Edgar Filing: Industrias Bachoco S.A.B. de C.V.

The following items were the subject of a Form 12b-25 and are included herein: Note 21 to Item 18, Reports of Independent Registered Public Accounting Firms, Item 15: “Controls and Procedures – Attestation Report of the Independent Registered Public Accounting Firm” and the discussion of the reconciliation of Mexican FRS to US GAAP in Item 5: “Operating and Financial Review and Prospects”, A. “Operating Results”.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F/A

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

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

For the fiscal year ended December 31, 2008

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

¨	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 Tecnológico No. 401

Ciudad Industrial C.P. 38010

Celaya, Guanajuato, México

(Address of principal executive offices)

Daniel Salazar Ferrer

Avenida Tecnológico No. 401

Ciudad Industrial C.P. 38010

Celaya, Guanajuato, México

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 Series B Shares.		New York Stock Exchange

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 ¨ No x

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

Yes x No ¨

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

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

Yes x No ¨

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

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 filer x

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	Other x
	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 18 x

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

Yes ¨ No x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

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

Yes ¨ No ¨

EXPLANATORY NOTE

This annual report on Form 20-F/A of Industrias Bachoco, S.A.B. de C.V. (the “Company”) replaces in its entirety the annual report of the Company on Form 20-F/A of that was originally filed on July 1, 2009 (the “Original Form 20-F/A”) and includes the following items which were omitted from the Original Form 20-F/A: (i) Note 21 to Item 18, (ii) Reports of Independent Registered Public Accounting Firms, (iii) Item 15: “Controls and Procedures – Attestation Report of the Independent Registered Public Accounting Firm” and (iv) the discussion of the reconciliation of Mexican FRS to US GAAP in Item 5: “Operating and Financial Review and Prospects”, A. “Operating Results”. The items were omitted from the Original Form 20-F/A because the Company’s external auditors required additional time to complete their audit of the reconciliation of the Company’s Consolidated Financial Statements under Mexican FRS to U.S. GAAP.

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	12
	A.	History and Development of the Company	12

	B.	Business Overview	16

	C.	Organizational Structure	26

	D.	Property, Plants and Equipment	26

	ITEM 4.A.	UNRESOLVED STAFF COMMENTS	27
	ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	28
	A.	Operating Results	32

	B.	Liquidity and Capital Resources	40

	C.	Research and Development, Patents and Licenses, etc.	41

	D.	Trend Information	41

	E.	Off-Balance Sheet Arrangements	41

	F.	Tabular Disclosure of Contractual Obligations	41

	G.	Safe Harbor	41

	ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	42
	A.	Directors and Senior Management	42

	B.	Compensation	48

	C.	Board Practices	48

	D.	Employees	48

	E.	Share Ownership	49

ITEM 7.	MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS	49
A.	Major Shareholders	49

B.	Related Party Transactions	50

C.	Interests of Experts and Counsel	51

ITEM 8.	FINANCIAL INFORMATION	51
A.	Consolidated Statements and Other Financial Information	51

B.	Significant Changes	52

ITEM 9.	THE OFFER AND LISTING	53
A.	Offer and Listing Details	53

B.	Plan of Distribution	55

C.	Markets	55

D.	Selling Shareholders	57

E.	Dilution	57

F.	Expenses of the Issue	57

ITEM 10.	ADDITIONAL INFORMATION	57
A.	Share Capital	57

B.	Memorandum and Articles of Association	57

C.	Material Contracts	66

D.	Exchange Controls	66

E.	Taxation	67

F.	Dividends and Paying Agents	72

G.	Statement by Experts	72

H.	Documents on Display	72

I.	Subsidiary Information	72

ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	73
ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	74
A.	Debt Securities	74

B.	Warrants and Rights	74

C.	Other Securities	75

D.	American Depository Receipts	75

PART II			75

	ITEM 13.	DEFAULT, DIVIDEND ARREARAGES AND DELINQUENCIES	75
	ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	75
	ITEM 15.	CONTROLS AND PROCEDURES	75
	ITEM 16.	[RESERVED]	77
	ITEM 16.A.	AUDIT COMMITTEE FINANCIAL EXPERT	77
	ITEM 16.B.	CODE OF ETHICS	77
	ITEM 16.C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	77
	ITEM 16.D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	78
	ITEM 16.E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	78
	ITEM 16.F.	CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT	78
	ITEM 16.G.	CORPORATE GOVERNANCE	78

PART III			82

	ITEM 17.	FINANCIAL STATEMENTS	82
	ITEM 18.	FINANCIAL STATEMENTS	82
	ITEM 19.	EXHIBITS	82
	INDEX OF EXHIBITS		82

iii

Industrias Bachoco, S.A.B. de C.V. is a holding company with no operations other than holding the stock of its subsidiaries. During an extraordinary stockholders’ meeting held on November 23, 2007, our shareholders approved our name change from Industrias Bachoco S.A. de C.V. to Industrias Bachoco, S.A.B. de C.V., by operation of law and amended article one of our bylaws. 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 94.1% of consolidated total assets on December 31, 2008. 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 (México), and all of our operations are in México. Our principal executive offices are located at Avenida Tecnológico No. 401, Ciudad Industrial C.P. 38010, Celaya, Guanajuato, México, 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”) in effect as of the balance sheet date and include the recognition of the effects of inflation on the financial information through December 31, 2007, based on the Mexican National Consumer Price Index (NCPI) published by Banco de México (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 (IFRS) 2. The principal considerations established by this FRS are:

(i) 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%; and (b) a non-inflationary economic environment, when inflation over the aforementioned period is less than 26%. For more detail, see Note 2-x in our Consolidated Financial Statements.

With respect to (a) above, similarly to the now 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 this case 2008), 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 the “Consolidated Financial Statements”) and the selected financial information included throughout this Form 20-F/A (this “Annual Report”) have been presented in nominal pesos for the year 2008 and in constant pesos as of December 31, 2007 for the year 2007, 2006, 2005 and 2004.

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 and consolidated stockholders’ equity to U.S. GAAP, and a consolidated statement of cash flows under U.S. GAAP, see Note 21 to the 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 21 to the Consolidated Financial Statements.

References herein to “U.S. dollars,” “U.S.$” or “$” are to the lawful currency of the United States of America. References herein to “pesos” or “Ps.” are to the lawful currency of México. This Annual Report contains translations of certain peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise indicated, such U.S. dollar amounts have been translated from pesos at an exchange rate of Ps.13.815 to U.S.$1.00, the exchange rate on December 31, 2008.

As used herein, the term “tonnes” 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 Unión Nacional de Avicultores (“UNA”), Consejo Nacional Agropecuario (“CNA”); Consejo Mexicano de Porcicultura (“CMP”), as well as Banco de México (“Mexican Central Bank”), Secretaría de Agricultura, Ganadería, 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 on Forms 20-F and 6-K, in our annual report to stockholders, in offering circulars and prospectuses, in press releases and other written materials and in oral statements made by one of our officers, directors or employees to analysts, institutional investors, representatives of the media and others.

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

Forward-looking statements involve inherent risks and uncertainties, and a number of unexpected changes could cause actual results to deviate from our plans, objectives, expectations, estimates and intentions. We recognize that the accuracy of our predictions and our ability to follow through on our intentions depend on factors beyond our control. The potential risks are many and varied, but include unexpected changes in:

economic, weather and political conditions;

raw material prices;

competitive conditions; and

demand for chicken, eggs, turkey, balanced feed 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 information set forth below is derived from Bachoco’s Consolidated Financial Statements, which are included in Item 18. In this disclosure, we explain the figures and year-to-year changes in our Consolidated Financial Statements.

In preparing the Consolidated Financial Statements, we followed Mexican FRS, which differ in certain respects from U.S. GAAP. Note 21 to the 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, 2007 and 2008 and for the years ended December 31, 2006, 2007 and 2008. Our financial statements were prepared pursuant to Bulletin B-10, as superseded by Mexican FRS B-10, as well as Bulletin B-12, as superseded by Mexican FRS B-2, both issued by the Mexican Institute of Public Accountants. See the summary on Mexican FRS B-10 in “Presentation of information” above.

Except as otherwise indicated, all data in the consolidated financial statements included below in Item 18 (collectively with the accompanying notes, the “Consolidated Financial Statements”) and the selected financial information included throughout this Form 20-F/A (this “Annual Report”) have been presented in nominal pesos for the year 2008 and in constant pesos as of December 31, 2007 for the years 2007, 2006, 2005 and 2004. The effects of this price-level restatement under Mexican FRS have not been reversed in the reconciliation of Mexican FRS to U.S. GAAP. See Note 21 to the Consolidated Financial Statements.

As of January 1, 2008, we have adopted the new standard related to “Inflationary Effects” in accordance with Mexican FRS (Mexican FRS B-10). Due to the relatively low inflation that the country has consistently achieved during the past several years, a new financial reporting standard came into effect on January 1, 2008, which eliminates the recognition of inflationary effects in our financial information. Consequently, financial information corresponding to periods prior to December 31, 2007 is expressed in millions of Mexican Pesos with purchasing power as of December 31, 2007, while the financial information for December 31, 2008, is stated in million of nominal Mexican Pesos.

	As of and for the year ended December 31,
	2004			2005			2006			2007			2008			2008(2)
Income Statement Data	(in millions of constant pesos as of December 31, 2007 for years 2004 – 2007 and in millions of nominal pesos for year 2008)(1)															(millions of U.S. dollars)(1)
Mexican FRS:
Net revenues	Ps.	14,836.7		Ps.	15,617.7		Ps.	15,551.0		Ps.	18,219.6		Ps.	20,125.3			1,456.8
Cost of sales		12,032.4			11,234.2			12,053.0			14,477.9			17,482.5			1,265.5
Gross profit		2,804.3			4,383.5			3,498.0			3,741.8			2,642.9			191.3
Operating income		952.4			2,378.1			1,425.4			1,496.3			230.1			16.7
Comprehensive financing income (loss)		(79.8	)		(74.0	)		61.4			19.1			(1,,369.2	)		(99.1	)

Majority net income (loss)		788.3			1,908.4			906.2			1,270.9			(879.0	)		(63.6	)
Majority net income (loss) per Share(3)		1.3			3.2			1.5			2.1			(1.5	)		(0.1	)
Majority net income (loss) per ADS(4)		15.8			38.2			18.1			25.4			(17.5	)		(1.3	)
Dividends per Share(5)		0.46			0.44			0.61			0.59			0.59			0.05
Weighted average Shares outstanding (thousands)		599,260			599,694			599,571			600,000			600,000			600,000

U.S. GAAP:
Net revenues	Ps.	14,836.7		Ps.	15,617.7		Ps.	15,551.0		Ps.	18,219.6		Ps.	20,125.3			1,456.8
Operating income		999.2			2,356.0			1,395.7			1,481.0			185.6			13.4
Majority net income (loss)		825.9			1,893.3			895.6			1,261.9			(869.4	)		(62.9	)

Statement of Financial Position Data
Mexican FRS:
Cash and cash equivalents	Ps.	2,608.4		Ps.	3,419.9		Ps.	3,583.9		Ps.	3,039.9		Ps.	1,998.2			144.6
Total assets		15,008.6			16,530.9			17,559.2			19,116.4			19,455.0			1,408.2
Short-term debt(6)		111.2			100.0			9.8			58.8			234.2			17.0
Long-term debt		80.9			56.0			35.5			50.8			391.7			28.3
Total stockholders’ equity		12,132.7			13,502.7			14,102.9			15,127.2			14,079.4			1,019.1
Capital Stock		2,294.6			2,294.6			2,294.9			2,294.9			2,294.9			166.1

U.S. GAAP:
Total stockholders’ equity		12,144.7			13,499.0			14,053.2			15,071.7			13,786.7			997.9

Selected Operating Data
Sales volume (thousands of tonnes):
Chicken		733.0			773.0			773.7			837.2			878.1
Eggs		138.1			140.6			143.4			147.8			143.6
Swine and Others		9.1			9.6			8.9			16.1			18.8
Balanced Feed		320.7			389.6			484.4			438.8			370.7
Margins
Gross margin (%)		18.9	%		28.1	%		22.5	%		20.5	%		13.1	%
Operating margin (%)		6.4	%		15.2	%		9.2	%		8.2	%		1.1	%
Consolidated net margin (%)		5.3	%		12.2	%		5.8	%		7.0	%		(4.4	)%

Total employees		18,896			20,432			21,035			23,088			23,248

(1)

Except per share and per ADS amounts and operating data.

(2)

Peso amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of Ps.13.815 per U.S. dollar.

(3)

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

(4)

Net income per ADS has been computed by multiplying net income per share by twelve, to reflect the ratio of twelve Shares per ADS.

(5)

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

(6)

Includes notes payable to banks and current portion of long term debt.

Exchange Rates

In 2004, the Mexican peso showed volatility for the first four months of the year with a general trend to depreciate with respect to the U.S. dollar. In the following months, the Mexican peso fluctuated around the same level, it finished the year stronger against the dollar when compared to the exchange rate at the end of 2003.

During 2005, the Mexican peso continued showing volatility mainly at the beginning and at the end of the year, with a general trend to appreciate with respect to the U.S. dollar. At the end of 2005, the Mexican peso finished stronger against the U.S. dollar.

During 2006, the Mexican economy showed signs of stability with an annual inflation rate of 4.1%. After showing volatility during the first part of the year, the Mexican peso showed a reasonably stable peso-dollar exchange rate with a final depreciation of 1.6%, compared with the exchange rate at the end of 2005.

In 2007, the Mexican economy was stable overall, with an annual inflation rate of 3.8%, while the peso-dollar exchange rate at the year-end depreciated by 1.1% with respect to December 31, 2006.

During 2008, the Mexican economy suffered a sharp slowdown and ended the year with an inflation rate of 6.5%. 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.

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

	Exchange Rate(1) (in current pesos per U.S. dollar)
Year Ended December 31,	High		Low		Average(2)		Year End
2004		11.64		10.81		11.29		11.15
2005		11.41		10.41		10.89		10.63
2006		11.46		10.43		10.91		10.80
2007		11.27		10.67		10.93		10.92
2008		13.94		9.92		11.14		13.83

(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.

	Exchange Rate(1) (in current pesos per U.S. dollar)
Period	High		Low
December 2008		13.83		13.09
January 2009		13.33		14.33
February 2009		15.09		14.13
March 2009		15.41		14.02
April 2009		13.89		13.05
May 2009		13.82		12.88

(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.

On May 29, 2009, the exchange rate for cable transfers in pesos as certified for customs purposes by the Federal Reserve Bank of New York was Ps.13.18 per $1.00 U.S. dollar.

B.	Capitalization and Indebtedness

Not applicable

C.	Reasons for the Offer and Use of Proceeds

Not Applicable

D.	Risk Factors

Risks Relating to México, Other Emerging Market Countries and the U.S. Economy

México has experienced adverse economic conditions

In 2004, México’s GDP increased by 4.4% and the inflation rate was 5.19%.

In 2005, México’s GDP improved and increased by 3.0%, and the inflation rate was 3.33%.

In 2006, GDP increased by 4.8% while the inflation rate was 4.05%.

In 2007, GDP increased by 3.3% and the inflation rate was 3.8%.

In 2008, GDP increased by 1.3% and the inflation rate was 6.5%.

In general, if the Mexican economy falls or remains in a recession or if inflation and interest rates increase significantly, consumers may find it difficult to pay for the products we offer. This and other effects of recession or increased inflation and interest rates could have adverse consequences on our business, financial condition and results of operations.

Depreciation or fluctuation of the peso relative to the U.S. dollar could adversely affect our financial condition and results of operations

The single largest component of our cost of sales, our feed, is comprised partially of ingredients we purchase from the United States, where prices are denominated in U.S. dollars. In addition, the prices of ingredients we purchase in México may be influenced by U.S. commodity markets. Therefore, should the peso fall relative to the U.S. dollar, both the cost of our operations and our debt payments would increase. Any future depreciation or devaluation of the peso may result in further net foreign exchange losses.

In 2004, the Mexican peso appreciated with respect to the U.S. dollar by 0.8% at year end, whereas the average value of the Mexican peso against the U.S. dollar was 4.4% lower, since the peso appreciated at the end of the year.

In 2005, the Mexican peso appreciated with respect to the U.S. dollar by 4.9% at the end of the year and also the average value of the Mexican peso was 3.6% higher.

In 2006, the Mexican peso was reasonably stable in its peso-dollar exchange rate with a final depreciation of 1.6%, compared to the end of 2005. The average value of the Mexican peso was 0.10% lower than the average of 2005.

In 2007, the Mexican peso remained reasonably stable in its peso-dollar exchange rate. According with the U.S. Federal Reserve Bank, the peso was depreciated with respect to the U.S. dollar by 1.1% at year-end. The average value of the Mexican peso was 0.21% lower than the average of 2006.

In 2008, the Mexican peso was highly volatile during the year in its peso-dollar exchange rate with a final depreciation of 21.0%, compared to the end of 2007. The average value of the Mexican peso was 1.9% lower than the average in 2007.

The Company uses financial instruments to counter financial risks on the exchange rate of the Mexican peso versus the U.S. dollar; a drastic change in the exchange rate could have an adverse impact on the financial position of our Company.

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. While the Mexican government does not currently restrict, and for many years has not restricted, the right or ability of Mexican or foreign persons or entities to convert pesos into U.S. dollars or to transfer other currencies out of México, the government could institute restrictive exchange rate policies in the future. Currency fluctuations will probably continue to affect our revenues and expenses.

Furthermore, 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 “Series B Shares”) in the Mexican Stock Exchange and the price of American Depository Shares (“ADSs”) on the New York Stock Exchange. 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 Depositary.

High levels of inflation and high interest rates in México could adversely affect our financial condition and results of operations

México has experienced high levels of inflation and high domestic interest rates in the past. The annual rate of inflation, as measured by changes in the National Consumer Price Index was; 5.2% in 2004, 3.3% in 2005, 4.1% in 2006, 3.8% in 2007 and 6.5% in 2008. Inflation for the first four months of 2009 was 1.38% according to the Mexican Central Bank.

According to Bank of México the average interest rates on 28-day Mexican treasury bills, or Cetes, was 6.8%, 9.2%, 7.2% , 7.2% and 7.6% during 2004, 2005, 2006, 2007 and 2008, respectively. On May 27, 2009, the 28-day Cetes rate was 5.09%. High interest rates in México 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 beneficed by the interest we earn in our cash balance.

Political events in México could affect Mexican economic policy and our operations

Felipe Calderón was elected as President of México in July of 2006. President Calderón’s party, the Partido Acción Nacional, or PAN, obtained a plurality of the seats in the Mexican Congress after the election, no party succeeded in securing a majority in either chamber of the Mexican Congress. The absence of a clear majority by a single party and the lack of alignment between the president-elect and the legislature are likely to continue until the next Congressional election in 2009. This situation may result in government gridlock and political uncertainty, which could have an adverse effect on our business, financial position and results of operations. We cannot provide any assurance that future political developments in México, over which we have no control, will not have an adverse effect on our financial position or results of operations.

Developments in other emerging market countries may adversely affect our business or the market price of our securities

The market value of securities of Mexican companies is, to varying degrees, affected by economic and market conditions in other emerging market countries. Although economic conditions in such countries may differ significantly from economic conditions in México, investors’ reactions to developments in any of these other countries may have an adverse effect on the market value of securities of Mexican issuers. We cannot assure you that the market value of our securities will not be adversely affected by events elsewhere, especially in emerging markets.

Developments in the U.S. economy may adversely affect our business

Economic conditions in México are heavily influenced by the condition of the U.S. economy due to various factors, including commercial trade pursuant to the North American Free Trade Agreement (“NAFTA”), U.S. investment in México and emigration from México to the United States. Events and conditions affecting the U.S. economy may adversely affect our business, results of operations, prospects and financial condition.

Risks Relating to our Organization

The chicken industry is characterized by long-term price declines and cyclical periods

The Mexican chicken industry, like 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. Real prices for eggs and swine in México have also declined over the long term and have varied cyclically. 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.

The price of feed ingredients is subject to significant volatility

The largest single component of our cost of sales is the cost of ingredients used to prepare feed, including sorghum, soybean meal, corn, fish meal, meat meal and, for certain chicken products, marigold extract. The price of most of our feed 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. Given the long-term declining trends in real chicken prices, we may experience difficulty or delays in passing any increase in grain costs to customers. Accordingly, increases in the prices of the main ingredients used in the preparation of feed may have a material adverse effect on our margins and results of operations. Since we purchase many feed ingredients in U.S. dollars, from time to time we may acquire financial instruments to protect us against exchange rate fluctuations that may affect future purchases of feed ingredients.

Additionally, the prices of corn and soybean meal experienced high volatility in 2007 and throughout most of 2008. Prices of corn reached historically high prices worldwide, as a result of strong demand and consequently, lower inventories worldwide. . However, by the end of 2008, such prices had begun to decline. We can offer no assurance that corn and soybean meal prices will not continue to experience strong volatility in the future. If such prices begin to increase again, our profits could be adversely affected.

The company uses these financial instruments to counter financial risks as protection against adverse fluctuations in the prices of corn and soybean. A drastic change in the grain prices could have an adverse impact on the financial position of the Company.

Our operations depend on raising animals and meat processing, which are subject to risks such as disease, contamination and adverse weather conditions

Our operations involve raising animals and are subject to a variety of risks, including disease, contamination and adverse weather conditions. Chickens, in particular, are susceptible to infections by a variety of microbiological agents. Since 1983, the avian influenza virus (“AIV”) has been widespread in the United States and in México. In 2004 and 2005, AIV was still present in Asian countries and the United States. During 2004 and 2005, México has been eliminating some restrictions on the importation of chicken from certain U.S. states as the sanitary conditions in those states improve. In October 2005, México lifted importation restrictions on all U.S. states, except for 11 counties in the state of Texas. Since 2007, Mexico lifted importation restrictions for those remaining 11 counties in the state of Texas.

In the past we have experienced limited outbreaks of various diseases that have resulted in higher mortality rates.

During 2005, there was an ample diffusion on the media worldwide of the widespread of a particular strain of AIV (H5N1), mainly in Asia and some European countries, which affected consumption of chicken in those countries. At the present time, this strain has not been found in the United States or in Latin America.

Meat and eggs are subject to contamination during processing and distribution. We do not believe that contamination of individual shipments during distribution would have a material adverse effect on our operations. Contamination during processing, however, could affect a larger number of our poultry products and therefore could have a more significant impact on operations.

Hurricanes or other adverse weather conditions could result in additional losses of inventory and damage to our plants and equipment. Our facilities near México’s coast are most vulnerable to the risk of severe weather. The last year we experienced a loss of chickens was in 2006 in our Norwest Complex due to the effects of Hurricane Lane.

The use of nutritional supplements and the possibility of contamination expose us to risk of loss of consumer confidence in the chicken industry

To reduce contamination, we use specialized feedstock and nutritional supplements that have been approved by the Mexican government and meet international industry standards. We can offer no assurance, however, that in the future we will not be materially adversely affected by claims or consumer concerns arising out of the use of these products in raising our animals.

Our sales are entirely dependent on consumer preferences, and the loss of consumer confidence in the products sold by Mexican 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.

We face significant competition from other chicken producers in all of our geographic markets and product lines

According to the UNA, we are México’s largest chicken producer, but we face competition from other producers in all of the markets in which we sell our products. In 2008, we accounted for approximately 31% of total chicken production in México. There are two other major vertically integrated chicken producers in México, which together with Bachoco account for more than 55% of Mexican chicken production, with the balance distributed among approximately two hundred small- and medium-sized integrated and non-integrated producers.

Each of the two other major companies has substantial financial resources and strengths in particular product lines and regions. 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 coverage. Accordingly, we cannot assure you that our performance will not be adversely affected by increased competition.

We face increased competition from U.S. producers

In January 2003, import quotas and most tariffs on poultry, eggs and swine were eliminated through the North America Free Trade Agreement or “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 México, which could have a material adverse effect on our performance.

In July 2003, the Mexican government imposed temporary restrictions on chicken leg quarters imported from the U.S. The safeguard consists of a five-year limited poultry import measure. The measure, which became effective in 2003, includes quotas and an initial tariff of 98.8% on chicken leg quarters that will slowly decrease until it reaches 0.0% in 2008. On January 1, 2008, the safeguard was phased out.

We are a holding company with no substantial operations and depend on our subsidiaries for cash flow

We are a holding company with no substantial operations and, consequently, we are dependent on dividends and other payments from subsidiaries for virtually all of our cash flow, including cash flow to pay taxes, service debt, make equity investments, finance the growth of subsidiaries and pay dividends to stockholders. Together with Mexican law, our ability to pay dividends may, in the future, be limited by financial covenants in debt instruments that we, or our subsidiaries, may acquire.

Risks Relating to the ADS, and the Shares in the Mexican Market

The Robinson Bours family controls our management and their interests may differ from other security holders

Certain members of the Robinson Bours family 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 Robinson Bours family has established two Mexican trusts, which they control (“Control Trust”), that together held 496,500,000 Shares outstanding on December 31, 2007. In November of 2008, the Robinson Bours family created a third trust with 102,000,000 Shares, which were taken from one of the existing trusts. The purpose of this new trust is to serve as collateral for the Company’s loan indebtedness. The three trusts together accounted for 496,500,000 Shares outstanding on December 31, 2008 and there has been no change in the position of each holder.

Future sales of Shares by the controlling stockholders may affect prevailing market prices for the ADS’s and the Shares trading at the Mexican Market.

The prevailing market prices for the ADS’s and Shares could decline if either:

the Robinson Bours family were to sell substantial amounts of their Shares, whether

directly, or

indirectly, through the Mexican trusts through which they hold Shares; or

the perception arose that such a sale could occur.

The protection afforded to minority stockholders in México 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 our 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 México

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 México, and most of our directors, officers and controlling persons reside outside the United States. In addition, all of our assets and their assets are located in México. 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 México, whether in original actions or in actions to enforce judgments of U.S. courts, of liabilities based solely on the U.S. federal securities laws.

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

Under Mexican law and our bylaws, if we issue new Shares for cash as part of a capital increase, we must grant our stockholders the right to purchase a sufficient number of Shares to maintain their existing ownership percentage in the Company (“preemptive rights”). We can allow holders of ADSs in the United States to exercise preemptive rights in any future capital increase only in one of the following two circumstances:

we file a registration statement with the Securities and Exchange Commission with respect to that future issuance of Shares; or

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 México may differ from other countries

There may be less, or different, publicly available information about issuers of securities in México 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.

ITEM 4.

Information on 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 were incorporated in México on April 17, 1980. Our headquarters are located at Avenida Tecnológico No. 401, Ciudad Industrial 38010, Celaya, Guanajuato, México, telephone (52)(461) 618-3500 and (52)(461)618-3555. Our investor relations agent in the U.S. is Grayling, who is located in New York, New York. Our main product lines are: chicken, table egg, balanced feed and swine. At the present almost all of our production and almost all of our sales are made in México.

According to the UNA, we are the largest poultry producer in México. In 2008, we produced approximately 9.4 million chickens per week and accounted for approximately 31% of total chicken production in México. As a vertically integrated producer, we control virtually all aspects of the production and distribution process, which enables us to exercise cost controls and to maintain high standards of quality, service and efficiency. With over 700 production and distribution facilities dispersed throughout México, our operations include the following:

preparing balanced feed;

breeding, hatching and growing chickens; and

processing, packaging and distributing chicken products.

Sales of chicken products accounted for 76.9% of our net revenues in 2008. Please also see the table under Item 5. “General—Results of Operations for the Years Ended December 31, 2007 and 2008.”

We are also a significant producer of commercial balanced feed. We sell our feed both through distributors and directly to small producers. During 2008, we sold approximately 370 thousand tons of balanced feed to external customers, which amounted to 7.3% of our total revenues for that year.

Currently, Bachoco is the second largest producer of table eggs products. In 2008, we sold approximately 143 thousand tons. Table egg sales accounted for 10.5% of our net revenues in 2008.

As part of our other product lines we also sell swine on the hoof to meat packers for pork product production, miscellaneous poultry-related products, and in 2007 we entered into two new business lines: turkey and beef value-added products. In 2008, sales of swine and these other lines accounted for 5.3% of our net revenues.

The following table sets forth, for each of the periods presented, the volume of chicken, balanced feed, table eggs and swine that we sold:

	Bachoco Sales Volume (in thousands of tonnes)

	Year Ended December 31,
	2004		2005		2006		2007		2008

Chicken		733.0		773.0		773.7		837.2		878.1
Eggs		138.1		140.6		143.4		147.8		143.6
Swine(1)		9.1		9.6		8.9		16.1		18.8
Balanced Feed		320.7		389.6		484.4		438.8		370.7

(1) Includes Swine, Turkey and Beef products.

In the Mexican poultry industry few producers operate in multiple regions. We believe we have the broadest geographic market coverage in the Mexican poultry industry and that we are one of the largest poultry suppliers in the México City metropolitan region (which accounts for a significant portion of overall Mexican chicken consumption). We currently compete in every major product category and channel of distribution for poultry products within the regions that we serve. We expect to continue to do so in order to meet growing consumer demand and needs.

Background and Ownership Structure

Founded in 1952 by the Robinson Bours family as a small commercial table egg operation in the state of Sonora, we grew by expanding our existing facilities and acquiring additional facilities from other poultry producers. In 1974, we established operations in Celaya, located in the agricultural region of Bajio, to begin serving the México City metropolitan region. Beginning in 1988, our management recognized the potential for growth in Mexican chicken consumption, as well as the advantages of a large, vertically integrated operation. As a result, we began to seek opportunities for geographic expansion and to increase production capacity and market share. We extended our market coverage (particularly in 1993 and 1994) by purchasing fixed assets and inventory from major regional producers that faced financial difficulties. Following each acquisition, we made substantial investments to apply our production and distribution methods and reap the benefits of vertical integration and economies of scale, improving the performance of the acquired facilities.

In April 1995, Robinson Bours stockholders created a trust (the “Control Trust”), the principal purpose of which was to hold a controlling interest in our Series B Shares. Before September 2006, our common stock (“Common Stock”) consisted of Series B Shares and Series L Shares of limited voting stock (“Series L Shares”) (collectively, the “Old Shares”). The Old Shares were grouped into units. Each unit (“Unit”) consisted of one Series B Share and one Series L Share. Each B Unit (“B Unit”) consisted of two Series B Shares.

In September 1997, we made an initial public offering of Units representing 17.25% of the outstanding Old Shares. Following such offering, the Control Trust held Units and B Units representing 68.0% of the outstanding Series B Shares.

In September 2006, we separate the UBL and UBB units trading on the Mexican Exchange into their component L and B Shares. The Series L Shares was converted into Series B Shares, on a one -to -one basis, thereby creating a single Share class, the Series B Shares, which represent our entire Common Stock. This change did not modify the face value of the Shares. These Shares are trading on the Mexican stock market. The ADS still consist of twelve underlying Shares, but they are all Series B Shares, with full rights.

As of December 31, 2008, the Robinson Bours Stockholders owned B Shares representing 82.75% of the Series B Shares outstanding. As a result, the Robinson Bours Stockholders continue to have the power to control the Company.

Members of the Robinson Bours family, together with certain of our executive officers, hold a majority of the seats on our Board of Directors.

In November 1998, we approved a stock repurchase plan (the “Repurchase Plan”), which allows us to repurchase up to 3.0% of the total Shares outstanding and trading on the Mexican Stock Exchange (Bolsa Mexicana de Valores), in accordance with Mexican securities laws. To execute the Repurchase Plan, we created a reserve of Ps. 180.0 million (Ps. $303.9 million in constant Mexican pesos as of December 31, 2007), which reduced retained earnings on our balance sheet. As of May 29, 2009, we had repurchased a total of 92,000 shares.

In July 2004, we reached an agreement for renting the farms of the union producers of UPAVAT & UPATEC, small union producers of table eggs in the Techamachalco Valley of the state of Puebla, south of México City, with a capacity of about 0.75 million of lying hens. This operation allows us to start the production of table eggs in southern México.

On June 29, 2005, we acquired certain assets of Grupo Sanjor, a private poultry company located in the Yucatan Peninsula, with production of approximately 300 thousand chickens per week and 100 thousand table egg laying hens, which allow us to reinforce our leadership in this region of the country.

In December 2006, we acquired most of the assets and inventories of “Del Mezquital” to start a new complex in the State of Sonora, located in northern México, close to the border with the United States. See Item 5: “Operating and Financial Review and Prospects - Acquisitions and Dispositions” in this Annual Report for more details on this transaction.

In February 2007, we reached a business agreement with “Grupo Libra” a Company in the Northeast of México, that includes the buying of all their inventories and long term rent agreement of their facilities to strengthen our presence in that market. See Item 5: “Operating and Financial Review and Prospects – Acquisitions and Dispositions” in this Annual Report for more details on this transactions.

In December 2007, we reached an agreement with “Grupo Agra,” a table eggs company located in the states of Nuevo Leon and Coahuila in Northeast Mexico. The agreement provides for leasing of their facilities, which include laying hens farms (with a capacity of approximately 1.0 million hens), a processing table eggs plant, distribution centers and the Agra brands. In addition, we acquired all of their inventories.

Business Strategy

Over the past decade, we have substantially increased our chicken production, establishing ourselves in every major product category and distribution channel for chicken and expanding to cover a geographic market in México that is more widespread than any other chicken producer. We have also increased the efficiency of our production process and built a reputation for the freshness of our chicken products and quality of our customer service.

The Mexican poultry industry has experienced considerable consolidation in the last years, in which we have participated. We continue to evaluate possible acquisitions of other poultry producers or production facilities from time to time and may pursue certain opportunities consistent with our business strategy.

The key elements of our business strategy are as follows:

Increased market penetration through expanded distribution. We have an extensive distribution network, supported by our own transportation fleet, superior knowledge of existing wholesale channels and strategically located cold storage warehouses and facilities. We have substantially increased our distribution routes during the past years. We plan to continue to develop and improve our distribution network and systems in every product category and throughout our expanded geographic coverage in México.

Increased service and market responsiveness. We seek to remain a leader in the Mexican poultry market by maintaining high standards of customer service and continuing to be responsive to the changing needs of varying market segments. As part of this strategy, we have structured our operations in such a way as to enable us to vary the size, weight, color and presentation of our chicken products, depending upon the particular demands of the market segment. In addition, we have decentralized order and sales services from our headquarters to our cold storage warehouses and facilities, which serve as midpoints in the distribution chain to wholesalers and local customers. This strategy allows us to stay closer to our customer base and to better cultivate growing customer segments, such as food-service operators, supermarkets and food wholesale clubs.

Low-cost production and operating efficiency. We are among México’s lowest-cost producers and distributors of chicken, due in part to economies of scale and vertically integrated operations. We pursue on-going programs to increase operating efficiencies and reduce operating costs.

Continued brand differentiation. We have developed a brand image for premium fresh chicken and table eggs in México. Building on the success of our branded products to date, we seek to continue to promote our brand name through billboards, packaging, special publicity campaigns and through development of brand loyalty among wholesale and retail distributors. At the end of 2007 and beginning of 2008, we successfully launched Bachoco’s new image.

Capital Expenditures

Over the last three years, we have financed our capital expenditures with resources generated by our operations. We made the following capital expenditures during the last three years (nominal pesos):

In 2006, we made capital expenditures of Ps.856.2 million net, with which we:

Continued to update our transportation fleet, farms, processing plants and feed mills, which expenditures continue to the present;

Increased capacity, mainly for the production of live chickens and;

Building of a new feed mill in the state of Aguascalientes.

In 2007, we made capital expenditures of Ps.991.7 million net, with which we:

Began the construction of the new complex in the state of Sonora.

Finished the construction of our new feed mill in the state of Aguascalientes;

Increased capacity in the production of live chicken;

Increased capacity of the secondary processor at some of our processing plants; and

Updated our transportation fleet, processing plants and feed mills.

In 2008, we made capital expenditures of Ps. 1,098.8 million, with which we:

Increased capacity and implemented new technology in the processing plants located in Celaya and Culiacán.

Increased chicken capacity in farms located in Mérida and Veracruz.

Finished the construction of new farms located in Ciudad Obregón and Hermosillo.

Began the construction of new farms located in the state of Chiapas.

Updated our transportation fleet.

B.	Business Overview

Chicken Market

Mexican consumers value distinct characteristics in their chicken. Virtually all chicken sold by us and other major chicken producers in México is fresh. Fresh chicken is a central ingredient in many traditional Mexican dishes and it is the leading meat consumed in México according to data from the UNA. Traditionally, 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.

The value-added chicken products are a new market in Mexico; we participate significantly in the market and try to lead the supply of these products. According to the UNA, value-added chicken products currently account for approximately 4.0% of the chicken sold in México; this represents a decrease from the 7.0% market share in 2007.

Mexican consumers traditionally prefer chicken with pronounced yellow skin pigmentation, a characteristic found mainly in our public-market and supermarket-broiler chicken products that we attain by including marigold extract in our chicken feed. We have also noticed an increased demand for smaller, whole, fresh chicken from various fast-food outlets, principally chicken roasting shops (rosticerías), which have developed rapidly in México.

According to data obtained from the UNA, total Mexican chicken consumption per capita increased by 14.6% from 2004 to 2008. Chicken is the leading meat consumed in México, and it accounted for approximately the 50.0% of all meat produced in México in 2008. The following table sets forth total Mexican production of chicken, pork and beef for 2004 to 2008:

Mexican Production of Chicken, Beef and Pork

(in thousands of tonnes)*(1)

	2004		2005		2006		2007		2008
Chicken		2,390		2,498		2,592		2,683		2,853
Beef		1,543		1,559		1,602		1,628		1,673
Swine		1,150		1,088		1,102		1,116		1,149

*(1) Source: UNA

The Mexican chicken industry, like chicken industries in other countries, 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.

In 2004, our chicken prices increased by approximately 6.7%, mainly as a result of an increase in the cost of the main feed ingredients worldwide, and a more normalized supply in México during the second half of the year.

In 2005, our chicken prices decreased by approximately 1.7%, mainly as a result of a decrease in the cost of the main feed ingredients worldwide, and a strong oversupply during the last quarter of the year. We believe that Mexican chicken prices may decline further in real terms and that prices for chicken may also vary cyclically.

In 2006 our chicken prices declined 3.6% when compared to the previous year mainly as a result of an oversupply in the Mexican poultry market at the beginning of 2006.

During 2007, our chicken prices increased by 8.3% as compared with 2006, due to increases in the price of the main feed ingredients and a strong demand for chicken.

In 2008, our chicken prices increased by 4.4% compared to prices in 2007, which was primarily a result of increases in the prices of raw materials, partially offset by (i) excess domestic supply, particularly during the second half of the year, and (ii) a decrease in the purchasing power of the average consumer.

We believe that changes in Mexican chicken consumption correlate closely with changing chicken prices and their effect on consumer purchasing power. Chicken per capita consumption increased 3.3% in 2004, 3.5% in 2005, 2.6% in 2006, 2.5% in 2007 and 5.3% in 2008.

Chicken Products

Six main product categories exist for fresh chicken in México: live, public market, rotisserie, supermarket broiler, chicken parts and value-added products.

Below is a brief description of each chicken product line as well as its respective percentage of the total Mexican chicken production in 2008:

“Live” chicken is 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. According to the UNA, live chicken accounted for approximately 27% by volume of the chicken sold by producers in México.

“Public Market” chicken is a whole broiler presented either uneviscerated or eviscerated, generally sold within 48 hours after slaughter in public markets throughout México, but primarily concentrated in the México City metropolitan region. According to the UNA, public market chicken accounts for 21% by volume of the chicken sold by producers in México.

“Rotisserie” chicken is a whole broiler presented eviscerated and ready to cook. Rotisserie chicken is sold by wholesalers and directly by producers to small shops, stands (rosticerías or asaderos) and supermarkets, which cook the chicken and sell it whole and freshly cooked to the end-consumer, providing an economical form of fast-food. According to the UNA, rotisserie chicken accounts for 26% by volume of the chicken sold by producers in México.

“Supermarket Broiler” chicken is 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. According to information provided by the UNA, the supermarket broiler chicken accounted by the 12% of the volume of the chicken sold by producers in México.

“Chicken Parts” refers to cut-up fresh chicken parts sold wrapped in trays or in bulk principally to supermarket chains, the fast-food industry and other institutional food-service providers. 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. According to the UNA, chicken parts accounts for 10% of the chicken volume sold by producers in México.

“Value-added Products” refers 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. According to the UNA, these products account for 4% of the chicken volume sold by producers in 2008.

We sell value-added chicken products mainly to supermarkets and other retailers. The following table sets forth, for the periods indicated, the sales volume in tonnes and as a percentage of the total volume of chicken sold for each of our principal lines of chicken products:

	Year Ended December 31,
	2004					2005					2006					2007					2008
	Volume		% of Total			Volume		% of Total			Volume		% of Total			Volume		% of Total			Volume		% of Total
	(thousands of tonnes, except percentages)
Public Market and Rotisserie		319.1		43.5			349.6		45.2			344.3		44.5			371.0		44.3			402.1		45.8
Supermarket Broiler, Chicken Parts and Other(1)		219.6		30.0			219.1		28.4			228.2		29.5			245.1		29.3			239.0		27.2
Live		194.4		26.5			204.3		26.4			201.2		26.0			221.2		26.4			237.0		27.0
Total		733.1		100.0	%		773.0		100.0	%		773.7		100.0	%		837.2		100.0	%		878.1		100.0	%

(1)	“Other” comprises sales of value-added poultry products, viscera and other products.

Our product mix varies from region to region in México, reflecting different consumption and distribution patterns. Based on market demand, we believe that fresh, rather than frozen, chicken will continue to dominate 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 principally on producing fresh chicken, including value-added fresh chicken products.

Chicken Marketing, Sales and Distribution

We have developed an extensive distribution system that we believe is the largest and most modern of any chicken or egg producer in México. We use various distribution channels in every major product category to service different market segments. We use our own fleet to transport the majority of rotisserie chickens, supermarket broilers and other chicken products to our customers. 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 nine processing plants (located in Celaya, Culiacán, Puebla, Lagos de Moreno, Coatzacoalcos, Mérida, Gómez 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) and transport certain products directly to supermarkets and food-service operations. Our distribution infrastructure includes 60 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.

We have expanded our distribution network, which now covers almost all of México:

During 2004, we finished our projects to expand the facilities at our Northwest Complex and Peninsula Complex.

In 2005, we acquired assets of Grupo Sanjor, a private producer of chicken and table eggs located in the Yucatán Peninsula.

At the end of 2006, we acquired assets of “Del Mezquital,” a private broiler producer located in the state of Sonora.

At the beginning of 2007, we reached a business agreement with “Grupo Libra,” a chicken producer located in northeast México. We also started to build a new complex in Hermosillo City.

In 2008, we finished several projects to expand our facilities in Mérida and continued increasing our production in Northern México, specifically in the city of Hermosillo and in the state of Chiapas.

In the following paragraphs, we provide a description of our marketing, sales and distribution strategies for each of our major chicken products.

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 us on our farms. However, we believe that the market as a whole is moving slowly away from live chicken.

Public Market Chicken – We believe that we are the largest producer of public market chicken in México. We regularly sell to more than 50 of the approximately 200 whole fresh chicken wholesalers operating in the México City region. 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.

Rotisserie Chicken –We sell rotisserie chicken directly to rosticerías, asaderos and supermarkets. We attribute the growth in our sales of rotisserie chicken in large part to the rapid growth of the market for freshly cooked chicken sold by rosticerías and asaderos and in the rotisserie sections of supermarkets. We expect this market to continue to grow because of an ever-increasing consumer demand for convenient, low-priced 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. We expect to expand sales of rotisserie chicken by leveraging our increasingly developed transportation and distribution network.

Supermarket Broiler Chicken – We sell supermarket broilers, as well as chicken parts and eggs, directly to the principal supermarkets, convenience store chains and wholesale clubs in México. In order to build consumer loyalty for our supermarket broiler chicken, 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 every point 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 –Mexican consumers have a greater preference for fresh chicken than their U.S. counterparts. Frozen, heat and serve and other further processed poultry products make up only a small proportion of total Mexican poultry consumption today. Demand for these kinds of fresh products is growing rapidly. The potential for substantial growth in this market is large and we believe that our distribution network, our large market share for supermarket chicken sales, our brand name and our experience in a wide range of existing Mexican distribution channels will be important competitive strengths in this area.

Even though sales of value-added products have increased during recent years, fresh chicken still dominates the industry. The Company is constantly developing new, convenient value-added products.

Table Eggs

According to the UNA, México has one of the largest per capita consumption of table eggs in the world with 21.7 kilograms per capita a year, compared with approximately 21.6 kilograms per capita consumed in 2007. This high level of consumption is due in part to the fact that eggs are among the cheapest sources of protein in México.

The Mexican table egg industry is more fragmented than the chicken industry but has experienced some degree of consolidation in recent years, including acquisitions made by us. According to the UNA, the ten largest producers of table eggs in México now account for approximately 48.6% of the market.

Eggs in México have traditionally been 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. At present, approximately 20.0% of the eggs sold in México are sold in packaged form, 10.0% are sold in processed form and approximately 70.0% are sold in bulk to wholesalers. The sales trend in recent years has slowly been moving towards packaged and processed egg sales. We expect that the convenience, the development of brand loyalty and the growth of supermarket chains will contribute to the continuance of this trend toward packaged eggs.

According to the UNA, Bachoco is the second largest producer of table eggs in México with approximately 12.0% of the market. We sell both brown and white eggs. We are the largest producer of brown eggs in México. Our marketing efforts for egg products focus on increasing our brand recognition.

The branded carton of brown eggs is a premium product in the Mexican market. We believe that brown eggs are less vulnerable to price fluctuations than white or unbranded eggs, 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.

In 2004, we started to build new farms to increase production capacity of table eggs in our Northwest Complex, at Mexicali, near the U.S. border. We completed this project in the second half semester of 2005.

In 2005, as part of the acquisition of Grupo Sanjor, we acquired some table egg farms located in the Yucatán Peninsula.

In December 2007, we reached an agreement with “Grupo Agra”, located in the states of Nuevo Leon and Coahuila in Northeast Mexico. The agreement provides for leasing of their facilities, which include laying hens farms with a capacity of approximately 1.0 million hens, a processing table eggs plant, distribution centers and the Agra brands. In addition, we acquired all of their working capital.

In 2007, we began to enter into foreign markets. We are testing our brand by selling table eggs in the southern U.S. states with products produced in the U.S. This test will allow us to see how our brand is received and identify opportunities and strategies going forward.

In 2008, our table egg production remained stable with a slight reduction in production capacity due to some adjustments we made in production.

We have designed our egg distribution system to transport eggs from our laying farms at Celaya, Los Mochis, Obregón, Mexicali, Tecamachalco, Mérida, Saltillo and La Laguna regions to customers in all sales regions. We sell packaged eggs directly to all of the principal supermarket chains in México, with daily deliveries directly to their outlets.

Seasonality

Our sales are moderately seasonal, with the highest levels of sales, in general, in the second and fourth quarter due to higher chicken consumption during the holiday season.

Balanced Feed

According to Consejo Nacional de Fabricantes de Alimento Balanceado y de la Nutrición Animal, A.C) (”CONAFAB”), Mexican production of balanced feed has been in constant growth, increasing from 23.9 million tons in 2004 to an estimated 26.2 million tons in 2008. In 2008, México was ranked the third largest producer of feed in the world and the second largest in Latin America.

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. Integrated producers account for approximately 63.4% of total production. Imports of feed come almost entirely from the United States and represent approximately 1.1% of the total consumption in México.

We entered the feed business as a result of our acquisition of Grupo Campi at the end of 1999. We sell to small livestock producers and through a network of small distributors located mainly in central and southern México. 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. Currently, we have four feed plants dedicated to produce balanced feed to third parties.

We estimate that our balanced feed business comprises approximately 3.9% of the market share of the commercial (non-integrated) balanced feed business in México, a reduction from the 4.8% market share in 2007. The decrease in our balanced feed sales volume is due to as high increases in the cost of grains which particularly affects our markets.

Swine

We purchase breeder swine live from the United States and breed them at facilities in Navojoa. We then raise swine to maturity at our farms in Celaya and three other locations in México. Mature swine is sold on the hoof to Mexican swine meat packers for the production of pork products. In 2004, our swine prices increased by more than 20.0% as a result of an increase in the cost of feed ingredients and a more normalized supply and imports, and, during 2005, our swine prices decreased 9.0% due to larger supplies in the Mexican market which continued in 2006 where prices went down about 11.9%. In 2007, swine prices decrease 5.5% as a result of over-supply conditions in the swine market. In 2008, our swine prices increase by 19.6% as a result of a better balance in the commercial market. Traditionally, Mexicans consume less swine products than chicken and eggs products.

Turkey and Prepared Beef Products

In 2007, as a result the “Del Mezquital” and “Grupo Libra” agreements we introduced 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. See Item 5: “Operating and Financial Review and Prospects - Acquisitions & Dispositions” in this Annual Report for more details on the “Del Mezquital” and “Grupo Libra” agreements.

In 2008, these products lines represented less than 1.0% of our total sales. However we see opportunities to grow these businesses by taking advantage of our distribution network.

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 in the preparation of feed including, principally, sorghum, soy meal, corn, fish meal, meat meal, and for certain chicken products, marigold extract. 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, the government eliminated the tariff on sorghum effective January 1, 1994, and eliminated tariffs on all other grains that we use, except corn, on January 1, 2003. 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.

Since the end of 2006, throughout all of 2007 and most of 2008, prices of corn and soybean meal have experienced high volatility and have demonstrated historically high prices world-wide. However, by the end of 2008, prices of corn and soybean meal started to decrease and have continued their downward trend into the first quarter of 2009.

We take advantage of lower-cost feed ingredients from Mexican sources, when available. In 2008, we obtained approximately 48.0% of our total grain we bought from the domestic market. We believe that the quality of local feed ingredients, particularly sorghum, is superior to that of imported feed ingredients. In addition, the use of local feed ingredients allows us to save on transportation costs and import duties. However, in southern México where Grupo Campi’s complexes are located, domestic crops and feed ingredients are limited. As such, these complexes use mainly imported grain. The Company engages in hedging of its feed costs in order to assure more stable cost of grains.

Competition

Chicken

According to the UNA, we are México’s largest chicken producer. We face significant competition from other producers in all of the markets in which we sell our products. When combined with our two largest vertically integrated competitors, we account for approximately 55.0% of total Mexican poultry production; the balance is distributed among approximately one hundred and ninety small- and medium-sized integrated and non-integrated producers. The major producers, including Bachoco, have substantial cost advantages over smaller, non-integrated producers arising from economies of scale and control of feed preparation. To varying degrees, each of these companies has substantial financial resources and strengths in particular product lines and regions. 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 México, including, among others, the consumer preference for fresh chicken, the weaknesses of 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.

Nonetheless, we expect that we will continue to face strong competition in every market and that existing or new competitors are likely to broaden their product lines and to extend their geographic coverage.

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, we have experienced increased competition from U.S. poultry producers. According to the UNA, in 2008, imports of poultry products increased 23.0% in volume over imports in 2007 and an increase of 6.2% over year 2006. This increase was due to lower level of prices in the U.S. and others foreign markets as well as the phase out at the beginning of 2008 of the temporary tariff safeguard which has been put into place for the benefit of domestic producers.

We expect that competition from U.S. exporters could increase. However, Mexican consumer acceptance of frozen poultry products is still low, and we do not anticipate significant growth in the near future.

Table Eggs

We are one of the largest producers of table eggs in México, with approximately 12.0% of total Mexican egg production at the end of 2008. The Mexican table egg industry is very fragmented and the principal 10 companies only account for 48.6% of total table egg production in Mexico.

Balanced Feed

According to the Consejo Nacional de Fabricantes de Alimento Balanceado y de la Inustria Animal, A.C. ( “CONAFAB”), the balanced feed production in México recorded a cumulative increase of 9.6% from 2004 to 2008, where the integrated firms produce approximately 63.4% of total production for their internal use, and the remaining 36.6% is produced for sale to third parties. We estimate a market share of approximately 3.9% in our feed product line.

Swine

The Mexican swine industry is highly fragmented, and no producer has more than 15.0% of the market. On December 31, 2008, we had less than 1.0% of the Mexican market share in swine. U.S. producers already compete in this market in México because tariff barriers on swine are moderate.

Mexican Regulation

Mexican Import Regulation and Price Controls

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.

Import limits and short-term tariffs:

The Mexican government has put in place a number of short-term tariffs and import limits on poultry, eggs and swine:

In January 2003, the Mexican government announced a temporary safeguard to stabilize the flow of poultry imports, which included an initial tariff of 98.8% on imports of chicken leg quarters. This safeguard will decrease annually until it reaches 0% in 2008. All other chicken products from the United States, including whole chicken, chicken parts other than leg quarters and eggs, remain tariff-free.

According to the safeguard, for 2007, the tariff in effect was 19.8% for imports of chicken leg quarters above the quota of 104 thousand tonnes.

Starting on January 1, 2008, the safeguard was phased out. This allows U.S. producers to export any amount of chicken leg quarters free of tariffs to México.

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

Antitrust Regulations

The Ley Federal de Competencia Económica (“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 Comisión 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.

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 Ecológico y Protección Ambiental (General Law of Ecological Balance and Environmental Protection—the “Environmental Law”) and Ley de Aguas Nacionales (“National Waters Law”). The Secretaría del Medio Ambiente y Recursos Naturales (Ministry of Environment and Natural Resources, or “Semarnat”) administers the Environmental Law, and Comisión 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 México is required to provide Semarnat with periodic reports regarding compliance with the Environmental Law and the regulations thereunder.

The level of environmental regulation in México has increased in recent years, and enforcement of the law is improving. We expect this trend to continue and to intensify with international agreements between México 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.

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.

C.	Organizational Structure

We are a holding company with no operations other than holding the stock of our subsidiaries, all of which are incorporated in México, and engaging in transactions with our subsidiaries. Our principal operating subsidiary is BSACV, which owns our principal operating assets, and which accounted for 94.1% of consolidated total assets as of December 31, 2008, and 91.9% of our consolidated revenues for the year ended December 31, 2008. All of our subsidiaries are directly owned by us in the percentage listed below. None of these subsidiaries have any subsidiaries of their own.

The following table shows our main subsidiaries as of December 31, 2006, 2007 and 2008:

	Percentage Equity Interest
	2006		2007		2008
Acuícola Bachoco, S.A. de C.V.		100		100		100
Aviser, S.A. de C.V.		100		100		100
Bachoco, S.A. de C.V. (“BSACV”)		100		100		100
Bachoco Comercial, S.A. de C.V		-		100		100
Campi Alimentos, S.A. de C.V.		100		100		100
Huevo y Derivados, S.A. de C.V.		97		97		97
Operadora de Servicios de Personal, S.A. de C.V.		100		100		100
Pecuarius Laboratorios, S.A. de C.V.		64		64		64
Secba, S.A. de C.V.		100		100		100
Sepetec, S. A. de C.V.		100		100		100
Servicios de Personal Administrativo, S.A. de C.V.		100		100		100
Induba Pavos, S.A. de C.V.		100		100		100

In December 2006 and July 2007 we created Induba Pavos, S.A. de C.V. and Bachoco Comercial, S.A. de C.V. respectively. They are both 100% owned subsidiaries of Industrias Bachoco.

There were no changes in our subsidiaries during 2008.

D.	Property, Plant and Equipment

Our production and storage facilities are located throughout the regions we serve in order to ensure freshness and minimize transportation time and costs. The most extensive facilities are grouped in nine complexes that include farms and processing plants. The largest of our complexes is in Celaya, where we have broiler grow-out farms, a broiler processing plant and egg production farms. The complex at Culiacán includes broiler grow-out farms and a broiler processing plant, as do the complexes located in Puebla, Lagos de Moreno, Coatzacoalcos, Mérida, Hermosillo and Monterrey. There are smaller egg production farms at Los Mochis, Ciudad Obregón and Mexicali. In Gómez Palacio and Saltillo, we have a complex which consists of broiler grow-out farms, a broiler processing plant and egg production farms representing nearly half of our total egg production capacity.

The following table summarizes the types and number of each type of our production facilities as of March 2009:

Bachoco Production Facilities

Type	Number
Chicken breeding farms		168
Broiler grow-out farms		466
Broiler processing plants		9
Egg incubation plants		21
Egg production farms		101
Swine breeding farms		1
Swine grow-out farms		12
Feed mills		17
Further process plants		3

In 2003, the Company implemented projects to expand the facilities at the Peninsula Complex as well as the Northwest Complex. Both complexes were expanded to increase capacity by approximately 50% by the third quarter of 2004. These projects were financed with internal resources generated by our own operations.

On September 16, 2006, Hurricane Lane, hit the southern part of the state of Sinaloa affecting some of our chicken growing farms in that region. We were able to keep a proper supply to our customers in that region from our other complexes.

On April 13, 2008, the secondary processor at our processing plant in Monterrey caught fire. While the fire destroyed the entire secondary processor, the primary processor, which is physically separate from the second, did not suffer any damage and is operating under nearly normal conditions. The assets were properly covered by an insurance policy.

We operate 17 feed mills for our own chickens, feed sales to third parties and egg and swine operations. The total production capacity of our feed plants is approximately 390,000 tons per month. We estimate that we are the largest producer of animal feed in México.

Our other facilities include two poultry manure-processing plants. Our headquarters are located in Celaya Guanajuato, México, and we have 60 sales centers throughout the regions we serve.

We own most of our facilities. We also 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 carries part of the feed from feed mills to farms, live chickens from farms to processing plants, day-old chickens from egg incubation plants to farms, eggs from farms to distribution centers and, ultimately, products from distribution centers to customers.

ITEM 4.A.

Unresolved Staff Comments

None.

ITEM 5.

Operating and Financial Review and Prospects

The following discussion should be read in conjunction with our Consolidated Financial Statements. The Consolidated Financial Statements have been prepared in accordance with Mexican FRS, which differs in certain respects from U.S. GAAP. Note 21 to the 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 changes in stockholders’ equity and a consolidated statement of cash flows under U.S. GAAP as of December 31, 2007 and 2008 and for the years ended December 31, 2006, 2007 and 2008.

As of January 1, 2008, we have adopted the new standard related to “Inflationary Effects” in accordance with Mexican FRS (Mexican FRS B-10). Due to the relatively low inflation that the country has consistently achieved during the past several years, a new financial reporting standard came into effect on January 1, 2008, which terminates the recognition of inflationary effects in our financial information. Consequently, financial information corresponding to periods prior to December 31, 2007 is expressed in millions of Mexican Pesos with purchasing power as of December 31, 2007, while the financial information for periods after December 31, 2007 is stated in millions of nominal Mexican Pesos. The effects of this price-level restatement in accordance with Mexican FRS have not been reversed in the reconciliation from Mexican FRS to U.S. GAAP. See the Consolidated Financial Statements for more detail.

General

In the following discussion we describe various trends and how they affected our results of operations for the years ended December 31, 2006, 2007 and 2008.

Mexican Economic Conditions

In 2006 the Mexican economy showed signs of volatility during the first part of the year, before the presidential election. After the election the economy showed stability with an annual inflation rate of 4.1% and a reasonably stable peso-dollar exchange rate with a final depreciation of the peso against the dollar of 1.6%, as compared to the end of 2005, Rates on 28-day Cetes decreased to an average of 7.2% for the year.

In 2007 the Mexican economy was stable with an annual inflation rate of 3.8% and a final dollar-peso depreciation rate of the peso against the dollar of 1.1%, as compared to the end of 2006. Rates on 28 day Cetes had an average of 7.19% for the year.

During 2008 the Mexican economy was very volatile. In the first half of the year, the Mexican economy showed little signs of volatility. However, as a result of the global economic slowdown and particularly the financial crisis in the U.S., the Mexican economy experienced a drastic downturn in the second half of the year. In particular, the Mexican peso experienced a sharp depreciation, the Mexican economy had a general slowdown and economic forecasts deteriorated.

In 2008 the annual inflation rate for was 6.5% and the final dollar-peso depreciation rate of the peso against the U.S. dollar was approximately 21.0%, as compared to the end of 2007. The rate on 28 day Cetes had an average of 7.6% for the year.

The global financial crisis which is currently negatively affecting Mexico could extend for several years and thus could have a material adverse effect on our future operating and financial results.

Effects of Economic Conditions on the Industry and the Company

Any erosion of the purchasing power of Mexican consumers may adversely affect demand for our products and, as a result, our net revenues and profitability. Inflation and changing prices affect our ability to raise prices as well as consumer demand, supplier prices and other costs and expenses, consumer purchasing power and competitive factors, all of which in turn affect our net revenues and operating results. Peso devaluations and high inflation levels could further adversely affect our operations and financial position.

Mexican economic conditions have had an important impact on México’s chicken market, especially in the feed costs and the exchange rate as we noted above. Balanced feed constitutes a substantial portion of our cost and is priced mostly in U.S. dollars.

We use financial instruments to mitigate the cost of goods sold in currencies other than Mexican pesos. See Note 2-q and Note 10 of the Consolidated Financial Statements.

In 2006, average Mexican producer prices decreased by approximately 3.0% mainly from oversupply conditions in the market during the first part of the year and as market conditions returned to more normalized levels as compared with the first three quarters of 2005.

In 2007, average Mexican producer prices increased by approximately 10.0% mainly due to increases in the cost of raw materials and a balance between supply and demand in the market, particularly in the second and third quarter of the year.

During 2008, average Mexican producer prices increased by approximately 0.2% mainly due to increases in the cost of raw materials, partially offset by oversupply conditions primarily in the second part of the year.

Our outstanding total indebtedness at the end of 2008 increased to Ps. 625.9 million as compared to the Ps. 109.6 million in 2007, as we increased our debt in order to ensure sufficient liquidity.

In 2008, we had foreign exchange gain of Ps. 160.2 million due to fluctuations in the exchange rate of the peso against the U.S. dollar, as compared to a foreign exchange loss of Ps.3.4 million in 2007 and a foreign exchange gain of Ps. 40.8 million in 2006. Our valuation effects of financial instruments was a loss of Ps. 1,666.8 million as compared to a loss of Ps. 44.1 millions in 2007, as a result of the Mexican peso depreciation at the end of the year and the volatility in the cost of grains which negatively affected our hedging positions. See note 10 in our Consolidated Financial Statements.

Volume of Chicken Sold

The Company achieved an increase in its volume of chicken sold during the last years by

The slight increase in 2006 was 0.1%, due mainly to productivity improvements, offset by the negative effects Hurricane Lane on our Northwest Complex during the second half of the year, and a reduction in yield as the Company moves to offering value-added products.

The 8.2% increase in the volume in 2007, was mainly due the business agreements entered into in 2007, domestic growth and productivity efforts.

In 2008, the Company reported an increase in volume of chicken sold of 4.9%, compared to 2007. This increase is due mainly to new farms in the cities of Hermosillo and an expansion in capacity at our Mérida and Coatzacoalcos complexes.

Trends in Product Prices

Our results of operations may also significantly affected by the cyclical and volatile nature of Mexican prices for chicken, feed, eggs and swine.

Chicken Prices

In 2006, our chicken prices decreased 3.7% due to oversupply in the market, in the first part of the year, and a lower more normalized historical demand compared to 2005.

In 2007, our chicken prices increased 8.3% as a result of a stable market conditions and increases in the cost of our main raw materials.

In 2008, our chicken prices increased 4.4% as a result of increases in our costs of sales, partially offset by oversupply conditions, which were present throughout the year.

Egg Prices

In 2006, our egg prices increased 3.9% compared to 2005, as a result of a more stable supply.

In 2007 our egg prices increased 18.5% as a result of a strong demand, particularly in the second half of the year.

In 2008 our egg business was strong and egg prices increased by 23.9% as a result of a better balance between the demand and supply in the market and improvements in our mix of products sold.

Bachoco’s eggs business continues to work to improve its sales mix by increasing the mix of packaged product with brand identification with better profit margins.

Balanced Feed Prices

In 2008 the Company was strongly affected by higher feed ingredient costs and oversupply conditions which resulted principally from the global economic slowdown. Balanced feed prices tend to follow the trends in the prices of feed ingredients, which we discuss in “Trends in Prices of Feed Ingredients” below.

Swine Prices

In 2006, our swine prices declined 11.9% as a result of greater competition from imports and a more fragmented Mexican market.

The same conditions in the swine market that were present in 2006 were also present in 2007, causing a 5.5% decline in our swine prices.

During 2008, demand and supply were stable for most of the year and swine prices increased by 19.6% as compared to 2007.

We believe that, among other factors, industry price competition may continue to exert downward pressure on chicken prices, and that prices for chicken, feed, eggs and swine are also likely to remain volatile and subject to cyclical variation, due to the time needed to complete the chicken growth cycle, chicken producers generally cannot adjust production to respond immediately to cyclical variations, and, accordingly, in times of oversupply, prices may decline due to overproduction.

Trends in Prices of Feed Ingredients

The single largest component of our cost of sales is the cost of ingredients used to prepare feed, including sorghum, soybean meal, corn, fish meal, meat meal and, for certain chicken products, marigold extract. The prices of these feed ingredients are subject to significant volatility due to a number of variables, including, among other factors, weather, harvest size, transportation and storage costs, government agricultural policies and currency exchange rates. The price at which we may obtain feed ingredients from Mexican producers relative to U.S. producers is also subject to volatility depending on these variables.

At present, Mexican feed prices tend to parallel U.S. and international prices. In 2006, the percentage of grain purchased from domestic markets was 31.0%, in 2007 it was 36.4% and in 2008 it was approximately 48.0%.

During the second part of 2006, and through 2007, international corn prices increased significantly as a result of lower inventories and increases in alternative uses of corn, such as ethanol production.

Beginning in 2007 and throughout most of the 2008, international grain prices increased drastically reaching new historically high prices worldwide and exceeding the corn prices reached in 2004, due to strong demand and lower inventories worldwide. These price increases put strong pressure on our production costs.

Restrictions on importing grain under NAFTA phased out at the beginning of 2008. We expect this condition to be beneficial to the Company and result in a reduction of the costs associated with our imports of feed ingredients. However, while this change is generally positive to the Company, the high cost of raw materials made it difficult to reflect the positive impact of the purchases we made during 2008.

Acquisitions & Dispositions

Our operations have been affected during the periods we discuss herein, by a series of acquisitions and production arrangements that we have made in recent years:

In December 2006, the Company started operations at a new complex in the state of Sonora by acquiring the farms from and leasing the processing plant and feed mill of “Del Mezquital Alimentos” in accordance with our strategic plans.

In February 2007 and December 2007, the Company reached a business agreement with “Grupo Libra” and “Grupo AGRA” respectively as described below:

Grupo Libra is a company located in northeast México. The agreement establishes a lease for the use of their facilities, which included breeders and chicken farms with a capacity of approximately 3.0 million chickens per cycle, along with a slaughter plant, and a processing center. In addition, Bachoco acquired all of Grupo Libra’s inventories and brands.

Grupo Agra is an eggs producing company located in the states of Nuevo Leon and Coahuila in Northeast Mexico. The agreement provides for leasing of their facilities, which include laying hens farms with a capacity of approximately 1.0 million hens, a processing table eggs plant, distribution centers and the Agra brands. In addition, we acquired all their inventories.

These two transactions in 2007, represent less than 1.0% of our total sales. We analyzed both transactions to determine whether these agreements should be considered as business acquisitions, under SFAS141 “Business Combination”. Per the terms of the agreements, we did not acquire any employees, customer base or production techniques. For these and other reasons, we concluded that the transactions did not qualify as a business in accordance with EITF 98-3 “Determining Whether a non-monetary transaction Involves Receipt of Productive Assets or of a Business” (paragraph 6) and therefore were not deemed to be business combinations, in accordance with FAS 141.

Both transactions were accounted for as asset acquisitions. The accounting is the same for Mexican GAAP. The FAS 141 disclosure requirements described in paragraph 51-53 therefore do not apply to these transactions.

Additionally, we analyzed the appropriate accounting treatment related to leases as described in FASB 13 “Accounting for Leases” and concluded that the transactions were operating leases and did not qualify as capital leases because there is no transfer of ownership of the property to Bachoco by the end of the lease term, the lease does not contain an option to purchase the leased property at a bargain price, the lease term is not equal or greater than 75% of the estimated economic life of the leased property and the present value of rental and other minimum lease payment is not equal to or exceed 90% of the fair value of the leased property. We concluded that they were operating leases under both Mexican Financial Reporting Standards and US GAAP. The lease commitments were appropriately included in footnote No. 11 to the Consolidated Financial Statements.

On April 13, 2008, the second phase of our production process at our processing plant in Monterrey caught fire. While the fire destroyed the entire second phase of our production process, the first phase of our production process, which is physically separate from the second, did not suffer any damage and is operating under nearly normal conditions. All the assets were properly covered by an insurance policy.

A.	Operating Results

Summary

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

	Year Ended December 31,
	2006			2007			2008
	(percentage of net revenues)
Net revenues		100.0	%		100.0	%		100.0	%
Cost of sales		(77.5	)		(79.5	)		(86.9	)
Gross profit		22.5			20.5			13.1
Selling, general and administrative expenses		(13.3	)		(12.3	)		(12.0	)
Operating income		9.2			8.2			1.1
Comprehensive financing income (loss)		0.4			0.1			(6.8	)
Taxes		(3.9	)		(1.7	)		1.4
Net income (loss)		5.8			7.0			(4.4	)

The following table sets forth, for each of the periods indicated, our net revenues of chicken, feed, eggs, swine and other products as a percentage of total net revenues in each period:

	Year Ended December 31,
	2006			2007			2008
	(percentage of net revenues)
Chicken		77.6	%		77.6	%		76.9	%
Feed		9.0	%		8.0	%		7.3	%
Eggs		9.2	%		9.6	%		10.5	%
Swine and Others		4.2	%		4.8	%		5.3	%
Total		100.0	%		100.0	%		100.0	%

Results of Operations for the Years Ended December 31, 2007 and 2008

General

The global financial crisis had severe repercussions in the Mexican economy, especially in the second half of the year. In particular, there was a slowdown in the Mexican economy and a reduction in economic growth forecasts. In addition, the exchange rate of the peso against the U.S. dollar experienced a sharp depreciation of 21.0% when compared to the year-end exchange rate for 2007.

The Mexican economy had a growth rate of only 1.3% and the annual inflation rate increased to 6.5%.

According to the UNA, the production volume of the Mexican chicken industry grew by approximately 6.4% in 2008 as a result of consumer preference for healthier meat products, income increases per capita and chicken as a low-cost protein alternative to other meat sources.

With respect to the table egg industry, domestic production increased by 1.2% which led to a better balance between supply and demand in the market.

Even though we were able to increase sales in all our main product lines and sold our entire production, the Mexican economic slowdown, the continued increases in the cost of our main raw materials and oversupply conditions in the chicken markets negatively affected our operating and financial results. Consequently, we achieved an operating margin of 1.1%, which is lower than the 8.2% reached in 2007 and one of the weakest margins in the Company’s history.

Net revenues

Net sales during 2008 were Ps. 20,125.3 million, 10.5% higher than the Ps. 18,219.6 million reported in 2007. This was due to an increase in sales in all of our business lines. For more detail see the table included in Item 5: “Operating and Financial Review and Prospects - Summary” above.

Chicken sales grew by 9.5% as compared to sales in 2007. The increase was due to an 4.4% price increase. Even when there were oversupply issues throughout the year, the Company was able to sell its entire chicken production. Chicken volume grew by 4.9% due to increases in capacity driven by increases in capacity at several farms located in our Mérida and Veracruz complexes and new farms located in Hermosillo.

Table egg sales grew by 20.4% in 2008 as compared to sales in 2007 due to a 23.9% price increase, partially offset by a 2.8% decrease in volume. The sales increase was due to stable supply in the Mexican table eggs industry and strong demand for our table eggs products during most part of the year, of which more than 50% are packaged under our brand name.

During 2008, balanced feed sales grew slightly by 0.9% and the volume of balanced feed sold dropped 15.5% in comparison to 2007. This business line was strongly affected by high increases in the prices of raw material. The 19.4% increase in our balanced feed prices was not enough to offset the increases in our production costs.

We increased our pork sales by 35.3% in 2008 as compared to sales in 2007, due to a 13.1% increase in volume sold and a 19.6% increase in our pork prices which resulted from stable demand in the Mexican market and a slight reduction in imports of pork products.

In 2007 and 2008, we recognized Ps.10.9 million and Ps. 16.7 million, respectively, in revenue as a result of the fair valuing part of the Company’s inventories, see Note 2-g, and Note 6-b in our Consolidated Financial Statements for more detail.

Cost of sales

Our consolidated cost of sales in 2008 was Ps. 17,482.5 million, an increase of 20.8% with respect to 2007, as a result of the substantial increases in the prices of raw materials, particularly grains, which are the most important components of our costs of sales.

Gross profit

As a percentage of net sales, gross profit was 13.1% in 2008, compared to 20.5% reported in 2007. The decrease was mainly due to a sharp increase in the cost of sales.

Selling, general and administrative expenses

The operating expenses of the Company in 2008 amounted to Ps. 2,412.8 million, an increase of 7.4% as compared to 2007, primarily due to increases in sales and distribution expenses. Total expenses accounted for 12.0% of the Company’s total sales, representing a decrease of 0.3% when compared with the 12.3% reported for year 2007.

Operating income

The consolidated operating result for 2008 was a profit of Ps. 230.1 million, lower than the Ps. 1,496.3 million profit reported in 2007. The operating margin was 1.1% in 2008, as compared to the 8.2% reported in 2007.

Other income, net

Other income, net represented a net cost of Ps.21.0 million in 2008 as compared to a gain of Ps.69.6 million in 2007, mainly due to lower income for sales of waste animals, raw materials and by products, lower tax incentives and higher employee profit sharing contributions. See Note 17 of the Consolidated Financial Statements for more detail.

Comprehensive financial results

The Company had negative comprehensive financial results of Ps. 1,369.2 million in 2008, as compared to the comprehensive financing income of Ps. 19.1 million achieved in 2007. This reversal was primarily due to negative results in our exchange rate derivative instruments and grain hedge positions. Our net interest position and the impact on the valuation of our financial instruments was a loss of Ps.1,529.3 million in 2008, partially offset by our foreign exchange gain of Ps.160.2 million. See Note 10-a of our Consolidated Financial Statements for more detail.

Income (loss) before income taxes, and minority interest

Loss before income and asset taxes and minority interest was Ps. 1,160.1 million in 2008 as compared to income of Ps. 1,585.0 million in 2007.

At December 31, 2008, the Company recognized an income tax benefit for an amount of Ps. 274.0 million, compared to an income tax expense of Ps. 312.7 million reported in 2007. See note 16-a of the Consolidated Financial Statements for more details.

Net (loss) income

The Company reported a consolidated net loss of Ps. 886.0 million for 2008 , representing a loss per share of Ps.1.5 (equivalent to U.S.$1.3 per ADS), as compared to a consolidated net profit in 2007 of Ps. 1,272.2 million or Ps. 2.1 per share (equivalent to U.S.$1.8 per ADS). This decrease is due to the lower operating income and the negative comprehensive financial results we achieved in 2008.

Results of Operations for the Years Ended December 31, 2006 and 2007

General

In 2007, the Mexican economy showed signs of stability: GDP grew by 3.3%, the annual inflation rate was 3.8% and the peso-dollar exchange rates was reasonably stable with a dollar-peso depreciation rate of 1.1% at the end of the year, as compared to the end of 2006.

According to the UNA, the production volume of the Mexican chicken industry grew by approximately 3.5% in 2007. Consumer preference for healthier products, income increases per capita, and chicken as a low-cost protein alternative to other meat sources have all had a favorable effect on per capita poultry consumption in the country.

With respect to the egg industry, domestic production decreased by almost 5.3%, which contributed to a better balanced supply in the market particularly in the second half of 2007.

We were able to increase our sales in all our main product lines. We sold our entire production and achieved an operating margin of 8.2%, which is lower than the 9.2% reached in 2006.

Net revenues

Net sales during 2007 were Ps. 18,219.6 million, 17.2% higher than the Ps. 15,551.0 million reported in 2006. This was due to an increase in sales in all of our business lines.

Chicken sales grew by 17.3% as compared to the sales in 2006. The increase was due to an 8.3% price increase, as a result of a balance between supply and demand in the chicken market for most of the year. Chicken volume grew by 8.2%, due to increases in capacity driven by the business agreements with the “Del Mezquital” and “Libra” companies, as detailed previously.

Table egg sales grew by 22.2% in 2007 as compared to sales in 2006, due to an 18.5% price increase, while volume grew by 3.1%. The sales increase was due to a stable supply in the Mexican table eggs industry, particularly during the second half of the year and more than 50% of our eggs being packaged under our brand name.

In 2007, balanced feed sales grew by 4.2%, while the volume of balanced feed sold decreased by 9.4% in comparison to 2006. Balanced feed price increased by 15.1% with respect to the prior year, driven by increases in the costs of raw materials.

We increased our pork sales by 24.3% in 2007, due to a 31.5% increase in volume sold while the price fell by 5.5% in comparison with 2006. This price drop was caused by a greater supply of these products in the Mexican market.

We recognized Ps.10.9 million in our 2007 revenue as a result of fair valuing part of the Company’s inventories.

Cost of sales

In 2007, the consolidated cost of sales was Ps. 14,477.9 million, an increase of 20.1% with respect to 2006, as a result of increases in the prices of raw materials, particularly grains, which are one of our main raw materials.

Gross profit

As a percentage of net sales, gross profit was 20.5% in 2007, compared to 22.5% reported in 2006. The decline was due primarily to the increase in the cost of sales, resulting of the increase in cost of our main raw materials.

Selling, general and administrative expenses

Operating expenses increased to Ps. 2,245.5 million in 2007, an 8.4% increase over the prior year, primarily as a result of the increase in the volume of sales. These expenses represented 12.3% of the Company’s sales, which was lower than the 13.3% reported in 2006.

Operating income

Consolidated operating income in 2007 was Ps. 1,496.3 million; 4.9% more than the Ps. 1,426.4 million reported in 2006. The operating margin was 8.2% in 2007, lower than the 9.2% reported in 2006.

Other income, net

Other income, net represented a net gain of Ps.69.6 million in 2007 as compared to a gain of Ps.18.4 million in 2006. Other income, net in both 2007 and 2006 was attributable mainly to sales of used equipment, income from governmental aid and miscellaneous services.

Comprehensive financial results

In 2007, we had a net comprehensive financing result of Ps. 19.1 million primarily due to Ps. 177.3 million of net interest income. This result was lower than the Ps. 61.4 million reported in 2006.

Income before income tax, asset tax, and minority interest

Income before income tax, asset tax, and minority interest was Ps, 1,585.0 million in 2007, Ps. 78.7 million more than Ps. 1,506.3 reported in 2006. In 2007, taxes recognized by the Company amounted to Ps. 312.7 million, a decrease with respect to the Ps. 599.1 million recognized in 2006, primarily due to a unique charge amount in deferred taxes recognized at the end of 2006, due to the tax rate increase that affected the poultry industry and consequently our Company in fiscal year 2007.

Net income

Net income was Ps. 1,272.2 million in 2007, 40.2% higher than the Ps. 907.1 million reported in 2006. Earnings per share of Ps. 2.12 (US$ 2.33 per ADR), compared to Ps.1.51 (US$ 1.66 per ADR) reported in 2006.

Income Tax, Asset Tax and Flat Rate Business Tax, Year 2008

We, and each of our subsidiaries file separate income tax returns. Bachoco, the main subsidiary is subject to the simplified regime, which rate was 16% in 2005 and 2006 and since 2007 it is 19%. This regime is applicable to agriculture, cattle-raising, and fishing among a few others.

In 2007, a new law was approved which partially revoked the Asset Tax Law. Pursuant to the new law, as of 2007, the applicable asset tax rate was 1.25% rate and liabilities were no longer deductible from the asset tax base. Through December 31, 2006, the applicable asset tax rate had been 1.8% of the average value of most assets and net of certain liabilities. The asset tax in 2006 and 2007 amounted to Ps 28.3 million and Ps 27.2 million, respectively. In each of the two years we credited against these amounts the income tax paid.

During 2007, we recognized an additional liability of Ps. 288.6, in order to account for the difference between deferred taxes as calculated under the asset and liability method and deferred taxes as calculated under the stockholders’ equity method. Then, effective January 1, 2008, we adopted Mexican FRS D-4, which supersedes Bulletin D-4 and establishes the assets and liability method as the only approved method for calculating deferred taxes. Consequently, we proceeded to reverse the Ps. 288.6 of additional liability which was recognized in 2007 against consolidated retained earnings in 2008. See Note 16-e and 16-e to the Consolidated Financial Statements for more detail.

As of December 31, 2008, we had Ps. 4.5 million in asset tax credits. See Note 16-c to the Consolidated Financial Statements for more detail.

In 2008, we recognized a total income, deferred and asset tax credit of Ps. 274.0 million (an effective income tax rate of 24.1%). This credit resulted mainly from the Company’s net loss in 2008. By comparison, the Company had a total income tax and asset charge of Ps. 312.7 million in 2007 and Ps.599.1 million in 2006.

The Flat-Rate Business Tax (FRBT or IETU in Spanish) law was published in the Official Gazette on October 1, 2007. This Law came into effect as of January 1, 2008 and abolished the Asset Tax Law.

The FRBT rate is 16.5% for 2008, 17.0% for 2009 and 17.5 for 2010 and thereafter based on cash flows and certain limited deductions.

FRBT credits derive principally from the unamortized negative FRBT base and salary credits and social security contributions, as well as credits derived from the deduction of certain investments, such as inventories and fixed assets, during the transition period, which began starting on the date on which the FRBT came into force.

FRBT shall be payable only to the extent it exceeds income tax for the same period. Should a negative FRBT base be determined because deductions exceed taxable income, there will be no FRBT payable. The amount of the negative base multiplied by the FRBT rate results in a FRBT credit, which may be applied against income tax for the same year or, if applicable, against FRBT payable in the next ten years.

In 2008, we recognized a total FRBT of Ps. 0.1 million. We cannot assure a similarly low FRBT in future years.

For a more detailed discussion on this topic, please see Note 16 to our Consolidated Financial Statements. We and each of our subsidiaries file individual tax returns and may be subject to different tax regimes.

Reconciliation to U.S. GAAP

Our Consolidated Financial Statements are prepared in accordance with Mexican Financial Reporting Standards (“Mex FRS”), 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 in Note 21 of our Consolidated Financial Statements, with an explanation, where appropriate, of the method used to determine the adjustments that affect income and stockholders’ equity. Some of the differences between Mexican FRS and U.S. GAAP, as they relate to us, concern (i) net cost of labor obligations (ii) capitalization of financing costs, (iii) biological assets and agricultural products valuation at fair value, and (iv) treatment of minority interest. Each of these differences also affects our balance sheet.

Our consolidated majority net income under U.S. GAAP was Ps.895.6 million in 2006, Ps.1,261.9 million in 2007 and a net loss of Ps.869.4 million in 2008, compared to Ps.906.2 million, Ps.1,270.9 million and a loss of Ps.879.0 million, respectively, under Mexican FRS.

Bachoco has applied Statement of Financial Accounting Standards (SFAS) No.109, Accounting for Income Taxes, for all periods presented. The deferred tax adjustment included in the net income (loss) 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 in MexFRS in 2008, this concept generates a reconciling difference to U.S. GAAP. The deferred tax liability under this concept amounted Ps. 288,580 and Ps. 284,226 as of December 31, 2007 and 2008, respectively.

Beginning January 1, 2005, due to the adoption of MexFRS B-7, goodwill is no longer amortized, but rather is subject to periodic impairment valuations. For U.S. GAAP purposes, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets” in 2002. 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. In 2006, 2007 and 2008, we performed the required impairment tests of goodwill and did not result an impairment charge.

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 21 to our Consolidated Financial Statements is based on information available at December 31, 2008 and 2007. 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, 2008 and 2007, could differ significantly from these amounts.

In January 1, 2002, we also adopted the requirements of Statement 144 and we have not identified any impairment adjustments to the carrying value of its long lived assets.

Use of Estimates in Certain Accounting Policies

In preparing our 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 presentation.

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.

Accumulated depreciation expense for property, plant and equipment in 2008 amounted to Ps. 7.2 billion. As applied to our 2008 financial results, the depreciation was Ps.616.4 million, or 3.1% of our net revenues. For further explanation, see Notes 2-h and 7 to the 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 2g in our Consolidated Financial Statements for more detail.

Inventory Valuation

Inventories

At December 31, 2008, 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.

Our inventories at December 31, 2007 were stated using the specific-cost method. The stated value of inventories is not in excess of net realizable value

Agriculture

Our 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.

The allowance for decline in the productivity of breeder chickens and pigs is estimated based on 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 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 significantly in the 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.

For more details, see “Inventories and biological assets” in Note 6 of the Consolidated Financial Statements.

Allowance for Doubtful Accounts

Our 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 taking into account current market conditions and our customer’s financial conditions, the amount of receivables in dispute, the aging of our current receivable aging, and the collectibility of our current receivables based on individual payment patterns. Accounts which are more than 60 days overdue are reviewed individually for collectibles. See Note 2-f to our Consolidated Financial Statements for more detail.

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. See Note 2-m and Note 14 to our Consolidated Financial Statements.

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.

B.	Liquidity and Capital Resources

Our working capital (current assets less current liabilities) decreased year over year from Ps.6.5 billion on December 31, 2007 to Ps.4.6 billion on December 31, 2008. Said decrease was mainly due to a decrease in the cash and investments current assets accounts, and increases in the accounts payable and derivatives financial instruments current liabilities accounts. The ratio of current assets to current liabilities on December 31, 2008 was 2.4.

Cash and cash equivalents were Ps.2.0 billion on December 31, 2008, representing a decrease of Ps.1.0 billion or 34.3% from the previous year. The decrease was primarily due to larger inventories, increase in our level of capital expenditures and losses in our financial instrument positions.

Inventories were Ps.4.0 billion as of December 31, 2008, representing an increase of Ps.644.3 million or 19.4% from the previous year, due mainly to larger inventories and higher cost of raw materials.

Total debt, including the current portion of long term debt, equaled Ps.625.9 million as of December 31, 2008, much higher than the Ps. 109.6 million reported as of December 31, 2007. This increase is due to new debt obligations we entered into in order to guarantee our liquidity under highly volatile conditions.

Long term debt on December 31, 2008 represented 2.7% of our capitalization, compared to 0.3% reported on December 31, 2007.

Stockholders’ equity decreased to Ps.14.1 billion on December 31, 2008 from Ps.15.1 billion on December 31, 2007.

In 2008, capital investments amounted to Ps. 1.1 billion, all of which were financed from 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.

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. See our Consolidated Statement of Cash Flow in our Consolidated Financial Statements for more details.

We consider our current level of working capital to be sufficient for our operations.

We expect to finance our capital expenditures, additional working capital, and debt service obligations from our current liquidity and capital resources, cash flows and from additional borrowings from our existing sources of debt financing, although we will also consider other sources of debt financing if they are available on advantageous terms. For a discussion of our use of hedging instruments, please see Note 10 of our Consolidated Financial Statements.

We entered into operating leases for certain offices, production sites, computer equipments, and automobiles. These agreements have terms ranging between one and five years period and some of them contain renewal options. Rental expenses under these leases for 2006, 2007 and 2008 were Ps. 124.0, Ps. 153.2 million and Ps. 167.9 million, respectively.

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

None

D.	Trend Information

For a description of trends in our product lines see Item 3: “General – Trend in Product Prices” above.

E.	Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements of the type that we are required to disclose under Item 5.E of Form 20-F.

F.	Tabular Disclosure of Contractual Obligations

Our major categories of indebtedness included the following:

•

As of December 31, 2008 we have Ps. 234.2 million in notes payable to banks and current installments of long term debt.

•

Long term debt to banks, as of December 31, 2008, was Ps.391.7 million outstanding (excluding current portion), which is higher than Ps. 50.8 million in the same date of 2007. The weighted average interest rates on long term debt for 2007 and 2008 were 7.8% and 12.9% respectively. See Note 9 of the Consolidated Financial Statements for more detail.

The following table summarizes long-tem debt as of December 31, 2008. The table does not include short term debt, accounts payable or pension liabilities.

		Payments Due by Period (millions of constant pesos as of December 31, 2008)

Contractual Obligations		Total	2010		2011		2012			2013
Long-term debt	Ps.	391.6		360.9		15.3		11.5	Ps.	3.9
Operating leases	Ps.	227.8		70.5		69.0		68.2	Ps.	20.1

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.

Before September 2006, holders of Series B Shares elected directors and alternate directors at a general ordinary stockholders’ meeting, while holders of Series L Shares had the right to appoint or elect two directors and two alternate directors to the Board of Directors.

Since September 2006, we have only Series B Shares with full voting rights.

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.

The following table identifies our directors, alternate directors, Honorary Chairman of the board and Secretary of the board as of June 2009, their positions and their years of service:

Name	Position	Years as a Member of the Board of Directors
Enrique Robinson Bours Almada	Honorary Chairman of the board	55
Mario Javier Robinson Bours Almada	Life Honorary Shareholder Director	55
Francisco Javier R. Bours Castelo	Chairman of the Board and Proprietary Shareholder Director	27
Eduardo Rojas Crespo	Secretary of the Board	1
Jose Gerardo Robinson Bours Castelo	Proprietary Shareholder Director	1
Juan Bautista Salvador Robinson Bours	Proprietary Shareholder Director	55
Jesús Enrique Robinson Bours Muñoz	Proprietary Shareholder Director	15
Jesús Rodolfo Robinson Bours Muñoz	Proprietary Shareholder Director	7
Arturo Bours Griffith	Proprietary Shareholder Director	15
Octavio Robinson Bours	Proprietary Shareholder Director	12
Ricardo Aguirre Borboa	Proprietary Shareholder Director	15
José Eduardo Robinson Bours Castelo	Alternate Director	15
Juan Salvador Robinson Bours Martínez	Alternate Director	15
José Francisco Bours Griffith	Alternate Director	15
Guillermo Pineda Cruz	Alternate Director	15
Avelino Fernández Salido	Independent Director	6
Humberto Schwarzbeck Noriega	Independent Director	6

Enrique Robinson Bours Almada, Mario Javier Robinson Bours Almada and Juan Bautista Salvador Robinson Bours are brothers.

Francisco Javier R. Bours Castelo, José Gerardo Robinson Bours Castelo and José Eduardo Robinson Bours Castelo are sons of Mario Javier Robinson Bours.

Arturo Bours Griffith, José Francisco Bours Griffith and Octavio Robinson Bours are nephews of Enrique Robinson Bours Almada, Mario Javier Robinson Bours Almada and Juan Bautista Salvador Robinson Bours.

Jesús Enrique Robinson Bours Muñoz and Jesús Rodolfo Robinson Bours Muñoz are sons of Enrique Robinson Bours Almada.

Juan Salvador Robinson Bours Martínez is the son of Juan Bautista Salvador Robinson Bours.

Guillermo Pineda Cruz is the son-in-law of Enrique Robinson Bours Almada, and Ricardo Aguirre Borboa is the son-in-law of Juan Bautista Salvador Robinson Bours.

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

Mr. Enrique Robinson Bours Almada, Chairman of the board and co-founder of the Company is retired in April 2002. Mr. Bours led the Company for 50 years. The Board named as his successor Mr. Javier Robinson Bours Castelo, Mr. Enrique Robinson Bours’s nephew. Mr. Bours Castelo has been at Bachoco for 27 years as a member of the board and served as Vice-Chairman for nine years.

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. José Gerardo Robinson Bours Castelo as a Proprietary Shareholder Director in the place of Mr. Mario Javier Robinson Bours Almada.

In order to fully comply with current Mexican Corporate and Securities Market Laws in which Bachoco’s Shares are traded, we ratified our Board of Directors at our stockholders’ meeting held on April 22, 2009. As of June 2009, our Board of Directors is composed of the following members:

Proprietary Shareholder Directors:

Francisco Javier R. Bours Castelo (Chairman of the Board)

Jose Gerardo Robinson Bours Castelo

Juan Bautista S. Robinson Bours Almada

Jesús Enrique Robinson Bours Muñoz

Jesús Rodolfo Robinson Bours Muñoz

Arturo Bours Griffith

Octavio Robinson Bours

Ricardo Aguirre Borboa

Alternate Directors:

José Eduardo Robinson Bours Castelo

Juan Salvador Robinson Bours Martínez

José Francisco Bours Griffith

Guillermo Pineda Cruz

Independent Directors:

Avelino Fernández Salido

Humberto Schwarzbeck Noriega

Life Honorary Chairman of the Board:

Enrique Robinson Bours Almada

Life Honorary Shareholder Director:

Mario Javier Robinson Bours Almada

Secretary of the Board of Directors:

Eduardo Rojas Crespo

Francisco Javier R. Bours Castelo, Chairman of the Board of Directors, has been a member of the board for 27 years, and has been Chairman since 2002. Before that, he was Vice-Chairman for several years. Mr. Bours holds a degree in Civil Engineering from the Instituto Tecnológico 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., Congeladora Hortícola, S.A. de C.V., Inmobiliaria of Trento S.A. de C.V., Acuícola Boca S.A. de C.V., Agriexport S.A. de C.V., Industrias Boca, S.A. de C.V., and Promotora Empresarial del Noroeste, S.A. de C.V.

José Gerardo Robinson Bours Castelo, Proprietary Shareholder Director, is member of the board since April, 2008. He previously served as Systems Manager. Mr. Bours, holds a degree in Computer Engineering from the Instituto Tecnológico y de Estudios Superiores Monterrey (ITESM). He currently serves as member of the following companies: Grupo Megacable, S.A. de C.V., Congeladora Hortícola, S.A. de C.V., Acuícola Boca, S.A. de C.V., Industrias Boca, S.A. de C.V. and Promotora Empresarial del Noroeste, S.A. de C.V. He is also Chairman of Fundación Mexicana para el Desarrollo Rural del Valle del Yaqui and Instituto Tecnológico y de Estudios Superiores de Monterrey Campus Obregón.

Juan Bautista S. Robinson Bours Almada, Proprietary Shareholder Director, has been a member of the board for 55 years and is a co-founder of Industrias Bachoco S.A.B. de C.V.

Jesús Enrique Robinson Bours Muñoz, Proprietary Shareholder Director, has been a member of the board for 15 years, having previously served 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 Corporación S.A. de C.V., and Megacable S.A. de C.V.

Jesús Rodolfo Robinson Bours Muñoz, Proprietary Shareholder Director, has been a member of the board for 7 years. 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 Agrícola Monte Cristo S.A. de C.V., Agrícola Río Yaqui S.P.R. de R.L., Agrícola Nacapul S.P.R. de R.L. and Ganadera Cocoreña S.P.R. de R.L., Chairman of the Board of Centro Cultural Cocorit and Manager of the Museum of the Yaqui Indians.

Arturo Bours Griffith, Proprietary Shareholder Director, has been a member of the board for 15 years. 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, S.A. de C.V., Promotora Empresarial del Noroeste, S.A. de C.V., and Taxis Aereos del Noroeste, S.A. de C.V.

Octavio Robinson Bours, Proprietary Shareholder Director, has been a member of the board for 12 years. Mr. Robinson Bours holds a degree in Agricultural Engineering from the Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM). He has experience in producing swine, and is also a member of the board of Choya, S.A. de C.V., and Granos Santa Fe, S.A. de C.V.

Ricardo Aguirre Borboa, Proprietary Shareholder Director, was also an Independent Director until April 2007. Mr. Aguirre has been a member of the board for 15 years. He is also a member of the Board of Directors of the newspaper El Debate and he holds a degree in Agricultural Engineering from the Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM). He has experience in agriculture and pork production. Mr. Aguirre Borboa is also member of the board of Gasolinera Servicios del Valle del Fuerte S.A. de C.V., Periódico el Debate de los Mochis, and Tepeyac Produce, Inc.

José Eduardo Robinson Bours Castelo, Alternate Director, has been a member of the board for 15 years. Mr. Robinson Bours holds a degree in Industrial Engineering from the Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM). He was previously Commercial Director of Industrias Bachoco, a Senator of the Mexican Congress and is currently governor of the state of Sonora.

Juan Salvador Robinson Bours Martínez, Alternate Director, has been a member of the board for 15 years, and has served Bachoco as Purchasing Manager. Mr. Robinson Bours holds a degree in Industrial Engineering from the Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM). His other appointments include Chairman of the board and CEO of Llantas y Accesorios, S.A. de C.V.

José Francisco Bours Griffith, Alternate Director, has been a member of the board for 15 years. He holds a degree in Civil Engineering from the Universidad Autónoma 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, has been a member of the board for 15 years. 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 Serfín, Inverlat and Inverméxico. Mr. Pineda holds a degree in Civil Engineering from the Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and a master’s degree in Business Administration from the Instituto Tecnológico de Sonora (ITSON). He co‑founded Edificadora Pi‑Bo, S.A. de C.V. in 1983 and is its President and CEO.

Avelino Fernández Salido, Independent Director, is member of the board since 2003. He is also a member of the board of Banco Nacional de México, BBVA Bancomer, and Banca Serfín. 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 Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM). He is currently CEO of Yeso Industrial de Navojoa S.A. de C.V. and Chairman of the Board of Promotora de Manufacturas S.A. de C.V.

Eduardo Rojas Crespo, was named Secretary of the Board of Directors on April 23, 2008. 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. He holds a law degree from the Universidad Nacional Autónoma de México (UNAM) and a post-graduate diploma in Environmental Law and Due Diligence and a master’s degree in Corporate Laws, both from the Anáhuac University.

Executive Officers

Our executive officers as of June 2008 are set forth in the table below:

Name	Position	Age
Cristóbal Mondragón Fragoso	Chief Executive Officer	63
Daniel Salazar Ferrer	Chief Financial Officer	44
David Gastélum Cazares	Director of Sales	57
José Luis López Lepe	Director of Personnel	63
Rodolfo Ramos Arvizu	Technical Director	51
Ernesto Salmón Castelo	Director of Operations	46
Andres Morales Astiazaran	Director of Marketing and Value-added Products	40
Marco Antonio Esparza Serrano	Comptroller Director	53

Cristóbal Mondragón Fragoso, Chief Executive Officer, joined us in 1982 and assumed his current position in 2001. Previously, Mr. Mondragón served as Administration Manager, as Manager of Corporate Finance and as Chief Financial Officer. Before joining us, Mr. Mondragón worked as an accountant for three years. Later he joined La Hacienda, S.A. de C.V., where he held the positions of Auditor, Accountant, Head of Processing Systems, Audit Manager, Administration Manager and Comptroller. Mr. Mondragón holds an Accounting degree from Universidad Nacional Autónoma de México (UNAM).

Daniel Salazar Ferrer, Chief Financial Officer, joined us in 2000 and assumed his current position in January 2003. Previously, Mr. Salazar worked for four years as Chief Financial Officer at Grupo Covarrubias and as Comptroller at Negromex, a company of Grupo Desc. Mr. Salazar holds an Accounting degree from Universidad Tecnológica de México and a master’s degree in Business Administration from Instituto Tecnológico de Estudios Superiores de Monterrey (ITESM).

David Gastélum Cazares, Director of Sales, joined us in 1979 and assumed his current position in 1992. Previously, Mr. Gastélum 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 México City Division and National Sales Manager. Before joining us, Mr. Gastelúm worked at La Hacienda, S.A. de C.V. as Technical Advisor and as Area Officer for the Southeast Division. Mr. Gastélum holds a degree in Veterinary Medicine from the school of Veterinary Medicine of Universidad Nacional Autónoma de México (UNAM).

José Luis López Lepe, Director of Personnel, joined us in 1993. Previously, Mr. López worked as a teacher in several institutions as well as with Grupo Condumex, where he was Director of Personnel. Mr. López holds a degree in Physics and Chemistry from the Escuela Normal Superior and a degree in Business Administration from Instituto Tecnológico Autónomo de México.

Rodolfo Ramos Arvizu, Technical Director, joined us in 1980. Previously, Mr. Ramos held positions in the Egg Quality Control Training Program and in Poultry Management as well as serving as Supervisor of the Commercial Egg Production Training Program, Manager of Raw Material Purchasing and as a Director of Production. Mr. Ramos holds a degree in Agricultural Engineering from Instituto Tecnológico de Estudios Superiores de Monterrey (ITESM).

Ernesto Salmón Castelo, Director of Operations, joined us in 1991 and assumed his current position in 2000. Previously, Mr. Salmón 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. Salmón holds a degree in Chemical Engineering from Instituto Tecnológico de Sonora and a master’s degree in Business Administration from Instituto Tecnológico de Estudios Superiores de Monterrey (ITESM).

Andrés Morales Astiazaran, Director of Marketing and Value-added Products since July 2006. Before joining us, Mr. Morales worked during 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 Instituto Tecnológico de Monterrey (ITESM) and marketing courses by the universities of Northwestern University (Kellog), University of Chicago, 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, two American companies and one German company. 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, Instituto Tecnológico de Estudios Superiores de Monterrey (ITESM), University of Almeria Spain and IPADE.

Statutory Auditor

According with the Mexican Securities Market Law, the Statutory Auditor is no longer required for public companies as of June 2006. The activities of the Statutory Auditor will be performed by the Audit Committee.

Audit Committee

In January 2001, the Mexican Commission of Business Leaders (Consejo Coordinador Empresarial), with the support of the Comisión Nacional Bancaria y de Valores (Mexican Banking and Securities Commission, or “CNBV”), issued a Código de Mejores Prácticas Corporativas (“Code of Best Practices”) for publicly traded Mexican companies, recommending certain actions with respect to various areas of corporate governance. Subsequently, the Securities Market Law was amended, effective June 2006, to require that all publicly traded Mexican companies have an audit committee.

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

(a)

Submit an annual report to the Board of Directors;

(b)

Provide the Board of Directors with its opinion on the matters that pertain to the Auditing Committee, in accordance with the Securities Market Law;

(c)

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;

(d)

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;

(e)

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;

(f)

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;

(g)

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

(h)

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.

In order to fully comply with current Mexican Corporate and Securities Market Laws, we named an audit committee on April, 2003.

There were changes in the audit committee during the ordinary stockholder’s meeting held on April 25, 2007; Mr. Francisco Javier R. Bours Castelo is no longer a member of the audit committee and the audit committee is now comprised of the following members:

Avelino Fernández Salido (President)

Humberto Schwarzbeck Noriega

Ricardo Aguirre Borboa

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

B.	Compensation

For the year ended December 31, 2008, we paid approximately Ps.38.5 million in aggregate compensation to our directors and executive officers, for services they rendered in their respective capacities.

C.	Board Practices

In 2001, we changed the composition of our board and appointed an audit committee. See “Directors” and “Audit Committee.”

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.

Employees

As of December 31, 2006, 2007 and 2008, we had approximately 21,035, 23,088 and 23,248 employees, respectively.

In 2008, approximately 64.6% of our employees were members of labor unions. Labor relations with our employees are governed by 49 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. As is typical in México, 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.

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 managers holds share ownership of more than one percent of our Shares. 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 hold 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.

A.	Major Shareholders

Control Trust

Initially in April 1995, the Robinson Bours Stockholders created the Control Trust to hold certain Units owned by members of the Robinson Bours family. The Robinson Bours Stockholders, through the Control Trust and a separate trust established in connection with our 1997 initial public offering (the “Family Trust”). Prior to the Share conversion in September 2005 described above, the Control Trust and the Family Trust were composed by:

Title of Class	Identity of Group	Amount Owned		Percent of Class

Series B(1)	Control Trust and Family Trust		398,250,000		88.5	%

Series L(2)	Control Trust and Family Trust		98,250,000		65.5	%

All Classes(3)	Control Trust and Family Trust		496,500,000		82.8	%

(1)	Percentage is based on 450,000,000 Series B Shares, including 300,000,000 Shares not registered under Section 12 of the Securities and Exchange Act of 1934.

(2)	Percentage is based on 150,000,000 Series L Shares.

(3)	Percentage is based on 600,000,000 Shares.

After the conversion of L Shares to B Shares, the Control Trust and the Family Trust own the same number of Shares (496,500,000 Shares or 82.75% of outstanding Shares). However, these Shares are all now Series B Shares.

In November 2008, the Robinson Bours family created a third trust with 102,000,000 Shares, which were taken from one of the existing trusts. The purpose of this new trust is to serve as collateral for the Company’s loan indebtedness. The three trusts together accounted for 496,500,000 Shares outstanding on December 31, 2008 and there has been no change in the position of each holder.

Apart from the ownership set forth above, at the end of March 2009, Fidelity Low Priced Stock Fund and Fidelity Management & Research Co. each owned 4.7% of our Common Stock; equal to a total of 2,325,000 ADS’s for each respectively.

In November 1998, in accordance with rules established by the CNBV, we established a reserve in the amount of Ps.180.0 million in nominal pesos, for the repurchase of Shares. At the end of 2008, the Company had repurchased zero Shares.

During our stockholders’ meeting of April 22, 2009, we capped the share repurchase program for 2009 to a maximum amount of Ps.165.6 million. As of May 29, 2009, we had repurchased a total of 92,000 shares.

The following table sets forth the estimated percentages of the Shares held in México and other Countries as of December 31, 2008.

Year	Percentage

México		84.8	%
Other Countries		15.2	%

As of March 31, 2009, from the 100% of the total shares of the Company, we accounted for approximately 49 shareholders in the NYSE and 65 in 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. All of these transactions are described below. See Note 5 to the Consolidated Financial Statements. We expect to engage in similar transactions in the future.

We regularly purchase vehicles and related equipment from distributors owned by various members of the Robinson Bours family. The total amount spent on such purchases was Ps. 63.5 million, Ps.95.8 million and Ps. 156.9 million for the years ended December 31, 2006, 2007 and 2008, respectively. 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 own Taxis Aéreos del Noroeste, S.A. de C.V. (“TAN”), an air transport company that provides transportation for members of the Board of Directors to and from meetings at our headquarters in Celaya. We paid Ps.4.2 million, Ps.3.2 million and Ps. 2.1 for the years ended December 31, 2006, 2007 and 2008, respectively, for such transportation.

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. The cost of such purchases was Ps.251.9 million, Ps.192.8 million and Ps.427.7 million for the years ended December 31, 2006, 2007 and 2008, respectively.

Our accounts payable to related parties totaled Ps.26.8 million and Ps. 50.3 million as of ended December 31, 2007 and 2008, respectively. These transactions took place among companies owned by the same set of stockholders. See Note 5 to the Consolidated Financial Statements.

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

C.	Interests of Experts and Counsel

Not applicable.

ITEM 8.

Financial Information

A.	Consolidated Statements and Other Financial Information

Our Consolidated Financial Statements are included in Item 18. The financial statements were audited by independent registered public accounting firms and are accompanied by their audit reports.

On August 28, 2008, we announced that the Company’s Board of Directors, as per the Audit Committee’s recommendation, approved the selection of KPMG Cárdenas Dosal, S.C. as the Company’s independent auditor, effective as of August 27, 2008.

The financial statements include a consolidated balance sheet, consolidated statements of operations, consolidated statements of changes in stockholders’ equity, consolidated statements of changes in financial position, and consolidated statement of cash flows and notes relating to the consolidated financial statements.

The Consolidated Financial Statements have been prepared in accordance with Mexican FRS, which differ in certain respects from U.S. GAAP. Note 21 to the 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, and consolidated net income, a consolidated statement of changes in stockholders’ equity and a consolidated cash flow statement under U.S. GAAP as of December 31, 2007 and 2008, and for the years ended December 31, 2006, 2007 and 2008.

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 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.

In 2006, 2007 and 2008, we declared and paid cash dividends at nominal values of Ps.353.9, Ps. 353.9 and Ps. 353.9 respectively (Ps. 378.1 and Ps.363.7 in constant Mexican pesos as at December 31 of 2006 and 2007 respectively).

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 the 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

Significant Changes in Accounting Practices

New Accounting pronouncements

The most important new accounting pronouncements that came into effect after December 31, 2007 are:

Mexican FRS B-10, (Effects of inflation). As a result of the adoption of this FRS, at January 1, 2008, the stockholders' equity accounts were reclassified as shown on the consolidated statement of stockholders' equity. We present the 2007 and 2006 consolidated financial statements in constant pesos at December 31, 2007, the last date on which the comprehensive method for recognizing the effects of inflation was used.

Mexican FRS D-3, (Employee Benefits). As a result of the adoption of this FRS, in 2008 the intangible asset of Ps. 28.3 million, previously recognized in the consolidated balance sheet as of December 31, 2007, and the labor obligation minimum liability adjustment of Ps. 2.5 million, previously recognized in the consolidated statement of stockholders equity as of December 31, 2007, were eliminated. Furthermore, amortization of unamortized items resulted in an approximate gain of Ps. 0.8 million during 2008.

Mexican FRS D-4, (Taxes on income). Effective January 1, 2008, the asset and liability method became the only approved method to calculate deferred taxes. Therefore, we wrote off the Ps. 288.6 million of additional liability determined under the stockholders’ equity method in 2007 against retained earnings.

Mexican FRS B-2, (Statement of Cash Flow). As a result of the adoption of this FRS in 2008, the indirect method was used for the calculation of consolidated cash flows in 2008 while the consolidated statements of change in the financial position in 2006 and 2007 are presented as issued.

The CINIF has issued the following FRS, effective for fiscal years beginning after December 31, 2008:

FRS B-7 “Business acquisitions”, FRS B-8 “Consolidated and combined financial statements”, FRS C-7 “Investments in associates and other permanent investments” and FRS C-8 “Intangible assets”.

We consider that the initial effects of these new FRS’s will not be material.

For more detail see Note 2-x and Note 20 to the Consolidated Financial Statements.

ITEM 9.

The Offer and Listing

A.	Offer and Listing Details

On September 19, 1997, Bachoco commenced trading on the Mexican Stock Exchange through Units (each comprised of one Series B Share and one Series L Share), and on the New York Stock Exchange through American Depositary Shares (“ADSs,” each comprised of six Units). The ADSs are evidenced by American Depositary Receipts (“ADRs”) issued by The Bank of New York, as Depositary under a Deposit Agreement among the Company, the Depositary and the holders from time to time of ADRs.

In September 2006, the Company separated the UBL and UBB Units into their components, and converted their Series L Shares into Series B Shares, on a one to one basis. Consequently, now all our Common Stock Shares are Series B Shares with full voting rights. This change had not modified the face value of the Shares.

As of April 30, 2009, there were 7,574,991 ADSs outstanding, representing 15.1% of the total Shares outstanding, which were held by approximately 50 holders.

The following tables set forth for each year from 2004 to 2008, for each quarter from 2007 and 2008 and for each complete month from December 2008 to May 2009, the high, low and close prices of the Shares on the Mexican Stock as reported by the Mexican Stock Exchange and the high, low and close price of the ADSs on the NYSE as reported by the New York Stock Exchange.

Mexican Stock Exchange

(Nominal pesos per Share)

Year	High		Low		Close
2004		13.35		8.50		13.10
2005		20.70		12.22		17.25
2006		23.70		15.70		23.66
2007		30.96		20.00		28.60
2008		30.15		14.21		15.99

New York Stock Exchange

(U.S.$ per ADS)

Year	High		Low		Close
2004		14.19		8.8		14.19
2005		23.02		12.87		19.50
2006		29.00		16.33		29.00
2007		35.11		24.10		31.81
2008		33.34		12.75		14.50

Mexican Stock Exchange

(Nominal pesos per Share)

Period	High		Low		Close
First Quarter 2007		28.00		20.00		25.80
Second Quarter 2007		30.08		25.89		28.60
Third Quarter 2007		30.96		24.00		29.50
Fourth Quarter 2007		29.02		23.00		27.01
First Quarter 2008		30.15		25.00		26.13
Second Quarter 2008		26.50		23.99		24.99
Third Quarter 2008		25.60		22.76		22.76
Fourth Quarter 2008		22.00		14.21		15.99

New York Stock Exchange

(U.S.$ per ADS)

Period	High		Low		Close
First Quarter 2007		30.75		24.10		28.34
Second Quarter 2007		33.55		28.51		32.25
Third Quarter 2007		35.11		27.14		32.06
Fourth Quarter 2007		32.61		26.04		30.77
First Quarter 2008		33.34		27.39		29.12
Second Quarter 2008		31.24		27.56		29.60
Third Quarter 2008		31.00		21.59		24.38
Fourth Quarter 2008		24.60		12.75		14.50

Mexican Stock Exchange

(Nominal pesos per Share)

Month	High		Low		Close
December 2008		18.00		14.21		15.99
January 2009		16.99		14.01		15.64
February 2009		18.00		13.03		13.03
March 2009		14.69		11.85		13.80
April 2009		17.48		13.00		17.48
May 2009		20.00		16.00		19.12

New York Stock Exchange

(U.S.$ per ADS)

Period	High		Low		Close
December 2008		16.50		12.75		14.50
January 2009		15.30		12.00		13.50
February 2009		15.29		9.60		11.70
March 2009		12.70		9.03		11.35
April 2009		15.00		11.58		15.00
May 2009		18.50		15.20		17.89

B.	Plan of Distribution

Not applicable.

Markets

Trading on the Mexican Stock Exchange

The Mexican Stock Exchange, located in México City, is the only stock exchange in México. Founded in 1894. Since 2008, the Mexican Stock Exchange has been a public company, The brokerage houses are currently the only entities authorized to trade on the floor of the Mexican Stock Exchange.

Trading on the Mexican Stock Exchange takes place principally through an automated inter-dealer quotation system known as SENTRA, which is open for trading between the hours of 8:30 a.m. and 3:00 p.m., México City time, each business day. Each trading day is divided into six trading sessions with ten-minute periods separating each session. Trades in securities listed on the Mexican Stock Exchange can, subject to certain requirements, also be realized off the Exchange. Due primarily to Mexican tax considerations, however, most transactions in listed securities are effected through the Exchange. The Mexican Stock Exchange operates a system of automatic suspension of trading in Shares of a particular issuer as a means of controlling excessive price volatility, but under current regulations this system does not apply to securities such as the Units that are directly or indirectly (for example, through ADSs) quoted on a stock exchange outside México.

Settlement is effected two business days after a share transaction on the Mexican Stock Exchange. Deferred settlement, even by mutual agreement, is not permitted without the approval of the CNBV. Most securities traded on the Mexican Stock Exchange are on deposit with S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., (Central Securities Depository for the Mexican Securities Market, or “Indeval”), a privately owned central securities depositary that acts as a clearing house, depositary, custodian and registrar for Mexican Stock Exchange transactions, eliminating the need for physical transfer of securities.

The Mexican Stock Exchange is one of Latin America’s largest exchanges in terms of market capitalization, but it remains relatively small and illiquid compared to major world markets, and is therefore subject to greater volatility. There is no formal over-the-counter market for securities in México.

The market value of securities of Mexican companies is, to varying degrees, affected by economic and market conditions in other emerging market countries.

Market Regulation

The predecessor of the CNBV was established in 1946 to regulate stock market activity. The Ley del Mercado de Valores (“Securities Market Law”) of 1975, as amended, regulates the securities markets and brokerage houses and sets standards for the registration of brokers in the Intermediaries Section of the Registro Nacional de Valores e Intermediarios (National Registry of Securities and Intermediaries, or “RNVI”), such registration being a prerequisite to becoming a member of the Mexican Stock Exchange. Prior to registration in the RNVI, a brokerage house must be authorized by the Ministry of Finance upon the recommendation of the CNBV. Legislative provisions under NAFTA allow foreign securities firms in a NAFTA country to establish and control brokerage firms in México. There are several foreign brokerage houses authorized to operate in México. In addition, a number of other foreign brokerage firms have submitted preliminary applications to be authorized to operate on the Mexican Stock Exchange. The Securities Market Law also empowers the CNBV to regulate the public offering and trading of securities. The governing committee of the CNBV is composed of representatives of the Ministry of Finance, the Mexican Central Bank, the Comisión Nacional de Seguros y Fianzas (“National Insurance and Bonding Commission”), the Comisión Nacional del Sistema de Ahorro para el Retiro (“National Retirement Savings Fund Commission”) and the CNBV.

Under the Mexican Securities Market Law, the CNBV must be notified before stockholders of a company listed on the Mexican Stock Exchange effect one or more simultaneous or successive transactions resulting in the transfer of 10% or more of such company’s capital stock. The holders of the Shares being transferred in the transactions are also obligated to inform the CNBV of the results of the transactions within three days of completion of the last transaction, or that the transactions have not been completed. The CNBV will notify the Mexican Stock Exchange of such transactions, without specifying the names of the parties involved.

The CNBV and the Mexican Stock Exchange must also be notified in the event of any of the following contingencies:

on the following day of operation if any stockholder of a company listed on the Mexican Stock Exchange effects one or more transactions resulting in the ownership of more than 10% and less of 30% of capital stock;

on the following day of operation if any Related Person increases his ownership of the stock of a company; and

at least 15 days before the operation becomes effective if any stockholder of a company listed on the Mexican Stock Exchange undertakes in a Public Offering one or more transactions resulting in the ownership of more than 30% but less than 50% of capital stock.

In June 2006, the Ley del Mercado de Valores (“Securities Market Law”) was updated. Our bylaws were also updated accordingly, which are available in an English version, in our web page.

Some of the changes, among others, were:

We had to change our name from “Industrias Bachoco S.A. de C.V.” to “Industrias Bachoco, S.A.B. de C.V.”

b) Defines more specifically the concept of “Control” or “Controlled”

c) Defines and assigns specific duties to the General Director or CEO.

d) Defines more precisely and widely the duties of the Board of Directors.

e) Assign more ample responsibilities to the audit committee.

The Statutory Auditor no longer exists for Public Companies, his duties were assumed by the Audit Committee.

D.	Selling Shareholders

Not applicable.

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 was included in the Initial Registration Form F-1, submitted in September 1997. In April 2002, we made changes to our bylaws, which were reported in our annual report for year 2002. In December 2003 and January 2007 we made further changes, the most important are summarized below. An English translation of our bylaws was submitted with our annual report for year 2006 and is incorporated by reference herein and is also available on our web page www.bachoco.com.mx. Aside from these changes, the information contained in the Initial Registration Form F-1 is applicable to this Annual Report.

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

General

The Company was incorporated on April 17, 1980 as a variable capital corporation (sociedad anónima de capital variable) under the laws of México. To fully comply with Mexican laws, the Company modified its name to Industrias Bachoco, S.A.B. de C.V. (sociedad anónima 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. Each Unit consisted of one Series B Share and one Series L Share. 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.

Originally for a period of 10 years after the Global Offering, the Series B Shares will be issuable only in the form of Units and B Units, and the Series L Shares only in the form of Units. Commencing 10 years from the date of the Global Offering, Units will automatically separate into their component Series B Shares and Series L Shares, B Units will automatically separate into their component Series B Shares, and each Series L Share underlying the Units will automatically convert into one Series B Share.

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. The Series L Shares were converted 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. These Shares are currently trading on the Mexican Stock Market. Each ADS still consists of 12 underlying Shares, but they are all Series B Shares.

The Series B Shares had full voting rights and the Series L Shares had limited voting rights. Nevertheless the Series B Shares and the Series L Shares had the same economic rights. Each Series B Share entitled the holder thereof to one vote at any general meeting of the stockholders. The Series L Shares were entitled to vote only with respect to certain limited matters as described under “—Voting Rights and Stockholders’ Meetings.”

The Robinson Bours Stockholders have advised us that they intend to ensure that the Control Trust will hold at least 51% of the Series B Shares at any time outstanding. See “—Foreign Investment Legislation” in this Item.

Registration and Transfer

Series B 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% 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% 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 violate 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% or more of the voting stock of the Company, the fine will be equal to the market value of those Shares, provided that board authorization was not obtained in advance.

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

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

Voting Rights and Stockholders’ Meetings

Each Series B 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. Our board was reformed during our ordinary shareholders meeting held on April 23, 2007, and now consists of eight proprietary shareholder Directors and two independent Directors. The stockholders also appointed four alternate Shareholders 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% (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.

Before September 2006, any holder of Series L Shares representing 10% or more of the outstanding capital stock had the right to appoint one member and one alternate member of the Board of Directors during a Shareholders’ meeting.

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

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

Our bylaws require the approval of holders of at least 95% of the outstanding Shares and the approval of the CNBV for the amendment of the controlling stockholders’ obligation under the bylaws to repurchase Shares and certain other provisions in the event of delisting. See “—Other Provisions—Repurchase in the Event of Delisting.”

For more detail see our bylaws on our webpage at www.bachoco.com.mx

Holders of ADRs are entitled to instruct the Depositary as to the exercise of the voting rights.

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

Moreover, holders of Shares having voting rights, including limited or restricted voting rights or holders of Shares without voting rights that jointly or individually represent 5% (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 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% (ten percent) 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% (ten percent) 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 Federación (“Official Gazette”) or in a newspaper of general circulation in México City. Stockholders’ meetings may be held without such publication provided that 100.0% 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:

(i)

The Board of Directors will be integrated by a minimum of 5 (five) and a maximum of 21 (twenty-one) principal members.

(ii)

At least 25% (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.

(iii)

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

Besides from 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 México 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.

Dividend 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 Series B Shares for their consideration. The holders of Series B Shares, once they have approved the financial statements, determine the allocation of our net profits, if any, for the preceding year. They are required by law to allocate 5% of such net profits to a legal reserve, which is not thereafter available for distribution until the amount of the legal reserve equals 20% of our historical capital stock (before giving effect to the restatement thereof in constant pesos). As of December 31, 2008, 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 Series B 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 bylaws require that any capital increase affected pursuant to a capital contribution be represented by new Series B 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.”

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 Federación (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 ADRs that are U.S. citizens or are located in the United States may be restricted in their ability to participate in the exercise of preemptive rights.

Foreign Investment Legislation

Ownership by foreigners of Shares of Mexican companies is regulated by the Ley de Inversión Extranjera (“Foreign Investment Law”) and by the Reglamento de la Ley para Promover la Inversión Mexicana y Regular la Inversión 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% 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% 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%.

Other Provisions

Fixed and Variable Capital. As a sociedad anónima 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.

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% of the paid in capital stock.

Forfeiture of Shares. As required by Mexican law, our bylaws provide that our current and future foreign stockholders are formally bound to the Mexican Secretaría 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 bylaws of all Mexican corporations unless such bylaws prohibit ownership of capital stock by foreign investors.

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

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% of the voting capital stock, vote against the issuance of these Shares, such issuance can not 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% (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

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

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

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

Submit an annual report to the Board of Directors;

Provide the Board of Directors with its opinion on the matters that pertain to the Auditing Committee, in accordance with the Securities Market Law;

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 his duties, as well as carry out the actions that, in its judgment, may be appropriate in connection with such observations;

Call Shareholders Meetings and cause the items it deems pertinent to be inserted into the agendas of such Shareholder’s Meetings, and

See Article 35 of the Mexican Securities Market Law for more detail.

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% 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 such Series.

Taxation

The following is a general summary of the principal U.S. federal 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.

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 “—Passive Foreign Investment Company Rules.” This summary is based on the federal income tax laws and regulations of the United States and México, 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 México (the “Tax Treaty”) took effect on January 1, 1994. The Tax Treaty was amended by a second 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 México 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.

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 dividends paid with respect to the Shares constituting the Shares or Shares represented by 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 Shares represented by ADSs, and will not be eligible for the dividends-received deduction allowed to corporations under the Internal Revenue Code of 1986, as amended (the “Code”). 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, 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. 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, foreign source income is separated into different “baskets,” and the credit for foreign taxes on income in any basket is limited to the U.S. federal income tax allocable to such income. Dividends paid with respect to Shares or ADSs generally will constitute “passive category income” in most cases. 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 Share, or the Depositary, in the case of Share represented by 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.

Subject to certain exceptions for short-term and hedged positions, and provided that we are not a passive foreign investment company (as discussed below), dividends received by certain U.S. Holders (including individuals) prior to January 1, 2011 with respect to the Shares or ADSs will be subject to U.S. federal income taxation at a maximum rate of 15% if such dividends represent “qualified dividend income.” Dividends paid on the ADSs will be treated as qualified dividend income if (i) 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. 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.

Based on existing guidance, it is not entirely clear whether dividends received with respect to Shares will be treated as qualified dividend income, because the Shares are not themselves listed on a U.S. exchange. In addition, 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 a Shares or an ADS equal to its U.S. dollar cost. 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. 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.

Passive Foreign Investment Company Rules

A non-U.S. corporation generally will be classified as a passive foreign investment company (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% of its gross income is passive income, or (2) on average at least 50% 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 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% 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) with respect to (a) any gain realized on the sale or other disposition of Units 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 Units or ADSs exceed 125% of the average annual distributions the U.S. Holder received on the Units or ADSs during the preceding three taxable years or, if shorter, the U.S. Holder’s holding period for the Units 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 Units 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 would be required to annually file IRS Form 8621 to disclose ownership of an equity interest in a PFIC. 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 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.

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,” a Non-U.S. Holder of Shares or ADSs will not be subject to U.S. federal income or withholding tax on 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 holder is present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met.

U.S. Backup Withholding and Information Reporting

In general, dividends on Shares or 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 holder (i) establishes that it is a corporation or other 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 holder to the payor or intermediary and the payor or intermediary does not have actual knowledge or a reason to know that the certificate is incorrect.

Backup withholding is not an additional tax. The amount of any backup withholding withheld from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s 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.

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 México 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 México, or (ii) such gains are attributable to a permanent establishment or fixed base of such U.S. resident in México.

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 México (a “Mexican Resident”) if he or she has established his or her home in México, 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 México. A Mexican citizen is presumed to be a resident of México for tax purposes unless such person can demonstrate otherwise. If a person is deemed to have a permanent establishment or fixed base in México for tax purposes, such permanent person shall be required to pay taxes in México 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% 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 at the our company headquarters, located at Ave. Tecnológico No.401, Cd. Industrial, Celaya, Guanajuato, 38010, México, for any inspection required. Part of this information is available on our web page, at www.bachoco.com.mx.

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. Since we have liabilities denominated in U.S. dollars, we are exposed to foreign exchange losses when the peso declines in value against the U.S. dollar. The peso has been subject to significant volatility in the past, most recently in the second half of 2008.

All of our sales are priced in Mexican pesos but we have significant costs and expenses in U.S. dollars. A significant portion of our feed cost is priced in U.S. dollars, and other purchases may be influenced by U.S. dollar prices. A devaluation of the peso will accordingly affect our earnings. In addition, the Mexican peso exchange rate can directly and indirectly impact our results of operations and financial position in several respects, including potential economic recession in México resulting from a devalued peso.

In 2006, we experienced a total foreign gain of Ps.40.8 million, due to the net position of our liabilities and assets.

In 2007, we experienced a foreign exchange loss of Ps.3.4 million since the Mexican peso demonstrated low volatility during the year.

During 2008, our net interest position and the impact on the valuation of our financial instruments was a loss of Ps. 1,529.3 million, mainly due to negative results in our exchange rate derivative instruments and grain hedge positions, partially offset by our foreign exchange gain of Ps.160.2 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.

During 2006 and 2007, we have observed different strategies with respect to derivatives which involve call and put options in U.S. dollars.

Even though we did not have debt denominated in U.S. dollars as of December 31, 2008, given our hedge positions, our comprehensive financial cost was strongly affected by the abrupt depreciation of the Mexican peso against the US dollar, especially during the second half of 2008.

At December 31, 2008, we maintained positions in several financial instrument derivatives. For details, please see Note 10 to our 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 works with independent consultants whom make evaluations of our positions and provides us with consulting services. Said companies do not sell any financial instruments to us.

Based on our position in March 2009, we estimate that a hypothetical 10.0% devaluation of the Mexican peso against the U.S. dollar would result in losses of Ps.514.1 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 March 2009, we had borrowings of approximately Ps.616.8 million pursuant to variable rate debt instruments, representing approximately 3.3% of our total assets.

Based on our position on December 31, 2008, 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. 3.1 million per annum. Any such increase would likely be offset by an increase in interest income due to our cash and cash equivalent position.

Feed Ingredients

The largest single component of our cost of sales is the cost of ingredients used to prepare feed, including principally, sorghum, soy meal, corn, fish meal, meat meal and, for certain chicken products, marigold extract. The price of these ingredients is subject to significant volatility resulting, among other factors, from weather, the size of harvests, transportation and storage costs, governmental agricultural policies and currency exchange rates. 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 35.0%, 30.1%, 31.3%, and 36.4% in 2004, 2005, 2006 and 2007 respectively. In 2008 we purchased approximately 48.0% of grain from local sources.

During 2008, grain reached new historically high prices worldwide, due principally to strong demand and alternative uses of grain such as ethanol production. Soybean meal prices also increased, particularly in the second half of the year, as a result of strong demand coupled with lower supply than expected worldwide. Towards the end of 2008, the situation began to change as corn and soybean meal prices started to decline.

Based on results for 2008, we estimate that a hypothetical variation of 10.0% in the cost of our feed ingredients would have an impact of 6.6% 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

Not applicable.

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, 2008. 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.

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, 2008. 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, 2008, 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, 2008, has been audited by KPMG Cádenas Dosal S.C., an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Controls

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’ of Industrias Bachoco, S.A.B. de C.V.

We have audited Industrias Bachoco, S.A.B. de C.V.’s internal control over financial reporting as of December 31, 2008, 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.

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, 2008, based on criteria established in Internal Control-Integral Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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 balance sheet of Industrias Bachoco, S.A.B. de C.V. and subsidiaries, as of December 31, 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2008 and our report dated July 10, 2009 expressed an unqualified opinion on those consolidated financial statements.

Queretaro, Mexico, July 10, 2009.

	Demetrio Villa Michel
	KPMG Cárdenas Dosal, S.C.

ITEM 16.

[Reserved]

ITEM 16.A. Audit Committee Financial Expert

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, controller and persons performing similar functions, as well as to other officers and employees. Our code of ethics is available free of charge upon request through our 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 to us by our independent auditors, Mancera, S.C., and KPMG Cárdenas Dosal, S.C. independent registered public accounting firm. The following amounts were paid in 2007 and 2008; all the amounts are in nominal pesos, prior to taxes:

	Mancera, S.C.				KPMG, Cárdenas Dosal S.C.
	Thousands of Mexican pesos, year ended December 31,
	2007		2008		2007		2008

Audit fees	Ps. 4,456.2		Ps. 3,067.3			—	Ps. 2,573.5
Tax fees		953.5		261.5		—		—
Other fees		—		267.0		—		—
Total fees	Ps. 5,409.7		Ps. 3,595.9			—	Ps. 2,573.5

Audit fees in the above table are the aggregate fees billed by Mancera, S.C., and KPMG Cárdenas Dosal, S.C. in connection with the audit of our annual financial statements and statutory and regulatory audits for the years 2007 and 2008. The total 2008 audit fees to be paid to KPMG Cárdenas Dosal, S.C. amounts Ps. 5,285.0 million.

Tax fees for 2007, in the above table are fees billed by Mancera, S.C. for services related to tax refund claims.

Other fees in the table above are fees related to services such as reviewing Security and Exchange Commission requirements and other services.

Audit Committee Approval Policies and Procedures

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

ITEM 16.D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

ITEM 16.E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

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

Not applicable.

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 he 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;

(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;

NYSE Corporate Governance Rules for Domestic Issuers		Our Corporate Governance Practices

(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

(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:

NYSE Corporate Governance Rules for Domestic Issuers		Our Corporate Governance Practices

		· 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.

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.

NYSE Corporate Governance Rules for Domestic Issuers		Our Corporate Governance Practices

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.

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., Institución de Banca Múltiple, 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., Institución de Banca Múltiple, 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.

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F/A 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:	/s/ DANIEL SALAZAR FERRER
	Daniel Salazar Ferrer
	Chief Financial Officer

Date: July 15, 2009

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

Consolidated Financial Statements

As of

December 31, 2007 and 2008

With Reports of Independent Registered Public

Accounting Firms

F-1

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

AND SUBSIDIARIES

Consolidated Financial Statements

As of December 31, 2006, 2007 and 2008

Content

Reports of Independent Registered Public Accounting Firms

Consolidated Financial Statements:

Balance Sheets	F-5
Statements of Operations	F-6
Statements of Changes in Stockholders’ Equity	F-7
Statements of Changes in Financial Position	F-8
Statements of Changes in Cash Flows	F-9
Notes to the Consolidated Financial Statements	F-10

F-2

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

The Board of Directors and Stockholders

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

We have audited the accompanying consolidated balance sheet of Industrias Bachoco, S. A. B. de C. V. and subsidiaries (the Company) as of December 31, 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended. 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 audit.

We conducted our audit 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 audit provides 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, 2008, and the results of their operations and their cash flows for the year then ended, in conformity with Mexican Financial Reporting Standards.

As disclosed in note 2x to the consolidated financial statements, several new Mexican Financial Reporting Standards were adopted on January 1, 2008.

The accompanying consolidated financial statements as of and for the year ended December 31, 2008 have been translated into United Stated dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated financial statements expressed in thousands of Mexican pesos, have been translated into thousands of United States dollars on the basis set forth in note 2v 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 21 to the consolidated financial statements.

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, 2008, 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 July 10, 2009 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Queretaro, Mexico, July 10, 2009.

	Demetrio Villa Michel
	KPMG Cárdenas Dosal, S.C.

F-3

To the Stockholders of

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

We have audited the accompanying consolidated balance sheets of Industrias Bachoco, S.A.B. de C.V. and subsidiaries as of December 31, 2007, and the related consolidated statements of income, stockholders’ equity and changes in financial position for each of the two years in the period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Industrias Bachoco, S.A.B. de C.V. and subsidiaries at December 31, 2007, and the consolidated results of their operations, stockholders´equity and changes in financial position for each of the two years in the period ended December 31, 2007, in conformity with Mexican Financial Reporting Standards which differ in certain respects from U.S. generally accepted principles (see Note 21).

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, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 27 2008 expressed an unqualified opinion thereon.

Mexico, D.F., June 27, 2008.

	Francisco José Sánchez González
	Mancera, S.C., a member practice of Ernst & Young
	Global

F-4

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

Consolidated Balance Sheets

December 31, 2007 and 2008

(Thousands of mexican pesos-note 2x)

					(Thousands of U.S. dollars) (note 2v)
	2007		2008		2008

Assets

Current assets:
Cash and investments (note 3)	$	3,039,876		1,998,247		144,643
Accounts receivable:
Trade, net (note 4)		765,502		892,207		64,582
Value added and other recoverable taxes		440,945		456,732		33,061

Total accounts receivable		1,206,447		1,348,939		97,643

Inventories, net (note 6a)		3,329,340		3,973,615		287,630
Biological current assets (note 6b)		108,502		139,844		10,123
Derivative financial instruments (note 10a)		123,503		126,164		9,132
Prepaid expenses and other current assets		129,582		154,285		11,168
Land and building available for sale		-		22,771		1,648

Total currents assets		7,937,250		7,763,865		561,987

Property, plant and equipment, net (note 7)		10,256,239		10,689,235		773,741
Biological non-current assets (note 6b)		575,413		681,577		49,336
Intangible assets from labor obligations (note 14)		28,341		-		-
Goodwill, net (note 8)		300,848		300,848		21,777
Other assets		18,333		19,446		1,408

Total assets	$	19,116,424		19,454,971		1,408,249


Liabilities and stockholders' equity

Current liabilities:
Notes payable to banks (note 9a)	$	40,000		40,000		2,895
Current installmet of long-term debt (note 9b)		18,844		194,235		14,059
Account payable		1,138,011		1,651,930		119,575
Related parties (note 5)		26,819		50,336		3,644
Other taxes payable and other accruals (note 12)		243,429		328,602		23,786
Derivative financial instruments (note 10a)		-		919,026		66,524

Total current liabilities		1,467,103		3,184,129		230,483

Long-term liabilities:
Long term debt, excluding current installmens (note 9b)		50,757		391,657		28,350
Deferred income tax (note 16e)		2,375,025		1,719,076		124,435
Labor obligations (note 14)		96,373		80,690		5,841

Total liabilities		3,989,258		5,375,552		389,109

Commitments and contingencies (note 11)

Stockholders' equity (note 15):
Majority interest:
Capital stock		2,294,927		2,294,927		166,118
Additional paid-in capital		743,674		743,674		53,831
Reserve for repurchase of shares		159,455		159,455		11,542
Retained earnings		14,250,225		11,720,612		848,398
Net majority interest income (loss) of the year		1,270,941		(879,048	)	(63,630	)
Minimun liability adjustment of labor obligations (note 14)		(2,512	)	-		-
Deficit from restatement of stockholders' equity		(3,735,254	)	-		-
Derivative financial instruments (note 10c)		98,922		-		-

Total majority interest		15,080,378		14,039,620		1,016,259

Minority interest		46,788		39,799		2,881

Total stockholders' equity		15,127,166		14,079,419		1,019,140

Subsequent event (note 19)

Total liabilities and stockholders' equity	$	19,116,424		19,454,971		1,408,249

See accompanying notes to consolidated financial statements

F-5

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

Consolidated Statements of Operations

Years ended December 31, 2006, 2007 and 2008

(Thousands of mexican pesos-note 2x, except per share amount)

										(Thousands of U.S. dollars) (note 2v)
	2006			2007			2008			2008

Net revenues	$	15,550,965			18,219,647			20,125,321			1,456,773
Cost of sales (note 5)		(12,052,986	)		(14,477,861	)		(17,482,468	)		(1,265,470	)

Gross profit		3,497,979			3,741,786			2,642,853			191,303
Selling, general and administrative expenses (note 5)		2,071,553			2,245,522			2,412,788			174,650

Operating income		1,426,426			1,496,264			230,065			16,653

Other income (expense), net (note 17)		18,427			69,571			(20,958	)		(1,517	)

Comprehensive financial results:
Interest income		302,910			363,016			173,694			12,573
Valuation effects of financial instruments (note 10)		-			(44,137	)		(1,666,821	)		(120,653	)
Interest and financial expenses		(131,852	)		(141,578	)		(36,202	)		(2,620	)
Net interest income (expense) and valuation effects of financial instruments		171,058			177,301			(1,529,329	)		(110,700	)
Foreign exchange gain (loss), net		40,782			(3,351	)		160,166			11,594
Monetary position loss		(150,438	)		(154,814	)		-			-

Comprehensive financial results, net		61,402			19,136			(1,369,163	)		(99,106	)

Income (loss) before income taxes and minority interest		1,506,255			1,584,971			(1,160,056	)		(83,970	)

Income tax benefit (expense) (note 16d)		(599,126	)		(312,745	)		274,019			19,835

Net consolidated net income (loss)		907,129			1,272,226			(886,037	)		(64,135	)

Net majority interest income (loss)		906,186			1,270,941			(879,048	)		(63,630	)
Minority interest		943			1,285			(6,989	)		(505	)

Consolidated net income (loss)	$	907,129			1,272,226			(886,037	)		(64,135	)

Weighted average outstanding (shares in thousands)		599,571			600,000			600,000			600,000

Net majority interest income (loss) per share	$	1.51			2.12			(1.46	)		(0.11	)

See accompanying notes to consolidated financial statements.

F-6

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

Consolidated Statements of Stockholders' Equity

Years ended December 31, 2006, 2007 and 2008

(Thousand of mexican pesos-note 2x, except per share amount)

	Number of											Net majority			Minimun			Deficit from
	shares of											interest			liability			restatement
	capital						Reserve for					income			adjustment			of			Derivative									Total
	stock		Capital		Additional		repurchase of		Retained			(loss) of the			of labor			stockholders'			financial ins-			Total majority			Minority			stockholders'
	(thousands)		stock		paid in capital		shares		earnings			year			obligations			equity			truments			interest			interest			equity

Balances as of December 31, 2005		599,080	$	2,294,682		726,070		159,455		12,177,287			1,908,535			(3,336	)		(3,713,627	)		(92,374	)		13,456,692			46,366			13,503,058
Transfer of prior year's net income based on stockholders' meeting held on April 2006		-		-		-		-		1,908,535			(1,908,535	)		-			-			-			-			-			-
Sales of repurchased shares		920		245		17,604		-		-			-			-			-			-			17,849			-			17,849
Cash dividends paid (note 15b)		-		-		-		-		(378,075	)		-			-			-			-			(378,075	)		-			(378,075	)
Comprehensive income, net of taxes (note 2o)		-		-		-		-		-			906,186			2,420			(40,288	)		92,744			961,062			(940	)		960,122

Balances as of December 31, 2006		600,000		2,294,927		743,674		159,455		13,707,747			906,186			(916	)		(3,753,915	)		370			14,057,528			45,426			14,102,954
Transfer of prior year's net income based on stockholders' meeting held on April 2007		-		-		-		-		906,186			(906,186	)		-			-			-			-			-			-
Cash dividends paid (note 15b)		-		-		-		-		(363,708	)		-			-			-			-			(363,708	)		-			(363,708	)
Comprehensive income, net of taxes (note 2o)		-		-		-		-		-			1,270,941			(1,596	)		18,661			98,552			1,386,558			1,362			1,387,920

Balances as of December 31, 2007		600,000		2,294,927		743,674		159,455		14,250,225			1,270,941			(2,512	)		(3,735,254	)		98,922			15,080,378			46,788			15,127,166
Transfer of prior year's net income based on stockholders' meeting held on April 2008		-		-		-		-		1,270,941			(1,270,941	)		-			-			-			-			-			-
Cash dividends paid (note 15b)		-		-		-		-		(353,880	)		-			-			-			-			(353,880	)		-			(353,880	)
Write-off of additional deferred tax liability (note 16)		-		-		-		-		288,580			-			-			-			-			288,580			-			288,580
Reclasification of deficit from restatement of stockholders' equity (note 2x)		-		-		-		-		(3,735,254	)		-			-			3,735,254			-			-			-			-
Comprehensive loss, net of taxes (note 2o)		-		-		-		-		-			(879,048	)		2,512			-			(98,922	)		(975,458	)		(6,989	)		(982,447	)

Balances as of December 31, 2008		600,000	$	2,294,927		743,674		159,455		11,720,612			(879,048	)		-			-			-			14,039,620			39,799			14,079,419

See accompanying notes to consolidated financial statements.

F-7

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

Consolidated Statements of Changes in Financial Position

(Thousands of mexican pesos-note 2x)

Years ended December 31, 2006 and 2007

	2006			2007
Operating activities:
Net income	$	907,129			1,272,226
Add charges to operations not requiring funds:
Depreciation		537,383			571,393
Deferred income tax		346,110			169,716
Labor obligations, net period cost		37,464			42,112

Funds provided by operations		1,828,086			2,055,447

Changes in operating assets and liabilities:
Accounts receivable		(51,435	)		(336,083	)
Inventories and biological assets		(535,933	)		(1,140,124	)
Prepaid expenses and others current assets		(11,081	)		(31,463	)
Accounts payable		364,813			300,566
Related parties		6,002			14,169
Taxes payable and other accruals		(73,193	)		(45,534	)
Labor obligations, plan contributions		(27,576	)		(32,617	)
Derivative financial instruments		(6,407	)		(35,769	)

Funds provided by operating activities		1,493,276			748,592

Financing activities:
Proceeds from of long-term debt		-			40,000
Proceeds from notes payable to bank		-			40,000
Payment of long-term debt and notes payable to bank		(104,836	)		(13,963	)
Constant pesos effect on notes payable to banks and long-term debt		(6,081	)		(1,638	)
Cash dividends paid		(378,075	)		(363,708	)
Sales of Company's own shares, net		17,849			-

Funds used in financing activities		(471,143	)		(299,309	)

Investing activities:
Acquisition of property, plan and equipment, net		(856,227	)		(991,737	)
Investment in securities		(394,004	)		(12,001	)
Other assets		(2,060	)		(1,561	)

Funds used in investing activities		(1,252,291	)		(1,005,299	)

Net increase (decrease) in cash and equivalents		(230,158	)		(556,016	)
Cash and equivalents at beginning of year		3,420,045			3,189,887

Cash and equivalents at end of year		3,189,887			2,663,871
Investment in securities		394,004			406,005
Cash and investment at end of year	$	3,583,891			3,039,876

See accompanying notes to consolidated financial statements.

F-8

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

Consolidated Statement of Cash Flows

Year ended December 31, 2008

(Thousand mexican pesos)

				Thousands of
				U.S. dollars
				(note 2v)

	2008			2008
Cash flows from operating activities:
Loss before income taxes and minority interest	$	(1,160,056	)		(83,970	)
Items relating to investing activities:
Valuation effects of financial instruments		1,666,821			120,653
Depreciation and amortization		616,358			44,615
Loss on sale of plant and equipment		49,485			3,582
Interest income		(173,694	)		(12,573	)
Item relating to financing activities:
Interest expense		36,202			2,620

Subtotal		1,035,116			74,927

Derivative financial instruments		(747,795	)		(54,129	)
Accounts receivable, net		(151,635	)		(10,976	)
Recoverable taxes and other assets		52,972			3,834
Inventories and biological assets		(784,442	)		(56,781	)
Prepaid expenses and other current assets		(24,703	)		(1,788	)
Trade accounts payable, taxes payable and other accruals		596,229			43,158
Income taxes paid		(147,426	)		(10,671	)
Accounts payable to related parties		23,517			1,702
Labor obligations		15,170			1,098
Deferred tax related to derivative financial instruments in stockholders' equity		(23,204	)		(1,679	)
Assets available for sale		2,159			156

Net cash used in operating activities		(154,042	)		(11,149	)

Cash flows from investing activities:
Acquisition of property, plant and equipment		(1,156,168	)		(83,690	)
Proceeds from sale of plant and equipment		57,329			4,150
Increase in other non-current assets		(1,113	)		(80	)
Interest collected		173,694			12,573

Net cash used in investing activities		(926,258	)		(67,047	)

Cash flows from financing activities:
Equity component of derivative financial instruments		(98,922	)		(7,160	)
Dividends paid		(353,880	)		(25,615	)
Proceeds from loans		535,100			38,733
Interest paid		(33,339	)		(2,414	)
Asset tax recovery		8,521			616
Principal payments on loans		(18,809	)		(1,361	)

Net cash provided by financing activities		38,671			2,799

Net decrease in cash and investments		(1,041,629	)		(75,397	)

Cash and investments:
At beginning of year		3,039,876			220,040

At end of year	$	1,998,247			144,643

See accompanying notes to consolidated financial statements.

F-9

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(1)	Organization and Business Activity-

Industrias Bachoco, S.A.B. de C.V. and subsidiaries (collectively “Bachoco” or the “Company”) 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, S.A.B. de C.V. is the controlling company of a group of subsidiaries.

In June 2006, the new Securities Trading Act came into effect, which, among other provisions, established that corporations listed on the Mexican Stock Exchange must change their entity names from variable capital stock corporation (S.A. de C.V.) to variable capital stock market corporation (S. A. B. de C.V.); as of February 1, 2007, the Company’s name is Industrias Bachoco, S.A.B. de C.V., in compliance with the aforementioned law.

On July 10, 2009, the accompanying financial statements and related notes were authorized by the Company’s Finance Director, Daniel Salazar Ferrer, for the Audit Committee, Board of Directors and Stockholders’ meeting approval.

(2)	Accounting Policies and Practices-

The preparation of 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 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 no limited to, the carrying amount of property, plant and equipment, and goodwill; valuation allowances for receivables, inventories and deferred income tax assets; valuation of financial instruments; and assets and obligations related to employee benefits. Actual results could differ from those estimates and assumptions.

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

F-10

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

The Company’s consolidated financial statements are prepared in accordance with Mexican Financial Reporting Standards (Mexican FRS) in effect as of the balance sheet date (see note 2x). The significant accounting policies and practices observed by the Company in the preparation of the accompanying financial statements are described below:

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 minority interest.

Intercompany balances, investments and 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 was based on the audited financial statements of the issuing companies, which have been prepared in accordance with Mexican FRS.

The accompanying consolidated financial statements include the following consolidated subsidiaries as of December 31, 2006, 2007 and 2008:

	Percentage equity interest
	2006		2007		2008
Acuícola Bachoco, S.A. de C.V.		100		100		100
Aviser, S.A. de C.V.		100		100		100
Bachoco, S.A. de C.V. (“BSACV”) (Consolidated)		100		100		100
Bachoco Comercial, S.A. de C.V.		-		100		100
Campi Alimentos, S.A. de C.V.		100		100		100
Huevo y Derivados, S.A. de C.V.		97		97		97
Operadora de Servicios de Personal, S.A. de C.V.		100		100		100
Pecuarius Laboratorios, S.A. de C.V.		64		64		64
Secba, S.A. de C.V.		100		100		100
Sepetec, S.A de C.V.		100		100		100
Servicios de Personal Administrativo, S.A. de C.V.		100		100		100
Induba Pavos, S.A. de C.V.		100		100		100

(Continued)

F-11

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

The main subsidiaries of the group are as follows:

- Bachoco, S.A. de C.V. (“BSACV”) (Consolidated)

This company is engaged in breeding, processing and marketing of poultry (chicken and eggs).

- Campi Alimentos, S.A. de C.V.

- Acuícola Bachoco S.A. de C.V.

These companies are engaged in producing and marketing of balanced animal feed.

- 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.

On December 2006 and July 2007, the subsidiaries Induba Pavos, S.A. de C.V. and Bachoco Comercial, S.A. de C.V. were incorporated, respectively. Both entities have 100% ownership from their holding company, Industrias Bachoco, S.A.B. de C.V. These entities are engaged in the import and trading of turkey.

Revenue recognition-

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

- There is evidence of an arrangement.

- Delivery has occurred.

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

- Collectability is reasonably certain.

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

(Continued)

F-12

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Recognition of the effects of inflation on financial information-

The accompanying consolidated financial statements have been prepared in accordance with Mexican FRS in effect as of the balance sheet 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 México (central bank) (see note 2x).

Cumulative inflation percentages of the current and three preceding years and the indexes used in recognizing inflation through such year are as follows:

December 31	NCPI		Inflation
			Yearly			Cumulative

2008		133.761		6.53	%		18.84	%
2007		125.564		3.76	%		11.56	%
2006		121.015		4.05	%		7.51	%
2005		116.301		3.33	%		3.33	%

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. Based on such amendment, the Company restated the appraised value at December 31, 1996 and property, plant and equipment acquisitions since January 1, 1997 until December 31, 2007 are carried at cost adjusted by the NCPI.

(Continued)

F-13

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

- Stockholders’ equity

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

- Net monetary position loss

Until December 31, 2007, the net monetary position loss represented the impact of inflation on monetary assets and liabilities at the beginning of each month updated by inflation factors through year-end. The monetary position loss of each year is included in the statements of operations as a part of the comprehensive financial result (See note 2x).

- Deficit from restatement of stockholders’ equity

Until December 31, 2007, the deficit from restatement of stockholders’ equity comprises the accumulated monetary position loss at the time the provisions of Bulletin B-10 were first applied and the subsequent gain or loss from holding nonmonetary assets, mainly inventories. Deficit from restatement of stockholders’ equity is originated when the replacement cost of these assets is lower than the cost of these assets restated by the NCPI (see note 2x).

Cash and investments-

Cash and investments consist primarily of bank deposits and checking accounts in foreign currencies. At the date of the consolidated financial statements, interest income and foreign exchange gains and losses are included in the statements of operations, under comprehensive financial results.

(Continued)

F-14

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Primary 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” (see note 3).

Trading securities, except held-to-maturity, are recorded at fair value, where peso-denominated debt securities are provided by local price vendors, while US-denominated debt securities are diversified. Held-to-maturity securities are reported 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 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.

Allowance for doubtful accounts-

The Company 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 to take into account current market condition and our customers’ financial condition, the amount of receivables in dispute and the current receivable aging and current payment patterns. Past due balances over 60 days are reviewed individually for collectibility.

Inventories, agricultural products and biological assets-

- Inventories

At December 31, 2008, 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.

Inventories at December 31, 2007, are valued using the average cost method and restated based on the NCPI. The stated value of inventories is not in excess of net realizable value.

(Continued)

F-15

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

-Agriculture

The 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.

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

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.

(Continued)

F-16

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

In conformity with Mexican FRS E-1, biological assets and agricultural products were classified as either current or non-current assets based on their availability 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 replacement cost or net realizable value of inventories during the year and, through 2007, is expressed in thousands of constant pesos as of December 31, 2007.

The Company records the necessary allowances for inventory impairment arising from damaged, obsolete or slow-moving inventories.

Property, plant and equipment-

Property, plant and equipment are initially recorded at acquisition cost and through December 31, 2007, adjusted for inflation by using factors derived from the NCPI (see note 2c).

As of January 1, 2007, as a result of the adoption of MexFRS D-6 “Capitalization of the Comprehensive Cost of Financing”, in which is defined the capitalization of the comprehensive financing cost incurred during the construction or installation of property, plant and equipment in process, which is subsequently restated by applying factors based on the NCPI. The amount of comprehensive financing cost to be capitalized is determined by applying the weighted average interest rate of financing to the weighted average of the investments in qualifying assets made during the qualifying period. In the case of foreign currency denominated financing, comprehensive financing cost includes the related exchange gains or losses. During 2007 the Company did not capitalize any amount due to its immateriality; and during 2008, no comprehensive financial results have been capitalized, as the criteria mentioned above were not met.

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 7).

Minor repairs and maintenance costs are expensed as incurred.

(Continued)

F-17

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Impairment of property, plant and equipment and goodwill-

The Company periodically evaluates the values of long-lived assets of property, plant and equipment and goodwill, 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 flow expected to be generated by the asset. If the 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.

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 basically the same as the remaining useful life of the leased asset; or d) the present value of minimum lease payments is basically 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 accrued lease expense is charged to results of operations as incurred.

The Company classified its leases as operating leases at December 31, 2007 and 2008.

Goodwill-

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

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

At December 31, 2007 and 2008, there was no impairment loss in the value of goodwill shown in the consolidated balance sheet.

(Continued)

F-18

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Liabilities, provisions, 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. Liabilities for loss contingencies are recorded when is probable that a liability has been incurred and the amount thereof 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, provision 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 balance sheet 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.

Employee benefits-

Bachoco has a retirement plan in which all non-union workers 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:

- 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 as required by Mexican labor law.

(Continued)

F-19

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Termination benefits for reasons other than restructuring and retirement to which employees 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, 2008 and for purposes of recognizing benefits upon retirement, the remaining average service life of employees entitled to plan benefits approximates 19.66 years (note 14).

Comprehensive financial results (CFR)-

The CFR includes interest income and expense, foreign exchange gains and losses and valuation of financial instruments and, through 2007, monetary position gains and losses.

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 balance sheet date. Exchange differences arising from assets and liabilities denominated in foreign currencies are reported in operations for the year.

Comprehensive income (loss)-

Comprehensive income (loss) consists of the net income or loss for the year, plus the result from holding non-monetary assets, the tax effect of the items which are recorded directly in stockholders’ equity, the effective portion of the unrealized gain or loss on cash flow hedges, the minimum liability adjustment of labor obligations and the minority interest as required by Mexican FRS B-4 “Comprehensive Income”.

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 (OTC), based on valuation techniques and inputs usually accepted in the financial sector.

(Continued)

F-20

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

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 as assets or liabilities within derivative instruments; with subsequent changes in their fair value, recognized within income of the year in which such changes occur, as derivatives effects under comprehensive financial results.

Derivative Financial Instruments, and Risk Hedging activities-

As of December 31, 2008

The Company uses selected financial derivative instruments to protect itself against adverse price fluctuations in agriculture commodities, such as corn and sorghum. Said 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, a dependent entity ascribed to Mexico’s Secretary of Farming and Agriculture) 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 Alimentación), 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) 0% 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) a 50% of the payment of the option’s premium, and 100% of the benefit.

Designation of the derivates offered through ASERCA is documented every time derivatives are contracted to hedge price risk and when these hedging relationships meet all of the hedge accounting requirements. Said 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.

(Continued)

F-21

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

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

The Company needs to revoke 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 effectiveness to compensate for the changes in the fair value or cash flows of the hedged item, or when at the Company’s discretion, the entity decides to cancel the hedge relationship.

Certain financial derivative instruments are entered into from an economic perspective and are neither designated nor qualify for hedge accounting purposes, hence are treated accounting wise, as trading derivatives, with fluctuations in the fair value of these derivatives recognized within comprehensive financing operations.

In the case of hedges with options or combinations of 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 or liabilities within derivative financial instruments, with subsequent changes in their fair values recognized in the comprehensive financial results in the case of fair value hedges, while under cash flow hedge are recognized within the other comprehensive income (OCI) account of stockholders’ equity, in the case of cash flow hedges.

The Company has established an Investments and Risk Committee which sets the guidelines and strategies to be followed in terms of the use of investments and derivatives use.

(Continued)

F-22

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

At December 31, 2007

Derivative Financial hedging instruments

The Company uses derivative financial instruments to hedge certain risks and reduce its financial risks exposure.

The Company is exposed to exchange rate (Mexican Peso-U.S. dollars) fluctuations and fluctuations in the price of grains (corn and sorghum) within its normal course of business. The Company manages these risks through a program that includes the use of derivative financial instruments (FDI).

Company’s policy is to establish a 25 to 30% range of protection on the total amount of its annual needs for U.S. dollars. It also uses OTC (non-listed) options and futures agreements exchange rate variability in its short-tern U.S. dollar cash out flow needs, considering these as a forecasted transaction under the cash flow hedge model. Basically, the Company generally uses FDIs for hedging intention, unless they are not designated or do not meet accounting requirements for hedging purposes. These instruments are signed with well-positioned financial institutions.

The FDIs are factored in and documented according to the accounting compliance established in FRS Financial Reporting Standard (FRS) C-10 “Financial instruments, derivates and hedging operations” (Mexican GAAP) which is very similar to US GAAP equivalent (SFAS-133 “Accounting for Derivative Instruments and Hedging Activities”.

(Continued)

F-23

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

The Company has entered into agreements on the following types of FDI:

Options

When options are acquired through a premium payment, these FDI grant the buyer the right, albeit not the obligation to buy (purchased Call) or sell (purchased Put) a price of a commodity or an exchange rate (U.S. dollars parity level against the Mexican Peso in this case) at a fixed price or exchange rate known as the Option’s strike price or level of exercise, at a certain date on which the option contract matures or expires. In the case of entering as the issuer or seller of the same options, the Company is obligated to sell (sold Put) or to buy (sold Call) if the buyer exercises the sold option. More than 90% of the cases in which Bachoco contracts combinations of bought and sold options do not involve the payment of a net premium and these instruments were neither designated nor qualify for being designated as hedges under one of the permissible hedge accounting models.

During 2007, the Company entered into bought options under the program offered by ASERCA in order to hedge the risk of lower prices on certain grains prices such as corn, sorghum and wheat it contracts associated to the Farming Contract program. Under this program, the Company agrees the terms to buy certain amount of physical grain volumes and abide by the price established in U.S. dollars for each Metric Ton that must be paid against delivery of future productions that domestic farmers will supply on certain crop dates. ASERCA provides the Company with Put-type of options upon presenting said agreements that allows it to hedge if CBOT prices fall below those agreed upon prices with the local farms. By participating in this government sponsored program, the Company receives 50% of subsidy on the option’s market premium from ASERCA (if the price goes up) or a loan that will be recovered by ASERCA (if the price goes down). The results of using these financial derivative instruments ensures that the Company obtains protection from falling prices in regard to the price it contractually agreed to pay binding farmers as firm commitments to them.

(Continued)

F-24

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Futures

Futures are contracts that bind two entities to exchange a commodity good, and index, exchange rate or a value (grain prices, in this specific case) at a future date, at an established amount, quality and price. Different from options, this type of contracts do not consider premium payments or receptions and can simply exist symmetrically as a corporate profit or loss when taken long futures positions in the event that the price of the grain in the market happens to be higher than the agreed price (profit) or the market price is lower than the amount established in the agreement (loss). The Company contracted futures through New Age (FIMAT) in fiscal year 2007. FIMAT is a broker that specializes in Futures and Options on Futures listed in organized markets such as CBOT. The Company is required to keep a deposit or margin requirement that guarantees its open position on futures contracts, which generates market interests and represents a safeguard that ensures the honoring of the signed agreement. This margin account is debited or credited on a daily basis by New Age, based on market settlement prices as of the closing time, impacting with respective losses or gains. When the market moves against the Company’s open position, the margin account is consumed and additional margin requirements (intraday margin calls) are needed to be established otherwise, the position is closed with a realized loss.

Effectiveness testing

In order to access special hedge accounting requirements, both prospective assessment and retrospective effectiveness testing of the hedging relationship (hedge item and designated hedge instrument) is needed. Said effectiveness is measured on a periodic basis. In the case of cash flow hedges, an instrument in which the variability in the present value changes in the contractual or expected cash flows of the hedged item attributable to the hedged risk are satisfactorically offset by the hedge instrument (FDI), it is then considered that the hedge relationship is highly effective (a either period by period or cumulative dollar offset in the range of 80% to 125% is to be considered as to meet hedge effectiveness goals).

FRS C-10 establishes that the effective portion of a profit or loss obtained from a cash flow hedging derivative is recognized in the comprehensive profit (OCI, within stockholders equity), net of deferred taxes, while the ineffective portion is recognized directly in the earnings.

(Continued)

F-25

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Income taxes (Income Tax (IT), Asset Tax (AT), 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.

Deferred IT, IETU and, from January 1, 2008 deferred ESPS, 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, and in the case of IT and IETU, for tax loss carryforwards and tax credits. 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.

At December 31, 2007, a deferred income tax liability determined by treating the stockholders’ equity as a single temporary item is greater than the amount determined by using the asset and liability method, and thus, the Company recognized an additional deferred tax liability of $288,580 in 2007 to account for this difference.

Effective January 1, 2008, Mexican FRS D-4 “Tax on earnings” supersedes Bulletin D-4 and Circular 54. Mexican FRS D-4 establishes the asset and liability method as the only method in determining deferred taxes. Therefore, the Company wrote-off $288,580 against retained earnings, which relates to the additional deferred tax liability previously determined as at December 31, 2007 under the stockholders’ equity method.

Until December 31, 2007, deferred ESPS was recognized only for timing differences arising from the reconciliation of book income to income for profit sharing purposes, for which it was reasonably estimated that a future liability or benefit would arise and there was no indication that the liabilities or benefits would not materialize.

(Continued)

F-26

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Statement of operations-

The Mexican FRS B-3 “Statement of Operations”, that came into effect in 2007, states that costs and expenses in the Company’s statement of operations are presented based on their function, since such classification allows for an accurate evaluation of both operating income and gross profit margins.

Although Mexican FRS B-3 “Statement of Operations”, does not require the presentation of operating income, this caption is shown in the income statement, since operating income is an important indicator used to evaluate the Company’s performance. Operating income consists of revenues as well as operating costs and expenses and thus excludes other income (expenses).

The presentation of the statement of operations for the year ended December 31, 2006, is in accordance with the presentation used in 2007 and 2008.

Net majority interest income (loss) per share-

Net majority interest income (loss) per share has been computed based on majority interest net income (loss) and on the weighted average number of shares outstanding, as established in Mexican FRS B-14 “Profit per Share”.

Financial information by segments-

Mexican 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 Mexican 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.

The financial information by segment is disclosed in note 18.

(Continued)

F-27

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Convenience translation-

United States thousands dollars amounts as shown in the accompanying consolidated balance sheet as of December 31, 2008, as well as in the consolidated statements of operations and cash flows for the year ended December 31, 2008, have been included solely for the convenience of the reader and are translated from Mexican pesos to US dollars as a matter of arithmetic computation only, at an exchange rate of $13.815 to one U.S. dollar, which was the exchange rate at December 31, 2008. Such translation should not be construed as a representation that the Mexican peso amounts could have been or could be converted into U.S. dollars at this rate.

Reclassifications-

Certain captions shown in the 2006 and 2007 consolidated statement of operations and in the consolidated statements of changes in financial position as originally issued have been reclassified for uniformity of presentation with the 2008 financial statements, in conformity with Mexican FRS B-1, “Accounting Changes and Error Corrections”.

(Continued)

F-28

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

New accounting pronouncements-

The Mexican Board for Research and Development of Financial Reporting Standards (Consejo Mexicano para la Investigación y Desarrollo de Normas de Información Financiera or CINIF) has issued the following Mexican FRS effective for years beginning after December 31, 2007. Early application is not permitted.

(a)

Mexican FRS B-10 “Effects of inflation" – 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 (IFRS) 2. The principal considerations established by this FRS are:

(i)

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%; and b) non-inflationary economic environment, when inflation over the aforementioned period is less than 26%.

For case a), the comprehensive recognition of the effects of inflation is required, (similarly to Bulletin B-10 being superseded). 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 this case 2008), 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 as non-inflationary should be recognized retrospectively.

(ii)

Price index – the use of the National Consumer Price Index (NCPI) or the change in the value of the Investment Unit (UDI) may be used for determining the inflation for a given period.

(iii)

Valuation of inventories and of foreign machinery and equipment – The possibility of using replacement costs for inventories and specific indexation for foreign machinery and equipment is no longer allowed.

(Continued)

F-29

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(iv)

Equity adjustment for non-monetary Assets – On the effective date of this FRS, the unrealized portion of the equity adjustment for non monetary assets, which is maintained in stockholders' equity, should be identified to be reclassified to earnings of the year when the originating item is realized. The realized portion or when is not practical to identify the unrealized portion, the realized and unrealized portions should be reclassified to retained earnings.

(v)

Monetary Position Gains or Losses (included in Deficit/Excess in Equity Restatement) will be reclassified to retained earnings on the effective date of this FRS.

As a result of the adoption of this FRS, at January 1, 2008 the stockholders' equity accounts were reclassified as shown on the consolidated statement of stockholders' equity.

The 2007 consolidated financial statements are presented expressed in constant pesos at December 31, 2007, the date on which the comprehensive method for recognizing the effects of inflation was last used.

(b)

Mexican FRS D-3 “Employee benefits”- Mexican FRS D-3 supersedes Bulletin D-3 "Labor Obligations", the sections applicable to Employee Statutory Profit Sharing (ESPS) of Bulletin D-4 and IFRS 4. The principal considerations established by this FRS are:

(i)

Elimination of the recognition of an additional liability and the related intangible asset or any comprehensive item as a separate element of stockholders' equity.

(ii)

Employee benefits are classified in four principal categories; direct short-term and long term, termination and post-employment benefits. Mexican FRS 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 benefits actuarial gains or losses may be immediately recognized in results of operations or amortized over the expected service life of the employees.

(Continued)

F-30

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(iii)

The use of nominal rates and the incorporation of the term salary increases due to promotions.

(iv)

ESPS, including deferred ESPS, shall be presented in the statement of operations as ordinary operations, preferably within "other income and expenses". Furthermore, Mexican FRS D-3 establishes that the asset and liability method should be used for determining deferred ESPS; any effects arising from the change in method shall be recognized in retained earnings, without restatement of prior years’ financial statements.

In 2008, as a result of the adoption of this Mexican FRS, the intangible asset of $28,341 reflected in the consolidated balance sheet and the labor obligation minimum liability adjustment of $2,512 reflected in consolidated statements of stockholders equity as of December 31, 2007, were eliminated. Furthermore, for 2008, amortization of unamortized items resulted in an approximate gain of $845.

(c)

Mexican FRS D-4 “Taxes on income”- Mexican FRS D-4 supersedes Bulletin D-4 "Accounting for income and asset taxes and employee statutory profit sharing" and Circulars 53 and 54. The principal considerations established by this Mexican FRS are:

(i)

the accounting treatment of ESPS (current and deferred) is transferred to Mexican FRS D-3, as mentioned in paragraph (b) above.

(ii)

Deferred income tax liabilities at December 31, 2007 were determined by considering the stockholders’ equity as a temporary liability, which resulted in an amount that surpassed the amount determined by the asset and liability method. Consequently, the Company recognized an additional liability in the amount of $288,580 in 2007, to recognize the greater amount of the deferred taxes determined by the asset and liability method and the amount determined by considering the stockholders’ equity as the only temporary item.

Effective January 1, 2008, the asset and liability method is the only acceptable method to determine deferred taxes. Therefore, the Company write-off $288,580 that relates to the additional deferred tax liability referred to above, against retained earnings.

(Continued)

F-31

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(d)

Mexican FRS B-2 “Statement of cash flows”- Mexican FRS B-2 supersedes Bulletin B-12 "Statement of changes in financial position" and paragraph 33 of Bulletin B-16. The principal considerations established by this Mexican FRS are shown below:

(i)

Instead of the statement of changes in financial position, the financial statements shall include the statements of cash flows for all the periods presented comparatively with those of the current year, except for financial statements of periods prior to 2008;

(ii)

Cash inflows and cash outflows are reported in nominal currency units, thus not including the effects of inflation;

(iii)

Two alternative preparation methods (direct and indirect) are established, without stating preference for either method. Furthermore, cash flows from operating activities are to be reported first, followed by cash flows from investing activities and lastly by cash flows from financing activities;

(iv)

Captions of principal items are to be reported gross, with certain exceptions and require disclosure of the composition of items considered cash equivalents.

Accordingly, the Company presents its consolidated statement of changes in financial position for 2007 and 2006 as issued and the consolidated statement of cash flows for 2008 under the indirect method.

(3)	Cash and investments-

Consolidated cash and investments as of December 31, 2007 and 2008 consist of:

	2007		2008

Cash and bank accounts	$	221,539		228,589

Current primary investment securities (note 10 b)		2,818,337		1,545,737

Restricted cash		-		223,921

	$	3,039,876		1,998,247

(Continued)

F-32

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Restricted cash correspond to margin calls to cover future derivative commitments.

(4)	Trade receivable net-

Trade receivables at December 31, 2007 and 2008, are shown net of an allowance for doubtful accounts for $36,154 and $28,320, respectively.

(5)	Related parties-

The companies mentioned below are considered affiliates, since the Company’s stockholders are also stockholders in such companies.

A summary of related party accounts payable as of December 31, is as follows:

	Relation	2007		2008
Vimifos, S.A. de C.V.	Affiliate	$	21,311	$	39,496
Maquinaria Agrícola, S.A. de C.V.	Affiliate		3,382		4,858
Llantas y Accesorios, S.A. de C.V.	Affiliate		1,688		3,953
Pulmex 2000, S.A. de C.V.	Affiliate		-		905
Frescopack, S.A. de C.V.	Affiliate		-		715
Camiones y Tractocamiones de Sonora, S.A. de C.V.	Affiliate		-		149
Autos y Tractores de Culiacán, S.A. de C.V.	Affiliate		-		106
Autos y Accesorios, S.A. de C.V.	Affiliate		438		76
Alfonso R Bours, S.A. de C.V.	Affiliate		-		48
Distribuidora Automotriz de los Mochis, S.A. de C.V.	Affiliate		-		28
Qualyplast, S.A. de C.V.	Affiliate		-		2
		$	26,819	$	50,336

At December 31, 2007 and 2008, balances due to related parties correspond to unsecured current accounts denominated in thousands of pesos that bear no interest and are payable within 30 days.

(Continued)

F-33

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

For the years ended December 31, 2006, 2007 and 2008, the Company had the following transactions with related parties:

Purchases of feed, raw materials and packing supplies	2006		2007		2008

Vimifos, S.A. de C.V.	$	251,931		192,188		283,912
Frescopack, S.A. de C.V.		-		-		128,176
Pulmex 2000, S.A. de C.V.		-		-		15,619
Qualiplast, S.A. de C.V.		-		634		22

Purchases of vehicles, tires and spare parts
Maquinaria Agrícola, S.A. de C.V.		17,585		47,155		54,502
Autos y Tractores de Culiacán, S.A. de C.V.		-		-		26,665
Llantas y Accesorios, S.A. de C.V.		12,289		23,349		22,426
Autos y Accesorios, S.A. de C.V.		33,585		14,985		21,729
Camiones y Tractocamiones de Sonora, S.A. de C.V.		-		-		14,501
Distribuidora Automotriz de los Mochis, S.A. de C.V.		-		8,095		13,687
Alfonso R. Bours, S.A. de C.V.		-		2,171		3,356

Airplane leasing expenses

Taxis Aéreos del Noroeste, S.A. de C.V.		4,196		3,153		2,106

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

(Continued)

F-34

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(6)	Inventories and biological assets-

Inventories consist of the following:

	2007		2008
Raw materials and byproducts	$	2,004,691	$	2,232,409
Medicine, materials and spare parts		369,337		457,106
Finished feed		56,608		71,841
		2,430,636		2,761,356
Agricultural products:
Live chicken		667,022		921,061
Processed chicken		177,719		228,619
Commercial egg		22,551		24,383
Turkey		28,339		35,113
Beef		2,708		2,445
Others		365		638
		898,704		1,212,259
Total	$	3,329,340	$	3,973,615

Biological assets at December 31, 2007 and 2008 consist of the following:

	2007			2008
Current biological assets:
Breeder pigs	$	32,464		$	40,709
Incubatable eggs for fattening		76,038			99,135
Total current biological assets	$	108,502		$	139,844

Non-current biological assets:
Laying and breeder hens	$	202,214		$	248,877
Breeder pigs		27,280			28,040
Laying hens		577,043			681,114
Allowance for productivity declines		(231,124	)		(276,454	)

Total non-current biological assets	$	575,413		$	681,577

The change in the historical value of biological assets and agricultural products to be measured at their fair value presented increases of $10,879 in 2006; $10,882 in 2007; and $16,358 in 2008. Such effects were included in the results of operations each year.

(Continued)

F-35

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(7)	Property, plant and equipment-

Property, plant and equipment at December 31consists of the following:

	Useful lives (years)		2007			2008
Buildings, farm structures and equipment		7-27	$	13,987,063		$	14,914,390
Office, furniture and equipment		3		227,183			237,727
Transportation equipment		6		1,162,747			1,207,229
				15,376,993			16,359,346
Accumulated depreciation				(6,702,709	)		(7,164,781	)
Net				8,674,284			9,194,565
Land				856,486			897,273
Construction in progress and advance payments				725,469			597,397

Total			$	10,256,239		$	10,689,235

Depreciation expense for the years ended December 31, 2006, 2007 and 2008, amounted to $537,383, $571,393 and $616,358, respectively.

Certain property, plant and equipment guarantee part of the loans mentioned in note 9.

(8)

Goodwill-

In 1999, goodwill was derived from the purchase of the shares of Campi Alimentos, S.A. de C.V. in the amount of $367,135. At December 31, 2005 (the last year of amortization), accumulated amortization aggregates to $66,287. In 2006, 2007 and 2008, goodwill was not amortized as a result of the adoption of Mexican FRS B-7 “Business Acquisitions”.

(9)	Notes payable to banks and long-term debt-

Short-term notes payable to banks, consist of the following:

(Continued)

F-36

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

	2007		2008
Unsecured notes payable to banks:
Denominated in pesos, interest rate: TIIE(1) FIRA(2) rate less 3.00 points	$	40,000	$	40,000

The weighted average interest rate on short-term notes payable at December 31, 2007 and 2008 was 4.93% and 5.73%, respectively. Average interest rates on short-term notes for the years ended December 31, 2007 and 2008 were 4.68% and 5.28%, respectively.

Long-term notes payable to banks, as of December 31, consist of the following:

	2007			2008

Long-term notes payable:

Secured by equipment:
Denominated in pesos, payable in monthly installments through December 2010, at CETES(3) rate plus 2 points.	$	30,400		$	20,500

Secured by shares of the Company, and the subsidiaries as collaterals (note 11f):
Determined in pesos, payable in six quarterly installments beginning in August 2009 and maturing in November 2010 at a rate of TIIE (1) plus 5 points.		-			500,000

Unsecured:
Denominated in Mexican pesos, at TIIE(1) FIRA(2) rate less 3.30 points, with minimum rate of 2.90%, through December, 2010		5,541			4,112
Denominated in Mexican pesos, at TIIE(1) FIRA(2) rate less 1.10 points, with minimum rate of 0.875 points, through December, 2012 and June 2013.		33,660			61,280

Total		69,601			585,892
Less current installments		(18,844	)		(194,235	)

Total long-term debt, excluding current installments	$	50,757		$	391,657

(1) TIIE = Interbank Equilibrium Rate

(Continued)

F-37

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(2) FIRA = Fideicomisos Instituidos en Relación con la Agricultura

(3) CETE = Treasury Bills

Weighted average interest rates on long-term debt at December 31, 2007 and 2008 were 7.80% and 12.92%, respectively. The weighted average interest rate on the Company’s total long-term debt for the years ended December 31, 2007 and 2008 was 7.92%, and 8.45%, respectively.

The weighted average interest rate of the Company’s total debt at December 31, 2007 and 2008 was 6.75% and 12.46%, respectively.

At December 31, 2007 and 2008, unused lines of credit amounted $956,050 and $1,182,574, respectively. In 2007 and 2008, the Company did not pay any fee for unused lines of credit.

The book value of assets collateralizing long-term debt was $137,857 at December 31, 2007 and $129,350 at December 31, 2008.

Maturities of long-term debt as of December 31, 2008, are as follows:

Year	Amount

2010	$	360,902
2011		15,280
2012		11,540
2013		3,935
	$	391,657

Interest expense on loans for the years ended December 31, 2007 and 2008, aggregated to $6,885 and $16,040, respectively.

Bank loans establish certain affirmative and negative covenants. As of June 25, 2009, the Company was in compliance with all these covenants.

(Continued)

F-38

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(10-a)

Financial Instruments and hedging activities as at December 31, 2008-

Derivatives for trading purposes (neither designated or qualified as hedges)

The Company maintains a portfolio of explicit FDI, which are neither designated or qualified as hedges under C-10 and, therefore, their related changes in fair value were recognized as valuation effects of financial instruments within Comprehensive Financial Results, in the results of operations. The related amount for 2008 was $(919,026), and arose from the following derivative instruments, shown on the following pages.

(Continued)

F-39

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

OTC1 foreign currency option structures – finance counter-party in private agreements:

Effects on the

results of

operations

Counter-party

Instrument

Underlying6

Notional

Maturity

RIF

Merril Lynch5

TARNs2

Exchange rate

5,500

April through July

Capital

MXP/USD

US$

2009

753,705

Services Inc

(OTC)

KO FWD3

Exchange rate

2,000

January and May

MXP/USD

US$

2009

(19,478

)

Call Spread

Exchange rate

84,000

January

MXP/USD

US$

2009

(30,639

)

European Call

Exchange rate

1,500

March

MXP/USD

US$

2009

(34

)

Banamex

(OTC)

European Call

Exchange rate

MXP/USD

3,000

US$

January through

March

2009

(586

)

European Put

Exchange rate

MXP/USD

2,000

US$

February through

March

2009

Call Digital

Exchange rate

MXP/USD

600

US$

January though

March

2009

584

TARNs

Exchange rate

21,000

January and April

MXP/USD

US$

2009

59,480

Barclays

TARFs4

Exchange rate

2,000

November

Capital

MXP/USD

US$

2009

96,235

(OTC)

859,284

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.

2 Target Redemption Notes: Options structure on MXP/USD exchange rates that provide the Company with limited earnings when the Mexican peso appreciates, and an unlimited loss when the U.S. dollar appreciates before the Mexican peso.

3 Knock out Forward: this refers to an exchange rate Forward which eliminates or extinguishes both party's rights and obligations when it reaches an exchange rate or barrier level, which was established in the terms of the agreement on the instrument.

4Target Redemption Forward: this is an option structure on MXP/USD exchange rates that provide the Company with limited earnings when the Mexican peso appreciates, and unlimited losses when the U.S. dollar appreciates before the Mexican peso.

5See note 3, collaterals established by Bachoco’s broker.

6MXP means Thousands of Mexican Peso and USD means Thousands of U.S. dollars.

(Continued)

F-40

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Derivatives on prices of farming goods (commodities):

				Effects on the result of operations
Counter-party	Instrument	Underlying	Maturity	RIF


Cargill	Swap	Corn	January 2009	$	16,862
(OTC)
	Swap	Soy bean	January 2009		3,285

New Edge7	Futures	Corn	March 2009		12,001


	Futures	Soy bean	March 2009		(13,151	)

	Call	Corn	March 2009		(727	)

	Puts	Corn	March 2009		41,472

				$	59,742

7New 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 3, collaterals established by the broker for Bachoco.

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.

(Continued)

F-41

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

In regard to the positions on FDI that the Company enters into and that are designated and qualify for hedge accounting purposes on one or more financial risks, its fair value amounted to a total of $126,164 at December 31, 2008. Following are the details on the derivative instruments found accessing special hedge accounting models, their notional dimension, risks and effects, either on the balance sheets or in the statements of operations. The derivatives mentioned below fundamentally offset the effects of the hedged items within the statement of operations, as long as they continue to qualify and be designated for hedge purposes:

Fair value hedges: The Company entered into several firm commitments that are contractual agreements with domestic farmers, to purchase expected volumes of grain crops at a USD-denominated fixed price including basis locks. These agreements were carried as to access hedging instruments under the “farming by contract” program sponsored by ASERCA. These firm commitments create off-balance sheet grain price and foreign exchange risk exposures as well. The ASERCA Put options offering, only hedge the fair value risk of the grain fixed price, hence are designated as fair value hedges under the Fair Value Hedge accounting model, as to hedge against a downside risk, where both effective effects from the derivate (based on intrinsic value changes only, excluding extrinsic value) and from the hedge item for such hedged risk are taken to earnings, where both compensate. The effective changes in the fair value of these firm commitments attributable to price risk, are allocated within the balance sheet as current assets or liabilities until contractual volumes of grain are recognized as inventory, then the same ASERCA put options in their correspondent volume, are re-designated as to hedge the fair value of commodity inventories in accordance with the fair value hedge accounting model, that is, adjusting the book value of such inventory against earnings, up to when these inventories of grain (corn and sorghum) impact earnings as cost of goods sold, then all pending derivate effects allocated as current assets or liabilities coming from the firm commitment period, are then recycled to cost of good sold, as to adjust this for fair value hedging effects.

(Continued)

F-42

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Options listed on corn future, effective at December 31, 2008:

Counter-party	Instrument	Underlying	Term	Effective offsetting effects on comprehensive financial result

ASERCA	Puts	Corn	March And May
			2009	$	126,164

Option type of derivatives entered under the ASERCA program are under the 0% modality for payment of the premium and a 100% benefit with a 60% discount over the initial premium amount.

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.

As the worldwide recession worsened during 2008, international grain prices also experienced a deep downside, hence turned effective the ASERCA Put options held, designated to hedge fixed grain firm commitments, with fair value changes effects on the corn & sorghum8 prices, while both were under firm commitments and/or inventory, were taken to the consolidated balance sheet as inventory fair value hedge adjustment (lowering this) or fair value adjustments recognized as current liabilities on the balance sheet with correspondent offsetting effects against the option’s intrinsic only value changes within comprehensive financial result in the consolidated statement of operations.

8 The sorghum maintains a high correlation with the futures price of corn, however, unlike said corn, it is not traded or listed in commodity organized/listed futures market.

(Continued)

F-43

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Grain purchase firm commitments, subject to fair value hedge relationships9:

Description of the contract	Designated derivative and hedged risk	Changes in the fair value recognized within the financial statements as short term liability

Sorghum purchase agreements	ASERCA Puts that hedge the fair value of these firm commitments, due to falling grain prices.	$	(87,586	)

Grain inventories adjusted to fair value hedge:


Description	Re-designated derivatives and hedged items	Changes in the fair value, recognized as fair value adjustment to the book value of grain inventory within current assets.

Sorghum and corn inventories	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.	$	(38,578	)

9 These represent contracts the Company enters into with an unrelated party that can been 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.

(Continued)

F-44

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(10-b)

Investment in primary financial securities at December 31, 2007 and 2008-

The Company keeps investments in primary financial debt instruments at December 31, 2007 and 2008, both in U.S. dollars and Mexican pesos, as follows:

	2007							2008
	Book value		Fair value		Average interest rates			Book value		Fair value		Interest10 rate

Mexican peso
denominated
debt securities:
Government issued	$	1,097,304		1,097,304				$	564,055		564,055		8.30	%
Bank issued		1,276,109		1,276,109					669,884		669,884		8.95	%
Commercial paper		436,491		436,491					109,330		109,330		9.28	%

	$	2,809,904		2,809,904		6.99	%	$	1,343,269		1,343,269

U.S dollars
denominated
debt securities:
Bank issued	$	8,433		8,433				$	-		-		-
Commercial paper		-		-		-			167,169		167,169		5.31	%

	$	8,433		8,433		0.69	%	$	167,169		167,169

	2008
Held to maturity	Paid price when bought		Impairment		Expected recovery amount		Interest rate

Mexican peso
denominated
debt securities:
Commercial paper	$	48,415	$	13,116		35,299		8.2	%

10 Average interest rate in the company

(Continued)

F-45

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Due to the financial crisis experienced in most economies around the World, several securities were no longer traded actively in the financial markets, hence the Company decided to access INIF 16 “Transfer of accounting category of financial instruments carried for trading purposes”, hence Commercial Paper was transferred to the Held To Maturity category starting October 1, 2008. An impairment effect of $13,116 was immediately recognized considering that these non guaranteed debt securities will not recover their initial paid-in-value. Impairment was recognized in the Comprehensive Results within earnings.

(10-c)

Financial instruments and hedging operations at December 31, 2007-

The Company has entered into contracts with Merrill Lynch, JP Morgan and FIMAT USA, LLC, to hedge U.S. dollar exchange rates, corn and sorghum for the Company’s projected cash expenditures for the period from January through December 2007.

Following is a summary of these instruments at December 31, 2007:

Instruments	Type (future) Call or Put)	Position Profile assumed	Notional amount		Fair value			Other compre hensive income (equity)			Ineffectiveness effects (earnings)
Futures on Soybean		Short	$	2,469	$	(3,442	)	$	(3,442	)	$	-
Futures on Soybean		Long		2,379		4,424			4,424			-
Future on Corn		Short		167		(420	)		(420	)		-
Future on Corn		Long		553		1,424			1,424			-
Options on Soybean	Call	Long		1,890		1,947			1,947			-
Options on Soybean	Put	Long		3,480		(255	)		(255	)		-
Options on Corn	Call	Long		2,870		3,815			3,815			-
Options on Corn	Put	Short		5,380		(226	)		(226	)		-
Options on Corn under ASERCA program	Put	Long		48,438		99,310			99,310			-
Embedded derivatives on the price of corn		Long		16,356		15,549			15,549			-
Exchange rate options	Call	Long		49,500		9,424			-			9,424
Exchange rate options	Put	Long		7,500		429			-			429
Exchange rate options	Call	Short		8,500		(15,632	)		-			(15,632	)
Exchange rate options	Put	Short		85,000		(3,871	)		-			(3,871	)
Exchange rate forward	Call	Long		147,500		21,246			-			21,246
Exchange rate forward	Put	Short		120,000		(10,219	)		-			(10,219	)
						123,503			122,126			1,377
Deferred tax effects						(23,466	)		(23,204	)		-
Net total after deferred tax effects					$	100,037			98,922			1,377

(Continued)

F-46

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

As part of the exchange hedge strategy, the Company, includes the use of financial derivative instruments to reduce exchange rate fluctuations associated with forecasted grain purchase operations. The Company has short-tem call and put options whose fair value amount as of 2007 ascending to 277,000 U.S. dollars and liabilities in the amount of 225,000 U.S. dollars. The Company recognized a net payment in the amount of $8,097 in 2007 in its comprehensive financial results.

(11)	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

2006	$	124,028
2007		153,165
2008	$	167,871

(b)

There is a contingent liability arising from the labor obligations mentioned in note 2m.

(c)

The Company is involved in a number of lawsuits and claims arising in the normal course of business. It is expected that the final outcome of these matters will not have significant adverse effects on the Company’s financial position and results of operations.

(d)

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.

(e)

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.

(f)

One of the bank loans mentioned in note 9 is guaranteed by third parties through their shares in the Company, which shares are held in a trust. In the event of a reduction in the value of the qualified shares, Bachoco or the shareholders will directly or indirectly, through its subsidiaries or affiliates, assume the obligation to make additional contributions, or make cash deposits to cover the difference.

(Continued)

F-47

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(12)	Other taxes payable and other accruals-

An analysis of other taxes payable and other accruals presented in the financial statements is as follows:

	2007		2008

Expenses payable	$	91,981	$	76,787
IMSS (1)		29,408		30,234
SAR (2)		5,303		6,721
INFONAVIT (3)		21,765		22,786
Other accounts payable		39,005		99,037
Trade advances		38,204		33,422
Employee statutory profit sharing		5,756		34,355
Salaries payable		4,514		10,804
Tax payable		4,128		5,485
Payroll taxes		2,637		6,107
Interest payable		728		2,864

Total	$	243,429	$	328,602

(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, along with the Company’s own contribution to the social security fund.

(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.

(Continued)

F-48

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(13)	Foreign currency position-

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, 2007 and 2008 were as follows:


	2007			2008
Assets:
Cash and investments	$	380,344		$	451,957
Other accounts		-			3,958
Advances to suppliers (included in inventories and property, plant and equipment)		404,936			433,333
		785,280			889,248
Liabilities:
Accounts payable		(154,358	)		(342,993	)

Net assets	$	630,922		$	546,255

As of December 31, 2007 and 2008, the exchange rate was $ 10.91 and $ 13.81 per US dollar, respectively. At March 27, 2009, date of the statutory audit report, the exchange rate was $14.21 per US dollar.

(14)	Labor obligations-

Labor obligations at December 31, 2008

The Company has a defined benefit pension plan covering the non unionized personnel. 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.

(Continued)

F-49

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Cash flows-

Plan contributions and benefits paid were as follows:

	Benefits 2008
	Termination		Retirement		Total

Plan contributions	$	-		17,450		17,450
Benefits paid		21,489		2,865		24,354

The cost, obligations and other elements of the pension, seniority premium and severance compensation plans for reasons other than restructuring, mentioned in note 2m, have been determined based on computations prepared by independent actuaries at December 31, 2008. The components of the net periodic cost for the year ended December 31, 2008 were as follows:

	Benefits 2008
	Termination		Retirement			Total

Net periodic cost:
Service cost	$	13,122		18,539			31,661
Interest cost		5,324		19,880			25,204
Return on plan assets		-		(18,683	)		(18,683	)
Net actuarial loss (gain)		7,012		(380	)		6,632
Prior service cost (2007 unamortized items):
Amortization of prior service cost and plan modifications		-		1,885			1,885
Amortization of transition liability		4,828		5,448			10,276

Net periodic cost	$	30,286		26,689			56,975

(Continued)

F-50

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

The present value of benefit obligations of the plans at December 31, 2008, is as follows:

	Benefits 2008
	Termination			Retirement			Total

Accumulated benefit obligation (ABO)	$	52,131			138,077			190,208

Projected benefit obligation (PBO)		70,915			210,319			281,234
Plan assets at fair value		-			(188,815	)		(188,815	)

Projected benefit obligation over plan assets		70,915			21,504			92,419

Unrecognized items:
Transition liability		(18,370	)		(21,793	)		(40,163	)
Plan modifications		-			(25,437	)		(25,437	)
Actuarial gains		-			53,871			53,871

Projected liability, net	$	52,545			28,145			80,690

Following is an itemized analysis of the determination of benefits obligations of the plan at December 31, 2008:

	Retirement benefits
	Seniority premium			Pension plan			Total
Defined benefits obligations:
Obligation because of defined benefits at the beginning of year	$	32,095			199,333			231,428
Current labor cost		2,658			15,880			18,538
Interest cost		2,743			17,137			19,880
Actuarial gains and losses		(3,187	)		(51,298	)		(54,485	)
Benefits paid		(1,329	)		(3,713	)		(5,042	)
Defined benefits obligations at end of year		32,980			177,339			210,319

(Continued)

F-51

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Following is an itemized analysis of the determination regarding the plan’s assets at December 31, 2008:

	Retirement benefits
	Seniority premium		Pension plan			Total
Plan assets:
Plan asset at the beginning of year	$	-		182,017			182,017
Yield expected		-		(8,475	)		(8,475	)
Company contributions		-		17,450			17,450
Benefits		-		(2,177	)		(2,177	)
Plan assets at end of year		-		188,815			188,815

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:

	Seniority premium*
	2004		2005		2006		2007		2008
Defined benefits obligations	$	36,238		46,546		49,097		56,601		59,086
Plan assets		-		-		-		-		-

Plan situation	$	36,238		46,546		49,097		56,601		59,086

(Continued)

F-52

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

	Pension plan
	2004			2005			2006			2007			2008
Defined benefits obligations	$	130,860			152,360			189,355			199,333			177,339
Plan assets		(96,085	)		(130,747	)		(160,421	)		(182,017	)		(188,815	)

Plan status	$	34,775			21,613			28,934			17,316			(11,476	)

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.

	Benefits
	2007			2008

Discount rate (net of inflation)		5.25	%		9.75	%
Rate of compensation increase		1.00	%		4.50	%
Expected return on plan assets		6.25	%		9.75	%
Amortization period of unrecognized items (applicable to retirement benefit)	19.2 years			19.66 years

The distribution of assets listed by category and the related budget at the end of 2006, 2007 and 2008, are analyzed as follows:

	Assets to ended year

	2006			2007			2008

Fixed rate investment		74	%		77	%		77	%
Variable rate investment		26	%		23	%		23	%

Total		100	%		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.

(Continued)

F-53

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Labor obligations at December 31, 2007

An analysis of the net period cost, reserve amounts and the assumptions considered in the pension plan, the seniority premium and severance obligation at December 31, 2007 is as follows:

	Pension plan						Seniority premium				Severance

	2006			2007			2006		2007		2006		2007
Net periodic cost:

Labor cost	$	11,791			15,429			3,781		4,361		9,475		9,191
Return on plan assets		(8,395	)		(10,090	)		-		-		-		-
Amortization of unrecognized prior past service costs		2,429			2,239			3,757		1,215		1,530		4,250

Interest cost		7,864			8,890			2,298		2,348		1,993		1,765

Net periodic cost		13,689			16,468			9,836		7,924		12,998		15,206

Loss from early extinguishment of obligations	$	-			-			-		-		941		2,514

(Continued)

F-54

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

	Pension plan						Seniority premium						Severance

	2006			2007			2006			2007			2006			2007
Labor obligations:
Accumulated benefit obligation	$	160,280			186,865			33,063			36,306			31,936			38,567
Current benefit obligation		99,220			124,592			28,202			30,821			31,036			38,567
Projected benefit obligation		189,355			199,333			49,098			56,601			36,053			42,895
Plan assets		(160,421	)		(182,017	)		-			-			-			-
Unrecognized prior service cost		(22,971	)		(20,959	)		(6,930	)		(6,283	)		-			-
Transition liability		-			-			-			-			(27,913	)		(23,198	)
Unrecognized net gains		36,756			48,415			(15,784	)		(21,490	)		7,223			(455	)
Unrecognized changes or improvements		(28,545	)		(27,322	)		104			-			-			-
Net projected benefit obligation		14,174			17,450			26,488			28,828			15,363			19,242
Unfunded accumulated benefit obligation		4,624			15,960			33,063			36,307			31,936			38,567
Current net liability over net projected liability in some subsidiaries		-			4,049			6,575			7,479			16,573			19,325

Additional liability		-			(4,049	)		(6,575	)		(7,479	)		(16,573	)		(19,325	)

Intangible assets		-			4,049			5,659			5,967			16,573			18,325
Minimum labor obligation liability adjustment	$	-			-			916			1,512			-			1,000

(Continued)

F-55

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

	Pension plan						Seniority Premium						Severance
	2006			2007			2006			2007			2006			2007
Change in benefit obligation:
Benefit obligation at beginning of year	$	152,360			189,355			46,546			49,097			42,671			36,053
Service cost		11,791			15,429			3,781			4,361			9,475			9,191
Interest cost		7,864			8,890			2,298			2,348			1,992			1,765
Actuarial differences		8,518			(12,587	)		2,339			6,379			(6,077	)		9,726
Benefits paid		(1,554	)		(1,754	)		(5,867	)		(5,584	)		(8,803	)		(13,840	)
Changes to plan not applied		-			-			-			-			(3,205	)		-
Increase for plan improvement		10,376			-			-			-			-			-
Projected benefit obligation at end of year	$	189,355			199,333			49,097			56,601			36,053			42,895

	Pension plan
	2006			2007
Changes in plan assets:
Plan assets at beginning of the year	$	130,742			160,421
Actual return on plan assets		8,395			10,090
Employer contribution		14,039			13,193
Actuarial differences		8,799			67
Benefit paid		(1,554	)		(1,754	)

Fair value of plan assets at end of year		160,421			182,017

Funded status		(28,934	)		(17,316	)
Unrecognized net actuarial loss (gain)		(36,758	)		(48,415	)
Unrecognized prior service cost		22,971			20,959

Net amount recognized	$	(42,721	)		(44,772	)

The Company used December, 2006 and 2007 measurement date for pension plan, seniority premium, and December 31, 2006 and 2007 for the severance plan.

(Continued)

F-56

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

The transition liability, the prior service cost and plan changes, and actuarial differences assumptions will be amortized over a period ranging from 21 to 25 years (the average remaining working life of employees).

The information about the expected cash flow for the pension benefit plan and seniority premium is as follows:

	Pension plan		Seniority premium		Severance
Expected benefit payment
2008	$	6,972		6,395		8,215
2009		8,222		6,857		7,431
2010		9,482		7,145		7,002
2011		10,859		7,282		6,651
2012		11,957		7,369		6,303
2013-2017		76,959		37,704		27,856
Total
	$	124,451		72,752		63,458

The above table reflects the total benefits expected to be paid from the plan.

(Continued)

F-57

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(15)	Stockholders’ Equity-

In April 1997, Bachoco had a stock split and created so-called “BL” units, which consist of one series “B” share and one series “L” share, and so-called “BB” units, which consist of two series “B” shares. Series “L” shares have limited voting rights.

In September 2006, the Company split the BL units into B and L shares and converted the series L shares into series B shares; consequently only one series remains (series B). All shares issued and outstanding have voting rights.

In 2006, 2007 and 2008, the Company declared and paid cash dividends at nominal values of $353,880, $353,880 and $353,880, respectively ($378,075 and $363,708 in constant pesos as at December 31, 2006 and 2007) or $0.59, $0.59 and $0.59, respectively, per share in nominal pesos, respectively.

The Mexican Corporation Act 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, 2007 and 2008, included in retained earnings, was $ 209,399.

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 appropiation of retained earnings in 1998. During 2005, the Company repurchased 920 thousand shares for an amount of $11,462. During 2006, 2007 and 2008, no shares were repurchased. In 2005 and 2006, the Company sold 800 thousand and 920 thousand of shares, respectively, previously repurchased; the sales value was for $2,954 and $17,849, respectively. In 2007 and 2008, no shares were sold.

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.

(Continued)

F-58

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

The Company obtains the majority of its revenues and net profit from Bachoco, S.A. de C.V. (“BSACV”). For the years 2007 and 2008, pretax income (loss) of BSACV, represented between 90% and 94% of Bachoco’s consolidated pretax income (loss).

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.

From 1999 through 2001, under Mexican income tax law, corporate taxpayers were extended the option of deferring payment of a portion of their annual corporate income tax, so that the tax payable will represent 30% of taxable income. 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.

Stockholders contribution restated as provided for by the tax law, aggregating $1,999,574, may be refunded to stockholders tax-free, to the extent that such contribution equals or exceeds stockholders’ equity.

(16)	Income Tax (IT), Asset Tax (AT), and Flat Rate Business Tax (IETU)-

Income tax (IT)-

The Company and each of its subsidiaries file separate income tax returns. 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 certain 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, with which rule BSACV has complied.

(Continued)

F-59

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

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 16% in 2005 and 2006, and 19% from 2007.

The income tax reforms passed in December 2004 include the elimination, as from January 2005, of the purchase deduction so as to permit only the deduction of cost of sales. This reform is not applicable for BSACV, since it is subject to taxes under the simplified regime.

The changes in tax rates enacted in 2006 from 16% to 19% effective beginning in 2007 resulted in a charge of $336,376 in the consolidated statement of operations.

Flat Rate Business Tax (IETU)-

On October 1, 2007, new laws were published and a number of tax laws were revised. This new law came into effect on January 1, 2008.

The IETU rate is 17.5% for 2010 and thereafter (16.5% for 2008 and 17% for 2009) based on cash flows and limits certain deductions.

IETU credits are derived mainly from the unamortized negative IETU base and salaries credits 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 income tax for the same year or, if applicable, against IETU payable in the next ten years.

(Continued)

F-60

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

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. Until December 31, 2006, the applicable rate was 1.8% and the asset tax was payable on the average value of most assets, net of certain liabilities. The asset tax in 2006 and 2007 in one of the Company’s subsidiaries amounted to $28,267 and $27,189, respectively. In each of the two years, this subsidiary credited these amounts against its income tax paid.

At December 31, 2008, the Company had $4,494 in asset tax credits and such recoverable AT will expire, as follows:

	Asset tax restated at
	December 31,		Year of
Base year	2008		expiration

2005	$	1,137	2015
2006		3,357	2016

	$	4,494

Income tax charged to operations-

For the years ended December 31, 2006, 2007 and 2008, income tax charged (credited) to results of operations was as follows:

	2006		2007		2008

Current income tax	$	250,519		143,029		78,559
Flat Rate Business Tax		-		-		108
Deferred income tax		348,607		169,716		(352,686	)

Total income tax expense (benefit)	$	599,126		312,745		(274,019	)

(Continued)

F-61

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Deferred income tax-

Based on the financial projections of taxable income in each of the next four years, the Company estimated that it will pay income tax (IT); therefore, deferred tax effects as of December 31, 2007 and 2008 have been recorded reflecting the IT basis.

The component of the Company’s deferred income tax assets and liabilities are as follows:

	2007		2008
Deferred tax assets:
Account payable	$	196,460		393,725
Labor obligations		6,697		15,851
ESPS payable		1,385		9,168
Effects on derivative financial instruments		-		150,644
Recoverable AT		4,613		4,494
Tax loss carry forwards		-		165,121

Total gross deferred tax assets		209,155		739,003
Less valuation allowance		4,613		28,015
Net deferred tax assets		204,542		710,988

Deferred tax liabilities:
Inventories		420,993		711,742
Accounts receivables		396,437		308,543
Fixed assets		1,450,073		1,394,687
Effects on financial instruments		23,204		-
Other deductions		-		15,092
Other accruals		280		-
Additional liability from stockholders’ equity		288,580		-

Total gross deferred tax liabilities		2,579,567		2,430,064

Net deferred tax liability	$	2,375,025		1,719,076

(Continued)

F-62

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

At December 31, 2007, the deferred income tax liability determined by treating stockholders’ equity as a single temporary item is greater than the amount determined by using the asset and liability method, and thus, the Company recognized an additional deferred tax liability of $288,580 in 2007 to account for this difference.

Effective January 1, 2008, the Company adopted Mexican FRS D-4, which supersedes Bulletin D-4 and Circular 54. Mexican FRS D-4 establishes the asset and liability method as the only acceptable method in determining deferred taxes. Therefore, the Company wrote-off $288,580 against retained earnings that relates to the additional deferred tax liability previously determined under the stockholders equity method in 2007.

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.

The significant items that gave rise to the difference between the effective income tax rate (current and deferred taxes) and the current year tax determined at the statutory rate are as follows:

	2006			2007			2008
	%			%			%
Statutory income tax rate		16.00			19.00			(19.00	)
Effect of companies outside simplified regime		4.42			4.13			2.33
Effect of non-taxable items		(3.04	)		(3.40	)		(6.95	)
Effect due to change in tax rate from 16% to 19% in 2007		22.40			-			-

Effective income tax rate		39.78			19.73			(23.62	)

(Continued)

F-63

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Tax loss carryforwards-

As of December 31, 2008, 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, 2008
	Year of	Restated
Base year	expiration	amount

2001	2011	$	181
2005	2015		241
2007	2017		6,227
2008	2018		835,987

		$	842,636

Equity tax value-

As of December 31, 2007 and 2008, the tax value of the Company’s equity, which will not be subject to taxation, comprised the following:

	2007		2008

Restated contribution capital (CUCA)	$	1,877,344		1,999,574
Net tax profit account (CUFIN) and net reinvested tax profit account (CUFINRE)		2,574,183		2,535,424

Total	$	4,451,527		4,534,998

(Continued)

F-64

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(17)	Other income (expense), net-

As of December 31, 2006, 2007 and 2008, other income and expense net, were as follows:

	2006			2007			2008
Other income:
Sales of waste animals, raw material, by-products and other	$	206,528			276,094			187,911
Tax incentives		32,379			73,054			44,899
Other		-			-			8,106

Total other income		238,907			349,148			240,916

Other expense:
Cost of waste animals, raw material, by- products and other		(182,324	)		(261,703	)		(200,960	)
Employee statutory profit sharing		(4,362	)		(4,828	)		(32,981	)
Other		(33,794	)		(13,046	)		(27,933	)

Total other expense		(220,480	)		(279,577	)		(261,874	)

Total other income (expense), net	$	18,427			69,571			(20,958	)

Employee statutory profit sharing

The Company and BSACV have no employees, but each of the subsidiaries of the Company that has employees is required under Mexican law to pay employees, in addition to their compensation and benefits, profit sharing in an aggregate amount equal to 10% of such subsidiary’s taxable income subject to certain adjustments.

Employee statutory profit sharing is recorded as part of the other expense caption.

(Continued)

F-65

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(18)	Segment financial information-

The segments to be reported are organized by product line. Inter-segment transactions have been eliminated. Our Poultry segment is comprised of our chicken and egg products due to their similarity and to the fact that egg sales represent approximately 10% of total revenue for the years ended on December 31, 2006, 2007 and 2008. The information included under “Others” corresponds to pigs, balanced animal feed and other non-significant sub-products. The required disclosures are shown below:

	As of and for the year ended at December 31, 2006
	Poultry			Others			Total

Net revenues	$	13,486,020			2,064,945			15,550,965
Cost of sales		(10,220,870	)		(1,832,116	)		(12,052,986	)
Gross profit		3,265,150			232,829			3,497,979
Interest income		288,932			13,978			302,910
Interest and financial expenses		(129,506	)		(2,346	)		(131,852	)
Monetary position loss		(150,438	)		-			(150,438	)
Income taxes		(567,933	)		(31,193	)		(599,126	)
Net majority interest income		826,642			79,544			906,186
Property, plant and equipment, net		9,576,266			259,629			9,835,895
Total assets		16,833,872			725,367			17,559,239
Total liabilities		(3,321,636	)		(134,649	)		(3,456,285	)
Capital expenditures		856,227			-			856,227
Expenses not requiring cash disbursement:
Depreciation		523,720			13,663			537,383

(Continued)

F-66

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

	As of and for the year ended at December 31, 2007
	Poultry			Others			Total
Net Revenues	$	15,885,828			2,333,819			18,219,647
Cost of sales		(12,353,458	)		(2,124,403	)		(14,477,861	)
Gross profit		3,532,370			209,416			3,741,786
Interest income		348,167			14,849			363,016
Valuation effects of financial instruments		(44,137	)		-			(44,137	)
Interest and financial expenses		(133,913	)		(7,665	)		(141,578	)
Loss on net monetary position		(151,035	)		(3,779	)		(154,814	)
Income taxes		(280,792	)		(31,953	)		(312,745	)
Majority net income		1,203,149			67,792			1,270,941
Property, plant and equipment, net		9,986,129			270,110			10,256,239
Total assets		18,264,882			851,542			19,116,424
Total liabilities		3,798,656			190,602			3,989,258
Capital expenditures		987,322			4,415			991,737
Expenses not requiring cash disbursement:
Depreciation		556,188			15,205			571,393

	As of and for the year ended at December 31, 2008
	Poultry			Others			Total
Net Revenues	$	17,594,994			2,530,327			20,125,321
Cost of sales		(15,171,145	)		(2,311,323	)		(17,482,468	)
Gross profit		2,423,849			219,004			2,642,853
Interest income		168,283			5,411			173,694
Valuation effects of financial instruments		(1,666,821	)		-			(1,666,821	)
Interest and financial expenses		(16,691	)		(19,511	)		(36,202	)
Income taxes		292,563			(18,544	)		274,019
Majority net (loss) income		(939,068	)		60,020			(879,048	)
Property, plant and equipment, net		10,422,423			266,812			10,689,235
Total assets		18,386,409			1,068,562			19,454,971
Total liabilities		5,039,205			336,347			5,375,552
Capital expenditures		1,140,843			15,325			1,156,168
Expenses not requiring cash disbursement::
Depreciation		594,704			21,654			616,358

(Continued)

F-67

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Revenues from our poultry segment are analyzed as follows:

	Year ended at December 31, 2006
	hens		Eggs		Total

Net revenues	$	12,053,293		1,432,727		13,486,020

	Year ended at December 31, 2007
	hens		Eggs		Total

Net revenues	$	14,135,242		1,750,586		15,885,828

	Year ended at December 31, 2008
	hens		Eggs		Total

Net revenues	$	15,486,614		2,108,380		17,594,994

(Continued)

F-68

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(19)	Subsequent event-

The Official Federal Gazette granted a tax credit to the Company corresponding to Technological Research and Development on February 27, 2009 for fiscal year 2008 in the amount of $58,122.

(20)	Recently issued accounting standards-

The CINIF has issued the following Mexican FRS, effective for years beginning after December 31, 2008. Early application is not permitted.

(a)

FRS B-7 “Business acquisitions”– Mexican FRS B-7 supersedes Bulletin B-7 and establishes, among other things, the general rules for the initial valuation and recognition at the acquisition date of net assets, stressing that all business acquisitions should be accounted under the purchase method.

Management considers that the initial effects of this new FRS will not be material.

(b)

FRS B-8 “Consolidated and combined financial statements”- Mexican FRS B-8 supersedes Bulletin B-8 "Consolidated and combined financial statements and valuation of permanent investments in shares" and establishes the general rules for the preparation and presentation of consolidated and combined financial statements and related disclosures. Amendments include:

(i)

The obligation to consolidate special purpose entities (SPEs) when controlled.

(ii)

The possibility, under certain rules, of presenting unconsolidating financial statements when the parent is, in turn, a subsidiary with no minority interest or when the minority stockholders do not object to the fact that consolidated financial statements are not issued.

(iii)

Consideration is given to the existence of potential voting rights that might be exercised or converted in favor of the entity as parent and that may change its involvement in decision making at the time of assessing the existence of control.

(Continued)

F-69

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(iv)

Additionally, regulations relating to the valuation of permanent investments have been transferred to a different bulletin.

Management estimates that the initial effects of this new FRS will be immaterial.

(c)

FRS C-7 “Investments in associates and other permanent investments”- Mexican FRS C-7 sets forth the rules to account for investments in associates as well as other permanent investments where there is no control, joint control or significant influence. The principal changes with respect to the former standard include the following:

(i)

Equity method of accounting is required for SPEs where significant influence is exercised.

(ii)

(iii)

A specific procedure and a limit for recognizing the associated entity's losses are provided.

Management estimates that the initial effects of this new FRS will not be material.

(d)

FRS C-8 “Intangible assets”- Mexican FRS C-8 supersedes Bulletin C-8 and establishes general rules for the initial and subsequent recognition of intangible assets acquired individually, either through the acquisition of a business or arising internally during the normal course of the entity's operations. Main changes include:

(i)

The definition of intangible assets is narrowed to establish that separability is not the only condition for the intangible asset to be identifiable;

(ii)

Subsequent outlays for research and development projects in progress should be expensed as earned if they are part of the research phase or as an intangible asset if they meet the criteria to be recognized as such;

(Continued)

F-70

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

(iii)

Greater detail is provided to account for the exchange of an asset, in accordance with the provisions of international standards and other FRS;

(iv)

The presumption that an intangible asset may not exceed a useful life of twenty years was eliminated;

Management estimates that the initial effects of this new FRS will not be material.

(21)	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 income and stockholders’ equity, or additional disclosures as applicable.

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 document as well as the related circulars and Mexican Interpretation of Financial Reporting Standards 2. The main considerations established by this MexFRS is: the i) recognition of the effects of inflation when an entity operates in an inflationary economic environment (defined as when cumulative inflation over the immediately preceding 3-year period is equal to or greater than 26%) applicable to as from January 2008. Therefore, the last restatement factor applied to financial statements for the year ended December 2006 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 flows”- Beginning January 1, 2008, MexFRS B-2 supersedes Bulletin B-12 "Statement of changes in financial position" and paragraph 33 of Bulletin B-16. The principal considerations established by this MexFRS are shown as follows: (i)Instead of the statement of changes in financial position, the financial statements shall include the statements of cash flows for all the periods presented comparatively with those of the current year, except for financial statements of periods prior to 2008; (ii) Cash inflows and cash outflows are reported in nominal currency units, thus not including the effects of inflation; (iii) Two alternative preparation methods (direct and indirect) are established, without stating preference for either method. Furthermore, cash flows from operating activities are to be reported first, followed by cash flows from investing activities and lastly by cash flows from financing activities; (iv) Captions of principal items are to be reported gross, with certain exceptions and require disclosure of the composition of items considered cash equivalents.

(Continued)

F-71

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

For U.S. GAAP purposes, Statement of Financial Accounting Standards (SFAS) No. 95, Statement of Cash Flows, does not provide guidance with respect to inflation adjusted financial statements. As at December 31, 2007, in accordance with MexFRS, changes in current and long-term debt due to re-expression in constant pesos, including the effect of exchange differences, is presented in the statement of changes in financial position within the financing activities section. Also, under U.S. GAAP, non-cash investing activities are not reported in the Statement of Cash Flows, including the capitalization of debt; whereas under MexFRS, non-cash transactions affecting the financial structure of an entity, such as converting debt into equity, must be presented separately in the statement of changes in financial position. This difference between US GAAP and MexFRS does not have any effect in the Company’s financial statements due to the absence of non-cash transactions settled in any of the years presented in such financial statements.

As of the date of this report, certain reclassifications were made to the U.S. GAAP cash flow statement to the 2006 and 2007 figures to conform to the 2008 presentations.

At December 31, 2008, primary investments securities disclosed in note 10b with a maturity of more than three months that amount to Ps.468,003, and restricted cash amounting to Ps.223,921 are being reclassified for U.S. GAAP purposes from the line-item “cash and investment” to “investment securities” and “restricted cash”, respectively, within investing activities, since such investments and restricted cash do not meet the definition of cash equivalents according to SFAS 95. At December 31, 2007 there was no difference between book value and fair value on primary investment securities which amount to Ps 406,005.

Consolidated statements of cash flows derived from information prepared in accordance with U.S. GAAP would be as presented in the following page:

(Continued)

F-72

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Cash Flow Information	Years ended December 31,
	2006			2007			2008
OPERATING ACTIVITIES:
Net income (loss)	Ps	895,570		Ps	1,261,883		Ps	(869,369	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		540,862			575,306			620,041
Minority interest in net income (loss)		943			1,285			(6,989	)
Deferred income tax		330,982			168,405			(341,925	)
Impairment on investment securities		-			-			13,116
Unrealized loss on derivative financial instruments		-			-			887,174
Loss on net monetary position		149,825			154,765			-
Loss on sale of plant and equipment		-			-			49,485
Labor obligations, net period cost		58,155			44,619			48,345
		1,976,337			2,206,263			399,878
Changes in assets and liabilities:
Accounts receivable		(85,313	)		(375,590	)		(167,422	)
Inventories and biological assets		(781,395	)		(1,419,495	)		( 768,084	)
Prepaid expenses and other accounts receivable		25,502			(74,556	)		(24,703	)
Accounts payable		392,321			338,084			513,919
Related parties payable		6,410			14,944			23,517
Other taxes payable and other accruals		( 60,488	)		(35,827	)		93,694
Labor obligations, net		(26,085	)		(37,610	)		(41,805	)
Assets available for sale		-			-			2,159
Derivative financial instruments		(5,856	)		(36,131	)		(122,126	)
Cash flows provided by (used in) operating activities		1,441,433			580,082			(90,973	)

INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	Ps	(904,300	)	Ps	(998,622	)	Ps	(1,156,168	)
Proceeds from sale of property, plant and equipment		-			-			57,329
Restricted cash		-			-			(223,921	)
Investment securities		(335,554	)		(12,001	)		(61,998	)
Other assets		(2,696	)		(2,216	)		(1,112	)
Cash flows (used in) provided by investing activities		(1,240,550	)		(1,012,839	)		(1,385,870	)

(Continued)

F-73

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to banks		-			80,000			535,100
Repayment of long-term debt and notes payable		(107,324	)		(12,529	)		(18,809	)
Cash dividends paid		(378,075	)		(363,708	)		(353,880	)
Sale of repurchased shares		17,849			-			-
Cash flows (used in) provided by financing activities		(467,550	)		(296,237	)		162,411
Effect of inflation accounting		96,959			172,978			-
Net increase (decrease) in cash and investments		(169,708	)		(556,016	)		(1,314,432	)
Cash and investments at beginning of year		3,359,595			3,189,887			2,633,871
Cash and investments at end of year	Ps	3,189,887		Ps	2,633,871		Ps	1,319,439

Supplemental disclosure of cash flows information:
	Years ended December 31,
	2006			2007			2008
Interest paid during the year	Ps	(130,915	)		(140,850	)		(33,339	)
Payment of valuation effects of financial instruments		-			(44,137	)		(747,795	)
Income taxes paid during the year		(250,519	)		(143,029	)		(147,426	)

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.

(Continued)

F-74

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

In accordance with U.S. GAAP, under SOP 85-3 biological assets and agricultural products are to be valued at cost. Accordingly, the reconciliation between MexFRS and U.S. GAAP income (loss) for 2006, 2007 and 2008 includes a reversal of the unrealized gain on valuation of biological assets and agricultural products at fair value, which shows a decrease of Ps (10,879), Ps (10,882) and Ps (16,358), 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 2007 the Company did not capitalize any amount due to its immateriality as described in Note 2 h), and during 2008, there were no construction projects identified with interest expense related to debt.

Under U.S. GAAP, interest expenses 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 2008, there were no qualifying construction projects.

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 asset tax (AT) carryforwards and other tax credits. 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.

(Continued)

F-75

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

All income (loss) before income tax and minority interest and related income tax benefit (expense) are from Mexican sources.

Under U.S. GAAP, as of December 31, 2007 and 2008, the long term deferred tax liability is Ps 1,626,495 and Ps 1,747,348 respectively. Short term deferred tax liability is Ps 739,444 and Ps 261,984 as of December 31, 2007 and 2008, respectively.

The deferred tax adjustment included in the net income (loss) 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 in MexFRS in 2008, this concept generates a reconciling difference to U.S. GAAP. The deferred tax liability under this concept amounted Ps. 288,580 and Ps. 284,226 as of December 31, 2007 and 2008, respectively.

The Company is required to pay Employee Statutory Profit Sharing (ESPS) in accordance with Mexican labor law. On January 1, 2008, the Company adopted MexFRS D-3 “Employee Benefits” which supersedes Bulletin D-3 “Labor Obligations”, the sections applicable to ESPS of Bulletin D-4 and Mexican Interpretation of Financial Reporting Standards 4. In accordance with this MexFRS, deferred ESPS is determined under the asset and liability method at the statutory rate of 10%. This methodology is in compliance with U.S. GAAP which is determined following the guidelines of SFAS No. 109.

Under MexFRS, as described in Note 2r), until December 31, 2007 the deferred consequences of employee profit sharing were determined only on temporary non-recurring differences with a known turnaround time.

The Company’s reconciliations between MexFRS and U.S. GAAP do not include deferred employee profit sharing due that there is no amount to be booked.

Under MexFRS, beginning January 1, 2007, current ESPS is recorded within other expenses, net. In prior years, such effects were presented as equivalents to income tax. The Company’s income statement for the year ended December 31, 2006 under MexFRS was reclassified to comply with the presentation rules required in 2007. Under U.S. GAAP, ESPS is classified as selling, general and administrative expenses.

(Continued)

F-76

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Severance indemnities

As described in Note 2 x) (b), on January 1, 2008, the Company adopted MexFRS D-3 “Labor Obligations”. This MexFRS 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 benefits 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, SFAS No. 112, "Employers' Accounting for 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, 2006, 2007 and 2008, the amounts of past service cost amortized under MexFRS were Ps (20,691), Ps (2,507) and Ps 4,828, 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 income and equity.

(Continued)

F-77

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

SFAS 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an Amendment of FASB Statements No. 87, 88, 106 and 132(R)”:

Due to the revision of MexFRS D-3, effective January 1, 2008, companies must now amortize transition obligations/benefits, unrecognized prior service costs/benefits and net gains and losses over a maximum period of 5 years. This change has resulted in an increase in net periodic pension cost under MexFRS which is being reversed for US GAAP purposes.

Effective December 31, 2006, the Company adopted the recognition and disclosure provisions of FASB Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. Statement 158 requires companies to recognize the funded status of defined benefit pension and other postretirement plans as a net asset or liability and to recognize changes in that funded status in the year in which the changes occur through other comprehensive income to the extent those changes are not included in the net periodic cost. The funded status reported on the balance sheet as of December 31, 2006, 2007 and 2008 under Statement 158 was measured as the difference between the fair value of plan assets and the projected benefit obligation on a plan-by-plan basis.

The components of the plan funded status that is reflected in the consolidated statement of financial position as of December 31, 2007 and 2008 are as follows:

	2007
	Pension plan			Seniority premium		Severance		Total
Projected benefit obligation	Ps	199,333		Ps	56,601	Ps	42,895	Ps	298,829
Market value of plan assets		(182,017	)		-		-		(182,017	)
Under-funded defined benefit plan liability	Ps	17,316		Ps	56,601	Ps	42,895	Ps	116,812

	2008
	Pension plan			Seniority premium		Severance		Total
Projected benefit obligation	Ps	177,339		Ps	59,085	Ps	44,810	Ps	281,234
Market value of plan assets		(188,814	)		-		-		(188,814	)
Under-funded defined benefit plan	Ps	(11,475	)	Ps	59,085	Ps	44,810	Ps	92,420

(Continued)

F-78

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Effects of inflation accounting on U.S. GAAP adjustments:

For the 2006 and 2007 reconciliation of net income between MexFRS and U.S. GAAP purposes, the Company recognized the effects of the inflation on adjustments described throughout this Note.

Goodwill:

Beginning January 1, 2005, due to the adoption of MexFRS B-7, goodwill is no longer amortized, but rather is subject to periodic impairment valuations.

For U.S. GAAP purposes, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” in 2002. Up to December 31, 2004, the Company recognized an accumulated effect (increase in equity) of Ps. 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. In performing the yearly goodwill impairment test, the Company compares the estimated fair value to the carrying amount at the reporting unit level. If the carrying amount exceeds the fair value, a second step of the impairment test is required which involves the determination of the implicit fair value of the reporting unit by performing a hypothetical purchase price allocation. If the implicit value of the goodwill exceeds the carrying value, an impairment is recognized. The fair value of the reporting unit is estimated using the present value of future cash flow. In 2006, 2007 and 2008, the Company performed the required impairment tests of goodwill which did not result in any impairment charge.

Reporting comprehensive income:

For U.S. GAAP reconciliation purposes, the Company has adopted the SFAS No. 130, “Reporting Comprehensive Income”, which establishes rules for reporting and disclosure of comprehensive income and its components. Comprehensive income consists of current year net income (loss) plus (less) the change in stockholders’ equity resulting from transactions and other events and circumstances from non-owner sources. For the 2008, 2007 and 2006 fiscal years the components of comprehensive income are the net income (loss), the changes in fair value of the effective portion of derivative financial instruments, and the effect of labor obligation under SFAS 158.

(Continued)

F-79

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

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 of fair value to carrying value. No impairment losses on long-lived assets have been recorded in 2006, 2007 and 2008.

Valuation and Qualifying accounts:

		Balance at beginning of period		Charged to cost and expenses		Deductions			Balance at and of period
Allowance for
doubtful accounts	2008	$	36,154	$	7,637	$	(15,471	)	$	28,320
	2007	$	31,852	$	8,791	$	(4,489	)	$	36,154
	2006	$	37,695	$	15,858	$	(21,701	)	$	31,852

(Continued)

F-80

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Accounting for uncertainty in income taxes:

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of Statement of Financial Accounting Standards No.109” (FIN 48). On January 1, 2007, the Company adopted FIN 48, which clarifies the accounting for uncertain tax positions. This interpretation requires that an entity recognizes in the consolidated financial statements the impact of a tax position, if that position is 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 adoption of FIN 48 on January 1, 2007 did not have any effect on the Company’s consolidated financial statements. 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.

As of January 1, 2007 and for the years ended December 31, 2007 and 2008, 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 2003.

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.

(Continued)

F-81

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Investment Securities:

Investments securities described in note 10b includes Ps 406,005 and Ps 468,003 in 2007 and 2008 respectively, with a maturity of more than 90 days which do not met the definition of cash equivalents according to SFASB 95, consequently such amounts are being presented within investing activities in the consolidated statement of cash flows.

(Continued)

F-82

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Due to the financial crisis experienced in most economies around the World, several securities were no longer traded actively in the financial markets, hence the Company decided to access SFAB 115 “Accounting for certain investment in debt and equity securities”; the Company transferred Commercial Paper classified as trading instrument into Held-To-Maturity category starting October 1, 2008. The portion of the unrealized holding gain or loss at the date of the transfer, which was already recognized in financial results, was not reversed. An impairment effect of $13,116 was immediately recognized in the Comprehensive Results within earnings considering that these non guaranteed debt securities will not recover their initial paid-in-value.

Derivative Financial Instruments and Risk Hedging Activities:

The Company accounts for derivatives and hedging activities in accordance with FASB Statement No. 133, Accounting for Derivative Instruments and Certain Hedging Activities, as amended, 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, effective portion changes on the fair value of the derivatives are recognized in accumulated other comprehensive income until the hedged item is recognized in earnings.

The Company enters into hedge transactions denominated in foreign currencies, buying and selling structures of options. None of these derivatives are designated in a hedging relationship, thus the changes in their fair values are recorded in financial results.

Relative to grain usage, the Company enters into derivative contracts designated as hedges of either forecasted transactions (cash flow hedges) or firm commitments not ready recognized as assets or liabilities in the balance sheet (fair value hedges). However, derivatives not designated under a hedging relationship or which do not qualify under strict hedge accounting criteria, are accounted for as trading instruments with fair value changes taken within earnings.

(Continued)

F-83

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

For all qualifying hedging relationships, the Company formally designates 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 under the cash-flow hedge accounting model, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects operations, in the case of grain prices, this is taken within cost of good sold. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in comprehensive financial results within current earnings.

For derivative instruments that are designated and qualify for a hedge relationship under the fair value hedge accounting model, the Company recognizes the changes in fair value of the derivative directly in earnings, as well as the changes in fair value attributable to the hedged risk of the hedged item.

The Company discontinues hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting changes in fair value or in the cash flows of the hedged item, or if the derivative expires or is sold, terminated, or exercised, or if the derivative is dedesignated as a hedging instrument because it is unlikely that a forecasted transaction will occur, or if 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 is retained, the Company continues to carry the derivative at its fair value on the balance sheet and recognizes any subsequent changes in its fair value within earnings. When it is probable that a forecasted transaction will not occur, the Company discontinues hedge accounting and recognizes immediately in earnings gains and losses that were accumulated in other comprehensive income.

Derivative Financial Instruments and Risk Hedging Activities:

As of December 31, 2008, the Company used commodity derivatives to manage its exposure to commodity price, also foreign exchange rate derivatives were entered into. 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.

(Continued)

F-84

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

By using derivative financial instruments to hedge exposures to changes in commodity and exchange rate prices, 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.

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 grains. Price fluctuations in the grains cause market values of grains inventory to differ from its cost and cause the actual purchase price of the grains to differ from the anticipated price.

(Continued)

F-85

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

As of December 31, 2008, the Company has periodically entered into grain futures and options on futures (F&O) contracts traded at the CBOT (Chicago Board of Trade) through New Edge, a F&O broker on behalf of the Company, as to economically hedge a portion of its anticipated purchases of grains, against the price risk associated with fluctuations in market prices. These F&O were not designated into hedge relationships, thus changes in its market value is recognized directly in comprehensive financial result.

Also, the Company has entered into options on futures of corn, as to hedge the downward changes in the prices of grains, such as corn and sorghum, when the pricing of these is 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 has two participating modalities: (i) 0% 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) a 50% of the payment of the option’s premium, and 100% of the benefit in the payment of the premium of the bought options.

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 into 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 comprehensive financial result. Changes in the fair value of the hedged item attributable to the hedge risk, that were recognized within consolidated balance sheet during the hedging relationship, are subsequently reclassified as hedge adjustments to cost of goods sold when the related inventory layer affects state of operations.

(Continued)

F-86

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

As of December 31, 2008, the Company had entered into structures of foreign currency exchange rate derivatives, traded with the following financial institutions: Banco Nacional de México, Merrill Lynch Capital Services and Barclays Bank PLC. These structured derivatives were not designated into hedging relationship, hence changes in the fair value for these instruments were recognized within comprehensive financial results. Likewise, the Company did entered into over-the-counter (OTC) grain derivatives with Cargill Incorporated, which were not designated into a hedging relationship and in consequence, the changes in its fair value were also recognized within comprehensive financial results.

As of December 31, 2008, 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 this date.

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.

When feaseble, 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, 2008 and 2007. 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.

(Continued)

F-87

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

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, 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.

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.

Interest rate swaps and cross currency swaps: The fair value of these derivatives is estimated calculating the expected future cash flows at present value for both “legs”, paying and receiving, to define the difference between them as the fair value.

(Continued)

F-88

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

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. 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 Statement 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 its fair value. The disclosure excludes leases, pension and benefit obligations, and 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.

According to the Statement 107, certain items are excluded from this table, such as receivables and payables that arises from the ordinary course of business.

	2007						2008
	Carrying amount			Fair value			Carrying amount			Fair value
Cash	Ps	221,539		Ps	221,539		Ps	228,589		Ps	228,589
Investment Securities		2,818,337			2,818,337			1,510,438			1,510,438

Short term debt		(58,844	)		(58,844	)		(234,235	)		(279,262	)
Long term debt		(50,757	)		(50,757	)		(391,657	)		(345,474	)

(Continued)

F-89

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Fair Value Hierarchy:

In September, 2006, the Financial Accounting Standards Boards (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157”), which defines fair value, establishes a framework for the measurement of fair value and enhances disclosures about fair value measurements. The Statement does not require any new fair value measures but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFASB No. 157 was effective for fiscal years beginning after November 15, 2007. However, in February 2008, the FASB issued FAS 157-2 which delays the effective date of SFAS no. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

The Company adopted Statement 157 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, it did not have a material impact on our financial position and results of operations. Statement 157 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:

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 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 ASERCA) are classified in Level 1. Currency options and OTC grain derivatives (Cargill) are classified in Level 2.

(Continued)

F-90

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

The following fair value hierarchy table presents assets and liabilities that are measured at fair value on a recurring basis at December 31, 2008 (including only items that are required to be measured at fair value, items for which the fair value option could be elected, are not presented due that the Company did not elect the Fair Value Option):

	Total asset/ liabilities at Fair Value			Quoted prices in active markets for identical assets (Level1)			Significant other observable inputs (Level2)			Significant Unobservable Inputs (Level3)
Assets:
Primary investment securities		1,510,438			-			1,510,438			-
Derivative instruments		125,261			125,261			-			-

Total		1,635,699			125,261			1,510,438			-

Liabilities:
Derivative instruments		(886,272	)		(39,595	)		(846,677	)		-

Total		(886,272	)		(39,595	)		(846,677	)		-

(Continued)

F-91

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Fair Value Option

Statement 159 “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement 115” provides entities with an option to measure many financial instruments and certain other items at fair value. Under Statement 159, 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 Statement 159 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.

Recently Issued Accounting Standards:

In December 2007, the FASB issued FASB Statement No. 141(R), “Business Combination”, and FASB Statement No. 160, “Noncontrolling Interest in Consolidated Financial Statements” –an amendment to ARB No. 51. Statement 141(R) and 160 require most identifiable assets, liabilities, noncontrolling interest and goodwill acquired in a business combination to be recorded at “full fair value” and require noncontrolling interest (previously referred to as minority interest) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Both Statements are effective for periods beginning on or after December 15, 2008, and earlier adoption is prohibited. Statement 141(R) will be applied to business combination occurring after the effective date. Statement 160 will be applied prospectively to all noncontrolling interest, including any that arose before the effective date. As described in Note 2 a), most of the Company’s subsidiaries are wholly owned, so the adoption of Statement 160 is not expected to have a material impact on its financial position and results of operations. The Company is currently evaluating the impact of adopting Statement 141(R) on its financial position and results of operations.

In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities” –an amendment of FASB Statement No. 133. Statement 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. Statement 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of Statement 133 have been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. Statement 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact of Statement 161 on the disclosures about its hedging activities and use of derivatives.

(Continued)

F-92

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

In April 2008, the FASB issued FASB Staff Position FAS 142-3, “Determination of the Useful Life of Intangible Assets.” FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under Statement 142. FSP FAS 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact, if any, of adopting FSP FAS 142-3 on its financial position and results of operations.

In December 2008, the FASB Issued FASB Staff Position FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”. FPS FAS 132(R) -1 provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP FAS 132(R)-1 also includes a technical amendment to FASB Statement No. 132(R), effective immediately, which requires nonpublic entities to disclose net periodic benefit cost for each annual period for which a statement of income is presented. The disclosures about plan assets required by FSP FAS 132(R)-1 most be provided for fiscal years ending after December 15, 2009. The Company is currently evaluating the impact of the FSP on its disclosures about plan assets.

In May 2009 the FASB issued SFAS No. 165, “Subsequent Events”, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 becomes effective to interim or annual financial periods ending after June 15, 2009. We do not expect any material impact from adoption of SFAS 165 on our consolidated financial position or results of operations since we already evaluate events or transactions that may affect recognition or disclosure in the financial statements.

(Continued)

F-93

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets – an amendment of Statement No. 140”, which improves the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. This Statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This Statement must be applied to transfers occurring on or after the effective date. We are currently evaluating the impact of adoption of SFAS 166 on our consolidated financial position or results of operations.

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, (loss) adjusted to take into account certain material differences between MexFRS and U.S. GAAP.

	Years ended December 31,
	2006			2007			2008
Net income (loss) as reported under MexFRS	Ps	907,129		Ps	1,272,226		Ps	(886,037		)
Adjustments to reconcile net income (loss) to U.S. GAAP:
Biological assets and agricultural products valuation at fair value		(10,879	)		(10,882	)		(16,358		)
Interest cost capitalized		8,692			6,885			-
Depreciation of capitalized interest		(3,479	)		(3,913	)		(3,683		)
Severance indemnities		(20,691	)		(2,507	)		4,828
Pensions and retirement plans		-			-			3,802
Deferred income tax on US AAP adjustments		15,128			1,310			(15,116		)
Effect of inflation accounting on U.S. GAAP adjustments		613			49			-
Fair value credit valuation adjustment effect		-			-			31,852
Additional deferred income tax liability		-			-			4,354
Minority interest		( 943	)		(1,285	)		6,989
Net income (loss) under U.S. GAAP	Ps	895,570		Ps	1,261,883		Ps	(869,369		)
Weighted average number of shares outstanding (thousands)		599,571			600,000			600,000
Net income (loss) per basic and diluted share	Ps	1.49		Ps	2.10				(1.45	)

(Continued)

F-94

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

Notes to the Consolidated Financial Statements

Years ended December 31, 2006, 2007 and 2008

(Thousands of Mexican pesos note 2x,

except per share amounts)

Classification differences:

There are certain other classification differences between MexFRS and U.S. GAAP, which are as follows:

Employee statutory profit sharing expenses are classified as other expenses for MexFRS and as selling, general and administrative expenses for U.S. GAAP.

Tax incentives are presented as other income for MexFRS and as income taxes for U.S. GAAP.

The reconciliation of the stockholders’ equity between MexFRS and U.S. GAAP is as follows:

	Years ended December 31
	2007			2008
Majority stockholders' equity as reported under MexFRS	Ps	15,080,378		Ps	14,039,620
Adjustments to reconcile majority stockholders’ equity to U.S. GAAP:

Biological assets and agricultural products valuation at fair value		(95,384	)		(111,742	)
Accumulated differences between the financing cost capitalized for MexFRS and U.S. GAAP purposes		94,481			94,481
Accumulated depreciation on capitalized interest		(20,595	)		(24,278	)
Severance cost		(23,198	)		(18,370	)
Pensions and labor liabilities		(31,735	)		6,641
Reversal of accumulated amortization of goodwill		58,716			58,716
Deferred income taxes on U.S. GAAP adjustments		9,086			( 6,030	)
Additional deferred income tax liability		-			( 284,226	)
Fair value credit valuation adjustment effect		-			31,852
Majority stockholders’ equity as reported under U.S. GAAP	Ps	15,071,749		Ps	13,786,664

The effects of the above adjustments do not have any impact on minority interest.

(Continued)

F-95

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 stockholders’ equity
Balances at December 31, 2005		2,294,682		726,070		159,455		14,128,603			(3,809,337	)					13,499,473
Sales of repurchased shares		245		17,604		-		-			-			-			17,849
Cash dividends paid		-		-		-		(378,075	)		-			-			(378,075	)
SFAS 158 adoption		-		-		-		-			(36,454	)		-			(36,454	)
Comprehensive income:
Net income for the year		-		-		-		895,570			-			895,570			895,570
Components of other comprehensive income:
Deficit from restatement of stockholders’ equity		-		-		-		-			-			(40,288	)		(40,288	)
Derivative financial instruments		-		-		-		-			-			92,744			92,744
Minimum labor obligations liability adjustment		-		-		-		-			-			2,420			2,420
Other comprehensive income, net of taxes											54,876			54,876
Comprehensive income													Ps	950,446
Balance at December 31, 2006		2,294,927		743,674		159,455		14,646,098			(3,790,915	)					14,053,239
Cash dividends paid		-		-		-		(363,708	)		-			-			(363,708	)
Comprehensive income:
Net income for the year		-		-		-		1,261,883			-			1,261,883			1,261,883
Components of other comprehensive income:
Deficit from restatement of stockholders’ equity		-		-		-		-			-			18,661			18,661
Derivative financial instruments		-		-		-		-			-			98,552			98,552
Other comprehensive income SFAS 158 effect		-		-		-		-			-			3,122			3,122
Other comprehensive income, net of taxes											120,335			120,335
Comprehensive income													Ps	1,382,218
Balance at December 31, 2007	Ps	2,294,927	Ps	743,674	Ps	159,455	Ps	15,544,273		Ps	(3,670,580	)				Ps	15,071,749
Cash dividends paid		-		-		-		(353,880	)		-			-			(353,880	)
Comprehensive income (loss):
Net loss for the year		-		-		-		(869,369	)		-			(869,369	)		(869,369	)
Components of other comprehensive income:
Deficit from holding of non monetary assets		-		-		-		(3,735,254	)		3,735,254						-
Derivative financial instruments (net of deferred income tax effect of $23,204)		-		-		-					-			(98,922	)		(98,922	)
Other comprehensive income SFAS 158 effect		-		-		-					-			37,086			37,086
Other comprehensive loss, net of taxes											(61,836	)		(61,836	)
Comprehensive loss													Ps	(931,205	)
Balance at December 31, 2008	Ps	2,294,927	Ps	743,674	Ps	159,455	Ps	10,585,770		Ps	2,838					Ps	13,786,664

F-96