SEC Info - American Beverage Co Ambev - ‘20-F’ for 12/31/04

Possible extension of the expected maturity of the notes

Under the terms of the notes and the indenture, if, on the expected maturity date for the notes, the insurance policy is in effect or certain funds are on deposit in the reserve account and certain specified events have occurred and are continuing relating to the imposition of currency exchange controls in Brazil, the date for the repayment of the notes will automatically be extended until the earlier to occur of (i) twenty-four calendar months from the expected maturity date; (ii) the latest date for which funds are available in the reserve account or under the letter of credit and under the insurance policy to pay interest on the notes; or (iii) the thirtieth day after any such currency exchange control event has ended. Accordingly, you should not rely, in making your investment decision, on receiving repayment in full of the notes on the initial expected maturity date.

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

Judgments of Brazilian courts enforcing our obligations under the notes or the indenture would be payable only in reais

If proceedings were brought in Brazil seeking to enforce our obligations under the notes or the indenture, we would not be required to discharge our obligations in a currency other than reais. Under the Brazilian exchange control limitations, an obligation to pay amounts denominated in a currency other than Brazilian currency, which is payable in Brazil, may only be satisfied in Brazilian currency at the rate of exchange, as determined by the Central Bank, in effect on the date of payment.

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

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

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

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

Book-entry registration

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

Subordination to certain statutory liabilities

Under Brazilian law, our obligations under the notes and the indenture are subordinated to certain statutory preferences. In the event of our bankruptcy, and according to the new Brazilian bankruptcy law which became effective on June 9, 2005, such statutory preferences, such as claims for salaries and wages (up to 150 minimum wages, per plaintiff), social security and other taxes, court fees and expenses, will have preference over any other claims, including claims by any investor in respect of the notes.

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

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

RISKS RELATING TO THE INSURANCE POLICY

Limited financial information concerning the insurer

The rating of the notes is in part based on the availability of the insurance policy to cover certain risks related to inconvertibility or non-transferability of amounts which may be paid by the issuer under the indenture and the notes in the event that the Brazilian government imposes limitations on the conversion of reais to U.S. dollars. No financial information concerning the insurer is included in this annual report and statutory financial statements are available from the Delaware insurance authorities. The insurer’s financial obligations are subject to pooling arrangements with its parent and certain of its affiliates, which arrangements depend on the financial condition of these entities. No financial information concerning these entities is included herein. Any decline in the financial condition of the insurer or any of these companies may impair the ability of the insurer to pay claims under the insurance policy and could result in a downgrade of the rating of the notes.

Limitation on amount of coverage under the insurance policy

The insurance policy has a policy payment limit in U.S. dollars which corresponds to the amount of scheduled interest due on the notes for eighteen months. Combined with the amounts on deposit in a reserve account or available under the letter of credit, the amounts available to the trustee from the insurance policy should be sufficient to cover the payment of interest due on the notes for up to four interest payment periods. If for any reason any currency exchange control event were to continue for a period longer than twenty-four months (four consecutive interest payment periods) during which time AmBev would otherwise be required to make payments to the trustee on behalf of the noteholders under the notes, a default may occur on the notes. In such cases, noteholders may, in certain circumstances be required to accept reais in satisfaction of AmBev’s obligation to make payments to the trustee under the notes regardless of whether such reais are then convertible into U.S. dollars or any other currency.

See “—Risks Relating to the Notes—Judgments of Brazilian courts enforcing our obligations under the notes or the indenture would be payable only in reais”.

Conditional nature of the insurer’s obligation to pay under the insurance policy

The insurer’s obligation to make payments under the insurance policy is subject to certain conditions, limitations and exclusions including, but not limited to:

·	the requirement that AmBev generally either attempts and fails to convert reais to U.S. dollars or attempts and fails to transfer U.S. dollars from Brazil to the trustee in New York;

·	certain events causing the failure of AmBev to pay under the indenture, continuing for the entire 180 calendar-day waiting period under the insurance policy;

·	the filing by the trustee, as the insured party under the insurance policy, of a claim with the insurer; and

·	the provision of certain information by the trustee and AmBev to the insurer within the time periods proscribed by the insurance policy in connection with the filing of the claim with the insurer.

The failure to satisfy any such condition, if not waived by the insurer, may result in the insurer not being obligated to make any payment on the insurance policy.

In addition, the insurer may in certain circumstances cancel the insurance policy, exclude the payment of a claim thereunder and adjust the amount of a claim under the insurance policy.

Limitation on timing of payments under the insurance policy

The insurance policy requires that the insurer make payments in respect of a claim thereunder 180 days after the original payment schedule for principal of, and interest on, the notes. Accordingly, in the event of an acceleration of the notes prior to the maturity thereof during certain events, the insurer will not be obligated to make such payments in the event of any such acceleration.

Information on the Company

History and Development of the Company

Overview

Companhia de Bebidas das Américas—AmBev is the successor of Companhia Cervejaria Brahma (“Brahma”) and Companhia Antarctica Paulista Indústria Brasileira de Bebidas e Conexos (“Antarctica”), two of the oldest brewers in Brazil. Antarctica ws 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.

AmBev was incorporated as Aditus Participações S.A. (“Aditus”) on September 14, 1998. AmBev, a Brazilian sociedade anônima, is a publicly held corporation incorporated under the laws of the Federative Republic of Brazil. On July 1, 1999, the controlling shareholders of Brahma and Antarctica, contributed all of their common and preferred shares in Brahma and Antarctica in exchange for shares of the same type and class of AmBev (the “controlling shareholders’ contribution”).

On March 31, 2001, Brahma was merged into Antarctica, and Antarctica changed its name to CBB. These transactions had no effect on AmBev’s consolidated financial statements because each of the entities was wholly owned by AmBev.

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

On January 31, 2003, AmBev completed a business combination with Quilmes Industrial (Quinsa), Société Anonyme (“Quinsa”), through which AmBev acquired a 40.5% initial economic interest in Quinsa and established a leading presence in the beer markets of Argentina, Bolivia, Paraguay and Uruguay.

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

On August 27, 2004, AmBev and Interbrew S.A./N.V. (now known as InBev S.A./N.V. (“InBev”)), a Belgian brewer, completed a business combination that involved the merger of an indirect holding company of Labatt, one of the leading brewers in Canada, into AmBev. At the same time, controlling shareholders of AmBev completed the contribution of all shares of an indirect holding company of AmBev to InBev in exchange for newly issued shares of InBev.

On May 31, 2005, CBB merged into AmBev, a transaction which simplified AmBev’s corporate structure.

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

AmBev was formed through the combination of Brazil’s two largest beverage companies, Brahma and Antarctica (the “combination”). The combination involved the creation of AmBev, as a holding company for Brahma and Antarctica. The combination was carried out over the course of 1999 and 2000, beginning with the contribution of shares of the controlling shareholders of Brahma and Antarctica in exchange for shares of AmBev on July 1, 1999. This was followed by the completion of the transactions by which Antarctica and Brahma became wholly-owned subsidiaries of AmBev on September 15, 1999 and September 14, 2000, respectively, and the public shareholders of Brahma and Antarctica became shareholders of AmBev. Pursuant to the controlling shareholders’ contribution on July 1, 1999, Brahma’s controlling shareholders, Empresa de Administração e Participações S.A. - ECAP (“ECAP”) and Braco S.A., and Antarctica’s controlling shareholder, the FAHZ, each contributed all its common and preferred shares in Brahma and Antarctica, respectively, in exchange for AmBev shares of the same type and class.

In connection witih the combination, on July 1, 1999, the FAHZ, Braco S.A., and ECAP, the controlling shareholders of AmBev, as well as AmBev and Marcel Telles, Jorge Paulo Lemann and Carlos Alberto Sicupira, entered into a shareholders’ agreement that contains provisions relating to the voting of shares of AmBev and the voting by AmBev of the shares of its subsidiaries. Messrs. Telles, Lemann and Sicupira are indirectly part of the control block of InBev Brasil (formerly known as Braco Investimentos S.A.) InBev Brasil holds all of the AmBev shares previously held by Braco S.A. and has succeeded to Braco S.A.’s rights and obligations under the AmBev shareholders’ agreement and had ECAP merged into it on June 24, 2005. For a detailed description of the AmBev shareholders’ agreement, see “Major Shareholders and Related Party Transactions—Major Shareholders—AmBev Shareholders’ Agreement”.

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

The CADE, an independent agency of the Brazilian Ministry of Justice, is the principal Brazilian antitrust authority. On April 7, 2000, CADE approved the controlling shareholders’ contribution subject to restrictions designed to prevent AmBev from exercising excessive control over the Brazilian beer market. CADE imposed no restrictions in connection with soft drinks or other beverages produced by AmBev. On April 19, 2000, AmBev entered into a performance agreement with CADE pursuant to which AmBev agreed to comply with the restrictions imposed by CADE. The principal terms of the performance agreement included:

Distribution network: For a period of four years, we had to share our distribution network with at least one regional Brazilian beer company, which cannot have a market share in excess of 5% of its respective regional market, in each of the five regions of Brazil as defined by CADE. On September 10, 2001, after a public bidding process, AmBev signed an agreement for the sharing of AmBev’s distribution network with Eduardo Bier Comercial de Produtos Alimenticios (“Dado Bier”);

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

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

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

·	Bavaria: A requirement that we sell Antarctica’s Bavaria brand and related assets.

On November 6, 2000, we entered into an agreement with Molson Inc. (which has since merged with Adolph Coors Company to form Molson Coors Brewing Company, “Molson”) for the sale of Bavaria pursuant to the terms of our performance agreement with CADE. Our agreement with Molson provided for an initial purchase price of up to R$416.1 million, of which R$191.4 million was received at that time. Molson agreed to pay an additional R$44.8 million for each 0.5% increase in market share achieved by the Bavaria brand on a yearly basis during a five year period, up to a maximum additional payment of R$224.7 million. A minimum annual market share of 6.5%, in addition to intermediary targets, should have been attained by 2005 to assure receipt of the full contingent price of R$224.7 million. Because the targets have not been met, we have not received any portion of this additional consideration. CADE approved this agreement on December 13, 2000, and the sale was completed on December 20, 2000. The agreement also provided for the sharing of our distribution network for a period of six years, renewable for an additional two-year period at the option of the purchaser. During the first four years,

Molson, in accordance with the agreement, would not have to pay us any commission for the use of the distribution network. On April 30, 2002, Molson decided to terminate the distribution agreement in order to enter into a distribution agreement with The Coca-Cola Company.

Non-compliance with any obligation under the performance agreement may trigger a minimum daily fine of R$5,320 per occurrence. This daily fine could be increased up to a maximum of R$106,410 per occurrence. In the event of non-compliance, CADE may also appoint a judicial officer to enforce compliance. CADE has the authority to revoke its approval of the controlling shareholders’ contribution and to file an administrative proceeding against us if we do not comply with our obligations. CADE also has the general authority to order other remedial measures as provided by law and as established under the performance agreement. Pursuant to the terms of the performance agreement, AmBev has to file with CADE half yearly reports attesting compliance with its terms and conditions. To date, AmBev has filed nine reports with CADE and is due to file the tenth and last report by August 31, 2005. CADE has analyzed all reports up to the eighth report and, except for the obligations in connection with exclusivity agreements and the closure of plants (in connection with which further information has been required) all other obligations under the agreement have been considered fulfilled up to the date of such reports.

Acquisition of Interest in Quinsa

On January 31, 2003, AmBev consummated the acquisition of an interest in Quinsa, an indirect holding company of Cerveceria y Malteria Quilmes, the largest Argentine brewer, and in Quilmes International (Bermuda) Ltd. (“QIB”), Quinsa’s controlled subsidiary which is the holding company for all Quinsa’s operating subsidiaries. Quinsa owned 85% of the economic interest in QIB as of January 31, 2003. This transaction involved an initial acquisition of 37.5% of the total capital Quinsa and 8.6% of the shares of QIB, resulting in a total ownership of 40.5% of Quinsa’s economic interest. The transaction included:

·	the purchase of 230.9 million Class A Quinsa shares from Beverage Associates Corp. (“BAC”), for R$1,222.6 million (U.S.$346.4 million);

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

·	the purchase of 8.0 million QIB shares from Heineken International Beheer B.V.C. (“Heineken”), a subsidiary of Heineken N.V., for R$206.5 million (U.S.$58.5 million).

During 2003, we acquired an additional 12.0 million Class B shares of Quinsa in the open market for a total consideration of R$243.7 million (U.S.$82.7 million), increasing our total economic interest in Quinsa to 49.7% at December 31, 2003. During 2004, Quinsa conducted certain share repurchases pursuant to its share buy-back program, increasing our total economic interest in Quinsa to 54.8% at December 31, 2004. As of May 2005, our total economic interest in Quinsa increased to 55.2%.

AmBev and BAC are parties to a shareholder’s agreement whereby each shareholder exercises 50% control over the operations of Quinsa. Accordingly, under Brazilian GAAP, Quinsa is proportionaly consolidated and under U.S. GAAP, Quinsa is accounted for under the equity method.

This acquisition granted AmBev access to leading positions in the Argentine, Bolivian, Uruguayan and Paraguayan markets, as well as to Quinsa’s operations in Chile. In addition, following the acquisition, AmBev has been able to distribute the Quilmes brands throughout Brazil. Pursuant to the agreement with BAC, AmBev has a call optin to acquire 373.5 million Quinsa Class A Shares held by BAC in exchange for shares of AmBev, which may be exercised by AmBev beginning in April 2009 and in April of each year thereafter. Conversely, BAC has a put optin to sell to AmBev the 373.5 million Quinsa Class A Shares held by BAC in exchange for shares of AmBev, which may be exercised by BAC beginning in April 2003 and in April of each year thereafter. The put option held by BAC is immediately exercisable upon a change of control of AmBev occurring prior to January 31, 2006, and will be deemed exercised in the event of a change of control of AmBev occurring after that date. We refer to these agreements in this annual report as the “Quinsa Put and Call Options”. BAC did not seek to exercise the put option in connection with the consummation of the InBev-AmBev Transactions. The price of the shares will be calculated based on the EBITDA of both AmBev and Quinsa at the time of exchange.

The acquisition of AmBev's interest in Quinsa was approved with certain restrictions by the CNDC, the Argentine Antitrust Authority. The main restrictions imposed were:

·	Quinsa and AmBev are required to sell the brands Bieckert, Palermo, Imperial and Norte, as well the brewery located in Lujan, where the Brahma brand was produced, to an independent brewery, which must be financially sound and which does not produce beer in the Argentine Market (the “Purchaser”).

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

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

Companies that produced beer in Argentina may not purchase the assets we are required to sell pursuant to the CNDC's decision; however, in April, 2003, a subsidiary of Compañia Cervecerías Unidas S.A. (“CCU”) filed a lawsuit to be able to participate in any such sale. As a consequence, our compliance with the restrictions has been suspended.

Expansion into the North of Latin America

During 2003 and the first quarter of 2004, we extended our presence in Latin America through a series of transactions in the Northern region of the continent.

On October 24, 2002, AmBev and The Central America Bottling Corporation (“CabCorp”), PepsiCo’s anchor bottler in Central America, agreed to establish a 50-50 joint venture company to explore the beer markets in Central America and the Caribbean. The joint venture, Cerveceria Rio, built a brewing facility in 2003 in the region of Tecolután, Guatemala. Cerveceria Rio started to produce beer in September 2003, when the Brahva brand, an extension of AmBev’s Brahma brand, was launched in Guatemala. In 2004, the sales of Brahva were extended to Nicaragua, and in the beginning of 2005, to El Salvador. Brahva is sold in these three countries through Cabcorp’s distribution network.

On October 14, 2003, we agreed to purchase, through our Peruvian subsidiary AmBev Peru, certain production and distribution assets from Embotelladora Rivera, including two soft drinks bottling plants, for a consideration of R$ 86.7 million. Among the assets acquired were the franchise for Pepsi products in Lima and northern Peru. In connection with our expansion in Peru, in May 2005 we finalized a brewing and soft drinks bottling facility in the region of Lima, with an estimated investment of approximately R$92.1 million.

On December 2, 2003, we acquired 80% of the voting rights and economic interest of Cerveceria Suramericana in Ecuador, the owner of a brewing facility in the city of Guayaquil, with an annual production capacity of 900,000 hectoliters. This company ws valued at an amount equivalent to its existing debt (approximately U.S.$45 million), and was renamed AmBev Ecuador after we acquired it. In October 2004, we launched the Brahma brand in the local market.

On February 12, 2004, we acquired a 51.0% voting and economic interest in Embotelladora Dominicana, C. per A. (“Embodom”), PepsiCo’s bottler for the Dominican Republic bottler, for U.S.$60.0 million. AmBev’s stake will be increased to 66.0% by the end of 2005 through an asset contribution to Embodom consisting of U.S.$ 10 million and a brewing facility in the region of Santo Domingo, which is currently under construction.

InBev-AmBev Transactions

Summary

On March 3, 2004, various entities controlled by AmBev’s former controlling shareholders, Messrs. Lemann, Telles and Sicupira, entered into an agreement (the “Contribution and Subscription Agreement”) with InBev and InBev’s controlling shareholders to exchange their controlling interest in AmBev (consisting of approximately 8.25 billion AmBev common shares) for 141,712,000 newly-issued ordinary shares of InBev.

Also on March 3, 2004, AmBev entered into an agreement (the “Incorporação Agreement”) through which an indirect holding company of Labatt, one of the leading brewers in the Canadian market, would be merged into

AmBev. AmBev issued to InBev, the former owner of Labatt, approximately 7.9 billion AmBev common shares and 11.4 billion AmBev preferred shares.

On August 27, 2004, with the completion of the transactions contemplated by these agreements, which we refer to collectively as the “InBev-AmBev Transactions”:

·	Labatt became a wholly owned subsidiary of AmBev;

·	Interbrew S.A./N.V. was renamed InBev S.A/N.V.;

InBev acquired a total of 16,120,095,140 AmBev common shares and 11,398,181,319 AmBev preferred shares, representing a 68.6% voting interest and a 49.8% economic interest in AmBev as of August 31, 2004. Pursuant to Brazilian law, InBev was required to conduct, following the consummation of the agreements above mentioned, a mandatory tender offer (“MTO”) for all remaining outstanding common shares of AmBev. The MTO was completed on March 29, 2005, and InBev acquired an additional 2,960,070,177 AmBev common shares, increasing its stake in AmBev to a 81.0% voting interest and 55.9% economic interest as of April 30, 2005; and

Messrs. Lemann, Telles and Sicupira acquired 141,712,000 InBev shares, representing approximately a 24.7% voting and economic interest in InBev; Messrs. Lemann, Telles and Sicupira, together with InBev’s existing controlling shareholder group, jointly and equally, indirectly through a holding company named Stichting Interbrew, exercise control over approximately 321,712,000 InBev shares, representing approximately a 56% voting and economic interest in InBev.

AmBev believes these transactions will allow AmBev to develop a presence in the Canadian beer market, provide an opportunity for InBev to sell AmBev’s brands under license in the countries where InBev operates, and offer the potential for AmBev to benefit from InBev’s brand portfolio in countries where AmBev operates.

Acquisition of Labatt - Incorporação Agreement

On March 3, 2004, AmBev entered into the Incorporação Agreement with InBev, Labatt and Mergeco. Pursuant to the Incorporação Agreement, Mergeco was merged into AmBev by means of an Incorporação under Brazilian law, and InBev indirectly received approximately 7.9 billion newly issued AmBev common shares and approximately 11.4 billion newly issued AmBev preferred shares. Mergeco held 99.9% of the capital stock of Labatt ApS. As a result, with the completion of the Incorporação, AmBev held 99.9% of the capital stock of Labatt ApS, and indirectly, of Labatt, as well as C$1.3 billion of third-party net debt then held by Labatt and its subsidiaries. AmBev did not, however, receive assets held by Labatt USA L.L.C., as those were transferred to InBev prior to the closing of the Incorporação Agreement.

AmBev accounted for this transaction as an acquisition of Labatt for both Brazilian GAAP and U.S. GAAP reporting. The U.S. GAAP reporting was based on the substantive participating rights that FAHZ enjoys under the AmBev Shareholders’ Agreement.

Contribution and Subscription Agreement

On March 3, 2004, S-Braco Participações S.A., Rougeval Limited, Tinsel Investments Inc., ECAP, Braco S.A., Braco Management Inc., Tinsel Participações Ltda., Tinsel Investments S.A. (“Tinsel Lux”), BRC S.A. (“BRC”) and Bracopar S.A. (collectively, the “SB Group Companies”) entered into the Contribution and Subscription Agreement with the Stichting Interbrew (the “Stichting”), Eugénie Patri Sébastien (“EPS”), and InBev. Messrs. Lemann, Telles and Sicupira controlled, directly or indirectly, all of the SB Group Companies. The Stichting is a foundation organized under Dutch law which held, as of March 3, 2004, on behalf of EPS and affiliates of EPS approximately 275.1 million ordinary shares of InBev, representing approximately 63.7% of the outstanding ordinary shares of InBev.

On August 27, 2004, upon completion of the transactions contemplated by the Contribution and Subscription Agreement, BRC contributed to InBev 100% of the capital stock of Tinsel Lux that indirectly owned (i) a total of approximately 4.2 billion AmBev common shares and (ii) approximately 98.64% of the capital stock of ECAP, which directly held approximately 4.0 billion AmBev common shares. In exchange for the contribution to InBev of 100% of the capital stock of Tinsel Lux, InBev issued to BRC approximately 141.7 million ordinary shares of InBev.

Upon completion of the transactions contemplated by the Contribution and Subscription Agreement, Messrs. Lemann, Sicupira and Telles beneficially owned, through their interests in BRC, the InBev shares acquired by BRC, and InBev beneficially owned the AmBev common shares that were beneficially owned by Messrs. Lemann, Sicupira and Telles by virtue of their interests in the SB Group Companies.

Mandatory Tender Offer

As required by Brazilian law, InBev launched on February 14, 2005 a MTO for all common shares of AmBev not owned by it, offering to AmBev common shareholders who tendered their common shares (a) a cash payment option, consisting of an amount in reais equal to €353.28 for each 1,000 AmBev common shares tendered and (b) a stock payment option, consisting of 13.827166 InBev ordinary shares for each 1,000 AmBev common shares tendered. On March 29, 2005, the auction consummating the MTO took place on the premises of the São Paulo Stock Exchange (“Bovespa”) and on March 31, 2005, InBev announced that 1,612,915,545 AmBev common shares were tendered in exchange for the cash payment option in the auction and 1,347,155,632 AmBev common shares were tendered in exchange for the stock payment option in the auction. As a result of the settlement of the MTO on May 3, 2005, InBev acquired (directly and indirectly) 2,960,070,177 AmBev common shares.

InBev Shareholders’ Agreement

According to publicly-available information, we understand that, in connection with the Contribution and Subscription Agreement, on March 2, 2004, BRC, EPS, an affiliate of EPS, Rayvax Société d’Investissements S.A. (“Rayvax”) and the Stichting entered into a shareholders agreement (the “InBev Shareholders’ Agreement”) that became effective on August 27, 2004. The InBev Shareholders’ Agreement provides for BRC and EPS to hold their interests in InBev through the Stichting and addresses, among other things, certain matters relating to the governance and management of the Stichting and InBev as well as the transfers of interests in InBev. On August 27, 2004, BRC transferred all 141,712,000 of its InBev shares to the Stichting in exchange for 141,712,000 Stichting certificates, and EPS held 180,000,000 Stichting certificates (representing 180,000,000 million InBev shares). As of December 31, 2004, the 321,712,000 InBev shares held by the Stichting represented 55.8% of all issued and outstanding InBev shares at that time. Pursuant to the terms of the InBev Shareholders’ Agreement, BRC and EPS will jointly and equally exercise control over the Stichting and the InBev shares held by the Stichting.

The InBev Shareholders’ Agreement provides for restrictions on the ability of BRC and EPS to transfer their Stichting certificates (and consequently their InBev shares held through the Stichting). EPS has agreed that it will at all times hold, directly or indirectly, no less than 180,000,000 Stichting certificates (representing 180,000,000 InBev shares), and BRC has agreed that it will at all times hold, directly or indirectly, no less than 141,712,000 Stichting certificates (representing 141,712,000 InBev shares). In addition, the InBev Shareholders’ Agreement requires certain affiliates of EPS whose InBev shares are not held through the Stichting to vote their InBev shares in the same manner as the InBev shares held by the Stichting and will restrict such affiliates’ ability to transfer their InBev shares in a manner that would disrupt the orderly trading of the InBev shares. In addition, under the InBev Shareholders’ Agreement, EPS and BRC agreed not to acquire any shares of capital stock of AmBev, subject to limited exceptions. The InBev Shareholders’ Agreement will remain in effect for an initial term of 20 years from August 27, 2004. Thereafter, the InBev Shareholders’ Agreement will be automatically renewed for successive renewal terms of 10 years each unless, not later than two years prior to the expiration of the initial or any renewal term, either BRC or EPS notifies the other of its intention to terminate the agreement.

Investment Grade Status

In December 2004, Standard & Poor’s raised AmBev’s risk rating denominated in foreign currency from BB- to BBB-, three levels above the Brazilian government’s sovereign risk, making AmBev the first Brazilian company to obtain the investment grade status.

Merger of CBB into AmBev

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

Share Dividend

On May 31, 2005, the Board of Directors of AmBev approved a share dividend to each shareholder of AmBev at a rate of one common share for every five preferred shares and/or common shares held by such shareholder on that date. Pursuant to the terms of the share dividend, AmBev issued a total of 10,941,151,072 common shares. As a result of the share dividend, InBev Brazil received an additional 6,095,669,326 common shares, and FAHZ received an additional 848,947,447 common shares. As of May 31, 2005, InBev's voting interest in AmBev was of 73.0%, while its economic interest was 55.7%.

Business Overview

Description of the Company

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

We conduct our operations through three business units:

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

Hispanic Latin America (“HILA”), which includes AmBev’s stake in Quinsa, and the operations of our subsidiaries in the Dominican Republic, Ecuador, Guatemala (which also serves Nicaragua and El Salvador), Peru and Venezuela. We refer to our HILA operations, excluding Quinsa and its subsidiaries, as “HILA-ex”); and

·	North America, represented by Labatt’s operations, which includes domestic sales in Canada and beer exports to the United States.

The following map illustrates the main locations where our business units operate:

The following tables set forth our net debt consolidated position as of December 31, 2004, 2003 and 2002:

	Net Debt Consolidated Position
	2004			2003			2002
	LC(1)	FC(2)	Total	LC(1)	FC(2)	Total	LC(1)	FC(2)	Total
	(R$ in millions)
Short-term debt(3)	503.2	2,939.9	3,443.1	262.0	1,714.1	1,976.1	269.1	338.3	607.4
Long-term debt	497.7	3,869.9	4,367.6	639.5	3,364.8	4,004.3	719.0	3,160.3	3,879.3
Total	1,000.9⁽²⁾	6,809.8	7,810.7	901.5	5,078.9	5,980.4	988.0	3,498.6	4,486.7

Cash and cash equivalents and short-term investments			1,505.4			2,534.2⁽⁴⁾			3,290.0
Net debt			6,305.3			3,446.2			1,196.7

Amounts may not add due to rounding.

(1)	LC = Local Currency.
(2)	FC = Foreign Currency.
(3)	Includes the current portion of long-term debt.
(4)	Includes unrealized gains on derivatives of R$258.7 million.

Short-term debt

As of December 31, 2004, our short-term debt totaled R$3,443.1 million, 86.7% of which was denominated in foreign currencies. Most of our short-term foreign debt consisted of Labatt’s bank debt of R$1,911.7 million, which will mature in the last quarter of 2005. On July 28, 2004, we paid in full our yen-denominated syndicated loan in the amount of R$ 974.7 million, net of hedge effects on such debt.

As of December 31, 2003, our short-term debt totaled R$1,976.1 million, consisting primarily of the current portion of our yen-denominated syndicated loan which matured in August 2004. As of December 31, 2003, 86.7% of our short-term debt was denominated in foreign currencies, with an annual weighted average interest rate of approximately 7.0%. The yen-denominated syndicated loan represented 53.8% of our total short-term debt.

As of December 31, 2002, our short-term debt totaled R$607.4 million and consisted primarily of financing for the importation of raw materials and equipment, and working capital. As of December 31, 2002, 55.7% of our short-term debt was denominated in foreign currencies, with an annual weighted average interest rate of approximately 9.9%.

Long-term Debt

As of December 31, 2004, our long-term debt, excluding the current portion of long-term debt, totaled R$4,367.6 million, of which R$497.7 million was denominated in Reais. The remainder was denominated primarily in U.S. dollars. The current portion of our local long-term debt totaled R$1,289.3 million as of December 31, 2004.

	Long term Debt Maturity⁽¹⁾

2006		257.5
2007		428.3
2008		658.0
2009		10.4
2010		74.5
2011		1,523.3
2012 and later		1,415.6
Total		4,367.6
____________________
Amounts may not add due to rounding. (1) Excludes the current portion of long-term debt.

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

As of December 31, 2003, our long-term debt, excluding the current portion of long-term debt, totaled R$4,004.3 million, of which R$639.5 million was denominated in Reais. The remainder was denominated primarily in U.S. dollars. The current portion of our local long-term debt totaled R$1,427.4 million as of December 31, 2003.

As of December 31, 2002, our long-term debt, excluding the current portion of long-term debt, totaled R$3,879.3 million, of which R$718.9 million was denominated in Reais. The remainder was denominated in U.S. dollars and Japanese Yen. The current portion of our local long-term debt totaled R$292.5 million as of December 31, 2002.

In December 2001, CBB issued U.S.$500 million 10.5% Notes due 2011, fully guaranteed by AmBev. This offering significantly increased the average maturity of our outstanding debt. On October 4, 2002, we completed an SEC registered exchange offer for these notes. These notes contain certain covenants and events of default which, if triggered, cause accelerated amortization. The proceeds of the syndicated loans and the notes issued in 2001 were used principally to repay short-term debt, but also to finance part of AmBev’s capital expenditure program and for general corporate purposes. In September 2003, CBB issued U.S.$500 million 8.75% Notes due 2013, fully guaranteed by AmBev. The transaction was priced at 99.674% of the nominal principal amount with a coupon rate of 8.75%. These notes contain certain covenants and events of default which, if triggered, cause accelerated amortization. The proceeds of the notes issued in 2003 were used principally to repay short-term debt, to finance part of AmBev’s capital expenditure program, and also for general corporate purposes. On September 15, 2004, we completed an SEC registered exchange offer for these notes. On May 31, 2005, upon the completion of the merger of CBB into AmBev, AmBev became the successor to CBB under the indentures governing both the 2011 notes and the 2013 notes.

As of December 31, 2004, our local currency long-term debt borrowings consisted primarily of long-term plant expansion and other loans from governmental agencies including the Brazilian Economic and Social Development Bank (“BNDES”), and BNDES programs, including the Fund for Financing the Acquisition of Industrial Machinery and Equipment (“FINAME”), and the Financing Fund for Studies and Projects (“FINEP”).

As of December 31, 2003, our local currency long-term debt borrowings consisted primarily of long-term plant expansion and other loans from governmental agencies including the BNDES, and BNDES programs, including FINAME, and FINEP.

Our reais denominated long-term borrowings at December 31, 2002 consisted primarily of long-term plant expansion and other loans from governmental agencies including BNDES, and BNDES programs, including FINAME, and FINEP. In May 2001, we entered into an additional line of credit agreement with BNDES totaling R$216.5 million. The line of credit is payable in monthly installments with final maturity in December 2008.

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

As of December 31, 2004, we reclassified approximately U.S.$4.7 million of Quinsa’s long-term debt, with respect to which Quinsa was not in compliance with certain covenants, to current liabilities. At December 31, 2003, Quinsa was in default of certain loan covenants. Quinsa’s management concluded the process of renegotiating the terms of the affected loans. As of December 31, 2003, we reclassified approximately U.S.$4.2 million of Quinsa’s long-term debt, with respect to which Quinsa was not in compliance with certain covenants, to current liabilities

Quinsa’s results of operations are proportionately consolidated in our financial statements for 2004 and 2003.

Secured debt

Certain of our loans, with an aggregate outstanding principal balance of R$ 417.9 million at December 31, 2004, are secured by either our facilities located in, or equipment in our facilities located in, Agudos, Jacareí, Águas Claras (Sergipe), Nova Rio (Rio de Janeiro), Teresina, Manaus, Aquiraz, Natal, Jacarepaguá, Curitiba and Cuiabá. The loans, which include the loans provided by BNDES and FINEP, were used to expand or modernize our facilities and equipment.

Sales tax deferrals and other tax credits

We currently participate in several programs by which a portion of payments of ICMS tax due from sales generated by specific production facilities are deferred for periods of generally five years from their original due date. The total amount deferred at December 31, 2004, including ICMS financing, was R$711.9 million, as disclosed in note 11 to our financial statements. Percentages deferred typically range from 40% to 100% over the life of the program. Balances deferred generally accrue interest and are partially inflation indexed, with adjustments generally set at 60% to 80% of a general price index. The amount of sales taxes deferred as of December 31, 2004, R$330.2 million, included a current portion of R$54.5 million (classified under other taxes and contributions payable), and R$275.7 million payable thereafter. The remaining R$381.6 million relates to ICMS financing. We also participate in ICMS value-added tax credit programs offered by various Brazilian states which provide tax credits to offset ICMS value-added tax payable. In return, we are committed to meeting certain operational requirements including, depending on the State, production volume and employment targets, among others. The grants are received over the lives of the respective programs. In the years ended December 31, 2004 and 2003, we recorded R$193.3 million and R$175.9 million, respectively, of tax credits as gains on tax incentive programs. The benefits granted are not subject to withdrawal in the event that we do not meet the program’s targets; however, future benefits may be withdrawn.

Capital Investment Program

In 2004, consolidated capital expenditures on property, plant and equipment totaled R$1,273.7 million consisting of R$901.5 million in Brazil and HILA-ex, R$102.5 million related to our proportional consolidation of Quinsa and R$269.7 million related to the approximately four months of consolidation of Labatt. These expenditures primarily included investments in quality controls, automation, modernization and replacement of packaging lines, warehousing for direct distribution, coolers, expenditures for the replacement of bottles and crates, and continued investments in information technology.

Increased capital expenditures during 2004 were a result of our focus on the construction of new facilities in South and Central America, increased investment in bottles and packaging in connection with our expansion into new markets and the addition of Labatt to our operations.

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

In 2003, capital expenditures on property, plant and equipment totaled R$862.2 million consisting of R$809.8 million in Brazil and HILA-ex, and R$52.4 million related to our proportional consolidation of Quinsa. These capital expenditures primarily included investments in quality controls, automation, modernization, replacement of packaging lines, warehousing for direct distribution, coolers, expenditures for the replacement of bottles and crates, and continued investments in information technology.

At December 31, 2003, our investments in subsidiaries and affiliates, including acquisitions of intangible assets net of cash, totaled R$1,745.3 million, which included (i) the R$1,429.0 million cash disbursement as purchase price for our initial interest in Quinsa in 2003; (ii) the additional R$249.6 million cash disbursement used to purchase an additional 12.0 million Class B Quinsa shares on the open market, increasing our economic interest in Quinsa to 49.66%; and (iii) the acquisition of our interests in our Peruvian and Ecuadorian assets.

In 2002, capital expenditures on property, plant and equipment totaled R$522.3 million. These expenditures primarily included investments in quality controls, automation, modernization and replacement of packaging lines, warehousing for direct distribution, coolers, expenditures for the replacement of bottles and crates, and continued investments in information technology. Investments in subsidiaries and affiliates, including acquisition of intangible assets net of cash, totaled R$75.6 million and included the purchase of an additional stake in Astra.

We continually evaluate possible acquisitions, products and technologies that are complementary to our business and any such acquisitions or investments may be financed with additional debt. We invested approximately U.S.$50 million in the Dominican Republic, including the acquisition of 51% of the capital of Embodom that includes a soft drink facility and distribution network, and construction of a beer facility in Santo Domingo. The new beer facility will be fully operational in the Dominican Republic during the fourth quarter of 2005.

We also constructed a brewery in Peru, which started operations during the second quarter of 2005. Total investments in the brewery amounted to approximately U.S.$ 38.4 million including production facilities, working capital and pre-operating expenses.

Off-balance Sheet Arrangements

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

Contingencies which represent possible, though not probable, risk of loss have not been provided for in our balance sheet and amount to R$1,241.1 million, which have been disclosed in “—Liquidity and Capital Resources—Commitments and contingencies”; In addition, during the first quarter of 2005, we received a number of assessments from Brazilian tax authorities relating to earnings of our foreign subsidiaries, in the total amount of approximately R$3,000.0 million. Brazil on the advice of legal counsel, we believe that such assessments are without merit and have not made any provision in connection therewith. We have estimated the total exposures of possible (but not probable) losses, which are not recorded as liabilities, to be approximately R$2,000.0 million in connection with those assessments, and we have estimated that the remaining amount constitute remote losses. We believe that our estimates are based on reasonable assumptions and assessments of external legal counsel, but should the worst case scenario develop, subjecting us to losses in all cases, our net impact on the statement of operations would be an expense for this amount.

·	Future committed capital expenditures of R$163.0 million, related primarily to industrial and distribution system investments, which have been disclosed in “—Liquidity and Capital Resources—Commitments and contingencies”;

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

·	We may receive further disposal proceeds from the sale of Bavaria to Molson, subject to certain brand market share criteria being met. See “Information on the Company—Brazilian Antitrust Approval”; and

We may be obliged to acquire the remaining interest that BAC holds in Quinsa, subject to certain put and call options, which can be exercised by the shareholders of BAC or ourselves. AmBev’s interest in Quinsa is accounted for on the proportional consolidation method under Brazilian GAAP and on the equity basis for purposes of U.S. GAAP. The put agreement is not reflected on our Brazilian GAAP balance sheet.

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

Commitments and contingencies

The following table and discussion provide additional disclosure regarding our material contractual obligations and commercial commitments as of December 31, 2004:

Contractual Obligations		Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
	(in millions of *Reais*)
Long-term debt		5,65.9	1,289.3	1,343.8	1,608.2	1,415.6
Sales tax deferrals		711.9	148.0	-	-	-
Capital expenditure commitments		163.0	163.0	-	-	-
Other post-retirement liabilities		954.2	73.7	233.6	208.5	432.8
Total contractual cash commitments		7,486.0	1,674.0	1,577.4	1,816.7	1,848.4

_____________________

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

Pursuant to the Put and Call Options, AmBev has a call option to acquire 373.5 million Quinsa Class A Shares held by BAC in exchange for newly issued shares of AmBev, and BAC has a put option to sell to AmBev the 373.5 million Quinsa Class A Shares held by BAC in exchange for newly issued shares of AmBev. See “Information on the Company—Acquisition of Interest in Quinsa”. Even though the Quinsa Put and Call Options are not considered a commitment on our part, either we or BAC may decide to exercise them in the future.

We are subject to numerous commitments and contingencies with respect to tax, labor, distributors and other claims. To the extent that we believe these contingencies will probably be realized, they have been recorded in the balance sheet. As discussed in “Operating and Financial Review and Prospects—Critical Accounting Policies—Contingencies—Unrecognized exposures”, these have been estimated at R$1,241.1 million at December 31, 2004 but are not considered commitments.

Directors, Senior Management and Employees

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

The Board of Directors and the executive officers oversee AmBev’s administration. The Board of Directors is comprised of three to 15 members who must be shareholders of AmBev and provides the overall strategic direction of AmBev. Directors are elected at general shareholders’ meetings for a three-year term, reelection being permitted. Day-to-day management is delegated to the executive officers of AmBev, who must number at least two but no more than 15. The Board of Directors appoints executive officers for a three-year term, reelection being permitted. The AmBev shareholders’ agreement regulates the election of directors of AmBev by the controlling shareholders. See “Major Shareholders and Related Party Transactions—AmBev Shareholders’ Agreement—Management of AmBev”.

Directors

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

Board of Directors⁽¹⁾
Name	Age⁽²⁾	Position	Director of AmBev Since	Term Expires

Victório Carlos De Marchi	66	Co-Chairman and Director	1999	2008
John Franklin Brock, III	64	Co Chairman and Director	2005	2008
Marcel Herrmann Telles	55	Director	1999	2008
Carlos Alberto da Veiga Sicupira	57	Director	1999	2008
José Heitor Attilio Gracioso	73	Director	1999	2008
Roberto Herbster Gusmão	82	Director	1999	2008
Vicente Falconi Campos	64	Director	1999	2008
Luis Felipe Pedreira Dutra Leite	39	Director	2005	2008
Brent David Willis	45	Director	2005	2008

Alternate Members

Jorge Paulo Lemann	65	Alternate Director	1999	2008
Roberto Moses Thompson Motta	47	Alternate Director	1999	2008

_______________________

(1)

Victório Carlos De Marchi, Co-Chairman of the Board of Directors of AmBev, was appointed by the FAHZ, the former controlling shareholder of Antarctica, while John Franklin Brock, III, Co-Chairman of the Board of Directors, is also a Chief Executive Officer of InBev S.A./N.V. InBev Brasil appointed two additional directors—Marcel Herrmann Telles and Carlos Alberto Sicupira. The FAHZ appointed two additional directors—José Heitor Attílio Gracioso and Roberto Herbster Gusmão. InBev S.A./N.V. appointed two additional directors—Luis Felipe Pedreira Dutra Leite and Brent David Willis, according to the terms of AmBev’s bylaws. Both alternate directors were appointed by InBev Brasil. The alternate members of the Board of Directors of AmBev are appointed in order to replace, if and when necessary, any of the directors appointed by InBev Brasil.

(2)

Age as at May 31, 2005.

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

Victório Carlos De Marchi. Mr. De Marchi is the Co-Chairman of the Board of Directors of AmBev. Mr. De Marchi joined Companhia Antarctica Paulista 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 until February 2002 and is a party to the Orientation Committee of FAHZ. He is also a board member of Quinsa. Mr. De Marchi has a degree in economics from Faculdade de Economia, Finanças e Administracão de São Paulo and a law degree from Faculdade de Direito de São Bernardo do Campo. His principal business address is Rua Dr. Renato Paes de Barros 1017, 4th floor, São Paulo, Brazil.

John Franklin Brock III. Mr. Brock is the Co-Chairman of the Board of Directors of AmBev. He also serves as Chief Executive Officer of InBev S.A./N.V., a position which he assumed in February 2003. Mr. Brock has a masters degree in chemical engineering from the Georgia Institute of Technology. His principal business address is Brouwerijplein 1,3000, City of Leuven, Belgium.

Marcel Herrmann Telles. Mr. Telles is a member of the Board of Directors of AmBev. He served as Chief Executive Officer of Companhia Cervejaria Brahma from 1989 to 1999. Currently, he is also a member of the Board of Directors of Lojas Americanas S.A. Mr. Telles has a degree in economics from Universidade Federal do Rio de Janeiro and attended the Owners/Presidents Management Program at Harvard Business School. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, Brazil.

Carlos Alberto da Veiga Sicupira. Mr. Sicupira is a member of the Board of Directors of AmBev. He also served as a member of the Board of Directors of Brahma from 1990 until 1999. He is also currently a board member of São Carlos Empreendimentos e Participações and Lojas Americanas S.A. He has also been a member of the Board of Associates of Harvard Business School since 1988 and is currently a board member of Quinsa. Mr. Sicupira has a degree in business administration from the Universidade Federal do Rio de Janeiro and a degree from the Harvard Business School. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 15th floor, São Paulo, Brazil.

José Heitor Attílio Gracioso. Mr. Gracioso is a member of the Board of Directors of AmBev. Mr. Gracioso joined Companhia Antarctica Paulista in 1946 and held various positions during his tenure. In 1994, Mr. Gracioso was elected to Companhia Antarctica Paulista’s Board of Directors and, in 1999, he was elected Chairman of the Board of Directors, a position he held until April 2000. He holds a degree in marketing from the Escola Superior de Propaganda de São Paulo, a degree in business administration from Fundação Getúlio Vargas and a degree in law from Faculdade de Direito de São Bernardo do Campo. His principal business address is Av. Brig. Faria Lima, 3900, 11th floor, São Paulo, Brazil.

Roberto Herbster Gusmão. Mr. Gusmão is a member of the Board of Directors of AmBev. He was previously Vice-Chairman of the Board of Directors of Companhia Antarctica Paulista from 1998 until April 2000. Mr. Gusmão was Chief Executive Officer of Cervejaria Antarctica-Niger S.A. from 1968 to 1982, and from 1986 to 1997. He was the Brazilian Minister of Trade and Industry from 1985 to 1986 and CEO of Banco de Desenvolvimento do Estado de São Paulo from 1982 to 1983. Mr. Gusmão was also a professor and founder of graduation and post-graduate programs at Fundação Getulio Vargas from 1954 to 1969. Mr. Gusmão has a law degree from Faculdade de Direito da Universidade de Minas Gerais. His principal business address is Av. Brig. Faria Lima, 3900, 11th floor, São Paulo, Brazil.

Vicente Falconi Campos. Mr. Campos is a member of the Board of Directors of AmBev. He is also a member of the Institutional Council of Instituto de Desenvolvimento Gerencial (“INDG”) and is a member of the Board of Directors of Sadia. Mr. Campos is also a consultant for the Brazilian government and Brazilian and multinational companies such as Grupo Gerdau, Grupo Votorantim and Mercedes Benz. He holds a degree in Mining and Metal Engineering from Universidade Federal de Minas Gerais, and M.Sc. and Ph.D. degrees from the Colorado School of Mines. His principal business address is Av. Contorno, 7962, 10th floor, Belo Horizonte, Brazil.

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

Brent David Willis. Mr. Willis is a member of the Board of Directors of AmBev. He also serves as Commercial Officer of InBev S.A./N.V., a position which he assumed in the second half of 2003. Mr. Willis holds an MBA from the University of Chicago. His principal business address is Brouwerijplein 1, 3000, city of Leuven, Belgium.

Jorge Paulo Lemann. Mr. Lemann is an alternate member of the Board of Directors of AmBev. He is also a member of the Board of Directors of Lojas Americanas S.A. and Swiss Re. He is the Chairman of the Latin American Advisory Committee of the New York Stock Exchange, founder and board member of Fundação Estudar, which provides scholarships for students in Brazil, and also a member of the Advisory Board of DaimlerChrysler. He previously served as a member of the Board of Directors of Brahma from 1990 to 2001. He holds a BA degree from Harvard Business School, class of 1961. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 15th floor, São Paulo, Brazil.

Roberto Moses Thompson Motta. Mr. Thompson is an alternate member of the Board of Directors of AmBev. He is also a board member of Lojas Americanas S.A. and of Quinsa. He worked in the investment banking division of Banco de Investimentos Garantia S.A. from 1986 to 1992. He holds a degree in engineering from Pontifícia Universidade Católica do Rio de Janeiro, and an MBA from the Wharton School of the University of Pennsylvania. His principal business address is Av. Brig. Faria Lima, 3729, 7th floor, São Paulo, Brazil.

Executive Officers

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

Name	Age⁽¹⁾	Position	Current Position Held Since	Term Expires

Carlos Alves de Brito⁽²⁾	45	Chief Executive Officer for North America	2005	2007
Luiz Fernando Ziegler de Saint Edmond⁽³⁾	39	Chief Executive Officer for Latin America	2005	2007
Juan Manuel Vergara Galvis⁽⁴⁾	45	Executive Officer for Hispanic Latin America	2004	2007
João Mauricio Giffoni de Castro Neves⁽⁵⁾	38	Chief Financial Officer and Investor Relations Officer	2004	2007
Bernardo Pinto Paiva	36	Sales Executive Officer	2004	2007
Carlos Eduardo Klützenschell Lisboa	35	Marketing Executive Officer	2004	2007
Cláudio Braz Ferro⁽⁶⁾	50	Industrial Executive Officer	1999	2007
Francisco de Sá Neto	39	Soft Drinks Executive Officer	2004	2007
Milton Seligman	53	Corporate Affairs Executive Officer	2004	2007
Pedro de Abreu Mariani	38	General Counsel	2004	2007
Ricardo Bacellar Wuerkert⁽⁷⁾	41	People and Management Executive Officer	2004	2007

________________

(1)	Age as at May 31, 2005.
(2)	Mr. Brito has been an Executive Officer since 2000; however, he was appointed Chief Executive Officer for North America in 2005.
(3)	Mr. Edmond has been an Executive Officer since 2004; however, he was appointed Chief Executive Officer for Latin America in 2005.
(4)	Mr. Vergara has been an Executive Officer since 2000; however, he was appointed Executive Officer for Hispanic Latin America in 2005.
(5)	Mr. Castro Neves has been an Executive Officer since 2003; however, he was appointed Chief Financial Officer and Investor Relations Officer in 2004.
(6)	Mr. Braz Ferro has been an Executive Officer since 2000; however, he was appointed Industrial Executive Officer in 2005.
(7)	Mr. Wuerkert has been an Executive Officer since 2003; however, he was appointed People and Management Executive Officer in 2004.

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

Carlos Alves de Brito. Mr. Brito is the Chief Executive Officer for North America of AmBev. 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 and as Chief Executive Officer of AmBev in 2004. 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 Labatt House, 207, Queen’s West, Suite 299, P.O. Box 133, Toronto, Ontario, Canada.

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

Juan Manuel Vergara Galvis. Mr. Galvis is AmBev’s Executive Officer for Hispanic Latin America. He served as AmBev’s Carbonated Soft Drinks and Non-alcoholic Non-Carbonated Beverages Officer from 2001 to

2003 and as International Operating Officer in 2004. He was also the Marketing Officer of Brahma and AmBev from 1997 to 2000. He is also a board member of Quinsa. He holds a degree in business administration from Colegio de Estudos Superiores de Administración, in Bogota, Colombia. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, Brazil.

João Maurício Giffoni de Castro Neves. Mr. Neves is AmBev’s Chief Financial Officer and Investor Relations Officer. He began working for Brahma in 1996, where he served in various departments, such as Mergers and Acquisitions, Treasury, Investor Relations, New Businesses, Technology and Shared Services, and Carbonated Soft Drinks and Non-Alcoholic Non-Carbonated Beverages. He is also a board member of Quinsa. He has a degree in engineering from Pontifícia Universidade Católica do Rio de Janeiro, and holds an MBA from the University of Illinois. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, Brazil.

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

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

Cláudio Braz Ferro. Mr. Ferro is the Industrial Executive Officer of AmBev. He joined Brahma in 1977 as a Brew Master and was responsible for the production and bottling divisions. In 1984, he was appointed Manager of the Industrial Department and, in 1990, Manager of the Rio de Janeiro plant. He holds a degree in industrial chemistry from Universidade Federal de Santa Maria. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, Brazil.

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

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

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

Ricardo Bacellar Wuekert. Mr. Wuekert is AmBev’s People and Management Executive Officer. He joined Brahma in 1991 and has held the positions of Marketing Manager, Northeastern Regional Officer and International Operating Manager. He has a degree in mechanical engineering from Universidade Federal do Rio de Janeiro, and holds an MBA from COPPEAD-RJ. His principal business address is Rua Dr. Renato Paes de Barros, 1017, 4th floor, São Paulo, Brazil.

Board Practices and Corporate Governance

In 2004, we held numerous meetings with investors and analysts. We also participated in conferences and road shows in Brazil, the United States and Europe. We host quarterly conference calls, transmitted simultaneously on the Internet, to clarify financial and operating results as well as answer questions from the investment community. We also organize site visits for investors and analysts.

Fiscal Committee(Conselho Fiscal)

At AmBev’s Annual and Extraordinary Shareholders’ Meeting held on April 12, 2005, we approved an amendment of our by-laws to transform the Conselho Fiscal into a permanent body and appointed the following members for a term expiring upon our next Ordinary Annual Shareholders’ Meeting: Alcides Lopes Tápias, Álvaro Antônio Cardoso de Souza and Antônio Luiz Benevides Xavier, and, as alternates, respectively, Ary Waddington, Emmanuel Sotelino Schifferle and Nilson José Bulgueroni.

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

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

The Board of Directors

Except for Messrs. Luis Felipe Pedreira Dutra Leite, John Franklin Brock, III and Brent David Willis, who were appointed members of the Board of Directors in 2005, all of the current members and alternate members of the Board of Directors of AmBev have been members since 1999 and had their mandates renewed in 2005 until 2008.

The Board members use their extensive knowledge of the business to ensure that AmBev reaches its long-term goals and maintains its short-term competitiveness. Also, the Board of Directors ensures that AmBev pursues its short-term business goals without compromising the Company’s long-term growth, while ensuring that AmBev’s corporate values are practiced and known.

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

Executive Committee

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

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

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

·	to monitor AmBev’s standing through analysis of its results and market developments;

·	to analyze, propose and monitor the uniformization of best practices; and

·	to analyze and monitor the performance of our trademarks, as well as our innovation strategies.

The Committee is also responsible for opining on recruiting programs, variable compensation policies and the spreading of our culture.

Current members of the committee are Messrs. Victório Carlos De Marchi (President), Marcel Herrmann Telles, Carlos Alberto da Veiga Sicupira and Luis Felipe Pedreira Dutra Leite. Throughout the year, the Executive Committee holds at least six meetings.

Compliance Committee

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

·	related party transactions;

·	conflict of interest situations;

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

·	monitoring and analysis of our internal controls;

·	monitoring and analysis of our tax profile; and

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

Current members of the Compliance Committee are Messrs. Victório Carlos De Marchi (President), José Heitor Attílio Gracioso, John Franklin Brock III, Vicente Falconi Campos and Luis Felipe Pedreira Dutra Leite. Throughout the year, the Compliance Committee holds at least four meetings.

Finance Committee

The Finance Committee analyzes and monitors our annual investment plan. This Committee assesses merger and acquisition opportunities before forwarding them to the Board of Directors. It is also the Finance Committee’s responsibility to evaluate the capital structure and cash flow of AmBev. In addition, the Finance Committee is responsible for analyzing and monitoring our risk policy and profile.

Current members of the Finance Committee are Messrs. Luis Felipe Pedreira Dutra Leite (President), Marcel Herrmann Telles, Victório Carlos de Marchi, Carlos Alberto da Veiga Sicupira and Roberto Moses Thompson Motta.

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

Consulting Committee

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

to issue opinions to the Shareholders’ General Meetings concerning the conducting of the business and compliance with statutory obligations by the Company’s senior management; the Company’s management discussion and analysis report; and any submissions to be made by the Board of Directors to the Shareholders’ General Meetings;

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

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

The current members of the Consulting Committee, with terms expiring in 2006, are: Messrs. José de Maio Pereira da Silva, Paulo Cezar Castello Branco Chaves de Aragão and Ary Oswaldo Mattos Filho.

Compensation

The aggregate remuneration of all members of the Board of Directors and senior management of AmBev in 2004 for services in all capacities amounted to R$37.7 million, including variable pay (bonuses). In addition, the members of the Board of Directors and senior management received some additional benefits provided to all AmBev employees and their beneficiaries and covered dependents, such as medical assistance, educational expenses and supplementary social security benefits. All such benefits were provided through the FAHZ and, prior to October 27, 2000, by the BWF. The Board of Directors and AmBev’s senior management also receive benefits pursuant to AmBev’s pension, profit sharing plan, and stock ownership plan, which is not included in the amount above. For a description of these plans see below.

On various dates in 2004 and 2005, pursuant to our stock ownership plan, we acquired from our directors and executive officers a total of 345.3 million preferred shares held directly by each of them which had been subscribed to by each of them upon the exercise of certain rights to acquire shares granted to each of them under our stock ownership plan. Such directors and executive officers sold their preferred shares to us more than 60 months after each of them acquired such shares, for which we paid R$237.2 million, which was the market price of the shares at the time we bought them, calculated pursuant to the terms of the stock ownership plan.

There are no benefits in kind provided to the directors of AmBev. Neither are there agreements between AmBev and any of its directors providing for benefits upon termination of employment.

Employees

As of December 31, 2004, AmBev and its subsidiaries (except Quinsa and its subsidiaries) had approximately 25,974 employees, approximately 47% of whom were engaged in production, 41% of whom were engaged in sales and distribution and 12% of whom were engaged in administration.

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

Employees As of December 31,
2004	2003	2002
25,974	18,890	18,570

The following table shows the geographical distribution of AmBev’s employees as of December 31, 2004:

Geographical Distribution of AmBev Employees⁽¹⁾
Location			Number of Employees

Brazil			17,606
Canada			3,702
Dominican Republic			1,704
Venezuela			1,220
Peru			1,095
Ecuador			402
Guatemala			245
Total			25,974

____________________

(1) Not including Quinsa and its subsidiaries.

Training

In 1995, Brahma created the Brahma University (now “AmBev University”) to train and enhance our employees’ performance, and the performance of our distributors’ employees. In 2004, the AmBev University provided specific training for 2,235 employees and its distributors, totaling 8,500 hours of training. At the management level, AmBev’s senior management and executive officers participate in several business and technical training programs at leading United States and European universities. Training schools in our major facilities provide courses, mainly technical in nature, for supervisory and operating personnel. Together with Sindicerv, the Brazilian beer producers’ association, AmBev also has established a training school in the city of Vassouras, near Rio de Janeiro, which includes a micro brewery, bottling line and malting plant. AmBev also maintains a partnership with SIEBEL Institute in Chicago and with Dömens Academie in Munich, Germany, where its personnel responsible for beer production are introduced to new worldwide technologies and are able to visit other brewers and equipment suppliers.

AmBev operates AmBev TV, a proprietary distance-learning tool operated over a secure satellite broadcasting system that connects all of AmBev’s business units and a majority of our third-party distributors. In 2004, we provided standardized effective training to nearly 13,000 sales people. The television program coursework is reinforced and supplemented with online testing to closely monitor the learning process of each sales person, allowing us to pinpoint weaknesses and then act to provide individual training programs, as well as providing feedback to improve the quality of the broadcast. AmBev believes that its personnel are well trained and kept abreast of current technical and business developments.

Industrial Relations

All of AmBev’s employees in Brazil are represented by labor unions, but only approximately 6% of its employees in Brazil are actually members of labor unions. The number of administrative and distribution employees who are members of labor unions is not significant. Salary negotiations are conducted annually between the workers’ unions and AmBev. Collective bargaining agreements are negotiated separately for each facility or distribution center. AmBev’s collective bargaining agreements have a term of one year, and AmBev usually enters into new collective bargaining agreements on or prior to the expiration of the existing agreements. AmBev believes that its relation with its employees is satisfactory, and there have been no strikes or significant labor disputes in the past ten years.

Approximately 60% of our employees in our North America operations are represented by unions. Unionized employees are usually employees working within the production or distribution departments of the company, except for our operations in Quebec, which is approximately 95% unionized with both sales and office administration employees belonging to unions. The company has been working together with its unions to obtain operating flexibility in exchange for improved wages and benefits. However, in the past years there have been disputes in some of our locations, which curtailed our activities in such places. For example, in 2002, in London (Canada), we experienced a 4-month lockout. Similarly, in 2003 we were subject to a 3-month strike at our Montreal unit. Recently, at St. Johns, we also had a strike that lasted for 3 weeks.

Health and Severance Benefits

In addition to wages, AmBev’s employees receive additional benefits from AmBev. Some of these benefits are mandatory under Brazilian law, some are provided for in collective bargaining agreements, and others are voluntarily given by AmBev. The benefits packages of AmBev’s employees consist of benefits provided both by AmBev directly and by AmBev through the FAHZ, which provides medical, dental, educational and social assistance to current and retired employees of AmBev and their beneficiaries and covered dependents, either for free or at a reduced cost. AmBev may voluntarily contribute up to 10% of its consolidated net income, as determined in accordance with Brazilian Corporate law and AmBev’s bylaws, to support the FAHZ.

AmBev is required to contribute 8.5% of each Brazilian employee’s gross pay to an account maintained in the employee’s name in the Government Severance Indemnity Fund (“FGTS”). Under Brazilian law, AmBev is also required to pay termination benefits to Brazilian employees dismissed without just cause, equal to 50% of the accumulated contributions made by AmBev to the FGTS during the employee’s period of service.

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

Stock Ownership Plan

AmBev has a stock ownership plan designed to attract and retain the services of qualified directors, executives and employees. As of December 31, 2004, the plan had outstanding and exercisable rights to acquire

651,036 shares of AmBev. The plan is administered by a committee, which periodically creates programs under the stock ownership plan defining the terms and employees to be included, and establishes the price at which the rights to acquire shares are to be issued. This price may not be less than 90% of the average price of the shares traded on the stock market on the previous three business days, adjusted by an inflation index to be defined by the committee for each program. The number of shares which may be granted in each year cannot exceed 5% of the total number of preferred shares outstanding of each type of shares. When shares are acquired by the employee, AmBev issues new shares or transfers treasury shares to the option holder. Stock ownership rights granted have no final date to be exercised. When the grantee leaves the Company (other than upon retirement), the rights to acquire shares are forfeited. If an employee decides to sell shares acquired under the plan or an employee leaves AmBev, AmBev has the right to buy such shares at a price equal to:

·	the inflation indexed price paid by such employee, if the employee sells the shares during the first 30 months after shares are acquired by the employee;

·	50% of the inflation indexed price paid by such employee, plus 50% of the prevailing market price, if the employee sells the shares after the first 30 months but before the 60th month after shares are acquired by the employee; or

·	the market price, if the employee sells the shares more than 60 months after shares are acquired by the employee.

For plans granted prior to 2003, the subscription price of the shares could be paid over time, such period normally not exceeding four years and at an interest rate of 8% per annum over a designated general price index. These deferred payment rights are guaranteed by the shares which will be acquired under the plan. Due to the enactment of Sarbanes-Oxley Act of 2002, we have ceased to grant such deferred payment rights for any subsequent stock ownership plans. Nevertheless, advances granted prior to 2003 to employees are grandfathered. At December 31, 2004 the outstanding balance of the advances to employees amounted to R$175.2 million and is classified as an asset under Brazilian GAAP and a deduction from shareholders’ equity under U.S. GAAP.

AmBev Pension Plan

AmBev’s pension plans are administered by the AmBev Pension Fund (Instituto AmBev de Previdencia Privada - IAPP). The AmBev Pension Fund operates both a defined benefit pension plan and a defined contribution plan, which supplements benefits that the Brazilian government social security system provides to our employees. The AmBev Pension Fund was established solely for the benefit of our employees and its assets are held independently. IAPP is managed by the IAPP Council Board or Conselho Deliberativo which has four members, three of which are appointed by AmBev and the IAPP Director Board or Diretoria Executiva which has three members, all of which are appointed by the IAPP Council Board. IAPP also has a Fiscal Council with three members, two of which are appointed by the IAPP Council Board.

The AmBev Pension Fund is available to both active and retired employees. Three months after joining us, employees may opt to join the defined contribution plan. Upon leaving (unless upon retirement) members are required to leave the AmBev Pension Fund. Members who joined after 1990 and request to leave will receive their contributions in a single inflation indexed installment.

As of December 31, 2004, we had 6,248 participants in our pension plans, 3,296 participants in the defined benefit plan, including 2,326 retired participants, and 2,952 participants in the defined contribution plan, including 23 retired participants.

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

Pension costs relating to the AmBev contributed to IAPP for the year ended December 31, 2004 were approximately R$3.9 million compared to R$ 4.4 million in 2003.

The plan assets are comprised principally of time deposits and equity securities (including 9,595,170 preferred shares and 88,664,850 common shares of AmBev with a total market value of R$128.9 million as of December 31, 2004), government securities and properties. All benefits are calculated and paid in inflation indexed Reais.

Profit-Sharing Plan

AmBev’s bylaws provide for the distribution of up to 10% of AmBev’s net income, as determined in accordance with Brazilian GAAP, to its employees. Executive officers are eligible for profit sharing in an amount not to exceed the lower of their annual remuneration or 5% of AmBev’s net income in the aggregate.

Payments under AmBev’s profit sharing plan are subject to the availability of cash resources of AmBev. Executive officers’ bonuses are determined based upon the achievement of corporate, department or business-unit and individual goals, established by the Board of Directors. All other employees of AmBev are entitled to performance-based variable bonuses calculated on an annual basis.

Among all employees, up to 70% of our administrative employees and up to 60% of production, sales and distribution employees, can be awarded bonuses. The distribution of these bonuses is subject to a three-tier system in which AmBev must first achieve efficiency targets approved by the Board of Directors. Following that, each business unit must achieve its targets and finally individual performance is ranked.

Our annual targets may be changed by the Board of Directors. For employees involved in operations, we have a collective award for production sites and distribution centers with outstanding performances. The bonus award at the plant level is based on a ranking between the different plants, which based on their relative ranking may or may not receive the bonus.

Expenses of AmBev provisioned under these programs amounted to R$152.4 millions for the year ended December 31, 2004, R$23.6 million for the year ended December 31, 2003 and R$125.1 million for the year ended December 31, 2002.

Bonuses, commissions and collective awards to be shared among employees depend on the operating results of AmBev and performance reviews based on individual and collective targets.

In the past, variable compensation used to be calculated based on AmBev’s annual EVA. Due to AmBev’s increased international expansion and the resulting complexity of the EVA calculation, in 2004 AmBev changed the payment model, and established the following:

Administrative employees: a total of approximately 4,000 administrative employees were eligible for variable compensation in 2004. Depending on their individual performance reviews, these employees received a multiple of 0x, 7x or 14x their annual salary. Each department was subject to a discount in the referred multiples depending on their respective percentage of results achieved.

Industrial, sales and distribution employees: these employees are given productivity incentives across the Company through set standards, tools and management methods. Business units compete against each other for prizes and bonuses. Prizes and bonuses were awarded in 2004 to employees from the top 18 manufacturing plants and 14 sales and distribution units. Business units ranking in first place for three years are granted the “Quality Ambassador” title.

These rules did not apply to our North America operations since Labatt was only merged into AmBev on August 27, 2004. In 2004, Labatt employees were compensated based on InBev’s system, and received a total of C$12.1 million in variable compensation.

AmBev’s variable compensation system is under review to better serve AmBev's new and expanded structure. However, the new system will continue to be based on AmBev's operating results and subject to the achievement of corporate targets.

Director and Senior Management Share Ownership

The following table shows the amount, type and percentage of class of our equity securities held by members of our Board of Directors and by senior management as of May 31, 2005:

Name	Amount and Percentage of Common Shares	Amount and Percentage of Preferred Shares

Victório Carlos De Marchi⁽¹⁾	*	*
John Franklin Brock, III	*	*
Marcel Herrmann Telles⁽²⁾	*	*
Carlos Alberto da Veiga Sicupira⁽³⁾	*	*
José Heitor Attílio Gracioso⁽⁴⁾	*	*
Roberto Herbster Gusmão⁽⁵⁾	*	*
Vicente Falconi Campos	*	*
Luis Felipe Pedreira Dutra Leite	*	*
Brent David Willis	*	*
Jorge Paulo Lemann⁽⁶⁾	*	*
Roberto Moses Thompson Motta⁽⁷⁾	*	*

Carlos Alves de Brito	*	*
Luiz Fernando Ziegler de Saint Edmond	*	*
Juan Manuel Vergara Galvis	*	*
Joáo Mauricio Giffoni de Castro Neves	*	*
Bernardo Pinto Paiva	*	*
Carlos Eduardo Klützenschell Lisboa	*	*
Cláudio Braz Ferro	*	*
Francisco de Sá Neto	*	*
Milton Seligman	*	*
Pedro de Abreu Mariani	*	*
Ricardo Bacellar Wuerkert	*	*

_________________

*	Indicates that the individual holds less than 1% of the class of securities.
(1)	Mr. De Marchi is a trustee of the FAHZ. For information regarding the shareholding of the FAHZ, see “Major Shareholders and Related Party Transactions—AmBev’s Major Shareholders”.
(2)	Does not include 25,175,834,643 common shares and 11,398,181,319 preferred shares owned by InBev Brasil. Mr. Telles owns indirectly 2.61% of the voting capital of AmBev, and is also an intervening party to the AmBev Shareholders’ Agreement. See “Major Shareholders and Related Party Transactions—Major Shareholders—AmBev Shareholders’ Agreement”. Mr. Telles is also a trustee of the FAHZ. For information regarding the shareholdings of the FAHZ, see “Major Shareholders and Related Party Transactions— Major Shareholders—AmBev’s Major Shareholders”.
(3)	Does not include 25,175,834,643 common shares and 11,398,181,319 preferred shares owned by InBev Brasil Mr. Sicupira owns indirectly 2.20% of the voting capital of AmBev, and is also an intervening party to the AmBev Shareholders’ Agreement. See “Major Shareholders and Related Party Transactions—Major Shareholders—AmBev Shareholders’ Agreement”.
(4)	Mr. Gracioso is a trustee of the FAHZ. For information regarding the shareholding of the FAHZ, see “Major Shareholders and Related Party Transactions— Major Shareholders—AmBev’s Major Shareholders”.
(5)	Mr. Gusmão is a trustee of the FAHZ. For information regarding the shareholding of the FAHZ, see “Major Shareholders and Related Party Transactions— Major Shareholders—AmBev’s Major Shareholders”.
(6)	Does not include 25,175,834,643 common shares and 11,398,181,319 preferred shares owned by InBev Brasil. Mr. Lemann owns indirectly 5.84% of the voting capital of AmBev, and is also an intervening party to the AmBev Shareholders’ Agreement. See “Major Shareholders and Related Party Transactions—Major Shareholders—AmBev Shareholders’ Agreement”.

(7)	Does not include 25,175,834,643 common shares owned by InBev Brasil. Mr. Motta is an executive officer of InBev Brasil.

DIFFERENCES BETWEEN THE UNITED STATES AND THE BRAZILIAN CORPORATE

GOVERNANCE PRACTICES

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

In Brazil, the CVM has provided guidance to the market with a set of recommendations on differentiated corporate governance practices which are not yet required but strongly recommended. Additionally, the Bovespa and the IBGC–Brazilian Institute of Corporate Governance have developed guidelines to help with the dissemination of corporate governance 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 comply with this requirement.

The Brazilian Corporate Law and our bylaws require that our directors be elected by our shareholders at a general shareholders meeting. Currently, all of our directors are appointed by our controlling shareholders; minority shareholders are represented through one seat in our Conselho Fiscal.

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

EXECUTIVE SESSIONS

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

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

NOMINATING/CORPORATE GOVERNANCE AND COMPENSATION COMMITTEES

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

In addition, we are not required under Brazilian law to have, and accordingly we do not have, a nominating committee, corporate governance committee or compensation committee. Currently, all of our directors are nominated by our controlling shareholders. The role of the corporate governance committee is generally performed by either our Board of Directors or our senior management. With respect to compensation, under Brazilian Corporate Law, the shareholders determine the total or individual compensation of a company’s directors and executive officers, including benefits and allowances at a general shareholder’s meeting.

AUDIT COMMITTEE AND AUDIT COMMITTEE ADDITIONAL REQUIREMENTS

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

The Brazilian Corporate Law requires us to have a non-permanent Conselho Fiscal. The Conselho Fiscal 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 maintain a permanent Conselho Fiscal. We are relying on the exemption provided by Rule 10A-3(c)(3) and believe that our reliance on this exemption will not materially affect the ability of the Conselho Fiscal to act independently and to satisfy the other requirements of Rule 10A-3.

SHAREHOLDER APPROVAL OF EQUITY COMPENSATION PLANS

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

Our Board of Directors is responsible for voting on the issuance of new equity in connection with our existing stock option plans, provided that the limit of our authorized capital is respected. Any issuance of new shares that exceeds such authorized capital is subject to shareholder approval.

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, annual performance evaluation of the board.

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

We periodically update our investor relations website. We also host quarterly conference calls with investors which are broadcasted live through the internet.

CODE OF BUSINESS CONDUCT

NYSE corporate governance standards require that a listed company must adopt and disclose a code of business conduct and ethics for directors, officers and employees and promptly disclose any waivers of the code for directors or officers.

We have adopted a Code of Business Conduct that applies to all officers and employees. There are no waivers to our Code of Business Conduct. We amended the code on May 2, 2005, in order to improve its contents.

CERTIFICATION REQUIREMENTS

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

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

Major Shareholders and Related Party Transactions

MAJOR SHAREHOLDERS

Introduction

As of May 31, 2005 (after giving effect to the transactions that took place on that date), AmBev had 34,499,422,931 common voting shares and 31,147,483,500 preferred non-voting shares outstanding. AmBev has registered two classes of American Depositary Shares (“ADSs”) pursuant to the Securities Act: ADSs evidenced by American Depositary Receipts (“ADRs”) representing 100 preferred shares, and ADSs evidenced by ADRs representing 100 common shares. As of May 31, 2005, there were 72,932,984 preferred ADSs outstanding (representing 7,293,298,400 preferred shares) and 14,618,863 common ADSs outstanding (representing 1,467,886,300 common shares). AmBev ADRs are issuable by The Bank of New York pursuant to deposit agreements for common and preferred shares.

Control

AmBev is controlled by InBev Brasil and the FAHZ, which own in the aggregate 86.5% of AmBev’s outstanding common shares. In addition, InBev Brasil and the FAHZ, as well as Marcel Telles, Jorge Paulo Lemann and Carlos Sicupira, as intervening parties, are parties to a shareholders’ agreement relating to AmBev. See “—AmBev Shareholders’ Agreement”. As of May 31, 2005, FAHZ owns 13.48% of the outstanding common shares of AmBev. InBev Brasil collectively own 72.97% of the outstanding common shares of AmBev. InBev Brasil held 99.74% of the voting shares of ECAP, which was merged into InBev Brasil on June 24, 2005. InBev Brasil is a holding company, substantially all the assets of which consist of the shares of AmBev previously held by Braco S.A. and ECAP.

Share Buy-back Programs

In 2004, we acquired 2,605.0 million preferred shares in connection with our share buy-back program, at a cost of R$1,609.6 million. In 2003, we acquired 63.5 million common shares and 529.3 million preferred shares in connection with our share buy-back program, at a cost of R$310.0 million. In 2002, we acquired 89.5 million common shares and 701.3 million preferred shares in connection with our share buy-back program, totaling R$337.1 million. In 2004, 2003 and 2002, a portion of the common shares and preferred shares purchased by us were acquired by us pursuant to put options sold in connection with our share buy-back program.

In 2004, our Board of Directors launched four programs for the purchase of our outstanding preferred shares. In accordance with CVM rules, share buy-back programs are valid for a period of 365 days from the date they are approved, may be conducted through the issuance of put and call options (provided that the volume of such options issued multiplied by their respective strike prices do not exceed the limit established for the plan), and the amount of shares to be kept in treasury may not exceed the equivalent to 10% of the free float of each class of shares.

The following table summarizes the share buy-back programs approved by our Board of Directors in 2004:

Approval Date

Preferred Shares Repurchased

Amount Repurchased

Date program was finalized

As a number

As a % of free float

(R$ in thousands)

March 22, 2004

333,101,966

1.5

192,715

July 5, 2004

May 24, 2004

824,531,749

3.8

487,798

May 24, 2004

July 6, 2004

765,637,460

3.7

497,962

September 24, 2004

September 14, 2004

721,684,400

3.6

499,044

Not finalized

Total

2,644,955,575

N/A

1,677,519

N/A

On June 14, 2005, InBev announced that it decided to increase its economic interest in AmBev by purchasing preferred shares up to an aggregate amount of €500 million. These purchases are expected to occur over a period of twelve months from the date of the announcement.

AmBev’s Major Shareholders

The following table sets forth information as of May 31, 2005 with respect to any person known to AmBev to be the beneficial owner of 5% or more of AmBev’s outstanding shares:

	Amount and Percentage of Common Shares				Amount and Percentage of Preferred Shares

The Bank of New York - ADR Department⁽¹⁾		1,461,886,360	4.24	%		7,293,298,400	23.42	%
InBev Holding Brasil S.A^.⁽²⁾		20,328,352,883	58.92	%		11,398,181,319	36.33
ECAP⁽³⁾		4,847,481,870	14.05	%		−	−
FAHZ⁽⁴⁾		4,649,352,173	13.48	%		444,332,513	1.42	%
Caixa da Previdência dos Funcionários do Banco Central do Brasil - PREVI		664,631,731	1.93	%		3,323,156,855	10.67	%
Marcel Herrmann Telles⁽⁵⁾		42,629,006	0.12	%		213,145,000	0.68	%
Jorge Paulo Lemann⁽⁶⁾		12	0.00	%		−	−
Carlos A. Sicupira(7)		6	0.00	%		−	−

_____________________

(1)	Represents the number of shares held in the form of ADSs. The Bank of New York is the depositary of AmBev shares in accordance with the deposit agreement entered into with AmBev and the owners of AmBev ADSs.
(2)	Does not include shares owned by ECAP. Messrs. Telles, Lemann and Sicupira, each a member of the Board of Directors of AmBev, currently indirectly owns, respectively, approximately 2.61%, 5.84% and 2.10% of AmBev.
(3)	Does not include shares owned by InBev Brasil. ECAP was merged into InBev Brasil on June 24, 2005. Messrs. Telles, Lemann and Sicupira, each a member of the Board of Directors of AmBev, currently indirectly own, respectively, approximately 2.61%, 5.84% and 2.10% of AmBev.
(4)	Messrs. Telles, Victório Carlos De Marchi, José Heitor Attílio Gracioso and Roberto Herbster Gusmão, directors of AmBev, are counselors of the FAHZ.
(5)	Does not include 25,175,834,643 common shares and 11,398,181,319 preferred shares owned by InBev Brasil. Mr. Telles currently indirectly owns approximately 2.61% of AmBev, and is also an intervening party to the AmBev Shareholders’ Agreement.
(6)	Does not include 25,175,834,643 common shares and 11,398,181,319 preferred shares owned by InBev Brasil and ECAP. Mr. Lemann currently indirectly owns approximately 5.84% of AmBev, and is also an intervening party to the AmBev Shareholders’ Agreement.
(7)	Does not include 25,175,834,643 common shares and 11,398,181,319 preferred shares owned by InBev Brasil and ECAP. Mr. Sicupira currently indirectly owns approximately 2.10% of AmBev, and is also an intervening party to the AmBev Shareholders’ Agreement.

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

Options and Warrants

In 2002, AmBev decided to request a ruling from the CVM in connection with a dispute between AmBev and some of its warrant holders regarding the criteria used in the calculation of the strike price of certain AmBev warrants. See “Major Shareholders and Related Party Transactions—Major Shareholders—Options and Warrants”. On April 17, 2003, the CVM ruled that the criteria used by AmBev to calculate the strike price was correct. In response to the CVM’s final decision, some of the warrant holders filed separate lawsuits before the courts of São Paulo and Rio de Janeiro seeking to reverse the CVM’s decision.

Although the warrants expired without being exercised, the warrant holders claim that the strike price should be reduced to take into account the strike price of certain stock options granted by AmBev to its officers and employees since 1996 to acquire shares of AmBev, as well as for the strike price of other stock purchase warrants issued in 1993. The warrant holders requested preliminary injunctions for: (i) the immediate issuance by AmBev of the shares corresponding to the total amount of warrants held by the plaintiffs; and (ii) the right to subscribe for these shares at the substantially lower subscription price described above.

We have been notified of six claims from 11 holders arguing that they would be entitled to those rights. Three judicial decisions were issued in favor of AmBev in the state of Rio de Janeiro, denying the warrant holders’ right to subscribe for the shares at the lower price intended. One judicial decision was issued against AmBev in the state of São Paulo, recognizing the right of three warrant holders to subscribe for the shares at the lower price. All such decisions were appealed and are pending analysis by the Appellate Courts of the states of São Paulo and Rio de Janeiro.

In the event the plaintiffs prevail in all of the above proceedings, we believe that the corresponding dilution for the existing shareholders would be the difference between the values below and the net book value of such shares at the time they are issued, multiplied by the number of shares involved. We estimate that the aggregate subscription price of all the relevant shares will be R$1,022.4 million, based on a strike price of R$0.90977 for preferred shares and R$0.91595 for voting shares and warrants entitling its holders to subscribe for 29,602,450 common shares and 1,093,920,115 preferred shares. Three of the plaintiffs, who hold warrants that entitle them to subscribe for, in the aggregate, 435,563,170 preferred shares, argue that the strike price should be R$0.13585. AmBev has filed counterclaims on these lawsuits, three of which were granted, and one of which was rejected. Each decision, favorable or adverse to us, does not bind the court in relation to the other lawsuits.

In addition, one warrant holder filed a lawsuit for damages against AmBev before the courts of São Paulo. This holder claims that our setting of a high strike price caused such holder damages by unabling such holder from exercising his warrants for a lower strike price. The court issued a decision denying such holders’ request. The warrant holder appealed against such decision, which has not been analyzed by the Appellate Court of the state of São Paulo. The amount of the indemnification to be paid by AmBev in case the Appellate Court grants such appeal is approximately R$12 million.

Based on advice from our external counsel we believe our chances of prevailing in these proceedings are possible, and have not made any provisions in connection with these claims. However, no assurance can be given that favorable decision that we obtained will be upheld by the Appelate Courts, or that the unfavorable decision issued will be reversed. Except for the lawsuit for damages, as these disputes are based on whether we should receive as a subscription price a lower price than the price that we consider adequate, without any contingent liability (except for legal fees), a provision of amounts with respect to these proceedings is not applicable.

AmBev Shareholders’ Agreement

On July 1, 1999 FAHZ, Braco S.A. and ECAP (which was merged into InBev Brasil on June 24, 2005), as well as AmBev and Jorge Paulo Lemann, Marcel Telles and Carlos Alberto Sicupira, the latter four as intervening parties, entered into a shareholders’ agreement (the “AmBev Shareholders’ Agreement”) with respect to the voting of the shares of AmBev and the voting by AmBev of the shares of its subsidiaries, among other matters.

On March 2, 2004, the FAHZ, Braco S.A. and ECAP, along with AmBev, Messrs. Lemann, Sicupira, Telles and InBev, as intervening parties, executed the first amendment to the AmBev Shareholders’ Agreement to, among other things, (i) provide that each of the FAHZ, Braco S.A. and ECAP may appoint two observers to the meetings of the Board of Directors of AmBev, without a right to vote; (ii) create a financial committee and an audit committee; (iii) provide that Braco S.A. and ECAP shall have the right to elect, from among the directors they are entitled to appoint, one effective member and the respective alternate appointed by InBev; (iv) eliminate the right of first refusal with respect to the dispositions of AmBev shares; (v) restrict the disposal of shares, directly or indirectly, by the FAHZ, Braco S.A. and ECAP through private trades, on the securities market or on the over-the-counter market, including by way of tender offers, either voluntary or mandatory, as long as the corporate control of InBev is shared with Messrs. Lemann, Sicupira and Telles, except for the indirect disposal of shares among Messrs. Lemann, Sicupira and Telles or to InBev or its affiliates and other limited exceptions; (vi) terminate the provisions relating to the buy-sell rights of the FAHZ, Braco S.A. and ECAP; and (vii) extend the term of the agreement so as to expire on July 1, 2019, subject to the option of Braco S.A. and ECAP to accelerate the termination of the AmBev Shareholders’ Agreement in the event that the current procedure for the election of the members of the Board of Trustees of the FAHZ is modified or ceases to be observed, other than as a result of a change in law or regulation applicable to the FAHZ. Furthermore, the first amendment to the AmBev Shareholders’ Agreement approved amending AmBev’s bylaws to increase the mandatory minimum dividend to 35%.

The following discussion relates to the AmBev Shareholders’ Agreement, as modified by the first amendment. In addition, InBev Brasil has succeeded to the rights and obligations of Braco S.A. under the AmBev Shareholders’ Agreement, as so amended.

Management of AmBev

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

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

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

Presently, under the AmBev Shareholders’ Agreement, as amended, each of the FAHZ and InBev Brasil will have representation on the Board of Directors of AmBev and its subsidiaries and, in addition to the members and respective alternates they are entitled to appoint, each of FAHZ, on the one hand, and InBev Brasil, on the other hand, may appoint up to two observers to attend AmBev’s board meetings, without voting rights. The boards of directors of AmBev and its subsidiaries will each be comprised of at least three and no more than 15 regular members and the same number of alternates, with a term of office of three years and reelection being permitted. FAHZ will have the right to appoint four directors and their respective alternates to the boards of directors of AmBev and its subsidiaries, so long as it maintains ownership of common shares that FAHZ held as of July 1, 1999, when the AmBev Shareholders’ Agreement was entered into (adjusted for share dividends, splits and stock grouping). At that time FAHZ held 459,521,728 common shares, which was adjusted for the five-for-one stock split that took effect on October 23, 2000 and for the share dividend that took effect on May 31, 2005. The FAHZ appointed three of our directors. FAHZ is not allowed under the AmBev Shareholders’ Agreement to appoint more than four directors in the event that its holding of AmBev common shares increases. FAHZ will always be entitled to appoint at least one director as long as it holds a minimum of 10% of AmBev’s voting shares. InBev Brasil has the right to appoint members and its alternates to the boards of directors of AmBev and its subsidiaries, in a number proportionate to the number of members appointed by FAHZ. Such proportion is based on the ratio between the FAHZ’s holding and the holding of InBev Brasil in the voting capital of AmBev. According to the amended AmBev Shareholders’ Agreement, InBev Brasil shall have the right to elect, from among the directors whom it is entitled to appoint, one effective member, and respective alternate, which shall be ultimately appointed by InBev.

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

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

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

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

Preliminary Meetings and Exercise of Voting Right.

On matters submitted to a vote of the shareholders or their representatives in the Board of Directors of AmBev or its subsidiaries, FAHZ and InBev Brasil have agreed to endeavor first to reach a consensus with respect to voting their common shares of each of AmBev and its subsidiaries, and have agreed on the manner to direct their representatives to vote on the matter being submitted. The AmBev Shareholders’ Agreement provides that the parties shall hold a preliminary meeting in advance of all meetings of shareholders or boards of directors of AmBev or of its subsidiaries, with the purpose of discussing and determining a consensus position to be taken by the parties in such meetings. This procedure makes it more likely that a matter approved by the controlling shareholders will also be approved at a shareholders’ meeting.

If the parties fail to reach a consensus with respect to a particular matter, the position to be adopted by all parties to the agreement will be determined by the group holding the greatest number of AmBev voting common shares, which currently is constituted of InBev Brasil. However, this rule does not apply in connection with the election of members of Board of Directors, as described above under “Management of AmBev”, and with respect to fundamental matters which require unanimous approval by FAHZ and InBev Brasil, as follows:

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

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

·	designation, dismissal and substitution of the Chief Executive Officer of AmBev;

·	approval of or amendment to the remuneration policy for the Board of Directors and of the executive board of AmBev, as well as of its subsidiaries;

·	approval of stock ownership plans for the managers and employees of AmBev and/or its subsidiaries;

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

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

amalgamations, spin-offs, transformations, mergers, acquisitions, and divestments involving AmBev and/or any of its subsidiaries, in the latter case (a) when such operation involves a company that is not a subsidiary, directly or indirectly, of AmBev and (b) provided that the transaction in question results in the reduction in the average dividend paid by AmBev in the past five years, adjusted by the IGP-M published by Fundação Getúlio Vargas as of the date of payment;

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

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

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

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

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

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

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

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

·	appointment of the external auditors of AmBev and/or any of its subsidiaries.

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

Transfer of Shares

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

FAHZ and InBev Brasil have agreed (i) not to dispose, directly or indirectly, of their shares, through private trades, on the stock market or on the over-the-counter market, including by way of tender offers, either voluntary or mandatory, except as provided for in Section VI of the AmBev Shareholders’ Agreement, during the term of the agreement, and (ii) not to create any type of encumbrance on their shares, without the prior written consent of FAHZ, in the case of InBev Brasil, and without the prior written consent of InBev Brasil, in the case of FAHZ;

In the event that the shares of AmBev owned by FAHZ on the one hand, and by InBev Brasil, on the other hand, become subject to seizure, attachment, judicial surety or any other restrictive measure, and such restriction is not removed or waived within 30 days after its imposition, the shares subject to the restriction shall be automatically deemed offered for sale to the other party. This offer will remain open for 30 days, and the price for the AmBev shares will be the lesser of either (i) the book value of the AmBev shares, as per the latest audited balance sheet of AmBev, prepared in accordance with Brazilian GAAP, and adjusted by the IGP-M inflation index or (ii) the average quoted market price of the AmBev shares on stock exchanges in the 20 days prior to the petition for removal or waiver of the restriction. If the obligations in respect of such restriction exceed the above price, the party whose shares have been subject to the restriction will be liable for the difference that the other party may be required to deposit in order to acquire the shares. If the obligations in respect of such restriction were lower than the price for the AmBev shares as described above, then the party whose shares have been subject to the restriction will be entitled to receive the difference between the price for the AmBev shares and the obligations in respect of such restriction.

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

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

Specific Performance

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

Shareholders’ Voting Rights Agreement

As of August 30, 2002, each of the Santas, with Messrs. Lemann, Sicupira and Telles, as intervening parties and S-Braco, Braco S.A., ECAP and AmBev, as acknowledging parties, entered into a shareholders’ voting rights agreement (the “Shareholders’ Voting Rights Agreement”) with respect to Messrs. Lemann’s, Sicupira’s and Telles’ respective indirect interests in each of S-Braco, Braco S.A., ECAP and AmBev. In the Shareholders’ Voting Rights Agreement, each of the Santas (and Messrs. Lemann, Sicupira and Telles) agreed to exercise their respective influence in S-Braco, Braco S.A., ECAP and AmBev in full compliance with the terms of the Shareholder’s Voting Rights Agreement. The Santas agreed that the Board of Directors of S-Braco shall consist of four members and that the executive committees of Braco S.A. and ECAP should consist of two to four members, respectively. Each block of voting shares representing 25% of the voting shares of S-Braco shall entitle its owner(s), at all times, to designate (i) one member of the Board of Directors of S-Braco, (ii) one member of the executive committees of Braco S.A. and ECAP, respectively, and (iii) one member of the Board of Directors of AmBev and the respective alternate member (or such higher number of individuals as proves necessary to maintain control over AmBev’s Board of Directors, alone or in conjunction with FAHZ, pursuant to the AmBev Shareholder’s Agreement). The Santas further agreed that resolutions concerning S-Braco, Braco S.A., ECAP and AmBev relating to certain issues may only be approved by prior unanimous vote of the Santas. On other issues not requiring unanimity, Messrs. Lemann, Sicupira and Telles, as the controlling shareholders of the Santas, shall in turn, have a binding personal casting vote to resolve any deadlock with respect to such issues. The Shareholder’s Voting Rights Agreement also contained, among others, terms and conditions (a) restricting the vehicles by which Messrs. Lemann, Sicupira and Telles, and their respective direct descendants could hold shares of S-Braco, Braco S.A., ECAP and AmBev and (b) prohibiting the pledging of shares of S-Braco, Braco S.A., ECAP and AmBev by any of the Santas as security for the obligations of third parties which could result in the potential transfer of ownership or control of such shares.

Additionally, Santa Judith, Santa Irene, Santa Estela and Santa Prudência, as well as Messrs. Lemann, Sicupira and Telles, the latter three as intervening parties, were parties to a shareholders’ property rights agreement relating to the disposition of shares of S-Braco.

Notwithstanding the dissolution of S-Braco and the Santas or any other transaction in connection with the internal restructuring of the SB Group Companies pursuant to the Contribution and Subscription Agreement, Messrs. Lemann, Sicupira and Telles have entered into an agreement confirming that their relationship with respect to their interests in InBev Brasil, ECAP and AmBev will continue to be governed by substantially similar arrangements.

AmBev Share Transfer Agreement and AmBev Governance Agreement

Pursuant to the stock purchase agreement dated May 1, 2002 (as amended, the “Stock Purchase Agreement”), between AmBev and BAC, for the purchase by AmBev of 230,920,000 Class A common shares, without par value, of Quinsa, on January 31, 2003, FAHZ, InBev Brasil (formerly Braco Investimentos S.A.) and ECAP, as well as AmBev and BAC entered into (i) a share transfer agreement related to the capital stock of AmBev (the “AmBev Share Transfer Agreement”) and (ii) a governance agreement related to the governance of AmBev (the “AmBev Governance Agreement”). The AmBev Share Transfer Agreement and the AmBev Governance Agreement will not become effective until shares of AmBev are acquired by BAC by means of the exercise of the put or of call provided in the Put and Call Options.

Pursuant to the AmBev Share Transfer Agreement, among other things, (i) BAC has agreed not to transfer any common shares of AmBev held by BAC, except for transfers to affiliates or family members (“Permitted Transferees”), other than in accordance with the provisions of the AmBev Shareholders Agreement, (ii) BAC and its Permitted Transferees have granted InBev Brasil and ECAP a right of first refusal on any transfer of

common shares of AmBev to third parties, pursuant to which BAC will not transfer any common shares of AmBev (except to Permitted Transferees) unless BAC or its Permitted Transferees shall have first offered to sell such common shares of AmBev to InBev Brasil, (iii) InBev Brasil has granted BAC and its Permitted Transferees tag-along rights pursuant to which BAC and its Permitted Transferees have the right to sell at the same price and on the same terms and conditions as InBev Brasil in connection with any sale by InBev Brasil of more than 50% of the AmBev shares held by InBev Brasil to a third person or any sale of a majority of the outstanding shares of InBev Brasil, (iv) BAC and its Permitted Transferees have granted InBev Brasil drag-along rights pursuant to which in the event that InBev Brasil proposes to sell in a bona fide arm’s-length sale more than 50% of their common shares of AmBev to any unaffiliated third party, InBev Brasil has the right to require BAC and its Permitted Transferees to sell to the proposed transferee all or a portion of their common shares of AmBev for the same per share consideration, in the same pro rata portion and on the same terms and conditions as proposed to be received by InBev Brasil, and (v) AmBev has granted to BAC and its Permitted Transferees the preemptive rights set forth in Article 171 of the Brazilian Corporate Law. Pursuant to the AmBev Governance Agreement, among other things, (i) BAC and its Permitted Transferees have the right to nominate a number of directors of AmBev proportionate to their percentage ownership of the total outstanding common shares of AmBev, provided that BAC and its Permitted Transferees have the right to nominate at least one director as long as BAC and its Permitted Transferees continue to own at least 90% of the common shares of AmBev acquired by them pursuant to the options under the Stock Purchase Agreement, and (ii) for so long as BAC and its Permitted Transferees have at least 90% of the shares of AmBev acquired pursuant to the consummation of the options, certain matters will not be approved by the shareholders meeting or the Board of Directors of AmBev without the vote of BAC.

RELATED PARTY TRANSACTIONS

Material Related Party Transactions

We engage in the purchase and sale of raw material with affiliated entities, which are eliminated on consolidation in our financial statements, with the exception of entities under common control (which are proportionally consolidated), as described in note 2(b) to our audited consolidated financial statements.

AmBev has entered into an agreement with FAHZ for the purchase of certain labels for the beer packaging. FAHZ, as described in “Operating and Financial Review and Prospects—Critical Accounting policies”, provides medical, dental and social assistance to current and former employees and their dependents. FAHZ owned 13.48% of AmBev’s outstanding voting shares and 7.73% of our total outstanding shares on May 31, 2005. FAHZ is not included in our Brazilian GAAP financial statements. During the year ended December 31, 2004, we purchased labels on an arm’s-length basis with a value of R$25.1 million from the FAHZ.

Before January 1, 2003, AmBev financed its employees’ purchases of shares pursuant to its stock ownership plan. See “Directors, Senior Management and Employees—Employees—Stock Ownership Plan”. Such financing option, however, has been removed from the stock ownership plans approved subsequent to the enactment of the Sarbanes-Oxley Act. Nevertheless, advances for the stock ownership plans granted prior to 2003 are grandfathered and may be requested.

We have entered into a variety of agreements with Quinsa and BAC, Quinsa’s controlling shareholder, relating to the acquisition of our interest in Quinsa. See “Information on the Company—Acquisition of Interest in Quinsa”.

On August 27, 2004, in connection with the consummation of the merger of Labatt into AmBev, Labatt Brewing Company Limited (“LBCL”) and InBev entered into cross-services agreements with a view to:

·	terminating the existing services agreement among those entities;

·	LBCL providing to InBev, on an hourly basis, certain administrative services such as tax support services, internal audit services and legal services, until December 31, 2004 (extended until March 31, 2005 pursuant to an amendment to the cross-services agreement);

·	InBev providing to LBCL, on an hourly basis, administrative services such as internal audit services, legal advice and IT support, until December 31, 2004 (extended until March 31, 2005 pursuant to an amendment to the cross-services agreement).

On the same date, InBev and LBCL and AmBev agreed that InBev would be entitled to all intellectual property created or developed by LBCL with aid or funds from InBev from August 27, 2004 to December 31, 2004 (extended until March 31, 2005 pursuant to an amendment to this agreement) and that LBCL would be entitled to continue using a subsidiary of InBev to assist it with hedge arrangements.

We distribute some of our brands in the United States, including Labatt Blue and Kokanee, through InBev USA (previously Labatt USA, L.L.C.), a subsidiary of InBev. We have no written agreement to sell through InBev USA. Over the four month period that we held Labatt in 2004, we have exported approximately C$36.3 million worth of beer to the United States.

On March 4, 2005, due to a notice of reassessment in respect of LBCL’s 1998 taxation year issued by the Canada Revenue Agency on December 2, 2004, and other notices that could be issued, and in view of the indemnification provisions set forth in the Incorporação Agreement, InBev, LBCL and AmBev agreed that LBCL should pay the relevant tax authorities the full amounts due under any such notices, and InBev would reimburse any such amounts, including increased interest expenses as a result of LBCL’s increased leverage ratios, on an annual basis or at each time that LBCL has a credit with InBev over U.S.$ 40 million.

On March 21, 2005, AmBev and InBev entered into a cross-license agreement through which AmBev is allowed to produce, package, market and distribute beer under the brands Stella Artois and Beck’s in Latin America (except Argentina and Cuba), on an exclusive basis, and InBev is allowed to produce, package, market and distribute beer under the brand Brahma in Europe, Asia, Africa, Cuba and the United States on an exclusive basis. AmBev has agreed not to directly or indirectly produce, package, market, distribute, sell or resell (or have an interest in any of these) any other European premium branded beer in Latin America, and InBev has agreed to be bound by the same restrictions relating to any other Latin American premium branded beer in Europe, Asia, Africa, Cuba and the United States. No royalties will be due in the first year, but royalties will be increased annually by 1.75% of net sales, up to 7%, thereafter. Since March 23, 2005, InBev has been distributing the Brahma brand in the United States and in a number of European countries such as the United Kingdom, France, the Benelux, Ukraine and Russia. We announced the launch of the Stella Artois brand in Brazil on June 28, 2005. In addition, we have an agreement with InBev through which we can distribute Stella Artois branded beer in Canada

On June 14, 2005, InBev announced that it decided to increase its economic interest in AmBev by purchasing preferred shares up to the aggregate amount of €500 million. These purchases are expected to occur over a period of twelve months from the date of the announcement.

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Financial Information

CONSOLIDATED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION

Consolidated Financial Statements

See “Financial Statements” .

Legal Proceedings

Except as set forth below, there are no legal proceedings to which we are party, or to which any of our properties are subject which, either individually or in the aggregate, may have a material adverse effect on our results of operations, liquidity or financial condition. For further details, see note 12 of our consolidated financial statements.

Tax matters

As of March 31, 2005, we had approximately 2,309 tax claims pending, including judicial and administrative proceedings. Most of these claims relate to the ICMS tax and the IPI excise tax. We have made provisions of R$997.9 million in connection with these tax proceedings for which we believe there is a probable chance of loss.

Among the pending tax claims, there are claims filed by AmBev against Brazilian tax authorities alleging that certain taxes are unconstitutional. Such tax proceedings include claims for income taxes, ICMS, IPI tax and revenue taxes (“PIS” and “COFINS”). As these claims are contingent on obtaining favorable judicial decisions, the corresponding assets which might arise in the future are only recorded once it becomes certain that we will receive the amounts previously paid or deposited.

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

In October 1996, a tax law allowed credits of ICMS on capital expenditures to be offset against the amounts payable on such tax. Based on this law and on certain constitutional principles, some of our subsidiaries filed several lawsuits with state courts to allow them to offset ICMS tax paid prior to 1996 and with the IPI excise tax paid in the 1997 against similar taxes payable in 1996. We made a provision regarding the amounts offset, including the interest and penalties that could become payable should we lose these lawsuits.

During 1999, a new law came into effect requiring Brazilian companies to pay PIS and COFINS not only on sales and services net sales, but also on financial income. We have not been paying PIS and COFINS as required by the new law, as we have obtained injunctions permitting the non-payment of these additional taxes on the basis that the new law is unconstitutional. As such new taxes remain in force until a final ruling is rendered, we recorded the accumulated amount of R$382.1 million as “provisions for contingencies and other” as of March 31, 2005. We will not be permanently relieved of the obligation to pay such taxes unless and until a final favorable ruling is rendered.

Certain Brazilian taxpayers have filed claims to be able to exclude for the period from 1988 to 1995, in the calculation basis (i.e., the gross revenue of the sixth previous months) the indexation for inflation prior to the calculation of the PIS tax. The taxpayers argue that Complementary Law No. 7/70 does not require indexation of the calculation basis, and the provision in the Decree Laws, which created indexation of the calculation basis, was overturned by the Federal Supreme Court and the Senate. Tax authorities asserted that the Federal Supreme Court and Senate actions affected only the determination of the calculation basis, but did not affect the definition of the indexation procedure in the Decree Laws.

On May 29, 2001 (ruling published on June 11, 2001), an arbitration session of the Court of Appeals ruled in favor of the taxpayer. In the administrative system, the decisions have been favorable to the taxpayers, and the tax authorities are no longer issuing new tax assessments regarding this issue. Although the issue has not yet received a final ruling, taxpayers are likely to prevail.

On October 15, 2001, we concluded the preliminary determination of the credits arising in the five year prescriptive period prior to the date of our claim. The provision for the PIS liability, including interest and charges, totaling R$138.7 million was reversed to income and recorded in “Value added and excise taxes on sales” during 2001 and we are currently awaiting a final decision.

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Income tax and social contribution

Beginning in 1997, an amendment to the tax laws confirmed the deductibility of interest attributable to shareholders’ equity for social contribution and income tax purposes. Brahma filed a lawsuit with the Federal Courts of Rio de Janeiro requesting the recovery of social contribution taxes previously paid for the fiscal year of 1996 in the amount of R$40.1 million. The Federal Court granted Brahma an injunction recognizing the deductibility of payment of interest attributable to shareholders’ equity and, as a result, allowed Brahma to suspend the payment of social contribution amounts owed in 1999 up to the amount not deducted in 1996, thereby allowing Brahma to offset the amounts of taxes unduly paid in 1996 against the amounts owed in 1999. In April 2001, the Federal Appellate Court reversed the Federal Court’s injunction. On April 3, 2002, we appealed the Federal Appellate Court’s judgment to the Brazilian Supreme Court and to the Superior Court of Justice.

During the last quarter of 2004 and the first quarter of 2005, we received a number of assessments from Brazilian tax authorities relating to earnings of our foreign subsidiaries, in the total amount of approximately R$3,500.0 million. Based on the advise of external counsel, we believe that such assessments are without merit, and we believe that our chances of ultimately losing these claims are possible (but not probable) with respect to R$2,000.0 million and remote with respect to R$1,500 million. Accordingly, we have not made any provision in connection therewith. Based on advice of our external counsel, we reached those conclusions due to the following main reasons: (i) the assessments are based upon legislation which was not in force at the time to which the corresponding assessment periods relate to; (ii) the assessments do not consider the existence of a double taxation treaty between Brazil and Spain; (iii) there is a mistake in the determination of the amounts supposedly due; and (iv) the assessments purport to tax foreign exchange variation on our offshore investments, which is a taxable event not provided for under Brazilian law.

Labor matters

We are involved in approximately 8,500 legal proceedings with former and current employees, mainly relating to overtime, dismissals, severance, overtime, health and safety premiums, supplementary retirement benefits and other matters, all of which are awaiting judicial resolution.

We have made provisions of R$333.8 million as of March 31, 2005, in connection with all labor proceedings in which we believe there is a probable chance of loss. In Brazil, it is not unusual for a company to be a defendant in a large number of labor claims.

Civil claims

As of March 31, 2005 we had 4,001 civil claims pending, including distributors and product related claims. We are the plaintiff in 1,462 and the defendant in 2,539 of these claims, respectively. We have established provisions in the amount of R$88.4 million as of March 31, 2005 in connection with civil claims in which we believe there is a probable chance of loss.

On April 11, 2003, the Federal District Public Attorney initiated an administrative civil public investigation regarding advertisements that allegedly have the potential to induce teenagers and children to consume alcoholic beverages in a Skol and Brahma beer marketing campaigns. We have presented a settlement proposal to the Federal Public Attorney’s Office and are waiting for a response. We believe that the investigation will end without any material disbursement on our part and therefore have not made a provision for any amount in connection with this investigation.

On February 29, 2000, five former shareholders of Antarctica who had exercised appraisal rights under the Antarctica conversion jointly filed a lawsuit against us and Antarctica in the civil courts of the City of São Paulo. These former shareholders claim that the decision taken at the Antarctica shareholders’ meeting held on September 2, 1999, changing the valuation method (from book value to economic value) that was used to determining the appraisal value of withdrawing Antarctica shareholders was invalid because it occurred after the plaintiffs had exercised their withdrawal rights. These plaintiffs claim compensation in the total amount of approximately R$0.8 million (the current amount is R$1.1 million). On July 21, 2001, the court dismissed the action against Antarctica. On December 21, 2001 the judge adjudicated in favor of the minority shareholders requiring us to pay the difference between the value of the shares. We have appealed this ruling and expect to prevail in the Appellate Courts based upon advice from our external counsel. Based upon this expectation, we have not made a provision for any amount.

A court in the City of São Paulo, state of São Paulo, granted an injunction to restrict AmBev from advertising soft drinks on television during the hours that children’s programming airs and imposed information requirements on our advertisements, labels and containers informing consumers about the damages that excessive sugar could bring to health as well as the risk of obesity. We appealed this decision and the appellate court suspended the injunction. A final decision is pending. On May 18, 2004, another lawsuit was filed against AmBev in a court in the city of Ribeirão Preto, state of São Paulo, to impose similar restrictions and requirements. No injunction has been granted and final judgment is still pending. We expect favorable decisions in both cases based on advice from our external counsel. Based upon this expectation, we have not made a provision for any amount.

A number of class action lawsuits have been commenced in various U.S. states against multiple defendants in the alcohol industry (including Labatt Brewing Company Limited and affiliated entities), alleging intentional and negligent marketing of alcohol to minors. Labatt entities have retained external legal counsel and joined a coordinated joint defense group, to help manage information flow, overall strategy and defense costs. It is too early to provide any assessment of possible exposure.

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Options and Warrants

Currently, we have been notified of six proceedings, with eleven holders claiming such rights. We estimate that the aggregate subscription price of all the relevant shares will be R$1,022.4 million, based on a strike price of R$0.90977 for preferred shares and R$0.91595 for voting shares and warrants entitling its holders to subscribe for 29,602,450 common shares and 1,093,920,115 preferred shares. Three of the plaintiffs, who hold warrants that entitle them to subscribe for, in the aggregate, 435,563,170 preferred shares, argue that the strike price should be R$0.13585.

The maximum dilution for the existing shareholders would be the difference between these values and the net book value of such shares at the time they are issued, multiplied by the number of shares involved. AmBev has filed counterclaims on these lawsuits, three of which were granted, and one of which was rejected. Each decision, favorable or adverse to us, does not bind the court in relation to the other lawsuits.

In spite of the favorable decisions issued so far, we decided to adopt a cautionary approach due to the unfavorable decision of the lower court of the state of São Paulo that changed, in relation to those lawsuits, our initial evaluation (according to which we had a probable chance of prevailing). Based on advice from our external counsel, and for the cautionary approach described above, we believe our chances of prevailing in these proceedings are possible. Except for the lawsuit for damages, as these disputes are based on whether we should receive as a subscription price a lower price or the price that we consider adequate, without any contingent liability (except for legal fees), a provision of amounts with respect to these proceedings is not applicable.

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Distributors and product-related claims

Numerous claims have been filed against us by former distributors whose contracts were terminated. Most claims are still under review by first instance and state Appellate Courts, and a few are currently being reviewed by the highest level Court of Appeals in Brazil, the Superior Court of Justice and the Federal Supreme Court.

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The aggregate amount of these claims was R$344.2 million as of March 31, 2005. AmBev has established provisions in the amount of R$33.3 million in connection with these claims as of March 31, 2005, based on the advice of outside legal counsel. We intend to continue a program of increasing our direct distribution and, in areas where we continue to use third-party distributors, may terminate existing distributors in favor of new distributors. We expect this program to result in additional lawsuits.

There are currently eleven administrative proceedings against us under CADE’s review, each of them commenced by former or present distributors who challenge the legality of our market practices under distribution arrangements and request the suspension of such market practices. CADE has dismissed ten of those complaints, concluding that we did not engage in any of the alleged illegal activities. The remaining one proceeding is under review by CADE.

Antitrust matters

The Combination

We currently have a number of antitrust investigations pending against us, which have been initiated by CADE following its investigations in connection with the combination.

The first proceeding refers to complaints brought by the Brazilian Association of Antarctica Distributors (“ABRADISA”), alleging that provisions in our distribution agreements are illegal exclusivity provisions. After appropriate investigations, on February 22, 2002, the Brazilian antitrust authorities decided to accept the proceedings against us to determine whether there is circumstantial evidence relating to unfair market practices. The antitrust authorities are seeking to determine whether or not the following main practices are taking place: (i) establishment of minimum quotas for retailers to purchase our beverages; (ii) imposition of sale price to retailers; (iii) whether the sharing of the distribution network among Antarctica, Skol and Brahma products has resulted in damages to retailers’ fair competition; (iv) unjustified increase in price; and (v) unfair competition between retailers and direct distribution. On March 29, 2002, we filed our defense. Presently, this proceeding is awaiting decision by the Brazilian antitrust authorities as in March 2003 CBB and its forty-one distributors executed a settlement agreement (Termo de Transação) that has been fully complied with by all its parties. On November 4, 2003, the ABRADISA President filed a petition in this proceeding before the Brazilian antitrust authorities stating that the settlement agreement has been fully complied with by all its parties and that ABRADISA has no interest in continuing with this proceeding.

In 2002, a distributor in the state of Alagoas filed a petition requesting that the State Public Attorney investigate compliance with CADE’s performance agreement with respect to exclusivity agreements. The State Public Prosecutor requested information from AmBev on July 16, 2002. On August 12, 2002, we presented our defense. We expect the State Public Attorney to withdraw the charges with no further implication to AmBev. Based on the arguments presented before the antitrust authorities on May 7, 2003, we believe that we have good chances of being successful in these proceedings. On February 17, 2005, CADE acknowledged that AmBev had not disobeyed the performance agreement in connection with this case.

On April 24, 2003, Cervejaria Braumeister, a small brewer with which we had executed five exclusivity agreements (one for each store) filed a complaint with the Brazilian antitrust authorities alleging that we have breached the antitrust performance agreement that we signed with CADE by imposing exclusivity on them. On October 20, 2003, we presented our defense alleging that there was no imposition of exclusivity, but that the exclusivity was negotiated between the parties. To date, the case is in its discovery phase. We expect this complaint to be dismissed as there are three lower court judicial decisions which were granted in our favor.

The State Public Attorney of Rio Grande do Sul filed two claims in connection with the lay-off of employees in the beer plants of Estrela and Montenegro and also in connection with the closing or disposing of any of our beer plants. On February 17, 2005, CADE acknowledged that AmBev did not disobey the

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performance agreement in connection with this case. We expect the State Public Attorney to withdraw the charges with no further implication to AmBev.

On February 13, 2004, the Labor Union of the Food and Beverages Industry Workers (Sindicato dos Trabalhadores nas Indústrias de Alimentação e Bebidas) of the city of Jacareí, State of São Paulo, filed a claim with the Brazilian antitrust authorities in connection with the lay-off of employees in our beer plant in Jacareí. In this claim, this union alleges that we have breached our antitrust performance agreement signed with CADE pursuant to which we have committed to maintain the level of employment in our plants. On June 14, 2004, we presented our defense. We expect this claim to be dismissed as we believe we have complied with all the provisions of the mentioned antitrust performance agreement.

In 2004, Schincariol, which is currently one of our largest competitors, filed a complaint with the Brazilian antitrust authorities asking them to investigate whether our loyalty program named Tô Contigo complies with Brazilian antitrust laws and alleging that AmBev had not complied with the performance agreement signed with CADE due to AmBev’s conduct in the market. The Brazilian antitrust authorities have not yet made any decision on this complaint, as it is in its discovery phase.

Joint Ventures and Alliances

Brahma’s joint ventures with Miller and Unilever Brasil Ltda., its franchise agreement with PepsiCo and Skol’s licensing agreement with Carlsberg were all required to be submitted to CADE for approval. In October 1998, CADE approved the franchise agreement with PepsiCo International, Inc. In early 1999, CADE approved Brahma’s joint venture with Unilever Brasil Ltda., which resulted in the creation of Ice Tea do Brasil Ltda. Also in 1999, the Skol licensing arrangement with Carlsberg was approved by CADE. The Miller license arrangement was approved in 1997 and the performance agreement entered into in connection with such transaction lead to the execution of a production agreement with Dado Bier, which will expire in December 2005.

CADE approved on July 16, 2004, our cooperation with Souza Cruz S.A. for the implementation of “Cportal”, a business-to-business website. On November 28, 2001, CADE unconditionally approved the cooperation with Souza Cruz S.A. regarding the implementation of Agrega, a business-to-business website, through which the acquisition of MRO (materials, repairs and operation) products and services would be negotiated. The Agrega joint venture was commenced on November 30, 2000.

As a result of PepsiCo’s acquisition of Gatorade and subsequent licensing of the trademark to us, CADE began analyzing the isotonic market concentration. AmBev has agreed to keep all the labor positions related to Gatorade production, while the marketing policies for Gatorade and Marathon will be maintained independently. AmBev has also agreed not to reveal the secrets regarding the production. On July 14, 2004, CADE members voted for the approval of the transaction with restrictions, including the sale of Marathon. We are awaiting CADE’s proposal of performance agreement.

On July 23, 2003, CADE approved with no restrictions our agreement with Quinsa to distribute Quinsa beer in Brazil. This agreement is pending the approval of Argentinean antitrust authorities as it also provides for the distribution of Brahma in Argentina.

InBev-AmBev Transactions

On March 18, 2004, we formally notified the Brazilian antitrust authorities of the proposed InBev-AmBev Transactions. On May 27, 2004, the SEAE, an office within the Ministry of Finance and one of the three bodies responsible for reviewing the transaction, issued an opinion recommending unrestricted approval, on the grounds that the transactions would not affect the domestic beer market. Schincariol filed an opposition to the transaction that was rejected by the SEAE. On June 29, 2004, the SDE, an office of the Ministry of Justice, issued an opinion concurring in SEAE’s recommendation. On May 18, 2005, the Federal Public Attorney issued an opinion recommending unrestricted approval. Finally, on June 15, 2005, CADE

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issued its unrestricted approval of the transaction.

Other

In the first quarter of 2005, the Canadian Competition Bureau commenced an investigation into Labatt and Molson’s activities in Quebec, alleging possible re-sale price maintenance in the retail sale of beer. No charges have been laid. Internal and external legal counsel are managing the matter, and are in dialogue with the Bureau. It is too early to determine how this investigation will conclude.

In addition, several Canadian brewers are party to an Industry Standard Bottle Agreement (“ISBA”) whereby the parties have agreed to use only a particular type of bottle which are then recycled to ISBA signatories on a proportionate basis for re-use. Brick Brewing Company, a small Ontario brewer that is not an ISBA signatory, commenced litigation against TBS and obtained an injunction pending determination of Brick's continued access to the industry bottles. The discovery stage of the matter is completed, with trial likely in 2006. Brick took its position to the Canadian Competition Bureau. The Bureau launched a civil investigation, contending that the ISBA may have the likely effect of preventing/lessening competition for beer products in Canada. The Bureau has gathered documentation from all parties and a response from the Bureau is expected in 2005 or 2006.

CVM

Caixa de Previdencia dos Funcionarios do Banco do Brasil - PREVI, a Brazilian pension fund holding approximately 6.07% of AmBev’s capital stock as of May 31, 2005, filed an administrative complaint against AmBev with the CVM on April 8, 2004, alleging abuse of position by AmBev’s controlling shareholders and breach of fiduciary duty by AmBev’s directors in connection with the approval of the InBev-AmBev Transactions, appropriation of commercial opportunity and inadequate disclosure. The complaint requested, among other things, that CVM render an opinion contesting the legality of the transactions and intervene to prevent the closing of the Incorporação. On May 4, 2004, AmBev filed a response to the complaint with the CVM, which was supported by several opinions of renowned Brazilian legal scholars. The complaint was reviewed by the staff of CVM in a decision that rejected all the complaints of PREVI, which subsequently filed an administrative appeal to the CVM. The CVM, in a decision issued on December 16, 2004, declared that (i) there was no element to conclude that there had been an abuse of position by the controlling shareholders or conflict of interests in relation to them, and (ii) that there were no indication of an appropriation of a commercial opportunity by the directors of AmBev, without prejudice to any further investigation that the staff of the CVM might conduct as needed. Moreover, the CVM expressed its understanding that directors involved in the InBev-AmBev Transactions could not have intervened in the AmBev board resolutions related thereto, recommending that the staff investigate any possible violation of the fiduciary obligations of one specific director who was a shareholder of Braco (now known as InBev Brasil) and ECAP, the direct controlling shareholders of AmBev and took part in AmBev’s board resolution. There would be a quorum to approve the relevant resolutions even without the vote of such director. The CVM recommended also that the staff investigate the adequacy of the disclosure proceeding of the transactions. So far, we have not been informed of any specific administrative action in relation thereto.

Following the announcement of the InBev-AmBev Transactions, we were notified by the CVM that it detected what it perceived to be unusual trading patterns in shares of AmBev in the weeks preceding the announcement. The CVM, in accordance with what we understand to be its standard procedures, requested from us and from InBev Brasil a list of all directors, officers, employees, accountants, lawyers, investment bankers and other consultants involved in the InBev-AmBev Transactions. That information has been supplied to the CVM. According to certain public statements of staff members and commissioners of the CVM, the CVM is investigating the possibility that the trading of AmBev shares based on non-public information occurred. We believe that CVM’s investigation is pending; however, we have no indication of when the investigation will conclude.

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Environmental matters

On November 7, 2001, the Public Attorney (Promotoria) of Manaus notified us that a criminal lawsuit had been initiated against IBANN, our subsidiary, and three of its officers in the courts of the State of Manaus claiming damages for harm allegedly done to the Igarapé dos Franceses forest. On March 21, 2002, the Public Attorney proposed a settlement through a series of environmental projects. On November 19, 2002 we entered into an agreement with the Public Attorney which included the reforestation of an area of the Igarapé dos Franceses forest and the purchase of equipment used by the governmental agencies to protect the environment. We have complied with all the terms of the agreement which will be homologated at a judicial hearing which has yet to be scheduled.

There was a civil action brought by the Public Attorney of the State of Amazonas against the State Government of Amazonas (Environmental Protection Institute of Amazonas - “IPAAM”), the municipality of Manaus (Municipal Department of Environment Development - “SEDEMA”) and beverage industry companies in August 2000, which resulted in a settlement which provides for obligations in the collection and recycling of PET packages. The obligations are of a permanent nature and we believe that we are regularly complying with them.

In August 2003, Oliveira Comércio de Sucatas filed a complaint with the Public Attorney of the city of Pedreira, in the State of São Paulo, alleging that CBB was using the waste disposal site of the city as a disposal for toxic garbage. In September 2003, we presented our response and have performed all the necessary studies which allowed us to conclude that CBB had not disposed of any toxic garbage and that there were no actions causing harm to the environment. We are awaiting conclusion of expert testimony. Based on the results of our studies, as well as the retaliatory nature of Oliveira Comércio de Sucatas’ complaint filed immediately following a termination of a service contract, we believe we will be cleared.

The Public Attorney of the State of Rio de Janeiro has requested the initiation of a civil investigation to investigate anonymous reports of the pollution allegedly caused by Nova Rio, AmBev’s beer plant located in the city of Rio de Janeiro. Currently this investigation is in the discovery phase. We expect this investigation to be dismissed as we have presented several expert opinions, including one from the State environmental agency (“FEEMA”) showing lack of environmental damages. Due to the wide repercussion of this matter in the media, the Legislative Branch initiated a Parliamentary Commission of Investigation (Comissão Parlamentar de Inquérito - “CPI”) to investigate the facts. Our corporate relations officer, Milton Seligman, has testified in a public hearing related to this matter. We expect the CPI to be dismissed as we presented expert opinions showing the lack of any environmental damages.

Dividend Policy

For information regarding our dividend policy, see “Key Information—Selected Financial Data—Dividends—Dividend Policy”.

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Significant Changes

Except as otherwise described in our annual financial statements and in this annual report, there have been no significant changes in our business, financial conditions or results since December 31, 2004.

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The Offer and Listing

PRINCIPAL MARKET AND TRADING MARKET PRICE INFORMATION

AmBev is registered as a publicly held company with the CVM and has been listed on the Brazilian stock exchanges since December 17, 1998 under the name Aditus Participações S.A. Because AmBev was originally incorporated as a shelf company without any operational activity, there was no market for AmBev shares until September 17, 1999, two business days after the Antarctica conversion. From September 17, 1999 until September 15, 2000, the first date following the Brahma conversion, there was a limited trading market for AmBev shares. For a description of the combination transactions that led to the formation of AmBev, including the Antarctica and Brahma conversions, see “Information on the Company—The Combination” and “Information on the Company—Brazilian Antitrust Approval”. AmBev shares are quoted on Bovespa under the symbols “AMBV3” (common shares) and “AMBV4” (preferred shares). Until April 28, 2000, the AmBev shares were traded on the Rio de Janeiro Stock Exchange and other Brazilian stock exchanges under the symbols “AMBVON” (common shares) and “AMBVPN” (preferred shares).

On October 20, 2000, the shareholders of AmBev present at an extraordinary general meeting unanimously approved a five-for-one stock split of the Company’s outstanding common and preferred shares. See note 15(a)(ii) in our consolidated financial statements.

Shares

The table below shows the quoted high and low closing sales prices in reais on Bovespa for AmBev’s preferred and common shares for the indicated periods. All prices quoted below relating to periods prior to September 15, 2000 relate to high and low closing sales prices in reais on the Bovespa for preferred and common shares of Brahma, AmBev’s predecessor. All share prices, including prices relating to Brahma preferred and common shares, have been restated to reflect AmBev’s five-for-one stock split described in the preceding paragraph.

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ADRs

AmBev has registered two classes of American Depositary Shares (“ADSs”) pursuant to the Securities Exchange Act: ADSs evidenced by American Depositary Receipts (“ADRs”) representing 100 preferred shares, and ADSs evidenced by ADRs representing 100 common shares. The ADSs have been listed on the New York Stock Exchange since September 15, 2000 and trade under the symbols “ABV.c” (ADSs representing AmBev common shares) and “ABV” (ADSs representing AmBev preferred shares). On October 20, 2000, the shareholders present at an extraordinary general meeting unanimously approved a five-for-one stock split of AmBev’s outstanding common and preferred shares. However, AmBev’s ADSs were not split. Prior to the stock split, each ADS represented 20 common or preferred shares of AmBev. Since the stock split did not affect AmBev’s ADSs, after the stock split each ADS represented 100 common or preferred shares of AmBev. Consequently, the stock split did not have a significant impact on the price of our ADRs.

As of May 31, 2005, there were 19 registered holders of our preferred ADSs, with approximately 99.9% of the preferred ADSs registered in the name of The Depository Trust Company. As of May 31, 2005, there were three registered holders of the common ADSs, with approximately 99.9% of the ADSs registered in the name of The Depository Trust Company.

The information presented in the table below represents, for the indicated periods, the reported high and low closing sales prices of AmBev ADRs quoted in U.S. dollars on the New York Stock Exchange. All prices quoted below relating to periods prior to September 15, 2000 relate to the reported high and low closing sales prices of the ADRs of Brahma, AmBev’s predecessor, quoted in dollars on the New York Stock Exchange.

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Trading Prices on the New York Stock Exchange: ADRs Representing 100 Common and Preferred Shares⁽¹⁾

	Per 100 Common Shares ADR				Per 100 Preferred Shares ADR

	High			Low	High	Low
	(in U.S.$)				(in U.S.$)
Annual
2004		U.S.$ 52.05	U.S.$ 17.90		U.S.$28.33		U.S.$16.20
2003		22.00	10.00		25.51		13.00
2002		18.75	10.18		21.49		10.70
2001		26.00	10.00		28.70		14.20
2000		19.88	9.00		25.50		11.81

Quarterly
2005
First Quarter		U.S.$52.50	U.S.$42.00		U.S.$30.71		U.S.$ 24.28
2004
First Quarter		U.S.$32.80	U.S.$17.90		U.S.$28.24		U.S.$17.90
Second Quarter		39.17	32.87		20.07		16.20
Third Quarter		42.50	37.20		22.52		19.88
Fourth Quarter		52.05	42.50		28.33		22.69
2003
First Quarter		U.S.$14.11	U.S.$10.00		U.S.$16.61		U.S.$13.00
Second Quarter		18.10	10.00		21.31		17.15
Third Quarter		19.00	14.00		24.06		18.18
Fourth Quarter		22.00	15.00		25.51		21.02

Monthly
2005
January		U.S.$52.50	U.S.$47.10		U.S.$28.65		U.S.$24.28
February		51.58	50.49		30.71		25.56
March		49.80	42.00		30.55		27.52
April		35.61	25.02		28.67		26.51
May		27.36	22.36		30.46		27.75
2004
December		U.S.$52.05	U.S.$48.19		U.S.$28.33		U.S.$25.90

_____________________

Source: The Bank of New York

(1) For a period of time commencing on September 17, 1999, two business days after the Antarctica conversion, and prior to September 15, 2000, the first date following the Brahma conversion, two separate trading markets existed for the shares of AmBev and Brahma, AmBev’s predecessor. Due to the limited trading volume in AmBev’s shares throughout this period, however, this chart only relates to the stock prices of Brahma shares for the period of time commencing on September 17, 1999 and prior to September 15, 2000.

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REGULATION OF THE BRAZILIAN SECURITIES MARKET

The Brazilian securities markets are regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, as well as by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. The Brazilian securities markets are governed by Law No. 6,385 dated December 7, 1976 (the Brazilian Securities Law), and by Brazilian Corporate Law, as amended and supplemented. These laws and regulations, among others, provide for disclosure requirements, restrictions on insider trading and price manipulation, and protection of minority shareholders. They also provide for licensing and oversight of brokerage firms and governance of Brazilian stock exchanges. However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets.

Under Brazilian Corporate Law, a company is either publicly held (listed), a companhia aberta, such as AmBev, whose shares are publicly traded on the Bovespa, or privately held (unlisted), a companhia fechada. All listed companies are registered with the CVM and are subject to reporting and regulatory requirements. The Brazilian Corporate Law allows the CVM to classify listed companies according to the kind of securities they issue. A company registered with the CVM may trade its securities either on the Brazilian stock exchanges or in the Brazilian over-the-counter market. Shares of companies like AmBev traded on the Bovespa may not simultaneously be traded on the Brazilian over-the-counter market. The shares of a listed company, including AmBev, may also be traded privately subject to several limitations. To be listed on the Bovespa a company must apply for registration with the CVM and the Bovespa.

The trading of securities on the Brazilian stock exchanges may be halted at the request of a company in anticipation of a material announcement. Companies are sometimes required by law to request such suspension. Trading may also be suspended on the initiative of a Brazilian stock exchange or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or a stock exchange.

Trading on the Brazilian Stock Exchanges

On January 27, 2000, a formal protocol was signed merging the previous nine Brazilian stock exchanges. Following the merger, Bovespa is the only Brazilian stock exchange on which private equity and private debt may be traded. Bovespa is a not-for-profit entity owned by its member brokerage firms. Trading on Bovespa is limited to member brokerage firms and a limited number of authorized non-members.

Bovespa outcry trading sessions are from 10:00 a.m. to 1:00 p.m. and from 2:00 p.m. to 4:45 p.m., São Paulo time. During daylight savings time in the United States, the sessions are held from 9:00 a.m. to 12:00 p.m. and from 1:00 p.m. to 3:45 p.m., São Paulo time. There is also an on-line Bovespa trading system called Mega Bolsa which trades all stocks that are not traded in the floor, the simultaneously trade of some stocks being permitted (from 10:00 a.m. to 5 p.m., or from 9:00 a.m. and 4:00 p.m. during daylight savings time in the United States and from 4:45 p.m. to 5:00 p.m. there is a closing call). Bovespa also permits trading from 6:45 p.m. to 7:30 p.m. on an on-line system connected to traditional and Internet brokers called the After Market. The After Market session is restricted to certain stocks that were traded in the floor during the outcry session demonstrating certain liquidity characteristics. Trading on the After Market is subject to regulatory limits on price volatility and on the volume of shares transacted through Internet brokers. CVM has discretionary authority to suspend trading in shares of a particular issuer under specific circumstances. Securities listed on the Bovespa may also be traded off the exchange under specific circumstances, but such trading is very limited.

Settlement of transactions is effected three business days after the trade date, without adjustment for inflation. Delivery of and payment for shares are made through the facilities of separate clearing houses for each exchange, which maintain accounts for the member brokerage firms. The seller is ordinarily required to deliver the shares to the exchange on the second business day following the trade date. The clearing house for Bovespa is Companhia Brasileira de Liquidação e Custodia (“CBLC”), which is owned by Bovespa and its members.

In order to better control volatility, Bovespa has adopted a “circuit breaker” mechanism pursuant to which trading sessions may be suspended for a period of 30 minutes or 1 hour whenever the index of the stock exchange falls 10% or 15%, respectively, compared to the previous day’s closing index. If the market falls more than 15%

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compared to the previous day no more pauses are taken. The “circuit breaker” is not allowed to be started during the last 30 minutes of the trading session (from 4:15 p.m. to 4:45 p.m.).

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. At December 31, 2004, the aggregate market capitalization of all the companies listed on Bovespa was equivalent to approximately R$904.9 billion. Although all of the outstanding shares of a listed company are actually available for trading by the public, in most cases fewer than half of the listed shares are actually traded by the public because the remainder of a listed company’s shares are usually held by small groups of controlling persons, by governmental entities or by one principal shareholder. For this reason, data showing the total market capitalization of Brazilian stock exchanges tend to overstate the liquidity of the Brazilian equity securities market.

There is also significantly greater concentration in the Brazilian securities markets. During the year ended December 31, 2004, the ten most actively traded issues represented approximately 49.5% of the total volume of shares traded on Bovespa, comparable to the 53.5% of total volume in 2003.

Trading on Brazilian stock exchanges by non-residents of Brazil is subject to limitations under Brazilian foreign investment legislation. See “Key Information—Exchange Rate Information—Exchange Controls” and “Additional Information—Memorandum and Articles of Association—Restrictions on Foreign Investment”.

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Additional Information

MEMORANDUM AND ARTICLES OF ASSOCIATION

Set forth below is a brief summary of the material provisions concerning our preferred shares, common shares, bylaws and the Brazilian Corporate Law. In Brazil, the principal governing document of a corporation is the company’s bylaws (“Estatuto Social”). This description is qualified in its entirety by reference to Brazilian Corporate Law and our bylaws. An English translation of our bylaws has been filed with the SECas 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. Information on the trading market for our preferred shares is set forth under “The Offer and Listing-Principal Market and Trading Market Price Information” and information on ownership of our shares is set forth under “Major Shareholders and Related Party Transactions-Major Shareholders”.

Our capital stock is comprised of preferred shares and common shares, all without par value. At May 31, 2005, there were 31,147,483,500 total preferred shares (“ações preferenciais”) outstanding and 34,499,422,931 total common shares (“ações ordinárias”) outstanding. We are authorized to increase our capital upon the decision of our Board of Directors, without the need to amend our bylaws, up to 70,000,000,000 shares. There are no other classes or series of preferred shares outstanding.

Each AmBev common share entitles the holder thereof to one vote at meetings of our shareholders. Holders of common shares are not entitled to any preference relating to our dividends or other distributions or any preference upon our liquidation.

Each AmBev preferred share is non-voting, may not be converted into a common share, and is entitled to:

(i)

priority in the reimbursement of capital in case of company’s liquidation; and

(ii)

the right to receive dividends in an amount per share at least 10% higher than the amount per share paid to holders of common shares.

See “Voting Rights” for more information regarding the voting rights of our preferred shares.

Although Law No. 10,303/01 has amended the Brazilian Corporate Law to establish that the number of non-voting shares or shares with limited voting rights, such as our preferred shares, may not exceed half (50%) of the total number of issued shares, since AmBev has been incorporated prior to the enactment of Law No. 10,303/01, it is allowed by law to keep the existing proportion between common shares and preferred shares - i.e. the number of its non-voting shares may not exceed two-thirds of the total number of its shares.

The majority of members of our Board of Directors are elected by the controlling shareholders of our common shares. Board members, regardless the shareholder they represent, owe fiduciary duties towards the Company and all of its shareholders. At the same time, any director appointed by shareholders bound by a shareholders’ agreement is also bound by the terms of such agreement. For further information on this matter see “Major Shareholders and Related Party Transactions—Major Shareholders—AmBev Shareholders’ Agreement”.

General

Our registered name is Companhia de Bebidas das Américas - AmBev and our registered office is in São Paulo, SP, Brazil. Our registration number with the São Paulo Commercial Registry is 35,300,157,770. AmBev’s principal corporate purposes include the production and sale of beer, soft drinks and other beverages. A more detailed description of AmBev’s purposes can be found in Chapter I, Article 3 of AmBev’s bylaws.

Board of Directors

In accordance with the Brazilian Corporate Law, any matters subject to the approval of our Board of Directors can be approved by the affirmative vote of a majority of our Board members present at the relevant meeting, except as provided in AmBev’s Shareholders’ Agreement.

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According to the general principles of the Brazilian Corporate Law, if a director or an executive officer has a conflict of interest with the company in connection with any proposed transaction, the director or executive officer may not vote in any decision of the Board of Directors or of the board of executive officers regarding such transaction and must disclose the nature and extent of the conflicting interest for transcription in the minutes of the meeting. In any case, a director or an executive officer may not transact any business with the company, including any borrowings, except on reasonable or fair terms and conditions that are identical to the terms and conditions prevailing in the market or offered by third parties. Any transaction a director may have an interest can only be approved if carried out on an arm’s-length basis.

Our bylaws and the Brazilian Corporate Law require that our directors be shareholders of the Company. Ownership of one share is sufficient to satisfy this condition.

Dividends and Reserves

The discussion below summarizes the main provisions of the Brazilian Corporate Law regarding the establishment of reserves by corporations and rules with respect to the distribution of dividends, including provisions regarding the interest attributable to shareholders’ equity.

Calculation of Distributable Amounts

At each Annual Shareholders’ meeting, AmBev’s Board of Directors is required to propose how the Company’s net earnings for the preceding fiscal year are to be allocated. For purposes of Brazilian Corporate Law, a company’s net income after income taxes and social contribution taxes for such fiscal year, net of any accumulated losses from prior fiscal years and amounts allocated to employees’ and management’s participation in earnings represents its “adjusted income” for such fiscal year. In accordance with the Brazilian Corporate Law, an amount equal to such “adjusted income” (which we will refer to as the “distributable amount”) will be available for distribution to shareholders in any particular year. Such distributable amount is subject to:

Reductions that may be caused by amounts contributed for the purpose of meeting the charges of the assistance foundation 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”.

Increases caused by reversals of reserves constituted in prior years.

Mandatory Dividend

AmBev is required by its bylaws to distribute to shareholders as dividends in respect to each fiscal year ending on December 31 an amount not less than 35% of the distributable amount (mandatory dividend). In addition to the mandatory dividend, the Board of Directors may recommend payment of additional dividends to shareholders. The limit for dividend payment is the distributable amount plus the balance available in our statutory “Investment Reserve”, in which we allocate distributable amounts from previous fiscal years not paid as dividends. See “—Reserves”. Furthermore, dividend payments may be implemented in advance, during the fiscal year to which it is related, upon decision of the Board of Directors. Any amount paid as dividend in advance will be considered by the end of the fiscal year as part of the mandatory dividend owed to shareholders.

In addition, the mandatory dividend, either the full amount or a portion of it, may not be paid in any given year should the Board of Directors consider that such payment is incompatible with the company’s financial situation, subject to shareholders approval. While the law does not establish the circumstances in which payment of the mandatory dividend is “incompatible” with a company’s financial situation, it is generally agreed that a company is allowed not to pay the mandatory dividend if such payment threatens the existence of the company as a going concern or harms its normal course of operations. The Company’s Conselho Fiscal must opine on the non-payment of mandatory dividends, and AmBev’s administration is supposed to provide to the CVM, no later

than 5 business days after such decision is taken, a report explaining the reasons considered by the Board of Directors.

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Any postponed payment of mandatory dividends must be allocated as a special reserve. Any remaining balance of such reserve not absorbed by losses in subsequent fiscal years must be paid to shareholders as soon as the Company’s financial situation allows.

Dividend Preference of Preferred Shares

Pursuant to AmBev’s bylaws, AmBev’s preferred shares, if any, are entitled to dividends 10% greater than the dividends to be paid to AmBev’s common shares.

Payment of Dividends

Under Brazilian Corporate Law any holder of record of shares at the time of a dividend declaration is entitled to receive dividends, which are generally required to be paid within 60 days following the date of such declaration, unless a shareholders’ resolution sets forth another date of payment, which, in either case, must occur prior to the end of the fiscal year in which such dividends were declared. AmBev’s bylaws do not provide for a time frame for payment of dividends. The mandatory dividend is satisfied through payments made in the form of dividends and interest attributable to shareholders’ equity, which is equivalent, from an economic perspective, to a dividend, but is usually a tax maximizing way to distribute earnings to our shareholders, as it is generally deductible for income tax purposes (see “—Interest Attributable to Shareholders’ Equity”). Shareholders have a three-year period from the dividend payment date to claim the payment of dividends after which the Company has no liability for such payment.

Shareholders who are not residents of Brazil must register their investment with the Central Bank in order for dividends, sales proceeds or other amounts to be eligible for remittance in foreign currency outside of Brazil. The preferred and common shares underlying our ADSs are held in Brazil by the custodian, Banco Itaú S.A., as agent for the depositary (The Bank of New York), which is the registered owner of such AmBev shares. Payments of cash dividends and distributions, if any, on AmBev common and preferred shares will be made in Brazilian reais to the custodian on behalf of the depositary. The custodian will then convert such proceeds into U.S. dollars and will deliver such U.S. dollars to the depositary for distribution to the holders of AmBev ADSs. In the event that the custodian is unable to immediately convert the dividends in reais into U.S. dollars, holders of the preferred and common AmBev ADSs may be adversely affected by devaluations or other exchange rate fluctuations before such dividends can be converted and remitted. Fluctuations in the exchange rate between the real and the U.S. dollar may also affect the U.S. dollar equivalent of the real price of the preferred and common shares of AmBev in the Brazilian stock exchange.

Interest Attributable to Shareholders’ Equity

Since 1996, Brazilian companies are permitted to distribute earnings to shareholders under the concept of interest attributable to shareholder’s equity. The amounts paid under this concept are generally deductible for AmBev’s income tax purposes and, as of the beginning of 1998, they also became deductible for social contribution purposes. The amount of any such notional “interest” payment to holders of equity securities is limited in respect of any particular year to the minimum of (a) 50% of retained earnings plus any statutory earnings reserve or (b) the company’s shareholder’s equity multiplied by the Taxa de Juros de Longo Prazo (“TJLP”), which is the official interest rate used as reference in long-term loans provided by the BNDES.

Interest attributable to shareholder’s equity is treated exactly as dividends for purposes of income distribution. The only significant difference is that a 15% withholding tax is due by non-exempt shareholders upon receipt of such interest payment, which tax is collected by the company on behalf of its shareholders when the distribution is implemented.

The net amount shareholders receive as interest attributable to shareholder’s equity is deducted from the mandatory dividend owed to shareholders.

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Reserves

General

Brazilian Corporate Law provides that all discretionary allocations of “adjusted income”, including the Unrealized Income Reserve and the Investment Reserve, are subject to approval by shareholders and may be added to capital or distributed as dividends in subsequent years. In the case of Tax Incentive Reserve and the Legal Reserve, they are also subject to shareholders’ approval; however, the use of their respective balances is restricted to being added to capital or the absorption of losses. They cannot be used as a source for income distribution to shareholders.

Legal Reserve

Under Brazilian Corporate Law, corporations are required to maintain a “Legal Reserve” to which they must allocate 5% of their “adjusted income” for each fiscal year until the balance of the reserve equals 20% of their paid-in capital. Accumulated losses, if any, may be charged against the Legal Reserve. Other than that, the Legal Reserve can only be used to increase a company’s capital.

Contingency Reserve

Under the Brazilian Corporate Law, a portion of our “adjusted income” may also be discretionally allocated to a “contingency reserve” for an anticipated loss that is deemed probable in future years. Any amount so allocated in a prior year must be either reversed in the fiscal year in which the loss was anticipated if such loss does not in fact occur or is not charged off in the event that the anticipated loss occurs.

Investment Reserve

Under Brazilian Corporate Law, a portion of a corporation’s “adjusted income” may be allocated for discretionary appropriations for plant expansion and other fixed or working capital investment projects, including share buyback programs. The amounts appropriated in such reserves are based on a capital budget previously presented by management and approved by shareholders.

Pursuant to the Brazilian Corporate Law, the Investment Reserve balance is not allowed to be greater than a company’s capital. In the case such limit is reached, shareholders may vote for the amount in excess to be converted into capital or distributed as dividends.

Unrealized Income Reserve

As of March 1, 2002, under Law No. 10,313, which amended the Brazilian Corporate Law, the amount by which the mandatory dividend exceeds the “realized” portion of net profits for any particular year may be allocated to the unrealized income reserve. The “realized” portion of net profits is the amount by which “adjusted income” exceed the sum of:

(i)

our net positive results, if any, from the equity method of accounting for earnings and losses of our subsidiaries and certain affiliates; and

(ii)

the profits, gains or return obtained on transactions to be completed after the end of the following fiscal year.

Tax Incentive Reserve

Under Brazilian tax laws, a portion of “adjusted income” may also be allocated to a general “tax incentive reserve” in amounts corresponding to reductions in a company’s income tax generated by credits for particular government-approved investments. The reserve is available only in connection with the acquisition of capital stock of companies undertaking specific government-approved projects.

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Voting Rights

Each common share entitles its holder to one vote at AmBev’s shareholders meetings. Holders of preferred shares are not ordinarily entitled to vote at AmBev’s shareholders’ meetings.

Brazilian Corporate Law provides that non-voting preferred shares entitled to receive minimum or fixed dividends acquire full voting rights in the event that a company fails to pay the minimum or fixed dividends to which such shares are entitled for the period established by such company’s bylaws, which may not exceed three consecutive fiscal years. Such voting rights continue until payment of dividends is resumed (or until all dividends due are paid, in the case of preferred shares with the right to receive dividends cumulatively). The same rule applies to preferred shares with restricted voting rights, causing the suspension of the restrictions in place. The existing preferred shares of AmBev will not acquire such voting rights as AmBev preferred shares are not entitled to receive minimum or fixed dividends.

Election of Directors

Each common share of AmBev represents one vote at any shareholders’ meeting in connection with the election of the Board of Directors of AmBev. Minority common shareholders holding at least 15% of voting capital or preferred shareholders holding at least 10% of total capital may each elect one member of the Board of Directors and its alternate member. Additionally, if such shareholders do not achieve such percentage, they can jointly appoint one member of the Board of Directors and its alternate member once they represent, together, at least 10% of total capital. In order to exercise these minority rights, shareholders must prove that they have held the shares for at least the last three months.

If such prerogative is exercised with the adoption of a cumulative voting procedure, the controlling shareholder will always have the right to elect the same number of members appointed by minority shareholders plus one, independently of the number of directors provided in the Company’s bylaws.

Shareholders holding shares representing at least 10% of the shares entitled to vote in the shareholders’ meeting, or such smaller percentage applicable according to a sliding scale determined by the CVM and based on the capital of the company (5% of the voting shares, in the case of AmBev), have the right to request that a cumulative voting procedure be adopted. Under such procedure, each voting share shall have as many votes as there are positions of directors to be filled, and each shareholder may cast all the votes for a single candidate or distribute them among various candidates.

Under the bylaws of AmBev and applicable law, the number of directors may be reduced to a minimum of three. Because the AmBev shareholders’ agreement provides that, as long as the FAHZ maintains a minimum shareholding in AmBev, the FAHZ shall have the right to appoint four members of the Board of Directors, any reduction in the number of such members to fewer than four would be subject to the FAHZ’s approval.

Liquidation

In the event of liquidation, a general shareholders meeting shall determine the form of liquidation and appoint a committee to supervise the process during the liquidation period. A liquidator will be appointed by the Board of Directors.

Upon liquidation, the AmBev preferred shares have an absolute preference over the AmBev common shares. In the event of a liquidation, the assets available for distribution to AmBev’s shareholders would be distributed first to the preferred shareholders in an amount equal to their pro rata share of the legal capital of the Company (AmBev’s current bylaws state that its capital is R$4,742,803,034.47, prior to making any distributions to AmBev’s common shareholders. In the event that the assets to be so distributed are insufficient to fully compensate AmBev’s preferred shareholders, the preferred shareholders would each receive a pro rata amount (based on their pro rata share of the legal capital of the Company excluding the common shares in such calculation) of any available assets.

Although the FAHZ’s net assets are included for the purposes of U.S. GAAP, in the event of liquidation the creditors of AmBev would not have access to the assets of the FAHZ.

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Shareholders’ Meeting

A general meeting is convened by publishing, no later than 15 days prior to the scheduled meeting date and no fewer than three times, a notice in the Diário Oficial do Estado de São Paulo and in a newspaper with general circulation in São Paulo, where AmBev has its registered office. The shareholders of AmBev have previously designated a local newspaper in the city of São Paulo for this purpose. Such notice must contain the agenda for the meeting.

A general meeting may be held if shareholders representing at least one-quarter of the voting shares are present, except in some cases provided for by law, such as for the alteration of a company’s bylaws, which requires the presence of shareholders representing at least two-thirds of the voting shares. If no such quorum is present, eight-day prior notice must be given in the same manner as described above, and a meeting may then be convened without any specific quorum requirement, subject to the minimum quorum and voting requirements for specific matters, as discussed below. Shareholders without voting rights may attend a general meeting and take part in the discussion of matters submitted for consideration.

Except as otherwise provided by law, resolutions of a general meeting are passed by a simple majority vote of the shares present or represented at the meeting, abstentions not being taken into account. Under Brazilian Corporate Law, the approval of shareholders representing at least a majority of the issued and outstanding voting shares is required for the types of action described below, as well as, in the case of items (a) and (b), the approval of shareholders representing a majority of the issued and outstanding preferred shares of the harmed class in a separate special meeting held no later than one year after the resolution is approved;

(a)

creating preferred shares or increasing disproportionately an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by the bylaws;

(b)

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

(c)

reducing the mandatory dividend;

(d)

merging AmBev with another company or consolidating or splitting it;

(e)

participating in a centralized group of companies as defined under Brazilian Corporate Law;

(f)

changing the corporate objectives of AmBev;

(g)

creating founders’ shares; and

(h)

dissolving AmBev or ceasing its liquidation status.

General meetings can be called by the Board of Directors of AmBev. Under the Brazilian Corporate Law, meetings can also be convened by AmBev’s shareholders as follows: (i) by any shareholder if, under certain circumstances set forth in the Brazilian Corporate Law, the directors take more than 60 days to convene a general shareholders’ meeting; (ii) by shareholders holding at least 5% of AmBev’s total capital stock if, after a period of eight days, the directors fail to call a general shareholders’ meeting that has been justifiably requested by such shareholders; and (iii) by shareholders holding at least 5% of either AmBev’s voting capital stock or AmBev’s non-voting capital stock if, after a period of eight days, the directors fail to call a general meeting for the purpose of installing a Conselho Fiscal that has been requested by such shareholders. Additionally, under certain circumstances set forth in the Brazilian Corporate Law, meetings can also be convened by AmBev’s Conselho Fiscal. For further information regarding AmBev’s Conselho Fiscal, see “Directors, Senior Management and Employees—Directors—Board Practices and Corporate Governance”.

A shareholder may be represented at a general meeting by an attorney-in-fact appointed no more than one year before the meeting, who must be a shareholder, a company officer or a lawyer. For a public company such as AmBev, the attorney-in-fact may also be a financial institution.

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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 its own accounts, as well as in those resolutions that may favor such shareholders specifically, or whenever there is a conflicting interest with the company. Mergers between affiliated parties are subject to a special statutory valuation procedure intended to determine whether the exchange ratio is adequate for all the parties involved, without preventing the resolution to be approved for lack of the statutory quorum.

Restrictions on Foreign Investment

There are no restrictions on ownership or voting rights in respect of capital stock of AmBev owned by individuals or legal entities domiciled outside Brazil. For a description of voting rights, see “—Voting Rights”. The right to convert dividend (including interest attributable to shareholders’ equity) payments and proceeds from the sale of preferred or common shares into foreign currency and to remit such amounts outside Brazil, however, is subject to exchange control restrictions and foreign investment legislation. For a description of these exchange control restrictions and foreign investment legislation, see “Key Information—Exchange Rate Information—Exchange Controls”.

Withdrawal Rights

Under Brazilian Corporate Law, a dissenting shareholder has the right to withdraw from AmBev and be reimbursed for the value of the common or preferred shares held, whenever a decision is taken at a shareholders’ meeting by a qualified quorum of shareholders representing at least 50% of the total outstanding voting capital to:

·	create preferred shares or increase disproportionately an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by AmBev’s bylaws;

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

·	reduce the mandatory dividend;

·	merge or consolidate AmBev with another company;

·	participate in a centralized group of companies (as defined by the Brazilian Corporate Law);

·	change the corporate objectives of AmBev;

·	split AmBev, if the new entities resulting from the split have different principal corporate objectives, a lower minimum mandatory dividend or participate in a centralized group of companies;

·	transform AmBev into another corporate type;

·	in case AmBev is transformed into a wholly owned subsidiary of another company; or

·	approve the acquisition of another company, the price of which exceeds the limits set forth in Brazilian Corporate Law.

Furthermore, if a governmental entity acquires control of AmBev through expropriation of shares, shareholders will have the right to withdraw from AmBev and be reimbursed for the value of the shareholders’ equity attributable to their equity interest.

The withdrawal rights lapse 30 days after publication of the minutes of the relevant shareholders’ meeting in the Brazilian press. AmBev would be entitled to reconsider any action triggering withdrawal rights within 10 days following the expiration of such rights if the redemption of shares of dissenting shareholders would jeopardize the financial stability of AmBev. Shares to be purchased by AmBev from the dissenting shareholders exercising withdrawal rights will be valued at an amount equal to the ratable portion attributable to such shares of the

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shareholders’ equity of AmBev as shown on the last balance sheet approved at a general meeting of the shareholders (book value). However, if more than 60 days have elapsed since the date of such balance sheet; dissenting shareholders may require that the value of their shares be calculated on the basis of a new balance sheet. As a general rule, shareholders who acquire their shares after the first notice convening the shareholders’ meeting or after the relevant press release concerning the meeting are published will not be entitled to withdrawal rights.

Preemptive Rights

Each shareholder of AmBev generally has a preemptive right to subscribe for shares in capital increases (including in the issuance of stock purchase warrants or convertible bonds), in proportion to its shareholdings. A minimum period of 30 days following the publication of notice of the capital increase is allowed for the exercise of the right and the right is negotiable. In the event of a capital increase which would maintain or increase the proportion of capital represented by preferred or common shares, holders of preferred ADSs or common ADSs, as the case may be, would have preemptive rights to subscribe only to newly issued preferred shares or common shares, as applicable. In the event of a capital increase which would reduce the proportion of capital represented by preferred shares or common shares, holders of preferred ADSs or common ADSs, as the case may be, would have preemptive rights to subscribe for common shares or preferred shares, as applicable, in proportion to their shareholdings only to the extent necessary to prevent dilution of their interest in AmBev. AmBev’s bylaws provide that if our Board of Directors decides to increase our share capital within the limit of our authorized capital through sale in stock exchanges, public offerings or public tender offers, no preemptive rights apply. In addition, Brazilian law provides that the grant or the exercise of stock options pursuant to certain stock option plans, such as our stock ownership plan, is not subject to preemptive rights.

Form and Transfer

Brazilian law provides that ownership of shares of capital stock of a Brazilian corporation shall generally be evidenced only by a record of ownership maintained by either the corporation or an accredited intermediary, such as a bank, acting as a registrar for the shares. Banco Itaú S.A. currently maintains AmBev’s share ownership records.

Because the preferred shares and common shares of AmBev are in registered book-entry form, a transfer of such preferred and common shares is made under the rules of the Brazilian Corporate Law, which provides that a transfer of shares is effected by an entry made by the registrar for AmBev’s shares in its books, by debiting the share account of the transferor and crediting the share account of the transferee.

Transfers of preferred and common shares by a foreign investor are made in the same way and executed by such investor’s local agent on the investor’s behalf except that, if the original investment was registered with the Central Bank pursuant to the foreign investment regulations, the foreign investor should also seek amendment, if necessary, through its local agent, of the corresponding electronic registration to reflect the new ownership.

The Bovespa operates a central clearing system. A holder of our shares may choose, at its discretion, to participate in this system, and all shares elected to be put into the system will be deposited in custody with the stock exchange (through a Brazilian institution that is duly authorized to operate by the Central Bank and maintains a clearing account with the stock exchange). The fact that these shares are subject to custody with the stock exchange will be reflected in our registry of shareholders. Each participating shareholder will, in turn, be registered in our register of beneficial shareholders maintained by the stock exchange and will be treated in the same way as registered shareholders.

Disclosure of Principal Shareholders

Under Brazilian law, shareholders owning more than ten percent of a company’s voting shares, such as the holders of AmBev’s common shares, must publicly disclose their shareholder ownership.

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Other Significant Provisions of Brazilian Corporate Law

Brazilian Corporate Law also requires the following:

·	upon a sale of control, the acquiror is required to launch a tender offer to purchase all minority voting shares at a price equal to at least 80% of the price per share paid for the controlling stake;

·	if provided for in the bylaws, disputes among our shareholders will be subject to arbitration. Our bylaws currently do not provide for arbitration;

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

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

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

·	members of our Board of Directors elected by the non-controlling shareholders have the right to veto the choice of the independent accountant by the controlling shareholder;

our controlling shareholders, the shareholders that elect members to our Board of Directors and to the Conselho Fiscal, the members of our Board of Directors and Conselho Fiscal and our executive officers are required to disclose any purchase or sale of our shares to the CVM and to the São Paulo Stock Exchange; and

·	the chairman of any shareholders’ or Board of Directors’ meeting shall disregard any vote that is rendered against provisions of any shareholders’ agreement if that shareholders’ agreement has been duly filed with us. The AmBev Shareholders’ Agreement has been duly filed with us.

MATERIAL CONTRACTS

The following is a summary of the material contracts to which we are a party.

Shareholders’ Agreement

The agreement between the shareholders of Brahma and Antarctica to form AmBev, including the amendments inserted in connection with the transaction between, among others, AmBev and InBev, and the other amendments is discussed in “Major Shareholders Related and Party Transactions—Major Shareholders—AmBev Shareholders’ Agreement.”

Governance Agreement

The agreement relating to the governance of AmBev entered into between FAHZ, InBev Brasil, ECAP, AmBev and BAC pursuant to the stock purchase agreement between AmBev and BAC is discussed in “Major Shareholders and Related Party Transactions—Major Shareholders—AmBev Share Transfer Agreement and AmBev Governance Agreement”.

Acquisitions, Dispositions and Joint Ventures

We have discussed the details of some material acquisitions, and agreements related thereto, in “Information on the Company—InBev-AmBev Transactions” and “Information on the Company—Acquisition of Quinsa”. In addition, we are a party to the following material acquisitions, dispositions and joint-ventures:

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Pepsi

In 1997, we acquired Pepsi-Cola Engarrafadora Ltda. and PCE Bebidas Ltda., PepsiCo bottlers in southern and southeastern Brazil, and at the same time acquired the exclusive rights to produce, sell and distribute Pepsi soft drink products in northeastern Brazil. In 1999, we obtained the exclusive rights to produce, sell and distribute Pepsi soft drink products throughout Brazil. On October 9, 2000, following the combination, we entered into a new franchise agreement with PepsiCo which terminated the Brahma franchise agreement and granted us sole bottler and distributor rights for Pepsi soft drink products in Brazil. On January 1, 2002, we expanded our partnership with PepsiCo to include the production, sale and distribution of Gatorade. The Gatorade agreement has been submitted for CADE's review. CADE has approved the transaction with certain restrictions, including the sale of the trademark Marathon. See “Consolidated Financial Statements and Other Financial Information—Legal Proceedings—Joint Ventures and Alliances”. Our PepsiCo franchise agreement expires in 2017, and, thereafter, will be automatically renewed for additional ten-year terms absent two years’ prior notice by either party of its intent not to renew the contract following the expiration of the initial or any subsequent term.

ETCO

On December 30, 2002, AmBev, Souza Cruz, Coca-Cola, and Sindicato Nacional dos Distribuidores de Combustíveis (“Sindicom”), among other Brazilian non-governmental entities, formed the Brazilian Institute for Ethical Competition (Instituto Brasileiro de Ética Concorrencial - “ETCO”). The main purpose of this non-profit organization is to fight tax evasion and illegal commerce. ETCO focuses on informing the public about unfair market practices, supporting governmental and non-governmental entities and proposing regulation regarding this subject. AmBev has also engaged in helping federal and state governments to fight tax evasion. The main initiative taken by AmBev, and supported by ETCO, was the request to have the government require the mandatory installation of flow meters in all Brazilian beer and soft drink factories.

In May 2004, the Brazilian government officially released a set of technical specifications required for the regulation of flow meters installed in brewing plants. This announcement enables companies interested in installing

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flow meters to request official certification. Once the government officially certifies the first supplier, the brewers operating in Brazil will have up to six months to install flow meters in all production lines. In July 2004, AmBev’s Jaguariúna plant was the first plant to receive flow meter certification, thus triggering the obligation of all Brazilian brewers to install flow meters within the following six months. We believe that all Brazilian brewers complied with such installation period, and we estimate that the certification procedure by the Brazilian government will be concluded in the last half of 2005. All of AmBev’s flow meters have been duly tested and we expect that the certification procedure with respect to our production lines will be finished by July 2005.

Industrias Del Atlántico

AmBev completed the construction of a brewery in Guatemala in partnership with CabCorp, the main Pepsi bottler in Central America. Operations began in August 2003. Equipment for the Guatemala plant was transferred from our other facilities in Brazil due to the overcapacity resulting from the Brahma and Antarctica merger. On October 24, 2002, AmBev and CabCorp entered into a joint-venture agreement, setting forth rights and obligations for the creation of a strategic regional alliance to collaborate in, among other things, the production, importation, distribution, marketing and sale of AmBev’s products, especially beer, in Guatemala and other Central American countries. On August 12, 2003, Monthiers S.A. (“Monthiers”), an indirect subsidiary of AmBev, subscribed for 573,092 shares of common stock of Industrias Del Atlántico S.A. (“IDA”), a Guatemalan company formerly controlled by CabCorp, representing 50% plus one share of the outstanding issued and outstanding common stock of IDA. As consideration, Monthier contributed to IDA U.S.$ 7.2 million in debt of IDA relating to credits that CBB held against IDA in connection with the import by IDA of certain goods and equipment from CBB that had been transferred to Monthier. IDA produces beer in Guatemala under the trade name of Cerveceria Rio.

Compañia Cervecera AmBev Peru S.A.C.

On February 19, 2003, we announced our decision to enter into the Peruvian beer market through the construction of a production facility and a distribution network. Our new plant, located in the Lima metropolitan region, was completed in May, 2005. The new plant will serve the local market and export to certain neighboring countries, such as Ecuador.

On October 31, 2003, through our subsidiary Compañia Cervecera AmBev Peru S.A.C (“AmBev Peru”), AmBev acquired certain assets of Embotelladora Rivera in Peru for approximately R$86.7 million. These assets include two soft drinks plants, which combined have an estimated production capacity of 6.3 million hectoliters per year, and other sales and distribution assets in Lima. Contemporaneously with this acquisition, AmBev became PepsiCo’s exclusive bottler for Northern Peru and Lima. Embotteladora Rivera will sell and distribute our beer and soft drinks products in Northern Peru.

Cerveceria Suramericana

In December 2003, we acquired 80% of the capital of Cerveceria Suramericana, currently AmBev Ecuador, the second largest brewer in Ecuador, for approximately R$105.6 million. Through its Biela brand, AmBev Ecuador currently holds approximately 7.0% of the Ecuadorian beer market, according to our estimates. AmBev’s plan is to leverage AmBev Ecuador's operations to launch a brand of its own in Ecuador.

Embodom

On February 12, 2004, we announced an alliance with Embodom, a Pepsi bottler in the Dominican Republic, in order to jointly produce and market beer and soft drinks in the Dominican Republic. AmBev agreed to pay R$204.9 million for 51% of Embodom’s total capital. In addition, AmBev expects to build a beer plant in the region of Santo Domingo, which will be contributed to Embodom together with U.S.$ 10 million in exchange for additional shares that will raise AmBev’s stake in Embodom to 66%.

Brazilian Soccer Team Sponsorship Agreement

On May 24, 2001, we signed an agreement with the Brazilian Soccer Federation, or the CBF, for sponsorship of the Brazilian national soccer team. We chose Guaraná Antarctica as the soft drink brand to initiate our sponsorship campaign. The Guaraná Antarctica brand logo is displayed on the Brazilian national soccer team training shirt. According to the sponsorship agreement, we may also run other promotions, use illustrated cans, distribute points-of-sale merchandising materials and implement advertising campaigns, which may be extended to our entire beverage portfolio. We will pay the CBF a minimum of U.S.$10 million annually for 18 years. The amount payable by us may increase by up to double the minimum amount based on bonus format on the performance of our proprietary soft drink market share.

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The Antitrust Performance Agreement

We are currently subject to one antitrust performance agreement in effect. See “Financial Information—Consolidated Financial Statements and Other Financial Information—Legal Proceedings”. This agreement was signed with CADE in Brazil and relates to the Brahma and Antarctica combination.

The Conditional Approval of our deal with Quinsa

The completion of our deal with Quinsa required the approval of the CNDC, the Argentinean antitrust agency. The approval was obtained in January 2003 subject to the accomplishment of some specific conditions. For further information on this matter see “—Information on the Company—Acquisition of Interest in Quinsa”.

Debt Issuances

In December 2001, CBB issued U.S.$500 million 10½% notes due December 2011 in the U.S. securities markets, fully guaranteed by AmBev. This offering significantly increased the average maturity of AmBev outstanding debt. The transaction was priced at 98.56% of the nominal principal amount with a coupon rate of 10.5%. On October 4, 2002, we consummated an SEC registered exchange offer. These notes contain certain covenants and events of default which, if triggered, may cause accelerated amortization.

In September 2003, CBB issued U.S.$500 million 8.75% notes due September 2013 in the U.S. securities markets, fully guaranteed by AmBev. The transaction was priced at 99.67% of the nominal principal amount with a coupon rate of 8.75%. We consummated an SEC registered exchange offer on September 15, 2004. These notes contain certain covenants and events of default which, if triggered, may cause accelerated amortization.

With the merger of CBB into AmBev in May 31, 2005, AmBev succeeded in all rights and obligations of CBB under the 2011 notes and the 2013 notes.

License Agreements

We have a number of important license agreements, including (i) a cross-license agreement with InBev that allows us to exclusively produce, distribute and market the Stella Artois and Beck’s brands in most of Latin America, and allows InBev to exclusively produce, distribute and market the Brahma brand in Europe, Asia, Africa Cuba and the United States, in addition to a license agreement among us and InBev and according to which we may distribute Stella Artois branded beer in Canada; (ii) several license agreements with PepsiCo that grants us the exclusive right to bottle, sell and distribute certain brands of PepsiCo’s portfolio of soft drinks in certain Latin American countries, including Brazil; and (iii) long term licensing agreements with Anheuser-Busch that grant us the exclusive right to manufacture, package, sell, distribute and market some of Anheuser-Busch’s brands, including the Budweiser and Bud Light brands, in Canada. See “Information on the Company - Licenses”. See also, for the AmBev-InBev cross-license agreement, “Major Shareholders and Related Party Transactions - Related Party Transactions”, and for the license agreements with PepsiCo, “–Material Contracts – Acquisitions, Dispositions and Joint Ventures – Pepsi”.

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EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS

There are no restrictions on ownership of our American Depositary Shares or capital stock by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of preferred shares or common shares into foreign currency and to remit such amounts outside Brazil is subject to restrictions under foreign investment legislation which generally requires, among other things, that the relevant investment be registered with the Central Bank. These restrictions on the remittance of foreign capital abroad could hinder or prevent the custodian for the preferred shares or common shares represented by American Depositary Shares, or holders who have exchanged American Depositary Shares for preferred shares or common shares, from converting dividends, distributions or the proceeds from any sale of preferred shares or common shares, as the case may be, into U.S. dollars and remitting such U.S. dollars abroad. Delays in, or refusal to grant any required government approval for conversions of Brazilian currency payments and remittances abroad of amounts owed to holders of American Depositary Shares could adversely affect holders of American Depositary Receipts.

Under Resolution No. 2,689, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that certain requirements are fulfilled. In accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities, domiciled or headquartered abroad.

Under Resolution No. 2,689, a foreign investor must:

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

·	appoint an authorized custodian in Brazil for its investments,

·	complete the appropriate foreign investor registration form,

·	register as a foreign investor with the CVM, and

·	register its foreign investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution No. 2,689 must be registered or maintained in deposit accounts or under the custody of an entity duly licensed by the Central Bank the CVM. In addition securities trading is restricted to transactions carried out on stock exchanges or through organized over-the-counter markets licensed by the CVM, except for subscription, share dividends, conversion of debentures into shares, securities indexes, purchase and sale of investment funds quotas and, if permitted by the CVM, going private transactions, canceling or suspension of trading. Moreover, the offshore transfer or assignment of the securities or other financial assets held by foreign investors pursuant to Resolution No. 2,689 are prohibited, except for transfers resulting from a corporate reorganization, or occurring upon the death of an investor by operation of law or will.

Resolution No. 1,927 of the National Monetary Council, which is the restated and amended Annex V to Resolution No. 1,289, which we call the Annex V Regulations, provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers. It provides that the proceeds from the sale of American Depositary Shares by holders of American Depositary Receipts outside Brazil are free of Brazilian foreign investment controls and holders of American Depositary Shares who are not resident in a tax-haven jurisdiction, as defined below (see “—Taxation”) will be entitled to favorable tax treatment. See “—Brazilian Tax Considerations” for more information on the Brazilian tax implications on the acquisition, ownership and disposition of our securities.

An electronic registration has been issued by the custodian in the name of The Bank of New York, the depositary, with respect to the American Depositary Shares. Pursuant to this electronic registration, the custodian and the depositary are able to convert dividends and other distributions with respect to the preferred shares or common shares represented by American Depositary Shares into foreign currency and to remit the proceeds outside Brazil. If a holder exchanges American Depositary Shares for preferred shares or common shares, the holder may continue to rely on the custodian’s electronic registration for only five business days after the exchange. After that,

128

Companhia de Bebidas

das Américas - AmBev

Consolidated Financial Statements at

December 31, 2004 and 2003, and for

Each of the Three Years Ended December 31, 2004 and Reports of Independent Registered Public

Accounting Firms

Deloitte Touche Tohmatsu Auditores Independentes

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Companhia de Bebidas das Américas - AmBev

São Paulo - SP- Brazil

1. We have audited the accompanying consolidated balance sheet of Companhia de Bebidas das Américas - AmBev and subsidiaries (the “Company”) as of December 31, 2004, and the related consolidated statements of operations, changes in stockholders’ equity, changes in financial position and cash flow for the year then ended, all expressed in Brazilian reais. These financial statements are the responsibility of Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements of Labatt Brewing Company Limited (“Labatt”) (a wholly-owned subsidiary of AmBev), which statements reflect total assets constituting 8.59 percent of consolidated total assets as of December 31, 2004, total revenues constituting 13 percent of consolidated total revenues and net income constituting 4.65% of consolidated net income of the Company for the year then ended. Such financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for such subsidiary, is based solely on the report of such other auditors.

2. We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinion.

3. In our opinion, based on our audit and the report of other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Companhia de Bebidas das Américas - AmBev and subsidiaries as of December 31, 2004, and the results of its operations, changes in its stockholders’ equity, its financial position and its cash flow for the year then ended in conformity with accounting practices adopted in Brazil.

4. Accounting practices adopted in Brazil vary in certain significant respects from accounting principles generally accepted in the United States of America. The Company has presented the nature and effect of such differences in Note 24 to the consolidated financial statements.

DELOITTE TOUCHE TOHMATSU

Auditores Independentes

/s/ DELOITTE TOUCHE TOHMATSU

March 13, 2005, except for Note 24 as to which the date is June 27, 2005

F-2

Deloitte Touche Tohmatsu

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

Labatt Brewing Company Limited

Toronto - Canada

We have audited the accompanying balance sheet of Labatt Brewing Company Limited (the “Company”) as of December 31, 2004, and the related statements of income and changes in stockholder’s equity for the period from August 28 to December 31, 2004, all expressed in Canadian dollars. These financial statements are the responsibility of Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Labatt Brewing Company Limited as of December 31, 2004, and the results of its operations, and changes in its stockholders’ equity for the period from August 28, 2004 to December 31, 2004 in conformity with accounting practices adopted in Brazil.

Accounting practices adopted in Brazil vary in certain significant respects from accounting principles generally accepted in the United States of America (U.S. GAAP). The Company has presented the nature and effect of such differences in Note 15 to the financial.

Chartered Accountants

Toronto, Canada

/s/ DELOITTE TOUCHE TOHMATSU

February 18, 2005, except as to Note 16 which is as of March 31, 2005

F-3

[PWC LOGO]


PricewaterhouseCoopers Av. Francisco Matarazzo, 1400 Torre Torino Caixa Postal 61005 05001-903 São Paulo, SP- Brasil Telefone (11) 3674-2000 www. pwc.com/br

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Companhia de Bebidas das Américas - AmBev

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in shareholders’ equity, of changes in financial position and of cash flows present fairly, in all material respects, the financial position of Companhia de Bebidas das Américas - AmBev and its subsidiaries at December 31, 2003 and the results of their operations and their changes in financial position for each of the two years in the period ended December 31, 2003, in conformity with accounting practices adopted in Brazil. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Brazil and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Accounting practices adopted in Brazil vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 24.

/s/ PricewaterhouseCoopers	São Paulo, February 12, 2004, except as to
Auditores Independentes	Note 23, as to which the date is March 1,2 004

F-4

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003
(Expressed in millions of Brazilian reais)


ASSETS	2004	2003	LIABILITIES AND SHAREHOLDERS' EQUITY	2004		2003

CURRENT ASSETS			CURRENT LIABILITIES
Cash and cash equivalents	1,290.9	1,196.1	Suppliers	1,047.7		800.3
Short-term investments	214.5	1,338.1	Payroll and related charges	251.9		94.1
Unrealized gain on derivatives	-	258.7	Loans and financings	3,443.1		1,976.1
Trade accounts receivable, net	1,360.1	725.7	Taxes on income payable	650.6		543.2
Taxes recoverable	654.3	771.4	Other taxes payable	983.3		758.3
Inventories	1,380.9	954.6	Unrealized loss on derivatives	409.1		11.7
Other	478.9	255.9	Dividends payable	998.9		293.9
Total current assets	5,379.6	5,500.5	Accounts payable to related parties	1.2		0.8
			Other	985.9		241.6
NON-CURRENT ASSETS			Total current liabilities	8,771.7		4,720.0
Deferred income tax	2,216.6	1,831.8
Compulsory judicial deposits and tax incentives	419.1	365.9	LONG-TERM LIABILITIES
Assets held for sale	113.9	144.1	Loans and financings	4,367.6		4,004.3
Advances to employees for purchase of shares	175.2	234.7	Accrued liability for contingencies	1,471.0		1,232.9
Other	681.7	616.1	Sales tax deferrals	275.7		235.2
Total non-current assets	3,606.5	3,192.6	Other	936.3		133.1
			Total long term liabilities	7,050.6		5,605.5
PERMANENT ASSETS
Investments:			MINORITY INTEREST	198.3		196.4
Goodwill and negative goodwill	18,170.4	1,687.3
Other	34.2	24.1	SHAREHOLDERS' EQUITY
Property, plant and equipment	5,531.7	4,166.3	Subscribed and paid-up capital	4,742.8		3,124.1
Deferred charges	294.1	259.3	Capital reserve	12,149.3		16.6
Total permanent assets	24,030.4	6,137.0	Revenue reserves	433.7		1,506.0
			Treasury shares	(329.9	)	(338.5	)
			Total shareholders' equity	16,995.9		4,308.2

TOTAL	33,016.5	14,830.1	TOTAL	33,016.5		14,830.1

The accompanying notes are an integral part of the consolidated financial statements.

F-5

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(Expressed in millions of Brazilian reais)

	2004		2003		2002

GROSS REVENUES	23,297.6		17,143.5		14,279.9
Value-added and other taxes, discounts and returns	(11,290.8	)	(8,459.7	)	(6,954.6	)

NET SALES	12,006.8		8,683.8		7,325.3
Cost of sales	(4,780.5	)	(4,044.2	)	(3,341.7	)

GROSS PROFIT	7,226.3		4,639.6		3,983.6

OPERATING INCOME (EXPENSES)
Selling and marketing	(1,582.8	)	(847.1	)	(687.2	)
Direct distribution	(868.9	)	(648.6	)	(537.4	)
General and administrative	(617.9	)	(417.9	)	(373.5	)
Depreciation and amortization of deferred charges	(541.5	)	(420.0	)	(334.6	)
Provision for contingencies and other	(260.2	)	(187.9	)	(123.7	)
Financial income (expense), net	(776.4	)	93.1		(747.0	)
Other operating income (expense), net	(420.9	)	(240.1	)	199.4
Equity in results of affiliates	5.6		(6.2	)	-
	(5,063.0	)	(2,674.7	)	(2,604.0	)

OPERATING INCOME	2,163.3		1,964.9		1,379.6
Non-operating expenses, net	(333.9	)	(100.7	)	(72.2	)

INCOME BEFORE INCOME TAXES, PROFIT SHARING AND
CONTRIBUTIONS AND MINORITY INTEREST	1,829.4		1,864.2		1,307.4

Income tax and social contribution benefit (expense)
Current	(740.6	)	(624.4	)	(123.4	)
Deferred	228.8		198.3		404.0

INCOME BEFORE PROFIT SHARING, CONTRIBUTIONS
AND MINORITY INTEREST	1,317.6		1,438.1		1,588.0
Employee and management profit sharing	(152.4	)	(23.6	)	(112.3	)
Contributions to FAHZ					(12.8	)

INCOME BEFORE MINORITY INTEREST	1,165.2		1,414.5		1,462.9
Minority interest	(3.7	)	(2.9	)	47.4

NET INCOME	1,161.5		1,411.6		1,510.3

NUMBER OF SHARES OUTSTANDING AT YEAR-END,
EXCLUDING TREASURY SHARES (THOUSANDS)	54,627,407		37,912,634		38,245,915

EARNINGS PER THOUSAND SHARES
AT YEAR END (WHOLE REAIS) - R$	21.26		37.23		20.31

The accompanying notes are an integral part of the consolidated financial statements.

F-6

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 (Expressed in millions of Brazilian reais)


			Revenue reserves
	Subscribed				Future						Accumulated
	and paid-up	Capital			capital		Statutory		Treasury		retained
	capital	reserve		Legal	increase		investments		shares		earnings		Total

BALANCES AT DECEMBER 31, 2001	2,944.2	4.9		62.7	798.4		52.6		(499.4	)			3,363.4

Employee stock ownership plan purchases	102.0												102.0
Repurchase of own shares for treasury									(355.7	)			(355.7	)
Release from investments reserve							(52.6	)			52.6		-
Cancellation of treasury shares					(674.5	)			674.5				-
Gain on transfer of treasury shares to IFC		11.7											11.7
Net income											1,510.3		1,510.3
Appropriation of net income													-
Legal reserve				75.4							(75.4	)	-
Interim dividends											(160.8	)	(160.8	)
Supplemental dividends											(341.3	)	(341.3	)
Revenue reserve					910.0		75.4				(985.4	)	-

BALANCES AT DECEMBER 31, 2002	3,046.2	16.6		138.1	1,033.9		75.4		(180.6	)	-		4,129.6

Employee stock ownership plan purchases	77.4												77.4
Subscription of stock warrants	0.5												0.5
Repurchase of own shares for treasury									(312.5	)			(312.5	)
Cancellation of treasury shares					(154.6	)			154.6				-
Transfer of reserves					(853.2	)	853.2						-
Net income											1,411.6		1,411.6
Appropriation of net income
Legal reserve				70.6							(70.6	)	-
Interim dividends											(717.7	)	(717.7	)
Supplemental dividends											(280.7	)	(280.7	)
Revenue reserve							342.6				(342.6	)	-

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

(Expressed in millions of Brazilian reais) (Continuation)


BALANCES AT DECEMBER 31, 2003	3,124.1	16.6		208.7	26.1		1,271.2		(338.5	)	-		4,308.2

Employee stock ownership plan purchases	18.0												18.0
Capital increase upon incorporation of Labatt	1,600.7	12,840.3											14,441.0
Repurchase of own shares for treasury		(710.1	)						(899.5	)			(1,609.6	)
Premium on stock option sold		2.5											2.5
Cancellation of treasury shares					(26.1	)	(882.0	)	908.1				-
Transfer of reserves													-
Net income											1,161.5		1,161.5
Appropriation of net income							(164.2	)			164.2		-
Legal reserve													-
Interim dividends											(344.4	)	(344.4	)
Supplemental dividends											(982.7	)	(982.7	)
Revenue reserve													-
Dividends and interest on own capital prescribed											1.4		1.4

BALANCES AT DECEMBER 31, 2004	4,742.8	12,149.3		208.7	-		225.0		(329.9	)	-		16,995.9

The accompanying notes are an integral part of the consolidated financial statements.

F-7

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV

STATEMENTS OF CHANGES IN FINANCIAL POSITION FOR THE YEARS
ENDED DECEMBER 31, 2004, 2003 AND 2002
(Expressed in millions of Brazilian reais)

	2004			2003			2002
FINANCIAL RESOURCES WERE PROVIDED BY
From operations:
Net income for the year		1,161.5			1,411.6			1,510.3
Items not affecting working capital:
Equity in results of affiliates		(5.6	)		6.2
Deferred income tax and social contribution		(228.8	)		(198.3	)		(404.0	)
Amortization of goodwill and negative goodwill, net		803.6			252.4			90.5
Gain on the settlement of tax incentives		(21.9	)		(16.6	)		-
Depreciation of property, plant and equipment and
amortization of deferred charges		922.2			766.3			659.5
Accrued liability for contingencies and other		260.1			187.9			123.7
Interest expense on accrued liability for contingencies		49.8			59.8			32.9
Financial charges on long-term loans, net		278.0			(496.6	)		867.3
Foreign exchange loss (gain) on subsidiaries abroad		(213.8	)		367.3			(155.8	)
Loss arising from changes in holdings in subsidiaries		80.7			33.3			-
Minority interest		3.8			2.9			(47.4	)
Book value of disposals of property, plant and equipment and investments		168.7			73.8			159.8
Interest and charges on advances to employees for purchase of shares		(41.9	)		(47.7	)		(88.1	)
Provision for losses on permanent assets		(6.7	)		58.7			97.5
Total from operations		3,209.7			2,461.0			2,846.2

From shareholders:
Employee stock ownership plan purchases		18.0			77.4			102.0
Subscription of stock warrants		-			0.5			-
Premium on the placement of options to repurchase own shares		2.6
Changes in the capital of minority shareholders		-			4.8			-
Advances to employees for the purchase of shares		101.2			91.3			-

From third parties:
Increase in long-term liabilities and decrease in non-current assets
Loans and financings		-			295.7			162.6
Sales tax deferrals		167.9			57.3			-
Affiliated companies		-						35.1
Other accounts receivable		-			44.1			-
Others		17.3			-			-
Total working capital funds provided		3,516.7			3,032.1			3,145.9
The accompanying notes are an integral part of the consolidated financial statements.

F-8

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV

STATEMENTS OF CHANGES IN FINANCIAL POSITION FOR THE YEARS
ENDED DECEMBER 31, 2004, 2003 AND 2002
(Expressed in millions of Brazilian reais)	(Continuation	)

	2004			2003			2002
FINANCIAL RESOURCES WERE USED FOR
Increase in non-current assets and decrease in long-term liabilities:
Restricted deposits for legal proceedings		52.7			84.0			51.3
Advances to employees for purchase of shares		-			-			21.4
Receivables from companies consolidated proportionally		5.9			14.5			-
Taxes recoverable		20.7			11.5			6.0
Other assets		52.6			9.7			4.3
Accrued liability for contingencies		87.0			123.8			32.6
Other liabilities		19.3			98.3			28.3
Permanent assets:
Investments		345.9			2,100.6			107.7
Property, plant and equipment		1,267.2			862.2			544.7
Deferred charges		101.9			91.2			45.7
Repurchase of own shares for treasury		1,609.6			311.9			337.1
Increase of minority interest in subsidiaries		114.8			277.6
Proposed and declared dividends		1,394.1			1,004.0			502.1
Change in the capital of minority shareholders		31.9			-			-
Financings		2,585.7			-			-
Total working capital funds used		7,689.3			4,989.3			1,681.2

INCREASE (DECREASE) IN WORKING CAPITAL		(4,172.6	)		(1,957.2	)		1,464.7

REPRESENTED BY:
Current assets:
At end of year		5,379.6			5,500.5			5,571.4
At beginning of year		5,500.5			5,571.4			4,685.0
		120.9			(70.9	)		886.4
Current liabilities
At end of year		8,771.7			4,720.0			2,833.7
At beginning of year		4,720.0			2,833.7			3,412.0
		(4,051.7	)		1,886.3			(578.3	)

INCREASE (DECREASE) IN WORKING CAPITAL		4,172.6			(1,957.2	)		1,464.7

The accompanying notes are an integral part of the consolidated financial statements.

F-9

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 2004, 2003 AND 2002
(Expressed in millions of Brazilian reais

	2004			2003			2002

CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the year		1,161.5			1,411.6			1,510.3
Expenses (income) not affecting cash and cash equivalents:
Deferred income tax and social contribution		(228.8	)		(198.3	)		(404.0	)
Amortization of goodwill and negative goodwill, net		803.6			252.4			90.5
Depreciation of property, plant and equipment and amortization
of deferred charges		922.2			766.3			659.5
Accrued liabilities for contingencies and other		260.2			187.9			123.7
Interest expense on accrued liability for contingencies		49.8			59.8			32.9
Gain on the settlement of tax incentives		(21.9	)		(16.6	)		-
Provision for losses on inventories and permanent assets		(6.4	)		64.6			113.4
Provision for reestructuring		182.7			-			-
Unrealized losses under derivatives		407.3			46.9			-
Interest and charges on advances to employees for purchase of shares		(41.9	)		(47.7	)		(88.1	)
Interest and charges on taxes and contributions		(5.1	)		(43.5	)		(21.4	)
Interest and foreign exchange losses (gains) on loans, net		329.2			(40.1	)		2,120.4
Unrealized exchange rate variation and gains on financial assets		37.1			183.3			(840.0	)
Loss on disposal of property, plant and equipment, net		116.3			41.3			63.3
Loss arising from changes in holdings in subsidiaries		80.7			33.3
Foreign exchange gains on subsidiaries abroad not affecting cash, net		(355.6	)		203.5			(108.7	)
Minority interest		3.7			2.9			(47.4	)
Equity in results of affiliates		(5.6	)		6.2			-
Decrease (increase) in assets:
Trade accounts receivable, net		(141.4	)		(12.8	)		107.9
Taxes recoverable		(241.8	)		(253.2	)		(35.6	)
Inventories		(199.1	)		(48.6	)		37.8
Restricted deposits for legal proceedings		(50.7	)		(102.9	)		(51.5	)
Other		(105.9	)		(167.2	)		25.9
Increase (decrease) in liabilities:
Suppliers		110.0			(14.1	)		260.6
Payroll and related charges		188.5			(86.4	)		50.6
Taxes on income payable		175.3			491.3			(195.3	)
Accrued liability for contingencies		(88.0	)		(104.8	)		(34.6	)
Other		82.7			(87.5	)		224.8
Net cash provided by operating activities		3,418.6			2,527.6			3,595.0

CASH FLOWS FROM INVESTING ACTIVITIES
Short-term investments (maturity over 90 days)		1,322.2			423.1			(808.7	)
Investments in affiliates and subsidiaries, net of cash acquired		(170.2	)		(1,745.3	)		(75.5	)
Securities and collateral		27.2			228.6			(249.3	)
Acquisitions of property, plant and equipment		(1,273.7	)		(862.2	)		(522.4	)
Proceeds from disposal of property, plant and equipment		52.3			32.4			98.3
Expenditures on deferred charges		(101.9	)		(91.3	)		(45.5	)
Repurchase of own Shares by affiliated companies		(179.2	)		-			-
Pay-off of investments		0.5			-			-
Cash in the subsidiary’s initial consolidation		433.6			-			-
Net cash provided by (used in) investing activities		110.8			(2,014.7	)		(1,603.1	)
The accompanying notes are an integral part of the consolidated financial statements.

F-10

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 2004, 2003, AND 2002
(Expressed in millions of Brazilian reais)	(Continuation	)

	2004			2003			2002

CASH FLOWS FROM FINANCING ACTIVITIES
Loans and financings:
Issuances	6,152.1			3,359.2			620.1
Repayments, including interest		(7,466.5	)		(2,510.1	)		(2,925.3	)
Capital subscriptions		15.6			4.6			29.0
Repurchase of own shares for treasury		(1,609.6	)		(308.5	)		(337.1	)
Dividends paid		(602.9	)		(1,026.9	)		(335.6	)
Advances to employees for purchase of shares, net of repayments		103.2			130.2			26.2
Premium of repurchase of shares		2.6			-			-
Other		(28.4	)		4.8			10.5
Net cash provided by (used in) financing activities		(3,433.9	)		(346.7	)		(2,912.2	)

EFFECTS OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(0.7	)		(101.7	)		639.1

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		94.8			64.5			(281.2	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		1,196.1			1,131.6			1,412.8

CASH AND CASH EQUIVALENTS AT END OF YEAR		1,290.9			1,196.1			1,131.6


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest, net of capitalized interest		472.2			255.1			559.5
Taxes on income		639.5			251.3			22.4

NONCASH INVESTING AND FINANCING TRANSACTIONS

Issuance of shares related to the Labatt transaction,		16,683.3			-			-
Assets contributed in acquisition of Quinsa		-			300.7			-

The accompanying notes are an integral part of the consolidated financial statements.

F-11

COMPANHIA DE BEBIDAS DAS AMÉRICAS - AMBEV

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AT DECEMBER 31, 2004 AND 2003

(Amounts in millions of Brazilian reais - R$, unless otherwise indicated; Amounts in Canadian

dollars are in millions of Canadian dollars)

1. OUR GROUP AND OPERATIONS

Companhia de Bebidas das Américas (the “Company”, “AmBev” or “we”) is a publicly-held company incorporated under the laws of the Federative Republic of Brazil, headquartered in São Paulo, Brazil. AmBev and its subsidiaries produce, distribute and sell beer, draft beer, soft drinks, malt and other non-carbonated beverages, such as isotonic sport drinks, iced tea and water, in Brazil and elsewhere in the Americas.

AmBev has a franchise agreement with PepsiCo International, Inc. (“PepsiCo”) to bottle, sell and distribute Pepsi products in Brazil and in other Latin American countries, including Lipton Ice Tea and Gatorade, the isotonic sports drink. We also have an agreement with PepsiCo for bottling, sale and distribution of the “Guaraná Antarctica” internationally.

AmBev’s shares are traded on the São Paulo Stock Exchange - BOVESPA, and the New York Stock Exchange - NYSE, as American Depositary Receipts (ADRs).

(i) Agreement with Inbev

On August 27, 2004, at an Extraordinary Shareholders’ Meeting, the Company’s shareholders approved the closing of the transaction with InBev S.A. (“InBev”, formerly Interbrew), announced on March 3, 2004, which involved:

- The incorporation of Labatt Brewing Canada Holding Limited, a company headquartered in the Bahamas and that indirectly held a 100% interest in Labatt Canada, by AmBev in exchange for 19,264,363,201 newly issued shares of AmBev, comprised of 7,866,181,882 common shares and 11,398,181,319 preferred shares, representing approximately 33.5% and 34.4% of AmBev’s total voting capital, respectively, as of August 27, 2004.

- On this same date, the totality of the shares of Tinsel Investment S.A. (“Tinsel”), a holding company, which indirectly controlled AmBev, were contributed to InBev. InBev issued 141.712 million new shares to BRC S.à.r.l (“BRC”), in exchange for the totality of Tinsel’s capital stock. Tinsel, through InBev Holding Brasil S.A. (formerly Braco Investimentos S.A. (“InBev Brasil”)) and Empresa de Administração e Participações S.A. - ECAP (“ECAP”), indirectly holds 15.1% of AmBev’s total capital and 35.1% of AmBev’s voting capital, on December 31, 2004.

- BRC contributed all the InBev shares received in the transaction mentioned above to Stichting Interbrew (“Stichting”), InBev’s controlling company, in exchange for 141,712,000 Stichting certificates. The 321,712,000 shares of InBev, currently pertaining to Stichting, represent approximately 56% of all InBev’s issued and outstanding shares, and are subject to a shareholders’ agreement executed between Stichting and its partners (BRC, Eugénie Patri Sébastien (“EPS”), and an affiliated company of EPS, Rayvax Société d'Investissements S.A.), which deals, amongst other things, with certain aspects related to Stichting and InBev’s governance and management and to the transfer of holding in Stichting and InBev.

F-12

As mentioned in Note 23, continuing with the closing of the transaction, and pursuant to the Brazilian legislation, InBev shall carry out a mandatory tender offer for the acquisition of AmBev’s remaining common shares on March 29, 2005, pursuant to CVM’s authorization granted on February 14, 2005.

The Antonio and Helena Zerrenner Foundation (“FAHZ”) maintained its share ownership in AmBev and has extended the terms of the shareholders’ agreement of which the Foundation is a party to until 2019, by means of an addendum, which was filed with the CVM.

(ii) Incorporation of Labatt Canada

The total amount of the Incorporation as at August 27, 2004 of R$ 14,441.0 was recorded as follows: (i) increase of AmBev’s capital stock by R$ 1,600.7; and (ii) increase of additional paid-in capital, a capital reserve, by R$ 12,840.3.

The impact arising from the consolidation of Labatt Holding ApS (“Labatt ApS”), a company headquartered in Denmark and direct controlling company of Labatt Canada, and of Labatt Canada in the financial statements of AmBev is presented as follows:

	December 31, 2004
Assets	Labatt Canada	Labatt ApS	Combined	Eliminations	Consolidated

Cash and cash equivalents	125.4	0.1	125.5		125.5
Trade accounts receivable, net	213.6		213.6		213.6
Accounts receivable from related parties (*)	323.8		323.8		323.8
Inventories	333.4		333.4		333.4
Tax recoverable	6.5		6.5		6.5
Others	80.2		80.2		80.2
Current Assets	1,082.9	0.1	1,083.0		1,083.0

Deferred income tax	256.3		256.3		256.3
Investments	1.8	(1,848.2)	(1,846.4)	1,848.2	1.8
Goodwill on the acquisition of companies, net	230.5	16,271.9	16,502.4		16,502.4
Other investments	21.1		21.1		21.1
Property, plant and equipment	1,240.1		1,240.1		1,240.1
Deferred charges	3.1		3.1		3.1
Total	2,835.8	14,423.8	17,259.6	1,848.2	19,107.8

	December 31, 2004
Liabilities	Labatt Canada	Labatt ApS	Combined	Eliminations	Consolidated

Suppliers	198.1	0.1	198.2		198.2
Accounts payable to related parties	14.1		14.1		14.1
Payroll and related charges	113.7		113.7		113.7
Loans and financings	1,914.7		1,914.7		1,914.7
Income tax payable	193.0		193.0		193.0
Provisions for restructurings	220.8		220.8		220.8
Other taxes	192.0		192.0		192.0
Others	338.4		338.4		338.4
Current liabilities	3,184.8	0.1	3,184.9		3,184.9

Deferred income tax	100.3		100.3		100.3
Long-term loans and financings	831.3		831.3		831.3
Provision for post-retirement benefits	567.6		567.6		567.6
Long-term liabilities	1,499.2		1,499.2		1,499.2

Shareholders’ equity (*)	(1,848.2)	14,423.7	12,575.5	1,848.2	14,423.7
Total	2,835.8	14,423.8	17,259.6	1,848.2	19,107.8

F-13

	From August 27, 2004 to December 31, 2004
Statement of operations	Labatt Canada	Labatt ApS	Combined	Eliminations	Consolidated

Net sales	1,558.8	-	1,558.8	-	1,558.8
Cost of sales	(502.4)	-	(502.4)	-	(502.4)

Gross profit	1,056.4	-	1,056.4		1,056.4
Operating expenses	(710.1)	(276.7)	(986.8)	(54.0)	(1,040.8)

Operating income	346.3	(276.7)	69.6	(54.0)	15.6

Non-operating income	(198.7)	-	(198.7)	-	(198.7)
Provision for income tax	(93.6)	-	(93.6)	-	(93.6)
Net Income (loss) for the period	54.0	(276.7)	(222.7)	(54.0)	(276.7)

(*) An account receivable balance equivalent to R$ 268.7 was recorded on December 31, 2004, as described below.

Adjustments to the investments originally recorded in Labatt Canada

The following adjustments were made to the initial investment and goodwill calculated in the Incorporation of Labatt Canada (amounts translated from Canadian dollars to Reais at the exchange rate as of August 27, 2004):

Investment of Labatt Canada (net liabilities) - originally recorded	(2,134.8)
Adjustments recorded to initial adjustment
Restructuring expenditures	27.7
Income tax payable provision (FEMSA)	(80.6)
Unrealized profits in inventories	(31.1)
Other adjustments	(0.9)
Income tax effect	1.5
Accounts receivable InBev (reimbursement of InBev)	274.6
Total adjustments to Labatt Canada’s net liabilities	191.2
Adjusted investment Labatt Canada (net liabilities) - adjusted	(1,943.6)


Goodwill Labatt Canada - originally recorded	16,574.5
Adjustment to net liabilities of Labatt Canada	(191.2)
Goodwill Labatt Canada - adjusted, on August 27, 2004	16,383.3

These adjustments primarily arose from events that occurred prior to the Extraordinary Shareholders’ Meeting of AmBev which approved the transaction with InBev and, therefore, were reflected in the initial balance sheet of Labatt Canada.

As part of the Incorporation agreement of Labatt Canada, InBev committed to reimburse AmBev any fiscal, tax or contingency disbursement resulting from any event existing prior to the Incorporation. Accordingly, Labatt had recorded provisions equivalent in Canadian dollars to R$ 193.5 on August 27 and recorded an additional amount of R$ 80.3 during the fourth quarter, related to income tax payable, which will be reimbursed by InBev upon payment.

Therefore, in the elaboration process of its consolidated financial statements, AmBev recorded accounts receivable balance from InBev at the amount of R$ 268.7.

F-14

(iii) Embotelladora Dominicana, C. per A. ("Embodom")

In February 2004, the Company acquired 51% of the capital stock of Embodom, located in the Dominican Republic, generating goodwill in the amount of R$ 173.4, based on the expectation of future results, to be amortized in up to ten years, as from March 2004. In December 2004, the Company recalculated the goodwill due to adjustments in the shareholders’ equity basis for the acquisition as a result of a reduction of ownership interest resulting from capital increases made by the Company and set forth in the acquisition agreement, resulting in an adjustment at the amount of R$ 24.0.

(iv) Cerveceria Suramericana ("Cervesursa")

In December 2003, the Company acquired 80% of the capital stock of Cervesursa, located in Ecuador, generating a negative goodwill of R$ 18.5, based on the expectation of future results, to be amortized in up to ten years. In 2004, Cervesursa changes its name to Compañia Cervecera AmBev Ecuador S.A. (“AmBev Ecuador”)

(v) Compañia Cervecera AmBev Peru S.A.C. ("AmBev Peru")

In October 2003, the Company acquired, for R$ 86.7, machinery and equipment, inventory and the franchise of PepsiCo for the production, marketing and sale of Pepsi products in Lima and in the Northern region of Peru. Such assets were contributed into the capital of AmBev Peru.

(vi) Industrias del Atlántico ("Atlántico")

In September 2003, the Company and the Central American Bottling Corporation ("CarbCorp"), launched their operations in the Central American and Caribbean beer markets, through Atlántico, a wholly-owned subsidiary located in Guatemala.

(vii) Quilmes Industrial (Quinsa) Societé Anonyme ("Quinsa")

During 2003, AmBev and Quinsa integrated their operations, mainly in the Mercosur. The transaction was authorized with certain restrictions by the Comisión Nacional de Defensa de la Competencia (Argentine National Commission for the Protection of Competition - "CNDC"). Compliance with restriction mentioned in item (i) below has been delayed, as a result of the legal action filed by a company pertaining to the Compañía Cervecerías Unidas S.A. ("CCU") group in April 2003, through which it claimed the right to participate in the process of acquisition of the assets mentioned in item (i) below. A summary of the main restrictions imposed by the CNDC is as follows:

Quinsa and AmBev (the "Parties") shall dispose of the brands Bieckert, Palermo, Imperial and Norte, as well as the brewery located in Lujan, where the Brahma brand was produced, to an independent brewery, which must be financially sound and which does not produce beer in the Argentinean market (the "Purchaser").

·	the Parties should submit documentation to the CNDC, evidencing the commitment to allow the Purchaser, for a period of seven years starting on the date of the sale of the assets in item (i), to have access to Quinsa's distribution network in Argentina, for the brands sold to the Purchaser.

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·	the Parties shall assume a commitment with the Purchaser to produce the Bieckert, Palermo and Imperial brands, for a two-year period, as from the date on which such assets are sold.

2. SUMMARY OF OUR SIGNIFICANT ACCOUNTING POLICIES

a) Basis of presentation of our financial statements

Our financial statements are presented in Brazilian reais and have been prepared in accordance with accounting practices adopted in Brazil, or Brazilian GAAP, which is based on the Brazilian Corporate Law (Law No. 6,404/76, as amended), the rules and regulations issued by the "Comissão de Valores Mobiliários" - CVM, or the Brazilian Securities Commission, and the accounting standards issued by the IBRACON - "Instituto dos Auditores Independentes do Brasil", or the Brazilian Institute of Independent Auditors.

These financial statements differ from our Brazilian GAAP financial statements due to certain reclassifications and changes in terminology, and additional explanatory notes added to conform more closely to financial reporting practices in the United States of America. The statement of cash flows conforms with International Accounting Standard No. 7, Cash Flow Statements and IBRACON NPC Standard No. 20, Cash Flow Statements.

Certain accounting practices applied by the Company and its subsidiaries that conform with Brazilian GAAP may not conform with accounting principles generally accepted in the United States of America (US GAAP) (Note 24).

b) Consolidation principles

For the subsidiaries, the totality of assets, liabilities and results have been consolidated, and the interest of minority shareholders in the shareholders’ equity and results for the year of subsidiaries is presented separately.

Investments in subsidiaries and their shareholders' equities, as well as inter-company assets, liabilities, income and expenses, have been eliminated in consolidation. Also, unrealized results arising from the purchase of raw materials and products from subsidiaries and associated companies, included in the balance of inventory at the end of each period, as well as other transactions between the Company's subsidiaries, are eliminated.

The consolidated financial statements include the financial statements, prepared at the same dates, of the subsidiaries either directly or indirectly controlled by the Company.

F-16

c) Foreign currency translation

The financial statements of our subsidiaries operating outside Brazil are translated using the year-end exchange rate. Income and expense accounts are translated and maintained in reais at average exchange rates for the period. The difference between the net result determined at the exchange rates at the balance sheet date, and that determined on average exchange rates for the period, is adjusted under other operating income. In addition, the financial statements of the subsidiaries abroad include the foreign exchange gains or losses on assets and liabilities denominated in foreign currency.

The financial statements for C.A. Cevecera Nacional S.A. (CACN) in Venezuela include inflation accounting adjustments based on local price index variations (measured by Consumer Price Index - IPC), which were recorded in Other operating income (Note 20).

In the cases of Maltería Pampa S.A. (Maltería Pampa), Maltería Uruguay S.A. (Maltería Uruguay) and Cervecería y Maltería Paysandu S.A. (Cympay), the U.S. dollar is considered to be the currency of their economic environment, and, therefore, their prices and cash flows are primarily based on the U.S. dollar. The following translation methodology was applied for these companies which adopt the U.S. dollar as the functional currency: (i) inventories, property, plant and equipment, accumulated depreciation and shareholders' equity accounts were translated into U.S. dollars at historical exchange rates and translated into reais at current rates; (ii) monetary assets and liabilities were translated at current rates; (iii) depreciation was determined based on the U.S. dollar value of the assets, (iv) other income accounts were converted at the average exchange rates in the period; and (v) translation gains and losses are included in income for the period.

d) Cash and cash equivalents

Cash equivalents consist primarily of time deposits and other short-term investments held through private mutual funds denominated in reais, having a ready market and an original maturity of 90 days or less, and which have insignificant early withdrawal penalty clauses and are recorded under acquisition cost, plus interest incurred up to the date of the balance and adjusted, when applicable, to its equivalent market value. We also invest in money market instruments and private mutual funds denominated in U.S. dollars through our off-shore subsidiaries.

e) Short-term investments

We buy and sell debt securities with the main objective of mitigating our consolidated exposure to currency and interest rate risks. These securities, substantially represented by notes and securities, government securities, and bank deposit certificates, including those denominated in foreign currency, are recorded at cost, adding, when applicable, from the income earned “pro rata temporis”; if necessary, a provision is recorded for reduction to market values. In addition, investment fund quotas are measured at market values, and when applicable, a provision is recorded to defer the variable unrealized income.

F-17

The balance of financial investments at December 31, 2004 includes bank deposits and financial investments given as guarantee, in connection with the issuance of foreign debt securities of subsidiaries, in the amount of R$ 2.4 (R$ 29.9 in 2003).

f) Accounts receivable

Accounts receivable are stated at cost. The consolidated allowance for doubtful accounts receivable is recorded at an amount deemed sufficient by management to cover probable losses on realization of receivables and totals R$ 175.9 at December 31, 2004 (R$ 182.3 in 2003).

g) Inventories

Inventories are recorded at the average cost of purchases or production, adjusted by a provision for reduction to realizable values when necessary. On December 31, 2004, the consolidated provision for losses, to reduce inventories to net realizable value amounted to R$ 17.5 (R$ 33.7 in 2003).

h) Other current assets and long-term receivables

Other current assets and long-term receivables are recorded at cost, including, when applicable, accrued interest. A provision for reduction to market values is recorded when necessary.

i) Property, plant and equipment

Property, plant and equipment are stated at cost, indexed for inflation through December 31, 1995, and include the interest incurred in financing during the construction phase of certain qualified assets. Property, plant and equipment are depreciated using the straight-line method, considering the useful lives of the assets, at the annual rates listed in Note 9.

Expenditures for maintenance and repairs are charged to expense when incurred. Costs incurred in connection with developing or obtaining internal-use software are capitalized and depreciated over the useful lives of the software.

Management reviews long-lived assets, primarily buildings and equipment to be held and used in the business, for the purpose of determining and measuring impairment on a recurring basis or when events or changes in circumstances indicate that the carrying value of an asset or group of assets may not be recoverable through operating activities. Write-down of the carrying value of assets or groups of assets is made if and when appropriate.

Returnable bottles are classified as property, plant and equipment and are depreciated normally and written-off when breakage occurs to Cost of sales. We maintain a small number of bottles for sale to distributors to replace bottles broken in the distribution network. These bottles are recorded in inventory and are not used during our day-to-day operations. They are not subject to depreciation.

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Assets held for sale include land and buildings and are reported at the lower of their carrying amounts or their fair values less cost to sell.

j) Deferred charges

The Company defers certain charges related primarily to acquisition and implementation of software and pre-operation expenses incurred in the construction or expansion of a new facility until the facility begins operations. Deferred charges are amortized on a straight line basis over a period of up to five years from the beginning of operations.

k) Goodwill and negative goodwill

Goodwill or negative goodwill recorded on the acquisition of a company is computed as the difference between the purchase consideration and the underlying book value (usually the tax basis) of the investment acquired. Goodwill is allocated between the write-up of tangible assets at market value and estimated future profitability; each component is amortized using the straight-line method, respectively, over the remaining lives of the tangible assets or the period of the projected profitability, generally ten years. Negative goodwill is only amortized upon realization of the related asset through sale or disposal, unless losses are expected. Generally, goodwill is not tax deductible until the assets are sold or measures are taken to restructure the assets. Goodwill amortization is recorded as other operating expenses in our statement of operations (Note 20).

l) Pension and other post-retirement benefits

The cash contributions made by the Company to the pension and employee welfare foundations (Note 15) prior to December 31, 2001 were determined by independent actuaries and treated as operating expenses, although the actuarial obligation was not accrued. Since January 1, 2002 the pension obligation is recorded on an accrual basis.

Unrealized actuarial gains and losses are deferred and recognized in income when exceeding the higher of (a) 10% of the present value of the actuarial liability and (b) 10% of the fair value of the plan's assets, over the average future working life of the plan's members.

m) Compensated absences

The liability for future compensation for employee vacations is fully accrued as earned.

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n) Deferred income taxes

The tax effects of net operating loss carryforwards expected to be recovered through offset, are recorded as deferred tax assets on our balance sheet. Pursuant to CVM Deliberation No. 273/98 and CVM Instruction No. 371/02 only tax losses which are estimated to be recovered within a ten-year period based on a discounted cash flow model are recorded as assets. In the event realization of deferred tax assets is not considered probable, no such assets are recorded.

Deferred income tax asset as of December 31, 2004 includes the total effect of tax losses of Brazilian subsidiaries, which have no expiration dates and are available, at the 30% rate on future taxable income. Part of the tax benefit corresponding to the tax losses of foreign subsidiaries was not recorded as an asset, as management cannot determine whether its realization is probable.

A deferred tax liability arises in the case of an excess of net assets recorded for financial reporting purposes over the tax basis of these net assets.

Current and non-current deferred tax assets and liabilities are presented separately.

o) Stock ownership plan and advances to employees for purchase of shares

AmBev operates a stock ownership plan. The purchase consideration paid by employees is recorded as an increase in capital stock. The rights to acquire AmBev's shares granted to employees, officers or directors under the stock ownership plans do not generate a charge to income.

p) Warrants and stock option premiums

The net premium received on the placement of options and warrants was recognized in a capital reserve in shareholders' equity upon receipt.

q) Treasury shares

We acquire our own shares to be held in treasury and record them using the cost method, as a deduction from shareholders' equity. Cancellations of treasury shares are recorded as a transfer from Treasury shares to Revenue reserves.

r) Interest attributed to shareholders' equity

Interest attributed to shareholders' equity is recorded as a deduction from unappropriated retained earnings. As required by law, we pay the related withholding tax on behalf of our shareholders (Note 16(e)).

s) Revenues and expenses

Sales revenues and the corresponding cost of sales are recorded upon delivery of products to the corresponding customers. No reserve for expected returns is recorded, as such amounts are insignificant. Other expenses and costs are recognized on an accrual basis.

F-20

Selling and marketing expenses include costs of advertising and other marketing activities. Advertising and marketing expenses are deferred within each fiscal year and systematically appropriated to results of operations for each period, in accordance with projected sales volume, thereby reflecting the seasonal nature of monthly sales. Advertising expenses (including promotional materials) were R$ 397.8, R$ 253.2 and R$ 280.8 for the years ended December 31, 2004, 2003, and 2002, respectively.

In addition to our third-party distribution networks, we operate a direct distribution system which distributes our products directly to points of sale. Direct distribution expenses include product delivery charges and the cost of sales and delivery personnel required to distribute our products.

Expenditures relating to ongoing environmental programs are charged to income as incurred. Ongoing programs are designed to minimize the environmental impact of our operations and to manage any potential environmental risks of our activities. Provisions with respect to such costs are recorded at the time the obligation is considered to be probable and reasonably estimable.

t) Profit sharing and related charges

The year-end provision of our profit-sharing program is an estimate made by our management. Amounts paid with respect to the program may differ from the liability accrued.

u) Earnings per share

Earnings per share were calculated based on the number of shares outstanding at the end of each year, net of treasury shares.

v) Financial instruments and derivatives

Forwards and cross-currency interest rate swaps:

The Company enters into derivative financial instruments to hedge its consolidated exposure to currency and interest rate risks. Financial instruments “not designated as hedges for accounting purposes”are measured at the lower of cost based on the contractual conditions between the Company and counterparties (“yield curve”) or market value and accounted for as "Unrealized gain on derivatives" or "Unrealized loss on derivatives".

Forward and swap instruments in commodities:

The nominal values of cross-currency interest rate swap operations and forwards are not recorded in the balance sheet.

The Company enters into derivative financial instruments to hedge its consolidated exposure to costs of raw material to be acquired, denominated in foreign currency.

The net results of such derivative instruments, designated for accounting purposes as hedges, are recorded at cost (equivalent to their market value), deferred and recorded in

F-21

the Company's balance sheet under "Other", and recognized in the result under "Cost of sales" when the product is sold.

Tax incentives

Certain states in Brazil provide indirect tax incentives in the form of deferrable tax payments and partial or complete tax rebates in order to promote investments in their regions (Note 13). The recognition of these benefits occurs only when the gain is definite and all conditions have been met and is recognized against Other operating income (Note 20). The benefits granted are not subject to clawback provisions in the event we do not meet the program target; however, future benefits may be withdrawn. Amounts recognized during 2004 totaled R$ 193.3 (R$ 176.0 in 2003 and R$ 151.9 in 2002).

y) Accrued liabilities for legal proceedings

Provisions for contingencies are recorded and updated to current values for labor, tax, civil and commercial claims being disputed at the administrative and judicial levels, based on estimates of losses determined by the Company’s external legal counsels, for lawsuits in which a loss is considered probable.

Expected tax savings obtained based on provisional court decisions resulting from claims filed by the Company against the tax authorities, if recognized in the statement of income, are subject to provisioning until the right is assured through a final legal decision in favor of the Company.

w) Other current and long-term liabilities

These are shown by known values or calculable, accrued, when applicable, of the corresponding charges and monetary variations incurred until the end date of the financial statements.

z) Related party transactions

Transactions with related parties include, among other operations, the purchase and sale of raw materials such as malt, concentrates, labels, corks and several finished products, eliminated in the Company's consolidated financial statements, except for the non-consolidated portion of operations with jointly-controlled entities (recorded based on the proportional consolidation method) and other related parties.

aa) Accounting estimates

The preparation of consolidated financial statements in conformity with Brazilian GAAP requires management to make estimates that affect the reported amounts of certain assets, liabilities and other transactions. Thus, various estimates are included in the financial statements referring to the useful lives of property, plant and equipment, the provisions necessary to reduce assets to the realization amount and for contingent liabilities and the determination of provision for income tax, which are based on the best estimates of the Company's management; however, actual results could differ from those estimates. Estimates are used for, but not limited to: accounting for allowance for doubtful accounts, depreciation and amortization, asset impairments, depreciable lives

F-22

of assets, useful lives of intangible assets, recognition of deferred taxes and contingencies. The Company’s management periodically reviews these estimates and believes that significant differences do not exist.

ab) Proportionally consolidated financial statements

The assets and liabilities, income and expenses of entities which are jointly-controlled through a shareholders' agreement have been proportionally consolidated based on the Company's total ownership in the capital stock of the respective jointly-controlled subsidiary. Amounts corresponding to the proportional assets, liabilities, income and expenses, arising from inter-company transactions, were eliminated in the proportional consolidation.

Quinsa has been acquiring its own shares, thus, changing the percentage of the Company’s economic interest in Quinsa, which on December 31, 2004 reached 54.80%. These acquisitions led to a NON-CASH loss of R$ 80.8 in the Company’s earnings for the year ended on December 31, 2004 (R$ 11.0 in 2003), since the amount paid was higher than the equity value of the shares.

Quinsa’s controlling shareholders are entitled to swap their 373.5 million class A shares of Quinsa with common and preferred shares of AmBev, in April of each year, or at any moment when change occurs in the control structure of AmBev. AmBev also has the right to determine the exchange of class A shares of Quinsa for AmBev’s shares starting from the end of the 7th year (counted from April 2003). In both cases, the number of AmBev’s shares to be issued to Quinsa's controlling shareholders will be determined by a pre-agreed formula based on the EBITDA of the two companies.

On October 28, 2004 AmBev announced that it was informed by Beverage Associates (BAC) Corp. that the latter decided to not accelerate the full exercise of its swap option of Class A shares of Quinsa currently under its possession by shares of AmBev. A change in the structure of control of AmBev resulting from the conclusion of the strategic alliance with InBev gave BAC the right to accelerate its option according to the conditions provided for in the aforementioned agreements.

The net assets of Quinsa, Agrega Inteligência em Compras Ltda ("Agrega") and Ice Tea do Brasil Ltda (“ITB”), proportionally consolidated in the Company's financial statements, are as follows:

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	December 31, 2004
	Quinsa	(i)	Agrega	(ii)	ITB	(iii)	Total

Current assets	418.8		1.0		0.3		420.1
Long-term receivables	242.6				6.3		248.9
Permanent assets	1,138.0		0.5		0.9		1,139.4
Current liabilities	(436.3)		(1.1)				(437.4)
Long-term liabilities	(440.8)				(11.6)		(452.4)
Minority interest	(201.6)						(201.6)
Total net assets (liabilities)	720.7		0.4		(4.1)		717.0

(i) 49.66% ownership interest.

(ii) 50% ownership interest.

(iii) 50% ownership interest.

	December 31, 2003
	Quinsa	(i)	Agrega	(ii)	ITB	(iii)	Total

Current assets	513.4		1.3		0.3		515.0
Long-term receivables	132.4				7.1		139.5
Permanent assets	1,156.3		0.5		1.1		1,157.9
Current liabilities	(382.4)		(1.2)		(1.2)		(384.8)
Long-term liabilities	(401.9)				(10.8)		(412.7)
Minority interest	(199.6)						(199.6)
Total net assets (liabilities)	818.2		0.6		(3.5)		815.3

(i) 49.66% ownership interest.

(ii) 50% ownership interest.

(iii) 50% ownership interest.

Quinsa’s, Agrega’s and ITB’s results, proportionally consolidated in the Company's financial statements, are as follows:

	Year ended December 31, 2004
	Quinsa	Agrega	ITB	Total

Net revenues	1,153.0	0.8		1,153.8
Cost of products and services sold	(510.3)			(510.3)
Gross profit	642.7	0.8		643.5
Operating expenses	(432.8)	(2.8)	(0.9)	(436.5)
Operating income (loss)	209.9	(2.0)	(0.9)	207.0
Non-operating income	2.4			2.4
Provision for Income tax	(77.0)		0.3	(76.7)
Statutory interest	(19.7)			(19.7)
Minority interest	(29.2)			(29.2)
Net income (loss) for the year	86.4	(2.0)	(0.6)	83.8

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	Year ended December 31, 2003
	Quinsa	Agrega	ITB	Total

Net revenues	773.7	0.6	12.7	787.0
Cost of products and services sold	(387.3)		(9.2)	(396.5)
Gross profit	386.4	0.6	3.5	390.5
Operating expenses	(210.6)	(2.5)	(4.5)	(217.6)
Operating income (loss)	175.8	(1.9)	(1.0)	172.9
Non-operating income	(11.3)			(11.3)
Provision for income tax	27.5		0.3	27.8
Statutory interest	(9.3)			(9.3)
Minority interest	(33.0)			(33.0)
Net income (loss) for the year	149.7	(1.9)	(0.7)	147.1

The table below shows Quinsa's main holdings in subsidiaries, fully consolidated in its financial statements, and proportionally adjusted in the AmBev's consolidated financial statements:

	Quinsa’s total holdings at
	December 31,
	2004 - %

Cerveceria y Malteria Quilmes S.A.I.C.A. y G.	87.36
Cerveceria Boliviana Nacional La Paz	74.61
Cerveceria Chile S.A.	87.63
Cerveceria Paraguay S.A.	76.54
Fábrica Paraguaya de Vitrios S.A.	87.38
Fábricas Nacionales de Cerveza S.A.	85.09
QIB	87.63

3. TRADE ACCOUNTS RECEIVABLE, NET

Trade accounts receivable relate primarily to sales to Beer and soft drinks customers. Credit risk is minimized by the large customer base and control procedures through which we monitor the creditworthiness of customers. Changes in the allowance for doubtful accounts were as follows:

	2004	2003	2002

At beginning of year	182.3	139.5	131.6
Provision	1.4	11.1	12.6
Write-offs, net of recoveries	(45.9)	(10.2)	(4.7)
Quinsa (proportionally consolidated)	38.	41.9
At end of year	175.9	182.3	139.5

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4. INVENTORIES


	2004	2003
Finished products	396.8	145.6
Work in process	62.8	63.9
Raw materials	606.7	564.2
Production materials	199.3	112.9
Supplies and others	132.8	101.7
Provision for losses	(17.5)	(33.7)
	1,380.9	954.6

5. TRANSACTIONS WITH RELATED PARTIES

The main transactions of the Company with related parties are listed in the following table:

	2004
	Balances			Transactions
	Accounts	Accounts	Inter-company	Net	Net financial
Companies	receivable	Payable	Loans	sales	results

AmBev		(2.0)	(3,334.0)		(219.7)
CBB	24.4		1,789.7	234.7	168.2
IBA-Sudeste	3.2		1,125.5	29.8
Jalua			11.9		(55.6)
Monthiers			1,242.2		68.9
Arosuco	5.2		336.3	416.6
Dunvegan			(873.0)		45.3
Cympay		(12.4)		116.2	(0.3)
Malteria Pampa	6.0			152.3
Aspen			(197.0)		(1.7)
Labatt Canada (i) (ii)	323.8	(14.1)		85.7
Other nationals	74.3	(78.9)	(90.0)	64.7	(9.1)
Other internationals	5.4	(24.4)	(7.7)	152.0	1.2

(i) Transaction with other companies associated with InBev, mainly Labatt USA, which are not eliminated in the Company’s consolidated financial statements.

(ii) Additionally, there are service agreements between Labatt Canada and InBev in which services rendered or expenses incurred on behalf of the other party are reimbursed. On December 31, 2004, Labatt Canada had accounts receivable of approximately R$ 6.6 and accounts payable of approximately R$ 2.4 with InBev as part of the referred agreements.

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	2003
	Balances			Transactions
	Accounts	Accounts	Inter-company	Net	Net financial
Companies	receivable	Payable	Loans	revenues	Results

AmBev		(8.5)	(1,535.5)		(44.6)
CBB	11.9		218.1	166.7	277.4
IBA-Sudeste		(1.7)	977.9	4.3	18.5
Jalua			(55.5)		(35.5)
Monthiers			1,226.5		(250.2)
Arosuco	3.8		246.1	334.4	6.0
Dunvegan			(802.0)		30.8
Cympay		(4.1)	0.3	76.8
Malteria Pampa	7.4			115.7	13.9
Aspen			(173.0)		(19.2)
Other nationals	41.8	(55.7)	(39.3)	241.7	1.1
Other internationals	19.7	(12.0)	(59.9)	112.0	(0.8)

Names used:

- Indústria de Bebidas Antarctica do Sudeste S.A. ("IBA-Sudeste")

- Jalua Spain S.L. ("Jalua")

- Monthiers S.A. ("Monthiers")

- Arosuco Aromas e Sucos Ltda. ("Arosuco")

- Dunvegan S.A. ("Dunvegan")

- Cervecería y Maltería Paysandú - Cympay ("Cympay")

- Maltería Pampa S.A. ("Maltería Pampa")

- Aspen Equities Corporation ("Aspen")

- Labatt Brewing Company Limited ("Labatt Canada")

Transactions with related parties are carried out under usual market conditions and include, among other operations, the purchase and sale of raw materials such as malt, concentrates, labels, corks and several finished products, eliminated in the Company's consolidated financial statements, except for the non-consolidated portion of operations with jointly-controlled entities (recorded based on the proportional consolidation method) and related parties.

All loan agreements between the Company's subsidiaries in Brazil have undetermined duration and some are assessed market financial charges. The agreements that involve the Company's subsidiaries headquartered abroad are usually monetarily indexed based on the US dollar exchange rate plus 10% p.a. interest. Inter-company loans are consolidated based on the same criteria described above.

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6. OTHER ASSETS

	2004	2003
Current assets
Deferred income from commodities,
swap and forward operations, net	54.9	0.1
Prepaid expenses	242.1	123.3
Advances to suppliers and others	42.8	26.5
Other accounts receivable	139.1	106.0
	478.9	255.9
Non-current assets
Other recoverable taxes and charges (*)	362.3	348.4
Prepaid expenses	111.7	119.3
Investments in debt securities	147.4	77.0
Prepaid pension benefit cost	20.6	22.0
Other accounts receivable	39.7	49.4
	681.7	616.1

(*) At December 31, 2004 these consist primarily of zero-rated excise tax (IPI) credits totaling R$ 228.1 (R$ 228.1 in 2003) and value-added taxes (ICMS) credits totaling 81.3 (R$ 69.2 in 2003). The Company has recorded a provision for the full amount of the IPI tax asset (Note 13) as our right to recover such amounts is not recognized by the tax authorities and is subject to a definite judicial ruling in our favor.

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7. INVESTMENTS - SIGNIFICANT DIRECT AND INDIRECT SUBSIDIARIES

	Percentage interest (total shares)			Shareholders' equity (capital deficiency)					Net income (loss)
Fully consolidated		2004	2003		2004		2003			2004		2003		2002

Arosuco		99.7	99.7		334.2		224.8			219.8		176.3		153.4
CACN		50.2	50.2		(27.1	)	17.9			(47.2	)	(39.4	)	(37.2	)
CBB		99.9	99.9		5,067.4		5,222.2			939.8		2,046.7		(371.2	)
Cerveceria Suramericana (Cervesursa)		80.0	80.0		102.2		145.5			(31.4	)	(7.3	)	-
Cervejaria Astra S.A. (Astra)														68.0
Compañia Cervecera AmBev Peru A.C. (AmBev Peru)		100.0	100.0		(0.7	)	8.7			(9.2	)	(5.7	)	-
Eagle Distribuidora de Bebidas S.A (Eagle)		100.0	100.0		2,660.4		2,684.4			(24.0	)	(539.0	)	1,484.7
Hohneck		100.0	100.0		1,245.6		1,315.1			(69.6	)	(67.1	)	363.0
IBA Sudeste		99.3	99.3		1365.8		1,426.7			(78.9	)	47.5		3.6
Industria del Atlántico (Atlántico)		50.0	50.0		62.0		46.9			17.2		5.8
Jalua		100.0	100.0		3,593.0		3,609.9			(16.9	)	(451.2	)	1,536.6
Labatt Holding ApS		100.0			14,423.8		-			276.7		-		-
Labatt Canada		100.0			(1,848.2	)	-			54.0		-		-
Maltería Pampa		100.0	100.0		197.4		190.7			22.4		41.5		(31.5	)
Monthiers		100.0	100.0		3,576.1		3,609.8			42.3		(451.1	)	1,516.7

Proportionally consolidated companies (*)

Agrega		50.0	50.0		0.4		0.6			(2.0	)	(1.9	)	(2.0	)
Ice Tea do Brasil Ltda (ITB)		50.0	50.0		(4.1	)	(3.4	)		(0.6	)	(0.7	)	(1.7	)
Quinsa		54.8	49.7		720.6		818.2			(86.4	)	149.7		-

(*) The pro-rated balances proportionally consolidated and included in the consolidated balance sheet at December 31, 2004 were: total assets - R$ 1,808.4 (R$ 1,812.5 in 2003); working capital - R$ (17.3) (R$ 1.1 in 2003) and cash and cash equivalents of R$ 175.4 (R$ 44.3 in 2003). The pro-rated net income from these affiliates included in the consolidated statement of operations totaled R$ 83.8 (R$ 147.1 in 2003 and R$ 3.7 in 2002).

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8. GOODWILL AND NEGATIVE GOODWILL

	2004	2003
Goodwill
CBB - attributed to
Property, plant and equipment fair value excess	144.6	144.6
Expected future profitability	702.7	702.7
	847.3	847.3
Expected future profitability
Labatt Canada	16,677.7
Quinsa	1,123.2	1,123.2
Cympay (ii)	26.6	34.2
Embodom	214.9	-
Malteria Pampa	28.1	28.1
Indústrias Del Atlântico	5.1	5.1
Cervejaria Miranda Corrêa S.A.	5.5	5.5
Labatt Canada Subsidiaries (i)	3,648.6	-
Quinsa and subsidiaries (proportionally consolidated)	547.6	510.4
Total goodwill	23,124.6	2,553.8

Accumulated amortization	(4,779.1)	(689.6)
Total goodwill, net	18,345.5	1,864.2

Negative goodwill
CBB	(149.9)	(149.9)
Cervesursa	(16.4)	(18.5)
Total goodwill, net	(8.8)	(8.5)
Total negative goodwill	(175.1)	(176.9)

Goodwill, net	18,170.4	1,687.3

(i) The balance of the accumulated amortization referring to goodwill existing in Labatt Canada totaled R$ 3,418.2 on December 31, 2004.

(ii) Goodwill reclassified to deferred charges, following the downstream mergers of subsidiaries between related parties.

Changes in the goodwill and negative goodwill, net are as follows:

	2004	2003

At beginning of year, net	1,687.3	626.9
Goodwill on new acquisitions	16,892.6	1,035.0
Negative goodwill on new acquisitions	-	(18.5)
Labatt and subsidiaries (first time consolidation)	355.1	-
Quinsa and subsidiaries (proportionally consolidated)	37.3	442.6
Amortization	(803.6)	(252.4)
Negative goodwill realized	1.7	-
Reclassification to deferred charges, net (see (ii) above)	-	(146.3)
At end of year, net	18,170.4	1,687.3

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9. PROPERTY, PLANT AND EQUIPMENT

			Annual
			depreciation
	2004	2003	rates - %

Land	328.6	244.6
Buildings and constructions	2,578.2	2,090.8	4
Machinery and equipment	7,968.2	5,673.3	10 to 20
Offsite equipment	1,551.0	1,030.4	10 to 20
Other assets and intangibles	1,241.9	987.0	4 to 20
Construction in progress	368.3	153.7

	14,036.2	10,179.8
Accumulated depreciation	(8,504.5)	(6,013.5)
	5,531.7	4,166.3

The subsidiaries held for sale properties, on December 31, 2004, with a total book value of R$ 113.8 (R$ 144.1 in 2003), which are classified under long-term receivables, net of a provision for expected losses on realization, in the amount of R$ 69.1 (R$ 89.1 in 2003).

During the year, a provision for potential losses on the sale of property, machinery and equipment was established, in the amount of R$ 10.4 (R$ 58.7 in 2003), accounted for in the Company's consolidated financial statements under "Non-operating expenses".

In view of bank loans and leases taken by the Company and its subsidiaries, at December 31, 2004, there are pledged property, machinery and equipment, at the residual amount of R$ 781.4 (R$ 909.3 in 2003). Such restriction has no impact on the use of such assets and on the Company's operations.

10. DEFERRED CHARGES

	2004	2003

Pre-operating costs	208.6	190.6
Implementation and expansion expenses	53.9	55.7
Future Profitability (*)	109.1	146.3
Other	162.6	71.5
	534.2	464.1
Accumulated amortization	(240.1)	(204.8)
	294.1	259.3

(*) This refers to the goodwill and negative goodwill on the acquisition of subsidiaries, incorporated by the Parent Company in previous years, reclassified from “O” to “Deferred charges” and amortized based on future profitability.

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11. LOANS AND FINANCING


			Current		Long-term
	Annual financial charges	Final maturity	2004	2003	2004	2003

Reais
ICMS sales tax incentives	4.99%	June 2013	93.5	34.6	288.2	340.5
Acquisition of equipment	2.40% above the TJLP(*)	October 2009	135.2	227.1	209.5	298.6
Other	104% of CDI	April 2005	274.5	0.2		0.4

			503.2	261.9	497.7	639.5

Foreign currency
Working Capital (i)			2,619.5
Syndicated loan	2.4% above quarterly LIBOR (i)	August 2004		1,062.9
Bond 2011	9.63%	December 2011	10.3	11.6	1,527.0	1,444.6
Bond 2013	9.63%	September 2013	36.4	42.1	1,127.4	1,444.6
Raw materials	6.43%	May 2005	112.6	183.7		22.1
Acquisition of equipment	6.53%	June 2010	141.0	303.5	1,102.4	418.4
Other (ii)	5.9%	October 2008	20.1	110.4	113.1	35.1
			2,939.9	1,714.2	3,869.9	3,364.8
			3.443,1	1,976.1	4,367.6	4,004.3

(i) Changes from last year is basically due to consolidation of Labatt ApS, as shown in Note 1 (ii).

(ii) Includes local currency loans (and interest) in Argentina, Ecuador, Peru, Uruguay and Venezuela

(*) The annualized TJLP (Government nominal long-term interest rate), fixed quarterly at 9.75% per annum as from December 31, 2004 (11% in 2003); LIBOR - The six-monthly London Interbank Offered Rate - LIBOR at December 31, 2004 is 2.78 % per annum (1.4% per annum in 2003).

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Abbreviations used:

- TJLP - Long-Term Interest Rate.

- LIBOR - London Interbank Offered Rate.

- ICMS - Value-Added Tax on Sales and Services.

(a) Principal loan contracts and programs

(i) ICMS tax incentive programs

The loans relate to programs offered by certain states through which a percentage of the monthly ICMS due is financed by Government related agencies, generally over a five year period (Note 12).

The amount of R$ 330.2 (R$ 393.6 as of December 31, 203) of “Deferrals of taxes on sales” includes a current portion of R$ 54.5 (R$ 161.8 in 2003) classified under “Other taxes and contributions payable”.

The remaining amounts refer to the financed deferrals of ICMS due for periods of up to twelve years, as part of industrial incentive programs. The deferred percentages may be fixed during the program or vary regressively, from 75% in the first year to 40% in the final year. The deferred amounts are partially indexed at 60% to 80% of a general price index.

(ii) Acquisition of equipment

In May 2001, we entered into a credit agreement with BNDES for R$ 216.5 of which R$ 168.2 was received in 2001 and the remainder in 2002. The balance under the credit agreement is to be paid in monthly installments with final maturity in December 2008.

(iii) Notes issued in the international market

In September 2003 CBB issued US$ 500 million 8.75% notes due 2013 (the 2013 Notes), under Regulation 144A and Regulation S, with a full and unconditional guarantee offered by AmBev. The 2013 Notes were issued at 99.67% of face value, and bear annual interest of 10.3% including 15% withholding tax, payable every six months and mature in September 2013. On September 15, 2004, the Company registered the 2013 Notes with the Securities and Exchange Commission - SEC under the U.S. Securities Act of 1933 and its subsequent amendments. In addition, the 2013 Notes were filed with the Luxembourg Stock Exchange for settlement through the Depository Trust Company (“DTC”), Euroclear and Clearstream.

In December 2001 CBB issued US$ 500 million 10.5% notes due 2011 (the 2011 Notes), under Regulation 144A and Regulation S with a full and unconditional guarantee offered by AmBev. The 2011 Notes were issued at 98.56% of face value, and bear annual interest of 12.3% including 15% withholding tax, payable every six months and maturite in December 2011. On October 4, 2002, we consumated our SEC registered exchange offer for the 2011 Notes.

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(iv) Syndicated loan

On July 28, 2004, the Company paid its syndicated loan in the amount of R$ 974.7, net of hedge effect of the correspondent debt.

(v) Raw materials

Raw material import finance terms are normally for payment in a single installment on the 360th day, and are primarily to finance importations of malt and hops. The supplier credit financings are mostly obtained through international financial institutions.

(b) Mortgages and collateral

Loans and financings for expansion, construction of new plants and purchases of equipment are guaranteed by mortgages on the plant properties and financial liens on equipment. Loans for the purchase of raw materials, mainly malt, and the issue of Notes on the international market are guaranteed by collaterals of AmBev and its subsidiaries, which at December 31, 2004 totaled R$ 295.7 (R$ 199.1 in 2003).

As of December 31, 2004, the Company and its subsidiaries are in compliance with debt and liquidity ratio covenants in connection with obtaining the loans, except for what is mentioned in the following paragraph.

During the year 2003, certain subsidiaries of Quinsa in Argentina concluded a debt renegotiation process, covering also financings and payment terms. On December 31, 2004, US$ 4.7 million was recorded under current liabilities, because certain liquidity ratio covenants have not been fulfilled.

(d) Maturities

At December 31, 2004, the Company's long-term loans, by year of maturity, are the following:

2006	257.5
2007	428.3
2008	658.0
2009	10.4
2010	74.5
2011	1,523.3
2012 and on	1,415.6
	4,367.6

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(e) Labatt Canada

Effective May 25, 2004, Labatt Canada entered into a loan agreement in the amount of CAD$ 700.0 with a bank consortium and a final maturity date on December 12, 2005.

The loans under the loan agreement bear interest at the bankers acceptance rate plus applicable margin ceiling of which stands at 0.9% per annum. On December 31, 2004, the bankers acceptance average rate on the debt was at 2.765% p.a. and the applicable margin was 0.55% per annum.

Effective from December 12, 2002, Labatt Canada entered into a forward loan agreement at the amount of CAD$ 600.0 with syndicated banks. This agreement has two different parts: (a) a pre-approved line of credit for the utilization of funds when necessary of CAD$ 30.0; and (b) a forward loan of CAD$ 300.0 with semi-annual amortizations of CAD$ 50.0. On December 31, 2004 Labatt had recorded as liability: (i) CAD$ 60.0 referring to the portion used in the pre-approved line of credit; and (ii) two remaining installments of the loan, totaling CAD$ 100.0, with final maturity on December 12, 2005.

The loans contracted under these two types incur interest at bankers acceptance rates plus the applicable margin, the ceiling of which is 0.95% per annum to the line of credit and 0.90% per annum to the forward agreement. On December 31, 2004, the bankers acceptance average rates on the debt was 2.636% per annum and the applicable margin was 0.60% per annum.

Effective from July 23, 1998, Labatt Canada entered into a US dollar loan agreement in the amount of US$ 162 million in Series A Bank Notes and CAD$ 50 in Series B Bank Notes ("Notes"), contracted from a group of institutional investors. The Notes are subject to fixed interest rates of 6.56% p.a. over the portion in US dollars and at 6.07% p.a. over the Canadian dollars, expiring on July 23, 2008.

12. SALES TAX DEFERRALS AND ICMS TAX INCENTIVE PROGRAMS

We currently participate in programs whereby a percentage of payments of ICMS, due from sales generated by specific production facilities, are deferrable (financed by a state related financial agent) for periods of generally five years from their original due date.

Sales tax deferrals arise from programs under which percentages deferrable usually range from 40% to 75% over the life of the program. Amounts deferrable under these programs are unlimited, except in certain states with which we have specific agreements. Balances deferred generally accrue interest and are only partially inflation-indexed.

F-35

Description	2004	2003

Short-term liabilities
Loans and financings (Note 11)	93.5	34.6
Sales tax deferrals (included in Other taxes payable)	54.5	161.8
	148.0	196.4

Long-term liabilities
Loans and financings (Note 11)	288.2	340.5
Sales tax deferrals	275.7	235.2
	563.9	575.7

13. COMMITMENTS AND CONTINGENCIES

(a) Tax and legal claims

We are contesting the payment of certain taxes and contributions and have made judicial escrow deposits (Restricted deposits for legal proceedings) of equivalent or lesser amounts pending final judicial decisions. Our management believes that the accrued liability for contingencies, including interest, is sufficient to meet probable and reasonably estimable losses in the event of unfavorable rulings.

The following probable losses have been identified based on the advice of outside legal counsel and have been provided as liabilities in our financial statements:

	2004	2003

Indirect taxes
ICMS and IPI (i)	540.4	532.0
PIS and COFINS (ii)	383.5	339.2
Labor claims (iii)	324.0	211.1
Income tax and social contribution (iv)	71.3	50.2
Claims from distributors and resellers (v)	47.2	28.6
Others (vi)	104.6	71.8
Total accrued liabilities for contingencies	1,471.0	1,232.9

AmBev may be exposed to additional possible risks, based on the opinion of legal counsel, estimated at R$ 1,241.1 (R$ 1,266.6 in 2003) which have not been provisioned. Although there can be no assurance that AmBev will prevail in every case, management does not believe that the ultimate disposition of these legal contingencies will have a material effect on AmBev's financial condition or results of operations.

F-36

Changes in the accrued liabilities for contingencies are as follows:

	2004	2003

At beginning of year	1,232.9	989.3
New provisions	250.8	172.3
Payments	(78.4)	(15.4)
Interest	39.7	59.8
Quinsa and subsidiaries (proportionally consolidated)	26.0	26.9
At end of year	1,471,0	1,232.9

(i) ICMS and IPI

These legal proceedings relate mainly to tax disputes of presumed zero-rated IPI credits and to extemporaneous ICMS credits on purchases of property, plant and equipment prior to 1996. We have filed claims against the tax authorities to assure we effectively benefit from IPI tax exemptions on certain inputs. Currently the "exemption" becomes a mere tax deferral at the time of sale. As these and other claims are contingent upon obtaining favorable, non-appealable judicial decisions, the corresponding assets, which might arise in the future, are only recognized once realization is assured.

(ii) PIS and COFINS

PIS - We obtained an injunction in the first quarter of 1999, which was confirmed by a lower court judgment, granting the right to pay PIS (up to December 31, 2002 only) on billings, without paying such contribution on other revenues. Following the enactment of Law 10,637 of December 31, 2002, which established new rules for calculating PIS with effects from December 1, 2002, the Company and its subsidiaries began to pay such contribution on other revenues, as prescribed by current legislation.

COFINS - The 3rd Region Local Federal Court confirmed a legal decision in favor of the Company and its subsidiaries, which allows them to pay COFINS on billings, releasing them from paying such contribution on other income. Following the enactment of Law No. 10,833/03 as of December 29, 2003, effective February 1, 2004 the Company and its subsidiaries began to pay such contribution, as prescribed by current legislation.

At December 31, 2004, the provision primarily refers to amounts that were not paid pursuant to the injunctions, and which will be subject to provisioning until they are assured by a final decision in favor of the Company.

In common with many Brazilian taxpayers, we have filed claims seeking to exclude for the period from 1988 to 1995 the indexation for inflation of certain PIS taxes. In May 2001 a decision of the appellate court ruled in favor of a plaintiff taxpayer. In the administrative judicial system, the decisions have been favorable to the taxpayers, and the tax authorities are no longer issuing new infraction notices regarding this issue. Although the issue has not yet received a final non-

F-37

appealable ruling, the probability of the taxpayers' position not prevailing is considered to be remote. During 2001, we concluded the determination of the credits arising in the five-year prescriptive period prior to the date of our claim. The liability, including interest and charges, totaling R$ 138.7 was reversed to income (Provision for contingencies and other) during 2001. The amounts were recovered by offsetting other Federal taxes due.

We have also filed claims against the tax authorities to support our view that certain taxes levied are unconstitutional, however because we are required by law to pay these amounts, we have deposited the amounts into judicial escrow accounts (Restricted deposits for legal proceedings) and/or made provisions for amounts legally due.

(iii) Labor claims

We are involved in approximately 8,500 legal proceedings with former and current employees, mainly relating to dismissals, severance, health and safety premiums, supplementary retirement benefits and other matters. We have established provisions in connection with all proceedings for which we believe, based on the advice of our outside legal counsel, there is a probable chance of loss. Judicial escrow deposits, principally for labor claims, totaled R$ 129.6 at December 31, 2004 (R$ 111.6 in 2003). At December 31, 2004 none of these claims had probable estimated losses which individually exceeded R$ 2.0.

(iv) Income Tax and Social Contribution

This provision relates substantially to the recognition of the deductibility of interest attributed to shareholders' equity in the calculation of social contribution for the year 1996.

(v) Claims from distributors and resellers

We have several claims filed against us by former distributors whose contracts were terminated due to their failure to meet our guidelines and a general restructuring of our distribution network. We have provisions for probable losses of R$ 47.2, based on advice of outside legal counsel (R$ 28.6 in 2003).

(vi) Other provisions

These provisions relate substantially to issues involving the National Social Security Institute (INSS), products and suppliers.

(vii) Labatt Canada

Certain beer and alcoholic beverage producers of the United States, Canada and Europe were mentioned in collective suits for losses and damages brought under the claim of marketing of alcoholic beverages for under age consumers. Labatt Canada was mentioned in one of these proceedings. Such suit will be vigorously defended and, at this time, it is not possible to estimate the loss probability or estimate its amount.

F-38

Labatt was sued by the Canadian Government concerning the interest rate used in certain contracts with related parties existing in the past. The total amount sued by the Government is approximately CAD$ 200, equivalent to R$ 490 on December 31, 2004). In the event Labatt is required to pay this amount, AmBev will be fully reimbursed. Until then, Labatt recorded a current liability at the amount of R$ 189.9 (equivalent to CAD$ 86 million on December 31, 2004) as “Provision for contingency of Income Tax” (Note 14), and AmBev recorded an account receivable at the same amount as an adjustment in the consolidation of Labatt.

(b) Commitments

Commitments for construction under contract at December 31, 2004 are estimated at R$ 100.0 (R$ 20.1 in 2003).

We have contracts with certain key suppliers to buy volumes of key materials in our production processes, including aluminum, plastics and natural gas, but without fixed volumes or amounts.

We are subject to federal, state and local environmental laws. These laws generally provide for control of air emissions and require responsible parties to undertake remediation of hazardous waste disposal sites. Civil penalties may be imposed for noncompliance.

We provide for remediation costs and penalties when a loss is probable and the amount is reasonably determinable. It is not presently possible to estimate the amount of all remediation costs that might be incurred or penalties that may be imposed. Our management does not presently anticipate that such costs and penalties, to the extent not previously provided for, will have a material adverse effect on our consolidated financial condition, statement of operations or liquidity.

At present we believe there are no unasserted environmental claims or assessments. We have made substantial capital expenditures to bring existing facilities into compliance with various environmental laws.

Recent environmental expenditures are as follows:

	Property, plant	Waste
Year ended December 31	and equipment	treatment	Total

2004	12.9	36.1	49.0
2003	9.3	38.3	47.6
2002	2.8	38.8	41.6

Budgeted environmental expenditures for the five-year period ending December 31, 2008 total approximately R$ 242.3 (unaudited).

F-39

(d) Income from foreign subsidiaries

In December 2004 and January 2005, two subsidiaries of the Company received tax assessment notices at the amount of R$ 52.0 and R$ 458.0, respectively, referring to the taxation requirement in Brazil of income from foreign subsidiaries.

The Company, through its attorneys, challenges the validity of the referred tax assessment notices and shall defend this case vigorously. The probability of loss in these cases is deemed by the external counsels as possible, but not probable. Therefore, no amount was recorded referring to these tax assessment notices on December 31, 2004.

14. OTHER LIABILITIES

	2004	2003

Current liabilities
Employee and management profit sharing-program	126.3	11.5
Deposits for containers (i)	84.4
Provision for restructuring (ii)	183.0
Provision for income tax contingency (Note 13 a (vii))	189.9
Deferred net income from commodities swap and forward operations	12.7
Marketing accounts payable	101.1
Provision for royalties payment	37.1
Advances from customers		31.0
Other accounts payable	251.4	199.1
	985.9	241.6

Long-term liabilities
Post-retirement benefits (Note 15b)	646.0	72.9
Deferred income tax and social contribution (Note 18 (b))	138.5	26.2
Supplier credits		0.8
Deferred income from debt swap operations	90,3
Other accounts payable	61.5	33.2
	936.3	133.1

(i) These deposits are made by points of sale in Canada and at the time of the beer sale, as a guarantee by the containers, and they are given back when the containers are returned.

(ii) On September 8, 2004, Labatt announced the closing of its plant in New Westminster, British Columbia. This plant will continued to operate through the end of March 2005 and closed on April 22, 2005, when the agreement with the labor union ended. As the closing plan of this plant had already been approved at the time of the Incorporation, lay-off provisions at the amount of CAD$ 9.9 million (equivalent to R$ 21.9 on December 31, 2004) was registered on August 27, 2004. During the 4Q04, Labatt provisioned CAD$12.3 million (equivalent to R$ 27.2 on December 31, 2004) as supplement to the preliminary provisions as part of an agreement entered into with the Workers Union. Additionally, in December 2004, Labatt announced a workforce restructuring with a view at reducing the personnel fixed cost by 20%. Thus, Labatt recorded a provision in the amount of CAD$ 60.7 million (equivalent to R$ 134.0 on December 31, 2004) in order to cover lay-off expenses, in addition to CAD$ 17.0 million (equivalent to R$ 37.5 on December 31, 2004)

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referring to post-retirement benefits and private pension plan of employees to be laid-off. These provisions totaled R$ 198.7 in 2004 earnings results and were recorded as “Non-Operating Income”.

15. EMPLOYEE BENEFITS

(a) AmBev pension benefits

AmBev sponsors a defined-benefit pension plan (closed to new participants since May 1998) and a defined-contribution plan, which supplement benefits that the Brazilian government's social security system provides to our employees and those of our Brazilian subsidiaries. Contributions by AmBev under the plan are determined based on a percentage of participant salaries.

These plans are administered by the AmBev Pension Fund, Instituto AmBev de Previdência Privada (IAPP). In the year ended December 31, 2004, the Company contributed R$ 3.9 (R$ 4.4 in 2003) to IAPP. The IAPP was established solely for the benefit of our employees, and its assets are held independently. We nominate the three directors of IAPP.

At December 31, 2004 we had 4,539 participants in our plan (4,662 in 2003), of which 2,611 (2,778 in 2003) participated in the defined-benefit plan.

Based on the independent actuarial reports, the funded status of AmBev's plans at December 31, is determined as follows:

	2004	2003

Fair value of plan assets	633.3	501.5
Present value of actuarial liability	(438.1)	(334.4)
Funded status	195.2	167.1

The surplus of assets of IAPP is recognized by the Company in its consolidated financial statements under "Surplus assets - Instituto AmBev", in the amount of R$ 20.6 (R$ 22,0 in 2003), estimated as the maximum limit of its future use, also taking into account the legal restrictions that prevent the return of a possible remaining actuarial surplus, not used in the payment of private security benefits, in the event of a winding up of IAPP.

(b) Post-retirement benefits and others

The Company directly provides medical assistance, reimbursement of medicine expenses and other benefits to certain retired pensioners.

Labatt Canada, the Company’s indirect subsidiary, provides pension plan benefits in the defined contribution model and in the defined benefit model to its employees, as well as certain post-retirement benefits; Labatt Canada also provides certain post-retirement pension benefits to certain distributors.

F-41

On December 31, 2004 liabilities deriving from these obligations are recorded in the Company’s financial statements in the account “Provision for employee benefits” in the following amounts:

	Labatt (i)	Labatt (ii)	AmBev (ii)	Total

Projected Benefit Obligation	2,209.7	239.8	105.2	2,554.7
Fair value of plan assets	(1,597.6)			(1,597.6)

Plan deficit	612.1	239.8	105.2	957.1
Non-amortized actuarial adjustments	(320.5)	(60.6)	(26.8)	(407.9)
Other benefits - Labatt Canadá				0.3
Distributors’ plans (iii)				96.5

Total liabilities	291.6	179.2	78.4	646.0

(i)	Pension plan;

(ii)	Post-retirement benefit plan;

(iii)

The obligation referring to the distributors’ plan accounts for Labatt Canada’s pro rata participation under the obligations of these plans which will be financed by Labatt Canada by means of the allocation of services costs of these affiliated companies

Change in the provision for employee benefits, according to the independent actuary’s report:

	AmBev	Labatt	Total

Balance on December 31, 2003	72.9		72.9
First time consolidation of Labatt		611.0	611.0
Financial charges	11.9	37.0	48.9
Foreign exchange variation		(13.9)	(13.9)
Contributions received		(62.4)	(62.4)
Benefits paid	(6.4)	(4.1)	(10.5)

Balance on December 31, 2004	78.4	567.6	646.0

The employees and retirees of the Company in Brazil receive health care and dental assistance from the FAHZ, one of our shareholders.

The changes in the provision for these benefits of FAHZ, based on independent actuarial reports, were as follows:

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	2004			2003

January 1		163.5			154.1
Interest cost		30.6			24.9
Actuarial adjustment		3.3			1.2
Benefits paid		(20.4	)		(16.7	)
December 31, 2004		177.0			163.5

The actuarial liabilities related to the benefits provided by the FAHZ on December 2004 were fully offset by an equivalent amount of assets held by the FAHZ on the same date. The surplus assets were not recorded by us in our financial statements, since under current welfare foundation regulations, any surplus of assets over liabilities cannot be returned to the Company.

In accordance with NPC No. 26, the Company recognized the actuarial liability related to the obligation for the benefits provided directly by AmBev, but not for benefits provided by the FAHZ. The assumption is that this obligation will not be legally imputed to the Company and will be covered by the contributions made annually to the FAHZ (up to 10% of the net income of each year), which are recognized through the statement of operations.

The medium and long-term assumptions adopted by the independent actuary, in the calculation of the actuarial liability were the following:

	Annual Percentage - in nominal terms
	AmBev		Labatt
	2004	2003	2004	2003

Discount rate	10.9	10.9	5.7	6.0
Expected rate of return on assets	15.4	16.6	8.0	8.0
Increase in the remuneration factor	7.3	7.3	3.0	3.0
Increase in health care costs	7.3	7.3	4.0	4.0

16 SHAREHOLDERS' EQUITY

(a) Capital and shareholders' rights

(i) Capital

The Company's capital stock on December 31, 2004 amounted to R$ 4,742.8 (R$ 3,124.1 in 2003), represented by 56,277,742 thousand no-par value and registered shares (38,537,333 thousand in 2003), comprised of 23,558,245 thousand common shares and 32,719,497 thousand preferred shares (15,735,878 thousand and 22,801,455 thousand, respectively, in 2003).

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On December 6, 2004, the Company announced to the market that it intends to approve the distribution of share dividends to its shareholders in the format of one common share for each five shares (preferred shares or common shares). The share dividends shall be distributed through capitalization of capital reserves as at September 30, 2004. The purpose of this dividend is to maintain the liquidity of the common shares after the mandatory tender offer for the common shares of AmBev by InBev, regardless of the level of acceptance thereof. Fraction of shares which may occur shall be dealt with as provided for by the Article 169 of the Law 6,404/76.

The share dividends shall be submitted for approval by the appropriate authorities and once approved shall only occur when the settlement of the public offering of InBev S.A. is concluded in order not to alter the economic effects thereof.

The AGE (Extraordinary Shareholders’ Meeting) as of August 27, 2004, approved the issue, by the Company, of 19,264,363 thousand new shares, comprised of 7,866,182 thousand common shares and 11,398,181 thousand preferred shares, and also decided to appropriate to the capital stock account the amount of R$ 1,600.7and to the capital reserve account the amount of R$12,840.3 as premium on share subscription, which was fully subscribed by Labatt ApS legal representatives.

In April 2004, the Company increased capital stock by R$ 17.9, using advance for future capital increase at the amount of R$ 9.0, originally classified in long-term liabilities, and the remaining amount paid-up in the same month, through the private subscription of 55,727,205 preferred shares, exclusively to fulfill the provision in the Stock Ownership Plan, as mentioned in item (f).

(ii) Warrants

During the period for the exercise of warrants between April 1 and April 30, 2003, 25 thousand common and 489 thousand preferred shares were subscribed, for the total amount of R$ 0.5. Certain warrant holders have challenged in court the CVM's and Company's understanding related to the warrant conversion criteria.

(iii) Share rights

Our preferred shares are non-voting but have priority in the return of capital in the event of liquidation. Our common shares have the right to vote at shareholder meetings. Under our by-laws, we are required to distribute to shareholders as a mandatory dividend in respect of each fiscal year ending on December 31 an amount not less than 35.0% of our net income determined under Brazilian GAAP, as adjusted in accordance with such law, unless payment of such amount would be incompatible with AmBev's financial situation. The mandatory dividend includes amounts paid as interest attributed to shareholders' equity (item (e)). Preferred shares are entitled to a dividend premium of 10% over that received by the common shareholders.

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(iv) Share activity (in thousands of shares)

	2004	2003	2002

Preferred shares
At beginning of year	22,801,455	22,824,827	23,668,349
Employee stock ownership plan purchases	55,727	259,007	384,075
Labatt transaction	11,398,181
Stock warrants		489
Cancellation of shares	(1,535,866)	(282,868)	(1,227,597)
At end of year	32,719,497	22,801,455	22,824,827

Common shares
At beginning of year	15,735,878	15,795,903	16,073,049
Labatt transaction	7,866,182
Stock warrants		25
Cancellation of shares	(43,815)	(60,050)	(277,146)
At end of year	23,558,245	15,735,878	15,795,903

(b) Appropriation of net income for the year and transfers to statutory reserves

(i) Legal

Under Brazilian Corporate Law, AmBev, together with our Brazilian subsidiaries, are required to appropriate an amount not less than 5% of net income after absorbing accumulated losses, to a statutory (legal) reserve. The reserve may be used to increase capital or absorb losses, but may not be distributed as dividends.

(ii) Investments

Our by-laws permit that we appropriate an amount not lower than 5% and not higher than 61.75% of our statutory adjusted net income to a reserve for investments, in order to finance the expansion of our activities, including subscription to capital increases or the establishment of new enterprises. This reserve cannot exceed 80% of our capital stock. Should this limit be reached, a General Meeting of shareholders must deliberate on the balance, either distributing it to shareholders or increasing capital.

(iii) Shareholder transaction

During 2002, in connection with our project financing agreement with the International Finance Corporation - IFC, we transferred to the IFC 53,727 thousand preferred shares as payment of US$ 5 million of our outstanding debt, upon the exercise by the IFC of its option to convert the balance of the debt. We recognized a gain of R$ 11.7 on this transaction which was recorded directly in shareholders' equity as a capital reserve.

(iv) Employee profit sharing of up to 10% of net income for the period, based on predetermined criteria. Directors are allotted a 5% participation in net income for the period, limited to the amount equivalent to their annual remuneration, whichever is lower. Profit sharing is conditioned to the

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achievement of collective and individual targets, which are established in advance by the Board of Directors at the beginning of the fiscal year.

At December 31, 2004 the Company held in treasury 60,731 thousand common shares and 1,589,604 thousand preferred shares in the total amount of R$ 1,040.1.

The Board of Directors has successively approved the repurchase of shares, and the Company is authorized, during renewable periods of up to 90 days, to acquire shares within certain limits.

Additionally as part of our buyback program, in 2001, our Board of Directors authorized the issue of put options for the repurchase of 188,380 thousand preferred shares of our own stock. The net premium received on the placement of the options was R$ 4.9, recorded as a capital reserve in shareholders' equity. In 2002, the put options were exercised and the Company repurchased 188,380 shares for the total consideration of R$ 89.1.

Activity in treasury shares during the year was as follows (in thousands):

	2004	2003	2002

Preferred shares
At beginning of year	(520,153)	(273,684)	(848,906)
Repurchase of shares	(2,605,318)	(529,337)	(706,102)
Transfer of shares to IFC			53,727
Cancellation of shares	1,535,867	282,868	1,227,597
At end of year	(1,589,604)	(520,153)	(273,684)

Common shares
At beginning of year	(104,546)	(101,131)	(271,567)
Repurchase of shares		(63,464)	(106,710)
Cancellation of shares	43,815	60,049	277,146
At end of year	(60,731)	(104,546)	(101,131)

(d) Dividends and contributions

The determination of the dividend approved by the Board of Directors from net income for the year ended December 31 was as follows:

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	2004		2003	2002

Net income for the year	1,161.5		1,411.6	1,510.3
Legal reserve (5%)		(i)	(70.6)	(75.4)
Dividend basis	1,161.5		1,341.0	1,434.9



Dividends
Prepaid interim distribution
as dividends	108.4		495.2	160.8
as interest attributed to shareholders' equity	236.1		222.5
Supplemental dividends
as dividends	424.6		54.6	341.3
as interest attributed to shareholders’ equity	558.1		226.1

Withholding tax on interest attributed to
shareholders' equity (generally 15%)	(119.3)		(67.3)
Total dividends, net of withholding tax	1,207.9		931.1	502.1

Percentage of dividends to dividend basis	102.2		69.4	35.0

Dividends per thousand shares outstanding
at year-end, net of withholding tax (in whole reais) - R$
Common	20,86	(ii)	23.15	12.40
Preferred	22,95	(ii)	25.46	13.64

(i) We did not appropriate any amounts to our legal reserve during 2004, based on the provisions in Brazilian Corporation Law which determine that capital reserves may be limited to 30% of the Company’s capital stock.

(ii) Dividends per lot of thousand shares outstanding (excluding treasury shares) at year-end - before withholding tax (IRRF): common - R$ 22.92 and preferred - R$ 25.21

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(e) Interest on shareholders’ equity

Brazilian companies are permitted to pay limited amounts of interest on capital to shareholders and treat such payments as an expense for Brazilian income and social contribution tax purposes. This notional interest distribution is treated for accounting purposes as a deduction from shareholders' equity in a manner similar to a dividend. A 15% tax is withheld and paid by AmBev upon credit of the interest. Interest attributed to shareholders' equity is treated as a dividend for purposes of the mandatory dividend payable by AmBev.

(f) Stock ownership plan

The stock ownership plan for the purchase of Company shares (the Plan) is administered by a committee that includes non-executive members of our Board of Directors. This committee periodically creates stock ownership programs and sets the terms, vesting requirements and employees to be included and establishes the price at which the preferred and common shares are to be issued.

The purchase price cannot be less than 90% of the average price of the shares traded on the Bovespa in the previous three business days, at the date the award is granted. The number of shares which may be granted each year under the Plan cannot exceed 5% of the total number of shares outstanding of each type of share at that date (shares granted represented 1.0% and 0.03% of total shares outstanding in 2003 and 2002, respectively).

The Company may opt to issue new shares, or transfer its treasury shares to the employee. There is no expiration date for the purchase of the shares. The Company has the right of first refusal on shares issued under the program if (i) the employee decides to sell the shares or (ii) the employee ceases to be employed by the Company, automatically forfeiting the purchase rights. The Company has the right to repurchase any shares subscribed by the employee at a price equal to: (i) the price paid by the employee, adjusted by inflation, should the shares be sold within the first 30 months following the purchase; (ii) 50% at the price paid, adjusted by inflation, and another 50% at the market price, if the employee sells the shares after the first 30 months but before the 60th month following the purchase; or (iii) at market price if sold at least 60 months following the purchase.

Employees who do not apply at least 70% of their annual bonuses, net of income tax and other charges, to subscribe shares under the stock ownership plan, will forfeit their purchase rights in the same proportion of the bonuses not applied, unless the equivalent amount had been previously subscribed in cash by the employee.

For plans granted prior to 2003, the Company provided advances to employees for the purchase of shares. Financing arrangements were normally for periods of no more than four years and accrued 8% interest per annum above the "Índice Geral de Preços - Mercado" - IGP-M (Note 2(o)).These advances are guaranteed by the shares. On December 31, 2004 these advances totaled R$ 175.2 (R$ 234.7 in 2003) and are included in the balance sheet as non-current assets. For plans granted beginning in 2004, the Company no longer provides these advances.

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The summary of changes in shares included in the Plan for the years ended December 31, 2004 and 2003 is the following:

	2004	2003

Outstanding (in thousands of shares)
At beginning of year	733,689	640,800
Granted	9,000	386,000
Exercised	(55,727)	(259,007)
Cancelled	(35,926)	(34,104)
At year end - outstanding and exercisable	651,036	733,689

Shares available at end of each year that may
be granted in the subsequent year	2,813,887	1,926,867

17 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(a) Overview

A substantial part of our loans and financing are denominated in foreign currency. We also have assets in Brazil, Argentina and other South and Central American countries.

We hold certain amounts of cash and cash equivalents denominated in foreign currency, and enter into cross-currency interest rate and commodities swap transactions and currency forward contracts to hedge against the effects of exchange rates variations on our consolidated exposure to foreign currency, interest rate fluctuations, and changes in raw material costs, particularly aluminum, sugar and wheat.

Financial assets are purchased to hedge against financial liabilities, which does not prevent the Company from redeeming them at any time, even though its real intent is to carry such assets to maturity on their respective due dates.

(b) Derivative financial instruments

Volatility of interest rates, exchange rates and commodity prices are the principal market risks to which we are exposed and which we manage through derivative instruments to mitigate exposure to risk.

We monitor and evaluate our derivative positions on a daily basis and adjust our strategy in response to market conditions. We also periodically review the credit limits and creditworthiness of our counter parties in these transactions. In view of our policies and practices established for derivatives, management considers the occurrence of non-measurable risk situations as unlikely.

The notional outstanding amounts do not represent amounts exchanged by the parties and, thus, are not a measure of our exposure through the use of derivatives. The amounts exchanged during the term of the derivatives are calculated on the basis of the notional amounts and the other contractual conditions of the derivatives, which relate to interest rates and foreign currency exchange rates.

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The estimated fair value amounts of our derivatives exposures as of December 31, were as follows:

Financial instrument	2004	2003

Foreign currency
US$/R$	3,929.6	4,686,5
Yen/US$		775.7
Argentine Pesos/US$	132.9	152.4
CAD$/US$	298.6

Interest rate
Floating LIBOR/ fixed LIBOR	55.7	944.6
CDI (*)/Fixed interest rate		(201.8)
Fixed interest rate/ Canadian BA	943.2

Commodities
Wheat	2.3
Aluminum	13.2
Sugar	60.3	22.3
	5,435.8	6,379.7

(*) Interbank Deposit Certificate rate.

(i) Currency and interest rate hedges

Interest rate risks mainly relate to debt borrowed at floating rates. The foreign currency debt is largely subject to fluctuations in the LIBOR. The portion of local currency denominated debt that is subject to floating rates is linked to the TJLP. We use derivative instruments to mitigate the effects of volatility of the LIBOR rate.

At December 31, 2004, unrealized gains (losses) on financial instrument, not designated as hedges for accounting purposes were recorded at the lower of cost plus accrued interest and market value, in accordance with Brazilian GAAP. Had the Company recorded its short-term investments and financial instruments at market value, it would have recorded an additional unrealized gain in the amount of R$ 189.0 in earnings for the year ended December 31, 2004 (R$ 206.0 in 2004) as presented in the table below:

Financial instruments	Book value	Market value	Unrealized gain

Public bonds	131.0	148.7	17.7
Swaps/forwards	(421.7)	(264.6)	157.1
“Cross currency Interest rate Swap” (*)	(40.9)	(26.6)	14.3
	331.6	(142.5)	189.1

(*) Swaps of Labatt Canada for the conversion of the Notes taken at fixed interest in US dollars for fluctuating interest in Canadian dollars.

The fair values of investments are estimated based on quoted market prices. For investments for which there are no quoted market prices, fair values are derived from available yield curves for investments of similar maturity and terms.

(ii) Currency and commodities

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At December 31, 2004, losses totaling R$ 45.3 (Gain of R$ 1.2 in 2003), arising from these instruments obtained for the specific purpose of mitigating our exposure to fluctuations in foreign currencies and the prices of raw materials to be purchased, were deferred, and will be recognized in income when realized.

During the years ended December 31, 2004 and 2003, the following effects arising from such instruments were recorded in earnings under Cost of sales:

	Gain (loss) recorded in cost of sales
Description		2004		2003

Currency		(9.1	)	(99.0	)
Sugar		6.6		-
Wheat and corn		(0.1	)	-
Aluminum		10.9		16.7
		8.3		(82.3	)

The Company's financial liabilities, represented mainly by Bonds 2013 and 2011, Syndicated Loan and import financings, are stated at cost plus accrued interest and monetary and exchange variations, based on closing rates and indices.

Had the Company recorded its financial liabilities at market values, it would have recorded an additional loss, before income taxes, of approximately R$ 602.6, on December 31, 2004 (loss of R$ 202.2 in 2003 and a gain of R$ 461.7 in 2002), as presented in the table below:

Financial liabilities	Book value	Market value	Unrealized (loss)

Bonds	2,701.1	3,265.7	(564.6	)
Series A Notes (i)	434,2	466.1	(31.9	)
Series B Notes (ii)	111.7	117.8	(6.1	)
	3,247.0	3,849.6	(602.6	)

(i) Series A notes executed by Labatt Canada in US dollars.

(ii) Series B notes executed by Labatt Canada in Canadian dollars.

The criteria used to estimate the market value of the financial liabilities was carried out based on quotations of investment brokers, on quotations from banks that render services to AmBev and Labatt Canada and at the secondary market value of securities on the base date as of December 31. The Bonds, approximately 125.25% of face value for Bond 2011 and 117.2% for Bond 2013 and the Series A Notes and Series B Notes of Labatt Canada, the prices were calculated based on the cash flow discounted at present value, using market rates available for Labatt Canada for similar instruments.

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We sell to distributors, supermarket and retailers, within a broad distribution network. Credit risk is reduced as a result of the large number of customers and control procedures that monitor the creditworthiness of distributors and customers. Historically, we have not experienced significant losses on receivables from customers. 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 loan limits and appraisals of financial institutions, not allowing concentration, i.e., the loan risk is monitored and minimized for the negotiations are carried out only with a select group of counterparties highly qualified. Labatt Canada enteres compensation agreements with its counterparties, allowing them to terminate financial assets and liabilities contracts in the event of default.

(d) Financial income (expense)

	2004	2003	2002
Financial income
Realized and unrealized gain from derivative instruments	128.9	319.8	1,202.4
Foreign exchange gains (losses) on investments	(49.7)	(97.2)	1,007.2
Financial income on cash equivalents	175.2	233.7	120.5
Interest on taxes, restricted deposits for legal proceedings	11.6	77.4	34.2
Other	73.2	68.1	166.0
	339.2	601.8	2,530.3

Financial expenses
Realized and unrealized losses from derivative instruments	(541.3)	(298.2)	(883.6)
Foreign exchange rate (losses) gains on loans	258.3	524.3	(1,738.8)
Interest and charges on loans	(592.6)	(474.5)	(441.8)
Tax on financial transactions	(121.3)	(90.9)	(95.0)
Interest on contingencies and other	(53.9)	(95.4)	(95.7)
Other	(64.8)	(74.0)	(22.4)
	(1,115.6)	(508.7)	(3,277.3)
Total	(776.4)	93.1	(747.0)

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18 INCOME TAXES

(a) Tax rates

Income taxes in Brazil comprise federal income tax (25%) and social contribution (9%) (a federal tax on income) which, combined, provide a composite statutory rate of 34%. There are no taxes levied by state or local authorities on income in Brazil. The Company is subject to taxes from its operations in foreign jurisdictions.

(b) Income tax reconciliation

	2004	2003	2002

Income before income taxes, profit sharing
and contributions and minority interest	1,829.4	1,864.2	1,307.4
Deduct: profit sharing and contributions	(152.4)	(23.6)	(125.1)
Income before taxes on income	1,677.0	1,840.6	1,182.3

Tax expense at statutory rates - 34%	(570.1)	(625.8)	(402.0)

Adjustments to derive effective benefit (expense)
Benefit from deductibility of interest attributed
to shareholders' equity	270.0	152.7	-
Tax losses carryforwards from previous years (i)	-	147.9	-
Non-taxable gains from tax incentives
in subsidiaries (Note 2(x))	65.7	59.8	51.7
Realization of goodwill upon merger of subsidiary	(12.4)	37.1	-
Non-deductible losses on exclusive funds	(39.5)	-	-
Foreign earnings not subject to tax	(204.1)	(183.0)	621.5
Non-deductible goodwill amortization	(59.5)	(21.2)	(24.5)
Restructuring gains	-	-	(1.5)
Exchange rate variation on foreign subsidiaries	85.0	(6.8)	-
Other non taxable income, net	(46.9)	13.2	35.4
Tax benefit (expense) per statement of operations	(511.8)	(426.1)	280.6

(i) We acquired Pepsi in October 1997 including net operating tax losses available for offset. Pursuant to the purchase agreement, in the event we had used such tax losses within a five-year period from the date of purchase, we would have been required to reimburse 80% of these amounts to the seller. Although this clause expired on October 21, 2002, we had not recorded the remaining 80% of the Pepsi tax asset, totaling R$ 148.0 as management was not fully confident, that the asset met the probable recoverability test under CVM Instruction No. 273/98 and 271/02.

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Composition of benefit (expense) of Income Tax and CSLL:

	2004	2003	2002

Current	(740.6)	(624.4)	(123.4)
Deferred	228.8	198.3	404.0
Total	(511.8)	(426.1)	280.6

The major components of the deferred tax asset and liability accounts are as follows:

	2004	2003

Deferred income tax assets
Tax loss carryforwards, net	1,091.0	1,163.5
Temporary differences
Non-deductible provisions	491.3	410.0
Other	634.3	258.3
	2,216.6	1,831.8

Deferred income tax liabilities
Accelerated depreciation	100.5	17.9
Other	38.0	8.3
	138.5	26.2

(d) Net operating loss carryforwards

Deferred tax assets are limited to the amount for which offset is supported by profit projections for the next ten years, discounted to present value, according to CVM Instructions No. 273/98 and 271/02.

Net deferred income tax assets comprise Brazilian net operating losses, which have no expiration dates, available for offset against future taxable income. Brazilian carryforward losses are available for offset of up to 30% of annual income before tax in any year. Tax losses are not inflation-indexed.

Based on projections of future taxable income, the estimated recovery of income tax and social contribution loss carryforwards is as follows:

2006			54
2007			309
2008			150
2009			228
2010			296
2011			54
			1,091

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It is estimated that the balance of deferred taxes on temporary differences as of December 31, 2004 will be realized until the fiscal year 2010. However, it is not

possible to accurately estimate when such temporary differences will be realized, because the major part of them depends on legal decisions, over which the Company has no control nor any means of anticipating exactly when a final decision will be reached.

The projections of future taxable income include various estimates on the performance of the Brazilian and the global economy, the determination of foreign exchange rates, sales volume, sales prices, tax rates, and other factors that may differ from the data and actual values.

Since the income tax and social contribution derive not only from taxable income but also depend on the Company’s tax and corporate structure, the existence of non-taxable income, non-deductible expenses, tax exemption and incentives, and other variables, there is no relevant correlation between net income and the determination of income tax and social contribution. Therefore, we recommend that the tax loss carryforwards should not be taken as an indicator of future profits.’

Tax loss carryforwards available for offset arising from operations in Argentina, Venezuela, Uruguay and Paraguay totaling R$ 184.0, expire through 2007. Recovery of these tax losses is not considered to be more likely than not based on current estimates at December 31, 2004 and, accordingly, we have not recorded these assets.

19. COMMITMENTS WITH SUPPLIERS

The Company has agreements with certain suppliers to acquire certain quantities of materials that are important for the production and packaging processes, such as malt, plastics for PET bottles, aluminum and natural gas.

The Company has commitments assumed with suppliers for 2005 and 2006, already contracted on December 31, 2004 at the amount of approximately R$ 1,320.0 and R$ 390.0, respectively.

20. OTHER OPERATING INCOME (EXPENSES), NET

	2004	2003	2002

Operating income
Gain on tax incentive programs in subsidiaries	193.3	175.9	151.9
Foreign exchange and inflation accounting gains on subsidiaries abroad (i)	255.3		128.8
Recovery of taxes and contributions	14.2	24.6	26.7
Negative goodwill realized upon sale			14.8
Gain on the settlement of tax incentives	21.9	16.6
Other	22.9	23.5	45.4
	507.6	240.6	367.6

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	2004	2003	2002

Operating expenses
Amortization of goodwill (ii)	(803.6)	(252.4)	(105.3)
Foreign exchange and inflation accounting losses on subsidiaries abroad	(2.9)	(142.4)
Taxes on other income	(67.5)	(31.2)
Other	(54.5)	(54.7)	(62.9)
	(928.5)	(480.7)	(168.2)
Operating income (expenses), net	(420.9)	(240.1)	(199.4)

(i) Effect of the exchange variation over the investment in Labatt ApS.

(ii) The goodwill of Labatt Canada resulted in an amortization expense of R$ 409.7 in the period between August 27, 2004 and

December 31, 2004.

21. NON-OPERATING INCOME (EXPENSES), NET

	2004	2003	2002

Non-operating income
Reversal of provision for loss on property, plant and equipment	13.2
Gain on holdings of investiments			31.8
Gain on disposal of property, plant and equipment	53.5	38.5
Other	9.1	5.6	4.0
	75.8	44.1	35.8

Non-operating expenses
Asset impairments, miscellaneous investment write-offs and other	(10.4)	(58.7)	(69.9)
Provision for restructuring	(198.7)
Loss of interest ownership in subsidiaries	(80.8)	(33.3)
Loss on disposal of property, plant and equipment	(97.8)	(25.8)	(12.4)
Other	(22.0)	(27.0)	(25.7)
	(409.7)	(144.8)	(108.0)
Non-operating income (expenses), net	(333.9)	(100.7)	72.2

22. INSURANCE

At December 31, 2004, the main assets of the Company and its subsidiaries, such as property, plant and equipment and inventories, are insured against fire and other risks, at replacement value. Insurance coverage is higher than the book values.

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23. SUBSEQUENT EVENTS

On January 7, 2005, the Company’s Board of Directors deliberated on the payment of interest on shareholders’ equity, in the amount of R$ 9.6800 per lot of thousand common shares and R$ 10.6480 per lot of thousand preferred shares. The Board of Directors also deliberated on the payment of supplementary dividends to be included in the mandatory minimum dividends for 2004, in the amount of R$ 7.3600 per lot of thousand common shares and R$ 8.0960 per lot of thousand preferred shares.

On February 14, 2005, the CVM authorized the registration of the Mandatory Tender Offer for Common Shares (MTO) issued by the Company under the terms of the Article 29 of the CVM Instruction 361/02. The MTO, which shall be carried out on March 29, 2005, and shall have the following characteristics:

(a) Issuer: InBev AS/NV;

(b) Purpose of the offering:

(i) up to 100% of the outstanding common shares on the date of the auction, which totaled, on December 31,2004, 3,577,208,360 shares, or 15.2% of the voting capital and 6.3% of the Company’s total capital;

(ii) up to 67,730,600 common shares of the Company owned by CBB, which accounted for, on December 31, 2004, 0.3% of the voting capital and 0.1% of the Company’s total capital;

(iii) up to 6,006,448 common shares owned by AmBev’s management members, which accounted for, on December 31, 2004, 0.02% of the voting capital and 0.1% of the Company’s total capital;

(c) Offering price: the payment of the acquisition price of common shares shall be made, at the option of each shareholder holding common shares, purpose of this Offering, in one of the following ways:

(i) Payment in InBev’s common shares (“Option to Pay in Shares”), in the proportion of 13.827166 InBev’s common shares per each lot of 1,000 AmBev’s common shares;

(ii) Payment in cash, in Brazilian Reais (“Option to Pay in Cash”), corresponding to 353.28 Euros, convertible into US dollars and then into Brazilian Reais, under the terms defined in the Public Tender Offer Notice. The conversion of Euros into US dollars and of these into Brazilian Reais shall be made as a result of the low liquidity in the exchange market of Euros into Reais;

(d) Conditions of payment: to the holders of common shares issued by AmBev who choose for the payment in shares, the financial settlement shall occur as soon as possible and no later than 30 days after the final date of qualification, determined in the Public Tender Offer Notice within 60 days after the Auction date. Those who choose for the cash transaction, the payment for traded shares will be made within five business days after

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the Auction date, under the terms of the Public Tender Offer Notice.

(e)        Price reference: AmBev’s valuation report, prepared by an independent Financial Institution, on the reference date as of June 30,
     2004, under the terms of the CVM Instruction 361/02, containing the price calculation of AmBev’s shares, taking into account
     the following methodologies:

(i) Book value: the book value on June 30, 2004 was R$ 104.90 per lot of thousand common shares;

(ii) Weighted average quotation price: the weighted average quotation price of AmBev’s common shares on BOVESPA between September 1, 2003 and August 30, 2004 corresponds to R$ 952.80 per lot of thousand common shares; and

(iii) Economic value (unaudited): AmBev’s economic value, calculated according to the discounted cash flow methodology, resulted in the value interval of R$ 819.00 and R$ 901.00 per lot of thousand common shares on June 30, 2004.

24. SUMMARY OF PRINCIPAL DIFFERENCES BETWEEN BRAZILIAN GAAP AND US GAAP

(a) Description of the GAAP differences

The Company's accounting policies comply with and its consolidated financial statements have been repared in accordance with, accounting principles set forth in Brazilian GAAP. The Company has elected to use its Brazilian GAAP financial statements as its primary financial statements.

A summary of the Company's principal accounting policies that differ significantly from US GAAP is set forth below.

(i) Supplementary inflation restatement in 1996 and 1997 for US GAAP

Under Brazilian GAAP, inflation accounting was discontinued effective January 1, 1996. Prior to that date, Brazilian GAAP statements included indexation adjustments which partially accounted for the effect of inflation on property, plant and equipment, investments, deferred charges (together denominated Permanent assets) and shareholders' equity, and reported the net charge or credit in the statement of operations. However, under US GAAP, Brazil ceased to be treated as a highly inflationary economy only as from January 1, 1998. Therefore the financial information for purposes of US GAAP for the two-year period ended December 31, 1997 include additional inflation restatement adjustments made by applying the IGP-M to permanent assets and shareholders' equity.

Shareholders' equity under US GAAP was increased by R$ 110.4, R$ 120.1 and R$ 130.9, respectively, at December 31, 2004, 2003 and 2002 due to the additional inflation restatement adjustments, net of depreciation.

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(ii) Reversal of inflation restatement adjustment on foreign subsidiaries

Under Brazilian GAAP, the financial statements of our subsidiaries operating in Argentina and Venezuela include inflation accounting adjustments for certain periods. For purposes of US GAAP, neither of these countries was considered to be highly inflationary for the years presented and, accordingly, amounts are reported based on nominal local currency balances translated to reais at the period end exchanges rates for balance sheet accounts and average rates for the year for statements of operations and of cash flows.

Shareholders' equity under US GAAP was reduced by R$ 13.0, R$ 116.0 and R$ 105.3 at December 2004, 2003 and 2002, due to the reversal of the inflation restatement adjustments

(iii) Property, plant and equipment

·	Capitalized interest

Under Brazilian GAAP, prior to January 1, 1997 there was no accounting standard requiring capitalization of interest as part of the cost of the related assets. Under US GAAP, capitalization of the financial costs of borrowed funds, excluding foreign exchange losses, during construction of major facilities is recognized as part of the cost of the related assets.

For purposes of the reconciliation, an increase in shareholders’ equity due to capitalized interest, net of amortization effects was recorded, amounting to R$ 10.9 in 2004, R$ 7.6 in 2003 and R$ 8.1 in 2002.

·	Impairment

Under Brazilian GAAP, companies are required to determine if operating income is sufficient to absorb the depreciation of long-lived assets in order to assess potential asset impairment. In the event such operating income is insufficient to recover the depreciation, the assets, or groups of assets, are written-down to recoverable values, preferably, based on the projected discounted cash flows of future operations. In the event of a planned substitution of assets prior to the end of the original estimated useful life of the asset, depreciation of such asset is accelerated to ensure that the asset is depreciated according to estimated net realizable values at the estimated date of substitution.

Under US GAAP, SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, requires companies to evaluate the carrying value of long-lived assets to be held and used, and for long-lived assets to be disposed of, when events and circumstances require such a review. The carrying value of long-lived assets is considered impaired when the anticipated undiscounted cash flow from identified asset groups, representing the lowest level for which identifiable cash flow are largely independent of the cash flows of other groups of assets, is less than their carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value

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of the assets or discounted cash flows generated by the assets.

During 2004, as a result of the decision from the Brazilian antitrust authorities that AmBev must sell its Marathon brand, we recorded an impairment provision totalling R$26.1. No impairment charge was recorded in our Brazilian GAAP records.

(iv) Deferred charges

Brazilian GAAP permits deferral of acquisition and implementation of software, payments made to distributors (recorded as Other intangible assets) and pre-operating expenses incurred in the construction or expansion of a new facility until the facility begins operations.

For US GAAP reconciliation purposes, amounts deferred related to pre-operating expenses incurred in the construction or expansion of a new facility, do not meet the conditions established for deferral and accordingly have been charged to income.

For purposes of the reconciliation, deferred charges expensed under US GAAP, net of amortization effects, amounted to R$ 143.9 in 2004, R$ 138.2 in 2003 and R$ 174.6 in 2002.

(v) Business combinations

Under Brazilian GAAP, goodwill arises from the difference between the amount paid and the Brazilian GAAP book value (normally also the tax basis) of the net assets acquired. This goodwill is normally attributed to the difference between the book value and the market value of assets acquired or justified based on expectation of future profitability and is amortized over the remaining useful lives of the assets or up to ten years. Negative goodwill arises under Brazilian GAAP when the book value of assets acquired exceeds the purchase consideration; negative goodwill is not generally amortized but is realized upon disposal of the investment.

Under US GAAP, fair values are assigned to acquired assets and liabilities in business combinations, including intangible assets and unallocated goodwill. Upon the adoption of SFAS No. 142, Goodwill and Other Intangible Assets, as from January 1, 2002 goodwill is no longer amortized but, instead, is assigned to an entity's reporting units and tested for impairment at least annually. The differences in relation to Brazilian GAAP arise principally from the measurement of the consideration paid under US GAAP using the fair value of shares and put options issued, and the effects of amortization which is no longer recorded for US GAAP purposes.

For Brazilian GAAP purposes, the net balance of goodwill at December 31, 2004 was R$ 18,345.5 (R$ 1,864.2 in 2003), which is being amortized to income over a period of up to 10 years; negative goodwill at December 31, 2004 was R$ 175.1 (R$ 176.9 in 2003).

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For US GAAP purposes, the net balance of goodwill at December 31, 2004 is R$ 13,418.9 (R$ 253.5 in 2003), excluding goodwill arising from the acquisition of Quinsa, which is accounted for under the equity method.

The following significant business combinations have generated differences in accounting between Brazilian GAAP and US GAAP:

	2004		2003		2002
Differences in net income
The Labatt transaction
Amortization of goodwill	515.2
Depreciation of purchase accounting adjustments allocated to tangible and intangible assets acquired	(23.5	)
Effect of reorganizations and plant closures	(48.7	)
Income tax effect	26.1
Employee future benefits	0.5
Derivative instruments	(4.6	)
	465.0
The Quinsa transaction
Amortization of goodwill	103.0		84.8
Depreciation of purchase accounting adjustments allocated to tangible and intangible assets acquired	(58.6	)	(35.8	)
Cumulative translation adjustment	76.6		157.1
Fair value adjustment of put option	(130.3	)	(135.2	)
	(9.3	)	70.9
The Antarctica transaction
Amortization of goodwill	84.7		84.7		84.7
Depreciation of purchase price adjustments	(11.9	)	(12.2	)	43.2
Amortization/write-off of US GAAP intangibles	19.2		(64.5	)	(12.2	)
	92.0		8.0		115.7

Other acquisitions (principally reversal of amortization)	21.8		24.6		9.8
Business combinations adjustments (Note 24 a(v))	569.5		103.5		125.5

Differences in shareholders' equity
The Labatt transaction
Goodwill	(3,678.8	)
Fair value of tangible and intangible assets	5,895.9
Effect of reorganizations and plant closures	81.2
Income tax effect	(1,691.5	)
Employee future benefits	(675.2	)
Derivative instruments	(22.1	)
	(90.5	)
The Quinsa transaction
Cumulative translation adjustment	12.2		(6.8	)
Goodwill	78.5		84.8
Fair value of tangible and intangible assets	(101.2	)	(35.8	)
Fair value of put options	(265.5	)	(135.2	)
	(276.0	)	(93.0	)

The Antarctica transaction
Goodwill	(355.4	)	(440.3	)	(525.0	)
Fair value of tangible and intangible assets	115.5		108.4		185.0
	(239.9	)	(331.9	)	(340.0	)

Roll-up of Brahma minority shareholders	149.9		149.9		149.9
Other acquisitions	41.7		19.9		(4.7	)
Business combinations adjustments (Note 22 (a)(v))	(414.8	)	(255.1	)	(194.8	)

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·	The Labatt transaction

Under Brazilian GAAP, the incorporation of Labatt was accounted for as a pooling of interest. AmBev incorporated a holding company, Labatt ApS at fair value. The only significant asset of Labatt ApS was its investment in Labatt Canada.

For Brazilian GAAP purposes, AmBev issued shares in an amount equivalent to the fair value of Labatt ApS.

Under U.S. GAAP, we acccounted for the transaction using the purchase method of accounting with AmBev as the accounting acquirer. We accounted for this transaction as if AmBev had acquired Labatt Canada directly in order to determine the amount of goodwill to be recorded by AmBev.

The purchase consideration of R$ 14,243.8 was determined based on the fair value of the shares issued by AmBev at March 3, 2005 which was considered to be the measurement date for this transaction.

Goodwill arising from the acquisition of Labatt under US GAAP totaled R$ 12,950.5 and will be tested for impairment on an annual basis or whenever events or circumstances indicates it to be necessary.

The following fair value adjustments were made to the US GAAP book value of Labatt’s net assets:

	August 27, 2004

Book value of our interest in Labatt	477.7
Allocation of fair value
Property, plant and equipment	372.7
Contractual agreements	3,367.0
Trademarks	1,887.1
Contingencies to be reimbursed by InBev	275.4
Pension and other post-retirement benefits	(382.7	)
Reversal of goodwill from previous acquisitions	(2,920.9	)
Deferred tax effect on fair value adjustments	(1,783.0	)
Fair value of Investment in Labatt	1,293.3

Total purchase consideration	14,243.8
Fair value of subsidiary acquired	1,293.3

Goodwill	12,950.5

Registered trademardks are not subject to amortization and contractual agrements have a useful life of 100 years.

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The following summary presents the Company’s unaudited pro forma consolidated results of operations for the years ended December 31, 2004 and 2003, in accordance with accounting principles generally accepted in the United States, as if the Labatt acquisition had been completed at the beginning of each period. The pro forma information is only presented for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition actually been made at such date, nor is it necessarily indicative of future operating results:

	2004	2003
	(unaudited)	(unaudited)

Net sales	12,380.5	12,330.2
Operating income	3,605.4	3,021.9
Net income	1,761.8	2,308.0
Net earnings per thousand AmBev shares (R$)
Basic
Common	35.37	53.91
Preferred	38.90	59.30
Diluted
Common	35.17	53.50
Preferred	38.69	58.85

·	The Quinsa transaction

Under Brazilian GAAP, the acquisition of Quinsa generated goodwill of R$ 1,029.9, arising from the difference between total consideration paid and assets contributed (shares of Linthal S.A.), and the book value of net assets acquired, which was attributed to expected future profitability, to be amortized over ten years.

Under US GAAP, we compared the total purchase consideration of R$ 1,950.2, comprised of: (i) cash paid totaling R$ 1,672.7; (ii) the fair value of our assets contributed to Quinsa of R$ 191.5 and (iii) the fair value of the put option granted to BAC of R$ 69.0 and (iv) other costs associated to the acquisition totalling R$17.0 with the fair value of our interest of the net assets acquired of R$ 830.9 and the fair value of the call option received from BAC of R$ 68.1, resulting in goodwill of R$ 1,051.2. We reviewed our purchase accounting of Quinsa during 2004, and, as a result, our goodwill was reduced by R$ 92.2. The measurement date of January 31, 2003 was used for purposes of determining the fair value of assets contributed.

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The following fair value adjustments were made to the US GAAP book value of Quinsa’s net assets:

	January 31, 2003

Book value of our interest in Quinsa	585.1
Property, plant and equipment	536.2
Intangible assets not previously recognized	153.6
Reversal of goodwill from previous acquisitions	(317.4)
Deferred tax effect on fair value adjustments	(126.6)
Fair value of Investment in Quinsa	830.9

The put option granted is recognized at fair value in our balance sheet as a non-current liability with changes in fair value, totaling R$ 130.3 in 2004 (R$ 135.2 in 2003), recognized in earnings as Financial expenses under US GAAP. The call option is recorded at cost and was tested for impairment at December 31, 2004. No impairment charge was recognized.

Consistent with Accounting Principles Board Opinion No. 18, "The Equity Method of Accounting for Investment in Common Stock", the carrying value of our investments in Quinsa was tested for impairment by comparing it to the December 31, 2004 market value of Quinsa’s ADRs. No impairment charge was recognized.

·	The Antarctica transaction

Under Brazilian GAAP, the transaction was treated as a merger (similar to a pooling-of-interest under US GAAP) whereby the controlling shareholders of Brahma and Antarctica each contributed their shares at the Brazilian GAAP book values of their corresponding net assets.

Under Brazilian GAAP, the net assets of Antarctica were adjusted to be consistent with the accounting principles of Brahma, resulting in goodwill on the combination. These adjustments totaled R$ 815.6 and resulted in an adjusted book value of the net assets of Antarctica at the date of the combination of R$ 586.9. Subsequent hindsight adjustments in 2000 increased the goodwill to R$ 847.3. This goodwill was attributed to property, plant and equipment (R$ 144.6) and future profitability (R$ 671.0) and will be amortized over the useful lives of the property, plant and equipment, and in the case of future profitability, over 10 years.

Under US GAAP, the combination of Brahma and Antarctica was accounted for using the purchase method as defined by U.S. Accounting Principles Board Opinion (APB) No. 16, Business Combinations, in which Brahma was the accounting acquirer.

The excess purchase consideration over the historical US GAAP book value of the net assets acquired and liabilities assumed was as follows:

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	July 1, 1999

Purchase consideration (represented by the market value of
Brahma shares equivalent to the AmBev's shares issued)	501.9
Less: Antarctica's shareholders' equity under US GAAP	(91.2)
Excess purchase consideration	410.7

The excess purchase price was allocated based on independent fair value appraisals to complement tangible assets (US$ 130.1 million) and the remainder to trademarks, distribution networks, software and others. The fair value allocated to tangible assets is being depreciated over an estimated average useful life of ten years, the fair value allocated to trademarks is being depreciated over 40 years, the distributors network over 30 years and the software over five years.

·	Roll-up of Brahma minorities

At Brahma's Extraordinary Shareholders' meeting on September 14, 2000, Brahma's common shareholders approved the combination by which all outstanding shares of Brahma not yet exchanged for AmBev shares were converted (rolled up) into shares of the same type and class of AmBev.

The adjustment of R$ 149.9 to shareholders' equity for all periods presented relates to the reversal of the negative goodwill under the Brazilian GAAP.

·	Other acquisitions

Under Brazilian GAAP we acquired Embodom during 2004 with a goodwill of R$ 214.5, based on future profitability, to be amortized over ten years.

Under US GAAP, no adjustment was made. We will test our goodwill for impairment periodically. No impairment charge was recognized during 2004.

Under Brazilian GAAP we acquired Cervesursa during 2003 with a negative goodwill of R$ 18.5, based on expectations of future losses, to be amortized over ten years.

Under US GAAP, we recorded a write-off of Cervesursa’s property and equipment in the amount of R$ 18.5, net of taxes.

A number of acquisitions in prior years were treated differently under Brazilian GAAP compared to US GAAP. These differences arose primarily from bases for determining purchase considerations, fair values, allocation of excess purchase prices, goodwill, amortization periods and cases of step-acquisition accounting.

For purposes of the US GAAP reconciliation, additional credits of R$ 21.8 were recognized in net income under US GAAP in the year ended December 31, 2004 (R$ 24.5 in 2003 and R$9.8 in 2002).

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(vi) FAHZ net assets

The FAHZ is a legally distinct entity for statutory purposes in Brazil, formed in 1936, which provides medical and other services to the employees and retirees of AmBev in Brazil. Under Brazilian GAAP, AmBev does not include the assets of the FAHZ in its financial statements.

For US GAAP purposes, the net assets of the FAHZ, excluding the actuarial liability, detailed below (see item vii), and its operating expenses, are included in the determination of shareholders' equity and net income under US GAAP of AmBev because such asses are not considered to be under US GAAP of AmBev because such assets are not considered to be plan assets as defined by SFAS No. 106, Employers' Accounting for Post-retirement Benefits Other than Pensions since they are not segregated and restricted between active and retired employees. The cash and cash equivalents of the FAHZ are presented as Restricted cash in the condensed consolidated US GAAP balance sheet. A substantial part of the assets are represented by shares in AmBev and have been reflected as treasury shares, thereby reducing the number of outstanding shares and affecting the determination of earnings per share.

The net assets and results of operations, after elimination adjustments of the FAHZ as at and for the years ended December 31, 2004 and 2003 are as follows:

	2004			2003			2002

Current assets
Restricted cash		2714			279.5			117.8
Others		13.1			11.5			14.2
Property and equipment		87.1			76.9			74.3
Other assets		2.2			3.8			82.2
Current liabilities		(8.2	)		(4.3	)		(8.0)
Non-current liabilities		(32.1	)		(24.5	)		(13.6)
Net assets		333.5			342.9			266.9

Operating expenses		(92.5	)		(79.4	)		(63.8	)
Operating (loss)		(84.0	)		(72.8	)		(56.2	)
Net loss		(34.0	)		(16.7	)		(4.9	)

(vii) Pension and other post-retirement benefits

In determining the pension and other post-retirement benefit obligations for Brazilian GAAP purposes, NPC No. 26 became effective for financial statements ended December 31, 2001. As permitted by the Standard, the transitional gain or loss (being the difference between the plan net assets and the projected benefit obligation (PBO) at that date was fully recognized as a direct credit to retained earnings.

F-66

Under US GAAP, SFAS No. 87, Employer's Accounting for Pensions, and SFAS No. 106 are effective for fiscal years beginning after 1988 and 1992, respectively. As from such dates, when an initial transition obligation determined based on an actuarial valuation was booked, actuarial gains and losses, as well as unexpected variations in plan assets and the PBO and the effects of amendments, settlements and other events, have been recognized in accordance with these standards and therefore result in deferral differences. Through 1997, these amounts were treated as non-monetary and were indexed for inflation.

Under Brazilian GAAP, the Company does not record the liability related to medical, dental, educational and social assistance provided by the FAHZ, as they are considered legally separate entities and under current welfare foundation regulation, the surplus of assets over liabilities of FAHZ at December 31, 2003 cannot be returned to the Company. Under US GAAP those liabilities are recorded as post-retirement benefits. The FAHZ provides such benefits to current and retired employees of AmBev and their beneficiaries and covered dependents (approximately 45,000 beneficiaries and dependents at December 31, 2004 and 40,000 in 2003).

Plan assets include amounts contributed by AmBev and its employees and amounts earned from investing the contributions, less benefits paid. Based on the actuarial review of the defined benefits plan which had been closed to new participants, the net assets at December 31, 2004 were considered to be in excess of that required to meet the projected benefit obligation. Although AmBev will reduce future employer contributions to the minimum permitted by law, Brazilian pension regulations currently provide no means for returning this surplus to the sponsor. In view of this uncertainty, AmBev included in the actuarial determination of the pension obligation at December 31, 2004 a valuation allowance of R$195.2 against the plan assets (R$167.1 in 2003). This allowance impacts the determination of the pension charge/benefit.

Under US GAAP, as confirmed by a meeting of the AICPA International Practices Task Force on November 25, 2002, recording a valuation allowance against a pension asset is not appropriate. Accordingly, the valuation allowance was reversed and inlcuded in the actuarial gain or loss calculation for purposes of the reconciliation to US GAAP.

Based on the report of our independent actuary, the funded status and amounts recorded in our US GAAP condensed balance sheet and statement of operations as at and for the years ended December 31, 2004 and 2003 for our pension and welfare obligations to retirees in accordance with SFAS No. 132, Employer's Disclosures about Pensions and other Post-retirement Benefits, are as follows:

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	Pension benefits			Benefits other than pension
		2004	2003		2004	2003
Change in benefit obligation
Projected benefit obligation at
Beginning of year		360.7	325.6		338.4	240.3
Acquisition of Labatt		2,238.9			244.3

Plan participant's contribution	2.4		0.8
Service cost	16.2		2.1		2.0
Interest cost	91.4		45.0		47.1		33.5
Actuarial loss	166.8		23.3		57.0		86.8
Translation loss	(52.6	)			(5.6	)
Gross benefits paid	(72.8	)	(36.1	)	(31.1	)	(22.2	)
Special termination benefits	43.2
Curtailments	2.9
Amendments	3.5		-		-		-
Projected benefit obligation at end of year	2,800.6		360.7		652.1		338.4

Accumulated benefit obligation	2,532.6		343.7

Change in plan assets
Fair value of plan assets
at beginning of year	501.6		458.7
Acquisition of Labatt	1,662.2		-
Actual return on plan assets	279.1		77.3
Employer contributions	62.8		1.0
Employee contributions	2.3		0.9
Translation loss	(38.4	)	-
Gross benefits paid	(72.8	)	(36.3	)
Fair value of plan assets at end of year	2,396.8		501.6

Funded status at end of year	(403.8	)	140.9		(652.3	)	(338.4	)
Unrecognized net
actuarial (gain) loss	(75.9	)	(82.7	)	225.3		173.8
Unrecognized prior service cost	28.4		29.9		3.2
Unrecognized net transition
obligation	-		0.2		16.7		14.6
Net amount recognized at end of year	(451.3	)	88.3		(407.1	)	(150.0	)

Long-term	(451.3	)	88.3		(407.1	)	(150.0	)

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The charge in the statement of operations is comprised as follows:

	Pension benefits						Benefits other than pension
	2004		2003		2002		2004		2003		2002

Components of net periodic benefit cost
Service cost	16.2		3.1		3.3		2.0
Interest cost	91.4		45.0		21.3		47.3		33.5		15.5
Expected return on assets	(118.8)		(80.1)		(33.3)
Amortization of
Transition obligation (asset)	0.3		0.6		0.6		1.6		1.5		1.5
Prior service cost	4.9		4.9		4.9		0.2
Actuarial (gain) loss	(2.5)		(5.6)		(8.8)		7.4		4.1		1.7
Employee contributions	(0.9)		(0.9)		(0.9)
Total net periodic benefit cost (benefit)		(9.4)		(33.0)		(12.9)		58.5		39.1		18.7

Assumed health care cost trend rates have a significant effect on the amounts reported for the welfare plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects (all other assumptions have been held constant):

AmBev’s Plans/Labatt’s Plans	One-percentage-point increase				One-percentage-point decrease
		2004	2003	2002		2004	2003		2002
Sensitivity of retiree welfare results
On total service and interest cost components		5.2/1.3	4.5	3.2		(4.4)/(1.0)	(3.8	)	(2.8	)
On post-retirement benefit obligation		40.0/12.8	35.1	22.3		(34.1)/(11.3)	(29.7	)	(19.2	)

Under US GAAP, we recognized an additional liability related to other post-retirement benefits totaling R$ 95.8, R$ 77.1 and R$ 79.8 in 2004, 2003 and 2002, respectively. These amounts do not include the impact of Labatt's plans which are recorded as part of the purchase accounting adjustment.

Under US GAAP we recognized an additional pension plan asset of R$ 91.8, R$ 66.3 and R$ 32.8 in 2004, 2003 and 2002, respectively. These amounts do not include the impact of Labatt's plans which are recoreded as part of the purchase accounting adjustment.

AmBev’s pension plan weighted-average assets allocation at December 31, 2004 and 2003, by asset category, are as follows:

	Labatt		AmBev

	Quebec Plan	National and salaried Plans	2004	2003

Debt securities			62.0%	77.7%
Real estate	41%	36%	5.0%
Equity securities	59%	64%	33.0%	22.3%
Total	100%	100%	100.0%	100.0%

The Company’s investment strategy for its pension plan is to maximize the long-term rate of return on plan assets within an acceptable level of risk in order to minimize the cost of providing pension benefits while maintaining adequate funding levels. The Company’s practice is to conduct a strategic review of its assets allocation strategy every year.

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Included within the fair value of the IAPP plan assets as of December 31, 2004 are 9,595 thousand of our preferred shares and 88,665 thousand of our common shares with a total fair value at December 31, 2004 of R$ 128.4 (R$ 63.4 in 2003).

Assumptions applied were as follows:

(i) Weighted-average assumptions to determine benefit obligations at December 31:

				AMBEV
	Labatt 2004			Pension benefits					Benefits other than pension
	Pension		Benefits other than pension		2004		2003			2004		2003

Discount rate	5.75	%	5.75	%	10.9	%	10.9	%		10.9	%	10.9	%
Projected annual inflation rate	2.00	%	2.00	%	4.1	%	4.1	%		4.1	%	4.1	%
Rate of compensation increase	3.00	%			7.3	%	7.3	%		7.3	%	7.3	%
Health care cost trend on covered charges			10.0	%						7.3	%	7.3	%

(ii) Weighted-average assumptions to determine net periodic benefit cost for years ended December 31:

				AMBEV
	Labatt 2004			Pension benefits					Benefits other than pension
	Pension		Benefits other than pension		2004		2003			2004		2003

Discount rate	6.25	%	6.25	%	10.9	%	10.6	%		10.9	%	10.6	%
Projected annual inflation rate	2.0	%	2.0	%	4.1	%	4.3	%		4.1	%	4.3	%
Expected return on plan assets	8.0	%			15.0	%	18.0	%
Rate of compensation increase	3.0	%			7.3	%	7.5	%		7.3	%	7.5	%
Health care cost trend on covered charges			10.0	%						7.3	%	7.5	%

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Expected cash flows:

Information about the expected benefit payments for the Company’s defined benefit plan an other post-retirement benefits is as follows:

		AMBEV'S PLANS
	Labatt's plans	Pension Benefits	Benefits other than pension	Total

2005	119.3	32.1	30.2	73.7
2006	126.0	32.2	31.8	75.9
2007	133.5	31.9	33.3	77.9
2008	141.0	31.6	34.9	79.8
2009	149.2	31.4	36.4	208.5
2010-2014	837.4	150.3	203.1	432.8
	1,506.4	309.5	369.7	954.2

(viii) Earnings per share

Under Brazilian GAAP, net income per share is calculated on the number of shares outstanding at the balance sheet date, no information is disclosed on diluted earnings per share. Information is disclosed per lot of one thousand shares, because generally this is the minimum number of shares that can be traded on the Brazilian stock exchanges.

Under US GAAP, because the preferred and common shareholders have different voting and liquidation rights, Basic and Diluted earnings per share have been calculated using the "two-class" method, pursuant to SFAS No. 128, Earnings per Share which provides computation, presentation and disclosure requirements for earnings per share. The "two-class" method is an earnings allocation formula that determines earnings per share for preferred and common stock according to the dividends to be paid as required by the Company's by-laws and participation rights in undistributed earnings. Basic earnings per common share are computed by dividing net income by the weighted-average number of common and preferred shares outstanding during the period.

The table below presents the determination of net income available to common and preferred shareholders and weighted average common and preferred shares outstanding used to calculate basic and diluted earnings per share for each of the years presented.

The inclusion of the net assets of the FAHZ has had the effect of reducing the number of outstanding shares.

For purposes of computing diluted earnings per share, stock granted in the stock ownership plan and stock warrants are assumed to be converted into preferred or common shares as of the date of issuance of the security using the treasury stock method.

Earnings per share for all periods have been calculated giving retroactive effect for the share dividend distribution of 1 common shares for each 5 common or preferred shares held which was paid on May 31, 2005.

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Under US GAAP	AmBev
	2004							2003							2002
		Preferred		Common		Total			Preferred		Common		Total			Preferred		Common		Total

Basic numerator
Actual dividends declared		307.9		250.5		558.3			535.2		413.6		948.8			110.5		85.8		196.3
Basic allocated undistributed earnings		459.7		374.0		833.7			417.7		322.9		740.6			814.5		631.4		1,445.9
Allocated net income available for common and preferred shareholders		767.6		624.4		1,392.0			952.9		736.5		1,689.4			925.0		717.2		1,642.2

Basic denominator (in thousand of shares)
Weighted average shares - AmBev		25,375,493		26,139,315		51,514,808			22,371,249		22,421,904		44,793,153			22,640,577		22,577,466		45,218,043
Weighted average shares held by FAHZ/		(405,072	)	(3,794,205	)	(4,199,277	)		(419,053	)	(3,757,548	)	(4,176,601	)		(467,319	)	(3,668,559	)	(4,135,878	)
Weighted average outstanding shares, net		24,970,421		22,345,110		47,315,531			21,952,196		18,664,356		40,616,552			22,173,258		18,908,907		41,082,165

Basic earnings per thousand
shares - US GAAP (*) (whole reais) - R$		30.74		27.94					43.41		39.46					41.72		37.93

Diluted numerator
Actual dividends declared		308.8		249.5		558.3			537.2		411.6		948.8			111.0		85.3		196.3
Diluted allocated undistributed earnings		461.1		372.6		833.7			419.3		321.3		740.6			817.8		628.2		1,445.9
Allocated net income available for common and preferred shareholders		769.9		622.1		1,392.0			956.5		732.9		1,689.4			928.7		713.4		1,642.2

Diluted denominator
Stock ownership plan		216,156				216,156			250,579				250,579			268,485				268,485
Diluted weighted average shares (in thousands)		25,186,577		22,388,341		47,574,918			22,202,775		18,714,472		40.917,247			22,441,743		18,962,604		41,404,347

Diluted earnings per thousand
shares - US GAAP (*) (whole reais) - R$		30.57		27.79					43.08		39.16					41.38		37.62

(*) Preferred shareholders are entitled to receive per share dividends of at least 10% greater than the per share dividends paid to common shareholders. Undistributed earnings, therefore, have been allocated to common and preferred shareholders on a 100 to 110 basis, respectively, based upon the weighted average number of shares outstanding during the period to total shares (allocation percentage). Common and preferred shareholders share equally in undistributed losses.

F-72

(ix) Foreign exchange gain (loss) from translation of foreign subsidiaries

Under Brazilian GAAP, gains or losses arising from the translation of our foreign subsidiaries for purposes of consolidation are recorded in earnings.

Under US GAAP, we record these gains or losses directly to our shareholders’ equity as cumulative translation adjustments, a component of other comprehensive income.

(x) Income taxes

Under Brazilian GAAP, the deferred income tax asset represents the probable estimated amount to be recovered. In addition, deferred income taxes are presented gross rather than being netted.

Under US GAAP, deferred taxes are accrued on all temporary tax differences. Valuation allowances are established when it is not more likely than not that tax losses will be recovered. Deferred tax assets and liabilities are classified as current or long-term based on the classification of the asset or liability underlying the temporary difference. Deferred income tax assets and liabilities are netted rather than presented gross.

As discussed in Note 18(b), as part of the 1997 Pepsi transaction we acquired the conditional right to certain tax related assets. As we had not utilized the assets within the period which expired on October 21, 2002, any future benefit from these assets accrues entirely to AmBev.

We recorded these tax credits during 2003 for purposes of Brazilian GAAP, under the more stringent probability tests and CVM regulations. Under US GAAP, we recorded this tax benefit in 2002 as recovery was then considered to be more likely than not.

(xi) Provision for dividends and interest attributable to own capital

Under Brazilian GAAP, at each year-end, management is required to propose a dividend distribution from earnings and accrue for it in the financial statements. Under Brazilian GAAP, companies are permitted to distribute or capitalize an amount of interest, subject to certain limitations, calculated based on a government interest rate, on shareholders' equity. Such amounts are deductible for tax purposes and are presented as a deduction from shareholders' equity.

Under US GAAP, since proposed dividends may be ratified or modified at the annual Shareholders' Meeting, such dividends would not be considered as declared at the balance sheet date and would therefore not be accrued. However, interim dividends paid or interest credited to shareholders as capital remuneration under Brazilian legislation would be considered as declared for US GAAP purposes.

At December 31, 2004 the provision of R$ 992.9 (R$ 280.2 in 2003 and R$ 341.4 in 2002) for proposed dividends was reversed under US GAAP.

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(xii) Stock ownership plan

Under Brazilian GAAP, the rights to acquire AmBev's shares granted to employees, officers and directors under the stock ownership plan does not result in any expense being recorded. The purchase of the stock by the employees is recorded as an increase in capital stock for the amount of the purchase price.

Under US GAAP, in accordance with APB 25, Accounting for Stock Issued to Employees, the rights to acquire AmBev's shares granted under the stock ownership plan is deemed to give rise to compensation expense to the extent of the excess market price of the shares over the purchase price to employees, officers and directors. Unearned compensation expense is calculated at the end of each year using the expected number of awards outstanding. These awards are multiplied by the year-end market price less the employees' expected share price. The incremental change in compensation cost is then amortized as a charge to expense over the periods in which the employees perform the related services; such periods normally include a vesting period.

In addition, under US GAAP pro forma disclosures of net income and earnings per share are presented under the fair value method of accounting. Under this method, fair value is determined using a pricing model (Black - Scholes), which takes into account the stock price at the grant date, the purchase price, the expected life of the award, the volatility of the underlying stock, the expected dividends, and the risk-free interest rate over the expected life of the award.

For purposes of the reconciliation, additional charges were recognized under US GAAP in the amounts of R$ 14.3, R$ 32.0 and R$ 17.7 in 2004, 2003 and 2002, respectively.

(xiii)

Advances to employees for purchase of shares

Under Brazilian GAAP, advances to employees for purchase of shares are recorded as an asset and the interest accrued credited to income.

Under US GAAP, as the advances are collaterized by the stock issued under the stock ownership plan, the loan is reported as a deduction from shareholders' equity.

For purposes of the reconciliation, shareholders' equity is reduced under US GAAP by R$ 175.2, R$ 234.7 and R$ 324.8 in 2004, 2003 and 2002, respectively.

(xiv)

Accounting for derivative instruments

Under Brazilian GAAP, derivative instruments are recorded at the lower of cost plus accrued interest and fair market value. Additionally, unrealized gains or losses arising from transactions, which are designated as hedge instruments, entered to mitigate risks on purchase of raw materials, are deferred and recognized in the statement of operations when realized.

F-74

Under US GAAP, SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities and measure those instruments at fair value.

For purposes of the reconciliation, we have recorded unrealized losses totaling R$ 199.0 in our earnings under US GAAP, arising from the mark-to-market adjustment on our derivative instruments at December 31, 2004 Unrealized losses of R$ 153.8 in 2003)

(xv)

Short-term investments

Under Brazilian GAAP, our short-term investments are recorded at the balance sheet dates at the lower of cost plus interest and market value.

For US GAAP purposes, our short-term investments in debt securities are classified under guidance of SFAS No.115 "Accounting for Certain Investments in Debt and Equity Securities" as either trading securities or available for sale securities.

Our securities classified as Trading are measured at fair value at the balance sheet dates, and unrealized gains (losses) are included in earnings. During 2004, we reversed the R$ 6.5 gain recorded during 2003 for US GAAP as these securities were sold.

Our securities classified as Available for Sale are measured at fair value at the balance sheet dates, interest is recorded in income as incurred and unrealized gains (losses) are included directly in shareholders’ equity as Other comprehensive income (loss). At December 31, 2004, the amount of R$ 17.7 was recorded in Other comprehensive income as Unrealized gain from available for sale debt securities (47.7 in 2003).

Additionally our securities provided as guarantees in connection with the issuance of bonds in the amount of R$ nil (R$ 28.9 in 2003) are presented as restricted cash in the condensed consolidated US GAAP balance sheet.

(xvi)

Classification of statement of operations line items

Under Brazilian GAAP, in addition to the issues noted above, the classification of certain income and expense items is presented differently from US GAAP.

We have recast our statement of operations under the Brazilian GAAP to present a condensed statement of operations in accordance with US GAAP (Note 24(d)(ii)).

We have also incorporated the net income (loss) differences between Brazilian GAAP and US GAAP (Note 24 (b)(i)), in the statement of operations in accordance with US GAAP.

F-75

The reclassifications are summarized as follows:

Interest income and interest expense, together with other financial charges, are displayed within operating income in the statement of operations presented in accordance with Brazilian GAAP. Such amounts have been reclassified to non-operating income and expenses in the condensed statement of operations in accordance with US GAAP.

·	Under Brazilian GAAP, gains and losses on the disposal or impairment of permanent assets are classified as non-operating income (expense). Under US GAAP, gains and losses on the disposal or impairment of property, plant and equipment are classified as an adjustment to operating income.

Employee profit sharing expenses have been classified after non-operating expenses in the consolidated statement of operations in accordance with Brazilian GAAP. Such amounts have been reclassified to operating expenses in the condensed consolidated statement of operations in accordance with US GAAP.

·	Under Brazilian GAAP, certain credits arising from sales tax are recorded in operating income. Under US GAAP these are adjusted against net sales, as a Sales tax deduction.

·	Under Brazilian GAAP, charges arising from provision for contingencies are presented in a single line item in operating expense. Under US GAAP, provisions for contingencies are recorded in the statement of operations based on the type of contingency.

Under Brazilian GAAP, jointly controlled entities must be consolidated using the proportional consolidation method. Proportional consolidation requires that the share of the assets, liabilities, income and expenses are combined on a line-by line basis with similar items in the Company's financial statements. Under US GAAP, jointly controlled entities are recorded under the equity method. The prorated accounts of our jointly controlled affiliates have not been combined in the condensed consolidated US GAAP balance sheet and statements of operations.

Under Brazilian GAAP, shipping and handling costs, representing R$ 409.2 R$ 324.1, and R$ 264.2, respectively, for the years ended December 31, 2004, 2003, and 2002, are expensed as incurred and classified as selling expenses in the income statement. Under US GAAP, pursuant to the requirements of the Emerging Issues Task Force - EITF Issue No. 00-10, these expenses were reclassified to cost of sales.

F-76

In order to obtain more prominent and accessible shelf space for its products, AmBev pays distributors and retailers to place our products in premium positions. The Company also pays bonuses and gives discounts to increase sales, normally processed in the form of cash payments. Under Brazilian GAAP, these costs are classified as selling and marketing expenses. Under US GAAP, pursuant to the EITF 01-09 these costs are reclassified reducing net revenues.

Under Brazilian GAAP, unrealized gains or losses arising from foreign currency and commodities swaps entered to mitigate prices and foreign exchange risks on purchase of raw material, designated as hedge instruments are deferred and recognized in the statement of operations as Cost of sales upon realization. For US GAAP, as these instruments do not meet the qualifying criteria for hedge accounting under SFAS No. 133, these gains or losses, due to changes in fair value of swaps, are recorded as Financial income or Financial expense. The total amount reclassified were R$ 14.0, R$ 82.3 and R$ 345.6, for the years ended December 31, 2004, 2003 and 2002, respectively.

(xvii)

Classification of balance sheet line items

Under Brazilian GAAP, the classification of certain balance sheet items is presented differently from US GAAP. We have eliminated the effects of the proportional consolidation of our investment in Quinsa and certain other affiliates and reflected our investment in these affiliates on a single line item (Investment in affiliates) in the recast balance sheet under US GAAP.

We have recast our consolidated balance sheet under Brazilian GAAP to present a condensed consolidated balance sheet in accordance with US GAAP (Note 24 (d)(i)). The reclassifications are summarized as follows:

·	Under US GAAP certain deferred charges were reclassified to property, plant and equipment, accordingly to their nature.

·	Under US GAAP certain property, plant and equipment were reclassified to intangible assets, according to their nature.

·	Under Brazilian GAAP, deferred income taxes are not netted and assets are shown separately from liabilities. For US GAAP purposes, deferred tax assets and liabilities are netted and classified as current or non-current based on the classification of the underlying temporary difference.

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(b) Reconciliation of the differences between Brazilian GAAP and US GAAP

(i)

Net income

	Ref. Note 22(a)		2004		2003		2002

Net income under Brazilian GAAP			1,161.5		1,411.6		1,510.3

Depreciation of additional indexation of property
and equipment from 1995 to 1997	(i	)	(9.6	)	(10.8	)	(18.1	)
Reversal of inflation restatement adjustment on foreign subsidiaries	(ii	)	(6.2	)	(10.7	)	(105.3	)
Capitalized interest, net of amortization	(iii	)	3.3		(0.5	)	(2.4	)
Deferred charges, net of amortization	(iv	)	(5.7	)	36.4		18.3
Business combination adjustments	(v	)	569.5		103.5		125.5
FAHZ net assets	(vi	)	(34.0	)	(16.7	)	(4.9	)
Pension plan	(vii	)	25.5		33.5		13.9
Other post-retirement benefits	(vii	)	(18.7	)	2.6		(1.7	)
Foreign exchange gain (loss) from translation
of foreign subsidiaries	(ix	)	(245.2	)	52.6		(23.6	)
Recognition of Pepsi tax assets	(x	)	-		(148.0	)	148.0
Compensation expense from employee stock ownership plan	(xii	)	(14.3	)	(32.0	)	(17.7	)
Fair value adjustment on derivative instruments	(xiv	)	(199.0	)	153.8		4.9
Fair value adjustment on trading securities	(xv	)	(6.5	)	6.5
Realized gains from sale of avilable for sale securities			43.7
Minority interest on adjustments above			-		4.8		(2.0	)
Deferred income tax on adjustments above			127.7		102.8		(3.0	)
Net income under US GAAP			1,392.0		1,689.4		1,642.2

(ii)

Shareholders' equity

	Ref. Note 22(a)		2004		2003		2002

Shareholders' equity under Brazilian GAAP			16,995.9		4,308.2		4,129.6

Additional indexation of property and equipment
from 1995 to 1997, net	(i	)	110.4		120.1		130.9
Reversal of inflation restatement adjustment on on foreign subsidiaries	(ii	)	(13.0	)	(116.0	)	(105.3	)
Capitalized interest, net of amortization	(iii	)	10.9		7.6		8.1
Reversal of deferred charges,	(iv	)	(143.9	)	(138.2	)	(174.6	)
Business combination adjustments	(v	)	(414.8	)	(255.1	)	(194.8	)
FAHZ net assets	(vi	)	333.6		342.9		266.9
Pension plan	(vii	)	91.8		66.3		32.8
Other post-retirement benefits	(vii	)	(95.8	)	(77.1	)	(79.8	)
Recognition of Pepsi tax assets	(x	)	-				148.0
Reversal of dividends not yet declared	(xi	)	992.9		280.2		341.4
Advances to employees for purchase of shares	(xiii	)	(175.2	)	(234.7	)	(324.8	)
Fair value adjustment on derivative instruments	(xiv	)	3.4		158.7		4.9
Unrealized gain on available for sale securities	(xv	)	17.7		43.7
Fair value adjustment on trading securities					6.5
Minority interest on adjustments above							(4.8	)
Deferred income tax on adjustments above			6.4		(130.2	)	(217.9	)
Shareholders' equity under US GAAP			17,720.3		4,382.9		3,960.6

F-78

(i)

Property, plant and equipment

	2004		2003

Property, plant and equipment	10,627.2		7,288.2
Accumulated depreciation	(6,877,1	)	(4,635.2	)
Property, plant and equipment, net	3,750.1		2,653.0

(ii)

Adoption of new accounting pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51”, or FIN No. 46. FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN No. 46 explains how to identify variable interests entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. It requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. It also requires certain disclosures by the primary beneficiary of a variable interest entity and by an enterprise that holds significant variable interests in a variable interest entity where the enterprise is not the primary beneficiary. FIN No. 46 is effective immediately to variable interest entities created after January 31, 2003 and to variable interest entities in which an enterprise obtains an interest after that date, and effective for the first fiscal year or interim period beginning after June 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN No. 46 requires an entity to disclose certain information regarding a variable interest entity, if when the Interpretation becomes effective, it is reasonably possible that an enterprise will consolidate or have to disclose information about that variable interest entity, regardless of the date on which the variable entity interest was created. Adoption of this rule did not have any material impact on the Company’s financial statements.

(iii)

Recent US GAAP accounting pronouncements

In November 2004, the FASB issued SFAS No. 151, Inventory Costs an amendment of ARB No. 43, Chapter 4, which amends Chapter 4 of ARB No. 43 that addresses inventory pricing. This statement clarifies the accounting for abnormal amounts of idle facility expenses, freight, handling costs, and spoilage. Under previous guidance, paragraph 5 of ARB No. 43, chapter 4, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs that are considered to be “so abnormal” are treated as current period charges. This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of

F-79

conversion be based on the normal capacity of the production facilities. The provisions of this Statement shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after the date this Statement is issued. The provisions of this Statement shall be applied prospectively. Management is currently analyzing the requirements of this new statement to determine the impact that its adoption will have on the Company’s financial position, results of operations or cash flows.

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 153, "Exchanges of Non-monetary Assets - an amendment of APB Opinion No. 29" (“SFAS 153”), which amends Accounting Principles Board Opinion No. 29, "Accounting for Non-monetary Transactions" to eliminate the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. SFAS 153 is effective for non-monetary assets exchanges occurring in fiscal periods beginning after June 15, 2005. Management will apply this statement in the event that exchanges of non-monetary assets occur in fiscal periods beginning after June 15, 2005.

In December 2004, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004), "Share-Based Payments" or SFAS 123R. This statement eliminates the option to apply the intrinsic value measurement provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" to stock compensation awards issued to employees. Rather, SFAS 123R requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide services in exchange for the award--the requisite service period (usually the vesting period). SFAS 123R applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. SFAS 123R will be effective for the Company’s fiscal year ending December 31, 2006. The Company has not yet quantified the effect of the future adoption of SFAS 123R on a going forward basis.

In May 2005, the FASB issued Statement No. 154. This statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. The Statement applies to all voluntary changes in accounting principle and to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. Contrary to Opinion 20 that previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle, this Statement requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more

F-80

individual prior periods presented, this Statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable.

This Statement carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate. This Statement also carries forward the guidance in Opinion 20 requiring justification of a change in accounting principle on the basis of preferability.

This Statement shall be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this Statement is issued. Management will apply this statement in the event that exchanges of nonmonetary assets occur in fiscal periods beginning after December 15, 2005.

In March 2005, the FASB issued Interpretation No. 47. This interpretation clarifies that the term conditional asset retirement obligation as used in FASB Statement No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the entity. The Interpretation was issued in order to minimize the diverse accounting practices that have developed with respect to the timing of liability recognition for legal obligations associated with the retirement of a tangible long-lived asset when the timing and (or) method of settlement of the obligation are conditional on a future event. This Interpretation clarifies that an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation when it is incurred if the liability’s fair value can be reasonably estimated.

The Interpretation is effective no later than the end of the fiscal years ending after December 15, 2005 (December 31, 2005 for calendar-year enterprises). Management has previously evaluated the application of FASB Statement No. 143 to its operations and concluded that no material effects would be expected. Management will consider this Interpretation in 2005 in the event a conditional asset retirement obligation arises.

F-81

(iv)

Additional information - stock ownership plan

	2004	2003

Range of purchase prices for outstanding awards	70.93 - 568.65	70.93 - 494.87

Weighted average market price per share (based on quoted market value at date granted) for awards granted during the year	670.17	558.57

Weighted average exercise price of awards granted in the year	568.65	479.97

Weighted average grant-date intrinsic value of awards granted during year (difference between quoted market price and purchase price)	101.52	78.60

	2004	2003
Weighted-average purchase prices
At beginning of year	421.09	313.75
Granted	568.65	479.97
Exercised	289.75	298.63
Forfeited	431.20	328.33
At end of year	431.03	421.09

Outstanding and exercisable

Range of 2003	Number of shares (thousands)				Weighted - average purchase prices(*)
purchase prices (*)		2004	2003	2002		2004	2003	2002

70.93 - 96.18		9,955	16,420	3,038		94.34	91.21	57.49
96.19 - 139.24		5,573	8,100	42,061		139.24	139.24	93.73
139.25 - 196.93		16,466	23,997	92,254		184.62	184.62	166.06
196.94 - 226.74		79,584	97,094	140,803		96.12	212.94	226.74
226.75 - 477.30		159,123	194,652	352,144		474.53	474.05	411.65
477.31 - 494.87		371,335	393,426	10,500		480.13	480.25	450.19
494.88 - 568.65		9,000				568.65
		651,036	733,689	640,800		431.03	421.09	313.75

(*) Expressed in whole reais.

(iv)

Pro forma fair value effects of stock ownership plan

We have calculated the pro forma effects of accounting for the stock ownership plan in accordance with SFAS No. 123, Accounting for Stock Based Compensation. Had compensation cost for the Plan been determined based on the fair value at the grant date in accordance with the provisions of SFAS No. 123, our US GAAP net income and earnings per thousand shares would have been as follows:

F-82

	2004		2003		2004

Net income - US GAAP	1,392.0		1,689.4		1,642.2
(+) Compensation cost under APB 25	14.2		32.0		17.7
(-) Compensation cost under SFAS No. 123	(27.4	)	(57.4	)	(40.8	)
	1,378.8		1,664.0		1,619.1

Earnings per thousand shares - pro forma (whole reais) - R$
Basic
Preferred	30.45		42.75		41.13
Common	27.68		38.87		37.39
Diluted
Preferred	30.28		42.43		40.80
Common	27.52		38.57		37.09

These pro forma results are not necessarily indicative of future amounts.

The fair value of each award granted was estimated on the date of grant using the Black - Scholes pricing model with the following weighted average assumptions used for grants in 2004: dividend yield - 1.21% (3.0% in 2003 and 1.7% in 2002), expected volatility - 32% (33% in 2003 and 43% in 2002), risk-free interest rate-nominal terms - 16.4% (18.7% in 2003 and 16.8% in 2002) and expected lives of three years for all periods.

	2004	2003	2002

Fair value of awards granted in the year measured using the Black & Scholes pricing model (R$ per thousand shares)	307.7	337.8	335.8
Total fair value of awards granted in the year	2.8	130.4	3.5

(d) US GAAP condensed financial information

Based on the reconciling items and discussion above, the AmBev consolidated balance sheet, statement of operations, and statement of changes in shareholders' equity under US GAAP have been recast in condensed format as follows:

F-83

(i)

Condensed balance sheets under US GAAP

Assets	2004	2003

Current assets
Cash and cash equivalents	1,007.1	1,151.7
Restricted cash	274.8	309.4
Short term investments	212.1	1,359.4
Unrealized gain on derivatives		258.7
Trade accounts receivable, net	749.4	671.9
Taxes recoverable	643.6	765.3
Inventories	915.7	829.1
Other	379.0	407.2
	4,181.7	5,752.7
Investments
Investment in affiliates, including goodwill	1,711.4	1,921.6
Other	13.3	16.9
	1,724.7	1,938.5

Goodwill and intangible assets, net	17,125.7	1,119.7

Property, plant and equipment, net	3,750.1	2,653.0

Other assets
Deferred income tax	1,889.4	1,359.6
Prepaid pension cost	112.4	88.3
Restricted deposits for legal proceedings	407.1	352.9
Assets held for sale	113.3	142.0
Other	355.1	359.3
Total assets	29,659.5	13,766.0

Liabilities and shareholders' equity	2004	2003

Current liabilities
Suppliers	671.5	657.1
Taxes on income payable	419.7	530.5
Other taxes payable	763.1	713.4
Short-term debt	1,155.9	400.5
Current portion of long-term debt	216.1	1,427.4
Other	937.9	325.5
	4,164.2	4,054.4
Long-term liabilities
Long-term debt	3,262.9	3,664.6
Accrued liability for contingencies	1,246.1	999.6
Sales tax deferrals	275.7	231.8
Post-retirement benefits	849.1	150.0
Other	2,022.0	203.9
	7,655.8	5,249.9

Minority interest	119.2	78.8
Shareholders' equity	17,720.3	4,382.9
Total liabilities and shareholders' equity	29,659.5	13,766.0

F-84

(ii)

Condensed statements of operations under US GAAP

	2004		2003		2002

Net sales	9,377.9		7,929.4		7,310.4
Cost of sales	(4,272.8	)	(3,997.1	)	(3,900.2	)
Gross profit	5,105.1		3,932.3		3,410.2

Operating income (expenses)
Selling and marketing	(1,382.4	)	(989.7	)	(928.3	)
General and administrative	(1,161.1	)	(790.4	)	(910.9	)
Other operating expense, net	317.1		(114.0	)	(1.8	)
Operating income	2,878.7		2,038.2		1,569.2


Non-operating income (expenses)	(957.4	)	86.8		(332.9	)
Financial income (expense), net	(168.3	)	(101.8	)	(59.3	)
Other non-operating expense, net	(1,125.7	)	(15.0	)	(392.2	)

Income before income tax, equity in
affiliates and minority interest	1,753.0		2,023.2		1,177.0

Income tax benefit (expense)
Current	(137.3	)	(652.3	)	(123.4	)
Deferred	(24.9	)	153.1		548.4
	(162.2	)	(499.2	)	425.0

Income before equity in affiliates and minority interest	1,590.8		1,524.0		1,602.0

Equity in earnings (losses) of affiliates	(209.3	)	155.8		(6.5	)
Minority interest	10.5		9.6		46.7

Net income	1,392.0		1,689.4		1,642.2

(iii)

Statement of comprehensive income

Under Brazilian GAAP, the concept of comprehensive income is not recognized.

Under US GAAP, SFAS No. 130, Reporting Comprehensive Income, requires the disclosure of comprehensive income. Comprehensive income is comprised of net income and other comprehensive income that include charges or credits directly to equity which are not the result of transactions with owners. For AmBev, the components of the comprehensive income are (i) the adjustment related to the gains and losses arising on the translation to reais of the financial statements of foreign subsidiaries upon consolidation, and (ii) unrealized gains on available for sale securities, net of tax.

F-85

	2004		2003		2002

Net income	1,392.0		1,689.4		1,642.2
Unrealized gains on available
for sale securities, net of tax of R$ 6.0 (R$ 18.9 in 2003)	11.7		28.8
Minimum pension liability
Foreign exchange gain (loss) from
translation of foreign subsidiaries	(177.3	)	(187.6	)	23.6
Comprehensive income	1,226.4		1,530.6		1,665.8

(iv)

Condensed statement of changes in shareholders' equity under US GAAP

	2004		2003		2002

At beginning of the year	4.382.9		3,960.6		2,839.9
Capital increase	14,261.8		77.4		101.9
Treasury shares acquired	(1,639.6	)	(330.7	)	(370.7	)
Additional paid-in capital	14.2		32.5		17.7
Premium received on sale of options	2.5				11.7
Repayments (advances) to employees for purchase of shares	59.5		90.1		(109.5	)
Other comprehensive income	(194.7	)	(187.6	)	23.6
Net income	1,392.0		1,689.4		1,642.2
Dividends and interest attributed to
shareholders' equity declared	(558.3	)	(948.8	)	(196.2	)
At end of the year	17,720.3		4.382.9		3,960.6

25 SEGMENT REPORTING

Under Brazilian GAAP, no separate segment reporting is required.

Under US GAAP, SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, defines operating segments as components of an enterprise for which separate financial information is available and evaluated regularly as a means for assessing segment performance and allocating resources to segments. A measure of profit or loss, total assets and other related information are required to be disclosed for each operating segment. In addition, this standard requires the annual disclosure of information concerning revenues derived from the enterprise's products or services, countries in which it earns revenues or hold assets, and major customers. AmBev's business is comprised of four main segments: AmBev Brazil (dividend into Brazil beer, Brazil carbonated soft drinks and non-alcoholic non-carbonated (NANC) beverages, and Brazil other products, Hispanic Latin America, operations excluding Quinsa - HILA -ex, Quinsa and North America (Labatt). We have reclassified prior periods to disclose our NANC segment together with our Carbonated soft drinks segment.

SFAS No. 131 requires that segment data be presented in the US GAAP financial statements on the basis of the internal information that is used by management for making operating decisions, including allocation of resources among segments, and segment performance. This information is derived from our statutory accounting records which are maintained in

F-86

accordance with Brazilian GAAP. Certain expenses were not allocated to the segments. These unallocated expenses are corporate overheads, minority interests, income taxes and financial interest income and expense. Certain operating units do not separate operational expenses, total assets, depreciation and amortization. These amounts were allocated based on gross sales revenue.

	2004		2003		2002

Net sales
Beer	6,907.4		6,114.6		5,546.4
Carbonated soft drinks and NANC	1,462.8		1,332.1		1,228.9
Others	155.7		191.0		153.7
AmBev Brazil	8,525.9		7,637.7		6,929.0
Quinsa	1,153.0		773.7
HILA - Ex	769.1		272.4		396.3
North America	1,558.8
Total consolidated	12,006.8		8,683.8		7,325.3

Cost of sales
Beer	(2,467.0	)	(2,503.6	)	(2,237.1	)
Carbonated soft drinks and NANC	(820.5	)	(887.3	)	(809.0	)
Others	(81.1	)	(118.6	)	(81.6	)
AmBev Brazil	(3,368.6	)	(3,509.5	)	(3,127.7	)
Quinsa	(510.3	)	(387.3	)
HILA - Ex	(399.2	)	(147.5	)	(214.0	)
North America	(502.4	)
Total consolidated	(4,780.5	)	(4,044.2	)	(3,341.7	)

Selling and marketing expenses
Beer	(736.5	)	(534.0	)	(467.8	)
Carbonated soft drinks and NANC	(97.2	)	(93.9	)	(145.1	)
Others					(15.6	)
AmBev Brazil	(833.7	)	(627.9	)	(628.5	)
Quinsa	(210.8	)	(159.8	)
HILA - Ex	(127.1	)	(59.4	)	(58.7	)
North America	(411.2	)
Total consolidated	(1,582.8	)	(847.1	)	(687.2	)


Direct distribution expense
Beer	(618.0	)	(480.4	)	(363.0	)
Carbonated soft drinks and NANC	(135.2	)	(124.8	)	(109.1	)
Others					(1.6	)
AmBev Brazil	(753.2	)	(605.2	)	(473.7	)
Quinsa	-		-		-
HILA - Ex	(88.3	)	(43.4	)	(63.7	)
North America	(27.4	)
Total consolidated	(868.9	)	(648.6	)	(537.4	)

F-87


General and administrative expenses
Beer	(372.7	)	(328.1	)	(326.8	)
Carbonated soft drinks and NANC	(14.0	)	(16.2	)	(13.1	)
Others	(2.9	)	(4.2	)	(6.5	)
AmBev Brazil	(389.6	)	(348.5	)	(346.4	)
Quinsa	(50.0	)	(38.4	)
HILA - Ex	(80.2	)	(30.9	)	(27.1	)
North America	(98.1	)
Total consolidated	(617.9	)	(417.9	)	(373.5	)

Depreciation and amortization expenses (*)
Beer	(330.7	)	(339.1	)	(275.5	)
Carbonated soft drinks and NANC	(109.5	)	(16.7	)	(36.1	)
Others			(4.1	)	(7.3	)
AmBev Brazil	(440.2	)	(359.9	)	(318.9	)
Quinsa	(42.8	)	(31.6	)
HILA - Ex	(39.2	)	(28.5	)	(15.7	)
North America	(19.3	)
Total consolidated	(541.5	)	(420.0	)	(334.6	)



Less
Provisions for contingencies and other	(260.2	)	(187.9	)	(123.7	)
Other operating income, net	(420.9	)	(240.1	)	199.4
Financial income (expense), net	(776.4	)	93.1		(747.0	)
Non-operating income (expense), net	(333.9	)	(100.7	)	(72.2	)
Income tax benefit (expense), net	(511.8	)	(426.1	)	280.6
Profit sharing and contributions	(152.4	)	(23.6	)	(125.1	)
Minority interest	(3.7	)	(2.9	)	47.4
Equity in results of Quinsa (proportionally consolidated)	5.6		(6.2	)
Net income	1,161.5		1,411.6		1,510.3

Revenues from no individual customer represented more than 10% of our net sales. Information on our geographic areas is as follows:

	2004		2003

Total property, plant and equipment
AmBev Brazil		2,590.0		2,788.7
Quinsa		750.1		747.1
HILA - Ex		951.5		630.5
North America		1.240.1
		5.531.7		4,166.3
Total segment assets
Beer		7,371.7		7,370.0
Carbonated soft drinks and NANC		2,237.5		2,046.2
Others		786.6		860.8

F-88

Quinsa	942.7	1,802.1
HILA - Ex	1,744.1	391.3
North America	4,663,8
General corporate assets	15,270.1	2,359.7
Total assets	33,016.5	14,830.1

Total assets by location
Brazil	25,665.9	12,636.7
Quinsa	942.7	1,802.1
HILA - Ex	1,744.1	391.3
North America	4,663.8
Total assets	33,016.5	14,830.1

(*) Relates primarily to administrative assets and amortization of deferred charges; excludes depreciation of production assets and amortization of goodwill, included in Other operating income, net.

26 CONSOLIDATING SCHEDULES

In connection with an issuance of Notes by CBB in 2001and 2003 in the United States of America and international markets under rule 144-A and Regulation S (Note 10), we are presenting, pursuant to Rule 3-10 of Regulation S-X of the SEC, condensed consolidating financial information in Brazilian GAAP, of certain entities with which we are co-guarantors.

The financial information regarding AmBev Holding is unconsolidated. The financial information regarding CBB is consolidated.

We believe that the condensed consolidating financial information, as presented below, provides an appropriate level of financial information to investors.

F-89

(a) Consolidating schedules for the year ended December 31, 2004

(i)

Condensed consolidated balances sheet


	AmBev Holding		CBB			Labatt ApS		Other		Consolidating adjustments			Consolidated

Assets
Current assets
Cash and cash equivalents		1.6		1,163.2			125.5		0.6					1,290.9
Short-term investments				213.9					0.6					214.5
Trade accounts receivable, net				1,143.8			213.6		2.7					1,360.1
Receivable froma affiliates				111.7			323.8		5.9		(441.4	)
Dividends and interest attributed to shareholders’ equity		709.1									(709.1	)
Taxes recoverable		71.8		564.1			6.5		11.9					654.3
Inventories				1,037.7			333.3		9.9					1,380.9
Other		1.0		390.9			80.2		11.9		(5.1	)		478.9
		783.5		4,625.3			1,082.9		43.5		(1,155.6	)		5,379.6

Non-current assets
Receivables from affiliates
Companies				4,916.5					357.7		(5,274.2	)
Deferred income tax		447.6		1,512.5			256.3		0.2					2,216.6
Other taxes recoverable		85.0		277.2					0.1					362.3
Other		207.8		819.7					0.1					1,027.6
		740.4		7,525.9			256.3		358.1		(5,274.2	)		3,606.5

Permanent assets
Investments
CBB		5,067.8									(5,067.8	)
Labatt		14,423.8									(14,423.8	)
Investments in affiliates - 100% Interest		333.2									(333.2	)
Goodwill and negative goodwill		234.1		1,433.9			16,502.4							18,170.4
Other		65.9		(54.6	)		22.9							34.2
		20,124.8		1,379.3			16,525.3				(19,824.8	)		18,204.6

Property, plant and equipment				4,267.2			1,240.1		24.4					5,531.7
Deferred charges				287.6			3.1		3.4					294.1

Total assets		21,648.7		18,085.3			19,107.7		429.4		(26,254.6	)		33,016.5

F-90

	AmBev Holding		CBB		Labatt ApS		Other		Consolidating adjustments			Consolidated

Liabilities and shareholders' equity
Current liabilities
Suppliers				847.9		198.2		1.6					1,047.7
Loans and financing				1,528.4		1,914.7							3,443.1
Unrealized losses on derivatives				409.1									409.1
Payable to affiliates		3,336.1		2,957.7		14.1		22.0		(6,328.7	)		1.2
Payroll and related charges		4.5		133.3		113.7		0.4					251.9
Taxes on income payable				391.7		193.0		65.9					650.6
Other taxes payable		66.9		721.3		192.0		3.1					983.3
Dividends payable		995.4		3.5									998.9
Other		4.8		420.6		559.1		1.4					985.9
		4,407.7		7,413.5		3,184.8		94.4		(6,328.7	)		8,771.7
Long-term liabilities
Loans and financing				3,536.4		831.2							4,367.6
Accrued liability for contingencies		140.1		1,330.6				0.3					1,471.0
Sales tax deferrals				275.7									275.7
Other				368.4		667.9				(100.0	)		936.3
		140.1		5,511.1		1,499.1		0.3		(100.0	)		7,050.6

Minority interest				198.3									198.3
Shareholders' equity		17,100.9		4,962.4		14,423.8		334.7		(19,825.9	)		16,995.9

Total liabilities and shareholders' equity		21,648.7		18,085.3		19,107.7		429.4		(26,254.6	)		33,016.5

F-91

(ii)

Condensed consolidated statements of operations for the year ended December 31, 2004

	AmBev Holding			CBB			Labatt ApS			Other			Consolidating adjustments			Consolidated

Net sales					10,437.6			1,558.9			427.8			(417.5	)		12,006.8
Cost of sales					(4,613.7	)		(502.4	)		(81.0	)		416.6			(4,780.5	)
Gross profit					5,823.9			1,056.5			346.8			(0.9	)		7,226.3

Operating income (expenses)
Selling, general and administrative		(11.7	)		(2,778.8	)		(536.9	)		(3.3	)		0.9			(3,329.8	)
Depreciation and amortization of deferred charges					(521.5	)		(19.3	)		(0.7	)					(541.5	)
Financial income (expense), net		(217.1	)		(519.3	)		(37.4	)		(2.6	)					(776.4	)
Other operating income, net		122.6			(85.9	)		(448.2	)		(9.4	)					(420.9	)
Equity in earnings of affiliates		1,065.1			4.8			0.8						(1,065.1	)		5.6
Operating income		958.9			1,923.2			15.5			330.8			(1,065.1	)		2,163.3

Non-operating income (expense), net		(1.3	)		(134.1	)		(198.6	)		0.1						(333.9	)

Income before income taxes, profit
sharing and minority interest		957.6			1,789.1			(183.1	)		330.9			(1,065.1	)		1,829.4

Income tax benefit (expense)		208.6			(513.6	)		(93.6	)		(113.2	)					(511.8	)

Income before profit sharing, \| contributions and minority interest		1,166.2			1,275.5			(276.7	)		217.7			(1,065.1	)		1,317.6
Employee and management
profit sharing		(4.7	)		(147.7	)											(152.4	)

Income before minority interest		1,161.5			1,127.8			(276.7	)		217.7			(1,065.1	)		1,165.2
Minority interest					(3.7	)											(3.7	)
Net income for the year		1,161.5			1,124.1			(276.7	)		217.7			(1,065.1	)		1,161.5

F-92

(iii)

Condensed consolidated statements of cash flows for the year ended December 31, 2004

	AmBev Holding			CBB			Labatt ApS			Other			Consolidating adjustments			Consolidated

Net cash provided by operating activities		471.3			2,557.8			180.9			197.3			11.3			3,418.6

Cash flows from investing activities
Investments in affiliates and subsidiaries,
net of cash acquired		518.4			(101.7	)					91.6			(678.5	)		(170.2	)
Disposal of investments and property, plant and equipment		(1.1	)		53.9												52.8
Short term investments (maturity over 90 days)					1,322.2												1,322.2
Repurchase of treasury shares by investee					(179.2	)											(179.2	)
Securities and collateral					26.1						1.1						27.2
Property, plant and equipment, net					(1,004.0	)		(269.7	)								(1,273.7	)
Expenditures on deferred charges					(101.9	)											(101.9	)
Cash from first time consolidation of Labatt								433.6									433.6
Net cash used in investing activities		517.3			15.4			163.9			92.7			(678.5	)		110..8

Cash flows from financing activities
Loans and financings
Issuance					5,437.0			715.1									6,152.1
Repayments, including interest					(6,998.5	)		(468.0	)								(7,466.5	)
Intercompany loans, net		1,079.0			(989.5	)					(89.5	)
Repurchase of own shares for treasury		(1,609.6	)														(1,609.6	)
Capital subscriptions		15.6															15.6
Dividends paid		(591.3	)		(480.1	)		1.4			(200.1	)		667.2			(602.9	)
Advances to employees for purchase
of shares, net of repayments		104.6			(1.4	)											103.2
Capital subscriptions for minorities					(28.4	)											(28.4	)
Other		14.6			(12.0	)											2.6
Net cash provided by (used in) financing activities		(987.1	)		(3,072.9	)		248.5			(289.6	)		667.2			(3,433.9	)

Effects of exchange rate changes on cash and cash equivalents					(0.7	)											(0.7	)

Net increase (decrease) in cash and cash equivalents		1.5			(466.2	)		125.5			0.4						(338.8	)

Cash and cash equivalents, at beginning of year		0.1			1,195.9						0.1						1,196.1
Cash and cash equivalents at end of year		1.6			1,163.3			125.5			0.5						1,290.9

F-93

(b) Consolidating schedules for the year ended December 31, 2003

(i)

Condensed consolidated balances sheet

	AmBev Holding		CBB		Other		Consolidating adjustments			Consolidated

Assets
Current assets
Cash and cash equivalents				1,196.0		0.1					1,196.1
Short-term investments				1,492.8		1.1					1,493.9
Unrealized gain on derivatives				102.9							102.9
Trade accounts receivable, net				725.1		3.9		(3.3	)		725.7
Taxes recoverable		68.9		688.8		13.7					771.4
Inventories				938.9		15.7					954.6
Other		0.4		248.1		8.1		(0.7	)		255.9
		69.3		5,392.6		42.6		(4.0	)		5,500.5

Non-current assets
Receivables from affiliates
Companies				1,544.2		246.1		(1,790.3	)
Deferred income tax		239.0		1,592.2		0.6					1,831.8
Other taxes recoverable		78.0		270.2		0.2					348.4
Other		225.9		786.4		0.1					1,012.4
		542.9		4,193.0		247.0		(1,790.3	)		3,192.6

Permanent assets
Investments
CBB		5,222.2						(5,222.2	)
Investments in affiliates		224.7						(224.7	)
Goodwill and negative goodwill		319.0		1,368.3							1,687.3
Other		16.2		7.9							24.1
		5,782.1		1,376.2				(5,446.9	)		1,711.4

Property, plant and equipment				4,135.0		31.3					4,166.3
Deferred charges				255.5		3.8					259.3
		5,782.1		5,766.7		35.1		(5,446.9	)		6,137.0

Total assets		6,394.3		15,352.3		324.7		(7,241.2	)		14,830.1

F-94

	AmBev Holding		CBB		Other		Consolidating adjustments			Consolidated

Liabilities and shareholders' equity
Current liabilities
Suppliers				799.1		4.5		(3.3	)		800.3
Payable to affiliates		1,544.1		246.7		0.2		(1,790.2	)		0.8
Payroll and related charges				93.7		0.4					94.1
Loans and financing				1,976.1							1,976.1
Taxes on income payable				453.0		90.2					543.2
Dividends payable		290.8		3.1							293.9
Other		0.2		1,008.3		3.8		(0.7	)		1,011.6
		1,835.1		4,580.0		99.1		(1,794.2	)		4,720.0
Long-term liabilities
Loans and financing				4,004.3							4,004.3
Accrued liability for contingencies		146.0		1,086.6		0.3					1,232.9
Sales tax deferrals				235.2							235.2
Other				133.1							133.1
		146.0		5,459.2		0.3					5,605.5

Minority interest				195.8				0.6			196.4
Shareholders' equity		4,413.2		5,117.3		225.3		(5,447.6	)		4,308.2

Total liabilities and shareholders' equity		6,394.3		15,352.3		324.7		(7,241.2	)		14,830.1

F-95

(ii)

Condensed consolidated statements of operations for the year ended December 31, 2003

	AmBev Holding			CBB			Other			Consolidating adjustments			Consolidated

Net sales					8,677.7			341.1			(335.0	)		8,683.8
Cost of sales					(4,312.0	)		(66.6	)		334.4			(4,044.2	)
Gross profit					4,365.7			274.5			(0.6	)		4,639.6

Operating income (expenses)
Selling, general and administrative		(2.9	)		(1,897.5	)		(13.8	)		0.6			(1,913.6	)
Depreciation and amortization of deferred charges					(419.4	)		(0.6	)					(420.0	)
Financial income (expense), net		(30.9	)		120.6			3.4						93.1
Other operating income, net		(112.2	)		(314.4	)		(1.4	)					(428.0	)
Equity in earnings of affiliates		1,665.1			(6.2	)					(1,665.1	)		(6.2	)
Operating income		1,519.1			1,848.8			262.1			(1,665.1	)		1,964.9

Non-operating income (expense), net		(215.5	)		114.8									(100.7

Income before income taxes, profit
sharing and minority interest		1,303.6			1,963.6			262.1			(1,665.1	)		1,864.2

Income tax benefit (expense)		100.4			(436.7	)		(89.8	)					(426.1	)

Income before profit sharing, \| contributions and minority interest		1,404.0			1,526.9			172.3			(1,665.1	)		1,438.1
Employee and management
profit sharing		7.6			(33.4	)		2.2						(23.6	)

Income before minority interest		1,411.6			1,493.5			174.5			(1,665.1	)		1,414.5
Minority interest					(2.9	)								(2,9	)
Net income for the year		1,411.6			1,490.6			174.5			(1,665.1	)		1,411.6

F-96

(iii)

Condensed consolidated statements of cash flows for the year ended December 31, 2003

	AmBev Holding		CBB		Other		Consolidating adjustments	Consolidated

Net cash provided by operating activities	1,309.6		1,130.3		87.7			2,527.6

Cash flows from investing activities
Investments in affiliates and subsidiaries,
net of cash acquired			(1,745.3	)				(1,745.3	)
Short term investments (maturity over 90 days)			423.3		(0.2	)		423.1
Securities and collateral			228.6					228.6
Property, plant and equipment, net			(829.8	)				(829.8	)
Expenditures on deferred charges			(91.0	)	(0.3	)		(91.3	)
Net cash used in investing activities			(2,014.2	)	(0.5	)		(2,014.7	)

Cash flows from financing activities
Loans and financings
Issuance			3,359.2					3,359.2
Repayments, including interest			(2,510.1	)				(2,510.1	)
Repurchase of own shares for treasury	(310.0	)	1.5					(308.5	)
Capital subscriptions	3.7		(1.1	)	2.0			4.6
Dividends paid	(1,052.2	)	114.4		(89.1	)		(1,026.9	)
Advances to employees for purchase
of shares, net of repayments	48.8		81.4					130.2
Other			4.8					4.8
Net cash provided by (used in) financing activities	(1,309.7	)	1,050.1		(87.1	)		(346.7	)

Effects of exchange rate changes on cash and cash equivalents			(101.7	)				(101.7	)

Net increase (decrease) in cash and cash equivalents	(0.1	)	64.5		0.1			64.5
Cash and cash equivalents, at beginning of year	0.1		685.7		445.8			1,131.6
Merger of Eagle into CBB			445.8		(445.8	)

Cash and cash equivalents at end of year			1,196.0		0.1			1,196.1

F-97

(b) Consolidating schedules for the year ended December 31, 2002

(i)

Condensed consolidated statements of operations for the year ended December 31, 2002

	AmBev Holding			CBB			Other			Consolidating adjustments			Consolidated

Net sales					6,971.2			542.3			(188.2	)		7,325.3
Cost of sales					(3,145.0	)		(347.7	)		151.0			(3,341.7	)

Gross profit					3,826.2			194.6			(37.2	)		3,983.6

Operating income (expenses)
Selling, general and administrative		(13.7	)		(1,583.3	)		(157.1	)		32.3			(1,721.8	)
Depreciation and amortization of deferred charges					(302.9	)		(31.7	)					(334.6	)
Financial income (expense), net		(25.7	)		(2,416.0	)		1,689.8			4.9			(747.0	)
Other operating income, net		73.9			75.9			76.9			(27.3	)		199.4
Equity in results of affiliates		1,462.3						12.3			(1,474.6	)
Operating income (loss)		1,496.8			(400.1	)		1,784.8			(1,501.9	)		1,379.6
Non-operating income (expense), net					(33.6	)		(15.9	)		(22.7	)		(72.2	)

Income (loss)before income taxes, profit sharing and minority interest		1,496.8			(433.7	)		1,768.9			(1,524.6	)		1,307.4
Income tax benefit		20.4			235.0			25.2						280.6

Income (loss) before profit sharing, contributions and minority interest		1,517.2			(198.7	)		1,794.1			(1,524.6	)		1,588.0
Employee and management profit sharing		(6.9	)		(105.4	)								(112.3	)
Contributions to FAHZ					(12.8	)								(12.8	)
Income (loss) before minority interest		1,510.3			(316.9	)		1,794.1			(1,524.6	)		1,462.9

Minority interest					(17.5	)		51.6			13.3			47.4
Net income (loss)		1,510.3			(334.4	)		1,845.7			(1,511.3	)		1,510.3

F-98

(ii)

Condensed consolidated statement of cash flows for the year ended December 31, 2002

	AmBev Holding			CBB			Other			Consolidating adjustments			Consolidated

Net cash provided by operating activities		496.2			1,714.7			1,513.9			(129.8	)		3,595.0

Cash flows from investing activities
Short-term investments (maturity over 90 days)					609.5			(1,418.2	)					(808.7	)
Securities and collateral								(249.3	)					(249.3	)
Investments in affiliates and subsidiaries, net of cash acquired		88.1			(163.3	)		(0.3	)					(75.5	)
Property, plant and equipment, net					(413.2	)		(10.9	)					(424.1	)
Expenditures on deferred charges					(45.5	)								(45.5	)
Net cash provided by (used in) investing activities		88.1			(12.5	)		(1,678.7	)					(1,603.1	)

Cash flows from financing activities
Loans and financings
Issuance					549.9			44.4			25.8			620.1
Repayments, including interest		(0.3	)		(2,665.8	)		(259.2	)					(2,925.3	)
Capital subscription		32.8			(447.9	)		444.1						29.0
Repurchase of own shares for treasury		(337.1	)											(337.1	)
Capital increase of minority interests in subsidiaries					10.5									10.5
Dividends paid		(290.4	)		(149.2	)					104.0			(335.6	)
Advances to employees for
purchase of shares		10.8			15.4									26.2
Net cash provided by (used in) financing activities		(584.2	)		(2,687.1	)		229.3			129.8			(2,912.2	)

Effects of exchange rate changes on cash					639.1									639.1

Net increase (decrease) in cash and cash equivalents		0.1			(345.8	)		64.5						(281.2	)
Cash and cash equivalents,
at beginning of year		—			1,031.5			381.3						1,412.8
Cash and cash equivalents at end of year		0.1			685.7			445.8						1,131.6

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

			Page
INTRODUCTION			i
ACCOUNTING PERIODS AND PRINCIPLES			i
CURRENCY TRANSLATION			i
INDUSTRY DATA			ii
TRADEMARKS			ii
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION			ii
Item 1.	Identity of Directors, Senior Management and Advisers		1
Item 2.	Offer Statistics and Expected Timetable		1
Item 3.	Key Information		1
Item 4.	Information on the Company		20
Item 5.	Operating and Financial Review and Prospects		45
Item 6.	Directors, Senior Management and Employees		79
Item 7.	Major Shareholders and Related Party Transactions		92
Item 8.	Financial Information		101
Item 9.	The Offer and Listing		110
Item 10.	Additional Information		116
Item 11.	Quantitative and Qualitative Disclosures about Market Risk		141
Item 12.	Description of Securities Other Than Equity Securities		142
Item 13.	Defaults, Dividend Arrearages and Delinquencies		144
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds		144
Item 15.	Disclosure Controls and Procedures		144
Item 16.	Reserved		144
	Item 16A.	Audit Committee Financial Expert	144
	Item 16B.	Code of Ethics	144
	Item 16C.	Principal Accountant Fees and Services	145
	Item 16D.	Exemptions from the Listing Standards for Audit Committees	146
	Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	146
Item 18.	Financial Statements		146
Item 19.	Exhibits		147
SIGNATURES			152

	As of or for the year ended December 31,
		2004	2003	2002	2001	2000
	(R$ in millions, except for per share amounts, number of shares and other operating data)
U.S. GAAP

Net sales		9,377.9	7,929.4	7,310.4	6,566.3	4,821.5
Operating income		2,878.7	2,038.2	1,569.2	1,309.0	743.4
Net income (loss)		1,392.0	1,689.4	1,642.2	822.9	879.2
Net income per 1,000 shares (weighted average)⁽³⁾⁽⁷⁾
- Basic
Common shares		27.94	39.46	37.93	18.84	19.28
Preferred shares		30.74	43.41	41.72	20.71	21.20
- Diluted
Common shares		27.79	39.05	37.65	18.59	18.55
Preferred shares		30.57	42.95	41.37	20.45	20.41
Net income (loss) per ADS⁽⁴⁾
- Basic
Common shares		2.79	3.95	3.79	1.88	1.93
Preferred shares		30.7	4.34	4.17	2.07	2.12
- Diluted
Common shares		2.78	3.91	3.77	1.86	1.86
Preferred shares		3.06	4.30	4.14	2.05	2.04
Dividends and interest attributable to shareholders equity per 1,000 shares (weighted average)^{(3)(5) (6)}
- Basic
Common shares		11.21	22.16	4.53	5.74	3.55
Preferred shares		12.33	24.38	4.99	6.31	3.90
- Diluted
Common shares		11.15	21.93	4.50	5.67	3.41
Preferred shares		12.26	24.12	4.94	6.23	3.76
Weighted average number of shares (thousands)^{(3)(7)(8)(20)}
- Basic
Common shares		22,345,110	18,664,356	18,908,907	19,170,168	21,502,332
Preferred shares		24,970,421	21,952,196	22,173,258	22,291,121	21,919,724
- Diluted
Common shares		22,388,341	18,733,355	18,962,604	19,257,270	21,988,430
Preferred shares		25,186,577	22,299,692	22,441,743	22,726,632	23,090,525

	As of or for the year ended December 31,
		2004		2003		2002		2001		2000
	(R$ in millions, except for per share amounts, number of shares and other operating data)
Brazilian GAAP

Other Financial Information:

Net working capital⁽¹³⁾		(3,392.1	)	780.5		2,737.7		1,273.0		(12.0	)
Cash dividends paid⁽⁵⁾		602.9		1,026.9		335.6		313.4		221.1
Depreciation and amortization of deferred charges ⁽¹⁴⁾		922.2		766.3		659.5		613.9		589.2
Capital expenditures⁽¹⁵⁾		1,273.7		862.2		544.7		446.8		295.0
Operating cash flows - generated⁽¹⁶⁾		3,418.6		2,527.6		3,595.0		1,006.6		1,243.2
Investing cash flows - used⁽¹⁶⁾		(110.8	)	(2,014.7	)	(1,603.1	)	(1,687.4	)	(100.7	)
Financing cash flows-generated - used⁽¹⁶⁾		(3,433.9	)	(346.7	)	(2,912.2	)	1,418.0		(2,065.7	)


Other Operating Data:

Total production capacity - beer⁽¹⁷⁾		114.2 million hl		88.3 million hl		89.7 million hl		89.8 million hl		94.4 million hl
Total production capacity - CSD & NANC⁽¹⁷⁾		43.9 million hl		45.7 million hl		37.3 million hl		38.8 million hl		36.6 million hl
Total beer volume sold⁽¹⁸⁾		63.9 million hl		56.9 million hl		62.0 million hl		62.4 million hl		64.8 million hl
Total CSD & NANC volume sold⁽¹⁸⁾		22.8 million hl		19.2 million hl		19.6 million hl		18.5 million hl		17.2 million hl
Number of employees⁽¹⁹⁾		25,974		18,890		18,570		18,136		18,172

⁽¹⁾ General and administrative expenses include director’s fees.
⁽²⁾ Operating income under Brazilian GAAP is presented after financial income and financial expense.
⁽³⁾ The information is provided per thousand shares because AmBev common and preferred shares are generally traded on the São Paulo Stock Exchange in blocks of one thousand shares.
⁽⁴⁾ ADS represents American Depositary Shares. Each ADS represents 100 shares.
⁽⁵⁾ Includes dividends, interest attributable to shareholders’ equity (including withholding tax paid by AmBev in respect thereof), and in 2000, returns of capital of R$111.8 million. Certain distributions in 2000 were made in the form of a return of capital rather than in the form of dividends or interest attributable to shareholders’ equity because, prior to the completion of the Brahma conversion, AmBev did not have sufficient retained earnings to pay these amounts as dividends or interest attributable to shareholders’ equity. The dividend and interest attributable to shareholders equity per 1,000 shares for Brazilian GAAP purposes is calculated net of withholding tax and therefore represents the amounts received as disclosed in “Dividends”. We changed the criteria for reporting this amount in 2002 and therefore the dividends per share disclosed in the years prior to 2002 do not conform to those disclosed in our 2001 annual report on Form 20-F.
⁽⁶⁾ Brazilian GAAP and U.S. GAAP differ on the recognition of declared / proposed dividends, specifically with regard to when the dividend should be recognized. The executive officers are required to propose a dividend at year end, which is subject to ratification by the shareholders at a general meeting and must be recognized under Brazilian GAAP. However, under U.S. GAAP, the proposed dividends may be modified or ratified by the shareholders at a general meeting and are treated as a deduction from shareholders’ equity.
⁽⁷⁾ In the U.S. GAAP selected financial data only, earnings per share are calculated dividing the net income by the weighted average number of common and preferred shares outstanding during the relevant periods. In the Brazilian GAAP selected financial information section, earnings per share are calculated by dividing by the number of shares outstanding at the year end. AmBev’s preferred shares are entitled to dividends 10% greater than the dividends paid to common shares.
⁽⁸⁾ Under U.S. GAAP we have included the net assets of the FAHZ, one of our major shareholders, on our balance sheet as of December 31, 2004, 2003, 2002, 2001 and 2000. As a result, AmBev shares owned by the FAHZ are treated as treasury shares, rather than outstanding shares, thereby reducing the number of our weighted average outstanding shares and increasing our earnings or loss per share. For further information, please refer to our consolidated financial statements contained within this annual report.
⁽⁹⁾ Includes current portion of long-term debt.
⁽¹⁰⁾ Excludes current portion of long-term debt.
⁽¹¹⁾ In the financial statements as of and for the year ended December 31, 2004, total tax incentives are R$711.9 million, of which 381.6 million relate to deferred sales tax, and R$381.6 million to ICMS financing incentives.
⁽¹²⁾ Consistent with accounting practice under Brazilian GAAP, we had not recognized our actuarial obligation for pension liabilities and post-retirement benefits, including medical benefits to retirees in our financial statements prior to December 31, 2001. Pension amounts due to the pension plan were treated on an accrual basis as the obligations fell due. However, following the issuance of accounting standard NPC No. 26, we are required to record these actuarial obligations beginning in 2002. We had the option to account for these actuarial obligations at December 31, 2001 either against retained earnings or prospectively as a charge against earnings over five years. We elected to recognize the liability against retained earnings on December 31, 2001. The standard requires comprehensive recording of pension expenses and obligations on an actuarial basis instead of, as was previously required, based on the required contributions for the relevant year.
⁽¹³⁾ Represents total current assets less total current liabilities.
⁽¹⁴⁾ Includes depreciation of property, plant and equipment and amortization of deferred charges.
⁽¹⁵⁾ Represents cash expenditures for property, plant and equipment.
(16) Operating, Investing and Financing cash flows data is derived from our consolidated financial statements.
⁽¹⁷⁾ Represents available production capacity of AmBev and its respective subsidiaries, domestic and international; Quinsa’s production capacity is not considered; (hl is the abbreviation for hectoliters; CSD & NANC is the abbreviation for Carbonated Soft Drinks and Non Alcoholic and Non Carbonated Soft Drinks).
⁽¹⁸⁾ Represents full-year volumes of AmBev and its respective subsidiaries (except Quinsa and its subsidiaries). Labatt's volumes for 2004 were consolidated from August 27 through December 31.
⁽¹⁹⁾ Includes all production- and non-production-related employees of AmBev and its respective subsidiaries, excluding Quinsa and its subsidiaries.
⁽²⁰⁾ In the U.S. GAAP selected financial data only, earnings per share have been restated to give retroactive effect to the share dividend distributed by AmBev on May 31, 2005.

American Beverage Co Ambev – ‘20-F’ for 12/31/04

On: Friday, 7/1/05, at 8:12am ET · For: 12/31/04 · Accession #: 950157-5-542 · File #: 1-15194

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Annual Report of a Foreign Private Issuer — Form 20-F
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20-F — Annual Report of a Foreign Private Issuer — form20-f

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Dates Referenced Herein and Documents Incorporated by Reference

Earnings generated	First payment date	*Reais* per thousand⁽¹⁾share⁽²⁾	U.S. dollar equivalent per thousand⁽¹⁾ shares at payment date⁽⁴⁾

First half 1999	July 20, 1999	1.58		(preferred	)	0.88
		1.44		(common	)	0.80
Second half 1999	March 15, 2000	2.96		(preferred	)	1.70
		2.69		(common	)	1.54
Extraordinary⁽³⁾	March 23, 2000	1.88		(preferred	)	1.09
		1.88		(common	)	1.09
Extraordinary⁽³⁾	November 30, 2000	2.38		(preferred	)	1.22
		2.38		(common	)	1.22
Second half 2000	February 20, 2001	4.11		(preferred	)	2.05
		3.74		(common	)	1.86
First half 2001	September 17, 2001	3.11		(preferred	)	1.16
		2.83		(common	)	1.06
Second half 2001	February 19, 2002	4.78		(preferred	)	1.97
		4.34		(common	)	1.79
First half 2002	November 25, 2002	4.37		(preferred	)	1.15
		3.97		(common	)	1.04
Second half 2002	February 28, 2003	9.27		(preferred	)	2.60
		8.43		(common	)	2.37
First half 2003	October 13, 2003	18.70		(preferred	)	6.59
		17.00		(common	)	5.99
Second half 2003	March 25, 2004	6.75		(preferred	)	2.30
		6.14		(common	)	2.09
First half 2004	October 8, 2004	5.80		(preferred	)	2.05
		5.28		(common	)	1.87
Second half 2004	February 15, 2005	17.15		(preferred	)	6.66
		15.59		(common	)	6.05

⁽¹⁾ The information is provided per thousand shares because AmBev common and preferred shares are generally traded on the São Paulo Stock Exchange in blocks of one thousand.
⁽²⁾ The amounts set forth above are amounts actually received (as adjusted to give effect retroactively to AmBev’s common and preferred share five-for-one stock split effective October 23, 2000) by shareholders, which are net of withholding tax. The amounts set forth here represent pro-forma U.S. GAAP calculations for the impact of a stock split which is not required under Brazilian GAAP. The financial statements present the amounts actually disbursed, including the withholding tax on interest on shareholders’ equity, which was paid on behalf of AmBev’s shareholders. The dividends per thousand shares set forth above are calculated based on the number of shares outstanding at the date the distributions were declared (as adjusted to give effect retroactively to AmBev’s common and preferred share five-for-one stock split effective October 23, 2000).
⁽³⁾ On March 23, 2000 and on November 30, 2000 AmBev distributed R$1.88 (U.S. $1.09) per common and preferred shares and R$2.38 (U.S. $1.22) per common and preferred shares, respectively, to its shareholders as a return of capital.
⁽⁴⁾ Translated to U.S. dollars at the exchange rate in effect at the date declared.

	Annual Exchange Rates of *Reais* per U.S.$1.00
		2004	2003	2002	2001	2000

Low		R$2.6544	R$2.8219	R$2.2709	R$1.9357	R$1.7234
High		3.2051	3.6623	3.9552	2.8007	1.9847
Average⁽¹⁾		2.9257	3.0600	2.9983	2.3532	1.8348
Period End		2.6544	2.8892	3.5333	2.3204	1.9554

	Net Proceeds Year ended December 31,
	2004				2003			2002
Brazil		8,525.9	71.0	%	7,637.7	88.0	%	6,928.9	94.6	%
Beer Brazil		6,907.4	57.5	%	6,114.6	70.4	%	5,546.4	75.7	%
CSD & NANC		1,462.8	12.2	%	1,332.1	15.3	%	1,096.2	15.0	%
Other Products		155.8	1.3	%	190.9	2.2	%	286.3	3.9	%
HILA		1,922.1	16.0	%	1,046.1	12.0	%	396.3	5.4	%
Quinsa(1)		1,153.0	9.6	%	773.7	8.9	%	−	−
HILA-ex		769.1	6.4	%	272.4	3.1	%	396.3	5.4	%
North America(2)		1,558.8	13.0	%	−	−		−	−
AmBev Consolidated		12,006.8	100.0	%	8,683.8	100.0	%	7,325.2	100.0	%

	Sales Volumes Year ended December 31,
	2004				2003			2002
Brazil		76,884.9	70.6	%	74,058.4	78.3	%	77,650.4	95.2	%
Beer Brazil		57,776.8	53.1	%	55,260.2	58.4	%	58,009.6	71.1	%
CSD & NANC		19,108.2	17.6	%	18,798.3	19.9	%	19,640.8	24.1	%
Other Products		−	−		−	−		−	−
HILA		28,333.2	26.0	%	20,301.3	21.7	%	3,909.1	4.8	%
Quinsa⁽¹⁾		22,145.9	20.3	%	18,514.6	19.6	%	−	−
HILA-ex		6,187.2	5.7	%	2,056.6	2.2	%	3,909.1	4.8	%
North America⁽²⁾		3,621.3	3.3	%	−	−		−	−
AmBev Consolidated		108,839.4	100.0	%	94,629.6	100.0	%	81,559.5	100.0	%

	2004 Quarterly Volumes
	(As a percentage of annual volumes)
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	2004
Brazil	23.2%	21.1%	24.0%	31.7%	100.0%
Beer Brazil	22.8%	21.0%	24.3%	31.9%	100.0%
CSD & NANC	24.3%	21.4%	23.1%	31.2%	100.0%
HILA	26.5%	19.6%	22.4%	31.5%	100.0%
Quinsa	27.9%	18.5%	21.5%	32.1%	100.0%
HILA-ex	21.4%	23.6%	25.5%	29.5%	100.0%
North America(1)	19.6%	28.6%	27.2%	24.6%	100.0%
AmBev Consolidated	23.6%	21.5%	23.9%	31.0%	100.0%

(1)	The Embodom plant’s beer line is currently under construction.
(2)	The Toronto brewery will be closed in the second half of 2005 as part of a production rationalization plan.
(53)	The New Westminster brewery was closed in the first half of 2005 as part of a production rationalization plan.

Financial liabilities	Book value	Fair value	Unrealized gain (loss	)

Notes	R$2,701.1	R$3,265.7	R$(564.6	)
C$ Labatt Series A Notes	434.2	466.1	(31.9	)
U.S.$ Labatt Series B Notes	111.7	117.8	(6.1	)
	R$3,247.0	R$3,849.6	R$(602.6	)

Statement of operations	February- December 2003					Year ended December 31, 2003					Year ended December 31, 2004
(Brazilian GAAP)		100% of Quinsa		AmBev’s Share(1)(2)			AmBev without Quinsa(3)		AmBev consolidated			AmBev without Quinsa(3)	AmBev consolidated
(R$ in millions)

Gross Sales		2,542.4		1,125.1			16,018.4		17,143.5			21,599.2	23,297.6
Net Sales		1,745.5		773.7			7,910.1		8,683.8			10,859.8	12,006.8
Cost of Sales		(882.4	)	(387.3	)		(3,656.9	)	(4,044.2	)		4,276.2	(4,780.5	)
Gross Profit		863.1		386.4			4,253.1		4,639.6			6,583.6	7,226.3
Operating Income(4)		382.3		175.8			1,789.1		1,964.9			1,778.1	2,163.3
Net Income		316.5		149.7			1,261.9		1,411.6			884.9	1,161.5

Balance Sheet	December 31, 2003							December 31, 2004
(Brazilian GAAP)		100% of Quinsa	AmBev’s Share(1)(2)(5	)	AmBev without Quinsa(3	)	AmBev consolidated		AmBev without Quinsa(3	)	AmBev consolidated
	*(R$ in millions)*

Current assets		861.0	427.6		5,072.9		5,500.5		4,960.8		5,379.6
Long term assets		439.6	132.4		2,974.3		3,192.6		3,363.9		3,606.5
Permanent assets		2,328.5	1,156.3		4,980.7		6,137.0		22,892.4		24,030.4

Short term borrowings		298.3	148.1		1,828.0		1,976.1		3,283.6		3,443,1
Other short term liabilities		477.8	237.3		2,506.6		2,743.9		5,051.7		5,328.6

Long term borrowings		684.1	339.7		3,664.6		4,004.3		4,000.5		4,367.6
Other long term liabilities		119.2	59.2		1,541.9		1,601.1		2,609.3		2,683.0

Minority Interest		402.0	199.6		(3.2	)	196.4		(3.3)		198.3
Shareholders’ equity		1,647.7	818.2		3,490.0		4,308.2		16,275.3		16,995,9

(1)	For the purposes of U.S. GAAP, we report our interest in Quinsa on an equity accounting basis and not on a proportional consolidation basis.
(2)	Represents our economic interest in Quinsa during the eleven months from January 31, 2003 through December 31, 2003.
(3)	Net of adjustments arising from proportional consolidation of Quinsa.
(4)	Operating income under Brazilian GAAP is presented after financial income and financial expenses.
(5)	Represents our economic interest in Quinsa at December 31, 2003.

	Consolidated Financial Highlights
		2004		2003		% Change
Brazilian GAAP	(R$ in millions, except volume amounts, percentages and per share amounts)

Sales volume—000 hectoliters⁽¹⁾		98,272		84,310		16.6	%
Net sales		12,006.8		8,683.8		38.3
Net revenue per hectoliter—R$/hl		122.2		103.0		18.6
Cost of sales		(4,780.5	)	(4,044.2	)	18.2
Gross profit		7,226.3		4,639.6		55.8
*Gross margin (%)*		60.2	%	53.4	%
Selling, general and administrative expenses
Selling and marketing expenses		(1,582.8	)	(847.1	)	86.8
Direct distribution expenses		(868.9	)	(648.6	)	34.0
General and administrative expenses, including directors’ fees		(617.9	)	(417.9	)	47.9
Depreciation and amortization⁽²⁾		(541.5	)	(420.0	)	28.9
Total selling, general and administrative expense		(3,611.1	)	(2,333.5	)	54.8
Provisions for contingencies		(260.2	)	(187.9	)	38.5
Other operating income (expenses), net		(420.9	)	(240.1	)	75.3
Equity in results of subsidiaries		5.6		(6.2	)	(9.7	)
Net financial income (expenses)		(776.4	)	93.1		−
Operating income⁽⁴⁾		2,163.3		1,964.9		10.1
*Operating margin (%)*		18.0	%	22.6	%
Net income		1,161.5		1,411.6		(17.7	)
Net margin		9.7	%	16.3	%
Earnings per share - R$/000 shares⁽³⁾		21.26		37.23		(42.9	)

(1)	Total beverage sales volume combines AmBev’s own beverage volume with its ownership percentage share of volume in Quinsa.
(2)	Does not include depreciation recorded on production assets which is recorded within cost of sales, nor amortization of goodwill which is within Other operating income, net.
(3)	Calculated based on year-end number of shares, excluding treasury shares.
(4)	Under Brazilian GAAP, operating income includes net financial expense.

	Year ended December 31,
		2004		2003
		(%)		(%)

Net sales		100.0		100.0
Cost of sales		(39.8	)	(46.6	)
Gross profit		60.2		53.4
Selling and marketing expenses		(13.2	)	(9.8	)
Direct distribution expenses		(7.2	)	(7.5	)
General and administrative expenses, including directors’ fees		(5.1	)	(4.8	)
Depreciation and amortization		(4.5	)	(4.8	)
Provision for contingencies		(2.2	)	(2.2	)
Other operating income (expenses), net		(3.5	)	(2.8	)
Net financial income (expenses)		(6.5	)	1.1

Operating income (expenses)⁽¹⁾		18.0		22.6

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

(1)	Represents AmBev’s share of Quinsa’s sale volumes.
(2)	Consists of the results of Labatt’s operations from August 27, 2004 through December 31, 2004.

	Gross Profit
	2004						2003
	(R$ in millions, except percentages)
		Amount	%		Margin			Amount	%		Margin
Brazilian Operations		5,157.3	71.4	%	60.5	%		4,128.3	89.0	%	54.1	%
Beer Brazil		4,440.3	61.4	%	64.3	%		3,611.0	77.8	%	59.1	%
CSD & NANC Brazil		642.2	8.9	%	43.9	%		444.9	9.6	%	33.4	%
Other Products		74.7	1.0	%	48.0	%		72.3	1.6	%	37.9	%
HILA Operations		1,012.5	14.0	%	52.7	%		511.3	11.0	%	48.9	%
Quinsa(1)		642.7	8.9	%	55.7	%		386.4	8.3	%	49.9	%
Hila-ex		369.9	5.1	%	48.1	%		124.9	2.7	%	45.9	%
North America(2)		1,056.4	14.6	%	67.8	%		−	−		−
Total		7,226.3	100.0	%	60.2	%		4,639.6	100.0	%	53.4	%

(1)	Calculated based on our proportional share of the results of operations of Quinsa.
(2)	North America’s results reflect the consolidation of Labatt’s operating results from August 27, 2004 through December 31, 2004.

	Year ended December 31,
	2003					2002
		Brazilian Operations		HILA Operations			Brazilian Operations		HILA Operations

Net sales		7,637.7		1,046.1			6,929.0		396.3
Cost of sales		(3,509.4	)	(534.7	)		(3,127.6	)	(214.1	)
Gross profit		4,128.3		511.3			3,801.4		182.2
Selling, general and administrative expenses		(1,957.5	)	(376.0	)		(1,767.5	)	(165.2	)

	AmBev’s Profile as of December 31, 2004
Debt Instruments		2005		2006	2007	2008	2009	Thereafter	Total
(R$ in millions, except percentages)
U.S.$ Denominated Debt (Fixed Rate)
Notional Amount		309.5		-	-	-	-	2,654.4	2,963.9
Average Pay Rate		9.63	%

BNDES Currency Basket Debt (Fixed Rate)
U.S. $ Denominated Debt (Fixed Rate)	18.7		18.4	18.6	16.8	0.8	-	73.2
Average Pay Rate	3.50	%
International Debt
U.S. $ Denominated Debt (Fixed Rate)	495.2		155.9	151.4	572.5	-	281.3	1,656.2
Average Pay Rate	4.44	%
International Debt
Other Latin American Currency (Fixed Rate)	204.8		-	-	-	-	-	204.8
Average Pay Rate	9.86	%
International Debt
C$ Denominated Debt (Fixed Rate)	1,911.7		-	-	-	-	-	1,911.7
Average Pay Rate	4.30	%
R$ Denominated Debt (Floating Rate - TJLP)
Notional Amount	135.2		80.1	66.2	53.7	9.6	-	344.7
Average Pay Rate (TJLP +)	2.40	%
R$ Denominated Debt (Floating Rate - CDI)
Notional Amount	274.6		-	-	-	-	-	274.6
Average Pay Rate (% of CDI)	104	%
R$ Debt - ICMS (Fixed Rate)
Notional Amount	93.5		3.1	192.1	15.1	-	77.8	381.6
Average Pay Rate	4.99	%
Total	3,443.2		257.5	428.3	658.1	10.4	3,013.4	7,810.7

Trading Prices on the Bovespa: Common and Preferred Shares⁽¹⁾

	Per 1,000 Common Shares				Per 1,000 Preferred Shares

	High		High		High		Low
	(in reais)				(in reais)
Annual
2004	R$	1,420	R$	635	R$	815	R$	514
2003		640		415		739		474
2002		489		355		550		391
2001		540		350		581		406
2000		470		158		488		208

Quarterly
2005
First Quarter	R$	1,401	R$	1,050	R$	825	R$	655
2004
First Quarter	R$	1,000	R$	635	R$	815	R$	520
Second Quarter		1,230		948		616		514
Third Quarter		1,140		1,232		670		605
Fourth Quarter		1,420		1,195		765		646
2003
First Quarter	R$	480	R$	415		562	R$	474
Second Quarter		540		470		613		543
Third Quarter		630		484		703		563
Fourth Quarter		640		550		739		600

Monthly
2005
January	R$	1,401	R$	1,260	R$	766	R$	655
February		1,335		1,280		804		665
March		1,305		1,050		825		745
April		950		630		750		690
May		655		600		726		696
2004
December	R$	1,420	R$	1,330	R$	765	R$	707

American Beverage Co Ambev – ‘20-F’ for 12/31/04

On: Friday, 7/1/05, at 8:12am ET · For: 12/31/04 · Accession #: 950157-5-542 · File #: 1-15194

Previous ‘20-F’: ‘20-F/A’ on 7/9/04 for 12/31/03 · Next: ‘20-F/A’ on 8/3/05 for 12/31/04 · Latest: ‘20-F’ on 4/30/13 for 12/31/12

Annual Report of a Foreign Private Issuer — Form 20-FFiling Table of Contents

20-F — Annual Report of a Foreign Private Issuer — form20-f

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Dates Referenced Herein and Documents Incorporated by Reference

Annual Report of a Foreign Private Issuer — Form 20-F
Filing Table of Contents

	Companhia de Bebidas das Américas—AmBev
	Attention:	Investor Relations Department
	Telephone numbers:	(55-11) 2122-1415
		(55-11) 2122-1414
	Fax:	(55-11) 2122-1526
	Email:	ir@ambev.com.br

	Principal Maturity Periods⁽¹⁾
	2005	2006	2007	2008	2009	Thereafter		Total	Fair Value
	(R$ million, except price per ton)
Derivatives Instruments

Sugar Futures (LIFFE)
Notional Amount (ton)	10,550						10,550		0.11
Average Price (R$/ton)	670
Sugar Futures (NYBOT)
Notional Amount (ton)	84,496	13,564					99,060		4.22
Average Price (R$/ton)	418	437
Wheat Futures (CBOT)
Notional Amount (ton)	15,232						15, 232		(0.34)
Average Price (R$/ton)	359
Aluminum Futures (LME)
Notional Amount (ton)	2,875						2,875		0.2
Average Price (R$/ton)	4,480
Total									4.2

	Principal Maturity Periods⁽¹⁾
	2005	2006	2007	2008	2009	Thereafter	Total⁽²⁾	Fair Value⁽²⁾
	(R$ in millions, except percentages)
Derivatives Instruments
BM&F DDI Dollar Future
Notional Amount	(232.7)	270.3	136.4	104.8	54.7	375.9	709.4	(1.7)
Average Interest Rate	0.39%	3.25%	3.94%	4.78%	5.22%	6.23%
U.S.$ x R$ Cross Currency
Interest Rate Swap
Notional Amount	1,794.6			1,105.6		320.0	3,220.3	(285.2)
Average Interest Rate	2.33%			11.32%		9.82%
C$ x U.S.$ Pre Fixed Rate x
Canadian Bankers Acceptance
Notional Amount	551.3	225.4		166.5			943.2	(17.4)
Average Interest Rate	2.94%	5.37%		5.28%
C$ x U.S.$ Cross Currency
Interest Rate Swap
Notional Amount				299.0			299.0	(58.8)
Average Interest Rate				6.65%
NDF Argentine Peso x U.S.$
Notional Amount	132.9						132.9	(0.2)
Average Interest Rate	3.046%
Interest Rate Swap LIBOR
3 Months x Fixed
Notional Amount	55.7						55.7	(0.1)
Average Interest Rate	4.71%
Total								78.2

	2004⁽²⁾		2003⁽¹⁾
	R$		R$
Audit Fees	2,241,376		1,398,395
Audit-related Fees		240,000		875,864
Tax Fees		-		419,048
All Other Fees		260,445		544,974
Total		2,741,821		3,238,281
____________________ ⁽¹⁾Amounts billed by PricewaterhouseCoopers
⁽²⁾Amounts billed by Deloitte Touche & Tohmatsu

This ‘20-F’ Filing	Date	Other Filings

	7/1/19
	12/31/17
	12/31/08	20-F
	7/23/08
	12/31/06	20-F, 20-F/A, NT 20-F
	1/31/06
	12/31/05	20-F, 20-F/A
	12/15/05
	12/12/05	6-K
	8/31/05
Filed on:	7/1/05	NT 20-F, NTN 20F
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	6/28/05
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	6/24/05
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	6/14/05	6-K
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	5/31/05	6-K
	5/18/05
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	4/22/05
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	1/7/05
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For Period End:	12/31/04	20-F/A, 6-K, NT 20-F, NTN 20F
	12/16/04
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	12/2/04
	10/28/04
	10/8/04	6-K
	9/30/04	6-K, 6-K/A
	9/24/04
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	9/14/04
	9/8/04
	8/31/04	6-K, 6-K/A
	8/30/04	6-K, 6-K/A
	8/28/04
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	7/22/04
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	7/6/04	6-K
	7/5/04	6-K
	6/30/04	20-F, 20-F/A, 6-K
	6/29/04
	6/22/04
	6/14/04
	5/27/04	6-K, SC 13D/A
	5/25/04	6-K
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	5/20/04	6-K
	5/18/04
	5/4/04
	4/8/04
	3/25/04
	3/22/04
	3/18/04	6-K
	3/9/04	6-K, SC 13D/A
	3/3/04	6-K, SC 13D/A
	3/2/04	6-K, SC 13D/A
	2/13/04
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	2/1/04
	12/31/03	20-F, 20-F/A, 6-K, 6-K/A
	12/29/03
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	11/4/03
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	6/30/03	20-F, 6-K
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	4/24/03	6-K
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	2/19/03	6-K
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	2/1/03
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	10/4/02	424B3, 6-K
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	12/31/01	20-F, 6-K
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