we are ready! · 2018. 3. 14. · we are ready to deliver better results biggest and most impo...

a n n u a l r e p o r t 2 0 1 5

WE ARE READY!

the year 2015 was undoubtedly a significant year for Soriana due to different events of great relevance that would mark the future course of the organization. the transformation process that is being implemented by the Company in order to carry out a profound renovation in our organizational culture, commercial strategy and technological platforms has allowed us to be ready to face, and to be up-to-date in, a highly competitive and dynamic sector, such as the self-service sector. one of the main tangible changes towards the outside was the in-depth renovation of the institutional image and its main store formats, highlighting the new image which is depicted by the heart symbol and an “S”-shaped figure in the center, regarding the name of the Company. It joins the red and green colors, which, together, represent the values of our people and the quality of our products and services. In addition to this and as a milestone in Soriana’s history, during this year we carry out the purchase agreement of Controladora Comercial Mexicana (CCM) in order to acquire 143 stores under different formats and other high-valued assets. With this acquisition, signed in January 2016, we strengthen our long-term strategic position within the country’s commercial sector.

WE ARE READY!

01_WE ARE READY02_SORIANA TODAY03_FINANCIAL HIGHLIGHTS04_PROFILE05_MISSION /VISION /VALUES06_LETTER FROM CEO08_STORE FORMATS10_COMPANY FOOTPRINT12_MORE SATISFACTION / COMMERCIAL STRATEGY14_BETTER EXPERIENCES / HUMAN RESOURCES16_MORE QUALITY / LOGISTICS AND OPERATIONS 18_FINANCIAL STRENGTH/ FINANCIAL20_MORE HEART / CORPORATE RESPONSIBILITY 22_EXECUTIVE OFFICERS_BOARD OF DIRECTORS25_FINANCIAL RESULTS

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BETTER RESULTS

BIGGEST AND MOST IMPORTANTE SELF-SERVICE MEXICAN COMPANY IN THE COUNTRY$109.380 BILLION PESOS IN TOTAL REVENUES IN 2015648 STORES +34 WEARHOUSE CLUBS IN OPERATION+ 3.3 SQ.MTS OF SALES FLOOR AREAPRESENCE ALL 32 STATES AND 263 MUNICIPALITIES6 DIFFERENT STORE FORMATS+ 7,400 COMMERCIAL PREMISES14 DISTRIBUTION CENTERS+ 81,800 COLLABORATORS4 WIND FARMS IN OPERATION$111.9 MILLON PESOS IN SOCIAL INVESTMENT IN 2015

2011 2012 2013 2014 2015

TOTAL REVENUES 96,197 104,611 105,028 101,829 109,380

% OF INCREASE TOTAL STORES 4.9% 8.7% 0.4% -3.0% 7.4%

% OF INCREASE SAME STORES 1.6% 4.5 -2.2 -4.8 5.6

GROSS PROFIT 20,423 21,552 22,229 22,491 23,155

% GROSS MARGIN 21.2% 20.6% 21.2% 22.1% 21.2%

% OF INCREASE4.4 5.5 3.1 1.2 3.0

SG&A EXPENSES 13,258 14,126 14,695 15,431 15,693

% SG&A EXPENSES 13.8% 13.5% 14.0% 15.2% 14.3%

% OF INCREASE7.2 6.6 4.0 5.0 1.7

EBITDA(1)7,165 7,426 7,534 7,060 7,461

% EBITDA(1) 7.4% 7.1% 7.2% 6.9% 6.8%

% OF INCREASE (0.4) 3.6 1.5 (6.3) 5.7

OPERATING INCOME 5,224 5,410 5,558 4,977 5,306

% OPERATING INCOME 5.4% 5.2% 5.3% 4.9% 4.9%

% OF INCREASE 2.4 3.6 2.7 -10.5 6.6

NET EARNINGS3,217 3,557 3,117 3,704 3,726

% NET EARNINGS3.3% 3.4% 3.0% 3.6% 3.4%

% OF INCREASE-1.9 10.6 -12.4 18.8 0.6

CASH NET PROFIT 5,717 6,129 6,323 5,837 6,705

% CASH NET PROFIT 5.9% 5.9% 6.0% 5.7% 6.1%

% OF INCREASE3.3 7.2 3.2 -7.7 14.9

TOTAL ASSETS 73,828 74,377 78,952 80,720 101,845

% OF INCREASE 6.7% 0.7% 6.2% 2.2% 26.2%

TOTAL LIABILITIES 36,593 34,106 35,553 34,319 51,716

% OF INCREASE 6.5% (6.8%) 4.2% -3.5% 50.7%

SHAREHOLDERS’ EQUITY 37,235 40,271 43,400 46,400 50,129

% OF INCREASE6.8 8.2 7.8 6.9 8.0

CUSTOMERS (MILLIONS) 566.0 585.7 578.9 573.5 578.6

% OF INCREASE 3.9% 3.5% -1.2% -0.9% 0.9%

EMPLOYEES (THOUSANDS) 84.9 85.7 80.9 85.3 81.8

% OF INCREASE1.3% 0.9% -5.6% 5.4% -4.1%

NUMBER OF STORES 558 606 659 674 682

% OF INCREASE 9.8% 8.6% 8.7% 2.3% 1.2%

SQ. FT. OF SALES FLOOR (THOUSANDS) 3,034.9 3,135.0 3,220.6 3,285.6 3,309.4

% OF INCREASE4.0% 3.3% 2.7% 2.0% 0.7%

financialhighlights

The figures presenTed in These fisCal years are under inTernaTional finanCial reporTing sTandards (ifrs) (1) eBiTda is defined as operaTing inCoMe Before depreCiaTion and aMorTizaTion

(In millions of Mexican pesos)

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A BETTER SORIANA

Give service every time to a bigger number of communities as a leader, by offering the best shopping experience to our customers and the best workplace to our collaborators, derived from a constant innovation.

vision

Satisfy the needs of products and services of the communities where we are present, promoting in each of us the philosophy and values necessary for guaranteeing a permanent and valuable relationship with our clients, collaborators, suppliers, shareholders, community and environment, obtaining in this manner an adequate profitability and guaranteeing our permanence and growth.

Mission

We are correct and polite.

one team with the same goal: Customer satisfaction.

accomplish results.

We anticipate and innovate.

We are committed to Soriana.

values

We are a Mexican company from the commercial sector founded in the city of torreón, Coahuila in 1968. the shares representative of capital stock are listed in the Mexican Stock exchange since 1987 under the name SorIana B. Following our multi-format strategy, by year-end we operated 682 self-service stores, warehouse clubs and those belonging to the convenience stores known as “Súper City”. We are present in 263 municipalities in the 32 states of the Mexican republic. the total sales area is more than 3.3 million square meters distributed throughout our different store formats. the logistics network is composed by 14 distribution centers strategically located in 8 states. In stores, we annually process more than 578 million transactions with a work force of more than 81,800 collaborators. our headquarter offices are located in Monterrey, nuevo león.

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DEAR SHAREHOLDERS

With this positive outlook, plus the efforts to improve operations, increase profitability at the sales floor and increase our market share, we were able to have one of the best year-end closings that I can remember. For this reason, throughout the year, our focus was on changing our commercial strategy, remodeling and updating the stores, adjusting our pricing policy, as well as investing to increase fresh product quality. all these allowed us to recover the consumer’s preference. thus, we were able to serve more than 578 million visitors in our stores during the year.

In this regard, I am glad to inform you that the Company was able to reach important goals, such as an increase of 7.4% total revenue and 5.6% increase of same store sale indicator. likewise, we had an annual increase of 5.7% in cash operating income, reaching $7.461 billion pesos. the operating income showed a 6.6% increase and 14.9% increase in cash net income, reaching $6.705 billion pesos.

It is worth highlighting that these positive results have been part of the efforts made during recent years through the implementation of our transformation plan and a thorough control of expenses. this transformation plan already delivers

sustainability policy, the use of clean energy was one of the areas of highest priority. We can highlight two additional wind parks located in the states of oaxaca and puebla. likewise, we had the second stage of the installation of photovoltaic panels on the parking lot shades in some of our stores. there is an important advance made in the installation of leD-technology lamps in the parking lots of the stores country-wide.

as you can see, fortunately, the improvement trend in our results throughout the year tells us that time, human resources and economic investments in recent years have been worthwhile and begin to give their first results. So now, with the acquisition of the Comercial Mexicana stores, we are ready to write a new chapter in Soriana’s history. thus, we will double our efforts in order to positively integrate the experience and culture of the two Companies of important commercial tradition in our country and make Soriana a better and larger company.

riCardo MarTín BringasCeo

positive results, such as those obtained by the correct implementation of Sap platform and of the new commercial management and operating processes in all our store formats. In this regard, it is quite encouraging to see the result shown by the formats that have been working longer under this platform, such as Soriana Mercado and Soriana express, which continue delivering double-digit results in the same store sales indicator. this is a very positive sample of what we expect will happen in the short term in the Soriana Híper and Soriana Súper formats, which were the last ones to implement these changes. Improvements were also seen during the year, both in the average sales ticket and the increase of customer traffic in our stores, thus increasing productivity per square meter in our sales floor.

Investments made during the year totaled $1.8 billion pesos, mainly for the opening of 11 units around the country and for updating the image, remodeling and maintaining the stores, as well as other strategic areas in the Company.

In January 2016, as an event of great significance in the history of Soriana, we materialized a new significant step forward in the inorganic growth of the Company, by successfully closing the purchase of Comercial Mexicana. With this, we acquired more than 96% of the Comerci shares via a public offer. We then consolidated our position as the main 100% Mexican self-service store chain.

last, but not least, I share our progress in our Corporate Social responsibility strategy in which we focused a great part of our efforts this year. Soriana Fundación placed Mexican children in the core of its support programs, besides giving support in regard to health, education and food, among other topics. Social investment in 2015 totaled $111.9 million pesos favoring 435 institutions and 483,770 people. at the same time and as part of the actions of our

The year 2015 was undoubtedly a year of great challenges and opportunities. although it had complicated moments, we were able to move forward in an unstable economic environment. domestic private consumption was more dynamic during the year compared to other sectors, partly based on the favorable evolution of the labor market, with low inflation and more trust from the consumer, which was reflected in the increase of our customers’ purchasing power. all this definitely presented an excellent outlook for soriana’s economic activity and for all the commercial sector, reminding us of the close correlation there is between the results of our sector and the country’s economic growth.

5.6% SAME STORE SALE INDICATOR FOR THE YEAR

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WE ARE READY TO OFFER

BETTER SHOPPING OPTIONS CLOSER TO YOUit was created with the objective of giving a better solution for the daily family purchases in a practical way, thanks to the efficient distribution of all its departments. it has a 2,500sq.mts which is optimum to find quality products; personalized customer service in an agile and pleasant environment.

VARIETY AT THE BEST PRICE it is a store aimed to all the community. it operates under the scheme of hypermarkets with a 7,000sq.mts average sales floor area. its main objective is to meet the consumption needs of their customers at a competitive price, where they can find all the products, services and novelties that will give them more variety and better assortment at a fair price in just one visit.

THROUGH OUR 6 DIFFERENT STORE FORMATS

STORES272

IT’S BEST FOR YOUit’s convenience stores program that offer their customers a wide variety of brands and products with the purpose of meeting the needs of last minute purchases. it offers a different option in convenience stores with its own personality and characteristics.

MORE FOR LESS it is our most recent store format, which is focused on meeting a wide range of consumption needs through a 1,500sq. mts average sales floor area, carrying more than 8,200 sKus distributed in an efficient and optimized stock in all categories.

STORES106

STORES130

STORES129

ALWAYS BETTERit is our warehouse club, which offers their clients the best value for their membership, offering different products in institutional and multi-packaging sizes, perfect for businesses or high consumption families. it has a sales floor of approximately 8,000sq.mts.

MORE FOR LESS it is aimed to the population segment that seeks a shopping option focused on low prices on basic commodities. it offers the families a high competitive scheme in prices and promotions on a 4,500sq.mts average sales floor area. it has an efficient and optimized product variety in all its departments.

STORES141

STORES34

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CLOSER TO OUR CUSTOMERSThroughout the year, 11 new stores were opened, representing a total sales floor expansion of 39,337m2. The Company total, at the 2015 closing, is 682 operating units distributed throughout the Mexican Republic; the sales floor coverage of the north zone shows more concentration, accounting for 50% of the total. Cumulatively, the total sales surface area reaches 3,309,407m2.

for 47 years we have been fortunate to be witnesses of soriana’s growth and expansion history. during 2015, we had the opportunity of reaching new cities by opening two stores located in the municipalities of santiago Tianguistenco in the state of Mexico and autlán de navarro in the state of Jalisco. With these openings, the Company is now present in 263 municipalities of the 32 states of the country.

SOUTHEAST

71SOUTH

56METROPOLITAN AREA

104

WEST 67

NORTH-PACIFIC

94NORTH

68NORTHEAST

62MONTERREY

82CENTER78

SOUTH

18%682 STORES

NORTH

45%

CENTER

37%

WITH MORE THAN 680 STORES

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MORE SATISFACTION

60 MILLIONof free produCTs Were redeeMed WiTh apreCio poinTs.

+73,000neW produCTs

in order To CoMpleMenT our

CoMMerCial CaTalog.

10.7 MILLIONfrequenT CusToMers Were idenTified WiTh The reCoMpensas (reWards) Card.

Because of this and to be able to achieve it, we worked in different promotional campaigns around seasons and holidays to convey all the benefits to our customers so they could take advantage of the best formula to save.

We then created the “1,2,3 del Ahorro” (1,2,3 of Savings) campaign, with which customers have the possibility of deciding their personal savings formula of our main vehicle, the loyalty card “Recompensas Soriana” (Soriana Rewards), which has the mission of acknowledging our customers through initiatives to give them purchasing experiences and benefits which are unique in the market. The program includes more promotions, both in Aprecio points, as in exclusive discounts in key products. Thus, our customers are rediscovering the benefits they can obtain by accumulating points, con-verting them into free products or redeeming them by products which are exclusive of the Loyalty Program. Through this, during 2015, we identified more than 10 million regular customers who were able to take home more than 60 million free products.

It is worth mentioning that we are the only self-service chain that awards all the pur-chases made with points, giving our custom-ers the possibility of choosing among more than 10,000 products and redeem them to take them home for free.

This Savings campaign is implemented in all our self-service formats at different times of the year, thus achieving a great positioning and success in results. The savings formula is based on three guiding principles. 1 “Ahor-ra” (Save), where products are offered with discounts directly in the price. 2 “Aprovecha” (Take advantage) of an assortment of items in special sale at one price, 3x$precio espe-cial (3x$special price), combos, additional points, etc. 3 “Canjea” (Redeem), where our customers can redeem to take free

participating products home with the points accumulated in their purchases. Also, there were other campaigns across the formats throughout the year, such as: Mother’s Day, El Buen Fin (the so-called Black Friday) and the holiday season. Other campaigns were implemented that are specific by format, such as “El Pesito Valedor” in the Mercado and Express formats. Lastly, with the cam-paign slogan “Un Club para ti” (A Club for You), City Club aimed their communication at young consumers who looked for products in volume and novelties at club prices.

As a pillar of all these campaigns, we de-veloped a communication platform called “AMAS DEL MUNDO” with which we want to acknowledge our female customers in order to create an emotional connection with them, and at the same time provide them with a commercial offer according to their current purchasing needs.

One of the challenges we faced during the year was to strengthen the value proposal with our Own-brand, one more option to save in thousands of products that have the quality of leader products. As of today, we have more than 2,000 products in our catalog and an assortment of more than 40 brands, of which we can highlight the fol-lowing: Soriana, Valley Foods, Always Save, Quality Day, Pro Selection, Members Choice, among others.

We know that our customers have evolved and are more connected to Internet; thus, we launched Soriana.com, so our customers could interact with us wherever they are and however they want. With this electronic commercial platform we complemented our commercial offer with our physical stores. Also, we launched the Soriticket mobile app, which publishes discount coupons for thousands of products that can be redeemed at the cashiers registers.

CoMMerCialWe have in soriana the commitment to work to please our customers by offering them an excellent service and a wide assortment of quality products. That is the reason why, during 2015, we worked in redesigning and implementing our commercial proposal to offer them a renewed purchasing experience and to differentiate ourselves from the competition.

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This was done to generate a cultural change, focus our actions to please the customer, seek better results and con-solidate the commitment with Soriana. As part of all of this, we implemented the Ambassa-dor Program. Its objective is to monthly recognize our fellow workers, who, through their behavior and actions set an example in the different busi-ness units. We acknowledged more than 17,700 collaborators nationwide

Our collaborators are the most important element for the suc-cess of our Organization. Thus, 62% of the collaborators that form part of the management training program were internal talent. To achieve this, we gave more than 180,000 hours of training where we reinforced different topics: operations, competencies, management and business. In regard to training plans for stores, CEDIS (Distribution Centers) and store-support offices we carried

out and updated more than 960 contents, with which

we were able to reach all the Organization. In to-

tal, we had more than 2.9 million hours in training, that is, a total of 42 hours per collaborator, which

is a 3.48 monthly aver-age per employee.

We continue with the commit-ment for our people to train more through programs that give the opportunity of having a holist growth. Thus, we contin-ued with the academic support program for our collaborators, in which 708 collaborators were favored with scholarships for the Soriana Universidad. More than 190 collaborators, from elementary to graduate level, graduated after completing their studies.

This year, we recognized 7,074 collaborators, from 5 to 45 years seniority, as part of our acknowledgement program of loyalty to the Company. They are recognized every 5 years of working for the Company.

Lastly, our Soriana San Pedro store in the municipality of San Pedro Garza García, NL obtained the “Empresa Famili-armente Responsable” (Respon-sible Family Company) award from the Mexican Secretariat of Labor. This is the first store in the Company that is recognized by the Federal Government because of our work practices that benefit the families of our collaborators, and also because we work in the prevention and combat against work-related violence and sexual harassment.

huMan resourCes in order to reinforce and continue with change in the organizational culture where we are renewing ourselves to strengthen the 5 values of our organization, during 2015, we gave 221,131 hours of training focused in workshops to reinforce such values at different hierarchical levels for all the Company.


MORE EXPERIENCES

2.9 MILLION

17,700 COLLABORATORSnaTionWide Were reCognized By The aMBassador prograM for Their Behavior and good aCTions.

hours of Training given in 2015.

86% of The WorKforCe has ConTaCT WiTh The CusToMer.

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In coordination with Procurement, more than 175 million packages and more than 552,000 tons of products are shipped each year so that our customers find that product they look for in the stores.

Our transportation network has different distribution channels that respond to the specific needs of product type, rotation and target store. It is worth highlighting that our transport fleet is one of the largest in the country, having a vehicle fleet of 434 trucks and 540 trailers, most of them are refrigerated.Likewise, our fleet is recognized by the SEMARNAT (Mexican Secretariat of the Environment and Natural Resources) within the Clean Transport program because of its savings of 6,611 of CO

2 in the year. During 2015,

there were 67,670 trips covering 40.8 million kilometers, which is equivalent to 53 round trips to the moon.

As an additional recognition, we received the National Logistics Award, “Galardón Tameme” for

the improvements imple-mented in the distribution

network.

This acknowledgement has con-solidated as the maximum recog-nition of the logistics sector for industrial and commercial com-panies that have been outstand-ing due to achievements reached in the application, diffusion and teaching of logistics at national level. Among the improvements implemented in the distribu-tion network, we can highlight: reduction of diesel consumption and backhaul, school for drivers, use of technologies to better use resources, among others.

Taking our main value of continuing pleasing our customers by guaranteeing freshness in the products we offer as a basis, during 2015 we opened our new Distribution Center of fresh product in the state of Nuevo León on a piece of land with a surface area of more 20,000m2 and a total investment of more than $300 million pesos, which has world class facilities and infrastructure with the most advanced technologies in refrigeration systems and material handling. With this CEDIS, we expand the national installed capacity in 20% in the fresh product network.

logisTiCs and operaTionsour distribution Centers are the cornerstone that responds to the coordination and integration among suppliers, transportation and the stores. operating 365 days a year, the 14 Cedis (distribution Centers) that conform our logistics network, are strategically located in 8 states through the country. Their main target is to supply merchandise to the stores promptly and based on quality at the least cost possible, as well as having balanced inventory levels throughout the distribution network.


FRESH AND FROZEN PRODUCT DISTRIBUTION

+175 MILLION

14 DISTRIBUTION CENTERSsTraTegiCally loCaTed in 8 sTaTes of The CounTry.

paCKages are shipped By year and More Than 552 Thousand Tons of produCTs.

in 2015 We opened a Cedis WiTh The MosT advanCed TeChnology in Cooling sysTeMs and MaTerial handling.

MORE QUALITY

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We were able to have better control of the gross margin and from promotional investments, which, in combination with increases of same store revenues and an adequate policy of operating expense control, allowed us to maintain the EBITDA with hardly any variation, compared to the previous year. The net income shows a 14.9% growth compared to 2014.

It is worth highlighting that the positive results are the outcome of a better commercial strategy, both in customer traffic as in the increase of the average ticket. There were also improvements in processes, inventory control and shortage reduction. Together with this, we are implementing the new image in all our stores, renewing more than 130 units across the country as of today.

Regarding debt levels and in preparation for the acquisition of Comercial Mexicana, as of the fiscal year closing, there is a debt of $17.111 billion pesos, which we came into at the end of 2015. In this regard, it is important to mention that this debt is totally in Mexican pesos.

Although there is still some way to go, we ended the year learning that behind a complicated macroeconomic outlook there are opportunities for improvement. Besides this and the sum of experiences acquired in the past, Soriana is stronger today. We are ready to continue our growth and to take the opportunity of serving and meeting the needs of more Mexican families.

finanCialsince the launching of the transformation project, efforts made during the last 5 years begin to show an important improvement on the Company’s financial results, closing 2015 with a total income of more than $109 billion pesos.


$1.8 BILLON PESOS

+$109 BILLION PESOS

14.9%INCREMENT IN

THE CASH NET PROFIT

2015 CAPEX

TOTAL REVENUES DURING 2015

FINANCIAL STRENGTH

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This strategy has 4 pillars which represent a solid platform for our customers, community, suppliers, collaborators and shareholders. Such pillars were supported by the following actions throughout the year:

soriana foundaTion Actively participates in community activities in all the cities where the Company is present. In 2015, support was given to several causes, among which, an important one was for children, since it is one of the guiding principles of our actions. It is very important to offer better options to new generations. For this reason, the social investment totaled $111.9 million pesos helping 435 institutions favoring 119,849 Mexican children, giving food to 101,405 people across the country. Also, we met different needs of 262,515 people.

environMenTAs part of our actions to comply with our sustainability policy, in 2015, the use of clean energy was a high priority area for Soriana. We continue incorporating more stores with energy supply from wind farms located in Oaxaca and Puebla, so

32% of our business units were supplied with renewable

energy. Likewise, we had the second stage of the installation of photovoltaic panels for power generation on the

shades to shield vehicles from the sun in our parking

lots of the stores located in the state of Baja California Sur. Also, there was

important progress in substituting our HID and sodium-vapor lamps with LED high-efficiency technology to illuminate the parking lots in our stores.

Continuing with internal recycling programs, in 2015 we were able to collect more than 171,417 kilograms of paper, aluminum and plastic. In regard to the recycling program we were able to recycle 67,307 tons of solid waste, preventing 993,330 trees from being cut, 83,371 crude oil barrels from being burned, the use of 218,023 m3 of landfill and the use of 281,559 Mw-hr of electricity, among other important savings. We also have Battery Collection Centers which collected more than 57,210 kilograms as of the end of the year.

soriana universidadSupports the professional growth of our collaborators, so scholarships were granted to more than 708 people, from elementary to graduate level, in 2015.

BesT praCTiCesSoriana recognizes and supports small regional producers (PYMES) as an important factor of the dynamic economic conditions of the country. In 2011, the ‘Development of Small Suppliers’ area was created to grant special conditions and the necessary guidance to allow the development of those companies. So, in 2015, we supported 1,748 suppliers and 670 new products were offered in stores to be considered by our customers.

CorporaTe responsaBiliTy We are a socially responsible Company, always committed to the community. Thus, we work with our heart to improve the quality of life of Mexican families.


MORE HEART

$111.9 MILLION PESOSsoCial invesTMenT in 2015 BenefiTing 483,770 people Through 435 ChariTy insTiTuTions

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EXECUTIVE OFFICERS

RICARDO MARTÍN BRINGASChief Executive Officer

ISMAEL HUMBERTO FAYAD WOLFFDirector, Hypermarkets & Supermarkets

FRANCISCO RAMÍREZ DÍAZDirector, Markets & Express

YUSEF ATIYEH NAVARRODirector, Real Estate

LUIS GIRARD DE LA LASTRADirector Logistics, Distribution & T Proyect

FEDERICO GUITARTE DELGADODirector, Human Resources

SERGIO FERNANDO MARTÍNEZ SAN GERMÁNChief Information Technology and Administration Officer

RICARDO PERERA TORRES SEPTIENDirector, City Club & Super City

AURELIO OSCAR ADÁN HERNÁNDEZChief Financial Officer

RODRIGO JESÚS BENET CÓRDOVADirector, Strategic Planning and Communications

JOSÉ LUIS GONZÁLEZ FLORESDirector, Audit

ChairMan Francisco Javier Martín Bringas

direCTors Francisco Javier Martín BringasCarlos eduardo Martín BringasGerardo Martín Soberónalberto Martín SoberónGerardo José Maldonado rodríguez* Guillermo torre lópez*María rosa Martín Soberónana María Martín Bringas

propieTary seCreTary Gustavo armando robles luque

BOARD OF DIRECTORS

AUDIT AND CORPORATE COVERNANCE COMMITTEEpreSIDent ernesto Icazbalceta lerma*

SeCretarY Guillermo torre lópez*

MeMBer Gerardo José Maldonado rodríguez*

* Independents Boards Members+ Deceased in april 2016. rIp.

alTernaTe ChairMan ricardo Martín Bringas

alTernaTe direCTorsricardo Martín BringasMaría teresa Martín Bringaspedro luis Martín Bringas armando Martín Soberón

alejandro Córdoba ruíz*Juan José Martín Bringas (+)ernesto Icazbalceta lerma*

alTernaTe seCreTary María enriqueta García Farfán

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A s o f D e c e m b e r 3 1 , 2 0 1 5 a n d 2 0 1 4

ORGANIZACIÓN SORIANA, S . A . B . DE C. V. AND SUBSID IARIES

TA B L E O F C O N T E N T S2 9 . I N D E P E N D E N T A U D I T O R S ’ R E P O R T

3 0 . C O N S O L I D A T E D S T A T E M E N T S O F F I N A N C I A L P O S I T I O N3 1 . C O N S O L I D A T E D S T A T E M E N T S O F P R O F I T A N D O T H E R C O M P R E H E N S I V E I N C O M E

3 2 . C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S I N S T O C K H O L D E R S ’ E Q U I T Y3 4 . C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S

3 5 . N O T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

CONSOLIDATED FINANCIAL STATEMENTS

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Auditing and Corporate Practices Committee ReportMarch 31, 2016

Board of directors oforganización soriana, s. a. B. de c. V.

In my capacity as Chairman of the Auditing and Corporate Practices Committee and in compliance with the duties set forth in Article 43 of the Securities Exchange Act relative to issuing an annual report about the activities carried out by this Committee, (the Committee), focused on achieving a better performance of Organización Soriana, S.A.B. de C.V, (the Company), for the year ending on the 31st of December 2015, I would like to present the following summary of the activities performed:

i. audit-related actiVitiesa) The activities carried out by the Committee were performed in a complete independent manner, in strict complian-

ce with provisions set forth in the Securities Exchange Act, as well as with the recommendations provided for in the Best Corporate Practices Code.

b) We reviewed the internal control system status, and we thoroughly analyzed the reports issued by the internal audit based on their work program, as well as the outcome of the activities carried out by the external auditor, re-porting and following-up the implemented preventive and corrective measures, ratifying that the Company works under adequate control and auditing systems.

c) We evaluated the performance of the external auditors, Galaz, Yamazaki, Ruiz Urquiza, S. C. (member of Deloitte Touche Tohmatsu), who are responsible for issuing an opinion on the reasonableness of the figures included in the financial statements of the entity and that they were written based on the IFRS (International Financial Reporting Standard). Considering their proven technical capacity, as well as their acceptable professional and independent performance, we recommend that the Board of Directors assigns them to audit and issue the report on the finan-cial statements of the Company and its subsidiaries for fiscal year 2015. Likewise, in such assessment we analyzed and recommended respective approval of fee proposal for the 2015 audit presented by Galaz, Yamazaki, Ruiz Urquiza, S. C. (member of Deloitte Touche Tohmatsu Limited) for the FY 2015 external audit services.

d) We reviewed the financial statements for the year ending on December 31, 2015 of Organización Soriana, S.A.B. de C.V. and its subsidiaries and analyzed the opinion issued on said financial statements and comments thereof with the external auditors of the Company.

e) Follow-up to the implementation and correction of the items observed by Galaz, Yamazaki, Ruiz Urquiza, S. C. (member of Deloitte Touche Tohmatsu Limited) was provided in regard to the findings for improvement in the internal control of the Corporation corresponding to the FY 2014 audit observation report.

f) We held several meetings to review the financial information of the quarters to be issued to the Mexican Stock Exchange and the annual financial information. We checked for consistency with accounting policies and criteria as well as compliance with new amendments to IFRS during the year, provided comments we deemed necessary and authorized the publication of said financial information.

g) We analyzed the financial operations with derivatives that were punctually proposed to this Committee by the management of the Company, inspecting they had a close correlation with the natural operations of the business and the existing hedging alternatives, recommending to this Committee the punctual use of these plain FX hedging derivatives, to mitigate some exchange risks.

h) We reviewed the report related to the end of the implementation process of SAP in the supply and commercial modules, which were extended to the whole chain of self-service units. We ensured that the intern controls were properly warranted, and the accounting records and financial information were consistent.

i) We reviewed the supported agreements in the Promise Contract of Acquisition signed with the controlling sha-reholders of Controladora Comercial Mexicana, S.A.B. de C.V. (CCM) for the acquisition of a substantial part of CCM’s assets, as well as the arrangements that we had to attend and cover as part of this process in 2015. Among others, the latter included the process with the COFECE and the CNBV, in order to complete the acquisition of that business unit through a Tender Offer.

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j) We held several meetings to analyze and evaluate the long term business strategy, business potential alternatives and the main investment and financing policies, outstanding amongst others themes the strategy to finance the acquisition of CCM by taking debt and issuing Cebures, looking forward to optimize the financing structure of Soriana.

k) We reviewed the necessary steps to take in order to attend and fulfill promptly COFECE’s resolution related to the divest process of 12 stores included in the transaction with CCM.

l) We took a close monitoring to the resolutions made at the Shareholders’ and members of the Board meetings.

m) We assessed the Company has the internal and external mechanisms that allow to ensure and comply with the laws and regulations that apply.

n) Were identified and followed up the contingencies and legal proceedings as well as trials and litigation that are in process, and the result of the concluded ones.

o) Were reviewed the procedures in order to receiving and handle complaints regarding accounting, administrative, internal control and audit aspects, including the presentation of confidential complaints of the personnel regarding doubtable accounting or auditing practices.

ii. actiVities related to corporate practices1. We requested and were informed about the processes to evaluate the performance of relevant directors.

2. We were informed about the operations performed with related parties, monitoring their transparency in strict compliance with the normal operational business practices, and that they were properly shown in the audited finan-cial statements of the Company.

3. We reviewed the policies regarding the use and control of Company assets.

4. We analyzed proposals and final results of reviews to Union Agreements with the several unions in the cities with unionized personnel.

5. We reviewed the emolument package of the Chief Executive Officer, as well as those of relevant directors and managers, according to what is described in the audited financial statements of the Company.

6. There were no dispensations granted by the Board of Directors in regard to the provisions set forth in Article 28, paragraph III, subsection f) of the Securities Exchange Law.

7. We followed up to the resolutions adopted at the General Shareholders’ Meetings and in the session of the Board of Directors.

Based on the above statements and based on the report issued by the external auditors, the Committee has deter-mined that Organización Soriana, S. A. B. de C. V. and its Subsidiaries have performed their duties in an adequate corporate governance environment and that its financial information is presented in a reasonable manner, and so we strongly make the recommendation to the Board of Directors that the financial statements of the fiscal year ending on the 31st of December 2015 be submitted to the Annual Shareholders’ Assembly for their approval.

sincerely yours,

Lic. Ernesto Icazbalceta LermaChairman of the Auditing and Corporate Practices Committee

Independent Auditors’ Report to the Board of Directors and Stockholders of Organización Soriana, S. A. B. de C. V.We have audited the accompanying consolidated financial statements of Organización Soriana, S. A. B. de C. V. and Subsidiaries (the Company), which comprise the consolidated statements of financial position as of December 31, 2015 and 2014, and the consolidated statements of profit and other comprehensive income, changes in stockholders’ equity and of cash flows for the years then ended, and a summary of significant accounting policies and other expla-natory information.

ManageMent’s responsiBility for the consolidated financial stateMentsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board and for such internal control as management determines is necessary to enable the preparation of consolida-ted financial statements that are free from material misstatement, whether due to fraud or error.

auditor´s responsiBilityOur responsibility is to express an opinion on these consolidated financial statements based on our audits. We con-ducted our audits in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consoli-dated financial statements are free from material misstatement.

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

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

opinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Organización Soriana, S. A. B. de C. V. and Subsidiaries as of December 31, 2015 and 2014, and their financial perfor-mance and their cash flows for the years then ended in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

other MatterAs described in note 2 a) to the accompanying financial statements, on January 8, 2016, the Company, through its subsidiary Tiendas Soriana, S. A. de C. V., acquired 96.31% of the outstanding capital stock of Controladora Comer-cial Mexicana, S.A.B. de C. de V. (CCM), by purchasing 1,045,879,794 linked securities, representing 4,183,519,176 common shares, at no par value, fully subscribed and paid, of the aforementioned capital stock. The consideration paid for the acquisition of such related shares was $34,109 million pesos in cash.

CCM is a commercial retail entity with operations throughout Mexico, which operates 143 self-service stores under the format Comercial Mexicana, Mega, Bodega Comercial Mexicana and Alprecio and sells a wide variety of food, clothing, general merchandise and health products.

The accompanying consolidated financial statements have been translated into English for the convenience of rea-ders.

galaz, yaMazaki, ruiz urquiza, s. c.Member of Deloitte Touche Tohmatsu Limited

c.p.c. agustín Martínez tamezMarch 31, 2016

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O r g a n i z a c i ó n S o r i a n a , S . A . B . d e C . V . a n d S u b s i d i a r i e s

CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONas of December 31, 2015 and 2014 (In millions of Mexican pesos)

NotE 2015 2014

ASSETS

CURRENT ASSETS:

CASH AND CASH EQUIVALENTS 6 $ 22,675 $ 2,673

TRADE ACCOUNTS RECEIVABLE, NET 7 2,166 2,844

OTHER ACCOUNTS RECEIVABLE 7 3,655 2,917

INVENTORIES 8 17,589 16,145

TOTAL CURRENT ASSETS 46,085 24,579

PROPERTY, FURNITURE AND EQUIPMENT, NET 9 44,199 44,648

INTANGIBLE ASSETS, NET 10 10,558 10,544

INVESTMENTS IN SHARES 923 867

OTHER ASSETS 80 82

TOTAL ASSETS $ 101,845 $ 80,720

LIABILITIES AND STOCKHOLDERS’ EQUITY

SHORT-TERM LIABILITIES:

TRADE ACCOUNTS PAYABLE $ 19,806 $ 19,807

DEBT SECURITIES AND SHORT-TERM DEBT 15 388 -

OTHER ACCOUNTS PAYABLE 16 2,362 2,485

TOTAL SHORT-TERM LIABILITIES 22,556 22,292

NON-CURRENT LIABILITIES:

LONG-TERM DEBT 15 17,594 1,131

EMPLOYEE BENEFITS 17 451 366

DEFERRED INCOME TAX 21 9,226 8,606

OTHER LIABILITIES 11 1,889 1,925

TOTAL LONG-TERM LIABILITIES 29,160 12,028

TOTAL LIABILITIES 51,716 34,320

COMMITMENTS AND CONTINGENCIES 22

STOCKHOLDERS’ EQUITY: 18

CAPITAL STOCK 1,253 1,253

ADDITIONAL PAID-IN CAPITAL 977 977

PAID-IN CAPITAL 2,230 2,230

RESERVE FOR REPURCHASE OF SHARES 550 550

RETAINED EARNINGS 43,641 39,937

CONSOLIDATED NET INCOME OF THE YEAR 3,726 3,704

OTHER COMPREHENSIVE INCOME (18) (21)

TOTAL STOCKHOLDERS’ EQUITY 50,129 46,400

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $101,845 $ 80,720

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.

Lic. Sergio Fernando Martínez San Germán Chief Administrative Officer

C.P. Jorge Alberto Reyes MoraChief Controller

CONSOLIDATED STATEMENTS OF PROFIT AND OTHER COMPREHENSIVE INCOMEFor the years ended December 31, 2015 and 2014 ( In millions of Mexican pesos)



Note 2015 2014

NET SALES $ 106,783 $ 99,617

OTHER REVENUES 19 2,597 2,212

TOTAL REVENUES 109,380 101,829

COST OF SALES (86,225) (79,338)

GROSS PROFIT 23,155 22,491

GENERAL EXPENSES (17,849) (17,514)

OPERATING PROFIT 5,306 4,977

INTEREST EXPENSE, NET 20 (425) (464)

GAIN FROM REDUCTION IN LONG-TERM PROVISION 451

EQUITY IN INCOME OF ASSOCIATES AND JOINT VENTURES 68 65

INCOME BEFORE TAX PROVISIONS 5,400 4,578

INCOME TAX PROVISION: 21

CURRENT INCOME TAX (1,054) (952)

DEFERRED INCOME TAX (620) 78

(1,674) (874)

CONSOLIDATED NET INCOME FOR THE YEAR 3,726 3,704

OTHER COMPREHENSIVE INCOME:

ITEM THAT WILL NOT BE RECLASSIFIED TO CONSOLIDATED NET

INCOME:

REMEASUREMENT OF DEFINED BENEFIT OBLIGATION (3) (3)

ITEM THAT WILL BE RECLASSIFIED TO PROFIT OR LOSS IN THE FUTURE:

NET FAIR VALUE GAIN ON CASH FLOW HEDGE 6

3 (3)

TOTAL CONSOLIDATED COMPREHENSIVE INCOME $ 3,729 $ 3,701

EARNINGS PER SHARE IN MEXICAN PESOS 4.o y 18 $ 2.06 $ 2.06


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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFor the years ended December 31, 2015 and 2014(In millions of Mexican pesos)

Capital stock

Additional Paid-in Capital

Reserve for Repurchase of

Shares Retained Earnings

ConsolidatedNet Income

of the Year

OtherComprehensive

Income

TotalStockholders’

Equity

BALANCES AS OF JANUARY 1, 2013 $1,253 $ 977 $ 550 $ 37,521 $ 3,117 $ (18) $ 43,400

TRANSFER OF PRIOR YEAR’S RESULT 3,117 (3,117) -

COMPREHENSIVE NET INCOME 3,704 (3) 3,701

DIVIDENDS PAID (701) (701)

BALANCES AS OF DECEMBER 31, 2014 1,253 977 550 39,937 3,704 (21) 46,400

TRANSFER OF PRIOR YEAR´S RESULT 3,704 (3,704) -

COMPREHENSIVE NET INCOME 3,726 3 3,729

BALANCES AS OF DECEMBER 31, 2015 (NOTE18) $1,253 $ 977 $ 550 $ 43,641 $ 3,726 ($18) $ 50,129




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CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2015 and 2014(In millions of Mexican pesos)

Lic. Sergio Fernando Martínez San Germán Director de Administración y Sistemas

C.P. Jorge Alberto Reyes MoraDirector de Contraloría

2015 2014

CASH FLOWS FROM OPERATING ACTIVITIES:

INCOME BEFORE INCOME TAXES PROVISIONS $ 5,400 $ 4,578

ADJUSTMENT FOR:

DEPRECIATION AND AMORTIZATION 2,155 2,083

GAIN ON SALE OF FURNITURE AND EQUIPMENT (346) (91)

GAIN FROM REDUCTION OF LONG-TERM PROVISION (451)

EQUITY INCOME OF ASSOCIATES AND JOINT VENTURES (68) (65)

OTHER 139 255

INTEREST EXPENSE 268 313

7,097 7,073

CHANGES IN WORKING CAPITAL:

TRADE ACCOUNTS RECEIVABLE 678 1,194

INVENTORIES (1,444) (1,141)

TRADE ACCOUNTS PAYABLE 67 769

OTHER ACCOUNTS RECEIVABLE AND ADVANCE PAYMENTS (1,794) (870)

OTHER ACCOUNTS PAYABLE 1,814 1,137

INCOME TAXES PAID (1,300) (1,358)

NET CASH PROVIDED BY OPERATING ACTIVITIES 5,118 6,804

CASH FLOWS FROM INVESTING ACTIVITIES:

ACQUISITION OF PROPERTY, FURNITURE AND EQUIPMENT, AND INTANGIBLE ASSETS (1,879) (3,030)

PROCEEDS FROM SALE OF FURNITURE AND EQUIPMENT 505 183

INVESTMENT IN SHARES 12 18

NET CASH USED IN INVESTING ACTIVITIES (1,362) (2,829)

CASH FLOWS FROM FINANCING ACTIVITIES:

PROCEEDS FROM BORROWINGS 37,503 36,230

REPAYMENT OF BORROWINGS (20,750) (38,180)

INTEREST PAID (271) (90)

DIVIDENDS PAID (701)

PAYMENTS FOR ACQUISITION OF PROPERTY UNDER FINANCE LEASES (222) (225)

OTHER (14) (2)

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 16,246 (2,968)

NET INCREASE IN CASH AND CASH EQUIVALENTS 20,002 1,007

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 2,673 1,666

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 22,675 $ 2,673


1. ACTIVITIESOrganización Soriana, S. A. B. de C. V. and Subsidiaries (Soriana or the Company), is a commercial retail business in Mexico with 100% Mexican capital. Founded in 1968, Soriana operates several formats of supermarket stores and markets a wide variety of food, clothing, general merchandise, health products and basic household services under retail, medium wholesale and wholesale schemes. The shares representing Soriana’s capital stock are listed on the Mexican Stock Exchange (BMV) since 1987, under the ticker symbol SORIANA. The address of Soriana’s corporate headquarters is Alejandro de Rodas. 3102-A, Col. Cumbres 8° Sector, C.P. 64610, Monterrey, N.L., México.

In order to consolidate its position, Soriana has an ongoing growth program and is considered one of Mexico’s largest employers. Soriana ended 2015 with a presence in 263 cities among the 32 states of Mexico and 3.3 million square meters of sales floor distributed through its five store formats. As of the close of 2015, Soriana has a total of 682 stores in the following formats: 272 Hyper, 141 Markets, 129 Super, 106 Express and 34 City Club.

Soriana also operates 130 convenience stores under the name of Super City in a combined regime of own stores and franchises; furthermore, the Company performs real estate business activities comprising leases of commercial premises adjacent to each store as part of the commercial area, and conducts commercial developments.

Soriana maintains a strategic alliance with Banamex in Servicios Financieros Soriana, S.A.P.I. de C.V., Sociedad Financiera de Objeto Múltiple, a regulated company, called SORIBAN, and owns 50% minus one share of its capital stock. SORIBAN is a financial institution that provides various financial products of added value to customers visiting Soriana’s stores. Currently, the product portfolio of SORIBAN includes basically credit cards.

The term the “Company” as used herein, refers to Soriana together with its consolidated subsidiaries.

2. SUBSEQUENT EVENTa) Acquisition of Controladora Comercial Mexicana, S. A. B. de C. V. (CCM)On January 28, 2015, the Company entered into an agreement with Controladora Comercial Mexicana, S. A. B. de C. V. (CCM) to purchase a substantive portion of CCM, which consists of 157 self-service stores under the formats Comercial Mexicana, Mega, Bodega Comercial Mexicana and Alprecio. The originally agreed-upon price for this tran-saction was $39,193.7.

In October 2015, Soriana announced that it received a notice from the Federal Economic Competition Commission (COFECE) on a conditioned favorable decision with respect to the purchase agreement entered into with CCM. Sub-sequently, both Soriana and CCM advised that they filed with COFECE a letter accepting the conditions imposed by such authority for the approval of the transaction, whereby Soriana agrees to meet COFECE conditions, making the purchase and subsequent divestiture or refrain from purchasing 26 stores of the 157 stores negotiated within the ori-ginal agreement with CCM. Based on the above, the Company decided to exclude 14 stores from the transactions and divest in the short term the remaining 12 stores, with the actual acquisition of CCM including 143 self- service stores.

On January 1, 2016, CCM split, and La Comer, S.A.B. de C.V. arose as the spun-off company, and Controladora Comercial Mexicana, S.A.B. de C.V. as the original company. CCM is a public entity in the commercial retail industry in Mexico, which operates 143 self-service units under the formats Comercial Mexicana, Mega, Bodega Comercial Mexicana and Alprecio, marketing a wide variety of food, clothing, general merchandise and health products.

On January 7, 2016, the Company, through its main subsidiary Tiendas Soriana, S. A. de C. V. (Tiendas Soriana), successfully concluded the Takeover Bid (“Bid” or “OPA”) of up to 100% of the related units representing the capital stock of CCM, which began on December 7, 2015. The OPA was settled on January 8, 2016, acquiring 1,045,879,794 linked securities, representing 4,183,519,176 common stock with no par value, fully subscribed and paid, represen-ting 96.31% of CMM’s outstanding capital stock. The consideration paid in cash for the acquisition of such related shares was $34,109.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the years ended December 31, 2015 and 2014 (In millions of Mexican pesos)

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As part of this transaction, Soriana acquired assets of high strategic value such as: real estate, lease agreements with third parties, operating equipment, inventory in stores, local and business premises and spaces, other additional real estate assets, a logistics platform, distribution centers, licensing on the technological platform and information systems, certain rights of use of brands and promotional campaigns, among other strategic assets. In addition, and as a strategic part of the transaction, the labor force of CCM including approximately 20,700 employees became part of the Company, thus creating a great opportunity for the exchange of commercial and operational best practices among the staff of both Entities.

At the issuance date of these consolidated financial statements, the Company is in the process of determining and concluding the assignment of the purchase price to the net assets acquired of CCM.

At the date of these financial statements, the shares of CCM are listed in the BMV (Mexican Stock Exchange) have not been delisted, and the value per share is $29.69 pesos.

b) Debt issuance On January 7, 2016, the OPA was concluded, and on January 8, 2016 Soriana took control of CCM at the agreed upon share price, for which during that month it issued long-term debt with several financial institutions for $ 15,277, that coupled with financings incurred during December 2015, described in Note 15, and cash flows from operations, were used to settle the acquisition of CCM. The entire debt issued by Soriana is denominated in Mexican pesos.

c) Divestiture process for the 12 stores acquired from CCM, subject to a COFECE decisionOn January 27, 2016, Soriana reported that it had formally begun the process of selling and divesting 12 stores acquired from CCM, following the acceptance of the conditions set by the COFECE in its decision file number CNT-021-2015. At the issuance date of these consolidated financial statements, the process continues.

3. BASIS OF PRESENTATIONa. Basis of presentation The following are new and revised International Financing Reporting Standards (“IFRS” or IAS) and interpretations as issued by the International Accounting Standard Board (“IASB”) that could affect the accounting balance and/or disclosures in the consolidated financial statements.

The Company will apply the new and revised IFRS that are mandatory effective for on accounting period that begins on or after January 1, 2016.

N e w a n d r e v i s e d I F R S s i n i s s u e b u t n o t y e t e f f e c t i v eThe Company has not applied the following new and revised IFRSs that have been issued but are not yet effective:

IFRS 9 Financial Instruments (effective beginning January 1, 2018) IFRS 15 Revenue from Contracts with Customers (effective beginning January 1, 2018) IFRS 16 Leases (effective beginning January 1, 2019) Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations (effective beginning January 1, 2016) Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization (effective beginning January 1, 2016)

I F R S 9 F i n a n c i a l I n s t r u m e n t s

IFRS 9 issued in November 2009 introduced new requirements for the classification and measurement of financial assets. IFRS 9 was subsequently amended in October 2010 to include requirements for the classification and mea-surement of financial liabilities and for derecognition and in November 2014 to include the new requirements for general hedge accounting. Another revised version of IFRS 9 was issued in July 2015 mainly to include a) impairment requirements for financial assets and b) limited amendments to the classification and measurement requirements by introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement category for certain simple debt instruments.

Key requirements of IFRS 9:

• AllrecognizedfinancialassetsthatarewithinthescopeofIAS39FinancialInstruments:RecognitionandMeasurement are required to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contrac-tual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. Debt instruments that are held within a business mo-del whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that 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, are generally measured at FVTOCI.

• Allotherdebtinvestmentsandequityinvestmentsaremeasuredattheirfairvalueattheendofsubsequentaccounting periods. In addition, under IFRS 9, entities may make an irrevocable election to present subsequent chan-ges in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in net income (loss).

• Withregardtothemeasurementoffinancialliabilitiesdesignatedasoffairvaluethroughprofitorloss,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 the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss is presented in profit or loss.

• Inrelationtotheimpairmentoffinancialassets,IFRS9requiresanexpectedcreditlossmodel,asoppo-sed 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 in those expected credit losses at each reporting date to reflect changes 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.

• Thenewgeneralhedgeaccountingrequirementsretainthethreetypesofhedgeaccountingmechanismscurrently 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’s Management is assessing the possible impacts of IFRS 9 on the consolidated financial statements.

I F R S 1 5 R e v e n u e f r o m C o n t r a c t s w i t h C u s t o m e r s In May 2014, IFRS 15 was issued which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance including IAS 18 revenue, IAS 11 Construction Contracts and the related Interpretations when it becomes effective.

The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer. Far more prescriptive guidance has been added in IFRS 15 to deal with specific scenarios. Furthermore, extensive disclosures are required by IFRS 15.


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I F R S 1 6 , L e a s e s 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 1 January 2019, with earlier adoption permitted if IFRS 15 ‘Revenue from Contracts with Customers’ has also been applied.

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 expen-ses) as an assumed linear depreciation of the right-of-use asset and the decreasing interest on the liability will lead to an overall decrease of expense over the reporting period.

The lease liability is initially measured at the present value of the lease payments payable over the lease term, dis-counted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate.

However, a lessee may elect to account for lease payments as an expense on a straight-line basis over the lease term for leases with a lease term of 12 months or less and containing no purchase options (this election is made by class of underlying asset); and leases where the underlying asset has a low value when new, such as personal computers or small items of office furniture (this election can be made on a lease-by-lease basis).

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


A m e n d m e n t s t o I F R S 1 1 A c c o u n t i n g f o r A c q u i s i t i o n s o f I n t e r e s t s i n J o i n t O p e r a t i o n sThe amendments to IFRS 11 provide guidance on how to account for the acquisition of a joint operation that constitu-tes a business as defined in IFRS 3 Business Combinations. Specifically, the amendments state that the relevant prin-ciples on accounting for business combinations in IFRS 3 and other standards (e.g. IAS 12 Income Taxes regarding the recognition of deferred taxes at the time of acquisition and IAS 36 Impairment of Assets regarding impairment testing of a cash-generating unit to which goodwill on acquisition of a joint operation has been allocated) should be applied. The same requirements should be applied to the formation of a joint operation if and only if an existing business is contributed to the joint operation by one of the parties that participate in the joint operation.

A joint operator is also required to disclose the relevant information required by IFRS 3 and other standards for busi-ness combinations.

The amendments should be applied prospectively to acquisitions of interests in joint operations (in which the activi-ties of the joint operations constitute businesses as defined in IFRS 3) occurring from the beginning of annual periods beginning on or after January 1, 2016. The Company’s Management is assessing the possible impacts of these amendments on the consolidated financial statements.

A m e n d m e n t s t o I A S 1 6 a n d I A S 3 8 C l a r i f i c a t i o n o f A c c e p t a b l e M e t h o d s o f D e p r e c i a t i o n a n d A m o r t i z a t i o nThe amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortization of an intangible asset. This presumption can only be rebutted in the following two limited circum-stances:

a) When the intangible asset is expressed as a measure of revenue; or

b) When it can be demonstrated that revenue and consumption of the economic benefits of the intangible asset are highly correlated.

The amendments apply prospectively for annual periods beginning on or after January 1, 2016. Currently, the Company uses the straight-line method for depreciation and amortization for its property, plant and equipment, and intangible assets respectively. The Company’s management believes that the straight-line method is the most appropriate method to reflect the consumption of economic benefits inherent in the respective assets and accordingly, does not anticipate that the application of these amendments to IAS 16 and IAS 38 will have a material impact on the consolidated financial statements.

b. Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial Reporting Stan-dards as issued by the IASB and that are applicable at December 31, 2015.

c. Basis of measurementThe consolidated financial statements have been prepared in accordance with International Financial Reporting Stan-dards as issued by the IASB and that are applicable at December 31, 2015.

i. historical costHistorical cost is generally based on the fair value of the consideration given in exchange for assets.

ii. fair valueFair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique.

d. Classification of costs and expenses Costs and expenses presented in the consolidated statements of profit and other comprehensive income were classified based on their function; therefore, cost of sales was separated from the remaining general costs and expenses as well as the operating income, which allows a better understanding of the operational performance of the business.

e. Basis of consolidation -The consolidated financial statements incorporate the financial statements of the Soriana and its subsidiaries contro-lled by it. Control in compliance with IFRS 10 Consolidated Financial Statements, is achieved when Soriana:

•Haspowerovertheinvestee; •Isexposed,orhasrights,tovariablereturnsfromitsinvolvementwiththeinvestee;and •Hastheabilitytouseitspowertoaffectitsreturns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

The main subsidiaries of Soriana are:

•TiendasSoriana,S.A.deC.V.(operatorofretailstores) •Servicecompaniesthatgroupseveralentities. •Companiesintherealestatesectorthatcompriseseveralentities.

For consolidation purposes, all balance and transaction between affiliated companies have been eliminated.

F. Functional currency -The amounts included in the financial statements of each one of the Companies composing Soriana are measured using the primary economic environment currency where each entity operates; i.e. their functional currency. The consolidated financial statements are presented in Mexican pesos and have been rounded up to thousands, unless the contrary is specified. The Company’s functional currency is the Mexican peso.

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4. SIGNIFICANT ACCOUNTING POLICIESThe most significant accounting policies followed by the Company are summarized as follows:

a. Cash and cash equivalents -Cash equivalents consist mainly of short-term bank deposits and investments that are readily convertible to cash, subject to a low risk of material changes in value. Cash is stated at nominal value and cash equivalents are valued at fair value. The differences between the value at the date of the investment and at the date of the consolidated state-ment of financial position are recognized in the consolidated statements of profit and other comprehensive income as financial income.

b. Financial instruments -Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attribu-table to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

F i n a n c i a l a s s e t sFinancial assets are initially classified, depending on the nature and purpose of the financial assets, into the following categories and it is determined at initial recognition: i) financial assets ‘at fair value with changes through profit or loss’ (FVTPL), ii) ‘held-to-maturity’ investments, iii) ‘available-for-sale’ (AFS) financial assets, and iv) ‘loans and receivables’.

The Company only has financial assets classified as trade accounts receivable, based on fixed or determinable payments, which are not traded in an active market. They are valued at amortized cost using the effective interest method, less any impairment. Interest income is recognized applying the effective interest rate, except for short-term accounts receivable in case the interest recognition is insignificant.

The effective interest method is a method to calculate the amortized cost of a financial instrument and to allocate financial income or cost during the relevant period. The effective interest rate is the rate that discounts estimated future cash inflows (including all fees and basis points paid or received that are a comprehensive part of the effective interest rate, transaction costs and other premiums or discounts) during the expected life of the financial asset or liability or, where appropriate, a shorter period. Such amount represents the carrying amount upon initial recognition.

Financial assets are subject to impairment tests at the end of each reporting period. The impairment of trade accou-nts receivable is recognized reducing the asset value through an allowance for doubtful accounts. When an account receivable is deemed uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss.

D e r e c o g n i t i o n o f f i n a n c i a l a s s e t sThe Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other com-prehensive income and accumulated in equity is recognized in profit or loss.

F i n a n c i a l l i a b i l i t i e sFinancial liabilities are classified as either financial liabilities ‘at FVTPL’ or ‘other financial liabilities’.

Financial liabilities are initially valued at fair value. The transaction costs that are directly attributable to the acquisi-tion or issuance of financial liabilities (other than financial liabilities at fair value with changes in earnings) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. For other financial liabilities (including loans and debt) are measured at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated fu-ture cash payments (including all fees, and points paid or received that form an integral part of the effective interest rate transactions cost and other income or discounts) through the expected life of the financial, liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

The Company’s financial liabilities include trade accounts payable, other accounts payable, debt, and financial lease obligations.

The cost of transaction directly attributable to the adquisition of financial liabilities to FVTPL are recognized directly in profit or loss

Financial assets and liabilities are offset and the net amount is presented in the consolidated statement of financial position if, and only if the Company: i) has a legal right to offset such amounts, and ii) intends to settle upon realizing the asset and liability simultaneously.

D e r e c o g n i t i o n o f f i n a n c i a l l i a b i l i t i e s

The Company derecognizes financial liabilities when, and only when, the Company obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

c. Derivative financial instruments and hedging -The Company recognizes derivative financial instruments in the statement of financial position at their respective fair values either as financial assets or financial liabilities in accordance with the rights and obligations set forth in the same contracts. Soriana’s policy to contract derivative instruments, occurs only for hedging purposes in relation to the Company’s operational activity, which purpose is to safeguard the liquidity of the Company and stockholders’ interests, reducing the risk of exposure to external variables of the market, such as exchange rate risks and interest risks, among others.

To protect itself from the risks arising from fluctuations in exchange rates, the Company evaluates the use of derivati-ve financial instruments, primarily using exchange rate hedge forwards. The company’s policy consists of conducting transactions exclusively for hedging purposes, and never conduct transactions with derivative financial instruments for speculative purposes.

Derivatives are contracted in order to hedge risks arising mainly from business operating activities and fulfill all hed-ging requirements; their designation is documented at inception of the hedging transaction, describing the objective, characteristics, accounting recognition and how effectiveness will be measured, applicable to that transaction.

Hedge derivatives recognize valuation changes according to the type of hedging: (i) when they are fair value hedged, fluctuations of both the derivative and the hedged item are valued at fair value and recognized in the statement of profit or loss; (ii) when they are cash flow hedges, the effective portion is temporarily recognized in other compre-hensive income and is recycled to profit or loss when the hedged item affects it; the ineffective portion is recognized immediately in profit or loss.

The Company hedge accounting when the derivative has expired, been sold, been cancelled or been exercised, when the derivative does no reach high effectiveness to settle the changes in fair value or cash flows of the hedged item, or when the Company decides to cancel the hedging designation. The Company has a financial risk committee that consists of main officers, who report to the Audit and Corporate Practices Committee, which analyzes and assesses

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the different alternatives, and proposes to the Board of Directors for their approval, all this to fulfill the Company’s financial strategies.

It is the Company’s policy to contract derivative financial instruments with institutions with high solvency and proven credit quality.

The Company designates counterparties as calculation agents. In addition, the Company performs periodic estimates to monitor the behavior of the risk factors (exchange rate), allowing it to permanently assess the outcome of the contracted hedges.

d. Inventories and cost of sales-Inventories are recorded at acquisition cost and are valued at average cost determined through the perpetual inventory method.

Cost of sales is stated at average cost of the dates on which the sales were made.

Purchase allowances obtained from suppliers are recognized as part of the value of the inventory and recorded as a reduction in cost of sales as the goods for which the allowance is earned are sold.

e. Property, furniture and equipment, net -The Company records its property, furniture and equipment at historical cost and is presented net of its accumulated depreciation and any accumulated loss for impairment.

Depreciation is calculated using the straight-line method considering the residual value based on the useful lives of the assets estimated by the Company, in order to depreciate separately each of the items of property, furniture and equipment that have a significant cost in relation to the total cost of the item (components). The estimated useful lives for the Company’s assets are as follows:

BUILDINGS:

STRUCTURE 80 YEARS

HYDRO-SANITARY AND ELECTRIC INSTALLATIONS AND DATA NETWORK 25 YEARS

FINISHING WORK 15 YEARS

FURNITURE AND EQUIPMENT 3 - 15 YEARS

VEHICLES 3 - 12 YEARS

LEASEHOLD IMPROVEMENTS THE SHORTER OF EITHER THE USEFUL LIFE OF THE ASSETS OR THE RELATED LEASE TERM

The estimated useful lives, residual values and depreciation method are reviewed at year, and the effect of any chan-ge in the allowance recorded is recognized prospectively.

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 are added to the cost of those assets during the construction stage and until their operation and / or exploitation commences. Income earned on the temporary investment of specific borrowings to be used in qualifying assets is deducted from the borrowing costs eligible to be qualified. All other borrowing costs are recognized in earnings in the period in which they are incurred.

Assets held under finance leases are depreciated according to the related lease term considering the existing re-newals in the contract.

The gain or loss arising from the sale or retirement of an item of property, furniture and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the results of the period.

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at historical cost, including transaction costs and are implicit in the items of land and buildings, as the same historical cost policy is used in both cases.

f. Investments in associates and joint ventures - An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy deci-sions of the investee, but it does not imply control or joint control over those policies.

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrange-ment, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The results, assets and liabilities of associates and joint ventures are incorporated to the Company’s consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates and joint ventures are initially recognized in the consolidated statement of financial position at cost, adjusted for changes subsequent to the acquisition for the Company’s interest in the associate company and joint ventures net assets, less any impairment in the individual value of the investments.

Losses of an associate company in excess of the Company’s interest therein are recognized provided the Company has incurred any legal or constructive obligations or has made payments on behalf of the associate and joint ventures.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabi-lities and contingent liabilities of an associate recognized and joint ventures at the acquisition date is recognized as goodwill. Goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in earnings.

The requirements of IAS 39, Recognition and Measurement, are applied to determine whether it is necessary to recognize any impairment loss with respect to the Company’s investment in an associate and joint ventures. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset, comparing its recoverable amount (higher of value in use and fair value less costs of sale) with its carrying amount. Any impairment loss recognized is part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

When the Company conducts transactions with an associated company and joint ventures, unrealized profits and los-ses are eliminated to the proportion of the Company’s interests in such associated company and joint ventures.

The share of the profit or loss of the joint venture SORIBAN for the year ended December 31, 2015 and 2014 amounts to a profit of $68 and $65, respectively.

g. Intangible assets -The Company classifies intangible assets according to their estimated useful life in two types: indefinite and defined lives.

Intangible assets with in definitive useful lives are recorded at acquisition cost. The rights on lease contracts have been classified as intangible assets with indefinite useful life.

The Company records intangible assets with definite useful lives at cost less accumulated amortization. Acquired software is measured at cost less accumulated amortization. Expenditures for software acquisition and development are capitalized when classified as development activities and generate future economic benefits for the Company and can be measured reliably otherwise they are recognized in the consolidated statement of profit and other comprehen-sive income when incurred. The amortization related to intangible assets is included in operating expenses. Intangible assets with defined lives are amortized using the straight-line method over the estimated useful lives determined by the Company. Such amortization is recorded under general expenses.

For purposes of impairment tests, intangible assets with indefinite useful lives mainly represented by the assignment of lease agreement rights were allocated to the segment of supermarket stores. The following factors are considered in the evaluation of the recoverable value for purposes of impairment tests:

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•PerpetualgrowthrateestimatedbasedontheinflationoftheeconomywheretheCompanyoperates.•Thediscountratebasedontheweightedcapitalcostandthemarketparticipants’variablestobeconsidered.•Sizeofthemarketwherethesupermarketstoresoperatesforrecoverablevalueestimatepurposes.•Behaviorofprimarycostsofrawmaterialsandinput,andthenecessaryexpensestomaintainfixedassetsincondi-

tions to be used.•Futurecashflowsdiscountedatpresentvaluebasedonfinancialprojectionofaperpetuityvalue,consideringesti-

mates at the valuation date based on the budged approved by the Company´s management, which include the last trends known in supermarket stores and in the industry.

h. Impairment of tangible and intangible assets -The Company reviews the carrying amounts of long-lived assets in use when an impairment indicator suggests that such amounts might not be recoverable, considering the greater of the present value of future net cash flows or the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed the greater of the afore-mentioned amounts of the Company’s cash generating units.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is a sign that the asset may be impaired.

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

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in earnings.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is in-creased to the revised estimate of its recoverable amount, such that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in earnings.

Under IAS 36, the Company identifies the possible impairment of intangible assets with indefinite useful lives using the present value methodology, considering the cash generating unit at the operating segment level established by the Company in accordance with IFRS 8, Operating Segments.

i. Leasing - LLease agreements are classified as financial leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Under IAS 17, Leases, the Company classifies its property leases as financial or operating, mainly assessing the prin-ciples established in such standard. The most relevant guidelines in the Company’s leases are as follows: i) The lease term covers most of the economic life of the asset, even if ownership is not transferred at the end of the transaction; ii) At the inception of the lease agreement, the present value of the minimum lease payments is substantially equiva-lent to the fair value of the leased asset; iii) If the lessee can cancel the lease agreement, and the lessor’s losses associated with the cancellation are borne by the lessee.

T h e C o m p a n y a s a l e s s e e :

Assets held under finance leases are recognized as assets of the Company at the lower of the fair value at the in-ception of the lease or the present value of the minimum lease payments determined using the interest rate implicit in the lease if it is feasible to be determined or the incremental rate of a loan with similar conditions, amortized and depreciated according to the term of the lease agreement considering its respective renewals.

The corresponding liability to the lessee is included in the consolidated statement of financial position as a finance lease obligation, and is presented under the item of other long-term liabilities.

Lease payments are apportioned between financial expenses and the reduction of the lease obligations so as to achieve a constant interest rate on the remaining balance of the liability. Financial expenses are directly charged to results, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company´s policy on borrowing costs (see Note 4e). Contingent rentals related to sale percentages or ad-justments for inflation are recognized as expenses in the periods in which they are incurred.

Operating lease payments are charged to results using the straight-line method during the lease term, except where another systematic apportionment basis is more representative to reflect the pattern of the lease benefits for the user more adequately.

Currently, the Company does not recognize leases of land as finance leases.

T h e C o m p a n y a s l e s s o r :Rental income from operating leases is recognized using the straight-line method during the term of the relevant lease. Initial direct costs incurred in the negotiation and agreement of an operating lease are added to the carrying amount of the leased asset and recognized using the straight-line method during the lease term.

j. Employee benefits -

D e f i n e d c o n t r i b u t i o n b e n e f i t p l a nBenefits associated with retirement benefit plans are recognized as an expense when employees have rendered servi-ce entitling them to such benefits.

D e f i n e d b e n e f i t p l a nFor defined benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial calculations being carried out at the end of each reporting period. Actuarial remeasurements are recogni-zed within comprehensive income and are not reclassified to earnings. Past service costs are recognized immediately in earnings. The Company presents service costs within cost of sales and operating expenses in the consolidated statements of profit and comprehensive income, and presents net interest cost within interest cost in the statements of profit and other comprehensive income. Employee retirement benefits are recognized in the consolidated state-ment of financial position and represent the present value of the defined benefit obligation less the fair value of the plan assets.

A subsidiary of the Company has a pension plan with defined benefits that consists of a lump payment based on their remuneration, according to their age and years of service.

Actuarial gains and losses arising from adjustments based on experience and changes in actuarial assumptions are debited or credited to stockholders’ equity in other comprehensive income items in the period in which they arise.

Any liability for labor settlement is recorded by the Company when the offer of settlement cannot be cancelled and when the Company recognizes the related restructuring cost.

D i r e c t e m p l o y e e b e n e f i t sDirect employee benefits are valued in proportion to the services rendered, considering current salaries and recogni-zing the liability as incurred. This includes primarily statutory employee profit sharing payable, compensated absen-ces, such as vacation and vacation premiums, and incentives.

S t a t u t o r y e m p l o y e e p r o f i t s h a r i n g ( P T U )PTU is recorded in the results of the year in which it is incurred and presented under general expenses in the con-solidated statements of profit and other comprehensive income. PTU is determined based on the taxable income in accordance with Section I of Article 10 of the Income Tax Law.

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k. Provisions -Provisions are recognized when the Company has a present obligation (legal or constructive) that arise from a past event, that will probably result in the use of economic resources, and that can be reasonably estimated.

The amount recognized as a provision is the best estimate of the expense necessary to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount represents the present value of those cash flows.

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

Provisions are classified as either current or non-current according to the estimated period of time to meet the covered obligations.

l. Foreign currency transactions and exchange differences -Monetary assets and liabilities denominated in foreign currencies, mainly U.S. dollars, are expressed in national cu-rrency at the exchange rate in effect at the close date. Exchange differences arising from fluctuations in the exchan-ge rate between the date the transactions were conducted and the date of settlement or valuation at the date of the consolidated statements of financial position, are recorded in net financial cost.

m. Revenue recognition -In accordance with IAS 18, Revenues, revenues from the sale of goods are recognized at the time the risks and rewards derived from ownership of the goods are transferred to the customer, which generally coincides when they are delivered on the sales floor; other income is recognized when it is earned.

Revenues are calculated at the fair value of the consideration received or receivable, taking into account the amount of customer returns, rebates and other similar allowances.

Through its Loyalty Program, the Company performs certain promotions whereby it provides incentives for custo-mers, whose value is linked to either a percentage of the sales price (e.g. electronic money) or by granting points for merchandise purchases made. Points or electronic money can be used by customers to settle future purchases within stores that are operated by Soriana. The sale of merchandise and rendering of points or electronic money according to the Loyalty Program are recorded as revenue transactions with multiple elements and the fair value of the consi-deration received (points or electronic money granted) is distributed among the merchandise that generated them. The consideration allocated to the program’s benefits is valued by reference to its fair value (the amount by which such credits by incentives could be sold separately). Such consideration is not recognized as revenue at the time of the initial sale transaction; rather it is deferred and recognized as revenues when the points or electronic money have been used by the customer.

The Company recognized the commissions from transactions related to the sale of airtime on cell phones as an agent.

n. Income taxes -Income tax expense represents the sum of current tax and deferred income tax.

C u r r e n t t a x e sCurrent income tax (“ISR”) is recognized in the results of the year in which is incurred.

D e f e r r e d t a xDeferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Defe-rred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be availa-

ble against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.

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

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and must be reduced to the extent that it is not probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted at the end of the re-porting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would arise from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and deferred tax liabilities are offset when there is a legal right to offset short-term assets with short-term liabilities and when they refer to income tax relating to the same tax authority and the Company intends to settle its assets and liabilities on a net basis

C u r r e n t a n d d e f e r r e d t a x

Current and deferred tax are recognized as income or expense in earnings, except when they refer to items that are recognized outside earnings, either in other comprehensive income or directly in stockholders’ equity, in which case, the tax is also recognized outside earnings, or when they arise from the initial recognition of a business combination.

The asset tax (IMPAC) expected to be recovered in future periods is recorded as an income tax credit and is presen-ted in the consolidated statement of financial position as a net amount in the balance of deferred income tax.

o. Earnings per share-La utilidad por acción común se calcula dividiendo la utilidad neta consolidada entre el promedio ponderado de ac-ciones comunes en circulación durante el año. No existen efectos que deriven de acciones potencialmente dilutivas.

5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The Company’s management uses certain estimates and assumptions based on historical experience and other factors that are considered to be relevant for the preparation of the consolidated financial statements. Actual results may differ from these estimates.

The estimates and assumptions are continuously reviewed. Amendments to accounting estimates are recognized in the period in which the amendment is performed and future periods if the amendment affects both current and sub-sequent periods.

Below are the estimates performed by management in the application of the Company’s accounting policies, and that may have a significant effect on the consolidated financial statements.

i. Recognition of revenues related to the Loyalty Program, see Note 4m. ii. Determination of finance leases, mainly including the term based on the extension clauses, discount rates, alloca-tion of building components of the total agreement, see Notes 4i. and 11. iii. Recoverability of intangible assets with indefinite useful lives, see Notes 4g. and 10. iv. Impairment of fixed assets, see Note 4h. v. Useful lives of property, furnishings and equipment, see Notes 4e. and 9. vi. Non-interest bearing long-term liability payable, see Note 15.

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6. CASH AND CASH EQUIVALENTSCash and cash equivalents at the end of the reporting period are as follows:

2015 2014

CASH AND BANKS $ 5,014 $ 1,283

CASH EQUIVALENTS 17,661 1,390

$ 22,675 $ 2,673

As of December 31, 2015, the Company had $17,112 related to amounts obtained from its bank and security market debt certificates obtained during that month, which was used in early January 2016 to pay for the acquisition of CCM.

7. TRADE ACCOUNTS AND OTHER ACCOUNTS RECEIVABLETrade and other accounts receivable are as follows:

2015 2014

Trade accounts receivable, net $ 2,166 $ 2,844

Sundry debtors 500 289

Recoverable tax 1,032 560

Creditable tax 2,033 2,014

Other 90 54

Other accounts receivable 3,655 2,917

$ 5,821 $ 5,761

Trade accounts receivableTrade accounts receivable are classified as accounts receivable; therefore, they are valued at amortized cost.

In determining the recoverability of accounts receivable, the Company’s management considers any change in the credit quality of the account from the date at which the credit was initially granted to the end of the reporting period.

Trade accounts receivable disclosed above include past-due amounts at the end of the reporting period (see below for ageing analysis). The Company has recognized an allowance for doubtful accounts for some customers related to leases of commercial premises.

The analysis of the age of non-impaired accounts receivable as of December 31, 2015 and 2014 is as follows :

2015 2014

CURRENT BALANCE $ 738 $ 433

30 DAYS 194 54

31 TO 60 DAYS 22 121

OVER 61 DAYS 1,212 2,236

TRADE ACCOUNTS RECEIVABLE, NET $ 2,166 $ 2,844

The movement in the allowance for impairment and other accounts receivable is analyzed as follows:

2015 2014

BALANCE AT BEGINNING OF THE YEAR $ 2 $ 12

ALLOWANCE FOR DOUBTFUL ACCOUNTS 5 5

ACCOUNTS RECEIVABLE WRITE-OFFS (2) (15)

FINAL BALANCE AS OF DECEMBER 31 $ 5 $ 2

Recoverable taxRecoverable tax balances mainly consist of value added tax in 2015 and favorable income tax resulting from filing estimated tax payments pursuant to the tax provisions in effect in 2014.

Creditable taxThe Company’s main creditable tax arise from value added tax and special tax on production and services, and for such tax to be creditable, they must have been effectively paid.

8. INVENTORIES

2015 2014

MERCHANDISE FOR SALE $ 16,658 $ 15,191

MERCHANDISE IN TRANSIT 931 954

INVENTORIES $ 17,589 $ 16,145

9. PROPERTY, FURNITURE AND EQUIPMENT, NET

Balance as of December 31, 2014 Additions Disposals Balance as of

December 31, 2015

INVESTMENT:

LAND $ 13,695 $ 103 ($ 152) $ 13,646

BUILDINGS AND CONSTRUCTION 27,670 670 (200) 28,140

FURNITURE AND OFFICE EQUIPMENT 19,052 942 (669) 19,325

WORK IN PROGRESS 191 137 328

TOTAL INVESTMENT 60,608 1,852 (1,021) 61,439

DEPRECIATION:

BUILDING AND CONSTRUCTION (5,271) (578) 18 (5,831)

FURNITURE AND OFFICE EQUIPMENT (10,689) (1,332) 612 (11,409)

TOTAL ACCUMULATED DEPRECIATION (15,960) (1,910) 630 (17,240)

NET INVESTMENT $ 44,648 $ (58) ($ 391) $ 44,199

Balance as of December 31, 2013 Additions Disposals Balance as of

December 31, 2014

INVESTMENT:

LAND $ 13,629 $ 185 ($ 119) $ 13,695

BUILDINGS AND CONSTRUCTION 26,366 1,441 (137) 27,670

FURNITURE AND OFFICE EQUIPMENT 17,965 1,406 (319) 19,052

WORK IN PROGRESS 88 103 191

TOTAL INVESTMENT 58,048 3,135 (575) 60,608

DEPRECIATION:

BUILDING AND CONSTRUCTION (4,749) (539) 17 (5,271)

FURNITURE AND OFFICE EQUIPMENT (9,530) (1,302) 143 (10,689)

TOTAL ACCUMULATED DEPRECIATION (14,279) (1,841) 160 (15,960)

NET INVESTMENT $ 43,769 $ 1,294 ($ 415) $ 44,648

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Depreciation expense for the years ended as of December 31, 2015 and 2014, amounted to $1,912 and $1,841, res-pectively.

The balance of buildings and construction include the recognized portion of finance leases and their related accu-mulated depreciation, which amounted to $2,117 and ($697) as of December 31, 2015 and $2,020 and ($639) as of December 31, 2014, respectively.

10. INTANGIBLE ASSETS

2015 2014

ASSIGNMENT OF LEASE AGREEMENT RIGHTS (1) $ 8,834 $ 8,834

NON-COMPETE AGREEMENT (2) 2,109 2,109

OTHER INTANGIBLE ASSETS (2) 1,407 1,150

12.350 12,093

ACCUMULATED AMORTIZATION (1,792) (1,549)

INTANGIBLE ASSETS, NET $ 10,558 $ 10,544

(1) INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIVES.(2) INTANGIBLE ASSETS WITH DEFINED USEFUL LIVES.

The useful lives used for the calculation of amortization in respect of the non-compete agreement are 10 years.

As part of its information technology transformation project, the Company made disbursements for the acqui-sition and development of its SAP computer system, which became operational on January 1, 2013, the date it began to amortize the related intangible asset.

The Company concluded that no impairment adjustments existed according to the impairment calculations on its intangible assets as of December 31, 2015 and 2014.

The assignment of lease agreement rights as of December 31, 2015 and 2014, represent the rights acquired by Soriana to lease for an indefinite period of time, 176 points of sale located in different geographical areas of the country.

There were no borrowing costs for capitalized loans related to qualifying intangible assets for the years ended December 31, 2015 and 2014.

The discount and perpetual growth rates used to assess the possible impairment of intangible assets with indefi-nite useful lives for the periods ended December 31, 2015 and 2014 are as follows:

A. 2015 2014

DISCOUNT RATE 12.6% 10.1%

PERPETUAL GROWTH RATE 3.4% 3.3%

For purposes of the calculation of the recoverable value of supermarket stores, discount rates before tax are used and applied to cash flows before tax.

The Company’s management believes that any reasonably possible change in the factors used in the evaluation of the recoverable value will not cause the value of supermarket stores to exceed their recoverable value.

11. OTHER LONG-TERM LIABILITIES Balances of other long-term liabilities consist mainly of finance leases.

The Company has entered into real property lease agreements with third parties, which have binding terms from 5 to 20 years extendable or renewable for at least a similar period. Payments for these agreements include fixed mini-

mum payments as well as in certain cases variable terms based on a percentage of sales of the Company’s stores.

The amounts of minimum rentals that will be paid during the following years for finance leases, and the present value thereof which represents a recognized financial lease liability, are as follows:

Finance leases minimun rental payments

2016 $ 45 $ 222

2017 47 220

2018 44 212

2019 38 202

2020 41 201

2021 45 201

2022 AND THEREAFTER 1,541 3,577

$ 1,801 $ 4,835 The amounts charged to profit or loss related to payments for leases of property as of December 31, 2015 and 2014 amounted to $ 341 and $ 358, respectively, which include depreciation, interest expense and contingent lease pay-ments.

During 2015, the Company did not have any acquisitions of property, furniture and equipment under finance leases.

12. TRANSACTIONS AND BALANCES WITH RELATED PARTIESBalances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated in consolidation.

The remuneration and benefits for key management personnel during the year ended December 31, 2015 and 2014 were $103 and $111, respectively, which comprise of base salaries and other benefits. There is no agreement or pro-gram to involve employees in Soriana’s equity.

The Company conducted transactions with related parties, mainly stockholders which resulted in lease income of $ 29 and $ 30 for the years ended December 31, 2015 and 2014, respectively, and purchases of merchandise for sale and freight services of $ 461 and $ 465 for the years ended December 31, 2015 and 2014, respectively. The balances payable to related parties as of December 31, 2015 and 2014 were $12 and $53 respectively, are included in trade accounts payable in the consolidated statements of financial position.

13. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGESSoriana has a natural asset position in Mexican pesos (MXN), and it needs U.S. dollars (USD) for the purchase (acqui-sition time) of some inventories for sale, and for accounts payable (upon settlement) in U.S. dollars. To mitigate the exchange rate risk between the MXN/USD, it has contracted a foreign exchange derivative financial Instrument (DFI).

As of December 31, 2015, the fair value of the aforementioned derivative financial instrument is as follows:

TYPE OF DERIVATIVE Contract date Expiration Counterparty Currency Notional (Millions

of USD) Fair Value (Millions of pesos)

FX FORWARD December 2015 February 2016 HSBC USD $9.7 $6.2

Soriana has designated the aforementioned derivative financial instrument as a cash flow hedge model under the terms permitted by IFRS, and has documented each hedging relationship, formally establishing the objectives, the strategy of Management to hedge the risk, the identification of the hedging instrument, the nature of the risk to be hedged, and the methodology of the effectiveness assessment.

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As of December 31, 2015, the effectiveness of these hedges is highly effective, as changes in the fair value and cash flows of the primary position are offset within a range of 80%-125%. The method to measure effectiveness is the ratio analysis, using a hypothetical derivative, this method consists of comparing the changes in the fair value of the hedging instrument with the changes in the fair value of the hypothetical derivative that would result in a perfect hedge of the hedged item. In addition, as of December 31, 2015, in “Other comprehensive income items”, amounts of $6 relating to the effective portion of hedges, were recorded.

Finally, as of December 31, 2015, the capital amounts reclassified to profit or loss for maturities amount to $ 135 in financial cost and $ 31 in cost of sales

14. FINANCIAL INSTRUMENT RISK MANAGEMENTThe Company is exposed to different financial risks inherent to its operation, which are mainly: a) market risk (foreign exchange and interest rates, b) liquidity risk and c) credit risk, for which it seeks to manage the potential negative effects thereof in its financial performance. These risks are evaluated through a risk management program according to the valuation of these risks and internal guidelines.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, financial obligations, finance lease liabilities and derivative financial instruments. The carrying amounts of these financial assets and liabilities approximate their fair value due to their short-term maturities or because they were issued during December 2015 and for derivative financial instruments are measured at their fair value.

a) Market risk

i . E x c h a n g e r i s kAs of December 31, 2015 and 2014, the exchange rate was $ 17.34 and $ 14.73 nominal pesos per U.S. dollar, res-pectively. At the issuance of this consolidated financial statements, the U.S. dollar was $17.40 nominal pesos per U.S. dollar.

The amounts shown in this note are stated in millions of U.S. dollars (US$), as it is the prevailing currency for the Company’s foreign currency transactions. As of December 31, the Company’s financial assets and liabilities in foreign currency are as follows:

2015 2014

CURRENT FINANCIAL ASSETS US$ 5.4 US$ 3.9

SHORT-TERM FINANCIAL LIABILITIES (109.5) (120.5)

LONG-TERM FINANCIAL LIABILITIES (50.1) (76.7)

NET LIABILITY POSITION OF FINANCIAL INSTRUMENTS (US$ 154.2) (US$ 193.3)

EQUIVALENT IN MILLIONS OF MEXICAN PESOS ($ 2,674) ($ 2,847)

The Company’s main foreign currency transactions are:

2015 2014

PURCHASES US$ 445 US$ 328

EQUIVALENT IN MILLIONS OF MEXICAN PESOS $ 7,026 $ 3,388

A substantial devaluation of the Mexican peso against the U.S. dollar exchange rate may affect the economic perfor-mance of the country, which could have an impact of a lower level of consumption and consequently the Company’s revenues would be affected. However, the main operation of the Company does not have a close relationship with fluctuations of the Mexican peso against the U.S. dollar exchange rate; therefore, the potential risk derived from this factor is of a minor impact to the Company’s current operations. Considering the net liability position in U.S. dollars as of December 31, 2015 shown in the above table, if a movement of 0.50 Mexican pesos arises at the exchange rate of the U.S. dollar, where all other assumptions remained constant, there would be a favorable or unfavorable impact to the Company’s net income of $55, net of tax.

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exchange risk managementThe Company manages this type of risk with hedging transactions, contracting derivative financial instruments such as forwards to mitigate its forecasted transactions. A hedge is considered highly effective when changes in fair value or cash flows of the underlying directly attributable to the hedged risk, are offset by the changes in the fair value or the cash flows of the hedging instrument.

The Company prepared a sensitivity analysis considering different scenarios in which losses may occur in the valua-tion of derivative financial instruments (Fx Forwards) at December 31, 2015.

Scenarios

December 31,2015 -10% -5% 5% 10%

USD EXCHANGE RATE 17.34 15.61 16.47 18.21 19.07

FAIR VALUE 6.2 millones (10.6) (2.2) 14.6 22.9

VARIATION (16.8) (8.4) 8.4 16.8

i i . I n t e r e s t r a t e r i s kThrough its debt securities program, the Company issued long-term debt securities bearing interest at 28-day inter-bank interest rate (TIIE) plus a spread. In addition, in order to finance the acquisition of CCM, the Company, through its main subsidiary Tiendas Soriana, S.A. de C.V., has issued long-term bank loans with financial institutions that also have TIIE rate as reference to determine the interest rate. Therefore, the Company’s exposure to interest rate risk for its debt is related to changes in the Mexican TIIE.

The Company’s entire interest related debt was contracted at a variable rate.

In recent years, the TIIE rate has remained at stable levels, which results from the consistency and continuity in the country’s macroeconomic policies, reason by which, the Company’s management has considered that the risk in that variable is relatively low. A variation in the TIIE rate could cause a change in its interest expense, which is associated with levels of debt.

If a 25-point basis variation in the TIIE rate occurred, where all other assumptions remained constant, there would be a favorable or unfavorable impact to the Company’s net income of $55, net of tax.

b) Liquidity riskThe Company has issued debt through its current debt securities program; therefore, it must access the Mexican debt market. In addition, the Company, in order to finance the acquisition of CCM, has issued long-term bank loans. To date, the Company has been able to place its debt issuance in the market successfully on an ongoing basis in recent years and has been able to access credit lines with financial institutions. Notwithstanding the foregoing, the Company cannot guarantee that in the future it will have access to financial resources, which could have an adverse effect on its operating results and financial position.

The Company has authorized uncommitted credit lines with different banks, which allow it to address any additional liquidity requirements.

The Company, through its Treasury and Finance departments, performs cash flow projections, monitoring their behavior and treasury levels on a daily basis, which allows anticipating any event that may jeopardize its liquidity levels to be able to meet different payment obligations. In addition, such cash flow projections and the daily treasury monitoring allow the Company to be able to plan and anticipate the required actions to cover any cash flow needs it may require in the future.

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c) Credit riskThe concentration of credit risk with respect to accounts receivable is very limited, as sales are mainly conducted through its supermarket stores with the general public in cash; therefore, it has a diversified customer base, which significantly reduces credit risk.

The Company considers that the allowance for doubtful accounts adequately covers accounts receivable that could represent a risk of recovery, which is reviewed regularly for such allowance to be adjusted, if necessary.

d) Capital ManagementThe Company manages its capital to ensure it will be able to continue as a going concern, seeking for balancing the return to its stockholders at a low level of risk, through the optimization of its debt and equity structure. Historically, the Company’s strategy has been to reinvest in general terms its earnings allocating resources to generate further organic growth, in pursuit of maintaining a financial structure without debt, except for the financing it utilized for the acquisition of CCM’s supermarket stores.

The Board of Directors annually reviews the capital structure of the Company.

The Company’s capital structure consists of net debt (debt generated through the debt securities program and the short term promissory note reduced by cash and bank balances, as needed) and the capital of the Company (inclu-ding issued capital stock, capital reserves and retained earnings).

15. DEBT SECURITIES AND SHORT AND LONG – TERM DEBT In May 2013, the Company’s management obtained from the National Banking and Securities Commission (CNBV), authorization to start a new program of short and long term debt securities on a revolving basis. The period for issuan-ces under the program shall be five years and the amount authorized for the issuance of short-term debt securities is up to $6 billion pesos, or its equivalent in investment units (UDIS). In November 2015, the CNBV authorized the Company to extend the authorized amount of the program up to $25 billion pesos or its equivalent in UDIS on a revolving basis. The amount of issuance of debt securities is up to 6 billion pesos. In addition, the Company has issued long-term bank loans with financial institutions.

As of December 31, 2015 and 2014, the short and long-term debt of the Company includes the following:

2015 Interest RATE (*) 2014

DEBT SECURITIES (1) $ 7,090 3.86%

UNSECURED LOAN (BANORTE) (2) 5,000 4.66%

UNSECURED LOAN (BANK OF TOKYO)(3) 5,022 3.74%

TOTAL $ 17,112 4.06%

LESS- CURRENT PORTION (4) $ 388

TOTAL LONG-TERM DEBT $ 16,724

NON-INTEREST BEARING LONG-TERM LIABILITY (5) $ 870 $ 1,131

LONG-TERM DEBT $ 17,594 $ 1,131

(*) WEIGHTED AVERAGE OF RATES EFFECTIVE AS OF DECEMBER 31, 2015. (1) CORRESPONDING TO DEBT SECURITIES OF $7,100 AT NOMINAL VALUE, BEARING VARIABLE INTEREST BASED ON TIIE PLUS A SPREAD OF 0.55%, OFFSETTING INTEREST EVERY 28 DAYS, AND WITH A FINAL MATURITY OF PRINCIPAL IN DECEMBER 2020.(2) CORRESPONDING TO AN UNSECURED LOAN GRANTED BY BANCO MERCANTIL DEL NORTE, S. A., WITH A TERM OF 48 MONTHS, BEARING VARIABLE INTEREST BASED ON TIIE PLUS A SPREAD OF 1.25%, OFFSETTING INTEREST ON A MONTHLY BASIS, AND WITH A FINAL MATURITY OF PRINCIPAL IN NOVEMBER 2019. (3) CORRESPONDING TO A PORTION OF A LONG-TERM UNSECURED LOAN GRANTED BY BANK OF TOKYO-MITSUBISHI UFJ, LTD IN THE AMOUNT OF $5,040 AT NOMINAL VALUE, WITH A TERM OF 49 MONTHS, BEARING VARIABLE INTEREST BASED ON TIIE PLUS A SPREAD OF 0.43%, PAYING INTEREST ON A QUARTERLY BASIS, AND WITH A FINAL MATURITY OF PRINCIPAL IN DECEMBER 2019.(4) CORRESPONDING TO THE CURRENT PORTION OF AN UNSECURED LOAN GRANTED BY BANK OF TOKYO-MITSUBISHI UFJ, LTD IN THE AMOUNT OF $5,040 AT NOMINAL VALUE, THE CURRENT PORTION MATURES IN DECEMBER 2016.(5) NON-INTEREST BEARING LIABILITY ARISING FROM THE AGREEMENT WITH BANAMEX IN THE AMOUNT OF US$50.2 AND US$76.7 MILLION AS OF DECEMBER 31, 2015 AND 2014, RESPECTIVELY. THE TERM AND TOTAL PAYMENT OF THIS PROVISION ARE SUBJECT TO THE OPERATING RESULTS OF SORIBAN FOR THE FIRST TEN YEARS OF OPERATION, WHICH BEGAN IN 2007. IN THE THIRD QUARTER OF 2015, THE COMPANY REDUCED THE PROVISION ASSOCIATED WITH THIS NON-INTEREST BEARING LIABILITY IN THE AMOUNT OF $451 RELATED TO CERTAIN ESTIMATES MADE BY THE COMPANY’S MANAGEMENT BASED ON THE JOINT VENTURE CONTRACT WITH BANAMEX.

During 2016, interest payable relating to the outstanding debt as of December 31, 2015 is expected to be $746 with a principal payment of $388. As of December 31, 2015, interest-bearing long-term debt maturities, are as follows:

YEAR Payment of Principal Interest*

2017 $ 2,551 $ 689

2018 5,894 552

2019 5,875 291

2020 2,404 100

$ 16,724 $ 1,632

* INTEREST PAYABLE IS ESTIMATED BASED ON 28-DAY TIIE AT DECEMBER 31, 2015.

The Company’s stock and bank loan contracts set forth restrictions and the obligation to maintain certain financial ratios, which have been fulfilled as of December 31, 2015.

16. OTHER ACCOUNTS PAYABLE2015 2014

TAX PAYABLE $ 1,157 $ 1,262

OTHER ACCOUNTS PAYABLE 1,205 1,223

TOTAL OTHER ACCOUNTS PAYABLE $ 2,362 $ 2,485

17. EMPLOYEE BENEFITS Defined and vested benefit obligations, and seniority and retirement premiums are detailed below:

As of December 31, 2015

Retirement benefit Seniority PREMIUM Total

DEFINED BENEFIT OBLIGATIONS ($ 1) ($ 350) ($ 351)

PLAN ASSETS 1 29 30

UNFUNDED DEFINED BENEFIT (130) (130)

RECOGNIZED LIABILITY FOR THE YEAR ($ 130) ($ 321) ($ 451)

As of December 31, 2014

Retirement benefit Seniority PREMIUM Total

DEFINED BENEFIT OBLIGATIONS ($ 1) ($ 312) ($ 313)

PLAN ASSETS 3 34 37

UNFUNDED DEFINED BENEFIT (90) (90)

RECOGNIZED LIABILITY FOR THE YEAR ($ 88) ($ 278) ($ 366)

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The nominal economic hypothesis used were:

December 31

2015 2014

DISCOUNT RATE 6.75% 6.75%

SALARY GROWTH RATE 5.49% 5.49%

MINIMUM WAGE GROWTH RATE 3.91% 3.91%

RETURN ON PLAN ASSETS 6.75% 6.75%

Defined benefit obligations are detailed as follows:

2015 2014

BENEFIT PLAN FOR:

DEFINED BENEFIT RETIREMENT PLAN ($ 1) ($ 1)

SENIORITY PREMIUM (350) (312)

RECOGNIZED LIABILITY FOR THE YEAR ($ 351) ($ 313)

The status of the defined benefit pension plan is detailed as follows:

2015 2014

DEFINED BENEFIT OBLIGATION ($ 2) ($ 2)

PLAN ASSETS 3 3

RECOGNIZED ASSET FOR THE YEAR $ 1 $ 1

The reconciliation of defined benefit seniority premium liability/asset is detailed as follows:

As of December 31

2015 2014

OPENING BALANCE AS OF JANUARY 1 ($ 278) ($ 232)

SERVICE COST (28) (25)

NET INTEREST ON DEFINED BENEFIT LIABILITY (19) (17)

ACTUARIAL REMEASUREMENTS (25) (32)

PAYMENTS MADE 29 28

RECOGNIZED LIABILITY AT THE END OF THE YEAR ($ 321) ($ 278)

Below is a sensitivity analysis of the financial hypothesis which the Company’s actuary considers can generate the most probable impacts on the defined benefit obligation, namely the discount rate. The sensitivity analysis is perfor-med with 0.5% above/below the discount rate.

(%) Amount Differences

DISCOUNT RATE 6.25% $ 1 $ .039

6.75% 1 -

7.25% 1 .042

Below is a sensitivity analysis of the financial hypothesis which the Company’s considers can generate the most probable impacts on the defined benefit obligation, namely the discount rate and minimum wage growth rate. The sensitivity analysis is performed with 0.5% above and below related to the discount rate, for the minimum increase rate sensitivity analysis is made with 0.25%.


WAGE INCREASE RATE (3.66%): 6.25% $ 336 $ 13

6.75% 339 11

7.25% 366 16


WAGE INCREASE RATE (4.16%): 6.25% $ 334 $ 15

6.75% 361 11

7.25% 364 14 Estimated benefit payments in the following years are as follows:

Seniority PREMIUM Defined benefit retirement plan

2016 $ 27 $ 4

2017 27 4

2018 27 4

2019 27 4

2020 30 4

2021 TO 2025 197 25

18. STOCKHOLDERS’ EQUITY As of December 31, 2015 and 2014, the Company’s capital stock is comprised of 1,800,000,000 no par value shares, fully subscribed and paid; which correspond to series B and represent the minimum fixed capital, without right of with-drawal.

Pursuant to a General Ordinary Stockholders’ Meeting on April 29, 2014, a cash dividend equivalent to $0.3888 Mexican pesos (nominal value) per share was declared, which was paid in one payment during August 2015.

Net income for the year is subject to the statutory provision that requires that 5% of the profits of each year be trans-ferred to the legal reserve, until such reserve equals 20% of capital stock. As of December 31, 2015 and 2014 the legal reserve amounts to $413 and is included in retained earnings.

Stockholders’ equity, except for restated paid-in capital (CUCA for its acronym in Spanish) and tax retained earnings from the net tax income account (CUFIN for its acronym in Spanish) will be subject to ISR payable by the Company at the rate in effect upon distribution when it does not arise from such account. Any tax paid on such distribution may be credited against annual and estimated ISR of the year in which the tax on dividends is paid and the following two fiscal years. The balance of CUCA and CUFIN as of December 31, 2015 amounted to $11,576 and $19,952, respectively.

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19. OTHER REVENUES 2015 2014

LEASE INCOME $ 1,192 $ 1,076

SERVICE REVENUES 744 729

OTHER INCOME 661 407

$ 2,597 $ 2,212

20. INTEREST EXPENSE, NET 2015 2014

INTEREST EXPENSE ($ 274) ($ 322)

INTEREST INCOME 177 140

EXCHANGE LOSS, NET (334) (291)

(431) (473)

CAPITALIZED INTEREST IN PROPERTY, FURNITURE AND EQUIPMENT 6 9

($ 425) ($ 464)

21. INCOME TAXSoriana and its subsidiaries are subject to ISR at a rate of 30%.

Beginning in 2008, the IMPAC Law was repealed, allowing, under certain circumstances, the recovery of this tax paid in the ten fiscal years prior to that in which ISR was paid for the first time, under the terms of the tax provisions.

The reconciliation of the statutory and effective ISR rates for the years ended December 31, 2015 and 2014 is as follows:

2015 2014

INCOME BEFORE INCOME TAX $ 5,400 $ 4,578

STATUTORY INCOME TAX RATE

(30% FOR 2015 AND 2014) $ 1,620 $ 1,373

ADD (LESS) EFFECT ON INCOME TAX FOR:

COMPREHENSIVE FINANCING INCOME BASE DIFFERENCES 82 171

NON-DEDUCTIBLE EXPENSES AND NON-TAXABLE INCOME, NET 90 192

INCREASE IN TAX VALUE OF PROPERTY, FURNITURE AND EQUIPMENT (190) (220)

CHANGE IN TAX RATES

PERMANENT DIFFERENCES FROM TAX CHANGES 49 (706)

OTHER PERMANENT DIFFERENCES, NET 23 64

TOTAL INCOME TAX IN EXPENSE $ 1,674 $ 874

EFFECTIVE RATE 31.0% 19.1%

The main items that give rise to the deferred income tax liability are:

2015 2014

PROPERTY, FURNITURE AND EQUIPMENT $ 3,578 $ 4,678

INVENTORIES 194 145

OTHER (*) 5,454 3,783

DEFERRED INCOME TAX PROVISION $ 9,226 $ 8,606

* Includes benefit from tax loss carryforwards and IMPAC.

Deferred income tax as of December 31, 2015 and 2014 was recognized as follows:

2015 2014

DEFERRED TAX OPENING BALANCE $ 8,606 $ 8,684

PROVISION OF THE YEAR 620 (78)

DEFERRED INCOME TAX PROVISION $ 9,226 $ 8,606

Tax loss carryforwards are recoverable under certain requirements. As of December 31, 2015, years of expiration and restated amounts are as follows:

YEAR SENIORITY PREMIUM DEFINED BENEFIT RETIREMENT PLAN

2016 TO 2017 $ 16 $ 1

2018 8 3

2019 19

2020 21

2021 12

2022 53

2023 82

2024 50

2025 73

TOTAL $ 24 $ 314

Tax-loss carryforwards can be applied solely to offset taxes of each one of the entities generating them.

22. COMMITMENTS AND CONTINGENCIES a. CommitmentsThe Company has commitments for operating leases of real property for average terms of 15 years, which are re-newable for a similar period, some of which have a fixed portion and a variable portion determined based on percen-tages of sales of its stores. Such commitments amount to $6,635 as of December 31, 2015.

b. ContingenciesSome subsidiaries are currently defendants in agricultural lawsuits regarding the acquisition of land, and commercial lawsuits, which are mainly in the stage of presenting evidence. These contingencies amount to approximately $271 (nominal value) as of December 31, 2015. The Company has not recorded any provision with respect to these contin-gencies, since its legal advisors believe there are high possibilities of obtaining a favorable ruling.

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Investors Relationsrodrigo Benet c.

[email protected]

Marcela Muñoz [email protected]

arturo ledesMa M. [email protected]

Independets AuditorsGalaz, Yamazaki, Ruiz Urquiza, S.C. Lázaro Cárdenas 2321 Poniente, PB

Col. Residencial San Agustín San Pedro Garza Garcia, N.L.

México, C.P. 66260

CorporaTE OFFICES Alejandro de Rodas 3102-A

Col. Cumbres 8° SectorMonterrey, N.L.

México, C.P. 64610

THIS 2015 ANNUAL REPORT OF ORGANIzACION SORIANA CAN CONTAIN CERTAIN FORWARD-LOOKING INFORMATION RELATING TO THE

PERFORMANCE OF THE COMPANY AND ITS SUBSIDIARIES, WICH SHOULD BE CONSIDERED AS ESTIMATES MADE IN GOOD FAITH. THESE

EXPECTATIONS REFLECT MANAGEMENT’S OPINIONS, BASED ON CURRENT AVAILABLE INFORMATION. RESULTS ARE SUBJECT TO FUTURE AN

UNCERTAIN EVENTS, WHICH COULD HAVE AN MATERIAL IMPACT ON THE COMPANY’S ACTUAL PERFORMANCE.

www.soriana.com

INFORMATION FOR INVESTORS

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During the year ended December 31, 2015, Management followed the practice of contracting insurance for third-par-ty liabilities, material transport and fleets of cars and trucks. In relation to the coverage of real estate, the Company contracted an insurance policy with basic coverage of fire, hydrometeorological phenomena and earthquakes for all the stores, distribution centers and corporate offices, including buildings, inventory, equipment and furniture.

23. SEGMENT FINANCIAL INFORMATIONThe segment financial information determined by the Company has been prepared according to IFRS 8, Operating Segments. The Company prepares the information for senior management and for their decision-making based on supermarket stores, which are its main line of business; therefore, it considers it as its only operating segment.

The Company’s main business is the sale of grocery products, perishable goods, clothing, and general merchandise to the general public through its supermarket stores. The Company operates solely in Mexico; therefore, it is considered its only geographical market.

24. AUTHORIZATION TO ISSUE THE CONSOLIDATED FINANCIAL STATEMENTS The issuance of the accompanying consolidated financial statements was authorized on March 31, 2016, by Lic. Sergio Fernando Martínez San Germán, Chief Administrative Officer, and C.P. Jorge Alberto Reyes Mora, Chief Con-troller. These consolidated financial statements are subject to the approval of the ordinary stockholders meeting, where they may be modified, based on provisions set forth in the Mexican General Corporate Law.

Lic. Sergio Fernando Martínez San Germán C.P. Jorge Alberto Reyes Mora Chief Administrative Officer Chief Controller

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O R G A N I Z A C I Ó N S O R I A N AA L E J A N D R O D E R O D A S 3 1 0 2 - A / C O L . C U M B R E S 8 V O S E C T O R / M O N T E R R E Y, N . L . / C . P. 6 4 6 1 0 , M É X I C O

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