Fomento Economico Mexicano S.A.B. de C.V. Annual Report 2014

FY2014 Annual Report · Fomento Economico Mexicano S.A.B. de C.V.

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annual report 2014

Rising
to the occasion

FEMSA is a leading company that participates in the beverage industry through
Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products in the
world; and in the beer industry, through its ownership of the second largest
equity stake in Heineken, one of the world’s leading brewers with operations in
over 70 countries. In the retail industry it participates with FEMSA Comercio,
operating various small-format store chains including OXXO, the largest and
fastest-growing in the Americas. Additionally, through FEMSA Strategic
Businesses, it provides logistics, point-of-sale refrigeration solutions and plastics
solutions to FEMSA’s business units and third-party clients.

At FEMSA, our team continues to rise to the occasion,
overcoming a challenging market environment to meet—
and exceed—the evolving needs of our consumers each
and every day. Building on our strengths, we work to
transform challenges into opportunities, pursue new
avenues for growth, and convert complexity into
profitability. We further foster our company’s sustainable
growth and development, creating economic, social, and
environmental value for our stakeholders now and into the
future.

Consumer Focus

At FEMSA, we fine-tune our focus and leverage our strengths to pursue our
ultimate goal: to create a perfect experience for each of our consumers
on every occasion. To this end, we tirelessly strive to get closer to our
consumers, understand and anticipate their evolving needs, and tailor our
value proposition to exceed their expectations.

+2,500

products and services
for our OXXO shoppers.
What can we offer you?

Coca-Cola Life

a low-calorie alternative
sweetened with natural
ingredients.

OXXO’s Bitz snacks,
candy, and baked
goods satisfy our
consumers’ cravings
any time of day.

3.4 billion

unit cases of refreshing
beverages sold this year.
Enjoy a Coke and a smile!

1,132

new OXXO stores opened
across Mexico and Colombia.
Growing to serve you!

Sprite Zero and Fanta Zero
complement our growing
portfolio of affordable,
zero-calorie
sparkling beverages.

Constant Growth

Growth is an essential element of our DNA. We constantly scan the horizon
for occasions that afford us the opportunity to enhance our offerings and
expand our opportunities for value creation to an ever-wider array of
consumers. We are persistent in our search and unwavering in our effort to
achieve sustainable growth—capitalizing on our core capabilities.

Profitable Complexity

When you continually strive to meet the ever-changing needs of millions
of consumers across multiple countries with diverse economies and
cultures, complexity is the name of the game. Fortunately, our skilled team
relentlessly rises to the challenge, profitably transforming complexity into
opportunity for our company today and tomorrow.

+3.4 billion

transactions carried out
at OXXO during 2014.
We keep on going!

+90 new

small-box drugstores
opened to cater to
Mexican consumers.

351 million

beverage consumers
served across 10 different
countries every day.
No problem!

26,500

development agendas

managed to support
employees’ performance.
Our people are our most
valuable asset!

+88,100

employees received
training at FEMSA
University last year.
Fostering a talent culture!

4.3 million

hours

of classroom instruction
delivered across
our Business Units.
Developing personally
and professionally!

Talent Management

For this reason, we are dedicated to recruiting, encouraging and retaining
the best talent for our business through our Comprehensive Talent
Management model, we foster the professional and personal growth
of our people, developing the capabilities necessary for them to reach their
maximum potential, while contributing to the achievement of our
near-and long-term goals.

Rising to the Occasion

Dear Shareholders

In 2014, we successfully navigated a tough operating environment. Throughout
the year, we leveraged our core businesses’ strengths to satisfy our consumers’
needs, generated new avenues for growth, and profitably converted complexity
into opportunity. Furthermore, through our 20% economic interest in Heineken, we
remained positioned to benefit from the promising long-term prospects of the global
brewing space.

José Antonio
Fernández Carbajal
Executive Chairman
of the Board (left)

Carlos Salazar Lomelín
Chief Executive Officer (right)

femsa annual report 2014

70 million

transactions

Consumer transactions generated daily across
Coca-Cola FEMSA’s franchise territories.

Our company overcame significant headwinds this
year as we effectively managed extremely chal-
lenging consumer dynamics. In our key Mexican
market, the soft macroeconomic situation, mag-
nified by structural reforms, increased taxation,
excise tax-driven price increases on most soft
drinks and calorie-dense products, and higher VAT
rates in northern and southern border states, com-
pounded a sluggish consumer environment for our
retail and beverage businesses. Moreover, adverse
foreign exchange dynamics in our major South
American markets, combined with decelerating
GDP growth in Brazil, a weak economy in Argentina,
and a demanding operating landscape in Venezuela,
affected consumer confidence across the region.

In light of these and other challenges, we gener-
ated better than expected results for our share-
holders thanks to our robust business platform,
talented team of people, and operations’ ability to
adapt to new market realities. For 2014, our total
revenues increased 2.1% to Ps. 263.4 billion
(US$ 17.9 billion). Our income from operations
increased 0.4% to Ps. 30.0 billion (US$ 2.0 billion).
Our net income increased 2.1% to Ps. 22.6 billion
(US$ 1.5 billion), and our earnings per unit were
Ps. 4.67 (US$ 3.16 per ADR). Now that the new
taxes and related price increases are reflected in
our retail and beverage businesses’ base, as we
look forward, we are optimistic about our ability
to succeed throughout ever-evolving operating
conditions.

Now, let us briefly review some of the year’s high-
lights for each of our businesses.

Coca-Cola FEMSA
Coca-Cola FEMSA surmounted a complex environ-
ment, particularly in Mexico and Brazil, to deliver
volume growth and profitable results across our
markets. In Mexico, our operations acted swiftly
to protect our profitability and cash flow gen-
eration, proactively implementing portfolio and
revenue management initiatives. To address the
impact of new taxes, our operations’ emphasized
returnable, low-calorie, and single-serve sparkling
beverages—coupled with packaging and brand
innovation—to enable us to connect more closely
with our consumers’ needs, generating more than
9 billion transactions, while outpacing our volume
performance for the year. Additionally, we restruc-

tured our operations, reducing costs and expenses,
while scaling back investments. These initiatives,
combined with our relentless focus on market-
place execution and operating efficiency, set us on
the right path to achieve operating cash flow and
margin expansion for the year.

Despite a difficult environment, we integrated the
operations of Companhia Fluminense and Spaipa,
solidifying our position as Brazil’s leading Coca-Cola
bottler. Thanks to our team’s efforts, we are rapidly
capturing the expected synergies, which total ap-
proxiamtely US$ 52 million. We also made strategic
capital investments across the supply chain to
keep up with potential demand. In November, we
began operations at our new state-of-the-art
bottling plant in Itabirito, Brazil, with an annual
capacity of approximately 200 million unit cases.
Built to LEED certification standards, this efficient,
eco-friendly facility enhances our position to cap-
ture the benefits of this dynamic market’s great
long-term prospects.

Coca-Cola FEMSA further embarked on an intensive
strategic, organizational, and operating transfor-
mation process to create a leaner, nimbler, and
more flexible organization with the requisite capa-
bilities to drive our competitiveness and prepare
for the next wave of growth. Among our actions,
we established centers of excellence, focused on
our supply chain, commercial, and IT innovation
areas. We commenced streamlining and de-lay-
ering our organization to foster a tighter, leaner,
more agile management that will enable greater
efficiency and bring us closer to our customers.

We rose to the
occasion, creating
economic, social,
and environmental
value for our
stakeholders.

2.8 million points of
sale to quench our
consumers’ thirst.
How refreshing!

We are also reinforcing our talent management
to develop a deep bench of professionals who can
address growing market and industry complexity,
while furthering our strategic vision.

FEMSA Comercio
FEMSA Comercio effectively managed soft consum-
er dynamics to produce resilient, positive results for
2014, including top- and bottom-line growth, a 50
basis point gross margin expansion, and comparable
same-store sales growth that outperformed our
industry. We also continued our long-term strategy
to solidify OXXO’s leadership position as Mexico’s
unique national modern small-format store chain.
In 2014, we successfully opened a record 1,132 new
OXXO stores for a total of 12,853 stores—serving
more than 9 million shoppers daily.

Beyond OXXO, we strengthened our position in the
complementary drugstore sector, further develop-
ing an important new avenue for growth. Building
on our 2013 acquisitions of Farmacias YZA and
Farmacias FM Moderna, we leveraged our in-depth
understanding of our consumers and expertise
operating a national small-box retail chain to
enhance the value proposition of our base of 515
drugstores, while opening more than 90 new drug-
stores over the course of the year.

Additionally, in December 2014, we agreed to ac-
quire Farmacias Farmacón, an important drugstore
operator with over 200 stores in northwestern
Mexico. Through this transaction, we take an addi-
tional step in our strategy to play a relevant role in
an attractive, still-fragmented industry, where we
aspire to replicate the success of our small-box
retail format.

Furthermore, we made great strides in the inte-
gration of recently acquired Doña Tota, a leading

quick-service restaurant operator with more than
200 outlets in Mexico and the U.S. Consequently, we
are now well positioned to gradually increase the
pace of growth of this business in the coming year.

Strategic Businesses
We also advanced our strategy to focus and
strengthen our Strategic Businesses’ operations,
which provide significant support to our core
businesses and also present attractive growth
potential. To this end, we worked to consolidate

femsa annual report 2014

Imbera as the leader in the design and production of
state-of-the-art refrigeration solutions for retail ap-
plications, spearheading innovation and achieving the
highest efficiency ratings in the Americas. At FEMSA
Logística, we made progress with its operational re-
structuring, positioning it to drive growth organically
and through selective acquisitions. In this regard,
we continued to foster Logistica’s transformation
into an integrated logistics provider by deploying
resources to increase our operational capabilities in
key markets such as Brazil. World-class operations
in their own right, these businesses will continue to
contribute to the growth and success of our compa-
ny going forward.

Sustainable Development
Sustainability is integral to our company’s develop-
ment. Consistent with our commitment to ensure
that renewable sources of energy eventually

Underscoring our commitment to sustainability,
Coca-Cola FEMSA was once again selected as one of
only 86 corporations chosen from emerging mar-
kets and one of only four Mexico-based companies
included in the Dow Jones Sustainability Emerging
Markets Index. Importantly, Coca-Cola FEMSA was
the first Mexican company that was included in
RobecoSAM’s Sustainability Yearbook and also
received this prestigious institution’s Industry Mover
Sustainability Award.

Management Changes
As previously announced, we recently initiated
certain executive changes that will not only enable
us to properly manage the transition processes for
certain key responsibilities, but also reinforce our
management team to transcend current and future
challenges, continue our growth trajectory, and
build an ever better, more global business.

After nine years as Vice President of Corporate
Development and 25 years working at FEMSA,
Federico Reyes García has decided to retire as of
April 1, 2015. Javier Astaburuaga Sanjines, current-
ly FEMSA’s Chief Financial and Corporate Officer,
will replace Federico as Vice President of Corpo-
rate Development. In that position, Javier will con-
tinue to support FEMSA’s Strategic and Mergers &
Acquisitions processes.

We also warmly welcome Daniel Rodríguez Cofré,
who joined FEMSA on January 1, 2015, and will
take Javier’s place as Chief Financial and Corporate
Officer on April 1, 2015. Born in Chile, Daniel enjoys
considerable international financial experience in
Latin America and Europe; first as CFO of Shell in
South America and later as Global CFO of one of
Shell’s European based operating divisions. For
the past six years, Daniel has served as the CEO of
CENCOSUD, a major Chilean retail consortium.

Looking forward, we envision an immensely
rewarding future for our company, driven by our
passionate team of managers and employees. On
behalf of these 216,000 dedicated men and wom-
en, we thank you for your continued support. The
very reason for our existence is to create econom-
ic, social, and environmental value for our stake-
holders—including our employees, our consumers,
our shareholders, and the enterprises and institu-
tions within our society—now and into the future. |

José Antonio Fernández
Carbajal
Executive Chairman of the Board

Carlos Salazar
Lomelín
Chief Executive Officer

cover a high percentage of our electricity needs,
we executed two important power purchase
agreements that will enable us to fulfill more
than 25% of FEMSA’s current annual electricity
requirements in Mexico. Through these agree-
ments, we have secured 193,000 megawatt
(MW) hours of electricity per year from the
100-MW Dominica II wind farm in San Luis Poto-
si, Mexico, and 350,000 MW hours of electricity
per year from the 126-MW Ventika II wind farm
in Nuevo León, Mexico. With the power generat-
ed from these wind farms, which are expected
to come online in the third quarter of 2015 and
the first quarter of 2016, respectively, we will
lower the consumption of fossil fuels, reduce
our energy costs, and decrease our overall
carbon footprint.

In Memoriam
If we are fortunate in our lives, we are privileged
to know a very few great and fascinating leaders.
Donald R. Keough was one of them.

Donald R. Keough
(September 4, 1926 – February 24, 2015)

femsa annual report 2014

The Coca-Cola Company, FEMSA
and Coca-Cola FEMSA Members
of the Board of Directors and Top
Management, October 2011.

Donald R. Keough stands in
the first row from left to right
with Muhtar Kent, José Antonio
Fernández Carbajal, and Eva
Garza Lagüera de Fernández.

At FEMSA, we appreciate the character and the values
of those leaders, and strive to carry their values
beyond the workplace and into our broader lives.

We recognize the admirable way Don Keough lived
his life as a great man, a talented business leader,
and a dedicated philantropist for many educational
and charitable causes.

Don will certainly be remembered for his many
business and personal accomplishments in
challenging times. He was a key figure in the
history and growth of iconic institutions such as
The Coca-Cola Company, Allen & Company, and the
University of Notre Dame.

Donald R. Keough was a dear friend and cherished
mentor to so many. He truly believed that people
are at the heart of successful companies. His legacy
includes a new leadership model; unmatched
operating skills; an expansive vision; and, above all, a
deep commitment to developing people who possess
the potential to positively transform our world.

Don had high regards for Coca-Cola FEMSA,
where he contributed his passion, talent, visionary
leadership, and counsel to help build the company
that it is today. We will always remember and be
thankful for his devotion to our company.

His impact will be forever present in our shared
committment to create economic, social, and
environmental value for our stakeholders and
communities.

“In admiration and affection for a man whom it was
a privilege and an inspiration to have known, we will
miss Don Keough´s sharp wit and generous spirit.”

José Antonio Fernández Carbajal
Executive Chairman of the Board

Financial Highlights

Millions of pesos

Total Revenues

2014 1

2014

2013 % Change

2012 % Change

2011 2

17,861 263,449 258,097

2.1% 238,309

8.3% 201,540

Income from Operations 3

2,033 29,983

29,857

0.4% 29,227

2.2% 24,484

Consolidated Net Income

1,534 22,630

22,155

2.1%

28,051

-21.0% 20,901

Controlling Interest 6

1,132

16,701

15,922

4.9% 20,707

-23.1%

15,332

Non-Controlling Interest

402

5,929

6,233

-4.9%

7,344

-15.1%

5,569

Total Assets

Total Liabilities

Total Equity

25,503 376,173 359,192

4.7% 295,942

21.4% 263,362

9,902

146,051

136,642

6.9%

85,781

59.3%

71,191

15,601 230,122 222,550

3.4% 210,161

5.9%

192,171

Capital Expenditures

1,231

18,163

17,882

1.6%

15,560

14.9%

12,609

Controlling Interest Book Value per Share 4

0.65

9.53

8.91

7.0%

8.68

2.7%

8.06

Net Controlling Interest Income per Share 4

0.06

0.93

0.89

4.9%

1.16

-23.1%

0.86

Headcount 5

216,740 209,232

3.6% 182,260

14.8% 168,370

1 U.S. dollar figures are converted from Mexican pesos using the noon-buying rate published by U.S. Federal Reserve Board, which was Ps. 14.7500 per
US$1.00 as of December 31, 2014.
2 2011 figures were restated for comparison with 2014, 2013 and 2012 as a result of transition to International Financial Reporting Standards (IFRS).
3 Company’s key performance indicator.
4 Data based on outstanding shares of 17,891,131,350.
5

Includes headcount from Coca-Cola FEMSA, FEMSA Comercio and Other Businesses of FEMSA.

6 Represents the net income that is assigned to the controling shareholders of the entity.

FEMSA Consolidated

Ps. 376,173

femsa annual report 2014

Ps. 263,449

Ps. 29,983

Total Assets
millions of Mexican pesos

Total Revenues
millions of Mexican pesos

Income from Operations
millions of Mexican pesos

Headcount
thousands

Total Revenues
billions of Mexican pesos

Income from
Operations1
billions of Mexican pesos

EBITDA2
billions of Mexican pesos

Total Assets
billions of Mexican pesos

9
9
6

4
3
7

9
4
8

4
3
8

2
3
2
1

7
7
4
1

0
6
5
1

3
7
4
1

4
8
1

0
2
2

5
.
1
2

7
0
2

2
3
2

9
7
2

6
8
2

4
8
2

7
.
1
4
1

1
.
6
6
1

7
6
1
2

4
2
1
2

% annual
growth

5.0

15.7

-1.8

% annual
growth

19.9

5.6

-5.6%

% annual
growth

% operating
margin

19.4

-2.3

-3.3%

14.9

13.7

14.1

% annual
growth

20.2

2.4

-0.7%

% annual
growth

17.2

30.4

-2.0%

Headcount
thousands

Total Revenues
billions of Mexican pesos

Income from
Operations1
billions of Mexican pesos

EBITDA2
billions of Mexican pesos

Total Assets
billions of Mexican pesos

8
3
8

9
.
1
9

0
3
0
1

7
0
1
1

1
.
4
7

4
6
8

6
7
9

6
9
0
1

5
5

8
6

9
7

7
8

5
7

0
9

5
0
1

8
.
1
1

5
6
2

1
.
1
3

6
9
3

7
3
4

% annual
growth

9.7

12.0

7.5

% annual
growth

16.6

12.9

12.4

% annual
growth

% operating
margin

22.7 16.6
7.8 8.1

9.8
7.9

% annual
growth

19.8 17.3

11.5

% annual
growth

17.2

27.4

10.4

A
S
M
E
F
a
l
o
C
-
a
c
o
C

o
c
r
e
m
o
C
A
S
M
E
F

l Coca-Cola FEMSA
l FEMSA Comercio
l Others (Includes other companies and our 20% economic interest in Heineken)

1 Company’s key performance indicator.
2 EBITDA equals Income from Operations plus Depreciation,

Amortization and other non-cash items.

Operating Overview

l Coca-Cola FEMSA

l FEMSA Comercio

l Coca-Cola FEMSA & FEMSA Comercio

Note: Only includes Coca-Cola FEMSA and FEMSA Comercio information.

1. FEMSA owns 47.9%; the remaining 28.1% and 24.0% are owned by The Coca-Cola Company and

the investing public, respectively.

2. Includes Guatemala, Nicaragua, Costa Rica and Panama.
3. Includes third-party distributors.
4. Includes brand extensions.
5. Includes private label brands.
6. Clients per year based on the number of daily transactions.
7. Includes third-party headcount.

Mexico 1

Headcount

Plants

Distribution Facilities
Distribution Routes 3
Brands 4
Clients

43,015

144

3,242

100

849,725

Central America 1, 2

Headcount

Plants

Distribution Facilities
Distribution Routes 3
Brands 4
Clients

6,013

340

105,658

Mexico
and Colombia

Headcount

Stores

Distribution Facilities
Brands 5
Clients 6

104,564

12,853

+ 3 billion

Saldazo, OXXO’s popular
co-branded debit card with
Banamex and Visa, reached
over 1.4 million accounts
for the year.

200

million unit cases

Is the annual capacity of
our new state-of-the-art
bottling plant in Itabirito,
Brazil; it positions us to
capture this market’s
long-term demand.

femsa annual report 2014

Colombia 1

Headcount

Plants

Distribution Facilities
Distribution Routes 3
Brands 4
Clients

Venezuela 1

Headcount

Plants

Distribution Facilities
Distribution Routes 3
Brands 4
Clients

Brazil 1

Headcount

Plants

Distribution Facilities
Distribution Routes 3
Brands 4
Clients

Argentina 1

Headcount

Plants

Distribution Facilities
Distribution Routes 3
Brands 4
Clients

4,991

947

413,200

7,602

710

181,605

18,447

2,473

329,764

2,855

349

71,900

Philippines 1

Headcount 7
Plants

Distribution Facilities
Brands 4
Clients

14,103

853,242

Our Share a Coke campaign
appealed to consumers
across Mexico through our
more than 300 personalized
cans and bottles.

Coca-Cola FEMSA

A Transformational Year
As the complexity and demands of our business grow, we are transforming our
company to create a leaner, more agile, and flexible organization with the right
capabilities to drive our competitiveness and prepare for the next wave of growth.
Through transformative growth and innovation, we ensure our ability to satisfy
consumers’ evolving needs, adapt to ever-changing market dynamics, and capitalize on
new business opportunities.

9
9
4
2

9
4
6
2

6
4
0
3

5
0
2
3

7
1
4
3

% annual
growth

2.9 6.0 15.0 6.6

Beverage volume
million unit cases*

* One unit case equals 24 8-ounce bottles.

femsa annual report 2014

To intensify
our consumer
connection, we
extended our
Magic Price
Points Strategy
throughout our
markets. Thanks
to this strategy,
we expanded
the growth of
our sparkling
beverages across
Brazil, Mexico,
and Colombia by
offering the right
product at the
Magic Price for our
consumers.

[case study]
“SHARE
A COKE”
CAMPAIGN

IN MEXICO, WE
LAUNCHED our
successful Share a
Coke campaign from
July through Octo-
ber. This innovative
promotion engaged
consumers mainly
through our per-
sonalized 12-ounce
cans and 600-ml
presentations,
sporting more than
300 different names.
Through this cam-
paign, we generated
increased transac-
tions throughout our
Mexican territories.

Profitable Complexity
In the face of structural changes and an exception-
ally challenging, complex consumer environment,
particularly in Mexico and Brazil, our business
delivered profitable results across our geographi-
cally balanced portfolio of franchise territories for
the year. Notably, in Mexico, our operations acted
swiftly to protect our profitability and cash flow
generation, proactively implementing portfolio and
revenue management initiatives. To address the
new tax environment, our operations emphasized
returnable, low-calorie, and single-serve sparkling
beverages—coupled with packaging and brand
innovation—to enable us to connect more closely
with our consumers’ needs. Additionally, to navi-
gate such tough market dynamics, we restructured
our operations, reducing costs and expenses while
scaling back investments. These initiatives, com-
bined with our relentless focus on marketplace
execution and the generation of operating efficien-
cies, set us on the right path for the year.

For 2014, Coca-Cola FEMSA’s total sales volume
grew 6.6% to more than 3.4 billion unit cases.
Our total revenues were Ps. 147.3 billion, and our
income from operations was Ps. 20.7 billion,
resulting in an operating income margin expansion
of 40 basis points to 14.1%.

Consumer Focus
Consumer-driven innovation is key to our business
strategy. Through transformative innovation, we
ensure our ability to serve and satisfy the evolving
needs of our more than 351 million consumers
across 10 different countries each and every day.

Together with our partner The Coca-Cola Company,
in 2014, we introduced a number of new products
and presentations to address our consumers’
needs more closely. After last year’s kickoff in
Buenos Aires, Argentina, we successfully launched
Coca-Cola Life across our Mexican operations this
year. Sweetened with natural ingredients such as
stevia and cane sugar, Coca-Cola Life offers our
consumers a reduced calorie alternative for one of
the world’s most beloved brands. Rolled out in five
different presentations—including our new
235-ml lean can—this refreshing new product not
only achieved more than 70% point-of-sale cover-

age, but also helped us to gain share and revitalize
the Coca-Cola category among our consumers.

We also continued to satisfy and stimulate demand
among our consumers for our growing portfolio of
low-calorie, affordable sparkling beverages. Comple-
menting the positive appeal of Coca-Cola Zero,
Sprite Zero, and Sidral Mundet Light, we launched
Fanta Zero and Fresca Zero throughout Mexico at
attractive price points at the beginning of the year.
Thanks to these initiatives, we significantly increased
the coverage and volume of these zero-calorie
beverages throughout the country.

Importantly, we continued to proactively serve our
cost-conscious consumers with a growing array
of affordable, returnable packaging alternatives. In
Brazil, we considerably expanded the coverage of
our 2-liter multi-serve returnable PET presentation
for brand Coca-Cola, enabling more consumers to
share the magic of Coke at home. In the Valley of
Mexico, we significantly increased the volume of
our 3.0-liter multi-serve returnable PET presenta-
tion for brand Coca-Cola, enhancing an attractive

Sweetened with
natural ingredients,
reduced calorie
Coca-Cola Life
helped revitalize
one of the
world’s most
beloved brands
among Mexican
consumers.

femsa annual report 2014

value proposition for our consumers’ enjoyment,
while we reinforced our 2.5-liter multi-serve
returnable PET presentation for Coca-Cola across
the rest of our territories, expanding the oppor-
tunities to share this popular brand. In Mexico, we
further broadened the coverage of our affordable,
convenient 500-ml returnable glass presentation
for brand Coca-Cola, fostering consumption at the
point of sale or at home. In this key market, we
also grew the coverage of our 1.25-liter multi-
serve returnable glass presentation for brand
Coca-Cola, catering to families across our oper-
ations. Consistent with our long-term strategy,
through our growing portfolio of returnable
presentations, we always look to provide the right
product in the right package at the right price for
every consumer.

Additionally, we carried on expanding our Magic
Price Points Strategy throughout our franchise ter-
ritories. Thanks to this strategy, we are increasing
the availability of our affordably priced, one-way
PET presentations—from our 200-ml and
300-ml packages in Brazil and Mexico to our
1.4-liter package in Colombia—enabling us to con-
nect more closely with the ever-evolving needs of
our consumers.

Constant Growth
Despite the prevailing consumer landscape, we
generated solid currency-neutral organic growth
in 2014. Excluding the non-comparable results
from the recently integrated territories in Mexico

Our strong foundation for
growth will enable us to
take advantage of future
opportunities.

femsa annual report 2014

[case study]
THE
POWER OF
POWERADE

tification standards and offers additional flexibility
for future expansion. Through these investments,
we maximize our operations’ capacity to achieve
the full potential of our business more efficiently,
productively, and profitably.

Furthermore, Coca-Cola FEMSA embarked on an
aggressive organizational transformation to ensure
that we have the right capabilities to drive our
competitiveness and prepare for the next wave
of growth. Among our actions, we redesigned our
corporate structure to strengthen the core func-
tions of the organization. We established centers of
excellence, focused on our supply chain, com-
mercial, and IT innovation areas. We commenced
streamlining and de-layering our organization to
create a tighter, leaner, more agile management
that will enable greater efficiency and bring us
closer to our customers. Additionally, we are
reinforcing our talent management: recognizing
and rewarding performance, developing leaders,
and fostering a talent culture throughout the
company. Looking forward, the measures that we
are undertaking position us better to transform
today’s challenges into opportunities and to deliver
sustainable value for our stakeholders. |

and Brazil, our organic revenues and income from
operations rose 4.1% and 10.8%, respectively. The
main drivers of our performance for the year were
our committed team, organizational flexibility, pro-
active revenue management initiatives, and ability
to adapt our broad portfolio of beverages, partic-
ularly our wide array of returnable presentations,
to connect with cost-conscious consumers across
our franchise territories, increasing transactions by
11.2% during the year.

In a difficult environment, we integrated the opera-
tions of Companhia Fluminense and Spaipa, solidify-
ing our position as Brazil’s leading Coca-Cola bottler.
Thanks to our team’s efforts, we captured our
targeted synergies of approximately US$52 million
during the year faster than anticipated. Beyond the
synergies, the cross-fertilization of talent and best
practices are key ingredients to success. This was
no different with the integration of these franchises,
as many of their talented executives now occupy
important positions in Coca-Cola FEMSA’s opera-
tions. Moreover, in terms of best practices, Com-
panhia Fluminese’s award-winning execution in the
modern trade channel, coupled with Spaipa’s exem-
plary distribution in the traditional sales channel, is
helping us to reach our customers and consumers
more efficiently and effectively than ever.

During the year, the strategic capital investments
we made in every one of our markets create a
strong foundation for growth, enabling us to take
advantage of the opportunities that will arise in the
future. Among our investments, we continue to en-
hance our cooler coverage—a distinct competitive
advantage—across our franchise territories. We
remain at the forefront of technology through our
installation of high-speed tri-block bottling lines
and the ongoing rollout of our efficient warehouse
management system. We further continue our
construction of sustainable, state-of-the-art bot-
tling facilities, including our recently opened plant
in Itabirito, Brazil. With an annual capacity of 200
million unit cases, this facility is built to LEED cer-

WE SATISFY HEALTH
CONSCIOUS
CONSUMERS’
growing demand for
isotonic sports drinks
with Powerade. Our
hot fill formula heats
Powerade almost to
the point of pasteur-
ization, eliminating
the need for preser-
vatives and resulting
in a better tasting
product. In Mexico,
Powerade achieved a
leading brand posi-
tion across three of
our four territories
during the year,
while our volume
of Powerade more
than doubled among
Argentine consum-
ers attracted to this
drink’s refreshing
qualities.

FEMSA Comercio

Overcoming A Challenging Year
In a complex operating environment, we leveraged our in-depth understanding of our
consumers and our expertise operating a national modern small-format retail chain
to enhance our value proposition and produce positive results for our stakeholders.
Rolling out attractive new initiatives, we broadened the scope of our offerings and
further developed important avenues for growth—positioning our company for
sustained, profitable growth.

6
2
4
8

1
6
5
9

1
0
6
0
1

1
2
7
,
1
1

3
5
8
2
1

% annual
growth

13.5 10.9 10.6 9.7

OXXO stores
new openings

femsa annual report 2014

By conveniently
and reliably
satisfying
shoppers’ needs,
OXXO plays a
growing role
in the lives of
consumers
throughout
Mexico. Serving
over 3.4 billion
consumers
annually, OXXO
continues to
solidify its position
as the foremost
choice for
shoppers across
the country.

[case study]
DESIGNING A
SPECIALIZED
DRUGSTORE
FORMAT

CAPITALIZING ON
OUR IN-DEPTH
understanding of
the Mexican con-
sumer, we opened
more than 90 new
drugstores over the
course of the year.
Unlike their large-box
counterparts, these
convenient, relatively
small-box drugstore
formats resonate
with shoppers’ grow-
ing demand for spe-
cialization, primarily
offering consumers a
selection of pharma-
ceutical and health
and beauty products,
along with a con-
centrated array of
popular convenience
store categories.

Profitable Complexity
Over the course of 2014, FEMSA Comercio was
able to profitably navigate an exceptionally tough,
complex operating landscape. In the face of a very
difficult consumer environment—which was nega-
tively impacted by lower disposable income, excise
taxes on key product categories, and incremen-
tal increases in VAT in Mexico’s northern border
cities—we managed to produce positive, resilient
results for the year. Our performance throughout
an extremely challenging year underscores the
strength of our ever-improving value proposition,
brand equity, and marketplace execution, high-
lighted by our effective collaboration with our key
supplier partners.

For 2014, our total revenues rose 12.4% to
Ps. 109.6 billion, including the results from our
acquisitions of Farmacias YZA, Farmacias FM
Moderna, and Doña Tota. Our increased revenues
primarily came from our continued store expan-
sion, complemented by our comparable same-
store sales growth—driven by an improvement in
our average customer ticket that offset a slight
decline in store traffic.

Gross profit grew 13.9% to Ps. 39.4 billion, result-
ing in a 50 basis point gross margin expansion to
35.9% of total revenues. Income from operations
increased 9.8% to Ps. 8.7 billion. Operating ex-
penses grew slightly ahead of revenues, reflecting
the incorporation and strengthening of our new
drugstore and quick-service restaurant operations,
the solid growth in our new OXXO stores, and the
continued rollout of our new initiatives. As a result,
our operating margin contracted slightly when
compared to the prior year.

Consumer Focus
At OXXO, we continue to enhance our value prop-
osition to satisfy our shoppers’ needs through an
attractive array of quality products and services.
Among our initiatives, we continue to broaden the
scope of our convenient one-stop financial ser-
vices. To optimize our consumers’ time, we carried
on expanding our correspondent bank program
to encompass five leading financial institutions.
Through this program, within certain transaction
parameters, we enable customers to make cash

deposits and withdrawals to both their checking
and credit card accounts at any of OXXO’s stores
across the country. As consumers realize the
advantages of this readily accessible functional-
ity, we look forward to sustained growth in the
adoption of this program—particularly since the
number of our OXXO stores is already compara-
ble to the combined number of branches of every
bank in the country.

In January 2014, we launched Saldazo, a co-brand-
ed debit card with Banamex and Visa, which also
serves as OXXO’s loyalty program. An unqualified
success with our consumers, we issued these new
debit cards at a rate of over 100,000 per month,
reaching more than 1.4 million debit card accounts
for the year. Beyond generating greater customer
loyalty and traffic, these cards will enable us to
gather useful data about our shoppers’ particular
preferences and practices, so we can better tailor
our promotional activity to our consumers’ individ-
ual needs.

Our assortment of
Bitz brand snacks,
candy, and baked
goods indulge
our consumers’
craving, while our
broad selection
of private-label
staples replenishes
and fulfills their
daily requirements.

femsa annual report 2014

Moreover, given the difficult economic environ-
ment, we continued to work with our consumers
to provide a substantial offering of high quality,
competitively priced private label products to satis-
fy their tastes. While our Bitz brand snacks, candy,
and baked goods indulge our shoppers’ cravings,
our broad selection of staples—from canned veg-
etables, milk, and beans to diapers, detergent, and
toilet paper—replenish and fulfill our customers’
daily requirements.

Furthermore, to satisfy our consumers’ hunger
at any time of day, we shifted from a promising
pilot to the segmented rollout of our O‘Sabor
brand menu of tacos, burritos, tortas, tamales, and
pizzas. Indeed, our base menu of O‘Sabor brand

tacos and burritos is already available at more than
340 high-traffic locations. Through this initiative,
along with our systematic progress along the
entire prepared food supply chain, we are just
beginning to unlock the potential of this promis-
ing consumption occasion.

By efficiently, conveniently, and reliably serving
and satisfying their needs, OXXO is an increasingly
important part of the lives of consumers across
Mexico. The myriad transactions carried out at
OXXO—more than 9 million a day and more than
3 billion a year—means that the chain continues
to secure its position as the preeminent choice for
suppliers and shoppers throughout the country.

We leveraged our
capabilities and
our small-box
retail platform to
strengthen our
position in the
complementary
drugstore sector—
developing an
important avenue
for growth.

Furthermore, we made great strides in the integra-
tion of Doña Tota, a leading quick-service restau-
rant operator with a strong brand and more than
200 outlets in Mexico and the U.S. Consequently,
we are now well positioned for a new phase of
growth of this promising stand-alone format in the
coming year. |

[case study]
SALDAZO:
MORE THAN
JUST A CARD

OXXO’S NEW
SALDAZO
CO-BRANDED DEBIT
CARD with Banamex
and Visa is a hit with
consumers. This
innovative card not
only fosters growing
loyalty among an in-
creasing pool of over
1.4 million shoppers,
but also is often the
first banking rela-
tionship in many of
our consumers’ lives.
Additionally, these
cards will allow us to
collect useful data,
so we can tailor our
offerings to better
suit our shoppers’
needs.

Constant Growth
We managed to navigate significant headwinds to
produce same-store sales growth of 2.7%—out-
performing the rate of growth of our industry.
In addition to our same-store sales growth, we
continued with our long-term strategy to expand
OXXO’s leadership position as Mexico’s largest
and fastest growing modern small-format store
chain. In 2014, we opened a record 1,132 new
stores for a total of 12,853 stores in Mexico
and Colombia.

Beyond OXXO, FEMSA Comercio strengthened its
position in the complementary drugstore sector,
developing an important avenue for growth that
leverages our capability and our platform across
small retail formats. Building on our acquisitions
of Farmacias YZA and Farmacias FM Moderna in
2013, we leveraged our in-depth understanding
of our consumers and our expertise operating a
national small-box retail chain to enhance the value
proposition of our initial base over 500 drugstores,
while opening more than 90 new drugstores over
the course of the year. These stores appeal to con-
sumers’ evolving demand for more specialization,
focusing primarily on pharmaceutical and health
and beauty products, as well as a limited array
of convenience categories such as soft drinks
and snacks.

Additionally, in December 2014, we agreed to ac-
quire Farmacias Farmacón, an important drugstore
operator with over 200 stores in the western
states of Sinaloa, Sonora, Baja California, and Baja
California Sur, strengthening our position in the
northwest of the country. Through this transaction,
we are advancing our strategy to play a relevant
role in an attractive, still-fragmented industry,
where we can leverage our capabilities to develop
another successful small-box retail format.

Positively transforming
our communities

Strategic Highlights
In 2014, we continued to integrate our long-term Sustainability Strategy throughout
the company by incorporating sustainability plans and projects in key phases and
processes such as the Business Units’ annual business plans, where the executive team
reviewed progress and accomplishments quarterly.

16,200

children and youth

along with 1,100 adults, have
benefited through our life-skills
program, Coordinates for Life.

femsa annual report 2014

US $149 million

invested in programs to positively transform our people,
our planet, and our communities.

water use; Decreasing our waste by implement-
ing measures such as our Zero Waste Facility
program; and Optimizing our energy use by
incorporating efficient technologies and integrat-
ing renewable energy sources.

Our Community. We invested US$24 million toward
our goal of achieving more sustainable communi-
ties by: Supporting education through programs
such as Coordinates for Life; Fostering healthy and
active lifestyles with the Sign Up to Play initiative;
Developing communities through the Polygon
Edison Trust in Monterrey, Mexico, and Citizen’s
Plaza in Brazil; Empowering social and environmen-
tal entrepreneurs through initiatives such as Youth
with Value; and, Supporting great institutions such
as ASHOKA, The Impact Hub, ANDE, The Pool, and
Global Social Business Summit, among others. |

Another important step was the development of
FEMSA’s Supplier Guiding Principles, which not only
reflect our expectations of suppliers, but also will
enable both parties to identify opportunities to
improve their sustainability performance collabo-
ratively. We held meetings with investment firms in
the U.S. and Europe, sharing our vision of sustain-
ability, receiving feedback, and acknowledging their
areas of interest such as water and waste man-
agement, energy efficiency, and healthy lifestyles.
For the second consecutive year, we produced a
mid-year Sustainability Report, providing more
timely information to our stakeholders.

During 2015, we will continue to implement our
Sustainability Strategy throughout our business
units by: Establishing corporate-level sustainability
goals once our Business Units’ sustainability goals
are set; Utilizing a strategic approach, based on
local community needs and opportunities, to foster
internal capabilities that improve our community
engagement and, thereby, increase our positive
impact; and, Deploying our Sustainability Informa-
tion System among our Business Units, enabling
enhanced information management concerning key
sustainability performance indicators.

Underscoring our commitment to sustainability,
Coca-Cola FEMSA was once again the only Mexican
beverage company included in the Dow Jones Sus-
tainability Emerging Markets Index. For the third
consecutive year, FEMSA and Coca-Cola FEMSA
improved their ranking from the Carbon Disclosure
Project for both their performance and disclosure
of carbon emissions strategies and data.

Sustainability Pillars: 2014 Highlights
Our People. We invested US$73.3 million for
onsite and online training, health and safety initia-
tives, and programs fostering the comprehensive
development of our employees and their families,
including volunteering.

Our Planet. We invested US$51.7 million to con-
tinue advancing our objectives: Minimizing our
impact on the environment through optimizing

We invite you to read our 2014 Sus-
tainability Report on our website at:
http://www.sustainabilityreport.
femsa.com/index.html

FEMSA Foundation

Building Strong Partnerships that Produce Results
FEMSA Foundation is FEMSA’s instrument for social investment. We are committed to
the creation of long-term value for the communities where we operate. We partner with
stakeholders from different sectors to increase support for projects and create regional
platforms that ensure the long-term success of our initiatives.

Our Healthy and Active program
benefited more than
6,900 children from schools
in southeastern Mexico.

femsa annual report 2014

+52,000 PEOPLE

enjoy improved access to water resources
through our Water Links program.

and restore 6.9 million cubic meters of water by
protecting over 6,000 hectares of watersheds
in seven countries across Latin America and the
Caribbean. The initiative also aims to replenish the
water used in the companies’ production process-
es and to strengthen water security in the region.

Quality of Life
In 2014, the Quality of Life area of FEMSA Foundation
partnered with the Food Bank Association of Mexico
to add a nutritional education component to the food
delivery programs that they provide to disadvantaged
families in 10 different cities across the country. In
this way, we help them to prepare better, more
nutritious meals for their families. One of the first
of these efforts is the Comer en Familia (Eating With
Your Family) program, conducted in collaboration
with the Food Bank of Saltillo and other partners. A
mobile kitchen staffed by nutritional experts travels
throughout five communities in the southern part of
Saltillo, Coahuila, every two weeks, teaching people
better ways to use traditional staples to create higher
quality, more nutritious recipes that they can prepare
with affordable food for meals they can enjoy togeth-
er with their families.

We also fostered the Sanos y Activos (Healthy and
Active) program in schools in the southeastern
states of Mexico, Quintana Roo, Mérida, and Chiapas.
This program has already benefited more than
6,900 children between the ages of eight and
14 in 36 schools by promoting nutritional education,
sports, and physical activity. The program also
conducted 16 workshops for parents and teachers
and created 34 Health Clubs in which 430 children
actively participate within the schools—thereby
improving the social environment and ensuring
sustainable change in the communities. |

Sustainable Development of Water Resources
In 2014, the Water Center for Latin America and
the Caribbean—created by FEMSA Foundation, the
Inter-American Development Bank (IDB), and the
Tecnológico de Monterrey—continued to focus on
building capacities for water professionals, one
of the greatest opportunities for water steward-
ship throughout Latin America. With renewed
economic support from IDB, the Center further
strengthened its applied research capabilities
with the planned development of a center that
will allow different actors in the field to make
better decisions and arrive at better solutions for
water-related challenges.

In partnership with The Coca-Cola Company Latin
America and the Millennium Water Alliance, the
Foundation ran the Water Links program for its
second year. During 2014, this program enabled
more than 52,000 people in marginalized com-
munities across five countries to gain access to
safe water, sanitation, and hygiene. Ultimately,
Water Links looks to build sustainable, healthy
long-term communities, while sharing best prac-
tices among implementers through a knowledge
platform where partners communicate lessons
learned to their peers.

In 2011, we joined The Nature Conservancy (TNC),
IDB, and the Global Environment Facility (GEF) to
create the Latin American Water Funds Part-
nership. The Partnership leveraged over US$27
million to invest as seed capital in regional water
funds to positively impact three million hectares
of natural ecosystems. Revenue from these in-
vestments preserves key hydrological basins up-
stream that filter and regulate the water supply
of some of the most important cities in the region.

The Global Water
Summit Awarded
FEMSA Foundation and
Cuauhtémoc Moctezuma
the Water Stewardship
2014 Prize in Recognition
of their Water Balance
Strategy.

Today, the Partnership has launched 17 Water
Funds, benefiting 17 cities in six countries. In 2014,
the Partnership joined forces with The Coca-Cola
Company’s Latin Center Business Unit and its local
bottlers to roll out the Water for Our Future initia-
tive. With an investment of nearly US$7.4 million,
this initiative is designed to protect, replenish,

For more information about
FEMSA Foundation, please
visit: http://www.
femsafoundation.org.

Executive Team

Our deep, multi-talented team of executives enables us to continually rise to the occasion, directing our steadfast pursuit
of excellence as a leading international consumer company. Together, they continue to create economic, social, and
environmental value for our stakeholders year after year. They leverage our strengths to satisfy our consumers’ needs,
generate new avenues for growth, and profitably convert complexity into opportunity. Thanks to their efforts, we sustain
a superior competitive position in our industry—ensuring and instilling our legacy of integrity well into the future.

José Antonio Fernández Carbajal
Executive Chairman of the Board
of FEMSA
After 11 years of professional
experience in different companies,
José Antonio Fernández Carbajal
began his career at FEMSA in 1987,
serving various positions in its
different businesses, including CEO
of OXXO. He was appointed CEO
of FEMSA in 1995 and Chairman
of the Board in 2001, serving both
positions until January 2014. In
2010, he was appointed Vice-
President of Heineken Holding
NV’s Board of Directors and
Chairman of Heineken’s Americas
Committee, which oversees the
strategic direction of the business
in the Americas and evaluates
new business opportunities in the
region. Since 2012, Mr. Fernández
has been Chairman of the Board
of Tecnológico de Monterrey,
where he served as Vice Chairman
since 1997. He is also Chairman
of the Board of Coca-Cola FEMSA,
FEMSA Foundation and the U.S.-
Mexico Foundation. Currently, he
participates as a board member
of Industrias Peñoles and Grupo
Televisa, and he co-chairs the
Mexican Chapter of the Woodrow
Wilson Center. He holds a degree
in Industrial Engineering and
Systems from Tecnológico de
Monterrey and in 1978, he earned
an MBA from that institution. For
more than 20 years, he has been
professor of Planning Systems at
Tecnológico de Monterrey.

Carlos Salazar Lomelín
Chief Executive Officer of FEMSA
Carlos Salazar joined FEMSA in
1973, and he has held several
senior management positions
across FEMSA, including Vice-
President of Grafo Regia, Vice-
President of Plásticos Técnicos
Mexicanos, S.A., Vice-President of
the International Division of FEMSA
Cerveza, Vice-President of the
Commercial Planning in Grupo Visa,
CEO of FEMSA Cerveza, and CEO of
Coca-Cola FEMSA. In 2014 he was
appointed Chief Executive Officer of
FEMSA. In 2010, he was awarded
the medal of Distinguished Citizen
by the state of Nuevo León. He
was President of the 21st Century
Commission and Executive Director
of CINTERMEX in Monterrey. He has
been a professor in economics for
a number of years at Tecnológico
de Monterrey and is the current
President of the Advisory Board
of the EGADE Business School
of this Institution. He holds a B.A.
in Economics and a Master’s
degree in Business Administration
from this institution. He also
has pursued graduate studies in
Economic Development in Italy
and a Management Program from
the IPADE in Mexico, among other
studies in different countries.

Javier Astaburuaga Sanjines
Corporate Vice-President of FEMSA
Javier Astaburuaga joined FEMSA
in 1982. In 2006, he was named
FEMSA’s CFO and Vice-President
of Strategic Development. In 2012,
he was appointed Chief Financial
and Strategic Development
Officer, adding the Human
Resources function matters to his
responsibilities. Prior to that, Mr.
Astaburuaga served as co-CEO of
FEMSA Cerveza, Vice-President of
Sales for Northern Mexico, CFO of
FEMSA Cerveza, Vice-President of
Corporate Development for FEMSA,
and Chief Information Officer of
FEMSA Cerveza. Mr. Astaburuaga
earned a Bachelor’s degree in Public
Accounting from Tecnológico de
Monterrey.

Federico Reyes García
Vice-President of Corporate
Development of FEMSA
Mr. Reyes assumed his current
position in January 2006, after
serving as Vice-President
of Finance and Corporate
Development of FEMSA since
1999. Starting in 1987, he was
associated with FEMSA as
an external advisor, and he
formally joined FEMSA in 1992
as Vice-President of Corporate
Development. Between 1993 and
1999, he was CEO of Seguros
Monterrey Aetna and Valores
Monterrey Aetna and Executive
Vice-President of the Insurance
and Pension Division at Bancomer
Financial Group. He rejoined
FEMSA in 1999. Mr. Reyes holds a
Bachelor’s degree in Accounting
from Tecnológico de Monterrey.

Alfonso Garza Garza
Vice-President of Strategic
Businesses of FEMSA
Alfonso Garza joined FEMSA
in 1985 and was named
Executive Vice-President of
Human Resources in 2005.
Prior to that, he held various
positions at FEMSA Cerveza and
FEMSA Empaques, including
the Vice-Presidency of FEMSA
Empaques and Grafo Regia. In
January 2009, he was appointed
Vice-President of Strategic
Businesses of FEMSA. From 2011
to 2013, he served as President
of the Employers Confederation
of Mexico (Coparmex) for the
state of Nuevo León and since
2009 he has been National Vice-
President of this organization. In
2012 he was appointed Chairman
of the Talent and Culture
Committee of Tecnológico de
Monterrey. He also participates
as a member of the Board of
Directors of Coca-Cola FEMSA
and Tecnológico de Monterrey.
Mr. Garza earned a Bachelor’s
degree in Industrial Engineering
from Tecnológico de Monterrey
and completed postgraduate
courses at IPADE.

Genaro Borrego Estrada
Vice-President of Corporate Affairs
of FEMSA
Genaro Borrego joined FEMSA in
September 2007 as Vice-President
of Corporate Affairs. Prior to that,
Mr. Borrego was elected as a
Federal Congressman for the LII
Legislature from 1982 to 1985.
After that, he served as Governor
of the Mexican State of Zacatecas
from 1986 to 1992, and in early
1992, he was elected President of
the PRI political party for one year.
From 1993 to 2000, he led the
Mexican Social Security Institute
(IMSS), and he was the President of
the American Conference of Social
Security Institutions. In 2000, he
was also elected as a Senator of
the Federal Congress to represent
the State of Zacatecas during the
LVIII and LIX Legislatures. He holds
a degree in Industrial Relations
from Universidad Iberoamericana.

José González Ornelas
Vice-President of Administration
and Corporate Control of FEMSA
José González assumed his
current position in 2003. He first
joined FEMSA in 1973, where he
held different positions in the
organization, such as Finance
Information Manager, Planning
and Administration Vice-
President, and Administration
Vice-President. In 1997, he was
named CEO of FEMSA Logística.
He is a board member of
several international companies,
he participates as Auditing
Committee Secretary of FEMSA’s
and Coca-Cola FEMSA’s board
and sits on the controller board
at Tecnológico de Monterrey. He
is also part of the Instituto de
Contadores Públicos de Nuevo
León Directive Committee and he
is President of the Club de Fútbol
Monterrey board. He holds a B.A.
in Accounting from Universidad
Autónoma de Nuevo León and
undertook postgraduate studies
in Business Administration from
different universities in Mexico
and abroad.

Corporate Governance

femsa annual report 2014

3737

John Anthony Santa Maria Otazúa
Chief Executive Officer of
Coca-Cola FEMSA
John Anthony Santa Maria
Otazúa was appointed Chief
Executive Officer of Coca-Cola
FEMSA as of January 2014. He
joined Coca-Cola FEMSA in 1995.
Since then, he has held several
senior management positions,
including Chief Operating
Officer of the company’s Mexico
Division, Strategic Planning
and Commercial Development
Officer, and Chief Operating
Officer of the company’s South
America Division, overseeing
its operations in Argentina,
Brazil, Colombia, and Venezuela.
His previous beverage and
consulting experience includes
PepsiCo, Inc. and McKinsey & Co.,
respectively. He is a member of
the Board of Directors of Banco
Compartamos. Mr. Santa Maria
earned a Bachelor´s degree and
an MBA with a major in Finance
from Southern Methodist
University.

Eduardo Padilla Silva
Chief Executive Officer of FEMSA
Comercio
Eduardo Padilla joined FEMSA in
1997 as FEMSA’s Vice-President
of Strategic Planning and
Corporate Control. In 2000, he
was appointed CEO of FEMSA
Strategic Procurement, which
included Packaging, Logistics, and
OXXO. Since 2004, he has focused
on his position as CEO of FEMSA
Comercio. Before joining FEMSA,
Mr. Padilla served as CEO of Terza,
a subsidiary of Grupo ALFA, from
1987 to 1996. Mr. Padilla earned
a Bachelor’s degree in Mechanical
and Administrative Engineering
from Tecnológico de Monterrey
and a Master’s degree in Business
Administration from Cornell
University. He also has completed
Graduate studies at IPADE.

For well over a century, our Board of Directors has followed the highest standards
of corporate governance in guiding our company. We are committed to the quality,
accuracy, and reliability of our disclosure practices, and we adhere to best corporate
governance policies and procedures. Specifically, we comply with the standards
set forth in the Mexican Securities Law and the applicable provisions of the United
States’ Sarbanes-Oxley Act. Also, we were among the first in our industry to embrace
the Code of Best Corporate Governance Practices, established by the Mexican
Entrepreneurial Council.

We always work to ensure that our company fosters financial transparency,
accountability, and the highest ethical standards. Based on a sound foundation of
responsible corporate governance, we sustainably build our business—delivering the
results our stakeholders expect from FEMSA.

Audit Committee
The Audit Committee is responsible for (1) reviewing the accuracy and integrity of quarterly and annual
financial statements in accordance with accounting, internal control and auditing requirements, (2) the
appointment, compensation, retention, and oversight of the independent auditor, who reports directly to
the Audit Committee, and (3) identifying and following up on contingencies and legal proceedings. The Audit
Committee has implemented procedures for receiving, retaining, and addressing complaints regarding
accounting, internal control, and auditing matters, including the submission of confidential, anonymous
complaints from employees regarding questionable accounting or auditing matters. To carry out its
duties, the Audit Committee may hire independent counsel and other advisors. As necessary, the company
compensates the independent auditor and any outside advisor hired by the Audit Committee and provides
funding for ordinary administrative expenses incurred by the Audit Committee in the course of its duties.
The Chairman of the Audit Committee and financial expert is José Manuel Canal Hernando. Members include:
Francisco Zambrano Rodriguez, Alfonso González Migoya, and Ernesto Cruz Velázquez de León—all of them
independent directors as required by the Mexican Securities Law and applicable New York Stock Exchange
listing standards. The Secretary (non-member) of the Audit Committee is José González Ornelas.

Corporate Practices Committee
The Corporate Practices Committee is responsible for preventing or reducing the risk of performing
operations that could damage the value of our company or that could benefit a particular group of
shareholders. The committee may call a shareholders’ meeting and include matters on the agenda for
that meeting as it may deem appropriate. They are also responsible for the approval of policies for the
use of the company’s assets or related party transactions, the approval of the compensation of the Chief
Executive Officer and relevant officers, and support our board of directors in the elaboration of reports on
accounting practices. Alfredo Livas Cantú is the Chairman of the Corporate Practices Committee. Members
include: Robert E. Denham, Moisés Naím, and Ricardo Saldívar Escajadillo. Each member of the Corporate
Practices Committee is an independent director, as required by the Mexican Securities Law. The Secretary
(non-member) of the Corporate Practices Committee is Javier Astaburuaga Sanjines.

Finance and Planning Committee
The Finance and Planning Committee’s responsibilities include (1) evaluating the investment and financing
policies proposed by the Chief Executive Officer, and (2) evaluating risk factors to which the corporation
is exposed, as well its management policies. The current Finance and Planning Committee members are
Ricardo Guajardo Touché (chairman), Federico Reyes García, Robert E. Denham, Francisco Javier Fernández
Carbajal and Alfredo Livas Cantú. Javier Astaburuaga Sanjines is the appointed secretary (non-member) of
this committee.

For more information on how our corporate governance practices differ from those followed by
United States companies under NYSE listing standards, please refer to the Corporate Governance
section of our website: www.femsa.com/investor.

Board of Directors

Our Board of Directors heads our corporate governance system. Guided by the best long-term interests of our
company’s shareholders and other stakeholders, our Board is responsible for determining our corporate strategy;
defining and overseeing the implementation of our key values and vision; and approving related-party transactions and
transactions not in the ordinary course of business.

In addition to our management team, our Board of Directors is supported by its committees: the Audit Committee, the
Corporate Practices Committee, and the Finance Committee. Our Board appoints and supervises these committees,
which assist and make recommendations to our Board in their respective areas of responsibility.

Series “B” Directors

José Antonio Fernández Carbajal
Executive Chairman of the Board of Fomento
Económico Mexicano, S.A.B. de C.V.
Elected 1984
Alternate Director: Federico Reyes García c

Eva María Garza Lagüera Gonda
Private Investor
Elected 1999
Alternate Director: Mariana Garza Lagüera
Gonda

Paulina Garza Lagüera Gonda
Private Investor
Elected 2004
Alternate Director: Othón Páez Garza

José Calderón Rojas
Chief Executive Officer of Franca Servicios, S.A.
de C.V., Regio Franca, S.A. de C.V., and Franca
Industrias, S.A. de C.V.
Elected 2005
Alternate Director: Francisco José Calderón
Rojas

Consuelo Garza de Garza
Founder and Former President of Asociación
Nacional Pro-Superación Personal, A.C.
(a Non-profit Organization)
Elected 1995
Alternate Director: Alfonso Garza Garza

Max Michel Suberville
Private Investor
Elected 1985
Alternate Director: Max Michel González

Alberto Baillères González
Chairman of the Board of Grupo BAL
companies, and Chairman of the Governance
Board of the Instituto Tecnológico Autónomo
de México (ITAM).
Elected 1989
Alternate Director: Arturo Fernández Pérez

José Manuel Canal Hernando a, i
Independent Consultant
Elected 2003
Alternate Director: Ricardo Saldívar Escajadillo b, i

Series “D” Directors

Francisco Javier Fernández Carbajal c
Chief Executive Officer of Servicios
Administrativos Contry, S.A. de C.V.
Elected 2005
Alternate Director: Javier Astaburuaga Sanjines c

Armando Garza Sada i
Chairman of the Board of
Grupo Alfa, S.A.B. de C.V.
Elected 2003
Alternate Director: Enrique F. Senior Hernández i

Ricardo Guajardo Touché c, i
Chairman of Solfi, S.A. and Director
of Grupo Valores Monterrey
Elected 1988
Alternate Director: Alfonso González Migoya a, i

Moisés Naím i
Distinguished Fellow at the Carnegie
Endowment for International Peace
Elected 2011
Alternate Director: Francisco Zambrano
Rodríguez a,i

Alfredo Livas Cantú c, i
President of Praxis Financiera, S.C.
Elected 1995
Alternate Director: Sergio Deschamps
Ebergenyi i

Bárbara Garza Lagüera Gonda
Private Investor, President of the Acquisitions
Committee of Colección FEMSA
Elected 2005
Alternate Director: Juan Guichard Michel

Michael Larson i
Chief Investment Officer for William H. Gates III
Elected 2011

Robert E. Denham b, c, i
Partner at Munger, Tolles & Olson,
LLP Law firm
Elected 2001

Secretary
Carlos Eduardo Aldrete Ancira

Alternate Secretary
Arnulfo Treviño Garza

Committees:
a) Auditing
b) Corporate Practices
c) Finance and Planning

Relation:
i) Independent

femsa annual report 2014

3939

Consolidated
Financial Statements

Contents

Financial Summary
Management’s Discussion and Analysis
Audit Committee Annual Report
Independent Auditors’ Report
Consolidated Statements of Financial Position
Consolidated Income Statements
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Headquarters

40
42
46
48
49
50
51
52
54
55
114

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

Financial Summary

Amounts expressed in millions of Mexican pesos (Ps.)

as of December 31:

Income Statement
Net sales
Total revenues
Cost of goods sold
Gross profit
Operating expenses
Income from operations (2)
Other non-operating expenses (income), net
Financing expenses, net
Income before income taxes and share of the profit of associates and
joint ventures accounted for using the equity method
Income taxes
Share of the profit of associates and joint ventures accounted for
using the equity method, net of taxes
Consolidated net income
Controlling Interest
Non-Controlling Interest
Ratios to total revenues (%)

Gross margin
Operating margin

Consolidated net income

Other information
Depreciation

Amortization and other non cash charges to income from operations
Operative Cash Flow (EBITDA)

Capital expenditures (3)

2014

2013

2012

2011(1)

Ps. 262,779
263,449
153,278
110,171
80,188
29,983
(508)
6,988

Ps. 256,804
258,097
148,443
109,654
79,797
29,857
326
4,249

Ps. 236,922
238,309
137,009
101,300
72,073
29,227
(345)
1,904

Ps. 200,426
201,540
117,244
84,296
59,812
24,484
625
196

23,503
6,253

5,380
22,630
16,701
5,929

41.8%
11.4%
8.6%

9,029
1,933
40,945
18,163

25,282
7,756

27,668
7,949

23,663
7,618

4,629
22,155
15,922
6,233

42.5%
11.6%
8.6%

8,805
1,208
39,870
17,882

8,332
28,051
20,707
7,344

42.5%
12.3%
11.8%

7,175
1,278
37,680
15,560

4,856
20,901
15,332
5,569

41.8%
12.1%
10.4%

5,694
1,320
31,498
12,609

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

femsa annual report 2014 41
femsa annual report 2014
41

BALANCE SHEET
Assets

Current assets
Investments in associates and joint ventures
Property, plant and equipment, net(4)
Intangible assets,net

Other assets, net
Total assets

Liabilities

Short-term bank loans and current portion of long-term

bank loans and notes payable

Other current liabilities

Long-term bank loans and notes payable
Post-employment and other long-term employee benefits
Deferred tax liabilities
Other long-term liabilities
Total liabilites
Total equity

Controlling interest
Non-controlling interest
Financial ratios (%)
Liquidity
Leverage
Capitalization

Data per share

Controlling interest book value (5)
Net controlling interest income (6)

Dividends paid (7)(8)

Series B shares
Series D shares
Number of employees (9)
Number of outstanding shares (10)

2014

2013

2012

2011(1)

79,112
102,159
75,629
101,527
17,746
376,173

1,553
47,766
82,935
4,207
3,643
5,947
146,051
230,122
170,473
59,649

1.604
0.635
0.27

9.528
0.933

0.000
0.000
216,740
17,891.13

73,569
98,330
73,955
103,293
10,045
359,192

3,827
45,042
72,921
4,074
2,993
7,785
136,642
222,550
159,392
63,158

1.505
0.614
0.26

8.909
0.890

0.667
0.833
209,232
17,891.13

75,455
83,840
61,649
67,893
7,105
295,942

8,702
39,814
28,640
3,675
700
4,250
85,781
210,161
155,259
54,902

1.555
0.408
0.16

8.678
1.157

0.309
0.386
182,260
17,891.13

59,983
78,643
54,563
63,030
7,143
263,362

5,573
33,752
23,819
2,584
414
5,049
71,191
192,171
144,222
47,949

1.525
0.370
0.14

8.061
0.857

0.229
0.287
168,370
17,891.13

(1) 2011 figures were restated for comparison with 2014, 2013 and 2012 as a result of transition to International Financial Reporting Standards (IFRS).
(2) Company’s key performance indicator.
(3)

Includes investments in property, plant and equipment, as well as deferred charges and intangible assets.
Includes bottles and cases

(4)

(5) Controlling interest divided by the total number of shares outstanding at the end of each year.
(6) Net controlling interest income divided by the total number of shares outstanding at the end of the each year.
(7) Expressed in nominal pesos of each year.
(8) 2014 Dividend was paid in December 2013.
(9)
(10) Total number of shares outstanding at the end of each year expressed in millions.

Includes incremental employees resulting from mergers & acquisitions made during the year.

Management’s Discussion and Analysis

Audited Financial Results for the twelve months ended December 31, 2014
Compared to the twelve months ended December 31, 2013.

Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) is a Mexican holding company. Set forth
below is certain audited financial information for FEMSA and its subsidiaries (the “Company” or
“FEMSA Consolidated”) (NYSE: FMX; BMV: FEMSA UBD). The principal activities of the Company
are grouped mainly under the following subholding companies (the “Subholding Companies”):
Coca-Cola FEMSA, S.A.B de C.V. (“Coca-Cola FEMSA” or “KOF”), (NYSE: KOF, BMV: KOFL) which
engages in the production, distribution and marketing of beverages, and FEMSA Comercio, S.A.
de C.V. (“FEMSA Comercio”), which engages in the operation of small format stores.

The consolidated financial information included in this annual report was prepared in accor-
dance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board (“IASB”).

The 2014 and 2013 results are stated in nominal Mexican pesos (“pesos” or “Ps.”). Translations
of pesos into US dollars (“US$”) are included solely for the convenience of the reader and are
determined using the noon buying rate for pesos as published by the U.S. Federal Reserve
Board in its H.10 Weekly Release of Foreign Exchange Rates as of December 31, 2014, which
was 14.7500 pesos per US dollar.

This report may contain certain forward-looking statements concerning Company’s future
performance that should be considered good faith estimates made by the Company. These
forward-looking statements reflect management expectations and are based upon currently
available data. Actual results are subject to future events and uncertainties, which could mate-
rially impact the Company’s actual performance.

FEMSA Consolidated
2014 amounts in millions of Mexican pesos

Total Revenues
FEMSA Consolidated 263,449
147,298
Coca-Cola FEMSA
109,624
FEMSA Comercio

% Growth vs ‘13
2.1%
-5.6%
12.4%

Gross Profit
110,171
68,382
39,386

% Growth vs ‘13
0.5%
-6.2%
13.9%

FEMSA’s consolidated total revenues increased 2.1% to Ps. 263,449 million in 2014 com-
pared to Ps. 258,097 million in 2013. Coca-Cola FEMSA’s total revenues decreased 5.6% to
Ps. 147,298 million, driven by the negative translation effect resulting from using the SICAD II
exchange rate to translate the Venezuelan operation. FEMSA Comercio’s revenues increased
12.4% to Ps. 109,624 million, mainly driven by the opening of 1,132 net new stores combined
with an average increase of 2.7% in same-store sales.

Consolidated gross profit increased 0.5% to Ps. 110,171 million in 2014 compared to Ps. 109,654
million in 2013. Gross margin decreased 70 basis points compared to 2013 to 41.8% of consoli-
dated total revenues, reflecting margin contraction at Coca-Cola FEMSA.

Consolidated operating expenses increased 0.5% to Ps. 80,188 million in 2014 compared to
Ps. 79,797 million in 2013. As a percentage of total revenues, consolidated operating expenses
decreased from 30.9% in 2013 to 30.4% in 2014.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO
43

Consolidated administrative expenses in-
creased 2.8% to Ps. 10,244 million in 2014
compared to Ps. 9,963 million in 2013. As a
percentage of total revenues, consolidated
administrative expenses remained stable at
3.9% in 2014.

Consolidated selling expenses decreased
0.8% to Ps. 69,016 million in 2014 as com-
pared to Ps. 69,574 million in 2013. As a
percentage of total revenues, selling expenses
decreased 80 percentage points, from 26.9%
in 2013 to 26.1% in 2014.

Consolidated income from operations in-
creased 0.4% to Ps. 29,983 million in 2014
as compared to Ps. 29,857 million in 2013.
As a percentage of total revenues, operating
margin decreased 20 percentage points, from
11.6% in 2013 to 11.4% in 2014.

Some of our subsidiaries pay management
fees to us in consideration for corporate
services we provide to them. These fees
are recorded as administrative expenses
in the respective business segments. Our
subsidiaries’ payments of management
fees are eliminated in consolidation and,
therefore, have no effect on our consolidat-
ed operating expenses.

Net financing expenses increased to
Ps. 6,988 million from Ps. 4,249 million in
2013, driven by an interest expense of
Ps. 6,701 million in 2014 compared to
Ps. 4,331 million in 2013 resulting from
higher financing expenses related to bonds
issued by FEMSA and Coca-Cola FEMSA.

Income before income taxes and share of
the profit in Heineken results decreased
7.0% to Ps. 23,503 million in 2014 com-
pared with Ps. 25,282 million in 2013, re-
flecting the previously mentioned negative
translation effect from Coca-Cola FEMSA’s
Venezuelan operations.

Our accounting provision for income taxes in
2014 was Ps. 6,253 million, as compared to
Ps. 7,756 million in 2013, resulting in an effec-
tive tax rate of 26.6% in 2014, as compared
to 30.7% in 2013.

Consolidated net income was Ps. 22,630
million in 2014 compared to Ps. 22,155
million in 2013, resulting from a lower tax
rate combined with an increase in FEMSA’s
20% participation in Heineken’s results, which
offset higher financing expenses related to
bonds issued by Coca-Cola FEMSA and FEMSA.
Controlling interest amounted to Ps. 16,701
million in 2014 compared to Ps. 15,922 million
in 2013. Controlling interest in 2014 per FEM-
SA Unit(1) was Ps. 4.67 (US$ 3.16 per ADS).

Coca-Cola FEMSA
Coca-Cola FEMSA total revenues decreased
5.6% to Ps. 147,298 million in 2014, as com-
pared to 2013, driven by the negative trans-
lation effect resulting from using the SICAD II
exchange rate to translate the results of its
Venezuelan operation. Excluding the recent-
ly integrated territories of Fluminense and
Spaipa in Brazil and the integration of Yoli in
Mexico, total revenues were Ps. 134,088 mil-
lion. On a currency neutral basis and excluding
the non-comparable effect of Fluminense
and Spaipa in Brazil, and Yoli in Mexico, total
revenues grew 24.7%, driven by average price
per unit case growth in most operations and
volume growth in Brazil, Colombia, Venezuela
and Central America.

Coca-Cola FEMSA gross profit decreased
6.2% to Ps. 68,382 million in 2014, as com-
pared to 2013. Cost of goods sold decreased
5.0%, this decline was driven by the previ-
ously mentioned negative translation effect in
Venezuela. In local currency, lower sweetener
and PET prices in most of Coca-Cola FEMSA’s
operations were offset by the depreciation of
the average exchange rate of the Argentine

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 201444

peso, the Brazilian real, the Colombian peso and the
Mexican peso as applied to Coca-Cola FEMSA’s U.S.
dollar-denominated raw material costs. Gross margin
reached 46.4% in 2014, a contraction of 30 basis points
as compared to 2013.

The component of cost of goods sold include raw mate-
rials (principally soft drink concentrate sweeteners and
packaging materials), depreciation costs attributable to our
production facilities, wages and other employment costs
associated with labor force employed at our production
facilities and certain overhead costs. Concentrate prices are
determined as a percentage of the retail price of our prod-
ucts in the local currency, net of applicable taxes. Packag-
ing materials, mainly polyethylene terephthalate (“PET”)
and aluminum, and High Fructose Corn Syrup (“HFCS”),
used as a sweetener in some countries, are denominated
in U.S. dollars.

Operating expenses decreased 8.7% to Ps. 46,850 million
in 2014 compared with Ps. 51,315 million in 2013.

Administrative expenses decreased 1.6% to Ps. 6,385
million in 2014, compared with Ps. 6,487 million in 2013.
Selling expenses decreased 9.7% to Ps. 40,464 million in
2014 compared with Ps. 44,828 million in 2013.

Income from operations decreased 3.3% to Ps. 20,743
million in 2014 compared with Ps. 21,450 million in 2013.

FEMSA Comercio

FEMSA Comercio total revenues increased 12.4% to
Ps. 109,624 million in 2014 compared to Ps. 97,572
million in 2013, primarily as a result of the opening
of 1,132 net new stores during 2014, together with
an average increase in same-store sales of 2.7%. As
of December 31, 2014, there were a total of 12,853
stores. FEMSA Comercio same-store sales increased an
average of 2.7% compared to 2013, driven by a 2.7%
increase in average customer ticket that offset a slight-
ly decrease in store traffic.

Cost of goods sold increased 11.5% to Ps. 70,238 million in
2014, below total revenue growth, compared with
Ps. 62,986 million in 2013. As a result, gross profit
reached Ps. 39,386 million in 2014, which represented a
13.9% increase from 2013. Gross margin expanded 50
percentage points to reach 35.9% of total revenues. This
increase reflects a more effective collaboration and exe-
cution with our key supplier partners, including higher and

more efficient joint use of promotion-related marketing
resources, as well as objective-based incentives.

Operating expenses increased 15.1% to Ps. 30,706 million
in 2014 compared with Ps. 26,680 million in 2013, reflect-
ing the incorporation and strengthening of our new drug-
store and quick-service restaurant operations, the solid
growth in our new OXXO stores, and the continued rollout
of our new initiatives.

Administrative expenses increased 8.4% to Ps. 2,042
million in 2014, compared with Ps. 1,883 million in 2013;
however, as a percentage of sales, they remained stable
at 1.9%. Selling expenses increased 15.3% to Ps. 28,492
million in 2014 compared with Ps. 24,707 million in 2013.

Income from operations increased 9.8% to Ps. 8,680
million in 2014 compared with Ps. 7,906 million in 2013,
resulting in an operating margin contraction of 20 percent-
age points to 7.9% as a percentage of total revenues for
the year, compared with 8.1% in 2013.

Key Events During 2014

Coca-Cola FEMSA Reopens Senior Notes and Issues US$350 Million
in the International Capital Markets.
On January 13, 2014 Coca-Cola FEMSA announced the reopen-
ing of the U.S. dollar-denominated 10-year bonds and 30-year
bonds that were placed on November 19, 2013 (the “Original
Senior Notes”) in the international capital markets.

The Company successfully reopened its bond issuance to
increase the total principal amount to US$2.5 billion (in
three tranches), placing an additional US$150 million for
10-year bonds at a yield of US Treasury +107 basis points,
with a coupon of 3.875%; and an additional US$200
million for 30-year bonds at a yield of US Treasury +122
basis points, with a coupon of 5.250% (the “Additional
Senior Notes”). The Company’s 10-year bonds now have
an aggregate principal amount of US$900 million and
30-year bonds now have an aggregate principal amount
of US$600 million. The Additional Senior Notes have the
same CUSIP and the same coupon as the respective Origi-
nal Senior Notes.

The proceeds will be used for general corporate purposes,
including partial debt refinancing.

Femsa held its Annual Shareholders Meeting
On March 14, 2014 - FEMSA held its Annual Ordinary Gen-
eral Shareholders Meeting, during which the shareholders

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO45

approved the Company’s annual report for 2013 prepared
by the Chief Executive Officer, the Company’s consolidated
financial statements for the year ended December 31, 2013
and the election of the Board of Directors and its Commit-
tees for 2014.

In addition, the shareholders established the amount of
Ps. 3,000 million as the maximum amount that could
potentially be used for the Company’s share repurchase
program during 2014.

Coca-Cola FEMSA Repeats as Member of Dow Jones
Sustainability Indices in 2014.
On September 17, 2014 Coca-Cola FEMSA, announced
today that it has been selected as a member of the Dow
Jones Sustainability Indices (“DJSI”).

serve on the Boards of Directors of FEMSA and
Coca-Cola FEMSA, as well as that of Heineken.

Effective January 1st, 2015, Daniel Rodríguez Cofré
will join FEMSA and on April 1st he will replace Javier
Astaburuaga as Chief Financial and Corporate Officer.
Born in Chile, Daniel has a long track record in senior
finance and management positions in Latin America and
Europe, having served as CFO of Shell South America as
well as Global CFO of one of Shell’s operating divisions,
headquartered in London. For the past six years Daniel
has been Chief Executive Officer of CENCOSUD, a large
publicly-traded Chilean retailer with operations in Chile,
Argentina, Peru, Colombia and Brazil. He brings with him
extensive experience and management skills and consti-
tutes a valuable addition to FEMSA’s senior talent pool.

For the second consecutive year, Coca-Cola FEMSA
will be a part of the Dow Jones Sustainability Emerging
Markets Index, comprised of a group of 86 emerging mar-
kets companies.

The new appointments represent another step in the
evolution and strengthening of FEMSA’s management
team in preparation for sustained growth ahead.

Femsa Comercio announces acquisitions
of Famarcias Farmacón
On December 1, 2014 FEMSA Comercio, announced that
its subsidiary Cadena Comercial de Farmacias, S.A.P.I. de
C.V. has agreed to acquire 100% of Farmacias Farmacón,
a drugstore operator in the western Mexican states of
Sinaloa, Sonora, Baja California and Baja California Sur.
This transaction represents an important step as FEMSA
Comercio advances in its strategy to establish a relevant
position in this attractive small-box retail segment.

Headquartered in the city of Culiacán, Sinaloa, Farmacias
Farmacón currently operates over two hundred stores.

The transaction is pending customary regulatory
approvals, and is expected to close during 1Q15. |

“Being a member of the Dow Jones Sustainability
Emerging Markets Index for the second consecutive
year is proof of our commitment and dedication to
contribute in a sustainable manner to the communities
we serve. We are pleased that our company is recog-
nized for its leadership in the field of sustainability by
the Mexican Sustainability Index and the Dow Jones
Sustainability Index. We will continue to work with the
same passion to improve and develop the right skills
to create economic, social and environmental value,”
said John Santa Maria Otazúa, Chief Executive Officer of
the Company.

Femsa announces changes to Senior Finance Team
On November 13, 2014 FEMSA announced that Federico
Reyes, FEMSA’s Vice President of Corporate Develop-
ment for the past nine years, will retire on April 1st 2015
after a long and productive career that includes 25 years
of fruitful collaboration with the FEMSA group. During
this time, Federico has made significant contributions to
the development and growth of FEMSA, including key
roles in large M&A transactions. Federico will remain
on the Boards of Directors and Finance Committees of
FEMSA and Coca-Cola FEMSA.

Javier Astaburuaga, FEMSA’s Chief Financial and Corporate
Officer for the past nine years, will replace Federico as
Vice President of Corporate Development. From his new
position Javier will be closely involved in FEMSA’s strategic
and M&A-related processes, and he will also continue to

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

Annual Report of the Audit Committee

To the Board of Directors
Fomento Económico Mexicano, S.A.B. de C.V. (the “Company”):

Pursuant to Articles 42 and 43 of the Mexican Securities Law (Ley del Mercado de Valores) and the Charter of the Audit Committee, we submit to the
Board of Directors our report on the activities performed during, 2014. We considered the recommendations established in the Code of Corporate Best
Practices and, since the Company is a publicly-listed company in the New York Stock Exchange (¨NYSE¨), we also complied with the applicable provisions
set forth in Sarbanes-Oxley Act. We met at least on a quarterly basis and, based on a work program, we carried out the activities described below:

Risk Assessment
We periodically evaluated the effectiveness of the Risk Management System, which is established to identify, measure, record, assess, and control the
Company´s risks, as well as the implementation of the related controls to ensure its effective operation.

We reviewed with Management and both External and Internal Auditors of the Company, the key risk factors that could adversely affect the Company´s
operations and assets, and we determined that they have been appropriately identified managed, and considered in both audit programs.

Internal Control
We verified the compliance by management of its responsibilities regarding internal control, the establishment of general guidelines and the procedures
necessary for their application and compliance. Additionally, we reviewed the comments and suggestions made by the External Auditors as a result of
their findings.

We verified the actions taken by the Company in order to comply with section 404 of Sarbanes-Oxley Act regarding the self-assessment of internal
controls performed by the Company to be reported for the year 2014. Throughout this process, we verified the preventive and corrective measures
implemented.

External Audit
We recommended to the Board of Directors to approve the external auditors (who have been the same for the past seven years) for the Company
and its subsidiaries for fiscal year 2014. For this purpose, we verified their independence and their compliance with the requirements established by
applicable laws and regulations. We analyzed their approach, work program as well as their coordination with Internal Audit.

We were in permanent and direct communication with them to be timely informed of their progress and their observations, and also to consider any
comments that resulted from their review of the quarterly financial statements. We were timely informed of their conclusions and reports, regarding
annual financial statements and followed up on the actions implemented resulting from the findings and recommendations provided during the year.

We authorized the fees of the external auditors for their audit and other permitted services, and made sure that such services would not compromise
their Independence.

With the appropriate input from Management, we carried out an evaluation of their services for the previous year and initiated the evaluation process
for the fiscal year 2014.

Internal Auditing
In order to maintain its independence and objectivity, the Internal Audit area reports to the Audit Committee therefore:

We reviewed and approved the annual work program and budget, in order to comply with the requirements of SAROX. For its preparation, the Internal
Audit area participated in the risk assessment process and the validation of the internal control system.

We received periodic reports regarding the progress of the approved work program, their findings and the causes thereof.

We followed up the implementation of the observations developed by Internal Audit.

We confirmed the existence of an Annual Training program.

We reviewed the evaluations of the Internal Audit service performed by the responsible of each business unit and the Audit Committee.

Financial Information, Accounting Policies and Reports to the Third Parties
We reviewed the quarterly and annual financial statements of the Company with the individuals responsible for their preparation and recommended
the Board of Directors its approval and authorized their publication. As part of this process, we took into account the opinions and remarks of the
external auditors and made sure that the criteria, accounting policies and information used by Management to prepare financial information were
adequate, sufficient, and consistently applied with the prior year. As a consequence, the information submitted by Management reasonably reflects the
Company´s financial situation, its operating results and cash flows for the fiscal year ending December 31, 2014.

We also reviewed the quarterly reports prepared by Management and submitted to shareholders and the financial community, verifying that such
information was prepared under International Financial Reporting Standards (IFRS) and with the same accounting criteria used for preparing the annual
information. We also reviewed the existence of an integral process that provides a reasonable assurance of fairness in the information content. To
conclude, we recommended to the Board to authorize the release of such information.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

femsa annual report 2014

Our reviews also included reports and any other financial information required by Mexican and United States regulatory authorities.

We reviewed and approved the accounting standards for the Company that became effective in 2014, recommending their approval to the Board of
Directors.

Compliance with Applicable Laws and Regulations, Legal Issues and Contingencies
We verified the existence and reliability of the Company-established controls to ensure compliance with the various legal provisions applicable to the
Company. When required, we verified the appropriate disclosure in the financial reports.

We made periodic reviews of the various tax, legal and labor contingencies of the Company. We supervised the efficiency of the procedures established
for their identification and follow-up, as well as their adequate disclosure and recording.

Code of Conduct
We reviewed the new version of the Business Code of Ethics of the Company which incorporates among other changes an update of its values. We
validated the incorporation of a compliance provision with the Anti-Money Laundering laws in the countries where we operate, as well as compliance
with anti corruption laws (FCPA) recommending its approval to the Board of Directors.

With the support from Internal Audit, we verified the compliance of the Business Code of Ethics, the existence of adequate processes to update it and
its communication to employees, as well as the application of sanctions in those cases where violations were detected.

We reviewed the complaints received in the Company´s Whistle-Blowing System and followed up on their correct and timely handling.

Administrative Activities
We held regular meetings with the Management to be informed of any relevant or unusual activities and events. We also met individually with external
and internal auditors to review their work, and observations.

In those cases where we deemed advisable, we requested the support and opinion from independent experts. We are not aware of any significant
non-compliance with the operating policies, the internal control system or the accounting records of the Company.

We held executive meetings and when applicable reviewed with management our resolutions.

We submitted quarterly reports to the Board of Directors, on the activities performed by the Committee.

We reviewed the Audit Committee Charter and made the amendments that we deemed appropriate, submitting such changes for its approval to the
Board of Directors.

We verified that the financial expert of the Committee meets the technical background and experience requirements to be considered as such, and that
each Committee Member meets the independence requirements set forth in by the applicable laws and regulations.

Our activities were duly documented in the minutes prepared for each meeting. Such minutes were properly reviewed and approved by Committee
members.

We made our annual performance self-assessment, and submitted the results to the Chairman of the Board of Directors.

Sincerely

February 25, 2015

José Manuel Canal Hernando

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

Independent Auditor’s Report

The Board of Directors and Shareholders of
Fomento Económico Mexicano, S.A.B. de C.V.

Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Fomento Económico Mexicano, S.A.B. de C.V. and its subsidiaries, which
comprise the consolidated statements of financial position as at December 31, 2014 and 2013, and the consolidated income statements, consolidated
statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the three
years in the period ended December 31, 2014, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International
Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance
with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Fomento Económico Mexicano,
S.A.B. de C.V. and its subsidiaries as at December 31, 2014 and 2013, and their financial performance and cash flows for each of the three years in the
period ended December 31, 2014, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board.

Mancera, S.C.
A member practice of Ernst & Young Global Limited

Agustín Aguilar Laurents
March 11, 2015
Monterrey, N.L. MEXICO

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

femsa annual report 2014

Consolidated Statements of Financial Position

As of December 31, 2014 and 2013.

Amounts expressed in millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.)

Note

December
2014 (*)

December
2014

December
2013

ASSETS
Current Assets:

Cash and cash equivalents
Investments

Accounts receivable, net

Inventories
Recoverable taxes

Other current financial assets
Other current assets
Total current assets
Investments in associates and joint ventures
Property, plant and equipment, net
Intangible assets, net
Deferred tax assets
Other financial assets
Other assets, net
TOTAL ASSETS

LIABILITIES AND EQUITY
Current Liabilities:

Bank loans and notes payable
Current portion of long-term debt
Interest payable
Suppliers

Accounts payable
Taxes payable

Other current financial liabilities
Total current liabilities
Long-Term Liabilities:

Bank loans and notes payable
Post-employment and other long-term employee benefits
Deferred tax liabilities
Other financial liabilities

Provisions and other long-term liabilities

Total long-term liabilities
Total liabilities
Equity:

Controlling interest:
Capital stock

Additional paid-in capital
Retained earnings
Cumulative other comprehensive (loss) income

Total controlling interest
Non-controlling interest in consolidated subsidiaries
Total equity
TOTAL LIABILITIES AND EQUITY

(*) Convenience translation to U.S. dollars ($) – See Note 2.2.3

5
6
7
8

9
9

10
11
12
24
13
13

18
18

18
16
24
25
25

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

2,407
10
939
1,167
544
176
121
5,364
6,926
5,127
6,883
426
444
333
25,503

30
75
33
1,794
527
554
330
3,343

5,623
285
247
22
382
6,559
9,902

Ps.

35,497
144
13,842
17,214
8,030
2,597
1,788
79,112
102,159
75,629
101,527
6,278
6,551
4,917
Ps. 376,173

Ps.

27,259
126
12,798
18,289
9,141
3,977
1,979
73,569
98,330
73,955
103,293
3,792
2,753
3,500
Ps. 359,192

Ps.

449
1,104
482
26,467
7,778
8,177
4,862
49,319

82,935
4,207
3,643
328
5,619
96,732
146,051

Ps.

529
3,298
409
26,632
6,911
6,745
4,345
48,869

72,921
4,074
2,993
1,668
6,117
87,773
136,642

227
1,739
9,974
(383)
11,557
4,044
15,601
25,503

3,347
25,649
147,122
(5,645)
170,473
59,649
230,122
Ps. 376,173

3,346
25,433
130,840
(227)
159,392
63,158
222,550
Ps. 359,192

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

Consolidated Income Statements

For the years ended December 31, 2014, 2013 and 2012.

Amounts expressed in millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.), except per share amounts.

Note

2014 (*)

2014

2013

2012

Net sales
Other operating revenues
Total revenues
Cost of goods sold
Gross profit
Administrative expenses
Selling expenses
Other income
Other expenses
Interest expense
Interest income
Foreign exchange loss, net
Monetary position loss, net
Market value gain on financial instruments
Income before income taxes and share of the profit of associates
and joint ventures accounted for using the equity method

Income taxes
Share of the profit of associates and joint ventures accounted

for using the equity method, net of taxes

Consolidated net income
Attributable to:

Controlling interest
Non-controlling interest
Consolidated net income

Basic net controlling interest income:

Per series “B” share
Per series “D” share

Diluted net controlling interest income:

Per series “B” share
Per series “D” share

(*) Convenience translation to U.S. dollars ($) – See Note 2.2.3

19
19
18

23
23

17,816
45
17,861
10,392
7,469
694
4,679
74
(86)
(454)
58
(61)
(22)
5

1,610
424

348
1,534

1,132
402
1,534

0.06
0.07

Ps. 262,779
670
263,449
153,278
110,171
10,244
69,016
1,098
(1,277)
(6,701)
862
(903)
(319)
73

Ps. 256,804
1,293
258,097
148,443
109,654
9,963
69,574
651
(1,439)
(4,331)
1,225
(724)
(427)
8

Ps. 236,922
1,387
238,309
137,009
101,300
9,552
62,086
1,745
(1,973)
(2,506)
783
(176)
(13)
8

23,744
6,253

25,080
7,756

27,530
7,949

5,139
22,630

Ps.

4,831
22,155

8,470
28,051

Ps.

16,701
5,929
22,630

0.83
1.04

Ps.

15,922
6,233
22,155

0.79
1.00

0.79
0.99

Ps.

20,707
7,344
28,051

1.03
1.30

1.03
1.29

The accompanying notes are an integral part of these consolidated income statements.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

femsa annual report 2014

Consolidated Statements of Comprehensive Income

For the years ended December 31, 2014, 2013 and 2012.

Amounts expressed in millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.)

Consolidated net income
Other comprehensive income:
Items that may be reclassified to consolidated net income, net of tax:
Unrealized loss on available for sale securities
Valuation of the effective portion of derivative

financial instruments

Exchange differences on the translation of foreign

operations and associates

Share of other comprehensive income of associates

and joint ventures

Total items that may be reclassified
Items that will not to be reclassified to consolidated net income

in subsequent periods, net of tax:
Remeasurements of the net defined benefit liability

Total items that will not be reclassified
Total other comprehensive loss, net of tax
Consolidated comprehensive income, net of tax
Controlling interest comprehensive income
Reattribution to non-controlling interest of other comprehensive

income by acquisition of Grupo YOLI

Reattribution to non-controlling interest of other comprehensive

income by acquisition of FOQUE
Controlling interest, net of reattribution
Non-controlling interest comprehensive income
Reattribution from controlling interest of other comprehensive

income by acquisition of Grupo YOLI

Reattribution from controlling interest of other comprehensive

income by acquisition of FOQUE

Non-controlling interest, net of reatribution
Consolidated comprehensive income, net of tax

(*) Convenience translation to U.S. dollars ($) – See Note 2.2.3

Note

2014 (*)

2014

2013

2012

1,534

Ps.

22,630

Ps.

22,155

Ps.

28,051

493

(2)

(246)

(243)

(831)

(12,256)

1,151

(5,250)

30
(768)

(24)
(24)
(792)
742
765

-
765
(23)

-
(23)
742

441
(11,322)

(2,629)
(1,726)

(781)
(6,276)

(361)
(361)
(11,683)
10,947
11,283

(112)
(112)
(1,838)
Ps. 20,317
15,030

(279)
(279)
(6,555)
Ps. 21,496
15,638

Ps.

(36)

Ps.

-
11,283
(336)

Ps.

-
14,994
5,287

Ps.

29
15,667
5,858

-
(336)
10,947

-
5,323
20,317

Ps.
Ps.

(29)
5,829
21,496

Ps.
Ps.

$
$

The accompanying notes are an integral part of these consolidated statements of comprehensive income.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

Consolidated Statements of Changes in Equity

For the years ended December 31, 2014, 2013 and 2012.

Amounts expressed in millions of Mexican pesos (Ps.)

Capital
Stock

Additional
Paid-in
Capital

Retained
Earnings

Unrealized
Gain (Loss) on
Available
for Sale
Securities

Valuation of

the Effective

Portion of

Derivative

Financial

Exchange

Differences

Translation

of Foreign

Operations

Instrument

and Associates

on the Remeasurements

of the Net

Defined

Benefit

Liability

Total

Controlling

Non-Controlling

Interest

Total

Equity

Ps.

3,345

Ps. 20,656

Ps.

114,487

Ps.

365

Ps. 5,717

Ps.

(352)

Ps. 144,222

Ps. 47,949

Ps.

192,171

Balances at January 1, 2012

Net income
Other comprehensive income, net of tax

Comprehensive income

Dividends declared

Issuance (repurchase) of shares associated with share-based payment plans

(50)

Acquisition of Grupo Fomento Queretano through issuance

of Coca-Cola FEMSA shares (see Note 4)

Other transactions of non-controlling interest

Other movements of equity method of associates, net of taxes
Balances at December 31, 2012

Net income
Other comprehensive income, net of tax

Comprehensive income

Dividends declared

2,134

3,346

22,740

20,707

(6,200)

(486)
128,508

15,922

(13,368)

(2)

Issuance (repurchase) of shares associated with share-based payment plans

Acquisition of Grupo Yoli through issuance of Coca-Cola FEMSA shares (see Note 4)

(172)

2,865

Other acquisitions (see Note 4)

Increase in share of non-controlling interest

Other movements of equity method of associates, net of taxes

(222)

Balances at December 31, 2013

3,346

25,433

130,840

181

779

(1,187)

159,392

63,158

222,550

Net income
Other comprehensive income, net of tax

Comprehensive income

Dividends declared

Issuance (repurchase) of shares associated with share-based payment plans
Other movements of equity method of associates, net of taxes

216

16,701

(419)

Balances at December 31, 2014

Ps.

3,347

Ps.

25,649

Ps.

147,122

Ps.

307

Ps.

(3,633)

Ps.

(2,319 )

Ps. 170,473

Ps. 59,649

Ps.

230,122

The accompanying notes are an integral part of these consolidated statements of changes in equity.

349

1,961

(1,647)

155,259

54,902

(17)

(3,725)

(1,296)

(31)

(170)

(1,214)

458

126

(4,412)

(1,132)

20,707

(5,040)

15,667

(6,200)

(49)

2,105

(486)

15,922

(928)

14,994

(13,368)

(172)

2,901

(222)

16,701

(5,418)

11,283

217

(419)

7,344

(1,515)

5,829

(2,986)

(12)

4,172

(50)

6,233

(910)

5,323

(3,125)

(7)

5,120

430

515

5,929

(6,265)

(336)

(3,152)

(21)

28,051

(6,555)

21,496

(9,186)

(61)

6,277

(50)

(486)

210,161

22,155

(1,838)

20,317

(16,493)

(179)

8,021

430

515

(222)

22,630

(11,683)

10,947

(3,152)

196

(419)

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

femsa annual report 2014

Capital

Stock

Additional

Paid-in

Capital

Retained

Earnings

Unrealized

Gain (Loss) on

Available

for Sale

Securities

Valuation of
the Effective
Portion of
Derivative
Financial
Instrument

Exchange
Differences

Translation
of Foreign
Operations
and Associates

on the Remeasurements
of the Net
Defined
Benefit
Liability

Total
Controlling
Interest

Non-Controlling
Interest

Total
Equity

Ps.

3,345

Ps. 20,656

Ps.

114,487

Ps.

365

Ps. 5,717

Ps.

(352)

Ps. 144,222

Ps. 47,949

Ps.

192,171

(17)

(3,725)

(1,296)

2,134

(31)

3,346

22,740

349

1,961

(1,647)

(170)

(1,214)

458

20,707
(5,040)

15,667

(6,200)

(49)

2,105

(486)
155,259

15,922
(928)

14,994

(13,368)

(172)

2,901

(222)

7,344
(1,515)

5,829

(2,986)

(12)

4,172

(50)

-
54,902

6,233
(910)

5,323

(3,125)

(7)

5,120

430

515

28,051
(6,555)

21,496

(9,186)

(61)

6,277

(50)

(486)
210,161

22,155
(1,838)

20,317

(16,493)

(179)

8,021

430

515

(222)

Balances at December 31, 2013

3,346

25,433

130,840

181

779

(1,187)

159,392

63,158

222,550

Issuance (repurchase) of shares associated with share-based payment plans

216

Other movements of equity method of associates, net of taxes

126

(4,412)

(1,132)

16,701
(5,418)

11,283

217
(419)

5,929
(6,265)

(336)

(3,152)

(21)
-

22,630
(11,683)

10,947

(3,152)

196
(419)

Balances at December 31, 2014

Ps.

3,347

Ps.

25,649

Ps.

147,122

Ps.

307

Ps.

(3,633)

Ps.

(2,319 )

Ps. 170,473

Ps. 59,649

Ps.

230,122

Issuance (repurchase) of shares associated with share-based payment plans

(50)

Issuance (repurchase) of shares associated with share-based payment plans

Acquisition of Grupo Yoli through issuance of Coca-Cola FEMSA shares (see Note 4)

(172)

2,865

Balances at January 1, 2012

Net income

Other comprehensive income, net of tax

Comprehensive income

Dividends declared

Acquisition of Grupo Fomento Queretano through issuance

of Coca-Cola FEMSA shares (see Note 4)

Other transactions of non-controlling interest

Other movements of equity method of associates, net of taxes

Balances at December 31, 2012

Net income

Other comprehensive income, net of tax

Comprehensive income

Dividends declared

Other acquisitions (see Note 4)

Increase in share of non-controlling interest

Other movements of equity method of associates, net of taxes

Net income

Other comprehensive income, net of tax

Comprehensive income

Dividends declared

(2)

20,707

(6,200)

(486)

128,508

15,922

(13,368)

(222)

16,701

(419)

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

Consolidated Statements of Cash Flows

For the years ended December 31, 2014, 2013 and 2012.

Amounts expressed in millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.)

Cash flows from operating activities:
Income before income taxes
Adjustments for:
Non-cash operating expenses
Employee profit sharing
Depreciation
Amortization

Loss (gain) on sale of long-lived assets
Gain on sale of shares
Disposal of long-lived assets
Impairment of long-lived assets
Share of the profit of associates and joint ventures accounted

for using the equity method, net of taxes

Interest income
Interest expense
Foreign exchange loss, net
Monetary position loss, net
Market value (gain) on financial instruments
Cash flow from operating activities before changes in operating

accounts and employee profit sharing
Accounts receivable and other current assets
Other current financial assets
Inventories
Derivative financial instruments
Suppliers and other accounts payable
Other long-term liabilities
Other current financial liabilities
Post-employment and other long-term employee benefits
Cash generated from operations
Income taxes paid
Net cash generated by operating activities
Cash flows from investing activities:
Acquisition of Grupo Fomento Queretano, net of cash acquired (see Note 4)
Acquisition of Grupo Yoli, net of cash acquired (see Note 4)
Acquisition of Companhia Fluminense de Refrigerantes,

net of cash acquired (see Note 4)

Acquisition of Spaipa S.A. Industria Brasileira de Bebidas,

net of cash acquired (see Note 4)

Other acquisitions, net of cash acquired (see Note 4)

Investment in shares of Coca-Cola FEMSA Philippines, Inc. CCFPI (see Note 10)

Other investments in associates and joint ventures (see Note 10)

Disposals of subsidiaries and associates, net of cash
Purchase of investments
Proceeds from investments
Interest received
Derivative financial instruments
Dividends received from associates and joint ventures
Long-lived assets acquisitions
Proceeds from the sale of long-lived assets

Acquisition of intangible assets
Investment in other assets
Investment in other financial assets
Collection in other financial assets

Net cash used in investing activities
Cash flows from financing activities:
Proceeds from borrowings
Payments of bank loans
Interest paid
Derivative financial instruments
Dividends paid

Acquisition of non-controlling interests

Increase in shares of non-controlling interest

Other financing activities
Net cash (used in) generated by financing activities
Increase (decrease) in cash and cash equivalents
Initial balance of cash and cash equivalents
Effects of exchange rate changes and inflation effects on cash and

cash equivalents held in foreign currencies

Ending balance of cash and cash equivalents

(*) Convenience translation to U.S. dollars ($) – see Note 2.2.3
The accompanying notes are an integral part of these consolidated statements of cash flow.

2014 (*)

2014

2013

2012

1,958

Ps.

28,883

Ps. 29,911

Ps.

36,000

14
77
612
67
-
-
10
10

(348)
(58)
454
61
22
(5)

2,874
(336)
118
(76)
17
468
(155)
54
(28)
2,936
(401)
2,535

-
-

-
-
-
6
-
(41)
40
59
(2)
122
(1,152)
14
(48)
(54)
(3)
-
(1,059)

363
(388)
(270)
(154)
(214)
-
-
33
(630)
846
1,848

209
1,138
9,029
985
7
-
153
145

(5,139)
(862)
6,701
903
319
(73)

42,398
(4,962)
1,736
(1,122)
245
6,910
(2,308)
793
(416)
43,274
(5,910)
37,364

-
-

-
-
-
90
-
(607)
589
863
(25)
1,801
(16,985)
209
(706)
(796)
(41)
-
(15,608)

5,354
(5,721)
(3,984)
(2,267)
(3,152)
-
-
482
(9,288)
12,468
27,259

752
1,936
8,805
891
(41)
-
122
-

(4,831)
(1,225)
4,331
724
427
(8)

41,794
(1,948)
(1,508)
(1,541)
402
517
(109)
417
(317)
37,707
(8,949)
28,758

-
(1,046)

(4,648)

(23,056)
(3,021)
(8,904)
(335)
-
(118)
1,488
1,224
119
1,759
(16,380)
252
(1,077)
(1,436)
(52)
-
(55,231)

78,907
(39,962)
(3,064)
697
(16,493)
-
515
(16)
20,584
(5,889)
36,521

1,683
1,650
7,175
715
(132)
(2,148)
133
384

(8,470)
(783)
2,506
176
13
(8)

38,894
(746)
(977)
(2,289)
(17)
3,833
(18)
329
(209)
38,800
(8,015)
30,785

(1,114)
-

-
-
-
(1,207)
1,055
(2,808)
2,534
777
94
1,697
(14,844)
362
(441)
(1,264)
-
516
(14,643)

14,048
(5,872)
(2,172)
(209)
(9,186)
(6)
-
(21)
(3,418)
12,724
25,841

(287)
2,407

(4,230)
35,497

(3,373)
Ps. 27,259

(2,044)
Ps. 36,521

Ps.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIES
MONTERREY, N.L., MEXICO

femsa annual report 2014

Notes to the Consolidated Financial Statements

As of December 31, 2014, 2013 and 2012.

Amounts expressed in millions of U.S. dollars ($) and in millions of Mexican pesos (Ps.)

Note 1. Activities of the Company
Fomento Económico Mexicano, S.A.B. de C.V. (“FEMSA”) is a Mexican holding company. The principal activities of FEMSA and its subsidiaries (the
“Company”), as an economic unit, are carried out by operating subsidiaries and companies under direct and indirect holding company subsidiaries (the
“Subholding Companies”) of FEMSA.

The following is a description of the activities of the Company as of the date of the issuance of these consolidated financial statements, together with
the ownership interest in each Subholding Company:

Subholding Company

Coca-Cola FEMSA,
S.A.B. de C.V.
and subsidiaries
(“Coca-Cola FEMSA”)

% Ownership

December 31,
2014

47.9% (1)
(63.0% of
the voting
shares)

December 31,
2013

47.9% (1)
(63.0% of
the voting
shares)

Activities

Production, distribution and marketing of certain Coca-Cola trademark
beverages in Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia,
Venezuela, Brazil, Argentina and Philippines (see Note 10).
At December 31, 2014, The Coca-Cola Company (TCCC) indirectly owns
28.1% of Coca-Cola FEMSA’s capital stock. In addition, shares representing
24.0% of Coca-Cola FEMSA’s capital stock are traded on the Bolsa Mexicana
de Valores (Mexican Stock Exchange “BMV”). Its American Depositary
Shares (“ADS”) trade on the New York Stock Exchange, Inc (NYSE).

100%

Operation of chains of small-box retail formats in Mexico,
Colombia and the United States, mainly under the trade name “OXXO.”

FEMSA Comercio,
S.A. de C.V. and subsidiaries
(“FEMSA Comercio”)

CB Equity, LLP
(“CB Equity”)

100%

Other companies

100%

(1) The Company controls Coca-Cola FEMSA’s relevant activities.

This Company holds Heineken N.V. and Heineken Holding N.V. shares,
which represents in the aggregate a 20% economic interest in both entities
(“Heineken Company”).

Companies engaged in the production and distribution of coolers,
commercial refrigeration equipment and plastic cases; as well as
transportation logistics and maintenance services to FEMSA’s subsidiaries
and to third parties.

Note 2. Basis of Preparation
2.1 Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).

The Company’s consolidated financial statements and notes were authorized for issuance by the Company’s Chief Executive Officer Carlos Salazar
Lomelín and Chief Financial and Administrative Officer Javier Astaburuaga Sanjines on February 20, 2015. Those consolidated financial statements and
notes were then approved by the Company’s Board of Directors on February 25, 2015 and subsequent events have been considered through that date
(see Note 28). These consolidated financial statements and their accompanying notes will be presented at the Company’s shareholders meeting in
March 19, 2015. The Company´s shareholders have the faculty to approve or modify the Company´s consolidated financial statements.

2.2 Basis of measurement and presentation
The consolidated financial statements have been prepared on the historical cost basis, except for the following:

• Available-for-sale investments.

• Derivative financial instruments.

• Long-term notes payable on which fair value hedge accounting is applied.

• Trust assets of post-employment and other long-term employee benefit plans.

The financial statements of subsidiaries whose functional currency is the currency of a hyperinflationary economy are stated in terms of the measuring
unit current at the end of the reporting period.

2.2.1 Presentation of consolidated income statement
The Company classifies its costs and expenses by function in the consolidated income statement, in order to conform to the industry practices where
the Company operates. Information about expenses by their nature is disclosed in notes of these financial statements.

2.2.2 Presentation of consolidated statements of cash flows
The Company’s consolidated statement of cash flows is presented using the indirect method.

2.2.3 Convenience translation to U.S. dollars ($)
The consolidated financial statements are stated in millions of Mexican pesos (“Ps.”) and rounded to the nearest million unless stated otherwise.
However, solely for the convenience of the readers, the consolidated statement of financial position as of December 31, 2014, the consolidated income
statement, the consolidated statement of comprehensive income and consolidated statement of cash flows for the year ended December 31, 2014
were converted into U.S. dollars at the exchange rate of 14.7500 Mexican pesos per U.S. dollar as published by the U.S. Federal Reserve Board in its
H.10 Weekly Release of Foreign Exchange Rates as of that date. This arithmetic conversion should not be construed as representation that the amounts
expressed in Mexican pesos may be converted into U.S. dollars at that or any other exchange rate.

2.3 Critical accounting judgments and estimates
In the application of the Company’s accounting policies, which are described in Note 3, management is required to make judgments, estimates and
assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which
the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and
future periods.

2.3.1 Key sources of estimation uncertainty
The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Existing
circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control
of the Company. Such changes are reflected in the assumptions when they occur.

2.3.1.1 Impairment of indefinite lived intangible assets, goodwill and depreciable long-lived assets
Intangible assets with indefinite lives including goodwill are subject to annual impairment tests. An impairment exists when the carrying value of an asset
or cash generating unit (CGU) exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less
costs to sell calculation is based on available data from binding sales transactions in arm’s length transactions of similar assets or observable market
prices less incremental costs for disposing of the asset. In order to determine whether such assets are impaired, the Company initially calculates an
estimation of the value in use of the cash-generating units to which such assets have been allocated. The value in use calculation requires management
to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The
Company reviews annually the carrying value of its intangible assets with indefinite lives and goodwill for impairment based on recognized valuation
techniques. While the Company believes that its estimates are reasonable, different assumptions regarding such estimates could materially affect its
evaluations. Impairment losses are recognized in current earnings in the period the related impairment is determined. The key assumptions used to
determine the recoverable amount for the Company’s CGUs, including a sensitivity analysis, are further explained in Notes 3.16 and 12.

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual
impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. When the carrying amount of an asset or CGU
exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If
no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share
prices for publicly traded subsidiaries or other available fair value indicators.

2.3.1.2 Useful lives of property, plant and equipment and intangible assets with defined useful lives
Property, plant and equipment, including returnable bottles as they are expected to provide benefits over a period of more than one year, as well
as intangible assets with defined useful lives are depreciated/amortized over their estimated useful lives. The Company bases its estimates on the
experience of its technical personnel as well as based on its experience in the industry for similar assets, see Notes 3.12, 3.14, 11 and 12.

2.3.1.3 Post-employment and other long-term employee benefits
The Company regularly evaluates the reasonableness of the assumptions used in its post-employment and other long-term employee benefit
computations. Information about such assumptions is described in Note 16.

2.3.1.4 Income taxes
Deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and the tax
basis of assets and liabilities. The Company regularly reviews its deferred tax assets for recoverability, and records a deferred tax asset based on its
judgment regarding the probability of historical taxable income continuing in the future, projected future taxable income and the expected timing of the
reversals of existing temporary differences, see Note 24.

2.3.1.5 Tax, labor and legal contingencies and provisions
The Company is subject to various claims and contingencies related to tax, labor and legal proceedings as described in Note 25. Due to their nature, such
legal proceedings involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties and governmental
actions. Management periodically assesses the probability of loss for such contingencies and accrues a provision and/or discloses the relevant
circumstances, as appropriate. If the potential loss of any claim or legal proceeding is considered probable and the amount can be reasonably estimated,
the Company accrues a provision for the estimated loss. Management’s judgement must be excercised to determine the likelihood of such a loss and an
estimate of the amount, due to the subjective nature of the loss.

2.3.1.6 Valuation of financial instruments
The Company is required to measure all derivative financial instruments at fair value.

The fair values of derivative financial instruments are determined considering quoted prices in recognized markets. If such instruments are not traded,
fair value is determined by applying techniques based upon technical models supported by sufficient reliable and verifiable data, recognized in the
financial sector. The Company bases its forward price curves upon market price quotations. Management believes that the chosen valuation techniques
and assumptions used are appropriate in determining the fair value of financial instruments, see Note 20.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO57

2.3.1.7 Business combinations
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair
value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Company, liabilities assumed by the Company
to the former owners of the acquiree and the equity interests issued by the Company in exchange for control of the acquiree.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, except that:

• Deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with

IAS 12, Income Taxes and IAS 19, Employee Benefits, respectively;

• Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the
Company entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2, Share-based Payment
at the acquisition date, see Note 3.24; and

• Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations

are measured in accordance with that Standard.

Management’s judgement must be exercised to determine the fair value of assets acquired and liabilities assumed.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the
fair value of the Company previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities
assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the
Company previously held interest in the acquiree (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.

For each business combination, with respect to the non-controlling present ownership interests in the acquiree that entitle their holders to a proportionate
share of net assets in liquidation, the Company elects whether to measure such interest at fair value or at the proportionate share of the acquiree’s
identifiable net assets.

2.3.1.8 Investments in associates
If the Company holds, directly or indirectly, 20 per cent or more of the voting power of the investee, it is presumed that it has significant influence, unless
it can be clearly demonstrated that this is not the case. If the Company holds, directly or indirectly, less than 20 per cent of the voting power of the
investee, it is presumed that the Company does not have significant influence, unless such influence can be clearly demonstrated. Decisions regarding
the propriety of utilizing the equity method of accounting for a less than 20 per cent-owned corporate investee requires a careful evaluation of voting
rights and their impact on the Company’s ability to exercise significant influence. Management considers the existence of the following circumstances
which may indicate that the Company is in a position to exercise significant influence over a less than 20 per cent-owned corporate investee:

• Representation on the board of directors or equivalent governing body of the investee;

• Participation in policy-making processes, including participation in decisions about dividends or other distributions;

• Material transactions between the Company and the investee;

•

Interchange of managerial personnel; or

• Provision of essential technical information.

Management also considers the existence and effect of potential voting rights that are currently exercisable or currently convertible when assessing
whether the Company has significant influence.

In addition, the Company evaluates certain indicators that provide evidence of significant influence, such as:

• Whether the extent of the Company’s ownership is significant relative to other shareholders (i.e., a lack of concentration of other shareholders);

• Whether the Company’s significant shareholders, fellow subsidiaries, or officers hold additional investment in the investee; and

• Whether the Company is a part of significant investee committees, such as the executive committee or the finance committee.

2.3.1.9 Joint arrangements
An arrangement can be a joint arrangement even though not all of its parties have joint control of the arrangement. When the Company is a party
to an arrangement it shall assess whether the contractual arrangement gives all the parties, or a group of the parties, control of the arrangement
collectively; joint control exists only when decisions about the relevant activities require the unanimous consent of the parties that control the
arrangement collectively. Management needs to apply judgment when assessing whether all the parties, or a group of the parties, have joint control of
an arrangement. When assessing joint control, management considers the following facts and circumstances:

a) Whether all the parties or a group of the parties, control the arrangement, considering definition of joint control, as described in Note 3.11.2; and

b) Whether decisions about the relevant activities require the unanimous consent of all the parties, or of a group of the parties.

As mentioned in Note 10, on January 25, 2013, Coca-Cola FEMSA closed the acquisition of 51% of Coca-Cola FEMSA Philippines, Inc (CCFPI) (formerly
Coca-Cola Bottlers Philippines, Inc.). Coca-Cola FEMSA jointly controls CCFPI with TCCC. This is based on the following factors: (i) during the initial four-
year period, some relevant activities require joint approval between Coca-Cola FEMSA and TCCC; and (ii) potential voting rights to acquire the remaining
49% of CCFPI are not likely to be exercised in the foreseeable future due to the fact that the call option is “out of the money” as of December 31, 2014
and 2013.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 201458

2.3.1.10 Venezuela exchange rates
As is further explained in Note 3.3 below, the exchange rate used to account for foreign currency denominated monetary items arising in Venezuela,
and also the exchange rate used to translate the financial statements of the Company’s Venezuelan subsidiary for group reporting purposes are both
key sources of estimation uncertainty in preparing the accompanying consolidated financial statements.

2.4 Changes in accounting policies
The Company has adopted the following new IFRS and amendments to IFRS, during 2014:

• Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities

• Amendments to IAS 36, Impairment of Assets

• Amendments to IAS 39, Financial Instruments: Recognition and Measurement

• Annual Improvements 2010-2012 Cycle

• Annual Improvements 2011-2013 Cycle

•

IFRIC 21, Levies

The nature and the effect of the changes are further explained below.

Amendments to IAS 32, Offsetting Financial Assets and Financial Liabilities
Amendments to IAS 32, “Offsetting Financial Assets and Financial Liabilities”, clarify existing application issues relating to the offsetting requirements.
Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realization and settlement’.
The amendments to IAS 32 are effective for annual periods beginning on or after January 1, 2014, with retrospective application required. The Company
adopted these amendments, which had no impact on its consolidated financial statements because the Company´s policy for offsetting financial
instruments was already in accordance with the amendments made to IAS 32.

Amendments to IAS 36, Impairment of Assets
Amendments to IAS 36 “Impairment of Assets”, reduce the circumstances in which the recoverable amount of assets or cash-generating units is
required to be disclosed, clarify the disclosures required, and introduce an explicit requirement to disclose the discount rate used in determining
impairment (or reversals) where recoverable amount (based on fair value less costs of disposal) is determined using a present value technique. The
amendments to IAS 36 are effective for annual periods beginning on or after January 1, 2014.

Amendments to IAS 39, Financial Instruments: Recognition and Measurement
Amendments to IAS 39 “Financial Instruments: Recognition and Measurement” clarify that there is no need to discontinue hedge accounting if a hedging
derivative is novated, provided certain criteria are met. A novation indicates an event where the original parties to a derivative agree that one or more
clearing counterparties replace their original counterparty to become the new counterparty to each of the parties. In order to apply the amendments
and continue hedge accounting, novation to a central counterparty (CCP) must happen as a consequence of laws or regulations or the introduction of
laws or regulations. The amendments to IAS 39 are effective for annual periods beginning on or after January 1, 2014. The Company adopted these
amendments and they had no impact on the Company´s consolidated financial statements because the Company did not have novated derivatives
designated as hedging instruments.

Annual Improvements 2010-2012 Cycle
Annual Improvements 2010-2012 Cycle includes amendments to: IFRS 2 “Share-based payment”, by amending the definitions of vesting condition
and market condition, and adding definitions for performance condition and service condition, had no impact on the Company´s consolidated financial
statements derived from these amended definitions; IFRS 3 “Business combinations”, which requires contingent consideration that is classified as an
asset or a liability to be measured at fair value at each reporting date, which the Company will apply to future business combinations; IFRS 13 “Fair value
measurement”, clarifying that issuing IFRS 13 and amending IFRS 9 and IAS 39 did not remove the ability to measure certain short-term receivables
and payables on an undiscounted basis when the discount amount is immaterial (amends basis for conclusions only), This improvement had no impact
because financial instruments that qualify as accounts receivable or accounts payable, when measured at fair value, approximate their carrying value
quantified on an undiscounted basis. These amendments are applicable to annual periods beginning on or after July 1, 2014.

Annual Improvements 2011-2013 Cycle
Annual Improvements 2011-2013 Cycle includes amendments to: IFRS 13, clarifying the scope of the portfolio exception of paragraph 52, which permits
an entity to measure the fair value of a group of financial assets and financial liabilities on the basis of the price that would be received to sell a net
long position for a particular risk exposure or to transfer a net short position for a particular risk exposure in an orderly transaction between market
participants at the measurement date under current market conditions. The amendments clarify that the portfolio exception in IFRS 13 can be applied
not only to financial assets and financial liabilities, but also to other contracts within the scope of IAS 39. These improvements are applicable to annual
periods beginning on or after July 1, 2014. The Company adopted these amendments and they had no impact on the Company´s consolidated financial
statements, because it has no instruments it manages on a net basis.

IFRIC 21, Levies
IFRIC 21 Levies, provides guidance on when to recognize a liability for a levy imposed by a government, both for levies that are accounted for in
accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets and those where the timing and amount of the levy is certain. This
interpretation is effective for accounting periods beginning on or after January 1, 2014, with early adoption permitted. The Company adopted this
interpretation and it had no impact on the financial statements because taxes other than income and consumption taxes are recorded at the time the
event giving rise to the payment obligation arises.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO59

Note 3. Significant Accounting Policies
3.1 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Control is achieved when the Company
is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over
the investee.

Specifically, the Company controls an investee if and only if the Company has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);

• Exposure, or rights, to variable returns from its involvement with the investee; and

• The ability to use its power over the investee to affect its returns.

When the Company has less than a majority of the voting or similar rights of an investee, the Company considers all relevant facts and circumstances
in assessing whether it has power over an investee, including:

• The contractual arrangements with the other vote holders of the investee;

• Rights arising from other contractual arrangements; and

• The Company’s voting rights and potential voting rights.

The Company re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses
control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated
financial statements from the date the Company gains control until the date the Company ceases to control the subsidiary.

Consolidated net income and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Company
and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made
to the financial statements of subsidiaries to bring their accounting policies into line with the Company’s accounting policies. All intercompany assets
and liabilities, equity, income, expenses and cash flows have been eliminated in full on consolidation.

3.1.1 Acquisitions of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is
recognized as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are measured at
carrying amount and reflected in shareholders’ equity as part of additional paid-in capital.

3.1.2 Loss of control
Upon the loss of control, the Company derecognizes the assets (including goodwill) and liabilities of the subsidiary, any non-controlling interests,
cumulative translation differences recorded in equity and the other components of equity related to the subsidiary. The Company recognizes the fair
value of the consideration received, and any surplus or deficit arising on the loss of control is recognized in consolidated net income, including the share
by the controlling interest of components previously recognized in other comprehensive income. If the Company retains any interest in the previous
subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for by the equity method or as a
financial asset depending on the level of influence retained.

3.2 Business combinations
Business combinations are accounted for using the acquisition method at the acquisition date, which is the date on which control is transferred to the
Company. In assessing control, the Company takes into consideration substantive potential voting rights.

The Company measures goodwill at the acquisition date as the fair value of the consideration transferred plus the fair value of any previously-held
equity interest in the acquiree and the recognized amount of any non-controlling interests in the acquiree (if any), less the net recognized amount of the
identifiable assets acquired and liabilities assumed. If after reassessment, the excess is negative, a bargain purchase gain is recognized in consolidated
net income at the time of the acquisition.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are recognized in
consolidated net income of the Company.

Costs related to the acquisition, other than those associated with the issuance of debt or equity securities, that the Company incurs in connection with
a business combination are expensed as incurred.

Any contingent consideration payable is recognized at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not
remeasured and settlement is accounted for within equity. Otherwise, if after reassessment, subsequent changes to the fair value of the contingent
considerations are recognized in consolidated net income.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company
reports provisional amounts for the items for which the accounting is incomplete, and discloses that its allocation is preliminary in nature. Those
provisional amounts are adjusted during the measurement period (not greater than 12 months), or additional assets or liabilities are recognized, to
reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts
recognized at that date.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 201460

3.3 Foreign currencies, consolidation of foreign subsidiaries and accounting for investments in associates and joint ventures
In preparing the financial statements of each individual subsidiary and accounting for investments in associates and joint ventures, transactions in
currencies other than the individual entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of
the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that
date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not remeasured.

Exchange differences on monetary items are recognized in consolidated net income in the period in which they arise except for:

• The variations in the net investment in foreign subsidiaries generated by exchange rate fluctuation which are included as part of the exchange

differences on translation of foreign operations within the cumulative other comprehensive income (loss) item, which is recorded in equity.

•

Intercompany financing balances with foreign subsidiaries are considered as long-term investments when there is no plan to pay such financing in the
foreseeable future. Monetary position and exchange rate fluctuation regarding this financing is recorded in the exchange differences on translation
of foreign operations within the cumulative other comprehensive income (loss) item, which is recorded in equity.

• Exchange differences on transactions entered into in order to hedge certain foreign currency risks.

For incorporation into the Company’s consolidated financial statements, each foreign subsidiary, associates or joint venture’s individual financial
statements are translated into Mexican pesos, as described as follows:

• For hyperinflationary economic environments, the inflation effects of the origin country are recognized, and subsequently translated into Mexican
pesos using the year-end exchange rate for the consolidated statements of financial position and consolidated income statement and comprehensive
income; and

• For non-hyperinflationary economic environments, assets and liabilities are translated into Mexican pesos using the year-end exchange rate, equity
is translated into Mexican pesos using the historical exchange rate, and the income statement and comprehensive income is translated using the
exchange rate at the date of each transaction. The Company uses the average exchange rate of each month only if the exchange rate does not
fluctuate significantly.

Country or
Zone

Guatemala
Costa Rica
Panama
Colombia
Nicaragua
Argentina
Venezuela
Brazil
Euro Zone
Philippines

Functional /
Recording
Currency

Quetzal
Colon
U.S. dollar
Colombian peso
Cordoba
Argentine peso
Bolivar
Reai
Euro (€)
Philippine peso

Exchange Rates of Local Currencies Translated to Mexican Pesos

Average Exchange Rate for

Exchange Rate as of

2014

1.72
0.02
13.30
0.01
0.51
1.64
1.28
5.66
17.66
0.30

2013

1.62
0.03
12.77
0.01
0.52
2.34
2.13
5.94
16.95
0.30

2012

1.68
0.03
13.17
0.01
0.56
2.90
3.06
6.76
16.92
0.31

December 31,
2014

December 31,
2013

1.94
0.03
14.72
0.01
0.55
1.72
0.29
5.54
17.93
0.33

1.67
0.03
13.08
0.01
0.52
2.01
2.08
5.58
17.98
0.29

The Company has operated under exchange controls in Venezuela since 2003 that affect its ability to remit dividends abroad or make payments other
than in local currencies and that may increase the real price of raw materials purchased in local currency. Cash balances of the Company’s Venezuela
subsidiary which are not readily available for use within the group are disclosed in Note 5.

As of December, 31, 2014, Venezuela´s entities were able to convert bolivars to U.S. dollars at one of three legal exchange rates:

i) The official exchange rate. Used for transactions involving what the Venezuelan government considers to be “essential goods and services”.

ii) SICAD I. Used for certain transactions, including payment of services and payments related to foreign investments in Venezuela, which were
transacted at the state-run Supplementary Foreign Currency Administration System (SICAD-I) exchange rate. The SICAD-I determined an alternative
exchange rate based on limited periodic sales of U.S. dollars through auction.

iii) SICAD II. The Venezuelan government enacted a new law in 2014 that authorized an additional method of exchanging Venezuelan bolivars to U.S.
dollars at rates other than either the official exchange rate or the SICAD-I exchange rate. SICAD-II was used for certain types of defined transactions
not otherwise covered by the official exchange rate or the SICAD-I exchange rate.

As of December 31, 2014, the official exchange rate was 6.30 bolivars per U.S. dollar (2.34 Mexican peso per bolivar), the SICAD-I exchange rate was
12.00 bolivars per U.S. dollar (1.23 Mexican peso per bolivar), and the SICAD-II exchange rate was 49.99 bolivars per U.S. dollar (0.29 Mexican peso
per bolivar).

The Company’s recognition of its Venezuela operations involves a two-step accounting process in order to translate into bolivars all transactions in a
different currency than the Venezuelan currency and then to translate to Mexican Pesos.

Step-one.- Transactions are first recorded in the stand-alone accounts of the Venezuelan subsidiary in its functional currency, that is the bolivars. Any
non-bolivar denominated monetary assets or liabilities are translated into bolivar at each balance sheet date using the exchange rate at which the
Company expects them to be settled, with the corresponding effect of such translation being recorded in the income statement.

As of December 31, 2014 Coca-Cola FEMSA had US $ 449 million in monetary liabilities recorded using the official exchange rate. The Company believes
that these payables for imports of essential goods should continue to qualify for settlement at the official exchange rate. If there is a change in the
official exchange rate in the future, or should we determine these amounts no longer qualify, we will recognize the impact of this change in the income
statement.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Step-two.- In order to integrate the results of the Venezuelan operations into the consolidated figures of the Company, such Venezuelan results are
translated from Venezuelan bolivars into Mexican pesos. During the first three quarters of 2014, the Company used SICAD-I exchange rate as the rate
for the translation of the Venezuelan amounts based on the expectation this would have been the exchange rate at which dividends will be settled.
During the fourth quarter, the Company decided to move from SICAD-I to SICAD-II exchange rate to reflect its revised estimate. In accordance with IAS 21
and given the fact that Venezuela is considered a hyper-inflationary economy, we have translated the results for the entire year using SICAD II exchange
rate. Prior to 2014, the Company used the official exchange rate of 6.30 and 4.30 bolivars per U.S. dollar in 2013 and 2012, respectively.

As a result of the change in exchange rate applied to translate financial statements during 2014 and the devaluation of Bolivar in 2013, the statement
of financial position reflects a reduction in equity of Ps. 11,836 and Ps. 3,700, respectively. These reductions in equity are presented as part of other
comprehensive income.

Official exchange rates for Argentina are published by the Argentine Central Bank. The Argentine peso has experienced significant devaluation over the
past several years and the government has adopted various rules and regulations since late 2011 that established new restrictive controls on capital
flows into the country. These enhanced exchange controls have practically closed the foreign exchange market to retail transactions. It is widely
reported that the Argentine peso/U.S. dollar exchange rate in the unofficial market substantially differs from the official foreign exchange rate. The
Argentine government could impose further exchange controls or restrictions on the movement of capital and take other measures in the future in
response to capital flight or a significant depreciation of the Argentine peso. The Company uses the official exchange rate.

On the disposal of a foreign operation (i.e., a disposal of the Company’s entire interest in a foreign operation, or a disposal involving loss of control
over a subsidiary that includes a foreign operation, a disposal involving loss of joint control over a joint venture that includes a foreign operation, or a
disposal involving loss of significant influence over an associate that includes a foreign operation), all of the exchange differences accumulated in other
comprehensive income in respect of that operation attributable to the owners of the Company are recognized in the consolidated income statement.

In addition, in relation to a partial disposal of a subsidiary that does not result in the Company losing control over the subsidiary, the proportionate
share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognized in profit or loss. For all other partial
disposals (i.e., partial disposals of associates or joint ventures that do not result in the Company losing significant influence or joint control), the
proportionate share of the accumulated exchange differences is reclassified to profit or loss.

Goodwill and fair value adjustments on identifiable assets and liabilities acquired arising on the acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Foreign exchange differences
arising are recognized in equity as part of the cumulative translation adjustment.

The translation of assets and liabilities denominated in foreign currencies into Mexican pesos is for consolidation purposes and does not indicate that the
Company could realize or settle the reported value of those assets and liabilities in Mexican pesos. Additionally, this does not indicate that the Company
could return or distribute the reported Mexican peso value equity to its shareholders.

3.4 Recognition of the effects of inflation in countries with hyperinflationary economic environments
The Company recognizes the effects of inflation on the financial information of its Venezuelan subsidiary that operates in hyperinflationary economic
environments (when cumulative inflation of the three preceding years is approaching, or exceeds, 100% or more in addition to other qualitative factors),
which consists of:

• Using inflation factors to restate non-monetary assets, such as inventories, property, plant and equipment, intangible assets, including related costs

and expenses when such assets are consumed or depreciated;

• Applying the appropriate inflation factors to restate capital stock, additional paid-in capital, net income, retained earnings and items of other
comprehensive income by the necessary amount to maintain the purchasing power equivalent in the currency of Venezuela on the dates such capital
was contributed or income was generated up to the date of these consolidated financial statements are presented; and

•

Including the monetary position gain or loss in consolidated net income.

The Company restates the financial information of subsidiaries that operate in a hyperinflationary economic environment (Venezuela) using the
consumer price index of that country. The Venezuelan economy’s cumulative inflation rate for the period 2012-2014, 2011-2013 and 2010-2012 was
210.2%, 139.3% and 94.8%; respectively. While the inflation rate for the period 2010-2012 was less than 100%, it was approaching 100%, and
qualitative factors supported its continued classification as a hyper-inflationary economy.

During 2014, the International Monetary Fund (IMF) issued a declaration of censure and called on Argentina to adopt remedial measures to address the
quality of its official inflation data. The IMF noted that alternative data sources have shown considerably higher inflation rates than the official data
since 2008. Consumer price data reported by Argentina from January 2014 onwards reflect the new national CPI (IPCNu), which differs substantively
from the preceding CPI. Because of the differences in geographical coverage, weights, sampling, and methodology, the IPCNu data cannot be directly
compared to the earlier CPI-GBA data.

3.5 Cash and cash equivalents and restricted cash
Cash is measured at nominal value and consists of non-interest bearing bank deposits. Cash equivalents consist principally of short-term bank deposits
and fixed rate investments, both with maturities of three months or less at the acquisition date and are recorded at acquisition cost plus interest income
not yet received, which is similar to market prices.

The Company also maintains restricted cash held as collateral to meet certain contractual obligations (see Note 9.2). Restricted cash is presented
within other current financial assets given that the restrictions are short-term in nature.

3.6 Financial assets
Financial assets are classified into the following specified categories: “fair value through profit or loss (FVTPL) ,” “held-to-maturity investments,”
“available-for-sale” and “loans and receivables” or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The
classification depends on the nature and purpose of holding the financial assets and is determined at the time of initial recognition.

When a financial asset is recognized initially, the Company measures it at its fair value plus, in the case of a financial asset not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition of the financial asset.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 201462

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their economic best interest.

The Company’s financial assets include cash, cash equivalents and restricted cash, investments with maturities of greater than three months, loans and
receivables, derivative financial instruments and other financial assets.

3.6.1 Effective interest rate method
The effective interest rate method is a method of calculating the amortized cost of loans and receivables and other financial assets (designated as held
to-maturity) and of allocating interest income/expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated
future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the financial asset, or (where appropriate) a shorter period, to the net carrying amount on initial
recognition.

3.6.2 Investments
Investments consist of debt securities and bank deposits with maturities of more than three months at the acquisition date. Management determines
the appropriate classification of investments at the time of purchase and assesses such designation as of each reporting date (see Note 6).

3.6.2.1 Available-for-sale investments are those non-derivative financial assets that are designated as available for sale or are not classified as loans
and receivables, held to maturity investments or financial assets at fair value through profit or loss. These investments are carried at fair value, with
the unrealized gains and losses, net of tax, reported in other comprehensive income. Interest and dividends on investments classified as available-for-
sale are included in interest income. The fair values of the investments are readily available based on quoted market prices. The exchange effects of
securities available for sale are recognized in the consolidated income statement in the period in which they arise.

3.6.2.2 Held-to maturity investments are those that the Company has the positive intent and ability to hold to maturity, and after initial measurement,
such financial assets are subsequently measured at amortized cost, which includes any cost of purchase and premium or discount related to the
investment. Subsequently, the premium/discount is amortized over the life of the investment based on its outstanding balance utilizing the effective
interest method less any impairment. Interest and dividends on investments classified as held-to maturity are included in interest income.

3.6.3 Loans and receivables
Loans and receivables are non-derivative financial instruments with fixed or determinable payments that are not quoted in an active market. Loans and
receivables with a stated term (including trade and other receivables) are measured at amortized cost using the effective interest method, less any
impairment.

Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be
immaterial. For the years ended December 31, 2014, 2013 and 2012 the interest income on loans and receivables recognized in the interest income line
item within the consolidated income statements is Ps. 47, Ps. 127 and Ps. 87, respectively.

3.6.4 Other financial assets
Other financial assets include long term accounts receivable and derivative financial instruments. Long term accounts receivable with a stated term are
measured at amortized cost using the effective interest method, less any impairment.

3.6.5 Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are
considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the
financial asset, (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial assets that can be
reliably estimated.

Evidence of impairment may include indicators as follows:

• Significant financial difficulty of the issuer or counterparty; or

• Default or delinquent in interest or principal payments; or

•

It becoming probable that the borrower will enter bankruptcy or financial re-organization; or

• The disappearance of an active market for that financial asset because of financial difficulties.

For financial assets carried at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and
the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables,
where the carrying amount is reduced through the use of an allowance for doubtful accounts. When a trade receivable is considered uncollectible, it
is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account.
Changes in the carrying amount of the allowance account are recognized in consolidated net income.

No impairment was recognized for the years ended December 31, 2014 and 2013. For the year ended December 31, 2012, the Company recognized
impairment of Ps. 384 (see Note 19).

3.6.6 Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:

• The rights to receive cash flows from the financial asset have expired, or

• The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and
rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO63

3.6.7 Offsetting of financial instruments
Financial assets are required to be offset against financial liabilities and the net amount reported in the consolidated statement of financial position if,
and only when the Company:

• Currently has an enforceable legal right to offset the recognized amounts; and

•

Intends to settle on a net basis, or to realize the assets and settle the liabilities simultaneously.

3.7 Derivative financial instruments
The Company is exposed to different risks related to cash flows, liquidity, market and third party credit. As a result, the Company contracts different
derivative financial instruments in order to reduce its exposure to the risk of exchange rate fluctuations between the Mexican peso and other currencies,
and interest rate fluctuations associated with its borrowings denominated in foreign currencies and the exposure to the risk of fluctuation in the costs
of certain raw materials.

The Company values and records all derivative financial instruments and hedging activities, in the consolidated statement of financial position as either
an asset or liability measured at fair value, considering quoted prices in recognized markets. If such instruments are not traded in a formal market, fair
value is determined by applying techniques based upon technical models supported by sufficient, reliable and verifiable market data. Changes in the
fair value of derivative financial instruments are recorded each year in current earnings or as a component of cumulative other comprehensive income
based on the item being hedged and the effectiveness of the hedge.

3.7.1 Hedge accounting
The Company designates certain hedging instruments, which include derivatives in respect of foreign currency risk, as either fair value hedges or cash
flow hedges. Hedges of foreign exchange risk on firm commitments are accounted for as cash flow hedges.

At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged item, along with its
risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing
basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item
attributable to the hedged risk.

3.7.2 Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in other comprehensive
income and accumulated under the heading valuation of the effective portion of derivative financial instruments. The gain or loss relating to the
ineffective portion is recognized immediately in consolidated net income, and is included in the market value (gain) loss on financial instruments line item
within the consolidated income statements.

Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to consolidated net income in the periods
when the hedged item is recognized in consolidated net income, in the same line of the consolidated income statement as the recognized hedged item.
However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses
previously recognized in other comprehensive income and accumulated in equity are transferred from equity and included in the initial measurement of
the cost of the non-financial asset or non-financial liability.

Hedge accounting is discontinued when the Company revokes the hedging relationship, when the hedging instrument expires or is sold, terminated, or
exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognized in cumulative other comprehensive income in equity at that
time remains in equity and is recognized when the forecast transaction is ultimately recognized in consolidated net income. When a forecast transaction
is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in consolidated net income.

3.7.3 Fair value hedges
The change in the fair value of a hedging derivative is recognized in the consolidated income statement as foreign exchange gain or loss. The change in
the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item and is also recognized in
the consolidated income statement as foreign exchange gain or loss.

For fair value hedges relating to items carried at amortized cost, any adjustment to carrying value is amortized through profit or loss over the remaining
term of the hedge using the EIR method. EIR amortization may begin as soon as an adjustment exists and no later than when the hedged item ceases to
be adjusted for changes in its fair value attributable to the risk being hedged. If the hedged item is derecognized, the unamortized fair value is recognized
immediately in profit or loss.

When an unrecognized firm commitment is designated as a hedged item, the subsequent cumulative change in the fair value of the firm commitment
attributable to the hedged risk is recognized as an asset or liability with a corresponding gain or loss recognized in the consolidated net income.

3.8 Fair value measurement
The Company measures financial instruments, such as derivatives, and non-financial assets, at fair value at each balance sheet date. Also, fair values
of financial instruments measured at amortized cost are disclosed in Notes 13 and 18.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place
either:

•

In the principal market for the asset or liability; or

•

In the absence of a principal market, in the most advantageous market for the asset or liability.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in
its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 201464

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy,
described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the

measurement date.

• Level 2 — Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 — Are unobservable inputs for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable
inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred
between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.

The Company determines the policies and procedures for both recurring fair value measurements, such as those described in Note 20 and unquoted
liabilities such as debt described in Note 18.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and
risks of the asset or liability and the level of the fair value hierarchy as explained above.

3.9 Inventories and cost of goods sold
Inventories are measured at the lower of cost and net realizable value. Net realizable value represents the estimated selling price for inventories less
all estimated costs of completion and costs necessary to make the sale.

Inventories represent the acquisition or production cost which is incurred when purchasing or producing a product, and are based on the weighted
average cost formula. The operating segments of the Company use inventory costing methodologies to value their inventories, such as the weighted
average cost method in Coca-Cola FEMSA and retail method in FEMSA Comercio.

Cost of goods sold is based on average cost of the inventories at the time of sale.

Cost of goods sold in Coca-Cola FEMSA includes expenses related to the purchase of raw materials used in the production process, as well as labor
costs (wages and other benefits), depreciation of production facilities, equipment and other costs, including fuel, electricity, equipment maintenance,
inspection and plant transfers costs.

Cost of goods sold in FEMSA Comercio includes expenses related to the purchase of goods and services used in the sale process of the Company´s
products.

3.10 Other current assets
Other current assets, which will be realized within a period of less than one year from the reporting date, are comprised of prepaid assets and
agreements with customers.

Prepaid assets principally consist of advances to suppliers of raw materials, advertising, promotional, leasing and insurance costs, and are recognized
as other current assets at the time of the cash disbursement. Prepaid assets are carried to the appropriate caption in the income statement when
inherent benefits and risks have already been transferred to the Company or services have been received.

The Company has prepaid advertising costs which consist of television and radio advertising airtime paid in advance. These expenses are generally
amortized over the period based on the transmission of the television and radio spots. The related production costs are recognized in consolidated net
income as incurred.

Coca-Cola FEMSA has agreements with customers for the right to sell and promote Coca-Cola FEMSA’s products over a certain period. The majority of
these agreements have terms of more than one year, and the related costs are amortized using the straight-line method over the term of the contract,
with amortization presented as a reduction of net sales. During the years ended December 31, 2014, 2013 and 2012, such amortization aggregated to
Ps. 338, Ps. 696 and Ps. 970, respectively.

3.11 Investments in associates and joint arrangements

3.11.1 Investments in associates
Associates are those entities over which the Company has significant influence. Significant influence is the power to participate in the financial and
operating policy decisions of the investee, but is not control over those policies.

Investments in associates are accounted for using the equity method and initial recognition comprises the investment’s purchase price and any directly
attributable expenditure necessary to acquire it.

The consolidated financial statements include the Company’s share of the consolidated net income and other comprehensive income, after adjustments
to align the accounting policies with those of the Company, from the date that significant influence commences until the date that significant influence
ceases.

Profits and losses resulting from ‘upstream’ and ‘downstream’ transactions between the Company (including its consolidated subsidiaries) and an
associate are recognized in the consolidated financial statements only to the extent of unrelated investors’ interests in the associate. ‘Upstream’
transactions are, for example, sales of assets from an associate to the Company. ‘Downstream’ transactions are, for example, sales of assets from the
Company to an associate. The Company’s share in the associate’s profits and losses resulting from these transactions is eliminated.

When the Company’s share of losses exceeds the carrying amount of the associate, including any long-term investments, the carrying amount is
reduced to nil and recognition of further losses is discontinued except to the extent that the Company has a legal or constructive obligation to pay the
associate or has made payments on behalf of the associate.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO65

Goodwill identified at the acquisition date is presented as part of the investment in shares of the associate in the consolidated statement of financial
position. Any goodwill arising on the acquisition of the Company’s interest in an associate is measured in accordance with the Company’s accounting
policy for goodwill arising in a business combination, see Note 3.2.

After application of the equity method, the Company determines whether it is necessary to recognize an additional impairment loss on its investment
in its associate. The Company determines at each reporting date whether there is any objective evidence that the investment in the associates is
impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and
its carrying value, and recognizes the amount in the share of the profit or loss of associates and joint ventures accounted for using the equity method
in the consolidated income statements.

3.11.2 Joint arrangements
A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Company
classifies its interests in joint arrangements as either joint operations or joint ventures depending on the Company’s rights to the assets and obligations
for the liabilities of the arrangements.

Joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
The Company recognizes its interest in the joint ventures as an investment and accounts for that investment using the equity method, as described in
Note 3.11.1. As of December 31, 2014 and 2013 the Company does not have an interest in joint operations.

After application of the equity method, the Company determines whether it is necessary to recognize an impairment loss on its investment in its joint
venture. The Company determines at each reporting date whether there is any objective evidence that the investment in the joint ventures is impaired.
If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the joint venture and its
carrying value and recognizes the amount in the share of the profit or loss of joint ventures accounted for using the equity method in the consolidated
statements of income.

3.12 Property, plant and equipment
Property, plant and equipment are initially recorded at their cost of acquisition and/or construction, and are presented net of accumulated depreciation
and/or accumulated impairment losses, if any. The borrowing costs related to the acquisition or construction of qualifying asset is capitalized as part
of the cost of that asset.

Major maintenance costs are capitalized as part of total acquisition cost. Routine maintenance and repair costs are expensed as incurred.

Investments in progress consist of long-lived assets not yet in service, in other words, that are not yet used for the purpose that they were bought, built
or developed. The Company expects to complete those investments during the following 12 months.

Depreciation is computed using the straight-line method over the asset’s estimated useful life. Where an item of property, plant and equipment
comprises major components having different useful lives, they are accounted and depreciated for as separate items (major components) of property,
plant and equipment. The Company estimates depreciation rates, considering the estimated useful lives of the assets.

The estimated useful lives of the Company’s principal assets are as follows:

Buildings
Machinery and equipment
Distribution equipment
Refrigeration equipment
Returnable bottles
Leasehold improvements
Information technology equipment
Other equipment

Years

15-50
10-20
7-15
5-7
1.5-3
The shorter of lease term or 15 years
3-5
3-10

The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in
estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued
use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sales proceeds (if any) and the carrying amount of the asset and is recognized in consolidated net income.

Returnable and non-returnable bottles:
Coca-Cola FEMSA has two types of bottles: returnable and non-returnable.

• Non returnable: Are recorded in consolidated net income at the time of product sale.

• Returnable: Are classified as long-lived assets as a component of property, plant and equipment. Returnable bottles are recorded at acquisition cost;
and for countries with hyperinflationary economies, restated according to IAS 29, “Financial Reporting in Hyperinflationary Economies.” Depreciation
of returnable bottles is computed using the straight-line method considering their estimated useful lives.

There are two types of returnable bottles:

• Those that are in Coca-Cola FEMSA’s control within its facilities, plants and distribution centers; and

• Those that have been placed in the hands of customers, but still belong to Coca-Cola FEMSA.

Returnable bottles that have been placed in the hands of customers are subject to an agreement with a retailer pursuant to which Coca-Cola FEMSA
retains ownership. These bottles are monitored by sales personnel during periodic visits to retailers and Coca-Cola FEMSA has the right to charge any
breakage identified to the retailer. Bottles that are not subject to such agreements are expensed when placed in the hands of retailers.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Coca-Cola FEMSA’s returnable bottles are depreciated according to their estimated useful lives (3 years for glass bottles and 1.5 years for PET bottles).
Deposits received from customers are amortized over the same useful estimated lives of the bottles.

3.13 Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a
substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially
ready for their intended use or sale. Borrowing costs may include:

•

Interest expense; and

• Exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs.

Interest income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the
borrowing costs eligible for capitalization.

All other borrowing costs are recognized in consolidated net income in the period in which they are incurred.

3.14 Intangible assets
Intangible assets are identifiable non monetary assets without physical substance and represent payments whose benefits will be received in future
years. Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination
is their fair value as at the date of acquisition (see Note 3.2). Following initial recognition, intangible assets are carried at cost less any accumulated
amortization and accumulated impairment losses. The useful lives of intangible assets are assessed as either finite or indefinite, in accordance with the
period over which the Company expects to receive the benefits.

Intangible assets with finite useful lives are amortized and mainly consist of:

•

Information technology and management system costs incurred during the development stage which are currently in use. Such amounts are
capitalized and then amortized using the straight-line method over their expected useful lives, with a range in useful lives from 3 to 10 years.
Expenses that do not fulfill the requirements for capitalization are expensed as incurred.

• Long-term alcohol licenses are amortized using the straight-line method over their estimated useful lives, which range between 12 and 15 years, and

are presented as part of intangible assets with finite useful lives.

Amortized intangible assets, such as finite lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset or group of assets may not be recoverable through its expected future cash flows.

Intangible assets with an indefinite life are not amortized and are subject to impairment tests on an annual basis as well as whenever certain
circumstances indicate that the carrying amount of those intangible assets exceeds their recoverable value.

The Company’s intangible assets with an indefinite life mainly consist of rights to produce and distribute Coca-Cola trademark products in the Company’s
territories. These rights are contained in agreements that are standard contracts that The Coca-Cola Company has with its bottlers.

As of December 31, 2014, Coca-Cola FEMSA had nine bottler agreements in Mexico: (i) the agreements for Mexico’s Valley territory, which expire in
April 2016 and June 2023, (ii) the agreements for the Central territory, which expire in March 2015 (two agreements), May 2015 and July 2016, (iii) the
agreement for the Northeast territory, which expires in March 2015 (iv) the agreement for the Bajio territory, which expires in May 2015, and (v) the
agreement for the Southeast territory, which expires in June 2023. As of December 31, 2014, Coca-Cola FEMSA had four bottler agreements in Brazil,
two expiring in October 2017 and the other two expiring in April 2024. The bottler agreements with The Coca-Cola Company will expire for territories
in other countries as follows: Argentina in September 2024; Colombia in June 2024; Venezuela in August 2016; Guatemala in March 2025; Costa Rica
in September 2017; Nicaragua in May 2016 and Panama in November 2024. All of these bottler agreements are automatically renewable for ten-year
terms, subject to the right of either party to give prior notice that it does not wish to renew the applicable agreement. In addition, these agreements
generally may be terminated in the case of material breach. Termination would prevent Coca-Cola FEMSA from selling Coca-Cola trademark beverages
in the affected territory and would have an adverse effect on the Company´s business, financial conditions, results from operations and prospects.

3.15 Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction
rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group)
is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition
as a completed sale within one year from the date of classification.

When the Company is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified
as held for sale when the criteria described above are met, regardless of whether the Company will retain a non-controlling interest in its former
subsidiary after the sale.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less
costs to sell.

3.16 Impairment of non financial assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company
estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can
be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest CGUs for which a reasonable and
consistent allocation basis can be identified.

For goodwill and other indefinite lived intangible assets, the Company tests for impairment on an annual basis and whenever certain circumstances
indicate that the carrying amount of the cash generating unit might exceed its recoverable amount.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO67

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced
to its recoverable amount. An impairment loss is recognized immediately in consolidated net income.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in consolidated net income. Impairment
losses related to goodwill are not reversible.

For the year ended December 31, 2014, the Company recognized impairment of Ps. 145 (see Note 19). No impairment was recognized for the years
ended December 31, 2013 and 2012.

3.17 Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfillment
of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not
explicitly specified in an arrangement.

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All
other leases are classified as operating leases.

Assets held under finance leases are initially recognized as assets of the Company at their fair value at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position
as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a
constant rate of interest on the remaining balance of the liability. Interest expenses are recognized immediately in consolidated net income, unless they
are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on borrowing costs.
Contingent rentals are recognized as expenses in the periods in which they are incurred. Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more
representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases
are recognized as an expense in the period in which they are incurred. In the event that lease incentives are received to enter into operating leases, such
incentives are recognized as a liability. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis, except
where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Leasehold
improvements on operating leases are amortized using the straight-line method over the shorter of either the useful life of the assets or the related
lease term.

3.18 Financial liabilities and equity instruments

3.18.1 Classification as debt or equity
Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial liability and an equity instrument.

3.18.2 Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Company are recognized at the proceeds received, net of direct issue costs.

Repurchase of the Company’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the
purchase, sale, issue or cancellation of the Company’s own equity instruments.

3.18.3 Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at FVTPL, loans and borrowings, or as derivatives designated as hedging
instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value less, in the case of loans and borrowings, directly attributable transaction costs.

The Company financial liabilities include trade and other payables, loans and borrowings, and derivative financial instruments, see Note 3.7.

Subsequent measurement
The measurement of financial liabilities depends on their classification as described below.

3.18.4 Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Gains
and losses are recognized in the consolidated income statements when the liabilities are derecognized as well as through the effective interest method
amortization process.

Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective
interest method. The effective interest method amortization is included in interest expense in the consolidated income statements, see Note 18.

3.18.5 Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective
carrying amounts is recognized in the consolidated income statements.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 201468

3.19 Provisions
Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company
will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting
period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle
the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as
an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

The Company recognizes a provision for a loss contingency when it is probable (i.e., the probability that the event will occur is greater than the probability
that it will not) that certain effects related to past events, would materialize and can be reasonably quantified. These events and their financial impact
are also disclosed as loss contingencies in the consolidated financial statements when the risk of loss is deemed to be other than remote. The Company
does not recognize an asset for a gain contingency until the gain is realized, see Note 25.

Restructuring provisions are recognized only when the recognition criteria for provisions are fulfilled. The Company has a constructive obligation when
a detailed formal plan identifies the business or part of the business concerned, the location and number of employees affected, a detailed estimate of
the associated costs, and an appropriate timeline. Furthermore, the employees affected must have been notified of the plan’s main features.

3.20 Post-employment and other long-term employee benefits
Post-employment and other long-term employee benefits, which are considered to be monetary items, include obligations for pension and retirement
plans, seniority premiums and postretirement medical services, are all based on actuarial calculations, using the projected unit credit method.

In Mexico, the economic benefits from employee benefits and retirement pensions are granted to employees with 10 years of service and minimum age
of 60. In accordance with Mexican Labor Law, the Company provides seniority premium benefits to its employees under certain circumstances. These
benefits consist of a one-time payment equivalent to 12 days wages for each year of service (at the employee’s most recent salary, but not to exceed
twice the legal minimum wage), payable to all employees with 15 or more years of service, as well as to certain employees terminated involuntarily
prior to the vesting of their seniority premium benefit. For qualifying employees, the Company also provides certain post-employment healthcare
benefits such as the medical-surgical services, pharmaceuticals and hospital.

For defined benefit retirement plans and other long-term employee benefits, such as the Company’s sponsored pension and retirement plans, seniority
premiums and postretirement medical service plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial
valuations being carried out at the end of each reporting period. All remeasurements of the Company’s defined benefit obligation such as actuarial gains
and losses are recognized directly in other comprehensive income (“OCI”). The Company presents service costs within cost of goods sold, administrative
and selling expenses in the consolidated income statements. The Company presents net interest cost within interest expense in the consolidated income
statements. The projected benefit obligation recognized in the consolidated statement of financial position represents the present value of the defined
benefit obligation as of the end of each reporting period. Certain subsidiaries of the Company have established plan assets for the payment of pension
benefits, seniority premiums and postretirement medical services through irrevocable trusts of which the employees are named as beneficiaries, which
serve to increase the funded status of such plans’ related obligations.

Costs related to compensated absences, such as vacations and vacation premiums, are recognized on an accrual basis. Cost for mandatory severance
benefits are recorded as incurred.

The Company recognizes a liability and expense for termination benefits at the earlier of the following dates:

a) When it can no longer withdraw the offer of those benefits; or

b) When it recognizes costs for a restructuring that is within the scope of IAS 37 “Provisions, Contingent Liabilities and Contingent Assets,” and involves

the payment of termination benefits.

The Company is demonstrably committed to a termination when, and only when, the entity has a detailed formal plan for the termination and is without
realistic possibility of withdrawal.

A settlement occurs when an employer enters into a transaction that eliminates all further legal of constructive obligations for part or all of the
benefits provided under a defined benefit plan. A curtailment arises from an isolated event such as closing of a plant, discontinuance of an operation
or termination or suspension of a plan. Gains or losses on the settlement or curtailment of a defined benefit plan are recognized when the settlement
or curtailment occurs.

During 2014, the Company settled its pension plan in Brazil and consequently recognized the corresponding effects of the settlement on the results of
the current period, refer to Note 16.

3.21 Revenue recognition
Sales of products are recognized as revenue upon delivery to the customer, and once all the following conditions are satisfied:

• The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

• The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the

goods sold;

• The amount of revenue can be measured reliably;

•

It is probable that the economic benefits associated with the transaction will flow to the Company; and

• The costs incurred or to be incurred in respect of the transaction can be measured reliably.

All of the above conditions are typically met at the point in time that goods are delivered to the customer at the customers’ facilities. Net sales reflect
units delivered at list prices reduced by promotional allowances, discounts and the amortization of the agreements with customers to obtain the rights
to sell and promote the Company’s products.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO69

Rendering of services and other
Revenue arising from services of sales of waste material and packing of raw materials are recognized in the other operating revenues caption in the
consolidated income statement.

The Company recognized these transactions as revenues in accordance with the requirements established in the IAS 18 “Revenue” for delivery of goods
and rendering of services, which are:

a) The amount of revenue can be measured reliably;

b) It is probable that the economic benefits associated with the transaction will flow to the entity.

Interest income
Revenue arising from the use by others of entity assets yielding interest is recognized once all the following conditions are satisfied:

• The amount of the revenue can be measured reliably; and

•

It is probable that the economic benefits associated with the transaction will flow to the entity.

For all financial instruments measured at amortized cost and interest bearing financial assets classified as available for sale, interest income is recorded
using the effective interest rate (“EIR”), which is the rate that exactly discounts the estimated future cash or receipts through the expected life of the
financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset. The related interest income is included in
the consolidated income statements.

3.22 Administrative and selling expenses
Administrative expenses include labor costs (salaries and other benefits, including employee profit sharing “PTU”) of employees not directly involved in
the sale or production of the Company’s products, as well as professional service fees, the depreciation of office facilities, amortization of capitalized
information technology system implementation costs and any other similar costs.

Selling expenses include:

• Distribution: labor costs (salaries and other related benefits), outbound freight costs, warehousing costs of finished products, write off of returnable
bottles in the distribution process, depreciation and maintenance of trucks and other distribution facilities and equipment. For the years ended
December 31, 2014, 2013 and 2012, these distribution costs amounted to Ps. 19,236, Ps. 17,971 and Ps. 16,839, respectively;

• Sales: labor costs (salaries and other benefits, including PTU) and sales commissions paid to sales personnel; and

• Marketing: labor costs (salaries and other benefits), promotional expenses and advertising costs.

PTU is paid by the Company’s Mexican and Venezuelan subsidiaries to its eligible employees. In Mexico, employee profit sharing is computed at the
rate of 10% of the individual company taxable income, except for considering cumulative dividends received from resident legal persons in Mexico,
depreciation of historical rather tax restated values, foreign exchange gains and losses, which are not included until the asset is disposed of or the
liability is due and other effects of inflation are also excluded. As of January 1, 2014, PTU in Mexico will be calculated from the same taxable income for
income tax, except for the following: a) neither tax losses from prior years nor the PTU paid during the year are deductible; and b) payments exempt
from taxes for the employees are fully deductible in the PTU computation.

In Venezuela, employee profit sharing is computed at a rate equivalent to 15% of after tax income, and it is no more than four months of salary.

3.23 Income taxes
Income tax expense represents the sum of the tax currently payable and deferred tax. Income taxes are charged to consolidated net income as they
are incurred, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and
deferred tax are also recognized in other comprehensive income or directly in equity, respectively.

3.23.1 Current income taxes
Income taxes are recorded in the results of the year they are incurred.

3.23.2 Deferred income taxes
Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements
and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary
differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits
will be available against which those deductible temporary differences can be utilized and if any, future benefits from tax loss carry forwards and
certain tax credits. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from initial recognition of goodwill (no
recognition of deferred tax liabilities) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit, except in the case of Brazil, where certain goodwill amounts are at times deductible
for tax purposes.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, associates, and interests in joint
ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests
are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary
differences and they are expected to reverse in the foreseeable future.

Deferred income taxes are classified as a long-term asset or liability, regardless of when the temporary differences are expected to reverse.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 201470

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset
realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of
deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the
reporting period, to recover or settle the carrying amount of its assets and liabilities.

In Mexico, the income tax rate is 30% for 2012, 2013 and 2014, and as result of Mexican Tax Reform for 2014, it will remain at 30% for the following
years (see Note 24).

3.24 Share-based payments arrangements
Senior executives of the Company receive remuneration in the form of share-based payment transactions, whereby employees render services as
consideration for equity instruments. The equity instruments are granted and then held by a trust controlled by the Company until vesting. They are
accounted for as equity settled transactions. The award of equity instruments is a fixed monetary value on grant date.

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date. The fair value determined
at the grant date of the equity-settled share-based payments is expensed and recognized based on the graded vesting method over the vesting period,
based on the Company’s estimate of equity instruments that will eventually vest. At the end of each reporting period, the Company revises its estimate
of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognized in consolidated net
income such that the cumulative expense reflects the revised estimate.

3.25 Earnings per share
The Company presents basic and diluted earnings per share (EPS) data for its shares. Basic EPS is calculated by dividing the net income attributable
to controlling interest by the weighted average number of shares outstanding during the period adjusted for the weighted average of own shares
purchased in the year. Diluted EPS is determined by adjusting the weighted average number of shares outstanding including the weighted average of
own shares purchased in the year for the effects of all potentially dilutive securities, which comprise share rights granted to employees described
above.

3.26 Issuance of subsidiary stock
The Company recognizes the issuance of a subsidiary’s stock as an equity transaction. The difference between the book value of the shares issued and
the amount contributed by the non-controlling interest holder or third party is recorded as additional paid-in capital.

Note 4. Mergers, Acquisitions and Disposals
4.1 Mergers and acquisitions
The Company had certain business mergers and acquisitions that were recorded using the acquisition method of accounting. The results of the acquired
operations have been included in the consolidated financial statements since the date on which the Company obtained control of the business, as
disclosed below. Therefore, the consolidated income statements and the consolidated statements of financial position in the years of such acquisitions
are not comparable with previous periods. The consolidated statements of cash flows for the years ended December 31, 2013 and 2012 show the
merged and acquired operations net of the cash related to those mergers and acquisitions. For the year ended December 31, 2014, the Company did
not have any acquisitions or mergers.

While the acquired companies disclosed below, from note 4.1.1 to note 4.1.4, represent bottlers of Coca-Cola trademarked beverages, such entities were
not under common ownership control prior to their acquisition.

4.1.1 Acquisition of Grupo Spaipa
On October 29, 2013, Coca-Cola FEMSA through its Brazilian subsidiary Spal Industria Brasileira de Bebidas, S.A. completed the acquisition of 100%
of Grupo Spaipa. Grupo Spaipa is comprised of the bottler entity Spaipa, S.A. Industria Brasileira de Bebidas and three Holding Companies (collectively
“Spaipa”) and was acquired for Ps. 26,856 in an all cash transaction. Spaipa was a bottler of Coca-Cola trademark products which operated mainly in
Sao Paulo and Paraná, Brazil. This acquisition was made to reinforce Coca-Cola FEMSA’s leadership position in Brazil. Transaction related costs of Ps.
8 were expensed by the Company as incurred, and recorded as a component of administrative expenses in the accompanying consolidated income
statements. Spaipa was included in operating results from November 2013.

The fair value of Grupo Spaipa’s net assets acquired is as follows:

Total current assets (including cash acquired of Ps. 3,800)
Total non-current assets
Distribution rights
Total assets
Total liabilities
Net assets acquired

Goodwill
Total consideration transferred

Preliminary
Estimate
Disclosed in
2013

Ps.

5,918
5,390
13,731
25,039
(5,734)
19,305

Additional
Fair Value
Adjustments

Ps.

-
(300) (1)

(1,859)
(2,159)
(1,073) (2)
(3,232)

3,232
-

2014
Final
Purchase
Price Allocation

Ps.

5,918
5,090
11,872
22,880
(6,807)
16,073

10,783
26,856

7,551
Ps. 26,856

Ps.

(1) Originated by changes in fair value of property, plant and equipment and investment in associates.

(2) Originated by identification of new contingencies which existed before acquisition date as well as changes in valuation of contingencies identified at acquisition date.

Coca-Cola FEMSA expects to recover the amount recorded as goodwill through synergies related to the available production capacity. Goodwill has
been allocated to Coca-Cola FEMSA’s cash generating unit in Brazil. The goodwill recognized and expected to be deductible for income tax purposes
according to Brazil tax law, is Ps. 22,202.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Selected income statement information of Spaipa for the period from the acquisition date through December 31, 2013 is as follows:

Income Statement

Total revenues
Income before income taxes
Net income

2013

2,466
354
311

Ps.

4.1.2 Acquisition of Companhia Fluminense de Refrigerantes
On August 22, 2013, Coca-Cola FEMSA through its Brazilian subsidiary Spal Industria Brasileira de Bebidas, S.A. completed the acquisition of 100% of
Companhia Fluminense de Refrigerantes (“Companhia Fluminense”) for Ps. 4,657 in an all cash transaction. Companhia Fluminense was a bottler of
Coca-Cola trademark products which operated in the states of Minas Gerais, Rio de Janeiro and Sao Paulo, Brazil. This acquisition was made to reinforce
Coca-Cola FEMSA’s leadership position in Brazil. Transaction related costs of Ps. 11 were expensed by Coca-Cola FEMSA as incurred, and recorded as a
component of administrative expenses in the accompanying consolidated income statements. Companhia Fluminense was included in operating results
from September 2013.

The fair value of Companhia Fluminense’s net assets acquired is as follows:

Total current assets (including cash acquired of Ps. 9)
Total non-current assets
Distribution rights
Total assets
Total liabilities
Net assets acquired

Goodwill
Total consideration transferred

Preliminary
Estimate
Disclosed in
2013

Ps.

515
1,467
2,634
4,616
(1,581)
3,035

1,622
4,657

Additional
Fair Value
Adjustments

2014
Final
Purchase
Price Allocation

Ps.

-
254 (1)
(557)
(303)
(382) (2)
(685)

685
-

Ps.

515
1,721
2,077
4,313
(1,963)
2,350

2,307
4,657

(1) Originated by changes in fair value of property, plant and equipment and investment in associates.

(2) Originated by identification of new contingencies which existed before acquisition date as well as changes in valuation of contingencies identified at acquisition date.

Selected income statement information of Companhia Fluminense for the period from the acquisition date through December 31, 2013 is as follows:

Income Statement

Total revenues
Loss before taxes
Net loss

2013

981
(39)
(34)

Ps.

4.1.3 Merger with Grupo YOLI
On May 24, 2013, Coca-Cola FEMSA completed the merger of 100% of Grupo Yoli. Grupo Yoli comprised the bottler entity YOLI de Acapulco, S.A. de
C.V. and other nine entities. Grupo Yoli was a bottler of Coca-Cola trademark products which operated mainly in the state of Guerrero, as well as in
parts of the state of Oaxaca in Mexico. This merger was made to reinforce Coca-Cola FEMSA’s leadership position in Mexico. The transaction involved
the issuance of 42,377,925 new L shares of Coca-Cola FEMSA, along with a cash payment immediately prior to closing of Ps. 1,109, in exchange for
100% share ownership of Grupo YOLI, which was accomplished through a merger. The total purchase price was Ps. 9,130 based on a share price of
Ps. 189.27 per share on May 24, 2013. Transaction related costs of Ps. 82 were expensed by Coca-Cola FEMSA as incurred, and recorded as a component
of administrative expenses in the accompanying consolidated income statements. Grupo YOLI was included in operating results from June 2013.

The fair value of Grupo Yoli net assets acquired is as follows:

Total current assets (including cash acquired of Ps. 63)
Total non-current assets
Distribution rights
Total assets
Total liabilities
Net assets acquired

Goodwill
Total consideration transferred

2013

837
2,144
3,503
6,484
(1,487)
4,997

4,133
9,130

Ps.

Coca-Cola FEMSA expects to recover the amount recorded as goodwill through synergies related to the available production capacity. Goodwill has
been allocated to Coca-Cola FEMSA’s cash generating unit in Mexico. The entire amount of goodwill will not be tax deductible.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Selected income statement information of Grupo YOLI for the period from the acquisition date through December 31, 2013 is as follows:

Income Statement

Total revenues
Income before taxes
Net income

2013

2,240
70
44

Ps.

4.1.4 Merger with Grupo Fomento Queretano
On May 4, 2012, Coca-Cola FEMSA completed the merger of 100% of Grupo Fomento Queretano. Grupo Fomento Queretano comprised the bottler
entity Refrescos Victoria del Centro, S. de R.L. de C.V. and three other entities. Grupo Fomento Queretano was a bottler of Coca-Cola trademark
products in the state of Queretaro in Mexico. This merger was made to reinforce Coca-Cola FEMSA’s leadership position in Mexico. The transaction
involved the issuance of 45,090,375 new L shares of Coca-Cola FEMSA, along with a cash payment prior to closing of Ps. 1,221, in exchange for 100%
share ownership of Grupo Fomento Queretano, which was accomplished through a merger. The total purchase price was Ps. 7,496 based on a share
price of Ps. 139.22 per share on May 4, 2012. Transaction related costs of Ps. 12 were expensed by Coca-Cola FEMSA as incurred, and recorded as a
component of administrative expenses in the accompanying consolidated income statements. Grupo Fomento Queretano was included in operating
results from May 2012.

The fair value of the Grupo Fomento Queretano’s net assets acquired is as follows:

Total current assets (including cash acquired of Ps. 107)
Total non-current assets
Distribution rights
Total assets
Total liabilities
Net assets acquired

Goodwill
Total consideration transferred

2012

445
2,123
2,921
5,489
(598)
4,891

2,605
7,496

Ps.

Coca-Cola FEMSA expects to recover the amount recorded as goodwill through synergies related to the available production capacity. Goodwill has
been allocated to Coca-Cola FEMSA’s cash generating unit in Mexico. The entire amount of goowill will not be tax deductible.

Selected income statement information of Grupo Fomento Queretano for the period from the acquisition date through December 31, 2012 is as follows:

Income Statement

Total revenues
Income before taxes
Net income

2012

2,293
245
186

Ps.

4.1.5 Other acquisitions
During 2013, other cash payments, net of cash acquired, related to the Company’s smaller acquisitions amounted to Ps. 3,021. These payments
were primarily related to the following: acquisition of Expresso Jundiaí, supplier of logistics services in Brazil, with experience in the service industry
breakbulk logistics, warehousing and value added services. Expresso Jundiaí operated a network of 42 operating bases as of the date of the agreement,
and has presence in six states in South and Southeast Brazil; acquisition of 80% of Doña Tota, brand leader in quick service restaurants in Notheast
Mexico, originated in the state of Tamaulipas, Mexico, which operated 204 restaurants in Mexico and 11 in the state of Texas, United States, as of the
date of the agreement. This transaction resulted in the acquistion of assets and rights for the production, processing, marketing and distribution of its
fast food products, which was treated as business combination according to IFRS 3 “Business Combinations;” acquisition of Farmacias Moderna, leading
pharmacy in the state of Sinaloa, Mexico which operated 100 stores in Mazatlan, Sinaloa as of the date of the agreement; and acquisition of 75% of
Farmacias YZA, a leading pharmacy in Southeast Mexico, in the state of Yucatan, which operated 330 stores, as of the date of the agreement.

Unaudited Pro Forma Financial Data
The following unaudited consolidated pro forma financial data represent the Company’s historical financial statements, adjusted to give effect to (i) the
acquisition of Spaipa, Companhia Fluminense and merger of Grupo Yoli, mentioned in the preceding paragraphs as if they occurred on January 1, 2013;
and (ii) certain accounting adjustments mainly related to the pro forma depreciation of fixed assets of the acquired companies. Unaudited Pro Forma
Financial Data for all other acquisitions is not included,as they are not material.

Total revenues
Income before income taxes and share of the profit of associates and joint ventures accounting for using the equity method
Net income
Basic net controlling interest income per share Series “B”
Basic net controlling interest income per share Series “D”

Unaudited pro forma financial
information for the –year ended
December 31,
2013

Ps. 270,705
23,814
20,730
0.76
0.95

Ps.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Below are pro-forma 2012 results as if Grupo Fomento Queretano was acquired on January 1, 2012:

Unaudited pro forma financial
information for the –year ended
December 31,
2012

Ps. 239,297
27,618
28,104
1.03
1.30

Ps.

4.2 Disposals
During 2012, gain on sale for shares from the disposal of subsidiaries and investments of associates amounted to Ps. 1,215, primarily related to the sale
of the Company’s subsidiary Industria Mexicana de Quimicos, S.A. de C.V., a manufacturer and supplier of cleaning and sanitizing products and services
related to food and beverage industrial processes, as well as of water treatment, for an amount of Ps. 975. The Company recognized a gain of Ps. 871,
as a sales of shares within other income, which is the difference between the fair value of the consideration received and the book value of the net assets
disposed. None of the Company’s other disposals was individually significant. (See Note 19).

Note 5. Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash includes cash on hand and in banks and cash equivalents, which are short-term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, with a maturity
date of three months or less at their acquisition date. Cash at the end of the reporting period as shown in the consolidated statement of cash flows is
comprised of the following:

Cash and bank balances
Cash equivalents (see Note 3.5)

December 31,
2014

December 31,
2013

Ps.

12,654
22,843
35,497

Ps.

16,862
10,397
27,259

As explained in Note 3.3 above, the Company operates in Venezuela, which has a certain level of exchange control restrictions, which might prevent cash
and cash equivalent balances from being available for use elsewhere in the group. At December 31, 2014 and 2013, cash and cash equivalent balances
of the Company’s Venezuela subsidiaries were Ps. 1,954 and Ps. 5,603, respectively.

Note 6. Investments
As of December 31, 2014 and 2013 investments are classified as held-to maturity, the carrying value of the investments is similar to their fair value. The
following is a detail of held-to maturity investments:

Held-to Maturity (1)
Bank Deposits

Acquisition cost
Accrued interest
Amortized cost

2014

143
1
144
144

Ps.

Ps.
Ps.

2013

125
1
126
126

Ps.

Ps.
Ps.

(1) Denominated in euros at a fixed interest rate. Investments as of December 31, 2014 mature during 2015.

For the years ended December 31, 2014, 2013 and 2012, the effect of the investments in the consolidated income statements under the interest income
item is Ps. 3, Ps. 3 and Ps. 23, respectively.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Note 7. Accounts Receivable, Net

Trade receivables
Allowance for doubtful accounts
Current trade customer notes receivable
The Coca-Cola Company (see Note 14)
Loans to employees
Other related parties (see Note 14)
Heineken Company (see Note 14)
Others

December 31,
2014

Ps.

9,083
(456)
229
1,584
242
273
811
2,076
13,842

December 31,

2013

9,294
(489)
185
1,700
275
235
454
1,144
12,798

Ps.

7.1 Trade receivables
Accounts receivable representing rights arising from sales and loans to employees or any other similar concept, are presented net of discounts and the
allowance for doubtful accounts.

Coca-Cola FEMSA has accounts receivable from The Coca-Cola Company arising from the latter’s participation in advertising and promotional programs
and investment in refrigeration equipment and returnable bottles made by Coca-Cola FEMSA.

The carrying value of accounts receivable approximates its fair value as of December 31, 2014 and 2013.

Aging of past due but not impaired (days outstanding)

60-90 days
90-120 days
120+ days
Total

7.2 Changes in the allowance for doubtful accounts

Opening balance
Allowance for the year
Charges and write-offs of uncollectible accounts
Restatement of beginning balance in hyperinflationary economies

and effects of changes in foreign exchange rates

Ending balance

December 31,
2014

December 31,
2013

Ps.

65
24
182
271

2013

413
154
(34)

(44)
489

Ps.

208
40
299
547

2012

343
330
(232)

(28)
413

2014

489
94
(90)

(37)
456

Ps.

In determining the recoverability of trade receivables, the Company considers any change in the credit quality of the trade receivable from the date
credit was initially granted up to the end of the reporting period. The concentration of credit risk is limited due to the customer base being large and
unrelated.

Aging of impaired trade receivables (days outstanding)

60-90 days
90-120 days
120+ days
Total

Ps.

13
10
433
456

Ps.

December 31,
2014

December 31,

2013

69
14
406
489

7.3 Payments from The Coca-Cola Company
The Coca-Cola Company participates in certain advertising and promotional programs as well as in the Coca-Cola FEMSA’s refrigeration equipment
and returnable bottles investment program. Contributions received by Coca-Cola FEMSA for advertising and promotional incentives are recognized as
a reduction in selling expenses and contributions received for the refrigeration equipment and returnable bottles investment program are recorded
as a reduction in the investment in refrigeration equipment and returnable bottles items. For the years ended December 31, 2014, 2013 and 2012
contributions received were Ps. 4,118, Ps. 4,206 and Ps. 3,018, respectively.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Note 8. Inventories

Finished products
Raw materials
Spare parts
Work in process
Inventories in transit
Other

December 31,
2014

Ps.

10,989
3,493
1,353
279
929
171
17,214

December 31,

2013

10,492
4,934
1,404
238
1,057
164
18,289

Ps.

For the years ended at 2014, 2013 and 2012, the Company recognized write-downs of its inventories for Ps. 1,028, Ps. 1,322 and Ps. 793 to net realizable
value, respectively.

For the years ended at 2014, 2013 and 2012, changes in inventories are comprised as follows and included in the consolidated income statement under
the cost of goods sold caption:

Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Total

2014

Ps. 92,390
55,038
Ps. 147,428

2013

76,163
49,740
125,903

Ps.

2012

68,712
51,033
119,745

Ps.

Note 9. Other Current Assets and Other Current Financial Assets
9.1 Other current assets

Prepaid expenses
Agreements with customers
Short-term licenses
Other

Prepaid expenses as of December 31, 2014 and 2013 are as follows:

Advances for inventories
Advertising and promotional expenses paid in advance
Advances to service suppliers
Prepaid leases
Prepaid insurance
Others

December 31,
2014

Ps.

1,375
161
68
184
1,788

December 31,

2013

1,666
148
55
110
1,979

Ps.

December 31,
2014

Ps.

380
156
517
80
29
213
1,375

December 31,

2013

478
191
309
120
33
535
1,666

Ps.

Advertising and promotional expenses paid in advance recorded in the consolidated income statement for the years ended December 31, 2014, 2013
and 2012 amounted to Ps. 4,460, Ps. 6,232 and Ps. 4,471, respectively.

9.2 Other current financial assets

Restricted cash
Derivative financial instruments (see Note 20)
Short term note receivable

December 31,
2014

Ps.

1,213
384
1,000
2,597

December 31,

2013

3,106
28
843
3,977

Ps.

The Company has pledged part of its short-term deposits in order to fulfill the collateral requirements for the accounts payable in different currencies.
As of December 31, 2014 and 2013, the fair value of the short-term deposit pledged were:

Venezuelan bolivars
Brazilian reais
Colombian pesos

December 31,
2014

Ps.

550
640
23
1,213

December 31,

2013

2,658
340
108
3,106

Ps.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Note 10. Investments in Associates and Joint Ventures
Details of the Company’s associates and joint ventures accounted for under the equity method at the end of the reporting period are as follows:

Investee

Heineken Company (1) (2)
Coca-Cola FEMSA:
Joint ventures:
Grupo Panameño de Bebidas
Dispensadoras de Café, S.A.P.I. de C.V.
Estancia Hidromineral Itabirito, LTDA

Coca-Cola FEMSA Philippines, Inc. (“CCFPI”)
Associates:
Promotora Industrial Azucarera, S.A. de C.V. (“PIASA”)

Industria Envasadora de Querétaro, S.A. de C.V.(“IEQSA”)
Industria Mexicana de Reciclaje, S.A. de C.V. (“IMER”)

Jugos del Valle, S.A.P.I. de C.V.
KSP Partiçipações, LTDA
Leao Alimentos e Bebidas, L.T.D.A. (3)
Other investments in Coca-Cola FEMSA’s companies
FEMSA Comercio:
Café del Pacífico, S.A.P.I. de C.V. (Caffenio) (1)
Other investments (1) (4)

(1) Associate.

Ownership Percentage

Carrying Amount

Principal
Activity

Place of
Incorporation

December 31,
2014

December 31,
2013

December 31,
2014

December 31,
2013

Beverages The Netherlands 20.0%

20.0%

Ps. 83,710

Ps. 80,351

Beverages
Services
Bottling and
distribution
Bottling

Panama
Mexico

50.0%
50.0%

Brazil
Philippines

50.0%
51.0%

Sugar production Mexico
Canned bottling Mexico
Mexico
Mexico
Brazil
Brazil
Various

Recycling
Beverages
Beverages
Beverages
Various

36.3%
32.8%
35.0%
26.3%
38.7%
24.4%
Various

Coffee
Various

Mexico
Various

40.0%
Various

50.0%
50.0%

50.0%
51.0%

36.3%
32.8%
35.0%
26.2%
38.7%
26.1%
Various

40.0%
Various

1,740
190

164
9,021

2,082
194
98
1,470
91
1,670
606

892
187

142
9,398

2,034
181
90
1,470
85
2,176
112

467
656
Ps. 102,159

466
746
Ps. 98,330

(2) As of December 31, 2014, comprised of 12.53% of Heineken, N.V. and 14.94% of Heineken Holding, N.V., which represents an economic interest of 20% in Heineken. The
Company has significant influence, mainly, due to the fact that it participates in the Board of Directors of Heineken Holding, N.V. and the Supervisory Board of Heineken
N.V.; and for the material transactions between the Company and Heineken Company.

(3) During March 2013, Holdfab2 Partiçipações Societárias, LTDA and SABB- Sistema de Alimentos e Bebidas Do Brasil, LTDA. were merged into Leao Alimentos e Bebidas, Ltda.

(4) Joint ventures.

As mentioned in Note 4, on May 24, 2013 and May 4, 2012, Coca-Cola FEMSA completed the acquisition of 100% of Grupo Yoli and Grupo Fomento
Queretano, respectively. As part of these acquisitions, Coca-Cola FEMSA increased its equity interest to 36.3% and 26.1% in Promotora Industrial
Azucarera, S.A de C.V., respectively. Coca-Cola FEMSA has recorded the incremental interest acquired at its estimated fair value.

During 2014 Coca-Cola FEMSA converted its account receivable from Compañía Panameña de Bebidas, S.A.P.I. de C.V. in the amount of Ps. 814 into an
additional capital contribution in the investee.

During 2014 and 2013 Coca-Cola FEMSA made capital contributions to Jugos del Valle, S.A.P.I. de C.V. in the amount of Ps. 25 and Ps. 27, respectively.

During 2014 Coca-Cola FEMSA received dividends from Jugos del Valle, S.A.P.I. de C.V. in the amount of Ps. 48.

On January 25, 2013, Coca-Cola FEMSA finalized the acquisition of 51% of CCFPI for an amount of $688.5 U.S. dollars (Ps. 8,904) in an all-cash
transaction. As part of the agreement, Coca-Cola FEMSA obtained a call option to acquire the remaining 49% of CCFPI at any time during the seven
years following the closing. Coca-Cola FEMSA also has a put option to sell its 51% ownership to The Coca-Cola Company at any time from the fifth
anniversary of the date of acquisition until the sixth anniversary, at a price which is based in part on the fair value of CCFPI at the date of acquisition
(see Note 20.7).

From the date of the investment acquisition through December 31, 2014, the results of CCFPI have been recognized by Coca-Cola FEMSA using the
equity method, this is based on the following factors: (i) during the initial four-year period some relevant activities require joint approval between
Coca-Cola FEMSA and The Coca-Cola Company; and (ii) potential voting rights to acquire the remaining 49% of CCFPI are not probable to be executed
in the foreseeable future due to the fact that the call option is “out of the money” as of December 31, 2014 and 2013.

On February 23, 2012, a wholly-owned subsidiary of Mitsubishi Corporation, and Stichting Depositary PGGM Infrastructure Funds, a pension fund
managed by PGGM, acquired the 45% interest held by FEMSA in the parent companies of the Mareña Renovables Wind Power Farm. The sale of FEMSA’s
participation as an investor resulted in a gain of Ps. 933. Certain subsidiaries of FEMSA, FEMSA Comercio and Coca-Cola FEMSA have entered into
20-year wind power supply agreements with the Mareña Renovables Wind Power Farm to purchase some of the energy output produced by it. These
agreements will remain in full force and effect.

On April 30, 2010, the Company acquired an economic interest of 20% of Heineken Group. Heineken’s main activities are the production, distribution
and marketing of beer worldwide. The Company recognized an equity income of Ps. 5,244, Ps. 4,587 and Ps. 8,311, net of taxes regarding its interest in
Heineken for the years ended December 31, 2014, 2013 and 2012, respectively.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Summarized financial information in respect of the associate Heineken accounted for under the equity method is set out below.

December 31, 2014

December 31, 2013

Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total equity
Equity attributable to equity holders of Heineken
Total revenue and other income
Total cost and expenses
Net income
Net income attributable to equity holders of the company
Other comprehensive income
Total comprehensive income
Total comprehensive income attributable to equity holders of the company

Million of

Peso

Ps.

109,101
515,282
152,950
230,285
241,148
222,453
Ps. 342,313
293,134
Ps. 30,216
26,819
4,210
Ps. 34,426
29,826

€.

Euro

6,086
28,744
8,532
12,846
13,452
12,409
19,350
16,570
1,708
1,516
238
1,946
1,686

Million of

Peso

Euro

Ps. 98,814
500,667
143,913
233,376
222,192
205,038
Ps. 333,437
289,605
Ps. 27,236
23,409
(18,998)
Ps. 8,238
5,766

€. 5,495
27,842
8,003
12,978
12,356
11,402
€. 19,429
16,875
1,587
1,364
(1,107)
480
336

€.

€

Reconciliation from the equity of the associate Heineken to the investment of the Company.

December 31, 2014

December 31, 2013

Million of

Peso

Euro

Million of

Peso

Euro

Equity attributable to equity holders of Heineken
Effects of fair value determined by Purchase Price Allocation
Goodwill
Equity attributable to equity holders of Heineken adjusted
Economic ownership percentage
Investment in Heineken Company

Ps. 222,453
88,537
107,560
Ps. 418,550
20%
Ps. 83,710

€.

12,409
4,939
6,000
€. 23,348
20%
4,670

€.

Ps. 205,038
88,822
107,895
Ps. 401,755
20%
Ps. 80,351

€. 11,402
4,939
6,000
€. 22,341
20%
€. 4,468

As of December 31, 2014 and 2013 fair value of Company’s investment in Heineken N.V. Holding and Heineken N.V. represented by shares equivalent to
20% of its outstanding shares amounted to Ps. 116,327 (€ 6,489 million) and Ps. 99,279 (€ 5,521 million) based on quoted market prices of those dates.
As of February 25, 2015, issuance date of these consolidated financial statements, fair value amounted to € 7,503 million.

During the years ended December 31, 2014, 2013 and 2012, the Company received dividends distributions from Heineken, amounting to Ps. 1,795,
Ps. 1,752 and Ps. 1,697, respectively.

Summarized financial information in respect of the interests in individually immaterial of Coca-Cola FEMSA’s associates accounted for under the equity
method is set out below.

Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total revenue
Total cost and expenses
Net income (1)

(1) Includes FEMSA Comercio’s investments and other investments.

2014

Ps.

8,622
17,854
5,612
2,684
Ps. 20,796
20,173
502

Ps.

2013

8,232
18,957
4,080
3,575
20,889
20,581
433

Ps.

2012

6,958
12,023
3,363
2,352
16,609
15,514

858

Summarized financial information in respect of the interests in individually immaterial of Coca-Cola FEMSA’s joint ventures accounted for under the
equity method is set out below.

Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total revenue
Total cost and expenses
Net (loss) income (1)

(1) Includes FEMSA Comercio’s investments and other investments.

Ps.

2014

8,735
22,689
5,901
2,699
18,557
19,019
(328)

Ps.

2013

8,622
18,483
6,547
1,939
16,844
16,622
113

Ps.

2012

1,612
2,616
1,977
106
2,187
2,262
(77)

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

The Company’s share of other comprehensive income from equity investees, net of taxes for the year ended December 31, 2014, 2013 and 2012 are
as follows:

Valuation of the effective portion of derivative financial instruments
Exchange differences on translating foreign operations
Remeasurements of the net defined benefit liability

2014

(257)
1,579
(881)
441

Ps.

2013

(91)
(3,029)
491
(2,629)

Ps.

2012

113
183
(1,077)
(781 )

Ps.

Note 11. Property, Plant and Equipment, Net

Cost

Land

Buildings

Machinery
and
Equipment

Refrigeration
Equipment

Returnable
Bottles

Investments in
Fixed Assets
in Progress

Leasehold
Improvements

in progress

389

1,158

992

785

(6,296)

1,828

Cost as of January 1, 2012
Additions
Additions from business combinations
Adjustments of fair value of

past business combinations

Transfer of completed
projects in progress

Transfer to/(from) assets classified

as held for sale

Disposals
Effects of changes in foreign

exchange rates

Changes in value on the recognition

of inflation effects

Capitalization of borrowing costs
Cost as of December 31, 2012

Cost as of January 1, 2013
Additions
Additions from business combinations
Transfer of completed projects

Transfer to/(from) assets classified

as held for sale

Disposals
Effects of changes in foreign

exchange rates

Changes in value on the recognition

of inflation effects

Capitalization of borrowing costs
Cost as of December 31, 2013

Cost as of January 1, 2014
Additions
Changes in fair value of past acquisitions
Transfer of completed projects

in progress

Transfer to/(from) assets classified

as held for sale

Disposals
Effects of changes in foreign

exchange rates

Changes in value on the recognition

of inflation effects

Capitalization of borrowing costs
Cost as of December 31, 2014

Other

Total

595 Ps. 86,555
14,844
186
1,184
-

(210)

Ps. 5,144
329
206

Ps. 13,066 Ps. 40,624
4,607
486

415
390

Ps.

10,636
1,176
84

Ps.

4,115
1,434
18

Ps. 4,102
6,511
-

Ps.

8,273 Ps.

186
-

(39)

901

-
(591)

(451)

275
-
11,991

11,991
1,107
428

1,144

-
(749)

137

-
(82)

(107)

312

339

-
(131)

(462)

1,721

(34)
(963)

(485)

(2,051)

85
-
Ps. 5,769

Ps. 5,769
433
536

471
-

1,138
16
Ps. 14,377 Ps. 45,082

Ps. 14,377 Ps. 45,082
4,648
2,814

167
2,278

Ps.

(77)

(1)

765

(5,183)

1,320

-
(324)

(134)

17
-
5,814

5,814
1,435
96

Ps.

-
(14)

(28)

-
(100)

-
(69)

(34)
(2,274)

(60)

(41)

(3,357)

(31)
-
Ps. 5,357

Ps. 5,357
8,238
614

Ps.

-
-
9,618 Ps.

9,618 Ps.
11
36

83
-

2,038
16
754 Ps. 98,762

754 Ps. 98,762
16,380
341
7,066
264

-
(11)

-
(291)

(216)
(2,049)

(250)

(1,336)

(3,678)

(1,135)

228
-
Ps. 7,094

1,191
-

2,252
32
Ps. 17,544 Ps. 49,877

Ps. 7,094
803
(115)

Ps. 17,544 Ps. 49,877
4,156
891

54
(610)

Ps.

603
-
13,389

13,389
32
(57)

Ps.

-
(15)

(216)
(4,884)

-
(697)

(103)

(55)

(7,314)

-
(748)

(291)

165
-
Ps. 7,039

Ps. 7,039
11,209
(68)

-
-
10,693 Ps.

277
-

4,762
32
1,566 Ps. 114,588

Ps.

Ps. 10,693 Ps.

99
99

1,566 Ps. 114,588
16,985
(113)

234
(253)

-
(324)

(466)

46
-
7,386

7,386
398
-

-
(17)

1,717

2,823

1,523

1,994

(10,050)

1,990

-
(144)

(134)
(2,243)

-
(632)

-
(60)

-
(5)

-
(587)

-
(79)

(134)
(3,767)

(664)

(3,125)

(5,415)

(1,975)

(323)

(545)

(44)

(506)

(12,597)

110
-
Ps. 7,211

355
-

531
33
Ps. 15,791 Ps. 50,519

186
-
Ps. 12,466

7
-
9,402

Ps.

29
263
Ps. 7,872

-
-

Ps. 12,250 Ps.

110
-

1,328
296
1,075 Ps. 116,586

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Accumulated Depreciation

Land

Buildings

Machinery
and
Equipment

Refrigeration
Equipment

Investments in
Returnable Fixed Assets
in Progress

Bottles

Leasehold
Improvements

Other

Total

Accumulated Depreciation
as of January 1, 2012
Depreciation for the year
Transfer (to)/from assets classified

as held for sale

Disposals
Effects of changes in foreign

exchange rates

Changes in value on the recognition

of inflation effects
Accumulated Depreciation

Ps.

-
-

Ps.

(4,161) Ps.
(361)

(17,849)
(3,781)

Ps.

(6,044)
(1,173)

Ps.

(1,031)
(1,149)

Ps.

1
158

200

10
951

749

-
492

303

(288)

(641)

(200)

-
200

(5)

(3)

-
-

Ps. (2,699) Ps.

(639)

(208) Ps. (31,992)
(7,175)

(72)

-
94

(26)
1

(5)

(15)
1,896

1,310

(1,137)

as of December 31, 2012

Ps.

Ps. (4,451) Ps.

(20,561)

Ps.

(6,622)

Ps.

(1,988)

Ps.

(3,176) Ps.

(315) Ps. (37,113)

Accumulated Depreciation
as of January 1, 2013
Depreciation for the year
Transfer (to)/from assets classified

Ps.

as held for sale

Disposals
Effects of changes in foreign

exchange rates

Changes in value on the recognition

of inflation effects
Accumulated Depreciation

as of December 31, 2013

Accumulated Depreciation
as of January 1, 2014
Depreciation for the year
Transfer (to)/from assets classified

as held for sale

Disposals
Effects of changes in foreign

exchange rates

Changes in value on the recognition

of inflation effects
Accumulated Depreciation

as of December 31, 2014

Carrying Amount
As of December 31, 2012
As of December 31, 2013
As of December 31, 2014

-
-

Ps. (4,451) Ps.

(431)

(20,561)
(4,380)

Ps.

(6,622)
(1,452)

Ps.

(1,988)
(1,662)

Ps.

-
200

591

105
1,992

2,061

-
785

755

(583)

(996)

(442)

-
33

143

(6)

-
-

Ps.

(3,176) Ps.
(784)

(315) Ps. (37,113)
(8,805)
(96)

-
682

-
6

105
3,698

3,631

(122)

(2,149)

Ps. (4,674) Ps.

(21,779)

Ps.

(6,976)

Ps.

(3,480)

Ps.

(3,270) Ps.

(454) Ps.(40,633)

Ps. (4,674) Ps.

(466)

(21,779)
(4,525)

Ps.

(6,976)
(1,181)

Ps. (3,480)
(1,879)

Ps.

-
77

62
2,086

-
602

1,512

3,481

1,046

(175)

(707)

(135)

-
57

105

(8)

-
-

Ps.

(3,270) Ps.
(863)

(454) Ps. (40,633)
(9,029)

(115)

-
517

-
1

62
3,340

236

6,382

(54)

(1,079)

Ps. (3,726) Ps. (21,382)

Ps. (6,644)

Ps.

(5,205)

Ps. -

Ps. (3,614) Ps.

(386) Ps. (40,957)

Ps.

Ps. 5,769
Ps. 7,094
Ps. 7,211

Ps. 9,926 Ps.
24,521
Ps. 12,870 Ps. 28,098
Ps. 12,065 Ps. 29,137

Ps.
Ps.
Ps.

5,369
6,413
5,822

Ps. 3,826
Ps. 3,906
4,197
Ps.

Ps. 5,357
Ps. 7,039
Ps. 7,872

6,442 Ps.
Ps.
Ps.
7,423 Ps.
Ps. 8,636 Ps.

439 Ps. 61,649
1,112 Ps. 73,955
689 Ps. 75,629

During the years ended December 31, 2014, 2013 and 2012 the Company capitalized Ps. 296, Ps. 32 and Ps. 16, respectively of borrowing costs in
relation to Ps. 1,915, Ps. 790 and Ps. 196 in qualifying assets. The effective interest rates used to determine the amount of borrowing costs eligible for
capitalization were 4.8%, 4.1% and 4.3%, respectively.

For the years ended December 31, 2014, 2013 and 2012 interest expense, interest income and net foreign exchange losses are analyzed as follows:

Interest expense, interest income and foreign exchange losses
Amount capitalized (1)
Net amount in consolidated income statements

2014

7,080
338
6,742

Ps.

2013

Ps.

3,887
57
Ps. 3,830

2012

1,937
38
1,899

Ps.

(1) Amount capitalized in property, plant and equipment and amortized intangible assets. Commitments related to acquisitions of property, plant and equipment are disclosed

in Note 25.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Note 12. Intangible Assets

Cost

Cost as of January 1, 2012
Purchases
Acquisition from business combinations
Capitalization of internally
developed systems
Adjustments of fair value of

past business combinations

Transfer of completed development systems
Disposals
Effect of movements in exchange rates
Changes in value on the recognition of

inflation effects

Capitalization of borrowing costs
Balance as of December 31, 2012

Cost as of January 1, 2013
Purchases
Acquisition from business combinations
Transfer of completed development systems
Disposals
Effect of movements in exchange rates
Changes in value on the recognition of

inflation effects

Capitalization of borrowing costs
Cost as of December 31, 2013

Cost as of January 1, 2014
Purchases
Change in fair value of past acquisitions
Transfer of completed development systems
Disposals
Effect of movements in exchange rates
Changes in value on the recognition of

inflation effects

Capitalization of borrowing costs
Cost as of December 31, 2014

Amortization and Impairment Losses

Amortization as of January 1, 2012
Amortization expense
Disposals
Effect of movements in exchange rates
Amortization as of December 31, 2012
Amortization as of January 1, 2013
Amortization expense
Disposals
Effect of movements in exchange rates
Amortization as of December 31, 2013

Amortization as of January 1, 2014
Amortization expense
Impairment losses
Disposals
Effect of movements in exchange rates
Amortization as of December 31, 2014

Carrying Amount

As of December 31, 2012
As of December 31, 2013
As of December 31, 2014

Rights to Produce
and Distribute
Coca-Cola
Trademark
Products

Goodwill

Other
Indefinite
Lived
Intangible
Assets

Total
Unamortized
Intangible
Assets

Technology
Costs and
Management
Systems

Systems
in
Development

Ps. 54,938 Ps. 4,515
-
-
2,605
2,973

Ps.

395 Ps. 59,848
6
5,578

6
-

Ps. 2,373 Ps.
35
-

(42)
-
-
(478)

(148)
-
-
-

-
(121)
-
-
Ps. 57,270 Ps. 6,972

Ps. 57,270 Ps. 6,972
-
-
14,692
19,868
-
-
-
-
(356)

(1,828)

-
417
-
-
Ps. 75,727 Ps. 21,308

-
-
(62)
-

(190)
-
(62)
(478)

-
-

(121)
-
339 Ps. 64,581

339 Ps. 64,581
-
36,181
-
(163)
(2,194)

-
1,621
-
(163)
(10)

Ps.

-
559
(7)
(97)

-
-

Ps. 2,863 Ps.

Ps. 2,863 Ps.
164
70
172
-
(75)

-
-

417
-

-
25

1,431 Ps.

90
-

-
(559)
-
(3)

-
22
1,019 Ps.

1,019 Ps.

644
-
(172)
-
-

113
-

Alcohol
Licenses

Other

Total
Amortized
Intangible
Assets

Total
Intangible
Assets

560 Ps.
166
-

281 Ps. 4,645
397
106
-
-

Ps. 64,493
403
5,578

-
-
-
-

-
-
-
(3)

-
-
(7)
(103)

(190)
-
(69)
(581)

-
-

-
22
726 Ps. 384 Ps. 4,992

-
-

726 Ps. 384 Ps. 4,992
1,110
123
179
266
196
-
-
-
-
(46)
-
(46)
(88)
(13)
-

-
-

113
25
859 Ps. 690 Ps. 6,372

-
-

(121)
22
Ps. 69,573

Ps. 69,573
1,110
36,447
-
(209)
(2,282)

530
25
Ps. 105,194

Ps. 105,194

681
1,479
-
(428)
(5,770)

Ps.

1,787 Ps. 98,822 Ps. 3,219 Ps. 1,604 Ps.

(2,416)

Ps. 75,727 Ps. 21,308
-
-
4,117
-
-
(251)

(5,343)

-
-

Ps.

1,787 Ps. 98,822
13
1,496
-
(8)
(5,604)

13
(205)
-
(8)
(10)

Ps. 3,219 Ps. 1,604 Ps.

227
-
278
(387)
(152)

229
-
(278)
-
(1)

859 Ps. 690 Ps. 6,372
668
44
168
(17)
(17)
-
-
-
-
(420)
(33)
-
(166)
(13)
-

2,295
-
-
-
Ps. 70,263 Ps. 25,174

Ps.

Ps.
Ps.

Ps.

- Ps.
-
-
-
- Ps.
- Ps.
-
-
-
- Ps.

- Ps.
-
-
-
-
- Ps.

-
-
-
-
-
-
-
-
-
-

-
-
-
-
-
-

Ps.

Ps.
Ps.

Ps.

-
-

2,295
-
1,577 Ps. 97,014

(2)
42
Ps. 3,225 Ps.

-
-
1,554 Ps.

-
-
1,027 Ps.

-
-

(2)
42
671 Ps. 6,477

2,293
42
Ps. 103,491

(103) Ps.
-
-
-
(103) Ps.
(103) Ps.
-
103
-
- Ps.

- Ps.
-
(36)
-
-

(36) Ps.

(103) Ps.

-
-
-

(1,116) Ps.
(202)
25
65

(103) Ps. (1,228) Ps.
(103) Ps. (1,228) Ps.

-
103
-
-

-
-
(36)
-
-

(271)
2
35
Ps. (1,462) Ps.

Ps. (1,462) Ps.
(268)
-
387
-

(36) Ps. (1,343) Ps.

- Ps.
-
-
-
- Ps.
- Ps.
-
-
-
- Ps.

- Ps.
-
-
-
-
- Ps.

(114) Ps.
(36)
-
-
(150) Ps.
(150) Ps.
(73)
46
-

(177) Ps.

(130) Ps. (1,360) Ps. (1,463)
(304)
(304)
(66)
25
25
-
62
62
(3)
(199) Ps. (1,577) Ps. (1,680)
(199) Ps. (1,577) Ps. (1,680)
(416)
(416)
(72)
151
48
-
44
44
9
(262) Ps. (1,901) Ps. (1,901)

(177) Ps.
(58)
-
-
-
(235) Ps.

(262) Ps. (1,901) Ps. (1,901)
(423)
(423)
(36)
-
387
387
9
9
(350) Ps. (1,928) Ps. (1,964)

(97)
-
-
9

Ps. 57,270 Ps. 6,972
Ps. 75,727 Ps. 21,308
Ps. 70,263 Ps. 25,174

Ps.
Ps.
Ps.

Ps.
236 Ps. 64,478
1,787 Ps. 98,822
Ps.
1,541 Ps. 96,978 Ps.

1,635 Ps. 1,019 Ps. 576 Ps.
185 Ps. 3,415
1,757 Ps. 1,604 Ps. 682 Ps. 428 Ps. 4,471
321 Ps. 4,549
1,882 Ps. 1,554 Ps.

792 Ps.

Ps. 67,893
Ps. 103,293
Ps. 101,527

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

During the years ended December 31, 2014, 2013 and 2012 the Company capitalized Ps. 42, Ps. 25 and Ps. 22, respectively of borrowing costs in relation
to Ps. 600, Ps. 630 and Ps. 674 in qualifying assets, respectively. The effective interest rates used to determine the amount of borrowing costs eligible
for capitalization were 4.2%, 4.1% and 4.3%, respectively.

For the years ended 2014, 2013 and 2012, allocation for amortization expense is as follows:

Cost of goods sold
Administrative expenses
Selling expenses

2014

12
156
255
423

Ps.

2013

10
249
157
416

Ps.

The average remaining period for the Company’s intangible assets that are subject to amortization is as follows:

Technology Costs and Management Systems
Alcohol Licenses

2012

3
204
97
304

Years

7
9

Coca-Cola FEMSA Impairment Tests for Cash-Generating Units Containing Goodwill and Distribution Rights
For the purpose of impairment testing, goodwill and distribution rights are allocated and monitored on an individual country basis, which is considered
to be the CGU.

The aggregate carrying amounts of goodwill and distribution rights allocated to each CGU are as follows:

Mexico
Guatemala
Nicaragua
Costa Rica
Panama
Colombia
Venezuela
Brazil
Argentina
Total

December 31,
2014

December 31,
2013

Ps.

55,137
352
418
1,188
884
5,344
823
29,622
88
93,856

Ps.

55,126
303
390
1,134
785
5,895
3,508
28,405
103
95,649

Goodwill and distribution rights are tested for impairments annually. The recoverable amounts of the CGUs are based on value-in-use calculations. Value in
use was determined by discounting the future cash flows generated from the continuing use of the CGU.

The foregoing forecasts could differ from the results obtained over time; however, Coca-Cola FEMSA prepares its estimates based on the current situation
of each of the CGUs.

The recoverable amounts are based on value in use. The value in use of CGUs is determined based on the method of discounted cash flows. The key
assumptions used in projecting cash flows are: volume, expected annual long-term inflation, and the weighted average cost of capital (“WACC”) used to
discount the projected flows.

To determine the discount rate, Coca-Cola FEMSA uses the WACC as determined for each of the cash generating units in real terms and as described in
following paragraphs.

The estimated discount rates to perform the IAS 36 “Impairment of assets”, impairment test for each CGU consider market participants’ assumptions.
Market participants were selected taking into consideration the size, operations and characteristics of the business that are similar to those of Coca-Cola
FEMSA.

The discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and
individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific
circumstances of Coca-Cola FEMSA and its operating segments and is derived from its WACC. The WACC takes into account both debt and equity. The cost
of equity is derived from the expected return on investment by Company’s investors. The cost of debt is based on the interest bearing borrowings Coca-
Cola FEMSA is obliged to service. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated annually based
on publicly available market data.

Market participant assumptions are important because, not only do they include industry data for growth rates, management also assesses how the CGU’s
position, relative to its competitors, might change over the forecasted period.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

The key assumptions used for the value-in-use calculations are as follows:

• Cash flows were projected based on actual operating results and the five-year business plan. Cash flows for a further five-year were forecasted
maintaining the same stable growth and margins per country of the last year base. Coca-Cola FEMSA believes that this forecasted period is justified
due to the non-current nature of the business and past experiences.

• Cash flows after the first ten-year period were extrapolated using a perpetual growth rate equal to the expected annual population growth, in order

to calculate the terminal recoverable amount.

• A per CGU-specific Weighted Average Cost of Capital (“WACC”) was applied as a hurdle rate to discount cash flows to get the recoverable amount of

the units; the calculation assumes, size premium adjusting.

The key assumptions by CGU for impairment test as of December 31, 2014 were as follows:

CGU

Mexico
Colombia
Venezuela
Costa Rica
Guatemala
Nicaragua
Panama
Argentina
Brazil

Pre-tax WACC

WACC Real

Expected Annual
Long-Term Inflation
2015-2024

Expected Volume
Growth Rates
2015-2024

5.5%
6.4%
12.9%
7.7%
10.0%
12.7%
7.6%
9.9%
6.2%

5.0%
5.9%
12.3%
7.6%
9.4%
12.2%
7.2%
9.3%
5.6%

3.5%
3.0%
51.1%
4.7%
5.0%
6.0%
3.8%
22.3%
6.0%

2.3%
5.3%
3.9%
2.7%
4.3%
2.7%
4.1%
2.5%
3.8%

The key assumptions by CGU for impairment test as of December 31, 2013 were as follows:

CGU

Mexico
Colombia
Venezuela
Costa Rica
Guatemala
Nicaragua
Panama
Argentina
Brazil

Pre-tax WACC

WACC Real

Expected Annual
Long-Term Inflation
2014-2024

Expected Volume
Growth Rates
2014-2024

5.7%
6.6%
11.5%
7.5%
10.4%
13.1%
7.7%
11.6%
6.6%

5.1%
6.0%
10.8%
7.2%
9.7%
12.5%
7.1%
10.9%
5.9%

3.9%
3.0%
32.2%
5.0%
5.2%
6.3%
4.2%
11.1%
6.0%

1.3%
5.0%
2.5%
2.4%
5.2%
4.1%
5.7%
3.8%
4.4%

The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both external
sources and internal sources (historical data). Coca-Cola FEMSA consistently applied its methodology to determine CGU specific WACC’s to perform its
annual impairment testing.

Sensitivity to Changes in Assumptions
At December 31, 2014 Coca-Cola FEMSA performed an additional impairment sensitivity calculation, taking into account an adverse change in post-
tax WACC, according to the country risk premium, using for each country the relative standard deviation between equity and sovereign bonds and an
additional sensitivity to the volume of 100 basis points, except for Costa Rica and concluded that no impairment would be recorded.

CGU

Mexico
Colombia
Venezuela
Costa Rica
Guatemala
Nicaragua
Panama
Argentina
Brazil

(1) Compound Annual Growth Rate (CAGR).

Change in
WACC

+1.5 %
+0.6 %
+5.8 %
+2.2 %
+1.9 %
+3.6 %
+1.9 %
+3.5 %
+2.0 %

Change in Volume
Growth CAGR (1)

-1.0 %
-1.0 %
-1.0 %
-0.6 %
-1.0 %
-1.0 %
-1.0 %
-1.0 %
-1.0 %

Effect on
Valuation

Passes by 6.62x
Passes by 6.17x
Passes by 8.94x
Passes by 1.78x
Passes by 4.67x
Passes by 1.77x
Passes by 7.00x
Passes by 65.61x
Passes by 1.86x

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Note 13. Other Assets, Net and Other Financial Assets
13.1 Other assets, net

Agreement with customers, net
Long term prepaid advertising expenses
Guarantee deposits (1)
Prepaid bonuses
Advances to acquire property, plant and equipment
Recoverable taxes
Others

December 31,
2014

December 31,
2013

Ps. 239
87
1,400
92
988
1,329
782
4,917

Ps.

314
102
1,147
116
866
185
770
3,500

(1) As it is customary in Brazil, the Company is required to collaterize tax, legal and labor contingencies by guarantee deposits (see Note 25.7).

13.2 Other financial assets

Non-current accounts receivable
Derivative financial instruments (see Note 20)
Other non-current financial assets

December 31,
2014

December 31,
2013

Ps.

155
6,299
97
6,551

Ps.

1,120
1,472
161
2,753

As of December 31, 2014 and 2013, the fair value of long term accounts receivable amounted to Ps. 69 and Ps. 1,142, respectively. The fair value is
calculated based on the discounted value of contractual cash flows whereby the discount rate is estimated using rates currently offered for receivable
of similar amounts and maturities, which is considered to be level 2 in the fair value hierarchy.

Note 14. Balances and Transactions with Related Parties and Affiliated Companies
Balances and transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.

The consolidated statements of financial positions and consolidated income statements include the following balances and transactions with related
parties and affiliated companies:

Balances
Due from The Coca-Cola Company (see Note 7) (1) (9)
Balance with BBVA Bancomer, S.A. de C.V. (2)
Balance with Grupo Financiero Banorte, S.A. de C.V. (2)
Instituto Tecnológico y de Estudios Superiores de Monterrey, A.C. (3)
Due from Heineken Company (1) (7)
Due from Grupo Estrella Azul (3)
Due from Compañía Panameña de Bebidas, S.A.P.I de C.V. (3) (8)
Other receivables (1) (4)
Due to The Coca-Cola Company (6) (9)
Due to BBVA Bancomer, S.A. de C.V. (5)
Due to Caffenio (6) (7)
Due to Grupo Financiero Banamex, S.A. de C.V. (5)
Due to British American Tobacco Mexico (6)
Due to Heineken Company (6) (7)
Other payables (6)

(1) Presented within accounts receivable.

(2) Presented within cash and cash equivalents.

(3) Presented within other financial assets.

(4) Presented within other current financial assets.

(5) Recorded within bank loans.

(6) Recorded within accounts payable.

(7) Associates.

(8) Joint venture.

(9) Non controlling interest.

December 31,
2014

December 31,
2013

Ps.

1,584
4,083
3,653
126
811
59
-
1,209
4,343
149
70
-
-
2,408
1,206

Ps.

1,700
2,357
817
171
454
-
893
924
5,562
1,080
7
1,962
280
2,339
605

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Balances due from related parties are considered to be recoverable. Accordingly, for the years ended December 31, 2014 and 2013, there was no
expense resulting from the uncollectibility of balances due from related parties.

Transactions

Income:

Services to Heineken Company (1)
Logistic services to Grupo Industrial Saltillo, S.A. de C.V. (3)
Sales of Grupo Inmobiliario San Agustín, S.A. shares to Instituto Tecnológico y
de Estudios Superiores de Monterrey, A.C. (3)
Logistic services to Jugos del Valle (1)
Other revenues from related parties
Expenses:

Purchase of concentrate from The Coca-Cola Company (2)
Purchases of raw material, beer and operating expenses from Heineken Company (1)
Purchase of coffee from Caffenio (1)
Purchase of baked goods and snacks from Grupo Bimbo, S.A.B. de C.V. (3)
Purchase of cigarettes from British American Tobacco Mexico (3)
Advertisement expense paid to The Coca-Cola Company (2) (4)
Purchase of juices from Jugos del Valle, S.A.P.I. de C.V. (1)
Purchase of sugar from Promotora Industrial Azucarera, S.A. de C.V.(1)
Interest expense and fees paid to BBVA Bancomer, S.A. de C.V. (3)
Purchase of sugar from Beta San Miguel (3)
Purchase of sugar, cans and aluminum lids from Promotora Mexicana
de Embotelladores, S.A. de C.V. (3)
Purchase of canned products from IEQSA (1)
Advertising paid to Grupo Televisa, S.A.B. (3)
Interest expense paid to Grupo Financiero Banamex, S.A. de C.V. (3)
Insurance premiums for policies with Grupo Nacional Provincial, S.A.B. (3)
Donations to Instituto Tecnológico y de Estudios Superiores de Monterrey, A.C. (3)
Donations to Fundación FEMSA, A.C. (3)
Purchase of plastic bottles from Embotelladora del Atlántico, S.A.
(formerly Complejo Industrial Pet, S.A.) (3)
Donations to Difusión y Fomento Cultural, A.C. (3)
Interest expense paid to The Coca-Cola Company (2)

Other expenses with related parties

(1) Associates.

(2) Non controlling interest.

2014

Ps.

3,544
313

Ps.

-
513
670

Ps. 28,084
15,133
1,491
3,674
-
1,167
2,592
1,020
99
1,389

567
591
158
2
140
42
-

174
73
4
321

2013

2,412
287

-
471
399

22,988
11,865
1,383
2,860
2,460
1,291
2,628
956
77
1,557

670
615
92
19
67
78
27

124
-
60
299

Ps.

2012

2,979
242

391
431
341

23,886
11,013
342
2,394
2,342
1,052
1,985
423
205
1,439

711
483
124
-
57
109
864

99
29
24
389

(3) Members of the board of directors in FEMSA participate in board of directors of this entity.

(4) Net of the contributions from The Coca-Cola Company of Ps. 4,118, Ps. 4,206 and Ps. 3,018, for the years ended in 2014, 2013 and 2012, respectively.

Also as disclosed in Note 10, during January 2013, Coca-Cola FEMSA purchased its 51% interest in CCFPI from The Coca-Cola Company. The remainder
of CCFPI is owned by The Coca-Cola Company and Coca-Cola FEMSA has currently outstanding certain call and put options related to CCFPI’s equity
interests.

Commitments with related parties

Related Party

Heineken Company

Commitment

Supply

Conditions

Supply of all beer products in Mexico’s OXXO stores. The contract may be
renewed for five years or additional periods. At the end of the contract
OXXO will not hold exclusive contract with another supplier of beer for the
next 3 years. Commitment term, Jan 1st, 2010 to Jun 30, 2020.

The benefits and aggregate compensation paid to executive officers and senior management of the Company were as follows:

Short-term employee benefits paid
Postemployment benefits
Termination benefits
Share based payments

Ps.

2014

964
45
114
283

Ps.

2013

1,268
37
25
306

Ps.

2012

1,022
37
13
275

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Note 15. Balances and Transactions in Foreign Currencies
Assets, liabilities and transactions denominated in foreign currencies are those realized in a currency different than the functional currency of the
Company. As of the end and for the years ended on December 31, 2014, 2013 and 2012, assets, liabilities and transactions denominated in foreign
currencies, expressed in Mexican pesos (contractual amounts) are as follows:

Balances

As of December 31, 2014
U.S. dollars
Euros
Other currencies
Total
As of December 31, 2013
U.S. dollars
Euros
Other currencies
Total

Transactions

For the year ended December 31, 2014
U.S. dollars
Euros
Other currencies
Total

For the year ended December 31, 2013
U.S. dollars
Euros
Other currencies
Total
For the year ended December 31, 2012
U.S. dollars
Euros
Other currencies
Total

Assets

Liabilities

Short-Term

Long- Term

Short-Term

Long- Term

Ps.

5,890
32
27
5,949

5,340
333
-
5,673

Ps.

989
-
1,214
2,203

969
-
186
1,155

Ps.

7,218
27
50
7,295

Ps.

6,061
152
251
Ps. 6,464

Ps. 66,140
-
31
Ps. 66,171

Ps. 53,929
-
115
Ps. 54,044

Revenues

Ps. 2,817
7
178
Ps. 3,002

Ps. 2,013
1
-
Ps. 2,014

Ps. 1,631
-
-
Ps. 1,631

Disposal
Shares

Other
Revenues

Ps.

-
-
-
-

1,127
-
-
1,127

Ps.

641
-
-
641

605
3
-
608

717
-
-
717

Purchases
of Raw
Materials

Ps. 15,006
80
10
15,096

Ps.

15,017
55
-
15,072

12,016
-
-
12,016

Interest
Expense

Consulting
Fees

Assets
Acquisitions

Ps. 1,669
15
-
Ps. 1,684

Ps. 435
9
-
Ps. 444

Ps. 380
-
-
Ps. 380

Ps.

14
-
-
14

11
-
-
11

13
-
-
13

Ps. 478
5
-
Ps. 483

Ps. 80
2
-
Ps. 82

Ps.

154
32
-
186

Other

Ps. 2,068
13
4
Ps. 2,085

Ps.

1,348
15
3
1,366

1,585
10
68
1,663

Mexican peso exchange rates effective at the dates of the consolidated statements of financial position and at the issuance date of the Company’s
consolidated financial statements were as follows:

U.S.dollar
Euro

December 31,

February 25,

2014

14.7180
17.9182

2013

2015

13.0765
18.0079

15.0832
16.9269

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Note 16. Post-Employment and Other Long-Term Employee Benefits
The Company has various labor liabilities for employee benefits in connection with pension, seniority and post-retirement medical benefits. Benefits
vary depending upon the country where the individual employees are located. Presented below is a discussion of the Company’s labor liabilities in
Mexico and Venezuela, which comprise the substantial majority of those recorded in the consolidated financial statements.

During 2014, Coca-Cola FEMSA settled its pension plan in Brazil and consequently Coca-Cola FEMSA recognized the corresponding effects of the
settlement as disclosed below.

16.1 Assumptions
The Company annually evaluates the reasonableness of the assumptions used in its labor liability for post-employment and other non-current employee
benefits computations.

Actuarial calculations for pension and retirement plans, seniority premiums and post-retirement medical benefits, as well as the associated cost for the
period, were determined using the following long-term assumptions for non-hyperinflationary Mexico and Brazil:

Mexico

Financial:

Discount rate used to calculate the defined benefit obligation
Salary increase
Future pension increases
Healthcare cost increase rate

Biometric:
Mortality (1)
Disability (2)

Normal retirement age

Employee turnover table (3)

Measurement date December:

(1) EMSSA. Mexican Experience of social security. Updated due to lower mortality rates.

(2) IMSS. Mexican Experience of Instituto Mexicano del Seguro Social.

(3) BMAR. Actuary experience.

Brazil

Financial:

Discount rate used to calculate the defined benefit obligation
Salary increase
Future pension increases

Biometric:
Mortality (1) (2)
Disability (3)

Normal retirement age

Employee turnover table

Measurement date December:

(1) EMSSA. Mexican Experience of social security. Updated due to lower mortality rates.

(2) UP84. Unisex mortality table.

(3) IMSS. Mexican Experience of Instituto Mexicano del Seguro Social.

(4) Rest of employee turnover bases on the experience of the Company’s subsidiary in Brazil.

December 31,
2014

December 31,
2013

December 31,
2012

7.00%
4.50%
3.50%
5.10%

7.50%
4.79%
3.50%
5.10%

7.10%
4.79%
3.50%
5.10%

EMSSA 2009
IMSS-97
60 years
BMAR 2007

EMSSA 82-89
IMSS-97
60 years
BMAR 2007

EMSSA 82-89
IMSS - 97
60 years
BMAR 2007

December 31,
2014

December 31,
2013

December 31,
2012

12.00%
7.20%
6.20%

EMSSA 2009
IMSS - 97
65 years
Brazil (4)

10.70%
6.80%
5.80%

UP84
IMSS-97
65 years
Brazil (4)

9.30%
5.00%
4.00%

UP84
IMSS-97
65 years
Brazil (4)

Venezuela is a hyper-inflationary economy. The actuarial calculations for post-employment benefit (termination indemnity), as well as the associated
cost for the period, were determined using the following long-term assumptions which are “real” assumptions (excluding inflation):

Venezuela

Financial:

Discount rate used to calculate the defined benefit obligation
Salary increase

Biometric:
Mortality (1)
Disability (2)

Normal retirement age

Employee turnover table (3)

Measurement date December:

(1) EMSSA. Mexican Experience of social security. Updated due to lower mortality rates.

(2) IMSS. Mexican Experience of Instituto Mexicano del Seguro Social.

(3) BMAR. Actuary experience.

December 31,
2014

December 31,
2013

December 31,
2012

1.00%
1.00%

1.50%
1.50%

EMSSA 2009
IMSS – 97
65 years
BMAR 2007

EMSSA 82-89
IMSS-97
65 years
BMAR 2007

EMSSA 82-89
IMSS – 97
65 years
BMAR 2007

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

In Mexico the methodology used to determine the discount rate was the Yield or Internal Rate of Return (“IRR”) which involves a yield curve. In this case,
the expected rates of each period were taken from a yield curve of Mexican Federal Government Treasury Bond (known as CETES in Mexico).

In order to valuate the plan and the effects of the settlement in Brazil the methodology used to determine the discount rate was the Yield or Internal
Rate of Return (“IRR”) which involves a yield curve. In this case, the expected rates of each period were taken from a yield curve of fixed long term bonds
of Federal Republic of Brazil.

In Venezuela the methodology used to determine the discount rate started with reference to the interest rate of bonds of similar denomination issued
by the Republic of Venezuela, with subsequent consideration of other economic assumptions appropriate for hyper-inflationary economy. Ultimately,
the discount rates disclosed in the table above are calculated in real terms (without inflation).

In Mexico upon retirement, the Company purchases an annuity for the employee, which will be paid according to the option chosen by the employee.

Based on these assumptions, the amounts of benefits expected to be paid out in the following years are as follows:

2015
2016
2017
2018
2019
2020 to 2024

Pension and
Retirement Plans

Seniority
Premiums

Ps.

549
192
202
210
183
1,064

52
41
43
43
45
273

Post
Retirement
Medical
Services

Post-
Employment
(Venezuela)

Ps.

14
31
31
32
33
245

7
8
9
9
10
75

Total

Ps. 622
272
285
294
271
1,657

16.2 Balances of the liabilities for post-employment and other long-term employee benefits

Pension and Retirement Plans:
Defined benefit obligation
Pension plan funds at fair value

Net defined benefit liability
Effect due to asset ceiling

Net defined benefit liability after asset ceiling
Seniority Premiums:

Defined benefit obligation
Seniority premium plan funds at fair value

Net defined benefit liability
Postretirement Medical Services:
Defined benefit obligation

Medical services funds at fair value
Net defined benefit liability
Post-employment:

Defined benefit obligation
Post-employment plan funds at fair value

Net defined benefit liability
Total post-employment and other long-term employee benefits

December 31,
2014

December 31,
2013

Ps.

Ps.
Ps.

5,270
(2,015)
3,255
-
3,255

563
(87)
476

338
(56)
282

194
-
194
4,207

Ps.

Ps.
Ps.

4,866
(2,230)
2,636
94
2,730

475
(90)
385

267
(51)
216

743
-
743
4,074

As of December 2013, the net defined benefit liability of the pension and retirement plan includes an asset generated in Brazil (the following information
is included in the consolidated information of the tables above), which is as follows:

Defined benefit obligation
Pension plan funds at fair value
Net defined benefit asset
Effect due to asset ceiling
Net defined benefit asset after asset ceiling

December 31,
2013

Ps.

313
(498)
(185)
94
(91)

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

16.3 Trust assets
Trust assets consist of fixed and variable return financial instruments recorded at market value, which are invested as follows:

Type of Instrument

Fixed return:

Traded securities
Bank instruments
Federal government instruments of the respective countries

Variable return:

Publicly traded shares

December 31,
2014

December 31,
2013

19%
8%
57%

16%
100%

15%
6%
57%

22%
100%

In Mexico, the regulatory framework for pension plans is established in the Income Tax Law and its Regulations, the Federal Labor Law and the Mexican
Social Security Institute Law. None of these laws establish minimum funding levels or a minimum required level of contributions.

At December 31, 2013, in Brazil, the regulatory framework for pension plans is established by the Brazilian Social Security Institute (INSS), which
indicates that the contributions must be made by the Company and the workers. There are not minimum funding requirements of contributions in Brazil
neither contractual nor given.

In Venezuela, the regulatory framework for post-employment benefits is established by the Organic Labor Law for Workers (LOTTT). The organic
nature of this law means that its purpose is to defend constitutional rights, and therefore has precedence over other laws.

In Mexico, the Income Tax Law requires that, in the case of private plans, certain notifications must be submitted to the authorities and a certain level of
instruments must be invested in Federal Government securities among others.

The Company’s various pension plans have a technical committee that is responsible for verifying the correct operation of the plan with regard to the
payment of benefits, actuarial valuations of the plan,and supervise the trustee. The committee is responsible for determining the investment portfolio
and the types of instruments the fund will be invested in. This technical committee is also responsible for reviewing the correct operation of the plans
in all of the countries in which the Company has these benefits.

The risks related to the Company’s employee benefit plans are primarily attributable to the plan assets. The Company’s plan assets are invested in a
diversified portfolio, which considers the term of the plan so as to invest in assets whose expected return coincides with the estimated future payments.

Since the Mexican Tax Law limits the plan asset investment to 10% for related parties, this risk is not considered to be significant for purposes of the
Company’s Mexican subsidiaries.

In Mexico, the Company’s policy is to invest at least 30% of the fund assets in Mexican Federal Government instruments. Guidelines for the target
portfolio have been established for the remaining percentage and investment decisions are made to comply with these guidelines insofar as the market
conditions and available funds allow.

At December 2013, in Brazil, the investment target is to obtain the consumer price index (inflation), plus six percent. Investment decisions are made to
comply with this guideline insofar as the market conditions and available funds allow.

On May 7, 2012, the President of Venezuela amended the Organic Law for Workers (LOTTT), which establishes a minimum level of social welfare
benefits to which workers have a right when their labor relationship ends for whatever reason. This benefit is computed based on the last salary
received by the worker and retroactive to June 19, 1997 for any employee who joined the Company prior to that date. For employees who joined the
Company after June 19, 1997, the benefit is computed based on the date on which the employee joined the Company. An actuarial computation must
be performed using the projected unit credit method to determine the amount of the labor obligations that arise. As a result of the initial calculation,
there was an amount for Ps. 381 included in the other expenses caption in the consolidated income statement reflecting past service costs during the
year ended December 31, 2012 (see Note 19).

In Mexico, the amounts and types of securities of the Company in related parties included in portfolio fund are as follows:

Debt:

Cementos Mexicanos. S.A.B. de C.V.
Grupo Televisa, S.A.B. de C.V.
Grupo Financiero Banorte, S.A.B. de C.V.
El Puerto de Liverpool, S.A.B. de C.V.
Grupo Industrial Bimbo, S.A.B. de C. V.
Grupo Financiero Banamex, S.A.B. de C.V.
Teléfonos de México, S.A. de C.V.

Capital:

Fomento Económico Mexicano, S.A.B. de C.V.
Coca-Cola FEMSA, S.A.B. de C.V.
Grupo Televisa, S.A.B. de C.V.
Alfa, S.A.B. de C.V.
Grupo Aeroportuario del Sureste, S.A.B. de C.V.
Grupo Industrial Bimbo, S.A.B. de C.V.
The Coca-Cola Company
Gentera

December 31,
2014

December 31,
2013

Ps.

7
45
12
5
3
-
-

96
12
-
8
-
-
11
7

-
3
-
5
3
22
4

85
19
3
4
1
1
-
-

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

At December 31, 2013, in Brazil, the amounts and types of securities of the Company in related parties included in plan assets are as follows:

Brazil Portfolio

Debt:

HSBC - Sociedad de inversión Atuarial INPC (Brazil)

Capital:

HSBC - Sociedad de inversión Atuarial INPC (Brazil)

December 31,

Ps.

2013

383

114

During the years ended December 31, 2014 and 2013, the Company did not make significant contributions to the plan assets and does not expect to make
material contributions to the plan assets during the following fiscal year.

16.4 Amounts recognized in the consolidated income statements and the consolidated statement of comprehensive income

December 31, 2014
Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment Venezuela
Total

December 31, 2013
Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment Venezuela
Total

December 31, 2012
Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment Venezuela
Total

Income Statement

OCI (2)

Current
Service
Cost

Past
Service
Cost

Gain or
Loss on
Settlement

Net Interest Remeasurements
of the Net
Defined
Benefit
Liability

on the
Net Defined
Benefit
Liability (1)

Ps.

221
75
10
24
330

220
55
11
48
334

185
42
8
48
283

Ps.

54
9
-
-
63

12
-
-
-
12

-
-
-
381
381

Ps.

(193)
(27)
-
-
(220)

(7)
-
-
-
(7)

1
-
-
-
1

Ps.

279
28
16
18
341

164
22
15
67
268

136
17
14
63
230

Ps. 998
76
74
99
Ps. 1,247

Ps. 470
44
14
312
Ps. 840

Ps. 499
38
25
71
Ps. 633

(1) Interest due to asset ceiling amounted to Ps. 8 and Ps. 11 in 2013 and 2012, respectively.

(2) Amounts accumulated in other comprehensive income as of the end of the period.

For the years ended December 31, 2014, 2013 and 2012, current service cost of Ps. 330, Ps. 334 and Ps. 283 has been included in the consolidated
income statement as cost of goods sold, administration and selling expenses.

Remeasurements of the net defined benefit liability recognized in other comprehensive income are as follows:

December 31,
2014

December 31,
2013

December 31,

Amount accumulated in other comprehensive income as of the beginning of the period, net of tax
Actuarial losses arising from exchange rates
Remeasurements during the year, net of tax
Actuarial gains arising from changes in demographic assumptions
Actuarial gains and (losses) arising from changes in financial assumptions
Changes in the effect of limiting a net defined benefit asset to the asset ceiling
Amount accumulated in other comprehensive income as of the end of the period, net of tax

Ps.

585
(173)
318
41
171
-
942

Ps.

469
(26)
251
-
(109)
-
585

Ps.

Remeasurements of the net defined benefit liability include the following:

• The return on plan assets, excluding amounts included in interest expense.

• Actuarial gains and losses arising from changes in demographic assumptions.

• Actuarial gains and losses arising from changes in financial assumptions.

• Changes in the effect of limiting a net defined benefit asset to the asset ceiling, excluding amounts included in interest expense.

2012

190
(13)
20
-
281
(9)
469

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

16.5 Changes in the balance of the defined benefit obligation for post-employment

Pension and Retirement Plans:

Initial balance
Current service cost
Past service cost
Interest expense
Settlement
Remeasurements of the net defined benefit obligation
Foreign exchange (gain) loss
Benefits paid
Plan amendments
Acquisitions
Ending balance
Seniority Premiums:
Initial balance
Current service cost
Past service cost
Interest expense
Curtailment
Remeasurements of the net defined benefit obligation
Benefits paid
Acquisitions
Ending balance

Postretirement Medical Services:

Initial balance
Current service cost
Interest expense
Remeasurements of the net defined benefit obligation
Benefits paid
Ending balance
Post-employment:
Initial balance
Current service cost
Past service cost
Interest expense
Remeasurements of the net defined benefit obligation
Foreign exchange (gain) loss
Benefits paid
Ending balance

16.6 Changes in the balance of plan assets

Total Plan Assets:
Initial balance
Actual return on trust assets
Foreign exchange (gain) loss
Life annuities
Benefits paid
Acquisitions
Plan amendments
Effect due to settlement
Ending balance

December 31,
2014

December 31,
2013

December 31,
2012

Ps.

4,866
221
54
353
(482)
378
42
(162)
-
-
5,270

475
75
9
33
(27)
29
(37)
6
563

267
10
20
60
(19)
338

743
24
-
18
54
(638)
(7)
194

Ps.

4,495
220
-
311
(7)
(143)
(60)
(152)
28
174
4,866

324
55
-
24
-
2
(36)
106
475

267
11
17
(11)
(17)
267

Ps.

594 Ps.

48
-
67
238
(187)
(17)
743

Ps.

3,972
185
-
288
1
238
(67)
(154)
-
32
4,495

241
42
-
19
(2)
33
(23)
14
324

235
8
17
25
(18)
267

-
48
381
63
108
-
(6)
594

December 31,
2014

December 31,
2013

December 31,
2012

Ps.

2,371
133
(8)
197
-
-
-
(535)
2,158

Ps.

2,110
29
(73)
88
-
201
16
-
2,371

Ps.

1,991
145
(91)
29
(12)
48
-
-
2,110

As a result of the Company’s investments in life annuities plan, management does not expect it will need to make material contributions to plan assets
in order to meet its future obligations.

16.7 Variation in assumptions
The Company decided that the relevant actuarial assumptions that are subject to sensitivity and valuated through the projected unit credit method, are
the discount rate, the salary increase rate and healthcare cost increase rate. The reasons for choosing these assumptions are as follows:

• Discount rate: The rate that determines the value of the obligations over time.

• Salary increase rate: The rate that considers the salary increase which implies an increase in the benefit payable.

• Healthcare cost increase rate: The rate that considers the trends of health care costs which implies an impact on the postretirement medical service

obligations and the cost for the year.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

The following table presents the impact in absolute terms of a variation of 0.5% in the assumptions on the net defined benefit liability associated with
the Company’s defined benefit plans. The sensitivity of this 0.5% on the significant actuarial assumptions is based on a projected long-term discount
rates to Mexico and a yield curve projections of long-term sovereign bonds:

+0.5%:

Discount rate used to calculate
the defined benefit obligation and
the net interest on the net defined
benefit liability

Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment
Total

Expected salary increase

Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment
Total

Assumed rate of increase in healthcare costs

Postretirement medical services

-0.5%:

Discount rate used to calculate
the defined benefit obligation and
the net interest on the net defined
benefit liability

Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment
Total

Expected salary increase

Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment
Total

Assumed rate of increase in healthcare costs

Postretirement medical services

Income Statement

OCI

Current
Service
Cost

Past
Service
Cost

209
71
10
22
312

231
78
10
27
346

Ps.

52
8
-
-
60

56
9
-
-
65

Ps.

Gain or
Loss on
sobre
Settlement

on the Net

Net Interest Remeasurements
of the Net
Defined Benefit Defined Benefit
Liability (Asset) Liability (Asset)

Ps.

(95)
(25)
-
-
(120)

(111)
(28)
-
-
(139)

Ps.

192
29
16
17
254

206
30
16
19
271

Ps. 545
36
35
85
701

Ps.

Ps. 1,083
93
74
124
Ps. 1,374

Ps.

234
79
11
26
Ps. 350

Ps.

210
73
10
22
315

Ps.

57
9
-
-
66

53
8
-
-
61

Ps.

(108)
(29)
-
-
(137)

(99)
(27)
-
-
(126)

Ps.

198
29
16
19
262

Ps. 1,070
113
87
117
Ps. 1,387

183
27
16
15
241

Ps. 547
69
74
79
Ps. 769

Ps.

16.8 Employee benefits expense
For the years ended December 31, 2014, 2013 and 2012, employee benefits expenses recognized in the consolidated income statements are as follows:

Wages and salaries
Social security costs
Employee profit sharing
Post employment benefits
Post employment benefits recognized in other expenses (Note 19)
Share-based payments
Termination benefits

2014

Ps. 35,659
5,872
1,138
514
-
283
431
Ps. 43,897

2013

36,995
5,741
1,936
607
-
306
480
46,065

Ps.

2012

31,561
3,874
1,650
514
381
275
541
38,796

Ps.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Note 17. Bonus Programs
17.1 Quantitative and qualitative objectives
The bonus program for executives is based on complying with certain goals established annually by management, which include quantitative and
qualitative objectives, and special projects.

The quantitative objectives represent approximately 50% of the bonus, and are based on the Economic Value Added (“EVA”) methodology. The objective
established for the executives at each entity is based on a combination of the EVA generated per entity and the EVA generated by the Company,
calculated at approximately 70% and 30%, respectively. The qualitative objectives and special projects represent the remaining 50% of the annual
bonus and are based on the critical success factors established at the beginning of the year for each executive.

The bonus amount is determined based on each eligible participant’s level of responsibility and based on the EVA generated by the applicable business
unit the employee works for. This formula is established by considering the level of responsibility within the organization, the employees’ evaluation
and competitive compensation in the market. The bonus is granted to the eligible employee on an annual basis and after withholding applicable taxes.

17.2 Share-based payment bonus plan
The Company has implemented a stock incentive plan for the benefit of its senior executives. As discussed above, this plan uses as its main evaluation
metric the Economic Value Added, or EVA. Under the EVA stock incentive plan, eligible employees are entitled to receive a special annual bonus (fixed
amount), to be paid in shares of FEMSA or Coca-Cola FEMSA, as applicable or stock options (the plan considers providing stock options to employees;
however, since inception only shares of FEMSA or Coca-Cola FEMSA have been granted).

The plan is managed by FEMSA’s chief executive officer (CEO), with the support of the board of directors, together with the CEO of the respective
sub-holding company. FEMSA’s Board of Directors is responsible for approving the plan’s structure, and the annual amount of the bonus. Each year,
FEMSA’s CEO in conjunction with the Evaluation and Compensation Committee of the board of directors and the CEO of the respective sub-holding
company determine the employees eligible to participate in the plan and the bonus formula to determine the number of shares to be received, which
vest ratably over a six year period. On such date, the Company and the eligible employee agree to the share-based payment arrangement, being when
it and the counterparty have a shared understanding of the terms and conditions of the arrangement. FEMSA accounts for its share-based payment
bonus plan as an equity-settled share based payment transaction as it will ultimately settle its obligations with its employees by issuing its own shares
or those of its subsidiary Coca-Cola FEMSA.

The Company contributes the individual employee’s special bonus (after taxes) in cash to the Administrative Trust (which is controlled and consolidated
by FEMSA), who then uses the funds to purchase FEMSA or Coca-Cola FEMSA shares (as instructed by the Administrative Trust’s Technical Committee),
which are then allocated to such employee. The Administrative Trust tracks the individual employees’ account balance. FEMSA created the Administrative
Trust with the objective of administering the purchase of FEMSA and Coca-Cola FEMSA shares by each of its subsidiaries with eligible executives
participating in the stock incentive plan. The Administrative Trust’s objectives are to acquire FEMSA shares, or shares of Coca-Cola FEMSA and to
manage the shares granted to the individual employees based on instructions set forth by the Technical Committee. Once the shares are acquired
following the Technical Committee’s instructions, the Administrative Trust assigns to each participant their respective rights. As the trust is controlled
and therefore consolidated by FEMSA, shares purchased in the market and held within the Administrative Trust are presented as treasury stock (as it
relates to FEMSA’s shares) or as a reduction of the noncontrolling interest (as it relates to Coca-Cola FEMSA’s shares) in the consolidated statement
of changes in equity, on the line issuance (repurchase) of shares associated with share-based payment plans. Should an employee leave prior to their
shares vesting, they would lose the rights to such shares, which would then remain within the Administrative Trust and be able to be reallocated to other
eligible employees as determined by the Company. The incentive plan target is expressed in months of salary, and the final amount payable is computed
based on a percentage of compliance with the goals established every year. For the years ended December 31, 2014, 2013 and 2012, the compensation
expense recorded in the consolidated income statement amounted to Ps. 283, Ps. 306 and Ps. 275, respectively.

All shares held in the Administrative Trust are considered outstanding for diluted earnings per share purposes and dividends on shares held by the trust
are charged to retained earnings.

As of December 31, 2014 and 2013, the number of shares held by the trust associated with the Company’s share based payment plans is as follows:

Beginning balance
Shares acquired by the administrative trust to employees
Shares released from administrative trust to employees upon vesting
Forfeitures
Ending balance

Number of Shares
FEMSA UBD

KOF L

2014

2013

2014

2013

7,001,428
517,855
(2,755,528)
-
4,763,755

8,416,027
2,285,948
(3,700,547)
-
7,001,428

1,780,064
330,730
(812,261)
-
1,298,533

2,421,876
407,487
(1,049,299)
-
1,780,064

The fair value of the shares held by the trust as of the end of December 31, 2014 and 2013 was Ps. 788 and Ps. 1,166, respectively, based on quoted
market prices of those dates.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Note 18. Bank Loans and Notes Payables

At December 31, (1)

(in millions of Mexican pesos)

2015

2016

2017

2018

2019

Short-term debt:
Fixed rate debt:
Argentine pesos
Bank loans

Interest rate
Variable rate debt:
Brazilian Reais
Bank loans

Interest rate
Total short-term debt

Long-term debt:
Fixed rate debt:
U.S. dollars
Senior notes

Interest rate

Senior note (FEMSA USD 2023)

Interest rate

Senior note (FEMSA USD 2043)

Interest rate

Bank loans

Interest rate

Mexican pesos
Units of investment (UDIs)

Interest rate
Domestic senior notes
Interest rate

Brazilian reais
Bank loans

Interest rate

Finance leases

Interest rate
Argentine pesos
Bank loans

Interest rate

Subtotal

Variable rate debt:
U.S. dollars
Bank loans

Interest rate

Mexican pesos
Domestic senior notes
Interest rate

Bank loans

Interest rate
Argentine pesos
Bank loans

Interest rate

Brazilian reais
Bank loans

Interest rate

Finance leases

Interest rate
Colombian pesos
Bank loans

Interest rate

Subtotal
Total long-term debt
Current portion of long term debt

Ps.

301
30.9%

Ps.

- Ps.
-

-
-

-
-
-

-
-
-
-
-
-
-
-

Ps.

-
-

-
-
-

Ps. 14,668
2.4%
-
-
-
-
-
-

Ps.

-
-
- Ps.

- Ps.
-
-
-
-
-
-
-

-
-
-
-

120
4.3%
192
4.6%

3,599
4.2%
-
-

123
4.5%
168
4.6%

-
-
-
-

91
5.1%
88
4.6%

124
24.9%
493

131
27.5%

54
30.2%
Ps. 443 Ps. 3,944

-
-
14,847

Ps.

148
12.6%
449

Ps.

-
-
-
-
-
-
30
3.9%

-
-
-
-

116
4.1%
223
4.7%

-
-

17
24.9%

64
12.3%
38
10.0%

-
-

17
7.6%
-
-

2,473
3.4%

215
21.3%

27
9.7%
25
10.0%

-
-

17
7.6%
-
-

-
-
17
3,961

2020 and
Thereafter

Ps.

-
-

-
-
-

Ps. 29,225
4.5%
4,308
2.9%
9,900
4.4%
-
-

-
-
9,988
6.2%

97
4.9%
50
4.6%

-
-

-
-
-

-
-
-
-
-
-
-
-

-
-
-
-

54
5.2%
41
4.6%

Ps.

-
-
95

-
-
Ps. 53,568

Ps.

-
-

17
7.6%
-
-

14
6.0%
-
-

Carrying
Value at

Carrying
Value at
December 31, December 31, December 31,
2013(1)

Fair
Value at

2014

Ps.

301 Ps.

304

Ps.

30.9%

148
12.6%

148

Ps.

449 Ps.

452

Ps.

495
25.4%

34
9.7%
529

Ps. 43,893 Ps. 46,924

3.8%
4,308
2.9%
9,900
4.4%
30
3.9%

3,599
4.2%
9,988
6.2%

601
4.6%
762
4.6%

309
26.8%

4,117

9,594

3,599

9,677

553

642

302

Ps. 73,390 Ps. 75,438

Ps. 34,272
3.7%
3,736
2.9%
8,377
4.4%
123
3.8%

3,630
4.2%
9,987
6.2%

337
3.1%
965
4.6%

358
20.3%
Ps. 61,785

0.9%

2,473
3.4%

232
21.5%

156
6.7%
63
10.0%

769
5.9%

2,502

227

146

63
10.0%

766

Ps. 10,649 Ps. 10,705
Ps. 84,039 Ps. 86,143

(1,104)
Ps. 82,935

5,843
0.9%

2,517
3.9%
4,132
4.0%

180
25.7%

167
11.3%
100
10.0%

Ps.
Ps.

1,495
5.7%
14,434
76,219
(3,298)
Ps. 72,921

492
5.9%
611
1,104

277
5.9%
Ps. 5,125 Ps.
Ps. 5,568 Ps.

Ps.
Ps.

-
-
Ps. 4,865
19,712
Ps.

Ps.
Ps.

-
-
17
112

-
-
Ps.
14
Ps. 53,582

(1) All interest rates shown in this table are weighted average contractual annual rates.

Ps. 2,108 Ps.
0.9%

- Ps. 4,848
0.9%
-

Ps. 6,956 Ps. 7,001

Ps.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

Hedging Derivative
Financial Instruments (1)

Cross currency swaps:
Units of investments to Mexican pesos

and variable rate:

Fixed to variable

Interest pay rate
Interest receive rate
U.S. dollars to Mexican pesos:
Fixed to variable

Interest pay rate
Interest receive rate

Variable to fixed

Interest pay rate
Interest receive rate

Fixed to fixed

Interest pay rate
Interest receive rate
U.S. dollars to Brazilian reais:
Fixed to variable

Interest pay rate
Interest receive rate

Variable to variable

Interest pay rate
Interest receive rate

Interest rate swap:
Mexican pesos
Variable to fixed rate: (2)
Interest pay rate
Interest receive rate
Variable to fixed rate: (3)
Interest pay rate
Interest receive rate

2015

2016

2017

2018

2019

(notional amounts in millions of Mexican pesos)

2020 and
Thereafter

2014

2013

Ps.

- Ps.
-
-

-
-
-
-
-
-
-
-
-

30
13.7%
3.9%
-
-
-

-
-

-
-
-

-
-
-
-
-
-
-
-
-

-
-
-
-
-
-

-
-

Ps.

2,500
3.1%
4.2%

Ps.

-
-
-

-
-
-
-
-
-
-
-
-

-
-
-
-
-
-

5.0%
3.2%

-
-

-
-
-
6,476
3.2%
2.4%
-
-
-

6,623
11.2%
2.7%
20,311
11.3%
1.5%

-
-

-
-
-

-
-
-
-
-
-
-
-
-

-
-
-
-
-
-

-
-

7.2%
4.6%

Ps.

- Ps. 2,500 Ps. 2,500
4.1%
-
4.2%
-

3.1%
4.2%

11,403
4.6%
4.0%
-
-
-
1,267
5.7%
2.9%

-
-
-
-
-
-

-
-

11,403
4.6%
4.0%
6,476
3.2%
2.4%
1,267
5.7%
2.9%

6,653
11.3%
2.7%
20,311
11.3%
1.5%

5.0%
3.2%

7.2%
4.6%

11,403
5.1%
4.0%
-
-
-
2,575
7.2%
3.8%

6,017
9.5%
2.7%
18,046
9.5%
1.5%

2,538
8.6%
4.0%
2,538
8.6%
4.0%

(1) All interest rates shown in this table are weighted average contractual annual rates.

(2) IRS with a notional of Ps. 1,500, that receives a variable rate of 3.2% and pays a fixed rate of 5.0%; joined with a cross currency swap which covers units of investments

to Mexican pesos that receives a fixed rate of 4.2% and pays a variable rate of 3.2%.

(3) IRS with notional of Ps. 11,403, that receives a variable rate of 4.6% and pays a fixed rate of 7.2%; joined with a cross currency swap which covers U.S. Dollars to Mexican

pesos that receives a fixed rate of 4.0% and pay a variable rate of 4.6%.

For the years ended December 31, 2014, 2013 and 2012, the interest expense is comprised as follows:

Interest on debts and borrowings
Finance charges payable under capitalized interest
Finance charges for employee benefits
Derivative instruments
Finance operating charges
Finance charges payable under finance leases

2014

3,992
(117)
341
2,413
66
6
6,701

Ps.

2013

3,055
(59)
268
825
225
17
4,331

Ps.

2012

2,029
(38)
230
142
98
45
2,506

Ps.

On May 7, 2013, the Company issued long-term debt on the NYSE in the amount of $1,000, which was made up of senior notes of $300 with a maturity
of 10 years and a fixed interest rate of 2.875%; and senior notes of $700 with a maturity of 30 years and a fixed interest rate of 4.375%. After the
issuance, the Company contracted cross-currency swaps to reduce its exposure to risk of exchange rate and interest rate fluctuations associated with
this issuance, see Note 20.

In November, 2013, Coca-Cola FEMSA issued U.S.$1,000 in aggregate principal amount of 2.375% Senior Notes due 2018, U.S.$750 in aggregate
principal amount of 3.875% Senior Notes due 2023 and U.S.$400 in aggregate principal amount of 5.250% Senior Notes due 2043, in an SEC
registered offering. These notes are guaranteed by its subsidiaries: Propimex, S. de R.L. de C.V., Comercializadora La Pureza de Bebidas, S. de R.L. de
C.V., Controladora Interamericana de Bebidas, S. de R.L. de C.V., Grupo Embotellador Cimsa, S. de R.L. de C.V., Refrescos Victoria del Centro, S. de R.L.
de C.V., Servicios Integrados Inmuebles del Golfo, S. de R.L. de C.V. and Yoli de Acapulco, S.A. de C.V. (“Guarantors”).

On December 4, 2007, the Company obtained the approval from the National Banking and Securities Commission (Comisión Nacional Bancaria y de
Valores or “CNBV”) for the issuance of long-term domestic senior notes (“Certificados Bursátiles”) in the amount of Ps. 10,000 (nominal amount) or
its equivalent in investment units. As of December 31, 2014 the Company has issued the following domestic senior notes: i) on December 7, 2007, the
Company issued domestic senior notes composed of Ps. 3,500 (nominal amount) with a maturity date on November 29, 2013 and a floating interest
rate, which was paid at maturiry; ii) on December 7, 2007, the Company issued domestic senior notes in the amount of 637,587,000 investment units
(Ps. 2,500 nominal amount), with a maturity date on November 24, 2017 and a fixed interest rate.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Coca-Cola FEMSA has the following bonds: a) registered with the Mexican stock exchange: i) Ps. 2,500 (nominal amount) with a maturity date in 2016
and a variable interest rate, ii) Ps. 2,500 (nominal amount) with a maturity date in 2021 and fixed interest rate of 8.3% and iii) Ps. 7,500 (nominal
amount) with a maturity date in 2023 and fixed interest rate of 5.5%; b) registered with the SEC : i) Senior notes of $500 with interest at a fixed rate
of 4.6% and maturity date on February 15, 2020, ii) Senior notes of $1,000 with interest at a fixed rate of 2.4% and maturity date on November 26,
2018, iii) Senior notes of $750 with interest at a fixed rate of 3.9% and maturity date on November 26, 2023 and iv)Senior notes of $400 with interest
at a fixed rate of 5.3% and maturity date on November 26, 2043 which are guaranteed by the Guarantors.

During 2013, Coca-Cola FEMSA contracted and prepaid in part the following Bank loans denominated in dollars: i) $500 (nominal amount) with a
maturity date in 2016 and variable interest rate and prepaid $380 (nominal amount) in November 2013, the outstanding amount of this loan is $120
(nominal amount) and ii) $1,500 (nominal amount) with a maturity date in 2018 and variable interest rate and prepaid $1,170 (nominal amount) in
November 2013, the outstanding amount of this loan is $330 (nominal amount). In December 2013, Coca-Cola FEMSA prepaid in full outstanding Bank
loans denominated in dollars for a total amount of $600 (nominal amount).

The Company has financing from different institutions under agreements that stipulate different restrictions and covenants, which mainly consist of
maximum levels of leverage and capitalization as well as minimum consolidated net worth and debt and interest coverage ratios. As of the date of these
consolidated financial statements, the Company was in compliance with all restrictions and covenants contained in its financing agreements.

In January 13, 2014, Coca-Cola FEMSA issued an additional U.S. $350 million of Senior Notes comprised of 10 year and 30 year bonds. The interest rates
and maturity dates of the new notes are the same as those of the initial 2013 notes offering. These notes are also guaranteed by the same Guarantors.

In February 2014, Coca-Cola FEMSA prepaid in full outstanding Bank loans denominated in pesos for a total amount of Ps. 4,175 (nominal amount).

Note 19. Other Income and Expenses

Gain on sale of shares (see Note 4)
Gain on sale of long-lived assets
Gain on sale of other assets
Sale of waste material
Write off-contingencies
Recoveries from previous years
Insurance rebates
Others
Other income
Contingencies associated with prior acquisitions or disposals
Loss on sale of long-lived assets
Impairment of long-lived assets
Disposal of long-lived assets (1)
Foreign Exchange
Securities taxes from Colombia
Severance payments
Donations (2)
Legal fees and other expenses from past acquisitions
Effect of new labor law (LOTTT) (see Note 16) (3)
Other
Other expenses

2014

-
-
276
44
475
89
18
196
1,098
-
7
145
153
147
69
277
172
31
-
276
1,277

Ps.

2013

-
41
170
43
120
-
-
277
651
385
-
-
122
99
51
190
119
110
-
363
1,439

Ps.

2012

1,215
132
38
43
76
-
-
241
1,745
213
-
384
133
40
40
349
200
-
381
233
1,973

Ps.

(1) Charges related to fixed assets retirement from ordinary operations and other long-lived assets.

(2) In 2012 are included the gain on the sale of 45% interest held by FEMSA in the parent companies of the Mareña Renovables Wind Power Farm (see Note 10) offsetting to

the donation made to Fundación FEMSA, A. C. (see Note 14).

(3) This amount relates to the past service cost related to post-employment by Ps. 381 as a result of the effect of the change in LOTTT and it is included in the consolidated

income statement under the “Other expenses” caption.

Note 20. Financial Instruments
Fair Value of Financial Instruments
The Company measures the fair value of its financial assets and liabilities classified as level 2 applying the income approach method, which estimates
the fair value based on expected cash flows discounted to net present value. The following table summarizes the Company’s financial assets and
liabilities measured at fair value, as of December 31, 2014 and 2013:

Derivative financial instrument (current asset)
Derivative financial instrument (non-current asset)
Derivative financial instrument (current liability)
Derivative financial instrument (non-current liability)

December 31, 2014

December 31, 2013

Level 1

-
-
313
112

Level 2

384
6,299
34
39

Level 1

2
-
272
-

Level 2

26
1,472
75
1,526

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

20.1 Total debt
The fair value of bank and syndicated loans is calculated based on the discounted value of contractual cash flows whereby the discount rate is
estimated using rates currently offered for debt of similar amounts and maturities, which is considered to be level 2 in the fair value hierarchy. The fair
value of the Company’s publicly traded debt is based on quoted market prices as of December 31, 2014 and 2013, which is considered to be level 1 in
the fair value hierarchy.

Carrying value
Fair value

Ps.

2014

84,488
86,595

Ps.

2013

76,748
76,077

20.2 Interest rate swaps
The Company uses interest rate swaps to offset the interest rate risk associated with its borrowings, pursuant to which it pays amounts based on
a fixed rate and receives amounts based on a floating rate. These instruments have been designated as cash flow hedges and are recognized in the
consolidated statement of financial position at their estimated fair value. The fair value is estimated using formal technical models. The valuation
method involves discounting to present value the expected cash flows of interest, calculated from the rate curve of the cash flow currency, and
expresses the net result in the reporting currency. Changes in fair value are recorded in cumulative other comprehensive income, net of taxes until such
time as the hedged amount is recorded in the consolidated income statements.

At December 31, 2014, the Company has the following outstanding interest rate swap agreements:

Maturity Date

2017
2023

Notional
Amount

Fair Value
Liability
December 31,
2014

Fair Value
Asset
December 31,
2014

Ps.

1,250
11,403

Ps.

(35)
(4)

Ps.

-
12

At December 31, 2013 the Company has the following outstanding interest rate swap agreements:

Maturity Date

2014
2015

Notional
Amount

Fair Value
Liability
December 31,
2013

Fair Value
Asset
December 31,
2013

Ps.

575
1,963

Ps.

(18)
(122)

Ps.

-
-

The net effect of expired contracts treated as hedges are recognized as interest expense within the consolidated income statements.

20.3 Forward agreements to purchase foreign currency
The Company has entered into forward agreements to reduce its exposure to the risk of exchange rate fluctuations between the Mexican peso and
other currencies. Foreign exchange forward contracts measured at fair value are designated hedging instruments in cash flow hedges of forecast
inflows in Euros and forecast purchases of raw materials in U.S. dollars. These forecast transactions are highly probable.

These instruments have been designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated
fair value which is determined based on prevailing market exchange rates to terminate the contracts at the end of the period. The price agreed in
the instrument is compared to the current price of the market forward currency and is discounted to present value of the rate curve of the relevant
currency. Changes in the fair value of these forwards are recorded as part of cumulative other comprehensive income, net of taxes. Net gain/loss on
expired contracts is recognized as part of cost of goods sold when the raw material is included in sale transaction, and as a part of foreign exchange
when the inflow in Euros are received.

At December 31, 2014, the Company had the following outstanding forward agreements to purchase foreign currency:

Maturity Date

2015
2016

Notional
Nocional

Ps.

4,411
1,192

Fair Value
Liability
December 31,
2014

Ps.

-
(26)

Ps.

Fair Value
Asset
December 31,

2014

298
-

At December 31, 2013, the Company had the following outstanding forward agreements to purchase foreign currency:

Maturity Date

2014
2015

Notional
Nocional

Ps.

3,002
614

Fair Value
Liability
December 31,
2013

Fair Value
Asset
December 31,

2013

Ps.

(17)
-

Ps.

-
1

20.4 Options to purchase foreign currency
The Company has entered into a collar strategy to reduce its exposure to the risk of exchange rate fluctuations. A collar is a strategy that limits the
exposure to the risk of exchange rate fluctuations in a similar way as a forward agreement.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

These instruments have been designated as cash flow hedges and are recognized in the consolidated statement of financial position at their estimated
fair value which is determined based on prevailing market exchange rates to terminate the contracts at the end of the period. Changes in the fair value
of these options, corresponding to the intrinsic value are initially recorded as part of cumulative other comprehensive income, net of taxes. Changes in
the fair value, corresponding to the extrinsic value are recorded in the consolidated income statements under the caption “market value gain (loss) on
financial instruments,” as part of the consolidated net income. Net gain (loss) on expired contracts is recognized as part of cost of goods sold when the
related raw material is affecting the cost of good sold.

At December 31, 2014, the Company had the following outstanding collars agreements to purchase foreign currency:

Maturity Date

2015

Notional
Amount

Fair Value
Liability
December 31,
2014

Ps.

402

Ps.

Fair Value
Asset
December 31,

2014

At December 31, 2013, the Company had no outstanding collars to purchase foreign currency (composed of a call and a put option with different strike
levels with the same notional amount and maturity).

20.5 Cross-currency swaps
The Company has contracted for a number of cross-currency swaps to reduce its exposure to risks of exchange rate and interest rate fluctuations
associated with its borrowings denominated in U.S. dollars and other foreign currencies. Cross-Currency swaps contracts are designated as hedging
instruments through which the Company changes the debt profile to its functional currency to reduce exchange exposure.

These instruments are recognized in the consolidated statement of financial position at their estimated fair value which is estimated using formal
technical models. The valuation method involves discounting to present value the expected cash flows of interest, calculated from the rate curve
of the cash foreign currency, and expresses the net result in the reporting currency. These contracts are designated as financial instuments at fair
valuethrough profit or loss. The fair values changes related to those cross currency swaps are recorded under the caption “market value gain (loss) on
financial instruments,” net of changes related to the long-term liability, within the consolidated income statements.

The Company has cross-currency contracts designated as cash flow hedges and are recognized in the consolidated statement of financial position
at their estimated fair value. Changes in fair value are recorded in cumulative other comprehensive income, net of taxes until such time as the hedge
amount is recorded in the consolidated income statement.

At December 31, 2014, the Company had the following outstanding cross currency swap agreements:

Maturity Date

2015
2017
2018
2019
2023

Ps.

Notional
Amount

30
2,711
33,410
369
12,670

At December 31, 2013, the Company had the following outstanding cross currency swap agreements:

Maturity Date

2014
2015
2017
2018
2023

Ps.

Notional
Amount

1,358
83
2,711
23,930
12,670

Ps.

Fair Value
Liability
December 31,
2014

Fair Value
Asset
December 31,

2014

6
1,209
3,002
15
2,060

Ps.

-
-
-
-
-

Fair Value
Liability
December 31,
2013

-
-
-
(825)
(350)

Fair Value
Asset
December 31,

Ps.

2013

18
11
1,180
-
-

20.6 Commodity price contracts
The Company has entered into various commodity price contracts to reduce its exposure to the risk of fluctuation in the costs of certain raw material.
The fair value is estimated based on the market valuations to terminate the contracts at the end of the period. These instruments are designated as
Cash Flow Hedges and the changes in the fair value are recorded as part of “cumulative other comprehensive income.”

The fair value of expired commodity price contract was recorded in cost of goods sold where the hedged item was recorded.

At December 31, 2014, Coca-Cola FEMSA had the following sugar price contracts:

Maturity Date

2015
2016
2017

Ps.

Notional
Amount

1,341
952
37

Fair Value
Liability
December 31,

Ps.

2014

(285)
(101)
(2)

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

At December 31, 2014, Coca-Cola FEMSA had the following aluminum price contracts:

Maturity Date

2015
2016

At December 31, 2013, Coca-Cola FEMSA had the following outstanding sugar price contracts:

Maturity Date

2014
2015
2016

At December 31, 2013, Coca-Cola FEMSA had the following aluminum price contracts:

Maturity Date

2014

Fair Value
Liability
December 31,
2014

Ps.

(12)
(9)

Notional
Amount

361
177

Fair Value
Liability

December 31,

2013

(246)
(48)
-

Fair Value
Asset
December 31,
2013

Ps.

-
-
2

Ps.

Notional
Amount

Fair Value
Liability
December 31,
2013

Ps.

205

Ps.

(10)

Ps.

Notional
Amount

1,183
730
103

20.7 Financial Instruments for CCFPI acquisition
The Coca-Cola FEMSA’s call option related to the remaining 49% ownership interest in CCFPI is calculated using a Level 3 concept. The call option had an
estimated fair value of approximately Ps. 859 million at inception of the option, and approximately Ps. 799 million and Ps. 755 million as of December
31, 2013 and 2014, respectively. Significant observable inputs into that Level 3 estimate include the call option’s expected term (7 years at inception),
risk free rate as expected return (LIBOR), implied volatility at inception (19.77%) and the underlying enterprise value of the CCFPI. The enterprise value
of CCFPI for the purpose of this estimate was based on CCFPI’s long-term business plan. The Coca-Cola FEMSA acquired its 51% ownership interest in
CCFPI in January 2013 and continues to integrate CCFPI into its global operations using the equity method of accounting, and currently believes that the
underlying exercise price of the call option is “out of the money.”

The Level 3 fair value of the Company’s put option related to its 51% ownership interest approximates zero as its exercise price as defined in the
contract adjusts proportionately to the underlying fair value of CCFPI.

20.8 Net effects of expired contracts that met hedging criteria

Type of Derivatives

Interest rate swaps
Forward agreements to purchase foreign currency
Commodity price contracts
Options to purchase foreign currency
Forward agreements to purchase foreign currency

Impact in Consolidated
Income Statement

Interest expense
Foreign exchange
Cost of goods sold
Cost of goods sold
Cost of goods sold

Ps.

2014

(337)
(38)
(291)
-
(22)

Ps.

2013

(214)
1,710
(362)
-
-

20.9 Net effect of changes in fair value of derivative financial instruments that did not meet the hedging criteria for accounting purposes

Type of Derivatives

Interest rate swaps
Cross currency swaps
Others

Impact in Consolidated
Income Statement

Market value gain (loss) on financial instruments

Ps.

2014

10
59
3

Ps.

2013

(7)
33
(19)

Ps.

20.10 Net effect of expired contracts that did not meet the hedging criteria for accounting purposes

Type of Derivatives

Impact in Consolidated
Income Statement

2014

2013

Cross-currency swaps

Market value gain (loss) on financial instruments

Ps.

2012

(147)
126
6
13
-

2012

(4)
(2)
(29)

2012

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

20.11 Market risk
Market risk is the risk that the fair value of future cash flow of a financial instrument will fluctuate because of changes in market prices. Market prices
include currency risk and commodity price risk.

The Company’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and commodity prices. The Company
enters into a variety of derivative financial instruments to manage its exposure to foreign currency risk, and commodity prices risk including:

• Forward Agreements to Purchase Foreign Currency in order to reduce its exposure to the risk of exchange rate fluctuations.

• Cross-Currency Swaps in order to reduce its exposure to the risk of exchange rate fluctuations.

•

Interest Rate Swaps in order to reduce its exposure to the risk of interest rate fluctuations.

• Commodity price contracts in order to reduce its exposure to the risk of fluctuation in the costs of certain raw materials.

The Company tracks the fair value (mark to market) of its derivative financial instruments and its possible changes using scenario analyses.

The following disclosures provide a sensitivity analysis of the market risks management considered to be reasonably possible at the end of the reporting
period, which the Company is exposed to as it relates to foreign exchange rates and commodity prices, which it considers in its existing hedging strategy:

Foreign Currency Risk

2014

FEMSA (3)

Coca-Cola FEMSA

2013

FEMSA (3)

Coca-Cola FEMSA

2012

FEMSA (3)

Coca-Cola FEMSA

Cross Currency Swaps (1) (2)

2014

FEMSA (3)
Coca-Cola FEMSA

2013

FEMSA (3)
Coca-Cola FEMSA

2012

FEMSA (3)
Coca-Cola FEMSA

Change in

Exchange Rate

Effect on
Equity

Effect on
Profit or Loss

Ps.

+9% MXN/EUR

Ps.

-9% MXN/EUR

+7% MXN/USD

Ps.

+14% BRL/USD

+9% COP/USD

+11% ARS/USD

-7% MXN/USD

-14% BRL/USD

-9% COP/USD

-11% ARS/USD

(278)

278

119

(119)

(96)

(42)

(22)

+7% MXN/EUR

Ps.

(157)

Ps.

-7% MXN/EUR

+11% MXN/USD

+13% BRL/USD

+6% COP/USD

-11% MXN/USD

-13% BRL/USD

-6% COP/USD

+9% MXN/EUR/+11% MXN/USD

Ps.

-9% MXN/EUR/-11% MXN/USD

-11% MXN/USD

157

(67)

(86)

(19)

(250)

104

(204)

Ps.

Change in
Exchange Rate

Effect on
Profit or Loss

-7% MXN/USD
-7% MXN/USD
-14% USD/BRL

-11% MXN/ USD
-11% MXN/ USD
-13% USD/BRL

-
-11% MXN/ USD

(22)
(481)
(3,935)

(1,581)
(392)
(3,719)

-
(234)

(1) The sensitivity analysis effects include all subsidiaries of the Company.

(2) Includes the sensitivity analysis effects of all derivative financial instruments related to foreign exchange risk.

(3) Does not include Coca-Cola FEMSA.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

100

Net Cash in Foreign Currency (1)

2014

FEMSA (3)

Coca-Cola FEMSA

2013

FEMSA (3)

Coca-Cola FEMSA

2012

FEMSA (3)

Coca-Cola FEMSA

Commodity Price Contracts (1)

2014

Coca-Cola FEMSA

2013

Coca-Cola FEMSA

2012

Coca-Cola FEMSA

Change in
Exchange Rate

Effect on
Profit or Loss

+9% EUR/+7%USD
-9% EUR/-7%USD
+7%USD
-7%USD

+7% EUR/+11% USD
-7% EUR/-11% USD
+11% USD
-11% USD

+9% EUR/+11% USD
-9% EUR/-11% USD
+15% USD

Ps.

233
(233)
(747)
747

335
(335)
(1,090)
1,090

809
(809)
(362)

Change in
U.S. $ Rate

Effect on
Equity

Sugar -27%
Aluminum -17%

Sugar -18%
Aluminum -19%

Sugar -30%
Aluminum -20%

Ps.

(528)
(87)

(298)
(36)

(732)
(66)

(1) The sensitivity analysis effects include all subsidiaries of the Company.

(2) Includes the sensitivity analysis effects of all derivative financial instruments related to foreign exchange risk.

(3) Does not include Coca-Cola FEMSA.

20.12 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flow of a financial instrument will fluctuate because of changes in market interest rates.

The Company is exposed to interest rate risk because it and its subsidiaries borrow funds at both fixed and variable interest rates. The risk is managed
by the Company by maintaining an appropriate mix between fixed and variable rate borrowings, and by the use of the different derivative financial
instruments. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective
hedging strategies are applied.

The following disclosures provide a sensitivity analysis of the interest rate risks management considered to be reasonably possible at the end of the
reporting period, which the Company is exposed to as it relates to its fixed and floating rate borrowings, which it considers in its existing hedging
strategy:

Interest Rate Swap (1)

2014

FEMSA (2)
Coca-Cola FEMSA

2013

FEMSA (2)
Coca-Cola FEMSA

2012

FEMSA (2)
Coca-Cola FEMSA

Change in
Bps.

Effect on
Equity

(100 Bps.)
-

-
(100 Bps.)

(528)
-

-
(32)

-
(57)

(1) The sensitivity analysis effects include all subsidiaries of the Company.

(2) Does not include Coca-Cola FEMSA.

Interest Effect of Unhedged Portion Bank Loans

Change in interest rate
Effect on profit loss

2014

2013

2012

+100 Bps.
(244)

Ps.

+100 Bps.
(332)

Ps.

+100 Bps.
(198)

Ps.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

101

20.13 Liquidity risk
Each of the Company’s sub-holding companies generally finances its operational and capital requirements on an independent basis. As of December 31,
2014 and 2013, 80.66% and 79.48%, respectively of the Company’s outstanding consolidated total indebtedness was at the level of its sub-holding
companies. This structure is attributable, in part, to the inclusion of third parties in the capital structure of Coca-Cola FEMSA. Currently, the Company’s
management expects to continue to finance its operations and capital requirements primarily at the level of its sub-holding companies. Nonetheless,
they may decide to incur indebtedness at its holding company in the future to finance the operations and capital requirements of the Company’s
subsidiaries or significant acquisitions, investments or capital expenditures. As a holding company, the Company depends on dividends and other
distributions from its subsidiaries to service the Company’s indebtedness.

The Company’s principal source of liquidity has generally been cash generated from its operations. The Company has traditionally been able to rely
on cash generated from operations because a significant majority of the sales of Coca-Cola FEMSA and FEMSA Comercio are on a cash or short-term
credit basis, and FEMSA Comercio’s OXXO stores are able to finance a significant portion of their initial and ongoing inventories with supplier credit. The
Company’s principal use of cash has generally been for capital expenditure programs, acquisitions, debt repayment and dividend payments.

Ultimate responsibility for liquidity risk management rests with the Company’s board of directors, which has established an appropriate liquidity risk
management framework for the management of the Company’s short-, medium- and long-term funding and liquidity requirements. The Company
manages liquidity risk by maintaining adequate reserves and credit facilities, by continuously monitoring forecast and actual cash flows, and with a
low concentration of maturities per year.

The Company has access to credit from national and international bank institutions in order to meet treasury needs; besides, the Company has the
highest rating for Mexican companies (AAA) given by independent rating agencies, allowing the Company to evaluate capital markets in case it needs
resources.

As part of the Company’s financing policy, management expects to continue financing its liquidity needs with cash from operations. Nonetheless, as a
result of regulations in certain countries in which the Company operates, it may not be beneficial or, as in the case of exchange controls in Venezuela,
practicable to remit cash generated in local operations to fund cash requirements in other countries. Exchange controls like those in Venezuela may
also increase the real price of remitting cash from operations to fund debt requirements in other countries. In the event that cash from operations
in these countries is not sufficient to fund future working capital requirements and capital expenditures, management may decide, or be required, to
fund cash requirements in these countries through local borrowings rather than remitting funds another country. In addition, the Company’s liquidity in
Venezuela could be affected by changes in the rules applicable to exchange rates as well as other regulations, such as exchange controls. In the future
the Company management may finance its working capital and capital expenditure needs with short-term or other borrowings.

The Company’s management continuously evaluates opportunities to pursue acquisitions or engage in joint ventures or other transactions. We would
expect to finance any significant future transactions with a combination of cash from operations, long-term indebtedness and capital stock.

The Company’s sub-holding companies generally incur short-term indebtedness in the event that they are temporarily unable to finance operations or
meet any capital requirements with cash from operations. A significant decline in the business of any of the Company’s sub-holding companies may
affect the sub-holding company’s ability to fund its capital requirements. A significant and prolonged deterioration in the economies in which we operate
or in the Company’s businesses may affect the Company’s ability to obtain short-term and long-term credit or to refinance existing indebtedness on
terms satisfactory to the Company’s management.

The Company presents the maturity dates associated with its long-term financial liabilities as of December 31, 2014, see Note 18. The Company
generally makes payments associated with its long-term financial liabilities with cash generated from its operations.

The following table reflects all contractually fixed pay-offs for settlement, repayments and interest resulting from recognized financial liabilities. It
includes expected net cash outflows from derivative financial liabilities that are in place as of December 31, 2014. Such expected net cash outflows are
determined based on each particular settlement date of an instrument. The amounts disclosed are undiscounted net cash outflows for the respective
upcoming fiscal years, based on the earliest date on which the Company could be required to pay. Cash outflows for financial liabilities (including
interest) without fixed amount or timing are based on economic conditions (like interest rates and foreign exchange rates) existing at December 31,
2014.

Non-derivative financial liabilities:
Notes and bonds

Loans from banks

Obligations under finance leases
Derivative financial liabilities

2015

2016

2017

2018

2019

2020 and
Thereafter

Ps. 2,375
1,587
289
2,316

Ps. 4,821
3,015
237
2,393

Ps. 5,643
267
180
1,218

Ps. 16,972
5,013
94
(1,906)

Ps.

1,934 Ps. 69,001
122
54
(2,060)

78
45
-

The Company generally makes payments associated with its non-current financial liabilities with cash generated from its operations.

20.14 Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has
adopted a policy of only dealing with creditworthy counterparties, where appropriate, as a means of mitigating the risk of financial loss from defaults.
The Company only transacts with entities that are rated the equivalent of investment grade and above. This information is supplied by independent
rating agencies where available and, if not available, the Company uses other publicly available financial information and its own trading records to
rate its major customers. The Company’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value
of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and
approved by the risk management committee.

The Company has a high receivable turnover; hence management believes credit risk is minimal due to the nature of its businesses, which have a large
portion of their sales settled in cash. The Company’s maximum exposure to credit risk for the components of the statement of financial position at 31
December 2014 and 2013 is the carrying amounts (see Note 7).

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

102

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by
international credit-rating agencies.

The Company manages the credit risk related to its derivative portfolio by only entering into transactions with reputable and credit-worthy counterparties
as well as by maintaining in some cases a Credit Support Annex (CSA) that establishes margin requirements, which could change upon changes to the
credit ratings given to the Company by independent rating agencies. As of December 31, 2014, the Company concluded that the maximum exposure to
credit risk related with derivative financial instruments is not significant given the high credit rating of its counterparties.

Note 21. Non-Controlling Interest in Consolidated Subsidiaries
An analysis of FEMSA’s non-controlling interest in its consolidated subsidiaries for the years ended December 31, 2014 and 2013 is as follows:

Coca-Cola FEMSA
Other

The changes in the FEMSA’s non-controlling interest were as follows:

Balance at beginning of the year
Net income of non controlling interest (1)
Other comprehensive income:

Exchange differences on translation of foreign operation
Remeasurements of the net defined benefits liability
Valuation of the effective portion of derivative financial instruments

Increase in capital stock
Acquisitions effects (see Note 4)
Disposal effects
Dividends
Share based payment
Balance at end of the year

December 31,
2014

December 31,
2013

Ps.

59,202
447
59,649

Ps.

62,719
439
63,158

2014

Ps. 63,158
5,929

(6,264)
(110)
109
-
-
-
(3,152)
(21)
Ps. 59,649

2013

54,902
6,233

(664)
(80)
(166)
515
5,550
-
(3,125)
(7)
63,158

Ps.

2012

47,949
7,344

(1,342)
(60)
(113)
-
4,172
(50)
(2,986)
(12)
54,902

Ps.

(1) For the years ended at 2014, 2013 and 2012, Coca-Cola FEMSA’s net income allocated to non-controlling interest was Ps. 424, 239 and 565, respectively.

Non controlling cumulative other comprehensive income is comprised as follows:

Exchange differences on translation foreign operation
Remeasurements of the net defined benefits liability
Valuation of the effective portion of derivative financial instruments
Cumulative other comprehensive income

December 31,
2014

December 31,
2013

Ps.

(6,326)
(316)
(129)
(6,771)

Ps.

(62)
(206)
(238)
(506)

Coca-Cola FEMSA shareholders, especially The Coca-Cola Company which hold Series D shares, have some protective rights about investing in or
disposing of significant businesses. However, these rights do not limit the continued normal operations of Coca-Cola FEMSA.

Summarized financial information in respect of Coca-Cola FEMSA is set out below.

Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Total revenue
Total consolidated net income
Total consolidated comprehensive income
Net cash flow from operating activities
Net cash flow from used in investing activities
Net cash flow from financing activities

December 31,
2014

December 31,
2013

Ps.

38,128
174,238
28,403
73,845
147,298
10,966
(1,005)
24,406
(11,137)
(11,350)

Ps.

43,231
173,434
32,398
67,114
156,011
11,782
9,791
22,097
49,481
23,506

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

103

Note 22. Equity
22.1 Equity accounts
The capital stock of FEMSA is comprised of 2,161,177,770 BD units and 1,417,048,500 B units.

As of December 31, 2014 and 2013, the capital stock of FEMSA was comprised 17,891,131,350 common shares, without par value and with no foreign
ownership restrictions. Fixed capital stock amounts to Ps. 300 (nominal value) and the variable capital may not exceed 10 times the minimum fixed
capital stock amount.

The characteristics of the common shares are as follows:

• Series “B” shares, with unlimited voting rights, which at all times must represent a minimum of 51% of total capital stock;

• Series “L” shares, with limited voting rights, which may represent up to 25% of total capital stock; and

• Series “D” shares, with limited voting rights, which individually or jointly with series “L” shares may represent up to 49% of total capital stock.

The Series “D” shares are comprised as follows:

• Subseries “D-L” shares may represent up to 25% of the series “D” shares;

• Subseries “D-B” shares may comprise the remainder of outstanding series “D” shares; and

• The non-cumulative premium dividend to be paid to series “D” shareholders will be 125% of any dividend paid to series “B” shareholders.

The Series “B” and “D” shares are linked together in related units as follows:

• “B units” each of which represents five series “B” shares and which are traded on the BMV; and

• “BD units” each of which represents one series “B” share, two subseries “D-B” shares and two subseries “D-L” shares, and which are traded both on

the BMV and the NYSE.

As of December 31, 2014 and 2013, FEMSA’s capital stock is comprised as follows:

Units
Shares:

Series “B”
Series “D”

Subseries “D-B”
Subseries “D-L”

Total shares

“B” Units

“BD” Units

Total

1,417,048,500

2,161,177,770

3,578,226,270

7,085,242,500
-
-
-
7,085,242,500

2,161,177,770
8,644,711,080
4,322,355,540
4,322,355,540
10,805,888,850

9,246,420,270
8,644,711,080
4,322,355,540
4,322,355,540
17,891,131,350

The net income of the Company is subject to the legal requirement that 5% thereof be transferred to a legal reserve until such reserve equals 20% of
capital stock at nominal value. This reserve may not be distributed to shareholders during the existence of the Company, except as a stock dividend. As
of December 31, 2014 and 2013, this reserve amounted to Ps. 596.

Retained earnings and other reserves distributed as dividends, as well as the effects derived from capital reductions, are subject to income tax at the
rate in effect at the date of distribution, except when capital reductions come from restated shareholder contributions and when the distributions of
dividends come from net taxable income, denominated “Cuenta de Utilidad Fiscal Neta” (“CUFIN”).

Dividends paid in excess of CUFIN are subject to income tax at a grossed-up rate based on the current statutory rate. Since 2003, this tax may be
credited against the income tax of the year in which the dividends are paid, and in the following two years against the income tax and estimated tax
payments. Due to the Mexican Tax Reform, a new Income Tax Law (LISR) went into effect on January 1, 2014. Such law no longer includes the tax
consolidation regime which allowed calculating the CUFIN on a consolidated basis; therefore, beginning in 2014, distributed dividends must be taken
from the individual CUFIN balance of FEMSA, which can be increased with the subsidiary companies’ individual CUFINES through the transfers of
dividends. The sum of the individual CUFIN balances of FEMSA and its subsidiaries as of December 31, 2014 amounted to Ps. 83,314.

In addition, the new LISR sets forth that entities that distribute dividends to its stockholders who are individuals and foreign residents must withhold
10% thereof for ISR purposes, which will be paid in Mexico. The foregoing will not be applicable when distributed dividends arise from the accumulated
CUFIN balance as of December 31, 2013.

At an ordinary shareholders’ meeting of FEMSA held on March 15, 2013, the shareholders approved a dividend of Ps. 6,684 that was paid 50% on
May 7, 2013 and other 50% on November 7, 2013; and a reserve for share repurchase of a maximum of Ps. 3,000. As of December 31, 2014, the
Company has not repurchased shares. Treasury shares resulted from share-based payment bonus plan are disclosed in Note 17.

At an ordinary shareholders’ meeting of FEMSA held on December 6, 2013, the shareholders approved a dividend of Ps. 6,684 that was paid on
December 18, 2013.

At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 5, 2013, the shareholders approved a dividend of Ps. 5,950 that was paid 50%
on May 2, 2013 and other 50% on November 5, 2013. The corresponding payment to the non-controlling interest was Ps. 3,073.

At an ordinary shareholders’ meeting of Coca-Cola FEMSA held on March 6, 2014, the shareholders approved a dividend of Ps. 6,012 that was paid 50%
on May 4, 2014 and other 50% on November 5, 2014. The corresponding payment to the non-controlling interest was Ps. 3,134.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

104

For the years ended December 31, 2014, 2013 and 2012 the dividends declared and paid by the Company and Coca-Cola FEMSA were as follows:

FEMSA
Coca-Cola FEMSA (100% of dividend)

Ps.

2014

-
6,012

Ps.

2013

13,368
5,950

Ps.

2012

6,200
5,625

For the years ended December 31, 2014 and 2013 the dividends declared and paid per share by the Company are as follows:

Series of Shares

“B”
“D”

Ps.

2014

-
-

Ps.

2013

0.66667
0.83333

22.2 Capital management
The Company manages its capital to ensure that its subsidiaries will be able to continue as going concerns while maximizing the return to shareholders
through the optimization of its debt and equity balance in order to obtain the lowest cost of capital available. The Company manages its capital structure
and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes for
managing capital during the years ended December 31, 2014 and 2013.

The Company is not subject to any externally imposed capital requirements, other than the legal reserve (see Note 22.1) and debt covenants (see Note 18).

The Company’s finance committee reviews the capital structure of the Company on a quarterly basis. As part of this review, the committee considers
the cost of capital and the risks associated with each class of capital. In conjunction with this objective, the Company seeks to maintain the highest credit
rating both nationally and internationally and is currently rated AAA in Mexico and BBB+ in the United States, which requires it to have a debt to earnings
before interest, taxes, depreciation and amortization (“EBITDA”) ratio lower than 2. As a result, prior to entering into new business ventures, acquisitions
or divestures, management evaluates the optimal ratio of debt to EBITDA in order to maintain its credit rating.

Note 23. Earnings per Share
Basic earnings per share amounts are calculated by dividing consolidated net income for the year attributable to controlling interest by the weighted
average number of shares outstanding during the period adjusted for the weighted average of own shares purchased in the period.

Diluted earnings per share amounts are calculated by dividing consolidated net income for the year attributable to controlling interest by the weighted
average number of shares outstanding during the period plus the weighted average number of shares for the effects of dilutive potential shares
(originated by the Company’s share based payment program).

Net Controlling Interest Income
Shares expressed in millions:
Weighted average number of shares for

basic earnings per share

Effect of dilution associated with nonvested
shares for share based payment plans
Weighted average number of shares adjusted for

the effect of dilution

2014

2013

2012

Per Series
“B” Shares

Per Series
“D” Shares

Per Series
“B” Shares

Per Series
“D” Shares

Per Series
“B” Shares

Per Series
“D” Shares

7,701.08

8,999.92

7,341.74

8,579.98

9,548.21

11,158.58

9,240.54

8,621.18

9,238.69

8,613.80

9,237.49

8,609.00

5.88

23.53

7.73

30.91

8.93

35.71

9,246.42

8,644.71

9,246.42

8,644.71

9,246.42

8,644.71

Note 24. Income Taxes
At December 2013, the Mexican government enacted a package of tax reforms (the “2014 Tax Reform”) which includes several significant changes to
tax laws, discussed in further detail below, entering into effect on January 1, 2014. The following changes are expected to most significantly impact the
Company’s financial position and results of operations:

• The introduction of a new withholding tax at the rate of 10% for dividends and/or distributions of earnings generated in 2014 and beyond;

• A fee of one Mexican peso per liter on the sale and import of flavored beverages with added sugar, and an excise tax of 8% on food with caloric

content equal to, or greater than 275 kilocalories per 100 grams of product;

• The prior 11% value added tax (VAT) rate that applied to transaction in the border region was raised to 16%, matching the general VAT rate applicable

in the rest of Mexico;

• The elimination of the tax on cash deposits (IDE) and the business flat tax (IETU);

• Deductions on exempt payroll items for workers are limited to 53%;

• The income tax rate in 2013 was 30%. Scheduled decreases to the income tax rate that would have reduced the rate to 29% in 2014 and 28% in 2015

and thereafter, were canceled in connection with the 2014 Tax Reform;

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

105

• The repeal of the existing tax consolidation regime, which was effective as of January 1, 2014, modified the payment term of a tax on assets payable
of Ps. 180, which will be paid over the following 5 years instead of an indefinite term. Additionally, deferred tax assets and liabilities associated with
the Company’s subsidiaries in Mexico are no longer offset as of December 31, 2014 and 2013, as the future income tax balances are expected to
reverse in periods where the Company is no longer consolidating these entities for tax purposes and the right of offset does not exist; and

• The introduction of a new optional tax integration regime (a modified form of tax consolidation), which replaces the previous tax consolidation
regime. The new optional tax integration regime requires an equity ownership of at least 80% for qualifying subsidiaries and would allow the
Company to defer the annual tax payment of its profitable participating subsidiaries for a period equivalent to 3 years to the extent their individual
tax expense exceeds the integrated tax expense of the Company.

The impacts of the 2014 Tax Reform on the Company’s financial position and results of operations as of and for the year ended December 31, 2013,
resulted from the repeal of the tax consolidation regime as described above regarding the payable of Ps. 180 and the effects of the changes in tax rates
on deferred tax assets and liabilities as disclosed below, which was recognized in earnings in 2013.

On November 18, 2014, the Venezuelan government published two decrees which are effective as of the date of publication. This reform establishes
that segregated loss carryforward (i.e. foreign operating or domestic operating) may be used only against future income of the same type. Additionally
the three year carryforward for net operating losses is maintained, but the amount of losses available for carryforwards may not exceed twenty five
percent of the tax period’s taxable income.

24.1 Income Tax
The major components of income tax expense for the years ended December 31, 2014, 2013 and 2012 are:

Current tax expense
Deferred tax expense:
Origination and reversal of temporary differences

(Recognition) utilization of tax losses

Total deferred tax (income) expense
Change in the statutory rate (1)

(1) Effect due to 2014 Tax Reform.

Recognized in Consolidated Statement of Other Comprehensive Income (OCI)

Income tax related to items charged or
recognized directly in OCI during the year:

Unrealized loss (gain) on cash flow hedges
Unrealized gain on available for sale securities
Exchange differences on translation of foreign operations
Remeasurements of the net defined benefit liability
Share of the other comprehensive income of associates and joint ventures
Total income tax cost (benefit) recognized in OCI

2014

2013

Ps.

7,810

Ps.

7,855

Ps.

1,303
(2,874)
(1,571)
14
6,253

2014

219
-
(60)
(49)
189
299

Ps.

257
(212)
45
(144)
7,756

2013

(128)
(1)
1,384
(56)
(1,203)
(4)

Ps.

2012

7,412

103
434
537
-
7,949

2012

(120)
(1)
(1,012)
(113)
(304)
(1,550)

A reconciliation between tax expense and income before income taxes and share of the profit or loss of associates and joint ventures accounted for
using the equity method multiplied by the Mexican domestic tax rate for the years ended December 31, 2014, 2013 and 2012 is as follows:

Mexican statutory income tax rate
Difference between book and tax inflationary values and translation effects
Annual inflation tax adjustment
Difference between statutory income tax rates
Non-deductible expenses
Taxable (non-taxable) income, net
Change in the statutory Mexican tax rate
Others

2014

30.0%
(3.1%)
(4.4%)
0.9%
3.7%
(1.1%)
0.1%
0.2%
26.3%

2013

30.0%
(0.2%)
(1.2%)
1.2%
1.0%
0.7%
(0.6%)
-
30.9%

2012

30.0%
(0.8%)
(0.3%)
1.1%
0.8%
(1.3%)
-
(0.6%)
28.9%

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

106

Deferred Income Tax Related to:

Allowance for doubtful accounts
Inventories
Other current assets
Property, plant and equipment, net
Investments in associates and joint ventures
Other assets
Finite useful lived intangible assets
Indefinite lived intangible assets
Post-employment and other long-term employee benefits
Derivative financial instruments
Provisions
Temporary non-deductible provision
Employee profit sharing payable
Tax loss carryforwards
Cumulative other comprehensive income (1)
Exchange differences on translation of foreign operations in OCI
Other liabilities
Deferred tax (income) expense
Deferred tax income net recorded in share of the profit of

associates and joint ventures accounted for using the equity method

Deferred tax (income) expense, net
Deferred income taxes, net
Deferred tax asset
Deferred tax liability

Consolidated Statement
of Financial Position as of

December 31,
2014

December 31,
2013

Ps.

(242)
132
114
(1,654)
(176)
226
246
75
(753)
(38)
(1,318)
2,534
(268)
(3,249)
(303)
2,135
(96)

Ps.

(148)
9
147
(452)
(271)
(188)
384
299
(636)
61
(860)
(150)
(255)
(393)
(479)
2,195
(62)

(2,635)
(6,278)
3,643

(799)
(3,792)
Ps. 2,993

Ps.

Consolidated Statement
of Income

2014

(106)
77
(18)
(968)
87
422
(133)
(195)
(92)
(99)
(477)
2,450
(13)
(2,874)
-
-
475
(1,464)

(93)
(1,557)

Ps.

2013

(24)
(2)
109
(630)
115
(2)
236
88
30
62
(164)
562
(27)
(212)
-
-
(131)
10

(109)
(99)

Ps.

2012

Ps.

(33)
51
(104)
(101)
1,589
238
(38)
32
(40)
(14)
(12)
51
(13)
434
-
-
72
Ps. 2,112

(1,575)
Ps. 537

(1) Deferred tax related to derivative financial instruments and remeasurements of the ned defined benefit liability.

Deferred tax related to Other Comprehensive Income (OCI)

Income tax related to items charged or
recognized directly in OCI as of the year:

Unrealized loss (gain) on derivative financial instruments
Remeasurements of the net defined benefit liability
Total deferred tax income related to OCI

The changes in the balance of the net deferred income tax asset are as follows:

Initial balance
Deferred tax provision for the year
Change in the statutory rate
Deferred tax income net recorded in share of the profit of associates and

joint ventures accounted for using the equity method

Acquisition of subsidiaries (see Note 4)
Disposal of subsidiaries
Effects in equity:
Unrealized loss (gain) on cash flow hedges
Unrealized gain on available for sale securities

Exchange differences on translation of foreign operations
Remeasurements of the net defined benefit liability
Retained earnings of associates

Ps.

Restatement effect of beginning balances associated with hyperinflationary economies
Ending balance

Ps.

2014

12
(315)
(303)

2013

(1,328)
45
(144)

109
647
-

(149)
(1)
2
102
(121)
39
(799)

Ps.

2013

(209)
(270)
(479)

2012

(1,586)
537
-

1,575
(77)
16

(76)
(1)
(974)
(532)
(189)
(21)
(1,328)

Ps.

2014

(799)
(1,571)
14

93
(516)
-

109
-
617
(427)
(180)
25
(2,635)

The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and
the deferred tax assets and deferred tax liabilities related to income taxes are levied by the same tax authority.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

Tax Loss Carryforwards
The subsidiaries in Mexico and Brazil have tax loss carryforwards. The tax effect net of consolidation benefits and their years of expiration are as
follows:

107

Year

2015
2016
2017
2018
2019
2020
2021
2022
2023 and thereafter
No expiration (Brazil)

Tax losses used in consolidation

Tax Loss
Carryforwards

Ps.

-
-
-
3
24
10
13
41
1,860
7,842
9,793
(1,059)
8,734

During 2013 Coca-Cola FEMSA completed certain acquisitions in Brazil as disclosed in Note 4. In connection with those acquisition Coca-Cola FEMSA
recorded certain goodwill balances that are deductible for Brazilian income tax reporting purposes. The deduction of such goodwill amortization has
resulted in the creation of NOLs in Brazil. NOLs in Brazil have no expiration, but their usage is limited to 30% of Brazilian taxable income in any given
year. As of December 31, 2014 Coca-Cola FEMSA believes that it is more likely than not that it will ultimately recover such NOLs through the reversal of
temporary differences and future taxable income. Accordingly no valuation allowance has been provided.

The changes in the balance of tax loss carryforwards are as follows:

Balance at beginning of the year
Additions
Usage of tax losses
Translation effect of beginning balances
Balance at end of the year

2014

558
8,199
(45)
22
8,734

Ps.

2013

91
593
(122)
(4)
558

There were no withholding taxes associated with the payment of dividends in either 2014, 2013 or 2012 by the Company to its shareholders.

The Company has determined that undistributed profits of its subsidiaries, joint ventures or associates will not be distributed in the foreseeable future.
The temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has not been
recognized, aggregate to Ps. 43,394 (December 31, 2013: Ps. 44,920 and December 31, 2012: Ps. 43,569).

24.2 Other taxes
The operations in Guatemala, Nicaragua, Colombia and Argentina are subject to a minimum tax, which is based primary on a percentage of assets. Any
payments are recoverable in future years, under certain conditions.

Note 25. Other Liabilities, Provisions, Contingencies and Commitments
25.1 Other current financial liabilities

Sundry creditors
Derivative financial instruments
Total

25.2 Provisions and other long term liabilities

Provisions
Taxes payable
Others
Total

25.3 Other financial liabilities

Derivative financial instruments
Security deposits
Total

December 31,
2014

December 31,
2013

Ps.

4,515
347
4,862

Ps.

3,998
347
4,345

December 31,
2014

December 31,
2013

Ps.

4,285
444
890
5,619

Ps.

4,674
558
885
6,117

December 31,
2014

December 31,
2013

Ps.

151
177
328

Ps.

1,526
142
1,668

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

108

25.4 Provisions recorded in the consolidated statement of financial position
The Company has various loss contingencies, and has recorded reserves as other liabilities for those legal proceedings for which it believes an
unfavorable resolution is probable. Most of these loss contingencies are the result of the Company’s business acquisitions. The following table presents
the nature and amount of the loss contingencies recorded as of December 31, 2014 and 2013:

Indirect taxes (1)
Labor
Legal
Total

December 31,
2014

December 31,
2013

Ps.

2,271
1,587
427
4,285

Ps.

3,300
1,063
311
4,674

(1) As of December 31, 2013 indirect taxes include Ps. 246 of tax loss contingencies regarding indemnification accorded with Heineken over FEMSA Cerveza prior tax

contingencies.

25.5 Changes in the balance of provisions recorded
25.5.1 Indirect taxes

Balance at beginning of the year
Penalties and other charges
New contingencies
Reclasification in tax contingencies with Heineken
Contingencies added in business combination
Cancellation and expiration
Payments
Current portion
Brazil amnesty adoption
Restatement of the beginning balance of subsidiaries in hyperinflationary economies
Balance at end of the year

December 31,
2014

December 31,
2013

December 31,
2012

Ps.

3,300
220
38
1,349
1,190
(798)
(2,517)
-
(599)
88
2,271

Ps.

1,263
1
263
-
2,143
(5)
(303)
(163)
-
101
3,300

Ps.

1,405
107
56
-
117
(124)
(157)
(52)
-
(89)
1,263

During 2014, Coca-Cola FEMSA took advantage of a Brazilian tax amnesty program. The settlement of certain outstanding matters under that amnesty
program generated a benefit Ps. 455 which is reflected in other income during the year ended December 31, 2014.

25.5.2 Labor

Balance at beginning of the year
Penalties and other charges
New contingencies
Contingencies added in business combination
Cancellation and expiration
Payments
Restatement of the beginning balance of subsidiaries in hyperinflationary economies
Balance at end of the year

December 31,
2014

December 31,
2013

December 31,
2012

Ps.

1,063
107
145
442
(53)
(57)
(60)
1,587

Ps.

934
139
187
157
(226)
(69)
(59)
1,063

Ps.

1,128
189
134
15
(359)
(91)
(82)
934

A roll forward for legal contingencies is not disclosed because the amounts are not considered to be material.

While provision for all claims has already been made, the actual outcome of the disputes and the timing of the resolution cannot be estimated by the
Company at this time.

25.6 Unsettled lawsuits
The Company has entered into several proceedings with its labor unions, tax authorities and other parties that primarily involve Coca-Cola FEMSA and
its subsidiaries. These proceedings have resulted in the ordinary course of business and are common to the industry in which the Company operates.
The aggregate amount being claimed against the Company resulting from such proceedings as of December 31, 2014 is Ps. 30,071. Such contingencies
were classified by legal counsel as less than probable but more than remote of being settled against the Company. However, the Company believes
that the ultimate resolution of such several proceedings will not have a material effect on its consolidated financial position or result of operations.

Included in this amount Coca-Cola FEMSA has tax contingencies, amounting to approximately Ps.21,217, with loss expectations assessed by management
and supported by the analysis of legal counsel which it considers possible. Among these possible contingencies, are Ps. 8,625 in various tax disputes
related primarily to credits for ICMS (VAT) and Industrialized Products Tax (IPI). Possible claims also include Ps. 10,194 related to the disallowance of IPI
credits on the acquisition of inputs from the Manaus Free Trade Zone. Cases related to these matters are pending final decision at the administrative
level. Possible claims also include Ps. 1,817 related to compensation of federal taxes not approved by the IRS (Tax authorities). Cases related to these
matters are pending final decision in the administrative and judicial spheres. Finally, possible claims include Ps. 538 related to the requirement by the
Tax Authorities of State of São Paulo for ICMS (VAT), interest and penalty due to the alleged underpayment of tax arrears for the period 1994-1996.
Coca-Cola FEMSA is defending its position in these matters and final decision is pending in court. In addition, the Company has Ps. 5,162 in unsettled
indirect tax contingencies regarding indemnification accorded with Heineken over FEMSA Cerveza. These matters are related to different Brazilian
federal taxes which are pending final decision.

At December 31, 2014 there are not important labor and legal contingencies that we have to disclose.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

109

In recent years in its Mexican and Brazilian territories, Coca-Cola FEMSA has been requested to present certain information regarding possible
monopolistic practices. These requests are commonly generated in the ordinary course of business in the soft drink industry where this subsidiary
operates. The Company does not expect any material liability to arise from these contingencies.

25.7 Collateralized contingencies
As is customary in Brazil, the Company has been required by the tax authorities there to collateralize tax contingencies currently in litigation amounting
to Ps. 3,026 and Ps. 2,248 as of December 31, 2014 and 2013, respectively, by pledging fixed assets and entering into available lines of credit covering
the contingencies (see Note 13).

25.8 Commitments
As of December 31, 2014, the Company has contractual commitments for finance leases for machinery and transport equipment and operating lease
for the rental of production machinery and equipment, distribution and computer equipment, and land for FEMSA Comercio’s operations.

The contractual maturities of the operating lease commitments by currency, expressed in Mexican pesos as of December 31, 2014, are as follows:

Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
Total

Mexican
Pesos

Ps.

3,434
12,340
15,672
Ps. 31,446

U.S.
Dollars

196
689
361
1,246

Ps.

Others

29
15
3
47

Ps.

Rental expense charged to consolidated net income was Ps. 4,988, Ps. 4,345 and Ps. 4,032 for the years ended December 31, 2014, 2013 and 2012,
respectively.

Future minimum lease payments under finance leases with the present value of the net minimum lease payments are as follows:

Not later than 1 year
Later than 1 year and not later than 5 years
Total mínimum lease payments
Less amount representing finance charges
Present value of minimum lease payments

2014
Minimum
Payments

Present
Value of
Payments

Ps.

299
596
895
64
831

263
568
831
-
831

2013
Minimum
Payments

Ps.

322
852
1,174
109
1,065

Present
Value of
Payments

Ps. 276
789
1,065
-
Ps. 1,065

The Company through its subsidiary Coca-Cola FEMSA has firm commitments for the purchase of property, plant and equipment of Ps. 2,077 as
December 31, 2014.

25.9 Restructuring provision
Coca-Cola FEMSA recorded a restructuring provision. This provision relates principally to reorganization in the structure of the Company. The
restructuring plan was drawn up and announced to the employees of the Company in 2014 when the provision was recognized in its consolidated
financial statements. The restructuring of the Company is expected to complete by 2015 and it is presented in current liabilities within accounts payable
caption in the consolidated statement of financial position.

Balance at beginning of the year
New
Payments
Cancellation
Balance at end of the year

December 31,
2014

December 31,
2013

December 31,
2012

Ps.

-
199
(142)
(25)
32

Ps.

90
179
(234)
(35)
-

Ps.

153
195
(258)
-
90

Note 26. Information by Segment
The analytical information by segment is presented considering the Company’s business units (Subholding Companies as defined in Note 1), which is
consistent with the internal reporting presented to the Chief Operating Decision Maker. A segment is a component of the Company that engages in
business activities from which it earns revenues, and incurs the related costs and expenses, including revenues, costs and expenses that relate to
transactions with any of Company’s other components. All segments’ operating results are reviewed regularly by the Chief Operating Decision Maker,
which makes decisions about the resources that would be allocated to the segment and to assess its performance, and for which financial information
is available.

Inter-segment transfers or transactions are entered into and presented under accounting policies of each segment, which are the same to those applied
by the Company. Intercompany operations are eliminated and presented within the consolidation adjustment column included in the tables below.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

110

a) By Business Unit:

2014

Total revenues
Intercompany revenue
Gross profit
Administrative expenses
Selling expenses
Other income
Other expenses
Interest expense
Interest income
Other net finance expenses (3)
Income before income taxes and share of the profit
of associates and joint ventures accounted
for using the equity method

Income taxes
Share of the profit of associates and joint ventures accounted

for using the equity method, net of taxes

Consolidated net income

Depreciation and amortization (2)
Non-cash items other than depreciation and amortization

Investments in associates and joint ventures
Total assets
Total liabilities
Investments in fixed assets (4)

Ps.

Coca-Cola
FEMSA

FEMSA
Comercio

Ps. 147,298
3,475
68,382
-
-
-
-
(5,546)
379

Ps. 109,624
-
39,386
-
-
-
-
(686)
23

14,952
3,861

(125)

6,949
693

17,326
212,366
102,248
11,313

7,959
541

2,872
204

742
43,722
31,860
5,191

CB Equity

Other (1)

Consolidation
Adjustments

Consolidated

-
-
-
-
-
-
-
-
16

8
2

5,244

-
-

83,710
85,742
2,005
-

Ps. 20,069
10,067
4,871
-
-
-
-
(1,093)
1,068

Ps.

(13,542) Ps. 263,449
(13,542)
-
110,171
(2,468)
-
10,244
-
69,016
-
1,098
-
(1,277)
(6,701)
624
862
(624)
(1,149)

905
1,849

(17)

193
87

381
51,251
26,846
1,955

(80)
-

-
-

-
(16,908)
(16,908)
(296)

23,744
6,253

5,139

22,630

10,014
984

102,159
376,173
146,051
18,163

(1) Includes other companies (see Note 1) and corporate.
(2) Includes bottle breakage.
(3) Includes foreign exchange loss, net; loss on monetary position for subsidiaries in hyperinflationary economies; and market value gain on financial instruments.
(4) Includes acquisitions and disposals of property, plant and equipment, intangible assets and other long-lived assets.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

2013

Income taxes
Share of the profit of associates and joint ventures accounted

for using the equity method, net of taxes

Consolidated net income

Depreciation and amortization (2)
Non-cash items other than depreciation and amortization

Investments in associates and joint ventures
Total assets
Total liabilities
Investments in fixed assets (4)

2012

Income taxes
Share of the profit of associates and joint ventures accounted

for using the equity method, net of taxes

Consolidated net income

Depreciation and amortization (2)
Non-cash items other than depreciation and amortization

Investments in associates and joint ventures
Total assets
Total liabilities
Investments in fixed assets (4)

Ps.

Coca-Cola
FEMSA

Ps. 156,011
3,116
72,935
-
-
-
-
(3,341)
654
-

FEMSA
Comercio

Ps. 97,572
-
34,586
-
-
-
-
(601)
5
-

17,224
5,731

289

7,132
12

16,767
216,665
99,512
11,703

Ps. 147,739
2,873
68,630
-
-
-
-
(1,955)
424
-

19,992
6,274

180

5,692
580

5,352
166,103
61,275
10,259

2,890
339

2,443
197

734
39,617
37,858
5,683

Ps.

Ps. 86,433
5
30,250
-
-
-
-
(445)
19
-

6,146
729

(23)

2,031
200

459
31,092
21,356
4,707

111

CB Equity

Other (1)

Consolidation
Adjustments

Consolidated

-
-
-
-
-
-
-
-
12
-

4
1

4,587

-
-

80,351
82,576
1,933
-

-
-
-
-
-
-
-
-
18
-

10
-

8,311

-
-

77,484
79,268
1,822
-

Ps. 17,254
9,624
4,670
-
-
-
-
(865)
1,030
-

Ps.

(12,740) Ps. 258,097
(12,740)
-
109,654
(2,537)
9,963
-
69,574
-
-
651
(1,439)
-
(4,331)
476
(476)
1,225
(1,143)
-

5,120
1,685

(56)

121
108

478
45,487
21,807
831

(158)
-

-
-

-
(25,153)
(24,468)
(335)

25,080
7,756

4,831

22,155

9,696
317

98,330
359,192
136,642
17,882

Ps. 15,899
8,884
4,647
-
-
-
-
(511)
727
-

Ps.

(11,762) Ps. 238,309
(11,762)
-
101,300
(2,227)
9,552
-
62,086
-
-
1,745
(1,973)
-
(2,506)
405
783
(405)
(181)
-

1,620
946

293
237

545
31,078
12,409
959

(238)
-

(126)
-

-
(11,599)
(11,081)
(365)

27,530
7,949

8,470

28,051

7,890
1,017

83,840
295,942
85,781
15,560

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014

112

b) Information by geographic area:
The Company aggregates geographic areas into the following for the purposes of its consolidated financial statements: (i) Mexico and Central America
division (comprising the following countries: Mexico, Guatemala, Nicaragua, Costa Rica and Panama) and (ii) the South America division (comprising the
following countries: Brazil, Argentina, Colombia and Venezuela). Venezuela operates in an economy with exchange controls and hyper-inflation; and as
a result, it is not aggregated into the South America area, (iii) Europe (comprised of the Company’s equity method investment in Heineken) and (iv) the
Asian division comprised of the Coca-Cola FEMSA’s equity method investment in CCFPI (Philippines) which was acquired in January 2013.

Geographic disclosure for the Company is as follow:

2014
Mexico and Central America (1) (2)
South America (3)
Venezuela
Europe
Consolidation adjustments
Consolidated

2013
Mexico and Central America (1) (2)
South America (3)
Venezuela
Europe
Consolidation adjustments
Consolidated

2012
Mexico and Central America (1)
South America (3)
Venezuela
Europe
Consolidation adjustments
Consolidated

Total
Revenues

186,736
69,172
8,835
-
(1,294)
263,449

171,726
55,157
31,601
-
(387)
258,097

Ps.

Total
Non Current
Assets

Ps.

139,899
67,078
6,374
83,710
-
297,061

Ps.

133,571
61,143
10,558
80,351
-
Ps. 285,623

Total
Revenues

Ps.

155,576
56,444
26,800
-
(511)
Ps. 238,309

(1) Central America includes Guatemala, Nicaragua, Costa Rica and Panama. Domestic (Mexico only) revenues were Ps. 178,125, Ps. 163,351 and Ps. 148,098 during the years
ended December 31, 2014, 2013 and 2012, respectively. Domestic (Mexico only) non-current assets were Ps. 138,662 and Ps. 127,693, as of December 31, 2014, and
December 31, 2013, respectively.

(2) Coca-Cola FEMSA’s Asian division consists of the 51% equity investment in CCFPI (Philippines) which was acquired in 2013, and is accounted for using the equity method of
accounting (see Note 10). The equity in earnings of the Asian division were Ps. (334) and Ps. 108 in 2014 and 2013, respectively as is the equity method investment in CCFPI
was Ps. 9,021 and Ps. 9,398 and this is presented as part of the Company’s corporate operations in 2014 and 2013, respectively and thus disclosed net in the table above
as part of the “Total Non Current assets” in the Mexico & Central America division. However, the Asian division is represented by the following investee level amounts, prior
to reflection of the Company’s 51% equity interest in the accompanying consolidated financial statements: revenues Ps. 16,548 and Ps. 13,438, gross profit Ps. 4,913 and
Ps. 4,285, income before income taxes Ps. 664 and Ps. 310, depreciation and amortization Ps. 643 and Ps. 1,229, total assets Ps. 19,877 and Ps. 17,232, total liabilities Ps.
6,614 and Ps. 4,488, capital expenditures Ps. 2,215 and Ps. 1,889, as of December 31, 2104 and 2013, respectively.

(3) South America includes Brazil, Argentina, Colombia and Venezuela, although Venezuela is shown separately above. South America revenues include Brazilian revenues
of Ps. 45,799, Ps. 31,138 and Ps. 30,930 during the years ended December 31, 2014, 2013 and 2012, respectively. Brazilian non-current assets were Ps. 51,587 and Ps.
45,900, as of December 31, 2014 and December 31, 2013, respectively. South America revenues include Colombia revenues of Ps. 14,207, Ps. 13,354 and Ps. 14,597 during
the years ended December 31, 2014, 2013 and 2012, respectively. Colombia non-current assets were Ps. 12,933 and Ps. 12,888, as of December 31, 2014 and December
31, 2013, respectively. South America revenues include Argentina revenues of Ps. 9,714, Ps. 10,729 and Ps. 10,270 during the years ended December 31, 2014, 2013 and
2012, respectively. Argentina non-current assets were Ps. 2,470 and Ps. 2,042, as of December 31, 2014 and December 31, 2013, respectively.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICO

113

Note 27. Future Impact of Recently Issued Accounting Standards
not yet in Effect
The Company has not applied the following standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s
financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

IFRS 9, Financial Instruments
In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces
IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for
classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with
early application permitted. The transition to IFRS 9 differs by requirements and is partly retrospective and partly prospective. Early application of
previous versions of IFRS 9 (2009, 2010 and 2013) is permitted if the date of initial application is before February 1, 2015. The Company has not early
adopted this IFRS, and the Company has yet to complete its evaluation of whether it will have a material impact on its consolidated financial statements.

IFRS 15, Revenue from Contracts with Customers
IFRS 15, “Revenue from Contracts with Customers”, was issued in May 2014 and applies to annual reporting periods beginning on or after January 1,
2017, earlier application is permitted. Revenue is recognized as control is passed, either over time or at a point in time.

The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes
most current revenue recognition guidance, including industry specific guidance. In applying the revenue model to contracts within its scope, an entity
will: 1) Identify the contract(s) with a customer; 2) Identify the performance obligations in the contract; 3) Determine the transaction price; 4) Allocate
the transaction price to the performance obligations in the contract; 5) Recognize revenue when (or as) the entity satisfies a performance obligation.
Also, an entity needs to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty
of revenue and cash flows arising from contracts with customers. The Company has yet to complete its evaluation of whether these changes will have
a significant impact on its consolidated financial statements.

Amendments to IAS 16 and IAS 38, Clarification of Acceptable Methods of Depreciation and Amortization
The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a
business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method
cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The
amendments are effective prospectively for annual periods beginning on or after January 1, 2016, with early adoption permitted. These amendments
are not expected to have any impact to the Company given that the Company has not used a revenue-based method to depreciate its non-current assets.

Amendments to IFRS 11, Joint Arrangements: Accounting for acquisitions of interests
The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint
operation constitutes a business must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a
previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control
is retained.

The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same
joint operation and are prospectively effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. The Company
anticipates that no impact is expected on the financial statements from the adoption of these amendments because it does not have investment in a
joint operation.

Note 28. Subsequent Events
On February 11, 2015, the Venezuelan government announced plans for a new foreign currency exchange system with three markets. The new
legislation, maintains the official exchange rate of 6.3 bolivars to the U.S. dollar (USD) that will continue to be available for certain foods and medicines;
furthermore the new legislation merges SICAD I and SICAD II into a new SICAD that is currently valued at 12 bolivars per USD, and creates a new open
market foreign exchange system (SIMADI) that started at 170 Bolivars per USD. At the date of this report, no specific guidance has been defined with
respect to the use of each exchange rate available. The Company will closely monitor developments in this area, which may affect the exchange rate(s)
used prospectively.

On December 2014, FEMSA Comercio agreed to acquire 100% of Farmacias Farmacon, a regional drugstore operator in the western Mexican states
of Sinaloa, Sonora, Baja California and Baja California Sur. Headquartered in the city of Culiacan, Sinaloa, Farmacias Farmacon currently operates
213 stores. The transaction is pending customary regulatory approvals, including the authorization of the Mexican Federal Economic Competition
Commission (“Comisión Federal de Competencia Económica”).

Since 1995, FEMSA Comercio has been providing services and assets for the operation of gasoline service stations through agreements with third
parties that own Petroleos Mexicanos (PEMEX) franchises, using the commercial brand OXXO Gas. As of December 31, 2014 there were 227 OXXO Gas
stations, most of them adjacent to OXXO stores.

Mexican legislation precluded FEMSA Comercio from participating in the retail of gasoline and therefore from owning PEMEX franchises given FEMSA’s
foreign institutional investor base. In light of recent changes to the legal framework as part of Mexico’s energy reform, FEMSA Comercio is no longer
precluded from owning PEMEX franchises and participating in the retail of gasoline. In order to enable this, FEMSA Comercio has agreed to acquire the
related PEMEX franchises from the aforementioned third parties and plans to lease, acquire or open more gasoline service stations in the future.

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. AND SUBSIDIARIESMONTERREY, N.L., MEXICOfemsa annual report 2014114

Headquarters

FEMSA Corporate Offices
General Anaya No. 601 Pte.
Col. Bella Vista
Monterrey, Nuevo León
Mexico, C.P. 64410
Phone: (52) 81 8328-6000
Fax: (52) 81 8328-6080

Coca-Cola FEMSA
Mario Pani N° 100
Col. Santa Fé Cuajimalpa 05348,
México, D.F. Mexico
Phone: (52) 55 1519-5000

FEMSA Comercio
Edison No. 1235 Nte.
Col. Talleres
Monterrey, Nuevo León
Mexico, C.P. 64480
Phone: (52) 81 8389-2121
Fax: (52) 81 8389-2106

FEMSA Negocios Estratégicos
General Anaya No. 601 Pte.
Col. Bella Vista
Monterrey, Nuevo León
Mexico, C.P. 64410
Phone: (52) 81 8328-6600
Fax: (52) 81 8328-6601

The FEMSA 2014 Annual Report may contain certain forward-looking statements concerning FEMSA and its
subsidiaries’ future performance and should be considered as good faith estimates of FEMSA and its subsidiaries.
These forward-looking statements reflect management’s expectations and are based upon currently available
data. Actual results are subject to further events and uncertainties which could materially impact the Company’s
subsidiaries’ actual performance.

Contact Information

General Counsel
Carlos E. Aldrete
General Anaya No. 601 Pte.
Colonia Bella Vista
Monterrey, Nuevo León
Mexico, C.P. 64410
Phone: (52) 81 8328-6180

Independent Accountant
Mancera, S.C.
A Member Practice of Ernst & Young Global Limited
Av. Lázaro Cárdenas No. 2321 Pte. Piso 5
Col. Residencial San Agustín
San Pedro Garza García, Nuevo León
Mexico, C.P. 66260
Phone: (52) 81 8152-1800

Depositary Bank and Registrar
BNY Mellon
BNY Mellon Shareowner Services
P.O. Box 30170
College Station, TX 77842-3170
Phone: 888 BNY ADRS

(269-2377)

Investor Relations
Juan Fonseca
Gerardo Lozoya
Phone: (52) 81 8328-6167
Fax: (52) 81 8328-6080
e-mail: investor@femsa.com.mx

Corporate Communication
Mauricio Reyes
Erika De la Peña
Phone: (52) 55 5249-6843
Fax: (52) 55 5249-6861
e-mail: comunicacion@femsa.com

International Callers: 201-680-6825
e-mail: shrrelations@cpushareownerservices.com
Website: www.bnymellon.com/shareowner

For more information visit us at:
www.femsa.com
www.femsa.com/investor

Stock Markets and Symbols
Fomento Económico Mexicano, S.A.B. de C.V. stock
trades on the Bolsa Mexicana de Valores (BMV) in
the form of units under the symbols FEMSA UBD
and FEMSA UB. The FEMSA UBD units also trade on
The New York Stock Exchange, Inc. (NYSE) in the
form of ADRs under the symbol FMX.

P R I N T ED USI

WIND E N E

Y
G

Supplied by Community Energy

design: www.signi.com.mx

www.femsa.com
investor@femsa.com.mx

General Anaya No. 601 Pte.
Colonia Bella Vista
Monterrey, Nuevo León
Mexico, C.P. 64410
Phone: (52) 81 8328-6180