Fomento Economico Mexicano S.A.B. de C.V. Annual Report 2016

FY2016 Annual Report · Fomento Economico Mexicano S.A.B. de C.V.

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FOMENTO ECONOMICO MEXICANO, S.A.B. DE C.V.
General Anaya 601 Pte. Col. Bella Vista C.P. 64410
Monterrey, Nuevo Leon, Mexico
investor@femsa.com.mx

www.annualreport.femsa.com
www.femsa.com.mx

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AN N UAL R EP OR T 2 01 6

TABLE OF CONTENTS

FEMSA at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . .6
FEMSA Comercio - Retail Division . . . . . . . . . . . . . . .8
FEMSA Comercio - Health Division . . . . . . . . . . . . . .9
FEMSA Comercio - Fuel Division . . . . . . . . . . . . . . .10
Coca-Cola FEMSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
FEMSA Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Executive Management . . . . . . . . . . . . . . . . . . . . . . . .18
Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . .19
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
In Memoriam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Management’s Discussion & Analysis . . . . . . . . . .24

FEMSA is a multinational beverage and retail
company headquartered in Mexico. We hold

a 48% stake in Coca-Cola FEMSA, the largest

bottler of Coca-Cola products in the world by

volume, and a 20% stake in Heineken, one of the

world’s leading brewers with operations in over

70 countries. We participate in the retail industry

through FEMSA Comercio (100%), comprising a

Retail Division operating primarily through OXXO,

the largest convenience store chain in Latin

America by units; a Fuel Division, operating the

OXXO GAS chain of retail service stations; and a

Health Division, which includes drugstores and

related operations in Mexico and South America.

In addition, our FEMSA Strategic Businesses

provide logistics, point-of-sale refrigeration and

plastics solutions to our own businesses and

third party clients.

FOMENTO ECONOMICO MEXICANO, S.A.B. DE C.V.
General Anaya 601 Pte. Col. Bella Vista C.P. 64410
Monterrey, Nuevo Leon, Mexico
investor@femsa.com.mx

www.annualreport.femsa.com
www.femsa.com.mx

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AN N UAL R EP OR T 2 01 6

TABLE OF CONTENTS

FEMSA is a multinational beverage and retail
company headquartered in Mexico. We hold

a 48% stake in Coca-Cola FEMSA, the largest

bottler of Coca-Cola products in the world by

volume, and a 20% stake in Heineken, one of the

world’s leading brewers with operations in over

70 countries. We participate in the retail industry

through FEMSA Comercio (100%), comprising a

Retail Division operating primarily through OXXO,

the largest convenience store chain in Latin

America by units; a Fuel Division, operating the

OXXO GAS chain of retail service stations; and a

Health Division, which includes drugstores and

related operations in Mexico and South America.

In addition, our FEMSA Strategic Businesses

provide logistics, point-of-sale refrigeration and

plastics solutions to our own businesses and

third party clients.

FOCUSED
ON GROWTH

We continue to deliver on our promise of
sustainable growth at FEMSA. More stores,
products, categories, markets, formats.
More innovation, diversification, economies of scale.
More segmentation, consumption,
traffic. More revenues, profits, returns.
And more jobs, investment, community
impact. Our definition of growth is
broad, ensuring we keep our focus
on the horizon in order to thrive in the
complex global environment in which
we operate and create enduring value
for all our stakeholders.

FEMS A AN N UAL R EP OR T 2 01 6

FEMSA

at a Glance

2016 was a year of growth, diversification,

expansion and consolidation, with

double-digit increases in revenue and

income from operations.

FEMSA COMERCIO
Retail Division

OXXO, the largest C-store
chain in the Americas

by units

FEMSA COMERCIO
Health Division

Drugstores and related
operations in Mexico,
Chile and Colombia

FEMSA COMERCIO
Fuel Division

OXXO GAS chain of
retail service stations
in Mexico

COCA-COLA FEMSA

Largest Coca-Cola
franchise bottler in
the world by volume

Mexico

Central America

Colombia

Venezuela

Brazil

Argentina

Philippines

Total

Clients per Day
(millions)1

Mexico and
Colombia

Points of Sale

Distribution Facilities

Headcount

10.9

15,225

120,588

Clients per Year
(millions)2

Mexico,
Chile and
Colombia

Points of Sale

Distribution Facilities

Headcount

138

2,120

21,216

Clients per Year
(millions)

Mexico

Points of Sale

Headcount

135

382

5,359

Population Served
(millions)

Points of Sale

Plants

Distribution
Facilities

71.1

21.3

46.9

31.7

87.7

12.2

104.5

375.4

854,459

125,778

401,234

168,833

394,489

49,416

846,588

2,840,797

145

328

1 Clients per day based on daily transactions.

2 The number of clients for Chile includes only the Cruz Verde format.

2
2

FE MS A AN N UAL R EP OR T 2 01 6

Mexico
● ● ● ● ●

Guatemala
● ●

Nicaragua
● ●

Panama
● ●

Venezuela
●

Costa Rica
● ●

Colombia
● ● ● ●

Business Unit
● FEMSA Comercio / Retail Division
● FEMSA Comercio / Health Division
● FEMSA Comercio / Fuel Division
● Coca-Cola FEMSA

FEMSA Comercio / Retail Division

and Coca-Cola FEMSA
● Strategic Businesses

Philippines
●

Peru
●

Chile
● ●

Brazil
● ●

Argentina
●

FEMS A AN N UAL R EP OR T 2 01 6
FEMS A AN N UAL R EP OR T 2 01 6

3
3

~20

billion
beverage
transactions

~11

million transactions
per day at OXXO
on average

138

million clients in the
Health Division

Financial

Highlights

Millions of pesos

Total revenues

Income from operations (2)

Operating margin

Consolidated net income

Controlling interest net income (3)

Controlling interest earnings per BD unit (4)

Controlling interest earnings per ADS (5)

EBITDA

EBITDA margin

Total assets

Total liabilities

Total equity

Capital expenditures

Total cash and cash equivalents (6)

Short-term debt

Long-term debt

Headcount (7)

2016 (1)

19,377

1,815

1,318

1,025

0.3

2.9

2,667

26,465

12,584

13,880

1,075

2,117

353

6,401

2016

2015

%Change

2014

%Change

399,507

311,589

37,427

9.4%

27,175

21,140

5.9

59.1

54,987

13.8%

545,623

259,453

286,170

22,155

43,637

7,281

131,967

266,144

33,735

10.8%

23,276

17,683

4.9

49.4

46,626

15.0%

409,332

167,476

241,856

18,885

29,396

5,895

85,969

246,158

28.2%

10.9%

16.8%

19.5%

20.4%

19.6%

17.9%

33.3%

54.9%

18.3%

17.3%

48.4%

23.5%

53.5%

8.1%

263,449

29,983

11.4%

22,630

16,701

4.7

46.7

40,945

15.5%

376,173

146,051

230,122

18,163

18.3%

12.5%

2.9%

5.9%

4.3%

5.8%

13.9%

8.8%

14.7%

5.1%

4.0%

35,497

-17.2%

1,553

279.6%

82,935

216,740

3.7%

13.6%

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. 20.6170 per

US$1.00 as of December 30, 2016.
2 Company's key performance indicator.
3 Represents the net income that is assigned to the controlling shareholders of the entity.
4 "BD" units each of which represents one series "B" share, two series "D-B" shares and two series "D-L" shares. Data based on outstanding 2,161,177,770

BD units and 1,417,048,500 B units.

5 American Depositary Shares, a U.S. dollar-denominated equity share of a foreing-based company available for purchase on an American stock exchange.
6 Cash consists of non-interest bearing bank deposits and cash equivalents consist principally of short-term bank deposits and fixed rate investments.
7 Includes headcount from Coca-Cola FEMSA (excluding the Philippines operations), FEMSA Comercio and Other Businesses of FEMSA.
8 Includes other companies and our 20% economic interest in Heineken.

FEMSA Consolidated

Total Revenues
by Business Unit
millions of pesos

Total assets
by Business Unit
millions of pesos

Income from Operations
by Business Unit
millions of pesos

EBITDA
by Business Unit
millions of pesos

Ps.399,507

Ps.545,623

Ps.37,427

Ps.54,987

● Coca-Cola FEMSA
FEMSA Comercio:

● Retail Division
● Fuel Division
● Health Division
● Others (8)

43%

33%
7%
10%

● Coca-Cola FEMSA
FEMSA Comercio:

● Retail Division
● Fuel Division
● Health Division
● Others (8)

48%

10%
1%
6%

35%

● Coca-Cola FEMSA
FEMSA Comercio:

● Retail Division
● Fuel Division
● Health Division
● Others (8)

64%

31%
0.5%
4%

0.5%

● Coca-Cola FEMSA
FEMSA Comercio:

● Retail Division
● Fuel Division
● Health Division
● Others (8)

65%

28%
1%
4%

4
4

FE MS A AN N UAL R EP OR T 2 01 6

FEMSA COMERCIO

● Retail Division ● Health Division ● Fuel Division

Headcount
thousands

123.9

110.7

113.7

103.0

Total Revenues
billions of Mexican pesos

Income from Operations1
billions of Mexican pesos

EBITDA2
billions of Mexican pesos

Total Assets
billions of Mexican pesos

137.1

119.9

109.6

97.6

11.5

10.3

15.5

13.7

59.7

8.7

7.9

11.8

10.5

43.7

44.7

39.6

% annual
growth

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

Headcount
thousands

21.2

20.0

Total Revenues
billions of Mexican pesos

Income from Operations1
billions of Mexican pesos

EBITDA2
billions of Mexican pesos

Total Assets
billions of Mexican pesos

43.4

1.6

2.4

35.9

% annual
growth

13.1

% annual
growth

0.6

% annual
growth

0.8

% annual
growth

22.5

% annual
growth

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

Headcount
thousands

5.4

4.6

Total Revenues
billions of Mexican pesos

Income from Operations1
billions of Mexican pesos

EBITDA2
billions of Mexican pesos

Total Assets
billions of Mexican pesos

28.6

0.3

18.5

0.2

0.4

0.3

3.6

3.2

% annual
growth

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

COCA-COLA FEMSA

Headcount3
thousands

84.9

83.4 83.7

85.1

Total Revenues
billions of Mexican pesos

Income from Operations1
billions of Mexican pesos

EBITDA2
billions of Mexican pesos

Total Assets
billions of Mexican pesos

177.7

156.0

147.3 152.4

23.9

22.6

21.5

20.7

35.5

31.2

28.6 28.4

279.3

216.7 212.4 210.2

% annual
growth

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

1 Company’s key performance indicator.
2 EBITDA equals to Income from operations plus depreciation, amortization and other non-cash items.
3 Excluding the Philippines operations.

FEMS A AN N UAL R EP OR T 2 01 6
FEMS A AN N UAL R EP OR T 2 01 6

5
5

17.8 54.6 22.2 26.1 13.0 6.0 232.6 157.7 205.1 59.1 15.7 -1.8 0.4 1.7 5.6 5.6 3.4 16.6 12.0 7.5 2.7 9.0 -2.3 -3.3 9.2 5.6 2.4 -0.7 10.0 13.6 30.4 -2.0 -1.0 32.8 12.9 12.4 9.4 14.4 8.1 7.9 8.6 8.4 17.3 11.5 16.7 13.1 27.4 10.4 2.2 33.7 José Antonio Fernández Carbajal
Executive Chairman of the Board

Carlos Salazar Lomelín
Chief Executive Officer

DEAR
SHAREHOLDERS

On behalf of the entire FEMSA team, we are pleased to

share this report on our performance, people, strategy and

impact in 2016.

It was a challenging but rewarding
year for the company, one of growth,
diversification, expansion and
consolidation. We strengthened our
competitive position, leveraged our strong
brand portfolio and operational expertise,
successfully accessed the capital markets,
and further embedded sustainability
within our operations, all while adapting
to challenging macroeconomic conditions
and industry dynamics in several of our
key markets.

A year of growth
A number of developments in the year
helped shape our performance and
advance our growth.

FEMSA Comercio, which is now
comprised of three divisions –Retail,
Health and Fuel– to provide greater
transparency to the dynamics and
performance of each format, delivered
remarkable gains in 2016. In Retail, we
benefited from a 7.0% rise in same-store
sales at OXXO Mexico, as well as the
addition of 1,164 net new OXXO stores and
the acquisition of a small but promising
convenience store platform in Chile; in
Health, the first full year of integration
of Socofar and bolt-on acquisitions in
Colombia and Mexico drove growth; and
in Fuel, our role in the rapid transformation
of Mexico’s energy sector can be seen with
the addition of 75 new OXXO GAS stations,
and an encouraging 7.6% increase in
same-station sales.

FE MS A AN N UAL R EP OR T 2 01 6

expanding our powerful, diversified
platform across businesses and markets,
primed for growth yet also resilient and
defensive as the environment requires.
Our balance sheet is robust and we will
continue to use it with focus and care. And
we are fortunate to have an extraordinary
team of men and women who every year
find a way to exceed our expectations and
create more value than ever. Thus we are
very confident as together we all write the
growth story of the year that begins.

Consolidated revenues

totaled Ps. 399.5 billion

in 2016, up 28.2%."

by solid growth across most operations,
as well as by the integration of Socofar
in FEMSA Comercio’s Health Division.
Income from operations increased 10.9%
to Ps. 37.4 billion (US$ 1.8 billion), while net
consolidated income increased 16.8% to
Ps. 27.2 billion (US$ 1.3 billion). Net majority
income per BD Unit was Ps. 5.91 in 2016
(US$ 2.87 per ADS).

We know the value we create must be
shared in order to be sustainable. To that
end, we invest approximately 1% of total
consolidated revenue in sustainability each
year, an amount totaling Ps. 2,875 million
in 2016 (US$ 139.4 million), allocated
both externally to our communities, and
internally to employee development and
environmental stewardship. This helps
us develop the capabilities we need
to generate the economic, social, and
environmental conditions required to
operate today and grow in the future, in
harmony with our environment.

The road ahead
As is often the case, we begin the new
year on a road that presents challenges
as well as many opportunities. We are

At Coca-Cola FEMSA, we might
characterize the year as a tale of
two regions: in Mexico, a supportive
consumer backdrop and strong
execution drove solid top line growth,
while we faced adverse consumer and
macroeconomic environments in South
America. Notwithstanding, revenues,
transactions and volume all rose in
the year, with outperformance in still
beverages. Our multi-category leadership
was strengthened this year with the
acquisition of AdeS1, the leading soy-
based beverage brand in Latin America,
and the acquisition of Vonpar, one of
the largest privately owned bottlers in
the Brazilian Coca-Cola system that
expands our regional footprint and
consolidates our position as the largest
volume franchise bottler in the world. We
continue to see strong growth potential
across our markets, with a focus on
increasing our share of value and on
driving incremental transactions.

Within our Strategic Businesses, FEMSA
Logistica made progress in the integration
of its less-than-truckload platform in Brazil
and its storage platform in Mexico, while
Imbera, our commercial cooling solutions
operation, expanded into the foodservice
equipment space through an acquisition
in Mexico. While these business units are
not yet of a scale comparable to our retail
or beverage businesses, they are growing
quickly and delivering attractive levels of
profitability and returns.

Creating value, retaining flexibility
Our long-term growth strategy and
disciplined execution have continued to
create economic and social value with and
for the communities we serve, and for all
our stakeholders. This is reflected in our
performance at the consolidated level:

Total revenues in 2016 increased 28.2%
over the previous year to Ps. 399.5
billion (US$ 19.4 billion), mainly driven

FEMS A AN N UAL R EP OR T 2 01 6

1 At the time of the publication of this report, this transaction was still pending approval from antitrust
authorities. Hence, the closing of this acquisition has not yet been finalized.

FEMSA
COMERCIO

Sustained growth,

market leadership

Our fast-growing retail operations in

Mexico and South America generated

approximately half of FEMSA’s consolidated

revenues and a third of EBITDA in 2016,

favorably diversifying our business portfolio

and financial performance. The strong

pace of growth at FEMSA Comercio

continued across every division, reflecting

the integration of acquisitions, new store

openings, and a favorable consumer

environment in Mexico.

Retail Division
The OXXO chain of convenience stores
in Mexico is the heart of our Retail
Division. With approximately 11 million
people making purchases each day, and
a new store opening every eight hours on
average, OXXO is today the third largest
retailer in the country by revenue, and the
leading retailer in Latin America by units.

We use proprietary models to identify
optimal store locations, layouts and
product categories, with strict cost of
capital parameters that together with
our well-developed operating processes
and practices, allow us to drive margins
and returns. We continue to fine-tune
our business model by adding new
categories and services in order to meet
differentiated consumer needs, adjusting

FE MS A AN N UAL R EP OR T 2 01 6

15,225

14,061

12,853

11,721

% annual
growth

10.6

9.7

9.4

8.3

2013

2014

2015

2016

Total OXXO stores

1,164

net new OXXO stores
in 2016

the value proposition of each store to its
location and environment. This helped
OXXO’s same-store sales in 2016 rise by
an average of 7.0% over a demanding
comparison base from the prior year.

2016 highlights:
• We opened 1,164 net new OXXO
stores in the year, including 19 in
Colombia, representing the creation of
approximately 10,200 direct new jobs.
Penetration levels remain low in many
regions of Mexico, indicating plenty of
runway for continued growth.

• We acquired Big John, a well-

positioned convenience store chain
in Chile operating 49 stores, mainly
in the Santiago metropolitan area.
The transaction helps advance our
regional growth strategy by deploying
our considerable expertise in the
convenience store format in the Chilean
market, where we also acquired leading
drugstore operator Socofar in 2015.

• We continued to enhance our Services
platform, particularly in the financial
arena, adding HSBC and Banorte to
our Correspondent Banking network,
reaching 6.6 million Saldazo debit card
accounts, and launching a nationwide
partnership with Western Union to
receive and disburse remittances
to our customers.

Health Division
We first entered the drugstore segment in
2013 with the acquisition of two regional
chains in Mexico, leveraging our small-
box retail expertise with the addition
of pharmaceutical, health and beauty
products. Two additional acquisitions in
2015, including a majority stake in Chilean
leader Socofar, significantly advanced
our growth strategy in this segment and
allowed us to expand beyond our home
market in Mexico. Given its expansion
and continued potential for growth, as
well as our commitment to transparent
disclosure practices that align with

internal decision-making, we now present
all our drugstore and related operations
under the Health Division.

Our strategy is to consolidate fragmented
markets such as Mexico and Colombia
following the OXXO game plan, using
our operational and logistics expertise
to facilitate international expansion.
With 2,120 stores at year-end 2016, we
are becoming a key drugstore operator
in Latin America. Revenues jumped a
remarkable 232.6% in 2016 with the
integration of Socofar, and 24.0% on an
organic basis.

We are preparing for further

growth while integrating

our legacy operations into a

single platform.”

FEMS A AN N UAL R EP OR T 2 01 6

2016 highlights:
• We opened 99 net new stores in the year,
primarily in Mexico, entering new regions
including the key Valley of Mexico market.

• Additionally, we made two small

bolt-on acquisitions: Generix in Mexico
and Acuña in Colombia, adding a total of
121 new stores to our regional footprint.

• During the year we made significant
progress building the infrastructure
required to integrate our legacy drugstore
operations in Mexico into a single
platform and standardize the business
model across different regional brands in
order to prepare for future growth.

Fuel Division
When Mexico’s regulatory framework
for the energy sector was modified in
2013, we saw a unique opportunity to
participate in the transformation of the
fuel industry via the operation of a large
network of service stations. The clear
alignment with our retail service operation
and the ability to leverage OXXO’s brand
equity, combined with the potential
returns on capital of a low asset-intensity
model, was compelling.

Our 382 strong network of OXXO GAS
service stations is located in 16 states,

primarily in the north of Mexico. Along
with fuel, oil and additives, we differentiate
our offering through reliable and high
quality service, a strong brand, and
exclusive promotions available only to
OXXO GAS clients.

In our first full year of reporting Fuel
Division results (2015: 10 months), total
revenues increased 54.6% while same-
station sales increased 7.6%. Looking
ahead to 2017, as the industry continues
to transition into an open market model,
higher gas prices will likely translate
to higher revenues but our long-term
growth strategy will remain focused on
expanding the network of service stations,
and enhancing underlying profitability by
continuing to gear the business model
towards our expertise in retail dynamics.

2016 highlights:
• We added 75 new service stations in the
year; this rapid pace of growth rate led to
short-term operating deleverage, as new
service stations take some time to ramp up.

• We continued to invest in the expansion

of our infrastructure to enable accelerated
growth across more territories.

• We launched and began the rollout of the
new image and branding for OXXO GAS,
in order to further differentiate our stations.

220

net new stores in 2016

2,120

1,900

% annual
growth

2015

2016

Total number of stores
for Health Division
per year

net new services
stations in 2016

382

307

% annual
growth

2015

2016

Total OXXO GAS
Services stations
per year

We are expanding

our infrastructure to

accommodate rapid growth

across more territories."

FE MS A AN N UAL R EP OR T 2 01 6

24.4 11.6
COCA-COLA
FEMSA

We also reached a new, broad
cooperation framework with our partner,
The Coca-Cola Company, that aims to
maintain a mutually beneficial business
relationship over the long term and allows
both companies to focus on driving
business growth.

Portfolio initiatives
We generated nearly 20 billion
transactions in 2016, and maintained or
gained market share in both sparkling and
still beverages in key territories. We are
building a compelling product portfolio
with a wider array of sparkling beverages,
juices, isotonic sports and energy
drinks, teas, waters, and dairy products,
maximizing value in each segment through
innovation and increased affordability.

Portfolio excellence,

geographic growth, ongoing

transformation

We are the largest franchise bottler of

Coca-Cola beverages in the world by

volume, operating in two of the most

attractive regions in the industry: Latin

America and Southeast Asia. We delivered

solid financial results in 2016 in the context

of a challenging consumer, currency, and

raw material environment across many of

our markets, and continued to transform our

operating model, strengthen our corporate

culture, consolidate our geographic footprint,

and deliver portfolio innovations.

FEMS A AN N UAL R EP OR T 2 01 6

Significantly enhanced our

profile in one of the largest

markets for Coke products

in the world.”

% annual
growth

346

351

375

358

2013

2014

2015

2016

Population served
millions

+375

million consumers in 2016

2016 highlights:
• We launched Coca-Cola Stevia across
targeted channels in Brazil. Sweetened
with natural ingredients, it offers a
reduced calorie alternative for one of the
world’s most beloved brands.

• We began distributing the Monster

energy portfolio in Mexico and Brazil,
outperforming expectations.

• Our dairy volume more than doubled

in 2016, and we continue to strengthen
our position in Mexico’s premium dairy
category. Since the 2014 launch of
Santa Clara brand UHT milk, we have
expanded our offering to lactose-free,
light, and skim white UHT milk, along
with chocolate, cappuccino, vanilla, and
strawberry flavored options.

• Together with The Coca-Cola Company,

we agreed to acquire AdeS, Latin
America’s leading soy-based beverage
producer, to expand our non-carbonated
beverage portfolio. Along with
geographic expansion potential, AdeS
provides a strategic platform for our
nutritional products focus; the brand is
well positioned to benefit from favorable
dynamics in the broader dairy-alternative
beverage segment, as well as positive
consumption trends for premium,
nutritious, and natural products.

Expansion and consolidation
Among other competitive advantages,
our geographic footprint across ten
countries provides us with the benefits
of diversification. In 2016, for example,
solid performance in Mexico, our largest
market, was sufficient to offset headwinds
in much of South America. In addition,

extend our portfolio to new customers,
generate economies of scale, and capture
approximately BRL 65 million of synergies
at the EBITDA level in the next 18 to
24 months.

per capita consumption trends indicate
attractive potential for growth in several
of our operations; we see significant
opportunities ahead, particularly in the
Central American markets of Panama,
Costa Rica, Nicaragua and Guatemala,
as well as in the Philippines.

We continue to transform the company
by complementing organic growth with
strategic value-creating acquisitions.
In 2016 we acquired Vonpar in Brazil,
a strategically important franchise that
borders our territories in the south, and
significantly enhances our profile in one
of the largest markets for Coke products
in the world. Combined, we will serve
approximately 88 million consumers,
nearly half of the Coca-Cola system’s
volume in the country. The integration
of Vonpar will create opportunities to

FE MS A AN N UAL R EP OR T 2 01 6

10.9 1.4 2.0 4.7 The profitable transformation of our
operations in the Philippines continued
in 2016, in advance of the financial
consolidation of this operation’s
results beginning in 2017. We further
strengthened the supply chain, enhanced
control of distribution and logistics, and
installed the fastest bottling line in the
world as part of the effort to modernize
our production capacity and expand our
package portfolio.

Transforming the operating model
Our Strategic Framework continues to
guide our long-term business growth. As
part of the multi-year process launched
in 2014 to create a leaner, more agile
and flexible organization, we continue to
evolve our core capabilities and transform
our operating models via Centers of
Excellence (CoE).

This year, the Commercial CoE rolled
out the KOFmmercial Digital Platform
in Mexico, which provides advanced
analytics for revenue transformation,
next generation trade marketing, and
sales force automation. Already deployed
to over 600,000 clients in over 3,400
routes across the country, it has quickly
generated incremental volume and
sales growth and improved point of sale
execution. Deployment to other markets
will take place through 2017.

Our Distribution & Logistics CoE is
working to transform the supply chain; we
implemented Digital Distribution at four
distribution centers in Mexico in 2016,
with mobile applications, telematics and
live web platform that aim to improve
customer satisfaction, optimize route-to-
market resources, and enhance driver
safety. In the Manufacturing CoE, we
continued the development and rollout of
our Manufacturing Management Model to
bolster efficiency and productivity; in 2016,
we increased production lines under our
Plant Operating Model, covering one-third
of the company’s total volumes.

Strengthening our culture
As a growing multicultural corporation,
Coca-Cola FEMSA is continuously
evolving and adapting to ensure a strong,
unified corporate culture that embraces

diversity. To support the priorities
identified via feedback from employees,
we developed and deployed a number of
initiatives including:

• A holistic program to transform

our leadership style to incorporate
consultative, supportive, and inspirational
leadership roles within our executive
team and their direct reports.

• Growing future leaders by defining and
communicating clear career tracks, and
self-development tools to advance their
specific priorities.

• Bolstering the performance management
process to systematically recognize and
reward positive performance.

• Deploying current and future leaders into
stretch roles to accelerate their and our
company’s growth.

• Utilizing new technology to enable

greater communication, closeness, and
collaboration between our employees.

600,000+ clients

already on KOFmmercial

Digital Platform.”

FEMS A AN N UAL R EP OR T 2 01 6

SUSTAINABILITY

We rely on a robust Strategic
Sustainability Framework, which is
grounded in our ethics and values,
to focus our actions, programs, and
initiatives. FEMSA’s sustainability
efforts are spearheaded by the
Executive Committee and increasingly
integrated into the operating strategy
of each business unit, bringing greater
accountability and transparency.

In 2016, we developed a number of new
and updated policies regarding natural
resource management, community
relationships, and anti-corruption
measures, among others. We made
progress across all three pillars of our

Conducting our actions and

decisions with a sustainable

approach contributes to

achieving our mission

Our commitment to stakeholders,

embedded in our mission, is to create

economic and social value. To deliver

growth and sustainable value, we

must adapt our capabilities and shape

the conditions in which we operate,

particularly in the context of competing

demands and constraints.

We promote wellness and quality of life for our
employees and their families, and encourage them
to contribute positively to their communities.

FE MS A AN N UAL R EP OR T 2 01 6

SUSTAINABILITYStrategic Sustainability Framework – Our
People, Our Planet, and Our Community
– and continued to strengthen the
foundation of Our Ethics and Values.

Our Planet

Our Community

Goal: Minimize the environmental impact
of our operations.

Goal: Contribute to the generation of
sustainable communities.

Highlights include:

Our People

Action/Focus Areas: Water; energy
(includes impact of transportation &
logistics); waste and recycling
(includes packaging).

Goal: Promote the comprehensive
development of our employees.

2016 Investment: Ps. 963 million
(US $46.7 million).

Action/Focus Areas: Culture and values;
training and development (includes
workplace safety & health, compensation);
comprehensive development.

2016 Highlights: Improved our water and
energy utilization rates, reduced our CO2
emissions, expanded our recycling initiatives,
and reduced total tons of waste.

2016 Investment: Ps. 1,555 million
(US $75.4 million).

2016 Highlights: Strengthened HR and
talent management platform; expanded
FEMSA University offerings; promoted
culture of self-directed development.

KPIs: Average number of training hours per
employee: 186,150 (2015: 121,428)
Accident Index1: 2.13 (2015: 3.94)
Employee hours volunteered: 81.5
(2015: 81.6).

KPIs: Liters of water consumed per liter of
beverages produced (KOF): 1.72 (2015: 1.77)
CO2e tons direct and indirect emissions:
1,050,707 (2015: 1,266,732) Porcentage of
recycled material: 93.6 (2015: 82.7). Indirect
energy consumption2: 8,803,031 GJ (2015:
8,418,810 GJ).

Ps. 2,875.3 million invested

in sustainability programs

and initiatives in 2016.”

Action/Focus Areas: Healthy lifestyles
(includes nutrition & physical activity);
community development (includes
responsible marketing, sustainable products
& services, environmental safety, and
social wellbeing).

2016 Investment: Ps. 357.3 million
(USD $17.3 million).

2016 Highlights: Began implementing
MARRCO (Model for Addressing Risks
and Relations with the Community) to
strengthen the way we relate to local
communities, improve the effectiveness of
our relationships, and advance a culture
of partnership rather than philanthropy.

KPIs: Funds collected by Redondeo
Clientes OXXO: Ps. 98.3 million
(US $4.7 million) (2015: Ps. 100.8 million)
(US $5.8 million). Food Program (OXXO):
Ps. 43.6 million (US $2.1 million) 2015:
Ps. 29 million (US $ 1.6 million).

+186,000

employees received training
through 13,260
courses in 2016

186,150

121,428

79,438

84,077

2013

2014

2015

2016

FEMSA University
Number of employees trained

End of school year event 2015 – 2016, Coordenadas para Vivir, Veracruz, Mexico.

FEMS A AN N UAL R EP OR T 2 01 6

1 Index based on the number of incidents per 100 employees. Figures are calculated based on the number of FEMSA direct employees reported to SASSO. Includes
information on all countries.

2 Consumption of electrical energy from renewable and non-renewable sources.

FEMSA
FOUNDATION

In Wawa Bar, Nicaragua, Gibaron Haward age 9, already uses the water system installed in his community.
© E.Hasting/Water aid.

Lasting impacts that empower

people and communities

The FEMSA Foundation is our social

investment vehicle through which we aim

to create lasting positive impacts that

empower people and communities to take

the reins of their own development. We work

Children eating nopal salad prepared with
Comer en Familia at the fair Juntos con Mexico 2016.

with high-level international partnerships

that strengthen our impact: in 2016, for

every dollar invested, we secured another

US$2.39, a total of US$13.5 million in partner

investments to support our projects and

Our investment philosophy is rooted in
innovation, replicability, and scalability,
with an emphasis on capacity building
and community ownership to ensure
sustainable impact once interventions are
complete. We are currently focused on
two strategic action areas:

grantees this year.

Water

Goal: Address water challenges in Latin
America and the Philippines through
technology-supported informed decision-
making, access to water and sanitation,
and water security through watershed
sustainability.

FE MS A AN N UAL R EP OR T 2 01 6

Partners: Inter-American Development
Bank, Global Environment Facility, The
Nature Conservancy, Millennium Water
Alliance, Coca-Cola Latin America,
Tecnológico de Monterrey.

Key Programs: Latin American Water
Funds Partnership: initiative that provides
technical and financial assistance for the
creation of Water Funds, collective action
mechanisms aimed at helping achieve water
security by investing in natural infrastructure
and governance; to date, Water Funds have
leveraged over Ps 2,149 million from more
than 100 local partners.

Water Links: program that empowers more
than 110,000 people through access to safe
water, sanitation, and hygiene education in
196 rural communities of Mexico, Nicaragua,
Guatemala, Honduras, and Colombia.

Strategic Decisions Hub (NED, for its
acronym in Spanish): tool run by the Water
Center for Latin America and the Caribbean
at Tecnológico de Monterrey to support the
decision-making process in complex matters
such as water management, integrating
methodology, technology information, and a
network of experts.

2016 Highlights: Hosted the 3rd Water
Funds Biennial in Bogotá, Colombia, with
President Juan Manuel Santos as the guest
of honor, during which we built capacities,
shared lessons learned, and finalized
the first phase of the Partnership and
launched the second, with a new approach:
water security. Supported the Monterrey
Water Fund in leveraging NED’s powerful
simulation instruments to design the city’s
Water Plan and help secure its supply for
the next 50 years.

Early Childhood Development

Goal: Foster early childhood development
so children, mainly those who live in adverse
conditions, may reach their maximum
potential; support applied scientific research
on health.

Partners: Save the Children; Sesame
Workshop; Food for the Hungry; Glasswing
International; Healthy Ministry of Mexico;
UNICEF; as well as local schools in Mexico,
Brazil, Costa Rica, Guatemala, Nicaragua,
Panama, and Colombia; Tecnológico de
Monterrey, University of Houston.

Key Programs: ¡Listos a Jugar! (Ready to
play!): a multi-platform initiative to promote life-
long habits among children from 0 to 6 years.

1,124,319

631,250

533,545

297,545

+493,000

more people benefited
in 2016

2014

2015

2016
2013
People benefited
accumulated

Carlos Vives, Colombian celebrity, was one of our guests of honor at the 3rd Water Funds Biennial.
©Ana Guzmán/TNC.

Lasting impacts that

empower people and

communities.”

Eating as a Family: training mothers and
caregivers in healthy cooking habits to
empower them to promote their families’
health and well-being.

Colors Campaign: nutrition education
programs for elementary and pre-school
children to boost their development,
together with their teachers and parents.

2016 Highlights: Organized the Early
Childhood Development Symposium
“Foundations for Our Future,” a dialogue
space where over 200 specialists from
9 countries gathered to analyze the situation
of the sector in Latin America and
the Caribbean; supported the development
of a device for early diabetes detection at the
FEMSA Biotechnology Center, which is now
ready for clinical trials.

FEMS A AN N UAL R EP OR T 2 01 6

EXECUTIVE
MANAGEMENT

Our management team is focused on growth and creating

economic, social and environmental value for our stakeholders.

Our executives have significant experience, often across multiple

business units and roles within FEMSA, ensuring a deep

understanding of the challenges and opportunities we face, as well

as the rich culture and values upholding the organization.

José Antonio Fernández Carbajal
Executive Chairman of the Board

Javier Gerardo Astaburuaga Sanjines
Vice President of Corporate Development

Mr. Fernández joined FEMSA in 1988. He was
appointed CEO in 1995 and Chairman in 2001,
serving in both positions until January 2014. He is
Vice Chairman of the Heineken N.V. Supervisory
Board and member of the Heineken Holding
N.V. Board, and also serves as Chairman of
Coca-Cola FEMSA, FEMSA Foundation,
Tecnológico de Monterrey, and the US-Mexico
Foundation. He is a member of the Board of
Industrias Peñoles and Grupo Televisa, and
co-chairs the Mexico Institute of the Woodrow
Wilson Center. His degrees in Industrial
Engineering and Systems and MBA were both
earned from Tecnológico de Monterrey.

Carlos Salazar Lomelín
Chief Executive Officer

Mr. Salazar was appointed CEO in 2014
following his tenure as CEO of Coca-Cola
FEMSA, and prior to that as CEO of FEMSA
Cerveza and various management roles in
other FEMSA subsidiaries. Mr. Salazar is an
Advisory Board member of the Tecnológico
de Monterrey’s EGADE Business School. He
holds a BA in Economics and an MBA from
Tecnológico de Monterrey, and he pursued
graduate studies in Economic Development
in Italy.

Miguel Eduardo Padilla Silva
Chief Financial and Corporate Officer

Mr. Padilla joined FEMSA in 1997 and was
named to his current position in January
2016. Previously he served as CEO of
FEMSA Comercio, CEO of FEMSA Strategic
Procurement, and FEMSA’s Director of
Planning and Control. Mr. Padilla earned a
Bachelor’s degree in Mechanical Engineering
from Tecnológico de Monterrey and an MBA
from Cornell University. He also holds a
Master’s degree from IPADE.

Mr. Astaburuaga joined FEMSA in 1982. His
roles in the company have included co-CEO of
FEMSA Cerveza, Director of Sales for Northern
Mexico, CFO of FEMSA Cerveza, and Chief
Financial and Corporate Officer of FEMSA. He
was appointed to his current position in April
2015. Mr. Astaburuaga earned his Bachelor’s
degree in Public Accounting from Tecnológico
de Monterrey.

Alfonso Garza Garza
Vice President of Strategic Businesses

Mr. Garza joined FEMSA in 1985 and held
various positions including CEO of FEMSA
Empaques. In 2012 he was appointed to his
current position. He served as President
of the Employers Confederation of Mexico
(Coparmex) for the state of Nuevo León
(2011-2013), and has served as National Vice
President since 2009. He is Chairman of the
Talent and Culture Committee of Tecnológico
de Monterrey, and member of the Board
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 coursework at IPADE.

Genaro Borrego Estrada
Vice President of Corporate Affairs

Mr. Borrego joined FEMSA in 2008 after
serving as Governor of the Mexican State of
Zacatecas (1986-1992), head of the Mexican
Social Security Institute (IMSS)(1993-
2000), and Senator to the Federal Congress
representing the State of Zacatecas (2000-
2006). He holds a degree in Industrial Relations
from Universidad Iberoamericana.

José González Ornelas
Vice President of Administration and
Corporate Control

Mr. González joined FEMSA in 1973 and
assumed his current position in 2001. His
previous roles have included CFO of FEMSA
Cerveza, Director of Planning and Corporate
Development of FEMSA, and CEO of FEMSA
Logística. He serves as Secretary of the Audit
Committee of both FEMSA’s and Coca-Cola
FEMSA’s Boards of Directors, and is a member
of the Board of Productorºa de Papel, S.A. He
holds a BA in Accounting from Universidad
Autónoma de Nuevo León and completed
postgraduate studies in Business Administration
from IPADE.

John Anthony Santa Maria Otazúa
Chief Executive Officer of Coca-Cola FEMSA

Mr. Santa Maria was appointed to his current
position in 2014, having joined Coca-Cola
FEMSA in 1995 and having served in several
senior management positions since then,
including COO of the company’s Mexico
Division, and Strategic Planning and Business
Development Officer. Mr. Santa Maria earned a
Bachelor´s degree and an MBA with a major in
Finance from Southern Methodist University.

Daniel Alberto Rodríguez Cofré
Chief Executive Officer of FEMSA Comercio

Mr. Rodríguez joined FEMSA in 2015 as Chief
Financial and Corporate Officer, and was named
to his current position in January 2016. Prior
to joining the company he was CFO and then
CEO of CENCOSUD (Centros Comerciales
Sudamericanos S.A.), among other senior
finance and management positions in Latin
America, Europe and Africa. He is a member
of the Board of Coca-Cola FEMSA and an
alternate member of the Board of FEMSA. Mr.
Rodríguez holds a forest engineering degree
from Austral University of Chile and an MBA
from Adolfo Ibañez University.

FE MS A AN N UAL R EP OR T 2 01 6

CORPORATE
GOVERNANCE

We seek to adhere to best governance practices, with a

commitment to quality, accuracy and reliability in our disclosure,

financial transparency, accountability, and the highest ethical

standards. We comply with the standards set forth in the Mexican

Securities Law (Ley del Mercado de Valores) and the applicable

provisions of the Sarbanes-Oxley Act (United States of America).

The reliability and

transparency of our

corporate governance

policies at FEMSA is

essential to our

long-term success."

The following committees support the work of
the Board of Directors:

Audit Committee
The Audit Committee is responsible for
(i) reviewing the accuracy and integrity of
quarterly and annual financial statements in
accordance with accounting, internal control
and auditing requirements; (ii) the appointment,
compensation, retention, and oversight of
the independent auditor, who reports directly
to the Audit Committee; and (iii) identifying
and following up on contingencies and legal
proceedings.

The Audit Committee has 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.

As required by Mexican Securities Law and
applicable NYSE listing standards, all committee
members are independent directors. The
members of the committee are: José Manuel
Canal Hernando (Chairman and financial
expert), Francisco Zambrano Rodriguez, Alfonso
González Migoya and Ernesto Cruz Velázquez
de León. The Secretary of the Audit Committee
is José González Ornelas.

Corporate Practices Committee
The Corporate Practices Committee is
responsible for preventing or reducing the risk
of transactions that could damage the value
of the company or benefit a particular group
of shareholders. The committee may call a
shareholders’ meeting and place matters on
that meeting’s agenda as it deems appropriate.
It is also responsible for approving policies for
the use of the company’s assets or any related
party transactions and the compensation of the
Chief Executive Officer and senior executives, as
well as supporting the Board of Directors in the
preparation of reports on accounting practices.

As required by Mexican Securities Law, each
member of the Corporate Practices Committee
is an independent director. The members of
the committee are: (✝) Alfredo Livas Cantú
(Chairman), Robert E. Denham, Moisés Naím
and Ricardo Saldívar Escajadillo. The Secretary
of the Corporate Practices Committee is Miguel
Eduardo Padilla Silva.

Finance and Planning Committee
The Finance and Planning Committee is
responsible for (i) evaluating the investment
and financing policies proposed by the Chief
Executive Officer; and (ii) evaluating risk
factors to which the corporation is exposed, as
well as its management policies. The members
of the committe are: Ricardo Guajardo Touché
(Chairman), Federico Reyes García, Robert E.
Denham, Francisco Javier Fernández Carbajal
and (✝) Alfredo Livas Cantú. The Secretary of
the Finance and Planning Committee is Miguel
Eduardo Padilla Silva.

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

FEMS A AN N UAL R EP OR T 2 01 6

BOARD OF
DIRECTORS

The Board is responsible for determining corporate strategy;

defining and overseeing the implementation of vision and values;

and approving related-party transactions and transactions not in

the ordinary course of business.

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: Federico Reyes García C

Mariana Garza Lagüera Gonda
Private Investor
Elected 1998
Alternate: Eva María Garza Lagüera Gonda

Paulina Garza Lagüera Gonda
Private Investor
Elected 1999
Alternate: Othón Páez Garza

José Fernando Calderón Rojas
Chief Executive Officer and Chairman of
the Board of Directors of Franca Servicios,
S.A. de C.V., Servicios Administrativos de
Monterrey, S.A. de C.V., Regio Franca, S.A.
de C.V., and Franca Industrias, S.A. de C.V.
Elected 1984
Alternate: Francisco José Calderón Rojas

Alfonso Garza Garza
Vice President of Strategic Businesses of
Fomento Económico Mexicano, S.A.B. de C.V.
Elected 2001
Alternate: Juan Carlos Garza Garza

Max Michel González
Operations Manager at Servicios Liverpool,
S.A. de C.V.
Elected 1996
Alternate: Bertha Michel González

Alberto Bailleres González
Chairman of the Boards of the companies
of Grupo BAL, S.A. de C.V.
Elected 1989
Alternate: Arturo Fernández Pérez

Francisco Javier Fernández Carbajal C
Chief Executive Officer of Servicios
Administrativos Contry, S.A. de C.V.
Elected 2004
Alternate: Javier Astaburuaga Sanjines

Ricardo Guajardo Touché C, I
Chairman of the Board of Solfi, S.A. de C.V.
Elected 1988
Alternate: Alfonso González Migoya A, I

Alfredo Livas Cantú B, C, I
(✝ April 2016)
Elected 1995
Alternate: Sergio Deschamps Ebergenyi I

Bárbara Garza Lagüera Gonda
Private Investor; President of the
Acquisitions Committee of
Colección FEMSA
Elected 1998
Alternate: Juan Guichard Michel

Carlos Salazar Lomelín
Chief Executive Officer of Fomento
Económico Mexicano, S.A.B. de C.V.
Elected 2014
Alternate: Miguel Eduardo Padilla Silva

Ricardo Saldívar Escajadillo B, I
President of the Board of Directors and
Chief Executive Officer of The Home Depot
Mexico
Elected 2006

Alfonso de Angoitia Noriega I
Executive Vice-Chairman and Chairman
of the Finance Committee of Grupo
Televisa, S.A.B.
Elected 2015

SERIES “D” DIRECTORS

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

Moisés Naím B, I
Distinguished Fellow at the Carnegie
Endowment for International Peace;
Producer and host of Efecto Naím; author
and journalist
Elected 2011
Alternate: Francisco Zambrano Rodríguez A, I

José Manuel Canal Hernando A, I
Independent Consultant
Elected 2003

Michael Larson I
Chief Investment Officer for William H.
Gates III
Elected 2010
Alternate Director: Daniel Alberto
Rodríguez Cofré

Robert E. Denham B, C, I
Partner at Munger, Tolles & Olson, LLP
(law firm)
Elected 2001
Alternate Director: Ernesto Cruz Velázquez
de León A, I

Secretary
Carlos Eduardo Aldrete Ancira

Alternate Secretary
Arnulfo Treviño Garza

A Audit Committee

B Corporate Practices Committee

C Strategy and Finance Committee

I Independent Director

2020

FE MS A AN N UAL R EP OR T 2 01 6

Alfredo Livas Cantú, Board member and

longtime friend of our company, passed away on

April 26, 2016. Mr. Livas contributed his talent,

loyalty and integrity for almost forty years."

IN MEMORIAM

Alfredo Livas Cantú
(✝ 1951 - 2016)

He earned an undergraduate degree in Economics from the Universidad
Autónoma de Nuevo León, and master’s degrees in Business
Administration and Economics from the University of Texas and the
UANL. He first came to FEMSA, then known as VISA, in 1978. For ten
years he served as the company’s Chief Financial Officer, and played an
outstanding role in key transactions such as the debt restructuring in the
1980s, forging the successful joint venture with The Coca-Cola Company,
various business acquisitions and divestitures in the 1990s and, most
significantly, the corporate restructuring of VISA-FEMSA, which paved
the way for our historic public offering on the New York Stock Exchange.

He was elected member of FEMSA’s Board of Directors in 1995 and
Secretary of the Planning and Finance Committee in 2002. As a Board
member, he was known for his vision, openness and clarity, and he gave
crucial guidance to the company in its strategic path. He earned not
only the trust of Board members and shareholders but also business
executives, who valued his talent, experience and professional prestige.

He was an altruistic man, who served his community and his country
with dedication and passion. The affection and generosity he brought to
his continuous efforts to help neighbors and peasant families of Linares,
Nuevo León, is just one shining example.

Firm in his convictions, faithful to his friends and loving to his family,
Alfredo Livas will always be a life example for future generations.

FEMS A AN N UAL R EP OR T 2 01 6

FINANCIAL
SUMMARY

Amounts expressed in millions of Mexican pesos (Ps.)
as of December 31, 2016

INCOME STATEMENT
Net sales
Total revenues
Cost of goods sold
Gross profit
Operating expenses
Income from operations (1)
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 (2)

Ps.

398,622
399,507
251,303
148,204
110,777
37,427
4,208
4,619

28,600
7,888

6,463
27,175
21,140
6,035

37.1%
9.4%
6.8%

2016

2015

2014

2013

2012

Ps. 310,849
311,589
188,410
123,179
89,444
33,735
954
7,618

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

25,163
7,932

6,045
23,276
17,683
5,593

39.5%
10.8%
7.5%

23,503
6,253

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

41.8%
11.4%
8.6%

25,282
7,756

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

42.5%
11.6%
8.6%

12,076

9,761

9,029

8,805

5,484
54,987
22,155

3,130
46,626
18,885

1,933
40,945
18,163

1,208
39,870
17,882

27,668
7,949

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

42.5%
12.3%
11.8%

7,175

1,278
37,680
15,560

FE MS A AN N UAL R EP OR T 2 01 6

BALANCE SHEET
Assets
Current assets

Investments in associates and joint ventures
Property, plant and equipment, net (3)
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
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 (4)
Net controlling interest income (⁵)
Dividends paid (6)

Series B shares
Series D shares

Number of employees (7)
Number of outstanding shares (8)

2016

2015

2014

2013

2012

117,951
128,601
102,223
153,268
43,580
545,623

7,281
79,008
131,967
4,447
11,037
25,713
259,453
286,170
211,904
74,266

1.367
0.907
0.33

86,723
111,731
80,296
108,341
22,241
409,332

5,895
59,451
85,969
4,229
6,230
5,702
167,476
241,856
181,524
60,332

1.327
0.692
0.28

11.844
1.182

10.146
0.988

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

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

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

0.417
0.521
266,144
17,891.13

0.366
0.458
246,158
17,891.13

0.000
0.000
216,740
17,891.13

0.667
0.833
209,232
17,891.13

0.309
0.386
182,260
17,891.13

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

(1) Company’s key performance indicator.
(2)
(3)
(4) Controlling interest divided by the total number of shares outstanding at the end of each year.
(5) Net controlling interest income divided by the total number of shares outstanding at the end of the each year.
(6) Expressed in nominal pesos of each year.
(7)
(8)

Includes incremental employees resulting from mergers & acquisitions made during the year.
Total number of shares outstanding at the end of each year expressed in millions.

FEMS A AN N UAL R EP OR T 2 01 6

MANAGEMENT’S
DISCUSSION AND
ANALYSIS

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

Audited Financial Results for the twelve months ended December 31, 2016
Compared to the twelve months ended December 31, 2015.

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”),
including its Retail Division which operates small-format chain stores, a Health Division, which includes
drugstores and related operations and its Fuel Division which operates retail service stations for fuels,
motor oils and others.

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

The 2016 and 2015 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 30, 2016, which was 20.6170 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 materially impact the Company’s actual performance.

FEMSA Consolidated
2016 amounts in millions of Mexican pesos

Total Revenues

% Growth vs‘15

Gross Profit

% Growth vs ‘15

FEMSA Consolidated
Coca-Cola FEMSA
FEMSA Comercio – Retail Division
FEMSA Comercio – Health Division
FEMSA Comercio – Fuel Division

399,507
177,718
137,139
43,411
28,616

28.2%
16.6%
14.4%
N/A
54.6%

148,204
79,662
50,990
12,738
2,248

20.3%
10.6%
16.8%
N/A
58.3%

FE MS A AN N UAL R EP OR T 2 01 6

FEMSA’s consolidated total revenues
increased 28.2% to Ps. 399,507 million in
2016 compared to Ps. 311,589 million in
2015. Coca-Cola FEMSA’s total revenues
increased 16.6% to Ps. 177,718 million,
supported by the positive translation
effect originated by the appreciation of
the Brazilian real and the Colombian
peso, despite of the depreciation of the
Venezuelan bolivar and the Argentine
peso; all as compared to the Mexican
peso. FEMSA Comercio – Retail Division’s
revenues increased 14.4% to Ps. 137,139
million, driven by the opening of 1,164
net new OXXO stores combined with
an average increase of 7.0% in same-
store sales. FEMSA Comercio – Health
Division’s amount to PS. 43,411 million,
which on an organic basis,1 increased
24.0% compared to 2015. FEMSA
Comercio – Fuel Division revenues
increased 54.6% to Ps. 28,616 million in
2016, compared to the ten-month period
from March to December of 2015, driven
by the addition of 75 total net new stations
in the last twelve months, a 7.6% increase
in same-store sales.

Consolidated gross profit increased 20.3%
to Ps. 148,204 million in 2016 compared to
Ps. 123,179 million in 2015. Gross margin
decreased 240 basis points to 37.1% of total
revenues compared to 2015, reflecting
a contraction in Coca-Cola FEMSA’s
gross margin and the incorporation and
growth of lower margin businesses in
FEMSA Comercio.

Consolidated operating expenses increased
23.9% to Ps. 110,777 million in 2016
compared to Ps. 89,444 million in 2015. As a
percentage of total revenues, consolidated
operating expenses decreased from 28.7%
in 2015 to 27.7% in 2016.

Consolidated administrative expenses
increased 25.8% to Ps. 14,730 million in
2016 compared to Ps. 11,705 million in
2015. As a percentage of total revenues,
consolidated administrative expenses
decreased 10 basis points, from 3.8% in
2015, compared to 3.7% in 2016.

Consolidated selling expenses increased
25.1% to Ps. 95,547 million in 2016 as
compared to Ps. 76,375 million in 2015.
As a percentage of total revenues, selling
expenses decreased 60 basis points, from
24.5% in 2015 to 23.9% in 2016.

Consolidated income from operations
increased 10.8% to Ps. 37,427 million in
2016 as compared to Ps. 33,735 million in
2015. As a percentage of total revenues,
operating margin decreased 140 basis
points, from 10.8% in 2015 to 9.4% in 2016.

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
consolidated operating expenses.

Net financing expenses decreased to
Ps. 4,619 million from Ps. 7,618 million in
2015, mostly driven by a positive result
caused by inflationary effects in KOF’s
net monetary positions across different
countries, combined with a foreign exchange
gain related to the effect of FEMSA’s US
Dollar-denominated cash position, these
movements where enough to offset an
interest expense increase of 24.0% to
Ps. 9,646 million in 2016, compared
to Ps. 7,777 million in 2015 resulting from
new debt issuance at Coca-Cola FEMSA
in connection to the Vonpar acquisition,
and the EUR $1,000 million bond issued by
FEMSA during the first half of 2016.

Income before income taxes and share of the
profit in Heineken results increased 13.7%
to Ps. 28,600 million in 2016 compared with
Ps. 25,163 million in 2015, mainly as a result of
growth in FEMSA’s income from operations
and lower financing expenses, which more
than offset higher non-operating expenses.

Our accounting provision for income taxes
in 2016 was Ps. 7,888 million, as compared
to Ps. 7,932 million in 2015, resulting in

an effective tax rate of 27.6% in 2016, as
compared to 31.5% in 2015, slightly under
our expected medium term range of 30%.
The lower effective tax rate registered
during 2016 is mainly related to Coca-Cola
FEMSA driven by; certain tax efficiencies,
lower effective tax rate in Colombia and
ongoing efforts to reduce non-deductible
items across our operations.

Consolidated net income was Ps. 27,175
million in 2016 compared to Ps. 23,276
million in 2015, resulting from growth in
FEMSA’s income from operations and an
increase in FEMSA’s 20% participation
in Heineken’s results. Controlling interest
amounted to Ps. 21,140 million in 2016
compared to Ps. 17,683 million in 2015.
Controlling interest in 2016 per FEMSA
Unit was Ps. 5.91 (US$ 2.87 per ADS).

Coca-Cola FEMSA
Coca-Cola FEMSA total revenues
increased 16.6% to Ps. 177,718 million in
2016, as compared to 2015, supported by
the positive translation effect originated
by the appreciation of the Brazilian real
and the Colombian peso, despite of the
depreciation of the Venezuelan bolivar and
the Argentine peso; all as compared to the
Mexican peso. On a currency neutral basis
and excluding Venezuela, total revenues
grew 6.6%, driven by average price per
unit case growth across most of our
operations and volume growth in Mexico
and Central America.

Coca-Cola FEMSA gross profit increased
10.6% to Ps. 79,662 million in 2016, as
compared to 2015, with a gross margin
contraction of 250 basis points. In local
currency, higher sugar prices, plus the
depreciation of the average exchange
rate of the Argentine peso, the Colombian
Peso, the Brazilian Real and the Mexican
peso as applied to our U.S. dollar-
denominated raw material costs; and an
unfavorable currency hedging position in
Brazil, were not fully offset by the benefit
of lower PET prices, and our ongoing
currency hedging strategy. Gross margin
reached 44.8% in 2016.

1 Excludes non-comparable results and significant acquisitions in the last twelve months.

FEMS A AN N UAL R EP OR T 2 01 6

The components of cost of goods
sold include raw materials (principally
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
products in the local currency, net of
applicable taxes. Packaging materials,
mainly PET and aluminum, and HFCS,
used as a sweetener in some countries,
are denominated in U.S. dollars.

Operating expenses increased 12.9% to
Ps. 55,742 million in 2016 compared with
Ps. 49,386 million in 2015.

Administrative expenses increased 15.9%
to Ps. 7,423 million in 2016, compared
with Ps. 6,404 million in 2015. Selling
expenses increased 14.7% to Ps. 48,039
million in 2016 compared with Ps. 41,880
million in 2015.

Income from operations increased 5.6%
to Ps. 23,920 million in 2016 compared
with Ps. 22,645 million in 2015.

FEMSA Comercio – Retail Division
FEMSA Comercio – Retail Division total reve-
nues increased 14.4% to Ps. 137,139 million in
2016 compared to Ps. 119,879 million in 2015,
primarily as a result of the opening of 1,164
net new OXXO stores during 2016, together
with an average increase in same-store sales
of 7.0%. As of December 31, 2016, there were
a total of 15,225 OXXO stores. As referenced
above, OXXO same-store sales increased an
average of 7.0% compared to 2015, driven by
a 6.8% increase in average customer ticket
while store traffic increased 0.2%.
Cost of goods sold increased 13.0% to
Ps. 86,149 million in 2016, compared with
Ps. 76,235 million in 2015. Gross margin
increased 80 basis points to reach 37.2% of
total revenues. This increase reflects healthy
trends in our commercial income activity
and the sustained growth of the services
category, including income from financial
services. As a result gross profit increased
16.8% to Ps. 50,990 million in 2016 compared
with 2015.

Operating expenses increased 18.4% to
Ps. 39,505 million in 2016 compared with
Ps. 33,356 million in 2015. The increase
in operating expenses was driven by the
electricity tariff pick-up seen during the
second half of 2016, and our initiative to
improve the compensation structure of
key in-store personnel.

Administrative expenses increased 17.6% to
Ps. 2,924 million in 2016, compared with Ps.
2,487 million in 2015; as a percentage of sales,
they reached 2.1%. Selling expenses increased
18.6% to Ps. 36,341 million in 2016 compared
with Ps. 30,631 million in 2015; as a percentaje
of sales, they reached 26.5% in 2016.

Income from operations increased 11.6% to
Ps. 11,485 million in 2016 compared with Ps.
10,288 million in 2015, resulting in an operating
margin contraction of 20 basis points to 8.4%
as a percentage of total revenues for the year,
compared with 8.6% in 2015.

FEMSA Comercio – Health Division
FEMSA Comercio – Health Division total
revenues amounted to Ps. 43,411 million
compared to Ps. 13,053 million in 2015
driven by the integration of Socofar and 220
net new store openings across territories.
On an organic basis1, total revenues for
the full year increased 24.0% compared
to 2015. As of December 31, 2016, there
were a total of 2,120 drugstores in Mexico,
Chile and Colombia. FEMSA Comercio –
Health Division same-store sales increased
an average of 22.4% reflecting strong
performance across operations and positive
foreign exchange translation effects from
our South American operations.

Cost of goods sold amounted to Ps. 30,673
million in 2016, compared with Ps. 9,365
million in 2015. Gross margin increased
100 basis points to reach 29.3% of total
revenues compared with 28.3% in 2015
reflecting higher structural gross margins
at the Socofar operation. As a result, gross
profit reached Ps. 12,738 million in 2016.

Operating expenses amounted to Ps.
11,166 million in 2016 compared with Ps.
3,078 million in 2015. The increase reflects
the integration of Socofar and the organic
expansion across Mexico.

Administrative expenses amounted to
Ps. 1,769 million in 2016, compared with
Ps. 414 million in 2015; as a percentage of
sales, they reached 4.1%. Selling expenses
amounted to Ps. 9,365 million in 2016
compared with Ps. 2,682 million in 2015; as
a percentage of sales, they reached 21.5%.

Income from operations increased 157.7%
to Ps. 1,572 million in 2016, resulting in
an operating margin contraction of 110
basis points to 3.6% as a percentage of
total revenues for the year, compared with
4.7% in 2015, reflecting higher expenses
in Mexico, as we continue to build
infrastructure and prepare for further growth
while we integrate our four legacy drugstore
operations into a single platform, as well as
improvements to the incentive structures for
our in-store personnel. On an organic basis1,
income from operations increased 5.8%
compared to 2015.

FEMSA Comercio – Fuel Division
FEMSA Comercio – Fuel Division total
revenues increased 54.6% to Ps. 28,616
million in 2016 compared to the ten-month
period from March to December 2015.
Same-station sales increased an average
of 7.6% compared to the comparable
period in 2015, driven by a 6.9% increase
in average volume and a slight increase of
0.7% in average price per liter.

Cost of goods sold increased 54.3% to
Ps. 26,368 million in 2016, compared with
Ps. 17,090 million in 2015. Gross margin
increased 20 basis points to reach 7.9% of
total revenues. This increase reflects the
benefit of price increases as well as higher
operating leverage. For 2016, gross profit
increased 58.3% to Ps. 2,248 million in
2016 compared with the ten-month period
from March to December of 2015.

Operating expenses increased 64.5% to Ps.
1,995 million in 2016 compared with Ps. 1,213
million the comparable period of 2015.

Administrative expenses increased 44.3%
to Ps. 127 million in 2016, compared
with Ps. 88 million in the comparable
period of 2015; as a percentage of sales,
they reached 0.4%. Selling expenses
increased 65.9% to Ps. 1,865 million in

1 Excludes non-comparable results and significant acquisitions in the last twelve months.

FE MS A AN N UAL R EP OR T 2 01 6

2016 compared with Ps. 1,124 million
in the comparable period of 2015; as a
percentage of sales, they reached 6.6%.

Income from operations increased 22.2% to
Ps. 253 million in 2016 compared with Ps.
207 million in the comparable period of 2015,
resulting in an operating margin contraction
of 20 basis points to 0.9% as a percentage
of total revenues for the year, compared with
1.1% from the comparable period reflecting
the ongoing expansion of our infrastructure
to accommodate rapid growth across more
territories, as well as higher regulation costs.

Key Events During 2016
Successful Euro Bond issuance in
International Markets
The following texts reproduced our
press releases exactly as the time they
were published.

On March 18, 2016, FEMSA announced
the placement of Euro-denominated notes
in the international capital markets.

FEMSA successfully issued EUR $1,000
million in 7-year senior unsecured notes
at a spread of 155 basis points over the
relevant benchmark mid-swap, for a total
yield of 1.824%. This issuance received
credit ratings of A- from Standard & Poor's
and A from Fitch Ratings. The proceeds
from this issuance will be used for general
corporate purposes, improving FEMSA's
cost of debt. FEMSA has again increased
its financial flexibility under extremely
favorable conditions in order to continue to
advance its long-term growth strategy.

The Coca-Cola Company and
Coca-Cola FEMSA acquired soy-based
beverage business from Unilever
On June 1 2016, The Coca-Cola Company
together with Coca-Cola FEMSA announced
that it had entered into an agreement with
Unilever to acquire Unilever’s AdeS soy-
based beverage business for an aggregate
amount of US$ 575 million.

Founded in 1988 in Argentina, AdeS is the
leading soy-based beverages brand in Latin
America. As the first major brand launched
in the category, AdeS pioneered the
development of the second largest global
market for soy-based beverages. The AdeS

brand has a presence in Brazil, Mexico,
Argentina, Uruguay, Paraguay, Bolivia, Chile,
and Colombia. During 2015, AdeS sold
56.2 million unit cases of beverages and
generated net revenues of US$ 284 million.

FEMSA Comercio enters convenience
store space in Chile
On June 6, 2016, FEMSA Comercio
announced that it had acquired Big John,
a leading convenience store operator
based in Santiago, Chile.

Following its acquisition of a majority
stake in Chilean drugstore operator
Socofar in the second half of 2015, FEMSA
Comercio reiterated its appetite to pursue
incremental growth opportunities in the
region by acquiring Big John, which as
of that date operated 49 stores mainly
in the Santiago metropolitan area. This
transaction represents another important
step for FEMSA Comercio as it brings its
considerable expertise in the convenience
store format to the Chilean market,
acquiring a strong local operator with
a leading banner and attractive growth
prospects while establishing a solid base
from which to expand in the region.

Coca-Cola FEMSA Selected as One
of the Most Sustainable Emerging
Market Companies
On July 11, 2016, Coca-Cola FEMSA was
selected for the second consecutive time
as one of the highest rated companies in
sustainability in emerging markets by the
Vigeo Eiris Emerging Market 70 Ranking.

Because of its commitment to the
sustainable generation of economic, social
and environmental value, the Company was
selected from a field of 842 companies from
37 industries and 31 countries. Furthermore,
the ranking selected only four companies
from the beverage sector, and only four
based in Mexico. The ranking follows the
Equitis ® methodology, based on 38 criteria,
divided into six key areas: environment,
human rights, human resources, community
involvement, business behavior, and
corporate governance.

Coca-Cola FEMSA Recognized by Dow
Jones for Its Commitment to
Sustainable Development

On September 13, 2016, Coca-Cola FEMSA
was selected as a member of the Dow
Jones Sustainability Emerging Markets
Index for the fourth consecutive year.
After a rigorous evaluation process, the
Dow Jones Sustainability Index selects the
top companies committed to sustainable
development. The Company is one of only
eight beverage companies in the world and
one of just five Mexican companies across
all industries chosen on the Dow Jones
Sustainability Emerging Markets Index for
its excellent performance in the economic,
social, and environmental fields. Throughout
the year, the Company has earned several
awards and recognitions for its sustainability
performance. These include its participation
in the Mexican Stock Exchange Sustainability
Index and its selection as a member of the
Vigeo Eiris Emerging Market 70 Ranking.

Coca-Cola FEMSA reaches an
agreement to acquire Vonpar in Brazil
On September 23, 2016, Coca-Cola FEMSA
announced that its Brazilian subsidiary,
Spal Industria Brasileira de Bebidas S.A.
(“Spal”), had reached an agreement with
the shareholders of Vonpar to acquire
100% of Vonpar, one of the largest privately
owned bottlers in the Brazilian Coca-Cola
system, for an aggregate enterprise value of
R$3,578 million and an approximate equity
value of R$3,508 million.

Vonpar’s footprint is a perfect geographic
fit that links with the Coca-Cola FEMSA’s
operations in the state of Paraná, in the
south of Brazil. This transaction will increase
Coca-Cola FEMSA’s volume in Brazil by
25%, allowing them to reach 49% of the
Coca-Cola system’s volume in the country.
During the last twelve months ended June
30, 2016, Vonpar sold 190 million unit cases
of beverages, including 23 million unit
cases of beer, generating R$2,026 million
in net revenues and an EBITDA of R$335
million. The preliminary estimated amount
of synergies to be captured from this
transaction in the next 18 to 24 months is
approximately R$65 million at the EBITDA
level. These synergies will result from
reconfiguration of the logistic network,
manufacturing optimization, efficiencies
in administrative expenses and the
implementation of Coca-Cola FEMSA’s
commercial practices. This transaction was
successfully closed on December 6, 2016.

FEMS A AN N UAL R EP OR T 2 01 6

HEADQUARTERS

For more information

FEMSA Corporate Offices

Monterrey
General Anaya No. 601 Pte.
Col. Bella Vista
Monterrey, Nuevo Leon
Mexico, C.P. 64410
Phone: +52 (81) 8328-6000
Fax: +52 (81) 8328-6080

Ciudad de Mexico
Mario Pani N° 100
Col. Santa Fe Cuajimalpa, C.P. 05348
Ciudad de Mexico, Mexico
Phone: +52 (55) 5249 6800

Coca-Cola FEMSA
Mario Pani N° 100
Col. Santa Fe Cuajimalpa, C.P. 05348,
Ciudad de Mexico, Mexico
Phone: +52 (55) 1519-5000

FEMSA Comercio
Edison No. 1235 Nte.
Col. Talleres
Monterrey, Nuevo Leon
Mexico, C.P. 64480
Phone: +52 (81) 8389-2121
Fax: +52 (81) 8389-2106

FEMSA Negocios Estrategicos
General Anaya No. 601 Pte.
Col. Bella Vista
Monterrey, Nuevo Leon
Mexico, C.P. 64410
Phone: +52 (81) 8328-6600
Fax: +52 (81) 8328-6601

We provide additional information and
extensive reporting online, including the
Audited Financial Statements.

We encourage you to review the following
sites to learn more about FEMSA:

www.annualreport.femsa.com

www.sustainabilityreport.femsa.com

www.femsafoundation.org/report216

The FEMSA 2016 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 fur ther events and uncer tainties which could materially impact the Company’s subsidiaries’ actual performance.

FE MS A AN N UAL R EP OR T 2 01 6

Consolidated Financial Statements

AN N UAL R EP OR T 2 01 6

Consolidated

Financial

Statements

C O N T EN T S

Annual Report of the Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Consolidated Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . 7

Consolidated Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . 9

Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . 10

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . 13

Annual Report of the Audit Committee

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. Y SUBSIDIARIAS
MONTERREY, N.L., MEXICO

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, 2016 . 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 Enterprise Risk Management Process, which is established to identify, measure, record, assess, and manage the
Company´s risks, as well as for the implementation of follow-up measures 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, and the establishment of general guidelines and the procedures necessary
for their application and compliance . This process included presentations to the Audit Committee by the area responsible of the most important subsidiaries . Additionally,
we followed the comments and remarks made in this regard by 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 . During this
process, we made sure that a follow up on main preventive and corrective actions implemented concerning internal control issues that required improvement, were
taken, and the submission to the authorities of requested information .

External Audit
We recommended to the Board of Directors the appointment of the external auditors (who have been the same for the past seven years) for the Company and its
subsidiaries for fiscal year 2016 . 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 the 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 annual audit and other permitted services, and verified 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 fiscal year 2016 .

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 Sarbanes-Oxley Act . 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, any deviations and the causes thereof .

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

We confirmed the existence and validated the implementation of an Annual Training program .

We reviewed and discuss with the responsible of the IA function 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 its preparation and recommended to the Board
of Directors, its approval and authorize its publication . As part of this process, we analyzed the comments of the external auditors and confirm 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 financial position of the Company, its operating results and cash flows for the fiscal
year ending on December 31, 2016 .

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 the same accounting criteria 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 of Directors
to authorize the release of such information .

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

We reviewed and approved the changes to the accounting standards used by the Company that became effective in 2016, 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 its 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, validating that it
includes a compliance provision with the Anti-Money Laundering laws in the countries where we operate, as well as compliance with anti-corruption laws (FCPA), and
recommended its approval to the Board of Directors .

With the support of 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 .

Training
To comply with the training requirements of our charter, during the year, The Audit Committee members attended specific courses on topics as internal controls, risk
management and auditing .

Administrative Activities
We held regular meetings with 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 by 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 24, 2017

José Manuel Canal Hernando

Independent Auditor’s Report

FOMENTO ECONÓMICO MEXICANO, S.A.B. DE C.V. Y SUBSIDIARIAS
MONTERREY, N.L., MEXICO

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

Opinion
We have audited the accompanying consolidated financial statements of Fomento Económico Mexicano, S .A .B . de C .V . and its subsidiaries (collectively “the Group”),
which comprised the related consolidated statement of financial position as of December 31, 2016, and the consolidated income statement, consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated
financial statements including a summary of significant accounting policies .

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of
December 31, 2016, and their financial performance and cash flows for the year then ended, in accordance with International Financial Reporting Standards (“IFRS”) .

Basis for opinion
We conducted our audit in accordance with International Standard on Auditing (“ISAs”) . Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report . We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) together with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Mexico according with the “Codigo de Etica Profesional del Instituto Mexicano de Contadores Publicos”
(“IMCP Code”), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code . We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion .

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the year ended
December 31, 2016 . These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters . For each matter below, our description of how our audit addressed the matter is provided in that context .

We have fulfilled the responsibilities described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report, including in
relation to these matters . Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement
of the accompanying consolidated financial statements . The results of our audit procedures, including the procedures performed to address the matters below, provide
the basis for our audit opinion on the accompanying consolidated financial statements .

Investment in Coca-Cola - FEMSA Philippines and subsequent consolidation in 2017

Description of the key audit matter
As disclosed in Notes 10 and 20 .7 to the consolidated financial statements, up to December 31, 2016, the Group accounts using the equity method for its 51%
ownership in Coca-Cola FEMSA Philippines (“CCFPI”), and holds potential voting rights in CCFPI through a call option to acquire the remaining 49% of CCFPI from
The Coca-Cola Company (“TCCC”) at any time through January 2020, and also has a put option to sell its 51% ownership back to TCCC at any time from January 2018
through January 2019 .

The estimation of fair value of CCFPI performed by management is a key audit matter as it impacts the significant judgment applied to evaluate whether the call option
to acquire the remaining 49% is substantive, which generally occurs when the call option is in-the-money, and consequently whether the potential voting rights are
probable of being executed . The results of these evaluations would impact whether the Group should consolidate CCFPI rather than to apply the equity method of
accounting . Further, the fair value of CCFPI is used also to assess whether the Company’s investment in CCFPI is impaired; thus an additional key audit matter .

The complexity of this analysis and the fact that related unobservable data (specifically management projections of future cash flows of CCFPI) requires a high degree
of estimation uncertainty, resulted in specific focus during our audit .

On January 25, 2017, the Company obtained control without transfer of additional consideration over CCFPI and started consolidating such subsidiary . As the acquisition
occurred before the issuance of the consolidated financial statements, pursuant to the requirements of IFRS 3 the Company has disclosed the purchase price allocation
in Note 28 of the consolidated financial statements .

Based on the quantitative materiality of the acquisition and the significant degree of estimates required of management in determining the purchase price allocation,
we have determined this to be a key audit matter .

How our audit addressed the matter
We evaluated management assumptions related to compound annual growth rates, projected cost and expense savings among others key assumptions used in both
an IFRS 13 Level 3 fair value and an IAS 36 value in use computation by 1) assessing the historical accuracy of the Group’s budgetary estimates, 2) obtaining and
analyzing the Group´s business strategies supporting the future cash flow estimates, and 3) evaluating the macroeconomic environment including comparisons to the
performance of market participants for which publicly available data is available . We also tested the Group's procedures around the preparation of the budget, upon
which the value-in-use model is based and management’s assessment of the probability that the potential voting rights might be executed and whether they were
substantive based on the aforementioned fair value estimates and the call option’s written terms by reviewing 1) management´s valuation model of the call option
and analysis of whether the call option is in or out of the money, and 2) management´s assessment of the qualitative matters in regards to why the call option is not
substantive in nature . We involved our internal specialists when performing these procedures . Finally, we evaluated the related disclosures made in the consolidated
financial statements .

In regards to this acquisition, we assessed the identification of the acquired assets and assumed liabilities . We have compared this identification with our knowledge
of the Group’s business, business plans, and management's explanations on the rationale of the acquisition . We have tested management´s fair values of assets and
liabilities of these acquisitions based on commonly used valuation models with the assistance of our internal specialists . We further assessed the adequacy of the
company's disclosures on these business combinations .

Impairment of distribution rights, goodwill and trade mark rights

Description of the key audit matter
As disclosed in Note 12 to the consolidated financial statements, Distribution Rights, Goodwill and Trade mark rights were Ps .143,420 million as of December 31,
2016 . Given the materiality of distribution rights, goodwill and trade mark rights in relation to the consolidated financial statements and the significant judgment and
estimation required by management when evaluating these accounts for impairment, we focused our auditing efforts in this area in particular for Brazil and Chile due to
recent acquisitions that resulted in significant additions to these accounts and Venezuela given the general deterioration of the country’s macroeconomic environment .

How our audit addressed the matter
We evaluated management assumptions related to compound annual growth rates, projected cost and expense savings among others key assumptions used in the
impairment testing by 1) assessing the historical accuracy of the Management’s budgetary estimates, 2) obtaining and analyzing Management´s business strategies
supporting the future cash flow estimates, and 3) evaluating the macroeconomic environment including comparisons to the performance of market participants for
which publicly available data is available .

We also assessed management’s sensitivity analyses focusing on the projected compound annual growth rates and projected cost savings, mainly . We involved our
internal specialists when performing these procedures . In addition, we tested the Group's procedures around the preparation of the budget, upon which the value-in-
use model is based .

Furthermore, we assessed the related disclosures made in the consolidated financial statements .

Venezuela

Description of the key audit matter
Venezuela is a challenging economic and political environment . Challenges of operating in Venezuela include, but are not limited to, the existence of multiple foreign
currency exchange rates, lack of exchangeability across all exchange mechanisms, limited access to certain key raw materials, and periodic government intervention
into operations including continually changing laws and regulations .

We focused on this area because of the following key judgments and sources of estimation uncertainty include:

1) Whether the Group continues to have control over relevant activities in its Venezuela operations under IFRS 10 given the foreign currency restrictions, as well as

other operating challenges established by the economic and political environment .

2) The appropriate exchange rate to be used to translate foreign currency denominated liabilities, including the effect of security advances, and consolidate foreign

operations, due to the existence of multiple foreign exchange rates available .

3) The recoverability of long-lived assets related to the Group’s Venezuela operations as described in the key audit matter “Impairment of distribution rights and

goodwill," section above .

As disclosed in Note 3 .3 of the consolidated financial statements, the Group has, over the past few years, accumulated significant amounts of accumulated other
comprehensive loss in an amount of Ps . 20,230 million as of December 31, 2016 . To the extent that the Group losses control of its Venezuela operations such amounts
would be required to be recognized in the Group’s income statement as a loss .

How our audit addressed the matter
We evaluated management´s assessment of the relevant activities attributable to the Venezuela operations under IFRS 10 . This included consideration of management’s
ability to control relevant activities such as budgeting, establishing sales strategies, pricing, financial decisions, cost infrastructure, among other matters and the
analysis of the Group exposure to variable returns in their investment in Venezuela .

With regards to measurement of foreign liabilities in Venezuela we focused our audit efforts on assessing management’s judgment applied in selecting the most
appropriate exchange rate at which such foreign liabilities should be measured, including amounts payable to those vendors for which off-shore security advances
have been provided and for these vendors we have also inspected the relevant documentation and performed confirmation of balances and terms and conditions; with
the assistance of our internal specialists we analyzed the legal and other regulatory implications .

We also assessed the adequacy of the related disclosures made in the consolidated financial statements .

Recoverability of the deferred tax assets

Description of the key audit matter
As disclosed on Note 24 to the consolidated financial statements, the Group had Ps .27,452 million of net operating losses carrying forwards as of December 31, 2016;
such amount relates to Brazil, Colombia and Mexico . Brazilian amounts are mainly attributable to deductions of goodwill amortization generated on recent business
acquisitions while the amounts generated in Mexico related to tax losses generated in recent years .

We focus on this area because the recognition of deferred tax assets relies on the significant application of judgement by management in respect of assessing the
probability and sufficiency of future taxable profits and ongoing tax planning strategies, therefore, due to the size of the Group's deferred tax assets of Brazil and Mexico
and the associated uncertainty surrounding recoverability, this is considered a key audit matter .

How our audit addressed the matter
Our audit procedures, among others, included the assessment of controls over the recognition and measurement of deferred tax assets and the evaluation of
assumptions used in projecting the Group's future taxable profits in Mexico and Brazil . With the assistance of our internal tax specialists, we assessed the feasibility of
the Group's future tax planning strategies that may enable the materialization of deferred tax asset of the Company .

When applicable, our audit procedures also focused on the review of management´s projections of future cash flows in relation to the likelihood of generating sufficient
taxable profits based on forecasts of anticipated future cost savings, growth rates, discount rates, and other key assumptions . We involved our internal specialists when
performing these procedures .

We also evaluated the related disclosures made in the consolidated financial statements .

Business acquisitions

Description of the key audit matter
On December 6, 2016 the Group acquired Vonpar, S .A . for a total consideration of Ps .20,992 million and completed during the year smaller acquisitions which in the
aggregate amounted to Ps .5,612 million . For these acquisitions, the Company made a preliminary purchase price allocation in which the consideration transferred was
allocated to the preliminary fair values of the various assets and liabilities including significant contingencies of the acquired company . This is outlined in Note 4 of the
consolidated financial statements . The preliminary purchase price allocation and the analysis of the accounting, and the evaluation of the consideration transferred
which in the case of Vonpar it involved embedded derivatives, are key audit matter .

How our audit addressed the matter
We audited for acquisitions in scope, the corresponding purchase agreements and analyzed the propriety of the accounting of the consideration transferred, in the
case of Vonpar including the identification of the embedded derivatives . We also tested with the assistance of our risk specialists the measurement of the fair values
of the various embedded derivatives including the option to convert the promissory note into equity instruments as part of the consideration transferred . In regards to
these acquisitions, we audit the identification of the acquired assets and assumed liabilities . We have assessed this identification with our knowledge of the Group’s
business, business plans, and management's explanations on the rationale of the acquisition, and tested management´s estimated fair values of assets and liabilities of
these acquisitions . We further assessed the adequacy of the company's disclosures of these business combinations in the consolidated financial statements .

Other information included in the Group’s 2016 Annual Report

Other information comprises of the information included in the Group’s 2016 Annual Report presented to the Comisión Nacional Bancaria y de Valores (“CNBV”) other
than the financial statements and our auditor’s report thereon . Management is responsible for the other information .

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon .

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated, as issuing the declaratory on annual report requested by CNBV . If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact . We have nothing to report in this regard .

Responsibilities of Management and the Audit Committee for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the accompanying 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 .

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so .

The Audit Committee is responsible for overseeing the Group’s financial reporting process .

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor’s report that includes our opinion . Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs will always detect a material misstatement when it exists . Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements .

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit . We also:

· Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion . The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control .

· Obtain an understanding of internal control relevant to the audit 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 Group’s internal control .

· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management .

· Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern . If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures
are inadequate, to modify our opinion . Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report . However, future events or
conditions may cause The Group to cease to continue as a going concern .

· Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial

statements represent the underlying transactions and events in a manner that achieves fair presentation .

· Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion of the
consolidated financial statements . We are responsible for the direction, supervision and performance of the Group audit . We remain solely responsible for our audit opinion .

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit .

We also provide to the Audit Committee a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards .

From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial
statements of the current period and are therefore the key audit matters . We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication .

The engagement partner on the audit resulting in this independent auditor’s report, is who signs It .

February 28, 2017
Monterrey, N .L . México

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

Américo de la Paz de la Garza

Consolidated Statements of Financial Position

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

As of December 31, 2016 and 2015 .
Amounts expressed in millions of U .S . dollars ($)
and in millions of Mexican pesos (Ps .) .

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
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
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 income (loss)

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

Note

December
2016 (*)

December
2016

December
2015

5
6
7
8
24
9
9

10
11
12
24
13
13

18
18

18
16
24
25
25

2,117
6
1,272
1,549
447
131
199
5,721
6,238
4,958
7,434
585
744
785
26,465

93
260
47
2,302
564
551
368
4,185

6,401
216
535
355
892
8,399
12,584

162
1,248
8,187
682
10,279
3,602
13,881
26,465

Ps.

43,637
120
26,222
31,932
9,226
2,705
4,109
117,951
128,601
102,223
153,268
12,053
15,345
16,182
Ps. 545,623

Ps.

29,396
19
18,012
24,680
8,544
2,418
3,654
86,723
111,731
80,296
108,341
8,293
8,955
4,993
Ps. 409,332

Ps.

1,912
5,369
976
47,465
11,624
11,360
7,583
86,289

131,967
4,447
11,037
7,320
18,393
173,164
259,453

Ps.

2,239
3,656
597
35,773
9,236
9,136
4,709
65,346

85,969
4,229
6,230
495
5,207
102,130
167,476

3,348
25,733
168,796
14,027
211,904
74,266
286,170
Ps. 545,623

3,348
25,807
156,532
(4,163)
181,524
60,332
241,856
Ps. 409,332

(*) Convenience translation to U .S . dollars ($) – See Note 2 .2 .3
The accompanying notes are an integral part of these consolidated statements of financial position .

2016

2015

2014

Ps. 310,849
740
311,589
188,410
123,179
11,705
76,375
423
2,741
7,777
1,024
(1,193)
(36)
364

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. 398,622
885
399,507
251,303
148,204
14,730
95,547
1,157
5,909
9,646
1,299
1,131
2,411
186

28,556
7,888

25,163
7,932

6,045
23,276

17,683
5,593
23,276

0.88
1.10

Ps.

23,744
6,253

5,139
22,630

16,701
5,929
22,630

0.83
1.04

6,507
27,175

Ps.

21,140
6,035
27,175

1.05
1.32

Consolidated Income Statements

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

For the years ended December 31, 2016, 2015 and 2014 .
Amounts expressed in millions of U .S . dollars ($)
and in millions of Mexican pesos (Ps .), except per share amounts .

Note

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 gain (loss), net
Monetary position gain (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

19
19
18

23
23

2016 (*)

19,335
42
19,377
12,189
7,188
714
4,634
56
287
468
63
55
117
9

1,385
383

316
1,318

1,025
293
1,318

0.05
0.06

(*) Convenience translation to U .S . dollars ($) – See Note 2 .2 .3
The accompanying notes are an integral part of these consolidated income statements .

Consolidated Statements of Comprehensive Income

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

For the years ended December 31, 2016, 2015 and 2014 .
Amounts expressed in millions of U .S . dollars ($)
and in millions of Mexican pesos (Ps .)

Note

2016 (*)

2016

2015

2014

Consolidated net income
Other comprehensive income:
Items that may be reclassified to consolidated net income, net of tax:

Valuation of the effective portion of derivative

financial instruments

Loss on hedge of a net investment in a foreign operations
Exchange differences on the translation of foreign

operations and associates

Share of other comprehensive (loss) income of associates

and joint ventures

20
18

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 share of other
comprehensive (loss) income of associates and joint ventures

Remeasurements of the net defined benefit liability

Total items that will not be reclassified
Total other comprehensive income (loss), net of tax
Consolidated comprehensive income, net of tax
Controlling interest comprehensive income
Non-controlling interest comprehensive income (loss)
Consolidated comprehensive income, net of tax

1,318

Ps.

27,175

Ps.

23,276

Ps.

22,630

84
(70)

1,732
(1,443)

122
-

493
-

1,492

30,763

(2,234)

(12,256)

(108)
1,398

(2,228)
28,824

282
(1,830)

1,322
(10,441)

(49)
(8)
(57)
1,341
2,659
1,908
751
2,659

(1,004)
(167)
(1,171)
27,653
54,828
39,330
15,498
54,828

Ps.

169
144
313
(1,517)
21,759
19,165
2,594
21,759

(881)
(361)
(1,242)
(11,683)
10,947
11,283
(336)
10,947

Ps.

(*) Convenience translation to U .S . dollars ($) – See Note 2 .2 .3
The accompanying notes are an integral part of these consolidated statements of comprehensive income .

Consolidated Statements of Changes in Equity

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

For the years ended December 31, 2016, 2015 and 2014 .
Amounts expressed in millions of Mexican pesos (Ps .)

Capital
Stock

Additional
Paid-in
Capital

Retained
Earnings

Valuation of
the Effective
Portion of
Derivative
Financial
Instrument

Exchange

Differences

on the

Translation

of Foreign

Operations

and Associates

Remeasurements

of the Net

Defined

Benefit

Liability

Total

Controlling

Interest

Non-

Controlling

Interest

Total

Equity

Balances at January 1, 2014

Ps.

3,346

Ps.

25,433

Ps. 130,840

Ps.

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

3,347

25,649

147,122

Net income

Other comprehensive income, net of tax

Comprehensive income

Dividends declared

Issuance of shares associated with share-based payment plans

Acquisition of Grupo Socofar (see Note 4)

Contributions from non-controlling interest

Other movements of equity method of associates, net of taxes

158

17,683

(7,350)

(923)

Balances at December 31, 2015

3,348

25,807

156,532

Net income

Other comprehensive income, net of tax

Comprehensive income

Dividends declared

Issuance of shares associated with share-based payment plans

Other equity instruments from acquisition of Vonpar (see Note 4)

Other acquisitions and remeasurements (see Note 4)

Contributions from non-controlling interest

Other movements of equity method of associates, net of taxes

(74)

21,140

(8,355)

(521)

181

126

307

299

606

2,057

Ps.

779

Ps.

(1,187)

Ps. 159,392

Ps. 63,158

Ps. 222,550

(3,633)

(2,319 )

170,473

59,649

230,122

(4,412)

(1,132)

945

238

17,241

(1,108)

16,701

(5,418)

11,283

217

(419)

17,683

1,482

19,165

(7,350)

159

(923)

21,140

18,190

39,330

(8,355)

(74)

(521)

5,929

(6,265)

(336)

(3,152)

(21)

5,593

(2,999)

2,594

(3,351)

1,133

250

6,035

9,463

15,498

(3,690)

(485)

1,710

892

22,630

(11,683)

10,947

(3,152)

196

(419)

23,276

(1,517)

21,759

(10,701)

216

1,133

250

(923)

27,175

27,653

54,828

(12,045)

(65)

(485)

1,710

892

(521)

(2,688)

(2,081)

181,524

60,332

241,856

Balances at December 31, 2016

Ps.

3,348

Ps. 25,733

Ps. 168,796

Ps.

2,663

Ps. 14,553

Ps.

(3,189)

Ps. 211,904

Ps. 74,266

Ps. 286,170

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

Balances at January 1, 2014

Ps.

3,346

Ps.

25,433

Ps. 130,840

Ps.

181

Ps.

779

Ps.

(1,187)

Ps. 159,392

Ps. 63,158

Ps. 222,550

Capital

Stock

Additional

Paid-in

Capital

Valuation of

the Effective

Portion of

Derivative

Financial

Instrument

Exchange
Differences
on the
Translation
of Foreign
Operations
and Associates

Remeasurements
of the Net
Defined
Benefit
Liability

Total
Controlling
Interest

Non-
Controlling
Interest

Total
Equity

Balances at December 31, 2014

3,347

25,649

147,122

(3,633)

(2,319 )

170,473

59,649

230,122

(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, 2015

3,348

25,807

156,532

606

(2,688)

(2,081)

181,524

60,332

241,856

945

238

17,683

1,482

19,165

(7,350)

159

(923)

5,593

(2,999)

2,594

(3,351)

1,133

250

23,276

(1,517)

21,759

(10,701)

216

1,133

250

(923)

Balances at December 31, 2016

Ps.

3,348

Ps. 25,733

Ps. 168,796

Ps.

2,663

Ps. 14,553

Ps.

(3,189)

Ps. 211,904

Ps. 74,266

Ps. 286,170

17,241

(1,108)

21,140

18,190

39,330

(8,355)

(74)

(521)

6,035

9,463

15,498

(3,690)

(485)

1,710

892

27,175

27,653

54,828

(12,045)

(65)

(485)

1,710

892

(521)

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

216

Other movements of equity method of associates, net of taxes

Issuance of shares associated with share-based payment plans

158

Net income

Other comprehensive income, net of tax

Comprehensive income

Dividends declared

Net income

Other comprehensive income, net of tax

Comprehensive income

Dividends declared

Acquisition of Grupo Socofar (see Note 4)

Contributions from 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

Issuance of shares associated with share-based payment plans

Other equity instruments from acquisition of Vonpar (see Note 4)

Other acquisitions and remeasurements (see Note 4)

Contributions from non-controlling interest

Other movements of equity method of associates, net of taxes

Retained

Earnings

16,701

(419)

17,683

(7,350)

(923)

21,140

(8,355)

(521)

(74)

126

307

299

2,057

Consolidated Statements of Cash Flows

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

For the years ended December 31, 2016, 2015 and 2014 .
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
Depreciation
Amortization
(Gain) loss on sale of long-lived assets
Loss (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 (gain) loss, net
Monetary position (gain) loss, net
Market value (gain) on financial instruments
Cash flow from operating activities before changes in operating accounts

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

Employee benefits paid

Cash generated from operations

Income taxes paid

Net cash generated by operating activities

Cash flows from investing activities:

Acquisition of Grupo Socofar, net of cash acquired (see Note 4)
Partial payment of Vonpar, net of cash acquired (see Note 4)

Other acquisitions, net of cash acquired (see Note 4)
Other investments in associates and joint ventures

Purchase of investments
Proceeds from investments
Interest received

Derivative financial instruments
Dividends received from associates and joint ventures

Property, plant and equipment acquisitions
Proceeds from the sale of property, plant and equipment
Acquisition of intangible assets
Investment in other assets
Collections of 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
Contributions from non-controlling interest
Other financing activities
Net cash generated (used in) 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 .

2016 (*)

2016

2015

2014

1,701

Ps.

35,063

Ps.

31,208

Ps.

28,883

199
586
79
(8)
-
12
-

(316)
(63)
468
(55)
(117)
(9)
2,477
(92)
(68)
(239)
6
744
47
128
(23)
2,980
(549)
2,431

-
(640)
(244)
(106)
(6)
1
63
(11)
159
(926)
28
(112)
(83)
-
(1)
3
(1,875)

1,292
(265)
(265)
(168)
(584)
43
11
64
620
1,426

4,111
12,076
1,633
(170)
8
238
-

(6,507)
(1,299)
9,646
(1,131)
(2,411)
(186)
51,071
(1,889)
(1,395)
(4,936)
130
15,337
968
2,642
(476)
61,452
(11,321)
50,131

-
(13,198)
(5,032)
(2,189)
(118)
20
1,299
(220)
3,276
(19,083)
574
(2,309)
(1,709)
2
(23)
65
(38,645)

26,629
(5,458)
(5,470)
(3,471)
(12,045)
892
220
1,297
12,783
29,396

2,873
9,761
1,064
(249)
(14)
416
134

(6,045)
(1,024)
7,777
1,193
36
(364)
46,766
(4,379)
318
(4,330)
441
6,799
822
(570)
(382)
45,485
(8,743)
36,742

(6,890)
-
(5,821)
(291)
-
126
1,024
232
2,394
(17,485)
630
(971)
(1,502)
223
(28)
-
(28,359)

8,422
(15,520)
(4,563)
8,345
(10,701)
250
26
(13,741)
(5,358)
35,497

71
2,117

1,458
43,637

Ps.

(743)
29,396

Ps.

209
9,029
985
7
-
153
145

(5,139)
(862)
6,701
903
319
(73)
41,260
(4,962)
1,736
(1,122)
245
8,048
(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

(4,230)
35,497

Notes to the Consolidated Financial Statements

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

For the years ended December 31, 2016, 2015 and 2014 .
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 a
business unit, are carried out by operating subsidiaries and companies under direct and indirect holding company subsidiaries of FEMSA .

The following is a description of the Company´s activities as of the date of the issuance of these consolidated financial statements, together with the ownership
interest in each subholding company or business unit:

Subholding Company

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

% Ownership

December 31,
2016

December 31,
2015

Activities

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

47 .9% (1)
(63 .0% of the
voting shares)

Retail Division

100%

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 and 28) .
At December 31, 2016, 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”) and on the New York Stock
Exchange, Inc (NYSE) in the form of American Depositary Shares (“ADS”) .

Small-box retail chain format operations in Mexico, Colombia and the
United States, mainly under the trade name “OXXO” and “Big John” in Chile .

Fuel Division

100%

Retail service stations for fuels, motor oils, lubricants and car care products
under the trade name “OXXO GAS” with operations in Mexico .

Health Division (3)

Various (2)

CB Equity, LLP (“CB Equity”)

100%

Other companies

100%

Drugstores operations in Chile and Colombia, mainly under the trademark
“Cruz Verde” and Mexico under different brands such as YZA, La Moderna
and Farmacon .

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”) .

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

(1) The Company controls Coca-Cola FEMSA’s relevant activities.
(2) The former shareholders of Farmacias YZA hold a 25% stake in Cadena Comercial de Farmacias, S.A.P.I. de C.V., a subsidiary of FEMSA Comercio that holds all pharmacy business
in Mexico (which we refer to as CCF). In addition, FEMSA Comercio through one of its subsidiaries, Cadena Comercial de Farmacias Sudamerica, S.P.A., holds a 60% stake in Grupo
Socofar, see Note 4.1.2.

(3) As of 2016, FEMSA Comercio – Health Division has been considered as a separate reportable segment, see Note 26.

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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 Corporate Officer Eduardo Padilla Silva on February 23, 2017 . These consolidated financial statements and notes were then approved by the Company’s
Board of Directors on February 24, 2017 and subsequent events have been considered through that date (see Note 28) . These consolidated financial statements and
their accompanying notes were then approved by the Company's shareholders meeting in March 16, 2017 .

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 carrying values of recognized assets and liabilities that are designated as hedged items in fair value hedges that would otherwise be carried at amortised cost are
adjusted to record changes in the fair values atrtributable to the risks that are being hedged in effective hedge relationship .

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 .

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, 2016, the consolidated income statement, the consolidated statement of
comprehensive income and consolidated statement of cash flows for the year ended December 31, 2016 were converted into U .S . dollars at the exchange rate of 20 .6170
Mexican pesos per U .S . dollar as published by the Federal Reserve Bank of New York as of December 30, 2016 . 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 . As explained in Note 2 .1 above, as of
February 24, 2017 (the issuance date of these financial statements) such exchange rate was Ps . 19 .9127 per U .S . dollar, a revaluation of 4% since December 31, 2016 .

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 . Real 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 impairment tests annually or whenever indicators of impairment are present . 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 . Impairment losses are recognized in current earnings in the
period the related impairment is determined .

The Company assesses at each reporting date whether there is an indication that a long-lived 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 .

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 .

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 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 bases 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 judgment must be exercised 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 .

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 to, and liabilities assumed by the Company from the former owners
of the acquiree, the amount of any non-controlling interest in 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 and measured 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 .

•

Indemnifiable assets are recognized at the acquisition date on the same basis as the indemnifiable liability subject to any contractual limitations .

For each acquisition, management’s judgment must be exercised to determine the fair value of the assets acquired, the liabilities assumed and any non-controlling
interest in the acquiree, applying estimates or judgments in techniques used, especially in forecasting CGU's cash flows, in the computation of WACC and estimation
of inflation during the identification of intangible assets with indefinite live, mainly, goodwill and trademark rights .

2.3.2 Judgements
In the process of applying the Company’s accounting policies, management has made the following judgements which have the most significant effects on the amounts
recognized in the consolidated financial statements .

2.3.2.1 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 .

2.3.2.2 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 such as:

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, Coca-Cola FEMSA accounts for its 51% investment in Coca-Cola FEMSA Philippines, Inc . (CCFPI) as a joint venture . This is based on the facts
that Coca-Cola FEMSA and TCCC: (i) make all operating decisions jointly during the initial four-year period; 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 the call option was “out of the money” as of December 31, 2016 and 2015 .

2.3.2.3 Venezuela exchange rates and consolidation
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 .

As is also explained in Note 3 .3 below, the Company believes that it currently controls its subsidiary operations in Venezuela but recognizes the challenging economic
and political environment in Venezuela . Should the Company in the future conclude that it no longer controls such operations, its consolidated financial statements
would change as further explained below .

2.4 Aplication of recently issued accounting standards
The Company has applied the following amendments to IFRS during 2016:

IAS 19 Employee Benefits

The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than
the country where the obligation is located . When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used .
This amendment is applied prospectively . For the Company´s pension plan there is no deep market for high-quality corporate bonds in mexican pesos, therefore, the
Company continues to use government bond rates (see Note 16 .1) .

Note 3. Significant Accounting Policies

3.1 Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company . 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 of income and
comprehensive income from the date the Company gains control until the date the Company ceases to control the subsidiary .

Profit or loss 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 intra-group assets and liabilities, equity, income, expenses and cash flows relating
to transactions between members of the Company are eliminated in full on consolidation .

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction . If the Company loses control over a subsidiary, it:

• Derecognizes the assets (including goodwill) and liabilities of the subsidiary .

• Derecognizes the carrying amount of any non-controlling interests .

• Derecognizes the cumulative translation differences recorded in equity .

• Recognizes the fair value of the consideration received .

• Recognizes the fair value of any investment retained .

• Recognizes any surplus or deficit in profit or loss .

• Reclassifies the parent’s share of components previously recognized in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Company

had directly disposed of the related assets or liabilities .

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 .

3.2 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 cost of an acquisition is measured as the aggregate of the consideration
transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree . For each business combination, the
Company elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets .

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 .

Costs, 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 in which the accounting is incomplete, and discloses that its allocation is preliminary in nature . Those provisional amounts are adjusted
retrospectively during the measurement period (not greater than 12 months from the acquisition date), 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 .

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 in other comprehensive income, which is

recorded in equity as part of cumulative translation adjustment within the cumulative other comprehensive income .

•

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 .

Foreign exchange differences on monetary items are recognized in profit or loss . Their classification in the income statement depends on their nature . Differences
arising from fluctuations related to operating activities are presented in the “other expenses” line (see Note 19) while fluctuations related to non-operating activities such
as financing activities are presented as part of “foreign exchange gain (loss)” line in the income statement .

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 follows:

• For hyperinflationary economic environments, the inflation effects of the origin country are recognized pursuant IAS 29 Financial Reporting in Hyperinflationary
Economies, 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 if the exchange rate does not fluctuate significantly .

Country or
Zone

Guatemala
Costa Rica
Panama
Colombia
Nicaragua
Argentina
Venezuela a)
Brazil
Chile
Euro Zone
Peru
Ecuador
Philippines

Functional /
Recording
Currency

Quetzal
Colon
U.S. dollar
Colombian peso
Cordoba
Argentine peso
Bolivar
Reais
Chilean peso
Euro (€)
Nuevo Sol
Peso
Philippine peso

Exchange Rates of Local Currencies Translated to Mexican Pesos

Average Exchange Rate for

Exchange Rate as of

2016

2.46
0.03
18.66
0.01
0.65
1.26
a)
5.39
0.03
20.66
5.53
18.66
0.39

2015

2.07
0.03
15.85
0.01
0.58
1.71
a)
4.81
0.02
17.60
4.99
15.85
0.35

2014

1.72
0.02
13.30
0.01
0.51
1.64
a)
5.66
0.02
17.66
4.68
13.30
0.30

December 31,
2016

December 31,
2015

2.75
0.04
20.66
0.01
0.70
1.30
a)
6.34
0.03
21.77
6.15
20.66
0.41

2.25
0.03
17.21
0.01
0.62
1.32
a)
4.41
0.02
18.94
5.05
17.21
0.36

a) Venezuela
The Company has operated under exchange controls in Venezuela since 2003, which limit its ability to remit dividends abroad or make payments other than in
local currency and which may increase the real price paid for raw materials and services purchased in local currency . Cash balances of the Company’s Venezuelan
subsidiary which are not available for use at the time the Company prepares its consolidated financial statements are disclosed in Note 5 .

The exchange rate used by the Company for its Venezuelan operations depends on the type of the transaction as explained below .

As of December 31, 2016 and 2015, the companies in Venezuela were able to convert bolivars to U .S . dollars at one of the following legal exchange rates:

i) The official exchange rate . Used for transactions involving what the Venezuelan government considers to be “essential goods and services” . Until March 10, 2016, most
of the Company’s concentrate purchases from The Coca-Cola Company and other strategic suppliers qualified for such treatment . As of December 31, 2014 and 2015
the official exchange rate was 6 .30 bolivars per U .S . dollar .

ii) SICAD . Used for certain transactions, including payment of services and payments related to foreign investments in Venezuela, determined by the state-run system
known as Sistema Complementario de Administración de Divisas or SICAD exchange rate . The SICAD determined this alternative exchange rate based on limited
periodic sales of U .S . dollars through auctions . As of December 31, 2015 the SICAD exchange rate was 13 .50 bolivars per U .S . dollar (Ps . 1 .27 per bolivar) . During part
of 2015, SICAD was used for certain types of transactions including purchases from other strategic suppliers that did not qualify by the official exchange rate .

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 . During part
of 2015 SICAD-II was used for certain types of transactions not covered by the official exchange rate or the SICAD exchange rate . In February 2015, this exchange
rate was eliminated .

iv) SIMADI . In February 2015, the Venezuelan government enacted a new market-based exchange rate determined by the system known as the Sistema Marginal de
Divisas, or SIMADI . The SIMADI determined the exchange rates based on supply and demand of U .S . dollars . The SIMADI exchange rate as of December 31, 2015 was
198 .70 bolivars per U .S . dollar (Ps . 0 .09 per bolivar) . As of December 31 2015, the Company used SIMADI to translated its results of their Venezuela subsidiary .

v) DIPRO and DICOM . In March 10, 2016, the Venezuelan government announced the replacement of (a) the SIMADI exchange rate with a new market based exchange
rate known as Divisas Complementarias, or “DICOM”, and (b) the official exchange rate with a preferential exchange rate denominated Divisa Protegida, or “DIPRO” .
The DIPRO exchange rate is determined by the Venezuelan government and may be used to settle imports of a list of goods and raw materials . The DICOM exchange
rate is determined based on supply and demand of U .S . dollars . As of December 31, 2016 the DIPRO and DICOM exchange rates were 10 bolivars and 673 .76 bolivars
per U .S . dollar, respectively . As of December 31, 2016 the Company used the DIPRO exchange rates to remeasure some of their liabilities in U .S . dollar that were
originally recorded at the official exchange rate . The DICOM exchange rate was used in the remeasurement of certain liabilities and in the translation of the financial
statements of their Venezuelan operations .

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

Step-one .- Transactions are first recorded in the stand-alone accounts of the Venezuelan subsidiary in its functional currency, which are bolivars . Any non-bolivar
denominated monetary assets or liabilities are translated into bolivars 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, 2016 Coca-Cola FEMSA had U .S . $429 .8 million in monetary liabilities recorded using DIPRO exchange rate, and U .S . $189 .8 recorded at DICOM .

As of December 31, 2015 Coca-Cola FEMSA had U .S . $418 .5 million in monetary liabilities recorded using the official exchange rate, and U .S . $138 .7 recorded at SICAD
at the moment this exchange rate was determined by the government, of which U .S . $44 .9 million were recorded at 12 .00 bolivars, U .S . $35 .9 were recorded at 12 .80
bolivars and U .S . $57 .9 at 13 .50 bolivars .

Coca-Cola FEMSA believes that these account payables for imports of essential goods should continue to qualify as transactions that may be settled using the DICOM
rate, as they were recorded, but also recognizes the current illiquidity of the U .S . dollar market in Venezuela . If there is a change in the official exchange rate used in the
future, or should Coca-Cola FEMSA determine these amounts no longer qualify, the Coca-Cola FEMSA may need to recognize a portion of the impact of this change
in the income statement .

Step-two .- In order to integrate the results of the Venezuelan operations into the consolidated figures of Coca-Cola FEMSA, such Venezuelan results are translated
from Venezuelan bolivars into Mexican pesos . During 2016 and 2015, the Coca-Cola FEMSA used DICOM (673 .76 bolivars per USD) and SIMADI exchange rate (198 .70
bolivars per USD) for accounting purposes respectively, based on the expectations that these would have been the exchange rate to what dividends will be settled .

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 . The Company continues to monitor all of its foreign operations,
but most notably its Venezuela operations for the reasons explained herein . Over the past few years, the Coca-Cola FEMSA has recognized significant amounts of
exchange difference in accumulated other comprehensive loss (approximating Ps . 20,230 million) related to such Venezuela operations . To the extent that economic
and or operational conditions were to worsen in the future resulting in a conclusion that the Coca-Cola FEMSA no longer controls such operations, such would result
in both deconsolidation and an income statement charge for the accumulated exchange loss . There can be no assurances that such might not happen in the future .

In addition, in relation to a partial disposal of a subsidiary that does not result in the Coca-Cola FEMSA 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 in 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 those 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 hyperinflationary economic environment using the consumer price index of each country
(CPI) . As of December 31, 2016, 2015, and 2014, the operations of the Company are classified as follows:

Country

Mexico
Guatemala
Costa Rica
Panama
Colombia
Nicaragua
Argentina a)
Venezuela
Brazil
Philippines
(equity method investment)
Euro Zone
Chile
Peru
Ecuador

Cumulative
Inflation
2014- 2016

9.9%
10.6%
5.1%
2.8%
17.0%
13.1%
99.7%
2263.0%
25.2%

5.7%
1.2%
12.2%
11.2%
8.4%

Type of Economy

Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Hyperinflationary
Non-hyperinflationary

Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary

Cumulative
Inflation
2013- 2015

10.5%
10.8%
8.1%
5.1%
12.8%
15.8%
59.2%
562.9%
24.7%

8.3%
0.9%
12.5%
10.8%
10.0%

Type of Economy

Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Hyperinflationary
Non-hyperinflationary

Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary

Cumulative
Inflation
2012- 2014

12.4%
11.5%
14.6%
9.7%
8.1%
21.9%
52.6%
210.2%
19.0%

9.9%
2.9%
9.4%
9.0%
10.9%

Type of Economy

Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Hyperinflationary
Non-hyperinflationary

Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary
Non-hyperinflationary

a) As of December 2016 there are multiple inflation indices (including combination of indices in the case of CPI or certain months without official available information

in the case of National Wholesale Price Index (WPI), as follows:

i) CPI for the City and Greater Buenos Aires Area (New CPI-CGBA), for which the IMF noted improvements in quality, this new consumer price index will only
be provided for periods after April 2016 and does not provide national coverage . The cumulative CPI inflation (using the indices of the City of Buenos Aires for
November 2015 to April 2016) for the three years was 104 .6% as of November 2016 .

ii) “Coeficiente de Estabilización de Referencia” (CER or Reference Stabilization Ratio) to calculate the three-year cumulative inflation rate in Argentina, the CER is
used by the government of Argentina to adjust the rate they pay on certain adjustable rate bonds they issue . At November 30, 2016, the three-year cumulative
inflation rate based on CER data is estimated to be approximately 92% .

iii) WPI with a cumulative inflation for three years of 92 .2% at November 2016 but not including information for November and December 2015 since it was not
published by the National Bureau of Statistics of Argentina (INDEC) . The WPI has historically been viewed as the most relevant inflation measure for companies
by practitioners in Argentina .

As a result of the existence of multiple inflation indices, the Company believes it necessitates an increased level of judgment in determining whether the economy of
Argentina should be considered highly inflationary .

The Company believes that general market sentiment is that on the basis of the quantitative and qualitative indicators in IAS 29, the economy of Argentina should not
be considered as hyperinflationary as of December 31, 2016 . However, it is possible that certain market participants and regulators could have varying views on this
topic both during 2016 and as Argentina’s economy continues to evolve in 2017 . The Company will continue to carefully monitor the situation and make appropriate
changes if and when necessary .

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 .

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 (EIR)
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 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, 2016, 2015 and 2014 the interest income on loans and receivables recognized in the interest income line item within the consolidated income
statements is Ps . 41, Ps . 53 and Ps . 47, respectively .

3.6.4 Other financial assets
Other financial assets include long term accounts receivable, derivative financial instruments and recoverable contingencies acquired from business combinations .
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 to the allowance account . Changes in the carrying amount of the allowance account
are recognized in consolidated net income .

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 .

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 otherwise 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 to cover 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 .

3.7.1.1 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 .

3.7.1.2 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 .

3.7.2 Hedge of net investment in a foreign business
The Company applies hedge accounting to foreign currency differences arising between the functional currency of its investments abroad and the functional currency
of the holding (Mexican peso), regardless of whether the net investment is held directly or through a sub-holding .

Differences in foreign currency that arise in the conversion of a financial liability designated as a hedge of a net investment in a foreign operation are recognized in
other comprehensive income in the exchange differences on the translation of foreign operations and associates caption in other comprehensive income, to the extent
that the hedge is effective . To the extent that the hedge is ineffective, such differences are recognized as market value gain or loss on financial instruments within
the consolidated income statements . When part of the hedge of a net investment is eliminated, the corresponding accumulated foreign currency translation effect is
recognized as part of the gain or loss on disposal within the consolidated income statement .

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 .

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 . 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, retail method (a method to estimate the
average cost) in FEMSA Comercio – Retail Division and FEMSA Comercio – Health Division; and acquisition method in FEMSA Comercio – Fuel Division, except for the
distribution centers which are valued with average cost method .

Cost of goods sold is based on the weighted average cost of the inventories at the time of sale . Cost of goods sold 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 maintenanceand inspection; expenses related to the purchase of goods and services used in the sale process of the Company´s products
and expenses related to the purchase of gasoline, diesel and all engine lubricants used in the sale process of the Company .

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 product promotion
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, respectively .

The Company has prepaid advertising costs which consist of television and radio advertising airtime 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, 2016, 2015 and 2014, such amortization aggregated to Ps . 582, Ps . 317 and Ps . 338, 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 . Upon loss of significant influence over the associate, the Company measures and recognizes any
retained investment at its fair value .

Investments in associates are accounted for using the equity method and initially recognized at cost, which comprises the investment’s purchase price and any
directly attributable expenditure necessary to acquire it . The carrying amount of the investment is adjusted to recognize changes in the Company’s shareholding of the
associate since the acquisition date . The financial statements of the associates are prepared for the same reporting period as the Company .

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 advances, 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 to make payments on behalf of
the associate .

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,
2016 and 2015 the Company does not have an interest in joint operations .

Upon loss of joint control over the joint venture, the Company measures and recognizes any retained investment at its fair value .

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,
if material .

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 ready 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
1.5-4
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 the sale of the product .

• 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, 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, and 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 .

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 . Additionaly, the Company´s intangible
assets with an indefinite life consist of FEMSA Comercio – Health Division´s trademark rights which consist of standalone beauty store retail banners, pharmaceutical
distribution to third-party clients and the production of generic and bioequivalent pharmaceuticals .

As of December 31, 2016, Coca-Cola FEMSA had nine bottler agreements in Mexico: (i) the agreements for the Valley of Mexico territory, which are up for renewal in
August 2017 and June 2023, (ii) the agreement for the Southeast territory, which is up for renewal in June 2023, (iii) three agreements for the Central territory, which
are up for renewal in August 2017 (two agreements), and May 2025, (iv) the agreement for the Northeast territory, which is up for renewal in August 2017, and (v) two
agreements for the Bajio territory, which are up for renewal in August 2017 and May 2025 .

As of December 31, 2016, Coca-Cola FEMSA had nine bottler agreements in Brazil, which are up for renewal in October 2017 (seven agreements) and April 2024 (two
agreements); and one bottler agreement in each of Argentina, which is up for renewal in September 2024; Colombia, which is up for renewal in June 2024; Venezuela,
which is up for renewal in August 2026; Guatemala, which is up for renewal in March 2025; Costa Rica, which is up for renewal in September 2017; Nicaragua, which
is up for renewal in May 2026 and Panama, which is up for renewal in November 2024 .

The 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 a specific
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 long-lived assets
At the end of each reporting period, the Company reviews the carrying amounts of its long-lived 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 the purpose of impairment testing, where a reasonable basis of allocation can not be identified, goodwill acquired in a business combination, from the acquisition
date, is allocated to each of the group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the
acquiree are assigned to those units .

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 related CGU might exceed its recoverable amount .

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, as discussed in Note 2 .3 .1 .1 .

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, 2015 and 2014, the Company recognized impairment of Ps . 134 and Ps . 145, respectively (see Note 19) .

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´s 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, 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 .

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 effects 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 when the related event occurs .

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, Coca-Cola FEMSA 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 all of the Company products (including retail and consumer goods, fuel and others) 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 .

Rendering of services and other
Revenue arising from logistic transportation, maintenance services and packing of raw materials are recognized in the 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 held to maturity, 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, 2016, 2015 and 2014,
these distribution costs amounted to Ps . 20,250, Ps . 20,205 and Ps . 19,236, respectively;

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

• Marketing: promotional expenses and advertising costs .

PTU is paid by the Company’s Mexican subsidiaries to its eligible employees . In Mexico, employee profit sharing is computed at the rate of 10% of the individual
company taxable income . PTU in Mexico is 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 .

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 .

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset to be utilized . Unrecognized deferred tax assets are re-assessed at each reporting date and are recognized to
the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered .

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 .

Deferred tax relating to items recognized in the other comprehensive income are recognized in correlation to the underlying transaction in OCI .

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 2016, 2015 and 2014, and as result of Mexican Tax Reform for 2014, it will remain at 30% for the following years .

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 and Acquisitions

4.1 Mergers and acquisitions
The Company has had certain mergers and acquisitions for the years 2016 and 2015; which 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, 2016 and 2015 show the cash outflow for the merged
and acquired operations net of the cash acquired related to those mergers and acquisitions . For the year ended December 31, 2014, the Company did not have any
acquisitions or mergers .

4.1.1 Acquisition of Vonpar
On December 6, 2016, Coca-Cola FEMSA through its Brazilian subsidiary Spal Industria Brasileira de Bebidas, S .A . completed the acquisition of 100% of Vonpar S .A .
(herein “Vonpar”) for a consideration transfered of Ps . 20,992 . Vonpar was a bottler of Coca-Cola trademark products which operated mainly in Rio Grande do Sul and
Santa Catarina, Brazil . This acquisition was made to reinforce the Company’s leadership position in Brazil .

Of the purchase price of approximately Ps . 20,992 (R$3,508); Spal paid an amount of approximately Ps . 10,370 (R$1,730) in cash on December 6, 2016 .

On the same date Spal additionally paid Ps . 4,124 (R$688) in cash, of which in a subsequent and separate transaction the sellers commited to capitalize for an amount
of Ps . 4,082 into Coca-Cola FEMSA in exchange for approximately 27 .9 million KOF series L shares at an implicit value of Ps . 146 .27 .

At closing, Spal issued a 3-year promissory note denominated and payable in cash in Brazilian Reals for the remaining balance of Ps . 6,534 (R$1,090) . This note will pay
an annual interest rate of 0 .375% plus or minus the depreciation or appreciation of the Brazilian Real relative to the U .S . Dollar, plus an additional amount in case the
price of KOF shares is higher than Ps . 178 .5 per share (the “Additional Amount”), in connection with the following option: the sellers will have the option to capitalize,
in an amount equivalent to the promissory note plus the Additional Amount, a new Mexican company to be merged into Coca-Cola FEMSA in order to receive KOF
publicly traded shares at a price of Ps . 178 .5 .

As of December 6, 2016, the fair value of KOF series L (KL) shares was Ps . 128 .88 per share, in addition the KL shares have not been issued, consequently as a result
of this subsequent transaction an embedded financial instrument was originated and recorded into equity for an amount of Ps . 485 . In accordance with IAS 32, in the
consolidated financial statements the purchase price was also adjusted to recognize the fair value of the embedded derivative arising from the difference between the
implicit value of KL shares and the fair value at acquisition date .

As of December 31, 2016 the Company is still in the process of completing its purchase price allocation of this transaction . Specifically, it is in the process of evaluating
the fair value of the net assets acquired which valuation is in the process of completion with the assistance of a third party valuation expert . The Company ultimately
anticipates allocating a large component of this purchase price to the value of the distribution right agreement with the Coca-Cola Company, which will be an indefinite
life intangible asset .

Transaction related costs of Ps . 35 were expensed by Spal as incurred, and recorded as a component of administrative expenses in the accompanying consolidated
income statements . Results of operation of Vonpar have been included in the operating results from acquisition date .

Coca-Cola FEMSA preliminary estimate of the fair value of Vonpar’s net assets acquired and the reconciliation of cash flows is as follows:

Total current assets (including cash acquired of Ps. 1,287)
Total non-current assets
Distribution rights
Total assets
Total liabilities

Net assets acquired
Goodwill
Total consideration transferred

Amount to be paid through Promissory Notes
Cash acquired of Vonpar
Amount recognized as embedded financial instrument
Net cash paid

2016

4,390
10,855
9,602
24,847
(11,709)

13,138
7,854
20,992

(6,992)
(1,287)
485
13,198

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 Brazil . The goodwill recognized and expected to be deductible for income tax purposes according to Brazil tax law, is Ps . 7,854 .

Selected income statement information of Vonpar for the period from the acquisition date through to December 31, 2016 is as follows:

Income Statement

Total revenues
Income before income taxes
Net income

2016

1,628
380
252

Ps.

4.1.2 Acquisition of Grupo Socofar
On September 30, 2015, FEMSA Comercio – Health Division completed the acquisition of 60% of Grupo Socofar . Grupo Socofar is an operator of pharmacies in
South America which operated, directly and through franchises, 643 pharmacies and 154 beauty supply stores in Chile, and over 150 pharmacies in Colombia . Grupo
Socofar was acquired for Ps . 7,685 in an all cash transaction . Transaction related costs of Ps . 116 were expensed by FEMSA Comercio – Health Division as incurred,
and recorded as a component of administrative expenses in the accompanying consolidated income statements . Socofar was included in operating results from the
closing in September 2015 .

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

Total current assets (including cash acquired of Ps. 795)
Total non-current assets
Trademark rights
Total assets
Total liabilities

Net assets acquired
Goodwill
Non-controlling interest (2)
Total consideration transferred

2016
Final Purchase
Price Allocation

Ps.

10,499
4,240
3,033
17,772
(12,564)

5,208
4,559 (1)
(2,082)
7,685

(1) As a result of the purchase price allocation which was finalized in 2016, additional fair value adjustments from those recognized in 2015 have been recognized as follow: property,
plant and equipment amounted of Ps. 197, trademark rights amounted of Ps. 3,033, other intangible assets with finete live amounted of Ps. 163 and deferred tax liabilities amounted of
Ps. 1,009.

(2) Measured at the proportionate share of the acquiree’s identificable net assets.

FEMSA Comercio – Health Division expects to recover the amount recorded as goodwill through synergies related to the implementation of successful practices
from its existing Mexican operations such as speed and quality in execution of the customer’s value proposition and growth . Goodwill has been allocated to FEMSA
Comercio Health Division cash generating units in South America (see Note 12) .

Selected income statement information of Socofar for the period from the acquisition date through December 31, 2015 is as follows:

Income Statement

Total revenues
Income before income taxes
Net income

2015

7,583
394
354

Ps.

FEMSA Comercio – Health Division entered into option transactions regarding the remaining 40% non-controlling interest not held by FEMSA Comercio – Health
Division . The former controlling shareholders of Socofar may be able to put some or all of that interest to FEMSA Comercio – Health Division beginning (i) 42-months
after the initial acquisition, upon the occurrence of certain events and (ii) 60 months after the initial acquisition, in any event, FEMSA Comercio – Health Division can
call the remaining 40% non-controlling interest beginning on the seventh anniversary of the initial acquisition date . Both of these options would be exercisable at the
then fair value of the interest and shall remain indefinitely .

4.1.3 Other acquisitions
During 2016, the Company completed a smaller acquisitions which in the aggregate amounted to Ps . 5,612 . These acquisitions were primarily related to the following:
(1) acquisition of 100% of Farmacias Acuña, a drugstore operator in Bogota, Colombia; at the acquisition date, Farmacias Acuña operated 51 drugstores .; (2) acquisition
of an additional 50% of Specialty’s Café and Bakery Inc . shares, a small coffee and bakery restaurant (“Specialty’s”), reaching an 80% of ownership, with 56 stores
in California, Washington and Illinois in the United States; (3) acquisition of 100% of Comercial Big John Limitada “Big John”, an operator of small-box retail format
stores located in Santiago, Chile; at the acquisition date, Big John operated 49 stores; (4) acquisition of 100% of Operadora de Farmacias Generix, S .A .P .I . de C .V ., a
regional drugstore operator in Guadalajara, Guanajuato, Mexico City and Queretaro in Mexico; at the acquisition date, Farmacias Generix operated 70 drugstores and
one distribution center; (5) acquisition of 100% of Grupo Torrey (which consist in many companies constituted as S .A . de C .V .), a Mexican company with 47 years of
know-how in operation in the manufacture of equipment for the processing, conservation and weighing of foods, with corporate offices in Monterrey, Mexico and (6)
acquisition of 80% of Open Market, a specialized company in providing end-to-end integral logistics solutions to the local and international companies which operate
in Colombia . Transactions related costs in the aggregate amounted of Ps . 46 were expensed as incurred, and recorded as a component of administrative expenses in
the accompanying consolidated income statements .

The Company is currently in the process of allocating to all assets acquired and liabilities assumed in the acquisitions the consideration transferred as the sum of the
acquisitions-dates fair values of the net assets acquired because it is conducting a detailed review process . The Company expects to finish the allocation during the
following year but before the measurement period allowed by IFRS; preliminary estimate of fair value of 2016 acquisitions’ net assets acquired in the aggregate is as
follows:

Total current assets (including cash acquired of Ps. 211)
Total non-current assets
Total assets
Total liabilities
Net assets acquired

Goodwill
Non-controling interest (1)
Equity interest held previously
Total consideration transferred

2016

1,267
1,958
3,225
(1,664)
1,561

4,420
(369)
369
5,243

Ps.

(1) In the case of the acqusition of Specialty’s the non-controling interest was measured at fair value at the acquisition date, and for Open Market the non-controling interest was

recognized at the proportionate share of the net assets acquired.

During 2016, FEMSA Comercio has been allocated goodwill in the acqusitions in FEMSA Comercio – Retail Division in Chile and FEMSA Comercio – Health Division in
Mexico and Colombia, to each one respectively . FEMSA Comercio expects to recover the amount recorded through synergies related to the adoption of the Company’s
economic current value proposition, the ability to apply the successful operational processes and expansion planning designed for each unit .

Other companies dedicated to the production, distribution of coolers and logistic transportation services have been allocated goodwill of Grupo Torrey and Open
Market, respectively in Mexico and Colombia . The companies dedicated to the production and distribution expect to recover the goodwill through synergies related
to operative improvements; in the case of logistic transportation services, through the know how of specialized skills to attend pharmaceutical market and increasing
new customers in the countries where the company operates .

Selected income statement information of other acquisitions in the aggregate amount for the period from the acquisition date through December 31, 2016 is as follows:

Income Statement

Total revenues
Income before income taxes
Net income

2016

2,400
(66)
(126)

Ps.

The former controlling shareholders of Open Market retain a put for their remaining 20% non-controlling interest that can be exercised (i) at any time after the
acquisition date upon the occurrence of certain events and (ii) annually from January through April, after the third anniversary of the acquisition date . In any event,
the Company through one of its subsidiaries can call the remaining 20% non-controlling interest annually from January through April, after the fifth anniversary of the
acquisition date . Both options would be exercisable at the then fair value of the interest and shall remain indefinitely . Given that these options are exercisable at the then
fair value on exercise date, their value is not significant at the acquisition date and at December 31, 2016 .

During 2015, the Company completed smaller acquisitions and mergers which in the aggregate amounted to Ps . 5,892 . These acquisitions and mergers were primarily
related to the following: acquisition of 100% Farmacias Farmacon, a regional drugstore operator in the western Mexican states of Sinaloa, Sonora, Baja California and
Baja California Sur with headquarters in the city of Culiacan, Sinaloa, at the acquisition date Farmacias Farmacon operated 215 stores; merger of 100% of PEMEX
franchises in which FEMSA Comercio – Fuel Division has been providing operational and administrative services for gasoline service stations through agreements
with third parties, using the commercial brand name “OXXO GAS”, at the acquisition date there were 227 OXXO GAS stations; acquisition of 100% of “Zimag”, supplier
of logistics services in Mexico, with experience in warehousing, distribution and value added services over twelve cities in Mexico mainly in Mexico City, Monterrey,
Guanajuato, Chihuahua, Merida and Tijuana; acquisition of 100% of Atlas Transportes e Logistica, supplier of logistics services in Brazil, with experience in the service
industry breakbulk logistics with a network of 49 operative centers and over 1,200 freight units through all regions in Brazil . Transactions related costs in the aggregate
amounted of Ps . 39 were expensed as incurred, and recorded as a component of administrative expenses in the accompanying consolidated income statements .

The fair value of other acquisitions’ net assets acquired in the aggregate is as follows:

Total current assets (including cash acquired of Ps. 71)
Total non-current assets
Total assets
Total liabilities
Net assets acquired

Goodwill
Total consideration transferred

Final Purchase
Price Allocation

Ps.

1,683
2,319
4,002
(2,955)
1,047

5,027 (1)
6,074

(1) As a result of the purchase price allocation which was finalized in 2016, additional fair value adjustments from those recognized in 2015 have been recognized as follow: property,

plant and equipment amounted of Ps. 130, trademark rights amounted of Ps. 453 and other liabilities amounted of Ps. 1,202.

FEMSA Comercio – Health Division and the logistic services business expect to recover the amount recorded as goodwill through synergies related to the ability to
apply the operational processes of these business units . Farmacias Farmacon goodwill have been allocated to FEMSA Comercio – Health Division cash generating
unit in Mexico and merger of PEMEX franchises goodwill have been allocated to FEMSA Comercio – Fuel Division cash generating unit in Mexico . Zimag and Atlas
Transportes e Logistica goodwill have been allocated into logistic services business’s cash generating unit in Mexico and Brazil, respectively .

Selected income statement information of these acquisitions for the period from the acquisition date through December 31, 2015 is as follows:

Income Statement

Total revenues
Income before income taxes
Net income

2015

20,262
176
120

Ps.

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
Vonpar, Farmacias Acuña, Specialty´s, Big John, Farmacias Generix, Grupo Torrey and Open Market as if they occurred on January 1, 2016; 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 acquisitions and merger
included, are as follow .

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, 2016

Ps.

410,831
29,950
28,110
1.08
1.35

Below are unaudited consolidated pro forma data of the acquisitions made on 2015 as if Grupo Socofar, Farmacias Farmacon, Zimag, Atlas Transportes e Logística and
merger of PEMEX franchises were acquired on January 1, 2015:

Unaudited pro forma financial
information for the –year ended
December 31, 2015

Ps.

340,600
27,485
25,004
0.97
1.21

Note 5. Cash and Cash Equivalents

For the purposes of the statement of cash flows, the cash ítem includes cash on hand and in bank deposits 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,
2016

Ps.

18,140
25,497
43,637

December 31,
2015

Ps.

12,530
16,866
29,396

As explained in Note 3 .3 above, the Company operates in Venezuela, which has a certain level of exchange control restrictions, that might prevent cash and cash
equivalent balances from being available for use elsewhere in the group . At December 31, 2016 and 2015, cash and cash equivalent balances of the Company’s
Venezuela subsidiaries were Ps . 2,764 and Ps . 1,259, respectively .

Note 6. Investments

As of December 31, 2016 and 2015 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)

Corporate Debt Securities

Acquisition cost
Accrued interest
Amortized cost

2016

118
2
120
120

Ps.

Ps.
Ps.

2015

19
-
19
19

Ps.

Ps.
Ps.

(1) Denominated in euros at a fixed interest rate. Investments as of December 31, 2016 mature during 2017.

For the years ended December 31, 2015 and 2014, the effect of the investments in the consolidated income statements under the interest income item is Ps . 1 and Ps . 3,
respectively . For the year ended December 31, 2016 the Company recognized an immaterial amount in the consolidated income statement .

Note 7. Accounts Receivable, Net

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

December 31,
2016

December 31,
2015

Ps.

22,177
(1,193)
1,857
229
254
1,041
1,857
26,222

Ps.

14,696
(849)
1,559
151
243
754
1,458
18,012

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, 2016 and 2015 .

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
Addition from business combinations
Effects of changes in foreign exchange rates
Ending balance

December 31,
2016

December 31,
2015

Ps.

610
216
1,539
2,365

2015

456
167
(99)
401
(76)
849

Ps.

178
161
588
927

2014

489
94
(90)
-
(37)
456

2016

849
467
(418)
94
201
1,193

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 disperse .

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 carrying amount of refrigeration
equipment and returnable bottles items . For the years ended December 31, 2016, 2015 and 2014 contributions due were Ps . 4,518, Ps . 3,749 and Ps . 4,118, respectively .

Note 8. Inventories

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

December 31,
2016

December 31,
2015

Ps.

22,709
5,156
2,401
144
1,188
334
31,932

Ps.

17,631
3,629
1,661
108
1,534
117
24,680

For the years ended at 2016, 2015 and 2014, the Company recognized write-downs of its inventories for Ps . 1,832, Ps . 1,290 and Ps . 1,028 to net realizable value,
respectively .

For the years ended at 2016, 2015 and 2014, 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

2016

Ps. 172,554
63,285
Ps. 235,839

2015

132,835
53,514
186,349

Ps.

2014

92,390
55,038
147,428

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, 2016 and 2015 are as follows:

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

December 31,
2016

December 31,
2015

Ps.

3,784
179
112
34
4,109

December 31,
2016

2,734
171
466
164
104
145
3,784

Ps.

3,363
168
86
37
3,654

December 31,
2015

2,291
58
601
115
58
240
3,363

Advertising and promotional expenses paid in advance recorded in the consolidated income statement for the years ended December 31, 2016, 2015 and 2014
amounted to Ps . 6,578, Ps . 4,613 and Ps . 4,460, respectively .

9.2 Other current financial assets

Restricted cash
Derivative financial instruments (see Note 20)
Short term note receivable (1)

December 31,
2016

December 31,
2015

Ps.

774
1,917
14
2,705

Ps.

704
523
1,191
2,418

(1) The carrying value approximates its fair value as of December 31, 2016 and 2015.

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, 2016 and 2015, the carrying of the short-term deposit pledged were:

Venezuelan bolivars
Brazilian reais
Colombian pesos

December 31,
2016

December 31,
2015

Ps.

183
73
518
774

Ps.

344
360
-
704

Restricted cash in Venezuela and Brazil relates to short term deposits in order to fulfill the collateral requirements for accounts payable .

During 2016 due to a jurisdictional order with the municipal sewage system services, the Colombian autorithies withheld all the cash that Coca-Cola FEMSA has in the
bank account, the total amount of which was reclassified as a restricted cash according with the Company’s accounting policy .

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 (1) (2)
Coca-Cola FEMSA:
Joint ventures:

Ownership Percentage

Carrying Amount

Principal
Activity

Place of
Incorporation

December 31,
2016

December 31,
2015

December 31,
2016

December 31,
2015

Beverages

The Netherlands 20.0%

20.0%

Ps. 105,229 Ps. 92,694

Compañía Panameña de Bebidas, S.A.P.I. de C.V.

Dispensadoras de Café, S.A.P.I. de C.V.
Estancia Hidromineral Itabirito, L.T.D.A
Coca-Cola FEMSA Philippines, Inc. (“CCFPI”)
Fountain Agua Mineral, L.T.D.A

Beverages
Services
Bottling and distribution
Bottling
Beverages

Panama
Mexico
Brazil
Philippines
Brazil

Associates:

Promotora Industrial Azucarera, S.A. de C.V. (“PIASA”)
Industria Envasadora de Queretaro, 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, L.T.D.A.
Leao Alimentos e Bebidas, L.T.D.A.

Other investments in Coca-Cola FEMSA’s companies
FEMSA Comercio:

Café del Pacifico, S.A.P.I. de C.V. (Caffenio) (1)

Other investments (1) (3)

Sugar production
Canned bottling
Recycling
Beverages
Beverages
Beverages
Various

Mexico
Mexico
Mexico
Mexico
Brazil
Brazil
Various

Coffee
Various

Mexico
Various

40.0%
Various

50.0%
50.0%
50.0%
51.0%
50.0%

36.4%
26.5%
35.0%
26.3%
38.7%
27.7%
Various

50.0%
50.0%
50.0%
51.0%
50.0%

36.4%
26.5%
35.0%
26.3%
38.7%
24.4%
Various

40.0%
Various

1,911
145
96
11,460
765

2,657
177
100
1,574
126
3,282
64

1,573
161
160
9,996
491

2,187
172
100
1,531
80
1,363
60

493
522
Ps. 128,601 Ps.

467
696
111,731

(1) Associate.
(2) As of December 31, 2016 and 2015, 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.

(3) Joint ventures.

As mentioned in Note 4, on December 6, Coca-Cola FEMSA through its subsidiary Spal, completed the acquisition of 100% of Vonpar . As part of this acquisition Spal
increase its equity interest to 3 .36% in Leao Alimentos e Bebidas, LTDA .

During 2016 the Coca-Cola FEMSA made capital contributions to Leao Alimentos e Bebidas, LTDA, Compañía Panameña de Bebidas, S .A .P .I . de C .V . and Promotora
Industrial Azucarera, S .A . de C .V . in the amounts of Ps . 1,273, Ps . 419 and Ps . 376, respectively , there were no changes in the ownership percentage as a result of capital
contributions made by the other shareholders .

During 2016 the Coca-Cola FEMSA received dividends from Industria Envasadora de Queretaro, S .A . de C .V ., and Estancia Hidromineral Itabirito, LTDA in the amount of
Ps . 5 and Ps . 190 .

During 2015, Coca-Cola FEMSA received dividends from Industria Envasadora de Queretaro, S .A . de C .V ., in the amount of Ps . 13 and subsequently sold shares for an
amount of Ps . 22 .

During 2015, Coca-Cola FEMSA made capital contributions to Compañía Panameña de Bebidas, S .A .P .I . de C .V . in the amount of Ps . 7 .

During 2015, Coca-Cola FEMSA made capital contributions to Leao Alimentos e Bebidas, L .T .D .A . in the amount of Ps . 71 .

On January 25, 2013, Coca-Cola FEMSA closed 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) .

Although Coca-Cola FEMSA currently owns 51% of CCFPI, when considering (i) the terms of the shareholders’ agreements (specifically the fact that during the initial
four year period the joint approval of both Coca-Cola FEMSA and TCCC is required to approve CCFPI´s annual business plan, which is the key documents pursuant to
which CCFPI´s business is operated among other matters); and (ii) potential voting rights to acquire the remaining 49% of CCFPI are not probable to be executed in the
foreseeable future and the fact that the call option remains “out of the money”, the Company has concluded it did not control CCFPI during any of the periods presented
in the consolidated financial statements and consequently the Company has accounted for this investment as joint venture using the equity method . As disclosed in
Note 28, starting in February 2017 Coca-Cola FEMSA will take control over the relevant activities of CCFPI´s in accordance with the shareholders agreements and will
consolidated CCFPI results .

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 . 6,342, Ps . 5,879 and Ps . 5,244, net of taxes regarding its interest in Heineken for the years ended
December 31, 2016, 2015 and 2014, respectively . The Company’s equity method in the net income attributable to equity holders of Heineken exclusive of amortization
of adjustments amounted to Ps . 6,430 (€ . 308 million), Ps . 6,567 (€ . 378 million) and Ps . 5,362 (€ . 303 million), for the years ended December 31, 2016, 2015 and 2014,
respectively .

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

December 31, 2016

Million of

December 31, 2015

Million of

Peso

Euro

Peso

Euro

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

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

Equity attributable to equity holders of Heineken
Economic ownership percentage

Investment in Heineken exclusive of goodwill and others adjustments
Effects of fair value determined by Purchase Price Allocation
Goodwill

Investment in Heineken

Ps.

177,176
679,004
226,385
312,480
317,315
288,246
Ps. 427,019
370,563
Ps. 35,636
31,558
(19,037)
16,599
13,525

Ps.

€.

8,137
31,184
10,397
14,351
14,573
13,238
20,838
18,083
1,739
1,540
(929)
810
660

Ps.

157,599
602,217
206,875
267,551
285,390
256,323
Ps. 363,191
309,812
37,166
32,844
4,809
41,975
37,323

Ps.

€. 8,322
31,800
10,924
14,128
15,070
13,535
€. 20,922
17,847
2,141
1,892
277
2,418
2,150

€.

December 31, 2016

Million of

Peso

€.

Ps. 288,090
20%

Ps. 57,618
21,495
26,116

Ps. 105,229

€.

December 31, 2015

Million of

Peso

Ps. 256,323
20%

Ps.

51,265
18,704
22,725

€.

Euro

13,535
20%

2,707
988
1,200

Ps. 92,694

€. 4,895

Euro

13,238
20%
2,648
988
1,200
4,836

For the years then ended December 31, 2016 and 2015 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 . 173,857 (€ . 7,989 million) and Ps . 165,517 (€ . 8,740 million) based on quoted market prices of those dates . As of February
24, 2017, issuance date of these consolidated financial statements, fair value amounted to € . 8,695 million .

During the years ended December 31, 2016, 2015 and 2014, the Company received dividends distributions from Heineken, amounting to Ps . 3,263, Ps . 2,343 and
Ps . 1,795, respectively .

For the years then ended December 31, 2016, 2015 and 2014 the total net income corresponding to the inmaterial associates of Coca-Cola FEMSA was Ps . 31, Ps . 185
and Ps . 195, respectively .

For the years then ended December 31, 2016, 2015 and 2014 the total net income (loss) corresponding to the inmaterial joint ventures of Coca-Cola FEMSA was Ps . 116,
Ps . (30) and Ps . (320), respectively .

The Company’s share of other comprehensive income from equity investees, net of taxes for the year ended December 31, 2016, 2015 and 2014 are as follows:

Items that may be reclassified to consolidated net income:
Valuation of the effective portion of derivative financial instruments
Exchange differences on translating foreign operations
Total
Items that may not be reclassified to consolidated net income in subsequent periods:
Remeasurements of the net defined benefit liability

2016

Ps.

614
(2,842)
(2,228)

Ps.

(1,004)

Ps.

2015

213
69
282

169

2014

(257)
1,579
1,322

(881)

Ps.

Note 11. Property, Plant and Equipment, Net

Cost

Land

Buildings

January 1, 2014
Additions
Changes in fair value of past acquisitions
Transfer of completed projects in progress
Transfer (to)/from assets classified

Ps. 7,094
803
(115)
-

Ps.

17,544 Ps.
54
(610)
1,717

Machinery
and
Equipment

49,877
4,156
891
2,823

-
(17)

-
(144)

(134)
(2,243)

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

Refrigeration
Equipment

Returnable
Bottles

Ps.

13,389
32
(57)
1,523

-
(632)

Ps.

7,386
398
-
1,994

-
(60)

Investments
in Fixed
Assets in
Progress

Ps. 7,039
11,209
(68)
(10,050)

Leasehold
Improvements

Other

Total

Ps.

10,693 Ps.
99
99
1,990

1,566 Ps. 114,588
16,985
234
(113)
(253)
-
3

-
(5)

-
(587)

-
(79)

(134)
(3,767)

(664)

(3,125)

(5,415)

(1,975)

(323)

(545)

(44)

(506)

(12,597)

110
-

355
-

531
33

186
-

7
-

29
263

-
-

110
-

1,328
296

Cost as of December 31, 2014

Ps.

7,211

Ps.

15,791 Ps.

50,519

Ps.

12,466

Ps.

9,402

Ps. 7,872

Ps.

12,250 Ps.

1,075 Ps. 116,586

Cost as of January 1, 2015
Additions
Additions from business 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

Ps.

7,211
675
30

Ps.

15,791 Ps.
1,688
251

50,519
5,122
870

Ps.

12,466
851
-

Ps.

9,402
1,655
-

Ps. 7,872
6,942
-

Ps.

12,250 Ps.
41
862

1,075 Ps. 116,586
17,485
2,013

511
-

-
(56)

1,289

3,251

-
(219)

(10)
(2,694)

1,168

-
(972)

662

(8,143)

1,714

-
(103)

-
-

-
(356)

-
(40)

(10)
(4,440)

(595)

(1,352)

(4,330)

(1,216)

(266)

(1,004)

(23)

(848)

(9,634)

245
-

503
-

957
-

295
-

301
-

91
57

-
-

229
-

2,621
57

Cost as of December 31, 2015

Ps. 7,569

Ps.

17,951 Ps.

53,685

Ps.

12,592

Ps.

11,651

Ps. 5,815

Ps.

14,488 Ps.

927 Ps. 124,678

Cost as of January 1, 2016
Additions
Additions from business acquisitions
Changes in fair value of past acquisitions
Transfer of completed projects

Ps. 7,569
328
163
50

Ps.

17,951 Ps. 53,685
6,499
1,521
85

877
763
-

Ps.

12,592
73
105
-

Ps.

11,651
2,236
23
-

Ps. 5,815
8,667
45
-

Ps.

14,488 Ps.
36
668
115

927 Ps. 124,678
19,083
367
3,288
-
250
-

in progress

1,039

2,445

1,978

779

(8,493)

2,206

-
(88)
260

854
-

-
(202)
2,643

1,470
-

(36)
(2,461)
5,858

2,710
61

-
(574)
1,953

851
-

-
(139)
1,271

122
-

-
(2)
569

415
(38)

-
(474)
329

-
-

-
(19)
(132)

942
1

(36)
(3,959)
12,751

7,364
24

Ps. 9,182

Ps. 24,541 Ps.

70,367

Ps.

16,978

Ps. 15,943

Ps. 6,978

Ps.

17,368 Ps. 2,086 Ps. 163,443

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, 2016

Accumulated Depreciation

Land

Buildings

Machinery
and
Equipment

Refrigeration
Equipment

Returnable
Bottles

Investments
in Fixed
Assets in
Progress

Ps.

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

Accumulated Depreciation as of

January 1, 2015
Depreciation for the year
Disposals
Effects of changes in foreign

exchange rates

Changes in value on the recognition

of inflation effects

Accumulated Depreciation as of

December 31, 2015

Accumulated Depreciation as of

January 1, 2016
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, 2016

Ps.

-
-

-
-
-

-
-

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.

(3,726) Ps.

(21,382)

Ps.

(6,644)

Ps.

(5,205)

Ps.

(3,726) Ps.
(515)
172

(21,382)
(4,864)
2,001

Ps.

(6,644)
(1,184)
946

Ps.

(5,205)
(1,984)
80

Ps.

498

2,222

1,044

167

(187)

(426)

(166)

(436)

Ps. (3,758) Ps.

(22,449)

Ps.

(6,004)

Ps.

(7,378)

Ps.

Ps. (3,758) Ps. (22,449)
(5,737)

(734)

Ps.

(6,004)
(1,723)

Ps.

(7,378)
(2,235)

Ps.

-
132

16
2,101

-
672

-
227

(600)

(3,093)

(1,147)

(847)

(593)

(1,101)

(521)

(33)

Ps. (5,553) Ps. (30,263)

Ps. (8,723)

Ps. (10,266)

Ps.

-
-

-
-
-

-
-

Leasehold
Improvements

Other

Total

Ps.

(3,270) Ps.
(863)

(454) Ps. (40,633)
(9,029)
(115)

-
517

-
1

62
3,340

236

6,382

(54)

(1,079)

Ps.

(3,614) Ps.

(386) Ps. (40,957)

Ps.

(3,614) Ps.
(1,071)
270

(386) Ps. (40,957)
(9,761)
(143)
3,471
2

212

4,165

(86)

(1,300)

Ps.

(4,392) Ps.

(401) Ps. (44,382)

Ps.

(4,392) Ps.
(1,447)

(401) Ps. (44,382)
(12,076)
(200)

-
364

-
9

16
3,505

(81)

(5,729)

(306)

(2,554)

Ps.

(5,556) Ps.

(859) Ps. (61,220)

Carrying Amount

Land

Buildings

Machinery
and
Equipment

Refrigeration
Equipment

Returnable
Bottles

Investments
in Fixed
Assets in
Progress

Leasehold
Improvements

Other

Total

As of December 31, 2014

As of December 31, 2015
As of December 31, 2016

Ps.

7,211

Ps. 12,065 Ps.

29,137

Ps. 7,569
Ps. 9,182

Ps.
14,193 Ps.
Ps. 18,988 Ps.

31,236
40,104

Ps.

Ps.
Ps.

5,822

6,588
8,255

Ps.

Ps.
Ps.

4,197

4,273
5,677

Ps. 7,872

Ps. 5,815
Ps. 6,978

Ps.

Ps.
Ps.

8,636 Ps.

689 Ps. 75,629

10,096 Ps.
11,812 Ps.

526 Ps. 80,296
1,227 Ps. 102,223

During the years ended December 31, 2016, 2015 and 2014 the Company capitalized Ps . 61, Ps . 57 and Ps . 296, respectively of borrowing costs in relation to Ps . 99,
Ps . 993 and Ps . 1,915 in qualifying assets . The effective interest rates used to determine the amount of borrowing costs eligible for capitalization were 4 .5%, 4 .1% and
4 .8%, respectively .

For the years ended December 31, 2016, 2015 and 2014 interest expense, interest income and net foreign exchange losses and gains are analyzed as follows:

Interest expense, interest income and net foreign exchange
Amount capitalized (1)
Net amount in consolidated income statements

(1) Amount of interest capitalized in property, plant and equipment and intangible assets.

Commitments related to acquisitions of property, plant and equipment are disclosed in Note 25 .8 .

2016

7,285
69
7,216

Ps.

2015

8,031
85
7,946

2014

7,080
338
6,742

Ps.

Note 12. Intangible Assets

Cost as of December 31, 2014 Ps. 70,263 Ps. 25,174 Ps.

1,514

Ps.

63 Ps. 97,014 Ps. 3,225 Ps.

1,554 Ps.

1,027 Ps.

671 Ps. 6,477 Ps. 103,491

Cost

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 January 1, 2015
Purchases
Acquisitions 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 January 1, 2016
Purchases
Acquisitions from

business combinations
(see Note 4)

Changes in fair value of
past acquisitions
Internally development
Transfer of completed

development systems

Disposals
Effect of movements in
exchange rates
Changes in value on the

recognition of inflation
effects
Capitalization of

Rights to
Produce and
Distribute
Coca-Cola
Trademark
Products

Goodwill

Trademark
Rights

Other
Indefinite
Lived
Intangible
Assets

Total
Unamortized
Intangible
Assets

Technology
Costs and
Management
Systems

Systems in
Development

Alcohol
Licenses

Other

Total
Amortized
Intangible
Assets

Total
Intangible
Assets

1,604 Ps.
229

859 Ps.
168

690 Ps. 6,372 Ps. 105,194
681
668

Ps. 75,727 Ps. 21,308 Ps.

1,515
-

(2,416)

4,117

-
-

Ps.

272 Ps. 98,822 Ps.

3,219 Ps.

(205)

1,496

-
(8)

227

278
(387)

(278)
-

(5,343)

(251)

(1)

(9)

(5,604)

(152)

(1)

2,295

(2)

Ps. 70,263 Ps. 25,174 Ps.

-
-

11,369

-
-

1,514
-

-
-

Ps.

63 Ps. 97,014 Ps. 3,225 Ps.

1,238

12,607

480

328

-
-

1,085
(150)

(1,085)
(242)

(4,992)

(2,693)

(33)

(19)

(7,737)

(94)

(2)

1,121

(12)

1,554 Ps.
458

1,027 Ps.

198

671 Ps. 6,477 Ps. 103,491
1,219
1,219
83

-
-

(17)

-
(33)

(17)

1,479

-
(420)

-
(428)

(13)

(166)

(5,770)

(2)

2,293

-
-

199

-
(77)

(16)

527

13,134

-
(469)

(112)

(7,849)

(12)

1,109

Ps. 66,392 Ps. 33,850 Ps.

1,481
3

Ps. 1,282 Ps. 103,005 Ps. 4,890 Ps.
3

345

9,602

12,276

239

1,067

23,184

318

-
-

(2,385)

-
-

4,315
-

-
-

(554)
-

1,376
-

-
-

304
(336)

(304)
-

8,124

8,116

187

392

16,819

451

(193)

1,220

141

683 Ps.
609

-
-

1,225 Ps. 860 Ps. 7,658 Ps. 110,663
1,296

1,291

146

191

-
-

174

495

23,679

1,078
-

2,372
-

-
(24)

-
(360)

104

362

17,181

141

1,361

Ps. 2,187 Ps. 145,607 Ps. 6,124 Ps.

798 Ps.

1,416 Ps. 2,338 Ps. 10,676 Ps. 156,283

Cost as of December 31, 2015 Ps. 66,392 Ps. 33,850 Ps.

1,481

Ps. 1,282 Ps. 103,005 Ps. 4,890 Ps.

683 Ps.

1,225 Ps. 860 Ps. 7,658 Ps. 110,663

borrowing costs

-
Cost as of December 31, 2016 Ps. 85,338 Ps. 51,857 Ps. 6,225

Rights to
Produce and
Distribute
Coca-Cola
Trademark
Products

Goodwill

Trademark
Rights

Other
Indefinite
Lived
Intangible
Assets

Total
Unamortized
Intangible
Assets

Technology
Costs and
Management
Systems

Systems in
Development

Alcohol
Licenses

Other

Total
Amortized
Intangible
Assets

Total
Intangible
Assets

Amortization and
Impairment Losses

Amortization as of
January 1, 2014
Amortization expense
Impairment losses
Disposals
Effect of movements in
exchange rates

Amortization as of

Ps.

- Ps.
-
-
-

December 31, 2014

Ps.

- Ps.

Amortization as of
January 1, 2015
Amortization expense
Disposals
Effect of movements in
exchange rates

Amortization as of

Ps.

- Ps.
-
-

December 31, 2015

Ps.

- Ps.

Amortization as of
January 1, 2016
Amortization expense
Impairment losses
Disposals
Effect of movements
in exchange rates

Amortization as of

Ps.

- Ps.
-
-
-

December 31, 2016

Ps.

- Ps.

Carrying Amount

-
-
-
-

-
-
-

-
-
-
-

Ps.

- Ps.
-
(36)
-

(1,462) Ps.
(268)
-
387

- Ps.
-
-
-

(177) Ps.
(58)
-
-

(262) Ps. (1,901) Ps.
(97)
-
-

(423)
-
387

(1,901)
(423)
(36)
387

Ps.

(36) Ps.

(1,343) Ps.

- Ps.

(235) Ps.

(350) Ps. (1,928) Ps.

(1,964)

Ps.

(36) Ps.
-
-

(36) Ps.

(1,343) Ps.

-
-

(461)
126

- Ps.
-
-

(67)
-

(76)
42

(604)
168

(1,964)
(604)
168

(235) Ps.

(350) Ps. (1,928) Ps.

Ps.

(36) Ps.

(1,619) Ps.

- Ps.

(302) Ps.

(365) Ps. (2,286) Ps. (2,322)

Ps.

(36) Ps.
-
-
-

(36) Ps.

-
-
-

(1,619) Ps.
(630)
-
313

- Ps.
-
-
-

(302) Ps. (365) Ps. (2,286) Ps. (2,322)
(1,006)
-
349

(302)
-
36

(74)
-
-

-
349

(1,006)

(1)

(35)

(36)

Ps.

(36) Ps.

(36) Ps. (1,937) Ps.

- Ps. (376) Ps. (666) Ps. (2,979) Ps. (3,015)

As of December 31, 2014
As of December 31, 2015
As of December 31, 2016

Ps. 70,263 Ps. 25,174 Ps.
1,514
1,481
Ps. 66,392 Ps. 33,850 Ps.
Ps. 85,338 Ps. 51,857 Ps. 6,225

Ps.
27 Ps. 96,978 Ps.
Ps. 1,246 Ps. 102,969 Ps.
Ps. 2,151 Ps. 145,571 Ps.

1,882 Ps.
3,271 Ps.
4,187 Ps.

1,554 Ps.
683 Ps.
798 Ps.

792 Ps.
923 Ps.

321 Ps. 4,549 Ps. 101,527
495 Ps. 5,372 Ps. 108,341
1,040 Ps. 1,672 Ps. 7,697 Ps. 153,268

During the years ended December 31, 2016, 2015 and 2014 the Company capitalized Ps . 8, Ps . 28 and Ps . 42, respectively of borrowing costs in relation to Ps . 28,
Ps . 410 and Ps . 600 in qualifying assets, respectively . The effective interest rates used to determine the amount of borrowing costs eligible for capitalization were 4 .1%,
4 .1% and 4 .2%, respectively .

For the years ended 2016, 2015 and 2014, allocation for amortization expense is as follows:

Cost of goods sold
Administrative expenses
Selling expenses

2016

84
677
160
921

Ps.

2015

61
407
136
604

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

2014

12
156
255
423

Years

3 - 10
12 - 15

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,
2016

December 31,
2015

Ps.

55,137
499
532
1,622
1,241
5,988
1,225
52,609
67
118,920

Ps.

55,137
410
465
1,391
1,033
4,746
621
23,557
69
87,429

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, which is
equivalent to the cost of debt based on the conditions that would asses a creditor in the market . Segment-specific risk is incorporated by applying beta factors which
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 .

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, 2016 were as follows:

CGU

Mexico
Colombia
Venezuela
Costa Rica
Guatemala
Nicaragua
Panama
Argentina
Brazil

Pre-tax WACC

6.8%
7.9%
17.5%
8.4%
9.9%
10.6%
7.8%
9.1%
8.7%

Post-tax WACC

6.3%
7.5%
17.0%
8.3%
9.5%
10.1%
7.4%
8.5%
8.1%

Expected Annual
Long-Term Inflation
2017-2026

Expected Volume
Growth Rates
2017-2026

3.7%
3.2%
117.3%
4.4%
5.0%
4.2%
3.0%
12.2%
4.4%

1.2%
4.0%
1.0%
4.7%
13.2%
5.7%
4.9%
4.1%
2.9%

The key assumptions by CGU for impairment test as of December 31, 2015 were as follows:

CGU

Mexico
Colombia
Venezuela
Costa Rica
Guatemala
Nicaragua
Panama
Argentina
Brazil

Pre-tax WACC

Post-tax WACC

Expected Annual
Long-Term Inflation
2016-2025

Expected Volume
Growth Rates
2016-2025

6.7%
7.6%
17.8%
8.2%
10.6%
13.4%
7.4%
9.8%
8.0%

6.1%
6.8%
17.1%
7.9%
10.0%
12.8%
6.8%
9.1%
7.4%

3.4%
3.0%
72.5%
4.7%
3.7%
5.3%
3.1%
22.8%
4.9%

2.1%
4.4%
3.9%
3.9%
4.7%
6.4%
5.2%
3.4%
4.0%

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, 2016, 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 Venezuela and concluded that no impairment would be recorded .

For Venezuela CGU the Coca-Cola FEMSA performed a sensivity analysis with a possible change in each key assumption that must change, in order for the CGU
recoverable amount assigned to its distribution right to be equal to its carrying amount in accordance with IAS 36 given the uncertainty in the macroeconomic
conditions in Venezuela .

To the extent that economic and or operational conditions were to worsen in the future resulting in a conclusion that Coca-Cola FEMSA has an impairment in Venezuela
an income statement charge could affect our future results . There can be no assurances that such might not happen in the future .

CGU

Mexico
Colombia
Venezuela
Costa Rica
Guatemala
Nicaragua
Panama
Argentina
Brazil

(1) Compound Annual Growth Rate (CAGR).

Change in WACC

+0.4%
+0.6%
+2.7%
+1.1%
+1.0%
+3.4%
+0.3%
+0.7%
+0.2%

Change in Volume
Growth CAGR (1)

-1.0%
-1.0%
-0.385%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%
-1.0%

Effect on Valuation

Passes by 4.1x
Passes by 3.4x
Passes by 1.0x
Passes by 2.7x
Passes by 13.3x
Passes by 5.4x
Passes by 11.7x
Passes by 270.6x
Passes by 1.33x

FEMSA Comercio Impairment Test for Cash-Generating Units Containing Goodwill
For the purpose of impairment testing, goodwill is allocated and monitored on an individual country basis by operating segment . FEMSA Comercio has integrated
its cash generating units as follow: Retail Division and Health Division are integrated as Mexico, Chile and Colombia for each of them and Fuel Division includes only
Mexico .

As of December 31, 2016 in Health Division there is a significant carrying amount of goodwill allocated in Chile and Colombia as a group of cash generating (South
America) with a total carrying amount of Ps . 5,861 .

Goodwill is 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, FEMSA Comercio prepares its estimates based on the current situation of each of
the CGUs or group of 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: sales, expected annual long-term inflation, and the weighted average cost of capital (“WACC”) used to discount the projected flows .

To determine the discount rate, FEMSA Comercio uses the WACC as determined for each of the cash generating units or group 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 or group of 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 FEMSA Comercio .

The discount rates represent the current market assessment of the risks specific to each CGU or group of 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 opportunity cost
to a market participant, considering the specific circumstances of FEMSA Comercio and its operating segments and is derived from its WACC . The WACC takes into
account both debt and cost of equity . The cost of equity is derived from the expected return on investment by Company’s investors . The cost of debt is estimated based
on the conditions that would asses a creditor in the market for credit to the CGUs . . Segment-specific risk is incorporated by applying beta factors which are evaluated
annually based on publicly available market data .

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 . FEMSA Comercio believes that this forecasted period is justified due

to the non-current nature of the business and past experiences .

• Cash flows projected based on actual operating results and five-year business plan were calculated 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, 2016 were as follows:

CGU

South America (Health Division)

Pre-tax WACC

7.5%

Post-tax WACC

7.3%

Expected Annual
Long-Term Inflation
2016-2025

Expected Volume
Growth Rates
2016-2025

13%

During 2015, the goodwill allocated to the Chile and Colombia CGU’s was in the process of initial allocation of the purchase price .

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) . FEMSA Comercio consistently applied its methodology to determine CGU specific WACC’s to perform its annual impairment testing .

Sensitivity to Changes in Assumptions
At December 31, 2016, FEMSA Comercio 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 a sensitivity analysis of sales that would be
affected considering a contraction in economic conditions as a result of lower purchasing power of customers, which based on management estimation considered to
be reasonably possible an effect of 100 basis points in the sale’s compound annual growth rate (CAGR), concluding that no impairment would be recognized .

CGU

Health Division (South America)

(1) Compound Annual Growth Rate.

Change in WACC

+0.5%

Change in Sales
Growth CAGR (1)

-1.0%

Effect on Valuation

Passes by 1.23x

Note 13. Other Assets and Other Financial Assets

13.1 Other assets

Agreement with customers
Long term prepaid advertising expenses
Guarantee deposits (1)
Prepaid bonuses
Advances to acquire property, plant and equipment
Recoverable taxes
Indemnifiable assets from business combinations (2)
Others

December 31,
2016

December 31,
2015

Ps.

793
392
3,757
103
173
1,653
8,081
1,230
16,182

Ps.

238
52
1,870
122
370
1,181
-
1,160
4,993

(1) As it is customary in Brazil, the Company is required to collaterize tax, legal and labor contingencies by guarantee deposits including those related to business acquisitions

(see Note 25.7).

(2) Corresponds to indemnifiable assets that are warranted by former Vonpar owners as per the share purchase agreement.

13.2 Other financial assets

Non-current accounts receivable
Derivative financial instruments (see Note 20)
Other non-current financial assets

December 31,
2016

December 31,
2015

Ps.

511
14,729
105
15,345

Ps.

478
8,377
100
8,955

As of December 31, 2016 and 2015, the fair value of long term accounts receivable amounted to Ps . 541 and Ps . 452, 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) (8)
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 (1) (3) (7)
Due from Grupo Estrella Azul (3)
Other receivables (1) (4)
Due to The Coca-Cola Company (5) (6) (8)
Due to BBVA Bancomer, S.A. de C.V. (5)
Due to Caffenio (6) (7)
Due to Heineken (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 and notes payable.
(6) Recorded within accounts payable.
(7) Associates.
(8) Non controlling interest.

December 31,
2016

December 31,
2015

Ps.

1,857
2,535
-
128
2,622
-
237
4,454
395
76
4,458
1,047

Ps.

1,559
2,683
1,178
79
1,739
69
1,352
3,140
292
108
2,588
981

Balances due from related parties are considered to be recoverable . Accordingly, for the years ended December 31, 2016 and 2015, there was no expense resulting from
the uncollectibility of balances due from related parties .

Transactions

Income:
Services to Heineken (1)
Logistic services to Grupo Industrial Saltillo, S.A. de C.V. (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 and beer from Heineken (1)
Purchase of coffee from Caffenio (1)
Purchase of baked goods and snacks from Grupo Bimbo, S.A.B. de C.V. (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)
Purchase of inventories to Leao Alimentos e Bebidas, L.T.D.A. (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)
Donations to Difusión y Fomento Cultural, A.C. (3)
Interest expense paid to The Coca-Cola Company (2)
Other expenses with related parties

Ps.

2016

3,153
427
555
857

Ps. 38,146
16,436
2,064
4,184
2,354
3,310
1,765
26
1,349

759
798
1,648
193
-
63
1
62
49
-
617

Ps.

2015

3,396
407
564
644

27,330
14,467
1,774
3,740
1,316
3,082
1,236
68
1,264

587
731
3,359
175
-
58
-
30
59
1
470

(1) Associates.
(2) Non controlling interest.
(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. 4,518, Ps. 3,749 and Ps. 4,118, for the years ended in 2016, 2015 and 2014, respectively.

2014

3,544
313
513
670

28,084
15,133
1,404
3,674
1,167
2,592
1,020
99
1,389

567
591
2,891
158
2
140
42
-
73
4
321

Commitments with related parties

Related Party

Heineken

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.

2016

1,510
39
192
468

Ps.

2015

1,162
42
63
463

Ps.

2014

964
45
114
283

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, 2016, 2015 and 2014, assets, liabilities and transactions denominated in foreign currencies, expressed in Mexican pesos
(contractual amounts) are as follows:

Assets

Liabilities

Short-Term

Long-Term

Short-Term

Long- Term

Ps.

17,796
246
5

Ps.

696
-
1,581

Ps.

4,540
345
246

Ps. 88,611
21,774
1,190

Ps.

18,047

Ps.

2,277

Ps.

5,131

Ps. 111,575

Ps.

10,939
3
-

Ps.

630
-
1,173

Ps.

10,942

Ps.

1,803

Ps.

1,672
23
152

1,847

Ps. 71,123
-
41

Ps. 71,164

Revenues

Other
Revenues

Purchases of
Raw
Materials

Interest
Expense

Consulting
Fees

Assets
Acquisitions

Other

Ps.

4,068
6
29

1,281
1,987
150

Ps.

14,961
104
-

Ps. 3,173
355
150

Ps.

182
43
185

Ps.

4,103

Ps.

3,418

Ps.

15,065

Ps. 3,678

Ps. 410

Ps. 407
-
-

Ps. 407

Ps. 3,339
5
4

Ps. 3,348

Ps.

1,891
-
20

1,911

2,817
7
178

Ps.

3,002

Ps.

472
1
-

473

641
-
-

641

Ps.

11,710
2
-

11,712

Ps.

Ps. 1,973
-
-

Ps. 1,973

Ps.

15,006
80
10

Ps. 1,669
15
-

Ps.

15,096

Ps. 1,684

Ps.

34
2
-

14
-
-

Ps.

75
-
-

Ps. 2,035
37
204

Ps. 2,276

Ps. 478
5
-

Ps. 483

Ps. 2,068
13
4

Ps. 2,085

Balances

As of December 31, 2016
U.S. dollars
Euros
Other currencies

Total

As of December 31, 2015
U.S. dollars
Euros
Other currencies

Total

Transactions

For the year ended December 31, 2016
U.S. dollars
Euros
Other currencies

Total

For the year ended December 31, 2015
U.S. dollars
Euros
Other currencies

Total

For the year ended December 31, 2014
U.S. dollars
Euros
Other currencies

Total

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

Note 16. Employee Benefits

2016

20.6640
21.7741

December 31,

2015

17.2065
18.7873

February 24,
2016

19.9127
21.0364

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, which comprise the
substantial majority of those recorded in the consolidated financial statements .

During 2016 and 2014, Coca-Cola FEMSA settled its pension plan in Colombia and Brazil, respectively and consequently Coca-Cola FEMSA recognized the corresponding
effects of the settlement as disclosed below . In Colombia, the settlement of the complementary pension plan was only for certain executive employees .

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:

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.
(2) IMSS. Mexican Experience of Instituto Mexicano del Seguro Social.
(3) BMAR. Actuary experience.

December 31,
2016

December 31,
2015

December 31,
2014

7.60%
4.50%
3.50%
5.10%

7.00%
4.50%
3.50%
5.10%

EMSSA 2009
IMSS-97
60 años
BMAR 2007

EMSSA 2009
IMSS-97
60 years
BMAR 2007

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) because there is no deep market in
high quality corporate obligations in mexican pesos .

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:

2017
2018
2019
2020
2021
2022 to 2026

Pension and
Retirement Plans

Seniority
Premiums

Ps.

465
307
367
457
380
2,075

51
36
34
33
33
181

Ps.

Post
Retirement
Medical
Services

18
19
20
21
23
141

Total

Ps. 534
362
421
511
436
2,397

16.2 Balances of the liabilities for employee benefits

Pension and Retirement Plans:
Defined benefit obligation

Pension plan funds at fair value

Net defined benefit liability

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:
Net defined benefit liability
Total employee benefits

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,
2016

December 31,
2015

Ps.

Ps.
Ps.

5,702
(2,216)
3,486

663
(102)
561

460
(60)
400

-
4,447

Ps.

Ps.
Ps.

5,308
(2,068)
3,240

610
(103)
507

404
(57)
347

135
4,229

December 31,
2016

December 31,
2015

15%
4%
63%

18%
100%

13%
6%
63%

18%
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 .

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 .

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.
Gentera, S.A.B. de C.V.

Capital:

Alfa, S.A.B. de C.V.
Gruma, S.A.B. de C.V.
Grupo Industrial Bimbo, S.A.B. de C.V.

December 31,
2016

December 31,
2015

Ps.

7
45
7
5
19
8

-
-
6

7
45
12
5
3
8

13
5
3

During the years ended December 31, 2016, 2015 and 2014, 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 . The plan assets include securities of the Company in portfolio fund in amount of Ps . 114 and Ps . 113,
as of December 31, 2016 and 2015, respectively .

16.4 Amounts recognized in the consolidated income statements and the consolidated statement of comprehensive income

December 31, 2016
Pension and retirement plans
Seniority premiums
Postretirement medical services

Total

December 31, 2015
Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment Venezuela

Total

December 31, 2014
Pension and retirement plans
Seniority premiums
Postretirement medical services
Post-employment Venezuela

Total

Income Statement

OCI (1)

Current
Service
Cost

Past
Service
Cost

Gain or Loss
on Settlement
or Curtailment

Net Interest
on the Net
Defined
Benefit
Liability

Remeasurements
of the Net
Defined
Benefit
Liability

Ps.

245
92
22

359

233
88
16
6

343

221
75
10
24

Ps.

330

Ps.

45
-
-

3
-
-
-

54
9
-
-

Ps.

(61)
-
-

(61)

(120)
(9)
-
-

(129)

(193)
(27)
-
-

Ps.

(220)

Ps.

224
34
24

282

212
32
23
9

276

279
28
16
18

341

Ps.

1,102
18
151

Ps.

1,271

Ps.

913
39
119
-

Ps.

1,071

Ps.

998
76
74
99

Ps.

1,247

(1) Amounts accumulated in other comprehensive income as of the end of the period.

For the years ended December 31, 2016, 2015 and 2014, current service cost of Ps . 359, Ps . 343 and Ps . 330 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:

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
Amount accumulated in other comprehensive income as of the end of the period, net of tax

Ps.

810
123
288
-
(255)
966

Ps.

942
(12)
(46)
-
(74)
810

Ps.

585
(173)
318
41
171
942

December 31,
2016

December 31,
2015

December 31,
2014

Remeasurements of the net defined benefit liability include the following:

• The return on plan assets, excluding amounts included in net interest expense .

• Actuarial gains and losses arising from changes in demographic assumptions .

• Actuarial gains and losses arising from changes in financial assumptions .

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
Effect on curtailment
Remeasurements of the net defined benefit obligation
Foreign exchange loss (gain)
Benefits paid
Ending balance

Seniority Premiums:
Initial balance
Current service cost
Past service cost
Interest expense
Settlement
Effect on 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
Certain liability cost
Interest expense
Reclasification to certain liability cost
Foreign exchange (gain)
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 loss (gain)
Life annuities
Benefits paid
Effect due to settlement
Ending balance

December 31,
2016

December 31,
2015

December 31,
2014

Ps.

5,308
245
45
369
-
(61)
(67)
150
(287)
Ps. 5,702

Ps.

610
93
-
41
-
-
(43)
(55)
17
663

404
22
27
30
(23)
460

135
-
-
-
(135)
-
-
-

Ps.

5,270
233
3
353
-
(120)
(154)
39
(316)
5,308

563
88
-
38
-
(9)
(34)
(45)
9
610

338
16
26
44
(20)
404

194
5
73
-
-
(137)
-
135

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

December 31,
2016

December 31,
2015

December 31,
2014

Ps.

2,228
40
4
107
(1)
-
2,378

Ps.

2,158
65
7
61
(63)
-
2,228

Ps.

2,371
133
(8)
197
-
(535)
2,158

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 .

The following table presents the amount of defined benefit plan expense and OCI 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

(1) Amounts accumulated in other comprehensive income as of the end of the period.

Income Statement

Current
Service Cost

Past
Service Cost

Ps.

236
89
20
-

345

257
100
21
-

378

Ps.

43
-
-
-

48
1
-
-

Gain or
Loss on
Settlement or
Curtailment

Effect of
Net Interest
on the Net
Defined Benefit
Liability (Asset)

Ps. (57)

Ps.

-
-
-

Ps.

(57)

Ps.

(66)
-
-
-

(66)

Ps.

217
34
23
-

274

240
37
24
-

301

OCI (1)

Remeasurements
of the Net
Defined Benefit
Liability (Asset)

Ps.

648
(22)
126
-

Ps.

752

Ps. 1,043
69
151
-

Ps. 1,263

Ps.

Ps. 193

Current
Service Cost

Past
Service Cost

Gain or
Loss on
Settlement or
Curtailment

Effect of
Net Interest
on the Net
Defined Benefit
Liability (Asset)

Ps.

258
99
22
-

379

236
89
21
-

346

Ps.

50
1
-
-

44
-
-
-

Ps.

(66)
-
-
-

(66)

(60)
-
-
-

(60)

Ps.

227
35
25
-

287

205
32
24
-

261

Remeasurements
of the Net
Defined Benefit
Liability (Asset)

Ps.

1,101
48
187
-

Ps. 1,336

Ps. 703
(24)
151
-

Ps. 830

Ps.

131

16.8 Employee benefits expense
For the years ended December 31, 2016, 2015 and 2014, employee benefits expenses recognized in the consolidated income statements as cost of goods sold,
administrative and selling expenses are as follows:

Wages and salaries
Social security costs
Employee profit sharing
Post employment benefits
Share-based payments
Termination benefits

Note 17. Bonus Programs

2016

Ps. 39,459
6,114
1,506
625
468
503
Ps. 48,675

2015

39,459
6,114
1,243
493
463
503
48,275

Ps.

2014

35,659
5,872
1,138
514
283
431
43,897

Ps.

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 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 . Until 2015 the shares were vested ratably over a six year period, beginning with
January 1, 2016 onwards they were ratably vest over a four year period, with retrospective effects . Early December 31, 2015, 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 conducting
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, 2016, 2015 and 2014, the compensation expense recorded in the consolidated
income statement amounted to Ps . 468, Ps . 463 and Ps . 283, 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, 2016 and 2015, 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

KOFL

2016

2015

2016

2015

4,246,792
2,375,196
(2,996,817)
-
3,625,171

4,763,755
1,491,330

(2,008,293)

4,246,792

1,160,311
695,487
(787,471)
-
1,068,327

1,298,533

466,036

(604,258)

1,160,311

The fair value of the shares held by the trust as of the end of December 31, 2016 and 2015 was Ps . 712 and Ps . 830, respectively, based on quoted market prices of those dates .

Note 18. Bank Loans and Notes Payables

(in millions of Mexican pesos)

2017

2018

2019

2020

2021

At December 31, (1)

Carrying
Value at
December 31,
2016

Fair
Value at
December 31,
2016

Carrying
Value at
December 31,
2015(1)

2022 and
Thereafter

Short-term debt:
Fixed rate debt:
Colombian pesos
Bank loans

Interest rate
Argentine pesos
Bank loans

Interest rate

Chilean pesos
Bank loans

Interest rate
Finance leases
Interest rate

U.S. dollars
Bank loans
Interest rate
Variable rate debt:
Colombian pesos
Bank loans

Interest rate

Brazilian reais
Bank loans

Interest rate
Chilean pesos
Bank loans

Interest rate

Ps.

-
-

- Ps.
-

644
32.0%

338
4.3%
-
-

206
3.4%

723
9.1%

-
-

1
10.0%

-
-

-
-
-
-

-
-

Total short-term debt

Ps.

1,912

Ps.

- Ps.

-
-

-
-
-
-

-
-

Ps.

-
-

-
-
-
-

-
-

Ps.

-
-

-
-
-
-

-
-

Ps.

-
-

-
-
-
-

-
-

Ps.

- Ps.
-

219
6.5%

644
32.0%

338
4.3%
-
-

206
3.4%

723
9.1%

-
-

1
10.0%

Ps.

1,912

669
-

338
-
-
-

208
-

720
-

-
-

165
26.2%

1,442
4.2%
10
2.4%

-
-

235
8.2%

168
14.8%

1
-
-
-
Ps. 1,936 Ps. 2,239

(in millions of Mexican pesos)

2017

2018

2019

2020

2021

At December 31, (1)

Carrying
Value at
December 31,
2016

Fair
Value at
December 31,
2016

Carrying
Value at
December 31,
2015(1)

2022 and
Thereafter

Long-term debt:
Fixed rate debt:
Euro
Senior unsecured notes

Interest rate

U.S. dollars
Yankee bond

Interest rate

Bank of NY (FEMSA USD 2023)

Interest rate (1)

Bank of NY (FEMSA USD 2043)

Interest rate (1)

Finance leases

Interest rate (1)

Mexican pesos
Units of investment (UDIs)

Interest rate
Domestic senior notes
Interest rate

Brazilian reais
Bank loans

Interest rate
Finance leases
Interest rate

Notes payable

Interest rate
Argentine pesos
Bank loans

Interest rate

Chilean pesos
Bank loans

Interest rate
Finance leases
Interest rate
Colombian pesos
Finance leases
Interest rate

Subtotal

Ps.

-
-

- Ps.
-

Ps.

-
-

Ps.

-
-

-
-
-
-
-
-
7
4.0%

3,245
4.2%
-
-

282
4.7%
-
-
-
-

-
-

125
6.8%
25
3.5%

-
-

20,625
2.4%
-
-
-
-
6
4.0%

-
-
-
-

227
5.1%
-
-
-
-

-
-

39
7.9%
25
3.6%

758
9.6%

-
-
-
-
-
-
5
3.8%

-
-
-
-

106
7.4%
-
-
7,022
0.4%

-
-

-
-
23
3.5%

-
-

10,297
4.6%
-
-
-
-
2
4.0%

-
-
-
-

50
5.1%
-
-
-
-

-
-

-
-
21
3.3%

-
-

-
-
-
-
-
-
-
-

-
-
2,497
8.3%

41
5.1%
-
-
-
-

-
-

-
-
20
3.2%

-
-

Ps. 21,627
1.8%

Ps. 21,627 Ps. 22,178
-

1.8%

Ps.

-
-

30,781
4.4%
6,117
2.9%
14,128
4.4%
-
-

-
-
7,494
5.5%

36
5.1%
-
-
-
-

-
-

-
-
-
-

-
-

61,703
3.8%
6,117
2.9%
14,128
4.4%
20
3.9%

3,245
4.2%
9,991
6.2%

742
5.3%
-
-
7,022
0.4%

-
-

164
7.0%
114
3.4%

64,230
-
5,953
-
13,749
-
20
-

3,245
-
8,983
-

714
-
-
-
6,547
-

-
-

164
-
114
-

51,333
3.8%
5,068
2.9%
11,675
4.4%
-
-

3,385
4.2%
9,989
6.2%

819
6.0%
460
4.6%
-
-

18
15.3%

232
7.5%
92
3.4%

758
9.6%

-
-
Ps. 125,631 Ps. 126,647 Ps. 83,071

750
-

Ps. 3,684

Ps. 21,680 Ps.

7,156

Ps.

10,370

Ps.

2,558

Ps. 80,183

(1) All interest rates shown in this table are weighted average contractual annual rates.

(in millions of Mexican pesos)

2017

2018

2019

2020

2021

At December 31, (1)

Carrying
Value at
December 31,
2016

Fair
Value at
December 31,
2016

Carrying
Value at
December 31,
2015(1)

2022 and
Thereafter

Variable rate debt:
U.S. dollars
Bank loans

Interest rate (1)

Mexican pesos
Domestic senior notes
Interest rate (1)

Argentine pesos
Bank loans

Interest rate

Brazilian reais
Bank loans

Interest rate

Notes payable

Interest rate
Colombian pesos
Bank loans

Interest rate

Chilean pesos
Bank loans

Interest rate

Subtotal
Total long-term debt
Current portion of long term debt

Ps.

- Ps.
-

-
-

40
27.8%

483
5.5%
10
0.4%

793
9.1%

-
-

451
5.5%
10
0.4%

413
10.0%

359
3.9%
Ps. 1,685
Ps. 5,369

477
3.9%
Ps.
1,351 Ps.
Ps. 23,031 Ps.

-
-

410
5.5%
6
0.4%

-
-

641
3.8%
1,057
8,213

Ps.

Ps.
Ps.

-
-

308
5.5%
-
-

-
-

1,071
3.8%
1,379
11,749

(1) All interest rates shown in this table are weighted average contractual annual rates.

Ps.

4,218
1.6%

Ps.

-
-

88
5.5%
-
-

-
-

706
3.7%
5,012
7,570

Ps.
Ps.

-
-

124
5.5%
-
-

-
-

Ps. 4,218 Ps. 4,299 Ps.

1.6%

-
-

40
27.8%

1,864
5.5%
26
0.4%

1,206
9.6%

-
-

40
-

1,776
-
23
-

1,213
-

-
-

2,496
3.6%

123
32.2%

584
10.1%
-
-

1,176
6.9%

1,097
3.6%
Ps.
1,221
Ps. 81,404

4,350
-

4,351
3.7%
11,705 Ps.

2,175
6.0%
Ps.
11,701 Ps. 6,554
Ps. 137,336 Ps. 138,348 Ps. 89,625
(3,656)
Ps. 85,969

Ps. 131,967

(5,369)

Hedging Derivative
Financial Instruments (1)

Cross currency swaps:

Units of investments to Mexican
pesos and variable rate:
Fixed to variable (2)
Interest pay rate
Interest receive rate
U.S. dollars to Mexican pesos
Fixed to variable (3)

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

Chilean pesos
Variable to fixed

Interest pay rate
Interest receive rate

Interest rate swap:
Mexican pesos
Variable to fixed rate:
Interest pay rate
Interest receive rate
Variable to fixed rate (2):
Interest pay rate
Interest receive rate
Variable to fixed rate (3):
Interest pay rate
Interest receive rate

2017

2018

2019

2020

2021

(notional amounts in millions of Mexican pesos)

2022 and
Thereafter

Total
2016

Total
2015

Ps. 2,500 Ps.
5.9%
4.2%

-
-
-

Ps.

-
-
-
-
-
-
-
-
-

207
14.3%
3.4%
-
-
-

-
-
-

5.9%
6.0%

-
-

-
-
-
9,092
6.0%
2.4%
2,376
6.4%
2.4%

9,195
12.6%
2.5%
18,598
12.6%
2.1%

-
-
-

-
-

-
-
-

-
-
-
-
-
-
-
-
-

7,022
10.1%
0.4%
-
-
-

-
-
-

77
6.5%
4.7%

-
-

Ps.

-
-
-

-
-
-
-
-
-
10,332
9.1%
4.6%

4,786
12.9%
2.9%
-
-
-

827
6.9%
6.2%

-
-
-

-
-

-
-
-

-
-
-
-
-
-
-
-
-

-
-
-
4,236
11.7%
1.5%

-
-
-

727
7.6%
4.7%

-
-

Ps.

- Ps. 2,500 Ps. 2,500
3.4%
-
4.2%
-

5.9%
4.2%

11,403
7.4%
4.0%
-
-
-
6,743
9.1%
3.8%

-
-
-
-
-
-

-
-
-

2,787
4.8%
4.1%

-
-

7.2%
7.4%

11,403
7.4%
4.0%
9,092
6.0%
2.4%
19,451
8.8%
4.1%

21,210
11.9%
1.9%
22,834
12.4%
2.0%

827
6.9%
6.2%

3,591
6.4%
5.1%

5.9%
6.0%

7.2%
7.4%

11,403
4.8%
4.0%
7,571
3.5%
2.4%
1,267
5.7%
2.9%

5,592
12.7%
2.7%
17,551
12.6%
2.1%

1,097
6.9%
6.8%

1,273
7.0%
5.5%

5.2%
3.4%

7.2%
4.8%

(1) All interest rates shown in this table are weighted average contractual annual rates.
(2) Interest rate swaps with a notional amount of Ps. 1,250 that receive a variable rate of 6.0% and pay a fixed rate of 5.9%; joined with a cross currency swap of the same notional amount,

which covers units of investments to Mexican pesos, that receives a fixed rate of 4.2% and pays a variable rate of 5.9%.

(3) Interest rate swaps with a notional amount of Ps. 11,403 that receive a variable rate of 7.4% and pay 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 7.4%.

For the years ended December 31, 2016, 2015 and 2014, the interest expense is comprised as follows:

Interest on debts and borrowings
Capitalized interest
Finance charges for employee benefits
Derivative instruments
Finance operating charges
Finance charges payable under finance leases

2016

5,694
(32)
282
3,519
183
-
9,646

Ps.

2015

4,586
(60)
276
2,894
79
2
7,777

2014

3,992
(117)
341
2,413
66
6
6,701

Ps.

In March 14, 2016, the Company issued long-term debt on the Irish Stock Exchange (ISE) in the amount of €1,000, which was made up of senior notes with a maturity of
7 years, a fixed interest rate of 1 .75% and a spread of 155 basis points over the relevant benchmark mid-swap, for a total yield of 1 .824% . The Company has designated
this non-derivative financial liability as a hedge on the net investment in Heineken . For the year ended December 31, 2016, a foreing exchange loss, net of tax, has been
recognized as part of the exchange differences on translation of foreign operations within the cumulative other comprehensive income of Ps . 1,443 .

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 .

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 .

Coca-Cola FEMSA has the following debt bonds: a) registered with the Mexican stock exchange: i) Ps . 2,500 (nominal amount) with a maturity date in 2021 and fixed
interest rate of 8 .27% and ii) Ps . 7,500 (nominal amount) with a maturity date in 2023 and fixed interest rate of 5 .46%; and b) registered with the SEC: i) Senior notes of
U .S . $500 with interest at a fixed rate of 4 .63% and maturity date on February 15, 2020, ii) Senior notes of U .S . $1,000 with interest at a fixed rate of 2 .38% and maturity
date on November 26, 2018, iii) Senior notes of U .S . $900 with interest at a fixed rate of 3 .88% and maturity date on November 26, 2023 and iv) Senior notes of U .S . $600
with interest at a fixed rate of 5 .25% and maturity date on November 26, 2043 all of which are guaranteed by Coca-Cola FEMSA 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 ., Distribuidora y Manufacturera del Valle de Mexico, S . de R .L . de C .V (as successor guarantor of Servicios Integrados
Inmuebles del Golfo, S . de R .L . de C .V .) and Yoli de Acapulco, S . de R .L . de C .V . (“Guarantors”) .

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 December 2015, Coca-Cola FEMSA prepaid in full outstanding Bank loans denominated in U .S . million dollars for a total amount of $450 (nominal amount) .

Note 19. Other Income and Expenses

Gain on sale of shares
Gain on sale of long-lived assets
Gain on sale of other assets
Sale of waste material
Write off-contingencies (see Note 25.5)
Recoveries from previous years
Insurance rebates
Others
Other income
Contingencies associated with prior acquisitions or disposals (1)
Loss son sale of shares
Loss on sale of long-lived assets
Loss on sale of other assets
Impairment of long-lived assets
Disposal of long-lived assets (2)
Foreign exchange losses related to operating activities
Non-income taxes from Colombia
Severance payments
Donations
Legal fees and other expenses from past acquisitions
Other
Other expenses

(1) Contingencies amounted of Ps. 764 associated with Heineken (see Note 25.5.1).
(2) Charges related to fixed assets retirement from ordinary operations and other long-lived assets.

2016

-
170
-
50
329
466
10
132
1,157
1,582
8
-
159
-
238
2,370
53
98
203
241
957
5,909

Ps.

Ps.
Ps.

Ps.

Ps.
Ps.

Ps.

2015

14
249
-
41
-
16
17
86
423
93
-
-
-
134
416
917
30
285
362
223
281
2,741

2014

-
-
276
44
475
89
18
196
1,098
-
-
7
-
145
153
147
69
277
172
31
276
1,277

Ps.

Ps.
Ps.

Ps.

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, 2016 and 2015:

Derivative financial instrument (current asset)
Derivative financial instrument (non-current asset)
Derivative financial instrument (current liability)
Derivative financial instrument (non-current liability)

December 31, 2016

December 31, 2015

Level 1

374
-
-
-

Level 2

1,543
14,729
264
6,403

Level 1

-
-
270
-

Level 2

523
8,377
89
277

20.1 Total debt
The fair value of bank 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, 2016 and 2015, which is considered to be level 1 in the fair value hierarchy .

Carrying value
Fair value

Ps.

2016

139,248
140,284

Ps.

2015

91,864
91,551

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, 2016, the Company has the following outstanding interest rate swap agreements:

Maturity Date

2017
2019
2021
2022
2023

At December 31, 2015, the Company has the following outstanding interest rate swap agreements:

Maturity Date

2017
2019
2021
2022
2023

Ps.

Notional
Amount

1,250
77
727
929
13,261

Notional
Amount

1,250
76
623
574
11,403

Fair Value Liability
December 31,
2016

Fair Value Asset
December 31,
2016

Ps.

-
(4)
(87)
(35)
(73)

Ps.

10
-
-
-
1,028

Fair Value Liability
December 31,
2015

Fair Value Asset
December 31,
2015

Ps.

(36)
(3)
(62)
(9)
-

-
-
-
-
89

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, 2016, the Company had the following outstanding forward agreements to purchase foreign currency:

Maturity Date

2017

Notional
Amount

Fair Value Liability
December 31,
2016

Fair Value Asset
December 31,
2016

Ps.

8,265

Ps.

(247)

Ps.

364

At December 31, 2015, the Company had the following outstanding forward agreements to purchase foreign currency:

Maturity Date

2016

Notional
Amount

Fair Value Liability
December 31,
2015

Fair Value Asset
December 31,
2015

Ps.

6,735

Ps.

(84)

Ps.

383

20.4 Options to purchase foreign currency
The Company has executed call option and collar strategies to reduce its exposure to the risk of exchange rate fluctuations . A call option is an instrument that limits the
loss in case of foreign currency depreciation . A collar is a strategy that combines call and put options, limiting the exposure to the risk of exchange rate fluctuations in
a similar way as a forward agreement .

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” . 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 including the net premium paid, is recognized as part of cost of goods sold when the hedged item is recorded in the consolidated income statements .

At December 31, 2015, the Company paid a net premium of Ps . 75 millions for the following outstanding call options to purchase foreign currency:

Maturity Date

2016

Notional
Amount

Fair Value Liability
December 31,
2015

Fair Value Asset
December 31,
2015

Ps.

1,612

Ps.

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 instruments at fair value through 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, 2016, the Company had the following outstanding cross currency swap agreements:

Maturity Date

2017
2018
2019
2020
2021
2023
2026
2027

At December 31, 2015, the Company had the following outstanding cross currency swap agreements:

Maturity Date

2017
2018
2020
2023

Ps.

Notional
Amount

2,707
39,262
7,022
19,474
5,076
12,670
925
5,476

Notional
Amount

2,711
30,714
4,034
12,670

Fair Value Liability
December 31,
2016

Fair Value Asset
December 31,
2016

Ps.

(10)
(4,837)
(265)
(842)
(128)
-
(131)
-

Fair Value
Liability
2015

-
-
(116)
-

Ps.

1,165
3,688
-
798
28
9,057
-
125

Fair Value Asset
December 31,
2015

Ps.

1,159
2,216

4,859

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, 2016, Coca-Cola FEMSA had the following sugar price contracts:

Maturity Date

2017

At December 31, 2016, Coca-Cola FEMSA had the following aluminum price contracts:

Maturity Date

2017

At December 31, 2015, Coca-Cola FEMSA had the following sugar price contracts:

Maturity Date

2016

At December 31, 2015, Coca-Cola FEMSA had the following aluminum price contracts:

Maturity Date

2016

Notional
Amount

Ps.

572

Ps.

Notional
Amount

Ps.

Fair Value Asset
December 31,

2016

370

Fair Value Asset
December 31,

2016

Ps.

Notional
Amount

1,497

Notional
Amount

Ps.

436

Ps.

Fair Value Liability
December 31,

2015

(190)

Ps.

Fair Value Liability
December 31,

2015

(84)

20.7 Financial Instruments for CCFPI acquisition
Coca-Cola FEMSA’s call option related to the remaining 49% ownership interest in CCFPI is measured at fair value in its financial statements 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 . 466 million and Ps . 456 million as of
December 31, 2016 and 2015, 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), a volatility (18 .56%) 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 . Coca-Cola FEMSA uses Black & Scholes valuation technique to measure call option value . 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 Coca-Cola FEMSA’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 .

Coca-Cola FEMSA estimates that the call option is “out of the money” as of December 31, 2016 and 2015 . As of December 31, 2016 and 2015, the call option is “out of the
money” by approximately 25 .47% and 13 .89% or U .S . $155 million and U .S . $90 million, respectively, with respect to the strike price .

20.8 Option embedded in the Promissory Note to fund the Vonpar’s acquisition
As disclosed in Note 4 .1 .1 regarding the acquisition of Vonpar as part of the purchase price agreement the acquirer Spal Industria Brasileira de Bebidas, S .A .
(a subsidiary of the Coca-Cola FEMSA) granted a call option to former Vonpar owners to convert the promissory note denominated and payable in Brazilian Reals for
the remaining balance of Ps . 6,534 million plus the appreciation and depretiation of the reals versus the U .S . dollars and an additional amount if the price of KOF shares
is higher than Ps . 178 .5 per share at the maturity date .

Coca-Cola FEMSA uses Black & Scholes valuation technique to measure call option at fair value . The call option had an estimated fair value of Ps . 343 million at
inception of the option and Ps . 368 million as of December 31, 2016 . The option is recorded as part of the Promisory Note disclosed in Note 18 .

Coca-Cola FEMSA estimates that the call option is “out of the money” as of December 31, 2016 by approximately 35 .9% or U .S . $93 million with respect to the strike price .

20.9 Net effects of expired contracts that met hedging criteria

Type of Derivatives

Interest rate swaps
Cross currency swap (1)
Cross currency swap (1)
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
Interest expense
Foreign exchange
Foreign exchange
Cost of goods sold
Cost of goods sold
Cost of goods sold

Ps.

2016

-
-
-
160
(241)
-
(45)

Ps.

2015

-
2,595
(10,911)
(180)
619
(21)
(523)

(1) This amount corresponds to the settlement of cross currency swaps portfolio in Brazil presented as part of the other financial activities.

20.10 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.

20.11 Net effect of expired contracts that did not meet the hedging criteria for accounting purposes

Type of Derivatives

Cross-currency swaps

Impact in Consolidated
Income Statement

Market value

Ps.

2016

-
-
-

2016

Ps.

2015

-
(20)
56

Ps.

2015

204

Ps.

2014

337
-
-
38
291
-
22

2014

10
59
3

2014

20.12 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 .

• 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 based
on a stress test of the exchange rates according to an annualized volatility estimated with historic prices obtained for the underlying asset over a period of time, in the
cases of derivative financial instruments related to foreign currency risk, which the Company is exposed to as it relates to in its existing hedging strategy:

Change in
Exchange Rate

Effect on
Equity

-17% MXN/EUR

Ps.

+17% MXN/EUR

+11% CLP/USD

-11% CLP/USD

-18% BRL/USD

+18% BRL/USD

-17% MXN/USD

+17% MXN/USD

-18% COP/USD

+18% COP/USD

-14% MXN/EUR

Ps.

+14% MXN/EUR

+10% CLP/USD

-10% CLP/USD

-11% MXN/USD

+11% MXN/USD

+21% BRL/USD

+17% COP/USD

-36% ARS/USD

+36% ARS/USD

-21% BRL/USD

-17% COP/USD

+17% COP/USD

-9% MXN/EUR

Ps.

+9% MXN/EUR

-11% ARS/USD

+11% ARS/USD

-14% BRL/USD

+14% BRL/USD

-9% COP/USD

+9% COP/USD

-7% MXN/USD

+7% MXN/USD

293

(293)

(12)

(203)

203

(916)

916

(255)

255

319

(319)

(9)

197

(197)

(387)

(113)

231

(231)

387

113

(113)

278

(278)

(22)

(96)

(42)

(119)

119

Foreign Currency Risk

2016
FEMSA (1)

Coca-Cola FEMSA

2015
FEMSA (1)

Coca-Cola FEMSA

2014
FEMSA (1)

Coca-Cola FEMSA

(1) Does not include Coca-Cola FEMSA.

Cross Currency Swaps (1) (2)

2016

FEMSA (3)

Coca-Cola FEMSA

2015
FEMSA (3)

Coca-Cola FEMSA

2014
FEMSA (3)

Coca-Cola FEMSA

Net Cash in Foreign Currency (1)

2016
FEMSA (3)

Coca-Cola FEMSA

2015
FEMSA (3)

Coca-Cola FEMSA

2014
FEMSA (3)

Coca-Cola FEMSA

(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.

Change in
Exchange Rate

Effect on
Equity

Effect on
Profit or Loss

-11% CLP/USD

Ps.

+11% CLP/USD

-17% MXN/USD

+17% MXN/USD

-18% COP/USD

+18% COP/USD

+17% MXN/USD

+18% BRL/USD

-17% MXN/USD

-18% BRL/USD

-11% MXN/USD

Ps.

+11% MXN/USD

-11% MXN/USD

+11% MXN/USD

-21% BRL/USD

+21% BRL/USD

-7% MXN/USD

Ps.

+7% MXN/USD

-7% MXN/USD

+7% MXN/USD

-14% BRL/USD

+14% BRL/USD

3,687

9,559

(3,687)

(9,559)

(4,517)

4,517

Ps.

(549)

549

(3,836)

3,836

(448)

448

1,790

(1,790)

Ps.

(2,043)

2,043

(938)

938

(1,086)

1,086

Ps.

(1,100)

1,100

(481)

415

(3,935)

2,990

Change in
Exchange Rate

Effect on
Profit or Loss

+17% EUR/ +17% USD

Ps.

-17% EUR/ -17% USD

+17% USD

-17% USD

+14% EUR/ +11%USD

Ps.

-14% EUR/ -11%USD

+11%USD

-11%USD

+9% EUR/+7%USD

Ps.

-9% EUR/-7%USD

+7%USD

-7%USD

3,176

(3,176)

(105)

105

504

(504)

(1,112)

1,112

233

(233)

(747)

747

Commodity Price Contracts (1)

2016

Coca-Cola FEMSA

2015

Coca-Cola FEMSA

2014

Coca-Cola FEMSA

Change in
U.S.$ Rate

Effect on
Equity

Sugar - 33%

Ps.

Aluminum - 16%

Sugar - 31%

Ps.

Aluminum - 18%

Sugar - 27%

Ps.

Aluminum - 17%

(310)

(13)

(406)

(58)

(528)

(87)

(1) Effects on commoditie price contracts are only in Coca-Cola FEMSA.

20.13 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)

2016
FEMSA (2)

2015
FEMSA (2)

2014
FEMSA (2)

(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

Change in
Bps.

Effect on
Equity

(100 Bps.)

Ps.

(550)

(100 Bps.)

Ps.

(542)

(100 Bps.)

Ps.

(528)

2016

2015

2014

+100 Bps.
(354)
Ps.

+100 Bps.
(192)

Ps.

+100 Bps.
(244)

Ps.

20.14 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, 2016 and
2015, 64 .5% and 82 .66%, 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 financing
its operations and capital requirements when it is considering domestic funding at the level of its sub-holding companies, otherwise; it is generally more convenient that
its foreign operations would be financed directly through the Company because of better market conditions obtained by itself . Nonetheless, sub-holdings companies
may decide to incur indebtedness in the future to finance their own 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 cash reserves and 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 banking 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 from 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, 2016, 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, 2016 . 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, 2016 .

Non-derivative financial liabilities:
Notes and bonds
Loans from banks

Obligations under finance leases
Derivative financial liabilities

2017

2018

2019

2020

2021

2022 and
thereafter

Ps. 7,930
4,690
39
(1,296)

Ps. 22,997
2,724
36
638

Ps. 9,429
1,402
33
664

Ps. 12,754
1,591
28
624

Ps.

4,879 Ps. 122,628
1,070
5,158
0
26
(12,253)
(1)

The Company generally makes payments associated with its non-current financial liabilities with cash generated from its operations .

20.15 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 December 31, 2016 and 2015 is the
carrying amounts (see Note 7) .

The credit risk on 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, 2016, 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, 2016 and 2015 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
Other comprehensive income (loss):

Exchange differences on translation of foreign operation
Remeasurements of the net defined benefits liability
Valuation of the effective portion of derivative financial instruments

Other acquisitions and remeasurments
Contribution from non-controlling interest
Equity instruments
Dividends
Share based payment
Balance at end of the year

Non controlling cumulative other comprehensive loss 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 loss

2016

Ps. 60,332
6,035
9,463
9,238
(63)
288
1,710
892
(485)
(3,690)
9
Ps. 74,266

December 31,
2016

Ps.

70,293
3,973
74,266

December 31,
2015

Ps.

58,340
1,992
60,332

2015

59,649
5,593
(2,999)
(3,110)
75
36
1,133
250
-
(3,351)
57
60,332

December 31,
2016

(199)
(304)
195
(308)

Ps.

2014

63,158
5,929
(6,265)
(6,264)
(110)
109
-
-
-
(3,152)
(21)
59,649

December 31,
2015

(9,436)
(241)
(93)
(9,770)

Ps.

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

Note 22. Equity

December 31,
2016

December 31,
2015

Ps.

45,453
233,803
39,868
110,155
177,718
10,527
27,171
32,446
(26,915)
(9,734)

Ps.

42,232
168,017
30,480
71,034
152,360
10,329
5,033
23,202
(10,945)
(8,567)

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, 2016 and 2015, the capital stock of FEMSA was comprised of 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, 2016 and 2015, 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, 2016 and 2015,
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, 2016 amounted to Ps . 103,615 .

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 balances as December
31, 2013 .

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 .

At an ordinary shareholders’ meeting of FEMSA held on March 19, 2015, the shareholders approved a dividend of Ps . 7,350 that was paid 50% on May 7, 2015 and other
50% on November 5, 2015; and a reserve for share repurchase of a maximum of Ps . 3,000 . As of December 31, 2015, 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 Coca-Cola FEMSA held on March 12, 2015, the shareholders approved a dividend of Ps . 6,405 that was paid 50% on May 5, 2015
and other 50% on November 3, 2015 . The corresponding payment to the non-controlling interest was Ps . 3,340 .

At an ordinary shareholders’ meeting of FEMSA held on March 8, 2016, the shareholders approved a dividend of Ps . 8,355 that was paid 50% on May 5, 2016 and other
50% on November 3, 2016; and a reserve for share repurchase of a maximum of Ps . 7,000 . As of December 31, 2016, 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 Coca-Cola FEMSA held on March 7, 2016, the shareholders approved a dividend of Ps . 6,944 that was paid 50% on May 3, 2016
and other 50% on November 1, 2016 . The corresponding payment to the non-controlling interest was Ps . 3,621 .

For the years ended December 31, 2016, 2015 and 2014 the dividends declared and paid by the Company and Coca-Cola FEMSA were as follows:

FEMSA
Coca-Cola FEMSA (100% of dividend)

Ps.

2016

8,355
6,945

Ps.

For the years ended December 31, 2016 and 2015 the dividends declared and paid per share by the Company are as follows:

Series of Shares

“B”
“D”

Ps.

2014

-
6,012

2015

7,350
6,405

2016

Ps.

0.41666
0.52083

Ps.

2015

0.36649
0.45811

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, 2016
and 2015 .

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 national and
international, currently rated AAA and A- respectively, which requires it to have a debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio
lower than 1 .5 . 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) .

Shares expressed in millions:
Weighted average number of shares for

basic earnings per share

Effect of dilution associated with non-vested shares

2016

2015

2014

Per Series
“B” Shares

Per Series
“D” Shares

Per Series
“B” Shares

Per Series
“D” Shares

Per Series
“B” Shares

Per Series
“D” Shares

9,242.48

8,628.97

9,241.91

8,626.69

9,240.54

8,621.18

for share based payment plans

3.94

15.74

4.51

18.02

5.88

23.53

Weighted average number of shares adjusted for the

effect of dilution (Shares outstanding)

Dividend rights per series (see Note 22.1)
Weighted average number of shares further

adjusted to reflect dividend rights

Allocation of earnings, weighted
Net Controlling Interest Income Allocated

Note 24. Income Taxes

9,246.42
100%

8,644.71
125%

9,246.42
46.11%
9,748 Ps.

Ps.

10,805.89
53.89%

9,246.42
100%

9,246.42
46.11%

8,644.71
125%

9,246.42
100%

8,644.71
125%

10,805.89
53.89%

9,246.42
46.11%

10,805.89
53.89%
7,701 Ps. 9,000

11,392 Ps.

8,154 Ps.

9,529 Ps.

On April 1, 2015, the Brazilian government issued Decree No . 8 .426/15 to impose, as of July 2015, PIS/COFINS (Social Contributions on Gross Revenues) of 4 .65% on
financial income (except for foreign exchange variations) .

Also in Brazil, starting 2016 the rates of value-added tax in certain states will be changed as follows: Mato Grosso do Sul – from 17 .0% to 20 .0%; Rio Grande do Sul from
18 .0% to 20 .0%; Minas Gerais - the tax rate will remain at 18 .0% but there will be an additional 2 .0% as a contribution to poverty eradication just for the sales to non-
taxpayer (final consumers); Rio de Janeiro - the contribution related to poverty eradication fund will be increased from 1 .0% to 2 .0% effectively in April; Paraná - the rate
will be reduced to 16 .0% but a rate of 2 .0% as a contribution to poverty eradication will be charged on sales to non-taxpayers .

Additionally in Brazil, starting on January 1st, 2016, the rates of federal production tax will be reduced and the rates of the federal sales tax will be increased . Coca-Cola
FEMSA estimates of these taxes is 16 .2% over the net sales . For 2017, we expected the average of these taxes will range between 15 .0% and 17 .0% over the net sales .

On January 1, 2015, a general tax reform became effective in Colombia . This reform included the imposition of a new temporary tax on net equity through 2017 to
Colombian residents and non-residents who own property in Colombia directly or indirectly through branches or permanent establishments . The relevant taxable base
will be determined annually based on a formula . For net equity that exceeds 5 .0 billion Colombian pesos (approximately U .S . $2 .1 million) the rate will be 1 .15% in 2015,
1 .0% in 2016 and 0 .4% in 2017 . In addition, the tax reform in Colombia imposed that the supplementary income tax at a rate of 9 .0% as contributions to social programs,
which was previously scheduled to decrease to 8 .0% by 2015, will remain indefinitely . Additionally, this tax reform included the imposition of a temporary contribution to
social programs at a rate of 5 .0%, 6 .0%, 8 .0% and 9 .0% for the years 2015, 2016, 2017 and 2018, respectively . Finally, this reform establishes an income tax deduction of
2 .0% of value-added tax paid in the acquisition or import of hard assets, such as tangible and amortizable assets that are not sold or transferred in the ordinary course
of business and that are used for the production of goods or services . Some of these rules were changed again through a new tax reform introduced at the end of 2016
and be effective in 2017, as described below .

On January 1, 2017, a new general tax reform became effective in Colombia . This reform modifies the income tax rate to 33%, starting with a 34 .0% for 2017 and then
33 .0% for the next years . In addition, this reform includes an extra income tax rate of 6 .0% for 2017 and 4 .0% for 2018, for entities located outside free trade zone .
Regarding taxpayers located in free trade zone, the special income tax rate increase to 20 .0% for 2017 . In 2016 the rate is 15 .0% . Additionally, the supplementary income
tax (9 .0%) the temporary contribution to social programs (5 .0% to 9 .0% for 2015 to 2018), and the tax on net equity which were included in tax reform 2015 were
eliminated . For 2017, the dividends received by individuals that are Colombian residents will be subject to a withholding of 35 .0%; the dividends received by foreign
individuals or entities non-residents in Colombia will be subject to a withholding of 5 .0% . Finally, regarding the presumptive income on patrimony, the rate increased to a
3 .5% for 2017 instead of 3 .0% in 2016 . Starting in 2017, the Colombian general rate of value-added tax (VAT) increased to 19 .0%, replacing the 16 .0% rate in effect till 2016 .

On December 30, 2015, the Venezuelan government enacted a package of tax reforms that became effective in January 2016 . This reform mainly (i) eliminated the
inflationary adjustments for the calculation of income tax as well as the new investment tax deduction, and (ii) imposed a new tax on financial transactions effective
as of February 1, 2016, for those identified as “special taxpayers,” at a rate of 0 .75% over certain financial transactions, such as bank withdrawals, transfer of bonds and
securities, payment of debts without intervention of the financial system and debits on bank accounts for cross-border payments, which will be immediately withheld
by the banks . Given the inherent uncertainty as to how the Venezuelan Tax Administration will require that the aforementioned inflation adjustments be applied, starting
2016 the Company decided to recognize the effects of elimination of the inflationary adjustments .

24.1 Income Tax
The major components of income tax expense for the years ended December 31, 2016, 2015 and 2014 are:

Current tax expense
Deferred tax expense:
Origination and reversal of temporary differences

(Recognition) application of tax losses, net

Total deferred tax income
Change in the statutory rate

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 on cash flow hedges
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 recognized in OCI

2016

Ps.

13,548

Ps.

(3,947)
(1,693)
(5,640)
(20)
7,888

Ps.

2016

745
4,478
(49)
(1,385)
3,789

Ps.

2015

9,879

826
(2,789)
(1,963)
16
7,932

2015

93
1,699
49
193
2,034

2014

7,810

1,303
(2,874)
(1,571)
14
6,253

2014

219
(60)
(49)
189
299

Ps.

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, 2016, 2015 and 2014 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
Hedge of a net investment in foreign operations
Effect of changes in Venezuela Tax Law
Income tax credits
Others

2016

30.0%
(2.4%)
0.6%
1.2%
2.8%
(0.4%)
(0.1%)
(2.2%)
3.6%
(3.9%)
(1.6%)
27.6%

2015

30.0%
(1.3%)
(1.5%)
0.4%
3.3%
(0.3%)
0.1%
-
-
-
0.8%
31.5%

2014

30.0%
(3.1%)
(4.4%)
0.9%
3.7%
(1.1%)
0.1%
-
-
-
0.2%
26.3%

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
Tax credits to recover (2)
Cumulative other comprehensive income (1)
Exchange differences on translation of foreign operations in OCI
Other liabilities

Deferred tax income
Deferred tax income net recorded in share of the profit of associates

and joint ventures accounted for using the equity method

Deferred tax income, net

Deferred income taxes, net
Deferred tax asset
Deferred tax liability

Consolidated Statement
of Financial Position as of

December 31,
2016

December 31,
2015

Ps.

(172)
(112)
64
(471)
(1,227)
257
201
9,376
(692)
255
(2,956)
(3,450)
(340)
(8,889)
(1,150)
537
7,694
59
-

-
(1,016)
(12,053)
11,037

Ps.

(128)
66
120
(1,858)
307
99
419
146
(672)
127
(1,209)
2,486
(311)
(5,272)
-
(171)
3,834
(46)

(2,063)
(8,293)
6,230

Ps.

Consolidated Statement
of Income

Ps.

2015

93
(14)
21
(314)
684
(52)
201
84
86
165
(8)
735
(43)
(2,789)
-
-
-
(113)

Ps.

2014

(106)
77
(18)
(968)
87
422
(133)
(195)
(92)
(99)
(477)
2,450
(13)
(2,874)
-
-
-
475

Ps.

(1,264)

Ps. (1,464)

2016

(17)
(151)
(80)
670
75
234
(1,506)
7,391
(34)
128
(411)
(9,118)
(29)
(1,693)
(1,150)
-
-
102
(5,589)

Ps.

(71)

(683)

(93)

Ps.

(5,660)

Ps.

(1,947)

Ps. (1,557)

(1) Deferred tax related to derivative financial instruments and remeasurements of the ned defined benefit liability.
(2) Correspond to income tax credits arising of dividends received from foreign subsidiaries to be recovered within the next ten years accordingly to the Mexican Income Tax law as well

as effects of the exchange of foreign currencies with a related and non-related parties.

As a result of the change of this law, the Company recognized a deferred tax liability in Venezuela for an amount of Ps . 1,107 with their corresponding impact on the
income tax of the year as disclosed in the effective tax rate reconciliation .

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 on derivative financial instruments
Remeasurements of the net defined benefit liability
Total deferred tax loss (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)
Effects in equity:
Unrealized loss on cash flow hedges

Exchange differences on translation of foreign operations
Remeasurements of the net defined benefit liability
Retained earnings of associates
Cash flow hedges in foreign investments

Restatement effect of the year and beginning balances associated
with hyperinflationary economies
Ending balance

Ps.

2016

847
(306)
541

2015

(2,635)
(1,963)
16

683
(161)

184
1,729
121
(396)
-

Ps.

2015

105
(275)
(170)

2014

(799)
(1,571)
14

93
(516)

109
617
(427)
(180)
-

Ps.

2016

(2,063)
(5,640)
(20)

71
1,375

1,008
3,260
(479)
(224)
(618)

2,314
(1,016)

Ps.

359
(2,063)

25
(2,635)

Ps.

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 .

Tax Loss Carryforwards
The subsidiaries in Mexico, Colombia and Brazil have tax loss carryforwards . The tax losses carryforwards and their years of expiration are as follows:

Year

2017
2018
2019
2020
2021
2022
2023
2024
2025
2026 and thereafter
No expiration (Brazil and Colombia)

Tax Loss
Carryforwards

Ps.

502
91
563
119
53
185
15
1,850
3,463
6,706
13,905
27,452

The Company recorded certain goodwill balances due to acquisitions 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, 2016, The Company 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 the related deferred tax assets have been fully recognized .

The changes in the balance of tax loss carryforwards are as follows:

Balance at beginning of the year
Reserved
Additions
Additions from acquisitions
Usage of tax losses
Translation effect of beginning balances
Balance at end of the year

2016

16,463
(2)
6,349
-
(168)
4,810
27,452

Ps.

2015

8,734
-
8,545
825
(215)
(1,426)
16,463

Ps.

There were no withholding taxes associated with the payment of dividends in either 2016, 2015 or 2014 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 . 41,204
(December 31, 2015: Ps . 44,082 and December 31, 2014: Ps . 43,394) .

24.2 Recoverable taxes
Recoverable taxes are mainly integrated by higher provisional payments of income tax during 2016 in comparison to prior year, which will be compensated during 2017 .

The operations in Guatemala and Colombia 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 (see Note 20)
Others
Total

The carrying value of short-term payables approximates its fair value as of December 31, 2016 and 2015 .

25.2 Provisions and other long term liabilities

Provisions
Taxes payable
Others
Total

December 31,
2016

December 31,
2015

Ps.

7,244
264
75
7,583

Ps.

4,336
358
15
4,709

December 31,
2016

December 31,
2015

Ps.

16,428
508
1,457
18,393

Ps.

3,415
458
1,334
5,207

25.3 Other financial liabilities

Derivative financial instruments (see Note 20)
Security deposits
Total

December 31,
2016

December 31,
2015

Ps.

6,403
917
7,320

Ps.

277
218
495

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, 2016 and 2015:

Indirect taxes
Labor
Legal
Total

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 (see Note 19)
Reclasification in tax contingencies with Heineken
Contingencies added in business combination (1)
Cancellation and expiration
Payments
Brazil amnesty adoption
Effects of changes in foreign exchange rates
Balance at end of the year

December 31,
2016

December 31,
2015

Ps.

11,065
2,578
2,785
16,428

Ps.

1,725
1,372
318
3,415

December 31,
2016

December 31,
2015

December 31,
2014

Ps.

1,725
173
768
-
7,840
(106)
(6)
-
671
11,065

Ps.

2,271
21
84
-
-
(205)
(214)
-
(232)
1,725

Ps.

3,300
220
38
1,349
1,190
(798)
(2,517)
(599)
88
2,271

During 2014, Coca-Cola FEMSA took advantage of a Brazilian tax amnesty program . The settlementof 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 (see Note 19) .

25.5.2 Labor

December 31,
2016

December 31,
2015

December 31,
2014

Ps.

1,372
203
397
500
(186)
(336)
628
2,578

Ps.

1,587
210
44
-
(102)
(114)
(253)
1,372

Ps.

1,063
107
145
442
(53)
(57)
(60)
1,587

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 .

25.5.3 Legal

December 31,
2016

December 31,
2015

December 31,
2014

Balance at beginning of the year
Penalties and other charges
New contingencies
Contingencies added in business combination
Cancellation and expiration
Payments
Effects of changes in foreign exchange rates
Balance at end of the year
(1) Coca-Cola FEMSA recognized an amount of Ps. 7,840 correspond to tax claims with local IRS (including a contingency of Ps. 5,321 related to the deductibility of a tax goodwill balance).
The remaining contingencies relates to multiple IRS claims with loss expectations assessed by management and supported by the analysis of legal counsels as possible, the total
amount of contingencies guaranteed agreements amounts to Ps. 8,081, such amount is included in Note 13.1.

318
34
196
2,231
(46)
(81)
133
2,785

427
-
-
-
(33)
-
(76)
318

417
4
9
-
(5)
-
2
427

Ps.

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, 2016 is Ps. 53,045. 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, most of which are related to its Brazilian operations, amounting to approximately Ps. 40,606, with
loss expectations assessed by management and supported by the analysis of legal counsel consider as possible. Among these possible contingencies, are Ps. 11,748
in various tax disputes related primarily to credits for ICMS (VAT) and Ps. 26,559 related to tax credits of IPI over raw materials acquired from Free Trade Zone Manaus.
Possible claims also include Ps. 1,646 related to compensation of federal taxes not approved by the IRS (Tax authorities) and Ps. 653 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. 6,531 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.

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. 8,093 and
Ps. 3,569 as of December 31, 2016 and 2015, 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, 2016, 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, 2016, 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.

4,130
17,500
28,560
Ps. 50,190

U.S. Dollars

363
1,253
468
2,084

Ps.

Others

1,424
4,109
2,887
8,420

Ps.

Rental expense charged to consolidated net income was Ps. 8,202, Ps. 6,088 and Ps. 4,988 for the years ended December 31, 2016, 2015 and 2014, 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
Later than 5 years

Total minimum lease payments
Less amount representing finance charges
Present value of minimum lease payments

2016
Minimum
Payments

Present
Value of
Payments

2015
Minimum
Payments

Present
Value of
Payments

Ps.

(32)
103
-

135
23
112

Ps.

(68)
83
97
112
-
112

109
359
166

634
67
567

Ps.

91
327
149

567
-
567

The Company through its subsidiary Coca-Cola FEMSA has firm commitments for the purchase of property, plant and equipment of Ps. 234 as December 31, 2016.

Note 26. Information by Segment

The analytical information by segment is presented considering the Company’s business units (as defined in Note 1) based on its products and services, 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 renenues, 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 .

a) By Business Unit:

2016

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

Coca-Cola
FEMSA

FEMSA
Comercio
Retail Division

FEMSA
Comercio
Health Division

FEMSA
Comercio
Fuel Division

Ps. 177,718 Ps.
4,269
79,662
-
-
-
-
7,473
715
-

137,139
-
50,990
-
-
-
-
809
246
-

Ps. 43,411
-
12,738
-
-
-
-
654
31
-

Ps. 28,616
-
2,248
-
-
-
-
109
37
-

14,308
3,928

11,046
719

147

8,666

3,736

914
371

855

182
16

CB Equity

Other (1)

Consolidation
Adjustments

Consolidated

Ps.

-
-
-
-
-
-
-
-
20
-

9
3

6,342

(16,868)
(3,548)

Ps. 29,491 Ps. (16,868) Ps. 399,507
-
148,204
14,730
95,547
1,157
5,909
9,646
1,299
3,728

12,599
6,114
-
-
-
-
1,580
1,229
-

-
-
-
-
(979)
(979)
-

2,218
2,851

(121)
-

28,556
7,888

360

630

404
90,429
64,876

1,671

(32,289)
(32,289)

6,507

27,175

13,709

3,851

128,601
545,623
259,453

(312)

22,155

depreciation and amortization

2,908

288

Investments in associates
and joint ventures

Total assets
Total liabilities
Investments in fixed assets (4)

22,357
279,256
150,023

12,391

611
59,740
42,211

7,632

-
35,862
24,368

474

-
3,649
3,132

299

105,229
108,976
7,132

(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.

2015

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)

Coca-Cola
FEMSA

FEMSA
Comercio
Retail Division

FEMSA
Comercio
Health Division

FEMSA
Comercio
Fuel Division

CB Equity

Other (1)

Consolidation
Adjustments

Consolidated

Ps.

Ps. 152,360 Ps.
3,794
72,030
-
-
-
-

(6,337)
414
-

14,725
4,551

155

-
7,144

1,443
17,873
210,249
101,514
11,484

119,884
46
43,649
-
-
-
-
(612)
149
-

9,714
859

(10)

-
3,132

296
744
44,677
30,661
5,731

Ps.

13,053
-
3,688
-
-
-
-
(148)
8
-

416
97

-
204

(16)
-
22,534
14,122
317

Ps.

18,510
-
1,420
-
-
-
-
(78)
35
-

164
28

-
63

17
19
3,230
2,752
228

Ps.

-
-
-
-
-
-
-
-
18
-

8
2

5,879

-
-

-
92,694
95,502
4,202
-

22,774 Ps. (14,992) Ps. 311,589
-
(14,992)
123,179
(2,942)
11,705
76,375
423
(2,741)
(7,777)
1,024
(865)

11,152
5,334
-
-
-
-
(1,269)
1,067
-

-
-
-
-
667
(667)
-

208
2,395

-
282

326
401
49,213
30,298
1,448

(72)
-

25,163
7,932

-
-

(16,073)
(16,073)
(323)

6,045

23,276
10,825

2,066
111,731
409,332
167,476
18,885

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

147,298
3,475
68,382
-
-
-
-
(5,546)
379
-

14,952
3,861

(125)
-
6,949
693
17,326
212,366
102,248
11,313

FEMSA
Comercio
Retail Division

Ps. 109,624
-
39,386
-
-
-
-
(686)
23
-

7,959
541

37
-
2,872
204
742
43,722
31,860
5,191

CB Equity

Other (1)

Consolidation
Adjustments

Consolidated

Ps.

-
-
-
-
-
-
-
-
16
-

8
2

5,244
-
-
-
83,710
85,742
2,005
-

(13,542)
(2,468)

Ps. 20,069 Ps. (13,542) Ps. 263,449
-
110,171
10,244
69,016
1,098
(1,277)
(6,701)
862
(1,149)

10,067
4,871
-
-
-
-
(1,093)
1,068
-

-
-
-
-
624
(624)
-

905
1,849

(80)
-

23,744
6,253

(17)
-
193
87
381
51,251
26,846
1,955

-
-
-
-
-

(16,908)
(16,908)
(296)

5,139
22,630
10,014
984
102,159
376,173
146,051
18,163

As of December 31, 2016, FEMSA Comercio – Health Division was aggregated into FEMSA Comercio – Retail Division, based on the non compliance of the quantitative
thresholds to be considered as a reportable segment (see Note 2 .3 .2) . However, in 2016, FEMSA Comercio – Health Division has been considered as a separate
reportable segment since it exceeds the quantitative criteria; therefore, the Company had restated 2015 information by segment in its consolidated financial statements
for comparative purposes .

b) 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, Chile 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:

2016

Mexico and Central America (1) (2)
South America (3)
Venezuela
Europe
Consolidation adjustments
Consolidated

2015

Mexico and Central America (1) (2)
South America (3)
Venezuela
Europe
Consolidation adjustments
Consolidated

2014

Mexico and Central America (1) (2)
South America (3)
Venezuela
Europe
Consolidation adjustments
Consolidated

Total
Revenues

267,732
113,937
18,937
-
(1,099)
399,507

228,563
74,928
8,904
-
(806)
311,589

Ps.

Total
Non Current
Assets

176,613
138,549
7,281
105,229
-
427,672

158,506
67,568
3,841
92,694
-
322,609

Total
Revenues

186,736
69,172
8,835
-
(1,294)
263,449

Ps.

(1) Central America includes Guatemala, Nicaragua, Costa Rica and Panama. Domestic (Mexico only) revenues were Ps. 254,643, Ps. 218,809 and Ps. 178,125 during the years ended
December 31, 2016, 2015 and 2014, respectively. Domestic (Mexico only) non-current assets were Ps. 168,976 and Ps. 157,080, as of December 31, 2016, and December 31, 2015,
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. 93, Ps. 86 and Ps. (334) in 2016, 2015 and 2014, respectively as is the equity method investment in CCFPI was Ps. 11,460,
Ps. 9,996 and Ps. 9,021 this is presented as part of the Company’s corporate operations in 2016, 2015 and 2014, 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. 22,768, Ps. 19,576 and Ps. 16,548, gross profit Ps. 7,678, Ps. 5,325 and Ps. 4,913, income before
income taxes Ps. 486, Ps. 334 and Ps. 664, depreciation and amortization Ps. 2,163, Ps. 2,369 and Ps. 643, total assets Ps. 28,066, Ps. 22,002 and Ps. 19,877, total liabilities Ps. 9,634,
Ps. 6,493 and Ps. 6,614, capital expenditures Ps. 3,342, Ps. 1,778 and Ps. 2,215, as of December 31, 2016, 2105 and 2014, respectively.

(3) South America includes Brazil, Argentina, Colombia, Chile and Venezuela, although Venezuela is shown separately above. South America revenues include Brazilian revenues of
Ps. 48,924, Ps. 39,749 and Ps. 45,799 during the years ended December 31, 2016, 2015 and 2014, respectively. Brazilian non-current assets were Ps. 97,127 and Ps. 44,851, as of December
31, 2016 and December 31, 2015, respectively. South America revenues include Colombia revenues of Ps. 17,027, Ps. 14,283 and Ps. 14,207 during the years ended December 31, 2016,
2015 and 2014, respectively. Colombia non-current assets were Ps. 18,835 and Ps. 12,755, as of December 31, 2016 and December 31, 2015, respectively. South America revenues include
Argentina revenues of Ps. 12,340, Ps. 14,004 and Ps. 9,714 during the years ended December 31, 2016, 2015 and 2014, respectively. Argentina non-current assets were Ps. 3,159 and
Ps. 2,861, as of December 31, 2016 and December 31, 2015, respectively. South America revenues include Chile revenues of Ps. 36,631 and Ps. 7,586 during the year ended December 31,
2016 and 2015, respectively. Chile non-current assets were Ps. 19,367 and Ps. 7,031, as of December 31, 2016 and 2015, respectively.

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 15, Revenue from Contracts with Customers
IFRS 15, “Revenue from Contracts with Customers”, was originally issued in May 2014 and supersedes IAS 18 “Revenue” and applies to annual reporting periods
beginning on or after January 1, 2018, with early adoption permitted . Revenue is recognized as control is passed, either over time or at a point in time . The Company does
not plan on early adopting this standard . However, it has determined that the adoption of this standard will be accounted prospectively, as allowed by the corresponding
transitional provisions which imply cumulative effect shown as an adjustment to retained earnings at the date of initial application .

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 is currently in the process of performing its evaluation of the potential impacts that the adoption of IFRS 15 may represent to its consolidated financial
statements . As part of such process, management is assessing the different revenue streams by reportable segment by applying them to the five-step revenue model,
in order to determine whether its performance obligations are satisfied over time or at a point in time and to identify potential gaps with its existing accounting policies,
which are in accordance with IAS 18 .

With regards to the Coca-Cola FEMSA reportable segment, revenue streams are mainly related to the sale of finished products and delivery of promotional products,
which are currently recognized in the income statement when the Company transfers such goods to its customers . This revenue stream is supported by contracts
maintained with different companies of the retail industry through both traditional and modern channels, in which prices with these customers are constantly
negotiated due to the high turnover of the Company’s products and to remain competitive in the market . The Company is performing its evaluation of the potential
impacts that the adoption of IFRS 15 may represent to its consolidated financial statements . As part of such process the Company is assessing whether such
negotiations should be considered as modifications to the contracts and whether each transaction represents a separate performance obligation with the customer
that is accounted for once the particular goods are delivered . Additionally, the Company is analyzing if any discounts offered to the client are already considered
in each negotiation and recognized net of the related revenue and whether embedded derivatives may exist as well as significant financial components nor agent
or principal considerations as it relates to its operation . As its new revenue accounting policy is developed and applied, potential impacts could be identified upon
adoption of the new standard .

With regards to the FEMSA Comercio, revenue streams are mainly related to direct sales to the end consumers, in which discounts are also offered directly in the
price per product available . This revenue stream is currently recognized in the income statement when the Company transfers such goods to its customers at the
point of sale . Additionally, the Company provides certain services in which it acts as an agent and recognizes the corresponding net revenue in the income statement
in the moment in which the transaction has been completed physically in the stores as meeting its performance obligation (i .e . sale of prepaid telephone minutes or
other prepaid cards and services) . The Company is analyzing whether embedded derivatives may exist as well assignificant financial components nor other agent
or principal considerations as it relates to this segment . As its new revenue accounting policy is developed and applied, potential impacts could be identified upon
adoption of the new standard .

With regards to the other companies, revenues are mainly related to contracts mainly directly with the end consumer, in which there are no discounts offered
directly in the price of the contract . This revenue stream is currently recognized in the income statement when the Company transfers such services according to
the conditions in the contract . The Company is analyzing whether embedded derivatives may exist as well assignificant financial components nor other agent or
principal considerations as it relates to this segment . As its new revenue accounting policy is developed and applied, potential impacts could be identified upon
adoption of the new standard .

The Company has yet to complete its evaluation of whether there will be a significant impact as a consequence of this standard’s adoption in the consolidated
financial statements .

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 .

The Company plans to adopt the new standard on the required effective date . The Company is analyzing whether an impact of all three aspects of IFRS 9 may exist
based on currently available information and may be subject to changes arising from further detailed analyses or additional reasonable and supportable information
being made available to the Company in the future . As its new accounting policy is developed and applied, potential impacts could be identified upon adoption of the
new standard .

IFRS 16, Leases
IFRS 16 “Leases” was issued in January 2016 and supersedes IAS 17 “Leases” and related interpretations . The new standard brings most leases on-balance sheet for
lessees under a single model, eliminating the distinction between operating and finance leases . Lessor accounting, however, remains largely unchanged and the
distinction between operating and finance leases is retained . IFRS 16 is effective for periods beginning on or after January 1, 2019, with earlier adoption permitted if IFRS
15 ‘Revenue from Contracts with Customers’ has also been applied . The Company does not plan on early adopting this standard . However, it has determined that the
adoption of this standard will be treated applying the prospective transitional provisions, which imply that adoption effects will be reflected directly against retained
earnings and the applicable assets and liabilities as of January 1, 2019 .

Under IFRS 16 a lessee recognizes a right-of-use asset and a lease liability . The right-of-use asset is treated similarly to other non-financial assets and depreciated
accordingly and the financial liability accrues interest . This will typically produce a front-loaded expense profile (whereas operating leases under IAS 17 would typically
have had straight-line expenses) as an assumed linear depreciation of the right-of-use asset and the decreasing interest on the liability will lead to an overall decrease
of expense over the life of the lease .

The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if that can be
readily determined . If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate . However, a lessee may elect to account for lease
payments as an expense on a straight-line basis over the lease term for leases with a lease term of 12 months or less and containing no purchase options (this election
is made by class of underlying asset); and leases where the underlying asset has a low value when new, such as personal computers or small items of office furniture
(this election can be made on a lease-by-lease basis) .

The Company is currently in the process of performing its evaluation of the potential impacts that the adoption of IFRS 16 may represent to its consolidated financial
statements . As part of such process, management is assessing by reportable segment the different lease contracts, mainly those in which it acts as a lessee as well
as other contracts in which the definition of a lease could be met independently of its legal form . Based on the ongoing assessment, it may expect a material impact
from the adoption of IFRS 16 on its consolidated financial statements especially as relates to its FEMSA Comercio Retail, Fuel and Health reportable segments given
that they have significant real estate leases .

The Company is in the process of quantifying the effects of IFRS 16 as well developing its accounting policy under the new standard, which includes evaluating those
lease contracts that may qualify under the accounting exceptions provided by the standard for those assets considered as low value and developing its corresponding
judgement on potentially subjective matters particularly in respect of the definition of a lease and the assessment of the lease term .

Amendments to IAS 7, Disclosure Initiative
The amendments to IAS 7 Statement of Cash Flows, require that the following changes in liabilities arising from financing activities be disclosed separately from
changes in other assets and liabilities: (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses;
(iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes . One way to fulfill the new disclosure requirement is to provide a
reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities .

Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the statement of cash flows as cash flows from
financing activities . The new disclosure requirements also relate to changes in financial assets if they meet the same definition .

These amendments are effective for annual periods beginning on or after January 1, 2017 with earlier application permitted, and entities need not provide comparative
information when they first apply them . The Company is in the process of assessing the potential impacts from the adoption of these amendments in its financial statements .

Amendments to IAS 12, Recognition of Deferred Tax Assets for Unrealized Losses
The amendments clarify that an entity needs to consider whether tax law restricts the sources of taxable profits against which it may make deductions on the reversal
of that deductible temporary difference . Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the
circumstances in which taxable profit may include the recovery of some assets for more than their carrying amount .

Entities are required to apply the amendments retrospectively . However, on initial application of the amendments, the change in the opening equity of the earliest
comparative period may be recognized in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between
opening retained earnings and other components of equity . Entities applying this relief must disclose that fact .

These amendments are effective for annual periods beginning on or after January 1, 2017 with early application permitted . If an entity applies the amendments for an
earlier period, it must disclose that fact . These amendments are not expected to have any impact on the Company .

Note 28. Subsequent Events

On January 25, 2013, the Company closed 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, on January 25, 2017 the veto right held by TCCC over certain operating decisions has expired and, as a result, Coca-Cola FEMSA obtained the control of
CCFPI, because by contractual agreement joint approval over operating decisions is no longer required . Consequently the Company has obtained control without a
transfer of consideration . As a result of the above, the company will consolidate in its financial statements the Philippine figures from February 2017 .

CCFPI is a bottler of Coca-Cola trademark products which operates in Philippines . This acquisition was made to strengthen the Company’s position in Asia .
As mentioned in Note 19 .6 the Company has a Call Option related to the remaining 49% ownership interest in CCFPI which is maintained under the same conditions .

Since January 25, 2017, Coca-Cola FEMSA control CCFPI since all decisions relating to the operation and management of CCFPI’s business, including its annual normal
operations plan, are approved by a majority of its board of directors without requiring the affirmative vote of any director appointed by The Coca-Cola Company . Commencing
on February 1, 2017, Coca-Cola FEMSA started consolidating CCFPI’s financial results in the financial statements . The results for the first quarter of 2017 and future results in
2017 will reflect a reduction in our share of the profit of associates and joint ventures accounted for using the equity method as a result of this consolidation .

The Company estimate of fair value of CCFPI net assets acquired to the date of acquisition (February 2017) is as follows:

Total current assets
Total non-current assets
Distribution rights
Total assets
Total liabilities

Net assets acquired
Acquisition date fair value of the equity interest in

the acquire (in substitution to nil or zero consideration)

Non-controlling interest
Net assets acquired attributable to the parent company
Goodwill
Carrying value of CCFPI investment derecognized
Loss as a result of remeasuring to fair value the equity interest
Gain on derecognition of other comprehensive income

Total gain on a bargain purchase

Ps.

9,372
18,371
4,026
31,769
(9,814)

21,955

21,482
(10,758)
11,197
-
11,460
263
2,783

Ps.

2,520

On January 2017, FEMSA Comercio through its subsidiary Cadena Comercial USA Corporation, LLC ., completed the acquisition of an additional 20% stake in Specialty’s
Cafe & Bakery, reaching 100% of shareholding .

On February 13, 2017, Heineken announced that it had reached an agreement to acquire Brasil Kirin Holding S .A ., for a consideration of € . 664 . The transaction is
expected to close in the first half of 2017 . The Company will recognize results of operation of this business combination through the recognition of the equity method in
Heineken, once it has been incorporated in the consolidation of Heineken .

Investor Relations
Juan Fonseca
Gerardo Lozoya
Phone: +52 (81) 8328-6167
Fax: +52 (81) 83286080
e-mail: investor@femsa.com.mx

Corporate Communication
Mauricio Reyes
Alma Beltran
Phone: +52 (55) 5249-6843
Fax: +52 (55) 5249-6861
e-mail: comunicacion@femsa.com.mx

For more information visit us at:
www.femsa.com
www.femsa.com/investor
investor@femsa.com.mx
General Anaya No. 601 Pte. Colonia Bella
Vista Monterrey, Nuevo Leon, Mexico,
C.P. 64410
Phone: +52 (81) 8328-6180

CONTACT INFORMATION

General Counsel
Carlos E. Aldrete Ancira
General Anaya No. 601 Pte.
Colonia Bella Vista Monterrey,
Nuevo Leon, Mexico, C.P. 64410
Phone: +52 (81) 8328-6180

Independent Accountant
Mancera, S.C.
A Member Practice of Ernst & Young
Global Limited
Av. Lazaro Cardenas No. 2321 Pte. Piso 5
Col. Residencial San Agustín San Pedro
Garza Garcia, Nuevo Leon, 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: +1 888 BNY ADRS
(269-2377)
International Callers: +1 201-680-6825
e-mail:
shrrelations@cpushareownerservices.com
Website:
www.mybnymdr.com

Stock Markets and Symbols
Fomento Economico 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.

Design: www.signi.com.mx

FOMENTO ECONOMICO MEXICANO, S.A.B. DE C.V.
General Anaya 601 Pte. Col. Bella Vista C.P. 64410
Monterrey, Nuevo Leon, Mexico
investor@femsa.com.mx

www.annualreport.femsa.com
www.femsa.com.mx

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TABLE OF CONTENTS

FEMSA is a multinational beverage and retail
company headquartered in Mexico. We hold

a 48% stake in Coca-Cola FEMSA, the largest

bottler of Coca-Cola products in the world by

volume, and a 20% stake in Heineken, one of the

world’s leading brewers with operations in over

70 countries. We participate in the retail industry

through FEMSA Comercio (100%), comprising a

Retail Division operating primarily through OXXO,

the largest convenience store chain in Latin

America by units; a Fuel Division, operating the

OXXO GAS chain of retail service stations; and a

Health Division, which includes drugstores and

related operations in Mexico and South America.

In addition, our FEMSA Strategic Businesses

provide logistics, point-of-sale refrigeration and

plastics solutions to our own businesses and

third party clients.