SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 6-K
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the
Securities Exchange Act of 1934
 
For the month of March, 2020

Commission File Number 1565025
 

 

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

AMBEV S.A.
(Translation of Registrant's name into English)
 

Rua Dr. Renato Paes de Barros, 1017 - 3rd Floor
04530-000 São Paulo, SP
Federative Republic of Brazil
(Address of principal executive office)
 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. 


Form 20-F ___X___ Form 40-F _______

 Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.  

Yes _______ No ___X____


 

 

 

 

MANUAL FOR THE ORDINARY AND EXTRAORDINARY

GENERAL SHAREHOLDERS’ MEETINGS

TO BE HELD ON APRIL 24, 2020

 

 

 

INDEX

 

 

1.   Message from the Co-Chairman of the Board of Directors

 

2.   General Information – Procedures and Deadlines

 

3.   Call Notice

 

4.   Information Regarding the Matters in the Agenda

 

4.1    Ordinary Shareholders’ Meeting

4.2    Extraordinary Shareholders’ Meeting

4.3    Published Documents to the Shareholders

 

5.   Exhibit - Management Proposal

 

 

 


 

1.           MESSAGE FROM THE CO-CHAIRMAN OF THE BOARD OF DIRECTORS

 

São Paulo, March 24, 2020.

 

To the Shareholders,

 

We are delighted to invite you to read our Manual for the Ordinary and Extraordinary General Shareholders’ Meetings of Ambev S.A. (“Company”) to be held, cumulatively, on April 24, 2020, at 2:00 pm, at the Company’s headquarters (“AGOE”).

 

The main matters in the agenda for the AGOE are, in short: in the Ordinary Shareholders’ Meeting, (i) analysis and approval of the management accounts and examination, discussion and voting on the financial statements of the Company for the fiscal year ended December 31, 2019; (ii) resolution on the allocation of the net profits for the year ended December 31, 2019, and ratification of the payment of interest on own capital related to the fiscal year ended December 31, 2019, approved by the Board of Directors at the meeting held on December 2, 2019; (iii) definition of the number of members of the Board of Directors; (iv) election of the effective and alternate members of the Board of Directors for a term in office of three (3) years, which shall end on the Ordinary Shareholders’ Meeting to be held in 2023; (v) election of the effective and alternate members of the Fiscal Council for a term in office of one (1) year, which shall end on the Ordinary Shareholders’ Meeting to be held in 2021; (vi) establishment of the overall compensation of the management and the members of the Fiscal Council for year 2020; and, in the Extraordinary Shareholders’ Meeting, (vii) amendment of the Company's by-laws to, additionally to other minor adjustments of language and remuneration highlighted in the Management Proposal: (a) amend the heading of article 5 in order to reflect the capital increases approved by the Board of Directors up to the date of the AGOE, within the authorized capital limit; (b) amend article 8 to make express reference to the other possibilities for using the authorized capital limit by the Board of Directors, as set forth in Law No. 6,404/76; (c) amend articles 11, 15, 16, 17, 18 and 19 to adjust the composition of the Board of Directors; (d) amend article 21 to adjust the duties of the Board of Directors; and (e) amend articles 22 to 34, including new articles 25 and 34 and renumbering the other articles in order to restructure the composition of the Board of Executive Officers of the Company, establish the duties of the new positions and altering the name of certain already existent positions; (viii) consolidation of the Company’s by-laws; and (ix) amendment to the Share-Based Compensation Plan currently in force, in order to increase the global volume of shares representing the Company’s capital stock that may be delivered to the participants of such plan from 0.3% to 3%.

 

The Call Notice included in item 3 of this Manual describes in detail the matters included in the agenda to be resolved on the AGOE. Additional Information may be found in the Management Proposal, an exhibit to this Manual.

 

We encourage the participation of all shareholders in our AGOE and, considering the current recommendations of the Health Ministry and the State Government of São Paulo for the prevention and confrontation of coronavirus (COVID-19), and aiming at the safety of its shareholders, the Company suggests that, if possible, preference should be given to using the distance voting instruments, specially by sending such instruments through the service providers that are able to collect and transmit instructions for filling out the voting instruments (custodian or Banco Bradesco S.A., as the bookkeeper of the Company’s shares), given the greater simplicity of such procedure.

 

Sincerely,

Victorio Carlos De Marchi

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2.           GENERAL INFORMATION – PROCEDURES AND DEADLINES

 

The participation of the shareholders in the AGOE is of great importance. The Ordinary Shareholders’ Meeting will be declared open upon a first call with the attendance of shareholders representing at least 1/4 of the voting capital. The Extraordinary Shareholders’ Meeting will be declared open upon a first call with the attendance of shareholders representing at least 2/3 of the voting capital. We note that, should there not be sufficient quorum for declaring the shareholders’ meetings open, a new call will take place. Upon a second call, the shareholders’ meetings will be declared open with any number of shareholders present.

 

The participation of the shareholders may be in person, by proxy or by distance voting.

 

2.1.       IN PERSON

 

The shareholders willing to participate in person in the AGOE shall be present at 2:00 pm on April 24, 2020, at the Company’s headquarters, located at Rua Dr. Renato Paes de Barros, 1,017, 4th floor, Itaim Bibi, in the City and State of São Paulo, with the following documents:

 

2.1.1.  Individuals

 

Identity document with photo of the shareholder (Identity Card (RG), Foreigner’s Identity Card (RNE), Driver’s License (CNH), passport or a document issued by a duly recognized professional association); and

 

Extract stating their respective stock ownership, issued by the custodian entity, within 48 hours prior to the date of the AGOE, for the shareholders taking part in the Registered Stocks Fungible Custody of B3 S.A. – Brasil, Bolsa, Balcão (“B3”).

 

2.1.2.  Legal Entities

 

(a) last consolidated by-laws or articles of association, as the case may be, (b) other documents that evidence the powers granted to the legal representative(s) of the shareholder, pursuant to its by-laws or articles of association, including, without limitation, minutes of election of directors, officers, powers of attorney, etc., and (c) identity document with photo of the legal representative(s); and

 

Extract stating their respective stock ownership, issued by the custodian entity, within 48 hours prior to the date of the AGOE, for the shareholders taking part in the Registered Stocks Fungible Custody of B3.

 

2.1.3.  Investment Funds

 

(a) last consolidated regulations of the fund, (b) by-laws or articles of association of its administrator or manager, as the case may be, subject to the voting policy of the fund, (c) other documents that evidence the powers granted to the legal representative(s) of the manager or administrator of the fund, as the case may be, and (d) identity document with photo of the legal representative(s); and

 

Extract stating their respective stock ownership, issued by the custodian entity, within 48 hours prior to the date of the AGOE, for the shareholders taking part in the Registered Stocks Fungible Custody of B3.

 

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2.2.       PROXY

 

The shareholders that are unable to attend the AGOE may be represented by a proxy granted within less than one year, pursuant to article 126, §1 of Law No. 6,404/76. In this case, in order to take part in the AGOE, the shareholder’s representative must bear an instrument attesting the respective powers of representation at the AGOE.

 

The Company requires that the proxies have their signatures certified by a notary public and by an embassy or consulate and are translated by a sworn translator, as the case may be. The Company does not accept electronic proxies granted by shareholders.

 

The Company requires that, if possible, the powers of attorney with special powers of representation in the AGOE are filed in the Company’s headquarters, with at least 3 business days in advance of the date set forth for the meeting, to the attention of the Chief Legal Officer, Mrs. Letícia Rudge Barbosa Kina.

 

2.3.       DISTANCE VOTING

 

The shareholder that elects to exercise its distance voting right may do so by sending its voting instrument to the services providers that are able to collect and transmit instructions for filling out the instrument, or directly to the Company.

 

The shareholders may send the instructions for completion of the distance voting instrument to service providers which provide services of collection and transmission of instructions for completion of the distance voting instrument, such as:

 

(i)          the shareholder’s custodian, in case the shares are deposited in a central depository; or

 

(ii)         Banco Bradesco S.A., as the financial institution hired by the Company to provide securities bookkeeping services, in case the shares are not deposited in a central depository.

 

If the shareholder wishes to vote at distance by sending the voting instrument directly to the Company, it shall send the documents below directly to the Company, at Rua Dr. Renato Paes de Barros, 1017, 4th floor, ZIP Code 04530-001, São Paulo/SP, to the attention of the Investor Relations Department (Departamento de Relações com Investidores):

 

(i)          distance voting instrument concerning the general meeting, duly filled out, with all its pages initialed and signature certified by a notary or by digital certificate;

(ii)         extract containing their respective stock ownership; and

(iii)       certified copy of the following documents:

·      for individuals - identity document with photo of the shareholder;

·      for legal entities - (a) last consolidated by-laws or articles of association, as the case may be, (b) other documents that evidence the powers granted to the legal representative(s) of the shareholder, pursuant to its by-laws or articles of association, including, without limitation, minutes of election of directors, officers, powers of attorney, etc., and (c) identity document with photo of the legal representative(s);

·      for investment funds - (a) last consolidated regulations of the fund, (b) by-laws or articles of association of its administrator or manager, as the case may be, subject to the voting policy of the fund, (c) other documents that evidence the powers granted to the legal representative(s) of the manager or administrator of the fund, as the case may be, and (d) identity document with photo of the legal representative(s).

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The following identity documents will be accepted, provided they have a photo of the bearer: Identity Card (RG), Foreigner’s Identity Card (RNE), Driver’s License (CNH), passport or a document issued by a duly recognized professional association.

 

In relation to the documents indicated in items (i) to (iii) above, the Company requires that the signatures are certified by a public notary, by an embassy or consulate and that the documents are translated by a sworn translator, as the case may be.

 

The distance voting instruments, along with their respective documentation, will only be considered at the AGOE if received by the Company, in good order and in compliance with the provisions above, with at least 7 days in advance of the date of the date of the AGOE. Pursuant to Article 21-U of CVM Instruction No. 481/09, the Company will inform the shareholder whether the documents received are sufficient for the vote to be deemed valid or the procedures and terms for any rectification or for resending, if necessary.

 

If any shareholder wishes to include proposals for resolution or candidates to be members of the board of directors or the fiscal council in the distance voting instruments, it will be required to send such proposals by mail to Rua Dr. Renato Paes de Barros, 1017, 4th floor, ZIP Code 04530-001, São Paulo/SP, to the attention of the Investor Relations Department (Departamento de Relações com Investidores), along with the documents concerning the proposal (including the information mentioned in Article 21-M of CVM Instruction 481/09) and the status and interest of the shareholder, within the terms and in the manner established in the applicable regulation.

 

Considering the current recommendations of the Health Ministry and the State Government of São Paulo for the prevention and confrontation of coronavirus (COVID-19), and aiming at the safety of its shareholders, the Company suggests that, if possible, preference should be given to using the distance voting instruments for participating in the AGOE, specially by sending such instruments through the service providers that are able to collect and transmit instructions for filling out the voting instrument (custodian or Banco Bradesco S.A., as the bookkeeper of the Company’s shares), given the greater simplicity of such procedure.

 

2.4.       MECHANISMS FOR CONFLICT OF INTERESTS MANAGEMENT

 

According to the practice recommended in item 5.2.3 of the Brazilian Code of Corporate Governance (Código Brasileiro de Governança Corporativa), the Company has mechanisms for managing conflicts of interests in the voting submitted to the shareholders’ meetings.

 

Article 115, §1 of Law No. 6,404/76 provides that the shareholder may not vote on the resolutions at the shareholders’ meeting that relate to the appraisal report of assets to which the shareholder may contribute on the formation of the capital stock and to the approval of its accounts as manager, nor in any other resolutions that might benefit the shareholder in a particular way, or in which the shareholder has a conflicting interest with the Company’s interest. 

 

During the AGOE, in case of allegation, by any of the shareholders present at the meeting, of an alleged conflict of interest of another shareholder that impedes him of voting at the meeting, or, even, in case of occurrence of another legal hypothesis of voting impediment (including, as the case may be, of participation in a separate voting for the election of a member of the Board of Directors or Fiscal Council), and if the shareholder himself has not declared an impediment, the chairman or secretary of the meeting shall postpone the resolution in order to listen and receive such allegation (which shall include the name of the shareholder in potential conflict, the matter to be resolved and the alleged existent conflict), with the possible manifestation in contrary from the relevant shareholder, before putting the matter to a vote. The chairman of the meeting himself may, in identifying a potential voting impediment, request clarifications on the situation from the shareholder, before putting the matter to a vote. If an impediment is confirmed, the relevant shareholder must be immediately absent from the discussions on the matter and abstain from voting.

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If a conflict situation is identified by a shareholder and such situation is not informed as set forth above, such shareholder must inform the Company of the situation within fifteen days as of the date of the AGOE, so that the management of the Company can take the appropriate measures with regard to the resolution.

 

In line with the understandings of the Brazilian Securities Commission (“CVM”), in situations in which the voting impediment is clear and the shareholder does not abstain from voting, the chairman of the meeting has the power to declare such impediment, not being allowed to impede the voting in other situations, notwithstanding the legal provisions on the potential nullity of the casted vote. 

 

 

 

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3.           CALL NOTICE

 

The shareholders of Ambev S.A. (“Company”) are invited to attend the Ordinary and Extraordinary General Meetings (“AGOE”) to be held on April 24, 2020, at 2:00 p.m., at the Company’s headquarters, located at Rua Dr. Renato Paes de Barros, 1,017, 4 floor, Itaim Bibi, in the City and State of São Paulo, to resolve on the following agenda:

 

(a)              Ordinary General Meeting:

 

(i)               analyze and approve the management accounts, with examination, discussion and voting on the financial statements related to the fiscal year ended December 31, 2019;

 

(ii)             discuss the allocation of the net profits for the fiscal year ended December 31, 2019 and ratification of the payment of interest on own capital related to the fiscal year ended December 31, 2019, approved by the Board of Directors at the meeting held on December 2, 2019;

(iii)           define the number of members of the Board of Directors;

 

(iv)            elect the effective and alternate members of the Board of Directors for a term in office of three (3) years, which shall end on the Ordinary General Meeting to be held in 2023;

 

(v)             elect the effective and alternate members of the Fiscal Council for a term in office of one (1) year, which shall end on the Ordinary General Meeting to be held in 2021; and

 

(vi)            establish the overall compensation of the management and of the members of the Fiscal Council for the fiscal year of 2020.

 

(b)             Extraordinary General Meeting:

 

(i)               amend the Company's bylaws to, additionally to other minor adjustments of language and compensation highlighted in the Management Proposal:

 

(a)    amend the heading of article 5 in order to reflect the capital increases approved by the Board of Directors up to the date of the AGOE, within the authorized capital limit;

 

(b)   amend article 8 to make express reference to the other possibilities for using the authorized capital limit approved by the Board of Directors as set forth in Law No. 6,404/76;

 

(c)    amend articles 11, 15, 16, 17, 18 and 19 to adjust the composition of the Board of Directors;

 

(d)   amend article 21 to adjust the duties of the Board of Directors: and

 

(e)    amend articles 22 to 34, including new articles 25 and 34 and renumbering the other articles in order to restructure the composition of the Board of Executive Officers of the Company, establish the duties of the new positions and altering the name of certain already existent positions;

 

(ii)             consolidate the Company’s by-laws; and

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(iii)           amend the Share-Based Compensation Plan currently in force, in order to increase the global volume of shares representing the Company’s capital stock that may be delivered to the participants of such plan from 0.3% to 3%.

 

General Information:

 

1.    On February 27, 2020 the following documents were published on the newspapers “Diário Oficial do Estado de São Paulo” and “Valor Econômico”: (i) the annual management report; (ii) the financial statements regarding the fiscal year ended on December 31, 2019; (iii) the report of the independent accountant’s opinion; and (iv) the Fiscal Council’s opinion.

2.    The documents and information referred to above and those listed in CVM Ruling No. 481/09 were presented to the Comissão de Valores Mobiliários (“CVM”) by means of its information system Empresas.Net, in accordance with Article 6 of such Ruling, and are available to the shareholders at the Company’s headquarters, on its Investor Relations website (ri.ambev.com.br), and on the websites of B3 S.A. – Brasil, Bolsa Balcão (“B3”) (www.b3.com.br) and CVM (www.cvm.gov.br).

3.    The shareholder or its legal agent must present valid identification in order to vote at the AGOE. Proxies containing special powers for representation in the general meeting shall be deposited at the Company’s headquarters (att. Mrs. Letícia Rudge Barbosa Kina, Chief Legal Officer), at least three (3) business days prior to the date scheduled for the meetings.

4.    Shareholders taking part in the Registered Stocks Fungible Custody of B3 that plan on attending the AGOE shall submit a statement containing their respective stock ownership, issued by qualified entity, within forty-eight (48) hours prior to the meetings.

5.    The shareholder that wishes may opt to exercise its voting right through the distance voting system, under the terms of CVM Ruling No. 481/09, sending the correspondent distance voting instrument through its relevant custodian agents or directly to the Company, according to the instructions provided on item 12.2 of the Company’s Reference Form and the Management Proposal for the AGOE. Considering the current recommendations of the Health Ministry and the State Government of São Paulo for the prevention and confrontation of coronavirus (COVID-19), and aiming at the safety of its shareholders, the Company suggests that, if possible, preference should be given to using the distance voting instruments for participating in the AGOE now convened, specially by sending such instruments through their service providers that are able to collect and transmit instructions for filling out the voting instruments (custodian or Banco Bradesco S.A., as the bookkeeper of the Company’s shares), given the greater simplicity of such procedure.

6.    Under the terms of article 3 of CVM Ruling No. 165/91 and article 4 of CVM Ruling No. 481/09, it is informed that the minimum percentage of equity interest held in the Company’s capital stock needed for submitting a request for adoption of the multiple voting process in the election of members of the Board of Directors is 5%.

 

São Paulo, March 24, 2020.

 

 

Victorio Carlos De Marchi

Co-Chairman of the Board of Directors

 

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4.           INFORMATION REGARDING THE MATTERS IN THE AGENDA

 

4.1.       ORDINARY SHAREHOLDER’S MEETING

 

1.           Analysis of the management accounts, examination, discussion and voting on the financial statements for the fiscal year ended December 31, 2019;

 

We propose that the management accounts are approved and the financial statements relating to the fiscal year ended December 31, 2019, as disclosed on February 27, 2020 on the websites of the Brazilian Securities Commission (“CVM”) and the B3 S.A. – Brasil, Bolsa, Balcão, through the Periodic Information System (Sistema de Informações Periódicas), on the Company’s website (www.ri.ambev.com.br) and on the newspapers Valor Econômico and the Official Gazette of the State of São Paulo.

 

We stress that, under the terms of article 9, item III, of CVM Ruling No. 481, of December 17, 2009 (“CVM Ruling 481/09”), the information disclosed in Exhibit A.I to the Management Proposal reflect our comments on the financial situation of the Company.

 

2.           Allocation of the net profits for the year ended December 31, 2019 and ratification of the payment of interest on own capital for the year ended December 31, 2019, approved by the Board of Directors at the meeting held on December 2, 2019;

 

We propose that the net profit for the fiscal year ended December 31, 2019 be allocated as indicated below, which is defined in detail in Exhibit A.II of the Management Proposal, prepared in accordance with article 9, sole paragraph, item II, of CVM Ruling 481/09. It is further proposed to ratify the payment of interest on own capital relating to the fiscal year ended December 31, 2019, approved by the Board of Directors at the meeting held on December 2, 2019.

 

Net Profits

R$ 11,779,965,119.88

Amount allocated to the Tax Incentives Reserve

R$ (1,352,121,653.10)

Amount allocated to payment of dividends and / or interest on own capital (gross), declared based on the net profit relating to the fiscal year ended December 31, 2019

R$ (7,717,419,618.63)

 

 

Amount allocated to the Investments Reserve(1)

R$ 4,180,780,132.35

(1) Including values relating to (i) reversion of effects of the revaluation of fixed assets in the amount of R$11,823,167.53; (ii) effect of application of IAS 29/CPC 42 (hyperinflation) in the amount of R$ 1,430,343,000.00; and (iii) expired dividends in the amount of R$28,190,116.67, as detailed in Exhibit A.II to the Management Proposal.

 

3.           Define the number of members of the Board of Directors and elect the effective and alternate members for a term in office ending at the Ordinary Shareholders’ Meeting to be held in 2023, under the terms of the Company’s By-laws.

 

The Company’s By-laws provides that the Board of Directors will be composed of 3 (three) to 11 (eleven) effective members, and it might have from 2 (two) to 11 (eleven) alternates.

 

The Management proposes that the Board of Directors is composed of 11(eleven) effective members and 2 (two) alternates, with or without a separate election.

 

Shareholders representing at least 5% of the Company’s capital stock may request the adoption of the multiple voting process in the election of the Board of Directors, provided that such request is sent with at least 48 hours in advance of the date and time set for the Ordinary General Meeting, or within the regular term, in case they opt for doing so through distance voting instrument. In the election of board members through the multiple voting process, each share equals to as many votes as the number of members to be elected, and shareholders are allowed to cumulate all of its votes in one candidate, or distribute them among more than one.   

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According to article 141, paragraph 7 of Law No. 6,404/76, every time, cumulatively, the election of the board of directors is performed through the multiple voting system and the minority shareholders exercise their prerogative of electing a member in a separate voting, it will be assured to the controlling shareholder the right to elect members in an equal number to the members elected by the other shareholders, plus one, independently of the number of members that, according to the by-laws, compose the board.

 

The controlling shareholders of the Company have appointed 11 (eleven) effective members and 2 (two) alternates for the positions of members of the Board of Directors. They are the individuals qualified below, which compose the “Controlling Shareholder Slate – Board of Directors”:

 

(i)          by reelection, Victorio Carlos De Marchi, Brazilian, married, lawyer, bearer of Identity Card RG No. 2.702.087 SSP/SP, enrolled with the CPF/ME under No. 008.600.938-91, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors;

 

(ii)         by reelection, José Heitor Attilio Gracioso, Brazilian, married, lawyer, bearer of Identity Card RG No. 2.833.137 SSP/SP, enrolled with the CPF/ME under No. 006.716.908-25, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors;

 

(iii)       by reelection, Carlos Alves de Brito, Brazilian, married, engineer, bearer of Identity Card RG No. 03.574.624-7 IFP/RJ, enrolled with the CPF/ME under No. 595.438.507-63, resident and domiciled in New York, NY, United States of America, to take office as an effective member of the Board of Directors;

 

(iv)       by reelection, Luis Felipe Pedreira Dutra Leite, Brazilian, divorced, economist, bearer of Identity Card RG No. 06522715-9 IFP/RJ, enrolled with the CPF/ME under No. 824.236.447-87, resident and domiciled in Greenwich, CT, United States of America, to take office as an effective member of the Board of Directors;

 

(v)         by reelection, Milton Seligman, Brazilian, married, engineer, bearer of Identity Card RG No. 965.908 SSP/DF, enrolled with the CPF/ME under No. 093.165.740-72, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors;

 

(vi)       by reelection, Vicente Falconi Campos, Brazilian, married, engineer, bearer of Identity Card RG No. M-1.176.273 SSP/MG, enrolled with the CPF/ME under No. 000.232.216-15, resident and domiciled in the City of Nova Lima, State of Minas Gerais, to take office as an effective member of the Board of Directors;

 

(vii)      by reelection, Roberto Moses Thompson Motta, Brazilian, married, businessman, bearer of Identity Card RG No. 50952008-X SSP/SP, enrolled with the CPF/ME under No. 706.988.307-25, resident and domiciled in New York, NY, United States of America, to take office as an effective member of the Board of Directors;

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(viii)    by reelection, Nelson José Jamel, Brazilian, married, engineer, bearer of Identity Card RG No. 37.990.760-4 SSP/SP, enrolled with the CPF/ME under No. 025.217.577-80, resident and domiciled in New York, NY, United States of America, to take office as an effective member of the Board of Directors;

 

(ix)       by reelection, Cecília Sicupira, Brazilian, married, business administrator, bearer of Identity Card RG No. 34.095.839-X SSP/SP, enrolled with the CPF/ME under No. 055.532.167-37, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors;

 

(x)         by reelection, Antonio Carlos Augusto Ribeiro Bonchristiano, Brazilian, married, bachelor of politics, philosophy and economics, bearer of Identity Card RG No. 13.076.140-0 SSP-SP, enrolled with the CPF/ME under No. 086.323.078-43, resident and domiciled in Capri, Italy, to take office as an effective member of the Board of Directors, as an Independent Director;

 

(xi)       by reelection, Marcos de Barros Lisboa, Brazilian, divorced, economist, bearer of Identity Card RG No. 006.653.074-2 IFP/RJ, enrolled with the CPF/ME under No. 806.030.257-49, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors, as an Independent Director;

 

(xii)      by reelection, Carlos Eduardo Klutzenschell Lisboa, Brazilian, married, administrator, bearer of Identity Card RG No. 54.929.337-1 SSP-SP, enrolled with the CPF/ME under No. 694.514.864-53, resident and domiciled in the City of Mexico, Mexico, to take office as an alternate member of the Board of Directors; and

 

(xiii)    by reelection, Michel Dimitrios Doukeris, Brazilian, married, chemical engineer, bearer of Identity Card RG No. 2.595.585 SSP/SC, enrolled with the CPF/ME under No. 810.940.279-87, resident and domiciled in New York, NY, United States of America, take office as an alternate member of the Board of Directors.

 

We clarify that, under the terms of article 10 of CVM Ruling 481/09, the information referring to the candidates nominated as members of the Board of Directors indicated above are further detailed in Exhibit A.III to the Management Proposal.

 

4.                Election of the effective and alternate members of the Fiscal Council for a term in office ending at the Ordinary Shareholders’ Meeting to be held in 2021, pursuant to the terms of the Company's by-laws.

 

The controlling shareholders appoint as members of the Fiscal Council the individuals qualified below, who will compose the “Controlling Shareholder Slate – Fiscal Council”:

 

(i)          by reelection, Elidie Palma Bifano, Brazilian, married, lawyer, bearer of Identity Card RG No. 3.076.167SSP/SP, enrolled with the CPF/ME under No. 395.907.558-87, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Fiscal Council of the Company;

 

(ii)         by reelection, José Ronaldo Vilela Rezende, Brazilian, married, accountant, bearer of Identity Card RG No. M-2.399.128 SSP/MG, enrolled with the CPF/ME under No. 501.889.846-15, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Fiscal Council of the Company;

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(iii)       by reelection, Emanuel Sotelino Schifferle, Brazilian, married, engineer, bearer of Identity Card RG No. 01.433.665-5 IFP/RJ, enrolled with the CPF/ME under No. 009.251.367-00, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an alternate member of the Fiscal Council of the Company; and

 

(iv)       by election, Eduardo Rogatto Luque, Brazilian, married, accountant, bearer of the Identity Card RG No. 17.841.962-X SSP/SP, enrolled with the CPF/ME under No. 142.773.658-84, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an alternate member of the Fiscal Council of the Company.

 

Additionally, Caixa de Previdência dos Funcionários do Banco do Brasil – PREVI, pursuant to article 161, paragraph 4, item “a”, of Law No. 6,404/76 informed the Company's management that it will appoint for the position of members of the Fiscal Council:

 

(i)          by election, Mr. Vinicius Balbino Bouhid, Brazilian citizen, single, engineer, bearer of Identity Card RG No. 029.562.824 - DETRAN/RJ, enrolled with the CPF/ME under No. 667.460.867/04, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an effective member of the Company's Fiscal Council; and

 

(ii)          by election, Carlos Tersandro Fonseca Adeodato, Brazilian, divorced, economist, bearer of Identity Card No. 10482 CRE/RJ, enrolled with the CPF/ME under No. 337.770.397-72, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an alternate member of the Company’s Fiscal Council.

 

We clarify that, under the terms of article 10 of CVM Ruling 481/09, the information referring to the candidates nominated as members of the Fiscal Council of the Company listed above are further detailed in Exhibit A.IV of the Management Proposal.

 

5.                Establishment of the global compensation of the managers and members of the Fiscal Council for year 2020.

 

We propose that the global compensation of the managers for the year 2020 (that is, between January 1, 2020 and December 31, 2020) be established in the global amount of up to R$111,079,130.00.

 

According to the CVM guidance (item 3.4.5 of Circular-Notice/CVM/SEP/No. 02/2020 – “Notice”), the global amount of managers’ compensation to be approved in the Ordinary Shareholders’ Meeting according to article 152 of Law No. 6,404/76 must include, besides the fixed compensation and short-term variable of the managers, the expenses relating to the recognition of the fair value of the call options and/or the shares that the Company intends to grant in the fiscal year. We stress that, therefore, in the global amount of managers’ compensation are included (i) the expenses associated with the recognition of the fair value of the stick options the Company intends to grant in this fiscal year based on the Stock Option Plan, dated as of June 30, 2013; and (ii) the expenses associated with the recognition of the fair value of the share-based compensation the Company intends to enforce in this fiscal year based on the Share-Based Compensation Plan, dated as of April 29, 2016, in both cases with accounting, and not financial, effects set forth in CPC 10.

 

As far as the global compensation of the Fiscal Council is concerned, for the year 2020 (that is, between January 1, 2020 and December 31, 2020), we propose the establishment of the global amount of up to R$2,162,700.00, with the compensation of the alternate members corresponding to half of the amount received by the effective members, which is in compliance with Law No. 6,404/76.

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We inform that the amounts paid as global compensation attributed to the managers and members of the Fiscal Council of the Company for the year 2019 were, respectively, R$ 75,163,352.00 and R$ 1,917,900.00. Such amounts are inferior to the limits approved by the Ordinary Shareholders’ Meeting held on April 26, 2019, of R$ 101,728,287.00 for the managers and R$ 2,146,762.00 for the members of the Fiscal Council. The difference verified between the limits approved by the Ordinary Shareholders’ Meeting of the Company on April 26, 2019 and the amounts actually paid as per the global compensation attributed to the managers is justified, mainly, due to the variable component of the compensation, which is linked to specific performance goals of the managers and the Company, that were not entirely met. 

 

Please note that the information required for the necessary analysis of the proposal of compensation of the managers and the Fiscal Council, as provided in article 12 of CVM Ruling 481/09, is set forth in Exhibit A.V to the Management Proposal, more specifically in items 13.1 and 13.4.

 

4.2.       EXTRAORDINARY SHAREHOLDERS’ MEETING

 

6.                Approve the amendment of the Company’s By-laws to:

 

(a)                amend the heading of article 5 in order to reflect the capital increases approved by the Board of Directors, within the authorized capital limit until the date of the Shareholders’ Meeting;

 

If the proposal is approved, the language of the heading of article 5 of the By-laws of the Company shall be that indicated in Exhibit B.I of the Management Proposal.

 

(b)                 amend article 8 to make express reference to other possibilities of using the authorized capital limit by the Board of Directors, as set forth in Law No 6,404/76;

 

The Management proposes the amendment of the heading of article 8 to make express reference to other possibilities of using the authorized capital limit approved by the Board of Directors, as set forth in Law No. 6,404/76, such as the capitalization of profits or reserves and the issuance of subscription bonus or debentures convertible in shares, as detailed in Exhibit B.I to the Management Proposal.

 

(c)                amend articles 11, 15, 16, 17, 18 and 19 to adjust the composition of the Board of Directors:

 

The Management proposes adjustments to articles 11, 15, 16, 17, 18 and 19 of the Company’s By-laws in order to (i) set forth the possibility of having only one Chairman to the Board of Directors alternatively as the current model of Co-Chairmen, allowing the board members to choose the composition of the Board of Directors more adequate for the moment of the Company; (ii) increase the minimum number of members that can compose the Board of Directors from three to five; and (iii) with the intention of following the recommendations of the Brazilian Code of Corporate Governance (Código Brasileiro de Governança Corporativa), provide that the Board of Directors will be composed, in its majority, by external members, all as set forth in details in Exhibit B.I to the Management Proposal.

 

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(d)                amend article 21 to adjust the duties of the Board of Directors:

 

The Management proposes the amendment of article 21 of the By-laws to adjust the list of matters subject to the prior approval by the Board of Directors, in view of excluding those that, as per its relevance and potential impact to the functioning and results of the Company, should be under the responsibilities of the Executive Officers, as detailed in Exhibit B.I to the Management Proposal.

 

(e)                amend articles 22 to 34, including the new articles 25 and 34 and renumbering the other articles to restructure the composition of the Board of Executive Officers of the Company, set the duties of the new positions and change the name of the positions already existent.

 

The Management proposes the use of a new name for positions in the Board of Executive Officers and the creation of the positions of Commercial and Compliance Vice-President Officers, detailing their duties, to reflect the Company’s new organizational structure, as detailed in Exhibit B.I to the Management Proposal.

 

7.                Approve the consolidation of the Company’s Bylaws.

 

In order to reflect the foregoing amendments, as well as other adjustments also detailed in Exhibit B.I to the Management Proposal, arising from the renumbering and language corrections, the Management proposes the restatement of the Company’s Bylaws, under the terms of the Exhibit B.I to the Management Proposal.

 

8.                Approve the amendment of the Share-Based Compensation Plan in force, to increase the global volume of shares representing the Company’s capital stock that may be granted to the participants of the plan from 0.3% to 3%.

 

The Management proposes the approval of the amendment of the Share-Based Compensation Plan in force, approved by the Extraordinary Shareholders’ Meeting of the Company held on April 29, 2016 (“Stock Plan”), to increase the global volume of shares representing the Company’s capital stock that may be granted to participants of the Stock Plan from 0.3% to 3%. The new percentage proposed considers the longevity of the Stock Plan, considering the future concessions that the Company will make to its managers and high-level employees in observance of its compensation policy and as approved by the Shareholders’ Meeting, as per the annual appreciation of the global compensation of the managers (if applicable), and by the Board of Directors. Thus, the Management understands that such increase is necessary for the Stock Plan to continue fulfilling its objectives of (i) stimulate the expansion, exit and performance of social objectives of the Company and its shareholders’ interests, encouraging the integration of managers and high-level employees of the Company; and (ii) allow the Company to obtain and keep, in an effective way, the services of such managers and employees.

 

The proposed amendment will be reflected in item 5.1 of the Stock Plan, as follows:

 

Current Language

Proposed Language

5.1. Participants may be granted, under the Stock Plan, shares representing, at most, 0.3% of the shares representing the Company’s capital stock on this date (“Global Volume”). The Global Volume may only be adjusted under the terms of item 8.1 of the Stock Plan.

5.1. Participants may be granted, under the Stock Plan, shares representing, at most, 0,3%3% of the shares representing the Company’s capital stock on this date on April 24, 2020 (“Global Volume”). The Global Volume may only be adjusted without modification of this Stock Plan under the terms of item 8.1.

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In order to reflect the amendment proposed above, we propose that the amendment to the Stock Plan is approved, under the terms of Exhibit B.II of the Management Proposal, that includes a copy of the Stock Plan revised and the additional information required by article 13 of CVM Ruling 481/09.

 

4.3.       DOCUMENTS DISCLOSED TO SHAREHOLDERS

 

The following documents were published on February 27, 2020 on the newspapers “Diário Oficial do Estado de São Paulo” and “Valor Econômico”: (i) the annual management report; (ii) the financial statements regarding the fiscal year ended on December 31, 2019; (iii) the report of the independent accountant’s opinion; and (iv) the Fiscal Council’s opinion.

 

The documents and information referred to above and those listed in CVM Ruling No. 481/09 were presented to the Comissão de Valores Mobiliários – CVM by means of its information system Empresas.Net, in accordance with Article 6 of such Ruling, and are available to the shareholders at the Company’s headquarters, on its Investor Relations website (ri.ambev.com.br), and on the websites of B3 (www.b3.com.br) and CVM (www.cvm.gov.br).

15


 

 

EXHIBIT

 

 

 

 

 

 

 

 

AMBEV S.A.

 

 

MANAGEMENT PROPOSAL

 

 

ORDINARY AND EXTRAORDINARY

SHAREHOLDERS’ MEETINGS

 

 

 

MARCH 24, 2020

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TABLE OF CONTENTS

 

17


 

AMBEV S.A.

CNPJ/ME [National Corporate Taxpayers Register of the Ministry of Economy] No. 07.526.557/0001-00

NIRE [Corporate Registration Identification Number] 35.300.368.941

 

To the Shareholders,

 

We hereby present the following Management Proposal regarding the matters set forth in the agenda for the Ordinary and Extraordinary Shareholders’ Meetings of Ambev S.A. (“Company” and “AGOE”, respectively) to be held, cumulatively, on April 24, 2020, at 2:00 p.m. (“Proposal”):

 

A.        Annual Shareholders’ Meeting:

 

 

1.           Analysis of the management accounts, examination, discussion and voting on the financial statements for the fiscal year ended December 31, 2019;

 

We propose that the management accounts are approved and the financial statements relating to the fiscal year ended December 31, 2019, as disclosed on February 27, 2020 on the websites of the Brazilian Securities Commission (“CVM”) and the B3 S.A. – Brasil, Bolsa, Balcão, through the Periodic Information System (Sistema de Informações Periódicas), on the Company’s website (www.ri.ambev.com.br) and on the newspapers Valor Econômico and the Official Gazette of the State of São Paulo.

 

We stress that, under the terms of article 9, item III, of CVM Ruling No. 481, of December 17, 2009 (“CVM Ruling 481/09”), the information disclosed in Exhibit A.I to the Management Proposal reflect our comments on the financial situation of the Company.

 

2.           Allocation of the net profits for the year ended December 31, 2019 and ratification of the payment of interest on own capital for the year ended December 31, 2019, approved by the Board of Directors at the meeting held on December 2, 2019;

 

We propose that the net profit for the fiscal year ended December 31, 2019 be allocated as indicated below, which is defined in detail in Exhibit A.II of the Management Proposal, prepared in accordance with article 9, sole paragraph, item II, of CVM Ruling 481/09. It is further proposed to ratify the payment of interest on own capital relating to the fiscal year ended December 31, 2019, approved by the Board of Directors at the meeting held on December 2, 2019.

 

Net Profits

R$ 11,779,965,119.88

Amount allocated to the Tax Incentives Reserve

R$ (1,352,121,653.10)

Amount allocated to payment of dividends and / or interest on own capital (gross), declared based on the net profit relating to the fiscal year ended December 31, 2019

R$ (7,717,419,618.63)

 

 

Amount allocated to the Investments Reserve(1)

R$ 4,180,780,132.35

(1) Including values relating to (i) reversion of effects of the revaluation of fixed assets in the amount of R$11,823,167.53; (ii) effect of application of IAS 29/CPC 42 (hyperinflation) in the amount of R$ 1,430,343,000.00; and (iii) expired dividends in the amount of R$28,190,116.67, as detailed in Exhibit A.II to the Management Proposal.

 

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3.           Define the number of members of the Board of Directors and elect the effective and alternate members for a term in office ending at the Ordinary Shareholders’ Meeting to be held in 2023, under the terms of the Company’s By-laws.

 

The Company’s By-laws provides that the Board of Directors will be composed of 3 (three) to 11 (eleven) effective members, and it might have from 2 (two) to 11 (eleven) alternates.

 

The Management proposes that the Board of Directors is composed of 11(eleven) effective members and 2 (two) alternates, with or without a separate election.

 

Shareholders representing at least 5% of the Company’s capital stock may request the adoption of the multiple voting process in the election of the Board of Directors, provided that such request is sent with at least 48 hours in advance of the date and time set for the Ordinary General Meeting, or within the regular term, in case they opt for doing so through distance voting instrument. In the election of board members through the multiple voting process, each share equals to as many votes as the number of members to be elected, and shareholders are allowed to cumulate all of its votes in one candidate, or distribute them among more than one.   

 

According to article 141, paragraph 7 of Law No. 6,404/76, every time, cumulatively, the election of the board of directors is performed through the multiple voting system and the minority shareholders exercise their prerogative of electing a member in a separate voting, it will be assured to the controlling shareholder the right to elect members in an equal number to the members elected by the other shareholders, plus one, independently of the number of members that, according to the by-laws, compose the board.

 

The controlling shareholders of the Company have appointed 11 (eleven) effective members and 2 (two) alternates for the positions of members of the Board of Directors. They are the individuals qualified below, which compose the “Controlling Shareholder Slate – Board of Directors”:

 

(i)          by reelection, Victorio Carlos De Marchi, Brazilian, married, lawyer, bearer of Identity Card RG No. 2.702.087 SSP/SP, enrolled with the CPF/ME under No. 008.600.938-91, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors;

 

(ii)         by reelection, José Heitor Attilio Gracioso, Brazilian, married, lawyer, bearer of Identity Card RG No. 2.833.137 SSP/SP, enrolled with the CPF/ME under No. 006.716.908-25, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors;

 

(iii)       by reelection, Carlos Alves de Brito, Brazilian, married, engineer, bearer of Identity Card RG No. 03.574.624-7 IFP/RJ, enrolled with the CPF/ME under No. 595.438.507-63, resident and domiciled in New York, NY, United States of America, to take office as an effective member of the Board of Directors;

 

(iv)       by reelection, Luis Felipe Pedreira Dutra Leite, Brazilian, divorced, economist, bearer of Identity Card RG No. 06522715-9 IFP/RJ, enrolled with the CPF/ME under No. 824.236.447-87, resident and domiciled in Greenwich, CT, United States of America, to take office as an effective member of the Board of Directors;

 

(v)         by reelection, Milton Seligman, Brazilian, married, engineer, bearer of Identity Card RG No. 965.908 SSP/DF, enrolled with the CPF/ME under No. 093.165.740-72, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors;

 

19


 

(vi)       by reelection, Vicente Falconi Campos, Brazilian, married, engineer, bearer of Identity Card RG No. M-1.176.273 SSP/MG, enrolled with the CPF/ME under No. 000.232.216-15, resident and domiciled in the City of Nova Lima, State of Minas Gerais, to take office as an effective member of the Board of Directors;

 

(vii)      by reelection, Roberto Moses Thompson Motta, Brazilian, married, businessman, bearer of Identity Card RG No. 50952008-X SSP/SP, enrolled with the CPF/ME under No. 706.988.307-25, resident and domiciled in New York, NY, United States of America, to take office as an effective member of the Board of Directors;

 

(viii)    by reelection, Nelson José Jamel, Brazilian, married, engineer, bearer of Identity Card RG No. 37.990.760-4 SSP/SP, enrolled with the CPF/ME under No. 025.217.577-80, resident and domiciled in New York, NY, United States of America, to take office as an effective member of the Board of Directors;

 

(ix)       by reelection, Cecília Sicupira, Brazilian, married, business administrator, bearer of Identity Card RG No. 34.095.839-X SSP/SP, enrolled with the CPF/ME under No. 055.532.167-37, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors;

 

(x)         by reelection, Antonio Carlos Augusto Ribeiro Bonchristiano, Brazilian, married, bachelor of politics, philosophy and economics, bearer of Identity Card RG No. 13.076.140-0 SSP-SP, enrolled with the CPF/ME under No. 086.323.078-43, resident and domiciled in Capri, Italy, to take office as an effective member of the Board of Directors, as an Independent Director;

 

(xi)       by reelection, Marcos de Barros Lisboa, Brazilian, divorced, economist, bearer of Identity Card RG No. 006.653.074-2 IFP/RJ, enrolled with the CPF/ME under No. 806.030.257-49, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Board of Directors, as an Independent Director;

 

(xii)      by reelection, Carlos Eduardo Klutzenschell Lisboa, Brazilian, married, administrator, bearer of Identity Card RG No. 54.929.337-1 SSP-SP, enrolled with the CPF/ME under No. 694.514.864-53, resident and domiciled in the City of Mexico, Mexico, to take office as an alternate member of the Board of Directors; and

 

(xiii)    by reelection, Michel Dimitrios Doukeris, Brazilian, married, chemical engineer, bearer of Identity Card RG No. 2.595.585 SSP/SC, enrolled with the CPF/ME under No. 810.940.279-87, resident and domiciled in New York, NY, United States of America, take office as an alternate member of the Board of Directors.

 

We clarify that, under the terms of article 10 of CVM Ruling 481/09, the information referring to the candidates nominated as members of the Board of Directors indicated above are further detailed in Exhibit A.III to the Management Proposal.

 

4.                Election of the effective and alternate members of the Fiscal Council for a term in office ending at the Ordinary Shareholders’ Meeting to be held in 2021, pursuant to the terms of the Company's by-laws.

 

The controlling shareholders appoint as members of the Fiscal Council the individuals qualified below, who will compose the “Controlling Shareholder Slate – Fiscal Council”:

 

(i)          by reelection, Elidie Palma Bifano, Brazilian, married, lawyer, bearer of Identity Card RG No. 3.076.167SSP/SP, enrolled with the CPF/ME under No. 395.907.558-87, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Fiscal Council of the Company;

20


 

 

(ii)         by reelection, José Ronaldo Vilela Rezende, Brazilian, married, accountant, bearer of Identity Card RG No. M-2.399.128 SSP/MG, enrolled with the CPF/ME under No. 501.889.846-15, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an effective member of the Fiscal Council of the Company;

 

(iii)       by reelection, Emanuel Sotelino Schifferle, Brazilian, married, engineer, bearer of Identity Card RG No. 01.433.665-5 IFP/RJ, enrolled with the CPF/ME under No. 009.251.367-00, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an alternate member of the Fiscal Council of the Company; and

 

(iv)       by election, Eduardo Rogatto Luque, Brazilian, married, accountant, bearer of the Identity Card RG No. 17.841.962-X SSP/SP, enrolled with the CPF/ME under No. 142.773.658-84, resident and domiciled in the City of São Paulo, State of São Paulo, to take office as an alternate member of the Fiscal Council of the Company.

 

Additionally, Caixa de Previdência dos Funcionários do Banco do Brasil – PREVI, pursuant to article 161, paragraph 4, item “a”, of Law No. 6,404/76 informed the Company's management that it will appoint for the position of members of the Fiscal Council:

 

(i)          by election, Mr. Vinicius Balbino Bouhid, Brazilian citizen, single, engineer, bearer of Identity Card RG No. 029.562.824 - DETRAN/RJ, enrolled with the CPF/ME under No. 667.460.867/04, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an effective member of the Company's Fiscal Council; and

 

(ii)          by election, Carlos Tersandro Fonseca Adeodato, Brazilian, divorced, economist, bearer of Identity Card No. 10482 CRE/RJ, enrolled with the CPF/ME under No. 337.770.397-72, resident and domiciled in the City of Rio de Janeiro, State of Rio de Janeiro, to take office as an alternate member of the Company’s Fiscal Council.

 

We clarify that, under the terms of article 10 of CVM Ruling 481/09, the information referring to the candidates nominated as members of the Fiscal Council of the Company listed above are further detailed in Exhibit A.IV of the Management Proposal.

 

5.                Establishment of the global compensation of the managers and members of the Fiscal Council for year 2020.

 

We propose that the global compensation of the managers for the year 2020 (that is, between January 1, 2020 and December 31, 2020) be established in the global amount of up to R$111,079,130.00.

 

According to the CVM guidance (item 3.4.5 of Circular-Notice/CVM/SEP/No. 02/2020 – “Notice”), the global amount of managers’ compensation to be approved in the Ordinary Shareholders’ Meeting according to article 152 of Law No. 6,404/76 must include, besides the fixed compensation and short-term variable of the managers, the expenses relating to the recognition of the fair value of the call options and/or the shares that the Company intends to grant in the fiscal year. We stress that, therefore, in the global amount of managers’ compensation are included (i) the expenses associated with the recognition of the fair value of the stick options the Company intends to grant in this fiscal year based on the Stock Option Plan, dated as of June 30, 2013; and (ii) the expenses associated with the recognition of the fair value of the share-based compensation the Company intends to enforce in this fiscal year based on the Share-Based Compensation Plan, dated as of April 29, 2016, in both cases with accounting, and not financial, effects set forth in CPC 10.

21


 

 

As far as the global compensation of the Fiscal Council is concerned, for the year 2020 (that is, between January 1, 2020 and December 31, 2020), we propose the establishment of the global amount of up to R$2,162,700.00, with the compensation of the alternate members corresponding to half of the amount received by the effective members, which is in compliance with Law No. 6,404/76.

 

We inform that the amounts paid as global compensation attributed to the managers and members of the Fiscal Council of the Company for the year 2019 were, respectively, R$ 75,163,352.00 and R$ 1,917,900.00. Such amounts are inferior to the limits approved by the Ordinary Shareholders’ Meeting held on April 26, 2019, of R$ 101,728,287.00 for the managers and R$ 2,146,762.00 for the members of the Fiscal Council. The difference verified between the limits approved by the Ordinary Shareholders’ Meeting of the Company on April 26, 2019 and the amounts actually paid as per the global compensation attributed to the managers is justified, mainly, due to the variable component of the compensation, which is linked to specific performance goals of the managers and the Company, that were not entirely met. 

 

Please note that the information required for the necessary analysis of the proposal of compensation of the managers and the Fiscal Council, as provided in article 12 of CVM Ruling 481/09, is set forth in Exhibit A.V to the Management Proposal, more specifically in items 13.1 and 13.4.

 

B.         Extraordinary Shareholders’ Meeting:

 

6.                Approve the amendment of the Company’s By-laws to:

 

(a)                 amend the heading of article 5 in order to reflect the capital increases approved by the Board of Directors, within the authorized capital limit until the date of the Shareholders’ Meeting;

 

If the proposal is approved, the language of the heading of article 5 of the By-laws of the Company shall be that indicated in Exhibit B.I of the Management Proposal.

 

(b)                 amend article 8 to make express reference to other possibilities of using the authorized capital limit by the Board of Directors, as set forth in Law No 6,404/76;

 

The Management proposes the amendment of the heading of article 8 to make express reference to other possibilities of using the authorized capital limit approved by the Board of Directors, as set forth in Law No. 6,404/76, such as the capitalization of profits or reserves and the issuance of subscription bonus or debentures convertible in shares, as detailed in Exhibit B.I to the Management Proposal.

 

(c)                 amend articles 11, 15, 16, 17, 18 and 19 to adjust the composition of the Board of Directors:

 

The Management proposes adjustments to articles 11, 15, 16, 17, 18 and 19 of the Company’s By-laws in order to (i) set forth the possibility of having only one Chairman to the Board of Directors alternatively as the current model of Co-Chairmen, allowing the board members to choose the composition of the Board of Directors more adequate for the moment of the Company; (ii) increase the minimum number of members that can compose the Board of Directors from three to five; and (iii) with the intention of following the recommendations of the Brazilian Code of Corporate Governance (Código Brasileiro de Governança Corporativa), provide that the Board of Directors will be composed, in its majority, by external members, all as set forth in details in Exhibit B.I to the Management Proposal.

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(d)                 amend article 21 to adjust the duties of the Board of Directors:

 

The Management proposes the amendment of article 21 of the By-laws to adjust the list of matters subject to the prior approval by the Board of Directors, in view of excluding those that, as per its relevance and potential impact to the functioning and results of the Company, should be under the responsibilities of the Executive Officers, as detailed in Exhibit B.I to the Management Proposal.

 

(e)                 amend articles 22 to 34, including the new articles 25 and 34 and renumbering the other articles to restructure the composition of the Board of Executive Officers of the Company, set the duties of the new positions and change the name of the positions already existent.

 

The Management proposes the use of a new name for positions in the Board of Executive Officers and the creation of the positions of Commercial and Compliance Vice-President Officers, detailing their duties, to reflect the Company’s new organizational structure, as detailed in Exhibit B.I to the Management Proposal.

 

7.                Approve the consolidation of the Company’s Bylaws.

 

In order to reflect the foregoing amendments, as well as other adjustments also detailed in Exhibit B.I to the Management Proposal, arising from the renumbering and language corrections, the Management proposes the restatement of the Company’s Bylaws, under the terms of the Exhibit B.I to the Management Proposal.

 

8.                Approve the amendment of the Share-Based Compensation Plan in force, to increase the global volume of shares representing the Company’s capital stock that may be granted to the participants of the plan from 0.3% to 3%.

 

The Management proposes the approval of the amendment of the Share-Based Compensation Plan in force, approved by the Extraordinary Shareholders’ Meeting of the Company held on April 29, 2016 (“Stock Plan”), to increase the global volume of shares representing the Company’s capital stock that may be granted to participants of the Stock Plan from 0.3% to 3%. The new percentage proposed considers the longevity of the Stock Plan, considering the future concessions that the Company will make to its managers and high-level employees in observance of its compensation policy and as approved by the Shareholders’ Meeting, as per the annual appreciation of the global compensation of the managers (if applicable), and by the Board of Directors. Thus, the Management understands that such increase is necessary for the Stock Plan to continue fulfilling its objectives of (i) stimulate the expansion, exit and performance of social objectives of the Company and its shareholders’ interests, encouraging the integration of managers and high-level employees of the Company; and (ii) allow the Company to obtain and keep, in an effective way, the services of such managers and employees.

 

The proposed amendment will be reflected in item 5.1 of the Stock Plan, as follows:

 

Current Language

Proposed Language

5.1. Participants may be granted, under the Stock Plan, shares representing, at most, 0.3% of the shares representing the Company’s capital stock on this date (“Global Volume”). The Global Volume may only be adjusted under the terms of item 8.1 of the Stock Plan.

5.1. Participants may be granted, under the Stock Plan, shares representing, at most, 0,3%3% of the shares representing the Company’s capital stock on this date on April 24, 2020 (“Global Volume”). The Global Volume may only be adjusted without modification of this Stock Plan under the terms of item 8.1.

23


 

 

In order to reflect the amendment proposed above, we propose that the amendment to the Stock Plan is approved, under the terms of Exhibit B.II of the Management Proposal, that includes a copy of the Stock Plan revised and the additional information required by article 13 of CVM Ruling 481/09.

 

São Paulo, March 24, 2020.

 

 

The Management

Ambev S.A.

 

 

24


 

 

EXHIBIT A.I – COMMENTS FROM THE MANAGEMENT

 

(as item 10 to Annex 24 to CVM Instruction 480/09)

 

10.1– General financial and asset conditions

 

The financial information included in this section, except if otherwise expressly set forth, refer to our consolidated financial statements related to the fiscal years that ended on December 31, 2019, 2018 and 2017. Our consolidated audited financial statements were prepared in accordance with the International Financial Reporting Standards (“IFRSs”), issued by the International Accounting Standards Board (“IASB”), and in accordance with the accounting practices adopted in Brazil, that comprehend the accounting practices set forth in Law No. 6404/76 and the pronouncements, guidance and interpretations issued by the Accounting Pronouncement Committee (Comitê de Pronunciamentos Contábeis – CPC) and approved by CVM.

 

On January 1, 2019, we adopted IFRS 16 which establishes principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. IFRS 16 Leases replaces the current lease accounting requirements and introduces significant changes in the accounting, removing the distinction between operating and finance leases under IAS 17 Leases and related interpretations, and requires a lessee to recognize a right-of-use asset and a lease liability at lease commencement date. The impact to the financial statements is demonstrated in the recognition of right-of-use assets and lease liabilities in the balance sheet. As a result of the above, our audited consolidated financial statements for the years ended December 31, 2018 and 2017 included in this annual report have been restated for comparative purposes using the full retrospective method.

 

The information under this item 10 of the Reference Form must be read and analyzed together with our consolidated financial statements, available at our website (ri.ambev.com.br ) and at the CVM’s website (cvm.gov.br).

 

a) General financial and asset conditions.

 

The Executive Board understands that the Company presents sufficient equity and financial conditions to implement its business plan and perform its obligations of short and medium term.

 

2019

As of December 31, 2019, the Company had, in its current assets, a total of R$ 27,621.1 million, with R$ 11,915.2 in cash and cash equivalents of the Company. The current liabilities as of December 31, 2019 amounted to R$ 25,011.0 million. The current liquidity ratio, used to assess the Company’s capacity to of payment of the short-term obligations was 1.1x. Its positions of cash net of bank overdrafts and cash net of debt1 were R$ 11,900.6 million and R$ 8,852.4 million, respectively. The indebtedness indicator of net debt/EBITDA2 was -0.42.

 


1 The cash net of bank overdrafts position is represented by the balances of cash and cash equivalents being deducted the balance of bank overdrafts. The cash net of debt position is represented by the cash net of bank overdrafts position added by balances of current financial investments and being deducted the balances of loans and financings. Both the cash net of bank overdrafts position and the cash net of debt position are performance indicators used by the Company, and they are not measures according to the Accounting Practices Adopted in Brazil or according to IFRS.

 

2 The Company calculates the net debt as the balances of loans and financings being deducted the balances of current financial investments and cash net of bank overdrafts. The net debt/EBITDA is a performance indicator used by the Company, and it is not a measure according to the Accounting Practices Adopted in Brazil or according to IFRS.

 

25


 

 

2018

As of December 31, 2018, the Company had total current assets in the amount of 25,329.6 million, with R$ 11,476.9 in cash and cash equivalents of the Company. The current liabilities as of December 31, 2018 amounted to R$ 25,208.9 million. The liquidity ratio, used to assess the Company’s capacity of payment of the short-term obligations was 1.0x. Its positions of cash net of bank overdrafts and cash net of debt3 were R$ 11,476.9 million and R$ 7,373.2 million, respectively. The indebtedness indicator of net debt/EBITDA4 was -0.34.

 

2017

As of December 31, 2017, the Company had total current assets in the amount of R$ 24,718.0 million, of which R$ 10,364.6 million were cash and cash equivalents. As of December 31, 2017, its current liabilities totaled R$ 29,066.7 million. The current liquidity ratio, used to assess the capacity of the Company to meet its short-term commitments, was 0.9x. Its positions of cash net of bank overdrafts and cash net of debt5 were R$ 10,366.4 million and R$ 5,835.9 million, respectively. The indebtedness indicator of net debt/EBITDA6 was -0.28.

 

(in million of Reais)

12/31/2019

12/31/2018

12/31/2017

Total Current Assets

27,621.1

25,329.6

24,718.0

Total Current Liabilities

25,011.0

25,208.9

29,066.7

Net Working Capital Ratio (CA-CL)

2,610.1

120.7

(4,384.7)

Net Cash of Bank Overdrafts

11,900.6

11,476.9

10,364.6

Cash net of debt

8,852.4

7,373.2

5,835.9

 

 

12/31/2019

12/31/2018

12/31/2017

Current Liquidity

1.1

1.0

0.9

Net Debt/EBITDA

-0.42

-0.34

-0.28

 

b) Capital structure.

 

Capital Structure

On December 31

2019

2018

2017

R$ million

%

R$ million

%

R$ million

%

Third-party financing(1)

39,186.9

39

38,259.6

40

40,846.6

45

Equity(2)

62,556.0

61

57,454.8

60

47,919.7

55

 (1) The Company’s third-party financing is represented by the totality of the current and non-current liabilities.

(2) The Company’s equity is represented by the consolidated owner’s equity.

 

The Company’s capital structure was the following: (i) as of December 31, 2017, 55% of equity and 45% of third-party financing; (ii) as of December 31, 2018, 60% of equity and 40% of third-party financing; and (iii) as of December 31, 2019, 61% of equity and 39% of third-party financing.


3 The cash net of bank overdrafts position is represented by the balances of cash and cash equivalents being deducted the balance of bank overdrafts. The cash net of debt position is represented by the cash net of bank overdrafts position added by balances of current financial investments and being deducted the balances of loans and financings. Both the cash net of bank overdrafts position and the cash net of debt position are performance indicators used by the Company, and they are not measures according to the Accounting Practices Adopted in Brazil or according to IFRS.

4 The Company calculates the net debt as the balances of loans and financings being deducted the balances of current financial investments and cash net of bank overdrafts. The net debt/EBITDA is a performance indicator used by the Company, and it is not a measure according to the Accounting Practices Adopted in Brazil or according to IFRS.

5 The cash net of bank overdrafts position is represented by the balances of cash and cash equivalent being deducted the balance of net cash of bank overdrafts. The cash net of debt position is represented by the cash net of bank overdrafts position added by the balances of current financial investments. Both the cash net of bank overdrafts position and the cash net of debt position are performance indicators used by the Company, and they are not measures according to the Accounting Practices Adopted in Brazil or according to IFRS.

6 The Company calculates the net debt as the balances of loans and financings being deducted the balances of current financial investments and cash net of bank overdrafts. The net debt/EBITDA is a performance indicator used by the Company, and it is not a measure according to the Accounting Practices Adopted in Brazil or according to IFRS.

 

26


 

 

c) payment capacity in relation to financial commitments undertaken.

 

(in million of Reais)

12/31/2019

12/31/2018

12/31/2017

Total debt

3,062.8

4,103.7

4,530.5

Short-term debt

653.1

1,941.2

1,699.4

Total current assets

27,621.1

25,329.6

24,718.0

Cash and cash equivalents

11,915.2

11,476.9

10,366.4

Current liquidity ratio

 1.1x 

1.0x

0.9x

Cash net of debt

8,852.4

7,373.2

5,835.9

 

2019

Considering the Company’s debt profile, as described in 10.1(f) below (total debt of R$ 3,062.8 million as of December 31, 2019, of which R$ 653.1 million is short-term debt), its cash flow and liquidity position evidenced by total current assets (R$ 27,621.1 million), cash and cash equivalents (R$ 11,915.2 million), current liquidity ratio (1.1x) and cash net of debt (R$ 8,852.4 million), all as of December 31, 2019, indicated in 10.1 (a) above, the directors believe that the Company has sufficient liquidity and capital resources to cover the investments, costs, expenses, debts and other amounts payable over the next few years, although they cannot guarantee that this situation will remain unchanged. In case it may be necessary to take out new loans to finance its investments and acquisitions, the directors believe that the Company has capacity to do so.

 

2018

Considering the Company’s debt profile, as described in 10.1(f) below (total debt of R$4,103.7 million as of December 31, 2018, of which R$ 1,941.2 million is short-term debt), its cash flow and liquidity position evidenced by total current assets (R$25,329.6 million), cash and cash equivalents (R$ 11,476.9 million), current liquidity ratio (1.0x) and cash net of debt (R$ 7,373.2 million), all as of December 31, 2018, indicated in 10.1 (a) above, the officers believe that the Company has sufficient liquidity and capital resources to cover the investments, costs, expenses, debts and other amounts payable over the next few years, although they cannot guarantee that this situation will remain unchanged. In case it may be necessary to take out new loans to finance its investments and acquisitions, the officers believe that the Company has capacity to do so.

 

2017

Considering the Company’s debt profile, as described in 10.1(f) below (total debt of R$ 4,530.5 million as of December 31, 2017, of which R$ 1,699.3 million is short-term debt), its cash flow and liquidity position evidenced by total current assets (R$ 24,718.0 million), cash and cash equivalents (R$ 10,366.4 million), current liquidity ratio (0.9x) and cash net of debt (R$ 5,835.9 million), all as of December 31, 2017, indicated in 10.1 (a) above, the directors believe that the Company has sufficient liquidity and capital resources to cover the investments, costs, expenses, debts and other amounts payable over the next few years, although they cannot guarantee that this situation will remain unchanged. In case it may be necessary to take out new loans to finance its investments and acquisitions, the directors believe that the Company has capacity to do so.

 

d) sources of financing for working capital and investments in non-current assets used.

 

The Company’s working capital cycle has substantially evolved every year since 2014, and as of December 31, 2019, 2018 and 2017, it reported a negative working capital, meaning that there is no need to raise new loans to finance working capital.

 

With regard to investments in non-current assets, the Company’s current cash position and the expected cash flow generation are sufficient to cover these investments. In any case, the Company has wide access to funding sources should there be an occasional need for supplemental cash funding for such investments.

27


 

 

 

e) sources of financing for working capital and for investments in non-current assets that it intends to use to cover liquidity shortfalls.

 

The Company has access to credit facilities extended by leading Brazilian and foreign banks, and has already raised funds in domestic and international capital markets. The Company’s current investment grade rating issued by key international rating agencies facilitates its access to additional financing arrangements that could be used to compensate any potential liquidity shortcomings. The Company has a Baa3 risk credit by Moody`s and BBB by S&P.

 

f) levels of indebtedness and characteristics of debts.

 

i. relevant financing and loan agreements

 

Please, find below additional information related to each one of the fiscal years that ended on December 31, 2019, 2018 and 2017:

 

2019

The Company's debt was structured in a manner to avoid significant concentration of maturities in each year and is tied to different interest rates. The most significant rates are: (i) fixed rate for the Bond 2021 and BNDES/FINEP; (ii) Long-Term Interest Rate (TJLP) for loans from Brazilian Bank of Economic and Social Development (“BNDES”); (iii) reference interest rate (“TR”) for the CRI 2030 operation; and (iv) floating rate (Libor) for international loans.

 

As of December 31, 2019, the Company was in compliance with its contractual obligations for its loans and financings and with any applicable borrowing limits.

 

Debt Profile – December 31, 2019

 

Debt Instruments

2019

2020

2021

2022

2023

After

Total

BNDES Basket Debt floating rate

 

 

 

 

 

 

 

Par Value

10.0

10.5

14.0

12.3

13.4

111.6

171.8

TJLP or TR + Average Pay Rate

9.3%

9.3%

9.3%

9.3%

9.3%

9.3%

 

International Debt

 

 

 

 

 

 

 

Other Latin-American currencies floating rate

34.4

230.6

14.1

13.0

17.5

38.3

348.0

Average Pay Rate

10.0%

10.0%

10.0%

10.0%

10.0%

10.0%

 

US dollar – fixed rate

10.9

8.1

-

-

-

-

19.1

Average Pay Rate

4.7%

4.7%

0.0%

0.0%

0.0%

0.0%

 

US dollar – floating rate

95.1

0.2

-

-

-

-

95.3

Average Pay Rate

4.1%

4.1%

0.0%

0.0%

0.0%

0.0%

 

Canadian dollar – floating rate

38.0

39.3

36.3

55.2

26.4

48.5

243.7

Average Pay Rate

3.5%

3.5%

3.5%

3.5%

3.5%

3.5%

 

Canadian dollar – fixed rate

0.5

-

-

-

-

-

0.5

Average Pay Rate

2.7%

-

-

-

-

-

 

Debt in Reais - ICMS fixed rate

 

 

 

 

 

 

 

Par Value

40.4

34.7

23.2

4.9

0.8

22.4

126.4

Average Pay Rate

6.1%

6.1%

6.1%

6.1%

6.1%

6.1%

 

Debt in Reais - fixed rate

 

 

 

 

 

 

 

Par Value

423.9

568.5

368.8

161.4

80.7

454.9

2,058.1

Average Pay Rate

7.9%

7.8%

7.8%

7.8%

7.8%

7.8%

 

Total indebtedness

653.1

892.0

456.4

246.8

138.8

675.6

3,062.8

28


 

 

2018

The Company's debt was structured in a manner to avoid significant concentration of maturities in each year and is tied to different interest rates. The most significant rates are: (i) fixed rate for the Bond 2021 and BNDES/FINEP; (ii) Long-Term Interest Rate (TJLP) for loans from Brazilian Bank of Economic and Social Development (“BNDES”); (iii) reference interest rate (“TR”) for the CRI 2030 operation; and (iv) floating rate (Libor and CAD BA) for international loans.

 

As of December 31, 2018, the Company was in compliance with its contractual obligations for its loans and financings and with any applicable borrowing limits.

 

Debt Profile – December 31, 2018

Debt Instruments

2019

2020

2021

2022

2023

After

Total

TJLP BNDES debt or TR floating rate

 

 

 

 

 

 

 

Par Value

75.3

9.7

10.1

10.8

11.8

120

237.7

TJLP or TR  + Average Pay Rate

9.1%

9.3%

9.3%

9.3%

9.3%

9.3%

 

International Debt

 

 

 

 

 

 

 

Other Latin-American currencies -fixed rate

26.1

80.9

120.6

33.8

-

-

261.3

Average pay rate

10.0%

10.0%

10.0%

10.0%

 

 

 

US Dollar - fixed rate

32.4

2.2

-

7.8

-

-

42.4

Average pay rate

4.4%

2.2%

-

4.3%

-

-

 

US Dollar -floating rate

538.8

91.2

-

-

-

-

630.0

Average pay rate

3.6%

5.1%

-

-

-

-

 

Canadian Dollar -floating rate

743.9

2.8

2.9

1.8

1.8

-

753.2

Average pay rate

2.4%

2.8%

2.8%

2.8%

2.8%

-

 

Canadian dollar -

fixed rate

25.2

23.4

21.5

21.2

16.4

37.9

145.5

Average Pay Rate

3.5%

3.5%

3.5%

3.5%

3.5%

3.5%

 

Debt in Reais – ICMS fixed rate

 

 

 

 

 

 

 

Par value

37.2

38

22.7

5.4

2.8

22.4

128.5

Average pay rate

5.8%

5.8%

5.8%

5.8%

5.8%

5.8%

 

Debt in Reais – fixed rate

 

 

 

 

 

 

 

Par value

462.3

497.5

538.6

284.1

57.2

65.2

1,905.0

Average pay rate

10.0%

10.0%

10.0%

10.0%

10.0%

10.0%

 

Total debt

1,941.2

745.7

716.5

364.9

89.9

245.5

4,103.7

29


 

 

2017

The Company's debt was structured in a manner to avoid significant concentration of maturities in each year and is tied to different interest rates. The most significant rates are: (i) fixed rate for the Bond 2021 and BNDES/FINEP; (ii) Long-Term Interest Rate (TJLP) to loans from Brazilian Bank of Economic and Social Development (“BNDES”); (iii) reference interest rate (TR) for the CRI 2030 operation; and (iv) floating rate (Libor and CAD BA) for international loans.

 

As of December 31, 2017, the Company was in compliance with its contractual obligations for its loans and financings and with any applicable borrowing limits.

 

Debt Profile – December 31, 2017

 

Debt Instruments

2018

2019

2020

2021

2022

After

Total

TJLP BNDES debt or TR floating rate

 

 

 

 

 

 

 

Par Value

164.7

74.3

9.6

10

10.79

133

402.39

TJLP or TR  + Average Pay Rate

9.2%

9.1%

9.4%

9.4%

9.4%

9.4%

 

International Debt

 

 

 

 

 

 

 

Other Latin-American currencies floating rate

-

5.0

-

-

-

-

5.0

Average Pay Rate

-

2.3%

-

-

-

-

 

Other Latin-American currencies fixed rate

219.21

24.15

-

-

-

-

243.36

Average Pay Rate

10.2%

10.2%

-

-

-

-

 

US dollar – fixed rate

6.5

16.48

-

-

-

-

22.98

Average Pay Rate

2.2%

4.5%

-

-

-

-

 

US dollar – floating rate

78.2

477

-

-

-

-

555.2

Average Pay Rate

4.0%

2.5%

-

-

-

-

 

Canadian dollar – floating rate

685.9

-

-

-

-

-

685.9

Average Pay Rate

2.1%

-

-

-

-

-

 

Canadian dollar - fixed rate

24.1

21.1

19.5

17.6

17.2

46.0

145.4

Average Pay Rate

3.7%

3.7%

3.7%

3.7%

3.7%

3.7%

 

Debt in Reais - ICMS fixed rate

 

 

 

 

 

 

 

Par Value

38.4

27

19.7

7.8

3.8

33.2

129.9

Average Pay Rate

5.6%

5.6%

5.6%

5.6%

5.6%

5.6%

 

Debt in Reais - fixed rate

 

 

 

 

 

 

 

Par Value

482.4

751.3

408.8

463.7

113.7

120.6

2,340.4

Average Pay Rate

10.2%

10.2%

10.2%

10.2%

10.2%

10.2%

 

Total indebtedness

1,699.4

1,396.3

457.5

499.1

145.5

332.7

4,530.5

30


 

 

ii. other long-term relations with financial institutions

 

The Company has other long-term relations with financial institutions, such as payroll agreements, derivative operations and guarantee agreements.

 

iii. subordination degree among the debts

 

In the years ended on December 31, 2019, 2018 and 2017, the Company's loans had equal rights to payment without subordination clauses. Except for the credit lines due to FINAME contracted by the Company with BNDES, where collateral is provided on assets acquired with the credit granted which serve as collateral; other loans and financing contracted by the Company provide only personal guarantees as collateral, or are unsecured.

 

iv. any restrictions imposed to the issuer, especially concerning the limit of indebtedness and contracting of new debts, the distribution of dividends, the sale of assets, the issue of new securities and the sale of the corporate control, as well as if those restrictions are being complied with by the issuer

 

Most of the loan contracts contain financial covenants including:

 

(i) financial covenants, including restrictions on new borrowing;

(ii) going-concern;

(iii) maintenance, in use or in good condition for the business, of the Company's assets;

(iv) restrictions on acquisitions, mergers, sale or disposal of its assets;

(v) disclosure of accounting statements and balance sheets;

(vi) prohibition related to new real guarantees for loans contracted, except if (a) expressly authorized under the agreement or (b) new loans contracted from financial institutions linked to the Brazilian government - including the BNDES or foreign governments; - or foreign governments, multilateral financial institutions (e.g. World Bank) or located in jurisdictions in which the Company operates.

31


 

 

As of December 31, 2019, the Company was in compliance with its contractual obligations for its loans and financings.

 

g) borrowing limits contracted and percentages utilized

 

As of December 31, 2019, the Company had loans with BNDES, FINEP and FINAME credit facilities and other lines of credit with private banks, in the amount of R$3,168.2 million. Of this total, R$914.9 million (28.9%) are being used, with R$ 2,253.3 million (71.1%) still available.

 

 

h) significant changes to each item of the Financial Statements

 

The following table shows the amounts outstanding on the Company balance sheet for the periods indicated.

 

BALANCE SHEET

(in million of Reais)

 

 

 

 

December 31

Assets

2019

2018

2017

 

 

 

 

Cash and cash equivalents

11,900.7

11,463.5

10,354.5

Short-term investments

14.6

13.4

11.9

Derivative financial instruments

172.1

220.0

350.0

Trade receivables

4,495.5

4,879.3

4,944.8

Inventories

5,978.6

5,401.8

4,319.0

Taxes and social contribution receivable

1,831.4

1,285.4

2,770.4

Other tax receivable(ii)

2,242.7

863.3

600.2

Other assets

985.5

1,202.9

1,367.2

Current Assets

27,621.1

25,329.6

24,718.0

 

 

 

 

 

 

 

 

Financial Investments

163.6

147.3

122.0

Derivative financial instruments

1.2

34.9

35.2

Taxes and social contribution receivable

4,331.9

3,834.4

2,312.7

Other tax receivable

671.1

539.8

225.0

Deferred income tax and social contribution

2,950.1

2,064.7

2,310.9

Other assets

1,751.7

1,687.4

1,964.4

Employee Benefits

56.2

64.3

58.4

Investments

303.4

257.1

238.0

Property, plant and equipment

22,576.3

21,638.0

20,705.1

Intangible

6,306.4

5,840.6

4,674.7

Goodwill

35,009.9

34,276.2

31,401.9

Non-current assets

74,121.8

70,384.7

64,048.3

 

 

 

 

Total assets

  101,742.9

95,714.3

88,766.3

 

 

 

 

32


 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

Accounts payable

15,069.6

14,050.0

11,854.0

Derivative financial instruments

355.3

679.3

215.1

Loans and financing

653.1

1,941.1

1,699.3

Bank overdrafts

-

-

1.8

Salaries and charges

833.0

851.6

1,047.2

Dividends and interest on shareholders’ equity payable

956.6

807.0

1,778.6

Income tax and social contribution payable

1,394.2

1,558.6

1,668.4

Taxes, charges and contributions payable

4,108.5

3,781.6

3,825.4

Other liabilities

1,530.7

1,366.6

6,807.9

Provisions

110.0

173.0

169.0

Current liabilities

25,011.0

25,208.8

29,066.7

 

 

 

 

Accounts payable

309.5

126.1

175.1

Derivative financial instruments

0.1

2.5

2.4

Loans and financing

2,409.7

2,162.4

2,831.2

Deferred income tax and social contribution

2,371.1

2,424.6

2,329.2

Income tax and social contribution payable (i)

2,219.5

2,227.8

2,418.0

Taxes, charges and contributions payable

645.2

675.6

771.6

Put option granted on interest in controlled company and other liabilities

3,145.3

2,661.8

429.1

Provisions

371.0

426.2

512.6

Employee benefits

2,704.5

2,343.7

2,310.7

Non-current liabilities

14,175.9

13,050.7

11,779.9

 

 

 

 

Total liabilities

39,186.9

38,259.5

40,846.6

 

 

 

 

Shareholders’ equity

 

 

 

Capital Stock

57,866.8

57,710.2

57,614.1

Reserves

75,685.7

70,122.6

63,298.2

Equity Valuation Adjustment

(72,274.5)

(71,584.8)

(74,966.6)

Controlling shareholders’ interest

61,278.0

56,248.0

45,945.7

Non-controlling interest

1,278.0

1,206.8

1,974.0

Total shareholders’ equity

62,556.0

57,454.8

47,919.7

 

 

 

 

Total liabilities and shareholders’ equity

101,742.9

95,714.3

88,766.3

(i) During the third quarter of 2017, the Company adhered to the Tax Regularization Special Program [Programa Especial de Regularização Tributária] (“PERT 2017”).

(ii) The variation in the balances is mainly explained by the recognition of PIS/COFINS credits.

 

For additional information on the accounting practices adopted by the Company, see section 10.5.

 

 

33


 

 

Comparative analysis of Balance Sheets - As of December 31, 2019 and December 31, 2018

 

(in million of Reais, except percentages)

 

 

 

 

December 31

 

2019

Vertical Analysis

2019

Vertical Analysis

Variation

2019/2018

 

Assets

 

 

 

 

 

Cash and cash equivalents

 11,900.7

11.7%

 11,463.5

12.0%

3.8%

Financial investments

 14.6

0.0%

 13.4

0.0%

9.0%

Derivative financial instruments

 172.1

0.2%

 220.0

0.2%

-21.8%

Accounts receivable

 4,495.5

4.4%

 4,879.3

5.1%

-7.9%

Inventories

 5,978.6

5.9%

 5,401.8

5.6%

10.7%

Tax and social contribution receivable

1,831.4

1.8%

1,285.4

1.3%

42.5%

Other tax receivable

2,242.7

2.2%

863.3

0.9%

159.8%

Other assets

985.5

1.0%

1,202.9

1.3%

-18.1%

Current assets

27,621.1

27.1%

25,329.6

26.5%

9.0%

 

 

 

 

 

 

Financial investments

 163.6

0.2%

147.3

0.2%

11.1%

Derivative financial instruments

 1.2

0.0%

        34.9

0.0%

-96.6%

Tax and social contributions receivable

4,331.9

4.3%

3,834.4

4.0%

13.0%

Other tax receivable

671.1

0.7%

539.8

0.6%

24.3%

Deferred income tax and social contribution

 2,950.1

2.9%

2,064.7

2.2%

42.9%

Other assets

 1,751.7

1.7%

1,687.4

1.8%

3.8%

Employee benefits

 56.2

0.1%

64.3

0.1%

-12.6%

Investments

 303.4

0.3%

257.1

0.3%

18.0%

Property, plant and equipment

 22,576.3

22.2%

21,638.0 

22.6%

4.3%

Intangible

 6,306.4

6.2%

5,840.6

6.1%

8.0%

Goodwill

 35,009.9

34.4%

34,276.2

35.8%

2.1%

Non-current assets

 74,121.8

72.9%

70,384.7

73.5%

5.3%

 

 

 

 

 

 

Total assets

101,742.9

100.0%

95,714.3

100.0%

6.3%

 

 

 

 

 

 

(i) During the third quarter of 2017, the Company adhered to PERT 2017.

 

 

 

34


 

 

Assets

 

Cash and cash equivalents

 

As of December 31, 2019, the balance of cash and cash equivalents and short-term financial investments amounted to R$ 11,915.2 million, compared to R$ 11,476.9 million as of December 31, 2018. The increase of R$ 438.3 million, or 3.8%, is a result particularly from (i) the operational performance; (ii) the increase in the accounts payable; (iii) a reduction in the interests paid in 2019; and (iv) lower outflows related to the acquisition of non-controlling shareholders.

 

Accounts receivable

 

As of December 31, 2019, the balance of receivables amounted to R$ 4,495.5 million, compared to R$ 4,879.3 million as of December 31, 2018, a reduction of R$ 383.7 million, or -7,9%.

 

Inventories

As of December 31, 2019, the balance of inventories amounted to R$ 5,978.6 million, compared to R$ 5,401.8 million as of December 31, 2018. The increase of R$ 576.8 million, or 10.7%, is demonstrated in the chart below:

 

(in million Reais)

2019

2018

Finished products

2,080.7

1,688.0

Products under processing

450.8

339.5

Raw materials and consumer items

2,637.4

2,624.3

Stockroom and others

602.6

597.0

Early payments

328.3

304.4

Provision for losses

(121.2)

(151.4)

 

5,978.6

5,401.8

 

Income tax, social contribution and Other tax receivable

 

As of December 31, 2019, the balance of taxes and contributions receivable, current and noncurrent, amounted to R$ 9,077.1 million, compared to R$ 6,522.9 million as of December 31, 2018. The variation in the balances is mainly explained by the recognition of PIS/COFINS credits.

 

 

35


 

 

 

Property, plant and equipment

 

2019

2018

Property, plant and equipment

20,547.7

20,100.4

Right of use asset

2,028.6

1,537.6

 

22,576.3

21,638.0

 

As of December 31, 2019, the balance of property, plant and equipment amounted to R$ 22,576.3 million, compared to R$ 21,638.0 million as of December 31, 2018. The movement that resulted in a net increase of R$ 938.3 million or 4.3% is demonstrated in the chart below:

 

 

2019

 

2018

(restated)

 

Land and buildings

Facilities and equipment

Fixtures and fittings

Under construction

Total

 

Total

Acquisition Cost

             

Initial balance

10,375.5

28,075.7

5,690.4

1,422.0

45,563.6

 

39,834.9

Effect of conversion

(240.9)

(979.5)

(300.8)

(19.5)

(1,540.7)

 

(27.7)

Effect of application of IAS 29/CPC 42 (hyperinflation)

291.3

1,169.9

399.6

11.1

1,871.9

 

3,589.0

Acquisition through share exchange

-

-

-

-

-

 

218.4

Acquisitions through business combination

0.2

-

2.1

5.7

8.0

 

-

Acquisitions

14.8

606.1

147.9

3,707.1

4,475.9

 

3,520.5

Disposals and write-offs

(33.4)

(739.3)

(133.3)

-

(906.0)

 

(1,416.6)

Transfers from (to) other asset categories

479.3

1,543.1

561.6

(2,942.2)

(358.2)

 

(162.9)

Others

-

-

-

-

-

 

8.0

Final balance

10,886.8

29,676.0

6,367.5

2,184.2

49,114.5

 

45,563.6

 

             

Depreciation and Impairment

             

Initial balance

(3,031.4)

(18,246.6)

(4,185.2)

-

(25,463.2)

 

(21,012.6)

Effect of conversion

23.9

549.1

237.9

-

810.9

 

(129.7)

Effect of application of IAS 29/CPC 42 (hyperinflation)

(51.1)

(686.0)

(288.1)

-

(1,025.2)

 

(1,908.7)

Write-off through equity interest

-

-

-

-

-

 

(20.5)

Depreciation

(350.3)

(2,516.6)

(663.2)

-

(3,530.1)

 

(3,536.9)

Loss due to reduction of the recovery amount

(0.8)

(140.5)

(11.7)

-

(153.0)

 

(180.0)

Disposals and write-offs

9.9

650.3

123.8

-

784.0

 

1,351.8

Transfers (from) to other asset categories

(0.7)

(0.5)

1.4

-

0.2

 

(30.7)

Others

-

9.6

-

-

9.6

 

4.1

Final balance

(3,400.5)

(20,381.2)

(4,785.1)

-

(28,567.1)

 

(25,463.2)

Book value:

       

-

   

December 31, 2018

7,344.1

9,829.1

1,505.2

1,422.0

20,100.4

 

20,100.4

December 31, 2019

7,486.3

9,294.8

1,582.1

2,184.3

20,547.7

   

 

Right of use assets:

 

 

2019

 

2018

   

(Restated)

 

Properties

Machines and Equipment

Others

Total

 

Total

Acquisition Cost

           

Initial balance

972.5

1,343.3

78.3

2,394.1

 

2,309.5

Effect of conversion

17.7

0.6

1.2

19.5

 

14.5

Acquisitions

849.2

41.3

8.3

898.8

 

70.1

Transfers (from) to other asset categories

31.8

-

16.9

48.7

 

-

Final balance

1,871.2

1,385.2

104.7

3,361.1

 

2,394.1

             

Depreciation and Impairment

           

Initial balance

(308.4)

(490.7)

(57.4)

(856.5)

 

(426.7)

Effect of conversion

(4.6)

(0.5)

(0.6)

(5.7)

 

(1.0)

Depreciation

(173.3)

(263.3)

(30.6)

(467.2)

 

(428.8)

Transfers (from) to other asset categories

(8.2)

(2.4)

7.5

(3.1)

 

-

Final balance

(494.5)

(756.9)

(81.1)

(1,332.5)

 

(856.5)

Book value:

           

December 31, 2018

664.1

852.6

20.9

1,537.6

 

1,537.6

December 31, 2019

1,376.7

628.3

23.7

2,028.6

   

 

 

36


 

Intangible Assets

 

As of December 31, 2019, the balance of the intangible assets amounted to R$ 6,306.4 million, compared to R$ 5,840.6 million, as of December 31, 2018. The net increase of R$ 465.8 million, or 8.0%, is a result mainly of the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29/CPC 42) in Argentina, as described in item 10.5 – Critical accounting policies – “(x) Accounting and disclosure rule in highly inflationary economy”.

 

Goodwill

 

As of December 31, 2019, the balance of goodwill amounted to R$ 35,009.9 million, compared to R$ 34,276.2 million as of December 31, 2018. The movement that resulted in a net increase of R$ 733.7 million is demonstrated in the chart below:

 

 

2019

2018

Initial Balance

34,276.2

31,401.9

Effect of foreign-exchange variation

16.1

1,224.8

Effect of application of IAS 29/CPC 42 (hyperinflation)

691.2

1,686.5

Acquisition, (write-off) and exchange of subsidiaries

26.4

(37.0)

Final balance

35,009.9

34,276.2

 

Liabilities

 

Accounts payable

 

As of December 31, 2019, the balance of the current accounts payable amounted to R$ 15,069.6 million, compared to R$ 14,050.0 million as of December 31, 2018, an increase of R$ 1,019.6 million or 7.3%. The balance of non-current accounts payable amounted to R$ 309.6 million as of December 31, 2019, compared to R$ 126.1 million in the same period in 2018, an increase of R$ 183.5 million, or 146.0%.

 

Loans and financing

 

The current and non-current loans and financing amounted to R$ 3,062.8 million as of December 31, 2019, compared to R$ 4,103.6 million as of December 31, 2018, a reduction of R$ 1,040.8 million, or -25.4% in the gross indebtedness in the year ended on December 31, 2019.

 

Income tax and social contribution

 

As of December 31, 2019, the balance of current and non-current income tax and social contribution amounted to R$ 3,613.8 million, compared to R$ 3,786.4 million as of December 31, 2018, a reduction of R$ 172.6 million, explained mainly by the payment of the installments regarding adhesion to PERT 2017. As announced on September 29, 2017, the Company adhered to a special tax regularization program, involving tax contingencies under dispute, including contingencies related to the income tax and social contribution on profits. The total amount to be paid is approximately R$ 3.5 billion, of which approximately R$ 1.0 billion was paid in 2017, and the remaining is being paid in 145 monthly installments as from January 2018, added by interests.

 

 

37


 

 

In addition, the balance of the income tax and social contribution is also a result of a lower effective tax rate, which, in 2019, was 5,8%, compared to an effective tax rate of 13.5% in 2018. The main events that took place in the period and that impacted the effective tax rate were:

 

- Government grants related to taxes on sales: the reduction of the tax expenses reflects the deductibility of the subsidies for investment arising out of deferred or presumed credits on ICMS.

 

- Benefit of deductibility of interest on capital (“IOC”): according to the Brazilian legislation, the companies can opt for distributing IOC calculated based on the Long-Term Interest Rate (“TJLP”), which is deductible for income tax purposes under the applicable legislation, whose amount distributed until the date hereof was of R$ 7,717.4 million, and the tax impact was  of R$ 2,623.8 million.

 

Equity

 

As of December 31, 2019, the balance of equity amounted to R$ 62,556.0 million, compared to R$ 57,454.8 million as of December 31, 2018. The main reasons for the variation in equity accounts were: (i) profit in the year of R$12,188.3 million; (ii) the effect of the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29/CPC 42) in Argentina, as described in item 10.5 – Critical accounting policies – “(x) Accounting and disclosure rule in highly inflationary economy”; and (iii) distribution of IOC of R$ 7,717.4 million.

 

Deferred income tax and social contribution (Assets and Liabilities)

 

As of December 31, 2019, the balance of the deferred income tax and social contribution (assets and liabilities) amounted to R$ 579.0 million in assets, compared to R$ 359.9 million in liabilities as of December 31, 2018. The variation of R$ 938.9 million is described in the charts below, which demonstrate the composition of the deferred tax per origin of the temporary difference.

 

(in million Reais)

2019

 

Assets

Liabilities

Net

Financial Investments

10.0

-

10.0

Intangible

-

(1,067.5)

(1,067.5)

Employee Benefits

750.0

(3.9)

746.1

Accounts payable

2,330.3

(246.6)

2,083.7

Accounts receivable

45.5

(3.3)

42.2

Derivatives

38.9

(217.2)

(178.3)

Loans and financing

-

-

-

Inventories

372.0

(67.1)

304.9

Property, plant and equipment

290.4

(1,423.4)

(1,133.0)

Withholding tax on non-distributed dividends and royalties

-

(1,115.1)

(1,115.1)

Investments

-

(421.6)

(421.6)

Tax losses to be used

877.3

(148.4)

728.9

Provisions

465.9

(2.3)

463.6

Effect of the application of IFRS 16/CPC 06 (Leases)

44.6

(1.9)

42.7

Other items

89.0

(16.6)

72.4

Gross deferred tax assets/(liabilities)

5,313.9

(4,734.9)

579.0

Reclassification for net presentation

(2,363.8)

2,363.8

-

Net deferred tax assets/(liabilities)

2,950.1

(2,371.1)

579.0

 
 

 

 

38


 

 

(in million Reais)

2017

 

Assets

Liabilities

Net

Financial Investments

10.0

-

10.0

Intangible

-

(1,031.1)

(1,031.1)

Employee Benefits

614.8

-

614.8

Accounts payable

1,807.8

(271.9)

1,535.9

Accounts receivable

41.3

(2.3)

39.0

Derivatives

18.7

(304.2)

(285.5)

Loans and financing

2.5

(78.5)

(76.0)

Inventories

266.7

(44.8)

221.9

Property, plant and equipment

109.6

(1,386.4)

(1,276.8)

Withholding tax on non-distributed dividends and royalties

-

(863.8)

(863.8)

Investments

-

(421.6)

(421.6)

Tax losses to be used

791.0

-

791.0

Provisions

363.1

(24.0)

339.1

Effect of the application of IFRS 16/CPC 06 (Leases)

47.2

-

47.2

Other items

50.6

(54.6)

(4.0)

Gross deferred tax assets/(liabilities)

4,123.3

(4,483.2)

(359.9)

Reclassification for net presentation

(2,058.6)

2,058.6

-

Net deferred tax assets/(liabilities)

2,064.7

(2,424.6)

(359.9)

 

 

39


 

 

Comparative analysis of Balance Sheets as of December 31, 2018 and December 31, 2017

 

(in million of Reais, except percentages)

 

 

 

 

 

December 31

 

2018

Vertical Analysis

2017

Vertical

Analysis

Variation

2018/2017

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

11,463.5

12.0%

10,354.5

11.7%

10.7%

Financial investments

13.4

0.0%

11.9

0.0%

12.6%

Derivative financial instruments

220.0

0.2%

350.0

0.4%

-37.1%

Accounts receivable

4,879.3

5.1%

4,944.8

5.6%

-1.3%

Inventories

5,401.8

5.6%

4,319.0

4.9%

25.1%

Tax and social contribution receivable

1,285.4

1.3%

2,770.4

3.1%

-53.6%

Other tax receivable

863.3

0.9%

600.2

0.7%

43.8%

Other assets

1,202.9

1.3%

1,367.3

1.5%

-12.0%

Current assets

25,329.6

26.5%

24,718.1

27.8%

2.5%

 

 

 

 

 

 

Financial investments

147.3

0.2%

122.0

0.1%

20.7%

Derivative financial instruments

34.9

0.0%

35.2

0.0%

-0.9%

Tax and social contribution receivable

3,834.4

4.0%

2,312.7

2.6%

65.8%

Other tax receivable

539.8

0.6%

225.0

0.3%

139.9%

Deferred income tax and social contribution

2,064.7

2.2%

2,310.9

2.6%

-10.7%

Other assets

1,687.4

1.8%

1,964.4

2.2%

-14.1%

Employee benefits

64.3

0.1%

58.4

0.1%

10.1%

Investments

257.1

0.3%

238.0

0.3%

8.0%

Property, plant and equipment

21,638.0

22.6%

20,705.1

23.3%

4.5%

Intangible assets

5,840.6

6.1%

4,674.7

5.3%

24.9%

Goodwill

34,276.2

35.8%

31,401.9

35.4%

9.2%

Non-current assets

70,384.7

73.5%

64,048.3

72.2%

9.9%

 

 

 

 

 

 

Total assets

95,714.3

100.0%

88,766.4

100.0%

7.8%

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

14,050.0

36.7%

11,853.9

29.0%

18.5%

Derivative financial instruments

679.3

1.8%

215.1

0.5%

215.8%

Loans and financing

1,941.2

5.1%

1,699.4

4.2%

14.2%

Overdraft account

-

0.0%

1.8

0.0%

-100.0%

Salaries and charges

851.6

2.2%

1,047.2

2.6%

-18.7%

Dividends and interest on shareholders’ equity payable

807.0

2.1%

1,778.6

4.4%

-54.6%

Income tax and social contribution payable

1,558.6

4.1%

1,668.4

4.1%

-6.6%

Taxes, charges and contributions payable

3,781.6

9.9%

3,825.4

9.4%

-1.1%

Put option granted on interest in controlled company and other liabilities

1,366.6

3.6%

6,807.9

16.7%

-79.9%

Provisions

173.0

0.5%

169.0

0.4%

2.4%

Current liabilities

25,208.9

65.9%

29,066.7

71.2%

-13.3%

 

 

 

 

 

 

Accounts payable

126.1

0.3%

175.1

0.4%

-28.0%

Derivative financial instruments

2.5

0.0%

2.4

0.0%

4.2%

Loans and financing

2,162.4

5.7%

2,831.2

6.9%

-23.6%

Deferred income tax and social contribution

2,424.6

6.3%

2,329.2

5.7%

4.1%

Income tax and social contribution payable (i)

2,227.8

5.8%

2,418.0

5.9%

-7.9%

Taxes, charges and contributions payable

675.6

1.8%

771.6

1.9%

-12.4%

Put option granted on interest in controlled company and other liabilities

2,661.8

7.0%

429.1

1.1%

520.3%

Provisions

426.2

1.1%

512.6

1.3%

-16.9%

Employee benefits

2,343.7

6.1%

2,310.7

5.7%

1.4%

Non-current liabilities

13,050.7

34.1%

11,779.9

28.8%

10.8%

 

 

 

-

 

 

Total liabilities

38,259.6

100.0%

40,846.6

100.0%

-6.3%

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Capital stock

57,710.2

60.3%

57,614.1

64.9%

0.2%

Reserves

70,122.6

73.3%

63,298.1

71.3%

10.8%

Adjustment to equity valuation

(71,584.8)

-74.8%

(74,966.6)

-84.5%

-4.5%

Controlling shareholders’ equity

56,248.0

58.8%

45,945.6

51.8%

22.4%

Non-controlling interest

1,206.8

1.3%

1,974.0

2.2%

-38.9%

Total shareholders’ equity

57,454.8

60.0%

47,919.6

54.0%

19.9%

 

 

 

 

 

 

Total liabilities and shareholders’ equity

95,714.4

100.0%

88,766.2

100.0%

7.8%

 

 

40


 

Assets

 

Cash and cash equivalents

 

As of December 31, 2018, the balance of cash and cash equivalents and short-term financial investments amounted to R$ 11,476.9 million, compared to R$10,366.4 million as of December 31, 2017. The increase of R$ 1,110.5 million, or 10.7%, is a result particularly from (i) a stronger operational performance; (ii) a significant increase in the accounts payable; (iii) a reduction in the income tax and social contribution paid in 2018; and (iv) lower outflows related to the repayment of borrowings.

 

Accounts receivable

 

As of December 31, 2018, the balance of receivables amounted to R$ 4,879.3 million, compared to R$ 4,944.8 million as of December 31, 2017, a reduction of R$ 65.5 million, or -1.3%.

 

Inventories

 

As of December 31, 2018, the balance of inventories amounted to R$ 5,401.8 million, compared to R$ 4,319.0 million as of December 31, 2017. The increase of R$ 1,082.8 million, or 25.1%, is demonstrated in the chart below:

 

(in million Reais)

2018

2017

Finished products

1,688.0

1,528.4

Products under processing

339.5

309.6

Raw materials

2,517.3

1,816.3

Production materials

107.0

77.3

Stockroom and others

597.0

476.9

Early payments

304.4

210.9

Provision for losses

(151.4)

(100.4)

 

5,401.8

4,319.0

 

Income tax and social-contribution receivable

 

As of December 31, 2018, the balance of taxes and contributions receivable, current and noncurrent, amounted to R$ 6,522.9 million, compared to R$5,908.2 million as of December 31, 2017. The increase was due mainly to the accumulation of credits from abroad to be offset in subsequent years.

 

 

41


 

 

Property, plant and equipment

 

 

2018

2017

Property, plant and equipment

20,100.4

18,822.3

Right of use asset

1,537.6

1,882.8

 

21,638.0

20,705.1

 

As of December 31, 2018, the balance of property, plant and equipment amounted to R$ 21,638.0 million, compared to R$ 20,705.1 million as of December 31, 2017. The movement that resulted in a net increase of R$ 932.9 million or 4.5% is demonstrated in the chart below:

 

(in million Reais)

2018

 

2017

 

Land and buildings

Facilities and equipment

Fixtures and fittings

Under construction

Right of use Asset

Total

 

Total

Acquisition Cost

 

 

 

 

 

 

 

 

Initial balance

8,961.8

24,538.8

5,076.4

1,258.0

2,309.5

42,144.4

 

37,419.4

Effect of foreign-exchange variation

118.6

(52.7)

(110.8)

17.2

14.5

(13.2)

 

31.4

Effect of application of IAS 29/CPC 42 (hyperinflation)

630.0

2,301.5

566.6

91.0

-

3,589.0

 

-

Effect of the application of IFRS 16/CPC 06 (Leases)

-

-

-

-

70.1

70.1

 

2,296.7

Acquisition through share exchange

100.5

117.7

0.1

0.2

-

218.4

 

204.2

Acquisitions

18.8

574.6

141.0

2,786.1

-

3,520.5

 

3,175.5

Disposals and write-offs

(39.2)

(1,007.8)

(369.6)

-

-

(1,416.6)

 

(706.8)

Transfers from (to) other asset categories

585.0

1,595.7

386.8

(2,730.3)

-

(162.9)

 

(310.9)

Others

-

8.0

-

-

-

7.9

 

35.0

Final balance

10,375.5

28,075.8

5,690.5

1,422.2

2,394.1

47,957.6

 

42,144.5

 

 

 

 

 

 

 

 

 

Depreciation and Impairment

 

 

 

 

 

 

 

 

Initial balance

(2,585.7)

(14,973.5)

(3,453.4)

-

(426.7)

(21,439.3)

 

(18,265.5)

Effect of foreign-exchange variation

(39.7)

(141.0)

51.1

-

(1.0)

(130.7)

 

(118.5)

Effect of application of IAS 29/CPC 42 (hyperinflation)

(110.7)

(1,366.7)

(431.4)

-

-

(1,908.7)

 

-

Write-off through equity interest

(0.8)

(19.8)

-

-

-

(20.5)

 

-

Depreciation

(327.9)

(2,500.8)

(708.1)

-

(428.8)

(3,965.7)

 

(3,625.2)

Loss due to reduction of the recovery amount

(36.4)

(160.8)

17.2

-

-

(180.0)

 

(125.2)

Disposals and write-offs

68.8

945.3

337.7

-

-

1,351.8

 

654.3

Transfers (from) to other asset categories

1.1

(33.5)

1.7

-

-

(30.7)

 

32.9

Others

-

4.0

-

-

-

4.0

 

7.8

Final balance

(3,031.3)

(18,246.8)

(4,185.2)

-

(856.5)

(26,319.8)

 

(21,439.4)

Book value:

 

 

 

 

 

 

 

 

December 31, 2017

6,376.1

9,565.3

1,623.0

1,258.0

1,882.8

20,705.1

 

20,705.1

December 31, 2018

7,344.2

9,829.0

1,505.3

1,422.2

1,537.6

21,637.8

 

 

 

 

 

42


 

 

Intangible Assets

 

As of December 31, 2018, the balance of the intangible assets amounted to R$ 5,840.6 million, compared to R$ 4,674.7 million, as of December 31, 2017. The net increase of R$1,165.9 million, or 24.9%, is a result mainly of the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29/CPC 42) in Argentina, as described in item 10.5 – Critical accounting policies – “(x) Accounting and disclosure rule in highly inflationary economy”, in addition to the impact of currency conversion.

 

Goodwill

 

As of December 31, 2018, the balance of goodwill amounted to R$ 34,276.2 million, compared to R$ 31,401.9 million as of December 31, 2017. The movement that resulted in a net increase of R$ 2,874.3 million is demonstrated in the chart below:

 

 

2018

2017

Initial Balance

31,401.9

30,511.2

Effect of foreign-exchange variation

1,222.8

489.7

Effect of application of IAS 29/CPC 42 (hyperinflation)

1,686.5

-

Acquisition, (write-off) and exchange of subsidiaries

(37.0)

401.0

Final balance

34,276.2

31,401.9

 

Liabilities

 

Accounts payable

 

As of December 31, 2018, the balance of the current accounts payable amounted to R$ 14,050.0 million, compared to R$ 11,854.0 million as of December 31, 2017, an increase of R$ 2,196.0 million or 18.5%. The balance of non-current accounts payable amounted to R$126.1 million as of December 31, 2018, compared to R$ 175.1 million in the same period in 2017, a reduction of R$ 49.0 million, or -28.0%.

 

Loans and financing

 

The current and non-current loans and financing amounted to R$ 4,103.6 million as of December 31, 2018, compared to R$ 4,530.6 million as of December 31, 2017, a reduction of R$ 427.0 million, or -9.4% in the gross indebtedness in the year ended on December 31, 2018.

 

Income tax and social contribution

 

As of December 31, 2018, the balance of current and non-current income tax and social contribution amounted to R$3,786.4 million, compared to R$ 4,086.4 million as of December 31, 2017, a reduction of R$ 300.1 million, explained mainly by the payment of the installments to be paid in 2018 regarding adhesion to PERT 2017. As announced on September 29, 2017, the Company adhered to a special tax regularization program, involving tax contingencies under dispute, including contingencies related to the income tax and social contribution on profits. The total amount to be paid is approximately R$ 3.5 billion, of which approximately R$1.0 billion was paid in 2017, and the remaining shall be paid in 145 monthly installments as from January 2018, added by interests.

 

 

43


 

 

In addition, the balance of the income tax and social contribution is also a result of a lower effective tax rate, which, in 2018, was 13.6%, compared to an effective tax rate of 39.3% in 2017, much impacted by the adhesion to PERT, mentioned above. The main events that took place in the period and that impacted the effective tax rate were:

 

- Government grants related to taxes on sales: the reduction of the tax expenses reflects the deductibility of the subsidies for investment arising out of deferred or presumed credits on ICMS.

 

- Benefit of deductibility of interest on capital (“IOC”): according to the Brazilian legislation, the companies can opt for distributing IOC calculated based on the Long-Term Interest Rate (“TJLP”), which is deductible for income tax purposes under the applicable legislation, whose amount distributed until the date hereof was of R$ 5,030.5 million, and the tax impact was  of R$ 1,710.4 million.

 

Equity

 

As of December 31, 2018, the balance of equity amounted to R$ 57,454.8 million, compared to R$ 47,919.6 million as of December 31, 2017. The main reasons for the variation in equity accounts were: (i) profit in the year of R$ 11,347.7 million; (ii) the effect of the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29/CPC 42) in Argentina, as described in item 10.5 – Critical accounting policies – “(x) Accounting and disclosure rule of highly inflationary economy”; (iii) gains on the conversion of operations abroad amounting to R$ 1,766.6 million; and (iv) distribution of dividends and IOC of R$ 7,793.0 million.

 

Deferred income tax and social contribution (Assets and Liabilities)

 

As of December 31, 2018, the balance of the deferred income tax and social contribution (assets and liabilities) amounted to R$ 359.9 million liable, compared to R$ 18.3 million liable as of December 31, 2017. The variation of R$ 342.6 million is described in the charts below, which demonstrates the composition of the deferred tax per origin of the temporary difference.

 

(in million Reais)

2018

 

Assets

Liabilities

Net

Financial Investments

10.0

-

10.0

Intangible assets

-

(1,031.1)

(1,031.1)

Employee Benefits

614.8

-

614.8

Accounts payable

1,807.8

(271.9)

1,535.9

Accounts receivable

41.3

(2.3)

39.0

Derivatives

18.7

(304.2)

(285.5)

Loans and financing

2.5

(78.5)

(76.0)

Inventories

266.7

(44.8)

221.9

Property, plant and equipment

109.6

(1,386.4)

(1,276.8)

Withholding tax on non-distributed dividends and royalties

-

(863.8)

(863.8)

Investments

-

(421.6)

(421.6)

Tax losses to be used

791.0

-

791.0

Provisions

363.1

(24.0)

339.1

Effect of the application of IFRS 16/CPC 06 (Leases)

47.2

-

47.2

Other items

50.6

(54.6)

(4.0)

Gross deferred tax assets/(liabilities)

4,123.3

(4,483.2)

(359.9)

Reclassification for net presentation

(2,058.6)

2,058.6

-

Net deferred tax assets/(liabilities)

2,064.7

(2,424.6)

(359.9)

 

(in million Reais)

2017

 

Assets

Liabilities

Net

Financial Investments

39.0

-

39.0

Intangible assets

-

(719.5)

(719.5)

Employee Benefits

631.1

-

631.1

Accounts payable

1,382.4

(314.2)

1,068.2

Accounts receivable

52.3

-

52.3

Derivatives

6.8

(5.8)

1.0

Loans and financing

-

-

-

Inventories

248.7

(18.1)

230.6

Property, plant and equipment

-

(920.5)

(920.5)

Withholding tax on non-distributed dividends and royalties

-

(788.6)

(788.6)

Investments

-

(421.6)

(421.6)

Tax losses to be used

501.0

-

501.0

Provisions

347.3

(39.7)

307.6

Effect of the application of IFRS 16/CPC 06 (Leases)

31.6

 

31.6

Other items

-

(30.5)

(30.5)

Gross deferred tax assets/(liabilities)

3,240.1

(3,258.5)

(18.3)

Reclassification for net presentation

(929.3)

929.3

-

Net deferred tax assets/(liabilities)

2,310.9

(2,329.2)

(18.3)

 

 

44


 

 

Comparative analysis of Operational Results as of December 31, 2019 and December 31, 2018

 

The consolidated results of the Company are presented as follows:

 

Highlights of Consolidated Financial Information

(in million Reais, except for amounts related to volume, percentages*)

 

Years ended on December 31

 

 

2019

Vertical

Analysis

2018

Vertical

Analysis

Variation 2019/2018

Net revenue

52,599.7

100.0%

50,231.3

100.0%

4.7%

Cost of products sold

(21,678.2)

-41.2%

(19,249.4)

-38.3%

12.6%

Gross profit

30,921.5

58.8%

30,981.9

61.7%

-0.2%

 

 

 

 

 

 

Logistic expenses

(6,951.4)

-13.2%

(6,607.2)

-13.2%

5.2%

Commercial expenses

(5,696.1)

-10.8%

(5,721.3)

-11.4%

-0.4%

Administrative expenses

(2,680.0)

-5.1%

(2,363.5)

-4.7%

13.4%

Other operational income (expenses)

878.1

1.7%

947.3

1.9%

-7.3%

Operational earnings before non-recurring items

16,472.1

100.0%

17,237.2

34.3%

4.7%

 

 

 

 

 

 

Result from the exchange of equity interests

-

0.0%

30.0

0.1%

-100.0%

Restructuring

(101.8)

-0.2%

(175.5)

-0.3%

-42.0%

Result from the sale of a subsidiary

-

0.0%

78.6

0.2%

-100.0%

Acquisition of subsidiaries

-

0.0%

(1.5)

0.0%

-100.0%

Effect of application of IAS 29/CPC 42 (hyperinflation)

(5.4)

0.0%

(18.0)

0.0%

-70.0%

State Amnesty

(290.1)

-0.6%

-

0.0%

ns

Operational earnings

16,074.8

30.6%

17,150.8

34.1%

-6.3%

 

 

 

 

 

 

Financial expenses

(4,748.4)

-9.0%

(4,684.2)

-9.3%

1.4%

Financial income

1,638.9

3.1%

653.9

1.3%

150.6%

Net financial result

(3,109.5)

-5.9%

(4,030.3)

-8.0%

 

 

 

 

 

 

 

Interest in the results of jointly-controlled undertakings

(22.3)

0.0%

1.0

0.0%

-2,330.0%

Earnings before income tax and social contribution

12,943.0

24.6%

13,121.5

26.1%

-1.4%

 

 

 

 

 

 

Income tax and social contribution

(754.7)

-1.4%

(1,773.9)

-3.5%

-57.5%

Net profits of the period

12,188.3

23.2%

11,347.6

22.6%

7.4%

Controlling shareholder’s equity

11,780.0

 

10,995.0

 

 

Non-controlling shareholder’s equity

408.4

 

352.7

 

 

* Discrepancy in the sums of the amounts is due to rounding.

45


 

Highlights of the Financial Information per Business Segment

The table below contains some of the financial information per business segment regarding the years ended on December 31, 2019 and 2018:

 

 

2019

2018

 

Brazil

CAC(1)

LAS(2)

Canada

Total

Brazil

CAC(1)

LAS(2)

Canada

Total

Net revenue

28,724.5

6,757.9

10,028.7

7,088.6

52,599.7

26,814.2

5,813.9

10,753.9

6,849.3

50,231.3

Cost of products sold

(12,096.3)

(2934.1)

(3,998.0)

(2,649.8)

(21,678.2)

(10,014.8)

(2,559.1)

(4,261.7)

(2,413.8)

(19,249.4)

Gross profits

16,628.2

3,823.8

6,030.7

4,438.8

30,921.5

16,799.4

3,254.8

6,492.2

4,435.5

30,981.9

Administrative, sales and marketing expenses

(8,585.7)

(1,494.0)

(2,540.5)

(2,707.3)

(15,327.5)

(8,127.4)

(1,470.9)

(2,580.4)

(2,513.3)

(14,692.0)

Other operational income (expenses)

826.4

85.8

(18.0)

(16.1)

878.1

965.0

20.1

(24.6)

(13.1)

947.3

Non-recurring items

(328.2)

(17.1)

(51.9)

-

(397.2)

(43.7)

62.5

(88.4)

(16.8)

(86.4)

Operating income

8,540.7

2,398.5

3,420.4

1,715.4

16,074.9

9,593.2

1,866.4

3,798.9

1,892.4

17,150.9

 

(1) Beer and soft drink operation in the Central America and in the Caribbean.

(2) It includes the operations of Argentina, Bolivia, Paraguay, Uruguay and Chile.

 

Net revenue

 

For more information about the sales net revenue, see section 10.2(b).

 

Cost of products sold

 

The total cost of sales increased 12.6% in the year ended on December 31, 2019, reaching R$ 21,678.2 million, compared to R$ 19,249.4 million in the same period in 2018. As a percentage of the Company’s net revenue, the total cost of sales increased to 41.2% in 2019, in relation to 38.3% in 2018.

 

Cost of products sold per hectoliter

 

 

Year ended on December 31

 

2019

2018

% Variation

 

(in Reais, except for percentages)

Brazil

113.3

98.5

14.9%

Brazil Beer(1)

125.1

105.6

18.4%

NAB(2)

77.5

75.5

2.8%

CAC(3)

211.7

194.5

8.8%

Latin America South

121.2

125.5

-3.4%

Canada

276.4

242.8

13.8%

Company Consolidated

132.8

121.3

9.5%

 

(1) Beer and “future beverages” operations of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operations in Central America and in the Caribbean.

 

Brazilian Operations

 

The total cost of sales of the Company’s Brazilian operations increased 20.8% in the year ended on December 31, 2019, reaching R$ 12,096.3 million in relation to R$ 10,014.8 million in the same period in 2018. The cost of the products sold in the Company’s Brazilian operations, per hectoliter, increased 14.9% in the year ended on December 31, 2019, reaching R$ 113.3/hl in relation to R$ 98.5/hl in the same period in 2018.

 

 

46


 

Beer Operation in Brazil

 

The cost of products sold in the beer and “future beverages” operation in Brazil increased 22.2%, reaching R$ 10,037.9 million in the year ended on December 31, 2019. The cost of products sold, per hectoliter, increased 18.4%. The main factors that contributed to such increase was a depreciation of Real against the US dollar, impacting the cost of our raw materials indexed to US dollar, and the increase of commodities prices, particularly barley.

 

Beverages operation (“NAB”) in Brazil

 

The cost of products sold in the non-alcoholic beverages operation in Brazil increased 14.3%, reaching R$ 2,058.4 million. The cost of products sold per hectoliter increased 2.8%, amounting to R$77.5/hl, negatively impacted by a depreciation of Real against US dollar, impacting the cost of our raw materials indexed by US Dollar, which was partially offset by the reduction of the sugar price.

 

Operation in Central America and the Caribbean (“CAC”)

 

The cost of products sold in CAC operations increased 14.7% in 2019, reaching R$ 2,934.1 million. The cost of products sold per hectoliter increased 8.8% in reported terms, but increased 3.1% in organic terms, disregarding effects of currency variation in the conversion to Reais. The increase of the cost per hectoliter in local currency is explained by increased costs associated with higher sales volume and by increased costs to supply the Panamanian market with no disruption, as our current infrastructure in Panama was unable to support the strong sales volume growth since 2017, leading to production capacity restraints in the country.

 

Latin America South Operations (“LAS”)

 

The cost of products sold in LAS amounted to R$ 3,998.0 million in 2019, representing a reduction of 6.2% compared to 2018. The cost of products sold, per hectoliter, decreased 3.4 % in reported terms, but increased 16.5% in organic terms, disregarding effects of currency variation in the conversion to Reais, changes to the scope of the operation, regarding the perpetual licensing agreement to Quilmes (see item 10.3 - Events with effective or expected material effects on the Financial Statements and Income – b) constitution, acquisition or disposal of equity interest – Perpetual licensing agreement to Quilmes). The main factors that explain such an increase in local currency are the general inflation in Argentina and the depreciation of Argentinean Peso against US Dollar, which raised the cost of our raw materials indexed to US Dollar.

 

Operations in Canada

 

The cost of products sold in our operations in Canada increased 9.8% in the year ended on December 31, 2019, amounting to R$ 2,649.8 million compared to the same period in the previous year. The cost of products sold, per hectoliter, increased 13.8% in reported terms, but increased 7.9% in organic terms, disregarding effects of currency variation in the conversion to Reais. The main factor that explains the increase in local currency is the inflation of our raw material due to the increase of commodities prices, particularly aluminum.

 

Gross profit

 

The gross profit decreased 0.2% in the year ended on December 31, 2019, amounting R$ 30,921.6 million, compared to R$ 30,981.9 million in the same period of 2018. The table below shows the contribution of each business unit to the consolidated gross profit of the Company.

 

 

47


 

 

 

Gross profit

 

2019

2018

 

(in million Reais, except for percentages)

 

Amount

% Contrib.

Margin

Amount

% Contrib.

Margin

Brazil

16,628.2

53.8%

58%

16,799.4

54.2%

63%

Brazil Beer(1)

14,266.3

46.1%

59%

14,794.3

47.8%

64%

NAB(2)

2,361.9

7.6%

53%

2,005.2

6.5%

53%

CAC(3)

3,823.9

12.4%

57%

3,254.8

10.5%

56%

Latin America South

6,030.7

19.5%

60%

6,492.2

21.0%

60%

Canada

4,438.8

14.4%

63%

4,435.5

14.3%

65%

Company Consolidated

30,921.6

100.0%

59%

30,981.9

100.0%

62%

(1) Beer and “future beverages” operation of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operation in Central America and in the Caribbean.

 

Administrative, Distribution, and Sales and Marketing Expenses

The administrative, distribution, and sales and marketing expenses of the Company amounted to R$ 15,327.5 million in the year ended on December 31, 2019, representing an increase of 4.3% compared to the same period in 2018. The analysis of the administrative, distribution, and sales and marketing expenses in each of the business units is as follows.

 

Brazilian Operations

 

The administrative, distribution, and sales and marketing expenses, in Brazil, amounted to R$ 8,585.7 million in the year ended on December 31, 2019, an increase of 5.6% compared to the same period in 2018.

 

Beer Operation in Brazil

 

The administrative, distribution, and sales and marketing expenses amounted to R$ 7,252.6 million in the year ended on December 31, 2019, an increase of 2.9% compared to the same period in 2018, mainly explained by an increase in administrative expenses driven by higher variable remuneration provisions, an increase in distribution expenses, in line with inflation and a high depreciation. Such effects were partially offset by lower expenses with sales and marketing due to efficiency gains.

 

Non-alcoholic and beverages operation in Brazil (“NAB”)

 

The administrative, distribution, and sales and marketing expenses related to the non-alcoholic beverages segment amounted to R$ 1,333.2 million in the year ended on December 31, 2019, an increase of 23.8% compared to the same period in 2018, mainly explained by higher sales and marketing expenses, reflecting the volume growth and our continued investment in our brands; by slightly higher distribution expenses, mainly driven by inflation; by a higher depreciation; and by an increase in administrative expenses, mainly due to higher variable remuneration provisions.

 

Operation in Central America and the Caribbean (“CAC”)

 

The administrative, distribution, and sales and marketing expenses related to the Company’s operations in CAC amounted to R$ 1,494.0 million in the year ended on December 31, 2019, an increase of 1.6% compared to the same period in 2018, mainly as a consequence of the impact of the currency conversion and of higher depreciation. In organic terms, disregarding the effects of the foreign-exchange variations and of changes to the scope of the operation, our administrative, distribution, and sales and marketing expenses decreased 4.2%, reflecting the efficiency gains in sales and marketing and administrative expenses in the region.

 

 

48


 

 

Operations in Latin America South (“LAS”)

 

The administrative, distribution, and sales and marketing expenses of the Company in LAS amounted to R$ 2,540.5 million in the year ended on December 31, 2019, an increase of 1.5%, if compared to the same period in 2018, since the increase of the logistic and administrative expenses driven, above all, by the high inflation in Argentina, was offset by the impact of the currency conversion. In organic terms, disregarding the effects of the foreign-exchange variation and changes to the scope of the operation, our administrative, distribution, and sales and marketing expenses increased 25.2%, mainly impacted by inflationary pressures in Argentina, but still below the weighted inflation of the region.

 

Operations in Canada

 

The administrative, distribution, and sales and marketing expenses in our operation in Canada amounted to R$ 2,707.3 million in the year ended on December 31, 2019, an increase of 7.7%, if compared to the same period in 2018, as a result of a negative effect of the currency conversion. In organic terms, disregarding the effects of foreign-exchange variation, our administrative, distribution, and sales and marketing expenses increased 2.1%, explained by higher administrative expenses, due to higher variable compensation provisions, partially offset by efficiency gains in sales and marketing and distrubution initiatives.

 

Other Net Operational Income (Expenses)

 

The net balance of other operational income and expenses related to the year of 2019 posted gains of R$ 878.1 million, compared to gains of R$ 947.3 million reported in 2018. The decrease of 7.3% is explained mainly by a reduction of government grants related to long-term tax incentives of ICMS, due to a geographic mix of revenues and the expiration of a tax incentive in the state of Santa Catarina.

 

Non-recurring items

 

The non-recurring items amounted to an expense of R$ 397.2 million in 2019, compared to an expense of R$ 86.4 million reported in 2018. The expenses recorded in 2019 were mainly (i) due to an amnesty program in the State of Mato Grosso, in connection with requirements imposed in the context of the final validation of fiscal incentives granted by such state in the past, without the formal acceptance of other states; and (ii) by restructuring expenses primarily linked to centralization and sizing projects in Brazil and LAS.

 

Operating Income

 

The operating income decreased 6.3% in the period ended on December 31, 2019, reaching R$16.074.9 million in relation to the amount of R$ 17,150.9 million in the same period in 2018, mainly as a result of higher costs, partially offset by the increase of revenue.

 

Net Financial Result

 

The financial result in the period ended on December 31, 2019 was an expense of R$ 3,109.6 million compared to an expense of R$ 4,030.3 million in 2018. The decrease of 22.8% was driven by (i) higher interest income, driven by our cash balance, mainly in Reais, US dollars and Canadian dollars, and the recovery of a tax claim; and (ii) a positive impact resulting from the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29/CPC 42), since the effect of the adjustment for cumulative inflation, from January 1, 2019, of non-monetary assets on the balance sheet of our operations in Argentine was reported in a dedicated account in the finance results.. Such effects above were partially

offset by (i) higher losses on derivative instruments, mainly driven by the carry cost of our currency hedges, primarily linked to the exposure of our cost of goods sold in Argentina, and; and (ii) higher losses on non-derivative monetary financial instruments related to non-cash expenses due to exchange rate variation on intercompany loans held in local currency, mainly Brazilian reais and the Argentine peso. The finance result includes the impact of a non-recurring financial expense amounting to R$ 18.2 million, explained by the payment of amnesty in the state of Mato Grosso in Brazil, partially offset by intercompany transactions with no cash effect.

49


 

 

The total debt of the Company in the period ended on December 31, 2019 reduced R$ 1,040.9 million compared to 2018, while its amount of cash and cash equivalents, net of bank overdrafts, and financial investments, increased R$ 438.3 million.

Expense with income tax and social contribution

 

The expenses with income tax and social contribution in 2019 amounted to R$ 754.7 million, compared to R$ 1,773.9 million registered in 2018. The effective tax rate was 5.8% against the tax rate of the previous year of R$ 13.5%. The reduction in the effective tax rate in 2019 is mainly explained by a higher interest on equity deductibility benefit resulting from a higher payment of interest on equity in 2019.

 

Net Profit

 

The net profit obtained by the Company in the year ended on December 31, 2019 was R$ 12,188.3 million, representing an increase of 7.4%, if compared to R$ 11,347.7 million in 2018, while adjusted by the non-recurring items, the net profit increased 8.5% in 2019 to R$ 12,139.0 million.

 

Comparative analysis of Operational Results as of December 31, 2018 and December 31, 2017

 

The consolidated results of the Company are presented as follows:

 

Highlights of Consolidated Financial Information

(in million Reais, except for amounts related to volume, percentages*)

 

Years ended on December 31

 

 

2018

Vertical

Analysis

2017

Vertical

Analysis

Variation 2018/2017

Net revenue

50,231.3

100.0%

47,899.3

100.0%

4.9%

Cost of products sold

(19,249.4)

-38.3%

(18,028.4)

-37.7%

6.8%

Gross profit

30,981.9

61.7%

29,870.9

62.3%

3.7%

 

 

 

 

 

 

Logistic expenses

(6,607.2)

-13.2%

(6,193.8)

-13.1%

6.7%

Commercial expenses

(5,721.3)

-11.4%

(5,613.6)

-11.7%

1.9%

Administrative expenses

(2,363.5)

-4.7%

(2,620.0)

-5.5%

-9.8%

Other operational income (expenses)

947.3

1.9%

1,217.3

22.5%

-22.2%

Operational earnings before non-recurring items

17,237.2

34.3%

16,660.8

34.8%

3.5%

 

 

 

 

 

 

Result from the exchange of equity interests

30.0

0.1%

-

0.0%

ns

Restructuring

(175.5)

-0.3%

(105.5)

0.2%

66.4%

Result from the sale of a subsidiary

78.6

0.2%

-

0.0%

ns

Acquisition of subsidiaries

(1.5)

0.0%

-

0.0%

ns

Effect of application of IAS 29/CPC 42 (hyperinflation)

(18.0)

0.0%

-

0.0%

ns

State Amnesty

-

0.0%

-

0.0%

ns

Other non-recurring items

-

0.0%

(3.2)

0.1%

ns

Operational earnings

17,150.9

34.1%

16,552.1

34.6%

3.6%

 

 

 

 

 

 

Financial expenses

(4,684.2)

-9.3%

(4,488.2)

-9.4%

4.4%

Financial income

653.9

1.3%

774.4

1.6%

-15.6%

Net financial result

(4,030.3)

-8.0%

(3,713.8)

-7.8%

15.4%

 

 

 

 

 

 

Interest in the results of jointly-controlled undertakings

1.0

0.0%

(3.1)

0.0%

-132.3%

Earnings before income tax and social contribution

13,121.6

26.1%

12,835.2

26.8%

2.2%

 

 

 

 

 

 

Income tax and social contribution

(1,773.9)

-3.5%

(5,047.7)

-10.5%

-64.9%

Net profits of the period

11,347.7

22.6%

7,787.5

16.3%

45.7%

Controlling shareholder’s equity

10,995.0

 

7,269.0

 

 

Non-controlling shareholder’s equity

352.7

 

518.5

 

 

* Discrepancy in the sums of the amounts is due to rounding.

50


 

 

Highlights of the Financial Information per Business Segment

The table below contains some of the financial information per business segment regarding the years ended on December 31, 2018 and 2017:

 

 

2018

2017

 

Brazil

CAC(1)

LAS(2)

Canada

Total

Brazil

CAC(1)

LAS(2)

Canada

Total

Net revenue

26,814.2

5,813.9

10,753.9

6,849.3

50,231.3

26,353.0

4,733.0

10,769.7

6,043.5

47,899.3

Cost of products sold

(10,014.8)

(2,559.1)

(4,261.7)

(2,413.8)

(19,249.4)

(9,879.8)

(2,044.8)

(4,120.7)

(1,983.1)

(18,028.4)

Gross profits

16,799.4

3,254.8

6,492.2

4,435.5

30,981.9

16,473.2

2,688.2

6,649.0

4,060.5

29,870.9

Administrative, sales and marketing expenses

(8,127.4)

(1,470.9)

(2,580.4)

(2,513.3)

(14,692.0)

(8,359.3)

(1,330.1)

(2,487.1)

(2,250.8)

(14,427.4)

Other operational income (expenses)

965.0

20.1

(24.6)

(13.1)

947.3

1,092.7

77.8

41.2

5.6

1,217.3

Non-recurring items

(43.7)

62.5

(88.4)

(16.8)

(86.4)

(33.0)

(23.1)

(41.3)

(11.3)

(108.7)

Operating income

9,593.2

1,866.4

3,798.9

1,892.4

17,150.9

9,173.6

1,412.8

4,161.8

1,804.0

16,552.1

(1) Beer and soft drink operation in the Central America and in the Caribbean.

(2) It includes the operations of Argentina, Bolivia, Paraguay, Uruguay, Chile, and before December 31, 2016, Colombia, Ecuador and Peru.

51


 

 

 

Net revenue

 

For more information about the sales net revenue, see section 10.2(b).

 

Cost of products sold

 

The total cost of sales increased 6.8% in the year ended on December 31, 2018, reaching R$ 19,249.4 million, compared to R$ 18,028.4 million in the same period in 2017. As a percentage of the Company’s net revenue, the total cost of sales increased to 38.3% in 2018, in relation to 37.6% in 2017.

 

Cost of products sold per hectoliter

 

 

Year ended on December 31

 

2018

2017

% Variation

 

(in Reais, except for percentages)

Brazil

98.5

92.9

6.0%

Brazil Beer(1)

105.6

98.3

7.4%

NAB(2)

75.5

76.3

-1.0%

CAC(3)

194.5

166.6

16.7%

Latin America South

125.5

121.0

3.7%

Canada

242.8

195.7

24.1%

Company Consolidated

121.3

110.7

9.6%

(1) Beer and “future beverages” operations of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operations in Central America and in the Caribbean.

 

Brazilian Operations

 

The total cost of sales of the Company’s Brazilian operations increased 1.4% in the year ended on December 31, 2018, reaching R$ 10,014.8 million in relation to R$9,879.8 million in the same period in 2017. The cost of the products sold in the Company’s Brazilian operations, per hectoliter, increased 6.0% in the year ended on December 31, 2018, reaching R$ 98.5/hl in relation to R$ 92.9/hl in the same period in 2017.

 

Beer Operation in Brazil

 

The cost of products sold in the beer and “future beverages” operation in Brazil increased 4.2%, reaching R$ 8,214.2 million in the year ended on December 31, 2018. The cost of products sold, per hectoliter, increased 7.4%. The main factor that contributed to such increase was the increase of commodities prices, particularly aluminum, which was partially offset by an appreciation of Real against US Dollar, benefiting the cost of our raw materials indexed to US Dollar.

 

Non-alcoholic beverages operation (“NAB”) in Brazil

 

The cost of products sold in the non-alcoholic beverages operation in Brazil reduced by 9.7%, reaching R$ 1,800.6 million. The cost of  products sold per hectoliter decreased 1.0%, amounting to R$75.5/hl, positively impacted by the cost of our raw materials indexed by US Dollar and by lower commodities prices, especially sugar, as well as by lower expenses with industrial depreciation, partially offset by the increase of other commodities prices, such as aluminum.

 

52


 

 

Operation in Central America and the Caribbean (“CAC”)

 

The cost of products sold in CAC operations increased 25.2% in 2018, reaching R$ 2,559.1 million. The cost of products sold per hectoliter increased 16.7% in reported terms, but increased 6.2% in organic terms, disregarding effects of currency variation in the conversion to Reais and changes to the scope of the operation, regarding the sale of the subsidiary Barbados Bottling Co. Ltd. in June, 2018 (see item 10.3 – Events with effective or expected material effects on the Financial Statements and Income – a) introduction or divestment of operating segment). The increase of the cost per hectoliter in local currency is explained by the inflation of raw materials, as well as by increased temporary costs to supply the Panamanian market with no disruption, as our current infrastructure in Panama was unable to support the strong sales volume growth since 2017 leading to production capacity restraints in the country, partially offset by productivity gains as a function of the operational leverage.

 

Latin America South Operations (“LAS”)

 

The cost of products sold in LAS amounted to R$ 4,261.7 million in 2018, representing an increase of 3.4% compared to 2017. The cost of products sold, per hectoliter, increased by 3.7% in reported terms, but increased by 12.5% in organic terms, disregarding effects of currency variation in the conversion to Reais, changes to the scope of the operation, regarding the perpetual licensing agreement to Quilmes (see item 10.3 - Events with effective or expected material effects on the Financial Statements and Income – b) constitution, acquisition or disposal of equity interest – Perpetual licensing agreement to Quilmes) and effects of the application of the accounting and disclosure rule in highly-inflationary economy (IAS 29/CPC 42) in Argentina. The main factors that explain such an increase in local currency are the general inflation in Argentina, partially offset by the impact of the variation of Argentinean Peso against US Dollar on our raw materials indexed to US Dollar.

 

Operations in Canada

 

The cost of products sold in our operations in Canada increased 21.7% in the year ended on December 31, 2018, amounting to R$ 2,413.8 million compared to R$ 1,983.1 million in the same period in the previous year. The cost of products sold, per hectoliter, increased by 24.1% in reported terms, but increased by 8.5% in organic terms, disregarding effects of currency variation in the conversion to Reais. The main factor that explains the increase in local currency is the inflation of our raw material due to the increase of some commodities prices, particularly aluminum.

 

Gross profit

 

The gross profit increased 3.7% in the year ended on December 31, 2018, reaching R$ 30,981.9 million, compared to R$ 29,870.9 million in the same period of 2017. The table below shows the contribution of each business unit to the consolidated gross profit of the Company.

 

 

Gross profit

 

2018

2017

 

(in million Reais, except for percentages)

 

Amount

% Contrib.

Margin

Amount

% Contrib.

Margin

Brazil

16,799.4

54.2%

63%

16,473.2

55.1%

63%

Brazil Beer(1)

14,794.3

47.8%

64%

14,622.6

49.0%

65%

NAB(2)

2,005.2

6.5%

53%

1,850.6

6.2%

48%

CAC(3)

3,254.8

10.5%

56%

2,688.2

9.0%

57%

Latin America South

6,492.2

21.0%

60%

6,649.0

22.3%

62%

Canada

4,435.5

14.3%

65%

4,060.5

13.6%

67%

Company Consolidated

30,981.9

100.0%

62%

29,870.9

100.0%

62%

(1) Beer and “future beverages” operation of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operation in Central America and in the Caribbean.

 

53


 

Administrative, Distribution, and Sales and Marketing Expenses

 

The administrative, distribution, and sales and marketing expenses of the Company, amounted to R$ 14,692.0 million in the year ended on December 31, 2018, representing an increase of 1.8% compared to the same period in 2017. The analysis of administrative, distribution and sales and marketing expenses in each of the business units is shown below.

 

Brazilian Operations

 

The administrative, distribution, and sales and marketing expenses in Brazil amounted to R$ 8,127.4 million in the year ended on December 31, 2018, a reduction of 2.8% if compared to the same period in 2017.

 

Beer Operation in Brazil

 

Administrative, distribution, sales and marketing expenses totaled R$ 7,050.3 million for the year ended on December 31, 2018, a reduction of 3.3% compared to the same period in 2017, explained mainly by lower administrative expenses, impacted by the provision related to the variable remuneration and lower sales and marketing expenses, due to efficiency gains. These gains were partially offset by an increase in distribution expenses, in line with inflation.

 

Non-alcoholic beverages (“NAB”) operations in Brazil

 

Administrative, distribution and sales and marketing expenses for the segment of non-alcoholic beverages totaled R$ 1,077.1 million for the year ended on December 31, 2018, an increase of 0.7% compared to the same period in 2017, mostly explained by higher sales and marketing expenses, as well as distribution, driven mainly by inflation, partially offset by lower administrative expenses, impacted by the variable remuneration provision.

 

Central American and Caribbean Operations (“CAC”)

 

Administrative, distribution and sales and marketing expenses for the Company’s operations in CAC totaled R$ 1,470.9 million for the year ended on December 31, 2018, an increase of 10.6% compared to the same period in 2017, driven principally by the impact of currency conversion, and higher expenses with distribution. In organic terms, ignoring the effects of the change in exchange rate and change in the scope of the operation, our administrative, distribution, sales and marketing expenses increased 0.6%, reflecting the corresponding growth in sales volume and higher distribution expenses, driven by inflation, partially offset by efficiency gains in expenses with sales and marketing and administrative costs in the region.

 

Latin America South Operations (“LAS”)

 

Administrative, distribution, sales and marketing expenses of the Company in LAS amounted to R$ 2,580.4 million for the year ended on December 31, 2018, an increase of 3.8%, if compared with the year 2017, since the increase of logistic and administrative costs, mainly driven by the high inflation in Argentina was more than offset by the impact of currency conversion. In organic terms, disregarding the effects of the change in exchange rate, changes in the scope of the operation and effects of applying the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29) in Argentina, our administrative, distribution, sales and marketing expenses increased 22.0%, impacted, mainly, by inflationary pressures in Argentina, but still below the weighted inflation in the region.

 

Canada operations

 

Administrative, distribution, sales and marketing expenses of our Canada operations totaled R$2,513.3 million for the year ended December 31, 2018, an increase of 11.7% compared to 2017, as a result of a negative effect of currency conversion. In organic terms, disregarding the effects of the change in exchange rate, our administrative, distribution, sales and marketing expenses decreased 2.4%, explained by efficiency gains in sales and marketing and administrative initiative.

54


 

 

Other Net Operating Income (Expenses)

 

The net balance of other operating income and operational expenses for the year 2018 showed a gain of R$ 947.3 million against a gain of R$ 1,217.3 million registered in 2017. The decrease of 22.2% is primarily explained by the reduction in government subsidies relating to long-term ICMS incentives, due to a lower volume and geographic mix of revenues, as well as losses on disposal of property, plant and equipment and intangible assets, as the application of the Accounting and Disclosure Rule of Highly Inflationary Economy (IAS 29/CPC 42) in Argentina resulted in the restatement of fixed asset values and, consequently, higher losses on disposal.

 

Non-Recurring Items

 

Non-recurring items amounted to an expense of R$ 86.4 million in 2018, compared to an expense of R$ 108.7 million in 2017. The 2018 expense is explained mainly by restructuring costs, related to centralization and sizing projects in Brazil and in the LAS.

 

Operating Income

 

Operating income increased 3.6% in the period ended on December 31, 2018, reaching R$ 17,150.9 million in relation to R$ 16,552.1 million in the same period of 2017, due primarily to higher revenue, partially offset by higher costs.

 

Net Financial Result

 

The financial result for the year ended December 31, 2018 comprised expenses of R$ 4,030.3 million compared to an expense of R$ 3,713.8 million in 2017. The increase of 8.5% was driven by (i) higher losses with derivative instruments, explained by the increase the carry cost of our currency hedges linked to the exposure of the cost in Brazil and in Argentina, as well as by non-cash expenses related to equity swaps; (ii) losses with non-derivative instruments related to non-cash expenses due to the exchange rate change in loans among the companies of the group, as a result of the depreciation of Real and of the Argentinean Peso. The finance result includes the impact of a non-recurring financial expense amounting to R$ 179.1 million regarding the foreign-exchange variation of loans settled with related parties, historically recognized in the owners’ equity and reclassified to the result of the fiscal year upon the liquidation of said loans.

 

The Company’s total indebtedness for the year ended December 31, 2018 decreased R$ 426.9 million compared to 2017, while its current cash and cash equivalents, net of overdrafts, and financial investments increased R$ 1,112.3 million.

 

Income tax and social contribution expense

 

Expenses for income tax and social contribution in 2018 amounted to R$ 1,773.9 million, compared to R$ 5,047.7 million recorded in 2017. The effective rate was 13.5%, against the previous year’s rate of 39.3%, since in 2017 we have been impacted for two non-recurring tax adjustments, and the main adjustment was of R$ 2,784.7 million related to PERT 2017 and the other, without cash effect, of approximately R$ 510 million related to the tax effects of the exchange rate change over loans among the companies of the group, which were historically reported in the owners’ equity and were reclassified to the result of the exercise upon the liquidation of said loans. Adjusted by the two non-recurring tax adjustments, the effective tax rate in 2017 was of 13.7% comparable to the effective tax rate of 2018.

 

 

55


 

 

Net Profit

 

The Company’s net profit for the year ended on December 31, 2018 was of R$ 11,347.7 million representing an increase of 45.7%, if compared to the R$ 7,787.5 million in 2017 while adjusted by the non-recurring items, the net profit decreased 0.5% in 2018 to R$ 11,561.6 million.

 Cash Flow for the Year Ended on December 31, 2019 compared with 2018

 

 

 

 

2019

2018

Variation

Cash flow

 

 

2019/2018

Cash flow of the operating activities

18,381.3

18,346.1

-0.2%

Cash flow of the investment activities

-4,838.6

-3,675.7

31.6%

Cash flow of financial activities

-12,283.5

-13,656.5

-10.1%

Total

1,259.2

1,013.9

24.2%

 

Operating activities

 

The Company’s cash flow from operating activities decreased 0.2%, reaching R$ 18,381.3 million in the year ended on December 31, 2019, in relation to the R$ 18,346.1 million in the same period in 2018, mainly due to (i) an increase of 14.7% in the cost of product sold (excluding depreciation and amortization) and an increase of 3.1% in the distribution, administrative, sales and marketing expenses (excluding depreciation and amortization), partially offset by an increase of 4.7% in the net revenues of sales, which led to a worse operating income, and; (ii) an increase in income tax paid, partially offset by an improve in the variation of working capital during 2019, with an increase of R$ 262.6 million in 2019.

 

Investment Activities

 

The cash flow used in the investment activities of the Company in the year ended on December 31, 2019 amounted R$ 4,838.6 million, compared to R$ 3,675.7 million in the same period of 2018, mainly explained by an increase in investments in property, plant and equipment and intangible assets of R$ 1,498.4 million in 2019 compared to 2018, together with the greater outflows related to the acquisition of other investments.

 

Financial Activities

 

The cash flow of the financial activities in the year ended on December 31, 2019 amounted to a cash outflow of R$ 12,283.5 million, compared to the cash outflow of R$ 13,656.5 million in the same period in 2018, mainly as a result of decrease of cash used for the acquisition of non-controlling interest, due to the partial exercise, in 2018, of put option by E. León Jimenes S.A. related to the interest in the equity capital of Tenedora (see item 10.3 - Events with effective or expected material effects on the Financial Statements and Income – b) organization, acquisition or disposal of equity interest – Renegotiation of the shareholders’ agreement of Tenedora CND). Such impact was partially offset by lower proceeds from borrowings and by higher outflows related to cash net of finance costs other than interests.

 

Cash Flow for the Year Ended on December 31, 2018 compared with 2017

 

 

 

 

2018

2017

Variation

Cash flow

 

 

2018/2017

Cash flow of the operating activities

18,346.1

18,260.8

0.5%

Cash flow of the investment activities

-3,675.7

-3,073.0

19.6%

Cash flow of financial activities

-13,656.5

-13.250.9

3.1%

Total

1,013.9

1,936.9

-47.7%

         

56


 

 

Operating activities

 

The Company’s cash flow from operating activities increased 0.5%, reaching R$ 18,346.1 million in the year ended on December 31, 2018, in relation to the R$ 18,260.8 million in the same period in 2017, mainly due to (i) an increase of 4.9% in the net revenues, which led to an improved operating income, partially impacted by an increase of 6.5% in the cost of product sold (excluding depreciation and amortization) and an increase of 2.2% in the distribution, administrative, sales and marketing expenses (excluding depreciation and amortization); (ii) a reduction of R$ 445.3 million in income tax and social contribution paid in the year; partially compensated by a slight decrease in the variation of working capital during 2018, with a reduction of R$ 11.3 million in relation to 2017.

 

Investment Activities

 

The cash flow used in the investment activities of the Company in the year ended on December 31, 2018 amounted R$ 3,675.7 million, compared to the R$ 3,073.0 million in the same period of 2017, mainly explained by an increase in investments in property, plant and equipment and intangible assets of R$ 367.2 million in 2018, together with the financial investment in debt instruments.

 

Financial Activities

 

The cash flow of the financial activities of the year ended on December 31, 2018 amounted to a cash outflow of R$ 13,656.5 million compared to the cash outflow of R$ 13,250.9 million in the same period in 2017, mainly as a function of the acquisition of non-controlling shareholders, due to the partial exercise of put option by E. León Jimenes S.A. related to the interest in the equity capital of Tenedora (see item 10.3 - Events with effective or expected material effects on the Financial Statements and Income – b) organization, acquisition or disposal of equity interest – Renegotiation of the shareholders’ agreement of Tenedora CND). Such impact was partially offset by (i) higher proceeds from borrowings; (ii) lower outflows due to the repayment of borrowings; and (iii) lower outflows related to cash net of finance costs other than interests.

 

10.2 – Operating and financial income

 

a) Operating income of the Company, particularly: (i) the description of material income components; and (ii) factors with material impact on operating income.

 

i) Description of any material income components

 

The revenues of the Company and its subsidiaries primarily consist of the sale of beers, “future beverages” and non-alcoholic beverages through the operations described in Item 10.1 above.  To a lesser extent, the Company also generates revenues from the sale of malt and by-products deriving from its operations.

 

The demand for its products is primarily related to consumer disposable income, price and weather conditions in the countries where the Company and its subsidiaries operate.

 

ii) Factors that materially affect operating income

 

 

57


 

 

2019

 

The year 2019 was marked by transformative investments in our portfolio, with new liquids and new packaging, innovations that seek the long-term sustainable growth of the Company, achieving a growth in net revenue. On the other hand, we face significant cost pressures due to the increase in the raw material prices denominated in dollars.

 

In Brazil, beer and non-alcoholic beverages industries have resumed growth, in the face of a gradual improvement in the consumption environment. Additionally, in the beer segment in Brazil, we introduced innovations in all market segments and continue to make structural investments directed at the consumer. We launched and consolidated the Skol Puro Malte brand, which strengthens the Skol family of beers, and we move forward with the good momentum of the Brahma brand, which maintained its connection with Brazilian passion points - soccer and country music. Our portfolio of premium beers maintained a strong double-digit growth rate. Finally, to continue innovating in other beverage categories, we developed and launched the Skol Beats 150 bpm and Skol Beats GT products. We also had positive results in the non-alcoholic beverages market in Brazil, with the premium brands Tônica, Lipton, do bem, H2OH! and Gatorade. In addition, we maintained important investments in the Guaraná Antárctica brand.

 

In Latin America South, we faced strong macroeconomic volatility, especially in Argentina, impacting results in the region. In this scenario, we kept the focus on strengthening our brands in each country. Especially in Argentina, the Andes Origen brand, launched in the previous year, maintained an accelerated pace of growth throughout the year.

 

In Central America and the Caribbean, we continue with solid growth in our portfolio, with emphasis on the Modelo Especial, Corona and Presidente beers. As a consequence, we obtained an expansion of EBITDA and its margin in relation to the previous year.

 

In Canada, the performance of the Bud Light, Michelob Ultra, Stella Artois, Corona brands, in addition to our portfolio of specialty beers, guaranteed the maintenance of our leadership position in the beer market.

 

2018

In Brazil, the year 2018 was marked by a scenario of external volatility, particularly related to the following factors: (i) bad weather during summer at the beginning of the year; (ii) truckers strike in May; and (iii) uncertainty of consumers during the period preceding the elections, all of which in a context of a macroeconomic environment still under recovery. In such circumstances, both the beer and the non-alcoholic beverages industry contracted. However, we made transformational investments in our beer portfolio in Brazil, with innovations in new liquids and new packaging, involving all market segments. Particularly in the premium segment we had a strong growth of our brands, both the global and the national ones. We also kept investing in the non-alcoholic beverages segment, in which we also had a good performance of the premium brands, for instance, Lipton, Tônica, Gatorade and Do Bem. Finally, we carried out a series of initiatives through our growth platforms that contributed to the strengthening of the business and creation of long-term sustainable value.

 

In Central America and in the Caribbean (CAC), the favorable macroeconomic environment in most operations, as well as the continuous evolution of our commercial strategy, boosted an expansion of volume, income and EBITDA in the region.

 

In Latin America South (LAS), we faced, as of May 2018, an adverse macroeconomic scenario, with significant depreciation of the Argentinean Peso and high inflation. In such context, we started to report our results applying the accounting and disclosure rule in highly-inflationary economy (IAS 29/CPC 42) in Argentina as from the third quarter of the year, which exerted a relevant impact on our financial statements (see item 10.5 – Critical accounting policies – (x) Accounting and Disclosure Rule in Highly Inflationary Economy). Nevertheless, with our revenue management strategy and cost discipline in Argentina, combined with the solid performance of volume in other important markets of the region, such as Bolivia, Chile and Paraguay, we obtained solid growth of EBITDA in the local currencies.

 

In Canada, we faced a beer industry under pressure during the year, but kept our leading position in the market, reaching positive results with our portfolio, in the core segment with Bud Light and Michelob Ultra, in the premium segment with Stella Artois and Corona and with our craft beers.

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2017

In Brazil, the results of our beer operation in 2017 improved consistently during the year, reaching an inflection point and resuming the growth. Despite the negative volume of the industry, our beer operation generated volume, revenue and EBITDA growth. Our Soft Drinks and Non-Alcoholic and Non-Carbonated Beverages operation in Brazil was negatively impacted by the strong retraction of the soft-drink industry in Brazil. Notwithstanding, we had a good performance of the premium brands Fusion, Lipton and Do Bem, which reached positive volume results in relation to the previous year. Within this context, we are confident that the initiatives implemented by means of our commercial platforms contributed to our evolution in 2017.

 

In Central America and the Caribbean (CAC), we initiated our Panama operation, with a solid growth of our brand portfolio, which includes Atlas Golden Light and Stella Artois. Therefore, we had an expansion of EBITDA in the region corresponding to, approximately, 600 million of US dollars, which represents an increase of over 24% in relation to the previous year.

 

In Latin America South (LAS), our volume presented a solid growth, supported by the expansion of the beer market in Argentina and Paraguay, and by the good performance of our Brahma, Patagonia and Stella Artois brands.

 

And, in Canada, we maintained our market leadership, mainly due to the performance of Bud Light and Stella Artois and of our mixed beverage portfolio, ciders and special beers, which includes the Mill Street and Archibald brands.

 

b) income variation ascribed to variations in prices, foreign exchange rates, inflation, volumes and introduction of new products and services

 

Net Revenue – Year ended on December 31, 2019 compared to 2018

 

The net revenue increased 4.7% in the year ended on December, 2019, reaching R$ 52,599.7 million in relation to the R$ 50,231.3 million in the same period in 2018.

 

Net revenue

 

 

Year ended on December 31

 

2019

2018

% Variation

 

In million Reais, except for percentages

Brazil

28,724.5

54.6%

26,814.2

53.4%

7.1%

Beer Brazil(1)

24,304.2

46.2%

23,008.5

45.8%

5.6%

NAB(2)

4,420.2

8.4%

3,805.7

7.6%

16.1%

CAC(3)

6,757.9

12.8%

5,813.9

11.6%

16.2%

Latin America South

10,028.7

19.1%

10,753.9

21.4%

-6.7%

Canada

7,088.6

13.5%

6,849.3

13.6%

3.5%

Company Consolidated

52,599.7

100.0%

50,231.3

100.0%

4.7%

(1) Beer and “future beverages” operation of the Company in Brazil

(2) Non-alcoholic beverages

(3) Beer and soft drink operation in Central America and in the Caribbean

 

 

Sales volume

Year ended on December 31

 

2019

2018

% Variation

 

In thousands of hectoliters, except for percentages

Brazil

106,806.7

65.4%

101,642.9

64.0%

5,1%

Beer Brazil(1)

80,263.7

49.2%

77,784.2

49.0%

3,2%

NAB(2)

26,542.9

16.3%

23,858.8

15.0%

11,2%

CAC(3)

13,859.5

8.5%

13,159.8

8.3%

5,3%

Latin America South

32,991.1

20.2%

33,971.2

21.4%

-2,9%

Canada

9,585.7

5.9%

9,942.9

6.3%

-3,6%

Company Consolidate

163,243.0

100.0%

158,716.9

100.0%

2,9%

               

(1) Beer and “future beverages” operation of the Company in Brazil

(2) Non-alcoholic beverages

(3) Beer and soft drink operation in Central America and in the Caribbean

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Net revenue per hectoliter

 

Year ended on December 31

 

2019

2018

%Variation

 

(In Reais, except for percentages)

Brazil

268.9

263.8

1.9%

Beer Brazil(1)

302.8

295.8

2.4%

NAB(2)

166.5

159.5

4.4%

CAC(3)

487.6

441.8

10.4%

Latin America South

304.0

316.6

4.0%

Canada

739.5

688.9

7.3%

Company Consolidated

322.2

316.5

1.8%

(1) Beer and “future beverages” operation of the Company in Brazil

(2) Non-alcoholic beverages

(3) Beer and soft drink operation in Central America and in the Caribbean

 

Brazilian Operations

 

The net revenue generated by our Beer and NAB operations in Brazil increased 7.1% in 2019, reaching R$ 28,724.5 million.

 

Beer Operation in Brazil

 

The net revenue from the sales of beer in Brazil in 2019 increased 5.6%, accumulating R$ 24,304.2 million, explained by an increase of 2.4% in the revenue per hectoliter, which reached R$ 302.8/hl, combined with an expansion of the sales volume of 3.2% in the period. The increase of the net revenue per hectoliter was a result of our revenue management strategy.

 

Non-alcoholic beverage operation in Brazil

 

The net revenue generated by the NAB operation in 2019 increased 16.1%, reaching R$ 4,420.2 million. The volumes increased 11.3% in 2019 in view of the gradual improvement of the consumer environment. The net revenue per hectoliter of NAB segment in Brazil increased 4.4% in 2019, reaching R$ 166.5/hl in the year, mainly due to our revenue management.

 

Operation in Central America and in the Caribbean

 

The operations in CAC presented an increase of the net revenue in 2019 of 16.2%, amounting  R$ 6,757.9 million as a function of a volume increase of 5.3% and of an increase in the net revenue per hectoliter of 10.4%, explained both by the positive effect of the foreign-exchange variation in the conversion to Reais and by an organic increase of the net revenue per hectoliter of 4.4% per year.

 

Operations in Latin America South

The operations in Latin America South contributed with R$ 10,028.7 million to the consolidated net revenue in 2019, representing a reduction of 6.7% mainly as a function of the negative effect of the foreign-exchange variation in the conversion to Reais, together with a reduction of 2.9% of the sales volume in the region in the year. The organic increase of the revenue was of 15.1% as a function of an organic increase in the net revenue per hectoliter of 19.0%, boosted by high inflation in Argentina and our revenue management strategy.

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Operations in Canada

 

The operations in Canada contributed with R$ 7,088.6 million to our consolidated net revenue in 2019, an increase of 3.5% in relation to the previous year. Such result is mainly due to the positive effect of the foreign-exchange variation in the conversion to Reais. In local currency, the increase of 1.7% of our net revenue per hectoliter was more than offset by the volume decrease of 3.6% related to a weak beer industry in the year.

 

Net Revenue – Comparison between figures as of December 31, 2018 and 2017

 

Net revenue increased 4.9% in the year ended on December 31, 2018, reaching R$ 50,231.3 million compared to R$ 47,899.3 million in 2017.

 

 

Net Revenue

 

Year ended on December 31

 

2018

2017

% Variation

 

In million Reais, except for percentages

Brazil

26,814.2

53.4%

26,353.0

55.0%

1.8%

Beer Brazil(1)

23,008.5

45.8%

22,509.3

47.0%

2.2%

NAB(2)

3,805.7

7.6%

3,843.7

8.0%

-1.0%

CAC(3)

5,813.9

11.6%

4,733.0

9.9%

22.8%

Latin America South

10,753.9

21.4%

10,769.7

22.5%

-0.1%

Canada

6,849.3

13.6%

6,043.5

12.6%

13.3%

Company Consolidated

50,231.3

100.0%

47,899.3

100.0%

4.9%

(1) Beer and “future beverages” operation of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operation in Central America and in the Caribbean.

 

 

 

Sales Volume

 

Year ended on December 31

 

2018

2017

% Variation

 

In thousands of hectoliters, except for percentages

Brazil

101,642.9

64.0%

106,360.0

65.3%

-4.4%

Beer Brazil(1)

77,784.2

49.0%

80,233.6

49.3%

-3.1%

NAB(2)

23,858.8

15.0%

26,126.4

16.0%

-8.7%

CAC(3)

13,159.8

8.3%

12,271.8

7.5%

7.2%

Latin America South

33,971.2

21.4%

34,062.0

20.9%

-0.3%

Canada

9,942.9

6.3%

10,135.7

6.2%

-1.9%

Company Consolidated

158,716.9

100.0%

162,829.4

100.0%

-2.5%

           

(1) Beer and “future beverages” operation of the Company in Brazil.

(2) Non-alcoholic beverages.

(3) Beer and soft drink operation in Central America and in the Caribbean.

 

 

Net Revenue per Hectoliter

 

Year ended on December 31

 

2018

2017

% Variation

 

(In Reais, except for percentages)

Brazil

263.8

247.8

6.5%

Beer Brazil(1)

295.8

280.5

5.4%

NAB(2)

159.5

147.1

8.4%

CAC(3)

441.8

385.7

14.5%

Latin America South

316.6

316.2

0.1%

Canada

688.9

596.3

15.5%

Company Consolidated

316.5

294.2

7.6%

(1) Beer and “future beverages” operation of the Company in Brazil.
(2) Non-alcoholic beverages.
(3) Beer and soft drink operation in Central America and in the Caribbean.

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Brazilian Operations

 

Net revenue from our Beer and NAB operations in Brazil increased 1.8% in 2018, reaching R$ 26,814.2 million.

 

Beer Operations in Brazil

 

Net revenue from beer sales in Brazil increased 2.2% in 2018, accumulating R$ 23,008.5 million, mainly explained by an increase of 5.4% in the revenue per hectoliter, which amounted to R$ 295.8/hl, partially impacted by a reduction of the sale volume of 3.1% in the period. The increase in the net revenue per hectoliter was the result of our revenue management strategy.

 

Operations of carbonated soft drinks and non-alcoholic and non-carbonated beverages in Brazil

 

Net revenue from NAB operations in 2018 decreased 1.0%, reaching R$ 3,805.7 million. The volumes dropped 8.7% in 2018, since the industry is still pressured by a challenging consumer environment. Net revenue per hectoliter in Brazil’s NAB segment increased 8.4% in 2018, reaching R$ 159.5/hl in the year, especially due to our revenue management.

 

Central America and the Caribbean (CAC) Operations

 

The CAC operations showed an increase in net revenue in 2018 of 22.8%, rising to R$ 5,813.9 million, due to a volume increase of 7.2%, and a growth of net revenue per hectoliter of 14.5%, explained by the positive effect of the exchange rate change in the conversion into Reais, and by an organic increase in net revenue per hectoliter of 4.0% in the year.

 

Latin America South (LAS) Operations

 

Latin America South (LAS) operations contributed R$ 10,753.9 million to the consolidated revenue in 2018, representing a decrease of 0.1% due to, mainly, the negative effect of the exchange rate change in the conversion into Reais, together with a reduction of 0.3% of the sales volume in the region. The organic variation in revenue was 21.5%, due to an organic variation in the net revenue per hectoliter of 22.1%, driven by high inflation in Argentina and our revenue strategy management.

 

Canada Operations

 

Our operations in Canada contributed R$ 6,849.3 million to our consolidated net revenue in 2018, corresponding to an increase of 13.3% in comparison to the previous year. This result arises from, mainly, the positive effect of the exchange rate change in the conversion to Reais. In local currency, the increase of 1.0% of our net revenue per hectoliter was almost entirely offset by a drop in the volume of 1.9% related to a weak beer industry in the year.

 

c) impact of inflation, price variations of main inputs and products, foreign exchange and interest rates on the Company’s operating and financial income, where relevant.

 

2019

In 2019, our costs of products sold in Brazil were negatively impacted by the hedge rate of the Real against the US Dollar, since it was higher than the average hedged rate of the previous year, throughout the the year. In addition, the prices of some commodities, especially barley and aluminum, were hedged in US Dollars at values higher than those of the previous year, during most of the year and had a negative effect in our cost of products sold. The price of the commodity sugar was hedged at lower values in relation to the previous year throughout the year, positively impacting the costs of products sold of our NAB operation. In our international operations, in general, the cost conversion into Real resulted in a negative impact, due to the depreciation of the Real against the local currencies in each operation, except for Latin America South, due to the appreciation of the Real against the Argentinean Peso. Also in Latin America South, the inflationary pressures intensified, mainly in Argentina, on the local labor and logistic costs.

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2018

In 2018, our costs of products sold in Brazil were positively impacted by the hedge rate of the Real against the US Dollar, since it was lower than the average hedged rate of the previous year, mainly upon comparison among the three first quarters of the year. On the other hand, the prices of some commodities, especially aluminum, were hedged in US Dollars at values higher than those of the previous year, with a negative effect in our cost of products sold. The price of the commodity sugar was hedges during most t of the year at lower values in relation to the previous year, positively impacting the costs of products sold of our NAB operation. In our international operations, in general, the cost was negatively impacted by the depreciation of the Real against the local currencies in each operation, except for Latin America South, due to the appreciation of the  Real against the Argentinean Peso. Also in Latin America South, the inflationary pressures intensified, mainly in Argentina, on the local labor and logistic costs.

 

2017

In 2017, our costs of products sold in Brazil were once again severely impacted by the hedge rate of the Brazilian Real again the U.S. Dollar, since this was significantly higher than the average hedged rate of the previous year, mainly when compared to the first semester of the year. On the other hand, the prices of commodities were hedged in US dollars at values lower than those of the previous year, with positive impact on the cost of products sold, except for sugar, which specifically impacted the cost of sold products in the NAB operation in the country. In our international operations, in general, the costs had a positive impact by the appreciation of the Brazilian Real against the local currencies of each operation. Specifically in Latin America South, the inflationary pressures, especially in Argentina, continued to adversely affect our local labor and logistic costs.

 

 

2019 vs. 2018

Our net financial result decreased 22.8% in 2019, from an expense of R$ 4,030.3 million in 2018 to R$ 3,109.6 million. The decrease was driven by (i) higher interest income, driven by our cash balance, mainly in Reais, US dollars and Canadian dollars, and the recovery of a tax claim; and (ii) a positive impact resulting from the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29/CPC 42), since the effect of the adjustment for cumulative inflation, from January 1, 2019, of non-monetary assets on the balance sheet of our operations in Argentine was reported in a dedicated account in the finance results.. Such effects above were partially offset by (i) higher losses on derivative instruments, mainly driven by the carry cost of our currency hedges, primarily linked to the exposure of our cost of goods sold in Argentina, and; and (ii) higher losses on non-derivative monetary financial instruments related to non-cash expenses due to exchange rate variation on intercompany loans held in local currency, mainly Brazilian reais and the Argentine peso. The finance result includes the impact of a non-recurring financial expense amounting to R$ 18.2 million, explained by the payment of amnesty in the state of Mato Grosso in Brazil, partially offset by intercompany transactions with no cash effect

 

2018 vs. 2017

Our net financial result increased 8.5% in 2018, from an expense of R$ 3,713.8 million in 2017 to R$ 4,030.3 million. The increase of 8.5% was boosted by (i) higher losses with derivative instruments, explained by the increase of the carry cost of our hedges linked to our cost exposure in Brazil and Argentina, as well as by non-cash expenses related to equity swaps; and (ii) losses with non-derivative instruments related to non-cash expenses, due to the foreign-exchange variation in intercompany loans, as a function of the depreciation of Real and of the Argentinean Peso. The financial result includes the impact of a non-recurring financial expense amounting to R$ 179.1 million regarding the performance of the foreign-exchange variation of loans settled with related parties, historically recognized in equity and reclassified to the result of the year upon the settlement of such loans.

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10.3 - Events with effective or expected material effects on the Financial Statements and Income

 

a) introduction or divestment of operating segment

 

In June 8, 2018, the Company we concluded the sale of all shares of our subsidiary, Barbados BottlingCo. Limited, a subsidiary that produces and distributes carbonated soft drinks in Barbados, in the amount of US$53 million, corresponding to R$ 179 million. As a result of the transaction we recorded a gain of approximately US$22 million under non-recurring items, corresponding to R$ 75 million on the date of the transaction and to R$79 million on December 31, 2018, in the result of the year.

 

b) organization, acquisition or disposal of equity interest

 

Renegotiation of the shareholders’ agreement of Tenedora CND

 

On December 1, 2017, Ambev notified its shareholders and the market in general that E. León Jimenes, S.A. (“ELJ”), partner of the Company in Tenedora CND, S.A. (“Tenedora”), owner of almost the totality of Cervecería Nacional Dominicana, S.A. (“CND”), would partially exercise, under the provisions of the shareholders’ agreement of Tenedora, its sale option in relation to approximately 30% of Tenedora’s capital stock,. Due to the partial exercise of said sale option, the Company would pay to ELJ the amount of, approximately, R$ 3 billion (corresponding to, approximately, USD 926.5 million) and would become the owner of 85% of Tenedora, and the remaining 15% are still owned by ELJ. In addition, considering the strategic importance of the alliance with ELJ, the Board of Directors of the Company approved, on such date, the extension of the term, from 2019 to 2022, to the exercise of the call option granted by ELJ to the Company. The operation was subject to some conditions precedent and was concluded on January 18, 2018.

 

Perpetual licensing agreement to Quilmes

 

On September 2017, Quilmes, a subsidiary of Ambev, entered into an agreement under which AB InBev would grant a perpetual license to Quilmes in Argentina for the distribution of the Budweiser brand and other North-American brands after the recovery of the distribution rights of these brands by AB InBev from the Chilean entity Compañia Cervecerías Unidas S.A. - CCU. The agreement established the transfer of Cerveceria Argentina Sociedad Anonima Isenbeck by AB InBev to Quilmes and the transfer of some Argentinean brands (Norte, Iguana and Baltica) and related commercial assets, in addition to USD 50 million by Quilmes to CCU. The closing of the transaction  took place on May 2nd, 2018, after obtainment of approval, on April 27, 2018, by the Argentinean antitrust authority  (Comisión Nacional de Defensa de la Competencia) of the main operation documents and of the verification of the other usual closing conditions. The Company assessed gains of  306 million Argentinean Pesos  (corresponding to R$ 50 million on the date of the transaction and to R$ 30 million on December 31, 2018), in the result of the year arising out of the application of the accounting practice of exchange of assets involving transactions under common control registered under non-recurring items.

 

c) unusual events or transactions

 

Equity Swap Agreements

 

On December 20, 2018 the Board of Directors of Ambev approved the execution, by the Company or its subsidiaries, of equity swap agreements through financial institutions to be defined by the board of officers of the Company, with referenced in shares issued by the Company or American Depositary Receipts based on these shares (“ADRs”), without prejudice to the liquidation, within the regulatory term, of the equity swap agreement still in force. The liquidation of the approved equity swap agreements  shall occur within a maximum term of 18 months counted from the referred to approval, and such agreements may result in the exposition of up to 80 million of shares of common stock (of which a portion or the totality may be by means of ADRs), with limit value of up to R$ 1.5 billion.

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As of May 15, 2019, the Board of Directors of Ambev approved the execution of new equity swap agreements, without prejudice to the liquidation, within the regulatory term, of the equity swap agreements still in force. The liquidation of the new approved equity swap agreements shall occur within up to 18 months from the referred approval date, and such agreements may result in exposure of up to 80 million common shares (of which a part or the totality may be by means of ADRs), with limit value of up to R$ 1.5 billion.

 

As of December 19, 2019, the Board of Directors of Ambev approved the execution of new equity swap agreements, without prejudice to the liquidation, within the regulatory term, of the equity swap agreements still in force. The liquidation of the new approved equity swap agreements shall occur within up to 18 months from the referred approval date, and such agreements may result in exposure of up to 80 million common shares (of which a part or the totality may be by means of ADRs), with limit value of up to R$ 1.5 billion, and added to the balance of the agreements already executed in the context of the approvals of December 20, 2018 and May 15, 2019 and not liquidated yet, they may result in an exposure equivalent to up to 217,014,453 common shares (of which a part or the totality may be by means of ADRs).

 

10.4 – Significant changes in accounting practices – Qualifications and emphasis in the auditors’ report

 

a) Significant changes in accounting practices

 

a.I) Regarding the financial statements for the year ended on December 31, 2019: Consolidated and separate financial statements.

 

Impacts of adoption to IFRS 16/CPC 06 (R2) Leases (in force as from January 1st, 2019) replaces the existing lease accounting requirements and represents a significant alteration in the accounting and disclosure of leases that were previously classified as operational, which impact us in items of Rights of Use Assets and Liabilities, Depreciation and Interest Expenses.

 

Having adopted the standard effective from January 1, 2019, the Company has adopted retrospective presentation for the consolidated financial statements. The impact on the financial statements is demonstrated below:

 

- Recognition of right-of-use assets and lease liabilities in the balance sheet, initially measured at the present value of future lease payments;

 

- Recognition of depreciation expenses related to right-of-use assets in the income statement;

 

- Recognition of interest expenses in the financial result on the lease liabilities in the income statement; and

 

- Segregation of the payment of the leases, into a principal portion presented within the financing activities and an interest component presented in operating activities within cash flow.

 

The new lease definitions have been applied to all identified contracts in effect on the date of adoption of the standard. IFRS 16/CPC 06 (R2) specifies that the contract contains a lease if it grants the lessee the right to control the use of the identified asset for a period of time by exchange of counter payments.

 

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The Company carried out an inventory of the contracts, evaluating the lease terms in order to conclude whether they include a lease in accordance with IFRS 16/CPC 06 (R2). This analysis identified a significant number of contracts mainly related to the leasing of real estate from third parties, trucks, cars, forklifts and servers.

 

Short-term (12 months or less) and low value (USD 5,000 or less) leases were not subject to this analysis, as permitted bunder the standard. For these contracts, the Company will continue to recognize lease expenses on a straight-line basis, if applicable.

 

When measuring lease liabilities, the Company discounted lease payments using incremental borrowing rates. The weighted average rate applied is of 12.6% until December 31, 2018.

 

The Company has adopted the full retrospective adoption of IFRS 16/CPC 06 (R2) and, consequently, for each period of the previous report presented, it applied CPC 23 - Accounting Policies, Change in Estimates and Correction of Errors.

 

Uncertainty about Treatment of Taxes on Profit - ICPC 22/IFRIC 23 - The Company reviewed the treatments given to taxes levied on profit, in order to determine the impact on the parent company's and consolidated financial statements, as determined by IFRIC 23/ICPC 22 - Uncertainty about Treatment of Taxes on Profit.

 

The Company reallocated the balances previously classified in the item Provisions to the item Income tax and social contribution (IR/CSLL) payable on December 31, 2019. The amounts reclassified in 2019 were R$ 109,554 in the parent company and R$ 251,646 in the consolidation, according to Note 16. This reclassification was carried out in line with the clarification of the IFRS Interpretation Committee, which clarifies that uncertain positions on taxes on profit are part of the measurement of taxes on current or deferred income.

 

a.II) Regarding the financial statements for the year ended on December 31, 2018: Consolidated and separate financial statements.

 

There were no significant changes in the accounting policies of the consolidated and separate financial statements of December 31, 2018, as well as in the calculation methods used in relation to those presented in the financial statements for the year ended on December 31, 2017, except for those described below:

 

IFRS 9/CPC 48 – Financial instruments, which replaced IAS 39/CPC 38 for periods beginning as from January 1st, 2018, introduces new requirements for the classification of financial assets that depend on the business model of the entity and on the contractual characteristics of the cash flow of the financial instruments; defines a new accounting method of losses by reduction in the recoverable amount and a more effective recognition; and introduces a new  hedge accounting standard and impairment test with greater disclosure on the risk management activity. The new hedge accounting model represents a significant review of the policy and aligns the accounting treatment with the risk management activities. IFRS 9/CPC 48 also removes the volatility in the result caused by changes to the credit risks of the liabilities determined to be measured by fair value.

 

The Company applied IFRS 9/CPC 48 – Financial Instruments on the effective date, with no update of the comparative information for the period beginning on January 1st, 2017. Consequently, the classification and measurement of the financial instruments for the comparative periods follow the requirements provided for in IAS 39/CPC 38. The Company assessed the impact and concluded that IFRS 9/CPC 48 – Financial Instruments does not impact, in a relevant manner, its financial position, financial performance or risk management activities.

 

IFRS 15/CPC 47 – Revenue from Contracts with Clients requires the recognition of revenue to be made in such a manner that demonstrates the transfer of goods or services to the client for an amount that reflects the expectation of the company to receive, in exchange, the rights on such goods and services. The new applicable rule, for periods beginning as from January 1st, 2018, results in greater and improved disclosures on revenue, provides guidance for transactions not previously approached in a comprehensive manner (for instance, revenue from services and contractual amendments) and improves guidance for multiple elements.

66


 

 

The Company adopted IFRS 15/CPC 47 – Revenue from Contracts with Clients with the retroactive application with cumulative effect recognized on the date of initial application (January 1st, 2018). According to such approach, the accumulated effect of the initial application of the IFRS 15/CPC 47 must be recognized as an adjustment in the initial balance of equity, under retained earnings, on the date of adoption and with no restatement of previous periods, in accordance with CPC 23. On the date of implementation, the adjustment to the opening balance of equity resulted in a decrease in retained earnings in R$ 355,383, so as to reflect the amendment to the accounting policy related to certain rebates granted to clients that, in accordance with IFRS 15, must be linked to the transaction price underlying the 2017 revenues.

 

a.III) Regarding the financial statements for the year ended on December 31, 2017: Consolidated and separate financial statements.

 

There were no significant changes in the accounting policies of the consolidated and separate financial statements of December 31, 2017, as well as in the calculation methods used in relation to those presented in the financial statements for the year ended on December 31, 2016.

 

b) Significant effects of changes in accounting practices

 

b.I) Regarding the financial statements for the year ended on December 31, 2019:

 

The Company chose for the full retrospective adoption of IFRS 16/CPC 06 (R2) and, consequently, for each period of the previous report presented, it applied CPC 23 - Accounting Policies, Change in Estimates and Correction of Errors.

 

 

67


 

The following tables summarize the impacts on the adoption of the rule on the balance sheet, in the statement of income, in the comprehensive statement of income, in the statement of cash flows and in the statement of value added:

 

Parent Company

 

Consolidated

 

12/31/2018

 

01/01/2018

 

12/31/2018

 

01/01/2018

Balance Sheet

Originally Stated

IFRS 16

Restated

 

Originally Stated

IFRS 16

Restated

 

Originally Stated

IFRS 16

Restated

 

Originally Stated

IFRS 16

Restated

Assets

                             

Current Assets

10,646,666

-

10,646,666

 

11,157,284

-

11,157,284

 

25,329,605

-

25,329,605

 

24,362,690

-

24,362,690

                               

Deferred income tax and social contribution

768,689

19,786

788,475

 

470,621

6,381

477,002

 

2,017,475

47,267

2,064,742

 

2,279,339

31,567

2,310,906

Investments

60,773,044

(54,206)

60,718,838

 

64,353,205

(50,724)

64,302,481

 

257,135

-

257,135

 

237,961

-

237,961

Property, plant and equipment

10,514,553

982,700

11,497,253

 

10,806,139

380,943

11,187,082

 

20,096,996

1,541,012

21,638,008

 

18,822,327

1,882,818

20,705,145

Other items, not adjusted

6,117,778

-

6,117,778

 

4,426,105

-

4,426,105

 

46,424,927

-

46,424,927

 

40,794,289

-

40,794,289

Non-Current Assets

78,174,064

948,280

79,122,344

 

80,056,070

336,600

80,392,670

 

68,796,533

1,588,279

70,384,812

 

62,133,916

1,914,385

64,048,301

                               

Total assets

88,820,730

948,280

89,769,010

 

91,213,354

336,600

91,549,954

 

94,126,138

1,588,279

95,714,417

 

86,496,606

1,914,385

88,410,991

                               

Liabilities and shareholders’ equity

                             
                               

Loans and financing

233,962

154,577

388,539

 

351,119

161,831

512,950

 

1,560,630

380,591

1,941,221

 

1,321,122

378,236

1,699,358

Other items, not adjusted

12,062,644

-

12,062,644

 

19,488,228

-

19,488,228

 

23,267,740

-

23,267,740

 

27,367,354

-

27,367,354

Current liabilities

12,296,606

154,577

12,451,183

 

19,839,347

161,831

20,001,178

 

24,828,370

380,591

25,208,961

 

28,688,476

378,236

29,066,712

                               

Loans and financing

539,571

886,319

1,425,890

 

732,662

237,881

970,543

 

862,138

1,300,304

2,162,442

 

1,231,928

1,599,261

2,831,189

Other items, not adjusted

19,643,930

-

19,643,930

 

24,987,914

-

24,987,914

 

10,888,206

-

10,888,206

 

8,948,730

-

8,948,730

Non-current liabilities

20,183,501

886,319

21,069,820

 

25,720,576

237,881

25,958,457

 

11,750,344

1,300,304

13,050,648

 

10,180,658

1,599,261

11,779,919

                               

Total liabilities

32,480,107

1,040,896

33,521,003

 

45,559,923

399,712

45,959,635

 

36,578,714

1,680,895

38,259,609

 

38,869,134

1,977,497

40,846,631

                               

Shareholders’ Equity

                             
                               

Reserves

70,215,287

(92,726)

70,122,561

 

63,361,144

(63,009)

63,298,135

 

70,215,287

(92,726)

70,122,561

 

63,361,144

(63,009)

63,298,135

Equity Valuation Adjustment

(71,584,866)

110

(71,584,756)

 

(74,966,470)

(103)

(74,966,573)

 

(71,584,866)

110

(71,584,756)

 

(74,966,470)

(103)

(74,966,573)

Other items, not adjusted

57,710,202

-

57,710,202

 

57,258,757

-

57,258,757

 

57,710,202

-

57,710,202

 

57,258,757

-

57,258,757

Controlling Shareholders’ equity

56,340,623

(92,616)

56,248,007

 

45,653,431

(63,112)

45,590,319

 

56,340,623

(92,616)

56,248,007

 

45,653,431

(63,112)

45,590,319

Non-controlling interest

-

-

-

 

-

-

-

 

1,206,801

-

1,206,801

 

1,974,041

-

1,974,041

Total shareholders’ equity

56,340,623

(92,616)

56,248,007

 

45,653,431

(63,112)

45,590,319

 

57,547,424

(92,616)

57,454,808

 

47,627,472

(63,112)

47,564,360

                               

Total liabilities and shareholders’ equity

88,820,730

948,280

89,769,010

 

91,213,354

336,600

91,549,954

 

94,126,138

1,588,279

95,714,417

 

86,496,606

1,914,385

88,410,991

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68


 

 

 

 

 

Parent Company

 

2018

Statement of income

Originally

IFRS16

Restated

Stated

       

Net revenue

23,214,028

-

23,214,028

Cost of products sold

(12,447,880)

3,582

(12,444,298)

Gross profit

10,766,148

3,582

10,769,730

 

 

 

 

Logistic expenses

(2,266,991)

58,860

(2,208,131)

Commercial expenses

(2,372,956)

11,046

(2,361,910)

Administrative expenses

(1,326,741)

1,642

(1,325,099)

Other items, not adjusted

865,727

-

865,727

Profit sharing of subsidiaries, affiliates and joint ventures

6,795,992

(3,693)

6,792,299

Operational earnings

12,461,179

71,437

12,532,616

 

 

 

 

Financial expenses

(4,403,313)

(114,559)

(4,517,872)

Other items, not adjusted

2,158,542

-

2,158,542

Net financial result

(2,244,771)

(114,559)

(2,359,330)

 

 

 

 

Earnings before income tax and social contribution

10,216,408

(43,122)

10,173,286

 

 

 

 

Income tax and social contribution

808,270

13,405

821,675

Net profits of the period

11,024,678

(29,717)

10,994,961

 

 

 

 

 

 

 

 

Earnings per common share (basic) – R$

0.7014

(0.0019)

0.6995

Earnings per common share (diluted) – R$

0.6953

(0.0019)

0.6934

 

 

 

 

Consolidated

 

2018

Statement of income

Originally

IFRS16

Restated

Stated

       

Net revenue

50,231,336

-

50,231,336

Cost of products sold

(19,269,627)

20,204

(19,249,423)

Gross profit

30,961,709

20,204

30,981,913

 

 

 

 

Logistic expenses

(6,736,474)

129,260

(6,607,214)

Commercial expenses

(5,729,523)

8,226

(5,721,297)

Administrative expenses

(2,367,221)

3,756

(2,363,465)

Other items, not adjusted

860,926

-

860,926

Operational earnings

16,989,417

161,446

17,150,863

 

 

 

 

Financial expenses

(4,562,251)

(206,864)

(4,769,115)

Other items, not adjusted

738,815

-

738,815

Net financial result

(3,823,436)

(206,864)

(4,030,300)

 

 

 

 

Profit sharing of joint ventures

1,040

-

1,040

Earnings before income tax and social contribution

13,167,021

(45,418)

13,121,603

 

 

 

 

Income tax and social contribution

(1,789,594)

15,701

(1,773,893)

Net profits of the period

11,377,427

(29,717)

11,347,710

 

 

 

 

Attributed to:

 

 

 

Controlling interest

11,024,678

(29,717)

10,994,961

Non-controlling interest

352,749

-

352,749

 

 

 

 

Earnings per common share (basic) – R$

0.7014

(0.0019)

0.6995

Earnings per common share (diluted) – R$

0.6953

(0.0019)

0.6934

 

 

69


 
 

 

 

Parent Company

 

   

Consolidated

 

2018

 

2018

Comprehensive statement of income

Originally Stated

IFRS 16

Restated

 

Originally Stated

IFRS 16

Restated

Net profits of the period

11,024,678

(29,717)

10,994,961

 

11,377,427

(29,717)

11,347,710

 

 

 

 

 

 

 

 

Total profits and (losses) on conversion of operations abroad

1,643,491

213

1,643,704

 

1,766,433

213

1,766,646

 

 

 

 

 

 

 

 

Other items, not adjusted

520,670

-

520,670

 

519,344

-

519,344

 

 

 

 

 

 

 

 

Comprehensive result of the period

13,188,839

(29,504)

13,159,335

 

13,663,204

(29,504)

13,633,700

Attributed to:

 

 

 

 

 

 

 

Controlling interest

13,188,839

(29,504)

13,159,335

 

13,188,839

(29,504)

13,159,335

Non-controlling interest

-

-

-

 

474,365

-

474,365

 

 

 

 

 

Parent Company

     

Consolidated

 

2018

 

2018

Statement of cash flow

Originally Stated

IFRS 16

Restated

 

Originally Stated

IFRS 16

Restated

Net profits of the period

11,024,678

(29,717)

10,994,961

 

11,377,427

(29,717)

11,347,710

Depreciation, amortization and impairment

2,164,869

201,259

2,366,128

 

4,023,054

425,375

4,448,429

Net financial result

2,244,771

114,559

2,359,330

 

3,823,436

206,864

4,030,300

Income tax and social contribution

(808,270)

(13,405)

(821,675)

 

1,789,594

(15,701)

1,773,893

Profit sharing of subsidiaries, affiliates and joint ventures

(6,795,992)

3,693

(6,792,299)

 

(1,040)

-

(1,040)

Other items, not adjusted

267,364

-

267,364

 

(831,288)

-

(831,288)

Cash flow of operating activities before working capital and provisions

8,097,420

276,389

8,373,809

 

20,181,183

586,821

20,768,004

 

 

 

 

 

 

 

 

Cash generation from operating activities

7,341,821

276,389

7,618,210

 

19,734,610

586,821

20,321,431

 

 

 

 

 

 

 

 

Paid interest

(1,626,470)

(94,636)

(1,721,106)

 

(621,879)

(151,941)

(773,820)

Other items, not adjusted

8,276,878

-

8,276,878

 

(1,201,536)

-

(1,201,536)

Cash flow of operating activities

13,992,229

181,753

14,173,982

 

17,911,195

434,880

18,346,075

 

 

 

 

 

 

 

 

Payment of lease liabilities

-

(181,753)

(181,753)

 

(13,104)

(434,836)

(447,940)

Other items, not adjusted

(21,710,953)

-

(21,710,953)

 

(13,208,508)

-

(13,208,508)

Cash flow of financial activities

(21,710,953)

(181,753)

(21,892,706)

 

(13,221,612)

(434,836)

(13,656,448)

 

 

 

 

 

 

 

 

Other items, not adjusted

7,975,565

-

7,975,565

 

(3,675,706)

-

(3,675,706)

Net increase/(decrease) in cash and cash equivalents

256,841

-

256,841

 

1,013,877

44

1,013,921

Effect of foreign-exchange variation

-

-

-

 

96,886

(44)

96,842

 

 

70


 

 

 

Parent Company

 

Consolidated

 

2018

 

2018

Statement of value added

Originally Stated

IFRS 16

Restated

 

Originally Stated

IFRS 16

Restated

               

Revenue

42,735,280

-

42,735,280

 

76,976,596

-

76,976,596

Other items, not adjusted

42,735,280

-

42,735,280

 

76,976,596

-

76,976,596

Inputs purchased from third parties

(17,550,769)

171,641

(17,379,128)

 

(28,417,380)

319,503

(28,097,877)

Costs of products, goods and services sold

(13,945,502)

-

(13,945,502)

 

(18,955,201)

7,988

(18,947,213)

Materials, energy, third party services and others

(3,518,914)

171,641

(3,347,273)

 

(9,282,669)

311,515

(8,971,154)

Other items, not adjusted

(86,353)

-

(86,353)

 

(179,510)

-

(179,510)

Gross value added

25,184,511

171,641

25,356,152

 

48,559,216

319,503

48,878,719

 

 

 

 

 

 

 

 

Retentions

(2,078,516)

(201,258)

(2,279,774)

 

(3,843,544)

(425,375)

(4,268,919)

Depreciation and amortization

(2,078,516)

(201,258)

(2,279,774)

 

(3,843,544)

(425,375)

(4,268,919)

Net produced value added

23,105,995

(29,617)

23,076,378

 

44,715,672

(105,872)

44,609,800

 

 

 

 

 

 

 

 

Value added received on transfer

8,994,748

(3,693)

8,991,055

 

385,228

-

385,228

Profit sharing of subsidiaries, affiliates and joint ventures

6,795,992

(3,693)

6,792,299

 

1,040

-

1,040

Other items, not adjusted

2,198,756

-

2,198,756

 

384,188

-

384,188

Total value added to distribute

32,100,743

(33,310)

32,067,433

 

45,100,900

(105,872)

44,995,028

Distribution of value added

32,100,743

(33,310)

32,067,433

 

45,100,900

(105,872)

44,995,028

Taxes, fees and contributions

14,951,904

(13,405)

14,938,499

 

24,700,335

(15,701)

24,684,634

Federal

3,654,331

(13,405)

3,640,926

 

9,621,961

(15,701)

9,606,260

Other items, not adjusted

11,297,573

-

11,297,573

 

15,078,374

-

15,078,374

Remuneration of third party capital

4,324,668

9,812

4,334,480

 

4,558,199

(60,454)

4,497,745

Financial expenses, except tax on financial transactions

4,216,861

114,559

4,331,420

 

4,224,625

206,864

4,431,489

Rents

107,807

(104,747)

3,060

 

333,574

(267,318)

66,256

Remuneration of equity

11,024,678

(29,717)

10,994,961

 

11,377,427

(29,717)

11,347,710

Retained profits

3,479,070

(29,717)

3,449,353

 

3,479,070

(29,717)

3,449,353

Other items, not adjusted

7,545,608

-

7,545,608

 

7,898,357

-

7,898,357

Other items, not adjusted

1,799,493

-

1,799,493

 

4,464,939

-

4,464,939

 

71


 

 

b.II) Regarding the financial statements for the year ended on December 31, 2018:

 

The Company adopted IFRS 15/CPC 47 – Revenue from Contracts with Clients with the retroactive application with cumulative effect recognized on the date of initial application (January 1st, 2018). According to such approach, the cumulative effect of the initial application of IFRS 15/CPC 47 must be recognized as an adjustment to the initial balance of equity, under retained earnings, on the date of adoption and with no restatement of previous periods, in accordance with CPC 23. On the implementation date, the adjustment to the opening balance of equity resulted in a decrease in the retained earnings of R$ 355,383, so as to reflect the amendment to the accounting policy related to certain rebates granted to clients that, in accordance with IFRS 15, must be linked to the transaction price underlying the 2017 revenues.

 

b.III) Regarding the financial statements for the year ended on December 31, 2017:

 

The amendments of the following existing rules were published and are mandatory for future annual accounting years. Although the IFRS sets forth the early adoption, the regulatory bodies in Brazil have been forbidding this anticipation to preserve the comparability aspects. Therefore, for the year ended on December 31, 2017, the following norms were not applied in the elaboration of these financial statements.

 

IFRS 9/CPC 48  – Financial Instruments (in effect as of January 1, 2018), which aims to replace IAS 39/CPC 38, introduces new requirements for the classification of financial assets that depends on entity’s business model and the contractual characteristics of the cash flow of the financial instruments; defines a new model of impairment losses accounting which shall require more effective recognition and introduces a new standard of hedge accounting and impairment test with greater risk management activity disclosures. The new hedge accounting model represents a significant revision of the policy and aligns the accounting treatment with the risk management activities. IFRS 9/CPC 48 also removes the volatility in the result that was caused by the changes in credit risk of the liabilities established to be measured at fair value. The Company assessed the impact arising from the application of the new rule and concluded that it does not have a significant impact in its financial position, financial performance or risk management activities.

 

IFRS 15/ CPC 47 – Revenue of Agreement with Customers (in effect as of January 1, 2018) requires that revenue recognition be made in order to reflect the transfer of goods or services to the customer for an amount which reflects the expectation of the company to have in exchange the rights of such goods or services. The new rule shall also result in greater and improved revenue disclosures, and shall provide guidance for transactions that were not previously extensively addressed (for example, service revenues and changes in the agreements) and shall improve guidance for multi-element. On the implementation date (January 1st, 2018), the adjustment to the initial balance of equity resulted in a decrease in retained earnings of R$ 355,383 in the first quarter of 2018 so as to reflect the amendment to the accounting policy related to the performance that, in accordance with IFRS 15, must be linked to the transaction price underlying the 2017 revenues.

 

c) Qualifications and emphasis contained in the auditor’s report

 

There were no qualifications or emphasis in the auditor’s report in the past three fiscal years.

 

10.5 – Critical accounting policies

 

We consider an accounting policy to be critical when it is important to reflect our financial condition and operating income and require complex or significant judgments and estimates on the part of our management. For a summary of all accounting practices, please see Note 3 to the financial statements of the Company.

 

The individual and consolidated accounting statements were prepared according to Brazilian and international technical pronouncements, which require from management to make judgments and estimates and to make decisions that affect the application of the accounting practices and the amounts shown in the balance sheet and income statement. The estimates and the underlying judgments are based on historical experience and on several other factors considered reasonable in the light of the circumstances, whose results constitute the criterion for taking decisions regarding the book value of assets and liabilities not readily evident from other sources. Actual results may differ from these estimates.

72


 

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Changes to accounting estimates can only affect the period in which the estimate is revised or future periods.

 

Although each critical accounting policy reflects judgments, assessments or estimates, the Company believes that the accounting practices reflect the most critical judgments, estimates and assumptions that are important to its businesses and an understanding of its results:

 

(i) Impacts of adoption of IFRS 16/CPC 06 (R2) Leases

 

In force as from January 1st, 2019, it replaces the existing lease accounting requirements and represents a significant alteration in the accounting and disclosure of leases that were previously classified as operational, which impact us in items of Rights of Use Assets and Liabilities, Depreciation and Interest Expenses.

 

Having adopted the standard effective from January 1, 2019, the Company has adopted retrospective presentation for the consolidated financial statements. The impact on the financial statements is demonstrated below:

 

- Recognition of right-of-use assets and lease liabilities in the balance sheet, initially measured at the present value of future lease payments;

 

- Recognition of depreciation expenses related to right-of-use assets in the income statement;

 

- Recognition of interest expenses in the financial result on the lease liabilities in the income statement; and

 

- Segregation of the payment of the leases, into a principal portion presented within the financing activities and an interest component presented in operating activities within cash flow.

 

The new lease definitions have been applied to all identified contracts in effect on the date of adoption of the standard. IFRS 16/CPC 06 (R2) specifies that the contract contains a lease if it grants the lessee the right to control the use of the identified asset for a period of time by exchange of counter payments.

 

The Company carried out an inventory of the contracts, evaluating the lease terms in order to conclude whether they include a lease in accordance with IFRS 16/CPC 06 (R2). This analysis identified a significant number of contracts mainly related to the leasing of real estate from third parties, trucks, cars, forklifts and servers.

 

Short-term (12 months or less) and low value (USD 5,000 or less) leases were not subject to this analysis, as permitted bunder the standard. For these contracts, the Company will continue to recognize lease expenses on a straight-line basis, if applicable.

 

When measuring lease liabilities, the Company discounted lease payments using incremental borrowing rates. The weighted average rate applied is of 12.6% until December 31, 2018.

 

The Company chose the full retrospective adoption of IFRS 16/CPC 06 (R2) and, consequently, for each period of the previous report presented, it applied CPC 23 - Accounting Policies, Change in Estimates and Correction of Errors.

 

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(ii) Business combinations involving entities under common control

 

Business combinations between entities under common control have not yet been specifically addressed by IFRS or CPC. IFRS 3/CPC 15(R1) - Business combinations is the pronouncement that applies to business combinations, but explicitly excludes from its scope the business combinations between entities under common control.

 

1) Precedent Cost

 

As permitted by IAS 8/CPC 23 - Accounting Policies, Change of Estimate and Error Rectification, Management adopted an accounting practice in line with the Generally Accepted Accounting Principles in the United States and United Kingdom (USGAAP - Generally Accepted Accounting Principles (United States) and UKGAAP - Generally Accepted Accounting Principles (United Kingdom)), the predecessor basis of accounting to record the book value of the received asset, such as recorded by the subsidiary.

 

The predecessor basis of accounting provides that when booking a transfer of assets between entities under common control, the entity receiving the net assets or equity interests, shall initially measure the assets and liabilities transferred, recognized at their book values in the accounts of the transferring entity, on the transfer date, retrospectively. If the book values of the assets and liabilities transferred by the subsidiary differ from the historical cost of the subsidiary of the entities under common control, the accounting statements of the receiving entity must reflect the assets and liabilities transferred to the cost of the subsidiary of the entities under common control in contrast with equity against the adjustments reserve account of equity valuation.

 

2) Exchange of assets

 

In relation to the transactions between entities under common control involving the disposal/transfer from the subsidiary to its controlling shareholder, i.e., above the level of Ambev’s consolidated financial statement, the Company evaluates the existence of (i) opposition of interests; and (ii) substance and economic purpose. Having fulfilled these assumptions, seeking to provide adequate visibility and fair impact on the amount of distributable results to its shareholders, notably non-controlling shareholders, the Company has adopted as a policy, in a similar way, the concepts of IAS 16/CPC 27 - Fixed asset. Said policy contemplates assets acquired through swap for non-monetary asset, or a combination of monetary and non-monetary assets. The assets subject to swap may be of the same nature or of different natures. The cost of such asset item is measured at fair value, unless the swap transaction is not of a commercial nature, or the fair value of the received asset and the assigned asset may not be reliably measured. The acquired asset is measured in this way even if the entity may not immediately retire the assigned asset. If the acquired asset is not measurable at fair value, its cost is determined by the book value of the assigned asset.

 

When there is a distribution of assets other than in the form of cash, the asset before its distribution is measured at its fair value against an income account for the year. Although its application is provided for distributions through which the owners of the same class of equity instruments are benefited and the treatment of which is equitable, also in a manner similar to the ICPC 07/IFRIC 17, in the absence of a specific accounting practice for transactions under common control, we consider the provisions of this instruction in the definition of our accounting practice. As well as in other sales that Ambev makes for its controlling shareholder (products, inputs etc.) where the result of the transaction is recognized in the income statement as provided in paragraph 56 of ICPC 09 and similar to paragraph 33a of CPC 31 (the only rule that deals with the disposal of business, without distinguishing between transactions with controlling shareholder and third party).

 

(iii) Reduction at the recovery value (impairment) of non-financial assets

 

The Management assesses on a quarterly basis whether there is objective evidence that the financial asset of the group of financial assets is deteriorated. If there is any indication, the recovery value of the asset is estimated. An asset or group of financial assets is deteriorated and the losses for impairment are registered only if there is objective evidence of impairment as a result of one or more events occurred after the initial recognition of the assets (“event of loss”) and that event (or events) of loss exerts an impact on the estimated future cash flows of the financial asset or group of financial assets, and may be estimated in a reliable manner.

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(iv) Provisions

 

Provisions are recognized when: (i) the Company has a current (legal or non-formalized) obligation resulting from past events; (ii) there is likely to be a future disbursement to settle a current obligation; and (iii) the amount can be estimated with reasonable certainty.

 

The provisions, except for the ones mentioned in the disputes and litigation topic, are measured by discounting expected future cash flows at a pre-tax rate that reflects current market valuations of the value of money over time and, when appropriate, the specific risks of the obligation.

 

1) Restructuring

 

A provision for restructuring is recognized when the Company has a detailed and approved restructuring plan and when the restructuring has already started or announced. Expenses related to the Company's normal activities and future conduct are not provisioned, but they are recognized when an expense has been incurred. The provision includes the commitments related to the benefits that will be paid by the Company to the employees dismissed in the restructuring.

 

2) Disputes and litigation

 

The provision for disputes and litigation is recognized when it is more likely than unlikely that the Company will be required to make future payments as a result of past events. Such payments include, but are not limited to, various claims, proceedings and actions initiated by both third parties and the Company, relating to antitrust laws, breach of distribution and licensing agreements, environmental matters, labor disputes, complaints from tax authorities and other litigious matters.

 

(v) Share-based payment

 

Different compensation programs based on shares and options allow members of Management and other executives appointed by the Board of Directors to acquire the Company’s shares. The fair value of the stock options is measured on the granting date using the most appropriate option pricing model. Based on the expected number of options to be exercised, the fair value of the options granted is recognized as an expense during the option vesting period against equity. When the options are exercised, the equity increases by the amount of the proceeds received.

 

(vi) Employee benefits

Post-employment benefits

 

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

 

The Company manages defined benefit and/or defined contribution and/or dental and health care plans for employees of its companies located in Brazil and its subsidiaries located in the Dominican Republic, Barbados, Panama, Uruguay, Bolivia, Argentina and Canada.

 

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The Company maintains funded and unfunded plans.

 

vi.1) Defined contribution plans

 

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

 

The contributions from such plans are recognized as an expense in the period in which they are incurred.

 

vi.2) Defined benefit plans

 

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

 

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

 

Past service costs result from the introduction of new plans or changes to existing ones. They are immediately recognized in the income statement for the year on whichever occurs first between the date of: (i) settlements / agreements, or (ii) when the Company recognizes costs related to restructuring or termination, unless the changes are conditional on the employee remaining in their job for a specific period of time (the period during which the right is acquired). In such case, costs of past services are amortized using the straight-line method during the vesting period.

 

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

 

Re-measurements consisting of actuarial gains and losses, the effect of asset ceiling and the return on the plan’s assets, both excluding net interest, are recognized in the statement of comprehensive income, in their totality, during the period in which they occur. Re-measurements are not reclassified for the income statement in subsequent periods.

 

When the amount calculated for a defined benefit plan is negative (an asset), Ambev recognizes such assets (prepaid expenses) to the extent of the amount of the economic benefit available to Ambev either from refunds or reductions in future contributions.

 

Other post-employment obligations

 

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

 

Termination benefits

 

Termination benefits are recognized as an expense on the first of the following dates: (i) when Ambev is committed to a detailed formal plan for terminating the employment relationship prior to the normal retirement date, with no real possibility of withdrawing it; and (ii) when Ambev recognizes restructuring costs.

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Bonus

 

Bonus granted to employees and managers are based on attaining pre-defined individual and collective targets. The estimated amount of the bonus is recognized as an expense in the period in which it accrues.

 

(vii) Current and deferred taxes

 

The corporate income tax (IRPJ) and social contribution (CSLL) for the year represent current and deferred taxes. Income tax and social contribution are recognized to the income statement, unless they involve items directly recognized in the comprehensive income statement or other equity account. In these cases the tax effect is also recognized directly in the comprehensive income statement or equity account (except for interests on capital, as per Note 3 (t)).

 

Expenses with current taxes is the expectation of payment on the taxable income for the year, using the nominal tax rate approved or substantially approved on balance sheet date, as well as any adjustment to tax payable referring to previous years.

 

Deferred tax is recognized using the balance sheet method. This means that in the case of taxable and deductible differences of a temporary nature between the tax and accounting bases of the assets and liabilities, the deferred asset or liability tax is recognized. Under this method the provision for deferred tax is also calculated on the differences between the fair value of the assets and liabilities acquired in a business combination and their tax base. IAS 12 / CPC 32 Income Taxes provides that no deferred tax be recognized when recognizing goodwill; and that no deferred asset and/or liability tax be recognized (i) upon initial recognition of an asset or liability arising from a transaction other than a business combination which at the time of the transaction does not affect the book or fiscal income or loss; and (ii) on differences involving equity investments in subsidiaries, provided these are not reversed in the foreseeable future. The value determined for the deferred tax is based on the expectation or realization or liquidation of the temporary difference, and uses the nominal rate approved or substantially approved.

 

Deferred tax assets and liabilities are offset where a legal enforceable right to offset current tax assets and liabilities exists and provided that they relate to taxes assessed by the same tax authority on the same taxpayer, or different taxpayers who intend to settle current tax assets and liabilities on a net basis or simultaneously realize the asset and settle the liability.

 

Deferred tax assets are recognized only to the extent any future taxable income is likely to occur. Deferred income tax assets are reduced to the extent no future taxable income is likely to occur.

 

(viii) Joint arrangements:

 

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

 

(ix) Measurement of financial instruments, including derivatives

 

Classification and Measurement

 

The Company uses financial instruments to implement its risk management policies and strategy. Derivatives are often used to mitigate the impact of foreign currencies, interest rates, share prices and commodity prices upon performance of the Company. The financial risk management policy of the Company prohibits the use of derivatives when not related to the business of the Company.

 

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A financial asset (unless it is accounts receivable from clients with no significant financial component) or financial liability is initially measured at the fair value, added, for an item not measured at the fair value by means of the result, by the costs of transaction directly attributable to its acquisition or issuance. Accounts receivable from clients with no significant financial component is initially measured at the operation price.

 

Upon initial recognition, a financial asset is classified as measured: at the amortized cost; at the fair value through other comprehensive results – debt instrument; at the fair value through other comprehensive results – equity instrument; or at the fair value through the result.

 

The financial assets are not reclassified after the initial recognition, unless the Group changes the business model to the financial asset management, and, in such case, all affected financial assets are reclassified on the first day of the presentation period after the change to the business model.

 

The classifications of the financial assets of the Company are the following:

 

·        Debt instruments at the fair value through other comprehensive results, with gains or losses reversed to profit or losses upon derecognition. The financial assets in such category are the debt instruments of the Company kept within a business model to collect cash flows and sell.

 

·        Equity instruments designated at the fair value through other comprehensive results, with no new measurement of gains or losses in the result upon derecognition. Such category includes only the shareholders’ equity instrument, which the Company intends to retain in the foreseeable future and which the Company irrevocably elected to classify upon initial recognition or transition. Such instruments are not subject to impairment test.

 

·        The financial assets at the fair value through the result comprehend derivative instruments and equity instruments that the company had not classified, upon initial recognition or transition, to classify at the fair value through other comprehensive results. Such category also includes the debt instruments of which the cash flow characteristics are not kept within a business model whose purpose is collecting contractual cash flows or collecting contractual cash flows and sell.

 

The measurements of the financial assets of the Company are the following:

 

Hedge Accounting

 

Derivatives financial instruments are intended to hedge the Company against risks relating to foreign currencies, interest rates and commodity prices. Derivative financial instruments which, in spite of being contracted for hedging purposes, do not meet all hedging account criteria, are recognized at fair value through income for the year. 

 

Derivative financial instruments are initially recognized at fair value, which is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. The fair value of derivative financial instruments can be calculated based on market quotations; pricing models that consider current market quotations; or the credit quality of the counterparty.

 

After their initial recognition, derivative financial instruments are again measured at fair value on the date of the financial statements. Changes in the fair value of derivative financial instruments are recorded in the income for the year, except when these instruments are intended for hedging the cash flow or net investments, whose changes in fair value are recorded in comprehensive income.

 

The Company realizes derivatives of commodities that have critical terms similar to the hedged item. The Company applies component hedges to its commodities. The hedged component is contractually specified and coincides with those defined in the derivative agreement, thus, the hedge ratio is of 1:1. The hedge effectiveness is realized in a qualitative manner. Whenever the critical terms do not coincide, the company uses the hypothetical method to assess the efficacy. Possible sources of inefficacy are changes upon the moment of the transaction set forth, in the quantity of the good to be hedged, or changes upon the credit risk of any of the parties to the derivative agreement.

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The concepts of cash flow, net investment and fair value hedging are applied to all instruments that meet the hedge accounting requirements of IFRS 9/CPC 48 - Financial Instruments.

 

Accounting of cash flow hedge

 

The cash flow hedge is applicable to hedge the exposure of cash flows of a registered asset or liability, the foreign currency risk and commodities price fluctuations associated to a transaction whose performance is highly likely, the effective portion of any result (gain or loss) with the derivative financial instrument is directly recognized in the comprehensive result (cash flow hedged reserves) and must be reclassified from the cash flow hedge to the same category and in the same period impacted by the future expected hedged cash flows. The ineffective portion of any gain or loss is immediately recognized in the income statement.

 

When a hedge instrument or a hedge relationship is extinct, but the hedged transaction is still expected to occur, the accumulated gains and losses (until that point) remain in the comprehensive income, being reclassified according to the above practice, when the hedge transaction occur. If the hedged transaction is no longer likely to occur, the accumulated gains and losses recognized in the comprehensive income are immediately reclassified to the income statement.

 

Accounting of fair value hedge

 

When a derivative financial instrument hedges the exposure to the variability in a fair value of a registered asset or liability or a firm commitment, any result (gain or loss) with a derivative financial instrument is recognized in the income statement. The book value of the hedged item is also recognized by the fair value in relation to the risk, with the respective recognized gains and losses in the income statement.

 

Accounting of net investment hedge

 

When a non-derivative liability in foreign currency hedges a net investment in an operation abroad, the foreign exchange differences arising out of the conversion of the liability to the functional currency are directly recognized in other comprehensive income  (conversion reserves), while the ineffective portion is recognized in the income statement.

 

When a derivative financial instrument hedges a net investment in an operation abroad, the portion of gain or loss or the loss in the hedge instrument determined as effective is directly recognized in other comprehensive income (conversion reserves), while the ineffective portion is reported in profit or loss.

 

Derivatives measured at fair value by means of income

 

Certain derivative financial instruments do not qualify for accounting of hedge. The variations in the fair value of any of these derivative financial instruments are immediately recognized in the income statement.

 

Reduction in the recovery value (impairment) of financial assets

 

The Management, on a quarterly basis, assesses whether there is objective evidence that the financial asset of the group of financial assets is deteriorated. If there is any indication, the recovery value of the asset is estimated. An asset or group of financial assets is deteriorated and the losses for impairment are registered only if there is objective evidence of impairment as a result of one or more events occurred after the initial recognition of the assets (“event of loss”) and that event (or events) of loss exerts an impact on the future estimated cash flows of the financial asset or group of financial assets, and may be estimated in a reliable manner.

 

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(x) Accounting and Disclosure Rule in Highly Inflationary Economy

 

In July 2018, considering that the cumulative inflation over the previous three years in Argentina was above 100%, the application of the Accounting and Disclosure Rule in Highly Inflationary Economy (IAS 29/CPC 42) was required. IAS 29/CPC 42 requires disclosure of the results of the operations of the Company in Argentina as if they were highly inflationary as from January 1st, 2018 (beginning of the period in which the existence of hyperinflation is identified).

 

In accordance with IAS 29/CPC 42, the non-monetary assets and liabilities, the equity and the income statement of subsidiaries that operate in highly-inflationary economies are adjusted by the alteration of the general acquisition power of the currency, applying a general price index.

 

The financial statements of an entity of which the functional currency is that of a highly-inflationary economy, whether they are based on an approach by the historical cost or on the approach by the current cost, must be expressed in terms of the measurement unit current on the date of the balance sheet and converted to Real at the closing foreign rate of the period.

 

As a consequence of the aforementioned, the Company applied the accounting rule in highly inflationary economy to its subsidiaries in Argentina in the consolidated and separate financial statements, applying the rules of IAS 29/CPC 42 as follows:

 

·        accounting and disclosure rule in highly inflationary economy was applied as from January 1st, 2018 (according to paragraph 4 of IAS 29/CPC 42, the rule must be applied to the financial statements of any entity as from beginning of the period in which it the existence of hyperinflation is identified);

 

·        the non-monetary assets and liabilities registered by the historical cost (for instance, property, plant and equipment, intangible assets, goodwill, etc.) and the equity of the subsidiaries in Argentina were updated by an inflation index. The hyperinflation impacts resulting from changes to the general acquisition power up to December 31, 2017 were reported in retained earnings and the impacts of the changes to the general acquisition power as from January 1st, 2018 were reported in the statement of income in a specific item for hyperinflation adjustment, in the financial result (see Note 24 – Financial expenses and revenues). According to paragraph 3 of IAS 29/CPC 42, there is not a defined general price index, but it allows the execution of the judgment when the update of the financial statements is necessary. Thus, the updated indices were based on resolution 539/18 issued by the Argentinean Federation for the Council of Economic Science Professionals: (i) as from January 1st, 2017, the national IPC (consumer’s price index), and (ii) up to December 31, 2016, IPIM (internal wholesale price index).

 

·        the income statement is adjusted at the end of each reporting period by using the general price index variation and, afterwards, converted at the closing foreign exchange rate of each period (instead of the average rate accumulated in the year for economies which are not highly inflationary), thus resulting  the effects on the items of the income statement, both of the inflation index and of the currency conversion;

 

·        the income statement for the year 2017 and for the first and second quarters of 2018 and the respective balance sheets of the subsidiaries in Argentina were not restated. According to IAS 21, paragraph 42 (b) when the amounts are converted into the non-hyperinflationary economy currency, the comparative amounts must be those that would be presented as amounts of the current year in the financial statements for the previous year (that is, not adjusted to subsequent changes to the level of prices or subsequent changes to the foreign rates).

 

 

 

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10.6 – Material items not mentioned in the financial statements

 

a) the assets and liabilities directly or indirectly held by the Company and not reflected in its balance sheet

 

Not applicable since there is no material item not reflected the Company’s financial statements, including the notes thereto, especially notes 29 and 30.

 

b) other items not mentioned in the financial statements

 

Not applicable since there is no material item not reflected the Company’s financial statements, including the notes thereto.

 

10.7 – Comments on items not mentioned in the financial statements

 

a) how do those items change or may change the revenues, expenses, operating income, financial expenses and other items in the financial statements of the Company

 

As mentioned in item 10.6 above, there are no items that were not mentioned in our financial statements, including the notes thereto.

 

b) nature and purpose of the transaction

 

As mentioned in item 10.6 above, there are no items that have not been mentioned in our financial statements, including the notes thereto.

 

c) nature and amount of the obligations assumed and rights generated to the benefit of the Company as a result of the transaction

 

As mentioned in item 10.6 above, there are no items that have not been mentioned in our financial statements, including the notes thereto.

 

10.8 – Business Plan

 

a) investments (including quantitative and qualitative descriptions of existing investments and anticipated investments, sources of financing for existing and anticipated material investments and divestments), particularly: (i) quantitative and qualitative description of existing and anticipated investments; (ii) sources of financing for investments; and (iii) relevant divestments in progress and anticipated.

 

i. quantitative and qualitative description of existing and anticipated investments

 

In 2019, the investment in consolidated property, plant and equipment and intangible assets amounted to R$ 5,069.4 million, consisting in R$ 3,176.5 million for our business segment in Brazil, R$578.4 million for our business segment in CAC, R$ 1,025.0 million related to investments in our operation in Latin America South and R$ 289.5 million related to investments in Canada.

 

In 2018, the investment in consolidated property, plant and equipment and intangible assets amounted to R$ 3,571.0 million, consisting in R$ 1,811.9 million for our business segment in Brazil, R$500.4 million for our business segment in CAC, R$ 1,040.8 million related to investments in our operation in Latin America South and R$ 217.8 million related to investments in Canada.

 

In 2017, the investments in consolidated property, plant, and equipment and intangible assets summed R$ 3,203.7 million, consisting of R$ 1,446.5 million for our business segment in Brazil, R$413.2 million for our business segment in CAC, R$ 1,051.2 million related to investments in our Latin America South operations and R$ 292.8 million related to investments in Canada.

 

These investments included, mainly, the expansion of the productive capacity, quality control, automation, modernization and replacement of the packaging lines, storage for direct distribution, coolers, and investment for the replacement of bottles and crates, market assets of former players as well as continued investment in information technology.

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In 2020, we plan to invest with the purpose of strengthening our growth platforms and improving our operational excellence through innovations that may put us in a better position to best attend to the consumer market.

 

ii. sources of financing for investments

 

The Company has resources from its operating cash flow generation and credit facilities extended by financial institutions in Brazil and other countries.

 

Additionally, during the meetings held on August 28, 2015, and October 14, 2015, the Company approved the first (1st) issue of debentures not convertible into shares, unsecured, of a single series, in the amount of One billion Reais (R$1,000,000,000.00), intended for public distribution with restricted distribution efforts. Said issue was conducted according to article 1, item I, of Law 12431. Accordingly, the funds raised by the Company will be exclusively allocated to the investment projects (including reimbursements, as provided for in Law 12431) described in the relevant deed of issue, as amended, and included in the scope of the Company’s investment plan (capex).

 

iii. relevant divestments in progress and anticipated

 

On this date, the relevant divestment refers to the property in Mooca, in the amount of R$ 162 million.

 

b) acquisitions already disclosed of plants, equipment, patents and other assets that may significantly affect the production capacity of the Company

 

There has been no disclosure of acquisition of plants, equipment, patents or other assets, other than those already described in item 10.8.a above that may significantly affect the production capacity of the Company.

 

c) new products and services

 

Over the past few years, the Company invested in launching new products and packs, and intends to continue investing in product innovations. However, because this involves trade secrets, this information may not be disclosed in advance.

 

In 2017, with the purpose of offering people an experience which goes beyond a glass of beer, we presented our customers with special editions of our products, such as, Brahma Extra Märzen Lager, created to celebrate the Brazilian editions of the Oktoberfest with a limited label which reinforces the beer tradition of almost 130 years of such brand.  To celebrate the Brazilian fruits, regardless of the name, taste and appearance, Colorado launched 4 beers: Eugenia, Nassau, Rosália and Murica, this, for instance, won the best Cream Ale of the World prize in the World Beer Awards (London). Recognizing micro producers of the Brazilian ingredients used in our beers, Colorado launched a limited edition with the producers mentioned in the labels and 10% of the profits were destined to the relevant producers. We built the Ateliê Wäls, which shelters cave, brewer, restaurant, office, store and external area for food trucks, all in one place. Relating to non-alcoholic beverages, the energetic drink brand Fusion expanded its portfolio in 3 lines of beverages. In addition to the traditional line, launched Wake Up and T-Break, which blends Fusion with the taste of fruit juices, iced tea, respectively.

 

In 2018, we performed transformational investments in our beer portfolio in Brazil, with innovations in new liquids and packaging. In our technological development center in Rio de Janeiro, we developed Skol Hops, a pure malt beer with aromatic hops, and Skol Puro Malte, a pure malt beer with the characteristic lightness of Skol, the first one launched in 2018 and the second launched at the beginning of January 2019. Both strengthen the Skol brand, reinforcing its innovation attribute. Still regarding new liquids, we presented to consumers the regional beers Nossa and Magnífica. Both have, among their ingredients, cassava cultivated in its states of origin, Pernambuco and Maranhão, respectively. With this, the brands contribute to the development of the regional economy, at the same time representing a more affordable alternative for consumers. Finally, we introduced in the market new flavors from Colorado and Wals breweries and, in the “future beverages” segment, new flavors in the Skol Beats family. In addition to the new liquids, we developed new packaging, aiming at providing a better experience to consumers. For Skol brand, we launched a new visual identity for all its packaging versions; meanwhile, Budweiser brand has also been renewed, and Brazil was the first country to introduce it in the market, both in the long-neck bottle and in the sharing-size bottle. In addition, we launched cans for Serramalte beer, as well as for Colorado and Wals beers, in addition to the glass bottle for the whole grape juice Do Bem. With such innovations, we seek to approach the different preferences of consumers by always providing better consumption experiences.

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In 2019, we continue to see the trend of expansion of the premium segment as a significant opportunity: we launched Stella Artois Low Gluten, the first premium beer to address the health and wellness trend in Brazil, Beck’s, a legitimate pure malt beer that has followed the German purity law since 1873, started its roll-out focusing on the southeastern region of the country. We have also successfully conducted a pilot for a new variety of Brahma: the Brahma Duplo Malte, a core plus beer pure malt produced with two types of malt. Brahma Duplo Malte reinforces brewing expertise and has a positive impact on Brahma’s brand power. Also in Brazil, continuing the launch of craft beers, we launched Legítima beer in the state of Ceará. In Argentina, we launched Quilmes Red Lager, a new variety of our classic lager. At NAB we continue to make important investments in our main brand, Guaraná Antarctica, launching its new visual brand identity.

 

10.9 – Other factors with material influence

 

There were no other factors with material influence in the last three business years.

 

***

 

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EXHIBIT A.II – ALLOCATION OF NET PROFIT

 (as exhibit 9-1-II to CVM Instruction 481/09)

 

1.     Net profit for the year:

 

Net profit as per company law

R$ 11,779,965,119.88

2.     Overall value and value per share of the dividends, including interim dividends and interest on own capital (IOC) already declared.

 

Overall value of dividends and IOC (gross)

R$ 7,717,419,618.63

Overall value of dividends and IOC (net)

R$ 6,718,807,500.46

 

 

Overall value of dividends

R$ 0.00

Overall value of IOC (gross)

R$ 7,717,419,618.63

Overall value of IOC (net)

R$ 6,718,807,500.46

 

 

Total (dividends + IOC)

 

Amount per share (net)

 

Common

R$ 0.4170

 

 

Amount per share (gross)

 

Common

R$ 0.4906

 

 

Dividends

 

Amount per share

 

Common

-

 

 

IOC

 

Amount per share (gross)

 

Common

R$ 0.4906

 

 

Amount per share (net)

 

Common

R$ 0.4170

 

3.     Percentage of net profit distributed for the fiscal year:

 

Percentage of net profit distributed for the fiscal year

65.51%

Net percentage of net profit distributed

57.03%

 

 

4.     Overall value and value per share of dividends distributed based on profits from previous fiscal years:

In 2019, dividends based on the profit of previous years were not distributed.

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5.     State, having deducted the advance dividends and interest on own capital already declared:

a)   The gross value of the dividends and interest on own capital, declared separately, for shares of each type and class.

Not applicable given that the meeting of shareholders will merely ratify the amounts already advanced and declared by the Board of Directors of the Company, informed in item 2 above.

b)   The manner and period for the payment of dividends and interest on own capital.

Not applicable given that the meeting of shareholders will merely ratify the amounts already advanced and declared by the Board of Directors of the Company, informed in item 2 above.

c)   Possible restatement and interest falling due on dividends and interest on own capital.

Not applicable given that the meeting of shareholders will merely ratify the amounts already advanced and declared by the Board of Directors of the Company, informed in item 2 above.

d)   Date of declaration of the payment of dividends and interest on own capital taken into consideration for identifying shareholders with the right to receive these amounts.

Not applicable given that the meeting of shareholders will merely ratify the amounts already advanced and declared by the Board of Directors of the Company, informed in item 2 above.

 

6.     If dividends or interest on own capital have been declared based on profits assessed in balance sheets prepared every six months or in shorter periods:

a) State the amount of the dividends and interest on own capital already declared.

b) State the date of the respective payments.

Total amount of the dividends or interest on own capital already declared related to the fiscal year ended on December 31, 2019, based on profits assessed in balance sheets prepared every six months or in shorter periods:

 

Gross: R$ 7,717,419,618.63

 

Net of Withholding Income Tax (IRRF) on IOC: R$ 6,718,807,500.46

 

Board of Directors’ Meeting held on December 2, 2019

Payment date: December 30, 2019

Total Gross Amount: R$ 7,717,419,618.63.

Total Net Amount: R$ 6,718,807,500.46

DIVIDENDS (exempt from WHT)

Common

-

 

GROSS IOC

Common

0.4906

 

NET IOC

Common

 

 

0.4170

 

 

 

 

 

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7.     Comparative table presenting the following values per share of each type and class:

a)     Net profit for the fiscal year and the previous three fiscal years.

Profit per share:

Common (R$)

2019

0.75

2018

0.70

2017

0.47

2016

0.80

Profit per share (net of treasury shares)

 

2019

0.75

2018

0.70

2017    

0.47

2016

0.80

b)     Dividends and interest on own capital distributed during the previous three fiscal years.

 

Under the corporations laws (R$)

2018

 

Dividend per share:

Common

Dividends

0.1600

IOC (gross)

0.3200

IOC (net)

0.2720

2017

 

Dividend per share:

Common

Dividends

0.2300

IOC (gross)

0.3100

IOC (net)

0.2635

2016

 

Dividend per share:

Common

Dividends

0.360

IOC (gross)

0.220

IOC (net)

0.187

 

8.     Allocation of profits to the Legal Reserve:

The Company's Legal Reserve currently in the amount of R$ 4,456 thousand, plus the amount of capital reserves set forth in Paragraph 1 of article 193 of Law No. 6404/76, exceeded 30% of the capital stock, reason why there is no requirement to allocate any portion of the income for the fiscal year ended December 31, 2019 to its composition.

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9.     Fixed or minimum dividends:

Not applicable.

 

10.   Mandatory dividend:

a) Describe the manner of calculation as provided on the bylaws

Pursuant to §3 of article 41 of the Company’s bylaws, 5% of the net profit for the year will be allocated to the legal reserve, which shall not exceed 20% of the capital stock. The Company may refrain from constituting the legal reserve in a fiscal year when the balance of this reserve, plus the amount of capital reserves, exceeds 30% of the capital stock.

Following this allocation, and excluding the tax incentive reserves, 40% of the net profit will be allocated to pay mandatory dividends to all company shareholders.

b) State whether this is being paid out in full.

The mandatory dividend was fully paid.

c) State any amount that may have been withheld.

Not applicable.

 

11.   Withholding of the mandatory dividend:

No mandatory dividends were withheld.

 

12.   Allocation of earnings to the contingencies reserve:

There were no allocations of earnings to the contingencies reserve.

 

13.   Allocation of earnings to the reserve for future profits

There were no allocations of earnings to the reserve for future profits.

 

 

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14.   Allocations of earnings to the statutory reserves

a) Describe the statutory clauses establishing the reserve.

Article 41, §3, letter “c” of the Company’s bylaws stipulate that no more than 60% of the adjusted net profit can be set aside for constituting the Reserve for Investment, whose purpose is to finance the expansion of the Company’s activities and those of its subsidiary companies, including through capital increases or setting up new enterprises. In accordance with §4 of article 41 of the Company’s bylaws, the amount allocated to the statutory reserve may not exceed 80% of its capital stock. Once this limit is reached, the General Meeting of Shareholders must resolve on the balance, either allocating it for distribution to the shareholders or to increase the Company’s capital stock.

b) Identify the amount intended for the reserve.

 

RESERVE FOR INVESTMENT

Proposed allocation

R$ 4,180,780,132.35

c) Describe how the amount was calculated.

 

CALCULATION OF THE RESERVE FOR INVESTMENT (R$)

Net profit for the year

11,779,965,119.88

Reversal of the effect of revaluing fixed assets using historic cost (1)

11,823,167.53

Effect of the application of IAS 29/CPC 42 (hyperinflation) (2)

1,430,343,000.00

   

 Tax incentives reserve

(1,352,121,653.10)

 

 

Subtotal

11,870,009,634.31

 

 

Dividends distributed

-

Interest on own capital distributed

(7,717,419,618.63)

 

 

Subtotal

4,152,590,015.68

 

 

Expired dividends

28,190,116.67

 

 

Subtotal

4,180,780,132.35

 

 

Reserve for investments

(4,180,780,132.35)

 

 

Outstanding balance to be distributed

-

(1)      Refers to the portion of earnings equivalent to the 61.88% equity interest in Companhia de Bebidas das Américas - Ambev originally owned by Anheuser-Busch InBev S.A./N.V., by means of Interbrew International B.V and of AmBrew S.A until the contribution of said equity to the capital of the Company, as disclosed in a relevant fact of the Companhia de Bebidas das Américas – Ambev published on May 10, 2013 and described under item 15.7 of the Company’s reference form (“Contribution of Shares”). The Contribution of Shares was recognized in the financial statements for the purposes of disclosure, pursuant to the historic cost method described in section 10.5 of Exhibit A.I of this proposal, but this portion does not belong to the Company.

(2) According to described in Note 1(b) to the Consolidated Financial Statements of December 2019, in July 2018, considering that the accrued inflation in the last three years in Argentina was over 100%, the application of accounting rule and disclosure in highly inflationary economy (IAS 29/CPC 42) is now required.

 

15.       Retention of profits established in the budget:

None.

 

 

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16.   Allocation of earnings to the reserve for tax incentives:

a) State the amount allocated to the reserve.

b) Explain the nature of the allocation.

It is proposed allocating to the Reserve for Tax Incentives a total amount of R$ 1,352,121,653.10

of which (i) R$ 1,309,459,732.75 refer to state ICMS tax incentives received by several of the Company’s units; (ii) R$ 22,861,518.82 refer to tax incentives in the state of Sergipe pursuant to Law No. 5.382/04; and (iii) R$ 19,800,401.53refer to Federal Income Tax Reinvestment Incentives granted by the SUDENE, pursuant to article 19 of Law No. 8167/91.

 

***

 

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EXHIBIT A.III –  INFORMATION OF THE CANDIDATES TO THE POSITION OF MEMBER OF THE COMPANY'S BOARD OF DIRECTORS

(as items 12.5 to 12.10 of Exhibit 24 to CVM Instruction 480/09)

 

12.5 - Composition and professional experience of management, fiscal council and statutory audit

committee members

 

 

Name

Date of birth

Management body

Date elected

Term of office

Taxpayer No. (CPF)

 

Profession

Elected position held

 Date took office

Elected by controlling shareholder

Other issuer positions or duties

Whether the member shown is an independent member, and if so, the criterion used by  issuer to determine independence

Number of consecutive terms of office.

Victorio Carlos De Marchi

November 13, 1938

Board of Directors

April 24, 2020

Until the 2023 AGM

008.600.938-91

Attorney

Full member

May 13, 2020 (estimated)

Yes

Chairman of the Operations, Finance and Compensation Committee and the Antitrust Conducts and Related Parties Committee

 

 

 

Director elected by controlling shareholder

 

 

 

4th term of office.

 

 

 

Carlos Alves de Brito

May 08, 1960

Board of Directors

April 24, 2020

Until the 2023 AGM

595.438.507-63

Engineer

Full member

May 13, 2020 (estimated)

Yes

Not applicable, since the only position held in the Company is that of co-chairman of the  board of directors

 

 

 

 

Director elected by controlling shareholder

 

 

 

4th term of office.

 

 

 

Milton Seligman

August 19, 1951 

Board of Directors

April 24, 2020

Until the 2023 AGM

093.165.740-72

Engineer

Full member

May 13, 2020 (estimated)

Yes

 Not applicable, since the only position held in the Company is that of member of the Board of Directors

2nd term of office.

 

 

 

José Heitor Attilio Gracioso

November 20, 1931

Board of Directors

April 24, 2020

Until the 2023 AGM

006.716.908-25

Attorney

Full member

May 13, 2020 (estimated)

Yes

Member of the Antitrust Conducts and Related Parties Committee

 

 

 

Director elected by controlling shareholder

 

 

 

4th term of office.

 

 

 

Nelson José Jamel  

025.217.577-80

March 17, 1972

Engineer

Board of Directors

Full member

April 24, 2020

Until the 2023 AGM

Yes

Not applicable, since the only position held in the Company is that of member of the Board of Directors

 

May 13, 2020 (estimated)

 

Director elected by controlling shareholder

 

 

 

2nd term of office.

 

 

 

Vicente Falconi Campos

September 30, 1940

Board of Directors

April 24, 2020

Until the 2023 AGM

000.232.216-15

Engineer

Full member

May 13, 2020 (estimated)

Yes

Not applicable, since the only position held in the Company is that of member of the Board of Directors

 

 

 

Director elected by controlling shareholder

 

 

 

4th term of office.

 

 

 

Luis Felipe Pedreira Dutra Leite

August 3, 1965

Board of Directors

April 24, 2020

Until the 2023 AGM

824.236.447-87

Economist

Full member

May 13, 2020 (estimated)

Yes

Member of the Operations, Finance and Compensation Committee

 

 

 

Director elected by controlling shareholder

 

 

 

4th term of office.

 

 

 

Roberto Moses Thompson Motta

November 06, 1957

Board of Directors

April 24, 2020

Until the 2023 AGM

706.988.307-25

Engineer

Full member

May 13, 2020 (estimated)

Yes

Member of the Operations, Finance and Compensation Committee

 

 

 

Director elected by controlling shareholder

 

 

 

4th term of office.

 

 

 

Cecília Sicupira

May 24, 1981

Board of Directors

April 24, 2020

Until the 2023 AGM

055.532.167-37

Business Manager

Full member

May 13, 2017 (estimated)

Yes

Not applicable, since the only position held in the Company is that of member of the Board of Directors

 

 

 

Director elected by controlling shareholder

 

 

 

2nd term of office.

 

 

 

Antonio Carlos Augusto Ribeiro Bonchristiano 

April 1, 1967

Board of Directors

April 24, 2020

Until the 2023 AGM

086.323.078-43 

Bachelor of Politics, Philosophy and Economics

Independent member

May 13, 2020 (estimated)

Yes

Not applicable, since the only position held in the Company is that of member of the Board of Directors

 

 

 

Independent member - as defined in Company’s Bylaws

 

 

 

3rd term of office

 

 

 

Marcos de Barros Lisboa 

August 2, 1964

Board of Directors

April 24, 2020

Until the 2023 AGM

806.030.257-49 

Economist

Independent member

May 13, 2017 (estimated)

Yes

Member of the Antitrust Conducts and Related Parties Committee

 

 

 

Independent member - as defined in our Company’s Bylaws

 

 

 

3rd term of office.

 

 

 

Carlos Eduardo Klutzenschell Lisboa  

694.514.864-53

July 9, 1969

Manager

Board of Directors

April 24, 2020

Until the 2023 AGM

Not applicable, since the only position held in the Company is that of alternate member of the Board of Directors

Alternate member

May 13, 2020 (estimated)

Yes

Director elected by controlling shareholder.

 

 

 

2nd term of office.

 

 

 

Michel Dimitrios Doukeris

810.940.279-87 

April 9, 1973

Engineer

Board of Directors

Alternate member

April 24, 2020

May 13, 2020 (estimated)

Until the 2023 AGM

Yes

Not applicable, since the only position held in the Company is that of member of the Board of Directors

 

 

 

Director elected by controlling shareholder

 

 

 

2nd term of office.

 

 

 

 

 

 

 

 

 

  Professional experience  / Declaration of  convictions, if  applicable

         

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  Professional experience  / Declaration of  convictions, if  applicable

         

 

Victorio Carlos De Marchi – 008.600.938-91

 

In the past five years, was a member of the Company’s board of directors. Currently (i) since 1985, he has been a member of the Board of Directors of Fundação Zerrenner, a foundation whose core business is providing free health care and education, and since 2006, he has also been an executive director of this foundation; (ii) since 2018, he’s a member of the Board of Directors of Itaúsa – Investimentos Itáu S.A.; (iii) since 2006, he’s the chairman of the board of Instituto Ambev de Previdência Privada (IAPP), a private pension entity; (iv) since 2004, he’s a member of the board of a private institute researching Brazilian industry and development, Instituto de Estudos para o Desenvolvimento Industrial (IEDI); (v) since 1994, the member representing Brazil on the Latin American Business Council (CEAL), where also hold the position of executive officer; (vi) since 2008, he’s a member of the strategic affairs council of the State of São Paulo Employers Association (Federação das Indústrias do Estado de São Paulo or FIESP); (vii) since 2002, a member of the Executive Committee of Cerveceros Latinoamericanos Association; (viii) since 2003, a member of the Board of the Brazilian Competition Ethics Institute (Instituto Brasileiro de Ética Concorrencial - ETCO, and also he’s chairman of ETCO's Board of Directors since 2012; and (ix) since 2005, a member of the board of the Health and Alcohol Information Center (Centro de Informações sobre Saúde e Álcool (CISA). Since 1999, co-chairman of the Company's board of directors and chairman of the Company's Operations, Finance and Compensation Committee and Company’s Antitrust Conducts and Related Parties Committee. In addition, from 2003 to 2009, he was co-chairman of the board of directors of Quilmes Industrial Société Anonyme, the Company's subsidiary, whose core business is making, distributing and selling beer, and which is part of the Company's economic group. Mr. Victorio Carlos De Marchi declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

Carlos Alves de Brito – 595.438.507-63

 

In the past five years, he was a member of the Company’s board of directors. In addition, he currently holds the following positions: (i) member of the Board of Trustees and Finance Committee of Greenwich Academy, Inc., an educational entity in the United States; (ii) member of the Advisory Board of Tsinghua University School of Economics and Management, an educational entity in China; and (iii) Member of the CEO group of the International Alliance for Responsible Drinking (IARD), a nonprofit organization. Since 2006, he is also the co-chairman of the Company's board of directors. He is also, since December 2005, Chief Executive Officer of Anheuser-Busch InBev SA/NV, a listed company whose core business is producing and marketing beverages, and which is part of the Company's economic group. Additionally, in 2005, he was General Manager for North America of Companhia de Bebidas das Américas – Ambev, a listed company whose core business was making, distributing and selling beer, soft drinks and other non-alcoholic products, succeeded by the Company since January 2, 2014. Mr. Carlos Alves de Brito declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

Milton Seligman – 093.165.740-72

 

In the past five years, he held the position of (i) since 2015, president of the Board of Directors of Instituto Sonho Grande, that works to improve Brazilian public education; (ii) since 2014, advisory member of Fundação Brava, non-profit organization that develops and supports impact initiatives to contribute to the development of Brazil; (iii) since 2014, advisory member of Fundação Lemann, non-profit family organization focused on innovative education projects; (iv) since 2015, Global Fellow of Woodrow Wilson International Center for Scholars, an independent research center focused on public policies, in Washington, DC/USA, and (v) since 2017, coordinator of the Program of Courses in Management and Public Policies of higher education and research institution INSPER. He is currently a member of the Company's board of directors and of the Board of Directors of Fundação Zerrenner, whose core business is providing free health care and education; and he’s managing partner, since 2014, of Milton Seligman e Associados Consultoria e Participações Ltda., a business consulting company. In addition, between 2013 and 2016, was a member of the Board of Directors of Tenedora CND, S.A., holding company of the Company’s operations in the Dominican Republic and held the position of Chief Corporate Relations Officer of Companhia de Bebidas das Américas – Ambev, between 2004 and 2013. Mr. Milton Seligman declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

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José Heitor Attilio Gracioso – 006.716.908-25

 

In the past five years, he was member of the Company’s board of directors. Currently he’s a member of the Company's board of directors and its Antitrust Conducts and Related Parties Committee. Additionally, he is currently a member of the fiscal council of Escola Superior de Propaganda e Marketing (ESPM) and a member of the board of directors and the executive board of Fundação Zerrenner, whose core business is providing free health care and education. Mr. José Attilio Gracioso declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

Nelson José Jamel – 025.217.577-80

 

In the past five years, he has held different positions in Anheuser-Busch InBev SA/NV, a listed company whose core business is producing and marketing beverages, which is part of the Company's economic group, and in the Company. Currently he is Chief Financial Officer of the North America Zone of Anheuser-Busch InBev SA/NV and full member of Company’s Board of Directors. From 2007 to 2008, he held the position of Vice President of Finance for Western Europe of Anheuser-Busch InBev SA/NV. He was also Chief Financial Officer of Compañia Cervecera AmBev Dominicana, C. por A., which is part of the Company`s economic group. In 2009, he has held the position of Chief Financial and Investor Relations Officer of Companhia de Bebidas das Américas – Ambev, a listed company whose core business was making, distributing and selling beer, soft drinks and other non-alcoholic products, succeeded by the Company from January 2, 2014, remaining in the position of Chief Financial and Investor Relations Officer of the Company until 2015. Mr. Nelson José Jamel declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

Vicente Falconi Campos – 000.232.216-15

 

In the past five years, he was a member of the Company’s board of directors. Currently he’s (i) chairman of the board of the Social Institute for Encouraging, Supporting and Recognizing Talents (ISMART), a private non-profit entity that identifies young low-income talents and offers them scholarships at private schools of excellence, from elementary to university level; (ii) member of the advisory board of Fundação Zerrenner, whose core business is providing free health care and education; and (iii) member of the Board of Directors of Eletrobrás S.A., Brazil’s largest electricity producing and transmitting company. He is also the founder and chairman of the board of directors of Brazil's largest management consulting company, Falconi - Consultores de Resultados. He is a consultant for Brazil's federal government and various state and municipal governments as well as the largest Brazilian companies such as Gerdau, Vale, Amil (United Health), Petrobras, B2W, and many others. He graduated in Engineering from Universidade Federal de Minas Gerais (UFMG) in 1963 and holds an M.Sc. and Ph. D. in Engineering from the Colorado School of Mines, USA. He was honored with the title of Professor Emeritus by UFMG. Decorated with the Ordem do Rio Branco medal for services rendered to the nation. Elected by the American Society for Quality Control as ones of the “21 voices of the 21st century”. Mr. Vicente Falconi Campos declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

Luis Felipe Pedreira Dutra Leite – 824.236.447-87

 

In the past five years, he was a member of the Company’s board of directors. Currently, he is the Chief Financial Officer of Anheuser-Busch InBev SA/NV, a listed company whose core business is producing and marketing beverages, which is part of the Company's economic group. Also a member of the Operations, Finance and Compensation Committee. From 2013 to 2015 he was a member of the board of directors of Whitby School, an educational entity in the United States. Mr. Luis Felipe Pedreira Dutra Leite declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

92


 

 

Roberto Moses Thompson Motta – 706.988.307-25

 

In the past five years, he was a member of the Company’s board of directors. Currently, he is a member of the boards of directors of the following companies (i) since 2001, Lojas Americanas S.A., a listed company whose core business is general commerce; (ii) since 2001, São Carlos Empreendimentos e Participações S.A., a publicly listed company whose core business is managing real estate development projects of its own and third parties; (iii) since 2013, Restaurant Brands International (formerly known as Burger King Worldwide Inc.), a food industry company; and (iv) since 2005, 3G Capital, a private equity vehicle founded by Mr. Jorge Paulo Lemann, Mr. Marcel Herrmann Telles, and Mr. Carlos Alberto Sicupira, all indirectly controlling shareholders of the Company. Currently, he is also a member of the board of directors and the Company's Operations, Finance and Compensation Committee. Also was, from 2004 to 2014, a member of the board of directors of Anheuser-Busch InBev SA/NV, a listed company whose core business is producing and marketing beverages, which is part of the Company's economic group. Mr. Roberto Moses Thompson Motta declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

Cecília Sicupira – 055.532.167-37

 

In the past five years, held the following positions, in the following companies: (i) member of the board of directors of Restaurants Brands International Inc., whose core business is the operation of quick service restaurants and other type of restaurants; (ii) alternate member of the board of directors of São Carlos Empreendimentos e Participações S.A., a publicly listed company whose core business is managing real estate development projects of its own and third parties; (iii) member of the board of directors of S-BR Global Investiments Ltd., whose core business is providing financial consulting; and (iv) member of the board of directors and of the board of officers of S-Velame Administração de Recursos e Participações S.A., a holding company which holds an ownership interests in Anheuser-Busch InBev SA/NV. Currently, she is a member of the board of directors and the compensation committee of Lojas Americanas S.A., a listed company whose core business is general commerce, since 2013, and is a full member of Company’s board of directors. Mrs. Cecília Sicupira declared for all legal purposes that within the last five years, she has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

 

Antonio Carlos Augusto Ribeiro Bonchristiano – 086.323.078-43

 

In the past five years, he has held positions in the following companies, for the periods shown: was a member of the board of directors of BRZ Investimentos S.A., whose core business is managing investment funds, from 2014 to 2015. Currently holds the following positions: (i) Chief Executive Officer and member of the board of directors of GP Investments, Ltd., whose core business is holding ownership interest in the capital of other companies through private equity transactions; (ii) member of the board of directors of Rimini Street, company whose core business is providing system maintenance services; (iii) member of the Board of Directors of FoodFirst Global Restaurants, whose core business is operating restaurants in the United States, (iv) member of the Board of Directors of BR Properties S.A., whose core business is investing and managing commercial and logistics real properties; (v) member of the board of Fundação Estudar, a non-profit organization whose aim is to empower young talents to undertake ambitious projects and transform Brazil; (vi) member of the Board of Directors of John Carter Brown Library, library based in Providence, Rhode Island, United States; and (vii) member of the Advisory Board of Bodleian Library, library based in Oxford, United Kingdom. Currently he is also a full member of the Board of Directors of the Company. Mr. Antonio Carlos Augusto Ribeiro Bonchristiano declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

Marcos de Barros Lisboa – 806.030.257-49

 

In the past five years, he has been an Executive Officer of Unibanco S.A., and as Vice-President for Insurance, Controls and Operational Support of Itaú Unibanco S.A. both companies whose business is predominantly the financial sector. Currently he is (i) CEO of higher education and research institution INSPER; (ii) member of the Board of Directors of Cerradinho Bioenergia S.A.; and (iii) officer of PagSeguro Digital Ltda. Currently he is also a full member of Company’s Board of Directors. Until 2013, he was a member of the Board of Directors of Itaú Unibanco S.A. In addition, from 2003 to 2005, he was the Economic Policy Secretary at the Ministry of Finance. Since the late 1980s, he has been a member of the faculty of several educational institutions in Brazil and internationally. He holds a Ph.D. in Economics from the University of Pennsylvania. Mr. Marcos de Barros Lisboa declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

93


 

 

Carlos Eduardo Klutzenschell Lisboa – 694.514.864-53

 

In the past five years, he has held different positions in Anheuser-Busch InBev SA/NV, a listed company whose core business is producing and marketing beverages, and which is part of the Company's economic group, and in the Company. From 2014 to 2016, he held the position of Global Vice President of Global Brands of Anheuser-Busch InBev SA/NV. Currently, he holds the position of President of the Middle Americas Zone and he is an alternate member of the Company’s Board of Directors. In addition, from 2005 to 2011, he held the position of Vice President of Marketing of the Company, from 2011 to 2012, he held the position of President of the BU Austral in the Latin American South Zone, and, from 2013 to 2014, he held the position of President of Labatt, Company’s subsidiary. Mr. Carlos Lisboa declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

Michel Dimitrios Doukeris – 810.940.279-87

 

In the past five years, he held the following positions with Anheuser-Busch InBev SA/NV, a listed company whose core business is the production and sale of beverages, and which is part of the Company's economic group: (i) from 2013 to 2016, he was the Chief Operations Officer in APAC Zone (Asia Pacific Zone) of Anheuser-Busch InBev SA/NV; (ii) from 2016 to 2017, he was Chief Sales Officer of the global department of Anheuser-Busch InBev SA/NV, and (iii) since 2017, he has been Chief Executive Officer in North America for Anheuser-Busch InBev SA/NV. Also, he is currently an alternate member of the Company's board of directors. Mr. Michel Dimitrios Doukeris declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

94


 

12.6- For each person who was a board of directors or fiscal council member in the latest reporting period, state their percentage attendance at meetings held in this period after the board or council members took office, in tabular format

 

Board of Directors

Total number of meetings held by the board after taking office*

Percentage attendance at meetings held by the board in the same period that were called after taking office

Victorio Carlos De Marchi

41

100%

Carlos Alves de Brito

41

78%

Milton Seligman**

30

90%

José Heitor Attilio Gracioso

41

63%

Vicente Falconi Campos

41

85%

Luis Felipe Pedreira Dutra Leite

41

80%

Roberto Moses Thompson Motta

41

93%

Cecília Sicupira

41

83%

Antonio Carlos Augusto Ribeiro Bonchristiano

41

95%

Nelson José Jamel***

41

56%

Marcos de Barros Lisboa

41

98%

Carlos Eduardo Klutzenschell Lisboa**

23

17%

Michel Dimitrius Doukeris**

30

13%

*Meetings held from April 28, 2017 to March 20, 2020.

** All members took office on April 28, 2017, except for Messrs. Milton Seligman and Michel Dimitrios Doukeris, who took office on

January 11, 2018, and Mr. Carlos Eduardo Klutzenschell Lisboa, who took office on September 1st, 2018.

*** Nelson José Jamel became a full member on May 15, 2018 (formerly, he was an alternate).

 

95


 

12.7 - Composition of statutory committees and audit, financial and compensation committees

Name   

Date of birth 

Management body  

Date took office

Date elected  

Taxpayer No. (CPF)

Profession

                                   Elected position held

      Term of office

 

Other issuer positions or duties

Whether the member nominated is an independent member and if so, the criterion used by the issuer to determine independence

Number of consecutive terms of office.

Victorio Carlos De Marchi

November 13, 1938

Other - Operations, Finance and Compensation Committee

May 15, 2018

Until the 2020 AGM

008.600.938-91

Attorney

Chair

May 15, 2018

 

Co-chairman of the Board of Directors and chairman of the Antitrust Conducts and Related Parties Committee

 

 

 

 Non-independent member

 

 

 

3th term of office.

 

 

 

Roberto Moses Thompson Motta

November 6, 1957

Other - Operations, Finance and Compensation Committee

May 15, 2018

Until the 2020 AGM

706.988.307-25

Engineer

Full member of the committee

May 15, 2018

 

Member of the Board of Directors

 

 

 

Non-independent member

 

 

 

3th term of office.

 

 

 

Luis Felipe Pedreira Dutra Leite

August 3, 1965

Other - Operations, Finance and Compensation Committee

May 15, 2018

Until the 2020 AGM

824.236.447-87

Economist

Full member of the committee

May 15, 2018

 

Member of the Board of Directors

 

 

 

Non-independent member

 

 

 

3th term of office.

 

 

 

Victorio Carlos de Marchi

November 13, 1938

Others –  Antitrust Conducts and Related Parties Committee  

May 15, 2018

Until the 2020 AGM

008.600.938-91

Attorney

Chair

May 15, 2018

 

Co-chairman of the Board of Directors and chairman of Operations, Finance and Compensation Committee

 

 

 

Non-independent  member

 

 

 

3th term of office.

 

 

 

José Heitor Attilio Gracioso

November 20, 1931

Others –  Antitrust Conducts and Related Parties Committee  

May 15, 2018

Until the 2020 AGM

006.716.908-25

Attorney

Full member of the committee

May 15, 2018

 

Member of the Board of Directors

 

 

 

Non-independent member

 

 

 

3th term of office.

 

 

 

Marcos de Barros Lisboa

August 2, 1964

Others –  Antitrust Conducts and Related Parties Committee  

September 19, 2018

Until the 2020 AGM

806.030.257-49

Economist

Full member of the committee

September 19, 2018

 

Member of the Board of Directors

 

 

 

Independent member

 

 

 

1st term of office.

 

 

 

 Everardo de Almeida Maciel

February 13, 1947

Others –  Antitrust Conducts and Related Parties Committee  

May 15, 2018

Until the 2020 AGM

 018.711.614-87

Tax Advisor

Full member of the committee

May 15, 2018

 

Not applicable, since the only position held in the Company is that of Member of the Antitrust Conducts and Related Parties Committee

 

 

 

Independent member

 

 

 

2nd term of office

 

 

 

 Carlos Emmanuel Joppert Ragazzo

March 20, 1977

Others –  Antitrust Conducts and Related Parties Committee  

December 19, 2019

                    Until the 2020 AGM

 011.787.237-71

Attorney

Full member of the committee

December 19, 2019

                   

Not applicable, since the only position held in the Company is that of Member of the Antitrust Conducts and Related Parties Committee

 

 

 

Independent member

 

 

 

1st term of office

 

 

 

 

Professional experience/ Declaration of any convictions 

         

96


 

 

       

Professional experience/ Declaration of any convictions 

         

Victorio Carlos De Marchi – 008.600.938-91

 

See summary of professional experience and declaration in item 12.6 of the Reference Form.

 

Roberto Moses Thompson Motta – 706.988.307-25

 

See summary of professional experience and declaration in item 12.6 of the Reference Form.

 

Luis Felipe Pedreira Dutra Leite – 824.236.447-87

 

See summary of professional experience and declaration in item 12.6 of the Reference Form.

 

José Heitor Attilio Gracioso – 006.716.908-25

 

See summary of professional experience and declaration in item 12.6 of the Reference Form.

Marcos de Barros Lisboa – 806.030.257-49

 

See summary of professional experience and declaration in item 12.6 of the Reference Form.

97


 

 

Everardo de Almeida Maciel – 018.711.614-87

In the past five years, he has been a Tax Advisor, and as of 2003, he is the president-partner of Logos Consultoria Fiscal Ltda., consulting firm in the tax area. Currently, he is (i) a member of the International Academy of Law and Economics; (ii) member of the National Academy of Economics; (iii) member of the Superior Council of Law of FECOMERCIO-SP; (iv) member of the Council of High Studies on Finance and Taxation and of the Political and Social Board, both from São Paulo Trade Association; (v) member of the Board of Directors of Fundação Zerrenner, whose core business is providing free health care and education; (vi) member of the Fiscal Council of Instituto Fernando Henrique Cardoso; (vii) member of the Advisory Board of the Department of Judicial Researches of the National Council of Justice (CNJ); (viii) member of the Panel of Judges of Innovare Award; and (ix) president of the Advisory Board of the Brazilian Competition Ethics Institute (ETCO). In addition, teaches in graduation courses at Instituto Brasiliense de Direito Público (IDP), in Brasília. He held several public offices, the most recent being: Secretary of the Federal Revenue Office (1995-2002), Secretary of Finance and Planning of the Federal District (1991-1994), Executive Secretary of the Ministries of Finance (2002), of the Interior (1987) and of Education (1985), and President’s Chief of Staff (1986). Currently he is a member of the Company’s Antitrust Conducts and Related Parties Committee. Mr. Everardo de Almeida Maciel declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

Carlos Emmanuel Joppert Ragazzo - 011.787.237-71

In the past five years, he has been an attorney expert in antitrust and regulation, being a partner at Ragazzo Advogados, since 2016. He was the first General Superintendent of the Administrative Council for Economic Defense - CADE (from 2012 to 2014) and Director of that same agency from 2008 to 2012. Formerly, he held for almost six years the position of General Coordinator of the Economic Supervision Office - SEAE, of the Ministry of Finance. Bachelor of Laws from Pontifícia Universidade Católica do Rio de Janeiro, Master of Competition Law and Market Regulation (LL.M) from New York University School of Law - NYU, Master of Civil Law and Doctor in Civil Rights from Universidade Estadual do Rio de Janeiro - UERJ and also Post-PhD in Laws from University of California at Berkeley. Currently, he is an assistant professor of the graduation and post-graduation courses strictu sensu of the Law School of Fundação Getúlio Vargas of Rio de Janeiro - FGV DIREITO RIO. Mr. Carlos Emmanuel Joppert Ragazzo declared for all legal purposes that within the last five years, he has not been subject to the effects of any criminal conviction, or any conviction or penalty in administrative proceedings before the CVM or any final conviction in the judicial or administrative spheres that led to his being suspended or barred from practicing any professional or commercial activity.

 

98


 

12.8- For each person who has been a member of a statutory committee or the audit, risk, financial and compensation committees, even if such committees or structures are not statutory, state their percentage attendance at meetings held by the respective body in the same period, after taking office, to be shown in tabular form

 

 

Operations, Finance and Compensation Committee

Total meetings held as of the member's taking office*

Percentage attendance at meetings held in the same period held after taking office

Victorio Carlos De Marchi

9

100%

Roberto Moses Thompson Motta

9

100%

Luis Felipe Pedreira Dutra Leite

9

78%

*Meetings held from May 15, 2018 (date on which all members took office) to March 15, 2020.

 

 Antitrust Conducts and Related Parties Committee

Total meetings held as of the member's taking office*

Percentage attendance at meetings held in the same period after taking office

Victorio Carlos De Marchi

9

100%

José Heitor Attilio Gracioso

9

44%

Bolívar Moura Rocha****

9

78%

Everardo de Almeida Maciel

9

100%

Marcos de Barros Lisboa**

8

75%

Carlos Emmanuel Joppert Ragazzo***

1

100%

*Meetings held from May 15, 2018 (date on which all members took office) to March 15, 2020.

** Took office on September 19, 2018.

*** Took office on December 19, 2019.

**** Resigned from the position on February 20, 2019.

 

99


 

12.9- Existence of relations of marriage or kinship to the 2nd degree related to managers of the issuer and its subsidiaries or controlling companies

 

a)           managers of the Company

 

Not applicable since there are no relations of marriage, stable union or kinship to the second degree between the Company's managers.

 

b)           managers of the Company and those of its directly or indirectly held subsidiaries:

 

Not applicable since there are no relations of marriage, stable union or kinship to the second degree between the Company's managers and those of its directly or indirectly held subsidiaries.

 

c)            managers of the Company or its directly or indirectly held subsidiaries and the Company's directly or indirectly controlling shareholders:

 

Manager of issuer or subsidiary

Name

Taxpayer No. (CPF)

Business name of issuer, subsidiary or controlling company

Taxpayer no. (CNPJ)

Position

Cecília Sicupira

(member of the board of directors)

055.532.167-37

Ambev S.A.

07.526.557/0001-00

Member of the Board of Directors

Related person

Name

Taxpayer No. (CPF)

Business name of issuer, subsidiary or controlling company

Taxpayer No. (CNPJ)

Position

Carlos Alberto da Veiga Sicupira

041.895.317-15

Carlos Alberto da Veiga Sicupira

(indirectly controlling shareholder)

-

-

Type of relationship with the manager of the issuer or subsidiary

Parent (1st degree consanguinity)

 

d)           managers of the Company and managers of its directly and indirectly held subsidiaries:

 

Not applicable since there are no relations of marriage, stable union or kinship to the second degree between the Company's managers and those of its directly or indirectly controlling companies.

 

 

100


 

12.10- Relationships of subordination, provision of service or control between managers and subsidiaries, controlling and other

 

a)                      company directly or indirectly controlled by the Company, except those in which the Company directly or indirectly holds all share capital:

 

Not applicable, since there are no relations of subordination, provision of services or control maintained in the last three fiscal years between the Company's managers and those of a company directly or indirectly controlled by the Company, except those in which the Company directly or indirectly holds all share capital.

 

b)                      direct or indirectly controlling shareholder of the Company:

 

Fiscal year ended December 31, 2019

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between managers and related person

Type of related person

Manager of the issuer

Victorio Carlos De Marchi

008.600.938-91

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

|Manager of the issuer

José Heitor Attilio Gracioso

006.716.908-25

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

 

101


 

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Vicente Falconi Campos

000.232.216-15

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Consulting Committee of Fundação Zerrenner

Note

N/A

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Milton Seligman

093.165.740-72

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner

Note

N/A

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Everardo de Almeida Maciel

018.711.614-87

Subordination

Direct controlling shareholder

Member of the Company's Antitrust Conducts and Related Parties Committee

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

 

 

 

102


 

Fiscal year ended December 31, 2018

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between managers and related person

Type of related person

Manager of the issuer

Victorio Carlos De Marchi

008.600.938-91

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

|Manager of the issuer

José Heitor Attilio Gracioso

006.716.908-25

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Vicente Falconi Campos

000.232.216-15

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Advisory Board of Fundação Zerrenner.

Note

N/A

103


 

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Milton Seligman

093.165.740-72

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Everardo de Almeida Macie

018.711.614-87

Subordination

Direct controlling shareholder

Member of the Company's Antitrust Conducts and Related Parties Committee

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

Fiscal year ended December 31, 2017

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Victorio Carlos De Marchi

008.600.938-91

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

104


 

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

José Heitor Attilio Gracioso

006.716.908-25

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Vicente Falconi Campos

000.232.216-15

Subordination

Direct controlling shareholder

Member of the Company's Board of Directors

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Advisory Board of Fundação Zerrenner.

Note

N/A

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

James Terence Coulter Wright

872.316.898-68

Subordination

Direct controlling shareholder

Member of the Company's Fiscal Council

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Advisory Board of Fundação Zerrenner.

Note

N/A

105


 

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Everardo de Almeida Maciel

018.711.614-87

Subordination

Direct controlling shareholder

Member of the Company's Antitrust Conducts and Related Parties Committee

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of the Board of Directors of Fundação Zerrenner.

Note

N/A

 

c)       if relevant, supplier, client, debtor or creditor of the Company, its subsidiaries or controlling companies or subsidiaries of any of these persons:

 

Fiscal Year end December 31, 2019

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Vicente Falconi Campos

000.232.216-15

Control

Supplier

Member of the Company's Board of Directors

Related Person

Falconi Consultores S.A.

05.485.279/0001-64

 

 

Founder of Falconi Consultores S.A. and member of its Board of Directors

Note

N/A

 

Fiscal Year end December 31, 2018

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Vicente Falconi Campos

000.232.216-15

Control

Supplier

Member of the Company's Board of Directors

Related Person

Falconi Consultores S.A.

05.485.279/0001-64

 

 

Founder of Falconi Consultores S.A. and member of its Board of Directors

Note

N/A

106


 

 

Fiscal year ended December 31, 2017

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Vicente Falconi Campos

000.232.216-15

Control

Supplier

Member of the Company's Board of Directors

Related Person

Falconi Consultores S.A.

05.485.279/0001-64

 

 

Founder of Falconi Consultores S.A. and member of its Board of Directors

Note

N/A

 

***

107


 

Exhibit A.IV – Information of the Candidates to the position of Member of the Company's Fiscal Council

(as items 12.5 to 12.10 of Exhibit 24 to CVM Instruction 480/09)

12.5 - Composition and professional experience of members of management, Fiscal Council and statutory audit committee

 

Name:  

Date of birth

Management body

Date elected

Term of office

Taxpayer No. (CPF)

 

Profession

   Position held

Took office

Elected by controlling shareholder

Other positions and duties for Issuer

If the designated member is an independent member, criterion used by the issuer to determine their independence;

 Consecutive term of offices 

José Ronaldo Vilela Rezende

06/07/1962

Fiscal Council

04/24/2020

Until the 2021 AGM

501.889.846-15

Accountant

Fiscal Council (full member) / elected by controlling shareholder

05/06/2020

(estimated)

Yes

Not applicable, since the only position held in the Company is member of the Fiscal Council.

 

 

 

Member elected by controlling shareholder

 

 

 

5th term of office

 

 

 

 

Elidie Palma Bifano

 

 

05/16/1947

Fiscal Council

04/24/2020

Until the 2021 AGM

395.907.558 - 87

Lawyer

Fiscal Council (full member) / elected by controlling

05/06/2020

(estimated)

Yes

Not applicable, since the only position held in the Company is member of the Fiscal Council.

 

 

 

Member elected by controlling shareholder

 

 

 

2nd term of office

 

 

 

 

Vinicius Balbino Bouhid

08/06/1961

Fiscal Council

04/24/2020

Until the 2021 AGM

667.460.867/04

Bank employee and civil engineer

Fiscal Council (full member) / elected by minority shareholders

05/06/2020

(estimated)

No

Not applicable, since the only position held in the Company is member of the Fiscal Council.

 

 

 

Member elected by minority shareholders.

 

1st term of office

 

 

 

 

 

Carlos Tersandro Fonseca Adeodato

01/02/1954

Fiscal Council

04/24/2020

Until the 2021 GM

337.770.397/72

Economist

Board member (alternate) / elected by minority shareholders

05/06/2020

(estimated)

No

Not applicable, since the only position held in the Company is member of the Fiscal Council.

 

 

 

Member elected by minority shareholders.

1st term of office

 

 

 

Emanuel Sotelino Schifferle

02/27/1940

Fiscal Council

04/24/2020

Until the 2021 AGM

009.251.3 67-00

Engineer

Fiscal Council (alternate) / elected by controlling shareholder

05/06/2020

(estimated)

Yes

Not applicable, since the only position held in the Company is member of the Fiscal Council.

 

 

 

Member elected by the controlling shareholder

 

 

 

8th term of office

 

 

 

 

Eduardo Rogatto Luque

07/06/1969 

 

 

 

Fiscal Council

04/24/2020

Until the 2021 AGM

142.773.658-84

Contador

Fiscal Council (alternate) / elected by controlling shareholder

05/06/2020

(estimated)

Yes

Not applicable, since the only position held in the Company is that of Fiscal Council member.

 

 

 

Member elected by the controlling shareholder

 

 

 

8th term of office

 

 

 

 

108


 

Professional experience / Declaration of any convictions

 

 

 

 

 

José Ronaldo Vilela Rezende – 501.889.846-15

 

Over the past five years, he held the following positions with the following companies / institutions for the periods shown: (i) member of the audit committee of Cerradinho Bioenergia S.A. since September 2016; (ii) member of the audit committee of Diagnósticos da America S.A. – DASA since April 2017; and (iii) full member of the Company’s Fiscal Council. In addition, he performed the duties of risk management partner of the consulting practice at PricewaterhouseCoopers Brazil from 2005 to 2011, principal activity auditing services; PricewaterhouseCoopers's Agribusiness industry leader in Brazil (2006-2014) and the Americas (2009-2014); and PricewaterhouseCoopers partner in charge of delivering Risk Assurance Services (RAS) (related to auditing processes and systems) from 1998. He is Fiscal Council member certified by the Brazilian Institute of Governance (IBGC). Bachelor's degree in Accounting from UMA in Belo Horizonte and master's in Agroenergy from Fundação Getúlio Vargas (FGV) in São Paulo. Mr. José Vilela Rezende has declared that, for all legal purposes, he has not in the last five years been subject to the effects of any criminal conviction, any conviction or penalty arising from administrative proceedings before the CVM, or any final verdict in the judicial or administrative sphere, that led to suspension or disqualification from the practice of any professional or commercial activity.

 

Elidie Palma Bifano - 395.907.558 - 87

 

Over the past five years, she held the following positions with the following companies / institutions for the periods shown:  (i) partner of Mariz de Oliveira and Siqueira Campos Law Firm; (ii); (ii) professor of the Professional Master's Course of the São Paulo Law School of Fundação Getúlio Vargas - FGV, in the course Business Structuring; (iii) Professor of the post-graduation courses strictu sensu of IBDT, IBET, CEU, COGEAE / PUC; and (iv) member of the Audit Committee of Banco Santander (Brasil) S.A., from 2012 to 2018. In addition, she was audit partner of the tax consultancy area at PricewaterhouseCoopers – PWC, from 1974 to 2012. Mrs. Elidie Palma Bifano declared that for all legal purposes she has not in the last five years been subject to the effects of any criminal conviction, any conviction or penalty in administrative proceedings before the CVM or any final verdict in the judicial or administrative sphere that led to suspension or disqualification from the practice of any professional or commercial activity.

 

Vinicius Balbino Bouhid - 667.460.867/04

 

Over the past five years he has held the following positions in the following companies for the periods stated: (i) regular fiscal council at Norte Energia S.A. since May 2017; and (ii) alternate fiscal council at the Company. In addition, he performed the duties of statutory director general (CEO) of the London asset management firm BB Securities Ltd. from 2013 to 2015, where he introduced new governance structure with a compliance team and new processes; executive manager from 2009 to 2013, responsible for corporate governance and private equity at BB Securities Ltd. in London; member of the board of directors of Banco do Brasil Securities in London from 2013 to 2015; and member of the Fiscal Council of Companhia de Eletricidade do Estado da Bahia (Coelba), which operates in the electricity sector from 2011 to 2013. Holder of a Civil Engineering degree from Universidade de Brasília and an Executive MBA from Universidade de Mato Grosso. Mr. Vinicius Balbino Bouhid declared that for all legal purposes in the last five years he has not been subject to the effects of any criminal conviction, any conviction or penalty in administrative proceedings before the CVM or any final verdict in the judicial or administrative sphere that led to suspension or disqualification from the practice of any professional or commercial activity.

 

Carlos Tersandro Fonseca Adeodato - 337.770.397/72

 

Over the past 5 years, he has been involved in advising and consulting at the Company Comatrix Soluções Ltda., located in Rio de Janeiro, and at DOT Digital Group, located in Santa Catarina, besides being the representative in Brazil of HydroCarbon Dynamics (HCDi), subsidiary of Indago Energy, with headquarters in Australia. In addition, he performed the duties of Chief Financial and Investor Relations Officer at HRT Participações em Petróleo and of Chief Financial Officer at HRT Exploração em Petróleo Ltda from 2010 to 2013. Bachelor of Economic Sciences from Universidade Federal do Rio de Janeiro (Federal University of Rio de Janeiro). Mr. Carlos Tersandro Fonseca Adeodato declared that for all legal purposes he has not in the last five years been subject to the effects of any criminal conviction, any conviction or penalty in administrative proceedings before the CVM or any final verdict in the judicial or administrative sphere that led to suspension or disqualification from the practice of any professional or commercial activity.

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Emanuel Sotelino Schifferle - 009.251.367-00

 

Over the past five years, he has held the following positions in the following companies for the periods stated: (i) managing partner of ASPA Assessoria e Participações S/C Ltda., a company whose main activity is advising companies on restructuring, acquisition, negotiating contracts and transitional management, having managed companies under judicial recovery, reorganizing and restructuring companies, and renegotiating contracts among other activities; and (ii) alternate member of the Company’s Fiscal Council. In addition, he performed the duties of member of the Fiscal Council, from 2004 to 2009, of América Latina Logística (ALL), a listed company whose main activity is providing rail and road transportation services; alternate member of the Fiscal Council from 2005 to 2014 at Companhia de Bebidas das Américas (Ambev), succeeded by the Company as of January 2, 2014; member of the board of directors from 2007 to 2011 of São Carlos Empreendimentos e Participações S.A., a listed company whose main activity is managing property development projects for itself and third parties; member of the Fiscal Council of Estácio Participações S.A., a listed company whose main activities are development and management of educational activity and institutions; and member of the Fiscal Council from 2011 to 2015 of Allis Participações S.A., a publicly listed company whose main business is providing marketing and sales services for various segments. Mr. Emanuel Sotelino Schifferle has declared for all legal purposes that in the last five years he has not been subject to the effects of any criminal conviction, any conviction or penalty in administrative proceedings before the CVM or any final verdict in the judicial or administrative sphere that led to suspension or disqualification from the practice of any professional or commercial activity.

 

Eduardo Rogatto Luque - 142.773.658-84

 

 

In the past 5 years, he has held the following positions in the following companies/institutions: (i) Managing Partner and leader of the areas of Quality and Technical Committee of the Irko Group, since August, 2016; (ii) full member of the Fiscal Council of Qualicorp S.A. (Coordinator), Itaúsa S.A. and Fundação Zerrenner, since May, 2019; (iii) Strategy Director at ABRAPSA - Brazilian Association of Administrative Service Providers, since 2019; (iv) member of the Institute of Independent Auditors of Brazil (IBRACON); (v) member of California AICPA (CALAICPA); (vi) member of the Brazilian Institute of Corporate Governance (IBGC), since 2016, and (vii) member of the Brazilian Accounting Institutes (CRC and CFC). In addition, he was a partner at PricewaterhouseCoopers, from 2004 to 2016, a company he worked for for 27 years. He holds a BA in Accounting from the Pontifical Catholic University of São Paulo (PUC-SP) and an MBA in Controllership from the University of São Paulo (USP). Mr. Eduardo Rogatto Luque declared, for all legal purposes that, in the last 5 years, he has not been subject to the effects of any criminal conviction, any conviction or penalty in an administrative proceeding before the CVM or any final verdict in the judicial or administrative sphere that led to suspension or disqualification from the practice of any professional or commercial activity.

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12.6- For each person who acted as a member of the board of directors or the Fiscal Council in the last year, state in tabulated format their percentage attendance at meetings held by the respective body in the same period that occurred after taking office.

 

Fiscal Council

Total meetings held by the respective body since date of taking office*

Member's percentage attendance at meetings held by the respective body in the same period, after taking office

José Ronaldo Vilela Rezende

8

100%

Elidie Palma Bifano

8

100%

Aldo Luiz Mendes

8

88%

Vinicius Balbino Bouhid

8

100%

Emanuel Sotelino Schifferle

8

88%

Ary Waddington

8

88%

Eduardo Rogatto Luque

Not applicable; this will be his first term.

Not applicable; this will be the first term.

* Meetings held from 05/06/2019 (when all members took office) until 03/15/2020.

 

12.7 - Provide information mentioned in item 12.5 in relation to members of the statutory committees and of the audit, risk, financial and compensation committees, even if such committees or structures are not statutory.

 

Not applicable. None of the members designated for the Fiscal Council are part of any of the Company's committees.

 

12.8 - For each person who acted as a member of the statutory committees or the audit, risk, financial and compensation committees, even if such committees or structures are not statutory, state in tabular format, their percentage attendance at meetings held by the respective body in the same period that occurred after taking office.

 

Not applicable. None of the members designated for the Fiscal Council are part of any of the Company's committees.

 

12.9 - Any marital, 'stable union' or kinship relationship up to the 2nd degree related to management of the issuer, its subsidiaries or controlling shareholders

 

e)                the Company's management:

 

Not applicable, since there are no cases of marital, 'stable union' or kinship relations to the second degree among those nominated for positions as members of the Fiscal Council and its management.

 

b)           members of Company's management and its directly and indirectly held subsidiaries:

 

Not applicable, since there are no cases of marital, 'stable union' or kinship relations to the second degree among those nominated for positions as members of the Fiscal Council and managers of the Company's directly or indirectly held subsidiaries

 

c)                members of Company's management and its directly or indirectly held subsidiaries:

 

Not applicable, since there are no cases of marital, 'stable union' or kinship relations to the second degree among those nominated for positions as members of the Fiscal Council and the Company's directly or indirectly controlling shareholders.

 

d)               members of Company's management and its directly or indirectly held subsidiaries:

 

Not applicable, since there are no cases of marital, 'stable union' or kinship relations to the second degree among those nominated for positions as members of the Fiscal Council and the management of the Company's directly or indirectly controlling shareholders.

 

 

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12.10 - Relationships of subordination, providing services or control between management and subsidiaries, controlling shareholders or another

 

d)                company directly or indirectly controlled by the Company, except those in which the Company directly or indirectly holds all share capital:

 

Not applicable, since there are no relations of subordination, service or control maintained in the last three fiscal years, among those nominated for the Fiscal Council members and those of any company directly or indirectly controlled by the Company, except those in which the Company directly or indirectly holds all share capital.

 

e)                directly or indirectly controlling shareholder of the Company:

 

Identification

Position/duties

Taxpayer No. (CPF/CNPJ)

Relationship between manager and related person

Type of related person

Manager of the issuer

Eduardo Rogatto Luque

142.773.658-84

Service Supplier

Direct controlling shareholder

Member of the Company's Fiscal Council

Related Person

Fundação Zerrenner

60.480.480/0001-67

 

 

Member of Fundação Zerrenner’s Fiscal Council.

Note

N/A

 

f)                 if material, supplier, client, debtor or creditor of the Company, its subsidiaries or parent companies or subsidiaries of any of these persons, if material:

 

Not applicable, since there are no relevant relations of subordination, service or control maintained in the last three fiscal years among those nominated for the Company's Fiscal Council member positions and any supplier, client, debtor or creditor of the Company, its subsidiaries or controlling shareholders or subsidiaries of any of these persons.

 

***

 

112


 

Exhibit A.V – Compensation of the Management

 

(as item 13 of Exhibit 24 to CVM Instruction 480/09)

 

13.1       Compensation policy and practice for the Board of Directors, Board of Officers, Fiscal Council, Statutory Committees and Audit, Risk, Financial and Compensation Committees regarding the following aspects:

 

a. purposes of the compensation policy or practice, informing if the compensation practice was formally approved, the body responsible for its approval, approval date and, if the issuer discloses the policy, websites in which the document may be found:

 

The main purpose of the compensation policy of the Company is to establish a compensation system applicable to the management which encourages the development of a culture of high performance, keeping key personnel of the Company over the long term, while ensuring that the best people are hired and retained, and the interests of the management are aligned with those of shareholders.

 

The Company has a "Remuneration and Stock Option Policy for the Board of Officers", whose provisions were consolidated and approved at a meeting of the Board of Directors held on September 19, 2018. The Remuneration and Stock Option Policy for the Board of Officers may be found at the following electronic address: ri.ambev.com.br, in the section “Corporate Governance”, “Policies and Codes”, “Remuneration Policy for the Board of Officers”.

 

There is no policy formally approved for the remuneration of the Board of Directors and its advisory committees, nor the Fiscal Council.

 

b. compensation elements, indicating:

i. description of the elements of the compensation and the purposes of each of them

 

Pursuant to article 15, paragraph 1, of Company’s Bylaws, the global amount of the Company’s compensation is fixed annually by the Annual General Meeting, the compensation being distributed among the bodies by the Board of Directors.

 

The elements of the compensation of these bodies are described below:

 

a) Board of Directors

 

The compensation of the members of the Board of Directors is divided into: (i) a fixed compensation that is in line with market average; and (ii) a variable compensation, considering the sustainable growth of the Company and its long-term businesses, designed to stimulate and reward significant accomplishments by means of participation on the results. The Company also has a Stock Option Plan (“Option Plan”) and a Share-Based Payment Plan (“Stock Plan” and, together with the Option Plan, “Plans”), for more information see item 13.4 of this Reference Form. Additionally, certain members of the Board of Directors also participate in a private pension fund to which the Company also makes partial contributions, as described in item 13.10 of this Reference Form.

 

b) Board of Officers

 

Executive Officers have their compensation divided into fixed and variable components, provided that the base pay (the fixed component) is in line with market average, while the main focus is on the variable compensation (participation on the results) and on the long-term incentives. The members of the Board of Directors are also entitled to stock and/or options granted under the Plans, and, potentially, in the case of executives identified to have high potential in the long term, the granting of Share Appreciation Rights (as defined in item 13.4 below). The goal is to stimulate the alignment of interests for long-term value generation.

 

The Executive Officers are entitled to the benefits provided for in the benefits policy of the Company, pursuant to item 14.3(2) of the Company’s Reference Form. Such benefits include medical, dental, educational and social assistance to executive officers and their dependents, free of costs or at a reduced cost. In addition, certain executive officers participate in a private pension plan to which the Company makes partial contributions, as described in item 13.10 of this Reference Form.

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c) Fiscal Council

 

The members of the Fiscal Council receive a fixed compensation that corresponds, at least, to the legal minimum resolved by the Shareholders’ Meeting. The compensation paid to each member should not be lower than ten percent of the compensation assigned to each Executive Officer, considering the average amount received by the Executive Officers, excluding any benefits, representation allowances and participation on the results. The compensation of the alternate members is equivalent to 50% of the compensation of the effective members. Additionally, the members of the Fiscal Council shall be mandatorily reimbursed for transportation and lodging expenses, which may be necessary to perform their functions. The members of the Fiscal Council are not entitled to receive variable compensation.

 

d) Committees

 

All members of the Related Parties and Antitrust Conducts Committee and the members of the Operations, Finance and Compensation Committee that are part of the Board of Directors of the Company do not receive any specific compensation for their activities in those Committees. Members, who do not meet this condition, receive annual fixed fees aligned with the market average and annually updated based on the IPCA variation and are not entitled to receive variable compensation. Additionally, all members of the Committees shall be mandatorily reimbursed for transportation and lodging expenses, which may be necessary to perform their functions.

 

ii. regarding the 3 last fiscal years, what is the participation of each element in total compensation

2019

Board of Directors

Board of Officers

 

Fiscal Council

 

Committees

Fixed Compensation

45.35%

31.72%

100%

100%

Fees

37.79%

25.37%

83.33%

100%

Direct and indirect benefits

0.00%

1.37%

-

-

Charges

7.56%

4.97%

16.67%

-

Variable compensation

7.84%

11.43%

-

-

Share-based payment and stock Options

46.82%

56.85%

-

-

 

 

2018

Board of Directors

Board of Officers

 

Fiscal Council

 

Committees

Fixed Compensation

44.09%

36.85%

100%

100%

Fees

36.74%

28.69%

83.28%

100%

Direct and indirect benefits

0.00%

2.10%

-

-

Charges

7.35%

6.06%

16.72%

-

Variable compensation

3.26%

5.80%

-

-

Share-based payment and stock options

52.65%

57.36%

-

-

 

2017

Board of Directors

Board of Officers

 

Fiscal Council

 

Committees

Fixed Compensation

33.50%

26.70%

100%

100%

Fees

27.91%

20.90%

83.33%

100%

Direct and indirect benefits

0.00%

1.62%

-

-

Charges

5.58%

4.18%

16.67%

-

Variable compensation

10.67%

20.29%

-

-

Share-based payment and stock options

55.84%

53.01%

-

-

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 The proportion of the elements of compensation of the Board of Directors and the Board of Officers described above tends to repeat, to a greater or lesser degree, in years when the Company meets the eligible targets for distribution of variable compensation.

 

Variable compensation is determined according to the performance verified in relation to pre-established targets. Consequently, in case the minimum targets established are not fulfilled, no variable compensation will be due.

 

The compensation of the members of the Fiscal Council is 100% fixed, of which 83.33% corresponds to fees and 16.67% corresponds to charges on remuneration (percentages applicable to the years 2019, 2018, and 2017) and are reimbursed for their travels and lodging expenses required for the performance of their duties.

 

The members of the Committees that are not part of the Company’s Board of Directors have 100% of their compensation composed of annual fixed fees and are reimbursed for their travels and lodging expenses required for the performance of their duties.

 

iii. methodology for calculation and restatement of each of the compensation elements

 

The overall compensation of the management, as approved by the Annual Shareholders’ Meeting, is restated annually based on a market research carried out according to the terms indicated in sub-item (h) (ii) below and periodically assessed by the Company’s People & Management area, so as to secure that the amounts paid are sufficient to meet the specific objectives in relation to the market.

 

The variable compensation, when paid in cash, is calculated as a multiple of fixed compensation, provided that the target conferred on the manager and the Company have been achieved.

 

Regarding the determination of the amount of stock options to be granted under the Option Plan, please refer to items 13.4 and 13.8 below. For a description of the determination of the benefit resulting from Share Appreciation Rights, please refer to item 13.4 below. For a description related to the Stock Plan, please refer to item 13.4 below.

 

Both for the purpose of compensation and for the purpose of granting stock / options are also taken into account the achievement of annual targets and other results delivered in the year, meritocracy criteria and the seniority level of the executive.

 

Please refer to sub-item “h” below for further information.

 

iv. reasons behind the compensation elements

 

Compensation of the management is defined to encourage its members to meet short and long-term results for the Company. On this regard, the Company secures a fixed compensation based on market research, however, encouraging the achievement of expressive results to obtain a variable compensation above market average. Therefore, Company’s targets must be challenging but achievable.

 

The possibility of granting options and shares encourages the blending of interests of the shareholders and the management over the long-term, upon the free or onerous receipt, as the case may be, of the Company’s shares by its management, which shares shall be subject to restrictions on sale or delivery, contingent upon continued employment with the Company for a certain period of time. Also, additional shares may be granted depending on the reinvestment level of the variable compensation.

 

Finally, the Company has decided to adopt, for certain executives deemed strategic and with high performance potential, the granting of Share Appreciation Rights, enabling such participants to receive cash bonus based on the value of the shares of the Company. The granting of Share Appreciation Rights, however, is contingent upon the continued employment of executives with Company for a long or very long term, since the amounts have a lock-up period of five or ten years, then encouraging the retaining of strategic talent and generating value for shareholders in the long term.

 

115


 

In relation to the Fiscal Council and the Committees, the intention is to secure compensation compatible with the limits defined in applicable legislation, ensuring that its members are duly rewarded to perform their duties.

 

v. the existence of members who do not receive compensation and the reason for that

 

In addition to the alternate members, there are five members of the Board of Directors that do not receive compensation from the Company. Said members are also part of the management of the Parent Company (Anheuser-Busch InBev S.A./N.V - “ABI”), which bears payment of compensations to these members.

 

c. key performance indicators taken into account for determining each compensation element:

 

The key performance indicators for purposes of defining the variable compensation based on the achievement of goals either for the Company or its management are: EBITDA, cash flow and net revenues, in addition to other specific indicators for the various departments of the Company, according to their respective functions and competencies.

 

d. how is the compensation structured to reflect the progress of performance indicators:

 

The variable compensation (profit sharing) is defined according to the following basis: (i) below a certain level of target achievement, no variable compensation shall be due, but, on the other hand, outstanding accomplishments of targets must be compensated with participation on the results comparable to or even higher than top levels in the market; and (ii) variable compensation will only be granted if both the targets of the Company and those targets of the manager are achieved.

 

The managers have the possibility to reinvest their variable compensation in the Company, by using said compensation, in total or in part, for the exercise of the stock option granted within the Option Plan. In this event, the Company may grant to said executives additional shares or options, depending on the reinvestment level of their variable compensation.

 

For high potential executives, the Company also adopts a variable pay practice defined as Share Appreciation Rights. According to such practice, the executives receive, after vesting periods varying between five and ten years, a value per share corresponding to the closing price of shares or American Depositary Receipts (“ADRs”) issued by the Company at B3 S.A. - Brasil, Bolsa, Balcão (“B3”) or at the New York Stock Exchange (“NYSE”), as applicable, on the trading session immediately before the respective vesting periods.

 

e. how the compensation policy or practice is aligned with short, medium and long-term interests of the Company:

 

The fixed compensation is a compensation based on market research, but as the segment cycle in which the Company operates in is the segment of medium and long term, the alignment of the compensation to the interests of the Company is verified by means of the granting of a substantial portion of compensation referred to those periods.

 

The medium-term income is aligned with the compensation policy of the Company as to the payment of the profit sharing. In this case, the income of the Company and the results of its management during the year will affect the amount to be assigned as variable pay.

 

Additionally, the Option Plan requires a commitment of funds over the long-term, by virtue of the vesting term, the restriction on sale applicable to the corresponding shares or the delivery of stock options or shares being contingent upon the executive continued employment with the Company.

 

The Stock Plan reinforces the need for a long-term commitment, once the delivery of the Company’s shares is contingent upon the executive continued employment with the Company and the lapse of a vesting period.

 

Share Appreciation Rights occasionally granted to elected high potential executives by the Company, align the long-term and very long-term interests by means of the possibility of receiving, after the vesting periods of five or ten years, the amount corresponding to the appreciation of the shares issued by the Company, to encourage the retaining of talent as well as such appreciation of shares.

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As such, it is understood that the compensation policy of the Company is totally aligned with the monitoring of its performance and, therefore, reaffirms the sharing of the risk and profits among the Company’s managers.

 

f. existence of compensation borne by direct or indirect subsidiaries or controlling companies:

 

On November 25, 2008, some Company managers received stock options of shares issued by ABI, the controlling shareholder of the Company, totaling approximately five million options, with approximately one million options for members of the Board of Officers, at the time, and approximately 4 million for members of the Board of Directors, at the time. Each of such options entitles the acquisition of one common share issued by ABI. One half of those options became exercisable on January 1st, 2014 and the other half became on January 1st, 2019. In both cases the options may be exercised within five years at an exercise price of €10.32, corresponding to the market price of the shares of ABI on the date the options were granted. Moreover, the exercise of such options also depended on ABI’s net debt to EBITDA ratio to fall below 2.5 before December 31, 2013, which has been achieved. In 2016, there was a grant of restricted shares issued by ABI, in accordance with the applicable lock-up terms, in a total amount of approximately one hundred and seven thousand restricted shares, of which approximately two thousand and five hundred for members of the Board of Executive Officers and one hundred and four thousand restricted shares to the members of the Board of Directors.

 

In 2017, certain members of the Board of Directors received 2.1 million in stock options relating to shares issued by ABI and certain members of the Board of Officers received 2.2 million in stock options relating to shares issued by ABI, being 3.75 million in stock option conditional on achieving CAGR EBITDA of 7% in the fifth year. In case the condition is not met, a new evaluation will be made for the sixth year and later for the seventh year. The remaining stock options do not have a performance condition and have a vesting term of 5 years. In addition, in 2017, there was a concession of restricted shares issued by ABI in the total amount of 0.4 million shares with a vesting term of 5 years

 

In 2018, certain members of the Board of Directors received 2.3 million in ABI options and certain members of the Board of Officers received 0.01 million in ABI options, being 1.7 million in options that are conditional on achieving CAGR EBITDA of 7% in the fifth year. In the case the condition is not met, a new evaluation will be made for the sixth year and later for the seventh year. The remaining stock options do not have a performance condition and have a vesting term of 5 years. In addition, in 2018, there was a concession of restricted shares issued by ABI in a total of 0.2 million shares with vesting term of 5 years.

 

In 2019, certain members of the Board of Directors received 0.5 million in ABI options and no member of the Board of Officers received ABI options. The options have a vesting term of 5 years. In addition, in 2019, there was a concession of restricted shares issued by ABI in a total of 0.4 million shares with vesting term of 5 years.

 

g. existence of any compensation or benefit connected to the occurrence of a certain corporate event, such as the sale of corporate control of the Company:

 

Not applicable once there is no compensation or benefit connected to the occurrence of any corporate event.

 

h. practices and procedures adopted by the Board of Directors to define the individual compensation of the Board of Directors and Board of Officers, appointing:

 

i. the bodies and committees of the issuer that participate in the decision-making process, identifying the form in which they participate

 

The following bodies participate in the decision-making process for the definition of the individual compensation of the Board of Directors and the Board of Officers of the Company: the Operations, Finance and Compensation Committee and the Board of Directors. The Compensation, Financial and Operation Committee is responsible for providing an opinion on the management’s proposal to be assessed by the Board of Directors concerning the definition of the compensation policy for the high-performance management and employees of the Company, including their individual compensation packages, in order to the ensure that the beneficiaries have the proper compensation and incentives to reach an exceptional and sustainable performance. On the other hand, the Board of Directors is responsible for deciding on the recommendation presented by the Operations, Finance and Compensation Committee, as well as defining the criteria for the granting of stock / options, compensation and benefits (indirect benefits, participation on the results etc.) of the top management and employees (that is, the managers or holders of equivalent officer positions) of the Company.

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ii. criteria and methodology used to establish the individual compensation, appointing if studies were used to verify the market practices and, if yes, the comparison criteria and scope of said studies

 

The fixed and variable individual compensation of the members of the Board of Directors was defined based on a remuneration survey conducted with large public companies and is updated annually based on the IPCA variation until the Board of Directors deems it necessary to engage at a new compensation survey. All directors receive the same remuneration, being noted that (i) the directors compensated by the controlling shareholder and the alternates do not receive any fees from the Company; and (ii) the co-chairman of the Board of Directors compensated by the Company has different compensation due to his unique experience in the sector in which the Company operates, his greatest attributions and his longer time of dedication.

 

The fixed and variable individual compensation of the members of the Board of Officers is defined based on an annual remuneration survey, using the group of companies classified as “non-durable consumer goods” in the comparison. For the definition of fees, the monthly amount paid by the median of the companies involved in the survey is used as reference. If there is a positive variation of this indicator in relation to the previous year, the reference of the previous year is updated. After updating the market benchmark for each position level, the fees are set by varying according to meritocracy criteria and the seniority level of the executive. Without prejudice to the evaluation by the Operations, Finance and Compensation Committee and by the Board of Directors, as indicated in item (i) above, the fees of the Board of Officers are analyzed annually by the Company’s People & Management area, which may make adjustment recommendations, if necessary. Any recommendations need to be approved by the CEO to be implemented.

 

iii. the frequency and method in which the Board of Directors assesses the adequacy of the compensation policy of the issuer

 

Annually, the Operations, Finance and Compensation Committee evaluates the retention of the Company’s talents, which includes the analysis of the need to adapt the compensation practices adopted by the Company. If this Committee deems it necessary, it is proposed to the Board of Directors to adjust these practices. In addition, the goals of executives, whose achievement is decisive in the determination of the amount to be paid by the Company as variable compensation and the amount of stock options to be granted are reviewed and validated by the Board of Directors annually.

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13.2. Regarding the compensation of the Board of Directors, Board of Officers and Fiscal Council recognized in the income statement for the three previous fiscal years and forecasts for current year

 

Forecast for 2020

Board of Directors

Board of Officers

Fiscal Council

Total

No. of Members

                                    13.00

                                    11.67

                                      6.00

                                    30.67

No. of members receiving compensation

                                      8.00

                                    11.67

                                      6.00

                                    25.67

Annual Fixed Compensation

-

-

-

-

Salary/fees

5,866,441.00

15,030,603.00

1,802,250.00

22,699,294.00

Direct and indirect benefits

-

-

-

-

Compensation for sitting on Committees

-

-

-

-

Other

1,173,288.00

2,999,299.00

360,450.00

4,533,037.00

Description of other fixed compensation

Others: refers to INSS employer’s contribution

Others: refers to INSS employer’s contribution

Others: refers to INSS employer’s contribution

-

Variable Compensation

-

-

-

-

Bonus

-

-

-

-

Profit sharing

5,761,394.00

42,587,950.00

-

48,349,344.00

Compensation for attending meetings

-

-

-

-

Commissions

-

-

-

-

Other

-

-

-

-

Description of other variable compensation

-

-

-

-

Post-Employment Benefits

-

                                    919,080.00

-

                    919,080.00

Termination Benefits

-

-

-

-

Share-based compensation, including stock options (i)

6,998,916.00

29,742,159.00

-

36,741,075.00

Observation

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

-

Total compensation

19,800,039.00

91,279,091.00

2,162,700.00

113,241,830.00

2019

Board of Directors

Board of Officers

Fiscal Council

Total

No. of Members

                                    13.00

                                    10.92

                                      5.67

                                    29.58

No. of members receiving compensation

                                      8.00

                                    10.92

                                      5.67

                                    24.58

Annual Fixed Compensation

-

-

-

-

Salary/fees

                        5,413,489.00

                      15,434,648.00

                        1,598,250.00

                      22,446,387.00

Direct and indirect benefits

-

-

-

-

Compensation for sitting on Committees

-

-

-

-

Other

                        1,082,698.00

                        3,025,520.00

                           319,650.00

                        4,427,868.00

Description of other fixed compensation

 Others: refers to INSS employer’s contribution

Others: refers to INSS employer’s contribution

Others: refers to INSS employer’s contribution

-

Variable Compensation

-

-

-

-

Bonus

-

-

-

-

Profit sharing

                                1,122,565.00

                               6,955,545.00

-

               8,078,110.00

Compensation for attending meetings

-

-

-

-

Commissions

-

-

-

-

Other

-

-

-

-

Description of other variable compensation

-

-

-

-

Post-Employment Benefits

-

                                    835,527.00

-

                    835,527.00

Termination Benefits

-

-

-

-

Share-based compensation, including stock options

                                6,706,482.00

                              34,586,878.00

-

               41,293,360.00

Observation

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

-

Total compensation

14,325,234.00

60,838,118.00

1,917,900.00

77,081,252.00

119


 

 

2018

Board of Directors

Board of Officers

Fiscal Council

Total

No. of Members

                                                13.00

                                                10.67

                                                 5.58

                             29.25

No. of members receiving compensation

                                                 8.33

                                                10.67

                                                 5.58

                             24.58

Annual Fixed Compensation

-

-

-

-

Salary/fees

                            5,300,357.00

                                 11,602,815.00

                                 1,490,306.00

               18,393,478.00

Direct and indirect benefits

-

-

-

-

Compensation for sitting on Committees

-

-

-

-

Other

                                  1,060,071.00

                                2,450,542.00

                                    299,254.00

                 3,809,867.00

Description of other fixed compensation

Others: refers to INSS employer’s contribution

Others: refers to INSS employer’s contribution

Others: refers to INSS employer’s contribution

-

Variable Compensation

-

-

-

-

Bonus

-

-

-

-

Profit sharing

                                    469,575.00

                                2,344,266.00

                                                      -  

                  2,813,841.00

Compensation for attending meetings

-

-

-

-

Commissions

-

-

-

-

Other

-

-

-

-

Description of other variable compensation

-

-

-

-

Post-Employment Benefits

                                                      -  

                                    849,976.37

                                                      -  

                    849,976.37

Termination Benefits

-

-

-

-

Share-based compensation, including stock options(i)

                                7,595,577.00

                                 23,201,114.00

                                                      -  

               30,796,691.00

Observation

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

 -

Total compensation

14,425,580.00

40,448,713.00

1,789,560.00

56,663,853.00

(i)                Amounts arising from the accounting effects provided for in CPC 10 - Share-based Payment.

120


 

 

2017

Board of Directors

Board of Officers

Fiscal Council

Total

No. of Members

13.00

11.00

6.00

30.00

No. of members receiving compensation

9.00

11.00

6.00

26.00

Annual Fixed Compensation

-

-

-

-

Salary/fees

5,432,873.00

11,038,940.00

1,546,354.00

18,018,167.00

Direct and indirect benefits

-

-

-

-

Compensation for sitting on Committees

-

-

-

-

Other

1,086,575.00

2,207,788.00

309,271.00

3,603,634.00

Description of other fixed compensation

Others: refers to INSS employer’s contribution

Others: refers to INSS employer’s contribution

Others: refers to INSS employer’s contribution

-

Variable Compensation

-

-

-

-

Bonus

-

-

-

-

Profit sharing

2,075,768.00

10,713,235.00

 -  

12,789,003.00

Compensation for attending meetings

-

-

-

-

Commissions

-

-

-

-

Other

-

-

-

-

Description of other variable compensation

-

-

-

-

Post-Employment Benefits

-

854,052.00

-

854,052.00

Termination Benefits

-

-

-

-

Share-based compensation, including stock options(i)

10,866,993.00

27,998,463.00

-  

38,865,456.00

Observation

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

The number of members of each body corresponds to the average annual number of members of each body determined on a monthly basis to two decimal places.

 

Total compensation

19,462,209.00

52,812.478.00

1,855,625.00

74,130,312.00

(i) Amounts arising from the accounting effects provided for in CPC 10 - Share-based Payment.

Note: the alternate members of the Board of Directors and of the Fiscal Council are accounted for in the “number of members” included in the tables above.

 

 

 

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13.3. Regarding the variable compensation of the Board of Directors, the Board of Officers and the Fiscal Council for the three previous fiscal years and the forecasts for current fiscal year:

 

Variable compensation – forecast for 2020

Body

Board of Directors

Board of Officers

Fiscal Council

Total

No. of members

13.00

11.67

6.00

30.67

No. of members receiving compensation

1.00

11.67

0.00

12.67

Bonus

-

-

-

-

Minimum amount according to compensation plan

-

-

-

-

Maximum amount according to compensation plan

-

-

-

-

Amount provided for in compensation plan in case the targets are met

-

-

-

-

Amount effectively recognized in the income statement for the fiscal year

-

-

-

-

Profit sharing

 

 

 

 

Minimum amount according to compensation plan

210,051

1,525,891

-

1,735,942

Maximum amount according to compensation plan

5,761,394

42,587,950

-

48,349,344

Amount provided for in compensation plan in case the targets are met

2,400,581

17,387,694

-

19,788,275

Amount effectively recognized in the income statement for the fiscal year

-

-

-

-

 

 

Variable compensation – fiscal year ended on December 31, 2019

Body

Board of Directors

Board of Officers

Fiscal Council

Total

No. of members

13.00

10.92

5.67

29.58

No. of members receiving compensation

1.00

10.92

0.00

11.92

Bonus

-

-

-

-

Minimum amount according to compensation plan

-

-

-

-

Maximum amount according to compensation plan

-

-

-

-

Amount provided for in compensation plan in case the targets are met

-

-

-

-

Amount effectively recognized in the income statement for the fiscal year

-

-

-

-

Profit sharing

 

 

 

 

Minimum amount according to compensation plan

204,526

1,473,022

-

1,677,548

Maximum amount according to compensation plan

5,609,855

41,089,772

-

46,699,627

Amount provided for in compensation plan in case the targets are met

2,337,440

16,834,535

-

19,171,975

Amount effectively recognized in the income statement for the fiscal year

1,122,565

6,955,545

-

8,078,110

 

 

 

 

 

 

122


 

Variable compensation – fiscal year ended on 12/31/2018

Body

Board of Directors

Board of Officers

Fiscal Council

Total

No. of members

13.00

10.67

5.58

29.25

No. of members receiving compensation

1.00

10.67

0.00

11.67

Bonus

-

-

-

 

Minimum amount according to compensation plan

-

-

-

-

Maximum amount according to compensation plan

-

-

-

-

Amount provided for in compensation plan in case the targets are met

-

-

-

-

Amount effectively recognized in the income statement for the fiscal year

-

-

-

-

Profit sharing

 

 

 

 

Minimum amount according to compensation plan

504,674

2,782,303

-

3,286,977

Maximum amount according to compensation plan

4,249,890

23,429,920

-

27,679,810

Amount provided for in compensation plan in case the targets are met

3,162,886

15,499,729

-

18,662,615

Amount effectively recognized in the income statement for the fiscal year

469,575

2,344,266

-

2,813,841

 

 

 

123


 

 

Variable compensation – fiscal year ended on 12/31/2017

 

Body

Board of Directors

Board of Officers

Fiscal Council

Total

No. of members

13.00

11.00

6.00

30.00

No. of members receiving compensation

1.00

11.00

0.00

12.00

Bonus

-

-

-

-

Minimum amount according to compensation plan

-

-

-

-

Maximum amount according to compensation plan

-

-

-

-

Amount provided for in compensation plan in case the targets are met

-

-

-

-

Amount effectively recognized in the income statement for the fiscal year

-

-

-

-

Profit sharing

 

 

 

 

Minimum amount according to compensation plan

186,364

1,153,034

-

1,339,398

Maximum amount according to compensation plan

3,923,454

24,274,405

-

28,197,859

Amount provided for in compensation plan in case the targets are met

969,878

6,000,633

-

6,970,511

Amount effectively recognized in the income statement for the fiscal year

2,075,768

10,713,235

-

12,789,003

 

(1)              As shown in the table of item 13.2 above, the Company only pays profit sharing. Therefore, bonus payment does not apply for the purposes of this item 13.3.

 

Note: the alternate members of the Board of Directors and of the Fiscal Council are accounted for in the “number of members” included in the tables above.

124


 

13.4. Regarding the share-based compensation plan applicable to the Board of Directors and Board of Officers in force for the last fiscal year and forecasted for current fiscal year

 

a. general terms and conditions:

 

Option Plan

 

The Option Plan was approved by the Extraordinary Shareholders’ Meeting of the Company held on July 30, 2013 and provides for the general conditions applicable to the granting of options, the criteria to determine its exercise price, its general terms and conditions, and the restrictions on the transfer of shares acquired by its exercise.

 

The Option Plan is managed by the Board of Directors which grants options establishing the specific terms and conditions applicable to each grant through stock option programs, such as the identification of the beneficiaries, the options’ exercise price, any restrictions to the acquired shares, the vesting periods and the option exercise periods and rules applicable to the termination of the beneficiary’s employment contract, and it may also establish targets related to the performance of the Company. The Board of Directors may further define specific rules applicable to beneficiaries of the Company who have been transferred to other countries, including to the Company’s controlling companies its subsidiaries.

 

Under the Option Plan, senior employees and management of the Company or its direct or indirect subsidiaries (beneficiaries) are eligible to receive stock options of the Company or ADR based in shares issued by the Company, in the event the beneficiaries do not live in Brazil. Currently, approximately 580 people (including managers and employees) hold stock options for shares of the Company, taking all the programs of the Option Plan the together.

 

Share Appreciation Right

 

The Company also received the long-term incentive, approved by the Board of Directors of Companhia de Bebidas das Américas – Ambev on August 26, 2011, granted to some executives identified as high potential by the Company (and such incentive is denominated “Share Appreciation Rights”). Such incentive is beyond the scope of the Option Plan, since it does not involve settlement by the granting or acquisition of shares. Within the scope of the Share Appreciation Rights program, each beneficiary will receive two separate lots of Share Appreciation Rights – (lot A and lot B), as the case may be, in which each Share Appreciation Right will correspond to a share or ADR, as the case may be, subject to lock-up periods of five and ten years, respectively as of the date of their granting. Once such five or ten-year term has elapsed, as applicable, the beneficiary who remains at the Company or in any entity of its group will receive in funds immediately available the amount in Brazilian Reais corresponding to the closing price of shares or ADRs of the Company at B3 or NYSE, respectively, at the trading session immediately before the end of such lock-up terms. The Share Appreciation Rights granted  do not concern the delivery, subscription or acquisition of shares or ADRs, and, therefore, will not ascribe to the beneficiary the condition of shareholder of the Company or to any right or prerogative as a result of such condition. The benefits ascribed to the granting of Share Appreciation Rights shall be considered as variable compensation.

 

Stock Plan

 

The Company implemented a Stock Plan, approved by the Extraordinary Shareholders’ Meeting held on April 29, 2016, under which certain employees and members of the management of the Company or its subsidiaries, direct or indirect, are eligible to receive shares of the Company including in the form of ADRs, in the event of persons living outside Brazil. The shares that are subject to the Stock Plan are designated “Restricted Shares”.

 

The Board of Directors has broad powers of organization and management of the Stock Plan, in accordance with its general terms and conditions, and must establish the terms and conditions applicable to each Restricted Shares program (Share-Based Payment Program - “Stock Programs”), which, for its turn, sets the terms and conditions specific to the participants of that program, including the conditions and procedures for transferring the Restricted Shares and rules applicable in case of termination of the employment contract.

 

125


 

Under the Stock Plan, the participants may receive up to 0.3% of shares corresponding to the Company’s capital stock, and the delivery of the Restricted Shares is exempt from financial consideration.

 

b. main purposes of the Plan:

 

The main purposes of the  Plan are: (a) to encourage the expansion, the success and the achievement of Company’s corporate purposes and the interests of its shareholders, allowing executives and senior employees to be owners of shares of the Company, in the terms of the Plans, encouraging this way their integration with the Company; and (b) enabling the Company to obtain and maintain, effectively, the services of its executives and senior employees by offering them the possibility of becoming shareholders of the Company, in the terms of the Plans.

 

The purposes of the Share Appreciation Right incentive are the same described above, aiming at encouraging the alignment of interests for the generation of value in the long term, except for the fact that there is no delivery of shares.

 

c. how does these plans contribute to these objectives:

 

The possibility of acquiring or receiving shares issued by the Company under advantageous conditions provided for in the Plans allows the introduction of considerable incentives for the employees and management of the Company to commit to create value over the long term, seeking the future appreciation of shares. In addition, it allows the employees and the managers of the Company to join the interests of the shareholders, the corporate purposes and the growth plans of the Company, maximizing their results. Also, the adopted model expects to be efficient as a mechanism of retention of the key employees and managers due to, mainly, the sharing of the appreciation of the Company’s shares.

 

d. how does the Plan fit into the Company compensation policy:

 

The Plans and the incentive of the Share Appreciation Rights encourage the direct commitment of the respective beneficiaries or participants, as the case may be, with the performance of the Company in the medium and long term, once the most substantial portion of asset increase is connected to said performance.

 

In addition, the Option Plan contains elements that encourage the commitment of beneficiaries by giving them the option to allocate their own funds to purchase shares. Additionally, the Option Plans and the Share Appreciation Rights incentive stimulate the continued employment of executives that the Company deems highly strategic to its business and activities, upon the granting of an attractive variable compensation additional in the long or very long term.

 

e. how does the Plan aligns the interests of the management with those of the Company in the short, medium and long term:

 

The options granted under the Option Plan provide for mechanisms that enable lining up the interests of the management in different time horizons. In the short term, the managers participating in the Option Plan are encouraged to contribute to high earnings of the Company, since, at the end of the respective grace periods, when the beneficiaries become owners of the shares of the Company, they will also have the right to receive dividends. Regarding the medium and long term, the models used by the Company to grant stock options allow the allocation of a percentage of the beneficiary’s share on the results to the immediate exercise of the options which will give right to shares that will be subject to restrictions on transfer and delivery contingent upon continued employment of the beneficiary with the Company. For this reason, beneficiaries are expected to have their interests aligned with expectations of appreciation of the shares of the Company in the medium and long term, once the relevant shares will be subject to a lock-up, that is, a period during which they cannot be transferred (please refer to item “l” below). In addition, there are granting models in which the options granted to the beneficiaries are subject to a vesting period during which such shares may not be exercised and, therefore, convertible into shares. Therefore, the granting of options with said characteristics serves as a powerful incentive to align the interests of employees with those of the management of the Company in the long term, due to the possibility of expressive gains in the event of appreciation of the stocks of the Company.

 

126


 

In the case of the Share Appreciation Rights incentive, grants are essentially designed to align interests in the long and very long term. Any amounts may only be paid by the Company to the beneficiary after the applicable lock-up period of five or ten years, then encouraging a sustainable value generation over the time, and primarily encouraging continued employment of executives deemed strategic or of high potential in relation to the Company’s long-term targets for a term of two to ten years (depending on the program).

 

The same logic is applicable to the Stock Plan, programs of which the participants only receive the shares after long vesting periods and, further, conditioned to the continuance of the participant in the Company.

 

f. maximum number of shares covered:

 

The Option Plan does not provide for a maximum number of options potentially covered by the plan. Nevertheless, the Stock Plan provides for that the global amount of shares to be granted to employees and managers of the Company is up to 0.3% of shares representing the Company’s capital stock.

 

On December 31, 2019, the maximum number of shares covered by options not yet exercised, in relation to the members of the Board of Officers and the Board of Directors, totaled 20,091,273 common shares issued by the Company, already including the effects of the dilution resulting from the exercise of all options under all programs within the scope of the outstanding Option Plan.

 

g. maximum number of options to be granted:

 

The Option Plan does not provide the maximum number of options potentially covered by the plan, it being incumbent upon the Board of Directors to establish the options upon the approval of each program.

 

Considering that each option ensures to the beneficiary the right to acquire a common share of the Company, the quantity of granted options is connected to the dilution limit described in the second paragraph of item “f” above”.  On December 31, 2019, this amount corresponds, in relation to the members of the Board of Directors and Board of Officers, to 20,091,273 options within the scope of all programs in the Option Plan.

 

This item does not apply to the Stock Plan and the Share Appreciation Rights incentive.

 

h. conditions to acquire shares:

In relation to the last five fiscal years and in relation to the current fiscal year, in the Company’s programs named Programs 2014.1, 2014.2, 2014.3, 2015.1, 2015.2, 2015.3, 2016.1, 2016.2 e, 2016.3, 2017.1, 2017.2, 2017.4, 2018.1, 2018.2, 2018.4, 2019.1, 2019.2, 2019.4, 2019.5 and 2020.1, all within the Scope of the Option Plan, two types of grant were awarded, as follows: (i) in one type of grant,, the exercise price of the options must be paid on demand (or within five business days), although the delivery of a substantial part of the shares acquired is contingent upon continued employment of the beneficiary with the Company for a term of two to ten  years (depending on the program) as of the exercise date; and (ii) in the other type of grant, a beneficiary may only exercise his/her options after a vesting period of five years, upon payment of exercise price on demand, in consideration for the delivery of shares. Under this new model the exercise of options is not conditioned to meeting the Company’s performance targets.

 

The Share Appreciation Rights incentive does not involve exactly the acquisition of shares. The cash payment by the Company to the beneficiary of the amounts determined based on market prices of shares or ADRs issued by the Company is subject to continued employment with the Company for a term of five years for lot A and ten years for lot B, and it is not contingent upon the Company meeting performance targets.

 

In the Programs 2018.1, 2018.3, 2018.4, 2019.1, 2019.3, 2019.6 and 2020.1, within the scope of the Stock Plan, the granting was made free of charges and the shares will only be transferred to the participants after the vesting period of five years, and provided that the participant maintains the employment/statutory bond with the Company until the end of said term. There is no binding of the participants to the reaching of the Company’s performance goals.

 

 

127


 

 

i. criteria to set the acquisition or exercise price:

 

The price of the exercise of the shares arising from the Programs 2014.1, 2014.2, 2014.3, 2015.1, 2015.2, 2015.3, 2016.1, 2016.2, 2016.3, 2017.1, 2017.2, 2017.4, 2018.1, 2018.2, 2018.4, 2019.1, 2019.2, 2019.4, 2019.5 and 2020.1, all in the scope of the Option Plan, corresponds to the closing price of the Company’s stocks traded at B3 on the trading session immediately before the grant date, traded at B3, and a discount may be applied depending on the program.

 

The Share Appreciation Rights incentive does not involve the acquisition of shares, but rather the payment of a cash amount by the Company to the beneficiary. Such amount is determined at the end of the lock-up period applicable to each lot, based on the closing price of Company’s shares or ADRs on the trading session of B3 or NYSE, as applicable, immediately before the date of payment. Each Share Appreciation Right shall correspond to the right related to one share or ADR, as applicable.

 

In the Programs 2018.1, 2018.3, 2018.4, 2019.1, 2019.3, 2019.6 and 2020.1, within the scope of the Stock Plan, the granting of shares shall be made free of charge to the participants, under the terms of the Stock Plan and of the relevant program.

 

j. criteria to set the final term for exercise:

 

Within the scope of the Option Plan, according to the Programs 2014.1, 2014.2, 2014.3, 2015.1, 2015.2, 2015.3, 2016.1, 2016.2, 2016.3, 2017.1, 2017.2, 2017.4, 2018.1, 2018.4, 2019.1, 2019.5 the lots may only be exercised (i) in full upon the execution of the option grant agreement by the beneficiary; or (ii) in a period of five years after the verification of the vesting period of the relevant options. The programs 2018.2, 2019.2, 2019.4 and 2020.1 have single lots that may be exercised, in total or in part, within 45 days from the granting date.

 

The criteria used in the establishment of said terms takes into account the short, medium and long-term goals of this incentive form.

 

With regard to the Share Appreciation Rights, lot A provides for a term of five years to receive the relevant amounts, while in the case of lot B, there is a term of ten years. The main purpose of grace periods is to retain executives deemed of high potential and strategic for the business and activities of the Company, encouraging their continued employment with the Company in view of the possibility of receiving, in the long term, potentially attractive amounts linked to the value of shares issued by the Company.

 

Within the scope of the Stock Plan, according to the Programs 2018.1, 2018.3, 2018.4, 2019.1, 2019.3, 2019.6 and 2020.1 the delivery of Restricted Shares will be made after the vesting period of five years.

 

k. form of settlement:

 

In the case of the Option Plan, the Company may use treasury stocks to satisfy the exercise of options, and may, when applicable, use ADRs backed by shares issued by the Company. The Company may also issue new shares, upon an increase in capital stock, upon a resolution of the Board of Directors within the limits of authorized capital. The rule is that the exercise price must be paid on demand upon the exercise of the options within a period of up to five days as of their exercise date, depending on the program.

 

The Share Appreciation Rights do neither involve the effective delivery of shares, nor the payment of any amount by the beneficiary. They are settled upon the payment of the cash benefit by the Company directly to the beneficiary, immediately after the end of the relevant grace period.

 

Within the scope of the Stock Plan, according to the Programs 2018.1, 2018.3, 2018.4 and 2019.1, the Restricted Shares shall be delivered by the Company to the respective participant after the vesting period of five years. For purposes of the Stock Plan, the Company shall use existing shares held in treasury.

 

l. restrictions to the transfer of shares:

 

Within the Programs 2014.1, 2014.2, 2014.3, 2015.1, 2015.2, 2015.3, 2016.1, 2016.2, 2016.3 as well as the Programs 2017.1, 2017.2, 2017.4, 2018.1, 2018.2, 2018.4, 2019.1, 2019.2, 2019.4, 2019.5 and 2020.1, under terms of the Option Plan, the shares resulting from the option exercise may (i) be free and clear and may be transferred at any time, respected the preemptive right of the Company; or (ii) be subject to a lock-up of, at least, five years as of the date of the option exercise, depending on the program.

128


 

 

Share Appreciation Rights incentive by the Company does not involve the l delivery of shares. Therefore, there is nothing to say about any restriction to the transfer of shares. Please note, however, that the receipt of the amounts under the share appreciation rights program is subject to the grace periods described in sub-item “h” above.

 

Within the scope of the Stock Plan, according to the Programs 2018.1, 2018.3, 2018.4, 2019.1, 2019.3, 2019.6 and 2020.1, the delivered shares will be free and clear, and may be transferred at any time, respected the preemptive right of the Company.

 

m. criteria and event that, once verified, will result in the suspension, amendment or termination of the Plan:

 

The Plans may be amended or terminated by the Board of Directors, pursuant to the terms under said Plans. Regardless of the authority of the Board of Directors, no decision may change the rights and obligations of the Company or beneficiaries or participants in force.

 

In addition, in case of dissolution, transformation, merger, consolidation, spin-off or reorganization of the Company, the existing options will be subject to the rules established by the Board of Directors on this matter.

 

n. effects of withdrawal of a manager from the bodies of the Company on the rights provided under share-based compensation plan:

 

Pursuant to the Plans, the Board of Directors or a committee, as the case may be, shall establish, in each Program, the rules applicable to the cases of severance of Company’s beneficiaries and participants due to the termination of the employment agreement, end of term of office, dismissal or resignation from executive office, as well as to the cases of retirement, permanent disability or death of participants.

 

Programs (Option Plan)

 

- Programs 2014.2, 2014.3, 2015.1, 2015.2, 2015.3, 2016.2, 2016.3, 2017.1, 2017.4, 2018.1, 2018.4, 2019.1 and 2019.5: For these Programs, in the event of termination of the beneficiary’s employment contract, the following rules shall apply, as per each described event, namely: (i) in the event of termination for cause or similar reason, renouncement or resignation or leave without pay for a period exceeding 24 months, any options not qualified to be exercised will lapse and any options already qualified to be exercised may be so within 90 days as of the severance date, after which they will be canceled; (ii) in the event of dismissal without cause or severance resulting from outsourced services, sale of affiliate company or business unit of the Company, any options not qualified to be exercised will lapse and any options already qualified to be exercised may be so within 180 days as of the severance date, after which they will be canceled; (iii) in the event of severance after a beneficiary has cumulatively achieved 70 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), any options qualified to be exercised may be so, while in relation to any options not qualified to be exercised, in case severance has occurred within 24 months after the option grant, the beneficiary may only exercise his/her options on a pro rata basis if he/she has participated, upon destination of his/her variable net compensation, of other Option Programs that he/she has participated as beneficiary, conditioned to the execution of a non-compete agreement and, in case severance has occurred after 24 months, the beneficiary may exercise his/her options on a pro rata basis also conditioned to the execution of the above-mentioned non-compete agreement; (iv) in the event of severance after a beneficiary has cumulatively achieved 80 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), any options qualified to be exercised may be so within their respective terms, provided that he/she executes the above-mentioned non-compete agreement if this is so resolved by the Board of Directors of the Company; and (v) in case of death or permanent disability, any options already qualified to be exercised may be so within their respective terms, and any options not yet qualified to be exercised may nevertheless be so immediately, provided, however, that the Board of Directors of the Company may, in case of permanent disability, condition such exercise to the execution of a non-compete agreement.

 

129


 

- Programs 2014.1, 2015.1, 2016.1, and 2017.2: For these Programs, in the event the employment agreement or term of office of the beneficiary terminates during the vesting period, for any reason, except for the cases set forth below, the beneficiary will lose the right to receive said shares.  In the event of termination of the employment contract or term of office after 24 months as of grant date, for any reason other than (a) for cause, renouncement or resignation, or (b) the events provided below: (i) the beneficiary shall be entitled to receive, always on a pro rata basis to the number of calendar months completed during which he/she has remained performing his/her functions to the Company, its subsidiaries, controlling companies and affiliates as of the date the options were granted, the shares assigned to him/her until the termination of his/her functions to the Company, its subsidiaries, controlling companies and affiliates, provided that the Board of Directors may resolve that such receipt is contingent upon the execution and performance by the beneficiary of a non-compete agreement with the Company according to the terms and conditions established by the Board of Directors; and (ii) the restrictions to the transfer of shares provided for in the Program shall remain in force. In the event of severance after a beneficiary has cumulatively achieved seventy (70) years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), any options qualified to be exercised may be so, while in relation to any options not qualified to be exercised: (i) in case severance has occurred within 24 months after the option grant, the beneficiary will lose his/her right to receive the shares, except if the beneficiary shall have allocated 100% of his Bonus to full exercise of options in the last five years (or in such shorter period in which he/she has become eligible to participate in the Company’s Programs), in which case the beneficiary shall be entitled to receive, always on a pro rata basis to the number of calendar months completed during which he/she has remained in his/her office at the Company, its subsidiaries, controlling companies and affiliates, as of the grant date, the shares assigned to him/her until the date of termination of his/her employment with the Company, its subsidiaries, controlling companies and affiliates, provided that the Board of Directors may determine that receipt thereof shall be contingent upon the execution and performance, by the beneficiary, of a non-compete agreement with the Company; and (ii) if the severance occurred after 24 months after  the granting of options, the beneficiary shall be entitled to receive, at all times proportional to the number of complete civil months which he/she remained in the performance of his/her duties to the Company, or to its controlled or controlling companies and affiliates, since the stock granting date, the shares that were attributed to him/her until the termination of their duties to the Company or to its controlling or controlled companies and affiliates, it being certain that the Board of Directors may establish that the receipt is conditioned to the execution of and compliance with the non-compete agreement with the Company by the beneficiary.

 

In the event of severance after a beneficiary has cumulatively achieved 80 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), he/she shall be entitled to receive the shares after complying with the vesting period provided for in the Program. In this case, restrictions on the transfer of shares under the Program shall remain force.

 

In case of death or permanent disability of the beneficiary – in the latter case, contingent upon the execution and performance, by the beneficiary, of a non-compete agreement with the Company according to the terms and conditions established by the Board of Directors – he/she or his/her heirs or successors, as applicable, shall be entitled to immediately receive the shares resulting from the options granted, as well as the shares already assigned in the period, all of them free and clear.

 

- Programs 2018.2, 2019.2, 2019.4 and 2020.1: For such Programs, in the event the employment agreement or term of office of the beneficiary terminates (a) after the exercise date, for any reason, the beneficiary will remain entitled to the shares acquired under the program, as well as those acquired due to bonus, split, subscription or other acquisition form related to said shares or (b) prior to the exercise date, the beneficiary will lose right to the exercise of the options.

 

Share Appreciation Rights

 

In relation to lot A:

 

In the events of (i) dismissal for cause or similar reason; (ii) leave without pay for a period exceeding 24 months; (iii) renouncement or resignation; (iv) dismissal without cause; (v) severance resulting from outsourced services, sale of subsidiary, affiliate company or business unit of the Company; and (vi) severance after a beneficiary has cumulatively achieved 70 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), the Share Appreciation Rights will be canceled and terminated by operation of law.

130


 

 

In the events of (i) severance after a beneficiary has cumulatively achieved 80 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date); and (ii) permanent disability, the Share Appreciation Rights granted during the period starting on their grant date and ending on the severance date shall remain valid and their settlement shall comply with the vesting periods provided for in the relevant agreement, provided that receipt of the corresponding bonus shall be contingent upon the beneficiary executing and performing a non-compete agreement with the Company.

 

In the event of death of the beneficiary, the Share Appreciation Rights shall be settled on a pro rata basis according to a formula calculated based on the number of calendar months completed during the effectiveness of his/her employment contract with the Company and the beneficiary or, as applicable, his/her term of office as manager of the Company since the grant date.

 

In relation to lot B:

 

In the events of (i) dismissal for cause or similar reason; (ii) leave without pay for a period exceeding twenty-four (24) months; and (iii) renouncement or resignation, the Share Appreciation Rights shall be canceled and terminated by operation of law.

 

In the events of (i) dismissal without cause; (ii) severance resulting from outsourced services, sale of subsidiary, affiliate company or business unit of the Company; and (iii) severance after a beneficiary has cumulatively achieved 70 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), the following rules shall apply: (a) severance before the 5-year vesting term: - the Share Appreciation Rights shall be canceled and terminated by operation of law; and (b) severance between 5 and 10 years of grant date anniversary: - the Share Appreciation Rights shall be settled on a pro rata bass according to a formula calculated based on the number of calendar months completed during the effectiveness of his/her employment contract with the Company and the beneficiary or, as applicable, his/her term of office as manager of the Company since the grant date.

 

In the events of (i) severance after a beneficiary has cumulatively achieved 80 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date); and (ii) permanent disability, the Share Appreciation Rights granted during the period starting on the grant date and ending on severance date shall remain valid and their settlement shall comply with the vesting periods provided for in the relevant agreement, provided that receipt of the corresponding bonus shall be contingent upon the beneficiary executing and performing a non-compete agreement with the Company.

 

In the event of death of the beneficiary, the Share Appreciation Rights shall be settled on a pro rata basis according to a formula calculated based on the number of calendar months completed during the effectiveness of his/her employment contract with the Company and the beneficiary or, as applicable, his/her term of office as manager of the Company since the grant date.

 

Program (Stock Plan)

 

- Program 2018.1, 2019.1, 2019.3 and 2020.1:

 

For such Programs, in the event the employment agreement or term of office terminates during the vesting period, for any reason, except for the events described below, the beneficiary will lose the right to receive said shares. In the event of termination of the employment contract or term of office after 24 months as of grant date of the Restricted Shares, for any reason other than (a) termination for cause or similar reason, renouncement or resignation or leave without pay for a period exceeding 24 months, or (b) the events provided below: (i) the beneficiary shall be entitled to receive the corresponding shares, on a pro rata basis corresponding to the result of Restricted Shares and additional shares owned by the beneficiary on the severance date, multiplied by the complete civil months of employment or office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the Board of Directors may establish that the receipt be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary, with the Company, under the terms established by the Board of Directors; and (ii) the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

131


 

In the event of severance after a beneficiary has cumulatively achieved 70 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), except for the events of dismissal for cause, in relation to the Restricted Shares and additional shares that are not yet free to be delivered to the beneficiary: (i) if the severance occurred 24 months after the stock grant date and the beneficiary has participated, upon the destination of its net variable compensation (that is, total amount of the annual gratification, bonus or participation on the results, net of income tax and other levied charges), of all stock option programs of the Company approved by the Board of Directors of the Company in which his/her name appeared in the list of beneficiaries in the 5 years immediately prior to the severance date (or, in the event the beneficiary has become eligible to participate in such programs less than five years from the severance date, as many years as the years the beneficiary has become eligible), the beneficiary shall be entitled to receive the Restricted Shares and the additional shares, under the terms of the Program, on a pro rata basis corresponding to the result of Restricted Shares and additional shares owned by the beneficiary on the severance date, multiplied by the complete civil months of employment or office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the Board of Directors may establish that the receipt be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary, with the Company, under the terms established by the Board of Directors; and (ii) if the severance occurs after 24 months subsequent to the grant date of shares, the beneficiary shall be entitled to receive the Restricted Shares and the additional shares, under the terms of the Program, on a pro rata basis corresponding to the result of Restricted Shares and additional shares owned by the beneficiary on the severance date, multiplied by the complete civil months of employment or office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the receipt shall be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary, with the Company, under the terms established by the Board of Directors. In both cases, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

In the event of severance after a beneficiary has cumulatively achieved 80 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), except for the events of dismissal for cause, the beneficiary will receive the Restricted Shares and the additional shares that are not yet free to delivery, it being certain that the receipt shall be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary, with the Company. In this case, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

In case of death or permanent disability, the beneficiary (or his heirs or successors) will immediately receive the Restricted Shares and additional shares that are not yet free to be delivered under the Program, it being certain that in the event of permanent disability, the receipt shall be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary, with the Company. In case of death, all shares will be free and clear for sale at any moment. In case of permanent disability, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

- Program 2018.3:

 

For this Program, in the event the employment agreement or term of office of the beneficiary terminates during the vesting period, for any reason, the beneficiary will lose the right to receive said Restricted Shares, except for the events provided for as follows: In the event of severance by direct termination without case, in relation to the Restricted Shares that are not yet free to be delivered to the beneficiary: (1) if (a) the severance has occurred before 24 months after granting, and (b) the beneficiary has participated, through the allocation of part or all of its net variable remuneration (i.e., annual gratification, bonus or participation on the results, net of income tax and other levied charges) of all the Company’s stock option programs approved by the Company’s Board of Directors in which its name has been included in the list of beneficiaries in the 5 years immediately prior to its severance (or if the beneficiary has become eligible to participate in such programs for less than 5 years, as many years as the years the beneficiary has become eligible), the beneficiary will receive Restricted Shares pro rata equivalent to the result of the Restricted Shares held by the beneficiary on the date of severance multiplied by the complete civil months of employment or office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the Board of Directors may establish that the receipt be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary, with the Company, under the terms established by the Board of Directors, and (2) if the severance occurred 24 months after the stock grant date, the beneficiary will receive the Restricted Shares on a pro rata basis corresponding to the result of Restricted Shares owned by the beneficiary on the severance date, multiplied by the complete civil months of employment or term of office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the receipt will be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary with the Company, under the terms established by the Board of Directors. In both cases, the restriction on the sale of shares, set forth in the Program, will remain in effect.

132


 

 

In case of death or permanent disability, the beneficiary (or his heirs or successors) will immediately receive the Restricted Shares that are not yet free to be delivered under the Program, it being certain that in the event of permanent disability, the receipt shall be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary with the Company. In case of death, all shares will be free and clear for sale at any moment. In case of permanent disability, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

- Program 2018.4:

 

For this Program, in the event the employment agreement or term of office of the beneficiary terminates during the vesting period, for any reason, the beneficiary will lose the right to receive said Restricted Shares, except for the events provided for as follows: (i) Severance (1) by direct termination without case, or (2) after a beneficiary has cumulatively achieved 70 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date): except for the events of dismissal for cause, in relation to the Restricted Shares that are not yet free to be delivered to the beneficiary: (i) if (a) the severance occurred within 24 months after the granting and (b) the beneficiary has participated, upon the destination of part or all its net variable compensation (i.e., annual gratification, bonus or participation on the results, net of income tax and other levied charges), of all stock option programs of the Company approved by the Board of Directors of the Company in which his/her name appeared in the list of beneficiaries in the 5 years immediately prior to the severance date (or, in the event the beneficiary has become eligible to participate in such programs less than five years from the severance date, as many years as the years the beneficiary has become eligible), the beneficiary shall receive the Restricted Shares on a pro rata basis corresponding to the result of Restricted Shares owned by the beneficiary on the severance date, multiplied by the complete civil months of employment or term of office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the Board of Directors may establish that the receipt be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary, with the Company, under the terms established by the Board of Directors; and (ii) if the severance occurs after 24 months subsequent to the grant date of shares, the beneficiary shall be entitled to receive the Restricted Shares and the additional shares, under the terms of the Program, on a pro rata basis corresponding to the result of Restricted Shares and additional shares owned by the beneficiary on the severance date, multiplied by the complete civil months of employment or office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the receipt shall be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary with the Company, under the terms established by the Board of Directors. In both cases, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

In the event of severance after a beneficiary has cumulatively achieved 80 years (i.e. sum of his/her age and the duration of his/her service with the Company at severance date), except for the events of dismissal for cause, the beneficiary will receive the Restricted Shares that are not yet free to delivery, it being certain that that the receipt shall be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary with the Company. In this case, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

In case of death or permanent disability, the beneficiary (or his heirs or successors) will immediately receive the Restricted Shares that are not yet free to be delivered under the Program, it being certain that in the event of permanent disability, the receipt shall be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary with the Company. In case of death, all shares will be free and clear for sale at any moment. In case of permanent disability, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

133


 

- Program 2019.6:

 

For this Program, in the event the employment agreement or term of office of the beneficiary terminates during the vesting period, for any reason, the beneficiary will lose the right to receive said Restricted Shares, except for the events provided for as follows: In the case of (i) severance by direct termination without cause, in relation to the Restricted Shares that are not yet free to be delivered to the beneficiary: (1) if (a) the severance occurred within 24 months after the granting and (b) the beneficiary has participated, upon the destination of part or all its net variable compensation (i.e., annual gratification, bonus or profit sharing, net of income tax and other levied charges), of all stock option programs of the Company approved by the Board of Directors of the Company in which his/her name appeared in the list of beneficiaries in the 5 years immediately prior to the severance date (or, in the event the beneficiary has become eligible to participate in such programs less than five years from the severance date, as many years as the years the beneficiary has become eligible), the beneficiary shall receive the Restricted Shares on a pro rata basis corresponding to the result of Restricted Shares owned by the beneficiary on the severance date, multiplied by the complete civil months of employment or term of office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the Board of Directors may establish that the receipt be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary, with the Company, under the terms established by the Board of Directors; and (2) if the severance occurs after 24 months subsequent to the grant date of shares, the beneficiary shall be entitled to receive the Restricted Shares and the additional shares, under the terms of the Program, on a pro rata basis corresponding to the result of Restricted Shares and additional shares owned by the beneficiary on the severance date, multiplied by the complete civil months of employment or office by the period between the grant date and the relevant termination of the relation with the Company (which will always be inferior to 60 months), divided by 60, it being certain that the receipt shall be conditioned to the execution and compliance with a non-compete agreement, by the beneficiary with the Company, under the terms established by the Board of Directors. In both cases, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

 

In case of death, the beneficiary (or his heirs or successors) will immediately receive the Restricted Shares that are not yet free to be delivered under the Program, it being certain that in the event of permanent disability, the receipt shall be conditioned to the lapse of the grace period and to the execution and compliance with a non-compete agreement, by the beneficiary with the Company. In case of death, all shares will be free and clear for sale at any moment. In case of permanent disability, the restriction on the sale of shares, set forth in the Program, will remain in effect.

 

134


 

13.5 In relation to share-based payments made to the Board of Directors and Board of Officers recognized in the income statement of the last three fiscal years and the forecast for current year:

 

Share-based compensation estimated for the current fiscal year (*)

 

Body

Board of Directors

Board of Officers

No. of Members

13.00

11.67

No. of members receiving compensation

10.00

11.00

Weighted average exercise price:

 

 

(a) Options outstanding in the beginning of fiscal year

15.53

16.97

(b) Options lost during the fiscal year

N/A

N/A

(c) Options exercised during the fiscal year

N/A

N/A

(d) Options expired during the fiscal year

N/A

N/A

Potential dilution upon exercise of all options granted

 

0.0517%

0.0760%

(*) Based on the best estimate of the Company's management based on data for the fiscal year ended on 2019.

 

Share-based compensation – fiscal year ended on 12/31/2019

 

Body

Board of Directors

Board of Officers

No. of Members

13.00

10.92

No. of members receiving compensation

10.00

11.00

Weighted average exercise price:

 

 

(a) Options outstanding in the beginning of fiscal year

14.51

13.69

(b) Options lost during the fiscal year

0.00

0.00

(c) Options exercised during the fiscal year

0.00

10.66

(d) Options expired during the fiscal year

0.00

6.49

Potential dilution upon exercise of all options granted

 

0.0517%

0.0760%

 

Share-based compensation – fiscal year ended on 12/31/2018

 

 

Board of Directors

Board of Officers

No. of Members

13.00

10.67

No. of members receiving compensation

10.00

10.00

Weighted average exercise price:

-

-

(a) Options outstanding in the beginning of fiscal year

13.62

11.64

(b) Options lost during the fiscal year

0.00

0.00

(c) Options exercised during the fiscal year

6.26

11.35

(d) Options expired during the fiscal year

0.00

0.00

Potential dilution upon exercise of all options granted

0.0414%

0.0923%

 

Share-based compensation – fiscal year ended on 12/31/2017

 

 

 

Board of Directors

Board of Officers

No. of Members

13.00

11.00

No. of members receiving compensation

11.00

11.00

Weighted average exercise price:

-

-

(a) Options outstanding in the beginning of fiscal year

11.76

10.24

(b) Options lost during the fiscal year

0.00

0.00

(c) Options exercised during the fiscal year

0.78

7.54

(d) Options expired during the fiscal year

0.00

0.00

Potential dilution upon exercise of all options granted

0.0648%

0.0846%

135


 

 

 

Note: the alternate members of the Board of Directors are accounted for in the “number of members” included in the tables above.

 

For each grant recognized in income for the past three fiscal years and the current fiscal year

 

Current Fiscal Year (*)

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Stock Options

12/01/2015

12/01/2015

12/22/2015

12/01/2016

12/01/2016

12/22/2016

Grant Date

583,155

385,083

505,918

640,888

846,178

292,226

Number of Options Granted

12/01/2020

12/01/2020

12/22/2020

12/01/2021

12/01/2021

12/22/2021

Vesting Period

12/01/2025

12/01/2025

12/22/2025

12/01/2026

12/01/2026

12/22/2026

Term for exercise of the Options

N/A

N/A

N/A

N/A

N/A

NA

Lock-up Period

4,664,391.41

3,080,103.64

3,817,662.86

3,868,825.36

5,108,092.07

1,665,447.22

Fair value of options on grant date

 

 

 

 

 

 

             

Current Fiscal Year (*)
Cont. I

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Stock Options

 

 

 

 

 

 

Grant Date

02/10/2017

12/01/2017

12/01/2017

02/22/2018

02/22/2018

12/03/2018

Number of Options Granted

454,902

619,168

1,153,375

229,367

550,481

858,080

Vesting Period

02/10/2022

12/01/2022

12/01/2022

02/22/2023

02/22/2023

12/03/2023

Term for exercise of the Options

02/10/2027

12/01/2027

12/01/2027

02/22/2028

02/22/2028

12/03/2028

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

2,501,834.63

4,194,181.24

7,812,845.29

1,627,748.03

3,906,596.69

4,516,888.33

 

 

           

Current Fiscal Year (*)
Cont. II

Board of Officers

Board of Officers

Board of Directors

Board of Officers

 

Stock Options

 

 

 

 

Grant Date

03/12/2018

02/21/2019

12/02/2019

12/02/2019

Number of Options Granted

1,298,165

903,019

1,141,452

2,466,103

Vesting Period

03/12/2023

02/21/2024

12/02/2024

12/02/2024

Term for exercise of the Options

03/12/2028

02/21/2029

12/02/2029

12/02/2029

Lock-up Period

N/A

N/A

N/A

N/A

Fair value of options on grant date

6,833,472.79

4,849,514.79

4,613,265.13

9,966,942.96

(*) Based on the best estimates of the Company’s management and on data for the current fiscal year.

 

136


 

 

12/31/02019

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Stock Options

           

Grant Date

12/01/2014

12/01/2014

12/22/2014

12/01/2015

12/01/2015

12/22/2015

Number of Options Granted

   903,038

   418,952

   155,045

583,155

385,083

505,918

Vesting Period

12/01/2019

12/01/2019

12/22/2019

12/01/2020

12/01/2020

12/22/2020

Term for exercise of the Options

12/01/2024

12/01/2024

12/22/2024

12/01/2025

12/01/2025

12/22/2025

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

5,501,997

2,552,575.51

 

944,652.54

   4,664,391.41

   3,080,103.64

   3,817,662.86

             

12/31/02019
Cont. I

Board of Directors

Board of Officers

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Stock Options

 

 

 

 

 

 

Grant Date

12/01/2016

12/01/2016

12/22/2016

02/10/2017

12/01/2017

12/01/2017

Number of Options Granted

  640,888

   846,178

  292,226

454,902

619,168

   1,153,375

Vesting Period

12/01/2021

12/01/2021

12/22/2021

02/10/2022

12/01/2022

12/01/2022

Term for exercise of the Options

12/01/2026

12/01/2026

12/22/2026

02/10/2027

12/01/2027

12/01/2027

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

3,868,825.36

5,108,092.07

  1,665,447.22

2,501,834.63

  4,194,181.24

7,812,845.29

             

12/31/02019
Cont. II

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Stock Options

 

 

 

 

 

 

Grant Date

02/22/2018

02/22/2018

12/03/2018

12/03/2018

02/21/2019

12/02/2019

Number of Options Granted

229,367

   550,481

   858,080

  1,298,165

  903,019

  1,141,452

Vesting Period

02/22/2023

02/22/2023

12/03/2023

12/03/2023

02/21/2024

12/02/2024

Term for exercise of the Options

02/22/2028

02/22/2028

12/03/2028

12/03/2028

02/21/2029

12/02/2029

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

   1,627,748.03

  3,906,596.69

4,516,888.33

  6,833,472.79

4,849,514.79

   4,613,265.13

 

 

 

 

 

 

 

12/31/02019
Cont. III

Board of Officers

 

Stock Options

 

Grant Date

12/02/2019

Number of Options Granted

2,466,103

Vesting Period

12/02/2024

Term for exercise of the Options

12/02/2029

Lock-up Period

N/A

Fair value of options on grant date

   9,966,942.96

 

 

137


 

 

 

 

12/31/2018

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Stock Options

           

Grant Date

12/02/2013

12/02/2013

12/19/2013

12/01/2014

12/01/2014

12/01/2015

Number of Options Granted

715,299

199,325

  82,164

  903,038

  323,084

583,155

Vesting Period

12/02/2018

12/02/2018

12/19/2018

12/01/2019

12/01/2019

12/01/2020

Term for exercise of the Options

12/02/2023

12/02/2023

12/19/2023

12/01/2024

12/01/2024

12/01/2025

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

4,830,901.44

   1,346,177.51

  522,790.35

  5,501,997.08

   1,968,474.44

  4,664,391.41

 

           

12/31/2018
Cont. I

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Board of Officers

Stock Options

           

Grant Date

12/01/2015

12/22/2015

12/01/2016

12/01/2016

12/22/2016

02/10/2017

Number of Options Granted

   569,590

   769,838

  640,888

   1,043,741

  292,226

   454,902

Vesting Period

12/01/2020

12/22/2020

12/01/2021

12/01/2021

12/22/2021

02/10/2022

Term for exercise of the Options

12/01/2025

12/22/2025

12/01/2026

12/01/2026

12/22/2026

02/10/2027

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

  4,555,891.15

5,809,206.12

3,868,825.36

  6,300,713.47

   1,665,447.22

2,501,834.63

             

12/31/2018
Cont. II

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Stock Options

 

 

 

 

 

 

Grant Date

12/01/2017

12/01/2017

02/22/2018

02/22/2018

12/03/2018

12/03/2018

Number of Options Granted

  619,168

  1,661,228

  229,367

   550,481

  370,643

  1,391,689

Vesting Period

12/01/2022

12/01/2022

02/22/2023

02/22/2023

12/03/2023

12/03/2023

Term for exercise of the Options

12/01/2027

12/01/2027

02/22/2028

02/22/2028

12/03/2028

12/03/2028

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

   4,194,181.24

   11,252,990.01

  1,627,748.03

3,906,596.69

1,951,045.40

   7,325,778.25

 

 

 

 

138


 

 

             

12/31/2017

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Stock Options

           

Grant Date

11/30/2012

11/30/2012

12/20/2012

12/02/2013

12/02/2013

12/01/2014

Number of Options Granted

1,322,880

499,990

90,960

1,204,633

491,377

1,582,208

Vesting Period

11/30/2017

11/30/2017

12/20/2017

12/02/2018

12/02/2018

12/01/2019

Term for exercise of the Options

11/30/2022

11/30/2022

12/20/2022

12/02/2023

12/02/2023

12/01/2024

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

7,420,076.38

2,804,459.96

522,781.27

8,135,707.30

3,318,603.63

9,640,019.36

 

           

12/31/2017
Cont. I

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Stock Options

           

Grant Date

12/01/2014

12/01/2015

12/01/2015

12/22/2015

12/01/2016

12/01/2016

Number of Options Granted

677,502

612,965

785,962

505,918

684,057

1,118,079

Vesting Period

12/01/2019

12/01/2020

12/01/2020

12/22/2020

12/01/2021

12/01/2021

Term for exercise of the Options

12/01/2024

12/01/2025

12/01/2025

12/22/2025

12/01/2026

12/01/2026

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

Fair value of options on grant date

4,127,859.54

4,902,828.03

6,286,552.29

3,817,662.86

4,129,422.10

6,148,233.38

 

 

           

12/31/2017
Cont. II

Board of Officers

Board of Directors

Board of Officers

 

Stock Options

     

 

Grant Date

02/10/2017

12/01/2017

12/01/2017

 

Number of Options Granted

454,902

659,232

1,074,538

 

Vesting Period

02/10/2022

12/01/2022

12/01/2022

 

Term for exercise of the Options

02/10/2027

12/01/2027

12/01/2027

 

Lock-up Period

N/A

N/A

N/A

 

Fair value of options on grant date

2,501,834.63

4,465,570.72

6,255,011.18

 

 

 

  • Whenever necessary, the number of options granted and fair value were adjusted to reflect all stock splits that took place within the relevant period.

 

Calculation log of the potential dilution resulting from the exercise of options

 

The potential dilution mentioned in the tables above and represented in the table below considers that 100% of the options granted to the members of the Board of Directors and the Board of Officers are exercised on the base date of this Reference Form, this is to say, December 31, 2019, and that the Company issues new shares as a result thereof, that is, it does not consider the use of any shares held in treasury. The dilution is calculated by the ratio between the number of new shares issued and the total number of shares of the capital stock after such issuance.

139


 

 

 

Body

Grant Date

Number of Options

Shares of the Capital Stock at the End of the Year (12/31/2019)

Potential dilution if all options are exercised

Board of Directors

03/30/2010

852,850

15,733,575,289

0.00542%

08/19/2010

58,050

15,733,575,289

0.00037%

11/30/2011

887,850

15,733,575,289

0.00564%

11/30/2012

645,175

15,733,575,289

0.00410%

12/02/2013

715,299

15,733,575,289

0.00455%

12/01/2014

903,038

15,733,575,289

0.00574%

12/01/2015

583,155

15,733,575,289

0.00371%

12/01/2016

640,888

15,733,575,289

0.00407%

12/01/2017

619,168

15,733,575,289

0.00394%

02/22/2018

229,367

15,733,575,289

0.00146%

12/03/2018

858,080

15,733,575,289

0.00545%

12/02/2019

1,141,452

15,733,575,289

0.00725%

Board of Officers

03/30/2010

87,500

15,733,575,289

0.00056%

11/30/2010

795,650

15,733,575,289

0.00506%

11/30/2011

909,320

15,733,575,289

0.00578%

12/21/2011

32,360

15,733,575,289

0.00021%

11/30/2012

212,610

15,733,575,289

0.00135%

12/20/2012

79,590

15,733,575,289

0.00051%

12/02/2013

280,331

15,733,575,289

0.00178%

12/19/2013

130,093

15,733,575,289

0.00083%

12/01/2014

418,952

15,733,575,289

0.00266%

12/22/2014

155,045

15,733,575,289

0.00099%

12/01/2015

385,083

15,733,575,289

0.00245%

12/22/2015

505,918

15,733,575,289

0.00322%

12/01/2016

846,178

15,733,575,289

0.00538%

12/22/2016

292,226

15,733,575,289

0.00186%

02/10/2017

454,902

15,733,575,289

0.00289%

12/01/2017

1,153,375

15,733,575,289

0.00733%

02/22/2018

550,481

15,733,575,289

0.00350%

12/03/2018

1,298,165

15,733,575,289

0.00825%

02/21/2019

903,019

15,733,575,289

0.00574%

12/02/2019

2,466,103

15,733,575,289

0.01567%

(1)           When required, the number of options and fair value were adjusted to reflect the stock splits consummated in the period.

(2)           According to the accounting method of predecessor cost adopted by Ambev S.A., data related to periods before 2014 related to Companhia de Bebidas das Américas – Ambev historical information.

 

140


 

 

13.6. Information regarding outstanding options held by the Board of Directors and Executive Management at the end of the last fiscal year:

12/31/2019

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Number of members

13.00

10.92

13.00

10.92

13.00

10.92

10.92

13.00

10.92

10.92

No. of members receiving compensation

1

1

1

4

4

7

1

4

5

1

Grant Date

03/30/10

03/30/10

08/19/10

11/30/10

11/30/11

11/30/11

10/25/11

11/30/12

11/30/12

12/20/12

Options not qualified for exercise

-

-

-

-

-

-

-

-

-

-

Number of Options

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

Date on which they may be exercised

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

Maximum term for exercise

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

Lock-up Period

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

Weighted average exercise price

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

Fair value of options on the last day of the fiscal year

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

                                                   -  

Options qualified for exercise

 

 

 

 

 

 

 

 

 

 

Number of Options

852,850

87,500

58,050

795,650

887,850

909,320

32,360

645,175

212,610

79,590

Maximum term for exercise

03/30/20

03/30/20

08/19/20

11/30/20

11/30/21

11/30/21

03/30/20

11/30/22

11/30/22

12/20/22

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Weighted average exercise price

1.77

1.77

7.47

9.36

11.97

11.97

11.97

17.20

17.20

17.84

Fair value of options on the last day of the fiscal year

16.41

16.41

11.18

8.96

6.43

6.43

6.43

3.46

3.46

3.20

Fair value of the total of options on the last day of the fiscal year

13,993,560.37

1,435,699.75

649,159.91

7,125,593.84

5,709,672.25

5,847,743.62

208,103.84

2,232,622.31

735,735.00

254,633.86

 

 

 

               
 

141


 


 

12/31/2019

Cont. I

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Board of Directors

Number of members

13.00

10.92

10.92

13.00

10.92

10.92

13.00

10.92

10.92

13.00

No. of members receiving compensation

5

6

1

7

6

1

7

7

1

6

Grant Date

12/02/13

12/02/13

12/19/13

12/01/14

12/01/14

12/22/14

12/01/15

12/01/15

12/22/15

12/01/16

Options not qualified for exercise

 

 

 

 

 

 

 

 

 

 

Number of Options

-  

-  

-

-

-

-

583,155.00

385,083.00

505,918.00

640,888.00

Date on which they may be exercised

                                                   -  

                                                   -  

-

-

-

-

12/01/20

12/01/20

12/22/20

12/01/21

Maximum term for exercise

                                                   -  

                                                   -  

-

-

-

-

12/01/25

12/01/25

12/22/25

12/01/26

Lock-up Period

                                                   -  

                                                   -  

-

-

-

 -

 N/A

 N/A

 N/A

 N/A

Weighted average exercise price

                                                   -  

                                                   -  

-

-

-

                                             -

                                             18.64

                                             18.64

                                             18.00

                                             17.15

Fair value of options on the last day of the fiscal year

-  

-  

-

-

-

-

3.88

3.88

4.13

4.69

Options qualified for exercise

 

 

 

 

 

 

 

 

 

 

Number of Options

715,299

280,331

130,093

930,038

418,952

155,045.00

-

-

-

-

Maximum term for exercise

12/02/23

12/02/23

12/19/23

12/01/24

12/01/24

12/22/24

-

-

-

-

Lock-up Period

N/A

N/A

N/A

N/A

N/A

N/A

-

-

-

-

Weighted average exercise price

17.56

17.56

16.70

16.85

16.85

16.85

-

-

-

-

Fair value of options on the last day of the fiscal year

3.66

3.66

4.05

4.24

4.24

4.65

-

-

-

-

Fair value of the total of options on the last day of the fiscal year

2,617,199.79

1,025,700.07

526,739.94

3,832,841.45

1,778,193.82

720,776.87

2,263,273.45

1,494,539.41

2,087,377.29

3,007,169.97

 

142


 

 

12/31/2019

Cont. II

Board of Officers

Board of Officers

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Officers

Number of members

10.92

10.92

10.92

13.00

10.92

13.00

10.92

13.00

10.92

10.92

No.º of members receiving compensation

8

1

1

7

8

1

1

8

9

2

Grant Date

12/01/16

12/22/16

02/10/17

12/01/17

12/01/17

02/22/18

02/22/18

12/03/18

12/03/18

02/21/19

Options not qualified for exercise

 

 

 

 

 

 

 

 

 

 

Number of Options

 

846,178.00

                                    292,226.00

                                    454,902.00

                                    619,168.00

                                

1,153,375.00

                                    229,367.00

 

550,481.00

 

858,080.00

 

1,298,165. 00

 

903,019.00

Date on which they may be exercised

12/01/21

12/22/21

02/10/22

12/01/22

12/01/22

02/22/23

02/22/23

12/03/23

12/03/23

02/21/24

Maximum term for exercise

12/01/26

12/22/26

02/10/27

12/01/27

12/01/27

02/22/28

02/22/28

12/03/28

12/03/28

02/21/29

Lock-up Period

 N/A

 N/A

 N/A

 N/A

 N/A

 N/A

 N/A

 N/A

 N/A

 N/A

Weighted average exercise price

                                             17.15

                                             16.34

                                             16.89

                                             20.56

                                             20.56

                                             22.40

22.40

16.92

16.92

18.15

Fair value of options on the last day of the fiscal year

                                               4.69

                                               4.24

                                               4.65

                                               3.88

                                               3.88

                                               4.13

                                               4.13

                                               4.69

                                               4.69

                                               4.24

Options qualified for exercise

 

 

 

 

 

 

 

 

 

 

Number of Options

-

-

-

-

-

-

-

-

-

-

Maximum term for exercise

-

-

-

-

-

-

-

-

-

-

Lock-up Period

-

-

-

-

-

-

-

-

-

-

Weighted average exercise price

-

-

-

-

-

-

-

-

-

-

Fair value of options on the last day of the fiscal year

-

-

-

-

-

-

-

-

-

-

Fair value of the total of options on the last day of the fiscal year

3,970,430.21

1,240,319.82

2,114,759.19

2,403,042.92

4,476,345,07

946,349.94

2,271,240.68

4,026,276.68

6,091,240.29

3,832,760.81

 

143


 

 

12/31/2019

Cont. III

 

 

Board of Directors

Board of Officers

Number of members

 

 

13.00

10.92

Nº of members receiving compensation

 

 

8

10

Grant Date

 

 

12/02/19

12/02/19

Options not qualified for exercise

 

 

 

 

Number of Options

 

 

1,141,452.00

2,466,103.00

Date on which they may be exercised

 

 

12/02/24

12/02/24

Maximum term for exercise

 

 

12/02/29

12/02/29

Lock-up Period

 

 

 N/A

 N/A

Weighted average exercise price

 

 

18.05

18.05

Fair value of options on the last day of the fiscal year

 

 

4.65

4.65

Options qualified for exercise

 

 

 

 

Number of Options

 

 

-

-

Maximum term for exercise

 

 

-

-

Lock-up Period

 

 

-

-

Weighted average exercise price

 

 

-

-

Fair value of options on the last day of the fiscal year

 

 

-

-

Fair value of the total of options on the last day of the fiscal year

 

 

5,306,409.10

11,464,478.05

(1) Whenever necessary, the number of options granted and fair value were adjusted to reflect all stock splits that took place within the relevant period.

(2) According to the accounting method of predecessor cost adopted by the Company, data related to periods before 2014 relates to Companhia de Bebidas das Américas – Ambev historical information.

Note: the alternate members of the Board of Directors are accounted for in the “number of members” included in the tables above.

144


 

13.7. In relation to the options exercised and shares transferred as share-based compensation to the Board of Directors and Board of Officers in the last three fiscal years:

 

December 31, 2019

 

 

Board of Directors

Board of Officers

No. of members

13.00

10.92

No. of members receiving compensation

2.00

9.00

Options exercised

 

 

  Number of shares

-

2,681,735

  Weighted average exercise price

R$ 0.00

R$ 10.66

  Difference between the exercise price and the market value of the shares resulting from the options exercised

R$ 0.00

R$ 20,537,474.10

Shares transferred

 

 

  Number of shares transferred

327,562

161,578

  Weighted average acquisition price

16.87

16.87

  Difference between the acquisition price and the market value of the shares acquired

-1,076,232

-927,683

December 31, 2018

 

(i)

Board of Directors

Board of Officers

No. of members

13.00

10.67

No. of members receiving compensation

4.00

8.00

Options exercised

-

-

  Number of shares

1,392,135

1,551,470

  Weighted average exercise price

R$ 6.26

R$ 11.35

  Difference between the exercise price and the market value of the shares resulting from the options exercised

17,188,301

14,756,426

Shares transferred

-

-

  Number of shares transferred

301,074

91,835

  Weighted average acquisition price

17.69

17.69

  Difference between the acquisition price and the market value of the shares acquired

1,423,478

434,196

(i) Amounts arising from the accounting effects provided for in CPC 10 - Share-based Payment.

December 31, 2017

 

 

Board of Directors

Board of Officers

No. of members

13.00

11.00

No. of members receiving compensation

3.00

8.00

Options exercised

 -

 

  Number of shares

989,925

849,860

  Weighted average exercise price

R$ 0.78

R$ 7.54

  Difference between the exercise price and the market value of the shares resulting from the options exercised

19,983,774

9,079,088

Shares transferred

 

  Number of shares transferred

477,306

142,254

  Weighted average acquisition price

14.40

14.40

  Difference between the acquisition price and the market value of the shares acquired

1,388,960

413,959

Note: the alternate members of the Board of Directors are accounted for in the “number of members” included in the tables above.

 

145


 

13.8. Information required to understand the data disclosed in items 13.5 to 13.7, including the pricing method applied to determine the value of shares and options):

 

a. pricing model:

 

The fair value of the options granted under the Option Plan is determined based on Hull Binomial Pricing Model. The model is based on the assumption that price of a share in future periods may  follow two possible ways: one upward and another downward. Then, a binomial tree is built in relation to the share price. The upward and downward factors are determined based on volatility of the share and the time frame between the steps in the tree. The trajectories for share price are determined until maturity. In parallel, a tree is also constructed to represent the option value per period. The option value is determined backwards, it starts from the expiration of vesting period. In the final period, the holder of the option shall decide whether to exercise the option or not.

 

In the case of Share Appreciation Rights, at the end of vesting period of each lot, the number of Share Appreciation Rights shall be converted into an amount equal to the closing price of shares or ADRs issued by the Company and traded at B3 or NYSE, respectively, on the trading session immediately before such term, it being certain that each Share Appreciation Rights shall correspond to one share or ADR, as applicable.

 

For grants of deferred shares and grants under the Stock Plan, the fair value corresponds to the closing price of shares or ADR traded at B3 or NYSE, as the case may be, on the day immediately before its grant date, and a discount may be applied under certain conditions as provided in each program. For the programs under the Stock Plan, the shares will be granted free of charge after the five-year grace period and provided that the participant maintains the employment and / or statutory relationship with the Company until the end of such term, observing the other terms of the Stock Plan and of each program. For specific information about such programs, refer to item 13.4.

 

b. data and assumptions used in the pricing model, including the weighted average price of shares, the exercise price, the expected volatility, the duration of the option, expected dividends and risk free interest rate:

 

Calculation date

 

According to Technical Pronouncement CPC 10 – Share-Based Payment, options must be assessed on the date of their respective grant.

 

Weighted average price of shares

 

The price of the shares of the Company taken as basis to calculate the value of the respective options is their Market Value, as defined below.

 

Exercise price

 

Programs from 2008 to 2010

 

Lot A and lot C options (as specified in such programs) must be exercised for an exercise price corresponding to the average closing prices of shares traded at B3 over a 30-day window before grant date, or, in specific cases (e.g., to employees of subsidiaries of the Company headquartered abroad), the average closing price of ADRs traded at NYSE in the period (“Market Value”) under any specific provisions set forth in the Program. For the options belonging to lot B, the exercise price is the Market Value, applying a 10% discount.

 

In the case of the supplementary options set forth in said programs as belonging to lot C, the amounts corresponding to dividends and interest on own capital effectively paid out by the Company on the underlying shares during the period between grant date and exercise date is deducted from the exercise price.

 

 

146


 

 

Programs from 2010 to 2019

 

The exercise price of each option granted under the Option Plan corresponds to the closing price, in Brazilian Reais, of the Company’s shares traded on B3 in the trading session immediately prior to the grant date.

 

Expected volatility

 

The options’ expected volatility is based on historical volatility calculated since March 29, 2004. Based on the Hull Binomial Model, it is assumed that all employees would exercise their options immediately if the price of the shares of the Company would reach 2.5 times the exercise price. The Company will not use the sliding window method, in which volatility estimate is fixed length “m” (i.e., for each daily update information from the previous day is aggregated and the information of m+1 days ago is disregarded). To calculate the expected volatility, the Company used the daily stock returns of the Company. For every daily update of the calculation, information concerning that day is added to the base and no information is disregarded. Therefore, the base has mobile extension beginning on March 29, 2004 until the date of calculation.

 

Duration of options

 

Programs from 2008 to 2010

 

According to the option granting model used by the Company, the options belonging to the lots A and B must be immediately exercised, since they have a duration equal to zero. The supplementary options belonging to the lot c, in turn, have a total duration of ten years, considering a five-year vesting period and a five-year exercise period.

 

Programs from 2010 to 2019

 

Under the Option Plan, the options have a grace period of five years from the date of grant, and the beneficiary may exercise them within five years after the grace period ends, upon payment of the exercise price until five business days from the exercise date, as a compensation to the delivery of the shares, therefore, having a term of up to ten years.

 

Expected dividends (dividends distribution rate)

 

The dividends distribution rate represents the ratio between the dividend per share paid out over a certain period and the price of share in the market. The Company’s dividend distribution rate of 5% was calculated based on its history of dividends distribution and payment of interest on own capital.

 

However, in cases in which the options granted are protected in terms of dividends (programs prior to 2010), meaning that the amounts paid out as dividends and interest on own capital are deducted from their exercise price, the Company’s dividends distribution rate is zero for purposes of calculating the fair value of the options.

 

Risk-free interest rate

 

The risk-free interest rates were obtained based on the closing price of the futures contract DI1 (Future of Average Rate of One-Day Interbank Deposits) disclosed by B3 on the respective grant dates for similar maturity.

 

For illustrative purposes, the data explained in this item “b” was the following for the options granted in the fiscal years of 2017, 2018 and 2019:

 

147


 

OPTION PRICING MODEL

 

Assumptions

2019

Pricing Model

Hull Binomial

Fair value of options granted

4.50

Share price

17.66

Exercise price

17.66

Expected volatility

23.8%

Vesting (years)

5

Expected dividends

5%

Risk-free interest rate

7.8%

 

 

Assumptions

2018(i)

Pricing Model

Hull Binomial

Fair value of options granted

5.62

Share price

18.04

Exercise price

18.04

Expected volatility

26.2%

Vesting (years)

5

Expected dividends

5%

Risk-free interest rate(ii)

9.6%

 

 

Assumptions

2017(i)

Pricing Model

Hull Binomial

Fair value of options granted

6.51

Share price

19.80

Exercise price

19.80

Expected volatility

26.7%

Vesting (years)

5

Expected dividends

5%

Risk-free interest rate(ii)

10.1%

 

(i) Information based on the weighted average of the programs granted, exception made to the estimate on dividends and risk-free interest rate

(ii) The percentages include the stock options and ADRs granted during the fiscal year, whereas ADRs are denominated in US Dollars.

 

c. method used and assumptions made to incorporate the expected effects of early exercise of options:

 

Based on the Hull Binomial Model used by the Company, the immediate exercise of all options granted is assumed if the price of the shares issued by the Company reaches 2.5 times the exercise price. The premise for the period in which the option will be exercised after the expiration of the grace period is related to the behavior of the beneficiaries of the options, which differs from individual to individual. Despite the measurement of past behavior of the beneficiaries to estimate future behavior, in general, prove to be more appropriate, Option Plan, underwent significant changes, especially in relation to the protection of dividends, capable to influence the decision on the exercise of the option. Accordingly, the Company chose to use as a premise the average result of two studies cited by Hull himself, and carried out by Huddart Lang and Carpenter, the conclusion of which established that the exercise of options in a compensation program would occur when the price of the stock issued by the Company reached 2.8 and 2.2 times the exercise price, respectively.

 

d. how the expected volatility is determined:

 

For the 2009 option programs, the expected volatility (approved by Companhia de Bebidas das Américas – Ambev and received by the Company) is based on historical data of the last 252 days. As of the 2010 option programs, the expected volatility is measured since March 2004. As explained in “c”, above, the Hull Binomial Model, adopted by the Company, assumes that all employees would exercise their options immediately if the price of the shares issued by the Company reached 2.5 times the exercise price.

148


 

 

e. has any other characteristic of the option been incorporated to the determination of its fair value:

 

Other characteristics were not incorporated in the measurement of the fair value of the options.

13.9 Shares or quotas directly or indirectly held, in Brazil or abroad, and other securities convertible into shares or quotas issued by the Issuer, its direct or indirect shareholders, subsidiaries or affiliates by members of the Board of Directors, Board of Officers and Fiscal Council, grouped by body:

 

Instruments issued by Ambev – 12/31/2019

 

Body

No. Shares and ADRs

No. of Deferred Shares

No. Options

Total

Board of Directors

34,288,097

728,325

8,134,372

43,150,794

Board of Officers

7,278,433

5,030,791

11,956,901

24,266,125

Fiscal Council

7,225

0

0

7.225

Total

41,573,755

5,759,116

20,091,273

67,424,144

 

Instruments issued by ABI – 12/31/2019

 

Body

No.º Shares and ADRs

No. of Deferred Shares

No. Options

Total

Board of Directors

4,332,700

545,862

12,945,065

17,823,627

Board of Officers

2,896,481

67,820

4,909,677

7,873,978

Fiscal Council

0

0

0

-

Total

7,229,18

613,682

17,854,742

25,697,605

 

13.10. In relation to pension plans in effect granted to the members of the Board of Directors and Board of Officers:

 

RETIREMENT BENEFITS

Board of Directors

Board of Officers

No. of members

13.00

10.92

No. of members receiving compensation

6.00

10.00

Name of the plan

Defined Contribution

Defined Contribution

Number of managers that are eligible to retire

3

0

Conditions to early retirement

53 years of age and 11 years of plan

53 years of age and 11 years of plan

Updated amount of contributions accrued until the end of the last fiscal year, after deducting the amounts corresponding to contributions made directly by the managers

R$ 11,436,515.81

R$ 7,359,848.36

Total amount of contributions made during the last fiscal year, after deducting the amounts corresponding to contributions made directly by the managers

R$ 990,926.88

R$ 835,526.83

Possibility of and conditions to early redemption

Yes, in the event of termination of employment contract with the Company and provided that participant is neither eligible to a retirement benefit under the Plan, nor elects the pro rata deferred benefit, the portability or self-sponsorship. The amount redeemed shall correspond to the contributions made by the participant him/herself.

Yes, in the event of termination of employment contract with the Company and provided that participant is neither eligible to a retirement benefit under the Plan, nor elects the pro rata deferred benefit, the portability or self-sponsorship. The amount redeemed shall correspond to the contributions made by the participant him/herself.

149


 

13.11. Compensation of the Board of Directors, Board of Officers and Fiscal Council in the last three fiscal years:

 

12/31/2019

 

Body

No. of Members

No. of members receiving compensation

Highest Individual Compensation

Lowest Individual Compensation

Average Individual Compensation

Board of Directors

                                             13.00

                                                       8.00

 

9,036,710.50

 

299,839.45

 

1,790,654.25

Fiscal Council

                                                5.67

                                                       5.67

 

443,492.45

 

221,746.22

 

338,452.94

Board of Officers

                                             10.92

                                                    10.92

 

14,170,295.57

 

3,058,226.62

 

5,572,957.37

 

12/31/2018

 

Body

No. of Members

No. of members receiving compensation

Highest Individual Compensation

Lowest Individual Compensation

Average Individual Compensation

Board of Directors

                                             13.00

                                                       8.33

                             8,659,261.70

                               484,455.99

                              1,731,069.60

Fiscal Council

                                                5.58

                                                       5.58

                                  425,508.48

                                212,754.24

                                    320,518.21

Board of Officers

                                             10.67

                                                    10.67

                         12,177,219.57

                           2,120,323.95

                            3,792,066.84

 

12/31/2017

 

Body

No. of Members

No. of members receiving compensation

Highest Individual Compensation

Lowest Individual Compensation

Average Individual Compensation

Board of Directors

 

13.00

9.00

10,292,851.37

412,360.99

2,162,467.67

Fiscal Council

 

6.00

6.00

412,360.99

206,180.50

309,270.83

Board of Officers

11.00

11.00

14,065,113.97

2,466,975.34

4,801,134.36

 

Notes:

Board of Officers

12/31/2019

- The average compensation of the Board of Officers presented in this item is calculated taking into account the number of members of the Board of Officers (10.92 members) that receive compensation from the Company for their services.

 

- Includes stock-based compensation of the Company and of the Controlling Company.

 

- The member that received the highest individual compensation worked for 12 months.

12/31/2018

- The average compensation of the Board of Officers presented in this item is calculated taking into account the number of members of the Board of Officers (10.67 members) that receive compensation from the Company for their services.

 

- Includes stock-based compensation of the Company and of the Controlling Company.

 

- The member that received the highest individual compensation worked for 12 months.

12/31/2017

- The average compensation of the Board of Officers presented in this item is calculated taking into account the number of members of the Board of Officers (11 members) that receive compensation from the Company for their services.

 

- Includes stock-based compensation of the Company and of the Controlling Company.

 

- The member that received the highest individual compensation worked for 12 months.

 

Board of Directors

12/31/2019

- The average compensation of the Board of Directors presented in this item is calculated taking into account the number of members of the Board of Directors (8 members) that receive compensation from the Company for their services.

 

- Includes stock-based compensation of the Company and of the Controlling Company.

 

- The member that received the highest individual compensation worked for 12 months.

12/31/2018

- The average compensation of the Board of Directors presented in this item is calculated taking into account the number of members of the Board of Directors (8,33 members) that receive compensation from the Company for their services.

 

- Includes stock-based compensation of the Company and of the Controlling Company.

 

- The member that received the highest individual compensation worked for 12 months.

12/31/2017

- The average compensation of the Board of Directors presented in this item is calculated taking into account the number of members of the Board of Directors (9 members) that receive compensation from the Company for their services.

 

- Includes stock-based compensation of the Company and of the Controlling Company.

 

- The member that received the highest individual compensation worked for 12 months.

150


 

 

Fiscal Council

12/31/2019

- It was considered the 2.67 full members and the three alternate members of the Fiscal Council.

 

- The member that received the highest individual compensation worked for 12 months.

12/31/2018

- It was considered the 2.58 full members and the three alternate members of the Fiscal Council.

 

- The member that received the highest individual compensation worked for 12 months.

12/31/2017

- It was considered the three full members and the three alternate members of the Fiscal Council.

 

- The member that received the highest individual compensation worked for 12 months.

 

Note: the alternate members of the Board of Directors are accounted for in the “number of members” included in the tables above.

13.12. Contractual arrangements, insurance policies and other instruments structuring compensation or indemnification mechanisms for the management in the event of dismissal from their job or retirement (including the financial consequences to the Company):

 

 

There are no contractual arrangements, directors’ and officers’ liability insurance policies (“D&O”), or other instruments that structure compensation mechanisms or indemnification for the specific administrators for the hypothesis of removal from office or retirement specifically.

 

As stated on item 12.11 of the Reference Form, the Company has D&O, contracted with the Insurer Zurich Minas Brasil Seguros S/A, for the period from November 30, 2019 to November 30, 2020, with premium value of approximately US$ 35 mil, for the coverage of losses and damages to third parties, for acts related to the exercise of functions and attributions of the administrators, during and after their respective mandates, up to the amount of US$ 25 million.

 

For more information on the insurance policies for payment or reimbursement of expenses borne by the Company's managers, see item 12.11 of the Reference Form.

 

13.13. In relation to the three last fiscal years, give the percentage of the overall compensation of each body recognized in the earnings of the Company regarding the members of the Board of Directors, Board of Officers and Fiscal Council that are parties related to the direct or indirect controlling shareholders, as defined by applicable accounting rules on the matter:

 

December 31, 2019

 

Body

No. of Members

Related Party’s Compensation

Total Compensation

%

Board of Directors

6.00

549,665.45

14,325,234.00

4

Fiscal Council

-

-

1,917,900.00

-

Board of Officers

-

-

60,838,118.00

-

Total

6.00

549,665.45

77,081,252.00

1

 

 

 

151


 

 

December 31, 2018

 

Body

No. of Members

Related Party’s Compensation

Total Compensation

%

Board of Directors

5.00

484,455.99

14,425,580.00

3

Fiscal Council

-

-

1,789,560.00

-

Board of Officers

-

-

40,448,713.00

-

Total

5.00

484,455.99

56,663,853.00

1

 

December 31, 2017

 

Body

No. of Members

Related Party’s Compensation

Total Compensation

%

Board of Directors

6.00

690,908.00

19,462,209.00

4

Fiscal Council

-

-

1,855,625.00

-

Board of Officers

-

-

52,812,478.00

-

Total

6.00

690,908.00

74,130,312.00

1

Note: the alternate members of the Board of Directors are accounted for in the “number of members” included in the tables above.

 

13.14. Regarding the three last fiscal years, the amounts recognized in the income statement of the Company as compensation to the members of the Board of Directors, Board of Officers or Fiscal Council, grouped by body, for any reason other than their position in the Company, such as, for instance, commissions or fees for consultancy or advisory services rendered:

 

There are no amounts recognized in the Company’s results for the last three fiscal years as compensation for members of the Board of Directors, Executive Board or the Supervisory Board, since they do not receive compensation from the Company for any other reason (e.g., consulting, advisory etc.), except as a result of the exercise of their positions.

 

13.15. In relation to the three last fiscal years, the amounts recognized in the income statement of direct and indirect controlling shareholders, affiliates and subsidiaries of the Company, as compensation paid to the members of the Board of Directors, the Board of Officers and Board of Officers of the Company, grouped by body, specifying the reason why such amounts were assigned to those individuals:

 

Fiscal Year ended December 31, 2019 – Compensation received due to the position in the issuer

 

 

Board of Directors(i)

Board of Officers

Fiscal Council

Total(ii)

Direct and indirect shareholders

225,805,583.01

8,546,989.01

-

234,352,572.02

Companies controlled by the issuer

-

-

-

-

Affiliates

-

-

-

-

 

Fiscal Year ended December 31, 2018 – Compensation received due to the position in the issuer

 

 

Board of Directors(i)

Board of Officers

Fiscal Council

Total(ii)

Direct and indirect shareholders

143,434,692.69

4,960,234.61

-

148,394,927.30

Companies controlled by the issuer

-

-

-

-

Affiliates

-

-

-

-

 

Fiscal Year ended December 31, 2017 – Compensation received due to the position in the issuer

 

 

Board of Directors(i)

Board of Officers

Fiscal Council

Total(ii)

Direct and indirect shareholders

105,107,234.59

6,494,841.30

-

111,602,075.89

Companies controlled by the issuer

-

-

-

-

Affiliates

-

-

-

-

(i) Original amounts in dollar, by converted into Brazilian Reais by the annual average rate of each fiscal year.

(ii) The amounts consider the accounting effects provided for in CPC 10 - Share-based Payment.

Note: the alternate members of the Board of Directors and of the Fiscal Council are accounted for in the “number of members” included in the tables above.

152


 

13.16. Other relevant information:

 

As described on item 13.4, the members of Company’s management are eligible to receive options with immediate exercise and five years lock up. We present in the table below information regarding the restricted shares as open of the Board of Directors and Board of Officers at the end of the last fiscal year.

 

 

12/31/2019

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Directors

No. of members

2.00

6.00

2.00

8.00

1.00

Stock Options

 

 

 

 

 

  Grant date

03/30/2015

03/30/2015

03/30/2016

03/30/2016

03/30/2017

  Number of options granted

40,490

593,052

74,248

175,442

1,131

  Number of shares transferred upon the exercise of options during the lock up period

111,140

216,431

203,537

822,027

5,625

  Lock up period of restricted  shares

03/30/2020

03/30/2020

03/30/2021

03/30/2021

03/30/2022

  Weighted average exercise price:

18.430

18.430

18.250

18.250

17.210

Fair value of restricted shares on exercise date

2,048,310.20

 

3,988,823.33

 

3,714,550.25

 

15,001,992.75

 

96,806.25

 

Fair value of restricted shares on the last day of the fiscal year

2,000,520.00

 

3,895,758.00

 

3,663,666.00

 

14,796,486.00

 

101,250.00

 

Dilution after exercise of restricted shares

0.000706%

0.001376%

0.001294%

0.005225%

0.000036%

 

 

As described on item 13.4, the members of the Company's management are eligible to receive restricted shares subject to the Share Plan (options with immediate exercise). We present on the table below information on the restricted shares granted to the Board of Directors and to the Board of Officers within the scope of the Share Programs approved by the Board of Directors and with vesting periods still in progress at the end of the last fiscal year:

 

 

31/12/2019

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Board of Directors

Board of Officers

Total No. of members

2.00

9.00

1.00

10.00

1.00

11.00

Stock Options

-

-

-

-

-

-

Grant date

03/29/2018

03/29/2018

03/29/2019

03/29/2019

08/30/2019

08/30/2019

  Number of options granted

86,898

205,368

26,266

119,476

40,078

217,957

  Number of shares transferred upon the exercise of options during the lock up period

278,279

728,830

 

 

53,566

 

 

555,920

 

 

81,803

853.939

  Lock up period of restricted  shares

03/29/2023

03/29/2023

03/29/2024

03/29/2024

08/30/2024

08/30/2024

 

  Weighted average exercise price:

22.340

22.340

16.830

16.830

19.800

19.800

Fair value of restricted shares on exercise date

6,216,752.86

 

16,282,062.20

 

901,515.78

9,356,133.60

 

1,619,699.40

16,907,992.20

Fair value of restricted shares on the last day of the fiscal year

5,009,022.00

 

13,118,940.00

 

964,188.00

10,006,560.00

 

1,472,454.00

15,370,902.00

Dilution after exercise of restricted shares

0.001769%

0.004632%

 

0.000340%

0.003533%

 

0.000520%

0.005427%

 

 

As described in item 13.4 above, as from 2011, the Board of Directors approved, for certain officers deemed by Management to have greater potential, the granting of Share Appreciation Rights. Since this compensation modality does not include equity instruments, it does not imply the issue of shares and, consequently, a dilution for other shareholders.

 

The table below discloses the same information required for plans that use options whose exercise is not immediate.

 

153


 

12/31/2019

Board of

Officers

Board of

Officers

Board of Officers

Board of

 Officers

Board of Officers

No. of members

1.00

1.00

1.00

2.00

2.00

  Grant date

12/15/2010

12/20/2012

12/22/2014

12/22/2015

12/22/2015

Number of shares for calculation of appreciation

117,094

73,313

97,420

377,612

377,611

Share quotation on grant date

9.72

17.84

15.95

18.00

18.00

Lock up period regarding share appreciation rights

12/15/2020

12/20/2022

12/22/2024

12/22/2020

12/22/2025

Note: the alternate members of the Board of Directors and of the Fiscal Council are accounted for in the “number of members” included in the tables above.

 

***

 

 

154


 

Exhibit B.I – Report on the Changes to the company’s bylaws

(as exhibit 11 of CVM Instruction 481/09)

CURRENT

ARTICLES OF THE BYLAWS

PROPOSED CHANGES

(IN MARKS)

JUSTIFICATION

CHAPTER II

CAPITAL STOCK AND SHARES

CHAPTER II

CAPITAL STOCK AND SHARES

 

Article 5 – The capital stock is of R$ 57,798,844,242.20, divided into 15,726,842,297 nominative common shares, without par value.

 

Article 5 – The capital stock is of R$ 57,798,844,242.2057,899,072,773.68, divided into 15,726,842,29715,735,117,965 nominative common shares, without par value.

Amendment to reflect the capital increases approved by the Company's Board of Directors, within the authorized capital limit until the date of the general meeting.

Article 8 – The Board of Directors may, based on a plan approved by the Shareholders’ Meeting, grant call options to management, employees or individuals that render services to the Company or companies under its control.

 

Article 8 – The Board of Directors may, also, within the limit of the authorized capital, (i) based on a plan approved by the Shareholders’ Meeting, grant call options to management, employees or individuals that render services to the Company or companies under its control; (ii) approve the capital increase by capitalizing profits or reserves, with or without the issuance of new shares; and (iii) resolve on the issuance of subscription bonus or debentures convertible into shares.

Amendment to expressly refer to other hypotheses for using the  authorized capital limit by the Board of Directors, such as the capitalization of profits or reserves and the issuance of subscription bonuses or debentures convertible into shares, as provided for in the Law 6,404/76.

CHAPTER III

SHAREHOLDERS’ MEETINGS

CHAPTER III

SHAREHOLDERS’ MEETINGS

 

Article 11 – Shareholders’ Meetings shall be convened and presided over by one of the Co-Chairmen of the Board of Directors, or person appointed by them, who may designate up to two secretaries.

Article 11 – Shareholders’ Meetings shall be convened and presided over by the Chairman or one of the Co-Chairmen of the Board of Directors, as applicable, or person appointed by them, who may designate up to two secretaries.

Amendment due to the possibility of having a single Chairman of the Board of Directors, according to the proposed change to Article 17 of the Company's Bylaws ("Bylaws").

CHAPTER IV

MANAGEMENT OF THE COMPANY

CHAPTER IV

MANAGEMENT OF THE COMPANY

 

Article 15 – The Company shall be managed by a Board of Directors and a Board of Executive Officers, pursuant to law and these By-laws.

 

Paragraph 1 – The Shareholders’ Meeting shall establish the aggregate compensation of the Management, which shall be apportioned by the Board of Directors, as provided for in Article 21 hereof.

 

Paragraph 2 – The management must adhere to the Manual on Disclosure and Use of Information and Policy for the Trading with Securities Issued by the Company, by executing the Joinder Agreement.

 

No correspondence in the current Bylaws (new paragraph).

 

 

 

 

 

 

 

 

 

 

 

Paragraph 3 - The offices of Co-Chairmen of the Board of Directors and Chief Executive Officer of the Company may not be cumulated by the same person.

 

 

Paragraph 4 - At least two members of the Board of Directors of the Company will be Independent Directors, it being understood, for the purposes hereof, as Independent Directors those in compliance with the following requirements:

a)               he/she must not be a Controlling Shareholder, or spouse or relative up to second-degree thereof;

b)               he/she must not have been, for the last three years, an employee or officer (i) of the Company or of a company controlled by the Company, or (ii) of the Controlling Shareholder or of a company controlled thereby (“Jointly-Controlled Company”);

c)               he/she must not be a supplier or buyer, whether direct or indirect, of services and/or products of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly-Controlled Company, in all cases in magnitude which implies in the loss of independence;

d)               he/she must not be an employee or manager of a company or entity which is offering or requesting services and/or products of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly-Controlled Company, as per item (c) above;

e)               he/she must not be a spouse or relative up to second degree of any manager of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly-Controlled Company;

f)                he/she must not receive compensation by the Company, by a company controlled by the Company, by the Controlling Shareholder or by a Jointly-Controlled Company, except as a member of the Board of Directors (cash provisions from capital interests are excluded from this restriction).

 

 

Paragraph 5 - Directors elected pursuant to art. 141, paragraphs 4 and 5, of Law 6,404/76 will also be considered Independent Directors, notwithstanding of complying with the independence criteria provided in this Article.

Article 15 – The Company shall be managed by a Board of Directors and a Board of Executive Officers, pursuant to law and these By-laws.

 

Paragraph 1 – The Shareholders’ Meeting shall establish the aggregate compensation of the Management, which shall be apportioned by the Board of Directors, as provided for in Articlearticle 21 hereof.

 

Paragraph 2 – The management must adhere to the Manual on Disclosure and Use of Information and Policy for the Trading with Securities Issued by the Company, by executing the Joinder Agreement.

 

Paragraph 3 -– The Board of Directors will be composed, in its majority, by external members, that is, directors without current, employment or management relationship, with the Company, who may or may not be considered independent members, observed the provisions of paragraph 5 of this article 15.

 

Paragraph 4 – The offices of Chairman or Co-Chairmen of the Board of Directors, as applicable, and Chief Executive Officer of the Company may not be cumulated by the same person.

 

Paragraph 45 - At least two members of the Board of Directors of the Company will be Independent Directors, it being understood, for the purposes hereof, as Independent Directors those in compliance with the following requirements:

a)             he/she must not be a Controlling Shareholder, or spouse or relative up to second-degree thereof;

b)             he/she must not have been, for the last three years, an employee or officer (i) of the Company or of a company controlled by the Company, or (ii) of the Controlling Shareholder or of a company controlled thereby (“Jointly-Controlled Company”);

c)             he/she must not be a supplier or buyer, whether direct or indirect, of services and/or products of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly- Controlled Company, in all cases in magnitude which implies in the loss of independence;

d)             he/she must not be an employee or manager of a company or entity which is offering or requesting services and/or products of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly- Controlled Company, as per item (c) above;

e)             he/she must not be a spouse or relative up to second degree of any manager of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly- Controlled Company;

f)              he/she must not receive compensation by the Company, by a company controlled by the Company, by the Controlling Shareholder or by a Jointly- Controlled Company, except as a member of the Board of Directors (cash provisions from capital interests are excluded from this restriction).

 

Paragraph 56 - Directors elected pursuant to art. 141, paragraphs 4 and 5, of Law 6,404/76 will also be considered Independent Directors, notwithstanding of complying with the independence criteria provided in this Articlearticle.

Amendment to provide the Company's Board of Directors will be composed, in its majority, by external members, in accordance with the recommendations of the Brazilian Corporate Governance Code and with the practice already observed by the Company.

 

Amendment due to the possibility of having a single Chairman of the Board of Directors, according to the proposed change to article 17 of the Bylaws.

SECTION I

BOARD OF DIRECTORS

SECTION I

BOARD OF DIRECTORS

 

Article 16 – The Board of Directors shall be composed of three (3) to eleven (11) sitting members, with two (2) to eleven (11) alternates, bound or not to a specific sitting Director, and shall be elected by the Shareholders’ Meeting and be dismissed thereby at any time, with a term of office of three (3) years, reelection being permitted.

Article 16 – The Board of Directors shall be composed of threefive (35) to eleven (11) sitting members, with two (2) to eleven (11) alternates, bound or not to a specific sitting Director, and shall be elected by the Shareholders’ Meeting and be dismissed thereby at any time, with a term of office of three (3) years, reelection being permitted.

Amendment of the minimum number of effective members who must integrate the Board of Directors from 3 to 5, in order to ensure such body has a composition that allows it to maintain the quality and diversity of points of view in its discussions.

Article 17 - The Board of Directors shall have two (2) Co-Chairmen, with identical prerogatives and duties, who shall be elected by a majority of the members of the Board of Directors, immediately after said members are invested in office.

 

Article 17 - The Board of Directors shall have one Chairman or two (2) Co-Chairmen, withas defined by the vote of the majority of its members, and, in the case of Co-Chairmen, this must be done in a shared manner, with both Co-Chairmen having identical prerogatives and duties, who shall. The Chairman or Co-Chairmen of the Board of Directors, as applicable, will be elected by a majority of the members of the Board of Directors, immediately after said members are invested in office.

Amendment to provide for the possibility of having, as an alternative to the model of co-chairmen of the Board of Directors, a single Chairman, giving the directors freedom to choose the composition that is most appropriate for the time of the Company.

Article 18 - The Board of Directors shall meet, ordinarily, at least once each quarter and, extraordinarily, whenever necessary, upon call by any of its Co-Chairmen or by the majority of its members, through letter, email, telegram or personally, with at least 24 (twenty-four) hours in advance.

Article 18 - The Board of Directors shall meet, ordinarily, at least once each quarter and, extraordinarily, whenever necessary, upon call by the Chairman or any of its Co-Chairmen, as applicable, or by the majority of its members, through letter, email, telegram or personally, with at least 24 (twenty-four) hours in advance.

Amendment due to the possibility of having a single Chairman of the Board of Directors, according to the proposed change to article 17 of the Bylaws.

Article 19 - The Board of Directors shall be convened, operate and pass valid resolutions by the favorable vote of the majority of its members present in the meeting.

 

Paragraph 1 – The Directors may attend meetings by telephone, videoconferencing, telepresence or by previously sending their votes in writing.  In this case, the Director will be considered to be present at a meeting in order to ascertain the quorum for declaring it open and voting, with this vote being deemed valid for all legal effects, being included in minutes of such meeting.

 

Paragraph 2 – In the event of a tie in the resolutions of the Board of Directors, none of the Co-Chairmen shall have the casting vote, but only their own personal votes.

Article 19 - The Board of Directors shall be convened, operate and pass valid resolutions by the favorable vote of the majority of its members present in the meeting.

 

Paragraph 1 – The Directors may attend meetings by telephone, videoconferencing, telepresence or by previously sending their votes in writing.  In this case, the Director will be considered to be present at a meeting in order to ascertain the quorum for declaring it open and voting, with this vote being deemed valid for all legal effects, being included in minutes of such meeting.

 

Paragraph 2 – In the event of a tie in the resolutions of the Board of Directors, noneneither the Chairman nor any of the Co-Chairmen, as applicable, shall have the casting vote, but only their own personal votes.

Update of the spelling of words and changes due to the possibility of having a single Chairman of the Board of Directors, according to the proposed change to article 17 of the Bylaws.

Article 21 – The Board of Directors shall resolve on the matters listed below:

a)               establish the general direction of the Company's business, approving the guidelines, corporate policies and basic objectives for all the main areas of performance of the Company;

b)              approve the annual investment budget of the Company;

c)               approve the three-year strategic plan of the Company;

d)              elect and dismiss the Company's Officers, and set their attributions;

e)               supervise the management of the Board of Executive Officers, review at any time the books and documents of the Company, and request information regarding any acts executed or to be executed by the Company;

f)               attribute, from the aggregate value of the compensation established by the Shareholders’ Meeting, the monthly fees of each of the members of the Company's Management;

g)              define the general criteria on compensation and benefit policy (fringe benefits, participation in profits and/or sales) for the management and senior employees (namely, managers or employees in equivalent direction positions) of the Company;

h)              appoint the Company's independent auditors;

i)                resolve on the issue of shares and warrants, within the limit of the authorized capital of the Company;

j)                provide a previous manifestation on the management's report, the Board of Executive Officers' accounts, the financial statements for the fiscal year, and review the monthly balance sheets;

k)              submit to the Shareholders’ Meeting of the proposal of allocation of the net profits for the year; 

l)                call the Annual Shareholders’ Meeting and, whenever it may deem advisable, the Extraordinary Shareholders’ Meetings;

m)             approve any business or agreements between the Company and/or any of its controlled companies (except those fully controlled), management and/or shareholders (including any direct or indirect partners of the Company's shareholders), without impairment of item “q” below;

n)              approve the creation, acquisition, assignment, transfer, encumbering and/or disposal by the Company, in any way whatsoever, of shares, quotas and/or any securities issued by any company controlled by the Company or associated to the Company; except in case of operations involving only the Company and companies fully controlled thereby or in case of indebtedness operation, in which case the provisions of item “o” bellow shall apply;

o)              approve the contracting by the Company of any debt in excess of ten percent (10%) of the Company's shareholders’ equity reflected on the latest audited balance sheet; this amount shall be considered per individual transaction or a series of related transactions;

p)              approve the execution, amendment, termination, renewal or cancellation of any contracts, agreements or similar instruments involving trademarks registered or deposited in the name of the Company or any of its controlled companies; except in the event of licensing of brands to be used in gifts, advertising materials or disclosure in events for periods under three (3) years;

 

 

 

 

 

 

 

 

 

 

 

 

q)              approve the granting of loans and the rendering of guarantees of any kind by the Company for amounts exceeding one percent (1%) of the shareholders’ equity of the Company reflected on the latest audited balance sheet, to any third party, except in favor of any companies controlled by the Company;

r)               approve the execution by the Company of any long-term agreements (i.e., agreements executed for a term exceeding one year), involving an amount in excess of five percent (5%) of the shareholders’ equity of the Company, as shown on the latest audited balance sheet; this amount shall be considered per individual transaction or a series of related transactions;

 

 

 

s)               resolve on the Company's participation in other companies, as well as on any participation in other undertakings, including through a consortium or special partnership;

t)                resolve on the suspension of the Company's activities, except in the cases of stoppage for servicing of its equipment;

u)              authorize the acquisition of shares of the Company to be kept in treasury, be canceled or subsequently disposed of, as well as the cancellation and further sale of such shares, with due regard for applicable law;

 

v)              resolve on the issuance of Trade Promissory Notes for public distribution, pursuant to CVM Ruling No. 134;

w)             resolve, within the limits of the authorized capital, on the issuance of convertible debentures, specifying the limit of the increase of capital arising from debentures conversion, by number of shares, and the species and classes of shares that may be issued, under the terms of article 59 paragraph 2 of Law 6,404/76

x)              authorize the disposal of fixed assets, excepted for the ones mentioned in item “n” of this Article, and the constitution of collateral in an amount greater than 1% (one percent) of the shareholders’ equity reflected in the latest audited balance sheet. This amount will be considered per individual transaction or a series of related transactions; 

 

y)              perform the other legal duties assigned thereto at the Shareholders’ Meeting or in these By-laws; and

z)               resolve on any cases omitted by these By-laws and perform other attributions not conferred on another body of the Company by the law or these By-laws.

 

Article 21 – The Board of Directors shall resolve on the matters listed below:

a)             establish the general direction of the Company's business, approving the guidelines, corporate policies and basic objectives for all the main areas of performance of the Company;

b)            approve the annual investment budget of the Company;

c)             approve the three-year strategic plan of the Company;

d)            elect and dismiss the Company's Officers, and set their attributions;

e)             supervise the management of the Board of Executive Officers, review at any time the books and documents of the Company, and request information regarding any acts executed or to be executed by the Company;

f)             attribute, from the aggregate value of the compensation established by the Shareholders’ Meeting, the monthly fees of each of the members of the Company's Management;

g)            define the general criteria on compensation and benefit policy (fringe benefits, participation in profits and/or sales) for the management and senior employees (namely, managers or employees in equivalent direction positions) of the Company;

h)            appoint the Company's independent auditors;

i)              resolve on the issue of shares and warrants, within the limit of the authorized capital of the Company;

j)              provide a previous manifestation on the management's report, the Board of Executive Officers' accounts, the financial statements for the fiscal year, and review the monthly balance sheets;

k)            submit to the Shareholders’ Meeting of the proposal of allocation of the net profits for the year;

l)              call the Annual Shareholders’ Meeting and, whenever it may deem advisable, the Extraordinary Shareholders’ Meetings;

m)           approve any business or agreements between the Company and/or any of its controlled companies (except those fully controlled), management and/or shareholders (including any direct or indirect partners of the Company's shareholders), without impairment of item “q” below;

n)            approve the creation, acquisition, assignment, transfer, encumbering and/or disposal by the Company, in any way whatsoever, of shares, quotas and/or any securities issued by any company controlled by the Company or associated to the Company; except in case of operations involving only the Company and companies fully controlled thereby or in case of indebtedness operation, in which case the provisions of item “o” bellow shall apply;

o)            approve the contracting by the Company of any debt in excess of ten percent (10%) of the Company's shareholders’ equity reflected on the latest audited balance sheet; this amount shall be considered per individual transaction or a series of related transactions;

p)            approve the execution, amendment, termination, renewal or cancellation of any contracts, agreements or similar instruments involving trademarks registered or deposited in the name of the Company or any of its controlled companies; except (i) for the agreements entered into between the Company and its fully controlled companies, or (ii) in the event of licensing of brands to be used in gifts, advertising accessory materials connected to such brands, or disclosure in events for periods under three, or yet (3iii) yearsfor agreements in which the licensing of brands is an accessory element to the execution of its main purpose (provided they do not depend on the approval of the Board of Directors for any other reason provided in this article 21);

q)            approve the granting of loans and the rendering of guarantees of any kind by the Company for amounts exceeding one percent (1%) of the shareholders’ equity of the Company reflected on the latest audited balance sheet, to any third party, except in favor of any companies controlled by the Company;

r)             approve the execution by the Company of any long-term agreements (i.e., agreements executed for a term exceeding one year), involving an amount in excess of five percent (5%) of the shareholders’ equity of the Company, as shown on the latest audited balance sheet; this amount shall be considered per individual transaction or a series of related transactions, except in the case of agreements entered into between the Company and its fully controlled companies;

s)             resolve on the Company's participation in other companies, as well as on any participation in other undertakings, including through a consortium or special partnership;

t)              resolve on the suspension of the Company's activities, except in the cases of stoppage for servicing of its equipment;

u)            authorize the acquisition of shares of the Company to be kept in treasury, be canceled or subsequently disposed of, as well as the cancellation and further sale of such shares, with due regard for applicable law;

v)            resolve on the issuance of Trade Promissory Notes for public distribution, pursuant to CVM Ruling No. 134;

w)           resolve, within the limits of the authorized capital, on the issuance of convertible debentures, specifying the limit of the increase of capital arising from debentures conversion, by number of shares, and the species and classes of shares that may be issued, under the terms of article 59 paragraph 2 of Law 6,404/76

x)            authorize the disposal of fixed assets, excepted for the ones mentioned in item “n” of this Articlearticle, and the constitution of collateral in an amount greater than 1% (one percent) of the shareholders’ equity reflected in the latest audited balance sheet. This amount will be considered per individual transaction or a series of related transactions;

y)            perform the other legal duties assigned thereto at the Shareholders’ Meeting or in these By-laws; and

z)             resolve on any cases omitted by these By-laws and perform other attributions not conferred on another body of the Company by the law or these By-laws.

Adjustment to the list of matters subject to prior approval by the Board of Directors, in order to exclude those that, given their relevance and potential impact on the Company's operation and results, should be within the competence of the Company's Officers.

155


 

 

     

SECTION II

BOARD OF EXECUTIVE OFFICERS

SECTION II

BOARD OF EXECUTIVE OFFICERS

 

Article 22 – The Board of Executive Officers shall be composed of two (2) to fifteen (15) members, shareholders or not, of whom (i) one shall be the Chief Executive Officer (ii) one shall be the Sales Executive Officer, (iii) one shall be the People and Management Executive Officer, (iv) one shall be the Logistics Executive Officer, (v) one shall be the Marketing Executive Officer, (vi) one shall be the Industrial Executive Officer, (vii) one shall be the Chief Financial and Investor Relations Officer, (viii) one shall be the General Counsel, (ix) one shall be the Soft Drinks Executive Officer, (x) one shall be the Corporate Affairs Executive Officer, (xi) one shall be the Shared Services and Information Technology Executive Officer, and (xii) the remaining Officers shall have no specific designation; all of whom shall be elected by the Board of Directors, and may be removed from office by it at any time, and shall have a term of office of three (3) years, reelection being permitted.

 

Article 22 – The Board of Executive Officers shall be composed of two (2) to fifteen (15) members, shareholders or not, of whom (i) one shall be the Chief Executive Officer (ii) one shall be the Commercial Vice President Officer, (iii) one shall be the Sales ExecutiveVice President Officer, (iiiiv) one shall be the People and Management ExecutiveVice President Officer, (ivv) one shall be the Logistics ExecutiveVice President Officer, (vvi) one shall be the Marketing ExecutiveVice President Officer, (vivii) one shall be the Industrial ExecutiveVice President Officer, (viiviii) one shall be the Chief Financial and Investor Relations Officer, (viiiix) one shall be the General Counsel, (ix) one shall be the Soft Drinks ExecutiveLegal Vice President Officer, (x) one shall be the Corporate Affairs ExecutiveNon-Alcoholic Beverages Vice President Officer, (xi) one shall be the Shared Services andCompliance Vice President Officer, and (xii) one shall be the Information Technology ExecutiveVice President Officer, and (xiixiii) the remaining Officers shall have no specific designation; all of whom shall be elected by the Board of Directors, and may be removed from office by it at any time, and shall have a term of office of three (3) years, reelection being permitted.

Assignment of new names to the positions of the Executive Board and creation/exclusion of positions of Vice-President Directors to reflect a new organizational structure.

Article 23 – The Executive Board, whose presidency will be held by the Chief Executive Officer, shall meet as necessary, it being incumbent upon the Chief Executive Officer to call and to be the chairman of the meeting.

Article 23 – The Executive Board, whose presidency will be held by the Chief Executive Officer, shall meet as necessary, it being incumbent upon the Chief Executive Officer to call and to be the chairman of the meeting.

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

Article 24 – It is the Chief Executive Officer’s responsibility to:

 

Article 24 – It is the Chief Executive Officer’s responsibility to: (...)

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

No correspondence in the current Bylaws (new paragraph).

 

Article 25 – It is the Sales ExecutiveCommercial Vice President Officer’s responsibility to:

 

a)          be responsible for the direction, strategic planning and control of the Company's        sales and marketing areas; and

b)          exercise the other prerogatives conferred upon it by the Board of Directors.

Inclusion of the competence  details  attributed to the new position of Commercial Vice President Officer.

Article 25 – It is the Sales Executive Officer’s responsibility to: (...)

Article 26 – It is the Sales Vice President Officer’s responsibility to:  (...)

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

Article 26 – It is the People and Management Executive Officer’s responsibility to: (...)

 

Article 2627It is the People and Management ExecutiveVice President Officer’s responsibility to: (...)

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

Article 27 -  It is the Logistics Executive Officer’s responsibility to: (...)

Article 2728 -  It is the Logistics ExecutiveVice President Officer’s responsibility to: (...)

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

Article 28 -  It is the Marketing Executive Officer’s responsibility to: (...)

 

Article 2829 -  It is the Marketing ExecutiveVice President Officer’s responsibility to: (...)

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

Article 29 – It is the Industrial Executive Officer’s responsibility to: (...)

 

Article 2930It is the Industrial ExecutiveVice President Officer’s responsibility to: (...)

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

Article 30 – It is the Chief Financial and Investor Relations Officer’s responsibility to:

 

a)            manage and respond for the budget control of the Company;

 

b)            provide managerial and financial information;

 

c)            be responsible for the control over the cash flow and financial investments of the Company;

 

d)            provide any and all information to investors, to the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários) and to BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros

 

e)            maintain the registration of the Company as an openly-held company updated; and

 

f)             exercise the other prerogatives conferred upon it by the Board of Directors.

Article 3031It is the Chief Financial and Investor Relations Officer’s responsibility to:

 

a)             manage and respond for the budget control of the Company;

 

b)            provide managerial and financial information;

 

c)             be responsible for the control over the cash flow and financial investments of the Company;

 

d)            provide any and all information to investors, to the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários) and to BM&FBOVESPAB3 S.A. - Brasil, Bolsa de Valores, Mercadorias e Futuros, Balcão;

 

e)             maintain the registration of the Company as an openly- held company updated; and

 

f)             exercise the other prerogatives conferred upon it by the Board of Directors.

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws and update to the corporate name of the Brazilian Stock Exchange.

Article 31 -  It is the General Counsel’s responsibility to: (...)

Article 3132 -  It is the General Counsel’sLegal Vice President Officer responsibility to: (...)

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

Article 32 – It is the Soft Drinks Executive Officer’s responsibility to: (...)

Article 3233It is the Soft Drinks ExecutiveNon-Alcoholic Beverages Vice President Officer’s responsibility to: (...)

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws.

Article 33 – It is the Corporate Affairs Executive Officer’s responsibility to:

 

a)                   respond for the external communication, as well as the Company’s corporate and governmental relations; and

 

b)                   exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 3334It is the Corporate Affairs ExecutiveCompliance Vice President Officer’s responsibility to:

 

a)           implement, manage and operationalize the Company's compliance program,    ensuring compliance, effectiveness and continuous improvement;

 

b)           investigate any allegations of violations to the Company's compliance program; and

 

c)           exercise the other prerogatives conferred upon it by the Board of Directors.

 

Paragraph 1 –  It is granted to the Compliance Vice-President Officer, in the exercise of his/her duties, direct access to the Board of Directors.

Adjustment to reflect the new organizational structure of the Executive Board, as proposed in article 22 of the Bylaws, including competence  details attributed to the new position of  Compliance Vice President Officer.

Article 34 – It is the Shared Services and Information Technology Executive Officer’s responsibility to:

 

a)                respond for the direction, planning and control of the information technology sector of the Company, as well as of its shared services center; and

 

b)               exercise the other prerogatives conferred upon it by the Board of Directors.

Article 35 – It is the Information Technology Vice President Officer’s responsibility to:

 

a)       respond for the external communication, as well asdirection, planning and control of the information technology sector of the Company’s corporate and governmental relations; and

 

b)       exercise the other prerogatives conferred upon it by the Board of Directors.

Adjustment in the name of the positions of the Executive Board due to the proposed amendment to article 22 of the Bylaws and in the competence of the Information Technology Vice President Officer, who is no longer responsible for shared services.

Article 35 – It is incumbent upon the other Executive Officers to exercise the prerogatives conferred upon them by means of a Meeting of the Board of Directors, which may establish specific titles for their positions.

Article 3536 – It is incumbent upon the other Executive Officers to exercise the prerogatives conferred upon them by means of a Meeting of the Board of Directors, which may establish specific titles for their positions.

 

Article renumbering.

 Article 36 - The Documents involving the Company in any commercial, banking, financial or equity liability, such as agreements in general, check endorsements, promissory notes, bills of exchange, trade bills and any credit instruments, debt acknowledgments, granting of aval  guarantees and sureties, credit facility agreements, acts performed by branches, ad negocia and ad judicia powers of attorney, and any other acts creating any liability for the Company or waiving third-party obligations or obligations to the Company, shall be valid upon the signature of two members of the Executive Board.

Article 3637 - The Documents involving the Company in any commercial, banking, financial or equity liability, such as agreements in general, check endorsements, promissory notes, bills of exchange, trade bills and any credit instruments, debt acknowledgments, granting of aval  guarantees and sureties, credit facility agreements, acts performed by branches, ad negocia and ad judicia powers of attorney, and any other acts creating any liability for the Company or waiving third-party obligations or obligations to the Company, shall be valid upon the signature of two members of the Executive Board.

Article renumbering.

CHAPTER V FISCAL COUNCIL

CHAPTER V FISCAL COUNCIL

 

Article 37 – The Company shall have a Fiscal Council, on a permanent basis, composed of three (3) to five (5) members and an equal number of alternates. All of its members shall be elected at a Shareholders’ Meeting and by it removed at any time. Their term of office shall expire at the Annual Shareholders’ Meeting to be held following their election, reelection being permitted.

Article 3738 The Company shall have a Fiscal Council, on a permanent basis, composed of three (3) to five (5) members and an equal number of alternates. All of its members shall be elected at a Shareholders’ Meeting and by it removed at any time. Their term of office shall expire at the Annual Shareholders’ Meeting to be held following their election, reelection being permitted.

Article renumbering.

Article 38 – The compensation of the Fiscal Council's members shall be established by the Shareholders’ Meeting that elects them.

Article 3839The compensation of the Fiscal Council's members shall be established by the Shareholders’ Meeting that elects them.

Article renumbering.

CHAPTER VI FISCAL YEAR, BALANCE SHEET AND RESULTS

CHAPTER VI FISCAL YEAR, BALANCE SHEET AND RESULTS

 

Article 39 – The fiscal year shall have the duration of one year, and shall end on the last day of December of each year.

Article 3940The fiscal year shall have the duration of one year, and shall end on the last day of December of each year.

Article renumbering.

Article 40 - At the end of each fiscal year, the financial statements determined by law shall be drawn up in accordance with the Company's bookkeeping.

Article 4041 - At the end of each fiscal year, the financial statements determined by law shall be drawn up in accordance with the Company's bookkeeping.

Article renumbering.

Article 41 - From the profits ascertained in each year, accumulated losses and a provision for income tax shall be deducted prior to any other distribution.  

Article 4142 - From the profits ascertained in each year, accumulated losses and a provision for income tax shall be deducted prior to any other distribution. 

Article renumbering.

CHAPTER VII LIQUIDATION, WINDING-UP AND EXTINGUISHMENT

CHAPTER VII LIQUIDATION, WINDING-UP AND EXTINGUISHMENT

 

Article 42 – The Company shall be liquidated, wound up and extinguished in the cases contemplated by law or by resolution of the Shareholders’ Meeting.

Article 4243The Company shall be liquidated, wound up and extinguished in the cases contemplated by law or by resolution of the Shareholders’ Meeting.

Article renumbering.

CHAPTER VIII GENERAL PROVISIONS

CAPÍTULO VIII DISPOSIÇÕES GERAIS

 

 Article 43 – The dividends attributed to the shareholders shall be paid within the legal time frames, and monetary adjustment and/or interest shall only be assessed if so determined by the Shareholders’ Meeting.

Article 4344The dividends attributed to the shareholders shall be paid within the legal time frames, and monetary adjustment and/or interest shall only be assessed if so determined by the Shareholders’ Meeting.

Article renumbering.

Article 44 – The Company shall comply with the shareholders' agreements registered as provided for in article 118 of Law No. 6,404/76.

Article 4445 The Company shall comply with the shareholders' agreements registered as provided for in article 118 of Law No. 6,404/76.

Article renumbering.

Article 45 – The Company will provide the members of the Board of Directors, of the Board of Executive Officers and of the Fiscal Council, or the members of any corporate bodies with technical functions set up to advise the managers, a legal defense in lawsuits and administrative proceedings filed by third parties during or after their respective terms of office, for acts performed during the exercise of their functions, including through a permanent insurance policy, shielding them against liability for acts arising from the exercise of their positions or functions, including the payment of court costs, legal fees, indemnifications and any other amounts arising from such proceedings.

Article 4546The Company will provide the members of the Board of Directors, of the Board of Executive Officers and of the Fiscal Council, or the members of any corporate bodies with technical functions set up to advise the managers, a legal defense in lawsuits and administrative proceedings filed by third parties during or after their respective terms of office, for acts performed during the exercise of their functions, including through a permanent insurance policy, shielding them against liability for acts arising from the exercise of their positions or functions, including the payment of court costs, legal fees, indemnifications and any other amounts arising from such proceedings.

Article renumbering.

***

 

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“BY-LAWS

“BYLAWS

 

CHAPTER I

NAME, HEADQUARTERS, PURPOSE AND DURATION

 

 Article 1 - AMBEV S.A. (“Company”) is a corporation (sociedade anônima), which shall be governed by these By-laws and by applicable law.

 

Article 2 – The Company has its headquarters and jurisdiction in the City of São Paulo, State of São Paulo. Branches, offices, deposits or representation agencies may be opened, maintained and closed elsewhere in Brazil or abroad, by resolution of its Board of Directors, for achievement of the Company’s purposes.

 

Article 3 – The purpose of the Company, either directly or by participation in other companies, is:

 

·       the production and trading of beer, concentrates, soft drinks and other beverages, as well as foods and drinks in general, including ready-to-drink liquid compounds, flavored liquid preparations, powdered or tubbed guaraná;

 

·       the production and trading of raw materials required for the industrialization of beverages and byproducts, such as malt, barley, ice, carbonic gas, as well as apparatus, machinery, equipment, and anything else that may be necessary or useful for the activities listed in item (a) above, including the manufacturing and sale of packages for beverages, as well as the manufacturing, sale and industrial use of raw material necessary for the manufacturing of such packages;

 

·       the production, certification and commerce of seeds and grains, as well as the commerce of fertilizers and fungicides and other related activities, as necessary or useful to the development of the main activities of the Company as stated in these By-laws;

 

·       the packaging and wrapping of any of the products belonging to it or to third parties;

 

·       the agricultural cultivation and promotion activities in the field of cereals and fruits which are the raw material used by the Company in its industrial activities, as well as in other sectors that require a more dynamic approach in the exploration of the virtues of the Brazilian soil, mainly in the food and health segments;

 

·       the operation on the following areas: research, prospecting, extraction, processing, industrialization, commercialization and distribution of mineral water, in all national territory;

 

·       the beneficiation, expurgation and other phytosanitary services, and industrialization of products resulting from the activities listed in item (d) above, either for meeting the purposes of its industry or for trading of its byproducts, including, but not limited to, byproducts for animal feeding;

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·       the advertising of products belonging to it and to third parties, and the trading of  promotional and advertising materials;

 

·        the rendering of technical, market and administrative assistance services and other services directly or indirectly related to the core activities of the Company;

 

·       the importation of anything necessary for its industry and trade;

 

k)   the exportation of its products;

 

·       the direct or indirect exploration of bars, restaurants, luncheonettes and similar places;

 

·       the contracting, sale and/or distribution of its products and the products of its controlled companies, either directly or through third parties, using the means of transport required for distribution of such products, byproducts or accessories, and adoption of any system or instruction that, at the discretion of the Board of Directors, may lead to the envisaged purposes;

 

·       printing and reproduction of recorded materials, including the activities of printing, services of preprinting and graphic finishing and reproduction of recorded materials in any base.

 

Sole Paragraph – Additionally to the provisions of the caption of this Articlearticle, the Company may participate in or associate itself with other commercial and civil companies, as partner, shareholder or quotaholder, in Brazil or abroad.

 

Article 4 – The Company is established for an indeterminate term.

 

CHAPTER II

CAPITAL STOCK AND SHARES

 

Article 5 – The capital stock is of R$ 57,798,844,242.2057,899,072,773.68, divided into 15,726,842,29715,735,117,965 nominative common shares, without par value.

 

Paragraph 1 – Each common share shall be entitled to one vote in the resolutions of the Shareholders’ Meeting.

 

Paragraph 2 – The Company shares are in the book-entry form, and shall be held in a deposit account in the name of the respective holders, with a financial institution indicated by the Board of Directors.

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Paragraph 3 – The Company may suspend the services of transfer and splitting of shares and certificates in accordance with the Shareholders’ Meeting's determination, provided that this suspension does not exceed ninety (90) intercalary days during the fiscal year or fifteen (15) consecutive days.

 

Article 6 – The Company is authorized to increase its share capital up to the limit of 19,000,000 (nineteen billion) shares, irrespective of an amendment to the By-laws, by resolution of the Board of Directors, which shall resolve on the paying-up conditions, the characteristics of the shares to be issued and the issue price, and shall establish whether the increase shall be carried out by public or private subscription.

 

Sole Paragraph – The issuance of shares pursuant to any special laws regarding fiscal incentives (art. 172, sole paragraph, of Law 6,404/76) shall not give rise to preemptive rights to shareholders; provided, however, that shares subscribed with funds originated from fiscal incentives shall not carry preemptive rights for subscription in connection with any issuance of shares after such subscription.

 

Article 7 – The issuance of shares, debentures convertible into shares and subscription bonds, the placement of which shall be made (i) by sale on the stock exchange; (ii) by public subscription; or (iii) for share swap, in a public offering for acquisition of control which, under the terms of articles 257 and 263, of Law 6,404/76, may be carried out with exclusion of the preemptive right or with reduction in the period which is addressed in article 171, paragraph 4 of Law 6,404/76.

 

Article 8 – The Board of Directors may, also, within the limit of the authorized capital, (i) based on a plan approved by the Shareholders’ Meeting, grant call options to management, employees or individuals that render services to the Company or companies under its control; (ii) approve the capital increase by capitalizing profits or reserves, with or without the issuance of new shares; and (iii) resolve on the issuance of subscription bonus or debentures convertible into shares.

 

Article 9 – Failure by the subscriber to pay the subscribed value, on the conditions set forth in the bulletin or call shall cause it to be considered in default by operation of law, for purposes of articles 106 and 107 of Law 6,404/76, subjecting it to the payment of the amount in arrears, adjusted for inflation according to the variation in the General Market Price Index (IGP-M) in the shortest period permitted by law, in addition to interest at twelve percent (12%) per year, pro rata temporis, and a fine corresponding to ten percent (10%) of the amount in arrears, duly updated.

 

CHAPTER III

SHAREHOLDERS’ MEETINGS

 

Article 10 – The Shareholders’ Meeting has the power to decide on all businesses related to the object of the Company and to take any resolutions it may deem advisable for its protection and development.

 

Article 11 – Shareholders’ Meetings shall be convened and presided over by the Chairman or one of the Co-Chairmen of the Board of Directors, as applicable, or person appointed by them, who may designate up to two secretaries.

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Article 12 – Any resolutions of the Shareholders’ Meetings, except for the cases contemplated by law, shall be taken by an absolute majority of votes, excluding any blank votes.

 

Article 13 – Annual Shareholders’ Meetings shall be held within the first four months after the end of the fiscal year, and shall decide on matters under their authority, as set forth in law.

 

Article 14 – Extraordinary Shareholders’ Meetings shall be held whenever the interests of the Company so require, as well as in the events established in law and in these By-laws.

 

CHAPTER IV

MANAGEMENT OF THE COMPANY

 

Article 15 – The Company shall be managed by a Board of Directors and a Board of Executive Officers, pursuant to law and these By-laws.

 

Paragraph 1 – The Shareholders’ Meeting shall establish the aggregate compensation of the Management, which shall be apportioned by the Board of Directors, as provided for in Articlearticle 21 hereof.

 

Paragraph 2 – The management must adhere to the Manual on Disclosure and Use of Information and Policy for the Trading with Securities Issued by the Company, by executing the Joinder Agreement.

 

 

Paragraph 3 -– The Board of Directors will be composed, in its majority, by external members, that is, directors without current, employment or management relationship, with the Company, who may or may not be considered independent members, observed the provisions of paragraph 5 of this article 15.

 

Paragraph 4 The offices of Chairman or Co-Chairmen of the Board of Directors, as applicable, and Chief Executive Officer of the Company may not be cumulated by the same person.

 

Paragraph 45 - At least two members of the Board of Directors of the Company will be Independent Directors, it being understood, for the purposes hereof, as Independent Directors those in compliance with the following requirements:

g)     he/she must not be a Controlling Shareholder, or spouse or relative up to second-degree thereof;

h)     he/she must not have been, for the last three years, an employee or officer (i) of the Company or of a company controlled by the Company, or (ii) of the Controlling Shareholder or of a company controlled thereby (“Jointly-Controlled Company”);

i)      he/she must not be a supplier or buyer, whether direct or indirect, of services and/or products of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly- Controlled Company, in all cases in magnitude which implies in the loss of independence;

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j)      he/she must not be an employee or manager of a company or entity which is offering or requesting services and/or products of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly- Controlled Company, as per item (c) above;

k)     he/she must not be a spouse or relative up to second degree of any manager of the Company, of a company controlled by the Company, of the Controlling Shareholder or of a Jointly- Controlled Company;

l)      he/she must not receive compensation by the Company, by a company controlled by the Company, by the Controlling Shareholder or by a Jointly- Controlled Company, except as a member of the Board of Directors (cash provisions from capital interests are excluded from this restriction).

 

Paragraph 56 - Directors elected pursuant to art. 141, paragraphs 4 and 5, of Law 6,404/76 will also be considered Independent Directors, notwithstanding of complying with the independence criteria provided in this Articlearticle.

 

SECTION I

BOARD OF DIRECTORS

 

Article 16 – The Board of Directors shall be composed of threefive (35) to eleven (11) sitting members, with two (2) to eleven (11) alternates, bound or not to a specific sitting Director, and shall be elected by the Shareholders’ Meeting and be dismissed thereby at any time, with a term of office of three (3) years, reelection being permitted.

 

Paragraph 1- Subject to the caption of this Articlearticle, the number of members that will make up the Board of Directors in each management period shall be previously established at each Shareholders’ Meeting whose agenda includes election of the members of the Board of Directors, and this matter shall be forwarded by the Chairman of the Shareholders’ Meeting.

 

Paragraph 2 - The Board of Directors may determine the creation of advisory committees formed in its majority by members of the Board of Directors, defining their respective composition and specific duties.  The rules of article 160 of Law No. 6,404/76 shall apply to members of the advisory committees.  It will be incumbent upon said committees to analyze and discuss the issues defined as being within the scope of their duties, as well as to formulate proposals and recommendations for deliberation by the Board of Directors.

 

Paragraph 3- The members of the Board of Directors shall be invested in office upon the execution of the respective instrument, drawn up in the proper book, and shall remain in office until they are replaced by their successors.

 

Paragraph 4 - The Director shall have an indisputable reputation, and cannot be elected, unless waived by the Shareholders’ Meeting, if it (i) occupies a position in companies that can be considered as a competitor of the Company, or (ii) has or represents a conflicting interest with the Company; the voting rights of the Director cannot be exercised by him/her in case the same impediment factors are configured.

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Article 17 - The Board of Directors shall have one Chairman or two (2) Co-Chairmen, withas defined by the vote of the majority of its members, and, in the case of Co-Chairmen, this must be done in a shared manner, with both Co-Chairmen having identical prerogatives and duties, who shall. The Chairman or Co-Chairmen of the Board of Directors, as applicable, will be elected by a majority of the members of the Board of Directors, immediately after said members are invested in office.

 

Article 18 - The Board of Directors shall meet, ordinarily, at least once each quarter and, extraordinarily, whenever necessary, upon call by the Chairman or any of its Co-Chairmen, as applicable, or by the majority of its members, through letter, email, telegram or personally, with at least 24 (twenty-four) hours in advance.

 

Article 19 - The Board of Directors shall be convened, operate and pass valid resolutions by the favorable vote of the majority of its members present in the meeting.

 

Paragraph 1 – The Directors may attend meetings by telephone, videoconferencing, telepresence or by previously sending their votes in writing.  In this case, the Director will be considered to be present at a meeting in order to ascertain the quorum for declaring it open and voting, with this vote being deemed valid for all legal effects, being included in minutes of such meeting.

 

Paragraph 2 – In the event of a tie in the resolutions of the Board of Directors, noneneither the Chairman nor any of the Co-Chairmen, as applicable, shall have the casting vote, but only their own personal votes.

 

Paragraph 3 – The Director shall not have access to information or take part in meetings of the Board of Directors related to matters in which it has conflicting interests with the Company.

 

Article 20 - In the case of permanent absence or impediment of any Director, and if there is an alternate Director, the Board of Directors shall decide whether the alternate shall fill the vacant office, or if the vacant office shall be filled by a substitute on a permanent basis; the substitute Director shall, in any case, complete the term of office of the absent or impeded Director.

 

Sole Paragraph – In the event of temporary absence or impediment, the members of the Board of Directors shall be replaced by the respective alternates, or in the absence thereof, by another Director appointed for such purpose by the absent Director. In this latter case, the Director that is replacing the absent or impeded Director shall cast the vote of the absent Director in addition to his own vote.

 

Article 21 – The Board of Directors shall resolve on the matters listed below:

 

·       establish the general direction of the Company's business, approving the guidelines, corporate policies and basic objectives for all the main areas of performance of the Company;

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·       approve the annual investment budget of the Company;

·       approve the three-year strategic plan of the Company;

·       elect and dismiss the Company's Officers, and set their attributions;

·       supervise the management of the Board of Executive Officers, review at any time the books and documents of the Company, and request information regarding any acts executed or to be executed by the Company;

·       attribute, from the aggregate value of the compensation established by the Shareholders’ Meeting, the monthly fees of each of the members of the Company's Management;

·       define the general criteria on compensation and benefit policy (fringe benefits, participation in profits and/or sales) for the management and senior employees (namely, managers or employees in equivalent direction positions) of the Company;

·       appoint the Company's independent auditors;

·       resolve on the issue of shares and warrants, within the limit of the authorized capital of the Company;

·       provide a previous manifestation on the management's report, the Board of Executive Officers' accounts, the financial statements for the fiscal year, and review the monthly balance sheets;

·       submit to the Shareholders’ Meeting of the proposal of allocation of the net profits for the year;

·       call the Annual Shareholders’ Meeting and, whenever it may deem advisable, the Extraordinary Shareholders’ Meetings;

·       approve any business or agreements between the Company and/or any of its controlled companies (except those fully controlled), management and/or shareholders (including any direct or indirect partners of the Company's shareholders), without impairment of item “q” below;

·       approve the creation, acquisition, assignment, transfer, encumbering and/or disposal by the Company, in any way whatsoever, of shares, quotas and/or any securities issued by any company controlled by the Company or associated to the Company; except in case of operations involving only the Company and companies fully controlled thereby or in case of indebtedness operation, in which case the provisions of item “o” bellow shall apply;

·       approve the contracting by the Company of any debt in excess of ten percent (10%) of the Company's shareholders’ equity reflected on the latest audited balance sheet; this amount shall be considered per individual transaction or a series of related transactions;

·       approve the execution, amendment, termination, renewal or cancellation of any contracts, agreements or similar instruments involving trademarks registered or deposited in the name of the Company or any of its controlled companies; except (i) for the agreements entered into between the Company and its fully controlled companies, or (ii) in the event of licensing of brands to be used in gifts, advertising accessory materials connected to such brands, or disclosure in events for periods under three, or yet (3iii) yearsfor agreements in which the licensing of brands is an accessory element to the execution of its main purpose (provided they do not depend on the approval of the Board of Directors for any other reason provided in this article 21);

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·       approve the granting of loans and the rendering of guarantees of any kind by the Company for amounts exceeding one percent (1%) of the shareholders’ equity of the Company reflected on the latest audited balance sheet, to any third party, except in favor of any companies controlled by the Company;

·       approve the execution by the Company of any long-term agreements (i.e., agreements executed for a term exceeding one year), involving an amount in excess of five percent (5%) of the shareholders’ equity of the Company, as shown on the latest audited balance sheet; this amount shall be considered per individual transaction or a series of related transactions, except in the case of agreements entered into between the Company and its fully controlled companies;

·       resolve on the Company's participation in other companies, as well as on any participation in other undertakings, including through a consortium or special partnership;

·       resolve on the suspension of the Company's activities, except in the cases of stoppage for servicing of its equipment;

·       authorize the acquisition of shares of the Company to be kept in treasury, be canceled or subsequently disposed of, as well as the cancellation and further sale of such shares, with due regard for applicable law;

·       resolve on the issuance of Trade Promissory Notes for public distribution, pursuant to CVM Ruling No. 134;

·       resolve, within the limits of the authorized capital, on the issuance of convertible debentures, specifying the limit of the increase of capital arising from debentures conversion, by number of shares, and the species and classes of shares that may be issued, under the terms of article 59 paragraph 2 of Law 6,404/76

·       authorize the disposal of fixed assets, excepted for the ones mentioned in item “n” of this Articlearticle, and the constitution of collateral in an amount greater than 1% (one percent) of the shareholders’ equity reflected in the latest audited balance sheet. This amount will be considered per individual transaction or a series of related transactions;

·       perform the other legal duties assigned thereto at the Shareholders’ Meeting or in these By-laws; and

·       resolve on any cases omitted by these By-laws and perform other attributions not conferred on another body of the Company by the law or these By-laws.

 

Paragraph 1 – The decisions of the Board of Directors shall be recorded in minutes, which shall be signed by those present in the meeting.

 

Paragraph 2 – Any favorable vote cast by a Company representative in connection with any resolution on the matters listed above, in Shareholders’ Meetings and in other corporate bodies of the companies controlled by the Company, either directly or indirectly, shall be conditional on the approval of the Board of Directors of the Company.

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SECTION II

BOARD OF EXECUTIVE OFFICERS

 

Article 22 – The Board of Executive Officers shall be composed of two (2) to fifteen (15) members, shareholders or not, of whom (i) one shall be the Chief Executive Officer (ii) one shall be the Commercial Vice President Officer, (iii) one shall be the Sales ExecutiveVice President Officer, (iiiiv) one shall be the People and Management ExecutiveVice President Officer, (ivv) one shall be the Logistics ExecutiveVice President Officer, (vvi) one shall be the Marketing ExecutiveVice President Officer, (vivii) one shall be the Industrial ExecutiveVice President Officer, (viiviii) one shall be the Chief Financial and Investor Relations Officer, (viiiix) one shall be the General Counsel, (ix) one shall be the Soft Drinks ExecutiveLegal Vice President Officer, (x) one shall be the Corporate Affairs ExecutiveNon-Alcoholic Beverages Vice President Officer, (xi) one shall be the Shared Services andCompliance Vice President Officer, and (xii) one shall be the Information Technology ExecutiveVice President Officer, and (xiixiii) the remaining Officers shall have no specific designation; all of whom shall be elected by the Board of Directors, and may be removed from office by it at any time, and shall have a term of office of three (3) years, reelection being permitted.

 

Paragraph 1 – Should a position of Executive Officer become vacant or its holder be impeded, it shall be incumbent upon the Board of Directors to elect a new Executive Officer or to appoint an alternate, in both cases determining the term of office and the respective remuneration.

 

Paragraph 2 – It is incumbent upon the Executive Board to exercise the prerogatives that the law, the By-laws and the Board of Directors confer upon it for the performance of the actions required for the Company to function normally.

 

Paragraph 3 – The Executive Officers shall be invested in office upon the execution of the respective instrument, drawn up in the proper book, and shall remain in office until their successors are vested in office.

 

Article 23 – The Executive Board, whose presidency will be held by the Chief Executive Officer, shall meet as necessary, it being incumbent upon the Chief Executive Officer to call and to be the chairman of the meeting.

 

Article 24 – It is the Chief Executive Officer’s responsibility to:

 

a)       submit the annual work plans and budgets, investment plans and new Company expansion programs to the Board of Directors for approval, causing them to be carried out, pursuant to their approval;

 

b)      formulate the Company’s operating strategies and guidelines, as well as establishing the criteria for executing the resolutions of the Shareholders’ Meetings and of the Board of Directors, with the participation of the other Executive Officers;

 

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c)       supervise all the Company’s activities, providing the guidelines best suited to its corporate purpose;

 

d)      coordinate and oversee the activities of the Board of Executive Officers; and

 

e)       exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 25 – It is the Sales ExecutiveCommercial Vice President Officer’s responsibility to:

 

a)    be responsible for the direction, strategic planning and control of the Company's        sales and marketing areas; and

b)    exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 26 – It is the Sales Vice President Officer’s responsibility to:

 

a)       develop the strategic sales planning of the Company;

 

b)      be responsible for the management of the commercial team and develop and implement an action model for the sector; and

 

c)       exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 2627It is the People and Management ExecutiveVice President Officer’s responsibility to:

 

Ø  organize and manage the Company’s human resources; and

 

Ø  exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 2728 -  It is the Logistics ExecutiveVice President Officer’s responsibility to:

 

·         establish, manage and be responsible for the pre-production and post-production distribution and logistics strategy of the Company; and

 

·         exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 2829 -  It is the Marketing ExecutiveVice President Officer’s responsibility to:

 

a)       be responsible for the direction, planning and control of the marketing area of the Company; and

 

b)      exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 2930It is the Industrial ExecutiveVice President Officer’s responsibility to:

 

a)       manage the branches, warehouses, industrial plants and other units of the Company related to its industrial production; and

 

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b)      exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 3031It is the Chief Financial and Investor Relations Officer’s responsibility to:

 

1.        manage and respond for the budget control of the Company;

 

2.        provide managerial and financial information;

 

3.        be responsible for the control over the cash flow and financial investments of the Company;

 

4.        provide any and all information to investors, to the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários) and to BM&FBOVESPAB3 S.A. - Brasil, Bolsa de Valores, Mercadorias e Futuros, Balcão;

 

5.        maintain the registration of the Company as an openly- held company updated; and

 

6.        exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 3132 -  It is the General Counsel’sLegal Vice President Officer responsibility to:

 

Ø  establish, manage and coordinate the legal strategy adopted by the Company, and to supervise its judicial and administrative proceedings;

 

Ø  be responsible for the Company’s corporate documents; and

 

Ø  exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 3233It is the Soft Drinks ExecutiveNon-Alcoholic Beverages Vice President Officer’s responsibility to:

 

·         coordinate and supervise the non-alcoholic and non-carbonated drinks sector, and establish its planning strategy; and

 

·         exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 3334It is the Corporate Affairs ExecutiveCompliance Vice President Officer’s responsibility to:

 

a)       implement, manage and operationalize the Company's compliance program,    ensuring compliance, effectiveness and continuous improvement;

 

b)      investigate any allegations of violations to the Company's compliance program; and

 

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c)       exercise the other prerogatives conferred upon it by the Board of Directors.

 

Paragraph 1 –  It is granted to the Compliance Vice-President Officer, in the exercise of his/her duties, direct access to the Board of Directors.

 

Article 35 – It is the Information Technology Vice President Officer’s responsibility to:

 

a)       respond for the external communication, as well asdirection, planning and control of the information technology sector of the Company’s corporate and governmental relations; and

 

b)      exercise the other prerogatives conferred upon it by the Board of Directors.

 

 

Article 34 – It is the Shared Services and Information Technology Executive Officer’s responsibility to:

 

a)    respond for the direction, planning and control of the information technology sector of the Company, as well as of its shared services center; and

 

b)    exercise the other prerogatives conferred upon it by the Board of Directors.

 

Article 3536 – It is incumbent upon the other Executive Officers to exercise the prerogatives conferred upon them by means of a Meeting of the Board of Directors, which may establish specific titles for their positions.

 

Article 3637 - The Documents involving the Company in any commercial, banking, financial or equity liability, such as agreements in general, check endorsements, promissory notes, bills of exchange, trade bills and any credit instruments, debt acknowledgments, granting of aval  guarantees and sureties, credit facility agreements, acts performed by branches, ad negocia and ad judicia powers of attorney, and any other acts creating any liability for the Company or waiving third-party obligations or obligations to the Company, shall be valid upon the signature of two members of the Executive Board.

 

Paragraph 1 – The representation of the Company in the aforementioned documents may be delegated to an attorney-in-fact, and such documents may be executed by an Attorney-in-Fact in conjunction with an Officer, or by two Attorneys-in-Fact, jointly, provided that the instruments of power of attorney appointing these attorneys-in-fact are executed by two Officers.

 

Paragraph 2 - The Company shall be represented, individually, by any of the Officers or by a duly appointed Attorney-in-Fact, as regards receipt of service of process or judicial notices and rendering of personal deposition.

 

 

 

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CHAPTER V

FISCAL COUNCIL

 

Article 3738 The Company shall have a Fiscal Council, on a permanent basis, composed of three (3) to five (5) members and an equal number of alternates. All of its members shall be elected at a Shareholders’ Meeting and by it removed at any time. Their term of office shall expire at the Annual Shareholders’ Meeting to be held following their election, reelection being permitted.

 

Paragraph 1 – In order for the Fiscal Council to function, the majority of its members must attend its meeting.

 

Paragraph 2 -  It shall be incumbent upon the Fiscal Council to elect its Chairman in the first meeting to be held after its instatement.

 

Paragraph 3  - In addition to the duties conferred to it by these By-laws and by law, the Fiscal Council shall establish in its Internal Regiment the procedures for receiving, recording and treating complaints received in connection with accounting, internal accounting controls and matters related with the auditing of the Company, as well as any other communication received on such matters.

 

Paragraph 4 - The provisions of Paragraph 2 of Articlearticle 15 of these By-laws apply to the members of the Fiscal Council.

 

Article 3839The compensation of the Fiscal Council's members shall be established by the Shareholders’ Meeting that elects them.

 

 

CHAPTER VI

FISCAL YEAR, BALANCE SHEET AND RESULTS

 

Article 3940The fiscal year shall have the duration of one year, and shall end on the last day of December of each year.

 

Article 4041 - At the end of each fiscal year, the financial statements determined by law shall be drawn up in accordance with the Company's bookkeeping.

 

Paragraph 1 – The Board of Directors may resolve to draw up half-yearly balance sheets or for shorter periods, and approve the distribution of dividends and/or interest on net equity based on the profits ascertained in such balance sheets, subject to the provisions set forth in Article 204 of Law No. 6,404/76.

 

Paragraph 2 – At any time, the Board of Directors may also resolve on the distribution of interim dividends and/or interest on net equity based on the accrued profits or existing profits reserves presented in the latest yearly or half-yearly balance sheet.

 

Paragraph 3 – The interim dividends and interest on net equity shall always be considered as an advance on the minimum mandatory dividends.

 

Article 4142 - From the profits ascertained in each year, accumulated losses and a provision for income tax shall be deducted prior to any other distribution. 

 

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Paragraph 1 – Over the amount ascertained as provided for in the caption of this Articlearticle, it will be calculated:

 

a)     the statutory participation of the Company’s employees up to the maximum limit of 10% (ten percent), to be distributed according to the parameters to be established by the Board of Directors; and

 

b)      the statutory participation of the management, up to the maximum legal limit.

 

Paragraph 2 – Over the amount ascertained as provided for in the caption of this Articlearticle, it may be calculated, in addition, up to the limit of 10% (ten percent), a contribution 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.

 

Paragraph 3 – The following allocations shall be made from the net income of the fiscal year, obtained after the deductions dealt with in the previous paragraphs:

 

a)     five percent (5%) shall be allocated to the legal reserve, up to twenty percent (20%) of the paid-in capital stock or the limit established in article 193, paragraph 1 of Law No. 6,404/76;

 

b)     from the balance of the net profit of the fiscal year, obtained after the deduction mentioned in item (a) of this Articlearticle and adjusted pursuant to article 202 of Law No. 6,404/76, forty percent (40%) shall be allocated to pay the mandatory dividend to all its shareholders; and

 

c)     an amount not greater than sixty percent (60%) of the adjusted net profits shall be allocated to the formation of an Investment Reserve, for the purpose of financing the expansion of the activities of the Company and its controlled companies, including through subscription of capital increases or the creation of new business developments.

 

Paragraph 4 – The reserve set out in item (c) of paragraph 3 of this Articlearticle may not exceed eighty percent (80%) of the capital stock. Upon reaching this limit, the Shareholders’ Meeting shall resolve either to distribute the balance to the shareholders or increase the Company’s corporate capital.

 

CHAPTER VII

LIQUIDATION, WINDING-UP AND EXTINGUISHMENT

 

Article 4243The Company shall be liquidated, wound up and extinguished in the cases contemplated by law or by resolution of the Shareholders’ Meeting.

 

Paragraph 1 – The manner of liquidation shall be determined at a Shareholders’ Meeting, which shall also elect the Fiscal Council that will function during the liquidation period.

 

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Paragraph 2 - The Board of Directors shall appoint the liquidator, establish its fees and determine the guidelines for its operation.

 

CHAPTER VIII

GENERAL PROVISIONS

 

 Article 4344The dividends attributed to the shareholders shall be paid within the legal time frames, and monetary adjustment and/or interest shall only be assessed if so determined by the Shareholders’ Meeting.

 

Sole Paragraph – The dividends not received or claimed shall become time-barred within three years from the date on which they were made available to the shareholder, and shall revert to the benefit of the Company.

 

Article 4445 The Company shall comply with the shareholders' agreements registered as provided for in article 118 of Law No. 6,404/76.

 

Article 4546The Company will provide the members of the Board of Directors, of the Board of Executive Officers and of the Fiscal Council, or the members of any corporate bodies with technical functions set up to advise the managers, a legal defense in lawsuits and administrative proceedings filed by third parties during or after their respective terms of office, for acts performed during the exercise of their functions, including through a permanent insurance policy, shielding them against liability for acts arising from the exercise of their positions or functions, including the payment of court costs, legal fees, indemnifications and any other amounts arising from such proceedings.

 

Paragraph 1 – The guarantee set forth in the caption of this Articlearticle extends to employees working regularly to comply with powers-of-attorneys granted by the Company or the subsidiaries controlled by the Company.

 

Paragraph 2 – If any of the persons mentioned in the caption or in Paragraph 1 of this Articlearticle be sentenced by a final court decision due to negligent or criminal conduct, the Company must be reimbursed by such person for all costs and expenses disbursed on legal assistance, as set forth by law.”

 

***

 

* These Bylaws were approved at the Company's Ordinary and Extraordinary Shareholders' Meeting held on April 2624, 20192020.

 

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Exhibit B.II – Share-Based Compensation Plan

(as per CVM Ruling 481/09, annex 13)

 

There is no related party, as defined by the accounting rules for this matter, that has a special interest in the approval of the Share-Based Compensation Plan of Ambev S.A.

 

1.               Provide a copy of the proposed plan

 

AMBEV S.A.

CNPJ/ME [National Corporate Taxpayers Register] No. 07.526.557/0001-00

NIRE [Corporate Registration Identification Number] 35.300.368.941

 

SHARE-BASED COMPENSATION PLAN

Approved at the Extraordinary General Meeting held on April 24, 2020

 

1. Purpose of Share-Based Compensation Plan

 

1.1.  The purpose of the Share-Based Compensation Plan of Ambev S.A. ("Company"), established in accordance with applicable legislation and regulations ("Stock Plan") is to allow managers or employees of the Company or other companies under its direct or indirect control (included in the concept of Company for the Stock Plan's purposes), to receive payments in the form of Company shares, subject to certain conditions, in order to: (i) stimulate the Company's growth, success and objectives while catering for the interests of its shareholders, thus incentivizing the integration of these Company executives and employees; and (ii) enable the Company to effectively engage and retain the services of its senior managers and high-level staff.

 

2. Eligible participants

 

2.1. The Company's managers or employees may be designated to participate in the Stock Plan ("Participants").

 

3. Administration of Stock Plan

 

3.1. The Stock Plan will be administered by the Board of Directors, which may, subject to restrictions under applicable law, use a committee specifically or otherwise designated to advise and help administer the Stock Plan ("Committee").

 

3.2. The Board of Directors or Committee, depending on the case, will have extensive powers subject to the terms of the Stock Plan, and in the case of the Committee to guidelines determined by the Board of Directors, to organize and administer the Stock Plan and Company share based compensation, including by means of American Depositary Receipts, issued by the Company ("Restricted Shares").

 

3.2.1.  Notwithstanding the abovementioned representations, excepting adjustments permitted by the Stock Plan or any adjustments that may be made as a result of altering pertinent legislation, no decision of the Board of Directors or Committee may: (i) increase the maximum number of shares that may be granted, as stipulated in item 5 below; and / or (ii) alter or diminish Participants' rights or obligations without their prior consent in relation to share-based payments under the Stock Plan.

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3.3. The Board of Directors or Committee may, at any time, in all cases pursuant to item 3.2.1 above: (i) alter or extinguish the Stock Plan; (ii) accelerate any vesting periods under the Stock Plan; and (iii) determine rules applicable to cases of omission.

 

4.  Terms and conditions for granting Restricted Shares

 

4.1. Based on the Company's compensation policy, The Board of Directors or the Committee, depending on the case, will periodically run programs to award Restricted Shares ("Programs"), in which it will determine, among other conditions: (i) the Participants; (ii) the quantity of Restricted Shares covered by the corresponding program; (iii) the form of transferring Restricted Shares, which may be in lots; (v) the acquisition period for transfer of Restricted Shares; and (vi) any provisions governing penalties.

 

4.2. The Board of Directors or the Committee, depending on the case and in all cases within the overall maximum stipulated in item 5.1 below, and where appropriate limits voted by general meetings, may add new Participants to ongoing Programs, and determine the number of Restricted Shares to which Participants will be entitled.

 

4.3. As each Program is launched, the Board of Directors or the Committee, depending on the case, will set terms and conditions for the transfer of Restricted Shares in the agreement to be entered into between the Company and each Participant ("Agreement"), in all cases in accordance with this Stock Plan and the corresponding Program.

 

4.4. Restricted Shares may only be transferred to Participants under the terms and conditions of this Stock Plan in the programs and agreements, therefore granting the right to receive shares does not in itself assure Participants any rights over Restricted Shares or provide a guarantee of receiving them.

 

4.5. Shares awarded to Participants will have the rights set forth in this Stock Plan and corresponding programs and agreements, and Participants will not have any of the rights and privileges of a Company shareholder, in particular being paid dividends and interest on shareholder equity in relation to the Restricted Shares until such date as the Restricted Shares are transferred to the Participants.

 

4.6. Notwithstanding the provisions of the above Clause 4.5, the Board of Directors or Committee, depending on the case, may have the Program require payment of an amount equivalent to such dividends and interest in money or in shares in the form to be determined in the corresponding program and agreement.

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4.7. No shares will be awarded Participants unless all legal, regulatory and contractual requirements have been met in full.

 

4.8.  No provision in the Stock Plan, in any Program or Agreement will grant any Participant the right to remain as a Company manager or employee and will not in any way interfere with the Company's right to terminate a manager's mandate or employee's employment contract at any time.

 

4.9. Restricted Shares granted to Participants have no relationship or are bound to their fixed compensation or any profit sharing programs.

 

5.  Stock Plan - Global Volume

 

5.1. Participants may be granted, under the Stock Plan, shares representing, at most, 3% of the total shares representing the Company's share capital as of April 24, 2020 ("Global Volume"). The Global Volume may only be adjusted without alteration to this Stock Plan in accordance with item 8.1.

 

5.2.  For the purposes of the Stock Plan, the Company will use treasury shares subject to CVM rules.

 

6. Transferring Stock Plan shares

 

6.1. Subject to continuing employment and / or statutory relationship, depending on the case, of the Participant with the Company until the end of the applicable vesting period and subject to the rules set forth in each Agreement, the Company will transfer the Restricted Shares to the Participant in accordance with the lots and periods stipulated in the corresponding Program and / or Agreement.

 

6.1.1.  The Company's management will take all measures required to formalize transfer of Restricted Shares covered by Agreements.

 

6.1.2. Restricted Shares will be awarded to Participants free of charge. The reference price per Restricted Share, for the purposes of this Stock Plan, will be the price of the Company's stock on B3 S.A. – Brasil, Bolsa, Balcão at the trading session immediately preceding the date of awarding the Restricted Shares.

 

6.2.  Participants will be subject to rules restricting the use of insider information applicable to publicly listed companies in general and rules determined by the Company.

 

 

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7. Participant’s Leaving, Retirement, Disability or Decease

 

7.1. The Board of Directors or the Committee, as the case may be, will establish in each Program, the rules applicable to the cases of Participants leaving the Company, due to the expiry of employment contract, end of term of office, dismissal or resignation of executive position, as well as cases of retirement, permanent disability or decease of Participants.

 

8. Adjustments

 

8.1.  If the number of the Company's shares is increased or decreased as a result of share bonuses, splits or reverse splits, appropriate adjustments will be made to the number of shares covered by programs and agreements that have yet to be transferred to Participants.

 

8.1.1. Adjustments under item 8.1 above will be made by the Board of Directors or the Committee depending on the case, and their decision will be final and binding. No fractional shares will be sold or issued as a result of any such adjustments.

 

8.2.  In the event of a dissolution, transformation, merger, spin-off or reorganization of the Company, in which the Company is not the surviving entity or, is the surviving company but its shares are no longer admitted to trading on exchange, the Programs and Agreements in effect, at the discretion of the Board of Directors or the Committee, as the case may be: (i) may be transferred to the successor company; (ii) may accelerate their vesting; or (iii) may be maintained and settled in money.

 

9. Stock Plan duration

 

9.1. The Stock Plan will take effect when voted by the Company's General Meeting.

 

9.2. The end of the Stock Plan will not affect the efficacy of the Restricted Shares granted that are still in effect and that will be awarded to Participants by the corresponding dates under the Programs in effect.

 

9.3. The Stock Plan does not alter the provisions of the Stock Call Option Plan approved at the Extraordinary Shareholders’ Meeting held on July 30, 2013, which remains fully effective.

 

10. Sundry

 

10.1. Adhesion. Signing the Agreement will imply the Participants' express and irrevocable acceptance of all terms of the Stock Plan and Programs by Participants, who shall be bound to comply with them in full.

 

10.2. Specific execution The obligations stated in the Stock Plan, Programs and Agreements are undertaken irrevocably and will be valid as extrajudicial executive title under civil procedural law, binding the contracting parties and their successors under any title at all times. The parties stipulate that these obligations have specific execution under article 501 of the Civil Procedure Code.

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10.3. Assignment. Rights and obligations under the Stock Plan, the Programs and Agreements are personal and non-transferable and may not be assigned or transferred in whole or in part by either party, nor given to guarantee obligations without prior written consent from the other party, except as expressly stipulated in this Stock Plan.

 

10.4. Novation. It is expressly agreed that either party's forbearance of exercising any right, power, recourse or faculty assured by law, the Stock Plan, Programs or Agreements, nor any tolerance of delay in fulfilling any obligations by either of the parties, which will not prevent the other party at its sole discretion from exercising at any time such rights, powers, recourses or faculties which are cumulative and do not exclude those stipulated by law.

 

10.5. Jurisdiction The parties elect the court of the city of São Paulo, State of São Paulo, to the exclusion of any other, however privileged, to settle any disputes that may arise with respect to the Stock Plan, the Programs and / or Agreements.

 

10.6. Omissions. Omissions, questions or disagreement that may arise on the part of the Company and / or the Participants in relation to the Stock Plan, Programs and / or Agreements will be regulated by the Board of Directors. Any payment in shares determined under the Stock Plan will be subject to all the terms and conditions set forth herein, which will prevail if there is any discrepancy concerning the provisions of any agreement or document mentioned herein.

 

* * *

 

2.               State the main characteristics of the proposed plan, identifying:

a.               Potential beneficiaries

The amendment proposed herein does not modify the potential beneficiaries of the Stock Plan, which remain in force with no alterations. The rules of the Stock Plan determine that managers or employees of the Company or of other companies under its direct or indirect control may be designated to participate on the Stock Plan (Participants). The Board of Directors or the Committee, as applicable, will select, through the Programs, those that will be entitled to the compensation based on Restricted Shares.

When each Program is launched, the Board of Directors or Committee, depending on the case, will set the terms and conditions for the transfer of Restricted Shares in the agreement to be entered into by the Company and each Participant ("Agreement"), in all cases in accordance with the Stock Plan and the corresponding Program.

b.                Maximum number of options to be granted

The Participants may be granted shares representing a maximum of 3% of the total shares representing the Company's share capital on the date of approval of the amendment to the Stock Plan.

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c.                Maximum number of shares covered by the plan

As stated in item "b" above, the Stock Plan will now stipulate that the shares covered by it will amount to at most 3% of the total number of shares comprising the Company's share capital on the date of approval of the amendment to the Stock Plan, which corresponds, on the date hereof, to 472,053,539 shares.

d.               Conditions for acquisition

The amendment proposed herein does not modify the conditions of acquisition set forth in the Stock Plan, which remain in force with no alteration. Under the Stock Plan's rules and subject to the parameters stated therein, the Board of Directors or the Committee, depending on the case, will periodically create programs based on the Company's compensation policy, in which they will determine, among other conditions: (i) the Participants; (ii) the quantity of Restricted Shares to be awarded under the corresponding program; (iii) the form of transferring the Restricted Shares, which may be in lots; (v) the vesting period for the transfer of Restricted Shares; and (vi) any provisions governing penalties.

e.                Detailed criteria for setting exercise price

The amendment proposed herein does not modify the criteria for setting the exercise price set forth in the Stock Plan, which remain in force with no alteration. The Stock Plan's purpose, among others is to have payments made in the form of the Company's shares but without Participants paying the exercise price. Thus, there is no option to purchase shares on the lines of article 168, §3 of Law No. 6404 / 76; instead there is compensation based on awarding shares to the Participants. Nevertheless, the reference price per Restricted Share, for the purposes of the Stock Plan, corresponds to the Company's share price traded on the B3, S.A. – Brasil, Bolsa, Balcão (“B3”) at the trading session immediately preceding the date of awarding the Restricted Shares

f.                Criteria for setting exercise period

The amendment proposed herein does not modify the criteria for setting the exercise period set forth in the Stock Plan, which remain in force with no alteration. Thus, the Restricted Shares will be transferred by the Company to the Participant in accordance with the lots and for the periods set forth in the corresponding program and / or agreement. Participants will be entitled to receive the Restricted Shares if they are in the Company's employment until the end of the applicable vesting period, subject to the specific rules stipulated in each agreement, in the event of dismissal (with or without cause), removal from their position, end of mandate, resignation, voluntary termination, retirement or death.

g.               Form of settling options

As mentioned in item "e" above, this compensation is based on the Company's shares without requiring financial consideration for Restricted Shares awarded to Participants. Therefore, once the conditions stipulated in the Stock Plan, the Programs and the Agreement have been met, the Participant will be entitled to receive these Restricted Shares, and the Company's management must take all measures required to formalize their transfer.

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h.                Criteria and events that, if taking place, would lead to suspension, alteration or termination of the plan

The amendment proposed herein does not modify the criteria and events that could result in suspension, alteration or termination of the Stock Plan, which remain in force with no alteration. Thus, the Stock Plan may be terminated at any time by a decision of the Board of Directors or the Committee. The ending of the Stock Plan will not affect the efficacy of the Restricted Share grants still in effect which will be awarded to Participants on the corresponding dates under the Programs in effect.

The Stock Plan also stipulates that in the event of any Company dissolution, transformation, merger, spin-off or reorganization event in which the Company is not the surviving entity, or is the surviving company but no longer has its shares admitted to trading on exchange, and at the discretion of the Board of Directors or the Committee, as the case may be, the agreements under programs in effect may (i) be transferred to the successor company; (ii) have their vesting accelerated; or (iii) be maintained and paid out in cash.

 

3.               Reasons for the proposed plan, explaining:

 

It is important to note that, in this item, the amendment proposed to the Stock Plan does not modify its characteristics or objectives and, for such reason, this item 3 remains unaltered in relation to what has been previously presented to the shareholders. 

a.               The main objectives of the plan

The Stock Plan's main objective is to allow managers or high-level employees of the Company or other companies under its direct or indirect control, subject to fulfilling certain conditions, to receive payments in Company shares, including American Depositary Receipts, in order to (i) drive growth, success and ability to reach the Company's targets while attending to its shareholders interests, incentivizing these managers' and employees' integration with the Company; and (ii) enabling the Company to effectively engage and retain the services of its senior managers and high-level staff.

b.               How the plan contributes to these objectives

Granting Restricted Shares means that Participants’ interests are aligned with those of the Company and its shareholders through incentives to meet targets related to the performance of their activities, since the better the Company's performance as reflected in its share price, the more the Participant's will gain financially.

c.                How the plan engages with the company’s compensation policy

The Stock Plan contemplates the mechanism of flexible compensation that aligns with the Company’s medium- and long term-interests.

The focus on medium- and long-term flexible compensation reflects current market practices and offers attractive packages while catering for the Company's interests in the most efficient manner. The Stock Plan aims to strengthen the focus on this form of compensation, offering the possibility of more attractive returns while requiring a strong show of commitment by Participants, who must meet targets related to the performance of their activities in the manner stated in the Company's compensation policy.

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d.                How the plan aligns its beneficiaries’ short-, medium- and long-term interests with the company's

The Stock Plan stipulates mechanisms to align interests of participants over different timeframes but focuses on the medium and long term. This objective is served due to the vesting periods during which Restricted Shares will not be transferred to the Participants, thus favoring retention of professionals during these periods. The terms and conditions to be stipulated for each Program and Agreement should also help align interests.

 

4. Estimate the company’s expenses incurred by the plan under the accounting recognition rules covering this subject

 

The Company’s expenses arising from the Stock Plan will correspond to the market value of the shares to be granted, at the time of granting, which, in turn, corresponds to the closing price of shares of the same type in the trading session immediately prior to the grant date, traded on B3 and is recognized as per Technical Pronouncement CPC 10 on Share-Based Payment.

 

Exclusively for purposes of CVM Ruling 481/09, the Company estimates that the amount of expenses arising from the Stock Plan will be, on average, approximately R$ 250,000,000.00 per year. Since the ascertainment of such expenses depends on factors not yet known, such as the number of concessions to be effectively carried out and the market value of the Company’s shares, such estimation is based on (i) the number of concessions initially predicted under the Stock Plan; and (ii) the average closing price of the Company’s shares issued on B3 over the past 30 days.

 

***

 

 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date: March 24, 2020
     
 
AMBEV S.A.
     
 
By: 
/s/ Fernando Mommensohn Tennenbaum
 
Fernando Mommensohn Tennenbaum
Chief Financial and Investor Relations Officer
 
 
 
 

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