AUDIT COMMITTEE REPORT

February 20, 2020

Mr. Héctor Hernández-Pons Torres

Chairman of the Board of Directors

Grupo Herdez, S.A.B. de C.V.

Monte Pelvoux No. 215, Floor 5

Col. Lomas de Chapultepec

Mexico, D.F. 11000

Dear Mr. Hernández-Pons:

I am herein submitting to your attention the Annual Report on the activities of the Board of Directors’ Audit Committee for the 2019 fiscal year, in accordance with the provisions of Article 43, Section Il of the Securities Market Law.

In the development of our work, we have taken into consideration the regulations contained in the Securities Market Law, the General Provisions Applicable to Securities Issuers and Other Participants of the Securities Market, the Mexican Stock Exchange Internal Rules, the Principles and Best Practices on Corporate Governance Code’s recommendations, the provisions of the Audit Committee Rules, as well as the Annual Program issues to be considered.

During the reporting period, the Committee punctually held the scheduled meetings, and the Agenda with the issues to be discussed and the respective Minutes were in turn prepared for each meeting. The meetings were attended by the designated directors and invitees.

A Report was submitted to the Board of Directors with the issues discussed in every meeting of the Committee.

The relevant issues discussed and which in turn were favorably recommended for approval of the Board of Directors, as appropriate, were as follows:

  1. Reported Financial Statements as of December 31, 2018, with consolidated figures
    and their respective Notes were duly analyzed.

Considering its relative significance, the information of the subsidiary Herdez Del Fuerte, S.A. de C.V. which includes the operation of Megamex Foods, LLC, and its subsidiaries in the United States of America was also analyzed.

In accordance with the regulations of the National Banking and Securities Commission, the financial information has been prepared and submitted under the International Financial Reporting Standards, and the audit was carried out in compliance with the International Auditing Standards.

  1. We have learned about the document “Communication with those charged with the
    Entity’s governance”, which based on ISA 260 International Standard on Auditing has been issued by the society’s External Auditor, with the information required to be known by the Audit Committee.

 

  1. We have analyzed the Report on the Internal Control Assessment performed by the society’s external auditor, during the normal course of the revision for the 2018 fiscal year audit.

The Report indicates that certain audit procedures have been applied to the internal controls regarding determined areas for the identification of controls, control design and implementation, operative efficacy testing and the conclusion regarding the audit purpose. It is mentioned that coming out from its work, no differences were identified that would have make it necessary to substantially modify the originally planned audit approach. We have learned about improvement areas and follow up has been given to their implementation.

  1. We have learned about the 2019 Quarterly Financial Statements, and we have
    issued our recommendation for its submission to the Mexican Stock Exchange.

 

  1. We have analyzed and approved the Work Plan of the Internal Audit area for the 2019 fiscal year. Due follow up has been done to its development, and we have learned about its findings and the implementation of its recommendations.

 

  1. The new International Financial Reporting Standards used during the 2019 fiscal year, as well as those already in force, were consistently applied with no significant effect.

 

  1. We have assessed the performance of the external audit firm KPMG Cárdenas
    Dosal, which has been considered as satisfactory and in accordance with the
    criteria established in the services contract. Likewise, the partner in charge of the audit has in due time confirmed their professional and economic independence.

 

In this manner, confirmation of the firm KPMG Cárdenas Dosal as the External Auditor of the society and its subsidiaries for the 2019 fiscal year was recommended, with exception made of the components Herdez Del Fuerte, S.A. de C.V., and its subsidiaries, as well as McCormick de México, S.A. de C.V., of which external auditors are from other firm.

Nevertheless, being significant components, the external auditor of the society has been involved in their audits’ conducting and outcomes.

  1.  Additional services to those of auditing provided by the society’s external audit firm during 2019, were related to transfer prices, local contributions, tax-financial advisory and social security report, for an amount of 4.8 million pesos.

 

  1. Provisions of the so-called Auditors Unique Circular have been analyzed, and we have learned about the Schedule prepared by the Company’s Administration for its compliance in 2019 by each and every party involved.

 

  1. We have learned and assessed the activities of the Risks Committee, including the mechanisms implemented by the Chief Executive Office for the identification, analysis, management and control of the strategic risks to which the society is subject to, as well as the established criteria for their appropriate disclosure.

 

  1. In every meeting we have been informed about the complaints received due to lack of observance of the Ethics Code, the way in which they have been addressed and the protection given to the informants.

 

  1.  We have learned about and follow up has been given to the outstanding tax and legal matters, as well as to the adequate implementation of the Securities Market regulatory authorities provisions, and the Shareholders’ and the Board of Directors’ resolutions.

 

Sincerely,

Roberto Danel Díaz

Chairman of the Audit Committee