During the first half of 2011, the exchange rate of the peso to the dollar was stable, showing an average rate of $11.89 per one dollar. This stability changed drastically during the second half of the year, where we observed a higher average rate of $12.97 per one dollar, with a final depreciation of 13.0% by the end of the year with respect to year-end of 2010.

In 2012, the Mexican peso strengthened its position during the year as compared to the U.S. dollar, according to the U.S. Federal Reserve Bank, with the average peso-dollar exchange rate being $13.15 and appreciated with respect to the U.S. dollar by 7.1% at year-end (or 7.9% according with~~Banco de Mexico~~ ~~statistics).~~

~~In 2013, the exchange rate of the peso against the dollar started the year strong with an upward trend, but ended the year with a slight depreciation of 1.0% compared with December 31, 2012.~~

During most of 2014, the Mexican peso-dollar exchange rate was stable. This stability changed drastically toward the end of the year, when we observed a higher Mexican peso-dollar exchange rate, leading the Mexican peso-dollar exchange rate to depreciate 11.2% in 2014 with respect to the exchange rate in effect on December 31, 2013.

During the first half of 2015, the exchange rate of the peso against the dollar was stable. This stability changed toward the end of the year, as we observed an average rate of $16.59 per one dollar in the second half of the year, with a net depreciation of 14.3% by the end of the year with respect to year-end 2014.

The following table sets forth the high, low, average and year-end exchange rates for cable transfers in pesos as certified for customs purposes by the Federal Reserve Bank of New York, for periods indicated:

As of December 31, ~~2016,~~2018, the exchange rate for the year end published by the Mexican Central Bank was $19.67 per one U.S. dollar. On March 29, 2019, the exchange rate for cable transfers in pesos as certified for customs purposes by the Federal Reserve Bank of New York was ~~$17.214~~$19.40 per one U.S. dollar.

The Company is exposed to a wide range of risks. Note that the order in which the below risks are described does not necessarily reflect the effect that any of the below risks would have on the Company.

Bachoco’s core businesses are conducted in Mexico and in the United States and, therefore its performance depends on, among other factors, on the economic conditions prevailing in those countries, and particularly in Mexico. The Company’s risk exposure related to economic conditions includes risks related to economic performance, exchange rates, interest rates, as well as other political, economic and social events that may negatively affect the Company’s performance and may result in lower demand for, and lower real pricing of, our products.

Additionally, the Mexican economy continues to be heavily influenced by the U.S. economy, ~~and~~ therefore, deterioration in economic conditions in the U.S. economy may affect the Mexican economy. Prolonged periods of weak economic conditions in Mexico may have, and in the past have had, a negative effect on our Company and a material adverse effect on our results and financial condition.

Unfavorable economic conditions in Mexico or the United States, such as a recession or increases in interest and inflation rates, could have an adverse effect on our financial performance.

If the Mexican or U.S. economies experience a high inflation rate, recession or economic slowdown, consumers may not be able to purchase our products as usual, especially in Mexico, where these factors have a direct impact on the ~~consumers, and as~~consumers. As a consequence, our earnings may be adversely affected.

High interest rates in Mexico or in the U.S. could adversely affect our costs and our earnings due to the impact those changes have on our variable-rate debt ~~instruments; on the other hand,~~instruments. Alternatively, we may benefit from the interest we earn on our cash balance. Mexico historically has had, and may continue to have, high real and nominal interest rates.

A strong variation in the exchange rates between the peso and the U.S. dollar could negatively affect our financial results, as a greater percentage of our sales are made in pesos, and a large percentage of our raw material purchases are made in U.S. dollars.

Furthermore, the Company could be adversely affected by negative economic conditions prevalent in the U.S. or other countries, even when economic conditions in such countries may differ significantly from economic conditions in Mexico, as investors’ reactions to developments in any of these other countries may have an adverse effect on our securities. Consequently, the market value of our securities may be adversely affected by events taking place outside of Mexico or the U.S.

Political events and regulatory changes in Mexico could affect Mexican economic conditions and ~~as a consequence,~~ negatively affect our operations.

The Company has operations in both Mexico and the U.S. However, it is incorporated under the laws of Mexico, where a greater percentage of its sales are made. Accordingly, we foresee an impact mainly from negative developments in the political, regulatory and economic conditions in Mexico.

~~Mexican political events may significantly affect our operations.~~ In ~~June 2015, federal elections took place in Mexico, including, among others, the election of 500 representatives~~July 2018, Andrés Manuel López Obrador of the Mexican Congress and nine governors of various Mexican states. We cannot predict the impact these elections may have on future business conditions in Mexico. These, and future, federal elections may result in government instability and political uncertainty, which could have an adverse effect on Mexican economic policy and as a result, it could affect our business, financial position and operating results.

~~In July 2012, Enrique Peña Nieto of the Partido Revolucionario Institucional~~Movimiento Regeneracion Nacional was elected as President of Mexico. After taking office, ~~he started to implement significant changes~~there has been some uncertainty regarding his political decisions and their potential effect on the Mexican economy. While in ~~laws, public policy and regulations in areas such as~~ the ~~energy sector and fiscal affairs, all of which are still in process of becoming fully implemented, and~~short term there has been some economic volatility, it is still unclear what the effects ~~these and other possible reforms may have~~ on the Mexican ~~economy.~~economy would be of President Obrador’s policies.

~~Political disagreements~~The direct correlation between the executive and the legislative branches could result in deadlock and prevent the timely implementation of political and economic reforms. We cannot provide any assurances that political developments in Mexico, over which we have no control, will not have an adverse effect on our business, financial condition or results.

In November 2016, presidential elections will take place in the U.S. that will result in a change of the nation’s leadership since President Obama cannot run for re-election. Such political change and any other political or regulatory change in the U.S. regarding Mexico may affect the economic conditions in Mexico and asthe U.S. has strengthened in recent years because of the North American Free Trade Agreement, (“NAFTA”) now United States – Mexico – Canada Agreement (“USMCA”). During 2017 the renegotiation process of NAFTA began between U.S., Canada and Mexico. The three countries reached an agreement in November 2018, but the USMCA still needs to be ratified by the congressional bodies in Mexico, the United States and Canada. As for the industry in which we compete, the trade agreement remained practically unchanged. Because the Mexican economy is heavily influenced by the U.S. economy, any potential re-negotiation, or non-ratification, of USMCA and/or other U.S. government policies that may be adopted by the U.S. administration (which may result in regulatory gridlock or on the contrary, it could result in a ~~consequence,~~major regulatory change) could have a material adverse effect on the Mexican economy, which, in turn, could affect our business, financial ~~performance.~~condition and results of operations.

International trade policies may impact demand for our products and our competitive position.

Government policies on international trade and investment, such as sanctions, import quotas, capital controls or tariffs, whether adopted by individual governments, multinational organizations or addressed by regional trade blocs, may affect the demand for our products lines, impact the competitive position of our products or prevent us from being able to sell products in certain countries. The implementation of more protectionist trade policies, such as more detailed inspections, higher tariffs, or new barriers to entry, in countries where we sell products could negatively impact our business, results of operations and financial position. For example, trade disputes between the U.S. and Mexico could negatively affect demand for export products from both countries and directly or indirectly affect the markets in which we compete.

Government regulations in Mexico and the U.S. could cause a material increase in the Company’s costs of operations and thus could have a negative impact on our results of operations.

Every region in which Bachoco operates is subject to extensive federal, state and foreign laws and regulations that govern the production, packaging, storage, moving and marketing in the food industry and the poultry industry in particular, including several provisions relating to the discharge of materials into the environment.

We may be subject to fines, closures of our facilities, asset seizures, injunctions or criminal sanctions if we are held by a court of competent jurisdiction to be non-compliant with any of the applicable laws and regulations.

The adoption of new regulations or changes in the prevailing regulatory environment governing the food industry may entail restrictions in the daily operation of our Company, or increases in our expenses or production costs, conditions that could negatively affect our financial results.

Additionally, the imposition of new taxes or changes in the existing tax laws or rates in Mexico or the U.S. could have an adverse impact on our operations and, as a result, negatively affect our financial results.

The poultry industry in Mexico and the U.S., as well as the chicken industry in other countries, has undergone cyclical periods of higher prices and profitability, followed by overproduction, leading to periods of lower prices and profitability.

The market that we serve is subject to volatility with respect to supply and raw material prices, which affects our product prices. We ~~can~~cannot provide no assurance that future cyclicality, excess supply, increases in main raw materials prices, or downturns in real prices will not adversely affect our financial results.

The largest single component of our cost of sales is the cost of grains used to prepare balanced feed, including sorghum and corn, and some other ingredients such as: soybean meal and marigold extract, among others.

Increase or volatility in main raw materials prices may adversely affect our operating and financial results.

The price of most of these raw materials is subject to significant volatility resulting from weather conditions, the size of harvests, governmental agricultural policies, currency exchange rates, transportation, storage costs, and other factors.

Furthermore, the cost of corn in the U.S. may be affected by an increase in the demand both of ethanol and feed production, which can reduce the supply of corn in the U.S. market, adversely affecting our operations in the U.S.

High prices or volatility in main raw materials could adversely affect our production costs and, ~~as a consequence~~therefore, our financial results.

Supply, demand and the prices we are able to charge for our products may fluctuate due to competition from other food producers and the economic performance in the countries we are present may adversely affect our operating and financial results.

Excess in chicken or eggs supply caused by increases in production from our competitors coupled with a weak demand for our products in the markets we operate in may result in a downturn in prices for these products, and as a result, our operating margins and financial results could be negatively affected.

We face competition from other chicken producers in all markets in which we sell our products. These chicken producers have the financial resources and operating strengths to directly compete with our Company. We expect to continue to face strong competition in every market, as our existing or new competitors are likely to broaden their product lines and extend their geographic markets. Accordingly, we can provide no assurance that our performance will not be adversely affected by increased competition.

Raising animals and meat processing involve animal health and disease control risks, which can have an adverse impact on our results of operations.

Our operations in Mexico and in the U.S. depend on raising animals and meat processing, which are subject to risks such as diseases (like different types of avian flu) and contamination during production, packaging, storage or distribution processes. Such diseases may cause bans from countries we export to. Any such ban could affect export prices, and therefore our financial results.

Live chickens and swine are susceptible to infections by a variety of microbiological agents that may result in higher mortality rates, affecting our earnings and financial results.

Our chicken, turkey, beef and eggs products are subject to contamination during processing, packaging, distribution or conservation. Potential contamination of our products during processing, however, could affect a larger number of our products, which may have a significant impact on our results.

Natural disasters such as hurricanes, tornadoes or earthquakes may result in additional losses of inventory and damage to our plants and equipment.

Natural disasters could significantly damage our facilities. Our facilities in Mexico are susceptible mainly to earthquakes and hurricanes. Our facilities near Mexico’s coast are most vulnerable to the risk of severe weather. Our U.S. facilities are located in Georgia, Alabama, Arkansas and Oklahoma, a region vulnerable to being hit by tornadoes. Extensive damage to these facilities could affect our ability to conduct our regular production and, as a result, reduce our operation results.

Our growth through mergers, acquisitions or joint ventures may be impacted by challenges in integrating significant acquisitions.

We have made in the past, and may make in the future, certain acquisitions in order to continue our growth. Acquisitions involve risks, including, among others, the following: failure of acquired businesses to achieve expected ~~results;~~results, inability to retain or hire key personnel of acquired ~~businesses;~~businesses, inability to retain the same client and supplier ~~base;~~base and inability to achieve expected synergies and/or economies of scale. If we are unable to successfully integrate or manage our acquired businesses, we may not realize anticipated cost savings and revenue growth, which may result in reduced profitability or losses.

U.S. producers may increase exports to Mexico because chicken, eggs and swine are free of import quotas to Mexico according to the ~~North American Free Trade Agreement (“NAFTA”).~~USMCA. Poultry producers in the United States have developed low cost production methods and have been successful in exporting primarily frozen and value-added poultry to other countries, especially in periods of overcapacity in the United States, a condition that could have a material adverse effect on our performance in Mexico.

Regulations on animal health and environmental changes in Mexico could affect Mexican poultry industry conditions and, as a consequence, negatively affect the Company.

Our processes are subject to several animal health and environmental regulations that include animal raising, transportation, packaging, storage and distribution regulations. Drastic changes in any of these regulations could negatively affect our daily operations and ability to supply our products, ~~and,~~ as a consequence, affect our financial results. Changes in regulations may also require the implementation of new processes or equipment to comply with the new regulations, a condition that may negatively affect our liquidity, as our capital investments could increase.

Our inability to maintain good relationships with our work force and its labor union may affect our processes, and as a consequence, our financial results.

If we are unable to maintain good relations with our employees and with our labor union we may be faced with significant work stoppages as a result of labor problems, a condition that may affect our processes and our operating results.

Risks relating to Bachoco’s investors and its American Depositary Receipts (or ADRs)

The Robinson Bours family owns 73.25% of our total shares outstanding and their interests may differ from other security holders. With that percentage they hold the power to elect a majority of the members of our ~~Board~~board of ~~Directors~~directors and have the power to determine the outcome of certain other actions requiring the approval of our stockholders, including whether or not dividends are to be paid and the amount of such dividends.

The Company trades its ADRs on the New York Stock Exchange (“NYSE”) with each ADR representing twelve common shares.

The prevailing market prices for the ADRs and the shares could decline if the Robinson Bours family sold substantial amounts of their shares, whether directly, or indirectly, through two Mexican trusts through which they hold their shares, or if the perception arose that such a sale could occur. See Item 7 for more details about the Company’s trusts.

The market value of our securities may be affected by economic and market conditions prevailing in any other country, although economic conditions in such countries may differ significantly from economic conditions in Mexico. Investors’ reactions to developments in any of these other countries may have an adverse perception and, consequently, the market value of our securities may be adversely affected by events elsewhere.

Payment of cash dividends may be affected by the exchange rate of the peso versus the U.S. dollar.

Because we pay cash dividends in pesos, exchange rate fluctuations will affect the U.S. dollar amounts received by holders of ADRs upon conversion of such cash dividends by ~~BNY~~the Bank of New York (BNY) Mellon, who acts as our Depositary Bank.

The protection afforded to non-controlling stockholders in Mexico is different from that in the United States.

Under Mexican law, the protection afforded to minority stockholders is different from that in the United States. In particular, the law concerning fiduciary duties of directors is not well developed, there is no procedure for class actions or stockholder derivative actions, and there are different procedural requirements for bringing stockholder lawsuits. As a result, in practice, it may be more difficult for the minority stockholders of Bachoco to enforce their rights against us or our directors or our controlling ~~stockholder~~stockholders than it would be for stockholders of a U.S. company.

Our bylaws restrict the ability of non-Mexican stockholders to invoke the protection of their governments with respect to their rights as stockholders.

As required by Mexican law, our bylaws provide that non-Mexican stockholders shall be considered as Mexicans with respect to their ownership interests in Bachoco and shall be deemed to have agreed not to invoke the protection of their governments in certain circumstances. Under this provision, a non-Mexican stockholder is deemed to have agreed not to invoke the protection of its own government by asking such government to interpose a diplomatic claim against the Mexican government with respect to the stockholder’s rights as a stockholder, but is not deemed to have waived any other rights it may have, including any rights under the U.S. federal securities laws, with respect to its investment in Bachoco. If you invoke such governmental protection in violation of this agreement, your shares could be forfeited to the Mexican government.

Our bylaws provide that legal actions relating to the execution, interpretation or performance of the bylaws may be brought only in Mexican courts. As a result, it may be difficult for non-Mexican stockholders to enforce their stockholder rights pursuant to the bylaws.

It may be difficult to enforce civil liabilities against us or our directors, officers and controlling persons.

We are organized under the laws of Mexico, and most of our directors, officers and controlling persons reside outside the United States. As a result, it may be difficult for investors to affect service of process within the United States on such persons or to enforce judgments against them. This ~~pertains also to~~includes any action based on civil liabilities under the U.S. federal securities laws. There is doubt as to the enforceability against such persons in Mexico, whether in original actions or in actions to enforce judgments of U.S. courts of liabilities based solely on the U.S. federal securities laws.

Non-Mexican stockholders may not be entitled to participate in future preemptive rights offerings.

Under Mexican law and our bylaws, if we issue new shares for cash as part of a capital increase, we must grant our stockholders the right to purchase a sufficient number of shares to maintain their existing ownership percentage in the Company (“preemptive rights”). We can allow holders of ADRs in the United States to exercise preemptive rights in any future capital increase only in one of the following two circumstances: (i) we file a registration statement with the SEC with respect to that future issuance of shares; or (ii) the offering qualifies for an exemption from the registration requirements of the Securities Act of 1933, as amended.

We make no promises that we will file a registration statement with the SEC to allow holders of ADRs in the United States to participate in a preemptive rights offering. As a result, the equity interests of such holders in the Company may be diluted proportionately. In addition, under current Mexican law, it is not practicable for the depositary to sell preemptive rights and distribute the proceeds from such sales to ADR holders.

The Company was legally formed in Mexico as Industrias Bachoco, S.A.B. de C.V., on April 17, 1980, in ~~Obregon,~~Obregón, State of Sonora, Mexico, and is frequently referred to as Bachoco.

We are incorporated under the laws of ~~the United Mexican States,~~Mexico, but we have operations in both Mexico and the U.S. Our principal executive offices are located in Mexico at Avenida ~~Tecnologico~~Tecnológico 401, Ciudad Industrial, zip code 38010, Celaya, State of Guanajuato, Mexico, and our telephone number is +52 (461) 618 3500.

Our investor relations department is located at the address above and can be reached ~~at: email: Inversionistas@bachoco.net; telephone:~~by email at inversionistas@bachoco.net or by telephone at +52 (461) 618 3555.

The SEC maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. This annual report and the exhibits thereto and any other document we file pursuant to the Exchange Act may be viewed on the SEC Internet site (http://www.sec.gov) and on our website (www.bachoco.com.mx). However, the content of our website is not incorporated by reference into this annual report.

Our ~~main business line is poultry,~~operating segments, which ~~includes~~are comprised of our product lines, are identified on the basis of our core principles in accordance with IFRS 8.10. Accordingly, our operating segments are comprised of the following five components: chicken, eggs, pork, balanced feed and other meat products. The chicken and ~~eggs. The Company also produces and sells a wide range of other products that include, but are not limited to,~~eggs segments meet, in an aggregate basis, the quantitative thresholds for separate reporting, while the pork, balanced feed ~~live swine, beef~~ and ~~turkey value-added products.~~other meat products lines are immaterial, both on an individual and aggregate basis, and have therefore been reported on a combined basis in the “other operating segments” category. We have aggregated the chicken and eggs operating segments into one reportable segment. As a result, we end up with two reportable operating segments, “Poultry” and “Others”.

We were founded in 1952 and have grown from a small commercial table egg operation in the state of Sonora into a vertically integrated Company and the leading poultry company in Mexico as well as, in our opinion, one of the most important poultry companies worldwide.

In 1963, we started operations in the cities of Navojoa, Los Mochis and ~~Culiacan,~~Culiacán, producing just table eggs. In 1971, we commenced the production of chicken in an operating facility that we opened in the city of ~~Culiacan.~~Culiacán.

In 1974, we established a new complex in Celaya, Guanajuato, Mexico and in 1980 we legally incorporated as Industrias Bachoco, S.A.B. de C.V., in Obregón, State of Sonora, Mexico. ~~Our~~As our products were increasingly widely accepted, ~~in that region, which led us to open~~we opened offices and distribution centers in Mexico City. In 1993, we moved our headquarters from ~~Obregon~~Obregón to Celaya city, and opened a new complex in the city of Tecamachalco, in the Southeast of Mexico.

In 1994, we continued expanding our coverage, this time with a new complex in Lagos de Moreno city, in the Western Mexico. By 1994, we had four productive complexes strategically located throughout Mexico and an important presence in the Mexican poultry market share.

In September 1997, we began trading on the Mexican Stock Exchange (or “BMV”) and on the NYSE, through our ADR Level III Facility.

Furthermore, in December, 1999, we acquired Campi. With this acquisition we entered the chicken market in the South of Mexico, starting a new business line selling balanced feed to third parties. In 2001, we established our sixth productive complex in Gomez Palacio city, located in the Northeast of Mexico.

In December 2006, we acquired most of the assets and inventories of Del Mezquital to start a new complex in Hermosillo city, located in Northern Mexico, close to the border with the United States.

In 2007, through a business agreement with Grupo Libra and Grupo Agra we entered in a new business, the sales of turkey and beef value-added products, and increased our production capacity of table eggs. Both companies are located in the Northeast of Mexico.

In 2009, we made diverse business agreements with companies located at the Northeast of Mexico. Specifically, to improve capacity and efficiency in our Northeast production complex headquartered in Monterrey, wewe: (i) acquired the assets of a balanced feed mill and a soybean processing plant from Productora de Alimentos Pecuarios de Nuevo ~~Leon;~~León; (ii) acquired the assets of a chicken processing plant from Avi Carnes Monterrey; (iii) entered into agreements to rent breeder farms and egg incubation plants from Reproductoras Asociadas, and one-day-old breeder capacity farms and egg incubation plants from ~~Produccion Avicola~~Producción Avícola Especializada; and (iv) made arrangements with contract growers to acquire their inventories.

In August 20, 2011, we acquired Trosi de Carnes, S.A. de C.V. (or “Trosi”); this facility is located in Monterrey, Northern Mexico. Trosi produces and sells processed beef and chicken.

On November 1, 2011, the Company entered the U.S. market and increased its export business with the acquisition of the American poultry company, OK Foods. This company has operations across the River Valley area in Arkansas and Oklahoma. It supplies grocery retailers, food service distributors and commodity customers throughout the U.S. as well as foreign markets. Our U.S. subsidiary, Bachoco USA, is the holding company of OK Foods.

In December 2011, the Company carried out a transaction to buy certain property assets of Mercantil Agropecuaria Coromuel, S.A. de C.V. (or “MACSA”), whereby, the Company reinforced its presence in the State of Baja California in Mexico, with three ~~distributions~~distribution centers.

In July 2013, the Company reached an agreement to acquire the Arkansas breeding assets of Morris Hatchery Inc., a U.S. company. These assets comprise mainly of equipment and bird inventory (laying hens that produce hatching eggs).

In July 2015, the Company reached an agreement to acquire the Georgia breeding assets of Morris Hatchery Inc. These assets comprise mainly equipment and bird inventory (laying hens that produce hatching eggs), with a capacity of approximately one million laying hens. See Notes 4 and 12 of our Audited Consolidated Financial Statements for more detail.

In December 2015, the Company reached an agreement to acquire the Oklahoma City Fully Cooked facility from American Foods Group, a U.S. Company. This acquisition comprises all the American Foods Group’s Chicken assets located in Oklahoma City, with a capacity to produce over 700,000 pounds per week of fully cooked chicken products. The Company closed the transaction in February ~~2016~~ through its subsidiary, OK Foods.

~~See Note 30~~In 2017, the Company made two acquisitions: a) Proveedora La Perla S.A. de C.V. (hereinafter “La Perla”), a pet food plant located in central Mexico. This acquisition includes all the La Perla’s assets owned in the State of ~~our Audited Consolidated Financial Statements~~Queretaro, Mexico. These assets have the capacity to produce over 65,000 tons a year of dry pet food and comprise a facility for ~~more detail.~~producing pet food treats and b) Albertville Quality Foods Inc. (hereafter “AQF”) a U.S. company located in the State of Alabama that produces and sells value-added further processed products. This acquisition comprises two value-added, further processing plants. We merged AQF with OK Foods, Inc. at the end of 2017, and thus it is not operating as a separate subsidiary.

We finance most of our capital expenditures with resources generated by our operations.

The following is a summary of the capital expenditures incurred by the Company during the periods covered by this Annual Report with the amounts having been computed under IFRS.

In 2018, we made capital expenditures of $1,982.6, which were mainly allocated towards our organic growth plans, productivity and upgrading bottle necks in different parts of our process.

In 2017, we made capital expenditures of $3,513.4, which were mainly allocated towards our organic growth plans and the acquisitions made during the year as described above.

In 2016, we made capital expenditures of $2,459.7, which were mainly allocated towards our organic growth plans by investing in projects that will make our processes more efficient, alleviating bottlenecks, as well as in the replacement of part of our transportation fleet and of other equipment in all of our facilities.

Our capital expenditures in 2015 totaled $1,824.5 million, which was mainly allocated toward organic growth, by continued alleviating bottlenecks in some of our process and productivity projects across all of our facilities as well as our acquisition of the Georgia breeding assets of Morris Hatchery Inc. In 2014, we made capital expenditures of $1,241.1 million, which was mainly allocated to projects geared towards the alleviation of some bottleneck in our operating processes, thereby increasing production, productivity improvements and the replacement of the transportation fleet used in our operations in Mexico and the U.S.

In 2013, we made capital expenditures of $587.4 million, which were mainly allocated toward productivity projects in our chicken farms, and in some of our processing plants, increasing eggs production capacity, additional IT systems, and replacement of part of our transportation fleet in accordance with our replacement program and of other equipment in all of our facilities.

In 2012, we made capital expenditures of $951.8 million, which were used to replace our transportation fleet, to complete certain expansion projects and to implement productivity projects across all of our facilities in both the U.S. and Mexico.

At present, as part of its regular course of business, the Company continues with its replacement of equipment and productivity projects.

Bachoco owns and manages more than a thousand facilities, organized in 9nine production complexes and 64more than 80 distribution centers in Mexico, and 1one production complex in the United States.

We participate in the food industry in Mexico and in the U.S., mainly in the poultry industry.

We are the leader in the Mexican poultry industry, and one of the largest poultry producers globally. In 2011, we entered the U.S. chicken market through our acquisition of OK Foods.

In Mexico, our core business is poultry (chicken and egg products), but we also produce and sell a wide range of other products which we refer to as ~~“other business lines”~~“others” which include, among others, the production and selling of balanced feed, pet food, live swine, beef and turkey value-added products, one day old breeders and chicks, as well as a laboratory that produces vaccines for the poultry industry as well as other similar industries.

Sales generated by these other ~~business~~product lines, except for balanced ~~feed~~feed/pet food sales, each on an individual basis, do not represent more than 1.0% of our total sales.

In the United States, our sole ~~business~~product line is almost exclusively chicken products.

In the recent years, we have not experienced material changes in the development or production of our products.

We operate mainly in Mexico and in the U.S. We estimate that we are the biggest producer of chicken products in Mexico. Based on our internal estimates, we currently account for approximately 35.0% of the Mexican chicken production market and are the second largest producer of eggs with an estimated market share of approximately ~~5.0%~~5.1%. We currently estimate that we have ~~a 3.3%~~approximately 3.2% market share in the balanced feed products.

As noted previously, in the U.S. we produce and distribute chicken products only. Based on our internal estimates, we currently account for approximately ~~1.8%~~1.9% of ~~this~~the chicken production market.

The following table sets forth, for each of the periods indicated, our net revenues by main product lines as a percentage of total net revenues, as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013:~~2016:

Our poultry ~~business~~operating segment is our largest ~~business~~product line in terms of ~~revenues.~~revenue. Within our poultry ~~business,~~operating segment, our main ~~products~~product lines are chicken and eggs, which are described in more detail in the following paragraphs. Within our “Others” segment, our main product line is balanced feed, which is also described in more detail in the following paragraphs.

According to the UNA, chicken products are the main source of protein consumed in Mexico.

Mexico is among the ten main chicken producers worldwide, with an estimated production of ~~3,175.0~~3,470.7 thousand tons of chicken meat in ~~2015,~~2018, and a per capita consumption of ~~30.9~~32.5 kilograms a year in ~~2015, an~~2018, a 0.8% increase ~~of 5.0% when compared to 29.4~~from 32.2 kilograms a year in ~~2014.~~2017.

Fresh chicken is the most popular meat consumed in Mexico. According to the UNA, more than 90% of chicken is sold fresh, and just a small percentage is sold frozen and with value added (marinated, breaded, partially cooked and fully cooked, among others). These products have found limited acceptance among Mexican consumers due to tradition and historical consumer preferences for fresh chicken.

We estimate that we are Mexico’s largest chicken producer with around 35.0% share of the chicken production market, and when combined with our largest vertically integrated competitor in Mexico, we account for approximately 60.0% of total Mexican poultry production.

According to the USDA, Mexico is a main destination for U.S. chicken exports. Chicken imports from the U.S. have increased from 204.1 thousand tons in 2008 (when restrictions for leg quarters imports were phased out in January 2008) to approximately ~~480.5~~418.7 thousand tons in ~~2015.~~ 2018.

In particular, in ~~2015,~~2018 total chicken imports ~~increased 15.3% when compared~~remained practically identical to ~~2014. This increase was due to a decrease in the prices of products coming from the U.S. Chicken~~total chicken imports in ~~Mexico have also increased due to an increase in the volume of products coming from other countries.~~2017.

Chicken products in Mexico are classified into six main categories: live, public market, rotisserie, supermarket broiler, chicken parts and value-added products. Bachoco operates in all these categories. For a better understanding of the chicken market in Mexico, following is a brief description of each category of chicken products:

WeWhile we operate in all six of these chicken ~~categories;~~categories, our product mix varies from region to region, reflecting different consumption and distribution patterns.

In 2013
Industry /volume⁽²⁾
Bachoco /volume Bachoco /sales
Live 33 % 36 % 29 %
Public market 19 % 13 % 13 %
Rotisserie 26 % 26 % 27 %
Supermarket 12 % 5 % 5 %
Chicken parts 6 % 12 % 15 %
Value-added products 4 % 8 % 11 %

According to the USDA and the UNA, chicken is the main protein consumed in the U.S., but unlike in Mexico, most of the chicken is sold toby producers ~~uncut,~~in cuts, and the cuts are mainly sold frozen and with value-added (more than 85%). This is due to a large increase in demand for the three main components of chicken: the breast, wing, and leg quarters.

The U.S. is the world’s largest ~~producers~~producer of chicken. Its annual production is estimated at ~~18.2~~19.3 million tons or ~~40.04~~42.6 billion pounds in ~~2015~~2018. This represents a 4%2.2% increase over the ~~17.5~~18.9 million tons produced in ~~2014, and its~~2017, with per capita consumption ~~is also one of~~among the highest worldwide, per annum, estimated at ~~40.4~~41.8 kilograms (around ~~89.0~~92.1 pounds).

The U.S. chicken industry is ~~very~~substantially consolidated and vertically integrated. Most producers of chicken use state-of-the-art technology in their processes. It is estimated that the main three chicken producers account for ~~46.0%~~48.1% of the total chicken production in the U.S.

Another characteristic of the chicken industry in the U.S. is the use of contract growers, with more than 85% of chicken produced by contract growers. Such production consists of providing the growers with chickens, balanced feed, vaccines, medicines and training required for the growing of chickens. The grower supplies its facilities and labor required in order to bring the chickens to slaughter-ready weight. The contract grower is then paid based on the productivity and efficiency of its flock.

Brazil and the U.S. are the main exporters of chickens worldwide, and their main destinations are Mexico, China, Russia and the Middle East, among other countries. We estimate that our market share is around ~~1.8%~~1.9% in the U.S.

According to the UNA, Mexico has the largest per capita consumption of eggs (or “table eggs”) in the world.

There is an estimated per capita consumption of around ~~22.44~~22.9 kilograms for ~~2015,~~2018, a 1.0% increase when compared to ~~22.2~~22.6 kilograms in ~~2014.~~2017.

Mexico’s ~~2015~~2018 annual egg production is estimated at ~~2,635.6~~2,802.7 million tons, an increase of ~~2.5%~~3.1% as compared ~~with 2,571.3~~to 2,718.5 million tons produced in ~~2014.~~2017.

When compared to other protein sources, eggs are among the cheapest sources of protein in Mexico. The egg industry is more fragmented than the chicken industry.

Table eggs in Mexico are classified in three main categories: bulk, packaged and processed.

Bachoco participates in the bulk and packaged categories of eggs but does not participate in the processed market.

We estimate that we are the second largest producer of table eggs in Mexico. In ~~2015~~each of 2018 and ~~2014,~~2017, we produced approximately 5.1% ~~and 4.9%, respectively,~~ of the total eggs produced in Mexico measured in ~~terms of~~ tons. We sell both brown and white eggs. We estimate that we are the largest producer of brown eggs in Mexico, and the largest marketer of packaged eggs with brand identification.

In ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the volume sold in the table eggs category in the Mexican industry and by the Company was:

According to CONAFAB, Mexico is among the five biggest producers of balanced feed worldwide.

According to CONAFAB, it is estimated that ~~31,115~~34,637 thousand tons of balanced feed were produced in Mexico in ~~2015,~~2018, a ~~3.5%~~4.2% increase from ~~30,063~~33,240 thousand tons of balanced feed produced in ~~2014.~~2017.

Producers of balanced feed are classified as either commercial or integrated; commercial manufacturers produce for the market while integrated manufacturers mostly produce for themselves and occasionally for other producers.

Bachoco participates in both channels, integrated and commercial, as it produces balanced feed used for internal consumption as well as balanced feed it ultimately sells to third parties.

In ~~2015,~~2018, CONAFAB estimated that the production mix between commercial and integrated was about ~~38.3%~~38.1% and ~~61.7%~~61.9%, respectively. This mix has not changed much over the past several years.

The following table sets forth, for each of the periods indicated, our net volume sold of balanced feed:

~~(1)~~

(1)

CONAFAB estimates

(2)

According to CONAFAB, balanced feed produced by commercial producers in Mexico.

The poultry industry worldwide is very susceptible to price changes in its main raw materials, such as corn, soybean meal and sorghum. As a result, the industry is characterized by cyclical periods of higher profitability leading to overproduction followed by periods of lower prices and lower profitability.

Our sales are moderately seasonal in Mexico. Generally, we experience the highest levels of sales in the second and fourth quarters due to higher chicken consumption during the holiday seasons.

As for our sales in the U.S., there is slightly less seasonality due to the mix of products offered in the market, but breast meat prices are typically higher in the second and third quarters and wings are more in demand in the ~~fourth~~first and ~~first~~fourth quarters.

Chicken and eggs are considered a commodity item. Changes to the supply or demand and changes in raw material prices can directly impact sale prices, and, as a result, affect the profitability of main producers. Another factor that impacts chicken pricing, mainly in U.S., is the international demand.

As a vertically integrated company our processes start in our main ~~business~~product lines with production of balanced feed, as well as with the buying of grandparent breeder flocks.

Our production of chicken processes start with the purchasing of one-day birds called “grandparent” birds. These birds are raised to maturity in our farms where fertile eggs are produced to continue through our production processes. Grandparent birds are bought mainly in the U.S. and also in some other countries from genetic bird firms.

The largest single component of our cost of sales is the cost of balanced feed raw materials, mainly grain (corn and sorghum), as well as soybean meal, used to prepare balanced feed. We operate our own feed mills to produce balanced feed for both our individual business consumption as well as to sell to third parties.

The prices of these ingredients are subject to significant volatility resulting from weather, the size of harvests, transportation and storage costs, governmental agricultural policies, currency exchange rates and other factors. The Company engages in hedging of its feed costs in order to assure a more stable cost of grains.

In Mexico, domestic crops are limited, therefore a large percentage of our raw materials are imported from the U.S. In ~~2015,~~2018, in terms of volume, we bought approximately ~~40.4%~~16.3% of our total grain from the domestic market and the remaining ~~59.6%~~83.7% from the U.S.

We have developed an extensive distribution system to participate in all the existing distribution channels of chicken and eggs products. We consider our distribution system one of the Company’s strengths, where we have developed extensive expertise and knowledge of the business.

We use our own fleet to transport the majority of rotisserie chickens, supermarket broilers and other chicken products to our customers in Mexico. We try to cooperate with existing distribution channels and do not compete with wholesale distributors, except in areas where we supply our own distribution capacity where needed for market penetration.

We distribute products from our processing plants to our cold-storage facilities and warehouses, which serve as a midpoint in distribution to wholesalers and local customers. From our cold-storage facilities, we service wholesalers and retailers and transport certain products directly to supermarkets and food-service operations. Our distribution infrastructure includes more than 6466 cold-storage warehouses and facilities and a large fleet of vehicles.

Our U.S. operations, which lie across the River Valley area in Arkansas and Oklahoma, Alabama and Georgia, produce ~~only~~mainly chicken products. Those plants mainly supply grocery retailers, food service distributors, national accounts and commodity customers throughout the U.S. The U.S. complex also services the foreign market and exports to several countries including various Asian countries ~~Russia~~ and Mexico. Our distribution line through ~~this plant~~our plants is handled mainly through third parties.

Eggs are mostly sold packaged with brand identification. We sell white and brown ~~eggs; the~~eggs. Our branded carton of brown eggs is a premium product in the Mexican market because consumers perceive them to be of higher quality. ~~Brown eggs command a small premium over white eggs.~~

~~In some regions, however, we have reallocated part of our production from brown eggs to white eggs due to local market preferences.~~ Our marketing strategy in the eggs business is to gradually move from bulk to packaged white eggs. Packaged eggs are less vulnerable to price fluctuation and create brand loyalty.

We have designed our egg distribution system to transport eggs from our laying farms to customers in all sales regions.

Our production of balanced feed to third parties accounts for a wide range of ~~products; we~~products. We produce balanced feed products mainly in the poultry industry, but we also produce in other markets such as ~~dogs,~~pet food, cattle, swine and fish, among other species.

We sell balanced feed products mainly to small livestock producers and through a network of small distributors located mainly in central and southern Mexico. Currently, we have 4six feed plants dedicated to producing balanced feed to third parties.

At the end of 2018, we owned a total of 768 industrial and intellectual intangible assets as described below:

The Company’s operations are not dependent on the existence of patents or licenses or contracts signed with customers or suppliers.

We own the rights to a wide range of brands that we use to market our products. These rights are renewed every ten years.

Every region where Bachoco operates is subject to extensive federal, state and foreign laws and regulations, which can have a material effect on the Company. Such laws and regulations include among others, the following:

Effective January 1, 2008, there is a free chicken market between Mexico and the U.S. This allows U.S. producers to export any amount of chicken (mainly leg quarters) free of tariffs to Mexico.

The U.S. chicken exports to Mexico have substantially increased since applicable restrictions on such imports have recently phased out. However, this development does impact the Mexican market for chicken because neither we, nor any other Mexican chicken producer, are yet able to export similar products to the U.S. Our production complex in the U.S. exports chicken products to several countries such as ~~Russia,~~ China and Mexico, among others, and therefore it is subject to various laws and regulations that apply in each of these countries.

In Mexico, theLey Federal de Competencia ~~Economica~~Económica(“Mexican Economic Competition Law” or “LFCE”), regulates monopolies and monopolistic practices.

Under this law, Mexican producers, including Bachoco are required to notify the~~Comision~~Comisión Federal de Competencia ~~Economica~~Económica (“Competition Federal Commission” or “COFECE”) of all proposed transactions exceeding specified threshold amounts as set forth in the Mexican Economic Competition Law. The COFECE can impose conditions on, and prevent or unwind, any such transactions by Mexican companies. We have complied with all requirements under this law. In December 2009, Mexico’s COFECE published a notice announcing an investigation of the Mexican poultry sector regarding possible monopolistic business practices. No specific companies were cited as conducting business in this manner. We, along with other Mexican producers and distributors, were required to provide information to the commission during the following years. As a result of this investigation, COFECE imposed several fines on us for supposedly having certain practices where the price of chicken was manipulated.

In all cases, the Company disagreed with the COFECE’s resolution and appealed all of the resolutions according to the provisions of Mexican law in order to assert our rights as a company that contributes to the development of the country and to a free market.

As of the date of this Annual Report, some of these ~~files remain open;~~judgments were concluded in favor of the ~~COFECE is evaluating our impugnation and is expected to release a response in~~Company, accordingly the ~~upcoming months. The Company has~~provision recorded ~~a provision~~ for ~~the amount that it currently expects to be responsible for.~~this purpose was cancelled.

Since 2003, chicken (excluding leg quarters for which the Mexican government had imposed certain temporary restrictions), eggs and swine import quotas were eliminated by virtue of ~~NAFTA.~~NAFTA and its successor, once ratified, the USMCA. Poultry producers in the United States have developed extremely low-cost production methods and have been successful in exporting primarily frozen and value-added poultry to other countries, including Mexico, especially in periods of overcapacity in the United States.

On January 1, 2008, the restrictions previously imposed for leg quarters were phased out. As a result, there are no restrictions on exporting these products to Mexico at this time.

In February 2011, the~~Secretaria~~Secretaría de ~~Economia~~Economía (or “Mexican Ministry of ~~the~~ Economy”) initiated an antidumping investigation focusing exclusively on imports of leg quarters to Mexico from the U.S. This investigation was requested by Bachoco and by two other Mexican poultry companies.

As a result of this investigation, in January 2012, the Ministry of Economy issued a preliminary ruling on anti-dumping procedures and confirmed dumping conditions on chicken leg quarters imported from the U.S., including margins ranging from 62.90% to 129.77%, stating that such practices damaged the Mexican poultry industry.

The Mexican Ministry of ~~the~~ Economy had the authority to impose anti-dumping duties, but did not proceed as the interested parties expressed the desire to reach an agreement. The companies involved provided new arguments.

Consequently, on August 7, 2012, after examining all final arguments, the authorities confirmed the existence of dumping conditions that caused harm to the domestic poultry industry. The Mexican Ministry of ~~the~~ Economy imposed anti-dumping duties on imports of chicken leg quarters from the U.S., but stated that such penalties would not be applied immediately, as the poultry industry was being affected by the presence of avian flu type H7N3 in the ~~state~~State of Jalisco. It is worth noting that the Company´s facilities were not affected by this outbreak of influenza.

As of the date of this report, we do not have any further information from the Mexican Ministry of ~~the~~ Economy regarding the application of such duties to the chicken industry. We do not believe we will be subject to any ~~antidumping~~anti-dumping fines and thus have not recorded any provisions in our consolidated financial information.

The chicken industry is subject to government regulation in the health and environmental safety areas, including provisions relating to water and air pollution and noise control. Below is a description of the principal laws and administrative authorities in these areas in Mexico and the U.S.:

All of these laws or regulations can bring administrative and criminal proceedings against companies that violate environmental and safety laws and regulations, and after certain administrative procedures, such violations can result in the closure of non-complying facilities.

The Company provides information to these authorities on a regular basis or whenever required to assure the Company’s compliance thereof. Our Mexican and U.S. subsidiaries are also in compliance with all current regulations and are constantly monitored to ensure compliance in case of any changes in the regulatory environment.

The~~Comision~~Comisión Nacional del Agua (CONAGUA, for its Spanish acronym) imposed fines on the Company for infractions the Company supposedly committed when extracting water from wells and other sources for livestock use. The Company is appealing the imposition of these fines and has registered a provision for the amount that it will probably pay.

The Company is a holding company with no operations other than holding the stock of its subsidiaries. Our main operating subsidiaries are BSACV and Bachoco USA (the holding company for OK Foods), which own our main operating assets.

In ~~2015,~~2018, our subsidiary BSACV accounted for ~~57.7%~~58.9% of consolidated total assets and ~~71.9%~~62.6% of total consolidated sales and our subsidiary Bachoco USA, accounted for ~~13.7%~~18.2% of consolidated total assets and ~~21.4%~~28.9% of total consolidated sales.

All of our subsidiaries are directly owned by us in the percentages listed below. The following table shows our main subsidiaries as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013:~~2016:

Bachoco USA is a subsidiary incorporated on March 2, 2012 to serve as the holding company for O.K. Industries, Inc., the American poultry company we acquired in November 2011.

At the end of 2016 we set up Wii kit RE LTD, a captive reinsurance company to complement our risk management strategy, as a subsidiary of the Company, in which we own 100% of the shareholding. Wii kit RE LTD., is a Class I reinsurance company that provides insurance coverage to its affiliates.

In July 2017, we acquired La Perla, a Mexican corporation, as a fully owned subsidiary of the Company. This company is dedicated to the production and sale of pet food.

For more detail regarding the Company’s subsidiaries, see Note 5 of our Audited Consolidated Financial Statements included herein.

We have more than a thousand production facilities in Mexico and in the U.S. (most of which are farms) and 6467 distribution centers that are located throughout Mexico, to ensure freshness and minimize transportation time and costs.

We own most of our facilities, we own around 75% of our farms and lease a limited number of other farms and sales centers. We also employ a network of contract growers.

The following table indicates Bachoco’s production facilities and the number of each type of facility both in Mexico and the U.S., as of December 31, ~~2015:~~2018:

In the past, our facilities in Mexico were grouped in several complexes with main offices in ~~Merida,~~Mérida, Coatzacoalcos, Tecamachalco, Celaya, Lagos de Moreno, Monterrey, ~~Gomez~~Gómez Palacios, ~~Culiacan~~Culiacán and Hermosillo. In 2014, we implemented a new structure whereby our facilities are now grouped according to “business units” where each business unit is responsible not only for the production process but also customer service in an assigned region.

Our eight processing plants process around ~~11.0~~11.8 million chickens per week and our laying farms produce around ~~11.2~~12.0 thousand tons of commercial eggs each month.

~~Four~~Six of the ~~eighteen~~twenty feed mill plants in Mexico, are dedicated to the production of balanced feed for sales to third parties and the remaining fourteen are dedicated mainly to internal consumption. We produce around 3336 thousand tons of balanced feed per month for sale to third parties.

We own other facilities, including two poultry manure-processing plants. We also own a laboratory that produces vaccines for the poultry industry, which we mainly use for internal purposes, but we also sell some vaccines to third parties.

In 2018, we continued with our organic growth plans and productivity projects to improve our efficiency and to alleviate bottlenecks, thereby increasing production, in some of our production centers. For instance, we increased our grow-out capacity, we improved our productivity and increase our hatchery capacity, and we made several improvements in our processing plants. We also replaced part of our fleet in all of our business units.

In July 2017, we acquired La Perla, a pet food company with the capacity to produce over 65,000 tons a year of dry pet food and that has a facility for producing pet food treats.

In 2016, we continued several projects to improve our efficiency and alleviate bottlenecks, thereby increasing production, in some of our production centers. For instance, we increased: our breeding and processing capacity in the Yucatan peninsula region, our table egg production capacity in the southwest region and our hatchery capacity in the northern region of Mexico.

During 2015, we continued several projects to alleviate bottlenecks, thereby increasing production, in some of our production centers. For example, we finished our live chicken production capacity in the ~~state~~State of Chiapas and in other southern states and increased our processing capacity in our processing plants located in central Mexico.

During 2014, we undertook several projects to alleviate bottlenecks, thereby increasing production, in some of our production centers. For instance, we are increasing our live chicken production capacity in the state of Chiapas and in other southern states. At the same time, we are increasing our processing capacity in our processing plants located in central Mexico.

In 2013, several of our breeder farms located in the state of Guanajuato were affected by an outbreak of avian influenza type H7N3. As a result, the Company experienced a reduction in chicken volume sold of around 4.0% for the year. Once the outbreak was under control, the Company was able to gradually recover its production level. However, in 2014, most of these facilities closed and their production was replaced through our U.S. operations.

We have facilities across the River Valley area in Arkansas, Oklahoma, Alabama and ~~Oklahoma.~~in Georgia. We process around 33.0 million chickens per week in those facilities. Our offices are in Fort Smith, Arkansas. Our slaughter and deboning plants and feed mills are located in Fort Smith, Arkansas. and in Heavener, Oklahoma. We have further-processing plants to produce value-added chicken products in Fort Smith, Oklahoma City, Muldrow, Oklahoma and ~~Muldrow, Oklahoma;~~in Alabama; hatcheries in ~~Fort Smith,~~ Heavener and Stigler, Oklahoma; broiler research farms, in Greenwood, Arkansas and Hartford, Arkansas; and our cooler storage and distribution center in ~~Muldrow.~~Muldrow, Oklahoma.

OnIn July 2015, the Company reached an agreement to acquire the Georgia breeding assets of Morris Hatchery Inc. These assets comprise mainly of equipment and bird inventory (laying hens that produce hatching eggs), with a capacity of approximately - one million laying hens.

OnIn December 2015, the Company reached an agreement to acquire the Oklahoma City Fully Cooked facility from American Foods Group, a U.S. Company. This acquisition comprises all the American Foods Group’s chicken assets located in Oklahoma City, with a capacity to produce over 700,000 pounds per week of fully cooked chicken products. The Company closed the transaction in February 2016 through its subsidiary, OK Foods.

In July 2017, we acquired AQF a company that produces and sells value-added further processed products.

See ~~Notes~~Note 4 ~~12 and 30~~ of our Audited Consolidated Financial Statements for more detail.

The Company plans to continue with several projects, primarily in Mexico, gradually increasing our chicken and egg production in the next few years.

In January 2009, the CNBV published certain amendments to the Rules for Public Companies and other participants in the Mexican Securities Market that require public companies to report financial information in accordance with IFRS as issued by the IASB, effective as of January 1, 2012.

Following these amendments, for the year ended December 31, 2012, we adopted IFRS, with January 1, 2011 as our transition date. Thus, we timely issue our periodic reports under IFRS, meeting all of the CNBV requirements.

The rules and regulations of the SEC, do not require foreign private issuers that prepare their financial statements on the basis of IFRS (as issued by the IASB) to reconcile such financial statements to U.S. GAAP. As such, while the Company has in the past reconciled its consolidated financial statements prepared in accordance with MFRS to U.S. GAAP, those reconciliations are no longer presented in Bachoco’s filings with the SEC.

In ~~2015,~~2018, we posted improvements in our total sales asand volume sold, mainly in our poultry segment, when compared to the previous ~~year, while we were able to reach the second highest EBITDA margin in the last ten years.~~year.

These results were driven by external and internal conditions. Externally, we benefitted from (i) ~~economic growth in Mexico and~~ a ~~lower inflation rate when compared to 2014, (ii) strong level of demand and consumption of poultry products in Mexico and in the U.S. and (iii)~~ stable cost of our main raw materials in U.S. dollar terms, ~~which helped~~and (ii) a strong level of demand in ~~light~~Mexico during the first six months. However, we were negatively impacted by (i) oversupply conditions on the second half of the year, in both Mexico and the U.S. (ii) low prices for animal protein in the U.S. and (iii) volatility in exchange rate of the Mexican ~~peso depreciation against~~Peso versus the U.S. ~~dollar in 2015.~~dollar.

Internally, we increased ~~our volumes~~the volume sold in our ~~main business lines~~poultry segment, primarily due to (i) the implementation of ~~several projects to alleviate bottlenecks,~~our organic growth strategies, (ii) our ability to capture efficiencies to continue as a low cost producer company and (iii) the implementation of several projects to be closer to our customers and better understand and attend to their needs.

In 2018 Mexican macroeconomic conditions continued to display volatility. The ~~Mexican economy experienced GDP growth of 2.5% in 2015, which was higher than the growth rate reached in 2014. In addition, the~~annual inflation rate was ~~2.13%~~4.83%, ~~lower than 4.08% observed in 2014.~~

~~In terms of~~annual GDP was 2.0%, the Mexican ~~peso-dollar exchange rate, while it~~peso depreciating 2.0% on the average against the dollar and remained stable through most of the year, there was an increase in volatility towards the end of the year, leading the Mexican peso-dollar exchange rate to depreciate 14.3% by the end of the year with respect to the end of 2014.

~~The Mexican peso-dollar exchange rate depreciation that occurred~~unchanged at ~~the end of 2015 had an effect on our financial results, primarily, for the following reasons:~~

a) Approximately 24.0% of our sales correspond to our U.S. operations and are denominated in dollar terms. Therefore, these sales were positively affected by the Mexican peso-dollar exchange rate depreciation when preparing our results in Mexican peso terms.

b) About 35.4% of our total debt for the year ended December 31, 2015 was denominated in U.S. dollars. Therefore, this indebtedness was negatively affected by the Mexican peso-dollar exchange rate depreciation when preparing our results in Mexican peso terms.

c) The increase in the cost of our raw materials purchased in U.S. dollars, which occurred as a result of the Mexican peso-dollar exchange rate depreciation, was partially offset by a decrease in the prices of our main raw materials, such as grain and soybean meal, in U.S. dollar terms.year-end.

According to UNA estimates, in ~~2015,~~2018, the volume of chicken ~~and eggs produced~~ in Mexico grew by approximately ~~5.0% and~~ 2.5%, ~~respectively,~~ which means that the Mexican ~~poultry~~chicken industry ~~accelerated its growth during 2015, as compared to 2014, after seeing a reduction~~continued growing at normalized levels. However, the production of eggs increased by approximately 3.0%. We believe this increase in ~~production in 2013~~supply was due to ~~an outbreak~~the recovery of the ~~avian flu.~~production results of part of the industry during 2018.

All figures discussed below are information for ~~2015,~~2018, with comparative figures of ~~2014~~2017 and ~~2013~~2016 prepared in accordance with IFRS and are presented in millions of pesos unless otherwise indicated. This information should be read in conjunction with our Audited Consolidated Financial Statements.

The following table sets forth selected components of our results of operations for each of the periods indicated:

The following table sets forth, for each of the periods indicated, our net revenues by main product lines as a percentage of total net revenues, in each period:

Net sales in 2015 totaled $46,229.0 million, $4,450.0million more, or a 10.7% increase, in net sales, when compared to the $41,779.1 million in net sales reported in 2014. This increase was mainly due to a higher volume sold.

In ~~2015,~~2018, net sales totaled $61,052.1 million, $3,002.1 million or 5.2% more than the $58,050.0 million reported in the same period in 2017. The sales increase is mainly attributed to higher prices in both our poultry and others segments.

In 2018, sales of our U.S. ~~operation~~operations represented ~~24.1%~~28.7% of our total sales, compared ~~to 20.2%~~with 28.4% in ~~2014. During 2015, both our Mexican and U.S. operations reached a historical level of volumes sold.~~2017.

The Company’s sales of ~~chicken~~poultry products increased ~~10.6%~~5.4% in 2015, mainly as a result of an 8.1% increase in volume and a 2.3% increase in chicken prices. The increase in volume was mainly due to higher production volume and the increase in price was mainly due to an increase in our U.S. operations in Mexican peso terms.

~~Egg sales increased 3.5% in 2015,~~2018, mainly as a result of a ~~6.2%~~3.7% increase in poultry prices and a 1.7% increase in volume ~~sold, as we observed~~sold. The increase in prices was both in Mexico and the U.S. The increase in prices in the U.S. was due in part to a higher ~~level~~mix in value added products as a result of ~~supply~~the full year integration of AQF. However, we were unable to fully translate our increased costs into a higher price because of downward pressure on price from oversupply conditions in ~~Mexico (we do not produce table eggs~~the latter half of the year.

Sales of the “others” segment increased 3.1% due mainly to an increase of 8.2% in ~~our U.S. operation). This increase~~prices, which was partially offset by a ~~decline in prices.~~

~~Sales~~decrease of ~~balanced feed increased 31.6% in 2015, resulting from a 23.4% increase in~~5.1% of volume ~~sold and a 6.7% increase in balance feed prices.~~

Sales of the other business lines increased 6.3% due to an increase in our sales of value-added beef products and hatching eggs sold to third parties, which in turn resulted from our increased capacity in hatching eggs production.sold.

The following table sets forth a breakdown of our ~~operating results~~cost of sales for each of the periods indicated:

Our total cost of sales increased ~~$4,352.5~~$3,919.4 million or ~~13.4%~~8.3% in ~~2015,~~2018, when compared to the previous year.

This increase was mainly ~~driven by~~attributable to a higher cost of raw materials in Mexican peso terms, higher volume sold, and ~~an increase in the cost of our main raw materials during the second half of 2015, mainly as~~ a ~~result of the depreciation of the Mexican peso against the U.S. dollar. The increase in volumes sold represented 10.5% of the total increase with the remaining increase being~~mix effect, due to ~~the increase~~higher percentage of further processed products in ~~the cost of~~ our ~~main raw materials.~~US operation, which have a higher production cost.

The largest single component of our cost of sales is the cost related to our balanced feed raw materials, which has accounted for approximately ~~66%~~65% of our total cost of sales in the last three years. The main components of our balanced feed raw materials are corn, sorghum and soybean meal and all of the components of raw materials are subject to high volatility caused by supply, weather conditions and exchange rates, among others.

Besides balanced feed costs, the cost of sales includes other factors such as salaries and wages and energy costs. These two factors represented approximately 9% and 5% of our total cost of sales, respectively, in the last three years.

There are many other factors with much smaller contributions to the overall cost of sales. All of these secondary factors individually registered immaterial changes from ~~2014~~2018 to ~~2015.~~2017.

In ~~2015,~~2018, general, selling and administrative expenses totaled ~~$4,323.4~~$6,024.4 million, compared to ~~$3,781.3~~the $5,423.4 million reported in ~~2014,~~2017, representing an increase of ~~$542.0~~$601.0 million or ~~14.3%~~11.1%. Approximately ~~80%~~2% of this increase was ~~attributed~~attributable to more volume ~~sold.~~

~~The rest of this increase was~~sold and the ~~result of~~remainder is primarily due to higher unit expenses. In particular, we had (i) additional expenses ~~incurred in~~as part of the implementation of projects related to ~~further~~ improve our operating efficiency (ii) in Mexico, expenses increased due to price increases in fuel and energy, mainly in the ~~services we provide to our customers~~second half of 2018; and ~~our understanding of the needs~~(iii) a full year integration of our ~~customers.~~

~~We expect to experience additional benefits resulting from these projects in the upcoming years.~~AQF and La Perla acquisitions.

In ~~2015~~2018 and ~~2014,~~2017, our general, selling and administrative expenses represented ~~9.4%~~9.9% and ~~9.1%~~9.3% of total sales, respectively.

The main components that comprised our general, selling and administrative expenses in the past three years are the following: freight and transportation equipment expenses (about ~~38%~~37%), labor (about ~~32%~~35%) and publicity (about 4%), with no significant variation in these percentages.

Other income (expense) includes mainly the gains and losses on sales of by-products, sales of hens, asset disposal, sales of unused fixed assets and others.

In ~~2015,~~2018, we recognized other ~~net expenses~~income of ~~$4.6million~~$102.7 million and in ~~2014~~2017 we recorded other ~~net expenses~~income of ~~$160.9~~$167.6 million. ~~In 2014, as per~~The decrease was mainly due to impairment charges and a full year amortization taken on intangible assets of our ~~usual results, we had a net expense position resulting from provisions mainly related to regulatory fines, which were not present in 2015.~~AQF acquisition within our U.S. operations.

Operating income in ~~2015~~2018 totaled ~~$5,053.5~~$3,708.0 million, ~~this represented~~ a decrease ~~of $288.3 million or 5.4%, when~~ compared to the operating income of ~~$5,341.9~~$5,291.3 million reached in ~~2014. This~~2017. The decrease in operating income is mainly ~~attributed~~due to an increase in cost of sales and ~~general,~~ selling and administrative expenses, each as ~~explained above.~~described above, and we were not able to fully translate these increases into our sales prices.

The operating margin in ~~2015~~2018 and ~~2014~~2017 was ~~10.9%~~6.1% and ~~12.8%~~9.1%, respectively.

In ~~2015,~~2018, we reported net financial income of ~~$446.6million,~~$808.6, compared to net financial income of ~~$246.9~~$747.6 million in ~~2014.~~2017. This increase was mainly due to an increase in our financial income driven by our higher cash position and higher interest ~~income~~rates on our investments and a higher level of foreign currency exchange gains. Our foreign currency exchange gains are mainly the result of our ability to obtain U.S. dollars at a lower cost than the average cost in the market.Mexican peso denominated investments.

Financial income of ~~$593.8million~~$1,140.7 million in ~~2015~~2018 was mainly attributable to a ~~$482.4~~$1,073.0 million of interest income and a ~~$95.4~~$39.3 million in foreign currency exchange gain. This ~~gain~~financial income was partially offset by ~~$94.0~~$185.9 million in interest expense and ~~a $53.3~~$146.3 million in commissions and ~~financial expenses.~~

Financial income of $246.9 million in 2014 was mainly due to $347.4 million of interest income and a $19.9 million in foreign currency exchange gain. This gain was partially offset by $87.6 million in interest expense and $30.5 million in commissions andother financial expenses.

For more details see Note 2829 to our Audited Consolidated Financial Statements.

The following table sets forth our tax position for each of the periods indicated and is described in more detail in Note 2021 to our Audited Consolidated Financial Statements included herein:

In ~~2015,~~2018, total income tax expense was ~~$1,680.6~~$1,155.0 million, compared to income tax expense of ~~$1,656.1~~$1,084.4 million in ~~2014.~~2017. This ~~slight~~ increase is mainly attributable to a ~~$112.5~~$535.2 million ~~increase of current~~variance in deferred income ~~taxes and;~~taxes; partially offset by a ~~$88.0~~$464.7 decrease in ~~deferred~~current income ~~tax.~~taxes.

The effective income tax rate was ~~30.6%~~26.0% in ~~2015~~2018 and ~~29.6%~~18.0% in ~~2014. This~~2017. The increase in total income taxes expense was mainly due ~~to the fact that we had tax credits in 2014, which were not present in 2015.~~to:

Deferred income tax liability in 2015 increased $286.8 million, as a result of the following movements in temporary differences during the year: (i) an increase of $212.5 million for inventories, (ii) $96.0 million for prepaid expenses and (iii) $27.1 million for accounts payable. This increase was partially offset by decreases of $18.3 million for goodwill.

The following table sets forth our profit for the year for each of the periods indicated:

As a result of the factors detailed above, our net income for ~~2015~~2018 totaled ~~$3,819.5~~$3,361.6 million, or ~~$6.36~~$5.58 per basic and diluted share ($~~76.30~~67.00 per ADR), which isrepresents a ~~$113.1million~~$1,592.9 million or ~~2.9%~~32.2% decrease ~~when~~ compared to ~~$3,932.7 million~~the $4,954.4 in net income or ~~$6.55~~$8.25 per basic and diluted share ($~~78.66~~98.97 per ADR), reported in ~~2014.~~2017.

Our consolidated net margin in ~~2015~~2018 was ~~8.3%~~5.5% compared to a consolidated net margin of ~~9.4%~~8.5% in ~~2014.~~2017.

The following table shows reconciliation of EBITDA and EBITDA margin to consolidated net income for each of the periods indicated.

EBITDA result in ~~2015~~2018 and ~~2014~~2017 reached ~~$5,873.4and $6,147.6~~$4,993.1 and $6,424.1 million, respectively, representing an EBITDA margin of ~~12.7%~~8.2% and ~~14.7%~~11.1%.

The following table sets forth, for each of the periods indicated, our net revenues by main product lines as a percentage of total net revenues, in each period:

Net sales in 2014 totaled $41,779.1 million, $2,068.4 million more, or a 5.2% increase, in net sales, when compared to the $39,710.7 million in net sales reported in 2013. This increase was mainly due to a higher volume sold and stable demand in our core business lines.

In ~~2014,~~2017, net sales totaled $58,050.0 million, $6,029.7 million or 11.6% more than the $52,020.3 million reported in the same period in 2016. The sales increase is mainly attributed to (i) higher volume sold and (ii) higher poultry prices.

In 2017, sales of our U.S. ~~operation~~operations represented ~~20.2%~~28.4% of our total sales, compared ~~to 21.4%~~with 25.8% in ~~2013. During 2014, we slightly reduced the volume produced in our U.S. operation, mainly to increase efficiencies, and our U.S. operation reached an historical level of operating income and EBITDA.~~2016.

The Company’s sales of ~~chicken~~poultry products increased ~~7.1%~~12.0% in ~~2014,~~2017, mainly as a result of an 8.7% increase in poultry prices and a ~~6.2%~~3.3% increase in volume sold. The increase in volume and ~~a 0.9%~~price was due in part to an increase in ~~chicken prices.~~

~~Egg sales decreased 9.8%~~our U.S. operations due to the acquisition of AQF in ~~2014, as a result of a 10.3% decrease in volume sold.~~July 2017.

Sales of ~~balanced feed decreased 4.2% in 2014, resulting from a 5.4% decrease in prices, which was partially offset by a 1.4%~~the “others” lines increased 7.8% due mainly to an increase of 5.2% in volume sold. ~~In particular, sales of pet-food products increased one year after we opened our own facility for the production of pet-food products.~~

~~In 2014, the other business lines showed good performance; in particular, sales of swine were strong, as prices were high for most of 2014.~~

The following table sets forth a breakdown of our ~~operating results~~cost of sales for each of the periods indicated:

Our total cost of sales ~~decreased $681.6~~increased $4,867.9 million or ~~2.1%~~11.4% in ~~2014,~~2017, when compared to the previous year.

This ~~decrease~~increase was mainly ~~driven by a decline in our cost of sales per unit, equivalent~~attributable to a ~~decline of $2,025.9 million,~~higher volume sold, higher inflation rate in ~~our total cost of sales, mainly~~Mexico and a mix effect, due to a ~~reduction in the cost~~higher percentage of our main raw materials, which represented $1,876.2 million or 92.6% of the total decrease. This decrease was partially offset by an increase of 4.0% in volumes sold, which represented a $1,369.7 million increasefurther processed products in our total cost of sales. The increase in volume was primarily the result of an increase in our sales of chicken products (within our poultry segment), as we did not experience the avian influenza outbreak that affected our chickenUS operation, which have a higher production ~~in 2013.~~cost.

The largest single component of our cost of sales is the cost related to our balanced feed raw materials, which has accounted for approximately ~~68%~~65% of our total cost of sales in the last ~~few~~three years. The main components of our balanced feed raw materials are corn, sorghum and soybean meal and all of the components of raw materials are subject to high volatility caused by supply, weather conditions and exchange rates, among others.

Besides balanced feed costs, the cost of sales includes other factors such as salaries and wages and energy costs. These two factors represented approximately ~~8.5%~~9% and ~~5.0%~~5% of our total cost of sales, respectively, in the last ~~few~~three years.

In ~~2014,~~2017, general, selling and administrative expenses totaled ~~$3,781.3~~$5,423.4 million, compared to ~~$3,291.0~~the $4,847.9 million reported in ~~2013,~~2016, representing an increase of ~~$490.3~~$575.5 million or ~~14.9% that~~11.9%. Approximately 31% of this increase was ~~primarily attributed~~attributable to more volume ~~sold.~~sold, and 55% was due to our U.S. operations where we reinforced our structure, mainly after the acquisition of AQF in July 2017.

The rest of this increase was the result of ~~several projects the Company implemented to improve its go-to-market strategy and supply chain procedures, as well as~~additional expenses incurred in the implementation of ~~a new structure aimed at improving~~projects to further improve our ~~closeness~~operating efficiency, the services we provide to our customers and ~~increasing~~ our ~~flexibility in order to better serve~~understanding of the needs of our customers.

We expect to experience additional benefits resulting from these projects in the upcoming years.

In ~~2014~~2017 and ~~2013,~~2016, our general, selling and administrative expenses represented ~~9.1% and 8.3%~~9.3% of total ~~sales respectively.~~sales.

The main components that comprised our general, selling and administrative expenses in the past ~~few~~three years are the following: freight and transportation equipment expenses (about ~~36%~~38%), labor (about 32%) and publicity (about ~~4.5%~~4%), with no significant variation in these percentages.

Other income (expense) includes mainly the gains and losses on sales of ~~unused fixed assets as well~~by-products, sales of hens, ~~and other by-products.~~

In 2014, we recognized other net expenses of $160.9 million and in 2013, we recorded other net income of $30.7 million, notably from a gain on the sale of land at one of our farms in the southern region of the country. In 2014, as per our usual results, we had a net expense position resulting from provisions related to (1)asset disposal, sales of unused fixed assets and ~~(2) regulatory fines.~~others.

In 2017, we recognized other income of $167.6 million and in 2016 we recorded other income of $260.2 million. The decrease was due mainly to a lesser sale of unused fixed assets, partially offset by a bargain purchase gain of $87.5 million from the La Perla acquisition.

Operating income in ~~2014~~2017 totaled ~~$5,341.9~~$5,291.3 million, ~~this represented~~ an increase ~~of $2,068.1 million or 63.2%, when~~ compared to the operating income of ~~$3,273.8~~$4,797.6 million reached in ~~2013. This~~2016. The increase in operating income is mainly ~~attributed~~due to an increase in our gross profit given the increase in our net revenue and decrease in general, selling and administrative expenses as a percentage of sales, ~~and a reduction in cost of sales.~~each as described above.

The operating margin in ~~2014~~2017 and ~~2013 were 12.8%~~2016 was 9.1% and ~~8.2%~~9.2% respectively. This decrease was mainly due to a decrease in other income as described above.

In ~~2014,~~2017, we reported net financial income of ~~$246.9~~$747.6 million, compared to net financial income of ~~$118.4~~$797.0 million in ~~2013.~~2016. This ~~increase~~decrease was mainly due to ~~the 46.9% decrease~~an increase in our financial ~~expense~~expenses driven by ~~lower commissions and financial expenses.~~higher interest rates on our Mexican peso denominated debt.

Financial income of ~~$367.2~~$1,087.6 million in ~~2014~~2017 was mainly attributable to ~~$347.4~~a $848.1 million of interest income and a ~~$19.9~~$230.5 million in foreign currency exchange gain. This gain was partially offset by ~~$87.6~~$188.6 million in interest expense and a ~~$30.5~~$84.1 million decrease related to changes in ~~commissions and~~valuation of our financial ~~expenses.~~instruments.

For more details see Note 29 to our Audited Consolidated Financial income of $344.8 million in 2013 was mainly due to $314.2 million of interest income and a $28.1 million in foreign currency exchange gain. This gain was partially offset by $97.0 million in interest expense and $129.3 million in commissions and financial expenses.Statements.

The following table sets forth our tax position for each of the periods ~~indicated:~~indicated and is described in more detail in Note 21 to our Audited Consolidated Financial Statements included herein:

In ~~2014,~~2017, total income tax expense was ~~$1,656.1~~$1,084.4 million, compared to income tax expense of ~~$1,350.4~~$1,643.4 million in ~~2013.~~2016. This ~~increase~~decrease is mainly attributable to ~~$165.0~~a $1,010.0 million ~~of current income taxes in our U.S. operation and a $74.1 increase~~decrease in deferred income ~~taxes in our U.S. operation. The main reason for this~~taxes; partially offset by a $451.0 increase in ~~taxes in our U.S. operation is the improved in results in our U.S. operation in 2014 compared with 2013.~~current income taxes.

~~Through December 31, 2013, the Company was subject to a simplified tax regime, whereby its statutory~~The effective income tax rate was ~~21%. As a result of changes~~18.0% in ~~the Mexican Tax Law enacted~~2017 and 29.4% in ~~2013, such simplified regime~~2016. The decrease was eliminated and beginning in 2014, the Company is subject to a new and equivalent regime named regime for agriculture, livestock, forestry and fisheries, which applies to companies exclusively dedicated to these activities and applies a 30% tax rate. The effects on deferred income taxes are reflected in tax expense in 2013 as the changes were enacted in 2013, resulting in a $674.8 million charge.mainly due to;

Deferred income tax liability in 2014 increased $346.1 million, as a result of the following movements in temporary differences during the year: (i) an increase of $229.5 in accounts payable, (ii) $94.5 million for accounts receivable, (iii) $66.9 million for tax loss carry forwards and (iv) $40.8 million for prepaid expenses. This increase was partially offset by decreases of $59.1 million for inventories, $75.6 million for property plant and equipment, and $16.1 million in other provisions.

The following table sets forth our profit for the year for each of the periods indicated:

As a result of the factors detailed above, our net income for ~~2014~~2017 totaled ~~$3,932.7~~$4,954.4 million, or ~~$6.55~~$8.25 per basic and diluted share ($~~78.66~~98.97 per ADR), which isrepresents a ~~$1,890.9~~$1,003.3 million or ~~92.6%~~25.4% increase ~~when~~ compared to ~~$2,041.8~~the $3,951.2 million in net income or ~~$3.40~~$6.58 per basic and diluted share ($~~40.84~~78.90 per ADR), reported in ~~2013.~~2016.

Our consolidated net margin in ~~2014~~2017 was ~~9.4%~~8.5% compared to a consolidated net margin of ~~5.1%~~7.6% in ~~2013.~~2016.

The following table shows reconciliation of EBITDA and EBITDA margin to consolidated net income for each of the periods indicated.

EBITDA result in ~~2014~~2017 and ~~2013~~2016 reached ~~$6,147.6~~$6,424.1 and ~~$4,090.5~~$5,777.0 million respectively, representing an EBITDA margin for each year of ~~14.7% and 10.3%~~11.1%. ~~These represent historically high results for the Company, mainly due to strong net sales together with decreases in cost of sales.~~

The following information is a summary of the fiscal and accounting policies that could materially affect the Company’s operations or investments.

The Company and each of its subsidiaries file separate income tax returns. Through December 31, 2013, BSACV, the Company’s main subsidiary, was subject to the simplified regime, with a tax rate of 21%. Beginning in January 1, 2014, BSACV is now subject to a new regime for agriculture, livestock, forestry and fisheries, which applies to companies exclusively dedicated to these activities and in our case it applies a 30% tax rate.

Our subsidiary ~~O.K. Industries~~Bachoco, US LLC, is located in the U.S. and it has ~~a different~~the same fiscal period ~~than~~as the rest of the subsidiaries located in Mexico. ~~O.K. Industries’ fiscal year ends~~

The income tax rate for Bachoco, USA LLC was 35.0%, (prior to change resulting from the U.S. tax reform described in ~~April each year, while~~ the ~~rest of~~paragraph below).

On December 22, 2017, the ~~Companies end in December.~~U.S. government enacted comprehensive tax legislation, which revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35.0% to 21.0%

For more information please see Note 2021 of the Audited Consolidated Financial Statements.

~~Starting on January 1, 2014, the simplified tax regime, the Flat Rate Business Tax (“IETU”) and the cash deposit cash (“IDE”) laws were eliminated.~~

After a 2010 tax reform, the tax rate was increased from 19.0% to 21.0% in the simplified regime and from 28.0% to 30.0% in the general regime. In 2013, the Mexican Government approved further changes, and as a result the income tax subsidy for the simplified regime phased out.

Therefore, for fiscal year 2011 to 2013 the income tax rate was 21.0% for the simplified regime and 30.0% for the general regime. As of 2014, and in accordance with new regulations approved in 2013, the income tax for both regimes is 30.0%.

The main impact on income taxes for the Company, resulting from the tax reform enacted in 2013, was the increase from 21% to 30% of the tax rate applicable to BSACV, the Company’s main subsidiary, and the limitation on the deductibility by 53% of expenditures for wages that are exempt income for the employees.

The IETU was published on October 1, 2007 and it came into effect on January 1, 2008. The IETU rate was 17.5% in 2013, 2012 and 2011 and was based on cash flows, and limited certain deductions. Through December 31, 2013, IETU was required to be paid only when it was greater than the income tax to be paid in any given year. As a result of the aforementioned changes in Mexican Tax Law in 2013, IETU was eliminated. As the Company had projected that it would only pay regular income tax, it did not have any deferred income taxes calculated under the IETU regime, such that elimination of IETU did not have a significant impact on the Company’s results.

The following are the critical judgments, apart from those involving estimations, that the Company’s management has made in the process of applying its accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements.

Management uses its professional judgment to determine whether the acquisition of a group of assets constitutes a business combination. This determination may have a significant impact in how the acquired assets and assumed liabilities are accounted for, both at the initial recognition and subsequently.

The Company estimates the fair value of biological assets as the price that would be received or paid in an orderly transaction between market participants at the measurement date. As part of the estimate, the Company considers the maturity periods of such assets, the necessary time span for the biological assets to reach a productive stage, as well as future economic benefits obtained.

The balance of current biological assets is integrated by hatching eggs, growing pigs and growing poultry, while the balance of non-current biological assets is integrated by poultry in its different production stages and breeder pigs.

Non-current biological assets are valued at their production cost less accumulated depreciation or accumulated impairment losses, because the Company believes that there is no observable or reliable market for such assets. Also, the Company believes that there is no reliable method for measuring the fair value of non-current biological assets. Current biological assets are valued at fair value when there is an observable market, less sale expenses.

The Company’s chicken and egg operating segments are aggregated ~~into~~to present one reportable segment (Poultry) ~~because~~as they have similar products and services, production processes, ~~types~~classes of customers, methods used for distribution, ~~methods,~~the nature of the regulatory environment in which they operate, and similar economic characteristics as evidenced by similar five-year trends in gross profit margins. These factors are evaluated at least annually.

Below are critical estimates and assumptions in the application of accounting policies with significant effects on the amounts recognized in the consolidated financial statements, as well as information on assumptions and uncertainty of estimates that have a significant risk of resulting in a material adjustment in future years.

~~Assessments to determine the recoverability of deferred tax assets~~Expected credit losses on accounts receivable

~~As part~~The expected credit losses on financial assets are estimated using a provision matrix based on the Company's historical experience of credit losses, adjusted for factors that are specific to each of the ~~tax analysis carried out by the Company, on~~Company's customer and debtor groups, general economic conditions and an ~~annual basis the Company prepares projections~~assessment of ~~taxable income for purposes of determining if taxable income will be sufficient to recover the benefit of deferred tax assets recognized from deductible temporary differences, including tax losses~~both current and ~~other tax credits.~~forecast conditions at each reporting date.

Useful lives and residual values of property, plant and equipment are used to determine depreciation expense of such assets and are defined according to the analysis by internal and external specialists. Useful lives and residual values are reviewed periodically at least once a year, based on the current conditions of the assets and the estimate of the period during which they will continue to generate economic benefits to the Company. If there are changes in the estimate, measurement of the net carrying amount of assets and the corresponding depreciation expense are prospectively affected.

Fair value is a measurement based on the price a market participant would be willing to receive to sell an asset or pay to transfer a liability, and is not a measure specific to the Company. For some assets and liabilities, observable market transactions or market information may be available. For other assets and liabilities, observable market transactions and market information may not be available. However, the purpose of a measurement at fair value in both cases is to estimate the price at which an orderly transaction to sell the asset or to transfer the liabilities would be carried out among the market participants at the date of measurement under current market conditions.

When the price of an identical asset or liability is not observable, the Company determines the fair value using another valuation technique which maximizes the use of relevant observable information and minimizes the use of unobservable information. As the fair value is a measurement based on the market, it is measured using the assumptions that market participants would use when they fix a price to an asset or liability, including assumptions about risk.

The carrying amount of long-lived assets is reviewed for impairment when situations or changes in circumstances indicate that it is not recoverable, except for goodwill which is reviewed on an annual basis, at a minimum. If there are indicators of impairment, a review is carried out to determine whether the carrying amount exceeds its recoverable value and whether it is impaired. The recoverable value is the highest of the asset’s fair value, less selling costs, and its value in use which is the present value of the future estimated cash flows generated by the asset. The value in use calculation requires the Company’s management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

The Company uses various assumptions to determine the best estimate for its employee retirement benefits. Assumptions and estimates are established in conjunction with independent actuaries. These assumptions include demographic hypotheses, discount rates and expected increases in remunerations and future employee service periods, among others. Although the assumptions are deemed appropriate, a change in such assumptions could affect the value of employee benefit liabilities and the results of the period in which such a change occurs.

The assessment of such contingencies requires the exercise of significant judgments and estimates on the possible outcomes of those future events. The Company assesses the probability of loss arising from lawsuits and other contingencies with the assistance of its legal advisors. These estimates are reconsidered periodically at each reporting period.

IFRS 9,Financial Instruments issued in July 2014, is the replacement of IAS 39,Financial Instruments: Recognition and Measurementand applies to annual reporting periods on or after January 1, 2018. This new standard establishes a model of expected loss and makes changes to the classification and measurement requirements for financial assets and liabilities.

IFRS 15,Revenue from Contracts with Customers, issued in May 2014 and applies to annual reporting periods beginning on or after January 1, 2018. Revenue is recognized as control is passed, either over time or at a point in time. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.

We have not recorded any material effects to our Audited Consolidated Financial Statements as a result of these new IFRS standards, see Note 2, (e) of our Audited Consolidated Financial Statements for more details.

In addition, new standards and interpretations have been issued by not yet adopted in our Audited Consolidated Financial Statements, such as IFRS 16, among others:

IFRS 16,Leases, went into effect on January 1, 2019 and introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset’s value is not material. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Lessor accounting however remains largely unchanged and the distinction between operating and finance leases is retained. For purposes of the initial application of the standard, we took the option of recognizing the cumulative effect on the initial adoption date (January 1, 2019), and did not prepare comparative information. As a preliminary assessment, the amount to be recognized by the Company as a right-of-use asset and the corresponding liability as of January 1, 2019 will range from $900,000 to $950,000, with respect to all such leases.

We are a holding company with no significant operations of our ~~own.~~own, and we receive dividends from our operating subsidiaries from time to time. Our principal sources of liquidity are:

TOTAL CASH, CASH EQUIVALENTS, INVESTMENT IN SECURITIES AND DERIVATIVES FINANCIAL INSTRUMENTS

In ~~2015,~~2018, cash and cash equivalents, and investments in securities at fair value through profit or loss totaled ~~$15,290.1~~$18,458.5 million, ~~$3,321.8~~$1,218.4 million or ~~27.8%~~7.1%, more than ~~$11,968.3~~the $17,240.1 million recorded in ~~2014. This increase is~~2017, mainly due to the net cash provided from our ~~positive~~ operating ~~results in 2015.~~

~~As of December 31, 2015, we held~~activities. Of this total amount, $0.6 million corresponded to cash and cash equivalents in our U.S. ~~operations equivalent to $535.7 million.~~operations.

~~Accounts~~In 2018 accounts receivable decreased ~~$441.2million,~~$140.5 million, or ~~14.8%~~3.9%, when compared to ~~2014.~~2017. This decrease is mainly due to ~~a $438.4~~decreases of $149.8 million ~~decrease~~in trade receivables and $43.1 million in recoverable ~~value added~~value-added tax, ~~and other recoverable taxes, $263.7 million of other receivables,~~ which was partially offset by an increase of ~~$178.8~~$57.7 million in ~~trade receivables.~~income tax receivable.

For more detail, please see Note 9 of the Audited Consolidated Financial Statements.

In ~~2015,~~2018, accounts payable increased ~~$626.6~~$456.0 million or ~~15.8%~~9.6% when compared to ~~2014.~~2017. This increase is mainly due to a ~~$543.1~~$311.8 million increase in trade payables and ~~$39.0~~a $118.1 million ~~accrued employee benefits.~~increase in sundry creditors and expenses payable.

For more detail, please see Note 1819 of the Audited Consolidated Financial Statements.

As of December 31, ~~2015,~~2018, total debt was ~~$4,127.0~~$5,037.6 million, ~~an increase~~a decrease of ~~$1,676.5~~$211.4 million or ~~68.4%~~4.0% when compared to ~~$2,450.5~~$5,249.0 million of total debt as of December 31, ~~2014.~~2017. This ~~additional~~decrease was due to payments we made on our Mexican peso-denominated debt ~~was comprised of short-term debt~~due in ~~U.S. dollars terms we entered into to counter the economic volatility we faced at the end of the year and long-term debt we entered into at low interest rates.~~2018.

Most of our long-term debt consists of a Mexican bond issuance of $1,500.0 million in the ~~second~~third quarter of ~~2012,~~2017, due in ~~2017.~~2022. This bond accrues interest at the reference rate of 28-day TIIE (“Equilibrium Interbank Interest Rate”), plus accruing interest at TIIE + ~~0.60%~~0.31%. The funds obtained were ~~used~~ primarily used for liability management purposes as we used the proceeds to ~~pre-pay certain outstanding debt, some of which was previously incurred~~repay the bonds we issued in ~~our acquisition of OK Foods.~~2012, due in 2017

For details of maturity of our debt and the prevailing interest rates, see Note 1718 of our Audited Consolidated Financial Statements.

The working capital in the table above was calculated as current assets minus current liabilities.

In ~~2015,~~2018, our working capital increased ~~$2,882.7~~$1,694.2 million or ~~19.0%~~8.9% when compared to year ~~2014,~~2017, due primarily to increases in our level of cash, which in turn resulted from an increase in cash from operating activities, ~~and from financing activities.~~as well as a decrease in income taxes payable.

We believe our current level of working capital is sufficient for the regular course of our operations. Nevertheless, our working capital needs may be susceptible to change, as they depend mainly on the cost of our main raw materials which affect our inventory cost, and on the amount of accounts payable. Our working capital can also change from one quarter to another as the cost of buying domestic raw material depends of the given harvest season.

In ~~2014,~~2017, cash and cash equivalents, ~~primary financial instruments~~ and ~~derivative financial instruments~~investments in securities at fair value through profit or loss totaled ~~$11,968.3~~$17,240.1 million, ~~$4,235.6~~$1,580.3 million or ~~54.8%~~10.1%, more than the ~~$7,732.7~~$15,659.8 million recorded in ~~2013. The increase was~~2016, mainly due to the net cash provided from our ~~strong operations~~operating activities. Of this total amount, $62.8 million corresponded to cash and cash equivalents in ~~2014.~~our U.S. operations.

In ~~2014,~~2017 accounts receivable ~~increased $654.7~~decreased $2.3 million, or ~~28.2%~~0.1%, when compared to ~~2013.~~2016. This ~~increase was~~decrease is mainly due to ~~a $373.6~~decreases of $58.2 million on income tax receivable, $18.3 million in recoverable value-added tax and $117.9 in other receivables, which was partially offset by an increase of $191.6 million increase in trade receivables.

For more detail, please see Note 9 of ~~recoverable value added tax and other receivables as of December 31, 2014 when compared to 2013.~~the Audited Consolidated Financial Statements.

In ~~2014,~~2017, accounts payable increased ~~$594.9~~$195.2 million or ~~17.6%~~4.3% when compared to ~~2013.~~2016. This increase ~~was~~is mainly due to ~~a $492.5~~$95.1 million increase in ~~payments to suppliers~~direct employee benefits, $37.8 million increase in trade payables, $30.5 million increase in sundry creditors and ~~$81.9~~expenses payable, and $27.2 million increase in retained payroll taxes and other local taxes.

For more detail, please see Note 19 of ~~accrued expenses.~~the Audited Consolidated Financial Statements.

As of December 31, ~~2014,~~2017, total debt was ~~$2,450.5~~$5,249.0 million, an increase of ~~$382.7~~$1,201.1 million or ~~18.5%~~29.7% when compared to ~~the $2,067.8~~$4,047.9 million of total debt as of December 31, ~~2013. This additional debt was mainly short-term debt acquired at low interest rates.~~2016.

Most of our long-term debt consists of a Mexican bond issuance of $1,500.0 million ~~during~~in the ~~second~~third quarter of ~~2012,~~2017, due in ~~2017.~~2022. This bond accrues interest at the reference rate of 28-day TIIE (“Equilibrium Interbank Interest Rate”), plus accruing interest at TIIE + ~~0.60%~~0.31%. The funds obtained were primarily used ~~primarily~~for liability management purposes as we used the proceeds to ~~pre-pay certain outstanding debt, some of which was previously incurred~~repay the bonds we issued in 2012, due in 2017

The increase in our ~~acquisition~~short-term debt was mainly due to U.S. dollar denominated debt used to finance part of ~~OK Foods.~~our acquisitions of La Perla and AQF.

For details of maturity of our debt and the prevailing interest rates, see Note 18 of our Audited Consolidated Financial Statements.

The working capital in the table above was calculated as current assets minus current liabilities.

In ~~2014,~~2017, our working capital increased ~~$4,242.9~~$381.8 million or ~~38.7%~~2.1% when compared to ~~2013,~~year 2016, due primarily to increases in our level of cash, which in turn resulted from an increase in cash from operating activities and from financing ~~activities.~~activities, as well as an increase in inventories.

Most of the capital investments in the past years were financed with cash flows generated from our own operations.

In ~~2015,~~2018, we made capital expenditures of $1,982.6, a decrease when compared to the $3,513.4 million spent in 2017 when we made two acquisitions. Capital expenditures made in 2018 where mainly allocated to our organic growth strategies and some productivity projects in order to alleviate bottle neck in different parts of our process and supply chain.

In 2017, we made capital expenditures of $3,513.4 million, which were mainly allocated towards (i) our organic growth plans by investing in projects that will make our processes more efficient as well as alleviating bottlenecks and in the replacement of part of our transportation fleet and of other equipment in all of our facilities (ii) part of our acquisitions of La Perla and AQF.

In 2016, capital expenditures totaled ~~$1,824.5~~$2,459.7 million, an increase when compared to the ~~$1,241.1~~$1,824.5 million expended in ~~2014.~~2015. In ~~2015,~~2016, the Company implemented new projects for organic growth, aiming to alleviate certain bottlenecks in various processes, thereby increasing production, and to improve productivity in both of our U.S. and Mexican operations.

In 2014 and 2013, capital expenditures totaled $1,241.1 and $587.4 million respectively, incurred primarily in (i) the replacement of our transportation fleet and other equipment in our facilities, (ii) the completion of certain expansion projects (iii) the implementation of productivity projects in our chicken farms and in some processing plants, (iv) increasing eggs production capacity and (v) additional IT systems.

The Company plans to carry out several projects, primarily in Mexico, to gradually increase our poultry production over the course of the next few years.

We have entered into operating leases for certain offices, production sites, computer equipment and vehicles. These agreements have terms ranging between one and five years and some of them contain renewal options.

See Note 2324 to our Audited Consolidated Financial Statements for more information.

In the normal course of our business, we use various financial instruments to hedge exposure to financial risks involving fluctuations in currency exchange rates and commodity price risk in connection with fluctuations in the prices for our feed ingredients.

The main risk that the Company faces is the volatility in the Mexican ~~peso-dollar~~peso-U.S. dollar exchange rate.

A large variation in Mexican ~~peso-dollar~~peso-U.S. dollar exchange rate could affect our financial results, as a greater percentage of our sales are made in pesos, and a large percentage of our purchases of raw material are made in U.S. dollars.

As part of our normal operations, we purchase financial derivative instruments in order to ensure greater certainty for our purchases in U.S. dollars. We plan based on a six month period into the future and, depending on the expected uncertainty for that period, decide if it is economically advisable to purchase or sell any hedging instrument.

We have followed different strategies with respect to derivatives which involved call and put options in U.S. dollars. Our risk committee approves any change in policies and reviews the application of current policies.

See Note 8 to our Audited Consolidated Financial Statements for more information.

In ~~2015,~~2018, our bank debt denominated in U.S. dollars totaled ~~$1,462.9~~$2,757.5 million pesos (equivalent to ~~$85.0~~$140.2 million USD), ~~$1,241.6~~$5.1 million pesos, or ~~561.2%~~0.2% higher than the ~~$221.3~~$2,752.4 million pesos (equivalent to ~~$15.0~~$140.0 million USD) in ~~2014.~~2017. The short-term bank debt in U.S. dollars had an annual average interest rate of ~~1.05%~~2.26% in ~~2015, 1.10%~~2018, and 1.22% in ~~2014.~~2017.

The Company’s risk committee approves any change in policies and reviews the application of current policies.

At the end of ~~2015,~~2018, we ~~have~~had assets denominated in U.S. dollars of ~~$1,647.4~~$7,943.1 million pesos and liabilities of ~~$3,903.6~~$6,587.2 million pesos, resulting in a net ~~liability~~ position of ~~$2,256.2~~$1,355.9 million pesos (or ~~$131.1~~$68.9 million USD).

For more details see Note 8 and Note 1718 to our Audited Consolidated Financial Statements.

In ~~2014,~~2017, our bank debt denominated in U.S. dollars totaled ~~$221.3 million (equivalent to $15.0 million USD), $171.5 million or 43.6% lower than the $392.7~~$2,752.4 million pesos (equivalent to ~~$30.0~~$140.0 million USD), $1,307.6 million pesos, or 90.5% higher than the $1,444.8 million pesos (equivalent to $70.0 million USD) in ~~2013.~~2016. The short-term bank debt in U.S. dollars had an annual average interest rate of ~~1.10%~~1.22% in ~~2014~~2017, and ~~1.49%~~1.04% in ~~2013.~~2016.

The Company’s risk committee approves any change in policies and reviews the application of current policies.

At the end of ~~2014,~~2017, we had assets denominated in U.S. dollars of ~~$1,097.0~~$7,011.1 million pesos and liabilities of ~~$2,691.1~~$5,796.9 million pesos, resulting in a net ~~liability~~ position of ~~$108.1~~$1,214.2 million ~~dollars~~pesos (or ~~$1,594.0~~$61.8 million ~~pesos)~~USD).

The most significant trends that might have a negative impact on the Company’s operating performance are the following:

In ~~2015,~~2018, except for our operating lease agreements, we do not have off-balance sheet arrangements that might have current or future effects on the Company’s financial condition. Disclosure of operating leases is included in this Annual Report under Item 5-B.

See Note ~~17a and b~~18 of our Audited Consolidated Financial Statements for more detail.

The Company has certain leases related to operating assets, including farms and administrative offices. The following table summarizes the Company´s contractual obligations as of December 31, ~~2015.~~2018. The table does not include current installments of long-term debt, accounts payable or pension liabilities.

Operating lease expense for ~~2015~~2018 was ~~$359.7~~$453.2 and, ~~current installments made under long term debt were $0.0 million;~~ the Company did not make early payments of its long-term debt.

The Company has entered into grain supply agreements with third parties as part of the regular course of its operations. However, the payment terms are not fixed for which reason no amounts have been included in the table above.

The following table sets forth the maturity amounts of interest to be paid in connection with the long-term debt described above.

The Company’s future minimum rental payments required under its operating leases having an initial or remaining non-cancellable lease term in excess of one year as of December 31, 2015, and for each of the five succeeding years, are as follows:

We produce and sell our products throughout Mexico and in parts of the United States. As described further below, our operations are closely controlled by our majority shareholder, which directs our business strategy and operations through various committees that are made up of members of our Board of Directors (“BOD”). The principal BOD committees include the Executive Committee (“EC”), the Investments Committee (“IC”) and the Audit and Corporate Practices Committee (“ACPC”) (collectively, the “BOD Committees”). The BOD Committees, in turn, rely on the Chief Executive Officer (“CEO”) who oversees a group of managers, comprised of regional operating managers and executive managers, to execute the Company’s operating plan.

The Chief Operating Decision Maker (CODM) role is carried out by our BOD. The BOD is integrated by eight Proprietary Shareholders Directors, four Independent Directors and four Alternate Directors.

We are controlled by the Robinson Bours family, who collectively own 73.25% of our outstanding voting shares. The Robinson Bours family plays an active role in managing the Company through its participation in our BOD, where it holds a majority vote thereby granting it control over all of the BOD’s committees, activities and decisions.

In addition to carrying out the traditional roles of a typical board of directors, such as authorizing annual budgets, major investments and the hiring and compensation of executive management, the activities of our BOD also encompass managing certain key aspects of the Company’s operations, such as assuring the production of the Company’s products, exploiting growth opportunities and maximizing profitability. The BOD relies on its committees to carry out such management functions.

The EC is an intermediate management body, comprised entirely by Robinson Bours family members, that meets at least 10 times a year with the Company’s CEO. During such meetings, the following matters, among others, are addressed:

The IC is comprised of the same members as the EC and is responsible for analyzing all investment and capital expenditure proposals and meets at least six times a year with the CEO. Based on their analysis, the IC and the CEO identify which investment and capital expenditure proposals to submit to the BOD for approval.

The ACPC is comprised mainly by independent directors. The mandate of the ACPC is to establish and monitor controls and procedures in order to ensure that the financial information we distribute is useful, appropriate and reliable and accurately reflects our financial position. On November 3, 2015, during our shareholders’ ordinary meeting, Mr. Guillermo Ochoa Maciel was elected president of the ACPC. Mr. Ochoa Maciel possesses all the characteristics included in the definition of an “audit committee financial expert” within the meaning of Item 16A. He was appointed as an independent member of the BOD and as an independent director financial expert.

Our CEO is the only management team member that reports directly to the BOD, and is responsible for executing the operating plans for all product lines that are developed jointly between the BOD’s committees and the CEO, and approved by the BOD. Given the CEO’s responsibilities in overseeing the Company’s operating managers, which are discussed in more detail below, we have considered whether the CEO plays the role of CODM for the Company. However, in our judgment, the BOD is the CODM, by virtue of the BOD’s close involvement in the CEO’s activities, the resulting overlap in the respective functions of the CEO and the BOD and the BOD’s ability to override decisions taken by the CEO.

The individual responsible for reporting to the BOD and executing the Company’s operating plan is our CEO.

The financial information that is reviewed by the CODM in preparation for the meetings and the financial information that is discussed during those meetings is comprised as follows:

The CODM normally makes additional requests for supplemental financial information, which vary depending on the circumstances. Examples of such supplemental financial information, which is disaggregated by product, include:

The CEO formally meets with the full BOD four times a year, usually in January, April, August and October of each year.

The financial information that is reviewed by the CODM in preparation for the meetings and the financial information that is discussed during those meetings is comprised as follows:

The Board of Directors is responsible for the management of our business. The Board of Directors consists of an odd number of directors, never fewer than five, and corresponding alternate directors, each of whom is elected for a term of one year.

Alternate directors are authorized to serve on the Board of Directors in place of directors who are unable to attend meetings or otherwise participate in the activities of the Board of Directors.

At our annual stockholders’ meeting held on April ~~22, 2015,~~25, 2018, we ratified the membership of our Board of Directors.

Additionally, at our general ordinary stockholders’ meeting held on November 3, 2015, Mr. Guillermo Ochoa Maciel was appointed as an independent member of the Board of Directors and as an independent director financial expert.

Enrique Robinson Bours Almada and Mario Javier Robinson Bours Almada ~~and Juan Bautista Salvador Robinson Bours~~ are co-founders of the Company and Honorary members of the board.

The following table identifies the relationships among members of each of the four Bours families:

Our bylaws provide for the creation of an executive committee of the Board of Directors, which may exercise certain of the Board’s powers in full, subject to certain limitations.

Javier R. Bours Castelo, Chairman of the Board of Directors since 2002. Before his election as Chairman, he was Vice-Chairman for several years. Mr. Bours holds a degree in Civil Engineering from the Instituto Tecnologico y de Estudios Superiores Monterrey (“ITESM”). He currently serves as Chairman of the Boards of Directors of the following companies: Megacable Holdings, S.A.B. de C.V., Inmobiliaria Trento S.A. de C.V., Agriexport S.A. de C.V., Acuicola Boca, S.A. de C.V., and Centro de Servicios Empresariales del Noroeste, S.A. de C.V.

Jose Gerardo Robinson Bours Castelo, Proprietary Shareholder Director since 2008. He previously served as ~~Systems Manager.~~Director of Planning and Projects. Mr. Bours holds a degree in Computer Systems Engineering from the ITESM. He currently serves as member of the Board of the following companies: Megacable Holdings, S.A.B. de C.V., Congeladora Horticola, S.A. de C.V., Ocean Garden S.A., Industrias Boca, S.A. de C.V. and Fertilizantes Tepeyac S.A. de ~~C.V.~~C.V, Centro de Servicios Empresariales del Noroeste, S.A. de CV., and member of the regional board of Citi Banamex and Banorte. He is also Chairman of Fundacion Mexicana para el Desarrollo Rural del Valle del Yaqui and the ITESM in Obregon.

Jesus Enrique Robinson Bours Muñoz, Proprietary Shareholder Director since 1994. He has previously worked in Bachoco as Production Director and Divisional Manager. Mr. Robinson Bours holds a degree in Engineering from the University of Arizona. He is also a member of the Board of Directors of ~~San Luis Corporacion S.A.~~Rassini S.A de C.V. and Megacable Holdings, S.A.B. de C.V.

Jesus Rodolfo Robinson Bours Muñoz, Proprietary Shareholder Director since 2002. Mr. Robinson Bours previously served in the Company as Production Manager in the Northwest and Bajio divisions, Commercial Manager in Northwest Division and Purchasing Manager at the Bajio Division. Mr. Robinson Bours holds a degree in Agricultural Engineering from the University of Arizona. He has business experience in agriculture and raising livestock with ~~Agricola Monte Cristo S.A. de C.V., Agricola Rio Yaqui S.P.R. de R.L., Agricola Nacapul S.P.R. de R.L.,~~ Ganadera Cocoreña S.P.R. de R.L., and Chairman of the Board of the Cultural Center of Cocorit, A.C. He is currently partner and Director of Productos Orgánicos la Cocoreña S.P.R. de R.L and Cervecera Komunila S.A. de C.V.

Arturo Bours Griffith, Proprietary Shareholder Director since 1994. ~~Mr. Bours Griffith completed professional studies at the University of Arizona.~~ He is also Chairman of the board of Qualyplast, S.A. de C.V., and a member of the board of Megacable Holdings, S.A.B. de C.V., Centro de Servicios Empresariales del Noreste, S.A. de C.V., and Taxis Aereos del Noroeste, S.A. de C.V.

Octavio Robinson Bours, Proprietary Shareholder Director since 1997. Mr. Robinson Bours holds a degree in Agricultural Engineering from the ITESM. He has experience in ~~producing~~ swine production, agriculture and aquaculture. He is ~~also~~ a board member of ~~the board of~~several companies such as Productos Agropecuarios La Choya, S.A. de C.V. ~~and runs a business of agriculture and aquaculture.~~, Agropecuaria Bomanz S.A. de C.V., Gasbo S.A. de C.V., Kowi S.A. de C.V., INDEPROM, S.A. de C.V., SOFOM ENR.

Ricardo Aguirre Borboa, Proprietary Shareholder Director since ~~1994.~~1994 . He is also a member of the Audit Committee and Corporate Practices of Bachoco. Mr. Aguirre holds a degree in Agricultural Engineering from the ITESM. He is member of the Board of Directors of: the newspaper El Debate, Tepeyac Produce, Inc., Servicios del Valle del Fuerte, S.A. de C.V., Agrobo, S.A. de C.V., Agricola Santa Veneranda, S.P.R. de R.L., Colegio Mochis, Grupo Financiero Banamex, in Sinaloa, and Director of Granja Rab, S.A. de C.V.

Juan Salvador Robinson Bours Martinez, Proprietary Shareholder Director since 1994. He has served Bachoco as Purchasing Manager. Mr. Robinson Bours holds a degree in Industrial Engineering from the ITESM. His other appointments include Chairman of the board of Llantas y Accesorios, S.A. de C.V. and member of the Board of Megacable Holdings, S.A.B. de C.V.

Jose Eduardo Robinson Bours Castelo, member of the Board since 1994. Mr. Robinson is an alternate Director for Mr. Francisco Javier R. Bours Castelo and Mr. Jose Gerardo Robinson Bours Castelo. Mr. Robinson Bours holds a degree in Industrial Engineering from the ITESM. He was previously Commercial Director of Industrias Bachoco, a Senator of the Mexican Congress and was governor of the state of Sonora. In addition, Mr. Robinson was Chairman of the Board of National Agribusiness Council (Consejo Nacional Agropecuario), Chairman of the Board of Umbrella Organization of the Private Sector Mexico (Consejo Coordinador Empresarial), and Member of the Board of Nafinsa, Bancomext and Focir, and was Chairman of the board and Chief Executive Officer of Del Monte Foods.

Jose Francisco Bours Griffith, Alternate Director of Mr. Octavio Robinson Bours and Mr. Arturo Bours Griffith, since 1994. Mr. Bours Griffith holds a degree in Civil Engineering from the Universidad Autonoma de Guadalajara. Mr. Bours Griffith has worked at Bachoco as Engineering Manager. He is currently dedicated to agricultural operations and has run antwo aquaculture ~~farm~~farms for ~~fifteen~~17 years.

Guillermo Pineda Cruz, Alternate Director of Jesus Enrique Robinson Bours and Mr. Arturo Bours Griffith since 1994. Mr. Pineda holds a degree in Civil Engineering from the ITESM and a master’s degree in Business Administration from the Instituto Tecnologico de Sonora. He is also a member of the Board of Directors of ~~Banamex~~Citibanamex and was a regional member of the Board of Directors of Grupo Financiero Serfin, Inverlat and InverMexico. He co-founded Edificadora PiBo, S.A. de C.V. since 1983 and ~~has been~~is currently the Chairman of its ~~President and CEO since 1983.~~Board of Directors.

Gustavo Luders Becerril, Alternate Director of Juan Salvador Robinson Bours Martinez and Mr. Ricardo Aguirre Borboa, was named Alternate Director during the annual general meeting held in April 2011. Mr. Luders holds an Accounting degree from ITESM. He is a vegetable and fruit grower.

Avelino Fernandez Salido, Independent Director, has been a member of the board since 2003. He is also a member of the board of Banamex and BBVA Bancomer. He is also Chairman of the Board of the following companies: Grupo Cajeme Motors, S.A. de C.V., Navojoa Motors, S.A. de C.V., Turymayo S.A. de C.V. ~~and~~, Gasolineras Turymayo S.A. de C.V. and Agroempaques Turymayo S.A. de C.V His business experience is in the marketing of grains.

Guillermo Ochoa Maciel, Independent Director and has been a member of the board since November 2015. Mr. Ochoa Maciel holds a degree in public accounting from the Universidad de Guadalajara, México. Mr. Ochoa Maciel was employed at KPMG Cardenas ~~Dosel,~~Dosal, S.C., for over 36 years (the last 26 as firm partner). Since 2015, he has been the president of the board and director of his own consulting and real estate development firm. Mr. Ochoa Maciel has significant experience in financial audits, corporate governance matters (including Sarbanes-Oxley compliance) and equity and debt transactions both locally in Mexico as well as internationally (both private and SEC-registered) as well as IFRS and U.S. GAAP accounting matters. Mr. Ochoa Maciel was elected president of the Audit and Corporate Practices Committee during the ordinary stockholders’ meeting that took place on November 3, 2015.

David Gastelum Cazares, Independent Director and has been a member of the board since the annual general meeting held on April 27, 2016. Mr. Gastelum holds a degree in Veterinary Medicine from the school of Veterinary Medicine of the Universidad Nacional Autonoma de Mexico (“UNAM”) and is also a graduate of the Instituto Panamericano de Alta Dirección de Empresas (“IPADE”). He joined our company in 1979 and served as a pullet sales manager in the states of Sonora and Sinaloa, national sales manager of live animals and eggs, manager of the Northwest Division, manager of the Mexico City Division and National Sales Manager. He assumed the Director of Sales position from 1992 to 2013. For several years, he was the vice-president of poultry meat at the Mexican Poultry Association and a member of the Latin American Poultry Association (ALA). From 2014 to 2016 he was the General Director of Monteblanco, a company that produces and sells mushrooms. In 2016, he took the course of Directors in Action in IPADE in Mexico City. Mr. Gastelum is also member of the board of directors of the Unión Nacional de Avicultores (UNA). In 2017, he was recognized at the Annual convention of the National Association of Poultry Science Specialists (ANECA). In 2017, he was named as an Independent Director and Chairman of the Administration and Planning Committee of the Group “Frío” in Guadalajara, Mexico. In April of 2018 he joined the board of directors of Universal Wipes, dedicated to the production and commercialization of wet wipes.

Humberto Schwarzbeck Noriega, Independent Director, has been a member of the board since 2003. He holds a degree in economics from ITESM. He is currently CEO of Yeso Industrial de Navojoa S.A. de C.V.

Eduardo Rojas Crespo was named Secretary of the Board of Directors in 2008. He holds a Law Degree from ~~Universidad Nacional Autonoma de Mexico.~~UNAM. He holds a post-graduate diploma on Environmental Law and Due Diligence, and a Specialty as well as a Master’s Degree, both in Corporate Law; these three from the Anahuac University. He also holds a diploma on economic competition from the Centro de Investigación y Docencia Económicas ~~(CIDE)~~(“CIDE”) and has completed studies on Business Management at the ~~Instituto Panamericano de Alta Dirección de Empresas (IPADE).~~IPADE. Mr. Rojas has worked for Bachoco since 2004 as our Chief Legal Officer. Before joining Bachoco, Mr. Rojas worked for 10 years as the Chief Legal Officer of Grupo Fimex.

Mr. Enrique Robinson Bours Almada, Chairman of the Board and co-founder of the Company, he retired in April 2002. Mr. Bours led the Company for 50 years. The Board named Mr. Javier Robinson Bours Castelo, Mr. Enrique Robinson Bours’s nephew, as his successor.

Mr. Mario Javier Robinson Bours Almada, member of the Board of Directors, retired in April 2008, and was named as a Life Honorary Propriety Shareholder Director. On the same date, the Board named Mr. Jose Gerardo Robinson Bours Castelo as a Proprietary Shareholder Director in the place of Mr. Mario Javier Robinson Bours Almada.

~~Juan Bautista S. Robinson Bours Almada~~Executive Officers, Mr. Bours was co-founder of Industrias Bachoco, S.A.B. de C.V. and a Proprietary Shareholder Director for 57 years. Mr. Bours retired in April 2011 and was named as a Life Honorary Propriety Shareholders Director. On the same date, the Board named Mr. Juan Salvador Robinson Bours Martinez as a Propriety Shareholders Director in the place of Mr. Juan Bautista S. Robinson Bours Almada.

EXCECUTIVE OFFICERS THAT HAVE LEFT THE COMPANY, OR CHANGED POSITIONS IN THE LAST 12-MONTHS

~~None.~~Augusto Franco Gomez, Marketing, Research & Development Director, left the company in 2018, and we will not appoint a replacement. The responsibilities of this position will now fall under the scope of our current Director of Sales.

Rodolfo Ramos Arvizu, Chief Executive Officer. Mr. Ramos joined us in 1980 and he was named as Chief Executive Officer in November 2010. Previously, Mr. Ramos had served Bachoco as its Technical Director since 1992 and also held positions in the Egg Quality Control Training Program and in Poultry Management as well as serving as Supervisor of the Commercial Egg Production Training Program, Manager of Raw Material Purchasing and as a Director of Production. Mr. Ramos holds a degree in Agricultural Engineering from ITESM.

Trent Goins joined OK Foods in January 2003 as a management trainee. He was made Regional Sales Manager in 2005 with responsibility for retail sales. In 2008, Goins became Senior Vice President of Sales and Marketing, a position he held until his appointment as CEO/President of OK Foods in February 2014. Mr. Goins has served as past president and current board member of The Poultry Federation and is a present member of the National Chicken Council where he serves on the Executive Committee.

Daniel Salazar Ferrer, Chief Financial Officer. He joined us in 2000 and assumed his current position in January 2003. Previously, Mr. Salazar worked for four years as Chief Financial Officer at Grupo Covarrubias and as Comptroller at Negromex, a company of Grupo Desc. Mr. Salazar holds an accounting degree from Universidad Tecnologica de Mexico, a master’s degree in Business Administration from ITESM, and a Diploma from the IPADE (D1).

Ernesto Salmon Castelo, Director of Mexico Operations, joined us in 1991 and assumed his current position in 2000. Previously, Mr. Salmon worked for Gamesa, S.A. de C.V. and for us as Sales Manager in Sonora, Northwestern Distribution Manager, Manager of the Processing Plant in Celaya, Southeastern Division Manager and Bajio Division Manager. Mr. Salmon holds a degree in Chemical Engineering from the Instituto Tecnologico de Sonora and a master’s degree in Business Administration from ITESM.

Andres Morales Astiazaran, Director of Sales and Marketing, assumed this position in January 2014. Previously, Mr. Morales was Director of Marketing and Modern Channels since July 2006. Before joining us, Mr. Morales worked for 4 years as Sales and Marketing Vice President in Smithfield Foods, a U.S. Company with offices in Sonora, Mexico. Previously Mr. Morales worked for Bachoco as Marketing Manager, Manager of the Northeast division and then as National Manager of Bachoco. Mr. Morales holds an accounting degree from ITESM and attended marketing courses at Northwestern University, the University of Chicago, ITESM and the IPADE (D1).

Alejandro Elias Calles Gutierrez, was named purchasing Director in 2010. Mr. Calles joined Bachoco in January 2010 as Manager of Purchasing. Previously, Mr. Calles worked as the CEO of “Agroinsumos Cajeme,” Chairman of the Board of the “Distrito de Riego” in the Yaqui River, Secretary of the SAGARPA in the state of Sonora, and Leader of the Secretaries of SAGARPA in Mexico and Manager of the leasing department of Inverlat. Mr. Calles holds a degree in Agronomy from the ITESM.

Ismael Sanchez Moreno, Director of Human Resources, joined us and assumed his current position in 2013. Prior to his affiliation with Bachoco, Mr. Sanchez held several senior human resources positions, including Change-Management Director and Planning and Development Human Resources Director at Grupo Modelo. He previously worked for Cemex as Organization and Compensation Director, General Manager for Commercial Innovation Processes, and Development and Training Senior Manager. Mr. Sanchez graduated with a degree in Politics Sciences and Sociology from the Complutense University of Madrid and holds an MBA from the IE Business School and a MS in Human Resources from CEF.

~~Augusto Franco Gómez~~, Marketing, Research & Development Director, joined us and assumed his current position in September 2014. Mr. Franco has 16 years of work experience, with strong experience in Latin America, and has worked in foods, food service, HPC products and advertising. He has lived in different countries such as Mexico, Colombia, Bolivia and the U.S. He has worked for companies such as Unilever, Team Foods, Glaxo, General Mills and Leo Burnett and his last position was Marketing Director for Food Solutions in Unilever for the North Latin American region. Mr. Franco has a bachelor’s degree in Business Administration from the Colegio de Estudios Superiores de Administración in Colombia, an International MBA from St. Tomas University in the U.S., and took courses such as New Products Development at the University of Chicago.

The table below sets forth the aggregate compensation paid to our directors and executive officers, for services they rendered in their respective capacities, for the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013.~~2016.

We do not have any special agreements or contracts with any member of our board. All of our board members are subject to the specific expiration dates of their current terms of office.

The mandate of the Audit and Corporate Practices Committee is to establish and monitor procedures and controls in order to ensure that the financial information we distribute is useful, appropriate and reliable and accurately reflects our financial position. In particular, pursuant to our bylaws and Mexican law, among others, the Audit and Corporate Practices Committee must do the following:

On November 3, 2015, during the shareholders ordinary meeting, Mr. Guillermo Ochoa Maciel was elected President of the Audit and Corporate Practices Committee, which is composed of the following members:

Currently, Guillermo Ochoa Maciel, member of our audit committee, possesses all the characteristics included in the definition of an “audit committee financial expert” within the meaning of Item 16A.

Mr. Ricardo Aguirre Borboa represents the controlling shareholders and has no voting rights in the audit committee.

In ~~2015,~~2018, around ~~50.0%~~55.0% of our employees in Mexico were members of labor unions in our operations. As of March ~~2016~~2018 and the date of this Annual Report, labor relations with our employees in Mexico are governed by 5256 separate collective labor agreements, each relating to a different group of employees and negotiated on behalf of each such group by a different labor union.

In general, we believe that we have good relations with our employees. We have not experienced significant work stoppages as a result of labor problems.

As is typical in Mexico, wages are renegotiated every year while other terms and conditions of employment are renegotiated every two years. We seek to attract dependable and responsible employees to train at each of our plants and facilities. We offer our employees attractive salary and benefit packages, including, in some cases, a pension and savings plan.

In our U.S. operations ~~none of~~the only employees represented by a labor union are the bargaining unit employees at our ~~employees are members of labor unions. As~~Oklahoma City facility and, as of the date of this Annual Report, ~~labor relations with our U.S. employees are not governed by any~~there is a collective ~~labor~~ bargaining ~~agreements~~agreement governing the terms and conditions of their employment.

As is typical in the U.S., wages and other terms and conditions of employment are renegotiated periodically. We seek to attract dependable and responsible employees to train at each of our plants and facilities. We offer our employees attractive salary and benefit packages, including a health insurance and a retirement savings plan.

To the best of our knowledge, no individual director or manager holds shares of the Company. At this time, we have not developed a share options plan for our employees.

Before September 2006, our common stocks consisted of 450,000,000 Series B shares and 150,000,000 Series L shares. Holders of Series B shares were entitled to one vote at any general meeting of our stockholders for each Series B Share held. Holders of Series L shares were entitled to one vote for each Series L Share held, but only with respect to certain matters. We had UBL Units consisting of one Series B Share and one Series L Share and B Units consisting in two Series B shares.

During the extraordinary meeting held on April 26, 2006, Shareholders approved the Company’s plan to convert the Series L shares into Series B Shares, with full voting rights, as well as the dissolution of UBL and UBB Units into their components shares.

This process was completed in September 2006, and included two steps: separating the UBL and UBB Units trading on the Mexican Exchange into their component Shares and converting the Series L Shares into Series B Shares, thereby creating a single share class, the Series B Shares. These Shares are trading on the Mexican stock market. The ADRs which trade on the NYSE still consist of twelve underlying Shares, but they are all Series B Shares, with full voting rights.

Currently, the Company’s common stock consists of 600,000,000 Shares with full voting rights.

The Robinson Bours family owned 82.75% of the total shares outstanding of the Company. Their position was established through two Mexican trusts; the Control Trust and the Underwriting Trust (or “Family Trust”) that together held 496,500,000 Shares outstanding. The remaining 17.25% of shares were the free float of the Company.

On December 9, 2013, the Company announced that the Underwriting Trust had sold 9.5% of its shares. This transaction was carried out through the Mexican Stock Exchange at the market price. As a result of this transaction, the Company’s free float increased from 17.25% to 26.75% over the total shares outstanding.

As a result of this transaction, our Capital Stock is currently distributed as follows:

According to our Depositary Bank, as of ~~March 31, 2016,~~February 28, 2019, we had ~~3,453,865~~3,684,065 ADRs outstanding on the NYSE, which represent ~~6.9%~~7.4% over the total shares and ~~25.8%~~27.5% over the free float.

We estimate that the difference between total shares outstanding at the NYSE and the total free float represents the shares trading at the Mexican Stock Exchange.

According to information providing by BNY Mellon, as of December 31, ~~2015~~2018 and ~~March 31, 2016,~~February 28, 2019, from the 100.0% of the total Shares of the Company, there were approximately ~~122~~52 and ~~120~~44 shareholders in the NYSE, respectively.

According to the most recent information provided by broker dealers at the date of our ~~2015~~2018 Bachoco’s stockholders Annual meeting, we estimated that there are ~~1,241~~750 Shareholders on the BMV.

The following table sets forth the Company’s main shareholders, which held 1.0% or more of the total shares of the Company, as of December 31, ~~2015.~~2018.

As of March 31, ~~2016~~2018 there have been no significant changes in the composition of the Company’s main shareholders.

It is our policy not to engage in any transaction with or for the benefit of any stockholder or member of the Board of Directors, or any entity controlled by such a person or in which such a person has a substantial economic interest, unless (i) the transaction is related to our business and (ii) the price and other terms are at least as favorable to us as those that could be obtained on an arm’s-length basis from a third party.

We have engaged in a variety of transactions with entities owned by members of the Robinson Bours family, all of which we believe were consistent with this policy and not material to our business and results of operations.

We expect to engage in similar transactions in the future. All of these transactions are described below:

In addition, during ~~2015,~~2016, we granted a short-term loan that bears interest to a related party, Taxis ~~Aereos~~Aéreos del Noroeste, S.A. de C.V., for $189.1 million. This loan is recorded in our balance sheet as a current ~~assets~~asset under the “Due for related parties” line item. This non-recurring loan was made on terms and conditions substantially similar as those prevailing at the time for comparable transactions with unrelated third parties. As of December 31, 2018 the amount due from Taxis Aéreos del Noroeste was $0.0 million pesos.

Aside from the loan described in the paragraph immediately above, neither we nor our subsidiaries have loaned any money to any of our directors or officers, controlling shareholders or entities controlled by these parties.

As of December 31, ~~2015~~2018 and ~~2014,~~2017, the balances due to related parties are the balances owed denominated in pesos, which do not accrue interest, payable in cash in the short-term, for which there are no guarantees.

See Note 1920 to our Audited Consolidated Financial Statements for more detail regarding income and expenses incurred in connection with related parties transactions.

Our Audited Consolidated Financial Statements are included in Item 18 of this Annual Report. The Audited Consolidated Financial Statements were audited by independent registered public accounting firms and are accompanied by their audit reports.

On September 3, 2013, we announced that the Company’s Board of Directors, as per the Audit Committee’s recommendation, approved the selection of Galaz, Yamazaki, Ruiz Urquiza, S.C., Member of Deloitte Touche Tohmatsu Limited (“Deloitte”) as the Company’s independent registered public accounting firm, effective as of September 30, 2013. Deloitte was ratified as the Company’s external auditor for the ~~2014~~2018, 2017 and ~~2015~~2016 fiscal years and remains our external auditor as of the date of this Annual Report.

We are a party to certain legal proceedings in the ordinary course of our business.

We believe that none of these proceedings, individually or in the aggregate, is likely to have a material adverse effect on the Company’s Audited Consolidated Financial positions and consolidated results of operations.

Pursuant to Mexican law and our bylaws, the declaration, amount and payment of annual dividends are determined by a majority vote of the shareholders, generally but not necessarily on the recommendation of the Board of Directors.

Although there can be no assurance as to the amount or timing of future dividends, we expect to pay an annual dividend pro rata to holders of outstanding shares in an amount of approximately 20.0% of the prior year’s net income. The declaration and payment of dividends will depend on our results of operations, financial condition, cash requirements, future prospects and other factors deemed relevant by the Board of Directors and the shareholders, including debt instruments which may limit our ability to pay dividends.

Because we are a holding company with no significant operations of our own, we will have distributable profits and cash to pay dividends only to the extent that we receive dividends from our subsidiaries, principally BSACV. Accordingly, there can be no assurance that we will pay dividends or of the amount of any such dividends. BSACV, our principal operating subsidiary, could, in the future, enter into loan agreements containing covenants whose terms limit its ability to pay dividends under certain circumstances.

Mexican law requires that 5.0% of our net income each year be allocated to a legal reserve fund until such fund reaches an amount equal to at least 20.0% of our capital stock. Mexican corporations may pay dividends only out of earnings (including retained earnings after all losses have been absorbed or paid up) and only after such allocation to the legal reserve fund. The Company complies with this requirement and it is able to distribute dividends.

The Company and each of its subsidiaries file separate income tax returns. Through December 31, 2013, BSACV, the Company’s main subsidiary, was subject to the simplified regime. This simplified regime is applicable to agriculture, cattle-raising and fishing, among others, and permitted a reduced tax rate. See Note 20a in our Audited Consolidated Financial Statements.None

~~Starting on January 1, 2014, the simplified tax regime, the Flat Rate Business Tax (“IETU”) and the Cash Deposits Tax (“IDE”) laws were repealed.~~

We have traded with fully registered shares since 1997. The Company trades on the NYSE and the BMV with one single class of shares, with full rights.

On the NYSE, we trade through ADRs, with full registration, level 3, and each of our ADRs represents twelve shares. Our Depositary Bank is BNY Mellon.

The following tables set forth the high, low, average, and close prices and total trading volume of the Shares and ADRs on the BMV and NYSE, reported by these companies, for each of the periods indicated.

As of ~~March 31, 2016,~~February 28, 2018, there were ~~3,453,865~~3,684,065 ADRs outstanding at the NYSE. They represented ~~6.9%~~7.4% of the total shares of the Company or ~~25.8%~~27.5% of the free float.

Based on these figures, we can assume that the remaining ~~74.5%~~72.5% of the free float is trading at the Mexican Stock Exchange.

Information regarding the memorandum and articles of association are included in our F-1 Form and, an English translation of our bylaws is attached in this Annual Report, and is incorporated by reference herein and is also available on our web page www.bachoco.com.mx

The discussion set forth below contains information concerning our capital stock and a brief summary of the material provisions of the bylaws and applicable Mexican law. This summary does not purport to be complete and is qualified in its entirety by reference to the bylaws and the applicable provisions of Mexican law.

The Company was incorporated on April 17, 1980 as a variable capital corporation under the laws of Mexico. To fully comply with Mexican laws, the Company modified its name to Industrias Bachoco, S.A.B. de C.V. in April 2007.

In 1995, our stockholders authorized the issuance of up to 15,525,000 additional Series B Shares and 15,525,000 additional Series L Shares, all constituting fixed capital, to be issued in connection with the global offering of Shares that took place on September 19, 1997 (the “Global Offering”).

On April 21, 1997, we restructured our capital by (i) declaring a four-to-one stock split of the 106,678,125 Series B Shares and 35,559,375 Series L Shares outstanding, (ii) converting 7,762,500 Series L Shares (on a post-split basis) into Series B Shares and (iii) combining all of the 434,475,000 Series B Shares and 134,475,000 Series L Shares outstanding (in each case, on a post-split basis) into 134,475,000 Units and 150,000,000 B Units. Holders of Units were entitled to exercise all the rights of holders of the Series B Shares and Series L Shares underlying their Units. Each B Unit consisted of two Series B Shares. B Units entitle the holders thereof to exercise all the rights of holders of the Series B Shares underlying such B Units. Immediately prior to the Global Offering, our outstanding capital stock consisted of 434,475,000 Series B Shares and 134,475,000 Series L Shares, all of which were duly authorized, validly issued and are fully paid and non-assessable.

During the annual shareholders meeting held on April 26, 2006, shareholders approved to proceed with the anticipated conversion of the Series L Shares into Series B Shares, which have full voting rights. This conversion was effective in September 2006 and included two steps: separating the UBL and UBB Units currently trading on the Mexican Stock Exchange into their component Shares, and converting the Series L Shares into Series B Shares (on a one-to-one basis), thereby created a single share class, the Series B Shares, which represents all of our Common Stock.

The Robinson Bours Stockholders have advised us that they intend to ensure that the Control Trust will hold at least 51.0% of the Series B Shares at any time outstanding. See “—Foreign Investment Legislation” in this Item.

On April 27, 2011 during the extraordinary Stockholders meeting the Article Two - XII of our bylaws were modified as follows:

Note: An English translation of our complete bylaws is ~~attached~~incorporated by reference in this Annual Report.

Shares are evidenced by certificates in registered form, which may have dividend coupons attached. We maintain a registry and, in accordance with Mexican law, we recognize as stockholders only those holders listed in the stock registry. Stockholders may hold their Shares in the form of physical certificates (which, together with notations made in our stock registry, evidence ownership of the Shares) or through book entries with institutions that have accounts withS.D. Indeval Institución para el Depósito de Valores, S.A. de C.V.(“Indeval”).

Indeval is the holder of record in respect of Shares held through it. Accounts may be maintained at Indeval by brokerage houses, banks and other entities approved by the CNBV. Ownership of Shares maintained at Indeval is evidenced through Indeval’s records and through lists kept by Indeval participants.

In accordance with Article 130 of theLey General de Sociedades Mercantiles (“Mexican Corporations Law”), the Board of Directors must authorize any transfer of stock, or any securities based on such stock, when the number of Shares sought to be transferred in one act or a succession of acts, without limit of time or from one group of interrelated stockholders or stockholders who act in concert, constitutes 10.0% or more of the voting stock issued by the Company. If the Board of Directors refuses to authorize such a transfer, the Board must designate one or more purchasers of the stock, who must pay the interested party the prevailing price on the Mexican Stock Exchange. The Board must issue its resolution within three months of the date on which it receives the relevant request for authorization and, in any case, must consider: (i) the criteria that are in the best interests of the Company, the Company’s operations and the long-term vision of the activities of the Company and its Subsidiaries; (ii) that no shareholder of the Company is excluded, other than the person that intends to acquire control of the financial benefits that may result from the application of the terms of this clause; (iii) that the taking of the Control of the Company is not restricted in an absolute manner; (iv) that the provisions of the Securities Market Law, with respect to acquisition public offerings, are not contravened; and (v) that the exercise of the patrimonial rights of the acquirer are not rendered without effect.

If any person participates in a transaction that would have resulted in the acquisition of 10.0% or more voting stock of the Company without having obtained the board’s prior approval, they must pay the Company a fine equal to the market value of the Shares.

Any person who participates in an act that violates the terms of Article 130 discussed in the preceding paragraph will be obligated to pay the Company a fine in an amount equal to the value of the Shares owned directly or indirectly by the stockholder, or the value of the Shares involved in the prohibited transaction, if such person does not own Shares issued by the Company. In the case of a prohibited transaction that would have resulted in the acquisition of 10.0% or more of the voting stock of the Company, the fine will be equal to the market value of those Shares, provided that board authorization was not obtained in advance.

According to our bylaws, a majority of the members of the Board of Directors must authorize in writing, by a resolution made at a Board of Directors’ meeting, any change in the control of the Company. Our Board of Directors has the right to decide if a person or a group of persons is acting for the purpose of acquiring control of the Company.

“Control” or “Controlled” means (i) to directly or indirectly impose decisions at the general meetings of shareholders, stockholders or equivalent bodies or to appoint or remove the majority of the directors, managers or equivalent officers; (ii) to hold title to the rights that directly or indirectly allow the exercise of votes with respect to more than fifty percent of the capital stock; or (iii) to directly or indirectly direct the management, the strategy or the principal policies of the Company, whether through the ownership of securities, by contract or otherwise.

Each share entitles the holder thereof to one vote at any general meeting of the stockholders. Holders are currently entitled to elect all members of the Board of Directors.

Our bylaws provide that the Board of Directors shall consist of at least five members and no more than twenty one. The stockholders also appointed four alternate Shareholder Directors to the Board of Directors.

General stockholders’ meetings may be ordinary or extraordinary meetings. Extraordinary general meetings are meetings called to consider the matters specified in Article 182 of the Mexican Corporations Law and the bylaws, including changes in the fixed portion of the capital stock and other amendments to the bylaws, liquidation, merger, transformation from one type of corporate form to another, change in nationality and changes of corporate purposes.

General meetings called to consider all other matters, including election of the directors, are ordinary meetings. An ordinary general meeting of the Company must be held at least annually during the four months following the end of the preceding fiscal year to consider certain matters specified in Article 181 and 182 of the Mexican Corporations Law, including, principally, the election of directors, the approval of the report of the Board of Directors regarding their company’s performance, the Company’s financial statements for the preceding fiscal year and the allocation of the profits and losses of the preceding year, and to approve the transactions that the Company or the entities that the Company controls intend to carry out, in terms of Article 47 of the Securities Market Law, in one fiscal year, when such transactions represent 20.0% (twenty percent) or more of the consolidated assets of the Company, based on the figures corresponding to the closing of the immediately preceding quarter, independently of the manner in which such transactions are carried out, whether simultaneously or successively, but which due to their characteristics, may be considered as a single transaction. Holders of Shares may vote at such meetings.

Under our bylaws, the quorum on first call for a general ordinary meeting is at least 50%. If a quorum is not available on first call, a second meeting may be called at which action may be taken by a majority of those present, regardless of the number of Shares represented at the meeting. On a second call, Ordinary General Shareholders’ Meetings will be considered validly held regardless of the number of common or ordinary Shares represented therein and the resolutions of such meetings will be valid when passed by majority vote of the Common Stock therein.

The quorum on first call for a general extraordinary meeting or a special meeting is 75% of the outstanding Shares with voting rights on the matters to be addressed in that meeting. If a quorum is not available on first call, a second meeting may be called, provided that at least 50% of the outstanding Shares with voting rights on the matters to be addressed in that meeting are represented.

Our bylaws require the approval of holders of at least 95% of the outstanding Shares and the approval of the CNBV for the amendment of the controlling stockholders’ obligation under the bylaws to repurchase Shares and certain other provisions in the event of delisting. See “—Other Provisions—Repurchase in the Event of Delisting.” For more detail, see our bylaws on our webpage at www.bachoco.com.mx. Holders of ADRs are entitled to instruct the Depositary as to the exercise of the voting rights.

According to our bylaws, stockholders with a right to vote may ask to postpone a vote on any matters on which they believe they do not have enough information as defined by Article 199 of the Mexican Corporation Law. Stockholders with a right to vote, including a limited right to vote, and who hold at least 20% of the capital stock, may legally object to the decisions of a general stockholders’ meeting, with respect to matters in which they have rights, without the percentage established under article 201 of the General Law of Business Entities being applicable in such case.

Moreover, holders of shares having voting rights, including limited or restricted voting rights or holders of Shares without voting rights that jointly or individually represent 5% or more of the capital stock, may directly exercise the action of liability against the members and secretary of the Board of Directors, as well as against the relevant directors or executive officers. The exercise of such action will not be subject to the compliance with the requirements set forth under articles 161 and 163 of the General Law of Business Entities.

The Board of Directors, or its President or Secretary or the judicial authority, as applicable, must issue notices of calls of Shareholders’ Meetings. In addition, shareholders that jointly or separately represent at least 10% of the capital of the Company may request the President of the Board of Directors or the President of the Audit Committee to call a General Shareholder’s Meeting, without the percentage indicated under article 184 of the General Law of Business Entities being applicable for such purpose. If the notice of meeting is not issued within fifteen days after the date of the corresponding request, a Civil or District Judge of the Company’s domicile will issue such notice at the request of the interested parties that represent the requesting 10% of the capital, who must present their stock certificates for such purpose.

At least 15 days prior to the meeting, notice of the meeting must be published in theDiario Oficial de la Federacion (“Official Gazette”) or in a newspaper of general circulation in Mexico City. Stockholders’ meetings may be held without such publication provided that 100% of the outstanding Shares with voting rights on the matters to be addressed by such meeting are represented.

From the moment that a call for a stockholders’ meeting is made public, all the information related to the meeting must be available to the stockholders. In order to attend a stockholders’ meeting, a stockholder must request and obtain an admission card by furnishing, at least 24 hours before the time set for holding the stockholders’ meeting, appropriate evidence of ownership of Shares in us and depositing such Shares with our corporate secretary or with an institution authorized to accept such deposit. If so entitled to attend the meeting, a stockholder may be represented by proxy signed before two witnesses. Additionally, the stockholder may be represented at the stockholders’ meetings by a person named by proxy, on a printed form that we issue, which, under Mexican law, must identify our Company and indicate clearly the matters to be addressed in the meeting, with enough space for the instructions that the stockholder specifies. We are obliged to make information on the upcoming meeting available to the intermediaries in the stock market, for the time specified in Article 173 of the Mexican Law, in order to give the intermediaries time to send it to the stockholders they represent. The Secretary of the Board of Directors must verify that this requirement is met and report on this matter at the stockholders’ meeting. See “—Registration and Transfer.”

Under the Mexican Corporations Law, a Board of Directors must conform to the following requirements:

Besides satisfying all of the requirements mentioned above, failure to meet these standards for any reason will not constitute grounds for judicial action challenging any act, contract, or agreement undertaken by the board, an intermediate committee or other delegated authority. Furthermore, such standards will not be mandatory for the validity or existence of such acts.

The Board of Directors must meet at least every three months at our address or any other place in Mexico and on the dates that the board determines. Meetings previously scheduled in accordance with a schedule pre-approved by the board do not need to be called. Meetings must be called by at least 25% of the members of the Board of Directors, the Chairman of the Board of Directors, the Vice Chairman of the Board of Directors, the Secretary or the Alternate Secretary of the Board or the President of the Audit Committee. Members of the board must be notified via e-mail or in writing at least five calendar days in advance of a meeting.

At the annual ordinary general stockholders’ meeting, the Board of Directors submits our financial statements for the previous fiscal year, together with a report thereon by the board, to the holders of Shares for their consideration. The holders of Shares, once they have approved the financial statements, determine the allocation of our net profits, if any, for the preceding year. As of December 31, ~~2015,~~2018, our legal reserve fund was equal to at least 20% of our paid-in capital stock. Amounts in excess of those allocated to the legal reserve fund may be allocated to other reserve funds as the stockholders determine, including a reserve for the repurchase of our Shares. The remaining balance of net profits, if any, is available for distribution as dividends. No dividends may be paid, however, unless losses for prior fiscal years have been paid or absorbed.

Holders of shares and, accordingly, holders of ADRs will have equal rights, on a per Share basis, to dividends and other distributions, including any distributions we make upon liquidation. Partially paid Shares participate in any distribution to the extent that such Shares have been paid at the time of the distribution or, if not paid, only with respect to the proportion paid.

An increase of capital stock may generally be affected through the issuance of new shares for payment in cash or in kind, by capitalization of indebtedness or by capitalization of certain items of stockholders’ equity. An increase of capital stock generally may not be realized until all previously issued and subscribed Shares of capital stock have been fully paid. Generally, a reduction of capital stock may be effected to absorb losses, to redeem Shares, or to release stockholders from payments not made. A reduction of capital stock to redeem Shares is effected by reimbursing holders of Shares pro rata or by lot. Stockholders may also approve the redemption of fully paid Shares with retained earnings. Such redemption would be affected by a repurchase of Shares on the Mexican Stock Exchange (in the case of Shares listed thereon).

Except under limited circumstances, the bylaws require that any capital increase affected pursuant to a capital contribution be represented Shares.

The fixed portion of our capital stock may only be increased or decreased by resolution of a general extraordinary meeting and an amendment to the bylaws, whereas the variable portion of our capital stock may be increased or decreased by resolution of a general ordinary meeting. See “Other Provisions—Fixed and Variable Capital.”

No resolution by the stockholders is required for decreases in capital stock resulting from exercise of our right to withdraw variable Shares or from our repurchase of our own Shares or for increases in capital stock resulting from our sale of Shares we previously purchased. See “Other Provisions— Repurchase of our own Shares” and “Other Provisions—Appraisal Rights.”

Except in certain limited circumstances, in the event of a capital increase through the issuance of new Shares for payment in cash or in kind, a holder of existing Shares of a given Series at the time of the capital increase has a preferential right to subscribe for a sufficient number of new Shares of the same Series to maintain the holder’s existing proportionate holdings of Shares of that Series or, in the event of a capital increase through the issuance of limited-voting or non-voting stock only, to subscribe for a sufficient number of the Shares to be issued to maintain the holder’s existing proportionate holdings of our capital stock. Preemptive rights must be exercised within 15 days following the publication of notice of the capital increase in theDiario Oficial de la Federacion (Official Gazette) or following the date of the stockholders’ meeting at which the capital increase was approved if all stockholders were represented at such meeting; otherwise, such rights will lapse. Under Mexican law, preemptive rights cannot be waived in advance by a stockholder, except under limited circumstances, and cannot be represented by an instrument that is negotiable separately from the corresponding share. ~~The Robinson Bours Stockholders, including the Selling Stockholders, have waived all preemptive rights with respect to the Shares and the ADRs being offered in the Global Offering.~~ Holders of ADRs that are U.S. citizens or are located in the United States may be restricted in their ability to participate in the exercise of preemptive rights.

Ownership by foreigners of Shares of Mexican companies is regulated by theLey de Inversion Extranjera (“Foreign Investment Law”) and by theReglamento de la Ley para Promover la Inversion Mexicana y Regular la Inversion Extranjera (“Foreign Investment Regulations”). The Ministry of Commerce and Industrial Development and the Foreign Investment Commission are responsible for the administration of the Foreign Investment Law.

The Foreign Investment Law reserves certain economic activities exclusively for the Mexican state and certain other activities exclusively for Mexican individuals or Mexican corporations, and limits the participation of foreign investors to certain percentages in regard to enterprises engaged in activities specified therein. Foreign investors may own up to 100.0% of the capital stock of Mexican companies or entities, except for companies (i) engaged in reserved activities as referred to above or (ii) with assets exceeding an amount to be established annually by the Foreign Investment Commission, in which case an approval from the Foreign Investment Commission will be necessary in order for foreign investment to exceed 49.0% of the capital stock. Mexican and non-Mexican nationals will be entitled to hold and to exercise the rights of holders. The Robinson Bours Stockholders have advised us that they intend to maintain a control position. Pursuant to our bylaws, foreigners may only own Shares up to 49.0%.

As a “sociedad anonima de capital variable”, we are permitted to issue Shares constituting fixed capital and Shares constituting variable capital. The issuance of variable capital Shares, unlike the issuance of fixed capital Shares, does not require an amendment of the bylaws, although it does require approval at a general ordinary stockholders’ meeting. In no case may the capital of the Company be decreased to less than the minimum required by law and any decrease in the shareholders’ equity must be registered in the Equity Variations Book that the Company will keep for such purpose.

In the event of cancellation of the registration of the Company’s Shares in such Registry, whether at the request of the Company or by a resolution of the National Securities and Banking Commission under applicable law, the Company agrees to make a public offering for the acquisition of the total number of the Shares registered prior to the cancellation. The Company must contribute to a trust for at least six months, the necessary resources to purchase at the same price of the public offering, the Shares of the investors that did not attend or did not accept such offer, in case that after the public offering for purchase has been made and prior to the cancellation of the registration of the Shares that represent the capital stock of the Company or of other securities issued based on such Shares in the National Securities Registry, the Company had been unable to acquire 100.0% of the paid in capital stock.

As required by Mexican law, our bylaws provide that our current and future foreign stockholders are formally bound to the MexicanSecretaria de Relaciones Exteriores (“Ministry of Foreign Relations”) to consider themselves as Mexican nationals with respect to our Shares that they may acquire or of which they may be owners, and with respect to the property, rights, concessions, participations or interests that we may own or rights and obligations that are based on contracts to which we are party with the Mexican authorities, and not to invoke the protection of their government under penalty, should they do so, of forfeiting to the Mexican State the corporate participation that they may have acquired. In the opinion of Galicia & Robles, S.C., our special Mexican counsel, under this provision a non-Mexican stockholder (including a non-Mexican holder of ADRs) is deemed to have agreed not to invoke the protection of his own government by requesting such government to interpose a diplomatic claim against the Mexican government with respect to the stockholder’s rights as a stockholder, but is not deemed to have waived any other rights it may have with respect to its investment in us, including any rights under U.S. securities laws. If the stockholder should invoke such governmental protection in violation of this agreement, its Shares could be forfeited to the Mexican State. Mexican law requires that such a provision be included in the bylaws of all Mexican corporations unless such bylaws prohibit ownership of capital stock by foreign investors.

Our bylaws provide that legal actions relating to any conflict between our stockholders and us, or among the stockholders in connection with matters related to us, may be brought only in courts in Mexico City. Therefore, our stockholders are restricted to the courts of Mexico City.

We may repurchase our Shares on the Mexican Stock Exchange at any time at the then prevailing market price. Any repurchases will be charged to the Stockholders’ Equity as long as these Shares belong to the same Company or to the Capital Stock in the event that we convert these Shares to treasury stock, and in this last case no resolution of the stockholders’ meeting is required. At each annual ordinary Stockholder’s Meeting, the maximum amount of resources that may be used to repurchase Shares will be expressly defined. The Board of Directors will name the persons responsible for the operation of the repurchase process. The Shares that belong to the Treasury Stock or us can be resold among the public stockholders; in the latter case, no resolution of a stockholders’ meeting is necessary for an increase in capital. The economic and voting rights corresponding to such repurchased Shares may not be exercised during the period in which such Shares are owned by us, and such Shares are not deemed to be outstanding for purposes of calculating any quorum or vote at any stockholders’ meeting during such period.

With prior authorization of the CNBV, we may issue non-subscribed Shares provided that such Shares will be held by a depositary institution and that there is compliance with the conditions of Article 53 of theLey del Mercado de Valores (“Mexican Securities Law”). In any extraordinary stockholders’ meeting at which this issuance of non-subscribed Shares is approved, the preference rights established by Article 132 of the Mexican Corporations Law must be respected. With a quorum at the meeting, the approval of the issuance will take effect, even with respect to stockholders that were not present at the meeting, such that we will be free to issue these Shares with no prior publication. When a minority of stockholders representing at least 25.0% of the voting capital stock vote against the issuance of these Shares, such issuance cannot be made. Any stockholder that votes against this issuance at the stockholders’ meeting will have the right to request that we sell its Shares before issuing the new non-subscribed Shares. In such event, we will have the obligation to sell first the Shares belonging to such stockholders, at the same price that the non-subscribed Shares are to be offered to the public.

Under Mexican law, any stockholder that has a conflict of interest with respect to any transaction must abstain from voting thereon at the relevant stockholders’ meeting. A stockholder that votes on a business transaction in which its interest conflicts with that of ours may be liable for damages if the transaction would not have been approved without such stockholder’s vote.

Under Mexican law, any member of the Board of Directors who has a conflict of interest with us in any transaction must disclose such fact to the other members of the Board of Directors and abstain from voting. Any member of the Board of Directors who violates such provision may be liable for damages caused to us. Additionally, members of the Board of Directors and statutory auditors may not represent other stockholders at any stockholders’ meeting.

Whenever the stockholders approve a change of corporate purpose, a change in our nationality or transformation from one type of corporation form to another, any stockholder entitled to vote on such change or transformation who has voted against it has the right to withdraw from us and receive the amount calculated as specified under Mexican law attributable to its Shares, provided such stockholder exercises its right to withdraw within 15 days following the adjournment of the meeting at which the change or transformation was approved. Under Mexican law, the amount that a withdrawing stockholder is entitled to receive is equal to its proportionate interest in our capital stock according to the most recent balance sheet that has been approved by an ordinary general meeting of stockholders.

Under Mexican law, holders of Shares having voting rights, including limited or restricted voting rights or holders of Shares without voting rights that jointly or individually represent 5.0% (five percent) or more of the capital stock, may directly exercise the action of liability against the members and secretary of the Board of Directors, as well as against the relevant directors or executive officers. The exercise of such action, among others, will be subject to the compliance with the requirements set forth under the Mexican Law.

Under our bylaws, the Board of Directors is required to create an Audit Committee and Corporate Practices under the terms and conditions outlined below:

For more detail or to read more about the Committee’s activities please refer to “Audit Committee and Corporate Practices” section in Item 6 to this Annual Report. For additional information, also see Article 35 of the Mexican Securities Market Law.

Ownership by foreigners of Mexican companies is regulated by the Foreign Investment Law and by the Foreign Investment Regulations. The Ministry of Commerce and Industrial Development and the Foreign Investment Commission are responsible for the administration of the Foreign Investment Law.

The Foreign Investment Law reserves certain economic activities exclusively for the Mexican Government and certain other activities exclusively for Mexican individuals or Mexican corporations and limits the participation of foreign investors to certain percentages in regard to enterprises engaged in activities specified therein. Foreign investors may own 100% of the capital stock of Mexican companies or entities, except for companies (i) engaged in reserved activities as referred to above or (ii) with assets exceeding an amount to be established annually by the Foreign Investment Commission in which case an approval from the Foreign Investment Commission shall be necessary in order for foreign investment to exceed 49.0% of the capital stock. Mexican and non-Mexican nationals will be entitled to hold and to exercise the rights of holders. The Robinson Bours Stockholders have advised us that they intend to maintain a control position of his shares. Pursuant to our bylaws, foreigners may only own Shares up to 49% of shares.

The following discussion is a general summary of ~~the~~certain principal U.S. federal income tax consequences and the principal Mexican federal tax consequences of the acquisition, ownership and disposition of Shares or ADRs. This summary does not purport to address all material tax consequences that may be relevant to holders of Shares or ADRs, and does not take into account the specific circumstances of any particular investors, some of which (such as tax-exempt entities, banks, insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real estate investment trusts, partnerships and other pass-through entities or arrangements, investors liable for the U.S. alternative minimum tax, investors that own or are treated as owning 10% or more of our ~~voting~~ stock (by vote or value), investors that hold Shares or ADRs as part of a straddle, hedge, conversion transaction or other integrated transaction and U.S. Holders (as defined below) whose functional currency is not the U.S. dollar) may be subject to special tax rules. In addition, this summary is based in part upon the representations of the Depositary and the assumption that each obligation in the deposit agreement, and in any related agreement, will be performed in accordance with its terms.

For purposes of this discussion, a “U.S. Holder” is any beneficial owner of Shares or ADRs that, for U.S. federal income tax purposes, is:

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Shares or ADRs, the tax treatment of a partner generally will ~~generally~~ depend upon the status of the partner and upon the activities of the partnership. A partner of a partnership considering the purchase of Shares or ADRs should consult its own independent tax advisor regarding the U.S. federal income tax consequences of investing in Shares or ADRs through a partnership.

Except where specifically described below, this discussion assumes that we are not a passive foreign investment company, or PFIC, for U.S. federal income tax purposes. See “U.S. Federal Income Taxation—Passive Foreign Investment Company Rules” below. This discussion is based on the federal income tax laws and regulations of the United States (including the U.S. Internal Revenue Code of 1986, as amended or the “Code”) and Mexico, judicial decisions, published rulings and administrative pronouncements, all as ~~in effect on~~of the date hereof, and all of which are subject to change (possibly with retroactive effect) and different interpretations. Further, this discussion does not address U.S. federal estate and gift tax, U.S. Medicare tax on net investment income or the alternative minimum tax consequences of holding Shares or ADRs or the indirect consequences to holders or equity interests in partnerships (or any other entity or arrangement treated as a partnership for U.S. federal income tax purposes) that own Shares or ADRs. In addition, this discussion does not address the non-U.S., non-Mexican, state or local tax consequences of holding Shares or ADRs. Prospective purchasers of Shares or ADRs should consult their own tax advisors as to the U.S., Mexican or other tax consequences of the purchase, ownership and disposition of Shares or ADRs, including, in particular, the effect of any non-U.S., non-Mexican, state or local tax laws.

A Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, and a Protocol thereto, between the United States and Mexico (the “Tax Treaty”) took effect on January 1, 1994. The Tax Treaty was amended by a second Protocol signed September 8, 1994. The second Protocol entered into force on October 2, 2005. The Tax Treaty was amended by a third Protocol signed November 26, 2002, the provisions of which took effect in part on September 1, 2003, and in part on January 1, 2004. The United States and Mexico have also entered into an agreement concerning the exchange of information with respect to tax matters.

In general, for U.S. federal income tax purposes, holders of ADRs evidencing ~~ADRs~~ADSs will be treated as the beneficial owners of the Shares represented by those ADRs. However, see the discussion below under “Taxation of Dividends” regarding certain statements made by the U.S. Treasury concerning depository arrangements.

The following discussion is a summary of ~~the~~certain material U.S. federal income tax consequences to holders of Shares or ADRs that are U.S. Holders and that hold those Shares or ADRs as capital assets (generally, for investment purposes).

Cash distributions paid with respect to the Shares or ADRs to the extent paid out of our earnings and profits (as determined under U.S. federal income tax principles) will be included in the gross income of a U.S. Holder as ordinary income on the day on which the dividends are received by the U.S. Holder, in the case of Shares, or the Depositary, in the case of ADRs. We do not currently maintain calculations of our earnings and profits under U.S. federal income tax principles. Because these calculations are not made, distributions should be presumed to be taxable dividends for U.S. federal income tax purposes.

A U.S. Holder will be entitled, subject to a number of complex limitations and conditions (including a minimum holding period requirement), to claim a U.S. foreign tax credit in respect of any Mexican income taxes withheld on dividends received on Shares or ADRs. U.S. Holders who do not elect to claim a credit for any foreign income taxes paid during the taxable year may instead claim a deduction in respect of such Mexican income taxes, provided the U.S. Holder elects to deduct (rather than credit) all foreign income taxes for that year. Dividends received with respect to Shares or ADRs will be treated as foreign source income, subject to various classifications and other limitations. For purposes of the U.S. foreign tax credit limitation dividends paid with respect to Shares or ADRs generally will constitute “passive category income” for most of U.S. Holders. The U.S. Treasury Department has expressed concerns that parties to whom depositary shares such as the ADRs are released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. Holders of such ADRs. Accordingly, the analysis of the creditability of Mexican income taxes described above could be affected by future actions that may be taken by the U.S. Treasury Department. The rules relating to computing foreign tax credits or deducting foreign taxes are extremely complex, and U.S. Holders are urged to consult their own independent tax advisors regarding the availability of foreign tax credits with respect to any Mexican income taxes withheld.

Dividends paid in pesos will be included in the gross income of a U.S. Holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day they are received by the U.S. Holder, in the case of Shares, or by the Depositary, in the case of ADRs (regardless of whether such pesos are in fact converted into U.S. dollars on such date). If such dividends are converted into U.S. dollars on the date of receipt by the U.S. Holder or the Depositary, as the case may be, the U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividends. U.S. Holders should consult their own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any pesos received which are converted into U.S. dollars on a date subsequent to receipt.

Cash dividends paid to corporate U.S. Holders will not be eligible for the dividends-received deduction allowed to corporations under the Code. Subject to certain exceptions for short term and hedged positions, and provided that we are not a PFIC (as discussed below), dividends received by certain non-corporate U.S. Holders (including individuals) with respect to the Shares or ADRs will be subject to U.S. federal income taxation at preferential rates if such dividends represent “qualified dividend income.” Dividends paid on the Shares or ADRs will be treated as qualified dividend income if (i) we are eligible for the benefits of the Tax Treaty or the Shares or ADRs are readily tradable on an established securities market in the United States and (ii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a PFIC. We expect to be eligible for the benefits of the Tax Treaty. In addition, under current guidance issued by the Internal Revenue Service (“IRS”), the ADRs should qualify as readily tradable on an established securities market in the United States so long as they are listed on the New York Stock Exchange, but no assurances can be given that the ADRs will be or remain readily tradable under future guidance.

The U.S. Treasury Department has announced its intention to promulgate rules pursuant to which shareholders (and intermediaries) will be permitted to rely on certifications from issuers to establish that dividends qualify for the reduced rate of U.S. federal income taxation. Because such procedures have not yet been issued, we are not certain that we will be able to comply with them. U.S. Holders of Shares or ADRs should consult their own tax advisors regarding the availability of the reduced rate in the light of their own particular circumstances.

Distributions to U.S. Holders of additional Shares with respect to their Shares or ADRs that are made as part of a pro rata distribution to all of our stockholders generally will not be subject to U.S. federal income tax. If holders of the ADRs are restricted in their ability to participate in the exercise of preemptive rights, the preemptive rights may give rise to a deemed distribution to holders of the Shares under Section 305 of the Code. Any deemed distributions will be taxable as a dividend in accordance with the general rules of the income tax treatment of dividends discussed above.

Gain or loss recognized by a U.S. Holder on the sale or other taxable disposition of Shares or ADRs generally will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between such U.S. Holder’s adjusted tax basis in the Shares or ADRs and the amount realized on the disposition. A U.S. Holder generally will have an adjusted tax basis in its Shares or ADRs equal to its U.S. dollar cost for such Shares or ADRs. If the Shares or ADRs are treated as traded on an “established securities market,” a cash basis U.S. Holder, and, if it elects, an accrual basis U.S. Holder, will determine the dollar cost of such Shares or ADRs by translating the amount paid at the spot rate of exchange on the settlement date of the purchase. Such an election by an accrual basis U.S. Holder must be applied consistently from year to year and cannot be revoked without the consent of the IRS. If dollars are converted to pesos and immediately used to purchase Shares or ADRs, such conversion generally will not result in taxable gain or loss.

If the consideration that a U.S. Holder receives for the Shares or ADRs is paid in a currency other than the dollar, the amount realized generally will be the dollar value of the payment received determined on (1) the date of receipt of payment in the case of a cash basis U.S. Holder and (2) the date of disposition in the case of an accrual basis U.S. Holder. If the Shares or ADRs are treated as traded on an “established securities market,” a cash basis taxpayer, or, if it elects, an accrual basis taxpayer, will determine the dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale.

Gain or loss recognized by a U.S. Holder on the sale or other disposition of Shares or ADRs generally will be long-term gain or loss if, at the time of disposition, the U.S. Holder has held the Shares or ADRs for more than one year.

Certain non-corporate U.S. Holders, including individuals, are eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deduction of a capital loss is subject to limitations under the Code.

Gain realized by a U.S. Holder on a sale or other disposition of Shares or ADRs generally will be treated as U.S. source income for U.S. foreign tax credit purposes. Consequently, if any Mexican withholding tax is imposed on the sale or disposition of the Shares, a U.S. holder that does not receive significant foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of these Mexican taxes. Alternatively, a U.S. Holder may deduct the Mexican tax withheld from its gross income, provided such U.S. Holder does not claim a foreign tax credit for any foreign income taxes paid or accrued during the taxable year. U.S. Holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, the Shares or ADRs.

In some cases, gain may be treated as foreign source income by holders eligible for the benefits of the Tax Treaty. U.S. Holders should consult their own tax advisors regarding the application of the Tax Treaty to gain or loss recognized on the sale or other taxable disposition of Shares or ADRs.

Deposits and withdrawals of Shares by U.S. Holders in exchange for ADRs will not result in the realization of gain or loss for U.S. federal income tax purposes.

A non-U.S. corporation generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying look-through rules, either (1) at least 75.0% of its gross income is passive income, or (2) on average at least 50.0% of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income. Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents and gains from commodities and securities transactions. The determination as to whether a non-U.S. corporation is a PFIC is based on the application of complex U.S. federal income tax rules, which are subject to different interpretations. In addition, the PFIC determination is made annually and generally is based on the value of a non-U.S. corporation’s assets (including goodwill) and composition of its income. In determining whether we are a PFIC, a pro rata portion of the income and assets of each subsidiary in which we own, directly or indirectly, at least a 25.0% interest by value is taken into account.

Based on current estimates of our income and assets, we do not believe that we were classified for our most recently-ended taxable year, or will be classified for our current taxable year, as a PFIC for U.S. federal income tax purposes, and we intend to continue our operations in such a manner that we will not become a PFIC in the future, although no assurances can be made regarding determination of our PFIC status in the current or any future taxable year. If we are treated as a PFIC for any taxable year, a U.S. Holder would be subject to special rules (and may be subject to increased tax liability and form filing requirements) with respect to (a) any gain realized on the sale or other disposition of Shares or ADRs, and (b) any “excess distribution” made by us to the U.S. Holder (generally, any distribution during a taxable year in which distributions to the U.S. Holder on the Shares or ADRs exceed 125.0% of the average annual distributions the U.S. Holder received on the Shares or ADRs during the preceding three taxable years or, if shorter, the U.S. Holder’s holding period for the Shares or ADRs). Under those rules, (a) the gain or excess distribution would be allocated ratably over the U.S. Holder’s holding period for the Shares or ADRs, (b) the amount allocated to the taxable year in which the gain or excess distribution is realized and to taxable years before the first day on which we became a PFIC would be taxable as ordinary income, (c) the amount allocated to each prior year in which the Issuer was a PFIC would be subject to U.S. federal income tax at the highest tax rate in effect for that year and (d) the interest charge generally applicable to underpayments of U.S. federal income tax would be imposed in respect of the tax attributable to each prior year in which we were treated as a PFIC.

In addition, a U.S. Holder generally must file IRS Form 8621 periodically to disclose ownership of an equity interest in a PFIC during any taxable year.

Prospective investors should consult their own tax advisors regarding the potential application of the PFIC rules to Shares or ADRs and the application of recently enacted legislation to their particular situation.

The following discussion is a summary of ~~the~~certain principal U.S. federal income tax consequences to beneficial holders of Shares or ADRs that are neither U.S. Holders nor partnerships for U.S. federal income tax purposes (“Non-U.S. Holders”).

Subject to the discussion below under “U.S. Backup Withholding and Information Reporting,” a Non-U.S. Holder of Shares or ADRs will not be subject to ~~dividend or~~ U.S. federal income or withholding tax on a dividend paid by us or gain realized on the sale of Shares or ADRs, unless (i) such dividend or gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States (and, if an applicable tax treaty requires, is attributable to a U.S. permanent establishment or fixed base of such Non-U.S. Holder) or (ii) in the case of gain realized by an individual Non-U.S. Holder, such Non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met.

In general, dividends on Shares or ADRs, and payments of the proceeds of a sale or other taxable disposition of Shares or ADRs, paid within the United States, by the U.S. payor or through certain U.S.-related financial intermediaries to a U.S. Holder are subject to information reporting and may be subject to backup withholding at a current rate of ~~28%~~24%, unless the U.S. Holder (i) establishes that it is an exempt recipient or (ii) with respect to backup withholding, provides an accurate taxpayer identification number and certifies that it is a U.S. person and that no loss of exemption from backup withholding has occurred. Payments made within the United States, by a U.S. payor or through certain U.S.-related financial intermediaries to a Non-U.S. Holder will not be subject to backup withholding tax and information reporting requirements if an appropriate certification is provided by the Non-U.S. Holder to the payor or intermediary and the ~~pay~~payor or intermediary does not have actual knowledge or a reason to know that the certificate is incorrect.

Backup withholding is not an additional tax. The amount of any backup withholding withheld from a payment ~~to a U.S. Holder~~ will be allowed as a credit against the ~~U.S. Holder’s~~holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. A ~~U.S. Holder~~holder generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed its U.S. federal income tax liability by filing a timely refund claim with the IRS.

In addition, U.S. Holders should be aware of annual reporting requirements with respect to the holding of foreign financial assets, including stock of foreign issuers that are not held in an account maintained by certain types of financial institutions, if the aggregate value of all of such assets exceeds $50,000, subject to certain exceptions. U.S. Holders should consult their own tax advisors regarding the application of the information reporting rules to our common Shares and the application of these reporting requirements to their particular situation.

Through December 31, 2013, dividends, either in cash or in any other form, paid with respect to the Shares constituting the Shares or the ADRs were not subject to Mexican withholding tax. However, as a result of changes to the income tax law described in note 20(a) of our Audited Consolidated Financial Statements, beginning on January 1, 2014, a new withholding tax of 10% was established for Mexican individuals resident in Mexico and for all residents in foreign countries who receive dividends from entities. Such tax is considered a withholding tax by the entity that pays the dividends.

Gain on the sale or other disposition of ADRs by holders who are not Mexican Residents (as defined below) will not be subject to Mexican income tax. Deposits of Shares in exchange for ADRs and withdrawals of Shares in exchange for ADRs will not give rise to Mexican income tax.

Gain on the sale of Shares by a holder who is not a Mexican Resident (as defined below) will not be subject to Mexican tax if the transaction is carried out through the Mexican Stock Exchange or other securities markets approved by the Mexican Ministry of Finance, and provided certain requirements set forth by the Mexican Income Tax Law are complied with. Sales or other dispositions of Shares made in other circumstances generally would be subject to Mexican tax, except to the extent that a holder is eligible for benefits under an income tax treaty to which Mexico is a party of. Under the Tax Treaty, gain on the sale or other disposition of Shares by a U.S. resident (if eligible for benefits under the Tax Treaty) who is a holder of less than 25% of our capital stock during the twelve-month period preceding such sale or disposition will not be subject to Mexican tax, unless (i) 50% or more of the fair market value of our assets consist of “immovable property” (as defined in the Tax Treaty) situated in Mexico, or (ii) such gains are attributable to a permanent establishment or fixed base of such U.S. resident in Mexico.

For a holder that is not a Mexican Resident and that does not meet the requirements referred to above, gross income realized on the sale of Shares will be subject to a 5% Mexican withholding tax if the transaction is carried out through the Mexican Stock Exchange. Alternatively, a holder that is not a Mexican Resident can choose to be subject to a 20% withholding rate on the net gain obtained, as calculated pursuant to Mexican Income Tax Law provisions.

The Mexican tax rules governing the taxation of gains of holders who are not Mexican Residents on dispositions of their Shares or ADRs were amended during 2002. Holders who are not Mexican Residents who disposed of their Shares or ADRs during 2003 should consult their own Mexican tax advisors on the Mexican tax treatment of such dispositions.

For purposes of Mexican taxation (Ley del Impuesto sobre la Renta), an individual is a resident of Mexico (a “Mexican Resident”) if he or she has established his or her home in Mexico, unless he or she has resided in another country for more than 183 days, whether consecutive or not, during a calendar year and can demonstrate that he or she has become a resident of that country for tax purposes. A legal entity is a Mexican Resident if it has been incorporated under Mexican law. A company is also considered to be a Mexican Resident if its headquarters are located in Mexico. A Mexican citizen is presumed to be a resident of Mexico for tax purposes unless such person can demonstrate otherwise. If a person is deemed to have a permanent establishment or fixed base in Mexico for tax purposes, such permanent person shall be required to pay taxes in Mexico on income attributable to such permanent establishment or fixed base, in accordance with applicable tax laws.

There are no Mexican inheritance, succession or similar taxes applicable to the ownership, transfer or disposition of ADRs or Shares by holders that are not Mexican Residents; provided, however, that gratuitous transfers of Shares may in certain circumstances cause a Mexican federal tax to be imposed on the recipient. There is no Mexican stamp, issue, registration or similar taxes or duties payable by holders of ADRs or Shares. Brokerage fees on securities transactions carried out through the Mexican Stock Exchange are subject to a 16%, valued added tax.

The documents concerning us which are referred to in this document are available in our company headquarters, located at Avenida ~~Tecnologico~~Tecnológico No. 401, Ciudad Industrial, Celaya, Guanajuato, zip code 38010, Mexico, for any inspection required. Part of this information is available on our website, at ~~www.bachoco.com.mx/inversionistas.~~https://corporativo.bachoco.com.mx/inversionistas/

In the normal course of our business, we hold or issue various financial instruments that expose us to financial risks involving fluctuations in currency exchange rates and interest rates. Also, we are exposed to commodity price risk in connection with fluctuations in the prices for our feed ingredients.

The Company is exposed to several risks related to the use of financial instruments to which risk management is applied, including credit risk, liquidity risk, market risk, and operational risk.

Note 8 of our Audited Consolidated Financial Statements presents information on the Company’s exposure to each of the aforementioned risks, and the Company’s objectives, policies and procedures for risk measurement and management. Further quantitative disclosures are included in various sections of these Audited Consolidated Financial Statements included in this Annual Report.

The risk philosophy adopted by the Company seeks to minimize the risk and, therefore, to enhance its business stability, by opting for a sound relationship between the levels of risk assumed and its operating capabilities, for ensuring better decision-making.

Risk Management means the “Set of objectives, policies, procedures and actions implemented to identify measure, monitor, limit, control, report and disclose the various types of risks to which the entity is exposed.”

Our exposure to market risk associated with changes in foreign currency exchange rates relates primarily to cost and expenses which are denominated in U.S. dollars. See Risk Factors under Item 3.

In ~~2015, 2014~~2018, 2017 and ~~2013~~2016, we recognized net foreign exchange gains of ~~$95.4, $19.9~~$39.3, $230.5 and ~~$28.1~~$297.5 million, respectively. ~~These gains are mainly attributed to positive results in our investments of cash.~~

As of December 31, ~~2015,~~2018, a hypothetical increase of 10% in the exchange rate, would have resulted in ~~a decrease~~an increase in the foreign currency position of ~~$225.6~~$135.6 million, which represents a ~~loss~~gain from foreign currency exchange rates. On the other hand, a decrease of 10% in the exchange rate would have resulted in ~~an increase~~a decrease in our foreign currency position of ~~$225.6~~$135.6 million, which represents a ~~gain~~loss from foreign currency exchange rates.

We manage our exchange rate exposure primarily through management of our financial structure. As part of our normal operations, we plan over a six-month period into the future and, depending on the expected uncertainty for that period, decide if it is economically advisable to purchase or sell any hedging instrument. We purchase financial derivative instruments in order to ensure greater certainty in our purchases of U.S. dollars.

The main risk that the Company faces with the use of these derivative instruments is the volatility in the exchange rate of the peso against the U.S. dollar. Our risk committee approves any change in policies and reviews the application of current policies.

No assurance can be given as to the future valuation of the Mexican peso and how further movements in the peso could affect our future earnings. In order to mitigate our foreign exchange risk, we have established a Risk Committee which meets at least once a quarter and approves the guidelines and policies for entering into these operations. We also work with independent consultants who make evaluations of our positions and provide us with consulting services. Said companies do not sell any financial instruments to us.

Our earnings may also be affected by changes in interest rates due to the impact those changes have on our variable rate debt instruments.

As of December 31, ~~2015,~~2018, we had borrowings of approximately ~~$4,127.0~~$5,037.6 million pursuant to variable rate debt instruments, representing approximately ~~10.2%~~9.5% of our total assets.

Based on our debt position on December 31, ~~2015,~~2018, we estimate that a hypothetical increase in the interest rate of 50 basis points would increase our interest expense by ~~$17.4~~$30.2 million, negatively impacting our net income by the same. Whereas, we estimate that a hypothetical decrease in the interest rate of 50 basis points, would decrease our interest expense by ~~$17.4~~$30.2 million, positively impacting our net income by the same.

Any such increase would likely be partially offset by an increase in interest income due to our strong cash and cash equivalent position.

The price of sorghum, soy meal, and corn is subject to significant volatility resulting from many external factors like weather conditions, the size of harvests, transportation and storage costs, among others. In order to reduce the potential adverse effect of grain price fluctuations, we vary the composition of our feed to take advantage of current market prices for the various types of ingredients used.

Based on our results for ~~2015,~~2018, we estimate that a hypothetical increase in the price of corn bushel and short-ton of soybean meal of 15% would decrease the loss in our overall derivative position instruments to ~~$44.6~~$2.7 million, ~~negatively~~positively affecting our results. Whereas, we estimate that a hypothetical decrease in the price of corn bushel and short-ton soybean meal of 15%, would increase the loss in our overall derivative position instruments to ~~$56.8~~$0.1 million, ~~positively~~negatively affecting our results.

On August 29, 2012, we issued bonds for $1,500 million through a public issuance of local bonds (“Certificados ~~Bursatiles”~~Bursátiles” or “CBs”) in the local debt capital markets for a tenor of 5 years, maturing in 2017.

The bonds issued ~~have~~had a 28-day TIIE interest rate plus + 0.60%. The principal of the bonds will be amortized at face value, in one payment, on the date of maturity.

This represented our first bond offering, which was distributed among a wide range of local investors. The funds obtained were utilized in accordance with the Company’s financial requirements.

This first $1,500 million bonds issuance is part of a bond issuance program for up to $5,000 million that the Company has available for issuance within the next five years, in accordance with its financial needs. These bonds were repaid in their entirety at maturity in 2017.

On August 2017, we issued a second series of bonds for $1,500 million through the same program in the local debt capital markets for a tenor of 5 years, maturing in 2022.

The new bonds issued had a 28-day TIIE interest rate plus + 0.31%. The principal of the bonds will be amortized at face value in one payment on the date of maturity.

For more detail, see Note 1718 of our Audited Consolidated Financial ~~Statements.~~Statements

BNY Mellon has been our Depositary Bank since the day of our initial public offering of shares and continues to act in that capacity as of the date of this document. BNY Mellon is located at ~~Church~~240 Greenwich Street, ~~Station,~~ in New York, N.Y. ~~10286.~~10007. Below is their contact information for shareholder and proxy services:

Fees and charges that a Holder of our ADRs may have to pay, either directly or indirectly

Our Depositary may charge each person to whom ADRs are issued, including, without limitation, issuances against deposits of shares, issuances in respect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADRs or deposited securities, and each person surrendering ADRs for withdrawal of deposited securities in any manner permitted by the deposit agreement or whose ADRs are cancelled or reduced for any other reason, US$5.00 for each 100 ADRs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, the case may be. The Depositary may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other distribution prior to such deposit to pay such charge.

The Depositary collects its fees for delivery and surrender of ADRs directly from investors depositing shares or surrendering ADRs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of participants acting for them. The Depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.

The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADRs), whichever is applicable:

We will pay all other charges and expenses of the Depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the Depositary. The fees described above may be amended from time to time.

The Depositary has agreed to reimburse us for expenses we incur that are related to establishment and maintenance expenses of the ADR program. The Depositary has agreed to reimburse us for our continuing annual stock exchange listing fees. The Depositary has also agreed to pay the standard out-of-pocket maintenance costs for the ADRs, which consist of the expenses of postage and envelopes for mailing annual and interim financial reports, printing and distributing dividend checks, electronic filing of U.S. Federal tax information, mailing required tax forms, stationery, postage, facsimile, and telephone calls. It has also agreed to reimburse us annually for certain investor relationship programs or special investor relations promotional activities. In certain instances, the Depositary has agreed to provide additional payments to the Company based on any applicable performance indicators relating to the ADR facility. There are limits on the amount of expenses for which the depositary will reimburse us, but the amount of reimbursement available to us is not necessarily tied to the amount of fees the depositary collects from investors.

Pursuant to our letter agreement with our Depositary, in 2014 we did not receive any such payment because we renegotiated our contract with BNY Mellon in August 2014 and were not be able to request this benefit until one year from the contract renewal date. In ~~2015,~~2018 and 2017, we received a payment of US ~~$67,765.28~~$70,000.00 (less fees), and US$70,000.00 (less fees) respectively, as payment for expenses we incurred related to the maintenance of our ADR program, including investor relations expenses and exchange application and listing fees.

We carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, ~~2015.~~2018. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, as of December 31, ~~2015,~~2018, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to provide reasonable assurance, that information required to be disclosed in the reports we file and submit under the Securities Exchange Act are recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management is responsible for establishing and maintaining internal control over financial reporting as defined in Rules 13a-15(f) and 15d- 15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Effective control over financial reporting cannot, and does not, provide absolute assurance of achieving our control objectives. Also, any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the design and effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2015. In~~2018. Before 2016, in making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ~~(COSO)~~(“COSO”) in its original 1992 Internal Control—Integrated Framework.

Beginning in 2016, in making this assessment, the Company adopted the criteria set forth by the COSO in its 2013 Internal Control—Integrated Framework.

Based on this assessment, management concluded that, as of December 31, ~~2015,~~2018, the Company’s internal control over financial reporting is effective based on ~~those~~such criteria. ~~It is important to highlight that as of December 31, 2014, we did find material weaknesses (described below), which we had remediated as of December 31, 2015.~~

~~A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of~~Our management’s assessment and conclusion on the ~~Company's annual or interim financial statements will not be prevented or detected on a timely manner.~~

~~The following material weaknesses were identified in our internal controls over financial reporting as of December 31, 2014:~~

~~We implemented a number of steps to remediate the material weaknesses we identified as of December 31, 2014 and improve our internal control over financial reporting. As a result of this plan, we:~~

~~As a result of this plan, we remedied the material weaknesses we identified as of December 31, 2014 and no new material weaknesses were identified as of December 31, 2015.~~

The Company decided to prioritize the remediation of the identified material weaknesses to eliminate these weaknesses and to strengthen its internal control procedures. For this reason, the Company continued using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its original 1992 Internal Control—Integrated Framework. In 2016, the Company will adopt the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control—Integrated Framework by implementing a plan. This plan will be presented to the Company’s audit committee during the second quarter of 2016 for its approval.

~~The~~ effectiveness of ~~the Company’s~~our internal control over financial reporting as of December 31, ~~2015 has been audited by Deloitte, an independent registered public accounting firm, as stated~~2018 includes AQF, Inc. and La Perla, which we acquired in ~~their report which appears herein.~~July, 2017.

~~We implemented the processes and procedures mentioned above in connection with our efforts to remediate the material weaknesses reported in our 2014 annual report on Form 20-F.~~

There ~~have otherwise been~~were no changes in our internal control over financial reporting induring the ~~period covered by this Annual Report~~quarter ended December 31, 2018 that ~~has~~have materially affected, or isare reasonably likely to materially affect, our internal control financial reporting. During 2018, we implemented internal controls to ensure we have adequately evaluated our lease contracts and properly assessed the impact of the new IFRS 16 accounting standard to lease recognition on our financial statements to facilitate the adoption of such standard on January 1, 2019. We do not expect significant changes to our internal control over financial ~~reporting.~~reporting due to the adoption of such new standard.

Report of Independent Registered Public Accounting Firm to the Board of Directors and Stockholders of Industrias Bachoco, S.A.B. de C.V. and subsidiaries

We have audited the internal control over financial reporting of Industrias Bachoco, S.A.B. de C.V. and subsidiaries (the “Company”) as of December 31, ~~2015,~~2018, based on criteria established inInternal Control —Integrated Framework (2013) ~~(1992)~~ issued by the Committee of Sponsoring Organizations of the Treadway ~~Commission.~~ Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established inInternal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018, of the Company and our report dated April 29, 2019, expressed an unqualified opinion on those financial statements

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying ~~Management’s~~“Management’s Annual Report on Internal Control Over Financial ~~Reporting.~~Reporting” appearing in Item 15. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with ~~generally accepted accounting principles.~~International Financial Standards as issued by the International Accounting Standard Board. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with ~~generally accepted accounting principles,~~International Financial Standards as issued by the International Accounting Standard Board, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of ~~the~~its inherent limitations, of internal control over financial reporting ~~including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud~~ may not ~~be prevented~~prevent or ~~detected on a timely basis.~~detect misstatements. Also, projections of any evaluation of ~~the~~ effectiveness ~~of the internal control over financial reporting~~ to future periods are subject to the risk that ~~the~~ controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on the criteria established in~~~~Internal Control~~ —~~Integrated Framework~~ ~~(1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.~~

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2015 of the Company and our report dated April 29, 2016 expressed an unqualified opinion on those financial statements.

During our ordinary stockholders’ meeting that took place on November 3, 2015, Guillermo Ochoa Maciel was elected as President of the Audit and Corporate Practices Committee. Mr. Ochoa Maciel possesses all the characteristics included in the definition of an “audit committee financial expert” within the meaning of this Item 16A.

We have adopted a code of ethics, as defined in Item 16B of Form 20-F under the Securities Exchange Act of 1934, as amended. Our code of ethics applies to our Chief Executive Officer, Chief Financial Officer, controller and persons performing similar functions, as well as to other officers and employees. Our code of ethics is available free of charge upon request through our investor relations website www.bachoco.com.mx. If we amend the provisions of our code of ethics that apply to our Chief Executive Officer, Chief Financial Officer, controller and persons performing similar functions, or if we grant any waiver of such provisions, we will disclose such amendment or waiver upon request on our website at the same address.

On September 3, 2013, we announced that the Company’s Board of Directors, as per the Audit Committee’s recommendation, approved the selection of Deloitte as the Company’s independent registered public accountant, effective as of September 30, 2013.

The following table sets forth the fees billed by Deloitte our independent registered public accounting ~~firms,~~firm, and paid by us. All amounts are in nominal thousands of pesos, no taxes are included.

Deloitte’s audit related fees in the table above are fees related to the review of transfer price studies. Deloitte’s other fees in the ~~Annual Reports~~table above are fees related to ~~be released~~a diagnostic of a “shared service center” for our company.

In addition to the ~~Mexican and New York stock exchanges, as well as~~ fees ~~billed by~~for professional services paid listed in the table above, we reimbursed Deloitte ~~related to out of packet~~for out-of-pocket expenses they incurred in connection with the performance of their audit, such as lodging and ~~traveling.~~other travel related expenses of $417 and $733 in 2018 and 2017, respectively.

Our audit committee has not established pre-approval policies and procedures for the engagement of our independent auditors for services. Our audit committee expressly approves on a case-by-case basis any engagement of our independent auditors for audit and non-audit services provided to our subsidiaries or to us.

According to the New York Stock Exchange’s Listing Standards for Audit Committees of a Foreign Private Issuer, Ricardo Aguirre, a member of our audit committee, currently does not meet the independence standards set forth in Rule ~~10A-3b(1)~~10A-3(b)(1)(ii)(B) of the Exchange Act. Therefore, with respect to Mr. Aguirre, we rely on the exemption provided in Rule 10A-3(b)(1)(iv)(D) of the Exchange Act because Mr. Aguirre (i) represents the Company’s controlling shareholders, (ii) only has observer status on, and is not a voting member or the chair of, the Company’s audit committee and (iii) is not an executive officer of the Company. Our reliance on such exemption does not materially adversely affect the ability of our audit committee to act independently and to satisfy the other requirements of Rule 10A-3(b).

Every year during the annual ordinary stockholder meeting, the Board proposes the approval of an amount to be used in a repurchase plan of our shares. The repurchase plan is approved for a period of one year. All the shares set in the table below were repurchased pursuant to the repurchase plan in force at the date of the purchase.

The table set below sets forth the information regarding the purchase plan approved by the Board of Directors in the three recent fiscal years.

The table below sets forth information about the repurchase of our shares on the BMV:

Comparison of our Corporate Governance Rules and the Rules of the NYSE Applicable to U.S. Registered Companies

On November 4, 2003, the SEC approved final corporate governance standards for companies listed on the NYSE (“NYSE Corporate Governance Standards”). According to such standards, foreign private issuers are subject to a more limited set of requirements regarding corporate governance than those imposed on U.S. domestic issuers. As a foreign private issuer, we must comply with four NYSE Corporate Governance Standards:

Pursuant to Section 303A.11 of the NYSE Corporate Governance Standards, we are required to disclose any significant ways in which our corporate governance practices differ from those required to be followed by domestic companies under NYSE listing standards. A brief description disclosing the significant ways in which our corporate governance practices differ from those followed by U.S. companies under the NYSE listing standards is set forth below:

See the Audited Consolidated Financial Statements including Notes, incorporated herein by reference.

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Financial Statements

Years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016

Content

Report of Independent Registered Public Accounting Firm		F-2
Consolidated Statements of Financial Position		F-3
Consolidated Statements of Profit and Loss and Other Comprehensive Income		F-4
Consolidated Statements of Changes in ~~Stockholder’s~~Stockholders’ Equity		F-5
Consolidated Statements of Cash ~~Flow~~Flows		F-6
Notes to the Consolidated Financial Statements		F-7

F-1

Report of Independent Registered Public Accounting Firm to the Board of Directors and Stockholders of Industrias Bachoco, S.A.B. de C.V. and subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Industrias Bachoco, S.A.B. de C.V. and subsidiaries (the ~~“Company”~~"Company") as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013, and~~2016, the related consolidated statements of profit orand loss and other comprehensive income, changes in ~~shareholders’~~stockholders' equity, and cash flows, for the years then ~~ended. These financial statements are~~ended, and the ~~responsibility of~~related notes (collectively referred to as the ~~Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.~~

~~We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States)~~"financial statements"). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, ~~such~~the consolidated financial statements present fairly, in all material respects, the ~~consolidated~~ financial position of ~~Industrias Bachoco, S.A.B. de C.V. and subsidiaries~~the Company as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016, and the results of ~~their~~its operations and ~~their~~its cash flows for the years then ended, in conformity with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the ~~Company’s~~Company's internal control over financial reporting as of December 31, ~~2015,~~2018, based on ~~the~~ criteria established inInternal ~~Control-Integrated~~Control — Integrated Framework ~~(1992)~~(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 29, ~~2016~~2019, expressed an unqualified opinion on the ~~Company’s~~Company's internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Galaz, Yamazaki, Ruiz Urquiza, ~~S. C.~~S.C.

Member of Deloitte Touche Tohmatsu Limited

/s/ Miguel Angel Andrade Leven
C.P.C. Miguel Angel Andrade Leven
We have served as the Company's auditor since 2013.

~~By: /s/ C.P.C. Francisco Javier Robles Mújica~~

~~Querétaro, Qro., Mexico~~México City, México

April 29, ~~2016~~2019

We have served as the Company's auditor since 2013.

F-2

INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statements of Financial Position

December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016

(Thousands of pesos)

Assets	Note	2015		2014		2013		Note	2018		2017		2016

Current assets:
Cash and cash equivalents	7	$	14,046,262		11,036,062		6,716,894	7	$	17,901,845		16,112,268		14,681,204
Investment in securities at fair value through profit or loss	8		1,242,614		925,584		1,004,106	8		550,068		1,127,841		970,292
Derivative financial instruments	8		1,244		6,669		11,735	8		6,570		-		8,308
Accounts receivable, net	9		2,533,427		2,974,578		2,318,093	9		3,486,354		3,626,878		3,629,144
Due from related parties	19		194,522		1,929		3,678	20		99		326		148,855
Inventories	10		3,404,269		2,968,061		2,738,222	10		4,575,596		4,727,333		3,970,688
Current biological assets	11		1,651,794		1,501,428		1,420,174	11		2,073,526		1,942,193		1,961,191
Prepaid expenses and other current assets	12		1,587,808		1,379,077		1,135,539	12		1,131,870		638,671		1,503,945
Assets held for sale	13		60,048		58,583		49,053	13		49,068		49,523		56,728
Total currents assets			24,721,988		20,851,971		15,397,494			29,774,996		28,225,033		26,930,355

Non-current assets:
Property, plant and equipment, net	14		13,188,131		12,054,754		11,652,449	14		18,018,176		17,320,041		15,081,105
Non-current biological assets	11		1,434,131		1,109,233		1,109,936	11		1,721,728		1,617,503		1,668,543
Deferred income tax	20		54,127		49,378		34,940	21		103,826		80,670		60,132
Goodwill	15		454,295		349,764		344,259	15		1,631,771		1,631,094		484,877
Intangible assets								16		949,355		1,040,042		-
Other non-current assets	16		593,906		428,028		350,599	17		665,742		643,006		865,454
Total non-currents assets			15,724,590		13,991,157		13,492,183			23,090,598		22,332,356		18,160,111

Total assets		$	40,446,578		34,843,128		28,889,677		$	52,865,594		50,557,389		45,090,466

Liabilities and equity	Note	2015			2014			2013			Note	2018			2017			2016

Current liabilities:
Short term debt	17	$	1,622,850			664,250			541,200
Short-term debt											18	$	3,427,820			2,852,400			1,444,800
Current portion of long-term debt	17		9,033			133,732			16,392		18		64,973			842,651			1,652,725
Derivative financial instruments											8		0			6,821			-
Trade payable and other accounts payable	18		4,597,103			3,970,515			3,375,601		19		5,196,347			4,740,366			4,545,177
Income tax payable	20		248,205			759,982			456,657		21		248,290			731,654			483,618
Due to related parties	19		165,628			127,033			54,095		20		147,514			55,252			189,966
Total current liabilities			6,642,819			5,655,512			4,443,945				9,084,944			9,229,144			8,316,286

Long term liabilities:
Long term debt, excluding current installments	17		2,495,127			1,652,470			1,510,210
Long-term debt, excluding current installments											18		1,544,807			1,553,973			950,412
Deferred income tax	20		3,369,036			3,082,197			2,736,131		21		3,767,320			3,843,379			3,912,575
Employee benefits	21		160,218			90,899			48,245		22		302,818			252,965			195,019
Total long term liabilities			6,024,381			4,825,566			4,294,586				5,614,945			5,650,317			5,058,006

Total liabilities			12,667,200			10,481,078			8,738,531				14,699,889			14,879,461			13,374,292

Equity:
Capital stock	24		1,174,432			1,174,432			1,174,432		25		1,174,432			1,174,432			1,174,432
Share premium			414,017			399,641			399,641				414,470			414,385			414,385
Reserve for repurchase of shares			777,622			101,105			99,601				562,047			493,141			449,641
Retained earnings			24,749,616			22,513,154			18,586,228				34,792,320			32,367,912			28,244,970
Accumulated other comprehensive income													(307	)		-			-
Foreign currency translation reserve			710,439			208,107			(87,090	)			1,273,671			1,268,021			1,465,657
Actuarial remeasurements, net	21		(97,196	)		(79,035	)		(60,967	)	22		(120,378	)		(98,938	)		(86,774	)
Equity attributable to controlling interest			27,728,930			24,317,404			20,111,845				38,096,255			35,618,953			31,662,311

Non-controlling interest			50,448			44,646			39,301				69,450			58,975			53,863
Total equity			27,779,378			24,362,050			20,151,146				38,165,705			35,677,928			31,716,174

Commitments	26										27
Contingencies	27										28

Total liabilities and equity		$	40,446,578			34,843,128			28,889,677			$	52,865,594			50,557,389			45,090,466

See accompanying notes to consolidated financial statements.

F-3

INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statements of Profit and Loss and Other Comprehensive Income

Years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016

(Thousands of pesos, except share and per share amount)

	Note	2015			2014			2013			Note	2018			2017			2016

Net revenues		$	46,229,049			41,779,087			39,710,726			$	61,052,092			58,050,025			52,020,303
Cost of sales	22		(36,847,508	)		(32,494,974	)		(33,176,599	)	23		(51,422,376	)		(47,502,959	)		(42,635,071	)

Gross profit			9,381,541			9,284,113			6,534,127				9,629,716			10,547,066			9,385,232

General, selling and administrative expenses	22		(4,323,374	)		(3,781,326	)		(3,291,006	)	23		(6,024,406	)		(5,423,379	)		(4,847,858	)
Other (expenses) income, net	29		(4,640	)		(160,919	)		30,704
Other income (expenses), net											30		102,660			167,642			260,202

Operating income			5,053,527			5,341,868			3,273,825				3,707,970			5,291,329			4,797,576

Finance income	28		593,845			367,227			344,785		29		1,140,749			1,087,641			969,174
Finance costs	28		(147,292	)		(120,319	)		(226,366	)	29		(332,168	)		(340,091	)		(172,154	)
Net finance income			446,553			246,908			118,419				808,581			747,550			797,020

Profit before income taxes			5,500,080			5,588,776			3,392,244				4,516,551			6,038,879			5,594,596

Income taxes	20		1,680,560			1,656,110			1,350,439		21		1,154,978			1,084,444			1,643,433

Profit for the year		$	3,819,520			3,932,666			2,041,805			$	3,361,573			4,954,435			3,951,163

Other comprehensive income (loss) items:
Items that may be reclassified subsequently to profit or loss:
Currency translation effect			502,332			295,197			32,672				5,650			(197,636	)		755,218
Hedge result													(307	)		-			-
Items that will not be reclassified subsequently to profit or loss:
Actuarial remeasurements	21		(25,944	)		(25,812	)		(61,057	)	22		(30,629	)		(17,377	)		14,888
Income taxes related to actuarial remeasurements			7,783			7,744			18,317				9,189			5,213			(4,466	)
Other comprehensive (loss) income			484,171			277,129			(10,068	)
Other comprehensive income													(16,097	)		(209,800	)		765,640

Comprehensive income for the year		$	4,303,691			4,209,795			2,031,737			$	3,345,476			4,744,635			4,716,803

Profit attributable to:
Controlling interest		$	3,812,840			3,926,926			2,038,422			$	3,349,967			4,948,242			3,946,634
Non-controlling interest			6,680			5,740			3,383				11,606			6,193			4,529

Profit for the year		$	3,819,520			3,932,666			2,041,805			$	3,361,573			4,954,435			3,951,163

Comprehensive income attributable to:
Controlling interest		$	4,297,011			4,204,055			2,028,354			$	3,333,870			4,738,442			4,712,274
Non-controlling interest			6,680			5,740			3,383				11,606			6,193			4,529

Comprehensive income for the year		$	4,303,691			4,209,795			2,031,737			$	3,345,476			4,744,635			4,716,803

Weighted average outstanding shares			599,631,383			599,955,240			599,992,952				599,980,734			599,997,696			599,979,844

Basic and diluted earnings per share	25	$	6.36			6.55			3.40		26	$	5.58			8.25			6.58

See accompanying notes to consolidated financial statements.

F-4

INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders' Equity

Years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016

(Thousands of pesos)

		Attributable to controlling interest																										Attributable to controlling interest
		Capital stock				Retained earnings						Other comprehensive items																Capital stock				Retained earnings						Accumulated other comprehensive income
						Reserve for						Foreign			Actuarial																	Reserve for									Foreign			Actuarial
		Capital		Share		repurchase of			Retained			currency			remeasurements						Non-controlling			Total				Capital		Share		repurchase of			Retained			Hedge			currency			remeasurements						Non-controlling			Total
	Note	stock		premium		shares			earnings			translation reserve			net			Total			interest			equity			Note	stock		premium		shares			earnings			result			translation reserve			net			Total			interest			equity

Balance at January 1, 2013		$	1,174,432		399,641		99,474			17,405,360			(26,916	)		-			19,051,991			36,698			19,088,689

Dividends paid	24		-		-		-			(950,400	)		-			-			(950,400	)		-			(950,400	)
Dividends paid to non-controlling interest			-		-		-			-			-			-			-			(780	)		(780	)
Repurchase and sale of shares, net	24		-		-		127			-			-			-			127			-			127
IAS 19 R adoption effect	21		-		-		-			-			-			(18,227	)		(18,227	)		-			(18,227	)

Comprehensive income for the year:
Profit for the year			-		-		-			2,038,422			-			-			2,038,422			3,383			2,041,805
Other comprehensive income			-		-		-			92,846			(60,174	)		(42,740	)		(10,068	)		-			(10,068	)

Total comprehensive income for the year			-		-		-			2,131,268			(60,174	)		(42,740	)		2,028,354			3,383			2,031,737

Balance at December 31, 2013			1,174,432		399,641		99,601			18,586,228			(87,090	)		(60,967	)		20,111,845			39,301			20,151,146

Dividends paid to non-controlling interest			-		-		-			-			-			-			-			(845	)		(845	)
Repurchase and sale of shares, net	24		-		-		1,504			-			-			-			1,504			-			1,504
Disposal of non-controlling interest from disolution			-		-		-			-			-			-			-			450			450

Comprehensive income for the year:
Profit for the year			-		-		-			3,926,926			-			-			3,926,926			5,740			3,932,666
Other comprehensive income			-		-		-			-			295,197			(18,068	)		277,129			-			277,129

Total comprehensive income for the year			-		-		-			3,926,926			295,197			(18,068	)		4,204,055			5,740			4,209,795

Balance at December 31, 2014			1,174,432		399,641		101,105			22,513,154			208,107			(79,035	)		24,317,404			44,646			24,362,050
Balance at January 1, 2016																												$	1,174,432		414,017		777,622			24,749,616			-			710,439			(97,196	)		27,728,930			50,448			27,779,378

Dividends paid	24		-		-		-			(899,162	)		-			-			(899,162	)		-			(899,162	)	25		-		-		-			(779,960	)		-			-			-			(779,960	)		-			(779,960	)
Dividends paid to non-controlling interest			-		-		-			-			-			-			-			(878	)		(878	)			-		-		-			-			-			-			-			-			(1,114	)		(1,114	)
Reserve for repurchase of shares			-		-		677,216			(677,216	)		-			-			-			-			-				-		-		(328,680	)		328,680			-			-			-			-			-			-
Repurchase and sale of shares	24		-		14,376		(699	)		-			-			-			13,677			-			13,677		25		-		368		699			-			-			-			-			1,067			-			1,067

Comprehensive income for the year:
Profit for the year			-		-		-			3,812,840			-			-			3,812,840			6,680			3,819,520				-		-		-			3,946,634			-			-			-			3,946,634			4,529			3,951,163
Other comprehensive income			-		-		-			-			502,332			(18,161	)		484,171			-			484,171				-		-		-			-			-			755,218			10,422			765,640			-			765,640

Total comprehensive income for the year			-		-		-			3,812,840			502,332			(18,161	)		4,297,011			6,680			4,303,691				-		-		-			3,946,634			-			755,218			10,422			4,712,274			4,529			4,716,803

Balance at December 31, 2015		$	1,174,432		414,017		777,622			24,749,616			710,439			(97,196	)		27,728,930			50,448			27,779,378
Balance at December 31, 2016																													1,174,432		414,385		449,641			28,244,970			-			1,465,657			(86,774	)		31,662,311			53,863			31,716,174

Dividends paid																											25		-		-		-			(780,000	)		-			-			-			(780,000	)		-			(780,000	)
Dividends paid to non-controlling interest																													-		-		-			-			-			-			-			-			(1,081	)		(1,081	)
Reserve for repurchase of shares																													-		-		45,300			(45,300	)		-			-			-			-			-			-
Repurchase and sale of shares																											25		-		-		(1,800	)		-			-			-			-			(1,800	)		-			(1,800	)

Comprehensive income for the year:
Profit for the year																													-		-		-			4,948,242			-			-			-			4,948,242			6,193			4,954,435
Other comprehensive income																													-		-		-			-			-			(197,636	)		(12,164	)		(209,800	)		-			(209,800	)

Total comprehensive income for the year																													-		-		-			4,948,242			-			(197,636	)		(12,164	)		4,738,442			6,193			4,744,635

Balance at December 31, 2017																													1,174,432		414,385		493,141			32,367,912			-			1,268,021			(98,938	)		35,618,953			58,975			35,677,928

Dividends paid																											25		-		-		-			(852,000	)		-			-			-			(852,000	)		-			(852,000	)
Dividends paid to non-controlling interest																													-		-		-			-			-			-			-			-			(1,131	)		(1,131	)
Reserve for repurchase of shares																													-		-		73,559			(73,559	)		-			-			-			-			-			-
Repurchase and sale of shares																											25		-		85		(4,653	)		-			-			-			-			(4,568	)		-			(4,568	)

Comprehensive income for the year:
Profit for the year																													-		-		-			3,349,967			-			-			-			3,349,967			11,606			3,361,573
Other comprehensive income																													-		-		-			-			(307	)		5,650			(21,440	)		(16,097	)		-			(16,097	)

Total comprehensive income for the year																													-		-		-			3,349,967			(307	)		5,650			(21,440	)		3,333,870			11,606			3,345,476
Balance at December 31, 2018																												$	1,174,432		414,470		562,047			34,792,320			(307	)		1,273,671			(120,378	)		38,096,255			69,450			38,165,705

See accompanying notes to consolidated financial statements.

F-5

INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016

(Thousands of pesos)

	Note	2015			2014			2013			Note	2018			2017			2016

Cash flows from operating activities:
Profit for the year		$	3,819,520			3,932,666			2,041,805			$	3,361,573			4,954,435			3,951,163
Adjustments for:
Deferred income tax recognized in profit or loss	20		192,070			280,070			123,022		21		(91,869	)		(627,090	)		382,904
Current income tax recognized in profit or loss	20		1,488,490			1,376,040			1,227,417		21		1,246,847			1,711,534			1,260,529
Depreciation	14		769,270			805,650			816,673		14		1,226,917			1,075,788			925,748
Goodwill impairment loss	15		38,619			-			-
Loss on disposal of plant and equipment			90,279			152,830			14,958
Intangible impairment loss											16		21,430			-			-
Loss (gain) on disposal of plant and equipment													23,227			41,890			(157,245	)
Interest income	28		(489,934	)		(347,364	)		(314,245	)	29		(1,077,507	)		(857,109	)		(646,334	)
Interest expense	28		147,292			118,090			226,366		29		332,168			255,997			172,154
Unrealized foreign currency exchange			-			-			17,950
Foreign exchange loss on loans			33,300			82,148			11,865
Unrealized foreign exchange loss on loans													43,400			82,600			270,850

Subtotal			6,088,906			6,400,130			4,165,811				5,086,186			6,638,045			6,159,769

Derivative financial instruments			5,425			5,066			(8,797	)			(13,391	)		15,129			(7,064	)
Accounts receivable, net			521,603			(663,813	)		(8,091	)			200,145			162,906			(1,144,991	)
Due from related parties			(3,518	)		(1,929	)		-				227			3,967			1,154
Inventories			(448,404	)		(246,515	)		1,871,404				149,738			(461,783	)		(562,905	)
Current and non-current biological assets			(256,969	)		(83,023	)		151,010				(236,179	)		70,941			(539,395	)
Prepaid expenses and other current assets			(401,711	)		(76,149	)		(287,478	)			(493,442	)		875,307			82,324
Assets held for sale			(1,465	)		(9,530	)		2,454				455			7,205			3,320
Trade payable and other accounts payable			629,631			602,297			(70,540	)			457,941			(350,299	)		(43,707	)
Due to related parties			38,595			72,938			(33,944	)			92,262			(134,714	)		24,338
Income taxes paid			(2,087,286	)		(1,056,082	)		(843,906	)			(1,787,959	)		(1,405,256	)		(997,028	)
Employee benefits			43,375			42,654			(84,110	)			49,853			57,946			34,801

Net cash provided by operating activities			4,128,182			4,986,044			4,853,813				3,505,836			5,479,394			3,010,616

Cash flows from investing activities:
Payments for acquisition of property, plant and equipment			(1,909,771	)		(1,288,520	)		(575,411	)			(1,977,567	)		(2,126,361	)		(2,792,252	)
Proceeds from sale of plant and equipment			71,427			62,342			57,795				32,455			35,175			278,340
Restricted cash			(25,771	)		(8,008	)		-				-			(24,058	)		(19,236	)
Investment in securities			(317,030	)		78,522			(42,138	)
Investment in securities at fair value through profit or loss													577,773			(157,549	)		272,322
Other assets			(55,698	)		(42,087	)		(48,210	)			(27,983	)		2,125			4,583
Interest collected			489,934			347,364			314,245				1,077,507			857,109			646,334
Bussiness acquisition including option agreement			(190,595	)		(139,655	)		(135,450	)
Loans granted to related parties			(189,075	)		-			-
Bussiness acquisition including advance payment													-			(2,494,862	)		-
Collection of principal of loans granted to related parties													-			144,562			44,513

Net cash used in investing activities			(2,126,579	)		(990,042	)		(429,168	)			(317,815	)		(3,763,859	)		(1,565,396	)

Cash flows from financing activities:
Payment for repurchase of shares			(40,612	)		(7,019	)		(3,071	)			(6,454	)		(1,800	)		(4,157	)
Proceeds from issuance of repurchased shares			54,289			8,523			3,198				1,887			-			5,224
Dividends paid			(899,162	)		-			(950,400	)			(852,000	)		(780,000	)		(779,960	)
Dividends paid to non-controlling interest			(878	)		(845	)		(780	)			(1,131	)		(1,081	)		(1,114	)
Disposal of non-controlling interest from disolution			-			450			-
Proceeds from borrowings			3,903,200			1,454,050			1,507,700				3,370,400			5,378,915			2,320,500
Principal payment on loans			(2,231,596	)		(1,098,575	)		(2,181,166	)			(3,588,067	)		(4,246,100	)		(2,670,474	)
Interest paid			(147,292	)		(118,090	)		(226,366	)			(332,168	)		(255,997	)		(172,154	)

Net cash provided by (used in) financing activities			637,949			238,494			(1,850,885	)
Net cash (used in) provided by financing activities													(1,407,533	)		93,937			(1,302,135	)

Net increase in cash and cash equivalents			2,639,552			4,234,496			2,573,760				1,780,488			1,809,472			143,085

Cash and cash equivalents at January 1			11,028,054			6,716,894			4,179,541				16,088,210			14,661,968			14,020,491

Effect of exchange rate fluctuations on cash and cash equivalents			352,885			76,664			(36,407	)			33,147			(383,230	)		498,392

Cash and cash equivalents at December 31		$	14,020,491			11,028,054			6,716,894			$	17,901,845			16,088,210			14,661,968

See accompanying notes to consolidated financial statements.

F-6

INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES

Notes to the Consolidated Financial Statements

Years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016

(Thousands of Mexican pesos, except amounts per share)

(1)

Reporting entity

Industrias Bachoco, S.A.B. de C.V. and subsidiaries (hereinafter, “Bachoco” or the “Company”) is a publicly traded company and was incorporated on April 17, 1980, as a legal entity. The Company’s registered address is Avenida Tecnológico 401, Ciudad Industrial, Celaya, Guanajuato, Mexico.

The Company is engaged in breeding, processing and marketing poultry (chicken and eggs), swine and other products (primarily balanced animal feed). Bachoco is a holding company that has control over a group of subsidiaries (see note 5).

The shares of the Company are listed on the Mexican Stock Exchange (BMV for its Spanish acronym) under the ticker symbol “Bachoco,” and in the New York Stock Exchange (NYSE), under the ticker symbol “IBA”.

(2)

Basis of preparation

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), issued by the International Accounting Standard Board (IASB).

On April ~~8, 2016,~~12, 2019, the accompanying consolidated financial statements and related notes were authorized for issuance by the Company’s Chief Financial Officer, Mr. Daniel Salazar Ferrer, for review and approval by the Audit Committee, Board of Directors and stockholders. In accordance with Mexican General Corporate Law and the Company’s bylaws, the stockholders are empowered to modify the consolidated financial statements after their issuance should they deem it necessary.

~~F-7~~

Basis of measurement

The accompanying consolidated financial statements were prepared on the historical cost basis (historical cost is generally based on the fair value of the consideration given in exchange for goods and services), except for the following items in the consolidated statement of financial position, which are measured at fair value:

Derivative financial instruments for trading and hedging, and investment in securities at fair value through profit or loss

Biological assets

F-7

Fair value is defined as 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, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date.

In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements in its entirety, which are described as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 inputs are inputs, other than quoted prices included within Level 1, which are observable either directly or indirectly.

Level 3 inputs are unobservable inputs.

Functional and presentation currency

These consolidated financial statements are presented in thousands of Mexican pesos (pesos or $), the official currency of Mexico, which is the currency in which the Company’s accounting records are maintained and functional currency, except for the foreign subsidiaries for which the U.S. dollar is the functional currency as well as the currency in which accounting records ~~and maintained and functional currency.~~are maintained.

For disclosure purposes, in the notes to the consolidated financial statements, “thousands of pesos” or “$” means thousands of Mexican pesos, and “thousands of dollars” means thousands of U.S. dollars.

When deemed relevant, certain amounts are included between parentheses as a translation into thousands of dollars, into thousands of Mexican pesos, or both, as applicable. These translations are performed for the convenience of the reader at the closing exchange rate issued by Bank of Mexico, which is ~~$17.21, $14.75~~$19.67, $19.66 and ~~$13.09~~$20.64 pesos to one U.S. dollar as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016, respectively.

Use of estimates and judgments

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

~~F-8~~

Estimates and significant assumptions are reviewed on an ongoing basis. Changes in estimates are recognized in the period in which they occur and in any future periods affected.

The following are the critical accounting estimates and assumptions used by management in the application of the Company’s accounting policies, which are significant to the amounts recognized in the consolidated financial statements.

F-8

Critical accounting judgments

Fair value of biological assets

The balance of current biological assets includes hatching eggs, growing pigs and growing poultry, while the balance of non-current biological assets includes poultry in its different production stages, and breeder pigs.

Non-current biological assets are valued at production cost less accumulated depreciation or accumulated impairment losses, as there is no observable or reliable market for such assets. Additionally, the Company believes that there is no reliable method for measuring the fair value of non-current biological assets. Current biological assets are valued at fair value when there is an observable market, less estimated selling expenses.

ii.

Business combinations or acquisition of assets

iii.

Aggregation of operating segments

The Company’s chicken and egg operating segments are aggregated to present one reportable segment (Poultry) as they have similar products and services, production processes, classes of customers, methods used for distribution, the nature of the regulatory environment in which they operate, and similar economic characteristics as evidenced by similar five-year trends in gross profit margins. These factors are evaluated at least annually.

Key sources of estimation uncertainty on the application of accounting policies

Assessments to determine the recoverability of deferred tax assets

On an annual basis the Company prepares projections to determine if it will generate sufficient taxable income to utilize its deferred tax assets associated with deductible temporary differences, including tax losses and other tax credits.

~~F-9~~

ii.

Useful lives and residual values of property, plant and equipment

Useful lives and residual values of intangible assets and property, plant and equipment are used to determine amortization and depreciation expense of such assets and are determined with the assistance of internal and external specialists as deemed necessary.

F-9

Useful lives and residual values are reviewed periodically at least once a year, based on the current conditions of the assets and the estimate of the period during which they will continue to generate economic benefits to the Company. If there are changes in the related estimate, measurement of the net carrying amount of assets and the corresponding depreciation expense are affected prospectively.

iii.

Measurements and disclosures at fair value

When the price of an identical asset or liability is not observable, the Company determines the fair value using another valuation technique which maximizes the use of relevant observable information and minimizes the use of unobservable information. As the fair value is a measurement based on the market, it is measured using the assumptions that market participants would use when they assign a price to an asset or liability, including assumptions about risk.

iv.

Impairment of long-lived assets and goodwill

The carrying amount of long-lived assets is reviewed for impairment when situations or changes in circumstances indicate that it is not recoverable, except for goodwill which is reviewed on an annual basis. If there are indicators of impairment, a review is carried out to determine whether the carrying amount exceeds its recoverable value and whether it is impaired. The recoverable value is the highest of the asset’s fair value, less selling costs, and its value in use which is the present value of the future estimated cash flows generated by the asset. The value in use calculation requires the Company’s management to estimate the future cash flows expected to arise from the asset and/or from the cash-generating unit and an appropriate discount rate in order to calculate present value.

Employee retirement benefits

The Company uses assumptions to determine the best estimate for its employee retirement benefits. Assumptions and estimates are established in conjunction with independent actuaries. These assumptions include demographic hypotheses, discount rates and expected increases in remunerations and future employee service periods, among others. Although the assumptions are deemed appropriate, a change in such assumptions could affect the value of the employee benefit liability and the results of the period in which it occurs.

vi.

Expected credit losses on accounts receivable

The expected credit losses on financial assets are estimated using a provision matrix based on the Company's historical experience of credit losses, adjusted for factors that are specific to each of the Company's customer and debtor groups, general economic conditions and an assessment of both current and forecast conditions at each reporting date.

F-10

~~vi.~~vii.

Contingencies

A contingent liability is defined as:

A possible obligation that arises from past events and whose existence can only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company, or

a present obligation that arises from past events but is not recognized because:

it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

the amount of the obligation cannot be measured with sufficient reliability.

The assessment of such contingencies requires the exercise of significant judgments and estimates on the possible outcome of those future events. The Company assesses the probability of loss arising from lawsuits and other contingencies with the assistance of its legal advisors. These estimates are reconsidered periodically at each reporting period.

Issue of new IFRS

i. New and amended IFRS that affect reported balances and/or disclosures in financial statements

~~All~~In the current year, the Company adopted a series of new and amended IFRS issued by the IASB ~~mandatorily effective~~which went into effect on January 1, ~~2015 were early adopted by the Company in 2014.~~

~~ii. New IFRS in issue but not yet effective~~

~~The Company has not applied the following new and revised IFRS that have been issued, but that are not yet effective for periods beginning on January 1, 2015.~~2018 as it relates to its consolidated financial statements.

IFRS 9, Financial Instruments

IFRS 9,Financial Instruments~~issued in July 2014, is the replacement of IAS 39~~~~Financial Instruments: Recognition and Measurement.~~ ~~This standard~~, includes requirements for recognition and measurement, impairment, derecognition and general hedge accounting. ~~Another revised version~~

The details of IFRS 9 was issued in July 2015 mainly to introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement category for certain simple debt instruments. This version supersedes all previous versionsthese new requirements, and ~~is mandatorily effective for periods beginning~~their impact on ~~or after January 1, 2018, with early adoption being permitted. IFRS 9 (2014) does not replace~~ the ~~requirements for portfolio fair value hedge accounting for interest rate risk since this face~~consolidated statements of financial position of the ~~project was separated from the IFRS 9 project.~~Company, are described below.

IFRS 9 (2014) is a complete standard that includes the requirements previously issued and the additional amendments to introduce a new expected loss impairment model and limited changes to the classificationClassification and measurement ~~requirements for~~of financial assets. More specifically, the new impairment model is based on expected credit losses rather than incurred losses, and will apply to debt instruments measured at amortized cost or FVTOCI, lease receivables, contract assets and certain written loan commitments and financial guarantee contracts. Regarding the new measurement category of FVTOCI, it will apply for debt instruments held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets.

~~F-11~~

All recognized financial assets that are within the scope of ~~IAS 39~~IFRS 9 are required to be measured subsequently ~~measured~~ at amortized cost or fair ~~value.~~value, based on the Company's management of financial assets and the contractual cash flows characteristic of financial assets.

~~With regard~~The Company has not made changes in the classification of financial assets based on the application of IFRS 9; therefore, the adoption of such classification and measurement provisions has not had an impact on its consolidated statements of financial position, results and other comprehensive results.

F-11

Impairment of financial assets

IFRS 9 introduces a new model of impairment of expected loss and limited changes to the requirements of classification and measurement of financial ~~liabilities designated as of~~assets. Specifically, the new impairment model is based on the expected credit losses rather than the losses incurred, and will be applied to debt instruments valued at amortized cost or at fair value through ~~profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in~~ other comprehensive income, ~~unless~~leases receivable, contract asset, certain written loan commitments and financial guarantee contracts. Regarding the ~~recognition of the effects of changes in the liability’s credit risk in~~new fair value measurement category through other comprehensive income, ~~would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable~~the impairment provisions will be applicable to debt instruments that (i) are held within a ~~financial liability’s credit risk~~business model whose objectives are ~~not subsequently reclassified to profit or loss.~~

~~In relation to~~achieved through the ~~impairment~~collection of contractual cash flows and the sale of financial assets and (ii) have contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Company has not identified a material impact on its financial assets from the application of the impairment provisions of IFRS 9, ~~requires an expected credit loss model, as opposed to an incurred credit loss model under IAS 39. The expected credit loss model requires an entity to account for expected credit losses and changes~~neither in ~~those expected credit losses at each reporting date to reflect changes~~its investment positions nor in ~~credit risk since initial recognition. In other words, it is no longer necessary for a credit event to have occurred before credit losses are recognized.~~its trade accounts receivable.

General Hedge Accounting

The new general hedge accounting requirements retain the three types of hedge accounting ~~mechanisms~~schemes currently available in IAS 39. Under IFRS 9, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an ‘economic relationship’. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

~~The Company is in the process of assessing the potential impacts from the adoption of this standard in its financial statements.~~

IFRS 15, Revenue from Contracts with Customers

~~IFRS 15~~~~Revenue from contracts with customers~~~~, was issued in May 2014 and applies to annual reporting periods beginning on or after January 1, 2018, earlier application is permitted. Revenue~~Under this standard, revenue is recognized as control is passed, either over time or at a point in time.

The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In applying the revenue model to contracts within its scope, an entity will: 1) Identify the ~~contract(s)~~contract 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)~~as of) the entity satisfies a performance obligation. ~~Also,~~

The Company conducted an ~~entity needs to disclose sufficient information to enable users~~analysis of revenues with customers and determined that the adoption of this standard has no impact on its consolidated financial ~~statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.~~statements.

F-12

Amendments to IFRS 2, Share-based Payment

The amendments to IFRS 2,Share-based Payment, clarify the classification and measurement of share-based payment transactions. The amendments contain clarifications and amendments addressing the accounting for cash-settled share-based payment transactions; classification of share-based payment transactions with net settlement features; and accounting for modifications of share-based payment transactions from cash-settled to equity-settled. The adoption of these amendments had no impact on the consolidated financial statements of the Company as it does not have share-based payment plans.

IFRIC 22, Foreign Currency Transactions and Advance Considerations

The interpretation clarifies that when the entity pays or receives consideration in advance in a foreign currency, the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, is the date when the anticipated consideration has been paid or received in advance, i.e. when the advance payment or the income received in advance was recognized. The adoption of this interpretation had no impact on the Company’s consolidated financial statements because it already accounts for transactions that involve the payment or receipt of advance consideration in a foreign currency in a manner that is consistent with the modifications.

Amendments IFRS 4- The application of IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

Amendments to IFRS 4,Insurance Contracts, provide two options for entities that issue insurance contracts: i) an optional temporary exemption from applying IFRS 9 (referred to as the "deferral approach"); and ii) an option that allows entities presenting the changes in the fair value of the designated financial assets, in other comprehensive income (OCI), instead of in profit or loss (referred to as the "overlay approach"). The overlay approach will be applicable when IFRS 9 is applied for the first time. The deferral approach is effective for annual periods beginning on or after January 1, 2018 and will only be available for three years after that date. The modifications have had no impact on the Company’s consolidated financial statements.

ii. New IFRS issued but not yet effective

The Company ~~is in~~has not applied the ~~process of assessing the potential impacts from the adoption of this standard in its consolidated financial statements.~~following new and revised IFRS that have been issued, but are not yet effective for periods beginning on January 1, 2018.

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, ~~January~~ 2019, with earlier adoption permitted if IFRS 15 has also been applied.

F-13

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 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~~straight-line depreciation of the right-of-use asset and the decreasing interest on the liability will lead to an overall decrease of expense over the reporting period.

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~~The Company has decided to use ~~their~~an incremental borrowing rate.

~~However, a lessee may elect~~The Company has decided 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).~~furniture.

IFRS 16 establishes different transitional provisions, ~~including retrospective application or~~the Company has chosen the modified retrospective application where the comparative period is not restated.

IFRS 16 will change the way in which the Company accounts for leases previously classified as operating leases under IAS 17, which were accounted for off-balance sheet.

In the initial application of IFRS 16, as of January 1, 2019, for all leases (except those that the Company has elected to account for as an expense), the Company:

Recognizes right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments;

Recognizes depreciation of right-of-use assets and interest on lease liabilities in the consolidated statement of profit or loss;

Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated cash flow statement.

Under IFRS 16, right-of-use assets will be tested for impairment in accordance with IAS 36, Impairment of Assets. This will replace the previous requirement to recognize a provision for onerous lease contracts.

For the first time application of IFRS 16, the Company has carried out an implementation project, which has shown that the new definition in the standard will not significantly change the scope of contracts that meet the definition of a lease for the Company.

A preliminary assessment indicates that $ 18,290, monthly lease payments are related to leases other than short-term leases and leases of low-value assets, and therefore the amount to be recognized by the Company as a right-of-use asset and the corresponding liability as of January 1, 2019 will range from $900,000 to $950,000, with respect to all such leases. The effect of adoption arises from right-of-use assets and related liabilities related to leases of buildings, machinery and equipment and transport equipment. The impact on the 2019 consolidated statement of profit or loss will be comprised of an increase in the annual depreciation of approximately $193,129 and the annual interest expense of approximately $33,572.

F-14

IFRIC - 23 Uncertainty about treatment in the income tax

This interpretation deals with the determination of taxable income (loss), tax bases, unused fiscal losses, unused tax credits and tax rates, when there is uncertainty about their treatment in accordance with IAS 12. Specifically, it considers:

If tax treatments should be considered collectively

Assumptions about tax authorities’ examinations

The determination of taxable income (loss), tax bases, unused tax losses, unused tax credits and tax rates

The effects of changes in the facts and circumstances

This interpretation will be effective on January 1, 2019. The Company's management considers that the application of this interpretation will not have a significant impact on its consolidated financial statements, since its current practices for determining the effects of income taxes on its consolidated financial statements incorporate considerations similar to those set forth in the interpretation.

Annual Improvements 2015-2017 Cycle

The annual improvements include amendments to IFRS 3 and IFRS 11, to IFRS 12 and to IAS 23, which are all effective for annual periods beginning on or after January 1, 2019.

The amendments to IFRS 3 clarify that when an entity obtains control of a business that is a joint operation, the entity must remeasure previously held interests in that business. The amendments to IFRS 11 clarify that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.

The amendments to IFRS 12 clarify that the effects on income taxes for dividends (or distributions of profit) should be recognized in results regardless of how the tax arises.

The amendments to IAS 23 clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.

The Company is in the process of ~~assessing~~determining the potential impacts on its consolidated financial statements derived from the adoption of ~~this standard in its consolidated financial statements.~~these amendments.

(3)

Significant accounting policies

The significant accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

Basis of consolidation

~~Subsidiaries~~

i.Subsidiaries

Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control is lost (see note 5).

F-15

Profitsand losses of subsidiaries acquired or sold during the year are included in the consolidated statements of profit and loss and other comprehensive income from the acquisition date to the disposal date.

Where necessary, ~~subsidiaries’~~the financial statements of subsidiaries are adjusted to align their accounting policies with the Company’s consolidated accounting policies.

~~F-13~~

ii. Transactions eliminated in consolidation

~~ii.~~

~~Transactions eliminated in consolidation~~

Significant intercompany balances and transactions, and any unrealized gains and losses arising from transactions between consolidated companies have been eliminated in preparing these consolidated financial statements.

~~iii.~~

~~Business combinations~~

iii. Business combinations

Business combinations are accounted for using the acquisition method. For each business combination, any non-controlling interest in the acquiree is valued either at fair value or according to the proportionate interest in the acquiree’s identifiable net assets.

In a business combination, the Company evaluates the assets acquired and the liabilities assumed for proper classification and designation according to the contractual terms, economic circumstances and relevant conditions at the acquisition date.

Goodwill is originally valued at cost, and represents any excess of the transferred consideration over the net assets acquired and liabilities assumed. If the net amount of identifiable acquired assets and assumed liabilities as of the acquisition date exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquired entity and the fair value of the prior shareholding of the acquirer in the acquired entity (if any), any excess is immediately recognized in the consolidated statement of profit and loss and other comprehensive income as a bargain purchase gain.

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

Certain contingent consideration payable isare measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in profit and loss.

Foreign currency

~~Foreign currency transactions~~

i.Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of the Company at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign currency gain and loss on monetary items is the difference between amortized cost in the functional currency at the beginning of the period, adjusted for interest and principal payments during the period, and the amortized cost in foreign currency translated at the exchange rate at the end of the reporting period.

F-16

Non-monetary items that are measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.

~~F-14~~

ii.Translation of foreign operations

~~ii.~~

~~Translation of foreign operations~~

Assets and liabilities, including goodwill and fair value adjustments arising on acquisition, of foreign operations whose functional currency differs from the reporting currency, are translated into Mexican pesos at the exchange rates at the reporting date. Income and expenses are translated to pesos at the average exchange rate of the period of the transactions.

Foreign currency differences associated with translating foreign operations into the reporting currency (Mexican peso) are recognized in other comprehensive income, and presented in the foreign currency translation reserve in stockholders’ equity.

Foreign exchange gains and losses arising from amounts receivable or payable to a foreign operation, whose settlement is neither planned nor likely in the foreseeable future, are considered part of a net investment in a foreign operation and are recognized under the “other comprehensive income” account, and presented within stockholders’ equity in the foreign currency translation reserve. For the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 the Company did not enter into such transactions.

Financial instruments

i.Financial assets

Classification of financial assets

The Company classifies and measures its financial assets under the following criteria:

i.·

~~Non-derivative~~The Company's debt instruments are subsequently measured at amortized cost if the financial asset is maintained in a business model whose objective is to hold financial assets with the objective of obtaining contractual cash flows; and the contractual terms of the financial asset give rise on specific dates to cash flows that are only principal and interest payments on the amount of the principal.

Furthermore, debt instruments are subsequently measured at fair value through other comprehensive income if the financial asset is maintained within a business model whose objective is met by obtaining contractual cash flows and selling financial assets; and the contractual terms of the financial asset give rise, on specific dates, to cash flows that are only principal and interest payments on the outstanding amount of the principal.

By default, all other financial assets are subsequently measured at fair value through profit and loss.

~~Non-derivative~~Recognition and derecognition of financial assets

Assets are initially recognized on the date of the contract in which the Company becomes a member of the contractual provisions of the instruments. And they are initially valued at their fair value. Transaction costs that are directly attributable to the acquisition or issuance of financial assets and liabilities (other than financial assets at fair value through profit or loss) are added to or reduced from the fair value of the financial assets or liabilities, where applicable, at initial recognition. Transaction costs directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are recognized immediately in profit or loss.

F-17

All regular purchases or sales of financial assets are recognized and derecognised on a trade date. Regular purchases or sales are purchases or sales of financial assets that require the delivery of assets within the period established by the regulation or usual practices in the market.

All recognized financial assets are subsequently measured in full, either at amortized cost or fair value, according to the classification of financial assets.

Financial assets of the Company include cash and cash equivalents, investment in securities ~~(financial assets designated~~ at fair value through profit or loss, derivative financial instruments and ~~financial assets held to maturity),~~ trade ~~receivable and other~~ receivables.

The Company initially recognizes accounts receivable and cash equivalents on the date that they arise. All other financial assets (including assets measured at fair value through profit and loss) are initially recognized on the trading date, which is the date that the Company becomes a party to the contractual provisions of the instrument.

The Company derecognizes a financial asset when the contractual rights to cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which all the risks and rewards of ownership of the financial asset are substantially transferred.

Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial position solely if the Company has a legal right to offset the amounts and intends either to settle them on a net basis of financial assets and liabilities or otherwise realize the asset and settle the liability simultaneously.

~~F-15~~

~~Financial assets valued at fair value through profit and loss~~

A financial asset is presented at fair value through profit and loss if it is classified as held-for-trading or is designated as such on initial recognition. Financial assets are designated at fair value through profit and loss if the Company manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Company’s investment or risk management policy. Costs attributable to the acquisition or issue of such financial assets are recognized in profit and loss as incurred. Financial assets at fair value through profit and loss are measured at fair value, and changes therein are recognized in profit and loss.

~~Held-to-maturity financial assets~~

Held-to-maturity financial assets are debt instruments that the Company has the intention and ability to hold to maturity. Held-to-maturity financial assets are originally recognized at fair value plus any directly attributable transaction costs. Subsequently to initial recognition, held-to-maturity financial assets are measured at their amortized cost by using the effective interest method, less any impairment losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity financial assets would result in the reclassification of all held-to-maturity investments as available-for-sale, and prevent the Company from classifying investment securities as held-to-maturity for the current and the following two years.

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income or cost over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and 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 debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with maturities of three months or less from the acquisition date, which are subject to an insignificant risk of changes in their fair value, and are used by the Company in the management of its short-term commitments.

Receivables

Receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, receivables are measured at amortized cost. Receivables comprise trade, due from related parties and other receivables.

Impairment of financial assets

As of 2018, the Company evaluates whether its financial assets accounted for at amortized cost and at fair value through other comprehensive income are impaired on the basis of losses due to expected credit losses.

The amount of expected credit losses is updated on each reporting date to reflect changes in credit risk since the initial recognition of the respective financial instrument.

~~ii.~~F-18

~~Non-derivative financial instrument liabilities~~

The Company recognizes lifetime expected credit losses for commercial accounts receivable, contract assets and accounts receivable for leases. The expected credit losses on these financial assets are estimated using a provision matrix based on the Company's historical experience of credit losses, adjusted for factors that are specific to the debtors, the general economic conditions and management’s assessment of both the current and forecast conditions at the reporting date, including the time value of money when appropriate.

The Company considers a significant increase in credit risk to have occurred when the asset’s credit rating falls to the level of speculation, or when the rating has decreased by more than 2 levels with respect to the level at which it was acquired. Additionally, the Company considers that default has occurred when a financial asset is more than 90 days past-due, unless there is reasonable and reliable information demonstrating that a later default criterion is more appropriate.

For all other financial instruments, the Company recognizes the lifetime expected credit loss when there has been a significant increase in credit risk since the initial recognition. However, if the credit risk in the financial instrument has not increased significantly since the initial recognition, the Company measures the provision for losses for that financial instrument in an amount equal to the 12-month expected credit losses.

During 2017 and 2016, the method used to determine the impairment of financial assets was based on an incurred loss model.

ii.Financial liabilities

Debt and/or equity instruments are classified as financial liabilities or as equity according to the substance of the contractual agreement and the definitions of liability and equity.

All financial instrument liabilities are initially recognized on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument.

~~F-16~~

The Company derecognizes a financial instrument liability when its contractual obligations are met, cancelled or expire.

The Company has the following non-derivative financial instrument liabilities: short-term and long-term debt, and trade and other payables and accounts payable to related parties.

The aforementioned financial liabilities are originally recognized at fair value, plus costs directly attributable to the transaction. Subsequently, these financial liabilities are measured at amortized cost using the effective interest method or at fair value through results during their contractual term.

iii.Derivative financial instruments

The Company participates in a variety of derivative financial instruments to manage its exposure to exchange rate risks, including currency forward contracts.

~~iii.~~F-19

~~Derivative financial instruments~~

Derivative financial instruments entered into for fair value hedging or for trading purposes are initially recognized at fair value; any attributable transaction costs are recognized in profit and loss as incurred. Government grants are recognized initially as a liability, and subsequently recognized to profit and loss as the related obligation is settled. Subsequent to the initial recognition, such derivative financial instruments are measured at fair value, and changes in such value are immediately recognized in profit and loss unless the derivative is designated and is effective as a hedging instrument, in which case, its recognition in profit and loss will depend on the nature of the hedging.

Fair value of derivative financial instruments that are traded in recognized financial markets is based on quotes issued by these markets; when a derivative financial instrument is traded in the “over the counter” market, the fair value is determined based on internal models and market inputs accepted in the financial environment.

A derivative with a positive fair value is recognized as a financial asset, while a derivative with a negative fair value is recognized as a financial liability. Derivatives are not offset in the financial statements unless the Company has both the legal right and the intention to offset. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

The Company analyzes if there are embedded derivatives that should be segregated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related. A separate instrument with the same terms as those of the embedded derivative meets the definition of a derivative, and the combined instrument is not measured at fair value through profit and loss. Changes in fair value of the separable embedded derivatives are immediately recognized in profit and loss.

iv.Hedge Accounting

The Company ~~enters into derivative financial~~designates certain derivatives as hedging instruments ~~which are designated as~~with respect to foreign currency risk with fair value hedges, ~~for its exposure to commodity price risks~~~~(commodities)~~ ~~resulting from its operating activities. Derivative financial instruments~~cash flow hedges or hedges of net investments in foreign operations. Firm commitments that ~~do not meet the requirements for~~ hedge ~~accounting treatment~~foreign currency risk are accounted for as ~~trading derivative financial instruments.~~cash flow hedges.

~~On initial designation~~At the beginning of the ~~derivative as a hedging instrument,~~hedge relationship, the Company ~~formally~~ documents the relationship between the hedging ~~instruments~~instrument and the hedged ~~items, including the~~item, together with its risk management objectives and its strategy ~~in undertaking the hedge transaction, and the methods that will be used~~ to ~~assess the prospective and retrospective effectiveness of the hedging. The Company makes an assessment, both~~carry out various hedging transactions. In addition, at the ~~inception~~beginning of the hedge ~~relationship as well as~~and on an ongoing basis, ofthe Company documents whether the ~~hedging instruments are expected~~instrument is effective to ~~be highly effective in offsetting the~~offset changes in the fair ~~value~~values or cash flows of the ~~respective~~ hedged ~~items during~~item attributable to the ~~period for~~hedged risk, which is when the ~~hedge is designated and whether~~hedging relationships comply with all of the ~~actual results of each hedge are within a range of 80 – 125 percent.~~following coverage effectiveness requirements:

There is an economic relationship between the hedging instrument and the hedged item;

The effect of credit risk does not dominate the value of the changes resulting from the economic relationship; and

The coverage ratio of the coverage ratio is the same as that resulting from the amount of the hedged item that the Company actually covers and the amount of the hedging instrument that the Company actually uses to cover that amount of the hedged item.

~~F-17~~F-20

If the hedging instrument no longer meets the ~~criteria for~~effectiveness requirement related to the hedging ~~accounting treatment, expires or~~relationship, but the risk management objective for that designated hedging relationship remains the same, the Company adjusts the hedging relationship (that is, ~~sold, terminated or exercised, or~~rebalances) so that it meets the ~~designation~~qualification criteria again.

The Company designates the entire change in the fair value of a forward contract (that is, ~~revoked, then~~it includes the forward elements) as the hedging ~~accounting treatment~~instrument for all its hedging relationships that involve forward contracts.

The Company designates only the intrinsic value of option contracts as a hedged item, that is, ~~discontinued prospectively. Any gain or loss~~excluding the time value of the option. Changes in the fair value of the option are recognized in other comprehensive income and are accumulated in ~~equity at that time remains in equity and~~the cost of the hedge reserve. If the hedged item is ~~recognized~~related to the transaction, the fair value is reclassified to profit or loss when the ~~forecast transaction~~hedged item affects the profit or loss. If the hedged item is ~~ultimately~~related to the period of time, then the accumulated amount in the cost of the hedge reserve is reclassified to profit or loss in a rational manner: the Company amortizes the accumulated hedge reserve to profit or loss using the straight-line method. These reclassified amounts are recognized in profit or ~~loss. When~~loss on the same line as the hedged item. If the hedged item is a ~~forecast transaction~~non-financial item, the accumulated amount in the cost of the hedge reserve is ~~no longer expected~~eliminated directly from equity and is included in the initial carrying amount of the recognized non-financial item. In addition, if the Company expects that part or all of the accumulated loss in the cost of the hedge reserve will not be recovered in the future, that amount will be reclassified immediately to ~~occur, the gain or loss accumulated in equity is recognized immediately in profit or loss.~~results.

~~iv.~~

~~Capital stock~~

v.Capital stock

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares are recognized as a deduction from equity, net of any tax effects.

Stock repurchase

When share capital recognized as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve for repurchase of shares. When treasury shares are sold or are re-issued subsequently, the amount received as well as the resulting surplus or deficit on the transaction is recognized in equity.

Property, plant and equipment

~~Recognition and measurement~~

i.Recognition and measurement

Property, plant and equipment, except for land, are recorded at acquisition cost less accumulated depreciation ~~except for land,~~ and any accumulated impairment losses. Land is measured at the acquisition costs less any accumulated impairment losses.

Acquisition cost includes the purchase price, as well as any cost directly attributable to the acquisition of the asset, including all costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

F-21

When components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

An item of property, plant and equipment is derecognized at the time of disposal or when no future economic benefits are expected to arise from the continued use of the asset. Gains or losses on the sale of an item of property, plant and equipment are determined by comparing the proceeds from the sale with the carrying amount of property, plant and equipment, and are recognized net under “other income (expenses)” in profit and loss for the year.

~~F-18~~

ii.Subsequent costs

~~ii.~~

~~Subsequent costs~~

The replacement cost of an item of property, plant and equipment is capitalized if the future economic benefits associated with the cost are expected to flow to the Company and the related cost is reliably determined. The carrying amount of the replaced item is written off from the accounting records. Maintenance and repair expenses related to property, plant and equipment are expensed as incurred.

~~iii.~~

~~Depreciation~~

iii.Depreciation

Depreciation is calculated on the cost of the asset less its residual value, using the straight line method, based on the estimated useful life of the assets. Depreciation is recognized in profit and loss beginning from the time when the assets are available for use. ~~Land is not depreciated.~~

Below are the estimated useful lives for ~~2015, 2014~~2018, 2017 and ~~2013:~~2016:

	Average useful Life
Buildings		46
Machinery and Equipment		19
Vehicles		11
Computers		8
Furniture		11

The Company has estimated the following residual values as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013:~~2016:

	Residual Value
Buildings		9	%
Machinery and Equipment		8	%
Vehicles		5	%
Computers		0	%
Furniture		2	%

Goodwill

Goodwill arises as a result of the acquisition of a business over which control is obtained and is measured at cost less cumulative impairment losses; it is subject to annual tests for impairment.

F-22

Intangible assets

They are mainly comprised of trade names and customer relationships derived from the acquisition of businesses in the United States of America. The cost of intangible assets acquired through a business combination represents their fair value at the acquisition date and they are recognized separately from goodwill. Subsequently, they are valued at cost minus amortization and accumulated impairment losses.

Intangible assets are classified as having a definite or indefinite life. Those with a defined life are amortized under the straight-line method during their estimated life and when there are impairment indicators, they are tested for impairment. The amortization methods and the useful life of the assets are reviewed and adjusted, if necessary, at the date of each statement of financial position. Amortization is charged to income in the general expenses category. Those with an indefinite life are not amortized, but are subject to impairment tests at least annually.

Biological assets

Biological assets whose fair value can be measured reliably are measured at fair value less costs of sale, with any change therein recognized in profit and loss. Costs of sale include all costs that would be necessary to sell the assets, excluding finance costs and income taxes.

The Company’s biological assets consist of growing poultry, poultry in its different production stages, hatching eggs, breeder pigs, and growing pigs.

~~F-19~~

When fair value cannot be reliably, verifiably and objectively determined, assets are valued at production cost less accumulated depreciation, and any cumulative impairment loss. Depreciation related to biological assets forms part of the cost of inventories and current biological assets and is ultimately recognized within cost of sales in the statement of profit and loss and other comprehensive income.

Depreciation of poultry and breeder pigs is estimated based on the expected future life of such assets and is calculated on a straight-line basis.

	Expected average useful life (weeks)
Poultry in its different production stages		40-47
Breeder pigs		156

Biological assets are classified as current and non-current assets, based on the nature of such assets and their purpose, whether for commercialization or for reproduction and production.

g)h)

Leased assets

Operating leases entered into by the Company are not recognized in the Company’s statement of financial position. Operating lease rentals paid by the Company are recognized in profit and loss using the straight-line method over the lease term, even though payments may not be made on the same basis.

F-23

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained at the end of the lease term, assets are depreciated over the shorter of the lease term or their useful lives. As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the Company has not entered into any significant finance lease agreements.

h)i)

Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on average cost, and includes expenditures incurred for acquiring inventories, production or transformation costs, and other costs incurred for bringing them to their present location and condition.

Agricultural products derived from biological asses are processed chickens and commercial eggs.

Net realizable value is the estimated selling price in the ordinary course of business, less the costs necessary to make the sale.

Cost of sales represents cost of inventories at the time of sale, increased, if applicable, by reductions in inventory to its net realizable value, if lower than cost, during the year.

The Company records the necessary reductions in the value of its inventories for impairment, obsolescence, slow movement and other factors that may indicate that the use or performance of the items that are part of the inventory may be lower than the carrying value.

~~F-20~~

i)j)

Impairment

~~Financial assets~~

i.Financial assets

A financial asset that is not recorded at fair value through profit and loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of a loss event after the initial recognition of the asset, and that such loss event had a negative impact on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company, evidence that a debtor may go bankrupt, or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged reduction in its fair value below its cost is objective evidence of impairment.

The Company considers evidence of impairment for financial assets valued at amortized cost (accounts ~~receivables and held-to-maturity investment securities)~~receivables) both individually and collectively. All individually significant receivables and ~~held-to-maturity investment securities~~other financial assets are assessed for specific impairment. Assets that are not individually significant are collectively assessed for impairment by grouping together assets with similar risk characteristics.

F-24

In assessing collective impairment, the Company follows an expected loss model and the calculation is applicable to all receivables regardless of whether or not they have objective evidence of impairment. For these estimates, management uses historical trends of probabilities of default, timeliness of recoveries and the amount of loss incurred, adjusted for management’s judgment as to whether current economic and credit conditions are such that the actual losses are greater or less than those ~~suggested~~implied by historical trends.

An impairment loss related to a financial asset valued at amortized cost is calculated as the difference between the carrying amount of the asset and the present value of estimated future cash flows discounted at the effective interest rate. Losses are recognized in profit and loss and reflected in an allowance account against receivables or held-to-maturity investment securities. Interest on impaired assets continues being recognized. When a subsequent event that occurs after impairment has been recognized, it results in the reduction of the loss amount; this reduction is reversed through profit and loss.receivables.

~~ii.~~

~~Non-financial assets~~

ii.Non-financial assets

The carrying amounts of the ~~Company´s~~Company’s non-financial assets, other than inventories, biological assets and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the recoverable amount of the asset is estimated or cash generating units, as the lowest between its value in use and the fair value less cost of sale. Goodwill and indefinite-lived intangible assets are tested annually for impairment on the same dates.

The Company defines the cash generating units and also estimates the periodicity and cash flows that they should generate. Subsequent changes in the group of cash-generating units, or changes in the assumptions that support the cash flow estimates or the discount rate could impact the carrying amounts of the respective asset.

~~F-21~~

The main assumptions for developing estimates of recoverable amounts requires the Company’s management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate its present value. The Company estimates cash flow projections considering current market conditions, determination of future prices of goods and volumes of production and sales. In addition, for the purposes of the discount and perpetuity growth rates, the Company uses indicators of market and expectations of long-term growth in the markets in which it operates.

The Company estimates a discount rate before taxes for the purposes of the goodwill impairment test that reflects the risk of the corresponding cash-generating units and that enables the calculation of present value of expected future cash flows, as well as to reflect risks that were not included in the cash flow projection assumptions and premises. The discount rate that the Company estimates is based on the weighted average cost of capital. In addition, the discount rate estimated by the Company reflects the return that market participants would require if they had made a decision about an equivalent asset, as well as the expected generation of cash flow, time, and risk-and-return profiles.

The Company annually reviews the circumstances which led to an impairment loss arising from cash-generating units to determine whether such circumstances have been changed and that may result in the reversal of previously recognized impairment losses. An impairment loss in respect of goodwill is not reversed. For other long-lived assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if the impairment loss had not been recognized.

F-25

Impairment losses are recognized in profit and loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (or group of CGUs), and subsequently to reduce the carrying amount of the other long-lived assets within the cash-generating unit (or group of CGUs) on a pro rata basis.

j)k)

Held-for-sale assets

Available for sale assets mainly consist of foreclosed assets. Foreclosed assets are initially recorded at the lower of fairvalue less costs to sell or the net carrying amount of the related account receivable.

Immediately before being classified as held-for-sale, assets are valued according to the Company’s accounting policies in accordance towith the applicable IFRS. Subsequently, held-for-sale assets are recorded at the lower of the carrying amount and fair value less costs to sell. Impairment losses on initialclassification of held-for-sale assets and subsequent remeasurement gains and losses are recognized in profit and loss. Recognized gains shall not exceed cumulative impairment losses previously recognized.

k)l)

Other assets

Other long-term assets primarily include advances for the purchase of property, plant and equipment, investments in insurance policies and security deposits.

The Company owns life insurance policies of some of the former stockholders of Bachoco USA, LLC (foreign subsidiary). The Company records these policies at net cash surrender value which approximates its fair value (see note ~~16)~~17).

~~F-22~~

l)m)

Employee benefits

The Company grants to its employees in Mexico and abroad, different types of benefits as described below and as detailed in note ~~21.~~22.

~~Defined contribution plan~~

i.Defined contribution plan

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions to a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an employee benefit expense in profit and loss in the periods during which the related services are rendered by employees. Prepaid contributions are recognized as an asset to the extent that the Company has the right to a cash refund or a reduction in future payments is available. Contributions to a defined contribution plan due more than 12 months after the end of the period in which the employees render the service are discounted at present value.

~~ii.~~

~~Defined benefit plan~~

ii.Defined benefit plan

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. It is funded by contributions made by the Company and is intended to meet the Company’s labor obligations to its employees.

F-26

The Company´s net obligations in respect of defined benefit plans is calculated separately for each plan, estimating the amount of the future benefit that the employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present value, and is reduced by the fair value of the plan assets. The discount rate is the yield at the end of the reporting period on high quality corporate bonds (or governmental bonds in the instance that a deep market does not exist for high quality corporate bonds, which is the case in Mexico) that have maturity dates approximating the terms of the Company´s obligations and that are denominated in the currency in which the benefits are expected to be paid. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:

Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements)

Net interest expense or income

The Company presents service cost as part of operating income in the consolidated statements of profit or loss and other comprehensive income (loss). Gains and losses for reduction of service are accounted for as past service costs.

~~F-23~~

The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company, the recognized asset is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. When the benefits of a plan are modified or improved, the portion of the improved benefits related to past services by employees is recognized in profit and loss on the earlier of the following dates: when there is a modification or curtailment to the plan, or when the Company recognizes the related restructuring costs or termination benefits.

Remeasurement adjustments, comprising actuarial gains and losses, the effect of changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), are reflected immediately with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in equity and is not reclassified to profit or loss.

~~iii.~~

~~Short-term benefits~~

iii. Short-term benefits

Short-term employee benefits are valued on a non-discounted basis and are expensed as the respective services are rendered.

A liability is recognized for the amount expected to be paid under the short-term cash bonus plans or statutory employee profit sharing (PTU for its acronym in Spanish), if the Company has a legal or constructive obligation to pay such amounts as a result of prior services rendered by the employee, and the obligation may be reliably estimated.

~~iv.~~

~~Termination benefits from constructive obligations~~

iv. Termination benefits from constructive obligations

The Company recognizes, as a defined benefit plan, a constructive obligation from past practices. The liability accrues based on the services rendered by the employee. Payment of this benefit is made in one installment at the time that the employee voluntarily ceases working for the Company.

F-27

m)n)

Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

When the effect of time value of money is significant, the amount of the provision is the present value of the disbursements expected to be necessary to settle the obligation. The discount rate applied is determined before taxes, and reflects market conditions at the reporting date and takes into account the specific risk of the relevant liability, if any. The unwinding of the present value discount is recognized as a financial cost.

~~F-24~~

n)o)

Interests in joint operations

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The Company as a joint operator recognizes, in relation to its interest in a joint operation: its assets, including its share of any assets held jointly; its liabilities, including its share of any liabilities incurred jointly; its revenue from the sale of its share of the output arising from the joint operation; its share of the revenue from the sale of the output by the joint operation, and its expenses, including its share of any expenses incurred jointly.

The Company accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to such assets, liabilities, revenues and expenses.

The Company has joint operations derived from the ~~broiler~~ agreements for the development of its biological assets. For such operations, the Company accounts for its biological assets, its obligations derived from technical support, as well as the expenses it incurs with respect to the joint operations. The live poultry produced by the joint operation is ultimately used internally by the Company and may be sold by the Company to third parties. As a result, the joint operation itself does not generate any revenues with third parties.

o)p)

Revenues

~~Revenue~~During 2017 and 2016 revenues from the sale of goods in the course of ordinary activities isare measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. ~~Revenue is~~Revenues are recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration relating to the transaction is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, the discount is recognized as a reduction of revenue.

F-28

Beginning in 2018, revenues from the sale of goods in the course of ordinary activities are measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenues are recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that control over the product has been transferred to the customer. If it is probable that discounts will be granted and the amount can be measured reliably, the discount is recognized as a reduction of revenue. The Company generally does not accept sales returns. No asset is recognized for product returns, due to the fact that such products are not expected to be sold or recovered in another manner given that they are perishable. To the extent sales returns occur, the product returns are made simultaneously with the delivery and acceptance of the product (same day).

The Company has concluded that all performance obligations are satisfied at the time of delivery of the product to the customer.

The Company has a variety of credit terms for its various distribution channels, all of which have short terms, consistent with market and industry practices. Accordingly, there are no financing components. A significant portion of sales in Mexico are collected in cash on delivery.

p)q)

Financial income and costs and dividend income

Financial income comprises interest income from funds invested, fair value changes on financial assets at fair value through profit or loss and foreign currency exchange gains. Interest income is recognized in profit and loss, using the effective interest method. Dividend income is recognized in profit and loss on the date that the Company´s right to receive the payment is established.

Financial costs comprise interest expense for borrowings, foreign currency exchange losses and fair value changes on financial assets at fair value through profit and loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognized in profit and loss using the effective interest method.

~~F-25~~

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 costs of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.

Exchange gains and losses are reported on a net basis.

q)r)

Income taxes

Income tax ~~expenses comprise~~expense is comprised of current and deferred tax. Current income taxes and deferred income taxes are recognized in profit and loss provided they do not relate to a business combination, or items recognized directly in equity or in other comprehensive income.

Current income tax is the expected tax payable or receivable on the taxable income or loss for the fiscal year, which can be applied to taxable income from previous years, using tax rates enacted or substantively enacted in each jurisdiction at the reporting date, plus any adjustment to taxes payable with respect to previous years. Current income tax payable also includes any tax liability arising from the payment of dividends.

F-29

Deferred income tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities and the amounts used for tax purposes. Deferred income tax is not recognized for:

the initial recognition of assets or liabilities in a transaction that is not a business combination and did not affect either accounting or taxable profit or loss;

differences related to investments in subsidiaries to the extent that it is probable that the Company is able to control the reversal date, and the reversion is not expected to take place in the near future.

taxable temporary differences arising from the initial recognition of goodwill.

Deferred income tax is determined by applying the tax rates that are expected to apply in the period in which the temporary differences will reverse, based on the regulations enacted or substantively enacted at the reporting date.

The measurement of deferred income tax assets and liabilities reflect the tax consequences derived from the manner in which the Company expects to recover or settle the carrying amounts of its assets and liabilities.

In determining the amount of current and deferred income tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that the balance for its income tax liabilities are ~~adequate~~appropriate for all tax years subject to be reviewed by the tax authorities based on its assessment of several factors, including the interpretation of the tax laws and prior experience.

~~F-26~~

A deferred income tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is not probable that the related tax benefit will be realized.

r)s)

Earnings per share

The Company presents information on basic and diluted earnings per share (EPS) related to its ordinary shares. Basic EPS is computed by dividing the profit and loss attributable to the holders of the Company’s common shares by the weighted average number of outstanding ordinary shares during the period, adjusted for treasury shares held. Diluted EPS is determined by adjusting the profit and loss attributable to the holders of the ordinary shares and the outstanding weighted average number of ordinary shares, adjusted for treasury shares held, for the potential dilutive effects of all ordinary shares, including convertible instruments and options on shares granted to employees. At December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the Company has no potentially dilutive shares, for which reason basic and diluted EPS isare the same.

F-30

s)t)

Segment information

An operating segment is a component of the ~~Company that:~~Company: i) that is engaged in business activities from which revenues and expenses may be obtained and incurred, including revenues and expenses related to transactions with any of the other components of the Company, ii) ~~which~~whose results are reviewed periodically by the chief operating decision maker for the purpose of resource allocation and assessment of segment performance, and iii) for which discrete financial information exists.

The Company discloses reportable segments based on operating segments whose revenues exceed 10% of the combined revenues from all segments, whose absolute value of profit or loss exceeds 10% of the combined absolute value of profit or loss from all segments, whose assets exceed 10% of the combined assets from all segments, or that result from the aggregation of two or more operating segments ~~when they have~~that share similar economic characteristics and meet the aggregation criteria inunder IFRS (note 2 d).

t)u)

Costs and expenses by function

Costs and expenses in the consolidated statements of profit and loss and other comprehensive income were classified by their function. The nature of costs and expenses is presented in Note ~~22.~~23.

u)v)

Statement of cash flows

The Company presents cash flows from operating activities by using the indirect method, in which the income or loss is adjusted by the effects of items that do not require cash flows, including those related to investing or financing activities.

The Company classifies all interest received from its investments and accounts receivable as investment activities, and all interest paid as financing activities.

~~F-27~~

(4)

Business and asset acquisitions

~~Acquisition of assets from breeding farms from Morris Hatchery, Inc. 2013y 2015~~

Acquisition of Albertville Quality Foods, Inc.

On July ~~9, 2013 and July 10, 2015,~~14, 2017, the Company, ~~reached agreements~~through its subsidiary OK Foods, Inc., acquired 100% of the outstanding voting shares of Albertville Quality Foods, Inc. (Acquired Co. I). Acquired Co. I's operating results are included in the consolidated financial statements as of the date of acquisition. Acquired Co. I is dedicated to ~~acquire assets from~~ the ~~breeding farms~~production and sale of ~~Morris Hatchery Inc.,~~processed and value-added products based on animal protein, and is located in the ~~states~~state of ~~Arkansas and Georgia~~Alabama, in the United States of America. The aggregate purchase price paid in cash amounted to $2,449,862 (138.10 million dollars). Acquired Co. I was merged with OK Foods, Inc. at the end of 2017.

F-31

The purchase of Acquired Co. I benefits the Company’s Poultry segment because it significantly increases OK Foods, Inc.’s product portfolio, significantly increases the client base in the United States of America and opens the opportunity for cross-sales between the clients of Acquired Co. I and OK Foods, Inc., significantly strengthening the presence of OK Foods, Inc. in the self-service channel. Regarding production activities, the acquisition increases the manual cutting process capacity, thereby reducing OK Foods, Inc.’s current cutting costs with external suppliers, and will optimize the production processes by adopting the best practices of both companies for the benefit of the operation as a whole. These ~~acquisitions mainly consist~~benefits are not recognized separately from Goodwill because they do not meet the recognition criteria for identifiable intangible assets.

The assets acquired and the assumed liabilities of ~~poultry equipment~~Acquired Co. I were recognized based on the best estimate of their fair value at the acquisition date.

The Company used various valuation techniques to determine fair value. Cost and ~~biological assets comprised principally~~market approaches were used to determine the value of ~~breeding birds that produce hatching eggs. The acquisitions benefit~~ the ~~Company given that it did not previously have~~property, plant and equipment. Customer relationships and trademarks are valued based on discounted cash flow analysis, relief from royalty and multi-period excess earnings valuation approaches, which use significant unobservable inputs, or level 3 inputs, as defined by the ~~capacity of breeding birds that produce hatching eggs, which are used internally. The~~fair value hierarchy. Under these valuation approaches, management made estimates and assumptions about sales, operating margins, growth rates, royalty rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

Due to their liquidity or short-term maturities, as appropriate, the Company concluded that ~~the transactions represented~~Acquired Co. I´s pre-acquisition carrying amounts for cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities approximate their fair value at the acquisition ~~of businesses in accordance with IFRS 3.~~date, while inventories are recorded at their net realizable value.

~~Below~~Identifiable assets acquired and liabilities assumed

The following is a summary of the recognized amounts of assets acquired and liabilities assumed at the acquisition date, compared to the consideration paid:

Acquisition value

Current assets, other than inventories $ 202,873
Inventories 304,594
Property, plant and equipment 547,987
Other current assets 10,189
Intangible assets 969,942
Total assets 2,035,585
Current liabilities (155,798 )
Deferred income tax (472,088 )
Acquired net identifiable assets, net 1,407,699
Consideration paid 2,449,862
Goodwill at acquisition date $ 1,042,163
Goodwill arises because the transferred consideration exceeds the identifiable assets acquired net of liabilities assumed on the acquisition date.
F-32
The goodwill that arose from the acquisitions is not expected to be deductible for tax purposes.
Certain estimated values in the acquisition, including goodwill, intangible assets and deferred taxes, have not yet been definitively determined and are subject to revision as new information emerges and the analyses are completed. The purchase price was allocated based on the information available on the date of acquisition.
Had the acquisition occurred on January 1, 2017, management estimates that consolidated revenues and consolidated profits for the year ended December 31, 2017 would have totaled $61,093,104 and $5,202,397, respectively. In determining these amounts, management has assumed that the provisional adjustments to fair value recognized at the date of acquisition would have been similar if the acquisition had occurred on January 1, 2017.
Costs related to acquisition.
During 2017, the Company incurred costs related to the acquisition of Acquired Co. I of $16,145 corresponding to external legal fees and due diligence costs, which are included in other expenses in the Company’s consolidated statement of profit and loss and other comprehensive income for the year ended December 31, 2017 (see note 30).
b) Acquisition of Proveedora La Perla, S.A. de C.V.
On July 11, 2017, the Company acquired 100% of voting stock of Proveedora La Perla S.A. de C.V. (Acquired Co. II). Acquired Co. II's operating results are included in the consolidated financial statements as of that date. Acquired Co. II is dedicated to the production and sale of pet food and treats, and is located in the state of Queretaro, Mexico. The purchase price in cash amounted to $45,000.
The purchase of Acquired Co. II benefits the Other segment due to the fact that it expands its current production capacity for dry pet food. In addition, Acquired Co. II has equipment for the production of wet pet food and pet treats, which will allow the Company to enter this market where it currently does not participate. The production facilities of Acquired Co. II will allow for a reduction of logistics cost since they are within close proximity of the Company´s clients located in the central region of the country, and it will contribute improved customer service. This acquisition will allow for accelerated growth in the pet food business.
The assets acquired and the assumed liabilities of Acquired Co. II were recognized based on the best estimate of their fair value at the acquisition date.
The fair value of the ~~net~~ assets ~~acquired~~was determined using cost and market approaches. The cost approach, which estimates the value based on the current replacement cost of an asset by another asset of equal usefulness, was used mainly for plant and equipment. The market approach, in which the value of an asset is based on available market prices for comparable assets, was used mainly for real estate.
F-33
Due to their liquidity or short-term maturities, as ofappropriate, the Company concluded that Acquired Co. II’s pre-acquisition carrying amounts for cash equivalents, accounts receivable, other current assets, accounts payable and other current liabilities approximate their fair value at the acquisition date, ~~in conformity with IFRS 3, as well as the purchase price paid. The amounts~~while inventories are ~~final; accordingly, the Company did not utilize the use of the provisional measurement period permitted by IFRS 3.~~recorded at their net realizable value.

~~Acquired~~Identifiable assets acquired and ~~identifiable~~liabilities assumed ~~liabilities~~
Acquisition value
2013 2015
Current and non-current biological assets $ 77,237 235,486
Inventories 3,257 300
Property, plant and equipment 11,982 11,581
Other assets 194 -
Acquired assets, net 92,670 247,367
Cash consideration paid 135,450 371,300
Goodwill $ (42,780 ) (123,933 )

The ~~acquisition costs paid by~~following is a summary of the ~~Company were not material, given that it utilized mostly its own resources in~~recognized amounts of acquired assets and assumed liabilities at the ~~acquisition. Given that~~date, compared to the consideration paid:
Acquisition value

Current assets, other than inventories $ 13,835
Inventories 5,846
Property, plant and equipment 584,884
Total assets 604,565
Current liabilities (392,646 )
Deferred income tax (79,423 )
Acquired net identifiable assets 132,496
Consideration paid 45,000
Bargain purchase gain (note 30) $ 87,496
The bargain purchase gain arises because the net of fair value of the assets at the acquisition ~~was for the benefit of the Company’s own internal operations, it is impracticable to determine~~date exceeds the amount of ~~revenues or income attributable to~~ the ~~acquired business. Management believes that pro forma revenues~~consideration transferred. The business strategies followed by the acquiree in the past resulted in a high cost structure and ~~profit~~limited opportunity for ~~the year, giving effect to the acquisition as~~improving profitability, resulting in a fair value of the ~~beginning~~business below that of ~~the period, do not differ materially from historical revenues and profit for the year reported~~its component parts. For this reason, a gain was recognized in other income (expense) (see note 30) in the ~~statements~~consolidated statement of profit or loss and other comprehensive income.
Had the acquisition occurred on January 1, 2017, management estimates that consolidated revenues and consolidated profits for the year ended December 31, 2017 would have totaled $58,182,059 and $5,086,470, respectively. In determining these amounts, management has assumed that the provisional adjustments to fair value recognized at the date of acquisition would have been similar if the acquisition had occurred on January 1, 2017.
Costs related to acquisition.
During 2017, the Company incurred costs related to the acquisition of Acquired Co. II of $15,465 corresponding to external legal fees and due diligence costs, which are included in other expenses in the Company’s consolidated statement of profit and loss and other comprehensive income.

~~F-28~~F-34

(5) Subsidiaries of the Company

A list of subsidiaries and the ~~Company´s~~Company’s shareholding percentage in such subsidiaries as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 are presented below:

Name Shareholding percentage in subsidiaries Shareholding percentage in subsidiaries
December 31, December 31,
Country 2015 2014 2013 Country 2018 2017 2016
Bachoco, S.A. de C.V. México 99.99 99.99 99.99 México 99.99 99.99 99.99
Bachoco USA, LLC. & Subsidiary U.S. 100.00 100.00 100.00 U.S. 100.00 100.00 100.00
Campi Alimentos, S.A. de C.V. México 99.99 99.99 99.99 México 99.99 99.99 99.99
Induba Pavos, S.A. de C.V. México 99.99 99.99 99.99 México 99.99 99.99 99.99
Bachoco Comercial, S.A. de C.V. México 99.99 99.99 99.99 México 99.99 99.99 99.99
PEC LAB, S.A. de C.V. México 64.00 64.00 64.00 México 64.00 64.00 64.00
Aviser, S.A. de C.V. México 99.99 99.99 99.99 México 99.99 99.99 99.99
Operadora de Servicios de Personal, S.A. de C.V. México 99.99 99.99 99.99 México 99.99 99.99 99.99
Secba, S.A. de C.V. México 99.99 99.99 99.99 México 99.99 99.99 99.99
Servicios de Personal Administrativo, S.A. de C.V. México 99.99 99.99 99.99 México 99.99 99.99 99.99
Sepetec, S. A. de C.V. México 99.99 99.99 99.99
Sepetec, S.A. de C.V. México 99.99 99.99 99.99
Wii kit RE LTD. Bermuda 100.00 100.00 100.00
Proveedora La Perla S.A. de C.V. México 100.00 100.00 -

The main subsidiaries of the group and their activities are as follows:

- Bachoco, S.A. de C.V. (BSACV) (includes four subsidiaries which are 51% owned, and over which BSACV has control). BSACV is engaged in breeding, processing and marketing poultry goods (chicken and eggs).

- Bachoco USA, LLC. holds the shares of OK ~~Industries,~~Foods, Inc. and, therefore, ~~of the~~all operations ofcontrolled by the Company in the United States of America. OKEffective January 1, 2016, the Company merged O.K. Industries, Inc. ~~(acquired in November 2011) comprises five controlled subsidiaries. Their~~, O.K. Farms, Inc., O.K. Foods, Inc. and Ecology Management, Inc. into one surviving entity, O.K. Foods, Inc. The primary ~~activity includes~~activities of Bachoco USA, LLC and its subsidiary are comprised of the production of chicken products and hatching eggs, mostly marketed in the United States of America and, to a lesser extent, in other foreign markets.

- Campi Alimentos, S.A. de C.V., is engaged in producing and marketing balanced animal feed, mainly for ~~selling~~sales to third parties.

- The main activity of Bachoco Comercial, S.A. de C.V. ~~and Induba Pavos, S.A. de C.V.~~ is the distribution of chicken, turkey and beef value-added products.
- The main activity of Induba Pavos, S.A. de C.V. is the leasing of property, plant and equipment to its related parties.

- PEC LAB, S.A. de C.V. is the holding of the shares of Pecuarius Laboratorios, S.A. de C.V. Its main activity consists of the production and distribution of medicines and vaccines for animal consumption.
F-35

- Aviser, S.A. de C.V., Operadora de Servicios de Personal, S.A. de C.V., Secba, S.A. de C.V., Servicios de Personal Administrativo, S.A. de C.V. and Sepetec, S.A de C.V. are engaged in providing administrative and operating services rendered to their related parties.

- On December 2016 Wii kit RE LTD. was constituted in Bermuda as a subsidiary of the Company with 100% of the shareholding. It is a Class I reinsurance company that provides insurance coverage to its affiliates.
- In July 2017, the Company acquired Proveedora La Perla, S.A. of C.V., in Mexico, as a subsidiary of the Company with 100% participation, it is dedicated to the elaboration and commercialization of balanced animal feed and pet treats.
None of the Company’s contracts or loan agreements restrict the net assets of its subsidiaries.
~~F-29~~

(6) Operating segments

Reportable segments have been determined based on a line of product approach. Intersegment transactions have been eliminated. The poultry segment consists of chicken and egg operations. The information included in the “Others” segment corresponds to operations of ~~pigs,~~swine, balanced feed for animal consumption and other by-products that do not meet the quantitative thresholds to be considered as reportable segments.

Inter-segment pricing is determined on an arm’s length ~~basis.~~basis comparable to those which would be used with or between independent parties in comparable transactions. The accounting policies of operating segments are as those described in note 3 s)t).

Below is the information related to each reportable segment. Performance is measured based on each segment’s income before taxes, in the same manner as it is included in management reports that are regularly reviewed by the Company’s ~~chief operating decision maker.~~Board of Directors.
a) Operating segment information

Year ended December 31, 2015
Poultry Other Total
Net revenues $ 41,789,451 4,439,598 46,229,049
Cost of sales 32,906,801 3,940,707 36,847,508
Gross profit 8,882,649 498,892 9,381,541
Income before taxes 5,196,883 303,197 5,500,080
Income taxes 1,590,892 89,668 1,680,560
Net income attributable to controlling interest 3,599,728 213,112 3,812,840
Property, plant and equipment, net 11,805,132 1,382,999 13,188,131
Goodwill 366,280 88,015 454,295
Total assets 36,085,954 4,360,624 40,446,578
Total liabilities 11,325,636 1,341,564 12,667,200
Purchases of property, plant and equipment 1,646,968 177,541 1,824,509
Depreciation and amortization 694,502 74,768 769,270

Poultry
revenues Other
revenues
Total revenue $ 41,796,064 4,484,348
Intersegments (6,613 ) (44,750 )
Net revenues $ 41,789,451 4,439,598
Year ended December 31, 2018
Poultry Other Total
Net revenues $ 55,308,141 5,743,951 61,052,092
Cost of sales 46,562,214 4,860,162 51,422,376
Gross profit 8,745,927 883,789 9,629,716
Finance income 1,094,377 46,372 1,140,749
Finance costs 288,703 43,465 332,168
Income before taxes 4,025,050 491,501 4,516,551
Income taxes 1,028,335 126,643 1,154,978
Net income attributable to controlling interest 2,986,328 363,639 3,349,967
Property, plant and equipment, net 16,060,590 1,957,586 18,018,176
Goodwill 1,543,755 88,016 1,631,771
Intangible assets 962,738 (13,383 ) 949,355
Total assets 47,205,252 5,660,342 52,865,594
Total liabilities 13,364,922 1,334,967 14,699,889
Purchases of property, plant and equipment 1,747,286 235,297 1,982,583
Depreciation and amortization 1,121,751 105,166 1,226,917
F-36
Poultry
revenues Other
revenues
Total revenues $ 55,312,273 5,785,289
Intersegments (4,132 ) (41,338 )
Net revenues $ 55,308,141 5,743,951
Year ended December 31, 2017
Poultry Other Total
Net revenues $ 52,479,393 5,570,632 58,050,025
Cost of sales 42,767,202 4,735,757 47,502,959
Gross profit 9,712,191 834,875 10,547,066
Finance income 943,477 144,164 1,087,641
Finance costs 295,011 45,080 340,091
Income before taxes 5,522,187 516,692 6,038,879
Income taxes 958,201 126,243 1,084,444
Net income attributable to controlling interest 4,558,370 389,872 4,948,242
Property, plant and equipment, net 15,464,404 1,855,637 17,320,041
Goodwill 1,543,078 88,016 1,631,094
Intangible assets 1,040,042 - 1,040,042
Total assets 45,165,551 5,391,838 50,557,389
Total liabilities 13,525,194 1,354,267 14,879,461
Purchases of property, plant and equipment 3,154,390 358,988 3,513,378
Depreciation and amortization 982,019 93,769 1,075,788
Poultry
revenues Other
revenues
Total revenues $ 52,484,264 5,616,254
Intersegments (4,871 ) (45,622 )
Net revenues $ 52,479,393 5,570,632
Year ended December 31, 2016
Poultry Other Total
Net revenues $ 46,852,482 5,167,821 52,020,303
Cost of sales 38,285,367 4,349,704 42,635,071
Gross profit 8,567,116 818,116 9,385,232
Finance income 840,640 128,534 969,174
Finance costs 149,319 22,835 172,154
Income before taxes 5,077,042 517,554 5,594,596
Income taxes 1,494,918 148,515 1,643,433
Net income attributable to controlling interest 3,578,049 368,585 3,946,634
Property, plant and equipment, net 13,478,294 1,602,811 15,081,105
Goodwill 396,861 88,016 484,877
Total assets 40,035,990 5,054,476 45,090,466
Total liabilities 11,909,391 1,464,901 13,374,292
Purchases of property, plant and equipment 2,226,493 233,251 2,459,744
Depreciation and amortization 840,624 85,124 925,748

~~F-30~~F-37

Year ended December 31, 2014
Poultry Other Total
Net revenues $ 37,994,654 3,784,433 41,779,087
Cost of sales 29,329,056 3,165,918 32,494,974
Gross profit 8,665,598 618,515 9,284,113
Income before taxes 5,214,590 374,186 5,588,776
Income taxes 1,546,518 109,592 1,656,110
Net income attributable to controlling interest 3,662,769 264,157 3,926,926
Property, plant and equipment, net 11,017,198 1,037,556 12,054,754
Goodwill 261,749 88,015 349,764
Total assets 31,786,586 3,056,542 34,843,128
Total liabilities 9,578,370 902,708 10,481,078
Purchases of property, plant and equipment 1,128,331 112,785 1,241,116
Depreciation and amortization 738,663 66,987 805,650
As of December 31, 2014 Poultry
revenues Other
revenues
Total revenue $ 37,995,157 4,433,379
Intersegments (503 ) (648,946 )
Net revenues $ 37,994,654 3,784,433
Year ended December 31, 2013
Poultry Other Total
Net revenues $ 35,943,862 3,766,864 39,710,726
Cost of sales 29,847,653 3,328,946 33,176,599
Gross profit 6,096,209 437,918 6,534,127
Income before taxes 3,164,288 227,956 3,392,244
Income taxes 1,252,784 97,655 1,350,439
Net income attributable to controlling interest 1,890,572 147,850 2,038,422
Property, plant and equipment, net 10,425,139 1,227,310 11,652,449
Goodwill 256,244 88,015 344,259
Total assets 26,129,798 2,759,879 28,889,677
Total liabilities 7,943,868 794,663 8,738,531
Purchases of property, plant and equipment 531,465 56,128 587,593
Depreciation and amortization 731,797 84,876 816,673
As of December 31, 2013 Poultry
revenues Other
revenues
Total revenue $ 35,943,862 4,012,486
Intersegments - (245,622 )
Net revenues $ 35,943,862 3,766,864
~~F-31~~
Poultry
revenues Other
revenues
Total revenues $ 46,856,888 5,214,481
Intersegments (4,406 ) (46,660 )
Net revenues $ 46,852,482 5,167,821

b) Geographical information

When submitting information by geographic area, revenue is classified based on the geographic location where the Company’s customers are located. Segment assets are classified in accordance with their geographic location. Geographical information for the “Others” segment is not included below because the operations are carried out entirely within Mexico.

Year ended December 31, 2015 Year ended December 31, 2018
Domestic
poultry Foreign
poultry Operations
between
geographical
segments Total Domestic
poultry Foreign
poultry Operations
between
geographical
segments Total
Net revenues $ 30,686,151 11,159,936 (56,637 ) 41,789,451 $ 37,766,974 17,599,239 (58,072 ) 55,308,141
Non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets, and investments in insurance policies
Non-current biological assets 795,157 638,974 - 1,434,131 979,034 742,694 1,721,728
Property, plant and equipment, net 9,682,701 2,122,431 - 11,805,132 13,002,755 3,057,835 - 16,060,590
Goodwill 212,833 153,447 - 366,280 212,833 1,330,922 - 1,543,755
Intangible assets - 962,738 - 962,738

Year ended December 31, 2014 Year ended December 31, 2017
Domestic
poultry Foreign
poultry Operations
between
geographical
segments Total Domestic
poultry Foreign
poultry Operations
between
geographical
segments Total
Net revenues $ 29,556,202 8,955,964 (517,512 ) 37,994,654 $ 36,013,268 16,533,664 (67,539 ) 52,479,393
Non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets, and investments in insurance policies
Non-current biological assets 791,256 317,977 - 1,109,233 899,691 717,812 - 1,617,503
Property, plant and equipment, net 9,386,883 1,630,315 - 11,017,198 12,143,632 3,320,772 - 15,464,404
Goodwill 212,833 48,916 - 261,749 212,833 1,330,245 - 1,543,078
Intangible assets - 1,040,042 - 1,040,042

~~F-32~~F-38

Year ended December 31, 2013 Year ended December 31, 2016
Domestic
poultry Foreign
poultry Operations
between
geographical
segments Total Domestic
poultry Foreign
poultry Operations
between
geographical
segments Total
Net revenues $ 27,426,465 8,943,090 (425,693 ) 35,943,862 $ 33,414,262 13,496,189 (57,969 ) 46,852,482
Non-current assets other than financial instruments, deferred tax assets, post-employment benefit assets, and investments in insurance policies
Non-current biological assets 840,622 269,314 - 1,109,936 902,662 765,881 - 1,668,543
Property, plant and equipment, net 8,936,020 1,489,119 - 10,425,139 10,481,074 2,997,221 - 13,478,294
Goodwill 212,833 43,411 - 256,244 212,833 184,028 - 396,861
c) Major Customers

In Mexico, the Company’s products are traded among a large number of customers, without significant concentration with any specific customer. Therefore, in ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, no customer represented over 10% of the Company’s total revenues.

InAs of December 31, 2018 and 2017, the Company did not have operations with an individual customer that represented a significant concentration in the United States of ~~America,~~America. As of December 31, 2016 the Company ~~has~~had transactions with ~~Ozark Mountain Poultry,~~The Sygma Network, Inc. representing ~~19%, 24% and 14%~~9% of total sales outside of ~~Mexico during the years ended December 31, 2015, 2014 and 2013, respectively.~~Mexico.

(7) Cash and cash equivalents

The consolidated balances of cash and cash equivalents as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 are as follows:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Cash and banks $ 4,774,420 3,282,730 594,183 $ 13,566,098 15,464,312 9,890,007
Investments with maturities less than three months 9,246,071 7,745,324 6,121,330 4,331,423 623,898 4,771,961
Cash and cash equivalents 14,020,491 11,028,054 6,715,513 17,897,521 16,088,210 14,661,968

Restricted cash 25,771 8,008 1,381 4,324 24,058 19,236
Total cash and cash equivalents and restricted cash $ 14,046,262 11,036,062 6,716,894 $ 17,901,845 16,112,268 14,681,204

Restricted cash corresponds to the minimum margin required by the intermediary ~~related to~~for the Company’s derivative financial instruments on commodities in order to meet future commitments that may stem from adverse market movements affecting prices on the open positions as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013.~~
2016.
~~F-33~~F-39

(8) Financial instruments and risk management

The Company is exposed to market risks, liquidity risks and credit risks for the use of financial instruments, for which reason it exercises its risk management.

This note presents information on the Company’s exposure to each one of the aforementioned risks, as well as the Company’s objectives, policies and processes for the measurement and management of financial risks.

Risk management framework
The philosophy adopted by the Company seeks to minimize risks and, therefore maximize business stability, focusing decisions on creating an optimum combination of products and assets that produce a risk – return ratio more in agreement with the risk profile of its stockholders.

In order to establish a clear and optimum organizational structure with respect to risk management, a Risk Committee has been established which is the specialized body in charge of defining, proposing, approving and implementing the objectives, policies, procedures, methodologies and strategies, as well as the determination of the maximum limits of exposure to risk and contingency plans.

At December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the Company has not identified embedded derivatives.

The Company’s derivative financial instruments as of December 31, ~~2015, 2014~~2018 meet the requirements to be treated as hedges for accounting purposes (1,500 thousand dollars of notional, other disclosures are considered non-material). During 2017 and ~~2013,~~2016 the derivative instruments held by the Company do not meet the requirements to be treated as hedges for accounting purposes.

Management by type or risk
a) Categories of financial assets and liabilities

The Company’s financial assets and liabilities are shown below:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Financial assets
Cash and cash equivalents $ 14,046,262 11,036,062 6,716,894 $ 17,901,845 16,112,268 14,681,204
Investments in securities at fair value through profit and loss 1, 242,614 910,519 972,641
Investments held to maturity 52,572 56,252 67,219
Investment in securities at fair value through profit or loss 550,068 1,127,841 970,292
Other financial assets 66,177 64,629 65,509
Accounts receivable 1,862,250 1,952,039 1,652,484 2,444,013 2,599,208 2,524,942
Due from related parties 194,522 1,929 3,678 99 326 148,855
Long-term receivables 128,169 104,495 87,927 171,222 162,337 161,690
Derivative financial instruments 1,244 6,669 11,735 6,570 - 8,308

Financial liabilities
Financial debt $ (4,127,010 ) (2,450,452 ) (2,067,802 ) $ (5,037,600 ) (5,249,024 ) (4,047,937 )
Trade payables, sundry creditors and expenses payable (4,088,989 ) (3,530,546 ) (3,068,249 ) (4,593,344 ) (4,163,443 ) (4,095,089 )
Due to related parties (165,628 ) (127,033 ) (54,095 ) (147,514 ) (55,252 ) (189,966 )
Derivative financial instruments - (6,821 ) -

~~F-34~~F-40

b) Credit risk

Credit risk is defined as the potential loss of a portfolio of an amount owed to the Company due to lack of payment from a debtor, or for breach by a counterparty with which derivative financial instruments and investment in securities transactions are conducted.

The risk management process contemplates the use of derivative financial instruments, which are exposed to a market risk, ~~but are also to~~as well as counterparty risk.

Measurement and monitoring of counterparty risk

In terms of valuation and monitoring of over the counter (OTC) derivative financial instruments and investments in securities, the Company currently measures its counterparty risk by identifying the Credit Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA).

For investments in securities denominated in Mexican pesos, the financial instruments valuation models used by price vendors incorporate market movements and credit quality of issuers, thereby implicitly including the counterparty risk of the transaction in the fair value ~~determination;~~measurement; therefore, the position in investment in securities includes the counterparty risk and no additional adjustment is carried out. The price of the instruments obtained from the price vendor is the mid-point between the bid price and the ask price (the “mid-price”). ~~As of December 31, 2015, 2014 and 2013, the balance of held to maturity investments is $52,572, $56,252 and $67,219, respectively.~~

Investments in securities denominated in a foreign currency, not listed in Mexico, are recorded at prices contained in the broker's statements of account. The Company validates these market prices using Bloomberg, which incorporate market movements and the credit quality of issuers; thereby implicitly including the counterparty risk of the transaction and no related adjustment is carried out. The prices obtained from Bloomberg are mid prices.

Trade accounts receivable and other accounts receivable measurement and monitoring

It is the policy of the Company to establish an allowance for doubtful accounts to cover the balances of accounts receivable that are not likely to be recovered. To set the required allowance, the Company considers historical losses, assesses current market conditions, as well as customers' financial conditions, accounts receivable in litigation, price differences, portfolio aging and current payment patterns.

~~F-35~~
The impairment assessment of accounts receivable is performed on a collective basis, as there are no accounts with individually significant ~~balances, and in the short-term.~~balances. The Company's products are marketed to a large number of customers without, except as described in note 6 c, any significant concentration with a specific customer. As part of the objective evidence that an account receivable portfolio is impaired, the Company considers past experiences with respect to collection, increases in the number of overdue payments in the portfolio exceeding the average loan period, as well as observable changes in national and local economic conditions that correlate to defaults.
F-41

The Company has a credit policy under which each new customer is analyzed individually in terms of its creditworthiness before offering it payment terms and conditions. The Company's review includes internal and external assessments, and in some cases, bank references and a search in the Public Registry of Properties. For each customer, purchase limits are established, which represent the maximum credit amount. Customers that do not meet the Company's credit references can solely conduct transactions in cash or through advance payments.

The allowance for doubtful accounts includes trade accounts receivable that are ~~impaired,~~in process of legal recovery, which amount to ~~$103,057, $110,462~~$142,388, $141,636 and ~~$86,564~~$130,290 as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively. The reconciliation of movements of the allowance for doubtful accounts, and the analysis of past-due accounts receivable but not impaired, are presented in note 9.

The Company receives credit enhancements on credit lines granted to its clients, which consist of real and personal property, such as land, buildings, houses, vehicles, letters of credit, cash deposits and others. As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the fair value of such credit enhancements, determined by an appraisal at the time the credit lines were granted, is ~~$563,012, $589,430~~$572,085, $618,481 and ~~$497,490~~$570,546, respectively.

The fair value of trade accounts receivable is similar to the carrying amount, as the terms granted under credit lines are of a short term nature and do not include significant finance components.

Investments

The Company limits its exposure to credit risk investing solely with counterparties that have been rated on a well-recognized credit rating scale or are deemed to be investment grade. Management constantly monitors credit ratings, and as it invests solely in securities with high credit ratings, it is not expected that any counterparty will fail to fulfill its obligations.

Financial guarantees granted

It is the Company’s policy to grant financial guarantees solely to 100% owned subsidiary companies.

~~F-36~~
Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure, which as of the reporting date is as follows:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Cash and cash equivalents $ 14,046,262 11,036,062 6,716,894 $ 17,901,845 16,112,268 14,681,204
Investments designated at fair value through profit and loss 1,242,614 910,519 972,641
Investments held to maturity 52,572 56,252 67,219
Investments in securities at fair value through profit or loss 550,068 1,127,841 970,292
Other financial assets 66,177 64,629 65,509
Accounts receivable net of guarantees received 1,621,929 1,469,033 1,246,599 1,986,102 2,143,390 2,264,941
Derivative financial instruments 1,244 6,669 11,735 6,570 - 8,308
$ 16,964,621 13,478,535 9,015,088 $ 20,510,762 19,448,128 17,990,254
F-42

c) Liquidity risk

Liquidity risk is defined as the potential loss stemming from the impossibility to renew liabilities or enter into other liabilities under normal terms, the early or forced sale of assets or the need to grant unusual discounts in order to meet obligations, or by the fact that a position cannot be disposed of, acquired or covered promptly through the establishment of an equivalent contrary position.

Liquidity risk management process considers the management of the assets and liabilities included in the consolidated statements of financial position (Assets Liabilities Management - ALM) in order to anticipate funding difficulties because of extreme events.

Monitoring

The Company’s areas of risk management and financial planning measure, monitor and report to the Risk Committee liquidity risks associated with the ALM and prepare limits for the authorization, implementation and operation thereof, as well as contingent action measures in case of liquidity requirements.

Liquidity risk caused by differences between current and projected cash flows at different dates are measured and monitored, considering all asset and liability positions of the Company denominated in local and foreign currency. Similarly, funding diversification and sources to which the Company has access are evaluated.

The Company quantifies the potential loss arising from early or forced sale of assets or sale at unusual discounts to meet its obligations in a timely manner, as well as by the fact that a position cannot be disposed of, acquired or covered timely through the establishment of a contrary equivalent position.

Liquidity risk monitoring considers a liquidity gap analysis, scenarios for lack of liquidity and use of alternative sources of financing.

Below are the contractual maturities of the financial liabilities, including estimated interest payments. As of the date of the consolidated financial statements, there are no financial instruments which have been offset or recognized positions that are subject to offsetting rights.

~~F-37~~
Maturity table

December 31, 2015 December 31, 2018
Less than 1
year 1 to 3 years 3 to 5 years Less than 1
year 1 to 3 years 3 to 5 years
Trade payables, sundry creditors and expenses payable $ 4,088,989 -     - $ 4,593,344 - -
Due to related parties 147,514 - -
Variable-rate maturities
In U.S. dollars 1,462,850 - - 2,757,459 - -
In pesos 169,033 2,495,127 - 735,334 44,014 1,500,793
Interest 113,840 98,840 - 145,860 270,977 79,719
Total financial liabilities $ 5,834,712 2,593,967 - $ 8,379,511 314,991 1,580,512

December 31, 2014
Less than 1
year 1 to 3 years 3 to 5 years
Trade payables, sundry creditors and expenses payable $ 3,530,546 - -
Variable-rate maturities
In U.S. dollars 221,250 - -
In pesos 576,732 152,470 1,500,000
Interest 73,377 153,300 78,353
Total financial liabilities $ 4,401,905 305,770 1,578,353
F-43

December 31, 2013 December 31, 2017
Less than 1
year 1 to 3 years 3 to 5 years Less than 1
year 1 to 3 years 3 to 5 years
Trade payables, sundry creditors and expenses payable $ 3,068,250 - - $ 4,163,443 - -
Due to related parties 55,252 - -
Derivative financial instruments 6,821 -
Variable-rate maturities
In U.S. dollars 392,700 - - 2,752,400 - -
In Mexican pesos 164,892 10,210 1,500,000
In pesos 942,651 53,973 1,500,000
Interest 89,554 179,108 48,704 162,785 244,484 203,840
Total financial liabilities $ 3,715,396 189,318 1,548,704 $ 8,083,352 298,457 1,703,840

December 31, 2016
Less than 1
year 1 to 3 years 3 to 5 years
Trade payables, sundry creditors and expenses payable $ 4,095,089 - -
Due to related parties 189,966 - -
Variable-rate maturities
In U.S. dollars 1,444,800 - -
In pesos 1,652,725 950,412 -
Interest 142,100 136,859 -
Total financial liabilities $ 7,524,680 1,087,271 -

At least on a monthly basis, management evaluates and advises the Board of Directors on its liquidity. As of December 31, ~~2015,~~2018, the Company has evaluated that it has sufficient resources to meet its obligations in the short and long term; therefore, it does not consider having liquidity gaps in the future and it will not be necessary to sell assets to pay its debts at unusual discounts or at out-of-market prices.
~~F-38~~

d) Market risk

Market risk is defined as the potential loss arising from the portfolio of derivative financial instruments and investment in securities for changes in risk factors that affect the valuation of short or long positions. In this sense, the uncertainty of future losses resulting from changes in market conditions (interest rates, foreign currency, prices of commodities, among others), which directly affects movements in the price of both assets and liabilities, is detected.

The Company measures, monitors and reports all financial instruments subject to market risk, using sensitivity measurement models to show the potential loss associated with movements in risk variables, according to different scenarios on rates, prices and types of change during the period.

Monitoring

Sensitivity analyses are prepared at least monthly and are compared with the limits established. Any excess identified is reported to the Risk Committee.

F-44
Stress tests

At least monthly, the Company conducts stress tests calculating the value of the portfolios and considering changes in risk factors observed in historical dates of financial stress.

i. ~~Commodities price risk~~
i. Commodities price risk

With respect to risks related to commodities designated in a formal hedging relationship, the Company seeks protection against downward variations in the agreed-upon price of corn and/or sorghum with the producer, which may represent an opportunity cost as there are lower prices in the current market upon receiving the inventory, and to hedge the risk of a decline in prices between the receipt date and that of inventory consumption.

Purchases of corn and/or sorghum are formalized through an agreement denominated "Forward buy-sell agreement", which has the following characteristics:

· Transaction date
· Number of agreed-upon tons
· Harvest, state and agricultural cycle from which the harvest ~~comes~~originates
· Price of product per ton, plus quality award or penalty
~~F-39~~

Agricultural agreements that result in firm commitments are linked to two corn and/or sorghum agricultural cycles, and in contracting ~~purchases:~~purchases, both contracting cycles and dates are itemized as follows:

· Fall-winter Cycle - The registration window period is at the discretion of the Agency of Services for Distribution and Development of Agricultural Markets (ASERCA, for its Spanish acronym), which is usually between December and March, while the fall-winter cycle harvest period takes place during May, June and July. However, corn and/or sorghum harvest could lengthen up to one month or several months, depending on the weather conditions, such as drought and frost.

· Spring-summer Cycle - The registration window period is at the discretion of ASERCA; the spring-summer cycle usually takes place during the July and August and the harvest depends on each state of the country and is ~~very~~highly variable.

~~For contracts~~As of December 31, 2018 and 2017, the Company participates in the ASERCA program as buyer of the corn and / or sorghum crops, for which the Company must prove that a risk management instrument is maintained against market price fluctuations. Based on the foregoing, the Company entered into ~~through~~“put” options with maturities in March 2019 and 2018, July, September and December 2018 and 2017, with companies listed on the ~~commercialization support scheme with Agriculture Trust Funds (FIRA for its Spanish acronym)~~Chicago Mercantile Exchange. As of December 2018, the gain on valuation is $217 (11 thousand dollars), during 2017, there ~~are~~is no ~~purchase periods established as this program is focused on selling excess crops that weren’t sold through~~gain or loss from the ~~contract agriculture program. Normally~~valuation of these ~~purchases are made at the end of each harvest cycle.~~instruments.

As of December 31, ~~2015, 2014 and 2013,~~2016, the Company has economic hedging positions comprised of corn long “puts” with ASERCA, maturing in March 2017, July, September and December ~~2016~~2017 and ~~2015.~~2016. The gain on valuation of these instruments is ~~$5,601, $5,518 and $120,560, in 2015, 2014 and 2013, respectively,~~$3,189 during 2016, recorded within cost of sales.

F-45
~~The~~
As of December 31, 2018 and 2017, there is no subsidy by ASERCA for the purchase of hedging "puts" to the consumer; however, the Company participates in the "Agriculture by Contract" program with ASERCA, where contracts for the purchase of "put" options are registered with companies listed on the Chicago market exchange and the benefit of this program is the recovery of the breach of Call hedge purchased, in turn, by the producer with ASERCA. Accordingly, as of December 31, 2018 and 2017, no benefits have been realized under this scheme.
As of December 31, 2016 the Company maintains a contractual agreement with ASERCA in which the Company will pay 80% ~~(2014 and 2013 was 55%)~~ of the option premium and ASERCA will pay the remaining 20% ~~(2014 and 2013 was 45%)~~. In case the option is In“In the ~~Money~~Money” (Strike>Forward), the Company will recover the 80% portion paid ~~(2014 and 2013 recovery rate was 55%)~~ and an additional 10% ~~(2014 and 2013 portion paid was 22.5%)~~ which is equivalent to 50% of the portion paid by ASERCA. Due to its nature and in accordance with IAS 20,Accounting for Government Grants and Disclosure of Government Assistance, the portion paid by ASERCA must be recognized as an income over the term of the instrument in order to match it against the costs it is intended to offset, on a systematic basis. The effect of such benefit as of December 31, ~~2015, 2014 and 2013~~2016 is ~~$57,051 (3,315~~$67,080 (3,250 thousand dollars)~~, $280,058 (18,987 thousand dollars) and $193,981 (14,819 thousand dollars), respectively.~~.
As of December 31, 2015 and 2013, the Company has no outstanding long puts, which are used from time to time by the Company as economic hedges in connection with future purchases of sorghum with FIRA. As of December 31, 2014, the Company has economic hedging positions in the form of outstanding sorghum long puts entered into with FIRA with maturities in March 2015. Such instruments gave rise to a gain on valuation of $2,028, which was recorded to cost of sales for the year ended December 31, 2014.
Due to the above, the Company has a contractual agreement with FIRA in which it will absorb 50% of the premium payment option and FIRA the remaining 50%. Because of its nature and as established by IAS 20~~Accounting for Government Grants and Disclosure of Government Assistance~~, the portion paid by FIRA should be recognized as income over the periods the related costs are incurred, on a systematic basis. The effect of such benefit for the years ended December 31, 2015, 2014 and 2013 was $0, $5,281 (358 thousand dollars) and $0, respectively.
~~F-40~~

With respect to the risk in commodities that are not designated in a formal hedging relationship and to which the Company is exposed, sensitivity tests on corn and sorghum futures agreements are ~~entered into,~~performed, considering different (bullish and bearish) scenarios. ~~These~~The results ~~can be seen~~of these sensitivity analyses are presented in paragraph g) of this note.

~~ii.~~ ~~Chicken price risk~~
ii.Chicken price risk

The Company is exposed to financial risks mainly related to changes in the price of ~~chicken.The~~chicken. The Company presently does not anticipate that the price of chicken decreased to a level that represents a risk to the Company in the future; therefore, as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016, it has not entered into any derivative financial instrument or other agreement for managing the risk related to a decrease in chicken price.

The Company reviews chicken prices frequently in order to evaluate the need of having a financial instrument to manage the risk.

~~iii.~~ ~~Exchange risk~~
iii.Exchange risk

The Company is exposed to the effects of exchange rate volatility, mainly on in relation to Mexican pesos/dollars exchange rates on the ~~Company's~~Company’s assets and liabilities, including: investments in securities and derivative financial instruments hedging commodities, which are denominated in a currency other than the ~~Company's~~Company’s functional currency. In this regard, the Company has implemented a sensitivity analysis to measure the effects that currency risk may have over the assets and liabilities described.

The Company protects itself from exchange rate risk through economic hedging with derivative financial instruments, which cover a percentage of its estimated exposure to exchange rate volatility in relation to projected sale and ~~purchases~~purchase transactions. All instruments entered into as economic hedges of foreign exchange risk have maturities of less than one year from the contract date.

F-46
As of December 31, ~~2015~~2018, 2017 and 2016, the Company entered into derivative financial instrument positions as economic hedges to cover exchange rate risks. ~~As of December 31, 2014 and 2013, the Company did not have any such positions.~~

~~iv.~~ ~~Foreign currency position~~
iv.Foreign currency position

The Company has financial instrument assets and liabilities denominated in foreign currency on which there is an exposure to currency risk.

Below is the foreign currency position that the Company has as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013.~~2016.

~~F-41~~
December 31, December 31,
2015 2014 2013 2018 2017 2016
Dollars Mexican
Pesos Dollars Mexican
Pesos Dollars �� Mexican
Pesos Dollars
Mexican
Pesos
Dollars
Mexican
Pesos
Dollars
Mexican
Pesos

Assets
Cash and cash equivalents $ 66,929 1,151,844 1,866 27,526 39,843 521,546 $ 384,119 7,555,616 325,493 6,399,186 126,395 2,608,800
Investment in securities at fair value through profit and loss 28,549 491,325 24,849 366,527 29,284 383,333
Investment in securities at fair value through profit or loss 19,447 382,519 29,212 574,312 27,863 575,085
Accounts receivable 245 4,210 810 11,948 727 9,518 252 4,950 1,915 37,640 2,488 51,350
Total assets 95,722 1,647,379 27,525 406,001 69,855 914,397 403,818 7,943,085 356,619 7,011,138 156,746 3,235,235

Liabilities
Trade accounts payable (141,819 ) (2,440,708 ) (126,655 ) (1,868,163 ) (106,626 ) (1,395,730 ) (194,701 ) (3,829,765 ) (154,858 ) (3,044,515 ) (103,854 ) (2,143,547 )
Financial debt (85,000 ) (1,462,850 ) (15,000 ) (221,250 ) (30,000 ) (392,700 ) (140,186 ) (2,757,459 ) (140,000 ) (2,752,400 ) (70,000 ) (1,444,800 )
Total Liabilities (226,819 ) (3,903,558 ) (141,655 ) (2,089,413 ) (136,626 ) (1,788,430 ) (334,887 ) (6,587,224 ) (294,858 ) (5,796,915 ) (173,854 ) (3,588,347 )
Net asset position 68,931 1,355,861 61,761 1,214,223 - -
Net liability position $ (131,097 ) (2,256,179 ) (114,130 ) (1,683,412 ) (66,771 ) (874,033 ) $ - - - - (17,108 ) (353,112 )

The Company carries out a sensitivity analysis related to the ~~effect that the movement~~potential effects of changes in ~~the~~ exchange rates ~~may have~~ on its financial information. These results are shown in paragraph g) of this note. These analyses represent the scenarios that management considers reasonably possible of occurring.

The following is a detail of exchange rates effective during the fiscal year:

Spot exchange rate at
Average exchange rate December 31,
2015 2014 2013 2015 2014 2013
Dollars $ 15.87 13.30 12.76 17.21 14.75 13.09
Spot exchange rate at
Average exchange rate December 31,
2018 2017 2016 2018 2017 2016
Dollars $ 19.23 18.91 18.68 19.67 19.66 20.64

The exchange rate at the date of issuance of the consolidated financial statements is ~~$17.90.~~$18.86.

v. ~~Interest rate risk~~
v.Interest rate risk

The Company is exposed to fluctuations in rates for certain financial instruments, such as investments, bank loans and debt securities. This risk is managed ~~through derivative financial instruments such as interest rate swaps or others,~~ taking into account market conditions and the ~~criterion~~criteria of its Risk Committee and Board of Directors.
F-47

Interest rate fluctuations impacted mainly bank loans by changing either their fair value (fixed rate debt) or the future cash flows (variable rate debt). Management does not have a formal policy to determine how much of the Company's exposure should be at fixed or variable rate. However, at the time of obtaining new loans, management uses its judgment considering technical analyses and ~~the market’s~~market forecasts to decide whether fixed or variable rate instruments would be more favorable during the periods of such instruments.

To monitor this risk, the Company performs sensitivity tests at least monthly to measure the effect of the change in interest rates in the instruments described in the preceding paragraph, which are summarized in subsection g) of this note.

~~F-42~~
e) Financial instruments at fair value

The amounts of accounts payable and accounts receivable ~~and short-term debt~~ approximate their fair value because of their nature and short-term maturities.

The table below summarizes the presents the fair value of the financial instruments that are recognized at amortized cost, together with the carrying amount included in the consolidated statement of financial position:

Liabilities
recorded at
amortized cost Carrying
amount Fair
value Carrying
amount Fair
value Carrying
amount Fair
value
Carrying
amount

Fair
value

Carrying
amount

Fair
value

Carrying
amount

Fair
value

2015 2014 2013 2018 2017 2016
Financial debt $ 4,127,010 4,141,473 2,450,452 2,501,299 2,067,802 2,086,843 $ 5,037,600 5,037,688 5,249,024 5,255,932 4,047,937 4,062,999

f) Fair value hierarchy

The fair value of ~~the~~financial assets ~~(mainly equity, debt~~ and ~~corporate bonds) have standard terms and conditions and are traded in active liquid markets, which are~~liabilities is determined ~~by reference to quoted market prices.~~as follows:
· The fair value of the financial assets and liabilities that have standard terms and conditions and are traded in active liquid markets, which are determined by reference to quoted market prices (market approach), therefore, these instruments are considered Level 1 hierarchy according to the classification of fair value hierarchy described in note 2 b).
· The fair value of derivative financial instruments of the Company (Commodities) is determined based on the futures prices of the Chicago Stock Exchange, so these instruments are considered Level 2 hierarchy.

The following table summarizes financial instruments carried at fair value:

Level 1 Level 2 Level 3 Total
As of December 31, 2015
Investments in securities at fair value though profit and loss $ 1,242,614 - - 1,242,614
Interest rate derivative financial instruments - 195 - 195
Derivative financial instruments - 1,244 - 1,244
$ 1,242,614 1,439 - 1,244,053
Level 1 Level 2 Level 3 Total
As of December 31, 2014
Investments in securities at fair value though profit and loss $ 910,519 - - 910,519
Derivative financial instruments - 6,669 - 6,669
$ 910,519 6,669 - 917,188
Level 1 Level 2 Level 3 Total
As of December 31, 2018
Investment in securities at fair value through profit or loss $ 550,068 - - 550,068
Derivative financial instruments - 6,570 - 6,570
$ 550,068 6,570 - 556,638

~~F-43~~F-48

Level 1 Level 2 Level 3 Total
As of December 31, 2013
Investments in securities at fair value though profit and loss $ 972,641 - - 972,641
Derivative financial instruments on commodities - 11,735 - 11,735
$ 972,641 11,735 - 984,376
Level 1 Level 2 Level 3 Total
As of December 31, 2017
Investment in securities at fair value through profit or loss $ 969,309 158,532 - 1,127,841
Derivative financial instruments - (6,821 ) - (6,821 )
$ 969,309 151,711 - 1,121,020
Level 1 Level 2 Level 3 Total
As of December 31, 2016
Investment in securities at fair value through profit or loss $ 970,292 - - 970,292
Derivative financial instruments - 8,308 - 8,308
$ 970,292 8,308 - 978,600

Information regarding the hierarchy of fair value measurements related to financial liabilities that are not carried at fair value, but for which disclosures are required, is summarized below:

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
As of December 31, 2015
As of December 31, 2018
Financial debt - bank institutions $ - (2,626,327 ) (2,626,327 ) $ - (3,536,895 ) - (3,536,895 )
Financial debt – debt securities (1,515,146 ) - - (1,515,146 ) (1,500,793 ) - - (1,500,793 )
$ (1,515,146 ) (2,626,327 ) - (4,141,473 ) $ (1,500,793 ) (3,536,895 ) - (5,037,688 )

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
As of December 31, 2014
As of December 31, 2017
Financial debt - bank institutions $ (987,094 ) - (987,094 ) $ - (3,749,024 ) - (3,749,024 )
Financial debt – debt securities (1,514,205 ) - - (1,514,205 ) (1,506,908 ) - - (1,506,908 )
$ (1,514,205 ) (987,094 ) - (2,501,299 ) $ (1,506,908 ) (3,749,024 ) - (5,255,932 )

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
As of December 31, 2013
As of December 31, 2016
Financial debt - bank institutions $ - (567,778 ) - (567,778 ) $ - (2,550,469 ) - (2,550,469 )
Financial debt – debt securities (1,519,065 ) - - (1,519,065 ) (1,512,530 ) - - (1,512,530 )
$ (1,519,065 ) (567,778 ) - (2,086,843 ) $ (1,512,530 ) (2,550,469 ) - (4,062,999 )

g) Quantitative sensitivity measurements

~~Following~~The following are sensitivity analyses for the most significant risks to which the Company is exposed as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013.~~2016. These analyses represent the scenarios that management believes are reasonably possible of ~~occuring~~occurring in future periods and were performed in accordance with the policies of Risk Committee.

i. ~~Derivative Financial Instruments related to exchange rate and commodities risks~~
i.Derivative Financial Instruments related to exchange rate and commodities risks

As of December 31, ~~2015,~~2018 the Company has taken positions on derivative financial instruments to hedge exchange rate risks and commodities.

A 15% increase in the Mexican peso with respect to the U.S. dollar as of the end of ~~2015~~2018, 2017 and 2016 would have ~~had~~resulted in a ~~net effect~~valuation gain of $0$28,767, $25,971 and $41,235 on the fair value of the Company’s exchange rate derivative financial instruments position. On the other hand, a decrease of 15% in the aforementioned rate would have resulted in an additional valuation loss during the ~~period~~respective periods of ~~$10,575. As of December 31, 2014~~$48,429, $43,493 and ~~2013, the Company did not have any such positions~~$47,639.
F-49

The following table shows the Company’s sensitivity ofto an increase and decrease of 15% for ~~2015~~2018, 2017 and ~~7.5% for 2014 and 2013~~2016 in the “bushell” price of corn and short ton price of soybeans.

~~F-44~~
Effect of Increase Effect of Decrease
2018 2017 2016 2018 2017 2016
Loss (profit) for the year $ (2,665 ) (16,094 ) (9,085 ) $ 105 21,229 8,785

ii.Interest rate risk
Effect of Increase Effect of Decrease
2015 2014 2013 2015 2014 2013
Loss (profit) for the year $ (44,589 ) (4,966 ) 1,630 $ 56,753 12,377 (666 )
~~ii.~~ ~~Interest rate risk~~

As described in Note ~~17,~~18, the Company has financial debt denominated in pesos and dollars, which bear interest at variable rates based on TIIE and LIBOR, respectively.

The following table shows the Company’s sensitivity ofto an increase and decrease of 50 basis points for ~~2015~~2018, 2017 and ~~2014 and 25 basis points for 2013,~~2016, in the variable rates to which the Company is exposed.

Effect of Increase Effect of Decrease
2015 2014 2013 2015 2014 2013
Loss (profit) for the year $ 17,375 12,111 4,896 $ (17,375 ) (12,111 ) (4,896 )
Effect of Increase Effect of Decrease
2018 2017 2016 2018 2017 2016
Loss (profit) for the year $ 30,192 43,485 15,385 $ (30,192 ) (43,485 ) (15,385 )

~~iii.~~ ~~Exchange risk~~
iii.Exchange risk

As of December 31, ~~2015,~~2018, the Company's net monetary liability position in foreign currency was ~~$2,256,179.~~$1,355,861.

The following table shows the Company’s sensitivity of an increase and decrease of 10% for ~~2015~~2018, 2017 and ~~$0.50 for 2014 and 2013,~~2016, in exchange rate, which would have an effect in the result from foreign currency position.

Effect of Increase Effect of Decrease
2015 2014 2013 2015 2014 2013
Loss (profit) for the year $ 225,618 57,065 33,386 $ (225,618 ) (57,065 ) (33,386 )
Effect of Increase Effect of Decrease
2017 2017 2016 2018 2017 2016
Loss (profit) for the year $ (135,586 ) (121,422 ) 35,311 $ 135,586 121,422 (35,311 )

(9) Accounts receivable, net

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, accounts receivable are as follows:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Trade receivables $ 1,867,104 1,688,308 1,700,905 $ 2,523,950 2,673,705 2,482,077
Allowance for doubtful accounts (81,641 ) (76,793 ) (69,245 ) (79,937 ) (96,900 ) (97,400 )
Other receivables 76,787 340,524 20,824 - 22,403 140,265
Government grant 40 - -
Income tax receivable 143,517 56,512 73,146 114,935 57,186 115,428
Recoverable value-added tax and other recoverable taxes 527,620 966,027 592,463 927,406 970,484 988,774
$ 2,533,427 2,974,578 2,318,093 $ 3,486,354 3,626,878 3,629,144

~~F-45~~F-50

Past-due but not impaired portfolio

Below is a classification of trade accounts receivable according to their aging as of the reporting date, ~~excluding receivables that are in a legal process,~~ which has not been subject to impairment:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Past due 0 to 60 days 129,315 185,291 120,258 144,604 200,413 164,458
Past due by more than 60 days 3,443 9,438 27,467 17,250 6,190 3,395
$ 132,758 194,729 147,725 $ 161,854 206,603 167,853

The Company believes that non-impaired amounts that are past-due by more than 60 days can still be collected, based on the historical behavior of payments and analysis of credit ratings of customers.

Reconciliation of movements in allowance for doubtful accounts

2015 2014 2013 2018 2017 2016
Balance as of January 1 $ (76,793 ) (69,245 ) (46,681 ) $ (96,900 ) (97,400 ) (81,641 )
Increase in allowance (17,179 ) (16,164 ) (29,801 ) (7,862 ) (14,800 ) (18,405 )
Applications 12,454 9,529 7,416
Amounts written off 24,826 15,287 2,818
Currency translation effect (123 ) (913 ) (179 ) (1 ) 13 (172 )
Balance as of December 31, $ (81,641 ) (76,793 ) (69,245 ) $ (79,937 ) (96,900 ) (97,400 )

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 the Company has receivables in a legal ~~process~~proceedings (receivables for which legal counsel is seeking recoverability) of ~~$103,057, 110,462~~$142,388, $141,636 and ~~$86,564,~~$130,290, respectively.

To determine the recoverability of an account receivable, the Company considers any change in the credit quality of the account receivable from the date of authorization of the credit line to the end of the reference period. In addition, the Company estimates that the credit risk concentration is limited as the customer base is very large and there are no related party receivables or receivables from entities under common control.

Expected credit losses
Beginning in 2018, the Company recognizes expected credit losses for life for trade accounts receivable, which are estimated using a provision matrix based on the Company's historical experience of credit losses, adjusted for factors that are specific each of the Company’s customer and debtor groups, general economic conditions and an assessment of both the current and forecast conditions at the reporting date, including the time value of money when appropriate. During 2017 and 2016, the estimated credit losses were based on the incurred loss model.
The expected credit losses for 2018 in trade accounts receivable under IFRS 9 were estimated at $45,823, considering the balances of the portfolio and the different customer groups of the Company.
As part of the implementation analysis and once planned activities were executed, the Company decided to maintain its previously recorded estimated reserve for doubtful accounts for its subsidiaries, although such amounts were higher than the expected credit losses in 2018.
~~F-46~~F-51

(10) Inventories

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, inventories are as follows:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Raw materials and by-products $ 1,155,841 1,226,778 1,100,971 $ 1,688,527 1,861,092 1,515,824
Medicine, materials and spare parts 772,226 656,618 633,829 903,337 820,417 808,492
Balanced feed 241,473 218,951 209,082 322,522 296,538 275,845
Processed chicken 1,112,068 777,734 689,102 1,548,597 1,561,912 1,154,207
Commercial eggs 38,683 35,957 43,213 52,050 46,185 37,242
Processed beef 38,533 23,008 23,013 39,709 58,563 36,599
Processed turkey 34,251 17,561 25,090 10,762 64,918 122,722
Other processed products 11,194 11,454 13,922 10,092 17,708 19,757
Total $ 3,404,269 2,968,061 2,738,222 $ 4,575,596 4,727,333 3,970,688

Inventory consumption for the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 was ~~$28,877,468, $24,873,999~~$40,115,184, $37,567,550 and ~~$26,041,102~~$34,018,493, respectively.

(11) Biological assets

For the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, biological assets are as follows:

Current
biological
assets Non-current
biological
assets Total
Current
biological
assets

Non-current
biological
assets
Total
Balance as at January 1, 2015 $ 1,501,428 1,109,233 2,610,661
Balance as of January 1, 2018 $ 1,942,193 1,617,503 3,559,696
Increase due to purchases 337,632 603,081 940,713 334,710 629,902 964,612
Sales - 3,032 3,032 - (119,297 ) (119,297 )
Net increase due to births 225,000 1,422,535 1,647,535 274,286 2,292,178 2,566,464
Production cost 26,283,885 1,120,359 27,404,244 33,189,920 1,729,478 34,919,398
Depreciation - (1,475,470 ) (1,475,470 ) - (2,136,224 ) (2,136,224 )
Transfers to inventories (26,746,796 ) (1,422,535 ) (28,169,331 ) (33,690,071 ) (2,292,178 ) (35,982,249 )
Other 50,645 73,896 124,541 22,488 366 22,854
Balance as at December 31, 2015 $ 1,651,794 1,434,131 3,085,925
Balance as of December 31, 2018 $ 2,073,526 1,721,728 3,795,254

Current
biological
assets

Non-current
biological
assets
Total
Balance as of January 1, 2017 $ 1,961,191 1,668,543 3,629,734
Increase due to purchases 291,361 599,273 890,634
Sales - (87,230 ) (87,230 )
Net increase due to births 277,621 2,112,110 2,389,731
Production cost 30,892,045 1,532,189 32,424,234
Depreciation - (2,058,461 ) (2,058,461 )
Transfers to inventories (31,435,017 ) (2,112,110 ) (33,547,127 )
Other (45,008 ) (36,811 ) (81,819 )
Balance as of December 31, 2017 $ 1,942,193 1,617,503 3,559,696

~~F-47~~F-52

Current
biological
assets Non-current
biological
assets Total
Balance as at January 1, 2014 $ 1,420,174 1,109,936 2,530,110
Increase due to purchases 301,516 296,846 598,362
Sales - (222,283 ) (222,283 )
Net increase due to births 227,892 1,426,359 1,654,251
Production cost 24,324,638 1,088,254 25,412,892
Depreciation - (1,194,779 ) (1,194,779 )
Transfers to inventories (24,789,388 ) (1,426,359 ) (26,215,747 )
Other 16,596 31,259 47,855
Balance as at December 31, 2014 $ 1,501,428 1,109,233 2,610,661
Current
biological
assets Non-current
biological
assets Total
Current
biological
assets

Non-current
biological
assets
Total
Balance as at January 1, 2013 $ 1,496,964 1,106,120 2,603,084
Balance as of January 1, 2016 $ 1,651,794 1,434,131 3,085,925
Increase due to purchases 227,864 328,059 555,923 237,525 604,527 842,052
Sales - (178,543 ) (178,543 ) - (109,776 ) (109,776 )
Net increase due to births 283,175 1,242,535 1,525,710 240,085 2,034,670 2,274,755
Production cost 24,683,964 1,073,261 25,757,225 29,620,380 1,515,440 31,135,820
Depreciation - (1,221,754 ) (1,221,754 ) - (1,903,086 ) (1,903,086 )
Transfers to inventories (25,270,795 ) (1,242,535 ) (26,513,330 ) (29,886,985 ) (2,034,670 ) (31,921,655 )
Other (998 ) 2,793 1,795 98,392 127,307 225,699
Balance as at December 31, 2013 $ 1,420,174 1,109,936 2,530,110
Balance as of December 31, 2016 $ 1,961,191 1,668,543 3,629,734

The “Other” category includes the change in fair value of biological assets that resulted in ana decrease of $22,270 in 2018, increase of ~~$13,020~~$22,598 in ~~2015,~~2017 and ~~decreases~~decrease of ~~$23,096 and $7,857~~$18,276 in ~~2014 and 2013,~~2016, respectively.

The Company is exposed to different risks relating to its biological assets:

· Future excesses in the offer of poultry products and a decline in the demand growth of the chicken industry may negatively affect the Company’s results.

· Increases in raw material prices and price volatility may negatively affect the Company’s margins and results.

· In addition, in the case of the Company’s operations in the United States of America, the cost of corn and grain may be affected by an increase in the demand for ethanol, which may reduce the market’s available corn inventory.

· Operations in Mexico and the United States of America are based on animal breeding and meat processing, which are subject to sanitary risks and natural disasters.

· Hurricanes and other adverse climate conditions may result in additional inventory losses and damage to the Company’s facilities and equipment.

~~F-48~~
(12) Prepaid expenses and other current assets

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, prepaid expenses and other current assets are as follows:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Advances to suppliers of inventories $ 1,224,454 866,119 801,390 $ 704,563 234,458 929,815
Prepaid expenses of services 130,086 145,849 184,001 217,074 235,652 217,244
Option agreement on potential acquisition - 154,875 -
Advances for purchase of property, plant and equipment to related parties - 12,500 -
Prepaid expenses of insurance and bonds 82,238 64,979 58,764 129,582 88,533 185,678
Other current assets 151,030 134,755 91,383 80,651 80,028 171,208
Total $ 1,587,808 1,379,077 1,135,539 $ 1,131,870 638,671 1,503,945

F-53
Effective June 20, 2014, the Company executed an option agreement with Morris Hatchery, Inc. that gives the Company the right to purchase its hatching egg operations located in Gillsville, Georgia once the contractual obligations made by Morris Hatchery Inc. with its customers have concluded, which wasn’t completed by December 31, 2014. As consideration for this right, the Company made a nonrefundable payment of $154,875 (10,500 thousand dollars) which was credited against the total purchase price of $371,300 (23,500 thousand dollars) on the closing of the transaction on July 10, 2015.

(13) Assets held for sale

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, assets held for sale are as follows:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Buildings $ 24,430 22,965 18,242 $ 18,920 18,920 21,551
Land 32,779 32,779 28,168 27,310 27,765 32,338
Other 2,839 2,839 2,643 2,839 2,838 2,839
Total $ 60,048 58,583 49,053 $ 49,068 49,523 56,728

The Company recognized ~~a loss from the sale~~gains (losses) on sales of these assets ~~in 2015~~ of ~~$24, a gain of $5~~(13), $2,437 and $0 during ~~2014~~2018, 2017 and ~~a loss of $24 in 2013.~~2016, respectively.
~~F-49~~

(14) Property, plant and equipment

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, property, plant and equipment are comprised as follows:

Cost Balance as at
January 1,
2015 Additions Disposals Currency
translation
effect Balance as at
December 31,
2015
Balance as of
January 1,
2018
Additions Disposals
Currency
translation
effect

Balance as of
December 31,
2018

Land $ 1,094,182 57,901 (661 ) 9,387 1,160,809 $ 1,353,643 24,400 - 47 1,378,090
Buildings and construction 9,669,990 204,254 (17,191 ) 160,127 10,017,180 11,440,284 513,033 (11,546 ) 1,705 11,943,476
Machinery and equipment 9,816,722 991,378 (262,222 ) 160,343 10,706,221 14,021,881 1,255,026 (96,727 ) 1,864 15,182,044
Transportation equipment 1,171,030 247,232 (135,257 ) 3,207 1,286,212 1,773,153 101,645 (82,543 ) 18 1,792,273
Computer equipment 67,780 22,081 (6,163 ) 2,144 85,842 125,991 10,441 (318 ) 69 136,183
Furniture 153,015 6,372 (5,351 ) 1,959 155,995 169,752 12,985 (4,258 ) (24 ) 178,455
Leasehold improvements 21,442 - (12,700 ) - 8,742 2,661 1,689 - - 4,350
Construction in progress 991,866 295,291 (18,612 ) - 1,268,545 1,435,147 63,364 - 3,186 1,501,697
Total $ 22,986,027 1,824,509 (458,157 ) 337,167 24,689,546 $ 30,322,512 1,982,583 (195,392 ) 6,865 32,116,568

Accumulated depreciation Balance as at
January 1
2015 Depreciation
for the year Disposals Currency
translation
effect Balance as at
December 31,
2015
Buildings and construction $ (4,754,662 ) (179,402 ) 9,199 (17,979 ) (4,942,844 )
Machinery and equipment (5,210,886 ) (512,786 ) 150,685 (54,294 ) (5,627,281 )
Transportation equipment (795,625 ) (59,655 ) 107,333 (3,592 ) (751,539 )
Computer equipment (56,462 ) (7,946 ) 6,411 (2,201 ) (60,198 )
Furniture (113,638 ) (9,481 ) 4,210 (644 ) (119,553 )
Total $ (10,931,273 ) (769,270 ) 277,838 (78,710 ) (11,501,415 )
Cost Balance as at
January 1,
2014 Additions Disposals Currency
translation
effect Balance as at
December 31,
2014
Land $ 1,057,182 30,833 (29 ) 6,196 1,094,182
Buildings and construction 9,548,846 101,388 (87,755 ) 107,511 9,669,990
Machinery and equipment 9,524,495 298,248 (113,567 ) 107,546 9,816,722
Transportation equipment 1,204,326 114,453 (149,487 ) 1,738 1,171,030
Computer equipment 141,252 8,178 (82,768 ) 1,118 67,780
Furniture 149,741 8,512 (6,410 ) 1,172 153,015
Leasehold improvements 26,852 - (5,410 ) - 21,442
Construction in progress 356,447 679,504 (44,085 ) - 991,866
Total $ 22,009,141 1,241,116 (489,511 ) 225,281 22,986,027
Accumulated depreciation Balance as at
January 1
2014 Depreciation
for the year Disposals Currency
translation
effect Balance as at
December 31,
2014
Balance as of
January 1
2018

Depreciation
for the year
Disposals
Currency
translation
effect

Balance as
of December
31, 2018

Buildings and construction $ (4,607,271 ) (188,909 ) 52,135 (10,617 ) (4,754,662 ) $ (5,323,314 ) (221,565 ) 9,315 (1,261 ) (5,536,825 )
Machinery and equipment (4,724,963 ) (513,983 ) 58,514 (30,454 ) (5,210,886 ) (6,706,824 ) (857,930 ) 66,578 (7,046 ) (7,505,222 )
Transportation equipment (789,154 ) (87,375 ) 81,874 (970 ) (795,625 ) (771,406 ) (118,439 ) 60,276 (95 ) (829,664 )
Computer equipment (126,897 ) (5,954 ) 77,317 (928 ) (56,462 ) (81,504 ) (16,598 ) 305 (237 ) (98,034 )
Furniture (108,407 ) (9,429 ) 4,499 (301 ) (113,638 ) (119,423 ) (12,385 ) 3,218 (57 ) (128,647 )
Total $ (10,356,692 ) (805,650 ) 274,339 (43,270 ) (10,931,273 ) $ (13,002,471 ) (1,226,917 ) 139,692 (8,696 ) (14,098,392 )

~~F-50~~F-54

Cost Balance as at
January 1,
2013 Additions Disposals Currency
translation
effect Balance as at
December 31,
2013
Balance as of
January 1,
2017
Additions Disposals
Currency
translation
effect

Balance as of
December 31,
2017

Land $ 1,056,145 770 (59 ) 326 1,057,182 $ 1,210,052 156,000 (8,851 ) (3,558 ) 1,353,643
Buildings and construction 9,397,122 153,685 (19,482 ) 17,521 9,548,846 10,603,293 896,020 (3,200 ) (55,829 ) 11,440,284
Machinery and equipment 9,081,660 462,988 (25,267 ) 5,114 9,524,495 12,035,769 2,158,477 (106,310 ) (66,055 ) 14,021,881
Transportation equipment 1,170,321 167,324 (133,483 ) 164 1,204,326 1,611,153 269,462 (105,982 ) (1,480 ) 1,773,153
Computer equipment 138,172 3,151 (130 ) 59 141,252 118,759 13,210 (3,173 ) (2,805 ) 125,991
Furniture 145,669 5,778 (1,760 ) 54 149,741 174,183 19,515 (23,505 ) (441 ) 169,752
Leasehold improvements 38,841 - (11,989 ) - 26,852 5,186 - (2,525 ) - 2,661
Construction in progress 562,750 (206,303 ) - - 356,447 1,459,682 694 (33,419 ) 8,190 1,435,147
Total $ 21,590,680 587,393 (192,170 ) 23,238 22,009,141 $ 27,218,077 3,513,378 (286,965 ) (121,978 ) 30,322,512

Accumulated depreciation Balance as at
January 1
2013 Depreciation
for the year Disposals Currency
translation
effect Balance as at
December 31,
2013
Balance as of
January 1
2017

Depreciation
for the year
Disposals
Currency
translation
effect

Balance as
of December
31, 2017

Buildings and construction $ (4,420,885 ) (199,952 ) 15,844 (2,278 ) (4,607,271 ) $ (5,131,723 ) (202,513 ) 2,074 8,848 (5,323,314 )
Machinery and equipment (4,223,450 ) (515,833 ) 15,088 (768 ) (4,724,963 ) (6,064,744 ) (735,461 ) 69,960 23,421 (6,706,824 )
Transportation equipment (773,826 ) (86,936 ) 71,640 (32 ) (789,154 ) (741,253 ) (111,073 ) 80,177 743 (771,406 )
Computer equipment (121,753 ) (5,232 ) 130 (42 ) (126,897 ) (70,293 ) (15,069 ) 3,160 698 (81,504 )
Furniture (101,250 ) (8,720 ) 1,570 (7 ) (108,407 ) (128,959 ) (11,672 ) 20,779 429 (119,423 )
Total $ (9,641,164 ) (816,673 ) 104,272 (3,127 ) (10,356,692 ) $ (12,136,972 ) (1,075,788 ) 176,150 34,139 (13,002,471 )

December 31,
Carrying amounts, net 2015 2014 2013
Cost
Balance as of
January 1,
2016
Additions Disposals
Currency
translation
effect

Balance as of
December 31,
2016

Land $ 1,160,809 1,094,182 1,057,182 $ 1,160,809 40,398 (6,257 ) 15,102 1,210,052
Buildings and construction 5,074,336 4,915,328 4,941,575 10,017,180 423,357 (69,520 ) 232,276 10,603,293
Machinery and equipment 5,078,940 4,605,836 4,799,532 10,706,221 1,408,298 (355,957 ) 277,207 12,035,769
Transportation equipment 534,673 375,405 415,172 1,286,212 433,746 (114,222 ) 5,417 1,611,153
Computer equipment 25,644 11,318 14,355 85,842 29,702 (2,134 ) 5,349 118,759
Furniture 36,442 39,377 41,334 155,995 20,548 (5,183 ) 2,823 174,183
Leasehold improvements 8,742 21,442 26,852 8,742 - (3,556 ) - 5,186
Construction in progress 1,268,545 991,866 356,447 1,268,545 103,695 - 87,442 1,459,682
Total $ 13,188,131 12,054,754 11,652,449 $ 24,689,546 2,459,744 (556,829 ) 625,616 27,218,077
Accumulated depreciation
Balance as of
January 1
2016

Depreciation
for the year
Disposals
Currency
translation
effect

Balance as
of December
31, 2016

Buildings and construction $ (4,942,844 ) (192,810 ) 38,726 (34,795 ) (5,131,723 )
Machinery and equipment (5,627,281 ) (630,370 ) 297,180 (104,273 ) (6,064,744 )
Transportation equipment (751,539 ) (81,783 ) 94,872 (2,803 ) (741,253 )
Computer equipment (60,198 ) (10,544 ) 2,918 (2,469 ) (70,293 )
Furniture (119,553 ) (10,241 ) 2,038 (1,203 ) (128,959 )
Total $ (11,501,415 ) (925,748 ) 435,734 (145,543 ) (12,136,972 )
F-55
December 31,
Carrying amounts, net 2018 2017 2016
Land $ 1,378,090 1,353,643 1,210,052
Buildings and construction 6,406,651 6,116,970 5,471,570
Machinery and equipment 7,676,822 7,315,057 5,971,025
Transportation equipment 962,609 1,001,747 869,900
Computer equipment 38,149 44,487 48,466
Furniture 49,808 50,329 45,224
Leasehold improvements 4,350 2,661 5,186
Construction in progress 1,501,697 1,435,147 1,459,682
Total $ 18,018,176 17,320,041 15,081,105

Additions of property, plant and equipment in ~~2013~~2017 include assets acquired through business combinations of ~~$11,982~~$1,132,871 that consist of buildings for $7,095, machinery and equipment for $461, furniture for $77 and transportation equipment for $4,349. Additions of property, plant and equipment in 2015 include assets acquired through business combinations of $11,581 that consist of machinery and equipment for $126, furniture for $16 and transportation equipment for $11,439.the following:
Land $ 133,347
Buildings and construction 500,608
Machinery and equipment 491,101
Transportation equipment 2,137
Furniture 5,679
Total $ 1,132,871

Depreciation expense during the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 was ~~$769,270, $805,650~~$1,226,917, $1,075,788 and ~~$816,673,~~$925,748, respectively, which ~~were~~was charged to cost of sales and operating expenses.

~~F-51~~
(15) Goodwill

2015 2014 2013
Balances at beginning of the year $ 349,764 344,259 300,848
Business combinations (Note 4) 123,933 - 42,780
Goodwill impairment loss (38,619 ) - -
Foreign currency effects 19,217 5,505 631
Balances at end of year $ 454,295 349,764 344,259

Based on market conditions in which the reporting unit operates, the Company’s estimates of fair value indicated an impairment in Ok Farms – Morris Hatchery, Inc. Georgia, resulting in the recognition of a goodwill impairment loss of $38,619 (2,244 thousand dollars) for the year ended December 31, 2015.
2018 2017 2016
Balances at beginning of the year $ 1,631,094 484,877 454,295
Business combinations (Note 4) - 1,042,163 -
Foreign currency effects 677 104,054 30,582
Balances at end of year $ 1,631,771 1,631,094 484,877

The recoverable amount of the cash-generating unit is determined based on a calculation of its value in use, which uses projections of the estimated cash flows based on financial budgets approved by management for a determined projection period, which are discounted using an annual discount rate.

Projections of the cash flows during the budgeted period are based on sales projections which include increases due to inflation, as well as the projection of expected gross margins and operating margins during the budgeted period. Cash flows that exceed such period are extrapolated using an annual stable growth rate, which is the long-term weighted average growth rate for the market in which the cash-generating unit operates.

F-56
The assumptions and balances of each cash-generating unit are as follows:

2015
2018 2018
Cash-generating unit Final balance
of the year Projection
period
(years) Annual
discount
rate
(%) Annual
growth rate
(%)
Final
balance of
the year

Projection
period
(years)

Annual
discount
rate
(%)

Annual
growth
rate
(%)

Bachoco - Istmo and Peninsula regions $ 212,833 5 9.67 % 2.70 % $ 212,833 5 13.17 % 3.00 %
Campi 88,015 5 9.67 % 2.10 % 88,015 5 13.17 % 3.00 %
Ok Farms - Morris Hatchery, Inc. Arkansas 57,075 5 9.32 % 0.00 % 65,233 5 5.87 % 0.00 %
Ok Farms- Morris Hatchery Inc. Georgia 96,372 5 9.32 % 0.00 %
Ok Farms - Morris Hatchery Inc. Georgia 110,147 5 5.87 % 0.00 %
Ok Foods- Albertville Quality Foods, Inc. 1,155,543 5 5.87 % 0.00 %
$ 454,295 $ 1,631,771
2017
Cash-generating unit
Final
balance of
the year

Projection
period
(years)

Annual
discount
rate
(%)

Annual
growth
rate
(%)

Bachoco - Istmo and Peninsula regions $ 212,833 5 12.52 % 3.00 %
Campi 88,015 5 12.52 % 3.00 %
Ok Farms - Morris Hatchery, Inc. Arkansas 65,200 5 6.14 % 0.00 %
Ok Farms - Morris Hatchery Inc. Georgia 110,091 5 6.14 % 0.00 %
Ok Foods- Albertville Quality Foods, Inc. 1,154,955 5 6.14 % 0.00 %
$ 1,631,094
2016
Cash-generating unit
Final
balance of
the year

Projection
period
(years)

Annual
discount
rate
(%)

Annual
growth
rate
(%)

Bachoco - Istmo and Peninsula regions $ 212,833 5 12.91 % 2.70 %
Campi 88,015 5 12.91 % 2.10 %
Ok Farms - Morris Hatchery, Inc. Arkansas 68,449 5 8.62 % 0.00 %
Ok Farms- Morris Hatchery Inc. Georgia 115,580 5 8.62 % 0.00 %
$ 484,877

~~F-52~~F-57
2014
Cash-generating unit Final balance
of the year Projection
period
(years) Annual
discount
rate
(%) Annual
growth
rate
(%)
Bachoco - Istmo and Peninsula regions $ 212,833 5 9.93 % 2.70 %
Campi 88,015 5 9.93 % 2.10 %
Ok Farms- Morris Hatchery Inc. Arkansas 48,916 5 8.24 % 0.00 %
$ 349,764
2013
Cash-generating unit Final balance
of the year Projection
period
(years) Annual
discount
rate
(%) Annual
growth
rate
(%)
Bachoco - Istmo and Peninsula regions $ 212,833 5 10.33 % 2.70 %
Campi 88,015 5 10.33 % 2.10 %
Ok Farms- Morris Hatchery Inc. Arkansas 43,411 5 8.74 % 0.00 %
$ 344,259

(16) Intangible assets
The balances as of December 31, 2018 and 2017 for $949,355 and $1,040,042 are mainly comprised of trade names and customer relationships derived from the purchase transaction of the Acquired Co. I (note 4). Customer relationships are generally amortized over 15 years based on the pattern of revenue expected to be generated from the use of the asset.
Indefinite life intangible assets are initially recorded at their fair value and are not amortized, but they are reviewed for impairment at least annually or more frequently if impairment indicators arise.
During 2018, the Company decide to discontinue a product line that it was no longer producing and did not have any success in selling the trademarks associated with that line. Accordingly, an impairment charge of $11,756 in trade names was recognized. The remaining intangible assets were evaluated internally and an independent external impairment study was performed to determine the fair value. This study resulted in impairment charges of $3,535 in the trade names in addition to the amounts listed above. The total impairment charges recognized during 2018 for intangible assets were $21,430.
Intangible assets consist of the following:
2018 2017 2016
Amortizable intangible assets
Customer relationships $ 1,020,500 1,028,747 -
Accumulated amortization (95,911 ) (34,876 ) -
Impairment loss (6,139 ) - -
Total net amortizable intangible assets 918,450 993,871 -
Trade names not subject to amortization 46,196 46,171 -
Impairment loss (15,291 ) - -
Total intangible assets $ 949,355 1,040,042 -
(17) Other non-current assets

Other non-current assets consist of the following:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Advances for purchase of property, plant and equipment $ 277,277 167,935 133,214 $ 326,676 331,691 552,417
Investments in life insurance (note 3 (k)) 52,572 41,187 35,754
Investments in life insurance (note 3 (l)) 66,177 64,629 65,509
Security deposits 13,574 17,341 15,956 20,745 16,796 15,132
Other long-term receivable 128,169 104,495 87,927 171,222 162,337 161,690
Intangible assets in process 73,125 54,512 37,955 26,898 11,506 12,200
Other 49,189 42,558 39,793 54,024 56,047 58,506
Total non-current assets $ 593,906 428,028 350,599 $ 665,742 643,006 865,454

~~F-53~~F-58

~~(17)~~(18) Financial debt

a) Short-term financial debt is as follows:

December 31,
2015 2014 2013
Loan of USD$30,000 thousand dollars denominated in USD, maturing in June 2014, at LIBOR (3) rate plus 1.20 percentage points. $ - - 392,700
Loan of USD$85,000 thousand dollars denominated in USD, maturing in June 2016, at LIBOR (3) rate plus 0.48 percentage points 1,462,850 - -
Denominated in pesos, maturing in January, October, December 2014, at TIIE (1) FIRA (2) less 0.70 percentage points. - - 148,500
Loan in the amount of USD$15,000 thousand dollars, maturing in January 2015, at LIBOR (3) rate plus 1.04 percentage points. - 221,250 -
Denominated in pesos, maturing in January 2015, at TIIE (1) FIRA (2) less 0.70 percentage points. - 193,000 -
Denominated in pesos, maturing in January 2015, at TIIE (1) FIRA (2) rate plus 1.25 percentage points - 250,000 -
Denominated in pesos, maturing in January 2016, at TIIE (1) FIRA (2) rate plus 0.85 percentage points 160,000 - -
Total short-term debt $ 1,622,850 664,250 541,200
December 31,
2018 2017 2016
Loan in the amount of 70,000 thousand dollars, maturing in June 2017, at LIBOR (3) rate plus 0.44 percentage points. $ - 1,376,200 -
Loan in the amount of 70,000 thousand dollars, maturing in July 2017, at LIBOR (3) rate plus 0.425 percentage points. - 1,376,200 -
Denominated in pesos, maturing in January 2018, at TIIE (1) FIRA (2) rate plus 0.60 percentage points - 100,000 -
Loan in the amount of 70,000 thousand dollars, maturing in June 2017, at LIBOR (3) rate plus 0.50 percentage points. - - 1,444,800
Denominated in pesos, maturing in January 2019, at TIIE (1) FIRA (2) rate plus 1.25 percentage points. 100,306 - -
Loan in the amount of 140,000 thousand dollars, maturing in February 2019, at fixed rate 2.29 percentage points. 2,757,460 - -
Denominated in pesos, maturing in February 2019, at TIIE (1) rate plus 1.25 percentage points. 300,028 - -
Denominated in pesos, maturing in March 2019, at TIIE (1) rate plus 1.25 percentage points. 250,023 - -
Denominated in pesos, maturing in May 2019, at TIIE (1) rate plus 0.40 percentage points. 20,003 - -
Total short-term debt $ 3,427,820 2,852,400 1,444,800

~~Annual~~The annual weighted average interest rate of short-term loans denominated in pesos for ~~2015, 2015~~2018 and ~~2013~~2017 was ~~3.13%~~9.14% and 8.06%, ~~2.78%~~respectively, and ~~3.72%, respectively. Average~~during 2016, no short-term debt denominated in pesos was contracted. The average interest rate for ~~short-term~~ loans ~~existing~~outstanding as of December 31, ~~2015, 2014~~2018 and ~~2013,~~2017 was ~~4.17%, 3.68%~~9.15% and ~~3.10%~~8.06%, respectively.

~~Annual~~The annual weighted average interest rate of short-term loans denominated in dollars for the years ~~2015, 2014~~2018, 2017 and ~~2013~~2016 was ~~1.05%~~2.26%, ~~1.10%~~1.22% and ~~1.49%~~1.04%, respectively. ~~Average~~The average interest rate for loans ~~existing~~outstanding as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 was ~~0.83%~~2.29%, ~~1.24%~~1.57% and ~~1.37%~~1.05%, respectively.

(1) TIIE (for its acronym in Spanish) = Interbank Equilibrium Rate
(2) FIRA (for its acronym in Spanish) = Agriculture Trust Funds
(3) LIBOR= London Interbank Offered Rate

~~F-54~~F-59

b) Long-term debt consists of the following:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Denominated in pesos, maturing in 2015 and 2016, at TIIE (1) plus 1.00 percentage points. $ 2,489 10,209 22,329
Denominated in pesos, maturing in January 2014, at TIIE (1) FIRA (2) rates less 0.55 percentage points. - - 4,273
Denominated in pesos, maturing in September 2017, at TIIE (1) rates plus 0.63 percentage points. 100,000 102,000 - $ - - 98,000
Denominated in pesos, maturing in August 2015, at TIIE (1) FIRA (2) rates less 0.90 percentage points. 124,000 -
Denominated in pesos, maturing in April 2017, at TIIE (1) rates plus 0.25 percentage points. 49,993 -
Denominated in pesos, maturing in 2018, at TIIE (1) FIRA (2) rates less 0.25 percentage points. 603,871 - -
Denominated in pesos, maturing in 2017 and 2018, at TIIE (1) FIRA (2) rates less 0.25 percentage points. - 553,651 603,739
Denominated in pesos, maturing in 2018, at TIIE (1) FIRA (2) rates less 0.60 percentage points. 297,800 - - - 289,000 293,400
Denominated in pesos, maturing in 2019, at TIIE (1) FIRA (2) rates plus 0.25 percentage points. 53,980 53,973 53,978
Denominated in pesos, maturing in 2019, at TIIE (1) FIRA (2) rates plus 0.50 percentage points. - - 54,000
Denominated in pesos, maturing in 2023, at TIIE (1) FIRA (2) plus 0 percentage points. 55,007 - -
Debt securities (subsection (d)) - - 1,500,000
Debt securities (subsection (d)) 1,500,000 1,500,000 1,500,000 1,500,793 1,500,000 -
Total 2,504,160 1,786,202 1,526,602 1,609,780 2,396,624 2,603,137
Less current maturities (9,033 ) (133,732 ) (16,392 ) (64,973 ) (842,651 ) (1,652,725 )
Long-term debt, excluding current maturities $ 2,495,127 1,652,470 1,510,210 $ 1,544,807 1,553,973 950,412

~~Long-term~~The annual weighted average interest rate on long-term debt for ~~2015, 2014~~2018, 2017 and ~~2013~~2016 was ~~3.07%~~8.42%, ~~3.72%~~7.72% and ~~4.93%~~4.04%, respectively. ~~Average~~The average rate for ~~current~~outstanding loans as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 was ~~3.56%~~8.46%, ~~3.68%~~7.48% and ~~4.40%~~5.63%, respectively.

(1) TIIE (for its acronym in Spanish) = Interbank Equilibrium Rate
(2) FIRA (for its acronym in Spanish) = Trust Established in Relation to Agriculture

During ~~2015~~2018 and 2017 the Company did not make early payments on its long-term debt, ~~in 2014 and 2013,~~during 2017 the Company made early payments on its long-term debt of ~~$201,300 and $11,833 respectively, without payment of fees for~~$53,900, the Company did not make early ~~termination.~~payments on its long-term debt.

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013, total~~2016, unused lines of credit ~~totaled $6,156,229, $5,282,600~~amounted to $5,723,011, $7,031,813 and ~~$5,418,099,~~$5,551,263, respectively. In ~~both~~all such years, the Company did not pay any fee for undrawn balances.

c) Maturities of long-term debt, excluding current maturities, as of December 31, ~~2015,~~2017, are as follows:

Year Amount
2017 $ 1,652,500
2018 842,627
$ 2,495,127
Year Amount
2019 $ 1,807
2020 12,000
2021 12,000
2022 1,512,000
2023 7,000
1,544,807

Interest expense on total loans during the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, amounted to ~~$93,964, $87,624~~$185,913, $188,597 and ~~$97,025,~~$129,769, respectively.

~~F-55~~F-60

Certain bank loans establish certain affirmative and negative covenants, as well as the requirement to maintain certain financial ratios, which have been met as of December 31, ~~2015,~~2018, among which are:

a) Provide financial information at the request ~~from~~of the bank.

b) Not to contract liabilities with financial cost or grant loans that may affect payment obligations.

c) Notify the bank regarding the existence of legal issues that could substantially affect the financial situation of the Company.

d) Not to perform substantial changes to the nature of the business, or the administrative structure.

e) Not to merge, consolidate, separate, settle or dissolve except for those mergers in which the Company or surety are the merging company and do not ~~constitutes~~constitute a change onin control of the entities of the group to which the Company or the surety belong at the date of the agreement.

d) Issuance of debt securities

On August 28, 2012, the Company was authorized to issue debt securities in the total amount of the program of $5,000,000 or the equivalent in UDIS (1), on a revolving basis, for a term of five years from the date of the authorization letter from the Mexican Banking and Securities Commission. The initial issuance dated August 31, 2012 was offor $1,500,000 pesos with ticker symbol: "BACHOCO 12" for a term of 1,820 days, equivalent to 65 periods of 28 days, approximately five years, with 15,000,000 debt securities and a par value of $100 pesos per certificate.
On August 25, 2017, the debt securities issued with ticker "BACHOCO 12" expired, and were paid according to the contractual terms of the issuance.
On August 25, 2017, a second issuance of debt securities was carried out for a total amount of $1,500,000 with ticker symbol: “BACHOCO 17” for a term of 1,820 days, equivalent to 65 periods of 28 days, approximately five years, with 15,000,000 debt securities and a par value of $100 pesos per certificate.

From the date of issuance, and while the debt securities have not been paid, they will accrue annual gross interest on their ~~par value,~~face amount, at an annual interest rate, which is calculated by adding ~~0.60~~0.31 percentage points at the 28-day TIIE, and in the event the 28-day TIIE ~~were~~is not published, at the nearest term published by the Bank of Mexico. The ~~common representative of the stock-holders will calculate the~~debt issue that expired in 2017 accrued a gross interest ~~two business days prior~~on its nominal value, at an annual interest rate, which was calculated by adding 0.60 percentage points to the beginning of each interest period of 28 days, according to the payment schedule, computed from the date of issuance or at the beginning of each interest period and governed precisely during that interest period.28-day TIIE.

The amortization of the debt securities ~~will be paid~~is carried out at the expiration of the contractual ~~term.~~term of each issuance. Direct costs arising from debt issuance or contract are deferred and amortized as part of financial expense using the effective interest rate through the expiration of each transaction. Such costs include commissions and professional fees.

(1) UDIS = Investment units

F-61
Derived from the issuance of the Debt securities, the Company is subject to certain requirements, affirmative and negative covenants, with which they comply as of December 31, ~~2015.~~2017.
~~F-56~~

~~(18)~~e) Reconciliation of liabilities arising from financing activities
December 31,
2018 2017
Balance as of January 1 $ 5,249,024 4,047,937
Changes that represent cash flows
Proceeds from borrowings 3,370,400 5,378,915
Principal payment on loans (3,588,067 ) (4,246,100 )
Changes that do not represent cash flows
Others 6,243 68,272
Balance as of December 31 $ 5,037,600 5,249,024
(19) Trade accounts and other accounts payable

December 31, December 31,
2015 2014 2013 2018 2017 2016
Trade payables $ 3,800,407 3,257,291 2,764,766 $ 3,996,014 3,684,220 3,646,410
Sundry creditors and expenses payable 288,582 273,255 303,483 597,330 479,223 448,679
Provisions 202,303 215,003 133,103 103,494 103,474 105,434
Statutory employee profit sharing 31,730 19,939 29,140 68,432 42,940 42,134
Retained payroll taxes and other local taxes 197,806 167,205 129,122 259,828 241,739 214,558
Direct employee benefits 72,898 33,894 5,504 160,431 171,784 76,721
Interest payable 3,306 1,920 3,275 10,728 16,904 11,160
Government grant - 1,947 -
Others 71 61 7,208 90 82 81
$ 4,597,103 3,970,515 3,375,601 $ 5,196,347 4,740,366 4,545,177

Note 8 discloses the Company’s exposure to the exchange and liquidity risks related to trade accounts payable and other accounts payable.

OnIn December 2009, the Mexican Federal Competition Agency (CFC, for its Spanish acronym) released a news report in which it announced an investigation on the Mexican poultry industry in reference to possible monopolistic practices. As a result of this investigation, CFC imposed several fines to the Company for supposedly having certain practices where the price of chicken was manipulated. Although the Company and its legal advisors ~~consider~~considered that the interposed legal processes ~~are~~were well sustained and attended, a provision that iswas considered adequate ~~has been~~was recognized. During 2016 these judgments were concluded in favor of the Company's interests, for which reason the provision recorded for this purpose was canceled.

Additionally, the National Water Commission (CNA, for its Spanish acronym) imposed credits and fines to the Company for supposed infractions made by the Company in water administration for exploitation of livestock. The Company has recognized a provision for the amount that it expects to be probable to pay.

F-62
Bachoco USA, LLC. is involved in claims with the United States of America Department of Labor and the Unites State Immigration and Customs Enforcement, and various other matters related to its business, including workers’ payment claims and environmental issues. As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the Company has recorded provisions of ~~$51,630 (3,000~~$39,340 (2,000 thousand dollars), ~~$22,125 (1,500~~$39,320 (2,000 thousand dollars) and ~~$19,635 (1,500~~$41,280 (2,000 thousand dollars) for ~~the amount that it expects to be~~estimated probable ~~to pay.~~payments.

~~F-57~~
~~(19)~~(20) Transactions and balances with related parties

(a) Transactions with management

Compensation

The following table shows the compensation paid to the directors and executives for services provided in their respective positions for the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2014:~~2016:

December 31,
2015 2014 2013
Compensation $ 42,295 39,538 52,805
December 31,
2018 2017 2016
Compensation $ 61,189 56,201 53,531

(b) Transactions with other related parties

Below is a summary of the Company’s transactions and balances with other related parties, which are comprised of affiliates that are under common control:

i. ~~Revenues~~
i.Revenues

Transaction value Balance as of
December 31, December 31,
2015 2014 2013 2015 2014 2013
Sales of products to:
Vimifos, S.A. de C.V. $ 32,827 32,202 42,719 $ 5,447 109 3,665
Maquinaria Agrícola, S.A. de C.V. - - - - 19 -
Autos y Accesorios, S.A. de C.V. 419 1,302 - - - -
Alfonso R. Bours, S.A. de C.V. - - 13 - 1,801 13
Taxis Aereos del Noroeste, S.A. de C.V. 135 19 18 189,075 - -
$ 33,381 33,523 42,750 $ 194,522 1,929 3,678
Transaction value Balance as of
December 31, December 31,
2018 2017 2016 2018 2017 2016
Sales of products to:
Vimifos, S.A. de C.V. $ 8,812 47,344 41,715 $ 99 326 4,261
Frescopack, S.A. de C.V. - 10 66 - - 32
Taxis Aéreos del Noroeste, S.A. de C.V. 28 1,013 1,927 - - 144,562
$ 8,840 48,367 43,708 $ 99 326 148,855

The balance of Taxis ~~Aereos~~Aéreos del Noroeste, S.A. de C.V., as of December 31, ~~2015~~2016 for ~~$189,075~~$144,562 corresponds to a loan that bears interest and is due in the short term.

~~F-58~~F-63

~~ii.~~ ~~Expenses and balances payable to related parties~~
ii.Expenses and balances payable to related parties

Transaction value Balance as of Transaction value Balance as of
December 31, December 31, December 31, December 31,
2015 2014 2013 2015 2014 2013 2018 2017 2016 2018 2017 2016
Purchases of food, raw materials and packing supplies
Vimifos, S.A. de C.V. $ 477,920 359,258 361,497 $ 91,982 76,482 21,813 $ 557,490 392,226 554,282 $ 103,371 12,830 126,396
Frescopack, S.A. de C.V. 181,802 153,891 147,192 37,827 23,267 18,151 193,396 179,357 137,752 28,951 29,537 35,931
Pulmex 2000, S.A. de C.V. 42,263 21,283 13,766 16,181 6,858 - 37,794 26,700 41,122 5,227 8,138 7,528
Qualyplast, S.A. de C.V. 237 925 753 158 97 242 230 95 193 41 - 64
Purchases of vehicles, tires and spare parts
Maquinaria Agrícola, S.A. de C.V. $ 41,947 55,166 57,100 4,074 4,315 8,415 $ - 793 34,446 64 64 1,898
Llantas y Accesorios, S.A. de C.V. 29,269 31,423 29,421 2,732 4,688 4,458 38,581 35,225 29,457 3,374 4,207 3,449
Autos y Accesorios, S.A. de C.V. 29,510 21,397 22,525 3,364 6,454 253 18,776 24,645 40,575 4,712 57 1,985
Autos y Tractores de Culiacán, S.A. de C.V. 54,853 19,140 21,967 3,100 1,971 610 17,671 14,037 39,504 1,486 79 5,298
Camiones y Tractocamiones de Sonora, S.A. de C.V. 69,779 33,227 23,649 5,815 2,384 5 19,490 85,448 153,802 216 172 6,137
Agencia MX-5, S.A de C.V. 1 2 2,294 - 2 1 47 15 25 7 4 2
Alfonso R. Bours, S.A. de C.V. 526 452 590 93 63 147 307 428 394 40 95 94
Cajeme Motors S.A. de C.V. 6,632 - - 2 - - 30 29 7,974 5 1 710
Airplane leasing expenses
Taxis Aereos del Noroeste, S.A. de C.V. $ 7,874 1,964 7,375 300 452 -
Taxis Aéreos del Noroeste, S.A. de C.V. $ 8,368 7,854 7,739 20 68 474
$ 165,628 127,033 54,095 $ 147,514 55,252 189,966

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, balances payable to related parties correspond to current accounts denominated in pesos that bear no interest and are payable inon a short-term basis.

~~As of December 31st 2014 the Company has a prepayment for the purchase of property, plant and equipment for $12,500 paid to Autos y Tractores de Culiacan S.A. de C.V., which is included on note 12.~~
~~(20)~~(21) Income Tax

Under the tax legislation in Mexico and the United States of America in effect through December 31, ~~2015,~~2018, entities are subject to pay Income Tax (ISR, by its Spanish acronym). During 2013, certain reforms to the Mexican tax law were enacted that entered into effect beginning January 1, 2014, which include, among others, the cancelation of scheduled reductions in the income tax rate and the elimination of the business flat tax (“IETU” for its Spanish acronym).
~~F-59~~

a) ISR

The Company and each of its subsidiaries file separate income tax returns (including its foreign subsidiary, which files income tax returns in the United States of America, based on its fiscal year ending in April of every year). For the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the applicable rate under the general tax regime in Mexico is 30%; this rate will be applicable in future years as well. The applicable rate during 2017 and 2016 for the Company’s US subsidiary is ~~38.79% (includes~~35% (plus state and federal taxes) and as of January 1, 2018 the rate is 21% (plus state and federal taxes).

~~Until~~As of December 31, ~~2015~~2018, 2017 and ~~2014~~2016, BSACV, the Company’s primary operating subsidiary is subject to the agriculture, cattle-raising, forestry and fishing regime of the ISR law, which is applicable to entities exclusively dedicated to such activities. The ~~new~~ ISR Law establishes that such activities are exclusive when no more than 10% of an entity’s total revenues are generated from something other than those activities or from industrialized products. Up to December 31, 2013, BSACV was subject to the simplified tax regime applicable to entities with agriculture, cattle-raising, forestry and fishing operations. Under such simplified regime, BSCAV calculated income taxes on a cash basis measure of net profit and a rate of 21%.
F-64

b) Tax charged to profit and loss

For the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the income tax (benefit) expense included in profit and loss is as follows:

December 31
2015 2014 2013
Operation in Mexico:
Current ISR $ 1,291,536 1,211,006 1,227,189
Current IETU - - 228
Deferred ISR 146,595 230,255 (527,449 )
Deferred ISR from tax rate change - - 674,810
1,438,131 1,441,261 1,374,778
Foreign operation:
Current ISR 196,954 165,034 -
Deferred ISR 45,475 49,815 (24,339 )
Total ISR expense $ 1,680,560 1,656,110 1,350,439
~~F-60~~
December 31
2018 2017 2016
Operation in Mexico:
Current ISR $ 1,242,553 1,512,721 1,215,171
Deferred ISR (33,718 ) (157,646 ) 264,086
1,208,835 1,355,075 1,479,257
Foreign operation:
Current ISR 4,294 198,813 45,358
Deferred ISR (58,151 ) (469,444 ) 118,818
Total ISR expense $ 1,154,978 1,084,444 1,643,433

Total income tax expense

The income tax expense attributable to income before income taxes ~~was different~~differed from the amount computed by applying the ISR rate of 30% in ~~2015~~2018, 2017 and ~~2014, and 21% in 2013 as a result of~~2016 due to the items listed below:

December 31, December 31,
2015 2014 2013 2018 2017 2016
ISR Percentage ISR Percentage ISR Percentage ISR Percentage ISR Percentage ISR Percentage

Expected expense $ 1,650,025 30 % $ 1,676,633 30 % $ 712,371 21 % $ 1,354,965 30 % $ 1,811,667 30 % $ 1,678,379 30 %
Increase (decrease) resulting from: -
Net effects of inflation (87,322 ) (2 )% (112,388 ) (2 )% (64,401 ) (2 )% (276,758 ) (6 )% (329,516 ) (5 )% (144,611 ) (2 )%
(Non-taxable income) Non-deductible expenses (4,882 ) (0 )% (7,101 ) (0 )% (9,213 ) (0 )% 16,648 0 % 88,330 1 % 14,550 0 %
Effect of rate of the general regime - - - - 33,384 1 %
Effect of rate difference of foreign subsidiary 57,103 1 % 26,712 1 % (10,196 ) 0 % (16,572 ) (0 )% 702 0 % 21,979 0 %
Effect from non-deductible employee benefits 74,173 1 % 73,038 1 % 13,872 0 % 90,820 2 % 83,953 1 % 71,868 1 %
Effect from change on tax rate in the new ISR Law - - - - 674,810 20 %
Effect of change of income tax rate in the United States of America - - (443,104 ) (7 )% - -
Cancellation of loss by acquisition - - (129,036 ) (2 )% - -
Other (8,537 ) 0 % (784 ) (0 )% (188 ) 0 % (14,126 ) (0 )% 1,448 0 % 1,268 0 %
Income tax expense $ 1,680,560 30 % $ 1,656,110 30 % $ 1,350,439 39 % $ 1,154,978 26 % $ 1,084,444 18 % $ 1,643,433 29 %
F-65

c) Deferred income tax

The Company and each one of its subsidiaries determine the deferred taxes that are reflected at a consolidated level on stand-alone basis. BSACV, the main operating subsidiary of the Company, is subject to tax payment under the ~~agricultural~~agriculture, cattle-raising, forestry and fishing regime, in which the tax base for ISR is determined on collected revenues minus paid deductions.
~~F-61~~

The tax effects of temporary differences, tax losses and tax credits that give rise to significant portions of deferred tax assets and liabilities as atof December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 are detailed below:

December 31, December 31,
2015 2014 2013 2018 2017 2016
Deferred tax assets
Accounts payable $ 764 5,019 2,218 $ 27,738 16,404 831
Employee benefits 32,572 14,071 17,121 53,398 45,519 42,221
PTU payable 9,516 6,376 8,595 20,536 12,917 12,700
Accounts receivable 404 6,376 8,595
Tax loss carryforwards 10,236 21,383 3,858 - - 2,760
Property, plant and equipment 490 6,376 8,595
Prepaid expenses - 245 3,148
Other provisions 239 2,284 - 2,205 7,025 1,754
Total deferred tax assets 54,221 49,378 34,940 103,877 81,865 60,266

Deferred tax liabilities
Property, plant and equipment 51 59 82
Prepaid expenses 94 - - - 1,136 52
Total deferred tax liabilities 94 - - 51 1,195 134
Net deferred tax assets 54,127 49,378 34,940 103,826 80,670 60,132

December 31, December 31,
2015 2014 2013 2018 2017 2016
Deferred tax assets
Accounts payable $ 1,093,145 1,120,240 1,350,373 $ 1,483,275 1,170,771 964,676
Employee benefits - 7,445 -
PTU payable - 423 262
Tax loss carryforwards 1,081 4,073 86,779 59,883 22,013 676
Goodwill 22,326 - - 3,879 7,562 19,846
Other provisions 6,606 13,817 - 76,025 54,020 24,049
Derivative financial instruments 859 - -
Total deferred tax assets 1,124,017 1,145,998 1,437,414 1,623,062 1,254,366 1,009,247

Deferred tax liabilities
Inventories 1,400,793 1,188,259 1,235,848 1,639,156 1,601,498 1,612,890
Employee benefits - - 786
Accounts receivable 382,585 411,312 316,374 366,825 421,191 438,146
Property, plant and equipment 2,356,509 2,365,619 2,407,779 2,503,172 2,428,358 2,566,002
Prepaid expenses 353,166 257,133 22,615 647,480 392,800 302,958
Intangible assets 233,749 253,898 -
Derivative financial instruments - 5,872 190,143 - - 1,826
Total deferred tax liabilities 4,493,053 4,228,195 4,173,545 5,390,382 5,097,745 4,921,822
Net deferred tax liability $ 3,369,036 3,082,197 2,736,131 $ 3,767,320 3,843,379 3,912,575

~~F-62~~F-66

d) ~~Unrecognized deferred tax assets~~
~~Deferred tax assets that have not been recognized in the Company’s consolidated financial statements are as follows:~~
December 31,
2015 2014 2013
Recoverable tax on assets 1,774 2,586 3,324
Total $ 1,774 2,586 3,324
e) Unrecognized deferred tax liabilities

Deferred taxes related to investments in subsidiaries have not been recognized as the Company is able to control the moment of the reversal of the temporary difference, and the reversal is not expected to take place in the foreseeable future. Deferred income tax on investments in subsidiaries not recognized as of December 31, 2018, 2017 and 2016 amounts to $2,049,327, $2,587,954 and $1,962,545, respectively. The Company's policy has been to distribute accounting profits when the respective taxes have been paid and in the case of foreign profits, such tax may be duly credited in Mexico.

f)e) Movement in temporary differences during the fiscal year

January 1,
2015 Recognized
in profit
and loss Acquired or/
Recognized
directly in
equity December
31, 2015
January 1,
2018

Recognized
in profit
and loss

Acquired or/
Recognized
directly in
equity

December
31, 2018

Accounts payable $ (1,125,260 ) 35,489 (4,138 ) (1,093,909 ) $ (1,187,175 ) (323,784 ) (54 ) (1,511,013 )
Employee benefits (21,515 ) (3,274 ) (7,783 ) (32,572 ) (45,519 ) (1,317 ) (6,562 ) (53,398 )
PTU payable (6,800 ) (2,716 ) - (9,516 ) (12,917 ) (7,619 ) - (20,536 )
Tax loss carryforwards (25,455 ) 14,389 (251 ) (11,317 ) (22,013 ) (37,004 ) (866 ) (59,883 )
Other provisions (16,101 ) 9,379 (124 ) (6,846 ) (61,045 ) (17,240 ) 55 (78,230 )
Goodwill - (20,588 ) (1,738 ) (22,326 ) (7,562 ) 3,604 79 (3,879 )
Intangible assets 253,898 (19,825 ) (324 ) 233,749
Inventories 1,188,259 187,852 24,682 1,400,793 1,601,498 37,319 339 1,639,156
Accounts receivable 410,870 (28,688 ) - 382,182 421,191 (54,366 ) - 366,825
Property, plant and equipment 2,365,620 (88,973 ) 79,372 2,356,019 2,428,417 74,819 (13 ) 2,503,223
Prepaid expenses 257,329 95,931 - 353,260 393,936 253,544 - 647,480
Derivative financial instruments 5,872 (6,731 ) - (859 )
Net deferred tax liability $ 3,032,819 192,070 90,020 3,314,909 $ 3,762,709 (91,869 ) (7,346 ) 3,663,494

January 1,
2017

Recognized
in profit
and loss

Acquired or/
Recognized
directly in
equity

December
31, 2017

Accounts payable $ (965,507 ) (223,640 ) 1,972 (1,187,175 )
Employee benefits (42,221 ) 1,915 (5,213 ) (45,519 )
PTU payable (12,700 ) (217 ) - (12,917 )
Tax loss carryforwards (3,436 ) (18,577 ) - (22,013 )
Other provisions (25,803 ) (35,577 ) 335 (61,045 )
Goodwill (19,846 ) 10,895 1,389 (7,562 )
Intangible assets - - 253,898 253,898
Inventories 1,612,890 (82,523 ) 71,131 1,601,498
Accounts receivable 438,146 (16,955 ) - 421,191
Property, plant and equipment 2,566,084 (351,511 ) 213,844 2,428,417
Prepaid expenses 303,010 90,926 - 393,936
Derivative financial instruments 1,826 (1,826 ) - -
Net deferred tax liability $ 3,852,443 (627,090 ) 537,356 3,762,709

~~F-63~~F-67

January 1,
2014 Recognized
in profit
and loss Acquired or/
Recognized
directly in
equity December
31, 2014
January 1,
2016

Recognized
in profit
and loss

Acquired or/
Recognized
directly in
equity

December
31, 2016

Accounts payable $ (1,352,591 ) 229,510 (2,179 ) (1,125,260 ) $ (1,093,909 ) 134,658 (6,256 ) (965,507 )
Employee benefits (5,110 ) (8,661 ) (7,744 ) (21,515 ) (32,572 ) (14,115 ) 4,466 (42,221 )
PTU payable (8,857 ) 2,057 - (6,800 ) (9,516 ) (3,184 ) - (12,700 )
Tax loss carryforwards (90,637 ) 66,899 (1,717 ) (25,455 ) (11,317 ) 7,881 - (3,436 )
Other provisions - (16,249 ) 148 (16,101 ) (6,846 ) (18,200 ) (757 ) (25,803 )
Goodwill (22,326 ) 6,272 (3,792 ) (19,846 )
Inventories 1,235,848 (59,061 ) 11,472 1,188,259 1,400,793 167,441 44,656 1,612,890
Accounts receivable 316,374 94,496 - 410,870 382,182 55,964 - 438,146
Property, plant and equipment 2,389,609 (75,567 ) 51,578 2,365,620 2,356,019 93,752 116,313 2,566,084
Prepaid expenses 216,555 40,774 - 257,329 353,260 (50,250 ) - 303,010
Derivative financial instruments - 5,872 - 5,872 (859 ) 2,685 - 1,826
Net deferred tax liability $ 2,701,191 280,070 51,558 3,032,819 $ 3,314,909 382,904 154,630 3,852,443

January 1,
2013 Recognized
in profit
and loss Acquired or/
Recognized
directly in
equity December
31, 2013
Accounts payable $ (754,765 ) (597,826 ) - (1,352,591 )
Employee benefits (40,401 ) 60,696 (25,405 ) (5,110 )
PTU payable (9,254 ) 397 - (8,857 )
Effects on derivative financial instruments (858 ) 858 - -
Tax loss carryforwards (10,043 ) (80,594 ) - (90,637 )
Inventories 1,284,699 (48,851 ) - 1,235,848
Accounts receivable 221,133 95,241 - 316,374
Property, plant and equipment 1,871,086 512,889 5,634 2,389,609
Prepaid expenses 36,343 180,212 - 216,555
Net deferred tax liability $ 2,597,940 123,022 (19,771 ) 2,701,191
~~F-64~~
g)f) Tax on assets and tax loss carryforwards

As atof December 31, ~~2015,~~2018, tax loss carryforwards ~~and recoverable tax on assets (IMPAC, for its Spanish acronym) expires~~expire as shown below. Amounts are indexed for inflation as permitted by Mexican income tax law:

Amount as of December 31, 2015
Year Tax loss
carryforwards Recoverable
IMPAC Year of expiration /
maturity
2006 $ - 1,774 2016
2013 - - 2023
2014 36,370 - 2024
2015 2,101 - 2025
$ 38,471 1,774
Amount as of December 31, 2018
Year
Tax loss
carryforwards

Year of expiration /
maturity

2017 $ 58,710 2027
2018 196,197 2028
$ 254,907

h) ~~Impacts on the tax reform for changes beginning 2014~~
As discussed above, the Mexican Congress approved a new ISR Law that was enacted in 2013 but will go into effect beginning January 1, 2014. Due to this tax reform, the Company recognized in its consolidated financial statements a charge to 2013 results in the amount of $674,810 of deferred income tax mainly arising from the measurement of deferred assets and liabilities determined based on the new agriculture, cattle-raising, forestry and fishing regime, for the change in the general income tax rate to 30% and for the limitation to the deductible amount of certain employee benefit expenses provisioned.
The main income tax impact to the Company is related to the increase from 21% to 30% in the tax rate of BSACV, the Company’s primary operating subsidiary (beginning 2014 the tax rate is 21% on annual taxable income up to 10 million pesos, and for taxable income in excess of that amount, the tax rate is 30%), and to the deductible limitation of 53% of wage expenses of employee benefits that are tax exempt income for workers.
~~(21)~~(22) Employee benefits

a) Employee benefits in Mexico

Defined contribution plans

The Company has a defined contribution plan which receives contributions from both the employees and the Company. Employees can make contributions from 1% to 5% of their wage and from 2016, the Company is obligated to make contributions as follows: i) ~~from the first to the fifth year~~20% of employee contributions for employees with 1 - 4.99 years of service, ii) 40% of 1%employee contributions for employees with 5 – 9.99 years of service, and iii) 100% matching contributions for employees with 10 or more years of service or when the employee reaches 40 years of age, regardless of the ~~wage, ii) from the sixth year~~years of ~~services of the employee the contribution of the Company is increased by 1% until it reaches 5%, and iii) for the subsequent years the Company contribution will be the same as the employee’s.~~ service.
When an employee retires from the Company he/she has the right to receive the contribution he/she has made to the plan, and i) if the employee retires between the first and the ~~fourth~~4.99 year of services (4 year of services during 2015), he/she does not have the right to receive the contribution made by the Company, ii) if he/she retires on the fifth year of services he/she has the right to receive 50% of the contributions made by the Company and, for each additional service year, the employee has the right to receive an additional 10% of the contributions made by the Company. The expenses for paid contributions to defined contribution plans, other than those mandated by Mexican law, were ~~$1,481, $7,973~~$0, $0 and ~~$11,708,~~$1,597, in ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively.

~~F-65~~F-68

The Company makes payments equivalent to 2% of the integrated wage of its workers to the defined contribution plan for the retirement saving fund system established by Mexican law. The expense for this concept was ~~$46,670, $42,742~~$62,028, $56,063 and ~~$40,023,~~$50,047, in ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively.

Defined benefits plan

The Company has a defined benefit pension plan covering non-unionized personnel in Mexico. The benefits are based on the age, years of service and the employee’s payment. The retirement age is 65 years, with a minimum of 10 years of services, and there is an option for an anticipated retirement option, in certain circumstances, at 55 years of age. The Company’s policy to fund the pension plan is to make contributions up to the maximum amount that can be deducted for ISR.

Additionally, according to the Mexican Federal Labor Law, the Company is obligated to pay a seniority premium as a retirement benefit if an employee retires and has atof least 15 years of services, which consists of a sole payment of 12 days for each worked year based on the last wage, limited to the two minimal wages established by law.

The Company recognizes ~~as a benefit plan, a~~ constructive ~~obligation~~obligations from past practices. Such constructive ~~obligation is~~obligations are associated with service time the employee has worked onfor the Company. The payment of this benefit is disbursed in a single installment at the time the employee voluntarily stops working for the Company. As of 2018 this obligation is only recognized for directors and executives.

The plans in Mexico expose the Company to actuarial risks such ~~as:~~as interest rate risk, longevity risk and salary risk:

Interest risk A decrease in the interest rate for the governmental bonds will increase the plan’s liability.

Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary risk The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

~~F-66~~
The projected net liability presented on the consolidated statements of financial position is as follows:

December 31,
2015 2014 2013
Present value of unfunded obligations $ 160,218 90,899 48,245
Present value of funded obligations 286,881 314,804 312,170
Total present value of benefit obligations (PBO) 447,099 405,703 360,415
Plan assets at fair value (286,881 ) (314,804 ) (312,170 )
Projected liability, net $ 160,218 90,899 48,245
F-69

i. ~~Composition and return of plan assets~~
December 31,
2018 2017 2016
Present value of unfunded obligations $ 302,818 252,965 195,019
Present value of funded obligations 197,254 259,245 267,535
Total present value of benefit obligations (PBO) 500,072 512,210 462,554
Plan assets at fair value (197,254 ) (259,245 ) (267,535 )
Projected liability, net $ 302,818 252,965 195,019

Actual return of the plan’s
assets Composition of the plan’s
assets
2015 2014 2013 2015 2014 2013
Fixed income securities 1.25 % 5.99 % 3.83 % 60 % 63 % 68 %
Variable income securities 4.87 % 7.69 % 9.81 % 40 % 37 % 32 %
Total 100 % 100 % 100 %
i.Composition and return of plan assets

~~ii.~~ ~~Movements in the present value of defined benefit obligations (PBO)~~
Actual return of the plan assets Composition of the plan assets
2018 2017 2016 2018 2017 2016
Fixed income securities 5.10 % 7.18 % 7.16 % 67 % 61 % 64 %
Variable income securities (10.95 )% 12.78 % 10.07 % 33 % 39 % 36 %
Total 100 % 100 % 100 %

2015 2014 2013
PBO as at January 1 $ 405,703 360,415 385,178
Benefits paid by the plan (25,244 ) (31,091 ) (19,213 )
Service cost 26,836 24,438 26,680
Interest cost 31,603 29,768 28,138
Actuarial (gains) losses recognized in other comprehensive income 8,201 22,173 (60,368 )
PBO as at December 31 $ 447,099 405,703 360,415
ii.Movements in the present value of defined benefit obligations (PBO)

~~iii.~~ ~~Movements in the fair value of plan assets~~
2018 2017 2016
PBO as of January 1 $ 462,986 462,554 447,099
Benefits paid by the plan (38,393 ) (32,940 ) (26,031 )
Service cost 28,084 28,968 29,604
Interest cost 41,410 40,170 34,857
Actuarial (gains) losses recognized in other comprehensive income 494 13,458 (24,827 )
Past service cost – plan amendments 5,491 - 1,852
PBO as of December 31 $ 500,072 512,210 462,554

2015 2014 2013
Plan assets at fair value as at January 1 $ 314,804 312,170 263,250
Plan contributions - - 36,626
Transfer of assets to fund defined contribution benefit plan (24,187 ) - -
Benefits paid by the plan (10,894 ) (20,011 ) (8,482 )
Expected return on plan assets 24,901 26,283 20,087
Actuarial losses (gains) in other comprehensive income (17,743 ) (3,638 ) 689
Fair value of plan assets as at December 31 $ 286,881 314,804 312,170
iii.Movements in the fair value of plan assets
2018 2017 2016
Plan assets at fair value as of January 1 $ 259,245 267,535 286,881
Transfer of assets to fund defined contribution benefit plan (38,327 ) (10,664 ) (25,600 )
Benefits paid by the plan (16,772 ) (17,049 ) (9,457 )
Expected return on plan assets 23,244 23,342 25,650
Actuarial losses in other comprehensive income (30,136 ) (3,919 ) (9,939 )
Fair value of plan assets as of December 31 $ 197,254 259,245 267,535

~~F-67~~F-70

~~iv.~~ ~~Expense recognized in profit and loss~~
iv.Expense recognized in profit and loss

2015 2014 2013 2018 2017 2016
Current service cost $ 26,836 24,438 26,680 $ 28,084 28,968 29,604
Interest cost, net 6,702 3,485 8,051 18,166 16,828 9,207
$ 33,538 27,923 34,731 $ 46,250 45,796 38,811

v. ~~Actuarial gains and losses~~
v.Actuarial gains and (losses)

2015 2014 2013
Amount accumulated as at January, 1 $ (112,184 ) (86,372 ) (25,315 )
Recognized during the year (25,944 ) (25,812 ) (61,057 )
Amount accumulated as at December, 31 $ (138,128 ) (112,184 ) (86,372 )
2018 2017 2016
Amount accumulated as of January, 1 $ (140,617 ) (123,240 ) (138,128 )
Recognized during the year (30,630 ) (17,377 ) 14,888
Amount accumulated as of December, 31 $ (171,247 ) (140,617 ) (123,240 )

~~vi.~~ ~~Actuarial assumptions~~
vi.Actuarial assumptions

Primary actuarial assumptions at the consolidated financial statements date (expressed as weighted averages) are as follows.

2015 2014 2013 2018 2017 2016
Discount rate as at December, 31 8.00 % 8.00 % 8.50 %
Discount rate as of December, 31 10.50 % 9.25 % 9.00 %
Rate for future salary increases 4.50 % 4.50 % 4.50 % 4.50 % 4.50 % 4.50 %
Social security wage increase rate 3.50 % 3.50 % 4.25 % 3.50 % 3.50 % 3.50 %

The assumptions related to mortality are based on statistics and experiences over the Mexican population. The average expected life of an individual that retires at 65 years of age is 17.13 years for men and 10.92 years for women (Experience Chart of Demographic Mortality for Active EMSSA 1997).

~~vii.~~ ~~Historical information~~
vii.Historical information

December 31, December 31,
2015 2014 2013 2018 2017 2016
Present value of defined benefit obligation $ 447,099 405,703 360,415 $ 500,072 512,210 462,554
Plan assets at fair value (286,881 ) (314,804 ) (312,170 ) (197,254 ) (259,245 ) (267,535 )
Plan deficit $ 160,218 90,899 48,245 $ 302,818 252,965 195,019
Experience adjustments arising from plan liabilities $ 8,201 22,173 (60,368 ) $ 494 13,458 (24,827 )
Experience adjustments arising from plan assets $ (17,743 ) (3,638 ) (689 ) $ (30,136 ) (3,919 ) (9,939 )
viii.Sensitivity analysis of the defined benefits obligations as of December 31, 2018, 2017 and 2016
2018 Pension
plan Seniority
premium Constructive
obligation Total
PBO
Discount rate 10.50% (358,635 ) (119,973 ) (21,464 ) (500,072 )
Rate increase (+ 1%) (313,585 ) (109,872 ) (20,258 ) (443,715 )
Rate decrease (- 1%) (364,699 ) (121,572 ) (21,649 ) (507,920 )

~~F-68~~F-71

~~viii.~~ ~~Sensitivity analysis of the defined benefits obligations as of December 31, 2015, 2014 and 2013~~
2017
Pension
plan

Seniority
premium

Constructive
obligation
Total PBO
Discount rate 9.25% (343,485 ) (99,735 ) (68,990 ) (512,210 )
Rate increase (+ 1%) (314,460 ) (94,308 ) (65,113 ) (473,881 )
Rate decrease (- 1%) (377,114 ) (105,810 ) (73,338 ) (556,262 )

2015 Pension
plan Seniority
premium Constructive
obligation Total
PBO
Discount rate 8.00% (293,443 ) (93,037 ) (60,619 ) (447,099 )
2016
Pension
plan

Seniority
premium

Constructive
obligation

Total
PBO

Discount rate 9.00% (308,885 ) (93,877 ) (59,792 ) (462,554 )
Rate increase (+ 1%) (248,925 ) (87,540 ) (56,784 ) (393,249 ) (280,316 ) (88,657 ) (56,237 ) (425,210 )
Rate decrease (- 1%) (338,238 ) (99,240 ) (64,961 ) (502,439 ) (312,017 ) (99,733 ) (63,796 ) (475,546 )

2014 Pension
plan Seniority
premium Constructive
obligation Total
PBO
Discount rate 8.00% (266,298 ) (84,908 ) (54,497 ) (405,703 )
Rate increase (+ 1%) (216,605 ) (79,874 ) (51,033 ) (347,512 )
Rate decrease (- 1%) (334,923 ) (90,594 ) (58,423 ) (483,940 )
ix.Expected cash flows

2013 Pension
plan Seniority
premium Constructive
obligation Total
PBO
Discount rate 8.00% (225,650 ) (86,880 ) (47,885 ) (360,415 )
Rate increase (+ 1%) (186,196 ) (79,508 ) (44,936 ) (310,640 )
Rate decrease (- 1%) (277,487 ) (92,373 ) (51,223 ) (421,083 )
Total
2019-2029 $ 482,775

~~ix.~~ ~~Expected cash flows~~
x.Future contributions to the defined benefits plan
Total
2016-2026 $ 404,558
x. ~~Future contributions to the defined benefits plan~~

The Company does not expect to make contributions to the defined benefit plans in the following financial year.

b) Foreign employee benefits

Defined contribution plans

Bachoco USA, LLC. (foreign subsidiary) has a defined contribution retirement 401(k) plan, covering all employees who meet certain eligibility requirements. The Company contributes to the plan at the rate of 50% of employee’s contributions up to a maximum of 2% of the individual employee’s contribution. The cumulative contribution expense for this plan was ~~$8,014, $6,597~~$12,999, $11,497 and ~~$5,681~~$10,909 for the year ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively.
~~F-69~~

Equity-based compensation

Bachoco USA, LLC. has a deferred payment agreement with certain key employees. Amounts payable under this plan are vested after 10 years from the date of the agreement. The benefit value of each unit is equal to the increase in the initial book value from the date of the agreement to the conclusion of the vesting period. Under the agreement, ~~38,000, 38,000 and 38,500~~26,000 units were outstanding as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013, respectively,~~2016, all of which were fully vested. The total liability under this plan totaled ~~$4,195, $3,516~~$20,922, $3,378 and ~~$3,503~~$3,337 as atof December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively. No expense was recognized for this plan for the year ended December 31, ~~2015, 2014,~~2018, 2017 and ~~2013.~~2016.
F-72

c) PTU

Industrias Bachoco, S.A.B de C.V. and BSACV has no employees. Each of the subsidiaries of the Company that has employees in Mexico is required under Mexican laws to pay employees, in addition to their payment and benefits, statutory employee profit sharing in an aggregate amount equal to 10% of each subsidiary’s taxable income. The accrued liability as of December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 is shown in note ~~18,~~19, Trade payable and other accounts payable.

~~(22)~~(23) Costs and expenses by nature

2015 2014 2013
Cost of sales $ 36,847,508 32,494,974 33,176,599
General, selling and administrative expenses 4,323,374 3,781,326 3,291,006
Total costs and expenses $ 41,170,882 36,276,300 36,467,605

Inventory consumption $ 28,877,468 24,873,999 26,041,102
Wages and salaries 5,127,750 4,451,457 3,028,830
Freight 3,394,780 2,948,439 2,495,673
Maintenance 1,166,326 1,077,940 1,028,511
Other utility expenses 1,020,610 1,193,449 1,119,094
Depreciation 769,270 805,650 816,673
Leases 359,749 311,585 286,022
Other 454,929 613,781 1,651,700
Total $ 41,170,882 36,276,300 36,467,605

During 2013, the Company informed the National Service of Sanity, Safety and Food Quality (SENASICA, by its Spanish acronym) the presence of a H7N3 avian flu outbreak in some of the Company’s farms located in the state of Guanajuato and in the limits of the Jalisco and Guanajuato states. The financial effects derived from the outbreak were a charge to cost of sales in 2013 for $350,821 related to the destruction of birds and eggs inventory.
~~F-70~~
2018 2017 2016
Cost of sales $ 51,422,376 47,502,959 42,635,071
General, selling and administrative expenses 6,024,406 5,423,379 4,847,858
Total costs and expenses $ 57,446,782 52,926,338 47,482,929

Inventory consumption $ 40,115,184 37,567,550 34,018,493
Wages and salaries 7,348,795 6,605,584 5,971,382
Freight 4,809,678 4,176,508 3,712,349
Maintenance 1,719,907 1,471,392 1,292,763
Other utility expenses 1,591,920 1,334,339 1,005,570
Depreciation 1,226,917 1,075,788 925,748
Leases 453,162 416,437 403,116
Other 181,219 278,740 153,508
Total $ 57,446,782 52,926,338 47,482,929

~~(23)~~(24) Operating leases

Company as lessee

The Company has entered into operating leases for certain offices, production facilities, and automotive and computer equipment. Some leases contain renewal options. These agreements have terms between one and five years.

2015 2014 2013
Lease expenses $ 359,749 311,585 328,656
2018 2017 2016
Lease expenses $ 453,162 416,437 403,116

The amount of annual rentals payable, arising from lease agreements for the following five years is as follows:

2016 $ 91,812
2017 78,481
2018 46,835
2019 57,234
2020 34,417
2019 $ 117,496
2020 103,347
2021 97,548
2022 70,956
2023 50,751
F-73

~~(24)~~(25) Stockholders’ equity and reserves

a) Capital risk management

An adequate capital risk management allows ongoing business continuity and the maximization of the return towards the Company’s investors, which is why management has taken actions that ensure the Company maintains an adequate balance of the funding sources that build its capital structure.

Within its activities in risk management, the Company ensures that the ratio between financial debt and EBITDA of the last 12 months doesn’t exceed 2.75 times and that the interest coverage ratio is at least 3 to 1.

During ~~2015, 2014~~2018, 2017 and ~~2013~~2016 these ratios were below the thresholds established by the Company’s Risk Committee.

b) Common stock and premiums

As of December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the Company’s capital stock is represented by 600,000,000 Series “B” registered shares with a par value of $1 peso per share.

The Robinson Bours family owned 496,500,000 shares through two family trusts: the placement trust and the control trust, which collectively represented 82.75% of the Company’s total shares.

On December 9, 2013, the members of the placement trust decided to sell 57,000,000 shares that represent 9.5% of the total shares of the Company. The transaction was conducted through the BMV at market price.

~~F-71~~
After the sale of the shares, the Company’s capital stock was as follows:

Before the Transaction After the Transaction
Shares⁽¹⁾ Position Shares⁽¹⁾ Position
Familiar Trusts 496,500,000 82.75 % 439,500,000 73.25 %
-   Control Trust 312,000,000 52.00 % 312,000,000 52.00 %
-   Placement Trust 184,500,000 30.75 % 127,500,000 21.25 %
Floating Position⁽²⁾ 103,500,000 17.25 % 160,500,000 26.75 %

(1) All Series B shares with voting power.
(2) Operating at the BMV and the NYSE.

Based on the information provided to the Company, as of December 31, ~~2015, there are no~~2018, stockholders with 1% or more interest in the Company, in addition to the family ~~trusts.~~trusts, are as follows:
Shares Position
Renaissance Technologies LLC 7,559,952 1.26 %
F-74

c) Other comprehensive income items

i. ~~Foreign currency translation reserve~~
i.Foreign currency translation reserve

This concept is related to the translation of the Company’s U.S. operations from their functional currency (U.S. dollar) to the reporting currency, the Mexican peso.

~~ii.~~ ~~Actuarial remeasurements~~
ii.Actuarial remeasurements

Actuarial remeasurements are recognized as other components of comprehensive income and are related to variations in actuarial assumptions that generate actuarial gains or losses as well as adjust the actual yields from plan assets from the net interest cost calculated over the net defined benefits liability balance. Actuarial remeasurements are presented net of income tax within other comprehensive income in the consolidated statement of changes in stockholders’ ~~equity.~~equity, the amount of these actuarial remeasurements net of taxes as of December 31, 2018, 2017 and 2016 amounts to $120,378, $98,938 and $86,774, which includes a deferred tax effect of $50,867, $41,679 and $36,466, respectively.

d) Reserve for repurchase of shares

In 1998, the Company approved a stock repurchase plan in conformity with the Mexican Securities Trading Act and created a reserve for that purpose of $180,000 charged to retained earnings in such year.

On April ~~22, 2015,~~25, 2018, pursuant to a resolution at the General Ordinary Stockholders’ Meeting, an amount of ~~$778,321~~$568,500 was approved to be used in the reserve for acquisition own shares.

The following table shows the movements of the reserve for acquisition of shares during the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013:~~2016:

2015 2014 2013 2018 2017 2016
Balance as at January 1 - - -
Balance as of January 1 20,000 - 10,000
(+) Total shares purchased 677,013 149,475 100,000 86,928 20,000 100,157
(-) Total shares sold (667,013 ) (149,475 ) (100,000 ) (20,000 ) - (110,157 )
Balance as at December 31 10,000 - -
Balance as of December 31 86,928 20,000 -

The net amount of repurchase and treasury share sale transactions gave rise to additional paid in capital of ~~$14,376, $1,504~~$85, loss of ($1,800), and ~~$127~~gave rise to additional paid in capital of $368 during the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively, recognized within equity.

As atof December 31, ~~2015,~~2018, the Company has ~~10,000~~86,928 treasury shares.
~~F-72~~

e) Dividends

During the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, the Company has declared and paid the following dividends:

On April ~~22, 2015,~~25, 2018, the Company declared a payment of dividends in cash at nominal value of ~~$900,000~~$852,000 or ~~$1.50~~$1.42 pesos per outstanding share. The payment was made in two equal installments, on May 11 and July 6, 2018.
F-75
On April 26, 2017, the Company declared a payment of dividends in cash at nominal value of $780,000 or $1.30 pesos per outstanding share. The payment was made in two equal installments, on May 11 and July 6, 2017.
On April 27, 2016, the Company declared a payment of dividends in cash at nominal value of $780,000 or $1.30 pesos per outstanding share,from which there is a reduction of ~~$838~~$40 for the dividend corresponding to repurchased shares. The payment was made in two equal installments, inon May 12 and July ~~2015.~~7, 2016.
~~In 2014, the Company didn’t declare dividends or pay any dividends.~~
~~In 2013, the Company declared dividends as follows:~~
· On April 24th, the Company declared a payment of dividends in cash at nominal value of $350,400 or $0.584 pesos per outstanding share. The payment was made in two even installments of $0.292 pesos per outstanding share, in May and July, 2013.
· ~~On December 6th, the Company declared a second payment of dividends in cash in the amount at nominal value of $600,000 or $1.00 peso per outstanding share, which was paid on December 23, 2013.~~

Dividends that the Company pays to stockholders are subject to ISR solely insofar as such dividends exceed the balance in its net tax income account (CUFIN) consisting of income in which ISR is already paid by the Company. The ISR paid on dividends corresponds to a tax payable by legal entities and not by individuals. However, as a result of changes to the income tax law described in note 20(a), beginning on January 1, 2014, a new withholding tax of 10% for resident individuals in Mexico and for all residents in foreign countries who receive dividends from entities was established. Such tax is considered a withholding tax by the entity that pays the dividends. This tax will be applicable only to the income generated from period 2014. Thus, the Company must update its CUFIN from income generated up to December 31, 2013 and must calculate a new CUFIN with the income generated from January 1, 2014.

The Company obtains most of its revenue and net income from BSACV. For fiscal years ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, net income of BSACV, accounted for ~~67%~~63%, ~~72%~~63% and ~~71%~~65%, respectively, of consolidated net income. Dividends for which BSACV pays ISR will be credited to the Company’s CUFIN account, and accordingly, any future liabilities arising from ISR will be incurred when such amounts are distributed as dividends to the stockholders.

~~F-73~~
f) ~~Capital stock~~Tax balances of stockholders’ equity

CUFIN Balance as
2013 Balance
from 2014 Total
IBSA individual $ 8,175,229 2,441,137 10,616,366
IBSA Consolidado 8,871,825 5,399,598 14,271,423
CUFIN
Balance as
2013

Balance
from 2014
Total
IBSA individual $ 7,221,441 7,732,775 14,954,216
IBSA Consolidated 7,595,797 15,170,021 22,765,818

The restated amount as of December 31, ~~2015~~2018 on tax bases of the contributions made by stockholders (CUCA), totaling ~~$2,568,809,~~$2,971,796, may be refunded to them tax-free, to the extent that such amount is the same or higher than equity.

~~(25)~~(26) Earnings per share

The basic and diluted earnings per share for the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013~~2016 are ~~$6.36, $6.55~~$5.58, $8.25 and ~~$3.40,~~$6.58, respectively. The calculation of earnings per share was based on income attributable to ordinary stockholders of ~~$3,812,840, $3,926,926~~$3,349,967, $4,948,242 and ~~$2,038,422~~$3,946,634 for the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively.

The average weighted number of common outstanding in ~~2015, 2014~~2018, 2017 and ~~2013~~2016 was ~~599,631,383, 599,955,240~~599,980,734, 599,997,696 and ~~599,992,952~~599,979,844 shares, respectively.

The Company has no ordinary shares with potential dilutive effects.

F-76
~~(26)~~(27) Commitments

· Bachoco USA, LLC has self-insurance programs for health care costs and workers’ payments. The subsidiary is liable for health care claims up to ~~$6,024~~$6,885 (350 thousand dollars) each year per plan participant and workers’ payments claims up to ~~$17,210~~$19,670 (1,000 thousand dollars) per event. Self-insurance costs are recorded based on the aggregate of the liability for reported claims and an estimated liability for claims incurred but not reported. The provision for this concept is recorded in the accompanying consolidated statement of financial position within current liabilities amounting to ~~$69,718 (4,051~~$74,766 (3,801 thousand dollars), ~~$50,342 (3,413~~$98,221 (4,996 thousand dollars) and ~~$48,472 (3,703~~$75,873 (3,676 thousand dollars) as atof December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively. Likewise, the consolidated statement of comprehensive income includes expenses relating to self-insurance plans of ~~$108,360 (6,828~~$139,783, (7,269 thousand dollars), ~~$101,293 (7,616~~$221,644, (11,721 thousand dollars) and ~~$85,006 (6,494~~$120,729 (6,463 thousand dollars) for the years ended December 31, ~~2015, 2014~~2018, 2017 and ~~2013,~~2016, respectively. The Company is required to maintain letters of credit on behalf of the subsidiary of ~~$58,514, $50,150~~$57,043, (2,900 thousand dollars) during 2018, $57,014, (2,900 thousand dollars) during 2017 and ~~$44,506~~$70,176 and $58,514 (3,400 thousand dollars) as atof December 31, ~~2015, 2014 and 2013, respectively,~~2016, to secure self-insured workers' payments.

· The Company has entered into grain supply agreements with third parties as part of the regular course of its operations.

· The Company has entered into certain contracts with suppliers under which advanced payments are rendered in order to assure the supply of materials and services.

~~F-74~~
~~(27)~~(28) Contingencies

a) Insurance

The Company has established a risk management program under a best practices methodology that assures the main risks of the business with the objective of reducing losses due to relevant claims. At the end of 2016 the Company set up a captive reinsurance company to complement its risk management strategy. Notwithstanding the foregoing, since all the exposures are not contracted full coverage insurance for its facilities, interruption of activities or corporate civil liability in respect of property and environmental damage resulting from accidents in the Company’s property or that relate to Company operations. Until appropriate insurance coverage is obtained,covered, there is a risk that the loss or destruction of certain assets may have a significant adverse effect on the Company’s operations and financial situation.

b) Lawsuits

The Company is involved in a number of lawsuits and claims arising from the regular course of business. In the opinion of the Company’s management, they are not expected to have significant effects on the Company’s financial position, operating results and future consolidated statements of cash flows.

c) Tax contingencies

In accordance with tax laws, Mexican authorities are empowered to review transactions carried out during the five years prior to the most recent ISR return filed. For the operations in the United States of America, the authorities of that country are empowered to review transactions carried out during the three years prior to the due date of the most recent annual tax return. ~~Although~~The Company has not identified factors that may indicate the ~~Company is under review by the Mexican tax authorities for the fiscal year~~existence of ~~2009, nothing has come to its attention as~~ a ~~result of those reviews that would indicate that a contingency exists.~~contingency.
F-77

~~(28)~~(29) Financial income and costs

2015 2014 2013
Interest income $ 482,442 337,769 298,141
Income from interest in accounts receivable 7,492 9,595 16,104
Foreign exchange gain, net 95,447 19,863 28,085
Effects of valuation of derivative financial instruments 8,464 - 2,455
Financial income 593,845 367,227 344,785

Effects of valuation of derivative financial instruments - (2,229 ) -
Interest expense and financial expenses on financial debt (93,964 ) (87,624 ) (97,025 )
Commissions and other financial expenses (53,328 ) (30,466 ) (129,341 )
Financial costs (147,292 ) (120,319 ) (226,366 )
Financial income, net $ 446,553 246,908 118,419
~~F-75~~
2018 2017 2016
Interest income $ 1,072,991 848,148 637,977
Income from interest in accounts receivable 4,516 8,961 8,357
Foreign exchange gain, net 39,323 230,532 297,463
Effects of valuation of derivative financial instruments 23,919 - 25,377
Financial income 1,140,749 1,087,641 969,174

Effects of valuation of derivative financial instruments - (84,094 ) -
Interest expense and financial expenses on financial debt (185,913 ) (188,597 ) (129,769 )
Commissions and other financial expenses (146,255 ) (67,400 ) (42,385 )
Financial costs (332,168 ) (340,091 ) (172,154 )
Financial income, net $ 808,581 747,550 797,020

~~(29)~~(30) Other income (expenses)

2015 2014 2013
Other income
Sale of scrap of biological assets, raw materials, by-products and other $ 636,386 722,653 332,623
Total other income 636,386 722,653 332,623
Other expenses
Cost of disposal of biological assets, raw materials, by-products and other (507,196 ) (623,148 ) (244,054 )
Other (133,830 ) (260,424 ) (57,865 )
Total other expenses (641,026 ) (883,572 ) (301,919 )
Total other income (expenses), net $ (4,640 ) (160,919 ) 30,704
~~(30)~~ ~~Subsequent events~~
~~Merger of subsidiaries -~~Effective January 1, 2016, the Company merged O.K. Industries, Inc., O.K. Farms, Inc., O.K. Foods, Inc. and Ecology Management, Inc. into one surviving entity, O.K. Foods, Inc., which is wholly-owned by Bachoco USA, LLC.
~~Acquisition of assets -~~On February 22, 2016, the Company reached an agreement to acquire a plant that produces fully cooked chicken products for 7.9 thousand US dollars, located in Oklahoma City, OK. The objective of the Company is to use these facilities for value-added chicken products. Additional investments for that purpose will be made.
2018 2017 2016
Other income
Sale of scrap of biological assets, raw materials, by-products and other $ 1,041,677 896,840 1,076,902
Bargain purchase gain of domestic business acquisition (note 4b) - 87,496 -
Total other income 1,041,677 984,336 1,076,902
Other expenses
Cost of disposal of biological assets, raw materials, by-products and other (737,077 ) (731,110 ) (704,152 )
Other (201,940 ) (85,584 ) (112,548 )
Total other expenses (939,017 ) (816,694 ) (816,700 )
Total other income (expenses), net $ 102,660 167,642 260,202

~~F-76~~F-78

Title of each class		Name of each exchange on which registered
American Depositary Shares, each representing twelve Series B Shares.		New York Stock Exchange

			Page

Part I			67
Item 1.		Identity of Directors, Senior Management and Advisers	67
Item 2.		Offer Statistics and Expected Timetable	67
Item 3.		Key Information	67
A.		Selected Financial Data	67
B.		Capitalization and Indebtedness	810
C.		Reasons for the Offer and Use of Proceeds	910
D.		Risk Factors	910
Item 4.		Information of the Company	1315
A.		History and Development of the Company	1315
B.		Business Overview	1517
C.		Organizational Structure	2327
D.		Property, Plant and Equipment	2427
ITEM 4.	A.	Unresolved Staff Comments	2629
Item 5.		Operating and Financial Review and Prospects	2629
A.		Operating Results	2629
B.		Liquidity and Capital Resources	3840
C.		Research and Development, Patents and Licenses, etc.	4346
D.		Trend Information	4346
E.		Off-Balance Sheet Arrangements	4346
F.		Tabular Disclosure of Contractual Obligations	4346
G.		Safe Harbor	4447
Item 6.		Directors, Senior Management and Employees	4447
A.		Directors and Senior Management	4447
B.		Compensation	4954
C.		Board Practices	4954
D.		Employees	5055
E.		Share Ownership	5155
Item 7.		Major Stockholders and Related Party Transactions	5155
A.		Major Shareholders	5156
B.		Related Party Transactions	5257
C.		Interests of Experts and Counsel	5358
Item 8.		Financial Information	5459
A.		Consolidated Statements and Other Financial Information	5459
B.		Significant Changes	5560
Item 9.		The Offer and Listing	5560
A.		Offer and Listing Details	5560
B.		Plan of Distribution	5561
C.		Markets	5561
D.		Selling Shareholders	5661
E.		Dilution	5661
F.		Expenses of the Issue	5661
Item 10.		Additional Information	5661
A.		Share Capital	5661
B.		Memorandum and Articles of Association	5661
C.		Material Contracts	6369
D.		Exchange Controls	6469
E.		Taxation	6469
F.		Dividends and Paying Agents	6975

G.		Statement by Experts	6975
H.		Documents on Display	6975
I.		Subsidiary Information	6975
Item 11.		Quantitative and Qualitative Disclosures about Market Risk	6975
Item 12.		Description of Securities Other Than Equity Securities	7176
A.		Debt Securities	7176
B.		Warrants and Rights	7177
C.		Other Securities	7177
D.		American Depositary Receipts	7177
Part II			7379
Item 13.		Default, Dividend Arrearages and Delinquencies	7379
Item 14.		Material Modifications to the Rights of Security Holders and Use of Proceeds	7379
Item 15.		Controls and Procedures	7379
Item 16.		[Reserved]	7681
ITEM 16.	A.	Audit Committee Financial Expert	7681
ITEM 16.	B.	Code of Ethics	7681
ITEM 16.	C.	Principal Accountant Fees and Services	7681
ITEM 16.	D.	Exemptions from the Listing Standards for Audit Committees	7782
ITEM 16.	E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	7782
ITEM 16.	F.	Changes in Registrant’s Certifying Accountant	7883
ITEM 16.	G.	Corporate Governance	7884
ITEM 16.	H.	Mine Safety Disclosure	8287
Part III			8387
Item 17.		Financial Statements	8387
Item 18.		Financial Statements	8387
Item 19.		Exhibits	8387

In millions as of December 31	2015		2015		2014		2013		2012		2011
In millions as of December 31,													2018		2018		2017		2016		2015		2014
	USD$		$		$		$		$		$		USD		$		$		$		$		$
Total assets		2,350.2		40,446.6		34,843.1		28,889.7		28,040.2		24,717.3		2,687.6		52,865.6		50,557.4		45,090.5		40,446.6		34,843.1
Cash and cash equivalents		816.2		14,046.3		11,036.1		6,716.9		4,179.5		2,625.7		910.1		17,901.8		16,112.3		14,681.2		14,046.3		11,036.1
Total liabilities		736.0		12,667.2		10,481.1		8,738.5		8,951.5		7,337.5		747.3		14,699.9		14,879.5		13,374.3		12,667.2		10,481.1
Short-term debt⁽¹⁾		94.8		1,631.9		798.0		557.6		1,197.1		1,453.0		177.6		3,492.8		3,695.1		3,097.5		1,631.9		798.0
Long-term debt		145.0		2,495.1		1,652.5		1,510.2		1,526.6		384.4		78.5		1,544.8		1,554.0		950.4		2,495.1		1,652.5
Total stockholders’ equity		1,614.1		27,779.4		24,362.1		20,151.1		19,088.7		17,379.8		1,940.3		38,165.7		35,677.9		31,716.2		27,779.4		24,362.1
Capital stock		68.2		1,174.4		1,174.4		1,174.4		1,174.4		1,174.4		59.7		1,174.4		1,174.4		1,174.4		1,174.4		1,174.4

In thousands of tons, as of December 31,	2015		2014		2013		2012		2011		2018		2017		2016		2015		2014
Total sales volume:		2,034.3		1,841.4		1,771.1		1,861.6		1,606.3		2,234.8		2,201.4		2,122.8		2,034.3		1,841.4
Poultry		1,613.4		1,495.0		1,429.2		1,485.2		1,205.9		1,770.1		1,723.8		1,668.6		1,613.4		1,495.0
Others		420.9		346.4		341.9		376.4		400.4		464.7		477.6		454.2		420.9		346.4

In millions, for the year ended December 31,	2015			2015			2014			2013		2012			2011			2018		2018		2017		2016		2015			2014
	USD$			$			$			$		$			$			USD		$		$		$		$			$
Net revenues		2,686.2			46,229.0			41,779.1			39,710.7		39,367.4			27,735.0			3,103.8		61,052.1		58,050.0		52,020.3		46,229.0			41,779.1
Cost of sales		2,141.1			36,847.5			32,495.0			33,176.6		33,318.2			24,797.0			2,614.3		51,422.4		47,503.0		42,635.1		36,847.5			32,495.0
Gross profit		545.1			9,381.5			9,284.1			6,534.1		6,049.2			2,938.0			489.6		9,629.7		10,547.1		9,385.2		9,381.5			9,284.1
General, selling and administrative expenses		251.2			4,323.4			3,781.3			3,291.0		3,396.7			2,974.7			306.3		6,024.4		5,423.4		4,847.9		4,323.4			3,781.3
Other(expenses) income, net		(0.3	)		(4.6	)		(160.9	)		30.7		(23.8	)		1,000.0
Other income (expenses), net																			5.2		102.7		167.6		260.2		(4.6	)		(160.9	)
Operating income		293.6			5,053.5			5,341.9			3,273.8		2,628.8			963.2			188.5		3,708.0		5,291.3		4,797.6		5,053.5			5,341.9
Net finance income		25.9			446.6			246.9			118.4		165.0			177.6			41.1		808.6		747.6		797.0		446.6			246.9
Income tax		97.7			1,680.6			1,656.1			1,350.4		602.0			(38.6	)		58.7		1,155.0		1,084.4		1,643.4		1,680.6			1,656.1
Profit attributable to controlling interest		221.5			3,812.8			3,926.9			2,038.4		2,184.6			1,177.3			170.3		3,350.0		4,948.2		3,946.6		3,812.8			3,926.9
Profit attributable to non-controlling interest		0.4			6.7			5.7			3.4		7.2			2.1			0.6		11.6		6.2		4.5		6.7			5.7
Profit for the year		221.9			3,819.5			3,932.7			2,041.8		2,191.8			1,179.4			170.9		3,361.6		4,954.4		3,951.2		3,819.5			3,932.7
Basic and diluted earnings per share⁽¹⁾		0.37			6.36			6.55			3.40		3.65			1.96			0.28		5.58		8.25		6.58		6.36			6.55
Basic and diluted earnings per ADR⁽²⁾		4.43			76.30			78.66			40.84		43.80			23.52			3.41		67.00		98.97		78.90		76.30			78.66
Dividends per share⁽³⁾		0.087			1.500			0.000			1.584		0.50			0.50			0.072		1.420		1.300		1.300		1.500			0.000
Weighted average shares outstanding⁽⁴⁾		599,631			599,631			599,955			599,993		598,960			599,822			599,981		599,981		599,998		599,980		599,631			599,955

In percentage, for the years ended December 31:	2015			2014			2013			2012			2011
In percentage, for the years ended December 31,																2018			2017			2016			2015			2014
Gross margin		20.3	%		22.2	%		16.5	%		15.4	%		10.6	%		15.8	%		18.2	%		18.0	%		20.3	%		22.2	%
Operating margin		10.9	%		12.8	%		8.2	%		6.7	%		3.5	%		6.1	%		9.1	%		9.2	%		10.9	%		12.8	%
Margin for the year		8.4	%		9.4	%		5.1	%		5.6	%		4.3	%
Net margin for the year																	5.5	%		8.5	%		7.6	%		8.4	%		9.4	%

Year	GDP			Inflation Rate			CETES
2015		2.5	%		2.13	%		2.9	%
2014		2.1	%		4.08	%		2.7	%
2013		1.1	%		3.97	%		3.8	%
2012		3.9	%		3.57	%		3.9	%
2011		3.9	%		3.82	%		4.3	%

In pesos per one dollar	High		Low		Average		Close
	$		$		$		$
2015		17.36		14.56		15.87		17.20	⁽¹⁾
2014		14.79		12.85		13.30		14.75
2013		13.43		11.98		12.76		13.10
2012		14.37		12.63		13.15		12.96
2011		14.25		11.51		12.43		13.95
EXCHANGE RATE FOR THE LAST 6 MONTHS
March 2016		17.94		17.21		17.63		17.21
February 2016		19.19		18.02		18.43		18.07
January 2016		18.59		17.36		18.06		18.21
December 2015		17.36		16.53		17.07		17.20	⁽¹⁾
November 2015		16.85		16.37		16.63		16.60
October 2015		16.89		16.38		16.57		16.53

In millions of pesos, for the year ended December 31,	2015				2014				2013
	$		%		$		%		$		%
Net Revenues		46,229.0		100.0		41,779.1		100.0		39,710.7		100.0
Poultry		41,789.5		90.4		37,994.7		90.9		35,943.9		90.5
Others		4,439.6		9.6		3,784.4		9.1		3,766.8		9.5

In 2015	Industry /volume⁽¹⁾		Bachoco /volume			Bachoco /sales
In 2018									Industry /volume⁽¹⁾	Bachoco /volume			Bachoco /sales
Live		n/a		38	%		30	%	n/a		40	%		32	%
Public market		n/a		13	%		13	%	n/a		11	%		11	%
Rotisserie		n/a		23	%		25	%	n/a		28	%		29	%
Supermarket		n/a		5	%		5	%	n/a		4	%		5	%
Chicken parts		n/a		11	%		13	%	n/a		12	%		14	%
Value-added products		n/a		10	%		14	%	n/a		5	%		9	%

In 2014	Industry /volume⁽²⁾			Bachoco /volume			Bachoco /sales
In 2017										Industry /volume⁽²⁾			Bachoco /volume			Bachoco /sales
Live		38	%		36	%		30	%		37	%		41	%		32	%
Public market		15	%		12	%		12	%		11	%		11	%		11	%
Rotisserie		28	%		26	%		26	%		35	%		24	%		26	%
Supermarket		7	%		4	%		4	%		5	%		5	%		5	%
Chicken parts		8	%		11	%		13	%		9	%		12	%		14	%
Value-added products		4	%		11	%		15	%		3	%		8	%		13	%

In 2013	Industry /volume⁽²⁾			Bachoco /volume			Bachoco /sales
Live		33	%		36	%		29	%
Public market		19	%		13	%		13	%
Rotisserie		26	%		26	%		27	%
Supermarket		12	%		5	%		5	%
Chicken parts		6	%		12	%		15	%
Value-added products		4	%		8	%		11	%

In 2016	Industry /volume⁽²⁾			Bachoco /volume			Bachoco /sales
Live		37	%		39	%		32	%
Public market		11	%		13	%		13	%
Rotisserie		32	%		23	%		24	%
Supermarket		5	%		5	%		5	%
Chicken parts		10	%		11	%		13	%
Value-added products		5	%		9	%		14	%

In 2015	Industry / volume⁽¹⁾		Bachoco /volume			Bachoco /sales
In 2018									Industry / volume⁽¹⁾	Bachoco /volume			Bachoco /sales
Bulk		n/a		32	%		27	%	n/a		27	%		27	%
Packaged		n/a		68	%		73	%	n/a		73	%		73	%
Processed		n/a		0	%		0	%	n/a		0	%		0	%

In 2014	Industry / volume⁽²⁾			Bachoco /volume			Bachoco /sales
In 2017										Industry / volume⁽²⁾			Bachoco /volume			Bachoco /sales
Bulk		82	%		31	%		28	%		79	%		29	%		25	%
Packaged		14	%		69	%		72	%		14	%		71	%		75	%
Processed		4	%		0	%		0	%		7	%		0	%		0	%

Thousands of tons	Production⁽¹⁾		Bachoco’s Production		Estimated Market Share
2015⁽²⁾		11,904		395		3.3	%
2014		11,433		320		2.8	%
2013		11,035		316		2.9	%

Thousands of tons	Production		Bachoco’s Production		Estimated Market Share
2018⁽¹⁾		13,203		429		3.2	%
2017⁽¹⁾		12,616		451		3.6	%
2016⁽²⁾		12,438		429		3.4	%

	As of December 31,
Subsidiary	Country	2015		2014		2013		Country	2018		2017		2016
Aviser, S.A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
Bachoco, S.A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
Bachoco Comercial, S.A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
Campi Alimentos, S.A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
Operadora de Servicios de Personal, S.A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
PEC LAB, S.A. de C.V., and subsidiary	Mexico		64.00		64.00		64.00	Mexico		64.00		64.00		64.00
Secba, S.A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
Sepetec, S. A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
Servicios de Personal Administrativo, S.A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
Induba Pavos, S.A. de C.V.	Mexico		99.99		99.99		99.99	Mexico		99.99		99.99		99.99
Bachoco USA, LLC. and subsidiary	U.S.		100.00		100.00		100.00	U.S.		100.00		100.00		100.00
Wii kit RE LTD.								Bermuda		100.00		100.00		100.00
Proveedora La Perla S.A. de C.V.								Mexico		100.00		100.00

	Number of Facilities:
Facilities	In Mexico		In The U.S.
Chicken breeding farms		124		208
Broiler grow-out farms		513		355
Broiler processing plants		8		2
Hatchery		23		3
Egg production farms		115		0
Swine breeding farms		1		0
Swine grow-out farms		19		0
Feed mills		18		2
Further process plants		4		2

In millions of pesos, for the years ended December 31,	2015			2014			2013		2018		2017		2016
	$			$			$		$		$		$
Net revenues		46,229.0			41,779.1			39,710.7		61,052.1		58,050.0		52,020.3
Cost of sales		36,847.5			32,495.0			33,176.6		51,422.4		47,503.0		42,635.1
Gross profit		9,381.5			9,284.1			6,534.1		9,629.7		10,547.1		9,385.2
General, selling and administrative expenses		4,323.4			3,781.3			3,291.0		6,024.4		5,423.4		4,847.9
Other income (expenses), net		(4.6	)		(160.9	)		30.7		102.7		167.6		260.2
Operating income		5,053.5			5,341.9			3,273.8		3,708.0		5,291.3		4,797.6
Net finance income		446.6			246.9			118.4		808.6		747.6		797.0
Income tax		1,680.6			1,656.1			1,350.4		1,155.0		1,084.4		1,643.4

Profit attributable to controlling interest		3,812.8			3,926.9			2,038.4		3,350.0		4,948.2		3,946.6
Profit attributable to non-controlling interest		6.7			5.7			3.4		11.6		6.2		4.5
Profit for the year		3,819.5			3,932.7			2,041.8		3,361.6		4,954.4		3,951.2
Basic and diluted earnings per share⁽¹⁾		6.36			6.55			3.40		5.58		8.25		6.58
Basic and diluted earnings per ADR⁽²⁾		76.30			78.66			40.84		67.00		98.97		78.90
Dividends per share⁽³⁾		1.500			0.00			1.584		1.420		1.300		1.300
Weighted average shares outstanding⁽⁴⁾		599,631			599,955			599,993		599,981		599,998		599,980

In millions of pesos	2015				2014				Change				2018				2017				Change
	$		%/sales		$		%/sales		$		%		$		% sales		$		% sales		$		% sales
Net Revenues		46,229.0		100.0		41,779.1		100.0		4,450.0		10.7		61,052.1		100.0		58,050.0		100.0		3,002.1		5.2
Total Poultry		41,789.5		90.4		37,994.7		90.9		3,794.8		10.0
Poultry														55,308.1		90.6		52,479.4		90.4		2,828.7		5.4
Others		4,439.6		9.6		3,784.4		9.1		655.2		17.3		5,744.0		9.4		5,570.6		9.6		173.4		3.1

	For the year ended December 31,										Change
	2015 $		% over sales			2014 $		% over sales			$		%
Net Finance Income		446.6		1.0	%		246.9		0.6	%		199.6		80.9
Financial Income		593.8					367.2					226.6		61.7
Financial Expense		147.3					120.3					27.0		22.4

	For the year ended December 31,										Change
	2018 $		% over sales			2017 $		% over sales			$			%
Net finance income		808.6		1.3	%		747.6		1.3	%		61.0			8.2
Financial income		1,140.7					1,087.6					53.1			4.9
Financial expense		332.2					340.1					(7.9	)		(2.3	)

	For the year ended December 31,										For the year ended December 31,
	2015		2014		Change						2018			2017			Change
	$		$		$			%			$			$			$			%
Total income taxes (benefit) expense,		1,680.6		1,656.1		24.5			1.5
Total income taxes (benefit) expense												1,155.0			1,084.4			70.5			6.5
Current income tax		1,488.5		1,376.0		112.5			8.2			1,246.8			1,711.5			(464.7	)		(27.2	)
Deferred income tax		192.1		280.1		(88.0	)		(31.4	)		(91.9	)		(627.1	)		535.2			(85.3	)

	For the years ended December 31,
In millions of pesos	2018		2017		Change
	$		$		$			%
Profit for the year attributable to:		3,361.6		4,954.4		(1,592.9	)		(32.2	)
Controlling interest		3,350.0		4,948.2		(1,598.3	)		(32.3	)
Non-controlling interest		11.6		6.2		5.4			87.4
Basic and diluted earnings per share⁽¹⁾		5.58		8.25		(2.66	)		(32.3	)
Net income per ADR⁽¹⁾		67.00		98.97		31.96			(32.3	)

In millions of pesos	Total		2019		2020		2021		2022		2023
			$		$		$		$		$
Long-term debt⁽¹⁾		1,544.8		1.8		12.0		12.0		1,512.0		7.0
Operating leases⁽²⁾		440.1		117.5		103.3		97.5		71.0		50.8

In millions of pesos		Total				Less than 1 year				From 1 To 3 years				From 3 to 5 years
Interest		$	212.7			$	113.8			$	98.8			$	0

MEMBERS OF THE BOARD	Year of Birth	Member since	Year of Birth	Member since
Chairman of the Board and Proprietary Shareholder Director:
Javier R. Bours Castelo	1953	1982	1953	1982
Proprietary Shareholder Directors:
Jose Gerardo Robinson Bours Castelo	1958	2008	1958	2008
Jesus Enrique Robinson Bours Muñoz	1951	1994	1951	1994
Jesus Rodolfo Robinson Bours Muñoz	1957	2002	1957	2002
Arturo Bours Griffith	1955	1994	1955	1994
Octavio Robinson Bours	1952	1997	1952	1997
Ricardo Aguirre Borboa	1954	1994	1954	1994
Juan Salvador Robinson Bours Martinez	1965	1994	1965	1994
Alternate Directors:
Jose Eduardo Robinson Bours Castelo	1956	1994	1956	1994
Jose Francisco Bours Griffith	1950	1994	1950	1994
Guillermo Pineda Cruz	1948	1994	1948	1994
Gustavo Luders Becerril	1953	2011	1953	2011
Independent Directors:
Avelino Fernandez Salido	1938	2003	1938	2003
Humberto Schwarzbeck Noriega	1954	2003	1954	2003
Guillermo Ochoa Maciel	1955	2015	1955	2015
David Gastelum Cazares			1951	2016
Secretary of the Board:
Eduardo Rojas Crespo	1969	2008	1969	2008

Cousins		inIn law-related
~~Brothers~~Brothers::
● Arturo Bours Griffith
● Octavio Robinson Bours
● Jose Francisco Bours Griffith

Brothers:
● Jesus Enrique Robinson Bours Muñoz		● Guillermo Pineda Cruz
● Jesus Rodolfo Robinson Bours Muñoz

~~Brothers~~Brothers::
● Francisco Javier R. Bours Castelo
● Jose Gerardo Robinson Bours Castelo
● Jose Eduardo Robinson Bours Castelo		● Ricardo Aguirre Borboa
● Juan Salvador Robinson Bours Martinez		● Gustavo Luders Becerril

~~EXECUTIVE OFFICERS~~Name	Position

~~Name~~	~~Position~~	Year of Birth
Rodolfo Ramos Arvizu	Chief Executive Officer	1957
Trent Goins	Chief Executive Officer, U.S. Operations	1978
Ernesto Salmon Castelo	Director of Mexico Operations	1962
Andres Morales Astiazaran	Director of Sales	1968
Daniel Salazar Ferrer	Chief Financial Officer	1964
Ismael Sanchez Moreno	Director of Human Resources	1965
~~Augusto Franco Gomez~~	~~Marketing, Research & Development Director~~	~~1974~~
Alejandro Elias Calles Gutierrez	Director of Purchasing	1956

Name	Position	Member since
Guillermo Ochoa Maciel	President	2015
Humberto Schwarzbeck Noriega	Member	2003
Ricardo Aguirre Borboa	Member	2003
Avelino Fernandez Salido	Member	2003

	Before the transaction					After the transaction
	Shares⁽¹⁾		Position			Shares⁽¹⁾		Position
Family Trusts		496,500,000		82.75	%		439,500,000		73.25	%
Control Trust		312,000,000		52.00	%		312,000,000		52.00	%
Underwriting Trust		184,500,000		30.75	%		127,500,000		21.25	%
Float⁽²⁾		103,500,000		17.25	%		160,500,000		26.75	%

As of December 31:	2015			2014			2013
Total ADRs Outstanding		3,362,229			3,449,735			4,593,364
Percentage Over Total Shares		6.7	%		6.9	%		9.2	%

	Mexican Stock Exchange										The New York Stock Exchange
	Ticker Symbol: Bachoco In nominal pesos per Share										Ticker Symbol: IBA In U.S. Dollar per ADR
Year	High		Low		Average		Close		Volume		High		Low		Average		Close		Volume
2015		89.73		59.23		71.74		70.05		100,682,602		63.49		45.64		54.09		49.23		4,257,623
2014		68.50		44.71		56.62		61.94		91,033,100		61.24		40.37		50.84		49.88		4,937,600
2013		45.25		28.80		38.27		44.16		99,113,100		43.08		27.02		35.92		40.27		4,332,600
2012		30.13		20.59		24.62		30.13		44,787,100		27.97		18.86		22.41		27.92		4,525,400
2011		27.86		20.30		24.71		22.3		31,333,000		28.75		17.40		24.04		19.07		3,338,300