UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 20-F



| |  ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
    OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | --------------------------------------------------------------------------------------------------



OR



| | x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ----------------------------------------------------------------------------------------



For the fiscal year ended December 31,
2016OR



| |  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
| | - | --------------------------------------------------------------------------------------------



OR



| |  ̈ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
| | - | -----------------------------------------------------------------------------------------------



Date of event requiring this shell company
report ____________For the transition period from ____________ to ___________Commission File Number: 333-7480INDUSTRIAS BACHOCO, S.A.B. DE C.V.(Exact name of Registrant as specified in its charter)Bachoco Industries

(Translation of Registrant’s name into
English)The United Mexican States(Jurisdiction of incorporationor organization)Avenida Tecnologico 401

Ciudad Industrial, 38010

Celaya, Guanajuato, Mexico.(Address of principal executive offices)
Daniel Salazar Ferrer

Avenida Tecnologico No. 401

Ciudad Industrial C.P. 38010

Celaya, Guanajuato, Mexico

Telephone: (+011-52-461-618-3555)

Facsimile: (+011-52-461-611-6502)

Email: inversionistas@bachoco.net

(Name, Telephone, E-mail and/or Facsimile
number and Address of Company Contact Person)

Securities registered or to be registered
pursuant to Section 12(b) of the Act:



|Title
    of each class                                                  |  | Name
    of each exchange on which registered
|------------------------------------------------------------------------ |  | ---------------------------------------------
|American Depositary Shares, each representing
    twelveSeries B Shares. |  | New York Stock Exchange                      



Securities registered or to be registered
pursuant to Section 12(g) of the Act: NoneSecurities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None



Indicate the number of outstanding Shares
of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:



Series B Capital Stock:       600,000,000
Shares



Indicate by check mark if the registrant is
a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.



Yes  ̈ No
x



If this report is an annual or transition
report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.



Yes x No
 ̈



Note: Checking the box above will not
relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
from their obligations under those Sections.



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:



Yes x No
 ̈



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files).



Yes x No
 ̈



Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer,  a non-accelerated filer, or an emerging growth company. See definition of
“large accelerated filer”, “accelerated filer”, and “emerging growth
company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer  ̈  Accelerated
filer x           Non-accelerated
filer  ̈

Emerging
growth company  ̈



If an emerging growth company that prepares its financial statements
in accordance with U.S. GAAP, indicate by check mark if the registrant has elected no to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



† The term "new or revised
financial accounting standard" refers to any update issued by the Financial Accounting Standards Boards to its
Accounting Standards Codification after April 5, 2012.



Indicate by check mark which basis of accounting
the registrant has used to prepare the financial statements included in this filing:



|U.S. GAAP  ̈ | International Financial Reporting Standards as issued
    by theInternational Accounting Standards Board  x | Other  ̈
|----------- | ----------------------------------------------------------------------------------------------------------- | -------



If “Other” has been checked in
response to the previous question, indicate by check mark which financial statements item the registrant has elected to follow:



Item 17  ̈ Item 18  ̈



If this is an annual report, indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes  ̈ No
x
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)



Indicate by check mark whether the registrant
has filed all documents and reports required to be filed by Sections 12, 23 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by the court.



Yes  ̈ No
 ̈













TABLE
OF CONTENTS



|         |    |                                                         | Page
|-------- | -- | ------------------------------------------------------- | ----
|         |    |                                                         |     
|Part I   |    |                                                         | 7   
|Item 1.  |    | Identity of Directors, Senior Management and Advisers   | 7   
|Item 2.  |    | Offer Statistics and Expected Timetable                 | 7   
|Item 3.  |    | Key Information                                         | 7   
|A.       |    | Selected Financial Data                                 | 7   
|B.       |    | Capitalization and Indebtedness                         | 10  
|C.       |    | Reasons for the Offer and Use of Proceeds               | 10  
|D.       |    | Risk Factors                                            | 10  
|Item 4.  |    | Information of the Company                              | 15  
|A.       |    | History and Development of the Company                  | 15  
|B.       |    | Business Overview                                       | 17  
|C.       |    | Organizational Structure                                | 26  
|D.       |    | Property, Plant and Equipment                           | 26  
|ITEM 4.  | A. | Unresolved Staff Comments                               | 28  
|Item 5.  |    | Operating and Financial Review and Prospects            | 28  
|A.       |    | Operating Results                                       | 28  
|B.       |    | Liquidity and Capital Resources                         | 40  
|C.       |    | Research and Development, Patents and Licenses, etc.    | 45  
|D.       |    | Trend Information                                       | 45  
|E.       |    | Off-Balance Sheet Arrangements                          | 46  
|F.       |    | Tabular Disclosure of Contractual Obligations           | 46  
|G.       |    | Safe Harbor                                             | 47  
|Item 6.  |    | Directors, Senior Management and Employees              | 47  
|A.       |    | Directors and Senior Management                         | 47  
|B.       |    | Compensation                                            | 54  
|C.       |    | Board Practices                                         | 54  
|D.       |    | Employees                                               | 55  
|E.       |    | Share Ownership                                         | 55  
|Item 7.  |    | Major Stockholders and Related Party Transactions       | 56  
|A.       |    | Major Shareholders                                      | 56  
|B.       |    | Related Party Transactions                              | 57  
|C.       |    | Interests of Experts and Counsel                        | 58  
|Item 8.  |    | Financial Information                                   | 59  
|A.       |    | Consolidated Statements and Other Financial Information | 59  
|B.       |    | Significant Changes                                     | 60  
|Item 9.  |    | The Offer and Listing                                   | 60  
|A.       |    | Offer and Listing Details                               | 60  
|B.       |    | Plan of Distribution                                    | 61  
|C.       |    | Markets                                                 | 61  
|D.       |    | Selling Shareholders                                    | 61  
|E.       |    | Dilution                                                | 61  
|F.       |    | Expenses of the Issue                                   | 61  
|Item 10. |    | Additional Information                                  | 61  
|A.       |    | Share Capital                                           | 61  
|B.       |    | Memorandum and Articles of Association                  | 61  
|C.       |    | Material Contracts                                      | 69  
|D.       |    | Exchange Controls                                       | 69  
|E.       |    | Taxation                                                | 69  
|F.       |    | Dividends and Paying Agents                             | 75  



2







|G.                |    | Statement by Experts                                                         | 75
|----------------- | -- | ---------------------------------------------------------------------------- | --
|H.                |    | Documents on Display                                                         | 75
|I.                |    | Subsidiary Information                                                       | 75
|Item 11.          |    | Quantitative and Qualitative Disclosures about Market Risk                   | 75
|Item 12.          |    | Description of Securities Other Than Equity Securities                       | 77
|A.                |    | Debt Securities                                                              | 77
|B.                |    | Warrants and Rights                                                          | 77
|C.                |    | Other Securities                                                             | 77
|D.                |    | American Depositary Receipts                                                 | 77
|Part II           |    |                                                                              | 79
|Item 13.          |    | Default, Dividend Arrearages and Delinquencies                               | 79
|Item 14.          |    | Material Modifications to the Rights of Security Holders and Use of Proceeds | 79
|Item 15.          |    | Controls and Procedures                                                      | 79
|Item 16.          |    | [Reserved]                                                                   | 81
|ITEM 16.          | A. | Audit Committee Financial Expert                                             | 81
|ITEM 16.          | B. | Code of Ethics                                                               | 81
|ITEM 16.          | C. | Principal Accountant Fees and Services                                       | 81
|ITEM 16.          | D. | Exemptions from the Listing Standards for Audit Committees                   | 82
|ITEM 16.          | E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       | 82
|ITEM 16.          | F. | Changes in Registrant’s Certifying Accountant                                | 83
|ITEM 16.          | G. | Corporate Governance                                                         | 84
|ITEM 16.          | H. | Mine Safety Disclosure                                                       | 87
|Part III          |    |                                                                              | 87
|Item 17.          |    | Financial Statements                                                         | 87
|Item 18.          |    | Financial Statements                                                         | 87
|Item 19.          |    | Exhibits                                                                     | 87
|Index of Exhibits | 88



3







Introduction



Industrias Bachoco, S.A.B.
de C.V. is a holding company with no operations other than holding the stock of its subsidiaries. Our two main subsidiaries are
Bachoco, S.A. de C.V. (“BSACV”), located in Mexico, and Bachoco USA, LLC (“Bachoco USA”) located in the
United States of America (“United States” or “U.S.”).



References herein to “Bachoco,”
“we,” “us,” “our,” “its” or the “Company” are, unless the context
requires otherwise, to Industrias Bachoco, S.A.B. de C.V. and its consolidated subsidiaries as a whole.



Additionally, references
herein to “OK Industries” or “OK Foods” are, unless the context requires otherwise, to Bachoco USA and
its consolidated subsidiaries as a whole.



We are incorporated under
the laws of the United Mexican States (“Mexico”), but we have operations in both Mexico and the U.S. Our principal
executive offices are located in Mexico at Avenida Tecnologico 401, Ciudad Industrial, zip code 38010, Celaya, State of Guanajuato,
Mexico, and our main telephone number is +52 (461) 618 3500, or +52 (461) 618 3555.



Presentation of Information



Fiscal Year



The fiscal year for Bachoco
and its subsidiaries in Mexico ends in December each year. The fiscal year for Bachoco USA and its subsidiaries in the U.S. ends
in April each year. Notwithstanding the foregoing, for purposes of our consolidated financial statements, the accounting year
period for all the Company’s subsidiaries ends on December 31.



Currency



Except as otherwise indicated,
all data in the financial statements included below and in Item 18 (which together with the attached notes constitute our “Audited
Consolidated Financial Statements”) and the selected financial information included throughout this Form 20-F (this “Annual
Report”) have been presented in millions of nominal pesos unless otherwise indicated. References herein to “pesos”
or “$”are to the lawful currency of Mexico.



References herein to “U.S.
dollar” or “USD” are to the lawful currency of the United States of America.



This Annual Report contains
translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise
indicated, such U.S. dollar amounts have been translated from pesos at an exchange rate of $20.64 to USD1.00 (one U.S. dollar),
the exchange rate on December 31, 2016, according to the Banco de Mexico (the “Mexican Central Bank”).



Accounting Practices



In January 2009, the Comision
Nacional Bancaria y de Valores (Mexican Banking and Securities Commission or “CNBV”) published certain amendments
to the Rules for Public Companies and other participants in the Mexican Securities Market that require public companies to report
financial information in accordance with the International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”), effective as of January 1, 2012. Following these amendments, on
January 1, 2012, we adopted IFRS, meeting the CNBV requirements.



Our Audited Consolidated
Financial Statements included elsewhere in this Annual Report have been prepared in accordance with IFRS, as issued by the IASB.



4







The rules and regulations
of the Securities and Exchange Commission (the “SEC”), do not require foreign private issuers that prepare their financial
statements on the basis of IFRS (as published by the IASB) to reconcile such financial statements to accounting principles generally
accepted in the United States of America (“U.S. GAAP”). As such, while Bachoco has in the past reconciled its consolidated
financial statements prepared in accordance with Mexican Financial Reporting Standards (MFRS) to U.S. GAAP, those reconciliations
are no longer presented in Bachoco’s filings with the SEC.



Other References



Bachoco’s production
volume is measured in “tons”, which term refers to metric tons of 1,000 kilograms, equal to 2,204.6 pounds; the term
“billion” refers to one thousand million (1,000,000,000).



Non-GAAP Financial
Measures



The body of generally
accepted accounting principles is commonly referred to as “GAAP.” For this purpose, a non-GAAP financial measure is
generally defined by the SEC as a numerical measure of a company’s historical or financial performance, financial position
or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included
in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of comprehensive income,
statement of financial position or statement of cash flows (or equivalent statements) of the company; or includes amounts, or
is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure
so calculated and presented.



The Company discloses
in this Annual Report the so-called non-GAAP financial measures of EBITDA result, EBITDA margin, and Net debt. EBITDA result is
defined as profit before income tax expense (benefit), financial income (expense), net and depreciation. EBITDA margin is defined
as EBITDA result divided by total net revenues. Net debt is defined as long-term debt (including the current portion) plus short
term debt minus cash and cash equivalents, primary financial instruments and derivative financial instruments. The non-GAAP financial
measures of EBITDA result and EBITDA margin are not substitutes for the GAAP measure of profit for the year. Rather, these measures
are provided as additional information to complement the GAAP measure of profit for the year by providing further understanding
of the Company’s results of operations from management’s perspective. Additionally, the non-GAAP financial measure
of Net debt is not a substitute for the GAAP measure of Total debt. Rather, this measure is provided as additional information
to contemplate the GAAP measure of Total debt by providing further understanding of the Company’s debt obligations. Accordingly,
EBITDA result, EBITDA margin and Net debt should not be considered in isolation or as substitutes for an analysis of the Company’s
financial performance, liquidity or debt obligations.



Company management believes
that disclosure of these non-GAAP measures are an important supplemental measure of the Company’s operating performance
and debt obligations because investors, financial analysts and other interested parties frequently use EBITDA and Net debt in
the evaluation of other companies in the same industry in which the Company operates.



Market Data



This Annual Report contains
certain statistical information regarding the Mexican chicken, egg and balanced feed (or “feed”) markets. We have
obtained this information from a variety of sources, including but not limited to; Union Nacional de Avicultores (the National
Poultry Union or “UNA”), the Consejo Nacional de Fabricantes de Alimentos Balanceados y de la Nutricion Animal,
A.C. (or “CONAFAB”), the U.S. Department of Agriculture (or “USDA”), and the Mexican Central Bank,
among others.



Other sources of statistical
information used by the Company include Consejo Mexicano de Porcicultura (the Mexican Pork Council or “CMP”),
Secretaria de Agricultura, Ganaderia, Desarrollo Rural, Pesca y Alimentacion (Ministry of Agriculture, Livestock, Rural
Development, Fishing and Food or “SAGARPA”), among others.



5







The producers’ associations
rely principally on data provided by their members. Information for which no source is cited was prepared by us on the basis of
our knowledge of the Mexican chicken, egg, feed, turkey and swine markets and the wide variety of information available regarding
these markets. The methodology and terminology used by different sources are not always consistent, and data from different sources
are not readily comparable.



Forward-looking Statements



We may from time to time
make written or oral forward-looking statements in our periodic reports to the SEC on Forms 20-F and 6-K, in our Annual Report
to stockholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements
made by one of our officers, directors or employees to analysts, institutional investors, representatives of the media and others.



Examples of such forward-looking
statements include, but are not limited to: (i) projections of revenues, income (or loss), earnings (or loss) per share, capital
expenditures, dividends, capital structure or other financial items or ratios; (ii) statements of our plans, objectives or goals
or those of our management, including those relating to new contracts; (iii) statements about future economic performance; and
(iv) statements of assumptions underlying such statements. Words such as “believe,” “anticipate,” “plan,”
“expect,” “intend,” “target,” “estimate,” “project,” “predict,”
“forecast,” “guideline,” “should” and similar expressions are intended to identify forward-looking
statements but are not the exclusive means of identifying such statements.



Forward-looking statements
involve inherent risks and uncertainties, and a number of unexpected changes could cause actual results to deviate from our plans,
objectives, expectations, estimates and intentions. We recognize that the accuracy of our predictions and our ability to follow
through on our intentions depend on factors beyond our control. The potential risks are many and varied, but include unexpected
changes in: economic, weather and political conditions; raw material prices; competitive conditions; and demand for chicken, eggs,
turkey, balanced feed, beef and swine.

6









Part I



| | Item 1. | Identity of Directors, Senior Management and
    Advisers
| | ------- | ---------------------------------------------------------



Not applicable.



| | Item 2. | Offer Statistics and Expected Timetable
| | ------- | ---------------------------------------



Not applicable.



| | Item 3. | Key Information
| | ------- | ---------------



| | A. | Selected Financial Data
| | -- | -----------------------



The financial information
set forth below is derived from our Audited Consolidated Financial Statements, which are included in Item 18. We provide details
on the figures and year-to-year changes in our Audited Consolidated Financial Statements.



The tables below present
our key financial information for the fiscal years indicated. Except as otherwise indicated, the amounts are presented in millions
of nominal pesos, except per share amounts, which are presented in pesos.



STATEMENT OF PROFIT OR LOSS DATA



|In millions, for the year ended December 31,    |  | 2016 |         |  | 2016 |  |          | 2015 |  |  | 2014     |   |  | 2013 |          |   | 2012 | 
|----------------------------------------------- |  | ---- | ------- |  | ---- |  | -------- | ---- |  |  | -------- | - |  | ---- | -------- | - | ---- | 
|                                                |  | USD  |         |  | $    |  |          | $    |  |  | $        |   |  | $    |          |   | $    | 
|Net revenues                                    |  |      | 2,520.4 |  |      |  | 52,020.3 |      |  |  | 46,229.0 |   |  |      | 41,779.1 |   |      | 
|Cost of sales                                   |  |      | 2,065.7 |  |      |  | 42,635.1 |      |  |  | 36,847.5 |   |  |      | 32,495.0 |   |      | 
|Gross profit                                    |  |      | 454.7   |  |      |  | 9,385.2  |      |  |  | 9,381.5  |   |  |      | 9,284.1  |   |      | 
|General, selling and administrative expenses    |  |      | 234.9   |  |      |  | 4,847.9  |      |  |  | 4,323.4  |   |  |      | 3,781.3  |   |      | 
|Other(expenses) income, net                     |  |      | 12.6    |  |      |  | 260.2    |      |  |  | (4.6     | ) |  |      | (160.9   | ) |      | 
|Operating income                                |  |      | 232.4   |  |      |  | 4,797.6  |      |  |  | 5,053.5  |   |  |      | 5,341.9  |   |      | 
|Net finance income                              |  |      | 38.6    |  |      |  | 797.0    |      |  |  | 446.6    |   |  |      | 246.9    |   |      | 
|Income tax                                      |  |      | 79.6    |  |      |  | 1,643.4  |      |  |  | 1,680.6  |   |  |      | 1,656.1  |   |      | 
|Profit attributable to controlling interest     |  |      | 191.2   |  |      |  | 3,946.6  |      |  |  | 3,812.8  |   |  |      | 3,926.9  |   |      | 
|Profit attributable to non-controlling interest |  |      | 0.2     |  |      |  | 4.5      |      |  |  | 6.7      |   |  |      | 5.7      |   |      | 
|Profit for the year                             |  |      | 191.4   |  |      |  | 3,951.2  |      |  |  | 3,819.5  |   |  |      | 3,932.7  |   |      | 
|Basic and diluted earnings per share(1)         |  |      | 0.32    |  |      |  | 6.58     |      |  |  | 6.36     |   |  |      | 6.55     |   |      | 
|Basic and diluted earnings per ADR(2)           |  |      | 3.82    |  |      |  | 78.90    |      |  |  | 76.30    |   |  |      | 78.66    |   |      | 
|Dividends per share(3)                          |  |      | 0.063   |  |      |  | 1.300    |      |  |  | 1.500    |   |  |      | 0.000    |   |      | 
|Weighted average shares outstanding(4)          |  |      | 599,980 |  |      |  | 599,980  |      |  |  | 599,631  |   |  |      | 599,955  |   |      | 



| | (1) | Calculated based on the weighted average number of basic and
    diluted shares. No potentially dilutive shares exist in any of the years presented, for which reason, basic and diluted earnings
    per share are the same.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Each ADR represents twelve shares.                                                                                                                                                                                           
| | (3) | Dividends per share have been computed by dividing the total
    amount of dividends paid by the weighted average shares outstanding.                                                                                        



7









| | (4) | In thousands of shares.
| | --- | -----------------------



STATEMENT OF FINANCIAL POSITION DATA



|In millions as of December 31 |  | 2016 |         |  | 2016 |  |          | 2015 |  |  | 2014     |  |  | 2013 |          |  | 2012 | 
|----------------------------- |  | ---- | ------- |  | ---- |  | -------- | ---- |  |  | -------- |  |  | ---- | -------- |  | ---- | 
|                              |  | USD  |         |  | $    |  |          | $    |  |  | $        |  |  | $    |          |  | $    | 
|Total assets                  |  |      | 2,184.6 |  |      |  | 45,090.5 |      |  |  | 40,446.6 |  |  |      | 34,843.1 |  |      | 
|Cash and cash equivalents     |  |      | 758.7   |  |      |  | 15,659.8 |      |  |  | 14,046.3 |  |  |      | 11,036.1 |  |      | 
|Total liabilities             |  |      | 648.0   |  |      |  | 13,374.3 |      |  |  | 12,667.2 |  |  |      | 10,481.1 |  |      | 
|Short-term debt(1)            |  |      | 150.1   |  |      |  | 3,097.5  |      |  |  | 1,631.9  |  |  |      | 798.0    |  |      | 
|Long-term debt                |  |      | 46.0    |  |      |  | 950.4    |      |  |  | 2,495.1  |  |  |      | 1,652.5  |  |      | 
|Total stockholders’ equity    |  |      | 1,536.6 |  |      |  | 31,716.2 |      |  |  | 27,779.4 |  |  |      | 24,362.1 |  |      | 
|Capital stock                 |  |      | 56.9    |  |      |  | 1,174.4  |      |  |  | 1,174.4  |  |  |      | 1,174.4  |  |      | 



(1) Includes
notes payable to banks and current installments of long term debt.



MARGINS



|In percentage, for the years ended December 31: |  | 2016 |      |   | 2015 |  |      | 2014 |  |  | 2013 |   |  | 2012 |     
|----------------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | - |  | ---- | ----
|Gross margin                                    |  |      | 18.0 | % |      |  | 20.3 | %    |  |  | 22.2 | % |  |      | 16.5
|Operating margin                                |  |      | 9.2  | % |      |  | 10.9 | %    |  |  | 12.8 | % |  |      | 8.2 
|Net margin for the year                         |  |      | 7.6  | % |      |  | 8.4  | %    |  |  | 9.4  | % |  |      | 5.1 



Other Indicators



The tables set below present
key indicators.



VOLUME SOLD BY OPERATING SEGMENT



|In thousands of tons, as of December 31, |  | 2016 |         |  | 2015 |  |         | 2014 |  |  | 2013    |  |  | 2012 |        
|---------------------------------------- |  | ---- | ------- |  | ---- |  | ------- | ---- |  |  | ------- |  |  | ---- | -------
|Total sales volume:                      |  |      | 2,122.8 |  |      |  | 2,034.3 |      |  |  | 1,841.4 |  |  |      | 1,771.1
|Poultry                                  |  |      | 1,668.6 |  |      |  | 1,613.4 |      |  |  | 1,495.0 |  |  |      | 1,429.2
|Others                                   |  |      | 454.2   |  |      |  | 420.9   |      |  |  | 346.4   |  |  |      | 341.9  



Gross Domestic Product,
Inflation Rate and CETES



The chart below includes
Mexican gross domestic product (“GDP”) and inflation rate data from 2012 to 2016, and the average interest rates on
28-day Mexican treasury bills (“CETES”), as provided by the Mexican Central Bank.



Gross Domestic Product



Mexico has experienced
economic growth in the last five years, but to varying degrees. In 2016, the Mexican GDP was 2.3%, lower than the growth reached
in 2015, which was 2.5%. In 2014, Mexican GDP was 2.1%, and in 2013 and 2012 was 1.1% and 3.9% respectively.



Interest Rates



Mexico historically has
had, and may continue to have, high real and nominal interest rates. The interest rates on 28-day Mexican government treasury
securities averaged 4.2%, 2.9%, 2.7%, 3.8% and 3.9% for 2016, 2015, 2014, 2013 and 2012, respectively. High interest rates in
Mexico could increase our financing costs and thereby impair our financial condition, results of operations and cash flow.



8







Inflation Rates



Inflation rates in Mexico
have remained on the low end for more than a decade. The annual rate of inflation, as measured by changes in the Mexican National
Consumer Price Index, or NCPI, was 3.4% in 2016, 2.1% in 2015, 4.1% in 2014, 3.97% in 2013 and 3.6% in 2012, according to the
Mexican Central BankAn adverse change in the Mexican economy may have a negative impact on price stability and result
in higher inflation than its main trading partners, including the United States.



GDP, INFLATION RATE AND CETES DATA



|Year |  | GDP |     |   | Inflation
    Rate |  |      | CETES | 
|---- |  | --- | --- | - | ------------------ |  | ---- | ----- | 
|2016 |  |     | 2.3 | % |                    |  | 3.36 | %     | 
|2015 |  |     | 2.5 | % |                    |  | 2.13 | %     | 
|2014 |  |     | 2.1 | % |                    |  | 4.08 | %     | 
|2013 |  |     | 1.1 | % |                    |  | 3.97 | %     | 
|2012 |  |     | 3.9 | % |                    |  | 3.57 | %     | 



On March 30, 2017, the
28 day CETES rate was 6.43%.



Exchange Rates



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



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



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



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



During 2016, the exchange
rate of the peso against the U.S. dollar had high levels of volatility for the whole year, but mainly at year end, leading the
Mexican peso-U.S. dollar exchange rate depreciate 20.0% in 2016 with respect to year-end 2015.



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



9









EXCHANGE RATE FOR THE LAST 5 YEARS



|In pesos per one U.S. dollar        |  | High |       |  | Low |  |       | Average |  |  | Close | 
|----------------------------------- |  | ---- | ----- |  | --- |  | ----- | ------- |  |  | ----- | 
|                                    |  | $    |       |  | $   |  |       | $       |  |  | $     | 
|2016                                |  |      | 20.84 |  |     |  | 17.19 |         |  |  | 18.67 | 
|2015                                |  |      | 17.36 |  |     |  | 14.56 |         |  |  | 15.87 | 
|2014                                |  |      | 14.79 |  |     |  | 12.85 |         |  |  | 13.30 | 
|2013                                |  |      | 13.43 |  |     |  | 11.98 |         |  |  | 12.76 | 
|2012                                |  |      | 14.37 |  |     |  | 12.63 |         |  |  | 13.15 | 
|EXCHANGE RATE FOR THE LAST 6 MONTHS |  |      |       |  |     |  |       |         |  |  |       | 
|March 2017                          |  |      | 19.93 |  |     |  | 18.67 |         |  |  | 19.28 | 
|February 2017                       |  |      | 20.82 |  |     |  | 19.74 |         |  |  | 20.30 | 
|January 2017                        |  |      | 21.89 |  |     |  | 20.75 |         |  |  | 21.39 | 
|December 2016                       |  |      | 20.74 |  |     |  | 20.22 |         |  |  | 20.50 | 
|November 2016                       |  |      | 20.84 |  |     |  | 18.44 |         |  |  | 20.01 | 
|October 2016                        |  |      | 19.34 |  |     |  | 18.49 |         |  |  | 18.89 | 



Source: http://www.federalreserve.gov/releases/h10/Hist/dat00_mx.htm.

| | (1) | As of December 31, 2016, the exchange rate for the year end
    published by the Mexican Central Bank was $20.64 per one U.S. dollar.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------



On March 24, 2017, the
exchange rate for cable transfers in pesos as certified for customs purposes by the Federal Reserve Bank of New York was $18.852
per one U.S. dollar.



| | B. | Capitalization and Indebtedness
| | -- | -------------------------------



Not applicable.



| | C. | Reasons for the Offer and Use of Proceeds
| | -- | -----------------------------------------



Not Applicable.



| | D. | Risk Factors
| | -- | ------------



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



Risks Related
to Economic, Political and Regulatory Conditions



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



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



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



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



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



10









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



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



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



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



In July 2012, Enrique
Peña Nieto of the Partido Revolucionario Institucional was elected as President of Mexico. After taking office he
started to implement significant changes in laws, public policy and regulations in areas such as the energy sector and fiscal
affairs, all of which are still in process of becoming fully implemented, and it is still unclear what effects these and other
possible reforms may have on the Mexican economy.



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





The direct correlation
between economic conditions in Mexico and the U.S. has strengthened in recent years because of the North American Free Trade Agreement,
(“NAFTA”), and increased economic activity between the two countries (including increased remittances of U.S. dollars
from Mexican workers in the U.S. to their families in Mexico). However, Donald Trump’s victory in the U.S. presidential
election in November 2016, as well as the Republican Party maintaining control of both the House of Representatives and Senate
of the United States in the congressional election, has generated volatility in the global capital markets and may create uncertainty
regarding the future of NAFTA and trade between the U.S. and Mexico. On January 20, 2017, Donald Trump became president of the
U.S. President Trump and the Trump administration have made comments suggesting that he intends to re-negotiate the free trade
agreements that the U.S. is party to, including NAFTA, and to implement high import taxes, although it remains unclear what specifically
the new U.S. administration and U.S. Congress will or will not do in this respect. Because the Mexican economy is heavily influenced
by the U.S. economy, the re-negotiation, or even termination, of NAFTA and/or other U.S. government policies that may be adopted
by the new U.S. administration (which may result in regulatory gridlock or on the contrary, it could result in a major regulatory
change) could have a material adverse effect on the Mexican economy, which, in turn, could affect our business, financial condition
and results of operations.



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



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



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



11







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



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



Risks Related
to Bachoco and the Poultry Industry



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



The market that we serve
is subject to volatility with respect to supply and raw material prices, which affects our product prices. We cannot provide assurance
that future cyclicality, excess supply, increases in main raw materials prices, or downturns in real prices will not adversely
affect our financial results.



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



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



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



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



High prices or volatility
in main raw materials could adversely affect our production costs and as a



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



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



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



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



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



12







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



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



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



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



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



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



Elimination of tariff
barriers may adversely affect our performance.



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



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



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



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



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



13







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



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



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



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



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



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



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



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



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



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



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



Our bylaws may only
be enforced in Mexico.



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



14







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



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



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



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



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



| | Item 4. | Information of the Company
| | ------- | --------------------------



| | A. | History and Development of the Company
| | -- | --------------------------------------



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



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



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



Our operating segments,
which are comprised of our product lines, are identified on the basis of our core principles in accordance with IFRS 8.10. Accordingly,
our operating segments are comprised of the following five components: chicken, eggs, pork, balanced feed and other meat products.
The chicken and eggs segments meet, in an aggregate basis, the quantitative thresholds for separate reporting, while the pork,
balanced feed and other meat products lines are immaterial, both on an individual and aggregate basis, and have therefore been
reported on a combined basis in the “other operating segments” category. We have aggregated the chicken and eggs operating
segments into one reportable segment. As a result, we end up with two reportable operating segments, “Poultry” and
“Others”.



Important events
in the development of the Company’s business



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



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



15







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



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



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



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



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



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



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



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



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



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



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



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



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



16







Capital Expenditures



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



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



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



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



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



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



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



| | B. | Business Overview
| | -- | -----------------



General



Bachoco owns and manages
more than a thousand facilities, organized in 9 production complexes and 66 distribution centers in Mexico, and 1 production complex
in the United States.



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



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



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



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



In the United States,
our sole product line is chicken products.



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



17







Principal Markets



We operate mainly in Mexico
and in the U.S. We estimate that we are the biggest producer of chicken products in Mexico. Based on our internal estimates, we
currently account for approximately 35.0% of the Mexican chicken production market and are the second largest producer of eggs
with an estimated market share of approximately 5.1%. We currently estimate that we have approximately 3.4% market share in the
balanced feed products.



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



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



NET REVENUES BY OPERATING SEGMENTS



|In millions of pesos, for the year endedDecember 31, |  | 2016 |          |  | 2015 |  |       | 2014 | 
|---------------------------------------------------- |  | ---- | -------- |  | ---- |  | ----- | ---- | 
|                                                     |  | $    |          |  | %    |  |       | $    | 
|Net Revenues                                         |  |      | 52,020.3 |  |      |  | 100.0 |      | 
|Poultry                                              |  |      | 46,852.5 |  |      |  | 90.0  |      | 
|Others                                               |  |      | 5,167.8  |  |      |  | 10.0  |      | 



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



Overview of the
Chicken Industry in Mexico



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



Mexico is among the ten
main chicken producers worldwide, with an estimated production of 3,275.2 thousand tons of chicken meat in 2016, and a per capita
consumption of 31.7 kilograms a year in 2016, an increase of 2.3% when compared to 30.9 kilograms a year in 2015.



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



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



According to the USDA,
Mexico is a main destination for U.S. chicken exports. Chicken imports from the U.S. have increased from 204.1 thousand tons in
2008 (when restrictions for leg quarters imports were phased out in January 2008) to approximately 502.6 thousand tons in 2016.
In particular, in 2016, chicken imports increased 4.6% when compared to 2015. This increase was due to a decrease in the prices
of products coming from the U.S. Chicken, imports in Mexico have also increased due to an increase in the volume of products coming
from other countries mainly from South America.



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



18









| | - | Live chicken
    is sold alive to small independent slaughtering operations or to wholesalers that contract with independent slaughtering operations
    for processing.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Public market chicken
    is a whole broiler presented either un-eviscerated or eviscerated, generally sold within 48 hours after slaughter. This product
    is sold to consumers without any packaging or brand identification.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Rotisserie chicken
    is a whole broiler presented eviscerated and ready to cook.
| | - | ----------------------------------------------------------------------------------



| | - | Supermarket chicken
    is a fresh whole broiler presented with the edible viscera packed separately.
| | - | -----------------------------------------------------------------------------------------------------



| | - | Chicken cuts refers
    to cut-up fresh chicken parts sold wrapped in trays or in bulk principally to supermarket chains, the fast-food industry and
    other institutional food service providers.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Value-added products
    refer mainly to cut-up fresh chicken parts with value-added treatment like marinating, breading and individual quantity frozen.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



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





SALES AND VOLUME OF CHICKEN BY CATEGORY



|In 2016              |  | Industry
    /volume(1) |     |  | Bachoco
    /volume |  |    | Bachoco
    /sales | 
|-------------------- |  | ----------------------- | --- |  | ------------------- |  | -- | ------------------ | 
|Live                 |  |                         | n/a |  |                     |  | 39 | %                  | 
|Public market        |  |                         | n/a |  |                     |  | 13 | %                  | 
|Rotisserie           |  |                         | n/a |  |                     |  | 23 | %                  | 
|Supermarket          |  |                         | n/a |  |                     |  | 5  | %                  | 
|Chicken parts        |  |                         | n/a |  |                     |  | 11 | %                  | 
|Value-added products |  |                         | n/a |  |                     |  | 9  | %                  | 



|In 2015              |  | Industry
    /volume(2) |    |   | Bachoco
    /volume |  |    | Bachoco
    /sales | 
|-------------------- |  | ----------------------- | -- | - | ------------------- |  | -- | ------------------ | 
|Live                 |  |                         | 38 | % |                     |  | 38 | %                  | 
|Public market        |  |                         | 12 | % |                     |  | 13 | %                  | 
|Rotisserie           |  |                         | 32 | % |                     |  | 23 | %                  | 
|Supermarket          |  |                         | 6  | % |                     |  | 5  | %                  | 
|Chicken parts        |  |                         | 8  | % |                     |  | 11 | %                  | 
|Value-added products |  |                         | 4  | % |                     |  | 10 | %                  | 



|In 2014              |  | Industry
    /volume(2) |    |   | Bachoco
    /volume |  |    | Bachoco
    /sales | 
|-------------------- |  | ----------------------- | -- | - | ------------------- |  | -- | ------------------ | 
|Live                 |  |                         | 38 | % |                     |  | 36 | %                  | 
|Public market        |  |                         | 15 | % |                     |  | 12 | %                  | 
|Rotisserie           |  |                         | 28 | % |                     |  | 26 | %                  | 
|Supermarket          |  |                         | 7  | % |                     |  | 4  | %                  | 
|Chicken parts        |  |                         | 8  | % |                     |  | 11 | %                  | 
|Value-added products |  |                         | 4  | % |                     |  | 11 | %                  | 





|(1) | Industry information for 2016 is not available as of the date of this report.
|--- | -----------------------------------------------------------------------------
|(2) | Source: UNA.                                                                 



Overview of the
Chicken Industry in the U.S.



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



19







The U.S. is the world’s
largest producer of chicken. Its annual production is estimated at 18.5 million tons or 40.7 billion pounds in 2016 a 1.64% increase
over the 18.2 million tons produced in 2015, and its per capita consumption is also one of the highest worldwide, per annum, estimated
at 40.8 kilograms (around 89.8 pounds).



The U.S. chicken industry
is substantially consolidated and vertically integrated. Most producers of chicken use state-of-the-art technology in their processes.
It is estimated that the main three chicken producers account for 44.0% of the total chicken production in the U.S.



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



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



Overview of the
Egg Industry in Mexico



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



There is an estimated
per capita consumption of around 23.5 kilograms for 2016, a 4.8% increase when compared to 22.4 kilograms in 2015.



Mexico’s 2016 annual
egg production is estimated at 2,765.4 million tons, an increase of 4.8% as compared with 2,637.6 million tons produced in 2015.



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



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



| | - | Bulk is distributed
    in large 360 egg cases.
| | - | -----------------------------------------------



| | - | Packaged in branded
    packages of mainly 12, 18, 24 or more eggs.
| | - | -------------------------------------------------------------------



| | - | Processedis liquid
    or powdery eggs used mainly by the bakery industry.
| | - | --------------------------------------------------------------------------



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



We estimate that we are
the second largest producer of table eggs in Mexico. In each of 2016 and 2015, we produced 5.1% of the total eggs produced in
Mexico in terms of tons. We sell both brown and white eggs. We estimate that we are the largest producer of brown eggs in Mexico,
and the largest marketer of packaged eggs with brand identification.



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



20







SALES AND VOLUME OF EGG BY CATEGORY



|In 2016   |  | Industry
    /volume(1) |     |  | Bachoco
    /volume |  |    | Bachoco
    /sales | 
|--------- |  | ----------------------- | --- |  | ------------------- |  | -- | ------------------ | 
|Bulk      |  |                         | n/a |  |                     |  | 34 | %                  | 
|Packaged  |  |                         | n/a |  |                     |  | 66 | %                  | 
|Processed |  |                         | n/a |  |                     |  | 0  | %                  | 



|In 2015   |  | Industry
    /volume(2) |    |   | Bachoco
    /volume |  |    | Bachoco
    /sales | 
|--------- |  | ----------------------- | -- | - | ------------------- |  | -- | ------------------ | 
|Bulk      |  |                         | 81 | % |                     |  | 32 | %                  | 
|Packaged  |  |                         | 14 | % |                     |  | 68 | %                  | 
|Processed |  |                         | 5  | % |                     |  | 0  | %                  | 



|In 2014   |  | Industry
    /volume(2) |    |   | Bachoco
    /volume |  |    | Bachoco
    /sales | 
|--------- |  | ----------------------- | -- | - | ------------------- |  | -- | ------------------ | 
|Bulk      |  |                         | 82 | % |                     |  | 31 | %                  | 
|Packaged  |  |                         | 14 | % |                     |  | 69 | %                  | 
|Processed |  |                         | 4  | % |                     |  | 0  | %                  | 



| | (1) | Industry information for 2016 is not available as of the date
    of this report.
| | --- | ---------------------------------------------------------------------------------
| | (2) | Source: UNA.                                                                     



Overview of the
Balanced Feed Market in Mexico



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



According to CONAFAB,
it is estimated that 32,021 thousand tons of balanced feed were produced in Mexico in 2016, a 3.2% increase from 31,035 thousand
tons of balanced feed produced in 2015.



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



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



In 2016, CONAFAB estimated
that the production mix between commercial and integrated was about 38.3% and 61.7%, respectively. This mix has not changed much
over the past several years.



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



BALANCED FEED VOLUME SOLD



|Thousands of tons |  | Production(1) |        |  | Bachoco’sProduction |  |     | Estimated
    MarketShare | 
|----------------- |  | ------------- | ------ |  | ------------------- |  | --- | ------------------------- | 
|2016(2)           |  |               | 12,438 |  |                     |  | 429 |                           | 
|2015              |  |               | 11,904 |  |                     |  | 395 |                           | 
|2014              |  |               | 11,433 |  |                     |  | 320 |                           | 



| | (1) | According to CONAFAB, balanced feed produced by commercial
producers in Mexico.
| | --- | -------------------------------------------------------------------------------

| | (2) | CONAFAB estimates
| | --- | -----------------



Seasonality Effects



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



21







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



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



Pricing for chicken
and eggs products



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



Main Raw Materials
and Sources of Supply



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



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



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



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



In Mexico, domestic crops
are limited, therefore a large percentage of our raw materials are imported from the U.S. In 2016, in terms of volume, we bought
approximately 28.5% of our total grain from the domestic market and the remaining 71.5% from the U.S.



Marketing Channels
Used by the Company



Marketing and Distribution
of Chicken Products in Mexico



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



We participate and operate
in all the following marketing channels:



| | - | Live Chicken. Unlike
    most other countries, Mexico has a large marketing channel of live chicken which mainly operates in the central and southern
    regions of Mexico.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Wholesalers. Large
    percentages of our chicken sales operate via wholesalers. The main products marketed in this channel are live and public market
    chicken as well as rotisserie. We do not have exclusive supply agreements with our customers.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Institutional. We
    sell a large amount of product to institutional customers. We mainly sell chicken cuts and rotisserie chicken in the institutional
    channel. Success in supplying the institutional channel depends on consistency and good service, and only larger producers
    with more modern processing facilities and distribution capacity can compete in this market.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Supermarket. We sell
    cuts and value-added products as well as supermarket chicken types through supermarket channels or convenience stores. In
    this channel we emphasize our brand image as well as our superior service, reinforced by frequent delivery to ensure freshness,
    to build consumer’s loyalty.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Retail. A wide range of products
    are sold under this marketing channel that goes from the live chicken to value-added or public market and supermarket chicken
    type. The Company supplies several points of sale that directly sell these products to the customers.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

22









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



We distribute products
from our processing plants to our cold-storage facilities and warehouses, which serve as a midpoint in distribution to wholesalers
and local customers. From our cold-storage facilities, we service wholesalers and retailers and transport certain products directly
to supermarkets and food-service operations. Our distribution infrastructure includes more than 66 cold-storage warehouses and
facilities and a large fleet of vehicles.



Marketing and Distribution
of Chicken Products in the U.S.



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



Marketing and Distribution
of Eggs Products in Mexico



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



Our marketing strategy
in the eggs business is to gradually move from bulk to packaged white eggs. Packaged eggs are less vulnerable to price fluctuation
and create brand loyalty.



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



| | - | Wholesalers. We sell
    eggs in bulk; these wholesalers operate mainly in central Mexico. This product is sold to consumers mainly by kilogram and
    not by unit.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Institutional. We
    sell eggs in bulk in this institutional marketing channel.
| | - | --------------------------------------------------------------------------------



| | - | Supermarket. We sell
    eggs packaged with brand identification and a large number of presentation patterns in packages of 12, 18, 24 or more eggs.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Retail. We distribute
    eggs directly to customers in packages with brand identification.
| | - | -------------------------------------------------------------------------------------------



Marketing and Distribution
of Balanced Feed in Mexico



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



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



Patents, Licenses
and Other Contracts



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



23







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



Material Effects
of Government Regulations on the Company’s Business



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



Import and Export
Regulations



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



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



Antitrust Regulations



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



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



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



As of the date of this
Annual Report, some of these judgments were concluded in favor of the Company, accordingly the provision recorded for this purpose
was cancelled.



Antidumping Regulations



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



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



24







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



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



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



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



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



Environmental and
Sanitary Regulation



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



| | - | Mexico. The Servicio
    Nacional de Sanidad Inocuidad y Calidad Alimentaria (Mexican Sanitary Authority or “SENASICA”), the Ley
    General de Equilibrio Ecologico y Proteccion Ambiental(General Law of Ecological Balance and Environmental Protection)
    and the Secretaria del Medio Ambiente y Recursos Naturales (Ministry of Environment and Natural Resources or “SEMARNAT”).
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | The United States.
    The USDA, the Centers for Disease Control, the Environmental Protection Agency (or “EPA”), the U.S. Department
    of Homeland Security (or “DHS”) and the U.S. Department of Labor (or “DOL”).
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



25







| | C. | Organizational Structure
| | -- | ------------------------



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



In 2016, our subsidiary
BSACV accounted for 56.1% of consolidated total assets and 65.3% of total consolidated sales and our subsidiary Bachoco USA, accounted
for 15.5% of consolidated total assets and 25.8% of total consolidated sales.



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



PERCENTAGE EQUITY INTEREST



|                                                   |  | As of
    December 31,
|-------------------------------------------------- |  | ----------------------
|Subsidiary                                         |  | Country               
|Aviser, S.A. de C.V.                               |  | Mexico                
|Bachoco, S.A. de C.V.                              |  | Mexico                
|Bachoco Comercial, S.A. de C.V.                    |  | Mexico                
|Campi Alimentos, S.A. de C.V.                      |  | Mexico                
|Operadora de Servicios de Personal, S.A. de C.V.   |  | Mexico                
|PEC LAB, S.A. de C.V., and subsidiary              |  | Mexico                
|Secba, S.A. de C.V.                                |  | Mexico                
|Sepetec, S. A. de C.V.                             |  | Mexico                
|Servicios de Personal Administrativo, S.A. de C.V. |  | Mexico                
|Induba Pavos, S.A. de C.V.                         |  | Mexico                
|Bachoco USA, LLC. and subsidiary                   |  | U.S.                  
|Wii kit RE LTD.                                    |  | Bermuda               



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



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



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



| | D. | Property, Plant and Equipment
| | -- | -----------------------------



We have more than a thousand
production facilities in Mexico and in the U.S. (most of which are farms) and 66 distribution centers that are located throughout
Mexico, to ensure freshness and minimize transportation time and costs.



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



The following table indicates
Bachoco’s production facilities and the number of each type of facility both in Mexico and the U.S., as of December 31,
2016:



26







BACHOCO’S FACILITIES



|                          |  | Number of Facilities: |    
|------------------------- |  | --------------------- | ---
|Facilities                |  | In Mexico             |    
|Chicken breeding farms    |  |                       | 126
|Broiler grow-out farms    |  |                       | 518
|Broiler processing plants |  |                       | 8  
|Hatchery                  |  |                       | 23 
|Egg production farms      |  |                       | 122
|Swine breeding farms      |  |                       | 1  
|Swine grow-out farms      |  |                       | 20 
|Feed mills                |  |                       | 18 
|Further process plants    |  |                       | 4  



Bachoco’s
facilities in Mexico



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



Our eight processing plants
process around 11.3 million chickens per week and our laying farms produce around 11.6 thousand tons of commercial eggs each month.



Four of the eighteen feed
mill plants are dedicated to the production of balanced feed for sales to third parties and the remaining fourteen are dedicated
mainly to internal consumption. We produce around 36 thousand tons of balanced feed per month for sale to third parties.



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



Expansion, Construction
or Issues Related to Our Facilities in Mexico



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



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



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



Bachoco’s
facilities in the U.S.



We have facilities across
the River Valley area in Arkansas, Oklahoma and in Georgia. We process around 3.2 million chickens per week in those facilities.
Our offices are in Fort Smith, Arkansas. Our slaughter and deboning plants and feed mills are located in Fort Smith and in Heavener,
Oklahoma. We have further-processing plants to produce value-added chicken products in Fort Smith, Oklahoma city and Muldrow,
Oklahoma; hatcheries in Fort Smith, Heavener and Stigler, Oklahoma; broiler research farms, in Greenwood, Arkansas and Hartford,
Arkansas; and our cooler storage and distribution center, in Muldrow.



27







Expansion, Construction
or Issues Related with Our Facilities in the U.S.



In July 2013, the Company
reached an agreement to acquire the Arkansas breeding assets of Morris Hatchery Inc., a U.S. company. These assets comprise mainly
of equipment and bird inventory (laying hens that produce hatching eggs), with a capacity of approximately 350 thousand laying
hens.



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



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



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



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



| | ITEM 4.A. | Unresolved Staff Comments
| | --------- | -------------------------



None.



| | Item 5. | Operating and Financial Review and Prospects
| | ------- | --------------------------------------------



| | A. | Operating Results
| | -- | -----------------



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



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



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



Year 2016 Overview



In 2016, we posted improvements
in our total sales and volume sold in our main product lines as compared to the previous year.



These results were driven
by external and internal conditions. Externally, we benefitted from (i) the strong level of demand and consumption of poultry
products in Mexico and in the U.S. and (ii) the stable cost of our main raw materials, in U.S. dollar terms, which helped to offset
the depreciation of the Mexican peso against the U.S. dollar in 2016.



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



28







Macroeconomic Conditions
in Mexico



In 2016 Mexican macroeconomic
conditions continued with a high level of volatility, especially towards the end of the year. Consequently, the Mexican peso continued
to depreciate against the U.S. dollar, the annual inflation rate was 3.36% and the economic growth was 2.3%, below the expectations
at the beginning of the year.



The Mexican peso-U.S.
dollar exchange rate depreciation that occurred in 2016 had an effect on our financial results, primarily, for the following reasons:



a) Approximately 25.8%
of our sales correspond to our U.S. operations and are denominated in U.S. dollar terms. Therefore, these sales were positively
affected by the Mexican peso-U.S. dollar exchange rate depreciation when preparing our results in Mexican peso terms.



b) About 35.7% of our
total debt for the year ended December 31, 2016 was denominated in U.S. dollars. Therefore, this indebtedness was negatively affected
by the Mexican peso-U.S. dollar exchange rate depreciation when preparing our results in Mexican peso terms.



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



According to UNA estimates,
in 2016, the volume of chicken and eggs produced in Mexico grew approximately 3.0% and 4.0%, respectively, which means that the
Mexican poultry industry continued growing at normalized levels after recovering from the avian flu outbreak in 2013 that affected
supply.



Operating Performance



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



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



STATEMENT OF PROFIT OR LOSS DATA



|In millions of pesos, for the years ended
    December 31, |  | 2016 |          |  | 2015 |  |          | 2014 | 
|---------------------------------------------------------- |  | ---- | -------- |  | ---- |  | -------- | ---- | 
|                                                           |  | $    |          |  | $    |  |          | $    | 
|Net revenues                                               |  |      | 52,020.3 |  |      |  | 46,229.0 |      | 
|Cost of sales                                              |  |      | 42,635.1 |  |      |  | 36,847.5 |      | 
|Gross profit                                               |  |      | 9,385.2  |  |      |  | 9,381.5  |      | 
|General, selling and administrative expenses               |  |      | 4,847.9  |  |      |  | 4,323.4  |      | 
|Other income (expenses), net                               |  |      | 260.2    |  |      |  | (4.6     | )    | 
|Operating income                                           |  |      | 4,797.6  |  |      |  | 5,053.5  |      | 
|Net finance income                                         |  |      | 797.0    |  |      |  | 446.6    |      | 
|Income tax                                                 |  |      | 1,643.4  |  |      |  | 1,680.6  |      | 
|                                                           |  |      |          |  |      |  |          |      | 
|Profit attributable to controlling interest                |  |      | 3,946.6  |  |      |  | 3,812.8  |      | 
|Profit attributable to non-controlling interest            |  |      | 4.5      |  |      |  | 6.7      |      | 
|Profit for the year                                        |  |      | 3,951.2  |  |      |  | 3,819.5  |      | 
|Basic and diluted earnings per share(1)                    |  |      | 6.58     |  |      |  | 6.36     |      | 
|Basic and diluted earnings per ADR(2)                      |  |      | 78.90    |  |      |  | 76.30    |      | 
|Dividends per share(3)                                     |  |      | 1.300    |  |      |  | 1.500    |      | 
|Weighted average shares outstanding(4)                     |  |      | 599,980  |  |      |  | 599,631  |      | 



| | (1) | Calculated based on the weighted average number of basic and
    diluted shares. No potentially dilutive shares exist in any of the years presented, for which reason, basic and diluted earnings
    per share are the same.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Each ADR represents twelve shares.                                                                                                                                                                                           
| | (3) | Dividends per share have been computed by dividing the total
    amount of dividends paid by the weighted average shares outstanding.                                                                                        
| | (4) | In thousands of shares.                                                                                                                                                                                                      



29







Operating Results 2016 vs 2015



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



NET REVENUES BY OPERATING SEGMENTS



|In millions of pesos |  | 2016 |          |  | 2015    |  |       | Change | 
|-------------------- |  | ---- | -------- |  | ------- |  | ----- | ------ | 
|                     |  | $    |          |  | %/sales |  |       | $      | 
|Net Revenues         |  |      | 52,020.3 |  |         |  | 100.0 |        | 
|Total Poultry        |  |      | 46,852.5 |  |         |  | 90.0  |        | 
|Others               |  |      | 5,167.8  |  |         |  | 10.0  |        | 



NET REVENUES BYGEOGRAPHY



|In millions of pesos |  | 2016 |          |  | 2015    |  |       | Change | 
|-------------------- |  | ---- | -------- |  | ------- |  | ----- | ------ | 
|                     |  | $    |          |  | %/sales |  |       | $      | 
|Net Revenues         |  |      | 52,020.3 |  |         |  | 100.0 |        | 
|In Mexico            |  |      | 38,582.1 |  |         |  | 74.2  |        | 
|In the U.S.          |  |      | 13,438.2 |  |         |  | 25.8  |        | 



Net Revenues



In 2016, net sales totaled
$52,020.3 million, $5,791.3 million or 12.5% more than the $46,229.0 million reported in the same period in 2015. The increase
in sales is attributed mainly to (i) higher volumes sold as we had more product available and (ii) price increases mainly in chicken,
swine and balanced feed.



In 2016, sales of our
U.S. operations represented 25.8% of our total sales, compared with 24.1% in 2015.



The Company’s sales
of poultry products increased 12.1% in 2016, mainly as a result of an 8.5% increase in poultry prices and a 3.4% increase in volume
sold. The increase in price was due in part to an increase in our U.S. operations in Mexican peso terms.



Sales of the “others”
lines increased 16.4% due to an increase of 7.9% in volume sold and price increases in balanced feed and swine mainly.



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



COST OF SALES



|              |  | 2016 |          |  | 2015    |  |      | Change | 
|------------- |  | ---- | -------- |  | ------- |  | ---- | ------ | 
|              |  | $    |          |  | %/sales |  |      | $      | 
|Cost of sales |  |      | 42,635.1 |  |         |  | 82.0 |        | 
|Poultry       |  |      | 38,285.4 |  |         |  | 73.6 |        | 
|Others        |  |      | 4,349.7  |  |         |  | 8.4  |        | 



Our total cost of sales
increased $5,813.6 million or 15.7% in 2016, when compared to the previous year.



This increase was mainly
attributable to higher volumes sold and higher raw material costs in Mexican peso terms due to the depreciation of the Mexican
peso against the U.S. dollar. The increase in volumes sold represented a 4.4% increase with the remaining increase resulting
from the increase in the cost of our main raw materials.



30







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



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



There are many other factors
with much smaller contributions to the overall cost of sales. All of these secondary factors individually registered immaterial
changes from 2016 to 2015.



GENERAL, SELLING AND ADMINISTRATIVE EXPENSES



|           |  | 2016 |         |  | 2015    |  |     | Change | 
|---------- |  | ---- | ------- |  | ------- |  | --- | ------ | 
|           |  | $    |         |  | %/sales |  |     | $      | 
|Total SG&A |  |      | 4,847.9 |  |         |  | 9.3 |        | 



In 2016, general, selling
and administrative expenses totaled $4,847.9 million, compared to the $4,323.4 million reported in 2015, representing an increase
of $524.5 million or 12.1%. Approximately 37% of this increase was attributable to more volume sold, 32.0% was due to the sale
of more value-added products in our U.S. operations and partially due to the consolidation of our US operation to Mexican pesos.



The rest of this increase
was the result of additional expenses incurred in the implementation of projects to further improve our operating efficiency,
the services we provide to our customers and our understanding of the needs of our customers.



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



In 2016 and 2015, our
general, selling and administrative expenses represented 9.3% and 9.4% of total sales respectively.



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



OTHER INCOME (EXPENSE) NET



|                           |  | 2016 |       |  | 2015    |  |     | Change | 
|-------------------------- |  | ---- | ----- |  | ------- |  | --- | ------ | 
|                           |  | $    |       |  | %/sales |  |     | $      | 
|Other income (expense) net |  |      | 260.2 |  |         |  | 0.5 |        | 



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



In 2016, we recognized
other income of $260.2 million and in 2015 we recorded other net expenses of $4.6 million. The increase was due mainly to the
sale of unused fixed assets.



OPERATING INCOME



|                 |  | 2016 |         |  | 2015    |  |     | Change | 
|---------------- |  | ---- | ------- |  | ------- |  | --- | ------ | 
|                 |  | $    |         |  | %/sales |  |     | $      | 
|Operating Income |  |      | 4,797.6 |  |         |  | 9.2 |        | 



31







Operating income in 2016
totaled $4,797.6 million, this represented a decrease of $255.9 million or 5.1%, when compared to the operating income of $5,053.5
million reached in 2015. This decrease is mainly attributed to an increase in cost of sales and general, selling and administrative
expenses as explained above.



The operating margin in
2016 and 2015 was 9.2% and 10.9% respectively.



NET FINANCE INCOME



|                   |  | For
    the year ended December 31, |       |  |                  |  |     | Change | 
|------------------ |  | ----------------------------------- | ----- |  | ---------------- |  | --- | ------ | 
|                   |  | 2016$                               |       |  | %
    over sales |  |     | 2015$  | 
|Net Finance Income |  |                                     | 797.0 |  |                  |  | 1.5 | %      | 
|Financial Income   |  |                                     | 969.2 |  |                  |  |     |        | 
|Financial Expense  |  |                                     | 172.2 |  |                  |  |     |        | 



In 2016, we reported net financial income of
$797.0 million, compared to net financial income of $446.6 million in 2015. This increase was mainly due to an increase in our
financial income driven by higher interest income on our investments and a higher level of foreign currency exchange gains.



Financial income of $969.2
million in 2016 was mainly attributable to a $638.0 million of interest income and a $297.5 million in foreign currency exchange
gain. This gain was partially offset by $129.8 million in interest expense and a $42.4 million in commissions and financial expenses.



In 2015, we reported net
financial income of $446.6 million, compared to net financial income of $246.9 million in 2014. This increase was mainly due to
an increase in our financial income driven by higher interest income on our investments and a higher level of foreign currency
exchange gains.



Our foreign currency
exchange gains are mainly the result of our ability to obtain U.S. dollars at a lower cost than the average cost in the market.



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



The following table sets
forth our tax position for each of the periods indicated and is described in more detail in Note 20 to our Audited Consolidated
Financial Statements included herein:



TOTAL INCOME TAX



|                                      |  | For the
    year endedDecember 31, |         |  |      | 
|------------------------------------- |  | ---------------------------------- | ------- |  | ---- | 
|                                      |  | 2016                               |         |  | 2015 | 
|                                      |  | $                                  |         |  | $    | 
|Total income taxes (benefit) expense, |  |                                    | 1,643.4 |  |      | 
|Current income tax                    |  |                                    | 1,260.5 |  |      | 
|Deferred income tax                   |  |                                    | 382.9   |  |      | 



In 2016, total income
tax expense was $1,643.4 million, compared to income tax expense of $1,680.6 million in 2015. This decrease is mainly attributable
to a $228.0 million decrease of current income taxes; partially offset by a $190.8 increase in deferred income tax.



The effective income tax
rate was 29.4% in 2016 and 30.6% in 2015. The decrease was mainly due to the higher net effect of inflation.



Deferred income tax liability
in 2016 increased $543.5 million, as a result of the following movements in temporary differences during the year: (i) an increase
of $212.1 million for inventories, (ii) $209.5 million for property plant and equipment and (iii) a decrease of $128.5 million
for accounts payable. This increase was partially offset by a decrease of $50.2 million for prepaid expenses.



32







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



PROFIT FOR THE YEAR



|                                        |  | For the
    years endedDecember 31, |         |  |      |  |         |        | 
|--------------------------------------- |  | ----------------------------------- | ------- |  | ---- |  | ------- | ------ | 
|In millions of pesos                    |  | 2016                                |         |  | 2015 |  |         | Change | 
|                                        |  | $                                   |         |  | $    |  |         | $      | 
|Profit for the year attributable to:    |  |                                     | 3,951.1 |  |      |  | 3,819.5 |        | 
|Controlling interest                    |  |                                     | 3,946.6 |  |      |  | 3,812.8 |        | 
|Non-controlling interest                |  |                                     | 4.5     |  |      |  | 6.7     |        | 
|Basic and diluted earnings per share(1) |  |                                     | 6.58    |  |      |  | 6.36    |        | 
|Net income per ADR(1)                   |  |                                     | 78.9    |  |      |  | 76.30   |        | 



(1) In pesos.



As a result of the factors
detailed above, our net income for 2016 totaled $3,951.2 million, or $6.58 per basic and diluted share ($78.94 per ADR), which
is a $131.7 million or 3.4% increase when compared to $3,819.5 million in net income or $6.36 per basic and diluted share ($76.30
per ADR) reported in 2015.



Our consolidated net margin
in 2016 was 7.6% compared to a consolidated net margin of 8.3% in 2015.



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



EBITDA RESULT



|                              |  | For
    the years endedDecember 31, |         |   |      |  |         |        | 
|----------------------------- |  | ----------------------------------- | ------- | - | ---- |  | ------- | ------ | 
|                              |  | 2016                                |         |   | 2015 |  |         | Change | 
|                              |  | $                                   |         |   | $    |  |         | $      | 
|Net income                    |  |                                     | 3,951.1 |   |      |  | 3,819.5 |        | 
|Income tax expense            |  |                                     | 1,643.4 |   |      |  | 1,680.6 |        | 
|Net finance income            |  |                                     | (797.0  | ) |      |  | (446.6  | )      | 
|Depreciation and amortization |  |                                     | 979.5   |   |      |  | 819.9   |        | 
|EBITDA result                 |  |                                     | 5,777.0 |   |      |  | 5,873.4 |        | 
|EBITDA margin (%)             |  |                                     | 11.1    | % |      |  | 12.7    | %      | 



EBITDA result in 2016
and 2015 reached $5,777.0 and $5,873.4 million respectively, representing an EBITDA margin of 11.1% and 12.7%.



Operating Results
2015 vs 2014



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



NET REVENUES BY OPERATING SEGMENTS



|In millions of pesos |  | 2015 |          |  | 2014    |  |       | Change | 
|-------------------- |  | ---- | -------- |  | ------- |  | ----- | ------ | 
|                     |  | $    |          |  | %/sales |  |       | $      | 
|Net Revenues         |  |      | 46,229.0 |  |         |  | 100.0 |        | 
|Total Poultry        |  |      | 41,789.5 |  |         |  | 90.4  |        | 
|Others               |  |      | 4,439.6  |  |         |  | 9.6   |        | 



33







NET REVENUES BYGEOGRAPHY



|In millions of pesos |  | 2015 |          |  | 2014    |  |       | Change | 
|-------------------- |  | ---- | -------- |  | ------- |  | ----- | ------ | 
|                     |  | $    |          |  | %/sales |  |       | $      | 
|Net Revenues         |  |      | 46,229.0 |  |         |  | 100.0 |        | 
|In Mexico            |  |      | 35,125.8 |  |         |  | 75.9  |        | 
|In the U.S.          |  |      | 11,103.3 |  |         |  | 24.1  |        | 



Net Revenues



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



In 2015, sales of our
U.S. operation represented 24.1% of our total sales, compared to 20.2% in 2014. During 2015, both our Mexican and U.S. operations
reached an historical level of volumes sold.



The Company’s sales
of poultry products increased 10.0% in 2015, mainly as a result of a 1.9% increase in poultry prices and a 7.9% increase in volume
sold. The increase in price was due in part to an increase in our U.S. operations in Mexican peso terms.



Sales of the other lines
increased 17.3% due basically to 21.5% in volume sold, mainly in balanced feed and swine.



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



COST OF SALES



|              |  | 2015 |          |  | 2014    |  |      | Change | 
|------------- |  | ---- | -------- |  | ------- |  | ---- | ------ | 
|              |  | $    |          |  | %/sales |  |      | $      | 
|Cost of sales |  |      | 36,847.5 |  |         |  | 79.7 |        | 
|Poultry       |  |      | 32,906.8 |  |         |  | 71.2 |        | 
|Others        |  |      | 3,940.7  |  |         |  | 8.5  |        | 



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



This increase was mainly
driven by higher volume sold and an increase in the cost of our main raw materials during the second half of 2015, mainly as a
result of the depreciation of the Mexican peso against the U.S. dollar. The increase in volumes sold represented 10.5% of the
total increase with the remaining increase being due to the increase in the cost of our main raw materials.



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



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



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



34







GENERAL, SELLING AND ADMINISTRATIVE EXPENSES



|           |  | 2015 |         |  | 2014    |  |     | Change | 
|---------- |  | ---- | ------- |  | ------- |  | --- | ------ | 
|           |  | $    |         |  | %/sales |  |     | $      | 
|Total SG&A |  |      | 4,323.4 |  |         |  | 9.4 |        | 



In 2015, general, selling
and administrative expenses totaled $4,323.4 million, compared to $3,781.3 million in 2014, representing an increase of $542.0
million or 14.3%. Approximately 80% of this increase was attributed to more volume sold.



The rest of this increase
was the result of additional expenses incurred in the implementation of projects to further improve our operating efficiency,
the services we provide to our customers and our understanding of the needs of our customers.



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



In 2015 and 2014, our
general, selling and administrative expenses represented 9.4% and 9.1% of total sales, respectively.



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



OTHER INCOME (EXPENSE) NET



|                           |  | 2015 |      |   | 2014    |  |      | Change | 
|-------------------------- |  | ---- | ---- | - | ------- |  | ---- | ------ | 
|                           |  | $    |      |   | %/sales |  |      | $      | 
|Other income (expense) net |  |      | (4.6 | ) |         |  | (0.0 | )      | 



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



In 2015, we recognized
other net expenses of $4.6 million and in 2014 we recorded other net expenses of $160.9 million. In 2014, as per our usual results,
we had a net expense position resulting from provisions mainly related to regulatory fines, which were not present in 2015.



OPERATING INCOME



|                 |  | 2015 |         |  | 2014    |  |      | Change | 
|---------------- |  | ---- | ------- |  | ------- |  | ---- | ------ | 
|                 |  | $    |         |  | %/sales |  |      | $      | 
|Operating Income |  |      | 5,053.5 |  |         |  | 10.9 |        | 



Operating income in 2015
totaled $5,053.5 million, this represented a decrease of $288.3 million or 5.4%, when compared to the operating income of $5,341.9
million reached in 2014. This decrease is mainly attributed to an increase in cost of sales and general, selling and administrative
expenses as explained above.



The operating margin in
2015 and 2014 was 10.9% and 12.8% respectively.



NET FINANCE INCOME



|                   |  | For the
    year ended December 31, |       |  | Change      | 
|------------------ |  | ----------------------------------- | ----- |  | ----------- | 
|                   |  | 2015$                               |       |  | % oversales | 
|Net Finance Income |  |                                     | 446.6 |  |             | 
|Financial Income   |  |                                     | 593.8 |  |             | 
|Financial Expense  |  |                                     | 147.3 |  |             | 



35







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



Financial income of $593.8
million in 2015 was mainly attributable to a $482.4 million of interest income and a $95.4 million in foreign currency exchange
gain. This gain was partially offset by $94.0 million in interest expense and a $53.3 million in commissions and financial expenses.



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



The following table sets
forth our tax position for each of the periods indicated:



TOTAL INCOME TAX



|                                      |  | For the
    year endedDecember 31, |         |  |      |  |         |        | 
|------------------------------------- |  | ---------------------------------- | ------- |  | ---- |  | ------- | ------ | 
|                                      |  | 2015                               |         |  | 2014 |  |         | Change | 
|                                      |  | $                                  |         |  | $    |  |         | $      | 
|Total income taxes (benefit) expense, |  |                                    | 1,680.6 |  |      |  | 1,656.1 |        | 
|Current income tax                    |  |                                    | 1,488.5 |  |      |  | 1,376.0 |        | 
|Deferred income tax                   |  |                                    | 192.1   |  |      |  | 280.1   |        | 



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



The effective income tax
rate was 30.6% in 2015 and 29.6% in 2014. This increase was due to the fact that we had tax credits in 2014, which were not present
in 2015.



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



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



PROFIT FOR THE YEAR



|                                        |  | For the
    years endedDecember 31, |         |  |      |  |         |        | 
|--------------------------------------- |  | ----------------------------------- | ------- |  | ---- |  | ------- | ------ | 
|In millions of pesos                    |  | 2015                                |         |  | 2014 |  |         | Change | 
|                                        |  | $                                   |         |  | $    |  |         | $      | 
|Profit for the year attributable to:    |  |                                     | 3,819.5 |  |      |  | 3,932.7 |        | 
|Controlling interest                    |  |                                     | 3,812.8 |  |      |  | 3,926.9 |        | 
|Non-controlling interest                |  |                                     | 6.7     |  |      |  | 5.7     |        | 
|Basic and diluted earnings per share(1) |  |                                     | 6.36    |  |      |  | 6.55    |        | 
|Net income per ADR(1)                   |  |                                     | 76.30   |  |      |  | 78.66   |        | 



36







(1) In pesos.



As a result of the factors
detailed above, our net income for 2015 totaled $3,819.5 million, or $6.36 per basic and diluted share ($76.30 per ADR), which
is a $113.1 million or 2.9% decrease when compared to $3,932.7 million in net income or $6.55 per basic and diluted share ($78.66
per ADR) reported in 2014.



Our consolidated net margin
in 2015 was 8.3% compared to a consolidated net margin of 9.4% in 2014.



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



EBITDA RESULT



|                               |  | For the years ended December 31, |         |   |      |  |         |        | 
|------------------------------ |  | -------------------------------- | ------- | - | ---- |  | ------- | ------ | 
|                               |  | 2015                             |         |   | 2014 |  |         | Change | 
|                               |  | $                                |         |   | $    |  |         | $      | 
|Net income                     |  |                                  | 3,819.5 |   |      |  | 3,932.7 |        | 
|Income tax expense (benefit)   |  |                                  | 1,680.6 |   |      |  | 1,656.1 |        | 
|Net finance income             |  |                                  | (446.6  | ) |      |  | (246.9  | )      | 
|Depreciation and amortizations |  |                                  | 819.9   |   |      |  | 805.7   |        | 
|EBITDA result                  |  |                                  | 5,873.4 |   |      |  | 6,147.6 |        | 
|EBITDA margin (%)              |  |                                  | 12.7    | % |      |  | 14.7    | %      | 



EBITDA result in 2015
and 2014 reached $5,873.4 and $6,147.6 million respectively, representing an EBITDA margin of 12.7% and 14.7%.



Critical Tax and
Accounting Policies



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



Income TaxYear 2016



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



Our subsidiary O.K. Industries
is located in the U.S. and it has a different fiscal period than the rest of the subsidiaries located in Mexico. O.K. Industries’
fiscal year ends in April each year, while the rest of the Companies end in December.



For more information please
see Note 20 of the Audited Consolidated Financial Statements.



Income Tax



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



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



37







The income tax rate for
OK Foods is 35.0%



Recent changes in
tax laws



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





Use of Estimates
and Judgments in Certain Accounting Policies



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



Business combinations
or acquisition of assets



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



Fair value of biological
assets



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



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



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



Aggregation of operating
segments



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



Key sources of
estimation uncertainty



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



Assessments to determine
the recoverability of deferred tax assets



As part of the tax analysis
carried out by the Company, on an annual basis the Company prepares projections of taxable income for purposes of determining
if taxable income will be sufficient to recover the benefit of deferred tax assets recognized from deductible temporary differences,
including tax losses and other tax credits.



38







Useful lives and
residual values of property, plant and equipment



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



Measurements and
disclosures at fair value



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



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



Impairment of long-lived
assets and goodwill



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



Employee retirement
benefits



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



Contingencies



A contingent liability is defined as:



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



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



| | a. | it is not probable that an outflow of resources embodying economic
    benefits will be required to settle the obligation; or
| | -- | -----------------------------------------------------------------------------------------------------------------------------
| | b. | the amount of the obligation cannot be measured with sufficient
    reliability.                                             



39







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



| | B. | Liquidity and Capital Resources
| | -- | -------------------------------



We are a holding company
with no significant operations of our own. Our principal sources of liquidity are:



| | - | The sales of our products through our subsidiaries in the Mexican
    and U.S. markets;
| | - | ---------------------------------------------------------------------------------------



| | - | Credit lines we use from time to time; as of December 31, 2016
    and 2015, the unused credit lines of the Company totaled $5,551.3 and $6,156.2 million, respectively. The Company did not
    pay any commission or charge for the unused credits.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | The current Mexican bond issuance program available until August
    2017. For more details, please refer to Item 12 (“Description of Securities Other than Equity Securities”) of
    this Annual Report.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Liquidity and Capital Resources 2016 vs 2015



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



|                                                                                                |  | As of December 31, |          |  |      |  |          |        | 
|----------------------------------------------------------------------------------------------- |  | ------------------ | -------- |  | ---- |  | -------- | ------ | 
|In millions of pesos                                                                            |  | 2016               |          |  | 2015 |  |          | Change | 
|                                                                                                |  | $                  |          |  | $    |  |          | $      | 
|Total cash, cash equivalents, and investment in securities and derivative financial instruments |  |                    | 15,659.8 |  |      |  | 15,290.1 |        | 
|Cash and cash equivalents                                                                       |  |                    | 14,681.2 |  |      |  | 14,046.3 |        | 
|Investment in securities                                                                        |  |                    | 970.3    |  |      |  | 1,242.6  |        | 
|Derivative financial instruments                                                                |  |                    | 8.3      |  |      |  | 1.2      |        | 



In 2016, cash and cash
equivalents, and investments in securities at fair value through profit or loss totaled $15,659.8 million, $369.7 million or 2.4%,
more than the $15,290.1 million recorded in 2015, mainly due to the net cash provided from our operating activities.



As of December 31, 2016,
we held cash and cash equivalents in our U.S. operations equivalent to $37.3 million.



ACCOUNTS RECEIVABLE



|                          |  | As of December
    31, |         |  |      |  |         |        | 
|------------------------- |  | ---------------------- | ------- |  | ---- |  | ------- | ------ | 
|In millions of pesos      |  | 2016                   |         |  | 2015 |  |         | Change | 
|                          |  | $                      |         |  | $    |  |         | $      | 
|Total accounts receivable |  |                        | 3,629.1 |  |      |  | 2,533.4 |        | 



Accounts receivable increased
$1,095.7 million, or 43.3%, when compared to 2015. This increase is mainly due to a $615.0 million increase in trade receivables,
$461.2 million of recoverable value-added tax and other recoverable taxes, which was partially offset by a decrease of $28.1 million
on income tax receivable.



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



40









ACCOUNTS PAYABLE



|                       |  | As of December
    31, |         |  |      | 
|---------------------- |  | ---------------------- | ------- |  | ---- | 
|In millions of pesos   |  | 2016                   |         |  | 2015 | 
|                       |  | $                      |         |  | $    | 
|Total accounts payable |  |                        | 4,545.2 |  |      | 



In 2016, accounts payable
decreased $51.9 million or 1.1% when compared to 2015. This decrease is mainly due to a $154.0 million decrease in trade payables
and $96.9 million in provisions. This decrease was partially offset by an increase of $160.1 million in Sundry creditors and expenses
payable.



For more detail please
see Note 18 of the Audited Consolidated Financial Statements.



TOTAL DEBT



|                                   |  | As of December
    31, |         |  |      | 
|---------------------------------- |  | ---------------------- | ------- |  | ---- | 
|In millions of pesos               |  | 2016                   |         |  | 2015 | 
|                                   |  | $                      |         |  | $    | 
|Total debt                         |  |                        | 4,047.9 |  |      | 
|Short-term debt (1)                |  |                        | 1,597.5 |  |      | 
|Long-term debt (2)                 |  |                        | 950.4   |  |      | 
|Short-term debt (Local bond issue) |  |                        | 1,500.0 |  |      | 
|Long-term debt (Local bond issue)  |  |                        | 0.0     |  |      | 



| | (1) | Includes notes payable to banks and current portion of long-term
    debt.
| | --- | --------------------------------------------------------------------------
| | (2) | Does not include current installments of long-term debt.                  



As of December 31, 2016,
total debt was $4,047.9 million, a decrease of $79.1 million or 1.9% when compared to $4,127.0 million of total debt as of December
31, 2015.



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



For details of maturity
of our debt and the prevailing interest rates, see Note 17 of our Audited Consolidated Financial Statements.



WORKING CAPITAL



|                          |  | As of December
    31, |          |  |      | 
|------------------------- |  | ---------------------- | -------- |  | ---- | 
|In millions of pesos      |  | 2016                   |          |  | 2015 | 
|                          |  | $                      |          |  | $    | 
|Working Capital           |  |                        | 18,614.1 |  |      | 
|Total current assets      |  |                        | 26,930.4 |  |      | 
|Total current liabilities |  |                        | 8,316.3  |  |      | 



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



In 2016, our working capital
increased $534.9 million or 3.0% when compared to year 2015, due primarily to increases in our level of cash, which in turn resulted
from an increase in cash from operating activities and from financing activities, as well as an increase in current liabilities
as part of our noncurrent debt came into current debt this year.



41







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



Liquidity and Capital Resources 2015 vs 2014



TOTAL CASH, CASH EQUIVALENTS, PRIMARY AND DERIVATIVES FINANCIAL
INSTRUMENTS



|                                                                                   |  | As of December
    31, |          |  |      |  |          |        | 
|---------------------------------------------------------------------------------- |  | ---------------------- | -------- |  | ---- |  | -------- | ------ | 
|In millions of pesos                                                               |  | 2015                   |          |  | 2014 |  |          | Change | 
|                                                                                   |  | $                      |          |  | $    |  |          | $      | 
|Total cash,
    cash equivalents, and primary and derivative financial instruments |  |                        | 15,290.1 |  |      |  | 11,968.3 |        | 
|Cash and cash equivalents                                                          |  |                        | 14,046.3 |  |      |  | 11,036.1 |        | 
|Investment in securities                                                           |  |                        | 1,242.6  |  |      |  | 925.5    |        | 
|Derivative financial instruments                                                   |  |                        | 1.2      |  |      |  | 6.7      |        | 



In 2015, cash and cash
equivalents, and investments in securities at fair value through profit or loss totaled $15,290.1 million, $3,321.8 million or
27.8%, more than $11,968.3 million recorded in 2014. This increase is mainly due to our positive operating results in 2015.



As of December 31, 2015,
we held cash and cash equivalents in our U.S. operations equivalent to $535.7 million.



ACCOUNTS RECEIVABLE



|                          |  | As of December
    31, |         |  |      |  |         |        | 
|------------------------- |  | ---------------------- | ------- |  | ---- |  | ------- | ------ | 
|In millions of pesos      |  | 2015                   |         |  | 2014 |  |         | Change | 
|                          |  | $                      |         |  | $    |  |         | $      | 
|Total accounts receivable |  |                        | 2,533.4 |  |      |  | 2,974.6 |        | 



Accounts receivable decreased
$441.2 million, or 14.8%, when compared to 2014. This decrease is mainly due to a $438.4 million decrease in recoverable value
added tax and other recoverable taxes, $263.7 million of other receivables, which was partially offset by an increase of $178.8
million in trade receivables.



ACCOUNTS PAYABLE



|                       |  | As of December
    31, |         |  |      | 
|---------------------- |  | ---------------------- | ------- |  | ---- | 
|In millions of pesos   |  | 2015                   |         |  | 2014 | 
|                       |  | $                      |         |  | $    | 
|Total accounts payable |  |                        | 4,597.1 |  |      | 



In 2015, accounts payable
increased $626.6 million or 15.8% when compared to 2014. This increase is mainly due to a $543.1 million increase in trade payables
and $39.0 million accrued employee benefits.



42







TOTAL DEBT



|                                      |  | As of December
    31, |         |  |      | 
|------------------------------------- |  | ---------------------- | ------- |  | ---- | 
|In millions of pesos                  |  | 2015                   |         |  | 2014 | 
|                                      |  | $                      |         |  | $    | 
|Total debt                            |  |                        | 4,127.0 |  |      | 
|Short-term debt (1)                   |  |                        | 1,631.9 |  |      | 
|Long-term debt (2)                    |  |                        | 995.1   |  |      | 
|Long-term debt (Local
    bond issue) |  |                        | 1,500.0 |  |      | 



| | (1) | Includes notes payable to banks and current portion of long-term
    debt.
| | --- | --------------------------------------------------------------------------
| | (2) | Does not include current installments of long-term debt.                  



As of December 31, 2015,
total debt was $4,127.0 million, an increase of $1,676.5 million or 68.4% when compared to $2,450.5 million of total debt as of
December 31, 2014. This additional debt was comprised of short-term debt in U.S. dollars terms we entered into to counter the
economic volatility we faced at the end of the year and long-term debt we entered into at low interest rates.



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



WORKING CAPITAL



|                          |  | As of December
    31, |          |  |      | 
|------------------------- |  | ---------------------- | -------- |  | ---- | 
|In millions of pesos      |  | 2015                   |          |  | 2014 | 
|                          |  | $                      |          |  | $    | 
|Working Capital           |  |                        | 18,079.2 |  |      | 
|Total current assets      |  |                        | 24,722.0 |  |      | 
|Total current liabilities |  |                        | 6,642.8  |  |      | 



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



In 2015, our working capital
increased $2,882.7 million or 19.0% when compared to 2014, due primarily to increases in our level of cash, which in turn resulted
from an increase in cash from operating activities and from financing activities.



CAPITAL EXPENDITURES



|In millions of pesos, for the years ended
    December 31, |  | 2016 |         |  | 2015 |  |         | 2014 | 
|---------------------------------------------------------- |  | ---- | ------- |  | ---- |  | ------- | ---- | 
|                                                           |  | $    |         |  | $    |  |         | $    | 
|Capital Expenditures                                       |  |      | 2,459.7 |  |      |  | 1,824.5 |      | 



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



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



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



43







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



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



See Note 14 of our Audited
Consolidated Financial Statements for more details.



OPERATING LEASES



|In millions of pesos, for the years ended
    December 31, |  | 2016 |       |  | 2015 |  |       | 2014 | 
|---------------------------------------------------------- |  | ---- | ----- |  | ---- |  | ----- | ---- | 
|                                                           |  | $    |       |  | $    |  |       | $    | 
|Operating Leases expense                                   |  |      | 403.1 |  |      |  | 359.7 |      | 



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



See Note 23 to our Audited
Consolidated Financial Statements for more information.



Financial Instruments



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



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



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



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



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



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



DEBT IN FOREIGN CURRENCY 2016 vs 2015



|                                                             |  | As of December
    31, |         |  |      | 
|------------------------------------------------------------ |  | ---------------------- | ------- |  | ---- | 
|                                                             |  | 2016                   |         |  | 2015 | 
|                                                             |  | $                      |         |  | $    | 
|Short-term financial debt liabilities in foreign currency(1) |  |                        | 1,444.8 |  |      | 



44







(1) The foreign
currency is U.S. dollars.



In 2016, our bank debt
denominated in U.S. dollars totaled $1,444.8 million pesos (equivalent to $70.0 million USD), $18.1 million pesos or 1.2% lower
than the $1,462.9 million pesos (equivalent to $85.0 million USD) in 2015. The short-term bank debt in U.S. dollars had an annual
average interest rate of 1.04% in 2016, 1.05% in 2015.



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



At the end of 2016, we
had assets denominated in U.S. dollars of $3,235.2 million pesos and liabilities of $3,588.3 million pesos, resulting in a net
liability position of $353.1 million pesos (or $17.1 million USD).



For more details see Note
8 and Note 17 to our Audited Consolidated Financial Statements.



LIABILITIES IN FOREIGN CURRENCY 2015 vs 2014



|                                              |  | As of December
    31, |         |  |      | 
|--------------------------------------------- |  | ---------------------- | ------- |  | ---- | 
|                                              |  | 2015                   |         |  | 2014 | 
|                                              |  | $                      |         |  | $    | 
|Short-term liabilities in foreign currency(1) |  |                        | 1,462.9 |  |      | 



(1) The foreign
currency is U.S. dollars.



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



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



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



| | C. | Research and Development, Patents and Licenses,
    etc.
| | -- | --------------------------------------------------------



None.



| | D. | Trend Information
| | -- | -----------------



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



| | - | Mexico is facing a macroeconomic uncertainty regarding
    its GDP growth.
| | - | --------------------------------------------------------------------------



| | - | Despite the lower trend we have observed in the prices of our
    main raw material prices in U.S. dollar terms, the sharp increase in the Mexican peso depreciation against the U.S. dollar
    will not allow us to capitalize the benefit from these lower grain and soybean meal prices.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | We might be affected by more aggressive competition from our
    peers in the markets in which we operate.
| | - | ----------------------------------------------------------------------------------------------------------



| | - | Finally, we may also be negatively affected by any poultry sanitary
    issues that may arise in regions where our production centers are located, which may affect our production volumes and production
    costs.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



45









| | E. | Off-Balance Sheet Arrangements
| | -- | ------------------------------



In 2016, except for our
operating lease agreements, we do not have off-balance sheet arrangements that might have current or future effects on the Company’s
financial condition. Disclosure of operating leases is included in this Annual Report under Item 5-B.



| | F. | Tabular Disclosure of Contractual Obligations
| | -- | ---------------------------------------------



Our major categories of
indebtedness included the following:



| | - | As of December 31,2016 and 2015, we had $1,652.7 and $9.0
    million in current portion of long-term debt respectively.
| | - | ------------------------------------------------------------------------------------------------------------------------



| | - | Long-term debt to banks, excluding the current installments
    of long-term debt, as of December 31, 2016 and 2015 was $950.4 and $2,495.1 million, respectively.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | The weighted average interest rates on long-term debt, excluding
    the Mexican bond issuance, for years 2016 and 2015 were 4.04% and 3.07%, respectively.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



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



The Company has certain
leases related to operating assets, including farms and administrative offices. The following table summarizes the Company ́s
contractual obligations as of December 31, 2016. The table does not include current installments of long-term debt, accounts
payable or pension liabilities.



CONTRACTUAL OBLIGATIONS



|In millions of pesos |  | Total |       |  | 2017 |  |       | 2018 |  |  | 2019  |  |  | 2020 |       |  | 2021 | 
|-------------------- |  | ----- | ----- |  | ---- |  | ----- | ---- |  |  | ----- |  |  | ---- | ----- |  | ---- | 
|                     |  |       |       |  | $    |  |       | $    |  |  | $     |  |  | $    |       |  | $    | 
|Long-term debt(1)    |  |       | 950.4 |  |      |  | 0.0   |      |  |  | 842.8 |  |  |      | 107.6 |  |      | 
|Operating leases(2)  |  |       | 430.6 |  |      |  | 107.8 |      |  |  | 78.7  |  |  |      | 57.8  |  |      | 



| | (1) | See Note 17-c of the Audited Consolidated Financial Statements
    for more detail.
| | --- | -----------------------------------------------------------------------------------
| | (2) | See Note 23 of the Audited Consolidated Financial Statements
    for more detail.  



Operating lease expense
for 2016 was $403.1 and, the Company did not make early payments of its long-term debt.



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



INTEREST



|In millions of pesos |  | Total |       |  | Less than1 year |   |       | From 1 To3 years |  |   | From 3 to 5years | 
|-------------------- |  | ----- | ----- |  | --------------- | - | ----- | ---------------- |  | - | ---------------- | 
|Interest             |  | $     | 279.0 |  |                 | $ | 142.1 |                  |  | $ | 136.9            | 



46











| | G. | Safe Harbor
| | -- | -----------



Not applicable.



| | Item 6. | Directors, Senior Management and Employees
| | ------- | ------------------------------------------



| | A. | Directors and Senior Management
| | -- | -------------------------------



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



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



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



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



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



| | · | General
                                         business strategy for the Company, including growth strategy and initiatives.
| | - | ------------------------------------------------------------------------------------------------------------------------------

| | · | Analysis
                                         and approval of the Company’s organizational structure.
| | - | ---------------------------------------------------------------------------------------------------------

| | · | Discussion
                                         of relevant matters of the Company’s operations, including, among others, the identification
                                         and follow up on both opportunities as well as significant adverse events.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Analysis
                                         and follow up on the financial performance of the Company.
| | - | ------------------------------------------------------------------------------------------------------------

| | · | Approval
                                         and appointment of management.
| | - | --------------------------------------------------------------------------------



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



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



47







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



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



The BOD, through the EC, meets with the CEO
generally on a monthly basis.



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



| | · | A
                                         discrete monthly statement of profit and loss for our operating segments, up to gross
                                         profit level.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Updates
                                         regarding raw materials price conditions.
| | - | ------------------------------------------------------------------------------------------

| | · | Certain
                                         key performance measures such as volume, prices and estimated cost on a discrete basis
                                         for our operating segments.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Consolidated
                                         entity-wide earnings before interest, income taxes, depreciation and amortization (EBITDA).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         consolidated entity-wide statement of profit and loss.
| | - | -------------------------------------------------------------------------------------------------

| | · | A
                                         consolidated entity-wide statement of financial position.
| | - | ----------------------------------------------------------------------------------------------------

| | · | A
                                         consolidated entity-wide statement of cash flow.
| | - | -------------------------------------------------------------------------------------------



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



| | · | Enhanced
                                         discussion and analysis of significant period to period changes in operating results,
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| | · | Further
                                         detail regarding gross profit and cost, and
| | - | --------------------------------------------------------------------------------------------

| | · | Sales
                                         analysis explaining differences from prior period sales and deviations from our budget.
| | - | --------------------------------------------------------------------------------------------------------------------------------------



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



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



| | · | A
                                         discrete monthly statement of profit and loss for our operating segments, up to gross
                                         profit level.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | A
                                         consolidated entity-wide statement of profit and loss.
| | - | -------------------------------------------------------------------------------------------------

| | · | A
                                         consolidated entity-wide statement of financial position.
| | - | ----------------------------------------------------------------------------------------------------

| | · | A
                                         consolidated entity-wide statement of cash flow.
| | - | -------------------------------------------------------------------------------------------



Directors



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



48







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



At our annual stockholders’
meeting held on April 27, 2016, we ratified the membership of our Board of Directors. Additionally, Mr. David Gastelum Cazares
was appointed as an independent member of the Board of Directors.



Currently our board of
directors is composed of the following members:



|MEMBERS OF THE BOARD                                        |  | Year of
    Birth |  | Member
    since
|----------------------------------------------------------- |  | ----------------- |  | ----------------
|Chairman of the Board and Proprietary Shareholder Director: |  |                   |  |                 
|Javier R. Bours Castelo                                     |  | 1953              |  | 1982            
|Proprietary Shareholder Directors:                          |  |                   |  |                 
|Jose Gerardo Robinson Bours Castelo                         |  | 1958              |  | 2008            
|Jesus Enrique Robinson Bours Muñoz                          |  | 1951              |  | 1994            
|Jesus Rodolfo Robinson Bours Muñoz                          |  | 1957              |  | 2002            
|Arturo Bours Griffith                                       |  | 1955              |  | 1994            
|Octavio Robinson Bours                                      |  | 1952              |  | 1997            
|Ricardo Aguirre Borboa                                      |  | 1954              |  | 1994            
|Juan Salvador Robinson Bours Martinez                       |  | 1965              |  | 1994            
|Alternate Directors:                                        |  |                   |  |                 
|Jose Eduardo Robinson Bours Castelo                         |  | 1956              |  | 1994            
|Jose Francisco Bours Griffith                               |  | 1950              |  | 1994            
|Guillermo Pineda Cruz                                       |  | 1948              |  | 1994            
|Gustavo Luders Becerril                                     |  | 1953              |  | 2011            
|Independent Directors:                                      |  |                   |  |                 
|Avelino Fernandez Salido                                    |  | 1938              |  | 2003            
|Humberto Schwarzbeck Noriega                                |  | 1954              |  | 2003            
|Guillermo Ochoa Maciel                                      |  | 1955              |  | 2015            
|David Gastelum Cazares                                      |  | 1951              |  | 2016            
|Secretary of the Board:                                     |  |                   |  |                 
|Eduardo Rojas Crespo                                        |  | 1969              |  | 2008            



Honorary Members
of the Board



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



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



|Cousins                                 |  | in
    law-related       
|--------------------------------------- |  | -------------------------
|Brothers:                               |  |                          
|● Arturo Bours Griffith                 |  |                          
|● Octavio Robinson Bours                |  |                          
|● Jose Francisco Bours Griffith         |  |                          
|Brothers:                               |  |                          
|● Jesus Enrique Robinson Bours Muñoz    |  | ● Guillermo Pineda Cruz  
|● Jesus Rodolfo Robinson Bours Muñoz    |  |                          
|                                        |  |                          
|Brothers:                               |  |                          
|● Francisco Javier R. Bours Castelo     |  |                          
|● Jose Gerardo Robinson Bours Castelo   |  |                          
|● Jose Eduardo Robinson Bours Castelo   |  | ● Ricardo Aguirre Borboa 
|● Juan Salvador Robinson Bours Martinez |  | ● Gustavo Luders Becerril



49







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



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





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



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



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



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



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



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



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



50







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



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



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



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



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



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



David Gastelum
Cazares, Mr. Gastelum was elected as an independent member of the Board of Directors during the annual stockholders’
meeting held on April 27, 2016. Mr. Gastelum holds a degree in Veterinary Medicine from the school of Veterinary Medicine
of the Universidad Nacional Autonoma de Mexico (“UNAM”) and is also a graduated of the Instituto Panamericano de Alta
Dirección de Empresas (“IPADE”). He joined Bachoco in 1979 and served as a pullet sales manager in
the states of Sonora and Sinaloa, National Sales Manager of Live Animals and Eggs, Manager of the Northwest Division, Manager
of the Mexico City Division and National Sales Manager. He assumed the Director of Sales position from 1992 to 2013.

He worked at La Hacienda,
S.A. de C.V. as Technical Advisor and as Area Officer for the Southeast Division Director of Sales. He was for several years vice-president of
poultry meat at the Mexican Poultry association and member of the Latin American Poultry Association (ALA). He currently is CEO
at Monteblanco, S.A. de C.V., a mushroom producer and sales company, from 2014 up to date. On March 2016, he was elected as member
of the Board of Directors of the Music Conservatory of Celaya. Mr. Gastelum is also member of the Board of Directors of the Unión
Nacional de Avicultores (UNA).



51







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



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



Honorary members



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



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



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



Executive Officers



|EXECUTIVE OFFICERS               |  |                                            |  |                  
|-------------------------------- |  | ------------------------------------------ |  | -----------------
|                                 |  |                                            |  |                  
|Name                             |  | Position                                   |  | Year
    of Birth
|Rodolfo Ramos Arvizu             |  | Chief Executive Officer                    |  | 1957             
|Trent Goins                      |  | Chief Executive Officer, U.S. Operations   |  | 1978             
|Ernesto Salmon Castelo           |  | Director of Operations                     |  | 1962             
|Andres Morales Astiazaran        |  | Director of Sales                          |  | 1968             
|Daniel Salazar Ferrer            |  | Chief Financial Officer                    |  | 1964             
|Ismael Sanchez Moreno            |  | Director of Human Resources                |  | 1965             
|Augusto Franco Gomez             |  | Marketing, Research & Development Director |  | 1974             
|Alejandro Elias Calles Gutierrez |  | Director of Purchasing                     |  | 1956             



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



None.



A biography of the Executive
Officers is set forth below:



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



52







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



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



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



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



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



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



Augusto Franco Gómez,
Marketing, Research & Development Director, joined us and assumed his current position in September 2014. Mr. Franco has 17
years of work experience, with strong experience in Latin America, and has worked in foods, food service, HPC products and advertising.
He has lived in different countries such as Mexico, Colombia, Bolivia and the U.S. He has worked for companies such as Unilever,
Team Foods, Glaxo, General Mills and Leo Burnett and his last position was Marketing Director for Food Solutions in Unilever for
the North Latin American region. Mr. Franco has a bachelor’s degree in Business Administration from the Colegio de Estudios
Superiores de Administración in Colombia, an International MBA from St. Tomas University in the U.S., and took courses
such as New Products Development at the University of Chicago.



53









| | B. | Compensation
| | -- | ------------



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



TOTAL COMPENSATION



|                                      |  | As of
    December 31, |     
|------------------------------------- |  | ---------------------- | ----
|                                      |  | 2016                   |     
|                                      |  | $                      |     
|Compensation, net (in millions pesos) |  |                        | 53.5



| | C. | Board Practices
| | -- | ---------------



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



Audit and Corporate
Practices Committee



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



| | - | Submit an annual report to the Board of Directors;
| | - | --------------------------------------------------



| | - | Inform the Board of Directors of the current condition of the
    internal controls and internal auditing system of the Company or of the entities it controls, including any irregularities
    detected;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Require the relevant directors and other employees of the Company,
    or of the entities it controls, to provide reports relative to the preparation of the financial information or any other kind
    of reports or information it deems appropriate to perform its duties;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Receive observations formulated by shareholders, Board members,
    relevant officers, employees and, in general, any third party with regard to the matters under the Audit Committee duties,
    as well as carry out the actions that, in its judgment, may be appropriate in connection with such observations;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Inform the Board of Directors of any material irregularities
    detected as a result of the performance of its duties and, as applicable, inform the Board of Directors of the corrective
    actions taken, or otherwise propose the actions that should be taken;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Call Shareholders’ Meetings and cause the items it deems
    pertinent to be inserted into the agendas of such Shareholders’ Meetings; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | - | Assist the Board of Directors in selecting candidates for audit
    and reviewing the scope and terms of the auditor’s engagement, as well as evaluate the performance of the entity that
    provides the external auditing services and analyze the report, opinions, statements and other information prepared and signed
    by the external auditor.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



AUDIT AND CORPORATE PRACTICES COMMITTEE



|Name                         |  | Position  |  | Member since
|---------------------------- |  | --------- |  | ------------
|Guillermo Ochoa Maciel       |  | President |  | 2015        
|Humberto Schwarzbeck Noriega |  | Member    |  | 2003        
|Ricardo Aguirre Borboa       |  | Member    |  | 2003        
|Avelino Fernandez Salido     |  | Member    |  | 2003        



54







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



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



| | D. | Employees
| | -- | ---------



The Company has employees
in Mexico and the United States.



In 2016, around 50.0%
of our employees in Mexico were members of labor unions in our operations. As of March 2017 and the date of this Annual Report,
labor relations with our employees in Mexico are governed by 52 separate collective labor agreements, each relating to a different
group of employees and negotiated on behalf of each such group by a different labor union.



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



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



In our U.S. operations the only employees represented
by a labor union are the hourly employees at our Oklahoma City facility; however, as of the date of this Annual Report, there
is no collective bargaining agreement governing the terms and conditions of their employment.



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



WORKFORCE



|                 |  | 2016 |        |  | 2015 |  |        | 2014 |  |  | 2013   |  |  | 2012 |       
|---------------- |  | ---- | ------ |  | ---- |  | ------ | ---- |  |  | ------ |  |  | ---- | ------
|Total employees: |  |      | 25,725 |  |      |  | 25,231 |      |  |  | 24,736 |  |  |      | 24,486
|in Mexico        |  |      | 22,340 |  |      |  | 21,964 |      |  |  | 21,706 |  |  |      | 21,404
|In the U.S.      |  |      | 3,385  |  |      |  | 3,267  |      |  |  | 3,030  |  |  |      | 3,082 



| | E. | Share Ownership
| | -- | ---------------



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



55









| | Item 7. | Major Stockholders and Related Party Transactions
| | ------- | -------------------------------------------------



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



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



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



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



| | A. | Major Shareholders
| | -- | ------------------



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



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



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



|                   |  | Before
    the transaction |             |  | After the
    transaction | 
|------------------ |  | -------------------------- | ----------- |  | ------------------------- | 
|                   |  | Shares(1)                  |             |  | Position                  | 
|Family Trusts      |  |                            | 496,500,000 |  |                           | 
|Control Trust      |  |                            | 312,000,000 |  |                           | 
|Underwriting Trust |  |                            | 184,500,000 |  |                           | 
|Float(2)           |  |                            | 103,500,000 |  |                           | 



| | (1) | All shares B Class with full voting rights.
| | --- | -------------------------------------------
| | (2) | Trading on the BMV and at the NYSE.        



According to our Depositary
Bank, as of January 31, 2017, we had 3,574,521 ADRs outstanding on the NYSE, which represent 7.1% over the total shares and 26.7%
over the free float.



ADRs Outstanding



|As of December 31:           |  | 2016 |           |   | 2015 |  |           | 2014 | 
|---------------------------- |  | ---- | --------- | - | ---- |  | --------- | ---- | 
|Total ADRs Outstanding       |  |      | 3,482,595 |   |      |  | 3,362,229 |      | 
|Percentage Over Total Shares |  |      | 7.0       | % |      |  | 6.7       | %    | 



56







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



According to information
providing by BNY Mellon, as of December 31, 2016 and February 28, 2017, from the 100.0% of the total Shares of the Company, there
were approximately 109 and 112 shareholders in the NYSE, respectively.



According to the most
recent information provided by broker dealers at the date of our 2016 Bachoco’s stockholders Annual meeting, we estimated
that there are 1,235 Shareholders on the BMV.



The following table sets
forth the Company’s main shareholders, which held 1.0% or more of the total shares of the Company, as of December 31, 2016.



|                             |  | Shares(1) |             |  | Position |  |       | Country
|---------------------------- |  | --------- | ----------- |  | -------- |  | ----- | -------
|Control Trust                |  |           | 312,000,000 |  |          |  | 52.00 | %      
|Underwriting Trust           |  |           | 127,500,000 |  |          |  | 21.25 | %      
|Renaissance Technologies LLC |  |           | 6,376,800   |  |          |  | 1.06  | %      



| | (1) | All shares B Class with full voting rights.
| | --- | -------------------------------------------



As of March 31, 2017 there
have been no significant changes in the composition of the Company’s main shareholders.



| | B. | Related Party Transactions
| | -- | --------------------------



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



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



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



| | - | We regularly purchase vehicles and related equipment from distributors
    owned by various members of the Robinson Bours family. The distribution of vehicles and related equipment is a highly competitive
    aspect of business in the areas in which we operate. We are not dependent on affiliated distributors and are able to ensure
    that the pricing and service we obtain from affiliated distributors are competitive with those available from other suppliers.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | The Robinson Bours Stockholders also own Taxis Aereos del Noroeste,
    S.A. de C.V., an air transport company that provides transportation for members of the Board of Directors to and from meetings
    at our headquarters in Celaya, Guanajuato in Mexico.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | We purchased feed and packaging materials from enterprises owned
    by Robinson Bours Stockholders, the family of Enrique Robinson Bours and the family of Juan Bautista Robinson Bours.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | We also have accounts payable to related parties. These transactions
    took place among companies owned by the same set of stockholders.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



In addition, during 2015,
we granted a short-term loan that bears interest to a related party, Taxis Aereos del Noroeste, S.A. de C.V., for $189.1 million.
This loan is recorded in our balance sheet as a current assets under the “Due for related parties” line item. This
non-recurring loan was made on terms and conditions substantially similar as those prevailing at the time for comparable transactions
with unrelated third parties. As of December 31, 2016 the amount due from Taxis Aereos del Noroeste is $144.6 million pesos.



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



57









REVENUES FROM RELATED PARTY TRANSACTIONS



|                               |  | As of December 31, |     
|------------------------------ |  | ------------------ | ----
|In millions of Pesos           |  | 2016               |     
|                               |  | $                  |     
|Feed and packaging materials   |  |                    | 30.8
|Vehicles and related equipment |  |                    | 0.0 
|Air Transportation Services    |  |                    | 1.9 



EXPENSES INCURRED IN RELATED PARTY TRANSACTIONS



|                               |  | As of December 31, |      
|------------------------------ |  | ------------------ | -----
|In millions of Pesos           |  | 2016               |      
|                               |  | $                  |      
|Feed and packaging materials   |  |                    | 733.3
|Vehicles and related equipment |  |                    | 306.2
|Air Transportation Services    |  |                    | 7.7  



BALANCES WITH RELATED PARTIES



Balance of Revenues with Related Parties



|                               |  | As of
    December 31, |      
|------------------------------ |  | ---------------------- | -----
|In millions of Pesos           |  | 2016                   |      
|                               |  | $                      |      
|Feed and packaging materials   |  |                        | 4.3  
|Vehicles and related equipment |  |                        | 0.0  
|Air Transportation Services(1) |  |                        | 144.6



| | (1) | As of December 31, 2016, the balance due from Air
    Transportation Services is comprised of the short-term loan in an amount of $144.6 million we granted to Taxis Aereos del
    Noroeste, S.A. de C.V., as further described above.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Balance of Accounts Payable with Related Parties



|                               |  | As of
    December 31, |      
|------------------------------ |  | ---------------------- | -----
|In millions of Pesos           |  | 2016                   |      
|                               |  | $                      |      
|Feed and packaging materials   |  |                        | 169.9
|Vehicles and related equipment |  |                        | 19.6 
|Air Transportation Services    |  |                        | 0.5  



As of December 31, 2016
and 2015, the balances due to related parties are the balances owed denominated in pesos, which do not accrue interest, payable
in cash in the short-term, for which there are no guarantees.



See Note 19 to our Audited
Consolidated Financial Statements for more detail regarding income and expenses incurred in connection with related parties transactions.



| | C. | Interests of Experts and Counsel
| | -- | --------------------------------



Not applicable.



58







| | Item 8. | Financial Information
| | ------- | ---------------------



| | A. | Consolidated Statements and Other Financial Information
| | -- | -------------------------------------------------------



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



The Auditors



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



Legal Proceedings



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



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



Dividends Policy



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



DIVIDENDS



|                                             |  | As of
    December 31, |       
|-------------------------------------------- |  | ---------------------- | ------
|                                             |  | 2016                   |       
|Total dividends declared  (in million pesos) |  |                        | 780.0 
|Dividend declared per share (in pesos)       |  |                        | 1.300 
|Dividends declared per ADR (in pesos)        |  |                        | 15.600



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



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



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



59









| | B. | Significant Changes
| | -- | -------------------



None



| | Item 9. | The Offer and Listing
| | ------- | ---------------------



| | A. | Offer and Listing Details
| | -- | -------------------------



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



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



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



|     |  | Mexican Stock Exchange                           |       |  | The New York Stock Exchange              | 
|---- |  | ------------------------------------------------ | ----- |  | ---------------------------------------- | 
|     |  | Ticker Symbol: BachocoIn nominal pesos per Share |       |  | Ticker Symbol: IBAIn U.S. Dollar per ADR | 
|Year |  | High                                             |       |  | Low                                      | 
|2016 |  |                                                  | 85.65 |  |                                          | 
|2015 |  |                                                  | 89.73 |  |                                          | 
|2014 |  |                                                  | 68.50 |  |                                          | 
|2013 |  |                                                  | 45.25 |  |                                          | 
|2012 |  |                                                  | 30.13 |  |                                          | 



|Quarter |  | High |       |  | Low |  |       | Average |  |  | Close |  |  | Volume |       |  | High |  |            | Low |  |  | Average |  |  | Close |       |  | Volume | 
|------- |  | ---- | ----- |  | --- |  | ----- | ------- |  |  | ----- |  |  | ------ | ----- |  | ---- |  | ---------- | --- |  |  | ------- |  |  | ----- | ----- |  | ------ | 
|4Q-2016 |  |      | 85.65 |  |     |  | 77.88 |         |  |  | 81.71 |  |  |        | 84.75 |  |      |  | 20,990,139 |     |  |  | 53.23   |  |  |       | 45.76 |  |        | 
|3Q-2016 |  |      | 84.65 |  |     |  | 76.92 |         |  |  | 81.59 |  |  |        | 81.04 |  |      |  | 20,964,855 |     |  |  | 55.65   |  |  |       | 47.29 |  |        | 
|2Q-2016 |  |      | 77.31 |  |     |  | 70.42 |         |  |  | 74.62 |  |  |        | 75.28 |  |      |  | 26,096,399 |     |  |  | 52.68   |  |  |       | 46.04 |  |        | 
|1Q-2016 |  |      | 77.40 |  |     |  | 62.51 |         |  |  | 71.21 |  |  |        | 73.91 |  |      |  | 24,371,320 |     |  |  | 53.52   |  |  |       | 48.67 |  |        | 
|4Q-2015 |  |      | 85.80 |  |     |  | 65.95 |         |  |  | 74.50 |  |  |        | 70.05 |  |      |  | 31,816,471 |     |  |  | 61.13   |  |  |       | 45.64 |  |        | 
|3Q-2015 |  |      | 89.73 |  |     |  | 69.23 |         |  |  | 78.98 |  |  |        | 85.79 |  |      |  | 25,104,071 |     |  |  | 63.49   |  |  |       | 50.51 |  |        | 
|2Q-2015 |  |      | 73.70 |  |     |  | 64.38 |         |  |  | 70.01 |  |  |        | 70.50 |  |      |  | 21,136,177 |     |  |  | 58.14   |  |  |       | 50.87 |  |        | 
|1Q-2015 |  |      | 67.40 |  |     |  | 59.23 |         |  |  | 62.91 |  |  |        | 63.36 |  |      |  | 22,625,883 |     |  |  | 53.78   |  |  |       | 47.97 |  |        | 



|Month  |  | High |       |  | Low |  |       | Average |  |  | Close |  |  | Volume |       |  | High |  |            | Low |  |  | Average |  |  | Close |       |  | Volume | 
|------ |  | ---- | ----- |  | --- |  | ----- | ------- |  |  | ----- |  |  | ------ | ----- |  | ---- |  | ---------- | --- |  |  | ------- |  |  | ----- | ----- |  | ------ | 
|Mar-17 |  |      | 85.84 |  |     |  | 80.23 |         |  |  | 82.49 |  |  |        | 84.97 |  |      |  | 5,661,995  |     |  |  | 54.55   |  |  |       | 48.32 |  |        | 
|Feb-17 |  |      | 83.53 |  |     |  | 79.53 |         |  |  | 80.77 |  |  |        | 80.08 |  |      |  | 4,772,304  |     |  |  | 49.08   |  |  |       | 46.20 |  |        | 
|Jan-17 |  |      | 87.48 |  |     |  | 80.47 |         |  |  | 84.97 |  |  |        | 80.98 |  |      |  | 8,778,949  |     |  |  | 49.02   |  |  |       | 46.42 |  |        | 
|Dec-16 |  |      | 85.65 |  |     |  | 78.99 |         |  |  | 82.58 |  |  |        | 84.75 |  |      |  | 5,684,176  |     |  |  | 49.69   |  |  |       | 45.76 |  |        | 
|Nov-16 |  |      | 82.70 |  |     |  | 77.88 |         |  |  | 80.24 |  |  |        | 80.60 |  |      |  | 10,422,544 |     |  |  | 52.56   |  |  |       | 45.92 |  |        | 
|Oct-16 |  |      | 84.26 |  |     |  | 81.26 |         |  |  | 82.33 |  |  |        | 83.70 |  |      |  | 4,883,416  |     |  |  | 53.23   |  |  |       | 50.77 |  |        | 



Source:
Yahoo



Market Maker



Currently the Company
does not have any market maker program.



60







| | B. | Plan of Distribution
| | -- | --------------------



Not applicable.



| | C. | Markets
| | -- | -------



On September 19,
1997, Bachoco commenced trading on the BMV and on the NYSE.



As of January 31, 2017,
there were 3,574,521 ADRs outstanding at the NYSE. They represented 7.1% of the total shares of the Company or 26.7% of the free
float.



Based on these figures,
we can assume that the remaining 7.3% of the free float is trading at the Mexican Stock Exchange.



|Exchange |  | Country |  | Ticker
    Symbol |  | Securities
|-------- |  | ------- |  | ----------------- |  | ----------
|BMV      |  | Mexico  |  | Bachoco           |  | Shares    
|BMV      |  | Mexico  |  | Bachoco12         |  | Bonds     
|NYSE     |  | U.S.    |  | IBA               |  | ADR       



| | D. | Selling Shareholders
| | -- | --------------------



Not applicable.



| | E. | Dilution
| | -- | --------



Not applicable.



| | F. | Expenses of the Issue
| | -- | ---------------------



Not applicable.



| | Item 10. | Additional Information
| | -------- | ----------------------



| | A. | Share Capital
| | -- | -------------



Not applicable.



| | B. | Memorandum and Articles of Association
| | -- | --------------------------------------



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



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



General



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



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



61







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



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



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



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



|Prior language                                                                                                                                                                        |  | Current language                                                                                                                                                                                                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Produce, transform, adapt, import, export, purchase and sell, under any title, machinery,
    parts, materials, raw materials, industrial products, goods and merchandise of any kind |  | “Produce, transform, adapt or manufacturing of processed food in package and/or canned
    and/or in flask, as well as import, export, purchase and sell, under any title, machinery, parts, materials, raw materials,
    industrial products, goods and merchandise of any kind”



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



Registration and
Transfer



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



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



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



62







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



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



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



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



Voting Rights and
Stockholders’ Meetings



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



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



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



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



63







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



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



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



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



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



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



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



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



64







Members of the Board



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



| | - | The Board of Directors will be integrated by a minimum of five
    and a maximum of twenty-one principal members.
| | - | -----------------------------------------------------------------------------------------------------------------



| | - | At least twenty-five percent of the members of the Board of
    Directors must be independent, in accordance with the terms of Article 24 of the Securities Market Law.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | For each principal member, a substitute will be appointed, in
    the understanding that the substitutes of independent Board members must also be independent.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



Dividends and Distributions



At the annual ordinary
general stockholders’ meeting, the Board of Directors submits our financial statements for the previous fiscal year, together
with a report thereon by the board, to the holders of Shares for their consideration. The holders of Shares, once they have approved
the financial statements, determine the allocation of our net profits, if any, for the preceding year. As of December 31,
2016, our legal reserve fund was equal to at least 20% of our paid-in capital stock. Amounts in excess of those allocated to the
legal reserve fund may be allocated to other reserve funds as the stockholders determine, including a reserve for the repurchase
of our Shares. The remaining balance of net profits, if any, is available for distribution as dividends. No dividends may be paid,
however, unless losses for prior fiscal years have been paid or absorbed.



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



Changes in Capital
Stock



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



65







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



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



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



Preemptive Rights



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



Foreign Investment
Legislation



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



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



Other Provisions



Fixed and variable
capital



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



66







Repurchase in the
event of delisting



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



Forfeiture of Shares



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



Exclusive Jurisdiction



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



Duration



The duration of our existence
under our bylaws is indefinite.



Repurchase of our
own Shares



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



67







Non-Subscribed Shares



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



Stockholder Conflicts
of Interest



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



Board Member Conflicts
of Interest



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



Appraisal Rights



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



Actions against
Directors



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



Audit Committee
and Corporate Practices



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



68







| | - | The Audit Committee and Corporate Practices will consist of
    members of the Board of Directors. The President of the Audit Committee and Corporate Practices and a majority of the committee
    members must be independent, as independence is defined under the Mexican Securities Market Law.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | The mandate of the audit committee and corporate practices is
    to establish and monitor procedures and controls in order to ensure that the financial information we distribute is useful,
    appropriate and reliable, and accurately reflects our financial position.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Related Party Transactions



See “Related Party
Transactions” included in Item 7 to this Annual Report.



| | C. | Material Contracts
| | -- | ------------------



None.



| | D. | Exchange Controls
| | -- | -----------------



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



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



| | E. | Taxation
| | -- | --------



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



69







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



| | - | an individual who is a citizen or resident of the United States;
| | - | ----------------------------------------------------------------



| | - | a corporation organized in or under the laws of the United States,
    any state thereof, or the District of Columbia;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | - | an estate, the income of which is subject to U.S. federal income
    tax without regard to its source; or
| | - | ---------------------------------------------------------------------------------------------------------



| | - | a trust that is subject to the primary supervision of a U.S.
    court and the control of one or more U.S. persons, or that has a valid election in effect under applicable Treasury regulations
    to be treated as a U.S. person.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



U.S. Federal Income
Taxation



U.S. Holders



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



70







Taxation of Dividends



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



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



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



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



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



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



71







Taxation of Capital
Gains



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

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



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



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



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



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



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



Passive Foreign
Investment Company Rules



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



72







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



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



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



Non-U.S. Holders



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



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



U.S. Backup Withholding
and Information Reporting



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



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



73







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



Mexican Taxation



Taxation of Dividends



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



Taxation of Capital
Gains



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



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



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



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



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



74







Other Mexican Taxes



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



| | F. | Dividends and Paying Agents
| | -- | ---------------------------



Not applicable.



| | G. | Statement by Experts
| | -- | --------------------



Not applicable.



| | H. | Documents on Display
| | -- | --------------------



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



| | I. | Subsidiary Information
| | -- | ----------------------



Not applicable.



| | Item 11. | Quantitative and Qualitative Disclosures about
    Market Risk
| | -------- | --------------------------------------------------------------



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



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



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



Risk management
framework



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



75







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



Currency Fluctuation



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



In 2016, 2015 and 2014
we recognized foreign exchange gains of $297.5, $95.4, and $19.9 million, respectively. These gains are mainly attributed to positive
results in our investments of cash.



As of December 31, 2016,
a hypothetical increase of 10% in the exchange rate, would have resulted in a decrease in the foreign currency position of $35.3
million, which represents a loss from foreign currency exchange rates. On the other hand, a decrease of 10% in the exchange rate
would have resulted in an increase in our foreign currency position of $35.3 million, which represents a gain from foreign currency
exchange rates.



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



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



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



Interest Rates



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



As of December 31, 2016,
we had borrowings of approximately $4,027.9 million pursuant to variable rate debt instruments, representing approximately 9.0%
of our total assets.



Based on our debt position
on December 31, 2016, we estimate that a hypothetical increase in the interest rate of 50 basis points would increase our interest
expense by $15.4 million, negatively impacting our net income by the same. Whereas, we estimate that a hypothetical decrease in
the interest rate of 50 basis points, would decrease our interest expense by $15.4 million, positively impacting our net income
by the same.



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



Feed Ingredients



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



76







Based on our results for
2016, we estimate that a hypothetical increase in the price of corn bushel and short-ton of soybean meal of 15% would decrease
the loss in our overall derivative position instruments to $9.1 million, negatively affecting our results. Whereas, we estimate
that a hypothetical decrease in the price of corn bushel and short-ton soybean meal of 15%, would increase the loss in our overall
derivative position instruments to $8.8 million, positively affecting our results.



| | Item 12. | Description of Securities Other Than Equity Securities
| | -------- | ------------------------------------------------------



| | A. | Debt Securities
| | -- | ---------------



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



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



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



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



The CBs do not provide
restrictions of payment of cash dividends.



Because our current issued
bonds mature in 2017, we are analyzing the possibility of a new issuance under our bond issuance program.



For more detail, see Note
17 of our Audited Consolidated Financial Statements



| | B. | Warrants and Rights
| | -- | -------------------



Not applicable.



| | C. | Other Securities
| | -- | ----------------



Not applicable.



| | D. | American Depositary Receipts
| | -- | ----------------------------



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



|Shareholder
    Services                   |  | Proxy Services             
|------------------------------------------ |  | ---------------------------
|P.O. Box 30170                             |  | P.O. Box 43102             
|College Station, TX 77842-3170             |  | Providence RI 02940-5068   
|US:  888 BNY ADRS                          |  | Toll free:  888 269 2377   
|T.:  201 680 6825                          |  | T. 212 815 3700            
|E:  shrrelations@cpushareownerservices.com |  | E:  shareowner@bankofny.com



77







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



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



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



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



|Persons depositing
    or withdrawing sharesmust pay:                                                                                                                                          |  | For:                                                                                                                                                    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------
|$5.00 (or less) per 100 ADRs (or portion of 100 ADRs)                                                                                                                                          |  | ●   Issuance of ADRs,
    including issuances resulting from a distribution of shares or rights or other property                                       
|                                                                                                                                                                                               |  | ●   Cancellation of
    ADRs for the purpose of withdrawal, including if the deposit agreement terminates                                               
|$.02 (or less) per ADR                                                                                                                                                                         |  | ●   Any cash distribution
    to ADR registered holders                                                                                                 
|A fee equivalent to the fee that would be payable if securities distributed to you had been
    shares and the shares had been deposited for issuance of ADRs                                  |  | ●   Distribution of
    securities distributed to holders of deposited securities which are distributed by the depositary to ADR registered holders     
|Registration or transfer fees                                                                                                                                                                  |  | ●   Transfer and registration
    of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares
|Expenses of the depositary                                                                                                                                                                     |  | ●   Cable, telex and
    facsimile transmissions (when expressly provided in the deposit agreement)                                                     
|                                                                                                                                                                                               |  | ●   Converting foreign
    currency to U.S. dollars                                                                                                     
|Taxes and other governmental charges the depositary or the custodian have to pay on any
    ADR or share underlying an ADR, for example, stock transfer taxes, stamp duty or withholding taxes |  | ●   As necessary                                                                                                                                        
|Any charges incurred by the depositary or its agents for servicing the deposited securities                                                                                                    |  | ●   As necessary                                                                                                                                        



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



78







Fees and other direct
and indirect payments made by the Depositary and us



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



Pursuant to our letter
agreement with our Depositary, in 2014 we did not receive any such payment because we renegotiated our contract with BNY Mellon
in August 2014 and were not be able to request this benefit until one year from the contract renewal date. In 2016 and 2015, we
received a payment of US $69, 852.64 (less fees) and US$67,765.28 (less fees) respectively, as payment for expenses we incurred
related to the maintenance of our ADR program, including investor relations expenses and exchange application and listing fees.



Part II



| | Item 13. | Default, Dividend Arrearages and Delinquencies
| | -------- | ----------------------------------------------



None.



| | Item 14. | Material Modifications to the Rights of Security Holders
    and Use of Proceeds
| | -------- | --------------------------------------------------------------------------------



None.



| | Item 15. | Controls and Procedures
| | -------- | -----------------------



Disclosure Controls
and Procedures



We carried out an evaluation
under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2016.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility
of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls
and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, as of December
31, 2016, our Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective
to provide reasonable assurance, that information required to be disclosed in the reports we file and submit under the Securities
Exchange Act are recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms,
and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.



Management’s
Annual Report on Internal Control over Financial Reporting



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



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



79







Management assessed
the design and effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. Before
2016, in making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in its original 1992 Internal Control—Integrated Framework. In 2016, in making this assessment,
the Company adopted the criteria set forth by the COSO in its 2013 Internal Control—Integrated Framework.



Based on this assessment,
management concluded that, as of December 31, 2016, the Company’s internal control over financial reporting is effective
based on such criteria.



Changes in Internal
Control Over Financial Reporting



There have been no changes
in our internal control over financial reporting in the period covered by this Annual Report that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.



Attestation Report of the Independent Registered Public Accounting
Firm



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



We have audited the internal control over
financial reporting of Industrias Bachoco, S.A.B. de C.V. and subsidiaries (the “Company”) as of December 31, 2016,
based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
of the Treadway Commission.  The Company’s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in
the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit.

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

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

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



80







In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteria established
in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and
for the year ended December 31, 2016 of the Company and our report dated April 28, 2017 expressed an unqualified opinion on those
financial statements.

Galaz, Yamazaki, Ruiz Urquiza, S.C.
Member of Deloitte Touche Tohmatsu Limited

C.P.C. Francisco Javier
Robles Mújica
Querétaro, Qro., Mexico

April 28, 2017



| | Item 16. | [Reserved]
| | -------- | ----------



| | ITEM 16.A. | Audit Committee Financial Expert
| | ---------- | --------------------------------



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



| | ITEM 16.B. | Code of Ethics
| | ---------- | --------------



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



| | ITEM 16.C. | Principal Accountant Fees and Services
| | ---------- | --------------------------------------



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



Audit and Non-Audit
Fees



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



81







AUDIT FEES OF DELOITTE



|                       |  | As of December
    31, |      
|---------------------- |  | ---------------------- | -----
|In thousands of pesos, |  | 2016                   |      
|Total Fees:            |  | $                      | 9,383
|Audit fees             |  |                        | 9,015
|Audit related fees     |  |                        | 368  
|Other                  |  |                        | -    



Deloitte’s audit
related fees in the table above are fees related to the review of the Annual Reports to be released to the Mexican and New York
stock exchanges.



In addition to the fees for professional services
paid listed in the table above, we reimbursed Deloitte for out-of-pocket expenses they incurred in connection with the performance
of their audit, such as lodging and other travel related expenses of $991 and $1,330 in 2016 and 2015, respectively.



Total 2016 audit fees
and statutory audit fees agreed to be paid to Deloitte is $7.2 million.



Audit Committee
Approval Policies and Procedures



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



| | ITEM 16.D. | Exemptions from the Listing Standards for Audit
    Committees
| | ---------- | --------------------------------------------------------------



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



| | ITEM 16.E. | Purchases of Equity Securities by the Issuer
    and Affiliated Purchasers
| | ---------- | --------------------------------------------------------------------------



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



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



REPURCHASE PLAN APPROVED



|Year |  | Announced date |  | Expiration date |  | Amount |             |  | Estimate
    number of shares thatmay be purchase under the plan | 
|---- |  | -------------- |  | --------------- |  | ------ | ----------- |  | ---------------------------------------------------------------- | 
|2016 |  | April 27, 2016 |  | April 25, 2017  |  | $      | 449,640,000 |  |                                                                  | 
|2015 |  | April 22, 2015 |  | April 26, 2016  |  | $      | 778,320,000 |  |                                                                  | 
|2014 |  | April 23, 2014 |  | April 22, 2015  |  | $      | 576,600,000 |  |                                                                  | 



(1) The amount
includes current shares in the repurchase plan.



82







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



REPURCHASE OF SHARES IN 2016



|Monthly operation of therepurchase plan in 2016 |  | Total number ofsharespurchased |        |  | Average pricepaid per share(in pesos) |   |       | Total number ofshares purchaseas part of thepubliclyannounced plan |  |  | Estimatemaximumnumber ofshares that mayyet be purchasedunder the plan | 
|----------------------------------------------- |  | ------------------------------ | ------ |  | ------------------------------------- | - | ----- | ------------------------------------------------------------------ |  |  | --------------------------------------------------------------------- | 
|Opening balance                                 |  |                                | 10,000 |  |                                       | $ | 69.89 |                                                                    |  |  | 10,000                                                                | 
|January                                         |  |                                | 50,000 |  |                                       |   | 68.00 |                                                                    |  |  | 50,000                                                                | 
|February                                        |  |                                | 10,157 |  |                                       |   | 70.60 |                                                                    |  |  | 10,157                                                                | 
|March                                           |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|April                                           |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|May                                             |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|June                                            |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|July                                            |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|August                                          |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|September                                       |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|October                                         |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|November                                        |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|December                                        |  |                                | 0      |  |                                       |   | 0.00  |                                                                    |  |  | 0                                                                     | 
|Total 2016                                      |  |                                | 70,157 |  |                                       |   | 69.50 |                                                                    |  |  | 70,157                                                                | 



REPURCHASED OF SHARES IN 2017



|Monthly operation of therepurchase plan in 2017 |  | Total number ofshares purchased |   |  | Average pricepaid per share(in pesos) |   |      | Total number ofshares purchasedas part of thepubliclyannounced plan |  |  | Estimatemaximumnumber ofshares that mayyet bepurchasedunder the plan | 
|----------------------------------------------- |  | ------------------------------- | - |  | ------------------------------------- | - | ---- | ------------------------------------------------------------------- |  |  | -------------------------------------------------------------------- | 
|Opening balance                                 |  |                                 | 0 |  |                                       | $ | 0.00 |                                                                     |  |  | 0                                                                    | 
|January 2017                                    |  |                                 | 0 |  |                                       |   | 0.00 |                                                                     |  |  | 0                                                                    | 
|February 2017                                   |  |                                 | 0 |  |                                       |   | 0.00 |                                                                     |  |  | 0                                                                    | 
|March 2017                                      |  |                                 | 0 |  |                                       |   | 0.00 |                                                                     |  |  | 0                                                                    | 
|Total as of March 31, 2017:                     |  |                                 | 0 |  |                                       |   | 0.00 |                                                                     |  |  | 0                                                                    | 



REPURCHASE PLAN BALANCE



|                                                            |  | Number
    of Shares |       
|----------------------------------------------------------- |  | -------------------- | ------
|Total shares in the repurchase plan as of December 31, 2015 |  |                      | 10,000
|(+) Total shares purchased in 2016                          |  |                      | 60,157
|(-) Total shares sold in 2016                               |  |                      | 70,157
|Total shares in the repurchase plan as of December 31, 2016 |  |                      | 0     
|(+) Total shares purchased as of March 31, 2017             |  |                      | 0     
|(-) Total shares sold as of March 31, 2017                  |  |                      | 0     
|Total shares in the repurchase plan as of March 31, 2017    |  |                      | 0     



| | ITEM 16.F. | Changes in Registrant’s Certifying Accountant
| | ---------- | ---------------------------------------------



Not applicable.



83







| | ITEM 16.G. | Corporate Governance
| | ---------- | --------------------



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



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



| | - | prior to July 31, 2005, we must comply with the requirements
    set forth by the SEC concerning audit committees;
| | - | ------------------------------------------------------------------------------------------------------------------



| | - | we must submit an annual Written Affirmation to the NYSE and
    an Interim Written Annual Affirmation each time a change occurs in the Board of Directors or the Audit Committee;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | our CEO must promptly notify the NYSE in writing after any executive
    officer becomes aware of any material non-compliance with any of the applicable NYSE corporate governance rules; and
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | we must provide a brief description disclosing any significant
    ways in which our corporate governance practices differ from those followed by U.S. companies under NYSE listing standards.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|NYSE
    Corporate Governance Rules for DomesticIssuers                                                                                                                                              |  | Our
    Corporate Governance Practices                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Director Independence.  Majority of board of directors must be independent.”  Controlled
    companies,” which would include our company if it were a U.S. issuer, are exempt from this requirement. |  | Pursuant to the Mexican Securities Market Law and our bylaws, our stockholders are required
    to appoint a board of directors of between five and 20 members, 25% of whom must be independent.  Our board of directors
    is not required to make a determination as to the independence of our directors.
|                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                              
|A director is not independent if such director is:                                                                                                                                                   |  | Under Article 14 Bis of the Mexican Securities Market Law, a director is not independent
    if such director is:                                                                                                                                                                                            
|                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                              
|(i)   a person who the board determines has a material direct or indirect
    relationship with the company, its parent or a consolidated subsidiary;                                                |  | (i) an employee or officer of the company (one-year cooling off period);                                                                                                                                                                                                                                     
|                                                                                                                                                                                                     |  |                                                                                                                                                                                                                                                                                                              
|(ii)   an employee, or an immediate family member of an executive officer,
    of the company, its parent or a consolidated subsidiary, other than employment as interim chairman or CEO;            |  | (ii) a stockholder that, without being an employee or officer of the company, has influence
    or authority over the company’s officers;                                                                                                                                                                    





|NYSE
    Corporate Governance Rules for DomesticIssuers                                                                                                                                                                                                                                                                                                                                                                                             |  | Our
    Corporate Governance Practices                                                                                                                                                              
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(iii)   a person who receives, or whose immediate family member receives,
    more than $100,000 per year in direct compensation from the company, its parent or a consolidated subsidiary, other than director
    and committee fees or deferred compensation for prior services only (and other than compensation for service as interim chairman
    or CEO or received by an immediate family member for service as a non-executive employee); |  | (iii) a consultant, or partner or employee of a consultant, to the company or its affiliates,
    where the income from the company represents 10% or more of the overall income of such consultant;



84







|(iv)   a person who is affiliated with or employed, or whose immediate family
    member is affiliated with or employed in a professional capacity, by a present or former internal or external auditor of the
    company, its parent or a consolidated subsidiary;                                                                                                                                                                                                                                                                                                                    |  | (iv) an important client, supplier, debtor or creditor (or a partner, director or employee
    thereof).  A client and supplier is considered important where its sales to or purchases from the company represent
    more than 10% of the client’s or supplier’s total sales or purchases.  A debtor or creditor is considered
    important whenever its sales to or purchases from to the company represent more than 15% of the debtor’s or creditor’s
    total sales or purchases;
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(v)   an executive officer, or an immediate family member of an executive
    officer, of another company whose compensation committee’s membership includes an executive officer of the listed company,
    its parent or a consolidated subsidiary; or                                                                                                                                                                                                                                                                                                                                |  | (v)   an employee of a non-profit entity that receives contributions from
    the company that represent more than 15% of the total contributions received;                                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(vi)   an executive officer or employee of a company, or an immediate family
    member of an executive officer of a company, that makes payments to, or receives payments from, the listed company, its parent
    or a consolidated subsidiary for property or services in an amount which, in any single fiscal year, exceeds the greater of
    $1 million or 2% of such other company’s consolidated gross revenues (charities are not included, but any such payments
    must be disclosed in the company’s proxy (or, if no proxy is prepared, its Form 10-K / Annual Report)). |  | (vi)   a CEO or other high ranking officer of another company in which the
    issuer’s CEO or other high ranking officer is a member of the board of directors; or                                                                                                                                                                                                                                                                                                                      



85







|NYSE
    Corporate Governance Rules for DomesticIssuers                                                                                                                                                                                                                                                                                                                          |  | Our
    Corporate Governance Practices                                                                                                                                                                                                                                                                                                                                                                      
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(vii) ”Immediate family member” includes a person’s spouse, parents,
    children, siblings, mothers and fathers-in-law, sons and daughters-in-law and anyone (other than domestic employees) who shares
    the person’s home.  Individuals who are no longer immediate family members due to legal separation, divorce
    or death (or incapacity) are excluded.  §303A.02(b) |  | (vii) a “family member” related to any of the persons mentioned above in
    (i) through (vi).  ”Family member” includes a person’s spouse, concubine or other relative of
    up to three degrees of consanguinity and affinity, in the case of (i) and (ii) above, and a spouse, concubine or other relative
    of up to one degree of consanguinity or affinity in the case of (iii) through (vi) above.
|                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|Executive Sessions.  Non-management directors must meet regularly in executive
    sessions without management.  Independent directors should meet alone in an executive session at least once a year.  §303A.03                                                                                                                                                                 |  | There is no similar requirement under our bylaws or applicable Mexican law.                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|Audit committee.  Audit committee satisfying the independence and other
    requirements of Rule 10A-3 under the Exchange Act and the more stringent requirements under the NYSE standards is required.  §§303A.06,
    303A.07                                                                                                                                                  |  | The members of our audit committee are independent as independence is defined by Rule 10A-3.                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                 |  | Our audit committee complies with the requirements of the Mexican Securities Market Law
    and has the following attributes:                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                 |  | ●  We have a three-member
    audit committee, which is composed of one proprietary director and two proprietary independent directors.                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                 |  | ●  The president of the audit
    committee and one additional member are independent.  Under the Mexican Securities Market Law, the president and
    the majority of the members of the audit committee must be independent.                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                 |  | ●  Our audit committee operates
    pursuant to a written charter adopted by our board of directors.  See Item 6 for a detailed description of
    the duties of our audit committee.                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                 |  | ●  Pursuant to our bylaws
    and Mexican law, our audit committee submits an annual report regarding its activities to our board of directors.                                                                                                                                                                                                                                                             



86









|NYSE
    Corporate Governance Rules for DomesticIssuers                                                                                                                                                                                                                                                                                                                                          |  | Our
    Corporate Governance Practices                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Nominating/corporate governance committee.Nominating/corporate governance
    committee of independent directors is required.  The committee must have a charter specifying the purpose, duties
    and evaluation procedures of the committee.  “Controlled companies,” which would include our company
    if it were a U.S. issuer, are exempt from these requirements.  §303A.04             |  | We are not required to have a nominating/corporate governance committee, and it is not expressly
    recommended by the Mexican Code of Best Corporate Practices.                                                                                                                                                                                                                                                                                                              
|                                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Compensation committee.  Compensation committee of independent directors
    is required, which must approve executive officer compensation.  The committee must have a charter specifying the
    purpose, duties and evaluation procedures of the committee. “Controlled companies,” which would include our company
    if it were a U.S. issuer, are exempt from this requirement.  §303A.05 |  | We are not required to have a compensation committee.  As recommended by the Mexican
    Code of Best Corporate Practices, we have an evaluation mechanism for assisting the board of directors in approving executive
    officer compensation.                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Equity compensation plans.  Equity compensation plans require stockholder
    approval, subject to limited exemptions.  §303A.08                                                                                                                                                                                                                                                                 |  | Stockholder approval is not expressly required under Mexican law or our bylaws for the adoption
    and amendment of an equity-compensation plan.  However, regulations of the Mexican Banking and Securities Commission
    require stockholder approval under certain circumstances.  We currently do not have any equity-compensation plans
    in place.                                                                                                                   
|                                                                                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Code of Ethics.Corporate governance guidelines and a code of business
    conduct and ethics is required, with disclosure of any waiver for directors or executive officers.  §303A.10                                                                                                                                                                                                           |  | We have adopted a code of ethics, which has been accepted by to our chief executive officer,
    chief financial officer, controller and persons performing similar functions, as well as to other officers and employees.  We
    are required by Item 16B of Form 20-F to disclose any waivers granted to our chief executive officer, chief financial
    officer, principal accounting officer and persons performing similar functions.  We have no such waivers in place.



| | ITEM 16.H. | Mine Safety Disclosure
| | ---------- | ----------------------



Not applicable.



Part III



| | Item 17. | Financial Statements
| | -------- | --------------------



Not applicable.



| | Item 18. | Financial Statements
| | -------- | --------------------



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



| | Item 19. | Exhibits
| | -------- | --------



87







Index of Exhibits



Documents filed as exhibits to this Annual
Report:



|Exhibit No. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                         
|----------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.1         |   | An English translation of the Bylaws (estatutos sociales) of Industrias Bachoco,
    S.A. de C.V. dated June 29, 2007 (incorporated by reference to Exhibit 1.1 on Form 20-F filed with the U.S.
    Securities and Exchange Commission on June 29, 2007 (File No. 333-07950)).                                                                                                                                                     
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2.1         |   | Form of Amended and Restated Deposit Agreement, among Industrias Bachoco, S.A. de C.V.,
    the Depositary and each Owner and Beneficial Owner from time to time of American Depositary Receipts issued thereunder, including
    the form of American Depositary Receipt (incorporated by reference to Exhibit 1.1 on Form F-6 filed with the U.S. Securities
    and Exchange Commission on August 18, 2006 (File No. 333-07480)).
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2.2         |   | Trust Agreement, dated April 1, 1995, among Banco Internacional, S.A., Institucion
    de Banca Multiple, Grupo Financiero Prime Internacional, as trustee, and the stockholders of the Company named therein, together
    with an English translation, (incorporated by reference on our registration statement on Form F-1 filed with the U.S. Securities
    and Exchange Commission on August 22, 1997 (File No. 333-7472)).   
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2.3         |   | Trust Agreement, dated August 20, 1997, among Banco Internacional, S.A., Institucion
    de Banca Multiple, Grupo Financiero Bital, as trustee, and the stockholders of the Company named therein, together with an
    English translation, (incorporated by reference on our registration statement on Form F-1 filed with the U.S. Securities and
    Exchange Commission on August 22, 1997 (File No. 333-7472)).               
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|8.1*        |   | Subsidiaries of Industrias Bachoco S.A. de C.V.                                                                                                                                                                                                                                                                                                                                                                                     
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|12.1        | * | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                                                                                         
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|12.2        | * | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                                                                                                                                                                                                                         
|            |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|13.1        | * | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                            












* Filed herewith.



88







SIGNATURE



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



| | INDUSTRIAS BACHOCO, S.A.B de C.V.
| | ---------------------------------
| |                                  
| | By:                              
| |                                  
| |                                  



Date: April 28, 2017



89









|INDUSTRIAS BACHOCO, S.A.B. DE C.V. AND SUBSIDIARIES                      
|-------------------------------------------------------------------------
|                                                                         
|Consolidated Financial Statements                                        
|                                                                         
|Years ended December 31, 2016, 2015 and 2014                             
|                                                                         
|Content                                                                  
|                                                                         
|Report of Independent Registered Public Accounting Firm                  
|Consolidated Statements of Financial Position                            
|Consolidated Statements of Profit and Loss and Other Comprehensive Income
|Consolidated Statements of Changes in Stockholders’ Equity               
|Consolidated Statements of Cash Flows                                    
|Notes to the Consolidated Financial Statements                           





F-1







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



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



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



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



We have also audited, in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial
reporting as of December 31, 2016, based on the criteria established in Internal Control-Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated April 28, 2017 expressed an unqualified
opinion on the Company’s internal control over financial reporting.



Galaz, Yamazaki, Ruiz Urquiza, S. C.

Member of Deloitte Touche Tohmatsu Limited



/s/ C.P.C. Francisco Javier Robles Mújica

Querétaro, Qro., Mexico

April 28, 2017



F-2









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



Consolidated Statements of Financial Position



December 31, 2016, 2015 and 2014



(Thousands of pesos)



|Assets                                                        |  | Note |  | 2016 |            |  | 2015 |  |            | 2014 | 
|------------------------------------------------------------- |  | ---- |  | ---- | ---------- |  | ---- |  | ---------- | ---- | 
|                                                              |  |      |  |      |            |  |      |  |            |      | 
|Current assets:                                               |  |      |  |      |            |  |      |  |            |      | 
|Cash and cash equivalents                                     |  | 7    |  | $    | 14,681,204 |  |      |  | 14,046,262 |      | 
|Investment in securities at fair value through profit or loss |  | 8    |  |      | 970,292    |  |      |  | 1,242,614  |      | 
|Derivative financial instruments                              |  | 8    |  |      | 8,308      |  |      |  | 1,244      |      | 
|Accounts receivable, net                                      |  | 9    |  |      | 3,629,144  |  |      |  | 2,533,427  |      | 
|Due from related parties                                      |  | 19   |  |      | 148,855    |  |      |  | 194,522    |      | 
|Inventories                                                   |  | 10   |  |      | 3,970,688  |  |      |  | 3,404,269  |      | 
|Current biological assets                                     |  | 11   |  |      | 1,961,191  |  |      |  | 1,651,794  |      | 
|Prepaid expenses and other current assets                     |  | 12   |  |      | 1,503,945  |  |      |  | 1,587,808  |      | 
|Assets held for sale                                          |  | 13   |  |      | 56,728     |  |      |  | 60,048     |      | 
|Total currents assets                                         |  |      |  |      | 26,930,355 |  |      |  | 24,721,988 |      | 
|                                                              |  |      |  |      |            |  |      |  |            |      | 
|Non-current assets:                                           |  |      |  |      |            |  |      |  |            |      | 
|Property, plant and equipment, net                            |  | 14   |  |      | 15,081,105 |  |      |  | 13,188,131 |      | 
|Non-current biological assets                                 |  | 11   |  |      | 1,668,543  |  |      |  | 1,434,131  |      | 
|Deferred income tax                                           |  | 20   |  |      | 60,132     |  |      |  | 54,127     |      | 
|Goodwill                                                      |  | 15   |  |      | 484,877    |  |      |  | 454,295    |      | 
|Other non-current assets                                      |  | 16   |  |      | 865,454    |  |      |  | 593,906    |      | 
|Total non-currents assets                                     |  |      |  |      | 18,160,111 |  |      |  | 15,724,590 |      | 
|                                                              |  |      |  |      |            |  |      |  |            |      | 
|Total assets                                                  |  |      |  | $    | 45,090,466 |  |      |  | 40,446,578 |      | 



|Liabilities and equity                         |  | Note |  | 2016 |            |   | 2015 |  |            | 2014 | 
|---------------------------------------------- |  | ---- |  | ---- | ---------- | - | ---- |  | ---------- | ---- | 
|                                               |  |      |  |      |            |   |      |  |            |      | 
|Current liabilities:                           |  |      |  |      |            |   |      |  |            |      | 
|Short term debt                                |  | 17   |  | $    | 1,444,800  |   |      |  | 1,622,850  |      | 
|Current portion of long-term debt              |  | 17   |  |      | 1,652,725  |   |      |  | 9,033      |      | 
|Trade payable and other accounts payable       |  | 18   |  |      | 4,545,177  |   |      |  | 4,597,103  |      | 
|Income tax payable                             |  | 20   |  |      | 483,618    |   |      |  | 248,205    |      | 
|Due to related parties                         |  | 19   |  |      | 189,966    |   |      |  | 165,628    |      | 
|Total current liabilities                      |  |      |  |      | 8,316,286  |   |      |  | 6,642,819  |      | 
|                                               |  |      |  |      |            |   |      |  |            |      | 
|Long term liabilities:                         |  |      |  |      |            |   |      |  |            |      | 
|Long term debt, excluding current installments |  | 17   |  |      | 950,412    |   |      |  | 2,495,127  |      | 
|Deferred income tax                            |  | 20   |  |      | 3,912,575  |   |      |  | 3,369,036  |      | 
|Employee benefits                              |  | 21   |  |      | 195,019    |   |      |  | 160,218    |      | 
|Total long term liabilities                    |  |      |  |      | 5,058,006  |   |      |  | 6,024,381  |      | 
|                                               |  |      |  |      |            |   |      |  |            |      | 
|Total liabilities                              |  |      |  |      | 13,374,292 |   |      |  | 12,667,200 |      | 
|                                               |  |      |  |      |            |   |      |  |            |      | 
|Equity:                                        |  |      |  |      |            |   |      |  |            |      | 
|Capital stock                                  |  | 24   |  |      | 1,174,432  |   |      |  | 1,174,432  |      | 
|Share premium                                  |  |      |  |      | 414,385    |   |      |  | 414,017    |      | 
|Reserve for repurchase of shares               |  |      |  |      | 449,641    |   |      |  | 777,622    |      | 
|Retained earnings                              |  |      |  |      | 28,244,970 |   |      |  | 24,749,616 |      | 
|Foreign currency translation reserve           |  |      |  |      | 1,465,657  |   |      |  | 710,439    |      | 
|Actuarial remeasurements, net                  |  | 21   |  |      | (86,774    | ) |      |  | (97,196    | )    | 
|Equity attributable to controlling interest    |  |      |  |      | 31,662,311 |   |      |  | 27,728,930 |      | 
|                                               |  |      |  |      |            |   |      |  |            |      | 
|Non-controlling interest                       |  |      |  |      | 53,863     |   |      |  | 50,448     |      | 
|Total equity                                   |  |      |  |      | 31,716,174 |   |      |  | 27,779,378 |      | 
|                                               |  |      |  |      |            |   |      |  |            |      | 
|Commitments                                    |  | 26   |  |      |            |   |      |  |            |      | 
|Contingencies                                  |  | 27   |  |      |            |   |      |  |            |      | 
|                                               |  |      |  |      |            |   |      |  |            |      | 
|Total liabilities and equity                   |  |      |  | $    | 45,090,466 |   |      |  | 40,446,578 |      | 



See accompanying notes to consolidated financial statements.



F-3







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



Consolidated Statements of Profit and Loss and
Other Comprehensive Income



Years ended December 31, 2016, 2015 and 2014



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



|                                                                    |  | Note |  | 2016 |             |   | 2015 |  |             | 2014 | 
|------------------------------------------------------------------- |  | ---- |  | ---- | ----------- | - | ---- |  | ----------- | ---- | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Net revenues                                                        |  |      |  | $    | 52,020,303  |   |      |  | 46,229,049  |      | 
|Cost of sales                                                       |  | 22   |  |      | (42,635,071 | ) |      |  | (36,847,508 | )    | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Gross profit                                                        |  |      |  |      | 9,385,232   |   |      |  | 9,381,541   |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|General, selling and administrative expenses                        |  | 22   |  |      | (4,847,858  | ) |      |  | (4,323,374  | )    | 
|Other income (expenses), net                                        |  | 29   |  |      | 260,202     |   |      |  | (4,640      | )    | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Operating income                                                    |  |      |  |      | 4,797,576   |   |      |  | 5,053,527   |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Finance income                                                      |  | 28   |  |      | 969,174     |   |      |  | 593,845     |      | 
|Finance costs                                                       |  | 28   |  |      | (172,154    | ) |      |  | (147,292    | )    | 
|Net finance income                                                  |  |      |  |      | 797,020     |   |      |  | 446,553     |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Profit before income taxes                                          |  |      |  |      | 5,594,596   |   |      |  | 5,500,080   |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Income taxes                                                        |  | 20   |  |      | 1,643,433   |   |      |  | 1,680,560   |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Profit for the year                                                 |  |      |  | $    | 3,951,163   |   |      |  | 3,819,520   |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Other comprehensive income (loss) items:                            |  |      |  |      |             |   |      |  |             |      | 
|Items that may be reclassified subsequently to profit or loss:      |  |      |  |      |             |   |      |  |             |      | 
|Currency translation effect                                         |  |      |  |      | 755,218     |   |      |  | 502,332     |      | 
|Items that will not be reclassified subsequently to profit or loss: |  |      |  |      |             |   |      |  |             |      | 
|Actuarial remeasurements                                            |  | 21   |  |      | 14,888      |   |      |  | (25,944     | )    | 
|Income taxes related to actuarial remeasurements                    |  |      |  |      | (4,466      | ) |      |  | 7,783       |      | 
|Other comprehensive income                                          |  |      |  |      | 765,640     |   |      |  | 484,171     |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Comprehensive income for the year                                   |  |      |  | $    | 4,716,803   |   |      |  | 4,303,691   |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Profit attributable to:                                             |  |      |  |      |             |   |      |  |             |      | 
|Controlling interest                                                |  |      |  | $    | 3,946,634   |   |      |  | 3,812,840   |      | 
|Non-controlling interest                                            |  |      |  |      | 4,529       |   |      |  | 6,680       |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Profit for the year                                                 |  |      |  | $    | 3,951,163   |   |      |  | 3,819,520   |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Comprehensive income attributable to:                               |  |      |  |      |             |   |      |  |             |      | 
|Controlling interest                                                |  |      |  | $    | 4,712,274   |   |      |  | 4,297,011   |      | 
|Non-controlling interest                                            |  |      |  |      | 4,529       |   |      |  | 6,680       |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Comprehensive income for the year                                   |  |      |  | $    | 4,716,803   |   |      |  | 4,303,691   |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Weighted average outstanding shares                                 |  |      |  |      | 599,979,844 |   |      |  | 599,631,383 |      | 
|                                                                    |  |      |  |      |             |   |      |  |             |      | 
|Basic and diluted earnings per share                                |  | 25   |  | $    | 6.58        |   |      |  | 6.36        |      | 



See accompanying notes to consolidated financial statements.



F-4







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



Consolidated Statements of Changes in Stockholders' Equity



Years ended December 31, 2016, 2015 and 2014



(Thousands of pesos)



|                                                     |  |      |  | Attributable to controlling interest |           |  |                   |  |         |                           |  |  |          |  
|---------------------------------------------------- |  | ---- |  | ------------------------------------ | --------- |  | ----------------- |  | ------- | ------------------------- |  |  | -------- | -
|                                                     |  |      |  | Capital stock                        |           |  | Retained earnings |  |         | Other comprehensive items |  |  |          |  
|                                                     |  |      |  |                                      |           |  |                   |  |         | Reserve for               |  |  |          |  
|                                                     |  |      |  | Capital                              |           |  | Share             |  |         | repurchase of             |  |  | Retained |  
|                                                     |  | Note |  | stock                                |           |  | premium           |  |         | shares                    |  |  | earnings |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Balance at January 1, 2014                           |  |      |  | $                                    | 1,174,432 |  |                   |  | 399,641 |                           |  |  | 99,601   |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Dividends paid to non-controlling interest           |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|Repurchase and sale of shares, net                   |  | 24   |  |                                      | -         |  |                   |  | -       |                           |  |  | 1,504    |  
|Disposal of non-controlling interest from disolution |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Comprehensive income for the year:                   |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Profit for the year                                  |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|Other comprehensive income                           |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Total comprehensive income for the year              |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Balance at December 31, 2014                         |  |      |  |                                      | 1,174,432 |  |                   |  | 399,641 |                           |  |  | 101,105  |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Dividends paid                                       |  | 24   |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|Dividends paid to non-controlling interest           |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|Reserve for repurchase of shares                     |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | 677,216  |  
|Repurchase and sale of shares                        |  | 24   |  |                                      | -         |  |                   |  | 14,376  |                           |  |  | (699     | )
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Comprehensive income for the year:                   |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Profit for the year                                  |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|Other comprehensive income                           |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Total comprehensive income for the year              |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Balance at December 31, 2015                         |  |      |  |                                      | 1,174,432 |  |                   |  | 414,017 |                           |  |  | 777,622  |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Dividends paid                                       |  | 24   |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|Dividends paid to non-controlling interest           |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|Reserve for repurchase of shares                     |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | (328,680 | )
|Repurchase and sale of shares                        |  | 24   |  |                                      | -         |  |                   |  | 368     |                           |  |  | 699      |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Comprehensive income for the year:                   |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Profit for the year                                  |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|Other comprehensive income                           |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Total comprehensive income for the year              |  |      |  |                                      | -         |  |                   |  | -       |                           |  |  | -        |  
|                                                     |  |      |  |                                      |           |  |                   |  |         |                           |  |  |          |  
|Balance at December 31, 2016                         |  |      |  | $                                    | 1,174,432 |  |                   |  | 414,385 |                           |  |  | 449,641  |  



See accompanying notes to consolidated financial statements.



F-5







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



Consolidated Statements of Cash Flows



Years ended December 31, 2016, 2015 and 2014



(Thousands of pesos)



|                                                                  |  | Note |  | 2016 |            |   | 2015 |  |            | 2014 | 
|----------------------------------------------------------------- |  | ---- |  | ---- | ---------- | - | ---- |  | ---------- | ---- | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Cash flows from operating activities:                             |  |      |  |      |            |   |      |  |            |      | 
|Profit for the year                                               |  |      |  | $    | 3,951,163  |   |      |  | 3,819,520  |      | 
|Adjustments for:                                                  |  |      |  |      |            |   |      |  |            |      | 
|Deferred income tax recognized in profit or loss                  |  | 20   |  |      | 382,904    |   |      |  | 192,070    |      | 
|Current income tax recognized in profit or loss                   |  | 20   |  |      | 1,260,529  |   |      |  | 1,488,490  |      | 
|Depreciation                                                      |  | 14   |  |      | 925,748    |   |      |  | 769,270    |      | 
|Goodwill impairment loss                                          |  | 15   |  |      | -          |   |      |  | 38,619     |      | 
|(Gain) loss on disposal of plant and equipment                    |  |      |  |      | (157,245   | ) |      |  | 90,279     |      | 
|Interest income                                                   |  | 28   |  |      | (646,334   | ) |      |  | (489,934   | )    | 
|Interest expense                                                  |  | 28   |  |      | 172,154    |   |      |  | 147,292    |      | 
|Unrealized foreign exchange loss on loans                         |  |      |  |      | 270,850    |   |      |  | 33,300     |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Subtotal                                                          |  |      |  |      | 6,159,769  |   |      |  | 6,088,906  |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Derivative financial instruments                                  |  |      |  |      | (7,064     | ) |      |  | 5,425      |      | 
|Accounts receivable, net                                          |  |      |  |      | (1,144,991 | ) |      |  | 521,603    |      | 
|Due from related parties                                          |  |      |  |      | 1,154      |   |      |  | (3,518     | )    | 
|Inventories                                                       |  |      |  |      | (562,905   | ) |      |  | (448,404   | )    | 
|Current and non-current biological assets                         |  |      |  |      | (539,395   | ) |      |  | (256,969   | )    | 
|Prepaid expenses and other current assets                         |  |      |  |      | 82,324     |   |      |  | (401,711   | )    | 
|Assets held for sale                                              |  |      |  |      | 3,320      |   |      |  | (1,465     | )    | 
|Trade payable and other accounts payable                          |  |      |  |      | (43,707    | ) |      |  | 629,631    |      | 
|Due to related parties                                            |  |      |  |      | 24,338     |   |      |  | 38,595     |      | 
|Income taxes paid                                                 |  |      |  |      | (997,028   | ) |      |  | (2,087,286 | )    | 
|Employee benefits                                                 |  |      |  |      | 34,801     |   |      |  | 43,375     |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Net cash provided by operating activities                         |  |      |  |      | 3,010,616  |   |      |  | 4,128,182  |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Cash flows from investing activities:                             |  |      |  |      |            |   |      |  |            |      | 
|Payments for acquisition of property, plant and equipment         |  |      |  |      | (2,792,252 | ) |      |  | (1,909,771 | )    | 
|Proceeds from sale of plant and equipment                         |  |      |  |      | 278,340    |   |      |  | 71,427     |      | 
|Restricted cash                                                   |  |      |  |      | (19,236    | ) |      |  | (25,771    | )    | 
|Investment in securities at fair value through profit or loss     |  |      |  |      | 272,322    |   |      |  | (317,030   | )    | 
|Other assets                                                      |  |      |  |      | 4,583      |   |      |  | (55,698    | )    | 
|Interest collected                                                |  |      |  |      | 646,334    |   |      |  | 489,934    |      | 
|Bussiness acquisition including advance payment                   |  |      |  |      | -          |   |      |  | (190,595   | )    | 
|Loans granted to related parties                                  |  |      |  |      | -          |   |      |  | (189,075   | )    | 
|Collection of principal of loans granted to related parties       |  |      |  |      | 44,513     |   |      |  | -          |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Net cash used in investing activities                             |  |      |  |      | (1,565,396 | ) |      |  | (2,126,579 | )    | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Cash flows from financing activities:                             |  |      |  |      |            |   |      |  |            |      | 
|Payment for repurchase of shares                                  |  |      |  |      | (4,157     | ) |      |  | (40,612    | )    | 
|Proceeds from issuance of repurchased shares                      |  |      |  |      | 5,224      |   |      |  | 54,289     |      | 
|Dividends paid                                                    |  |      |  |      | (779,960   | ) |      |  | (899,162   | )    | 
|Dividends paid to non-controlling interest                        |  |      |  |      | (1,114     | ) |      |  | (878       | )    | 
|Disposal of non-controlling interest from disolution              |  |      |  |      | -          |   |      |  | -          |      | 
|Proceeds from borrowings                                          |  |      |  |      | 2,320,500  |   |      |  | 3,903,200  |      | 
|Principal payment on loans                                        |  |      |  |      | (2,670,474 | ) |      |  | (2,231,596 | )    | 
|Interest paid                                                     |  |      |  |      | (172,154   | ) |      |  | (147,292   | )    | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Net cash (used in) provided by financing activities               |  |      |  |      | (1,302,135 | ) |      |  | 637,949    |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Net increase in cash and cash equivalents                         |  |      |  |      | 143,085    |   |      |  | 2,639,552  |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Cash and cash equivalents at January 1                            |  |      |  |      | 14,020,491 |   |      |  | 11,028,054 |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Effect of exchange rate fluctuations on cash and cash equivalents |  |      |  |      | 498,392    |   |      |  | 352,885    |      | 
|                                                                  |  |      |  |      |            |   |      |  |            |      | 
|Cash and cash equivalents at December 31                          |  |      |  | $    | 14,661,968 |   |      |  | 14,020,491 |      | 



See accompanying notes to consolidated financial statements.



F-6







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



Notes to the Consolidated Financial Statements



Years ended December 31, 2016, 2015 and
2014



(Thousands of Mexican pesos, except amounts
per share)



| | (1) | Reporting entity
| | --- | ----------------



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



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



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



| | (2) | Basis of preparation
| | --- | --------------------



| | a) | Statement of compliance
| | -- | -----------------------



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



On March 31, 2017, the accompanying
consolidated financial statements and related notes were authorized for issuance by the Company’s Chief Financial Officer,
Mr. Daniel Salazar Ferrer, for review and approval by the Audit Committee, Board of Directors and stockholders. In accordance with
Mexican General Corporate Law and the Company’s bylaws, the stockholders are empowered to modify the consolidated financial
statements after their issuance should they deem it necessary.



| | b) | Basis of measurement
| | -- | --------------------



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



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



| | · | Biological assets
| | - | -----------------



F-7







Fair value is the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating
the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market
participants would take those characteristics into account when pricing the asset or liability at the measurement date.



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



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



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



Level 3 inputs are unobservable
inputs.



| | c) | Functional and presentation currency
| | -- | ------------------------------------



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



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



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



| | d) | Use of estimates and judgments
| | -- | ------------------------------



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



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



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



F-8







Critical accounting judgments



i.       
Fair value of biological assets



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



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



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



ii.       
Business combinations or acquisition of assets



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



iii.       
Aggregation of operating segments



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



Key sources of estimation
uncertainty



i.        
Assessments to determine the recoverability of deferred tax assets



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



ii.       Useful
lives and residual values of property, plant and equipment



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



F-9







iii.       Measurements
and disclosures at fair value



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



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



iv.       
Impairment of long-lived assets and goodwill



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



v.       
Employee retirement benefits



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



vi.      
Contingencies



A contingent liability is defined
as:



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



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

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

| | b. | the amount of the obligation cannot be measured with sufficient reliability.
| | -- | ----------------------------------------------------------------------------



F-10







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



e)       Issue
of new IFRS



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



All new and amended IFRS issued
by the IASB mandatorily effective on January 1, 2016 were early adopted by the Company in 2014.



ii. New IFRS
in issue but not yet effective



The Company has not applied
the following new and revised IFRS that have been issued, but that are not yet effective for periods beginning on January 1, 2016.



IFRS 9, Financial
Instruments



IFRS 9, Financial Instruments
issued in July 2014, is the replacement of IAS 39, Financial Instruments: Recognition and Measurement. This standard includes
requirements for recognition and measurement, impairment, derecognition and general hedge accounting. Another revised version of
IFRS 9 was issued in July 2015 mainly to introducing a ‘fair value through other comprehensive income’ (FVTOCI) measurement
category for certain simple debt instruments. This version supersedes all previous versions and is mandatorily effective for periods
beginning on or after January 1, 2018, with early adoption being permitted. IFRS 9 (2014) does not replace the requirements for
portfolio fair value hedge accounting for interest rate risk since this face of the project was separated from the IFRS 9 project.



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



All recognized financial assets
that are within the scope of IAS 39 are required to be subsequently measured at amortized cost or fair value.



With regard to the measurement
of financial liabilities designated as of fair value through profit or loss, IFRS 9 requires that the amount of change in the fair
value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive
income, unless 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.



F-11







In relation to the impairment
of financial assets, IFRS 9 requires an expected credit loss model, as opposed to an incurred credit loss model under IAS 39. The
expected credit loss model requires an entity to account for expected credit losses and changes 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.



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



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



IFRS 15, Revenue
from Contracts with Customers



IFRS 15, Revenue from Contracts
with Customers, was issued in May 2014 and applies to annual reporting periods beginning on or after January 1, 2018, earlier
application is permitted. Revenue is recognized as control is passed, either over time or at a point in time. The standard outlines
a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes
most current revenue recognition guidance, including industry-specific guidance. In applying the revenue model to contracts within
its scope, an entity will: 1) Identify the contract(s) with a customer; 2) Identify the performance obligations in the contract;
3) Determine the transaction price; 4) Allocate the transaction price to the performance obligations in the contract; 5) Recognize
revenue when (or as) the entity satisfies a performance obligation. Also, an entity needs to disclose sufficient information to
enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising
from contracts with customers.



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



Clarifications
to IFRS 15, Revenue from Contracts with Customers



The amendments add clarification
in the following areas:

| | · | Identification of performance obligations;
| | - | ------------------------------------------

| | · | Principal versus agent considerations;
and
| | - | ------------------------------------------

| | · | Application guidance for licensing.
| | - | -----------------------------------



The amendments introduce additional
practical expedients for entities making the transition to IFRS 15 on (i) contract modifications that occurred before the beginning
of the last period presented and (ii) contracts that were completed at the beginning of the first period presented.



F-12







Entities are required to apply
the amendments for annual periods beginning on or after January 1, 2018. Earlier application is permitted.



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



IFRS 16, Leases



IFRS 16, Leases was issued
in January 2016 and supersedes IAS 17, Leases and related interpretations. The new standard brings most leases on-balance
sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting, however,
remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 is effective for periods
beginning on or after January 1, 2019, with earlier adoption permitted if IFRS 15 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 expenses) as an assumed linear depreciation of the right-of-use asset and the
decreasing interest on the liability will lead to an overall decrease of expense over the reporting period.



The lease liability is initially
measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease if
that can be readily determined. If that rate cannot be readily determined, the lessee shall 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.



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



Amendments to IAS
12, Income Tax



IAS 12 provides requirements
on the recognition and measurement of current and deferred tax liabilities or assets. The amendments clarify the requirements on
recognition of deferred tax assets for unrealized losses, to address diversity in practice.



Entities are required to apply
the amendments for annual periods beginning on or after January 1, 2017. Earlier application is permitted.



The Company does not expect
significant impacts as a result of these amendments.



F-13







Amendments to IAS
7, Statements of Cash Flows



The amendments come with the
objective that entities shall provide disclosures that enable users of financial statements to evaluate changes in liabilities
arising from financing activities.



To achieve this objective, the
IASB requires that the following changes in liabilities arising from financing activities are disclosed (to the extent necessary):
(i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses;
(iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes.



Entities are required to apply
the amendments for annual periods beginning on or after January 1, 2017. Earlier application is permitted.



The Company does not expect
significant impacts a result of these amendments.



Annual Improvements
2014-2016



The annual improvement cycle
2014-2016 makes amendments to the following standards:



- IFRS 12, Disclosure of
Interests in Other Entities, clarification of the scope of the standard, establishes that the entity need not provide summarized
financial information for the interests in subsidiaries, associates or joint ventures that are classified, or include a group for
disposal that is classified, as held for sale (In accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued
Operations, effective for annual periods beginning on or after January 1, 2017, with retrospective application.



- IFRS 1, First-time Adoption
of International Financial Reporting Standards, elimination of short-term exemptions for first-time adopters, effective for
annual periods beginning on or after January 1, 2018.



- IAS 28, Investments in
Associates and Joint Ventures, the amendments clarify that the option for the venture capital organization and other similar
entities to measure investments in associates and joint ventures at fair value through other comprehensive results is available
separately for each associate or joint venture, and that the choice must be made at the initial recognition of the associate or
joint business, effective for annual periods beginning on or after January 1, 2018, with retrospective application.



The Company does not expect
significant impacts as a result of these amendments.



Amendments to IFRS
2, Share-based Payment



The amendments to IFRS 2, Share-based
Payment, clarify the classification and measurement of share-based payment transactions. The amendments contains clarifications
and amendments address to the accounting for cash-settled share-based payment transactions; classification of share-based payment
transactions with net settlement features; and accounting for modifications of share-based payment transactions from cash-settled
to equity-settled. These amendments are effective for annual periods beginning on or after January 1, 2018. Earlier application
is permitted. The amendments apply prospectively.



F-14







The Company does not expect
significant impacts as a result of these amendments.



IFRIC 22, Foreign
Currency Transactions and Advance Consideration



The interpretation clarifies
that when the entity pays or receives consideration in advance in a foreign currency, the date of the transaction for determining
the exchange rate to be used in the initial recognition of the related asset, expense or income is the date of the anticipated
consideration, i.e. when the advance payment or the income received in advance of the liability was recognized.



These amendments apply for annual
periods beginning on or after January 1, 2018 and the entities may choose to apply either retrospectively or prospectively. The
Company does not expect significant impacts as a result of these changes.



| | (3) | Significant accounting policies
| | --- | -------------------------------



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



a)       Basis
of consolidation



i.       
Subsidiaries



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



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



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



ii.       
Transactions eliminated in consolidation



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



iii.     
Business combinations



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



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



F-15







Goodwill is originally valued
at cost, and represents any excess of the transferred consideration over the net assets acquired and liabilities assumed. If the
net amount of identifiable acquired assets and assumed liabilities as of the acquisition date exceeds the sum of the consideration
transferred, the amount of any non-controlling interest in the acquired entity and the fair value of the prior shareholding of
the acquirer in the acquired entity (if any), any excess is immediately recognized in the consolidated statement of profit and
loss and other comprehensive income as a bargain purchase gain.



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



Certain contingent consideration
payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is
not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent
consideration are recognized in profit and loss.



b)       Foreign
currency



i.       
Foreign currency transactions



Transactions in foreign currencies
are translated to the respective functional currencies of the Company at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at that
date. The foreign currency gain and loss on monetary items is the difference between amortized cost in the functional currency
at the beginning of the period, adjusted for interest and principal payments during the period, and the amortized cost in foreign
currency translated at the exchange rate at the end of the reporting period.



Non-monetary items that are
measured at historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.



ii.       
Translation of foreign operations



Assets and liabilities, including
goodwill and fair value adjustments arising on acquisition, of foreign operations whose functional currency differs from the reporting
currency, are translated into Mexican pesos at the exchange rates at the reporting date. Income and expenses are translated to
pesos at the average exchange rate of the period of the transactions.



Foreign currency differences
associated with translating foreign operations into the reporting currency (Mexican peso) are recognized in other comprehensive
income, and presented in the foreign currency translation reserve in stockholders’ equity.



Foreign exchange gains and losses
arising from amounts receivable or payable to a foreign operation, whose settlement is neither planned nor likely in the foreseeable
future, are considered part of a net investment in a foreign operation and are recognized under the “other comprehensive
income” account, and presented within stockholders’ equity in the foreign currency translation reserve. For the years
ended December 31, 2016, 2015 and 2014 the Company did not enter into such transactions.



F-16







| | c) | Financial instruments
| | -- | ---------------------



i.       
Non-derivative financial assets



Non-derivative financial assets
of the Company include cash and cash equivalents, investment in securities (financial assets designated at fair value through profit
or loss and financial assets held to maturity), trade receivable and other receivables.



The Company initially recognizes
accounts receivable and cash equivalents on the date that they arise. All other financial assets (including assets measured at
fair value through profit and loss) are initially recognized on the trading date, which is the date that the Company becomes a
party to the contractual provisions of the instrument.



The Company derecognizes a financial
asset when the contractual rights to cash flows from the asset expire, or it transfers the rights to receive the contractual cash
flows in a transaction in which all the risks and rewards of ownership of the financial asset are substantially transferred.



Financial assets and liabilities
are offset and the net amount is presented in the statement of financial position solely if the Company has a legal right to offset
the amounts and intends either to settle them on a net basis of financial assets and liabilities or otherwise realize the asset
and settle the liability simultaneously.



Financial assets
valued at fair value through profit and loss



A financial asset is presented
at fair value through profit and loss if it is classified as held-for-trading or is designated as such on initial recognition.
Financial assets are designated at fair value through profit and loss if the Company manages such investments and makes purchase
and sale decisions based on their fair value in accordance with the Company’s investment or risk management policy. Costs
attributable to the acquisition or issue of such financial assets are recognized in profit and loss as incurred. Financial assets
at fair value through profit and loss are measured at fair value, and changes therein are recognized in profit and loss.



Held-to-maturity
financial assets



Held-to-maturity financial assets
are debt instruments that the Company has the intention and ability to hold to maturity. Held-to-maturity financial assets are
originally recognized at fair value plus any directly attributable transaction costs.



Subsequently to initial recognition,
held-to-maturity financial assets are measured at their amortized cost by using the effective interest method, less any impairment
losses. Any sale or reclassification of a more than insignificant amount of held-to-maturity financial assets would result in the
reclassification of all held-to-maturity investments as available-for-sale, and prevent the Company from classifying investment
securities as held-to-maturity for the current and the following two years.



The effective interest method
is a method of calculating the amortized cost of a debt instrument and of allocating interest income or cost over the relevant
period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points
paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.



F-17







Cash and cash equivalents



Cash and cash equivalents comprise
cash balances and call deposits with maturities of three months or less from the acquisition date, which are subject to an insignificant
risk of changes in their fair value, and are used by the Company in the management of its short-term commitments.



Receivables



Receivables are financial assets
with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value
plus any directly attributable transaction costs. Subsequent to initial recognition, receivables are measured at amortized cost.
Receivables comprise trade and other receivables.



ii.      
Non-derivative financial instrument liabilities



Debt and/or equity instruments
are classified as financial liabilities or as equity according to the substance of the contractual agreement and the definitions
of liability and equity.



All financial instrument liabilities
are initially recognized on the trade date, which is the date that the Company becomes a party to the contractual provisions of
the instrument.



The Company derecognizes a financial
instrument liability when its contractual obligations are met, cancelled or expire.



The Company has the following
non-derivative financial instrument liabilities: short-term and long-term debt, and trade and other payables and accounts payable
to related parties.



The aforementioned financial
liabilities are originally recognized at fair value, plus costs directly attributable to the transaction. Subsequently, these financial
liabilities are measured at amortized cost during their contractual term.



iii.     
Derivative financial instruments



Derivative financial instruments
entered into for fair value hedging or for trading purposes are initially recognized at fair value; any attributable transaction
costs are recognized in profit and loss as incurred. Government grants are recognized initially as a liability, and subsequently
recognized to profit and loss as the related obligation is settled. Subsequent to the initial recognition, such derivative financial
instruments are measured at fair value, and changes in such value are immediately recognized in profit and loss unless the derivative
is designated and is effective as a hedging instrument, in which case, its recognition in profit and loss will depend on the nature
of the hedging.



Fair value of derivative financial
instruments that are traded in recognized financial markets is based on quotes issued by these markets; when a derivative financial
instrument is traded in the “over the counter” market, the fair value is determined based on internal models and market
inputs accepted in the financial environment.



F-18







The Company analyzes if there
are embedded derivatives that should be segregated from the host contract and accounted for separately if the economic characteristics
and risks of the host contract and the embedded derivative are not closely related. A separate instrument with the same terms as
those of the embedded derivative meets the definition of a derivative, and the combined instrument is not measured at fair value
through profit and loss. Changes in fair value of the separable embedded derivatives are immediately recognized in profit and loss.



The Company enters into derivative
financial instruments, which are designated as fair value hedges for its exposure to commodity price risks (commodities)
resulting from its operating activities. Derivative financial instruments that do not meet the requirements for hedge accounting
treatment are accounted for as trading derivative financial instruments.



On initial designation of the
derivative as a hedging instrument, the Company formally documents the relationship between hedging instruments and hedged items,
including the risk management objectives and strategy in undertaking the hedge transaction, and the methods that will be used to
assess the prospective and retrospective effectiveness of the hedging. The Company makes an assessment, both at the inception of
the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be highly effective in
offsetting the changes in the fair value of the respective hedged items during the period for which the hedge is designated and
whether the actual results of each hedge are within a range of 80 – 125 percent.



If the hedging instrument no
longer meets the criteria for the hedging accounting treatment, expires or is sold, terminated or exercised, or the designation
is revoked, then hedging accounting treatment is discontinued prospectively. Any gain or loss recognized in other comprehensive
income and accumulated in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized
in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized
immediately in profit or loss.



iv.     
Capital stock



Ordinary shares



Ordinary shares are classified
as equity. Incremental costs directly attributable to the issuance of ordinary shares are recognized as a deduction from equity,
net of any tax effects.



Stock repurchase



When share capital recognized
as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects,
is recognized as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve
for repurchase of shares. When treasury shares are sold or are re-issued subsequently, the amount received as well as the resulting
surplus or deficit on the transaction is recognized in equity.



d)       Property,
plant and equipment



i.       
Recognition and measurement



Property, plant and equipment,
except for land, are recorded at acquisition cost less accumulated depreciation and any accumulated impairment losses. Land is
measured at the acquisition costs less any accumulated impairment losses.



F-19







Acquisition cost includes the
purchase price, as well as any cost directly attributable to the acquisition of the asset, including all costs directly attributable
to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.



When components of an item of
property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property,
plant and equipment.



An item of property, plant and
equipment is derecognized at the time of disposal or when no future economic benefits are expected to arise from the continued
use of the asset. Gains or losses on the sale of an item of property, plant and equipment are determined by comparing the proceeds
from the sale with the carrying amount of property, plant and equipment, and are recognized net under “other income (expenses)”
in profit and loss for the year.



ii.       Subsequent
costs



The replacement cost of an item
of property, plant and equipment is capitalized if the future economic benefits associated with the cost are expected to flow to
the Company and the related cost is reliably determined. The carrying amount of the replaced item is written off from the accounting
records. Maintenance and repair expenses related to property, plant and equipment are expensed as incurred.



iii.     
Depreciation



Depreciation is calculated on
the cost of the asset less its residual value, using the straight line method, based on the estimated useful life of the assets.
Depreciation is recognized in profit and loss beginning from the time when the assets are available for use.



Below are the estimated useful
lives for 2016, 2015 and 2014:



|                        |  | Average useful Life |   
|----------------------- |  | ------------------- | --
|Buildings               |  |                     | 46
|Machinery and Equipment |  |                     | 19
|Vehicles                |  |                     | 11
|Computers               |  |                     | 8 
|Furniture               |  |                     | 11



The Company has estimated the following
residual values as of December 31, 2016, 2015 and 2014:



|                        |  | Residual Value |  
|----------------------- |  | -------------- | -
|Buildings               |  |                | 9
|Machinery and Equipment |  |                | 8
|Vehicles                |  |                | 5
|Computers               |  |                | 0
|Furniture               |  |                | 2



F-20







| | e) | Goodwill
| | -- | --------



Goodwill arises as a result of
the acquisition of a business over which control is obtained and is measured at cost less cumulative impairment losses; it is subject
to annual tests for impairment.



| | f) | Biological assets
| | -- | -----------------



Biological assets whose fair
value can be measured reliably are measured at fair value less costs of sale, with any change therein recognized in profit and
loss. Costs of sale include all costs that would be necessary to sell the assets, excluding finance costs and income taxes.



The Company’s biological
assets consist of growing poultry, poultry in its different production stages, hatching eggs, breeder pigs, and growing pigs.



When fair value cannot be reliably,
verifiably and objectively determined, assets are valued at production cost less accumulated depreciation, and any cumulative impairment
loss. Depreciation related to biological assets forms part of the cost of inventories and current biological assets and is ultimately
recognized within cost of sales in the statement of profit and loss and other comprehensive income.



Depreciation of poultry and
breeder pigs is estimated based on the expected future life of such assets and is calculated on a straight-line basis.



|                                           |  | Expected average useful life (weeks) |      
|------------------------------------------ |  | ------------------------------------ | -----
|Poultry in its different production stages |  |                                      | 40-47
|Breeder pigs                               |  |                                      | 156  



Biological assets are classified
as current and non-current assets, based on the nature of such assets and their purpose, whether for commercialization or for reproduction
and production.



| | g) | Leased assets
| | -- | -------------



Operating leases entered into
by the Company are not recognized in the Company’s statement of financial position. Operating lease rentals paid by the Company
are recognized in profit and loss using the straight-line method over the lease term, even though payments may not be made on the
same basis.



Assets held under finance leases
are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty
that ownership will be obtained at the end of the lease term, assets are depreciated over the shorter of the lease term or their
useful lives. As of December 31, 2016, 2015 and 2014, the Company has not entered into any significant finance lease agreements.



| | h) | Inventories
| | -- | -----------



Inventories are measured at
the lower of cost and net realizable value. The cost of inventories is based on average cost, and includes expenditures incurred
for acquiring inventories, production or transformation costs, and other costs incurred for bringing them to their present location
and condition.



F-21







Agricultural products derived
from biological asses are processed chickens and commercial eggs.



Net realizable value is the
estimated selling price in the ordinary course of business, less the costs necessary to make the sale.



Cost of sales represents cost
of inventories at the time of sale, increased, if applicable, by reductions in inventory to its net realizable value, if lower
than cost, during the year.



The Company records the necessary
reductions in the value of its inventories for impairment, obsolescence, slow movement and other factors that may indicate that
the use or performance of the items that are part of the inventory may be lower than the carrying value.



| | i) | Impairment
| | -- | ----------



i.       
Financial assets



A financial asset that is not
recorded at fair value through profit and loss is assessed at each reporting date to determine whether there is objective evidence
that it is impaired. A financial asset is impaired if there is objective evidence of a loss event after the initial recognition
of the asset, and that such loss event had a negative impact on the estimated future cash flows of that asset that can be estimated
reliably.



Objective evidence that financial
assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Company, evidence that a
debtor may go bankrupt, or the disappearance of an active market for a security. In addition, for an investment in an equity security,
a significant or prolonged reduction in its fair value below its cost is objective evidence of impairment.



The Company considers evidence
of impairment for financial assets valued at amortized cost (accounts receivables and held-to-maturity investment securities) both
individually and collectively. All individually significant receivables and held-to-maturity investment securities are assessed
for specific impairment. Assets that are not individually significant are collectively assessed for impairment by grouping together
assets with similar risk characteristics.



In assessing collective impairment,
the Company uses historical trends of probabilities of default, timeliness of recoveries and the amount of loss incurred, adjusted
for management’s judgment as to whether current economic and credit conditions are such that the actual losses are greater
or less than those suggested by historical trends.



An impairment loss related to
a financial asset valued at amortized cost is calculated as the difference between the carrying amount of the asset and the present
value of estimated future cash flows discounted at the effective interest rate. Losses are recognized in profit and loss and reflected
in an allowance account against receivables or held-to-maturity investment securities. Interest on impaired assets continues being
recognized. When a subsequent event that occurs after impairment has been recognized, it results in the reduction of the loss amount;
this reduction is reversed through profit and loss.



F-22







ii.       
Non-financial assets



The carrying amounts of the
Company ́s non-financial assets, other than inventories, biological assets and deferred tax assets, are reviewed at each reporting
date to determine whether there is any indication of impairment. If any such indication exists, then the recoverable amount of
the asset is estimated or cash generating units, as the lowest between its value in use and the fair value less cost of sale. Goodwill
and indefinite-lived intangible assets are tested annually for impairment on the same dates.



The Company defines the cash
generating units and also estimates the periodicity and cash flows that they should generate. Subsequent changes in the group of
cash-generating units, or changes in the assumptions that support the cash flow estimates or the discount rate could impact the
carrying amounts of the respective asset.



The main assumptions for developing
estimates of recoverable amounts requires the Company’s management to estimate the future cash flows expected to arise from
the cash-generating unit and a suitable discount rate in order to calculate its present value. The Company estimates cash flow
projections considering current market conditions, determination of future prices of goods and volumes of production and sales.
In addition, for the purposes of the discount and perpetuity growth rates, the Company uses indicators of market and expectations
of long-term growth in the markets in which it operates.



The Company estimates a discount
rate before taxes for the purposes of the goodwill impairment test that reflects the risk of the corresponding cash-generating
units and that enables the calculation of present value of expected future cash flows, as well as to reflect risks that were not
included in the cash flow projection assumptions and premises. The discount rate that the Company estimates is based on the weighted
average cost of capital. In addition, the discount rate estimated by the Company reflects the return that market participants would
require if they had made a decision about an equivalent asset, as well as the expected generation of cash flow, time, and risk-and-return
profiles.



The Company annually reviews
the circumstances which led to an impairment loss arising from cash-generating units to determine whether such circumstances have
been changed and that may result in the reversal of previously recognized impairment losses. An impairment loss in respect of goodwill
is not reversed. For other long-lived assets, an impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if the impairment
loss had not been recognized.



Impairment losses are recognized
in profit and loss. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the cash-generating unit (or group of CGUs), and subsequently to reduce the carrying amount
of the other long-lived assets within the cash-generating unit (or group of CGUs) on a pro rata basis.



j)        Held-for-sale
assets



Available for sale assets mainly
consist of foreclosed assets. Foreclosed assets are initially recorded at the lower of fair value less costs to sell or the net
carrying amount of the related account receivable.



F-23







Immediately before being classified
as held-for-sale, assets are valued according to the Company’s accounting policies in accordance to the applicable IFRS.
Subsequently, held-for-sale assets are recorded at the lower of the carrying amount and fair value less costs to sell. Impairment
losses on initial classification of held-for-sale assets and subsequent remeasurement gains and losses are recognized in profit
and loss. Recognized gains shall not exceed cumulative impairment losses previously recognized.



k)      
Other assets



Other long-term assets primarily
include advances for the purchase of property, plant and equipment, investments in insurance policies and security deposits.



The Company owns life insurance
policies of some of the former stockholders of Bachoco USA, LLC (foreign subsidiary). The Company records these policies at net
cash surrender value which approximates its fair value (see note 16).



l)        Employee
benefits



The Company grants to its employees
in Mexico and abroad, different types of benefits as described below and detailed in note 21.



i.        Defined
contribution plan



A defined contribution plan
is a post-employment benefit plan under which an entity pays fixed contributions to a separate entity and has no legal or constructive
obligation to pay further amounts. Obligations for contributions to defined contribution plans are recognized as an employee benefit
expense in profit and loss in the periods during which the related services are rendered by employees. Prepaid contributions are
recognized as an asset to the extent that the Company has the right to a cash refund or a reduction in future payments is available.
Contributions to a defined contribution plan due more than 12 months after the end of the period in which the employees render
the service are discounted at present value.



ii.       
Defined benefit plan



A defined benefit plan is a
post-employment benefit plan other than a defined contribution plan. It is funded by contributions made by the Company and is intended
to meet the Company’s labor obligations to its employees.



The Company ́s net obligations
in respect of defined benefit plans is calculated separately for each plan, estimating the amount of the future benefit that the
employees have earned in return for their service in the current and prior years; that benefit is discounted to determine its present
value, and is reduced by the fair value of the plan assets. The discount rate is the yield at the end of the reporting period on
high quality corporate bonds (or governmental bonds in the instance that a deep market does not exist for high quality corporate
bonds, which is the case in Mexico) that have maturity dates approximating the terms of the Company ́s obligations and that
are denominated in the currency in which the benefits are expected to be paid. Net interest is calculated by applying the discount
rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:



| | · | Service cost (including current service
cost, past service cost, as well as gains and losses on curtailments and settlements)
| | - | -----------------------------------------------------------------------------------------------------------------------------

| | · | Net interest expense or income
| | - | ------------------------------



F-24







The Company presents service
cost as part of operating income in the consolidated statements of profit or loss and other comprehensive income (loss). Gains
and losses for reduction of service are accounted for as past service costs.



The calculation is performed
annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the Company,
the recognized asset is limited to the present value of any economic benefits available in the form of refunds from the plans or
reductions in future contributions to the plans. When the benefits of a plan are modified or improved, the portion of the improved
benefits related to past services by employees is recognized in profit and loss on the earlier of the following dates: when there
is a modification or curtailment to the plan, or when the Company recognizes the related restructuring costs or termination benefits.



Remeasurement adjustments, comprising
actuarial gains and losses, the effect of changes to the asset ceiling (if applicable) and the return on plan assets (excluding
interest), are reflected immediately with a charge or credit recognized in other comprehensive income in the period in which they
occur. Remeasurement recognized in other comprehensive income is reflected immediately in equity and is not reclassified to profit
or loss.



iii.      
Short-term benefits



Short-term employee benefits
are valued on a non-discounted basis and are expensed as the respective services are rendered.



A liability is recognized for
the amount expected to be paid under the short-term cash bonus plans or statutory employee profit sharing (PTU for its acronym
in Spanish), if the Company has a legal or constructive obligation to pay such amounts as a result of prior services rendered by
the employee, and the obligation may be reliably estimated.



iv.      
Termination benefits from constructive obligations



The Company recognizes, as a
defined benefit plan, a constructive obligation from past practices. The liability accrues based on the services rendered by the
employee. Payment of this benefit is made in one installment at the time that the employee voluntarily ceases working for the Company.



m)       Provisions



A provision is recognized if,
as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it
is probable that an outflow of economic benefits will be required to settle the obligation.



When the effect of time value
of money is significant, the amount of the provision is the present value of the disbursements expected to be necessary to settle
the obligation. The discount rate applied is determined before taxes, and reflects market conditions at the reporting date and
takes into account the specific risk of the relevant liability, if any. The unwinding of the present value discount is recognized
as a financial cost.



F-25







n)       Interests
in joint operations



A joint operation is a joint
arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities,
relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require unanimous consent of the parties sharing control.



The Company as a joint operator
recognizes, in relation to its interest in a joint operation: its assets, including its share of any assets held jointly; its liabilities,
including its share of any liabilities incurred jointly; its revenue from the sale of its share of the output arising from the
joint operation; its share of the revenue from the sale of the output by the joint operation, and its expenses, including its share
of any expenses incurred jointly.



The Company accounts for the
assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable
to such assets, liabilities, revenues and expenses.



The Company has joint operations
derived from the broiler agreements for the development of its biological assets. For such operations, the Company accounts for
its biological assets, its obligations derived from technical support, as well as the expenses it incurs with respect to the joint
operations. The live poultry produced by the joint operation is ultimately used internally by the Company and may be sold by the
Company to third parties. As a result, the joint operation itself does not generate any revenues with third parties.



o)       Revenues



Revenue from the sale of goods
in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns,
trade discounts and volume rebates. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales
agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration
relating to the transaction is probable, the associated costs and possible return of goods can be estimated reliably, there is
no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that
discounts will be granted and the amount can be measured reliably, the discount is recognized as a reduction of revenue.



p)       Financial
income and costs and dividend income



Financial income comprises interest
income from funds invested, fair value changes on financial assets at fair value through profit or loss and foreign currency exchange
gains. Interest income is recognized in profit and loss, using the effective interest method. Dividend income is recognized in
profit and loss on the date that the Company ́s right to receive the payment is established.



Financial costs comprise interest
expense for borrowings, foreign currency exchange losses and fair value changes on financial assets at fair value through profit
and loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset
are recognized in profit and loss using the effective interest method.



F-26













Borrowing costs directly attributable
to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period
of time to get ready for their intended use or sale, are added to the costs of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization.



Exchange gains and losses are
reported on a net basis.



q)       Income
taxes



Income tax expenses comprise
current and deferred tax. Current income taxes and deferred income taxes are recognized in profit and loss provided they do not
relate to a business combination, or items recognized directly in equity or in other comprehensive income.



Current income tax is the expected
tax payable or receivable on the taxable income or loss for the fiscal year, which can be applied to taxable income from previous
years, using tax rates enacted or substantively enacted in each jurisdiction at the reporting date, plus any adjustment to taxes
payable with respect to previous years. Current income tax payable also includes any tax liability arising from the payment of
dividends.



Deferred income tax is recognized
in respect of temporary differences between the carrying amounts of assets and liabilities and the amounts used for tax purposes.
Deferred income tax is not recognized for:



| | · | the
                                         initial recognition of assets or liabilities in a transaction that is not a business
                                         combination and did not affect either accounting or taxable profit or loss;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | differences
                                         related to investments in subsidiaries to the extent that it is probable that the Company
                                         is able to control the reversal date, and the reversion is not expected to take place
                                         in the near future.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | taxable
                                         temporary differences arising from the initial recognition of goodwill.
| | - | ------------------------------------------------------------------------------------------------------------------------



Deferred income tax is determined
by applying the tax rates that are expected to apply in the period in which the temporary differences will reverse, based on the
regulations enacted or substantively enacted at the reporting date.



The measurement of deferred
income tax assets and liabilities reflect the tax consequences derived from the manner in which the Company expects to recover
or settle the carrying amounts of its assets and liabilities.



In determining the amount of
current and deferred income tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes
and interest may be due. The Company believes that the balance for its income tax liabilities are appropriate for all tax years
subject to be reviewed by the tax authorities based on its assessment of several factors, including the interpretation of the
tax laws and prior experience.



F-27







A deferred income tax asset
is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future
taxable profits will be available against which they can be utilized. Deferred income tax assets are reviewed at each reporting
date and are reduced to the extent that it is not probable that the related tax benefit will be realized.



r)       Earnings
per share



The Company presents information
on basic and diluted earnings per share (EPS) related to its ordinary shares. Basic EPS is computed by dividing the profit and
loss attributable to the holders of the Company’s common shares by the weighted average number of outstanding ordinary shares
during the period, adjusted for treasury shares held. Diluted EPS is determined by adjusting the profit and loss attributable
to the holders of the ordinary shares and the outstanding weighted average number of ordinary shares, adjusted for treasury shares
held, for the potential dilutive effects of all ordinary shares, including convertible instruments and options on shares granted
to employees. At December 31, 2016, 2015 and 2014, the Company has no potentially dilutive shares, for which reason basic and
diluted EPS are the same.



s)       Segment
information



An operating segment is a component
of the Company that: i) is engaged in business activities from which revenues and expenses may be obtained and incurred, including
revenues and expenses related to transactions with any of the other components of the Company, ii) which results are reviewed
periodically by the chief operating decision maker for the purpose of resource allocation and assessment of segment performance,
and iii) for which discrete financial information exists.



The Company discloses reportable
segments based on operating segments whose revenues exceed 10% of the combined revenues from all segments, whose absolute value
of profit or loss exceeds 10% of the combined absolute value of profit or loss from all segments, whose assets exceed 10% of the
combined assets from all segments, or that result from the aggregation of two or more operating segments that share similar economic
characteristics and meet the aggregation criteria under IFRS (note 2 d).



t)       Costs
and expenses by function



Costs and expenses in the consolidated statements
of profit and loss and other comprehensive income were classified by their function. The nature of costs and expenses is presented
in Note 22.



u)       Statement
of cash flows



The Company presents cash flows
from operating activities by using the indirect method, in which the income or loss is adjusted by the effects of items that do
not require cash flows, including those related to investing or financing activities.



The Company classifies all interest received from
its investments and accounts receivable as investment activities, and all interest paid as financing activities.



F-28







| | (4) | Business and asset acquisitions
| | --- | -------------------------------



Acquisition of assets
from breeding farms from Morris Hatchery, Inc. 2013 and 2015



On July 9, 2013 and July 10,
2015, the Company reached agreements to acquire assets from the breeding farms of Morris Hatchery Inc., located in the states
of Arkansas and Georgia in the United States of America. These acquisitions mainly consist of poultry equipment and biological
assets comprised principally of breeding birds that produce hatching eggs. The acquisitions benefit the Company given that it
did not previously have the capacity of breeding birds that produce hatching eggs, which are used internally. The Company concluded
that the transactions represented the acquisition of businesses in accordance with IFRS 3.



Below is a summary of the fair
value of the net assets acquired as of the acquisition date in conformity with IFRS 3, as well as the purchase price paid. The
amounts are final; accordingly, the Company did not utilize the use of the provisional measurement period permitted by IFRS 3.



Acquired assets and identifiable
assumed liabilities



|                                          |  | Acquisition value |        
|----------------------------------------- |  | ----------------- | -------
|                                          |  | 2013              |        
|Current and non-current biological assets |  | $                 | 77,237 
|Inventories                               |  |                   | 3,257  
|Property, plant and equipment             |  |                   | 11,982 
|Other assets                              |  |                   | 194    
|Acquired assets, net                      |  |                   | 92,670 
|Cash consideration paid                   |  |                   | 135,450
|Goodwill                                  |  | $                 | (42,780



The acquisition costs paid
by the Company were not material, given that it utilized mostly its own resources in the acquisition. Given that the acquisition
was for the benefit of the Company’s own internal operations, it is impracticable to determine the amount of revenues or
income attributable to the acquired business. Management believes that pro forma revenues and profit for the year, giving effect
to the acquisition as of the beginning of the period, do not differ materially from historical revenues and profit for the year
reported in the statements of profit or loss and comprehensive income.



F-29







| | (5) | Subsidiaries of the Company
| | --- | ---------------------------



A list of subsidiaries and
the Company ́s shareholding percentage in such subsidiaries as of December 31, 2016, 2015 and 2014 are presented below:



|Name                                               |  | Shareholding percentage
    in subsidiaries
|-------------------------------------------------- |  | -------------------------------------------
|                                                   |  |                                            
|                                                   |  | Country                                    
|Bachoco, S.A. de C.V.                              |  | México                                     
|Bachoco USA, LLC. & Subsidiary                     |  | U.S.                                       
|Campi Alimentos, S.A. de C.V.                      |  | México                                     
|Induba Pavos, S.A. de C.V.                         |  | México                                     
|Bachoco Comercial, S.A. de C.V.                    |  | México                                     
|PEC LAB, S.A. de C.V.                              |  | México                                     
|Aviser, S.A. de C.V.                               |  | México                                     
|Operadora de Servicios de Personal, S.A. de C.V.   |  | México                                     
|Secba, S.A. de C.V.                                |  | México                                     
|Servicios de Personal Administrativo, S.A. de C.V. |  | México                                     
|Sepetec, S. A. de C.V.                             |  | México                                     
|Wii kit RE LTD.                                    |  | Bermuda                                    



The main subsidiaries of the group and their activities
are as follows:



- Bachoco, S.A. de C.V. (BSACV)
(includes four subsidiaries which are 51% owned, and over which BSACV has control). BSACV is engaged in breeding, processing and
marketing poultry goods (chicken and eggs).



- Bachoco USA, LLC. holds the
shares of OK Industries, Inc. and, therefore, all operations controlled by the Company in the United States of America. Effective
January 1, 2016, the Company merged O.K. Industries, Inc., O.K. Farms, Inc., O.K. Foods, Inc. and Ecology Management, Inc. into
one surviving entity, O.K. Foods, Inc. The primary activities of Bachoco USA, LLC and its subsidiary are comprised of the production
of chicken products and hatching eggs, mostly marketed in the United States of America and, to a lesser extent, in other foreign
markets.



- Campi Alimentos, S.A. de
C.V., is engaged in producing and marketing balanced animal feed, mainly for sales to third parties.



- The main activity of Bachoco
Comercial, S.A. de C.V. and Induba Pavos, S.A. de C.V. is the distribution of chicken, turkey and beef value-added products.



- PEC LAB, S.A. de C.V. is
the holding of the shares of Pecuarius Laboratorios, S.A. de C.V. Its main activity consists of the production and distribution
of medicines and vaccines for animal consumption.



- Aviser, S.A. de C.V., Operadora
de Servicios de Personal, S.A. de C.V., Secba, S.A. de C.V., Servicios de Personal Administrativo, S.A. de C.V. and Sepetec, S.A
de C.V. are engaged in providing administrative and operating services rendered to their related parties.



F-30







- On December 2016 Wii kit
RE LTD. was constituted in Bermuda as a subsidiary of the Company with 100% of the shareholding. Is a Class I reinsurance company
that provides insurance coverage to its affiliates.



None of the Company’s
contracts or loan agreements restrict the net assets of its subsidiaries.



| | (6) | Operating segments
| | --- | ------------------



Reportable segments have been
determined based on a line of product approach. Intersegment transactions have been eliminated. The poultry segment consists of
chicken and egg operations. The information included in the “Others” segment corresponds to operations of swine, balanced
feed for animal consumption and other by-products that do not meet the quantitative thresholds to be considered as reportable
segments.



Inter-segment pricing is determined
on an arm’s length basis comparable to those which would be used with or between independent parties in comparable transactions.
The accounting policies of operating segments are as those described in note 3 s).



Below is the information related
to each reportable segment. Performance is measured based on each segment’s income before taxes, in the same manner as it
is included in management reports that are regularly reviewed by the Company’s Board of Directors.



a)       Operating
segment information



|                                                |  | Year ended December
    31, 2016 |           
|----------------------------------------------- |  | -------------------------------- | ----------
|                                                |  | Poultry                          |           
|Net revenues                                    |  | $                                | 46,852,482
|Cost of sales                                   |  |                                  | 38,285,367
|Gross profit                                    |  |                                  | 8,567,116 
|Finance income                                  |  |                                  | 840,640   
|Finance costs                                   |  |                                  | 149,319   
|Income before taxes                             |  |                                  | 5,077,042 
|Income taxes                                    |  |                                  | 1,494,918 
|Net income attributable to controlling interest |  |                                  | 3,578,049 
|Property, plant and equipment, net              |  |                                  | 13,478,294
|Goodwill                                        |  |                                  | 396,861   
|Total assets                                    |  |                                  | 40,035,990
|Total liabilities                               |  |                                  | 11,909,391
|Purchases of property, plant and equipment      |  |                                  | 2,226,493 
|Depreciation and amortization                   |  |                                  | 840,624   



|              |  | Poultry revenues |            |   | Other revenues | 
|------------- |  | ---------------- | ---------- | - | -------------- | 
|Total revenue |  | $                | 46,856,888 |   |                | 
|Intersegments |  |                  | (4,406     | ) |                | 
|Net revenues  |  | $                | 46,852,482 |   |                | 



F-31







|                                                |  | Year ended December
    31, 2015 |           
|----------------------------------------------- |  | -------------------------------- | ----------
|                                                |  | Poultry                          |           
|Net revenues                                    |  | $                                | 41,789,451
|Cost of sales                                   |  |                                  | 32,906,801
|Gross profit                                    |  |                                  | 8,882,649 
|Income before taxes                             |  |                                  | 5,196,883 
|Income taxes                                    |  |                                  | 1,590,892 
|Net income attributable to controlling interest |  |                                  | 3,599,728 
|Property, plant and equipment, net              |  |                                  | 11,805,132
|Goodwill                                        |  |                                  | 366,280   
|Total assets                                    |  |                                  | 36,085,954
|Total liabilities                               |  |                                  | 11,325,636
|Purchases of property, plant and equipment      |  |                                  | 1,646,968 
|Depreciation and amortization                   |  |                                  | 694,502   



|              |  | Poultry revenues |            |   | Other revenues | 
|------------- |  | ---------------- | ---------- | - | -------------- | 
|Total revenue |  | $                | 41,796,064 |   |                | 
|Intersegments |  |                  | (6,613     | ) |                | 
|Net revenues  |  | $                | 41,789,451 |   |                | 



|                                                |  | Year ended December 31, 2014 |           
|----------------------------------------------- |  | ---------------------------- | ----------
|                                                |  | Poultry                      |           
|Net revenues                                    |  | $                            | 37,994,654
|Cost of sales                                   |  |                              | 29,329,056
|Gross profit                                    |  |                              | 8,665,598 
|Income before taxes                             |  |                              | 5,214,590 
|Income taxes                                    |  |                              | 1,546,518 
|Net income attributable to controlling interest |  |                              | 3,662,769 
|Property, plant and equipment, net              |  |                              | 11,017,198
|Goodwill                                        |  |                              | 261,749   
|Total assets                                    |  |                              | 31,786,586
|Total liabilities                               |  |                              | 9,578,370 
|Purchases of property, plant and equipment      |  |                              | 1,128,331 
|Depreciation and amortization                   |  |                              | 738,663   



|As of December 31, 2014 |  | Poultry revenues |            |   | Other revenues | 
|----------------------- |  | ---------------- | ---------- | - | -------------- | 
|Total revenue           |  | $                | 37,995,157 |   |                | 
|Intersegments           |  |                  | (503       | ) |                | 
|Net revenues            |  | $                | 37,994,654 |   |                | 



F-32







b)       Geographical
information



When submitting information
by geographic area, revenue is classified based on the geographic location where the Company’s customers are located. Segment
assets are classified in accordance with their geographic location. Geographical information for the “Others” segment
is not included below because the operations are carried out entirely within Mexico.



|                                                                                                                                                    |  | Year ended December
    31, 2016 |           
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------
|                                                                                                                                                    |  | Domestic poultry                 |           
|Net revenues                                                                                                                                        |  | $                                | 33,414,262
|Non-current assets other than financial instruments,
    deferred tax assets, post-employment benefit assets, and investments in insurance policies |  |                                  |           
|Non-current biological assets                                                                                                                       |  |                                  | 902,662   
|Property, plant and equipment, net                                                                                                                  |  |                                  | 10,481,074
|Goodwill                                                                                                                                            |  |                                  | 212,833   



|                                                                                                                                                    |  | Year ended December
    31, 2015 |           
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------
|                                                                                                                                                    |  | Domestic poultry                 |           
|Net revenues                                                                                                                                        |  | $                                | 30,686,151
|Non-current assets other than financial instruments,
    deferred tax assets, post-employment benefit assets, and investments in insurance policies |  |                                  |           
|Non-current biological assets                                                                                                                       |  |                                  | 795,157   
|Property, plant and equipment, net                                                                                                                  |  |                                  | 9,682,701 
|Goodwill                                                                                                                                            |  |                                  | 212,833   



F-33







|                                                                                                                                                    |  | Year ended December
    31, 2014 |           
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----------
|                                                                                                                                                    |  | Domestic poultry                 |           
|Net revenues                                                                                                                                        |  | $                                | 29,556,202
|Non-current assets other than financial instruments,
    deferred tax assets, post-employment benefit assets, and investments in insurance policies |  |                                  |           
|Non-current biological assets                                                                                                                       |  |                                  | 791,256   
|Property, plant and equipment, net                                                                                                                  |  |                                  | 9,386,883 
|Goodwill                                                                                                                                            |  |                                  | 212,833   



c)       Major
Customers



In Mexico, the Company’s
products are traded among a large number of customers, without significant concentration with any specific customer. Therefore,
in 2016, 2015 and 2014, no customer represented over 10% of the Company’s total revenues.



In the United States of America,
as of December 31, 2016 the Company has transactions with The Sygma Network, Inc. representing 9% of total sales outside of Mexico.
As of December 31, 2015 and 2014, the Company has transactions with Ozark Mountain Poultry, Inc., representing 19% and 24% of
total sales outside of Mexico.



| | (7) | Cash and cash equivalents
| | --- | -------------------------



The consolidated balances of cash and cash equivalents
as of December 31, 2016, 2015 and 2014 are as follows:



|                                                        |  | December 31, |           
|------------------------------------------------------- |  | ------------ | ----------
|                                                        |  | 2016         |           
|Cash and banks                                          |  | $            | 9,890,007 
|Investments with maturities
    less than three months  |  |              | 4,771,961 
|Cash and cash equivalents                               |  |              | 14,661,968
|Restricted cash                                         |  |              | 19,236    
|Total cash and cash equivalents
    and restricted cash |  | $            | 14,681,204



Restricted cash corresponds
to the minimum margin required by the intermediary related to the Company’s derivative financial instruments on commodities
in order to meet future commitments that may stem from adverse market movements affecting prices on the open positions as of December
31, 2016, 2015 and 2014.



F-34







| | (8) | Financial instruments and risk management
| | --- | -----------------------------------------



The Company is exposed to market
risks, liquidity risks and credit risks for the use of financial instruments, for which reason it exercises its risk management.



This note presents information
on the Company’s exposure to each one of the aforementioned risks, as well as the Company’s objectives, policies and
processes for the measurement and management of financial risks.



Risk management framework



The philosophy adopted by the
Company seeks to minimize risks and, therefore maximize business stability, focusing decisions on creating an optimum combination
of products and assets that produce a risk – return ratio more in agreement with the risk profile of its stockholders.



In order to establish a clear
and optimum organizational structure with respect to risk management, a Risk Committee has been established which is the specialized
body in charge of defining, proposing, approving and implementing the objectives, policies, procedures, methodologies and strategies,
as well as the determination of the maximum limits of exposure to risk and contingency plans.



At December 31, 2016, 2015
and 2014, the Company has not identified embedded derivatives.



The Company’s derivative
financial instruments as of December 31, 2016, 2015 and 2014, do not meet the requirements to be treated as hedges for accounting
purposes.



Management by type or risk



a)       Categories
of financial assets and liabilities



The Company’s financial assets and liabilities
are shown below:



|                                                                  |  | December 31, |           
|----------------------------------------------------------------- |  | ------------ | ----------
|                                                                  |  | 2016         |           
|Financial assets                                                  |  |              |           
|Cash and cash equivalents                                         |  | $            | 14,681,204
|Investment in securities at fair value through profit
    or loss |  |              | 970,292   
|Investments held to maturity                                      |  |              | 65,509    
|Accounts receivable                                               |  |              | 2,524,942 
|Due from related parties                                          |  |              | 148,855   
|Long-term receivables                                             |  |              | 161,690   
|Derivative financial instruments                                  |  |              | 8,308     
|                                                                  |  |              |           
|Financial liabilities                                             |  |              |           
|Financial debt                                                    |  | $            | (4,047,937
|Trade payables, sundry creditors and expenses payable             |  |              | (4,095,089
|Due to related parties                                            |  |              | (189,966  



F-35







b)       Credit
risk



Credit risk is defined as the
potential loss of a portfolio of an amount owed to the Company due to lack of payment from a debtor, or for breach by a counterparty
with which derivative financial instruments and investment in securities transactions are conducted.



The risk management process
contemplates the use of derivative financial instruments, which are exposed to a market risk, but are also to counterparty risk.



Measurement and monitoring
of counterparty risk



In terms of valuation and monitoring
of over the counter (OTC) derivative financial instruments and investments in securities, the Company currently measures its counterparty
risk by identifying the Credit Valuation Adjustment (CVA) and Debit Valuation Adjustment (DVA).



For investments in securities
denominated in Mexican pesos, the financial instruments valuation models used by price vendors incorporate market movements and
credit quality of issuers, thereby implicitly including the counterparty risk of the transaction in the fair value determination;
therefore, the position in investment in securities includes the counterparty risk and no additional adjustment is carried out.
The price of the instruments obtained from the price vendor is the mid-point between the bid price and the ask price (the “mid-price”).
As of December 31, 2016, 2015 and 2014, the balance of held to maturity investments is $65,509, $52,572 and $56,252, respectively.



Investments in securities denominated
in a foreign currency, not listed in Mexico, are recorded at prices contained in the broker's statements of account. The Company
validates these market prices using Bloomberg, which incorporate market movements and the credit quality of issuers; thereby implicitly
including the counterparty risk of the transaction and no related adjustment is carried out. The prices obtained from Bloomberg
are mid prices.



Trade accounts receivable
and other accounts receivable measurement and monitoring



It is the policy of the Company
to establish an allowance for doubtful accounts to cover the balances of accounts receivable that are not likely to be recovered.
To set the required allowance, the Company considers historical losses, assesses current market conditions, as well as customers'
financial conditions, accounts receivable in litigation, price differences, portfolio aging and current payment patterns.



The impairment assessment of
accounts receivable is performed on a collective basis, as there are no accounts with individually significant balances. The Company's
products are marketed to a large number of customers without, except as described in note 6 c, any significant concentration with
a specific customer. As part of the objective evidence that an account receivable portfolio is impaired, the Company considers
past experiences with respect to collection, increases in the number of overdue payments in the portfolio exceeding the average
loan period, as well as observable changes in national and local economic conditions that correlate to defaults.



F-36







The Company has a credit policy
under which each new customer is analyzed individually in terms of its creditworthiness before offering it payment terms and conditions.
The Company's review includes internal and external assessments, and in some cases, bank references and a search in the Public
Registry of Properties. For each customer, purchase limits are established, which represent the maximum credit amount. Customers
that do not meet the Company's credit references can solely conduct transactions in cash or through advance payments.



The allowance for doubtful
accounts includes trade accounts receivable that are impaired, which amount to $130,290, $103,057 and $110,462 as of December
31, 2016, 2015 and 2014, respectively. The reconciliation of movements of the allowance for doubtful accounts, and the analysis
of past-due accounts receivable but not impaired, are presented in note 9.



The Company receives credit
enhancements on credit lines granted to its clients, which consist of real and personal property, such as land, buildings, houses,
vehicles, letters of credit, cash deposits and others. As of December 31, 2016, 2015 and 2014, the fair value of such credit enhancements,
determined by an appraisal at the time the credit lines were granted, is $570,546, $563,012 and $589,430 respectively.



The fair value of trade accounts
receivable is similar to the carrying amount, as the terms granted under credit lines are of a short term nature and do not include
significant finance components.



Investments



The Company limits its exposure
to credit risk investing solely with counterparties that have been rated on a well-recognized credit rating scale or are deemed
to be investment grade. Management constantly monitors credit ratings, and as it invests solely in securities with high credit
ratings, it is not expected that any counterparty will fail to fulfill its obligations.



Financial guarantees
granted



It is the Company’s policy
to grant financial guarantees solely to 100% owned subsidiary companies.



Exposure to credit
risk



The carrying amount of financial
assets represents the maximum credit exposure, which as of the reporting date is as follows:



|                                                                   |  | December 31, |           
|------------------------------------------------------------------ |  | ------------ | ----------
|                                                                   |  | 2016         |           
|Cash and cash equivalents                                          |  | $            | 14,681,204
|Investments in securities at fair value through profit
    or loss |  |              | 970,292   
|Investments held to maturity                                       |  |              | 65,509    
|Accounts receivable net of guarantees received                     |  |              | 2,264,941 
|Derivative financial instruments                                   |  |              | 8,308     
|                                                                   |  | $            | 17,990,254



F-37







c)       Liquidity
risk



Liquidity risk is defined as
the potential loss stemming from the impossibility to renew liabilities or enter into other liabilities under normal terms, the
early or forced sale of assets or the need to grant unusual discounts in order to meet obligations, or by the fact that a position
cannot be disposed of, acquired or covered promptly through the establishment of an equivalent contrary position.



Liquidity risk management process
considers the management of the assets and liabilities included in the consolidated statements of financial position (Assets Liabilities
Management - ALM) in order to anticipate funding difficulties because of extreme events.



Monitoring



The Company’s areas of
risk management and financial planning measure, monitor and report to the Risk Committee liquidity risks associated with the ALM
and prepare limits for the authorization, implementation and operation thereof, as well as contingent action measures in case
of liquidity requirements.



Liquidity risk caused by differences
between current and projected cash flows at different dates are measured and monitored, considering all asset and liability positions
of the Company denominated in local and foreign currency. Similarly, funding diversification and sources to which the Company
has access are evaluated.



The Company quantifies the
potential loss arising from early or forced sale of assets or sale at unusual discounts to meet its obligations in a timely manner,
as well as by the fact that a position cannot be disposed of, acquired or covered timely through the establishment of a contrary
equivalent position.



Liquidity risk monitoring considers
a liquidity gap analysis, scenarios for lack of liquidity and use of alternative sources of financing.



Below are the contractual maturities
of the financial liabilities, including estimated interest payments. As of the date of the consolidated financial statements,
there are no financial instruments which have been offset or recognized positions that are subject to offsetting rights.



Maturity table



|                                                          |  | December 31, 2016 |          
|--------------------------------------------------------- |  | ----------------- | ---------
|                                                          |  | Less than 1 year  |          
|Trade payables, sundry creditors and
    expenses payable |  | $                 | 4,095,089
|Due to related parties                                    |  |                   | 189,966  
|Variable-rate maturities                                  |  |                   |          
|In U.S. dollars                                           |  |                   | 1,444,800
|In pesos                                                  |  |                   | 1,652,725
|Interest                                                  |  |                   | 142,100  
|Total financial liabilities                               |  | $                 | 7,524,680



F-38







|                                                          |  | December 31, 2015 |          
|--------------------------------------------------------- |  | ----------------- | ---------
|                                                          |  | Less than 1 year  |          
|Trade payables,
    sundry creditors and expenses payable |  | $                 | 4,088,989
|Variable-rate maturities                                  |  |                   |          
|In U.S. dollars                                           |  |                   | 1,462,850
|In pesos                                                  |  |                   | 169,033  
|Interest                                                  |  |                   | 113,840  
|Total financial liabilities                               |  | $                 | 5,834,712



|                                                          |  | December 31, 2014 |          
|--------------------------------------------------------- |  | ----------------- | ---------
|                                                          |  | Less than 1 year  |          
|Trade payables,
    sundry creditors and expenses payable |  | $                 | 3,530,546
|Variable-rate maturities                                  |  |                   |          
|In U.S. dollars                                           |  |                   | 221,250  
|In pesos                                                  |  |                   | 576,732  
|Interest                                                  |  |                   | 73,377   
|Total financial liabilities                               |  | $                 | 4,401,905



At least on a monthly basis,
management evaluates and advises the Board of Directors on its liquidity. As of December 31, 2016, the Company has evaluated that
it has sufficient resources to meet its obligations in the short and long term; therefore, it does not consider having liquidity
gaps in the future and it will not be necessary to sell assets to pay its debts at unusual discounts or at out-of-market prices.



d)       Market
risk



Market risk is defined as the
potential loss arising from the portfolio of derivative financial instruments and investment in securities for changes in risk
factors that affect the valuation of short or long positions. In this sense, the uncertainty of future losses resulting from changes
in market conditions (interest rates, foreign currency, prices of commodities, among others), which directly affects movements
in the price of both assets and liabilities, is detected.



The Company measures, monitors
and reports all financial instruments subject to market risk, using sensitivity measurement models to show the potential loss
associated with movements in risk variables, according to different scenarios on rates, prices and types of change during the
period.



Monitoring



Sensitivity analyses are prepared
at least monthly and are compared with the limits established. Any excess identified is reported to the Risk Committee.



F-39







Stress tests



At least monthly, the Company
conducts stress tests calculating the value of the portfolios and considering changes in risk factors observed in historical dates
of financial stress.



i.       
Commodities price risk



With respect to risks related
to commodities designated in a formal hedging relationship, the Company seeks protection against downward variations in the agreed-upon
price of corn and/or sorghum with the producer, which may represent an opportunity cost as there are lower prices in the current
market upon receiving the inventory, and to hedge the risk of a decline in prices between the receipt date and that of inventory
consumption.



Purchases of corn and/or sorghum
are formalized through an agreement denominated "Forward buy-sell agreement", which has the following characteristics:



| | · | Transaction
                                         date
| | - | ---------------------------------------------------------

| | · | Number
                                         of agreed-upon tons
| | - | -------------------------------------------------------------------

| | · | Harvest,
                                         state and agricultural cycle from which the harvest comes
| | - | -----------------------------------------------------------------------------------------------------------

| | · | Price
                                         of product per ton, plus quality award or penalty
| | - | ------------------------------------------------------------------------------------------------



Agricultural agreements that
result in firm commitments are linked to two corn and/or sorghum agricultural cycles, and in contracting purchases, both contracting
cycles and dates are itemized as follows:



| | · | Fall-winter
                                         Cycle - The registration window period is at the discretion of the Agency of Services
                                         for Distribution and Development of Agricultural Markets (ASERCA, for its Spanish acronym),
                                         which is usually between December and March, while the fall-winter cycle harvest period
                                         takes place during May, June and July. However, corn and/or harvest could lengthen up
                                         to one month or several months, depending on the weather conditions, such as drought
                                         and frost.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Spring-summer
                                         Cycle - The registration window period is at the discretion of ASERCA; the spring-summer
                                         cycle usually takes place during the July and August and the harvest depends on each
                                         state of the country and is highly variable.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For contracts entered into
through the commercialization support scheme with Agriculture Trust Funds (FIRA for its Spanish acronym), there are no purchase
periods established as this program is focused on selling excess crops that weren’t sold through the contract agriculture
program. Normally these purchases are made at the end of each harvest cycle.



As of December 31, 2016, 2015
and 2014, the Company has economic hedging positions comprised of corn long “puts” with ASERCA, maturing in March,
July, September and December 2017, 2016 and 2015. The gain on valuation of these instruments is $3,189, $5,601, and $5,518, in
2016, 2015 and 2014, respectively, recorded within cost of sales.



F-40







As of December 31, 2016, and
2015 the Company maintains a contractual agreement with ASERCA in which the Company will pay 80% (during 2014 was 55%) of the
option premium and ASERCA will pay the remaining 20% (during 2014 was 45%). In case the option is In the Money (Strike>Forward),
the Company will recover the 80% portion paid (during 2014, the recovery rate was 55%) and an additional 10% (during 2014, the
portion paid was 22.5%) which is equivalent to 50% of the portion paid by ASERCA. Due to its nature and in accordance with IAS
20, Accounting for Government Grants and Disclosure of Government Assistance, the portion paid by ASERCA must be recognized
as income over the term of the instrument in order to match it against the costs it is intended to offset, on a systematic basis.
The effect of such benefit as of December 31, 2016, 2015 and 2014 is $67,080 (3,250 thousand dollars), $57,051 (3,315 thousand
dollars) and $280,058 (18,987 thousand dollars), respectively.



As of December 31, 2016 and
2015, the Company has no outstanding long puts, which are used from time to time by the Company as economic hedges in connection
with future purchases of sorghum with FIRA. As of December 31, 2014, the Company has economic hedging positions in the form of
outstanding sorghum long puts entered into with FIRA with maturities in March 2015. Such instruments gave rise to a gain on valuation
of $2,028, which was recorded to cost of sales for the year ended December 31, 2014.



Due to the above, the Company
has a contractual agreement with FIRA in which the Company will absorb 50% of the premium payment option and FIRA the remaining
50%. Because of its nature and as established by IAS 20, Accounting for Government Grants and Disclosure of Government Assistance,
the portion paid by FIRA should be recognized as income over the periods the related costs are incurred, on a systematic basis.
The effect of such benefit for the years ended December 31, 2016, 2015 and 2014 was $0, $0 and $5,281 (358 thousand dollars),
respectively.



With respect to the risk in
commodities that are not designated in a formal hedging relationship and to which the Company is exposed, sensitivity tests on
corn and sorghum futures agreements are entered into, considering different (bullish and bearish) scenarios. These results can
be seen in paragraph g) of this note.



ii.     
Chicken price risk



The Company is exposed to financial
risks mainly related to changes in the price of chicken. The Company presently does not anticipate that the price of chicken decreased
to a level that represents a risk to the Company in the future; therefore, as of December 31, 2016, 2015 and 2014 it has not entered
into any derivative financial instrument or other agreement for managing the risk related to a decrease in chicken price.



The Company reviews chicken prices frequently in
order to evaluate the need of having a financial instrument to manage the risk.



iii.    
Exchange risk



The Company is exposed to the
effects of exchange rate volatility, mainly on in relation to Mexican pesos/dollars exchange rates, on the Company's assets and
liabilities, including: investments in securities, derivative financial instruments hedging commodities, which are denominated
in a currency other than the Company's functional currency. In this regard, the Company has implemented a sensitivity analysis
to measure the effects that currency risk may have over the assets and liabilities described.



F-41







The Company protects itself
from exchange rate risk through economic hedging with derivative financial instruments, which cover a percentage of its estimated
exposure to exchange rate volatility in relation to projected sale and purchases transactions. All instruments entered into as
economic hedges of foreign exchange risk have maturities of less than one year from the contract date.



As of December 31, 2016 and
2015 the Company entered into derivative financial instrument positions as economic hedges to cover exchange rate risks. As of
December 31, 2014, the Company did not have any such positions.



iv.     
Foreign currency position



The Company has financial instrument
assets and liabilities denominated in foreign currency on which there is an exposure to currency risk.



Below is the foreign currency
position that the Company has as of December 31, 2016, 2015 and 2014.



|                                                                  |  | December 31, |         
|----------------------------------------------------------------- |  | ------------ | --------
|                                                                  |  | 2016         |         
|                                                                  |  | Dollars      |         
|Assets                                                            |  |              |         
|Cash and cash equivalents                                         |  | $            | 126,395 
|Investment in securities at fair value through profit
    or loss |  |              | 27,863  
|Accounts receivable                                               |  |              | 2,488   
|Total assets                                                      |  |              | 156,746 
|Liabilities                                                       |  |              |         
|Trade accounts payable                                            |  |              | (103,854
|Financial debt                                                    |  |              | (70,000 
|Total Liabilities                                                 |  |              | (173,854
|Net liability position                                            |  | $            | (17,108 



The Company carries out a sensitivity
analysis related to the effect that the movement in the exchange rates may have on its financial information. These results are
shown in paragraph g) of this note. These analyses represent the scenarios that management considers reasonably possible of occurring.



The following is a detail of
exchange rates effective during the fiscal year:



|        |  |                       |       |  | Spot exchange rate at | 
|------- |  | --------------------- | ----- |  | --------------------- | 
|        |  | Average exchange rate |       |  | December 31,          | 
|        |  | 2016                  |       |  | 2015                  | 
|Dollars |  | $                     | 18.68 |  |                       | 



The exchange rate at the date
of issuance of the consolidated financial statements is $18.67.



F-42







v.       
Interest rate risk



The Company is exposed to fluctuations
in rates for certain financial instruments, such as investments, bank loans and debt securities. This risk is managed taking into
account market conditions and the criterion of its Risk Committee and Board of Directors.



Interest rate fluctuations
impacted mainly bank loans by changing either their fair value (fixed rate debt) or the future cash flows (variable rate debt).
Management does not have a formal policy to determine how much of the Company's exposure should be at fixed or variable rate.
However, at the time of obtaining new loans, management uses its judgment considering technical analyses and the market’s
forecasts to decide whether fixed or variable rate instruments would be more favorable during the periods of such instruments.



To monitor this risk, the Company
performs sensitivity tests at least monthly to measure the effect of the change in interest rates in the instruments described
in the preceding paragraph, which are summarized in subsection g) of this note.



e)       Financial
instruments at fair value



The amounts of accounts payable
and accounts receivable approximate their fair value because of their nature and short-term maturities.



The table below summarizes
the presents the fair value of the financial instruments that are recognized at amortized cost, together with the carrying amount
included in the consolidated statement of financial position:



|Liabilities recorded at amortized cost |  | Carrying amount |           |  | Fair value |  |           | Carrying amount |  |  | Fair value |  |  | Carrying amount |           |  | Fair value | 
|-------------------------------------- |  | --------------- | --------- |  | ---------- |  | --------- | --------------- |  |  | ---------- |  |  | --------------- | --------- |  | ---------- | 
|                                       |  | 2016            |           |  | 2015       |  |           | 2014            | 
|Financial debt                         |  | $               | 4,047,937 |  |            |  | 4,062,999 |                 |  |  | 4,127,010  |  |  |                 | 4,141,473 |  |            | 



f)       Fair
value hierarchy



The fair value of financial
assets and liabilities is determined as follows:



| | · | The
                                         fair value of the financial assets and liabilities that have standard terms and conditions
                                         and are traded in active liquid markets, which are determined by reference to quoted
                                         market prices (market approach), therefore, these instruments are considered Level 1
                                         hierarchy according to the classification of fair value hierarchy described in note 2
                                         b).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The
                                         fair value of derivative financial instruments of the Company (Commodities) is determined
                                         on the futures prices of the Chicago Stock Exchange, so these instruments are considered
                                         Level 2 hierarchy.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-43







The following table summarizes
financial instruments carried at fair value:



|                                                                  |  | Level 1 |         |  | Level 2 |  |       | Level 3 |  |  | Total | 
|----------------------------------------------------------------- |  | ------- | ------- |  | ------- |  | ----- | ------- |  |  | ----- | 
|As of December 31, 2016                                           |  |         |         |  |         |  |       |         |  |  |       | 
|Investment in securities at fair value
    through profit or loss |  | $       | 970,292 |  |         |  | -     |         |  |  | -     | 
|Derivative financial instruments                                  |  |         | -       |  |         |  | 8,308 |         |  |  | -     | 
|                                                                  |  | $       | 970,292 |  |         |  | 8,308 |         |  |  | -     | 



|                                                                  |  | Level 1 |           |  | Level 2 |  |       | Level 3 |  |  | Total | 
|----------------------------------------------------------------- |  | ------- | --------- |  | ------- |  | ----- | ------- |  |  | ----- | 
|As of December 31, 2015                                           |  |         |           |  |         |  |       |         |  |  |       | 
|Investment in securities at fair value
    through profit or loss |  | $       | 1,242,614 |  |         |  | -     |         |  |  | -     | 
|Interest rate derivative financial instruments                    |  |         | -         |  |         |  | 195   |         |  |  | -     | 
|Derivative financial instruments                                  |  |         | -         |  |         |  | 1,244 |         |  |  | -     | 
|                                                                  |  | $       | 1,242,614 |  |         |  | 1,439 |         |  |  | -     | 



|                                                                  |  | Level 1 |         |  | Level 2 |  |       | Level 3 |  |  | Total | 
|----------------------------------------------------------------- |  | ------- | ------- |  | ------- |  | ----- | ------- |  |  | ----- | 
|As of December 31, 2014                                           |  |         |         |  |         |  |       |         |  |  |       | 
|Investment in securities at fair value
    through profit or loss |  | $       | 910,519 |  |         |  | -     |         |  |  | -     | 
|Derivative financial instruments                                  |  |         | -       |  |         |  | 6,669 |         |  |  | -     | 
|                                                                  |  | $       | 910,519 |  |         |  | 6,669 |         |  |  | -     | 



Information regarding the hierarchy
of fair value measurements related to financial liabilities that are not carried at fair value, but for which disclosures are
required, is summarized below:



|                                     |  | Level 1 |            |   | Level 2 |  |            | Level 3 |  |  | Total | 
|------------------------------------ |  | ------- | ---------- | - | ------- |  | ---------- | ------- |  |  | ----- | 
|As of December 31, 2016              |  |         |            |   |         |  |            |         |  |  |       | 
|Financial debt - bank institutions   |  | $       | -          |   |         |  | (2,550,469 | )       |  |  | -     | 
|Financial debt – debt
    securities |  |         | (1,512,530 | ) |         |  | -          |         |  |  | -     | 
|                                     |  | $       | (1,512,530 | ) |         |  | (2,550,469 | )       |  |  | -     | 



|                                     |  | Level 1 |            |   | Level 2 |  |            | Level 3 |  |  | Total | 
|------------------------------------ |  | ------- | ---------- | - | ------- |  | ---------- | ------- |  |  | ----- | 
|As of December 31, 2015              |  |         |            |   |         |  |            |         |  |  |       | 
|Financial debt - bank institutions   |  | $       | -          |   |         |  | (2,626,327 | )       |  |  |       | 
|Financial debt – debt
    securities |  |         | (1,515,146 | ) |         |  | -          |         |  |  | -     | 
|                                     |  | $       | (1,515,146 | ) |         |  | (2,626,327 | )       |  |  | -     | 



|                                     |  | Level 1 |            |   | Level 2 |  |          | Level 3 |  |  | Total | 
|------------------------------------ |  | ------- | ---------- | - | ------- |  | -------- | ------- |  |  | ----- | 
|As of December 31, 2014              |  |         |            |   |         |  |          |         |  |  |       | 
|Financial debt - bank institutions   |  | $       |            |   |         |  | (987,094 | )       |  |  | -     | 
|Financial debt – debt
    securities |  |         | (1,514,205 | ) |         |  | -        |         |  |  | -     | 
|                                     |  | $       | (1,514,205 | ) |         |  | (987,094 | )       |  |  | -     | 



g)       Quantitative
sensitivity measurements



Following are sensitivity analyses
for the most significant risks to which the Company is exposed as of December 31, 2016, 2015 and 2014. These analyses represent
the scenarios that management believes are reasonably possible of occuring in future periods and were performed in accordance
with the policies of Risk Committee.



F-44







i.       
Derivative Financial Instruments related to exchange rate and commodities risks



As of December 31, 2016, the
Company has taken positions on derivative financial instruments to hedge exchange rate risks and commodities.



A 15% increase in the Mexican
peso with respect to the U.S. dollar as of the end of 2016 and 2015 would have resulted in a valuation gain of $41,235 and $0
on the fair value of the Company’s exchange rate derivative financial instruments position. On the other hand, a decrease
of 15% in the aforementioned rate would have resulted in an additional valuation loss during the respective periods of $47,639
and $10,575. As of December 31, 2014, the Company did not have any such positions.



The following table shows the
Company’s sensitivity to an increase and decrease of 15% for 2016 and 2015 and 7.5% for 2014 in the “bushell”
price of corn and short ton price of soybeans.



|                           |  | Effect of Increase |        |   | Effect of Decrease | 
|-------------------------- |  | ------------------ | ------ | - | ------------------ | 
|                           |  | 2016               |        |   | 2015               | 
|Loss (profit) for the year |  | $                  | (9,085 | ) |                    | 



ii.       
Interest rate risk



As described in Note 17, the
Company has financial debt denominated in pesos and dollars, which bear interest at variable rates based on TIIE and LIBOR, respectively.



The following table shows the
Company’s sensitivity of an increase and decrease of 50 basis points for 2016, 2015 and 2014, in the variable rates to which
the Company is exposed.



|                           |  | Effect of Increase |        |  | Effect of Decrease | 
|-------------------------- |  | ------------------ | ------ |  | ------------------ | 
|                           |  | 2015               |        |  | 2015               | 
|Loss (profit) for the year |  | $                  | 15,385 |  |                    | 



iii.       Exchange
risk



As of December 31, 2016, the
Company's net monetary liability position in foreign currency was $353,112.



The following table shows the
Company’s sensitivity of an increase and decrease of 10% for 2016 and 2015 and $0.50 for 2014, in exchange rate, which would
have an effect in the result from foreign currency position.



|                           |  | Effect of Increase |        |  | Effect of Decrease | 
|-------------------------- |  | ------------------ | ------ |  | ------------------ | 
|                           |  | 2016               |        |  | 2015               | 
|Loss (profit) for the year |  | $                  | 35,311 |  |                    | 



F-45







| | (9) | Accounts receivable, net
| | --- | ------------------------



As of December 31, 2016, 2015
and 2014, accounts receivable are as follows:



|                                                        |  | December 31, |          
|------------------------------------------------------- |  | ------------ | ---------
|                                                        |  | 2016         |          
|Trade receivables                                       |  | $            | 2,482,077
|Allowance for doubtful accounts                         |  |              | (97,400  
|Other receivables                                       |  |              | 140,265  
|Government grant                                        |  |              | -        
|Income tax receivable                                   |  |              | 115,428  
|Recoverable value-added tax and other recoverable taxes |  |              | 988,774  
|                                                        |  | $            | 3,629,144



Past-due but not impaired portfolio



Below is
a classification of trade accounts receivable according to their aging as of the reporting date, which has not been subject to
impairment:



|                              |  | December 31, |        
|----------------------------- |  | ------------ | -------
|                              |  | 2016         |        
|Past due 0 to 60 days         |  |              | 164,458
|Past due by more than 60 days |  |              | 3,395  
|                              |  | $            | 167,853



The Company believes that non-impaired amounts that
are past-due by more than 60 days can still be collected, based on the historical behavior of payments and analysis of credit
ratings of customers.



Reconciliation of movements
in allowance for doubtful accounts



|                            |  | 2016 |         |   | 2015 |  |         | 2014 | 
|--------------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- | 
|Balance as of January 1     |  | $    | (81,641 | ) |      |  | (76,793 | )    | 
|Increase in allowance       |  |      | (18,405 | ) |      |  | (17,179 | )    | 
|Amounts written off         |  |      | 2,818   |   |      |  | 12,454  |      | 
|Currency translation effect |  |      | (172    | ) |      |  | (123    | )    | 
|Balance as of December 31,  |  | $    | (97,400 | ) |      |  | (81,641 | )    | 



As of December
31, 2016, 2015 and 2014 the Company has receivables in a legal process (receivables for which legal counsel is seeking recoverability)
of $130,290, $103,057 and $110,462, respectively.



To determine the recoverability
of an account receivable, the Company considers any change in the credit quality of the account receivable from the date of authorization
of the credit line to the end of the reference period. In addition, the Company estimates that the credit risk concentration is
limited as the customer base is very large and there are no related party receivables or receivables from entities under common
control.



F-46













| | (10) | Inventories
| | ---- | -----------



As of December 31, 2016, 2015 and
2014, inventories are as follows:



|                                    |  | December 31, |          
|----------------------------------- |  | ------------ | ---------
|                                    |  | 2016         |          
|Raw materials and by-products       |  | $            | 1,515,824
|Medicine, materials and spare parts |  |              | 808,492  
|Balanced feed                       |  |              | 275,845  
|Processed chicken                   |  |              | 1,154,207
|Commercial eggs                     |  |              | 37,242   
|Processed beef                      |  |              | 36,599   
|Processed turkey                    |  |              | 122,722  
|Other processed products            |  |              | 19,757   
|Total                               |  | $            | 3,970,688



Inventory consumption for the years ended December
31, 2016, 2015 and 2014 was $34,018,493, $28,877,468 and $24,873,999, respectively.



| | (11) | Biological assets
| | ---- | -----------------



For the years ended December 31, 2016, 2015 and 2014,
biological assets are as follows:



|                                |  | Current biological assets |             |   | Non-current biological assets |  |            | Total | 
|------------------------------- |  | ------------------------- | ----------- | - | ----------------------------- |  | ---------- | ----- | 
|Balance as at January 1, 2016   |  | $                         | 1,651,794   |   |                               |  | 1,434,131  |       | 
|Increase due to purchases       |  |                           | 237,525     |   |                               |  | 604,527    |       | 
|Sales                           |  |                           | -           |   |                               |  | (109,776   | )     | 
|Net increase due to births      |  |                           | 240,085     |   |                               |  | 2,034,670  |       | 
|Production cost                 |  |                           | 29,620,380  |   |                               |  | 1,515,440  |       | 
|Depreciation                    |  |                           | -           |   |                               |  | (1,903,086 | )     | 
|Transfers to inventories        |  |                           | (29,886,985 | ) |                               |  | (2,034,670 | )     | 
|Other                           |  |                           | 98,392      |   |                               |  | 127,307    |       | 
|Balance as at December 31, 2016 |  | $                         | 1,961,191   |   |                               |  | 1,668,543  |       | 



|                                |  | Current biological assets |             |   | Non-current biological assets |  |            | Total | 
|------------------------------- |  | ------------------------- | ----------- | - | ----------------------------- |  | ---------- | ----- | 
|Balance as at January 1, 2015   |  | $                         | 1,501,428   |   |                               |  | 1,109,233  |       | 
|Increase due to purchases       |  |                           | 337,632     |   |                               |  | 603,081    |       | 
|Sales                           |  |                           | -           |   |                               |  | 3,032      |       | 
|Net increase due to births      |  |                           | 225,000     |   |                               |  | 1,422,535  |       | 
|Production cost                 |  |                           | 26,283,885  |   |                               |  | 1,120,359  |       | 
|Depreciation                    |  |                           | -           |   |                               |  | (1,475,470 | )     | 
|Transfers to inventories        |  |                           | (26,746,796 | ) |                               |  | (1,422,535 | )     | 
|Other                           |  |                           | 50,645      |   |                               |  | 73,896     |       | 
|Balance as at December 31, 2015 |  | $                         | 1,651,794   |   |                               |  | 1,434,131  |       | 



F-47







|                                |  | Current Biological assets |             |   | Non-current biological assets |  |            | Total | 
|------------------------------- |  | ------------------------- | ----------- | - | ----------------------------- |  | ---------- | ----- | 
|Balance as at January 1, 2014   |  | $                         | 1,420,174   |   |                               |  | 1,109,936  |       | 
|Increase due to purchases       |  |                           | 301,516     |   |                               |  | 296,846    |       | 
|Sales                           |  |                           | -           |   |                               |  | (222,283   | )     | 
|Net increase due to births      |  |                           | 227,892     |   |                               |  | 1,426,359  |       | 
|Production cost                 |  |                           | 24,324,638  |   |                               |  | 1,088,254  |       | 
|Depreciation                    |  |                           | -           |   |                               |  | (1,194,779 | )     | 
|Transfers to inventories        |  |                           | (24,789,388 | ) |                               |  | (1,426,359 | )     | 
|Other                           |  |                           | 16,596      |   |                               |  | 31,259     |       | 
|Balance as at December 31, 2014 |  | $                         | 1,501,428   |   |                               |  | 1,109,233  |       | 



The “Other” category
includes the change in fair value of biological assets that resulted in a decrease of $18,276, increase of $13,020 in 2015, and
decreases of $23,096 in 2014, respectively.



The Company is exposed to different
risks relating to its biological assets:



| | · | Future excesses in the offer of poultry
products and a decline in the demand growth of the chicken industry may negatively affect the Company’s results.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Increases in raw material prices and price
volatility may negatively affect the Company’s margins and results.
| | - | --------------------------------------------------------------------------------------------------------------



| | · | In addition, in the case of the Company’s
operations in the United States of America, the cost of corn and grain may be affected by an increase in the demand for ethanol,
which may reduce the market’s available corn inventory.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Operations in Mexico and the United States
of America are based on animal breeding and meat processing, which are subject to sanitary risks and natural disasters.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Hurricanes and other adverse climate conditions
may result in additional inventory losses and damage to the Company’s facilities and equipment.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



| | (12) | Prepaid expenses and other current assets
| | ---- | -----------------------------------------



As of December 31, 2016, 2015 and 2014, prepaid expenses
and other current assets are as follows:



|                                                                          |  | December 31, |          
|------------------------------------------------------------------------- |  | ------------ | ---------
|                                                                          |  | 2016         |          
|Advances to suppliers of inventories                                      |  | $            | 929,815  
|Prepaid expenses of services                                              |  |              | 217,244  
|Option agreement on potential acquisition                                 |  |              | -        
|Advances for purchase of property, plant and equipment to related parties |  |              | -        
|Prepaid expenses of insurance and bonds                                   |  |              | 185,678  
|Other current assets                                                      |  |              | 171,208  
|Total                                                                     |  | $            | 1,503,945



F-48







Effective June 20, 2014, the Company
executed an option agreement with Morris Hatchery, Inc. that gives the Company the right to purchase its hatching egg operations
located in Gillsville, Georgia once the contractual obligations made by Morris Hatchery Inc. with its customers have concluded,
which wasn’t completed by December 31, 2014. As consideration for this right, the Company made a nonrefundable payment of
$154,875 (10,500 thousand dollars) which was credited against the total purchase price of $371,300 (23,500 thousand dollars) on
the closing of the transaction on July 10, 2015.



| | (13) | Assets held for sale
| | ---- | --------------------



As of December 31, 2016, 2015 and
2014, assets held for sale are as follows:



|          |  | December 31, |       
|--------- |  | ------------ | ------
|          |  | 2016         |       
|Buildings |  | $            | 21,551
|Land      |  |              | 32,338
|Other     |  |              | 2,839 
|Total     |  | $            | 56,728



The Company recognized gains (losses)
on sales of these assets of $0, $(24), and $5 during 2016, 2015 and 2014, respectively.



| | (14) | Property, plant and equipment
| | ---- | -----------------------------



As of December 31, 2016, 2015 and
2014, property, plant and equipment are comprised as follows:



|Cost                       |  | Balance as at January 1, 2016 |            |  | Additions |  |           | Disposals |  |  | Currency translation effect |   |  | Balance as at December 31, 2016 |        
|-------------------------- |  | ----------------------------- | ---------- |  | --------- |  | --------- | --------- |  |  | --------------------------- | - |  | ------------------------------- | -------
|Land                       |  | $                             | 1,160,809  |  |           |  | 40,398    |           |  |  | (6,257                      | ) |  |                                 | 15,102 
|Buildings and construction |  |                               | 10,017,180 |  |           |  | 423,357   |           |  |  | (69,520                     | ) |  |                                 | 232,276
|Machinery and equipment    |  |                               | 10,706,221 |  |           |  | 1,408,298 |           |  |  | (355,957                    | ) |  |                                 | 277,207
|Transportation equipment   |  |                               | 1,286,212  |  |           |  | 433,746   |           |  |  | (114,222                    | ) |  |                                 | 5,417  
|Computer equipment         |  |                               | 85,842     |  |           |  | 29,702    |           |  |  | (2,134                      | ) |  |                                 | 5,349  
|Furniture                  |  |                               | 155,995    |  |           |  | 20,548    |           |  |  | (5,183                      | ) |  |                                 | 2,823  
|Leasehold improvements     |  |                               | 8,742      |  |           |  | -         |           |  |  | (3,556                      | ) |  |                                 | -      
|Construction in progress   |  |                               | 1,268,545  |  |           |  | 103,695   |           |  |  | -                           |   |  |                                 | 87,442 
|Total                      |  | $                             | 24,689,546 |  |           |  | 2,459,744 |           |  |  | (556,829                    | ) |  |                                 | 625,616



|Accumulated depreciation   |  | Balance as at January 1 2016 |             |   | Depreciation for the year |  |          | Disposals |  |  | Currency translation effect |  |  | Balance as at December 31, 2016 |         
|-------------------------- |  | ---------------------------- | ----------- | - | ------------------------- |  | -------- | --------- |  |  | --------------------------- |  |  | ------------------------------- | --------
|Buildings and construction |  | $                            | (4,942,844  | ) |                           |  | (192,810 | )         |  |  | 38,726                      |  |  |                                 | (34,795 
|Machinery and equipment    |  |                              | (5,627,281  | ) |                           |  | (630,370 | )         |  |  | 297,180                     |  |  |                                 | (104,273
|Transportation equipment   |  |                              | (751,539    | ) |                           |  | (81,783  | )         |  |  | 94,872                      |  |  |                                 | (2,803  
|Computer equipment         |  |                              | (60,198     | ) |                           |  | (10,544  | )         |  |  | 2,918                       |  |  |                                 | (2,469  
|Furniture                  |  |                              | (119,553    | ) |                           |  | (10,241  | )         |  |  | 2,038                       |  |  |                                 | (1,203  
|Total                      |  | $                            | (11,501,415 | ) |                           |  | (925,748 | )         |  |  | 435,734                     |  |  |                                 | (145,543



F-49







|Cost                       |  | Balance as at January 1, 2015 |            |  | Additions |  |           | Disposals |  |  | Currency translation effect |   |  | Balance as at December 31, 2015 |        
|-------------------------- |  | ----------------------------- | ---------- |  | --------- |  | --------- | --------- |  |  | --------------------------- | - |  | ------------------------------- | -------
|Land                       |  | $                             | 1,094,182  |  |           |  | 57,901    |           |  |  | (661                        | ) |  |                                 | 9,387  
|Buildings and construction |  |                               | 9,669,990  |  |           |  | 204,254   |           |  |  | (17,191                     | ) |  |                                 | 160,127
|Machinery and equipment    |  |                               | 9,816,722  |  |           |  | 991,378   |           |  |  | (262,222                    | ) |  |                                 | 160,343
|Transportation equipment   |  |                               | 1,171,030  |  |           |  | 247,232   |           |  |  | (135,257                    | ) |  |                                 | 3,207  
|Computer equipment         |  |                               | 67,780     |  |           |  | 22,081    |           |  |  | (6,163                      | ) |  |                                 | 2,144  
|Furniture                  |  |                               | 153,015    |  |           |  | 6,372     |           |  |  | (5,351                      | ) |  |                                 | 1,959  
|Leasehold improvements     |  |                               | 21,442     |  |           |  | -         |           |  |  | (12,700                     | ) |  |                                 | -      
|Construction in progress   |  |                               | 991,866    |  |           |  | 295,291   |           |  |  | (18,612                     | ) |  |                                 | -      
|Total                      |  | $                             | 22,986,027 |  |           |  | 1,824,509 |           |  |  | (458,157                    | ) |  |                                 | 337,167



|Accumulated depreciation   |  | Balance as at January 1 2015 |             |   | Depreciation for the year |  |          | Disposals |  |  | Currency translation effect |  |  | Balance as at December 31, 2015 |        
|-------------------------- |  | ---------------------------- | ----------- | - | ------------------------- |  | -------- | --------- |  |  | --------------------------- |  |  | ------------------------------- | -------
|Buildings and construction |  | $                            | (4,754,662  | ) |                           |  | (179,402 | )         |  |  | 9,199                       |  |  |                                 | (17,979
|Machinery and equipment    |  |                              | (5,210,886  | ) |                           |  | (512,786 | )         |  |  | 150,685                     |  |  |                                 | (54,294
|Transportation equipment   |  |                              | (795,625    | ) |                           |  | (59,655  | )         |  |  | 107,333                     |  |  |                                 | (3,592 
|Computer equipment         |  |                              | (56,462     | ) |                           |  | (7,946   | )         |  |  | 6,411                       |  |  |                                 | (2,201 
|Furniture                  |  |                              | (113,638    | ) |                           |  | (9,481   | )         |  |  | 4,210                       |  |  |                                 | (644   
|Total                      |  | $                            | (10,931,273 | ) |                           |  | (769,270 | )         |  |  | 277,838                     |  |  |                                 | (78,710



|Cost                       |  | Balance as at January 1, 2014 |            |  | Additions |  |           | Disposals |  |  | Currency translation effect |   |  | Balance as at December 31, 2014 |        
|-------------------------- |  | ----------------------------- | ---------- |  | --------- |  | --------- | --------- |  |  | --------------------------- | - |  | ------------------------------- | -------
|Land                       |  | $                             | 1,057,182  |  |           |  | 30,833    |           |  |  | (29                         | ) |  |                                 | 6,196  
|Buildings and construction |  |                               | 9,548,846  |  |           |  | 101,388   |           |  |  | (87,755                     | ) |  |                                 | 107,511
|Machinery and equipment    |  |                               | 9,524,495  |  |           |  | 298,248   |           |  |  | (113,567                    | ) |  |                                 | 107,546
|Transportation equipment   |  |                               | 1,204,326  |  |           |  | 114,453   |           |  |  | (149,487                    | ) |  |                                 | 1,738  
|Computer equipment         |  |                               | 141,252    |  |           |  | 8,178     |           |  |  | (82,768                     | ) |  |                                 | 1,118  
|Furniture                  |  |                               | 149,741    |  |           |  | 8,512     |           |  |  | (6,410                      | ) |  |                                 | 1,172  
|Leasehold improvements     |  |                               | 26,852     |  |           |  | -         |           |  |  | (5,410                      | ) |  |                                 | -      
|Construction in progress   |  |                               | 356,447    |  |           |  | 679,504   |           |  |  | (44,085                     | ) |  |                                 | -      
|Total                      |  | $                             | 22,009,141 |  |           |  | 1,241,116 |           |  |  | (489,511                    | ) |  |                                 | 225,281



|Accumulated depreciation   |  | Balance as at January 1 2014 |             |   | Depreciation for the year |  |          | Disposals |  |  | Currency translation effect |  |  | Balance as at December 31, 2014 |        
|-------------------------- |  | ---------------------------- | ----------- | - | ------------------------- |  | -------- | --------- |  |  | --------------------------- |  |  | ------------------------------- | -------
|Buildings and construction |  | $                            | (4,607,271  | ) |                           |  | (188,909 | )         |  |  | 52,135                      |  |  |                                 | (10,617
|Machinery and equipment    |  |                              | (4,724,963  | ) |                           |  | (513,983 | )         |  |  | 58,514                      |  |  |                                 | (30,454
|Transportation equipment   |  |                              | (789,154    | ) |                           |  | (87,375  | )         |  |  | 81,874                      |  |  |                                 | (970   
|Computer equipment         |  |                              | (126,897    | ) |                           |  | (5,954   | )         |  |  | 77,317                      |  |  |                                 | (928   
|Furniture                  |  |                              | (108,407    | ) |                           |  | (9,429   | )         |  |  | 4,499                       |  |  |                                 | (301   
|Total                      |  | $                            | (10,356,692 | ) |                           |  | (805,650 | )         |  |  | 274,339                     |  |  |                                 | (43,270



F-50







|                           |  | December 31, |           
|-------------------------- |  | ------------ | ----------
|Carrying amounts, net      |  | 2016         |           
|Land                       |  | $            | 1,210,052 
|Buildings and construction |  |              | 5,471,570 
|Machinery and equipment    |  |              | 5,971,025 
|Transportation equipment   |  |              | 869,900   
|Computer equipment         |  |              | 48,466    
|Furniture                  |  |              | 45,224    
|Leasehold improvements     |  |              | 5,186     
|Construction in progress   |  |              | 1,459,682 
|Total                      |  | $            | 15,081,105



Additions of property, plant and
equipment in 2015 include assets acquired through business combinations of $11,581 that consist of machinery and equipment for
$126, furniture for $16 and transportation equipment for $11,439.



Depreciation expense during the
years ended December 31, 2016, 2015 and 2014 was $925,748, $769,270 and $805,650, respectively, which were charged to cost of sales
and operating expenses.



| | (15) | Goodwill
| | ---- | --------



|                                  |  | 2016 |         |  | 2015 |  |         | 2014 | 
|--------------------------------- |  | ---- | ------- |  | ---- |  | ------- | ---- | 
|Balances at beginning of the year |  | $    | 454,295 |  |      |  | 349,764 |      | 
|Business combinations (Note 4)    |  |      | -       |  |      |  | 123,933 |      | 
|Goodwill impairment loss          |  |      | -       |  |      |  | (38,619 | )    | 
|Foreign currency effects          |  |      | 30,582  |  |      |  | 19,217  |      | 
|Balances at end of year           |  | $    | 484,877 |  |      |  | 454,295 |      | 



Based on market conditions in which
the reporting unit operates, the Company’s estimates of fair value indicated an impairment in Ok Farms – Morris Hatchery,
Inc. Georgia, resulting in the recognition of a goodwill impairment loss of $38,619 (2,244 thousand dollars) for the year ended
December 31, 2015.



The recoverable amount of the cash-generating
unit is determined based on a calculation of its value in use, which uses projections of the estimated cash flows based on financial
budgets approved by management for a determined projection period, which are discounted using an annual discount rate.



Projections of the cash flows during
the budgeted period are based on sales projections which include increases due to inflation, as well as the projection of expected
gross margins and operating margins during the budgeted period. Cash flows that exceed such period are extrapolated using an annual
stable growth rate, which is the long-term weighted average growth rate for the market in which the cash-generating unit operates.



The assumptions and balances of
each cash-generating unit are as follows:



F-51







|2016                                     
|-----------------------------------------
|Cash-generating unit                     
|Bachoco - Istmo and Peninsula regions    
|Campi                                    
|Ok Farms - Morris Hatchery, Inc. Arkansas
|Ok Farms- Morris Hatchery Inc. Georgia   
|                                         



|2015                                     
|-----------------------------------------
|Cash-generating unit                     
|Bachoco - Istmo and Peninsula regions    
|Campi                                    
|Ok Farms - Morris Hatchery, Inc. Arkansas
|Ok Farms- Morris Hatchery Inc. Georgia   
|                                         



|2014                                   
|---------------------------------------
|Cash-generating unit                   
|Bachoco - Istmo and Peninsula regions  
|Campi                                  
|Ok Farms- Morris Hatchery Inc. Arkansas
|                                       



| | (16) | Other non-current assets
| | ---- | ------------------------



Other non-current assets consist of the following:



|                                                       |  | December 31, |        
|------------------------------------------------------ |  | ------------ | -------
|                                                       |  | 2016         |        
|Advances for purchase of property, plant and equipment |  | $            | 552,417
|Investments in life insurance (note 3 (k))             |  |              | 65,509 
|Security deposits                                      |  |              | 15,132 
|Other long-term receivable                             |  |              | 161,690
|Intangible assets in process                           |  |              | 12,200 
|Other                                                  |  |              | 58,506 
|Total non-current assets                               |  | $            | 865,454



F-52







| | (17) | Financial debt
| | ---- | --------------



| | a) | Short-term financial debt is as follows:
| | -- | ----------------------------------------



|                                                                                                                        |  | December 31, |          
|----------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------
|                                                                                                                        |  | 2016         |          
|Loan in the amount of 70,000 thousand dollars, maturing in June 2017, at LIBOR (3) rate plus 0.50 percentage points.    |  | $            | 1,444,800
|Loan of 85,000 thousand dollars, maturing in June 2016, at LIBOR (3) rate plus 0.48 percentage points                   |  |              | -        
|Denominated in pesos, maturing in January 2016, at TIIE (1) FIRA (2) rate plus 0.85 percentage points                   |  |              | -        
|Loan in the amount of 15,000 thousand dollars, maturing in January 2015, at LIBOR (3) rate plus 1.04 percentage points. |  |              | -        
|Denominated in pesos, maturing in January 2015, at TIIE (1) FIRA (2) less 0.70 percentage points.                       |  |              | -        
|Denominated in pesos, maturing in January 2015, at TIIE (1) FIRA (2) rate plus 1.25 percentage points                   |  |              | -        
|Total short-term debt                                                                                                   |  | $            | 1,444,800



During 2016 no short-term debt denominated
in pesos was contracted. Annual weighted average interest rate of short-term loans denominated in pesos for 2015 and 2014 was 3.13%
and 2.78%, respectively. Average interest rate for short-term loans existing as of December 31, 2015 and 2014, was 4.17% and 3.68%,
respectively.



Annual weighted average interest
rate of short-term loans denominated in dollars for the years 2016, 2015 and 2014 was 1.04%, 1.05% and 1.10%, respectively. Average
interest rate for loans existing as of December 31, 2016, 2015 and 2014 was 1.05%, 0.83% and 1.24%, respectively.



| | (1) | TIIE (for its acronym in Spanish) = Interbank Equilibrium Rate
| | --- | --------------------------------------------------------------

| | (2) | FIRA (for its acronym in Spanish) = Agriculture Trust Funds
| | --- | -----------------------------------------------------------

| | (3) | LIBOR= London Interbank Offered Rate
| | --- | ------------------------------------



F-53







b)	Long-term debt consists of
the following:



|                                                                                                         |  | December 31, |           
|-------------------------------------------------------------------------------------------------------- |  | ------------ | ----------
|                                                                                                         |  | 2016         |           
|Denominated in pesos, maturing in September 2017, at TIIE (1) rates plus 0.63 percentage points.         |  | $            | 98,000    
|Denominated in pesos, maturing in 2017 and 2018, at TIIE (1) FIRA (2) rates less 0.25 percentage points. |  |              | 603,739   
|Denominated in pesos, maturing in 2018, at TIIE (1) FIRA (2) rates less 0.60 percentage points.          |  |              | 293,400   
|Denominated in pesos, maturing in 2019, at TIIE (1) FIRA (2) rates plus 0.25 percentage points.          |  |              | 53,978    
|Denominated in pesos, maturing in 2019, at TIIE (1) FIRA (2) rates plus 0.50 percentage points.          |  |              | 54,000    
|Denominated in pesos, maturing in 2015 and 2016, at TIIE (1) plus 1.00 percentage points.                |  |              | -         
|Denominated in pesos, maturing in August 2015, at TIIE (1) FIRA (2) rates less 0.90 percentage points.   |  |              | -         
|Denominated in pesos, maturing in April 2017, at TIIE (1) rates plus 0.25 percentage points.             |  |              | -         
|Debt securities (subsection (d))                                                                         |  |              | 1,500,000 
|Total                                                                                                    |  |              | 2,603,137 
|Less current maturities                                                                                  |  |              | (1,652,725
|Long-term debt, excluding current maturities                                                             |  | $            | 950,412   



Long-term annual weighted average
interest rate for 2016, 2015 and 2014 was 4.04%, 3.07% and 3.72%, respectively. Average rate for current loans as of December 31,
2016, 2015 and 2014 was 5.63%, 3.56% and 3.68%, respectively.



(1) TIIE (for its acronym in Spanish)
= Interbank Equilibrium Rate

(2) FIRA (for its acronym in Spanish)
= Trust Established in Relation to Agriculture



During 2016 and 2015 the Company
did not make early payments on its long-term debt, in 2014 the Company made early payments on its long-term debt of $201,300, without
payment of fees for early termination.



As of December 31, 2016, 2015 and
2014, total unused lines of credit totaled $5,551,263, $6,156,229 and $5,282,600, respectively. In all such years, the Company
did not pay any fee for undrawn balances.



c)	Maturities of long-term debt,
excluding current maturities, as of December 31, 2016, are as follows:



|Year |  | Amount |        
|---- |  | ------ | -------
|2018 |  | $      | 842,839
|2019 |  |        | 107,573
|     |  | $      | 950,412



Interest expense on total loans
during the years ended December 31, 2016, 2015 and 2014, amounted to $129,769, $93,964 and $87,624, respectively.



F-54







Certain bank loans establish certain
affirmative and negative covenants, as well as the requirement to maintain certain financial ratios, which have been met as of
December 31, 2016, among which are:



| | a) | Provide financial information at request from the bank.
| | -- | -------------------------------------------------------



| | b) | Not to contract liabilities with financial cost or grant loans that may affect payment obligations.
| | -- | ---------------------------------------------------------------------------------------------------



| | c) | Notify the bank regarding the existence of legal issues that could substantially affect the financial
situation of the Company.
| | -- | -------------------------------------------------------------------------------------------------------------------------------



| | d) | Not to perform substantial changes to the nature of the business, or the administrative structure.
| | -- | --------------------------------------------------------------------------------------------------



| | e) | Not to merge, consolidate, separate, settle or dissolve except for those mergers in which the Company
or surety are the merging company and do not constitutes a change on control of the entities of the group to which the Company
or the surety belong, at the date of the agreement.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



d)	Issuance of debt securities



On August 28, 2012, the Company
was authorized to issue debt securities in the total amount of the program of $5,000,000 or the equivalent in UDIS (1), on a revolving
basis, for a term of five years from the date of the authorization letter from the Mexican Banking and Securities Commission. The
initial issuance dated August 31, 2012 was of $1,500,000 pesos with ticker symbol: "BACHOCO 12" for a term of 1,820 days,
equivalent to 65 periods of 28 days, approximately five years, with 15,000,000 debt securities and a par value of $100 pesos per
certificate.



From the date of issuance, and while
the debt securities have not been paid, they will accrue annual gross interest on their par value, at an annual interest rate,
which is calculated by adding 0.60 percentage points at the 28-day TIIE, and in the event the 28-day TIIE were not published, at
the nearest term published by the Bank of Mexico. The common representative of the stock-holders will calculate the accrued interest
two business days prior to the beginning of each interest period of 28 days, according to the payment schedule, computed from the
date of issuance or at the beginning of each interest period and governed precisely during that interest period.



The debt securities will be paid
at the expiration of the contractual term. Direct costs arising from debt issuance or contract are deferred and amortized as part
of financial expense using the effective interest rate through the expiration of each transaction. Such costs include commissions
and professional fees.



| | (1) | UDIS = Investment units
| | --- | -----------------------



Derived from the issuance of the
Debt securities, the Company is subject to certain requirements, affirmative and negative covenants, with which they comply as
of December 31, 2016.



F-55







| | (18) | Trade accounts and other accounts payable
| | ---- | -----------------------------------------



|                                             |  | December 31, |          
|-------------------------------------------- |  | ------------ | ---------
|                                             |  | 2016         |          
|Trade payables                               |  | $            | 3,646,410
|Sundry creditors and expenses payable        |  |              | 448,679  
|Provisions                                   |  |              | 105,434  
|Statutory employee profit sharing            |  |              | 42,134   
|Retained payroll taxes and other local taxes |  |              | 214,558  
|Direct employee benefits                     |  |              | 76,721   
|Interest payable                             |  |              | 11,160   
|Government grant                             |  |              | -        
|Others                                       |  |              | 81       
|                                             |  | $            | 4,545,177



Note 8 discloses the Company’s
exposure to the exchange and liquidity risks related to trade accounts payable and other accounts payable.



On
December 2009, the Mexican Federal Competition Agency (CFC, for its Spanish acronym) released a news report in which it announced
an investigation on the Mexican poultry industry in reference to possible monopolistic practices. As a result of this investigation,
CFC imposed several fines to the Company for supposedly having certain practices where the price of chicken was manipulated. Although
the Company and its legal advisors considered that the interposed legal processes were well sustained and attended, a provision
that was considered adequate was recognized. During
2016 these judgments were concluded in favor of the Company's interests, for which reason the provision recorded for this purpose
was canceled.



Additionally, the National Water
Commission (CNA, for its Spanish acronym) imposed credits and fines to the Company for supposed infractions made by the Company
in water administration for exploitation of livestock. The Company has recognized a provision for the amount that it expects to
be probable to pay.



Bachoco USA, LLC. is involved in
claims with the United States of America Department of Labor and the Unites State Immigration and Customs Enforcement, and various
other matters related to its business, including workers’ payment claims and environmental issues. As of December 31, 2016,
2015 and 2014, the Company has recorded provisions of $41,280 (2,000 thousand dollars), $51,630 (3,000 thousand dollars) and $22,125
(1,500 thousand dollars) for estimated probable payments.



F-56







| | (19) | Transactions and balances with related parties
| | ---- | ----------------------------------------------



(a)      Transactions with management



Compensation



The following table shows the compensation
paid to the directors and executives for services provided in their respective positions for the years ended December 31, 2016,
2015 and 2014:



|             |  | December 31, |       
|------------ |  | ------------ | ------
|             |  | 2016         |       
|Compensation |  | $            | 53,531



(b)      Transactions with other related
parties



Below is a summary of the Company’s
transactions and balances with other related parties, which are comprised of affiliates that are under common control:



| | i. | Revenues
| | -- | --------



|                                        |  | Transaction value |        |  | Balance as of | 
|--------------------------------------- |  | ----------------- | ------ |  | ------------- | 
|                                        |  | December 31,      |        |  | December 31,  | 
|                                        |  | 2016              |        |  | 2015          | 
|Sales of products to:                   |  |                   |        |  |               | 
|Vimifos, S.A. de C.V.                   |  | $                 | 30,714 |  |               | 
|Frescopack, S.A. de C.V.                |  |                   | 66     |  |               | 
|Maquinaria Agrícola, S.A. de C.V.       |  |                   | -      |  |               | 
|Autos y Accesorios, S.A. de C.V.        |  |                   | -      |  |               | 
|Alfonso R. Bours, S.A. de C.V.          |  |                   | -      |  |               | 
|Taxis Aéreos del Noroeste, S.A. de C.V. |  |                   | 1,927  |  |               | 
|                                        |  | $                 | 43,708 |  |               | 
|                                        |  |                   |        |  |               | 



The balance of Taxis Aéreos
del Noroeste, S.A. de C.V., as of December 31, 2016 and 2015 for $144,562 and $189,075 corresponds to a loan that bears interest
and is due in the short term.



F-57







ii.       Expenses and
balances payable to related parties



|                                                      |  | Transaction value |         |  | Balance as of | 
|----------------------------------------------------- |  | ----------------- | ------- |  | ------------- | 
|                                                      |  | December 31,      |         |  | December 31,  | 
|                                                      |  | 2016              |         |  | 2015          | 
|Purchases of food, raw materials and packing supplies |  |                   |         |  |               | 
|Vimifos, S.A. de C.V.                                 |  | $                 | 554,282 |  |               | 
|Frescopack, S.A. de C.V.                              |  |                   | 137,752 |  |               | 
|Pulmex 2000, S.A. de C.V.                             |  |                   | 41,122  |  |               | 
|Qualyplast, S.A. de C.V.                              |  |                   | 193     |  |               | 
|Purchases of vehicles, tires and spare parts          |  |                   |         |  |               | 
|Maquinaria Agrícola, S.A. de C.V.                     |  | $                 | 34,446  |  |               | 
|Llantas y Accesorios, S.A. de C.V.                    |  |                   | 29,457  |  |               | 
|Autos y Accesorios, S.A. de C.V.                      |  |                   | 40,575  |  |               | 
|Autos y Tractores de Culiacán, S.A. de C.V.           |  |                   | 39,504  |  |               | 
|Camiones y Tractocamiones de Sonora, S.A. de C.V.     |  |                   | 153,802 |  |               | 
|Agencia MX-5, S.A de C.V.                             |  |                   | 25      |  |               | 
|Alfonso R. Bours, S.A. de C.V.                        |  |                   | 394     |  |               | 
|Cajeme Motors S.A. de C.V.                            |  |                   | 7,974   |  |               | 
|Airplane leasing expenses                             |  |                   |         |  |               | 
|Taxis Aéreos del Noroeste, S.A. de C.V.               |  | $                 | 7,739   |  |               | 
|                                                      |  |                   |         |  |               | 



As of December 31, 2016, 2015 and
2014, balances payable to related parties correspond to current accounts denominated in pesos that bear no interest and are payable
in a short-term basis.



As of December 31st 2014 the Company
has a prepayment for the purchase of property, plant and equipment for $12,500 paid to Autos y Tractores de Culiacan S.A. de C.V.,
which is included on note 12.



| | (20) | Income Tax
| | ---- | ----------



Under the tax legislation in Mexico
and the United States of America in effect through December 31, 2016, entities are subject to pay Income Tax (ISR, by its Spanish
acronym). During 2013, certain reforms to the Mexican tax law were enacted that entered into effect beginning January 1, 2014,
which include, among others, the cancelation of scheduled reductions in the income tax rate and the elimination of the business
flat tax (“IETU” for its Spanish acronym).



a)        ISR



The Company and each of its subsidiaries
file separate income tax returns (including its foreign subsidiary, which files income tax returns in the United States of America,
based on its fiscal year ending in April of every year). For the years ended December 31, 2016, 2015 and 2014, the applicable rate
under the general tax regime in Mexico is 30%; this rate will be applicable in future years as well. The applicable rate for the
Company’s US subsidiary is 38.79% (includes state and federal taxes).



F-58







As of December 31, 2016, 2015 and
2014 BSACV, the Company’s primary operating subsidiary is subject to the agriculture, cattle-raising, forestry and fishing
regime of the ISR law, which is applicable to entities exclusively dedicated to such activities. The new ISR Law establishes that
such activities are exclusive when no more than 10% of an entity’s total revenues are generated from something other than
those activities or from industrialized products.



b)        Tax charged to profit and
loss



For the years ended December 31,
2016, 2015 and 2014, the income tax (benefit) expense included in profit and loss is as follows:



|                     |  | December 31 |          
|-------------------- |  | ----------- | ---------
|                     |  | 2016        |          
|Operation in Mexico: |  |             |          
|Current ISR          |  |             | 1,215,171
|Deferred ISR         |  |             | 264,086  
|                     |  |             | 1,479,257
|Foreign operation:   |  |             |          
|Current ISR          |  |             | 45,358   
|Deferred ISR         |  |             | 118,818  
|Total ISR expense    |  | $           | 1,643,433



Total income tax expense



The income tax expense attributable
to income before income taxes, was different from the amount computed by applying the ISR rate of 30% in 2016, 2015 and 2014 as
a result of the items listed below:



|                                                |  | December 31, |          
|----------------------------------------------- |  | ------------ | ---------
|                                                |  | 2016         |          
|                                                |  | ISR          |          
|                                                |  |              |          
|Expected expense                                |  | $            | 1,678,379
|Increase (decrease) resulting from:             |  |              |          
|Net effects of inflation                        |  |              | (144,611 
|(Non-taxable income) Non-deductible expenses    |  |              | 14,550   
|Effect of rate difference of foreign subsidiary |  |              | 21,979   
|Effect from non-deductible employee benefits    |  |              | 71,868   
|Other                                           |  |              | 1,268    
|Income tax expense                              |  | $            | 1,643,433



F-59







c)        Deferred income tax



The Company and each one of its
subsidiaries determine the deferred taxes that are reflected at a consolidated level, on stand-alone basis. BSACV, the main operating
subsidiary of the Company is subject to tax payment under the agriculture, cattle-raising, forestry and fishing regime, in which
the tax base for ISR is determined on collected revenues minus paid deductions.



The tax effects of temporary differences,
tax losses and tax credits that give rise to significant portions of deferred tax assets and liabilities as at December 31, 2016,
2015 and 2014 are detailed below:



|                               |  | December 31, |       
|------------------------------ |  | ------------ | ------
|                               |  | 2016         |       
|Deferred tax assets            |  |              |       
|Accounts payable               |  | $            | 831   
|Employee benefits              |  |              | 42,221
|PTU payable                    |  |              | 12,700
|Accounts receivable            |  |              | -     
|Tax loss carryforwards         |  |              | 2,760 
|Property, plant and equipment  |  |              | -     
|Prepaid expenses               |  |              | -     
|Other provisions               |  |              | 1,754 
|Total deferred tax assets      |  |              | 60,266
|                               |  |              |       
|Deferred tax liabilities       |  |              |       
|Property, plant and equipment  |  |              | 82    
|Prepaid expenses               |  |              | 52    
|Total deferred tax liabilities |  |              | 134   
|Net deferred tax assets        |  |              | 60,132



|                                 |  | December 31, |          
|-------------------------------- |  | ------------ | ---------
|                                 |  | 2016         |          
|Deferred tax assets              |  |              |          
|Accounts payable                 |  | $            | 964,676  
|Employee benefits                |  |              | -        
|PTU payable                      |  |              | -        
|Tax loss carryforwards           |  |              | 676      
|Goodwill                         |  |              | 19,846   
|Other provisions                 |  |              | 24,049   
|Derivative financial instruments |  |              | -        
|Total deferred tax assets        |  |              | 1,009,247
|                                 |  |              |          
|Deferred tax liabilities         |  |              |          
|Inventories                      |  |              | 1,612,890
|Accounts receivable              |  |              | 438,146  
|Property, plant and equipment    |  |              | 2,566,002
|Prepaid expenses                 |  |              | 302,958  
|Derivative financial instruments |  |              | 1,826    
|Total deferred tax liabilities   |  |              | 4,921,822
|Net deferred tax liability       |  | $            | 3,912,575



F-60







d)        Unrecognized deferred tax
assets



Deferred tax assets that have not
been recognized in the Company’s consolidated financial statements are as follows:



|                          |  | December 31, |  
|------------------------- |  | ------------ | -
|                          |  | 2016         |  
|Recoverable tax on assets |  |              | -
|Total                     |  | $            | -



e)        Unrecognized deferred tax
liabilities



Deferred taxes related to investments
in subsidiaries have not been recognized as the Company is able to control the moment of the reversal of the temporary difference,
and the reversal is not expected to take place in the foreseeable future. Deferred income tax on investments in subsidiaries not
recognized as of December 31, 2016 amounts to $1,962,545. The Company's policy has been to distribute accounting profits when the
respective taxes have been paid and in the case of foreign profits, such tax may be duly credited in Mexico.



f)        Movement in temporary differences
during the fiscal year



|                                 |  | January 1, 2016 |            |   | Recognized in profit and loss |  |         | Acquired or/ Recognized directly in equity |  |  | December 31, 2016 |  
|-------------------------------- |  | --------------- | ---------- | - | ----------------------------- |  | ------- | ------------------------------------------ |  |  | ----------------- | -
|Accounts payable                 |  | $               | (1,093,909 | ) |                               |  | 134,658 |                                            |  |  | (6,256            | )
|Employee benefits                |  |                 | (32,572    | ) |                               |  | (14,115 | )                                          |  |  | 4,466             |  
|PTU payable                      |  |                 | (9,516     | ) |                               |  | (3,184  | )                                          |  |  | -                 |  
|Tax loss carryforwards           |  |                 | (11,317    | ) |                               |  | 7,881   |                                            |  |  | -                 |  
|Other provisions                 |  |                 | (6,846     | ) |                               |  | (18,200 | )                                          |  |  | (757              | )
|Goodwill                         |  |                 | (22,326    | ) |                               |  | 6,272   |                                            |  |  | (3,792            | )
|Inventories                      |  |                 | 1,400,793  |   |                               |  | 167,441 |                                            |  |  | 44,656            |  
|Accounts receivable              |  |                 | 382,182    |   |                               |  | 55,964  |                                            |  |  | -                 |  
|Property, plant and equipment    |  |                 | 2,356,019  |   |                               |  | 93,752  |                                            |  |  | 116,313           |  
|Prepaid expenses                 |  |                 | 353,260    |   |                               |  | (50,250 | )                                          |  |  | -                 |  
|Derivative financial instruments |  |                 | (859       | ) |                               |  | 2,685   |                                            |  |  | -                 |  
|Net deferred tax liability       |  | $               | 3,314,909  |   |                               |  | 382,904 |                                            |  |  | 154,630           |  



F-61







|                                 |  | January 1, 2015 |            |   | Recognized in profit and loss |  |         | Acquired or/ Recognized directly in equity |  |  | December 31, 2015 |  
|-------------------------------- |  | --------------- | ---------- | - | ----------------------------- |  | ------- | ------------------------------------------ |  |  | ----------------- | -
|Accounts payable                 |  | $               | (1,125,260 | ) |                               |  | 35,489  |                                            |  |  | (4,138            | )
|Employee benefits                |  |                 | (21,515    | ) |                               |  | (3,274  | )                                          |  |  | (7,783            | )
|PTU payable                      |  |                 | (6,800     | ) |                               |  | (2,716  | )                                          |  |  | -                 |  
|Tax loss carryforwards           |  |                 | (25,455    | ) |                               |  | 14,389  |                                            |  |  | (251              | )
|Other provisions                 |  |                 | (16,101    | ) |                               |  | 9,379   |                                            |  |  | (124              | )
|Goodwill                         |  |                 | -          |   |                               |  | (20,588 | )                                          |  |  | (1,738            | )
|Inventories                      |  |                 | 1,188,259  |   |                               |  | 187,852 |                                            |  |  | 24,682            |  
|Accounts receivable              |  |                 | 410,870    |   |                               |  | (28,688 | )                                          |  |  | -                 |  
|Property, plant and equipment    |  |                 | 2,365,620  |   |                               |  | (88,973 | )                                          |  |  | 79,372            |  
|Prepaid expenses                 |  |                 | 257,329    |   |                               |  | 95,931  |                                            |  |  | -                 |  
|Derivative financial instruments |  |                 | 5,872      |   |                               |  | (6,731  | )                                          |  |  | -                 |  
|Net deferred tax liability       |  | $               | 3,032,819  |   |                               |  | 192,070 |                                            |  |  | 90,020            |  



|                                 |  | January 1, 2014 |            |   | Recognized in profit and loss |  |         | Acquired or/ Recognized directly in equity |  |  | December 31, 2014 |  
|-------------------------------- |  | --------------- | ---------- | - | ----------------------------- |  | ------- | ------------------------------------------ |  |  | ----------------- | -
|Accounts payable                 |  | $               | (1,352,591 | ) |                               |  | 229,510 |                                            |  |  | (2,179            | )
|Employee benefits                |  |                 | (5,110     | ) |                               |  | (8,661  | )                                          |  |  | (7,744            | )
|PTU payable                      |  |                 | (8,857     | ) |                               |  | 2,057   |                                            |  |  | -                 |  
|Tax loss carryforwards           |  |                 | (90,637    | ) |                               |  | 66,899  |                                            |  |  | (1,717            | )
|Other provisions                 |  |                 | -          |   |                               |  | (16,249 | )                                          |  |  | 148               |  
|Inventories                      |  |                 | 1,235,848  |   |                               |  | (59,061 | )                                          |  |  | 11,472            |  
|Accounts receivable              |  |                 | 316,374    |   |                               |  | 94,496  |                                            |  |  | -                 |  
|Property, plant and equipment    |  |                 | 2,389,609  |   |                               |  | (75,567 | )                                          |  |  | 51,578            |  
|Prepaid expenses                 |  |                 | 216,555    |   |                               |  | 40,774  |                                            |  |  | -                 |  
|Derivative financial instruments |  |                 | -          |   |                               |  | 5,872   |                                            |  |  | -                 |  
|Net deferred tax liability       |  | $               | 2,701,191  |   |                               |  | 280,070 |                                            |  |  | 51,558            |  



g)       Tax on assets and tax loss
carryforwards



As at December 31, 2016, tax loss
carryforwards expires as shown below. Amounts are indexed for inflation as permitted by Mexican income tax law:



|     |  | Amount as of December 31, 2016 |       
|---- |  | ------------------------------ | ------
|Year |  | Tax loss carryforwards         |       
|2014 |  | $                              | 10,615
|2015 |  |                                | 1,365 
|     |  | $                              | 11,980



F-62







h)       Impacts on the tax reform
for changes beginning 2014



The main income tax impact to the
Company, due to tax reform with effect beginning January 1, 2014, is related to the increase from 21% to 30% in the tax rate of
BSACV, the Company’s primary operating subsidiary (beginning 2014 the tax rate is 21% on annual taxable income up to 10 million
pesos, and for taxable income in excess of that amount, the tax rate is 30%), and to the deductible limitation of 53% of wage expenses
of employee benefits that are tax exempt income for workers.



| | (21) | Employee benefits
| | ---- | -----------------



a)      Employee benefits in Mexico



Defined contribution
plans



Effective January 1, 2016 the Company
has a defined contribution plan which receives contributions from both the employees and the Company. Employees can make contributions
from 1% to 5% of their wage and the Company is obligated to make contributions as follows: i) 20% of employee contributions for
employees with 1 - 4.99 years of service, ii) 40% of employee contributions for employees with 5 – 9.99 years of service,
and iii) 100% matching contributions for employees with 10 or more years of service or when the employee reaches 40 years of age,
regardless of the years of service. During 2015 and 2014 the Company has a defined contribution plan which receives contributions
from both the employees and the Company. Employees can make contributions from 1% to 5% of their wage and the Company is obligated
to make contributions as follows: i) from the first to the fifth year of service of 1% of the wage, ii) from the sixth year of
services of the employee the contribution of the Company is increased by 1% until it reaches 5%, and iii) for the subsequent years
the Company contribution will be the same as the employee’s.



When an employee retires from the
Company he/she has the right to receive the contribution he/she has made to the plan, and i) if the employee retires between the
first and the 4.99 year of services (4 year of services during 2015 and 2014), he/she does not have the right to receive the contribution
made by the Company, ii) if he/she retires on the fifth year of services he/she has the right to receive 50% of the contributions
made by the Company and, for each additional service year, the employee has the right to receive an additional 10% of the contributions
made by the Company. The expenses for paid contributions to defined contribution plans, other than those mandated by Mexican law,
were $1,597, $1,481 and $7,973, in 2016, 2015 and 2014, respectively.



The Company makes payments equivalent
to 2% of the integrated wage of its workers to the defined contribution plan for the retirement saving fund system established
by Mexican law. The expense for this concept was $50,047, $46,670 and $42,742, in 2016, 2015 and 2014, respectively.



Defined benefits plan



The Company has a defined benefit
pension plan covering non-unionized personnel in Mexico. The benefits are based on the age, years of service and the employee’s
payment. The retirement age is 65 years, with a minimum of 10 years of services, and there is an option for an anticipated retirement
option, in certain circumstances, at 55 years of age. The Company’s policy to fund the pension plan is to make contributions
up to the maximum amount that can be deducted for ISR.



F-63







Additionally, according to the Mexican
Federal Labor Law, the Company is obligated to pay a seniority premium as a retirement benefit if an employee retires and has at
least 15 years of services, which consists of a sole payment of 12 days for each worked year based on the last wage, limited to
the two minimal wages established by law.



The Company recognizes as a benefit
plan, a constructive obligation from past practices. Such constructive obligation is associated with service time the employee
has worked on the Company. The payment of this benefit is disbursed in a single installment at the time the employee voluntarily
stops working for the Company.



The plans in Mexico expose the Company
to actuarial risks such as: interest rate risk, longevity risk and salary risk:



|Interest risk  | A decrease in the interest rate for the governmental bonds will increase the plan’s liability.                                                                                                                                                                                       
|-------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                                                                                      
|Longevity risk | The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.
|               |                                                                                                                                                                                                                                                                                      
|Salary risk    | The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.                                                      



The projected net liability presented
on the consolidated statements of financial position is as follows:



|                                                 |  | December 31, |         
|------------------------------------------------ |  | ------------ | --------
|                                                 |  | 2016         |         
|Present value of unfunded obligations            |  | $            | 195,019 
|Present value of funded obligations              |  |              | 267,535 
|Total present value of benefit obligations (PBO) |  |              | 462,554 
|Plan assets at fair value                        |  |              | (267,535
|Projected liability, net                         |  | $            | 195,019 



i.       Composition
and return of plan assets



|                           |  | Actual return of the plan’s assets |       |   | Composition of the plan’s assets | 
|-------------------------- |  | ---------------------------------- | ----- | - | -------------------------------- | 
|                           |  | 2016                               |       |   | 2015                             | 
|Fixed income securities    |  |                                    | 7.16  | % |                                  | 
|Variable income securities |  |                                    | 10.07 | % |                                  | 
|Total                      |  |                                    |       |   |                                  | 



F-64







ii.       Movements
in the present value of defined benefit obligations (PBO)



|                                                                  |  | 2016 |         |   | 2015 |  |         | 2014 | 
|----------------------------------------------------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- | 
|PBO as at January 1                                               |  | $    | 447,099 |   |      |  | 405,703 |      | 
|Benefits paid by the plan                                         |  |      | (26,031 | ) |      |  | (25,244 | )    | 
|Service cost                                                      |  |      | 29,604  |   |      |  | 26,836  |      | 
|Interest cost                                                     |  |      | 34,857  |   |      |  | 31,603  |      | 
|Actuarial (gains) losses recognized in other comprehensive income |  |      | (24,827 | ) |      |  | 8,201   |      | 
|Past service cost – plan amendments                               |  |      | 1,852   |   |      |  | -       |      | 
|PBO as at December 31                                             |  | $    | 462,554 |   |      |  | 447,099 |      | 



iii.     Movements
in the fair value of plan assets



|                                                             |  | 2016 |         |   | 2015 |  |         | 2014 | 
|------------------------------------------------------------ |  | ---- | ------- | - | ---- |  | ------- | ---- | 
|Plan assets at fair value as at January 1                    |  | $    | 286,881 |   |      |  | 314,804 |      | 
|Transfer of assets to fund defined contribution benefit plan |  |      | (25,600 | ) |      |  | (24,187 | )    | 
|Benefits paid by the plan                                    |  |      | (9,457  | ) |      |  | (10,894 | )    | 
|Expected return on plan assets                               |  |      | 25,650  |   |      |  | 24,901  |      | 
|Actuarial losses in other comprehensive income               |  |      | (9,939  | ) |      |  | (17,743 | )    | 
|Fair value of plan assets as at December 31                  |  | $    | 267,535 |   |      |  | 286,881 |      | 



iv.      Expense recognized
in profit and loss



|                     |  | 2016 |        |  | 2015 |  |        | 2014 | 
|-------------------- |  | ---- | ------ |  | ---- |  | ------ | ---- | 
|Current service cost |  | $    | 29,604 |  |      |  | 26,836 |      | 
|Interest cost, net   |  |      | 9,207  |  |      |  | 6,702  |      | 
|                     |  | $    | 38,811 |  |      |  | 33,538 |      | 



v.        Actuarial
gains and (losses)



|                                      |  | 2016 |          |   | 2015 |  |          | 2014 | 
|------------------------------------- |  | ---- | -------- | - | ---- |  | -------- | ---- | 
|Amount accumulated as at January, 1   |  | $    | (138,128 | ) |      |  | (112,184 | )    | 
|Recognized during the year            |  |      | 14,888   |   |      |  | (25,944  | )    | 
|Amount accumulated as at December, 31 |  | $    | (123,240 | ) |      |  | (138,128 | )    | 



vi.      Actuarial
assumptions



Primary actuarial assumptions at
the consolidated financial statements date (expressed as weighted averages) are as follows.



|                                   |  | 2016 |      |   | 2015 |  |      | 2014 | 
|---------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- | 
|Discount rate as at December, 31   |  |      | 9.00 | % |      |  | 8.00 | %    | 
|Rate for future salary increases   |  |      | 4.50 | % |      |  | 4.50 | %    | 
|Social security wage increase rate |  |      | 3.50 | % |      |  | 3.50 | %    | 



F-65







The assumptions related to mortality
are based on statistics and experiences over the Mexican population. The average expected life of an individual that retires at
65 years of age is 17.13 years for men and 10.92 years for women (Experience Chart of Demographic Mortality for Active EMSSA 1997).



vii.     Historical
information



|                                                     |  | December 31, |         
|---------------------------------------------------- |  | ------------ | --------
|                                                     |  | 2016         |         
|Present value of defined benefit obligation          |  | $            | 462,554 
|Plan assets at fair value                            |  |              | (267,535
|Plan deficit                                         |  | $            | 195,019 
|Experience adjustments arising from plan liabilities |  | $            | (24,827 
|Experience adjustments arising from plan assets      |  | $            | (9,939  



viii.    Sensitivity
analysis of the defined benefits obligations as of December 31, 2016, 2015 and 2014



|2016                 |  | Pension plan |          |   | Seniority premium |  |         | Constructive obligation |  |  | Total PBO |  
|-------------------- |  | ------------ | -------- | - | ----------------- |  | ------- | ----------------------- |  |  | --------- | -
|Discount rate 9.00%  |  |              | (308,885 | ) |                   |  | (93,877 | )                       |  |  | (59,792   | )
|Rate increase (+ 1%) |  |              | (280,316 | ) |                   |  | (88,657 | )                       |  |  | (56,237   | )
|Rate decrease (- 1%) |  |              | (312,017 | ) |                   |  | (99,733 | )                       |  |  | (63,796   | )



|2015                 |  | Pension plan |          |   | Seniority premium |  |         | Constructive obligation |  |  | Total PBO |  
|-------------------- |  | ------------ | -------- | - | ----------------- |  | ------- | ----------------------- |  |  | --------- | -
|Discount rate 8.00%  |  |              | (293,443 | ) |                   |  | (93,037 | )                       |  |  | (60,619   | )
|Rate increase (+ 1%) |  |              | (248,925 | ) |                   |  | (87,540 | )                       |  |  | (56,784   | )
|Rate decrease (- 1%) |  |              | (338,238 | ) |                   |  | (99,240 | )                       |  |  | (64,961   | )



|2014                 |  | Pension plan |          |   | Seniority premium |  |         | Constructive obligation |  |  | Total PBO |  
|-------------------- |  | ------------ | -------- | - | ----------------- |  | ------- | ----------------------- |  |  | --------- | -
|Discount rate 8.00%  |  |              | (266,298 | ) |                   |  | (84,908 | )                       |  |  | (54,497   | )
|Rate increase (+ 1%) |  |              | (216,605 | ) |                   |  | (79,874 | )                       |  |  | (51,033   | )
|Rate decrease (- 1%) |  |              | (334,923 | ) |                   |  | (90,594 | )                       |  |  | (58,423   | )



ix.      Expected
cash flows



|          |  | Total |        
|--------- |  | ----- | -------
|2017-2027 |  | $     | 455,006



F-66







x.       Future contributions
to the defined benefits plan



The Company does not expect to make
contributions to the defined benefit plans in the following financial year.



b)        Foreign employee benefits



Defined contribution
plans



Bachoco USA, LLC. (foreign subsidiary)
has a defined contribution retirement 401(k) plan, covering all employees who meet certain eligibility requirements. The Company
contributes to the plan at the rate of 50% of employee’s contributions up to a maximum of 2% of the individual employee’s
contribution. The cumulative contribution expense for this plan was $10,909, $8,014 and $6,597 for the year ended December 31,
2016, 2015 and 2014, respectively.



Equity-based compensation



Bachoco USA, LLC. has a deferred
payment agreement with certain key employees. Amounts payable under this plan are vested after 10 years from the date of the agreement.
The benefit value of each unit is equal to the increase in the initial book value from the date of the agreement to the conclusion
of the vesting period. Under the agreement, 26,000, 38,000 and 38,000 units were outstanding as of December 31, 2016, 2015 and
2014, respectively, all of which were fully vested. The total liability under this plan totaled $3,337, $4,195 and $3,516 as at
December 31, 2016, 2015 and 2014, respectively. No expense was recognized for this plan for the year ended December 31, 2016, 2015,
and 2014.



c)        PTU



Industrias Bachoco, S.A.B de C.V.
and BSACV has no employees. Each of the subsidiaries of the Company that has employees in Mexico is required under Mexican laws
to pay employees, in addition to their payment and benefits, statutory employee profit sharing in an aggregate amount equal to
10% of each subsidiary’s taxable income. The accrued liability as of December 31, 2016, 2015 and 2014 is shown in note 18,
Trade payable and other accounts payable.



F-67







| | (22) | Costs and expenses by nature
| | ---- | ----------------------------



|                                             |  | 2016 |            |  | 2015 |  |            | 2014 | 
|-------------------------------------------- |  | ---- | ---------- |  | ---- |  | ---------- | ---- | 
|Cost of sales                                |  | $    | 42,635,071 |  |      |  | 36,847,508 |      | 
|General, selling and administrative expenses |  |      | 4,847,858  |  |      |  | 4,323,374  |      | 
|Total costs and expenses                     |  | $    | 47,482,929 |  |      |  | 41,170,882 |      | 
|                                             |  |      |            |  |      |  |            |      | 
|Inventory consumption                        |  | $    | 34,018,493 |  |      |  | 28,877,468 |      | 
|Wages and salaries                           |  |      | 5,971,382  |  |      |  | 5,127,750  |      | 
|Freight                                      |  |      | 3,712,349  |  |      |  | 3,394,780  |      | 
|Maintenance                                  |  |      | 1,292,763  |  |      |  | 1,166,326  |      | 
|Other utility expenses                       |  |      | 1,005,570  |  |      |  | 1,020,610  |      | 
|Depreciation                                 |  |      | 925,748    |  |      |  | 769,270    |      | 
|Leases                                       |  |      | 403,116    |  |      |  | 359,749    |      | 
|Other                                        |  |      | 153,508    |  |      |  | 454,929    |      | 
|Total                                        |  | $    | 47,482,929 |  |      |  | 41,170,882 |      | 



| | (23) | Operating leases
| | ---- | ----------------



Company as lessee



The Company has entered into operating
leases for certain offices, production facilities, and automotive and computer equipment. Some leases contain renewal options.
These agreements have terms between one and five years.



|               |  | 2016 |         |  | 2015 |  |         | 2014 | 
|-------------- |  | ---- | ------- |  | ---- |  | ------- | ---- | 
|Lease expenses |  | $    | 403,116 |  |      |  | 359,749 |      | 



The amount of annual rentals payable,
arising from lease agreements for the following five years is as follows:



|2017 |  | $ | 107,842 | 
|---- |  | - | ------- | 
|2018 |  |   | 78,691  | 
|2019 |  |   | 57,826  | 
|2020 |  |   | 72,121  | 
|2021 |  |   | 114,116 | 



| | (24) | Stockholders’ equity and reserves
| | ---- | ---------------------------------



a)       Capital risk management



An adequate capital risk management
allows ongoing business continuity and the maximization of the return towards the Company’s investors, which is why management
has taken actions that ensure the Company maintains an adequate balance of the funding sources that build its capital structure.



Within its activities in risk management,
the Company ensures that the ratio between financial debt and EBITDA of the last 12 months doesn’t exceed 2.75 times and
that the interest coverage ratio is at least 3 to 1.



F-68







During 2016, 2015 and 2014 these
ratios were below the thresholds established by the Company’s Risk Committee.



b)      Common stock and premiums



As of December 31, 2016, 2015 and
2014, the Company’s capital stock is represented by 600,000,000 Series “B” registered shares with a par value
of $1 peso per share.



The Robinson Bours family owned
496,500,000 shares through two family trusts: the placement trust and the control trust, which collectively represented 82.75%
of the Company’s total shares.



On December 9, 2013, the members
of the placement trust decided to sell 57,000,000 shares that represent 9.5% of the total shares of the Company. The transaction
was conducted through the BMV at market price.



After the sale of the shares, the
Company’s capital stock was as follows:



|                     |  | Before the Transaction |             |  | After the Transaction | 
|-------------------- |  | ---------------------- | ----------- |  | --------------------- | 
|                     |  | Shares (1)             |             |  | Position              | 
|Familiar Trusts      |  |                        | 496,500,000 |  |                       | 
|-   Control Trust    |  |                        | 312,000,000 |  |                       | 
|-   Placement Trust  |  |                        | 184,500,000 |  |                       | 
|Floating Position(2) |  |                        | 103,500,000 |  |                       | 



| | (1) | All Series B shares with voting power.
| | --- | --------------------------------------

| | (2) | Operating at the BMV and the NYSE.
| | --- | ----------------------------------



Based on the information provided
to the Company, as of December 31, 2016, stockholders with 1% or more interest in the Company, in addition to the family trusts,
are as follows:



|                             |  | Shares |           |  | Position | 
|---------------------------- |  | ------ | --------- |  | -------- | 
|Renaissance Technologies LLC |  |        | 6,376,800 |  |          | 



c)        Other comprehensive income
items



i.        Foreign currency
translation reserve



This concept is related to the translation
of the Company’s U.S. operations from their functional currency (U.S. dollar) to the reporting currency, the Mexican peso.



ii.       Actuarial
remeasurements



Actuarial remeasurements are recognized
as other components of comprehensive income and are related to variations in actuarial assumptions that generate actuarial gains
or losses as well as adjust the actual yields from plan assets from the net interest cost calculated over the net defined benefits
liability balance. Actuarial remeasurements are presented net of income tax within other comprehensive income in the consolidated
statement of changes in stockholders’ equity, the amount of these actuarial remeasurements net of taxes as of December 31,
2016 amounts to $86,774, which includes a deferred tax effect of $36,466.



F-69







d)       Reserve for repurchase of
shares



In 1998, the Company approved a
stock repurchase plan in conformity with the Mexican Securities Trading Act and created a reserve for that purpose of $180,000
charged to retained earnings in such year.



On April 27, 2016, pursuant to a
resolution at the General Ordinary Stockholders’ Meeting, an amount of $449,641 was approved to be used in the reserve for
acquisition own shares.



The following table shows the movements
of the reserve for acquisition of shares during the years ended December 31, 2016, 2015 and 2014:





|                           |  | 2016 |          |   | 2015 |  |          | 2014 | 
|-------------------------- |  | ---- | -------- | - | ---- |  | -------- | ---- | 
|Balance as at January 1    |  |      | 10,000   |   |      |  | -        |      | 
|(+) Total shares purchased |  |      | 100,157  |   |      |  | 677,013  |      | 
|(-) Total shares sold      |  |      | (110,157 | ) |      |  | (667,013 | )    | 
|Balance as at December 31  |  |      | -        |   |      |  | 10,000   |      | 





The net amount of repurchase and
treasury share sale transactions gave rise to additional paid in capital of $368, $14,376 and $1,504 during the years ended December
31, 2016, 2015 and 2014, respectively, recognized within equity.



As at December 31, 2016, the Company
has no treasury shares.



e)       Dividends



During the years ended December
31, 2016, 2015 and 2014, the Company has declared and paid the following dividends:



On
April 27, 2016, the Company declared a payment of dividends in cash at nominal value of $780,000 or $1.30 pesos per outstanding
share, from which there is a reduction of $40
for the dividend corresponding to repurchased shares. The payment was made in two equal installments, in May and July, 2016.



On
April 22, 2015, the Company declared a payment of dividends in cash at nominal value of $900,000 or $1.50 pesos per outstanding
share, from which there is a reduction of $838
for the dividend corresponding to repurchased shares. The payment was made in two equal installments, in May and July, 2015.



In 2014, the Company didn’t
declare dividends or pay any dividends.



Dividends that the Company pays
to stockholders are subject to ISR solely insofar as such dividends exceed the balance in its net tax income account (CUFIN) consisting
of income in which ISR is already paid by the Company. The ISR paid on dividends corresponds to a tax payable by legal entities
and not by individuals. However, as a result of changes to the income tax law described in note 20(a), beginning on January 1,
2014, a new withholding tax of 10% for resident individuals in Mexico and for all residents in foreign countries who receive dividends
from entities was established. Such tax is considered a withholding tax by the entity that pays the dividends. This tax will be
applicable only to the income generated from period 2014. Thus, the Company must update its CUFIN from income generated up to December
31, 2013 and must calculate a new CUFIN with the income generated from January 1, 2014.



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The Company obtains most of its
revenue and net income from BSACV. For fiscal years 2016, 2015 and 2014, net income of BSACV, accounted for 65%, 67% and 72% respectively,
of consolidated net income. Dividends for which BSACV pays ISR will be credited to the Company’s CUFIN account, and accordingly,
any future liabilities arising from ISR will be incurred when such amounts are distributed as dividends to the stockholders.



f)       Tax balances of stockholders’
equity



|CUFIN             |  | Balance as 2013 |           |  | Balance from2014 |  |           | Total | 
|----------------- |  | --------------- | --------- |  | ---------------- |  | --------- | ----- | 
|IBSA individual   |  | $               | 7,646,453 |  |                  |  | 3,561,184 |       | 
|IBSA Consolidated |  |                 | 8,366,664 |  |                  |  | 8,172,556 |       | 



The restated amount as of December
31, 2016 on tax bases of the contributions made by stockholders (CUCA), totaling $2,655,121, may be refunded to them tax-free,
to the extent that such amount is the same or higher than equity.



| | (25) | Earnings per share
| | ---- | ------------------



The basic and diluted earnings per
share for the years ended December 31, 2016, 2015 and 2014 are $6.58, $6.36 and $6.55, respectively. The calculation of earnings
per share was based on income attributable to ordinary stockholders of $3,946,634, $3,812,840 and $3,926,926 for the years ended
December 31, 2016, 2015 and 2014, respectively.



The average weighted number of common
outstanding in 2016, 2015 and 2014 was 599,979,844, 599,631,383 and 599,955,240 shares, respectively.



The Company has no ordinary shares
with potential dilutive effects.



| | (26) | Commitments
| | ---- | -----------



| | · | Bachoco USA, LLC has self-insurance programs
for health care costs and workers’ payments. The subsidiary is liable for health care claims up to $7,224 (350 thousand dollars)
each year per plan participant and workers’ payments claims up to $20,640 (1,000 thousand dollars) per event. Self-insurance
costs are recorded based on the aggregate of the liability for reported claims and an estimated liability for claims incurred but
not reported. The provision for this concept is recorded in the accompanying consolidated statement of financial position within
current liabilities amounting to $75,873 (3,676 thousand dollars), $69,718 (4,051 thousand dollars) and $50,342 (3,413 thousand
dollars) as at December 31, 2016, 2015 and 2014, respectively. Likewise, the consolidated statement of comprehensive income includes
expenses relating to self-insurance plans of $120,729 (6,463 thousand dollars), $108,360 (6,828 thousand dollars) and $101,293
(7,616 thousand dollars) for the years ended December 31, 2016, 2015 and 2014, respectively. The Company is required to maintain
letters of credit on behalf of the subsidiary of $70,176, $58,514 and $50,150 (3,400 thousand dollars) as at December 31, 2016,
2015 and 2014, respectively, to secure self-insured workers' payments.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company has entered into grain supply
agreements with third parties as part of the regular course of its operations.
| | - | ------------------------------------------------------------------------------------------------------------------------

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| | · | The Company has entered into certain contracts
with suppliers under which advanced payments are rendered in order to assure the supply of materials and services.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (27) | Contingencies
| | ---- | -------------



a)       Insurance



The Company has established a risk
management program under a best practices methodology that assures the main risks of the business with the objective of reducing
losses due to relevant claims. At the end of 2016 the company set up a Captiva reinsurance company to complement its risk management
strategy. Notwithstanding the foregoing, since all the exposures are not covered, there is a risk that the loss or destruction
of certain assets may have a significant adverse effect on the Company’s operations and financial situation.



b)       Lawsuits



The Company is involved in a number
of lawsuits and claims arising from the regular course of business. In the opinion of the Company’s management, they are
not expected to have significant effects on the Company’s financial position, operating results and future consolidated statements
of cash flows.



c)       Tax contingencies



In accordance with tax laws, Mexican
authorities are empowered to review transactions carried out during the five years prior to the most recent ISR return filed. For
the operations in the United States of America, the authorities of that country are empowered to review transactions carried out
during the three years prior to the due date of the most recent annual tax return. Although the Company is under review by the
Mexican tax authorities for the fiscal year of 2009, nothing has come to its attention as a result of those reviews that would
indicate that a contingency exists.



| | (28) | Financial income and costs
| | ---- | --------------------------



|                                                          |  | 2016 |          |   | 2015 |  |          | 2014 | 
|--------------------------------------------------------- |  | ---- | -------- | - | ---- |  | -------- | ---- | 
|Interest income                                           |  | $    | 637,977  |   |      |  | 482,442  |      | 
|Income from interest in accounts receivable               |  |      | 8,357    |   |      |  | 7,492    |      | 
|Foreign exchange gain, net                                |  |      | 297,463  |   |      |  | 95,447   |      | 
|Effects of valuation of derivative financial instruments  |  |      | 25,377   |   |      |  | 8,464    |      | 
|Financial income                                          |  |      | 969,174  |   |      |  | 593,845  |      | 
|                                                          |  |      |          |   |      |  |          |      | 
|Effects of valuation of derivative financial instruments  |  |      | -        |   |      |  | -        |      | 
|Interest expense and financial expenses on financial debt |  |      | (129,769 | ) |      |  | (93,964  | )    | 
|Commissions and other financial expenses                  |  |      | (42,385  | ) |      |  | (53,328  | )    | 
|Financial costs                                           |  |      | (172,154 | ) |      |  | (147,292 | )    | 
|Financial income, net                                     |  | $    | 797,020  |   |      |  | 446,553  |      | 



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| | (29) | Other income (expenses)
| | ---- | -----------------------



|                                                                            |  | 2016 |           |   | 2015 |  |          | 2014 | 
|--------------------------------------------------------------------------- |  | ---- | --------- | - | ---- |  | -------- | ---- | 
|Other income                                                                |  |      |           |   |      |  |          |      | 
|Sale of scrap of biological assets, raw materials, by-products and other    |  | $    | 1,076,902 |   |      |  | 636,386  |      | 
|Total other income                                                          |  |      | 1,076,902 |   |      |  | 636,386  |      | 
|Other expenses                                                              |  |      |           |   |      |  |          |      | 
|Cost of disposal of biological assets, raw materials, by-products and other |  |      | (704,152  | ) |      |  | (507,196 | )    | 
|Other                                                                       |  |      | (112,548  | ) |      |  | (133,830 | )    | 
|Total other expenses                                                        |  |      | (816,700  | ) |      |  | (641,026 | )    | 
|Total other income (expenses), net                                          |  | $    | 260,202   |   |      |  | (4,640   | )    | 



F-73