amount of approximately R$271.0 million. In 2013, 2014 and 2015, we received similar tax assessments issued by the States of Pará and Piauí relating to the same issue, which are currently under discussion. Our management estimates the amount involved in these proceedings to be approximately R$600 million as of December 31, 2017, reflecting the payments made in October 2015 and January 2016. We have classified this as a possible loss and, therefore, for which no provision has been made.

94

 

In Brazil, goods manufactured within the Manaus Free Trade Zone (Zona Franca de Manaus) intended for remittance elsewhere in Brazil are exempt from the IPI Excise Tax.  We have been registering IPI Excise Tax presumed credits upon the acquisition of exempted inputs manufactured in the Manaus Free Trade Zone.  Since 2009, we have been receiving a number of tax assessments from the RFB relating to the disallowance of such presumed IPI excise tax credits, which are under discussion before the Brazilian Supreme Court.  Management estimates the possible losses in relation to these assessments to be R$3.2 billion as of December 31, 2017. We have not recorded any provision in connection with these assessments. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sales Tax Deferrals and Other Tax Credits.”

In addition, over the years, we also received tax assessments from the Brazilian Federal Tax Authorities charging federal taxes that they considered unduly offset with the disallowed IPI excise tax credits which are under discussion in the above mentioned proceedings. We are currently challenging those charges in the courts. Our management estimates the possible losses related to these assessments to be approximately R$0.9 billion as of December 31, 2017. We have not recorded any provision in connection with these assessments.

In 2014 and 2015, we received tax assessments from the RFB relating to IPI excise tax allegedly due over remittances of manufactured goods to other related factories, for which a decision from the Upper House of the Administrative Tax Court is still pending. Our management estimates the possible losses related to these assessments to be approximately R$1.5 billion as of December 31, 2017.  We have not recorded any provision in connection with these assessments.

Over the years, we have also received tax assessments relating to supposed ICMS differences considered due in the tax substitution system when the price of products sold by us reaches levels close to or above the fixed price table basis established by certain states in cases where tax authorities understand that the calculation basis should be based on a value-added percentage over the actual prices, not the fixed table price. Among other similar cases, we received three assessments issued by the State of Minas Gerais in the original amount of R$1.4 billion. In the second quarter of 2017, the Administrative Tax Court of the State of Minas Gerais issued a judgment in relation to these three matters in a manner unfavorable to us.  We have appealed the decision and are currently awaiting judgement from the Upper House of the Administrative Tax Court of the State of Minas Gerais. In 2017, we also received assessments from the State of Rio de Janeiro in the amount of R$0.9 billion related to this same issue.  We have presented defenses against such tax assessments and await judgment by the relevant administrative courts.  Considering these new assessments and others received in 2017 also related to the application of the fixed price table compared to the value-added percentage method in calculating ICMS taxes, our management estimates the amount related to this issue to be approximately R$5.8 billion as of December 31, 2017, classified as a possible loss and, therefore, for which we have made no provision.  We have recorded provisions in the total amount of R$6.7 million for proceedings where we consider the chances of loss to be probable considering specific procedural issues.

In addition to the above ICMS matters, we are currently challenging tax assessments issued by various Brazilian states, as described in the following section.

State Tax Incentives of the National Council on Fiscal Policy (Conselho Nacional de Política Fazendária), or CONFAZ

Many states in Brazil offer tax incentive programs to attract investments to their regions, pursuant to the rules of the CONFAZ, a council formed by the Treasury Secretaries from each of the 27 Brazilian states. We participate in ICMS value-added tax credit programs offered by various Brazilian states which provide (i) tax credits to offset ICMS value-added tax payables and (ii) ICMS value-added tax deferrals. In return, we are required to meet certain operational requirements, including, depending on the state, production volume and employment targets, among others. All of these conditions are included in specific agreements between us and the relevant state governments.

As previously disclosed, there has in recent years been a controversy regarding whether these benefits are constitutional when granted without the prior approval of every Brazilian state participating in the CONFAZ. Some states and public prosecutors filed direct actions of unconstitutionality (Ação Direta de Inconstitucionalidade) before the Brazilian Supreme Court to challenge the constitutionality of certain state laws granting tax incentive programs unilaterally, without the prior approval of the CONFAZ.

95

 

Since 2007, we have received tax assessments from various states, challenging the legality of tax credits arising from existing tax incentives received by us in other states. Our management estimates the possible losses related to these assessments to be approximately R$1.9 billion as of December 31, 2017.  We have not recorded any provision in connection therewith.

In 2017, Supplementary Law No. 160 was published authorizing the states and the Federal District to revalidate within 180 days the tax benefits allegedly created without the approvals required under Brazilian tax laws and regulations by means of an Interstate Agreement. Under the provisions of the aforementioned Supplementary Law, Confaz Interstate Agreement No. 190 was published on December 18, 2017, allowing the states to republish and to reinstall the state tax benefits created up to August 8, 2017. The validation of such tax incentives, however, is not self-applicable and depends on the fulfillment of certain conditions by the granting state.  We believe that the states will be able to comply with such conditions, except for the State of Amazonas that decided to not be a party to the Interstate Agreement.

In any case, we will continue to defend our position in those assessments, including those related to the State of Amazonas and those related to the states in which the conditions for validation were not satisfied.

Profits Generated Abroad

During 2005, certain of our subsidiaries received a number of assessments from Brazilian federal tax authorities relating to profits of our foreign subsidiaries. In December 2008, the Administrative Court decided on one of these tax assessments.  This decision was partially favorable to us, and in connection with the remaining part, we filed an appeal to the Upper House of the Administrative Court, which was denied in full in March 2017.  In September 2017, we filed a judicial proceeding for this tax assessment with a motion of injunction, which was decided in a manner favorable to us. In December 2013, 2016 and in October 2017, we received other tax assessments related to profits of our foreign subsidiaries. As of December 31, 2017, our management estimates the total amount involved in these matters classified as a possible risk of loss to be approximately R$6.1 billion and, therefore, for which we have not recorded a provision.  We have recorded provisions of approximately R$44.2 million for proceedings where we consider the chance of loss to be probable.

Income Tax - Tax Loss Offset

We and certain of our subsidiaries received a number of assessments from the RFB relating to the offset of tax loss carry forwards arising in the context of business combinations.  In February 2016, the Upper House of the Administrative Tax Court reached a judgment for two such tax assessments on this matter. In both cases, the decision was unfavorable to us, and we promptly filed a judicial proceeding. In September 2016, we received a favorable first level decision in one of the judicial claims, and in March 2017, we received an unfavorable first level decision on the second judicial case and filed an appeal to the second instance Court. Our management estimates the total exposures of possible losses in relation to these assessments to be R$549.4 million as of December 31, 2017.  We have not recorded any provision in connection with these disputes.

Special Goodwill Reserve

In December 2011, we received a tax assessment from the RFB related to the goodwill amortization resulting from Inbev Brasil’s merger referred to under “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Ambev and ABI—Special Goodwill Reserve.”  In June 2012 we filed an appeal against the unfavorable first level administrative decision. In November 2014, the lower Administrative Court rendered a partially favorable decision, and we presented a motion to clarify the decision to the Administrative Court.  This motion was considered in September 2016, and we were notified of the clarified decision in January 2018. The Administrative Court’s decision was partially favorable to us. As a result, we filed a judicial proceeding to discuss the unfavorable part of the decision pursuant to which we were rewarded an injunction.  The remaining unfavorable part will still be examined on the Administrative Upper Court.

96

 

In June 2016, we received a new tax assessment charging the remaining value of the goodwill amortization between 2011 to 2013, related to InBev Brazil’s merger with Ambev. In March 2017, we were notified of a partially favorable first level administrative decision on this tax assessment and filed an appeal to Lower Administrative Court. We have not recorded any provisions for this matter and our management estimates possible losses in relation to this assessment to be approximately R$8.3 billion as of December 31, 2017.  In the event we are required to pay these amounts, ABI will reimburse us in the amount proportional to the benefit received by ABI pursuant to the merger protocol, as well as related costs.

In October 2013, we also received a tax assessment related to the goodwill amortization resulting from the merger of Beverage Associate Holding into us. We filed our defense in November 2013, and the Lower Administrative Tax Court issued an unfavorable decision against us in November 2014. In December 2014, Ambev filed an appeal against the unfavorable first level administrative decision published in November 2014. In March 2017, the Lower Administrative Court decided to send the case back to the first level administrative judgment due to procedural matters. In July 2017, we were notified of the new first level decision which was also unfavorable to us, and filed a new appeal to the Lower Administrative Court. We estimate the amount of possible losses in relation to this assessment to be approximately R$1.6 billion as of December 31, 2017. We have not recorded any provision in connection with this assessment.

In November 2017, we received a tax assessment related to the goodwill amortization resulting from the merger of CND Holdings into Ambev. We promptly filed a defense in December 2017 and await the first level administrative decision on this matter. Our management estimates the amount of possible losses in relation to this assessment to be approximately R$1.1 billion as of December 31, 2017. We have not recorded any provision in connection with this assessment.

Disallowance of Expenses and Deductibility of Losses

In December 2014, we received a tax assessment from the RFB related to disallowance of alleged non-deductible expenses and certain loss deductions mainly associated with financial investments and loans, in the amount of approximately R$1.3 billion.  Our defense was presented on January 28, 2015. In July 2016, we were notified of an unfavorable administrative first level decision and filed an appeal to the Lower Administrative Court. In August 2017, the Lower Administrative Court ruled favorably on our appeal, and, considering that the RFB forfeited its right to appeal that decision, the case was then finalized. In December 2015 and December 2016, we also received two new tax assessments related to the same matter. We estimate our exposure to possible losses in relation to these assessments to be approximately R$4.4 billion as of December 31, 2017. We have not recorded any provision in connection with those assessments.

Disallowance of Taxes Paid Abroad

Since 2014, we have been receiving tax assessments from the RFB related to the disallowance of deductions associated with alleged unproven taxes paid abroad, for which the decision from the Upper House of the Administrative Tax Court is still pending. In September 2017, we opted to include part of these tax assessments in the Brazilian Federal Tax Regularization Program of the Provisional Measure No. 783 to settle part of this amount.  See “Item 8. Consolidated Financial Statements and Other Financial Information—A. Tax Matters— Adherence to the Special Tax Regularization Program.”  As of December 31, 2017, our management estimated the exposure of approximately R$7.2 billion as a possible risk, and accordingly we have not recorded a provision for such amount.

Presumed Profit

In April 2016, our subsidiary Arosuco received a tax assessment regarding the use of presumed profit method for the calculation of income tax and the social contribution on net profit instead of the real profit method. In September 2017, Arosuco was notified of the unfavorable first level administrative decision and filed an appeal to the Administrative Court. Arosuco management estimates the amount of possible losses in relation to this assessment to be approximately R$616.1 million as of December 31, 2017.

In December 2016, our subsidiary CRBS received a tax assessment regarding the use of presumed profit method for the calculation of income tax and social contribution on net profit instead of the real profit method. In July 2017, CRBS was notified of the unfavorable first level administrative decision and filed an appeal to the Administrative Court. In September 2017, CRBS decided to participate in the Brazilian Federal Tax Regularization Program of the Provisional Measure No. 783 in relation to this matter following which CRBS estimates that there are no remaining contingency values related to this matter as of December 31, 2017.  See “Item 8. Consolidated Financial Statements and Other Financial Information—A. Tax Matters— Adherence to the Special Tax Regularization Program.”

97

 

Social Contributions

We received a number of tax assessments issued by the Brazilian federal tax authorities relating to amounts allegedly due under Integration Program / Social Security Financing Levy (PIS/COFINS) over bonus products granted to our customers. These cases are now being discussed at the relevant administrative courts. Management estimates the possible losses related to these assessments to be approximately R$3.1 billion as of December 31, 2017. No related provision has been made.

Adherence to the Special Tax Regularization Program

In September 2017, we decided to participate in the Federal Tax Amnesty Program established by Provisional Measure No. 783/2017, converted into Law No. 13,496/2017, or PERT 2017, undertaking to pay tax assessments that were in dispute under administrative or judicial level, including debts from our subsidiaries, in the total amount of R$3.5 billion (already considering discounts established by the program).  The total amount paid in 2017 was approximately R$960.0million and the balance will be paid in 145 monthly installments, with interest, starting in January 2018. In order to benefit from this program, we were required to waive in advance any defense or rights in relation to existing administrative disputes involving the tax indebtedness. In this case, the debts being settled through the program are related to several discussions regarding income tax, social contributions and excise tax.

Despite our participation in this program, we could be subject to tax audits for subsequent periods, which may lead to additional tax challenges by the relevant authorities on similar claims. In addition, if we are delinquent in our payments under these programs or are otherwise unable to pay as scheduled, we may be barred from participating in this program and similar programs this.

Labor Matters

We are involved in more than 25,000 labor claims. Most of the labor claims we face relate to our Brazilian operations.  In Brazil, it is not unusual for a large company to be named as a defendant in such a significant number of claims.  As of December 31, 2017, we made provisions totaling R$139.1 million in connection the above labor claims involving former, current and outsourced employees relating mainly to overtime, dismissals, severance, health and safety premiums, supplementary retirement benefits and other matters, all of which are awaiting judicial resolution and have probable chance of loss.

In connection with the labor matters, we are also involved in claims regarding the social charges on payroll. Management estimates the possible losses related to these claims to be, approximately, R$253 million as of December 31, 2017.

Civil Claims

As of December 31, 2017, we were involved in more than 9.000 civil claims that were pending, including third-party distributors and product-related claims. We have established provisions totaling R$26.5 million reflecting applicable adjustments, such as accrued interest, as of December 31, 2017 in connection with civil claims.

Subscription Warrants

In 2002, we decided to request a ruling from the CVM in connection with a dispute between Old Ambev and some of its warrant holders regarding the criteria used in the calculation of the strike price of certain Old Ambev warrants.  In March and April 2003, the CVM ruled that the criteria used by Old Ambev to calculate the strike price were correct.  In response to the CVM’s final decision and seeking to reverse it, some of the warrant holders filed separate lawsuits before the courts of São Paulo and Rio de Janeiro.

98

 

Although the warrants expired without being exercised, the warrant holders claim that the strike price should be reduced to take into account the strike price of certain stock options granted by Old Ambev under its then-existing stock ownership program, as well as for the strike price of other warrants issued in 1993 by Brahma.

We are aware of at least seven claims in which the plaintiffs argue that they would be entitled to those rights. One of these cases was settled. Two of them were ruled favorably to us by the appellate court of the State of São Paulo. Both decisions were confirmed by the Superior Court of Justice . The plaintiffs have appealed to the Special Court of the Superior Court of Justice (requests for reconsideration based on conflicting precedent) and such appeals are pending Of the four other claims, we received a favorable ruling in one claim by a first level court in Rio de Janeiro, and the appellate court of the State of Rio de Janeiro ruled against us in another three claims. We have appealed to the Brazilian Superior Court of Justice with respect to the final decisions issued by the appellate court of the State of Rio de Janeiro. In 2016, we received a favorable ruling in one of such appeals, to which the plaintiffs filed an appeal of their own. In 2017, the Superior Court of Justice ruled two of the appeals in our favor, and the plaintiffs also filed appeals against such decisions. All three cases ruled favorable to us are pending final judgment. In November 2017, the Federal Public Prosecutor filled a motion favorable to our position in one of the cases, and the remaining appeals are still pending judgment.

In the event the plaintiffs prevail in the above six pending proceedings, we believe that the corresponding economic dilution for the existing shareholders would be the difference between the market value of the shares at the time they are issued and the value ultimately established in liquidation proceedings as being the subscription price pursuant to the exercise of the warrants.  We believe the warrants object of those six proceedings represented, on December 31, 2017, 172,831,574 Ambev common shares that would be issued at a value substantially below fair market value, should claimants ultimately prevail.  The plaintiffs also claim they should receive past dividends related to these shares in the amount of R$846.9 million as of December 31, 2017.

Based on management assessments, our chances of receiving unfavorable final decisions in this matter are remote, and therefore we have not established a provision for this litigation in our audited consolidated financial statements.  As these disputes are based on whether we should receive as a subscription price a lower price than the price that we consider correct, a provision of amounts with respect to these proceedings would only be applicable with respect to legal fees and past dividends.

Environmental Matters

Riachuelo

In 2004, an environmental complaint was initiated by certain neighbors residing in the Riachuelo Basin against the State of Argentina, the Province of Buenos Aires, the city of Buenos Aires and more than 40 corporate entities (including our Argentinean subsidiary) with premises located in the Riachuelo Basin or that discharge their waste into the Riachuelo River.  In this complaint, the Argentine Supreme Court of Justice ruled that the State of Argentina, the Province of Buenos Aires and the city of Buenos Aires remain primarily responsible for the remediation of the environment, and further resolved that the Riachuelo Basin Authority, an environmental authority created in 2006 pursuant to the Argentine Law No. 26,168, would be responsible for the implementation of a Remediation Plan for the Riachuelo Basin.  The Argentine Supreme Court of Justice also decided that any claim on damages should be initiated before a civil court. No further claims were initiated against our Argentinean subsidiary.

Lawsuit Against the Brazilian Beer Industry

On October 28, 2008, the Brazilian Federal Prosecutor’s Office (Ministério Público Federal) filed a suit for damages against us and two other brewing companies claiming total damages of approximately R$2.8 billion (of which approximately R$2.1 billion are claimed against us).  The public prosecutor alleges that: (1) alcohol causes serious damage to individual and public health, and that beer is the most consumed alcoholic beverage in Brazil; (2) defendants have approximately 90% of the national beer market share and are responsible for heavy investments in advertising; and (3) the advertising campaigns increase not only the market share of the defendants but also the total consumption of alcohol and, hence, cause damage to society and encourage underage consumption.

Shortly after the above lawsuit was filed, a consumer-protection association applied to be admitted as a joint-plaintiff.  The association has made further requests in addition to the ones made by the Public Prosecutor, including the claim for “collective moral damages” in an amount to be ascertained by the court; however, it suggests that it should be equal to the initial request of R$2.8 billion (therefore, doubling the initial amount involved).  The court has admitted the association as joint-plaintiff and has agreed to hear the new claims. After the exchange of written submissions and documentary evidence, the case was dismissed by the Lower Court Judge, which denied all the claims submitted against Ambev and the other defendants. The Prosecutor’s Office appealed to the Federal Court, but based on management assessments, we believe that our chances of loss are remote and, therefore, we have not made any provision with respect to such claim.

99

 

Class Action Canada (Brewers Retail Inc. Litigation)

On December 12, 2014, a lawsuit was commenced in the Ontario Superior Court of Justice against the Liquor Control Board of Ontario (LCBO), Brewers Retail Inc. (known as The Beer Store or “TBS”), and the owners of Brewers Retail Inc. (Molson Coors Canada, Sleeman Breweries Ltd. and Labatt Breweries of Canada LP (the “Brewers”).  The lawsuit was brought in Canada pursuant to the Ontario Class Proceedings Act, which sought, among other things: (1) to obtain a declaration that the defendants conspired with each other to allocate markets for the supply of beer sold in Ontario since June 1, 2000; (2) to obtain a declaration that the Brewers conspired to fix, increase and/or maintain prices charged to Ontario licensees (on-trade) for beer and the fees charged by TBS to other competitive brewers who wished to sell their products through TBS; and (3) damages for unjust enrichment. As part of this third allegation, the plaintiffs allege illegal trade practices by the Brewers. They are seeking damages not exceeding C$1.4 billion (approximately R$3.7 billion); punitive, exemplary and aggravated damages of C$5 million (R$13.1 million); and changes/repeals of the affected legislation. We have not recorded any provision in connection therewith. A motion for summary judgment has been filed by the defendants and was heard by the Superior Court of Ontario in February 2018. A hearing related to the class certification and trial on the merits is not expected to be held before the end of 2018.

Dividend Policy

The timing, frequency and amount of future dividend payments, if any, will depend upon various factors that our Board of Directors may consider relevant, including our earnings and financial condition.  Our bylaws provide for a minimum mandatory dividend of 40% of our adjusted annual net income, if any, as determined under IFRS at our individual financial statements.  Brazilian companies are permitted to make limited distributions to shareholders in the form of interest accrued on share capital, commonly referred to as “interest on shareholders’ equity,” and treat such payments as a deductible financial expense for purposes of Brazilian income tax and social contribution on profits.  This notional interest distribution is treated for accounting purposes as a deduction from shareholders’ equity in a manner similar to a dividend.  The benefit from the tax deductible interest on shareholders’ equity is recorded in the income statement.  The minimum mandatory dividend includes amounts paid as interest on shareholders’ equity.  However, payment of such interest on shareholders’ equity is subject to Brazilian withholding income tax, whereas no such withholding is required in connection with dividends paid.  For further information on this matter see “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations—Income Tax.”

Annual adjusted net income not distributed as dividends or interest on shareholders’ equity may be capitalized, used to absorb losses or otherwise appropriated as allowed under the Brazilian Corporation Law and our bylaws.  Therefore, annual adjusted net income amounts may not necessarily be available to be paid as dividends.  We may also not pay dividends to our shareholders in any particular fiscal year upon the determination of the Board of Directors that such distribution would be inadvisable in view of our financial condition at the time.  Any such dividends not distributed would be allocated to a special reserve account for future payment to shareholders, unless used to offset subsequent losses.  For further information on this matter, see “Item 3. Key Information— D. Risk Factors—Risks Relating to Our Common Shares and ADSs—Our shareholders may not receive any dividends.”

For further information on provisions of the Brazilian Corporation Law relating to required reserves and payment of dividends or interest on shareholders’ equity, as well as specific rules applicable to the payment of dividends by us under our bylaws, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Reserves.”

100

 

Ambev S.A.

The following table shows the cash dividends paid by Ambev to holders of Ambev’s common shares in reais and in U.S. dollars (translated from reais at the commercial exchange rate as of the date of payment) for each of the indicated periods ..  The amounts include interest on shareholders’ equity, net of withholding tax.  The last distribution of dividends approved, which relates to the second half of the 2017 fiscal year, was paid by Ambev on February 22, 2018.

Date of Approval	First Payment Date	Reais per Shares(1)	U.S. Dollar Equivalent per Share at Payment Date(1)(2)
First half 2015	March 31, 2015	0.077	0.024
	June 29, 2015	0.085	0.027
Second half 2015	September 28, 2015	0.150	0.036
	December 30, 2015	0.128	0.032
First half 2016	February 29, 2016	0.111	0.028
	July 29, 2016	0.130	0.040
Second half 2016	November 25, 2016	0.160	0.047
	December 29, 2016	0.187	0.057
	February 23, 2017	0.070	0.023
First half 2017	July 17, 2017	0.160	0.051
Second half 2017	December 28, 2017	0.264	0.080
	February 22, 2018	0.070	0.022

(1)The amounts set forth above are amounts actually received by shareholders, which are net of withholding tax.  The financial statements present the amounts actually disbursed, including the withholding tax on interest on shareholders’ equity, which was paid by Ambev on behalf of shareholders.  The dividends set forth above are calculated based on the number of outstanding shares at the date the distributions were declared.  See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”

(2)Translated to U.S. dollars at the exchange rate in effect at the first scheduled payment date.

For more information on rules and procedures for shareholder distributions under our bylaws, see “Item 10. Additional Information—B. Memorandum and Articles of Association—Reserves.”

B.            Significant Changes

Except as otherwise disclosed in our audited consolidated financial statements and in this annual report, there have been no significant changes in our business, financial conditions or results in December 31, 2017.

101

 

ITEM 9.                THE OFFER AND LISTING

A.            Offer and Listing Details

Not applicable.  Information regarding the price history of the stock listed as required by Item 9.A.4 is set forth below in “—C. Principal Market and Trading Market Price Information.”

B.            Plan of Distribution

Not applicable.

C.            Principal Market and Trading Market Price Information

We are registered as a publicly held company with the CVM.  Our common shares are listed on the B3 under the symbol “ABEV3” and our ADSs are listed on the NYSE under the symbol “ABEV”.  Our shares and ADSs began trading on the B3 and the NYSE, respectively, on November 11, 2013.  The shares and ADSs of Old Ambev ceased all trading activities on those stock exchanges on the close of business of November 8, 2013.

Ambev has only one class of shares (i.e, voting common shares), including in the form of ADSs (evidenced by ADRs), with each ADS representing one Ambev common share.  The Ambev common shares and ADSs are registered under the Exchange Act.  As of March 6, 2018, Ambev had 15,711,205,090 shares outstanding.  As of March 6, 2018, there were 1,253,690,208 Ambev ADSs outstanding(representing 1,253,690,208 Ambev shares, which corresponds to 8% of the total Ambev shares outstanding).  The Ambev shares held in the form of ADSs under the Ambev ADS facilities are deemed to be the shares held in the “host country” (i.e, the United States) for purposes of the Exchange Act.  In addition, as of March 6, 2018 there were 121 registered holders of Ambev ADSs.

Ambev S.A.

Shares

The table below shows the quoted high and low closing sales prices in reais of our shares on B3 for the indicated periods. 

Trading Prices on the B3: Ambev Common Shares*
	Per Common Share
	High	Low
	(in reais)
Annual
2017	21.73	15.81
2016	19.01	15.19
2015	18.88	14.18
2014	15.65	13.44
2013 (starting November 11)	15.14	14.08
Quarterly
2017
Fourth quarter	21.73	19.84
Third quarter	21.13	17.46
Second quarter	19.29	17.15
First quarter	17.79	15.81
2016
Fourth quarter	18.73	15.34
Third quarter	19.01	17.68
Second quarter	18.46	17.14
First quarter	18.22	15.19
Monthly
2018
February	22.71	21.49
January	21.96	21.53
2017
December	21.33	20.08
November	20.46	19.84
October	21.73	20.33
September	21.13	19.38

102

 

*      Historical pricing adjusted to reflect interest on shareholders’ equity and dividend distributions.

ADSs

The table below shows the quoted high and low closing sales prices in U.S. dollars of our ADSs on the NYSE for the indicated periods.

Trading Prices on the NYSE: Ambev ADSs*
	Per ADS
	High	Low
	(in U.S. dollars)
Annual
2017	6.86	4.90
2016	5.95	3.63
2015	6.21	4.11
2014	6.93	5.10
2013 (starting November 11)	6.61	5.95
Quarterly
2017
Fourth quarter	6.86	5.94
Third quarter	6.73	5.24
Second quarter	6.19	5.20
First quarter	5.75	4.90
2016
Fourth quarter	5.93	4.55
Third quarter	5.95	5.34
Second quarter	5.56	4.72
First quarte	4.96	3.63
Monthly
2018
February	6.95	6.46
January	6.88	6.56
2017
December	6.44	6.10
November	6.32	5.94
October	6.86	6.21
September	6.73	6.13

*      Historical pricing adjusted to reflect interest on shareholders’ equity and dividend distributions.

103

 

Old Ambev

The Old Ambev stock and ADS quotes below are based on the historical capital structure of Old AmBev, which was comprised of voting common shares and non-voting preferred shares.  Therefore, they do not take into account the 1:5 splitting effect that resulted from the exchange of five new Ambev common shares for each and every Old Ambev common and preferred share surrendered in the 2013 stock swap merger of Old Ambev with us (see “Item 4. Information on the Company—A. History and Development of the Company—Stock Swap Merger of Old Ambev with Ambev S.A.”).

Shares

The table below shows the quoted high and low closing sales prices in reais on the B3 for preferred and common shares of Old Ambev for the indicated periods, considering the last date of trading of those shares on November 8, 2013.

Trading Prices on the B3: Old Ambev Common and Preferred Shares
	Per Common Share		Per Preferred Share
	High	Low	High	Low
	(in reais)		(in reais)
Annual
2013 (until November 8)	91.13	75.69	93.80	76.38

ADSs

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

Trading Prices on the NYSE: Old Ambev Common and Preferred ADSs
	Per Common ADS		Per Preferred ADS
	High	Low	High	Low
	(in US$)		(in US$)
Annual
2013 (until November 8)	46.22	33.40	47.06	33.73

Regulation of the Brazilian Securities Market

The Brazilian securities market is regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, as well as by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions.  The Brazilian securities market is governed primarily by Law No. 6,385 dated December 7, 1976, as amended, or the Brazilian Securities Law, and by the Brazilian Corporation Law, as amended and supplemented.  These laws and regulations, among others, provide for disclosure requirements, restrictions on insider trading and price manipulation, and protection of minority shareholders.  They also provide for licensing and oversight of brokerage firms and governance of Brazilian stock exchanges.  However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets.

Under the Brazilian Corporation Law, a company is either publicly held (listed), such as Ambev, whose shares are publicly traded on the B3, or privately held (unlisted).  All listed companies are registered with the CVM and are subject to reporting and regulatory requirements.  The Brazilian Corporation Law allows the CVM to classify listed companies according to the kind of securities they issue.  A company registered with the CVM may trade its securities either on the Brazilian stock exchanges or in the Brazilian over-the-counter market.  Shares of companies like Ambev traded on the B3 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 B3, a company must apply for registration with the CVM and the B3.

104

 

The trading of securities on the Brazilian stock exchanges may be halted at the request of a company in anticipation of a material announcement.  Companies may be required by law to request such suspension.  Trading may also be suspended on the initiative of a Brazilian stock exchange or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or a stock exchange.

Trading on the Brazilian Stock Exchanges

B3 is the only Brazilian stock exchange on which private equity and private debt may be traded.

B3 trading sessions, from March 12, 2018, are from 10:00 a.m. to 4:55 p.m., São Paulo time.  Equity trading is executed fully electronically through an order-driven trading system called “PUMA Trading System,” or “PUMA.”  Additionally, the home broker system through the Internet has been established allowing retail investors to transmit orders directly to the B3.  B3 also permits trading from 5:30 p.m. to 6:00 p.m. on an online system connected to PUMA and Internet brokers called the “after-market”.  The after-market session is restricted to certain stocks that were traded in portfolios IBOV and/or IBrX 100 and that were traded on the same day during the regular negotiation.  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 B3 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 any adjustment.  Delivery of and payment for shares are made through the facilities of separate clearinghouses for each exchange, which maintain accounts for the member brokerage firms.  The seller is ordinarily required to deliver the shares to the exchange on the second business day following the trade date.  The B3 Equities Clearing is responsible for the registration, settlement and risk management of trades with shares through the PUMA Trading System.

In order to better control volatility, B3 has adopted a “circuit breaker” mechanism pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the index of the stock exchange falls 10% or 15%, respectively, compared to the previous day’s closing index.  If the market falls more than 20% compared to the previous day, the B3 may determine the suspension of trading in all markets for a defined period, at its sole discretion, and such decision must be disclosed to the market through the News Agency (ABO – Operações).  The “circuit breaker” is not allowed to be started during the last 30 minutes of the trading session.

Although the Brazilian equity market is Latin America’s largest in terms of market capitalization, it is smaller, more volatile and less liquid than the major U.S. and European securities markets.  As of December 31, 2017, the aggregate market capitalization of all companies included in the IBOVESPA index of the B3 was equivalent to approximately R$3.0 trillion.  Although all of the outstanding shares of a listed company are actually available for trading by the public, in most cases fewer than half of the listed shares are actually traded by the public because the remainders of a listed company’s shares are usually held by small groups of controlling persons, by governmental entities or by one principal shareholder.  For this reason, data showing the total market capitalization of Brazilian stock exchanges tend to overstate the liquidity of the Brazilian equity securities market.

There is also significantly greater concentration in the Brazilian securities markets.  For example, as of December 31, 2017 the ten shares with greatest representation on the IBOVESPA index of the B3 accounted for 57.5% of the total weight of all companies included in that stock index.

Trading on Brazilian stock exchanges by non-residents of Brazil is subject to limitations under Brazilian foreign investment legislation.  See “Item 3. Key Information—A. Selected Financial Data—Exchange Rate Information—Exchange Controls” and “Item 10. Additional Information—B. Memorandum and Articles of Association—Restrictions on Foreign Investment.”

D.            Selling Shareholders

Not applicable.

105

 

E.            Dilution

Not applicable.

F.            Expenses of the Issue

Not applicable.

106

 

ITEM 10.              ADDITIONAL INFORMATION

A.            Share Capital

Not applicable.

B.            Memorandum and Articles of Association

Below is a brief summary of the material provisions concerning our common shares, bylaws and the Brazilian Corporation Law.  In Brazil, the principal governing document of a corporation is its bylaws (Estatuto Social).  This description is qualified in its entirety by reference to the Brazilian Corporation Law and our bylaws.  An English translation of our bylaws has been filed with the SEC as an exhibit to this annual report.  A copy of our bylaws (together with an English translation) is also available for inspection at the principal office of the depositary and at our website (www.ri.ambev.com.br).  Information on ownership of our shares is set forth under “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”

As of March 6, 2018, our capital stock was equal to R$57,614,139,847.33 divided into 15,717,615,419  issued common shares, without par value, of which 6,410,329 were treasury shares.  We are authorized to increase our capital up to 19,000,000,000 shares upon the decision of our Board of Directors, without the need to amend our bylaws.  We have a single-class share structure, comprised exclusively of voting common shares, and there are no classes or series of preferred shares outstanding.

Pursuant to the Brazilian Corporation Law, we are allowed to sell in the open market any Ambev common shares that have been subscribed but not paid in full within the applicable deadline set forth in our bylaws or the applicable subscription bulletin under which those shares were issued.  If an open market sale is impractical, any subscribed but unpaid Ambev common shares may be forfeited.

Each common share entitles the holder thereof to one vote at our shareholders’ meetings.  Holders of common shares are not entitled to any preference upon our liquidation.

The Board of Directors does not vote on compensation payable to them or any of their members.  For more information on management compensation, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—The Board of Directors—Operations, Finance and Compensation Committee.”

There is no age limit for retirement applicable to the members of our Board of Director in our bylaws.

General

Our registered name is Ambev S.A. and our registered office is in São Paulo, São Paulo, Brazil.  Our registration number with the São Paulo Commercial Registry is 35,300,368,941.  Our principal corporate purposes include the production and sale of beer, CSDs and other beverages.  A more detailed description of our purposes can be found in Chapter I, Article 3 of our bylaws.

Rights of the Ambev Common Shares

Each of our common shares is indivisible and entitles its holder to one vote at any shareholders’ meeting of Ambev.  In accordance with our bylaws and the Brazilian Corporation Law, shareholders have the right to receive dividends or other distributions in proportion to their equity interest in our share capital.  For additional information regarding the payment of dividends and other distributions relating to our common shares, see “Item 8. Financial Information—A. Consolidated Financial Statements and Other Financial Information—Dividend Policy.”  In addition, our shareholders may freely transfer their shares and are entitled to be included in a statutory change of control tender offer upon a disposition of our control.

Also, upon our liquidation, and after the discharge of all our liabilities, our common shares entitle its holders to a participation in our remaining assets as capital reimbursement in proportion to their equity interest in our share capital.  Holders of our common shares have the right, but not the obligation, to subscribe for our future capital increases.

107

 

Moreover, pursuant to the Brazilian Corporation Law, neither our bylaws nor actions taken at a shareholders’ meeting may deprive a shareholder of the following rights:

·the right to participate in our profit distributions;

·the right to participate in our remaining assets in proportion to its equity interest in our share capital in the event of our liquidation;

·preemptive rights to subscribe for our common shares, convertible debentures and warrants, except in certain circumstances under the Brazilian Corporation Law, as described in “—Preemptive Rights”;

·the right to inspect and monitor our management, in accordance with the Brazilian Corporation Law;

·the right to vote at shareholders’ meetings; and

·the right to exercise appraisal rights and withdraw from the Company in the cases provided under the Brazilian Corporation Law, as described in “—Appraisal Rights.”

Shareholders’ Meetings

Pursuant to the Brazilian Corporation Law, shareholders, during shareholders’ meetings regularly called and convened, are generally empowered to pass resolutions relating to our corporate purpose as they may deem necessary.  Shareholders’ meetings may be ordinary, such as the annual meeting, or extraordinary.  Shareholders at the annual shareholders’ meeting, which is required to be held within four months of the end of our fiscal year, have the exclusive power to approve our financial statements and to determine the allocation of our adjusted net income and the distribution of dividends with respect to the fiscal year ended immediately prior to the relevant annual meeting.  Extraordinary shareholders’ meetings are convened to approve the remaining matters within their competency as provided by law and/or our bylaws.  An extraordinary shareholders’ meeting may be held concurrently with an ordinary meeting.

A shareholders’ meeting is convened by publishing a meeting call notice no later than 15 days prior to the scheduled meeting date, on first call, and no later than eight days prior to the date of the meeting, on second call, and no fewer than three times, in the Diário Oficial do Estado de São Paulo and in a newspaper with general circulation in São Paulo, where we have our registered office.  In certain circumstances, however, the CVM may require that the first notice be published no later than 30 days prior to the meeting.  At the shareholders’ meeting held on March 1, 2013, our shareholders designated Valor Econômico, a newspaper with general circulation in São Paulo for this purpose.   The call notice must contain the date, time, place and agenda of the meeting, and in case of amendments to the bylaws, the indication of the relevant matters.  CVM Rule No. 481 of December 17, 2009, also requires that additional information be disclosed in the meeting call notice for certain matters.  For example, in the event of an election of directors, the meeting call notice shall also disclose the minimum percentage of equity interest required from a shareholder to request the adoption of cumulative voting procedures.  All documents in connection with the shareholders’ meeting’s agenda shall be made available to shareholders either within at least one month prior to the meeting or upon publication of the first meeting call notice, as the case may be, except if otherwise required by law or CVM regulations.

A shareholders’ meeting may be held if shareholders representing at least one quarter of the voting shares are present, except in some cases provided by law, such as in meetings seeking to amend the Company’s bylaws, which requires the presence of shareholders representing at least two-thirds of the voting shares.  If no such quorum is present, an eight-day prior notice must be given in the same manner as described above, and a meeting may then be convened without any specific quorum requirement, subject to the minimum quorum and voting requirements for specific matters, as discussed below.

Except as otherwise provided by law, resolutions of a shareholders’ meeting are passed by a simple majority vote of the shares present or represented at the meeting, abstentions not being taken into account.  Under the Brazilian Corporation Law, the approval of shareholders representing at least a majority of the issued and outstanding voting shares is required for the types of actions described below (among others):

108

 

·creating preferred shares or increasing disproportionately an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by the bylaws;

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

·reducing the minimum mandatory dividend;

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

·changing our corporate purpose; and

·dissolving Ambev or ceasing its liquidation status.

Shareholders may not exercise voting rights whenever they are contributing assets in a capital increase paid in kind or with respect to the approval of their own accounts, as well as in those resolutions that may favor those shareholders specifically, or whenever there is a conflicting interest with the Company.  Mergers between affiliated parties are subject to a special statutory valuation procedure intended to determine whether the exchange ratio is adequate for all parties involved.

Shareholders’ meetings may be called by our Board of Directors.  Under the Brazilian Corporation Law, meetings may also be convened by our shareholders as follows:  (1) by any shareholder, if the directors take more than 60 days to convene a shareholders’ meeting after the date they were required to do so under applicable laws and our bylaws, (2) by shareholders holding at least 5% of our total capital stock, if our Board of Directors fails to call a meeting within eight days after receipt of a justified request to call a meeting by those shareholders indicating the proposed agenda, (3) by shareholders holding at least 5% of our voting capital stock, if the directors fail to call a general meeting within eight days after receipt of a request to call a shareholders’ meeting for purpose of assembling a Fiscal Council, and (4) by our Fiscal Council, if the Board of Directors fails to call an annual shareholders’ meeting within 30 days after the mandatory date for such call.  The Fiscal Council may also call an extraordinary shareholders’ meeting if it believes that there are important or urgent matters to be addressed.

To attend a shareholders’ meeting, shareholders or their legal representatives willing to attend the meeting shall present proof of ownership of their Company shares, including identification and/or pertinent documentation that evidences their legal representation of such shareholder.  A shareholder may be represented at a general meeting by an attorney-in-fact appointed no more than one year before the meeting, who must be another shareholder, a company officer or a lawyer. Notwithstanding the above, the CVM decided on November 4, 2014 that shareholders that are legal entities may be represented at general meetings by their legal representatives or by a duly appointed attorney-in-fact, pursuant to the bylaws and related corporate instruments of the legal entities and pursuant to the Brazilian Civil Code.  For a publicly-held company, the attorney-in-fact may also be a financial institution.  Investment funds must be represented by their investment fund officer.

The participation and remote voting in general shareholders’ meetings of publicly-held companies are regulated by CVM Rule No. 561, as amended, which aims to facilitate the participation of shareholders in general meetings either through the vote or through the submission of proposals, as well as to enhance the corporate governance instruments available in the Brazilian market.  For this purpose, this regulation provided the following:

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

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

·the deadlines, procedures and ways of sending this bulletin, which may be forwarded by the shareholder: (a) to the custodian (if the shares held by the shareholder are kept at a centralized deposit) or; (b) to the book-entry agent of the shares issued by the company (if such shares are not kept at a centralized deposit); or (c) directly to the company.

109

 

The application of CVM Rule No. 561, as amended, became mandatory on January 1, 2017 for companies that on April 9, 2015 had at least one share class included either on the Index Brasil 100 or the IBOVESPA index of the B3, such as Ambev. Additionally, CVM Rule No. 594 of December 20, 2017, introduced modifications to the rules applicable to remote voting, including, but not limited to, (i) the deadlines for inclusion of candidates in the bulletin by request of minority shareholders and for the company to resend the bulletin in case of inclusion of candidates by minority shareholders and (ii) the disclosure of the detailed final voting map of the shareholders’ meetings, including the partial disclosure of each shareholders taxpayer’s registry number and their respective votes on each matter.

Board of Directors

In accordance with the Brazilian Corporation Law, any matters subject to the approval of our Board of Directors can be approved by the affirmative vote of a majority of our Board members present at the relevant meeting, except as provided in our Shareholders’ Agreement. 

Under our bylaws, at least two members of our Board of Directors shall be independent directors.  According to our bylaws, for a director to be considered independent he or she may not:  (1) be a controlling shareholder, or a spouse or relative to the second degree of a controlling shareholder, (2) have been, within the last three years, an employee or executive officer of (a) Ambev or of any of our controlled companies or (b) our controlling shareholder or entities under common control with Ambev, (3) directly or indirectly, supply to, or purchase from, us, our controlled companies, controlling shareholder or entities under common control, any products or services, to such an extent as would cause that director to cease being independent, (4) be an employee or administrator of any corporation or entity that offers products or services to, or receives products or services from, us, our controlled companies, controlling shareholder or entities under common control, to such an extent as would cause that director to cease being independent, (5) be a spouse or relative to the second degree of any member of management of Ambev, its controlled companies, controlling company or entity under common control, or (6) receive any other compensation from Ambev, its controlled companies, controlling shareholder or entities under common control, aside from compensation for duties as a board member (gains arising from ownership of our stock are excluded from this restriction).  Our bylaws also set forth that directors elected by a separate ballot vote of minority shareholders holding at least 10% of our capital stock, as provided in paragraphs 4 and 5 of Section 141 of the Brazilian Corporation Law, shall be deemed independent regardless of compliance with the above mentioned criteria.

According to the general principles of the Brazilian Corporation Law, if a director or an executive officer has a conflict of interest with a company in connection with any proposed transaction, the director or executive officer may not vote in any resolution of the Board of Directors or of the board of executive officers regarding such transaction and must disclose the nature and extent of the conflicting interest for purposes of recording such information in the minutes of the meeting.  In any case, a director or an executive officer may not transact any business with a company, including any borrowings, except on reasonable or fair terms and conditions that are identical to the terms and conditions prevailing in the market or offered by third parties.  Any transaction in which a director or executive officer may have an interest can only be approved if carried out on an arm’s-length basis.

Since the enactment of Brazilian Law No. 12,431/11, which amended Section 146 of the Brazilian Corporation Law, directors no longer need to be shareholders to serve on the board of directors of a Brazilian corporation.

Election of Directors

Each Ambev common share represents one vote at any shareholders’ meeting in connection with the election of the Board of Directors of Ambev.

Common shareholders holding at least 10% of our capital may elect one member and respective alternate to the Board of Directors without the participation of the controlling shareholders.  To exercise these minority rights, shareholders must prove their continuous ownership of their Ambev common shares for at least three months prior to the shareholders’ meeting convened to elect board members.  If that prerogative is exercised with the adoption of cumulative voting procedures, as described below, the controlling shareholder will always have the right to elect the same number of members appointed by minority shareholders plus one, regardless of the number of directors provided in our bylaws.

110

 

Shareholders holding shares representing at least 10% of our capital, or a smaller applicable percentage according to a sliding scale determined by the CVM and based on a company’s capital stock (currently 5% of the Ambev common shares, pursuant to the CVM’s sliding scale), have the right to request that cumulative voting procedures be adopted.  Under such procedures, each of our common shares shall entitle as many votes as the number of director positions to be filled, and each shareholder may cast all of his or her votes for a single candidate or distribute them among various candidates.

Pursuant to CVM Rule No. 561/15, publicly-held companies shall adopt the following measures regarding voting process: (1) inform the market of the adoption of cumulative voting process in annual meetings immediately upon the receipt of the first valid requirement; (2) disclose the voting final summary statements, the voting final detailed statements, as well as any voting statement presented by shareholders at the annual meetings; and (3) register in the minutes of the annual shareholders’ meeting the number of approving, rejecting or abstaining votes for each item of the agenda, including the votes received by each member of the Board of Directors and/or Fiscal Council elected in such annual shareholders’ meeting.

Under our bylaws and applicable law, the number of directors may be reduced to a minimum of three.  Since our Shareholders’ Agreement provides that, as long as FAHZ maintains a minimum shareholding in our capital stock, it shall have the right to appoint four members to our Board of Directors, any reduction in the number of such members to fewer than four would be subject to FAHZ’s prior approval.  After 2019, however, FAHZ shall have the right to appoint only two members to our Board of Directors.

The current members of our Board of Directors were elected by our controlling shareholders.  Board members, regardless of the shareholder they represent, owe fiduciary duties to the Company and all of our shareholders.  At the same time, any director appointed by shareholders bound by a shareholders’ agreement is also bound by the terms of that agreement. For more information on our shareholders’ agreements, see “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders.”

Dividends

The discussion below summarizes the main provisions of the Brazilian Corporation Law regarding the establishment of reserves by corporations and rules with respect to the distribution of dividends, including provisions regarding interest on shareholders’ equity.

Calculation of Distributable Amounts

At each annual shareholders’ meeting, our Board of Directors is required to propose how Ambev’s net income for the preceding fiscal year is to be allocated.  For purposes of the Brazilian Corporation Law, a company’s net income after income taxes and social contribution on profits for the immediately preceding fiscal year, net of any accumulated losses from prior fiscal years and amounts allocated to employees’ and management’s participation in earnings, represents its “adjusted net income” for such preceding fiscal year.  In accordance with the Brazilian Corporation Law, an amount equal to such adjusted net income, which is also referred to in this section as the distributable amount, will be available for distribution to shareholders in any particular year.  Such distributable amount is subject to:

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

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

111

 

·increases caused by reversals of reserves constituted in prior years.

Minimum Mandatory Dividend

We are required by our bylaws to distribute to shareholders as dividends in respect to each fiscal year ending on December 31 a minimum mandatory dividend equivalent to no less than 40% of the distributable amount.  In addition to the minimum mandatory dividend, the Board of Directors may recommend payment of additional dividends to shareholders.  The limit for dividend payment is the distributable amount plus the balance available in our statutory “Investment Reserve,” to which we allocate distributable amounts from previous fiscal years not paid as dividends.  See “—Reserves.”  Furthermore, the Board of Directors may also resolve on the distribution of interim dividends and/or interest on shareholders’ equity based on the accrued profits or existing profits reserves presented in the latest annual or six-month balance sheet.  Interim dividends and interest on shareholders’ equity is always counted as an advancement towards the minimum mandatory dividend.

In addition, the minimum mandatory dividend, whether the full amount or only a portion thereof, may not be distributed in any given year should the Board of Directors consider that such payment is incompatible with the Ambev’s financial situation, subject to shareholder approval.  While the law does not establish the circumstances in which distribution of the minimum mandatory dividend is incompatible with a company’s financial situation, it is generally agreed that a company is allowed to refrain from paying the minimum mandatory dividend if such payment threatens its existence as a going concern or harms its normal course of operations.  The Fiscal Council must opine on the nonpayment of minimum mandatory dividends, and management must submit to the CVM a report explaining the reasons considered by the Board of Directors to withhold the payment of the minimum mandatory dividend no later than five business days after such a decision is taken.

Any postponed payment of minimum mandatory dividends must be allocated to a special reserve.  Any remaining balance in such reserve not absorbed by losses in subsequent fiscal years must be paid to shareholders as soon as the Company’s financial situation allows. 

Payment of Dividends

Under the Brazilian Corporation Law any holder of record of shares at the time of a dividend declaration is entitled to receive such dividends, which are generally required to be paid within 60 days following the date of such declaration, unless otherwise resolved by the shareholders’ meetings, which, in either case, must occur prior to the end of the fiscal year in which such dividends were declared.  Our bylaws do not provide for a time frame for payment of dividends.  The minimum mandatory dividend is satisfied through payments made both in the form of dividends and interest on shareholders’ equity, which, from an economic perspective, is equivalent to a dividend but represents a tax efficient alternative to distribute earnings to shareholders because it is deductible for income tax purposes up to a certain limit established by Brazilian tax laws (see “—Interest on Shareholders’ Equity”).  Shareholders have a three-year period from the dividend payment date to claim the payment of dividends, after which we are no longer liable for such payment.

Shareholders who are not residents of Brazil must register their investment with the Central Bank in order for dividends, sales proceeds or other amounts to be eligible for remittance in foreign currency outside of Brazil.  Our common shares underlying the Ambev ADSs will be deposited with the Brazilian custodian, Banco Bradesco S.A., which acts on behalf of and as agent for the Depositary, which is registered with the Central Bank as the fiduciary owner of those common shares underlying our ADSs.  Payments of cash dividends and distributions on our common shares will be made in reais to the custodian on behalf of the Depositary.  The custodian will then convert those proceeds into U.S. dollars and will deliver those U.S. dollars to the Depositary for distribution to ADS holders.  If the custodian is unable to immediately convert dividends in reais into U.S. dollars, ADS holders may be adversely affected by devaluations of the real or other exchange rate fluctuations before those dividends can be converted into U.S. dollars and remitted abroad.  Fluctuations in the exchange rate between the real and the U.S. dollar may also affect the U.S. dollar equivalent of the trading price of our common shares in reais on the B3.

Interest on Shareholders’ Equity

Brazilian companies are permitted to distribute earnings to shareholders under the concept of an interest payment on shareholders’ equity, calculated based on specific Ambev’s shareholders’ equity accounts multiplied by the TJLP rate.  The TJLP is the official interest rate defined by the Central Bank and used as reference in long-term loans provided by the BNDES.

112

 

Amounts distributed by Ambev to its shareholders as interest on shareholders’ equity is deductible for purposes of income tax and social contribution applicable to our profits.  The amount of the deduction may not exceed the greater of:

·50% of net income (after the deduction of social contribution on net income but before taking into consideration the provision for corporate income tax and the amounts attributable to shareholders as interest on shareholders’ equity) for the period in respect of which the payment is made; or

·50% of the sum of retained profits and profit reserves as of the date of the beginning of the period in respect of which the payment is made.

Interest on shareholders’ equity is treated similarly to dividends for purposes of distribution of profits.  The only significant difference is that a 15% withholding income tax is due by nonexempt shareholders, resident or not of Brazil, upon receipt of such interest payment, which tax must be withheld by us on behalf of our shareholders when the distribution is implemented.  If the shareholder is not a Brazilian resident, and is resident or domiciled in a tax-haven jurisdiction, withholding income tax is due at a 25% rate.  The amount shareholders receive as interest on shareholders’ equity net of taxes is deducted from the minimum mandatory dividend owed to shareholders.

For further information on the taxation of interest on shareholders’ equity, including the concept of tax haven jurisdiction for such purposes, see “—E. Taxation—Brazilian Tax Considerations—Income Tax—Distributions of Interest on Shareholders’ Equity.”

Reserves

General

The Brazilian Corporation Law provides that all discretionary allocations of adjusted net income, including the Unrealized Income Reserve and the Investment Reserve, are subject to shareholder approval and may be added to capital (except for the amounts allocated to the Unrealized Income Reserve) or distributed as dividends in subsequent years.  In the case of Tax Incentive Reserve and the Legal Reserve, they are also subject to shareholder approval; however, the use of their respective balances is limited to having those balances added to capital or used to absorb losses.  They cannot be used as a source for income distribution to shareholders.

Legal Reserve

Under the Brazilian Corporation Law, corporations are required to maintain a “Legal Reserve” to which they must allocate 5% of their adjusted net income for each fiscal year until the balance of the reserve equals 20% of their share capital.  However, corporations are not required to make any allocations to their legal reserve in a fiscal year in which the Legal Reserve, when added to other established capital reserves, exceeds 30% of their share capital.  Accumulated losses, if any, may be charged against the Legal Reserve.  Other than that, the Legal Reserve can only be used to increase a company’s share capital.

Contingency Reserve

Under the Brazilian Corporation Law, a portion of a corporation’s adjusted net income may also be discretionally allocated to a “Contingency Reserve” for an anticipated loss that is deemed probable in future years.  Any amount so allocated in a prior year must be either reversed in the fiscal year in which the loss was anticipated if that loss does not in fact occur or is not charged off in the event that the anticipated loss occurs.

Investment Reserve

Under Brazilian Corporation Law, we are permitted to provide for the allocation of part of our net income to discretionary reserve accounts that may be established in accordance with our bylaws. The allocation of our net income to discretionary reserve accounts may not be made if it serves to prevent the distribution of the minimum mandatory distributable amount. According to our bylaws, a portion of our adjusted net income may be allocated to an “Investment Reserve” for the expansion of our activities, including to be capitalized by us or for our investment in new business ventures.

113

 

Pursuant to our bylaws, the Investment Reserve balance is not allowed to be greater than 80% of our share capital.  In case such limit is reached, shareholders may resolve to use the exceeding amount for conversion into share capital or to be distributed as dividends.

Unrealized Income Reserve

Pursuant to the Brazilian Corporation Law, the amount by which the minimum mandatory dividend exceeds the “realized” portion of net income for any particular year may be allocated to the Unrealized Income Reserve.  The realized portion of net income is the amount by which the adjusted net income exceeds the sum of:

·our net positive results, if any, from the equity method of accounting for earnings and losses of our subsidiaries and certain affiliates; and

·the net profits, net gains or net return obtained on transactions or on accounting of assets and liabilities based on their market value, to be completed after the end of the following fiscal year.

Tax Incentive Reserve

Under the Brazilian Corporation Law, a portion of the adjusted net income may also be allocated to a general “Tax Incentive Reserve” in amounts corresponding to reductions in a company’s income tax generated by credits for particular government-approved investments.  This reserve is available only in connection with the acquisition of capital stock of companies undertaking specific government-approved projects.

Goodwill Premium from Shares Issued

Pursuant to the Brazilian Corporation Law, the amount received from subscription of shares in excess of the average book value of the shares must be allocated to this reserve.  The amount can be used for future capital increases without the issuance of new shares or to support an approved share buyback program.

Fiscal Benefit of Goodwill Premium Amortization (CVM Rule No. 319/99)

Pursuant to CVM Rule No. 319/99, when a reporting company merges with its parent company, while remaining a reporting company, the goodwill previously paid by the parent company on its acquisition is deductible for purposes of income tax and social contribution on profits.  This future tax benefit is recorded as a capital reserve by the reporting company.  As this benefit is realized, the company increases its share capital proportionally to the benefit, and is able to issue new shares to the parent company, pursuant to the terms of the merger agreement.

Liquidation

In the event of our liquidation, an extraordinary general shareholders’ meeting shall determine the form of liquidation and appoint a committee to supervise the process during the liquidation period.  A liquidator shall be appointed by the Board of Directors.

Restrictions on Foreign Investment

There are no restrictions on ownership or voting rights in respect of our common shares owned by individuals or legal entities domiciled outside Brazil.  For a description of voting rights, see “—Rights of the Ambev Common Shares” and “—Shareholders’ Meetings.”  The right to convert payments of dividends (including interest on shareholders’ equity) and proceeds from the sale of our common shares into foreign currency and to remit those amounts outside Brazil, however, is subject to exchange control and foreign investment legislation.  For a description of these exchange control restrictions and foreign investment legislation, see “Item 3. Key Information—A. Selected Financial Data—Exchange Rate Information—Exchange Controls.”

114

 

Appraisal Rights

Under the Brazilian Corporation Law, dissenting shareholders have appraisal rights that allow them to withdraw from the Company and be reimbursed for the value of their Ambev common shares, whenever a decision is taken at a shareholders’ meeting by a qualified quorum of shareholders representing at least 50% of the total voting capital to (among others):

·create preferred shares or increase disproportionately an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by our bylaws;

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

·reduce the minimum mandatory dividend;

·merge or consolidate us with another company;

·change our corporate purpose;

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

·transform us into another corporate type;

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

·approve the acquisition of control of another company, the price of which exceeds the limits set forth in the Brazilian Corporation Law.

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

Appraisal rights expire within 30 days after publication of the minutes of the relevant shareholders’ meeting that approved the transaction.  We are entitled to reconsider any action triggering appraisal rights within 10 days following the expiration of the 30-day appraisal rights exercise period if the redemption of our common shares held by dissenting shareholders would jeopardize our financial stability.

Any shareholder that exercises appraisal rights is, in general, entitled to receive the amount equivalent to its shares’ book value as per the last balance sheet approved by our shareholders.  If the resolution giving rise to appraisal rights is approved within more than 60 days after the date of the last shareholder-approved balance sheet of Ambev, dissenting shareholders may require that the value of their shares be calculated on the basis of an updated balance sheet (balanço especial) dated no less than 60 days before the resolution date.  In this case, we must (1) immediately advance 80% of the book value of the shares to be redeemed according to the most recent balance sheet approved by our shareholders and (2) pay the remaining balance within 120 days after the date of the resolution of the shareholders’ meeting.  However, if the advanced payment of 80% of the book value of the shares to be redeemed is greater than the actual appraisal rights value per share determined by the updated balance sheet, then the amount in excess advanced by the Company shall be refunded to us by the dissenting shareholders who exercised appraisal rights.

As a general rule, shareholders who acquire their shares after the publishing of a first meeting call notice or the relevant press release concerning the meeting will not be entitled to appraisal rights. 

115

 

Preemptive Rights

Each shareholder of Ambev generally has preemptive rights to subscribe for new shares of Ambev in our capital increases (including in the issuance of stock purchase warrants or convertible bonds) in proportion to its shareholdings.  A minimum 30-day period following the publication of the capital increase notice is given for the exercise of preemptive rights.  Preemptive rights may be purchased and sold by shareholders.  Our bylaws provide that if the Board of Directors decides to increase our share capital within the limit of the authorized capital through sales in stock exchanges, public offerings or public tender offers, no preemptive rights will apply.  In addition, Brazilian law provides that the grant or the exercise of stock options pursuant to certain stock option plans, such as our Stock Option Plan, is not subject to preemptive rights.

Inspection of Corporate Records

Shareholders that own 5% or more of our outstanding share capital have the right to inspect our corporate records, including shareholders’ lists, corporate minutes, financial records and other documents, if (1) Ambev or any of its officers or directors have committed any act contrary to Brazilian law or our bylaws or (2) there are grounds to suspect that there are material irregularities in the Company.  However, in either case, shareholders desiring to inspect our corporate records must obtain a court order authorizing the inspection. 

Form and Transfer

Brazilian law provides that ownership of shares issued by a Brazilian corporation shall generally be evidenced only by a record of ownership maintained by either the corporation or an accredited intermediary, such as a bank, acting as a registrar for the shares.  Banco Bradesco S.A. currently maintains our share ownership records.

Because our common shares are in registered book-entry form, a transfer of those shares is made under the rules of the Brazilian Corporation Law, which provides that a transfer of shares is effected by an entry made by the registrar for our shares in its books, by debiting the share account of the transferor and crediting the share account of the transferee.

Transfers of shares by a foreign investor are made in the same way and executed by that investor’s local agent on the investor’s behalf, except that, if the original investment was registered with the Central Bank pursuant to foreign investment regulations, the foreign investor should also seek, through its local agent, an amendment of the corresponding electronic registration to reflect the new ownership, if necessary.

The B3 operates a central clearing system.  A holder of our common shares may choose, at its discretion, to participate in this system, and all shares elected to be transferred to this system will be deposited in custody with the stock exchange through a Brazilian institution that is duly authorized to operate by the Central Bank and maintains a clearing account with the stock exchange.  Our common shares that are subject to custody with the stock exchange will be reflected in our registry of shareholders.  Each participating shareholder will, in turn, be registered in our register of beneficial shareholders maintained by the stock exchange and will be treated in the same way as registered shareholders.

Disclosure of Principal Shareholders

Under Brazilian law, shareholders owning more than 5% of a company’s voting shares must publicly disclose their shareholder ownership, as well as disclose any 5% increase or decrease.

With the issuance of CVM Rule 568/15, the CVM has amended CVM Rule No. 358/02 dealing with disclosure requirements of significant interests in Brazilian corporations.  These amendments provided for, among other things: (1) the change in the form of calculation of trades of relevant equity interests to determine when a disclosure obligation of those trades is triggered, and (2) the regulation of individual investment plans.  

Individual investment plans for direct or indirect controlling shareholders, members of any statutory governing bodies of a corporation, as well as any persons who, due to their responsibility, function or position in a listed company, its controlling company, subsidiaries or affiliates have potential access to insider information, are now allowed, subject to certain requirements, to trade in the company’s shares during certain periods during which such trading was previously prohibited.

116

 

CVM Rule No. 568/15 amended CVM Rule No. 358/02 in order to also require publicly held corporations to disclose monthly information of trades in their own securities executed by them or their affiliates.

Other Significant Provisions of the Brazilian Corporation Law

The Brazilian Corporation Law, as applicable to us, also requires the following:

·upon a disposition of our control, the acquirer is required to launch a tender offer to purchase all minority voting shares at a price equal to at least 80% of the price per share paid for the controlling stake;

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

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

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

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

·our controlling shareholders, the shareholders that elect members to our Board of Directors or Fiscal Council, the members of our Board of Directors and Fiscal Council, and our executive officers are required to disclose any purchase or sale of our shares to the CVM and to the B3; and

·the chairman of any shareholders’ meeting or directors shall disregard any vote that is rendered against provisions of any shareholders’ agreement if that shareholders’ agreement has been duly filed with us, as is the case with our Shareholders’ Agreement.

C.            Material Contracts

In addition to the contracts described in other sections of this annual report, the following is a summary of the material contracts to which we are a party.

Shareholders’ Agreement

See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—Ambev Shareholders’ Agreement” and “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders—Ambev’s Major Shareholders—The 2019 Shareholders’ Agreement.”

117

 

Acquisitions, Dispositions and Joint Ventures

We have discussed the details of some material acquisitions and agreements related thereto in “Item 4. Information on the Company—A. History and Development of the Company.” 

Licensing Agreements

Pepsi

See “Item 4. Information on the Company—B. Business Overview—Licenses—Pepsi.”

Licensing Agreements with ABI

See “Item 4. Information on the Company—B. Business Overview—Licenses—Licensing Agreements with ABI.”

Tax Benefits

Many states in Brazil offer tax benefits programs to attract investments to their regions.  We participate in ICMS Value-added Tax Credit Programs offered by various Brazilian states which provide (1) tax credits to offset ICMS Value-Added Tax payables and (2) ICMS Value-Added Tax deferrals.  In return, we are required to meet certain operational requirements including, depending on the state, production volume and employment targets, among others.  All of these conditions are included in specific agreements between Ambev and the state governments.  In the event that we do not meet the program’s targets, future benefits may be withdrawn.  Also, the State of São Paulo has challenged, in the Brazilian Supreme Court, state laws upon which certain of the above benefits have been granted, on the basis that they constitute tax benefits created without certain approvals required under Brazilian tax laws and regulations, which would render such state laws unconstitutional.  There is also a controversy regarding whether these benefits are constitutional when granted without the approval of every state of the country.  Although the Brazilian Supreme Court has already declared part of the State of Pará’s  tax benefits law unconstitutional, almost every state has specific legislation on this topic and even the State of Pará may still grant benefits which were not included in this decision.  Accordingly, as far as the tax benefits are granted based on the state legislation, most companies apply for and use those benefits when granted.  On August 8, 2017, Supplementary Law No. 160 was published authorizing the states and the Federal District to revalidate within 180 days the tax benefits allegedly created without the approvals required under Brazilian tax laws and regulations by means of an Interstate Agreement. Under the provisions of Supplementary Law No. 160, Confaz Interstate Agreement No. 190 was published on December 18, 2017, allowing the states to republish and reinstall the state tax benefits created up to August 08, 2017. The validation of such tax incentives, however, is not self-applicable and it depends on the fulfillment of certain conditions by the granting state.  See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Sales Tax Deferrals and Other Tax Credits” and “Item 3. Key Information—D. Risk Factors.”

Material Financing Agreements

For a discussion of our 2021 debentures, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Borrowings—Long-term Debt.”

D.            Exchange Controls and other Limitations Affecting Security Holders

See “Item 3. Key Information—A. Selected Financial Data—Exchange Rate Information—Exchange controls.”

E.            Taxation

The following summary contains a description of the material Brazilian and U.S. federal income tax consequences of acquiring, holding and disposing of common shares or ADSs issued by us.  This discussion is not a comprehensive discussion of all the tax considerations that may be relevant to a decision to purchase, hold or dispose of our common shares or ADSs and is not applicable to all categories of investors, some of which may be subject to special rules.  Each prospective purchaser is urged to consult its own tax advisor about the particular Brazilian and U.S. tax consequences to it of an investment in our common shares or ADSs.

118

 

The summary is based upon tax laws of Brazil and the U.S. and the regulations thereunder, as in effect on the date hereof, which are subject to change (possibly with retroactive effect).  Although there is at present no income tax treaty between Brazil and the U.S., the tax authorities of the two countries have entered into a Tax Information Exchange Agreement and have had discussions that may culminate in a treaty.  No assurance can be given, however, as to whether or when a treaty will enter into force or of how it will affect the U.S. Holders of our common shares or ADSs.  This summary is also based on representations of the depositary and on the assumption that each obligation in the Deposit Agreement relating to our ADSs and the related documents will be performed in accordance with its terms.

Brazilian Tax Considerations

The following discussion summarizes the material Brazilian tax consequences of the acquisition, ownership and disposition of our common shares or ADSs by a holder that is not deemed to be domiciled in Brazil for purposes of Brazilian taxation and, in the case of a holder of common shares, which has registered its investment in such securities with the Central Bank as a U.S. dollar investment (in each case, a “Non-Brazilian Holder”).

The discussion does not purport to be a comprehensive description of all tax considerations that may be relevant to a decision to purchase our common shares or ADSs.  The discussion below is based on Brazilian law as currently in effect.  Any change in such law may change the consequences described below.  The following discussion does not specifically address all of the Brazilian tax considerations applicable to any particular Non-Brazilian Holder, and each Non-Brazilian Holder should consult his or her own tax advisor concerning the Brazilian tax consequences of an investment in our common shares or ADSs.

Income Tax

Taxation of Dividends

Dividends paid by us to The Bank of New York Mellon in respect of the common shares underlying the respective ADSs, or to a Non-Brazilian Holder with respect to our common shares, currently will not be subject to Brazilian withholding income tax provided that they are paid out of profits generated as of January 1, 1996. Dividends paid from profits generated before January 1, 1996 may be subject to Brazilian withholding income tax at variable rates according to the tax legislation applicable to each corresponding year. 

Taxation of Gains

Gains realized outside Brazil by a Non-Brazilian Holder on the disposition of assets located in Brazil, including our common shares, to a Brazilian resident or to a non-resident in Brazil, are subject to Brazilian withholding income tax. 

Gains realized by a Non-Brazilian Holder on a sale or disposition of our common shares carried out on the Brazilian stock exchange, which includes the transactions carried out on the organized over-the-counter market, are:

·exempt from income tax when realized by a Non-Brazilian Holder that (1) has registered its investment in Brazil with the Central Bank under the rules of CMN Resolution No. 4,373/2014, or a 4,373 Holder, and (2) is not resident or domiciled in a tax haven jurisdiction, as defined below; or

·in all other cases, subject to income tax at a rate of up to 25%. In addition, a withholding tax  of 0.005% of the sale value shall be applicable and withheld by the intermediary institution (i.e, a broker) that receives the order directly from the Non-Brazilian Holder, which can be later offset against any income tax due on the capital gain earned by the Non-Brazilian Holder.

Any other gains assessed on a sale or disposition of the shares that is not carried out on a Brazilian stock exchange are subject to withholding tax at a rate of up to 25%. Lower rates may be applicable as provided for in an applicable tax treaty entered into between Brazil and the country where the Non-Brazilian Holder is resident. If these gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, a withholding tax of 0.005% on the sale value will also apply and can be used to offset the income tax due on the capital gain.

119

 

As of January 2017, Law No. 13,259/2016 increased the income tax rates applicable to gains realized by Brazilian resident individuals on sale or disposition of shares not carried out on a Brazilian stock exchange from a flat tax rate of 15.0% to progressive rates varying from 15% up to 22.5%. The income tax rates recognized by Brazilian individuals’ capital gains would be: (i) 15% for the part of the gain that does not exceed R$5 million, (ii) 17.5% for the part of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the part of the gain that exceeds R$10 million but does not exceed R$30 million and (iv) 22.5% for the part of the gain that exceeds R$30 million. These increased income tax rates may also affect Non-Brazilian Holders, except for 4,373 Holders that are not resident or domiciled in tax haven jurisdictions and that carry out a sale or disposition of our common shares in a stock exchange environment, including over-the-counter market, which are still exempt from income tax.

The statutory definition of a tax-haven jurisdiction for the purpose of income taxation on gains should differ depending on whether or not the investment in our common shares or ADSs is registered under CMN Resolution No. 4,373 or under Law No. 4,131.  In the case of gains arising from an investment registered under Resolution No. 4,373, a country or location should be defined as a tax-haven jurisdiction when such country or location (a) does not tax income, or (b) taxes income at a rate lower than 20%.  In turn, in the case of gains arising from an investment under Law No. 4,131, in addition to criteria (a) and (b) above for the definition of a tax-haven jurisdiction, a country or location should also be considered a tax-haven jurisdiction if the laws of such country or location do not allow access to information related to shareholding composition, to the ownership of investments, or to the identification of the beneficial owner of earnings that are attributed to non-residents. 

On November 28, 2014, the Finance Ministry issued Ordinance No. 488 reducing to 17% the maximum income tax rate that may be imposed by a given jurisdiction for characterization of a tax haven jurisdiction for income tax purposes, as long as the jurisdiction complies with international tax transparency standards. The RFB subsequently issued Normative Instruction No. 1,530/14 providing that compliance with such standards requires: (a) signature of or conclusion of negotiation to sign a treaty or agreement allowing the exchange of information related to identification of income beneficiaries, corporate structure, ownership of goods or rights or economic transactions; and (b) commitment to the criteria defined in international anti-tax evasion forums of which Brazil is a member.

The RFB regularly issues a list of jurisdictions which are considered tax-haven jurisdictions, the “black-list”. Such list is currently set forth in Normative Instruction No. 1,037/10, as amended. Please note that the “black-list” provided for in Normative Instruction No. 1,037/10 does not seem to differ from the tax haven jurisdiction definition for the purposes of investments registered under CMN Resolution No. 4,373 or under Law No. 4,131.¹

1       The countries currently included in this list, according to Article 1 of RFB Normative Instruction No. 1,037/10 are: Andorra, Anguilla, Antigua e Barbuda, Aruba, Ascension Islands, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Brunei, Campione D’Italia, Channel Islands (Jersey, Guernsey, Alderney and Stark), Cayman Island, Curaçao, Cyprus, the Cook Islands, Djibouti, Dominica, United Arab Emirates, Gibraltar, Grenada, Hong Kong, Ireland, Kiribati, Lebanon, Libya, Liberia, Liechtenstein, Macau, Maldives, Man Island, Marshall Island, Mauritius Island, Monaco, Montserrat Island, Nauru, Niue Island, Norfolk Island, Panama, Pitcairn Island, American French Polynesia, Qeshm Island, American Samoa, Western Samoa, San Marino, Saint Helena Island, Santa Lucia, Federation of Saint Christopher and Nevis, Saint Martin, Saint-Pierre e Miquelon, Saint Vincent and the Grenadines, Seychelles, Solomon Island, Swaziland, Sultanate of Oman, Tonga, Tristan da Cunha, Turks and Caicos Islands, Vanuatu and Virgin Islands. In addition, in Article 2 of RFB Normative Instruction No. 1,037/10, U.S. state LLCs held by non-residents and not subject to federal income tax in the U.S. and holding companies without substantial economic activity domiciled in Denmark and Netherlands are listed as tax privileged domiciled entities, as well as: (1) Financial Investment Companies of Uruguay (Sociedades Financeiras de Inversão), (2) Holding companies domiciled in Denmark, Netherlands and Austria, which do not develop “substantial economic activities,” as defined by the single paragraph of Article 2, (3) International Trading Company (ITC) domiciled in Iceland, (4) Entidad de Tenencia de Valores Extranjeros (ETVEs) of Spain, (5) the International Trading Companies (ITC) and International Holding Companies (IHC) domiciled in Malta, (6) Limited Liability Company (LLC) of United States of America and (7) the Holding Company, Domiciliary Company, Auxiliary Company, Mixed Company and Administrative Company domiciled in Switzerland subject to Federal, Cantonal and Municipal income tax at a combined rate lower than 20%, (8) companies in the Free Trade Zone of Costa Rica, (9) companies in the International Business Center of Madeira Island in Portugal, (10) and the following special regimes provided for the Singapore legislation: (i) special rate of tax for non-resident shipowner or charterer or air transport undertaking; (ii) exemption and concessionary rate of tax for insurance and reinsurance business; (iii) concessionary rate of tax for Finance and Treasury Centre; (iv) concessionary rate of tax for trustee company; (v) concessionary rate of tax for income derived from debt securities; (vi) concessionary rate of tax for global trading company and qualifying company); (vii) concessionary rate of tax for financial sector incentive company; (viii) concessionary rate of tax for provision of processing services for financial institutions; (ix) concessionary rate of tax for shipping investment manager; (x) concessionary rate of tax for trust income to which beneficiary is entitled; (xi) concessionary rate of tax for leasing of aircraft and aircraft engines; (xii) concessionary rate of tax for aircraft investment manager; (xiii) concessionary rate of tax for container investment enterprise; (xiv) concessionary rate of tax for container investment manager; (xv) concessionary rate of tax for approved insurance brokers; (xvi) concessionary rate of tax for income derived from managing qualifying registered business trust or company; (xvii) concessionary rate of tax for ship broking and forward freight agreement trading; (xviii) concessionary rate of tax for shipping-related support services; (xix) concessionary rate of tax for income derived from managing approved venture company; and (xx) concessionary rate of tax for international growth company. Netherlands was temporarily removed from the list, in 2010, and then re-included in the list, in 2015. The effects of the inclusion of the ETVE regime in the list were suspended by RFB Declaratory Act No. 22/2010, due to a review request presented by the Spanish government to Brazilian authorities.

120

 

We understand that ADSs are not assets located in Brazil for the purposes of the above-mentioned taxation on gains.  However, we are unable to predict how Brazilian courts would view this issue, and to date, we are not aware of any judicial or administrative precedent on this specific matter.  The withdrawal of ADSs in exchange for shares is not subject to Brazilian income tax, as far as the regulatory rules in respect to the registration of the investment before the Central Bank are duly observed.  The deposit of the shares in connection with the issuance of ADSs is not subject to Brazilian tax, provided that the shares are registered under Resolution No. 4,373 and the investor is not located in a tax-haven jurisdiction, considering the definition described above.  There is a special taxation system applicable to Non-Brazilian Holders (provided investments are duly registered under Resolution No. 4,373 and with the CVM and other conditions are fulfilled).  Upon receipt of the underlying shares, a Non-Brazilian Holder who qualifies under Resolution No. 4,373 will be entitled to register the U.S. dollar value of such shares with the Central Bank as described below.

As a general rule, the “gain realized” as a result of a transaction on a Brazilian stock exchange and the “gain realized” as a result of a transaction with shares which are registered under a Law No. 4,131 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. These gains will accordingly be subject to tax at a rate of up to 25%.

There can be no assurance that the current preferential treatment for holders of ADSs and Non-Brazilian Holders of shares under Resolution No. 4,373 will continue in the future or that it will not be changed in the future. 

Any exercise of preemptive rights relating to the Ambev common shares or ADSs will not be subject to Brazilian taxation.  Gains on the sale of preemptive rights relating to the shares will be treated differently for Brazilian tax purposes depending on (1) whether the sale is made by The Bank of New York Mellon or the investor and (2) whether the transaction takes place on a Brazilian stock exchange.  Gains on sales made by the depositary on a Brazilian stock exchange are not taxed in Brazil, but gains on other sales may be subject to tax at rates of up to 25%.

Distributions of Interest on Shareholders’ Equity

In accordance with Law No. 9,249, dated December 26, 1995, Brazilian corporations may make payments to shareholders characterized as distributions of interest on their shareholders’ equity.  Such interest is calculated by multiplying the TJLP, as determined by the Central Bank from time to time, by the sum of the determined Brazilian company’s net equity accounts.

121

 

Distributions of interest on shareholders’ equity in respect of the Ambev common shares paid to shareholders who are either Brazilian residents or non-Brazilian residents, including holders of ADSs, are subject to Brazilian withholding tax at the rate of 15% or 25% if the payee is domiciled in a tax-haven jurisdiction.  In this case, of interest on shareholders’ equity, a payee’s country or location should be deemed a tax-haven jurisdiction when (a) such country or location does not tax income, (b) such country or location taxes income at a rate lower than 20%, or (c) the laws of such country or location do not allow access to information related to shareholding composition, to the ownership of investments, or to the identification of the beneficial owner of earnings that are attributed to non-residents.  As explained in “—Taxation of Gains,” the RFB reduced to 17% the maximum income tax rate that may be imposed by a given jurisdiction for the purpose of characterization of a tax-haven jurisdiction, as long as the country complies with international tax transparency standards.

The amounts paid as distribution of interest on shareholders’ equity are deductible from the taxable basis of the corporate income tax and social contribution on net profits, both of which are taxes levied on our profits, as long as the payment of a distribution of interest is approved at a general meeting of shareholders of the Company.  The amount of such deduction cannot exceed the greater of:

·50% of net income (after social contribution on net profits, and before taking such distribution and any deductions for corporate income tax into account) for the period in respect of which the payment is made; or

·50% of the sum of retained earnings and profit reserves as of the initial date of the period in respect of which the payment is made.

The distribution of interest on shareholders’ equity may be determined by the Board of Directors.  No assurance can be given that the Board of Directors will not determine that future distributions of profits may be made by means of interest on shareholders’ equity instead of by means of dividends.  These payments of interest on shareholders’ equity may be included, at their net value, as part of any mandatory dividend. To the extent payment of interest on shareholders’ equity is so included, the corporation may be required to distribute to shareholders an additional amount to ensure that the net amount received by them, after payment of the applicable withholding income tax, plus the amount of declared dividends is at least equal to the mandatory dividend.

There are discussions in Congress regarding possible changes to the tax treatment of interest on shareholders’ equity from time to time.  In particular, a recent provisional measure (Provisional Measure No. 694) that was not timely voted by Congress for conversion into definitive legislation proposed to reduce the deductibility limits of interest on shareholders’ equity and increase the withholding income tax rate on interest on shareholders’ equity paid or credited to Non-Brazilian Holders located outside a tax haven jurisdiction. There can be no assurance that another provisional measure will not be issued seeking to implement similar changes as those proposed by expired Provisional Measure No. 694.

Other Relevant Brazilian Taxes

There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of shares or ADSs by a Non-Brazilian Holder except for gift and inheritance taxes which may be levied by some states of Brazil.  There currently are no Brazilian stamp, issue, registration or similar taxes or duties payable by holders of shares or ADSs.

Brazilian law imposes a Tax on Foreign Exchange Transactions, or “IOF/Exchange,” on the conversion of reais into foreign currency and on the conversion of foreign currency into reais.  As from October 7, 2014, the general IOF/Exchange rate applicable to almost all foreign currency exchange transactions was increased from zero to 0.38%, although other rates may apply in particular operations, such as:

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

122

 

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

·outflow related to the payment of dividends and interest on shareholders’ equity in connection with the investment mentioned under the first bulleted item above, zero.

Notwithstanding these rates of the IOF/Exchange, in force as of the date hereof, the Minister of Finance is legally entitled to increase the rate of the IOF/Exchange to a maximum of 25% of the amount of the currency exchange transaction, but only on a prospective basis.

Tax on Transactions Involving Bonds and Securities, or “IOF/Bonds” may be levied on transactions involving shares, even if the transactions are effected on Brazilian stock, futures or commodities exchanges.  IOF/Bonds may also be levied on transactions involving ADSs if they are considered assets located in Brazil by the Brazilian tax authorities.  As mentioned in the above discussion on taxation of gains, we are unable to predict how Brazilian courts would view this issue, and to date, we are not aware of any judicial or administrative precedent on this specific matter.  As from December 24, 2013, the IOF/Bonds levies at a rate of zero percent on the transfer (cessão) of shares traded in a Brazilian stock exchange environment with the specific purpose of enabling the issuance of depositary receipts to be traded outside Brazil.  Previously, a rate of 1.5% was applied to the product of (a) the number of shares which are transferred, multiplied by (b) the closing price for such shares on the date prior to the date of the transfer.  If no closing price was available on that date, the last available closing price was adopted.  The rate of IOF/Bonds with respect to other transactions related to shares and ADSs (if applicable) is currently zero.  The Minister of Finance, however, has the legal power to increase the rate to a maximum of 1.5% of the amount of the taxed transaction per each day of the investor’s holding period, but only on a prospective basis.

Tax Regime Created by Law No. 12,973 in 2014

Provisional Measure 627/13 was converted into Law No. 12,973, enacted on May 13, 2014, which revoked the so-called transitional tax regime (Regime Tributário de Transição - RTT) and introduced a new tax regime, in line with the current Brazilian accounting standards (IFRS).  According to Law No. 12,973, companies, such as us, that elected to be taxed under the new regime starting on January 1, 2014, as opposed to January 1, 2015, will not be subject to taxation on dividend distributions based on 2014 profits, as established by RFB Normative Instruction No. 1,397/13, as amended by RFB Normative Instruction No. 1,492/14.  Furthermore, dividends paid by us based on profits are generally not subject to withholding income tax (see “—Income Tax—Taxation of Dividends”).

United States Federal Income Tax Considerations

The following discussion is a summary of the U.S. federal income tax considerations relating to the ownership, sale or disposition of our common shares or ADSs.  This summary is based on the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing final, temporary and proposed U.S. Treasury Regulations, rulings and judicial decisions, all as currently in effect and all of which are subject to prospective and retroactive changes and differing interpretations.

This summary does not purport to address all U.S. federal income tax consequences that may be relevant to a particular holder and you are urged to consult your tax advisor regarding your specific tax situation.  The summary applies only to holders who hold our common shares or ADSs as “capital assets” for U.S. federal income tax purposes (generally, property held for investment).  This summary does not address the tax consequences that may be relevant to holders subject to special treatment, including, for example:

·insurance companies;

·tax-exempt organizations;

·dealers in securities or currencies;

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

·banks, mutual funds and other financial institutions;

123

 

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

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

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

·S corporations and small business investment companies;

·real estate investment trusts and regulated investment companies;

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

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

·holders that acquired their Ambev common shares or ADSs as compensation.

This summary assumes that we are not a passive foreign investment company, or PFIC, for U.S. federal income tax purposes.  For further information, see the discussion under “—Taxation of U.S. Holders—Passive Foreign Investment Company (PFIC) Rules” below.

Further, this summary does not address the 3.8% Medicare tax on certain investment income, the alternative minimum tax consequences of holding Ambev common shares or ADSs, or the indirect consequences to holders of equity interests in entities that own such common shares or ADSs.  In addition, this summary does not address the state, local, foreign or other tax consequences, if any, of holding Ambev common shares or ADSs.

You should consult your tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences of acquiring, owning and disposing of our common shares or ADSs in your particular circumstances.

Taxation of U.S. Holders

For purposes of this summary, you are a “U.S. Holder” if you are a beneficial owner of Ambev common shares or ADSs and you are for U.S. federal income tax purposes:

·a citizen or resident of the United States;

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

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

·a trust if (1) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) the trust has in effect a valid election to be subject to tax as a U.S. person.

If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds or disposes of Ambev common shares or ADSs, the tax treatment of a partner in that partnership will generally depend upon the status of the partner and the activities of the partnership.  A partner in a partnership holding or disposing of Ambev common shares or ADSs should consult its tax advisor regarding the U.S. federal income tax consequences to it of holding or disposing of our securities.

A “Non-U.S. Holder” is a beneficial owner of our common shares or ADSs that is not a U.S. Holder and that is not an entity treated as a partnership for U.S. federal income tax purposes.

The discussion below assumes that the representations contained in the ADS deposit agreement are true and that the obligations in the ADS deposit agreement and any related agreements will be complied with in accordance with their terms.  In general, for U.S. federal income tax purposes, U.S. Holders who own ADSs will be treated as the beneficial owners of the underlying common shares represented by those ADSs.  Accordingly, the surrender of ADSs in exchange for common shares (or vice versa) will not result in the realization of gain or loss for U.S. federal income tax purposes.  The rest of this discussion assumes that a holder of an ADS will be treated for U.S. federal income tax purposes as directly holding the underlying common shares.

124

 

Distributions on the Ambev Common Shares or ADSs

Subject to the discussion below under “—Taxation of U.S. Holders—Passive Foreign Investment Company (PFIC) Rules,” the gross amount of distributions paid by us to a U.S. Holder (including amounts withheld to pay Brazilian withholding taxes, if any) with respect to our common shares or ADSs (including distributions of interest on shareholders’ equity) will generally be taxable to such U.S. Holder as ordinary dividend income or qualified dividend income (as further described below) to the extent that such distribution is treated as paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes).  Distributions in excess of our current or accumulated earnings and profits will be treated as a non-taxable return of capital reducing such U.S. Holder’s tax basis in our common shares or ADSs, as applicable.  Any distribution in excess of such tax basis will be treated as capital gain and will be either long-term or short-term capital gain depending upon whether the U.S. Holder held our common shares or ADSs, as applicable, for more than one year at the time of the distribution. We do not calculate our earnings and profits under U.S. federal income tax principles.  Therefore a U.S. Holder should expect that the entire amount of a distribution will generally be treated as a dividend even if the distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

Dividends received by a U.S. Holder will generally be taxed at ordinary income tax rates.  However, a non-corporate U.S. Holder will generally be taxed at the lower rate applicable to qualified dividend income, provided that (1) our common shares or ADSs are “readily tradable on an established securities market in the United States,” (2) we are not a PFIC (as discussed below) for either the taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period and other requirements are satisfied.  For purposes of clause (1) above, we expect the ADSs to be treated as readily tradable on an established securities market in the United States.  Consequently, we expect dividends paid with respect to ADSs to constitute “qualified dividend income” provided that the other requirements set forth above are satisfied.  The Ambev common shares, however, are not expected to be treated as readily tradable on an established securities market in the United States.  U.S. Holders are urged to consult their tax advisors regarding the availability of the lower rate for any dividends paid with respect to such shares.

A U.S. Holder may be entitled, subject to a number of complex rules and limitations, to claim a U.S. foreign tax credit in respect of any Brazilian withholding taxes imposed on distributions received on our common shares or ADSs.  U.S. Holders that do not elect to claim a foreign tax credit may instead be entitled to claim a deduction in respect of any such withholdings.  Dividends received with respect to our common shares or ADSs will generally be treated as foreign-source income and will generally constitute “passive income” for U.S. foreign tax credit limitation purposes.  The rules relating to the foreign tax credit are complex and U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Dividends received by a U.S. Holder generally will not be eligible for the dividends received deduction available to certain corporate U.S. Holders.

For U.S. federal income tax purposes, the amount of any cash distribution paid in Brazilian currency will equal the U.S. dollar value of the distribution, calculated by reference to the exchange rate in effect at the time the distribution is received by the depositary (in the case of ADSs) or by the U.S. Holder (in the case of Ambev common shares held directly by such U.S. Holder), regardless of whether the payment is in fact converted to U.S. dollars at that time.  A U.S. Holder should not recognize any foreign currency gain or loss if such Brazilian currency is converted into U.S. dollars on the date received.  If the Brazilian currency is not converted into U.S. dollars on the date of receipt, however, gain or loss may be recognized upon a subsequent sale or other disposition of the Brazilian currency.  Such foreign currency gain or loss, if any, will generally be U.S.-source ordinary income or loss.

125

 

Sale, Exchange or Other Taxable Disposition of Ambev Common Shares or ADSs

Subject to the discussion below under “—Taxation of U.S. Holders—Passive Foreign Investment Company (PFIC) Rules,” a U.S. Holder will generally recognize capital gain or loss upon the sale, exchange or other taxable disposition of our common shares or ADSs, measured by the difference between the U.S. dollar value of the amount realized and the U.S. Holder’s tax basis in those common shares or ADSs.  If Brazilian tax is withheld on the sale or disposition, the amount realized by a U.S. Holder will include the gross amount of the proceeds of that sale or disposition before deduction of the Brazilian tax.  Any gain or loss will be long-term capital gain or loss if our common shares or ADSs have been held for more than one year at the time of the sale, exchange or other taxable disposition.  Long-term capital gains recognized by individuals are currently subject to reduced rates of taxation.  The deductibility of capital losses is subject to limitations.  Capital gain or loss, if any, realized by a U.S. Holder on the sale, exchange or other taxable disposition of an Ambev common share or ADS, will generally be treated as U.S.-source income or loss for U.S. foreign tax credit purposes.  Consequently, in the case of a disposition of an Ambev common share that is subject to Brazilian tax imposed on the gain, or in the case of a deposit of Ambev common shares in exchange for an Ambev ADS that is not registered pursuant to Resolution No. 4,373 on which a Brazilian capital gains tax is imposed (see “—Brazilian Tax Considerations—Income Tax—Taxation of Gains”), as the case may be, the U.S. Holder may not be able to benefit from the foreign tax credit for that Brazilian tax, unless the U.S. Holder can apply (subject to applicable limitations) the credit against U.S. tax payable on other income from foreign sources in the appropriate income category.  Alternatively, a U.S. Holder may be entitled to take a deduction for the Brazilian tax if such U.S. Holder elects to deduct all of its foreign income taxes.  Any Brazilian tax paid by a U.S. Holder that is not eligible for a credit or deduction will be treated as a reduction in the amount of cash received by the U.S. Holder on the sale, exchange or other taxable disposition of our common shares or ADSs and will generally reduce the amount of gain (if any) recognized by the U.S. Holder.  The rules relating to the foreign tax credit are complex and U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances. 

Passive Foreign Investment Company (PFIC) Rules

Special U.S. federal income tax rules apply to U.S. Holders owning shares of a PFIC.  In general, a foreign corporation is a PFIC if, for any taxable year in which the U.S. Holder holds stock in the foreign corporation, at least 75% of such corporation’s gross income is passive income or at least 50% of the value of such corporation’s assets (determined on the basis of a quarterly average) produce passive income or are held for the production of passive income.  The determination of whether our common shares or ADSs constitute shares of a PFIC is a factual determination made annually and thus may be subject to change.  Subject to certain exceptions, once a U.S. Holder’s Ambev common shares or ADSs, as applicable, are treated as shares in a PFIC, they remain shares in a PFIC.  In addition, dividends received by a U.S. Holder from a PFIC will not constitute qualified dividend income.

If we are treated as a PFIC, a U.S. Holder would generally be subject to special rules with respect to (a) any gain realized on the sale or other disposition of Ambev common shares or ADSs and (b) any “excess distribution” by us to the U.S. Holder (generally, the part of the distribution during a taxable year that exceeds 125% of the average annual distributions the U.S. Holder received on those common shares or ADSs during the preceding three taxable years or, if shorter, the U.S. Holder’s holding period for such common shares or ADSs).  In addition, if we are classified as a PFIC for any taxable year during which a U.S. Holder owns our common shares or ADSs and any of our non-U.S. subsidiaries is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of each such non-U.S. subsidiary classified as a PFIC for purposes of the application of these rules.

Based upon the nature of our current and projected income, assets and activities, we do not believe that we are a PFIC for U.S. federal income tax purposes for the taxable year ended December 31, 2016 and do not anticipate becoming a PFIC in the foreseeable future.  However, we cannot assure you that we will not be considered a PFIC in current or future years.  The determination as to whether or not we are a PFIC is a factual determination and cannot be made until the close of the applicable tax year.  If we are currently a PFIC or were to become a PFIC, U.S. Holders would be subject to special rules and a variety of potentially adverse tax consequences under the Code.

If we are treated as a PFIC, certain elections may be available to mitigate the adverse U.S. federal income tax consequences of owning stock in a PFIC.  In particular, a U.S. Holder may elect mark-to-market treatment for its common shares or ADSs, provided those common shares or ADSs constitute “marketable stock” as defined in U.S. Treasury Regulations.  In addition, certain information reporting rules may apply if we are treated as a PFIC, such as the requirement to file IRS Form 8621 regarding distributions received on the common shares or ADSs and any gain realized on the disposition of the common shares or ADSs.  U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to an investment in our common shares or ADSs.

126

 

Reporting Obligations for Certain U.S. Holders

Certain U.S. Holders that hold certain specified foreign financial assets, including stock in a foreign corporation, with values in excess of certain thresholds are required to file IRS Form 8938 with their federal income tax return.  Such Form requires disclosure of information concerning such foreign assets, including the value of the assets.  Failure to file the form when required is subject to penalties.  An exemption from reporting applies to foreign assets held through a U.S. financial institution, generally including a non-U.S. branch or subsidiary of a U.S. institution and a U.S. branch of a non-U.S. institution.  U.S. Holders are encouraged to consult their tax advisors regarding the possible application of this disclosure requirement to their investment in our common shares or ADSs.

THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.  ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF AMBEV COMMON SHARES OR ADSs, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX LAWS AND OF ANY PROPOSED CHANGES IN APPLICABLE LAW.

E.            Dividends and Paying Agents

Not applicable.

F.            Statement by Experts

Not applicable.

G.            Where You Can Find More Information (Documents on Display)

We are subject to the informational reporting requirements of the Exchange Act, and file with or furnish to the SEC, as applicable, the following documents that apply to foreign private issuers:

· annual reports on Form 20-F;  

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

· other information.  

You may read and copy any reports or other information that we file at the SEC’s public reference rooms at 100 F Street, NE, Washington, D.C. 20549, and at the SEC’s regional offices located at Brookfield Place, 200 Vesey Street, Suite 400 New York, New York 10281-1022 and 175 W. Jackson Boulevard, Suite 900, Chicago, Illinois 60604.  You may obtain information on the operation of the SEC’s public reference rooms by calling the SEC at 1-800-SEC-0330.  Electronic filings made through the Electronic Data Gathering, Analysis and Retrieval System are also publicly available through the SEC’s website on the Internet at www.sec.gov.  In addition, material filed by us may also be inspected at the offices of the NYSE at 20 Broad Street, New York, New York 10005.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements and will not be required to file proxy statements with the SEC, and its officers, directors and principal shareholders will be exempt from the reporting and “short swing” profit recovery provisions contained in Section 16 of the Exchange Act.

You may obtain documents from us by requesting them in writing, at the following addresses or by telephone: 

127

 

	Ambev S.A.
Attention:	Investor Relations Department
Telephone numbers:	(55-11) 2122-1415
	(55-11) 2122-1414
Fax:	(55-11) 2122-1526
Email:	ir@ambev.com.br

You may obtain additional information about us on our website at www.ri.ambev.com.br.  The information contained therein is not part of this annual report.

I.             Subsidiary Information

Not applicable.

128

 

ITEM 11.              QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our activities expose us to various market risks, including changes in foreign currency exchange rates and interest rates and changes in the prices of certain commodities, including malt, aluminum, sugar and corn.  Market risk is the potential loss arising from adverse changes in market rates and prices.  We enter into derivatives and other financial instruments, in order to manage and reduce the impact of fluctuations in commodity prices, in foreign currency exchange rates and in interest rates.  We have established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial activities.  Decisions regarding hedging are made according to our risk management policy, taking into consideration the amount and duration of the exposure, market volatility and economic trends.

These instruments are accounted for based on their characteristics.  See notes 3 and 27 to our audited consolidated financial statements for a discussion of the accounting policies and information on derivative financial instruments.

In order to minimize the credit risk of its investments, we have cash allocation and investment policies, taking into consideration financial institution credit limits and ratings, not allowing credit concentration. Thus, the credit risk is monitored and minimized because the negotiations are carried out only with a select group of highly qualified counterparties. The definition of financial institutions authorized to operate as a counterparty for us is described in our policy, which establishes maximum exposure limits for each counterparty based on each counterparty’s risk rating and capitalization.

Enterprise Risk Management (ERM)

We have implemented a management strategy to promote enterprise-wide risk management (ERM), through an integrated framework that considers the impact on our business of not only market risks but also of compliance, strategic and operational risks.  We believe that such integrated framework, which accounts for different kinds of business risks, enables us to improve management’s ability to evaluate risks associated with our business.

The risk management department is responsible for reviewing and following up with management the risk factors and related mitigating initiatives consistent with our corporate strategy. Market risks, such as exposure in foreign currency, interest rates, commodity prices, liquidity and credit risk arise during the normal course of our business. We analyze each of these risks both individually and on an interconnected basis, defining strategies for managing the economic impact on its performance in line with our financial risk management policy.

Commodity Risk

We use a large volume of agricultural goods to produce our products, including malt and hops for our beer and sugar, guaraná, other fruits and sweeteners for our CSDs.  See “Item 4. Information on the Company—B. Business Overview—Sources and Availability of Raw Materials.”  We purchase a significant portion of our malt and all of our hops outside of Brazil.  We purchase the remainder of our malt and our sugar, guaraná and other fruits and sweeteners locally.  Ambev also purchases substantial quantities of aluminum cans.

We produce approximately 83% of our consolidated malt needs.  The remainder and all other commodities are purchased from third parties.  We believe that adequate supplies of the commodities we use are available at the present time, but we cannot predict the future availability of these commodities or the prices we will have to pay for such commodities.  The commodity markets have experienced and will continue to experience price fluctuations.  We believe that the future price and supply of agricultural materials will be determined by, among other factors, the level of crop production, weather conditions, export demand, and government regulations and legislation affecting agriculture, and that the price of aluminum and sugar will be largely influenced by international market prices.  See “Item 4. Information on the Company—B. Business Overview—Sources and Availability of Raw Materials.”

All of the hops we purchase in the international markets outside of South America are paid for in U.S. dollars.  In addition, although we purchase aluminum cans and sugar in Brazil, their prices are directly influenced by the fluctuation of international commodity prices.

129

 

As of December 31, 2017, our derivative activities consisted of sugar, wheat, aluminum, heating oil, natural gas, corn and resin derivatives.  The table below provides information about our significant commodity risk sensitive instruments as of December 31, 2017.  The contract terms of these instruments have been categorized by expected maturity dates and are measured at market prices.

	Maturity Schedule of Commodities Derivatives as of December 31, 2017
Derivatives Instruments	2018	2019	2020	2021	2022	Thereafter	Total	Fair Value
	(in R$ million, except price per ton/gallon/barrel/gigajoule)
Sugar Derivatives:
Notional Amount	195.7	88.4	-	-	-	-	284.0	(47.1)
Average Price (R$/ton)	1,104.4	1,144.3	-	-	-	-	1,116.5
Wheat Derivatives:
Notional Amount	221.8	-	-	-	-	-	221.8	(4.5)
Average Price (R$/ton)	521.8	-	-	-	-	-	521.8
Aluminum Derivatives:
Notional Amount	1,081.1	2.7	-	-	-	-	1,083.7	143.5
Average Price (R$/ton)	5,968.4	921.7	-	-	-	-	5,896.7
Heating Oil Derivatives:
Notional Amount	42.2	-	-	-	-	-	42.2	12.7
Average Price (R$/gallon)	9.9	-	-	-	-	-	9.9
Natural Gas:
Notional Amount	5.7	1.1	-	-	-	-	6.8	(2.7)
Average Price (R$/GJ)	6.7	5.7	-	-	-	-	6.5
Corn Derivatives:
Notional Amount	62.2	-	-	-	-	-	62.2	(1.8)
Average Price (R$/ton)	504.8	-	-	-	-	-	504.8
Resin Derivatives:
Notional Amount	250.5	4.0	-	-	-	-	254.5	(4.2)
Average Price (R$/ton)	3,305.1	5,834.3	-	-	-	-	3,324.0

Interest Rate Risk

We use interest rate swap instruments to manage interest risks associated with changing rates.  The differential to be paid or received is accrued as interest rates change and is recognized in interest income or expense, respectively, over the life of the particular contracts.  We are exposed to interest rate volatility with respect to our cash and cash equivalents, current investment securities and fixed and floating rate debt.  Our U.S. dollar-denominated cash equivalents generally bear interest at a floating rate.

We are exposed to interest rate volatility with regard to existing issuances of fixed rate debt, existing issuances of floating rate debt, currency future and forward swaps agreements, cash and cash equivalents and current investment securities.  We manage our debt portfolio in response to changes in interest rates and foreign currency rates by periodically retiring, redeeming and repurchasing debt and using derivative financial instruments.

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, 2017.  The contract terms of these instruments have been categorized by expected maturity dates:

	Maturity Schedule of Debt Portfolio as of December 31, 2017
Debt Instrument	2018	2019	2020	2021	2022	Thereafter	Total
	(in R$ million, except percentages)
International Debt:
Other Latin America Currency Floating Rate	-	-	4.96	-	-	-	4.96
Average Pay Rate	-	-	2.3%	-	-	-	2.3%
Other Latin America Currency Fixed Rate	199.1	-	-	-	-	-	199.1
Average Pay Rate	9.3%	-	-	-	-	-	9.3%
US$ Fixed Rate	6.5	16.4	-	-	-	-	22.9
Average Pay Rate	2.2%	4.5%	-	-	-	-	3.8%
US$ Floating Rate	78.2	477.0	-	-	-	-	555.3
Average Pay Rate	4.0%	2.5%	-	-	-	-	2.7%
CAD Floating Rate	685.9	-	-	-	-	-	685.9
Average Pay Rate	0.5%	-	-	-	-	-	0.5%
Reais Denominated Debt Floating Rate – TJLP & TR:
Notional Amount	164.7	74.3	9.6	10.0	10.8	133.0	402.3
TJLP & TR + Average Pay Rate	9.1%	9.1%	9.4%	9.4%	9.4%	9.4%	9.2%
Reais Debt - ICMS Fixed Rate:
Notional Amount	38.4	27.0	19.7	7.8	3.8	33.2	129.9
Average Pay Rate	5.6%	5.6%	5.6%	5.6%	5.6%	5.6%	5.6%
Reais Debt - Fixed Rate:
Notional Amount	148.3	129.4	48.2	147.7	43.5	35.7	552.7
Average Pay Rate	5.6%	5.5%	4.0%	11.2%	3.5%	3.6%	6.6%
Total Debt	1,321.1	724.1	82.4	165.5	58.0	201.9	2,553.0

130

 

	Maturity Schedule of Cash Instruments as of December 31, 2017
Cash Instrument	2018	2019	2020	2021	2022	Thereafter	Total
	(in R$ million, except percentages)
US$-Denominated Cash and Cash Equivalents:
Notional	2,405.6						2,405.6
Average Interest Rate	1.2%						1.2%
Reais-Denominated Cash and Cash Equivalents:
Notional	3,948.9						3,948.9
Average Interest Rate	6.6%						6.6%
C$-Denominated Cash and Cash Equivalents:
Notional Amount	561.5						561.5
Average Pay Rate	0.8%						0.8%
Other Latin American Currency investments:
Notional Amount	3,436.7						3,436.7
Total	10,352.7						10,352.7

	Maturity Schedule of Interest Rate Derivatives as of December 31, 2017
Derivatives Instruments	2018	2019	2020	2021	2022	Thereafter	Total	Fair Value
	(in R$ million, except percentages)
BM&F DI Futures:
Notional Amount	-	-	15.0	-	-	-	15.0	(0.0)
Average Interest Rate	-	-	11.2%	-	-	-	11.2%
FIXED x CDIIRS(2):
Notional Amount	-	-	-	110.0	-	-	110.0	25.0
Average Interest Rate	-	-	-	6.9%	-	-	6.9%
FIXED x TJLP:
Notional Amount	-	-	-	-	-	97.4	97.4	(1.8)
Average Interest Rate	-	-	-	-	-	7.5%	7.5%
FIXED x TR:
Notional Amount	-	-	-	-	-	149.5	149.5	5.0
Average Interest Rate	-	-	-	-	-	0.2%	0.2%

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

(2)Interest rate swap.

131

 

Part of the floating rate debt accrues interest at TJLP.  During the period set forth below the TJLP was:

	2017	2016	2015
4th Quarter	7.00	7.50	7.00
3rd Quarter	7.00	7.50	6.50
2nd Quarter	7.00	7.50	6.00
1st Quarter	7.50	7.50	5.50

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 operating expenses, in particular those related to hops, malt, sugar, aluminum and corn, are also denominated in or linked to the U.S. dollar.  We enter into derivative financial instruments to manage and reduce the impact of changes in foreign currency exchange rates in respect of our U.S. dollar-denominated debt.  From January 1, 2015, until December 31, 2017, the U.S. dollar appreciated 24.5% against the real, and, as of December 31, 2017, the commercial market rate for purchasing U.S. dollars was R$3.308 per US$1.00.  The U.S. dollar appreciated against the real by 47.0% in 2015. In 2016, the U.S. dollar depreciated 16.5% against the real. In 2017, the U.S. dollar appreciated 1.5% against the real.

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, 2017, included debt of R$1,468.1 million.

As of December 31, 2017, 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, 2017.  The contract terms of these instruments have been categorized by expected maturity dates.

	Maturity Schedule of Foreign Exchange Derivatives as of December 31, 2017
Derivatives Instruments(1)	2018	2019	2020	2021	2022	Thereafter	Total	Fair Value
	(in R$ million, except Unit Price)
BM&F Dollar Futures:
Notional Amount	2,117.5	-	-	-	-	-	2,117.5	(4.0)
Average Unit Price	3.2	-	-	-	-	-	3.2
NDF R$ x US$:
Notional Amount	3,628.3	-	-	-	-	-	3,628.3	54.5
Average Unit Price	3.3	-	-	-	-	-	3.3
FDF C$ x US$:
Notional Amount	805.1	-	-	-	-	-	805.1	(20.9)
Average Unit Price	1.3	-	-	-	-	-	1.3
NDF INR x C$:
Notional Amount	8.5	-	-	-	-	-	8.5	0.0
Average Unit Price	51.6	-	-	-	-	-	51.6
FDF C$ x EUR:
Notional Amount	82.9	-	-	-	-	-	82.9	2.8
Average Unit Price	1.5	-	-	-	-	-	1.5
NDF MXN x R$:
Notional Amount	28.3	-	-	-	-	-	28.3	(0.4)
Average Unit Price	5.9	-	-	-	-	-	5.9
NDF ARS x US$:
Notional Amount	1,075.5	-	-	-	-	-	1,075.5	9.0
Average Unit Price	19.7	-	-	-	-	-	19.7
NDF CLP x US$:
Notional Amount	594.6	-	-	-	-	-	594.6	(46.2)
Average Unit Price	665.8	-	-	-	-	-	665.8
NDF UYU x US$:
Notional Amount	133.3	-	-	-	-	-	133.3	(7.8)
Average Unit Price	31.8	-	-	-	-	-	31.8
NDF BOB x US$:
Notional Amount	180.7	-	-	-	-	-	180.7	(1.8)
Average Unit Price	7.2	-	-	-	-	-	7.2
NDF PYG x US$:
Notional Amount	358.5	-	-	-	-	-	358.5	(13.4)
Average Unit Price	5,934.4	-	-	-	-	-	5,934.4
BM&F Euro Futures:
Notional Amount	47.6	-	-	-	-	-	47.6	0.1
Average Unit Price	3.9	-	-	-	-	-	3.9
NDF MXN x US$:
Notional Amount	140.0	3.6	-	-	-	-	143.5	23.8
Average Unit Price	19.9	20.3	-	-	-	-	19.9
NDF CLP x MXN:
Notional Amount	229.8	-	-	-	-	-	229.8	(21.3)
Average Unit Price	33.1	-	-	-	-	-	33.1

132

 

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

Equity Swap Risk

We established several share-based payment programs that allow our directors, officers and certain other employees to receive share-based compensation under certain conditions.

As part of these programs, our board of directors approved equity swap transactions on May 16, 2017 and December 21, 2017, respectively, pursuant to which we will receive any price variation related to the difference between the strike price and the trading price of our shares or ADRs at the maturity of the swap.  Ambev will pay CDI or Libor plus a fee over the notional value of the transaction. The objective of the transaction is to neutralize the possible effects of the stock prices’ oscillation, considering our share-based payment programs as eventual share price increases would result in a positive gain on the equity swap transaction mitigating the higher cost of purchasing shares in the market to deliver to the employees and vice versa. As these derivative instruments are not characterized as hedge accounting they were not therefore designated to any hedge.

The contracts approved on December 21, 2017 may result in an exposure of up to 44 million common shares (of which all or part may be through ADRs), with a value of up to R$820 million and, together with the balance of the agreements executed in the context of the approval of May 16, 2017 and not yet settled, may result in an exposure of up to 80 million common shares.

In December 2017, an exposure equivalent to R$2.3 billion in our shares (or ADR’s) was partially hedged, resulting in a gain in income statement of R$67.0 million.

133

 

	Maturity Schedule of Equity Swap Derivatives as of December 31, 2017
Derivatives Instruments	2018	2019	2020	2021	2022	Thereafter	Total	Fair Value
	(in R$ million, except Unit Price)
Equity Swap:
Notional Amount	677.0	-	-	-	-	-	677.0	69.2
Average Unit Price (R$/Share)	19.0	-	-	-	-	-	19.0

134

 

ITEM 12.              DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A.            Debt Securities

Not Applicable.

B.            Warrants and Rights

Not Applicable.

C.            Other Securities

Not Applicable.

D.            American Depositary Shares

The Bank of New York Mellon, or the Depositary, is the depositary of the Ambev shares in accordance with the Deposit Agreement, dated July 9, 2013, entered into among Ambev, The Bank of New York Mellon, as depositary, and all owners from time to time of ADSs of Ambev, or the Depositary Agreement.  A copy of this Depositary Agreement is filed as an exhibit to this annual report on Form 20−F.

The Depositary collects its fees for delivery and surrender of ADSs directly from investors depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them.  The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees.  The Depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them.  The Depositary may collect any of its fees by deduction from any cash distribution payable to ADS holders that are obligated to pay those fees.  The Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.  Pursuant to the Depositary Agreement, holders of our ADSs may have to pay to The Bank of New York Mellon, either directly or indirectly, fees or charges up to the amounts set forth in the table below.

Persons depositing or withdrawing shares or ADS holders must pay:	For:
US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)	issuance of ADSs, including issuances resulting from a distribution of shares, rights or other property; and
	cancellation of ADSs for the purpose of withdrawal, including if the deposit agreement terminates.
US$0.02 (or less) per ADS	any cash distribution to ADS holders.
A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADSs	distribution of securities distributed to holders of deposited securities which are distributed by the Depositary to ADS holders.
US$0.02 (or less) per ADSs per calendar year	depositary services.
Registration or transfer fees	transfer and registration of shares on Ambev’s share registry to or from the name of the Depositary or its agent when you deposit or withdraw shares.
Expenses of the Depositary	cable, telex and facsimile transmissions (when expressly provided in the deposit agreement); and converting foreign currency to U.S. dollars.
Taxes and other governmental charges the Depositary or the Custodian may have to pay on any ADS or share underlying an ADS, for example, stock transfer taxes or stamp duty (which currently are inapplicable in Brazil) or withholding taxes	as necessary.
Any charges incurred by the Depositary or its agents for servicing the deposited securities	as necessary.

135

 

In performing its duties under the Deposit Agreement, the Depositary may use brokers, dealers or other service providers that are affiliates of the Depositary and that may earn or share fees or commissions.

Subject to certain terms and conditions, the Depositary has agreed to reimburse us for certain expenses it incurs that are related to establishment and maintenance expenses of the ADS program, including the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls.  There are limits on the amount of expenses for which the Depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors.

The Depositary has made payments to us in the amount of US$2.9 million during 2017.  These amounts were used for general corporate purposes such as the payment of costs and expenses associated with (1) the preparation and distribution of proxy materials, (2) the preparation and distribution of marketing materials and (3) consulting and other services related to investor relations.

136

 

PART II

ITEM 13.              DEFAULT, DIVIDENDS ARREARAGES AND DELINQUENCIES

Not Applicable.

137

 

ITEM 14.              MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not Applicable.

138

 

ITEM 15.              CONTROLS AND PROCEDURES 

A.            Disclosure Controls and Procedures

The Company has carried out an evaluation, as of December 31, 2017, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures under the supervision and with the participation of the Company’s management, which is responsible for the management of the internal controls, including the Chief Executive Officer and Chief Financial Officer.  While there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures, the Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.  Based upon the Company’s evaluation, as of December 31, 2017, the Chief Executive Officer and Chief Financial Officer of the Company have concluded that the disclosure controls and procedures are (1) effective at the reasonable assurance level in ensuring that information required to be disclosed in the reports that are filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Commissions’ rules and forms and (2) effective at the reasonable assurance level in ensuring that information to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to the management of the Company, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

B.            Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.

Internal control over financial reporting is defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the audited consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect material misstatements. Therefore, effective control over financial reporting cannot, and does not, provide absolute assurance of achieving our control objectives. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.  The effectiveness of our internal control over financial reporting as of December 31, 2017, is based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.  Based on those criteria, management has concluded that as of December 31, 2017, the Company’s internal control over financial reporting is effective.

C.            Attestation Report of the Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 2017, has been audited by Deloitte Touche Tohmatsu Auditores Independentes, the Company’s independent registered public accounting firm. Their audit report and their report on Company’s internal control over financial reporting are included in our audited consolidated financial statements included in this Form 20-F. 

139

 

D.            Changes in Internal Control over Financial Reporting

Other than as discussed below, during the period covered by this Form 20-F, we have not made any change to our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Remediation Plan for Previously Existing Material Weakness

We have previously disclosed in our annual report on Form 20-F for the year ended December 31, 2016 that we and our independent registered public accounting firm identified a material weakness as of December 31, 2016 relating to the accounting and presentation of complex, non-routine transactions. During 2017, we have undertaken the following remedial steps to address the aforementioned material weakness:

•strengthened the detailed framework for the treatment of such complex non-routine transaction;

•formalized all the required steps to be taken in connection with the analysis of the applicable accounting practices for such transactions; and

•formalized the other procedures to be undertaken when reviewing the key assumptions and other data relating to complex, non-routine that may impact the accounting record of such transactions.

We have implemented these remedial steps and successfully tested the related controls. Therefore, as of December 31, 2017, we have concluded that the material weakness described in our annual report on Form 20-F for the year ended December 31, 2016 has been remediated.

140

 

ITEM 15T.           CONTROLS AND PROCEDURES

Not applicable.

141

 

ITEM 16A.           AUDIT COMMITTEE FINANCIAL EXPERT

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

142

 

ITEM 16B.           CODE OF BUSINESS CONDUCT

We have adopted a code of business conduct (as defined under the rules and regulations of the SEC) that applies to our principal executive officer, principal financial officer and principal accounting officer, among others.  Our code of business conduct has been incorporated by reference to this annual report and was approved by our Board of Directors on August 30, 2013 and amended on May 16, 2017 (though Old Ambev already had a Board-approved code of business conduct since 2003).  If the provisions of the code that apply to our principal executive officer, principal financial officer or principal accounting officer are amended, or if a waiver is granted, we will disclose such amendment or waiver.

143

 

ITEM 16C.           PRINCIPAL ACCOUNTANT FEES AND SERVICES

Auditor Fees

Deloitte Touche Tohmatsu Auditores Independentes, or Deloitte, acted as our independent auditor for the fiscal years ended December 31, 2017, 2016 and 2015.  The table below sets forth the total amount we were billed by Deloitte in 2017, 2016 and 2015 for services performed in those years, and breaks down the amount by category of service:

	Year Ended December 31, 2017	Year Ended December 31, 2016	Year Ended December 31, 2015
	(in R$ thousand)
Audit fees	4,306	4,532	7,316.1
Audit-related fees	3,382	3,512	-
Tax fees	-	1,103	568.9
All other fees	113	20	113.2
Total	7,801	9,167	7,998.2

Audit Fees

Audit fees are fees billed for the audit of our consolidated financial statements and for the reviews of our quarterly financial statements in connection with statutory and regulatory filings or engagements (including audit of our subsidiaries for consolidated purpose).

Audit-Related Fees

Audit-related fees consisted of fees billed for assurance and related services that were reasonably related to the performance of the audit or review of our financial statements or that were traditionally performed by the external auditor.

Tax Fees

Tax fees in  2016 and 2015 were related to tax compliance services.

All Other Fees

All other services consist primarily of fees billed for certain compliance reports to be filed with local regulators and certain comfort letters issued in connection with the issuance of debt.

Independent Registered Public Accounting Firm

Our audited consolidated financial statements as of and for the years ended December 31, 2017, 2016 and 2015 have been audited by Deloitte Touche Tohmatsu Auditores Independentes, São Paulo, Brazil, independent registered public accounting firm.  The offices of Deloitte Touche Tohmatsu Auditores Independentes are located at Avenida Dr. Chucri Zaidan, 1240, 4th to 12th floors, 04711-130, São Paulo, SP, Brazil.  They are members of the São Paulo State Regional Board of Accountants (Conselho Regional de Contabilidade) and their registration number is SP 011.609/O-8.

Our audited consolidated financial statements as of and for the years ended December 31, 2014 and 2013 have been audited by another independent registered public accounting firm (i.e. PricewaterhouseCoopers Auditores Independentes).

Pre-Approval Policies and Procedures

We have adopted pre-approval policies and procedures under which all audit and non-audit services provided by contracted external auditors must be pre-cleared by the Fiscal Council, which performs the duties of an audit committee for the purposes of the Sarbanes-Oxley Act of 2002, in accordance with Rule 10A-3(c)(3).  The Fiscal Council adopts a list of services and amount limits for contracting for each external auditor under terms included in a “basic list,” which is in turn approved by the Board of Directors.  Any services provided from such list are deemed “pre-approved” for purposes of the Sarbanes-Oxley Act of 2002.  The Fiscal Council periodically receive from our chief financial officer a summary report on the progress of the pre-approved services rendered and the corresponding fees duly authorized.  Any services which are not included in such require a prior favorable opinion of our Fiscal Council.  Our policy also contains a list of services which cannot be rendered by our external auditors.

144

 

145

 

ITEM 16D.           EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

NYSE corporate governance standards require that a listed company have an audit committee composed of three independent members that satisfy the independence requirements of Rule 10A-3 under the Exchange Act, with a written charter that addresses certain duties.

The Fiscal Council is a permanent body which operates independently from our management and from our registered independent public accounting firm.  Its principal function is to examine the financial statements of each fiscal year and provide a formal report to our shareholders.  We are relying on the exemption provided for in Rule 10A-3(c)(3) and believe that our reliance on this exemption will not materially affect the ability of the Fiscal Council to act independently and to satisfy the other requirements of Rule 10A-3.  In accordance with the charter of our Fiscal Council, at least one of its members has to fulfill the requirements of the Sarbanes-Oxley Act of 2002 for the purposes of qualifying as an audit committee financial expert.  Accordingly, our Fiscal Council has designated one financial expert, namely José Ronaldo Vilela Rezende.

146

 

ITEM 16E.           PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

As disclosed under “Major Shareholders—Share Buyback Program,” we have purchased a number of our shares during the period covered by this annual report.  See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Equity Swap Risk.”

Ambev S.A. Share Repurchases

Set forth below, in tabular format, is some disclosure on the repurchases of Ambev S.A. shares for the periods indicated.  Shares not purchased under publicly announced programs include those purchased from employees when no publicly announced program was in place and those bought from employees who were dismissed, in both cases, pursuant to the terms and conditions of our stock ownership plan.

Month	Total 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 Publicly Announced Plans or Programs
February-2018	291,262	22.09	Not Specified	Not Specified
January-2018	637,394	21.74	Not Specified	Not Specified
December-2017	493,724	20.69	Not Specified	Not Specified
November-2017	279,041	20.45	Not Specified	Not Specified
October-2017	78,803	21.01	Not Specified	Not Specified
September-2017	841,850	20.11	Not Specified	Not Specified
August-2017	788,027	19.55	Not Specified	Not Specified
July-2017	213,382	18.92	Not Specified	Not Specified
June-2017	262,702	18.39	Not Specified	Not Specified
May-2017	317,969	19.07	Not Specified	Not Specified
April-2017	437,084	17.68	Not Specified	Not Specified
March-2017	390,678	17.46	Not Specified	Not Specified
February-2017	36,522	17.11	Not Specified	Not Specified
January-2017	3,690,690	16.78	Not Specified	Not Specified
December-2016	170,024	16.49	Not Specified	Not Specified
November-2016	166,797	17.83	Not Specified	Not Specified
October-2016	108,375	18.71	Not Specified	Not Specified
September-2016	202,158	19.66	Not Specified	Not Specified
August-2016	351,594	19.53	Not Specified	Not Specified
July-2016	24,400	19.22	Not Specified	Not Specified
June-2016	180,981	18.77	Not Specified	Not Specified
May-2016	985,389	18.88	Not Specified	Not Specified
April-2016	369,266	18.80	Not Specified	Not Specified
March-2016	231,646	18.70	Not Specified	Not Specified
February-2016	76,999	17.69	Not Specified	Not Specified
January-2016	329,219	17.28	Not Specified	Not Specified
December-2015	263,393	18.52	Not Specified	Not Specified
November-2015	497,438	18.67	Not Specified	Not Specified
October-2015	347,578	19.79	Not Specified	Not Specified
September-2015	3,338,663	19.04	Not Specified	Not Specified
August-2015	7,889,279	19.16	Not Specified	Not Specified
July-2015	8,981,400	19.23	Not Specified	Not Specified
June-2015	9,885,614	18.65	Not Specified	Not Specified
May-2015	7,976,601	19.04	Not Specified	Not Specified
April-2015	5,457,010	19.16	Not Specified	Not Specified
March-2015	3,520,223	18.31	Not Specified	Not Specified
February-2015	756,819	18.18	Not Specified	Not Specified
January-2015	35,919	16.48	Not Specified	Not Specified

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

147

 

ITEM 16F.           CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

148

 

ITEM 16G.          CORPORATE GOVERNANCE

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

149

 

ITEM 16H.          MINE SAFETY DISCLOSURE

Not Applicable.

150

 

PART III

ITEM 17.              FINANCIAL STATEMENTS

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

151

 

ITEM 18.              FINANCIAL STATEMENTS

See “Item 17.—Financial Statements.”

152

 

ITEM 19.              EXHIBITS

1.1	Restated Bylaws of Ambev S.A. (English-language translation) (incorporated by reference to the report on Form 6-K furnished by Ambev on April 30, 2015).
2.1	Deposit Agreement among Ambev S.A., The Bank of New York Mellon, as Depositary, and all Owners and Holders from time to time of American Depositary Shares, representing Common Shares (incorporated by reference to Exhibit 4.1 to Form F-4 filed by Ambev on June 28, 2013).
2.2	Indenture, dated September 9, 2015, as amended, between Ambev S.A. and Simplific Pavarini Distribuidora de Títulos e Valores Mobiliários Ltda., as Trustee, relating to the R$1,000,000,000 14.476% Non-Convertible Debentures of Ambev S.A. due 2021 (incorporated by reference to Exhibit 2.6 to Form 20-F filed by Ambev on March 14, 2016).
3.1	Shareholders’ Agreement of Ambev S.A., dated April 16, 2013, effective as from the approval of the Stock Swap Merger until July 1, 2019, among Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência, Interbrew International B.V., AmBrew S.A., Ambev S.A. and Anheuser-Busch InBev SA/NV (English-language translation) (incorporated by reference to Exhibit 9.1 to Form F-4 filed by Ambev on June 28, 2013).
3.2	Shareholders’ Agreement of Ambev S.A., dated April 16, 2013, to be effective starting on July 2, 2019, among Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência, Interbrew International B.V., AmBrew S.A. and Ambev S.A. (English-language translation) (incorporated by reference to Exhibit 9.2 to Form F-4 filed by Ambev on June 28, 2013).
3.3	Voting Agreement between Stichting Anheuser-Busch InBev, Fonds Baillet Latour SPRL and Fonds Voorzitter Verhelst SPRL, effective November 1, 2015 (incorporated by reference to Exhibit 2.36 to Amendment No. 15 to Schedule 13D filed by former AB InBev on March 9, 2016).
3.4	Amended and Restated New Shareholders’ Agreement, dated April 11, 2016, among BRC S.à.R.L., Eugénie Patri Sébastian S.A., EPS Participations S.à.R.L., Rayvax Société d’Investissements S.A. and Stichting Anheuser-Busch InBev (incorporated by reference to Exhibit 2.37 to Schedule 13D filed by former AB InBev on April 19, 2016).
3.5	Voting and Support Agreement relating to Anheuser-Busch InBev SA/NV, dated October 8, 2016, among Stichting Anheuser-Busch InBev, Altria Group, Inc., BEVCO Ltd. and Anheuser-Busch InBev SA/NV (incorporated by reference to Exhibit 2.4 to Anheuser Busch InBev SA/NV’s Schedule 13D filed by BRC S.à.R.L. on November 2, 2016)
8.1	List of Material Subsidiaries of Ambev S.A.
11.1	Code of Business Conduct dated August 30, 2013 and amended on May 16, 2017 (English-language translation).
11.2	Manual on Disclosure and Use of Information and Policies for Trading with Securities issued by Ambev dated March 1, 2013 and amended on August 27, 2014 and on March 28, 2016 (English-language translation).
12.1	Principal Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
12.2	Principal Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
13.1	Principal Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2	Principal Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

153

 

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

AMBEV S.A.

By:         /s/ Bernardo Pinto Paiva                                   
Name:    Bernardo Pinto Paiva
Title:       Chief Executive Officer

By:         /s/ Ricardo Rittes de Oliveira Silva                  
Name:    Ricardo Rittes de Oliveira Silva
Title:       Chief Financial Officer

Date: March 19, 2018.

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

Ambev S.A.

São Paulo - SP - Brazil

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Ambev S.A. and subsidiaries (the “Company”) as of December 31, 2017, based on criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our report dated March 16, 2018, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A 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 generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.

/s/ DELOITTE TOUCHE TOHMATSU

São Paulo, Brazil

March 16, 2018

We have served as the Company’s auditor since 2015.

F-1

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of

Ambev S.A.

São Paulo - SP - Brazil

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ambev S.A. and subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated income statements, consolidated statements of comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with International Financial Reporting Standards - IFRS as issued by the International Accounting Standards Board - IASB.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 16, 2018, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE TOUCHE TOHMATSU

São Paulo, Brazil

March 16, 2018

We have served as the Company’s auditor since 2015.

F-2

 

AMBEV S.A. FINANCIAL STATEMENTS

Consolidated Income Statements

Years ended December 31, 2017, 2016 and 2015

(Expressed in millions of Brazilian Reais)

	Note	2017	2016	2015
Net sales	6	47,899.3	45,602.6	46,720.2
Cost of sales		(18,041.8)	(16,678.0)	(16,061.4)
Gross profit		29,857.5	28,924.6	30,658.8
Distribution expenses		(6,295.5)	(6,085.5)	(5,833.2)
Sales and marketing expenses		(5,620.0)	(5,925.0)	(5,344.7)
Administrative expenses		(2,623.8)	(2,166.1)	(2,281.3)
Other operating income/(expenses), net	7	1,217.3	1,223.1	1,936.1
Exceptional items	8	(108.7)	1,134.3	(357.2)
Income from operations		16,426.8	17,105.4	18,778.5
Finance cost	11	(4,268.3)	(4,597.9)	(3,562.4)
Finance income	11	774.4	895.9	1,294.2
Net finance cost		(3,493.9)	(3,702.0)	(2,268.2)
Share of result of joint ventures		(3.1)	(5.0)	3.1
Income before income tax		12,929.8	13,398.4	16,513.4
Income tax expense	12	(5,079.3)	(315.0)	(3,634.2)
Net income		7,850.5	13,083.4	12,879.2
Attributable to:
Equity holders of  Ambev		7,332.0	12,546.6	12,423.8
Non-controlling interests		518.5	536.8	455.4
Basic earnings per share – common - R$	21	0.47	0.80	0.79
Diluted earnings per share – common - R$	21	0.46	0.79	0.79

The accompanying notes are an integral part of these consolidated financial statements.

F-3

 

Consolidated Statements of Comprehensive Income

Years ended December 31, 2017, 2016 and 2015

(Expressed in millions of Brazilian Reais)

	2017	2016	2015
Net income	7,850.5	13,083.4	12,879.2
Items that will not be recycled to profit or loss:
Recognition of actuarial gains/(losses)	124.6	(129.6)	(24.5)
Items that may be recycled subsequently to profit or loss:
Exchange differences on translation of foreign operations gains/(losses)
Investment hedge in foreign operations	-	23.3	(1,859.4)
Investment hedge -  put option granted on subsidiary	61.7	707.8	(1,071.0)
Gains/losses on translation of other foreign operations	1,890.6	(4,858.8)	6,344.6
Gains/losses on translation of foreign operations	1,952.3	(4,127.7)	3,414.2
Cash flow hedge - gains/(losses)
Recognized in Equity (Hedge reserve)	189.3	(579.3)	1,634.6
Removed from Equity (Hedge reserve) and included in profit or loss	324.4	(494.0)	(970.0)
Total cash flow hedge	513.7	(1,073.3)	664.6
Other comprehensive (loss)/income	2,590.6	(5,330.6)	4,054.3
Total comprehensive income	10,441.1	7,752.8	16,933.5
Attributable to:
Equity holders of Ambev	9,891.7	7,610.4	16,086.5
Non-controlling interest	549.4	142.4	847.0

The accompanying notes are an integral part of these consolidated financial statements. The consolidated statements of comprehensive income are presented net of income tax. The income tax effects of these items are disclosed in note 17 - Deferred income tax and social contribution.

F-4

 

Consolidated Balance Sheets

As at December 31, 2017 and December 31, 2016

(Expressed in millions of Brazilian Reais)

Assets	Note	2017	2016
Property, plant and equipment	13	18,822.3	19,153.8
Goodwill	14	31,401.9	30,511.2
Intangible	15	4,674.7	5,245.9
Investments in associates		238.0	300.1
Investment securities	16	122.0	104.3
Deferred tax assets	17	2,279.3	2,268.2
Employee benefits	23	58.4	33.5
Derivative financial instruments	27	35.2	16.3
Income tax and social contributions recoverable		2,312.7	4.5
Other recoverable taxes		225.0	343.2
Other assets		1,964.4	1,973.6
Non-current assets		62,133.9	59,954.6
Investment securities	16	11.9	282.8
Inventories	18	4,319.0	4,347.1
Trade receivable	19	4,944.8	4,368.1
Derivative financial instruments	27	350.0	196.6
Income tax and social contributions recoverable		2,770.4	4,693.7
Other recoverable taxes		600.2	729.6
Cash and cash equivalents	20	10,354.5	7,876.8
Other assets		1,367.2	1,392.1
Current assets		24,718.0	23,886.8
Total assets		86,851.9	83,841.4

The accompanying notes are an integral part of these consolidated financial statements.

F-5

 

Consolidated Balance Sheets (continued)

As at December 31, 2017 and December 31, 2016

(Expressed in millions of Brazilian Reais)

Equity and liabilities	Note	2017	2016
Equity
Issued capital	21	57,614.1	57,614.1
Reserves		63,361.2	64,230.0
Carrying value adjustments		(74,966.5)	(77,019.1)
Equity attributable to equity holders of Ambev		46,008.8	44,825.0
Non-controlling interests		1,974.0	1,826.3
Total Equity		47,982.8	46,651.3
Interest-bearing loans and borrowings	22	1,231.9	1,765.7
Employee benefits	23	2,310.7	2,137.7
Derivative financial instruments	27	2.4	27.0
Deferred tax liabilities	17	2,329.2	2,329.7
Income tax and social contribution payable (i)		2,418.0	-
Taxes and contributions payable		771.6	681.4
Trade payables	25	175.1	237.8
Provisions	26	512.6	765.4
Put option granted on subsidiary and other liabilities		429.1	471.8
Non-current liabilities		10,180.6	8,416.5
Bank overdrafts	20	1.8	-
Interest-bearing loans and borrowings	22	1,321.1	3,630.6
Wages and salaries		1,047.2	686.6
Dividends and interest on shareholders’ equity payable		1,778.6	1,714.4
Derivative financial instruments	27	215.1	686.4
Income tax and social contribution payable		1,668.4	904.2
Taxes and contributions payable		3,825.4	3,378.2
Trade payables	25	11,854.0	10,868.8
Provisions	26	169.0	168.6
Put option granted on subsidiary and other liabilities		6,807.9	6,735.8
Current liabilities		28,688.5	28,773.6
Total liabilities		38,869.1	37,190.1
Total equity and liabilities		86,851.9	83,841.4

(i) During the third quarter, the Company joined a Special Program for Tax Regularization ("PERT 2017"). Additional information are disclosed on Note 1 - Corporate information.

The accompanying notes are an integral part of these consolidated financial statements.

F-6

 

Consolidated Statements of Changes in Equity

Years ended December 31, 2017, 2016 and 2015

(Expressed in millions of Brazilian Reais)

	Attributable to equity holders of Ambev
	Capital	Capital reserves	Net income reserves	Retained earnings	Carrying value adjustments	Total	Non- controlling interests	Total equity
At December 31, 2016	57,614.1	54,529.9	9,700.1	-	(77,019.1)	44,825.0	1,826.3	46,651.3
Net Income	-	-	-	7,332.0	-	7,332.0	518.5	7,850.5
Comprehensive income:
Gains/(losses) on translation of foreign operations	-	-	-	-	1,928.6	1,928.6	23.7	1,952.3
Cash flow hedges	-	-	-	-	513.4	513.4	0.3	513.7
Actuarial gain/(losses)	-	-	-	-	117.7	117.7	6.9	124.6
Total comprehensive income	-	-	-	7,332.0	2,559.7	9,891.7	549.4	10,441.1
Options granted on subsidiary	-	-	-	-	(380.4)	(380.4)	-	(380.4)
Gains/(losses) of controlling interest´s share	-	-	-	-	(12.1)	(12.1)	29.5	17.4
Tax on fictitious dividends	-	-	-	-	(38.7)	(38.7)	-	(38.7)
Dividends distributed	-	-	-	(3,612.8)	-	(3,612.8)	(431.2)	(4,044.0)
Interest on own capital	-	-	(3,770.1)	(1,099.6)	-	(4,869.7)	-	(4,869.7)
Acquired shares and result on treasury shares	-	13.7	-	-	-	13.7	-	13.7
Share-based payment	-	157.4	-	-	-	157.4	-	157.4
Prescribed dividends	-	-	-	34.7	-	34.7	-	34.7
Reversal effect revaluation of property, plant and equipment under the predecessor basis accounting	-	-	-	75.9	(75.9)	-	-	-
Fiscal incentive reserve	-	-	1,552.3	(1,552.3)	-	-	-	-
Investments reserve	-	-	1,177.9	(1,177.9)	-	-	-	-
At December 31, 2017	57,614.1	54,701.0	8,660.2	-	(74,966.5)	46,008.8	1,974.0	47,982.8

The accompanying notes are an integral part of these consolidated financial statements.

F-7

 

Consolidated Statements of Changes in Equity (continued)

Years ended December 31, 2017, 2016 and 2015

(Expressed in millions of Brazilian Reais)

	Attributable to equity holders of Ambev
	Capital	Capital reserves	Net income reserves	Retained earnings	Carrying value adjustments	Total	Non-controlling interests	Total equity
At December 31, 2015	57,614.1	54,373.6	8,201.2	-	(71,857.0)	48,331.9	2,001.8	50,333.7
Net Income	-	-	-	12,546.6	-	12,546.6	536.8	13,083.4
Comprehensive income:
Gains/(losses) on translation of foreign operations	-	-	-	-	(3,728.8)	(3,728.8)	(398.9)	(4,127.7)
Cash flow hedges	-	-	-	-	(1,076.7)	(1,076.7)	3.4	(1,073.3)
Actuarial gain/(losses)	-	-	-	-	(130.7)	(130.7)	1.1	(129.6)
Total comprehensive income	-	-	-	12,546.6	(4,936.2)	7,610.4	142.4	7,752.8
Options granted on subsidiary	-	-	-	-	(144.1)	(144.1)	-	(144.1)
Gains/(losses) of controlling interest´s share	-	-	-	-	(2.8)	(2.8)	37.6	34.8
Exchange transaction of shareholdings	-	-	-	-	(3.1)	(3.1)	-	(3.1)
Dividends distributed	-	-	-	(5,651.8)	-	(5,651.8)	(355.5)	(6,007.3)
Interest on own capital	-	-	(2,039.2)	(3,454.2)	-	(5,493.4)	-	(5,493.4)
Acquired shares and result on treasury shares	-	94.8	-	-	-	94.8	-	94.8
Share-based payment	-	61.5	-	-	-	61.5	-	61.5
Prescribed dividends	-	-	-	21.6	-	21.6	-	21.6
Reversal effect revaluation of property, plant and equipment under the predecessor basis accounting	-	-	-	75.9	(75.9)	-	-	-
Fiscal incentive reserve	-	-	1,819.5	(1,819.5)	-	-	-	-
Investments reserve	-	-	1,718.6	(1,718.6)	-	-	-	-
At December 31, 2016	57,614.1	54,529.9	9,700.1	-	(77,019.1)	44,825.0	1,826.3	46,651.3

The accompanying notes are an integral part of these consolidated financial statements.

F-8

 

Consolidated Statements of Changes in Equity (continued)

Years ended December 31, 2017, 2016 and 2015

(Expressed in millions of Brazilian Reais)

	Attributable to equity holders of Ambev
	Capital	Capital reserves	Net income reserves	Retained earnings	Carrying value adjustments	Total	Non-controlling interests	Total equity
At December 31, 2014	57,582.4	55,023.3	4,883.8	-	(75,267.9)	42,221.6	1,423.1	43,644.7
Net Income	-	-	-	12,423.8	-	12,423.8	455.3	12,879.1
Comprehensive income:
Gains/(losses) on translation of foreign operations	-	-	-	-	3,018.9	3,018.9	395.3	3,414.2
Cash flow hedges	-	-	-	-	666.2	666.2	(1.5)	664.7
Actuarial gain/(losses)	-	-	-	-	(22.4)	(22.4)	(2.1)	(24.5)
Total comprehensive income	-	-	-	12,423.8	3,662.7	16,086.5	847.0	16,933.5
Capital increase	31.7	(22.6)	-	-	-	9.1	-	9.1
Options granted on subsidiary	-	-	-	-	(189.4)	(189.4)	-	(189.4)
Gains/(losses) of controlling interest’s share	-	-	-	-	13.5	13.5	(7.9)	5.6
Dividends distributed	-	-	-	(2,352.4)	-	(2,352.4)	(260.4)	(2,612.8)
Interest on own capital	-	-	(1,979.8)	(4,866.3)	-	(6,846.1)	-	(6,846.1)
Acquired shares and result on treasury shares	-	(817.0)	-	-	-	(817.0)	-	(817.0)
Share-based payment	-	189.9	-	-	-	189.9	-	189.9
Prescribed dividends	-	-	-	16.2	-	16.2	-	16.2
Reversal effect revaluation of property, plant and equipment under the predecessor basis accounting	-	-	-	75.9	(75.9)	-	-	-
Fiscal incentive reserve	-	-	1,143.6	(1,143.6)	-	-	-	-
Additional Interest on shareholders’ equity	-	-	2,039.2	(2,039.2)	-	-	-	-
Investment reserve	-	-	2,114.4	(2,114.4)	-	-	-	-
At December 31, 2015	57,614.1	54,373.6	8,201.2	-	(71,857.0)	48,331.9	2,001.8	50,333.7

The accompanying notes are an integral part of these consolidated financial statements.

F-9

 

Consolidated Cash Flow Statements

Years ended December 31, 2017, 2016 and 2015

(Expressed in millions of Brazilian Reais)

	Note	2017	2016	2015
Net income		7,850.5	13,083.4	12,879.2
Depreciation, amortization and impairment		3,612.1	3,512.0	3,074.6
Impairment losses on receivables and inventories		156.3	196.5	97.7
Additions/(reversals) in provisions and employee benefits		168.3	347.1	483.1
Net finance cost	11	3,493.9	3,702.0	2,268.2
Losses/(gain) on sale of property, plant and equipment and intangible assets		(49.4)	(70.9)	(27.9)
Losses/(gain) on sale of operations in associates		(41.7)	-	(25.1)
Gains on exchange transaction of shareholdings		-	(1,240.0)	-
Equity-settled share-based payment expense	24	209.3	170.3	197.1
Income tax expense	12	5,079.3	315.0	3,634.2
Share of result of joint ventures		3.1	5.0	(3.1)
Other non-cash items included in the profit		196.3	(737.4)	(1,305.7)
Cash flow from operating activities before changes in working capital and use of provisions		20,678.0	19,283.0	21,272.3
(Increase)/decrease in trade and other receivables		(265.6)	(578.4)	(380.8)
(Increase)/decrease in inventories		(63.8)	(437.1)	(681.5)
Increase/(decrease) in trade and other payables		(105.8)	(565.1)	5,083.2
Cash generated from operations		20,242.8	17,702.4	25,293.2
Interest paid		(557.3)	(724.9)	(257.3)
Interest received		337.9	597.7	656.2
Dividends received		7.3	111.0	14.8
Income tax paid		(2,156.6)	(5,341.8)	(2,126.1)
Cash flow from operating activities		17,874.1	12,344.4	23,580.8
Proceeds from sale of property, plant and equipment and intangible assets		101.9	133.6	99.8
Proceeds from sale of subsidiaries operations		-	-	94.3
Acquisition of property, plant and equipment and intangible assets		(3,203.6)	(4,132.7)	(5,261.2)
Acquisition of subsidiaries, net of cash acquired		(333.3)	(1,824.2)	(1,212.2)
Acquisition of other investments		(1.1)	(37.6)	(123.5)
Investment in short term debt securities and net proceeds/(acquisition) of debt securities		276.9	(37.1)	403.8
Net proceeds/(acquisition) of other assets		86.2	-	2.0
Cash flow from investing activities		(3,073.0)	(5,898.0)	(5,997.0)
Capital increase		-	-	9.9
Proceeds/(repurchase) of treasury shares		(38.6)	0.4	(824.2)
Proceeds from borrowings		2,904.4	3,792.0	4,964.6
Repayment of borrowings		(5,441.7)	(1,896.2)	(5,653.0)
Cash net of finance costs other than interests		(1,459.5)	(3,207.8)	(2,326.9)
Payment of finance lease liabilities		(9.0)	(2.9)	(8.1)
Dividends and Interest on shareholder´s equity paid		(8,819.8)	(10,330.6)	(11,490.2)
Cash flow from financing activities		(12,864.2)	(11,645.1)	(15,327.9)
Net  increase/(decrease) in cash and cash equivalents		1,936.9	(5,198.7)	2,256.0
Cash and cash equivalents less bank overdrafts at beginning of year (i)		7,876.8	13,617.7	9,623.0
Effect of exchange rate fluctuations		539.0	(542.2)	1,738.7
Cash and cash equivalents less bank overdrafts at end of year (i)		10,352.7	7,876.8	13,617.7

(i) Net of bank overdrafts.

The accompanying notes are an integral part of these consolidated financial statements.

F-10

 

Notes to the consolidated financial statements:

1.	Corporate information
2.	Statement of compliance
3.	Summary of significant accounting policies
4.	Use of estimates and judgments
5.	Segment reporting
6.	Net sales
7.	Other operating income/(expenses)
8.	Exceptional items
9.	Payroll and related benefits
10.	Additional information on operating expenses by nature
11.	Finance cost and income
12.	Income tax and social contribution
13.	Property, plant and equipment
14.	Goodwill
15.	Intangible
16.	Investment securities
17.	Deferred income tax and social contribution
18.	Inventories
19.	Trade receivables
20.	Cash and cash equivalents
21.	Changes in equity
22.	Interest-bearing loans and borrowings
23.	Employee benefits
24.	Share-based payments
25.	Trade payables
26.	Provisions
27.	Financial instruments and risks
28.	Operating leases
29.	Collateral and contractual commitments with suppliers, advances from customers and other
30.	Contingent liability
31.	Non - cash items
32.	Related parties
33.	Group companies
34.	Insurance
35.	Events after the reporting period

F-11

 

1.CORPORATE INFORMATION

(a)Description of business

Ambev S.A. (referred to as the “Company” or “Ambev”), headquartered in São Paulo, Brazil, produces and sells beer, draft beer, soft drinks, other non-alcoholic beverages, malt and food in general, as well as the advertising of its and third party products, the sale of promotional and advertising materials and the direct or indirect exploitation of bars, restaurants, snack bars and the like, among others.

The Company’s shares and ADR’s (American Depositary Receipts) are listed on the B3 S.A.- Brasil, Bolsa, Balcão as “ABEV3” and on the New York Stock Exchange (NYSE) as “ABEV”.

The Company’s direct controlling shareholders are Interbrew International B.V. (“IIBV”), AmBrew S.A. (“Ambrew”), both subsidiaries of Anheuser-Busch InBev N.V. (“AB InBev”) and Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência (“Fundação Zerrenner”).

The financial statements were approved by the Board of Directors on February 27^st, 2018.

(b)Major corporate events in 2015, 2016 and 2017

Renegotiation of shareholders agreement CND

On December 1st, 2017, Ambev  informed  its  shareholders  and  the  general  market  that  the  E. León Jimenes, S.A. (“ELJ”), partner of Ambev in Tenedora CND, S.A. (“Tenedora”) – a holding company headquartered in Dominican Republic, which holds almost all shares of Cervecería Nacional Dominicana, S.A – will exercise partially, as provide for in shareholders’ agreement of Tenedora, ELJ put option of approximatelly 30% of capital stock by Tenedora. Due the partial put exercise option, the Company will pay to ELJ the amount of USD 926.5 million and will be the holder of approximately 85% of Tenedora, and ELJ will remain with 15% interest of CND. Considering the strategic importance of alliance with the ELJ, the  Board of Directors of Ambev approved this date the change of the call option term from 2019 to 2022. The transaction was subject to certain conditions precedent that were executed on January 18, 2018, as described in Note 36 - Subsequent events.

F-12

 

Adherence to the Special Tax Regularization Program

During the third quarter of 2017, the Company adhere a Special Program for Tax Regularization, fixed by Provisional Measure no. 783, from May 31, 2017, extended by the Provisional Measure no. 798 (“PERT 2017”), undertaking to pay some tax assessments that were in dispute, including debts from its subsidiaries, for a total amount of R$3.5 billion, already considering discounts according to the program, having paid the amount of approximately R$960 millions in 2017 and undertaking to pay the remaining value in 145 monthly installments, with interest, starting in January, 2018.

Perpetual licensing agreement with Quilmes

In September 2017, AB InBev and Quilmes, a subsidiary of Ambev, entered into an agreement whereby AB InBev will grant a perpetual license to Quilmes in Argentina for Budweiser and other North American brands upon the recovery of the distribution rights by AB InBev from CCU. The agreement also foresees the transfer of the brewery of Cerveceria Argentina Sociedad Anonima Isenbeck by AB InBev to Quilmes and the transfer of some Argentinean brands (Norte, Iguana and Baltica) and related business assets along with US$50 millions by Quilmes to CCU. The closing of the transaction is subject to the approval of the Argentinean antitrust authority and others usual closing conditions. Such approval has not been granted by the time of the publication of these financial statements.

Exchange contracts for future financial flows - Equity Swap

As of December 21, 2017, the Board of Directors approved new equity swap agreements without prejudice to the liquidation, within the regulatory term, of the agreements still in force as authorized at the meeting held on May 16, 2017. These agreements authorized may result in an exposure of up to 44 million common shares (of which all or part may be through ADR’s), with a limit value of up to R$820 million and, together with the balance of the agreements executed in the context of the approval of May 16, 2017 and not yet settled.

On May 16th, 2017, the Board of Directors of Ambev approved the execution, by and between the Company, or its subsidiaries, and financial institutions to be approved by the Board of Officers, of equity swaps, having as underlying asset the shares issued by the Company or American Depositary Receipts representing these shares (“ADRs”). The settlement of the equity swap will take place within a maximum period of 18 months from this date, and the agreements may result in an exposure of up to 80 million common shares, with a limit value of up to R$ 2.3 billion.

Acquisition of the Cachoeiras de Macacu

F-13

 

In December 2016, the Company acquired Cachoeira de Macacu Bebidas Ltda. from Brasil Kirin Indústria de Bebidas Ltda., a company that owns an operating industrial plant for the production and packaging of beer and non-alcohol  beverages  in the State of Rio de Janeiro for R$478.6 million.

Exchange of shareholdings

On May 12, 2016, Ambev and its controlling shareholder, AB InBev, entered into an agreement for the exchange of shareholdings (“Swap”). The execution of the Swap was conditional on the implementation of the merger of the activities of AB InBev and SABMiller Plc (“SABMiller”), which occurred on October 10, 2016. Subsequently, on December 31, 2016, after the implementation of certain preparatory corporate acts, the Swap was effected. Based on the agreement described above, Ambev transferred to AB InBev the equity interest in Keystone Global Corporation - KGC, which held shares in companies domiciled in Colombia, Peru and Ecuador. On the other hand, AB InBev transferred to Ambev its interest in Cerveceria Nacional S. de R.L., a subsidiary domiciled in Panama, which had previously been acquired as a third party.

The value attributed to the transaction is based on a fairness opinion prepared by a specialized company and duly approved by the Board of Directors of Ambev, with abstention from the vote of the directors appointed by AB InBev.

The result of the transaction above mentioned was R$1,236.8 million, of which R$1,240.0 million was recognized in the income statement on exceptional items.

Acquisition of Archibald Microbrasserie

On April, 2016, the Company, through its wholly-owned subsidiary Labatt Breweries, in Canada, acquired the company Archibald Microbrasserie, known for its local beers and seasonal specialties. Furthermore, in Brazil, acquired 66% of the company Sucos do Bem, which has a range of juices, teas and cereal bars. The acquisition amount added was approximately R$155 million.

Acquisition of Mark Anthony Group Companies

On January, 2016, the Ambev, through its wholly-owned subsidiaries, CRBS S.A. and Ambev Luxembourg, acquired companies to a range of primarily spirit­-based beers and ciders from Mark Anthony Group, by R$1.4 billion.

Business Acquisitions and Creation of B.Blend

During 2015 the Company, through its subsidiaries, effected the purchase of companies Wals (“Tropical Juice”), Colorado (“Beertech Bebidas”), Bogota Beer Company (“BBC”), Cervecería BBC SAS (“Cerveceria BBC”), Mill Street Brewery (“Mill St. Brewery”) and Banks Holdings Limited (“BHL”). Along with Whirpool has initiated the setting-up of the one joint venture, named B. Blend, being the first platform beverages in capsules all-in-one of the world.

F-14

 

2.STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared using the accounting basis of going concern and are being presented in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) that were effective as of December 31, 2017.

3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There were no significant changes in accounting policies and calculation methods used for the financial statements as of December 31, 2017 in relation to those presented in the financial statements for the years ended December 31, 2016 and 2015.

(a)Basis of preparation and measurement

The financial statements are presented in million of Brazilian Real (“R$”), unless otherwise indicated, rounded to the nearest million indicated. The measurement basis used in preparing the financial statements is historical cost, net realizable value, fair value or recoverable amount.

(b)Recently issued IFRS

The reporting standards below were published and are mandatory for future annual reporting periods. Although IFRSs anticipate early adoption, in Brazil, regulators have prevented this anticipation in order to preserve aspects of comparability. Accordingly, for the year ended December 31, 2017, these standards were not applied in the preparation of these financial statements:

IFRS 9 - Financial Instruments (effective from annual periods beginning on or after 1 January 2018), which will replace IAS 39, introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held; defines a new expected-loss impairment model that will require more effective recognition; and introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new hedge accounting model represents a significant overhaul of the policies and aligns the accounting treatment with risk management activities. IFRS 9 also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. The company evaluated the possible impacts arising from the application of IFRS 9 and does not identify a significant impact on its financial position and/or its financial performance.

F-15

 

IFRS 15 -Revenue from Contracts with Customers (effective from annual periods beginning on or after 1 January 2018)requires revenue recognition to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the Company expects to be entitled in exchange for those goods or services. The new standard will also result in more and enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. In view of the Ambev’s activities, the company does not identify that the application of IFRS 15 will have a significant impact on its financial position and/or its financial performance.

IFRS 16 – Leases(effective from annual periods beginning on or after 1 January 2019) replaces the existing lease accounting requirements and represents a significant change in the accounting and reporting of leases that were previously classified as operating leases, with more assets and liabilities to be reported on the balance sheet and a different recognition of lease costs.

The company is in process of assessing the full impact of IFRS 16 and expects changes in the presentation of operating leases in the balance sheet.

Other Standards, Interpretations and Amendments to Standards

The other amendments to standards effective for annual periods beginning after 1 January 2017, have not been listed above because of either their non-applicability to or their immateriality to Ambev’s consolidated financial statements.

(c)Consolidated financial statements

The financial statements of subsidiaries, joint arrangements and associates used in its consolidated financial statements are prepared for the same reporting period as Ambev, using consistent accounting policies.

All intercompany transactions, balances and unrealized gains or losses on transactions between group companies have been eliminated.

Subsidiaries

The Company controls an entity when it is exposed to or has rights to variable returns due to its involvement with the organization and is able to affect those returns through its power over the entity. In assessing control, potential voting rights are taken into account. Control is presumed to exist where the Company owns, directly or indirectly, more than one half of the voting rights (which does not always equate to economic ownership), unless it can be demonstrated that such ownership does not constitute control.

F-16

 

Subsidiaries are consolidated as from the date in which control is obtained to the Company, except when the predecessor basis of accounting is applied for common control transfers. Consolidation is discontinued as from the date control ceases.

Ambev uses the purchase method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interest issued by Ambev. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement, when applicable. Costs related to the acquisition are recognized in income, as incurred. Assets, liabilities and contingent liabilities acquired/assumed in a business combination are recognized initially at their fair values at the acquisition date. Ambev recognizes the non-controlling interest in the acquiree, either at fair value or at the non-controlling interest’s proportionate share of the net assets acquired. The measurement of non-controlling interest to be recognized is determined for each acquisition.

The excess: (i) of the consideration paid; (ii) of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired, at the date of acquisition, is recorded as goodwill. When the consideration transferred is less than the fair value of net assets acquired, the difference is recognized directly in income.

All intercompany transactions, balances and unrealized gains and losses on transactions between group companies have been eliminated. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

F-17

 

Joint arrangements

Joint arrangements are all entities over which the Company shares control with one or more parties. Joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor.

Business combination between entities under common control

Business combinations between entities under common control have not been addressed by IFRS’s. The IFRS 3 is the pronouncement that shall be applied to business combinations, however it explicitly excludes business combinations between entities under common control from its scope.

Therefore, in accordance with IAS 8, Management has adopted an accounting practice which is consistent with United States Generally Accepted Accounting Principles (USGAAP) and United Kingdom Generally Accepted Accounting Principles (UKGAAP), the predecessor basis of accounting to record the carrying amount of the asset received, as recorded by the parent company.

Under the predecessor basis of accounting, when accounting for a transfer of assets or a swap of shares between entities under common control, the entity that receives the net assets or the equity interests (the acquirer) shall initially record the assets and liabilities transferred at their parent book value at the transfer date. If the book value of assets and liabilities transferred by the parent are different from the historical cost registered by the controlling entity of the entities under common control (the ultimate parent), the financial statements of the acquirer shall reflect the assets and liabilities transferred at the same cost of the ultimate parent.

Regarding transactions between entities under common control that involve the disposal or transfer of assets from the subsidiary to its parent company, i.e. - above the level of our consolidated financial statement –, the Company assess the existence of (i) conflict of interests and (ii) economic substance and purpose. Having fulfilled these assumptions, the Company adopted as a policy the concepts of IAS 16 in order to provide adequate visibility and fair impact on the amount of the distributable results to our shareholders, specially the non-controlling interests. This policy also includes assets acquired through the swap of non-cash assets, or swap with a combination of cash and non-cash assets. The assets subject to the swap may be of equal or different nature. The cost of such asset is measured at fair value, unless (i) the swap transaction is not commercial in nature, or (ii) the fair value of the asset received (and the asset assigned) cannot be reliably measured. The acquired asset is measured through this way even if the assignor entity cannot immediately exclude the asset from its books. If the acquired asset is not measurable at fair value, its cost is determined by the book value of the assigned asset.

F-18

 

Whenever there is a distribution of assets that is not recorded as cash, the asset, before its distribution, is registered at fair value in the income account. This procedure is applicable to the distributions in which the assets are equal in nature and therefore treated equitably. However, similarly to IFRIC 17, in the absence of a specific accounting practice for transactions under common control, we apply this procedure in our accounting practice. Also, we apply the same procedure to sales (products, supplies, etc.) we perform to our controlling entity, where the positive result of the sale is recognized in the income account.

(d)Foreign currency translation

Functional and presentation currency

The items included in the financial statements of each subsidiary of the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”).

The functional and presentation currency of the Company financial statements is the Brazilian Real.

Transactions and balances

Foreign currency transactions are accounted for at exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the balance sheet date rate. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at exchange rates ruling at the dates the fair value was determined. Gains and losses arising from the settlement of transactions in foreign currencies and resulting from the conversion of assets and liabilities denominated in foreign currencies are recognized in the income statement.

The foreign exchange gains and losses related to loans and cash and cash equivalents are presented in the income statement as finance cost or finance income.

Conversion of the financial statements of subsidiaries located abroad

Assets and liabilities of subsidiaries located abroad are translated at foreign exchange rates prevailing at the balance sheet date, while amounts from income statement and cash flows are translated at average exchange rates for the year and the changes in equity are translated at historical exchange rates of each transaction. The translation adjustments arising from the difference between the average exchange rates and the historical rates are recorded directly in Carrying value adjustments.

F-19

 

On consolidation, exchange differences arising from translation of equity in foreign operations and borrowings and other currency instruments designated as net investment hedges are recognized in Carrying value adjustments, an equity reserve, and included in Other comprehensive income.

The goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Net investment in a foreign operation

An entity may have a monetary item that is receivable from or payable to a foreign operation which settlement is neither planned nor likely to occur in the foreseeable future and do not include trade receivables or trade payables. Exchange differences arising shall be recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

Exchange rates

The most significant exchange rates used in the preparation of the Company’s financial statements are as follows:

			Closing rate			Average rate
Currency	Name	Country	2017	2016	2015	2017	2016	2015
CAD	Canadian Dollars	Canada and Cuba	2.6380	2.4214	2.8124	2.4567	2.6348	2.5661
DOP	Dominican Pesos	Dominican republic	0.0685	0.0700	0.0860	0.0674	0.0755	0.0725
USD	US Dollar	Ecuador (i), Panamá and Cuba(ii)	3.3080	3.2591	3.9048	3.2017	3.4749	3.2596
GTQ	Quetzal	Guatemala	0.4500	0.4343	0.5129	0.4344	0.4570	0.4265
PEN	Novo Sol	Peru (i)	-	0.9720	1.1440	-	1.0269	1.0396
ARS	Argentinean Peso	Argentina	0.1762	0.2056	0.3003	0.1931	0.2354	0.3581
BOB	Bolivian Peso	Bolivia	0.4753	0.4683	0.5610	0.4600	0.4993	0.4683
PYG	Guarani	Paraguai	0.0006	0.0006	0.0007	0.0006	0.0006	0.0006
UYU	Uruguayan Peso	Uruguay	0.1151	0.1114	0.1304	0.1116	0.1166	0.1197
CLP	Chilean Peso	Chile	0.0054	0.0049	0.0055	0.0049	0.0051	0.0050
COP	Peso colombiano	Colômbia (i)	-	0.0011	0.0012	-	0.0011	0.0012
BBD	Barbadian Dollar	Barbados	1.6307	1.6075	-	1.5783	1.7139	-

(i) Until  December 31, 2016, due to exchange of shareholdings,  according the Note 1 - Corporate information.

(ii) The functional currency of Cuba, the Cuban convertible peso (“CUC”), has a fixed parity with the dollar (“USD”) at balance sheet date.

F-20

 

(e)Segment reporting

Reportable segments are identified based on internal reports regularly reviewed by the chief operating decision maker of the Company for purposes of evaluating the performance of each segment and allocating resources to those segments. Accordingly, segment information is presented on geographical areas, since the risks and rates of return are affected predominantly by the fact that the Company operates in different regions. The Company’s management structure and the information reported to the chief decision are structured the same way.

The performance information by business units (Beer and Soft drink (“CSD”) and Non-alcoholic and non-carbonated (“NANC”)), is also used by the decision maker for the Company and is presented as additional information, even though it does not qualify as a reportable segment. Internally, the Company’s management uses performance indicators, such as earnings of consolidated operation before interest and taxes (EBIT) and normalized earnings of consolidated operation before interest, taxes, depreciation and amortization (normalized EBITDA) as measures of segment performance to make decisions about resource allocation and performance analysis of consolidated operation. These indicators are reconciled to the profit of the segment in the tables on Note 5 – Segment reporting.

The Company operates its business through three zones identified as reportable segments:

▪ Latin America North, which includes our operations (a) in Brazil and Luxembourg, where we operate two business sub units: (i) beer and (ii) CSD and NANC; and (b) in Central America Operations (“CAC”), which includes our operations in the Dominican Republic (which also serves the islands of the Caribbean: Saint Vincent, Dominica, Antigua and Barbados), Guatemala (which also serves El Salvador and Nicaragua), Cuba and Panama;

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

▪ Canada, represented by Labatt’s operations.

(f)Revenue recognition

The Company recognizes revenue when the amount of revenue can be measured reliably and it is probable that economic benefits associated with the transaction will flow to the Company.

Revenue comprises the fair value of the amount received or receivable upon selling products or rendering services in the ordinary course of business. Revenue is presented net of taxes, returns, rebates and discounts, as well as net of elimination of sales between group companies.

F-21

 

Goods sold

In relation to the sale of goods, revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, and no significant uncertainties remain regarding recovery of the consideration due, the costs associated with the possible return of the products, and when there is no continuing management involvement with the goods. Revenue from the sale of goods is measured at the fair value of the consideration (price) received or receivable, net of returns, commercial deductions and discounts.

As part of its commercial policy, the Company provides unconditional discounts to its customers, which are recorded as s deductions at the time of sales.

Finance income

Finance income consists of interest received or receivable on funds invested, foreign exchange gains, gains on currency hedging instruments offsetting currency losses, gains on hedging instruments that are not part of a hedge accounting relationship, gains on financial assets classified as held for trading, as well as any gains from hedge ineffectiveness.

Interest income is recognized on an accrual basis unless collectability is in doubt.

(g)Expenses

Royalty expenses

Royalties are classified as cost of goods sold.

Finance costs

Finance costs comprise interest payable on borrowings, calculated using the effective interest rate method, foreign exchange losses, losses on currency hedging instruments offsetting currency gains, results on interest rate hedging instruments, losses on hedging instruments that are not part of a hedge accounting relationship, losses on financial assets classified as held for trading, impairment losses on financial assets classified as available for sale, as well as any losses from hedge ineffectiveness.

All interest costs incurred in connection with borrowings or financial transactions are expensed as incurred as part of finance costs, except when capitalized. Any difference between the initial amount and the maturity amount of interest bearing loans and borrowings, such as transaction costs and fair value adjustments, are recognized in the income statement over the expected life of the instrument on an effective interest rate method. The interest expense component of finance lease payments is also recognized in the income statement using the effective interest rate method.

F-22

 

(h)Exceptional items

Exceptional items are those that in Management’s judgment need to be disclosed separately by virtue of their size or incidence. In determining whether an event or transaction is special, Management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence, and the potential of impact on the variation of profit or loss. These items are disclosed in the income statement or separately disclosed in the notes to the financial statements. Transactions that may give rise to exceptional items are principally restructuring activities, acquisition of subsidiaries, impairment losses, and gains or losses on disposal of assets and investments.

(i)Income tax and social contribution

Income tax and social contribution for the year comprises current tax and deferred tax. Income tax and social contribution are recognized in the income statement, unless they relate to items recognized directly in comprehensive income or other equity accounts. In these cases the tax effect is also recognized directly in comprehensive income or equity account (except interest on shareholder’s equity. See Note 3 (p)).

The current tax expense is the expectation of payment on the taxable income for the year, using tax rates enacted, or substantially enacted, at the balance sheet date, and any adjustment to tax payable in respect of previous years.

The deferred taxes are recognized using the balance sheet liability approach. This means that a deferred tax liability or asset is recognized for all taxable and tax deductible temporary differences between the tax and accounting basis of assets and liabilities. Under this method, a provision for deferred taxes is also calculated on the differences between the fair value of assets and liabilities acquired in a business combination and their tax basis. IAS 12 prescribes that no deferred tax liability on goodwill recognition, and no deferred tax asset/liability is recorded: (i) at the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; and (ii) on differences related to investments in subsidiaries to the extent that they are not reversed in the foreseeable future. The amount of deferred tax provided is based on the expectation of the realization or settlement of the temporary difference, using currently or substantially enacted tax rates.

F-23

 

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously.

The deferred tax asset is recognized only to the extent that it is likely that future taxable profits will be available. The deferred income tax asset is reduced to the extent that it is no longer probable that the future taxable benefit will occur.

(j)Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. The cost includes the purchase price, borrowing cost incurred during the construction period and any other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management (e.g. nonrefundable tax, transport and the costs of dismantling and removal and site restoration, if applicable). The cost of a self-constructed asset is determined using the same principles as for an acquired asset. The depreciation methods, residual value, as well as the useful lives are reassessed and adjusted if appropriate, annually.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets.

Land is not depreciated since it is deemed to have an indefinite life.

Property, plant and equipment, and depreciation include the effects of the predecessor basis of accounting, according the Note 1 - Corporate information.

Subsequent expenditures

The Company recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing a component of such an item if it is probable that the future economic benefits embodied with the item will flow to the Company and the cost of the item can be measured reliably. All other costs are expensed as incurred.

Depreciation

The depreciable amount is the cost of an asset less its residual value. Residual values, if not insignificant, are reassessed annually. Depreciation is calculated from the date the asset is available for use, using the straight-line method over the estimated useful lives of the assets.

F-24

 

The estimated useful lives of major property, plant and equipment classes as follows:

Buildings	25 years
Plant and equipment	15 years
Fixtures	10 years
Fittings	10 years
External use assets	2 - 5 years

The assets residual values and useful lives are reviewed at least annually. Management uses judgment to assess and ascertain the useful lives of these assets.

Gains and losses on sale

Gains and losses on sales are determined by comparing the results with the carrying amount and are recognized in Other operating income/(expenses) in the income statement.

(k)Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint arrangements.

Goodwill is determined as the excess (i) of the consideration paid; (ii)  of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired at the date of acquisition. All business combinations are accounted for by applying the purchase method.

In conformity with IFRS 3 Business Combinations, goodwill is carried at cost and is not amortized, but tested for impairment at least annually, or whenever there are indications that the cash generating unit to which the goodwill has been allocated may be impaired. Impairment losses recognized on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is expressed in the functional currency of the subsidiary or joint operation to which it relates and translated to Reais using the year-end exchange rate.

Regarding associates and joint ventures, goodwill is included in the carrying amount of the investment in the associate/joint ventures.

If the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized exceeds the cost of the business combination such excess is recognized immediately in the income statement.

F-25

 

Expenditure on internally generated goodwill is expensed as incurred.

Goodwill includes the effects of the predecessor basis of accounting (Note 3 (c)).

(l)Intangible assets

Brands

When part of the consideration paid in a business combination is related to brands, these are recognized in a specific Intangible Assets account and measured at fair value at the acquisition date. Subsequently, the value of brands can be reduced in case of impairment losses. Internally generated expenditures for developing a brand are recognized as expenses.

Software

Purchased software is measured at cost less accumulated amortization.

Amortization related to software is included in cost of sales, distribution and sales expenses, marketing expenses or administrative expenses based on the activity the software supports.

Other intangible assets

Other intangible assets, acquired by the Company, are stated at acquisition cost less accumulated amortization and impairment losses.

Other intangible assets also include multi-year sponsorship rights acquired by the Company. These are initially recognized at the present value of the future payments and subsequently measured at cost less accumulated amortization and impairment losses.

F-26

 

Amortization

Intangible assets with definite useful lives are amortized based on the straight-line method over their estimated useful lives. Licenses, supply and distribution rights are amortized over the period in which the rights exist. Brands are considered to have an indefinite life and, therefore, are not amortized. Software and capitalized development cost related to technology are amortized over 3 to 5 years.

Items that are not amortized are tested for impairment on an annual basis.

(m) Inventories

Inventories are initially recorded at the acquisition cost and subsequent valued at the lower of cost and net realizable value. Cost includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. The weighted average method is used in determining the cost of inventories.

The cost of finished products and work in progress comprises raw materials, other production materials, direct labor, other direct costs, gains and losses with derivative financial instruments, and an allocation of fixed and variable overhead based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the cost for bringing inventories to sales conditions and selling costs.

Inventories have their amount reduced on a case-by-case basis if the anticipated net realizable value declines below its carrying amount. The calculation of the net realizable value takes into consideration specific characteristics of each inventory category, such as expiration date, remaining shelf life, slow-moving indicators, amongst others.

(n)Trade receivables

Accounts receivable are initially recognized at fair value and subsequently at amortized cost, less provision for losses on doubtful accounts. An allowance for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables. An allowance for impairment loss is recorded for an amount considered sufficient by management to cover probable losses upon the realization of receivables. The amount of the allowance is the difference between the asset’s carrying amount and the present value of the estimated future cash flows. The allowance for impairment loss is recognized in the income statement, as are subsequent recoveries of previous impairments. Historically, no significant losses in trade receivables have been experienced.

F-27

 

(o)Cash and cash equivalents

Cash and cash equivalents include all cash balances, bank deposits, and short-term highly liquid investments with original maturities of three months or less with insignificant risks of changes in value, and readily convertible into cash.They are stated at face value, which approximates their fair value.

For the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts, when applicable.

(p)Equity

Issued capital

The Company's issued capital consists only of common shares.

Repurchase of shares

When the Company buys back its own shares, the amount paid, including any additional costs directly attributable is recognized as a deduction from equity attributable to shareholders, in “Treasury shares” line item.

Share issuance costs

Incremental costs directly attributable to the issuance of new shares or options are presented in equity as a deduction, net of tax, from the proceeds.

Dividends and Interest on shareholder’s equity

Dividends and interest on shareholder’s equity are recognized in the liability on the date that are approved on Board of Directors Meeting, except the minimum statutory dividends provided by the Company’s bylaws, that are recognized as a liability when applicable, at the end of each fiscal year.

The expense of interest attributable to capital to shareholders is recognized in income for calculation of Brazilian income and social contribution tax and after are reclassified from shareholders' equity for presentation purposes in financial statements.

F-28

 

(q)Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortized cost with any difference between the initial and maturity amount being recognized in the income statement over the expected life of theinstrument on an effective interest rate basis. The Company has interest-bearing loans and borrowings covered by a hedge structure (Note 22 – Interest-bearing loans and borrowings).

Borrowing costs directly related to the acquisition, construction or production of a qualifying asset, that requires a substantial period of time to get ready for its intended use or sale, are capitalized as part of the cost of that asset when it is probable that future economic benefits associated with the item will flow to the Company and costs can be measured reliably. The other borrowing costs are recognized as finance costs in the period in which they are incurred.

(r)Employee benefits

Post-employment benefits

Post-employment benefits include pensions managed in Brazil by Instituto Ambev de Previdência Privada – IAPP, post-employment dental benefits and post-employment medical benefits managed by Fundação Zerrenner. Usually, pension plans are funded by payments made by both the Company and its employees, taking into account the recommendations of independent actuaries. Post-employment dental benefits and post-employment medical benefits are maintained by the return on Fundação Zerrenner’s plan assets. If necessary, the Company may contribute some of its profit to the Fundação Zerrenner.

The Company manages defined benefit and defined contribution plans for employees of its companies located in Brazil and in its subsidiaries located in Dominican Republic, Panama, Uruguai, Bolivia and Canada.

The Company maintains funded and unfunded plans.

r.1) Defined contribution plans

A defined contribution plan is a pension plan under which the Company pays fixed contributions into a fund. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees for the benefits relating to employee service in the current and prior periods.

F-29

 

The contributions of these plans are recognized as expense in the period they are incurred.

r.2) Defined benefit plans

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

For defined benefit plans, expenses are assessed separately for each plan using the projected credit unit method. The projected credit unit method takes into account each period of service as giving rise to an additional unit of benefit to measure each unit separately. Under this method, the cost of providing pensions is charged to the income statement during the period of service of the employee. The amounts charged to the income statement consist of current service cost, interest cost, past service costs and the effect of any settlements and curtailments. The obligations of the plan recognized in the balance sheet are measured at the present value of the estimated future cash outflows using a discount rate equivalent to the government´s bond rates with maturity terms similar to those of the obligation and the fair value of the plan assets.

Past service costs result from the introduction of a new plan or changes to an existing plan. They are recognized immediately in the income statement, at the earlier of when: (i) the settlements / curtailments occurs, or (ii) the Company recognizes related restructuring or termination costs, unless those changes are conditioned to the employee’s continued employment, for a specific period of time (the period in which the right is acquired). In such case, the past services costs are amortized using the straight-line method during the period in which the right was acquired.

Actuarial gains and losses consist of the effects of differences between the previous actuarial assumptions and what has actually occurred, and the effects of changes in actuarial assumptions. Actuarial gains and losses are fully recognized in Carrying value adjustments.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling and the return on plan assets, both excluding net interest, are recognized in full in the period in which they occur in the statement of comprehensive income. Re-measurements are not reclassified to profit or loss in subsequent periods.

When the amount of the defined benefit obligation is negative (an asset), the Company recognizes those assets (prepaid expenses), to the extent of the value of the economic benefit available to the Company either from refunds or reductions in future contributions.

Other post-employment obligations

F-30

 

The Company and its subsidiaries provide post-employment medical benefits, reimbursement of medication expenses and other benefits to certain retirees through Fundação Zerrenner. These benefits are not granted to new retirees. The expected costs of these benefits are recognized over the period of employment, using an accounting methodology similar to that for defined benefit plans, including actuarial gains and losses.

Termination benefits

Termination benefits are recognized as an expense at the earlier of: (i) when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date, and (ii) when the Company recognizes costs for a restructuring.

Bonuses

Bonuses granted to employees and managers are based on pre-defined company and individual target achievement. The estimated amount of the bonus is recognized as an expense in the period the bonus is earned.

(s)Share-based payments

Different share and share option programs allow management and other members appointed by the Board of Directors to acquire shares of the Company. The fair value of the share options is estimated at grant date, using an option pricing model that is most appropriate for the respective option. Based on the expected number of options that will be exercised, the fair value of the options granted is recognized as an expense over the vesting period with a credit to equity. When the options are exercised, equity is increased by the amount of the proceeds received.

(t)Trade payables

Trade payables are recognizedinitially at fair value and subsequently at amortized cost using the effective interest method.

F-31

 

(u)Provisions

Provisions are recognized when: (i) the Company has a present obligation (legal or constructive) as a result of past events; (ii) it is likely that a future disbursement will be required to settle the current obligation; and (iii) a reliable estimate of the amount of the obligation can be made.

Provisions, except for the mentioned on item disputes and litigation, are determined discounting the expected future cash flows, to a pre-tax rate, that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase accruals are recognized as finance expense.

Restructuring

A provision for restructuring is recognized when the Company has approved a detailed restructuring plan, and the restructuring has either commenced or has been announced. Costs relating to the ongoing and future activities of the Company are not provided for, but recognized when expenses are incurred.. The provision includes the benefit commitments in connection with early retirement and redundancy schemes.

Disputes and Litigations

A provision for disputes and litigation is recognized when it is more likely than not that the Company will be required to make future payments as a result of past events. Such items may include but are not limited to, several claims, suits and actions filed by or against the Company relating to antitrusts laws, violations of distribution and license agreements, environmental matters, employment-related disputes, claims from tax authorities, and other litigation matters..

(v)Financial assets and liabilities

Classification

The Company classifies its financial assets and liabilities in the following categories: (1) at fair value through profit or loss, (2) loans and receivables, (3) held to maturity  and (4) available for sale. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial assets at initial recognition.

F-32

 

1) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit or loss are financial instruments held for trading. A financial asset is classified in this category if acquired principally for the purpose of being sold in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges.

In general, financial instruments of this category are classified as short-term investments securities, on current assets. Investments with maturities beyond one year may be classified as short-term based on Management's intent and ability to withdraw them within less than one year, as well as, considering their highly liquid nature and the fact that they represent cash available to fund current operations.

2) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period (these are classified as non-current assets).

3) Investments held to maturity

Investmentsheld tomaturityare financial assets acquired with the intention and financial ability to hold them in the portfolio until maturity.

4) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets not classified in any other category. Available-for-sale financial assets are classified as non-current assets, unless Management intends to dispose of the investment within 12 months of the end of the reporting period.

Investments in debt and equity securities are classified in this category. Equity instruments are undertakings in which the Company does not have significant influence or control.

Recognition and measurement

Purchases and sales of financial assets and liabilities are recognized on the trade date - the date on which the Company undertakes to buy or sell the asset.

F-33

 

Financial assets and liabilities are realized when the rights to receive cash flows from investments have expired or have been transferred, in this case, when the Company has transferred substantially all risks and benefits of ownership.

1) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit and loss are initially recognized at fair value and transaction costs are charged to the income statement. Subsequently, they are carried at fair value. Gains or losses arising from changes in the fair value of financial instruments at fair value through profit or loss are presented in the income statement in the period in which they arise.

2) Loans and receivables

Loans and receivables are carried at amortized cost using the effective interest rate.

3) Investments held to maturity

Investments held to maturity are initially recognized at fair value plus any directly attributable transaction costs. After initial recognition, investments held to maturity are measured at amortized cost using the effective interest method, reduced by any on loss impairment.

4) Available-for-sale financial assets

Available-for-sale financial assets are initially measured at fair value. Interest and inflation monetary adjustments are recognized in income. Subsequently, available-for-sale financial assets are measured at fair value, with changes in fair value recognized in other comprehensive income, and interests (measured using the effective interest rate method), recognized in income statement.

When available-for-sale financial assets are settled or become impaired, the accumulated fair value adjustments recognized in other comprehensive income are included in the income statement.

The fair values of investments with public quotations are based on current bid prices. If the market for a financial asset (and for unlisted securities on the stock exchange) is not active, the Company establishes fair value by using valuation techniques. These techniques include the use of recent transactions with third parties, reference to other instruments that are substantially similar, analysis of discounted cash flows and option pricing models making maximum use of information from the market and with the least possible information generated by the Company's management.

Impairment of financial assets

F-34

 

Management assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. If any such indication exists, the asset’s recoverable amount is estimated. A financial asset or a group of financial assets is impaired and an impairment loss is recorded only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (“loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount presented in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

(w)Impairment of non-financial assets

The carrying amounts of non-financial assets, such as property, plant and equipment, goodwill and intangible assets are reviewed, at least, at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

Goodwill, intangible assets that are not yet available for use and intangibles with an indefinite useful life are tested for impairment at least annually at the business unit level (which is one level below the reportable segment) or whenever there is any indication of impairment.

An impairment loss is recognized whenever the carrying amount of an asset or the related cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement. Intangible assets with an indefinite useful life are tested on a fair value approach applying multiples that reflect current market transactions to indicators that drive the profitability of the asset or the royalty stream that could be obtained from licensing the intangible asset to another party in an arm’s length transaction.

The recoverable amount of other assets is determined as the higher of their fair value less costs to sell and value in use. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The recoverable amount of the cash-generating units to which the goodwill and the intangible assets with indefinite useful life belong is based on a discounted free cash flow approach, using a discount rate that reflects current valuation models of the time value of money and the risks specific to the asset. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

F-35

 

In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate before taxes that reflects current market assessments of the time value of money and the risks specific to the asset.

Non-financial assets, except by goodwill are reviewed for possible reversal of the impairment at the reporting date. Impairment losses are reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(x)Derivative financial instruments

The Company uses derivative financial instruments in order to mitigate against risks related to foreign currency, interest rates and commodity prices. Derivative financial instruments that, although contracted for hedging purposes, do not meet all hedge accounting criteria are recognized at fair value in the income statement.

Derivative financial instruments are recognized initially at fair value. Fair value is the amount an asset could be realized and a liability settled, between knowledgeable parties, in an arm’s length transaction. The fair value of derivative financial instruments may be obtained from quoted market prices or from pricing models that take into account current market rates, and also credit risk quality of the counterpart.

Subsequent to initial recognition, derivative financial instruments are re-measured to their fair value at the balance sheet date. Changes in fair value of derivative financial instruments are recognized in the income statement, except when they are designated as hedge instruments, when any effective portion of gain or loss is recognized directly in other comprehensive income.

Cash flow, net investment or fair value hedge accounting is applied to all hedges that qualify for hedge accounting under IAS 39, including the required hedge documentation and hedge effectiveness tests.

Cash flow hedge accounting

When a derivative financial instrument hedges the variability in cash flows of a recognized asset or liability, the foreign currency risk and the fluctuation of commodity prices associated with a highly probable forecasted transaction, the effective portion of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (cash flow hedging reserve). The ineffective portion of any resulting gain or loss is recognized in the income statement.

F-36

 

When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss (at that point) remains in other comprehensive income and is reclassified in accordance with the above policy when the hedged transaction occurs. If the hedged transaction is no longer probable, the cumulative gain or loss recognized in other comprehensive income is recycled into the income statement immediately.

Fair value hedge accounting

When a derivative financial instrument hedges the variability in fair value of a recognized asset or liability or a firm commitment, any resulting gain or loss on the hedging instrument is recognized in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in the income statement. The Company does not apply the fair value hedge accounting when the hedge item expires, was sold or exercised.

Net investment hedge accounting

When a derivative financial instrument hedges the net investment in foreign operations, the effective part of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (translation reserve) , while any gains or losses relating to the ineffective portion are recognized in the income statement

On disposal of a foreign operation, the cumulative gains or losses recognized directly in other comprehensive income is transferred to the income statement.

Derivative financial instruments at fair value through profit or loss

Certain derivative financial instruments do not qualify for hedge accounting purposes. Changes in fair value of such derivatives financial instruments are immediately recognized in income statement.

F-37

 

(y)Accounting for operating leases

Leases of assets under which all the risks and rewards of ownership are substantially retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the term of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place.

(z)Government grants

The Company has benefits from Brazilian state tax incentive programs to promote industrial development including the deferral of payment of taxes. These State programs are to promote long-term increases in employment, industrial decentralization, as well as complement and diversify the industrial states.

In the case of these States, the tax terms are foreseen in tax law. When conditions to obtain these grants exist, they are under the Company's control. The benefits for the postponement in the payment of such taxes are recorded in the income statement, on an accrual basis.

The interest rates and (or) terms of these loans are advantageous over the market conditions, such financing  are considered as subsidized loans as determined by IAS 20. The referred subsidy consists of the gain earned when comparing the value of these operations in market to the value agreed in contract. Thereby, upon funding the subsidy calculated is recorded in Other operating income, following the treatment for the other ICMS subsidies. Management reviews annually the market conditions prevailing in the year to assess such subsidies.

Monthly, taking into account the value of the consideration, the period to maturity, the financing contract interest rate and the above mentioned discount rate, the reduction in present value adjustment is allocated to financial income, so as to bring the balance to zero by the time of settlement of each consideration.

4.USE OF ESTIMATES AND JUDGMENTS

The preparation of financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect the application of accounting practices and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on past experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for decision making regarding the judgments about carrying amounts of assets and liabilities that are not readily evident from other sources. Actual results may differ from these estimates.

F-38

 

The estimates and assumptions are reviewed on a regular basis. Changes in accounting estimates may affect the period in which they are realized, or future periods.

Although each of its significant accounting policies reflects judgments, assessments or estimates, the Company believes that the following accounting practices reflect the most critical judgments, estimates and assumptions that are important to its business operations and the understanding of its results:

(i) predecessor basis of accounting (Note 3 (c));

(ii) business combinations (Note 3 (c) and (k);

(iii) impairment (Note 3 (v) and (w));

(iv) provisions (Note 3 (u));

(v) share-based payments (Note 3 (s));

(vi) employee benefits (Note 3 (r));

(vii) current and deferred tax (Note 3 (i));

(viii) joint arrangements (Note 3 (c)); e

(ix) measurement of financial instruments, including derivatives (Note 3 (v) and (x)).

The fair values of acquired identifiable intangibles are based on an assessment of future cash flows. Impairment analyses of goodwill and indefinite-lived intangible assets are performed at least annually and whenever a triggering event occurs, in order to determine whether the carrying value exceeds the recoverable amount.

The company uses its judgment to select a variety of methods including the discounted cash flow method and option valuation models and makes assumptions about the fair value of financial instruments that are mainly based on market conditions existing at each balance sheet date.

Actuarial assumptions are established to anticipate future events and are used in calculating pension and other long-term employee benefit expense and liability. These factors include assumptions with respect to interest rates, rates of increase in health care costs, rates of future compensation increases, turnover rates, and life expectancy.

The company is subject to income tax in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain. Some subsidiaries within the Company are involved in tax audits usually in relation to prior years. These audits are ongoing in various jurisdictions at the balance sheet date and, by their nature, these can take considerable time until its conclusion.

5.SEGMENT REPORTING

F-39

 

(a)Reportable segments – Years ended in:

	Latin America - north (i)			Latin America - south (ii)			Canada			Consolidated
	2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015
Net sales	31,086.0	28,927.8	29,654.9	10,769.7	10,212.9	11,255.6	6,043.6	6,461.9	5,809.7	47,899.3	45,602.6	46,720.2
Cost of sales	(11,935.0)	(10,870.4)	(9,921.3)	(4,122.6)	(3,685.4)	(4,306.8)	(1,984.2)	(2,122.2)	(1,833.3)	(18,041.8)	(16,678.0)	(16,061.4)
Gross profit	19,151.0	18,057.4	19,733.6	6,647.1	6,527.5	6,948.8	4,059.4	4,339.7	3,976.4	29,857.5	28,924.6	30,658.8
Distribution expenses	(4,193.8)	(3,965.4)	(3,709.6)	(1,007.9)	(979.6)	(1,047.5)	(1,093.8)	(1,140.5)	(1,076.1)	(6,295.5)	(6,085.5)	(5,833.2)
Sales and marketing expenses	(3,655.5)	(3,671.1)	(3,264.0)	(1,091.3)	(1,317.6)	(1,294.8)	(873.2)	(936.3)	(785.9)	(5,620.0)	(5,925.0)	(5,344.7)
Administrative expenses	(1,954.1)	(1,486.3)	(1,599.8)	(384.5)	(400.2)	(428.0)	(285.2)	(279.6)	(253.4)	(2,623.8)	(2,166.1)	(2,281.3)
Other operating income/(expenses)	1,170.5	1,283.7	1,871.5	41.2	(39.0)	60.3	5.6	(21.6)	4.2	1,217.3	1,223.1	1,936.1
Exceptional items	(56.1)	1,183.2	(273.9)	(41.3)	(41.5)	(39.9)	(11.3)	(7.4)	(43.4)	(108.7)	1,134.3	(357.2)
Income from operations (EBIT)	10,462.0	11,401.5	12,757.8	4,163.3	3,749.6	4,198.9	1,801.5	1,954.3	1,821.8	16,426.8	17,105.4	18,778.5
Net finance cost	(2,693.3)	(3,694.5)	(1,842.9)	(709.5)	(439.0)	(868.6)	(91.1)	431.5	443.3	(3,493.9)	(3,702.0)	(2,268.2)
Share of result of joint ventures	(4.7)	(6.8)	1.9	-	-	-	1.6	1.8	1.2	(3.1)	(5.0)	3.1
Income before income tax	7,764.0	7,700.2	10,916.8	3,453.8	3,310.6	3,330.3	1,712.0	2,387.6	2,266.3	12,929.8	13,398.4	16,513.4
Income tax expense	(3,309.5)	1,100.1	(1,884.7)	(1,144.1)	(814.0)	(1,154.1)	(625.7)	(601.1)	(595.5)	(5,079.3)	(315.0)	(3,634.2)
Net income	4,454.5	8,800.3	9,032.1	2,309.7	2,496.6	2,176.2	1,086.3	1,786.5	1,670.8	7,850.5	13,083.4	12,879.2
Normalized EBITDA(iii)	13,233.9	12,805.0	15,274.6	4,866.6	4,501.7	4,877.8	2,047.1	2,176.4	2,057.3	20,147.6	19,483.1	22,209.7
Exceptional items	(56.1)	1,183.2	(273.9)	(41.3)	(41.5)	(39.9)	(11.3)	(7.4)	(43.4)	(108.7)	1,134.3	(357.2)
Depreciation. amortization and impairment	(2,715.8)	(2,586.7)	(2,242.9)	(662.0)	(710.6)	(639.0)	(234.3)	(214.7)	(192.1)	(3,612.1)	(3,512.0)	(3,074.0)
Net finance costs	(2,693.3)	(3,694.5)	(1,842.9)	(709.5)	(439.0)	(868.6)	(91.1)	431.5	443.3	(3,493.9)	(3,702.0)	(2,268.2)
Share of result of joint ventures	(4.7)	(6.8)	1.9	-	-	-	1.6	1.8	1.2	(3.1)	(5.0)	3.1
Income tax expense	(3,309.5)	1,100.1	(1,884.7)	(1,144.1)	(814.0)	(1,154.1)	(625.7)	(601.1)	(595.5)	(5,079.3)	(315.0)	(3,634.2)
Net income	4,454.5	8,800.3	9,032.1	2,309.7	2,496.6	2,176.2	1,086.3	1,786.5	1,670.8	7,850.5	13,083.4	12,879.2
Normalized EBITDA margin in %	42.6%	44.3%	51.5%	45.2%	44.1%	43.3%	33.9%	33.7%	35.4%	42.1%	42.7%	47.5%
Acquisition of property, plant and equipment	1,862.0	2,352.0	3,442.0	1,051.2	1,365.5	1,654.1	292.8	317.9	285.8	3,206.0	4,035.4	5,381.9
	2017	2016	2015	2017	2016	2015	2017	2016	2015	2017	2016	2015
Segment assets	48,811.7	50,935.0	47,282.3	11,558.5	11,149.0	12,757.7	10,204.9	9,245.8	9,264.6	70,575.1	71,329.8	69,304.6
Intersegment elimination										(3,077.7)	(3,968.1)	(1,996.3)
Non-segmented assets										19,354.5	16,479.7	22,868.0
Total assets										86,851.9	83,841.4	90,176.3
Segment liabilities	23,031.6	22,958.9	20,998.7	6,015.2	5,576.4	5,093.9	3,700.2	3,275.7	3,608.6	32,747.0	31,811.0	29,701.2
Intersegment elimination										(3,077.7)	(3,968.1)	(1,996.3)
Non-segmented liabilities										57,182.6	55,998.5	62,471.4
Total liabilities										86,851.9	83,841.4	90,176.3

(i) Latin America – North: includes operations in Brazil, Luxembourg  and CAC (El Salvador, Guatemala, Nicaragua, Dominican Republic, Saint Vincent, Dominica,  Antigua, Cuba,  Barbados and Panama).

(ii) Latin America – South: includes operations in Argentina, Bolivia, Chile, Paraguay and Uruguay. In addition Colombia, Ecuador and Peru, until  December 31, 2016, due to exchange of shareholdings,  according the Note 1 - Corporate information.

(iii) Normalized EBITDA is calculated excluding of the net income the following effects: (i) Income tax expense, (iii) Share of results of joint ventures (iii) Net finance result, (iv) Exceptional items, and (v) Depreciation, amortization and impairment of property, plant and equipment.

F-40

 

(b)Additional information – by Business unit – Years ended in:

	Latin America - north
	CAC			Brazil			Total
	2017	2016	2015	2017	2016	2015	2017	2016	2015
Net sales	4,733.0	3,973.2	3,328.8	26,353.0	24,954.6	26,326.1	31,086.0	28,927.8	29,654.9
Cost of sales	(2,045.6)	(1,798.6)	(1,563.0)	(9,889.4)	(9,071.8)	(8,358.3)	(11,935.0)	(10,870.4)	(9,921.3)
Gross profit	2,687.4	2,174.6	1,765.8	16,463.6	15,882.8	17,967.8	19,151.0	18,057.4	19,733.6
Distribution expenses	(538.6)	(409.9)	(357.4)	(3,655.2)	(3,555.5)	(3,352.2)	(4,193.8)	(3,965.4)	(3,709.6)
Sales and marketing expenses	(526.4)	(456.7)	(390.1)	(3,129.1)	(3,214.4)	(2,873.9)	(3,655.5)	(3,671.1)	(3,264.0)
Administrative expenses	(265.0)	(171.7)	(158.3)	(1,689.1)	(1,314.6)	(1,441.4)	(1,954.1)	(1,486.3)	(1,599.7)
Other operating income/(expenses)	77.8	9.6	(0.2)	1,092.7	1,274.1	1,871.6	1,170.5	1,283.7	1,871.4
Exceptional items	(23.1)	(13.5)	(8.4)	(33.0)	1,196.7	(265.5)	(56.1)	1,183.2	(273.9)
Income from operations (EBIT)	1,412.1	1,132.4	851.4	9,049.9	10,269.1	11,906.4	10,462.0	11,401.5	12,757.8
Net finance cost	(46.5)	(9.2)	42.8	(2,646.8)	(3,685.3)	(1,885.7)	(2,693.3)	(3,694.5)	(1,842.9)
Share of result of joint ventures	6.0	19.0	-	(10.7)	(25.8)	1.9	(4.7)	(6.8)	1.9
Income before income tax	1,371.6	1,142.2	894.2	6,392.4	6,558.0	10,022.6	7,764.0	7,700.2	10,916.8
Income tax expense	(353.5)	(318.8)	(269.4)	(2,956.0)	1,418.9	(1,615.3)	(3,309.5)	1,100.1	(1,884.7)
Net income	1,018.1	823.4	624.8	3,436.4	7,976.9	8,407.3	4,454.5	8,800.3	9,032.1
Normalized EBITDA(iii)	1,842.0	1,483.8	1,173.9	11,391.9	11,321.2	14,100.7	13,233.9	12,805.0	15,274.6
Exceptional items	(23.1)	(13.5)	(8.4)	(33.0)	1,196.7	(265.5)	(56.1)	1,183.2	(273.9)
Depreciation, amortization and impairment	(406.8)	(338.0)	(314.1)	(2,309.0)	(2,248.7)	(1,928.8)	(2,715.8)	(2,586.7)	(2,242.9)
Net finance costs	(46.5)	(9.2)	42.8	(2,646.8)	(3,685.3)	(1,885.7)	(2,693.3)	(3,694.5)	(1,842.9)
Share of result of joint ventures	6.0	19.0	-	(10.7)	(25.8)	1.9	(4.7)	(6.8)	1.9
Income tax expense	(353.5)	(318.8)	(269.4)	(2,956.0)	1,418.9	(1,615.3)	(3,309.5)	1,100.1	(1,884.7)
Net income	1,018.1	823.3	624.8	3,436.4	7,977.0	8,407.3	4,454.5	8,800.3	9,032.1
Normalized EBITDA margin in %	38.9%	37.3%	35.3%	43.2%	45.4%	53.6%	42.6%	44.3%	51.5%

(i) Normalized EBITDA is calculated excluding of the net income the following effects: (i) Income tax expense, (iii) Share of results of joint ventures, (iii) Net finance result, (iv) Exceptional items, and (v) Depreciation, amortization and impairment of property, plant and equipment.

F-41

 

	Brazil
	Beer			Soft drink and Non-alcoholic and non-carbonated			Total
	2017	2016	2015	2017	2016	2015	2017	2016	2015
Net sales	22,509.3	21,173.1	22,441.3	3,843.7	3,781.5	3,884.8	26,353.0	24,954.6	26,326.1
Cost of sales	(7,895.1)	(7,339.9)	(6,757.6)	(1,994.3)	(1,731.9)	(1,600.7)	(9,889.4)	(9,071.8)	(8,358.3)
Gross profit	14,614.2	13,833.2	15,683.7	1,849.4	2,049.6	2,284.1	16,463.6	15,882.8	17,967.8
Distribution expenses	(2,961.0)	(2,891.7)	(2,754.0)	(694.2)	(663.8)	(598.2)	(3,655.2)	(3,555.5)	(3,352.2)
Sales and marketing expenses	(2,953.6)	(3,044.0)	(2,691.3)	(175.5)	(170.4)	(182.6)	(3,129.1)	(3,214.4)	(2,873.9)
Administrative expenses	(1,476.3)	(1,160.2)	(1,341.5)	(212.8)	(154.4)	(99.9)	(1,689.1)	(1,314.6)	(1,441.4)
Other operating income/(expenses)	825.0	969.8	1,551.2	267.7	304.3	320.4	1,092.7	1,274.1	1,871.6
Exceptional items	(28.2)	1,014.3	(265.2)	(4.8)	182.4	(0.3)	(33.0)	1,196.7	(265.5)
Income from operations (EBIT)	8,020.1	8,721.4	10,182.9	1,029.8	1,547.7	1,723.5	9,049.9	10,269.1	11,906.4
Net finance cost	(2,646.8)	(3,685.3)	(1,885.7)	-	-	-	(2,646.8)	(3,685.3)	(1,885.7)
Share of result of joint ventures	(10.7)	(25.8)	1.9	-	-	-	(10.7)	(25.8)	1.9
Income before income tax	5,362.6	5,010.3	8,299.1	1,029.8	1,547.7	1,723.5	6,392.4	6,558.0	10,022.6
Income tax expense	(2,956.0)	1,418.9	(1,615.3)	-	-	-	(2,956.0)	1,418.9	(1,615.3)
Net income	2,406.6	6,429.2	6,683.8	1,029.8	1,547.7	1,723.5	3,436.4	7,976.9	8,407.3
Normalized EBITDA (i)	10,047.3	9,618.6	12,038.9	1,344.6	1,702.6	2,061.8	11,391.9	11,321.2	14,100.7
Exceptional items	(28.2)	1,014.3	(265.2)	(4.8)	182.4	(0.3)	(33.0)	1,196.7	(265.5)
Depreciation, amortization and impairment	(1,999.0)	(1,911.5)	(1,590.8)	(310.0)	(337.3)	(338.0)	(2,309.0)	(2,248.8)	(1,928.8)
Net finance costs	(2,646.8)	(3,685.3)	(1,885.7)	-	-	-	(2,646.8)	(3,685.3)	(1,885.7)
Share of result of joint ventures	(10.7)	(25.8)	1.9	-	-	-	(10.7)	(25.8)	1.9
Income tax expense	(2,956.0)	1,418.9	(1,615.3)	-	-	-	(2,956.0)	1,418.9	(1,615.3)
Net income	2,406.6	6,429.2	6,683.8	1,029.8	1,547.7	1,723.5	3,436.4	7,976.9	8,407.3
Normalized EBITDA margin in %	44.5%	45.4%	53.6%	35.8%	45.0%	53.1%	43.2%	45.4%	53.6%

(i) Normalized EBITDA is calculated excluding of the net income the following effects: (i) Income tax expense, (iii) Share of results of joint ventures, (iii) Net finance result, (iv) Exceptional items, and (v) Depreciation, amortization and impairment of property, plant and equipment.

6.NET SALES

The reconciliation between gross sales and net sales is as follows:

	2017	2016	2015
Gross sales (i)	72,411.0	79,551.1	97,214.2
Excise duty	(16,192.9)	(16,345.2)	(17,471.7)
Discounts (i)	(8,318.8)	(17,603.3)	(33,022.3)
	47,899.3	45,602.6	46,720.2

(i)Variance resulting from the change in the billing method with direct effect on Gross sales and Discounts.

Services provided by distributors, such as the promotion of our brands and logistics services are considered as expense when separately identifiable.

F-42

 

7.OTHER OPERATING INCOME / (EXPENSES)

	2017	2016	2015
Government grants/NPV of long term fiscal incentives	993.7	1,166.5	1,755.7
(Additions)/reversals to provisions	(12.9)	(132.9)	(106.1)
Gains/(losses) on disposal of property, plant and equipment, intangible assets and operation in associates	91.1	70.9	53.0
Other operating income/(expenses), net	145.4	118.6	233.4
	1,217.3	1,223.1	1,936.0

Government grants are not recognized until there is reasonable assurance that the Company will meet related conditions and that the grants will be received. Government grants are systematically recognized in income during the periods in which the Company recognizes as expenses the related costs that the grants are intended to offset.

8.EXCEPTIONAL ITEMS

The exceptional items included in the income statement are detailed below:

	2017	2016	2015
Result through exchange transaction of shareholdings(i)	-	1,240.0	-
Restructuring	(105.5)	(79.8)	(63.3)
Administrative lawsuit	-	-	(239.2)
Costs arising from business combinations	(3.8)	(29.8)	(48.9)
Others	0.6	3.9	(5.8)
	(108.7)	1,134.3	(357.2)

(i) It refers to result of transaction of exchange of shareholdings, as mentioned in Note 1 (b).

The Company opted to exclude these items when measuring segment-based performance, as per Note 5 – Segment reporting.

On December 2017, the Company recorded exceptional net finance cost of R$977 million – see Note 11 -Finance cost and income – and a exceptional income tax expense of R$2.8 billion – see Note 12 - Income tax and social contribution.

9.PAYROLL AND RELATED BENEFITS

	2017	2016	2015
Wages and salaries	3,371.2	3,038.9	3,086.5
Social security contributions	741.1	727.2	756.1
Other personnel cost	616.2	613.8	561.3
Increase in liabilities for defined benefit plans	138.7	151.7	142.3
Share-based payment	236.9	189.3	209.4
Contributions to defined contribution plans	18.9	25.3	19.0
	5,123.0	4,746.2	4,774.6

F-43

 

The result with payroll and related benefits are presented in the income statement as below:

	2017	2016	2015
Cost of sales	1,714.8	1,912.3	1,890.2
Distribution expenses	791.5	780.8	722.1
Sales and marketing expenses	1,096.8	989.8	980.8
Administrative expenses	1,470.1	970.3	1,154.0
Net finance cost	42.9	95.9	27.5
Exceptional items	6.9	(2.9)	-
	5,123.0	4,746.2	4,774.6

10.ADDITIONAL INFORMATION ON OPERATING EXPENSES BY NATURE

Depreciation, amortization and impairment expenses are included in the following income statement accounts for the years 2017, 2016 and 2015:

	Depreciation and impairment of property, plant and equipment			Amortization of intangible assets
	2017	2016	2015	2017	2016	2015
Cost of sales	2,364.7	2,283.3	2,053.2	6.2	4.3	3.2
Distribution expenses	197.6	200.9	177.9	-	-	-
Sales and marketing expenses	532.2	538.0	431.5	142.3	222.9	162.5
Administrative expenses	231.1	182.5	165.8	142.0	95.8	81.5
	3,325.6	3,204.7	2,828.4	290.5	323.0	247.2

11.FINANCE COST AND INCOME

(a)Finance costs

	2017	2016	2015
Interest expense	(1,571.6)	(1,547.3)	(1,062.6)
Capitalized borrowings	2.3	3.9	26.0
Net Interest on pension plans	(77.6)	(105.6)	(97.6)
Losses on hedging instruments	(616.7)	(1,575.1)	(1,267.0)
Interest on provision for disputes and litigations	(225.9)	(619.5)	(120.1)
Exchange variation	(339.5)	(310.4)	(721.8)
Tax on financial transactions	(179.7)	(224.6)	(146.4)
Bank guarantee expenses	(89.5)	(87.1)	(80.8)
Other financial results	(193.3)	(132.2)	(92.1)
	(3,291.5)	(4,597.9)	(3,562.4)
Non-recurring finance cost	(976.8)	-	-
	(4,268.3)	(4,597.9)	(3,562.4)

The exceptional net finance cost refers to PERT 2017 which Ambev applied for – see Note 19 - Income tax and social contributionand to the realization of the exchange variation of loans settled with related parties historically recognized in shareholders' equity.

F-44

 

Interest expenses are presented net of the effect of interest rate derivative financial instruments which mitigate Ambev interest rate risk (Note 27 – Financial instruments and risks). The interest expense are as follows:

	2017	2016	2015
Financial liabilities measured at amortized cost	(477.6)	(545.6)	(423.1)
Liabilities at fair value through profit or loss	(1,076.2)	(961.0)	(601.3)
Fair value hedge - hedged items	(19.7)	(49.3)	(22.4)
Fair value hedge - hedging instruments	1.9	8.6	(15.8)
	(1,571.6)	(1,547.3)	(1,062.6)

(b)Finance income

	2017	2016	2015
Interest income	458.8	513.6	575.5
Gains on derivative	73.7	113.5	428.3
Financial assets at fair value through profit or loss	227.6	247.5	261.4
Other financial results	14.3	21.3	29.0
	774.4	895.9	1,294.2

Interest income arises from the following financial assets:

	2017	2016	2015
Cash and cash equivalents	233.4	241.5	425.9
Investment securities held for trading	26.9	51.1	149.6
Other receivables	198.5	221.0	-
	458.8	513.6	575.5

12.INCOME TAX AND SOCIAL CONTRIBUTION

Income taxes reported in the income statement are analyzed as follows:

	2017	2016	2015
Income tax expense - current	(5,332.3)	(413.9)	(1,227.8)
Deferred tax expense on temporary differences	891.9	(732.5)	(2,192.4)
Deferred tax over taxes losses carryforwards movements  in the current period	(638.9)	831.4	(214.0)
Total deferred tax (expense)/income	253.0	98.9	(2,406.4)
Total income tax expenses	(5,079.3)	(315.0)	(3,634.2)

F-45

 

The reconciliation from the weighted nominal to the effective tax rate is summarized as follows:

	2017	2016	2015
Income before tax	12,929.8	13,398.4	16,513.4
Adjustment on taxable basis
Non-taxable income	(310.9)	(392.0)	(999.9)
Government grants related to sales taxes	(1,889.1)	(1,528.6)	(1,360.7)
Share of results of joint ventures	3.1	5.0	(3.1)
Non-deductible expenses	91.1	539.3	415.9
Complement of income tax of foreign subsidiaries due in Brazil	560.4	148.0	1,965.2
Results of intercompany transactions non-taxable/not deductible in Brazil	(547.5)	640.7	(1,313.2)
	10,836.9	12,810.8	15,217.6
Aggregated weighted nominal tax rate	29.22%	30.16%	31.59%
Taxes payable – nominal rate	(3,166.6)	(3,864.0)	(4,806.9)
Adjustment on tax expense
Regional incentives - income taxes	304.6	264.5	257.8
Deductible interest on shareholders' equity	1,649.0	1,867.7	1,646.1
Tax savings from goodwill amortization on tax books	175.2	142.0	142.4
Withholding tax over undistributed profits	(356.9)	153.1	(672.4)
Recognition / write-off of deferred charges on tax losses	(178.9)	796.7	138.1
PERT 2017	(2,784.7)	-	-
Others with reduced taxation	(721.0)	325.0	(339.3)
Income tax and social contribution expense	(5,079.3)	(315.0)	(3,634.2)
Effective tax rate	39.28%	2.35%	22.01%

The main events that impacted the effective tax rate in the period were:

§	Government subsidy on sales taxes: The reduction of tax expense reflects the deductibility of investment subsidies arising from deferred and presumed ICMS credits.
§	Deductible Interest on net equity: Under Brazilian law, companies have the option to distribute interest on equity (“JCP”), calculated based on the long-term interest rate (“TJLP”), Which are deductible for income tax purposes under the applicable legislation, which amount to be distributed until now is R$4,869.8, of which R$4,850.1 are deductible and the tax impact is R$1,649.0.
§	Withholding tax on dividends: the variance is mainly driven by two factors (i) reversal of the provision related to withholding tax on unremitted earnings of Argentinean subsidiaries in 2016 due to a change in the local law that exempts the payment of dividends from withholding tax; and (ii) constitution of provision and exchange variation effect related to withholding tax on unremitted earnings of Canadian subsidiaries of approximately R$ 145 million, as opposed to the approximated amount of R$ 5 million in the same period of the previous year.
§	Amongst the contingencies covered by the Federal Tax Amnesty Program (“PERT 2017”), there is a litigation whose purpose was to discuss the Presumed Profit method used by CRBS (one of Ambev’s subsidiaries in Brazil) to calculate its Corporate Income Taxes (namely, “IRPJ” and “CSLL”). The total amount booked as an expense, after the conversion of the Provisional Measure 783/2017 into Law, was R$ 2,926 million (principal, fine and interests), being R$ 2,785 million booked as non-recurring expenses under Corporate Income Tax and R$ 141 million under Financial Results.

F-46

 

13.PROPERTY, PLANT AND EQUIPMENT

	2017
	Land and buildings	Plant and equipment	Fixtures and fittings	Under construction	Total
Acquisition cost
Balance at end of previous year	8,330.2	22,764.3	4,584.2	1,740.7	37,419.4
Effect of movements in foreign exchange	3.1	34.6	(27.3)	8.3	18.7
Business combinations	228.9	(24.7)	-	-	204.2
Acquisitions	10.2	626.1	171.8	2,367.4	3,175.5
Disposals	(25.9)	(555.5)	(125.4)	-	(706.8)
Transfer to other asset categories	415.4	1,657.8	473.2	(2,857.3)	(310.9)
Others	-	36.2	-	(1.2)	35.0
Balance at end	8,961.9	24,538.8	5,076.5	1,257.9	39,835.1
Depreciation and Impairment
Balance at end of previous year	(2,278.2)	(13,075.3)	(2,912.1)	-	(18,265.6)
Foreign exchange effects	(12.1)	(104.9)	0.3	-	(116.7)
Depreciation	(299.0)	(2,245.5)	(655.9)	-	(3,200.4)
Impairment losses	-	(125.0)	(0.2)	-	(125.2)
Disposals and write-off	5.3	539.5	109.5	-	654.3
Transfer to other asset categories	(1.9)	29.7	5.2	-	33.0
Others	-	7.8	-	-	7.8
Balance at end	(2,585.9)	(14,973.7)	(3,453.2)	-	(21,012.8)
Carrying amount:
December 31, 2016	6,052.0	9,689.0	1,672.1	1,740.7	19,153.8
December 31, 2017	6,376.0	9,565.1	1,623.3	1,257.9	18,822.3

F-47

 

	2016
	Land and buildings	Plant and equipment	Fixtures and fittings	Under construction	Total
Acquisition cost
Balance at end of previous year	7,718.3	22,369.6	4,465.1	2,132.6	36,685.6
Effect of movements in foreign exchange	(474.7)	(1,528.0)	(427.4)	(222.6)	(2,652.7)
Acquisitions through business combinations	283.4	360.4	56.0	0.6	700.4
Acquisitions through exchange transaction of shareholdings	221.2	185.0	-	27.7	433.9
Disposals through exchange transaction of shareholdings	(121.0)	(344.3)	(101.3)	(4.8)	(571.4)
Acquisitions	8.4	819.4	276.0	2,905.5	4,009.3
Disposals	(106.0)	(693.1)	(210.3)	(3.3)	(1,012.7)
Transfer to other asset categories	800.6	1,595.3	526.1	(3,095.0)	(173.0)
Balance at end	8,330.2	22,764.3	4,584.2	1,740.7	37,419.4
Depreciation and Impairment
Balance at end of previous year	(2,244.0)	(12,562.6)	(2,738.9)	-	(17,545.5)
Foreign exchange effects	95.6	804.8	236.7	-	1,137.1
Disposals through exchange transaction of shareholdings	52.8	241.7	51.4	-	345.9
Depreciation	(277.8)	(2,117.6)	(688.4)	-	(3,083.8)
Impairment losses	(0.1)	(120.7)	(0.1)	-	(120.9)
Disposals	95.3	646.0	187.5	-	928.8
Transfer to other asset categories	-	21.7	39.7	-	61.4
Others	-	11.4	-	-	11.4
Balance at end	(2,278.2)	(13,075.3)	(2,912.1)	-	(18,265.6)
Carrying amount:
December 31, 2015	5,474.3	9,807.0	1,726.2	2,132.6	19,140.1
December 31, 2016	6,052.0	9,689.0	1,672.1	1,740.7	19,153.8

Leases, capitalized interests and fixed assets provided as guarantee are not material.

14.GOODWILL

	2017	2016
Balance at end of previous year	30,511.2	30,953.1
Effect of movements in foreign exchange	489.7	(2,388.9)
Acquisition and disposal through business combinations (i)	401.0	1,947.0
Balance at the end of year	31,401.9	30,511.2

(i) In 2017 it refers mainly to the goodwill allocation of acquisition of  Cachoeiras de Macacu, and in 2016 refers to the acquisition of Mark Anthony and Cerveceria Nacional in the transaction of exchange of shareholdings.

F-48

 

The carrying amount of goodwill was allocated to the different cash-generating units as follows:

	Functional currency	2017	2016
LAN:
Brazil	BRL	17,668.4	17,424.6
Goodwill		102,911.0	102,667.2
Non-controlling transactions (i)		(85,242.6)	(85,242.6)
Dominican Republic	DOP	3,163.6	3,224.9
Cuba (ii)	USD	2.7	3.6
Panama	PAB	1,149.3	1,060.1
LAS:
Argentina	ARS	443.9	518.0
Bolivia	BOB	1,170.1	1,152.8
Chile	CLP	47.0	42.7
Paraguay	PYG	786.1	753.7
Uruguay	UYU	170.7	165.8
NA:
Canada	CAD	6,800.1	6,165.0
		31,401.9	30,511.2

(i) It refers to the exchange of shareholdings operation occurred in 2013 as a result of the adoption of the predecessor basis of accounting.

(ii) The functional currency of Cuba, the Cuban convertible peso (CUC), has a fixed parity with the dollar (USD) at balance sheet date.

Annual impairment testing

Goodwill impairment testing relies on a number of critical judgments, estimates and assumptions. Goodwill, which accounted for approximately 36% of total assets as of December 31, 2017 (36% as of December 31, 2016) is tested for impairment at the cash-generating unit level (that is one level below the reporting segments). The cash-generating unit level is the lowest level at which goodwill is monitored for internal management purposes. In a business combination occurs, goodwill is allocated as from the acquisition date, to each of business units that are expected to benefit from the synergies of the combination.

The Company’s impairment testing methodology is in accordance with IAS 36, in which a fair-value-less-cost-to-sell and value in use approaches are taken into consideration. This consists in applying a discounted cash flow approach based on acquisition valuation models for its major business units and the business units showing high capital amounts invested in earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. The ratio between invested capital and EBITDA is basis for selecting the cash generating units to be tested.

§ Only for CGU Latin America North there was need to apply the impairment test;

F-49

 

§ For Latin America South and Canada there was no need to apply the impairment test.

The key judgments, estimates and assumptions used in the discounted free cash flow calculations are generally as follows:

§	The first year of the model is based on management's best estimate of the free cash flow outlook for the current year;
§	In the second to fourth years of the model, free cash flows are based on ABInBev's strategic plan as approved by key management.  AB InBev's strategic plan is prepared per country and is based on external sources in respect of macro-economic assumptions, industry, inflation and foreign exchange rates, past experience and identified initiatives in terms of market share, revenue, variable and fixed cost, capital expenditure and working capital assumptions;
§	From the fifth to the tenth year of the model, as well as for perpetuity, the cash flows are extrapolated using expected long-term consumer price indices and the growth of the beer market, based on external sources specific from each UGC;
§	Projections are made in the functional currency of the business unit and discounted at the unit's weighted average cost of capital (“WACC”), considering sensitivities on this metric.
§	Cost to sell is assumed to reach 1.5% of the entity value based on historical precedents.

The weighted average cost of capital in nominal dollars, for the impairment testing of goodwill performed varied as follows:

	2017	2016
Latin America North	from 8.59% to 10.29%	from 8.39% to 10.27%

Although Ambev believes that its judgments, assumptions and estimates are appropriate, actual results may differ from these judgments.

F-50

 

15.INTANGIBLE

	2017
		Distribution
	Brands	contracts	Software	Others	Total
Acquisition cost
Balance at end of previous year	4,160.8	2,319.4	888.5	460.7	7,829.4
Effect of movements in foreign exchange	(10.5)	7.5	(12.1)	(1.2)	(16.3)
Acquisitions	18.8	-	2.9	8.8	30.5
Acquisitions through business combination	(4.0)	-	-	-	(4.0)
Transfers to other assets categories	(650.4)	6.4	265.3	26.4	(352.3)
Others	-	-	-	46.0	46.0
Balance at end of year	3,514.7	2,333.3	1,144.6	540.7	7,533.3
Amortization and Impairment losses(i)
Balance at end of previous year	(1.9)	(1,760.8)	(597.0)	(223.8)	(2,583.5)
Foreing exchange effects	-	4.9	5.5	5.1	15.5
Amortization	-	(138.7)	(118.9)	(32.9)	(290.5)
Transfers to other assets categories	-	-	(1.4)	1.3	(0.1)
Balance at end of year	(1.9)	(1,894.6)	(711.8)	(250.3)	(2,858.6)
Carrying amount:
December 31, 2016	4,158.9	558.6	291.5	236.9	5,245.9
December 31, 2017	3,512.8	438.7	432.8	290.4	4,674.7

(i) The period of amortization of intangible assets of definite useful life is five years and amortization is calculated at the rate of 20% and recognized in income on a straight-line method.

	2016
		Distribution
	Brands	contracts	Software	Others	Total
Acquisition cost
Balance at end of previous year	3,908.2	2,387.4	788.4	356.8	7,440.8
Effect of movements in foreign exchange	(645.9)	(68.3)	(50.3)	(93.6)	(858.1)
Acquisitions	3.0	-	4.1	19.0	26.1
Disposal	-	-	(0.4)	(0.3)	(0.7)
Acquisitions through business combination	1,043.1	-	-	30.7	1,073.8
Acquisitions through exchange transaction of shareholdings	228.1	-	20.6	-	248.7
Disposals through exchange transaction of shareholdings	(58.0)	-	(9.4)	(0.1)	(67.5)
Transfers to other assets categories	(317.7)	0.3	135.5	(24.1)	(206.0)
Others	-	-	-	172.3	172.3
Balance at end of year	4,160.8	2,319.4	888.5	460.7	7,829.4
Amortization and Impairment losses (i)
Balance at end of previous year	(1.9)	(1,622.2)	(539.7)	(184.8)	(2,348.6)
Foreing exchange effects	-	9.9	29.0	40.9	79.8
Amortization	-	(148.6)	(94.4)	(80.0)	(323.0)
Disposal	-	-	0.1	-	0.1
Disposals through exchange transaction of shareholdings	-	-	8.0	0.1	8.1
Transfers to other assets categories	-	0.1	-	-	0.1
Balance at end of year	(1.9)	(1,760.8)	(597.0)	(223.8)	(2,583.5)
Carrying amount:
December 31, 2015	3,906.3	765.2	248.7	172.0	5,092.2
December 31, 2016	4,158.9	558.6	291.5	236.9	5,245.9

(i) The period of amortization of intangible assets of definite useful life is five years and amortization is calculated at the rate of 20% and recognized in income on a straight-line method.

F-51

 

The Company is the owner of some of the world’s leading brands in the beer industry. As a result, brands are expected to generate positive cash flows for as long as the Company owns the brands and accordingly have been assigned indefinite lives. The most representative brands that have been registered as result of fair value determination of past acquisitions are Quilmes in Argentina, Pilsen in Paraguay and Bolivia and Presidente and Presidente Light in Dominican Republic.

The carrying value of intangible assets with indefinite useful lives classified as brands was allocated to the following CGU:

	2017	2016
Argentina	348.8	373.5
Bolivia	567.1	558.7
Brazil	4.6	575.5
Canada	223.9	205.6
Chile	69.5	63.1
Luxembourg	339.6	419.1
Paraguay	447.5	429.4
Dominican Republic	1,396.6	1,422.4
Uruguay	115.2	111.6
	3,512.8	4,158.9

Intangible assets with indefinite useful lives have been tested for impairment at a cash-generating unit level basis consistent with the same approach described in Note 14 – Goodwill.

16.INVESTMENT SECURITIES

	2017	2016
Debt held-to-maturity (i)	122.0	104.3
Non-current investments securities	122.0	104.3
Financial asset at fair value through profit or loss-held for trading	11.9	282.8
Current investments securities	11.9	282.8
Total	133.9	387.1

(i) The balance refers substantially to Bank Deposit Certificates - CDB linked to tax incentives.

17.DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION

Deferred taxes for income tax and social contribution taxes are calculated on tax losses, the negative tax basis of social contributions and the temporary differences between the tax bases and the carrying amount in the financial statement of assets and liabilities. The rates of these taxes in Brazil, which are expected at the realization of deferred taxes, are 25% for income tax and 9% for social contribution. For the other regions, with operational activity, expected rates, are as follow:

F-52

 

Central America and the Caribbean	from 23% to 31%
Latin America (i)	from 14% to 35%
Canada	26%

(i) Amendments to Argentine tax legislation approved on December 29, 2017 affect tax periods beginning in October 2018 and reduce the income tax rate in the first two years from 35% to 30% and, as a after, to 25%. For fiscal year 2017, however, there is an impact of R $ 33.0 million in deferred income tax.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available to be used to offset temporary differences / loss carry forwards based on projections of future results prepared and based on internal assumptions and future economic scenarios which may therefore change.

The amount of deferred income tax and social contribution by type of temporary difference is detailed as follows:

	2017			2016
	Assets	Liabilities	Net	Assets	Liabilities	Net
Investment securities	39.0	-	39.0	9.0	-	9.0
Intangible	-	(719.5)	(719.5)	0.7	(733.9)	(733.2)
Employee benefits	631.1	-	631.1	467.6	-	467.6
Trade payables	1,382.4	(314.2)	1,068.2	977.4	(531.3)	446.1
Trade receivable	52.3	-	52.3	42.7	-	42.7
Derivatives	6.8	(5.8)	1.0	71.1	(110.7)	(39.6)
Inventories	248.7	(18.1)	230.6	267.4	(13.8)	253.6
Property, plant and equipment	-	(920.5)	(920.5)	-	(905.7)	(905.7)
Withholding tax over undistributed profits and royalties	-	(788.6)	(788.6)	-	(684.8)	(684.8)
Investments in associates	-	(421.6)	(421.6)	-	(421.6)	(421.6)
Loss carryforwards	501.0	-	501.0	1,139.9	-	1,139.9
Provisions	347.3	(39.7)	307.6	448.9	(44.6)	404.3
Other items	-	(30.5)	(30.5)	(15.1)	(24.7)	(39.8)
Gross deferred tax assets / (liabilities)	3,208.6	(3,258.5)	(49.9)	3,409.6	(3,471.1)	(61.5)
Netting by taxable entity	(929.3)	929.3	-	(1,141.4)	1,141.4	-
Net deferred tax assets / (liabilities)	2,279.3	(2,329.2)	(49.9)	2,268.2	(2,329.7)	(61.5)

The Company only offsets the balances of deferred income tax and social contribution assets against liabilities when they are within the same entity and are expected to be realized in the same period.

Tax losses and negative bases of social contribution and temporary deductible differences in Brazil, on which the deferred income tax and social contribution were calculated, have no expiry date.

At December 31, 2017 the assets and liabilities deferred taxes related to combined tax losses has an expected utilization/settlement by temporary differences as follows:

F-53

 

	2017
Deferred taxes not related to tax losses	to be realized until 12 months	to be realized after 12 months	Total
Investment securities	-	39.0	39.0
Intangible assets	-	(719.5)	(719.5)
Employee benefits	112.8	518.3	631.1
Trade payables	1,382.4	(314.2)	1,068.2
Trade receivable	47.3	5.0	52.3
Derivatives	1.0	-	1.0
Inventories	230.6	-	230.6
Property, plant and equipment	(58.1)	(862.4)	(920.5)
Withholding tax over undistributed profits and royalties	-	(788.6)	(788.6)
Investments in associates	-	(421.6)	(421.6)
Provisions	91.7	215.9	307.6
Other items	-	(30.5)	(30.5)
Total	1,807.7	(2,358.6)	(550.9)

Deferred tax related to tax losses	2017
2018	209.0
2019	98.3
2020	16.1
2021	10.6
A partir de 2022 (i)	167.0
Total	501.0

(i) There is no expectation of realization that exceeds the term of 10 years.

As at December 31, 2017, deferred tax assets in the amount of R$427.4 (R$455.6 as at December 31, 2016) related to tax losses and temporary differences of subsidiaries abroad were not recorded as the realization is not probable.

Major part of the fiscal losses amount do not have a carryforward limit for utilization and the tax losses carried forward in relation to them are equivalent to R$1,709.5 in December 31, 2017 (R$2,285.2 in December 31, 2016).

F-54

 

The net change in deferred income tax and social contribution is detailed as follows:

At December 31, 2015	276.3
Full recognition of actuarial gains/(losses)	57.7
Investment hedge	(12.0)
Investment hedge - put option of a subsidiary interest	(364.6)
Cash flow hedge - gains/(losses)	536.2
Gains/losses on translation of other foreign operations	(578.2)
Recognized in other comprehensive income	(360.9)
Recognized in income statement	98.9
Changes directly in balance sheet	(75.8)
Recognized in deferred tax	(21.6)
Anticipation federal amnesty	(54.2)
At December 31, 2016	(61.5)
Full recognition of actuarial gains/(losses)	40.2
Investment hedge	(262.7)
Investment hedge - put option of a subsidiary interest	(31.8)
Cash flow hedge - gains/(losses)	(269.2)
Gains/(losses) on translation of other foreign operations	136.1
Recognized in other comprehensive income	(387.4)
Recognized in income statement	253.0
Changes directly in balance sheet	146.0
Recognized in deferred tax	35.4
Recognized in other group of balance sheet	110.6
At December 31, 2017	(49.9)

18.INVENTORIES

	2017	2016
Finished goods	1,528.4	1,445.5
Work in progress	309.6	328.5
Raw material	1,816.3	1,962.7
Consumables	77.3	50.0
Spare parts and other	476.9	447.2
Prepayments	210.9	234.5
Impairment losses	(100.4)	(121.3)
	4,319.0	4,347.1

Write-offs/losses on inventories recognized in the income statement amounted to R$73.2 in 2017 (R$114.4 in 2016).

19.TRADE RECEIVABLES

	2017	2016
Trade receivables	5,335.7	4,774.5
Bad debt provision	(521.5)	(443.7)
Net, trade receivables	4,814.2	4,330.8
Related parties	130.6	37.3
Total current trade receivables	4,944.8	4,368.1

The aging of our current trade receivables, net of impairment losses, is detailed as follows:

F-55

 

	Net carrying amount as of December 31,	No past due	Past due –  until 30  days	Past due – between 31 - 60 days	Past due –  between 61 - 90 days	Past due – between  91 - 180  days	Past due – between 181 - 360  days	Past due 360 days
Trade receivables	5,335.7	4,343.8	340.7	32.3	63.3	85.6	42.2	427.8
Bad debt provision	(521.5)	(4.3)	(0.1)	(0.4)	(0.8)	(45.9)	(42.2)	(427.8)
2017	4,814.2	4,339.5	340.6	31.9	62.5	39.7	-	-
Trade receivables	4,774.5	4,093.6	187.9	28.4	43.7	30.0	38.9	352.0
Bad debt provision	(443.7)	(6.9)	(1.9)	(4.1)	(9.9)	(30.0)	(38.9)	(352.0)
2016	4,330.8	4,086.7	186.0	24.3	33.8	-	-	-

Impairment losses on trade receivables recognized in the income statement in 2017 amount to R$83.1 (R$82.1 in 2016).

Company’s exposure to credit risk, currency and interest rate risks is disclosed in Note 27 -Financial instruments and risks.

20.CASH AND CASH EQUIVALENTS

	2017	2016
Short term bank deposits (i)	4,688.5	4,027.6
Current bank accounts	5,077.1	3,467.3
Cash	588.9	381.9
Cash and cash equivalents	10,354.5	7,876.8
Bank overdrafts	(1.8)	-
Cash and cash equivalents less bank overdraft	10,352.7	7,876.8

(i) The balance refers mostly to Bank Deposit Certificates - CDB, high liquidity, which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

21.CHANGES IN EQUITY

(a) Capital stock

		2017		2016
	Million of commom shares	Million of Real	Million of commom shares	Million of Real
Beginning balance as per statutory books	15,717.6	57,614.1	15,717.6	57,614.1
Share issued	-	-	-	-
	15,717.6	57,614.1	15,717.6	57,614.1

F-56

 

(b) Capital reserves

	Capital Reserves
	Treasury shares	Share Premium	Others capital reserves	Share-based Payments	Total
At December 31, 2015	(1,003.5)	53,662.8	700.9	1,013.4	54,373.6
Purchase of shares and result on treasury shares	94.8	-	-	-	94.8
Share-based payments	-	-	-	61.5	61.5
At December 31, 2016	(908.7)	53,662.8	700.9	1,074.9	54,529.9
Purchase of shares and result on treasury shares	13.7	-	-	-	13.7
Share-based payments	-	-	-	157.4	157.4
At December 31, 2017	(895.0)	53,662.8	700.9	1,232.3	54,701.0

(b.1) Treasury shares

The treasury shares comprise own issued shares reacquired by the Company and the result on treasury shares that refers to gains and losses related to share-based payments transactions and others.

Follows the changes of treasury shares:

	Acquire /realization shares		Result on Treasure Shares	Total Treasure Shares
	Million shares	Million Brazilian Real	Million shares	Million  Brazilian Real
At December 31, 2015	32.6	(617.5)	(386.1)	(1,003.5)
Changes during the year	(16.0)	304.7	(209.9)	94.8
At December 31, 2016	16.6	(312.7)	(596.0)	(908.7)
Changes during the year	(9.1)	173.0	(159.3)	13.7
At December 31, 2017	7.5	(139.7)	(755.3)	(895.0)

(b.2) Share premium

The share premium refers to the difference between subscription price that the shareholders paid for the shares and theirs nominal value. Since this is a capital reserve, it can only be used to increase capital, offset losses, redeem, reimbursement or repurchase shares.

(b.3) Share-based payment

There are different share-based payment programs and stock option plans which allow the senior management from Ambev economic group to receive or acquire shares of the Company.

The share-based payment reserve recorded a charge of R$209.3 in 2017 (R$170.3 and R$197.1 in 2016 and 2015, respectively) (Note 24 – Share-based payments).

F-57

 

(c) Net income reserves

	Net income reserves
	Investments reserve	Statutory reserve	Fiscal incentive	Interest on capital and dividends proposed	Total
At December 31, 2015	2,141.2	4.5	4,016.2	2,039.2	8,201.1
Interest on shareholder´s equity	-	-	-	(2,039.2)	(2,039.2)
Destination of net income	1,718.6	-	1,819.5	-	3,538.1
At December 31, 2016	3,859.9	4.5	5,835.7	-	9,700.1
Interest on shareholder´s equity	(3,770.1)	-	-	-	(3,770.1)
Fiscal incentive reserve	-	-	1,552.3	-	1,552.3
Investments reserve	1,177.9	-	-	-	1,177.9
At December 31, 2017	1,267.7	4.5	7,388.0	-	8,660.2

(c.1) Investments reserve

From net income after deductions applicable, will be aimed no more than 60% (sixty per cent) to investment reserve to support future investments.

(c.2) Statutory reserve

From net income, 5% will be applied before any other allocation, to the statutory reserve, which cannot exceed 20% of capital stock. The Company is not required to supplement the statutory reserve in the year when the balance of this reserve, plus the amount of capital reserves, exceeds 30% of the capital stock.

(c.3) Tax incentives

The Company has tax incentives framed in certain state and federal industrial development programs in the form of financing, deferred payment of taxes or partial reductions of the amount due. These state programs aim to promote the expansion of employment generation, regional decentralization, complement and diversify the industrial base of the States. In these states, the grace periods, enjoyment and reductions are permitted under the tax law.

(c.4) Interest on shareholders’ equity / Dividends

Brazilian companies are permitted to distribute interest attributed to shareholders’ equity calculated based on the long-term interest rate (TJLP), such interest being tax-deductible, in accordance with the applicable law and, when distributed, may be considered part of the minimum mandatory dividends.

As determined by its By-laws, the Company is required to distribute to its shareholders, as a minimum mandatory dividend in respect of each fiscal year ending on December 31, an amount not less than 40% of its net income determined under Brazilian law, as adjusted in accordance with applicable law, unless payment of such amount would be incompatible with Ambev’s financial situation. The minimum mandatory dividend includes amounts paid as interest on shareholder’s equity.

F-58

 

Events during the year ended 2017:

Event	Approval	Type	Date of payment	Year	Type of share	Amount per share	Total amount
Board of Directors Meeting	05/16/2017	Dividends	07/17/2017	2017	ON	0.1600	2,513.1
Board of Directors Meeting	12/01/2017	Interest on shareholder´s equity	12/28/2017	2017	ON	0.3100	4,869.7	(i)
Board of Directors Meeting	12/21/2017	Dividends	02/22/2018	2017	ON	0.0700	1,099.7
							8,482.5

(i) R$3,770.1 of  these interest on shareholder´s equity refer to the total amount approved for distribution in the period, and were accrued in investments reserves.

Events during the year ended 2016:

Event	Approval	Type	Date of payment	Year	Type of share	Amount per share	Total amount
Board of Directors Meeting	01/15/2016	Interest on shareholder´s equity	02/29/2016	2015	ON	0.1300	2,039.2	(i)
Board of Directors Meeting	06/24/2016	Dividends	07/29/2016	2016	ON	0.1300	2,040.8
Board of Directors Meeting	10/19/2016	Dividends	11/25/2016	2016	ON	0.1600	2,511.9
Board of Directors Meeting	1/12/2016	Interest on shareholder´s equity	12/29/2016	2016	ON	0.2200	3,454.2
Board of Directors Meeting	12/22/2016	Dividends	02/23/2017	2016	ON	0.0700	1,099.1
							11,145.2

Events during the year ended 2015:

Event	Approval	Type	Date of payment	Type of share	Ammount per share	Total amount
Board of Directors Meeting	02/23/2015	Interest on shareholders’ equity	03/31/2015	ON	0.0300	471.5	(i)
Board of Directors Meeting	02/23/2015	Interest on shareholders’ equity	03/31/2015	ON	0.0600	943.0
Board of Directors Meeting	05/13/2015	Interest on shareholders’ equity	06/29/2015	ON	0.1000	1,570.6
Board of Directors Meeting	08/28/2015	Dividends	09/28/2015	ON	0.1500	2,352.4
Board of Directors Meeting	12/01/2015	Interest on shareholders’ equity	12/30/2015	ON	0.1500	2,352.7
						7,690.2

(i) These dividends refer to the total amount approved for distribution in the period, and were accrued in investments reserves.

F-59

 

(d) Carrying value adjustments

	Carrying value adjustments
	Translation reserves	Cash flow hedge	Actuarial gains/ (losses)	Options granted on subsidiary	Gains/(losses) of non-controlling interest´s share	Business combination	Accounting adjustments for transactions between shareholders	Total
At December 31, 2015	3,472.2	932.2	(1,131.5)	(2,246.7)	2,123.6	156.1	(75,162.9)	(71,857.0)
Comprehensive income:								-
Gains/(losses) on translation of  foreign operations	(3,728.7)	-	-	-	-	-	-	(3,728.7)
Cash flow hedges	-	(1,076.7)	-	-	-	-	-	(1,076.7)
Actuarial gains/(losses)	-	-	(130.7)	-	-	-	-	(130.7)
Total Comprehensive income	(3,728.7)	(1,076.7)	(130.7)	-	-	-	-	(4,936.1)
Options granted on subsidiary	-	-	-	(144.2)	-	-	-	(144.2)
Gains/(losses) of controlling interest´s share	-	-	-	-	(2.8)	-	-	(2.8)
Exchange transaction of shareholdings	(33.0)	-	-	-	29.9	-	-	(3.1)
Reversal effect of revaluation of fixed assets by previous cost	-	-	-	-	-	-	(75.9)	(75.9)
At December 31, 2016	(289.5)	(144.5)	(1,262.2)	(2,390.9)	2,150.7	156.1	(75,238.8)	(77,019.1)
Comprehensive income:
Gains/(losses) on translation of  foreign operations	1,928.6	-	-	-	-	-	-	1,928.6
Cash flow hedges	-	513.4	-	-	-	-	-	513.4
Actuarial gains/(losses)	-	-	117.7	-	-	-	-	117.7
Total Comprehensive income	1,928.6	513.4	117.7	-	-	-	-	2,559.7
Put option granted on subsidiary	-	-	-	(380.4)	-	-	-	(380.4)
Gains/(losses) of controlling interest´s share	-	-	-	-	(12.1)	-	-	(12.1)
Tax on fictitious dividends	-	-	-	-	(38.7)	-	-	(38.7)
Reversal effect revaluation of fixed assets under the predecessor basis accounting	-	-	-	-	-	-	(75.9)	(75.9)
At December 31, 2017	1,639.1	368.9	(1,144.5)	(2,771.3)	2,099.9	156.1	(75,314.7)	(74,966.5)

F-60

 

(d.1) Translation reserves

The translation reserves comprise all foreign currency exchange differences arising from the translation of the financial statements with a functional currency different from the Real.

The translation reserves also comprise the portion of the gain or loss on the foreign currency liabilities and on the derivative financial instruments determined to be effective net investment hedges in conformity with IAS 39.

(d.2) Cash flow hedge reserves

The hedging reserves comprise the effective portion of the cumulative net change in the fair value of cash flow hedges to the extent the hedged risk has not yet impacted profit or loss (For additional information, see Note 27 – Financial instruments and risks).

(d.3) Actuarial gains and losses

The actuarial gains and losses include expectations with regards to the future pension plans obligations. Consequently, the results of actuarial gains and losses are recognized on a timely basis considering best estimate obtained by Management. Accordingly, the Company recognizes on a monthly basis the results of these estimated actuarial gains and losses according to the expectations presented based on an independent actuarial report.

The actuarial gain of R$158.5 arising from the surplus reverted to the Sponsor, originating from Ambev Private Pension Institute of the defined benefits plan was fully recorded under the heading of actuarial gains and losses.

(d.4) Options granted on subsidiary

As part of the shareholders agreement between the Ambev and ELJ, an option to sell (“put”) and to purchase (“call”) was issued, which may result in an acquisition by Ambev of the remaining shares of Tenedora CND, for a value based on EBITDA, +/- net debt, from operations, the “put” exercisable annually until 2019 and the “call” from 2019. On December 31, 2017 the put option held by ELJ is valued at R$5,520.2 (R$4,878.5 on December 31, 2016) and the liability categorized as “Level 3”, as the Note 27 (b) and in accordance with the IFRS 3. No value has been assigned to the call option held by the Company, since the likelihood of exercise is remote. The fair value of this consideration deferred was calculated by using standard valuation techniques (present value of the principal amount and future interest rates, discounted by the market rate). The criteria used are based on market information and from reliable sources and the fair value is revaluated on an annual basis.

As disclosed in Note 1, on December 1st, 2017, Ambev  informed  its  shareholders  and  the  general  market  that  the  E. León Jimenes, S.A. (“ELJ”) will exercise partially its put option of approximatelly 30% of capital stock by Tenedora. Due to the partial exercise of put option, the Company will be the holder of approximately 85% of Tenedora. Additionally, was approved the change of the call option term from 2019 to 2022. The operation was subject to certain conditions which were consummated on January 18, 2018, as presented in Note 35 - Events after the reporting period.

F-61

 

As part of the agreement to acquire the remaining shares of Sucos do Bem, a put option on interest in subsidiary determined by gross revenue of its products and exercisable from 2019 has been granted. On December 31, 2017 the option is valued at R$132.0 (R$127.7 on December 31, 2016).

As part of the acquisition agreement of all shares of the company Tropical Juice, currently Cervejaria ZX S.A. a put option on interest in subsidiary exercisable from 2018  has been granted. On December 31, 2017 the option is valued at R$23.0 (R$23.4 on December 31, 2016).

The reconciliation of changes in these options is presented in Note 27 – Financial instruments and risks.

(d.5) Accounting for acquisition of non-controlling interests

In transactions with non-controlling interests of the same business, even when performed at arm's length terms, that present valid economic grounds and reflect normal market conditions, will be consolidated by the applicable accounting standards as occurred within the same accounting entity.

As determined by IFRS 10, any difference between the amount paid (fair value) for the acquisition of non-controlling interests and are related to carrying amount of such non-controlling interest shall be recognized directly in controlling shareholders’ equity. The acquisition of non-controlling interest related to Old Ambev, the above mentioned adjustment was recognized in the Carrying value adjustments when applicable.

F-62

 

(e) Earnings per share

Basic and diluted earnings per share of the stock option and deferred stock

The calculation of basic earnings per share is based on the net income attributable to equity holders of Ambev and the proportional weighted average number of shares outstanding during the year.

Diluted earnings per share of the stock option and deferred stock is based on the net income attributable to equity holders of Ambev and the adjusting the weighted average number of shares outstanding during the year to assume conversion of all potentially dilutive shares, as follows:

Million shares	2017	2016	2015
	Common	Common	Common
Issued shares at December 31, net of treasury shares (i)	15,705.8	15,696.6	15,696.1
Effect of shares options	132.2	126.5	124.0
Weighted average number of shares (diluted) at December 31	15,838.0	15,823.1	15,820.1

(i) Not considered treasury shares.

The tables below present the calculation of earnings per share (“EPS”):

	2017	2016	2015
	Common	Common	Common
Income attributable to equity holders of Ambev	7,332.0	12,546.6	12,423.8
Weighted average number of shares (non diluted)	15,705.8	15,696.6	15,696.1
Basic EPS (i)	0.47	0.80	0.79
Income attributable to equity holders of Ambev	7,332.0	12,546.6	12,423.8
Weighted average numbers of shares (diluted)	15,838.1	15,823.2	15,820.1
Diluted EPS (i)	0.46	0.79	0.79

(i) Expressed in Brazilian Reais.

(f) Destinations

At December 31, 2017, the Company has done the appropriations to retained earnings, in accordance with the Brazilian Corporate law and the Company’s bylaws.The dividends payments made until December 2017 were approved at the Board of Directors’ Meeting.

Regarding the basis for dividends, the Company believes that the predecessor basis of accounting, as well as its presentation for comparative purposes, will not affect the determination of the minimum mandatory dividend. Therefore, the Company intends to adjust the calculation basis of the minimum mandatory dividend to delete any current and future impacts on net income resulting from the adoption of this accounting practice, related to the amortization/depreciation of surplus assets or even a possible impairment of goodwill.

F-63

 

	2017	2016	2015
Net income, attributable to equity holders of  Ambev	7,332.0	12,546.6	12,423.8
Prescribed dividends	34.7	21.6	16.2
Reversal effect of revaluation of fixed assets by predecessor	75.9	75.9	75.9
Retained earnings basis for dividends and destinations	7,442.6	12,644.1	12,515.9
Dividends and Interest on capital distributed and accrued to distribute based on net income for the year
Dividends and Interest on capital paid based on profit	3,612.7	5,651.8	7,218.7
Dividends approved for distribution	1,099.7	3,454.2	2,039.2
Total of dividends and Interest on capital	4,712.4	9,106.0	9,257.9
Percentage of distributed profit	63%	72%	74%
Interest on capital distributed and accrued to distribute based on the investment reserve
Interest on capital paid based on the investment reserve	3,770.1	-	-
Total of Interest on capital	3,770.1	-	-
Total of distributed and accrued to distribute	8,482.5	9,106.0	9,257.9
Percentage of distributed profit	114%	72%	74%

22.INTEREST-BEARING LOANS AND BORROWINGS

	2017	2016
Secured bank loans	589.3	665.8
Unsecured bank loans	413.7	609.9
Debentures and unsecured bond issues	102.7	100.8
Other unsecured loans	101.5	356.2
Financial leasing	24.7	33.0
Non-current liabilities	1,231.9	1,765.7
Secured bank loans	879.6	1,381.4
Unsecured bank loans	394.3	1,910.1
Debentures and unsecured bond issues	-	296.4
Other unsecured loans	38.4	33.5
Financial leasing	8.8	9.2
Current liabilities	1,321.1	3,630.6

Additional information regarding the exposure of the Company to the risks of interest rate and foreign currency are disclosed on Note 27 – Financial instruments and risks.

F-64

 

At December 31, 2017 and 2016 debts presented the following interest rates:

		2017			2016
Debt instruments	Average rate %	Current	Non-current	Average rate %	Current	Non-current
Debt denominated in USD fixed rate	3.83%	6.4	16.5	6.00%	-	11.5
Debt denominated in US dollars floating rate	2.74%	78.3	476.9	1.55%	1,508.8	351.1
Debt denominated in CAD dollars floating rate	2.00%	685.9	-	1.62%	1,259.1	-
BNDES basket debt floating rate (UMBNDES)	-	-	-	1.70%	22.7	-
Other latin american currency fixed rate	9.27%	199.1	-	8.86%	114.1	233.0
Other latin american currency floating rate	2.33%	-	5.0	2.66%	-	4.9
TJLP BNDES denominated floating rate (TJLP)	9.22%	165.3	237.0	9.66%	216.2	398.6
Reais debt - ICMS fixed rate	5.57%	38.4	91.5	4.13%	33.4	344.7
Reais debt - debentures floating rate % CDI	-	-	-	13.63%	52.9	-
Reais debt - fixed rate	6.63%	147.7	405.0	7.64%	423.4	421.9
Total		1,321.1	1,231.9		3,630.6	1,765.7

Terms and debt repayment schedule – December 31, 2017

	Total	Less than 1 year	1-2 years	2-3 years	3-5 years	More than 5 years
Secured bank loans	1,468.9	879.6	253.6	57.7	109.4	168.6
Unsecured bank loans	808.0	394.3	413.7	-	-	-
Debentures and unsecured bond issues	102.7	-	-	-	102.7	-
Unsecured other loans	139.9	38.4	32.0	24.7	11.6	33.2
Finance lease liabilities	33.5	8.8	24.7	-	-	-
	2,553.0	1,321.1	724.0	82.4	223.7	201.8

Contractual clauses (covenants)

As at December 31, 2017, the Company's loans had equal rights to payment without subordination clauses. Except for the credit lines due to FINAME contracted by the Company with Banco Nacional de Desenvolvimento Econômico e Social – BNDES (“BNDES”), where collateral were provided on assets acquired with the credit granted which serve as collateral; other loans and financing contracted by the Company predicted only guarantees as personal collateral or are unsecured. The most loan contracts contained financial covenants including:

• financial covenants, including limitation on new indebtedness;

• going-concern;

• maintenance, in use or in good condition for the business, of the Company's assets;

• restrictions on acquisitions, mergers, sale or disposal of its assets;

• disclosure of financial statements under Brazilian GAAP and IFRS; and/or

• no prohibition related to new real guarantees for loans contracted, except if: (i) expressly authorized under the aforementioned loan agreement, (ii) new loans contracted from financial institutions linked to the Brazilian government - including the BNDES or foreign governments; - or foreign governments, multilateral financial institutions (eg World Bank) or located in jurisdictions in which the Company operates;

F-65

 

These clauses apply to the extent that the events mentioned produce material adverse effects on the Company and / or its subsidiaries or the rights of its creditors, and, in the event of any of the events provided in the clauses, it may have been granted to the Company a grace period to cure such default.

Additionally, all agreements entered into with the BNDES are subject to certain “provisions applicable to agreements entered into with the BNDES” (“Provisions”). Such Provisions require the borrower, to obtain prior consent of BNDES if they, for instance, wish to: (i) raise new loans (except for loans described in the Provisions); (ii) give preference and/or priority to other debts; and/or (iii) dispose of or encumber any item of their fixed assets (except as provided for in the Provisions).

As at December 31, 2017, the Company was in compliance with all its contractual obligations for its loans and financings.

23.EMPLOYEE BENEFITS

The Company sponsors pension plans to defined benefit to employees in Brazil and subsidiaries located in the Dominican Republic, Panama, Uruguay, Bolivia and Canada based on employees' salaries and length of service. The entities are governed by local regulations and practices of each individual country as well as the relationship with the Company’s pension funds and their composition.

Ambev provides post-employment benefits, including pension benefits and medical and dental care. Post-employment benefits are classified as either defined contribution or defined benefit plans.

The defined benefit plans and the other post-employment benefits are not granted to new retirees.

Defined contribution plans

These plans are funded by the participants and the sponsor, and are managed by administered pension funds. During 2017, the Company contributed R$18.9 (R$25.3 during 2016) to these funds, which were recorded as an expense. Once the contributions have been paid, the Company has no further payment obligations.

F-66

 

Defined benefit plans

At December 31, 2017 the net liability for defined benefit plans consists of the following:

	2017	2016	2015
Present value of funded obligations	(5,027.7)	(4,592.1)	(4,646.4)
Fair value of plan assets	4,006.2	3,845.2	3,781.4
Present value of net obligations	(1,021.5)	(746.9)	(865.0)
Present value of unfunded obligations	(757.4)	(741.3)	(756.6)
Present value of net obligations	(1,778.9)	(1,488.2)	(1,621.6)
Asset ceiling	(368.4)	(532.2)	(534.5)
Net liability	(2,147.3)	(2,020.4)	(2,156.1)
Other long term employee benefits	(105.0)	(83.8)	(57.2)
Total employee benefits	(2,252.3)	(2,104.2)	(2,213.3)
Employee benefits amount in the balance sheet:
Liabilities	(2,310.7)	(2,137.7)	(2,221.9)
Assets	58.4	33.5	8.6
Net liabilities	(2,252.3)	(2,104.2)	(2,213.3)

The changes in the present value of the defined benefit obligations were as follows:

	2017	2016	2015
Defined benefit obligation at January 1 st	(5,333.4)	(5,403.0)	(4,808.0)
Acquisitions through exchange transaction of shareholdings	-	(67.3)	-
Service cost	(38.2)	(43.1)	(42.4)
Interest cost	(321.5)	(320.5)	(308.2)
Gains and (losses) on settlements or reductions in benefits	3.9	2.2	1.1
Contributions by plan participants	(4.1)	(5.2)	(5.2)
Actuarial gains and (losses) - geographical assumptions	77.3	(20.1)	-
Actuarial gains and (losses) - financial assumptions	(140.3)	(321.1)	182.5
Experience adjustment	(115.7)	(182.8)	(10.6)
Reclassifications	(7.5)	11.1	-
Exchange differences	(306.5)	599.6	(805.1)
Benefits paid	400.9	416.8	392.9
Defined benefit obligation at December, 31	(5,785.1)	(5,333.4)	(5,403.0)

The present value of funded obligations include R$762.0 (R$683.4 in 2016 and R$494.1 in 2015) of two health care plans for which the benefits are provided directly by Fundação Zerrenner. Fundação Zerrenner is a legally distinct entity whose main goal is to provide the Company’s current and retired employees and managers with health care and dental assistance, technical and superior education courses, maintaining facilities for assisting and helping elderly people, among other things, through direct initiatives or through financial assistance agreements with other entities.

F-67

 

The changes in the fair value of plan assets are as follows:

	2017	2016	2015
Fair value of plan assets at January 1 st	3,845.2	3,781.4	3,550.1
Interest Income	273.3	274.7	259.5
Administrative costs	(3.4)	(3.7)	(3.4)
Expected Return excluding interest income	(64.8)	269.8	(173.2)
Acquisition through business combination	-	73.5	-
Contributions by employer	183.2	175.9	107.6
Contributions by plan participants	4.5	5.6	5.2
Exchange differences	166.8	(315.3)	428.5
Benefits paid excluding costs of administration	(398.6)	(416.7)	(392.9)
Fair value of plan assets at December, 31	4,006.2	3,845.2	3,781.4

The real return on plan assets generated in 2017 was a gain of R$208.5 (gain of R$544.5 in 2016 and R$86.3 in 2015).

At December 31, 2017, the Company recorded R$58.4 (R$33.5 at December 31, 2016) up to the asset ceiling not exceeding the present value of future benefits.

The changes in the asset ceiling not exceeding the present value of future benefits are as follow:

	2017	2016	2015
Asset ceiling impact at January 1 st	33.5	8.6	12.8
Acquisitions through exchange transaction of shareholdings	-	10.4	-
Interest income/(expenses)	2.8	1.3	1.1
Change in asset ceiling excluding amounts included in interest income/(expenses)	8.8	15.8	(5.3)
Effect of exchange rate fluctuations	0.9	(2.6)	-
Others	12.4	-	-
Asset ceiling impact at December 31	58.4	33.5	8.6

The income/(expense) recognized in the income statement with regard to defined benefit plans is detailed as follows:           

	2017	2016	2015
Current service costs	(38.2)	(43.1)	(42.4)
Administrative costs	(3.4)	(3.7)	(3.4)
(Gains) losses on settlements and curtailments	4.2	0.7	1.1
Income from operations	(37.4)	(46.1)	(44.7)
Financial cost	(101.3)	(105.6)	(97.6)
Total expense for employee benefits	(138.7)	(151.7)	(142.3)

F-68

 

The employee benefit revenue/(expenses) are included in the following line items in the income statement:

	2017	2016	2015
Cost of sales	(22.3)	(24.5)	(19.3)
Sales and marketing expenses	(5.0)	(9.5)	(7.9)
Administrative expense	(10.1)	(10.2)	(17.5)
Financial expenses	(101.3)	(105.6)	(97.6)
Exceptional items	-	(1.9)	-
	(138.7)	(151.7)	(142.3)

The assumptions used in the calculation of the obligations are as follows:

	2017 (i)	2016 (i)	2015 (i)
Discount rate	3.6% to 10.6%	3.9% to 10.5%	4.1% to 12.1%
Inflation	2.0% to 5.0%	2.0% to 5.2%	2.0% to 5.2%
Future salary increases	1.0% to 8.7%	1.0% to 8.5%	1.0% to 8.8%
Future pension increases	2.0% to 4.3%	2.0% to 4.5%	2.0% to 4.5%
Medical cost trend rate	4.5% to 7.9% p.a. reducing to 7.9%	3.8% a 8.2% p.a. reducing to 8.2%	4.5% to 8.2%  p.a. reducing to8.2%
Dental claims trend rate	4.3%	4.5%	4.5%
Life expectation for an over 65 years old male	83 to 87	80 to 86	85 to 70
Life expectation for an over 65 years old female	86 to 89	83 to 89	88 to 71

(i) Includes assumptions in Latin America – North, Latin America – South and Canada.

Through its defined benefit pension plans and post-employment medical plans, the Company is exposed to a number of risks, the most significant are detailed below:

Asset volatility

The plans liabilities are calculated using a discount rate set with reference to high quality corporate yields; if plan assets underperform this yield, the Company’s net defined benefit obligation may increase. Most of the Company’s funded plans hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. As the plans mature, the Company usually reduces the level of investment risk by investing more in assets that better match the liabilities.

Changes in bond yields

A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.

F-69

 

Inflation risk

Some of the Company’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the plan’s assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation could potentially increase the Company’s net benefit obligation.

Life expectancy

The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities.

Investment strategy

In case of funded plans, the Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension schemes. Within this framework, the Company’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency.

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

		2017		2016		2015
In millions of Brazilian Reais	Change in assumption	Increase in assumption	Decrease in assumption	Increase in assumption	Decrease in assumption	Increase in assumption	Decrease in assumption
Medical cost trend rate	100 bases points	(119.7)	102.3	(104.7)	90.2	(77.5)	67.4
Discount rate	50 bases points	289.7	(309.2)	292.6	(311.5)	262.5	(280.1)
Future salary increase	50 bases points	(12.9)	12.3	(16.6)	15.3	(13.3)	12.5
Longevity	One year	(180.6)	176.5	(175.9)	172.9	(135.1)	131.1

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

F-70

 

The plans assets at December 31, 2017, 2016 and 2015 consist of the following:

	2017			2016			2015
	Rated	Unrated	Total	Rated	Unrated	Total	Rated	Unrated	Total
Government bonds	50%	-	50%	41%	-	41%	29%	-	29%
Corporate bonds	7%	-	7%	13%	-	13%	23%	-	23%
Equity instruments	14%	-	14%	18%	-	18%	15%	-	15%
Property	-	-	-	-	-	-	-	1%	1%
Cash	-	-	-	1%	-	1%	-	-	-
Others	29%	-	29%	27%	-	27%	32%	-	32%

The overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated share in the total investment portfolio.

Ambev expects to contribute approximately R$229.3 to its defined benefit plans in 2018.

24.SHARE-BASED PAYMENTS

There are different share-based payment programs and stock option plans which allow the senior management from the Company and its subsidiaries to receive or acquire shares of the Company. For all option plans, the fair value is estimated at grant date, using the Hull binomial pricing model, modified to reflect the IFRS 2 requirement that assumptions about forfeiture before the end of the vesting period cannot impact the fair value of the option.

This current model of share based payment includes two types of grants: Grant 1: the beneficiary may choose to allocate 30%, 40%, 60%, 70% or 100% of the amount related to the profit share he received in the year, at the immediate exercise of options, thus acquiring the corresponding shares of the Company, and the delivery of a substantial part of the acquired shares is conditioned to the permanency in the Company for a period of five-years from the date of exercise; Grant 2: the beneficiary may exercise the options after a period of five years.

Additionally, as a means of creating a long term incentive (wealth incentive) for certain senior employees and members of management considered as having “high potential,” the Company grant stocks to future delivery to those employees, pursuant to which the beneficiary shall receive two separate lots – Lot A and Lot B – subject to maturation periods of five and ten years, respectively.

In addition, the Company has implemented a Stock Based Payment Plan under which certain employees and members of the management of the Company or its direct or indirect subsidiaries are eligible to receive shares of the Company including in the form of ADR’s. The shares that are subject to the Stock Plan are designated as "Restricted Shares" and the restricted share price for the purposes of the stock plan will correspond to the price of the Company's shares on B3 S.A.- Brasil, Bolsa, Balcão, in the trading session immediately prior to the stock concession Restricted.

F-71

 

The weighted average fair value of the options and assumptions used in applying the Ambev option pricing model for the “Grant 2” of 2017, 2016 and 2015 grants are as follows:

In R$, except when otherwise indicated	2017	(i)	2016	(i)	2015	(i)
Fair value of options granted	6.51		6.21		7.84
Share price	19.80		17.18		18.41
Exercise price	19.80		17.18		18.41
Expected volatility	26.7%		27.0%		27.5%
Vesting year	5		5		5
Expected dividends	5%		5%		5%
Risk-free interest rate	10.1%	(ii)	12.4%	(ii)	15.9%	(ii)

(i)Information based on weighted average plans granted, except for the expected dividends and risk-free interest rate.

(ii) The percentages include the grants of stock options and ADR’s during the period, in which the risk-free interest rate of ADR’s are calculated in U.S. dollar.

The total number of outstanding options developed as follows:

Thousand options	2017	2016	2015
Options outstanding at January 1st	131,244	121,770	126,149
Options issued during the period	20,435	24,806	16,568
Options exercised during the period	(13,548)	(11,613)	(19,975)
Options forfeited during the period	(2,910)	(3,719)	(972)
Options outstanding at ended year	135,221	131,244	121,770

The range of exercise prices of the outstanding options is between R$0.001 (R$0.02 as of December 31, 2016 and R$0.35 as of December 31, 2015) and R$26.09 (R$28.32 as of December 31, 2015 and R$26.57 as of December 31, 2015) and the weighted average remaining contractual life is approximately 6.40 years (5.96 years as of December 31, 2016 and 6.30 years as of December 31, 2015).

Of the 135,221 thousand outstanding options (131,244 thousand as of December 31, 2016), 40,150 thousand options are vested as at December 31, 2017 (52,780 thousand as of December 31, 2016).

F-72

 

The weighted average exercise price of the options is as follows:

In R$ per share	2017	2016	2015
Options outstanding at January 1 st	13.87	12.36	10.07
Options issued during the period	19.82	17.18	18.42
Options forfeited during the period	17.88	12.83	20.35
Options exercised during the period	5.81	2.52	5.05
Options outstanding at ended period	15.27	13.87	12.36
Options exercisable at ended period	3.78	3.66	3.29

For the options exercised during 2017, the weighted average share price on the exercise date was R$18.87 (R$18.41  as of December 31, 2016).

To settle the exercised stock options, the Company may use treasury shares. The current limit of authorized capital is considered sufficient to meet all stock option plans if the issue of new shares is required to meet the grants awarded in the Programs.

During the period, Ambev issued 794 thousand (7,329 thousand in 2016) deferred stock units related to exercise of the options in the model “Grant 1”. These deferred stock units are valued at the share price of the day of grant, representing a fair value of approximately R$15.2 (R$133,9 in 2016), and cliff vest after five years.

The total number of shares purchased under the plan of shares by employees, whose grant is deferred to a future time under certain conditions (deferred stock), is shown below:

Thousand deferred shares	2017	2016	2015
Deferred shares outstanding at January 1st	19,260	19,056	17,490
New deferred shares during the period	794	7,329	2,692
Deferred shares granted during the period	(2,874)	(6,118)	(804)
Deferred shares forfeited during the period	(880)	(1,007)	(322)
Deferred shares outstanding at ended year	16,300	19,260	19,056

Additionally, certain employees and directors of the Company receive options to acquire AB Inbev shares, the compensation cost of which is recognized in the income statement against equity.

These share-based payments generated an expense of R$236.9 in the year ended December 31, 2017 (R$189.3 and R$209.4 for the year ended December 31, 2016 and 2015, respectively), recorded as administrative expenses.

F-73

 

25.TRADE PAYABLES

	2017	2016
Trade payables	175.1	237.8
Non-current	175.1	237.8
Trade payables	10,418.4	9,793.0
Related Parties	1,435.6	1,075.8
Current	11,854.0	10,868.8
Total	12,029.1	11,106.6

26.PROVISIONS

(a) Provision changes

	Balance as of December 31, 2016	Effect of changes in  foreign exchange rates	Additions	Provisions used and reversed	Balance as of December 31, 2017
Restructuring	7.4	0.7	-	-	8.1
Provision for disputes and litigations
Taxes on sales	247.2	0.2	113.9	(135.0)	226.3
Income tax	323.4	3.0	167.4	(336.8)	157.0
Labor	165.8	(1.4)	142.0	(176.9)	129.5
Civil	43.9	(0.1)	65.4	(74.0)	35.2
Others	146.3	(5.9)	69.8	(84.7)	125.5
Total of provision for disputes and litigations	926.6	(4.2)	558.5	(807.4)	673.5
Total provisions	934.0	(3.5)	558.5	(807.4)	681.6

(b)Disbursement expectative

	Balance as of December 31, 2017	1 year or less	1-2 years	2-5 years	Over 5 years
Restructuring	8.1	7.3	-	0.8	-
Provision for disputes and litigations
Taxes on sales	226.3	25.7	179.9	5.0	15.7
Income tax	157.0	33.6	100.7	22.7	-
Labor	129.5	77.3	25.3	17.6	9.3
Civil	35.2	17.1	15.4	1.6	1.1
Others	125.5	8.0	30.3	83.8	3.4
Total of provision for disputes and litigations	673.5	161.7	351.6	130.7	29.5
Total provisions	681.6	169.0	351.6	131.5	29.5

F-74

 

The expected settlement of provisions was based on management’s best estimate at the balance sheet date.

Main lawsuits with probable likelihood of loss:

(a) Income and Sales taxes

In Brazil, the Company and its subsidiaries are involved in several administrative and judicial proceedings related to Income tax, ICMS, IPI, PIS and COFINS taxes. Such proceedings include, among others, tax offsets, credits and judicial injunctions exempting tax payment.

(b) Labor

The Company and its subsidiaries are involved in labor proceedings with former employees or former employees of service providers. The main issues involve overtime and related effects and respective charges.

(c) Civil

The Company is involved in civil lawsuits considered with probable likelihood of loss. The most relevant portion of these lawsuits refers to former distributors, mainly in Brazil, which are mostly claiming damages resulting from the termination of their contracts.

The processes with possible probabilities are disclosed in Note 30 - Contingent liability.

27.FINANCIAL INSTRUMENTS AND RISKS

Risk factors

The Company is exposed to foreign currency, interest rate, commodity price, liquidity and credit risk in the ordinary course of business. The Company analyzes each of these risks both individually and as a whole to define strategies to manage the economic impact on Company’s performance consistent with its Financial Risk Management Policy.

The Company’s use of derivatives strictly follows its Financial Risk Management Policy approved by the Board of Directors. The purpose of the policy is to provide guidelines for the management of financial risks inherent to the capital markets in which Ambev carries out its operations. The policy comprises four main aspects: (i) capital structure, financing and liquidity, (ii) transactional risks related to the business, (iii) financial statements translation risks and (iv) credit risks of financial counterparties.

F-75

 

The policy establishes that all the financial assets and liabilities in each country where Ambev operates must be denominated in their respective local currencies. The policy also sets forth the procedures and controls needed for identifying, measuring and minimizing market risks, such as variations in foreign exchange rates, interest rates and commodities (mainly aluminum, wheat, corn and sugar) that may affect Ambev’s revenues, costs and/or investment amounts. The policy states that all the known risks (e.g. foreign currency and interest) shall be hedged by contracting derivative financial instruments. Existing risks not yet recorded (e.g. future contracts for the purchase of raw material or property, plant and equipment) shall be mitigated using projections for the period necessary for the Company to adapt to the new costs scenario that may vary from ten to fourteen months, also through the use of derivative financial instruments. Most of the translation risks are not hedged. Any exception to the policy must be approved by the Board of Directors.

Derivative financial Instruments

Derivative financial instruments authorized by the Financial Risk Management Policy are futures contracts traded on exchanges, full deliverable forwards, non-deliverable forwards, swaps and options. At December 31, 2017, the Company and its subsidiaries had no target forward, swaps with currency verification or any other derivative operations representing a risk level above the nominal value of their contracts. The derivative operations are classified by strategies according to their purposes, as follows:

i) Cash flow hedge derivative instruments – The highly probable forecast transactions contracted in order to minimize the Company's exposure to fluctuations of exchange rates and prices of raw materials, investments, equipment and services to be procured, protected by cash flow hedges that shall occur at various different dates during the next fourteen months. Gains and losses classified as hedging reserve in equity are recognized in the income statement in the period or periods when the forecast and hedged transaction affects the income statement.

ii) Fair value hedge derivative instruments – operations contracted with the purpose of mitigating the Company’s net indebtedness against foreign exchange and interest rate risk. Cash net positions and foreign currency debts are continually assessed for identification of new exposures.

The results of these operations, measured according to their fair value, are recognized in financial results.

iii) Net investment hedge derivative instruments – transactions entered into in order to minimize exposure of the exchange differences arising from conversion of net investment in the Company's subsidiaries located abroad for translation account balance. The effective portion of the hedge is allocated to equity and the ineffectiveness portion is recorded directly in financial results.

F-76

 

The following tables summarize the exposure of the Company that were identified and protected in accordance with the Company's Risk Policy. The following denominations have been applied:

Operational Hedge: Refers to the exposures arising from the core business of Ambev, such as: purchase of inputs, purchase of fixed assets and service contracts linked to foreign currency, which is protected through the use of derivatives.

Financial Hedge: Refers to the exposures arising from cash and financing activities, such as: foreign currency cash and foreign currency debt, which is protected through the use of derivatives.

Investment hedge in foreign operations: Refers mainly to exposures arising from cash hold in foreign currency in foreign subsidiaries whose functional currency is different from the consolidation currency.

Investment hedge - Put option granted on subsidiary: As detailed in Note 21 (d.4) the Company constituted a liability related to acquisition of Non-controlling interest in the Dominican Republic operations. This financial instrument is denominated in Dominican Pesos and is recorded in a Company which functional currency is the Real. The Company assigned this financial instrument as a hedging instrument for part of its net assets located in the Dominican Republic, in such manner the hedge result can be recorded in other comprehensive income of the group, following the result of the hedged item.

F-77

 

Transactions protected by derivative financial instruments in accordance with the Financial Risk Management Policy

						2017
				Fair Value		Gain / (Losses)
Exposure	Risk		Notional	Assets	Liability	Finance Result	Operational Result	Equity
Cost		(9,742.3)	9,318.9	283.6	(190.0)	(563.5)	(200.2)	584.8
	Commodity	(2,378.7)	1,955.3	166.5	(70.7)	(1.5)	103.6	(4.8)
	American Dollar	(6,879.1)	6,879.1	86.3	(93.4)	(556.1)	(331.5)	630.2
	Euro	(82.9)	82.9	3.5	(0.7)	(4.7)	0.4	6.6
	Mexican Pesos	(401.6)	401.6	27.3	(25.2)	(1.2)	27.3	(47.2)
Fixed Assets		(579.5)	579.5	1.9	(10.8)	(1.9)	-	-
	American Dollar	(531.9)	531.9	1.8	(10.8)	(2.8)	-	-
	Euro	(47.6)	47.6	0.1	-	0.9	-	-
Expenses		(177.7)	177.7	0.5	(1.8)	(2.9)	3.9	1.8
	American Dollar	(169.2)	169.2	0.3	(1.6)	(3.1)	3.5	2.4
	Rupee	(8.5)	8.5	0.2	(0.2)	0.2	0.4	(0.6)
Cash		(1,328.3)	1,328.3	-	(13.1)	(266.0)	-	-
	American Dollar	(1,313.3)	1,313.3	-	(13.1)	(266.0)	-	-
	Interest rate	(15.0)	15.0	-	-	-	-	-
Debts		(919.5)	356.9	30.0	(1.8)	(67.5)	-	-
	American Dollar	(562.6)	-	-	-	(76.2)	-	-
	Interest rate	(356.9)	356.9	30.0	(1.8)	8.7	-	-
Equity Instrument		(2,347.9)	677.0	69.2	-	67.0	-	-
	Stock Exchange Prices	(2,347.9)	677.0	69.2	-	67.0	-	-
As of December 31, 2017		(15,095.2)	12,438.3	385.2	(217.5)	(834.8)	(196.3)	586.6

F-78

 

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

F-79

 

I.Market risk

a.1) Foreign currency risk

The Company is exposed to foreign currency risk on borrowings, investments, purchases, dividends and/or interest expense/income whenever they are denominated in a currency other than the functional currency of the subsidiary. The main derivatives financial instruments used to manage foreign currency risk are futures contracts, swaps, options, non deliverable forwards and full deliverable forwards.

a.2) Commodity Risk

A significant portion of the Company inputs comprises commodities, which historically have experienced substantial price fluctuations. The Company therefore uses both fixed price purchasing contracts and derivative financial instruments to minimize its exposure to commodity price volatility. The Company has important exposures to the following commodities: aluminum, sugar, wheat and corn. These derivative financial instruments have been designated as cash flow hedges.

a.3) Interest rate risk

The Company applies a dynamic interest rate hedging approach whereby the target mix between fixed and floating rate debt is reviewed periodically. The purpose of the Company’s policy is to achieve an optimal balance between cost of funding and volatility of financial results, taking into account market conditions as well as the Company’s overall business strategy and this strategy is reviewed periodically.

The table below demonstrates the Company’s exposure related to debts, before and after interest rates hedging strategy.

	2017
	Pre - Hedge		Post - Hedge
	Interest rate	Amount	Interest rate	Amount
Brazilian Real	9.2%	402.3	7.6%	714.1
American Dollar	2.7%	555.3	2.7%	555.2
Canadian  Dollar	2.0%	685.9	2.0%	685.9
Barbadian Dollar	2.3%	5.0	2.3%	5.0
Interest rate postfixed		1,648.5		1,960.2
Brazilian Real	6.4%	682.5	5.9%	370.8
Working Capital in Argentinean Peso	31.0%	1.8	31.0%	1.8
Dominican Peso	9.3%	188.8	9.3%	188.8
American Dollar	3.8%	22.9	3.8%	22.9
Guatemala´s Quetzal	7.8%	10.3	7.8%	10.3
Interest rate pre-set		906.3		594.6

F-80

 

	2016
	Pre - Hedge		Post - Hedge
	Interest rate	Amount	Interest rate	Amount
Brazilian Real	10.0%	667.7	12.6%	2,375.6
American Dollar	1.5%	1,882.3	2.2%	565.7
Canadian  Dollar	1.6%	1,259.1	1.6%	1,259.1
Barbadian Dollar	2.7%	4.9	2.7%	4.9
Interest rate postfixed		3,814.0		4,205.3
Brazilian Real	6.8%	1,223.5	6.2%	841.9
Dominican Peso	9.7%	288.8	9.7%	288.8
American Dollar	6.0%	11.6	6.0%	1.8
Guatemala´s Quetzal	8.0%	9.9	8.0%	10.0
Barbadian Dollar	4.3%	48.5	4.3%	48.5
Interest rate pre-set		1,582.3		1,191.0

Sensitivity analysis

The Company mitigates risks arising from non-derivative financial assets and liabilities substantially, through derivative financial instruments. In this context, the Company has identified the main risk factors that may generate losses from these derivative financial instruments and has developed a sensitivity analysis based on three scenarios, which may impact the Company’s future results and/or cash flow, as described below:

1 – Probable scenario: Management expectations of deterioration in each transaction’s main risk factor. To measure the possible effects on the results of derivative transactions, the Company uses parametric Value at Risk – VaR. is a statistical measure developed through estimates of standard deviation and correlation between the returns of several risk factors. This model results in the loss limit expected for an asset over a certain time period and confidence interval. Under this methodology, we used the potential exposure of each financial instrument, a range of 95% and horizon of 21 days after December 31, 2017 for the calculation, which are presented in the module.

2 – Adverse scenario: 25% deterioration in each transaction’s main risk factor as compared to the level observed on December 31, 2017.

3 – Remote scenario: 50% deterioration in each transaction’s main risk factor as compared to the level observed on December 31, 2017.

F-81

 

Transaction	Risk	Fair value	Probable scenario	Adverse scenario	Remote
					scenario
Commodities hedge	Decrease on commodities price	95.8	-70.6	-392.9	-881.7
Input purchase		-95.8	108.7	498.8	1093.5
Foreign exchange hedge	Foreign currency decrease	-2.2	-105	-1,843.10	-3,684.00
Input purchase		2.2	105	1,843.10	3,684.00
Costs effects		-	38.1	105.9	211.8
Foreign exchange hedge	Foreign currency decrease	-8.9	-16.8	-153.8	-298.6
Capex Purchase		8.9	16.8	153.8	298.6
Fixed assets effects		-	-	-	-
Foreign exchange hedge	Foreign currency decrease	-1.3	-3.4	-45.7	-90.2
Expenses		1.3	3.4	45.7	90.2
Expenses effects		-	-	-	-
Hedge cambial	Foreign currency increase	-13.1	-37.5	-341.4	-669.8
Cash		13.1	37.5	341.4	669.8
Interest Hedge	Decrease in interest rate	-	-0.4	-2.9	-3.4
Interest revenue		-	0.4	2.9	3.4
Cash effects		-	-	-	-
Hedge cambial	Foreign currency decrease	-	-	-	-
Cash		-	9.7	140.6	281.3
Interest Hedge	Increase in interest rate	28.2	18.4	-131.5	-162.7
Interest expenses		-28.2	-18.4	131.5	162.7
Debt effects		-	9.7	140.6	281.3
Equity Instrument Hedge	Stock Exchange Price Decrease	69.2	54.3	-100.1	-269.3
Expenses		-69.2	-19.4	517.8	1104.8
Equity effects		-	34.9	417.7	835.5
		-	82.7	664.2	1,328.60

F-82

 

As of December 31, 2017 the Notional and Fair Value amounts per instrument and maturity were as follows:

		Notional Value
Exposure	Risk	2018	2019	2020	2021	2021	Total
Cost		9,219.2	99.7	-	-	-	9,318.9
	Commodity	1,859.2	96.1	-	-	-	1,955.3
	American Dollar	6,879.1	-	-	-	-	6,879.1
	Euro	82.9	-	-	-	-	82.9
	Mexican Peso	398.0	3.6	-	-	-	401.6
Fixed asset		579.5	-	-	-	-	579.5
	American Dollar	531.9	-	-	-	-	531.9
	Euro	47.6	-	-	-	-	47.6
Expenses		177.7	-	-	-	-	177.7
	American Dollar	169.2	-	-	-	-	169.2
	Rupee	8.5	-	-	-	-	8.5
Cash		1,313.3	-	15.0	-	-	1,328.3
	American Dollar	1,313.3	-	-	-	-	1,313.3
	Interest rate	-	-	15.0	-	-	15.0
Debt		-	-	-	110.0	246.9	356.9
	Interest rate	-	-	-	110.0	246.9	356.9
Foreign Investments		677.0	-	-	-	-	677.0
	American Dollar	677.0	-	-	-	-	677.0
		11,966.7	99.7	15.0	110.0	246.9	12,438.3

F-83

 

		Fair Value
Exposure	Risk	2018	2019	2020	2021	> 2021	Total
Cost		89.0	4.6	-	-	-	93.6
	Commodity	91.1	4.7	-	-	-	95.8
	American Dollar	(7.1)	-	-	-	-	(7.1)
	Euro	2.8	-	-	-	-	2.8
	Mexican Peso	2.2	(0.1)	-	-	-	2.1
Fixed asset		(8.9)	-	-	-	-	(8.9)
	American Dollar	(9.0)	-	-	-	-	(9.0)
	Euro	0.1	-	-	-	-	0.1
Expenses		(1.3)	-	-	-	-	(1.3)
	American Dollar	(1.3)	-	-	-	-	(1.3)
	Rupee	-	-	-	-	-	-
Cash		(13.1)	-	-	-	-	(13.1)
	American Dollar	(13.1)	-	-	-	-	(13.1)
	Interest rate	-	-	-	-	-	-
Debt		-	-	-	25.0	3.2	28.2
	Interest rate	-	-	-	25.0	3.2	28.2
Equity Instrument		69.2	-	-	-	-	69.2
	Stock prices	69.2	-	-	-	-	69.2
		134.9	4.6	-	25.0	3.2	167.7

II.Credit Risk

Concentration of credit risk on trade receivables

A substantial part of the Company’s sales is made to distributors, supermarkets and retailers, within a broad distribution network. Credit risk is reduced because of the widespread number of customers and control procedures used to monitor risk. Historically, the Company has not experienced significant losses on receivables from customers.

Concentration of credit risk on counterpart

In order to minimize the credit risk of its investments, the Company has adopted procedures for the allocation of cash and investments, taking into consideration limits and credit analysis of financial institutions, avoiding credit concentration, i.e., the credit risk is monitored and minimized to the extent that negotiations are carried out only with a select group of highly rated counterparties.

The selection process of financial institutions authorized to operate as the Company’s counterparty is set forth in our Credit Risk Policy. This Credit Risk Policy establishes maximum limits of exposure to each counterparty based on the risk rating and on each counterparty's capitalization.

F-84

 

In order to minimize the risk of credit with its counterparties on significant derivative transactions, the Company has adopted bilateral “trigger” clauses. According to these clauses, where the fair value of an operation exceeds a percentage of its notional value (generally between 10% and 15%), the debtor settles the difference in favor of the creditor.

As of December 31, 2017, the Company held its main short-term investments with the following financial institutions: Banco do Brasil, Bradesco, Bank Mendes Gans, Caixa Econômica Federal, Citibank, Itaú, JP Morgan Chase, Merrill Lynch, Santander e Toronto Dominion Bank. The Company had derivative agreements with the following financial institutions: Banco Bisa, Barclays, BNB, BNP Paribas, Bradesco, Bank Mendes Gans, Citibank, Deutsche Bank, Itaú, Goldman Sachs, JP Morgan Chase, Macquarie, Merrill Lynch, Morgan Stanley, Santander, ScotiaBank e TD Securities.

The carrying amount of cash and cash equivalents, investment securities, trade receivables excluding prepaid expenses, recoverable taxes and derivative financial instruments are disclosed net of provisions for impairment and represents the maximum exposure of credit risk as of December 31, 2017. There was no concentration of credit risk with any counterparties as of December 31, 2017.

III.Liquidity Risk

The Company believes that cash flows from operating activities, cash and cash equivalents and short-term investments, together with the derivative financial instruments and access to loan facilities are sufficient to finance capital expenditures, financial liabilities and dividend payments in the future.

IV.Equity price risk

Through the equity swap transaction approved on May 16th, 2017 and altered in December 21th, 2017 by the Board of Directors of Ambev (see Note 1 - Corporate information) , the Company, or its subsidiaries, will receive the price variation related to its shares traded on the stock exchange or ADRs, neutralizing the possible effects of the stock prices’ oscillation in view of the share-based payment of the Company. As these derivative instruments are not characterized as hedge accounting they were not therefore designated to any hedge.

In December 2017, an exposure equivalent to R$2.3 billion in AmBev’s shares (or ADR’s) was partially hedged, resulting in a gain in income statement of R$ 67.0.

F-85

 

V.Capital management

Ambev is continuously optimizing its capital structure targeting to maximize shareholder value while keeping the desired financial flexibility to execute the strategic projects. Besides the statutory minimum equity funding requirements that apply to the Company’s subsidiaries in the different countries, Ambev is not subject to any externally imposed capital requirements. When analyzing its capital structure, the Company uses the same debt ratings and capital classifications as applied in the Company’s financial statements.

Financial instruments

(a) Financial instruments categories

Management of the financial instruments held by the Company is effected through operational strategies and internal controls to assure liquidity, profitability and transaction security. Financial instruments transactions are regularly reviewed for the effectiveness of the risk exposure that management intends to cover (foreign exchange, interest rate, etc.).

The table below shows all financial instruments recognized in the financial statements, segregated by category:

	2017
	Loans and receivables	Held for trading	Financial assets/liabilities at fair value through profit or loss	Derivatives hedge	Financial  liabilities  through amortized cost	Total
Financial assets
Cash and cash equivalents	10,354.5	-	-	-	-	10,354.5
Investment securities	-	122.0	11.9	-	-	133.9
Trade  receivables excluding prepaid expenses	7,505.0	-	-	-	-	7,505.0
Financial instruments derivatives	-	-	100.1	285.1	-	385.2
Total	17,859.5	122.0	112.0	285.1	-	18,378.6
Financial liabilities
Trade payables and put option granted on subsidiary and other liabilities	-	-	5,764.1	-	13,502.0	19,266.1
Financial instruments derivatives	-	-	16.1	201.4	-	217.5
Interest-bearning loans and borrowings	-	-	-	-	2,553.0	2,553.0
Total	-	-	5,780.2	201.4	16,055.0	22,036.6

F-86

 

	2016
	Loans and receivables	Held for  trading	Financial assets/liabilities at fair value through profit or loss	Derivatives hedge	Financial liabilities through amortized cost	Total
Financial assets
Cash and cash equivalents	7,876.8	-	-	-	-	7,876.8
Investment securities	-	104.3	282.8	-	-	387.1
Trade receivables excluding prepaid expenses	6,962.5	-	-	-	-	6,962.5
Financial instruments derivatives	-	-	18.4	194.5	-	212.9
Total	14,839.3	104.3	301.2	194.5	-	15,439.3
Financial liabilities
Trade payables and put option granted on subsidiary and other liabilities	-	-	5,106.1	-	13,208.1	18,314.2
Financial instruments derivatives	-	-	49.9	663.5	-	713.4
Interest-bearning loans and borrowings	-	-	-	-	5,396.3	5,396.3
Total	-	-	5,156.0	663.5	18,604.4	24,423.9

(b) Classification of financial instruments by type of fair value measurement

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Also pursuant to IFRS 13, financial instruments measured at fair value shall be classified within the following categories:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date valuation;

Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 – unobservable inputs for the asset or liability.

F-87

 

	2017				2016
	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Financial assets
Financial asset at fair value through profit or loss	11.9	-	-	11.9	282.8	-	-	282.8
Derivatives assets at fair value through profit or loss	0.1	100.0	-	100.1	2.6	15.8	-	18.4
Derivatives - operational hedge	4.8	280.3	-	285.1	83.6	110.9	-	194.5
	16.8	380.3	-	397.1	369.0	126.7	-	495.7
Financial liabilities
Financial liabilities at fair value through profit and loss (i)	-	-	5,764.1	5,764.1	-	-	5,106.1	5,106.1
Derivatives liabilities at fair value through profit or loss	1.7	14.4	-	16.1	9.9	40.0	-	49.9
Derivatives - operational hedge	58.4	143.0	-	201.4	78.9	575.9	-	654.8
Derivatives - fair value hedge	-	-	-	-	-	8.7	-	8.7
	60.1	157.4	5,764.1	5,981.6	88.8	624.6	5,106.1	5,819.5

(i) Refers to the put option granted on subsidiary as described in Note 21 d(4).

Reconciliation of changes in the categorization of Level 3

Financial liabilities at December 31, 2016 (i)	5,106.1
Acquisition of investments	7.4
Total gains and losses in the year	650.6
Losses recognized in net income	359.1
Losses recognized in equity	291.5
Financial liabilities at December 31, 2017 (i)	5,764.1

(i) The liability was recorded under “Trade payables and put option granted on subsidiary and other liabilities” on the balance sheet.

(c) Fair value of financial liabilities measured at amortized cost

The Company’s liabilities, interest-bearing loans and borrowings, trade payables excluding tax payables, are recorded at amortized cost according to the effective rate method, plus indexation and foreign exchange gains/losses, based on closing indices for each exercise.

The financial instruments recorded at amortized cost are similar to the fair value and are not material for disclosure.

Calculation of fair value of derivatives

The Company measures derivative financial instruments by calculating their present value, through the use of market curves that impact the instrument on the computation dates. In the case of swaps, both the asset and the liability positions are estimated independently and brought to present value, where the difference between the result of the asset and liability amount generates the swaps market value. For the traded derivative financial instruments, the fair value is calculated according to the adjusted exchange-listed price.

F-88

 

Margins given in guarantee

In order to comply with the guarantee requirements of the derivative exchanges and/or counterparties in certain operations with derivative financial instruments, as of December 31, 2017 the Company held R$608.3 in highly liquid financial investments or in cash, classified as cash and cash equivalents and investment securities (R$486.8 on December 31, 2016).

Offsetting of financial assets and liabilities

For financial assets and liabilities subject to settlement agreements by the net or similar agreements, each agreement between the Company and the counterparty allows this type of settlement when both parties make this option. In the absence of such election, the assets and liabilities will be settled by their amounts, but each party shall have the option to settle on net, in case of default by the counterparty.

28.OPERATING LEASES

The Company primarily leases warehouses and offices.

The future contractual values mature as follows:

	2017	2016
Less than 1 year	35.7	26.7
Between 1 and 5 years	129.4	61.4
More than 5 years	71.1	66.5
	236.2	154.6

In 2017, the operating lease expense in the income statement amounted to R$39.0 (R$43.4 and R$58.7 in 2016 and 2015, respectively).

29.COLLATERAL AND CONTRACTUAL COMMITMENTS WITH SUPLLIERS, ADVANCES FROM CUSTOMERS AND OTHER

	2017	2016
Collateral given for own liabilities	606.3	1,051.5
Other commitments	842.7	754.3
	1,449.0	1,805.8
Commitments with suppliers (i)	11,096.3	4,019.2
Commitments - Bond 2017	-	300.0
	11,096.3	4,319.2

(i)Variation refers, mainly, a new contracts with a new suppliers of aluminum in 2017. 

F-89

 

The collateral provided for liabilities totaled approximately R$1,449.0 as at December 31, 2017 (R$1,805.8 as at December 31, 2016), including R$551.0 (R$571.3  as at December 31, 2016) of cash guarantees. The deposits in cash used as guarantees are presented as part of other assets. To meet the guarantees required by derivative exchanges and/or counterparties contracted in certain derivative financial instrument transactions, Ambev maintained as at December 31, 2017, R$606.3 (R$486.8 as at December 31, 2016) in highly liquid financial investments or in cash, classified as cash and cash equivalents and investment securities (Note 27 – Financial instruments and risks).

Most of the balance relates to commitments with suppliers of packaging.

Future contractual commitments as at December 31, 2017 and 2016 are as follows:

	2017	2016
Less than 1 year	3,812.8	3,325.7
Between 1 and 2 years	2,995.7	420.8
More than 2 years	4,287.8	572.7
	11,096.3	4,319.2

30.CONTINGENT LIABILITY

The Company has contingent liabilities arising from lawsuits in the normal course of its business. Due to their nature, such legal proceedings involve inherent uncertainties including, but not limited to, court and tribunals rulings, negotiations between affected parties and governmental actions, and as a consequence the Company’s management cannot at this stage estimate the likely timing of the resolution of these matters.

Contingent liabilities with a probable likelihood of loss are fully recorded as liabilities (Note 26 – Provisions).

The Company also has lawsuits related to tax, civil and labor, for which the likelihood of loss classified by management as possible and for which there are no provisions. Estimates of amounts of possible losses are as follows:

	2017	2016
IRPJ and CSLL	31,757.3	28,934.8
PIS and COFINS	3,485.2	1,971.1
ICMS and IPI	19,805.5	16,046.9
Labor	287.1	222.0
Civil	4,071.5	4,417.6
Others	1,113.4	858.1
	60,520.0	52,450.5

F-90

 

Principal lawsuits with a likelihood of possible loss:

Brazilian Federal Taxes

Special goodwill reserve

In December 2011, the Company received a tax assessment related to the goodwill amortization resulting from Inbev Holding Brasil S.A. In November 2014 the Lower Administrative Court concluded the judgment. The decision was partly favorable, Ambev presented a motion to clarify the decision to the Administrative Court. In September 2016, this motion was partially admitted and Ambev was formally notified of said decision in January 2018. As the decision of the Administrative Council of Tax Appeals (“CARF”) remained partially favorable, Ambev will file a judicial proceeding to discuss the unfavorable part of the decision and received a favorable decision in the injuctionand the remaining portion will still be submitted for reconsideration by the Administrative Upper Court.

In June 2016, Ambev received tax assessment charging the remaining value of the goodwill amortization, related to InBev B Holding Brasil S.A’s merger with Ambev, from 2011 to 2013. In March 2017, Ambev was notified of the partially favorable first level administrative decision on this tax assessment and filed an appeal to Lower Administrative Court.

Ambev management estimates possible losses in relation to the total amortization period (2005-2013) to be approximately R$8.3 billion (R$7.8 billion as of 31 December 2016), classified as possible loss, and, therefore, no provision was made by the Company in this matter. In the event Ambev is required to pay these amounts, AB Inbev will reimburse Ambev the amount proportional (70%) to the benefit received by the company pursuant to the merger protocol, as well as the related costs. 

Goodwill BAH

In October 2013, we also received a tax assessment related to the goodwill amortization resulting from the merger of Beverage Associates Holding Limited (“BAH”) into Ambev. In December 2014, Ambev filed an appeal against the unfavorable first level administrative decision published in November 2014. In March 2017, Lower Administrative Court concluded the judgment to send the case back to the first level administrative judgment due to processual matters. In July 2017, Ambev was notified of the revised first level decision and filed a new Voluntary Appeal. The possible risk amount is approximately R$ 1.6 billion (R$ 1.5 billion as of December 31, 2016). There was no provision made on the matter.

F-91

 

Goodwill CND Holdings

In November 2017, Ambev received a tax assessment related to the amortized goodwill related to the merger of CND Holdings into Ambev. Ambev filed a defense at the legal term and awaits judgment by the Federal Revenue Service (“DRJ”). The possible risk amount is approximately R$ 1.1 billion. There was no provision made on the matter.

Profits earned abroad

During the first quarter of 2005, certain of our subsidiaries received a number of assessments from the RFB relating to profits obtained by subsidiaries domiciled abroad.  In December 2008, the Administrative Court handed down a decision on one of the tax assessments relating to earnings of our foreign subsidiaries.  This decision was partially favorable to us, and in connection with the remaining part, we filed an appeal to the Appellate Division of the Administrative Court which was finally dismissed in March 2017. In September 2017, Ambev filed a court order to discuss the matter with an injunction granted in favor of the Company.

In December 2013, 2016 and October 2017, the Company received tax assessments related to the matter. We have not recorded any provision in connection with those assessments. We estimate our exposure to possible losses in relation to these assessments to be R$6.1billion (R$4.9 billion at December 31, 2016) and to probable losses to be R$44.2 million as of that date, for which we have recorded a provision in the corresponding amount (R$41.6 million at December 31, 2016).

Utilization of tax loss on mergers

The Company and its subsidiaries have received tax assessments from the Brazilian Tax authorities, from certain tax credits arising from alleged non-compliance with the Brazilian tax regulation concerning accumulated tax losses by companies in their final year of existence, following a merger.

In February 2016, Ambev was notified of the closure of the administrative phase and filed lawsuits to discuss the matter. In September 2016, Ambev received the first favorable court decision. In March 2017, Ambev received an unfavorable decision in the first judicial instance in the second case under discussion in the judiciary and filed an Appeal.

No provisions have been made for these cases as Ambev believes that there are no express legal grounds that limit the use of tax losses in cases where legal entities are extinguished (including in the case of mergers), and therefore the tax inspector’s interpretation in these tax assessments does not apply.

F-92

 

The Company estimates the possible exposure to losses on these assessments at approximately R$549.4 million (R$522.9 million at December 31, 2016).

Disallowance of Expenses and Deductible Losses

On December 2014, Ambev received a tax assessment from the Brazilian Federal Tax Authorities related to the disallowance of alleged non-deductible expenses and the deduction of certain losses mainly associated to financial investments and loans, in the amount of approximately R$1.3 billion. In August 2017, the Administrative Council of Tax Appeals ("CARF") concluded the judgment fully favorable to Ambev and, in December 2017, Ambev was notified of said decision, as well as of the manifestation from the fiscal authority informing the non-interposition of appeal and the permanent discontinuance of the case.

In December 2015 and in December 2016, Ambev also received other tax assessments related to the same matter. Ambev Management estimates the amount of possible losses in relation to this assessment to be approximately R$4.4 billion as of December 31, 2017 (R$5.6 billion as of December 31, 2016).

Disallowance of taxes paid abroad

Since 2014, Ambev has been receiving tax assessments from the Brazilian Federal Tax Authorities related to the disallowance of deductions associated with alleged unproven taxes paid abroad.

The Company filed a defense for all cases and awaits a decision in the first instance for the cases received in 2015 and 2016 and by the Administrative Court Management for the others.

In September, 2017, Ambev opted to include part of these tax assessments in the Special Tax Regularization Program established by the Provisional Measure nº. 783 (“PERT”). Ambev management estimates an amount of approximately R$7.2 billion (R$2.8 billion as of December 31, 2016) as possible loss.

Presumed Profit

In April 2016, Arosuco (subsidiary of Ambev) received a tax assessment regarding the use of Presumed Profit Method for the calculation of income tax and the social contribution on net profit instead of Real Profit method. In September, 2017, Arosuco was notified of the unfavorable first level administrative decision and filed Voluntary Appeal. Arosuco management estimates the amount of possible losses in relation to this assessment to be approximately R$616.1 million (R$569.6 billion as of December 31, 2016).

F-93

 

In December 2016, CRBS (a subsidiary of Ambev) received a tax assessment regarding the use of Presumed Profit Method for the calculation of income tax and social contribution on net profit instead of the Real Profit method. In July 2017, CRBS received an unfavorable decision at the first administrative instance and filed a Voluntary Appeal. In September 2017, the Company opted to include this tax assessment in the Special Tax Regularization Program established by Provisional Measure nº. 783 (“PERT”). There are no loss amounts related to this matter as of December 31, 2017 (R $ 3.6 billion as of December 31, 2016).

PIS and COFINS

PIS/COFINS over bonus products

Since 2015, Ambev has been receiving tax assessments issued by the Brazilian federal tax authorities, relating to amounts allegedly due under Integration Programme/Social Security Financing Levy (PIS/COFINS) over bonus products granted to its customers. The cases are now being discussed at Courts. Ambev management estimates the possible losses related to these assessments to be approximately R$3.1 billion (R$1.5 billion as of 31 December 2016).

ICMS and IPI

ICMS-ST Unconditional Discounts

Ambev has been party to legal proceedings with the State of Rio de Janeiro where it is challenging such State’s attempt to assess ICMS Value-Added Tax with respect to unconditional discounts granted by Ambev from January 1996 to February 1998. In October 2015 and January 2016, Ambev decided pay the debts related to the assessments issued by the State of Rio de Janeiro under an incentive tax payment, in the total amount of approximately R$271 million. In 2013, 2014 and  2015, Ambev has been receiving similar tax assessments with the States of Pará and Piauí. The Company filed a defense for this cases and currently awaits a decision. After the payments to the State of Rio de Janeiro, Ambev management estimates the amount involved in these proceedings to be approximately R$599.7 million (R$559.5 million as of 31 December 2016), classified as possible loss.

ICMS fiscal war

Ambev is currently challenging tax assessments from the States of São Paulo, Rio de Janeiro, Minas Gerais and other States, which question the legality of tax credits arising from existing tax incentives received in other States. Ambev management estimates the possible losses related to these assessments to be approximately R$1.9 billion (R$1.8 billion as of December 31, 2016) classified as possible loss.

F-94

 

ICMS-ST Trigger

Over the years, Ambev has received tax assessments relating to supposed ICMS differences considered due when the price of the products sold by the company reaches levels close to or above the fixed price table basis established by States. Ambev is currently challenging those charges before Courts

Among other similar cases, in 2016, Ambev received three assessment, issued by the State of Minas Gerais, in the original amount of R$1.4 billion. In the second quarter of 2017, the Administrative Court of the State Minas Gerais,  concluded the judgment of three relevant cases, unfavorably to Ambev. Ambev presented defense against such decisions to the Upper House of the Administrative Tax Court of the State of Minas Gerais and awaits for judgement.

In 2017, Ambev has receive a new tax assessments issued by the State of Rio de Janeiro, about these same issue in the total historical amount of 900 million. The Company filed a defense for this cases and currently awaits a decision of the Administrative Court of the State Rio de Janeiro.

Ambev management estimates the total possible losses related to this issue to be approximately R$5.8 billion (R$4.5 billion as of 31 December 2016). Ambev has recorded provisions in the total amount of R$6.7 million in relation to the proceedings for which it considers the chances of loss to be probable, considering specific procedural issues.

Manaus Free Trade Zone - IPI

Goods manufactured within the Manaus Free Trade Zone – ZFM intended for consumption elsewhere in Brazil are exempt from the IPI. The units of Ambev have been registering IPI presumed credits upon the acquisition of exempted inputs manufactured therein in the Manaus Free Trade Zone. Since 2009 we have been receiving a number of tax assessments from the RFB relating to the disallowance of such presumed credits, which are under discussion before the Brazilian Supreme Court. Management estimates possible losses in relation to these assessments to be R$3.2 billion (R$2.0 billion as of December 31, 2016).

In addition, over the years, Ambev has received tax assessments from the Brazilian Federal Tax Authorities charging federal taxes considered unduly offset with the disallowed IPI excise tax credits which are under discussion in other proceedings. Ambev is challenging those charges before Courts. Ambev management estimates the possible losses related to these assessments to be approximately R$900 million (R$735.5  million as of 31 December 2016).

F-95

 

IPI Excise Tax

In 2014 and 2015, we received tax assessments from Brazilian Federal Tax Authorities related to IPI exercise tax, supposedly due over remittances of manufactured goods to other related factories. Management estimates the possible losses related to these assessments to be approximately R$1.5 billion (R$1.5 billion as of December 31, 2016).

Civil

Subscription Warrants

Certain holders of warrants issued by Old Ambev in 1996 for exercise in 2003 have filed lawsuits to be able to subscribe the corresponding shares for an amount lower than what the Company considers to have been established at the time of the issuance of the warrants. The warrants object of those six proceedings represented, on December 31, 2017, 172.8 million Ambev common shares that would be issued at a value substantially below fair market value, should claimants ultimately prevail.  The plaintiffs also claim they should receive past dividends related to these shares in the amount of R$846,9 million (R$761.7 million on December 31, 2016). The Company believes that the loss of this lawsuit is possible has not recorded any provision in connection therewith. In the last quarter of 2017 the Company reassessed and the likelihood of loss is remote of this lawsuits and will not be disclosure of the coming interim financial statements.

Lawsuit  against Brewers Retail Inc.

On 12 December 2014, claimants in Canada brought a lawsuit against the Liquor Control Board of Ontario (“LCBO”), Brewers Retail Inc. (“The Beer Store”) and the owners of The Beer Store (Molson Coors Canada, Sleeman Breweries Ltd. and Labatt Breweries of Canada LP). The lawsuit, brought pursuant to the Ontario Class Proceedings Act in the Ontario Superior Court of Justice, seeks a declaration that LCBO and The Beer Store agreed with each to allocate sales, territories, customers or markets for the supply of beer sold in Ontario since June 1, 2000, and a declaration that the owners of The Beer Store agreed to fix. The claimants are seeking damages not exceeding R$3.7 billion (R$3,4 billion as of December 31, 2016), for all mentioned parts. Considering that The Beer Store operates according to the rules established by the Government of Ontario and that  prices at The Beer Store are independently set by each brewer, the Company believes that there are strong defenses and, accordingly, has not recorded any provision in connection therewith.

F-96

 

Contingent assets

According to IAS 37, contingent assets are not recorded in consolidated financial statements, except when the realization of income is virtually certain. There was no probable contingent assets to be disclosed on December 31, 2017.

The Company and its subsidiaries apply for the refund of the PIS and COFINS installments collected with the inclusion of ICMS in their calculation bases for the period from 1990 onwards. The amounts involved in the refund requests are still being determined.

31.NON-CASH ITEMS

The Company carried out the following investment and financing activities not involving cash:

	2017	2016	2015
Acquisition of property, plant and equipment	-	-	105.6
Acquisition of investments payables	-	208.7	-
Cash financing cost other than interests	42.3	37.7	1,752.3
PERT 2017	199.7	-	-
Fair value of option granted	221.8	205.1	144.6
Others	-	-	41.1

32.RELATED PARTIES

Policies and practices regarding the realization of transactions with related parties

The Company adopts corporate governance practices and those recommended and/or required by the applicable law.

Under the Company’s by laws the Board of Directors is responsible for approving any transaction or agreements between the Company and/or any of its subsidiaries, directors and/or shareholders (including shareholders, direct or indirect shareholders of the Company). The Antitrust Compliance and Related Parties Committee of the Company is required to advise the Board of Directors of the Company in matters related to transactions with related parties.

Management is prohibited from interfering in any transaction in which conflict exists, even in theory, with the Company interests. It is also not permitted to interfere in decisions of any other management member, requiring documentation in the Minutes of Meeting of the Board any decision to abstain from the specific deliberation.

The Company’s guidelines with related parties follow reasonable or commutative terms, similar to those prevailing in the market or under which the Company would contract similar transactions with third parties. These are clearly disclosed in the financial statements as reflected in written contracts.

F-97

 

Transactions with management members:

In addition to short-term benefits (primarily salaries), the management members are entitled to participate in Stock Option Plan (Note 24 – Share-based payments).

Total expenses related to the Company’s management members are as follows:

	2017	2016	2015
Short-term benefits (i)	33.4	21.7	32.1
Share-based payments (ii)	38.9	36.2	39.0
Total key management remuneration	72.3	57.9	71.1

(i) These correspond substantially to management’s salaries and profit sharing (including performance bonuses).

(ii) These correspond to the compensation cost of stock options and restricted stocks granted to management. These amounts exclude remuneration paid to members of the Fiscal Council.

Excluding the above mentioned plan (Note 24 – Share-based payments), the Company no longer has any type of transaction with the Management members or pending balances receivable or payable in its balance sheet.

Transactions with the Company's shareholders:

a) Medical, dental and other benefits

The Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficiência (“Fundação Zerrenner) is one of Ambev’s shareholders, and at December 31, 2017 held 10.2% of total share capital. Fundação Zerrenner is also an independent legal entity whose main goal is to provide Ambev’s employees, both active and retirees, with health care and dental assistance, technical and superior education courses, facilities for assisting elderly people, through direct initiatives or through financial assistance agreements with other entities. On December 31, 2017 and 2016, actuarial responsibilities related to the benefits provided directly by Fundação Zerrenner are fully funded by plan assets, held for that purpose, which significantly exceeds the liabilities at these dates. Ambev recognizes the assets (prepaid expenses) of this plan to the extent of amounts from economic benefits available to the Company, arising from reimbursements or future contributions reduction.

The expenses incurred by Fundação Zerrenner in providing these benefits totaled R$300.1 (R$266.7 as of December 31, 2016), of which R$264.3 and R$35.8 related to active employees and retirees respectively (R$231.9 and R$34.8 as of December 31, 2016 related to active employees and retirees respectively).

F-98

 

b) Leasing

The Ambev, through its subsidiary BSA (labeling), has an asset leasing agreement with Fundação Zerrenner, for R$63,3 for ten years, maturing on March 31, 2018.

c) Leasing – Ambev. head office

Ambev has a leasing agreement of two commercial sets with Fundação Zerrenner in the annual amount of R$3.3, maturing on January, 2020.

d) Licensing agreement

The Company maintains a licensing agreement with Anheuser-Busch, Inc., to produce, bottle, sell and distribute Budweiser products in Brazil, Canada, and sales and distribution agreements of Budweiser products in Guatemala, Dominican Republic, Paraguay, El Salvador, Nicaragua, Uruguay and Chile. In addition, the Company produces and distributes Stella Artois products under license to ABI in Brazil and Canada and, by means of a license granted to ABI, it also distributes Brahma’s product in the United States and several countries such as the United Kingdom, Spain, Sweden, Finland and Greece. The amount recorded was R$1.9 (R$2.0 on December 31, 2016 and R$52.8 on December 31, 2015) and R$314.5 (R$374.0  on December 31, 2016 and R$434.8 on December 31, 2015) as licensing income and expense, respectively.

Ambev has licensing agreements with the Group Modelo, subsidiaries of ABI, for to import, promote and sell products Corona (Corona Extra, Corona Light, Coronita, Pacifico and Negra Modelo) in countries of the Latin America and the Canada.

Transactions with related parties

	2017
Current	Trade receivables (i)	Other Trade receivables (i)	Trade payables  (i)	Other Trade payables  (i)	Borrowings and  interest payable	Dividends payables
AB InBev	1.2	33.6	(363.0)	(1.7)	-	-
AB Procurement	8.9	0.1	-	-	-	-
AB Services	0.8	29.1	-	(6.1)	-	-
AB USA	14.1	16.3	(375.7)	(8.7)	-	-
Ambrew	-	-	-	-	-	(89.9)
Cervecería Modelo	91.6	5.8	(589.3)	(59.7)	-	-
Inbev	0.1	23.8	(33.8)	-	-	-
ITW International	-	-	-	(212.5)	(48.3)	(590.9)
Panamá Holding	-	20.3	-	(4.0)	-	-
Others	13.9	8.6	(73.8)	(3.0)	-	-
	130.6	137.6	(1,435.6)	(295.7)	(48.3)	(680.8)

(i) The amount represents the trade operations (purchase and sale) and the reimbursement between the companies of the group.

F-99

 

	2016
Current	Trade receivables (i)	Other Trade  receivables (i)	Trade payables  (i)	Other Trade  payables  (i)	Borrowings and interest payable	Dividends payables
AB InBev	6.3	13.4	(308.9)	(0.7)	-	-
AB Package	-	-	(31.3)	-	-	-
AB Services	0.3	15.2	-	(3.1)	-	-
AB USA	19.7	18.6	(247.4)	(1.7)	-	-
Ambev Peru	7.1	-	(4.7)	-	-	-
Ambrew	-	-	-	-	-	(89.9)
Bogotá Beer	-	211.0	-	(211.0)	-	-
Cervecería Modelo	1.1	-	(444.1)	-	-	-
Inbev	0.2	17.6	(17.5)	(0.2)	-	-
ITW International	-	-	-	(209.4)	(30.5)	(590.9)
Modelo	-	1.0	(15.7)	(54.5)	-	-
Others	2.6	7.3	(6.2)	(14.4)	-	-
	37.3	284.1	(1,075.8)	(495.0)	(30.5)	(680.8)

(i) The amount represents the trade operations (purchase and sale) and the reimbursement between the companies of the group.

The tables below represent the transactions with related parties, recognized in the income statement:

				2017
Company	Buying / Service fees / Rentals	Sales	Royalties	Net finance cost
AB Procurement	(5.8)	20.8	-	-
AB USA	(258.7)	42.5	(284.5)	-
Ambev Peru	(8.6)	1.5	-	-
Cervecería Modelo	(749.1)	0.4	(45.8)	-
Inbev	(73.6)	-	-	-
Others	(91.1)	8.1	(35.9)	(16.8)
	(1,186.9)	73.3	(366.2)	(16.8)

				2016
Company	Buying / Service  fees / Rentals	Sales	Royalties	Net finance cost
AB Package	(32.8)	-	-	-
AB USA	(206.0)	52.3	(292.8)	-
Cervecería Modelo	(596.0)	2.0	(46.9)	-
InBev	(77.0)	-	-	-
ITW International	-	-	-	(26.0)
Modelo	(63.0)	-	-	-
SAB Group	(3.5)	23.5	-	-
Others	(45.6)	0.3	(32.2)	-
	(1,023.9)	78.1	(371.9)	(26.0)

F-100

 

			2015
Company	Buying / Service  fees / Rentals	Sales	Royalties
AB Inbev	(55.3)	-	(35.5)
AB USA	(124.9)	49.0	(288.1)
Cervecería Modelo	(257.7)	1.1	(52.9)
InBev	(73.3)	0.1	-
Modelo	(356.9)	-	-
Others	(74.0)	0.6	(1.1)
	(942.1)	50.8	(377.6)

Denomination used in the tables above:

Anheuser-Busch InBev N.V. (“AB InBev”)

Anheuser-Busch Packaging Group Inc. (“AB Package”)

Anheuser-Busch Inbev Services LLC (“AB Services”)

Anheuser-Busch Inbev USA LLC (“AB USA”)

Compañia Cervecera Ambev Peru S.A.C. (“Ambev Peru”)

Ambrew S.A. (“Ambrew”)

Bogotá Beer Company BBC S.A.S. (“Bogotá Beer”)

Cervecería Modelo de Mexico S. de R.L. de C.V. (“Cervecería Modelo”)

Inbev Belgium N.V. (“Inbev”)

Interbrew International B.V. (“ITW International”)

Cervecería Modelo de Guadalajara S.A. (“Modelo”)

Bavaria S.A. (“SAB Group”)

33.GROUP COMPANIES

Listed below are the main group companies.

Argentina
CERVECERIA Y MALTERIA QUILMES SAICA Y G Charcas 5160 – Buenos Aires	99.75%
Bolívia
CERVECERIA BOLIVIANA NACIONAL  S.A. Avenida Montes 400 e Rua Chuquisaca 121 - La Paz	85.67%
Brazil
AMBEV S.A. Rua Dr. Renato Paes de Barros, 1.017, 3º andar, Itaim Bibi, São Paulo	Companhia Consolidadora
AROSUCO AROMAS E SUCOS LTDA. Avenida Buriti, 5.385, Distrito Industrial - Manaus - AM	100.00%
CRBS S.A. Avenida Antarctica, 1.891, Fazenda Santa Úrsula – Jaguariúna – SP	100.00%
CERVEJARIA Z.X. Avenida Antarctica, 1.891, Fazenda Santa Ursula – Jaguariúna - SP	86.42%
Canadá
LABATT BREWING COMPANY LIMITED 207  Queens Quay West, Suite 299 - M5J 1A7 - Toronto	100.00%
Chile
CERVECERIA CHILE S.A. Avenida Presidente Eduardo Frei Montalva, 9.600 - Comuna de Quilicura - Santiago	100.00%
Spain
JALUA SPAIN, S.L. Juan Vara Terán, 14 – Ilhas Canárias	100.00%
Luxembourg
AMBEV LUXEMBOURG  15 Breedewues - L1259 - Sennngerberg	100.00%
Guatemala
INDUSTRIAS DEL ATLÁNTICO, SOCIEDAD ANÓNIMA KM 122 Ruta al Atlantico – C.P 01012 Teculutan, Zacapa	50.00%
Paraguay
CERVECERIA PARAGUAYA S.A. Ruta Villeta KM 30 - Ypané	87.36%
Dominican Republic
CERVECERÍA NACIONAL DOMINICANA, S.A. Autopista 30 de Mayo, Distrito Nacional	55.00%

F-101

 

Uruguay
LINTHAL S.A. 25 de Mayo 444, office 401 - Montevideo	100.00%
CERVECERIA Y MALTERIA PAYSSANDÚ S.A. Rambla Baltasar Brum, 2.933 – 11800 - Payssandu	99.93%
MONTHIERS SOCIEDAD ANÓNIMA Cesar Cortinas, 2.037 - Montevideo	100.00%

F-102

 

Panama
Cervecería Nacional S. de R.L. Planta Pasadena, vía Ricardo J Alfaro y Simón Bolívar, ciudad de Panamá, Rep. De Panamá	100.00%

34.INSURANCE

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

35.EVENTS AFTER THE REPORTING PERIOD

i) In January 2018, Ambev S.A., through its subsidiaries Labatt Breweries and Ambev Luxemburgo, acquired two new loans totaling approximately R$2.0 billion, maturing in up to one year.

ii) In January 2018, Ambev S.A., informed its investors and the market in general that, as per the notice to the market issued as of December 1^st, 2017, concluded the transaction with ELJ, shareholder in Tenedora, owner of almost the totality of CND. As a result of the such transaction, the Company, directly and indirectly, became the owner of approximately 85% of Tenedora, with ELJ owning the remaining 15%, as well as the term of exercise of the call option becomes from January 2019 to January 2022.

F-103

EX-8.1

 

Exhibit 8.1:    MATERIAL SUBSIDIARIES

Our operations are conducted principally by Ambev, and, in the case of our CAC, Latin America South and Canadian operations, by direct and indirect subsidiaries of Ambev.  The following is a list of the significant companies that Ambev controlled, either directly or indirectly, as of December 31, 2017: 

1.The Company indirectly owns 99.75% of the economic and voting interests in Cerveceria Y Malteria Quilmes Saica Y G (incorporated in Argentina).

2.The Company indirectly owns 85.67% of the economic and voting interests in Cerveceria Boliviana Nacional S.A. (incorporated in Bolivia).

3.The Company, directly and indirectly, owns 100% of the economic and voting interests in Arosuco Aromas e Sucos Ltda. (incorporated in Brazil).

4.The Company, directly and indirectly, owns 100% of the economic and voting interests in CRBS S.A (incorporated in Brazil).

5.The Company directly owns 86.42% of the economic and voting interests in Cervejaria ZX S.A. (incorporated in Brazil).

6.The Company indirectly owns 100% of Labatt Brewing Co. Ltd. (incorporated in Canada).

7.The Company indirectly owns 100% of the economic and voting interests in Cerveceria Chile S.A. (incorporated in Chile).

8.The Company indirectly owned 55.0% of the economic and voting interests in Cervecería Nacional Dominicana S.A. (incorporated in Dominican Republic) as of December 31, 2017, which was increased to 85.0% on January 18, 2018.

9.The Company indirectly owns 50.0% of the economic and voting interests in Industrias Del Atlántico, Sociedad Anónima (incorporated in Guatemala).

10.The Company directly owns 100% of the economic and voting interests in Ambev Luxembourg S.à R.L. (incorporated in Luxembourg).

11.The Company, directly and indirectly, owns 100% of the economic and voting interests in Cervecería Nacional S. de R.L. (incorporated in Panama).

12.The Company indirectly owns 87.36% of the economic and voting interests in Cerveceria Paraguaya S.A. (incorporated in Paraguay).

13.The Company directly owns 100% of the economic and voting interests in Jalua Spain S.L. (incorporated in Spain).

14.The Company indirectly owns 100% of the economic and voting interests in Monthiers S.A. (incorporated in Uruguay).

15.The Company indirectly owns 100% of the economic and voting interests in Linthal S.A., (incorporated in Uruguay).

16.The Company indirectly owns 99.93% of the economic and voting interests in Cerveceria Y Malteria Payssandú S.A. (incorporated in Uruguay).

EX-11.1

Code of Business Conduct

Introduction

Ambev operates in several countries and cultures as part of Anheuser-Busch InBev group (AB InBev), global leader in the beer market. In order to keep our Company united it is essential for us to follow an ethical, clear and consistent code of conduct, since that, in order to achieve our business goals, we always adhere to the highest standards of business integrity and ethics and comply with all applicable laws and regulations.

Therefore, Ambev's Code of Business Conduct (the "Code of Conduct") includes the most important ethical behavior principles that should guide all our employees in their daily activities, as well as all entities operating on our behalf.  

This Code of Conduct, along with our principles and other Ambev policies plays an essential role in building the foundation for long-term success. No financial goal, sales target or effort to outdo the competition outweighs our commitment to ethics, integrity, and compliance with applicable law.

This Code of Conduct applies to all directors, officers and employees ("Ambev's People" or "Employees") of Ambev S.A. and its subsidiaries in Brazil and abroad ("Ambev" or the "Company"), as well as to all business transactions we engage in, also expressing the principles to be followed by individuals and entities operating on our behalf. We expect our suppliers, service providers, and other business partners to act consistently with this Code of Conduct.

All Employees should carefully read and understand this Code of Conduct. Leaders should also guarantee that the Code of Conduct is known and followed within their respective areas of responsibility, and that it receives proper attention and follow-up.

Ambev's People are encouraged to report to the Company any activity or requested action that they believe to be, even potentially, in violation of the Company's laws, regulations or policies, including this Code of Conduct. Reporting should be done to the Compliance Area of the Legal Department (the "Compliance Area") or through the Compliance Helpline (see item 21.2 below). Ambev prohibits and will not tolerate any reprisal or threat of reprisal against any Employee reporting such violation. Only with your active support we can be the Best Beer Company bringing people together in a Better World.

Bernardo Pinto Paiva

Victorio Carlos de Marchi

1

 

Contents

1.Our principles

2.Culture

3.Honest and ethical conduct

4.Environment, health and safety

5.Human rights

6.Responsible Drinking

7.Compliance with competition law

8.Conflicts of interest

9.Anti-corruption policy

10.Gifts and Hospitality

11.Political contributions and Mandates

12.Books, Records and Controls

13.Code of Dealing

14.     Confidential information

15.Emails, Internet and information systems

16.Social media and instant messaging applications

17.Use of Company's assets

18.Code of Responsible Commercial Communication

19.     External communication

20.Ethics Committee

21.Contacts: Compliance Channel and Compliance Helpline

2

 

1. Our principles

Our Code of Conduct is a practical guide to living our principles and values every day. It is designed to be clear and must be the context in which all Company's business decisions are made.

10 principles

Dream

1.Our shared Dream energizes everyone to work in the same direction: Bringing people together for a better world.

People

2.Our greatest strength is our people. Great people grow at the pace of their talent and are rewarded accordingly.

3.We recruit, develop and retain people who can be better than us. We will be judged by the quality of our teams.

Culture

4.We are never completely satisfied with our results, which are the fuel of our Company. Focus and zero complacency guarantee lasting competitive advantage.

5.The Consumer is the Boss. We serve our consumers by offering brand experiences that play a meaningful role in their lives, and always in a responsible way.

6.We are a Company of Owners. Owners take results personally.

7.We believe common sense and simplicity are usually better guides than unnecessary sophistication and complexity.

8.We manage our costs tightly, to free up resources that will support sustainable and profitable top line growth.

9.Leadership by personal example is at the core of our Culture. We do what we say.

10.We never take shortcuts. Integrity, hard work, quality and responsibility are key to building our Company.

2. Culture

Every Employee must strictly comply with all applicable laws, regulations and policies, observing the highest standards of business ethics at all times. The Company's reputation for honesty and integrity is one of our most valuable assets.

3

 

No Employee is authorized to require any action against this Code of Conduct, which is not subject to any kind of waiver or exception, on account of business or competitive needs, industry practices or other kind of demand.

Every leader is responsible for the enforcement of and compliance with our policies, including their distribution and availability to the teams, as well as their amendments.

Every Employee that deliberately violates this policy, or authorizes or allows its violation by a subordinate, is subject to disciplinary action, including dismissal.

3. Honest and ethical conduct

We are a company of "owners". Ambev's People behave as owners, with honesty, objectivity and diligence in performing their functions and duties. The Company trusts its Employees to demonstrate professionalism in all subjects related to Ambev and to not engage in any activity that is illegal or breaches the provisions of this Code of Conduct and of other applicable policies.

Every relationship with our customers, suppliers, competitors, agencies, employees and government representatives must be guided by compliance with all applicable laws and regulations, including, but not limited to, anti-corruption and competitive legislation, as described below in this Code of Conduct, as well as laws and regulations regarding exchange control and anti-money laundering regulations (for more information, see Global Policy against Money Laundering).

This one is for you, our leader!

Be an example of ethical behavior to all Ambev's People!

Do not use your position to ask for services or personal favors from subordinates or business partners. Encourage our business partners to adopt managerial practices that respect human dignity, ethics and environmental conservancy and look for partners that are in accordance with our ethical standards and respect for the laws and regulations of Ambev.

4. Environment, health and safety

In support of the Company's dream, we work vigorously to achieve a high standard of environmental, health, and safety performance throughout the organization: (i) we strive to prevent any accident, injury and occupational illness within our operations, including promoting the proper use of safety equipments, (ii) we comply with all applicable environmental, occupational health and safety laws and regulations, as well as the Company's standards and other requirements, and (iii) we strive to manufacture our products with maximum respect for the environment, promoting rational use of natural resources, while maintaining our commitment to quality and cost-efficiency. Ambev's People play a fundamental role to ensure that we take into account the environment in our daily work, helping to limit our use of scarce resources and ensuring we continue our commitment to recycling throughout our operations.

5. Human rights

As signatories to the United Nations Global Compact, AB InBev and Ambev are committed to business practices that do not infringe on human rights and do align with various international standards of responsible business conduct, including the Universal Declaration of Human Rights and the Declaration of the International Labor Organization on Fundamental Principles and Rights at Work. Our Global Human Rights Policy sets out standards, expectations and commitments regarding our responsibility to respect human rights, among them the prohibition of child labor or any other form of compulsory labor in our operations or of our business partners. For more details see our Human Rights Policy.

4

 

In addition to our own operation, Ambev is committed to upholding high standards of responsible behavior among its business partners, including suppliers and service providers, through our Supply Global Responsibility Policy. To learn more, see our Supply Global Responsibility Policy.

5.1. Discrimination and harassment

Respect for people, diversity and authenticity is an essential foundation in our Culture. This is why the Company values and promotes initiatives to foster diversity and equality in the workplace by prohibiting every form of discrimination whether by race, religion, gender, sexual orientation, age, political opinion, nationality, social status, origin or any other. Decisions related to hiring, benefits, promotions, training, disciplinary action and dismissal must be taken solely based on Employees skills and performance.

Likewise, Ambev does not tolerate any kind of harassment or aggression, physical, psychological, moral or sexual.

5.2. Free association

Ambev supports the right of its Employees to freely associate with unions and other organizations of choice, as well as to enter into collective bargaining to support their interests (it is forbidden, however, to use the Company's assets, resources and registered trademarks for these purposes). The Company does not discriminate, under any form, Employees that choose to constitute or associate with unions and other organizations, neither Employees that choose not to engage in these activities.

6. Responsible Drinking

As leaders in the beer market we are committed to promoting the responsible consumption of our products. As owners, if we choose to consume alcohol, we must set the example and do it in a responsible and smart way, both inside and outside our workplace.

In this sense, we do not tolerate any level of compromising of activities due to excessive or improper alcohol consumption during working hours or while conducting Company’s business, and we do not tolerate that our Employees operate or drive motorized vehicles after consuming alcohol, during working hours or not.

As a responsible employer, the Employee's safety and well-being at work are our greatest priorities. For these reasons, we have a global policy regarding alcohol consumption at work, which describes the Company's responsibilities as well as the Employee's and provides clear guidelines on what to expect from both. To learn more, see our Responsible Drinking Policy.

5

 

7. Competition

Ambev believes in fair competition and, therefore, Ambev's People should be aware and understand how the antitrust laws affect their daily work, and comply with it. Breaching any of these laws may result in serious consequences to Ambev and to the Employees involved, such as fines, reputation damage, disputes and even imprisonment.

To ensure compliance with the antitrust laws:

· Be ethical! Do not exchange nor share confidential information with competitors (for example, incoming price increase, production costs or commercial strategies).

• Do not reach agreements or understandings with competitors that might restrict competition (for example, arrangements on price increase or production volume limitation, or agreements on exclusive territories, or customer allocation);

• Do not impose minimum or fixed resale prices on customers;

• Reject all actions that might be interpreted as or are anticompetitive, monopolist or in violation of the antitrust laws (for example, cartel);

• Be very careful to comply with these rules in trade association meetings and all other contacts with our competitors;

• Do not make comments with third parties, either directly or indirectly, about products and services provided by competitors, that are not proven, based on public facts, or with the intent to publicly discredit our competitor's image.

• Follow the guidelines of our Antitrust Compliance Policy at all times and,

• Ask for approval from the Compliance Team (via Compliance Channel) before any modification or creation of new commercial programs.

Not knowing the rules, therefore always  seek advice from the Compliance Team. If you have any suspicion that Ambev or any Employee is involved in any anticompetitive behavior, please use our Compliance Helpline or contact the Compliance Team immediately.

8. Conflicts of interest

Ambev's People should not get involved in any activity or situation which would conflict or interfere with the performance of their duties to the Company, i.e., Ambev's People must not compete with the Company or allow personal and family interests to influence, directly or indirectly, the Company's businesses.

A conflict of interest can arise in any personal relationship that can influence our ability to act in the best interest of the Company, or when our assessment of a circumstance could be affected or appear to be affected by the possibility of a personal benefit. Even in those cases where we do not receive a personal benefit in reality, the appearance of conflict of interest may negatively impact our credibility. We should do everything to avoid a conflict of interest.

Conflicts of interest may arise in several situations. There may be a conflict when you, or a family member:

6

 

• Own interest - individually or through family members (1st grade relatives such as parents, siblings, spouses and offspring) in business from, or take part in the management or administration of, any supplier, service provider, customer and competitor or in any other organization engaged in business, or willing to do so, with Ambev or any other company from the AB Inbev Group (unless interest in publicly traded companies for personal investment purposes).

• Take a business decision motivated by a personal interest.

• Receive a personal benefit from a supplier, service provider, customer or competitor, such as gifts, payment for meals, transportation or accommodation, regardless of value.

• Use the Company's assets or your position for private purposes.

In addition, Employees may have or form close personal friendships and, sometimes, affective relationships with their coworkers. To avoid conflicts of interest arising from these relationships, Employees should report to the Compliance Team if: (i) a member of your family or an Employee with whom you have a close personal relationship works for the company, or (ii) regardless of the management line, a personal relationship with a coworker may influence your decision-making process or interfere with your performance at work.

We do not admit professional decisions based on personal interests and relationships. That´s why you should seek guidance and aim for transparency at all times. In many cases the conflicts may be solved with an open conversation. A conflict of interest is not necessarily a violation of the Code of Conduct, but not disclosing it is!

Employees involved in an actual or potential conflict of interest situation must report it immediately to the Compliance Team, and refrain from taking part in any decision related to the conflict of interest situation.

9. Anti-corruption policy

Ambev has a zero tolerance anticorruption policy to each and every corruption activity. Ambev's People must comply, and ensure our partners comply, with local and international anti-corruption legislation, in all places we operate. This includes Law No. 12,846/2013 ("Brazilian Anti-corruption Law") and its regulations, the US Foreign Corrupt Practices Act ("FCPA") and other local and international applicable laws related to bribery and corruption, as well as norms, policies and internal procedures of Ambev.

Our Employees and business partners are strictly prohibited from directly or indirectly promising, offering or giving undue advantage to a Public Official or Entity or to any other third parties on Ambev's behalf (in addition to cash and equivalents, may be also deemed "undue advantage", gifts, products, entertainment (tickets), accommodation, meals, travel expenses, or anything else of tangible or intangible value).

Small payments as per the request of a Public Official to expedite or secure performance of a routine, non-discretionary governmental action ("facilitation payments") are strictly prohibited under this Code of Conduct, even if the refusal to pay would generate losses to the Company.

7

 

In order to ensure compliance with our Anti-corruption Policy, do not engage a third party who may eventually interact with a Public Official on behalf of the Company (Intermediary) without the proper approval by the Compliance Team.

To learn more about this subject, please refer to the Company's Anti-corruption Policy or contact the Compliance Team.

10. Gifts and Hospitality

Our Employees are not allowed to accept anything of value (including gifts, entertainment (tickets), favors, loans, payment of meals and travel expenses, and services or special treatment of any kind) from people or organizations that do or seek to do business with the Company. This includes suppliers, service providers, customers, public officials or any other type of business partner, actual or potential, regardless of value.

If you receive any gift, please send the standard thank-you letter available on the Compliance Channel. Ideally, the gift should be returned or, if not possible, forwarded to internal auction or donated to a charity institution chosen by Human Resources.

All gifts, entertainment or hospitality offered or given to third-parties by Employees must have a legitimate business purpose and be accurately recorded in the Company's accounting books and records.

Never take advantage of your position, or your condition as an Ambev's employee, to obtain discounts or personal benefits with customers, distributors, suppliers or public entities.

11. Political contributions and Mandates

In countries where political contributions are allowed, any direct or indirect contribution by Ambev to any political party, campaign committee or candidate to a public office must only be made upon prior approval from the Board of Directors of Ambev S.A.

Employees that wish to run for municipal, state or national elections must notify the Compliance Team about their intentions.

12. Books, Records and Controls

Transparency, ethics, and honesty must be the starting point to any procedure involving our accounting books, records and controls. The Company's financial statements, books and records must represent clearly, completely and precisely all business and operations with proper details. False, misleading, incomplete, inaccurate or artificial entries in Ambev's books and records are strictly prohibited.

Every business transaction must be recorded and managed according to the Company's accounting policy and no fund or asset not registered in the financial statements might be established or sustained to any purposes. 

8

 

No Employee must be involved in accounting or business records falsification. They must respond in a complete and precise manner to any question directed to them by the Company’s internal or external auditors or by any other regulatory authority.

Any Employee that becomes aware of any fund or asset not registered, or any kind of violation to Ambev's policy with regards to financial data and business operations must report it immediately to his/her Supervisor or to the Compliance Team.

12.1Disclosure

As a publicly listed company, Ambev needs to send all mandatory or requested documentation by the Comissão de Valores Imobilários (“CVM”) or by the Securities and Exchange Commission (“SEC”) within the deadline. It is strictly forbidden to submit inaccurate or dishonest reports, inside or outside Ambev. This may result in civil and criminal damage for Employees and the Company. This includes submitting information intentionally organized in a doubtful manner.

Do not submit forged financial data to meet individual performance targets or operational unit targets.

12.2 Finance Professionals: Professionalism and Credibility

Ambev is a solid, reliable and conscientious company aware of its social and business responsibilities. We wish to demonstrate to society that we seek results in a fair, lawful and transparent way. Our finance professionals must contribute to assert our credibility in the market. They must:

• Keep the proper professional standards in accounting and financial documentation.

• Stay up-to-date on laws and regulations. Seek legal advice whenever necessary.

• In their personal operations, not use any procedure or manipulation devices to affect, directly or indirectly, the transferable securities and assets quotation, inducing third parties to an error with the purpose of keeping financial advantages to themselves or others.

• Upon detection of any kind of violation of Ambev's policies in financial data and business operations, report them immediately to the Compliance Area.

The leaders of the Finance Team are responsible for keeping their teams with a variety of financial and operational skills, such as internal and accounting controls, financial planning and analyses, treasury and taxes. Leaders should not pressure the accounting team regarding their accounting estimates with the intent to improperly influence financial results.

13. Trading Manual

As a publicly listed company, Ambev must ensure a fair treatment to all its investors, which means that all investors should have access to the same information at the same time. The Manual of Disclosure and Use of Information and Trading Policy of Ambev ("Trading Manual") specifies the conditions to which Ambev's People and its relatives are subject when dealing with Ambev's shares.

9

 

All Employees with access to inside information (understood as information not publicly disclosed and that might have significant impact on Ambev's shares prices) as well as their family members, must observe the rules of the Trading Manual when conducting any kind of negotiation involving Ambev's shares. The complete Trading Manual and more information are available at your Legal Department, as well as in the Company's website: http://ri.ambev.com.br.

Failure to comply with the Trading Manual may result in disciplinary action, including dismissal with due cause. It may also be a criminal offense and give rise to civil liability.

14. Confidential information

Employees access confidential information on the Company, its customers, suppliers, associates or business partners when performing their functions. Confidential information includes, among others, any information not publicly disclosed by the Company, as finance information and documents related to financial models, processes and products, software, hardware and applications developed or in use by Ambev, even if the Employee was engaged in its development. The confidentiality of all information must be strictly kept even among different areas of the Company, unless its disclosure is authorized.

In order to preserve the confidentiality you should:

·Keep safe the documents related to your activities not leaving confidential material on desks, lock your virtual desktop ("VD") if you´re not using it and, at the end of your workday, lock documents in drawers or files;

·Keep absolute confidentiality on any kind of information, fact or operation involving Ambev's strategies;

·Keep secrecy on undisclosed information;

·Do not disclose any kind of unofficial information (rumors);

·Limit the discussion of related matters to the Company and the workplace. Do not speak about the Company's projects in public areas such as elevators, airplanes, restaurants or bars;

·Do not discuss strategic matters, unpublished information, or deal with confidential data via communication channels not officially approved by the Company.

Additionally, without authorization from your superior it is prohibited to:

·Withdraw internal material, including via email, from Ambev or any other company from the AB Inbev Group, including material related to operations you participated in;

·Make copies, by any means, of documents that might contain confidential information, including on customers, suppliers, products, costs, strategies and any other matter related to your work area inside the Company;

·To give lectures, seminars or write academic works about Ambev or matters that include your work area inside the company. In these cases it is also necessary to obtain permission from your area´s Vice-President.

Finally, you cannot profit from the Company's information to gain personal advantages. If you had access to confidential information, respect the Trading Manual rules.

10

 

15. Emails, Internet and information systems

Our systems, Internet, intranet (Portal Click), emails and all data transmitted through networks and systems from the Company are its exclusive property. Under no circumstance our systems should be used to send or receive discriminatory or harassment messages, obscene material, commercial requests or any other that violates this Code of Conduct.

Every message sent or received by these means are Ambev's property and may, if allowed by local legislation, be tracked and used to check compliance against internal laws and regulations.

Exercise care when using emails, as they have the same legal effect as other written communication. When using email communication, you should exercise discretion and compose statements with care, thought and precision.

Physical access to Ambev's facilities and to our systems is granted based on your position in the Company and are, therefore, personal and non-transferable. Only people who explicitly received user access and password are allowed in our facilities and systems. The information inserted, generated or modified in our systems, as well as its approvals, is the sole responsibility of the electronic user of the system. Therefore, it is prohibited to disclose, grant or share your passwords with other people, temporarily or permanently. This conduct might subject the Employee to internal disciplinary penalties due to the risk of exposure that sharing a password brings. 

16. Social Media and Instant Messaging Applications

Internet, social media and instant messaging applications changed our work manners, offering new ways to relate and communicate with Employees, business partners, clients and consumers, as well as with the world. Openness and transparency are part of our culture, therefore we encourage the exchange of ideas. However, disclosing confidential or inappropriate information on social medias may harm our brands, our Company and our Employees. Additionally, cases of discrimination, libel, defamation and slander on social medias or instant messaging applications are also against our principles.

In accordance with our culture of owners, the following guidelines must be followed by all Employees:

·Do not express opinions that may imply or be understood as official positions by Ambev.

·Do not post or share, without prior authorization, images, videos or internal information of the Company that were not publicly disclosed in our own official channels, including pictures or videos of Company's documents, trainings and internal meetings, financial information, information related to processes, strategic plans, projects, goals, market projections, information of clients etc.

·Do not share messages received in your corporate e-mail and that contain internal contents with people outside the Company.

·Do not expose information on our clients, partners and suppliers.

11

 

• Do not attack or slander, individually or in group, any person, product, client, supplier, other Employee, former Employee, competitor or any other party related to the Company.

• Finally, think about what you wish to show about yourself. Take care with your personal information, as anything you post or reveal about yourself on social medias affects the Company's image and yours. Take extra consideration when the subject is related with the Company's products, public bodies or our competitors.

Common sense always comes first. Ensure that any comment of yours is consistent with your work and with the values and professional standards of our Company. Take into consideration that your profile may be viewed not only by your coworkers, but also by our clients and shareholders. By being careful you protect the Company and your personal image!

17. Use of Company's assets

All Company's assets, including our properties (information, equipment, vehicles, computers, software), resources, funds, facilities, personnel, trademarks and the Company's name, must be used solely for legitimate business purposes. The Company's assets also include your time at work and the result of your work.

All Employees must protect the Company's assets and ensure that they are well managed and used in an efficient manner. The Company's assets should not be used for personal purposes, unless expressly authorized in a specific policy.

18. Code of Responsible Communication

As part of the leading global brewing group, Ambev has implemented a Code of Responsible Communication aimed at ensuring that our marketing and commercial communication are responsible and do not contribute to the misuse of our products, nor are not directed to under-age or people who are not able to drink alcohol. The Code of Responsible Communication applies to all forms of commercial communication and our brand marketing activities (including advertising, sponsorship, outdoor events, promotions, website content, relationship market, consumer public relations, packaging and labeling claims for all Ambev brands) and must be used as reference for marketing and commercial communication. For more information, please contact Corporate Affairs.

19. External communication

19.1Market

Contact the Investor Relations area whenever you have a request for communication with shareholders or investors. This area is prepared to make communications in a precise, transparent and timely manner, enabling shareholders and investors to follow the Company's activities and performance.   

19.2Press

We guide our relationship with the press with transparency and respect. In order to ensure the appropriateness of our communications with the press:

12

 

·Whenever the press contacts you, transfer the call to the External Communication area, which will handle the requests according to the applicable policies.

·Never provide information and/or give interviews without prior authorization from the External Communication. In addition to being prohibited by the Company's policies, inappropriate communications may cause serious damages to Ambev's name and image.

·Guide your suppliers to not disclose any project carried out with the Company or that is during the implementation process. No service provider has authorization to discuss Ambev projects without prior authorization from the External Communication area and the contracting area.

·Notify the External Communication area immediately when identifying an improper propagation of news or information that may affect Ambev's image.

·Do not spread or share information that you know or believe to be untrue (rumors).

·In the relationship with mass media and in the case of interviews focused on your personal life, do not expose the Company's name so as not to associate Ambev's image with your own opinions.   

20. Ethics Committee.

The management of the Code of Conduct is responsibility of the Ethics Committee, composed by the Chief Executive Officer (CEO), Chief Financial and Investor Relations Officer, Chief People Officer, General Counsel and Corporate Affairs Executive Officer, in addition to the Chief Compliance Officer, who acts as the Committee's secretary. The Ethics Committee is responsible for ensuring that the Code is known by all Employees and business partners who have relationships with the Company, as well as ensuring its efficacy and effectiveness.

21. Contacts

It is the responsibility of all Ambev's People to act as custodians of this Code and of the Company's Culture. A true OWNER does not overlook and, in order to ensure an effective communication, Ambev makes available several communication channels for questions, suggestions and complaints.

Contact with the Compliance Team and the Ethics Committee should be done in a clear and transparent manner through the channels below.

21.1 Compliance channel

Through the Compliance Channel (link found on Ambev Portal - Intranet), Ambev's People may easily (i) ask questions on the Code of Conduct and other compliance policies; (ii) report a conflict of interest; (iii) request approval for contracts with the government; (iv) request approval to modify or create a new commercial program; (v) request approval before making a donation; (vi) have access to documents/policies of the anti-corruption and antitrust compliance programs; and (vii) ask questions related to the anti-corruption and antitrust compliance programs.

21.2 Compliance Helpline

All Employees are encouraged to report any activity they believe is or might be a violation of the laws, regulations, to this Code of Conduct or our policies. If you become aware of activities that might constitute a violation, your are encouraged to report the activity:

13

 

• to your manager;

• to the Compliance Area of the Legal Department; or 

·to the Compliance Helpline.

Our Compliance Helpline is available 24/7 to all our Employees, suppliers and other business partners. It enables you to CONFIDENTIALLY and, if desired, ANONYMOUSLY report any concern regarding possible breaches of our Code of Conduct or of the applicable legislation.

It is a secure means of reporting, provided by an independent company and available anywhere in the world. You can report in your language on the phone +55 0800 795 0011 or at the website www.ouvidoriaambev.com.br

All reports and investigations are handled and conducted confidentially.

An independent company collects the reports and forwards them to the Compliance Area of the Legal Department, which oversees the handling of reports and investigates the complaints. If necessary, the complaint can be anonymously followed by the independent company via Internet.

No reprisals

Ambev prohibits and will not tolerate any reprisal or threat of reprisal against any person reporting a possible violation of the Company's laws, regulations or policies. Likewise, any Employee who discourages or prevents someone from reporting or seeking necessary aid or assistance to report the problem will be subject to disciplinary actions.

Reprisal is a violation and may be reported to our Compliance Helpline.

14

EX-11.2

 

Manual on Disclosure and Use of Information and Policy for the Trading with Securities Issued by Ambev S.A.

Ambev S.A.’s (“Ambev” or “Company”) policies on relations with investors and the market in general have always been based on the principle of transparency, and the Company’s conduct is guided by the principle of full disclosure of the available information regarding its business activities. Ambev adheres at all times to the highest standards of compliance with the statutes and regulations applicable to public companies which trade their securities in Brazil and abroad.

Considering the regulations of the Brazilian Securities and Exchange Commission (“CVM”) with respect to disclosure of information to the investing public, the Board of Directors of Ambev consolidated the Company’s best practices in a Manual designed to regulate the conduct of managers, persons and legal entities who, on account of their professional relationships, may have access to inside information related to Ambev. This Manual, therefore, comprises the best practices with regards to disclosure and use of information (Part I) and to the trading with securities issued by Ambev (Part II).

Sections I, II and III of Part I of the Manual deal with the use, communication and disclosure of material information involving the businesses and affairs of Ambev, as a result of decisions made by its management or controlling shareholders, among others, that may impact trading with the securities of Ambev in the market. These Sections define certain duties and responsibilities intended to ensure that information regarding material acts or facts receive fair treatment, either within Ambev or with respect to its transmission to market participants.

Section IV of Part I of the Manual deals with the communication of information regarding trading with securities by Ambev’s managers, members of its fiscal council and of any technical or consulting bodies that may be created by provisions in its bylaws, and by any persons or entities related thereto, as well as the procedures to be followed in this regard.

Further, Section V regulates the communication and disclosure of material change in share ownership.

In order to prevent misuse of privileged information, Part II of the Manual establishes the policy for the trading with Ambev’s securities to be followed whenever disclosure of a material act or fact is eminent, as well as during certain periods determined by the CVM Ruling No. 358/02. The restrictions imposed by such policy apply not only to the controlling shareholders and the managers of Ambev, but also to various other persons and entities who, on account of their professional relations, may have access to privileged information regarding Ambev, thus gaining advantageous position vis-à-vis market investors.

As permitted by CVM Ruling No. 358/02, Ambev approved a trading policy that, within the legal limits, makes the restrictions provided in such ruling more flexible. Such trading policy adopts certain mechanisms that ensure transparency of, and control over, trading with securities issued by Ambev, so as to avoid any possible presumption of misuse of privileged information.

 

2

The persons or entities subject to the obligations and duties provided in this Manual must adhere to it by executing a Joinder Agreement.

Any questions concerning the applicability of this Manual shall be addressed to Ambev’s Investor Relations Officer.

Ambev S.A.

 

3

Part I

Section I

Purpose and Scope	The purpose of this Manual, whose defined terms can be found in Schedule I hereto, is to establish high standards of conduct and transparency to be obligatorily followed by the Bound Persons and the Controlling Shareholders, in order to align the Company’s internal policies with the principle of transparency and the best practices of conduct regarding the use and disclosure of Privileged Information and the trading with Securities of the Company.
	The above-mentioned persons and entities are required to execute a Joinder Agreement to this Manual, in accordance with the terms of Article 16, Paragraph 1 of CVM Ruling No. 358/02, and in the form attached hereto as Schedule II.
	The Company will keep at its headquarters a list of the persons and entities that have executed the Joinder Agreement, with their qualification information, position or function, address and registration number with the Brazilian Federal Taxpayers’ Registry or Individual Taxpayers’ Registry. Such list will available to CVM at all times.

Section II

Principles	All persons subject to this Manual shall conduct themselves in keeping with the values of good faith, loyalty and accuracy, as well as to the general principles set forth herein.
	All efforts towards market efficiency must aim at assuring that competition among investors for optimal returns be based on analysis and interpretation of disclosed information and never on the privileged access to such information.
	The persons subject to this Manual must bear in mind that transparent, accurate and timely information is the main tool available to the investing public, particularly to the shareholders of the Company, for ensuring necessary equitable treatment.
	The Company’s relation with participants and opinion makers of the securities market must be consistent and transparent.
	The persons subject to the provisions of this Manual are obliged to ensure that disclosure of information regarding the financial standing of the Company is correct, complete and continuous, developed by the competent managers incumbent with such duties, and that such information includes data regarding changes in the equity interests such persons hold in the Company’s capital stock, as provided in this Manual and in applicable regulations.

 

4

Section III

Policies on Disclosure and Use of Information related to Material Act or Fact

1. Obligations towards the Investor Relations Officer	CVM Ruling No. 358/02 created a system that assigns responsibility for the use, communication and disclosure of Material Acts or Facts related to public companies. In this regard, the Investor Relations Officer is the primary responsible for the communication and disclosure of Material Acts or Events.
	In order to ensure that the Investor Relations Officer will be able to comply with its duties, certain obligations have been created for certain persons linked to the Company, requiring them to communicate to the Investor Relations Officer any Material Act or Fact of their knowledge, so as to permit the Investor Relations Officer to take action accordingly.

2. Purpose of Disclosure of Material Act or Fact The disclosure of a Material Act or Fact seeks to provide investors with the information they need to make investment decisions, in a timely, efficient and reasonable manner while preserving maximum symmetry with respect to the dissemination of information. This prevents persons having access to privileged information to use such information in the securities market for their own benefit or for the benefit of third parties, to the detriment of investors in general, the market or the Company itself.

3. Definition of Material Act or Fact A “Material Act or Fact” within the meaning of Section 155, Paragraph 1, of the Brazilian Corporation Law No. 6,404/76 and Section 2 of CVM Ruling No. 358/02 is: (a) any decision by the Controlling Shareholder(s), and any resolution by the shareholders’ meeting or the management bodies of the Company; or (b) any other political, administrative, technical, commercial, economic or financial act or fact occurring or relating to the business of the Company that may have a significant effect on: (i)        the quoted price of the Securities; (ii)       the decision of investors to purchase, sell or hold such Securities; or (iii)      the decision of investors to exercise any rights inherent to the holding of such Securities.

 

5

4. Examples of Material Act or Fact Section 2 of the CVM Ruling No. 358/02 provides a non-exhaustive list of examples of Material Acts or Facts, which does not need to be repeated herein. In any case, the materiality of events pertaining to a Material Act or Fact must be analyzed in the context of the normal course of business and dimensions of the Company, as well as in the context of the information previously disclosed, and not in abstract, so as to avoid trivialization of the disclosure of Material Acts or Facts to the detriment of the quality of the analysis, by the market, of the Company’s prospects.

5. Internal Procedures for Communication and Disclosure of Material Act or Fact

All information on Material Acts or Facts of the Company will be centralized in the Investor Relations Officer, who is the person responsible for disclosure and communication of Material Acts or Facts (CVM Ruling No. 358/02, Section 3).

The Controlling Shareholders, the Managers, the Fiscal Council, the Employees and Executives with access to Privileged Information, and the members of any Technical or Consulting Bodies of the Company who have executed the Joinder Agreement must communicate all Material Acts or Facts of their knowledge to the Investor Relations Officer, who, in the terms of this Manual, is the person responsible for its disclosure to the appropriate bodies and release to the press.

6. Public Meetings with Investors and Analysts

The meetings with class entities, investors, analysts or to a select audience either in Brazil or abroad regarding matters that may constitute Privileged Information must be attended by the Chairman or the Co-Chairmen of the Board of Directors, as the case may be, the Chief Executive Officer, or the Investor Relations Officer, or another person appointed for such purpose. Otherwise, the contents of such meetings, to the extent that it constitutes Privileged Information, shall be reported to the Investor Relations Officer, in order for such Privileged Information to be previously or simultaneously disclosed to the market.

7. Responsibility for Omission

The Managers, the Controlling Shareholders, the Fiscal Council Members, the Employees and Executives with access to Privileged Information, or any member of other Technical or Consulting Bodies of the Company, who have executed the Joinder Agreement and who have personal knowledge of a Material Act or Fact will be required to communicate such Material Act or Fact to the Investor Relations Officer. If after such communication (and where no decision has been made to maintain confidentiality, under the terms of Section 6 of the CVM Ruling No. 358/02) any of the foregoing persons or entities detect that the Investor Relations Officer has failed to fulfill its duty to communicate and disclose such information, they will only be released from responsibility if they promptly communicate the Material Act or Fact in question to CVM.

 

6

8. When to Communicate and Disclose - Terms	Whenever possible, disclosure of a Material Act or Fact will be made before the opening or after the closing of trading on the Stock Exchanges in Brazil or abroad, but preferably after the close of these trading sessions. If disclosure is necessary before the opening of a trading session, it should, if possible, be made at least 1 hour in advance to avoid delaying the opening of trading. In the case of incompatibility, the trading hours of the Brazilian market will prevail.
	As for the terms for communicating and disclosing information, the Investor Relations Officer shall also comply with the following:
	(i)        communicate and disclose a Material Act or Fact occurring or relating to the Company’s business promptly after its occurrence (CVM Ruling No. 358/02, caput of Section 3); (ii)       communicate and disclose a Material Act or Fact previously or simultaneously to the entire market, through any given means of communication, including disclosure of information to the press or at meetings held with class entities, investors, analysts or to select audience in Brazil or abroad (CVM Instruction No. 358/02, Section 3, Paragraph 3); and (iii)      evaluate the need to request to the Brazilian and foreign Stock Exchanges, always simultaneously, the suspension of the trading with the Securities for the time required for proper dissemination of the Privileged Information, in case it is imperative that the disclosure of a Material Act or Event be made during trading hours (CVM Ruling No. 358/02, Section 5, Paragraph 2).

9. Who to Communicate	Information on a Material Act or Fact must be communicated simultaneously to:
	(i)        CVM;
	(ii)       SEC; and
	(iii)      the Stock Exchanges.
10. Method of Disclosure	Disclosure of a Material Act or Fact involving the Company shall be made through publication in the website of Valor Econômico newspaper in the internet, that shall make available to the public, free of charge, such Material Act or Fact in its entirety at “www.valor.com.br/fatosrelevantes" “www.valor.com.br/fatosrelevantes” (CVM Ruling No. 358/02, Section 3, Paragraph 4, II).
	The Material Act or Fact shall also be disclosed at the Company´s investors’ relations website “http://ri.ambev.com.br”, through the CVM’s electronic system available at its website “http://www.cvm.gov.br”and stock exchanges where securities issued by the Company are traded. The Investor Relations Officer may determine the additional disclosure of the Material Act or Fact through publication in newspapers of wide-circulation normally used by the Company. Such publication may be made in summary form, provided that it indicates the addresses on the internet where the complete information is available to all investors, at least to the same extent as disclosed to CVM, the Stock Exchanges and SEC.

 

7

11. Privileged Information and Confidentiality Duty

The Controlling Shareholders, the Managers, the Fiscal Council Members, the Employees and Executives with access to Privileged Information, or any member of other Technical or Consulting Bodies of the Company, as well as persons who have executed the Joinder Agreement by virtue of their title, function or position within the Controlling Person, the Controlled Companies and the Affiliated Companies will have the duty to (i) maintain confidential the information related to a Material Act or Fact to which they have had privileged access, up until its disclosure to the market, and (ii) see that their subordinates and relying third parties act likewise, being jointly and severally responsible, with such persons, for any breach of the confidentiality duty (CVM Ruling No. 358/02, Section 8).

For guidance purposes, in case of doubt as to the relevance of any Privileged Information, the Investor Relations Officer shall be contacted to clarify any doubts.

12. Nondisclosure as Exception to the Rule	The general rule regarding Material Acts or Facts is that they must be promptly communicated and disclosed. In any case, not communicating and disclosing a Material Act or Fact constitutes an exception that shall be subject to specific analysis (CVM Ruling No. 358/02, caput of Section 6).
	However, there are exceptional cases where indistinct disclosure of Privileged Information constituting a Material Act or Fact could jeopardize the Company’s legitimate interest.

13. Procedures in Case of Nondisclosure of a Material Act or Fact by the Company	In such cases, nondisclosure of a Material Act or Fact related to the Company will be subject to the decision of the Controlling Shareholders or the Managers of the Company, as a case may be (CVM Ruling No. 358/02, caput of Section 6).
	Should the Material Act or Fact in question relate to transactions that directly involve the Controlling Shareholders and such Controlling Shareholders decide not to disclose it, then they shall inform the Company’s Investor Relations Officer of such decision.
	Even when the Managers and the Controlling Shareholders have made a decision not to disclose a Material Act or Fact, they will be required to promptly disclose such Material Act or Fact, either directly or through the Investor Relations Officer, if they lose control over the information or in case of unusual fluctuations of the quotes, prices or trading amounts of the Securities of the Company (CVM Ruling No. 358/02, Section 6, Sole Paragraph).

 

8

14. Request to CVM to Maintain in Confidence The Managers and the Controlling Shareholders may submit to CVM their exceptional decision to maintain confidential a Material Act or Fact that, if disclosed, would in their judgment pose a manifest risk to the legitimate interests of the Company (CVM Ruling No. 358/02, Section 7).

Section IV

Procedures for Communication of Information on

Trading by Managers and Related Persons

The procedures for communication of information on trading with the Company’s Securities provided in this Section are based on Section 11 of CVM Ruling No. 358/02.

The Managers, the Fiscal Council Members and the members of Technical or Consulting Bodies of the Company will be required to communicate the ownership of the securities of the Company, or of its Controlling Persons or Controlled Companies, in the latter two cases only if regarding public companies - or derivatives or any other securities referenced to them - whether held by them, directly, or by Related Persons, as well as any changes in such holdings.

Such communication will be made as per the model found in Schedule III and forwarded to the Company’s Investor Relations Officer, and by the latter to the CVM and the Stock Exchanges, as per CVM stipulations. The information required by the provisions on trading made by the Company itself, its controlled and affiliated companies must also be forwarded.

Such communication to the Company must be made (i) in the first business day immediately after their investiture in office, and (ii) within no more than five (5) days after each trading.

 

9

Section V

Procedures for Communication and Disclosure of

Purchase or Sale of Material Ownership Interest

The procedures for communication and disclosure of information on trading with Securities of the Company involving a material ownership interest, as provided in this Section, are based on Section 12 of CVM Ruling No. 358/02.

A material trade or series of trades refers to those through which the direct or indirect ownership interest of persons subject to the obligation is above or below the levels of five percent (5%), ten percent (10%), fifteen percent (15%) and so on successively, for a given type or class of shares representing the Company's share capital, including, pursuant to the rules for calculation stipulated in the provision, derivatives referenced to these shares and the acquisition of rights on these securities

The direct or indirect Controlling Shareholders as well as the shareholders who elect members to the Board of Directors or the Fiscal Council of the Company, as well as any natural or legal person or group of persons acting jointly or representing the same interest, must notify the Company - immediately on reaching the abovementioned levels of ownership interest - the details of material trades carried out, as required by the CVM, using the model in Schedule IV, and the Investor Relations Officer shall transmit them to the CVM and to the Stock Exchanges if applicable, and shall update the corresponding field of the Company's Reference Form.

If there is an alteration or intention to alter the corporate control or the management structure of the Company, or in case of a purchase that gives rise to a tender offer obligation, the purchaser shall also disclose the information referred to in items I to VI of the caput of Section 12 of CVM Ruling No. 358/02, doing so through the channels referred to in subsection 10 above.

 

10

Part II

Section I

Policy on Trading with the Company’s Securities

CVM Ruling No. 358/02 provides restrictions on trading with securities issued by public companies applicable to certain persons and in certain specific situations.

The same ruling allows public companies to adopt trading policies for their securities that enable the use of Individual Investment Plans which - as long as they comply with regulatory requirements - avoid any presumption of misuse of Privileged Information. This Section of the Manual establishes trading policy and rules for Securities of the Company, including (i) trading restrictions and the corresponding exceptions stipulated in CVM Ruling No. 358/02, and (ii) Individual Investment Plans.

1. Trading through Accredited Brokers and Black-Out Periods	In order to ensure that appropriate standards will be observed when trading with Securities of the Company and of the publicly-held Controlled Companies, a system is hereby adopted whereby all such trading by the Company itself and the persons required to adhere to this Manual will be conducted through Accredited Brokers only.
	The Company, its Managers, its Fiscal Council Members, the Employees and Executives with access to Material Information, and the members of other Technical or Consulting Bodies of the Company who have executed the Joinder Agreement shall refrain from directly or indirectly trading their shares during all periods determined as a non-trading period (each a “Black-Out Period”) by the Investor Relations Officer, through the issuance of a communication in such regard. The Investor Relations Officer will not be required to provide a reason for its decision to determine a Black-Out Period, which shall be maintained confidential by the recipients.
	The same obligations apply to the direct or indirect Controlling Shareholders, the Controlled Companies and those persons who, by virtue of their title, function or position within the Controlling Person, the Controlled Companies and the Affiliated Companies, have knowledge of information regarding Material Acts or Facts involving the Company, and that have executed the Joinder Agreement.

 

11

2. Restriction to Trading in the Eminence of a Material Act or Fact	Save the exceptions stipulated in this Trading Policy, Controlling Shareholders and Related Persons are prohibited from trading in the Company’s Securities:
	(i)        before a Material Act or Fact occurring in the Company’s business is disclosed to the market. This prohibition also applies to: a) any person who knows of information related to the Company's Material Fact and knows that this information has not yet been disclosed to the market, especially those who are party to commercial, professional or confidential relations with the Company, such as independent auditors, stock analysts, consultants and securities distribution system member institutions; and b) former managers, when leaving their Company management positions prior to disclosure of Material Acts or Facts originated during their term of office, until: (i) six (6) months after the date of their leaving; or (ii) the Material Fact's public disclosure. (ii)       whenever an option or proxy for the purchase or sale of shares of the capital stock of the Company, by the Company itself or its Controlled Companies, Affiliated Companies or another company under common control is in effect or has been granted; and (iii)      whenever there is an intention to carry out a merger, full or partial spin-off, consolidation, transformation into other company type, or material corporate reorganization.
	The restriction referred to in item (ii) above will apply to transactions involving shares of the Company made by the direct or indirect Controlling Shareholders and the Bound Persons, exclusively on the dates on which the Company itself trades or informs the Accredited Brokers that it will trade with shares of its capital stock. In this regard, the Accredited Brokers are directed by the Investor Relations Officer of the Company not to record trading made on such dates.

3. Exceptions to General Restrictions on Trading with Securities	The prohibition mentioned above in subsection 2, item (i) shall not apply to private transactions in treasury shares related to the exercise of stock options under a stock option plan approved by a shareholders’ meeting of the Company, or to grants of stock to members of management, employees, or service providers as part of compensation previously approved by a shareholders’ meeting.
	The trading restrictions stipulated in items (i), (ii) and (iii) of subsection 2 above shall not apply to the Controlling Shareholders and Related Persons for Individual Investment Plans covered by subsection 6 below, nor shall the restriction stipulated in subsection 5 below be applicable if the additional requirements described therein are fulfilled.

 

12

4. Restrictions on Trading after Disclosure of Material Act or Fact In the cases mentioned in the above subsection 2, items (i) and (iii), a prohibition on trading will remain in place even after disclosure of a Material Act or Fact, whenever such trading may, in the judgment of the Company, interfere with the conditions of transactions involving the Company’s shares, so as to result in losses to the Company itself or to its shareholders (CVM Ruling No. 358/02, Section 13, Paragraph 5), such additional restriction to be communicated by the Investor Relations Officer.

5. Prohibition on Trading during the Period Preceding the Disclosure of Quarterly or Annual Financial Statements	The Company, its Controlling Shareholders and the Bound Persons may not trade with Securities of the Company during the fifteen (15) day period preceding disclosure or publication, as the case may be, of:
	(i)        the quarterly information of the Company (ITR); and
	(ii)        the standardized financial statements of the Company (DFP).
	The same restriction applies to the period of fifteen (15) days preceding any early disclosure of financial information.
	The Accredited Brokers will be directed by the Company, and will acknowledge in writing such direction, not to record transactions carried out by the foregoing persons and entities during the 15-day period preceding disclosure or publication of such periodical information or financial statements of the Company.

6. Individual Investment Plans	As mentioned in subsection 3 above, Individual Investment Plans may allow Related Persons and Controlling Shareholders to trade the Company's shares during the prohibited periods stipulated in subsection 2, items (i), (ii) and (iii) above, provided that (i) they are formally notified in writing to the Investor Relations Officer prior to any trading; (ii) they irrevocably and irreversibly determine the dates and amounts of trades to be made by the participants; they are allowed to use of algorithms and formulas which, once applied to a specific case, determine whether the trades will be made or not and, if they will be made, on which dates and which financial amounts will be involved; (iii) stipulate a minimum period of six (6) months for the plan itself, or any alterations or its cancellation to produce effect. (iv) there is not more than one investment plan simultaneously in effect; and (v) no trades are made that annul or mitigate the economic effects of transaction to be determined by the investment plan. In addition, Individual Investment Plans may allow Related Parties and Controlling Shareholders to trade the Company's shares during the periods stipulated in subsection 5 above, provided that, in addition to the above requirements:
	(i) the Company has approved a schedule determining the specific dates for disclosure of the ITR and DFP forms; and
	(ii) it requires its participants to revert to the Company any losses avoided or gains made from trading Company shares arising from any changes to the dates of disclosure of the ITR and DFP forms, ascertained according to reasonable criteria specified in the Plan. At six-month intervals or more often, the Company’s Board of Directors shall verify that trades made by participants adhere to the investment plans formalized by them, in cases where these plans are used to allow trading during a prohibited trading period, subject to the other requirements described in this subsection.

 

13

7. Prohibition on Resolution relative to the Purchase or Sale of Shares issued by the Company itself (CVM Ruling No. 358/02, Section 14)	The Board of Directors of the Company may not approve a purchase or sale of shares of the capital stock of the Company before the following information has been made public by way of publication of a Material Act or Fact:
	(i)        execution of any agreement or contract for the purpose of transferring the controlling interest of the Company; or (ii)       granting of an option or proxy for the purpose of transferring the controlling interest of the Company; or (iii)      intention to carry out a merger, full or partial spin-off, consolidation, transformation into another company type, or corporate reorganization.
	If a fact falling within any of the three aforementioned situations occurs after the approval of a plan for the repurchase of its own shares, the Company will immediately suspend transactions involving its shares until disclosure of the respective Material Act or Fact.

Trading Subject to Prior Authorization	Notwithstanding anything herein contained, trading with Securities of the Company by the Bound Persons shall be previously authorized by the Investor Relations Officer and the General Counsel of the Company.
	Requests for such trading shall be made in writing, through a physical or electronic medium, with the indication of the intended transaction and the amount and type of Securities to be traded.
	In the event the Investor Relations Officer or the General Counsel themselves request authorization to trade with Securities of the Company, the Chairman of the Board of Directors of the Company will replace the requesting officer in the granting of such authorization.
	Within forty-eight (48) hours after receipt of a request to trade, the Investor Relations Officer of the Company shall communicate, in writing, to the person so requesting its decision to allow or prohibit the trade. Failure to respond to a request within five (5) business days as of its receipt will be deemed as prohibition of the transaction object of the request in question. If authorized, the respective trade must be completed within no more than five (5) business days as of the receipt of the communication delivered by the Investor Relations Officer of the Company.
	The Company shall keep a record of all correspondence involving requests submitted and decisions made in connection therewith, for a period of five (5) years as of receipt of each request to trade.
	Observance of the procedures described in this Section will be waived for trades in Company shares made in compliance with Individual Investment Plans stipulated in subsection 6 above that are used to allow trading during prohibited periods.

 

14

Section II

Final Provisions

1. Direct and Indirect Trading	The prohibitions on trading and requirements concerning notifications set forth in this Manual apply to trades carried out either directly or indirectly by the Controlling Shareholders and the Bound Persons, even when the trades by such persons or entities are conducted through:
	(i)        a company controlled by them;
	(ii)       third parties with whom a fiduciary agreement or a portfolio or stock management agreement has been entered into.
	Trading made by an investment fund of which the aforementioned person or entity is a quotaholder will not be deemed an indirect trading, provided that:
	(i)        the investment funds are not exclusive; and
	(ii)       the decisions to trade made by the manager of the investment fund cannot be influenced by the quotaholders.

 

15

2. Responsibility of the Investor Relations Officer to monitor the policies

The Investor Relations Officer of the Company will be responsible for enforcing and monitoring the policies on (i) disclosure and use of information, (ii) trading with the Company’s securities, and (iii) the Individual Investment Plans.

3. Amendment to the Manual

This Manual was approved by the Board of Directors of the Company on March 1st, 2013, and amendments to this Manual were approved by the Board of Directors of the Company on August 27th, 2014 and [March 28th, 2016]. Any new amendment to or revision shall be submitted to the Board of Directors of the Company and notified to the CVM and the Stock Exchanges together with a copy of the resolution and the full contents of the documents that govern the Manual and are part of it.

4. Liability of Third Parties

The provisions of this Manual will not rebut liability, under applicable rules and regulations, of third parties that are not directly linked to the Company but have knowledge of a Material Act or Fact and come to trade with Securities issued by the Company.

5. Penalties

Without prejudice to other penalties provided by law, failure to comply with the provisions of this Manual will subject the offender to disciplinary sanctions in accordance with the internal regulations of the Company, including, without limitation, as the case may be: (i) warning, suspension or dismissal with cause, in accordance with the gravity of the offense; and (ii) termination of the agreement executed with the Company, provided, further, that the Company will be entitled to demand, in any case and only if dully owed, full indemnification for any losses eventually sustained by the Company, arising, either directly or indirectly, from such failure to comply.

 

16

Manual on Disclosure and Use of Information and Policy for the Trading with Securities Issued by Ambev S.A.

Index

Part I

Section I - Purpose and Scope

Section II – Principles

Section III - Policies on Disclosure and Use of Information related to Material Act or Fact

1. Obligations towards the Investor Relations Officer

2. Purpose of Disclosure of Material Act or Fact

3. Definition of Material Act or Fact

4. Examples of Material Act or Fact

5. Internal Procedures for Communication and Disclosure of Material Act or Fact

6. Public Meetings with Investors and Analysts

7. Responsibility for Omission

8. When to Communicate and Disclose - Terms

9. Who to Communicate

10. Method of Disclosure

11. Privileged Information and Confidentiality Duty

12. Nondisclosure as Exception to the Rule

13. Procedures in Case of Nondisclosure of a Material Act or Fact by the Company

14. Request to CVM to Maintain in Confidence

Section IV - Procedures for Communication of Information on Trading by Managers and Related Persons

Section V -Procedures for Communication and Disclosure of Purchase or Sale of Material Ownership Interest

Part II

 

17

Section I - Policy on Trading with the Company’s Securities

1. Trading through Accredited Brokers and Black-Out Periods

2. Restriction to Trading in the Eminence of a Material Act or Fact

3. Exceptions to General Restrictions on Trading with Securities

4. Restriction on Trading after Disclosure of Material Act or Fact

5. Prohibition on Trading during the Period Preceding the Disclosure of Quarterly or Annual Financial Statement Information

6. Individual Investment Plans

7. Prohibition on Resolution relative to the Purchase or Sale of Shares issued by the Company itself

8. Trading Subject to Prior Authorization

Section II – Final Provisions

1. Direct and Indirect Trading

2. Responsibility of the Investor Relations Officer to monitor policies

3. Amendment to the Manual

4. Liability of Third Parties

6. Penalties

Schedules

Index

Schedule I

Schedule II

Schedule III

Schedule IV

 

18

Schedule I – Definitions

Definitions	The terms and expressions listed below will have the following meanings when used in this Manual:
“Accredited Brokers”	the securities brokers accredited by the Company to trade its Securities on behalf of the persons subject to this Manual.
“Affiliated Companies”	the companies in which the Company holds a substantial interest (article 243, paragraph 1, of Brazilian Corporation Law)
“Bound Persons”	(i) the Managers, the Fiscal Council Members and the members of other Technical or Consulting Bodies of the Company; (ii) the Controller and Tax Department; the Legal Department, the Manager and other employees of the Treasury Department; the Manager and other employees of the Investor Relations Department; the Manager and other employees of the Mergers and Acquisitions Department; the Manager of New Businesses; and the Internal Audit Department; (iii) the Employees and Executives with access to Material Information; (iv) any person who, by virtue of its title, function or position within the Controlling Person, the Controlled Companies and the Affiliated Companies has knowledge of information related to a Material Act or Fact with respect to the Company; and (v) the Related Persons.
“Company” or “Ambev”	Ambev S.A.
“Controlled Companies”	the companies in which the Company holds, either directly or through other subsidiaries, an ownership interest that entitles the Company to prevail in corporate resolutions, on a permanent basis, and that confers to the Company the power to elect the majority of its managers.
“Controlling Shareholders” or “Controlling Person”	the shareholder or group of shareholders bound by a shareholders’ agreement or under common control that exercise the controlling power over Ambev, in accordance with the terms of Law No. 6,404/76, as amended.

 

18

Schedule I – Definitions

“CVM Ruling No. 358/02”	CVM Ruling No. 358, dated January 3, 2002, as amended up to the date of approval of this Manual, regarding disclosure and use of information related to Material Acts or Facts with respect to public companies, as well as the trading of securities of public companies in the eminence of a material fact still undisclosed to the market, among other matters.
“CVM”	the Brazilian Securities and Exchange Commission.
“Employees and Executives with access to Material Information”	the employees and executives of the Company who have access to any Privileged Information on account of their title, function or position in the Company.
“Ex-managers”	former executive officers and former directors that have withdrawn from the management of the Company.
“Fiscal Council Members ”	the members of the Fiscal Council of the Company, whether sitting or alternate, elected by the Shareholders’ Meeting.
“Investor Relations Officer”	the executive officer of the Company responsible for providing information to the investing public, CVM, SEC, as the case may be, and the Stock Exchange or entities of the organized over-the-counter market, as well as for updating the Company’s registration.
“Joinder Agreement”	a joinder agreement to this Manual, required to be executed pursuant to and Section 16, Paragraph 1 of CVM Ruling No. 358/02.
“Brazilian Corporation Law”	Law No. 6404/76, dated December 15, 1976, as amended.
“Managers”	The sitting and alternate executive officers and the directors of Ambev.
“Manual”	this Manual on Disclosure and Use of Information and Policy for the Trading with Securities.
“Privileged Information” or “Material Information”	all material information related to the Company that may have a significant impact on the quoted prices of the Securities that is still undisclosed to the investing public.
“Related Persons”	the persons having the following ties with the executive officers, directors, Fiscal Council Members and members of the Technical or Consulting Bodies of the Company: (i) a spouse, not legally separated from; (ii) a partner (companheiro em união estável); (iii) any dependent reported in the annual income tax return; and (iv) the companies directly or indirectly controlled by the managers and similar persons, or by Related Persons.

 

18

Schedule I – Definitions

“SEC”	the Securities and Exchange Commission.
“Securities”	the term “Securities”, as used in this Manual, covers shares, debentures, warrants, subscription receipts and rights, promissory notes, put or call options, and indices and derivatives of any kind whatsoever, or any other collective investment instruments or agreements issued by the Company or referenced to them, that are legally deemed as securities.
“Stock Exchange”	the stock exchanges or over-the-counter markets on which the securities issued by Ambev are traded, whether in Brazil or abroad.
“Technical or Consulting Bodies”	the bodies of the Company created by provisions of its bylaws or by the Board of Directors, and entrusted with technical duties or for serving as consultants to its managers.

 

19

Schedule II - Joinder Agreement

to the Manual on Disclosure and Use of Information and Policy for the Trading with Securities Ambev S.A.

By this instrument, [insert name and identification details], residing and domiciled at [address], registered with the [Individual Taxpayers’ Registry] under No. [insert number] and bearer of Identification Card [indicate whether an RG or RNE] No. [insert number and issuing agency] (“Declarer”) in [his/her] capacity as [indicate title, function or relationship with the company] of [company], a corporation headquartered at [insert address], registered with the Brazilian Federal Taxpayers’ Registry (CNPJ) under No. [insert CNPJ] (“Company”), hereby declares to have full knowledge of the rules set forth in the Manual on Disclosure and Use of Information and Policy for the Trading with Securities by Ambev S.A. (the “Manual”), a copy of which [he/she] has received, and which regulates the internal policies regarding the use and disclosure of Material Information and trading with securities issued by the Company, and hereby undertakes to conduct [himself/herself] at all times in compliance with such rules. The Declarer executes this Joinder Agreement in three (3) counterparts of like form and substance, in the presence of the two (2) undersigned witnesses.

[insert place and date of execution]

[insert name of Declarer]

Witnesses:
1.	2.
Name:	Name:
RG:	RG:
CPF:	CPF:

 

20

 Schedule III

Trading in Securities of the Company or Publicly Listed Companies that control it or are controlled by it:
Period: [month/year]
Name of Purchaser or Seller
Identification Details	CNPJ/CPF
Date of Trade
Issuing Company
Type of trade and form of acquisition or disposal
Type of Security
Total Amount
Amount by Type or Class (shares)
Characteristics (other securities)
Price
Broker Used
Position before trading
Position after trading
Other Material Information

 

21

Schedule IV

Purchase or Sale of Material Ownership Interest
Period: [month/year]
Name of Purchaser/Seller
Identification Details	CNPJ/CPF
Date of Trade
Issuing Company
Type of Transaction
Type of Security
Intended Amount
Amount per Type or Class
Price
Broker Used
Purpose of Interest
Number of shares and other securities and derivatives referenced to these shares for physical or financial settlement, specifying quantity and class
Indication of any agreement or contract regulating the exercise of voting rights or purchase and sale of securities issued by the Company
Other Material Information

thn/115466.doc

3/24/16

EX-12.1

 

Exhibit 12.1

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

I, Bernardo Pinto Paiva, certify that:

1.            I have reviewed this annual report on Form 20-F of Ambev S.A. (the “Company”);

2.            Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.            Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.            The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)           Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.            The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of Company’s Board of Directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: March 19, 2018.

/s/ Bernardo Pinto Paiva                                                 

Name: Bernardo Pinto Paiva

Title:    Chief Executive Officer

EX-12.2

 

Exhibit 12.2

PRINCIPAL FINANCIAL OFFICER CERTIFICATION

I, Ricardo Rittes de Oliveira Silva, certify that:

1.            I have reviewed this annual report on Form 20-F of Ambev S.A. (the “Company”);

2.            Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.            Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.            The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)           Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)           Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.            The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of Company’s Board of Directors (or persons performing the equivalent functions):

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: March 19, 2018.

/s/ Ricardo Rittes de Oliveira Silva                                  

Name: Ricardo Rittes de Oliveira Silva

Title:    Chief Financial Officer

EX-13.1

 

Exhibit 13.1

Certification of the Principal Executive Officer
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the annual report of Ambev S.A. (the “Company”) on Form 20-F for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof, or the Report, I, Bernardo Pinto Paiva, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 19, 2018.

/s/ Bernardo Pinto Paiva                                                 

Name: Bernardo Pinto Paiva

Title:    Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-13.2

 

Exhibit 13.2

Certification of the Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002

In connection with the annual report of Ambev S.A. (the Company) on Form 20–F for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on the date hereof, or the Report, I, Ricardo Rittes de Oliveira Silva, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes–Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 19, 2018.

/s/ Ricardo Rittes de Oliveira Silva                                  

Name: Ricardo Rittes de Oliveira Silva

Title:    Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information	12 Months Ended
	Dec. 31, 2017 shares
Document Information [Line Items]
Entity Registrant Name	AMBEV S.A.
Entity Central Index Key	0001565025
Trading Symbol	abev
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	Yes
Entity Common Stock, Shares Outstanding (in shares)	15,710,221,382
Document Type	20-F
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Amendment Flag	false

XML

Consolidated Income Statements - BRL (R$) R$ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Net sales		R$ 47,899.3	R$ 45,602.6	R$ 46,720.2
Cost of sales		(18,041.8)	(16,678.0)	(16,061.4)
Gross profit		29,857.5	28,924.6	30,658.8
Distribution expenses		(6,295.5)	(6,085.5)	(5,833.2)
Sales and marketing expenses		(5,620.0)	(5,925.0)	(5,344.7)
Administrative expenses		(2,623.8)	(2,166.1)	(2,281.3)
Other operating income/(expenses), net		1,217.3	1,223.1	1,936.1
Exceptional items		(108.7)	1,134.3	(357.2)
Income from operations		16,426.8	17,105.4	18,778.5
Finance cost		(4,268.3)	(4,597.9)	(3,562.4)
Finance income		774.4	895.9	1,294.2
Net finance cost		(3,493.9)	(3,702.0)	(2,268.2)
Share of result of joint ventures		(3.1)	(5.0)	3.1
Income before income tax		12,929.8	13,398.4	16,513.4
Income tax expense		(5,079.3)	(315.0)	(3,634.2)
Net income		7,850.5	13,083.4	12,879.2
Attributable to:
Equity holders of Ambev		7,332.0	12,546.6	12,423.8
Non-controlling interests		R$ 518.5	R$ 536.8	R$ 455.4
Basic earnings per share – common - R$ (in BRL per share)	[1]	R$ 0.47	R$ 0.80	R$ 0.79
Diluted earnings per share – common - R$ (in BRL per share)	[1]	R$ 0.46	R$ 0.79	R$ 0.79

[1] Expressed in Brazilian Reais.

XML

Consolidated Statements of Comprehensive Income - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Net income	R$ 7,850.5	R$ 13,083.4	R$ 12,879.2
Items that will not be recycled to profit or loss:
Other comprehensive income, net of tax, gains (losses) on revaluation	124.6	(129.6)	(24.5)
Exchange differences on translation of foreign operations gains/(losses)
Investment hedge in foreign operations		23.3	(1,859.4)
Investment hedge - put option granted on subsidiary	61.7	707.8	(1,071.0)
Gains/losses on translation of other foreign operations	1,890.6	(4,858.8)	6,344.6
Gains/losses on translation of foreign operations	1,952.3	(4,127.7)	3,414.2
Cash flow hedge - gains/(losses)
Recognized in Equity (Hedge reserve)	189.3	(579.3)	1,634.6
Removed from Equity (Hedge reserve) and included in profit or loss	324.4	(494.0)	(970.0)
Total cash flow hedge	513.7	(1,073.3)	664.6
Other comprehensive (loss)/income	2,590.6	(5,330.6)	4,054.3
Total comprehensive income	10,441.1	7,752.8	16,933.5
Attributable to
Equity holders of Ambev	9,891.7	7,610.4	16,086.5
Non-controlling interest	R$ 549.4	R$ 142.4	R$ 847.0

XML

Consolidated Balance Sheets - BRL (R$) R$ in Millions		Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Property, plant and equipment		R$ 18,822.3	R$ 19,153.8
Goodwill		31,401.9	30,511.2
Intangible		4,674.7	5,245.9
Investments in associates		238.0	300.1
Investment securities		122.0	104.3
Net deferred tax assets		2,279.3	2,268.2
Employee benefits		58.4	33.5
Derivative financial instruments		35.2	16.3
Income tax and social contributions recoverable		2,312.7	4.5
Other recoverable taxes		225.0	343.2
Other assets		1,964.4	1,973.6
Non-current assets		62,133.9	59,954.6
Investment securities		11.9	282.8
Inventories		4,319.0	4,347.1
Trade receivable		4,944.8	4,368.1
Derivative financial asset instruments		350.0	196.6
Income tax and social contributions recoverable		2,770.4	4,693.7
Other recoverable taxes		600.2	729.6
Cash and cash equivalents		10,354.5	7,876.8
Other assets		1,367.2	1,392.1
Current assets		24,718.0	23,886.8
Total assets		86,851.9	83,841.4
Equity
Issued capital		57,614.1	57,614.1
Reserves		63,361.2	64,230.0
Carrying value adjustments		(74,966.5)	(77,019.1)
Equity attributable to equity holders of Ambev		46,008.8	44,825.0
Non-controlling interests		1,974.0	1,826.3
Total Equity		47,982.8	46,651.3
Interest-bearing loans and borrowings		1,231.9	1,765.7
Employee benefits		2,310.7	2,137.7
Derivative financial instruments		2.4	27.0
Deferred tax liabilities		2,329.2	2,329.7
Income tax and social contribution payable	[1]	2,418.0
Taxes and contributions payable		771.6	681.4
Trade payables		175.1	237.8
Provisions		512.6	765.4
Put option granted on subsidiary and other liabilities		429.1	471.8
Non-current liabilities		10,180.6	8,416.5
Bank overdrafts		1.8
Interest-bearing loans and borrowings, current		1,321.1	3,630.6
Wages and salaries		1,047.2	686.6
Dividends and interest on shareholders’ equity payable		1,778.6	1,714.4
Derivative financial instruments		215.1	686.4
Income tax and social contribution payable		1,668.4	904.2
Taxes and contributions payable		3,825.4	3,378.2
Trade payables		11,854.0	10,868.8
Provisions		169.0	168.6
Put option granted on subsidiary and other liabilities		6,807.9	6,735.8
Current liabilities		28,688.5	28,773.6
Total liabilities		38,869.1	37,190.1
Total equity and liabilities		R$ 86,851.9	R$ 83,841.4

[1] During the third quarter, the Company joined a Special Program for Tax Regulation ("PERT 2017"). Additional information regarding the adherence are disclosed on Note 1 - Corporate information.

XML

Consolidated Statements of Changes in Equity - BRL (R$) R$ in Millions	Issued capital [member]	Capital reserve [member]	Net income reserves [member]	Retained earnings [member]	Carrying value adjustments [member]	Equity attributable to owners of parent [member]	Non-controlling interests [member]	Total
Balance at Dec. 31, 2014	R$ 57,582.4	R$ 55,023.3	R$ 4,883.8		R$ (75,267.9)	R$ 42,221.6	R$ 1,423.1	R$ 43,644.7
Statement Line Items [Line Items]
Net Income				12,423.8		12,423.8	455.3	12,879.2
Comprehensive income:
Gains/(losses) on translation of foreign operations					3,018.9	3,018.9	395.3	3,414.2
Cash flow hedges					666.2	666.2	(1.5)	664.6
Actuarial gain/(losses)					(22.4)	(22.4)	(2.1)	(24.5)
Total comprehensive income				12,423.8	3,662.7	16,086.5	847.0	16,933.5
Options granted on subsidiary					(189.4)	(189.4)		(189.4)
Gains/(losses) of controlling interest´s share					13.5	13.5	(7.9)	5.6
Dividends distributed				(2,352.4)		(2,352.4)	(260.4)	(2,612.8)
Interest on own capital			(1,979.8)	(4,866.3)		(6,846.1)		(6,846.1)
Acquired shares and result on treasury shares		(817.0)				(817.0)		(817.0)
Share-based payment		189.9				189.9		189.9
Prescribed dividends				16.2		16.2		16.2
Reversal effect revaluation of property, plant and equipment under the predecessor basis accounting				75.9	(75.9)
Fiscal incentive reserve			1,143.6	(1,143.6)
Investments reserve			2,114.4	(2,114.4)
Balance at Dec. 31, 2014	57,582.4	55,023.3	4,883.8		(75,267.9)	42,221.6	1,423.1	43,644.7
Comprehensive income:
Net Income				12,423.8		12,423.8	455.3	12,879.2
Capital increase	31.7	(22.6)				9.1		9.1
Additional Interest on shareholders’ equity			2,039.2	(2,039.2)
Balance at Dec. 31, 2015	57,614.1	54,373.6	8,201.2		(71,857.0)	48,331.9	2,001.8	50,333.7
Statement Line Items [Line Items]
Net Income				12,546.6		12,546.6	536.8	13,083.4
Comprehensive income:
Gains/(losses) on translation of foreign operations					(3,728.8)	(3,728.8)	(398.9)	(4,127.7)
Cash flow hedges					(1,076.7)	(1,076.7)	3.4	(1,073.3)
Actuarial gain/(losses)					(130.7)	(130.7)	1.1	(129.6)
Total comprehensive income				12,546.6	(4,936.2)	7,610.4	142.4	7,752.8
Options granted on subsidiary					(144.1)	(144.1)		(144.1)
Gains/(losses) of controlling interest´s share					(2.8)	(2.8)	37.6	34.8
Dividends distributed				(5,651.8)		(5,651.8)	(355.5)	(6,007.3)
Interest on own capital			(2,039.2)	(3,454.2)		(5,493.4)		(5,493.4)
Acquired shares and result on treasury shares		94.8				94.8		94.8
Share-based payment		61.5				61.5		61.5
Prescribed dividends				21.6		21.6		21.6
Reversal effect revaluation of property, plant and equipment under the predecessor basis accounting				75.9	(75.9)
Fiscal incentive reserve			1,819.5	(1,819.5)
Investments reserve			1,718.6	(1,718.6)
Balance at Dec. 31, 2015	57,614.1	54,373.6	8,201.2		(71,857.0)	48,331.9	2,001.8	50,333.7
Comprehensive income:
Net Income				12,546.6		12,546.6	536.8	13,083.4
Exchange transaction of shareholdings					(3.1)	(3.1)		(3.1)
Capital increase
Balance at Dec. 31, 2016	57,614.1	54,529.9	9,700.1		(77,019.1)	44,825.0	1,826.3	46,651.3
Statement Line Items [Line Items]
Net Income				7,332.0		7,332.0	518.5	7,850.5
Comprehensive income:
Gains/(losses) on translation of foreign operations					1,928.6	1,928.6	23.7	1,952.3
Cash flow hedges					513.4	513.4	0.3	513.7
Actuarial gain/(losses)					117.7	117.7	6.9	124.6
Total comprehensive income				7,332.0	2,559.7	9,891.7	549.4	10,441.1
Options granted on subsidiary					(380.4)	(380.4)		(380.4)
Gains/(losses) of controlling interest´s share					(12.1)	(12.1)	29.5	17.4
Tax on fictitious dividends					(38.7)	(38.7)		(38.7)
Dividends distributed				(3,612.8)		(3,612.8)	(431.2)	(4,044.0)
Interest on own capital			(3,770.1)	(1,099.6)		(4,869.7)		(4,869.7)
Acquired shares and result on treasury shares		13.7				13.7		13.7
Share-based payment		157.4				157.4		157.4
Prescribed dividends				34.7		34.7		34.7
Reversal effect revaluation of property, plant and equipment under the predecessor basis accounting				75.9	(75.9)
Fiscal incentive reserve			1,552.3	(1,552.3)
Investments reserve			1,177.9	(1,177.9)
Balance at Dec. 31, 2016	57,614.1	54,529.9	9,700.1		(77,019.1)	44,825.0	1,826.3	46,651.3
Comprehensive income:
Net Income				7,332.0		7,332.0	518.5	7,850.5
Capital increase
Balance at Dec. 31, 2017	R$ 57,614.1	R$ 54,701.0	R$ 8,660.2		R$ (74,966.5)	R$ 46,008.8	R$ 1,974.0	R$ 47,982.8

XML

Consolidated of Cash Flow Statements - BRL (R$) R$ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Net Income		R$ 7,850.5	R$ 13,083.4	R$ 12,879.2
Depreciation, amortization and impairment		3,612.1	3,512.0	3,074.6
Impairment losses on receivables and inventories		156.3	196.5	97.7
Additions/(reversals) in provisions and employee benefits		168.3	347.1	483.1
Net finance cost		3,493.9	3,702.0	2,268.2
Losses/(gain) on sale of property, plant and equipment and intangible assets		(49.4)	(70.9)	(27.9)
Losses/(gain) on sale of operations in associates		(41.7)		(25.1)
Gains on exchange transaction of shareholdings			(1,240.0)
Equity-settled share-based payment expense		209.3	170.3	197.1
Income tax expense		5,079.3	315.0	3,634.2
Share of result of joint ventures		3.1	5.0	(3.1)
Other non-cash items included in the profit		196.3	(737.4)	(1,305.7)
Cash flow from operating activities before changes in working capital and use of provisions		20,678.0	19,283.0	21,272.3
(Increase)/decrease in trade and other receivables		(265.6)	(578.4)	(380.8)
(Increase)/decrease in inventories		(63.8)	(437.1)	(681.5)
Increase/(decrease) in trade and other payables		(105.8)	(565.1)	5,083.2
Cash generated from operations		20,242.8	17,702.4	25,293.2
Interest paid		(557.3)	(724.9)	(257.3)
Interest received		337.9	597.7	656.2
Dividends received		7.3	111.0	14.8
Income tax paid		(2,156.6)	(5,341.8)	(2,126.1)
Cash flow from operating activities		17,874.1	12,344.4	23,580.8
Proceeds from sale of property, plant and equipment and intangible assets		101.9	133.6	99.8
Proceeds from sale of subsidiaries operations				94.3
Acquisition of property, plant and equipment and intangible assets		(3,203.6)	(4,132.7)	(5,261.2)
Acquisition of subsidiaries, net of cash acquired		(333.3)	(1,824.2)	(1,212.2)
Acquisition of other investments		(1.1)	(37.6)	(123.5)
Investment in short term debt securities and net proceeds/(acquisition) of debt securities		276.9	(37.1)	403.8
Net proceeds/(acquisition) of other assets		86.2		2.0
Cash flow from investing activities		(3,073.0)	(5,898.0)	(5,997.0)
Capital increase				9.9
Proceeds/(repurchase) of treasury shares		(38.6)	0.4	(824.2)
Proceeds from borrowings		2,904.4	3,792.0	4,964.6
Repayment of borrowings		(5,441.7)	(1,896.2)	(5,653.0)
Cash net of finance costs other than interests		(1,459.5)	(3,207.8)	(2,326.9)
Payment of finance lease liabilities		(9.0)	(2.9)	(8.1)
Interest on capital paid based on the investment reserve		(8,819.8)	(10,330.6)	(11,490.2)
Cash flow from financing activities		(12,864.2)	(11,645.1)	(15,327.9)
Net increase/(decrease) in cash and cash equivalents		1,936.9	(5,198.7)	2,256.0
Cash and cash equivalents less bank overdrafts at beginning of year	[1]	7,876.8	13,617.7	9,623.0
Effect of exchange rate fluctuations		539.0	(542.2)	1,738.7
Cash and cash equivalents less bank overdrafts at end of year	[1]	R$ 10,352.7	R$ 7,876.8	R$ 13,617.7

[1] Net of bank overdrafts.

XML

Note 1 - Corporate Information

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Description of corporate information [text block]

1. CORPORATE INFORMATION

(a) Description of business

Ambev S.A. (referred to as the “Company” or “Ambev”), headquartered in São Paulo, Brazil, produces and sells beer, draft beer, soft drinks, other non-alcoholic beverages, malt and food in general, as well as the advertising of its and

third

party products, the sale of promotional and advertising materials and the direct or indirect exploitation of bars, restaurants, snack bars and the like, among others.

The Company’s shares and ADR’s (American Depositary Receipts) are listed on the

B3

S.A.- Brasil, Bolsa, Balcão as

“ABEV3”

and on the New York Stock Exchange (NYSE) as “ABEV”.

The Company’s direct controlling shareholders are Interbrew International B.V. (“IIBV”), AmBrew S.A. (“Ambrew”), both subsidiaries of Anheuser-Busch InBev N.V. (“AB InBev”) and Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficência (“Fundação Zerrenner”).

The financial statements were approved by the Board of Directors on

February 27

st

,

2018.

(b) Major corporate events in 2015, 2016 and 2017

Renegotiation of shareholders agreement CND

On

December

1st,

2017,

Ambev informed its shareholders and the general market that the E. León Jimenes, S.A. (“ELJ”), partner of Ambev in Tenedora CND, S.A. (“Tenedora”) – a holding company headquartered in Dominican Republic, which holds almost all shares of Cervecería Nacional Dominicana, S.A – will exercise partially, as provide for in shareholders’ agreement of Tenedora, ELJ put option of approximatelly

30%

of capital stock by Tenedora. Due the partial put exercise option, the Company will pay to ELJ the amount of USD

926.5

million and will be the holder of approximately

85%

of Tenedora, and ELJ will remain with

15%

interest of CND. Considering the strategic importance of alliance with the ELJ, the Board of Directors of Ambev approved this date the change of the call option term from

2019

to

2022.

The transaction was subject to certain conditions precedent that were executed on

January 18, 2018,

as described in Note

36

-

Subsequent events

.

Adherence to the Special Tax Regularization Program

During the

third

quarter of

2017,

the Company adhere a Special Program for Tax Regularization, fixed by Provisional Measure

no.

783,

from

May 31, 2017,

extended by the Provisional Measure

no.

798

(“PERT

2017”

), undertaking to pay some tax assessments that were in dispute, including debts from its subsidiaries, for a total amount of

R$3.5

billion, already considering discounts according to the program, having paid the amount of approximately 

R$960

millions in

2017

and undertaking to pay the remaining value in

145

monthly installments, with interest, starting in

January, 2018.

Perpetual licensing agreement with Quilmes

In

September 2017,

AB InBev and Quilmes, a subsidiary of Ambev, entered into an agreement whereby AB InBev will grant a perpetual license to Quilmes in Argentina for Budweiser and other North American brands upon the recovery of the distribution rights by AB InBev from CCU. The agreement also foresees the transfer of the brewery of Cerveceria Argentina Sociedad Anonima Isenbeck by AB InBev to Quilmes and the transfer of some Argentinean brands (Norte, Iguana and Baltica) and related business assets along with

US$50

millions by Quilmes to CCU. The closing of the transaction is subject to the approval of the Argentinean antitrust authority and others usual closing conditions. Such approval has

not

been granted by the time of the publication of these financial statements.

Exchange contracts for future financial flows - Equity Swap

As of

December 21, 2017,

the Board of Directors approved new equity swap agreements without prejudice to the liquidation, within the regulatory term, of the agreements still in force as authorized at the meeting held on

May 16, 2017.

These agreements authorized

may

result in an exposure of up to

44

million common shares (of which all or part

may

be through ADR’s), with a limit value of up to

R$820

million and, together with the balance of the agreements executed in the context of the approval of

May 16, 2017

and

not

yet settled.

On

May

16th,

2017,

the Board of Directors of Ambev approved the execution, by and between the Company, or its subsidiaries, and financial institutions to be approved by the Board of Officers, of equity swaps, having as underlying asset the shares issued by the Company or American Depositary Receipts representing these shares (“ADRs”). The settlement of the equity swap will take place within a maximum period of

18

months from this date, and the agreements

may

result in an exposure of up to

80

million common shares, with a limit value of up to R$

2.3

billion.

Acquisition of the Cachoeiras de Macacu

In

December 2016,

the Company acquired Cachoeira de Macacu Bebidas Ltda. from Brasil Kirin Indústria de Bebidas Ltda., a company that owns an operating industrial plant for the production and packaging of beer and non-alcohol  beverages  in the State of Rio de Janeiro for

R$478.6

million.

Exchange of shareholdings

On

May 12, 2016,

Ambev and its controlling shareholder, AB InBev, entered into an agreement for the exchange of shareholdings (“Swap”). The execution of the Swap was conditional on the implementation of the merger of the activities of AB InBev and SABMiller Plc (“SABMiller”), which occurred on

October 10, 2016.

Subsequently, on

December 31, 2016,

after the implementation of certain preparatory corporate acts, the Swap was effected. Based on the agreement described above, Ambev transferred to AB InBev the equity interest in Keystone Global Corporation - KGC, which held shares in companies domiciled in Colombia, Peru and Ecuador. On the other hand, AB InBev transferred to Ambev its interest in Cerveceria Nacional S. de R.L., a subsidiary domiciled in Panama, which had previously been acquired as a

third

party.

The value attributed to the transaction is based on a fairness opinion prepared by a specialized company and duly approved by the Board of Directors of Ambev, with abstention from the vote of the directors appointed by AB InBev.

The result of the transaction above mentioned was

R$1,236.8

million, of which

R$1,240.0

million was recognized in the income statement on exceptional items.

Acquisition of Archibald Microbrasserie

On

April, 2016,

the Company, through its wholly-owned subsidiary Labatt Breweries, in Canada, acquired the company Archibald Microbrasserie, known for its local beers and seasonal specialties. Furthermore, in Brazil, acquired

66%

of the company Sucos do Bem, which has a range of juices, teas and cereal bars. The acquisition amount added was approximately

R$155

million.

Acquisition of Mark Anthony Group Companies

On

January, 2016,

the Ambev, through its wholly-owned subsidiaries, CRBS S.A. and Ambev Luxembourg, acquired companies to a range of primarily spirit-based beers and ciders from Mark Anthony Group, by

R$1.4

billion.

Business Acquisitions and Creation of B.Blend

During

2015

the Company, through its subsidiaries, effected the purchase of companies Wals (“Tropical Juice”), Colorado (“Beertech Bebidas”), Bogota Beer Company (“BBC”), Cervecería BBC SAS (“Cerveceria BBC”), Mill Street Brewery (“Mill St. Brewery”) and Banks Holdings Limited (“BHL”). Along with Whirpool has initiated the setting-up of the

one

joint venture, named B. Blend, being the

first

platform beverages in capsules all-in-

one

of the world.

XML

Note 2 - Statement of Compliance

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Statement of IFRS compliance [text block]

2. STATEMENT OF COMPLIANCE

The consolidated financial statements have been prepared using the accounting basis of going concern and are being presented in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) that were effective as of

December 31, 2017.

XML

Note 3 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of significant accounting policies [text block]

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There were

no

significant changes in accounting policies and calculation methods used for the financial statements as of

December 31, 2017

in relation to those presented in the financial statements for the years ended

December 31, 2016

and

2015.

(a) Basis of preparation and measurement

The financial statements are presented in

million

of Brazilian Real (“R$”),

unless otherwise indicated, rounded to the nearest million indicated

. The measurement basis used in preparing the financial statements is historical cost, net realizable value, fair value or recoverable amount.

(b) Recently issued IFRS

The reporting standards below were published and are mandatory for future annual reporting periods. Although IFRSs anticipate early adoption, in Brazil, regulators have prevented this anticipation in order to preserve aspects of comparability. Accordingly, for the year ended

December 31, 2017,

these standards were

not

applied in the preparation of these financial statements:

IFRS

9

- Financial Instruments

(effective from annual periods beginning on or after

1

January 2018),

which will replace IAS

39,

introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held; defines a new expected-loss impairment model that will require more effective recognition; and introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new hedge accounting model represents a significant overhaul of the policies and aligns the accounting treatment with risk management activities. IFRS

9

also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. The company evaluated the possible impacts arising from the application of IFRS

9

and does

not

identify a significant impact on its financial position and/or its financial performance.

IFRS

15

- Revenue from Contracts with Customers

(effective from annual periods beginning on or after

1

January 2018)

requires revenue recognition to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the Company expects to be entitled in exchange for those goods or services. The new standard will also result in more and enhanced disclosures about revenue, provide guidance for transactions that were

not

previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. In view of the Ambev’s activities, the company does

not

identify that the application of IFRS

15

will have a significant impact on its financial position and/or its financial performance.

IFRS

16

– Leases

(effective from annual periods beginning on or after

1

January 2019)

replaces the existing lease accounting requirements and represents a significant change in the accounting and reporting of leases that were previously classified as operating leases, with more assets and liabilities to be reported on the balance sheet and a different recognition of lease costs.

The company is in process of assessing the full impact of IFRS

16

and expects changes in the presentation of operating leases in the balance sheet.

Other Standards, Interpretations and Amendments to Standards

The other amendments to standards effective for annual periods beginning after

1

 

January 2017,

have

not

been listed above because of either their non-applicability to or their immateriality to Ambev’s consolidated financial statements.

(c) Consolidated financial statements

The financial statements of subsidiaries, joint arrangements and associates used in its consolidated financial statements are prepared for the same reporting period as Ambev, using consistent accounting policies.

All intercompany transactions, balances and unrealized gains or losses on transactions between group companies have been eliminated.

Subsidiaries

The Company controls an entity when it is exposed to or has rights to variable returns due to its involvement with the organization and is able to affect those returns through its power over the entity. In assessing control, potential voting rights are taken into account. Control is presumed to exist where the Company owns, directly or indirectly, more than

one

half of the voting rights (which does

not

always equate to economic ownership), unless it can be demonstrated that such ownership does

not

constitute control.

Subsidiaries are consolidated as from the date in which control is obtained to the Company, except when the predecessor basis of accounting is applied for common control transfers. Consolidation is discontinued as from the date control ceases.

Ambev uses the purchase method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interest issued by Ambev. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement, when applicable. Costs related to the acquisition are recognized in income, as incurred. Assets, liabilities and contingent liabilities acquired/assumed in a business combination are recognized initially at their fair values at the acquisition date. Ambev recognizes the non-controlling interest in the acquiree, either at fair value or at the non-controlling interest’s proportionate share of the net assets acquired. The measurement of non-controlling interest to be recognized is determined for each acquisition.

The excess: (i) of the consideration paid; (ii) of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired, at the date of acquisition, is recorded as goodwill. When the consideration transferred is less than the fair value of net assets acquired, the difference is recognized directly in income.

All intercompany transactions, balances and unrealized gains and losses on transactions between group companies have been eliminated. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is

no

evidence of impairment.

Joint arrangements

Joint arrangements are all entities over which the Company shares control with

one

or more parties. Joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor.

Business combination between entities under common control

Business combinations between entities under common control have

not

been addressed by IFRS’s. The IFRS

3

is the pronouncement that shall be applied to business combinations, however it explicitly excludes business combinations between entities under common control from its scope.

Therefore, in accordance with IAS

8,

Management has adopted an accounting practice which is consistent with United States Generally Accepted Accounting Principles (USGAAP) and United Kingdom Generally Accepted Accounting Principles (UKGAAP), the predecessor basis of accounting to record the carrying amount of the asset received, as recorded by the parent company.

Under the predecessor basis of accounting, when accounting for a transfer of assets or a swap of shares between entities under common control, the entity that receives the net assets or the equity interests (the acquirer) shall initially record the assets and liabilities transferred at their parent book value at the transfer date. If the book value of assets and liabilities transferred by the parent are different from the historical cost registered by the controlling entity of the entities under common control (the ultimate parent), the financial statements of the acquirer shall reflect the assets and liabilities transferred at the same cost of the ultimate parent.

Regarding transactions between entities under common control that involve the disposal or transfer of assets from the subsidiary to its parent company, i.e. - above the level of our consolidated financial statement –, the Company assess the existence of (i) conflict of interests and (ii) economic substance and purpose. Having fulfilled these assumptions, the Company adopted as a policy the concepts of IAS

16

in order to provide adequate visibility and fair impact on the amount of the distributable results to our shareholders, specially the non-controlling interests. This policy also includes assets acquired through the swap of non-cash assets, or swap with a combination of cash and non-cash assets. The assets subject to the swap

may

be of equal or different nature. The cost of such asset is measured at fair value, unless (i) the swap transaction is

not

commercial in nature, or (ii) the fair value of the asset received (and the asset assigned) cannot be reliably measured. The acquired asset is measured through this way even if the assignor entity cannot immediately exclude the asset from its books. If the acquired asset is

not

measurable at fair value, its cost is determined by the book value of the assigned asset.

Whenever there is a distribution of assets that is

not

recorded as cash, the asset, before its distribution, is registered at fair value in the income account. This procedure is applicable to the distributions in which the assets are equal in nature and therefore treated equitably. However, similarly to IFRIC

17,

in the absence of a specific accounting practice for transactions under common control, we apply this procedure in our accounting practice. Also, we apply the same procedure to sales (products, supplies, etc.) we perform to our controlling entity, where the positive result of the sale is recognized in the income account.

(d) Foreign currency translation

Functional and presentation currency

The items included in the financial statements of each subsidiary of the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”).

The functional and presentation currency of the Company financial statements is the Brazilian Real.

Transactions and balances

Foreign currency transactions are accounted for at exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the balance sheet date rate. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at exchange rates ruling at the dates the fair value was determined. Gains and losses arising from the settlement of transactions in foreign currencies and resulting from the conversion of assets and liabilities denominated in foreign currencies are recognized in the income statement.

The foreign exchange gains and losses related to loans and cash and cash equivalents are presented in the income statement as finance cost or finance income.

Conversion of the financial statements of subsidiaries located abroad

Assets and liabilities of subsidiaries located abroad are translated at foreign exchange rates prevailing at the balance sheet date, while amounts from income statement and cash flows are translated at average exchange rates for the year and the changes in equity are translated at historical exchange rates of each transaction. The translation adjustments arising from the difference between the average exchange rates and the historical rates are recorded directly in Carrying value adjustments.

On consolidation, exchange differences arising from translation of equity in foreign operations and borrowings and other currency instruments designated as net investment hedges are recognized in Carrying value adjustments, an equity reserve, and included in Other comprehensive income.

The goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Net investment in a foreign operation

An entity

may

have a monetary item that is receivable from or payable to a foreign operation which settlement is neither planned nor likely to occur in the foreseeable future and do

not

include trade receivables or trade payables. Exchange differences arising shall be recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

Exchange rates

The most significant exchange rates used in the preparation of the Company’s financial statements are as follows:

			Closing rate						Average rate
Currency	Name	Country	2017		2016		2015		2017		2016		2015
CAD	Canadian Dollars	Canada and Cuba		2.6380		2.4214		2.8124		2.4567		2.6348		2.5661
DOP	Dominican Pesos	Dominican republic		0.0685		0.0700		0.0860		0.0674		0.0755		0.0725
USD	US Dollar	Ecuador (i) , Panamá and Cuba (ii)		3.3080		3.2591		3.9048		3.2017		3.4749		3.2596
GTQ	Quetzal	Guatemala		0.4500		0.4343		0.5129		0.4344		0.4570		0.4265
PEN	Novo Sol	Peru (i)		-		0.9720		1.1440		-		1.0269		1.0396
ARS	Argentinean Peso	Argentina		0.1762		0.2056		0.3003		0.1931		0.2354		0.3581
BOB	Bolivian Peso	Bolivia		0.4753		0.4683		0.5610		0.4600		0.4993		0.4683
PYG	Guarani	Paraguai		0.0006		0.0006		0.0007		0.0006		0.0006		0.0006
UYU	Uruguayan Peso	Uruguay		0.1151		0.1114		0.1304		0.1116		0.1166		0.1197
CLP	Chilean Peso	Chile		0.0054		0.0049		0.0055		0.0049		0.0051		0.0050
COP	Peso colombiano	Colômbia (i)		-		0.0011		0.0012		-		0.0011		0.0012
BBD	Barbadian Dollar	Barbados		1.6307		1.6075		-		1.5783		1.7139		-

(i) Until

December 31, 2016,

due to exchange of shareholdings

,

according the Note

1

-

Corporate information

.

(ii) The functional currency of Cuba, the Cuban convertible peso (“CUC”), has a fixed parity with the dollar (“USD”) at balance sheet date.

(e) Segment reporting

Reportable segments are identified based on internal reports regularly reviewed by the chief operating decision maker of the Company for purposes of evaluating the performance of each segment and allocating resources to those segments. Accordingly, segment information is presented on geographical areas, since the risks and rates of return are affected predominantly by the fact that the Company operates in different regions. The Company’s management structure and the information reported to the chief decision are structured the same way.

The performance information by business units (Beer and Soft drink (“CSD”) and Non-alcoholic and non-carbonated (“NANC”)), is also used by the decision maker for the Company and is presented as additional information, even though it does

not

qualify as a reportable segment. Internally, the Company’s management uses performance indicators, such as earnings of consolidated operation before interest and taxes (EBIT) and normalized earnings of consolidated operation before interest, taxes, depreciation and amortization (normalized EBITDA) as measures of segment performance to make decisions about resource allocation and performance analysis of consolidated operation. These indicators are reconciled to the profit of the segment in the tables on Note

5

– Segment reporting

.

The Company operates its business through

three

zones identified as reportable segments:

▪ Latin America North, which includes our operations (a) in Brazil and Luxembourg, where we operate

two

business sub units: (i) beer and (ii) CSD and NANC; and (b) in Central America Operations (“CAC”), which includes our operations in the Dominican Republic (which also serves the islands of the Caribbean: Saint Vincent, Dominica, Antigua and Barbados), Guatemala (which also serves El Salvador and Nicaragua), Cuba and Panama;

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

▪ Canada, represented by Labatt’s operations.

(f) Revenue recognition

The Company recognizes revenue when the amount of revenue can be measured reliably and it is probable that economic benefits associated with the transaction will flow to the Company.

Revenue comprises the fair value of the amount received or receivable upon selling products or rendering services in the ordinary course of business. Revenue is presented net of taxes, returns, rebates and discounts, as well as net of elimination of sales between group companies.

Goods sold

In relation to the sale of goods, revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, and

no

significant uncertainties remain regarding recovery of the consideration due, the costs associated with the possible return of the products, and when there is

no

continuing management involvement with the goods. Revenue from the sale of goods is measured at the fair value of the consideration (price) received or receivable, net of returns, commercial deductions and discounts.

As part of its commercial policy, the Company provides unconditional discounts to its customers, which are recorded as s deductions at the time of sales.

Finance income

Finance income consists of interest received or receivable on funds invested, foreign exchange gains, gains on currency hedging instruments offsetting currency losses, gains on hedging instruments that are

not

part of a hedge accounting relationship, gains on financial assets classified as held for trading, as well as any gains from hedge ineffectiveness.

Interest income is recognized on an accrual basis unless collectability is in doubt.

(g) Expenses

Royalty expenses

Royalties are classified as cost of goods sold.

Finance costs

Finance costs comprise interest payable on borrowings, calculated using the effective interest rate method, foreign exchange losses, losses on currency hedging instruments offsetting currency gains, results on interest rate hedging instruments, losses on hedging instruments that are

not

part of a hedge accounting relationship, losses on financial assets classified as held for trading, impairment losses on financial assets classified as available for sale, as well as any losses from hedge ineffectiveness.

All interest costs incurred in connection with borrowings or financial transactions are expensed as incurred as part of finance costs, except when capitalized. Any difference between the initial amount and the maturity amount of interest bearing loans and borrowings, such as transaction costs and fair value adjustments, are recognized in the income statement over the expected life of the instrument on an effective interest rate method. The interest expense component of finance lease payments is also recognized in the income statement using the effective interest rate method.

(h) Exceptional items

Exceptional items are those that in Management’s judgment need to be disclosed separately by virtue of their size or incidence. In determining whether an event or transaction is special, Management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence, and the potential of impact on the variation of profit or loss. These items are disclosed in the income statement or separately disclosed in the notes to the financial statements. Transactions that

may

give rise to exceptional items are principally restructuring activities, acquisition of subsidiaries, impairment losses, and gains or losses on disposal of assets and investments.

(i) Income tax and social contribution

Income tax and social contribution for the year comprises current tax and deferred tax. Income tax and social contribution are recognized in the income statement, unless they relate to items recognized directly in comprehensive income or other equity accounts. In these cases the tax effect is also recognized directly in comprehensive income or equity account (except interest on shareholder’s equity. See Note

3

(p)).

The current tax expense is the expectation of payment on the taxable income for the year, using tax rates enacted, or substantially enacted, at the balance sheet date, and any adjustment to tax payable in respect of previous years.

The deferred taxes are recognized using the balance sheet liability approach. This means that a deferred tax liability or asset is recognized for all taxable and tax deductible temporary differences between the tax and accounting basis of assets and liabilities. Under this method, a provision for deferred taxes is also calculated on the differences between the fair value of assets and liabilities acquired in a business combination and their tax basis. IAS

12

prescribes that

no

deferred tax liability on goodwill recognition, and

no

deferred tax asset/liability is recorded: (i) at the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; and (ii) on differences related to investments in subsidiaries to the extent that they are

not

reversed in the foreseeable future. The amount of deferred tax provided is based on the expectation of the realization or settlement of the temporary difference, using currently or substantially enacted tax rates.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously.

The deferred tax asset is recognized only to the extent that it is likely that future taxable profits will be available. The deferred income tax asset is reduced to the extent that it is

no

longer probable that the future taxable benefit will occur.

(j) Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. The cost includes the purchase price, borrowing cost incurred during the construction period and any other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management (e.g. nonrefundable tax, transport and the costs of dismantling and removal and site restoration, if applicable). The cost of a self-constructed asset is determined using the same principles as for an acquired asset. The depreciation methods, residual value, as well as the useful lives are reassessed and adjusted if appropriate, annually.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets.

Land is

not

depreciated since it is deemed to have an indefinite life.

Property, plant and equipment, and depreciation include the effects of the predecessor basis of accounting, according the Note

1

-

Corporate information

.

Subsequent expenditures

The Company recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing a component of such an item if it is probable that the future economic benefits embodied with the item will flow to the Company and the cost of the item can be measured reliably. All other costs are expensed as incurred.

Depreciation

The depreciable amount is the cost of an asset less its residual value. Residual values, if

not

insignificant, are reassessed annually. Depreciation is calculated from the date the asset is available for use, using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives of major property, plant and equipment classes as follows:

Buildings (years)		25
Plant and equipment (years)		15
Fixtures (years)		10
Fittings (years)		10
External use assets (years)	2	-	5

The assets residual values and useful lives are reviewed at least annually. Management uses judgment to assess and ascertain the useful lives of these assets.

Gains and losses on sale

Gains and losses on sales are determined by comparing the results with the carrying amount and are recognized in Other operating income/(expenses) in the income statement.

(k) Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint arrangements.

Goodwill is determined as the excess (i) of the consideration paid; (ii) of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired at the date of acquisition. All business combinations are accounted for by applying the purchase method.

In conformity with IFRS

3

Business Combinations

, goodwill is carried at cost and is

not

amortized, but tested for impairment at least annually, or whenever there are indications that the cash generating unit to which the goodwill has been allocated

may

be impaired. Impairment losses recognized on goodwill are

not

reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is expressed in the functional currency of the subsidiary or joint operation to which it relates and translated to

Reais

using the year-end exchange rate.

Regarding associates and joint ventures, goodwill is included in the carrying amount of the investment in the associate/joint ventures.

If the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized exceeds the cost of the business combination such excess is recognized immediately in the income statement.

Expenditure on internally generated goodwill is expensed as incurred.

Goodwill includes the effects of the predecessor basis of accounting (Note

3

(c)).

(l) Intangible assets

Brands

When part of the consideration paid in a business combination is related to brands, these are recognized in a specific Intangible Assets account and measured at fair value at the acquisition date. Subsequently, the value of brands can be reduced in case of impairment losses. Internally generated expenditures for developing a brand are recognized as expenses.

Software

Purchased software is measured at cost less accumulated amortization.

Amortization related to software is included in cost of sales, distribution and sales expenses, marketing expenses or administrative expenses based on the activity the software supports.

Other intangible assets

Other intangible assets, acquired by the Company, are stated at acquisition cost less accumulated amortization and impairment losses.

Other intangible assets also include multi-year sponsorship rights acquired by the Company. These are initially recognized at the present value of the future payments and subsequently measured at cost less accumulated amortization and impairment losses.

Amortization

Intangible assets with definite useful lives are amortized based on the straight-line method over their estimated useful lives. Licenses, supply and distribution rights are amortized over the period in which the rights exist. Brands are considered to have an indefinite life and, therefore, are

not

amortized. Software and capitalized development cost related to technology are amortized over

3

to

5

years.

Items that are

not

amortized are tested for impairment on an annual basis.

(m) Inventories

Inventories are initially recorded at the acquisition cost and subsequent valued at the lower of cost and net realizable value. Cost includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. The weighted average method is used in determining the cost of inventories.

The cost of finished products and work in progress comprises raw materials, other production materials, direct labor, other direct costs, gains and losses with derivative financial instruments, and an allocation of fixed and variable overhead based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the cost for bringing inventories to sales conditions and selling costs.

Inventories have their amount reduced on a case-by-case basis if the anticipated net realizable value declines below its carrying amount. The calculation of the net realizable value takes into consideration specific characteristics of each inventory category, such as expiration date, remaining shelf life, slow-moving indicators, amongst others.

(n) Trade receivables

Accounts receivable are initially recognized at fair value and subsequently at amortized cost, less provision for losses on doubtful accounts. An allowance for impairment of trade receivables is established when there is objective evidence that the Company will

not

be able to collect all amounts due according to the original terms of the receivables. An allowance for impairment loss is recorded for an amount considered sufficient by management to cover probable losses upon the realization of receivables. The amount of the allowance is the difference between the asset’s carrying amount and the present value of the estimated future cash flows. The allowance for impairment loss is recognized in the income statement, as are subsequent recoveries of previous impairments. Historically,

no

significant losses in trade receivables have been experienced.

(o) Cash and cash equivalents

Cash and cash equivalents include all cash balances, bank deposits, and short-term highly liquid investments with original maturities of

three

months or less with insignificant risks of changes in value,

and

readily convertible into cash. They are stated at face value, which approximates their fair value.

For the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts, when applicable.

(p) Equity

Issued capital

The Company's issued capital consists only of common shares.

Repurchase of shares

When the Company buys back its own shares, the amount paid, including any additional costs directly attributable is recognized as a deduction from equity attributable to shareholders, in “Treasury shares” line item.

Share issuance costs

Incremental costs directly attributable to the issuance of new shares or options are presented in equity as a deduction, net of tax, from the proceeds.

Dividends and Interest on shareholder’s equity

Dividends and interest on shareholder’s equity are recognized in the liability on the date that are approved on Board of Directors Meeting, except the minimum statutory dividends provided by the Company’s bylaws, that are recognized as a liability when applicable, at the end of each fiscal year.

The expense of interest attributable to capital to shareholders is recognized in income for calculation of Brazilian income and social contribution tax and after are reclassified from shareholders' equity for presentation purposes in financial statements.

(q) Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortized cost with any difference between the initial and maturity amount being recognized in the income statement over the expected life of the instrument on an effective interest rate basis. The Company has interest-bearing loans and borrowings covered by a hedge structure (Note

22

–

Interest-bearing loans and borrowings

).

Borrowing costs directly related to the acquisition, construction or production of a qualifying asset, that requires a substantial period of time to get ready for its intended use or sale, are capitalized as part of the cost of that asset when it is probable that future economic benefits associated with the item will flow to the Company and costs can be measured reliably. The other borrowing costs are recognized as finance costs in the period in which they are incurred.

(r) Employee benefits

Post-employment benefits

Post-employment benefits include pensions managed in Brazil by Instituto Ambev de Previdência Privada – IAPP, post-employment dental benefits and post-employment medical benefits managed by Fundação Zerrenner. Usually, pension plans are funded by payments made by both the Company and its employees, taking into account the recommendations of independent actuaries. Post-employment dental benefits and post-employment medical benefits are maintained by the return on Fundação Zerrenner’s plan assets. If necessary, the Company

may

contribute some of its profit to the Fundação Zerrenner.

The Company manages defined benefit and defined contribution plans for employees of its companies located in Brazil and in its subsidiaries located in Dominican Republic, Panama, Uruguai, Bolivia and Canada.

The Company maintains funded and unfunded plans.

r.1

) Defined contribution plans

A defined contribution plan is a pension plan under which the Company pays fixed contributions into a fund. The Company has

no

legal or constructive obligations to pay further contributions if the fund does

not

hold sufficient assets to pay all employees for the benefits relating to employee service in the current and prior periods.

The contributions of these plans are recognized as expense in the period they are incurred.

r.2

) Defined benefit plans

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on

one

or more factors such as age, years of service and compensation.

For defined benefit plans, expenses are assessed separately for each plan using the projected credit unit method. The projected credit unit method takes into account each period of service as giving rise to an additional unit of benefit to measure each unit separately. Under this method, the cost of providing pensions is charged to the income statement during the period of service of the employee. The amounts charged to the income statement consist of current service cost, interest cost, past service costs and the effect of any settlements and curtailments. The obligations of the plan recognized in the balance sheet are measured at the present value of the estimated future cash outflows using a discount rate equivalent to the government´s bond rates with maturity terms similar to those of the obligation and the fair value of the plan assets.

Past service costs result from the introduction of a new plan or changes to an existing plan. They are recognized immediately in the income statement, at the earlier of when: (i) the settlements / curtailments occurs, or (ii) the Company recognizes related restructuring or termination costs, unless those changes are conditioned to the employee’s continued employment, for a specific period of time (the period in which the right is acquired). In such case, the past services costs are amortized using the straight-line method during the period in which the right was acquired.

Actuarial gains and losses consist of the effects of differences between the previous actuarial assumptions and what has actually occurred, and the effects of changes in actuarial assumptions. Actuarial gains and losses are fully recognized in Carrying value adjustments.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling and the return on plan assets, both excluding net interest, are recognized in full in the period in which they occur in the statement of comprehensive income. Re-measurements are

not

reclassified to profit or loss in subsequent periods.

When the amount of the defined benefit obligation is negative (an asset), the Company recognizes those assets (prepaid expenses), to the extent of the value of the economic benefit available to the Company either from refunds or reductions in future contributions.

Other post-employment obligations

The Company and its subsidiaries provide post-employment medical benefits, reimbursement of medication expenses and other benefits to certain retirees through Fundação Zerrenner. These benefits are

not

granted to new retirees. The expected costs of these benefits are recognized over the period of employment, using an accounting methodology similar to that for defined benefit plans, including actuarial gains and losses.

Termination benefits

Termination benefits are recognized as an expense at the earlier of: (i) when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date, and (ii) when the Company recognizes costs for a restructuring.

Bonuses

Bonuses granted to employees and managers are based on pre-defined company and individual target achievement. The estimated amount of the bonus is recognized as an expense in the period the bonus is earned.

(s) Share-based payments

Different share and share option programs allow management and other members appointed by the Board of Directors to acquire shares of the Company. The fair value of the share options is estimated at grant date, using an option pricing model that is most appropriate for the respective option. Based on the expected number of options that will be exercised, the fair value of the options granted is recognized as an expense over the vesting period with a credit to equity. When the options are exercised, equity is increased by the amount of the proceeds received.

(t) Trade payables

Trade payables are recognized initially at fair value and subsequently at amortized cost using the effective interest method.

(u) Provisions

Provisions are recognized when: (i) the Company has a present obligation (legal or constructive) as a result of past events; (ii) it is likely that a future disbursement will be required to settle the current obligation; and (iii) a reliable estimate of the amount of the obligation can be made.

Provisions, except for the mentioned on item disputes and litigation, are determined discounting the expected future cash flows, to a pre-tax rate, that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase accruals are recognized as finance expense.

Restructuring

A provision for restructuring is recognized when the Company has approved a detailed restructuring plan, and the restructuring has either commenced or has been announced. Costs relating to the ongoing and future activities of the Company are

not

provided for, but recognized when expenses are incurred.. The provision includes the benefit commitments in connection with early retirement and redundancy schemes.

Disputes and Litigations

A provision for disputes and litigation is recognized when it is more likely than

not

that the Company will be required to make future payments as a result of past events. Such items

may

include but are

not

limited to, several claims, suits and actions filed by or against the Company relating to antitrusts laws, violations of distribution and license agreements, environmental matters, employment-related disputes, claims from tax authorities, and other litigation matters..

(v) Financial assets and liabilities

Classification

The Company classifies its financial assets and liabilities in the following categories: (

1

) at fair value through profit or loss, (

2

) loans and receivables, (

3

) held to maturity and (

4

) available for sale. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial assets at initial recognition.

1

) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit or loss are financial instruments held for trading. A financial asset is classified in this category if acquired principally for the purpose of being sold in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges.

In general, financial instruments of this category are classified as short-term investments securities, on current assets. Investments with maturities beyond

one

year

may

be classified as short-term based on Management's intent and ability to withdraw them within less than

one

year, as well as, considering their highly liquid nature and the fact that they represent cash available to fund current operations.

2

) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not

quoted in an active market. They are included in current assets, except for maturities greater than

12

months after the end of the reporting period (these are classified as non-current assets).

3

) Investments held to maturity

Investments held to maturity are financial assets acquired with the intention and financial ability to hold them in the portfolio until maturity.

4

) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets

not

classified in any other category. Available-for-sale financial assets are classified as non-current assets, unless Management intends to dispose of the investment within

12

months of the end of the reporting period.

Investments in debt and equity securities are classified in this category. Equity instruments are undertakings in which the Company does

not

have significant influence or control.

Recognition and measurement

Purchases and sales of financial assets and liabilities are recognized on the trade date - the date on which the Company undertakes to buy or sell the asset.

Financial assets and liabilities are realized when the rights to receive cash flows from investments have expired or have been transferred, in this case, when the Company has transferred substantially all risks and benefits of ownership.

1

) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit and loss are initially recognized at fair value and transaction costs are charged to the income statement. Subsequently, they are carried at fair value. Gains or losses arising from changes in the fair value of financial instruments at fair value through profit or loss are presented in the income statement in the period in which they arise.

2

) Loans and receivables

Loans and receivables are carried at amortized cost using the effective interest rate.

3

) Investments held to maturity

Investments held to maturity are initially recognized at fair value plus any directly attributable transaction costs. After initial recognition, investments held to maturity are measured at amortized cost using the effective interest method, reduced by any on loss impairment.

4

) Available-for-sale financial assets

Available-for-sale financial assets are initially measured at fair value. Interest and inflation monetary adjustments are recognized in income. Subsequently, available-for-sale financial assets are measured at fair value, with changes in fair value recognized in other comprehensive income, and interests (measured using the effective interest rate method), recognized in income statement.

When available-for-sale financial assets are settled or become impaired, the accumulated fair value adjustments recognized in other comprehensive income are included in the income statement.

The fair values of investments with public quotations are based on current bid prices. If the market for a financial asset (and for unlisted securities on the stock exchange) is

not

active, the Company establishes fair value by using valuation techniques. These techniques include the use of recent transactions with

third

parties, reference to other instruments that are substantially similar, analysis of discounted cash flows and option pricing models making maximum use of information from the market and with the least possible information generated by the Company's management.

Impairment of financial assets

Management assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. If any such indication exists, the asset’s recoverable amount is estimated. A financial asset or a group of financial assets is impaired and an impairment loss is recorded only if there is objective evidence of impairment as a result of

one

or more events that occurred after the initial recognition of the asset (“loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount presented in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

(w) Impairment of non-financial assets

The carrying amounts of non-financial assets, such as property, plant and equipment, goodwill and intangible assets are reviewed, at least, at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

Goodwill, intangible assets that are

not

yet available for use and intangibles with an indefinite useful life are tested for impairment at least annually at the business unit level (which is

one

level below the reportable segment) or whenever there is any indication of impairment.

An impairment loss is recognized whenever the carrying amount of an asset or the related cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement. Intangible assets with an indefinite useful life are tested on a fair value approach applying multiples that reflect current market transactions to indicators that drive the profitability of the asset or the royalty stream that could be obtained from licensing the intangible asset to another party in an arm’s length transaction.

The recoverable amount of other assets is determined as the higher of their fair value less costs to sell and value in use. For an asset that does

not

generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The recoverable amount of the cash-generating units to which the goodwill and the intangible assets with indefinite useful life belong is based on a discounted free cash flow approach, using a discount rate that reflects current valuation models of the time value of money and the risks specific to the asset. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate before taxes that reflects current market assessments of the time value of money and the risks specific to the asset.

Non-financial assets, except by goodwill are reviewed for possible reversal of the impairment at the reporting date. Impairment losses are reversed only to the extent that the asset’s carrying amount does

not

exceed the carrying amount that would have been determined, net of depreciation or amortization, if

no

impairment loss had been recognized.

( x ) Derivative financial instruments

The Company uses derivative financial instruments in order to mitigate against risks related to foreign currency, interest rates and commodity prices. Derivative financial instruments that, although contracted for hedging purposes, do

not

meet all hedge accounting criteria are recognized at fair value in the income statement.

Derivative financial instruments are recognized initially at fair value. Fair value is the amount an asset could be realized and a liability settled, between knowledgeable parties, in an arm’s length transaction. The fair value of derivative financial instruments

may

be obtained from quoted market prices or from pricing models that take into account current market rates, and also credit risk quality of the counterpart.

Subsequent to initial recognition, derivative financial instruments are re-measured to their fair value at the balance sheet date. Changes in fair value of derivative financial instruments are recognized in the income statement, except when they are designated as hedge instruments, when any effective portion of gain or loss is recognized directly in other comprehensive income.

Cash flow, net investment or fair value hedge accounting is applied to all hedges that qualify for hedge accounting under IAS

39,

including the required hedge documentation and hedge effectiveness tests.

Cash flow hedge accounting

When a derivative financial instrument hedges the variability in cash flows of a recognized asset or liability, the foreign currency risk and the fluctuation of commodity prices associated with a highly probable forecasted transaction, the effective portion of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (cash flow hedging reserve). The ineffective portion of any resulting gain or loss is recognized in the income statement.

When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss (at that point) remains in other comprehensive income and is reclassified in accordance with the above policy when the hedged transaction occurs. If the hedged transaction is

no

longer probable, the cumulative gain or loss recognized in other comprehensive income is recycled into the income statement immediately.

Fair value hedge accounting

When a derivative financial instrument hedges the variability in fair value of a recognized asset or liability or a firm commitment, any resulting gain or loss on the hedging instrument is recognized in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in the income statement. The Company does

not

apply the fair value hedge accounting when the hedge item expires, was sold or exercised.

Net investment hedge accounting

When a derivative financial instrument hedges the net investment in foreign operations, the effective part of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (translation reserve) , while any gains or losses relating to the ineffective portion are recognized in the income statement

On disposal of a foreign operation, the cumulative gains or losses recognized directly in other comprehensive income is transferred to the income statement.

Derivative financial instruments at fair value through profit or loss

Certain derivative financial instruments do

not

qualify for hedge accounting purposes. Changes in fair value of such derivatives financial instruments are immediately recognized in income statement.

(y) Accounting for operating leases

Leases of assets under which all the risks and rewards of ownership are substantially retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the term of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place.

(z) Government grants

The Company has benefits from Brazilian state tax incentive programs to promote industrial development including the deferral of payment of taxes. These State programs are to promote long-term increases in employment, industrial decentralization, as well as complement and diversify the industrial states.

In the case of these States, the tax terms are foreseen in tax law. When conditions to obtain these grants exist, they are under the Company's control. The benefits for the postponement in the payment of such taxes are recorded in the income statement, on an accrual basis.

The interest rates and (or) terms of these loans are advantageous over the market conditions, such financing are considered as subsidized loans as determined by IAS

20.

The referred subsidy consists of the gain earned when comparing the value of these operations in market to the value agreed in contract. Thereby, upon funding the subsidy calculated is recorded in Other operating income, following the treatment for the other ICMS subsidies. Management reviews annually the market conditions prevailing in the year to assess such subsidies.

Monthly, taking into account the value of the consideration, the period to maturity, the financing contract interest rate and the above mentioned discount rate, the reduction in present value adjustment is allocated to financial income, so as to bring the balance to

zero

by the time of settlement of each consideration.

XML

Note 4 - Use of Estimates and Judgments

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of accounting judgements and estimates [text block]

4. USE OF ESTIMATES AND JUDGMENTS

The preparation of financial statements in conformity with IFRS requires Management to make judgments, estimates and assumptions that affect the application of accounting practices and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on past experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for decision making regarding the judgments about carrying amounts of assets and liabilities that are

not

readily evident from other sources. Actual results

may

differ from these estimates.

The estimates and assumptions are reviewed on a regular basis. Changes in accounting estimates

may

affect the period in which they are realized, or future periods.

Although each of its significant accounting policies reflects judgments, assessments or estimates, the Company believes that the following accounting practices reflect the most critical judgments, estimates and assumptions that are important to its business operations and the understanding of its results:

(i) predecessor basis of accounting (Note

3

(c));

(ii) business combinations (Note

3

(c) and (k);

(iii) impairment (Note

3

(v) and (w));

(iv) provisions (Note

3

(u));

(v) share-based payments (Note

3

(s));

(vi) employee benefits (Note

3

(r));

(vii) current and deferred tax (Note

3

(i));

(viii) joint arrangements (Note

3

(c)); e

(ix) measurement of financial instruments, including derivatives (Note

3

(v) and (

x

)).

The fair values of acquired identifiable intangibles are based on an assessment of future cash flows. Impairment analyses of goodwill and indefinite-lived intangible assets are performed at least annually and whenever a triggering event occurs, in order to determine whether the carrying value exceeds the recoverable amount.

The company uses its judgment to select a variety of methods including the discounted cash flow method and option valuation models and makes assumptions about the fair value of financial instruments that are mainly based on market conditions existing at each balance sheet date.

Actuarial assumptions are established to anticipate future events and are used in calculating pension and other long-term employee benefit expense and liability. These factors include assumptions with respect to interest rates, rates of increase in health care costs, rates of future compensation increases, turnover rates, and life expectancy.

The company is subject to income tax in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income tax. There are some transactions and calculations for which the ultimate tax determination is uncertain. Some subsidiaries within the Company are involved in tax audits usually in relation to prior years. These audits are ongoing in various jurisdictions at the balance sheet date and, by their nature, these can take considerable time until its conclusion.

XML

Note 5 - Segment Reporting

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of entity's operating segments [text block]

5. SEGMENT REPORTING

(a) Reportable segments – Years ended in:

	Latin America - north (i)									Latin America - south (ii)									Canada									Consolidated
	2017			2016			2015			2017			2016			2015			2017			2016			2015			2017			2016			2015
Net sales		31,086.0			28,927.8			29,654.9			10,769.7			10,212.9			11,255.6			6,043.6			6,461.9			5,809.7			47,899.3			45,602.6			46,720.2
Cost of sales		(11,935.0	)		(10,870.4	)		(9,921.3	)		(4,122.6	)		(3,685.4	)		(4,306.8	)		(1,984.2	)		(2,122.2	)		(1,833.3	)		(18,041.8	)		(16,678.0	)		(16,061.4	)
Gross profit		19,151.0			18,057.4			19,733.6			6,647.1			6,527.5			6,948.8			4,059.4			4,339.7			3,976.4			29,857.5			28,924.6			30,658.8
Distribution expenses		(4,193.8	)		(3,965.4	)		(3,709.6	)		(1,007.9	)		(979.6	)		(1,047.5	)		(1,093.8	)		(1,140.5	)		(1,076.1	)		(6,295.5	)		(6,085.5	)		(5,833.2	)
Sales and marketing expenses		(3,655.5	)		(3,671.1	)		(3,264.0	)		(1,091.3	)		(1,317.6	)		(1,294.8	)		(873.2	)		(936.3	)		(785.9	)		(5,620.0	)		(5,925.0	)		(5,344.7	)
Administrative expenses		(1,954.1	)		(1,486.3	)		(1,599.8	)		(384.5	)		(400.2	)		(428.0	)		(285.2	)		(279.6	)		(253.4	)		(2,623.8	)		(2,166.1	)		(2,281.3	)
Other operating income/(expenses)		1,170.5			1,283.7			1,871.5			41.2			(39.0	)		60.3			5.6			(21.6	)		4.2			1,217.3			1,223.1			1,936.1
Exceptional items		(56.1	)		1,183.2			(273.9	)		(41.3	)		(41.5	)		(39.9	)		(11.3	)		(7.4	)		(43.4	)		(108.7	)		1,134.3			(357.2	)
Income from operations (EBIT)		10,462.0			11,401.5			12,757.8			4,163.3			3,749.6			4,198.9			1,801.5			1,954.3			1,821.8			16,426.8			17,105.4			18,778.5
Net finance cost		(2,693.3	)		(3,694.5	)		(1,842.9	)		(709.5	)		(439.0	)		(868.6	)		(91.1	)		431.5			443.3			(3,493.9	)		(3,702.0	)		(2,268.2	)
Share of result of joint ventures		(4.7	)		(6.8	)		1.9			-			-			-			1.6			1.8			1.2			(3.1	)		(5.0	)		3.1
Income before income tax		7,764.0			7,700.2			10,916.8			3,453.8			3,310.6			3,330.3			1,712.0			2,387.6			2,266.3			12,929.8			13,398.4			16,513.4
Income tax expense		(3,309.5	)		1,100.1			(1,884.7	)		(1,144.1	)		(814.0	)		(1,154.1	)		(625.7	)		(601.1	)		(595.5	)		(5,079.3	)		(315.0	)		(3,634.2	)
Net income		4,454.5			8,800.3			9,032.1			2,309.7			2,496.6			2,176.2			1,086.3			1,786.5			1,670.8			7,850.5			13,083.4			12,879.2
Normalized EBITDA (iii)		13,233.9			12,805.0			15,274.6			4,866.6			4,501.7			4,877.8			2,047.1			2,176.4			2,057.3			20,147.6			19,483.1			22,209.7
Exceptional items		(56.1	)		1,183.2			(273.9	)		(41.3	)		(41.5	)		(39.9	)		(11.3	)		(7.4	)		(43.4	)		(108.7	)		1,134.3			(357.2	)
Depreciation. amortization and impairment		(2,715.8	)		(2,586.7	)		(2,242.9	)		(662.0	)		(710.6	)		(639.0	)		(234.3	)		(214.7	)		(192.1	)		(3,612.1	)		(3,512.0	)		(3,074.0	)
Net finance costs		(2,693.3	)		(3,694.5	)		(1,842.9	)		(709.5	)		(439.0	)		(868.6	)		(91.1	)		431.5			443.3			(3,493.9	)		(3,702.0	)		(2,268.2	)
Share of result of joint ventures		(4.7	)		(6.8	)		1.9			-			-			-			1.6			1.8			1.2			(3.1	)		(5.0	)		3.1
Income tax expense		(3,309.5	)		1,100.1			(1,884.7	)		(1,144.1	)		(814.0	)		(1,154.1	)		(625.7	)		(601.1	)		(595.5	)		(5,079.3	)		(315.0	)		(3,634.2	)
Net income		4,454.5			8,800.3			9,032.1			2,309.7			2,496.6			2,176.2			1,086.3			1,786.5			1,670.8			7,850.5			13,083.4			12,879.2
Normalized EBITDA margin in %		42.6	%		44.3	%		51.5	%		45.2	%		44.1	%		43.3	%		33.9	%		33.7	%		35.4	%		42.1	%		42.7	%		47.5	%
Acquisition of property, plant and equipment		1,862.0			2,352.0			3,442.0			1,051.2			1,365.5			1,654.1			292.8			317.9			285.8			3,206.0			4,035.4			5,381.9
		2017			2016			2015			2017			2016			2015			2017			2016			2015			2017			2016			2015
Segment assets		48,811.7			50,935.0			47,282.3			11,558.5			11,149.0			12,757.7			10,204.9			9,245.8			9,264.6			70,575.1			71,329.8			69,304.6
Intersegment elimination																													(3,077.7	)		(3,968.1	)		(1,996.3	)
Non-segmented assets																													19,354.5			16,479.7			22,868.0
Total assets																													86,851.9			83,841.4			90,176.3
Segment liabilities		23,031.6			22,958.9			20,998.7			6,015.2			5,576.4			5,093.9			3,700.2			3,275.7			3,608.6			32,747.0			31,811.0			29,701.2
Intersegment elimination																													(3,077.7	)		(3,968.1	)		(1,996.3	)
Non-segmented liabilities																													57,182.6			55,998.5			62,471.4
Total liabilities																													86,851.9			83,841.4			90,176.3

(i) Latin America – North: includes operations in Brazil, Luxembourg and CAC (El Salvador, Guatemala, Nicaragua, Dominican Republic, Saint Vincent, Dominica, Antigua, Cuba, Barbados and Panama).

(ii) Latin America – South: includes operations in Argentina, Bolivia, Chile, Paraguay and Uruguay. In addition Colombia, Ecuador and Peru, until

December 31, 2016,

due to exchange of shareholdings

,

according the Note

1

-

Corporate information

.

(iii) Normalized EBITDA is calculated excluding of the net income the following effects: (i)

Income tax expense

, (iii)

Share of results of joint ventures

(iii)

Net finance result

, (iv) Exceptional items, and (v) Depreciation, amortization and impairment of property, plant and equipment.

(b) Additional information – by Business unit – Years ended in:

	Latin America - north
	CAC									Brazil									Total
	2017			2016			2015			2017			2016			2015			2017			2016			2015
Net sales		4,733.0			3,973.2			3,328.8			26,353.0			24,954.6			26,326.1			31,086.0			28,927.8			29,654.9
Cost of sales		(2,045.6	)		(1,798.6	)		(1,563.0	)		(9,889.4	)		(9,071.8	)		(8,358.3	)		(11,935.0	)		(10,870.4	)		(9,921.3	)
Gross profit		2,687.4			2,174.6			1,765.8			16,463.6			15,882.8			17,967.8			19,151.0			18,057.4			19,733.6
Distribution expenses		(538.6	)		(409.9	)		(357.4	)		(3,655.2	)		(3,555.5	)		(3,352.2	)		(4,193.8	)		(3,965.4	)		(3,709.6	)
Sales and marketing expenses		(526.4	)		(456.7	)		(390.1	)		(3,129.1	)		(3,214.4	)		(2,873.9	)		(3,655.5	)		(3,671.1	)		(3,264.0	)
Administrative expenses		(265.0	)		(171.7	)		(158.3	)		(1,689.1	)		(1,314.6	)		(1,441.4	)		(1,954.1	)		(1,486.3	)		(1,599.7	)
Other operating income/(expenses)		77.8			9.6			(0.2	)		1,092.7			1,274.1			1,871.6			1,170.5			1,283.7			1,871.4
Exceptional items		(23.1	)		(13.5	)		(8.4	)		(33.0	)		1,196.7			(265.5	)		(56.1	)		1,183.2			(273.9	)
Income from operations (EBIT)		1,412.1			1,132.4			851.4			9,049.9			10,269.1			11,906.4			10,462.0			11,401.5			12,757.8
Net finance cost		(46.5	)		(9.2	)		42.8			(2,646.8	)		(3,685.3	)		(1,885.7	)		(2,693.3	)		(3,694.5	)		(1,842.9	)
Share of result of joint ventures		6.0			19.0			-			(10.7	)		(25.8	)		1.9			(4.7	)		(6.8	)		1.9
Income before income tax		1,371.6			1,142.2			894.2			6,392.4			6,558.0			10,022.6			7,764.0			7,700.2			10,916.8
Income tax expense		(353.5	)		(318.8	)		(269.4	)		(2,956.0	)		1,418.9			(1,615.3	)		(3,309.5	)		1,100.1			(1,884.7	)
Net income		1,018.1			823.4			624.8			3,436.4			7,976.9			8,407.3			4,454.5			8,800.3			9,032.1
Normalized EBITDA (iii)		1,842.0			1,483.8			1,173.9			11,391.9			11,321.2			14,100.7			13,233.9			12,805.0			15,274.6
Exceptional items		(23.1	)		(13.5	)		(8.4	)		(33.0	)		1,196.7			(265.5	)		(56.1	)		1,183.2			(273.9	)
Depreciation, amortization and impairment		(406.8	)		(338.0	)		(314.1	)		(2,309.0	)		(2,248.7	)		(1,928.8	)		(2,715.8	)		(2,586.7	)		(2,242.9	)
Net finance costs		(46.5	)		(9.2	)		42.8			(2,646.8	)		(3,685.3	)		(1,885.7	)		(2,693.3	)		(3,694.5	)		(1,842.9	)
Share of result of joint ventures		6.0			19.0			-			(10.7	)		(25.8	)		1.9			(4.7	)		(6.8	)		1.9
Income tax expense		(353.5	)		(318.8	)		(269.4	)		(2,956.0	)		1,418.9			(1,615.3	)		(3,309.5	)		1,100.1			(1,884.7	)
Net income		1,018.1			823.3			624.8			3,436.4			7,977.0			8,407.3			4,454.5			8,800.3			9,032.1
Normalized EBITDA margin in %		38.9	%		37.3	%		35.3	%		43.2	%		45.4	%		53.6	%		42.6	%		44.3	%		51.5	%

(i) Normalized EBITDA is calculated excluding of the net income the following effects: (i)

Income tax expense

, (iii)

Share of results of joint ventures

, (iii)

Net finance result

, (iv) Exceptional items, and (v) Depreciation, amortization and impairment of property, plant and equipment.

	Brazil
	Beer									Soft drink and Non-alcoholic and non-carbonated									Total
	2017			2016			2015			2017			2016			2015			2017			2016			2015
Net sales		22,509.3			21,173.1			22,441.3			3,843.7			3,781.5			3,884.8			26,353.0			24,954.6			26,326.1
Cost of sales		(7,895.1	)		(7,339.9	)		(6,757.6	)		(1,994.3	)		(1,731.9	)		(1,600.7	)		(9,889.4	)		(9,071.8	)		(8,358.3	)
Gross profit		14,614.2			13,833.2			15,683.7			1,849.4			2,049.6			2,284.1			16,463.6			15,882.8			17,967.8
Distribution expenses		(2,961.0	)		(2,891.7	)		(2,754.0	)		(694.2	)		(663.8	)		(598.2	)		(3,655.2	)		(3,555.5	)		(3,352.2	)
Sales and marketing expenses		(2,953.6	)		(3,044.0	)		(2,691.3	)		(175.5	)		(170.4	)		(182.6	)		(3,129.1	)		(3,214.4	)		(2,873.9	)
Administrative expenses		(1,476.3	)		(1,160.2	)		(1,341.5	)		(212.8	)		(154.4	)		(99.9	)		(1,689.1	)		(1,314.6	)		(1,441.4	)
Other operating income/(expenses)		825.0			969.8			1,551.2			267.7			304.3			320.4			1,092.7			1,274.1			1,871.6
Exceptional items		(28.2	)		1,014.3			(265.2	)		(4.8	)		182.4			(0.3	)		(33.0	)		1,196.7			(265.5	)
Income from operations (EBIT)		8,020.1			8,721.4			10,182.9			1,029.8			1,547.7			1,723.5			9,049.9			10,269.1			11,906.4
Net finance cost		(2,646.8	)		(3,685.3	)		(1,885.7	)		-			-			-			(2,646.8	)		(3,685.3	)		(1,885.7	)
Share of result of joint ventures		(10.7	)		(25.8	)		1.9			-			-			-			(10.7	)		(25.8	)		1.9
Income before income tax		5,362.6			5,010.3			8,299.1			1,029.8			1,547.7			1,723.5			6,392.4			6,558.0			10,022.6
Income tax expense		(2,956.0	)		1,418.9			(1,615.3	)		-			-			-			(2,956.0	)		1,418.9			(1,615.3	)
Net income		2,406.6			6,429.2			6,683.8			1,029.8			1,547.7			1,723.5			3,436.4			7,976.9			8,407.3
Normalized EBITDA (i)		10,047.3			9,618.6			12,038.9			1,344.6			1,702.6			2,061.8			11,391.9			11,321.2			14,100.7
Exceptional items		(28.2	)		1,014.3			(265.2	)		(4.8	)		182.4			(0.3	)		(33.0	)		1,196.7			(265.5	)
Depreciation, amortization and impairment		(1,999.0	)		(1,911.5	)		(1,590.8	)		(310.0	)		(337.3	)		(338.0	)		(2,309.0	)		(2,248.8	)		(1,928.8	)
Net finance costs		(2,646.8	)		(3,685.3	)		(1,885.7	)		-			-			-			(2,646.8	)		(3,685.3	)		(1,885.7	)
Share of result of joint ventures		(10.7	)		(25.8	)		1.9			-			-			-			(10.7	)		(25.8	)		1.9
Income tax expense		(2,956.0	)		1,418.9			(1,615.3	)		-			-			-			(2,956.0	)		1,418.9			(1,615.3	)
Net income		2,406.6			6,429.2			6,683.8			1,029.8			1,547.7			1,723.5			3,436.4			7,976.9			8,407.3
Normalized EBITDA margin in %		44.5	%		45.4	%		53.6	%		35.8	%		45.0	%		53.1	%		43.2	%		45.4	%		53.6	%

(i) Normalized EBITDA is calculated excluding of the net income the following effects: (i)

Income tax expense

, (iii)

Share of results of joint ventures

, (iii)

Net finance result

, (iv) Exceptional items, and (v) Depreciation, amortization and impairment of property, plant and equipment.

XML

Note 6 - Net Sales

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of revenue [text block]

6. NET SALES

The reconciliation between gross sales and net sales is as follows:

	2017			2016			2015
Gross sales (i)		72,411.0			79,551.1			97,214.2
Excise duty		(16,192.9	)		(16,345.2	)		(17,471.7	)
Discounts (i)		(8,318.8	)		(17,603.3	)		(33,022.3	)
		47,899.3			45,602.6			46,720.2

(i) Variance resulting from the change in the billing method with direct effect on Gross sales and Discounts.

Services provided by distributors, such as the promotion of our brands and logistics services are considered as expense when separately identifiable.

XML

Note 7 - Other Operating Income/(Expenses)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of other operating income (expense) [text block]

7. OTHER OPERATING INCOME / (EXPENSES)

	2017			2016			2015
Government grants/NPV of long term fiscal incentives		993.7			1,166.5			1,755.7
(Additions)/reversals to provisions		(12.9	)		(132.9	)		(106.1	)
Gains/(losses) on disposal of property, plant and equipment, intangible assets and operation in associates		91.1			70.9			53.0
Other operating income/(expenses), net		145.4			118.6			233.4
		1,217.3			1,223.1			1,936.0

Government grants are

not

recognized until there is reasonable assurance that the Company will meet related conditions and that the grants will be received. Government grants are systematically recognized in income during the periods in which the Company recognizes as expenses the related costs that the grants are intended to offset.

XML

Note 8 - Exceptional Items

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of exceptional items [text block]

8. EXCEPTIONAL ITEMS

The exceptional items included in the income statement are detailed below:

	2017			2016			2015
Result through exchange transaction of shareholdings (i)		-			1,240.0			-
Restructuring		(105.5	)		(79.8	)		(63.3	)
Administrative lawsuit		-			-			(239.2	)
Costs arising from business combinations		(3.8	)		(29.8	)		(48.9	)
Others		0.6			3.9			(5.8	)
		(108.7	)		1,134.3			(357.2	)

(i) It refers to result of transaction of exchange of shareholdings, as mentioned in Note

1

(b).

The Company opted to exclude these items when measuring segment-based performance, as per Note

5

–

Segment reporting

.

On

December 2017,

the Company recorded exceptional net finance cost of

R$977

million – see Note

11

-

Finance cost and income

– and a exceptional income tax expense of

R$2.8

billion – see Note

12

-

Income tax and social contribution

.

XML

Note 9 - Payroll and Related Benefits

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of payroll and related benefits of the entity [text block]

9. PAYROLL AND RELATED BENEFITS

	2017		2016		2015
Wages and salaries		3,371.2		3,038.9		3,086.5
Social security contributions		741.1		727.2		756.1
Other personnel cost		616.2		613.8		561.3
Increase in liabilities for defined benefit plans		138.7		151.7		142.3
Share-based payment		236.9		189.3		209.4
Contributions to defined contribution plans		18.9		25.3		19.0
		5,123.0		4,746.2		4,774.6

The result with payroll and related benefits are presented in the income statement as below:

	2017		2016			2015
Cost of sales		1,714.8		1,912.3			1,890.2
Distribution expenses		791.5		780.8			722.1
Sales and marketing expenses		1,096.8		989.8			980.8
Administrative expenses		1,470.1		970.3			1,154.0
Net finance cost		42.9		95.9			27.5
Exceptional items		6.9		(2.9	)		-
		5,123.0		4,746.2			4,774.6

XML

Note 10 - Additional Information on Operating Expenses by Nature

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of additional information [text block]

10. ADDITIONAL INFORMATION ON OPERATING EXPENSES BY NATURE

Depreciation, amortization and impairment expenses are included in the following income statement accounts for the years

2017,

2016

and

2015:

	Depreciation and impairment of property, plant and equipment						Amortization of intangible assets
	2017		2016		2015		2017		2016		2015
Cost of sales		2,364.7		2,283.3		2,053.2		6.2		4.3		3.2
Distribution expenses		197.6		200.9		177.9		-		-		-
Sales and marketing expenses		532.2		538.0		431.5		142.3		222.9		162.5
Administrative expenses		231.1		182.5		165.8		142.0		95.8		81.5
		3,325.6		3,204.7		2,828.4		290.5		323.0		247.2

XML

Note 11 - Finance Cost and Income

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of finance income (cost) [text block]

11. FINANCE COST AND INCOME

(a) Finance costs

	2017			2016			2015
Interest expense		(1,571.6	)		(1,547.3	)		(1,062.6	)
Capitalized borrowings		2.3			3.9			26.0
Net Interest on pension plans		(77.6	)		(105.6	)		(97.6	)
Losses on hedging instruments		(616.7	)		(1,575.1	)		(1,267.0	)
Interest on provision for disputes and litigations		(225.9	)		(619.5	)		(120.1	)
Exchange variation		(339.5	)		(310.4	)		(721.8	)
Tax on financial transactions		(179.7	)		(224.6	)		(146.4	)
Bank guarantee expenses		(89.5	)		(87.1	)		(80.8	)
Other financial results		(193.3	)		(132.2	)		(92.1	)
		(3,291.5	)		(4,597.9	)		(3,562.4	)
Non-recurring finance cost		(976.8	)		-			-
		(4,268.3	)		(4,597.9	)		(3,562.4	)

The exceptional net finance cost refers to PERT

2017

which Ambev applied for – see Note

19

-

Income tax and social contribution

and to the realization of the exchange variation of loans settled with related parties historically recognized in shareholders' equity.

Interest expenses are presented net of the effect of interest rate derivative financial instruments which mitigate Ambev interest rate risk (Note

27

–

Financial instruments and risks

). The interest expense are as follows:

	2017			2016			2015
Financial liabilities measured at amortized cost		(477.6	)		(545.6	)		(423.1	)
Liabilities at fair value through profit or loss		(1,076.2	)		(961.0	)		(601.3	)
Fair value hedge - hedged items		(19.7	)		(49.3	)		(22.4	)
Fair value hedge - hedging instruments		1.9			8.6			(15.8	)
		(1,571.6	)		(1,547.3	)		(1,062.6	)

(b) Finance income

	2017		2016		2015
Interest income		458.8		513.6		575.5
Gains on derivative		73.7		113.5		428.3
Financial assets at fair value through profit or loss		227.6		247.5		261.4
Other financial results		14.3		21.3		29.0
		774.4		895.9		1,294.2

Interest income arises from the following financial assets:

	2017		2016		2015
Cash and cash equivalents		233.4		241.5		425.9
Investment securities held for trading		26.9		51.1		149.6
Other receivables		198.5		221.0		-
		458.8		513.6		575.5

XML

Note 12 - Income Tax and Social Contribution

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of income tax and social contribution [text block]

12. INCOME TAX AND SOCIAL CONTRIBUTION

Income taxes reported in the income statement are analyzed as follows:

	2017			2016			2015
Income tax expense - current		(5,332.3	)		(413.9	)		(1,227.8	)
Deferred tax expense on temporary differences		891.9			(732.5	)		(2,192.4	)
Deferred tax over taxes losses carryforwards movements  in the current period		(638.9	)		831.4			(214.0	)
Total deferred tax (expense)/income		253.0			98.9			(2,406.4	)
Total income tax expenses		(5,079.3	)		(315.0	)		(3,634.2	)

The reconciliation from the weighted nominal to the effective tax rate is summarized as follows:

	2017			2016			2015
Income before tax		12,929.8			13,398.4			16,513.4
Adjustment on taxable basis
Non-taxable income		(310.9	)		(392.0	)		(999.9	)
Government grants related to sales taxes		(1,889.1	)		(1,528.6	)		(1,360.7	)
Share of results of joint ventures		3.1			5.0			(3.1	)
Non-deductible expenses		91.1			539.3			415.9
Complement of income tax of foreign subsidiaries due in Brazil		560.4			148.0			1,965.2
Results of intercompany transactions non-taxable/not deductible in Brazil		(547.5	)		640.7			(1,313.2	)
		10,836.9			12,810.8			15,217.6
Aggregated weighted nominal tax rate		29.22	%		30.16	%		31.59	%
Taxes payable – nominal rate		(3,166.6	)		(3,864.0	)		(4,806.9	)
Adjustment on tax expense
Regional incentives - income taxes		304.6			264.5			257.8
Deductible interest on shareholders' equity		1,649.0			1,867.7			1,646.1
Tax savings from goodwill amortization on tax books		175.2			142.0			142.4
Withholding tax over undistributed profits		(356.9	)		153.1			(672.4	)
Recognition / write-off of deferred charges on tax losses		(178.9	)		796.7			138.1
PERT 2017		(2,784.7	)		-			-
Others with reduced taxation		(721.0	)		325.0			(339.3	)
Income tax and social contribution expense		(5,079.3	)		(315.0	)		(3,634.2	)
Effective tax rate		39.28	%		2.35	%		22.01	%

The main events that impacted the effective tax rate in the period were:

§ 

Government subsidy on sales taxes: The reduction of tax expense reflects the deductibility of investment subsidies arising from deferred and presumed ICMS credits.

§ 

Deductible Interest on net equity: Under Brazilian law, companies have the option to distribute interest on equity (“JCP”), calculated based on the long-term interest rate (“TJLP”), Which are deductible for income tax purposes under the applicable legislation, which amount to be distributed until now is

R$4,869.8,

of which

R$4,850.1

are deductible and the tax impact is

R$1,649.0.

§ 

Withholding tax on dividends: the variance is mainly driven by

two

factors (i) reversal of the provision related to withholding tax on unremitted earnings of Argentinean subsidiaries in

2016

due to a change in the local law that exempts the payment of dividends from withholding tax; and (ii) constitution of provision and exchange variation effect related to withholding tax on unremitted earnings of Canadian subsidiaries of approximately R$

145

million, as opposed to the approximated amount of R$

5

million in the same period of the previous year.        

§ 

Amongst the contingencies covered by the Federal Tax Amnesty Program (“PERT

2017”

), there is a litigation whose purpose was to discuss the Presumed Profit method used by CRBS (

one

of Ambev’s subsidiaries in Brazil) to calculate its Corporate Income Taxes (namely, “IRPJ” and “CSLL”). The total amount booked as an expense, after the conversion of the Provisional Measure

783/2017

into Law, was R$

2,926

million (principal, fine and interests), being R$

2,785

million booked as non-recurring expenses under Corporate Income Tax and R$

141

million under Financial Results.

XML

Note 13 - Property, Plant and Equipment

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of property, plant and equipment [text block]

13. PROPERTY, PLANT AND EQUIPMENT

	2017
	Land and buildings			Plant and equipment			Fixtures and fittings			Under construction			Total
Acquisition cost
Balance at end of previous year		8,330.2			22,764.3			4,584.2			1,740.7			37,419.4
Effect of movements in foreign exchange		3.1			34.6			(27.3	)		8.3			18.7
Business combinations		228.9			(24.7	)		-			-			204.2
Acquisitions		10.2			626.1			171.8			2,367.4			3,175.5
Disposals		(25.9	)		(555.5	)		(125.4	)		-			(706.8	)
Transfer to other asset categories		415.4			1,657.8			473.2			(2,857.3	)		(310.9	)
Others		-			36.2			-			(1.2	)		35.0
Balance at end		8,961.9			24,538.8			5,076.5			1,257.9			39,835.1
Depreciation and Impairment
Balance at end of previous year		(2,278.2	)		(13,075.3	)		(2,912.1	)		-			(18,265.6	)
Foreign exchange effects		(12.1	)		(104.9	)		0.3			-			(116.7	)
Depreciation		(299.0	)		(2,245.5	)		(655.9	)		-			(3,200.4	)
Impairment losses		-			(125.0	)		(0.2	)		-			(125.2	)
Disposals and write-off		5.3			539.5			109.5			-			654.3
Transfer to other asset categories		(1.9	)		29.7			5.2			-			33.0
Others		-			7.8			-			-			7.8
Balance at end		(2,585.9	)		(14,973.7	)		(3,453.2	)		-			(21,012.8	)
Carrying amount:
December 31, 2016		6,052.0			9,689.0			1,672.1			1,740.7			19,153.8
December 31, 2017		6,376.0			9,565.1			1,623.3			1,257.9			18,822.3

	2016
	Land and buildings			Plant and equipment			Fixtures and fittings			Under construction			Total
Acquisition cost
Balance at end of previous year		7,718.3			22,369.6			4,465.1			2,132.6			36,685.6
Effect of movements in foreign exchange		(474.7	)		(1,528.0	)		(427.4	)		(222.6	)		(2,652.7	)
Acquisitions through business combinations		283.4			360.4			56.0			0.6			700.4
Acquisitions through exchange transaction of shareholdings		221.2			185.0			-			27.7			433.9
Disposals through exchange transaction of shareholdings		(121.0	)		(344.3	)		(101.3	)		(4.8	)		(571.4	)
Acquisitions		8.4			819.4			276.0			2,905.5			4,009.3
Disposals		(106.0	)		(693.1	)		(210.3	)		(3.3	)		(1,012.7	)
Transfer to other asset categories		800.6			1,595.3			526.1			(3,095.0	)		(173.0	)
Balance at end		8,330.2			22,764.3			4,584.2			1,740.7			37,419.4
Depreciation and Impairment
Balance at end of previous year		(2,244.0	)		(12,562.6	)		(2,738.9	)		-			(17,545.5	)
Foreign exchange effects		95.6			804.8			236.7			-			1,137.1
Disposals through exchange transaction of shareholdings		52.8			241.7			51.4			-			345.9
Depreciation		(277.8	)		(2,117.6	)		(688.4	)		-			(3,083.8	)
Impairment losses		(0.1	)		(120.7	)		(0.1	)		-			(120.9	)
Disposals		95.3			646.0			187.5			-			928.8
Transfer to other asset categories		-			21.7			39.7			-			61.4
Others		-			11.4			-			-			11.4
Balance at end		(2,278.2	)		(13,075.3	)		(2,912.1	)		-			(18,265.6	)
Carrying amount:
December 31, 2015		5,474.3			9,807.0			1,726.2			2,132.6			19,140.1
December 31, 2016		6,052.0			9,689.0			1,672.1			1,740.7			19,153.8

Leases, capitalized interests and fixed assets provided as guarantee are

not

material.

XML

Note 14 - Goodwill

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of goodwill [text block]

14. GOODWILL

	2017		2016
Balance at end of previous year		30,511.2		30,953.1
Effect of movements in foreign exchange		489.7		(2,388.9	)
Acquisition and disposal through business combinations (i)		401.0		1,947.0
Balance at the end of year		31,401.9		30,511.2

(i) In

2017

it refers mainly to the goodwill allocation of acquisition of Cachoeiras de Macacu, and in

2016

refers to the acquisition of Mark Anthony and Cerveceria Nacional in the transaction of exchange of shareholdings.

The carrying amount of goodwill was allocated to the different cash-generating units as follows:

	Functional currency		2017			2016
LAN:
Brazil		BRL		17,668.4			17,424.6
Goodwill				102,911.0			102,667.2
Non-controlling transactions (i)				(85,242.6	)		(85,242.6	)
Dominican Republic		DOP		3,163.6			3,224.9
Cuba (ii)		USD		2.7			3.6
Panama		PAB		1,149.3			1,060.1
LAS:
Argentina		ARS		443.9			518.0
Bolivia		BOB		1,170.1			1,152.8
Chile		CLP		47.0			42.7
Paraguay		PYG		786.1			753.7
Uruguay		UYU		170.7			165.8
NA:
Canada		CAD		6,800.1			6,165.0
				31,401.9			30,511.2

(i) It refers to the exchange of shareholdings operation occurred in

2013

as a result of the adoption of the predecessor basis of accounting.

(ii) The functional currency of Cuba, the Cuban convertible peso (CUC), has a fixed parity with the dollar (USD) at balance sheet date.

Annual impairment testing

Goodwill impairment testing relies on a number of critical judgments, estimates and assumptions. Goodwill, which accounted for approximately

36%

of total assets as of

December 31, 2017 (

36%

as of

December 31, 2016)

is tested for impairment at the cash-generating unit level (that is

one

level below the reporting segments). The cash-generating unit level is the lowest level at which goodwill is monitored for internal management purposes. In a business combination occurs, goodwill is allocated as from the acquisition date, to each of business units that are expected to benefit from the synergies of the combination.

The Company’s impairment testing methodology is in accordance with IAS

36,

in which a fair-value-less-cost-to-sell and value in use approaches are taken into consideration. This consists in applying a discounted cash flow approach based on acquisition valuation models for its major business units and the business units showing high capital amounts invested in earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples. The ratio between invested capital and EBITDA is basis for selecting the cash generating units to be tested.

§ Only for CGU Latin America North there was need to apply the impairment test;

§ For Latin America South and Canada there was no need to apply the impairment test.

The key judgments, estimates and assumptions used in the discounted free cash flow calculations are generally as follows:

§ The first year of the model is based on management's best estimate of the free cash flow outlook for the current year;

§ In the second to fourth years of the model, free cash flows are based on ABInBev's strategic plan as approved by key management. AB InBev's strategic plan is prepared per country and is based on external sources in respect of macro-economic assumptions, industry, inflation and foreign exchange rates, past experience and identified initiatives in terms of market share, revenue, variable and fixed cost, capital expenditure and working capital assumptions;

§ From the fifth to the tenth year of the model, as well as for perpetuity, the cash flows are extrapolated using expected long-term consumer price indices and the growth of the beer market, based on external sources specific from each UGC;

§ Projections are made in the functional currency of the business unit and discounted at the unit's weighted average cost of capital (“WACC”), considering sensitivities on this metric.

§ Cost to sell is assumed to reach 1.5% of the entity value based on historical precedents.

The weighted average cost of capital in nominal dollars, for the impairment testing of goodwill performed varied as follows:

	2017			2016
Latin America North	from 8.59%	to	10.29%	from 8.39%	to	10.27%

Although Ambev believes that its judgments, assumptions and estimates are appropriate, actual results

may

differ from these judgments.

XML

Note 15 - Intangible

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of intangible assets [text block]

15. INTANGIBLE

	2017
				Distribution
	Brands			contracts			Software			Others			Total
Acquisition cost
Balance at end of previous year		4,160.8			2,319.4			888.5			460.7			7,829.4
Effect of movements in foreign exchange		(10.5	)		7.5			(12.1	)		(1.2	)		(16.3	)
Acquisitions		18.8			-			2.9			8.8			30.5
Acquisitions through business combination		(4.0	)		-			-			-			(4.0	)
Transfers to other assets categories		(650.4	)		6.4			265.3			26.4			(352.3	)
Others		-			-			-			46.0			46.0
Balance at end of year		3,514.7			2,333.3			1,144.6			540.7			7,533.3
Amortization and Impairment losses (i)
Balance at end of previous year		(1.9	)		(1,760.8	)		(597.0	)		(223.8	)		(2,583.5	)
Foreing exchange effects		-			4.9			5.5			5.1			15.5
Amortization		-			(138.7	)		(118.9	)		(32.9	)		(290.5	)
Transfers to other assets categories		-			-			(1.4	)		1.3			(0.1	)
Balance at end of year		(1.9	)		(1,894.6	)		(711.8	)		(250.3	)		(2,858.6	)
Carrying amount:
December 31, 2016		4,158.9			558.6			291.5			236.9			5,245.9
December 31, 2017		3,512.8			438.7			432.8			290.4			4,674.7

(i) The period of amortization of intangible assets of definite useful life is

five

years and amortization is calculated at the rate of

20

%

and recognized in income on a straight-line method.

	2016
				Distribution
	Brands			contracts			Software			Others			Total
Acquisition cost
Balance at end of previous year		3,908.2			2,387.4			788.4			356.8			7,440.8
Effect of movements in foreign exchange		(645.9	)		(68.3	)		(50.3	)		(93.6	)		(858.1	)
Acquisitions		3.0			-			4.1			19.0			26.1
Disposal		-			-			(0.4	)		(0.3	)		(0.7	)
Acquisitions through business combination		1,043.1			-			-			30.7			1,073.8
Acquisitions through exchange transaction of shareholdings		228.1			-			20.6			-			248.7
Disposals through exchange transaction of shareholdings		(58.0	)		-			(9.4	)		(0.1	)		(67.5	)
Transfers to other assets categories		(317.7	)		0.3			135.5			(24.1	)		(206.0	)
Others		-			-			-			172.3			172.3
Balance at end of year		4,160.8			2,319.4			888.5			460.7			7,829.4
Amortization and Impairment losses (i)
Balance at end of previous year		(1.9	)		(1,622.2	)		(539.7	)		(184.8	)		(2,348.6	)
Foreing exchange effects		-			9.9			29.0			40.9			79.8
Amortization		-			(148.6	)		(94.4	)		(80.0	)		(323.0	)
Disposal		-			-			0.1			-			0.1
Disposals through exchange transaction of shareholdings		-			-			8.0			0.1			8.1
Transfers to other assets categories		-			0.1			-			-			0.1
Balance at end of year		(1.9	)		(1,760.8	)		(597.0	)		(223.8	)		(2,583.5	)
Carrying amount:
December 31, 2015		3,906.3			765.2			248.7			172.0			5,092.2
December 31, 2016		4,158.9			558.6			291.5			236.9			5,245.9

(i) The period of amortization of intangible assets of definite useful life is

five

years and amortization is calculated at the rate of

20%

and recognized in income on a straight-line method.

The Company is the owner of some of the world’s leading brands in the beer industry. As a result, brands are expected to generate positive cash flows for as long as the Company owns the brands and accordingly have been assigned indefinite lives. The most representative brands that have been registered as result of fair value determination of past acquisitions are

Quilmes

in Argentina,

Pilsen

in Paraguay and Bolivia and

Presidente

and

Presidente Light

in Dominican Republic.

The carrying value of intangible assets with indefinite useful lives classified as brands was allocated to the following CGU:

	2017		2016
Argentina		348.8		373.5
Bolivia		567.1		558.7
Brazil		4.6		575.5
Canada		223.9		205.6
Chile		69.5		63.1
Luxembourg		339.6		419.1
Paraguay		447.5		429.4
Dominican Republic		1,396.6		1,422.4
Uruguay		115.2		111.6
		3,512.8		4,158.9

Intangible assets with indefinite useful lives have been tested for impairment at a cash-generating unit level basis consistent with the same approach described in Note

14

–

Goodwill

.

XML

Note 16 - Investment Securities

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of investment securities [text block]

16. INVESTMENT SECURITIES

	2017		2016
Debt held-to-maturity (i)		122.0		104.3
Non-current investments securities		122.0		104.3
Financial asset at fair value through profit or loss-held for trading		11.9		282.8
Current investments securities		11.9		282.8
Total		133.9		387.1

(i) The balance refers substantially to Bank Deposit Certificates - CDB linked to tax incentives.

XML

Note 17 - Deferred Income Tax and Social Contribution

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of deferred income tax and social contribution [text block]

17. DEFERRED INCOME TAX AND SOCIAL CONTRIBUTION

Deferred taxes for income tax and social contribution taxes are calculated on tax losses, the negative tax basis of social contributions and the temporary differences between the tax bases and the carrying amount in the financial statement of assets and liabilities. The rates of these taxes in Brazil, which are expected at the realization of deferred taxes, are

25%

for income tax and

9%

for social contribution. For the other regions, with operational activity, expected rates, are as follow:

Central America and the Caribbean	from 23%	to	31%
Latin America (i)	from 14%	to	35%
Canada		26%

(i) Amendments to Argentine tax legislation approved on

December 29, 2017

affect tax periods beginning in

October 2018

and reduce the income tax rate in the

first

two

years from

35%

to

30%

and, as a after, to

25%.

For fiscal year

2017,

however, there is an impact of R $

33.0

million in deferred income tax.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available to be used to offset temporary differences / loss carry forwards based on projections of future results prepared and based on internal assumptions and future economic scenarios which

may

therefore change.

The amount of deferred income tax and social contribution by type of temporary difference is detailed as follows:

	2017									2016
	Assets			Liabilities			Net			Assets			Liabilities			Net
Investment securities		39.0			-			39.0			9.0			-			9.0
Intangible		-			(719.5	)		(719.5	)		0.7			(733.9	)		(733.2	)
Employee benefits		631.1			-			631.1			467.6			-			467.6
Trade payables		1,382.4			(314.2	)		1,068.2			977.4			(531.3	)		446.1
Trade receivable		52.3			-			52.3			42.7			-			42.7
Derivatives		6.8			(5.8	)		1.0			71.1			(110.7	)		(39.6	)
Inventories		248.7			(18.1	)		230.6			267.4			(13.8	)		253.6
Property, plant and equipment		-			(920.5	)		(920.5	)		-			(905.7	)		(905.7	)
Withholding tax over undistributed profits and royalties		-			(788.6	)		(788.6	)		-			(684.8	)		(684.8	)
Investments in associates		-			(421.6	)		(421.6	)		-			(421.6	)		(421.6	)
Loss carryforwards		501.0			-			501.0			1,139.9			-			1,139.9
Provisions		347.3			(39.7	)		307.6			448.9			(44.6	)		404.3
Other items		-			(30.5	)		(30.5	)		(15.1	)		(24.7	)		(39.8	)
Gross deferred tax assets / (liabilities)		3,208.6			(3,258.5	)		(49.9	)		3,409.6			(3,471.1	)		(61.5	)
Netting by taxable entity		(929.3	)		929.3			-			(1,141.4	)		1,141.4			-
Net deferred tax assets / (liabilities)		2,279.3			(2,329.2	)		(49.9	)		2,268.2			(2,329.7	)		(61.5	)

The Company only offsets the balances of deferred income tax and social contribution assets against liabilities when they are within the same entity and are expected to be realized in the same period.

Tax losses and negative bases of social contribution and temporary deductible differences in Brazil, on which the deferred income tax and social contribution were calculated, have

no

expiry date.

At

December 31, 2017

the assets and liabilities deferred taxes related to combined tax losses has an expected utilization/settlement by temporary differences as follows:

	2017
Deferred taxes not related to tax losses	to be realized until 12 months			to be realized after 12 months			Total
Investment securities		-			39.0			39.0
Intangible assets		-			(719.5	)		(719.5	)
Employee benefits		112.8			518.3			631.1
Trade payables		1,382.4			(314.2	)		1,068.2
Trade receivable		47.3			5.0			52.3
Derivatives		1.0			-			1.0
Inventories		230.6			-			230.6
Property, plant and equipment		(58.1	)		(862.4	)		(920.5	)
Withholding tax over undistributed profits and royalties		-			(788.6	)		(788.6	)
Investments in associates		-			(421.6	)		(421.6	)
Provisions		91.7			215.9			307.6
Other items		-			(30.5	)		(30.5	)
Total		1,807.7			(2,358.6	)		(550.9	)

Deferred tax related to tax losses	2017
2018		209.0
2019		98.3
2020		16.1
2021		10.6
A partir de 2022 (i)		167.0
Total		501.0

(i) There is

no

expectation of realization that exceeds the term of

10

years.

As at

December 31, 2017,

deferred tax assets in the amount of

R$427.4

(

R$455.6

as at

December 31, 2016)

related to tax losses and temporary differences of subsidiaries abroad were

not

recorded as the realization is

not

probable.

Major part of the fiscal losses amount do

not

have a carryforward limit for utilization and the tax losses carried forward in relation to them are equivalent to

R$1,709.5

in

December 31, 2017 (

R$2,285.2

in

December 31, 2016).

The net change in deferred income tax and social contribution is detailed as follows:

At December 31, 2015	276.3
Full recognition of actuarial gains/(losses)	57.7
Investment hedge	(12.0	)
Investment hedge - put option of a subsidiary interest	(364.6	)
Cash flow hedge - gains/(losses)	536.2
Gains/losses on translation of other foreign operations	(578.2	)
Recognized in other comprehensive income	(360.9	)
Recognized in income statement	98.9
Changes directly in balance sheet	(75.8	)
Recognized in deferred tax	(21.6	)
Anticipation federal amnesty	(54.2	)
At December 31, 2016	(61.5	)
Full recognition of actuarial gains/(losses)	40.2
Investment hedge	(262.7	)
Investment hedge - put option of a subsidiary interest	(31.8	)
Cash flow hedge - gains/(losses)	(269.2	)
Gains/(losses) on translation of other foreign operations	136.1
Recognized in other comprehensive income	(387.4	)
Recognized in income statement	253.0
Changes directly in balance sheet	146.0
Recognized in deferred tax	35.4
Recognized in other group of balance sheet	110.6
At December 31, 2017	(49.9	)

XML

Note 18 - Inventories

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of inventories [text block]

18. INVENTORIES

	2017			2016
Finished goods		1,528.4			1,445.5
Work in progress		309.6			328.5
Raw material		1,816.3			1,962.7
Consumables		77.3			50.0
Spare parts and other		476.9			447.2
Prepayments		210.9			234.5
Impairment losses		(100.4	)		(121.3	)
		4,319.0			4,347.1

Write-offs/losses on inventories recognized in the income statement amounted to

R$73.2

in

2017

(

R$114.4

in

2016

).

XML

Note 19 - Trade Receivables

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of trade and other receivables [text block]

19. TRADE RECEIVABLES

	2017			2016
Trade receivables		5,335.7			4,774.5
Bad debt provision		(521.5	)		(443.7	)
Net, trade receivables		4,814.2			4,330.8
Related parties		130.6			37.3
Total current trade receivables		4,944.8			4,368.1

The aging of our current trade receivables, net of impairment losses, is detailed as follows:

	Net carrying amount as of December 31,			No past due			Past due – until 30 days			Past due – between 31 - 60 days			Past due – between 61 - 90 days			Past due – between 91 - 180 days			Past due – between 181 - 360 days			Past due 360 days
Trade receivables		5,335.7			4,343.8			340.7			32.3			63.3			85.6			42.2			427.8
Bad debt provision		(521.5	)		(4.3	)		(0.1	)		(0.4	)		(0.8	)		(45.9	)		(42.2	)		(427.8	)
2017		4,814.2			4,339.5			340.6			31.9			62.5			39.7			-			-
Trade receivables		4,774.5			4,093.6			187.9			28.4			43.7			30.0			38.9			352.0
Bad debt provision		(443.7	)		(6.9	)		(1.9	)		(4.1	)		(9.9	)		(30.0	)		(38.9	)		(352.0	)
2016		4,330.8			4,086.7			186.0			24.3			33.8			-			-			-

Impairment losses on trade receivables recognized in the income statement in

2017

amount to

R$83.1

(

R$82.1

in

2016

).

Company’s exposure to credit risk, currency and interest rate risks is disclosed in Note

27

-

Financial instruments and risks

.

XML

Note 20 - Cash and Cash Equivalents

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of cash and cash equivalents [text block]

20. CASH AND CASH EQUIVALENTS

	2017			2016
Short term bank deposits (i)		4,688.5			4,027.6
Current bank accounts		5,077.1			3,467.3
Cash		588.9			381.9
Cash and cash equivalents		10,354.5			7,876.8
Bank overdrafts		(1.8	)		-
Cash and cash equivalents less bank overdraft		10,352.7			7,876.8

(i) The balance refers mostly to Bank Deposit Certificates - CDB, high liquidity, which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

XML

Note 21 - Changes in Equity

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of changes in equity [text block]

21. CHANGES IN EQUITY

(a) Capital stock

			2017				2016
	Million of common shares		Million of Real		Million of common shares		Million of Real
Beginning balance as per statutory books		15,717.6		57,614.1		15,717.6		57,614.1
Share issued		-		-		-		-
		15,717.6		57,614.1		15,717.6		57,614.1

(b) Capital reserves

	Capital Reserves
	Treasury shares			Share Premium		Others capital reserves		Share-based Payments		Total
At December 31, 2015		(1,003.5	)		53,662.8		700.9		1,013.4		54,373.6
Purchase of shares and result on treasury shares		94.8			-		-		-		94.8
Share-based payments		-			-		-		61.5		61.5
At December 31, 2016		(908.7	)		53,662.8		700.9		1,074.9		54,529.9
Purchase of shares and result on treasury shares		13.7			-		-		-		13.7
Share-based payments		-			-		-		157.4		157.4
At December 31, 2017		(895.0	)		53,662.8		700.9		1,232.3		54,701.0

(

b.1

) Treasury shares

The treasury shares comprise own issued shares reacquired by the Company and the result on treasury shares that refers to gains and losses related to share-based payments transactions and others.

Follows the changes of treasury shares:

	Acquire /realization shares						Result on Treasure Shares			Total Treasure Shares
	Thousands shares			Thousands Brazilian Real			Thousands shares			Thousands Brazilian Real
At December 31, 2015		32.6			(617.5	)		(386.1	)		(1,003.5	)
Changes during the year		(16.0	)		304.7			(209.9	)		94.8
At December 31, 2016		16.6			(312.7	)		(596.0	)		(908.7	)
Changes during the year		(9.1	)		173.0			(159.3	)		13.7
At December 31, 2017		7.5			(139.7	)		(755.3	)		(895.0	)

(

b.2

) Share premium

The share premium refers to the difference between subscription price that the shareholders paid for the shares and theirs nominal value. Since this is a capital reserve, it can only be used to increase capital, offset losses, redeem, reimbursement or repurchase shares.

(

b.3

) Share-based payment

There are different share-based payment programs and stock option plans which allow the senior management from Ambev economic group to receive or acquire shares of the Company.

The share-based payment reserve recorded a charge of

R$209.3

in

2017

(

R$170.3

and

R$197.1

in

2016

and

2015,

respectively) (Note

24

–

Share-based payments

).

(c) Net income reserves

	Net income reserves
	Investments reserve			Statutory reserve		Fiscal incentive		Interest on capital and dividends proposed			Total
At December 31, 2015		2,141.2			4.5		4,016.2		2,039.2			8,201.1
Interest on shareholder´s equity		-			-		-		(2,039.2	)		(2,039.2	)
Destination of net income		1,718.6			-		1,819.5		-			3,538.1
At December 31, 2016		3,859.9			4.5		5,835.7		-			9,700.1
Interest on shareholder´s equity		(3,770.1	)		-		-		-			(3,770.1	)
Fiscal incentive reserve		-			-		1,552.3		-			1,552.3
Investments reserve		1,177.9			-		-		-			1,177.9
At December 31, 2017		1,267.7			4.5		7,388.0		-			8,660.2

(

c.1

) Investments reserve

From net income after deductions applicable, will be aimed

no

more than

60

%

(

sixty

per cent) to investment reserve to support future investments.

(

c.2

) Statutory reserve

From net income,

5

%

will be applied before any other allocation, to the statutory reserve, which cannot exceed

20

%

of capital stock. The Company is

not

required to supplement the statutory reserve in the year when the balance of this reserve, plus the amount of capital reserves, exceeds

30

%

of the capital stock.

(

c.3

) Tax incentives

The Company has tax incentives framed in certain state and federal industrial development programs in the form of financing, deferred payment of taxes or partial reductions of the amount due. These state programs aim to promote the expansion of employment generation, regional decentralization, complement and diversify the industrial base of the States. In these states, the grace periods, enjoyment and reductions are permitted under the tax law.

(

c.4

) Interest on shareholders’ equity / Dividends

Brazilian companies are permitted to distribute interest attributed to shareholders’ equity calculated based on the long-term interest rate (TJLP), such interest being tax-deductible, in accordance with the applicable law and, when distributed,

may

be considered part of the minimum mandatory dividends.

As determined by its By-laws, the Company is required to distribute to its shareholders, as a minimum mandatory dividend in respect of each fiscal year ending on

December 31,

an amount

not

less than

40

%

of its net income determined under Brazilian law, as adjusted in accordance with applicable law, unless payment of such amount would be incompatible with Ambev’s financial situation. The minimum mandatory dividend includes amounts paid as interest on shareholder’s equity.

Events during the year ended

2017:

Event

Approval

Type

Date of payment

Year

Type of share

Amount per share

Total amount

Board of Directors Meeting

05/16/2017

Dividends

07/17/2017

2017

ON

0.1600

2,513.1

Board of Directors Meeting

12/01/2017

Interest on shareholder´s equity

12/28/2017

2017

ON

0.3100

4,869.7

(i)

Board of Directors Meeting

12/21/2017

Dividends

02/22/2018

2017

ON

0.0700

1,099.7

8,482.5

(i)

R$3,770.1

of these interest on shareholder´s equity refer to the total amount approved for distribution in the period, and were accrued in investments reserves.

Events during the year ended

2016:

Event

Approval

Type

Date of payment

Year

Type of share

Amount per share

Total amount

Board of Directors Meeting

01/15/2016

Interest on shareholder´s equity

02/29/2016

2015

ON

0.1300

2,039.2

(i)

Board of Directors Meeting

06/24/2016

Dividends

07/29/2016

2016

ON

0.1300

2,040.8

Board of Directors Meeting

10/19/2016

Dividends

11/25/2016

2016

ON

0.1600

2,511.9

Board of Directors Meeting

1/12/2016

Interest on shareholder´s equity

12/29/2016

2016

ON

0.2200

3,454.2

Board of Directors Meeting

12/22/2016

Dividends

02/23/2017

2016

ON

0.0700

1,099.1

11,145.2

Events during the year ended

2015:

Event

Approval

Type

Date of payment

Type of share

Ammount per share

Total amount

Board of Directors Meeting

02/23/2015

Interest on shareholders’ equity

03/31/2015

ON

0.0300

471.5

(i)

Board of Directors Meeting

02/23/2015

Interest on shareholders’ equity

03/31/2015

ON

0.0600

943.0

Board of Directors Meeting

05/13/2015

Interest on shareholders’ equity

06/29/2015

ON

0.1000

1,570.6

Board of Directors Meeting

08/28/2015

Dividends

09/28/2015

ON

0.1500

2,352.4

Board of Directors Meeting

12/01/2015

Interest on shareholders’ equity

12/30/2015

ON

0.1500

2,352.7

7,690.2

(i) These dividends refer to the total amount approved for distribution in the period, and were accrued in investments reserves.

(d) Carrying value adjustments

	Carrying value adjustments
	Translation reserves			Cash flow hedge			Actuarial gains/ (losses)			Options granted on subsidiary			Gains/(losses) of non-controlling interest´s share			Business combination		Accounting adjustments for transactions between shareholders			Total
At December 31, 2015		3,472.2			932.2			(1,131.5	)		(2,246.7	)		2,123.6			156.1		(75,162.9	)		(71,857.0	)
Comprehensive income:																						-
Gains/(losses) on translation of foreign operations		(3,728.7	)		-			-			-			-			-		-			(3,728.7	)
Cash flow hedges		-			(1,076.7	)		-			-			-			-		-			(1,076.7	)
Actuarial gains/(losses)		-			-			(130.7	)		-			-			-		-			(130.7	)
Total Comprehensive income		(3,728.7	)		(1,076.7	)		(130.7	)		-			-			-		-			(4,936.1	)
Options granted on subsidiary		-			-			-			(144.2	)		-			-		-			(144.2	)
Gains/(losses) of controlling interest´s share		-			-			-			-			(2.8	)		-		-			(2.8	)
Exchange transaction of shareholdings		(33.0	)		-			-			-			29.9			-		-			(3.1	)
Reversal effect of revaluation of fixed assets by previous cost		-			-			-			-			-			-		(75.9	)		(75.9	)
At December 31, 2016		(289.5	)		(144.5	)		(1,262.2	)		(2,390.9	)		2,150.7			156.1		(75,238.8	)		(77,019.1	)
Comprehensive income:
Gains/(losses) on translation of  foreign operations		1,928.6			-			-			-			-			-		-			1,928.6
Cash flow hedges		-			513.4			-			-			-			-		-			513.4
Actuarial gains/(losses)		-			-			117.7			-			-			-		-			117.7
Total Comprehensive income		1,928.6			513.4			117.7			-			-			-		-			2,559.7
Put option granted on subsidiary		-			-			-			(380.4	)		-			-		-			(380.4	)
Gains/(losses) of controlling interest´s share		-			-			-			-			(12.1	)		-		-			(12.1	)
Tax on fictitious dividends		-			-			-			-			(38.7	)		-		-			(38.7	)
Reversal effect revaluation of fixed assets under the predecessor basis accounting		-			-			-			-			-			-		(75.9	)		(75.9	)
At December 31, 2017		1,639.1			368.9			(1,144.5	)		(2,771.3	)		2,099.9			156.1		(75,314.7	)		(74,966.5	)

(

d.1

) Translation reserves

The translation reserves comprise all foreign currency exchange differences arising from the translation of the financial statements with a functional currency different from the Real.

The translation reserves also comprise the portion of the gain or loss on the foreign currency liabilities and on the derivative financial instruments determined to be effective net investment hedges in conformity with IAS 

39.

(

d.2

) Cash flow hedge reserves

The hedging reserves comprise the effective portion of the cumulative net change in the fair value of cash flow hedges to the extent the hedged risk has

not

yet impacted profit or loss (For additional information, see Note

27

–

Financial instruments and risks)

.

(

d.3

) Actuarial gains and losses

The actuarial gains and losses include expectations with regards to the future pension plans obligations. Consequently, the results of actuarial gains and losses are recognized on a timely basis considering best estimate obtained by Management. Accordingly, the Company recognizes on a monthly basis the results of these estimated actuarial gains and losses according to the expectations presented based on an independent actuarial report.

The actuarial gain of

R$158.5

arising from the surplus reverted to the Sponsor, originating from Ambev Private Pension Institute of the defined benefits plan was fully recorded under the heading of actuarial gains and losses.

(

d.4

)

Options granted on subsidiary

As part of the shareholders agreement between the Ambev and ELJ, an option to sell (“put”) and to purchase (“call”) was issued, which

may

result in an acquisition by Ambev of the remaining shares of Tenedora CND, for a value based on EBITDA, +/- net debt, from operations, the “put” exercisable annually until

2019

and the “call” from

2019.

On

December 31, 2017

the put option held by ELJ is valued at

R$5,520.2

(

R$4,878.5

on

December 31, 2016)

and the liability categorized as “Level

3”,

as the Note

27

(b) and in accordance with the IFRS

3.

No

value has been assigned to the call option held by the Company, since the likelihood of exercise is remote. The fair value of this consideration deferred was calculated by using standard valuation techniques (present value of the principal amount and future interest rates, discounted by the market rate). The criteria used are based on market information and from reliable sources and the fair value is revaluated on an annual basis.

As disclosed in Note

1,

on

December

1st,

2017,

Ambev informed its shareholders and the general market that the E. León Jimenes, S.A. (“ELJ”) will exercise partially its put option of approximatelly

30%

of capital stock by Tenedora. Due to the partial exercise of put option, the Company will be the holder of approximately

85%

of Tenedora. Additionally, was approved the change of the call option term from

2019

to

2022.

The operation was subject to certain conditions which were consummated on

January 18, 2018,

as presented in Note

35

-

Events after the reporting period

.

As part of the agreement to acquire the remaining shares of Sucos do Bem, a put option on interest in subsidiary determined by gross revenue of its products and exercisable from

2019

has been granted. On

December 31, 2017

the option is valued at

R$132.0

(

R$127.7

on

December 31, 2016).

As part of the acquisition agreement of all shares of the company Tropical Juice, currently Cervejaria ZX S.A. a put option on interest in subsidiary exercisable from

2018

has been granted. On

December 31, 2017

the option is valued at

R$23.0

(

R$23.4

on

December 31, 2016).

The reconciliation of changes in these options is presented in Note

27

– Financial instruments and risks

.

(

d.5

) Accounting for acquisition of non-controlling interests

In transactions with non-controlling interests of the same business, even when performed at arm's length terms, that present valid economic grounds and reflect normal market conditions, will be consolidated by the applicable accounting standards as occurred within the same accounting entity.

As determined by IFRS

10,

any difference between the amount paid (fair value) for the acquisition of non-controlling interests and are related to carrying amount of such non-controlling interest shall be recognized directly in controlling shareholders’ equity. The acquisition of non-controlling interest related to Old Ambev, the above mentioned adjustment was recognized in the Carrying value adjustments when applicable.

(e) Earnings per share

Basic and diluted earnings per share of the stock option and deferred stock

The calculation of basic earnings per share is based on the net income attributable to equity holders of Ambev and the proportional weighted average number of shares outstanding during the year.

Diluted earnings per share of the stock option and deferred stock is based on the net income attributable to equity holders of Ambev and the adjusting the weighted average number of shares outstanding during the year to assume conversion of all potentially dilutive shares, as follows:

Million shares	2017		2016		2015
	Common		Common		Common
Issued shares at December 31, net of treasury shares (i)		15,705.8		15,696.6		15,696.1
Effect of shares options		132.2		126.5		124.0
Weighted average number of shares (diluted) at December 31		15,838.0		15,823.1		15,820.1

(i)

Not

considered treasury shares.

The tables below present the calculation of earnings per share (“EPS”):

	2017		2016		2015
	Common		Common		Common
Income attributable to equity holders of Ambev		7,332.0		12,546.6		12,423.8
Weighted average number of shares (non diluted)		15,705.8		15,696.6		15,696.1
Basic EPS (i)		0.47		0.80		0.79
Income attributable to equity holders of Ambev		7,332.0		12,546.6		12,423.8
Weighted average numbers of shares (diluted)		15,838.1		15,823.2		15,820.1
Diluted EPS (i)		0.46		0.79		0.79

(i) Expressed in Brazilian Reais.

(f) Destinations

At

December 31, 2017,

the Company has done the appropriations to retained earnings, in accordance with the Brazilian Corporate law and the Company’s bylaws. The dividends payments made until

December 2017

were approved at the Board of Directors’ Meeting.

Regarding the basis for dividends, the Company believes that the predecessor basis of accounting, as well as its presentation for comparative purposes, will

not

affect the determination of the minimum mandatory dividend. Therefore, the Company intends to adjust the calculation basis of the minimum mandatory dividend to delete any current and future impacts on net income resulting from the adoption of this accounting practice, related to the amortization/depreciation of surplus assets or even a possible impairment of goodwill.

	2017			2016			2015
Net income, attributable to equity holders of Ambev		7,332.0			12,546.6			12,423.8
Prescribed dividends		34.7			21.6			16.2
Reversal effect of revaluation of fixed assets by predecessor		75.9			75.9			75.9
Retained earnings basis for dividends and destinations		7,442.6			12,644.1			12,515.9
Dividends and Interest on capital distributed and accrued to distribute based on net income for the year
Dividends and Interest on capital paid based on profit		3,612.7			5,651.8			7,218.7
Dividends approved for distribution		1,099.7			3,454.2			2,039.2
Total of dividends and Interest on capital		4,712.4			9,106.0			9,257.9
Percentage of distributed profit		63	%		72	%		74	%
Interest on capital distributed and accrued to distribute based on the investment reserve
Interest on capital paid based on the investment reserve		3,770.1			-			-
Total of Interest on capital		3,770.1			-			-
Total of distributed and accrued to distribute		8,482.5			9,106.0			9,257.9
Percentage of distributed profit		114	%		72	%		74	%

XML

Note 22 - Interest-bearing Loans and Borrowings

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of borrowings [text block]

22. INTEREST-BEARING LOANS AND BORROWINGS

	2017		2016
Secured bank loans		589.3		665.8
Unsecured bank loans		413.7		609.9
Debentures and unsecured bond issues		102.7		100.8
Other unsecured loans		101.5		356.2
Financial leasing		24.7		33.0
Non-current liabilities		1,231.9		1,765.7
Secured bank loans		879.6		1,381.4
Unsecured bank loans		394.3		1,910.1
Debentures and unsecured bond issues		-		296.4
Other unsecured loans		38.4		33.5
Financial leasing		8.8		9.2
Current liabilities		1,321.1		3,630.6

Additional information regarding the exposure of the Company to the risks of interest rate and foreign currency are disclosed on Note

27

–

Financial instruments and risks

.

At

December 31, 2017

and

2016

debts presented the following interest rates:

				2017							2016
Debt instruments	Average rate %			Current		Non-current		Average rate %			Current		Non-current
Debt denominated in USD fixed rate		3.83	%		6.4		16.5		6.00	%		-		11.5
Debt denominated in US dollars floating rate		2.74	%		78.3		476.9		1.55	%		1,508.8		351.1
Debt denominated in CAD dollars floating rate		2.00	%		685.9		-		1.62	%		1,259.1		-
BNDES basket debt floating rate (UMBNDES)		-			-		-		1.70	%		22.7		-
Other latin american currency fixed rate		9.27	%		199.1		-		8.86	%		114.1		233.0
Other latin american currency floating rate		2.33	%		-		5.0		2.66	%		-		4.9
TJLP BNDES denominated floating rate (TJLP)		9.22	%		165.3		237.0		9.66	%		216.2		398.6
Reais debt - ICMS fixed rate		5.57	%		38.4		91.5		4.13	%		33.4		344.7
Reais debt - debentures floating rate % CDI		-			-		-		13.63	%		52.9		-
Reais debt - fixed rate		6.63	%		147.7		405.0		7.64	%		423.4		421.9
Total					1,321.1		1,231.9					3,630.6		1,765.7

Terms and debt repayment schedule –

December 31, 2017

	Total		Less than 1 year		1-2 years		2-3 years		3-5 years		More than 5 years
Secured bank loans		1,468.9		879.6		253.6		57.7		109.4		168.6
Unsecured bank loans		808.0		394.3		413.7		-		-		-
Debentures and unsecured bond issues		102.7		-		-		-		102.7		-
Unsecured other loans		139.9		38.4		32.0		24.7		11.6		33.2
Finance lease liabilities		33.5		8.8		24.7		-		-		-
		2,553.0		1,321.1		724.0		82.4		223.7		201.8

Contractual clauses (covenants)

As at

December 31, 2017,

the Company's loans had equal rights to payment without subordination clauses. Except for the credit lines due to FINAME contracted by the Company with Banco Nacional de Desenvolvimento Econômico e Social – BNDES (“BNDES”), where collateral were provided on assets acquired with the credit granted which serve as collateral; other loans and financing contracted by the Company predicted only guarantees as personal collateral or are unsecured. The most loan contracts contained financial covenants including:

· financial covenants, including limitation on new indebtedness;

· going-concern;

· maintenance, in use or in good condition for the business, of the Company's assets;

· restrictions on acquisitions, mergers, sale or disposal of its assets;

· disclosure of financial statements under Brazilian GAAP and IFRS; and/or

· no prohibition related to new real guarantees for loans contracted, except if: (i) expressly authorized under the aforementioned loan agreement, (ii) new loans contracted from financial institutions linked to the Brazilian government - including the BNDES or foreign governments; - or foreign governments, multilateral financial institutions (eg World Bank) or located in jurisdictions in which the Company operates;

These clauses apply to the extent that the events mentioned produce material adverse effects on

the Company

and / or its subsidiaries or the rights of its creditors, and, in the event of any of the events provided in the clauses

, it

may

have been granted to the Company a grace period to cure such default.

Additionally, all agreements entered into with the BNDES are subject to certain “provisions applicable to agreements entered into with the BNDES” (“Provisions”). Such Provisions require the borrower, to obtain prior consent of BNDES if they, for instance, wish to: (i) raise new loans (except for loans described in the Provisions); (ii) give preference and/or priority to other debts; and/or (iii) dispose of or encumber any item of their fixed assets (except as provided for in the Provisions).

As at

December 31, 2017,

the Company was in compliance with all its contractual obligations for its loans and financings.

XML

Note 23 - Employee Benefits

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of employee benefits [text block]

23. EMPLOYEE BENEFITS

The Company sponsors pension plans to defined benefit to employees in Brazil and subsidiaries located in the Dominican Republic, Panama, Uruguay, Bolivia and Canada based on employees' salaries and length of service. The entities are governed by local regulations and practices of each individual country as well as the relationship with the Company’s pension funds and their composition.

Ambev provides post-employment benefits, including pension benefits and medical and dental care. Post-employment benefits are classified as either defined contribution or defined benefit plans.

The defined benefit plans and the other post-employment benefits are

not

granted to new retirees.

Defined contribution plans

These plans are funded by the participants and the sponsor, and are managed by administered pension funds. During

2017,

the Company contributed

R$18.9

(

R$25.3

during

2016

) to these funds, which were recorded as an expense. Once the contributions have been paid, the Company has

no

further payment obligations.

Defined benefit plans

At

December 31, 2017

the net liability for defined benefit plans consists of the following:

	2017			2016			2015
Present value of funded obligations		(5,027.7	)		(4,592.1	)		(4,646.4	)
Fair value of plan assets		4,006.2			3,845.2			3,781.4
Present value of net obligations		(1,021.5	)		(746.9	)		(865.0	)
Present value of unfunded obligations		(757.4	)		(741.3	)		(756.6	)
Present value of net obligations		(1,778.9	)		(1,488.2	)		(1,621.6	)
Asset ceiling		(368.4	)		(532.2	)		(534.5	)
Net liability		(2,147.3	)		(2,020.4	)		(2,156.1	)
Other long term employee benefits		(105.0	)		(83.8	)		(57.2	)
Total employee benefits		(2,252.3	)		(2,104.2	)		(2,213.3	)
Employee benefits amount in the balance sheet:
Liabilities		(2,310.7	)		(2,137.7	)		(2,221.9	)
Assets		58.4			33.5			8.6
Net liabilities		(2,252.3	)		(2,104.2	)		(2,213.3	)

The changes in the present value of the defined benefit obligations were as follows:

	2017			2016			2015
Defined benefit obligation at January 1 st		(5,333.4	)		(5,403.0	)		(4,808.0	)
Acquisitions through exchange transaction of shareholdings		-			(67.3	)		-
Service cost		(38.2	)		(43.1	)		(42.4	)
Interest cost		(321.5	)		(320.5	)		(308.2	)
Gains and (losses) on settlements or reductions in benefits		3.9			2.2			1.1
Contributions by plan participants		(4.1	)		(5.2	)		(5.2	)
Actuarial gains and (losses) - geographical assumptions		77.3			(20.1	)		-
Actuarial gains and (losses) - financial assumptions		(140.3	)		(321.1	)		182.5
Experience adjustment		(115.7	)		(182.8	)		(10.6	)
Reclassifications		(7.5	)		11.1			-
Exchange differences		(306.5	)		599.6			(805.1	)
Benefits paid		400.9			416.8			392.9
Defined benefit obligation at December, 31		(5,785.1	)		(5,333.4	)		(5,403.0	)

The present value of funded obligations include

R$762.0

(

R$683.4

in

2016

and

R$494.1

in

2015

) of

two

health care plans for which the benefits are provided directly by Fundação Zerrenner. Fundação Zerrenner is a legally distinct entity whose main goal is to provide the Company’s current and retired employees and managers with health care and dental assistance, technical and superior education courses, maintaining facilities for assisting and helping elderly people, among other things, through direct initiatives or through financial assistance agreements with other entities.

The changes in the fair value of plan assets are as follows:

	2017			2016			2015
Fair value of plan assets at January 1 st		3,845.2			3,781.4			3,550.1
Interest Income		273.3			274.7			259.5
Administrative costs		(3.4	)		(3.7	)		(3.4	)
Expected Return excluding interest income		(64.8	)		269.8			(173.2	)
Acquisition through business combination		-			73.5			-
Contributions by employer		183.2			175.9			107.6
Contributions by plan participants		4.5			5.6			5.2
Exchange differences		166.8			(315.3	)		428.5
Benefits paid excluding costs of administration		(398.6	)		(416.7	)		(392.9	)
Fair value of plan assets at December, 31		4,006.2			3,845.2			3,781.4

The real return on plan assets generated in

2017

was a gain of

R$208.5

(gain of

R$544.5

in

2016

and

R$86.3

in

2015

).

At

December 31, 2017,

the Company recorded

R$58.4

(

R$33.5

at

December 31, 2016)

up to the asset ceiling

not

exceeding the present value of future benefits.

The changes in the asset ceiling

not

exceeding the present value of future benefits are as follow:

	2017		2016			2015
Asset ceiling impact at January 1 st		33.5		8.6			12.8
Acquisitions through exchange transaction of shareholdings		-		10.4			-
Interest income/(expenses)		2.8		1.3			1.1
Change in asset ceiling excluding amounts included in interest income/(expenses)		8.8		15.8			(5.3	)
Effect of exchange rate fluctuations		0.9		(2.6	)		-
Others		12.4		-			-
Asset ceiling impact at December 31		58.4		33.5			8.6

The income/(expense) recognized in the income statement with regard to defined benefit plans is detailed as follows:

	2017			2016			2015
Current service costs		(38.2	)		(43.1	)		(42.4	)
Administrative costs		(3.4	)		(3.7	)		(3.4	)
(Gains) losses on settlements and curtailments		4.2			0.7			1.1
Income from operations		(37.4	)		(46.1	)		(44.7	)
Financial cost		(101.3	)		(105.6	)		(97.6	)
Total expense for employee benefits		(138.7	)		(151.7	)		(142.3	)

The employee benefit revenue/(expenses) are included in the following line items in the income statement:

	2017			2016			2015
Cost of sales		(22.3	)		(24.5	)		(19.3	)
Sales and marketing expenses		(5.0	)		(9.5	)		(7.9	)
Administrative expense		(10.1	)		(10.2	)		(17.5	)
Financial expenses		(101.3	)		(105.6	)		(97.6	)
Exceptional items		-			(1.9	)		-
		(138.7	)		(151.7	)		(142.3	)

The assumptions used in the calculation of the obligations are as follows:

	2017 (i)			2016 (i)			2015 (i)
Discount rate	3.6%	to	10.6%	3.9%	to	10.5%	4.1%	to	12.1%
Inflation	2.0%	to	5.0%	2.0%	to	5.2%	2.0%	to	5.2%
Future salary increases	1.0%	to	8.7%	1.0%	to	8.5%	1.0%	to	8.8%
Future pension increases	2.0%	to	4.3%	2.0%	to	4.5%	2.0%	to	4.5%
Medical cost trend rate	4.5%	to	7.9%	3.8%	a	8.2%	4.5%	to	8.2%
	p.a. reducing to 7.9%			p.a. reducing to 8.2%			p.a. reducing to 8.2%
Dental claims trend rate		4.3%			4.5%			4.5%
Life expectation for an over 65 years old male	83	to	87	80	to	86	85	to	70
Life expectation for an over 65 years old female	86	to	89	83	to	89	88	to	71

(i) Includes assumptions in Latin America – North, Latin America – South and Canada.

Through its defined benefit pension plans and post-employment medical plans, the Company is exposed to a number of risks, the most significant are detailed below:

Asset volatility

The plans liabilities are calculated using a discount rate set with reference to high quality corporate yields; if plan assets underperform this yield, the Company’s net defined benefit obligation

may

increase. Most of the Company’s funded plans hold a significant proportion of equities, which are expected to outperform corporate bonds in the long-term while providing volatility and risk in the short-term. As the plans mature, the Company usually reduces the level of investment risk by investing more in assets that better match the liabilities.

Changes in bond yields

A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.

Inflation risk

Some of the Company’s pension obligations are linked to inflation, and higher inflation will lead to higher liabilities. The majority of the plan’s assets are either unaffected by or loosely correlated with inflation, meaning that an increase in inflation could potentially increase the Company’s net benefit obligation.

Life expectancy

The majority of the plans’ obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities.

Investment strategy

In case of funded plans, the Company ensures that the investment positions are managed within an asset-liability matching (ALM) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension schemes. Within this framework, the Company’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency.

The sensitivity of the defined benefit obligation to changes in the weighted principal assumptions is:

		2017						2016						2015
In millions of Brazilian Reais	Change in assumption	Increase in assumption			Decrease in assumption			Increase in assumption			Decrease in assumption			Increase in assumption			Decrease in assumption
Medical cost trend rate	100 bases points		(119.7	)		102.3			(104.7	)		90.2			(77.5	)		67.4
Discount rate	50 bases points		289.7			(309.2	)		292.6			(311.5	)		262.5			(280.1	)
Future salary increase	50 bases points		(12.9	)		12.3			(16.6	)		15.3			(13.3	)		12.5
Longevity	One year		(180.6	)		176.5			(175.9	)		172.9			(135.1	)		131.1

The data presented in these tables are purely hypothetical and are based on changes in individual assumptions holding all other assumptions constant: economic conditions and changes therein always affect the other assumptions at the same time and its effects are

not

linear. Therefore, the above information is

not

necessarily a reasonable representation of future results.

The plans assets at

December 31, 2017,

2016

and

2015

consist of the following:

	2017								2016								2015
	Rated			Unrated		Total			Rated			Unrated		Total			Rated			Unrated			Total
Government bonds		50	%		-		50	%		41	%		-		41	%		29	%		-			29	%
Corporate bonds		7	%		-		7	%		13	%		-		13	%		23	%		-			23	%
Equity instruments		14	%		-		14	%		18	%		-		18	%		15	%		-			15	%
Property		-			-		-			-			-		-			-			1	%		1	%
Cash		-			-		-			1	%		-		1	%		-			-			-
Others		29	%		-		29	%		27	%		-		27	%		32	%		-			32	%

The overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated share in the total investment portfolio.

Ambev expects to contribute approximately

R$229.3

to its defined benefit plans in

2018.

XML

Note 24 - Share-based Payments

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of share-based payment arrangements [text block]

24. SHARE-BASED PAYMENTS

There are different share-based payment programs and stock option plans which allow the senior management from the Company and its subsidiaries to receive or acquire shares of the Company. For all option plans, the fair value is estimated at grant date, using the Hull binomial pricing model, modified to reflect the IFRS

2

requirement that assumptions about forfeiture before the end of the vesting period cannot impact the fair value of the option.

This current model of share based payment includes

two

types of grants: Grant

1:

the beneficiary

may

choose to allocate

30%,

40%,

60%,

70%

or

100%

of the amount related to the profit share he received in the year, at the immediate exercise of options, thus acquiring the corresponding shares of the Company, and the delivery of a substantial part of the acquired shares is conditioned to the permanency in the Company for a period of

five

-years from the date of exercise; Grant

2:

the beneficiary

may

exercise the options after a period of

five

years.

Additionally, as a means of creating a long term incentive (wealth incentive) for certain senior employees and members of management considered as having “high potential,” the Company grant stocks to future delivery to those employees, pursuant to which the beneficiary shall receive

two

separate lots – Lot A and Lot B – subject to maturation periods of

five

and

ten

years, respectively.

In addition, the Company has implemented a Stock Based Payment Plan under which certain employees and members of the management of the Company or its direct or indirect subsidiaries are eligible to receive shares of the Company including in the form of ADR’s. The shares that are subject to the Stock Plan are designated as "Restricted Shares" and the restricted share price for the purposes of the stock plan will correspond to the price of the Company's shares on

B3

S.A.- Brasil, Bolsa, Balcão, in the trading session immediately prior to the stock concession Restricted.

The weighted average fair value of the options and assumptions used in applying the Ambev option pricing model for the “Grant

2”

of

2017,

2016

and

2015

grants are as follows:

In R$, except when otherwise indicated	2017			(i)	2016			(i)	2015			(i)
Fair value of options granted		6.51				6.21				7.84
Share price		19.80				17.18				18.41
Exercise price		19.80				17.18				18.41
Expected volatility		26.7	%			27.0	%			27.5	%
Vesting year		5				5				5
Expected dividends		5	%			5	%			5	%
Risk-free interest rate		10.1	%	(ii)		12.4	%	(ii)		15.9	%	(ii)

(i)    Information based on weighted average plans granted, except for the expected dividends and risk-free interest rate.

(ii) The percentages include the grants of stock options and ADR’s during the period, in which the risk-free interest rate of ADR’s are calculated in U.S. dollar.

The total number of outstanding options developed as follows:

Thousand options	2017			2016			2015
Options outstanding at January 1 st		131,244			121,770			126,149
Options issued during the period		20,435			24,806			16,568
Options exercised during the period		(13,548	)		(11,613	)		(19,975	)
Options forfeited during the period		(2,910	)		(3,719	)		(972	)
Options outstanding at ended year		135,221			131,244			121,770

The range of exercise prices of the outstanding options is between

R$0.001

(

R$0.02

as of

December 31, 2016

and

R$0.35

as of

December 31, 2015)

and

R$26.09

(

R$28.32

as of

December 31, 2015

and

R$26.57

as of

December 31, 2015)

and the weighted average remaining contractual life is approximately

6.40

years (

5.96

years as of

December 31, 2016

and

6.30

years as of

December 31, 2015).

Of the

135,221

thousand outstanding options (

131,244

thousand as of

December 31, 2016),

40,150

thousand options are vested as at

December 31, 2017 (

52,780

thousand as of

December 31, 2016).

The weighted average exercise price of the options is as follows:

In R$ per share	2017		2016		2015
Options outstanding at January 1 st		13.87		12.36		10.07
Options issued during the period		19.82		17.18		18.42
Options forfeited during the period		17.88		12.83		20.35
Options exercised during the period		5.81		2.52		5.05
Options outstanding at ended period		15.27		13.87		12.36
Options exercisable at ended period		3.78		3.66		3.29

For the options exercised during

2017,

the weighted average share price on the exercise date was

R$18.87

(

R$18.41

as of

December 31, 2016).

To settle the exercised stock options, the Company

may

use treasury shares. The current limit of authorized capital is considered sufficient to meet all stock option plans if the issue of new shares is required to meet the grants awarded in the Programs.

During the period, Ambev issued

794

thousand (

7,329

thousand in

2016

) deferred stock units related to exercise of the options in the model “Grant

1”.

These deferred stock units are valued at the share price of the day of grant, representing a fair value of approximately

R$15.2

(

R$133,9

in

2016

), and cliff vest after

five

years.

The total number of shares purchased under the plan of shares by employees, whose grant is deferred to a future time under certain conditions (deferred stock), is shown below:

Thousand deferred shares	2017			2016			2015
Deferred shares outstanding at January 1 st		19,260			19,056			17,490
New deferred shares during the period		794			7,329			2,692
Deferred shares granted during the period		(2,874	)		(6,118	)		(804	)
Deferred shares forfeited during the period		(880	)		(1,007	)		(322	)
Deferred shares outstanding at ended year		16,300			19,260			19,056

Additionally, certain employees and directors of the Company receive options to acquire AB Inbev shares, the compensation cost of which is recognized in the income statement against equity.

These share-based payments generated an expense of

R$236.9

in the year ended

December 31, 2017 (

R$189.3

and

R$209.4

for the year ended

December 31, 2016

and

2015,

respectively), recorded as administrative expenses.

XML

Note 25 - Trade Payables

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of trade and other payables [text block]

25. TRADE PAYABLES

	2017		2016
Trade payables		175.1		237.8
Non-current		175.1		237.8
Trade payables		10,418.4		9,793.0
Related Parties		1,435.6		1,075.8
Current		11,854.0		10,868.8
Total		12,029.1		11,106.6

XML

Note 26 - Provisions

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of provisions [text block]

26. PROVISIONS

(a) Provision changes

	Balance as of December 31, 2016		Effect of changes in foreign exchange rates			Additions		Provisions used and reversed			Balance as of December 31, 2017
Restructuring		7.4		0.7			-		-			8.1
Provision for disputes and litigations
Taxes on sales		247.2		0.2			113.9		(135.0	)		226.3
Income tax		323.4		3.0			167.4		(336.8	)		157.0
Labor		165.8		(1.4	)		142.0		(176.9	)		129.5
Civil		43.9		(0.1	)		65.4		(74.0	)		35.2
Others		146.3		(5.9	)		69.8		(84.7	)		125.5
Total of provision for disputes and litigations		926.6		(4.2	)		558.5		(807.4	)		673.5
Total provisions		934.0		(3.5	)		558.5		(807.4	)		681.6

(b) Disbursement expectative

	Balance as of December 31, 2017		1 year or less		1-2 years		2-5 years		Over 5 years
Restructuring		8.1		7.3		-		0.8		-
Provision for disputes and litigations
Taxes on sales		226.3		25.7		179.9		5.0		15.7
Income tax		157.0		33.6		100.7		22.7		-
Labor		129.5		77.3		25.3		17.6		9.3
Civil		35.2		17.1		15.4		1.6		1.1
Others		125.5		8.0		30.3		83.8		3.4
Total of provision for disputes and litigations		673.5		161.7		351.6		130.7		29.5
Total provisions		681.6		169.0		351.6		131.5		29.5

The expected settlement of provisions was based on management’s best estimate at the balance sheet date.

Main lawsuits with probable likelihood of loss:

(a) Income and Sales taxes

In Brazil, the Company and its subsidiaries are involved in several administrative and judicial proceedings related to Income tax, ICMS, IPI, PIS and COFINS taxes. Such proceedings include, among others, tax offsets, credits and judicial injunctions exempting tax payment.

(b) Labor

The Company and its subsidiaries are involved in labor proceedings with former employees or former employees of service providers. The main issues involve overtime and related effects and respective charges.

(c) Civil

The Company is involved in civil lawsuits considered with probable likelihood of loss. The most relevant portion of these lawsuits refers to former distributors, mainly in Brazil, which are mostly claiming damages resulting from the termination of their contracts.

The processes with possible probabilities are disclosed in Note

30

-

Contingent liability

.

XML

Note 27 - Financial Instruments and Risks

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of financial instruments [text block]

27. FINANCIAL INSTRUMENTS AND RISKS

Risk factors

The Company is exposed to foreign currency

,

interest rate

,

commodity price

,

liquidity and credit risk in the ordinary course of business

. The Company

analyzes each of these risks both individually and as a whole to define strategies to manage the economic impact on

Company’s

performance consistent with its Financial Risk Management Policy

.

The Company’s use of derivatives strictly follows its Financial Risk Management Policy approved by the Board of Directors. The purpose of the policy is to provide guidelines for the management of financial risks inherent to the capital markets in which Ambev carries out its operations. The policy comprises

four

main aspects: (i) capital structure, financing and liquidity, (ii) transactional risks related to the business, (iii) financial statements translation risks and (iv) credit risks of financial counterparties.

The policy establishes that all the financial assets and liabilities in each country where Ambev operates must be denominated in their respective local currencies. The policy also sets forth the procedures and controls needed for identifying, measuring and minimizing market risks, such as variations in foreign exchange rates, interest rates and commodities (mainly aluminum, wheat, corn and sugar) that

may

affect Ambev’s revenues, costs and/or investment amounts. The policy states that all the known risks (e.g. foreign currency and interest) shall be hedged by contracting derivative financial instruments. Existing risks

not

yet recorded (e.g. future contracts for the purchase of raw material or property, plant and equipment) shall be mitigated using projections for the period necessary for the Company to adapt to the new costs scenario that

may

vary from

ten

to

fourteen

months, also through the use of derivative financial instruments. Most of the translation risks are

not

hedged. Any exception to the policy must be approved by the Board of Directors.

Derivative financial Instruments

Derivative financial instruments authorized by the

Financial Risk Management Policy

are futures contracts traded on exchanges, full deliverable forwards, non-deliverable forwards, swaps and options. At

December 31, 2017,

the Company and its subsidiaries had

no

target forward, swaps with currency verification or any other derivative operations representing a risk level above the nominal value of their contracts. The derivative operations are classified by strategies according to their purposes, as follows:

i) Cash flow hedge derivative instruments – The highly probable forecast transactions contracted in order to minimize the Company's exposure to fluctuations of exchange rates and prices of raw materials, investments, equipment and services to be procured, protected by cash flow hedges that shall occur at various different dates during the next

fourteen

months. Gains and losses classified as hedging reserve in equity are recognized in the income statement in the period or periods when the forecast and hedged transaction affects the income statement.

ii) Fair value hedge derivative instruments – operations contracted with the purpose of mitigating the Company’s net indebtedness against foreign exchange and interest rate risk. Cash net positions and foreign currency debts are continually assessed for identification of new exposures.

The results of these operations, measured according to their fair value, are recognized in financial results.

iii

) Net

investment hedge

derivative instruments –

transactions entered into in order to minimize exposure of the exchange differences arising from conversion of net investment in the Company's subsidiaries located abroad for translation account balance

. The effective p

ortion

of the

hedge is allocated to

equity

and the ineffectiveness

portion

is recorded directly in financial results.

The following tables summarize the exposure of the Company that were identified and protected in accordance with the Company's Risk Policy. The following denominations have been applied:

Operational Hedge: Refers to the exposures arising from the core business of Ambev, such as: purchase of inputs, purchase of fixed assets and service contracts linked to foreign currency, which is protected through the use of derivatives.

Financial Hedge: Refers to the exposures arising from cash and financing activities, such as: foreign currency cash and foreign currency debt, which is protected through the use of derivatives.

Investment hedge in foreign operations: Refers mainly to exposures arising from cash hold in foreign currency in foreign subsidiaries whose functional currency is different from the consolidation currency.

Investment hedge -

Put option granted on subsidiary

: As detailed in Note

21

(

d.4

) the Company constituted a liability related to acquisition of Non-controlling interest in the Dominican Republic operations. This financial instrument is denominated in Dominican Pesos and is recorded in a Company which functional currency is the Real. The Company assigned this financial instrument as a hedging instrument for part of its net assets located in the Dominican Republic, in such manner the hedge result can be recorded in other comprehensive income of the group, following the result of the hedged item.

Transactions protected by derivative financial instruments in accordance with the Financial Risk Management Policy

																	2017
						Fair Value					Gain / (Losses)
Exposure	Risk			Notional		Assets		Liability			Finance Result			Operational Result			Equity
Cost		(9,742.3	)		9,318.9		283.6		(190.0	)		(563.5	)		(200.2	)		584.8
	Commodity	(2,378.7	)		1,955.3		166.5		(70.7	)		(1.5	)		103.6			(4.8	)
	American Dollar	(6,879.1	)		6,879.1		86.3		(93.4	)		(556.1	)		(331.5	)		630.2
	Euro	(82.9	)		82.9		3.5		(0.7	)		(4.7	)		0.4			6.6
	Mexican Pesos	(401.6	)		401.6		27.3		(25.2	)		(1.2	)		27.3			(47.2	)
Fixed Assets		(579.5	)		579.5		1.9		(10.8	)		(1.9	)		-			-
	American Dollar	(531.9	)		531.9		1.8		(10.8	)		(2.8	)		-			-
	Euro	(47.6	)		47.6		0.1		-			0.9			-			-
Expenses		(177.7	)		177.7		0.5		(1.8	)		(2.9	)		3.9			1.8
	American Dollar	(169.2	)		169.2		0.3		(1.6	)		(3.1	)		3.5			2.4
	Rupee	(8.5	)		8.5		0.2		(0.2	)		0.2			0.4			(0.6	)
Cash		(1,328.3	)		1,328.3		-		(13.1	)		(266.0	)		-			-
	American Dollar	(1,313.3	)		1,313.3		-		(13.1	)		(266.0	)		-			-
	Interest rate	(15.0	)		15.0		-		-			-			-			-
Debts		(919.5	)		356.9		30.0		(1.8	)		(67.5	)		-			-
	American Dollar	(562.6	)		-		-		-			(76.2	)		-			-
	Interest rate	(356.9	)		356.9		30.0		(1.8	)		8.7			-			-
Equity Instrument		(2,347.9	)		677.0		69.2		-			67.0			-			-
	Stock Exchange Prices	(2,347.9	)		677.0		69.2		-			67.0			-			-
As of December 31, 2017		(15,095.2	)		12,438.3		385.2		(217.5	)		(834.8	)		(196.3	)		586.6

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

I.          Market risk

a.1

) Foreign currency risk

The Company

is exposed to foreign currency risk on borrowings, investments, purchases, dividends and/or interest expense/income whenever they are denominated in a currency other than the functional currency of the subsidiary. The main derivatives financial instruments used to manage foreign currency risk are futures contracts, swaps, options, non deliverable forwards and full deliverable forwards.

a.2

) Commodity Risk

A significant portion of the Company inputs comprises commodities, which historically have experienced substantial price fluctuations. The Company therefore uses both fixed price purchasing contracts and derivative financial instruments to minimize its exposure to commodity price volatility. The Company has important exposures to the following commodities: aluminum, sugar, wheat and corn. These derivative financial instruments have been designated as cash flow hedges.

a.3

) Interest rate risk

The Company applies a dynamic interest rate hedging approach whereby the target mix between fixed and floating rate debt is reviewed periodically. The purpose of the Company’s policy is to achieve an optimal balance between cost of funding and volatility of financial results, taking into account market conditions as well as the Company’s overall business strategy and this strategy is reviewed periodically.

The table below demonstrates the Company’s exposure related to debts, before and after interest rates hedging strategy.

	2017
	Pre - Hedge					Post - Hedge
	Interest rate			Amount		Interest rate			Amount
Brazilian Real		9.2	%		402.3		7.6	%		714.1
American Dollar		2.7	%		555.3		2.7	%		555.2
Canadian Dollar		2.0	%		685.9		2.0	%		685.9
Barbadian Dollar		2.3	%		5.0		2.3	%		5.0
Interest rate postfixed					1,648.5					1,960.2
Brazilian Real		6.4	%		682.5		5.9	%		370.8
Working Capital in Argentinean Peso		31.0	%		1.8		31.0	%		1.8
Dominican Peso		9.3	%		188.8		9.3	%		188.8
American Dollar		3.8	%		22.9		3.8	%		22.9
Guatemala´s Quetzal		7.8	%		10.3		7.8	%		10.3
Interest rate pre-set					906.3					594.6

	2016
	Pre - Hedge					Post - Hedge
	Interest rate			Amount		Interest rate			Amount
Brazilian Real		10.0	%		667.7		12.6	%		2,375.6
American Dollar		1.5	%		1,882.3		2.2	%		565.7
Canadian Dollar		1.6	%		1,259.1		1.6	%		1,259.1
Barbadian Dollar		2.7	%		4.9		2.7	%		4.9
Interest rate postfixed					3,814.0					4,205.3
Brazilian Real		6.8	%		1,223.5		6.2	%		841.9
Dominican Peso		9.7	%		288.8		9.7	%		288.8
American Dollar		6.0	%		11.6		6.0	%		1.8
Guatemala´s Quetzal		8.0	%		9.9		8.0	%		10.0
Barbadian Dollar		4.3	%		48.5		4.3	%		48.5
Interest rate pre-set					1,582.3					1,191.0

Sensitivity analysis

The Company mitigates risks arising from non-derivative financial assets and liabilities substantially, through derivative financial instruments. In this context, the Company has identified the main risk factors that

may

generate losses from these derivative financial instruments and has developed a sensitivity analysis based on

three

scenarios, which

may

impact the Company’s future results and/or cash flow, as described below:

1

– Probable scenario: Management expectations of deterioration in each transaction’s main risk factor. To measure the possible effects on the results of derivative transactions, the Company uses parametric Value at Risk – VaR. is a statistical measure developed through estimates of standard deviation and correlation between the returns of several risk factors. This model results in the loss limit expected for an asset over a certain time period and confidence interval. Under this methodology, we used the potential exposure of each financial instrument, a range of

95%

and horizon of

21

days after

December 31, 2017

for the calculation, which are presented in the module.

2

– Adverse scenario:

25%

deterioration in each transaction’s main risk factor as compared to the level observed on

December 31, 2017.

3

– Remote scenario:

50%

deterioration in each transaction’s main risk factor as compared to the level observed on

December 31, 2017.

Transaction	Risk	Fair value			Probable scenario			Adverse scenario			Remote scenario
Commodities hedge	Decrease on commodities price		95.8			(70.6	)		(392.9	)		(881.7	)
Input purchase			(95.8	)		108.7			498.8			1,093.5
Foreign exchange hedge	Foreign currency decrease		(2.2	)		(105.0	)		(1,843.1	)		(3,684.0	)
Input purchase			2.2			105.0			1,843.1			3,684.0
Costs effects			-			38.1			105.9			211.8
Foreign exchange hedge	Foreign currency decrease		(8.9	)		(16.8	)		(153.8	)		(298.6	)
Capex Purchase			8.9			16.8			153.8			298.6
Fixed assets effects			-			-			-			-
Foreign exchange hedge	Foreign currency decrease		(1.3	)		(3.4	)		(45.7	)		(90.2	)
Expenses			1.3			3.4			45.7			90.2
Expenses effects			-			-			-			-
Hedge cambial	Foreign currency increase		(13.1	)		(37.5	)		(341.4	)		(669.8	)
Cash			13.1			37.5			341.4			669.8
Interest Hedge	Decrease in interest rate		-			(0.4	)		(2.9	)		(3.4	)
Interest revenue	-					0.4			2.9			3.4
Cash effects			-			-			-			-
Hedge cambial	Foreign currency decrease		-			-			-			-
Cash	-					9.7			140.6			281.3
Interest Hedge	Increase in interest rate		28.2			18.4			(131.5	)		(162.7	)
Interest expenses			(28.2	)		(18.4	)		131.5			162.7
Debt effects			-			9.7			140.6			281.3
Equity Instrument Hedge	Stock Exchange Price Decrease		69.2			54.3			(100.1	)		(269.3	)
Expenses			(69.2	)		(19.4	)		517.8			1,104.8
Equity effects			-			34.9			417.7			835.5
			-			82.7			664.2			1,328.6

As of

December 31, 2017

the Notional and Fair Value amounts per instrument and maturity were as follows:

		Notional Value
Exposure	Risk	2018		2019		2020		2021		> 2021		Total
Cost			9,219.2		99.7		-		-		-		9,318.9
	Commodity		1,859.2		96.1		-		-		-		1,955.3
	American Dollar		6,879.1		-		-		-		-		6,879.1
	Euro		82.9		-		-		-		-		82.9
	Mexican Peso		398.0		3.6		-		-		-		401.6
Fixed asset			579.5		-		-		-		-		579.5
	American Dollar		531.9		-		-		-		-		531.9
	Euro		47.6		-		-		-		-		47.6
Expenses			177.7		-		-		-		-		177.7
	American Dollar		169.2		-		-		-		-		169.2
	Rupee		8.5		-		-		-		-		8.5
Cash			1,313.3		-		15.0		-		-		1,328.3
	American Dollar		1,313.3		-		-		-		-		1,313.3
	Interest rate		-		-		15.0		-		-		15.0
Debt			-		-		-		110.0		246.9		356.9
	Interest rate		-		-		-		110.0		246.9		356.9
Foreign Investments			677.0		-		-		-		-		677.0
	American Dollar		677.0		-		-		-		-		677.0
			11,966.7		99.7		15.0		110.0		246.9		12,438.3

		Fair Value
Exposure	Risk	2018			2019			2020		2021		> 2021		Total
Cost			89.0			4.6			-		-		-		93.6
	Commodity		91.1			4.7			-		-		-		95.8
	American Dollar		(7.1	)		-			-		-		-		(7.1	)
	Euro		2.8			-			-		-		-		2.8
	Mexican Peso		2.2			(0.1	)		-		-		-		2.1
Fixed asset			(8.9	)		-			-		-		-		(8.9	)
	American Dollar		(9.0	)		-			-		-		-		(9.0	)
	Euro		0.1			-			-		-		-		0.1
Expenses			(1.3	)		-			-		-		-		(1.3	)
	American Dollar		(1.3	)		-			-		-		-		(1.3	)
	Rupee		-			-			-		-		-		-
Cash			(13.1	)		-			-		-		-		(13.1	)
	American Dollar		(13.1	)		-			-		-		-		(13.1	)
	Interest rate		-			-			-		-		-		-
Debt			-			-			-		25.0		3.2		28.2
	Interest rate		-			-			-		25.0		3.2		28.2
Equity Instrument			69.2			-			-		-		-		69.2
	Stock prices		69.2			-			-		-		-		69.2
			134.9			4.6			-		25.0		3.2		167.7

II.     Credit Risk

Concentration of credit risk on trade receivables

A substantial part of the Company’s sales is made to distributors, supermarkets and retailers, within a broad distribution network. Credit risk is reduced because of the widespread number of customers and control procedures used to monitor risk. Historically, the Company has

not

experienced significant losses on receivables from customers.

Concentration of credit risk on counterpart

In order to minimize the credit risk of its investments, the Company has adopted procedures for the allocation of cash and investments, taking into consideration limits and credit analysis of financial institutions, avoiding credit concentration, i.e., the credit risk is monitored and minimized to the extent that negotiations are carried out only with a select group of highly rated counterparties.

The selection process of financial institutions authorized to operate as the Company’s counterparty is set forth in our Credit Risk Policy. This Credit Risk Policy establishes maximum limits of exposure to each counterparty based on the risk rating and on each counterparty's capitalization.

In order to minimize the risk of credit with its counterparties on significant derivative transactions, the Company has adopted bilateral “trigger” clauses. According to these clauses, where the fair value of an operation exceeds a percentage of its notional value (generally between

10%

and

15%

), the debtor settles the difference in favor of the creditor.

As of

December 31, 2017,

the Company held its main short-term investments with the following financial institutions: Banco do Brasil, Bradesco, Bank Mendes Gans, Caixa Econômica Federal, Citibank, Itaú, JP Morgan Chase, Merrill Lynch, Santander e Toronto Dominion Bank. The Company had derivative agreements with the following financial institutions: Banco Bisa, Barclays, BNB, BNP Paribas, Bradesco, Bank Mendes Gans, Citibank, Deutsche Bank, Itaú, Goldman Sachs, JP Morgan Chase, Macquarie, Merrill Lynch, Morgan Stanley, Santander, ScotiaBank e TD Securities.

The carrying amount of cash and cash equivalents, investment securities, trade receivables excluding prepaid expenses, recoverable taxes and derivative financial instruments are disclosed net of provisions for impairment and represents the maximum exposure of credit risk as of

December 31, 2017.

There was

no

concentration of credit risk with any counterparties as of

December 31, 2017.

III.     Liquidity Risk

The Company believes that cash flows from operating activities

,

cash and cash equivalents and short-term investments

, together

with the derivative

financial

instruments and access to loan facilities

are

sufficient to finance capital expenditures

,

financial liabilities and dividend payments in the future

.

IV.     Equity price risk

Through the equity swap transaction approved on

May

16th,

2017

and altered in

December

21th,

2017

by the Board of Directors of Ambev (see Note

1

-

Corporate information

) , the Company, or its subsidiaries, will receive the price variation related to its shares traded on the stock exchange or ADRs, neutralizing the possible effects of the stock prices’ oscillation in view of the share-based payment of the Company. As these derivative instruments are

not

characterized as hedge accounting they were

not

therefore designated to any hedge.

In

December 2017,

an exposure equivalent to

R$2.3

billion in AmBev’s shares (or ADR’s) was partially hedged, resulting in a gain in income statement of R$

67.0.

V.     Capital management

Ambev is continuously optimizing its capital structure targeting to maximize shareholder value while keeping the desired financial flexibility to execute the strategic projects. Besides the statutory minimum equity funding requirements that apply to the Company’s subsidiaries in the different countries, Ambev is

not

subject to any externally imposed capital requirements. When analyzing its capital structure, the Company uses the same debt ratings and capital classifications as applied in the Company’s financial statements.

Financial instruments

(a) Financial instruments categories

Management of the financial instruments held by the Company is

effected through

operational strategies and internal controls to assure liquidity, profitability and transaction security

.

Financial instruments

transactions are

regularly reviewed

for the effectiveness

of

the

risk exposure that management intends to cover (foreign exchange, interest rate,

etc.).

The table below shows all financial instruments recognized in the financial statements,

segregated

by category

:

	2017
	Loans and receivables		Held for trading		Financial assets/liabilities at fair value through profit or loss		Derivatives hedge		Financial liabilities through amortized cost		Total
Financial assets
Cash and cash equivalents		10,354.5		-		-		-		-		10,354.5
Investment securities		-		122.0		11.9		-		-		133.9
Trade receivables excluding prepaid expenses		7,505.0		-		-		-		-		7,505.0
Financial instruments derivatives		-		-		100.1		285.1		-		385.2
Total		17,859.5		122.0		112.0		285.1		-		18,378.6
Financial liabilities
Trade payables and put option granted on subsidiary and other liabilities		-		-		5,764.1		-		13,502.0		19,266.1
Financial instruments derivatives		-		-		16.1		201.4		-		217.5
Interest-bearning loans and borrowings		-		-		-		-		2,553.0		2,553.0
Total		-		-		5,780.2		201.4		16,055.0		22,036.6

	2016
	Loans and receivables		Held for trading		Financial assets/liabilities at fair value through profit or loss		Derivatives hedge		Financial liabilities through amortized cost		Total
Financial assets
Cash and cash equivalents		7,876.8		-		-		-		-		7,876.8
Investment securities		-		104.3		282.8		-		-		387.1
Trade receivables excluding prepaid expenses		6,962.5		-		-		-		-		6,962.5
Financial instruments derivatives		-		-		18.4		194.5		-		212.9
Total		14,839.3		104.3		301.2		194.5		-		15,439.3
Financial liabilities
Trade payables and put option granted on subsidiary and other liabilities		-		-		5,106.1		-		13,208.1		18,314.2
Financial instruments derivatives		-		-		49.9		663.5		-		713.4
Interest-bearning loans and borrowings		-		-		-		-		5,396.3		5,396.3
Total		-		-		5,156.0		663.5		18,604.4		24,423.9

(b) Classification of financial instruments by type of fair value measurement

IFRS

13

defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Also pursuant to IFRS

13,

financial instruments measured at fair value shall be classified within the following categories

:

Level

1

– quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date valuation;

Level

2

– inputs other than quoted prices included within Level

1

that are observable for the asset or liability, either directly or indirectly; and

Level

3

– unobservable inputs for the asset or liability.

	2017								2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets
Financial asset at fair value through profit or loss		11.9		-		-		11.9		282.8		-		-		282.8
Derivatives assets at fair value through profit or loss		0.1		100.0		-		100.1		2.6		15.8		-		18.4
Derivatives - operational hedge		4.8		280.3		-		285.1		83.6		110.9		-		194.5
		16.8		380.3		-		397.1		369.0		126.7		-		495.7
Financial liabilities
Financial liabilities at fair value through profit and loss (i)		-		-		5,764.1		5,764.1		-		-		5,106.1		5,106.1
Derivatives liabilities at fair value through profit or loss		1.7		14.4		-		16.1		9.9		40.0		-		49.9
Derivatives - operational hedge		58.4		143.0		-		201.4		78.9		575.9		-		654.8
Derivatives - fair value hedge		-		-		-		-		-		8.7		-		8.7
		60.1		157.4		5,764.1		5,981.6		88.8		624.6		5,106.1		5,819.5

(i) Refers to the put option granted on subsidiary as described in Note

21

d(

4

).

Reconciliation of changes in the categorization of Level

3

Financial liabilities at December 31, 2016 (i)	5,106.1
Acquisition of investments	7.4
Total gains and losses in the year	650.6
Losses recognized in net income	359.1
Losses recognized in equity	291.5
Financial liabilities at December 31, 2017 (i)	5,764.1

(i) The liability was recorded under “Trade payables and put option granted on subsidiary and other liabilities” on the balance sheet.

(c) Fair value of financial liabilities measured at amortized cost

The Company’s liabilities, interest-bearing loans and borrowings, trade payables excluding tax payables, are recorded at amortized cost according to the effective rate method, plus indexation and foreign exchange gains/losses, based on closing indices for each exercise.

The financial instruments recorded at amortized cost are similar to the fair value and are

not

material for disclosure.

Calculation of fair value of derivatives

The Company measures derivative financial instruments by calculating their present value, through the use of market curves that impact the instrument on the computation dates. In the case of swaps, both the asset and the liability positions are estimated independently and brought to present value, where the difference between the result of the asset and liability amount generates the swaps market value. For the traded derivative financial instruments, the fair value is calculated according to the adjusted exchange-listed price.

Margins given in guarantee

In order to comply with the guarantee requirements of the derivative exchanges and/or counterparties in certain operations with derivative financial instruments, as of

December 31, 2017

the Company held

R$608.3

in highly liquid financial investments or in cash, classified as cash and cash equivalents and investment securities (

R$486.8

on

December 31, 2016).

Offsetting of financial assets and liabilities

For financial assets and liabilities subject to settlement agreements by the net or similar agreements, each agreement between the Company and the counterparty allows this type of settlement when both parties make this option. In the absence of such election, the assets and liabilities will be settled by their amounts, but each party shall have the option to settle on net, in case of default by the counterparty.

XML

Note 28 - Operating Leases

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of leases [text block]

28.

    OPERATING LEASES

The Company primarily leases warehouses and offices.

The future contractual values mature as follows:

	2017		2016
Less than 1 year		35.7		26.7
Between 1 and 5 years		129.4		61.4
More than 5 years		71.1		66.5
		236.2		154.6

In

2017,

the operating lease expense in the income statement amounted to

R$39.0

(

R$43.4

and

R$58.7

in

2016

and

2015,

respectively).

XML

Note 29 - Collateral and Contractual Commitments with Suppliers, Advances From Customers and Other

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of collateral and contractual commitments with suppliers, advances from customers and other [text block]

29. COLLATERAL AND CONTRACTUAL COMMITMENTS WITH SUPLLIERS, ADVANCES FROM CUSTOMERS AND OTHER

	2017		2016
Collateral given for own liabilities		606.3		1,051.5
Other commitments		842.7		754.3
		1,449.0		1,805.8
Commitments with suppliers (i)		11,096.3		4,019.2
Commitments - Bond 2017		-		300.0
		11,096.3		4,319.2

(i)

Variation refers, mainly, a new contracts with a new suppliers of aluminum in

2017.

The collateral provided for liabilities totaled approximately

R$1,449.0

as at

December 31, 2017 (

R$1,805.8

as at

December 31, 2016),

including

R$551.0

(

R$571.3

as at

December 31, 2016)

of cash guarantees. The deposits in cash used as guarantees are presented as part of other assets. To meet the guarantees required by derivative exchanges and/or counterparties contracted in certain derivative financial instrument transactions, Ambev maintained as at

December 31, 2017,

R$606.3

(

R$486.8

as at

December 31, 2016)

in highly liquid financial investments or in cash, classified as cash and cash equivalents and investment securities (Note

27

–

Financial instruments and risks

).

Most of the balance relates to commitments with suppliers of packaging.

Future contractual commitments as at

December 31, 2017

and

2016

are as follows:

	2017		2016
Less than 1 year		3,812.8		3,325.7
Between 1 and 2 years		2,995.7		420.8
More than 2 years		4,287.8		572.7
		11,096.3		4,319.2

XML

Note 30 - Contingent Liability

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of contingent liabilities [text block]

30. CONTINGENT LIABILITY

The Company has contingent liabilities arising from lawsuits in the normal course of its business.

Due to their nature, such legal proceedings involve inherent uncertainties including, but

not

limited to, court and tribunals rulings, negotiations between affected parties and governmental actions, and as a consequence the Company’s management cannot at this stage estimate the likely timing of the resolution of these matters.

Contingent liabilities with a probable likelihood of loss are fully recorded as liabilities (Note

26

–

Provisions

).

The Company also has lawsuits related to tax, civil and labor, for which the likelihood of loss classified by management as possible and for which there are

no

provisions. Estimates of amounts of possible losses are as follows:

	2017		2016
IRPJ and CSLL		31,757.3		28,934.8
PIS and COFINS		3,485.2		1,971.1
ICMS and IPI		19,805.5		16,046.9
Labor		287.1		222.0
Civil		4,071.5		4,417.6
Others		1,113.4		858.1
		60,520.0		52,450.5

Principal lawsuits with a likelihood of possible loss:

Brazilian Federal Taxes

Special goodwill reserve

In

December 2011,

the Company received a tax assessment related to the goodwill amortization resulting from Inbev Holding Brasil S.A. In

November 2014

the Lower Administrative Court concluded the judgment. The decision was partly favorable, Ambev presented a motion to clarify the decision to the Administrative Court. In

September 2016,

this motion was partially admitted and Ambev was formally notified of said decision in

January 2018.

As the decision of the Administrative Council of Tax Appeals (“CARF”) remained partially favorable, Ambev will file a judicial proceeding to discuss the unfavorable part of the decision and received a favorable decision in the injuctionand the remaining portion will still be submitted for reconsideration by the Administrative Upper Court.

In

June 2016,

Ambev received tax assessment charging the remaining value of the goodwill amortization, related to InBev B Holding Brasil S.A’s merger with Ambev, from

2011

to

2013.

In

March 2017,

Ambev was notified of the partially favorable

first

level administrative decision on this tax assessment and filed an appeal to Lower Administrative Court.

Ambev management estimates possible losses in relation to the total amortization period (

2005

-

2013

) to be approximately

R$8.3

billion (

R$7.8

billion as of

31

December 2016),

classified as possible loss, and, therefore,

no

provision was made by the Company in this matter. In the event Ambev is required to pay these amounts, AB Inbev will reimburse Ambev the amount proportional (

70%

) to the benefit received by the company pursuant to the merger protocol, as well as the related costs.

Goodwill BAH

In

October 2013,

we also received a tax assessment related to the goodwill amortization resulting from the merger of Beverage Associates Holding Limited (“BAH”) into Ambev. In

December 2014,

Ambev filed an appeal against the unfavorable

first

level administrative decision published in

November 2014.

In

March 2017,

Lower Administrative Court concluded the judgment to send the case back to the

first

level administrative judgment due to processual matters. In

July 2017,

Ambev was notified of the revised

first

level decision and filed a new Voluntary Appeal. The possible risk amount is approximately R$

1.6

billion (R$

1.5

billion as of

December 31, 2016).

There was

no

provision made on the matter.

Goodwill CND Holdings

In

November 2017,

Ambev received a tax assessment related to the amortized goodwill related to the merger of CND Holdings into Ambev. Ambev filed a defense at the legal term and awaits judgment by the Federal Revenue Service (“DRJ”). The possible risk amount is approximately R$

1.1

billion. There was

no

provision made on the matter.

Profits earned abroad

During the

first

quarter of

2005,

certain of our subsidiaries received a number of assessments from the RFB relating to profits obtained by subsidiaries domiciled abroad. In

December 2008,

the Administrative Court handed down a decision on

one

of the tax assessments relating to earnings of our foreign subsidiaries. This decision was partially favorable to us, and in connection with the remaining part, we filed an appeal to the Appellate Division of the Administrative Court which was finally dismissed in

March 2017.

In

September 2017,

Ambev filed a court order to discuss the matter with an injunction granted in favor of the Company.

In

December 2013,

2016

and

October 2017,

the Company received tax assessments related to the matter. We have

not

recorded any provision in connection with those assessments. We estimate our exposure to possible losses in relation to these assessments to be

R$6.1billion

(

R$4.9

billion at

December 31, 2016)

and to probable losses to be

R$44.2

million as of that date, for which we have recorded a provision in the corresponding amount (

R$41.6

million at

December 31, 2016).

Utilization of tax loss on mergers

The Company and its subsidiaries have received tax assessments from the Brazilian Tax authorities, from certain tax credits arising from alleged non-compliance with the Brazilian tax regulation concerning accumulated tax losses by companies in their final year of existence, following a merger.

In

February 2016,

Ambev was notified of the closure of the administrative phase and filed lawsuits to discuss the matter. In

September 2016,

Ambev received the

first

favorable court decision. In

March 2017,

Ambev received an unfavorable decision in the

first

judicial instance in the

second

case under discussion in the judiciary and filed an Appeal.

No

provisions have been made for these cases as Ambev believes that there are

no

express legal grounds that limit the use of tax losses in cases where legal entities are extinguished (including in the case of mergers), and therefore the tax inspector’s interpretation in these tax assessments does

not

apply.

The Company estimates the possible exposure to losses on these assessments at approximately

R$549.4

million (

R$522.9

million at

December 31, 2016).

Disallowance of Expenses and Deductible Losses

On

December 2014,

Ambev received a tax assessment from the Brazilian Federal Tax Authorities related to the disallowance of alleged non-deductible expenses and the deduction of certain losses mainly associated to financial investments and loans, in the amount of approximately

R$1.3

billion. In

August 2017,

the Administrative Council of Tax Appeals ("CARF") concluded the judgment fully favorable to Ambev and, in

December 2017,

Ambev was notified of said decision, as well as of the manifestation from the fiscal authority informing the non-interposition of appeal and the permanent discontinuance of the case.

In

December 2015

and in

December 2016,

Ambev also received other tax assessments related to the same matter. Ambev Management estimates the amount of possible losses in relation to this assessment to be approximately

R$4.4

billion as of

December 

31,

2017

(

R$5.6

billion as of

December 

31,

2016

).

Disallowance of taxes paid abroad

Since

2014,

Ambev has been receiving tax assessments from the Brazilian Federal Tax Authorities related to the disallowance of deductions associated with alleged unproven taxes paid abroad.

The Company filed a defense for all cases and awaits a decision in the

first

instance for the cases received in

2015

and

2016

and by the Administrative Court Management for the others.

In

September, 2017,

Ambev opted to include part of these tax assessments in the Special Tax Regularization Program established by the Provisional Measure nº.

783

(“PERT”). Ambev management estimates an amount of approximately

R$7.2

billion (

R$2.8

billion as of

December 31, 2016)

as possible loss.

Presumed Profit

In

April 2016,

Arosuco (subsidiary of Ambev) received a tax assessment regarding the use of Presumed Profit Method for the calculation of income tax and the social contribution on net profit instead of Real Profit method. In

September, 2017,

Arosuco was notified of the unfavorable

first

level administrative decision and filed Voluntary Appeal. Arosuco management estimates the amount of possible losses in relation to this assessment to be approximately

R$616.1

million (

R$569.6

billion as of

December 31, 2016).

In

December 2016,

CRBS (a subsidiary of Ambev) received a tax assessment regarding the use of Presumed Profit Method for the calculation of income tax and social contribution on net profit instead of the Real Profit method. In

July 2017,

CRBS received an unfavorable decision at the

first

administrative instance and filed a Voluntary Appeal. In

September 2017,

the Company opted to include this tax assessment in the Special Tax Regularization Program established by Provisional Measure nº.

783

(“PERT”). There are

no

loss amounts related to this matter as of

December 31, 2017 (

R $

3.6

billion as of

December 31, 2016).

PIS and COFINS

PIS/COFINS over bonus products

Since

2015,

Ambev has been receiving tax assessments issued by the Brazilian federal tax authorities, relating to amounts allegedly due under Integration Programme/Social Security Financing Levy (PIS/COFINS) over bonus products granted to its customers. The cases are now being discussed at Courts. Ambev management estimates the possible losses related to these assessments to be approximately

R$3.1

billion (

R$1.5

billion as of

31

December 2016).

ICMS and IPI

ICMS-ST Unconditional Discounts

Ambev has been party to legal proceedings with the State of Rio de Janeiro where it is challenging such State’s attempt to assess ICMS Value-Added Tax with respect to unconditional discounts granted by Ambev from

January 1996

to

February 1998.

In

October 2015

and

January 2016,

Ambev decided pay the debts related to the assessments issued by the State of Rio de Janeiro under an incentive tax payment, in the total amount of approximately

R$271

million. In

2013,

2014

and

2015,

Ambev has been receiving similar tax assessments with the States of Pará and Piauí. The Company filed a defense for this cases and currently awaits a decision. After the payments to the State of Rio de Janeiro, Ambev management estimates the amount involved in these proceedings to be approximately

R$599.7

million (

R$559.5

million as of

31

December 2016),

classified as possible loss.

ICMS fiscal war

Ambev is currently challenging tax assessments from the States of São Paulo, Rio de Janeiro, Minas Gerais and other States, which question the legality of tax credits arising from existing tax incentives received in other States. Ambev management estimates the possible losses related to these assessments to be approximately

R$1.9

billion (

R$1.8

billion as of

December 31, 2016)

classified as possible loss.

ICMS-ST Trigger

Over the years, Ambev has received tax assessments relating to supposed ICMS differences considered due when the price of the products sold by the company reaches levels close to or above the fixed price table basis established by States. Ambev is currently challenging those charges before Courts

Among other similar cases, in

2016,

Ambev received

three

assessment, issued by the State of Minas Gerais, in the original amount of

R$1.4

billion. In the

second

quarter of

2017,

the Administrative Court of the State Minas Gerais, concluded the judgment of

three

relevant cases, unfavorably to Ambev. Ambev presented defense against such decisions to the Upper House of the Administrative Tax Court of the State of Minas Gerais and awaits for judgement.

In

2017,

Ambev has receive a new tax assessments issued by the State of Rio de Janeiro, about these same issue in the total historical amount of

900

million. The Company filed a defense for this cases and currently awaits a decision of the Administrative Court of the State Rio de Janeiro.

Ambev management estimates the total possible losses related to this issue to be approximately

R$5.8

billion (

R$4.5

billion as of

31

December 2016).

Ambev has recorded provisions in the total amount of

R$6.7

million in relation to the proceedings for which it considers the chances of loss to be probable, considering specific procedural issues.

Manaus Free Trade Zone - IPI

Goods manufactured within the Manaus Free Trade Zone – ZFM intended for consumption elsewhere in Brazil are exempt from the IPI. The units of Ambev have been registering IPI presumed credits upon the acquisition of exempted inputs manufactured therein in the Manaus Free Trade Zone. Since

2009

we have been receiving a number of tax assessments from the RFB relating to the disallowance of such presumed credits, which are under discussion before the Brazilian Supreme Court. Management estimates possible losses in relation to these assessments to be

R$3.2

billion (

R$2.0

billion as of

December 31, 2016).

In addition, over the years, Ambev has received tax assessments from the Brazilian Federal Tax Authorities charging federal taxes considered unduly offset with the disallowed IPI excise tax credits which are under discussion in other proceedings. Ambev is challenging those charges before Courts. Ambev management estimates the possible losses related to these assessments to be approximately

R$900

million (

R$735.5

million as of

31

December 2016).

IPI Excise Tax

In

2014

and

2015,

we received tax assessments from Brazilian Federal Tax Authorities related to IPI exercise tax, supposedly due over remittances of manufactured goods to other related factories. Management estimates the possible losses related to these assessments to be approximately

R$1.5

billion (

R$1.5

billion as of

December 31, 2016).

Civil

Subscription Warrants

Certain holders of warrants issued by Old Ambev in

1996

for exercise in

2003

have filed lawsuits to be able to subscribe the corresponding shares for an amount lower than what the Company considers to have been established at the time of the issuance of the warrants. The warrants object of those

six

proceedings represented, on

December 31,

2017,172.8

million Ambev common shares that would be issued at a value substantially below fair market value, should claimants ultimately prevail. The plaintiffs also claim they should receive past dividends related to these shares in the amount of

R$846.9

million (

R$761.7

million on

December 31, 2016).

The Company believes that the loss of this lawsuit is possible has

not

recorded any provision in connection therewith. In the last quarter of

2017

the Company reassessed and the likelihood of loss is remote of this lawsuits and will

not

be disclosure of the coming interim financial statements.

Lawsuit against Brewers Retail Inc.

On

12

December 2014,

claimants in Canada brought a lawsuit against the Liquor Control Board of Ontario (“LCBO”), Brewers Retail Inc. (“The Beer Store”) and the owners of The Beer Store (Molson Coors Canada, Sleeman Breweries Ltd. and Labatt Breweries of Canada LP). The lawsuit, brought pursuant to the Ontario Class Proceedings Act in the Ontario Superior Court of Justice, seeks a declaration that LCBO and

The Beer Store

agreed with each to allocate sales, territories, customers or markets for the supply of beer sold in Ontario since

June 1, 2000,

and a declaration that the owners of The Beer Store agreed to fix. The claimants are seeking damages

not

exceeding

R$3.7

billion (

R$3,4

billion as of

December 31, 2016),

for all mentioned parts. Considering that The Beer Store operates according to the rules established by the Government of Ontario and that prices at The Beer Store are independently set by each brewer, the Company believes that there are strong defenses and, accordingly, has

not

recorded any provision in connection therewith.

Contingent assets

According to IAS

37,

contingent assets are

not

recorded in consolidated financial statements, except when the realization of income is virtually certain. There was

no

probable contingent assets to be disclosed

on

December 31, 2017.

The Company and its subsidiaries apply for the refund of the PIS and COFINS installments collected with the inclusion of ICMS in their calculation bases for the period from

1990

onwards. The amounts involved in the refund requests are still being determined.

XML

Note 31 - Non-cash Items

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of cash flow statement [text block]

31. NON-CASH ITEMS

The Company carried out the following investment and financing activities

not

involving cash:

	2017		2016		2015
Acquisition of property, plant and equipment		-		-		105.6
Acquisition of investments payables		-		208.7		-
Cash financing cost other than interests		42.3		37.7		1,752.3
PERT 2017		199.7		-		-
Fair value of option granted		221.8		205.1		144.6
Others		-		-		41.1

XML

Note 32 - Related Parties

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of related party [text block]

32. RELATED PARTIES

Policies and practices regarding the realization of transactions with related parties

The Company adopts corporate governance practices and those recommended and/or required by the applicable law.

Under the Company’s by laws the Board of Directors is responsible for approving any transaction or agreements between the Company and/or any of its subsidiaries, directors and/or shareholders (including shareholders, direct or indirect shareholders of the Company). The Antitrust Compliance and Related Parties Committee of the Company is required to advise the Board of Directors of the Company in matters related to transactions with related parties.

Management is prohibited from interfering in any transaction in which conflict exists, even in theory, with the Company interests. It is also

not

permitted to interfere in decisions of any other management member, requiring documentation in the Minutes of Meeting of the Board any decision to abstain from the specific deliberation.

The Company’s guidelines with related parties follow reasonable or commutative terms, similar to those prevailing in the market or under which the Company would contract similar transactions with

third

parties. These are clearly disclosed in the financial statements as reflected in written contracts.

Transactions with management members:

In addition to short-term benefits (primarily salaries), the management members are entitled to participate in Stock Option Plan (Note

24

–

Share-based payments

).

Total expenses related to the Company’s management members are as follows:

	2017		2016		2015
Short-term benefits (i)		33.4		21.7		32.1
Share-based payments (ii)		38.9		36.2		39.0
Total key management remuneration		72.3		57.9		71.1

(i) These correspond substantially to management’s salaries and profit sharing (including performance bonuses).

(ii) These correspond to the compensation cost of stock options and restricted stocks granted to management. These amounts exclude remuneration paid to members of the Fiscal Council.

Excluding the above mentioned plan (Note

24

–

Share-based payments

), the Company

no

longer has any type of transaction with the Management members or pending balances receivable or payable in its balance sheet.

Transactions with the Company's shareholders:

a

) Medical,

dental and other benefits

The Fundação Antonio e Helena Zerrenner Instituição Nacional de Beneficiência (“Fundação Zerrenner) is

one

of Ambev’s shareholders, and at

December 31, 2017

held

10.2%

of total share capital. Fundação Zerrenner is also an independent legal entity whose main goal is to provide Ambev’s employees, both active and retirees, with health care and dental assistance, technical and superior education courses, facilities for assisting elderly people, through direct initiatives or through financial assistance agreements with other entities. On

December 31, 2017

and

2016,

actuarial responsibilities related to the benefits provided directly by Fundação Zerrenner are fully funded by plan assets, held for that purpose, which significantly exceeds the liabilities at these dates. Ambev recognizes the assets (prepaid expenses) of this plan to the extent of amounts from economic benefits available to the Company, arising from reimbursements or future contributions reduction.

The expenses incurred by Fundação Zerrenner in providing these benefits totaled

R$300.1

(

R$266.7

as of

December 31, 2016),

of which

R$264.3

and

R$35.8

related to active employees and retirees respectively (

R$231.9

and

R$34.8

as of

December 31, 2016

related to active employees and retirees respectively).

b) Leasing

The Ambev, through its subsidiary BSA (labeling), has an asset leasing agreement with Fundação Zerrenner, for

R$63,3

for

ten

years, maturing on

March 31, 2018.

c) Leasing – Ambev. head office

Ambev has a leasing agreement of

two

commercial sets with Fundação Zerrenner in the annual amount of

R$3.3,

maturing on

January, 2020.

d) Licensing agreement

The Company maintains a licensing agreement with Anheuser-Busch, Inc., to produce, bottle, sell and distribute Budweiser products in Brazil, Canada, and sales and distribution agreements of Budweiser products in Guatemala, Dominican Republic, Paraguay, El Salvador, Nicaragua, Uruguay and Chile. In addition, the Company produces and distributes Stella Artois products under license to ABI in Brazil and Canada and, by means of a license granted to ABI, it also distributes Brahma’s product in the United States and several countries such as the United Kingdom, Spain, Sweden, Finland and Greece. The amount recorded was

R$1.9

(

R$2.0

on

December 31, 2016

and

R$52.8

on

December 31, 2015)

and

R$314.5

(

R$374.0

on

December 31, 2016

and

R$434.8

on

December 31, 2015)

as licensing income and expense, respectively.

Ambev has licensing agreements with the Group Modelo, subsidiaries of ABI, for to import, promote and sell products Corona (

Corona Extra

,

Corona Light

,

Coronita

,

Pacifico

and

Negra Modelo

) in countries of the Latin America and the Canada.

Transactions with related parties

	2017
Current	Trade receivables (i)		Other Trade receivables (i)		Trade payables (i)			Other Trade payables (i)			Borrowings and interest payable			Dividends payables
AB InBev		1.2		33.6		(363.0	)		(1.7	)		-			-
AB Procurement		8.9		0.1		-			-			-			-
AB Services		0.8		29.1		-			(6.1	)		-			-
AB USA		14.1		16.3		(375.7	)		(8.7	)		-			-
Ambrew		-		-		-			-			-			(89.9	)
Cervecería Modelo		91.6		5.8		(589.3	)		(59.7	)		-			-
Inbev		0.1		23.8		(33.8	)		-			-			-
ITW International		-		-		-			(212.5	)		(48.3	)		(590.9	)
Panamá Holding		-		20.3		-			(4.0	)		-			-
Others		13.9		8.6		(73.8	)		(3.0	)		-			-
		130.6		137.6		(1,435.6	)		(295.7	)		(48.3	)		(680.8	)

(i) The amount represents the grade operations (purchase and sale) and the reimbursement between the companies of the group.

	2016
Current	Trade receivables (i)		Other Trade receivables (i)		Trade payables (i)			Other Trade payables (i)			Borrowings and interest payable			Dividends payables
AB InBev		6.3		13.4		(308.9	)		(0.7	)		-			-
AB Package		-		-		(31.3	)		-			-			-
AB Services		0.3		15.2		-			(3.1	)		-			-
AB USA		19.7		18.6		(247.4	)		(1.7	)		-			-
Ambev Peru		7.1		-		(4.7	)		-			-			-
Ambrew		-		-		-			-			-			(89.9	)
Bogotá Beer		-		211.0		-			(211.0	)		-			-
Cervecería Modelo		1.1		-		(444.1	)		-			-			-
Inbev		0.2		17.6		(17.5	)		(0.2	)		-			-
ITW International		-		-		-			(209.4	)		(30.5	)		(590.9	)
Modelo		-		1.0		(15.7	)		(54.5	)		-			-
Others		2.6		7.3		(6.2	)		(14.4	)		-			-
		37.3		284.1		(1,075.8	)		(495.0	)		(30.5	)		(680.8	)

(i) The amount represents the trade operations (purchase and sale) and the reimbursement between the companies of the group.

The tables below represent the transactions with related parties, recognized in the income statement:

									2017
Company	Buying / Service fees / Rentals			Sales		Royalties			Net finance cost
AB Procurement		(5.8	)		20.8		-			-
AB USA		(258.7	)		42.5		(284.5	)		-
Ambev Peru		(8.6	)		1.5		-			-
Cervecería Modelo		(749.1	)		0.4		(45.8	)		-
Inbev		(73.6	)		-		-			-
Others		(91.1	)		8.1		(35.9	)		(16.8	)
		(1,186.9	)		73.3		(366.2	)		(16.8	)

									2016
Company	Buying / Service fees / Rentals			Sales		Royalties			Net finance cost
AB Package		(32.8	)		-		-			-
AB USA		(206.0	)		52.3		(292.8	)		-
Cervecería Modelo		(596.0	)		2.0		(46.9	)		-
InBev		(77.0	)		-		-			-
ITW International		-			-		-			(26.0	)
Modelo		(63.0	)		-		-			-
SAB Group		(3.5	)		23.5		-			-
Others		(45.6	)		0.3		(32.2	)		-
		(1,023.9	)		78.1		(371.9	)		(26.0	)

						2015
Company	Buying / Service fees / Rentals			Sales		Royalties
AB Inbev		(55.3	)		-		(35.5	)
AB USA		(124.9	)		49.0		(288.1	)
Cervecería Modelo		(257.7	)		1.1		(52.9	)
InBev		(73.3	)		0.1		-
Modelo		(356.9	)		-		-
Others		(74.0	)		0.6		(1.1	)
		(942.1	)		50.8		(377.6	)

Denomination used in the tables above

:

Anheuser-Busch InBev N.V. (“AB InBev”)

Anheuser-Busch Packaging Group Inc. (“AB Package”)

Anheuser-Busch Inbev Services LLC (“AB Services”)

Anheuser-Busch Inbev USA LLC (“AB USA”)

Compañia Cervecera Ambev Peru S.A.C. (“Ambev Peru”)

Ambrew S.A. (“Ambrew”)

Bogotá Beer Company BBC S.A.S. (“Bogotá Beer”)

Cervecería Modelo de Mexico S. de R.L. de C.V. (“Cervecería Modelo”)

Inbev Belgium N.V. (“Inbev”)

Interbrew International B.V. (“ITW International”)

Cervecería Modelo de Guadalajara S.A. (“Modelo”)

Bavaria S.A. (“SAB Group”)

XML

Note 33 - Group Companies

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of subsidiaries [text block]

33. GROUP COMPANIES

Listed below are the main group companies.

Argentina
CERVECERIA Y MALTERIA QUILMES SAICA Y G Charcas 5160 – Buenos Aires	99.75%
Bolívia
CERVECERIA BOLIVIANA NACIONAL S.A. Avenida Montes 400 e Rua Chuquisaca 121 - La Paz	85.67%
Brazil
AMBEV S.A. Rua Dr. Renato Paes de Barros, 1.017, 3º andar, Itaim Bibi, São Paulo	Companhia Consolidadora
AROSUCO AROMAS E SUCOS LTDA. Avenida Buriti, 5.385, Distrito Industrial - Manaus - AM	100.00%
CRBS S.A. Avenida Antarctica, 1.891, Fazenda Santa Úrsula – Jaguariúna – SP	100.00%
CERVEJARIA Z.X. Avenida Antarctica, 1.891, Fazenda Santa Ursula – Jaguariúna - SP	86.42%
Canadá
LABATT BREWING COMPANY LIMITED 207 Queens Quay West, Suite 299 - M5J 1A7 - Toronto	100.00%
Chile
CERVECERIA CHILE S.A. Avenida Presidente Eduardo Frei Montalva, 9.600 - Comuna de Quilicura - Santiago	100.00%
Spain
JALUA SPAIN, S.L. Juan Vara Terán, 14 – Ilhas Canárias	100.00%
Luxembourg
AMBEV LUXEMBOURG 15 Breedewues - L1259 - Sennngerberg	100.00%
Guatemala
INDUSTRIAS DEL ATLÁNTICO, SOCIEDAD ANÓNIMA KM 122 Ruta al Atlantico – C.P 01012 Teculutan, Zacapa	50.00%
Paraguay
CERVECERIA PARAGUAYA S.A. Ruta Villeta KM 30 - Ypané	87.36%
Dominican Republic
CERVECERÍA NACIONAL DOMINICANA, S.A. Autopista 30 de Mayo, Distrito Nacional	55.00%
Uruguay
LINTHAL S.A. 25 de Mayo 444, office 401 - Montevideo	100.00%
CERVECERIA Y MALTERIA PAYSSANDÚ S.A. Rambla Baltasar Brum, 2.933 – 11800 - Payssandu	99.93%
MONTHIERS SOCIEDAD ANÓNIMA Cesar Cortinas, 2.037 - Montevideo	100.00%
Panama
Cervecería Nacional S. de R.L. Planta Pasadena, vía Ricardo J Alfaro y Simón Bolívar, ciudad de Panamá, Rep. De Panamá	100.00%

XML

Note 34 - Insurance

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of insurance contracts [text block]

34. INSURANCE

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

XML

Note 35 - Events After the Reporting Period

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of events after reporting period [text block]

35. EVENTS AFTER THE REPORTING PERIOD

i) In

January 2018,

Ambev S.A., through its subsidiaries Labatt Breweries and Ambev Luxemburgo, acquired

two

new loans totaling approximately

R$2.0

billion, maturing in up to

one

year.

ii) In

January 2018,

Ambev S.A., informed its investors and the market in general that, as per the notice to the market issued as of

December 1

st

,

2017,

concluded the transaction with ELJ, shareholder in Tenedora, owner of almost the totality of CND. As a result of the such transaction, the Company, directly and indirectly, became the owner of approximately

85%

of Tenedora, with ELJ owning the remaining

15%,

as well as the term of exercise of the call option becomes from

January 2019

to

January 2022.

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Discloure of Significant Accounting Policies

Description of accounting policy for functional currency [text block]

(a) Basis of preparation and measurement

The financial statements are presented in

million

of Brazilian Real (“R$”),

unless otherwise indicated, rounded to the nearest million indicated

. The measurement basis used in preparing the financial statements is historical cost, net realizable value, fair value or recoverable amount.

Description of accounting policy for new IFRS releases [text block]

(b) Recently issued IFRS

The reporting standards below were published and are mandatory for future annual reporting periods. Although IFRSs anticipate early adoption, in Brazil, regulators have prevented this anticipation in order to preserve aspects of comparability. Accordingly, for the year ended

December 31, 2017,

these standards were

not

applied in the preparation of these financial statements:

IFRS

9

- Financial Instruments

(effective from annual periods beginning on or after

1

January 2018),

which will replace IAS

39,

introduces a logical approach for the classification of financial assets, which is driven by cash flow characteristics and the business model in which an asset is held; defines a new expected-loss impairment model that will require more effective recognition; and introduces a substantially-reformed model for hedge accounting, with enhanced disclosures about risk management activity. The new hedge accounting model represents a significant overhaul of the policies and aligns the accounting treatment with risk management activities. IFRS

9

also removes the volatility in profit or loss that was caused by changes in the credit risk of liabilities elected to be measured at fair value. The company evaluated the possible impacts arising from the application of IFRS

9

and does

not

identify a significant impact on its financial position and/or its financial performance.

IFRS

15

- Revenue from Contracts with Customers

(effective from annual periods beginning on or after

1

January 2018)

requires revenue recognition to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the Company expects to be entitled in exchange for those goods or services. The new standard will also result in more and enhanced disclosures about revenue, provide guidance for transactions that were

not

previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. In view of the Ambev’s activities, the company does

not

identify that the application of IFRS

15

will have a significant impact on its financial position and/or its financial performance.

IFRS

16

– Leases

(effective from annual periods beginning on or after

1

January 2019)

replaces the existing lease accounting requirements and represents a significant change in the accounting and reporting of leases that were previously classified as operating leases, with more assets and liabilities to be reported on the balance sheet and a different recognition of lease costs.

The company is in process of assessing the full impact of IFRS

16

and expects changes in the presentation of operating leases in the balance sheet.

Other Standards, Interpretations and Amendments to Standards

The other amendments to standards effective for annual periods beginning after

1

 

January 2017,

have

not

been listed above because of either their non-applicability to or their immateriality to Ambev’s consolidated financial statements.

Description of accounting policy for the basis of consolidation [text block]

(c) Consolidated financial statements

The financial statements of subsidiaries, joint arrangements and associates used in its consolidated financial statements are prepared for the same reporting period as Ambev, using consistent accounting policies.

All intercompany transactions, balances and unrealized gains or losses on transactions between group companies have been eliminated.

Subsidiaries

The Company controls an entity when it is exposed to or has rights to variable returns due to its involvement with the organization and is able to affect those returns through its power over the entity. In assessing control, potential voting rights are taken into account. Control is presumed to exist where the Company owns, directly or indirectly, more than

one

half of the voting rights (which does

not

always equate to economic ownership), unless it can be demonstrated that such ownership does

not

constitute control.

Subsidiaries are consolidated as from the date in which control is obtained to the Company, except when the predecessor basis of accounting is applied for common control transfers. Consolidation is discontinued as from the date control ceases.

Ambev uses the purchase method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interest issued by Ambev. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement, when applicable. Costs related to the acquisition are recognized in income, as incurred. Assets, liabilities and contingent liabilities acquired/assumed in a business combination are recognized initially at their fair values at the acquisition date. Ambev recognizes the non-controlling interest in the acquiree, either at fair value or at the non-controlling interest’s proportionate share of the net assets acquired. The measurement of non-controlling interest to be recognized is determined for each acquisition.

The excess: (i) of the consideration paid; (ii) of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired, at the date of acquisition, is recorded as goodwill. When the consideration transferred is less than the fair value of net assets acquired, the difference is recognized directly in income.

All intercompany transactions, balances and unrealized gains and losses on transactions between group companies have been eliminated. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is

no

evidence of impairment.

Joint arrangements

Joint arrangements are all entities over which the Company shares control with

one

or more parties. Joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor.

Business combination between entities under common control

Business combinations between entities under common control have

not

been addressed by IFRS’s. The IFRS

3

is the pronouncement that shall be applied to business combinations, however it explicitly excludes business combinations between entities under common control from its scope.

Therefore, in accordance with IAS

8,

Management has adopted an accounting practice which is consistent with United States Generally Accepted Accounting Principles (USGAAP) and United Kingdom Generally Accepted Accounting Principles (UKGAAP), the predecessor basis of accounting to record the carrying amount of the asset received, as recorded by the parent company.

Under the predecessor basis of accounting, when accounting for a transfer of assets or a swap of shares between entities under common control, the entity that receives the net assets or the equity interests (the acquirer) shall initially record the assets and liabilities transferred at their parent book value at the transfer date. If the book value of assets and liabilities transferred by the parent are different from the historical cost registered by the controlling entity of the entities under common control (the ultimate parent), the financial statements of the acquirer shall reflect the assets and liabilities transferred at the same cost of the ultimate parent.

Regarding transactions between entities under common control that involve the disposal or transfer of assets from the subsidiary to its parent company, i.e. - above the level of our consolidated financial statement –, the Company assess the existence of (i) conflict of interests and (ii) economic substance and purpose. Having fulfilled these assumptions, the Company adopted as a policy the concepts of IAS

16

in order to provide adequate visibility and fair impact on the amount of the distributable results to our shareholders, specially the non-controlling interests. This policy also includes assets acquired through the swap of non-cash assets, or swap with a combination of cash and non-cash assets. The assets subject to the swap

may

be of equal or different nature. The cost of such asset is measured at fair value, unless (i) the swap transaction is

not

commercial in nature, or (ii) the fair value of the asset received (and the asset assigned) cannot be reliably measured. The acquired asset is measured through this way even if the assignor entity cannot immediately exclude the asset from its books. If the acquired asset is

not

measurable at fair value, its cost is determined by the book value of the assigned asset.

Whenever there is a distribution of assets that is

not

recorded as cash, the asset, before its distribution, is registered at fair value in the income account. This procedure is applicable to the distributions in which the assets are equal in nature and therefore treated equitably. However, similarly to IFRIC

17,

in the absence of a specific accounting practice for transactions under common control, we apply this procedure in our accounting practice. Also, we apply the same procedure to sales (products, supplies, etc.) we perform to our controlling entity, where the positive result of the sale is recognized in the income account.

Description of accounting policy for foreign currency translation [text block]

(d) Foreign currency translation

Functional and presentation currency

The items included in the financial statements of each subsidiary of the Company are measured using the currency of the primary economic environment in which the entity operates (“functional currency”).

The functional and presentation currency of the Company financial statements is the Brazilian Real.

Transactions and balances

Foreign currency transactions are accounted for at exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the balance sheet date rate. Non-monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated at exchange rates ruling at the dates the fair value was determined. Gains and losses arising from the settlement of transactions in foreign currencies and resulting from the conversion of assets and liabilities denominated in foreign currencies are recognized in the income statement.

The foreign exchange gains and losses related to loans and cash and cash equivalents are presented in the income statement as finance cost or finance income.

Conversion of the financial statements of subsidiaries located abroad

Assets and liabilities of subsidiaries located abroad are translated at foreign exchange rates prevailing at the balance sheet date, while amounts from income statement and cash flows are translated at average exchange rates for the year and the changes in equity are translated at historical exchange rates of each transaction. The translation adjustments arising from the difference between the average exchange rates and the historical rates are recorded directly in Carrying value adjustments.

On consolidation, exchange differences arising from translation of equity in foreign operations and borrowings and other currency instruments designated as net investment hedges are recognized in Carrying value adjustments, an equity reserve, and included in Other comprehensive income.

The goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Net investment in a foreign operation

An entity

may

have a monetary item that is receivable from or payable to a foreign operation which settlement is neither planned nor likely to occur in the foreseeable future and do

not

include trade receivables or trade payables. Exchange differences arising shall be recognized initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment.

Exchange rates

The most significant exchange rates used in the preparation of the Company’s financial statements are as follows:

			Closing rate						Average rate
Currency	Name	Country	2017		2016		2015		2017		2016		2015
CAD	Canadian Dollars	Canada and Cuba		2.6380		2.4214		2.8124		2.4567		2.6348		2.5661
DOP	Dominican Pesos	Dominican republic		0.0685		0.0700		0.0860		0.0674		0.0755		0.0725
USD	US Dollar	Ecuador (i) , Panamá and Cuba (ii)		3.3080		3.2591		3.9048		3.2017		3.4749		3.2596
GTQ	Quetzal	Guatemala		0.4500		0.4343		0.5129		0.4344		0.4570		0.4265
PEN	Novo Sol	Peru (i)		-		0.9720		1.1440		-		1.0269		1.0396
ARS	Argentinean Peso	Argentina		0.1762		0.2056		0.3003		0.1931		0.2354		0.3581
BOB	Bolivian Peso	Bolivia		0.4753		0.4683		0.5610		0.4600		0.4993		0.4683
PYG	Guarani	Paraguai		0.0006		0.0006		0.0007		0.0006		0.0006		0.0006
UYU	Uruguayan Peso	Uruguay		0.1151		0.1114		0.1304		0.1116		0.1166		0.1197
CLP	Chilean Peso	Chile		0.0054		0.0049		0.0055		0.0049		0.0051		0.0050
COP	Peso colombiano	Colômbia (i)		-		0.0011		0.0012		-		0.0011		0.0012
BBD	Barbadian Dollar	Barbados		1.6307		1.6075		-		1.5783		1.7139		-

(i) Until

December 31, 2016,

due to exchange of shareholdings

,

according the Note

1

-

Corporate information

.

(ii) The functional currency of Cuba, the Cuban convertible peso (“CUC”), has a fixed parity with the dollar (“USD”) at balance sheet date.

Description of accounting policy for segment reporting [text block]

(e) Segment reporting

Reportable segments are identified based on internal reports regularly reviewed by the chief operating decision maker of the Company for purposes of evaluating the performance of each segment and allocating resources to those segments. Accordingly, segment information is presented on geographical areas, since the risks and rates of return are affected predominantly by the fact that the Company operates in different regions. The Company’s management structure and the information reported to the chief decision are structured the same way.

The performance information by business units (Beer and Soft drink (“CSD”) and Non-alcoholic and non-carbonated (“NANC”)), is also used by the decision maker for the Company and is presented as additional information, even though it does

not

qualify as a reportable segment. Internally, the Company’s management uses performance indicators, such as earnings of consolidated operation before interest and taxes (EBIT) and normalized earnings of consolidated operation before interest, taxes, depreciation and amortization (normalized EBITDA) as measures of segment performance to make decisions about resource allocation and performance analysis of consolidated operation. These indicators are reconciled to the profit of the segment in the tables on Note

5

– Segment reporting

.

The Company operates its business through

three

zones identified as reportable segments:

▪ Latin America North, which includes our operations (a) in Brazil and Luxembourg, where we operate

two

business sub units: (i) beer and (ii) CSD and NANC; and (b) in Central America Operations (“CAC”), which includes our operations in the Dominican Republic (which also serves the islands of the Caribbean: Saint Vincent, Dominica, Antigua and Barbados), Guatemala (which also serves El Salvador and Nicaragua), Cuba and Panama;

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

▪ Canada, represented by Labatt’s operations.

Description of accounting policy for recognition of revenue [text block]

(f) Revenue recognition

The Company recognizes revenue when the amount of revenue can be measured reliably and it is probable that economic benefits associated with the transaction will flow to the Company.

Revenue comprises the fair value of the amount received or receivable upon selling products or rendering services in the ordinary course of business. Revenue is presented net of taxes, returns, rebates and discounts, as well as net of elimination of sales between group companies.

Goods sold

In relation to the sale of goods, revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, and

no

significant uncertainties remain regarding recovery of the consideration due, the costs associated with the possible return of the products, and when there is

no

continuing management involvement with the goods. Revenue from the sale of goods is measured at the fair value of the consideration (price) received or receivable, net of returns, commercial deductions and discounts.

As part of its commercial policy, the Company provides unconditional discounts to its customers, which are recorded as s deductions at the time of sales.

Finance income

Finance income consists of interest received or receivable on funds invested, foreign exchange gains, gains on currency hedging instruments offsetting currency losses, gains on hedging instruments that are

not

part of a hedge accounting relationship, gains on financial assets classified as held for trading, as well as any gains from hedge ineffectiveness.

Interest income is recognized on an accrual basis unless collectability is in doubt.

Description of accounting policy for expenses [text block]

(g) Expenses

Royalty expenses

Royalties are classified as cost of goods sold.

Finance costs

Finance costs comprise interest payable on borrowings, calculated using the effective interest rate method, foreign exchange losses, losses on currency hedging instruments offsetting currency gains, results on interest rate hedging instruments, losses on hedging instruments that are

not

part of a hedge accounting relationship, losses on financial assets classified as held for trading, impairment losses on financial assets classified as available for sale, as well as any losses from hedge ineffectiveness.

All interest costs incurred in connection with borrowings or financial transactions are expensed as incurred as part of finance costs, except when capitalized. Any difference between the initial amount and the maturity amount of interest bearing loans and borrowings, such as transaction costs and fair value adjustments, are recognized in the income statement over the expected life of the instrument on an effective interest rate method. The interest expense component of finance lease payments is also recognized in the income statement using the effective interest rate method.

Description of accounting policy for exceptional items [text block]

(h) Exceptional items

Exceptional items are those that in Management’s judgment need to be disclosed separately by virtue of their size or incidence. In determining whether an event or transaction is special, Management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence, and the potential of impact on the variation of profit or loss. These items are disclosed in the income statement or separately disclosed in the notes to the financial statements. Transactions that

may

give rise to exceptional items are principally restructuring activities, acquisition of subsidiaries, impairment losses, and gains or losses on disposal of assets and investments.

Description of accounting policy for income tax [text block]

(i) Income tax and social contribution

Income tax and social contribution for the year comprises current tax and deferred tax. Income tax and social contribution are recognized in the income statement, unless they relate to items recognized directly in comprehensive income or other equity accounts. In these cases the tax effect is also recognized directly in comprehensive income or equity account (except interest on shareholder’s equity. See Note

3

(p)).

The current tax expense is the expectation of payment on the taxable income for the year, using tax rates enacted, or substantially enacted, at the balance sheet date, and any adjustment to tax payable in respect of previous years.

The deferred taxes are recognized using the balance sheet liability approach. This means that a deferred tax liability or asset is recognized for all taxable and tax deductible temporary differences between the tax and accounting basis of assets and liabilities. Under this method, a provision for deferred taxes is also calculated on the differences between the fair value of assets and liabilities acquired in a business combination and their tax basis. IAS

12

prescribes that

no

deferred tax liability on goodwill recognition, and

no

deferred tax asset/liability is recorded: (i) at the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss; and (ii) on differences related to investments in subsidiaries to the extent that they are

not

reversed in the foreseeable future. The amount of deferred tax provided is based on the expectation of the realization or settlement of the temporary difference, using currently or substantially enacted tax rates.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously.

The deferred tax asset is recognized only to the extent that it is likely that future taxable profits will be available. The deferred income tax asset is reduced to the extent that it is

no

longer probable that the future taxable benefit will occur.

Description of accounting policy for property, plant and equipment [text block]

(j) Property, plant and equipment

Property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. The cost includes the purchase price, borrowing cost incurred during the construction period and any other costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management (e.g. nonrefundable tax, transport and the costs of dismantling and removal and site restoration, if applicable). The cost of a self-constructed asset is determined using the same principles as for an acquired asset. The depreciation methods, residual value, as well as the useful lives are reassessed and adjusted if appropriate, annually.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalized as part of the cost of such assets.

Land is

not

depreciated since it is deemed to have an indefinite life.

Property, plant and equipment, and depreciation include the effects of the predecessor basis of accounting, according the Note

1

-

Corporate information

.

Subsequent expenditures

The Company recognizes in the carrying amount of an item of property, plant and equipment the cost of replacing a component of such an item if it is probable that the future economic benefits embodied with the item will flow to the Company and the cost of the item can be measured reliably. All other costs are expensed as incurred.

Depreciation

The depreciable amount is the cost of an asset less its residual value. Residual values, if

not

insignificant, are reassessed annually. Depreciation is calculated from the date the asset is available for use, using the straight-line method over the estimated useful lives of the assets.

The estimated useful lives of major property, plant and equipment classes as follows:

Buildings (years)		25
Plant and equipment (years)		15
Fixtures (years)		10
Fittings (years)		10
External use assets (years)	2	-	5

The assets residual values and useful lives are reviewed at least annually. Management uses judgment to assess and ascertain the useful lives of these assets.

Gains and losses on sale

Gains and losses on sales are determined by comparing the results with the carrying amount and are recognized in Other operating income/(expenses) in the income statement.

Description of accounting policy for goodwill [text block]

(k) Goodwill

Goodwill arises on the acquisition of subsidiaries, associates and joint arrangements.

Goodwill is determined as the excess (i) of the consideration paid; (ii) of the amount of any non-controlling interests in the acquiree (when applicable); and (iii) of the fair value, at acquisition date, of any previous equity interest in the acquiree, over the fair value of the net identifiable assets acquired at the date of acquisition. All business combinations are accounted for by applying the purchase method.

In conformity with IFRS

3

Business Combinations

, goodwill is carried at cost and is

not

amortized, but tested for impairment at least annually, or whenever there are indications that the cash generating unit to which the goodwill has been allocated

may

be impaired. Impairment losses recognized on goodwill are

not

reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is expressed in the functional currency of the subsidiary or joint operation to which it relates and translated to

Reais

using the year-end exchange rate.

Regarding associates and joint ventures, goodwill is included in the carrying amount of the investment in the associate/joint ventures.

If the Company’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized exceeds the cost of the business combination such excess is recognized immediately in the income statement.

Expenditure on internally generated goodwill is expensed as incurred.

Goodwill includes the effects of the predecessor basis of accounting (Note

3

(c)).

Description of accounting policy for intangible assets other than goodwill [text block]

(l) Intangible assets

Brands

When part of the consideration paid in a business combination is related to brands, these are recognized in a specific Intangible Assets account and measured at fair value at the acquisition date. Subsequently, the value of brands can be reduced in case of impairment losses. Internally generated expenditures for developing a brand are recognized as expenses.

Software

Purchased software is measured at cost less accumulated amortization.

Amortization related to software is included in cost of sales, distribution and sales expenses, marketing expenses or administrative expenses based on the activity the software supports.

Other intangible assets

Other intangible assets, acquired by the Company, are stated at acquisition cost less accumulated amortization and impairment losses.

Other intangible assets also include multi-year sponsorship rights acquired by the Company. These are initially recognized at the present value of the future payments and subsequently measured at cost less accumulated amortization and impairment losses.

Amortization

Intangible assets with definite useful lives are amortized based on the straight-line method over their estimated useful lives. Licenses, supply and distribution rights are amortized over the period in which the rights exist. Brands are considered to have an indefinite life and, therefore, are

not

amortized. Software and capitalized development cost related to technology are amortized over

3

to

5

years.

Items that are

not

amortized are tested for impairment on an annual basis.

Description of accounting policy for measuring inventories [text block]

(m) Inventories

Inventories are initially recorded at the acquisition cost and subsequent valued at the lower of cost and net realizable value. Cost includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. The weighted average method is used in determining the cost of inventories.

The cost of finished products and work in progress comprises raw materials, other production materials, direct labor, other direct costs, gains and losses with derivative financial instruments, and an allocation of fixed and variable overhead based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the cost for bringing inventories to sales conditions and selling costs.

Inventories have their amount reduced on a case-by-case basis if the anticipated net realizable value declines below its carrying amount. The calculation of the net realizable value takes into consideration specific characteristics of each inventory category, such as expiration date, remaining shelf life, slow-moving indicators, amongst others.

Description of accounting policy for trade and other receivables [text block]

(n) Trade receivables

Accounts receivable are initially recognized at fair value and subsequently at amortized cost, less provision for losses on doubtful accounts. An allowance for impairment of trade receivables is established when there is objective evidence that the Company will

not

be able to collect all amounts due according to the original terms of the receivables. An allowance for impairment loss is recorded for an amount considered sufficient by management to cover probable losses upon the realization of receivables. The amount of the allowance is the difference between the asset’s carrying amount and the present value of the estimated future cash flows. The allowance for impairment loss is recognized in the income statement, as are subsequent recoveries of previous impairments. Historically,

no

significant losses in trade receivables have been experienced.

Description of accounting policy for determining components of cash and cash equivalents [text block]

(o) Cash and cash equivalents

Cash and cash equivalents include all cash balances, bank deposits, and short-term highly liquid investments with original maturities of

three

months or less with insignificant risks of changes in value,

and

readily convertible into cash. They are stated at face value, which approximates their fair value.

For the purpose of the cash flow statement, cash and cash equivalents are presented net of bank overdrafts, when applicable.

Description of accounting policy for issued capital [text block]

(p) Equity

Issued capital

The Company's issued capital consists only of common shares.

Repurchase of shares

When the Company buys back its own shares, the amount paid, including any additional costs directly attributable is recognized as a deduction from equity attributable to shareholders, in “Treasury shares” line item.

Share issuance costs

Incremental costs directly attributable to the issuance of new shares or options are presented in equity as a deduction, net of tax, from the proceeds.

Dividends and Interest on shareholder’s equity

Dividends and interest on shareholder’s equity are recognized in the liability on the date that are approved on Board of Directors Meeting, except the minimum statutory dividends provided by the Company’s bylaws, that are recognized as a liability when applicable, at the end of each fiscal year.

The expense of interest attributable to capital to shareholders is recognized in income for calculation of Brazilian income and social contribution tax and after are reclassified from shareholders' equity for presentation purposes in financial statements.

Description of accounting policy for borrowings [text block]

(q) Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing loans and borrowings are stated at amortized cost with any difference between the initial and maturity amount being recognized in the income statement over the expected life of the instrument on an effective interest rate basis. The Company has interest-bearing loans and borrowings covered by a hedge structure (Note

22

–

Interest-bearing loans and borrowings

).

Borrowing costs directly related to the acquisition, construction or production of a qualifying asset, that requires a substantial period of time to get ready for its intended use or sale, are capitalized as part of the cost of that asset when it is probable that future economic benefits associated with the item will flow to the Company and costs can be measured reliably. The other borrowing costs are recognized as finance costs in the period in which they are incurred.

Description of accounting policy for employee benefits [text block]

(r) Employee benefits

Post-employment benefits

Post-employment benefits include pensions managed in Brazil by Instituto Ambev de Previdência Privada – IAPP, post-employment dental benefits and post-employment medical benefits managed by Fundação Zerrenner. Usually, pension plans are funded by payments made by both the Company and its employees, taking into account the recommendations of independent actuaries. Post-employment dental benefits and post-employment medical benefits are maintained by the return on Fundação Zerrenner’s plan assets. If necessary, the Company

may

contribute some of its profit to the Fundação Zerrenner.

The Company manages defined benefit and defined contribution plans for employees of its companies located in Brazil and in its subsidiaries located in Dominican Republic, Panama, Uruguai, Bolivia and Canada.

The Company maintains funded and unfunded plans.

r.1

) Defined contribution plans

A defined contribution plan is a pension plan under which the Company pays fixed contributions into a fund. The Company has

no

legal or constructive obligations to pay further contributions if the fund does

not

hold sufficient assets to pay all employees for the benefits relating to employee service in the current and prior periods.

The contributions of these plans are recognized as expense in the period they are incurred.

r.2

) Defined benefit plans

Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on

one

or more factors such as age, years of service and compensation.

For defined benefit plans, expenses are assessed separately for each plan using the projected credit unit method. The projected credit unit method takes into account each period of service as giving rise to an additional unit of benefit to measure each unit separately. Under this method, the cost of providing pensions is charged to the income statement during the period of service of the employee. The amounts charged to the income statement consist of current service cost, interest cost, past service costs and the effect of any settlements and curtailments. The obligations of the plan recognized in the balance sheet are measured at the present value of the estimated future cash outflows using a discount rate equivalent to the government´s bond rates with maturity terms similar to those of the obligation and the fair value of the plan assets.

Past service costs result from the introduction of a new plan or changes to an existing plan. They are recognized immediately in the income statement, at the earlier of when: (i) the settlements / curtailments occurs, or (ii) the Company recognizes related restructuring or termination costs, unless those changes are conditioned to the employee’s continued employment, for a specific period of time (the period in which the right is acquired). In such case, the past services costs are amortized using the straight-line method during the period in which the right was acquired.

Actuarial gains and losses consist of the effects of differences between the previous actuarial assumptions and what has actually occurred, and the effects of changes in actuarial assumptions. Actuarial gains and losses are fully recognized in Carrying value adjustments.

Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling and the return on plan assets, both excluding net interest, are recognized in full in the period in which they occur in the statement of comprehensive income. Re-measurements are

not

reclassified to profit or loss in subsequent periods.

When the amount of the defined benefit obligation is negative (an asset), the Company recognizes those assets (prepaid expenses), to the extent of the value of the economic benefit available to the Company either from refunds or reductions in future contributions.

Other post-employment obligations

The Company and its subsidiaries provide post-employment medical benefits, reimbursement of medication expenses and other benefits to certain retirees through Fundação Zerrenner. These benefits are

not

granted to new retirees. The expected costs of these benefits are recognized over the period of employment, using an accounting methodology similar to that for defined benefit plans, including actuarial gains and losses.

Termination benefits

Termination benefits are recognized as an expense at the earlier of: (i) when the Company is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date, and (ii) when the Company recognizes costs for a restructuring.

Bonuses

Bonuses granted to employees and managers are based on pre-defined company and individual target achievement. The estimated amount of the bonus is recognized as an expense in the period the bonus is earned.

Description of accounting policy for share-based payment transactions [text block]

(s) Share-based payments

Different share and share option programs allow management and other members appointed by the Board of Directors to acquire shares of the Company. The fair value of the share options is estimated at grant date, using an option pricing model that is most appropriate for the respective option. Based on the expected number of options that will be exercised, the fair value of the options granted is recognized as an expense over the vesting period with a credit to equity. When the options are exercised, equity is increased by the amount of the proceeds received.

Description of accounting policy for trade and other payables [text block]

(t) Trade payables

Trade payables are recognized initially at fair value and subsequently at amortized cost using the effective interest method.

Description of accounting policy for provisions [text block]

(u) Provisions

Provisions are recognized when: (i) the Company has a present obligation (legal or constructive) as a result of past events; (ii) it is likely that a future disbursement will be required to settle the current obligation; and (iii) a reliable estimate of the amount of the obligation can be made.

Provisions, except for the mentioned on item disputes and litigation, are determined discounting the expected future cash flows, to a pre-tax rate, that reflects the current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase accruals are recognized as finance expense.

Restructuring

A provision for restructuring is recognized when the Company has approved a detailed restructuring plan, and the restructuring has either commenced or has been announced. Costs relating to the ongoing and future activities of the Company are

not

provided for, but recognized when expenses are incurred.. The provision includes the benefit commitments in connection with early retirement and redundancy schemes.

Disputes and Litigations

A provision for disputes and litigation is recognized when it is more likely than

not

that the Company will be required to make future payments as a result of past events. Such items

may

include but are

not

limited to, several claims, suits and actions filed by or against the Company relating to antitrusts laws, violations of distribution and license agreements, environmental matters, employment-related disputes, claims from tax authorities, and other litigation matters..

Description of accounting policy for financial instruments [text block]

(v) Financial assets and liabilities

Classification

The Company classifies its financial assets and liabilities in the following categories: (

1

) at fair value through profit or loss, (

2

) loans and receivables, (

3

) held to maturity and (

4

) available for sale. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial assets at initial recognition.

1

) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit or loss are financial instruments held for trading. A financial asset is classified in this category if acquired principally for the purpose of being sold in the short term. Derivatives are also categorized as held for trading unless they are designated as hedges.

In general, financial instruments of this category are classified as short-term investments securities, on current assets. Investments with maturities beyond

one

year

may

be classified as short-term based on Management's intent and ability to withdraw them within less than

one

year, as well as, considering their highly liquid nature and the fact that they represent cash available to fund current operations.

2

) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are

not

quoted in an active market. They are included in current assets, except for maturities greater than

12

months after the end of the reporting period (these are classified as non-current assets).

3

) Investments held to maturity

Investments held to maturity are financial assets acquired with the intention and financial ability to hold them in the portfolio until maturity.

4

) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets

not

classified in any other category. Available-for-sale financial assets are classified as non-current assets, unless Management intends to dispose of the investment within

12

months of the end of the reporting period.

Investments in debt and equity securities are classified in this category. Equity instruments are undertakings in which the Company does

not

have significant influence or control.

Recognition and measurement

Purchases and sales of financial assets and liabilities are recognized on the trade date - the date on which the Company undertakes to buy or sell the asset.

Financial assets and liabilities are realized when the rights to receive cash flows from investments have expired or have been transferred, in this case, when the Company has transferred substantially all risks and benefits of ownership.

1

) Financial assets and liabilities at fair value through profit or loss

Financial assets and liabilities at fair value through profit and loss are initially recognized at fair value and transaction costs are charged to the income statement. Subsequently, they are carried at fair value. Gains or losses arising from changes in the fair value of financial instruments at fair value through profit or loss are presented in the income statement in the period in which they arise.

2

) Loans and receivables

Loans and receivables are carried at amortized cost using the effective interest rate.

3

) Investments held to maturity

Investments held to maturity are initially recognized at fair value plus any directly attributable transaction costs. After initial recognition, investments held to maturity are measured at amortized cost using the effective interest method, reduced by any on loss impairment.

4

) Available-for-sale financial assets

Available-for-sale financial assets are initially measured at fair value. Interest and inflation monetary adjustments are recognized in income. Subsequently, available-for-sale financial assets are measured at fair value, with changes in fair value recognized in other comprehensive income, and interests (measured using the effective interest rate method), recognized in income statement.

When available-for-sale financial assets are settled or become impaired, the accumulated fair value adjustments recognized in other comprehensive income are included in the income statement.

The fair values of investments with public quotations are based on current bid prices. If the market for a financial asset (and for unlisted securities on the stock exchange) is

not

active, the Company establishes fair value by using valuation techniques. These techniques include the use of recent transactions with

third

parties, reference to other instruments that are substantially similar, analysis of discounted cash flows and option pricing models making maximum use of information from the market and with the least possible information generated by the Company's management.

Impairment of financial assets

Management assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. If any such indication exists, the asset’s recoverable amount is estimated. A financial asset or a group of financial assets is impaired and an impairment loss is recorded only if there is objective evidence of impairment as a result of

one

or more events that occurred after the initial recognition of the asset (“loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount presented in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously.

Description of accounting policy for impairment of non-financial assets [text block]

(w) Impairment of non-financial assets

The carrying amounts of non-financial assets, such as property, plant and equipment, goodwill and intangible assets are reviewed, at least, at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

Goodwill, intangible assets that are

not

yet available for use and intangibles with an indefinite useful life are tested for impairment at least annually at the business unit level (which is

one

level below the reportable segment) or whenever there is any indication of impairment.

An impairment loss is recognized whenever the carrying amount of an asset or the related cash-generating unit exceeds its recoverable amount. Impairment losses are recognized in the income statement. Intangible assets with an indefinite useful life are tested on a fair value approach applying multiples that reflect current market transactions to indicators that drive the profitability of the asset or the royalty stream that could be obtained from licensing the intangible asset to another party in an arm’s length transaction.

The recoverable amount of other assets is determined as the higher of their fair value less costs to sell and value in use. For an asset that does

not

generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. The recoverable amount of the cash-generating units to which the goodwill and the intangible assets with indefinite useful life belong is based on a discounted free cash flow approach, using a discount rate that reflects current valuation models of the time value of money and the risks specific to the asset. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate before taxes that reflects current market assessments of the time value of money and the risks specific to the asset.

Non-financial assets, except by goodwill are reviewed for possible reversal of the impairment at the reporting date. Impairment losses are reversed only to the extent that the asset’s carrying amount does

not

exceed the carrying amount that would have been determined, net of depreciation or amortization, if

no

impairment loss had been recognized.

Description of accounting policy for derivative financial instruments [text block]

( x ) Derivative financial instruments

The Company uses derivative financial instruments in order to mitigate against risks related to foreign currency, interest rates and commodity prices. Derivative financial instruments that, although contracted for hedging purposes, do

not

meet all hedge accounting criteria are recognized at fair value in the income statement.

Derivative financial instruments are recognized initially at fair value. Fair value is the amount an asset could be realized and a liability settled, between knowledgeable parties, in an arm’s length transaction. The fair value of derivative financial instruments

may

be obtained from quoted market prices or from pricing models that take into account current market rates, and also credit risk quality of the counterpart.

Subsequent to initial recognition, derivative financial instruments are re-measured to their fair value at the balance sheet date. Changes in fair value of derivative financial instruments are recognized in the income statement, except when they are designated as hedge instruments, when any effective portion of gain or loss is recognized directly in other comprehensive income.

Cash flow, net investment or fair value hedge accounting is applied to all hedges that qualify for hedge accounting under IAS

39,

including the required hedge documentation and hedge effectiveness tests.

Cash flow hedge accounting

When a derivative financial instrument hedges the variability in cash flows of a recognized asset or liability, the foreign currency risk and the fluctuation of commodity prices associated with a highly probable forecasted transaction, the effective portion of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (cash flow hedging reserve). The ineffective portion of any resulting gain or loss is recognized in the income statement.

When a hedging instrument or hedge relationship is terminated but the hedged transaction is still expected to occur, the cumulative gain or loss (at that point) remains in other comprehensive income and is reclassified in accordance with the above policy when the hedged transaction occurs. If the hedged transaction is

no

longer probable, the cumulative gain or loss recognized in other comprehensive income is recycled into the income statement immediately.

Fair value hedge accounting

When a derivative financial instrument hedges the variability in fair value of a recognized asset or liability or a firm commitment, any resulting gain or loss on the hedging instrument is recognized in the income statement. The hedged item is also stated at fair value in respect of the risk being hedged, with any gain or loss being recognized in the income statement. The Company does

not

apply the fair value hedge accounting when the hedge item expires, was sold or exercised.

Net investment hedge accounting

When a derivative financial instrument hedges the net investment in foreign operations, the effective part of any resulting gain or loss on the derivative financial instrument is recognized directly in other comprehensive income (translation reserve) , while any gains or losses relating to the ineffective portion are recognized in the income statement

On disposal of a foreign operation, the cumulative gains or losses recognized directly in other comprehensive income is transferred to the income statement.

Derivative financial instruments at fair value through profit or loss

Certain derivative financial instruments do

not

qualify for hedge accounting purposes. Changes in fair value of such derivatives financial instruments are immediately recognized in income statement.

Description of accounting policy for leases [text block]

(y) Accounting for operating leases

Leases of assets under which all the risks and rewards of ownership are substantially retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the term of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place.

Description of accounting policy for government grants [text block]

(z) Government grants

The Company has benefits from Brazilian state tax incentive programs to promote industrial development including the deferral of payment of taxes. These State programs are to promote long-term increases in employment, industrial decentralization, as well as complement and diversify the industrial states.

In the case of these States, the tax terms are foreseen in tax law. When conditions to obtain these grants exist, they are under the Company's control. The benefits for the postponement in the payment of such taxes are recorded in the income statement, on an accrual basis.

The interest rates and (or) terms of these loans are advantageous over the market conditions, such financing are considered as subsidized loans as determined by IAS

20.

The referred subsidy consists of the gain earned when comparing the value of these operations in market to the value agreed in contract. Thereby, upon funding the subsidy calculated is recorded in Other operating income, following the treatment for the other ICMS subsidies. Management reviews annually the market conditions prevailing in the year to assess such subsidies.

Monthly, taking into account the value of the consideration, the period to maturity, the financing contract interest rate and the above mentioned discount rate, the reduction in present value adjustment is allocated to financial income, so as to bring the balance to

zero

by the time of settlement of each consideration.

XML

Note 3 - Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of effect of changes in foreign exchange rates [text block]

			Closing rate						Average rate
Currency	Name	Country	2017		2016		2015		2017		2016		2015
CAD	Canadian Dollars	Canada and Cuba		2.6380		2.4214		2.8124		2.4567		2.6348		2.5661
DOP	Dominican Pesos	Dominican republic		0.0685		0.0700		0.0860		0.0674		0.0755		0.0725
USD	US Dollar	Ecuador (i) , Panamá and Cuba (ii)		3.3080		3.2591		3.9048		3.2017		3.4749		3.2596
GTQ	Quetzal	Guatemala		0.4500		0.4343		0.5129		0.4344		0.4570		0.4265
PEN	Novo Sol	Peru (i)		-		0.9720		1.1440		-		1.0269		1.0396
ARS	Argentinean Peso	Argentina		0.1762		0.2056		0.3003		0.1931		0.2354		0.3581
BOB	Bolivian Peso	Bolivia		0.4753		0.4683		0.5610		0.4600		0.4993		0.4683
PYG	Guarani	Paraguai		0.0006		0.0006		0.0007		0.0006		0.0006		0.0006
UYU	Uruguayan Peso	Uruguay		0.1151		0.1114		0.1304		0.1116		0.1166		0.1197
CLP	Chilean Peso	Chile		0.0054		0.0049		0.0055		0.0049		0.0051		0.0050
COP	Peso colombiano	Colômbia (i)		-		0.0011		0.0012		-		0.0011		0.0012
BBD	Barbadian Dollar	Barbados		1.6307		1.6075		-		1.5783		1.7139		-

Disclosure of estimated useful lives of major property, plant and equipment classes [text block]

Buildings (years)		25
Plant and equipment (years)		15
Fixtures (years)		10
Fittings (years)		10
External use assets (years)	2	-	5

XML

Note 5 - Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of reportable segments [text block]

	Latin America - north (i)									Latin America - south (ii)									Canada									Consolidated
	2017			2016			2015			2017			2016			2015			2017			2016			2015			2017			2016			2015
Net sales		31,086.0			28,927.8			29,654.9			10,769.7			10,212.9			11,255.6			6,043.6			6,461.9			5,809.7			47,899.3			45,602.6			46,720.2
Cost of sales		(11,935.0	)		(10,870.4	)		(9,921.3	)		(4,122.6	)		(3,685.4	)		(4,306.8	)		(1,984.2	)		(2,122.2	)		(1,833.3	)		(18,041.8	)		(16,678.0	)		(16,061.4	)
Gross profit		19,151.0			18,057.4			19,733.6			6,647.1			6,527.5			6,948.8			4,059.4			4,339.7			3,976.4			29,857.5			28,924.6			30,658.8
Distribution expenses		(4,193.8	)		(3,965.4	)		(3,709.6	)		(1,007.9	)		(979.6	)		(1,047.5	)		(1,093.8	)		(1,140.5	)		(1,076.1	)		(6,295.5	)		(6,085.5	)		(5,833.2	)
Sales and marketing expenses		(3,655.5	)		(3,671.1	)		(3,264.0	)		(1,091.3	)		(1,317.6	)		(1,294.8	)		(873.2	)		(936.3	)		(785.9	)		(5,620.0	)		(5,925.0	)		(5,344.7	)
Administrative expenses		(1,954.1	)		(1,486.3	)		(1,599.8	)		(384.5	)		(400.2	)		(428.0	)		(285.2	)		(279.6	)		(253.4	)		(2,623.8	)		(2,166.1	)		(2,281.3	)
Other operating income/(expenses)		1,170.5			1,283.7			1,871.5			41.2			(39.0	)		60.3			5.6			(21.6	)		4.2			1,217.3			1,223.1			1,936.1
Exceptional items		(56.1	)		1,183.2			(273.9	)		(41.3	)		(41.5	)		(39.9	)		(11.3	)		(7.4	)		(43.4	)		(108.7	)		1,134.3			(357.2	)
Income from operations (EBIT)		10,462.0			11,401.5			12,757.8			4,163.3			3,749.6			4,198.9			1,801.5			1,954.3			1,821.8			16,426.8			17,105.4			18,778.5
Net finance cost		(2,693.3	)		(3,694.5	)		(1,842.9	)		(709.5	)		(439.0	)		(868.6	)		(91.1	)		431.5			443.3			(3,493.9	)		(3,702.0	)		(2,268.2	)
Share of result of joint ventures		(4.7	)		(6.8	)		1.9			-			-			-			1.6			1.8			1.2			(3.1	)		(5.0	)		3.1
Income before income tax		7,764.0			7,700.2			10,916.8			3,453.8			3,310.6			3,330.3			1,712.0			2,387.6			2,266.3			12,929.8			13,398.4			16,513.4
Income tax expense		(3,309.5	)		1,100.1			(1,884.7	)		(1,144.1	)		(814.0	)		(1,154.1	)		(625.7	)		(601.1	)		(595.5	)		(5,079.3	)		(315.0	)		(3,634.2	)
Net income		4,454.5			8,800.3			9,032.1			2,309.7			2,496.6			2,176.2			1,086.3			1,786.5			1,670.8			7,850.5			13,083.4			12,879.2
Normalized EBITDA (iii)		13,233.9			12,805.0			15,274.6			4,866.6			4,501.7			4,877.8			2,047.1			2,176.4			2,057.3			20,147.6			19,483.1			22,209.7
Exceptional items		(56.1	)		1,183.2			(273.9	)		(41.3	)		(41.5	)		(39.9	)		(11.3	)		(7.4	)		(43.4	)		(108.7	)		1,134.3			(357.2	)
Depreciation. amortization and impairment		(2,715.8	)		(2,586.7	)		(2,242.9	)		(662.0	)		(710.6	)		(639.0	)		(234.3	)		(214.7	)		(192.1	)		(3,612.1	)		(3,512.0	)		(3,074.0	)
Net finance costs		(2,693.3	)		(3,694.5	)		(1,842.9	)		(709.5	)		(439.0	)		(868.6	)		(91.1	)		431.5			443.3			(3,493.9	)		(3,702.0	)		(2,268.2	)
Share of result of joint ventures		(4.7	)		(6.8	)		1.9			-			-			-			1.6			1.8			1.2			(3.1	)		(5.0	)		3.1
Income tax expense		(3,309.5	)		1,100.1			(1,884.7	)		(1,144.1	)		(814.0	)		(1,154.1	)		(625.7	)		(601.1	)		(595.5	)		(5,079.3	)		(315.0	)		(3,634.2	)
Net income		4,454.5			8,800.3			9,032.1			2,309.7			2,496.6			2,176.2			1,086.3			1,786.5			1,670.8			7,850.5			13,083.4			12,879.2
Normalized EBITDA margin in %		42.6	%		44.3	%		51.5	%		45.2	%		44.1	%		43.3	%		33.9	%		33.7	%		35.4	%		42.1	%		42.7	%		47.5	%
Acquisition of property, plant and equipment		1,862.0			2,352.0			3,442.0			1,051.2			1,365.5			1,654.1			292.8			317.9			285.8			3,206.0			4,035.4			5,381.9
		2017			2016			2015			2017			2016			2015			2017			2016			2015			2017			2016			2015
Segment assets		48,811.7			50,935.0			47,282.3			11,558.5			11,149.0			12,757.7			10,204.9			9,245.8			9,264.6			70,575.1			71,329.8			69,304.6
Intersegment elimination																													(3,077.7	)		(3,968.1	)		(1,996.3	)
Non-segmented assets																													19,354.5			16,479.7			22,868.0
Total assets																													86,851.9			83,841.4			90,176.3
Segment liabilities		23,031.6			22,958.9			20,998.7			6,015.2			5,576.4			5,093.9			3,700.2			3,275.7			3,608.6			32,747.0			31,811.0			29,701.2
Intersegment elimination																													(3,077.7	)		(3,968.1	)		(1,996.3	)
Non-segmented liabilities																													57,182.6			55,998.5			62,471.4
Total liabilities																													86,851.9			83,841.4			90,176.3

	Latin America - north
	CAC									Brazil									Total
	2017			2016			2015			2017			2016			2015			2017			2016			2015
Net sales		4,733.0			3,973.2			3,328.8			26,353.0			24,954.6			26,326.1			31,086.0			28,927.8			29,654.9
Cost of sales		(2,045.6	)		(1,798.6	)		(1,563.0	)		(9,889.4	)		(9,071.8	)		(8,358.3	)		(11,935.0	)		(10,870.4	)		(9,921.3	)
Gross profit		2,687.4			2,174.6			1,765.8			16,463.6			15,882.8			17,967.8			19,151.0			18,057.4			19,733.6
Distribution expenses		(538.6	)		(409.9	)		(357.4	)		(3,655.2	)		(3,555.5	)		(3,352.2	)		(4,193.8	)		(3,965.4	)		(3,709.6	)
Sales and marketing expenses		(526.4	)		(456.7	)		(390.1	)		(3,129.1	)		(3,214.4	)		(2,873.9	)		(3,655.5	)		(3,671.1	)		(3,264.0	)
Administrative expenses		(265.0	)		(171.7	)		(158.3	)		(1,689.1	)		(1,314.6	)		(1,441.4	)		(1,954.1	)		(1,486.3	)		(1,599.7	)
Other operating income/(expenses)		77.8			9.6			(0.2	)		1,092.7			1,274.1			1,871.6			1,170.5			1,283.7			1,871.4
Exceptional items		(23.1	)		(13.5	)		(8.4	)		(33.0	)		1,196.7			(265.5	)		(56.1	)		1,183.2			(273.9	)
Income from operations (EBIT)		1,412.1			1,132.4			851.4			9,049.9			10,269.1			11,906.4			10,462.0			11,401.5			12,757.8
Net finance cost		(46.5	)		(9.2	)		42.8			(2,646.8	)		(3,685.3	)		(1,885.7	)		(2,693.3	)		(3,694.5	)		(1,842.9	)
Share of result of joint ventures		6.0			19.0			-			(10.7	)		(25.8	)		1.9			(4.7	)		(6.8	)		1.9
Income before income tax		1,371.6			1,142.2			894.2			6,392.4			6,558.0			10,022.6			7,764.0			7,700.2			10,916.8
Income tax expense		(353.5	)		(318.8	)		(269.4	)		(2,956.0	)		1,418.9			(1,615.3	)		(3,309.5	)		1,100.1			(1,884.7	)
Net income		1,018.1			823.4			624.8			3,436.4			7,976.9			8,407.3			4,454.5			8,800.3			9,032.1
Normalized EBITDA (iii)		1,842.0			1,483.8			1,173.9			11,391.9			11,321.2			14,100.7			13,233.9			12,805.0			15,274.6
Exceptional items		(23.1	)		(13.5	)		(8.4	)		(33.0	)		1,196.7			(265.5	)		(56.1	)		1,183.2			(273.9	)
Depreciation, amortization and impairment		(406.8	)		(338.0	)		(314.1	)		(2,309.0	)		(2,248.7	)		(1,928.8	)		(2,715.8	)		(2,586.7	)		(2,242.9	)
Net finance costs		(46.5	)		(9.2	)		42.8			(2,646.8	)		(3,685.3	)		(1,885.7	)		(2,693.3	)		(3,694.5	)		(1,842.9	)
Share of result of joint ventures		6.0			19.0			-			(10.7	)		(25.8	)		1.9			(4.7	)		(6.8	)		1.9
Income tax expense		(353.5	)		(318.8	)		(269.4	)		(2,956.0	)		1,418.9			(1,615.3	)		(3,309.5	)		1,100.1			(1,884.7	)
Net income		1,018.1			823.3			624.8			3,436.4			7,977.0			8,407.3			4,454.5			8,800.3			9,032.1
Normalized EBITDA margin in %		38.9	%		37.3	%		35.3	%		43.2	%		45.4	%		53.6	%		42.6	%		44.3	%		51.5	%

	Brazil
	Beer									Soft drink and Non-alcoholic and non-carbonated									Total
	2017			2016			2015			2017			2016			2015			2017			2016			2015
Net sales		22,509.3			21,173.1			22,441.3			3,843.7			3,781.5			3,884.8			26,353.0			24,954.6			26,326.1
Cost of sales		(7,895.1	)		(7,339.9	)		(6,757.6	)		(1,994.3	)		(1,731.9	)		(1,600.7	)		(9,889.4	)		(9,071.8	)		(8,358.3	)
Gross profit		14,614.2			13,833.2			15,683.7			1,849.4			2,049.6			2,284.1			16,463.6			15,882.8			17,967.8
Distribution expenses		(2,961.0	)		(2,891.7	)		(2,754.0	)		(694.2	)		(663.8	)		(598.2	)		(3,655.2	)		(3,555.5	)		(3,352.2	)
Sales and marketing expenses		(2,953.6	)		(3,044.0	)		(2,691.3	)		(175.5	)		(170.4	)		(182.6	)		(3,129.1	)		(3,214.4	)		(2,873.9	)
Administrative expenses		(1,476.3	)		(1,160.2	)		(1,341.5	)		(212.8	)		(154.4	)		(99.9	)		(1,689.1	)		(1,314.6	)		(1,441.4	)
Other operating income/(expenses)		825.0			969.8			1,551.2			267.7			304.3			320.4			1,092.7			1,274.1			1,871.6
Exceptional items		(28.2	)		1,014.3			(265.2	)		(4.8	)		182.4			(0.3	)		(33.0	)		1,196.7			(265.5	)
Income from operations (EBIT)		8,020.1			8,721.4			10,182.9			1,029.8			1,547.7			1,723.5			9,049.9			10,269.1			11,906.4
Net finance cost		(2,646.8	)		(3,685.3	)		(1,885.7	)		-			-			-			(2,646.8	)		(3,685.3	)		(1,885.7	)
Share of result of joint ventures		(10.7	)		(25.8	)		1.9			-			-			-			(10.7	)		(25.8	)		1.9
Income before income tax		5,362.6			5,010.3			8,299.1			1,029.8			1,547.7			1,723.5			6,392.4			6,558.0			10,022.6
Income tax expense		(2,956.0	)		1,418.9			(1,615.3	)		-			-			-			(2,956.0	)		1,418.9			(1,615.3	)
Net income		2,406.6			6,429.2			6,683.8			1,029.8			1,547.7			1,723.5			3,436.4			7,976.9			8,407.3
Normalized EBITDA (i)		10,047.3			9,618.6			12,038.9			1,344.6			1,702.6			2,061.8			11,391.9			11,321.2			14,100.7
Exceptional items		(28.2	)		1,014.3			(265.2	)		(4.8	)		182.4			(0.3	)		(33.0	)		1,196.7			(265.5	)
Depreciation, amortization and impairment		(1,999.0	)		(1,911.5	)		(1,590.8	)		(310.0	)		(337.3	)		(338.0	)		(2,309.0	)		(2,248.8	)		(1,928.8	)
Net finance costs		(2,646.8	)		(3,685.3	)		(1,885.7	)		-			-			-			(2,646.8	)		(3,685.3	)		(1,885.7	)
Share of result of joint ventures		(10.7	)		(25.8	)		1.9			-			-			-			(10.7	)		(25.8	)		1.9
Income tax expense		(2,956.0	)		1,418.9			(1,615.3	)		-			-			-			(2,956.0	)		1,418.9			(1,615.3	)
Net income		2,406.6			6,429.2			6,683.8			1,029.8			1,547.7			1,723.5			3,436.4			7,976.9			8,407.3
Normalized EBITDA margin in %		44.5	%		45.4	%		53.6	%		35.8	%		45.0	%		53.1	%		43.2	%		45.4	%		53.6	%

XML

Note 6 - Net Sales (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of the reconciliation between gross sales and net sales [text block]

	2017			2016			2015
Gross sales (i)		72,411.0			79,551.1			97,214.2
Excise duty		(16,192.9	)		(16,345.2	)		(17,471.7	)
Discounts (i)		(8,318.8	)		(17,603.3	)		(33,022.3	)
		47,899.3			45,602.6			46,720.2

XML

Note 7 - Other Operating Income/(Expenses) (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of other operating income (expense) portions [text block]

	2017			2016			2015
Government grants/NPV of long term fiscal incentives		993.7			1,166.5			1,755.7
(Additions)/reversals to provisions		(12.9	)		(132.9	)		(106.1	)
Gains/(losses) on disposal of property, plant and equipment, intangible assets and operation in associates		91.1			70.9			53.0
Other operating income/(expenses), net		145.4			118.6			233.4
		1,217.3			1,223.1			1,936.0

XML

Note 8 - Exceptional Items (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of exceptional items included in the income statement [text block]

	2017			2016			2015
Result through exchange transaction of shareholdings (i)		-			1,240.0			-
Restructuring		(105.5	)		(79.8	)		(63.3	)
Administrative lawsuit		-			-			(239.2	)
Costs arising from business combinations		(3.8	)		(29.8	)		(48.9	)
Others		0.6			3.9			(5.8	)
		(108.7	)		1,134.3			(357.2	)

XML

Note 9 - Payroll and Related Benefits (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of payroll and related benefits [text block]

	2017		2016		2015
Wages and salaries		3,371.2		3,038.9		3,086.5
Social security contributions		741.1		727.2		756.1
Other personnel cost		616.2		613.8		561.3
Increase in liabilities for defined benefit plans		138.7		151.7		142.3
Share-based payment		236.9		189.3		209.4
Contributions to defined contribution plans		18.9		25.3		19.0
		5,123.0		4,746.2		4,774.6

Disclosure of payroll and related benefits affecting the income statement [text block]

	2017		2016			2015
Cost of sales		1,714.8		1,912.3			1,890.2
Distribution expenses		791.5		780.8			722.1
Sales and marketing expenses		1,096.8		989.8			980.8
Administrative expenses		1,470.1		970.3			1,154.0
Net finance cost		42.9		95.9			27.5
Exceptional items		6.9		(2.9	)		-
		5,123.0		4,746.2			4,774.6

XML

Note 10 - Additional Information on Operating Expenses by Nature (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of depreciation and amortisation expense [text block]

	Depreciation and impairment of property, plant and equipment						Amortization of intangible assets
	2017		2016		2015		2017		2016		2015
Cost of sales		2,364.7		2,283.3		2,053.2		6.2		4.3		3.2
Distribution expenses		197.6		200.9		177.9		-		-		-
Sales and marketing expenses		532.2		538.0		431.5		142.3		222.9		162.5
Administrative expenses		231.1		182.5		165.8		142.0		95.8		81.5
		3,325.6		3,204.7		2,828.4		290.5		323.0		247.2

XML

Note 11 - Finance Cost and Income (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of finance cost [text block]

	2017			2016			2015
Interest expense		(1,571.6	)		(1,547.3	)		(1,062.6	)
Capitalized borrowings		2.3			3.9			26.0
Net Interest on pension plans		(77.6	)		(105.6	)		(97.6	)
Losses on hedging instruments		(616.7	)		(1,575.1	)		(1,267.0	)
Interest on provision for disputes and litigations		(225.9	)		(619.5	)		(120.1	)
Exchange variation		(339.5	)		(310.4	)		(721.8	)
Tax on financial transactions		(179.7	)		(224.6	)		(146.4	)
Bank guarantee expenses		(89.5	)		(87.1	)		(80.8	)
Other financial results		(193.3	)		(132.2	)		(92.1	)
		(3,291.5	)		(4,597.9	)		(3,562.4	)
Non-recurring finance cost		(976.8	)		-			-
		(4,268.3	)		(4,597.9	)		(3,562.4	)

Disclosure of interest expense [text block]

	2017			2016			2015
Financial liabilities measured at amortized cost		(477.6	)		(545.6	)		(423.1	)
Liabilities at fair value through profit or loss		(1,076.2	)		(961.0	)		(601.3	)
Fair value hedge - hedged items		(19.7	)		(49.3	)		(22.4	)
Fair value hedge - hedging instruments		1.9			8.6			(15.8	)
		(1,571.6	)		(1,547.3	)		(1,062.6	)

Disclosure of finance income [text block]

	2017		2016		2015
Interest income		458.8		513.6		575.5
Gains on derivative		73.7		113.5		428.3
Financial assets at fair value through profit or loss		227.6		247.5		261.4
Other financial results		14.3		21.3		29.0
		774.4		895.9		1,294.2

Disclosure of interest income [text block]

	2017		2016		2015
Cash and cash equivalents		233.4		241.5		425.9
Investment securities held for trading		26.9		51.1		149.6
Other receivables		198.5		221.0		-
		458.8		513.6		575.5

XML

Note 12 - Income Tax and Social Contribution (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of income tax [text block]

	2017			2016			2015
Income tax expense - current		(5,332.3	)		(413.9	)		(1,227.8	)
Deferred tax expense on temporary differences		891.9			(732.5	)		(2,192.4	)
Deferred tax over taxes losses carryforwards movements  in the current period		(638.9	)		831.4			(214.0	)
Total deferred tax (expense)/income		253.0			98.9			(2,406.4	)
Total income tax expenses		(5,079.3	)		(315.0	)		(3,634.2	)

Disclosure of reconciliation from the weighted nominal to the effective tax rate [text block]

	2017			2016			2015
Income before tax		12,929.8			13,398.4			16,513.4
Adjustment on taxable basis
Non-taxable income		(310.9	)		(392.0	)		(999.9	)
Government grants related to sales taxes		(1,889.1	)		(1,528.6	)		(1,360.7	)
Share of results of joint ventures		3.1			5.0			(3.1	)
Non-deductible expenses		91.1			539.3			415.9
Complement of income tax of foreign subsidiaries due in Brazil		560.4			148.0			1,965.2
Results of intercompany transactions non-taxable/not deductible in Brazil		(547.5	)		640.7			(1,313.2	)
		10,836.9			12,810.8			15,217.6
Aggregated weighted nominal tax rate		29.22	%		30.16	%		31.59	%
Taxes payable – nominal rate		(3,166.6	)		(3,864.0	)		(4,806.9	)
Adjustment on tax expense
Regional incentives - income taxes		304.6			264.5			257.8
Deductible interest on shareholders' equity		1,649.0			1,867.7			1,646.1
Tax savings from goodwill amortization on tax books		175.2			142.0			142.4
Withholding tax over undistributed profits		(356.9	)		153.1			(672.4	)
Recognition / write-off of deferred charges on tax losses		(178.9	)		796.7			138.1
PERT 2017		(2,784.7	)		-			-
Others with reduced taxation		(721.0	)		325.0			(339.3	)
Income tax and social contribution expense		(5,079.3	)		(315.0	)		(3,634.2	)
Effective tax rate		39.28	%		2.35	%		22.01	%

XML

Note 13 - Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of detailed information about property, plant and equipment [text block]

	2017
	Land and buildings			Plant and equipment			Fixtures and fittings			Under construction			Total
Acquisition cost
Balance at end of previous year		8,330.2			22,764.3			4,584.2			1,740.7			37,419.4
Effect of movements in foreign exchange		3.1			34.6			(27.3	)		8.3			18.7
Business combinations		228.9			(24.7	)		-			-			204.2
Acquisitions		10.2			626.1			171.8			2,367.4			3,175.5
Disposals		(25.9	)		(555.5	)		(125.4	)		-			(706.8	)
Transfer to other asset categories		415.4			1,657.8			473.2			(2,857.3	)		(310.9	)
Others		-			36.2			-			(1.2	)		35.0
Balance at end		8,961.9			24,538.8			5,076.5			1,257.9			39,835.1
Depreciation and Impairment
Balance at end of previous year		(2,278.2	)		(13,075.3	)		(2,912.1	)		-			(18,265.6	)
Foreign exchange effects		(12.1	)		(104.9	)		0.3			-			(116.7	)
Depreciation		(299.0	)		(2,245.5	)		(655.9	)		-			(3,200.4	)
Impairment losses		-			(125.0	)		(0.2	)		-			(125.2	)
Disposals and write-off		5.3			539.5			109.5			-			654.3
Transfer to other asset categories		(1.9	)		29.7			5.2			-			33.0
Others		-			7.8			-			-			7.8
Balance at end		(2,585.9	)		(14,973.7	)		(3,453.2	)		-			(21,012.8	)
Carrying amount:
December 31, 2016		6,052.0			9,689.0			1,672.1			1,740.7			19,153.8
December 31, 2017		6,376.0			9,565.1			1,623.3			1,257.9			18,822.3

	2016
	Land and buildings			Plant and equipment			Fixtures and fittings			Under construction			Total
Acquisition cost
Balance at end of previous year		7,718.3			22,369.6			4,465.1			2,132.6			36,685.6
Effect of movements in foreign exchange		(474.7	)		(1,528.0	)		(427.4	)		(222.6	)		(2,652.7	)
Acquisitions through business combinations		283.4			360.4			56.0			0.6			700.4
Acquisitions through exchange transaction of shareholdings		221.2			185.0			-			27.7			433.9
Disposals through exchange transaction of shareholdings		(121.0	)		(344.3	)		(101.3	)		(4.8	)		(571.4	)
Acquisitions		8.4			819.4			276.0			2,905.5			4,009.3
Disposals		(106.0	)		(693.1	)		(210.3	)		(3.3	)		(1,012.7	)
Transfer to other asset categories		800.6			1,595.3			526.1			(3,095.0	)		(173.0	)
Balance at end		8,330.2			22,764.3			4,584.2			1,740.7			37,419.4
Depreciation and Impairment
Balance at end of previous year		(2,244.0	)		(12,562.6	)		(2,738.9	)		-			(17,545.5	)
Foreign exchange effects		95.6			804.8			236.7			-			1,137.1
Disposals through exchange transaction of shareholdings		52.8			241.7			51.4			-			345.9
Depreciation		(277.8	)		(2,117.6	)		(688.4	)		-			(3,083.8	)
Impairment losses		(0.1	)		(120.7	)		(0.1	)		-			(120.9	)
Disposals		95.3			646.0			187.5			-			928.8
Transfer to other asset categories		-			21.7			39.7			-			61.4
Others		-			11.4			-			-			11.4
Balance at end		(2,278.2	)		(13,075.3	)		(2,912.1	)		-			(18,265.6	)
Carrying amount:
December 31, 2015		5,474.3			9,807.0			1,726.2			2,132.6			19,140.1
December 31, 2016		6,052.0			9,689.0			1,672.1			1,740.7			19,153.8

XML

Note 14 - Goodwill (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of reconciliation of changes in goodwill [text block]

	2017		2016
Balance at end of previous year		30,511.2		30,953.1
Effect of movements in foreign exchange		489.7		(2,388.9	)
Acquisition and disposal through business combinations (i)		401.0		1,947.0
Balance at the end of year		31,401.9		30,511.2

Disclosure of information for cash-generating units [text block]

	Functional currency		2017			2016
LAN:
Brazil		BRL		17,668.4			17,424.6
Goodwill				102,911.0			102,667.2
Non-controlling transactions (i)				(85,242.6	)		(85,242.6	)
Dominican Republic		DOP		3,163.6			3,224.9
Cuba (ii)		USD		2.7			3.6
Panama		PAB		1,149.3			1,060.1
LAS:
Argentina		ARS		443.9			518.0
Bolivia		BOB		1,170.1			1,152.8
Chile		CLP		47.0			42.7
Paraguay		PYG		786.1			753.7
Uruguay		UYU		170.7			165.8
NA:
Canada		CAD		6,800.1			6,165.0
				31,401.9			30,511.2

Disclosure of significant unobservable inputs used in fair value measurement of assets [text block]

	2017			2016
Latin America North	from 8.59%	to	10.29%	from 8.39%	to	10.27%

XML

Note 15 - Intangible (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of detailed information about intangible assets [text block]

	2017
				Distribution
	Brands			contracts			Software			Others			Total
Acquisition cost
Balance at end of previous year		4,160.8			2,319.4			888.5			460.7			7,829.4
Effect of movements in foreign exchange		(10.5	)		7.5			(12.1	)		(1.2	)		(16.3	)
Acquisitions		18.8			-			2.9			8.8			30.5
Acquisitions through business combination		(4.0	)		-			-			-			(4.0	)
Transfers to other assets categories		(650.4	)		6.4			265.3			26.4			(352.3	)
Others		-			-			-			46.0			46.0
Balance at end of year		3,514.7			2,333.3			1,144.6			540.7			7,533.3
Amortization and Impairment losses (i)
Balance at end of previous year		(1.9	)		(1,760.8	)		(597.0	)		(223.8	)		(2,583.5	)
Foreing exchange effects		-			4.9			5.5			5.1			15.5
Amortization		-			(138.7	)		(118.9	)		(32.9	)		(290.5	)
Transfers to other assets categories		-			-			(1.4	)		1.3			(0.1	)
Balance at end of year		(1.9	)		(1,894.6	)		(711.8	)		(250.3	)		(2,858.6	)
Carrying amount:
December 31, 2016		4,158.9			558.6			291.5			236.9			5,245.9
December 31, 2017		3,512.8			438.7			432.8			290.4			4,674.7

	2016
				Distribution
	Brands			contracts			Software			Others			Total
Acquisition cost
Balance at end of previous year		3,908.2			2,387.4			788.4			356.8			7,440.8
Effect of movements in foreign exchange		(645.9	)		(68.3	)		(50.3	)		(93.6	)		(858.1	)
Acquisitions		3.0			-			4.1			19.0			26.1
Disposal		-			-			(0.4	)		(0.3	)		(0.7	)
Acquisitions through business combination		1,043.1			-			-			30.7			1,073.8
Acquisitions through exchange transaction of shareholdings		228.1			-			20.6			-			248.7
Disposals through exchange transaction of shareholdings		(58.0	)		-			(9.4	)		(0.1	)		(67.5	)
Transfers to other assets categories		(317.7	)		0.3			135.5			(24.1	)		(206.0	)
Others		-			-			-			172.3			172.3
Balance at end of year		4,160.8			2,319.4			888.5			460.7			7,829.4
Amortization and Impairment losses (i)
Balance at end of previous year		(1.9	)		(1,622.2	)		(539.7	)		(184.8	)		(2,348.6	)
Foreing exchange effects		-			9.9			29.0			40.9			79.8
Amortization		-			(148.6	)		(94.4	)		(80.0	)		(323.0	)
Disposal		-			-			0.1			-			0.1
Disposals through exchange transaction of shareholdings		-			-			8.0			0.1			8.1
Transfers to other assets categories		-			0.1			-			-			0.1
Balance at end of year		(1.9	)		(1,760.8	)		(597.0	)		(223.8	)		(2,583.5	)
Carrying amount:
December 31, 2015		3,906.3			765.2			248.7			172.0			5,092.2
December 31, 2016		4,158.9			558.6			291.5			236.9			5,245.9

Disclosure of intangible assets with indefinite useful life [text block]

	2017		2016
Argentina		348.8		373.5
Bolivia		567.1		558.7
Brazil		4.6		575.5
Canada		223.9		205.6
Chile		69.5		63.1
Luxembourg		339.6		419.1
Paraguay		447.5		429.4
Dominican Republic		1,396.6		1,422.4
Uruguay		115.2		111.6
		3,512.8		4,158.9

XML

Note 16 - Investment Securities (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of investment securities portions [text block]

	2017		2016
Debt held-to-maturity (i)		122.0		104.3
Non-current investments securities		122.0		104.3
Financial asset at fair value through profit or loss-held for trading		11.9		282.8
Current investments securities		11.9		282.8
Total		133.9		387.1

XML

Note 17 - Deferred Income Tax and Social Contribution (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of the applied rates for deferred income and social contribution [text block]

Central America and the Caribbean	from 23%	to	31%
Latin America (i)	from 14%	to	35%
Canada		26%

Disclosure of temporary difference, unused tax losses and unused tax credits [text block]

	2017									2016
	Assets			Liabilities			Net			Assets			Liabilities			Net
Investment securities		39.0			-			39.0			9.0			-			9.0
Intangible		-			(719.5	)		(719.5	)		0.7			(733.9	)		(733.2	)
Employee benefits		631.1			-			631.1			467.6			-			467.6
Trade payables		1,382.4			(314.2	)		1,068.2			977.4			(531.3	)		446.1
Trade receivable		52.3			-			52.3			42.7			-			42.7
Derivatives		6.8			(5.8	)		1.0			71.1			(110.7	)		(39.6	)
Inventories		248.7			(18.1	)		230.6			267.4			(13.8	)		253.6
Property, plant and equipment		-			(920.5	)		(920.5	)		-			(905.7	)		(905.7	)
Withholding tax over undistributed profits and royalties		-			(788.6	)		(788.6	)		-			(684.8	)		(684.8	)
Investments in associates		-			(421.6	)		(421.6	)		-			(421.6	)		(421.6	)
Loss carryforwards		501.0			-			501.0			1,139.9			-			1,139.9
Provisions		347.3			(39.7	)		307.6			448.9			(44.6	)		404.3
Other items		-			(30.5	)		(30.5	)		(15.1	)		(24.7	)		(39.8	)
Gross deferred tax assets / (liabilities)		3,208.6			(3,258.5	)		(49.9	)		3,409.6			(3,471.1	)		(61.5	)
Netting by taxable entity		(929.3	)		929.3			-			(1,141.4	)		1,141.4			-
Net deferred tax assets / (liabilities)		2,279.3			(2,329.2	)		(49.9	)		2,268.2			(2,329.7	)		(61.5	)

Disclosure of the realization of deferred tax assets and liabilities [text block]

	2017
Deferred taxes not related to tax losses	to be realized until 12 months			to be realized after 12 months			Total
Investment securities		-			39.0			39.0
Intangible assets		-			(719.5	)		(719.5	)
Employee benefits		112.8			518.3			631.1
Trade payables		1,382.4			(314.2	)		1,068.2
Trade receivable		47.3			5.0			52.3
Derivatives		1.0			-			1.0
Inventories		230.6			-			230.6
Property, plant and equipment		(58.1	)		(862.4	)		(920.5	)
Withholding tax over undistributed profits and royalties		-			(788.6	)		(788.6	)
Investments in associates		-			(421.6	)		(421.6	)
Provisions		91.7			215.9			307.6
Other items		-			(30.5	)		(30.5	)
Total		1,807.7			(2,358.6	)		(550.9	)

Disclosure of deferred tax realization related to tax losses [text block]

Deferred tax related to tax losses	2017
2018		209.0
2019		98.3
2020		16.1
2021		10.6
A partir de 2022 (i)		167.0
Total		501.0

Disclosure of the reconciliation of changes in deferred tax liability (asset) [text block]

At December 31, 2015	276.3
Full recognition of actuarial gains/(losses)	57.7
Investment hedge	(12.0	)
Investment hedge - put option of a subsidiary interest	(364.6	)
Cash flow hedge - gains/(losses)	536.2
Gains/losses on translation of other foreign operations	(578.2	)
Recognized in other comprehensive income	(360.9	)
Recognized in income statement	98.9
Changes directly in balance sheet	(75.8	)
Recognized in deferred tax	(21.6	)
Anticipation federal amnesty	(54.2	)
At December 31, 2016	(61.5	)
Full recognition of actuarial gains/(losses)	40.2
Investment hedge	(262.7	)
Investment hedge - put option of a subsidiary interest	(31.8	)
Cash flow hedge - gains/(losses)	(269.2	)
Gains/(losses) on translation of other foreign operations	136.1
Recognized in other comprehensive income	(387.4	)
Recognized in income statement	253.0
Changes directly in balance sheet	146.0
Recognized in deferred tax	35.4
Recognized in other group of balance sheet	110.6
At December 31, 2017	(49.9	)

XML

Note 18 - Inventories (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of inventory components [text block]

	2017			2016
Finished goods		1,528.4			1,445.5
Work in progress		309.6			328.5
Raw material		1,816.3			1,962.7
Consumables		77.3			50.0
Spare parts and other		476.9			447.2
Prepayments		210.9			234.5
Impairment losses		(100.4	)		(121.3	)
		4,319.0			4,347.1

XML

Note 19 - Trade Receivables (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of current trade receivables [text block]

	2017			2016
Trade receivables		5,335.7			4,774.5
Bad debt provision		(521.5	)		(443.7	)
Net, trade receivables		4,814.2			4,330.8
Related parties		130.6			37.3
Total current trade receivables		4,944.8			4,368.1

Disclosure of maturity of the current trade receivables [text block]

	Net carrying amount as of December 31,			No past due			Past due – until 30 days			Past due – between 31 - 60 days			Past due – between 61 - 90 days			Past due – between 91 - 180 days			Past due – between 181 - 360 days			Past due 360 days
Trade receivables		5,335.7			4,343.8			340.7			32.3			63.3			85.6			42.2			427.8
Bad debt provision		(521.5	)		(4.3	)		(0.1	)		(0.4	)		(0.8	)		(45.9	)		(42.2	)		(427.8	)
2017		4,814.2			4,339.5			340.6			31.9			62.5			39.7			-			-
Trade receivables		4,774.5			4,093.6			187.9			28.4			43.7			30.0			38.9			352.0
Bad debt provision		(443.7	)		(6.9	)		(1.9	)		(4.1	)		(9.9	)		(30.0	)		(38.9	)		(352.0	)
2016		4,330.8			4,086.7			186.0			24.3			33.8			-			-			-

XML

Note 20 - Cash and Cash Equivalents (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of components in cash and cash equivalents [text block]

	2017			2016
Short term bank deposits (i)		4,688.5			4,027.6
Current bank accounts		5,077.1			3,467.3
Cash		588.9			381.9
Cash and cash equivalents		10,354.5			7,876.8
Bank overdrafts		(1.8	)		-
Cash and cash equivalents less bank overdraft		10,352.7			7,876.8

XML

Note 21 - Changes in Equity (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of issued capital [text block]

			2017				2016
	Million of common shares		Million of Real		Million of common shares		Million of Real
Beginning balance as per statutory books		15,717.6		57,614.1		15,717.6		57,614.1
Share issued		-		-		-		-
		15,717.6		57,614.1		15,717.6		57,614.1

Disclosure of classes of share capital [text block]

	Capital Reserves
	Treasury shares			Share Premium		Others capital reserves		Share-based Payments		Total
At December 31, 2015		(1,003.5	)		53,662.8		700.9		1,013.4		54,373.6
Purchase of shares and result on treasury shares		94.8			-		-		-		94.8
Share-based payments		-			-		-		61.5		61.5
At December 31, 2016		(908.7	)		53,662.8		700.9		1,074.9		54,529.9
Purchase of shares and result on treasury shares		13.7			-		-		-		13.7
Share-based payments		-			-		-		157.4		157.4
At December 31, 2017		(895.0	)		53,662.8		700.9		1,232.3		54,701.0

Disclosure of treasury shares [text block]

	Acquire /realization shares						Result on Treasure Shares			Total Treasure Shares
	Thousands shares			Thousands Brazilian Real			Thousands shares			Thousands Brazilian Real
At December 31, 2015		32.6			(617.5	)		(386.1	)		(1,003.5	)
Changes during the year		(16.0	)		304.7			(209.9	)		94.8
At December 31, 2016		16.6			(312.7	)		(596.0	)		(908.7	)
Changes during the year		(9.1	)		173.0			(159.3	)		13.7
At December 31, 2017		7.5			(139.7	)		(755.3	)		(895.0	)

Disclosure of net income reserves [text block]

	Net income reserves
	Investments reserve			Statutory reserve		Fiscal incentive		Interest on capital and dividends proposed			Total
At December 31, 2015		2,141.2			4.5		4,016.2		2,039.2			8,201.1
Interest on shareholder´s equity		-			-		-		(2,039.2	)		(2,039.2	)
Destination of net income		1,718.6			-		1,819.5		-			3,538.1
At December 31, 2016		3,859.9			4.5		5,835.7		-			9,700.1
Interest on shareholder´s equity		(3,770.1	)		-		-		-			(3,770.1	)
Fiscal incentive reserve		-			-		1,552.3		-			1,552.3
Investments reserve		1,177.9			-		-		-			1,177.9
At December 31, 2017		1,267.7			4.5		7,388.0		-			8,660.2

Disclosure of interest on shareholders' equity and dividends [text block]

Event

Approval

Type

Date of payment

Year

Type of share

Amount per share

Total amount

Board of Directors Meeting

05/16/2017

Dividends

07/17/2017

2017

ON

0.1600

2,513.1

Board of Directors Meeting

12/01/2017

Interest on shareholder´s equity

12/28/2017

2017

ON

0.3100

4,869.7

(i)

Board of Directors Meeting

12/21/2017

Dividends

02/22/2018

2017

ON

0.0700

1,099.7

8,482.5

Event

Approval

Type

Date of payment

Year

Type of share

Amount per share

Total amount

Board of Directors Meeting

01/15/2016

Interest on shareholder´s equity

02/29/2016

2015

ON

0.1300

2,039.2

(i)

Board of Directors Meeting

06/24/2016

Dividends

07/29/2016

2016

ON

0.1300

2,040.8

Board of Directors Meeting

10/19/2016

Dividends

11/25/2016

2016

ON

0.1600

2,511.9

Board of Directors Meeting

1/12/2016

Interest on shareholder´s equity

12/29/2016

2016

ON

0.2200

3,454.2

Board of Directors Meeting

12/22/2016

Dividends

02/23/2017

2016

ON

0.0700

1,099.1

11,145.2

Event

Approval

Type

Date of payment

Type of share

Ammount per share

Total amount

Board of Directors Meeting

02/23/2015

Interest on shareholders’ equity

03/31/2015

ON

0.0300

471.5

(i)

Board of Directors Meeting

02/23/2015

Interest on shareholders’ equity

03/31/2015

ON

0.0600

943.0

Board of Directors Meeting

05/13/2015

Interest on shareholders’ equity

06/29/2015

ON

0.1000

1,570.6

Board of Directors Meeting

08/28/2015

Dividends

09/28/2015

ON

0.1500

2,352.4

Board of Directors Meeting

12/01/2015

Interest on shareholders’ equity

12/30/2015

ON

0.1500

2,352.7

7,690.2

Disclosure of changes in carrying value of equity [text block]

	Carrying value adjustments
	Translation reserves			Cash flow hedge			Actuarial gains/ (losses)			Options granted on subsidiary			Gains/(losses) of non-controlling interest´s share			Business combination		Accounting adjustments for transactions between shareholders			Total
At December 31, 2015		3,472.2			932.2			(1,131.5	)		(2,246.7	)		2,123.6			156.1		(75,162.9	)		(71,857.0	)
Comprehensive income:																						-
Gains/(losses) on translation of foreign operations		(3,728.7	)		-			-			-			-			-		-			(3,728.7	)
Cash flow hedges		-			(1,076.7	)		-			-			-			-		-			(1,076.7	)
Actuarial gains/(losses)		-			-			(130.7	)		-			-			-		-			(130.7	)
Total Comprehensive income		(3,728.7	)		(1,076.7	)		(130.7	)		-			-			-		-			(4,936.1	)
Options granted on subsidiary		-			-			-			(144.2	)		-			-		-			(144.2	)
Gains/(losses) of controlling interest´s share		-			-			-			-			(2.8	)		-		-			(2.8	)
Exchange transaction of shareholdings		(33.0	)		-			-			-			29.9			-		-			(3.1	)
Reversal effect of revaluation of fixed assets by previous cost		-			-			-			-			-			-		(75.9	)		(75.9	)
At December 31, 2016		(289.5	)		(144.5	)		(1,262.2	)		(2,390.9	)		2,150.7			156.1		(75,238.8	)		(77,019.1	)
Comprehensive income:
Gains/(losses) on translation of  foreign operations		1,928.6			-			-			-			-			-		-			1,928.6
Cash flow hedges		-			513.4			-			-			-			-		-			513.4
Actuarial gains/(losses)		-			-			117.7			-			-			-		-			117.7
Total Comprehensive income		1,928.6			513.4			117.7			-			-			-		-			2,559.7
Put option granted on subsidiary		-			-			-			(380.4	)		-			-		-			(380.4	)
Gains/(losses) of controlling interest´s share		-			-			-			-			(12.1	)		-		-			(12.1	)
Tax on fictitious dividends		-			-			-			-			(38.7	)		-		-			(38.7	)
Reversal effect revaluation of fixed assets under the predecessor basis accounting		-			-			-			-			-			-		(75.9	)		(75.9	)
At December 31, 2017		1,639.1			368.9			(1,144.5	)		(2,771.3	)		2,099.9			156.1		(75,314.7	)		(74,966.5	)

Disclosure of earnings per share [text block]

Million shares	2017		2016		2015
	Common		Common		Common
Issued shares at December 31, net of treasury shares (i)		15,705.8		15,696.6		15,696.1
Effect of shares options		132.2		126.5		124.0
Weighted average number of shares (diluted) at December 31		15,838.0		15,823.1		15,820.1

Earnings per share [text block]

	2017		2016		2015
	Common		Common		Common
Income attributable to equity holders of Ambev		7,332.0		12,546.6		12,423.8
Weighted average number of shares (non diluted)		15,705.8		15,696.6		15,696.1
Basic EPS (i)		0.47		0.80		0.79
Income attributable to equity holders of Ambev		7,332.0		12,546.6		12,423.8
Weighted average numbers of shares (diluted)		15,838.1		15,823.2		15,820.1
Diluted EPS (i)		0.46		0.79		0.79

Disclosure for the basis of dividends [text block]

	2017			2016			2015
Net income, attributable to equity holders of Ambev		7,332.0			12,546.6			12,423.8
Prescribed dividends		34.7			21.6			16.2
Reversal effect of revaluation of fixed assets by predecessor		75.9			75.9			75.9
Retained earnings basis for dividends and destinations		7,442.6			12,644.1			12,515.9
Dividends and Interest on capital distributed and accrued to distribute based on net income for the year
Dividends and Interest on capital paid based on profit		3,612.7			5,651.8			7,218.7
Dividends approved for distribution		1,099.7			3,454.2			2,039.2
Total of dividends and Interest on capital		4,712.4			9,106.0			9,257.9
Percentage of distributed profit		63	%		72	%		74	%
Interest on capital distributed and accrued to distribute based on the investment reserve
Interest on capital paid based on the investment reserve		3,770.1			-			-
Total of Interest on capital		3,770.1			-			-
Total of distributed and accrued to distribute		8,482.5			9,106.0			9,257.9
Percentage of distributed profit		114	%		72	%		74	%

XML

Note 22 - Interest-bearing Loans and Borrowings (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of total liabilities [text block]

	2017		2016
Secured bank loans		589.3		665.8
Unsecured bank loans		413.7		609.9
Debentures and unsecured bond issues		102.7		100.8
Other unsecured loans		101.5		356.2
Financial leasing		24.7		33.0
Non-current liabilities		1,231.9		1,765.7
Secured bank loans		879.6		1,381.4
Unsecured bank loans		394.3		1,910.1
Debentures and unsecured bond issues		-		296.4
Other unsecured loans		38.4		33.5
Financial leasing		8.8		9.2
Current liabilities		1,321.1		3,630.6

Disclosure of detailed information about borrowings [text block]

				2017							2016
Debt instruments	Average rate %			Current		Non-current		Average rate %			Current		Non-current
Debt denominated in USD fixed rate		3.83	%		6.4		16.5		6.00	%		-		11.5
Debt denominated in US dollars floating rate		2.74	%		78.3		476.9		1.55	%		1,508.8		351.1
Debt denominated in CAD dollars floating rate		2.00	%		685.9		-		1.62	%		1,259.1		-
BNDES basket debt floating rate (UMBNDES)		-			-		-		1.70	%		22.7		-
Other latin american currency fixed rate		9.27	%		199.1		-		8.86	%		114.1		233.0
Other latin american currency floating rate		2.33	%		-		5.0		2.66	%		-		4.9
TJLP BNDES denominated floating rate (TJLP)		9.22	%		165.3		237.0		9.66	%		216.2		398.6
Reais debt - ICMS fixed rate		5.57	%		38.4		91.5		4.13	%		33.4		344.7
Reais debt - debentures floating rate % CDI		-			-		-		13.63	%		52.9		-
Reais debt - fixed rate		6.63	%		147.7		405.0		7.64	%		423.4		421.9
Total					1,321.1		1,231.9					3,630.6		1,765.7

Disclosure of terms and debt repayments [text block]

	Total		Less than 1 year		1-2 years		2-3 years		3-5 years		More than 5 years
Secured bank loans		1,468.9		879.6		253.6		57.7		109.4		168.6
Unsecured bank loans		808.0		394.3		413.7		-		-		-
Debentures and unsecured bond issues		102.7		-		-		-		102.7		-
Unsecured other loans		139.9		38.4		32.0		24.7		11.6		33.2
Finance lease liabilities		33.5		8.8		24.7		-		-		-
		2,553.0		1,321.1		724.0		82.4		223.7		201.8

XML

Note 23 - Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of net defined benefit liability (asset) [text block]

	2017			2016			2015
Present value of funded obligations		(5,027.7	)		(4,592.1	)		(4,646.4	)
Fair value of plan assets		4,006.2			3,845.2			3,781.4
Present value of net obligations		(1,021.5	)		(746.9	)		(865.0	)
Present value of unfunded obligations		(757.4	)		(741.3	)		(756.6	)
Present value of net obligations		(1,778.9	)		(1,488.2	)		(1,621.6	)
Asset ceiling		(368.4	)		(532.2	)		(534.5	)
Net liability		(2,147.3	)		(2,020.4	)		(2,156.1	)
Other long term employee benefits		(105.0	)		(83.8	)		(57.2	)
Total employee benefits		(2,252.3	)		(2,104.2	)		(2,213.3	)
Employee benefits amount in the balance sheet:
Liabilities		(2,310.7	)		(2,137.7	)		(2,221.9	)
Assets		58.4			33.5			8.6
Net liabilities		(2,252.3	)		(2,104.2	)		(2,213.3	)

Disclosure of defined benefit obligation [text block]

	2017			2016			2015
Defined benefit obligation at January 1 st		(5,333.4	)		(5,403.0	)		(4,808.0	)
Acquisitions through exchange transaction of shareholdings		-			(67.3	)		-
Service cost		(38.2	)		(43.1	)		(42.4	)
Interest cost		(321.5	)		(320.5	)		(308.2	)
Gains and (losses) on settlements or reductions in benefits		3.9			2.2			1.1
Contributions by plan participants		(4.1	)		(5.2	)		(5.2	)
Actuarial gains and (losses) - geographical assumptions		77.3			(20.1	)		-
Actuarial gains and (losses) - financial assumptions		(140.3	)		(321.1	)		182.5
Experience adjustment		(115.7	)		(182.8	)		(10.6	)
Reclassifications		(7.5	)		11.1			-
Exchange differences		(306.5	)		599.6			(805.1	)
Benefits paid		400.9			416.8			392.9
Defined benefit obligation at December, 31		(5,785.1	)		(5,333.4	)		(5,403.0	)

Disclosure of the change in fair value of the plan assets [text block]

	2017			2016			2015
Fair value of plan assets at January 1 st		3,845.2			3,781.4			3,550.1
Interest Income		273.3			274.7			259.5
Administrative costs		(3.4	)		(3.7	)		(3.4	)
Expected Return excluding interest income		(64.8	)		269.8			(173.2	)
Acquisition through business combination		-			73.5			-
Contributions by employer		183.2			175.9			107.6
Contributions by plan participants		4.5			5.6			5.2
Exchange differences		166.8			(315.3	)		428.5
Benefits paid excluding costs of administration		(398.6	)		(416.7	)		(392.9	)
Fair value of plan assets at December, 31		4,006.2			3,845.2			3,781.4

Disclosure of asset ceiling [text block]

	2017		2016			2015
Asset ceiling impact at January 1 st		33.5		8.6			12.8
Acquisitions through exchange transaction of shareholdings		-		10.4			-
Interest income/(expenses)		2.8		1.3			1.1
Change in asset ceiling excluding amounts included in interest income/(expenses)		8.8		15.8			(5.3	)
Effect of exchange rate fluctuations		0.9		(2.6	)		-
Others		12.4		-			-
Asset ceiling impact at December 31		58.4		33.5			8.6

Disclosure of defined benefit plans recognized in the income statement [text block]

	2017			2016			2015
Current service costs		(38.2	)		(43.1	)		(42.4	)
Administrative costs		(3.4	)		(3.7	)		(3.4	)
(Gains) losses on settlements and curtailments		4.2			0.7			1.1
Income from operations		(37.4	)		(46.1	)		(44.7	)
Financial cost		(101.3	)		(105.6	)		(97.6	)
Total expense for employee benefits		(138.7	)		(151.7	)		(142.3	)

Disclosure of employee benefit revenue (expenses) allocation in income statement [text block]

	2017			2016			2015
Cost of sales		(22.3	)		(24.5	)		(19.3	)
Sales and marketing expenses		(5.0	)		(9.5	)		(7.9	)
Administrative expense		(10.1	)		(10.2	)		(17.5	)
Financial expenses		(101.3	)		(105.6	)		(97.6	)
Exceptional items		-			(1.9	)		-
		(138.7	)		(151.7	)		(142.3	)

Disclosure of actuarial assumptions of the entity [text block]

	2017 (i)			2016 (i)			2015 (i)
Discount rate	3.6%	to	10.6%	3.9%	to	10.5%	4.1%	to	12.1%
Inflation	2.0%	to	5.0%	2.0%	to	5.2%	2.0%	to	5.2%
Future salary increases	1.0%	to	8.7%	1.0%	to	8.5%	1.0%	to	8.8%
Future pension increases	2.0%	to	4.3%	2.0%	to	4.5%	2.0%	to	4.5%
Medical cost trend rate	4.5%	to	7.9%	3.8%	a	8.2%	4.5%	to	8.2%
	p.a. reducing to 7.9%			p.a. reducing to 8.2%			p.a. reducing to 8.2%
Dental claims trend rate		4.3%			4.5%			4.5%
Life expectation for an over 65 years old male	83	to	87	80	to	86	85	to	70
Life expectation for an over 65 years old female	86	to	89	83	to	89	88	to	71

Disclosure of sensitivity analysis for actuarial assumptions [text block]

		2017						2016						2015
In millions of Brazilian Reais	Change in assumption	Increase in assumption			Decrease in assumption			Increase in assumption			Decrease in assumption			Increase in assumption			Decrease in assumption
Medical cost trend rate	100 bases points		(119.7	)		102.3			(104.7	)		90.2			(77.5	)		67.4
Discount rate	50 bases points		289.7			(309.2	)		292.6			(311.5	)		262.5			(280.1	)
Future salary increase	50 bases points		(12.9	)		12.3			(16.6	)		15.3			(13.3	)		12.5
Longevity	One year		(180.6	)		176.5			(175.9	)		172.9			(135.1	)		131.1

Disclosure of plan assets components [text block]

	2017								2016								2015
	Rated			Unrated		Total			Rated			Unrated		Total			Rated			Unrated			Total
Government bonds		50	%		-		50	%		41	%		-		41	%		29	%		-			29	%
Corporate bonds		7	%		-		7	%		13	%		-		13	%		23	%		-			23	%
Equity instruments		14	%		-		14	%		18	%		-		18	%		15	%		-			15	%
Property		-			-		-			-			-		-			-			1	%		1	%
Cash		-			-		-			1	%		-		1	%		-			-			-
Others		29	%		-		29	%		27	%		-		27	%		32	%		-			32	%

XML

Note 24 - Share-based Payments (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of indirect measurement of fair value of goods or services received, share options granted during period [text block]

In R$, except when otherwise indicated	2017			(i)	2016			(i)	2015			(i)
Fair value of options granted		6.51				6.21				7.84
Share price		19.80				17.18				18.41
Exercise price		19.80				17.18				18.41
Expected volatility		26.7	%			27.0	%			27.5	%
Vesting year		5				5				5
Expected dividends		5	%			5	%			5	%
Risk-free interest rate		10.1	%	(ii)		12.4	%	(ii)		15.9	%	(ii)

Disclosure of the number of share options [text block]

Thousand options	2017			2016			2015
Options outstanding at January 1 st		131,244			121,770			126,149
Options issued during the period		20,435			24,806			16,568
Options exercised during the period		(13,548	)		(11,613	)		(19,975	)
Options forfeited during the period		(2,910	)		(3,719	)		(972	)
Options outstanding at ended year		135,221			131,244			121,770

Disclosure of weighted average exercise prices of share options [text block]

In R$ per share	2017		2016		2015
Options outstanding at January 1 st		13.87		12.36		10.07
Options issued during the period		19.82		17.18		18.42
Options forfeited during the period		17.88		12.83		20.35
Options exercised during the period		5.81		2.52		5.05
Options outstanding at ended period		15.27		13.87		12.36
Options exercisable at ended period		3.78		3.66		3.29

Disclosure of number and weighted average exercise prices of other equity instruments [text block]

Thousand deferred shares	2017			2016			2015
Deferred shares outstanding at January 1 st		19,260			19,056			17,490
New deferred shares during the period		794			7,329			2,692
Deferred shares granted during the period		(2,874	)		(6,118	)		(804	)
Deferred shares forfeited during the period		(880	)		(1,007	)		(322	)
Deferred shares outstanding at ended year		16,300			19,260			19,056

XML

Note 25 - Trade Payables (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of the components of trade payables [text block]

	2017		2016
Trade payables		175.1		237.8
Non-current		175.1		237.8
Trade payables		10,418.4		9,793.0
Related Parties		1,435.6		1,075.8
Current		11,854.0		10,868.8
Total		12,029.1		11,106.6

XML

Note 26 - Provisions (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of other provisions [text block]

	Balance as of December 31, 2016		Effect of changes in foreign exchange rates			Additions		Provisions used and reversed			Balance as of December 31, 2017
Restructuring		7.4		0.7			-		-			8.1
Provision for disputes and litigations
Taxes on sales		247.2		0.2			113.9		(135.0	)		226.3
Income tax		323.4		3.0			167.4		(336.8	)		157.0
Labor		165.8		(1.4	)		142.0		(176.9	)		129.5
Civil		43.9		(0.1	)		65.4		(74.0	)		35.2
Others		146.3		(5.9	)		69.8		(84.7	)		125.5
Total of provision for disputes and litigations		926.6		(4.2	)		558.5		(807.4	)		673.5
Total provisions		934.0		(3.5	)		558.5		(807.4	)		681.6

Disclosure of the disbursement expectative of the provisions [text block]

	Balance as of December 31, 2017		1 year or less		1-2 years		2-5 years		Over 5 years
Restructuring		8.1		7.3		-		0.8		-
Provision for disputes and litigations
Taxes on sales		226.3		25.7		179.9		5.0		15.7
Income tax		157.0		33.6		100.7		22.7		-
Labor		129.5		77.3		25.3		17.6		9.3
Civil		35.2		17.1		15.4		1.6		1.1
Others		125.5		8.0		30.3		83.8		3.4
Total of provision for disputes and litigations		673.5		161.7		351.6		130.7		29.5
Total provisions		681.6		169.0		351.6		131.5		29.5

XML

Note 27 - Financial Instruments and Risks (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of financial risk management [text block]

																	2017
						Fair Value					Gain / (Losses)
Exposure	Risk			Notional		Assets		Liability			Finance Result			Operational Result			Equity
Cost		(9,742.3	)		9,318.9		283.6		(190.0	)		(563.5	)		(200.2	)		584.8
	Commodity	(2,378.7	)		1,955.3		166.5		(70.7	)		(1.5	)		103.6			(4.8	)
	American Dollar	(6,879.1	)		6,879.1		86.3		(93.4	)		(556.1	)		(331.5	)		630.2
	Euro	(82.9	)		82.9		3.5		(0.7	)		(4.7	)		0.4			6.6
	Mexican Pesos	(401.6	)		401.6		27.3		(25.2	)		(1.2	)		27.3			(47.2	)
Fixed Assets		(579.5	)		579.5		1.9		(10.8	)		(1.9	)		-			-
	American Dollar	(531.9	)		531.9		1.8		(10.8	)		(2.8	)		-			-
	Euro	(47.6	)		47.6		0.1		-			0.9			-			-
Expenses		(177.7	)		177.7		0.5		(1.8	)		(2.9	)		3.9			1.8
	American Dollar	(169.2	)		169.2		0.3		(1.6	)		(3.1	)		3.5			2.4
	Rupee	(8.5	)		8.5		0.2		(0.2	)		0.2			0.4			(0.6	)
Cash		(1,328.3	)		1,328.3		-		(13.1	)		(266.0	)		-			-
	American Dollar	(1,313.3	)		1,313.3		-		(13.1	)		(266.0	)		-			-
	Interest rate	(15.0	)		15.0		-		-			-			-			-
Debts		(919.5	)		356.9		30.0		(1.8	)		(67.5	)		-			-
	American Dollar	(562.6	)		-		-		-			(76.2	)		-			-
	Interest rate	(356.9	)		356.9		30.0		(1.8	)		8.7			-			-
Equity Instrument		(2,347.9	)		677.0		69.2		-			67.0			-			-
	Stock Exchange Prices	(2,347.9	)		677.0		69.2		-			67.0			-			-
As of December 31, 2017		(15,095.2	)		12,438.3		385.2		(217.5	)		(834.8	)		(196.3	)		586.6

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

Disclosure of detailed information about hedging instruments [text block]

	2017
	Pre - Hedge					Post - Hedge
	Interest rate			Amount		Interest rate			Amount
Brazilian Real		9.2	%		402.3		7.6	%		714.1
American Dollar		2.7	%		555.3		2.7	%		555.2
Canadian Dollar		2.0	%		685.9		2.0	%		685.9
Barbadian Dollar		2.3	%		5.0		2.3	%		5.0
Interest rate postfixed					1,648.5					1,960.2
Brazilian Real		6.4	%		682.5		5.9	%		370.8
Working Capital in Argentinean Peso		31.0	%		1.8		31.0	%		1.8
Dominican Peso		9.3	%		188.8		9.3	%		188.8
American Dollar		3.8	%		22.9		3.8	%		22.9
Guatemala´s Quetzal		7.8	%		10.3		7.8	%		10.3
Interest rate pre-set					906.3					594.6

	2016
	Pre - Hedge					Post - Hedge
	Interest rate			Amount		Interest rate			Amount
Brazilian Real		10.0	%		667.7		12.6	%		2,375.6
American Dollar		1.5	%		1,882.3		2.2	%		565.7
Canadian Dollar		1.6	%		1,259.1		1.6	%		1,259.1
Barbadian Dollar		2.7	%		4.9		2.7	%		4.9
Interest rate postfixed					3,814.0					4,205.3
Brazilian Real		6.8	%		1,223.5		6.2	%		841.9
Dominican Peso		9.7	%		288.8		9.7	%		288.8
American Dollar		6.0	%		11.6		6.0	%		1.8
Guatemala´s Quetzal		8.0	%		9.9		8.0	%		10.0
Barbadian Dollar		4.3	%		48.5		4.3	%		48.5
Interest rate pre-set					1,582.3					1,191.0

Sensitivity analysis for types of market risk [text block]

Transaction	Risk	Fair value			Probable scenario			Adverse scenario			Remote scenario
Commodities hedge	Decrease on commodities price		95.8			(70.6	)		(392.9	)		(881.7	)
Input purchase			(95.8	)		108.7			498.8			1,093.5
Foreign exchange hedge	Foreign currency decrease		(2.2	)		(105.0	)		(1,843.1	)		(3,684.0	)
Input purchase			2.2			105.0			1,843.1			3,684.0
Costs effects			-			38.1			105.9			211.8
Foreign exchange hedge	Foreign currency decrease		(8.9	)		(16.8	)		(153.8	)		(298.6	)
Capex Purchase			8.9			16.8			153.8			298.6
Fixed assets effects			-			-			-			-
Foreign exchange hedge	Foreign currency decrease		(1.3	)		(3.4	)		(45.7	)		(90.2	)
Expenses			1.3			3.4			45.7			90.2
Expenses effects			-			-			-			-
Hedge cambial	Foreign currency increase		(13.1	)		(37.5	)		(341.4	)		(669.8	)
Cash			13.1			37.5			341.4			669.8
Interest Hedge	Decrease in interest rate		-			(0.4	)		(2.9	)		(3.4	)
Interest revenue	-					0.4			2.9			3.4
Cash effects			-			-			-			-
Hedge cambial	Foreign currency decrease		-			-			-			-
Cash	-					9.7			140.6			281.3
Interest Hedge	Increase in interest rate		28.2			18.4			(131.5	)		(162.7	)
Interest expenses			(28.2	)		(18.4	)		131.5			162.7
Debt effects			-			9.7			140.6			281.3
Equity Instrument Hedge	Stock Exchange Price Decrease		69.2			54.3			(100.1	)		(269.3	)
Expenses			(69.2	)		(19.4	)		517.8			1,104.8
Equity effects			-			34.9			417.7			835.5
			-			82.7			664.2			1,328.6

Disclosure of notional and fair value amounts per financial instrument and maturity [text block]

		Notional Value
Exposure	Risk	2018		2019		2020		2021		> 2021		Total
Cost			9,219.2		99.7		-		-		-		9,318.9
	Commodity		1,859.2		96.1		-		-		-		1,955.3
	American Dollar		6,879.1		-		-		-		-		6,879.1
	Euro		82.9		-		-		-		-		82.9
	Mexican Peso		398.0		3.6		-		-		-		401.6
Fixed asset			579.5		-		-		-		-		579.5
	American Dollar		531.9		-		-		-		-		531.9
	Euro		47.6		-		-		-		-		47.6
Expenses			177.7		-		-		-		-		177.7
	American Dollar		169.2		-		-		-		-		169.2
	Rupee		8.5		-		-		-		-		8.5
Cash			1,313.3		-		15.0		-		-		1,328.3
	American Dollar		1,313.3		-		-		-		-		1,313.3
	Interest rate		-		-		15.0		-		-		15.0
Debt			-		-		-		110.0		246.9		356.9
	Interest rate		-		-		-		110.0		246.9		356.9
Foreign Investments			677.0		-		-		-		-		677.0
	American Dollar		677.0		-		-		-		-		677.0
			11,966.7		99.7		15.0		110.0		246.9		12,438.3

		Fair Value
Exposure	Risk	2018			2019			2020		2021		> 2021		Total
Cost			89.0			4.6			-		-		-		93.6
	Commodity		91.1			4.7			-		-		-		95.8
	American Dollar		(7.1	)		-			-		-		-		(7.1	)
	Euro		2.8			-			-		-		-		2.8
	Mexican Peso		2.2			(0.1	)		-		-		-		2.1
Fixed asset			(8.9	)		-			-		-		-		(8.9	)
	American Dollar		(9.0	)		-			-		-		-		(9.0	)
	Euro		0.1			-			-		-		-		0.1
Expenses			(1.3	)		-			-		-		-		(1.3	)
	American Dollar		(1.3	)		-			-		-		-		(1.3	)
	Rupee		-			-			-		-		-		-
Cash			(13.1	)		-			-		-		-		(13.1	)
	American Dollar		(13.1	)		-			-		-		-		(13.1	)
	Interest rate		-			-			-		-		-		-
Debt			-			-			-		25.0		3.2		28.2
	Interest rate		-			-			-		25.0		3.2		28.2
Equity Instrument			69.2			-			-		-		-		69.2
	Stock prices		69.2			-			-		-		-		69.2
			134.9			4.6			-		25.0		3.2		167.7

Disclosure of detailed information about financial instruments [text block]

	2017
	Loans and receivables		Held for trading		Financial assets/liabilities at fair value through profit or loss		Derivatives hedge		Financial liabilities through amortized cost		Total
Financial assets
Cash and cash equivalents		10,354.5		-		-		-		-		10,354.5
Investment securities		-		122.0		11.9		-		-		133.9
Trade receivables excluding prepaid expenses		7,505.0		-		-		-		-		7,505.0
Financial instruments derivatives		-		-		100.1		285.1		-		385.2
Total		17,859.5		122.0		112.0		285.1		-		18,378.6
Financial liabilities
Trade payables and put option granted on subsidiary and other liabilities		-		-		5,764.1		-		13,502.0		19,266.1
Financial instruments derivatives		-		-		16.1		201.4		-		217.5
Interest-bearning loans and borrowings		-		-		-		-		2,553.0		2,553.0
Total		-		-		5,780.2		201.4		16,055.0		22,036.6

	2016
	Loans and receivables		Held for trading		Financial assets/liabilities at fair value through profit or loss		Derivatives hedge		Financial liabilities through amortized cost		Total
Financial assets
Cash and cash equivalents		7,876.8		-		-		-		-		7,876.8
Investment securities		-		104.3		282.8		-		-		387.1
Trade receivables excluding prepaid expenses		6,962.5		-		-		-		-		6,962.5
Financial instruments derivatives		-		-		18.4		194.5		-		212.9
Total		14,839.3		104.3		301.2		194.5		-		15,439.3
Financial liabilities
Trade payables and put option granted on subsidiary and other liabilities		-		-		5,106.1		-		13,208.1		18,314.2
Financial instruments derivatives		-		-		49.9		663.5		-		713.4
Interest-bearning loans and borrowings		-		-		-		-		5,396.3		5,396.3
Total		-		-		5,156.0		663.5		18,604.4		24,423.9

Disclosure of financial instruments fair value hierarchy [text block]

	2017								2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Financial assets
Financial asset at fair value through profit or loss		11.9		-		-		11.9		282.8		-		-		282.8
Derivatives assets at fair value through profit or loss		0.1		100.0		-		100.1		2.6		15.8		-		18.4
Derivatives - operational hedge		4.8		280.3		-		285.1		83.6		110.9		-		194.5
		16.8		380.3		-		397.1		369.0		126.7		-		495.7
Financial liabilities
Financial liabilities at fair value through profit and loss (i)		-		-		5,764.1		5,764.1		-		-		5,106.1		5,106.1
Derivatives liabilities at fair value through profit or loss		1.7		14.4		-		16.1		9.9		40.0		-		49.9
Derivatives - operational hedge		58.4		143.0		-		201.4		78.9		575.9		-		654.8
Derivatives - fair value hedge		-		-		-		-		-		8.7		-		8.7
		60.1		157.4		5,764.1		5,981.6		88.8		624.6		5,106.1		5,819.5

Disclosure of fair value measurement of liabilities [text block]

Financial liabilities at December 31, 2016 (i)	5,106.1
Acquisition of investments	7.4
Total gains and losses in the year	650.6
Losses recognized in net income	359.1
Losses recognized in equity	291.5
Financial liabilities at December 31, 2017 (i)	5,764.1

XML

Note 28 - Operating Leases (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of finance lease and operating lease by lessee [text block]

	2017		2016
Less than 1 year		35.7		26.7
Between 1 and 5 years		129.4		61.4
More than 5 years		71.1		66.5
		236.2		154.6

XML

Note 29 - Collateral and Contractual Commitments with Suppliers, Advances From Customers and Other (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of commitments and contingent liabilities [text block]

	2017		2016
Collateral given for own liabilities		606.3		1,051.5
Other commitments		842.7		754.3
		1,449.0		1,805.8
Commitments with suppliers (i)		11,096.3		4,019.2
Commitments - Bond 2017		-		300.0
		11,096.3		4,319.2

Disclosure of future contractual commitments [text block]

	2017		2016
Less than 1 year		3,812.8		3,325.7
Between 1 and 2 years		2,995.7		420.8
More than 2 years		4,287.8		572.7
		11,096.3		4,319.2

XML

Note 30 - Contingent Liability (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of estimates of possible losses [text block]

	2017		2016
IRPJ and CSLL		31,757.3		28,934.8
PIS and COFINS		3,485.2		1,971.1
ICMS and IPI		19,805.5		16,046.9
Labor		287.1		222.0
Civil		4,071.5		4,417.6
Others		1,113.4		858.1
		60,520.0		52,450.5

XML

Note 31 - Non-cash Items (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of detailed information about non-cash items [text block]

	2017		2016		2015
Acquisition of property, plant and equipment		-		-		105.6
Acquisition of investments payables		-		208.7		-
Cash financing cost other than interests		42.3		37.7		1,752.3
PERT 2017		199.7		-		-
Fair value of option granted		221.8		205.1		144.6
Others		-		-		41.1

XML

Note 32 - Related Parties (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of key management personnel compensation [text block]

	2017		2016		2015
Short-term benefits (i)		33.4		21.7		32.1
Share-based payments (ii)		38.9		36.2		39.0
Total key management remuneration		72.3		57.9		71.1

Disclosure of transactions between related parties [text block]

	2017
Current	Trade receivables (i)		Other Trade receivables (i)		Trade payables (i)			Other Trade payables (i)			Borrowings and interest payable			Dividends payables
AB InBev		1.2		33.6		(363.0	)		(1.7	)		-			-
AB Procurement		8.9		0.1		-			-			-			-
AB Services		0.8		29.1		-			(6.1	)		-			-
AB USA		14.1		16.3		(375.7	)		(8.7	)		-			-
Ambrew		-		-		-			-			-			(89.9	)
Cervecería Modelo		91.6		5.8		(589.3	)		(59.7	)		-			-
Inbev		0.1		23.8		(33.8	)		-			-			-
ITW International		-		-		-			(212.5	)		(48.3	)		(590.9	)
Panamá Holding		-		20.3		-			(4.0	)		-			-
Others		13.9		8.6		(73.8	)		(3.0	)		-			-
		130.6		137.6		(1,435.6	)		(295.7	)		(48.3	)		(680.8	)

	2016
Current	Trade receivables (i)		Other Trade receivables (i)		Trade payables (i)			Other Trade payables (i)			Borrowings and interest payable			Dividends payables
AB InBev		6.3		13.4		(308.9	)		(0.7	)		-			-
AB Package		-		-		(31.3	)		-			-			-
AB Services		0.3		15.2		-			(3.1	)		-			-
AB USA		19.7		18.6		(247.4	)		(1.7	)		-			-
Ambev Peru		7.1		-		(4.7	)		-			-			-
Ambrew		-		-		-			-			-			(89.9	)
Bogotá Beer		-		211.0		-			(211.0	)		-			-
Cervecería Modelo		1.1		-		(444.1	)		-			-			-
Inbev		0.2		17.6		(17.5	)		(0.2	)		-			-
ITW International		-		-		-			(209.4	)		(30.5	)		(590.9	)
Modelo		-		1.0		(15.7	)		(54.5	)		-			-
Others		2.6		7.3		(6.2	)		(14.4	)		-			-
		37.3		284.1		(1,075.8	)		(495.0	)		(30.5	)		(680.8	)

									2017
Company	Buying / Service fees / Rentals			Sales		Royalties			Net finance cost
AB Procurement		(5.8	)		20.8		-			-
AB USA		(258.7	)		42.5		(284.5	)		-
Ambev Peru		(8.6	)		1.5		-			-
Cervecería Modelo		(749.1	)		0.4		(45.8	)		-
Inbev		(73.6	)		-		-			-
Others		(91.1	)		8.1		(35.9	)		(16.8	)
		(1,186.9	)		73.3		(366.2	)		(16.8	)

									2016
Company	Buying / Service fees / Rentals			Sales		Royalties			Net finance cost
AB Package		(32.8	)		-		-			-
AB USA		(206.0	)		52.3		(292.8	)		-
Cervecería Modelo		(596.0	)		2.0		(46.9	)		-
InBev		(77.0	)		-		-			-
ITW International		-			-		-			(26.0	)
Modelo		(63.0	)		-		-			-
SAB Group		(3.5	)		23.5		-			-
Others		(45.6	)		0.3		(32.2	)		-
		(1,023.9	)		78.1		(371.9	)		(26.0	)

						2015
Company	Buying / Service fees / Rentals			Sales		Royalties
AB Inbev		(55.3	)		-		(35.5	)
AB USA		(124.9	)		49.0		(288.1	)
Cervecería Modelo		(257.7	)		1.1		(52.9	)
InBev		(73.3	)		0.1		-
Modelo		(356.9	)		-		-
Others		(74.0	)		0.6		(1.1	)
		(942.1	)		50.8		(377.6	)

XML

Note 33 - Group Companies (Tables)

12 Months Ended

Dec. 31, 2017

Statement Line Items [Line Items]

Disclosure of detailed information about subsidiaries [text block]

Argentina
CERVECERIA Y MALTERIA QUILMES SAICA Y G Charcas 5160 – Buenos Aires	99.75%
Bolívia
CERVECERIA BOLIVIANA NACIONAL S.A. Avenida Montes 400 e Rua Chuquisaca 121 - La Paz	85.67%
Brazil
AMBEV S.A. Rua Dr. Renato Paes de Barros, 1.017, 3º andar, Itaim Bibi, São Paulo	Companhia Consolidadora
AROSUCO AROMAS E SUCOS LTDA. Avenida Buriti, 5.385, Distrito Industrial - Manaus - AM	100.00%
CRBS S.A. Avenida Antarctica, 1.891, Fazenda Santa Úrsula – Jaguariúna – SP	100.00%
CERVEJARIA Z.X. Avenida Antarctica, 1.891, Fazenda Santa Ursula – Jaguariúna - SP	86.42%
Canadá
LABATT BREWING COMPANY LIMITED 207 Queens Quay West, Suite 299 - M5J 1A7 - Toronto	100.00%
Chile
CERVECERIA CHILE S.A. Avenida Presidente Eduardo Frei Montalva, 9.600 - Comuna de Quilicura - Santiago	100.00%
Spain
JALUA SPAIN, S.L. Juan Vara Terán, 14 – Ilhas Canárias	100.00%
Luxembourg
AMBEV LUXEMBOURG 15 Breedewues - L1259 - Sennngerberg	100.00%
Guatemala
INDUSTRIAS DEL ATLÁNTICO, SOCIEDAD ANÓNIMA KM 122 Ruta al Atlantico – C.P 01012 Teculutan, Zacapa	50.00%
Paraguay
CERVECERIA PARAGUAYA S.A. Ruta Villeta KM 30 - Ypané	87.36%
Dominican Republic
CERVECERÍA NACIONAL DOMINICANA, S.A. Autopista 30 de Mayo, Distrito Nacional	55.00%
Uruguay
LINTHAL S.A. 25 de Mayo 444, office 401 - Montevideo	100.00%
CERVECERIA Y MALTERIA PAYSSANDÚ S.A. Rambla Baltasar Brum, 2.933 – 11800 - Payssandu	99.93%
MONTHIERS SOCIEDAD ANÓNIMA Cesar Cortinas, 2.037 - Montevideo	100.00%
Panama
Cervecería Nacional S. de R.L. Planta Pasadena, vía Ricardo J Alfaro y Simón Bolívar, ciudad de Panamá, Rep. De Panamá	100.00%

XML

Note 1 - Corporate Information (Details Textual) shares in Millions, R$ in Millions, $ in Millions				12 Months Ended
	Jan. 18, 2018	Dec. 01, 2017 USD ($)	May 16, 2017 BRL (R$) shares	Dec. 31, 2017 USD ($)	Dec. 31, 2017 BRL (R$)	Dec. 31, 2016 BRL (R$)	Dec. 21, 2017 BRL (R$) shares	Apr. 30, 2016 BRL (R$)	Jan. 31, 2016 BRL (R$)
Statement Line Items [Line Items]
Total amount considered under the Federal Tax Amnesty Program					R$ 3,500.0
Amount paid under the Federal Tax Amnesty Program					R$ 960.0
Remaining required monthly payments under the Federal Tax Amnesty Program					145
Maximum exposure of common shares under a equity swap agreement | shares			80				44
Maximum exposure of common shares under a equity swap agreement, amount			R$ 2,300.0				R$ 820.0
Maximum term of equity swap agreement			1 year 180 days
Cerveceria Nacional S. de R.L. [member] | Anheuser-Busch InBev N.V. [member]
Statement Line Items [Line Items]
Total consideration transferred, acquisition-date fair value						R$ 1,236.8
Fair value of profit (loss) from a like-kind exchange of property						1,240.0
Brasil Kirin Indústria de Bebidas Ltda. [member] | Cachoeira de Macacu Bebidas Ltda. [member] | Rio de Janeiro [member]
Statement Line Items [Line Items]
Total consideration transferred, acquisition-date fair value						R$ 478.6
Cervecería Nacional Dominicana S.A. [member] | E. León Jimenes S.A. [member]
Statement Line Items [Line Items]
Percentage of ownership acquired through the partial exercise of a put option		30.00%
Total consideration transferred, acquisition-date fair value | $		$ 926.5
Cervecería Nacional Dominicana S.A. [member] | E. León Jimenes S.A. [member] | Partial exercise of put option for further ownership of subsidiary [member]
Statement Line Items [Line Items]
Proportion of ownership interest in subsidiary	85.00%
Proportion of ownership interests held by non-controlling interests	15.00%
CERVECERIA Y MALTERIA QUILMES SAICA Y G [member]
Statement Line Items [Line Items]
Payments to a subsidiary for completion of 3rd party licensing transaction | $				$ 50.0
Labatt Breweries [member] | Archibald Microbrasserie [member]
Statement Line Items [Line Items]
Percentage of voting equity interests acquired								66.00%
Labatt Breweries [member] | Sucos do Bem [member] | Archibald Microbrasserie [member]
Statement Line Items [Line Items]
Total consideration transferred, acquisition-date fair value								R$ 155.0
CRBS S.A. and Ambev Luxembourg [member] | Mark Anthony Group [member]
Statement Line Items [Line Items]
Total consideration transferred, acquisition-date fair value									R$ 1,400.0

XML

Note 3 - Summary of Significant Accounting Policies (Details Textual)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Amortisation period of intangible assets material to entity	5 years	5 years
Bottom of range [member]
Statement Line Items [Line Items]
Amortisation period of intangible assets material to entity	3 years
Top of range [member]
Statement Line Items [Line Items]
Amortisation period of intangible assets material to entity	5 years

XML

Note 3 - Summary of Significant Accounting Policies - Significant Exchange Rates (Details)		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Canadian Dollars spent in Canada and Cuba [member]
Statement Line Items [Line Items]
Closing rate		2.638	2.4214	2.8124
Average rate		2.4567	2.6348	2.5661
Dominican Pesos spent in the Dominican Republic [member]
Statement Line Items [Line Items]
Closing rate		0.0685	0.07	0.086
Average rate		0.0674	0.0755	0.0725
US Dollars spent in Ecuador, Panama and Cuba [member]
Statement Line Items [Line Items]
Closing rate	[1],[2]	3.308	3.2591	3.9048
Average rate	[1],[2]	3.2017	3.4749	3.2596
Quetzal spent in Guatemala [member]
Statement Line Items [Line Items]
Closing rate		0.45	0.4343	0.5129
Average rate		0.4344	0.457	0.4265
Novo Sol spent in Peru [member]
Statement Line Items [Line Items]
Closing rate	[2]		0.972	1.144
Average rate	[2]		1.0269	1.0396
Argentinean Peso spent in Argentina [member]
Statement Line Items [Line Items]
Closing rate		0.1762	0.2056	0.3003
Average rate		0.1931	0.2354	0.3581
Bolivian Peso spent in Bolivia [member]
Statement Line Items [Line Items]
Closing rate		0.4753	0.4683	0.561
Average rate		0.46	0.4993	0.4683
Guarani spent in Paraguai [member]
Statement Line Items [Line Items]
Closing rate		0.0006	0.0006	0.0007
Average rate		0.0006	0.0006	0.0006
Uruguayan Peso spent in Uruguay [member]
Statement Line Items [Line Items]
Closing rate		0.1151	0.1114	0.1304
Average rate		0.1116	0.1166	0.1197
Chilean Peso spent in Chile [member]
Statement Line Items [Line Items]
Closing rate		0.0054	0.0049	0.0055
Average rate		0.0049	0.0051	0.005
Peso colombiano spent in Colombia [member]
Statement Line Items [Line Items]
Closing rate	[2]		0.0011	0.0012
Average rate	[2]		0.0011	0.0012
Barbadian Dollar spent in Barbados [member]
Statement Line Items [Line Items]
Closing rate		1.6307	1.6075
Average rate		1.5783	1.7139

[1] The functional currency of Cuba, the Cuban convertible peso ("CUC"), has a fixed parity with the dollar ("USD") at balance sheet date.

[2] Until December 31, 2016, due to exchange of shareholdings, according the Note 1 - Corporate information.

XML

Note 3 - Summary of Significant Accounting Policies - Useful Lives of Major Property, Plant and Equipment (Details)	12 Months Ended
	Dec. 31, 2017
Buildings [member]
Statement Line Items [Line Items]
Property, plant and equipment, useful life (Year)	25 years
Plant and equipment [member]
Statement Line Items [Line Items]
Property, plant and equipment, useful life (Year)	15 years
Fixtures [member]
Statement Line Items [Line Items]
Property, plant and equipment, useful life (Year)	10 years
Fittings [member]
Statement Line Items [Line Items]
Property, plant and equipment, useful life (Year)	10 years
External use assets [member] | Bottom of range [member]
Statement Line Items [Line Items]
Property, plant and equipment, useful life (Year)	2 years
External use assets [member] | Top of range [member]
Statement Line Items [Line Items]
Property, plant and equipment, useful life (Year)	5 years

XML

Note 5 - Segment Reporting - Reportable Segments (Details) - BRL (R$) R$ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Net sales		R$ 47,899.3	R$ 45,602.6	R$ 46,720.2
Cost of sales		(18,041.8)	(16,678.0)	(16,061.4)
Gross profit		29,857.5	28,924.6	30,658.8
Distribution expenses		(6,295.5)	(6,085.5)	(5,833.2)
Sales and marketing expenses		(5,620.0)	(5,925.0)	(5,344.7)
Administrative expenses		(2,623.8)	(2,166.1)	(2,281.3)
Other operating income/(expenses), net		1,217.3	1,223.1	1,936.1
Exceptional items		(108.7)	1,134.3	(357.2)
Income from operations (EBIT)		16,426.8	17,105.4	18,778.5
Net finance cost		(3,493.9)	(3,702.0)	(2,268.2)
Share of result of joint ventures		(3.1)	(5.0)	3.1
Income before income tax		12,929.8	13,398.4	16,513.4
Income tax expense		(5,079.3)	(315.0)	(3,634.2)
Net Income		7,850.5	13,083.4	12,879.2
Normalized EBITDA(iii)	[1]	20,147.6	19,483.1	22,209.7
Depreciation. amortization and impairment		R$ (3,612.1)	R$ (3,512.0)	R$ (3,074.6)
Normalized EBITDA margin in %		42.10%	42.70%	47.50%
Acquisition of property, plant and equipment		R$ 3,206.0	R$ 4,035.4	R$ 5,381.9
Total assets		86,851.9	83,841.4	90,176.3
Total liabilities		86,851.9	83,841.4	90,176.3
Operating segments [member]
Statement Line Items [Line Items]
Total assets		70,575.1	71,329.8	69,304.6
Total liabilities		32,747.0	31,811.0	29,701.2
Elimination of intersegment amounts [member]
Statement Line Items [Line Items]
Total assets		(3,077.7)	(3,968.1)	(1,996.3)
Total liabilities		(3,077.7)	(3,968.1)	(1,996.3)
Unallocated amounts [member]
Statement Line Items [Line Items]
Total assets		19,354.5	16,479.7	22,868.0
Total liabilities		57,182.6	55,998.5	62,471.4
North Latin America segment [member]
Statement Line Items [Line Items]
Net sales	[2]	31,086.0	28,927.8	29,654.9
Cost of sales	[2]	(11,935.0)	(10,870.4)	(9,921.3)
Gross profit	[2]	19,151.0	18,057.4	19,733.6
Distribution expenses	[2]	(4,193.8)	(3,965.4)	(3,709.6)
Sales and marketing expenses	[2]	(3,655.5)	(3,671.1)	(3,264.0)
Administrative expenses	[2]	(1,954.1)	(1,486.3)	(1,599.8)
Other operating income/(expenses), net	[2]	1,170.5	1,283.7	1,871.5
Exceptional items	[2]	(56.1)	1,183.2	(273.9)
Income from operations (EBIT)	[2]	10,462.0	11,401.5	12,757.8
Net finance cost	[2]	(2,693.3)	(3,694.5)	(1,842.9)
Share of result of joint ventures	[2]	(4.7)	(6.8)	1.9
Income before income tax	[2]	7,764.0	7,700.2	10,916.8
Income tax expense	[2]	(3,309.5)	1,100.1	(1,884.7)
Net Income	[2]	4,454.5	8,800.3	9,032.1
Normalized EBITDA(iii)	[1]	13,233.9	12,805.0	15,274.6
Depreciation. amortization and impairment	[2]	R$ (2,715.8)	R$ (2,586.7)	R$ (2,242.9)
Normalized EBITDA margin in %	[2]	42.60%	44.30%	51.50%
Acquisition of property, plant and equipment	[2]	R$ 1,862.0	R$ 2,352.0	R$ 3,442.0
Total assets
Total liabilities
North Latin America segment [member] | Operating segments [member]
Statement Line Items [Line Items]
Total assets	[2]	48,811.7	50,935.0	47,282.3
Total liabilities	[2]	23,031.6	22,958.9	20,998.7
North Latin America segment [member] | Elimination of intersegment amounts [member]
Statement Line Items [Line Items]
Total assets
Total liabilities
North Latin America segment [member] | Unallocated amounts [member]
Statement Line Items [Line Items]
Total assets
Total liabilities
South Latin America segment [member]
Statement Line Items [Line Items]
Net sales	[3]	10,769.7	10,212.9	11,255.6
Cost of sales	[3]	(4,122.6)	(3,685.4)	(4,306.8)
Gross profit	[3]	6,647.1	6,527.5	6,948.8
Distribution expenses	[3]	(1,007.9)	(979.6)	(1,047.5)
Sales and marketing expenses	[3]	(1,091.3)	(1,317.6)	(1,294.8)
Administrative expenses	[3]	(384.5)	(400.2)	(428.0)
Other operating income/(expenses), net	[3]	41.2	(39.0)	60.3
Exceptional items	[3]	(41.3)	(41.5)	(39.9)
Income from operations (EBIT)	[3]	4,163.3	3,749.6	4,198.9
Net finance cost	[3]	(709.5)	(439.0)	(868.6)
Share of result of joint ventures
Income before income tax	[3]	3,453.8	3,310.6	3,330.3
Income tax expense	[3]	(1,144.1)	(814.0)	(1,154.1)
Net Income	[3]	2,309.7	2,496.6	2,176.2
Normalized EBITDA(iii)	[1],[3]	4,866.6	4,501.7	4,877.8
Depreciation. amortization and impairment	[3]	R$ (662.0)	R$ (710.6)	R$ (639.0)
Normalized EBITDA margin in %	[3]	45.20%	44.10%	43.30%
Acquisition of property, plant and equipment	[3]	R$ 1,051.2	R$ 1,365.5	R$ 1,654.1
Total assets
Total liabilities
South Latin America segment [member] | Operating segments [member]
Statement Line Items [Line Items]
Total assets	[3]	11,558.5	11,149.0	12,757.7
Total liabilities	[3]	6,015.2	5,576.4	5,093.9
South Latin America segment [member] | Elimination of intersegment amounts [member]
Statement Line Items [Line Items]
Total assets
Total liabilities
South Latin America segment [member] | Unallocated amounts [member]
Statement Line Items [Line Items]
Total assets
Total liabilities
North Latin America segment - Central America Operations, excluding Latin America South segment [member]
Statement Line Items [Line Items]
Net sales		4,733.0	3,973.2	3,328.8
Cost of sales		(2,045.6)	(1,798.6)	(1,563.0)
Gross profit		2,687.4	2,174.6	1,765.8
Distribution expenses		(538.6)	(409.9)	(357.4)
Sales and marketing expenses		(526.4)	(456.7)	(390.1)
Administrative expenses		(265.0)	(171.7)	(158.3)
Other operating income/(expenses), net		77.8	9.6	(0.2)
Exceptional items		(23.1)	(13.5)	(8.4)
Income from operations (EBIT)		1,412.1	1,132.4	851.4
Net finance cost		(46.5)	(9.2)	42.8
Share of result of joint ventures		6.0	19.0
Income before income tax		1,371.6	1,142.2	894.2
Income tax expense		(353.5)	(318.8)	(269.4)
Net Income		1,018.1	823.4	624.8
Normalized EBITDA(iii)	[1]	1,842.0	1,483.8	1,173.9
Depreciation. amortization and impairment		R$ (406.8)	R$ (338.0)	R$ (314.1)
Normalized EBITDA margin in %		38.90%	37.30%	35.30%
North Latin America Segment - Brazil beer operations [member]
Statement Line Items [Line Items]
Net sales		R$ 22,509.3	R$ 21,173.1	R$ 22,441.3
Cost of sales		(7,895.1)	(7,339.9)	(6,757.6)
Gross profit		14,614.2	13,833.2	15,683.7
Distribution expenses		(2,961.0)	(2,891.7)	(2,754.0)
Sales and marketing expenses		(2,953.6)	(3,044.0)	(2,691.3)
Administrative expenses		(1,476.3)	(1,160.2)	(1,341.5)
Other operating income/(expenses), net		825.0	969.8	1,551.2
Exceptional items		(28.2)	1,014.3	(265.2)
Income from operations (EBIT)		8,020.1	8,721.4	10,182.9
Net finance cost		(2,646.8)	(3,685.3)	(1,885.7)
Share of result of joint ventures		(10.7)	(25.8)	1.9
Income before income tax		5,362.6	5,010.3	8,299.1
Income tax expense		(2,956.0)	1,418.9	(1,615.3)
Net Income		2,406.6	6,429.2	6,683.8
Normalized EBITDA(iii)	[4]	10,047.3	9,618.6	12,038.9
Depreciation. amortization and impairment		R$ (1,999.0)	R$ (1,911.5)	R$ (1,590.8)
Normalized EBITDA margin in %		44.50%	45.40%	53.60%
Canada segment [member]
Statement Line Items [Line Items]
Net sales		R$ 6,043.6	R$ 6,461.9	R$ 5,809.7
Cost of sales		(1,984.2)	(2,122.2)	(1,833.3)
Gross profit		4,059.4	4,339.7	3,976.4
Distribution expenses		(1,093.8)	(1,140.5)	(1,076.1)
Sales and marketing expenses		(873.2)	(936.3)	(785.9)
Administrative expenses		(285.2)	(279.6)	(253.4)
Other operating income/(expenses), net		5.6	(21.6)	4.2
Exceptional items		(11.3)	(7.4)	(43.4)
Income from operations (EBIT)		1,801.5	1,954.3	1,821.8
Net finance cost		(91.1)	431.5	443.3
Share of result of joint ventures		1.6	1.8	1.2
Income before income tax		1,712.0	2,387.6	2,266.3
Income tax expense		(625.7)	(601.1)	(595.5)
Net Income		1,086.3	1,786.5	1,670.8
Normalized EBITDA(iii)	[1]	2,047.1	2,176.4	2,057.3
Depreciation. amortization and impairment		R$ (234.3)	R$ (214.7)	R$ (192.1)
Normalized EBITDA margin in %		33.90%	33.70%	35.40%
Acquisition of property, plant and equipment		R$ 292.8	R$ 317.9	R$ 285.8
Total assets
Total liabilities
Canada segment [member] | Operating segments [member]
Statement Line Items [Line Items]
Total assets		10,204.9	9,245.8	9,264.6
Total liabilities		3,700.2	3,275.7	3,608.6
Canada segment [member] | Elimination of intersegment amounts [member]
Statement Line Items [Line Items]
Total assets
Total liabilities
Canada segment [member] | Unallocated amounts [member]
Statement Line Items [Line Items]
Total assets
Total liabilities
North Latin America segment - Brazil [member]
Statement Line Items [Line Items]
Net sales		26,353.0	24,954.6	26,326.1
Cost of sales		(9,889.4)	(9,071.8)	(8,358.3)
Gross profit		16,463.6	15,882.8	17,967.8
Distribution expenses		(3,655.2)	(3,555.5)	(3,352.2)
Sales and marketing expenses		(3,129.1)	(3,214.4)	(2,873.9)
Administrative expenses		(1,689.1)	(1,314.6)	(1,441.4)
Other operating income/(expenses), net		1,092.7	1,274.1	1,871.6
Exceptional items		(33.0)	1,196.7	(265.5)
Income from operations (EBIT)		9,049.9	10,269.1	11,906.4
Net finance cost		(2,646.8)	(3,685.3)	(1,885.7)
Share of result of joint ventures		(10.7)	(25.8)	1.9
Income before income tax		6,392.4	6,558.0	10,022.6
Income tax expense		(2,956.0)	1,418.9	(1,615.3)
Net Income		3,436.4	7,976.9	8,407.3
Normalized EBITDA(iii)	[4]	11,391.9	11,321.2	14,100.7
Depreciation. amortization and impairment		R$ (2,309.0)	R$ (2,248.7)	R$ (1,928.8)
Normalized EBITDA margin in %		43.20%	45.40%	53.60%
North Latin America segment - Brazil soft drink and non-alcoholic and non-carbonated operations [member]
Statement Line Items [Line Items]
Net sales		R$ 3,843.7	R$ 3,781.5	R$ 3,884.8
Cost of sales		(1,994.3)	(1,731.9)	(1,600.7)
Gross profit		1,849.4	2,049.6	2,284.1
Distribution expenses		(694.2)	(663.8)	(598.2)
Sales and marketing expenses		(175.5)	(170.4)	(182.6)
Administrative expenses		(212.8)	(154.4)	(99.9)
Other operating income/(expenses), net		267.7	304.3	320.4
Exceptional items		(4.8)	182.4	(0.3)
Income from operations (EBIT)		1,029.8	1,547.7	1,723.5
Net finance cost
Share of result of joint ventures
Income before income tax		1,029.8	1,547.7	1,723.5
Income tax expense
Net Income		1,029.8	1,547.7	1,723.5
Normalized EBITDA(iii)	[4]	1,344.6	1,702.6	2,061.8
Depreciation. amortization and impairment		R$ (310.0)	R$ (337.3)	R$ (338.0)
Normalized EBITDA margin in %		35.80%	45.00%	53.10%

[1] Normalized EBITDA is calculated excluding of the net income the following effects: (i) Income tax expense, (iii) Share of results of joint ventures (iii) Net finance result, (iv) Exceptional items, and (v) Depreciation, amortization and impairment of property, plant and equipment.

[2] Latin America - North: includes operations in Brazil, Luxembourg and CAC (El Salvador, Guatemala, Nicaragua, Dominican Republic, Saint Vincent, Dominica, Antigua, Cuba, Barbados and Panama).

[3] Latin America - South: includes operations in Argentina, Bolivia, Chile, Paraguay and Uruguay. In addition Colombia, Ecuador and Peru, until December 31, 2016, due to exchange of shareholdings, according the Note 1 - Corporate information.

[4] Normalized EBITDA is calculated excluding of the net income the following effects: (i) Income tax expense, (iii) Share of results of joint ventures, (iii) Net finance result, (iv) Exceptional items, and (v) Depreciation, amortization and impairment of property, plant and equipment.

XML

Note 6 - Net Sales - Reconiciliation Between Gross Sales and Net Sales (Details) - BRL (R$) R$ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Gross sales (i)	[1]	R$ 72,411.0	R$ 79,551.1	R$ 97,214.2
Excise duty		(16,192.9)	(16,345.2)	(17,471.7)
Discounts (i)	[1]	(8,318.8)	(17,603.3)	(33,022.3)
		R$ 47,899.3	R$ 45,602.6	R$ 46,720.2

[1] Variance resulting from the change in the billing method with direct effect on Gross sales and Discounts.

XML

Note 7 - Other Operating Income/(Expenses) (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Government grants/NPV of long term fiscal incentives	R$ 993.7	R$ 1,166.5	R$ 1,755.7
(Additions)/reversals to provisions	(12.9)	(132.9)	(106.1)
Gains/(losses) on disposal of property, plant and equipment, intangible assets and operation in associates	91.1	70.9	53.0
Other operating income/(expenses), net	145.4	118.6	233.4
	R$ 1,217.3	R$ 1,223.1	R$ 1,936.1

XML

Note 8 - Exceptional Items (Details Textual) - BRL (R$) R$ in Millions		1 Months Ended
	Dec. 01, 2017	Dec. 31, 2017
Statement Line Items [Line Items]
Finance costs, exceptional items		R$ 977
Tax income (expense), exceptional items	R$ (2,800)

XML

Note 8 - Exceptional Items - Exceptional Items Included in the Income Statement (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Result through exchange transaction of shareholdings(i)		R$ 1,240.0
Restructuring	(105.5)	(79.8)	(63.3)
Administrative lawsuit			(239.2)
Costs arising from business combinations	(3.8)	(29.8)	(48.9)
Others	0.6	3.9	(5.8)
	R$ (108.7)	R$ 1,134.3	R$ (357.2)

XML

Note 9 - Payroll and Related Benefits - Schedule of Payroll and Related Benefits (Details) - BRL (R$)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Wages and salaries	R$ 3,371,200,000	R$ 3,038,900,000	R$ 3,086,500,000
Social security contributions	741,100,000	727,200,000	756,100,000
Other personnel cost	616,200,000	613,800,000	561,300,000
Increase in liabilities for defined benefit plans	138,700,000	151,700,000	142,300,000
Expense from share-based payment transactions with employees	236,900,000	189,300,000	209,400,000
Contributions to defined contribution plans	18,900,000	25,300,000	19,000,000
	R$ 5,123,000,000	R$ 4,746,200,000	R$ 4,774,600,000

XML

Note 9 - Payroll and Related Benefits - Payroll and Related Benefits Income Statement Presentation (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Cost of sales	R$ 1,714.8	R$ 1,912.3	R$ 1,890.2
Distribution expenses	791.5	780.8	722.1
Sales and marketing expenses	1,096.8	989.8	980.8
Administrative expenses	1,470.1	970.3	1,154.0
Net finance cost	42.9	95.9	27.5
Exceptional item	6.9	(2.9)
	R$ 5,123.0	R$ 4,746.2	R$ 4,774.6

XML

Note 10 - Additional Information on Operating Expenses by Nature - Depreciation, Amortization and Impairment Expenses (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Depreciation and impairment of property, plant and equipment, cost of sales	R$ 2,364.7	R$ 2,283.3	R$ 2,053.2
Amortization of intangible assets, cost of sales	6.2	4.3	3.2
Depreciation and impairment of property, plant and equipment, distribution expenses	197.6	200.9	177.9
Amortization of intangible assets, distribution expenses
Depreciation and impairment of property, plant and equipment, sales and marketing expenses	532.2	538.0	431.5
Amortization of intangible assets, sales and marketing expenses	142.3	222.9	162.5
Depreciation and impairment of property, plant and equipment, administrative expenses	231.1	182.5	165.8
Amortization of intangible assets, administrative expenses	142.0	95.8	81.5
Depreciation and impairment of property, plant and equipment	3,325.6	3,204.7	2,828.4
Amortization of intangible assets	R$ 290.5	R$ 323.0	R$ 247.2

XML

Note 11 - Finance Cost and Income - Finance Costs (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Interest expense	R$ (1,571.6)	R$ (1,547.3)	R$ (1,062.6)
Capitalized borrowings	2.3	3.9	26.0
Net Interest on pension plans	(77.6)	(105.6)	(97.6)
Losses on hedging instruments	(616.7)	(1,575.1)	(1,267.0)
Interest on provision for disputes and litigations	(225.9)	(619.5)	(120.1)
Exchange variation	(339.5)	(310.4)	(721.8)
Tax on financial transactions	(179.7)	(224.6)	(146.4)
Bank guarantee expenses	(89.5)	(87.1)	(80.8)
Other financial results	(193.3)	(132.2)	(92.1)
	(3,291.5)	(4,597.9)	(3,562.4)
Non-recurring finance cost	(976.8)
	R$ (4,268.3)	R$ (4,597.9)	R$ (3,562.4)

XML

Note 11 - Finance Cost and Income - Interest Expense (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Financial liabilities measured at amortized cost	R$ (477.6)	R$ (545.6)	R$ (423.1)
Liabilities at fair value through profit or loss	(1,076.2)	(961.0)	(601.3)
Fair value hedge - hedged items	(19.7)	(49.3)	(22.4)
Fair value hedge - hedging instruments	1.9	8.6	(15.8)
	R$ (1,571.6)	R$ (1,547.3)	R$ (1,062.6)

XML

Note 11 - Finance Cost and Income - Finance Income (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Interest income	R$ 458.8	R$ 513.6	R$ 575.5
Gains on derivative	73.7	113.5	428.3
Financial assets at fair value through profit or loss	227.6	247.5	261.4
Other financial results	14.3	21.3	29.0
	R$ 774.4	R$ 895.9	R$ 1,294.2

XML

Note 11 - Finance Cost and Income - Interest Income (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Cash and cash equivalents	R$ 233.4	R$ 241.5	R$ 425.9
Investment securities held for trading	26.9	51.1	149.6
Other receivables	198.5	221.0
	R$ 458.8	R$ 513.6	R$ 575.5

XML

Note 12 - Income Tax and Social Contribution (Details Textual) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Interest on net equity, deductible and to be deductible	R$ 4,869.8
Deductible Interest on net equity	4,850.1
Tax impact of deductible interest in net equity	1,649.0
Unused provision reversed, other provisions	145.0	R$ 5.0
Total tax expense (income)	5,079.3	R$ 315.0	R$ 3,634.2
CRBS S.A. [member]
Statement Line Items [Line Items]
Total tax expense (income)	2,926.0
Tax expense (income), continuing operations, non-recurring, Federal Tax Amnesty Program	2,785.0
Tax expense (income), continuing operations, financial results, Federal Tax Amnesty Program	R$ 141.0

XML

Note 12 - Income Tax and Social Contribution - Income Taxes Reported (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Income tax expense - current	R$ (5,332.3)	R$ (413.9)	R$ (1,227.8)
Deferred tax expense on temporary differences	891.9	(732.5)	(2,192.4)
Deferred tax over taxes losses carryforwards movements in the current period	(638.9)	831.4	(214.0)
Total deferred tax (expense)/income	253.0	98.9	(2,406.4)
Total income tax expenses	R$ (5,079.3)	R$ (315.0)	R$ (3,634.2)

XML

Note 12 - Income Tax and Social Contribution - Reconciliation From the Weighted Nominal to the Effective Tax Rate (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Income before tax	R$ 12,929.8	R$ 13,398.4	R$ 16,513.4
Adjustment on taxable basis
Non-taxable income	(310.9)	(392.0)	(999.9)
Government grants related to sales taxes	(1,889.1)	(1,528.6)	(1,360.7)
Share of results of joint ventures	3.1	5.0	(3.1)
Non-deductible expenses	91.1	539.3	415.9
Complement of income tax of foreign subsidiaries due in Brazil	560.4	148.0	1,965.2
Results of intercompany transactions non-taxable/not deductible in Brazil	(547.5)	640.7	(1,313.2)
	R$ 10,836.9	R$ 12,810.8	R$ 15,217.6
Aggregated weighted nominal tax rate	29.22%	30.16%	31.59%
Taxes payable – nominal rate	R$ (3,166.6)	R$ (3,864.0)	R$ (4,806.9)
Adjustment on tax expense
Regional incentives - income taxes	304.6	264.5	257.8
Deductible interest on shareholders' equity	1,649.0	1,867.7	1,646.1
Tax savings from goodwill amortization on tax books	175.2	142.0	142.4
Withholding tax over undistributed profits	(356.9)	153.1	(672.4)
Recognition / write-off of deferred charges on tax losses	(178.9)	796.7	138.1
PERT 2017	(2,784.7)
Others with reduced taxation	(721.0)	325.0	(339.3)
Income tax and social contribution expense	R$ (5,079.3)	R$ (315.0)	R$ (3,634.2)
Effective tax rate	39.28%	2.35%	22.01%

XML

Note 13 - Property, Plant and Equipment - Reconciliation of Changes in Property, Plant and Equipment (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Property, plant and equipment, balance	R$ 19,153.8	R$ 19,140.1
Property, plant and equipment, balance	18,822.3	19,153.8
Property, plant and equipment, balance	18,822.3	19,153.8
Land and buildings [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	6,052.0	5,474.3
Property, plant and equipment, balance	6,376.0	6,052.0
Property, plant and equipment, balance	6,052.0	6,052.0
Plant and equipment [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	9,689.0	9,807.0
Property, plant and equipment, balance	9,565.1	9,689.0
Property, plant and equipment, balance	9,689.0	9,689.0
Fixtures and fittings [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	1,672.1	1,726.2
Property, plant and equipment, balance	1,623.3	1,672.1
Property, plant and equipment, balance	1,672.1	1,672.1
Construction in progress [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	1,740.7	2,132.6
Property, plant and equipment, balance	1,257.9	1,740.7
Property, plant and equipment, balance	1,740.7	1,740.7
Gross carrying amount [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	37,419.4	36,685.6
Effect of movements in foreign exchange	18.7	(2,652.7)
Business combinations	204.2	700.4
Acquisitions	3,175.5	4,009.3
Disposals	(706.8)	(1,012.7)
Transfer to other asset categories	(310.9)	(173.0)
Others	35.0
Property, plant and equipment, balance	39,835.1	37,419.4
Property, plant and equipment, balance	37,419.4	37,419.4
Acquisitions through exchange transaction of shareholdings		433.9
Disposals through exchange transaction of shareholdings		(571.4)
Gross carrying amount [member] | Land and buildings [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	8,330.2	7,718.3
Effect of movements in foreign exchange	3.1	(474.7)
Business combinations	228.9	283.4
Acquisitions	10.2	8.4
Disposals	(25.9)	(106.0)
Transfer to other asset categories	415.4	800.6
Others
Property, plant and equipment, balance	8,961.9	8,330.2
Property, plant and equipment, balance	8,330.2	8,330.2
Acquisitions through exchange transaction of shareholdings		221.2
Disposals through exchange transaction of shareholdings		(121.0)
Gross carrying amount [member] | Plant and equipment [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	22,764.3	22,369.6
Effect of movements in foreign exchange	34.6	(1,528.0)
Business combinations	(24.7)	360.4
Acquisitions	626.1	819.4
Disposals	(555.5)	(693.1)
Transfer to other asset categories	1,657.8	1,595.3
Others	36.2
Property, plant and equipment, balance	24,538.8	22,764.3
Property, plant and equipment, balance	22,764.3	22,764.3
Acquisitions through exchange transaction of shareholdings		185.0
Disposals through exchange transaction of shareholdings		(344.3)
Gross carrying amount [member] | Fixtures and fittings [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	4,584.2	4,465.1
Effect of movements in foreign exchange	(27.3)	(427.4)
Business combinations		56.0
Acquisitions	171.8	276.0
Disposals	(125.4)	(210.3)
Transfer to other asset categories	473.2	526.1
Others
Property, plant and equipment, balance	5,076.5	4,584.2
Property, plant and equipment, balance	4,584.2	4,584.2
Acquisitions through exchange transaction of shareholdings
Disposals through exchange transaction of shareholdings		(101.3)
Gross carrying amount [member] | Construction in progress [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	1,740.7	2,132.6
Effect of movements in foreign exchange	8.3	(222.6)
Business combinations		0.6
Acquisitions	2,367.4	2,905.5
Disposals		(3.3)
Transfer to other asset categories	(2,857.3)	(3,095.0)
Others	(1.2)
Property, plant and equipment, balance	1,257.9	1,740.7
Property, plant and equipment, balance	1,740.7	1,740.7
Acquisitions through exchange transaction of shareholdings		27.7
Disposals through exchange transaction of shareholdings		(4.8)
Accumulated depreciation, amortisation and impairment [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	(18,265.6)	(17,545.5)
Effect of movements in foreign exchange	(116.7)	1,137.1
Disposals	654.3	928.8
Transfer to other asset categories	33.0	61.4
Others	7.8	11.4
Property, plant and equipment, balance	(21,012.8)	(18,265.6)
Depreciation	(3,200.4)	(3,083.8)
Impairment losses	(125.2)	(120.9)
Property, plant and equipment, balance	(18,265.6)	(18,265.6)
Disposals through exchange transaction of shareholdings		345.9
Accumulated depreciation, amortisation and impairment [member] | Land and buildings [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	(2,278.2)	(2,244.0)
Effect of movements in foreign exchange	(12.1)	95.6
Disposals	5.3	95.3
Transfer to other asset categories	(1.9)
Others
Property, plant and equipment, balance	(2,585.9)	(2,278.2)
Depreciation	(299.0)	(277.8)
Impairment losses		(0.1)
Property, plant and equipment, balance	(2,278.2)	(2,278.2)
Disposals through exchange transaction of shareholdings		52.8
Accumulated depreciation, amortisation and impairment [member] | Plant and equipment [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	(13,075.3)	(12,562.6)
Effect of movements in foreign exchange	(104.9)	804.8
Disposals	539.5	646.0
Transfer to other asset categories	29.7	21.7
Others	7.8	11.4
Property, plant and equipment, balance	(14,973.7)	(13,075.3)
Depreciation	(2,245.5)	(2,117.6)
Impairment losses	(125.0)	(120.7)
Property, plant and equipment, balance	(13,075.3)	(13,075.3)
Disposals through exchange transaction of shareholdings		241.7
Accumulated depreciation, amortisation and impairment [member] | Fixtures and fittings [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance	(2,912.1)	(2,738.9)
Effect of movements in foreign exchange	0.3	236.7
Disposals	109.5	187.5
Transfer to other asset categories	5.2	39.7
Others
Property, plant and equipment, balance	(3,453.2)	(2,912.1)
Depreciation	(655.9)	(688.4)
Impairment losses	(0.2)	(0.1)
Property, plant and equipment, balance	(2,912.1)	(2,912.1)
Disposals through exchange transaction of shareholdings		51.4
Accumulated depreciation, amortisation and impairment [member] | Construction in progress [member]
Statement Line Items [Line Items]
Property, plant and equipment, balance
Effect of movements in foreign exchange
Disposals
Transfer to other asset categories
Others
Property, plant and equipment, balance
Depreciation
Impairment losses
Property, plant and equipment, balance
Disposals through exchange transaction of shareholdings

XML

Note 14 - Goodwill (Details Textual)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Goodwill percentage of total assets	36.00%	36.00%
Cost to sell rate	1.50%

XML

Note 14 - Goodwill - Changes in the Period (Details) - BRL (R$) R$ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Goodwill balance		R$ 30,511.2	R$ 30,953.1
Effect of movements in foreign exchange		489.7	(2,388.9)
Acquisition and disposal through business combinations (i)	[1]	401.0	1,947.0
Goodwill balance		R$ 31,401.9	R$ 30,511.2

[1] In 2017 it refers mainly to the goodwill allocation of acquisition of Cachoeiras de Macacu, and in 2016 refers to the acquisition of Mark Anthony and Cerveceria Nacional in the transaction of exchange of shareholdings.

XML

Note 14 - Goodwill - Carrying Amount of Goodwill Allocated to the Different Cash-Generating Units (Details) - BRL (R$) R$ in Millions		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Goodwill		R$ 31,401.9	R$ 30,511.2	R$ 30,953.1
North Latin America segment - Brazil, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill		17,668.4	17,424.6
Goodwill, gross		102,911.0	102,667.2
Goodwill, non-controlling transactions	[1]	(85,242.6)	(85,242.6)
North Latin America segment - Dominican Republic, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill		3,163.6	3,224.9
North Latin America segment - Cuba, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill	[2]	2.7	3.6
North Latin America segment - Panama, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill		1,149.3	1,060.1
South Latin America segment - Argentina, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill		443.9	518.0
South Latin America segment - Bolivia, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill		1,170.1	1,152.8
South Latin America segment - Chile, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill		47.0	42.7
South Latin America segment - Paraguay, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill		786.1	753.7
South Latin America segment - Uruguay, cash-generating unit [member]
Statement Line Items [Line Items]
Goodwill		170.7	165.8
Cash-generating unit in Canada [member]
Statement Line Items [Line Items]
Goodwill		R$ 6,800.1	R$ 6,165.0

[1] It refers to the exchange of shareholdings operation occurred in 2013 as a result of the adoption of the predecessor basis of accounting.

[2] The functional currency of Cuba, the Cuban convertible peso (CUC), has a fixed parity with the dollar (USD) at balance sheet date.

XML

Note 14 - Goodwill - Weighted Average Cost of Capital (Details) - Goodwill [member] - North Latin America segment [member]	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Bottom of range [member]
Statement Line Items [Line Items]
weighted average cost of capital, goodwill	8.59%	8.39%
Top of range [member]
Statement Line Items [Line Items]
weighted average cost of capital, goodwill	10.29%	10.27%

XML

Note 15 - Intangible (Details Textual)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Amortisation period of intangible assets material to entity	5 years	5 years
Amortisation percentage	20.00%	20.00%

XML

Note 15 - Intangible - Reconciliation of Changes in Intangible Assets (Details) - BRL (R$) R$ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Intangible assets, balance		R$ 5,245.9	R$ 5,092.2
Intangible assets, balance		4,674.7	5,245.9
Intangible		4,674.7	5,245.9
Brand names [member]
Statement Line Items [Line Items]
Intangible assets, balance		4,158.9	3,906.3
Intangible assets, balance		3,512.8	4,158.9
Intangible		4,158.9	4,158.9
Distribution contracts [member]
Statement Line Items [Line Items]
Intangible assets, balance		558.6	765.2
Intangible assets, balance		438.7	558.6
Intangible		558.6	558.6
Computer software [member]
Statement Line Items [Line Items]
Intangible assets, balance		291.5	248.7
Intangible assets, balance		432.8	291.5
Intangible		291.5	291.5
Other intangible assets [member]
Statement Line Items [Line Items]
Intangible assets, balance		236.9	172.0
Intangible assets, balance		290.4	236.9
Intangible		236.9	236.9
Gross carrying amount [member]
Statement Line Items [Line Items]
Intangible assets, balance		7,829.4	7,440.8
Effect of movements in foreign exchange		(16.3)	(858.1)
Acquisitions		30.5	26.1
Acquisitions through business combination		(4.0)	1,073.8
Transfers to other assets categories		(352.3)	(206.0)
Others		46.0	172.3
Intangible assets, balance		7,533.3	7,829.4
Intangible		7,829.4	7,829.4
Disposal			(0.7)
Acquisitions through exchange transaction of shareholdings			248.7
Disposals through exchange transaction of shareholdings			(67.5)
Foreing exchange effects		(16.3)	(858.1)
Gross carrying amount [member] | Brand names [member]
Statement Line Items [Line Items]
Intangible assets, balance		4,160.8	3,908.2
Effect of movements in foreign exchange		(10.5)	(645.9)
Acquisitions		18.8	3.0
Acquisitions through business combination		(4.0)	1,043.1
Transfers to other assets categories		(650.4)	(317.7)
Others
Intangible assets, balance		3,514.7	4,160.8
Intangible		4,160.8	4,160.8
Disposal
Acquisitions through exchange transaction of shareholdings			228.1
Disposals through exchange transaction of shareholdings			(58.0)
Foreing exchange effects		(10.5)	(645.9)
Gross carrying amount [member] | Distribution contracts [member]
Statement Line Items [Line Items]
Intangible assets, balance		2,319.4	2,387.4
Effect of movements in foreign exchange		7.5	(68.3)
Acquisitions
Acquisitions through business combination
Transfers to other assets categories		6.4	0.3
Others
Intangible assets, balance		2,333.3	2,319.4
Intangible		2,319.4	2,319.4
Disposal
Acquisitions through exchange transaction of shareholdings
Disposals through exchange transaction of shareholdings
Foreing exchange effects		7.5	(68.3)
Gross carrying amount [member] | Computer software [member]
Statement Line Items [Line Items]
Intangible assets, balance		888.5	788.4
Effect of movements in foreign exchange		(12.1)	(50.3)
Acquisitions		2.9	4.1
Acquisitions through business combination
Transfers to other assets categories		265.3	135.5
Others
Intangible assets, balance		1,144.6	888.5
Intangible		888.5	888.5
Disposal			(0.4)
Acquisitions through exchange transaction of shareholdings			20.6
Disposals through exchange transaction of shareholdings			(9.4)
Foreing exchange effects		(12.1)	(50.3)
Gross carrying amount [member] | Other intangible assets [member]
Statement Line Items [Line Items]
Intangible assets, balance		460.7	356.8
Effect of movements in foreign exchange		(1.2)	(93.6)
Acquisitions		8.8	19.0
Acquisitions through business combination			30.7
Transfers to other assets categories		26.4	(24.1)
Others		46.0	172.3
Intangible assets, balance		540.7	460.7
Intangible		460.7	460.7
Disposal			(0.3)
Acquisitions through exchange transaction of shareholdings
Disposals through exchange transaction of shareholdings			(0.1)
Foreing exchange effects		(1.2)	(93.6)
Accumulated depreciation, amortisation and impairment [member]
Statement Line Items [Line Items]
Intangible assets, balance	[1]	(2,583.5)	(2,348.6)
Effect of movements in foreign exchange	[1]	15.5	79.8
Transfers to other assets categories	[1]	(0.1)	0.1
Intangible assets, balance	[1]	(2,858.6)	(2,583.5)
Amortization	[1]	(290.5)	(323.0)
Intangible	[1]	(2,583.5)	(2,583.5)
Disposal	[1]		0.1
Disposals through exchange transaction of shareholdings	[1]		8.1
Foreing exchange effects	[1]	15.5	79.8
Accumulated depreciation, amortisation and impairment [member] | Brand names [member]
Statement Line Items [Line Items]
Intangible assets, balance	[1]	(1.9)	(1.9)
Effect of movements in foreign exchange	[1]
Transfers to other assets categories	[1]
Intangible assets, balance	[1]	(1.9)	(1.9)
Amortization	[1]
Intangible	[1]	(1.9)	(1.9)
Disposal	[1]
Disposals through exchange transaction of shareholdings	[1]
Foreing exchange effects	[1]
Accumulated depreciation, amortisation and impairment [member] | Distribution contracts [member]
Statement Line Items [Line Items]
Intangible assets, balance	[1]	(1,760.8)	(1,622.2)
Effect of movements in foreign exchange	[1]	4.9	9.9
Transfers to other assets categories	[1]		0.1
Intangible assets, balance	[1]	(1,894.6)	(1,760.8)
Amortization	[1]	(138.7)	(148.6)
Intangible	[1]	(1,760.8)	(1,760.8)
Disposal	[1]
Disposals through exchange transaction of shareholdings	[1]
Foreing exchange effects	[1]	4.9	9.9
Accumulated depreciation, amortisation and impairment [member] | Computer software [member]
Statement Line Items [Line Items]
Intangible assets, balance	[1]	(597.0)	(539.7)
Effect of movements in foreign exchange	[1]	5.5	29.0
Transfers to other assets categories	[1]	(1.4)
Intangible assets, balance	[1]	(711.8)	(597.0)
Amortization	[1]	(118.9)	(94.4)
Intangible	[1]	(597.0)	(597.0)
Disposal	[1]		0.1
Disposals through exchange transaction of shareholdings	[1]		8.0
Foreing exchange effects	[1]	5.5	29.0
Accumulated depreciation, amortisation and impairment [member] | Other intangible assets [member]
Statement Line Items [Line Items]
Intangible assets, balance	[1]	(223.8)	(184.8)
Effect of movements in foreign exchange	[1]	5.1	40.9
Transfers to other assets categories	[1]	1.3
Intangible assets, balance	[1]	(250.3)	(223.8)
Amortization	[1]	(32.9)	(80.0)
Intangible	[1]	(223.8)	(223.8)
Disposal	[1]
Disposals through exchange transaction of shareholdings	[1]		0.1
Foreing exchange effects	[1]	R$ 5.1	R$ 40.9

[1] The period of amortization of intangible assets of definite useful life is five years and amortization is calculated at the rate of 20% and recognized in income on a straight-line method.

XML

Note 15 - Intangible - Intangible Assets by Location (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	R$ 3,512.8	R$ 4,158.9
Intangible assets in Argentina [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	348.8	373.5
Intangible assets in Bolivia [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	567.1	558.7
Intangible assets in Brazil [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	4.6	575.5
Intangible assets in Canada [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	223.9	205.6
Intangible assets in Chile [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	69.5	63.1
Intangible assets in Luxembourg [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	339.6	419.1
Intangible assets in Paraguay [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	447.5	429.4
Intangible assets in the Dominican Republic [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	1,396.6	1,422.4
Intangible assets in Uruaguay [member]
Statement Line Items [Line Items]
Intangible assets with indefinite useful life	R$ 115.2	R$ 111.6

XML

Note 16 - Investment Securities - Portions of Investment Securities (Details) - BRL (R$) R$ in Millions		Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Debt held-to-maturity (i)	[1]	R$ 122.0	R$ 104.3
Non-current investments securities		122.0	104.3
Financial asset at fair value through profit or loss-held for trading		11.9	282.8
Current investments securities		11.9	282.8
Total		R$ 133.9	R$ 387.1

[1] The balance refers substantially to Bank Deposit Certificates - CDB linked to tax incentives.

XML

Note 17 - Deferred Income Tax and Social Contribution (Details Textual) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Applicable tax rate	29.22%	30.16%	31.59%
Unrecognised tax losses and temporary differences	R$ 427.4	R$ 455.6
Tax losses without limitation	R$ 1,709.5	R$ 2,285.2
BRAZIL
Statement Line Items [Line Items]
Applicable tax rate		25.00%
Nominal social contribution rate			9.00%
ARGENTINA
Statement Line Items [Line Items]
Applicable tax rate	35.00%
Applicable tax rate, first two years after legislation changes	30.00%
Applicable tax rate, later than two years after legislation changes	25.00%
Deferred tax expense (income) relating to tax rate changes or imposition of new taxes	R$ (33.0)

XML

Note 17 - Deferred Income Tax and Social Contribution - Applied Rates (Details)	12 Months Ended
	Dec. 31, 2017
Central America and the Caribbean [member] | Bottom of range [member]
Statement Line Items [Line Items]
Applied rates	23.00%
Central America and the Caribbean [member] | Top of range [member]
Statement Line Items [Line Items]
Applied rates	31.00%
Latin America [member] | Bottom of range [member]
Statement Line Items [Line Items]
Applied rates	14.00%	[1]
Latin America [member] | Top of range [member]
Statement Line Items [Line Items]
Applied rates	35.00%	[1]
Canada [member]
Statement Line Items [Line Items]
Applied rates	26.00%

[1] Amendments to Argentine tax legislation approved on December 29, 2017 affect tax periods beginning in October 2018 and reduce the income tax rate in the first two years from 35% to 30% and, as a after, to 25%. For fiscal year 2017, however, there is an impact of R $ 33.0 million in deferred income tax.

XML

Note 17 - Deferred Income Tax and Social Contribution - Deferred Income Tax and Social Contribution by Type of Temporary Difference (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Gross deferred tax assets	R$ 3,208.6	R$ 3,409.6
Gross deferred tax liabilities	(3,258.5)	(3,471.1)
Net deferred tax assets / (liabilities)	(49.9)	(61.5)	R$ 276.3
Netting by taxable entity, deferred tax assets	(929.3)	(1,141.4)
Netting by taxable entity, deferred tax liabilities	929.3	1,141.4
Net deferred tax assets	2,279.3	2,268.2
Net deferred tax liabilities	(2,329.2)	(2,329.7)
Temporary differences, investment securities [member]
Statement Line Items [Line Items]
Gross deferred tax assets	39.0	9.0
Gross deferred tax liabilities
Net deferred tax assets / (liabilities)	39.0	9.0
Temporary differences, intangible assets [member]
Statement Line Items [Line Items]
Gross deferred tax assets		0.7
Gross deferred tax liabilities	(719.5)	(733.9)
Net deferred tax assets / (liabilities)	(719.5)	(733.2)
Temporary differences, employee benefits [member]
Statement Line Items [Line Items]
Gross deferred tax assets	631.1	467.6
Gross deferred tax liabilities
Net deferred tax assets / (liabilities)	631.1	467.6
Temporary differences, trade payables [member]
Statement Line Items [Line Items]
Gross deferred tax assets	1,382.4	977.4
Gross deferred tax liabilities	(314.2)	(531.3)
Net deferred tax assets / (liabilities)	1,068.2	446.1
Temporary differences, trade receivable [member]
Statement Line Items [Line Items]
Gross deferred tax assets	52.3	42.7
Gross deferred tax liabilities
Net deferred tax assets / (liabilities)	52.3	42.7
Temporary differences, derivatives [member]
Statement Line Items [Line Items]
Gross deferred tax assets	6.8	71.1
Gross deferred tax liabilities	(5.8)	(110.7)
Net deferred tax assets / (liabilities)	1.0	(39.6)
Temporary differences, inventories [member]
Statement Line Items [Line Items]
Gross deferred tax assets	248.7	267.4
Gross deferred tax liabilities	(18.1)	(13.8)
Net deferred tax assets / (liabilities)	230.6	253.6
Temporary differences, property, plant and equipment [member]
Statement Line Items [Line Items]
Gross deferred tax assets
Gross deferred tax liabilities	(920.5)	(905.7)
Net deferred tax assets / (liabilities)	(920.5)	(905.7)
Temporary differences, withholding tax over undistributed profits and royalties [member]
Statement Line Items [Line Items]
Gross deferred tax assets
Gross deferred tax liabilities	(788.6)	(684.8)
Net deferred tax assets / (liabilities)	(788.6)	(684.8)
Temporary differences, investments in associates [member]
Statement Line Items [Line Items]
Gross deferred tax assets
Gross deferred tax liabilities	(421.6)	(421.6)
Net deferred tax assets / (liabilities)	(421.6)	(421.6)
Unused tax losses [member]
Statement Line Items [Line Items]
Gross deferred tax assets	501.0	1,139.9
Gross deferred tax liabilities
Net deferred tax assets / (liabilities)	501.0	1,139.9
Temporary differences, provisions [member]
Statement Line Items [Line Items]
Gross deferred tax assets	347.3	448.9
Gross deferred tax liabilities	(39.7)	(44.6)
Net deferred tax assets / (liabilities)	307.6	404.3
Temporary differences, other items [member]
Statement Line Items [Line Items]
Gross deferred tax assets		(15.1)
Gross deferred tax liabilities	(30.5)	(24.7)
Net deferred tax assets / (liabilities)	R$ (30.5)	R$ (39.8)

XML

Note 17 - Deferred Income Tax and Social Contribution - Deferred Taxes Not Related to Tax Losses (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	R$ (49.9)	R$ (61.5)	R$ 276.3
Temporary differences, investment securities [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	39.0	9.0
Temporary differences, investment securities [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)
Temporary differences, investment securities [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	39.0
Temporary differences, intangible assets [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(719.5)	(733.2)
Temporary differences, intangible assets [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)
Temporary differences, intangible assets [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(719.5)
Temporary differences, employee benefits [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	631.1	467.6
Temporary differences, employee benefits [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	112.8
Temporary differences, employee benefits [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	518.3
Temporary differences, trade payables [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	1,068.2	446.1
Temporary differences, trade payables [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	1,382.4
Temporary differences, trade payables [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(314.2)
Temporary differences, trade receivable [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	52.3	42.7
Temporary differences, trade receivable [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	47.3
Temporary differences, trade receivable [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	5.0
Temporary differences, derivatives [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	1.0	(39.6)
Temporary differences, derivatives [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	1.0
Temporary differences, derivatives [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)
Temporary differences, inventories [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	230.6	253.6
Temporary differences, inventories [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	230.6
Temporary differences, inventories [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)
Temporary differences, property, plant and equipment [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(920.5)	(905.7)
Temporary differences, property, plant and equipment [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(58.1)
Temporary differences, property, plant and equipment [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(862.4)
Temporary differences, withholding tax over undistributed profits and royalties [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(788.6)	(684.8)
Temporary differences, withholding tax over undistributed profits and royalties [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)
Temporary differences, withholding tax over undistributed profits and royalties [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(788.6)
Temporary differences, investments in associates [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(421.6)	(421.6)
Temporary differences, investments in associates [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)
Temporary differences, investments in associates [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(421.6)
Temporary differences, provisions [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	307.6	404.3
Temporary differences, provisions [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	91.7
Temporary differences, provisions [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	215.9
Temporary differences, other items [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(30.5)	R$ (39.8)
Temporary differences, other items [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)
Temporary differences, other items [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(30.5)
Deferred taxes not related to tax losses [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	(550.9)
Deferred taxes not related to tax losses [member] | Not later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	1,807.7
Deferred taxes not related to tax losses [member] | Later than one year [member]
Statement Line Items [Line Items]
Net deferred tax assets / (liabilities)	R$ (2,358.6)

XML

Note 17 - Deferred Income Tax and Social Contribution - Deferred Tax Related to Tax Losses (Details) - BRL (R$) R$ in Millions		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Deferred Tax Related to Tax Losses		R$ (49.9)	R$ (61.5)	R$ 276.3
Unused tax losses [member]
Statement Line Items [Line Items]
Deferred Tax Related to Tax Losses		501.0	R$ 1,139.9
Unused tax losses [member] | Not later than one year [member]
Statement Line Items [Line Items]
Deferred Tax Related to Tax Losses		209.0
Unused tax losses [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Deferred Tax Related to Tax Losses		98.3
Unused tax losses [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Deferred Tax Related to Tax Losses		16.1
Unused tax losses [member] | Later than four years and not later than five years [member]
Statement Line Items [Line Items]
Deferred Tax Related to Tax Losses		10.6
Unused tax losses [member] | Later than five years [member]
Statement Line Items [Line Items]
Deferred Tax Related to Tax Losses	[1]	R$ 167.0

[1] There is no expectation of realization that exceeds the term of 10 years.

XML

Note 17 - Deferred Income Tax and Social Contribution - Net Change in Deferred Income Tax and Social Contribution (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Balance	R$ (61.5)	R$ 276.3
Full recognition of actuarial gains/(losses)	40.2	57.7
Investment hedge	(262.7)	(12.0)
Investment hedge - put option of a subsidiary interest	(31.8)	(364.6)
Cash flow hedge - gains/(losses)	(269.2)	536.2
Gains/losses on translation of other foreign operations	136.1	(578.2)
Recognized in other comprehensive income	(387.4)	(360.9)
Recognized in income statement	253.0	98.9	R$ (2,406.4)
Changes directly in balance sheet	146.0	(75.8)
Recognized in deferred tax	35.4	(21.6)
Anticipation federal amnesty		(54.2)
Recognized in other group of balance sheet	110.6
Balance	R$ (49.9)	R$ (61.5)	R$ 276.3

XML

Note 18 - Inventories (Details Textual) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Net write-downs (reversals of write-downs) of inventories	R$ 73.2	R$ 114.4

XML

Note 18 - Inventories - Schedule of Inventory (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Finished goods	R$ 1,528.4	R$ 1,445.5
Work in progress	309.6	328.5
Raw material	1,816.3	1,962.7
Consumables	77.3	50.0
Spare parts and other	476.9	447.2
Prepayments	210.9	234.5
Impairment losses	(100.4)	(121.3)
	R$ 4,319.0	R$ 4,347.1

XML

Note 19 - Trade Receivables (Details Textual) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Impairment loss recognised in profit or loss, trade receivables	R$ 83.1	R$ 82.1

XML

Note 19 - Trade Receivables - Current Trade Receivables (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Trade receivables	R$ 5,335.7	R$ 4,774.5
Bad debt provision	(521.5)	(443.7)
Net, trade receivables	4,814.2	4,330.8
Related parties	130.6	37.3
Total current trade receivables	R$ 4,944.8	R$ 4,368.1

XML

Note 19 - Trade Receivables - Aging of Our Current Trade Receivables (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Trade receivables	R$ 5,335.7	R$ 4,774.5
Bad debt provision	(521.5)	(443.7)
Net, trade receivables	4,814.2	4,330.8
Current [member]
Statement Line Items [Line Items]
Trade receivables	4,343.8	4,093.6
Bad debt provision	(4.3)	(6.9)
Net, trade receivables	4,339.5	4,086.7
Less than one month [member]
Statement Line Items [Line Items]
Trade receivables	340.7	187.9
Bad debt provision	(0.1)	(1.9)
Net, trade receivables	340.6	186.0
Later than one month and not later than two months [member]
Statement Line Items [Line Items]
Trade receivables	32.3	28.4
Bad debt provision	(0.4)	(4.1)
Net, trade receivables	31.9	24.3
Later than two months and not later than three months [member]
Statement Line Items [Line Items]
Trade receivables	63.3	43.7
Bad debt provision	(0.8)	(9.9)
Net, trade receivables	62.5	33.8
Later than three months and less than six months [member]
Statement Line Items [Line Items]
Trade receivables	85.6	30.0
Bad debt provision	(45.9)	(30.0)
Net, trade receivables	39.7
Later than six months and less than 12 months [member]
Statement Line Items [Line Items]
Trade receivables	42.2	38.9
Bad debt provision	(42.2)	(38.9)
Net, trade receivables
Later than a year [member]
Statement Line Items [Line Items]
Trade receivables	427.8	352.0
Bad debt provision	(427.8)	(352.0)
Net, trade receivables

XML

Note 20 - Cash and Cash Equivalents - Components of Cash and Cash Equivalents (Details) - BRL (R$) R$ in Millions		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Statement Line Items [Line Items]
Short term bank deposits (i)	[1]	R$ 4,688.5	R$ 4,027.6
Current bank accounts		5,077.1	3,467.3
Cash		588.9	381.9
Cash and cash equivalents		10,354.5	7,876.8
Bank overdrafts		(1.8)
Cash and cash equivalents less bank overdraft	[2]	R$ 10,352.7	R$ 7,876.8	R$ 13,617.7	R$ 9,623.0

[1] The balance refers mostly to Bank Deposit Certificates - CDB, high liquidity, which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value.

[2] Net of bank overdrafts.

XML

Note 21 - Changes in Equity (Details Textual) - BRL (R$) R$ in Millions										12 Months Ended
	Jan. 18, 2018	Dec. 28, 2017	[1]	Dec. 01, 2017	Dec. 29, 2016	Feb. 29, 2016	[2]	Dec. 30, 2015	Jun. 29, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Adjustments for share-based payments										R$ 209.3	R$ 170.3	R$ 197.1
Investment reserve limit percentage of net income										60.00%	60.00%	60.00%
Statutory reserve limit percentage of net income										5.00%	5.00%	5.00%
Statutory reserve limit of capital stock										20.00%	20.00%	20.00%
Statutory reserve supplementation cutoff percentage related to capital stock										30.00%	30.00%	30.00%
Dividends recognised as distributions to owners		R$ 4,869.7			R$ 3,454.2	R$ 2,039.2		R$ 2,352.7	R$ 1,570.6	R$ 4,044.0	R$ 6,007.3	R$ 2,612.8
Other comprehensive income, net of tax, gains (losses) on revaluation										124.6	(129.6)	R$ (24.5)
Total financial liabilities										22,036.6	24,423.9
Cervecería Nacional Dominicana S.A. [member] | E. León Jimenes S.A. [member]
Statement Line Items [Line Items]
Percentage of ownership acquired through the partial exercise of a put option				30.00%
Cervecería Nacional Dominicana S.A. [member] | E. León Jimenes S.A. [member] | Partial exercise of put option for further ownership of subsidiary [member]
Statement Line Items [Line Items]
Proportion of ownership interest in subsidiary	85.00%
Put options [member] | Cervecería Nacional Dominicana S.A. [member] | E. León Jimenes S.A. [member]
Statement Line Items [Line Items]
Total financial liabilities										5,520.2	4,878.5
Put options [member] | Sucos do Bem [member]
Statement Line Items [Line Items]
Total financial liabilities										132.0	127.7
Put options [member] | Tropical Juice [member]
Statement Line Items [Line Items]
Total financial liabilities										23.0	R$ 23.4
Ambev Private Pension Institute of the defined benefits plan [member]
Statement Line Items [Line Items]
Other comprehensive income, net of tax, gains (losses) on revaluation										R$ 158.5
Net income reserves, investment reserve [member]
Statement Line Items [Line Items]
Dividend percentage of net income										114.00%	72.00%	74.00%
Dividends recognised as distributions to owners										R$ 3,770.1
Top of range [member] | Country of domicile [member]
Statement Line Items [Line Items]
Dividend percentage of net income										40.00%	40.00%	40.00%

[1] R$3,770.1 of these interest on shareholder's equity refer to the total amount approved for distribution in the period, and were accrued in investments reserves.

[2] These dividends refer to the total amount approved for distribution in the period, and were accrued in investments reserves.

XML

Note 21 - Changes in Equity - Capital Stock (Details) - BRL (R$) shares in Millions, R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Balance	R$ 46,651.3	R$ 50,333.7	R$ 43,644.7
Capital increase			9.1
Balance	R$ 47,982.8	R$ 46,651.3	50,333.7
Issued capital [member]
Statement Line Items [Line Items]
Balance, common shares (in shares)	15,717.6	15,717.6
Balance	R$ 57,614.1	R$ 57,614.1	57,582.4
Share issued, common shares (in shares)
Capital increase			R$ 31.7
Balance, common shares (in shares)	15,717.6	15,717.6	15,717.6
Balance	R$ 57,614.1	R$ 57,614.1	R$ 57,614.1

XML

Note 21 - Changes in Equity - Capital Reserves (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Balance, capital reserves	R$ 64,230.0
Balance, capital reserves	63,361.2	R$ 64,230.0
Treasury shares [member]
Statement Line Items [Line Items]
Balance, capital reserves	(908.7)	(1,003.5)
Purchase of shares and result on treasury shares	13.7	94.8
Share-based payments, capital reserve
Balance, capital reserves	(895.0)	(908.7)
Share premium [member]
Statement Line Items [Line Items]
Balance, capital reserves	53,662.8	53,662.8
Purchase of shares and result on treasury shares
Share-based payments, capital reserve
Balance, capital reserves	53,662.8	53,662.8
Other reserves [member]
Statement Line Items [Line Items]
Balance, capital reserves	700.9	700.9
Purchase of shares and result on treasury shares
Share-based payments, capital reserve
Balance, capital reserves	700.9	700.9
Reserve of share-based payments [member]
Statement Line Items [Line Items]
Balance, capital reserves	1,074.9	1,013.4
Purchase of shares and result on treasury shares
Share-based payments, capital reserve	157.4	61.5
Balance, capital reserves	1,232.3	1,074.9
Capital reserve [member]
Statement Line Items [Line Items]
Balance, capital reserves	54,529.9	54,373.6
Purchase of shares and result on treasury shares	13.7	94.8
Share-based payments, capital reserve	157.4	61.5
Balance, capital reserves	R$ 54,701.0	R$ 54,529.9

XML

Note 21 - Changes in Equity - Treasury Shares (Details) - BRL (R$)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Balance, treasury shares acquired/realized (in shares)	16,600	32,600
Changes during the year, treasury shares acquired/realized (in shares)	(9,100)	(16,000)
Balance, treasury shares acquired/realized (in shares)	7,500	16,600
Balance, treasury shares acquired/realized, amount	R$ (312,700)	R$ (617,500)
Changes during the year, treasury shares acquired/realized, amount	173,000	304,700
Balance, treasury shares acquired/realized, amount	R$ (139,700)	R$ (312,700)
Balance, treasury shares (in shares)	(596,000)	(386,100)
Changes during the year, treasury shares (in shares)	(159,300)	(209,900)
Balance, treasury shares (in shares)	(755,300)	(596,000)
Balance, treasury shares, amount	R$ (908,700)	R$ (1,003,500)
Changes during the year, treasury shares, amount	13,700	94,800
Balance, treasury shares, amount	R$ (895,000)	R$ (908,700)

XML

Note 21 - Changes in Equity - Net Income Reserves (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Balance	R$ 46,651.3	R$ 50,333.7	R$ 43,644.7
Interest on own capital	(4,869.7)	(5,493.4)	(6,846.1)
Fiscal incentive reserve
Investments reserve
Balance	47,982.8	46,651.3	50,333.7
Net income reserves, investment reserve [member]
Statement Line Items [Line Items]
Balance	3,859.9	2,141.2
Interest on own capital	(3,770.1)
Destination of net income		1,718.6
Fiscal incentive reserve
Investments reserve	1,177.9
Balance	1,267.7	3,859.9	2,141.2
Net income reserves, statutory reserve [member]
Statement Line Items [Line Items]
Balance	4.5	4.5
Interest on own capital
Destination of net income
Fiscal incentive reserve
Investments reserve
Balance	4.5	4.5	4.5
Net income reserves, fiscal incentive [member]
Statement Line Items [Line Items]
Balance	5,835.7	4,016.2
Interest on own capital
Destination of net income		1,819.5
Fiscal incentive reserve	1,552.3
Investments reserve
Balance	7,388.0	5,835.7	4,016.2
Net income reserves, interest on capital and dividends proposed [member]
Statement Line Items [Line Items]
Balance		2,039.2
Interest on own capital		(2,039.2)
Destination of net income
Fiscal incentive reserve
Investments reserve
Balance			2,039.2
Net income reserves [member]
Statement Line Items [Line Items]
Balance	9,700.1	8,201.2	4,883.8
Interest on own capital	(3,770.1)	(2,039.2)	(1,979.8)
Destination of net income		3,538.1
Fiscal incentive reserve	1,552.3	1,819.5	1,143.6
Investments reserve	1,177.9	1,718.6	2,114.4
Balance	R$ 8,660.2	R$ 9,700.1	R$ 8,201.2

XML

Note 21 - Changes in Equity - Interest on Shareholders' Equity/Dividends (Details) - BRL (R$) R$ / shares in Units, R$ in Millions																12 Months Ended
		Feb. 22, 2018	Dec. 28, 2017		Jul. 17, 2017	Feb. 23, 2017	Dec. 29, 2016	Nov. 25, 2016	Jul. 29, 2016	Feb. 29, 2016		Dec. 30, 2015	Sep. 28, 2015	Jun. 29, 2015	Mar. 31, 2015	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Amount per share, dividends (in BRL per share)					R$ 0.16	R$ 0.07		R$ 0.16	R$ 0.13				R$ 0.15
Total amount of dividends					R$ 2,513.1	R$ 1,099.1		R$ 2,511.9	R$ 2,040.8				R$ 2,352.4
Amount per share, interest on shareholder´s equity (in BRL per share)			R$ 0.31				R$ 0.22			R$ 0.13		R$ 0.15		R$ 0.10
Dividends recognised as distributions to owners			R$ 4,869.7	[1]			R$ 3,454.2			R$ 2,039.2	[2]	R$ 2,352.7		R$ 1,570.6		R$ 4,044.0	R$ 6,007.3	R$ 2,612.8
Total amount of dividends and interest on shareholder´s equity																R$ 8,482.5	R$ 11,145.2	R$ 7,690.2
Potential ordinary share transactions [member]
Statement Line Items [Line Items]
Amount per share, dividends (in BRL per share)		R$ 0.07
Total amount of dividends		R$ 1,099.7
Dividends 1 [member]
Statement Line Items [Line Items]
Amount per share, interest on shareholder´s equity (in BRL per share)															R$ 0.03
Dividends recognised as distributions to owners	[2]														R$ 471.5
Dividends 2 [member]
Statement Line Items [Line Items]
Amount per share, interest on shareholder´s equity (in BRL per share)															R$ 0.06
Dividends recognised as distributions to owners															R$ 943.0

[1] R$3,770.1 of these interest on shareholder's equity refer to the total amount approved for distribution in the period, and were accrued in investments reserves.

[2] These dividends refer to the total amount approved for distribution in the period, and were accrued in investments reserves.

XML

Note 21 - Changes in Equity - Carrying Value Adjustments (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Balance	R$ 46,651.3	R$ 50,333.7	R$ 43,644.7
Gains/(losses) on translation of foreign operations	1,952.3	(4,127.7)	3,414.2
Cash flow hedges	513.7	(1,073.3)	664.6
Actuarial gain/(losses)	124.6	(129.6)	(24.5)
Total comprehensive income	10,441.1	7,752.8	16,933.5
Options granted on subsidiary	(380.4)	(144.1)	(189.4)
Gains/(losses) of controlling interest´s share	17.4	34.8	5.6
Exchange transaction of shareholdings		(3.1)
Reversal effect of revaluation of fixed assets by predecessor
Tax on fictitious dividends	(38.7)
Balance	47,982.8	46,651.3	50,333.7
Carrying value adjustments, translation reserves [member]
Statement Line Items [Line Items]
Balance	(289.5)	3,472.2
Gains/(losses) on translation of foreign operations	1,928.6	(3,728.7)
Cash flow hedges
Actuarial gain/(losses)
Total comprehensive income	1,928.6	(3,728.7)
Options granted on subsidiary
Gains/(losses) of controlling interest´s share
Exchange transaction of shareholdings		(33.0)
Reversal effect of revaluation of fixed assets by predecessor
Tax on fictitious dividends
Balance	1,639.1	(289.5)	3,472.2
Carrying value adjustments, cash flow hedge [member]
Statement Line Items [Line Items]
Balance	(144.5)	932.2
Gains/(losses) on translation of foreign operations
Cash flow hedges	513.4	(1,076.7)
Actuarial gain/(losses)
Total comprehensive income	513.4	(1,076.7)
Options granted on subsidiary
Gains/(losses) of controlling interest´s share
Exchange transaction of shareholdings
Reversal effect of revaluation of fixed assets by predecessor
Tax on fictitious dividends
Balance	368.9	(144.5)	932.2
Carrying value adjustments, actuarial gains/losses [member]
Statement Line Items [Line Items]
Balance	(1,262.2)	(1,131.5)
Gains/(losses) on translation of foreign operations
Cash flow hedges
Actuarial gain/(losses)	117.7	(130.7)
Total comprehensive income	117.7	(130.7)
Options granted on subsidiary
Gains/(losses) of controlling interest´s share
Exchange transaction of shareholdings
Reversal effect of revaluation of fixed assets by predecessor
Tax on fictitious dividends
Balance	(1,144.5)	(1,262.2)	(1,131.5)
Carrying value adjustments, put option granted on subsidiary [member]
Statement Line Items [Line Items]
Balance	(2,390.9)	(2,246.7)
Gains/(losses) on translation of foreign operations
Cash flow hedges
Actuarial gain/(losses)
Total comprehensive income
Options granted on subsidiary	(380.4)	(144.2)
Gains/(losses) of controlling interest´s share
Exchange transaction of shareholdings
Reversal effect of revaluation of fixed assets by predecessor
Tax on fictitious dividends
Balance	(2,771.3)	(2,390.9)	(2,246.7)
Carrying value adjustments, gains/ of non-controlling interest´s share [member]
Statement Line Items [Line Items]
Balance	2,150.7	2,123.6
Gains/(losses) on translation of foreign operations
Cash flow hedges
Actuarial gain/(losses)
Total comprehensive income
Options granted on subsidiary
Gains/(losses) of controlling interest´s share	(12.1)	(2.8)
Exchange transaction of shareholdings		29.9
Reversal effect of revaluation of fixed assets by predecessor
Tax on fictitious dividends	(38.7)
Balance	2,099.9	2,150.7	2,123.6
Carrying value adjustments, business combination [member]
Statement Line Items [Line Items]
Balance	156.1	156.1
Gains/(losses) on translation of foreign operations
Cash flow hedges
Actuarial gain/(losses)
Total comprehensive income
Options granted on subsidiary
Gains/(losses) of controlling interest´s share
Exchange transaction of shareholdings
Reversal effect of revaluation of fixed assets by predecessor
Tax on fictitious dividends
Balance	156.1	156.1	156.1
Carrying value adjustments, accounting adjustments for transactions between shareholders [member]
Statement Line Items [Line Items]
Balance	(75,238.8)	(75,162.9)
Gains/(losses) on translation of foreign operations
Cash flow hedges
Actuarial gain/(losses)
Total comprehensive income
Options granted on subsidiary
Gains/(losses) of controlling interest´s share
Exchange transaction of shareholdings
Reversal effect of revaluation of fixed assets by predecessor	(75.9)	(75.9)
Tax on fictitious dividends
Balance	(75,314.7)	(75,238.8)	(75,162.9)
Carrying value adjustments [member]
Statement Line Items [Line Items]
Balance	(77,019.1)	(71,857.0)	(75,267.9)
Gains/(losses) on translation of foreign operations	1,928.6	(3,728.8)	3,018.9
Cash flow hedges	513.4	(1,076.7)	666.2
Actuarial gain/(losses)	117.7	(130.7)	(22.4)
Total comprehensive income	2,559.7	(4,936.2)	3,662.7
Options granted on subsidiary	(380.4)	(144.1)	(189.4)
Gains/(losses) of controlling interest´s share	(12.1)	(2.8)	13.5
Exchange transaction of shareholdings		(3.1)
Reversal effect of revaluation of fixed assets by predecessor	(75.9)	(75.9)	(75.9)
Tax on fictitious dividends	(38.7)
Balance	R$ (74,966.5)	R$ (77,019.1)	R$ (71,857.0)

XML

Note 21 - Changes in Equity - Diluted Earnings (Details) - shares shares in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Issued shares at December 31, net of treasury shares (i) (in shares)	[1]	15,705.8	15,696.6	15,696.1
Effect of shares options (in shares)		132.2	126.5	124.0
Weighted average number of shares (diluted) at December 31 (in shares)		15,838.1	15,823.1	15,820.1

[1] Not considered treasury shares.

XML

Note 21 - Changes in Equity - Calculation of Earnings Per Share (Details) - BRL (R$) R$ / shares in Units, shares in Millions, R$ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Income attributable to equity holders of Ambev		R$ 7,332.0	R$ 12,546.6	R$ 12,423.8
Issued shares at December 31, net of treasury shares (i) (in shares)	[1]	15,705.8	15,696.6	15,696.1
Basic earnings per share – common - R$ (in BRL per share)	[2]	R$ 0.47	R$ 0.80	R$ 0.79
Weighted average numbers of shares (diluted) (in shares)		15,838.1	15,823.1	15,820.1
Diluted earnings per share – common - R$ (in BRL per share)	[2]	R$ 0.46	R$ 0.79	R$ 0.79

[1] Not considered treasury shares.

[2] Expressed in Brazilian Reais.

XML

Note 21 - Changes in Equity - Basis for Dividends (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Net income, attributable to equity holders of Ambev	R$ 7,332.0	R$ 12,546.6	R$ 12,423.8
Reversal effect of revaluation of fixed assets by predecessor
Interest on capital paid based on the investment reserve	(8,819.8)	(10,330.6)	(11,490.2)
Total of Interest on capital	4,869.7	5,493.4	6,846.1
Total of distributed and accrued to distribute	8,482.5	11,145.2	7,690.2
Retained earnings [member]
Statement Line Items [Line Items]
Net income, attributable to equity holders of Ambev	7,332.0	12,546.6	12,423.8
Prescribed dividends	34.7	21.6	16.2
Reversal effect of revaluation of fixed assets by predecessor	75.9	75.9	75.9
Retained earnings basis for dividends and destinations	7,442.6	12,644.1	12,515.9
Total of Interest on capital	1,099.6	3,454.2	4,866.3
Net income reserves [member]
Statement Line Items [Line Items]
Reversal effect of revaluation of fixed assets by predecessor
Dividends and Interest on capital paid based on profit	3,612.7	5,651.8	7,218.7
Dividends approved for distribution	1,099.7	3,454.2	2,039.2
Total of dividends and Interest on capital	R$ 4,712.4	R$ 9,106.0	R$ 9,257.9
Percentage of distributed profit	63.00%	72.00%	74.00%
Total of Interest on capital	R$ 3,770.1	R$ 2,039.2	R$ 1,979.8
Net income reserves, investment reserve [member]
Statement Line Items [Line Items]
Percentage of distributed profit	114.00%	72.00%	74.00%
Interest on capital paid based on the investment reserve	R$ 3,770.1
Total of Interest on capital	3,770.1
Total of distributed and accrued to distribute	R$ 8,482.5	R$ 9,106.0	R$ 9,257.9

XML

Note 22 - Interest-Bearing Loans and Borrowings - Liabilities (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, noncurrent	R$ 1,231.9	R$ 1,765.7
Interest-bearing loans and borrowings, current	1,321.1	3,630.6
Secured bank loans [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, noncurrent	589.3	665.8
Interest-bearing loans and borrowings, current	879.6	1,381.4
Unsecured bank loans [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, noncurrent	413.7	609.9
Interest-bearing loans and borrowings, current	394.3	1,910.1
Debentures and unsecured bond issues [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, noncurrent	102.7	100.8
Interest-bearing loans and borrowings, current		296.4
Other unsecured loans [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, noncurrent	101.5	356.2
Interest-bearing loans and borrowings, current	38.4	33.5
Financial leasing [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, noncurrent	24.7	33.0
Interest-bearing loans and borrowings, current	R$ 8.8	R$ 9.2

XML

Note 22 - Interest-Bearing Loans and Borrowings - Debt Interest Rates (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current	R$ 1,321.1	R$ 3,630.6
Interest-bearing loans and borrowings, noncurrent	1,231.9	1,765.7
Debt denominated in USD [member] | Fixed interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current	6.4
Interest-bearing loans and borrowings, noncurrent	16.5	11.5
Debt denominated in USD [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current	78.3	1,508.8
Interest-bearing loans and borrowings, noncurrent	476.9	351.1
Debt denominated in CAD dollars [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current	685.9	1,259.1
Interest-bearing loans and borrowings, noncurrent
Brazilian Development Bank basket debt [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current		22.7
Interest-bearing loans and borrowings, noncurrent
Debt denominated in other Latin American currencies [member] | Fixed interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current	199.1	114.1
Interest-bearing loans and borrowings, noncurrent		233.0
Debt denominated in other Latin American currencies [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current
Interest-bearing loans and borrowings, noncurrent	5.0	4.9
TJLP BNDES denominated debt [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current	165.3	216.2
Interest-bearing loans and borrowings, noncurrent	237.0	398.6
Reais debt related to ICMS [member] | Fixed interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current	38.4	33.4
Interest-bearing loans and borrowings, noncurrent	91.5	344.7
Reais debentures related to CDI [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current		52.9
Interest-bearing loans and borrowings, noncurrent
Reais debt [member] | Fixed interest rate [member]
Statement Line Items [Line Items]
Interest-bearing loans and borrowings, current	147.7	423.4
Interest-bearing loans and borrowings, noncurrent	R$ 405.0	R$ 421.9
Weighted average [member] | Debt denominated in USD [member] | Fixed interest rate [member]
Statement Line Items [Line Items]
Average rate percentage	3.83%	6.00%
Weighted average [member] | Debt denominated in USD [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Average rate percentage	2.74%	1.55%
Weighted average [member] | Debt denominated in CAD dollars [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Average rate percentage	2.00%	1.62%
Weighted average [member] | Brazilian Development Bank basket debt [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Average rate percentage		1.70%
Weighted average [member] | Debt denominated in other Latin American currencies [member] | Fixed interest rate [member]
Statement Line Items [Line Items]
Average rate percentage	9.27%	8.86%
Weighted average [member] | Debt denominated in other Latin American currencies [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Average rate percentage	2.33%	2.66%
Weighted average [member] | TJLP BNDES denominated debt [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Average rate percentage	9.22%	9.66%
Weighted average [member] | Reais debt related to ICMS [member] | Fixed interest rate [member]
Statement Line Items [Line Items]
Average rate percentage	5.57%	4.13%
Weighted average [member] | Reais debentures related to CDI [member] | Floating interest rate [member]
Statement Line Items [Line Items]
Average rate percentage		13.63%
Weighted average [member] | Reais debt [member] | Fixed interest rate [member]
Statement Line Items [Line Items]
Average rate percentage	6.63%	7.64%

XML

Note 22 - Interest-Bearing Loans and Borrowings - Terms and Debt Repayment Schedule (Details) R$ in Millions	Dec. 31, 2017 BRL (R$)
Statement Line Items [Line Items]
Borrowings	R$ 2,553.0
Not later than one year [member]
Statement Line Items [Line Items]
Borrowings	1,321.1
Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Borrowings	724.0
Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Borrowings	82.4
Later than three years and not later than five years [member]
Statement Line Items [Line Items]
Borrowings	223.7
Later than five years [member]
Statement Line Items [Line Items]
Borrowings	201.8
Secured bank loans [member]
Statement Line Items [Line Items]
Borrowings	1,468.9
Secured bank loans [member] | Not later than one year [member]
Statement Line Items [Line Items]
Borrowings	879.6
Secured bank loans [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Borrowings	253.6
Secured bank loans [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Borrowings	57.7
Secured bank loans [member] | Later than three years and not later than five years [member]
Statement Line Items [Line Items]
Borrowings	109.4
Secured bank loans [member] | Later than five years [member]
Statement Line Items [Line Items]
Borrowings	168.6
Unsecured bank loans [member]
Statement Line Items [Line Items]
Borrowings	808.0
Unsecured bank loans [member] | Not later than one year [member]
Statement Line Items [Line Items]
Borrowings	394.3
Unsecured bank loans [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Borrowings	413.7
Unsecured bank loans [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Borrowings
Unsecured bank loans [member] | Later than three years and not later than five years [member]
Statement Line Items [Line Items]
Borrowings
Unsecured bank loans [member] | Later than five years [member]
Statement Line Items [Line Items]
Borrowings
Debentures and unsecured bond issues [member]
Statement Line Items [Line Items]
Borrowings	102.7
Debentures and unsecured bond issues [member] | Not later than one year [member]
Statement Line Items [Line Items]
Borrowings
Debentures and unsecured bond issues [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Borrowings
Debentures and unsecured bond issues [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Borrowings
Debentures and unsecured bond issues [member] | Later than three years and not later than five years [member]
Statement Line Items [Line Items]
Borrowings	102.7
Debentures and unsecured bond issues [member] | Later than five years [member]
Statement Line Items [Line Items]
Borrowings
Other unsecured loans [member]
Statement Line Items [Line Items]
Borrowings	139.9
Other unsecured loans [member] | Not later than one year [member]
Statement Line Items [Line Items]
Borrowings	38.4
Other unsecured loans [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Borrowings	32.0
Other unsecured loans [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Borrowings	24.7
Other unsecured loans [member] | Later than three years and not later than five years [member]
Statement Line Items [Line Items]
Borrowings	11.6
Other unsecured loans [member] | Later than five years [member]
Statement Line Items [Line Items]
Borrowings	33.2
Financial leasing [member]
Statement Line Items [Line Items]
Borrowings	33.5
Financial leasing [member] | Not later than one year [member]
Statement Line Items [Line Items]
Borrowings	8.8
Financial leasing [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Borrowings	24.7
Financial leasing [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Borrowings
Financial leasing [member] | Later than three years and not later than five years [member]
Statement Line Items [Line Items]
Borrowings
Financial leasing [member] | Later than five years [member]
Statement Line Items [Line Items]
Borrowings

XML

Note 23 - Employee Benefits (Details Textual) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Post-employment benefit expense, defined contribution plans	R$ 18.9	R$ 25.3	R$ 19.0
Defined benefit obligation, at present value	1,778.9	1,488.2	1,621.6
Return on plan assets, net defined benefit liability (asset)	208.5	544.5	86.3
Amount up to the asset ceiling not exceeding the present value of future benefits in a defined benefit plan	58.4	33.5
Estimate of contributions expected to be paid to plan for next annual reporting period	229.3
Two health care plans from Fundacao Zerrenner [member]
Statement Line Items [Line Items]
Defined benefit obligation, at present value	R$ 762.0	R$ 683.4	R$ 494.1

XML

Note 23 - Employee Benefits - Net Liability for Defined Benefit Plans (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Present value of funded obligations	R$ (5,027.7)	R$ (4,592.1)	R$ (4,646.4)
Fair value of plan assets	4,006.2	3,845.2	3,781.4
Present value of net obligations	(1,021.5)	(746.9)	(865.0)
Present value of unfunded obligations	(757.4)	(741.3)	(756.6)
Present value of net obligations, net	(1,778.9)	(1,488.2)	(1,621.6)
Asset ceiling	(368.4)	(532.2)	(534.5)
Net liability	(2,147.3)	(2,020.4)	(2,156.1)
Other long term employee benefits	(105.0)	(83.8)	(57.2)
Total employee benefits	(2,252.3)	(2,104.2)	(2,213.3)
Employee Benefits Amount - (Liabilities)/Assets	(2,252.3)	(2,104.2)	(2,213.3)
Employee benefits assets [member]
Statement Line Items [Line Items]
Total employee benefits	58.4	33.5	8.6
Employee Benefits Amount - (Liabilities)/Assets	58.4	33.5	8.6
Employee benefit liabilities [member]
Statement Line Items [Line Items]
Total employee benefits	(2,310.7)	(2,137.7)	(2,221.9)
Employee Benefits Amount - (Liabilities)/Assets	R$ (2,310.7)	R$ (2,137.7)	R$ (2,221.9)

XML

Note 23 - Employee Benefits - Defined Benefit Obligation (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Balance	R$ 2,104.2	R$ 2,213.3
Service cost	(38.2)	(43.1)	R$ (42.4)
Gains and (losses) on settlements or reductions in benefits	(4.2)	(0.7)	(1.1)
Balance	2,252.3	2,104.2	2,213.3
Present value of defined benefit obligation [member]
Statement Line Items [Line Items]
Balance	(5,333.4)	(5,403.0)	(4,808.0)
Acquisitions through exchange transaction of shareholdings		(67.3)
Service cost	(38.2)	(43.1)	(42.4)
Interest cost	(321.5)	(320.5)	(308.2)
Gains and (losses) on settlements or reductions in benefits	3.9	2.2	1.1
Contributions by plan participants	(4.1)	(5.2)	(5.2)
Actuarial gains and (losses) - geographical assumptions	77.3	(20.1)
Actuarial gains and (losses) - financial assumptions	(140.3)	(321.1)	182.5
Experience adjustment	(115.7)	(182.8)	(10.6)
Reclassifications	(7.5)	11.1
Exchange differences	(306.5)	599.6	(805.1)
Benefits paid	400.9	416.8	392.9
Balance	R$ (5,785.1)	R$ (5,333.4)	R$ (5,403.0)

XML

Note 23 - Employee Benefits - Plan Assets (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Balance	R$ 2,104.2	R$ 2,213.3
Administrative costs	3.4	3.7	R$ 3.4
Expected Return excluding interest income	208.5	544.5	86.3
Balance	2,252.3	2,104.2	2,213.3
Plan assets [member]
Statement Line Items [Line Items]
Balance	3,845.2	3,781.4	3,550.1
Interest Income	273.3	274.7	259.5
Administrative costs	(3.4)	(3.7)	(3.4)
Expected Return excluding interest income	(64.8)	269.8	(173.2)
Acquisition through business combination		73.5
Contributions by employer	183.2	175.9	107.6
Contributions by plan participants	4.5	5.6	5.2
Exchange differences	166.8	(315.3)	428.5
Benefits paid excluding costs of administration	(398.6)	(416.7)	(392.9)
Balance	R$ 4,006.2	R$ 3,845.2	R$ 3,781.4

XML

Note 23 - Employee Benefits - Asset Ceiling (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Balance	R$ 2,104.2	R$ 2,213.3
Balance	2,252.3	2,104.2	R$ 2,213.3
Effect of asset ceiling [member]
Statement Line Items [Line Items]
Balance	33.5	8.6	12.8
Acquisitions through exchange transaction of shareholdings		10.4
Interest Income	2.8	1.3	1.1
Change in asset ceiling excluding amounts included in interest income/(expenses)	8.8	15.8	(5.3)
Exchange differences	0.9	(2.6)
Others	12.4
Balance	R$ 58.4	R$ 33.5	R$ 8.6

XML

Note 23 - Employee Benefits - Defined Benefit Plans Recognized in the Income Statement (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Service cost	R$ (38.2)	R$ (43.1)	R$ (42.4)
Administrative costs	(3.4)	(3.7)	(3.4)
(Gains) losses on settlements and curtailments	4.2	0.7	1.1
Income from operations	(37.4)	(46.1)	(44.7)
Financial cost	(101.3)	(105.6)	(97.6)
Total expense for employee benefits	R$ (138.7)	R$ (151.7)	R$ (142.3)

XML

Note 23 - Employee Benefits - Employee Benefit Revenue/(Expenses) Allocation (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Employee Benefit Revenue/(Expenses) Allocation	R$ (138.7)	R$ (151.7)	R$ (142.3)
Employee benefit revenue (expenses) allocated to cost of sales [member]
Statement Line Items [Line Items]
Employee Benefit Revenue/(Expenses) Allocation	(22.3)	(24.5)	(19.3)
Employee benefit revenue (expenses) allocated to sales and marketing expenses [member]
Statement Line Items [Line Items]
Employee Benefit Revenue/(Expenses) Allocation	(5.0)	(9.5)	(7.9)
Employee benefit revenue (expenses) allocated to administrative expenses [member]
Statement Line Items [Line Items]
Employee Benefit Revenue/(Expenses) Allocation	(10.1)	(10.2)	(17.5)
Employee benefit revenue (expenses) allocated to financial expenses [member]
Statement Line Items [Line Items]
Employee Benefit Revenue/(Expenses) Allocation	(101.3)	(105.6)	(97.6)
Employee benefit revenue (expenses) allocated to exceptional items [member]
Statement Line Items [Line Items]
Employee Benefit Revenue/(Expenses) Allocation		R$ (1.9)

XML

Note 23 - Employee Benefits - Actuarial Assumptions (Details)		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Bottom of range [member]
Statement Line Items [Line Items]
Discount rate	[1]	3.60%	3.90%	4.10%
Inflation	[1]	2.00%	2.00%	2.00%
Future salary increases	[1]	1.00%	1.00%	1.00%
Future pension increases	[1]	2.00%	2.00%	2.00%
Medical cost trend rate	[1]	4.50%	3.80%	4.50%
Life expectation for an over 65 years old male	[1]	83	80	85
Life expectation for an over 65 years old female	[1]	86	83	88
Top of range [member]
Statement Line Items [Line Items]
Discount rate	[1]	10.60%	10.50%	12.10%
Inflation	[1]	5.00%	5.20%	5.20%
Future salary increases	[1]	8.70%	8.50%	8.80%
Future pension increases	[1]	4.30%	4.50%	4.50%
Medical cost trend rate	[1]	7.90%	8.20%	8.20%
Dental claims trend rate	[1]
Life expectation for an over 65 years old male	[1]	87	86	70
Life expectation for an over 65 years old female	[1]	89	89	71
Weighted average [member]
Statement Line Items [Line Items]
Medical cost trend rate	[1]	7.90%	8.20%	8.20%
Dental claims trend rate	[1]	4.30%	4.50%	4.50%

[1] Includes assumptions in Latin America - North, Latin America - South and Canada.

XML

Note 23 - Employee Benefits - Weighted Principal Assumptions (Details) R$ in Millions	Dec. 31, 2017 BRL (R$) Rate	Dec. 31, 2016 BRL (R$)	Dec. 31, 2015 BRL (R$)
Actuarial assumption of medical cost trend rates [member]
Statement Line Items [Line Items]
Change in assumption, percentage (Rate) | Rate	1.00%
Increase in assumption	R$ (119.7)	R$ (104.7)	R$ (77.5)
Decrease in assumption	R$ 102.3	90.2	67.4
Actuarial assumption of discount rates [member]
Statement Line Items [Line Items]
Change in assumption, percentage (Rate) | Rate	0.50%
Increase in assumption	R$ 289.7	292.6	262.5
Decrease in assumption	R$ (309.2)	(311.5)	(280.1)
Actuarial assumption of expected rates of salary increases [member]
Statement Line Items [Line Items]
Change in assumption, percentage (Rate) | Rate	0.50%
Increase in assumption	R$ (12.9)	(16.6)	(13.3)
Decrease in assumption	12.3	15.3	12.5
Actuarial assumption of life expectancy after retirement [member]
Statement Line Items [Line Items]
Increase in assumption	(180.6)	(175.9)	(135.1)
Decrease in assumption	R$ 176.5	R$ 172.9	R$ 131.1
Change in assumption, year	1

XML

Note 23 - Employee Benefits - Plan Assets Components (Details)	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Plan assets, government bonds [member]
Statement Line Items [Line Items]
Plan assets percentage, rated	50.00%	41.00%	29.00%
Plan assets percentage, unrated
Plan assets percentage	50.00%	41.00%	29.00%
Plan assets, corporate bonds [member]
Statement Line Items [Line Items]
Plan assets percentage, rated	7.00%	13.00%	23.00%
Plan assets percentage, unrated
Plan assets percentage	7.00%	13.00%	23.00%
Plan assets, equity instruments [member]
Statement Line Items [Line Items]
Plan assets percentage, rated	14.00%	18.00%	15.00%
Plan assets percentage, unrated
Plan assets percentage	14.00%	18.00%	15.00%
Plan assets, property [member]
Statement Line Items [Line Items]
Plan assets percentage, rated
Plan assets percentage, unrated			1.00%
Plan assets percentage			1.00%
Plan assets, cash [member]
Statement Line Items [Line Items]
Plan assets percentage, rated		1.00%
Plan assets percentage, unrated
Plan assets percentage		1.00%
Plan assets, others [member]
Statement Line Items [Line Items]
Plan assets percentage, rated	29.00%	27.00%	32.00%
Plan assets percentage, unrated
Plan assets percentage	29.00%	27.00%	32.00%

XML

Note 24 - Share-based Payments (Details Textual)		12 Months Ended
		Dec. 31, 2017 BRL (R$)	Dec. 31, 2016 BRL (R$)	Dec. 31, 2015 BRL (R$)	Dec. 31, 2014 BRL (R$)
Statement Line Items [Line Items]
Option life, share options granted	[1]	5	5	5
Weighted average exercise price of share options outstanding in share-based payment arrangement at end of period		R$ 15.27	R$ 13.87	R$ 12.36	R$ 10.07
Weighted average remaining contractual life of outstanding share options		6.4	5.96	6.3
Number of share options outstanding in share-based payment arrangement at end of period		135,221,000	131,244,000	121,770,000	126,149,000
Number of share options vested in share-based payment arrangement		40,150,000	52,780,000
Weighted average share price for share options in share-based payment arrangement exercised during period at date of exercise		R$ 18.87	R$ 18.41
Expense from share-based payment transactions with employees		236,900,000	189,300,000	R$ 209,400,000
Bottom of range [member]
Statement Line Items [Line Items]
Weighted average exercise price of share options outstanding in share-based payment arrangement at end of period		0.001	0.02	0.35
Top of range [member]
Statement Line Items [Line Items]
Weighted average exercise price of share options outstanding in share-based payment arrangement at end of period		R$ 26.09	R$ 28.32	R$ 26.57
Grant one [member]
Statement Line Items [Line Items]
Profit allocation, share-based payments, allocation option one		30.00%
Profit allocation, share-based payments, allocation option two		40.00%
Profit allocation, share-based payments, allocation option three		60.00%
Profit allocation, share-based payments, allocation option four		70.00%
Profit allocation, share-based payments, allocation option five		100.00%
Option life, share options granted		5
Grant two [member]
Statement Line Items [Line Items]
Option life, share options granted		5
Lot A [member]
Statement Line Items [Line Items]
Option life, share options granted		5
Lot B [member]
Statement Line Items [Line Items]
Option life, share options granted		10
Deferred stock units of Grant One [member]
Statement Line Items [Line Items]
Number of other new equity instruments introduced in share-based payment arrangement		794,000	7,329,000	2,692,000
Weighted average exercise price of other equity instruments granted in share-based payment arrangement		R$ 15,200,000	R$ 133,900,000
Cliff vest period		5 years

[1] Information based on weighted average plans granted, except for the expected dividends and risk-free interest rate.

XML

Note 24 - Share-based Payments - Weighted Average Fair Value of the Options and Assumptions (Details) - BRL (R$)		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Fair value of options granted	[1]	R$ 6.51	R$ 6.21	R$ 7.84
Share price	[1]	19.80	17.18	18.41
Exercise price	[1]	R$ 19.80	R$ 17.18	R$ 18.41
Expected volatility	[1]	26.70%	27.00%	27.50%
Vesting year	[1]	5	5	5
Expected dividends	[1]	5.00%	5.00%	5.00%
Risk-free interest rate	[1],[2]	10.10%	12.40%	15.90%

[1] Information based on weighted average plans granted, except for the expected dividends and risk-free interest rate.

[2] The percentages include the grants of stock options and ADR's during the period, in which the risk-free interest rate of ADR's are calculated in U.S. dollar.

XML

Note 24 - Share-based Payments - Outstanding Options (Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Options outstanding at January 1st	131,244,000	121,770,000	126,149,000
Options issued during the period	20,435,000	24,806,000	16,568,000
Options exercised during the period	(13,548,000)	(11,613,000)	(19,975,000)
Options forfeited during the period	(2,910,000)	(3,719,000)	(972,000)
Options outstanding at ended year	135,221,000	131,244,000	121,770,000

XML

Note 24 - Share-based Payments - Weighted Average Exercise Price of Options (Details) - BRL (R$)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Options outstanding at January 1 st, weighted average exercise price	R$ 13.87	R$ 12.36	R$ 10.07
Options issued during the period, weighted average exercise price	19.82	17.18	18.42
Options forfeited during the period, weighted average exercise price	17.88	12.83	20.35
Options exercised during the period, weighted average exercise price	5.81	2.52	5.05
Options outstanding at ended period, weighted average exercise price	15.27	13.87	12.36
Options exercisable at ended period, weighted average exercise price	R$ 3.78	R$ 3.66	R$ 3.29

XML

Note 24 - Share-based Payments - Deferred Shares (Details) - Deferred stock units of Grant One [member]	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Deferred shares outstanding at January 1st	19,260,000	19,056,000	17,490,000
New deferred shares during the period	794,000	7,329,000	2,692,000
Deferred shares granted during the period	(2,874,000)	(6,118,000)	(804,000)
Deferred shares forfeited during the period	(880,000)	(1,007,000)	(322,000)
Deferred shares outstanding at ended year	16,300,000	19,260,000	19,056,000

XML

Note 25 - Trade Payables - Components of Trade Payables (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Trade payables, noncurrent	R$ 175.1	R$ 237.8
Non-current	175.1	237.8
Trade payables, current	10,418.4	9,793.0
Related Parties, current	1,435.6	1,075.8
Current	11,854.0	10,868.8
Total	R$ 12,029.1	R$ 11,106.6

XML

Note 26 - Provisions - Changes in Provisions (Details) R$ in Millions	12 Months Ended
	Dec. 31, 2017 BRL (R$)
Statement Line Items [Line Items]
Balance	R$ 934.0
Effect of changes in foreign	(3.5)
Additions	558.5
Provisions used and reversed	(807.4)
Balance	681.6
Restructuring provision [member]
Statement Line Items [Line Items]
Balance	7.4
Effect of changes in foreign	0.7
Additions
Provisions used and reversed
Balance	8.1
Provision for taxes other than income tax [member]
Statement Line Items [Line Items]
Balance	247.2
Effect of changes in foreign	0.2
Additions	113.9
Provisions used and reversed	(135.0)
Balance	226.3
Provision for income tax [member]
Statement Line Items [Line Items]
Balance	323.4
Effect of changes in foreign	3.0
Additions	167.4
Provisions used and reversed	(336.8)
Balance	157.0
Provisions for labor [member]
Statement Line Items [Line Items]
Balance	165.8
Effect of changes in foreign	(1.4)
Additions	142.0
Provisions used and reversed	(176.9)
Balance	129.5
Legal proceedings provision [member]
Statement Line Items [Line Items]
Balance	43.9
Effect of changes in foreign	(0.1)
Additions	65.4
Provisions used and reversed	(74.0)
Balance	35.2
Miscellaneous other provisions [member]
Statement Line Items [Line Items]
Balance	146.3
Effect of changes in foreign	(5.9)
Additions	69.8
Provisions used and reversed	(84.7)
Balance	125.5
Total contingent provisions [member]
Statement Line Items [Line Items]
Balance	926.6
Effect of changes in foreign	(4.2)
Additions	558.5
Provisions used and reversed	(807.4)
Balance	R$ 673.5

XML

Note 26 - Provisions - Disbursement Expectative (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Provisions	R$ 681.6	R$ 934.0
Not later than one year [member]
Statement Line Items [Line Items]
Provisions	169.0
Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Provisions	351.6
Later than two years and not later than five years [member]
Statement Line Items [Line Items]
Provisions	131.5
Later than five years [member]
Statement Line Items [Line Items]
Provisions	29.5
Restructuring provision [member]
Statement Line Items [Line Items]
Provisions	8.1	7.4
Restructuring provision [member] | Not later than one year [member]
Statement Line Items [Line Items]
Provisions	7.3
Restructuring provision [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Provisions
Restructuring provision [member] | Later than two years and not later than five years [member]
Statement Line Items [Line Items]
Provisions	0.8
Restructuring provision [member] | Later than five years [member]
Statement Line Items [Line Items]
Provisions
Provision for taxes other than income tax [member]
Statement Line Items [Line Items]
Provisions	226.3	247.2
Provision for taxes other than income tax [member] | Not later than one year [member]
Statement Line Items [Line Items]
Provisions	25.7
Provision for taxes other than income tax [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Provisions	179.9
Provision for taxes other than income tax [member] | Later than two years and not later than five years [member]
Statement Line Items [Line Items]
Provisions	5.0
Provision for taxes other than income tax [member] | Later than five years [member]
Statement Line Items [Line Items]
Provisions	15.7
Provision for income tax [member]
Statement Line Items [Line Items]
Provisions	157.0	323.4
Provision for income tax [member] | Not later than one year [member]
Statement Line Items [Line Items]
Provisions	33.6
Provision for income tax [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Provisions	100.7
Provision for income tax [member] | Later than two years and not later than five years [member]
Statement Line Items [Line Items]
Provisions	22.7
Provision for income tax [member] | Later than five years [member]
Statement Line Items [Line Items]
Provisions
Provisions for labor [member]
Statement Line Items [Line Items]
Provisions	129.5	165.8
Provisions for labor [member] | Not later than one year [member]
Statement Line Items [Line Items]
Provisions	77.3
Provisions for labor [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Provisions	25.3
Provisions for labor [member] | Later than two years and not later than five years [member]
Statement Line Items [Line Items]
Provisions	17.6
Provisions for labor [member] | Later than five years [member]
Statement Line Items [Line Items]
Provisions	9.3
Legal proceedings provision [member]
Statement Line Items [Line Items]
Provisions	35.2	43.9
Legal proceedings provision [member] | Not later than one year [member]
Statement Line Items [Line Items]
Provisions	17.1
Legal proceedings provision [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Provisions	15.4
Legal proceedings provision [member] | Later than two years and not later than five years [member]
Statement Line Items [Line Items]
Provisions	1.6
Legal proceedings provision [member] | Later than five years [member]
Statement Line Items [Line Items]
Provisions	1.1
Miscellaneous other provisions [member]
Statement Line Items [Line Items]
Provisions	125.5	146.3
Miscellaneous other provisions [member] | Not later than one year [member]
Statement Line Items [Line Items]
Provisions	8.0
Miscellaneous other provisions [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Provisions	30.3
Miscellaneous other provisions [member] | Later than two years and not later than five years [member]
Statement Line Items [Line Items]
Provisions	83.8
Miscellaneous other provisions [member] | Later than five years [member]
Statement Line Items [Line Items]
Provisions	3.4
Total contingent provisions [member]
Statement Line Items [Line Items]
Provisions	673.5	R$ 926.6
Total contingent provisions [member] | Not later than one year [member]
Statement Line Items [Line Items]
Provisions	161.7
Total contingent provisions [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Provisions	351.6
Total contingent provisions [member] | Later than two years and not later than five years [member]
Statement Line Items [Line Items]
Provisions	130.7
Total contingent provisions [member] | Later than five years [member]
Statement Line Items [Line Items]
Provisions	R$ 29.5

XML

Note 27 - Financial Instruments and Risks (Details Textual) - BRL (R$) R$ in Millions	1 Months Ended	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Value at risk exposure, probable		95.00%
Value at risk, duration		21 days
Value at risk, adverse scenario, deterioration percentage		25.00%
Value at risk, remote scenario, deterioration percentage		50.00%
Total gains (losses) on financial assets at fair value through profit or loss		R$ 227.6	R$ 247.5	R$ 261.4
Guarantees held for derivative instruments	R$ 608.3	608.3	R$ 486.8
Swap contract [member]
Statement Line Items [Line Items]
Total gains (losses) on financial assets at fair value through profit or loss	67.0
Equity price risk [member]
Statement Line Items [Line Items]
Risk exposure associated with instruments sharing characteristic	R$ 2,300.0	R$ 2,300.0
Bottom of range [member]
Statement Line Items [Line Items]
Trigger clause percentage, credit risk		10.00%
Top of range [member]
Statement Line Items [Line Items]
Trigger clause percentage, credit risk		15.00%

XML

Note 27 - Financial Instruments and Risks - Transactions Protected by Derivative Financial Instruments (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Total cost exposure [member]
Statement Line Items [Line Items]
Risk	R$ (9,742.3)	R$ (8,807.6)
Notional	9,318.9	8,624.1
Fair Value Assets	283.6	190.7
Fair Value Liability	(190.0)	(582.8)
Gain (loss) Finance Result	(563.5)	(1,397.5)
Gain (loss) Operational Result	(200.2)	737.4
Gain (loss) Equity	584.8	(873.3)
Commodity risk portion of cost exposure [member]
Statement Line Items [Line Items]
Risk	(2,378.7)	(1,742.8)
Notional	1,955.3	1,559.3
Fair Value Assets	166.5	136.5
Fair Value Liability	(70.7)	(43.7)
Gain (loss) Finance Result	(1.5)	(5.4)
Gain (loss) Operational Result	103.6	(97.0)
Gain (loss) Equity	(4.8)	90.3
American dollar risk portion of cost exposure [member]
Statement Line Items [Line Items]
Risk	(6,879.1)	(6,566.9)
Notional	6,879.1	6,566.9
Fair Value Assets	86.3	36.0
Fair Value Liability	(93.4)	(491.3)
Gain (loss) Finance Result	(556.1)	(1,392.6)
Gain (loss) Operational Result	(331.5)	782.2
Gain (loss) Equity	630.2	(909.0)
Euro risk portion of cost exposure [member]
Statement Line Items [Line Items]
Risk	(82.9)	(135.2)
Notional	82.9	135.2
Fair Value Assets	3.5
Fair Value Liability	(0.7)	(4.7)
Gain (loss) Finance Result	(4.7)	3.2
Gain (loss) Operational Result	0.4	56.1
Gain (loss) Equity	6.6	(42.1)
Mexican Pesos risk portion of cost exposure [member]
Statement Line Items [Line Items]
Risk	(401.6)	(359.2)
Notional	401.6	359.2
Fair Value Assets	27.3	18.2
Fair Value Liability	(25.2)	(43.3)
Gain (loss) Finance Result	(1.2)	(2.9)
Gain (loss) Operational Result	27.3	(4.3)
Gain (loss) Equity	(47.2)	(13.2)
Total fixed asset exposure [member]
Statement Line Items [Line Items]
Risk	(579.5)	(523.1)
Notional	579.5	523.1
Fair Value Assets	1.9	3.0
Fair Value Liability	(10.8)	(76.1)
Gain (loss) Finance Result	(1.9)	(187.0)
Gain (loss) Operational Result
Gain (loss) Equity
Brazilian Real risk portion of cost exposure [member]
Statement Line Items [Line Items]
Risk		(3.5)
Notional		3.5
Fair Value Assets
Fair Value Liability		0.2
Gain (loss) Finance Result		0.2
Gain (loss) Operational Result		0.4
Gain (loss) Equity		0.7
American Dollar risk portion of fixed assets exposure [member]
Statement Line Items [Line Items]
Risk	(531.9)	(430.3)
Notional	531.9	430.3
Fair Value Assets	1.8	3.0
Fair Value Liability	(10.8)	(5.8)
Gain (loss) Finance Result	(2.8)	(119.0)
Gain (loss) Operational Result
Gain (loss) Equity
Euro risk portion of fixed assets exposure [member]
Statement Line Items [Line Items]
Risk	(47.6)	(92.8)
Notional	47.6	92.8
Fair Value Assets	0.1
Fair Value Liability		(70.3)
Gain (loss) Finance Result	0.9	(68.0)
Gain (loss) Operational Result
Gain (loss) Equity
Total expenses exposure [member]
Statement Line Items [Line Items]
Risk	(177.7)	(103.7)
Notional	177.7	103.7
Fair Value Assets	0.5	0.8
Fair Value Liability	(1.8)	(1.1)
Gain (loss) Finance Result	(2.9)	47.6
Gain (loss) Operational Result	3.9	5.8
Gain (loss) Equity	1.8	(134.2)
American Dollar risk portion of the expenses exposure [member]
Statement Line Items [Line Items]
Risk	(169.2)	(90.9)
Notional	169.2	90.9
Fair Value Assets	0.3
Fair Value Liability	(1.6)	(1.1)
Gain (loss) Finance Result	(3.1)	(3.0)
Gain (loss) Operational Result	3.5	5.8
Gain (loss) Equity	2.4	(29.4)
Rupee risk portion of the expenses exposure [member]
Statement Line Items [Line Items]
Risk	(8.5)
Notional	8.5
Fair Value Assets	0.2
Fair Value Liability	(0.2)
Gain (loss) Finance Result	0.2
Gain (loss) Operational Result	0.4
Gain (loss) Equity	(0.6)
Total cash exposure [member]
Statement Line Items [Line Items]
Risk	(1,328.3)	1,043.8
Notional	1,328.3	(1,043.8)
Fair Value Assets
Fair Value Liability	(13.1)	7.8
Gain (loss) Finance Result	(266.0)	(3.7)
Gain (loss) Operational Result
Gain (loss) Equity
American Dollar risk portion of the cash exposure [member]
Statement Line Items [Line Items]
Risk	(1,313.3)	592.3
Notional	1,313.3	(592.3)
Fair Value Assets
Fair Value Liability	(13.1)	7.8
Gain (loss) Finance Result	(266.0)	(55.8)
Gain (loss) Operational Result
Gain (loss) Equity
Euro risk portion of the expenses exposure [member]
Statement Line Items [Line Items]
Risk
Notional
Fair Value Assets
Fair Value Liability
Gain (loss) Finance Result		(0.3)
Gain (loss) Operational Result
Gain (loss) Equity		0.7
Interest rate risk portion of the cash exposure [member]
Statement Line Items [Line Items]
Risk	(15.0)	400.0
Notional	15.0	(400.0)
Fair Value Assets
Fair Value Liability		(0.1)
Gain (loss) Finance Result		40.5
Gain (loss) Operational Result
Gain (loss) Equity
Canadian dollar risk portion of the expenses exposure [member]
Statement Line Items [Line Items]
Risk
Notional
Fair Value Assets
Fair Value Liability
Gain (loss) Finance Result		50.9
Gain (loss) Operational Result
Gain (loss) Equity		(106.3)
Total debts exposure [member]
Statement Line Items [Line Items]
Risk	(919.5)	(2,547.9)
Notional	356.9	2,000.2
Fair Value Assets	30.0	18.4
Fair Value Liability	(1.8)	(61.2)
Gain (loss) Finance Result	(67.5)	(50.7)
Gain (loss) Operational Result
Gain (loss) Equity
Brazilian Real risk portion of the expenses exposure [member]
Statement Line Items [Line Items]
Risk		(12.8)
Notional		12.8
Fair Value Assets		0.8
Fair Value Liability
Gain (loss) Finance Result
Gain (loss) Operational Result
Gain (loss) Equity		0.8
American Dollar risk portion of the debts exposure [member]
Statement Line Items [Line Items]
Risk	(562.6)	(1,874.2)
Notional		1,326.5
Fair Value Assets		2.6
Fair Value Liability		(48.5)
Gain (loss) Finance Result	(76.2)	(28.7)
Gain (loss) Operational Result
Gain (loss) Equity
Interest rate risk portion of the debts exposure [member]
Statement Line Items [Line Items]
Risk	(356.9)	(673.7)
Notional	356.9	673.7
Fair Value Assets	30.0	15.8
Fair Value Liability	(1.8)	(12.7)
Gain (loss) Finance Result	8.7	(22.0)
Gain (loss) Operational Result
Gain (loss) Equity
Total equity exposure [member]
Statement Line Items [Line Items]
Risk	(2,347.9)
Notional	677.0
Fair Value Assets	69.2
Fair Value Liability
Gain (loss) Finance Result	67.0
Gain (loss) Operational Result
Gain (loss) Equity
Euro risk portion of the cash exposure [member]
Statement Line Items [Line Items]
Risk		51.5
Notional		(51.5)
Fair Value Assets
Fair Value Liability		0.1
Gain (loss) Finance Result		11.6
Gain (loss) Operational Result
Gain (loss) Equity
Stock exchange price risk portion of the equity instrument exposure [member]
Statement Line Items [Line Items]
Risk	(2,347.9)
Notional	677.0
Fair Value Assets	69.2
Fair Value Liability
Gain (loss) Finance Result	67.0
Gain (loss) Operational Result
Gain (loss) Equity
Total financial risk exposure [member]
Statement Line Items [Line Items]
Risk	(15,095.2)	(10,938.5)
Notional	12,438.3	10,207.3
Fair Value Assets	385.2	212.9
Fair Value Liability	(217.5)	(713.4)
Gain (loss) Finance Result	(834.8)	(1,592.5)
Gain (loss) Operational Result	(196.3)	743.2
Gain (loss) Equity	R$ 586.6	(972.1)
Total foreign investments exposure [member]
Statement Line Items [Line Items]
Risk
Notional
Fair Value Assets
Fair Value Liability
Gain (loss) Finance Result		(1.2)
Gain (loss) Operational Result
Gain (loss) Equity		35.4
American Dollar risk portion of the foreign investments exposure [member]
Statement Line Items [Line Items]
Risk
Notional
Fair Value Assets
Fair Value Liability
Gain (loss) Finance Result		(0.9)
Gain (loss) Operational Result
Gain (loss) Equity		37.2
Euro risk portion of the foreign investments exposure [member]
Statement Line Items [Line Items]
Risk
Notional
Fair Value Assets
Fair Value Liability
Gain (loss) Finance Result
Gain (loss) Operational Result
Gain (loss) Equity		1.7
Canadian Dollar risk portion of the foreign investments exposure [member]
Statement Line Items [Line Items]
Risk
Notional
Fair Value Assets
Fair Value Liability
Gain (loss) Finance Result		(0.3)
Gain (loss) Operational Result
Gain (loss) Equity		R$ (3.5)

XML

Note 27 - Financial Instruments and Risks - Interest Rate Hedging (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Interest rate risk, Brazilian Real [member]
Statement Line Items [Line Items]
Pre-hedge, post-fixed interest rate	9.20%	10.00%
Pre-hedge, post-fixed interest rate, amount	R$ 402.3	R$ 667.7
Post-hedge, post-fixed interest rate	7.60%	12.60%
Post-hedge, post-fixed interest rate, amount	R$ 714.1	R$ 2,375.6
Pre-hedge, pre-set interest rate	6.40%	6.80%
Pre-hedge, pre-set interest rate, amount	R$ 682.5	R$ 1,223.5
Post-hedge, pre-set interest rate	5.90%	6.20%
Post-hedge, pre-set interest rate, amount	R$ 370.8	R$ 841.9
Interest rate risk, American Dollar [member]
Statement Line Items [Line Items]
Pre-hedge, post-fixed interest rate	2.70%	1.50%
Pre-hedge, post-fixed interest rate, amount	R$ 555.3	R$ 1,882.3
Post-hedge, post-fixed interest rate	2.70%	2.20%
Post-hedge, post-fixed interest rate, amount	R$ 555.2	R$ 565.7
Pre-hedge, pre-set interest rate	3.80%	6.00%
Pre-hedge, pre-set interest rate, amount	R$ 22.9	R$ 11.6
Post-hedge, pre-set interest rate	3.80%	6.00%
Post-hedge, pre-set interest rate, amount	R$ 22.9	R$ 1.8
Interest rate risk, Canadian Dollar [member]
Statement Line Items [Line Items]
Pre-hedge, post-fixed interest rate	2.00%	1.60%
Pre-hedge, post-fixed interest rate, amount	R$ 685.9	R$ 1,259.1
Post-hedge, post-fixed interest rate	2.00%	1.60%
Post-hedge, post-fixed interest rate, amount	R$ 685.9	R$ 1,259.1
Interest rate risk, Barbadian Dollar [member]
Statement Line Items [Line Items]
Pre-hedge, post-fixed interest rate	2.30%	2.70%
Pre-hedge, post-fixed interest rate, amount	R$ 5.0	R$ 4.9
Post-hedge, post-fixed interest rate	2.30%	2.70%
Post-hedge, post-fixed interest rate, amount	R$ 5.0	R$ 4.9
Pre-hedge, pre-set interest rate		4.30%
Pre-hedge, pre-set interest rate, amount		R$ 48.5
Post-hedge, pre-set interest rate		4.30%
Post-hedge, pre-set interest rate, amount		R$ 48.5
Interest rate risk [member]
Statement Line Items [Line Items]
Pre-hedge, post-fixed interest rate
Pre-hedge, post-fixed interest rate, amount	R$ 1,648.5	R$ 3,814.0
Post-hedge, post-fixed interest rate
Post-hedge, post-fixed interest rate, amount	R$ 1,960.2	R$ 4,205.3
Pre-hedge, pre-set interest rate
Pre-hedge, pre-set interest rate, amount	R$ 906.3	R$ 1,582.3
Post-hedge, pre-set interest rate
Post-hedge, pre-set interest rate, amount	R$ 594.6	R$ 1,191.0
Interest rate risk, Argentinean Peso [member]
Statement Line Items [Line Items]
Pre-hedge, pre-set interest rate	31.00%
Pre-hedge, pre-set interest rate, amount	R$ 1.8
Post-hedge, pre-set interest rate	31.00%
Post-hedge, pre-set interest rate, amount	R$ 1.8
Interest rate risk, Dominican Peso [member]
Statement Line Items [Line Items]
Pre-hedge, pre-set interest rate	9.30%	9.70%
Pre-hedge, pre-set interest rate, amount	R$ 188.8	R$ 288.8
Post-hedge, pre-set interest rate	9.30%	9.70%
Post-hedge, pre-set interest rate, amount	R$ 188.8	R$ 288.8
Interest rate risk, Guatemala´s Quetzal [member]
Statement Line Items [Line Items]
Pre-hedge, pre-set interest rate	7.80%	8.00%
Pre-hedge, pre-set interest rate, amount	R$ 10.3	R$ 9.9
Post-hedge, pre-set interest rate	7.80%	8.00%
Post-hedge, pre-set interest rate, amount	R$ 10.3	R$ 10.0

XML

Note 27 - Financial Instruments and Risks - Sensitivity Analysis of Financial Instruments (Details) R$ in Millions	12 Months Ended
	Dec. 31, 2017 BRL (R$)
Statement Line Items [Line Items]
Fair value of hedging instruments	R$ 167.7
Commodity risk portion of cost exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	95.8
Total cost exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	93.6
Total fixed asset exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	(8.9)
Total expenses exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	(1.3)
Interest rate risk portion of the cash exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Total cash exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	(13.1)
Interest rate risk portion of the debts exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	28.2
Total debts exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	28.2
Stock exchange price risk portion of the equity instrument exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	69.2
Total equity exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	69.2
Total risk exposures [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	82.7
Sensitivity value level, adverse scenario	664.2
Sensitivity value level, remote scenario	1,328.6
Fair value of hedges and transactions, pro forma
Commodities hedge [member] | Commodity risk portion of cost exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	95.8
Sensitivity value level, probable scenario	(70.6)
Sensitivity value level, adverse scenario	(392.9)
Sensitivity value level, remote scenario	(881.7)
Commodities hedge [member] | Input purchase affecting the commodity risk portion of cost exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	108.7
Sensitivity value level, adverse scenario	498.8
Sensitivity value level, remote scenario	1,093.5
Fair value of hedging instrument transactions, pro forma	(95.8)
Foreign currency exchange hedge [member] | Foreign exchange risk portion of cost exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	(2.2)
Sensitivity value level, probable scenario	(105.0)
Sensitivity value level, adverse scenario	(1,843.1)
Sensitivity value level, remote scenario	(3,684.0)
Foreign currency exchange hedge [member] | Input purchase that affects the foreign exchange risk portion of cost exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	105.0
Sensitivity value level, adverse scenario	1,843.1
Sensitivity value level, remote scenario	3,684.0
Fair value of hedging instrument transactions, pro forma	2.2
Foreign currency exchange hedge [member] | Foreign currency risk portion of fixed assets exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	(16.8)
Sensitivity value level, adverse scenario	(153.8)
Sensitivity value level, remote scenario	(298.6)
Fair value of hedging instrument transactions, pro forma	(8.9)
Foreign currency exchange hedge [member] | Capex Purchase affecting the foreign currency exchange risk portion of the fixed assets exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	8.9
Sensitivity value level, probable scenario	16.8
Sensitivity value level, adverse scenario	153.8
Sensitivity value level, remote scenario	298.6
Foreign currency exchange hedge [member] | Total fixed asset exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario
Sensitivity value level, adverse scenario
Sensitivity value level, remote scenario
Fair value of hedges and transactions, pro forma
Foreign currency exchange hedge [member] | Foreign currency exchange risk portion of expenses exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	(1.3)
Sensitivity value level, probable scenario	(3.4)
Sensitivity value level, adverse scenario	(45.7)
Sensitivity value level, remote scenario	(90.2)
Foreign currency exchange hedge [member] | Expenses that affect the foreign currency exchange risk portion of expenses exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	3.4
Sensitivity value level, adverse scenario	45.7
Sensitivity value level, remote scenario	90.2
Fair value of hedging instrument transactions, pro forma	1.3
Foreign currency exchange hedge [member] | Total expenses exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario
Sensitivity value level, adverse scenario
Sensitivity value level, remote scenario
Fair value of hedges and transactions, pro forma
Foreign currency exchange hedge [member] | Foreign currency exchange risk portion of cash exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	(13.1)
Sensitivity value level, probable scenario	(37.5)
Sensitivity value level, adverse scenario	(341.4)
Sensitivity value level, remote scenario	(669.8)
Foreign currency exchange hedge [member] | Cash transaction affecting the foreign currency exchange risk portion of cash exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	37.5
Sensitivity value level, adverse scenario	341.4
Sensitivity value level, remote scenario	669.8
Fair value of hedging instrument transactions, pro forma	13.1
Foreign currency exchange hedge [member] | Foreign currency exchange portion of debt effects exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Sensitivity value level, probable scenario
Sensitivity value level, adverse scenario
Sensitivity value level, remote scenario
Foreign currency exchange hedge [member] | Cash transaction affecting the foreign currency exchange risk portion of debt exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	9.7
Sensitivity value level, adverse scenario	140.6
Sensitivity value level, remote scenario	281.3
Fair value of hedging instrument transactions, pro forma
Commodities and foreign exchange hedges [member] | Total cost exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	38.1
Sensitivity value level, adverse scenario	105.9
Sensitivity value level, remote scenario	211.8
Fair value of hedges and transactions, pro forma
Interest hedge [member] | Interest rate risk portion of the cash exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Sensitivity value level, probable scenario	(0.4)
Sensitivity value level, adverse scenario	(2.9)
Sensitivity value level, remote scenario	(3.4)
Interest hedge [member] | Interest revenue transaction affecting the interest rate risk portion of the cash exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	0.4
Sensitivity value level, adverse scenario	2.9
Sensitivity value level, remote scenario	3.4
Fair value of hedging instrument transactions, pro forma
Interest hedge [member] | Interest rate risk portion of the debts exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	28.2
Sensitivity value level, probable scenario	18.4
Sensitivity value level, adverse scenario	(131.5)
Sensitivity value level, remote scenario	(162.7)
Interest hedge [member] | Interest expenses affecting the interest rate portion of the debts exposure portion [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	(18.4)
Sensitivity value level, adverse scenario	131.5
Sensitivity value level, remote scenario	162.7
Fair value of hedging instrument transactions, pro forma	(28.2)
Interest and foreign currency hedges [member] | Total cash exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario
Sensitivity value level, adverse scenario
Sensitivity value level, remote scenario
Fair value of hedges and transactions, pro forma
Interest and foreign currency hedges [member] | Total debts exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	9.7
Sensitivity value level, adverse scenario	140.6
Sensitivity value level, remote scenario	281.3
Fair value of hedges and transactions, pro forma
Equity instrument hedges [member] | Stock exchange price risk portion of the equity instrument exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	69.2
Sensitivity value level, probable scenario	54.3
Sensitivity value level, adverse scenario	(100.1)
Sensitivity value level, remote scenario	(269.3)
Equity instrument hedges [member] | Expenses that affect the equity instrument risk portion of equity exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	(19.4)
Sensitivity value level, adverse scenario	517.8
Sensitivity value level, remote scenario	1,104.8
Fair value of hedging instrument transactions, pro forma	(69.2)
Equity instrument hedges [member] | Total equity exposure [member]
Statement Line Items [Line Items]
Sensitivity value level, probable scenario	34.9
Sensitivity value level, adverse scenario	417.7
Sensitivity value level, remote scenario	835.5
Fair value of hedges and transactions, pro forma

XML

Note 27 - Financial Instruments and Risks - Notional and Fair Value Amounts per Instrument and Maturity (Details) R$ in Millions	Dec. 31, 2017 BRL (R$)
Statement Line Items [Line Items]
Notional value	R$ 12,438.3
Fair value of hedging instruments	167.7
Not later than one year [member]
Statement Line Items [Line Items]
Notional value	11,966.7
Fair value of hedging instruments	134.9
Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value	99.7
Fair value of hedging instruments	4.6
Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value	15.0
Fair value of hedging instruments
Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value	110.0
Fair value of hedging instruments	25.0
Later than five years [member]
Statement Line Items [Line Items]
Notional value	246.9
Fair value of hedging instruments	3.2
Total cost exposure [member]
Statement Line Items [Line Items]
Notional value	9,318.9
Fair value of hedging instruments	93.6
Total cost exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	9,219.2
Fair value of hedging instruments	89.0
Total cost exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value	99.7
Fair value of hedging instruments	4.6
Total cost exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total cost exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total cost exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Commodity risk portion of cost exposure [member]
Statement Line Items [Line Items]
Notional value	1,955.3
Fair value of hedging instruments	95.8
Commodity risk portion of cost exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	1,859.2
Fair value of hedging instruments	91.1
Commodity risk portion of cost exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value	96.1
Fair value of hedging instruments	4.7
Commodity risk portion of cost exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Commodity risk portion of cost exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Commodity risk portion of cost exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American dollar risk portion of cost exposure [member]
Statement Line Items [Line Items]
Notional value	6,879.1
Fair value of hedging instruments	(7.1)
American dollar risk portion of cost exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	6,879.1
Fair value of hedging instruments	(7.1)
American dollar risk portion of cost exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American dollar risk portion of cost exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American dollar risk portion of cost exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American dollar risk portion of cost exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Euro risk portion of cost exposure [member]
Statement Line Items [Line Items]
Notional value	82.9
Fair value of hedging instruments	2.8
Euro risk portion of cost exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	82.9
Fair value of hedging instruments	2.8
Euro risk portion of cost exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Euro risk portion of cost exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Euro risk portion of cost exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Euro risk portion of cost exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Mexican Pesos risk portion of cost exposure [member]
Statement Line Items [Line Items]
Notional value	401.6
Fair value of hedging instruments	2.1
Mexican Pesos risk portion of cost exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	398.0
Fair value of hedging instruments	2.2
Mexican Pesos risk portion of cost exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value	3.6
Fair value of hedging instruments	(0.1)
Mexican Pesos risk portion of cost exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Mexican Pesos risk portion of cost exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Mexican Pesos risk portion of cost exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total fixed asset exposure [member]
Statement Line Items [Line Items]
Notional value	579.5
Fair value of hedging instruments	(8.9)
Total fixed asset exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	579.5
Fair value of hedging instruments	(8.9)
Total fixed asset exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total fixed asset exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total fixed asset exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total fixed asset exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of fixed assets exposure [member]
Statement Line Items [Line Items]
Notional value	531.9
Fair value of hedging instruments	(9.0)
American Dollar risk portion of fixed assets exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	531.9
Fair value of hedging instruments	(9.0)
American Dollar risk portion of fixed assets exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of fixed assets exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of fixed assets exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of fixed assets exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Euro risk portion of fixed assets exposure [member]
Statement Line Items [Line Items]
Notional value	47.6
Fair value of hedging instruments	0.1
Euro risk portion of fixed assets exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	47.6
Fair value of hedging instruments	0.1
Euro risk portion of fixed assets exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Euro risk portion of fixed assets exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Euro risk portion of fixed assets exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Euro risk portion of fixed assets exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total expenses exposure [member]
Statement Line Items [Line Items]
Notional value	177.7
Fair value of hedging instruments	(1.3)
Total expenses exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	177.7
Fair value of hedging instruments	(1.3)
Total expenses exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total expenses exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total expenses exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total expenses exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of the expenses exposure [member]
Statement Line Items [Line Items]
Notional value	169.2
Fair value of hedging instruments	(1.3)
American Dollar risk portion of the expenses exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	169.2
Fair value of hedging instruments	(1.3)
American Dollar risk portion of the expenses exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of the expenses exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of the expenses exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of the expenses exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Rupee risk portion of the expenses exposure [member]
Statement Line Items [Line Items]
Notional value	8.5
Fair value of hedging instruments
Rupee risk portion of the expenses exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	8.5
Fair value of hedging instruments
Rupee risk portion of the expenses exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Rupee risk portion of the expenses exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Rupee risk portion of the expenses exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Rupee risk portion of the expenses exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total cash exposure [member]
Statement Line Items [Line Items]
Notional value	1,328.3
Fair value of hedging instruments	(13.1)
Total cash exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	1,313.3
Fair value of hedging instruments	(13.1)
Total cash exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total cash exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value	15.0
Fair value of hedging instruments
Total cash exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total cash exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of the cash exposure [member]
Statement Line Items [Line Items]
Notional value	1,313.3
Fair value of hedging instruments	(13.1)
American Dollar risk portion of the cash exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	1,313.3
Fair value of hedging instruments	(13.1)
American Dollar risk portion of the cash exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of the cash exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of the cash exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
American Dollar risk portion of the cash exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Interest rate risk portion of the cash exposure [member]
Statement Line Items [Line Items]
Notional value	15.0
Fair value of hedging instruments
Interest rate risk portion of the cash exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Interest rate risk portion of the cash exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Interest rate risk portion of the cash exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value	15.0
Fair value of hedging instruments
Interest rate risk portion of the cash exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Interest rate risk portion of the cash exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total debts exposure [member]
Statement Line Items [Line Items]
Notional value	356.9
Fair value of hedging instruments	28.2
Total debts exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total debts exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total debts exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Total debts exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value	110.0
Fair value of hedging instruments	25.0
Total debts exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value	246.9
Fair value of hedging instruments	3.2
Interest rate risk portion of the debts exposure [member]
Statement Line Items [Line Items]
Notional value	356.9
Fair value of hedging instruments	28.2
Interest rate risk portion of the debts exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Interest rate risk portion of the debts exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Interest rate risk portion of the debts exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Fair value of hedging instruments
Interest rate risk portion of the debts exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value	110.0
Fair value of hedging instruments	25.0
Interest rate risk portion of the debts exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value	246.9
Fair value of hedging instruments	3.2
Total foreign investments exposure [member]
Statement Line Items [Line Items]
Notional value	677.0
Total foreign investments exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	677.0
Total foreign investments exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
Total foreign investments exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
Total foreign investments exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
Total foreign investments exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Total equity exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	69.2
Total equity exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	69.2
Total equity exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Total equity exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Total equity exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Total equity exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
American Dollar risk portion of the foreign investments exposure [member]
Statement Line Items [Line Items]
Notional value	677.0
American Dollar risk portion of the foreign investments exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Notional value	677.0
American Dollar risk portion of the foreign investments exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Notional value
American Dollar risk portion of the foreign investments exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Notional value
American Dollar risk portion of the foreign investments exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Notional value
American Dollar risk portion of the foreign investments exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Notional value
Stock exchange price risk portion of the equity instrument exposure [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	69.2
Stock exchange price risk portion of the equity instrument exposure [member] | Not later than one year [member]
Statement Line Items [Line Items]
Fair value of hedging instruments	69.2
Stock exchange price risk portion of the equity instrument exposure [member] | Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Stock exchange price risk portion of the equity instrument exposure [member] | Later than two years and not later than three years [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Stock exchange price risk portion of the equity instrument exposure [member] | Later than three years and not later than four years [member]
Statement Line Items [Line Items]
Fair value of hedging instruments
Stock exchange price risk portion of the equity instrument exposure [member] | Later than five years [member]
Statement Line Items [Line Items]
Fair value of hedging instruments

XML

Note 27 - Financial Instruments and Risks - Financial Instruments Recognized in the Financial Statements (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Financial assets
Financial asset	R$ 18,378.6	R$ 15,439.3
Financial liabilities
Financial liability	22,036.6	24,423.9
Trade payables and put option granted on subsidiary and other liabilities [member]
Financial liabilities
Financial liability	19,266.1	18,314.2
Financial liabilities, derivatives [member]
Financial liabilities
Financial liability	217.5	713.4
Interest-bearing loans and borrowings [member]
Financial liabilities
Financial liability	2,553.0	5,396.3
Financial liabilities at fair value through profit or loss, category [member]
Financial assets
Financial asset	112.0	301.2
Financial liabilities
Financial liability	5,780.2	5,156.0
Financial liabilities at fair value through profit or loss, category [member] | Trade payables and put option granted on subsidiary and other liabilities [member]
Financial liabilities
Financial liability	5,764.1	5,106.1
Financial liabilities at fair value through profit or loss, category [member] | Financial liabilities, derivatives [member]
Financial liabilities
Financial liability	16.1	49.9
Financial liabilities at fair value through profit or loss, category [member] | Interest-bearing loans and borrowings [member]
Financial liabilities
Financial liability
Financial liabilities, derivative hedges, categories [member]
Financial assets
Financial asset	285.1	194.5
Financial liabilities
Financial liability	201.4	663.5
Financial liabilities, derivative hedges, categories [member] | Trade payables and put option granted on subsidiary and other liabilities [member]
Financial liabilities
Financial liability
Financial liabilities, derivative hedges, categories [member] | Financial liabilities, derivatives [member]
Financial liabilities
Financial liability	201.4	663.5
Financial liabilities, derivative hedges, categories [member] | Interest-bearing loans and borrowings [member]
Financial liabilities
Financial liability
Financial liabilities at amortised cost, category [member]
Financial assets
Financial asset
Financial liabilities
Financial liability	16,055.0	18,604.4
Financial liabilities at amortised cost, category [member] | Trade payables and put option granted on subsidiary and other liabilities [member]
Financial liabilities
Financial liability	13,502.0	13,208.1
Financial liabilities at amortised cost, category [member] | Financial liabilities, derivatives [member]
Financial liabilities
Financial liability
Financial liabilities at amortised cost, category [member] | Interest-bearing loans and borrowings [member]
Financial liabilities
Financial liability	2,553.0	5,396.3
Financial asset, cash and cash equivalents [member]
Financial assets
Financial asset	10,354.5	7,876.8
Financial asset, cash and cash equivalents [member] | Financial liabilities at fair value through profit or loss, category [member]
Financial assets
Financial asset
Financial asset, cash and cash equivalents [member] | Financial liabilities, derivative hedges, categories [member]
Financial assets
Financial asset
Financial asset, cash and cash equivalents [member] | Financial liabilities at amortised cost, category [member]
Financial assets
Financial asset
Financial asset, investment securities [member]
Financial assets
Financial asset	133.9	387.1
Financial asset, investment securities [member] | Financial liabilities at fair value through profit or loss, category [member]
Financial assets
Financial asset	11.9	282.8
Financial asset, investment securities [member] | Financial liabilities, derivative hedges, categories [member]
Financial assets
Financial asset
Financial asset, investment securities [member] | Financial liabilities at amortised cost, category [member]
Financial assets
Financial asset
Trade receivables [member]
Financial assets
Financial asset	7,505.0	6,962.5
Trade receivables [member] | Financial liabilities at fair value through profit or loss, category [member]
Financial assets
Financial asset
Trade receivables [member] | Financial liabilities, derivative hedges, categories [member]
Financial assets
Financial asset
Trade receivables [member] | Financial liabilities at amortised cost, category [member]
Financial assets
Financial asset
Derivatives [member]
Financial assets
Financial asset	385.2	212.9
Derivatives [member] | Financial liabilities at fair value through profit or loss, category [member]
Financial assets
Financial asset	100.1	18.4
Derivatives [member] | Financial liabilities, derivative hedges, categories [member]
Financial assets
Financial asset	285.1	194.5
Derivatives [member] | Financial liabilities at amortised cost, category [member]
Financial assets
Financial asset
Loans and receivables, category [member]
Financial assets
Financial asset	17,859.5	14,839.3
Financial liabilities
Financial liability
Loans and receivables, category [member] | Trade payables and put option granted on subsidiary and other liabilities [member]
Financial liabilities
Financial liability
Loans and receivables, category [member] | Financial liabilities, derivatives [member]
Financial liabilities
Financial liability
Loans and receivables, category [member] | Interest-bearing loans and borrowings [member]
Financial liabilities
Financial liability
Loans and receivables, category [member] | Financial asset, cash and cash equivalents [member]
Financial assets
Financial asset	10,354.5	7,876.8
Loans and receivables, category [member] | Financial asset, investment securities [member]
Financial assets
Financial asset
Loans and receivables, category [member] | Trade receivables [member]
Financial assets
Financial asset	7,505.0	6,962.5
Loans and receivables, category [member] | Derivatives [member]
Financial assets
Financial asset
Held-to-maturity investments, category [member]
Financial assets
Financial asset	122.0	104.3
Financial liabilities
Financial liability
Held-to-maturity investments, category [member] | Trade payables and put option granted on subsidiary and other liabilities [member]
Financial liabilities
Financial liability
Held-to-maturity investments, category [member] | Financial liabilities, derivatives [member]
Financial liabilities
Financial liability
Held-to-maturity investments, category [member] | Interest-bearing loans and borrowings [member]
Financial liabilities
Financial liability
Held-to-maturity investments, category [member] | Financial asset, cash and cash equivalents [member]
Financial assets
Financial asset
Held-to-maturity investments, category [member] | Financial asset, investment securities [member]
Financial assets
Financial asset	122.0	104.3
Held-to-maturity investments, category [member] | Trade receivables [member]
Financial assets
Financial asset
Held-to-maturity investments, category [member] | Derivatives [member]
Financial assets
Financial asset

XML

Note 27 - Financial Instruments and Risks - Fair Value Hierarchy (Details) - BRL (R$) R$ in Millions		Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Financial asset at fair value through profit or loss		R$ 11.9	R$ 282.8
Derivatives assets at fair value through profit or loss		100.1	18.4
Derivatives - operational hedge		285.1	194.5
		397.1	495.7
Financial liabilities at fair value through profit and loss (i)	[1]	5,764.1	5,106.1
Derivatives liabilities at fair value through profit or loss		16.1	49.9
Derivatives liabilities - operational hedge		201.4	654.8
Derivatives liabilities - fair value hedge			8.7
		5,981.6	5,819.5
Level 1 of fair value hierarchy [member]
Statement Line Items [Line Items]
Financial asset at fair value through profit or loss		11.9	282.8
Derivatives assets at fair value through profit or loss		0.1	2.6
Derivatives - operational hedge		4.8	83.6
		16.8	369.0
Financial liabilities at fair value through profit and loss (i)	[1]
Derivatives liabilities at fair value through profit or loss		1.7	9.9
Derivatives liabilities - operational hedge		58.4	78.9
Derivatives liabilities - fair value hedge
		60.1	88.8
Level 2 of fair value hierarchy [member]
Statement Line Items [Line Items]
Financial asset at fair value through profit or loss
Derivatives assets at fair value through profit or loss		100.0	15.8
Derivatives - operational hedge		280.3	110.9
		380.3	126.7
Financial liabilities at fair value through profit and loss (i)	[1]
Derivatives liabilities at fair value through profit or loss		14.4	40.0
Derivatives liabilities - operational hedge		143.0	575.9
Derivatives liabilities - fair value hedge			8.7
		157.4	624.6
Level 3 of fair value hierarchy [member]
Statement Line Items [Line Items]
Financial asset at fair value through profit or loss
Derivatives assets at fair value through profit or loss
Derivatives - operational hedge
Financial liabilities at fair value through profit and loss (i)	[1]	5,764.1	5,106.1
Derivatives liabilities at fair value through profit or loss
Derivatives liabilities - operational hedge
Derivatives liabilities - fair value hedge
		R$ 5,764.1	R$ 5,106.1

[1] Refers to the put option granted on subsidiary as described in Note 21 d(4).

XML

Note 27 - Financial Instruments and Risks - Reconciliation of Changes in the Categorization of Level 3 (Details) R$ in Millions	12 Months Ended
	Dec. 31, 2017 BRL (R$)
Statement Line Items [Line Items]
Financial liabilities at December 31, 2016 (i)	R$ 24,423.9
Financial liabilities at December 31, 2017 (i)	22,036.6
Level 3 of fair value hierarchy [member]
Statement Line Items [Line Items]
Financial liabilities at December 31, 2016 (i)	5,106.1	[1]
Acquisition of investments	7.4
Total gains and losses in the year	650.6
Losses recognized in net income	359.1
Losses recognized in equity	291.5
Financial liabilities at December 31, 2017 (i)	R$ 5,764.1	[1]

[1] The liability was recorded under "Trade payables and put option granted on subsidiary and other liabilities" on the balance sheet.

XML

Note 28 - Operating Leases (Details Textual) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Total lease and sublease payments recognised as expense	R$ 39.0	R$ 43.4	R$ 58.7

XML

Note 28 - Operating Leases - Maturities (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Operating leases maturities	R$ 236.2	R$ 154.6
Not later than one year [member]
Statement Line Items [Line Items]
Operating leases maturities	35.7	26.7
Later than one year and not later than five years [member]
Statement Line Items [Line Items]
Operating leases maturities	129.4	61.4
Later than five years [member]
Statement Line Items [Line Items]
Operating leases maturities	R$ 71.1	R$ 66.5

XML

Note 29 - Collateral and Contractual Commitments with Suppliers, Advances From Customers and Other (Details Textual) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Collateral and other commitments	R$ 1,449.0	R$ 1,805.8
Cash guarantees	551.0	571.3
Guarantees held for derivative instruments	R$ 608.3	R$ 486.8

XML

Note 29 - Collateral and Contractual Commitments with Suppliers, Advances From Customers and Other - Components of Collateral and Commiments (Details) - BRL (R$) R$ in Millions		Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Collateral given for own liabilities		R$ 606.3	R$ 1,051.5
Other commitments		842.7	754.3
		1,449.0	1,805.8
Commitments with suppliers (i)	[1]	11,096.3	4,019.2
Commitments - Bond 2017			300.0
		R$ 11,096.3	R$ 4,319.2

[1] Variation refers, mainly, a new contracts with a new suppliers of aluminum in 2017.

XML

Note 29 - Collateral and Contractual Commitments with Suppliers, Advances From Customers and Other - Future Contractual Commitments (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Future contractual commitments	R$ 11,096.3	R$ 4,319.2
Not later than one year [member]
Statement Line Items [Line Items]
Future contractual commitments	3,812.8	3,325.7
Later than one year and not later than two years [member]
Statement Line Items [Line Items]
Future contractual commitments	2,995.7	420.8
Later than two years [member]
Statement Line Items [Line Items]
Future contractual commitments	R$ 4,287.8	R$ 572.7

XML

Note 30 - Contingent Liability (Details Textual) - BRL (R$) shares in Millions, R$ in Millions		12 Months Ended
	Dec. 29, 2014	Dec. 31, 2017	Dec. 31, 2016	Nov. 30, 2017	Aug. 31, 2016
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		R$ 60,520.0	R$ 52,450.5
Total provisions		681.6	934.0
Tax contingent liability [member] | Cervecería Nacional Dominicana S.A. [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities				R$ 1,100.0
Tax contingent liability [member] | Anheuser-Busch Inbev Services LLC [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		8,300.0	R$ 7,800.0
Estimated financial effect of contingent liabilities, percentage reimbursement			70.00%
Tax contingent liability [member] | Beverage Associates Holding Limited [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		1,600.0	R$ 1,500.0
Tax contingent liability [member] | Brazilian Tax authorities [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		549.4	522.9
Alleged amount expended and deducted incorrectly	R$ 1,300.0
Tax contingent liability [member] | Brazilian Tax authorities [member] | AROSUCO AROMAS E SUCOS LTDA. [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		616.1	569,600.0
Tax contingent liability [member] | Brazilian Tax authorities [member] | CRBS S.A. [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities			3,600.0
Tax contingent liability [member] | State of Minas Gerais [member]
Statement Line Items [Line Items]
Tax assessment from tax body					R$ 1,400.0
Tax contingent liability [member] | Rio de Janeiro [member]
Statement Line Items [Line Items]
Tax assessment from tax body		900.0
Tax contingent liability [member] | State of Minas Gerais and Rio de Janeiro [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		5,800.0	4,500.0
Total provisions		6.7
Legal proceedings contingent liability [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		4,071.5	4,417.6
Legal proceedings contingent liability [member] | Department of Federal Revenue of Brazil [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		6,100.0	4,900.0
Total provisions		44.2	41.6
Legal proceedings contingent liability [member] | Superior Court of Justice and the Brazilian Supreme Court [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		599.7	559.5
Payments for debts, net of tax incentives		271.0
Legal proceedings contingent liability [member] | States of São Paulo, Rio de Janeiro, Minas Gerais and other States [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		1,900.0	1,800.0
Legal proceedings contingent liability [member] | Certain holders of warrants issued by Old Ambev [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		R$ 846.9	761.7
Common shares alleged amount requested		172.8
Legal proceedings contingent liability [member] | Claimants in Canada [member]
Statement Line Items [Line Items]
Plaintiff, amount sought		R$ 3,700.0	3,400.0
Tax contingent liability related to expenses [member] | Brazilian Tax authorities [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		4,400.0	5,600.0
Tax contingent liability related to taxes paid abroad [member] | Brazilian Tax authorities [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		7,200.0	2,800.0
Legal proceedings contingent liability related to the Integration Programme/Social Security Financing Levy [member] | Brazilian federal tax authorities [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		3,100.0	1,500.0
Tax contingent liability relating to Manaus Free Trade Zone - ZFM [member] | Brazilian federal tax authorities [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		900.0	735.5
Tax contingent liability relating to Manaus Free Trade Zone - ZFM [member] | State of Minas Gerais [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		3,200.0	2,000.0
Tax contingent liability relating to IPI excise taxes [member] | Brazilian federal tax authorities [member]
Statement Line Items [Line Items]
Estimated financial effect of contingent liabilities		R$ 1,500.0	R$ 1,500.0

XML

Note 30 - Contingent Liability - Estimates of Amounts of Possible Losses (Details) - BRL (R$) R$ in Millions	Dec. 31, 2017	Dec. 31, 2016
Statement Line Items [Line Items]
Estimates of amounts of possible losses	R$ 60,520.0	R$ 52,450.5
IRPJ and CSLL tax contingent liability [member]
Statement Line Items [Line Items]
Estimates of amounts of possible losses	31,757.3	28,934.8
PIS and COFINS tax contingent liability [member]
Statement Line Items [Line Items]
Estimates of amounts of possible losses	3,485.2	1,971.1
ICMS and IPI contingent liability [member]
Statement Line Items [Line Items]
Estimates of amounts of possible losses	19,805.5	16,046.9
Labor contingent liability [member]
Statement Line Items [Line Items]
Estimates of amounts of possible losses	287.1	222.0
Legal proceedings contingent liability [member]
Statement Line Items [Line Items]
Estimates of amounts of possible losses	4,071.5	4,417.6
Other contingent liabilities [member]
Statement Line Items [Line Items]
Estimates of amounts of possible losses	R$ 1,113.4	R$ 858.1

XML

Note 31 - Non-cash Items - Investment and Financing Activities Not Involving Cash (Details) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Acquisition of property, plant and equipment			R$ 105.6
Acquisition of investments payables		208.7
Cash financing cost other than interests	42.3	37.7	1,752.3
PERT 2017	199.7
Fair value of option granted	221.8	205.1	144.6
Others			R$ 41.1

XML

Note 32 - Related Parties (Details Textual) - BRL (R$) R$ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Fundacao Zerrenner [member]
Statement Line Items [Line Items]
Percentage of ownership held by a related party	10.20%
Expenses incurred by a related party	R$ 300.1	R$ 266.7
Recognised finance lease as assets	R$ 63.3
Asset leasing agreement, term	10 years
Annual lease payment	R$ 3.3
Fundacao Zerrenner [member] | Active employees [member]
Statement Line Items [Line Items]
Expenses incurred by a related party	264.3	231.9
Fundacao Zerrenner [member] | Retirees [member]
Statement Line Items [Line Items]
Expenses incurred by a related party	35.8	34.8
Anheuser-Busch, Inc [member]
Statement Line Items [Line Items]
Transfers under licence agreements to entity, related party transactions	R$ 1.9	2.0	R$ 52.8
Transfers under licence agreements from entity, related party transactions		R$ 314.5	R$ 374.0	R$ 434.8

XML

Note 32 - Related Parties - Expenses Realted to Management Members (Details) - BRL (R$) R$ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Short-term benefits (i)	[1]	R$ 33.4	R$ 21.7	R$ 32.1
Share-based payments (ii)	[2]	38.9	36.2	39.0
Total key management remuneration		R$ 72.3	R$ 57.9	R$ 71.1

[1] These correspond substantially to management's salaries and profit sharing (including performance bonuses).

[2] These correspond to the compensation cost of stock options and restricted stocks granted to management. These amounts exclude remuneration paid to members of the Fiscal Council.

XML

Note 32 - Related Parties - Transactions With Related Parties (Details) - BRL (R$) R$ in Millions		12 Months Ended
		Dec. 31, 2017		Dec. 31, 2016	Dec. 31, 2015
Statement Line Items [Line Items]
Trade receivables, related parties	[1]	R$ 130.6		R$ 37.3
Other trade receivables, related parties	[1]	137.6		284.1
Trade payables, related parties	[1]	(1,435.6)		(1,075.8)
Other trade payables, related parties	[1]	(295.7)		(495.0)
Borrowings and interest payable, related parties		(48.3)		(30.5)
Dividends payables, related parties		(680.8)		(680.8)
Buying/service fees/rentals, related parties		(1,186.9)		(1,023.9)	R$ (942.1)
Sales, related parties		73.3		78.1	50.8
Royalties/benefits, related parties		(366.2)		(371.9)	(377.6)
Net finance cost, related parties		(16.8)		(26.0)
Anheuser-Busch InBev N.V. [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]	1.2		6.3
Other trade receivables, related parties	[1]	33.6		13.4
Trade payables, related parties	[1]	(363.0)		(308.9)
Other trade payables, related parties	[1]	(1.7)		(0.7)
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties					(55.3)
Sales, related parties
Royalties/benefits, related parties					(35.5)
Anheuser-Busch Procurement [Member
Statement Line Items [Line Items]
Trade receivables, related parties	[1]	8.9
Other trade receivables, related parties		0.1
Trade payables, related parties	[1]
Other trade payables, related parties	[1]
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties		(5.8)
Sales, related parties		20.8
Royalties/benefits, related parties
Net finance cost, related parties
Anheuser-Busch Packaging Group Inc. [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]
Other trade receivables, related parties	[1]
Trade payables, related parties	[1]			(31.3)
Other trade payables, related parties	[1]
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties				(32.8)
Sales, related parties
Royalties/benefits, related parties
Net finance cost, related parties
Anheuser-Busch Inbev USA LLC [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]	14.1		19.7
Other trade receivables, related parties	[1]	16.3		18.6
Trade payables, related parties	[1]	(375.7)		(247.4)
Other trade payables, related parties	[1]	(8.7)		(1.7)
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties		(258.7)		(206.0)	(124.9)
Sales, related parties		42.5		52.3	49.0
Royalties/benefits, related parties		(284.5)		(292.8)	(288.1)
Net finance cost, related parties
Anheuser-Busch Inbev Services LLC [member]
Statement Line Items [Line Items]
Trade receivables, related parties		0.8	[1]	0.3
Other trade receivables, related parties		29.1	[1]	15.2
Trade payables, related parties			[1]
Other trade payables, related parties		(6.1)	[1]	(3.1)
Borrowings and interest payable, related parties
Dividends payables, related parties
Compañia Cervecera Ambev Peru S.A.C. [member]
Statement Line Items [Line Items]
Trade receivables, related parties				7.1
Other trade receivables, related parties
Trade payables, related parties				(4.7)
Other trade payables, related parties
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties		(8.6)
Sales, related parties		1.5
Royalties/benefits, related parties
Net finance cost, related parties
Cervecería Modelo de Mexico S. de R.L. de C.V. [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]	91.6		1.1
Other trade receivables, related parties	[1]	5.8
Trade payables, related parties	[1]	(589.3)		(444.1)
Other trade payables, related parties	[1]	(59.7)
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties		(749.1)		(596.0)	(257.7)
Sales, related parties		0.4		2.0	1.1
Royalties/benefits, related parties		(45.8)		(46.9)	(52.9)
Net finance cost, related parties
Inbev Belgium N.V. [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]	0.1		0.2
Other trade receivables, related parties	[1]	23.8		17.6
Trade payables, related parties	[1]	(33.8)		(17.5)
Other trade payables, related parties	[1]			(0.2)
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties		(73.6)		(77.0)	(73.3)
Sales, related parties					0.1
Royalties/benefits, related parties
Net finance cost, related parties
Ambrew S.A. [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]
Other trade receivables, related parties	[1]
Trade payables, related parties	[1]
Other trade payables, related parties	[1]
Borrowings and interest payable, related parties
Dividends payables, related parties		(89.9)		(89.9)
Interbrew International B.V. [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]
Other trade receivables, related parties	[1]
Trade payables, related parties	[1]
Other trade payables, related parties	[1]	(212.5)		(209.4)
Borrowings and interest payable, related parties		(48.3)		(30.5)
Dividends payables, related parties		(590.9)		(590.9)
Buying/service fees/rentals, related parties
Sales, related parties
Royalties/benefits, related parties
Net finance cost, related parties				(26.0)
Cervecería Modelo de Guadalajara S.A. [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]
Other trade receivables, related parties	[1]			1.0
Trade payables, related parties	[1]			(15.7)
Other trade payables, related parties	[1]			(54.5)
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties				(63.0)	(356.9)
Sales, related parties
Royalties/benefits, related parties
Net finance cost, related parties
Other related parties [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]	13.9		2.6
Other trade receivables, related parties	[1]	8.6		7.3
Trade payables, related parties	[1]	(73.8)		(6.2)
Other trade payables, related parties	[1]	(3.0)		(14.4)
Borrowings and interest payable, related parties
Dividends payables, related parties
Buying/service fees/rentals, related parties		(91.1)		(45.6)	(74.0)
Sales, related parties		8.1		0.3	0.6
Royalties/benefits, related parties		(35.9)		(32.2)	R$ (1.1)
Net finance cost, related parties		(16.8)
Bogotá Beer Company BBC S.A.S. [member]
Statement Line Items [Line Items]
Trade receivables, related parties
Other trade receivables, related parties				211.0
Trade payables, related parties
Other trade payables, related parties				(211.0)
Borrowings and interest payable, related parties
Dividends payables, related parties
Bavaria S.A. [member]
Statement Line Items [Line Items]
Buying/service fees/rentals, related parties				(3.5)
Sales, related parties				23.5
Royalties/benefits, related parties
Net finance cost, related parties
Panamá Holding [member]
Statement Line Items [Line Items]
Trade receivables, related parties	[1]
Other trade receivables, related parties	[1]	20.3
Trade payables, related parties	[1]
Other trade payables, related parties	[1]	(4.0)
Borrowings and interest payable, related parties
Dividends payables, related parties

[1] The amount represents the grade operations (purchase and sale) and the reimbursement between the companies of the group.

XML

Note 33 - Group Companies - Main Group Companies (Details)	12 Months Ended
	Dec. 31, 2017
ARGENTINA | CERVECERIA Y MALTERIA QUILMES SAICA Y G [member]
Statement Line Items [Line Items]
Main group companies	99.75%
BOLIVIA | CERVECERIA BOLIVIANA NACIONAL S.A. [member]
Statement Line Items [Line Items]
Main group companies	85.67%
BRAZIL | AROSUCO AROMAS E SUCOS LTDA. [member]
Statement Line Items [Line Items]
Main group companies	100.00%
BRAZIL | CRBS S.A. [member]
Statement Line Items [Line Items]
Main group companies	100.00%
BRAZIL | CERVEJARIA Z.X. [member]
Statement Line Items [Line Items]
Main group companies	86.42%
CANADA | LABATT BREWING COMPANY LIMITED [member]
Statement Line Items [Line Items]
Main group companies	100.00%
CHILE | CERVECERIA CHILE S.A. [member]
Statement Line Items [Line Items]
Main group companies	100.00%
SPAIN | JALUA SPAIN, S.L. [member]
Statement Line Items [Line Items]
Main group companies	100.00%
LUXEMBOURG | AMBEV LUXEMBOURG [member]
Statement Line Items [Line Items]
Main group companies	100.00%
GUATEMALA | INDUSTRIAS DEL ATLÁNTICO, SOCIEDAD ANONIMA [member]
Statement Line Items [Line Items]
Main group companies	50.00%
PARAGUAY | CERVECERIA PARAGUAYA S.A. [member]
Statement Line Items [Line Items]
Main group companies	87.36%
DOMINICAN REPUBLIC | Cervecería Nacional Dominicana S.A. [member]
Statement Line Items [Line Items]
Main group companies	55.00%
URUGUAY | LINTHAL S.A. [member]
Statement Line Items [Line Items]
Main group companies	100.00%
URUGUAY | CERVECERIA Y MALTERIA PAYSSANDÚ S.A. [member]
Statement Line Items [Line Items]
Main group companies	99.93%
URUGUAY | MONTHIERS SOCIEDAD ANONIMA [member]
Statement Line Items [Line Items]
Main group companies	100.00%
PANAMA | Cervecería Nacional Dominicana S.A. [member]
Statement Line Items [Line Items]
Main group companies	100.00%

XML

Note 35 - Events After the Reporting Period (Details Textual) - BRL (R$) R$ in Millions		1 Months Ended
	Jan. 18, 2018	Jan. 31, 2018	Dec. 31, 2017
Statement Line Items [Line Items]
Total borrowings			R$ 2,553.0
Entering into two loan agreements [member]
Statement Line Items [Line Items]
Total borrowings		R$ 2,000.0
Borrowings, Term		1 year
Partial exercise of put option for further ownership of subsidiary [member] | Cervecería Nacional Dominicana S.A. [member] | E. León Jimenes S.A. [member]
Statement Line Items [Line Items]
Proportion of ownership interest in subsidiary	85.00%
Proportion of ownership interests held by non-controlling interests	15.00%