UNITED
STATES



SECURITIES AND EXCHANGE COMMISSION
Washington, 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,
2011



OR



| |  ̈ | 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: 333-7480



INDUSTRIAS 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 incorporation
or organization)



Avenida Tecnologico No. 401

Ciudad Industrial C.P. 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 twelve |  | New York Stock Exchange                  
|Series B Shares.                                     |  |                                          



Securities registered or to be registered
pursuant to Section 12(g) of the Act:None



Securities 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 ̈Nox





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.



Yesx  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:



YesxNo ̈





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).



Yesx  No ̈





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



|Large accelerated filer ̈ | Accelerated filerx | Non-accelerated filer ̈
|------------------------ | ------------------ | ----------------------



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        | Otherx
|---------- | ---------------------------------------- | ------
|           | Standards as issued by the International |       
|           | Accounting Standards Board ̈              |       

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 18x



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 ̈Nox



(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 ̈









ii









TABLE OF CONTENTS



|          |                                                       | Page
|--------- | ----------------------------------------------------- | ----
|          |                                                       |     
|PART I    |                                                       | 3   
|          |                                                       |     
|ITEM 1.   | Identity of Directors, Senior Management and Advisers | 3   
|ITEM 2.   | Offer Statistics and Expected Timetable               | 3   
|ITEM 3.   | Key Information                                       | 3   
|A.        | Selected Financial Data                               | 3   
|          |                                                       |     
|B.        | Capitalization and Indebtedness                       | 6   
|          |                                                       |     
|C.        | Reasons for the Offer and Use of Proceeds             | 6   
|          |                                                       |     
|D.        | Risk Factors                                          | 6   
|          |                                                       |     
|ITEM 4.   | Information on the Company                            | 11  
|A.        | History and Development of the Company                | 11  
|          |                                                       |     
|B.        | Business Overview                                     | 13  
|          |                                                       |     
|C.        | Organizational Structure                              | 23  
|          |                                                       |     
|D.        | Property, Plant and Equipment                         | 24  
|          |                                                       |     
|ITEM 4.A. | Unresolved Staff Comments                             | 25  
|ITEM 5.   | Operating and Financial Review and Prospects          | 25  
|A.        | Operating Results                                     | 26  
|          |                                                       |     
|B.        | Liquidity and Capital Resources                       | 34  
|          |                                                       |     
|C.        | Research and Development, Patents and Licenses, etc.  | 37  
|          |                                                       |     
|D.        | Trend Information                                     | 37  
|          |                                                       |     
|E.        | Off-Balance Sheet Arrangements                        | 37  
|          |                                                       |     
|F.        | Tabular Disclosure of Contractual Obligations         | 37  
|          |                                                       |     
|G.        | Safe Harbor                                           | 38  
|          |                                                       |     
|ITEM 6.   | Directors, Senior Management and Employees            | 38  
|A.        | Directors and Senior Management                       | 38  
|          |                                                       |     
|B.        | Compensation                                          | 44  
|          |                                                       |     
|C.        | Board Practices                                       | 44  





iii







|D.       | Employees                                                  | 44
|-------- | ---------------------------------------------------------- | --
|         |                                                            |   
|E.       | Share Ownership                                            | 45
|         |                                                            |   
|ITEM 7.  | Major Stockholders and Related Party Transactions          | 45
|A.       | Major Shareholders                                         | 45
|         |                                                            |   
|B.       | Related Party Transactions                                 | 46
|         |                                                            |   
|C.       | Interests of Experts and Counsel                           | 47
|         |                                                            |   
|ITEM 8.  | Financial Information                                      | 47
|A.       | Consolidated Statements and Other Financial Information    | 47
|         |                                                            |   
|B.       | Significant Changes                                        | 48
|         |                                                            |   
|ITEM 9.  | The Offer and Listing                                      | 49
|A.       | Offer and Listing Details                                  | 49
|         |                                                            |   
|B.       | Plan of Distribution                                       | 50
|         |                                                            |   
|C.       | Markets                                                    | 50
|         |                                                            |   
|D.       | Selling Shareholders                                       | 50
|         |                                                            |   
|E.       | Dilution                                                   | 50
|         |                                                            |   
|F.       | Expenses of the Issue                                      | 50
|         |                                                            |   
|ITEM 10. | Additional Information                                     | 50
|A.       | Share Capital                                              | 50
|         |                                                            |   
|B.       | Memorandum and Articles of Association                     | 50
|         |                                                            |   
|C.       | Material Contracts                                         | 59
|         |                                                            |   
|D.       | Exchange Controls                                          | 59
|         |                                                            |   
|E.       | Taxation                                                   | 59
|         |                                                            |   
|F.       | Dividends and Paying Agents                                | 65
|         |                                                            |   
|G.       | Statement by Experts                                       | 65
|         |                                                            |   
|H.       | Documents on Display                                       | 65
|         |                                                            |   
|I.       | Subsidiary Information                                     | 66
|         |                                                            |   
|ITEM 11. | Quantitative and Qualitative Disclosures about Market Risk | 66
|ITEM 12. | Description of Securities Other Than Equity Securities     | 67

iv







|A.                | Debt Securities                                                              | 67
|----------------- | ---------------------------------------------------------------------------- | --
|                  |                                                                              |   
|B.                | Warrants and Rights                                                          | 67
|                  |                                                                              |   
|C.                | Other Securities                                                             | 67
|                  |                                                                              |   
|D.                | American Depository Receipts                                                 | 67
|                  |                                                                              |   
|PART II           |                                                                              | 69
|                  |                                                                              |   
|ITEM 13.          | Default, Dividend Arrearages and Delinquencies                               | 69
|ITEM 14.          | Material Modifications to the Rights of Security Holders and Use of Proceeds | 69
|ITEM 15.          | Controls and Procedures                                                      | 69
|ITEM 16.          | [Reserved]                                                                   | 71
|ITEM 16.A.        | Audit Committee Financial Expert                                             | 71
|ITEM 16.B.        | Code of Ethics                                                               | 72
|ITEM 16.C.        | Principal Accountant Fees and Services                                       | 72
|ITEM 16.D.        | Exemptions from the Listing Standards for Audit Committees                   | 72
|ITEM 16.E.        | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       | 73
|ITEM 16.F.        | Changes in Registrant’s Certifying Accountant                                | 74
|ITEM 16.G.        | Corporate Governance                                                         | 75
|                  |                                                                              |   
|PART III          |                                                                              | 81
|                  |                                                                              |   
|ITEM 17.          | Financial Statements                                                         | 81
|ITEM 18.          | Financial Statements                                                         | 81
|ITEM 19.          | Exhibits                                                                     | 81
|Index of Exhibits | 81                                                                          



v









Industrias Bachoco, S.A.B.
de C.V. is a holding company with no operations other than holding the stock of its subsidiaries. Our principal operating subsidiary
is Bachoco, S.A. de C.V. (“BSACV”), which owns the principal operating assets of Industrias Bachoco, S.A.B. de C.V.
and accounted for 81.37% of consolidated total assets on December 31, 2011. 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.



We are incorporated under
the laws of the United Mexican States (“Mexico”), but we have operations in both in Mexico and in the U.S. Our principal
executive offices are located in Mexico at Avenida Tecnologico No. 401, Ciudad Industrial C.P. 38010, Celaya, Guanajuato, Mexico,
and our telephone number is +52(461)618-3555.



Presentation of Information



We publish our financial
statements in Mexican pesos and present our financial statements in accordance with Mexican Financial Reporting Standards (“Mexican
FRS”). Information from the years 2008 to 2011, does not include the recognition of the effects of inflation, while financial
information is presented in constant pesos as of December 31, 2007, based on the Mexican National Consumer Price Index (NCPI) published
by Banco de Mexico (the “Central Bank”).



Mexican FRS B-10 supersedes
Bulletin B-10 Recognition of the effects of inflation on the financial information and its five amendment documents as well as
the related circulars and Interpretation of Financial Reporting Standards. The principal considerations established by this FRS
are:



Recognition of the effects
of inflation – An entity operates in (a) an inflationary economic environment when cumulative inflation over the immediately
preceding 3-year period is equal to or greater than 26.0%; and (b) a non-inflationary economic environment, when inflation over
the aforementioned period is less than 26.0%. For more detail, see Note 2-d) in our Audited Consolidated Financial Statements.



With respect to (a) above,
similarly to the superseded Bulletin B-10, the comprehensive recognition of the effects of inflation is required. For case (b),
the effects of inflation are not recognized; however, at the effective date of this FRS and when an entity ceases to operate in
an inflationary economic environment, the restatement effects determined through the last period in which the entity operated in
an inflationary economic environment (in our case 2007), must be kept and shall be reclassified on the same date and using the
same procedure as that of the corresponding assets, liabilities and stockholders' equity. Should the entity once more operate in
an inflationary economic environment, the cumulative effects of inflation not recognized in the periods where the environment was
deemed to be non-inflationary should be recognized retrospectively.



Except as otherwise indicated,
all data in the financial statements included below 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 nominal pesos for the years ended December 31, 2008 through 2010, except for year 2007 that
is expressed in constant pesos for the year ended December 31, 2007.



Mexican FRS differs
in certain respects from generally accepted accounting principles in the United States (“U.S. GAAP”). For a discussion
of certain significant differences between Mexican FRS and U.S. GAAP as they apply to us, together with a reconciliation of consolidated
operating income, consolidated net income, consolidated stockholders’ equity to U.S. GAAP, and a consolidated statement
of cash flows under U.S. GAAP, see Note 23 to our Audited Consolidated Financial Statements. The effect of price-level restatement
under Mexican FRS has not been reversed in the reconciliation to U.S. GAAP. See Note 23 to our Audited Consolidated Financial
Statements.



1







In January 2009,
the Mexican Banking and Securities Commission (Comision Nacional Bancaria y de Valores, “CNBV”) published certain
amendments to the Rules for Public Companies and other participants in the Mexican Securities Market (Disposiciones de Caracter
General Aplicables a las Emisoras de Valores y a otros Participantes del Mercado de Valores – the “Rules”) 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.



On January 1, 2012, we
adopted IFRS, meeting the CNBV requirements. The Company must release its first quarter, 2012 unaudited results under IFRS, no
later than May 2, 2012. IFRS differs in certain significant respects from Mexican FRS. See Note 22 to our Consolidated Financial
Statements for a description of the principal differences among IFRS and Mexican FRS as they apply to us.



References herein to
“U.S. dollars,” “U.S. $” or “$” are to the lawful currency of the United States of America,
except that "$" is also used for pesos in the Audited Consolidated Financial Statements. References herein to “pesos”
or “Ps.” are to the lawful currency of Mexico. 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 ofPs 13.97 to US $1.00, the exchange rate
on December 31, 2011.



As used herein, the term
“tons” refers to metric tons of 1,000 kilograms (equal to 2,204.6 pounds) and the term “billion” refers
to one thousand million (1,000,000,000). One square meter is equivalent to 10.764 square feet.



Market Data



This Annual Report contains
certain statistical information regarding the Mexican chicken, beef, egg, balanced feed (or “feed”), turkey and swine
markets and our market share. We have obtained this information from a variety of sources, including the producers’ associations
Union Nacional de Avicultores (the National Poultry Union or the “UNA”), Consejo Nacional Agropecuario (the National
Agricultural Council or “CNA”); Consejo Mexicano de Porcicultura (the Mexican Pork Council or “CMP”), as
well as Banco de Mexico (the Central Bank), Secretaria de Agricultura, Ganaderia, Desarrollo Rural, Pesca y Alimentos (“Ministry
of Agriculture, Livestock, Rural Development, Fishing and Food” or “SAGARPA”) and publications of the U.S. Department
of Agriculture (“USDA”). 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 Securities and Exchange Commission (or “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.



2







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.



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.



In preparing our Audited
Consolidated Financial Statements, we followed Mexican FRS, which differ in certain respects from U.S. GAAP. Note 23 to our Audited
Consolidated Financial Statements provides a description of the main differences between Mexican FRS and U.S. GAAP as they apply
to us, a reconciliation from Mexican FRS to U.S. GAAP of total stockholders’ equity, net income, and a condensed statement
of cash flows under U.S. GAAP as of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009.



The table set below presents our key financial information.
Except as otherwise indicated the amounts are presented in millions of nominal pesos for years ended December 31, 2008 through
2011, and in constant pesos for the year ended December 31, 2007.



3







|                                                |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   | In millions of U.S. dollars |    
|----------------------------------------------- |  | ---- | -------- | - | ---- | --- | -------- | ---- |  | --- | -------- | - |  | ---- | -------- | - | --------------------------- | ---
|Income Statement Data                           |  | 2007 |          |   | 2008 |     |          | 2009 |  |     | 2010     |   |  | 2011 |          |   | 2011 (1)                    |    
|                                                |  |      |          |   |      |    
|Mexican FRS:                                    |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Net revenues                                    |  | Ps.  | 18,219.6 |   |      | Ps. | 20,125.3 |      |  | Ps. | 23,262.9 |   |  | Ps.  | 24,715.5 |   |                             | Ps.
|Cost of sales                                   |  |      | 14,477.9 |   |      |     | 17,482.5 |      |  |     | 19,326.8 |   |  |      | 19,500.7 |   |                             |    
|Gross profit                                    |  |      | 3,741.8  |   |      |     | 2,642.9  |      |  |     | 3,936.1  |   |  |      | 5,214.8  |   |                             |    
|Operating income                                |  |      | 1,496.3  |   |      |     | 230.1    |      |  |     | 1,413.8  |   |  |      | 2,463.0  |   |                             |    
|Comprehensive financing
    income (loss)       |  |      | 19.1     |   |      |     | (1,369.2 | )    |  |     | (133.2   | ) |  |      | 122.1    |   |                             |    
|Net controlling interest
    income (loss)      |  |      | 1,270.9  |   |      |     | (879.0   | )    |  |     | 797.6    |   |  |      | 1,983.4  |   |                             |    
|Net consolidated income
    (loss) per Share(2) |  |      | 2.1      |   |      |     | (1.5     | )    |  |     | 1.3      |   |  |      | 3.3      |   |                             |    
|Net consolidated income
    (loss) per ADS(3)   |  |      | 25.4     |   |      |     | (17.5    | )    |  |     | 16.0     |   |  |      | 39.7     |   |                             |    
|Dividends per Share(4)                          |  |      | 0.59     |   |      |     | 0.59     |      |  |     | 0.42     |   |  |      | 0.42     |   |                             |    
|Weighted average Shares outstanding (thousands) |  |      | 600,000  |   |      |     | 600,000  |      |  |     | 600,000  |   |  |      | 600,000  |   |                             |    
|                                                |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|U.S. GAAP:                                      |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Net revenues                                    |  | Ps.  | 18,219.6 |   |      | Ps. | 20,125.3 |      |  | Ps. | 23,262.9 |   |  | Ps.  | 24,715.5 |   |                             | Ps.
|Operating income                                |  |      | 1,481.0  |   |      |     | 185.6    |      |  |     | 1,391.0  |   |  |      | 2,400.3  |   |                             |    
|Net controlling interest
    income (loss)      |  |      | 1,261.9  |   |      |     | (869.4   | )    |  |     | 787.0    |   |  |      | 1,975.0  |   |                             |    
|                                                |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Statement of Financial Position Data            |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Mexican FRS:                                    |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Cash and cash equivalents(6)                    |  | Ps.  | 3,039.9  |   |      | Ps. | 1,998.2  |      |  | Ps. | 2,399.1  |   |  | Ps.  | 3,967.9  |   |                             | Ps.
|Primary financial instruments                   |  |      | 0.0      |   |      |     | 0.0      |      |  |     | 151.8    |   |  |      | 209.3    |   |                             |    
|Total assets                                    |  |      | 19,116.4 |   |      |     | 19,455.0 |      |  |     | 19,877.9 |   |  |      | 21,197.8 |   |                             |    
|Short-term debt(5)                              |  |      | 58.8     |   |      |     | 234.2    |      |  |     | 591.9    |   |  |      | 139.9    |   |                             |    
|Long-term debt                                  |  |      | 50.8     |   |      |     | 391.7    |      |  |     | 372.0    |   |  |      | 507.1    |   |                             |    
|Total stockholders’
    equity                  |  |      | 15,127.2 |   |      |     | 14,079.4 |      |  |     | 14,638.5 |   |  |      | 16,368.4 |   |                             |    
|Capital Stock                                   |  |      | 2,294.9  |   |      |     | 2,294.9  |      |  |     | 2,294.9  |   |  |      | 2,294.9  |   |                             |    
|                                                |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|U.S. GAAP:                                      |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Total
    controlling interest equity           |  |      | 15,071.7 |   |      |     | 13,786.7 |      |  |     | 14,329.2 |   |  |      | 16,052.8 |   |                             |    
|                                                |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Selected Operating Data                         |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Sales volume (thousands of tons):               |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Chicken                                         |  |      | 837.2    |   |      |     | 878.1    |      |  |     | 918.1    |   |  |      | 983.9    |   |                             |    
|Eggs                                            |  |      | 147.8    |   |      |     | 143.6    |      |  |     | 143.4    |   |  |      | 141.9    |   |                             |    
|Balanced Feed                                   |  |      | 438.8    |   |      |     | 370.7    |      |  |     | 337.9    |   |  |      | 327.5    |   |                             |    
|Swine and Others                                |  |      | 16.1     |   |      |     | 18.8     |      |  |     | 19.0     |   |  |      | 20.0     |   |                             |    
|Margins (Mexican FRS)                           |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Gross margin (%)                                |  |      | 20.5     | % |      |     | 13.1     | %    |  |     | 16.9     | % |  |      | 21.1     | % |                             |    
|Operating margin (%)                            |  |      | 8.2      | % |      |     | 1.1      | %    |  |     | 6.1      | % |  |      | 10.0     | % |                             |    
|Consolidated net margin
    (%)                 |  |      | 7.0      | % |      |     | (4.4     | )%   |  |     | 3.5      | % |  |      | 8.0      | % |                             |    
|                                                |  |      |          |   |      |     |          |      |  |     |          |   |  |      |          |   |                             |    
|Total employees                                 |  |      | 23,088   |   |      |     | 23,248   |      |  |     | 24,065   |   |  |      | 23,473   |   |                             |    

(1) Peso amounts have been translated
into U.S. dollars, solely for the convenience of the reader, at the rate of Ps.13.97 per U.S. dollar.

(2) Net income per share has been computed
based on the weighted average number of common Shares outstanding.

(3) Each ADS represents twelve shares.

(4) Dividends per share have been computed
by dividing the total amount of dividends paid by the weighted average Shares outstanding.

(5) Includes notes payable to banks and
current portion of long-term debt.

(6) For the years 2007 and 2008 the cash
and cash equivalents amount includes primary financial instruments.



The chart below includes
Mexican gross domestic product (“GDP”) and Inflation Rate data from 2007 to 2011, as provided by the Central Bank,
and the average interest rates on 28-day Mexican treasury bills (“CETES”), as provided by the Central Bank.



|Year |  |  | GDP |      |   | Inflation Rate |  |      | CETES | 
|---- |  |  | --- | ---- | - | -------------- |  | ---- | ----- | 
|2007 |  |  |     | 3.3  | % |                |  | 3.80 | %     | 
|2008 |  |  |     | 1.3  | % |                |  | 6.50 | %     | 
|2009 |  |  |     | (6.5 | % | )              |  | 3.57 | %     | 
|2010 |  |  |     | 5.5  | % |                |  | 4.40 | %     | 
|2011 |  |  |     | 3.9  | % |                |  | 3.82 | %     | 
|     |  |  |     |      |   |                |  |      |       | 

On April 17,
2012, the 28-day Cetes rate was 4.33%.



4







Exchange Rates

In 2007, the Mexican
peso remained reasonably stable in its peso-dollar exchange rate. According to the U.S. Federal Reserve Bank, the peso depreciated
with respect to the U.S. dollar by 1.1% at year-end. The average value of the Mexican peso was 0.2% lower than the average of 2006.



In 2008, the exchange
rate of the peso against the U.S. dollar was highly volatile. While during the first half of the year, the Mexican peso strengthened
its position with respect to the U.S. dollar, the Mexican peso experienced a steep depreciation during the second half of the year
and the peso-dollar exchange rate at year-end had depreciated by 21.0% with respect to December 31, 2007.



During 2009, although
the Mexican peso-dollar exchange rate depreciated during the first half of 2009, the peso stabilized and strengthened its position
in the second half of 2009, leading the Mexican peso-dollar exchange rate to appreciate 5.4% in 2009 with respect to the exchange
rate in effect on December 31, 2008.



In 2010, the Mexican
peso strengthened its position during the year as compared to the dollar, appreciating approximately 5.3% since the end of 2009,
while the inflation rate for 2010 was 4.40%.



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



The following table sets
forth the high, low, average and year-end exchange rates for the purchase and sale of US dollars (presented in each case as the
average between such purchase and sale rates) for periods indicated:



|       |               |  | Exchange Rate(1)                 | 
|------ | ------------- |  | -------------------------------- | 
|       |               |  | In Mexican pesos per U.S. dollar | 
|Yearly |               |  | High                             | 
|       | 2007          |  |                                  | 
|       | 2008          |  |                                  | 
|       | 2009          |  |                                  | 
|       | 2010          |  |                                  | 
|       | 2011          |  |                                  | 
|       | Monthly       |  |                                  | 
|       | October 2011  |  |                                  | 
|       | November 2011 |  |                                  | 
|       | December 2011 |  |                                  | 
|       | January 2012  |  |                                  | 
|       | February 2012 |  |                                  | 
|       | March 2012    |  |                                  | 

(1) The
exchange rates are the noon buying rates in New York City for cable transfers in pesos as certified for customs purposes by the
Federal Reserve Bank of New York (the “noon buying rate”).

(2)
Average of month-end rates for each period shown.

(3)
The exchange rate for the year end for the Banco de Mexico was Ps.13.97 per one dollar.



On April 13, 2011,
the exchange rate for cable transfers in pesos as certified for customs purposes by the Federal Reserve Bank of New York was Ps.13.1460
per $1.00 US dollar.



5







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



Not applicable



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



Not Applicable



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



Risks Related to Economic Conditions



Mexican economic and
other conditions, as well as economic and market conditions in other countries, may negatively affect our business, results of
operations and the market value of our securities.



If the Mexican economy
experiences decreased output in a recession, or if inflation or interest rates significantly increase, consumers may not be able
to purchase our products. These and other effects could have adverse consequences on our business, financial condition and results
of operations.

High interest rates in
Mexico could adversely affect our costs. Our earnings may also be affected by changes in interest rates due to the impact those
changes have on our variable-rate debt instruments and may benefit from the interest we earn on our cash balance.



Our market value (through
the trading of our shares listed on the Mexican Stock Exchange (or “BMV”) and our American Depositary Shares (or “ADSs”),
listed at the New York Stock Exchange (or “NYSE”), may be affected by economic and market conditions arising in any
other countries. Even when 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 effect on the Mexican securities. Consequently, the
market value of our securities may be adversely affected by events taking place outside of Mexico.



Political
events in México, including transition to a new presidential administration, could affectMexican economic
policy and our operations



In July 2012, we will
have presidential elections. We cannot predict the impact of this event in future business conditions in México. Presidential
elections may result in government gridlock and political uncertainty, which could have an adverse effect on Mexican economic policy
and as a result, to affect our business, financial position and results of operations.



Depreciation or fluctuation of the
peso relative to the U.S. dollar could adversely affect our financial conditions, results of operations and the market price of
our shares and ADSs.



The largest component
of our cost of sales is the balanced feed. The main components of the balanced feed are corn and soybean meal. We buy an important
percentage of grains in the U.S., priced in U.S. dollars.



In addition, the price
of grain we purchase in Mexico may be influenced by U.S. commodity markets.



In addition, severe devaluation
or depreciation of the peso may also result in disruption of the international foreign exchange markets and may limit our ability
to transfer or to convert pesos into U.S. dollars for the purpose of making timely payments of interest and principal on our indebtedness
and some accounts payable.



6







Therefore, if the peso
falls relative to the U.S. dollar, the cost of our balanced feed, some accounts payable due and our debt payments would increase.



Furthermore, currency
fluctuations will probably continue to affect our revenues and expenses.



Finally, fluctuations
in the exchange rate between the peso and the U.S. dollar will also affect the U.S. dollar equivalent of the peso price of our
shares (the “shares” or “Serie B Shares”) in the BMV and the price of American Depository Shares (“ADSs”)
on the NYSE.



Because we pay cash dividends
in pesos, exchange rate fluctuations will affect the U.S. dollar amounts received by holders of American Depository Receipts (“ADRs”)
upon conversion of such cash dividends by The Bank of New York Mellon, our Depositary Bank.



U.S. and Other Economies Worldwide



Events affecting the U.S. economy may adversely affect our
business, results of operations, prospects financial condition and our market value.



Economic conditions in
Mexico are heavily influenced by global economic conditions, mainly the U.S. economy. This is due to various factors, such as the
commercial trade pursuant to the North American Free Trade Agreement (“NAFTA”). Events and conditions affecting the
U.S. economy may adversely affect our business, results of operations, prospects and financial condition.



U.S. economy slowdown
may also negatively affect the results of our U.S. operation, since the demand and prices of chicken product in U.S. market depends
partially on the global economic growth.



Investor’s reactions
to economic conditions present in other economies worldwide, even when economic conditions in those countries may differ significantly
from economic conditions in Mexico, may have an adverse effect in our stock. Consequently, our market value may be adversely affected
by current events in other countries.



Risks Relating to the Food Industry



Future
cyclicality excess supply and downturns within the chicken industry may adversely affect our results.





The chicken industry
in Mexico and the U.S., as well as the chicken industry in other countries, has been characterized by a long-term decline in prices
in real terms. The industry 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, which affects
prices. We cannot assure you that future cyclicality, excess supply and downturns in real prices will not adversely affect our
results.





7









Increase
in the price of feed ingredients and its volatility may adversely affect or margins and results of operations



The largest single component
of our cost of sales is the cost of ingredients used to prepare balanced feed, including: sorghum, soybean meal, corn, fish meal,
meat meal and, for certain chicken products, marigold extract, among others.



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.



Given the long-term declining
trends in real chicken prices, we may experience difficulty or delays in passing through any increase in grain costs to our customers.
Accordingly, increases in the prices of the main raw materials used in the preparation of feed may have a material adverse effect
on our margins and results of operations.



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



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 and contamination.



Live chickens and swine
are susceptible to infections by a variety of microbiological agents. In the past we have experienced outbreaks of various diseases
that have resulted in higher mortality rates than our average mortality rates.



Chicken, turkey, beef
and eggs are subject to contamination during processing or distribution. To reduce contamination, we use specialized feedstock
and nutritional supplements that have been approved by the competent authorities and meet international industry standards, among
some other measures. However, potential contamination during processing, however, could affect a larger number of our products,
which may have a significant impact on our results.



Additionally, our sales
are entirely dependent on consumer preferences, and the loss of consumer confidence in the products sold by meat and egg producers
as a result of disease, contamination or other reasons, even if not related to our own products, could have a material adverse
effect on the results of our operations.



Hurricanes or other
adverse weather conditions 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 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, as a result, reduce our operation results.



Increased
competition may adversely affect our performance.



Both in Mexico and in
the U.S. we face significant competition from other chicken producers in all of our geographic markets and product lines.



According to the UNA,
we are Mexico’s largest chicken producer, but we face competition from other producers in all of the markets in which we
sell our products. Each of the two other major chicken producers in Mexico has substantial financial resources and strengths in
particular product lines and regions.



8







Our operations
in the U.S. face significant competition from other chicken producers in all of our geographic markets and product lines. According
to the WATTPoultry USA ranking of U.S. poultry companies for 2010(©Copyright 2012 WATT Publishing Co. all rights reserved),
our U.S. operations produced 2.1% of the total ready to cook pounds produced in the U.S. The top two companies in the U.S. produced
38.5% and the top ten produced 74.5%. Each of the top two companies in the U.S. has substantial financial resources and strengths
in particular product lines and regions. We also face competition from other companies in the markets in which we sell our products.



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 cannot assure you that our performance will not be adversely affected by increased competition.



Elimination
of tariff barriers may adversely affect our performance



Since 2003, chicken (excluding
leg quarters for which the Mexican government imposed some temporary restrictions), eggs and swine import quotas were eliminated
through the 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, especially in periods of overcapacity in the United States.
As tariff barriers decline under NAFTA, U.S. producers can be expected to increase exports to Mexico, which could have a material
adverse effect on our performance.



On January 1, 2008,
the restrictions for leg quarters were phased out. At present there are no restrictions on exporting these products to Mexico.



In February 2011, the
Mexican Secretaria of Economy initiated an antidumping investigation focusing exclusively on imports of leg and thigh meat for
human consumption from the United States of America to Mexico. This investigation was requested by Bachoco and by two other Mexican
poultry companies.



On January, 2012 the
Mexican Ministry of Economy (or “Ministry of Economy”) issued a preliminary ruling on the anti-dumping process regarding
chicken leg quarters imported to Mexico from the United States. On its press releases the Ministry of Economy stated the following:



| | · | There are dumping conditions on chicken
leg quarters imported from the United States, including margins ranging from 62.90% to 129.77%.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| | · | These practices damaged the Mexican poultry
industry.
| | - | -----------------------------------------------------

| | · | The Ministry of Economy has all the elements
for requiring anti-dumping duties, but did not proceed as the interested parties expressed the will to reach an agreement.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The antidumping practices investigation
process with regards to chicken leg-quarters price discrimination will continue.
| | - | ------------------------------------------------------------------------------------------------------------------------

| | · | The Ministry agreed to establish a 30
business day period for the interested parties to provide additional arguments or elements deemed relevant to the investigation.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



As of the date of this
report, we do not have any further information regarding this matter.



Risks Relating to Investors



The Robinson Bours family
owns 82.75% of our total shares outstanding and their interests may differ from other security holders.



9







The Robinson Bours family
has established two Mexican trusts, which they control (“Control Trusts”), that together held 496,500,000Shares
outstanding as of December 31, 2011. 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 prevailing
market prices for the ADS’s and the Shares could decline if the Robinson Bours family sold substantial amounts of their Shares,
whether directly, or indirectly, through the Mexican trusts through which they hold their Shares, or if the perception arose that
such a sale could occur.



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.



The protection afforded to minority
stockholders in Mexico is different from that in the United States

Under Mexican law, the
protection afforded to minority stockholders is different from those 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. 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.



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.



10







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 ADSs 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 Securities and Exchange Commission with respect to that
future issuance of Shares; or (ii) the offering qualifies for an exemption from the registration requirements of the Securities
Act.



We make no promises that
we will file a registration statement with the Securities and Exchange Commission to allow holders of ADSs 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 ADS holders.



Corporate disclosure and accounting
in Mexico may differ from other countries

There
may be less, or different, publicly available information about issuers of securities in Mexico than is regularly published by
or about issuers of securities in other countries with highly developed capital markets. In addition, due to country-by-country
differences in accounting and other reporting principles and standards, our corporate disclosures may differ in content from disclosures
made under other principles and standards, such as U.S. GAAP. However, we adopted IFRS starting January 1, 2012.



ITEM
4.Information of the Company



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



Our legal name is Industrias
Bachoco, S.A.B. de C.V., and we frequently refer to ourselves commercially as Bachoco. We are a holding company, and our principal
operating subsidiary is Bachoco, S.A. de C.V. We were incorporated in Mexico on April 17, 1980 under the laws of the United
Mexican States (“Mexico”.)



Our headquarters are
located at Avenida Tecnologico No. 401, Ciudad Industrial 38010, Celaya, Guanajuato, Mexico, telephone +52(461) 6183500 and +52(461)
6183555. Our main product lines are: chicken, table egg, balanced feed.



We have production facilities
and sales in México and, more recently, in the U.S. Until November 2011, our business and sales were domestic, with a very
small portion of exports to Asia. Now with the integration of the new business of O.K. Industries, Inc. (or “O.K. Industries”),
we are now also present in the U.S. market, with sales of chicken products under the O.K. brand.



Our current investor
relations agent since July 1, 2011 in the United States is I-adize Corporate Communications, located at 82 Wall Street, Suite 805
in New York, New York.



Important events
in the development of the Company’s business



We were founded in 1952.
It has grown from a small commercial table egg operation in the state of Sonora, to be a vertically integrated Company and the
leader poultry company in Mexico and we believe 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
the operation facility in the city of Culiacan.



11







In 1974, we established
a new complex in Celaya, a city located in the agricultural region of central Mexico. Our products were widely accepted in that
region, which led us to open offices and distribution centers in Mexico City.



Our management recognized
the potential for growth in Mexican chicken consumption, as well as the advantages of a large, vertically integrated company; as
a result, we began to seek opportunities for geographic expansion and to increase production capacity and market.



In 1993, we moved out
headquarters from the Obregon to Celaya city, and opened a new complex in the city of Techamalco, 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 BMV and on the NYSE, with 600 million shares outstanding and a free float of 17.25%, the remaining 82.75%
is held since that year by the Robinson Bours Family though the Control trusts.



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 a companies located at the Northeast of Mexico; 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 2011, the Company
carried out two acquisitions: In August 20, 2011, we acquired Trosi de Carnes, S.A. (“Trosi”) business; this facility
is located in Monterrey, Nuevo Leon in Northern Mexico. Trosi produces and sells processed beef and chicken. With this acquisition
we expect to increase our sales of beef value added products.



On November 1, 2011,
the Company entered the U.S. market and increased its export business with the acquisition of the American poultry company, O.K.
Industries, Inc. this company accounts with 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.



12







In
December 2011, the Company carried out a transaction to buy certain property assets ofMercantil Agropecuaria Coromuel,
S.A. de C.V.(or “MACSA”), with which, the Company entered
in the State of Baja California in Mexico, with 3 distributions centers.



Capital Expenditures



Over the past three years,
we have financed our capital expenditures with resources generated by our operations.



In 2009, we made capital
expenditures of Ps. 944.1 million, with which we entered into two main projects: (i) increased chicken production capacity in Chiapas,
Sonora and Yucatán, and updated our transportation fleet (ii) improved production capacity in the Monterrey Complex.



In 2010, we made capital
expenditures of Ps. 517.3 million, with which we increased capacity for live chicken in Merida and Tecamachalco facilities; increased
egg production capacity in the Mexicali facility; conducted productivity projects in the Tecamachalco and Merida processing plants,
as well as adjusted production process to export requirements for the export of chicken claws to Asia; and updated our transportation
fleet.



In 2011, we made capital
expenditures of Ps. 707.5 million, to implement new technologies in the processing plants located in Coatzacoalcos, Culiacan and
Celaya. In Celaya we built a water treatment plant and, we also updated our transportation fleet.



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



Description of the Company



We are a vertically integrated
Company dedicated to the production and commercialization of chicken, table eggs, balanced feed, swine and value added products
of turkey and beef in Mexico. Recently in November 2011, we entered the U.S. chicken market. We have had no material changes with
product development or production in the recent years.



|                               |  | In million of Mexican pesos, for year ended December 31, |         
|------------------------------ |  | -------------------------------------------------------- | --------
|Sales Breakdown                |  | 2009                                                     |         
|Chicken                        |  | Ps.                                                      | 18,211.1
|In Mexico                      |  |                                                          | 18,211.1
|In the U.S. (1)                |  |                                                          | -       
|Table eggs                     |  |                                                          | 2,356.8 
|Balanced feed                  |  |                                                          | 1,465.6 
|Swine and other business lines |  |                                                          | 1,229.4 
|Net revenues                   |  | Ps.                                                      | 23,262.9

(1
)Includes only sales subsequent to the acquisition of O.K. Industries.



Chicken Business Line



We basically compete
in two different markets: the Mexican and the U.S. chicken markets.



The Characteristics
of Mexican Chicken Market and Competition



Mexico is the fifth largest
producer of poultry worldwide. Fresh chicken is the leading meat consumed in Mexico. According to the UNA, for 2011 the annual
per capital consumption of chicken was an estimated of 25.6 kilograms. Chicken is a central ingredient in many traditional Mexican
dishes. Differently than in the U.S. chicken industry, value-added chicken products, such as heat-and-serve products, frozen dinners,
chicken nuggets and other similar foods, have found limited acceptance among Mexican consumers due to historical consumer preferences
for fresh chicken. Mexican consumers traditionally prefer chicken with pronounced yellow skin pigmentation.



13







Based on market demand,
fresh chicken rather than frozen will continue to be a preference within the Mexican market. Furthermore, we believe that consumer
demand for value-added fresh chicken products, such as rotisserie chicken, supermarket broilers and chicken parts, will increase
over time. Accordingly, we continue to focus primarily on producing fresh chicken, including value-added fresh chicken products.



According to the UNA,
we are Mexico’s largest chicken producer; In 2011 we produced 35.0% of the total chicken produced in Mexico. We face significant
competition from other producers in all of the markets in which we sell our chicken products. When combined with our two largest
vertically integrated competitors in Mexico, we account for approximately 59.0% of total Mexican poultry production; the remaining
41.0% is distributed among approximately 179 small and medium-sized integrated and non-integrated producers.



The three major poultry
producers in Mexico, including Bachoco, have substantial cost advantages and financial resources over smaller, non-integrated producers
arising from economies of scale and control of feed preparation. We believe, however, that we have substantial competitive strengths
over our competitors, including a broader range of chicken products and broader geographic coverage.



Furthermore, there are
considerable barriers to entry into large-scale chicken production and distribution in Mexico, including, among others, the consumer
preference for fresh chicken, the weaknesses of the transportation infrastructure and varying regional consumer preferences among
the various product categories. The channels for distribution of chicken products, in particular, are highly specialized and varied,
and they call for in-depth experience in market practices.



Poultry producers in
the United States have developed low-cost production techniques and have been successful in exporting primarily frozen and value-added
poultry to other countries, especially in periods of overcapacity in the United States. As tariff barriers have declined under
NAFTA since 2008, we have experienced increased competition from U.S. poultry producers. According to the UNA, in 2011, total imports
of chicken products increased 8.1% in volume over imports in 2010, 77.6% of the total imports were chicken leg quarter. This increase
was due to lower price levels in the U.S. and other foreign markets. Chicken imports from the U.S. have increased around 52.6%
since restrictions for leg quarters imports were phased out in January 2008.



The chicken industry
worldwide is characterized by a long-term decline in real prices in real terms in conjunction with cyclical periods of higher profitability
leading to overproduction followed by periods of lower prices and lower profitability.



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. A brief description of each category is provided as follows:



| | - | Live chickenis delivered alive to small independent slaughtering operations or to
wholesalers that contract with independent slaughtering operations for processing. The freshly slaughtered chicken is then sold
to chicken shops and other specialized retailers for sale to consumers and in some areas is sold directly to consumers by the slaughterhouse.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



14







| | - | Public market chickenis a whole broiler presented either uneviscerated or eviscerated,
generally sold within 48 hours after slaughter in public markets throughout Mexico, but primarily concentrated in the Mexico City
metropolitan region.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Rotisserie chickenis a whole broiler presented eviscerated and ready to cook. Rotisserie
chicken is sold by wholesalers and directly by producers to small shops, stands called rosticerias and supermarkets, which
cook the chicken and sell it whole and freshly cooked to the end-consumer, providing an economical form of fast-food.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Supermarket chickenis a fresh whole broiler presented with the edible viscera packed
separately. In most cases, it is sold directly by producers to supermarkets and, in some regions, to other independent food shops.
Mexican consumers’ preference for freshness requires regular deliveries of chicken to supermarkets and other food shops.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Chicken partsrefers 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. Producers generally sell
directly to the supermarket chains and deliver the chicken directly to the outlet. Sales to the institutional market often require
customized cutting and presentation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Value-added Productsrefers mainly to cut up fresh chicken parts with value-added
treatment like marinating, breading and individual quantity frozen, sold mainly wrapped in trays principally to supermarkets and
other institutional chains. Producers generally sell directly to the supermarket chains and deliver the chicken directly to the
store. Sales to the institutional market often require customized cutting and presentation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Chicken volume
sold by category in the Mexican industry and by Company in 2009:



|Category             |  | Industry s/volume (1) |    |   | Bachoco s/volume |  |    | Bachoco s/sales | 
|-------------------- |  | --------------------- | -- | - | ---------------- |  | -- | --------------- | 
|Live                 |  |                       | 29 | % |                  |  | 31 | %               | 
|Public market        |  |                       | 20 | % |                  |  | 16 | %               | 
|Rotisserie           |  |                       | 26 | % |                  |  | 30 | %               | 
|Supermarket          |  |                       | 14 | % |                  |  | 6  | %               | 
|Chicken parts        |  |                       | 8  | % |                  |  | 11 | %               | 
|Value-added products |  |                       | 3  | % |                  |  | 6  | %               | 

(1) According
with the UNA in Mexico



Chicken volume sold by
category in the Mexican industry and by Company in 2010:



|Category             |  | Industry s/volume (1) |    |   | Bachoco s/volume |  |    | Bachoco s/sales | 
|-------------------- |  | --------------------- | -- | - | ---------------- |  | -- | --------------- | 
|Live                 |  |                       | 31 | % |                  |  | 34 | %               | 
|Public market        |  |                       | 20 | % |                  |  | 14 | %               | 
|Rotisserie           |  |                       | 24 | % |                  |  | 28 | %               | 
|Supermarket          |  |                       | 15 | % |                  |  | 6  | %               | 
|Chicken parts        |  |                       | 7  | % |                  |  | 12 | %               | 
|Value-added products |  |                       | 3  | % |                  |  | 6  | %               | 

(1) According
with the UNA in Mexico



Chicken volume
sold by category in the Mexican industry and by Company in 2011:



|Category             |  | Industry s/volume (1) |    |   | Bachoco s/volume |  |    | Bachoco s/sales | 
|-------------------- |  | --------------------- | -- | - | ---------------- |  | -- | --------------- | 
|Live                 |  |                       | 33 | % |                  |  | 36 | %               | 
|Public market        |  |                       | 20 | % |                  |  | 14 | %               | 
|Rotisserie           |  |                       | 26 | % |                  |  | 27 | %               | 
|Supermarket          |  |                       | 12 | % |                  |  | 5  | %               | 
|Chicken parts        |  |                       | 6  | % |                  |  | 12 | %               | 
|Value-added products |  |                       | 3  | % |                  |  | 6  | %               | 

(1)According
with the UNA in Mexico



15







The U.S. Chicken
Market Description



Chicken is the most popular
meat produced in the United States. In 2011, the total meat production in the U.S. was 42.1 million tons. U.S. production of chicken
meat was 16.9 million tons or 40.2% of the total U.S. meat production. The U.S. broiler industry exported 3.1 million tons of chicken
or 18.4% of the total U.S. production.



On a retail weight basis
U.S. per capita consumption of chicken is estimated to be 37.8 kilograms. Most of the chicken produced in the U.S. is sold in either
a cut-up or a further processed form. Only 10.9% is sold in whole-bird form, with or without giblets, and 8.8% is cut up into 8
or 9 pieces for the KFC-type (Kentucky Fried Chicken) market. A further 51.5% is sold as bone-in pieces, primarily parts, by supermarkets
or as leg quarters for export markets. Finally 28.8% of production is represented by deboned breast and dark meat for value added
further processed meat.



Over the last thirty
years the industry has experienced a constant trend toward greater integration and consolidation between companies. In 1980, the
five largest companies in the industry processed 30.5% of all birds produced. In 2010, the five largest companies processed 59.6%
of all birds processed. The pace of consolidation has slowed in recent years due to economic difficulties associated with higher
ingredient costs. However since 2009, there has been significant investment by overseas poultry companies in U.S. broiler production
and these companies now own approximately the 36% of U.S. production capacity.



Bachoco’s Chicken
Marketing and Distribution



As previously stated,
we operate in all of the six chicken categories; our product mix varies from region to region, reflecting different consumption
and distribution patterns.



We have developed an
extensive distribution system. We use various distribution channels in every major product category to service different market
segments.



| | - | Live chicken. We sell live chicken primarily to wholesalers, which contract out the processing
to independent slaughterhouses and then resell the processed product as public market chicken. To a lesser extent, we sell to small,
independent slaughterhouses in the southeast, where live chicken continues to be the standard for consumption. Additionally, customers
can purchase live chicken directly from our farms.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Public market chicken.Most of our wholesale customers rely primarily on us for public
market chicken, although we have no exclusive supply agreements. Our principal focus in this market has been to provide superior
distribution and service to selected wholesalers in order to maintain and further develop loyalty. Public market chicken is ordinarily
sold to consumers without any packaging or other identification of the producer, but our distribution system encourages wholesalers
to sell to retailers in containers from our own “Bachoco” trailers, reinforcing our reputation for freshness and efficiency
of service and fostering brand loyalty among retailers. We believe we have developed excellent relationships with the wholesalers
we serve.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16







| | - | Rotisserie chicken.We sell rotisserie chicken directly to rosticerias and
supermarkets. We believe this market will continue to grow, as in the past, because of an ever-increasing consumer demand for convenient,
low-priced products and high-quality fast food. Success in supplying rotisserie chicken depends on consistency and good service,
and only larger producers with more modern processing facilities and distribution capacity can compete in this market.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Supermarket chicken. We sell supermarket broilers, directly to the principal supermarkets,
convenience store chains and wholesale clubs in Mexico. In order to build consumer loyalty, we emphasize our brand image as well
as our superior service, reinforced by frequent delivery to ensure freshness. Each chain negotiates purchases centrally, but we
deliver directly to many points of sale, ordinarily at least once every 48 hours. We believe that we lead the market in frequency
of deliveries to supermarkets.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Chicken parts. We sell chicken parts principally to supermarkets, using the same marketing
strategy that we use for supermarket broiler chicken. We are also an important supplier of chicken parts to the growing franchise
fast-food and institutional food-service industries. We continue to develop custom-cutting processes to help meet demand from fast-food
and institutional customers for a wider variety of chicken parts.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Value-added products. The potential growth in these products’ market is large and
we believe that our distribution network, our market share in the supermarket segment, our brand name and our experience in a wide
range of existing Mexican distribution channels will be important competitive strengths in this products. The Company is constantly
developing new, convenient value-added products.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 located in: Celaya, Culiacan, Tecamachalco, Lagos de Moreno, Coatzacoalcos, Merida, Gomez Palacio, Monterrey
and Hermosillo 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 (who in turn deliver to their customers), retailers and transport
certain products directly to supermarkets and food-service operations. Our distribution infrastructure includes 63 cold-storage
warehouses and facilities and a large fleet of vehicles. The decentralized sales force permits us to remain attuned to developments
in the regions we serve and to develop close relationships with customers.



Table Eggs Business Line



The Mexican Table
Eggs Market and Competition



According to the UNA,
Mexico has the largest per capita consumption of table eggs in the world with 22.4 kilograms per capita consumed in 2011. We believe
this level of consumption is due in part to the fact that eggs are among the cheapest sources of protein in Mexico.



The Mexican table egg
industry is more fragmented than the chicken industry. According to the UNA, in 2010 the nine largest producers of table eggs in
Mexico account for approximately 44.0% of the market.



17







We estimate that we are
the second largest producer of table eggs in Mexico, in 2011, we produced 5.2% of the total eggs produced in Mexico. We sell both
brown and white eggs. We estimate that we are the largest producer of brown eggs in Mexico. Our marketing efforts for egg products
focus on increasing our brand recognition.



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



| | - | Bulk. Distributed in large 360 egg cases through wholesalers to retailers. The retailers,
which are typically small grocery shops, sell the eggs by weight to consumers.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Packaged.Branded packages of mainly 12, 18 or 24 eggs. Packaged eggs are less vulnerable
to price fluctuations and are mainly sold through supermarkets.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Processed.Liquid or powdery eggs used mainly by the bakery industry. Bachoco does not participate
in this market.
| | - | -----------------------------------------------------------------------------------------------------------------



18







The tables below sets
forth the volume of the table eggs sold within the Mexican industry and volume and sales, recorded by us for each year indicated,



In 2009, the volume sold
by table eggs category in the Mexican industry and in the Company was:



|Category |           |  | Industry s/volume (1) |  |    | Bachoco s/volume |  |  | Bachoco s/sales |  
|-------- | --------- |  | --------------------- |  | -- | ---------------- |  |  | --------------- | -
|         | Bulk      |  |                       |  | 80 | %                |  |  | 45              | %
|         | Package   |  |                       |  | 15 | %                |  |  | 55              | %
|         | Processed |  |                       |  | 5  | %                |  |  | 0               | %



(1)Source:
UNA



In 2010, the volume sold
by table eggs category in the Mexican industry and in the Company was:



|Category |           |  | Industry s/volume (1) |  |    | Bachoco s/volume |  |  | Bachoco s/sales |  
|-------- | --------- |  | --------------------- |  | -- | ---------------- |  |  | --------------- | -
|         | Bulk      |  |                       |  | 80 | %                |  |  | 47              | %
|         | Package   |  |                       |  | 14 | %                |  |  | 53              | %
|         | Processed |  |                       |  | 6  | %                |  |  | 0               | %



(1)Source:
UNA



In 2011, the volume
sold by table eggs category in the Mexican industry and in the Company was:



|Category |           |  | Industry s/volume (1) |  |    | Bachoco s/volume |  |  | Bachoco s/sales |  
|-------- | --------- |  | --------------------- |  | -- | ---------------- |  |  | --------------- | -
|         | Bulk      |  |                       |  | 80 | %                |  |  | 45              | %
|         | Package   |  |                       |  | 14 | %                |  |  | 55              | %
|         | Processed |  |                       |  | 6  | %                |  |  | 0               | %



(1)Source:
UNA



Bachoco’s Marketing
and Distribution of Table Eggs



The branded carton of
brown eggs is a premium product in the Mexican market, because consumers perceive them to be of higher quality. Brown eggs command
a small premium over white eggs.



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



We have designed our
egg distribution system to transport eggs from our laying farms at Celaya, Los Mochis, Obregon, Mexicali, Tecamachalco, Merida,
Saltillo and La Laguna regions to customers in all sales regions. We sell packaged eggs directly to all of the principal supermarket
chains in Mexico, with daily deliveries directly to their outlets. Our marketing strategy for this business line is to lead sales
of package branded eggs.



Balanced Feed Business Line



The Mexican Balanced
Feed Market and Competition



According to the Consejo
Nacional de Fabricantes de Alimento Balanceado y de la Nutricion Animal, A.C. (or ”CONAFAB”) Mexico is among the
ten biggest producers of balanced feed worldwide. In 2010, total production of balanced feed in Mexico was 28.1 million tones,
representing a cumulative increase of 5.8% from 2007 to 2010. CONAFAB estimates that Mexican production of balanced feed for 2011
will be 29.4 million tons, and Mexico will account with 420 feed mill plants and a production capacity of 35 million tons.



19







Local production is composed
of commercial and integrated manufacturers. Commercial manufacturers produce for the market, while integrated manufacturers mostly
produce for themselves and occasionally for other producers. In 2010, integrated producers accounted for approximately 63.0% of
total production. Imports of feed come almost entirely from the United States.



We estimate
our market share in the balanced feed product line is approximately 3.1%.



Bachoco’s Marketing
and Distribution of Balance Feed



We have benefited from
economies of scale and synergies derived from producing feed both for our own internal consumption and for sale to third parties,
we sell 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.



We estimate that in 2010,
our balanced feed business comprised approximately 3.1% of the market share of the commercial (non-integrated) balanced feed business
in Mexico, a small reduction from the 3.4% market share in 2009. The decrease in our balanced feed sales volume is due to a reduction
in our production levels as we improve our sales mix.



Other Business Lines



This item comprises sales
of swine and turkey and beef value-added products. The Company sells live swine to small packers.



We purchase breeder swine
live from the United States and breed them at facilities in the state of Sonora. We then raise swine to maturity at our farms in
Celaya and three other locations in Mexico. Mature swine is sold on the hoof to Mexican swine meat packers for the production of
pork products.



The Mexican
swine industry is highly fragmented and our market share within this market is not significant.



The
Mexican market of turkey and beef value-added products is a small but one with a large growth potential.



In
2007, we entered into two new product lines: turkey and value-added beef and pork products. We do not raise either turkey or cattle;
we only process these products.



Each
of these business lines represented less 1.0% of our total sales. However, we see opportunities to grow these businesses
by taking advantage of our distribution network.



Seasonality of Our Company



Our sales are moderately
seasonal in Mexico, with the highest levels of sales, in general, in the second and fourth quarters due to higher chicken consumption
during the holiday season. As for our sales in the U.S., there is slightly less seasonality 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.



20







Main Raw Materials



We purchase our breeding
stock for broilers and layers from high-quality suppliers. All of our breeder swine currently come from one supplier, but we have
changed suppliers from time to time and have numerous alternative sources of supply.



The largest single component
of our cost of sales is the cost of ingredients used to prepare balanced feed, including: sorghum, soybean meal, corn, fish meal,
meat meal and, for certain chicken products, marigold extract, among some others.



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



Under NAFTA, corn tariffs
were eliminated on January 1, 2008. This new condition has been positive for the Company, allowing us more flexibility in
our cost of production as the cost of our ingredients more closely tracks prices in the international commodity markets.



To mitigate the effects
of increases in grain prices, we are always seeking lower-cost feed ingredients from Mexican sources when available. The use of
local feed ingredients allows us to save on transportation costs and import duties. However, because southern Mexico domestic crops
and feed ingredients are limited in some cases our complexes use imported grain.



In 2011, we bought approximately
44.6% of our total grain in the domestic market and the rest from the U.S. We believe that the quality of local feed ingredients,
particularly sorghum, is superior to that of imported feed ingredients. The Company engages in hedging of its feed costs in order
to assure more stable cost of grains.



Mexican Regulation



Mexican
Import Regulation



As required by NAFTA,
the Mexican government eliminated all permanent quotas and tariffs on poultry, table eggs and swine in January 2003. With
certain specific exceptions described below, there are now no quotas or tariffs on imports of poultry, eggs and swine from the
United States. We expect the elimination of these trade protections to stabilize the level of imports over time and to permit improved
private control over imports, which may result in increased competition from importers.



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 leg
quarters free of tariffs to Mexico.



In addition to NAFTA,
Mexico has entered into free trade agreements with several other countries including Chile, Bolivia, Colombia, Venezuela and Japan
and the European Union. Although such agreements may result in lower tariffs over our own products, we believe that imports from
such countries will not increase substantially in the future due to high transportation and distribution costs.



21







Antitrust
Regulations



The Ley Federal de
Competencia Economica (“Mexican Economic Competition Law”), which took effect on June 22, 1993, regulates
monopolies and monopolistic practices. Under this law, all companies (including Bachoco) are required to notify the Comision
Federal de Competencia (“Federal Competition Commission”) of all proposed transactions exceeding specified threshold
amounts as set forth in the Mexican Economic Competition Law. The Federal Competition Commission 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
Federal Commission of Economic Competition published a notice announcing an investigation of the Mexican poultry sector regarding
possible monopolistic business practices. No specific companies have been cited as conducting business in this manner. We, along
with other companies, were required to provide information to the commission.



In 2010 and 2011 the
Federal Commission of Economic Competition continued with the investigation and requested information from several poultry companies.
As of the date of this document we have not received further comments from this investigation.



Environmental
and Sanitary Regulation



Our operations are subject
to Mexican federal and state laws and regulations relating to the protection of the environment. The principal laws are Ley
General de Equilibrio Ecologico y Proteccion Ambiental(General Law of Ecological Balance and Environmental Protection) and
Ley de Aguas Nacionales(National Waters Law). The Secretaria del Medio Ambiente y Recursos Naturales (Ministry of
Environment and Natural Resources or “Semarnat”) administers the Environmental Law, and Comision Nacional del Agua(“National Water Commission”) administers the National Waters Law.



The Environmental Law
regulates water pollution, air pollution, noise control and hazardous substances. Semarnat can bring administrative and
criminal proceedings against companies that violate environmental laws, and after certain administrative procedures, it also has
the power to close non-complying facilities. Every company in Mexico is required to provide Semarnatwith periodic reports
regarding compliance with the Environmental Law and the regulations thereunder.



The level of environmental
regulation in Mexico has increased every year, and enforcement of the law is improving. We expect this trend to continue and to
intensify with international agreements between Mexico and the United States.



In particular, Mexican
environmental laws set forth standards for water discharge that are applicable to poultry processing operations. Our processing
plants have water treatment facilities that comply with Mexican environmental standards. We are implementing other investment projects
in anticipation of stricter environmental requirements in the future. We do not expect that compliance with those Mexican federal
environmental laws or Mexican state environmental laws will have a material effect on our financial condition or performance.



In 2008; the Company
voluntarily entered in an audit program through the Office of Environmental Protection (“Propaeg”) of the Government
of Guanajuato. As a result, in October 2011, the Company invested over Ps. 52.0 million in the building of water-treatment plant
for its poultry processing plant located in Celaya, Guanajuato. On February 29, 2012, the Company received the Certificate “Clean
Company” delivered by Propaeg.



This Certificate confirms
that the Company meets all environmental standards on its production processes and that is friendly to the environment. Thus, this
certification is a clear example of the Company’s environmental commitment with the community and the in general with the
country.



22







The production, distribution
and sale of chicken, eggs and swine are subject to Mexican federal and state sanitary regulations. The principal legislation is
Ley General de Salud (“General Health Law”) and Ley Federal de Sanidad Animal(“Federal Animal
Health Law”). The Federal Animal Health Law was enacted in 1993, and, since then, we have been working closely with Mexican
authorities to develop regulatory standards and inspection methods for chicken processing. Currently, Mexican authorities do not
monitor production or inspect products to the same degree as sanitary authorities in other countries, such as the USDA in the United
States. However, we believe that we are in compliance with all applicable sanitary regulations.



U.S.
Regulations



In our U.S. operations
we are subject to regulations from federal agencies such as the USDA, the U.S. Food and Drug Administration (or “FDA”),
the U.S. Environmental Protection Agency (or “EPA”), the U.S. Department of Homeland Security (or “DHS”),
and the U.S. Department of Labor (or “DOL”),as well as state regulatory agencies in the states where we conduct business.
Our U.S. subsidiary is in compliance with all current regulations and constantly monitors for any changes in those regulations.



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



Industrias Bachoco, S.A.B
de C.V. is a holding company with no operations other than holding the stock of its subsidiaries, most of which are incorporated
in Mexico. Our principal operating subsidiary is BSACV, which owns our principal operating assets, and which accounted for 81.37%
of consolidated total assets as of December 31, 2011, and 85.5% of our consolidated revenues for the year ended December 31,
2011. All of our subsidiaries are directly owned by us in the percentage listed below.



The following table shows our main subsidiaries
as of December 31, 2009, 2010 and 2011:





|                                                   |  | Percentage equity interest
|-------------------------------------------------- |  | --------------------------
|                                                   |  | 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                    
|Huevo y Derivados, S.A. de C.V.                    |  | Mexico                    
|Operadora de Servicios de Personal, S.A. de C.V.   |  | Mexico                    
|Pecuarius Laboratorios, S.A. de C.V.               |  | 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                    
|O.K. Industries Inc. and Subsidiaries              |  | U.S.                      





In 2009, Acuícola
Bachoco, S.A. de C.V. merged with Campi Alimentos, S.A. de C.V.



O.K. Industries was acquired
in November 2011. It includes 4 subsidiaries which it controls; in 3 of them O.K. Industries holds the 100% of their shares and
in the last one it holds the 85% of the shares.



For more information,
please read Note 2-a) of the Consolidated Financial Statements.



23







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



The following table indicates
production facilities and the number of each type of facility both in Mexico and the U.S., as of March 31, 2012:





|Bachoco production facilities |  | In Mexico |     |  | In the U.S. | 
|----------------------------- |  | --------- | --- |  | ----------- | 
|Chicken breeding farms        |  |           | 171 |  |             | 
|Broiler grow-out farms        |  |           | 518 |  |             | 
|Broiler processing plants     |  |           | 9   |  |             | 
|Hatchery                      |  |           | 21  |  |             | 
|Egg production farms          |  |           | 91  |  |             | 
|Swine breeding farms          |  |           | 1   |  |             | 
|Swine grow-out farms          |  |           | 10  |  |             | 
|Feed mills                    |  |           | 18  |  |             | 
|Further process plants        |  |           | 4   |  |             | 





Mexico Facilities

In Mexico, our facilities
are grouped in nine complexes that mainly include farms, feed mills, incubation and processing plants, and distribution centers.
These complexes are located in the cities of Culiacan, Monterrey, Hermosillo, Gomez Palacios, Lagos de Moreno, Celaya, Tecamachalco,
Coatzacoalcos, and Merida. Our nine processing plants process around 10 million chickens per week. The Celaya complex is the largest
of our complexes in México, and it is also where our headquarters are located.



We also account with
more than 800 production facilities (most of which are farms), and 63 distribution centers that are located throughout Mexico,
to ensure freshness and minimize transportation time and costs.



Additionally, there are
small egg production farms at Los Mochis, Ciudad Obregon, Puebla and Mexicali, and swine production is based in the cities of Los
Mochis, Ciudad Obregon and Celaya.



Four of the eighteen
feed mills plants are dedicated to produce balance feed to sales to third parties and the remaining fourteen are dedicated mainly
to internal consumption.



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.



We own most of our facilities,
and lease a limited number of farms and sales centers, all of which we do not consider material. We also employ a network of contract
growers.



Our fleet of trucks transport
day-old chickens from egg incubation plants to farms, part of the feed from feed mills to farms, live chickens from farms to processing
plants, products from the processing plants to distribution centers and in some cases directly to some customers, eggs from farms
to distribution centers and, ultimately, products from distribution centers to customers.



Expansion, Construction
or Issues Related with Our Facilities



On April 13, 2008, our
processing plant in Monterrey caught fire. While the fire destroyed the entire further processing area, our broiler production
processing did not suffer any damage and continued operating under nearly normal conditions until 2009. In 2009, the Company closed
this facility and moved the broiler production processing to a new facility in the same city of Monterrey.



24







In April 2010, the table
eggs operation located in Mexicali, B.C. was affected by an earthquake that hit northwestern Mexico on April 4. The earthquake
partially affected almost all of the farms located in this region, including our farm. Our affected farm represents approximately
9.0% of our total egg production. Other facilities, such as feed mill and distribution centers, were essentially undamaged. This
farm recommenced operations at the end of 2010, with normal production capacity by the end of 2011.



U.S. Facilities

We have facilities across the River Valley
area in Arkansas and Oklahoma. We process around 3 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 Heavener, Oklahoma. We have further processing
plants in Fort Smith and Muldrow, Oklahoma; our hatcheries in Fort Smith, Heavener and Stigler, Oklahoma; our broiler research
farms, in Greenwood and Hartford, Arkansas; and our cooler storage and distribution center, in Muldrow city.



We currently have no
plans to carry out any construction or material expansion in our Mexico or US facilities.



ITEM 4.A. Unresolved Staff Comments



None



ITEM
5.Operating and Financial Review and Prospects



Company’s
Overview



In 2011, the national economy grew 3.9%,
and was generally marked by uncertainty caused by high volatility in the world economy. The Mexican peso remained especially volatile
towards the end of the year, ending with a depreciation of 13.0 % with respect to the U.S. dollar when compared with the end year
of 2010, while the inflation rate in Mexico was 3.8%.



According to the Unión Nacional
de Avicultores en Mexico (National Association of Poultry Farmers in Mexico), during 2011, the volume of chicken produced in
Mexico grew 3.4% and consumption per capita was 25.6 kg. Additionally, table egg production grew 2.5% and consumption per capita
was 22.4 kg. of eggs per year.



In general, the poultry
industry and, consequently, Bachoco, continued experiencing high production costs during the entire 2011 fiscal year, caused mainly
by the high costs of raw materials.



Net sales of the Company for the 2011 fiscal
year increased 12.2% as compared to the prior year, resulting in the highest sales billed in the history of the Company.



The chicken products line, the Company’s
main source of income, was marked by an oversupply during most of 2011, with an important recovery towards the end of the year.
Nevertheless, it was insufficient to reverse the negative results recorded during most of the year.



Export sales from Mexico as percentage
of our total sales are only slightly representative. However, we recorded a 70.0% increase in our export sales over the prior fiscal
year. This increase is mainly due the marketing to new foreign customers.



25







In 2011, we experienced a significant growth
mainly through the following: On August 20, 2011, the Company reached an agreement with Grupo OSIG to acquire Trosi de Carnes,
S.A. de C.V. under a business combination agreement. This facility is located in Monterrey. It produces and sells processed beef.
The Company paid Ps. 57.7 million for this acquisition.



On November 1, 2011 we acquire OK. Foods,
Inc. a fully-integrated U.S. company. Headquartered in Fort Smith, Arkansas, O.K. Industries operates facilities across the River
Valley area in Arkansas and Oklahoma, processing 2.5 million chickens per week. With this acquisition, Bachoco might increase its
sales around 30.0%. The Company paid US$93.4 million for O.K. Industries. Under USGAAP and IFRS principles, we determine that this
acquisition has generated a profit of US$76.4 million equivalent to Ps. 1,038.0.



In addition, the Company carried out a
purchase of three distribution centers located all in the state of Baja California Sur, with which it expanded its domestic coverage.
The Company paid Ps. 55.5 million for this acquisition.



We are an important source of employment.
At the closing of the 2011 fiscal year, we had provided more than 25,300 direct jobs, most of them in Mexico. At Bachoco, we believe
in our personnel’s permanence and development. We have highly specialized and qualified employees in their different areas,
which gives us confidence and results in high productivity in our processes.



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



The following table sets
forth selected components of our results of operations as a percentage of net revenues for each of the periods indicated:

|                                             |  | For year ended December 31, |      
|-------------------------------------------- |  | --------------------------- | -----
|In percentages                               |  | 2009                        |      
|Net revenues                                 |  |                             | 100.0
|Cost of sales                                |  |                             | (83.1
|Gross profit                                 |  |                             | 16.9 
|Selling, general and administrative expenses |  |                             | (10.8
|Operating income                             |  |                             | 6.1  
|Comprehensive financing income (loss)        |  |                             | (0.6 
|Taxes (benefit)                              |  |                             | (1.7 
|Net income (loss)                            |  |                             | 3.5  



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:



|                          |  | For year ended December  31, |      
|------------------------- |  | ---------------------------- | -----
|In percentages over sales |  | 2009                         |      
|Chicken                   |  |                              | 78.3 
|Eggs                      |  |                              | 10.1 
|Feed                      |  |                              | 6.3  
|Swine and others          |  |                              | 5.3  
|Total revenues            |  |                              | 100.0



The following discussion should be read
in conjunction with our Audited Consolidated Financial Statements. Our Audited Consolidated Financial Statements have been prepared
in accordance with Mexican FRS, which differs in certain respects from U.S. GAAP. Note 23 to our Audited Consolidated Financial
Statements provides a description of the principal differences between Mexican FRS and U.S. GAAP, as they relate to us, and a reconciliation
to U.S. GAAP of consolidated stockholders’ equity, net income, a consolidated statement of stockholders’ equity and
a consolidated statement of cash flows under U.S. GAAP as of December 31, 2010 and 2011 and for the years ended December 31,
2009, 2010 and 2011.



26







|                               |  | For year ended December 31, |          
|------------------------------ |  | --------------------------- | ---------
|Net Revenues                   |  | 2009                        |          
|Chicken                        |  | Ps.                         | 18,211.1 
|In Mexico                      |  |                             | 18, 211.1
|In the U.S.(1)                 |  |                             | -        
|Eggs                           |  |                             | 2,356.8  
|Balanced feed                  |  |                             | 1,465.6  
|Swine and other business lines |  |                             | 1,229.4  
|Total Revenues                 |  | Ps.                         | 23,262.9 

(1
)Includes only sales of November and December, 2011, date on which O.K. was acquired.



2011 vs. 2010

The Company’s
net sales for fiscal year 2011 totaled Ps. 27,735.0 million pesos, 12.2% more than the sales registered in 2010, as a result of
the 2.6% increase in prices and 9.0% increase in the volume sold.



Chicken
products sales increased 12.2% during 2011 as a result of a 2.9% price increase and a 9.0% volume increase. The increase in volume
is mainly due to a greater production resulting from the acquisition of O.K. Industries.



Table
eggs sales decreased 0.8% during the 2011 fiscal year, although the price increased 5.7%; however, the sold volume decreased 6.1%.
Decrease in volume is mainly due less eggs production in Mexicali facility, which had been lost due to the April 2010 earthquake.
By the end of 2011, the production capacity in the Mexicali operation was almost totally restored.



Balanced
feed sales, conducted under the CAMPI trademark, had an increase of 34.2% in the 2011 fiscal year, as a result of an increase of
16.0% in prices and 15.7% in volume sold. This recovery comes after a couple of years of significant increases in its production
costs.



Other
business lines of the Company include: live swine sales, sales of value added turkey and beef products and other by-products. In
this respect, it is important to point out the significant growth in sales of value added beef products in the last quarter of
2011, as a consequence of more production capacity resulted from the integration of Trosi to the rest of the Company.



2010 vs. 2009

In 2010, we recorded
net sales of Ps. 24,715.5 million, a 6.2% increase with respect to the Ps. 23,262.9 million sales reported in 2009. A detail of
sales by segment follows.



Sales in our chicken
segment totaled Ps. 20,127.7 million during 2010, an increase of 10.5% as compared to 2009. This result is due to an increase of
3.3% in chicken prices and a 7.2% increase in volume sold, which is a record for the Company. Chicken sales accounted for 81.3%
of overall sales.



Throughout 2010, the
egg business line in our Company faced oversupply conditions, which increased pressure on egg prices. Sales of these products totaled
Ps. 2,101.8 million pesos in 2010, 10.8% lower than the Ps. 2,356.8 million recorded in 2009. This reduction in sales is mainly
due to a fall of 9.9% in egg prices and 1.0% decrease in volume sold. Egg sales accounted for 8.5% of overall sales.



The Company sells balanced
feed for livestock and pet industry. This segment was affected in 2010 by the contraction in demand during most of the year, with
a slight recovery by the fourth quarter. Sales of these products were Ps. 1,380.8 million, 5.8% below the recorded sales of Ps.
1,465.6 million in 2009. In 2010, this business line accounted for 5.6% of total sales.



27







During 2010, results
in our swine business were very favorable primarily because of a healthy balance between supply and demand. Sales totaled Ps. 297.1
million, 26.8% higher than sales in 2009, which were Ps. 234.3 million. This is due to an increase of 16.0% in prices and 9.3%
in sales volume. Sales of this product represent almost 1% of total sales of the Company.



The Company's other business
segments are: by-products, and value-added products of turkey and beef, which together represent approximately 3.5% of total sales.
During 2010, sales of other lines decreased 13.0% due mainly to a decline in the sales of by-products.



|                    |  | For year ended December 31, |         
|------------------- |  | --------------------------- | --------
|Cost of Sales       |  | 2009                        |         
|Total cost of sales |  | Ps.                         | 19,326.8
|Gross Profit        |  | Ps.                         | 3,936.1 
|Gross margin        |  | %                           | 16.9    



2011 vs. 2010

Total cost of sales increased
27.0% for year 2011, when compared to the year 2010. The production cost of chicken per unit was the most affected, it increased
around 19.0% in 2011 vs. 2010.



Balanced feed cost is
the single largest component of our cost of sales. In 2011, balanced feed cost was negatively affected by increases in corn and
soybean meal, resulting from lower supply inventories, worldwide and in particular to a volatile exchange rate of peso–dollar.
In 2011, 55.4% of the corn that we purchased was bought in the U.S., priced in dollars.



The gross
profit for 2011 was Ps. 2,961.8 million, with a gross margin of 10.7%. This represented a decrease of 43.2% as compared to the
previous year, mainly due to the high production costs that could not be passed through to our customers.



2010 vs. 2009

In 2010, cost of sales
was Ps. 19,500.7 million compared to Ps. 19,326.8 million in 2009, representing 2.9% decrease in the cost of sales per unit. This
was mainly due to increased efficiencies in our production indicators and an adequate administration of our grain hedging.



As a result of the reduction
in our cost of sales per unit and increases in the volume of chicken and swine sold, the Company registered a gross profit for
2010 of Ps. 5,214.8 million with a margin of 21.2%, up from a margin of 16.9% in 2009.



|                                    |  | For year ended December 31, |        
|----------------------------------- |  | --------------------------- | -------
|Operating Income ad EBITDA          |  | 2009                        |        
|Selling and administrative expenses |  | Ps.                         | 2,522.3
|Operating income                    |  | Ps.                         | 1,413.8
|Operating margin                    |  | %                           | 6.1    
|EBITDA result                       |  | Ps.                         | 2,076.4
|EBITDA margin                       |  | %                           | 8.9    



28







2011 vs. 2010

Bachoco
recorded an operating income of Ps. 9.9 million at the closing of 2011, a significant decrease compared with the operating income
of Ps. 2,463.0 million recorded in 2010. The optimization of production indexes, general expense control and considerable increases
in net sales of the Company, were insufficient to counterbalance the increases in the production cost.



The result
of the EBITDA in 2011 was Ps. 735.9 million, which represented 76.7% decrease compared to the Ps. 3,155.6 million of EBITDA reported
in 2010.



2010 vs. 2009

Total operating expenses
in 2010 were Ps. 2,751.8 million, compared with Ps. 2,522.3 million in 2009, which primarily reflected the increase in our distribution
and administrative expenses. As a result the Company achieved income of Ps. 2,463.0 million, or a margin of 10.0%. This figure
is higher than the operating income reached in 2009 of Ps. 1,413.8 million, or a margin of 6.1%.



The EBITDA for year 2010
was Ps. 3,155.6 million, a margin of 12.8% compared to and EBITDA result of Ps. 2,076.4 million and 8.9% margin reported in 2009.



|                                                                   |  | For year ended December 31, |        
|------------------------------------------------------------------ |  | --------------------------- | -------
|Comprehensive Financial Results                                    |  | 2009                        |        
|Comprehensive financial result:                                    |  | Ps.                         | (133.2)
|Net interest income and valuation effects of financial instruments |  |                             | (95.3  
|Foreign Exchange gain (loss)                                       |  |                             | (38.0  



2011 vs. 2010

In 2011, we had comprehensive
financial income of Ps. 177.6 million, compared with income of Ps. 122.1 million in 2010. The gain is mainly attributable to a
gain in valuation effects of financial instruments and net interest of Ps. 123.1 million recorded in 2011. We also recorded an
exchange gain of Ps. 54.5 million, compared to an exchange gain of Ps. 11.1 million in 2010.



2010 vs. 2009

In 2010, we recorded
comprehensive financial income of Ps. 122.1 million, compared with a loss of Ps. 133.2 million in 2009. The result is mainly attributable
to a gain in valuation effects of financial instruments and net interest of Ps. 111.0 million in 2010, while in 2009; we registered
a valuation effect of financial instruments and net interest loss of Ps. 95.3 million. In 2010 we recorded an exchange gain of
Ps. 11.1 million, compared to an exchange loss of Ps. 37.9 million in 2009.



|                                   |  | For year ended December 31, |      
|---------------------------------- |  | --------------------------- | -----
|Income Taxes                       |  | 2009                        |      
|Total income tax (benefit) expense |  | Ps.                         | 406.4
|Income tax                         |  |                             | 103.5
|Flat rate business tax             |  |                             | 0.4  
|Deferred Income tax                |  |                             | 302.5



2011 vs. 2010

Total taxes in 2011 were
a benefit of Ps. 40.5 million, compared to a charge of Ps. 503.4 million reported in 2010. This benefit in 2011 is mainly due to
income tax of Ps. 69.6 million, offset with deferred income tax of Ps. 110.1 million.



29







The main components of
the Income tax are computed “expected” tax expense for Ps.24.9 million and effect of companies outside simplified regime
for Ps.33.1. The main components of deferred income tax are an increase in deferred tax assets for Ps.287.9 million, partially
compensated by an increase in deferred tax liabilities for Ps. 6.0 million and an increase in deferred tax assets-foreign subsidiary
for Ps.174.1 million.



For more detail see Note
19 of our Consolidated Financial Statements.



2010 vs. 2009

Total taxes recognized
by the Company in 2010 amounted to Ps. 503.4 million, compared to Ps. 406.4 million reported in 2009. This represents an income
tax of Ps. 495.8 million and deferred income tax of Ps. 7.6 million in 2010, comparable to income tax of Ps. 103.9 million and
deferred income tax of Ps. 302.5 million in 2009. The decrease in deferred taxes in 2010 compared to 2009 is mainly that in 2009
we recognized a single charge of Ps. 188.8 million of deferred taxes, as a result of a tax reform authorized beginning in 2010,
the tax rate is increased from 19% to 21% in the simplified regime.



|                       |  | For year ended December 31, |      
|---------------------- |  | --------------------------- | -----
|Net Controlling Income |  | 2009                        |      
|Net controlling income |  | Ps.                         | 797.6
|Net margin             |  | %                           | 3.4  



2011 vs. 2010

Net controlling income
for year 2011 totaled Ps. 157.0 million, or Ps. 0.26 per share (US$0.22 per ADS), a sharp decrease as compared to income in 2010,
which amounted Ps. 1,983.5 million or Ps. 3.31 per share (US$ 2.84 per ADS). Net consolidated margin in 2011 was a profit of 0.6%
compared to a profit of 8.0% reached in 2010.



2010 vs. 2009

Net controlling interest
income for year 2010 was Ps. 1,983.4 million, or Ps. 3.31 per share (US. $2.84 per ADS), compared to a net controlling interest
income of Ps. 797.6 million, or Ps. 1.33 per share in 2009 (US. $1.14 per ADS) In terms of margin, the Company reached a net controlling
margin of 8.0%, significantly higher than the 3.5% net margin reported in the previous year.



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



Income Tax, Asset Tax and Flat Rate Business Tax, Year
2011



Industrias Bachoco and all of its subsidiaries
file separate income tax returns. Bachoco, the Company’s main subsidiary, is subject to the simplified regime. This simplified
regime is applicable to agriculture, cattle-raising and fishing, among others.



O.K. Industries, subsidiary is located
in the U.S. and it has a different fiscal period that 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 2-v)
and Note 19-a) and d) of the Consolidated Financial Statements.



Income Tax

In 2009, a tax reform
was authorized by which, as of 2010, 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. The Company recognized the result of this change in 2009, in a charge to results of Ps. 188.8 million,
which is reflected in deferred taxes under the line item “Adjustment to deferred tax assets and liabilities for enacted changes
in tax law and rates.” See Note 19-a) of the Consolidated Financial Statements for more information.



30







Flat Rate Business Tax (IETU)

On October 1, 2007, new
laws were published and a number of tax laws were revised relating to the Flat Rate Business Tax (IETU). These laws came into effect
on January 1, 2008. The IETU rate was set at 16.5% for 2008, 17.0% for 2009 and 17.5% for 2010 and thereafter, based on cash flows,
and limits certain deductions. The IETU is required to be paid only when it is greater than the income tax to be paid in any given
year. To determine the IETU base in a given year, gross income tax (before subtracting deductions) is subtracted from the net income
tax (after subtracting deductions), with the difference being the IETU base. If a negative IETU base is determined because deductions
exceed income tax, there will be no IETU payable. Instead, the amount of the negative IETU payable base multiplied by the IETU
rate results in an IETU credit, which may be applied against the income tax due for the same year or, if applicable, against any
IETU payable in the next ten years. See Note 19-b) of the Consolidated Financial Statements for more information.



Asset Tax (AT)

In 2007, a new law was
enacted that resulted in the derogation of the asset tax law beginning on January 1, 2008. In 2007, the asset tax rate was payable
at 1.25% and liabilities were no longer deductible from the asset tax base. At December 31, 2011, the Company had Ps. 5.0 million
in asset tax credits. See Note 19-c) to our Audited Consolidated Financial Statements for more detail.



|Base Year |  | Asset tax restated at

December 31, 2011 in million |     |  |  | Year of expiration |     
|--------- |  | --------------------------------------------------- | --- |  |  | ------------------ | ----
|2005      |  | Ps.                                                 | 1.6 |  |  |                    | 2015
|2006      |  | Ps.                                                 | 3.4 |  |  |                    | 2016



Deferred income tax in O.K. Industries

Deferred income taxes
of OK Industries is included in the consolidated deferred income tax of Bachoco, and relate primarily to the use of the farm price
method of accounting for inventories for tax purposes and certain self-insurance and other accruals and reserves, as well as temporary
differences between financial statement and tax return recognition of certain inventory costs, sales and other amounts resulting
from the previous use of the cash basis of accounting for income tax purposes by the subsidiary’s agricultural production
operations, as well as differences in basis and depreciation methods used on certain assets.



Reconciliation to U.S. GAAP

The Company’s Audited
Consolidated Financial Statements are prepared in accordance with Mexican Financial Reporting Standards (“MexFRS”),
which differ in certain respects from U.S. GAAP.



The principal differences
between MexFRS and U.S. GAAP, as they relate to us, with an explanation, where appropriate, of the method used to determine the
adjustments that affect income and stockholders’ equity, and any additional applicable disclosures as applicable are described
in the Note 23 of our Audited Consolidated Financial Statements. Our consolidated net income under U.S. GAAP was a net income of
Ps. 798.4 million in 2009, a net income of Ps. 1,978.0 million in 2010 and a net income of Ps. 1,180.7 million in 2011, compared
to a net income of Ps. 809.0 million, a net income of Ps. 1,986.3 million and, a net income of Ps.159.1 million, respectively,
under Mexican FRS.



31







Bachoco has applied Statement
of Financial Accounting Standards (included in FASB ASC Subtopic 740-10- Income taxes – Overall) (FIN 48.) Accounting for
Income Taxes for all periods presented. The deferred tax adjustment included in the net income and stockholders’ equity reconciliations
includes the effect of deferred taxes on all U.S. GAAP adjustments reflected in the reconciliation from Mexican FRS to U.S. GAAP.
Under U.S. GAAP, the Company recognizes a deferred tax liability associated with profits originated during the simplified regime
that have not paid income tax previously, but would be subject to taxation upon future distributions under the Mexican tax law.
Due to the accounting change in Mexican FRS in 2008, this concept generates a reconciling difference to U.S. GAAP. The deferred
tax liability under this concept was a charge of Ps. 309.1 and a benefit of Ps. 270.0 million as of December 31, 2010 and 2011,
respectively.



For U.S. GAAP purposes,
goodwill is reviewed for impairment at least annually in accordance with the provisions of FASB ASC Topic 350, Intangibles –
Goodwill and Other. Up to December 31, 2004, we recognized an accumulated effect (increase in equity) of Ps. 58.7 million for the
non amortization of goodwill, under U.S. GAAP. The Company performs its annual impairment review of goodwill at December 31, and
when a triggering event occurs between annual impairment tests. In 2009, 2010 and 2011, no triggering events occurred and the annual
impairment test did not reflect any impairment concern.



The fair value of financial
instruments is the amount at which a financial instrument could be exchanged in a current transaction between willing parties other
than in a forced sale or liquidation. When possible, we use quoted market prices to determine fair value. Where quoted market prices
are not available, the fair value is internally derived based upon appropriate valuation methodologies with respect to the amount
and timing of future cash flows and estimated discount rates for both counterparty and entity’s own risk. However, considerable
judgment is required in interpreting market data to develop estimates of fair value, so the estimates are not necessarily indicative
of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions
or estimation methodologies could be material to the estimated fair values.



Fair value information
presented in Note 23 to our Audited Consolidated Financial Statements is based on information available at December 31, 2010 and
2011. Although we are not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have
not been updated since those dates; therefore, the current estimates of fair value at dates after December 31, 2011 and 2010, could
differ from these amounts.



Use of Estimates in Certain Accounting
Policies

In preparing our Audited
Consolidated Financial Statements, we make estimates concerning a variety of matters. Some of these matters are highly uncertain,
and the estimates involve judgments based on the information available to us. The discussion below identifies matters for which
the financial presentation would be materially affected (a) if we relied on different estimates that we could reasonably use, or
(b) if in the future we change our estimates in response to changes that are reasonably likely to occur.



The discussion below
addresses only those estimates that we consider most important based on the degree of uncertainty and the likelihood of a material
impact if we used a different estimate. There are many other areas in which we use estimates about uncertain matters, but the reasonably
likely effect of changed or different estimates would not be material to our financial results.



Estimated Useful Lives of Property,
Plant and Equipment

We estimate the useful
lives of our property, plant and equipment in order to determine the amount of depreciation expense to be recorded in each period.
The current estimates of useful lives are based on estimates made by an independent appraiser in 1996. Those estimates have been
adjusted when applicable, based on historical experience with similar assets that we own.



32







Accumulated depreciation
expense for property, plant and equipment in 2011 amounted to Ps. 8.7 billion. As applied to our 2011 financial results, the depreciation
and amortization was Ps. 726.1 million, or 2.6% of our net revenues. For further explanation, see Notes 2-c) and 9 to our Audited
Consolidated Financial Statements.



Allowance for Productivity Declines

The allowance for decline
in productivity of our breeder chickens and swine is estimated based on expected future life under straight line method. See Note
2-h) in our Audited Consolidated Financial Statements for more detail.



Inventory Valuation

At
December 31, 2010 and 2011, our inventories are stated at the lower of historical cost determined by the average cost method or
market (replacement cost), provided that replacement cost is not less than net realizable value



Agriculture



Our Audited Consolidated
Financial Statements recognize the requirements of Mexican FRS E-1, “Agriculture,” which establishes the rules for
recognizing, measuring, presenting and disclosing biological assets and agricultural products.



Mexican FRS E-1 requires
biological assets and agricultural products (the latter at the time of harvesting) to be valued at their fair value, net of the
estimated costs at the point of sale. Bulletin E-1 also establishes that whenever the fair value cannot be determined in a reliable,
verifiable and objective manner, the assets are to be valued at their production cost, net of impairment loss.



Agricultural products
are live chickens, processed chickens, commercial eggs and pigs available for sale. The Company’s biological assets are comprised
of poultry in their different stages, incubatable eggs and breeder pigs.



Broiler chicks less than
six and a half weeks old, incubatable eggs, breeder pigs and laying hens are valued at production cost since it is not possible
to determine their fair value in a reliable, verifiable and objective manner.



Broilers more than six
and a half weeks old through their date of sale are valued at fair value net of estimated point-of-sale costs, considering the
price per kilogram of processed chicken at the valuation date.



Processed chicken and
commercial eggs are valued at fair value net of estimated point-of-sale costs, considering the price per kilogram of processed
chicken and commercial eggs at the time such items are considered as agricultural products. From such date through the date of
sale, the fair value is considered to be the cost of processed chicken or commercial eggs, not in excess of net realizable value.



We are exposed to financial
risks due to changes in the price of chicken. We estimate that the price of chicken will not fall sharply or significantly in the
near future; consequently, we have not entered into any derivative agreement or any other type of agreement to offset the risk
of a drop in the price of chicken.



33







For more details, see
“Inventories and biological assets” in Note 7 of our Audited Consolidated Financial Statements.



Allowance for Doubtful Accounts

The Company’s policy
is to record an allowance for doubtful accounts for balances which are not likely to be recovered. In establishing the required
allowance, management considers historical losses, current market conditions, and our customers’ financial condition, the
amount of receivables in dispute originated by price differences and the aging of our current receivable and current payment patterns.



Pension Plan

We have a retirement plan in which all
non-union workers participate. Pension benefits are based on the salary of workers in their final three years of service, the number
of years worked and their age at retirement.



This plan includes:

| | - | Defined contribution plan: This fund consists of employee and Company contributions. The employee
contribution percentage ranges from 1.0% to 5.0%. The Company contribution ranges from 1.0% to 2.0% in the case of employees with
less than 10 years’ seniority, and the same contribution percentage as the employee (up to 5.0%) when the employee has more
than 10 years’ seniority.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Defined benefit plan: This fund consists solely of Company contributions and covers the Company's
labor obligations with each employee.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------



Seniority premiums and severance payments
are paid to workers as required by Mexican labor law.



We recognize the liability for pension
benefits, seniority premiums and termination benefits (severance payments), based on independent actuarial computations using the
projected unit-credit method and financial assumptions net of inflation.



The Company’s employees in the US,
also accounts with a contribution plan, where the Company contributes with the 50.0% of the employee’s contribution up to
2.0% of their remuneration.



See Note 2-q) and Note 17 to our Audited
Consolidated Financial Statements, for more detail regarding pension plan for Bachoco’s employees either in Mexico and the
U.S.



Valuation Allowance for Deferred Tax
Assets

In assessing our ability to realize deferred
tax assets, management considers whether it is more likely than not that part or all of the deferred tax assets will not be realized
taking into account, that the final of our deferred tax assets is dependent upon the generation of future taxable income during
the periods in which such assets become deductible. We also consider the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment. The valuation allowance for deferred tax assets as
of January 1st, of 2010 and 2011 was Ps. 36.1 million and Ps. 53.3 million, respectively. For more information see Note 19-e) to
our Audited Consolidated Financial Statements.



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



We are a holding company with no significant
operations of our own. We principally engage in transactions with our subsidiaries. Our main subsidiary is Bachoco, which in 2011
accounted with the 81.37% of the total revenues of the Company.



34







|                              |  | For the year ended December 31, |        
|----------------------------- |  | ------------------------------- | -------
|Cash and cash equivalents     |  | 2009                            |        
|Total Cash and equivalents:   |  | Ps.                             | 2,551.0
|Cash and cash equivalents     |  | Ps.                             | 2,399.1
|Primary financial instruments |  |                                 | 151.9  
|Acid test ratio(1)            |  |                                 | 1.5    

(1) Current assets less inventories /current liabilities



Our cash
comes basically from the sales of our products in the Mexican and U.S. markets. Our second source of liquidity comes from credit
lines we use from time to time.



2011 vs. 2010

In 2011, cash and equivalents
amounted Ps. 3,036.4 million 27.3% less than Ps. 4,177.2 million in 2010. The decrease is mainly due to the payment for part of
the acquisition we completed in 2011, working capital increase and the weak operating results.



2010 vs. 2009

In 2010, our financial
position remained sound. In 2010, cash and cash equivalents and primary financial instruments increased to Ps. 4,177.2 million,
which compares positively to the Ps. 2,551.0 million reported in 2009. The increase was primarily due to our positive operating
results.



|                   |  | For the years ended December 31, |        
|------------------ |  | -------------------------------- | -------
|Debt               |  | 2009                             |        
|Accounts payable   |  | Ps.                              | 3,613.2
|Short-term debt    |  |                                  | 234.3  
|Long-term debt (1) |  |                                  | 729.5  
|Debt ratio         |  |                                  | 0.26   

(1) Includes
current installments of long-term debt-

(2) Total
liabilities / total assets



For details of maturity
of our debt, and interest rate, see Note 12 of our Consolidated Financial Statements.



2011 vs. 2010

In general, total debt
increased as a result of the recent acquisitions in Mexico and the U.S. Short-term debt totaled Ps. 1, 277.8, as the Company used
US$ 75.0 million from one of its line of credits to partially fund the acquisition of O.K. Industries.



2010 vs. 2009

In 2010, our short- and
long-term debt totaled Ps. 646.9 million, lower than the Ps. 963.8 million reported as fo December 31, 2009. This 32.9% of decrease
primarily reflects the payment of our short term debt and some notes payable to banks.



35







|                                         |  | For the years ended December 31, |        
|---------------------------------------- |  | -------------------------------- | -------
|                                         |  | 2009                             |        
|Working capital:                         |  | Ps.                              | 3,325.3
|Current assets less cash and equivalents |  | Ps.                              | 5,352.2
|Current liabilities less debt            |  |                                  | 2,026.9



2011 vs. 2010

Our working capital increased
in 2011 as compared to 2010, mainly due an increase in accounts receivable, inventories of raw materials and final and in process
inventories. We partially offset the increase with an increase in accounts payable.



We consider that our
current level of working capital is sufficient for the normal course of our operations. Our working capital needs are susceptible
to change, depending mainly on the cost of our main raw materials which affect or inventory cost, and on the level of accounts
payable.



The ratio of current
assets to current liabilities decreased from 4.4 in 2010 to 2.3 in 2011.



2010 vs. 2009

Our working capital increased
year over year from Ps. 5.2 billion on December 31, 2009 to Ps. 7.4 billion on December 31, 2010. Such increase was mainly
due to an increase in the cash and investments and a decrease in derivative financial instruments as current liabilities accounts.
The ratio of current assets to current liabilities on December 31, 2010 was 4.4.



|                        |  |     | For the years ended December 31, | 
|----------------------- |  | --- | -------------------------------- | 
|                        |  |     | 2009                             | 
|Capital Expenditures(1) |  | Ps. | 944.1                            | 

(1)Due
to the effect from accounting changes, amounts may differ from previously reported for past years.



2011

Our capital expenditures
in 2011 were paid with internal resources. In 2011, the capital investments in the Company totaled Ps. 707.5 million, with which
we implemented new technology in the processing plants located in Coatzacoalcos, Culiacan and Celaya. In Crelaya plant the Company
built a water treatment plant and, and lastly as every year. The Company also modernized its transportation fleet.

2010

In 2010, capital investments
amounted to Ps. 517.3 million, most of which were financed with resources generated from our own operations. These capital investments
were used mainly to finance, productivity projects, production growing capabilities and infrastructure improvements to keep facilities
in good operating conditions.

2010

In 2009, we made capital
expenditures of Ps. 944.1 million, with which we entered into two main projects: (i) increased chicken production capacity in Chiapas,
Sonora and Yucatán, and updated our transportation fleet (ii) improved production capacity in the Monterrey Complex.



|                 |  |     | For the years ended December 31, | 
|---------------- |  | --- | -------------------------------- | 
|                 |  |     | 2009                             | 
|Operating Leases |  | Ps. | 177.3                            | 



36







We 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 14 to our Audited Consolidated Financial Statements for more
information.



We are a holding company
with no significant operations of our own. We principally engage in transactions with our subsidiaries. We will have distributable
profits and cash to pay dividends only to the extent that we receive dividends from our subsidiaries, principally BSACV. The amount
of dividends payable by our subsidiaries and us is also subject to general limitations under Mexican corporate law.



We manage our exchange
rate exposure primarily through management of our financial structure, specifically by maintaining most of our debt through long-term
debt instruments. As part of our normal operations, we purchase financial derivative instruments in order to ensure greater certainty
in our purchases of U.S. dollars. 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.



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.



We have followed different
strategies with respect to derivatives which involved call and put options in U.S. dollars. In 2009 and, 2010 we did not have bank
debt denominated in U.S. dollars. During 2011, the Company acquired a one-year bank credit of US$75 million dollars, equivalent
to Ps. 1,047.7 million in pesos. The interest rate of this credit is LIBOR plus 0.60 points.



Our risk committee approves
any change in policies and reviews the application of current policies.



For more details see
Note 12 to our Audited Consolidated Financial Statements.



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



None



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



Our demand and prices continues depending
mainly on supply and demand in both markets, Mexico and U.S. and no new effect has been identify, additionally to those effects
present in the past.



Cost of our main raw materials is subject
to level of inventories available, as it occurred in past periods and no disruption new technology is foresee in the near future.



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



We do not have any off-balance sheet arrangements
of the type that we are required to disclose under this Item.



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



Our major categories
of indebtedness included the following:



| | · | As of December 31, 2011, we had Ps.
175.2 million in current installments of long-term debt.
| | - | --------------------------------------------------------------------------------------------



37







| | · | Long-term debt to banks, as of December 31,
2010 and 2011, were Ps. 507.1 and Ps. 384.4 million outstanding (excluding current portion) respectively, a 24.2% decrease.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The weighted average interest rates on
long-term debt for 2010 and 2011 were 6.32% and 5.58% respectively. See Note 12 of our Audited Consolidated Financial Statements
for more detail.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The following table summarizes
long-term debt as of December 31, 2011. The table does not include current installments of long-term debt, accounts payable
or pension liabilities.



|                        |  | Payments Due by Period                                |      
|----------------------- |  | ----------------------------------------------------- | -----
|                        |  | in millions of constant pesos as of December 31, 2011 |      
|Contractual Obligations |  |                                                       | Total
|Long-term debt          |  | Ps.                                                   | 384.4
|Operating leases        |  | Ps.                                                   | 641.1



The Company has certain leases related to operating assets,
including farms and administrative offices.



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



Not applicable.



ITEM
6.Directors, Senior Management and Employees



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



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.



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, 2011, Mr. Felizardo Gastelum Felix was elected to the Board of Directors, as President of the Audit and
Corporate Practices Committee and Financial Expert. Mr. Felizardo Gastelum Felix performed these roles in an exemplary manner until
his death on April 18, 2012.



At our annual stockholders’
meeting held on April 25, 2012, we ratified the membership of Board of Directors, which is composed of the following members:



38







|                                                            |  |  | Year of Birth |  |  |  | Member since | 
|----------------------------------------------------------- |  |  | ------------- |  |  |  | ------------ | 
|Chairman of the Board and Proprietary Shareholder Director: |  |  |               |  |  |  |              | 
|Francisco 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         | 
|Related Proprietary Director:                               |  |  |               |  |  |  |              | 
|Cristobal Gustavo Mondragon Fragoso                         |  |  | 1945          |  |  |  | 2011         | 
|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 the Bours family members:



|Brothers and Co-
        Founders            |  | Sons |                                       | Nephews |   | Son in Law                   
|-------------------------------------------- |  | ---- | ------------------------------------- | ------- | - | -----------------------------
|Enrique Robinson Bours Almada                |  | ·    | Jesus Enrique Robinson Bours Muñoz    |         | · | Arturo Bours Griffith        
|                                             |  | ·    | Jesus Rodolfo Robinson Bours Muñoz    |         |   |                              
|                                             |  | ·    | Francisco Javier R. Bours Castelo     |         |   |                              
|Mario Javier Robinson Bours Almada           |  | ·    | Jose Gerardo Robinson Bours Castelo   |         | · | Jose Francisco Bours Griffith
|                                             |  | ·    | Jose Eduardo Robinson Bours Castelo   |         |   |                              
|                                             |  |      |                                       |         |   |                              
|Juan Bautista Salvador Robinson Bours Almada |  |      | Juan Salvador Robinson Bours Martinez |         | · | Octavio Robinson Bours       



Ourbylaws 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.



Francisco 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.



39







Jose Gerardo Robinson
Bours Castelo,Proprietary Shareholder Director since 2008. He previously served as Systems Manager. Mr. Bours, holds
a degree in Computer 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., Acuicola Boca, S.A. de C.V., Industrias Boca, S.A. de C.V. and Centro
de Servicios Empresariales del Noreste, S.A. de C.V.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.



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



Octavio Robinson Bours,
Proprietary Shareholder Director since 1997. Mr. Robinson Bours holds a degree in Agricultural Engineering from the ITESM.
He has experience in producing swine, and is also a member of the board of Choya, S.A. de C.V., and runs a business of agriculture
and aquaculture.



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 and CEO of
Llantas y Accesorios, S.A. de C.V. and member of the Board of Megacable Holdings, S.A.B. de C.V.



Jose Eduardo Robinson
Bours Castelo, member of the Board since 1994. Mr. Robinson is an alternate Director for Mr. Francisco Javier R. Bours Castelo
and Mr. Jose Gerardo Robinson Bours Castelo. Mr. Robinson Bours holds a degree in Industrial Engineering from the ITESM. He
was previously Commercial Director of Industrias Bachoco, a Senator of the Mexican Congress and was governor of the state of Sonora.



Jose Francisco Bours
Griffith, Alternate Director of Mr. Octavio Robinson Bours and Mr. Arturo Bours Griffith, since 1994. Mr. Bours holds a degree
in Civil Engineering from the Universidad Autonoma de Guadalajara. Mr. Robinson Bours has worked at Bachoco as Engineering
Manager. He is currently dedicated to agricultural operations and has run an aquaculture farm for nine 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. and has been its President and CEO since 1983.



40









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 the ITESM. He is a farmer; he has served
as Chairman of the Agricultural and Industrial Union Credit of the Yaqui Valley, Chairman of the Company Citricola Yaqui, and as
Agent of citrus products in the Sonora state region.



Avelino Fernandez
Salido, Independent Director, is 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.



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



Cristobal Gustavo Mondragon Fragoso
is a Related Proprietary Director since April 2011. Mr. Mondragon holds an Accounting degree from the Universidad Nacional Autonoma
de Mexico (or “UNAM”). Mr. Mondragon joined Bachoco in 1982 and was Chief Executive Officer since 2001 to October 2010.
Previously, Mr. Mondragon served in Bachoco as Administration Manager, as Manager of Corporate Finance and as Chief Financial Officer.



Eduardo Rojas Crespo
was named Secretary of the Board of Directors in 2008. He holds a Law Degree from the UNAM. He also holds a post-graduate diploma
in 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. 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 as 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 got retired in April 2011 and 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.



41







Executive Officers



|Name                             |  | Position                                 |  | Year of Birth
|-------------------------------- |  | ---------------------------------------- |  | -------------
|Rodolfo Ramos Arvizu             |  | Chief Executive Officer                  |  | 1957         
|Paul Fox                         |  | Chief Executive Officer, U.S. Operations |  | 1966         
|Daniel Salazar Ferrer            |  | Chief Financial Officer                  |  | 1964         
|David Gastelum Cazares           |  | Director of Sales                        |  | 1951         
|Jose Luis Lopez Lepe             |  | Director of Personnel                    |  | 1947         
|Ernesto Salmon Castelo           |  | Director of Operations                   |  | 1962         
|Andres Morales Astiazaran        |  | Director of Marketing*                   |  | 1968         
|Marco Antonio Esparza Serrano    |  | Comptroller Director                     |  | 1955         
|Alejandro Elias Calles Gutierrez |  | Director of Purchasing                   |  | 1956         

*Director of Marketing
and Modern Segment Sales



Rodolfo Ramos Arvizu,Chief Executive Officer.Mr. Ramos joined us in 1980 and, he was named as Chief Executive Officer in November 2010.
Previously, Mr. Ramos 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. Ramos holds a degree in Agricultural Engineering from the ITESM.



Paul Fox,CEO,
U.S. Operations.Paul joined us in 2012 shortly after we acquired our U.S. operations. Paul started his career with
Tyson Foods serving in domestic and international leadership positions during 17 years prior to serving as a private equity CEO
and Managing Director with Marfrig. Mr. Fox received a BS in Animal Science from Missouri State University and MS in Leadership
and Ethics from John Brown University.



Daniel Salazar
Ferrer, Chief Financial Officer. Hejoined 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 Mexicoand a master’s degree
in Business Administration from theITESM, and Diploma from the IPADE (D1).



David Gastelum
Cazares, Director of Sales. He joining us in 1979 and assumed his current position in 1992. Previously, Mr. Gastelum
served as a pullet salesman 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. Before joining us, Mr. Gastelum worked
at La Hacienda, S.A. de C.V. as Technical Advisor and as Area Officer for the Southeast Division. Mr. Gastelum holds a degree
in Veterinary Medicine from the school of Veterinary Medicine of the UNAM.



Jose Luis Lopez
Lepe,Director of Personnel since 1993, before joining us Mr. Lopez worked as a teacher in several institutions,
and also worked with Grupo Condumex, where he was Director of Personnel. Mr. Lopez holds a degree in Physics and Chemistry
from the Escuela Normal Superior and a degree in Business Administration from Instituto Tecnologico Autonomo de Mexico.



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 Instituto Tecnologico de Sonora and a master’s degree in Business Administrationfromthe
ITESM.



42







Andres Morales
Astiazaran,Director of Marketing and Modern Segment Sales (Value-added Products) 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 the ITESM and attended marketing courses at Northwestern
University, the University of Chicago, the ITESM and the IPADE (D1).



Marco
Antonio Esparza Serrano,Comptroller Director since March 2009. Before joining Bachoco, Mr. Esparza worked
for more than 25 years in the pharmaceutical industry for three multinational companies. During that time, Mr. Esparza managed
and directed every area within Finance and Administration as Accounting Manager, Tax Manager Comptroller, Financial Planning Director
and Finance Director. Mr. Esparza holds a degree in public accounting and several post-graduate diplomas in Business Administration,
Economics and Direction of Enterprises from universities such as Instituto Politecnico Nacional, University of California at Berkeley,
theITESM, University of Almeria Spain and the IPADE.



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,” Chaiman 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.



Audit Committee and Corporate
Practices



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. In particular, pursuant to our
bylaws and Mexican law, among others, the Audit Committee and Corporate Practices 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





43







At our annual stockholders’
meeting held on April 27, 2011, Mr. Felizardo Gastelum Felix was elected to the Board of Directors, as President of the Audit and
Corporate Practices Committee and Financial Expert. Mr. Felizardo Gastelum Felix performed these roles in an exemplary manner until
his death on April 18, 2012.



At our annual stockholders’
meeting held on April 25, 2012, we ratified the membership of the Audit and Corporate Practices Committee, which is composed of
the following members:



|Name                         |  | Position
|---------------------------- |  | --------
|Humberto Schwarzbeck Noriega |  | Member  
|Ricardo Aguirre Borboa       |  | Member  
|Avelino Fernandez Salido     |  | Member  



Mr. Avelino Fernandez
was the President of the Audit Committee from April 2007 until April 2011, when Mr. Felizardo Gastelum Felix succeeded him to the
Presidency. Mr. Felizardo Gastelum Felix performed these roles in an exemplary manner until his death on April 18, 2012. Currently,
we do not have a President of the Audit and Corporate Practices Committee.



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



| | 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, 2009, 2010 and 2011.





|                  |  |     | In million of Mexican Pesos | 
|----------------- |  | --- | --------------------------- | 
|                  |  |     | 2009                        | 
|Compensation, net |  | Ps. | 35.2                        | 





| | 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.



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



|Workforce        |  | 2009 |        |  | 2010 |  |        | 2011 | 
|---------------- |  | ---- | ------ |  | ---- |  | ------ | ---- | 
|Total Employees: |  |      | 24,065 |  |      |  | 23,473 |      | 
|in Mexico        |  |      | 24,065 |  |      |  | 23,473 |      | 
|In the U.S.      |  |      | -      |  |      |  | -      |      | 



In 2011, around 60.0%
of our employees were members of labor unions in our operations in Mexico. As of March 2012 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.



44







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 a pension and savings plan.



In our U.S. operations
none of our employees are members of labor unions. As of the date of this Annual Report labor relations with our U.S. employees
are not governed by any collective labor bargaining agreements



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.



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.



| | 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.



ITEM
7.Major Stockholders and Related Party Transactions



Before September 2006,
our Common Stock 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 ADS 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 Series B Shares with full voting rights.



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



The Robinson Bours family
owns the 82.75% of the total shares outstanding of the Company. They have established two Mexican trusts (“Control Trust”
and “Family Trust”) that together held 496,500,000Shares outstanding as of the date of this Annual Report.



45







The following table sets
forth the Company’s main shareholders as of December 31, 2011.



|                                   |  | Shares |             |  | Position |  |       | Country | 
|---------------------------------- |  | ------ | ----------- |  | -------- |  | ----- | ------- | 
|Control Trust                      |  |        | 312,000,000 |  |          |  | 52.00 | %       | 
|Family Trust                       |  |        | 184,500,000 |  |          |  | 30.75 | %       | 
|Royce & Associates LLC             |  |        | 19,653,228  |  |          |  | 3.3   | %       | 
|Fidelity Management & Research Co. |  |        | 12,000,000  |  |          |  | 2.0   | %       | 
|River Road Asset Management LLC    |  |        | 9,826,488   |  |          |  | 1.6   | %       | 
|Tradewinds Global Investor LLC     |  |        | 6,023,016   |  |          |  | 1.0   | %       | 

All shares B Class with
full voting rights.



As of March 31, 2012
there have been no changes in the composition of the main shareholders of the Company.



As of December 31, 2011,
from the 100.0% of the total Shares of the Company, there were approximately 40 shareholders in the NYSE (there are no changes
as of March 31, 2012). On the same date, there were 5,221,136 ADSs outstanding on the NYSE (There were 6,071,748 ADSs as of December
31, 2011), representing 10.4% of the total Shares of the Company or the 60.5% of the free float. Based on these figures, we can
assume that the 39.5% remaining is trading at the Mexican Stock Exchange. According with most recent information providing by Stock
houses at the date of our 2011 Bachoco’s Stockholders Annual meeting, we accounted with 247 Shareholders at the BMV.



| | 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.



46







Neither we nor our subsidiaries
have loaned any money to any of our directors or officers, controlling shareholders or entities controlled by these parties.



|                                            |  | In million of Mexican Pesos |    
|------------------------------------------- |  | --------------------------- | ---
|Third Parties Transactions                  |  | 2009                        |    
|Purchases of feed and packaging materials   |  | Ps.                         | 415
|Purchases of vehicles and related equipment |  | Ps.                         | 139
|Air Transportation Services                 |  | Ps.                         | 10 
|Accounts payable to third parties           |  | Ps.                         | 68 

See Note 6 to our Audited
Consolidated Financial Statements for more detail.



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



Not applicable.



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 financial statements were audited by an independent
registered public accounting firm and are accompanied by their audit reports.



In 2008, the Company’s
Board of Directors, as per the Audit Committee’s recommendation, approved the selection of KPMG Cardenas Dosal, S.C. as the
Company’s independent auditor. The Board of Directors has ratified the appointment of KPMG, Cardenas Dosal, S.C. in the subsequent
years.



Our Audited Consolidated
Financial Statements have been prepared in accordance with Mexican FRS, which differ in certain respects from U.S. GAAP. Note 23
to our Audited Consolidated Financial Statements provides a description of the principal differences between Mexican FRS and U.S.
GAAP as they relate to us and a reconciliation to U.S. GAAP of Consolidated stockholders’ equity, consolidated net income,
a consolidated statement of stockholders’ equity and a consolidated cash flow statements under U.S. GAAP as of December 31,
2010 and 2011, and for the years ended December 31, 2009, 2010 and 2011.



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.



47









At the Company's annual
shareholder's meeting held on April 25, 2012, the Board of Directors approved a cash dividend payment of Ps. 0.50 per share or
Ps. 6.00 per ADS to be paid in two equal installments in the months of May and July of 2012.





|                                   |  | For years ended December 31, |      
|---------------------------------- |  | ---------------------------- | -----
|Dividends                          |  | 2009                         |      
|Total dividends paid (in millions) |  | Ps.                          | 250.0
|Dividend paid per Share (in pesos) |  | Ps.                          | 0.42 
|Dividends paid per ADS (in pesos)  |  | Ps.                          | 5.0  



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 (after profit sharing and other deductions required by Mexican law) 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 level of earnings available for the payment of dividends is determined under Mexican FRS.



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



In January, 2009, the
Mexican Banking and Securities Commission (Comision Nacional Bancaria y de Valores, “CNBV”) published certain amendments
to the Rules for Public Companies and other participants in the Mexican Securities Market (Disposiciones de Caracter General Aplicables
a las Emisoras de Valores y a otros Participantes del Mercado de Valores – the “Rules”) that require public companies
to report financial information in accordance with the International Financial Reporting Standards (“IFRS”) issued
by the International Accounting Standards Board (“IASB”), effective as of January 1st 2012.



On January 1, 2012, we
adopted IFRS, meeting the CNBV requirements. The Company must release its first quarter, 2012 unaudited results under IFRS, no
later than May 2, 2012. IFRS differs in certain significant respects from Mexican FRS. See Note 22 to our Consolidated Financial
Statements for a description of the principal differences among IFRS and Mexican FRS as they apply to us.



48







We believe that the adoption
of IFRS will provide more certainty to our international investors, and will cut some of the costs we incur in adjusting our financial
information to foreign financial reporting requirements.



ITEM
9.The Offer and Listing



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



We trade with fully registered
shares, comprising one single class of shares with full rights. On the NYSE, each of our ADSs represents twelve shares. The Bank
of New York Mellon is our Depositary Bank.



The following tables set forth the high, low
and close prices of the Shares on the BMV and NYSE, reported by this companies, for each of the periods indicated.



|         |  | Mexican Stock Exchange      |       |  | The New York Stock Exchange | 
|-------- |  | --------------------------- | ----- |  | --------------------------- | 
|         |  | Ticker Symbol: Bachoco      |       |  | Ticker Symbol: IBA          | 
|         |  | In  nominal pesos per Share |       |  | In U.S. Dollar per ADS      | 
|Year     |  | High                        |       |  | Low                         | 
|2007     |  |                             | 30.96 |  |                             | 
|2008     |  |                             | 30.15 |  |                             | 
|2009     |  |                             | 26.00 |  |                             | 
|2010     |  |                             | 26.99 |  |                             | 
|2011     |  |                             | 27.86 |  |                             | 
|Quarter  |  |                             |       |  |                             | 
|1Q-2010  |  |                             | 25.45 |  |                             | 
|2Q-2010  |  |                             | 24.50 |  |                             | 
|3Q-2010  |  |                             | 21.50 |  |                             | 
|4Q-2010  |  |                             | 26.99 |  |                             | 
|1Q-2011  |  |                             | 27.84 |  |                             | 
|2Q-2011  |  |                             | 27.86 |  |                             | 
|3Q-2011  |  |                             | 25.87 |  |                             | 
|4Q-2011  |  |                             | 25.50 |  |                             | 
|Month    |  |                             |       |  |                             | 
|Oct 2011 |  |                             | 25.50 |  |                             | 
|Nov 2011 |  |                             | 24.58 |  |                             | 
|Dec 2011 |  |                             | 23.08 |  |                             | 
|Jan 2012 |  |                             | 22.10 |  |                             | 
|Feb 2012 |  |                             | 23.30 |  |                             | 
|Mar 2012 |  |                             | 22.60 |  |                             | 



Market Maker



On January 24, 2011, the Company announced
the hiring of Accival as its market maker in order to promote and increase liquidity of its shares listed on the BMV.



The market maker was traded for
two periods of six months and ended its operation on December 24, 2011. Although there was a significant increase in trading volume,
the Company decided not to renew a third period with the market maker, but we can hire Accival in 2012 if the Company considers
appropriate for the operation of its securities.



49







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



Not applicable.



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



On September 19,
1997, Bachoco commenced trading on the BMV, and on the NYSE. As of March 31, 2012 there were 5,221,136 ADSs outstanding at the
NYSE, It represents 10.4% of the total Shares of the Company or the 60.5% of the free float. Based on these figures, we can assume
that the 39.5% remaining is trading at the Mexican Stock Exchange, besides the 82.75% of shares that owns the Robinson Bours Family.



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



| | 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.



50







General



The Company was incorporated
on April 17, 1980 as a variable capital corporation (sociedad anonima de capital variable) 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. (sociedad anonima bursatil
de capital variable) in April 2007.



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



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



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



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



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



|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”

An English translation
of our complete bylaws is attached in this annual report.



51







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 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.



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.



52







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.



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 bylawsrequire
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 bylawsto 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 ADSs 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.



53







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.”



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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------



54







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,
2012, 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 ADSs 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).



Except under limited
circumstances, the bylawsrequire 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—Purchase by the Company of its Shares” and “Other Provisions—Appraisal Rights.”



55







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 ADSs being offered in the Global Offering. Holders of ADSs
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.



56







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 bylawsprovide 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 ADSs) 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 bylawsof all Mexican corporations unless such bylawsprohibit
ownership of capital stock by foreign investors.



Exclusive Jurisdiction.Our bylawsprovide 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.



57







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:



| | - | 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



58









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 ADSs. This summary does not purport to address all material tax consequences
that may be relevant to holders of Shares or ADSs, 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 ADSs 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.



59









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



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



| | - | a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) 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 a partnership holds
Shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of
the partnership. A partner of a partnership considering the purchase of Shares or ADSs should consult its own independent tax advisor
regarding the U.S. federal income tax consequences of investing in Shares or ADSs 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 and Mexico, judicial decisions, published rulings
and administrative pronouncements, all as in effect on the date hereof, and all of which are subject to change (and some changes
may have retroactive effect) and different interpretations. Further, this discussion does not address U.S. federal estate and gift
tax or the alternative minimum tax consequences of holding Shares or ADSs or the indirect consequences to holders or equity interests
in partnerships (or any other entity treated as a partnership for U.S. federal income tax purposes) that own Shares or ADSs. In
addition, this discussion does not address the non-U.S., non-Mexican, state or local tax consequences of holding Shares or ADSs.
Prospective purchasers of Shares or ADSs 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 ADSs, 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 ADSs. However, see the discussion below under “Taxation of Dividends” regarding certain statements made by
the U.S. Treasury concerning depository arrangements.



60







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 our Shares and of ADSs that are U.S. Holders and
that hold those Shares or ADSs as capital assets (generally, for investment purposes).



Taxation of Dividends



Cash distributions paid
with respect to the Shares or ADSs 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 ADSs. 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 ADSs. 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 ADSs 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 ADSs 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 ADSs are released may be taking actions that are inconsistent
with the claiming of foreign tax credits by U.S. Holders of such ADSs. 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 ADSs (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 to corporate
U.S. Holders will not be eligible for the dividends-received deduction allowed to corporations under the Internal Revenue Code
of 1986, as amended (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 U.S. Holders (including individuals) prior to January 1,
2013 with respect to the Shares or ADSs will be subject to U.S. federal income taxation at a maximum rate of 15.0% if such dividends
represent “qualified dividend income.” Dividends paid on the ADSs will be treated as qualified dividend income if (i) we
are eligible for the benefits of the Tax Treaty or the ADSs 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 elegible dor the benefits of the Tax Treaty. In Addition, under current guidance
recently issued by the Internal Revenue Service (“IRS”), the ADSs 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 ADSs will be or remain readily tradable under future guidance.



61







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 ADSs
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 ADSs 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 ADSs 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.



Taxation of Capital Gains



Gain or loss recognized
by a U.S. Holder on the sale or other taxable disposition of Shares or ADSs 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 ADSs and the amount realized on the disposition. A U.S. Holder generally will have an adjusted tax basis in its Shares or ADSs
equal to its U.S. dollar cost for such Shares or ADSs. Gain or loss recognized by a U.S. Holder on the sale or other disposition
of Shares or ADSs will generally be long-term gain or loss if, at the time of disposition, the U.S. Holder has held the Shares
or ADSs for more than one year.



Certain 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 ADSs 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 ADSs.



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



62







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 suffering from different interpretations. In addition, the PFIC determination is made
annually and generally is based on the value of a non-U.S. corporation’s assets (including goodwill) and composition of its
income. In determining whether we are a PFIC, a pro rata portion of the income and assets of each subsidiary in which we own, directly
or indirectly, at least a 25.0% interest by value is taken into account.



Based on current estimates
of our income and assets, we do not believe that we were classified for our most recently-ended taxable year, or will be classified
for our current taxable year, as a PFIC for U.S. federal income tax purposes, and we intend to continue our operations in such
a manner that we will not become a PFIC in the future, although no assurances can be made regarding determination of our PFIC status
in the current or any future taxable year. If we are treated as a PFIC for any taxable year, a U.S. Holder would be subject to
special rules (and may be subject to increased tax liability and form filing requirements) with respect to (a) any gain
realized on the sale or other disposition of Shares or ADSs, 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 ADSs
exceed 125.0% of the average annual distributions the U.S. Holder received on the Shares or ADSs during the preceding three taxable
years or, if shorter, the U.S. Holder’s holding period for the Shares or ADSs). 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 ADSs, (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.
U.S. Holders should also be aware that recently enacted legislation may broaden the current IRS Form 8621 filing requirements or
impose an additional annual filing requirement for U.S. persons owning shares of a PFIC. The legislation does not describe what
information would be required to be included in either situation, but grants the Secretary of the U.S. Treasury Department power
to make this determination. Moreover, dividends that a U.S. Holder receives from us will not be eligible for the reduced U.S. federal
income tax rates described above for qualified dividend income if we are a PFIC either in the taxable year of the distribution
or the preceding taxable year (and instead will be taxable at rates applicable to ordinary income).



Prospective investors
should consult their own tax advisors regarding the potential application of the PFIC rules to Shares or ADSs 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 ADSs 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 ADSs will not be subject
to dividend or U.S. federal income or withholding tax on a dividend paid by us or gain realized on the sale of Shares or ADSs,
unless (i) such 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.



63







U.S. Backup Withholding and Information
Reporting



In general, dividends
on Shares or ADSs, and payments of the proceeds of a sale or other taxable disposition of Shares or ADSs, 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 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 to a U.S. Holder will be allowed as a credit
against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely furnished to
the IRS. A U.S. Holder generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed its
U.S. federal income tax liability by filing a timely refund claim with the IRS.



In addition, U.S. Holders
should be aware that recently enacted legislation imposes new reporting requirements with respect to the holding of foreign financial
assets, including stock of foreign issuers, 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 the recently enacted legislation to their particular situation.



Mexican Taxation



Taxation of Dividends



Dividends, either in
cash or in any other form, paid with respect to the Shares constituting the Shares or the ADSs will not be subject to Mexican withholding
tax.



Taxation of Capital Gains



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



64







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 ADSs were amended during
2002. Holders who are not Mexican Residents who disposed of their Shares or ADSs 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.



Other Mexican Taxes



There are no Mexican
inheritance, succession or similar taxes applicable to the ownership, transfer or disposition of ADSs 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 ADSs or Shares. Brokerage fees on securities transactions carried out through the
Mexican Stock Exchange are subject to a 15% for 2008 and 2009 and 16% for 2010, 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 Ave. Tecnologico No. 401, Ciudad
Industrial, Celaya, Guanajuato, 38010, Mexico, for any inspection required. Part of this information is available on our web page,
at www.bachoco.com.mx.



65







| | 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.



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 2009, we had a foreign
exchange loss of Ps. 38.0 million because of the slightly decreased volatility of the Mexican peso. The net interest expense and
the valuation effects of our financial instrument totaled Ps. 95 million as of December 31, 2009.



In 2010, we had a foreign
exchange gain of Ps. 11.1 million because of the stronger and more stable peso due to the growth of the Mexican economy in 2010.
The net interest income and the valuation effects of our financial instrument totaled Ps. 111.0 million as of December 31, 2010.



During 2011, we had a
foreign exchange gain of Ps. 54.7 million, even when the peso was volatile during the year, our investments allowed us to register
this gain. As of the same date, the net interest income and the valuation effects of our financial instruments totaled $123.1 million.



We manage our exchange
rate exposure primarily through management of our financial structure, specifically by maintaining most of our debt through long-term
debt instruments. As part of our normal operations, we purchase financial derivative instruments in order to ensure greater certainty
in our purchases of U.S. dollars. 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.



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.



We have followed different
strategies with respect to derivatives which involved call and put options in U.S. dollars. In 2009 and, 2010 we did not have bank
debt denominated in U.S. dollars. During 2011, the Company acquired a one-year bank credit of US$75 million dollars, equivalent
to Ps. 1,047.7 million in pesos. The interest rate of this credit is LIBOR plus 0.60 points.



For details, please
see Note 12 to our Audited Consolidated Financial Statements.



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 month 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.



66







Based
on our derivatives position On December 31, 2011, we estimate that a hypothetical 2.5% devaluation of the Mexican peso against
the U.S. dollar would result in gains of Ps. 0.2 million, while a 5.0% appreciation would result in a loss of Ps. 0.5 million



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, 2011, we had borrowings of approximately Ps. 1,879.1 million pursuant to variable rate debt instruments, representing
approximately 8.0% of our total assets.



Based
on our position on December 31, 2011, we estimate that a hypothetical interest rate variation of 0.5% on our Mexican peso denominated
debt would result in increased interest expenses of approximately Ps. 9.3 million per annum. Any such increase would likely be
partially offset by an increase in interest income due to our 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.



The percentage of grain
purchased from domestic markets was 48.0%, 54.0% and 44.6% in 2009, 2010 and 2011 respectively.



Based on results for 2011, we estimate
that a hypothetical variation of 10.0% in the cost of our feed ingredients would have an impact of 7.1% on total cost of sales.



ITEM
12.Description of Securities Other Than Equity Securities



| | A. | Debt Securities
| | -- | ---------------



Not applicable.



| | B. | Warrants and Rights
| | -- | -------------------



Not applicable.



| | C. | Other Securities
| | -- | ----------------



Not applicable.



| | D. | American Depository Receipts
| | -- | ----------------------------



The Bank of New York Mellon (or “BONY”)
has been our Depositary Bank since the day of our initial public offering of shares continues to act in that capacity as of the
date of this document. BONY is located in Church Street Station, in New York, N.Y. 100286.



67







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



Our Depositary may charge each person to
whom ADSs 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 ADSs or deposited securities, and each person surrendering
ADSs for withdrawal of deposited securities in any manner permitted by the deposit agreement or whose ADSs are cancelled or reduced
for any other reason, [US$5.00 for each 100 ADSs] (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 ADSs directly from investors depositing shares or surrendering ADSs 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 ADS holders, by any party depositing or withdrawing shares or by any party surrendering ADSs or to whom ADSs
are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of
stock regarding the ADSs or the deposited securities or a distribution of ADSs), whichever is applicable:



|Persons depositing or withdrawing shares
must pay:                                                                                                                                         |  | For:                                                                                                                                                                                                                                   
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)                                                                                                                                      |  | • Issuance of ADSs, including issuances resulting
        from a distribution of shares or rights or other property
        • Cancellation of ADSs for the purpose of withdrawal,
        including if the deposit agreement terminates
|$.02 (or less) per ADS                                                                                                                                                                     |  | • Any cash distribution to ADS 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 ADSs                                  |  | • Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADS registered holders                                                                                          
|$.02 (or less) per ADSs per calendar year                                                                                                                                                  |  | • Depositary services                                                                                                                                                                                                                  
|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 ADS or share underlying an ADS, 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                                                                                                                                                                                                                         



68







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.



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 ADS 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 ADSs, 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 ADS 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, as of June 18, 2010 we recorded an account receivable in 2010 and 2011 amounting to US$200,000 for expenses we incurred
related to the maintenance of our ADS program, including investor relations expenses and exchange application and listing fees.
We anticipate this amount to be paid by our Depositary during the first half of 2012.



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, 2011.



We acquired OK Industries, Inc., and subsidiaries (OK Industries) on November 1, 2011, with total assets of 1,848,660 Ps.
and total revenues of 1,378,779 Ps. that represent 8% and 5%, respectively, of the related consolidated financial statements
of Industrias Bachoco, S.A.B. de C.V. and subsidiaries as of and for the year ended December 31, 2011. As the acquisition
occurred in the fourth quarter of 2011, the scope of our assessment of the effectiveness of internal control over financial
reporting does not include OK Industries. This exclusion is in accordance with the SEC’s general guidance that an assessment
of a recently acquired business may be omitted from our scope in the year of acquisition.



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 and as of the date of
our evaluation, 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 is recorded, processed, summarized and reported as and when required.



69







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) 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 Mexican FRS.



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



Management assessed the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework. Based on this assessment, management concluded that, as of December 31, 2011, the Company’s
internal control over financial reporting is effective based on those criteria.



The effectiveness of
the Company’s internal control over financial reporting as of December 31, 2011, has been audited by KPMG Cardenas Dosal
S.C., an independent registered public accounting firm, as stated in their report which appears herein.



Changes in Internal Control Over Financial
Reporting



There has been no change
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



The Board of Directors and Stockholders



Industrias Bachoco, S. A. B. de C. V.:



(Thousands of pesos)

We have audited Industrias
Bachoco, S.A.B. de C.V.’s internal control over financial reporting as of December 31, 2011, based on criteria established
in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Industrias Bachoco, S.A.B. de C.V.’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 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.



70







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, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audit also included 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 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 its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of 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.



In our opinion, Industrias
Bachoco, S.A.B. de C.V. maintained, in all material respects, effective internal control over financial reporting as of December
31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission.





The Company acquired OK Industries, Inc. and subsidiaries (OK
Industries) on November 1, 2011, and management excluded from its assessment of the effectiveness of the Company’s internal
control over financial reporting as of December 31, 2011, OK Industries’ internal control over financial reporting associated
with total assets of $1,848,660 and total revenues of $1,378,779 that represent 8% and 5%, respectively, of the related consolidated
financial statements of Industrias Bachoco, S.A.B. de C.V. and subsidiaries as of and for the year ended December 31, 2011. Our
audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial
reporting of OK Industries.





We also have audited,
in accordance with the standards of the Public Company Accounting Oversight Board (United States) and with auditing standards generally
accepted in Mexico, the consolidated statements of financial position of Industrias Bachoco, S.A.B. de C.V. and subsidiaries as
of December 31, 2010 and 2011, and the related consolidated statements of income, stockholders’ equity, and cash flows for
each of the years in the three-year period ended December 31, 2011, and our report dated April 30, 2012 expressed an unqualified
opinion on those consolidated financial statements



Queretaro, Mexico, April
30, 2012.



|By: | /s/Demetrio Villa Michel  
|--- | --------------------------
|    | KPMG, Cardenas Dosal, S.C.



71







ITEM
16.[Reserved]



ITEM
16.A.Audit Committee Financial Expert



In April 2011, Mr. Felizardo
Gastelum Felix, Independent Director, was named as President of the Audit Committee and Corporate Practices. Until his death on
April 18, 2012, Mr. Felizardo Gastelum Felix met the requirements included in the definition of an “audit committee financial
expert” within the meaning of this Item 16A and performed this role in an exemplary manner. Currently, no member of our audit
committee possesses all the characteristics included in the definition of an “audit committee financial expert” within
the meaning of this Item 16A. We consider that the combined financial expertise of the members of our audit committee meet much
of this requirement. Our audit committee has the authority and appropriate funding to obtain outside advice, as it deems necessary,
to carry out its duties.



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, controllerand 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 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
on our website at the same address.



ITEM
16.C.Principal Accountant Fees and Services



Audit and Non-Audit Fees



The following table sets
forth the fees billed by our independent auditors KPMG Cardenas Dosal, S.C. independent registered public accounting firm and aid
by us. All amounts are in nominal thousand pesos, prior to taxes.



|                           |  | In thousand of pesos as of December 31 of, |      
|-------------------------- |  | ------------------------------------------ | -----
|KPMG, Cardenas Dosal, S.C. |  | 2010                                       |      
|Total fees                 |  | Ps.                                        | 9,500
|Audit fees                 |  |                                            | 7,184
|Audit related fees         |  |                                            | 1,602
|Taxes fees                 |  |                                            | 0    
|Other                      |  |                                            | 713  



The total 2010 and 2011
audit fees agreed to be paid to KPMG Cardenas Dosal, S.C. is Ps. 5.4million and, and Ps. 7.0 million respectively.



Audit related fees in
the table above for 2011 are fees billed by KPMG Cardenas Dosal, S.C. related to expenses they incurred in connection with the
performance of their audit, such as lodging and traveling.



Fees included in "other"
are related to Due Diligence as well as services related to the adoption of the IFRS.



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.



72







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 repurchased plan is approve
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.





|Year |  | Starting date  |  | Expiration date |  | Amount  in pesos |             | Estimate number of shares that may be purchased under the plan |           
|---- |  | -------------- |  | --------------- |  | ---------------- | ----------- | -------------------------------------------------------------- | ----------
|2010 |  | April 28, 2010 |  | April 27, 2011  |  | Ps.              | 273,120,000 |                                                                | 12,000,000
|2011 |  | April 27, 2011 |  | April 25, 2012  |  | Ps.              | 335,640,000 |                                                                | 12,000,000
|2012 |  | April 25, 2012 |  | April 24, 2013  |  | Ps.              | 195,770,700 |                                                                | 12,000,000



(1) The amount includes current
shares in the repurchased plan.





73







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



|Period of 2011 |  | Total number of shares purchased |         |  | Average price paid per share, in Mexican pesos |     |       | Total number of Shares purchased as part of the publicly Announced plan |  |  | Estimate maximum number of shares that may yet be purchased under the plan | 
|-------------- |  | -------------------------------- | ------- |  | ---------------------------------------------- | --- | ----- | ----------------------------------------------------------------------- |  |  | -------------------------------------------------------------------------- | 
|January        |  |                                  | 30,000  |  |                                                | Ps. | 25.80 |                                                                         |  |  | 30,000                                                                     | 
|February       |  |                                  | -       |  |                                                |     | -     |                                                                         |  |  | -                                                                          | 
|March          |  |                                  | -       |  |                                                |     | -     |                                                                         |  |  | -                                                                          | 
|April          |  |                                  | 10,000  |  |                                                |     | 27.10 |                                                                         |  |  | 10,000                                                                     | 
|May            |  |                                  | 40,100  |  |                                                |     | 25.19 |                                                                         |  |  | 40,100                                                                     | 
|June           |  |                                  | 37,300  |  |                                                |     | 25.04 |                                                                         |  |  | 37,300                                                                     | 
|July           |  |                                  | -       |  |                                                |     | -     |                                                                         |  |  | -                                                                          | 
|August         |  |                                  | 32,200  |  |                                                |     | 21.33 |                                                                         |  |  | 32,200                                                                     | 
|September      |  |                                  | 10,000  |  |                                                |     | 24.58 |                                                                         |  |  | 10,000                                                                     | 
|October        |  |                                  | -       |  |                                                |     | -     |                                                                         |  |  | -                                                                          | 
|November       |  |                                  | 70,000  |  |                                                |     | 23.37 |                                                                         |  |  | 70,000                                                                     | 
|December       |  |                                  | 27,800  |  |                                                |     | 21.02 |                                                                         |  |  | 27,800                                                                     | 
|Total 2011     |  |                                  | 257,400 |  |                                                | Ps. | 23.81 |                                                                         |  |  | 257,400                                                                    | 



|Period of 
2012 |  | Total number of
shares
purchased |           |  | Average price paid
per share, in
Mexican pesos |     |       | Total number of
Shares purchased as
part of the publicly
 Announced plan |  |  | Estimate maximum
number of shares
that may yet be
purchased under
the plan | 
|--------------- |  | -------------------------------- | --------- |  | ---------------------------------------------- | --- | ----- | ------------------------------------------------------------------------ |  |  | -------------------------------------------------------------------------- | 
|January 2012    |  |                                  | 43,700    |  |                                                | Ps. | 21.85 |                                                                          |  |  | 43,700                                                                     | 
|February 2012   |  |                                  | 2,083,381 |  |                                                |     | 22.73 |                                                                          |  |  | 2,083,381                                                                  | 
|March 2012      |  |                                  | 609,500   |  |                                                |     | 22.08 |                                                                          |  |  | 609,500                                                                    | 
|Total 2012      |  |                                  | 2,536,581 |  |                                                | Ps. | 22.20 |                                                                          |  |  | 2,536,581                                                                  | 



|Balance as of March 31, 2012                              |  | Shares |          
|--------------------------------------------------------- |  | ------ | ---------
|Total shares purchased as of December 31, 2010            |  |        | 200,000  
|(+) Total shares purchased in 2011                        |  |        | 257,400  
|(-) Total shares sold in 2011                             |  |        | 230,000  
|(+) Total shares purchased as of March 31, 2012           |  |        | 2,736,581
|(-) Total shares sold as of March 31, 2012                |  |        | 12,900   
|Total shares in the repurchased plan as of March 31, 2012 |  |        | 2,951,081



ITEM
16.F.Changes in Registrant’s Certifying Accountant



Not applicable.



74







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 Domestic
        Issuers                                                                                                                                   |  | 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;                                                                                                                                                                



75







|NYSE Corporate Governance Rules for Domestic
        Issuers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | 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;                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(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                                                                                                                                                                                                                                                                                                         



76







|NYSE Corporate Governance Rules for Domestic
        Issuers                                                                                                                                                                                                                                                                                                         |  | 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.



77







|NYSE Corporate Governance Rules for Domestic
        Issuers                                                                                                                                                                                                                                                                                                                      |  | 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.





78







PART III



ITEM
17.Financial Statements



Not applicable.



ITEM
18.Financial Statements



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



ITEM
19.Exhibits



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.                                                                                                                                                                                                                                                                                                                                                



79







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 30, 2012













Consolidated
Financial Statements





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



At December 31, 2010 and 2011 and
for the years ended December 31, 2009, 2010 and 2011

(With Independent Auditors’
Reports’ Thereon)

(Translation from Spanish
Language Original)



|Contents                                        |    
|----------------------------------------------- | ---
|                                                |    
|Independent Auditor’s Report                    | F-2
|Consolidated Statement of Financial Position    | F-4
|Consolidated Statements of Income               | F-5
|Consolidated Statements of Stockholders' Equity | F-6
|Consolidated Statement of Cash Flows            | F-7
|Notes to the Consolidated Financial Statements  | F-8



F-1









Independent Auditors’ Report

(Translation from Spanish Language Original)



The Board of Directors and Stockholders

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, 2010 and 2011, and the related consolidated statements of income, stockholders’ equity,
and cash flows for each of the years in the three-year period ended December 31, 2011. These consolidated financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States) and with auditing standards generally accepted in Mexico. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the 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, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Industrias Bachoco, S.A.B. de C.V. and subsidiaries as of December 31, 2010 and 2011, and the results of their operations
and their cash flows for each of the years in the three-year period ended December 31, 2011, in conformity with Mexican Financial
Reporting Standards.



As mentioned in note 1 to the consolidated financial statements, on November 1, 2011 the Company acquired
100% of the voting stock of OK Industries, Inc. (which owns five consolidated subsidiaries). OK Industries, Inc. operates
and is located in the United States of America. The results of operation of the acquired subsidiary are included in the Company ́s
consolidated financial statements from such date.



As disclosed in note 3 to the consolidated financial statements, new and
revised Mexican Financial Reporting Standards were adopted in 2011, with prospective or retrospective application, being specified
in each case.



Our audits were made for the purpose of forming an opinion expressed in the third paragraph above. The supplementary
information related to the translation of the financial position as of December 31, 2011 and the related consolidated statements
of income and cash flows for the year then ended from Mexican pesos into United States dollars in accordance with the basis
described in note 2(aa) and prepared under the responsibility of the Company ́s management, is presented solely for convenience
of the reader, and it is not required for the interpretation of the consolidated financial statements. In our opinion, such
additional information is fairly stated in all material respects, in relation to the consolidated financial statements.



Mexican
Financial Reporting Standards vary in certain significant respects from generally accepted accounting principles in the United
States of America. Information relating to the nature and effect of such differences is presented in note 23 to the consolidated
financial statements.







F-2







We also have audited, in accordance with
the standards of the Public Company Accounting Oversight Board (United States), Industrias Bachoco, S. A. B. de C. V.’s
internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated April 30,
2012 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting





Queretaro, Mexico

April 30, 2012







|By: | /s/Demetrio Villa
    Michel | 
|--- | ---------------------------- | 
|    | KPMG, Cardenas Dosal, S.C.   | 



F-3









Consolidated Statement of Financial
Position

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

December 31, 2010 and 2011

(Thousands of pesos)



|                                                          |  |      |            |  |      |  |            | (Thousands of U.S. dollars) (note 2aa) | 
|--------------------------------------------------------- |  | ---- | ---------- |  | ---- |  | ---------- | -------------------------------------- | 
|                                                          |  | 2010 |            |  | 2011 |  |            | 2011                                   | 
|Assets                                                    |  |      |            |  |      |  |            |                                        | 
|                                                          |  |      |            |  |      |  |            |                                        | 
|Current assets:                                           |  |      |            |  |      |  |            |                                        | 
|Cash and cash equivalents (note 4)                        |  | $    | 3,967,874  |  |      |  | 2,625,661  |                                        | 
|Primary financial instruments (note 13b)                  |  |      | 209,348    |  |      |  | 410,721    |                                        | 
|Accounts receivable:                                      |  |      |            |  |      |  |            |                                        | 
|Trade, net (note 5)                                       |  |      | 963,273    |  |      |  | 1,507,095  |                                        | 
|Value added and other recoverable taxes                   |  |      | 473,228    |  |      |  | 728,057    |                                        | 
|                                                          |  |      |            |  |      |  |            |                                        | 
|Total accounts receivable                                 |  |      | 1,436,501  |  |      |  | 2,235,152  |                                        | 
|                                                          |  |      |            |  |      |  |            |                                        | 
|Inventories, net (notes 3 and 7a)                         |  |      | 3,211,769  |  |      |  | 4,592,551  |                                        | 
|Biological current assets (note 7b)                       |  |      | 153,993    |  |      |  | 187,157    |                                        | 
|Derivative financial instruments (note 13a)               |  |      | 12,897     |  |      |  | 10,208     |                                        | 
|Prepaid expenses and other current assets (notes 3 and 8) |  |      | 505,114    |  |      |  | 752,150    |                                        | 
|Assets available for sale                                 |  |      | 40,222     |  |      |  | 46,752     |                                        | 
|                                                          |  |      |            |  |      |  |            |                                        | 
|Total currents assets                                     |  |      | 9,537,718  |  |      |  | 10,860,352 |                                        | 
|                                                          |  |      |            |  |      |  |            |                                        | 
|Property, plant and equipment, net (notes 3 and 9)        |  |      | 10,544,031 |  |      |  | 10,440,253 |                                        | 
|Biological non-current assets (note 7b)                   |  |      | 750,288    |  |      |  | 1,029,643  |                                        | 
|Deferred income tax (note 19e)                            |  |      | -          |  |      |  | 174,141    |                                        | 
|Goodwill, net (note 10)                                   |  |      | 300,848    |  |      |  | 300,848    |                                        | 
|Other non-current assets (notes 3 and 11)                 |  |      | 64,883     |  |      |  | 364,637    |                                        | 
|                                                          |  |      |            |  |      |  |            |                                        | 
|Total assets                                              |  | $    | 21,197,768 |  |      |  | 23,169,874 |                                        | 



|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|--------------------------------------------------------- |  | - | ---------- |  |  |  | ---------- |  |  |  | --------- | 
|Liabilities and stockholders' equity                      |  |   |            |  |  |  |            |  |  |  |           | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Current liabilities:                                      |  |   |            |  |  |  |            |  |  |  |           | 
|Short term debt (note 12a)                                |  | $ | -          |  |  |  | 1,277,750  |  |  |  | 91,464    | 
|Current installments of long-term debt (note 12b)         |  |   | 139,867    |  |  |  | 175,243    |  |  |  | 12,544    | 
|Accounts payables                                         |  |   | 1,572,292  |  |  |  | 2,326,779  |  |  |  | 166,556   | 
|Related parties (note 6)                                  |  |   | 60,873     |  |  |  | 78,543     |  |  |  | 5,622     | 
|Other taxes payable and other accruals (note 15)          |  |   | 393,722    |  |  |  | 594,662    |  |  |  | 42,567    | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Total current liabilities                                 |  |   | 2,166,754  |  |  |  | 4,452,977  |  |  |  | 318,753   | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Long term liabilities:                                    |  |   |            |  |  |  |            |  |  |  |           | 
|Long term debt, excluding current installments (note 12b) |  |   | 507,053    |  |  |  | 384,370    |  |  |  | 27,514    | 
|Deferred income tax (note 19e)                            |  |   | 2,029,150  |  |  |  | 1,921,333  |  |  |  | 137,533   | 
|Labor obligations (note 17)                               |  |   | 126,457    |  |  |  | 142,088    |  |  |  | 10,171    | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Total liabilities                                         |  |   | 4,829,414  |  |  |  | 6,900,768  |  |  |  | 493,971   | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Stockholders' equity (note 18):                           |  |   |            |  |  |  |            |  |  |  |           | 
|Controlling interest:                                     |  |   |            |  |  |  |            |  |  |  |           | 
|Capital stock                                             |  |   | 2,294,927  |  |  |  | 2,294,927  |  |  |  | 164,275   | 
|Additional paid-in capital                                |  |   | 744,753    |  |  |  | 744,753    |  |  |  | 53,311    | 
|Reserve for repurchase of shares                          |  |   | 154,288    |  |  |  | 154,079    |  |  |  | 11,029    | 
|Retained earnings                                         |  |   | 11,139,037 |  |  |  | 12,822,461 |  |  |  | 917,857   | 
|Net controlling interest income of the year               |  |   | 1,983,350  |  |  |  | 157,041    |  |  |  | 11,241    | 
|Cumulative currency translation effect                    |  |   | -          |  |  |  | 35,636     |  |  |  | 2,551     | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Total controlling interest                                |  |   | 16,316,355 |  |  |  | 16,208,897 |  |  |  | 1,160,264 | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Non-controlling interest                                  |  |   | 51,999     |  |  |  | 60,209     |  |  |  | 4,310     | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Total stockholders' equity                                |  |   | 16,368,354 |  |  |  | 16,269,106 |  |  |  | 1,164,574 | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Commitments and contingencies (note 14)                   |  |   |            |  |  |  |            |  |  |  |           | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Subsequent events (note 22)                               |  |   |            |  |  |  |            |  |  |  |           | 
|                                                          |  |   |            |  |  |  |            |  |  |  |           | 
|Total liabilities and stockholders' equity                |  | $ | 21,197,768 |  |  |  | 23,169,874 |  |  |  | 1,658,545 | 



See accompanying notes to consolidated
financial statements.



F-4







Consolidated Statement of Income

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

December 31, 2009, 2010 and 2011

(Thousands of pesos,
except per share amount)



|                                                                   |  |      |             |   |      |  |             |      |  |  | (Thousands of  U.S. dollars) (note 2aa) |  
|------------------------------------------------------------------ |  | ---- | ----------- | - | ---- |  | ----------- | ---- |  |  | --------------------------------------- | -
|                                                                   |  | 2009 |             |   | 2010 |  |             | 2011 |  |  | 2011                                    |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Net revenues                                                       |  | $    | 23,262,850  |   |      |  | 24,715,456  |      |  |  | 27,734,990                              |  
|Cost of sales (note 6b)                                            |  |      | (19,326,759 | ) |      |  | (19,500,677 | )    |  |  | (24,773,216                             | )
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Gross profit                                                       |  |      | 3,936,091   |   |      |  | 5,214,779   |      |  |  | 2,961,774                               |  
|Selling, general and administrative expenses (note 6b)             |  |      | 2,522,291   |   |      |  | 2,751,782   |      |  |  | 2,951,887                               |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Operating income                                                   |  |      | 1,413,800   |   |      |  | 2,462,997   |      |  |  | 9,887                                   |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Other expense, net (note 20)                                       |  |      | (65,189     | ) |      |  | (95,315     | )    |  |  | (68,921                                 | )
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Comprehensive financial results:                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Interest income                                                    |  |      | 170,655     |   |      |  | 165,646     |      |  |  | 193,777                                 |  
|Valuation effects of financial instruments (note 13)               |  |      | (174,603    | ) |      |  | 18,850      |      |  |  | (896                                    | )
|Interest and financial expenses                                    |  |      | (91,326     | ) |      |  | (73,519     | )    |  |  | (69,744                                 | )
|Net interest income and valuation effects of financial instruments |  |      | (95,274     | ) |      |  | 110,977     |      |  |  | 123,137                                 |  
|Foreign exchange (loss) gain, net                                  |  |      | (37,934     | ) |      |  | 11,082      |      |  |  | 54,505                                  |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Comprehensive financial results, net                               |  |      | (133,208    | ) |      |  | 122,059     |      |  |  | 177,642                                 |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Income before income taxes, and non-controlling interest           |  |      | 1,215,403   |   |      |  | 2,489,741   |      |  |  | 118,608                                 |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Income tax  expense (benefit)  (note 19d)                          |  |      | 406,358     |   |      |  | 503,415     |      |  |  | (40,530                                 | )
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Net consolidated income                                            |  |      | 809,045     |   |      |  | 1,986,326   |      |  |  | 159,138                                 |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Net controlling interest income                                    |  |      | 797,600     |   |      |  | 1,983,350   |      |  |  | 157,041                                 |  
|Non-controlling interest income                                    |  |      | 11,445      |   |      |  | 2,976       |      |  |  | 2,097                                   |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Consolidated net income                                            |  | $    | 809,045     |   |      |  | 1,986,326   |      |  |  | 159,138                                 |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Weighted average outstanding (shares in thousands)                 |  |      | 600,000     |   |      |  | 600,000     |      |  |  | 600,000                                 |  
|                                                                   |  |      |             |   |      |  |             |      |  |  |                                         |  
|Net income per share                                               |  | $    | 1.35        |   |      |  | 3.31        |      |  |  | 0.27                                    |  



See accompanying
notes to consolidated financial statements.



F-5







Consolidated Statements of Stockholders'
Equity

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

December 31, 2009, 2010 and 2011

(Thousand of pesos,
except per number of shares)





|                                                                                      |  | Number of   |         |  |         |   |           |                 |  |  |               |  |  |          |         |   | Net controlling |  |            |             |  |  |               |   |  |                 |        |  |               | 
|------------------------------------------------------------------------------------- |  | ----------- | ------- |  | ------- | - | --------- | --------------- |  |  | ------------- |  |  | -------- | ------- | - | --------------- |  | ---------- | ----------- |  |  | ------------- | - |  | --------------- | ------ |  | ------------- | 
|                                                                                      |  | shares of   |         |  |         |   |           |                 |  |  |               |  |  |          |         |   | interest        |  |            | Cumulative  |  |  |               |   |  |                 |        |  |               | 
|                                                                                      |  | capital     |         |  |         |   |           |                 |  |  | Reserve for   |  |  |          |         |   | income          |  |            | currency    |  |  | Controlling   |   |  |                 |        |  | Total         | 
|                                                                                      |  | stock       |         |  | Capital |   |           | Additional      |  |  | repurchase of |  |  | Retained |         |   | (loss) of the   |  |            | translation |  |  | stockholders' |   |  | Non-controlling |        |  | stockholders' | 
|                                                                                      |  | (thousands) |         |  | stock   |   |           | paid-in capital |  |  | shares        |  |  | earnings |         |   | year            |  |            | effect      |  |  | equity        |   |  | interest        |        |  | equity        | 
|                                                                                      |  |             |         |  |         |   |           |                 |  |  |               |  |  |          |         |   |                 |  |            |             |  |  |               |   |  |                 |        |  |               | 
|Balances as of December 31, 2008                                                      |  |             | 600,000 |  |         | $ | 2,294,927 |                 |  |  | 743,674       |  |  |          | 159,455 |   |                 |  | 11,720,612 |             |  |  | (879,048      | ) |  |                 | -      |  |               | 
|Transfer of prior year's net loss based on stockholders' meeting held on April 2009   |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | (879,048   | )           |  |  | 879,048       |   |  |                 | -      |  |               | 
|Cash dividends paid (note 18b)                                                        |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | (250,045   | )           |  |  | -             |   |  |                 | -      |  |               | 
|Cash dividends paid to non-controlling interest                                       |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | -          |             |  |  | -             |   |  |                 | -      |  |               | 
|Repurchase of shares (note 18d)                                                       |  |             | -       |  |         |   | -         |                 |  |  | 1,079         |  |  |          | -       |   |                 |  | -          |             |  |  | -             |   |  |                 | -      |  |               | 
|Comprehensive income, net of taxes (note 2s)                                          |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | -          |             |  |  | 797,600       |   |  |                 | -      |  |               | 
|                                                                                      |  |             |         |  |         |   |           |                 |  |  |               |  |  |          |         |   |                 |  |            |             |  |  |               |   |  |                 |        |  |               | 
|Balances as of December 31, 2009                                                      |  |             | 600,000 |  |         |   | 2,294,927 |                 |  |  | 744,753       |  |  |          | 159,455 |   |                 |  | 10,591,519 |             |  |  | 797,600       |   |  |                 | -      |  |               | 
|Transfer of prior year's net income based on stockholders' meeting held on April 2010 |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | 797,600    |             |  |  | (797,600      | ) |  |                 | -      |  |               | 
|Cash dividends paid (note 18b)                                                        |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | (250,082   | )           |  |  | -             |   |  |                 | -      |  |               | 
|Cash dividends paid to non-controlling interest                                       |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | -          |             |  |  | -             |   |  |                 | -      |  |               | 
|Repurchase of shares (note 18d)                                                       |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | (5,167  | ) |                 |  | -          |             |  |  | -             |   |  |                 | -      |  |               | 
|Comprehensive income, net of taxes (note 2s)                                          |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | -          |             |  |  | 1,983,350     |   |  |                 | -      |  |               | 
|                                                                                      |  |             |         |  |         |   |           |                 |  |  |               |  |  |          |         |   |                 |  |            |             |  |  |               |   |  |                 |        |  |               | 
|Balances as of December 31, 2010                                                      |  |             | 600,000 |  |         |   | 2,294,927 |                 |  |  | 744,753       |  |  |          | 154,288 |   |                 |  | 11,139,037 |             |  |  | 1,983,350     |   |  |                 | -      |  |               | 
|Transfer of prior year's net income based on stockholders' meeting held on April 2011 |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | 1,983,350  |             |  |  | (1,983,350    | ) |  |                 | -      |  |               | 
|Cash dividends paid (note 18b)                                                        |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | (299,926   | )           |  |  | -             |   |  |                 | -      |  |               | 
|Cash dividends paid to non-controlling interest                                       |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | -          |             |  |  | -             |   |  |                 | -      |  |               | 
|Repurchase of shares (note 18d)                                                       |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | (209    | ) |                 |  | -          |             |  |  | -             |   |  |                 | -      |  |               | 
|Acquired non-controlling interest (note 1)                                            |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | -          |             |  |  | -             |   |  |                 | -      |  |               | 
|Comprehensive income, net of taxes (note 2s)                                          |  |             | -       |  |         |   | -         |                 |  |  | -             |  |  |          | -       |   |                 |  | -          |             |  |  | 157,041       |   |  |                 | 35,636 |  |               | 
|                                                                                      |  |             |         |  |         |   |           |                 |  |  |               |  |  |          |         |   |                 |  |            |             |  |  |               |   |  |                 |        |  |               | 
|Balances as of December 31, 2011                                                      |  |             | 600,000 |  |         | $ | 2,294,927 |                 |  |  | 744,753       |  |  |          | 154,079 |   |                 |  | 12,822,461 |             |  |  | 157,041       |   |  |                 | 35,636 |  |               | 





See accompanying notes to consolidated
financial statements.



F-6







Consolidated Statement of Cash
Flows

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

December 31, 2009, 2010 and 2011

(Thousand of pesos)



|                                                                     |  |      |           |   |      |  |            |      |  |  | Thousands of |  
|-------------------------------------------------------------------- |  | ---- | --------- | - | ---- |  | ---------- | ---- |  |  | ------------ | -
|                                                                     |  |      |           |   |      |  |            |      |  |  | U.S. dollars |  
|                                                                     |  |      |           |   |      |  |            |      |  |  | (note 2aa)   |  
|                                                                     |  | 2009 |           |   | 2010 |  |            | 2011 |  |  | 2011         |  
|Cash flows from operating activities:                                |  |      |           |   |      |  |            |      |  |  |              |  
|Income before income taxes and non-controlling interest              |  | $    | 1,215,403 |   |      |  | 2,489,741  |      |  |  | 118,608      |  
|Items relating to investing activities:                              |  |      |           |   |      |  |            |      |  |  |              |  
|Depreciation                                                         |  |      | 662,630   |   |      |  | 692,640    |      |  |  | 726,061      |  
|Loss on sale of plant and equipment                                  |  |      | 88,187    |   |      |  | 148,572    |      |  |  | 46,671       |  
|Interest income                                                      |  |      | (170,655  | ) |      |  | (165,646   | )    |  |  | (193,777     | )
|Item relating to financing activities:                               |  |      |           |   |      |  |            |      |  |  |              |  
|Interest expense                                                     |  |      | 91,326    |   |      |  | 73,519     |      |  |  | 69,741       |  
|Foreign exchange loss on loans                                       |  |      | -         |   |      |  | -          |      |  |  | 34,500       |  
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Subtotal                                                             |  |      | 1,886,891 |   |      |  | 3,238,826  |      |  |  | 801,804      |  
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Derivative financial instruments                                     |  |      | (804,134  | ) |      |  | (1,625     | )    |  |  | 2,689        |  
|Accounts receivable, net                                             |  |      | (11,402   | ) |      |  | (59,664    | )    |  |  | (192,647     | )
|Recoverable taxes                                                    |  |      | (22,432   | ) |      |  | 9,241      |      |  |  | (190,277     | )
|Inventories and biological assets                                    |  |      | 849,213   |   |      |  | 397,231    |      |  |  | (730,284     | )
|Prepaid expenses and other current assets                            |  |      | (568,392  | ) |      |  | (349,895   | )    |  |  | (216,678     | )
|Trade accounts payable, taxes payable and other accruals             |  |      | 110,092   |   |      |  | (125,744   | )    |  |  | 565,426      |  
|Income taxes paid                                                    |  |      | (107,158  | ) |      |  | (495,846   | )    |  |  | (121,982     | )
|Accounts payable to related parties                                  |  |      | 17,277    |   |      |  | (6,740     | )    |  |  | 17,670       |  
|Net periodic cost from termination and retirement benefits           |  |      | 54,391    |   |      |  | 75,174     |      |  |  | 50,154       |  
|Contributions to plan assets for termination and retirement benefits |  |      | (20,634   | ) |      |  | (26,373    | )    |  |  | (16,375      | )
|Payments for termination and retirement benefits                     |  |      | (19,818   | ) |      |  | (16,973    | )    |  |  | (18,148      | )
|Assets available for sale                                            |  |      | (7,220    | ) |      |  | (10,231    | )    |  |  | (6,530       | )
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Net cash provided by (used in) operating activities                  |  |      | 1,356,674 |   |      |  | 2,627,381  |      |  |  | (55,178      | )
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Cash flows from investing activities:                                |  |      |           |   |      |  |            |      |  |  |              |  
|Acquisition of property, plant and equipment                         |  |      | (944,106  | ) |      |  | (517,296   | )    |  |  | (707,533     | )
|Proceeds from sale of plant and equipment                            |  |      | 16,542    |   |      |  | 42,179     |      |  |  | 83,946       |  
|Primary financial instruments                                        |  |      | 316,162   |   |      |  | (57,507    | )    |  |  | (201,373     | )
|Increase in other non-current assets                                 |  |      | (44,794   | ) |      |  | (44,787    | )    |  |  | (146,390     | )
|Interest collected                                                   |  |      | 170,655   |   |      |  | 165,646    |      |  |  | 193,777      |  
|Business acquisitions                                                |  |      | -         |   |      |  | -          |      |  |  | (1,326,741   | )
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Net cash used in investing activities                                |  |      | (485,541  | ) |      |  | (411,765   | )    |  |  | (2,104,314   | )
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Cash to be applied in (obtained from) financing activities           |  |      | 871,133   |   |      |  | 2,215,616  |      |  |  | (2,159,492   | )
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Cash flows from financing activities:                                |  |      |           |   |      |  |            |      |  |  |              |  
|Additional paid-in capital and reserve for repurchases of shares     |  |      | 1,079     |   |      |  | (5,167     | )    |  |  | (209         | )
|Dividends paid                                                       |  |      | (250,045  | ) |      |  | (250,082   | )    |  |  | (299,926     | )
|Dividends paid to non-controlling interest                           |  |      | (1,035    | ) |      |  | (1,186     | )    |  |  | (912         | )
|Proceeds from loans                                                  |  |      | 1,044,611 |   |      |  | 778,955    |      |  |  | 1,921,609    |  
|Interest paid                                                        |  |      | (90,192   | ) |      |  | (73,519    | )    |  |  | (60,809      | )
|Principal payments on loans                                          |  |      | (706,668  | ) |      |  | (1,095,870 | )    |  |  | (774,598     | )
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Net cash  (used in) provided by financing activities                 |  |      | (2,250    | ) |      |  | (646,869   | )    |  |  | 785,155      |  
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Currency translation effect                                          |  |      | -         |   |      |  | -          |      |  |  | 32,124       |  
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Net increase (decrease) in cash and cash equivalents                 |  |      | 868,883   |   |      |  | 1,568,747  |      |  |  | (1,342,213   | )
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|Cash and cash equivalents:                                           |  |      |           |   |      |  |            |      |  |  |              |  
|At beginning of year                                                 |  |      | 1,530,244 |   |      |  | 2,399,127  |      |  |  | 3,967,874    |  
|                                                                     |  |      |           |   |      |  |            |      |  |  |              |  
|At end of year                                                       |  | $    | 2,399,127 |   |      |  | 3,967,874  |      |  |  | 2,625,661    |  



See accompanying notes to consolidated
financial statements.



F-7







NOTES to
the Financial Statements



| | (1) | Organization, business activity
                                                                  and significant transactions-
| | --- | -------------------------------------------------------------------------------------------------------------------------------



Organization
and business activity-



Industrias
Bachoco, S.A.B. de C.V. and subsidiaries (collectively referred to as “Bachoco” or the “Company”) a public
stock corporation with variable capital was incorporated on February 8, 1980 and it is engaged in breeding, processing and marketing
of poultry (chicken and eggs), swine and other products (principally balanced animal feed). Bachoco is the controlling company
of a group of subsidiaries.



The
shares of Bachoco are listed on the Mexican Stock Exchange (MSE) on the New York Stock Exchange (NYSE), under the symbol “IBA”.



On
April 19, 2012, Bachoco ́s Finance Director and Controller Director authorized the issuance of the Consolidated Mexican Financial
Reporting Standards (Mexican FRS) financial statements and notes at December 31, 2010 and 2011 and each of the three years then
ended. The accompanying US GAAP disclosures are presented in note 23. These consolidated financial statements were authorized
for issuance herein by Bachoco ́s Financial Director and Controller Director on April 30, 2012 with consideration of subsequent
events through that date.



Significant transactions-



OK Industries acquisition



On
November 1, 2011, the Company acquired 100% percent of the voting stock of OK Industries, Inc. and subsidiaries (Acquired Entity).
Income of the Acquired Entity has been included in the consolidated financial statements from such date. The Acquired Entity is
engaged in breeding, processing and marketing of poultry (chiken) to supplier autoservices networks, fast food networks and others
in the U.S and foreing markets. The aggregate purchase price that was paid in cash amounted 93.4 million USD.





F-8







As
of December 31, 2011 Bachoco was in the process of allocating the fair values to the assets acquired and liabilities assumed.
In accordance with Mexican Financial Reporting Standard (Mex FRS) B-7 “Business acquisition”, the valuation period
shall not be more than one year since the date of acquisition. The consolidated financial statements of Bachoco include the balance
sheet of OK Industries, Inc. and subsidiaries, as of December 31, 2011, based on the best estimate of its net asset’s fair
value as of the acquisition date, and its results of operations for the two-month period ended December 31, 2011. The fair values
of these assets acquired were determined using the cost and market approaches.



The
cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic
utility, was utilized primarily for plant and equipment. The cost to replace a given asset reflects the estimated reproduction
or replacement cost for the asset, less an allowance for loss in value due to depreciation. The market approach, which indicates
value for a subjet asset based on available market pricing for comparable assets, was utilized primarily for real property. The
market approach indicates value based on financial multiples available for similar entities and adjustments for the lack of control
or lack of marketability that market participants would consider in determining fair value.



Due
to their short-term maturities, the Company believes the carrying amounts of cash equivalents, accounts receivables, other current
assets, accounts payable and other current liabilities approximate their fair value at the acquisition date. At the adquisition
date, inventories are stated at their net realizable value. The Company’s investment in an unconsolidated entity is recorded
at its historical cost and the investment in insurance contracts is recorded at its aggregate net cash surrender value, both of
which approximate fair value at the acquisition date.







F-9







The
following summarizes the acquired balance sheet of OK Industies, Inc., including the application of purchase accounting adjustments
to record the best estimate fair value of assets and liabilities at the date of acquisition (November 1, 2011):



|Allocated to:                 |  |   |           |  
|----------------------------- |  | - | --------- | -
|                              |  |   |           |  
|Current assets                |  | $ | 1,332,762 |  
|Property, plant and equipment |  |   | 1,693,980 |  
|Other non-current assets      |  |   | 153,364   |  
|                              |  |   |           |  
|Total assets                  |  |   | 3,180,106 |  
|                              |  |   |           |  
|Current liabilities           |  |   | (390,001  | )
|Deferred income tax           |  |   | (519,189  | )
|Non-controlling interest      |  |   | (7,025    | )
|                              |  |   |           |  
|Net acquired assets           |  |   | 2,263,891 |  
|Purchase price                |  |   | 1,269,306 |  
|                              |  |   |           |  
|Gain on bargain purchase      |  | $ | 994,585   |  



Under
MexFRS B-7 “Business acquisition”, if the amount of the fair value of the net assets acquired exceeds the aggregate
purchase price amount (bargain purchase), then the fair value of the net assets acquired shall be adjusted up to the purchase
price amount as such purchase price is considered the fair value of the transaction between two independent parties in a free
market.



Adjustment
to the fair value of the net assets acquired should be applied by reducing the value of certain assets until exhausting its value
in the following order: a) firstly, intangible assets, b) then, long-term non-monetary assets as property, plant and equipment,
and c) finally, any other long-term assets as permanent investments. Once exhausted the value of such assets, the remaining amount,
if any, should be recognized as a gain on bargain purchase in the income statement on the acquisition date.



In
accordance with the provision of MexFRS B-7, the Company adjusted the fair value of the property plant and equipment and the related
deferred income taxes up to the amount of the gain on bargain purchase on the net assets acquired.



F-10







The following table summarizes
the adjusted values of OK Industries, Inc., under Mex FRS at November 1, 2011 (acquisition date), and December 31, 2011:



|                                               |  | November 
1, 2011 |           |   | December 
31, 2011 |  
|---------------------------------------------- |  | ----------------- | --------- | - | ------------------ | -
|                                               |  |                   |           |   |                    |  
|Cash and cash equivalents                      |  | $                 | 288       |   |                    | $
|Accounts receivable                            |  |                   | 340,443   |   |                    |  
|Inventories                                    |  |                   | 949,518   |   |                    |  
|Refundable income taxes                        |  |                   | 12,155    |   |                    |  
|Other current assets                           |  |                   | 30,358    |   |                    |  
|Property, plant and equipment                  |  |                   | 11,876    |   |                    |  
|Investment in unconsolidated entity            |  |                   | 36,993    |   |                    |  
|Other long-term receivable                     |  |                   | 116,371   |   |                    |  
|Deferred income taxes                          |  |                   | 168,330   |   |                    |  
|Total assets acquired                          |  |                   | 1,666,332 |   |                    |  
|                                               |  |                   |           |   |                    |  
|Accounts payable                               |  |                   | (203,631  | ) |                    |  
|Other current liabilities                      |  |                   | (186,370  | ) |                    |  
|Total liabilities assumed                      |  |                   | (390,001  | ) |                    |  
|                                               |  |                   |           |   |                    |  
|Noncontrolling interest in consolidated entity |  |                   | (7,025    | ) |                    |  
|                                               |  |                   |           |   |                    |  
|Net assets acquired                            |  | $                 | 1,269,306 |   |                    | $



Trosi de Carne acquisition



On
August 20, 2011, Induba Pavos, S.A. de C.V. (subsidiary) acquired certain assets of Trosi de Carne, S.A. de C.V. Under MexFRS
B-7 “Business acquisition”, this net assets acquisition qualifies as a Business Combination. As result of this acquisition
the Company will be manufacturing beef value-added and pig. The aggregate purchase price that was paid in cash amounted to $57,723
is comprised as follow:



|Land                    |  | $ | 422    | 
|----------------------- |  | - | ------ | 
|Property                |  |   | 7,829  | 
|Machinery and equipment |  |   | 25,240 | 
|Inventory               |  |   | 13,500 | 
|Account Receivable      |  |   | 10,732 | 
|                        |  | $ | 57,723 | 



F-11









The
Company is in the process of completing the allocation of the purchase price to the fair value of the assets acquired.



Other
assets acquisitions



On
December 16, 2011, Bachoco, S.A. de C.V. (subsidiary) acquired certains assets from Mercantil Agropecuaria Coromuel, S.A. de C.V.
(MACSA) located in the state of Baja California. The transaction consisted of the acquisition of property, plant and equipment,
for an amount of $55,522. The acquisition intend increase the brand commercial presence and improve the distribution channels
in that region.



In
July 2009, Bachoco, S.A. de C.V. (subsidiary) acquired a poultry processing plant located in the state of Nuevo Leon, with a production
capacity of 9,000 chickens per hour. The transaction consisted of the acquisition of property, plant and equipment for an amount
of $321,984 and inventory in stock for an amount of $142,537. In addition to reducing costs, the goal of this acquisition, is
to increase the production capacity and diversifying.



In
September 2009, Campi Alimentos, S.A. de C.V. (subsidiary) acquired a poultry feed processing plant also located in the state
of Nuevo Leon, with a production capacity of 12,000 tons per month. The transaction consisted of the acquisition of property,
plant and equipment, for an amount of $114,904. As in the aforementioned July 2009 acquisition, the Company expanded its animal
balanced feed production capacity for internal consumption.



| | (2) | Accounting Policies and Practices-
| | --- | ----------------------------------



The
preparation of consolidated financial statements requires management to make a number of estimates and assumptions that affect
the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant items subject
to such estimates and assumptions include, but are not limited to, the carrying amount of property, plant and equipment, and goodwill;
valuation allowances for receivables, inventories and deferred income tax assets; valuation of primary investment securities and
financial instruments; and assets and labor obligations related to employee benefits. Actual results could differ from those estimates
and assumptions.





F-12







The
aforementioned financial statements are presented in Mexican pesos (reporting currency), which is the same as the recording currency
and the functional currency, except for the foreign entity that uses U.S dollar as its recording and functional currency.



For
disclosure purposes, “pesos” or “$” means thousands of Mexican pesos, and “dollars” or “US
dollars” means thousands of U.S. dollars.



When
it is deemed relevant, certain amounts presented in the notes to the financial statements include between parentheses a convenience
translation into dollars, into pesos, or both, as applicable. These translations are provided as informative data and should not
be construed as representations that the amounts in pesos or dollars, as applicable, actually represent those peso or dollar amounts
or could be converted into pesos or dollars at the indicated rate.



The
Company’s consolidated financial statements are prepared in accordance with Mexican Financial Reporting Standards (Mex FRS)
in effect as of the balance sheet date. The significant accounting policies and practices followed by the Company in the preparation
of the accompanying consolidated financial statements are described below:



| | a) | Consolidation-
| | -- | --------------



The
consolidated financial statements include the financial statements of the Company and all of its majority-owned and controlled
subsidiaries.



The
ownership interests of other stockholders in such subsidiaries are shown as non-controlling interest.



Intercompany
balances, investments and significant transactions between consolidated entities have been eliminated in consolidation.



The
results of operations of the subsidiaries were included in the Company’s consolidated financial statements as at the acquisition
or inception month.



The
consolidation of the subsidiaries as of December 31, 2009, 2010 and 2011, have been prepared or translated in accordance with
Mex FRS.



F-13







The
accompanying consolidated financial statements include the following subsidiaries as of December 31, 2009, 2010 and 2011:



|                                                   |  | Percentage equity interest |    
|-------------------------------------------------- |  | -------------------------- | ---
|                                                   |  | 2009                       |    
|Aviser, S.A. de C.V.                               |  |                            | 100
|Bachoco, S.A. de C.V. (“BSACV”)                    |  |                            | 100
|Bachoco Comercial, S.A. de C.V.                    |  |                            | 100
|Campi Alimentos, S.A. de C.V.  (1)                 |  |                            | 100
|Huevo y Derivados, S.A. de C.V. (2)                |  |                            | 97 
|Operadora de Servicios de Personal, S.A. de C.V.   |  |                            | 100
|Pecuarius Laboratorios, S.A. de C.V.               |  |                            | 64 
|Secba, S.A. de C.V.                                |  |                            | 100
|Sepetec, S.A de C.V.                               |  |                            | 100
|Servicios de Personal Administrativo, S.A. de C.V. |  |                            | 100
|Induba Pavos, S.A. de C.V.                         |  |                            | 100
|OK Industries, Inc., and subsidiaries (note 1)     |  |                            | -  



The
main subsidiaries of the group and their activities are as follows:



-
Bachoco, S.A. de C.V. (“BSACV”) (includes four subsidiaries which are 50% owned, and for which BSACV has control).
BSACV is engaged in breeding, processing and marketing of poultry (chicken and eggs).



-
OK Industries, Inc. (includes four subsidiaries which are 100% owned and one which is 85% owned, and for which OK Industries has
control). OK Industries was acquired by Bachoco on November 1, 2011, and it and their subsidiaries operate as an integrated poultry
processor in the United States (U.S), selling finished products to customers throughout the U.S and other countries.



-
Campi Alimentos, S.A. de C.V. (Campi), is engaged in producing and marketing of balanced animal feed.



F-14







- Aviser, S.A. de C.V.

- Operadora de Servicios
de Personal, S.A. de C.V.

- Secba, S.A. de C.V.

- Sepetec, S.A. de C.V.

- Servicios de Personal
Administrativo, S.A. de C.V.



These
companies are engaged in providing administrative and operative services to their related parties.



(1)
At the ordinary and extraordinary general stockholders’ meeting held on March 20, 2009, the shareholders agreed to the merger
through incorporation of Acuicola Bachoco, S.A. de C.V. (the acquiree entity) with Campi Alimentos, S.A. de C.V. (the acquiror
entity). The merger became effective as of March 31, 2009, so that as of that date, Acuicola, as the acquired corporation, no
longer exists. Pursuant to the Ley General de Sociedades Mercantiles (General Corporation and Partnership Law) when the merger
became effective, total assets and liabilities, rights, obligations and responsibilities of the merged corporation became part
of the acquiring corporation without reservation or limitation.



(2)	At
the extraordinary stockholders’ meeting held on March 31, 2010, the stockholders agreed the liquidation of the balance sheet
as of December 31, 2009. The aforementioned liquidation was effective on January 1, 2010.



| | b) | Translation
                                                                     of foreign currency financial statements-
| | -- | --------------------------------------------------------------------------------------------------------------------------



The
financial statements of foreign operations are translated into the reporting currency by initially determining if the functional
currency and the currency for recording the foreign operations are different and then translating the functional currency to the
reporting currency, using the historical exchange rate and/or the exchange rate at year end, (and the inflation index of the country
of origin when the foreign operation is located in inflationary economy).



| | c) | Revenue recognition-
| | -- | --------------------



Revenues
are recognized when each of the following criteria is met:



-
There is evidence of an arrangement.

-
Delivery of goods has occurred.

-
The seller fixes or determines the prices with the buyer.

-
Collectability is reasonably certain.



F-15







The
Company’s products are sold to a large number of customers without significant concentrations with any of them.



Based
on management ́s analysis and estimates, the Company provides for doubtful receivables (reported under selling, general and
administrative expenses).



| | d) | Recognition
                                                                     of the effects of inflation-
| | -- | -------------------------------------------------------------------------------------------------------------



The
accompanying consolidated financial statements have been prepared in accordance with Mexican FRS in effect as of the statement
of financial position date and include the recognition of the effects of inflation on financial information through December 31,
2007, based on the Mexican National Consumer Price Index (NCPI) published by Banco de Mexico (central bank).



Cumulative
inflation indexes and percentages of the current and three preceding years are as follows:



|December 31 |  | NCPI |         |  | Inflation | 
|----------- |  | ---- | ------- |  | --------- | 
|            |  |      |         |  | Yearly    | 
|            |  |      |         |  |           | 
|2011        |  |      | 103.551 |  |           | 
|2010        |  |      | 99.742  |  |           | 
|2009        |  |      | 95.537  |  |           | 
|2008        |  |      | 92.240  |  |           | 



A
summary of the key inflation accounting concepts and procedures is as follows:



-
Property, plant and equipment



Property,
plant and equipment were carried at replacement cost, determined annually by an independent appraiser, through 1996. The fifth
amendment to Bulletin B-10 “Accounting Recognition of the Effects
of Inflation on Financial Information” (as modified), which is applicable to financial statements for periods
beginning on or after January 1, 1997, disallows the use of appraisals on fixed assets. Based on such amendment, the Company restated
the appraised value at December 31, 1996, and the acquisitions of property, plant and equipment since January 1, 1997, until December
31, 2007, by applying factors derived from the NCPI.



F-16







-
Stockholders’ equity



Until
December 31, 2007, the date on which the economic environment turned to a non-inflationary environment in conformity with FRS
B-10 “Effects of Inflation”, capital stock, additional paid-in capital, reserve for repurchase of shares of Company’s
own shares, retained earnings and other capital accounts were restated using adjustment factors derived from the NCPI. The amounts
thus obtained in this manner represented the constant value of the stockholders’ equity.



| | e) | Cash
                                                                     and cash equivalents-
| | -- | -----------------------------------------------------------------------------------------------



Cash
and cash equivalents consist primarily of bank deposits and checking accounts in local and foreign currencies and other highly
liquid instruments. At the date of the consolidated financial statements, interest income and foreign exchange gains and losses
are included in the statements of income, under comprehensive financial results.



| | f) | Available
                                                                     on-demand investments and primary investment securities-
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------



All
rights and obligations arising from treasury primary investment securities are recognized on the statement of financial position
and the Company classifies its investment securities depending on the purpose for which the securities were acquired: (i) held-to-maturity,
(ii) trading or (iii) available for sale. Investments in these instruments with maturity of three months or less at the time of
investment are included on the line-item “available on-demand investments” within cash and cash equivalents (see note
4). Furthermore, primary investment securities with maturity over three months are included under current assets. In turn, the
balance of debt securities with due dates less than one year is reported under current liabilities



Trading
securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity debt securities
are securities in which the Company has the solvency, ability and intent to hold the security until maturity. All securities not
included in trading or held or held-to-maturity are classified as available-for sale.



F-17







Trading
securities, except held-to-maturity securities, are recorded at fair value, where peso-denominated debt securities are taken from
the bank statements which are based on the information of the local price vendors, while US-denominated debt securities are based
on diversified sources. Held-to-maturity securities are recorded at amortized cost. Changes in the carrying amounts of trading
securities, including the related costs and yields are included under comprehensive financial results. Gains or losses arising
from changes in the fair value of available-for-sale securities (less the corresponding yield) non functional currency denominated
and foreign exchange gain or loss, in the case of equity securities, as well as the related monetary position gain or loss, as
applicable, are reported as a comprehensive income (loss) item within stockholders’ equity.



Furthermore,
where evidence exists that a financial asset held-to-maturity shall not be recovered in full, the expected loss (impairment) is
recognized in the statement of income.



| | g) | Accounts
                                                                     receivable and allowance for doubtful accounts-
| | -- | -----------------------------------------------------------------------------------------------------------------------------



Accounts
receivable as of December 31, 2010 and 2011 are reported at fair value, net of the allowance for doubtful accounts.



The
Company’s policy is to record an allowance for doubtful accounts for balances which are not likely to be recovered. In establishing
the required allowance, management considers historical losses, current market conditions, customers’ financial condition,
the amount of receivables in dispute, price differences and the current receivable aging and current payment patterns.



| | h) | Inventories,
                                                                     agricultural products and biological assets-
| | -- | ------------------------------------------------------------------------------------------------------------------------------



-
Inventories



At
December 31, 2010 and 2011, inventories are stated at the lower of historical cost determined by the average cost method or market,
provided that replacement cost is not less than net realizable value.



F-18







-Agriculture



The
financial statements recognize the requirements of Bulletin E-1, “Agriculture”which establishes the rules for recognizing, measuring, presenting and disclosing biological assets and agricultural
products.



Bulletin
E-1 requires biological assets and agricultural products (the latter at the time of harvesting) to be valued at their fair value,
net of the estimated costs at the point of sale. Bulletin E-1 also establishes that whenever the fair value cannot be determined
in a reliable, verifiable and objective manner, the assets are to be valued at their production cost, less any impairment loss.



The
allowance for decline in the productivity of breeder chickens and pigs is estimated based on their expected future life, under
the straight-line method.



Agricultural
products are live chickens, processed chickens, commercial eggs and pigs available for sale. The Company’s biological assets
are comprised of poultry in their different stages, incubatable eggs and breeder pigs.



Broiler
chicks less than six and a half weeks old, incubatable eggs, breeder pigs and laying hens are valued at production cost since
it is not possible to determine their fair value in a reliable, verifiable and objective manner.



Broilers
more than six and a half weeks old through their date of sale are valued at fair value less estimated point-of-sale costs, considering
the price per kilogram of processed chicken at the valuation date.



Processed
chicken and commercial eggs are valued at fair value less estimated point-of-sale costs, considering the price per kilogram of
processed chicken and commercial eggs at the time such items are considered agricultural products. From such date through the
date of sale, the fair value is considered to be the cost of processed chicken or commercial eggs, not in excess of net realizable
value.



The
Company is exposed to financial risks due to changes in the price of chicken. The Company estimates that the price of chicken
will not fall significantly in the future; consequently, the Company has not entered into any derivative agreement or any other
type of agreement to offset the risk of a drop in the price of chicken.



The
Company reviews periodically the price of chicken so as to evaluate the need for a financial instrument to offset such risk.



In
conformity with Bulletin E-1, biological assets and agricultural products were classified as either current or non-current assets
based on their availability for sale and the business operating cycle.



Cost
of sales represents the replacement cost of inventories at the time of sale, increased, as applicable, for reductions in the net
realizable value of inventories during the year.



F-19







The
Company records the necessary allowances for inventory impairment arising from damaged, obsolete or slow-moving inventories or
any other reason indicating that the carrying amount will exceed the future revenues expected from use or realization of the inventory
items.



Beginning
January 1, 2011, and with retrospective application, based on FRS C-5, “Advanced Payments”, advances to suppliers
of inventory are presented as part of prepaid expenses and other current assets. As result, advances to suppliers of inventory
for $366,160 originally reported within the caption of inventories in 2010, were reclassified to prepaid expenses and other current
assets in the comparative statement of financial position (see note 3a).



| | i) | Assets
                                                                     available for sale-
| | -- | -----------------------------------------------------------------------------------------------



Assets
available for sale are comprised mainly of assets acquired through foreclosure and an aircraft acquired from the business combination
of OK industries, Inc. (note 1). Management is actively marketing the aircraft and expects to complete the sale during the next
fiscal year (see note 3a).



| | j) | Property,
                                                                     plant and equipment-
| | -- | ---------------------------------------------------------------------------------------------------



Property,
plant and equipment are initially recorded at acquisition cost (except for the property, plant and equipment acquired through
business combination that are recorded at fair value) and through December 31, 2007, adjusted for inflation by using factors derived
from the NCPI (see note 2d).



From
January 1, 2007, acquisitions of assets under construction or installation include the related comprehensive financial results
as part of the value of assets. During 2009, 2010 and 2011, no comprehensive financing costs have been capitalized, as result
of Mexican FRS D-6 criteria not being met.



F-20







Depreciation
of property, plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets, determined
by management (see note 9).



Leasehold
improvements are amortized over the useful life of the improvement or the related contract term, whichever is shorter.



Minor
repairs and maintenance costs are expensed as incurred.



Beginning
January 1, 2011, and with retrospective application, based on FRS C-5, “Advanced Payments”, advances to suppliers
of fixed assets are presented as part of other non-current assets. As result, advances to suppliers of fixed assets for $43,290
originally accounted for as property, plant and equipment in 2010, were reclassified to non-current assets accounts in the comparative
statement of financial position (see note 3b).



| | k) | Prepaid
                                                                     expenses and other current assets-
| | -- | ---------------------------------------------------------------------------------------------------------------



Mainly
include prepaid expenses for the purchase of inventories and services that are received after the date of the statement of financial
position and in the ordinary course of operations.



l)Impairment
of property, plant and equipment-



The
Company periodically evaluates the values of long-lived assets of property, plant and equipment, to determine whether there is
an indication of potential impairment. Recoverability of assets to be held and used is measured by comparison of the carrying
amount of an asset against future cash flows expected to be generated by the asset. If the net carrying amount of an asset exceeds
its estimated net revenues, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds
the fair value of the asset. Assets to be disposed of, are reported in the balance sheets at the lower of net carrying amount
or realizable value. The assets of a group classified as available-for sale are presented separately on the consolidated statement
of financial position.



F-21







| | m) | Leases-
| | -- | -------



Leased
property, plant and equipment arrangements are recognized as capital leases if: a) the ownership of the leased asset is transferred
to the lessee upon termination of the lease; b) the agreement includes an option to purchase the asset at a reduced price; c)
the term of the lease is substantially the same as the remaining useful life of the leased asset; or d) the present value of minimum
lease payments is substantially the same as the market value of the leased asset, net of any benefit or scrap value.



When
the risks and benefits inherent to the ownership of the leased asset remain mostly with the lessor, such leases are classified
as operating leases, and the lease expense is charged to results of income as incurred.



The
Company classified its leases as operating leases at December 31, 2009, 2010 and 2011.



| | n) | Business
                                                                     Combinations and Goodwill-
| | -- | --------------------------------------------------------------------------------------------------------



Bachoco
applies the purchase method as the sole recognition alternative for a business combination by allocating the purchase price to
all assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.



Goodwill
represents the difference between the purchase price and the fair value of the identifiable assets acquired in a business combination
at the purchase date.



In
the case of a gain on a bargain purchase (negative goodwill), such gain is reduced from the value of certain acquired assets up
to the amount of such gain on bargain purchase.



Goodwill
is recorded initially at acquisition cost and through December 31, 2007, was restated using adjustment factors derived from the
NCPI. Goodwill is subject to annual impairment testing.



At
December 31, 2010 and 2011, there was no impairment loss in the value of goodwill shown in the consolidated statement of financial
position.



F-22







| | o) | Other
                                                                     non-current assets-
| | -- | ----------------------------------------------------------------------------------------------



Other
non-current assets consist mainly of advances to suppliers of fixed assets, investment in life insurance contracts, and investment
in unconsolidated entity.



At
December 31, 2011, OK Industries, Inc. (foreign subsidiary) held a minority interest in Southern Hens, Inc. The Company cannot
exercise significant influence over the investee and, therefore has reported the investment at original cost, which approximated
fair value as of the acquisition date.



OK
Industries, Inc. (foreign subsidiary) owns life insurance policies for certain former stockholders. The Company has recorded these
policies at their aggregate net cash surrender value of $119,792.



| | p) | Liabilities,
                                                                     accruals, contingent liabilities and commitments-
| | -- | -----------------------------------------------------------------------------------------------------------------------------------



Liability
provisions are recognized when the following three conditions are met: (i) the Company has current obligations (legal or assumed)
derived from past events, (ii) it is probable that the liability will give rise to a future cash disbursement for its settlement
and (iii) the liability can be reasonably estimated. When a reasonable estimation cannot be made, qualitative disclosure is provided
in the notes to the consolidated financial statements. Contingent revenues, earnings or assets are not recognized until realization
is assured.



If
the effect of the time value of money is material, accrual amounts are determined as the present value of the expected disbursements
to settle the obligation. The discount rate is determined on a pre-tax basis and reflects current market conditions at the statement
of financial position date and, where appropriate, the risks specific to the liability. Where discounting is used, the increase
in the provision due to the passage of time is recognized as an interest expense.



| | q) | Employee
                                                                                                                                     benefits-
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------



Benefit
plan in Mexican operation-



Bachoco
has a retirement plan in which all non-union workers in Mexico participate. Pension benefits are determined based on the salary
of workers in their final three years of service, the number of years worked in the Company and their age at retirement. This
plan includes:



F-23











- Defined contribution plan:
This fund consists of employee and Company contributions. The employee contribution percentage ranges from 1% to 5%. The Company
contribution ranges from 1% to 2% in the case of employees with less than 10 years’ seniority, and the same contribution
percentage as the employee (up to 5%) when the employee has more than 10 years’ seniority.



- Defined benefit plan: This
fund consists solely of the Company’s contributions and covers the Company's labor obligations with each employee.



Seniority premiums and severance
payments are paid to workers in Mexico as required by Mexican labor law.



Termination benefits for reasons
other than restructuring and retirement to which employees in Mexico are entitled are charged to operations for each year, based
on actuarial computations using the projected unit credit method and projected salaries. At December 31, 2011 and for purposes
of recognizing benefits upon retirement, the remaining average service life of employees entitled to plan benefits approximates
11.89 years (see note 17).



The actuarial profit or loss
is recognized directly in the consolidated statement of income for the period as it is accrued (benefits due to termination) and
is amortized based on the remaining labor life of the employees in Mexico that are expected to receive benefits from the plan (retirement
benefits).



Benefit plan in foreign operation



| | i) | OK Industries, Inc. (foreign subsidiary) maintains a 401(k) retirement plan (defined contribution
plan) covering all employees meeting certain eligibility requirements. The Company contributes to the plan at the rate of 50% of
employees contributions up to a maximum of 2% of the individual employees compensation.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii) | OK Industries, Inc. (foreign subsidiary) maintains a deferred compensation arrangement with certain
key employees. Amounts payable under this plan vest 10 years from the date of the agreement. The benefit value of each unit is
equal to the increase in initial subsidiary book value from the date of the agreement to the conclusion of the vesting period.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





F-24







| | r) | Comprehensive financial results (CFR)-
| | -- | --------------------------------------



The CFR includes interest income and expense, foreign
exchange gains and losses and valuation of financial instruments, including derivatives.



Transactions in foreign currency are recorded at the
exchange rate prevailing on the date of execution or settlement. Foreign currency assets and liabilities are translated at the
exchange rate in force at the consolidated balance sheet date. Exchange differences arising from assets and liabilities denominated
in foreign currencies are reported in the consolidated statements of income for the year.



| | s) | Comprehensive income-
| | -- | ---------------------



The comprehensive income reported on the statements
of stockholders’ equity represents the results of the Company’s total activities during the year, and includes the
items mentioned below which, in accordance with Mexican FRS, are reported directly in stockholders’ equity, except for net
income.



|                               |  | 2009 |         |  | 2010 |   |           | 2011 | 
|------------------------------ |  | ---- | ------- |  | ---- | - | --------- | ---- | 
|                               |  |      |         |  |      |   |           |      | 
|Net income                     |  | $    | 797,600 |  |      | $ | 1,983,350 |      | 
|Currency traslation adjustment |  |      | -       |  |      |   | -         |      | 
|                               |  | $    | 797,600 |  |      | $ | 1,983,350 |      | 
|                               |  |      |         |  |      |   |           |      | 
|Non controlling interest       |  |      | 11,445  |  |      |   | 2,976     |      | 
|Comprehensive income           |  | $    | 809,045 |  |      | $ | 1,986,326 |      | 



| | t) | Derivative financial instruments-
| | -- | ---------------------------------



Irrespective of their use and either issuance or holding
purpose, the Company recognizes all derivative instruments as either assets or liabilities on the balance sheet at their respective
fair values. Fair values are determined based on known market prices such as Chicago Board of Trade (CBOT) and, when not listed
in a market, based on valuation techniques and inputs usually accepted in the financial sector.



Changes in the fair value of financial instruments
not designated and/or not qualifying under strict hedge accounting criteria are recognized within earnings for the year in which
such changes occur, as derivatives effects under comprehensive financial results.



In the case of operations with options on futures
not designated and/or do not qualify under strict hedge accounting criteria, premiums paid or received in connection with options
are initially recognized respectively as assets or liabilities within derivative instruments; while subsequent changes in their
fair value are recognized within income of the year in which such changes occur under comprehensive financial results.



F-25







| | u) | Derivative financial Instruments, designated and qualified as hedging instruments for one or
more risks-
| | -- | --------------------------------------------------------------------------------------------------------



The Company uses selected financial
derivative instruments to protect itself against adverse price fluctuations in agriculture commodities, such as corn and sorghum.
Those agriculture commodities derivative instruments include futures and options on futures which are listed on the CBOT, as well
as options on futures accessed through ASERCA (Farming Marketing Support and Services, ascribed to Mexico’s Secretary of
Farming and Agriculture), who functions as counterparty and that is a dependent entity of the Mexican Government’s unit that
belongs to the Secretary of Farming, Livestock, Rural Development, Fishing and Food (SAGARPA, Secretaria de Agricultura, Ganaderia
y Desarrollo Rural, Pesca y Alimentacion), through which, a commodities-related price hedging program (the “Farming by Contract”)
scheme is offered to both farmers and agro-business entities such as the Company. The ASERCA program has two participating modalities:
(i) 10% of the payment of the option’s premium and 100% of the benefit with a 60% discount on the amount of the initial premium,
or (ii) 50% of the payment of the option’s premium, and 100% of the benefit with a 30% discount on the amount of the initial
premium.



When the derivatives are acquired
to hedge risks, and accomplish with hedge accounting, there are strict requirements the hedging relationship be documented for
each hedged price risk. This documentation includes a description of the objective or hedge strategy, the nature of the hedged
item position, the risk(s) to be hedged, the designated derivatives and how the initial effectiveness testing assessment will be
performed, as well as the subsequent measurement of its retrospective effectiveness, which applies to each established hedge relationship.



F-26







Formal hedging derivatives designated
into a hedging relationship, follow special hedge accounting recognition, for fair value changes based on each corresponding hedge
accounting model: (1) Fluctuations in fair value type of hedges, require that both the derivative and the hedged item are to be
valued at fair value and recognized in the statement of income adjusting the carrying value of hedge item; (2) in the case of cash
flow hedges, only the effective portion of the derivative is temporarily recognized in comprehensive income (equity) and recycled
to operations when the effects of the hedged item affects operations as cost of good sold, interest, etc., while the ineffective
portion is immediately recognized within operations.



The Company discontinues hedge
accounting in the following cases: when the derivative has expired, has been sold, is cancelled or exercised, or when the derivative
does not achieve the required level of accumulated effectiveness as to compensate for the changes in the fair value or cash flows
of the hedged item, when the edged item is prepaid or when the Company decides to cancel the hedge relationship on a discretionary
basis.



Certain financial derivative
instruments are entered into to hedge on or more exposures from the user’s economic perspective, but are neither designated
nor qualify for hedge accounting purposes, hence these derivatives are treated accounting wise, as trading derivatives that is,
with fluctuations in the fair value of these derivatives recognized within comprehensive financial result.



In the case of hedges with options
on futures or combinations of these options, which are designated and qualifying under hedge accounting models, the premiums paid
and received through these derivative financial instruments are initially recognized as assets within derivative financial instruments
in the consolidated balance sheet, with subsequent changes in their fair values recognized in the comprehensive financial result
in the case of fair value hedges, while under cash flow hedge model, these changes are recognized within other comprehensive income
(OCI).



The Company has an investment
risk and hedge committee that analyzes the Company’s risk.







F-27







| | v) | Income taxes (income tax (IT),
flat rate business tax (IETU)), and employee statutory profit sharing (ESPS)-
| | -- | ------------------------------------------------------------------------------------------------------------



IT, IETU and ESPS payable for
the year are determined in conformity with the tax provisions in effect according to the income tax law applicable to each subsidiary.



Consolidated deferred income
taxes represents the addition of the amounts determined in each subsidiary by applying the enacted statutory tax. Deferred income
tax assets and liabilities to different tax jurisdictions are not offset.



Deferred IT and deferred ESPS
(for the Mexican subsidiaries), are accounted for under the asset and liability method. Deferred tax and ESPS assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, according to the income tax law applicable to each subsidiary and
in the case of IT, for tax loss and tax credit carryforwards. Deferred tax and ESPS assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax and ESPS assets and liabilities of a change in tax rates is recognized in income during the
period that includes the enactment date.



| | w) | Cumulative currency translation effect-
| | -- | ---------------------------------------



Cumulative currency translation
represents the difference resulting from the translation of the figures from the functional currency of foreign operations into
the reporting currency.



| | x) | Net income per share-
| | -- | ---------------------



Net income per share has been
computed based on controlling interest net income and on the weighted average number of shares outstanding, as established in Bulletin
B-14 “Profit per Share”.







F-28







| | y) | Financial information by segments-
| | -- | ----------------------------------



FRS B-5, “Financial
Information by Segments”, establishes the rules for disclosing financial information by segment.



Financial information by segment
is prepared based on a management’s approach, in conformity with FRS B-5, considering a segment to be an operating component
that is subject to risks and benefits that are different from other business segments. Beginning 2011, geographic operating segments
are also considered (see note 21).



| | z) | Reclassifications-
| | -- | ------------------



Certain captions shown in the
2010 financial statements as originally issued have been reclassified for uniformity of presentation with the 2011 financial statements.
The changes in these reclassifications were recognized retrospectively at December 31, 2010 and 2009, in conformity with Mex FRS
B-1. (see note 3)



| | aa) | Convenience translation-
| | --- | ------------------------



United States thousands dollars
amounts as shown in the accompanying consolidated statement of financial position as of December 31, 2011, as well as in the consolidated
statements of income and cash flows for the year ended December 31, 2011 have been included solely for the convenience of the reader
and are translated from pesos to US dollars as a matter of arithmetic computation only, at an exchange rate of $13.97 to one U.S.
dollar, which was the exchange rate at December 31, 2011. Such translation should not be construed as a representation that the
peso amounts could have been or could be converted into U.S. dollars at this rate.



| | (3) | New accounting pronouncements-
| | --- | ------------------------------



The FRS, and improvements mentioned
below, issued by the Mexican Board of Financial Reporting Standards (Consejo Mexicano de Normas de Informacion Financiera or CINIF)
became effective for fiscal years beginning on or after January 1, 2011, with the respective prospective or retrospective application
being specified in each case.





F-29







| | (a) | FRS C-4 “Inventories”-FRS C-4 is effective beginning January 1, 2011 with retrospective
application, supersedes Bulletin C-4 and establishes new valuation, presentation and disclosure rules for initial and subsequent
recognition of inventories on the statement of financial position. The principal changes are as follows:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | FRS C-4 eliminates: a) direct cost as a valuation system and, b) the inventory cost formula (formerly
method) referred to as Last In – First Out (LIFO).
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Inventory cost can only written down under the base of net realizable value.
| | - | ----------------------------------------------------------------------------



| | · | For inventories acquired on an installment payment basis, the difference between the purchase price
under normal credit conditions and the amount paid must be recognized as financial cost during the financing period.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Under certain circumstances, estimates of impairment losses on inventories recognized in a prior
period may be deducted or charged off against results of income for the period in which such modifications occur.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Items whose benefits and risks have already been transferred
to the entity must be recognized as inventories; therefore, prepayments are not part of inventory.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



Accounting changes resulting
from the initial application of this standard were recognized retrospectively, affecting the financial statements as follows:



|December 31, 2010     |  | Previously reported amounts |           |  | Accounting change |   |          | Adjusted amounts | 
|--------------------- |  | --------------------------- | --------- |  | ----------------- | - | -------- | ---------------- | 
|                      |  |                             |           |  |                   |   |          |                  | 
|Inventories, net      |  | $                           | 3,577,929 |  |                   | $ | (366,160 | )                | 
|                      |  |                             |           |  |                   |   |          |                  | 
|December
    31, 2009 |  |                             |           |  |                   |   |          |                  | 
|                      |  |                             |           |  |                   |   |          |                  | 
|Inventories, net      |  | $                           | 3,613,212 |  |                   | $ | (567,458 | )                | 



F-30







| | (b) | FRS C-5 “Prepayments”–FRS C-5 is effective beginning January 1, 2011,
with retrospective application, supersedes Bulletin C.5, and includes primarily the following changes:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Advances for purchase of inventories (current assets) or property, plant and equipment and intangible
assets (non-current assets), among others, must be reported under prepayments provided the benefits and risks inherent in the assets
to be acquired or the services to be received have not yet been transferred to the entity. Furthermore, prepaid expenses must be
reported based on the nature of the item to be acquired, either under current assets or non-current assets.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Among other things, the following must be disclosed in notes to financial statements: breakdown
of prepayments, accounting policies for recognition and impairment losses, as well as relevant reversal of impairments.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Accounting changes resulting
from the initial application of this standard were recognized retrospectively, affecting the financial statements as follows:



|December 31, 2010                                             |  | Previously reported amounts |            |  | Accounting change |   |         | Adjusted amounts | 
|------------------------------------------------------------- |  | --------------------------- | ---------- |  | ----------------- | - | ------- | ---------------- | 
|                                                              |  |                             |            |  |                   |   |         |                  | 
|Prepayments and other non-current assets (from inventory)     |  | $                           | 138,954    |  |                   | $ | 366,160 |                  | 
|                                                              |  |                             |            |  |                   |   |         |                  | 
|Property, plant and equipment, net                            |  | $                           | 10,587,321 |  |                   | $ | (43,290 | )                | 
|                                                              |  |                             |            |  |                   |   |         |                  | 
|Other non-current assets (from property, plant and equipment) |  | $                           | 21,593     |  |                   | $ | 43,290  |                  | 



F-31







|December 31, 2009                                             |  | Previously reported amounts |            |  | Accounting change |   |         | Adjusted amounts | 
|------------------------------------------------------------- |  | --------------------------- | ---------- |  | ----------------- | - | ------- | ---------------- | 
|                                                              |  |                             |            |  |                   |   |         |                  | 
|Prepayments and other non-current assets (from inventory)     |  | $                           | 155,219    |  |                   | $ | 567,458 |                  | 
|                                                              |  |                             |            |  |                   |   |         |                  | 
|Property, plant and equipment, net                            |  | $                           | 10,910,126 |  |                   | $ | (44,144 | )                | 
|                                                              |  |                             |            |  |                   |   |         |                  | 
|Other non-current assets (from property, plant and equipment) |  | $                           | 20,096     |  |                   | $ | 44,144  |                  | 



| | (c) | FRS C-6 “Property, plant and equipment”- FRS C-6 is effective beginning January
1, 2011. The accounting changes resulting from the initial application of this FRS must be prospectively recognized. The principal
changes with respect to the superseded Bulletin include the following:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The bases for determination of the residual value of a component are added.
| | - | ---------------------------------------------------------------------------



| | · | The requirement to assign an appraised value to property, plant and equipment acquired at no cost
or at an inadequate cost is eliminated.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | · | Depreciation for components representative of a property, plant and equipment item is mandatory,
independently of the depreciation of the rest of the item as if it were a single component.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Depreciation of idle components must continue, unless depreciation is determined based on the activity.
| | - | -------------------------------------------------------------------------------------------------------



| | (d) | 2011 FRS Improvements-
| | --- | ----------------------



In December 2010, the CINIF issued
the document referred to as “2011 FRS Improvements”, which contains precise modifications to some FRS. The modifications
that bring about accounting changes are listed below:



F-32







| | · | FRS B-1 “Accounting Changes and Error Corrections”-FRS B-1 requires the presentation
of the initial statement of financial position when there are retrospective adjustments, as well as the presentation in the statement
of changes in stockholders’ equity of previously reported initial balances, the effects of retrospective application and
restated initial balances. These improvements were effective beginning January 1, 2011 and were retrospectively applicable.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | FRS B-2 “Statement of cash flows”-The requirement to present in the statement
of cash flows the line item “cash surplus to be applied in financing activities or, cash to be obtained from financing activities”
is eliminated and is left at a recommendation level. This revision was effective for fiscal years beginning January 1, 2011 and
was retrospectively applicable.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Bulletin C-3 “Accounts receivable” -Interest income on accounts receivable
is recognized when accrued, provided the relevant amount is reliably determined and likely to be recovered. Furthermore, it is
provided that interest income on accounts receivable unlikely to be recovered must not be recognized. These improvements are effective
beginning January 1, 2011 and are prospectively applicable.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | FRS C-10 “Derivative financial instruments and hedging activities” –The
improvements to this new FRS are effective beginning January 1, 2011, with retrospective application. The principal improvements
include the following:
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Certain effects of hedge effectiveness may be excluded.
| | - | -------------------------------------------------------



| | · | An intra-group transaction may be recognized as hedging only when the functional currencies of
the related parties are different from each other.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Reporting of the effect of the hedged interest rate risk is required, when a portfolio portion
is the hedged position.
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | Account margins must be reported separately.
| | - | --------------------------------------------



| | · | In a hedge relationship, a proportion of the total amount of the hedging instrument may be designated
as the hedging instrument. The impossibility of designating a hedge relationship for a portion of the term of the hedging instrument
is specified.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







F-33







| | · | FRS C-13 “Related parties”-The definition of “immediate family”
is now more specific as it was limited to providing a list of the family members that fell within such definition. This revision
was effective for fiscal years beginning January 1, 2011 and was retrospectively applicable.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------









| | (4) | Cash and cash equivalents-
| | --- | --------------------------





Consolidated cash and cash equivalents
as of December 31, 2010 and 2011 consist of:





|                                           |  | 2010 |           |  | 2011 |  
|------------------------------------------ |  | ---- | --------- |  | ---- | -
|                                           |  |      |           |  |      |  
|Cash and bank accounts                     |  | $    | 513,076   |  |      | $
|Available on-demand investments (note 13b) |  |      | 3,445,899 |  |      |  
|Unrestricted cash and cash equivalents     |  |      | 3,958,975 |  |      |  
|                                           |  |      |           |  |      |  
|Restricted cash                            |  |      | 8,899     |  |      |  
|                                           |  |      |           |  |      |  
|Total cash and cash equivalents            |  | $    | 3,967,874 |  |      | $

| | 
| | 



Restricted cash corresponds to margin calls
to cover future derivative commitments, due to adverse market movements associated with the underlying prices for which the Company
had an open position as of December 31, 2010 and 2011.



| | (5) | Trade receivables, net-
| | --- | -----------------------



Trade receivables at December
31, 2010 and 2011 amounting $963,273 and $1,507,095, respectively, are shown net of an allowance of doubtful accounts of $32,990
and $38,537, respectively.



F-34







| | (6) | Related parties-
| | --- | ----------------



| | a) | A summary of related party accounts payable as of December 31, 2010 and 2011 is as follows:
| | -- | -------------------------------------------------------------------------------------------



|                                                     |  | 2010 |        |  | 2011 |  
|---------------------------------------------------- |  | ---- | ------ |  | ---- | -
|Vimifos, S.A. de C.V.                                |  | $    | 43,051 |  |      | $
|Frescopack, S.A. de C.V.                             |  |      | 6,670  |  |      |  
|Maquinaria Agrícola, S.A. de C.V.                    |  |      | 7,973  |  |      |  
|Llantas y Accesorios, S.A. de C.V.                   |  |      | 1,144  |  |      |  
|Autos y Accesorios, S.A. de C.V.                     |  |      | 678    |  |      |  
|Autos y Tractores de Culiacán, S.A. de C.V.          |  |      | 1,025  |  |      |  
|Camiones y Tractocamiones de Sonora, S.A. de C.V.    |  |      | 67     |  |      |  
|Alfonso R. Bours, S.A. de C.V.                       |  |      | 52     |  |      |  
|Distribuidora Automotriz de los Mochis, S.A. de C.V. |  |      | 213    |  |      |  
|                                                     |  | $    | 60,873 |  |      | $



At December 31, 2010 and 2011, balances
due to related parties correspond to unsecured current accounts denominated in pesos that bear no interest and are payable in short-term
basis.



F-35







| | b) | For the years ended December 31, 2009, 2010 and 2011, the Company had the following transactions
with related parties:
| | -- | ----------------------------------------------------------------------------------------------------------------------





|Purchases of feed, raw materials and packing
supplies |  | 2009 |         |  | 2010 |   |         | 2011 | 
|----------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- | 
|                                                      |  |      |         |  |      |   |         |      | 
|Vimifos, S.A. de C.V.                                 |  | $    | 261,385 |  |      | $ | 215,967 |      | 
|Frescopack, S.A. de C.V.                              |  |      | 136,609 |  |      |   | 113,229 |      | 
|Pulmex 2000, S.A. de C.V.                             |  |      | 17,307  |  |      |   | 10,896  |      | 
|Qualyplast, S.A. de C.V.                              |  |      | 21      |  |      |   | 19      |      | 



|Purchases of vehicles, tires and spare parts         |  | 2009 |        |  | 2010 |   |        | 2011 | 
|---------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- | 
|                                                     |  |      |        |  |      |   |        |      | 
|Maquinaria Agrícola, S.A. de C.V.                    |  | $    | 56,502 |  |      | $ | 64,546 |      | 
|Autos y Accesorios, S.A. de C.V.                     |  |      | 11,849 |  |      |   | 13,371 |      | 
|Autos y Tractores de Culiacán, S.A. de C.V.          |  |      | 19,555 |  |      |   | 16,551 |      | 
|Llantas y Accesorios, S.A. de C.V.                   |  |      | 30,848 |  |      |   | 32,775 |      | 
|Camiones y Tractocamiones de Sonora, S.A. de C.V.    |  |      | 8,391  |  |      |   | 338    |      | 
|Distribuidora Automotriz de los Mochis, S.A. de C.V. |  |      | 11,093 |  |      |   | 7,635  |      | 
|Alfonso R. Bours, S.A. de C.V.                       |  |      | 847    |  |      |   | 931    |      | 



|Airplane leasing expenses               |  | 2009 |       |  | 2010 |   |       | 2011 | 
|--------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- | 
|                                        |  |      |       |  |      |   |       |      | 
|Taxis Aéreos del Noroeste, S.A. de C.V. |  | $    | 9,810 |  |      | $ | 8,866 |      | 





Purchases transactions with
related parties are made at market prices, which are similar to those that would have been used in arms-length transactions.







F-36







| | (7) | Inventories and biological assets-
| | --- | ----------------------------------



| | a) | Inventories consist of the following:
| | -- | -------------------------------------





|                                                                                           |  | 2010 |           |  | 2011 |  
|------------------------------------------------------------------------------------------ |  | ---- | --------- |  | ---- | -
|Raw materials and subproducts (net of $27,940 (2,000 USD) reserve as at December 31, 2011) |  | $    | 1,523,690 |  |      | $
|Medicine, materials and spare parts                                                        |  |      | 452,373   |  |      |  
|Finished feed                                                                              |  |      | 60,405    |  |      |  
|                                                                                           |  |      | 2,036,468 |  |      |  
|Agricultural products:                                                                     |  |      |           |  |      |  
|Live chicken                                                                               |  |      | 877,654   |  |      |  
|Processed chicken (net of $30,203 (2,162 USD) reserve as at December 31, 2011)             |  |      | 250,904   |  |      |  
|Commercial egg                                                                             |  |      | 22,094    |  |      |  
|Beef                                                                                       |  |      | 4,463     |  |      |  
|Turkey                                                                                     |  |      | 20,186    |  |      |  
|                                                                                           |  |      | 1,175,301 |  |      |  
|Total                                                                                      |  | $    | 3,211,769 |  |      | $





| | b) | Biological assets at December 31, 2010 and 2011 consist
of the following:
| | -- | -------------------------------------------------------------------------





|                                    |  | 2010 |          |   | 2011 |  
|----------------------------------- |  | ---- | -------- | - | ---- | -
|Current biological assets:          |  |      |          |   |      |  
|Incubatable eggs                    |  | $    | 105,873  |   |      | $
|Breeder pigs                        |  |      | 48,120   |   |      |  
|Total current biological assets     |  | $    | 153,993  |   |      | $
|                                    |  |      |          |   |      |  
|Non-current biological assets:      |  |      |          |   |      |  
|Hens in production                  |  | $    | 771,454  |   |      | $
|Laying and breeder hens             |  |      | 282,111  |   |      |  
|Breeder pigs                        |  |      | 34,828   |   |      |  
|Allowance for productivity declines |  |      | (338,105 | ) |      |  
|                                    |  |      |          |   |      |  
|Total non-current biological assets |  | $    | 750,288  |   |      | $





F-37







The change in the historical value of biological
assets and agricultural products measured at their fair value presented decreases of $7,214, $32,016 in 2009 and 2010, respectively,
and an increase of $2,558 in 2011. Such effects were included in the results of income each year.



| | (8) | Prepaid expenses and other current assets-
| | --- | ------------------------------------------



Prepaid
expenses are comprised as follows:



|                                                |  | 2010 |         |  | 2011 |  
|----------------------------------------------- |  | ---- | ------- |  | ---- | -
|                                                |  |      |         |  |      |  
|Advances to suppliers of inventory              |  | $    | 366,160 |  |      | $
|Services                                        |  |      | 43,240  |  |      |  
|Other receivable                                |  |      | 77,753  |  |      |  
|Insurances                                      |  |      | 17,961  |  |      |  
|                                                |  |      |         |  |      |  
|Total prepaid expenses and other current assets |  | $    | 505,114 |  |      | $



F-38







| | (9) | Property, plant and equipment-
| | --- | ------------------------------



| | a) | Property, plant and equipment at December 31, 2010 and 2011 consists of the following:
| | -- | --------------------------------------------------------------------------------------





|                                |  | Useful lives
 (years) |       |  | 2010 |   |            | 2011 | 
|------------------------------- |  | --------------------- | ----- |  | ---- | - | ---------- | ---- | 
|Buildings and farm structures   |  |                       | 20-40 |  |      | $ | 8,911,833  |      | 
|Machinery and equipment         |  |                       | 7-15  |  |      |   | 7,156,921  |      | 
|Transportation equipment        |  |                       | 6     |  |      |   | 1,158,660  |      | 
|Office, furniture and equipment |  |                       | 3     |  |      |   | 246,349    |      | 
|                                |  |                       |       |  |      |   | 17,473,763 |      | 
|                                |  |                       |       |  |      |   |            |      | 
|Accumulated depreciation        |  |                       |       |  |      |   | (8,157,372 | )    | 
|                                |  |                       |       |  |      |   | 9,316,391  |      | 
|                                |  |                       |       |  |      |   |            |      | 
|Land                            |  |                       |       |  |      |   | 948,036    |      | 
|Construction in progress        |  |                       |       |  |      |   | 279,604    |      | 
|                                |  |                       |       |  |      |   |            |      | 
|Total                           |  |                       |       |  |      | $ | 10,544,031 |      | 





| | b) | Depreciation expense for the years ended December 31, 2009, 2010 and 2011, amounted to $662,630,
$692,640 and $726,061, respectively.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------



| | c) | As of December 31, 2010, the construction in progress amounting $279,604, has been placed in service
in 2011.
| | -- | -------------------------------------------------------------------------------------------------------------



| | d) | As of December 31, 2011, the construction in progress amounting $251,624, are expected to be placed
in service in 2012.
| | -- | -----------------------------------------------------------------------------------------------------------------------



F-39







| | e) | Changes in property, plant and equipment, were as follow:
| | -- | ---------------------------------------------------------



|                              |  | Buildings
 and farm
 structures |           |   | Machinery
 and
 equipment |  |           | Transport
 equipment |  |  | Office,
 furniture
 and
 equipment |   |  | Land |         |   | Constructions
 in progress |  |         | Total | 
|----------------------------- |  | ------------------------------- | --------- | - | ------------------------- |  | --------- | -------------------- |  |  | ---------------------------------- | - |  | ---- | ------- | - | -------------------------- |  | ------- | ----- | 
|                              |  |                                 |           |   |                           |  |           |                      |  |  |                                    |   |  |      |         |   |                            |  |         |       | 
|Balances at December 31, 2010 |  | $                               | 5,005,062 |   |                           |  | 3,739,226 |                      |  |  | 520,551                            |   |  |      | 51,552  |   |                            |  | 948,036 |       | 
|Acquisition                   |  |                                 | 184,845   |   |                           |  | 379,330   |                      |  |  | 93,576                             |   |  |      | 36,200  |   |                            |  | 13,582  |       | 
|Sale of plant and equipment   |  |                                 | (1,147    | ) |                           |  | (23,035   | )                    |  |  | (44,829                            | ) |  |      | (30,422 | ) |                            |  | (3,204  | )     | 
|Business acquisition          |  |                                 | 19,501    |   |                           |  | 25,343    |                      |  |  | 100                                |   |  |      | -       |   |                            |  | 422     |       | 
|Depreciation                  |  |                                 | (262,950  | ) |                           |  | (345,963  | )                    |  |  | (106,674                           | ) |  |      | (10,474 | ) |                            |  | -       |       | 
|Balances at December 2011     |  | $                               | 4,945,311 |   |                           |  | 3,774,901 |                      |  |  | 462,724                            |   |  |      | 46,856  |   |                            |  | 958,836 |       | 



| | (10) | Goodwill-
| | ---- | ---------



In 1999, goodwill was derived
from the purchase of the shares of Campi Alimentos, S.A. de C.V. in the amount of $359,564. At December 31, 2005 (the last year
of amortization), accumulated amortization aggregated to $58,716. In 2009, 2010 and 2011, goodwill was not amortized, but subject
to impairment test on an annual basis, as a result of the adoption of Mexican FRS B-7 “Business Acquisitions”
(see note 2n).



| | (11) | Other non-current asset-
| | ---- | ------------------------





Other non-current assets consist of:



|                                                         |  | 2010 |        |  | 2011 |  
|-------------------------------------------------------- |  | ---- | ------ |  | ---- | -
|                                                         |  |      |        |  |      |  
|Advances for purchases of property, plant and equipment  |  | $    | 43,290 |  |      | $
|Investment in life insurance contracts (note 1 and 2(o)) |  |      | -      |  |      |  
|Investment in unconsolidated entity (note 1 and 2(o))    |  |      | -      |  |      |  
|Others                                                   |  |      | 21,593 |  |      |  
|                                                         |  | $    | 64,883 |  |      | $

F-40







(12)
Short and long-term debt-



| | a) | Short term debt, as of December 31, consist of the following:
| | -- | -------------------------------------------------------------



|                                                                                                                                                |  | 2010 |   |  | 2011 |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | - |  | ---- | -
|Unsecured:                                                                                                                                      |  |      |   |  |      |  
|Denominated in USD for an amount of 75,000 USD, maturing in October 2012, at LIBOR (3) rate plus 0.60 points. Bachoco is guarantor of this debt |  | $    | - |  |      | $
|Denominated in pesos, maturing in January 2012, at TIIE (1)  plus 0.85 points (note 22(ii))                                                     |  |      | - |  |      |  
|Denominated in pesos, maturing in August 2012, at TIIE (1) FIRA (2) plus 0.50 points.                                                           |  |      | - |  |      |  
|                                                                                                                                                |  |      |   |  |      |  
|Short term debt                                                                                                                                 |  | $    | - |  |      | $



Weighted average interest rate on unsecured short-term debt
at December 31, 2011, was 5.53 %.



The average interest rate on unsecured short-term for the years
ended December 31, 2011 was 5.48%.



The weighted average interest rate on dollars unsecured short-term
at December 31, 2011 was 0.8702%.



| | (1) | TIIE= Interbank Equilibrium Rate
| | --- | --------------------------------

| | (2) | FIRA= Agriculture trust (Fideicomiso Instituido en Relacion con la Agricultura by its Spanish acronym)
| | --- | ------------------------------------------------------------------------------------------------------

| | (3) | LIBOR= London InterBank Offered Rate
| | --- | ------------------------------------



F-41











| | b) | Long-term debt, as of December 31, consist of the following:
| | -- | ------------------------------------------------------------





|                                                                                                                          |  | 2010 |          |   | 2011 |  
|------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | -
|                                                                                                                          |  |      |          |   |      |  
|Unsecured:                                                                                                                |  |      |          |   |      |  
|Denominated in pesos, maturing in June 2016, at TIIE (1) rate plus 1 points.                                              |  | $    | -        |   |      | $
|Denominated in pesos, maturing in 2013, at TIIE (1) rate plus 0.60 points.                                                |  |      | -        |   |      |  
|Denominated in pesos, maturing in 2015 and 2016, at TIIE (1) plus 1.00 points.                                            |  |      | -        |   |      |  
|Denominated in pesos, maturing in December 2013, at TIIE (1) FIRA (2) rates less 1.00 point.                              |  |      | 38,133   |   |      |  
|Denominated in pesos, maturing in April 2015, at TIIE (1) rate plus 0.95 points.                                          |  |      | 23,617   |   |      |  
|Denominated in pesos, maturing in April 2012 and June 2013, at TIIE (1) FIRA (2) rates less 1.10 points and 0.875 points. |  |      | 30,720   |   |      |  
|Denominated in pesos, maturing in March 2014, at TIIE (1) rate plus 2 points.                                             |  |      | 2,957    |   |      |  
|Denominated in pesos, maturing in July 2015, at TIIE (1) plus 1.50 points.                                                |  |      | 250,000  |   |      |  
|Denominated in pesos, maturing in April 2015, at TIIE (1) FIRA (2) rates plus 1.90 points.                                |  |      | 250,000  |   |      |  
|Denominated in pesos, maturing in June 2015, at TIIE (1) rate plus 2.50 points.                                           |  |      | 38,993   |   |      |  
|Denominated in pesos, maturing in June 2011, at TIIE (1) FIRA(2) rates plus 2 points.                                     |  |      | 12,500   |   |      |  
|Total                                                                                                                     |  |      | 646,920  |   |      |  
|                                                                                                                          |  |      |          |   |      |  
|Less current installments                                                                                                 |  |      | (139,867 | ) |      |  
|                                                                                                                          |  |      |          |   |      |  
|Long-term debt, excluding current installments                                                                            |  | $    | 507,053  |   |      | $



In 2010 and 2011, the Company made prepayments of long-term
debt of $533,750 and $538,993 respectively, without being required to pay early termination fee.



Weighted average interest rate on long-term debt at December
31, 2010 and 2011 was 6.32% and 5.58%, respectively.



F-42







The average interest rate of the Company’s total long-term
debt for the years ended December 31, 2010 and 2011 was 6.64%, and 6.17%, respectively.



(1) TIIE = Interbank Equilibrium Rate

(2) FIRA = Agriculture trust (Fideicomiso Instituido en Relación
con la Agriculturaby its Spanish acronym)



The weighted average interest rate of the Company ́s total
debt at December 31, 2010 and 2011 was 6.32% and 5.55%, respectively.



| | c) | At December 31, 2010 and 2011, unused lines of credit amounted to $2,047,839 and $2,257,870,
                                                                                         respectively. In 2010 and 2011, the Company did not pay any fee for unused lines of credit
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d) | Maturities of long-term debt as of December 31, 2011,
are as follows:
| | -- | ---------------------------------------------------------------------



|Year |  | Amount |        
|---- |  | ------ | -------
|     |  |        |        
|2013 |  | $      | 154,546
|2014 |  |        | 97,797 
|2015 |  |        | 89,537 
|2016 |  |        | 42,490 
|     |  |        |        
|     |  | $      | 384,370



Interest expense on loans
for the years ended December 31, 2009, 2010 and 2011, aggregated to $66,989, $52,903, and $40,687, respectively.



Bank loans establish
certain affirmative and negative covenants. As of December 31, 2011 and April 30, 2012, the Company was in compliance with all
these covenants.





F-43







(13-a) Financial Instruments and hedging activities as at December 31, 2010 and 2011-



Derivatives for trading
purposes (neither designated nor qualified for hedges accounting treatment)



The Company maintains
a portfolio of explicit Financial Derivative Instruments (FDI), which were neither designated nor qualified as hedges under FRS
C-10 and, therefore, their related changes in fair value were recognized as valuation effects of financial instruments within Comprehensive
Financial Results (CFR), in the results of income.The related
fair value amount of the open balance as of December 31, 2010 and 2011, was $(7,096) and $(2,378), respectively, and arose from
the derivative instruments, shown on the following pages:



F-44







As
at December 31, 2010:





OTC1foreign currency option structures and forwards – finance counter-party in private agreements:



|Counter-   
    party |  |  | Instrument                                                                                                   |  |  | Underlying4               |  | Notional       |  |  | Maturity                                                                                                |  |  |   | Effects on the results of operations CFR/loss (gain) |  
|--------------------- |  |  | ------------------------------------------------------------------------------------------------------------ |  |  | ------------------------- |  | -------------- |  |  | ------------------------------------------------------------------------------------------------------- |  |  | - | ---------------------------------------------------- | -
|                      |  |  |                                                                                                              |  |  |                           |  |                |  |  |                                                                                                         |  |  |   |                                                      |  
|Morgan Stanley        |  |  | European
                                                                                           options3 |  |  | Exchange
    rate MXP/USD |  | Several in US$ |  |  | January
                                                                                           2011 |  |  | $ | 211                                                  |  
|                      |  |  |                                                                                                              |  |  |                           |  |                |  |  |                                                                                                         |  |  |   |                                                      |  
|                      |  |  | Knock
                                                                                out-knock in2          |  |  | Exchange
    rate MXP/USD |  | Several in US$ |  |  | January
                                                                                2011            |  |  |   | (199                                                 | )
|                      |  |  |                                                                                                              |  |  |                           |  |                |  |  |                                                                                                         |  |  |   |                                                      |  
|                      |  |  | Forwards                                                                                                     |  |  | Exchange
    rate MXP/USD |  | Several in US$ |  |  | January
                                                                                2011            |  |  |   | 19                                                   |  
|                      |  |  |                                                                                                              |  |  |                           |  |                |  |  |                                                                                                         |  |  |   |                                                      |  
|Deutsche Bank         |  |  | Knock
                                                                                in2                    |  |  | Exchange
    rate MXP/USD |  | $150US         |  |  | January
                                                                                2011            |  |  |   | (63                                                  | )
|                      |  |  |                                                                                                              |  |  |                           |  |                |  |  |                                                                                                         |  |  |   |                                                      |  
|Santander             |  |  | European
                                                                                options3            |  |  | Exchange
    rate MXP/USD |  | Several in US$ |  |  | January
                                                                                2011            |  |  |   | 9                                                    |  
|                      |  |  |                                                                                                              |  |  |                           |  |                |  |  |                                                                                                         |  |  |   |                                                      |  
|                      |  |  | Forwards                                                                                                     |  |  | Exchange
    rate MXP/USD |  | Several in US$ |  |  | January
                                                                                2011            |  |  |   | 41                                                   |  
|                      |  |  |                                                                                                              |  |  |                           |  |                |  |  |                                                                                                         |  |  |   |                                                      |  
|                      |  |  |                                                                                                              |  |  |                           |  |                |  |  |                                                                                                         |  |  | $ | 18                                                   |  








1Over the Counter(OTC): refers to privately agreed operations (outside of the standardized or organized futures & options exchange markets
such as CBOT) with other financial or non-financial parties.

2Knock out – knock in:
Option combination that hedges up to a certain level of the exchange rate, and from another level of the exchange rate respectively.

3European options: derivative
financial instruments under which the buyer has the right or the obligation to buy or sell a certain amount of a underlying asset
in the future.

4MXP means Thousands of Mexican Peso and USD means
Thousands of U.S. dollars.



F-45







Derivatives on prices of farming goods (commodities):



|              |  |                  |  |            |  |                 |  | Effects on the result of operations |       
|------------- |  | ---------------- |  | ---------- |  | --------------- |  | ----------------------------------- | ------
|Counter-party |  | Instrument       |  | Underlying |  | Maturity        |  | CFR/loss (gain)                     |       
|              |  |                  |  |            |  |                 |  |                                     |       
|Cargill (OTC) |  | Swaps            |  | Corn       |  | January-May2011 |  | $                                   | (2,868
|              |  |                  |  |            |  |                 |  |                                     |       
|              |  | Swaps            |  | Soy bean   |  | January-May2011 |  |                                     | (950  
|              |  |                  |  |            |  |                 |  |                                     |       
|New Edge5     |  | American options |  | Corn       |  | March 2011      |  |                                     | (735  
|              |  |                  |  |            |  |                 |  |                                     |       
|              |  | Futures          |  | Corn       |  | March 2011      |  |                                     | (2,561
|              |  |                  |  |            |  |                 |  |                                     |       
|              |  |                  |  |            |  |                 |  | $                                   | (7,114










5
New Edge is the broker or the commission agents for the futures or options on the futures, that the
Company used to enter into these operation in this listed CBOT market on corn and soybeans forwards. See note 4, collaterals established
by the broker for Bachoco.





F-46











As at December 31,
2011:



OTC1foreign currency
option structures and forwards – finance counter-party in private agreements:



|               |  |            |  |                       |  |                |  |              |  | Effects on      |        
|-------------- |  | ---------- |  | --------------------- |  | -------------- |  | ------------ |  | --------------- | -------
|               |  |            |  |                       |  |                |  |              |  | the results of  |        
|               |  |            |  |                       |  |                |  |              |  | operations      |        
|Counter-
party |  | Instrument |  | Underlying4           |  | Notional       |  | Maturity     |  | CFR/loss
(gain) |        
|               |  |            |  |                       |  |                |  |              |  |                 |        
|Several        |  | Forwards   |  | Exchange rate MXP/USD |  | Several in US$ |  | January 2012 |  | (1,344)         |        
|               |  |            |  |                       |  |                |  |              |  |                 |        
|               |  |            |  |                       |  |                |  |              |  | $               | (1,344)










| | 1 | Over the Counter (OTC): refers to privately agreed operations (outside of the standardized
or organized futures & options exchange markets such as CBOT) with other financial or non-financial parties.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2 | Knock out – knock in: Option combination that hedges up to a certain level of the exchange
rate, and from another level of the exchange rate respectively.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------

| | 3 | European options: derivative financial instruments under which the buyer has the right or the obligation
to buy or sell a certain amount of a underlying asset in the future.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 4 | MXP means Thousands of Mexican Peso and USD means Thousands of U.S. dollars.
| | - | ----------------------------------------------------------------------------



F-47







Derivatives on prices of farming
goods (commodities):







|                     |  |                  |  |            |  |                |  | Effects on
        the result of
        operations |       
|-------------------- |  | ---------------- |  | ---------- |  | -------------- |  | --------------------------------------------------- | ------
|Counter-party        |  | Instrument       |  | Underlying |  | Maturity       |  | CFR/loss
        (gain)                             |       
|                     |  |                  |  |            |  |                |  |                                                     |       
|Cargill (OTC)        |  | Swaps            |  | Corn       |  | March-May 2012 |  | $                                                   | (701  
|                     |  |                  |  |            |  |                |  |                                                     |       
|                     |  | Swaps            |  | Soy bean   |  | March-May 2012 |  | (342                                                | )     
|                     |  |                  |  |            |  |                |  |                                                     |       
|New Edge5            |  | American options |  | Corn       |  | March 2012     |  | (760                                                | )     
|                     |  |                  |  |            |  |                |  |                                                     |       
|Jefferies Bache LLC5 |  | American options |  | Corn       |  | March 2012     |  | 769                                                 |       
|                     |  |                  |  |            |  |                |  |                                                     |       
|                     |  |                  |  |            |  |                |  | $                                                   | (1,034





On November 1, 2011, the Company acquired
OK Industries, Inc. As of this date, this enterprise had in its financial derivative instruments position American options listed
at CBOT, these options were acquired through the broker Jefferies Bache. The fair value of those instruments amounted $894 as of
this date, and for December 31, 2011 this options amounted a fair value of $769, which represented a gain in option’s fair
value of $125 that was recognized in earnings as of December 31, 2011.








5
New Edge and / or Jefferies Bache are the brokers or the commission agents for the futures or options
on the futures, that the Company used to enter into these operation in this  listed CBOT market on corn and soybeans forwards. See
note 4, collaterals established by the broker for Bachoco.



F-48







Derivatives that are
designated and qualify for hedging purposes attributable to (i) one or more risks included in identified hedged items which are
already recognized on the balance sheet or (ii) associated to risk exposures not yet recognized on the balance sheet.



In regard to the positions
on FDI that the Company enters into and that were designated and qualify for hedge accounting purposes on one or more financial
risks, its fair value amounted to a total of $5,801 and $7,829 at December 31, 2010 and 2011, respectively. Following are the details
on the derivative instruments found accessing special hedge accounting models, their notional dimension, risks and effects, either
on the statement of financial position or in the statements of income. The derivatives mentioned below offset the effects of the
hedged items within the statement of income, as long as they continue to qualify and be designated for hedge purposes:



Fair
value hedge: The Company has entered into a several firm commitments made through contractual agreements with domestic
farmers to purchase estimated grain crops denominated in US dollars at a fixed price, which constitute the hedged items. The long
position in puts contracted through ASERCA only hedges the risk arising from a decrease in grain prices, set through firm
commitments. These put options are designated in hedging relationships under the fair value hedge accounting model. Effective changes
in fair value of grain crops associated with firm commitments attributable to price risk are recognized on the statement
of financial position as an asset or a liability until the contracted grain volumes are recognized as inventory. Subsequently,
these put options contracted through ASERCA are partly or fully re-designated to hedge any changes in fair value of a portion of
the acquired grain inventories in accordance with the fair value hedge accounting model; that is, protecting against falls in grain
prices by adjusting the carrying amount of such inventory against cost of sales in the statement of income, and at the same time,
the pending effects derived from changes in fair value of the primary position, lodged in current assets or current liabilities
during the primary position term, against cost of sales, so as to adjust the inventory cost for the effects as determined by the
fair value hedging model.



F-49







Options
listed on corn future, effective at December 31, 2010:



|              |  |            |      |  |            |  |      |          |  |  | Effective offsetting | 
|------------- |  | ---------- | ---- |  | ---------- |  | ---- | -------- |  |  | -------------------- | 
|              |  |            |      |  |            |  |      |          |  |  | effects on           | 
|              |  |            |      |  |            |  |      |          |  |  | comprehensive        | 
|Counter-party |  | Instrument |      |  | Underlying |  |      | Maturity |  |  | financial            | 
|              |  |            |      |  |            |  |      |          |  |  | results/loss (gain)  | 
|              |  |            |      |  |            |  |      |          |  |  |                      | 
|ASERCA        |  |            | Puts |  |            |  | Corn |          |  |  | March and May
2011   | 





Options
listed on corn future, effective at December 31, 2011:



|              |  |            |      |  |            |  |      |          |  |  | Effective offsetting | 
|------------- |  | ---------- | ---- |  | ---------- |  | ---- | -------- |  |  | -------------------- | 
|              |  |            |      |  |            |  |      |          |  |  | effects on           | 
|Counter-party |  | Instrument |      |  | Underlying |  |      | Maturity |  |  | comprehensive        | 
|              |  |            |      |  |            |  |      |          |  |  | financial            | 
|              |  |            |      |  |            |  |      |          |  |  | results/loss (gain)  | 
|              |  |            |      |  |            |  |      |          |  |  |                      | 
|ASERCA        |  |            | Puts |  |            |  | Corn |          |  |  | March and May 2012   | 



Option type of derivatives entered under
the ASERCA program are under the modality described in the accounting policy.



Hedging effects on
the price of grain associated with firm commitments and grain inventories denominated in the Company’s non-functional currency
(USD), that are recognized at their fair value due to the price risk only, under the fair value hedge accounting model.



Due to the acquired 2010
and 2011 grain price variations, the hedging effects arising from the fair value changes linked to the corn & sorghum6
prices, according to the fair value hedge model were recognized in the consolidated statement
of financial position as a current liability or as an adjustment to the inventory, both with correspondent offsetting effects
against the option’s intrinsic value changes within comprehensive financial result in the consolidated statement of income.








6 Sorghum
price is not listed in an agriculture exchange, but its price-as feeding substitute for corn (which is negotiated and listed in
the CBOT) has a high correlation with the futures prices of corn, therefore, corn prices are usually used as a sound proxy the
hedge sorghum related prices exposure.



F-50







At December 31,
2010:



Grain
inventories adjusted to fair value hedge7:



|                                                                                               |  |                                                                                                                                                          |  | Changes in the         |        
|---------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | -------
|                                                                                               |  |                                                                                                                                                          |  | fair value of the firm |        
|                                                                                               |  |                                                                                                                                                          |  | commitment             |        
|                                                                                               |  | Risk covered and                                                                                                                                         |  | recognized within the  |        
|Description                                                                                    |  | secondary assigned                                                                                                                                       |  | balance sheet          |        
|                                                                                               |  |                                                                                                                                                          |  |                        |        
|Firm Commitments with a fix price and USD denominated to sorghum and corn purchases agreements |  | ASERCA Puts that were re-designated as to hedge the fair value of Commodity grain inventories from losing fair value, attributable to lower grain prices |  | $                      | (5,801)



At December 31,
2011:



Grain
inventories adjusted to fair value hedge7:





|                                                                                                               |  |                                                                                                                                                          |  | Changes in the         |       
|-------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ------
|                                                                                                               |  |                                                                                                                                                          |  | fair value of the firm |       
|                                                                                                               |  |                                                                                                                                                          |  | commitment             |       
|                                                                                                               |  | Risk covered and                                                                                                                                         |  | recognized within the  |       
|Description                                                                                                    |  | secondary assigned                                                                                                                                       |  | balance sheet          |       
|                                                                                                               |  |                                                                                                                                                          |  |                        |       
|Firm Commitments with a fix price and USD
        denominated to sorghum and corn
        purchases agreements |  | ASERCA Puts that were re-designated as to hedge the fair value of Commodity grain inventories from losing fair value, attributable to lower grain prices |  | $                      | (7,829










7These
represent contracts the Company enters into with an unrelated party that can be executed through legal means and specify the amount
the Company expects to exchange,    the fixed price, the currency and the transaction schedule, among other important aspects.



F-51







(13-b) Investment in primary financial securities at December
31, 2010 and 2011-



The Company keeps investments in primary
financial debt instruments and equity instruments at December 31, 2010 and 2011, both in U.S. dollars and Mexican pesos, as follows:



|                                          |  | 2010  |           |  | 2011  | 
|----------------------------------------- |  | ----- | --------- |  | ----- | 
|                                          |  | Book  |           |  | Fair  | 
|For trading9                              |  | value |           |  | value | 
|                                          |  |       |           |  |       | 
|Mexican peso denominated debt securities  |  |       |           |  |       | 
|Government issued                         |  | $     | -         |  |       | 
|Bank issued                               |  |       | 3,150,010 |  |       | 
|Commercial paper                          |  |       | 31,150    |  |       | 
|Repo                                      |  |       | 203,410   |  |       | 
|                                          |  |       |           |  |       | 
|                                          |  | $     | 3,384,570 |  |       | 
|                                          |  |       |           |  |       | 
|U.S. dollars denominated debt securities: |  |       |           |  |       | 
|Government issued                         |  | $     | 359       |  |       | 
|Commercial paper                          |  |       | 19,121    |  |       | 
|                                          |  |       | 19,480    |  |       | 
|                                          |  |       |           |  |       | 
|Total                                     |  | $     | 3,404,050 |  |       | 



F-52







|                                          |  | 2010  |         |  | 2011  | 
|----------------------------------------- |  | ----- | ------- |  | ----- | 
|For trading9                              |  | Book  |         |  | Fair  | 
|maturity over 90 days                     |  | value |         |  | value | 
|                                          |  |       |         |  |       | 
|Mexican peso denominated debt securities: |  |       |         |  |       | 
|Government  issued                        |  | $     | 32,395  |  |       | 
|Cuasi-Governmental                        |  |       | -       |  |       | 
|Commercial paper                          |  |       | 70,487  |  |       | 
|                                          |  |       |         |  |       | 
|                                          |  | $     | 102,882 |  |       | 
|                                          |  |       |         |  |       | 
|U.S. dollars denominated debt securities: |  |       |         |  |       | 
|Bank issued                               |  | $     | 14,593  |  |       | 
|Commercial paper                          |  |       | 91,873  |  |       | 
|                                          |  |       | 106,466 |  |       | 
|                                          |  |       |         |  |       | 
|Total                                     |  | $     | 209,348 |  |       | 



|                 |  | 2010 |        |  | 2011 | 
|---------------- |  | ---- | ------ |  | ---- | 
|                 |  | Book |        |  | Fair | 
|Held to maturity |  |      | value  |  |      | 
|                 |  |      |        |  |      | 
|Pesos:           |  |      |        |  |      | 
|Commercial paper |  | $    | 36,725 |  |      | 



|                              |  | 2010        |       |  | 2011        | 
|----------------------------- |  | ----------- | ----- |  | ----------- | 
|For trading without maturity: |  | Book 
value |       |  | Fair
 value | 
|                              |  |             |       |  |             | 
|U.S. dollars:                 |  |             |       |  |             | 
|Equity instruments            |  |             | 5,124 |  |             | 
|                              |  | $           | 5,124 |  |             | 












8Average
interest rate in the category



9Accrued interest as of December
31, 2010 and 2011 is not reported in this presentation. The total interest earned on primary financial instruments as of that date
amounts to $4,691 and 3,102, respectively.



F-53







The Company has diversified its
investment portfolio into government, bank, corporate or commercial instruments. These financial instruments have been classified
by the Company into two categories: for “trading” and “held-to-maturity” securities under Mex FRS C-2.



As far as the primary financial
instruments classified as trading securities are concerned, as of December 31, 2011 the Company’s investment is largely in
bank instruments. Ninety-nine percent of this investment is made in recognized national banking institutions, and the term of these
investments are three days (52% of the instruments), and twenty eight days (47% of the instruments).



As for held-to-maturity securities,
in May 2010, the Company acquired through a voluntary exchange of debt certificates, 485,995 debt certificates issued by Tiendas
Comercial Mexicana, S.A. de C.V., maturing in 2016. At the acquisition date, the Company made a decision to classify such certificates
as “held-to-maturity securities” in accordance with Mex FRS C-2.



(14) Commitments and contingencies-



| | a) | The Company has entered into operating leases for certain offices, production sites, and automotive
and computer equipment. Most leases contain renewal options. These agreements have terms between one and five years. Rental expense
under these leases was as follows:
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Year ended   |  |        |        
|------------ |  | ------ | -------
|December 31, |  | Amount |        
|             |  |        |        
|2009         |  | $      | 177,292
|2010         |  |        | 197,504
|2011         |  |        | 188,244



| | b) | There is a contingent liability arising from the labor obligations mentioned in note 2q.
| | -- | ----------------------------------------------------------------------------------------



| | c) | The Company is involved in a number of lawsuits and claims arising in the normal course of business.
In the opinion of management, it is expected that the final outcome of these matters will not have significant adverse effects
on the Company’s consolidated financial position and results of income.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-54







| | d) | OK Industries, Inc. (foreign subsidiary) maintains self-insurance programs for health care costs
and workers’ compensation. The subsidiary is liable for health care claims up to 350 USD ($4,890) each year per plan participant
and workers’ compensation claims up to 600 USD ($8,392) per occurrence. Self-insurance costs are accrued based upon the aggregate
of the liability for reported claims and an estimated liability for claims incurred but not reported. The allowance for this concept
is booked into the accompanying consolidated statement of financial position within current liabilities and amounting to 3,817
USD ($53,323) at December 31, 2011. The consolidated statement of income includes expenses relating to self-insurance plans of
approximately 1,097 USD ($15,325) for the two-month period of the subsidiary ended December 31, 2011. Bachoco is required to maintain
letters of credit on behalf of the subsidiary of 3,400 USD ($47,498) to secure self-insured workers compensation payments.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e) | OK Industries, Inc. (foreign subsidiary) is involved in claims with the U.S. Department of Labor
and the U.S. Immigration and Customs Enforcement, and various other matters incidental to its business, including workers’
compensation claims and environmental issues. At December 31, 2011, the subsidiary has accrued reserves for potential claims of
2,500 USD ($34,925) which are included within other current liabilities.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f) | In accordance with Mexican tax law, the tax authorities are entitled to examine transactions carried
out during the five years prior to the most recent income tax return filed.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g) | The Company has agreed contracts to supply grain from third parties as part of the normal course
of operations.
| | -- | ---------------------------------------------------------------------------------------------------------------



| | h) | In accordance with the Income Tax Law, companies carrying out transactions with related parties
are subject to certain requirements as to the determination of prices, which should be similar to those that would be used in arms-length
transactions.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Should the tax authorities examine
the transactions and reject the related-party prices, they could assess additional taxes plus the related inflation adjustment
and interest in addition to penalties of up to 100% of the omitted taxes.



F-55







(15) Other taxes payable and other accruals-



An analysis of other taxes payable
and other accruals as follows:



|                                  |  | 2010 |         |  | 2011 |  
|--------------------------------- |  | ---- | ------- |  | ---- | -
|Other accounts payable            |  | $    | 35,963  |  |      | $
|Expenses payable                  |  |      | 148,357 |  |      |  
|Trade advances                    |  |      | 66,189  |  |      |  
|IMSS (1)                          |  |      | 35,073  |  |      |  
|INFONAVIT (3)                     |  |      | 30,743  |  |      |  
|Employee statutory profit sharing |  |      | 37,921  |  |      |  
|Payroll taxes                     |  |      | 21,277  |  |      |  
|Salaries payable                  |  |      | 4,924   |  |      |  
|SAR (2)                           |  |      | 6,266   |  |      |  
|Taxes payable                     |  |      | 6,520   |  |      |  
|Interests payable                 |  |      | 489     |  |      |  
|                                  |  |      |         |  |      |  
|Total                             |  | $    | 393,722 |  |      | $



(1) IMSS (a Government health
care institution): contributions are made by the Company and by its employees in accordance with applicable regulations. The Company
is required to pay this contribution on a monthly basis.



(2) SAR (a Government institution
for employee retirement savings): Contributions are made by the Company based on applicable regulations as a percentage of the
employees’ salary. The Company has a duty to pay these contributions to the government every two months.



(3) INFONAVIT (a Government institution
that provides mortgages to employees): The Company is required to make contributions to this entity based on approximately 5% of
the employees’ salaries, subject to certain limits. The Company has a duty to pay these contributions every two months.



F-56







(16) Foreign currency position and translation-



| | a) | A summary of the Company’s monetary assets and liabilities denominated in U.S. dollars (the
only foreign currency) translated into reporting currency, as of December 31, 2010 and 2011, were as follows:
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                              |  | Pesos |         
|----------------------------- |  | ----- | --------
|                              |  | 2010  |         
|Assets:                       |  |       |         
|Cash and cash equivalents     |  | $     | 357,933 
|Primary financial instruments |  |       | 106,466 
|Accounts receivable           |  |       | -       
|Other accounts                |  |       | 6,926   
|Advances to suppliers         |  |       | 170,170 
|                              |  |       | 641,495 
|Liabilities:                  |  |       |         
|Accounts payable              |  |       | (770,931
|Other liabilities             |  |       | -       
|Short term debt               |  |       | -       
|                              |  |       |         
|Net liability                 |  | $     | (129,436



| | b) | As of December 31, 2010 and 2011, the exchange rate was $12.37 and $13.97 per US dollar, respectively.
At April 30, 2012, date of issuance of the consolidated financial statements the exchange rate was $13.21 per US dollar.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | As of December 31, 2010 and 2011, foreign exchange gains, net amounting to $11,082 and $54,505,
respectively, were recorded.
| | -- | ----------------------------------------------------------------------------------------------------------------------------



| | d) | At December 31, 2011 the Company had the foreign exchange hedging instruments mentioned in note
13a.
| | -- | ----------------------------------------------------------------------------------------------------



| | e) | U.S dollar is the recording and functional currency of the foreign subsidiary. This foreign currency
was translated into Mexican peso that is the consolidated reporting currency.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-57







(17) Labor obligations-



| | a) | Labor obligation in Mexico
| | -- | --------------------------



The Company has a defined benefit
pension plan covering non unionized personnel in México. The benefits are based on years of service and the employee’s
compensation. The Company makes annual contributions to the plan equal to the maximum amount that can be deducted for income tax
purposes based on the projected unit credit method.



Plan contributions and benefits
paid were as follows:



|           |  | Plan Contributions |        |  | Benefits paid | 
|---------- |  | ------------------ | ------ |  | ------------- | 
|           |  | 2009               |        |  | 2010          | 
|           |  |                    |        |  |               | 
|Retirement |  | $                  | 17,436 |  |               | 



F-58







The cost, obligations and other
elements of the pension, seniority premium and severance compensation plans for reasons other than restructuring, mentioned in
note 2q, have been determined based on computations prepared by independent actuaries at December 31, 2009, 2010 and 2011. The
components of the net periodic cost for the years ended December 31, 2009, 2010 and 2011, were as follows:



|                                                          |  | Benefits    |       
|--------------------------------------------------------- |  | ----------- | ------
|                                                          |  | Termination |       
|                                                          |  | 2009        |       
|Net periodic cost:                                        |  |             |       
|Service cost                                              |  | $           | 13,898
|Interest cost                                             |  |             | 6,220 
|Return on plan assets                                     |  |             | -     
|Net actuarial loss (gain)                                 |  |             | 7,171 
|Prior service cost:                                       |  |             |       
|Amortization of prior service cost and plan modifications |  |             | -     
|Amortization of transition liability                      |  |             | 4,828 
|Net periodic cost                                         |  | $           | 32,117



F-59







The present value of benefit
obligations of the plans as of December 31, 2009, 2010 and 2011, is as follows:



|                                              |  | Benefits    |        
|--------------------------------------------- |  | ----------- | -------
|                                              |  | Termination |        
|                                              |  | 2009        |        
|                                              |  |             |        
|Acumulated Benefit Obligation (ABO)           |  | $           | 64,328 
|                                              |  |             |        
|Projected Benefit Obligation (PBO)            |  |             | 76,988 
|Plan asset at fair value                      |  |             | -      
|Projected benefit obligation over plan assets |  |             | 76,988 
|Unrecognized ítems:                           |  |             |        
|Transition liability                          |  |             | (13,542
|Plan modifications                            |  |             | -      
|Actuarial gains                               |  |             | -      
|                                              |  |             |        
|Projected liability, net                      |  | $           | 63,446 



|                                                                             |  | Benefits |            
|---------------------------------------------------------------------------- |  | -------- | -----------
|                                                                             |  | 2009     |            
|                                                                             |  |          |            
|Discount rate (net of inflation)                                             |  |          | 9.50       
|Rate of compensation increase*                                               |  |          | 4.50       
|Expected return on plan assets                                               |  |          | 9.75       
|Amortization period of unrecognized items (applicable to retirement benefit) |  |          | 19.33 years



* Salary
increases, includingpast practice, trends in the market and compensation scheme (average salary increase earned if performance
is satisfactory).



F-60







Below is the determination of
benefit obligations of the plan at December 31, 2009, 2010, and 2011:



|                                                         |  | Retirement benefits 2009 |       
|-------------------------------------------------------- |  | ------------------------ | ------
|                                                         |  | Seniority premium        |       
|Defined benefit obligations:                             |  |                          |       
|Obligations of defined benefits at the beginning of year |  | $                        | 32,980
|Current labor cost                                       |  |                          | 3,034 
|Interest cost                                            |  |                          | 3,130 
|Actuarial gain and losses                                |  |                          | 1,439 
|Benefits paid                                            |  |                          | (1,801
|Defined benefit obligations at end of year               |  | $                        | 38,782



|                                                         |  | Retirement benefits 2010 |       
|-------------------------------------------------------- |  | ------------------------ | ------
|                                                         |  | Seniority premium        |       
|Defined benefit obligations:                             |  |                          |       
|Obligations of defined benefits at the beginning of year |  | $                        | 38,782
|Current labor cost                                       |  |                          | 3,675 
|Interest cost                                            |  |                          | 3,574 
|Actuarial gain and losses                                |  |                          | 1,523 
|Benefits paid                                            |  |                          | (1,613
|Defined benefit obligations at end of year               |  | $                        | 45,941



F-61







|                                                       |  | Retirement benefits 2011 |        
|------------------------------------------------------ |  | ------------------------ | -------
|                                                       |  | Seniority                |        
|                                                       |  | premium                  |        
|Defined benefits obligations:                          |  |                          |        
|Obligation of defined benefit at the beginning of year |  | $                        | 45,942 
|Current labor cost                                     |  |                          | 4,192  
|Interest cost                                          |  |                          | 3,585  
|Actuarial gain and losses                              |  |                          | (15,750
|Benefits paid                                          |  |                          | (1,702 
|Defined benefit obligations at end of year             |  | $                        | 36,267 



Below is the determination of
plan assets at 31 December 2009, 2010 and 2011:



|                                    |  | Retirement benefits 2009 |        
|----------------------------------- |  | ------------------------ | -------
|                                    |  | Seniority                |        
|                                    |  |                          | premium
|Plan assets:                        |  |                          |        
|Plan asset at the beginning of year |  | $                        | -      
|Yield expected                      |  |                          | -      
|Actuarial gain and losses           |  |                          | -      
|Company contributions               |  |                          | -      
|Benefits paid                       |  |                          | -      
|Plan assets at end of year          |  | $                        | -      



F-62







|                                    |  | Retirement benefits 2010 |  
|----------------------------------- |  | ------------------------ | -
|                                    |  | Seniority                |  
|                                    |  | premium                  |  
|Plan assets:                        |  |                          |  
|Plan asset at the beginning of year |  | $                        | -
|Yield expected                      |  |                          |  
|Actuarial gain and losses           |  |                          | -
|Company Contributions               |  |                          | -
|Benefits Paid                       |  |                          | -
|Plan assets at end of year          |  | $                        | -



|                                    |  | Retirement benefits 2011 |  
|----------------------------------- |  | ------------------------ | -
|                                    |  | Seniority                |  
|                                    |  | premium                  |  
|Plan assets:                        |  |                          |  
|Plan asset at the beginning of year |  | $                        | -
|Yield expected                      |  |                          | -
|Actuarial gains and losses          |  |                          | -
|Company contributions               |  |                          | -
|Benefits paid                       |  |                          | -
|Plan assets at end of year          |  | $                        | -



F-63







Following is a detailed description
of the current amounts and the amounts for the previous four annual periods derived from the defined benefit obligations, the reasonable
value of the plan’s assets and the adjustments on the plan assets and liabilities, based on experience:



|                             |  | Seniortiy premium* |       
|---------------------------- |  | ------------------ | ------
|                             |  | 2007               |       
|Defined benefit  obligations |  | $                  | 56,601
|Plan assets                  |  |                    | -     
|Plan status                  |  | $                  | 56,601



* The results of seniority premium include
retirement and termination, due to the fact that this division did not exist in prior years in accordance with the Bulletin D-3.



|                             |  | Pension plan |         
|---------------------------- |  | ------------ | --------
|                             |  | 2007         |         
|Defined benefit  obligations |  | $            | 199,333 
|Plan assets                  |  |              | (182,017
|Plan status                  |  | $            | 17,316  



The distribution of assets listed
by category at the end of 2009, 2010 and 2011, are as follows:



|                         |  | 2009 |     |   | 2010 |  |     | 2011 | 
|------------------------ |  | ---- | --- | - | ---- |  | --- | ---- | 
|                         |  |      |     |   |      |  |     |      | 
|Fixed rate investment    |  |      | 75  | % |      |  | 75  | %    | 
|Variable rate investment |  |      | 25  | % |      |  | 25  | %    | 
|                         |  |      |     |   |      |  |     |      | 
|Total                    |  |      | 100 | % |      |  | 100 | %    | 



The distribution of the assets
reflects the strategy that was used to optimize the return rate on the plan and the fund's results, within the framework of an
appropriate risk level.



F-64







| | b) | Benefit plans in foreign operation
| | -- | ----------------------------------



OK Industries, Inc. (foreign
subsidiary) maintains a 401(k) retirement plan (defined benefit plan) covering all employees meeting certain eligibility requirements.
The Company contributes to the plan at the rate of 50% of employees contributions up to a maximum of 2% of the individual employees
compensation. Expense for contributions accrued to this plan was 33.7 USD ($471) for the two-month period ending December 31, 2011.



OK Industries, Inc. (foreign
subsidiary) maintains a deferred compensation arrangement with certain key employees. Amounts payable under this plan vest 10 years
from the date of the agreement. The benefit value of each unit is equal to the increase in initial subsidiary book value from the
date of the agreement to the conclusion of the vesting period. Under the agreement, 275,000 units were outstanding on December
31, 2011, all of which were fully vested. Amounts expected to be paid within the next year of 657.7 USD ($9,189) are included in
other current liabilities. The remaining liability is 411.8 USD ($5,753) under this plan. There was no compensation expense for
the two-month period ending December 31, 2011.



(18) Stockholders’ Equity-



| | a) | As of December 31, 2009, 2010 and 2011, the Company’s capital stock is represented by 600,000,000
“B” shares with a par value of $1 peso each. All shares issued and outstanding have voting rights.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | In 2009, 2010 and 2011, the Company declared and paid cash dividends at nominal values of $250,045,
$250,082 and $299,926, respectively, or $0.42, $0.42, and $0.50 respectively, per share in nominal pesos.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | The Mexican Corporation Law requires that at least 5% of each year’s net income be appropriated
to increase the legal reserve until such reserve is equal to 20% of capital stock issued and outstanding. The balance of the legal
reserve at December 31, 2009, 2010 and 2011, included in retained earnings, was $209,399.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-65







| | d) | The Company approved a stock repurchase plan in 1998, in conformity with the Mexican Securities
Trading Act, providing a stock repurchase reserve for that purpose of $180,000 ($303,861 expressed in constant Mexican pesos at
December 31, 2007) through the appropriation of retained earnings in 1998. In 2009, the Company repurchased and sold 147 thousand
of shares. The repurchase value was for $1,880 and the sales value was for $2,959, resulting in a gain of $1,079, recorded as additional
paid in capital. During 2010 the Company repurchased 200 thousands of shares for $5,167; in 2011, the Company repurchased 257.4
thousands of shares. The repurchased value was for $6,153, and sales 230 thousands of shares, the sales value was for $5,944. There
are 227.4 thousands of shares held by treasury at December 31, 2011.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e) | The Company is required to pay taxes on dividends distributed to stockholders only to the extent
that the payment made exceeds the balance of the “net tax profit account” (CUFIN), which is used to control earnings
on which income tax has already been paid. Income tax paid on dividends refers to a tax payable by corporate entities and not by
individuals.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f) | The Company obtains the majority of its revenues and net profit from Bachoco, S.A. de C.V. (“BSACV”).
For the years 2009, 2010 and 2011, pretax income of BSACV, represented approximately, 92%, 93%, and 86% respectively of Bachoco’s
net revenues.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Dividends on which BSACV has
paid income tax will be credited to the Company’s “CUFIN” account and, accordingly, no further income tax will
be paid when such amounts are distributed as dividends to the Company’s stockholders.



| | g) | From 1999 through 2001, under Mexican income tax law, corporate taxpayers were extended with the
option of deferring payment of a portion of their annual corporate income tax, so that the tax rate will represent 30%. The earnings
on which taxpayers opted to defer payment of a portion of corporate income tax had to be controlled in the so-called “net
reinvested tax profit account” (CUFINRE).
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Since the Company opted for this
tax deferral, earnings will be considered to be distributed first from the CUFINRE and any excess will be paid from the “net
tax profit account” balance (“CUFIN”) so as to pay the 5% deferred tax. The option to defer a portion of the
annual corporate income tax was eliminated effective January 1, 2002.



F-66







| | h) | Stockholders contribution restated as provided for by the tax law (CUCA), aggregating $2,244,455,
may be refunded to stockholders tax-free, to the extent that such contribution equals or exceeds stockholders’ equity.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (19) | Income Tax (IT), Asset Tax (AT), and Flat Rate Business Tax (IETU) and Employee Statutory Profit
Sharing (ESPS)-
| | ---- | ----------------------------------------------------------------------------------------------------------------



Under the current tax legislation
in Mexico, companies must pay the greater of their IT or IETU. If IETU is payable, the payment will be considered final (i.e. not
subject to recovery in subsequent years).



| | a) | Income tax (IT)-
| | -- | ----------------



The Company and each of its subsidiaries
file separate income tax returns (including its foreign subsidiary, that files income tax returns in the U.S. based on its existing
tax year end of April). Bachoco, S.A. de C.V. BSACV, the Company’s principal operating subsidiary, is subject to corporate
income tax under the provisions of the simplified regime, which is applicable to companies engaged exclusively in agriculture,
cattle-raising, fishing, forestry and other activities. The income tax law establishes that such regime is exclusive for companies
that obtain no more than 10% of their total revenues from the production of processed products; BSACV has complied with this criteria.



In 2009, a tax reform was authorized
by which, beginning in 2010, the tax rate is increased from 19% to 21% in the simplified regime. The result of this change is recognized
in 2009, as a charge of $188,754, which is reflected in deferred taxes under the item “Adjustment to deferred tax assets
and liabilities for enacted changes in tax laws and rates”.



The simplified regime establishes
that the taxable base for income tax is determined on revenues collected net of deductions paid (cash basis). The tax rate for
this regime was 19% for 2009 and 21% for 2010 and thereafter.



The IT rate of the general regime
for fiscal years 2010 to 2012 is 30%, for 2013 the rate shall be 29% and for 2014 and thereafter is 28%.



The income tax rate of the foreign
subsidiary is 38.79%.



F-67







| | b) | Flat Rate Business Tax (IETU)-
| | -- | ------------------------------



The IETU rate is 17.5% for 2010
and thereafter (17% for 2009) based on cash flows and limits certain deductions.



IETU credits are derived mainly
from the unamortized negative IETU base, and salaries taxes for IT purposes and social security contributions, as well as credits
derived from the deduction of certain investments, such as inventories and fixed assets.



The IETU is required to be paid
only when it is greater than the IT. To determine the IETU payable, income tax paid in a given period shall first be subtracted
from the current IT of the same period and the difference shall be the IETU payable.



If negative IETU base is determined
because deductions exceed income, there will be no IETU payable. The amount of negative base multiplied by the IETU rate results
in a IETU credit, which may be applied against IT for the same year or, if applicable, against IETU payable in the next ten years.
According to the tax law, the IETU credit can not be applied against IT for 2010 and 2011.



| | c) | Asset tax (AT)-
| | -- | ---------------



In 2007, a new law was enacted
that resulted in the derogation of the AT Law beginning on January 1, 2008. In 2007, the asset tax rate was payable at 1.25% and
liabilities were no longer deductible from the asset tax base.



At December 31, 2011, the Company
had $5,044 in Asset Tax credits and such recoverable AT will expire, as follows:



|          |  | Asset tax    |       |  |            | 
|--------- |  | ------------ | ----- |  | ---------- | 
|          |  | restated at  |       |  |            | 
|          |  | December 31, |       |  | Year of    | 
|Base year |  | 2011         |       |  | expiration | 
|          |  |              |       |  |            | 
|2005      |  | $            | 1,615 |  |            | 
|2006      |  |              | 3,429 |  |            | 
|          |  |              |       |  |            | 
|          |  | $            | 5,044 |  |            | 



F-68







| | d) | Income tax charged to operations-
| | -- | ---------------------------------



For the years ended December
31, 2009, 2010 and 2011, income tax (credited) charged to results of operations was as follows:



|                       |  | 2009 |         |  | 2010 |   |         | 2011 | 
|---------------------- |  | ---- | ------- |  | ---- | - | ------- | ---- | 
|Mexican operation:     |  |      |         |  |      |   |         |      | 
|Current income tax     |  | $    | 103,482 |  |      | $ | 495,828 |      | 
|Flat rate business tax |  |      | 371     |  |      |   | 18      |      | 
|Deferred income tax    |  |      | 302,505 |  |      |   | 7,569   |      | 
|                       |  |      | 406,358 |  |      |   | 503,415 |      | 



|Foreign operation:                 |  |   |         |  |  |   |         |  |  |   |         |  
|---------------------------------- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | -
|Current income tax                 |  | $ | -       |  |  | $ | -       |  |  | $ | -       |  
|Deferred income tax                |  |   | -       |  |  |   | -       |  |  |   | (895    | )
|                                   |  |   | -       |  |  |   | -       |  |  |   | (895    | )
|                                   |  |   |         |  |  |   |         |  |  |   |         |  
|Total (benefit) income tax expense |  | $ | 406,358 |  |  | $ | 503,415 |  |  | $ | (40,530 | )



Income tax and employee statutory
profit sharing expense attributable to income before income taxes differed from the amounts computed by applying the Mexican statutory
IT rates of 19% for 2009 and 21% for 2010 and 2011, respectively and 10% employee statutory profit sharing to income, as a result
of the items shown in the next page:



F-69









|                                                                                            |  | 2009 |         |   | 2010 |  |         | 2011 | 
|------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- | 
|                                                                                            |  | IT   |         |   | ESPS |  |         | IT   | 
|                                                                                            |  |      |         |   |      |  |         |      | 
|Computed “expected” tax expense                                                             |  | $    | 230,927 |   |      |  | 121,540 |      | 
|Add ESPS expense                                                                            |  |      | -       |   |      |  | 3,300   |      | 
|Increase (decrease) in income taxes resulting from:                                         |  |      |         |   |      |  |         |      | 
|Effects of inflation, net                                                                   |  |      | (50,596 | ) |      |  | -       |      | 
|Non-deductible expenses                                                                     |  |      | 4,538   |   |      |  | 183     |      | 
|Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates |  |      | 188,754 |   |      |  | -       |      | 
|Subsidiaries not subject to labor obligations                                               |  |      | -       |   |      |  | (92,661 | )    | 
|Effect of companies outside simplified regime                                               |  |      | 38,163  |   |      |  | -       |      | 
|Change in the valuation allowance for deferred tax assets                                   |  |      | 8,130   |   |      |  | -       |      | 
|Other, net                                                                                  |  |      | (13,558 | ) |      |  | 639     |      | 
|                                                                                            |  |      |         |   |      |  |         |      | 
|IT and ESPS expense (benefit)                                                               |  | $    | 406,358 |   |      |  | 33,001  |      | 



| | e) | Deferred income tax-
| | -- | --------------------



Based on the financial projections
of taxable income, the Company estimated that it will pay income tax (IT); therefore, deferred tax effects as of December 31, 2010
and 2011 have been recorded reflecting the IT basis.



F-70







The components of the Company’s
deferred income tax assets and liabilities are as follows:



|                                            |  | 2010 |           |  | 2011 |  
|------------------------------------------- |  | ---- | --------- |  | ---- | -
|Deferred tax assets:                        |  |      |           |  |      |  
|Accounts payable                            |  | $    | 493,645   |  |      | $
|Labor obligations                           |  |      | 33,407    |  |      |  
|ESPS payable                                |  |      | 11,311    |  |      |  
|Effects on derivative financial instruments |  |      | 1,635     |  |      |  
|Recoverable AT                              |  |      | 4,859     |  |      |  
|Tax loss carryforwards                      |  |      | 17,698    |  |      |  
|Others                                      |  |      | 1,006     |  |      |  
|Total gross deferred tax assets             |  |      | 563,561   |  |      |  
|                                            |  |      |           |  |      |  
|Less valuation allowance                    |  |      | 53,309    |  |      |  
|Net deferred tax assets                     |  |      | 510,252   |  |      |  
|                                            |  |      |           |  |      |  
|Deferred tax liabilities:                   |  |      |           |  |      |  
|Inventories                                 |  |      | 842,767   |  |      |  
|Accounts receivable                         |  |      | 190,082   |  |      |  
|Property, plant and equipment, net          |  |      | 1,490,183 |  |      |  
|Other deductions                            |  |      | 16,370    |  |      |  
|Effects on derivative financial instruments |  |      | -         |  |      |  
|                                            |  |      |           |  |      |  
|Total gross deferred tax liabilities        |  |      | 2,539,402 |  |      |  
|                                            |  |      |           |  |      |  
|Net deferred tax liability                  |  | $    | 2,029,150 |  |      | $
|                                            |  |      |           |  |      |  
|Deferred tax assets-foreign subsidiary      |  | $    | -         |  |      | $
|                                            |  |      |           |  |      |  
|Deferred tax liability-Mexican subsidiaries |  | $    | 2,029,150 |  |      | $



F-71







The valuation allowance for deferred
tax assets as of January 1, 2010 and 2011 amounted to $36,145 and $53,309, respectively. The net change in the total valuation
allowance for the years ended December 31, 2009, 2010 and 2011, was an increase of $8,130, $17,164 and a decrease of $32,312, respectively.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.



| | f) | Tax loss carryforwards-
| | -- | -----------------------



As of December 31, 2011, the
Company has tax loss carryforwards restated in accordance with the current Mexican Tax Law, which can be used to offset future
taxable income in the next ten years, as follows:



|Tax loss carryforwards as adjusted by inflation
through December 31, 2011
|-------------------------------------------------------------------------
|                                                                         
|Base year                                                                
|                                                                         
|2007                                                                     
|2008                                                                     
|2009                                                                     
|2010                                                                     
|2011                                                                     
|                                                                         



F-72







| | g) | Equity tax value-
| | -- | -----------------



As of December 31, 2010 and 2011,
the tax value of the Company’s equity, which will not be subject to taxation, comprised the following:



|                                                                               |  | 2010 |           |  | 2011 |  
|------------------------------------------------------------------------------ |  | ---- | --------- |  | ---- | -
|                                                                               |  |      |           |  |      |  
|Restated contribution capital (CUCA)                                           |  | $    | 2,162,080 |  |      | $
|Net tax profit account (CUFIN) and net reinvested tax profit account (CUFINRE) |  |      | 4,203,221 |  |      |  
|                                                                               |  |      |           |  |      |  
|Total                                                                          |  | $    | 6,365,301 |  |      | $



| | h) | Employee statutory profit sharing
| | -- | ---------------------------------



Industrias Bachoco, S.A.B de
C.V. and BSACV have no employees, but each of the subsidiaries of the Company in Mexico that has employees is required under Mexican
law to pay employees, in addition to their compensation and benefits, statutory profit sharing in an aggregate amount equal to
10% of such subsidiary’s taxable income subject to certain adjustments.



F-73







| | (20) | Other income (expense), net-
| | ---- | ----------------------------



As of December 31, 2009, 2010
and 2011, other income and expense net, were as follows:



|                                                             |  | 2009 |          |   | 2010 |   |          | 2011 | 
|------------------------------------------------------------ |  | ---- | -------- | - | ---- | - | -------- | ---- | 
|Other income:                                                |  |      |          |   |      |   |          |      | 
|Sales of waste animals, raw material, by-products and others |  | $    | 139,555  |   |      | $ | 194,779  |      | 
|Tax incentives                                               |  |      | 5,496    |   |      |   | -        |      | 
|                                                             |  |      |          |   |      |   |          |      | 
|Total other income                                           |  |      | 145,051  |   |      |   | 194,779  |      | 
|                                                             |  |      |          |   |      |   |          |      | 
|Other expense:                                               |  |      |          |   |      |   |          |      | 
|Cost of waste animals, raw material, by- products and other  |  |      | (162,957 | ) |      |   | (173,436 | )    | 
|Employee statutory profit sharing                            |  |      | (33,001  | ) |      |   | (33,696  | )    | 
|Others                                                       |  |      | (14,282  | ) |      |   | (82,962  | )    | 
|                                                             |  |      |          |   |      |   |          |      | 
|Total other expense                                          |  |      | (210,240 | ) |      |   | (290,094 | )    | 
|                                                             |  |      |          |   |      |   |          |      | 
|Total other expense, net                                     |  | $    | (65,189  | ) |      | $ | (95,315  | )    | 



F-74







| | (21) | Segment financial information-
| | ---- | ------------------------------



a) Product line segments



The segments to be reported are
organized by geographic operation and product line. Inter-segment transactions have been eliminated. Our Poultry segment is comprised
of our chicken and egg products due to their similarity in risks and benefits. The information included under “Others”
corresponds to pigs, balanced animal feed and other non-significant sub-products. The segment information is as shown in the next
page:



|                                           |  | As of and for the year ended at December 31, 2009 |            
|------------------------------------------ |  | ------------------------------------------------- | -----------
|                                           |  | Poultry                                           |            
|Net revenues                               |  | $                                                 | 20,567,944 
|Cost of sales                              |  |                                                   | (16,900,540
|Gross profit                               |  |                                                   | 3,667,404  
|Interest income                            |  |                                                   | 149,160    
|Valuation effects of financial instruments |  |                                                   | (174,603   
|Interest and financial expenses            |  |                                                   | (77,052    
|Income taxes                               |  |                                                   | (370,734   
|Net controlling interest income            |  |                                                   | 702,344    
|Property, plant and equipment, net         |  |                                                   | 10,453,381 
|Goodwill, net                              |  |                                                   | 212,833    
|Total assets                               |  |                                                   | 18,706,330 
|Total liabilities                          |  |                                                   | 4,817,238  
|Capital expenditures                       |  |                                                   | 813,628    
|Expenses not requiring cash disbursement:  |  |                                                   |            
|Depreciation and amortization              |  |                                                   | 621,324    



F-75







|                                            |  | As of and for the year ended at December 31, 2010 |            
|------------------------------------------- |  | ------------------------------------------------- | -----------
|                                            |  | Poultry                                           |            
|Net revenues                                |  | $                                                 | 22,229,505 
|Cost of sales                               |  |                                                   | (17,377,938
|Gross profit                                |  |                                                   | 4,851,567  
|Interest income                             |  |                                                   | 154,203    
|Valuation effects of  financial instruments |  |                                                   | 18,850     
|Interest and financial expenses             |  |                                                   | (65,007    
|Income taxes                                |  |                                                   | (463,616   
|Net controlling interest (loss) income      |  |                                                   | 1,896,160  
|Property, plant and equipment, net          |  |                                                   | 10,240,120 
|Goodwill, net                               |  |                                                   | 212,833    
|Total assets                                |  |                                                   | 20,109,011 
|Total liabilities                           |  |                                                   | 4,407,236  
|Capital expenditures                        |  |                                                   | 504,675    
|Expenses not requiring cash disbursement:   |  |                                                   | -          
|Depreciation and amortization               |  |                                                   | 664,054    



|                                           |  | As of and for the year ended at December 31, 2011 |            
|------------------------------------------ |  | ------------------------------------------------- | -----------
|                                           |  | Poultry                                           |            
|Net revenues                               |  | $                                                 | 24,697,212 
|Cost of sales                              |  |                                                   | (22,075,071
|Gross profit                               |  |                                                   | 2,622,141  
|Interest income                            |  |                                                   | 182,400    
|Valuation effects of financial instruments |  |                                                   | (896       
|Interest and financial expenses            |  |                                                   | (58,327    
|Income taxes                               |  |                                                   | (13,135    
|Net controlling interest income            |  |                                                   | 65,502     
|Property, plant and equipment, net         |  |                                                   | 10,044,310 
|Goodwill, net                              |  |                                                   | 212,833    
|Total assets                               |  |                                                   | 21,832,440 
|Total liabilities                          |  |                                                   | (6,370,017 
|Capital expenditures                       |  |                                                   | 662,009    
|Expenses not requiring cash disbursement:  |  |                                                   |            
|Depreciation and amortization              |  |                                                   | 703,740    



F-76







Revenues from our poultry segment are analyzed
as follows:



|             |  | As of and for year ended at December 31, 2009 |           
|------------ |  | --------------------------------------------- | ----------
|             |  | Chicken                                       |           
|             |  |                                               |           
|Net revenues |  | $                                             | 18,211,109



|             |  | As of and for year ended at  December 31, 2010 |           
|------------ |  | ---------------------------------------------- | ----------
|             |  | Chicken                                        |           
|             |  |                                                |           
|Net revenues |  | $                                              | 20,127,721



|             |  | As of and for year ended at  December 31, 2011 |           
|------------ |  | ---------------------------------------------- | ----------
|             |  | Chicken                                        |           
|             |  |                                                |           
|Net revenues |  | $                                              | 22,611,264



F-77







b) Geographic operating
segments



As of 2011, with the acquired
operation in the United States, it incorporated a new segment at the management approach named “foreign” to identify
(segment) the national and foreign operations. When submitting information by geographical area, the revenues are classified based
on the geographical location of the customers. The assets of the segments are classified regarding the geographical location of
assets.



|                                           |  | As of and for the year ended at December 31, 2011 |            
|------------------------------------------ |  | ------------------------------------------------- | -----------
|                                           |  | National Poultry                                  |            
|                                           |  |                                                   |            
|Net revenues                               |  | $                                                 | 23,318,433 
|Cost of sales                              |  |                                                   | (20,772,407
|Gross profit                               |  |                                                   | 2,546,026  
|Interest income                            |  |                                                   | 182,400    
|Valuation effects of financial instruments |  |                                                   | (896       
|Interest and financial expenses            |  |                                                   | (58,164    
|Income taxes                               |  |                                                   | (12,240    
|Net controlling interest income            |  |                                                   | 68,160     
|Property, plant and equipment, net         |  |                                                   | 10,428,265 
|Goodwill, net                              |  |                                                   | 212,833    
|Total assets                               |  |                                                   | 19,983,780 
|Total liabilities                          |  |                                                   | (5,830,667 
|Capital expenditures                       |  |                                                   | 662,009    
|Expenses not requiring cash disbursement:  |  |                                                   |            
|Depreciation and amortization              |  |                                                   | 703,606    



|             |  | As of and for year ended at December 31, 2011 |           
|------------ |  | --------------------------------------------- | ----------
|             |  | National Chicken                              |           
|             |  |                                               |           
|Net revenues |  | $                                             | 21,232,485



F-78







| | (22) | Subsequent events-
| | ---- | ------------------



| | (i) | Migration to International Financial Reporting Standards (IFRS)
| | --- | ---------------------------------------------------------------



In
January, 2009, the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores “CNVB”)
in Mexico revised its “General Provisions applicable to Securities Issuers and other Securities Market Participants”
to require that certain public entities reporting financial information through the Mexican Stock Exchange (“BMV”),
beginning 2012 are required to prepare and report their financial information under International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB).



In this regard,
the consolidated financial statements to be issued by the Company for the year ended December 31, 2012 will be its first annual
financial statements complying with IFRS as issued by the IASB. The transition date for adoption will be on January 1, 2011. A
brief description of themain changes of the Company’s accounting policies impacted by the IFRS adoption, are listed
below:



| | a) | Property, Plant and Equipment - The Company has taken the “Deemed Cost” option
at the transition date by applying the fair value option for certain property, plant and equipment at December, 2011, according
to IFRS 1 “First time adoption of International Financial Reporting Standards”.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | Employee Benefits -Severanceaccrual has been written-off since such liability does
not meet the requirement required by the accounting standard IAS 19 “Employee Benefits”.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) | Stockholders’ equity –The adjustment that will be recognized at the transition
date will be accounted for against retained earnings.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------



| | d) | Inflation effects -According to IAS 29 “Financial Reporting in Hyperinflationary
Economies”, accumulated inflation effects recognized in periods that do not qualify as hyperinflationary in accordance with
IFRS will be eliminated from the equity accounts against retained earnings, such as capital stock, additional paid-in-capital,
and reserve for repurchase of shares.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-79







| | e) | Deferred Income Tax -Deferred income taxes were accounted for the adjustments that were
initially recognized in the financial statements caption at the transition date to IFRS.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | f) | Business combination -The Company has taken the option provided by IFRS 1, thus will not
apply IFRS 3 retrospectively to past business combinations that occurred before the date of transition to IFRS.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Best
estimated information regardingthe significant changes in captions of the Company’s financial statements impacted
by the IFRS adoption at January 1, 2011 (transition date) are listed below. The Company is in the process to determine the significant
changes in main captions of the financial statement at December 31, 2011 as they are currently obtaining all complementary information
to determine the final effects at such date, however, the Company estimates that such effects will not change significantly:



|January 1, 2011                    |  | note |     |  | MEX FRS |   |            | Adjustment at transition date |  |   | IFRS     |  
|---------------------------------- |  | ---- | --- |  | ------- | - | ---------- | ----------------------------- |  | - | -------- | -
|ASSETS                             |  |      |     |  |         |   |            |                               |  |   |          |  
|Current assets                     |  |      |     |  |         | $ | 9,537,718  |                               |  | $ | -        |  
|Property, plant and equipment, net |  |      | a   |  |         |   | 10,544,031 |                               |  |   | (403,563 | )
|Other non current assets           |  |      |     |  |         |   | 1,116,019  |                               |  |   | -        |  
|Total assets                       |  |      |     |  |         | $ | 21,197,768 |                               |  | $ | (403,563 | )
|                                   |  |      |     |  |         |   |            |                               |  |   |          |  
|LIABILITIES                        |  |      |     |  |         |   |            |                               |  |   |          |  
|Current liabilities                |  |      |     |  |         | $ | 2,166,754  |                               |  | $ | -        |  
|Long term debt                     |  |      |     |  |         |   | 507,053    |                               |  |   | -        |  
|Labor obligations                  |  |      | b   |  |         |   | 126,457    |                               |  |   | (69,359  | )
|Deferred income tax                |  |      | e   |  |         |   | 2,029,150  |                               |  |   | (71,732  | )
|Total liabilities                  |  |      |     |  |         | $ | 4,829,414  |                               |  | $ | (141,091 | )
|                                   |  |      |     |  |         |   |            |                               |  |   |          |  
|STOCKHOLDERS’ EQUITY               |  |      |     |  |         |   |            |                               |  |   |          |  
|Capital Stock                      |  |      | d   |  |         | $ | 2,294,927  |                               |  | $ | (902,051 | )
|Additional paid- in capital        |  |      | d   |  |         |   | 744,753    |                               |  |   | (286,244 | )
|Retained earnings                  |  |      | c,d |  |         |   | 13,122,387 |                               |  |   | 987,031  |  
|Other equity captions              |  |      | d   |  |         |   | 206,287    |                               |  |   | (61,208  | )
|Total stockholders’ equity         |  |      |     |  |         | $ | 16,368,354 |                               |  | $ | (262,472 | )



| | ii) | Short-term debt payment
| | --- | -----------------------



On January 25, 2012, the Company
paid the debt of $200,000 mentioned in note 12a.



F-80







| | iii) | Stockholders meeting
| | ---- | --------------------



At the stockholders meeting held
on April 25, 2012 the stockholders approved, among others:



| | a- | Ratification of the membership of Board of Directors.
| | -- | -----------------------------------------------------



| | b- | Dividend decree of $0.50 per share in nominal pesos.
| | -- | ----------------------------------------------------



| | (23) | Differences between Mexican Financial Reporting Standards and United States Generally Accepted
Accounting Principles
| | ---- | --------------------------------------------------------------------------------------------------------------------



The Company’s consolidated
financial statements are prepared in accordance with Mexican Financial Reporting Standards (“MexFRS”), which differ
in certain respects from accounting principles generally accepted in the United States (“U.S. GAAP”).



The principal differences between
MexFRS and U.S. GAAP, as they relate to us, are described below with an explanation, where appropriate, of the method used to determine
the adjustments that affect net income and stockholders’ equity, or additional disclosures as applicable.



Business Combination



OK Industries acquisition



Bachoco applies the purchase
method as the sole recognition alternative for a business combination by allocating the purchase price to all assets acquired and
liabilities assumed based on their estimated fair values as of the acquisition date.



As it is mentioned in note 1
“Significant transaction”, to the consolidated financial statements, on November 1, 2011 the Company acquired 100%
percent of the voting stock of OK Industries, Inc., the aggregate purchase price that was paid in cash, amounted to 93,400 thousand
USD.



As of December 31, 2011 Bachoco
was in the process of allocating the fair values to the assets acquired and liabities asumed. The consolidated financial statements
of Bachoco include the balance sheet of OK Industries, Inc., as of December 31, 2011, based on the best estimate of its net asset’s
fair value as of the acquisition date, and its results of operations for the two-month period ended December 31, 2011. The fair
values of these net assets acquired were determined using the cost and market approaches. The
following summarizes the difference between the purchase price and the fair value of the identifiable net assets acquired at the
purchase date:



F-81







|Allocated to:                                  |  | US GAAP  US dollars |         |   | USGAAP pesos |  
|---------------------------------------------- |  | ------------------- | ------- | - | ------------ | -
|                                               |  |                     |         |   |              |  
|Cash and cash equivalents                      |  | $                   | 21      |   |              | $
|Accounts receivable                            |  |                     | 25,051  |   |              |  
|Inventories                                    |  |                     | 69,869  |   |              |  
|Refundable income taxes                        |  |                     | 894     |   |              |  
|Other current assets                           |  |                     | 2,234   |   |              |  
|Property, plant and equipment                  |  |                     | 124,649 |   |              |  
|Investment in life insurance contracts         |  |                     | 2,539   |   |              |  
|Investment in unconsolidated entity            |  |                     | 2,722   |   |              |  
|Other long-term receivable                     |  |                     | 6,024   |   |              |  
|Total assets acquired                          |  |                     | 234,003 |   |              |  
|                                               |  |                     |         |   |              |  
|Accounts payable                               |  |                     | (14,985 | ) |              |  
|Other current liabilities                      |  |                     | (13,303 | ) |              |  
|Deferred compensation liability                |  |                     | (412    | ) |              |  
|Deferred income taxes                          |  |                     | (38,206 | ) |              |  
|Total liabilities assumed                      |  |                     | (66,906 | ) |              |  
|                                               |  |                     |         |   |              |  
|Noncontrolling interest in consolidated entity |  |                     | (516    | ) |              |  
|                                               |  |                     |         |   |              |  
|Net assets acquired                            |  |                     | 166,581 |   |              |  
|Less cost to acquire                           |  |                     | 93,400  |   |              |  
|                                               |  |                     |         |   |              |  
|Gain on bargain purchase                       |  | $                   | 73,181  |   |              | $
|                                               |  |                     |         |   |              |  



F-82







Under MexFRS B-7 “Business
acquisitions”, if the fair value of net assets acquired exceeds the aggregate purchase price amount (bargain purchase), then
the fair value of the net assets value shall be adjusted up to the purchase price amount as it is considered the fair value of
the transaction between two independent parties in a free market.



Adjustment to the fair value
of the net assets acquired should be applied by reducing the fair value of certain assets until exhausting its value in the following
order: a) firstly, intangible assets, b) then, long-term monetary assets as property, plant and equipment, and c) finally, any
other long-term assets as permanent investments. Once the fair value of such asset is exhausted the remaining amount, if any, should
be recognized as a gain on bargain purchase in the income statement on the acquisition date.



In accordance with the provision
of MexFRS B-7, the Company reduced the fair value of the property, plant and equipment and the related deferred income taxes up
to the amount of the gain on bargain purchase ($994,585 (73,181 thousand USD)).



For U.S. GAAP purposes, ASC Topic
805, Business Combinations, mentions that occasionally, an acquirer will make a bargain purchase, which is a business combination
in which the fair value of the net assets acquired exceeds the aggregate purchase price amount. If that excess remains after the
acquirer, reassess whether it has correctly identified and determined the fair value of all assets acquired, and liabilities assumed,
any non-controlling interest in the acquired entity, any previously held equity interest in the acquired entity, and the consideration
transferred, then the acquirer shall recognize the resulting gain in earnings on the acquisition date. The gain shall be attributed
to the acquirer. Therefore, for U.S. GAAP purposes, the Company recognized in earnings the amount of $994,585 (73,181 thousand
USD) as a gain on bargain purchase.



For U.S. GAAP purposes, the Company
recognized in the 2011 income statements, a depreciation expense of $18,546 and a deferred tax benefit of $7,000 related to the
depreciation of the fair values assigned to property, plant and equipment that come from OK Industries, Inc. acquisition.



Moreover, an additional amount
of $27,535 related to translation effect of foreign subsidiary (OK Industries, Inc.) was recognized for U.S. GAAP purposes in other
comprehensive income, to reach a total amount of $63,171 related to such translation effect of foreign subsidiary ($35,636 recognized
under Mex FRS)



F-83







In addition, Accounting Standards
Update (ASU) 2010-29 “Business Combination (Topic 805) Disclosures of Supplementary Pro Forma Information for Business Combinations,”
requests to public entities that presents comparative financial statements to disclose revenue and earnings of the combined entity
as though the business combination that occurred during the current year had been as of the beginning of the comparable prior annual
reporting period. ASU also expands the supplemental pro forma disclosures to include a description of the nature and amount of
material, nonrecurring pro forma adjustments directly attributable to the business combination. This unaudited disclosure is shown
as follow:



|                       | Combined Figures
|---------------------- | ----------------
|                       |                 
|                       |                 
|Results of operations: |                 
|Net Sales              |                 
|Operating income       |                 
|Net income             |                 



No proforma adjustments were
deemed necessary by the Company.



F-84







Effects of inflation



MexFRS B-10 “Effects of
inflation" (applicable for years beginning on or after January 1, 2008), supersedes Bulletin B-10 of MexFRS "Recognition
of the effects of inflation on the financial information", and its fifth amendment documents as well as the related circulars
and Mexican Interpretation of Financial Reporting Standards. The main consideration established by this MexFRS is the recognition
of the effects of inflation when an entity operates in an inflationary economic environment (defined as when cumulative inflation
over the immediately preceding three year period is equal to or greater than 26%) applicable as from January 1, 2008. Therefore,
the last restatement factor applied to financial statements for the year ended December 2007 was 1.0376, which corresponds to the
annual rate of inflation from December 31, 2006 to December 31, 2007, based on the Mexican National Consumer Price Index (NCPI)
published by Banco de Mexico.



The reconciliation to U.S. GAAP
does not include the reversal of the adjustments to the financial statements for the effects related to the inflation required
under MexFRS because the application of MexFRS B-10 represents a comprehensive measure of the effects of price level changes in
the Mexican economy and, as such, it is considered a more meaningful presentation than historical cost base over financial reporting
for both Mexican and U.S. accounting purposes as permitted by the “Securities and Exchange Commission” (SEC).



Cash flow information



MexFRS B-2 “Statement of
cash flow” was revised and changes are effective beginning January 1, 2010. The changes in the presentation were recognized
retrospectively and are related to “available on demand-investment” that should be highly liquid (original maturities
of three months or less).



At December 31, 2009, 2010 and
2011, restricted cash amounting to $8,270, $8,899, and $1,641 respectively, are being reclassified for U.S. GAAP purposes from
the line-item “cash and cash equivalents” to “restricted cash”, within investing activities, since such
restricted cash does not meet the definition of cash equivalents according to FASB ASC Topic 230 Statement of cash flows
(SFAS 95 Statement of cash flows).



F-85







Consolidated statements of cash
flows derived from information prepared in accordance with U.S. GAAP would be as presented as follows:



|Cash Flow Information                                                                       |  | Years ended December 31, |          
|------------------------------------------------------------------------------------------- |  | ------------------------ | ---------
|                                                                                            |  | 2009                     |          
|OPERATING ACTIVITIES:                                                                       |  |                          |          
|Net income under U.S. GAAP                                                                  |  | $                        | 798,440  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |                          |          
|Depreciation                                                                                |  |                          | 667,354  
|Bargain purchase                                                                            |  |                          | -        
|Deferred income tax                                                                         |  |                          | 291,459  
|Unrealized loss (gain) on derivative financial instruments                                  |  |                          | (785,398 
|Foreign exchange loss on loans                                                              |  |                          | -        
|Loss on sale of property, plant and equipment                                               |  |                          | 88,186   
|Labor obligations, net period cost                                                          |  |                          | 46,682   
|                                                                                            |  |                          | 1,106,723
|Changes in assets and liabilities:                                                          |  |                          |          
|Accounts receivable                                                                         |  | $                        | (44,359  
|Inventories and biological assets                                                           |  |                          | 274,541  
|Prepaid expenses and other accounts receivable                                              |  |                          | (934     
|Accounts payable                                                                            |  |                          | 2,058    
|Related parties payable                                                                     |  |                          | 17,277   
|Other taxes payable and other accruals                                                      |  |                          | 109,168  
|Labor obligations, net                                                                      |  |                          | (40,452  
|Cash flows provided by (used in) operating activities to next page                          |  | $                        | 1,424,022



F-86







|                                                                          |  | Years ended December 31, |          
|------------------------------------------------------------------------- |  | ------------------------ | ---------
|                                                                          |  | 2009                     |          
|Cash flows  provided by (used in) operating activities from previous page |  | $                        | 1,424,022
|INVESTING ACTIVITIES:                                                     |  |                          |          
|Acquisition of property, plant and Equipment                              |  | $                        | (988,250 
|Proceeds from sale of property, plant and Equipment                       |  |                          | 16,541   
|Restricted cash                                                           |  |                          | 215,651  
|Investment securities                                                     |  |                          | 316,162  
|Business acquisition                                                      |  |                          | -        
|Other assets                                                              |  |                          | (650     
|Cash flows used in  investing activities                                  |  | $                        | (440,546 
|                                                                          |  |                          |          
|FINANCING ACTIVITIES:                                                     |  |                          |          
|Proceeds from issuance of notes payable to Banks                          |  | $                        | 1,044,611
|Repayment of long-term debt and notes payable                             |  |                          | (706,668 
|Cash dividends paid                                                       |  |                          | (250,045 
|Dividends paid to non-controlling interest                                |  |                          | (1,035   
|Additional paid-in capital                                                |  |                          | 1,079    
|Cash flows provided by (used in) financing activities                     |  |                          | 87,942   
|Translation effect of foreign subsidiary                                  |  |                          | -        
|Net increase (decrease) in cash and equivalents                           |  |                          | 1,071,418
|Cash and cash equivalents at beginning of year                            |  |                          | 1,319,439
|Cash and cash equivalents at end of year                                  |  | $                        | 2,390,857



Supplemental disclosure of cash flows information:



|                                                      |  | Years ended December 31, |         
|----------------------------------------------------- |  | ------------------------ | --------
|                                                      |  | 2009                     |         
|Interest paid during the year                         |  | $                        | (90,192 
|Payment of valuation effects of financial instruments |  |                          | 177,740 
|Income taxes paid during the year                     |  | $                        | (107,158



F-87







Agriculture:



The Company follows the requirements
of the MexFRS bulletin E-1, Agriculture, which establishes the rules for recognizing, valuing, presenting and disclosing
biological assets and agricultural products.



This bulletin establishes that
biological assets and the agricultural products (the latter at the time of their harvesting) are to be valued at their fair value,
net of estimated costs at point of sale. Also, the bulletin establishes that whenever the fair value cannot be determined in a
reliable, verifiable and objective manner, the assets are to be valued at their production cost, net of accumulated impairment,
if any.



In accordance with U.S. GAAP,
under FASB ASC 905 Topic “Agriculture”, sub-topic 330 Inventory biological assets and agricultural products
are to be valued at cost. Accordingly, the reconciliation between MexFRS and U.S. GAAP income for 2009, 2010 and 2011 includes
a reversal of the unrealized gain (loss) on valuation of biological assets and agricultural products at fair value, which shows
an increases of $7,214 and increases of $32,016 and a decrease of ($2,558), respectively.



Capitalized interest:



Under MexFRS D-6 starting January
1, 2007, capitalized interest is comprehensively measured in order to include: (i) the interest expense, plus (ii) any foreign
exchange fluctuations, and less (iii) the related monetary position result, which was applicable until December 31, 2007, because
of the adoption of the new MexFRS B-10 that came into effect on January 1, 2008. Although the Company adopted the policy of capitalizing
the comprehensive result of financing on assets under construction, as a result of MexFRS D-6, during 2009, 2010 and 2011, there
were no construction projects identified with interest expense related to debt, as described in Note 2j.



Under U.S. GAAP, interest expense
incurred during the qualifying construction period must be considered as an additional cost of qualifying constructed assets to
be capitalized in property, plant and equipment and depreciated over the lives of the related assets. The amount of the capitalized
interest for U.S. GAAP purposes was determined by applying the weighted average interest rate of financing. During 2009, 2010 and
2011, there were no qualifying construction projects.



F-88







Deferred income tax and
deferred employee statutory profit sharing:



Under MexFRS, the Company determines
deferred income taxes in a manner similar to U.S. GAAP, using the asset and liability method, by applying the enacted statutory
income tax rate. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for operating
loss and tax credit carry forwards. The effect on deferred taxes of a change in tax rates is recognized in results of operations
in the period that includes the enactment date. For MexFRS presentation purposes, deferred tax assets and liabilities are long-term
items, while under U.S. GAAP, deferred tax assets and liabilities should be classified as short-term or long-term items depending
on the nature of the caption that gives rise to such deferred tax assets and liabilities.



Under U.S. GAAP, as of December
31, 2010 and 2011, the long term deferred tax liability is $1,825,344 and $2,132,907 respectively. Short term deferred tax liability
is $526,395 and $608,009 as of December 31, 2010 and 2011, respectively.



The deferred tax adjustment included
in the net income and stockholders’ equity reconciliations includes the effect of deferred taxes on all U.S. GAAP adjustments
reflected in the reconciliation from MexFRS to U.S. GAAP. Under U.S. GAAP, the Company recognizes a deferred tax liability associated
with profits originated during the simplified regime that have not paid income tax previously, but would be subject to taxation
upon future distributions under the Mexican tax law. Due to the accounting change under MexFRS in 2009, this concept generates
a reconciling difference to U.S. GAAP. The deferred tax liability under this concept amounted $309,106 and $270,029 as of December
31, 2010 and 2011, respectively.



F-89







The Company is required to pay
Employee Statutory Profit Sharing (ESPS) in accordance with Mexican labor law. In accordance with MexFRS D-3 “Employee Benefits”,
deferred ESPS is determined under the asset and liability method at the statutory rate of 10%. This methodology is similar to the
approach under FASB ASC Topic 740 “Income Taxes” (SFAS 109 Accounting for Income Taxes).



The Company’s reconciliations
between MexFRS and U.S. GAAP do not include deferred ESPS since there is no amount to be booked.



Under MexFRS, current ESPS is
recorded within other expenses, net. Under U.S. GAAP, ESPS is classified as selling, general and administrative expenses.



Severance indemnities



MexFRS D-3 “Labor Obligations”
requires among other things, that employee benefits should be classified in four main categories; direct short-term and long term,
termination and post-employment benefits. MexFRS D-3 establishes a maximum five-year period for amortizing unrecognized/unamortized
items while actuarial gains or losses may be recognized as earned or incurred. Unlike termination benefits, post-employment benefit
actuarial gains or losses may be immediately recognized in results of operations or amortized over the expected service life of
the employees.



Under U.S. GAAP, FASB ASC Topic
712 “Compensation-Non retirement Post employment Benefits”required that a liability for certain termination
benefits provided under an ongoing benefit arrangement such as statutorily mandated severance indemnities should be recognized
in results of operations when the employers’ obligations relates to rendered services, the likelihood of future settlement
is probable and the liability can be reasonably estimated. Therefore, as of December 31, 2009, 2010 and 2011, the amounts of past
service cost amortized under MexFRS was $4,828, $4,828 and $4,667, respectively. Such amounts have been reversed for U.S. GAAP
since these amounts had been already recognized in the results of operations under U.S. GAAP. These amounts were included in the
U.S. GAAP reconciliation of net income and equity.



FASB ASC Topic 715“Compensation-Retirement
Benefits”

Under MexFRS D-3, companies must
amortize transition obligations/benefits, over a maximum period of 5 years. This requirement has resulted in an increase in net
periodic pension cost under MexFRS which is being reversed for US GAAP purposes.



FASB ASC Topic 715 “Compensation-Retirement
Benefits”, requires companies to recognize the funded or unfunded status of defined benefit pension and other postretirement
plans as a net asset or liability and to recognize changes in that funded or unfunded status in the year in which the changes occur
through accumulated other comprehensive income to the extent those changes are included in the net periodic cost. The funded status
reported on the balance sheet as of December 31, 2009, 2010 and 2011 under FASB ASC Topic 715 “Compensation-Retirement
Benefits” was measured as the difference between the fair value of plan assets and the projected benefit obligation on
a plan-by-plan basis.



F-90







The components of the plan funded
status that is reflected in the consolidated balance sheets as of December 31, 2010 and 2011 are as follows:



|                                                         |  | 2010         |         
|-------------------------------------------------------- |  | ------------ | --------
|                                                         |  | Pension plan |         
|Projected benefit obligation                             |  | $            | 229,609 
|Market value of plan assets                              |  |              | (256,382
|(Funded) unfunded defined benefit plan (asset) liability |  | $            | (26,773 



|                                                         |  | 2011         |         
|-------------------------------------------------------- |  | ------------ | --------
|                                                         |  | Pension plan |         
|Projected benefit obligation                             |  | $            | 203,164 
|Market value of plan assets                              |  |              | (250,855
|(Funded) unfunded defined benefit plan (asset) liability |  | $            | (47,691 



The asset allocations of the Company’s pension benefits
as of December 31, 2010 and 2011 measurement dates were as follows:



|                |  | Pension benefits (Level 2) |        
|--------------- |  | -------------------------- | -------
|Asset category: |  |                            | 2010   
|Debt securities |  | $                          | 256,382
|Total           |  | $                          | 256,382



Goodwill:



Beginning January 1, 2005, due
to the adoption of MexFRS B-7, goodwill is no longer amortized, but rather is subject to annual impairment test, and also in interim
periods when impairment indicators are noted.



F-91







For U.S. GAAP purposes, goodwill
is reviewed for impairment at least annually in accordance with the provisions of FASB ASC Topic 350, “Intangibles –
Goodwill and Other”. Up to December 31, 2004, the Company recognized an accumulated effect (increase in equity) of $58,716
due to the reversal of amortization of goodwill recognized under MexFRS, restoring the goodwill amount in order to comply with
U.S. GAAP. The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared
with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication
of goodwill impairment exists for the reporting unit and the enterprise must perform step two of the impairment test (measurement).
Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over
the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting
unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value
of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair
value of the reporting unit exceeds its carrying value, step two does not need to be performed.



The Company performs its annual
impairment review of goodwill at December 31, and when a triggering event occurs between annual impairment tests. In 2009,
2010 and 2011, no triggering events occurred and the annual impairment test did not reflect any impairment concern.





F-92











Reporting comprehensive
income:



For U.S. GAAP reconciliation
purposes, the Company has adopted the FASB ASC Topic 220 “Comprehensive Income”, which establishes rules for
reporting and disclosure of comprehensive income and its components. Comprehensive income consists of current year net (loss) income
plus (less) the change in stockholders’ equity resulting from transactions and other events and circumstances from non-owner
sources. For the 2009, 2010 and 2011 fiscal years the components of comprehensive income are the net income, and labor obligation
under FASB ASC Topic 715 “Compensation-Retirement Benefits”net of taxes. In addition, for the 2011 fiscal year
there is a translation effect of foreign subsidiary as part of the comprehensive income. Comprehensive income effects and amounts
under US GAAP are disclosed in the consolidated statements of stockholder ́s equity in accordance with US GAAP.



Impairment of long-lived assets:



Under US GAAP, an impairment
test on long-lived assets requires a two-step process to determine the amount of any impairment loss to be recognized when events
and circumstances indicated that the carrying amount may not be recoverable. The first step of this test requires the determination
of whether the carrying amount of the long-lived asset is recoverable through the sum of the undiscounted cash flows expected to
result from the use and eventual disposition of the asset (asset group). The second step requires the determination of the amount
of impairment loss to be recognized by comparing the carrying amount of the asset (asset group) to its fair value. Mexican FRS
does not require a two-step impairment evaluation process for long-lived assets but rather, a direct comparison is made between
the recoverable amount (higher of value in use and fair value less cost to sale) and carrying value. Since there were no impairment
indicators or triggering events, no impairment losses on long-lived assets have been recorded in 2009, 2010 and 2011.



F-93







Valuation and Qualifying accounts:



Account balances are charged
off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Write-off’s for 2009, 2010 and 2011 were as follows:



|                                |  |  |      |  | Balance at beginning of period |   |        | Business Acquisition 
(OK Industries) |  |   | Charged to cost and expenses |  |  | Deductions |        |  | Balance at end of period |  
|------------------------------- |  |  | ---- |  | ------------------------------ | - | ------ | ------------------------------------- |  | - | ---------------------------- |  |  | ---------- | ------ |  | ------------------------ | -
|Allowance for doubtful accounts |  |  | 2011 |  |                                | $ | 32,990 |                                       |  | $ | 699                          |  |  | $          | 15,298 |  |                          | $
|                                |  |  | 2010 |  |                                | $ | 29,801 |                                       |  | $ | -                            |  |  | $          | 18,743 |  |                          | $
|                                |  |  | 2009 |  |                                | $ | 28,320 |                                       |  | $ | -                            |  |  | $          | 12,647 |  |                          | $



The Company does not have any
off-balance-sheet credit exposure related to its customers.



Investment Securities



All rights and obligations arising
from primary investment securities are recognized on the balance sheet and the company classifies its investment securities depending
on the purpose for which the securities were acquired: (i) held-to-maturity, (ii) trading, or (iii) available for sale. Investments
in these instruments are reflected on the line-item “current primary investment securities” within cash and investments,
denominated in Mexican peso and US dollar.



Trading securities, except held-to-maturity,
are recorded at fair value, where peso-denominated debt securities are taken from the bank statements which are based on the information
of the local price vendors, while US-denominated debt securities are based on diversified sources. Held-to-maturity securities
are recorded at amortized cost. Changes in the carrying amounts of trading securities, including the related costs and yields are
included under comprehensive financial results. Gains or losses arising from changes in the fair value of available-for-sale securities
(less the corresponding yield) non functional currency denominated and foreign exchange gain or loss, in the case of equity securities,
as well as the related monetary position gain or loss, as applicable, are reported as a comprehensive income (loss) item within
stockholders’ equity.

Furthermore, where evidence exists
that a financial asset held-to-maturity shall not be recovered in full, the expected loss (impairment) is recognized in the statement
of operations.



Several securities were no longer
traded actively in the financial markets, hence the Company, in accordance with FASB ASC Topic 320 “Investment-Debt and
Equity Securities”, transferred Commercial Paper classified as trading securities to the Held-To-Maturity category starting
October 1, 2008.



F-94







Derivative Financial Instruments
and Risk Hedging Activities



The Company accounts for derivatives
and hedging activities in accordance withFASB ASC Topic 815, “Derivatives and Hedging”, which requires
entities to recognize all derivative instruments as either assets or liabilities in the balance sheet at their respective fair
values. For derivatives designated into qualified fair value hedging relationships, changes in the fair value are either offset
through earnings against the change in fair value of the hedged item attributable to the risk being hedged or if a qualified cash
flow hedging relationship is designated, the effective portion changes on the fair value of the derivatives are recognized in accumulated
other comprehensive income. Amounts are reclassified from accumulated other comprehensive income into earnings when the hedged
item is recognized in earnings affecting the same revenue or expense item where the hedged item impacts.



The Company enters into transactions
denominated in foreign currencies, buying and selling options. These derivatives are not designated as hedging instruments for
financial reporting purposes, thus the changes in their fair values are recorded in earnings each period.



Relative to grain usage, the
Company enters into derivative contracts designated to hedge firm commitments not recognized as assets or liabilities in the balance
sheet (fair value hedges). However, derivatives not designated under a hedging relationship or those do not qualify under strict
hedge accounting criteria, are accounted for as trading instruments with changes in fair value recorded in earnings each period.
As of November 1st, 2011, the Company acquired OK Industries Inc., and with this acquisition the Company acquired open
positions on grain options listed in CBOT (Chicago Board of Trade). The changes in the fair value of these instruments have been
also recorded in earnings each period since that date.



F-95







For all qualifying hedging relationships,
the Company formally documents the hedging relationship, including its risk-management objective and strategy for undertaking the
hedge, the hedging instrument, the hedged item, the nature of the risk being hedged, how the hedging instrument’s effectiveness
in offsetting the hedged risk will be assessed prospectively and retrospectively, and a description of the method of measuring
ineffectiveness.



For derivative instruments that
are designated and qualify for a hedging relationship under the fair value hedge accounting model, the Company recognizes the changes
in fair value of the derivative directly in earnings each period, as well as the changes in fair value attributable to the hedged
risk of the hedged item, that is grain firm commitments (off-balance sheet executory contracts) which latter become recognized
assets (grain inventory).



The Company discontinues hedge
accounting prospectively when it determines that the derivative is no longer effective in offsetting changes in fair value or if
the derivative expires or is sold, terminated, or exercised, or if the derivative is no longer designated as a hedging instrument
because the management determines that designation of the derivative as a hedging instrument is no longer appropriate.



In all situations in which hedge
accounting is discontinued and the derivative instrument remains outstanding, the Company continues to carry the derivative instrument
at its fair value on the balance sheet and recognizes any subsequent changes in its fair value within current earnings.



On January 1, 2009, the
Company adopted the provisions of SFAS 161, Disclosures about Derivative Instruments and Hedging Activities (included in
Topic 815-10: Derivatives and Hedging – Overall), which amends the disclosure requirements for derivative instruments
and hedging activities.



The Company has implemented fair
value hedge relationships with firm commitments as hedged item, using bought options on grain futures. Hedge accounting for these
relationships does require the recognition of either an asset (gain) or a liability (loss) attributable to the hedged risk (intrinsic
changes only) on the balance sheet against current earnings where the changes in the fair value hedge derivatives effects are also
recognized and do compensate.



F-96







When the same bought options
on corn grain futures are redesigned as to hedge a portion of corn/sorghum inventories, once these became recognized assets, the
changes in these inventory’s portion fair values adjust the carrying value of such grain inventories against current earnings,
where the changes in fair value of the designated derivatives offset in current earnings these decreases in the inventories’
fair value. The cash flow statement is affected when the derivatives’ cash flow from early exercises or those that end up
with intrinsic value are collected from ASERCA.



During 2011, the Company took
long positions in 6,767 put option contracts on corn futures listed in the CBOT (each conveys 5,000 bushels), which gave the right
to the Company for selling 859,477 metric tons at certain strike price 5,493 of these put option contracts reached their maturity
during 2011 and provided to the Company a realized gain at correspondent expirations of $1.9 millions of dollars which was recognized
in current earnings into cost of goods sold.



DerivativeFinancial
Instruments and Risk Hedging Activities:



As of December 31, 2011 and 2010,
the Company used commodity derivatives to manage its exposure to commodity prices, and foreign exchange rate derivatives. The Company
does not enter into derivative instruments for any purpose other than hedging its exposure to these commodity prices and foreign
currency exchange rate fluctuations, however, derivatives that did not qualify for hedge accounting were accounted as trading instruments.
By the end of 2008 and amended in 2010, the Company did establish a Corporate Policy associated to the use of foreign exchange
derivatives, where instruments entered in the amount of up to 30 Million USD are approved by the Risk Committee, while entering
into an amount higher than this amount does require Board’s approval.



By using derivative financial
instruments to hedge exposures to changes in commodity prices and exchange rate fluctuations, the Company exposes itself to credit
risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When
the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company.
When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, the Company is not
exposed to the counterparty’s credit risk in those circumstances. Positive fair value derivatives are carried as financial
assets on the balance sheet, while negative fair values are presented as current liabilities on the balance sheet.



F-97







The Company maintains a commodity-price-risk
management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by commodity-price
volatility. The manufacturing of the Company’s products requires a significant volume of grain. Price fluctuations in grain
cause market values of grain inventory to differ from its cost and cause the actual purchase price of the grain to differ from
the anticipated price.



As of December 31, 2011 and 2010,
the Company has periodically entered into grain futures and options on futures (F&O) contracts traded at the CBOT through New
Edge, and Jefferies Bache a F&O brokers on behalf of the Company, to economically hedge a portion of its anticipated purchases
of grains, against the risk associated with fluctuations in market prices. These F&O contracts were not designated as hedges;
thus, changes in fair value were recognized directly in earnings each period.



Also, the Company has entered
into options on futures of corn, as to hedge the downward changes in the prices of grains, corn and sorghum, when the pricing of
these are fixed through firm commitments, based on a Mexican Government sponsored program named “Agricultura por Contrato”
managed by ASERCA (Apoyos y Servicios a la Comercialización Agropecuaria), a governmental entity ascribed to Mexico’s
Secretary of Farming and Agriculture (SAGARPA, Secretaría de Agricultura, Ganadería, Desarrollo Rural, Pesca y Alimentación).
This program basically represents a subsidy to the Company, through which, a commodities-related price hedging program scheme is
offered to both farmers and agro-business entities such as the Company. The ASERCA program had two participating modalities: during
2011 for which the Company applied (i) 10% of the payment of the option’s premium and 100% of the benefit with a 60% discount
on the amount of the initial premium, or (ii) 50% of the payment of the option’s premium, and 100% of the benefit in the
payment of the premium of the bought options with a 38% discount on the amount of the initial premium.



F-98







Also, in this program ASERCA
plays the role of the intermediary between the Company and the CBOT, but stands as the counterparty. These are put options on futures
listed at the CBOT and are designated as fair value hedging relationships. The changes in the fair value of these options and the
fair value of the hedged item (firm commitments) are recognized in earnings. Changes in the fair value of the hedged item attributable
to the hedged risk, that were recognized within the consolidated balance sheet as either an asset or liability from the grain firm
commitment’s valuation or as an adjustment to the carrying value of the inventory when the edged item is the grain inventory
during the hedging relationship, where the firm commitment’s fair value effects are subsequently  reclassified
as hedge adjustments to cost of goods sold when the related inventory layer affect earnings as cost of goods sold.



As of December 31, 2010 and 2011,
the Company had entered into foreign currency exchange rate derivatives, traded with the following financial institutions as of
December 31, 2010: UBS Group and Santander (México) and as of December 31, 2011: UBS Group Morgan Stanley and Morgan Stanley,
S. A. These structured derivatives were not designated in a hedging relationship, hence changes in the fair value for these instruments
were recognized in earnings each period. Likewise, the Company entered into over-the-counter (OTC) grain derivatives with Cargill
Incorporated and exchange traded derivatives through, New Edge and Jefferies Bache which were not designated as hedges and consequently,
the changes in their fair values were also recognized in earnings each period.



As of December 31, 2010 and 2011,
the Company had not established any current hedging relationship under the cash flow hedge model; hence there is no derivatives
effect in other comprehensive income as of these dates.



Fair Value Measurements
and the Fair Value Option of Financial Instruments:



The fair value of a financial
instrument is the amount 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.



F-99







When feasible, the Company uses
quoted market prices to determine fair values. Where quoted market prices are not available, the fair value is internally derived
based upon valuation methodologies with respect to the amount and timing of future cash flows and estimated discount rates adjusted
for both counterparty and entity’s own risk. However, considerable judgment is required in interpreting market data to develop
estimates of fair value, so the estimates including both counterparty and entity’s own risk adjustment are not necessarily
indicative of the amounts that could be realized or would be paid in a current market exchange, but those are proxy estimates.
The effect of using different market assumptions or estimation methodologies could be material to the estimated fair values. Fair
value information presented herein is based on information available as of December 31, 2010 and 2011. Fair values vary from period
to period based on changes in a wide range of risk factors, including interest rates, credit quality, and market perceptions of
value and as existing assets and liabilities run off and new transactions are entered into.



The following methods and assumptions
were used to estimate the fair value of each class of financial instruments:



Cash, trade accounts receivable,
other account receivables, other assets (nonderivatives), trade accounts payable, due to affiliated company, and accrued expenses
(nonderivatives): The carrying amounts, at face value or cost plus accrued interest, reported in the consolidated balance sheets
equal or approximate fair values, due to the short maturity of these instruments.



Investment securities:
The Company classifies its investment securities depending on the purpose for which the securities were acquired, its holding period
objective and the Company’s ability to hold them until maturity as either: (i) trading, (ii) held-to-maturity or (iii) available
for sale. Trading securities and available for sale securities are recognized at fair value, determined by using quoted market
prices multiplied by the quantity held when quoted market prices are available. Held-to-maturity securities are reported at amortized
cost.



Futures and Options on Futures
of Grains: Exchange listed futures and options on futures are valued using the closing (settlement) price observed at the CBOT
on the last business day of the year.



F-100







Currency exchange rate options:
The fair value of these over-the-counter options is determined using option pricing models that value the potential for the option
to become “in the money” through changes in currency exchange rate prices during the remaining term of the derivative.
Inputs to that option pricing model reflect observable market data, including implied volatility determined by reference to exchange
traded options on futures.



Note payables to banks, long
and short term debt: The fair value of the Company’s long-term debt is measured using quoted offered-side prices when
quoted market prices are available. If quoted market prices are not available, the fair value is determined by discounting the
future cash flows of each instrument at rates that reflect, among other things, market interest rates and the Company’s credit
standing. For long-term debt measurements, where there are not rates currently observable in publicly traded debt markets of similar
terms to companies with comparable credit, the Company uses market interest rates and adjusts that rate for all necessary risks,
including its own credit risk. In determining an appropriate spread to reflect its credit standing, the Company considers credit
default swap spreads, bond yields of other long-term debt offered by the Company, and interest rates currently offered to the Company
for similar debt instruments of comparable maturities by the Company’s bankers as well as other banks that regularly compete
to provide financing to the Company.



In accordance to FASB ASC Topic
825 “Financial Instruments” (SFAS 107 Disclosures about Fair Value of Financial Instruments), the following
table presents both the carrying and estimated fair value of assets and liabilities considered financial instruments under this
Statement. Others items like short and long term debt not carried and recognized originally at fair value are also presented in
the table at their fair value. The disclosure excludes leases, pension and benefit obligations, as well as insurance policy reserve.
Also as required, the disclosures excludes the effect of taxes, any premium or discount that could result from offering for sale
at one time the entire holdings of a particular instrument, excess fair value associated with deposit with no fixed maturity and
other expenses that would be incurred in a market transaction.



F-101







According to the FASB ASC Topic
825, certain items are excluded from this table, such as receivables and payables that arises from the ordinary course of business.



|                      |  | 2010            |           |   | 2011        |  
|--------------------- |  | --------------- | --------- | - | ----------- | -
|                      |  | Carrying amount |           |   | Fair 
value |  
|Cash                  |  | $               | 513,076   |   |             | $
|Investment Securities |  |                 | 3,655,247 |   |             |  
|                      |  |                 |           |   |             |  
|Short term debt       |  |                 | (139,867  | ) |             |  
|Long term debt        |  |                 | (507,053  | ) |             |  



Fair Value Hierarchy:



FASB ASC Topic 820 “Fair
Value Measurements and Disclosures” defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820 also establishes
a framework for measuring fair value and expands disclosures about fair value measurements.



The Company adopted FASB ASC
Topic 820 on January 1, 2008 for fair value measurements of financial assets and financial liabilities and for fair value
measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis.
On January 1, 2009, the Company adopted the provisions of FASB ASC Topic 820 for fair value measurements of nonfinancial assets
and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis.
FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy are as follows:



F-102











| | · | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the
ability to access at the measurement date. Since valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these products does not entail a significant degree of judgment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly. Assets and liabilities utilizing Level 2 inputs include investment securities that are not actively
traded and derivative contracts.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Level 3 inputs for the asset or liability are unobservable and significant to the overall fair value measurement.
| | - | -----------------------------------------------------------------------------------------------------------------



The level in the fair value hierarchy
within which a fair measurement in its entirety falls is based on the lowest level input that is significant to the fair value
measurement in its entirety.



The hierarchy requires the use
of observable market data when available. In the case of investment securities, the instruments are classified in Level 2. The
CBOT derivatives (counterparties New Edge and Jefferies Bache) are classified in Level 1. Currency options and OTC grain derivatives
(Cargill and ASERCA) are classified in Level 2.



The following fair value hierarchy
table presents assets and liabilities that are measured at fair value on a recurring basis at December 31, 2010 and 2011 (including
only items that are required to be measured at fair value, items for which the fair value option has be elected, are not presented
due that the Company did not elect the Fair Value Option):



F-103







|At December 31, 2010   |  | Total asset/ liabilities at Fair Value |           |   | Quoted prices in active markets for identical assets (Level 1) |  |       | Significant other observable inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3) |  
|---------------------- |  | -------------------------------------- | --------- | - | -------------------------------------------------------------- |  | ----- | --------------------------------------------- |  |  | ----------------------------------------- | -
|Assets:                |  |                                        |           |   |                                                                |  |       |                                               |  |  |                                           |  
|                       |  |                                        |           |   |                                                                |  |       |                                               |  |  |                                           |  
|Trading Securities     |  | $                                      | 3,655,247 |   |                                                                |  | -     |                                               |  |  | 3,655,247                                 |  
|Derivative instruments |  |                                        | 3,841     |   |                                                                |  | 3,573 |                                               |  |  | 268                                       |  
|                       |  |                                        |           |   |                                                                |  |       |                                               |  |  |                                           |  
|Total                  |  | $                                      | 3,659,088 |   |                                                                |  | 3,573 |                                               |  |  | 3,655,515                                 |  
|                       |  |                                        |           |   |                                                                |  |       |                                               |  |  |                                           |  
|Liabilities:           |  |                                        |           |   |                                                                |  |       |                                               |  |  |                                           |  
|Derivative instruments |  | $                                      | (568      | ) |                                                                |  | (282  | )                                             |  |  | (286                                      | )



|At December 31, 2011   |  | Total asset/
 liabilities at 
Fair Value |           |   | Quoted prices
 in active
 markets for
 identical 
assets  
(Level 1) |  |      | Significant 
other 
observable 
inputs (Level 2) |  |  | Significant 
Unobservable 
Inputs (Level 3) | 
|---------------------- |  | ---------------------------------------- | --------- | - | -------------------------------------------------------------------- |  | ---- | ------------------------------------------------ |  |  | ------------------------------------------- | 
|Assets:                |  |                                          |           |   |                                                                      |  |      |                                                  |  |  |                                             | 
|                       |  |                                          |           |   |                                                                      |  |      |                                                  |  |  |                                             | 
|Trading Securities     |  | $                                        | 2,565,661 |   |                                                                      |  | -    |                                                  |  |  | 2,565,661                                   | 
|Derivative instruments |  |                                          | 10,975    |   |                                                                      |  | 760  |                                                  |  |  | 10,216                                      | 
|                       |  |                                          |           |   |                                                                      |  |      |                                                  |  |  |                                             | 
|Total                  |  | $                                        | 2,576,636 |   |                                                                      |  | 760  |                                                  |  |  | 2,575,877                                   | 
|                       |  |                                          |           |   |                                                                      |  |      |                                                  |  |  |                                             | 
|Liabilities:           |  |                                          |           |   |                                                                      |  |      |                                                  |  |  |                                             | 
|                       |  |                                          |           |   |                                                                      |  |      |                                                  |  |  |                                             | 
|Derivative instruments |  |                                          | (768      | ) |                                                                      |  | (768 | )                                                |  |  | -                                           | 
|                       |  |                                          |           |   |                                                                      |  |      |                                                  |  |  |                                             | 
|Total                  |  | $                                        | (768      | ) |                                                                      |  | (768 | )                                                |  |  | -                                           | 



F-104







Fair Value Option



FASB ASC Topic 825-10 provides
entities with an option to measure many financial instruments and certain other items at fair value. Under ASC Topic 825-10, unrealized
gains and losses on items for which the fair value option has been elected are reported in earnings at each reporting period.  This
fair value option must be applied on an instrument-by-instrument basis with changes in fair value reported in earnings. After initial
adoption, the election can be made at the acquisition of an eligible financial asset, financial liability, or firm commitment or
when certain specified reconsideration events occur. The fair value election may not be revoked once an election is made. The adoption
of FASB ASC Topic 825-10 did not have an impact to the Company’s financial position and results of operations, as the Company
did not elect the fair value option for eligible items.



Income taxes



a) Tax rate reconciliation:



Until December 31, 2010, all
income before income tax and related income tax expense (benefit) are from Mexican sources. As it is mentioned in note 1 “Significant
transaction” to the consolidated financial statements, on November 1, 2011 the Company acquired 100% of the voting stock
of OK Industries Inc., entity located in the United States of America.



Pre-tax income from domestic
and foreign operations is comprised as follow:



|                                        |  | 2009 |           |  | 2010 |  |           | 2011 | 
|--------------------------------------- |  | ---- | --------- |  | ---- |  | --------- | ---- | 
|                                        |  |      |           |  |      |  |           |      | 
|Pre-tax income from domestic operations |  | $    | 1,193,751 |  |      |  | 2,524,746 |      | 
|Pre-tax income from foreign operations  |  |      | -         |  |      |  | -         |      | 
|Total                                   |  | $    | 1,193,751 |  |      |  | 2,524,746 |      | 



Income tax (IT) expense (benefit)
attributable to income before income tax differed from the amounts computed by applying the Mexican statutory rate of 19% for 2009
and 21% for 2010 and 2011, respectively, to income before income tax, as a result of the items shown in the following page:



F-105







|                                                                                            |  | 2009 |         |   | 2010 |  |         | 2011 | 
|------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- |  | ------- | ---- | 
|                                                                                            |  |      |         |   |      |  |         |      | 
|Computed “expected” tax (benefit) expense                                                   |  | $    | 226,813 |   |      |  | 530,197 |      | 
|Increase (decrease) in income taxes resulting from:                                         |  |      |         |   |      |  |         |      | 
|Effects of inflation, net                                                                   |  |      | (50,596 | ) |      |  | (66,504 | )    | 
|Non-deductible expenses                                                                     |  |      | 4,538   |   |      |  | 8,032   |      | 
|Adjustment to deferred tax assets and liabilities for enacted changes in tax laws and rates |  |      | 192,614 |   |      |  | -       |      | 
|Effect of companies outside simplified regime                                               |  |      | 38,163  |   |      |  | 31,661  |      | 
|Change  in the valuation , allowance of
    deferred tax assets                             |  |      | 8,130   |   |      |  | 17,164  |      | 
|(Reversal) addition of deferred tax liability related to simplified regime                  |  |      | (9,273  | ) |      |  | 34,153  |      | 
|Gain resulting from Bargain Purchase                                                        |  |      | -       |   |      |  | -       |      | 
|Other, net                                                                                  |  |      | (15,078 | ) |      |  | (7,908  | )    | 
|                                                                                            |  |      |         |   |      |  |         |      | 
|IT  expense (benefit)                                                                       |  | $    | 395,311 |   |      |  | 546,795 |      | 



Income tax expense (benefit)
for the years ended December 31, 2009, 2010, 2011 is comprised as follows:



|             |  | 2009 |         |  | 2010 |   |         | 2011 | 
|------------ |  | ---- | ------- |  | ---- | - | ------- | ---- | 
|             |  |      |         |  |      |   |         |      | 
|Current tax  |  | $    | 103,853 |  |      | $ | 495,846 |      | 
|Deferred tax |  |      | 291,458 |  |      |   | 50,949  |      | 
|             |  |      |         |  |      |   |         |      | 
|             |  | $    | 395,311 |  |      | $ | 546,795 |      | 



Deferred tax benefit for the
year ended December 31, 2011, includes an amount of ($123,723) related to the benefit of tax loss carryforwards.



F-106







b)     Deferred income tax-



Based on the financial projections
of taxable income, the Company estimated that it will pay income tax (IT) in future years; therefore, deferred income tax effects
as of December 31, 2010 and 2011 have been accounted for reflecting the IT basis.



The tax effects of temporary
differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2010 and 2011, are presented
below:



|                                                                      |  | 2010 |           |  | 2011 | 
|--------------------------------------------------------------------- |  | ---- | --------- |  | ---- | 
|Deferred tax assets:                                                  |  |      |           |  |      | 
|Accounts payable                                                      |  | $    | 493,645   |  |      | 
|Labor obligations                                                     |  |      | 29,785    |  |      | 
|ESPS payable                                                          |  |      | 11,311    |  |      | 
|Effects on derivative financial instruments                           |  |      | 1,635     |  |      | 
|Others                                                                |  |      | 1,006     |  |      | 
|Recoverable AT                                                        |  |      | 4,859     |  |      | 
|Tax loss carryforwards                                                |  |      | 17,698    |  |      | 
|Total gross deferred tax assets                                       |  |      | 559,939   |  |      | 
|                                                                      |  |      |           |  |      | 
|Less valuation allowance                                              |  |      | 53,309    |  |      | 
|Net deferred tax assets                                               |  |      | 506,630   |  |      | 
|                                                                      |  |      |           |  |      | 
|Deferred tax liabilities:                                             |  |      |           |  |      | 
|Inventories                                                           |  |      | 827,540   |  |      | 
|Accounts receivable                                                   |  |      | 190,082   |  |      | 
|Property, plant and equipment, net                                    |  |      | 1,515,271 |  |      | 
|Other deductions                                                      |  |      | 16,370    |  |      | 
|Effects on derivative financial instruments                           |  |      | -         |  |      | 
|Additional deferred income tax liability related to simplified regime |  |      | 309,106   |  |      | 
|                                                                      |  |      |           |  |      | 
|Total deferred tax liabilities                                        |  |      | 2,858,369 |  |      | 
|                                                                      |  |      |           |  |      | 
|Net deferred tax liability                                            |  | $    | 2,351,739 |  |      | 



F-107







The valuation allowance for deferred
tax assets as of January 1, 2010 and 2011 amounted to $36,145 and $53,309 respectively. The net change in the total valuation allowance
for the years ended December 31, 2010 and 2011, was an increase of $17,164 and a decrease of $(32,312), respectively. In assessing
the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The valuation allowance at December 31, 2011 is related to cover asset tax, and part
of labor obligations that, in the judgment of management, are not more likely that not to be realized. The ultimate realization
of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences
become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and
tax planning strategies in making this assessment.



Taxable income of the Company
on a consolidated basis for the year ended December 31, 2011 was $1,094,770. Based upon the level of historical taxable income
and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes
it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation
allowance at December 31, 2011. The amount of the deferred tax asset considered realizable, however, could be reduced in the
near future if estimates of future taxable income during the carryforward period are reduced.



The Company has not accounted
for deferred income taxes on the temporary differences resulting from investments in subsidiaries since it meets the criteria provided
by ASC 740 “Income taxes” (Accounting Principles Board Opinion 23 (APB 23)). The Company considers these investments
to be indefinitely held. A deferred tax liability will be recognized once the Company expects to dispose such investments, and
as long as the sale price is higher than the tax cost of such investments. The taxable temporary difference related to such investments
amounts approximately to $1,044,000, and it is no practicable to compute the unrecognized deferred tax liability.



F-108







Accounting for uncertainty
in income taxes:



FASB Interpretation No. 48 “Accounting
for Uncertainty in Income Taxes, an interpretation of Statement of Financial Accounting Standards No.109”(included in
FASB ASC Topic 740Income taxes – Overall)(FIN 48) requires that an entity recognizes in the consolidated financial
statements the effect of income tax positions, only if those positions are more likely than not of being sustained upon examination,
based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater
than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment
occurs. The Company’s accounting policy is to accrue interest and penalties related to unrecognized tax benefits, if and
when required, as a component of other income (expense), in the consolidated statements of operations.



For the years ended December
31, 2009, 2010 and 2011, the Company did not have any unrecognized tax benefits and thus no interest and penalties related to unrecognized
tax benefits were recorded. In addition, the Company does not expect that the amount of unrecognized tax benefits will change significantly
within the next 12 months. The income tax returns of the Company and its Mexican subsidiaries remain subject to examination by
the Mexican tax authorities for the tax years beginning in 2007. In regards to the US subsidiaries the income tax returns for the
tax years beginning in 2007 remain subject to examination by the US tax authorities.



F-109







Business and credit concentrations:



The Company’s products
are sold to a large number of customers without significant concentration with any of them; likewise, there is no significant supplier
concentration.



Summary of adjustments
to reconcile MexFRS and U.S. GAAP:



The following is a summary of
net income adjusted to take into account certain material differences between MexFRS and U.S. GAAP:



|                                                                                    |  | Years ended December 31, |        
|----------------------------------------------------------------------------------- |  | ------------------------ | -------
|                                                                                    |  | 2009                     |        
|Net income as reported under MexFRS                                                 |  | $                        | 809,045
|Adjustments to reconcile net income to U.S. GAAP:                                   |  |                          |        
|Biological assets and agricultural products valuation at fair value                 |  |                          | 7,214  
|Depreciation of capitalized interest                                                |  |                          | (4,724 
|Severance cost                                                                      |  |                          | 4,828  
|Pensions plan and Seniority Premium                                                 |  |                          | 2,882  
|Bargain purchase                                                                    |  |                          | -      
|Deferred income tax on US GAAP adjustments                                          |  |                          | 1,774  
|Fair value credit valuation adjustment effect                                       |  |                          | (31,852
|Additional deferred income tax liability related to simplified regime               |  |                          | 9,273  
|Depreciation of fair values of property, plant and equipment of OK Industries, Inc. |  |                          | -      
|Less: non-controlling interest income                                               |  |                          | (11,445
|Net controlling interest income under U.S. GAAP                                     |  | $                        | 786,995
|Other comprehensive income, net of tax                                              |  |                          | 4,469  
|Comprehensive income                                                                |  |                          | 791,464
|Weighted average number of shares outstanding (thousands)                           |  |                          | 600,000
|Net income per basic and diluted share                                              |  | $                        | 1.31   



Classification differences:



There are certain other classification
differences between MexFRS and U.S. GAAP, which are as follows:



| | - | Effective beginning January 1, 2011, with retrospective application; under Mex FRS, advances for
purchase of inventories (current assets) or property, plant and equipment and intangible assets (non-current assets), among others,
must be reported under prepayments provided the benefits and risks inherent in the assets to be acquired or the services to be
received have not yet been transferred to the entity. Furthermore, prepaid expenses must be reported based on the nature of the
item to be acquired, either under current assets or non-current assets. Under US GAAP, advances for purchase of inventory, or property
plant and equipment are still recorded as inventory or property plant and equipment, respectively.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-110







| | - | Employee statutory profit sharing expenses are classified as other expenses under MexFRS and as selling, general and administrative expenses under U.S. GAAP.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| | - | Tax incentives for 2009 are presented as other income under MexFRS and as a reduction of selling, general and administrative expenses under U.S. GAAP. There were no tax incentives in 2010 and 2011
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





The reconciliation of the controlling
interest between MexFRS and U.S. GAAP is as follows:



|                                                                                                 |  | Years ended December 31 |           
|------------------------------------------------------------------------------------------------ |  | ----------------------- | ----------
|                                                                                                 |  | 2010                    |           
|Controlling interest' equity as reported under MexFRS                                            |  | $                       | 16,316,355
|Adjustments to reconcile controlling interest’ equity to U.S. GAAP:                              |  |                         |           
|                                                                                                 |  |                         |           
|Biological assets and agricultural products valuation at fair value                              |  |                         | (72,512   
|Accumulated differences between the financing cost capitalized for MexFRS and U.S. GAAP purposes |  |                         | 94,481    
|Accumulated depreciation on capitalized interest                                                 |  |                         | (33,726   
|Severance cost                                                                                   |  |                         | (8,714    
|Pension plan and Seniority Premium                                                               |  |                         | 20,787    
|Reversal of accumulated amortization of goodwill                                                 |  |                         | 58,716    
|Deferred income taxes on U.S. GAAP adjustments                                                   |  |                         | (13,483   
|Additional deferred income tax liability related to simplified regime                            |  |                         | (309,106  
|Translation effect of foreign subsidiary                                                         |  |                         | -         
|Depreciation of fair value of property, plant and equipment of OK Industries, Inc.               |  |                         | -         
|Bargain purchase                                                                                 |  |                         | -         
|                                                                                                 |  |                         |           
|Controlling interest’ equity as reported under U.S. GAAP                                         |  | $                       | 16,052,798



The effects of the above adjustments
do not have any impact on non-controlling interest.



F-111









The consolidated statements of
stockholders’ equity in accordance with U.S. GAAP is as follows:



|                                                      |  | Capital 
stock |           |  | Additional 
Paid in-
capital |   |         | Reserve for 
repurchase 
of shares |  |   | Retained
 earnings |  |  | Accumulated
 other 
comprehensive

    income |            |   | Comprehensive
 income |   |       | Total
 controlling 
interest 
equity |  |   | Non-
controlling 
interest |  |  | Total 
stockholders ́ 
equity |           
|----------------------------------------------------- |  | -------------- | --------- |  | ---------------------------- | - | ------- | ---------------------------------- |  | - | ------------------ |  |  | --------------------------------------------- | ---------- | - | --------------------- | - | ----- | ------------------------------------ |  | - | -------------------------- |  |  | ---------------------------- | ----------
|                                                      |  |                |           |  |                              |   |         |                                    |  |   |                    |  |  |                                               |            |   |                       |   |       |                                      |  |   |                            |  |  |                              |           
|Balance at December 31, 2008                          |  | $              | 2,294,927 |  |                              | $ | 743,674 |                                    |  | $ | 159,455            |  |  | $                                             | 10,585,770 |   |                       | $ | 2,838 |                                      |  | $ | -                          |  |  | $                            | 13,786,664
|Cash dividends paid                                   |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |  |  |                                               | (250,045   | ) |                       |   | -     |                                      |  |   | -                          |  |  |                              | (250,045  
|Cash dividends paid to non-controlling interest       |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |  |  |                                               | -          |   |                       |   | -     |                                      |  |   | -                          |  |  |                              | -         
|Comprehensive income:                                 |  |                |           |  |                              |   |         |                                    |  |   |                    |  |  |                                               |            |   |                       |   |       |                                      |  |   |                            |  |  |                              |           
|Net income for the year                               |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |  |  |                                               | 786,995    |   |                       |   | -     |                                      |  |   | 786,995                    |  |  |                              | 786,995   
|Components of other comprehensive income:             |  |                |           |  |                              |   |         |                                    |  |   |                    |  |  |                                               |            |   |                       |   |       |                                      |  |   |                            |  |  |                              |           
|Labor obligations under
    FASB ASC Topic 715 effect |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |  |  |                                               | -          |   |                       |   | -     |                                      |  |   | 4,469                      |  |  |                              | -         
|Other comprehensive income, net of taxes              |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |  |  |                                               | -          |   |                       |   | 4,469 |                                      |  |   | 4,469                      |  |  |                              | 4,469     
|Repurchase of shares                                  |  |                | -         |  |                              |   | 1,079   |                                    |  |   | -                  |  |  |                                               | -          |   |                       |   | -     |                                      |  |   | -                          |  |  |                              | 1,079     
|Comprehensive income                                  |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |  |  |                                               | -          |   |                       |   | -     |                                      |  |   | 791,464                    |  |  |                              | -         
|Balance at December 31, 2009                          |  | $              | 2,294,927 |  |                              | $ | 744,753 |                                    |  | $ | 159,455            |  |  | $                                             | 11,122,720 |   |                       | $ | 7,307 |                                      |  | $ | -                          |  |  | $                            | 14,329,162



F-112









|                                                      |  | Capital 
stock |           |  | Additional 
Paid in-
capital |   |         | Reserve for 
repurchase of
 shares |  |   | Retained
 earnings |   |  | Accumulated 
other 
comprehensive

    income |            |   | Comprehensive
 income |   |        | Total 
controlling 
interest 
equity |  |   | Non-
controlling
 interest |  |  | Total
 stockholders ́
 equity |           
|----------------------------------------------------- |  | -------------- | --------- |  | ---------------------------- | - | ------- | ---------------------------------- |  | - | ------------------ | - |  | --------------------------------------------- | ---------- | - | --------------------- | - | ------ | ------------------------------------ |  | - | -------------------------- |  |  | ---------------------------- | ----------
|                                                      |  |                |           |  |                              |   |         |                                    |  |   |                    |   |  |                                               |            |   |                       |   |        |                                      |  |   |                            |  |  |                              |           
|Balance at December 31, 2009                          |  | $              | 2,294,927 |  |                              | $ | 744,753 |                                    |  | $ | 159,455            |   |  | $                                             | 11,122,720 |   |                       | $ | 7,307  |                                      |  | $ | -                          |  |  | $                            | 14,329,162
|Cash dividends paid                                   |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |   |  |                                               | (250,082   | ) |                       |   |        |                                      |  |   | -                          |  |  |                              | (250,082  
|Cash dividends paid to non-controlling interest       |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |   |  |                                               | -          |   |                       |   | -      |                                      |  |   | -                          |  |  |                              | -         
|Comprehensive income:                                 |  |                |           |  |                              |   |         |                                    |  |   |                    |   |  |                                               |            |   |                       |   |        |                                      |  |   |                            |  |  |                              |           
|Net income for the year                               |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |   |  |                                               | 1,974,975  |   |                       |   | -      |                                      |  |   | 1,974,975                  |  |  |                              | 1,974,975 
|Components of other comprehensive income:             |  |                |           |  |                              |   |         |                                    |  |   |                    |   |  |                                               |            |   |                       |   |        |                                      |  |   |                            |  |  |                              |           
|Labor obligations under
    FASB ASC Topic 715 effect |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |   |  |                                               | -          |   |                       |   | -      |                                      |  |   | 3,910                      |  |  |                              | -         
|Other comprehensive income, net of taxes              |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |   |  |                                               | -          |   |                       |   | 3,910  |                                      |  |   | 3,910                      |  |  |                              | 3,910     
|Repurchase of shares                                  |  |                | -         |  |                              |   | -       |                                    |  |   | (5,167             | ) |  |                                               | -          |   |                       |   | -      |                                      |  |   | -                          |  |  |                              | (5,167    
|Comprehensive income                                  |  |                | -         |  |                              |   | -       |                                    |  |   | -                  |   |  |                                               | -          |   |                       |   | -      |                                      |  |   | 1,978,885                  |  |  |                              | -         
|Balance at December 31, 2010                          |  |                | 2,294,927 |  |                              | $ | 744,753 |                                    |  | $ | 154,288            |   |  | $                                             | 12,847,613 |   |                       | $ | 11,217 |                                      |  | $ | -                          |  |  | $                            | 16,052,798







F-113







|                                                                                   |  | Capital
     stock |           |  | Additional
    
    Paid in-
    capital |   |         | Reserve
    for 
    repurchase of
 shares |  |   | Retained
    
    earnings |   |  | Accumulated
     other
 comprehensive  income |            |   | Comprehensive

    income |   |        | Total
    controlling 
    interest
 equity |  |   | Non-
controlling

    interest |  |  | Total
    
    stockholders ́
equity |           
|---------------------------------------------------------------------------------- |  | ------------------ | --------- |  | ---------------------------------------- | - | ------- | ------------------------------------------ |  | - | -------------------------- | - |  | --------------------------------------------- | ---------- | - | ------------------------- | - | ------ | ------------------------------------------- |  | - | ------------------------------ |  |  | ----------------------------------- | ----------
|                                                                                   |  |                    |           |  |                                          |   |         |                                            |  |   |                            |   |  |                                               |            |   |                           |   |        |                                             |  |   |                                |  |  |                                     |           
|Balance at December 31, 2010                                                       |  |                    | 2,294,927 |  |                                          | $ | 744,753 |                                            |  | $ | 154,288                    |   |  | $                                             | 12,847,613 |   |                           | $ | 11,217 |                                             |  | $ | -                              |  |  | $                                   | 16,052,798
|Cash Dividends paid                                                                |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               | (299,926   | ) |                           |   | -      |                                             |  |   | -                              |  |  |                                     | (299,926  
|Cash dividends paid to non-controlling interest                                    |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               |            |   |                           |   | -      |                                             |  |   | -                              |  |  |                                     | -         
|Comprehensive income:                                                              |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               |            |   |                           |   | -      |                                             |  |   |                                |  |  |                                     |           
|Net income for the year                                                            |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               | 1,178,588  |   |                           |   | -      |                                             |  |   | 1,178,588                      |  |  |                                     | 1,178,588 
|Components of other comprehensive income:                                          |  |                    |           |  |                                          |   |         |                                            |  |   |                            |   |  |                                               |            |   |                           |   |        |                                             |  |   |                                |  |  |                                     |           
|Translation effect of foreign subsidiary                                           |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               | -          |   |                           |   | -      |                                             |  |   | 63,171                         |  |  |                                     | 63,171    
|Labor obligations under FASB ASC Topic 715 effect, net of tax effect
    of $9,869 |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               | -          |   |                           |   | -      |                                             |  |   | 23,027                         |  |  |                                     | 23,027    
|Other comprehensive loss, net of taxes                                             |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               | -          |   |                           |   | 86,198 |                                             |  |   | 86,198                         |  |  |                                     |           
|Repurchase of shares                                                               |  |                    | -         |  |                                          |   | -       |                                            |  |   | (209                       | ) |  |                                               | -          |   |                           |   | -      |                                             |  |   | -                              |  |  |                                     | (209      
|Comprehensive income                                                               |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               | -          |   |                           |   | -      |                                             |  |   | 1,264,786                      |  |  |                                     | -         
|Non-controlling interest acquired                                                  |  |                    | -         |  |                                          |   | -       |                                            |  |   | -                          |   |  |                                               | -          |   |                           |   | -      |                                             |  |   | -                              |  |  |                                     | -         
|Balance at December 31, 2011                                                       |  |                    | 2,294,927 |  |                                          | $ | 744,753 |                                            |  | $ | 154,079                    |   |  | $                                             | 13,726,275 |   |                           | $ | 97,415 |                                             |  | $ | -                              |  |  | $                                   | 17,017,449



(Continued)



F-114