Consolidated Financial Statements

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, 2015
COMPARED TO THE TWELVE MONTHS ENDED DECEMBER 31, 2014.

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 and its Fuel Division which operates retail service stations for fuels, motor oils and others, the latter of which, as of December 31, 2015 , is treated as a separate business segment called Fuel Division.

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 2015 and 2014 results are stated in nominal Mexican pesos (“pesos” or “Ps.”). Translations of pesos into US dollars (“US$”) are included solely for the convenience of the reader and are determined using the noon buying rate for pesos as published by the U.S. Federal Reserve Board in its H.10 Weekly Release of Foreign Exchange Rates as of December 31, 2015, which was 17.1950 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

2015 amounts in millions of Mexican pesos

FEMSA’s consolidated total revenues increased 18.3% to Ps. 311,589 million in 2015 compared to Ps. 263,449 million in 2014. Coca-Cola FEMSA’s total revenues increased 3.4% to Ps. 152,360 million, driven by the local currency average price per unit case growth in all of their operations and volume growth in Mexico, Central America, Colombia and Argentina. FEMSA Comercio – Retail Division’s revenues increased 21.2% to Ps. 132,891 million, driven by the integration of Socofar and the opening of 1,208 net new OXXO stores combined with an average increase of 6.9% in same-store sales. FEMSA Comercio – Fuel Division amount to Ps. 18,510 million in 2015.

Consolidated gross profit increased 11.8% to Ps. 123,179 million in 2015 compared to Ps. 110,171 million in 2014. Gross margin decreased 230 basis points to 39.5% of consolidated total revenues compared to 2014, reflecting the incorporation of FEMSA Comercio – Fuel Division, which has a lower margin than the rest of FEMSA’s business units, and a margin contraction at FEMA Comercio – Retail Division driven by the integration of Socofar.

Consolidated operating expenses increased 11.5% to Ps. 89,444 million in 2015 compared to Ps. 80,188 million in 2014. As a percentage of total revenues, consolidated operating expenses decreased from 30.4% in 2014 to 28.7% in 2015.

Consolidated administrative expenses increased 14.3% to Ps. 11,705 million in 2015 compared to Ps. 10,244 million in 2014. As a percentage of total revenues, consolidated administrative expenses decreased 10 basis points, from 3.9% in 2014, compared to 3.8% in 2015.

Consolidated selling expenses increased 10.7% to Ps. 76,375 million in 2015 as compared to Ps. 69,016 million in 2014. As a percentage of total revenues, selling expenses decreased 160 basis points, from 26.1% in 2014 to 24.5% in 2015.

Consolidated income from operations increased 12.5% to Ps. 33,735 million in 2015 as compared to Ps. 29,983 million in 2014. As a percentage of total revenues, operating margin decreased 60 basis points, from 11.4% in 2014 to 10.8% in 2015.

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 increased to Ps. 7,618 million from Ps. 6,988 million in 2014, driven by an interest expense of Ps. 7,777 million in 2015 compared to Ps. 6,701 million in 2014 resulting from higher interest expenses at Coca-Cola FEMSA Brazil, following the reset of terms of certain cross-currency swaps related to the acquisition of Spaipa and Fluminense in 2013.

Income before income taxes and share of the profit in Heineken results increased 7.1% to Ps. 25,163 million in 2015 compared with Ps. 23,503 million in 2014, mainly as a result of growth in FEMSA’s income from operations, which more than compensated higher financing expenses.

Our accounting provision for income taxes in 2015 was Ps. 7,932 million, as compared to Ps. 6,253 million in 2014, resulting in an effective tax rate of 31.5% in 2015, as compared to 26.6% in 2014, in line with our expected medium term range of low 30’s. The lower effective tax rate registered during 2014 is mainly related to a one-time benefit resulting from the settlement of certain contingent tax liabilities under the tax amnesty program offered by the Brazilian tax authorities, which was registered during 2014.

Consolidated net income was Ps. 23,276 million in 2015 compared to Ps. 22,630 million in 2014, resulting from growth in FEMSA’s income from operations and an increase in FEMSA’s 20% participation in Heineken’s results, which more than compensated for higher interest expenses. Controlling interest amounted to Ps. 17,683 million in 2015 compared to Ps. 16,701 million in 2014. Controlling interest in 2015 per FEMSA Unit was Ps. 4.94 (US$ 2.87 per ADS).

Coca-Cola FEMSA

Coca-Cola FEMSA total revenues increased 3.4% to Ps. 152,360 million in 2015, as compared to 2014, despite the negative translation effect resulting from using the SIMADI exchange rate to translate the results of their Venezuelan operation and the depreciation of the Brazilian real, Colombian peso, the Mexican peso and the Argentine peso. On a currency neutral basis and excluding Venezuela, total revenues grew 8.6%, driven by the growth of the average price per unit case in all the operations and volume growth in Mexico, Central America, Colombia and Argentina.

Coca-Cola FEMSA gross profit increased 5.3% to Ps. 72,030 million in 2015, as compared to 2014, with a gross margin expansion of 90 basis points. In local currency, the benefit of lower sweetener and PET prices, in combination with their currency hedging strategy, was partially offset by the depreciation of the average exchange rate of the Brazilian real, the Colombian peso, the Mexican peso and the Argentine peso as applied to our U.S. dollar-denominated raw material costs. Gross margin reached 47.3% in 2015.

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 3.7% to Ps. 49,386 million in 2015 compared with Ps. 47,639 million in 2014.

Administrative expenses increased 0.3% to Ps. 6,405 million in 2015, compared with Ps. 6,385 million in 2014. Selling expenses increased 3.5% to Ps. 41,879 million in 2015 compared with Ps. 40,465 million in 2014.

Income from operations increased 9.2% to Ps. 22,645 million in 2015 compared with Ps. 20,743 million in 2014.

Coca-Cola FEMSA

FEMSA Comercio – Retail Division total revenues increased 21.2% to Ps. 132,891 million in 2015 compared to Ps. 109,624 million in 2014, primarily as a result of the opening of 1,208 net new OXXO stores during 2015, together with an average increase in same-store sales of 6.9%, as well as the incremental revenues from the acquisitions of Socofar and Farmacon drugstores in Chile and Mexico, respectively. As of December 31, 2015, there were a total of 14,061 OXXO stores. As referenced above, OXXO same-store sales increased an average of 6.9% compared to 2014, driven by a 5.1% increase in average customer ticket while store traffic increased 1.7%.

Cost of goods sold increased 21.9% to Ps. 85,600 million in 2015, compared with Ps. 70,238 million in 2014. Gross margin contracted 30 basis points to reach 35.6% of total revenues. This decrease was mainly driven by the integration of Socofar and Farmacon drugstores, both of which have a lower gross margins than the OXXO operations. As a result gross profit increase 20.1% to Ps. 47,291 million in 2015 compared with 2014.

Operating expenses increased 18.5% to Ps. 36,393 million in 2015 compared with Ps. 30,706 million in 2014. The increase in operating expenses was driven by (i) expenses related to the incorporation of the new drugstore operations, Socofar and Farmacon, (ii) the strong organic growth in new stores across formats and (iii) the strengthening of FEMSA Comercio’s business and organizational structure in preparation for the growth of new operations, particularly drugstores.

Administrative expenses increased 40.5% to Ps. 2,868 million in 2015, compared with Ps. 2,042 million in 2014; as a percentage of sales, they reach 2.2%. Selling expenses increased 16.9% to Ps. 33,305 million in 2015 compared with Ps. 28,492 million in 2014.

Income from operations increased 25.6% to Ps. 10,898 million in 2015 compared with Ps. 8,680 million in 2014, resulting in an operating margin expansion of 30 basis points to 8.2% as a percentage of total revenues for the year, compared with 7.9% in 2014.

FEMSA Comercio – Fuel Division

The operations that comprise the FEMSA Comercio – Fuel Division were integrated in 2015. As such, no results of operation are available for this segment for periods prior to 2015.

FEMSA Comercio – Fuel Division total revenues amounted to Ps. 18,510 million in 2015.

Cost of goods sold reached Ps. 17,090 million in 2015.

Administrative expenses amounted to Ps. 88 million in 2015. Selling expenses reached 1,124 million in 2015.

FEMSA Comercio – Fuel Division

The following texts reproduced our press releases exactly as the time they were published.

Coca-Cola FEMSA granted RobecoSAM’s Industry Mover Sustainability Award 2015

On January 22, 2015 Coca-Cola FEMSA announced that it had been granted the Industry Mover award as part of RobecoSAM’s 2015 “The Sustainability Yearbook”.

In September of 2014, Coca-Cola FEMSA was included for the second consecutive year as a member of the Dow Jones Sustainability Index for Emerging Markets. As one of the topscoring companies in the beverage industry, it has gained a membership in RobecoSAM’s 2015 “The Sustainability Yearbook”, the world’s most comprehensive publication on corporate sustainability. Every year since 2004, The Sustainability Yearbook has listed the world’s most sustainable companies in each industry as determined by their score in RobecoSAM’s annual Corporate Sustainability Assessment (CSA). Coca-Cola FEMSA has been granted the 2015 Industry Mover award for its excellent performance in sustainability. This recognition stands out as it is the first time that a Mexican company participates as a member of The Sustainability Yearbook and also the first time that a Mexican corporate receives RobecoSAM’s Industry Mover Sustainability Award.

Entry into Gas Station Market

On March 1, 2015, FEMSA Comercio announced that since 1995, FEMSA Comercio had provided services and assets for the operation of gasoline service stations through agreements with third parties that owned Mexican Petroleum (Petróleos Mexicanos, or PEMEX) franchises, using the commercial brand OXXO GAS.

Mexican legislation had historically precluded FEMSA Comercio from participating in the retail sale of gasoline and therefore precluded ownership of PEMEX franchises, given FEMSA’s foreign institutional investor base. In response to recent changes in this legislation, FEMSA Comercio, acting through its subsidiary OXXO GAS, agreed on March 1, 2015 to acquire the related PEMEX franchises from the aforementioned third parties and plans to lease, acquire or open more gasoline service stations in the future.

Standard & Poor’s Upgrades FEMSA’s International Credit and Debt Ratings to ‘A-’ from ‘BBB+’ on Strong Credit Metrics, Outlook Stable

On June 11, 2015 - Standard & Poor’s has upgraded FEMSA global scale corporate credit and debt ratings ‘A-’ from ‘BBB+’. At the same time, Standard & Poor’s affirmed the ‘mxAAA’ long-term national scale corporate credit and debt ratings and the ‘mxA-1+’ short-term national scale rating on FEMSA, with a stable outlook.

Coca-Cola FEMSA inaugurates state-of-the art facilities in Brazil and Colombia

On June 12, 2015 Coca-Cola FEMSA announced the inauguration of its new, state-of-the-art bottling facilities in Brazil and Colombia with a combined investment of more than US$500 million.

Built to LEED certification standards, these plants set a benchmark in sustainability in the Coca-Cola System globally, implementing the latest technology to deliver a more efficient use of energy and water, as well as using energy co-generation systems.

With an investment of US$258 million, the plant of Itabirito, Minas Gerais, Brazil began construction in 2012 and started operations in November 2014. With an annual production capacity of approximately 370 million unit cases, this plant is expected to generate more than 600 direct and indirect jobs.

Coca-Cola FEMSA’s plant in Tocancipá, Colombia, began construction in 2013 and was completed to begin operations in February 2015. Through an investment of more than US$219 million, this plant is expected to generate approximately 450 direct and indirect jobs and have an annual production capacity of approximately 130 million unit cases.

FEMSA Comercio closes the acquisition of Farmacias Farmacon

On June 18, 2015 FEMSA Comercio announced that its subsidiary Cadena Comercial de Farmacias, S.A.P.I. de C.V. had closed the acquisition of 100% of Farmacias Farmacon after obtaining all required regulatory approvals. Farmacias Farmacon is based in the city of Culiacán, Sinaloa and operated over 200 stores in the Mexican states of Sinaloa, Sonora, Baja California and Baja California Sur. This transaction represents an important step as FEMSA Comercio advances in its strategy in this attractive small-box retail segment.

Coca-Cola FEMSA selected for the third time as a member of the Dow Jones Sustainability Emerging Markets Index

On September 17, 2015 Coca-Cola FEMSA announced that it had been selected for the third consecutive time as a member of the Dow Jones Sustainability Emerging Markets Index.

In September of 2013, Coca-Cola FEMSA was included for the first time as a member of the Dow Jones Sustainability Index for Emerging Markets. As one of the top-scoring companies in the beverage industry, it gained a membership in RobecoSAM’s 2015 “The Sustainability Yearbook”, the world’s most comprehensive publication on corporate sustainability. In January 2015, the Company was granted the Industry Mover award for its excellent performance in sustainability.

FEMSA Comercio closes the acquisition of majority equity stake in Grupo Socofar

On September 23, 2015 FEMSA Comercio announced that it had successfully closed the acquisition of a majority equity stake in Grupo Socofar, (“Socofar”), a leading South American drugstore operator, after obtaining all required regulatory approvals. Socofar is based in Santiago, Chile and operated over 640 drugstores and 150 beauty stores throughout Chile as well as over 150 drugstores in Colombia.

This transaction represents an important step as FEMSA Comercio advances in its strategy in this attractive small-box retail segment, leveraging its growing expertise in the drugstore business by acquiring control of a best-in-class operator with leading banners and attractive growth prospects in South America, and establishing a solid base from which to expand across the region. It also provides important capabilities to FEMSA Comercio in the operation of standalone beauty store retail banners, pharmaceutical distribution to third-party clients, and the production of generic and bioequivalent pharmaceuticals.

Femsa announces changes to Senior Finance Team

On November 23, 2015 FEMSA announced changes to senior management team that became effective January 18, 2016. Eduardo Padilla Silva, former Chief Executive Officer of FEMSA Comercio, became FEMSA’s Chief Financial and Corporate Officer. For his part Daniel Rodríguez Cofré, former FEMSA’s Chief Financial and Corporate Officer, became Chief Executive Officer of FEMSA Comercio following the successful and proven strategy of rotating top talent among the different areas of business.

Eduardo Padilla, who joined FEMSA in 1997, returns to FEMSA’s corporate office after 16 years heading FEMSA Comercio, a remarkable period during which OXXO has become the leading proximity retail format in Mexico, with more than 13,000 stores across the country as well as promising new formats such as drugstores and gasoline stations. Eduardo and his team have been instrumental in building the culture and putting in place the processes that have enabled this significant growth, while positioning FEMSA Comercio to pursue incremental opportunities in Mexico and beyond. In his new role, Eduardo will be able to apply his talent and energy to the whole of FEMSA’s business portfolio.

After one year heading the financial and staff functions of the Company, Daniel Rodríguez is once again in charge of a large retail enterprise with various formats and operations in several Latin American markets. Daniel joined FEMSA in January of 2015 after being CEO of Chile-based retailer Cencosud for six years, and prior to that he spent more than a decade in senior finance positions at Royal Dutch Shell in the Americas as well as Europe. His expertise in retail and his knowledge of the fuel and lubricant industries will serve Daniel well as he leads FEMSA Comercio through the next stages of its growth.

These appointments represent one more step in the evolution and strengthening of FEMSA’s management team in preparation for sustained growth ahead.