Leveraging what we do best

annual report 2010 FEMSA FEMSA is a leading company that participates in the non-alcoholic beverage industry through Coca-Cola FEMSA, the largest independent bottler of Coca-Cola products in the world in terms of sales volume; in the retail industry through FEMSA Comercio, operating OXXO, the largest and fastest-growing chain of convenience stores in Latin America, and in the beer industry, through its ownership of the second largest equity stake in Heineken, one of the world’s leading brewers with operations in over 70 countries.

Contents

Financial Highlights 2 Letter to Shareholders 4 Coca-Cola FEMSA 10 FEMSA Comercio 18 Social Responsibility 24 FEMSA Operating Overview 30 Business Units Highlights 32 Executive Team 34 Governance Standards 35 Board of Directors 36 Financial Section 37 Headquarters 88 Contact Information inside back cover 2010

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sustainable value creation

Our track record of sustainable, profitable growth demonstrates our ability to leverage what we do best. Our capacity to evolve and adapt to challenging environments, to develop innovative solutions, to serve and satisfy our consumers, and to generate new avenues for growth provide us with a powerful platform for sustainable value creation— now and into the future. (1 2010

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Financial Highlights

% % Millions of 2010 pesos 2010(1) 2010 2009(2) Change 2008(2) Change

Total revenues 13,705 169,702 160,251 5.9% 133,808 19.8% Income from operations 1,819 22,529 21,130 6.6% 17,349 21.8% Net income from continuing operations 1,451 17,961 11,799 52.2% 7,630 54.6% Income from the exchange shares with HKN 2,150 26,623 0 100.0% 0 0.0% Net income from discontinuing operations 57 706 3,283 -78.5% 1,648 99.2% Net income 3,658 45,290 15,082 200.3% 9,278 62.6% Net controlling interest income 3,251 40,251 9,908 306.2% 6,708 47.7% Net non-controlling interest income 407 5,039 5,174 -2.6% 2,570 101.3% Total assets 18,056 223,578 225,906 -1.0% 198,034 14.1% Total liabilities 5,699 70,565 110,077 -35.9% 101,139 8.8% Stockholders’ equity 12,357 153,013 115,829 32.1% 96,895 19.5% Capital expenditures 902 11,171 9,103 22.7% 7,816 16.5% Book value per share (3) 0.53 6.56 4.56 43.7% 3.85 18.6% Net income per share (3) 0.18 2.25 0.55 306.2% 0.37 47.7% Personnel 153,809 139,867 10.0% 129,289 8.2%

(1) U.S. dollar figures are converted from Mexican pesos using the noon-buying rate published by Federal Reserve Bank of New York, which was Ps. 12.3825 per US$1.00 as of December 31, 2010. (2) The figures for these years were restated for comparison with the current period as a result of exchange of 100% of FEMSA Cerveza for 20% economic interest in the Heineken Group. (3) Data in Mexican pesos based on outstanding shares of 17,891,131,350.

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Total Assets f e m s a millions of Mexican pesos

• KOF 49.1% • OXXO 10.2% 43.7 • Others* 40.7% KOF 49.1% % OXXO 10.2% Otros* 40.7% growth in book value per share

Ps. 223,578 KOF 49.1% OXXO 10.2% Otros* 40.7%

Total Revenues millions of Mexican pesos KOF 58.2% OXXO 35.0% OtKOFros* 6.8%49.1% OXXO 10.2% Otros* 40.7%

• KOF 58.2% • OXXO 35.0% 5.9 Others* 6.8% KOF 58.2% • OXXO 35.0% % Otros* 6.8% total revenues growth during 2010

KOF 75.8% OXXO 23.1% Ps. 169,702 OtKOFros* 158.2%.1% OXXO 35.0% Otros* 6.8%

Income from Operations KOF 75.8% millions of Mexican pesos OXXO 23.1% Otros* 1.1%

• KOF 75.8% • OXXO 23.1% KOF 75.8% 6.6 Others* 1.1% OXXO 23.1% % • Otros* 1.1% growth in income from operations in the year

Ps. 22,529

* Includes other companies and our 20% of economic interest in Heineken (3 2010 Today, we are excited about the compelling growth

opportunities ahead of us. We are uniquely positioned to r e p o r t create significant value for our stakeholders through our a n n u a l investment in three fantastic brands: Coca-Cola, OXXO,

f e m s a and Heineken.

Dear Shareholder:

A Smooth Transition our beer business. In the context of the At FEMSA, we are leveraging what we ongoing reconfiguration of the global recognize we do best to create value beer industry and the resulting need to for our consumers, our employees, our increase scale and geographic reach communities, and you—my fellow share- to compete effectively, this transaction holders. With this in mind, I am happy to addressed that imperative, transforming inform you that, following the exchange FEMSA’s beer operations into an impor- of our beer business for a 20 percent tant part of Heineken’s leading global economic interest in Heineken, we platform. With the footprint, scale, brand- enjoyed a great transition that proceeded building and innovation capabilities, as smoothly, uneventfully, and according to well as the only truly global beer brand, plan. Last year, we were excited to look Heineken is exceptionally positioned to forward to this transaction; today, we are compete and win on a global scale. In enthusiastic about the compelling growth turn, with our experience, we expect to opportunities before us, and about the contribute significantly to Heineken’s suc- considerable strategic and financial flex- cess globally and in Mexico particularly. ibility brought about by the successful execution of the transaction. Despite the significant complexity of such a great multi-billion dollar transac- When closed on April 30, 2010, the tion involving two dynamic, transnational agreement represented an important operations, our positive working relation- milestone for us: the culmination of a ships with our counterparts at Heineken carefully considered process—lasting enabled a timely, effective, and mutually almost two years—in which we explored, beneficial integration process. Thanks to developed, and analyzed alternatives for the tremendous effort of the teams from

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Leveraging our strategic and financial discipline, we are well situated to use our considerable flexibility to pursue the significant growth opportunities that we envision for our company. both organizations, we are at the start of generation, allows us to focus on explor- a new stage for FEMSA, one that fills us ing a wide range of attractive strategic with optimism and enthusiasm. prospects.

Today, we are exceptionally situated to Results, Business Highlights create significant value for our sharehold- In the face of very challenging macroeco- ers through our company’s investment in nomic and weather-driven dynamics, we three iconic brands: Coca-Cola, OXXO, produced solid results in 2010. For the full and Heineken. Through our expanded year, our comparable total revenues rose relationship with Heineken, our sharehold- 5.9 percent to Ps. 169.702 billion ers will continue to benefit from strong (US$ 13.705 billion). Our comparable growth prospects in the global brewing income from operations grew 6.6 percent space, as well as improved diversifica- to Ps. 22.529 billion (US$ 1.819 billion). tion and more balanced exposure across Our net income from continuing operations multiple markets. Given the current global increased 52.2 percent to Ps. 17.961 billion environment, we are now in a unique stra- (US$ 1.451 billion). Our earnings per unit tegic and financial position to capitalize were Ps. 11.25 (US$ 9.08 per ADR). on the considerable flexibility unlocked by this transaction to pursue, with strategic Let me now briefly review some of the and financial discipline, the significant year’s highlights for our non-alcoholic growth opportunities that we envision for beverage and retail businesses. our company. Indeed, at the end of 2010, we had a very healthy net cash balance of In the face of a tough global commodity José Antonio Fernández Carbajal more than Ps. 1.657 billion that, together and consumer environment, along with un- c h a i r m a n o f t h e b o a r d with our substantial capacity for cash flow usually bad weather conditions across our a n d c h i e f e x e c u t i v e o f f i c e r

(5 Our new value-driven commercial model customers in the traditional sales channel 2010 and enhance the revenues of our company enables us to serve our highly fragmented and the industry. r e p o r t

base of customers, satisfy our consumers’ increasingly demanding preferences and Product and process innovation are integral drivers of Coca-Cola FEMSA’s a n n u a l practices, and capture the full potential of strategic growth and development. In 2010, our new affordably priced, single- f e m s a the beverage industry. serve, entry-level 250 ml cans and PET Mexico and Latincentro divisions packages, combined with the successful during an important part of the year, reintroduction of our 2 liter returnable Coca-Cola FEMSA generated positive presentation, accounted for close to results in 2010. For the year, our total 50 percent of our Brazilian operations’ revenues rose 0.7 percent to Ps. 103.456 incremental volumes. Moreover, innovation billion, despite the effect of the devalua- in our non-carbonated beverage platform tion of the Venezuelan bolivar. Our income accounted for more than 10 percent of from operations increased 7.9 percent to Coca-Cola FEMSA’s consolidated Ps. 17.079 billion, resulting in a 110 basis incremental volumes. Furthermore, point operating margin expansion to together with The Coca-Cola Company, in 16.5 percent of consolidated revenues. 2010, we initiated the rollout of a promis- Moreover, our majority net income grew ing new venture in our Mexican opera- 15.0 percent to Ps. 9.800 billion. tions. We started to install Blak brand coffee dispensing machines in the We embrace the responsibility of managing traditional sales channel. These dispensers a growing business enterprise, recognizing provide our traditional store owners with an the importance of operating with maximum additional product line to satisfy this efficiency. To this end, in 2010, we evolved consumption occasion, enabling them to from a volume-driven to a value-driven broaden their beverage platform, gain a commercial model. We adapted our busi- new source of income, and thereby, ness not only to serve the needs of our compete better against the customary highly fragmented retail customer base coffee offering normally found in other across our franchise territories, but also to trade formats. Through this large-scale satisfy our consumers’ increasing demand- initiative, in under a year, we managed to ing preferences and practices. Ultimately, roll out 5,000 Blak machines, and the initial our aim is to capture the full potential of results of the initiative are encouraging. the beverage industry in the nine coun- tries in which we operate throughout Latin In 2010, we advanced our strategy to America. During the year, we converted the grow our business through value-creating equivalent of more than 60 percent of our acquisitions. In October, 2010, we signed consolidated volumes to our new GVC a preliminary agreement to acquire Grupo (Client Value Management) commercial Industrias Lácteas in Panama. This acquisi- model. This new value-driven model en- tion marks the first incursion into this sector ables us to improve the performance of our of the Latin American beverage industry

Total Revenues billions of Mexican pesos 169.702 160.251 133.808 114.459 102.870

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% annual growth 11.3 16.9 19.8 5.9 6) for a Coca-Cola bottler. It positions our 2010 company ahead of the curve on a national scale in the milk and value-added dairy r e p o r t

products category, one of the most dynamic segments in terms of growth, scale, and value in the global non-alcoholic beverage a n n u a l industry. By closing this transaction, we will also significantly reinforce our offering in f e m s a Panama’s juice beverage category. Specifi- cally, we will expand our product portfolio by approximately 600 SKUs, placing us in a more favorable position to match our primary local competitor’s offering in terms of category integration.

This transformational step is also an ideal opportunity for us to continue develop- ing the necessary capabilities to manage a cold distribution system, with which we are already familiar through the logistics capabilities of OXXO. This acquisition will allow us to identify prospective synergies with Coca-Cola FEMSA’s existing distribu- tion system in Panama and to leverage the full potential of this new portfolio across our supply chain through our cooler equipment at the point of sale.

For its part, FEMSA Comercio generated solid results amid an adverse, challenging operating environment. In 2010, our total sion and our comparable same-store sales able investments in information technology revenues rose 16.3 percent to Ps. 62.259 growth—which once again outperformed related projects and deployment capabilities billion. Our gross profit grew 18.7 percent the industry. Our gain in gross margin designed to improve our core competen- to Ps. 21.039 billion, resulting in a 70 basis mainly reflected our effective revenue cies and ensure that we sustain our growth point gross margin expansion to 33.8 management, our positive relationships with as a cutting-edge retailer. percent of total revenues. Additionally, our our key supplier partners—coupled with the income from operations increased 16.7 more efficient use of promotion-related As part of these efforts, we invest in percent to Ps. 5.200 billion, resulting in a marketing resources—and our improved extensive information management 10 basis point operating margin expansion mix of higher margin products and services. systems to optimize our supply chain to 8.4 percent of total revenues. In contrast, our bottom line was affected management. Through our informa- by higher operating expenses. In addition tion technology platform and detailed In reviewing our results, our top-line growth to those related to the growing number of processes, we manage the supply chain. resulted from our continuing store expan- stores, these expenses include our siz- As a result, we are increasingly able to

Income from Operations billions of Mexican pesos 22.529 21.130 17.349 In the face of challenging macroeconomic 14.300 12.431 and weather-driven dynamics, our comparable income from operations increased 6.6 percent to Ps. 22.529 billion.

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% annual growth 15.0 21.3 21.8 6.6 (7 2010 r e p o r t a n n u a l f e m s a

improve product availability, minimize A cornerstone of our success is our ca- stock-outs, increase inventory turn over, pability to identify and launch new stores and achieve high levels of service and, quickly—three stores per day in Mexico— ultimately, meet the needs of more than successfully, and profitably. We utilize pro- 6.5 million consumers daily. prietary models that enable us to pinpoint proper store locations, formats, and product Building on OXXO’s position as a categories. Using location-specific demo- convenience store chain, during 2010 graphic data and our extensive knowledge we opened a record 1,092 new stores of similar locations, these models allow us for a total of 8,426. Recognizing that it to tailor the store’s layout, along with its took us 20 years to reach our first 1,000 product and service offerings, to suit the stores, this is a major landmark that not target market. Even as the number of our only illustrates how far we have come, convenience stores climbs, we continue but also how far we can grow. Given to improve our processes. Consequently, the relatively low penetration of the the success rate of our new store open- OXXO format across the vast majority of ings remains at an all-time high. During Mexico, we will continue our aggressive the year, we enhanced our value proposi- domestic store expansion going for- tion to provide consumers with the quality ward, while we test the OXXO platform products and services that they’ve come to beyond Mexico. With this in mind, we are expect from OXXO. Among our initiatives, not only expanding our incipient network we leveraged the popularity of Mexico’s of stores in Bogota, Colombia, but also most recognized brand of hot beverages, replicating, adapting, and fine-tuning our andatti, by launching two tempting new business platform to meet Colombia’s flavors. In addition to our seven existing local market dynamics and consumer flavors, we introduced Florencia (cinnamon preferences. and vanilla flavored cappuccino) and the

ROIC percent 14.8 13.4 12.5 13.0 11.2

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8) new hot chocolate to further stimulate and Looking Forward 2010 satisfy the tastes of a growing number of Beyond benefiting from our significant OXXO patrons. We also broadened the participation in the growth of Heineken, r e p o r t scope of our convenient one-stop services. the leading premium global brewer, In December, 2010, we initiated a pilot we are extremely well positioned to correspondent bank program with BBVA concentrate our efforts on Coca-Cola a n n u a l Bancomer, Mexico’s largest financial FEMSA and FEMSA Comercio, where

institution (in terms of customers and we have developed enviable market po- f e m s a deposits). Through this program, custom- sitions. We will continue to work closely ers can make cash deposits to their bank with The Coca-Cola Company to pursue accounts and make payments toward further consolidation opportunities for the balance of their bank credit cards at Coca-Cola FEMSA, building on our OXXO. We look forward to establishing capability set and taking advantage of this program across the country with a the business’ proven track record of growing number of banks in Mexico. 224 growth. As one of the leading bottlers Ps. in the global Coca-Cola bottling system, Social Responsibility we also look to continue to expand our billion Mexican pesos In addition to the development of our core non-alcoholic beverage business, total assets in 2010 businesses, we are committed to sound maintaining our disciplined, efficient corporate governance practices. We comply efforts to grow both organically and with all applicable legal standards—includ- through acquisitions that generate ing those set forth in the Mexican Securi- value for our stakeholders. We will ties Market Law and the relevant provisions further continue to emphasize and for foreign issuers in the U.S. Sarbanes- focus on the extraordinary growth Oxley Act—and pursue a culture of trans- potential of our OXXO convenience parency, accountability, and integrity. store chain, strengthening our business platform and further developing the We are dedicated to our talented team of capabilities that we need to operate employees, who are the foundation for our at the forefront of the industry. past, present, and future success. We are committed to the personal and professional We envision an immensely rewarding development of quality people at all levels future for our company, driven by our of our organization. We offer training pro- passionate team of fellow managers grams and tools to advance the capabilities and employees. On behalf of these of all of our people. In 2010, approximately more than 150,000 dedicated men and 68,300 employees took a course through women across FEMSA, we thank you FEMSA University, our integrated profes- for your continued support. The very sional development and personalized train- reason for our existence is to cre- ing platform. We also foster the cross-fertil- ate economic and social value for our ization and growth of our company’s shared stakeholders, including our employees, pool of knowledge and skills through the our consumers, our shareholders, and exchange of our executives among our the enterprises and institutions within José Antonio Fernández Carbajal international operations network. our society, now and into the future. • c h a i r m a n o f t h e b o a r d a n d c h i e f e x e c u t i v e o f f i c e r

Total Assets* billions of Mexican pesos 225.906 223.578 198.034 183.418 159.973 To generate value for our stakeholders, we continue our disciplined, efficient efforts to grow organically and through acquisitions.

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% annual growth 14.7 8.0 14.1 -1.0 * Includes Coca-Cola FEMSA, FEMSA Comercio, our 20% of economic interest in Heineken and other companies (9 2010 Coca-Cola FEMSA r e p o r t

Beyond the strength of our defensive business a n n u a l profile, our 2010 results demonstrated our ability to

f e m s a successfully stay ahead of the curve in a challenging business environment—characterized by continued economic volatility, higher sweetener costs, and unusually bad weather conditions. For the year, and despite the devaluation of the bolivar in Venezuela, our total revenues grew 0.7% to Ps. 103.456 billion, and our income from operations increased 7.9% to Ps. 17.079 billion. As a result, our operating margin expanded 110 basis points year over year to 16.5%.

Leveraging what we do best... staying ahead of the curve

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+110 basis points operating margin expansion year over year

(11 2010

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Sparkling Beverage Volume millions of unit cases* 2,011 1,959 1,865 1,791 1,695

*One unit case equals 24 8-ounce bottles. 06 07 08 09 10

% annual growth 5.7 4.2 5.0 2.6 12) Our information technology platform not 2010 only provides our company with a distinctive r e p o r t competitive advantage, but also enables us to a n n u a l achieve our business’ full operating potential. f e m s a

Achieving Our Business’ Full resources more efficiently and lay the Operating Potential cornerstone for our company’s future We look to manage our large, growing organic growth. company with maximum operating effi- ciency. To this end, in 2010, we advanced We continue to invest in relevant infor- from a volume-driven to a value-driven mation technology systems to achieve commercial model. We adapted our our business’ full operating potential. business not only to serve our highly This information technology platform fragmented customer base across our —a distinctive competitive advantage— franchise territories, but also to satisfy provides our company with the neces- our consumers’ increasingly demanding sary tools to capitalize on the benefits preferences and practices. Ultimately, our of the multi-dimensional segmentation u s $ 30 aim is to capture the full potential of the process required for the implementation beverage industry in the nine countries of our new commercial model. In 2010, million invested in a new we serve throughout Latin America. Dur- we started the rollout of our HVKOF distribution center in the ing the year, we converted the equivalent (Homologation Version KOF) project. of more than 60% of our consolidated This project aligns our business’ pro- Greater Buenos Aires volumes to our new GVC (Client Value cesses, improves our operations’ flex- metropolitan area Management) commercial model. This ibility, and facilitates our numerous daily of Argentina new value-driven client segmentation transactions. We have already integrated enables us to improve the performance a substantial part of our Mexican pro- of our customers in the traditional sales duction and distribution facilities, while channel, along with the revenues of our we continue integrating the rest of our company and the industry. operations under HVKOF’s new SAP platform. To successfully implement this In 2011, we will continue to execute this project, we have trained more than 3,600 large-scale commercial initiative, which employees in Mexico through 385 differ- will allow us to direct our marketing ent courses.

We adapted our business to satisfy our consumers’ increasingly demanding preferences and practices.

(13 2010

r e p o r t Every day, our new distribution center a n n u a l in Argentina will serve over 25,000 customers and deliver 150,000 unit cases f e m s a of beverages.

In September 2010, we opened a new tive, we installed Blak brand coffee dis- distribution center in the Greater Buenos pensing machines in the traditional sales Aires metropolitan area of Argentina, channel. As a result, we are providing our with an investment of approximately traditional store owners with an addition- US$ 30 million. This facility utilizes al product to complement our beverage automated logistics equipment, including portfolio. The project is off to an auspi- laser-guided electric vehicles and voice cious start: on average, the 5,000 coffee activated systems, which enable its opera- dispensers installed in 2010 registered tors to set up orders without any written 75,000 transactions daily or more than input. This center will consolidate the 27 million cups annually. In 2011, we operation of two existing distribution are on our way to extend this venture facilities. It will serve more than 25,000 throughout our territories in Mexico, clients, deliver 150,000 unit cases of Colombia, Costa Rica, and Brazil, under- beverages, and be able to receive more scoring the dynamic potential that we than 100 trucks from our production envision in this category. Through such facilities on a daily basis—a benchmark ventures, we sharpen our company’s and within the Coca-Cola bottling system. our employees’ capabilities to identify and capture new consumption occa- We continually develop our organization’s sions, secure an expanding share of our capabilities to reinvent and improve consumers’ beverage preferences, and relevant business models, systems, and continue to consolidate our position as a partnerships that we can successfully im- multi-category benchmark in the non- plement on a large scale, creating value alcoholic beverage industry. for our customers, our business, and our shareholders. Our introduction of single-serve, entry- level presentations for such brands as Driving Growth through Innovation Coca-Cola and Fanta is an innova- Innovation is integral to our company’s tive way for us to capture an important strategic growth and development. consumption occasion. These reasonably Therefore, in 2010, together with The priced, entry-level packs present con- Coca-Cola Company, we initiated the sumers with a compelling opportunity rollout of a promising new venture in our to try our beverages for the first time, Mexican operations. Through this initia- satisfy their thirst on-the-go, or simply

We continue to consolidate our position as the leading multi-category beverage player in our industry.

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indulge themselves. Importantly, they also only to address changing consumer complement our returnable packaging preferences and purchasing patterns, but strategy. In 2010 alone, the affordably also to increase our sales and to maxi- priced 250 ml cans and PET packages, as mize our market presence. In support of well as the 2 liter returnable presentation our returnable initiative in Brazil, in 2010 launched in Brazil contributed approxi- we completed the installation of the 5,000 mately 50% of the operation’s volume largest returnable bottle production line growth. Moreover, in Mexico, we intro- in the Coca-Cola bottling system with an coolers installed duced an affordable 200 ml PET contour investment of US$ 17 million. This new bottle designed to replicate the success line can produce more than 300 million in only one day in Brazil of our Brazilian entry-level pack launches. liters or 50 million unit cases annually. Through such innovations, we develop Moreover, it makes our already highly- our capabilities to design strategies that efficient plant in Jundiaí, near São Paulo, enable our company to satisfy relevant the largest bottling facility in the world consumption occasions profitably. by production capacity. Our Brazilian returnable strategy contributes to the At the end of 2009, we began to rein- Coca-Cola system as we share our best force our returnable package base in our practices with our bottling partners. Our Brazilian operations. With the reintroduc- company continues to develop innovative tion of the 2 liter returnable presentation capabilities to manage an increasingly for brand Coca-Cola, we provided con- complex array of presentations, building sumers with a very persuasive purchas- a competitive advantage that is difficult ing opportunity. In an improving economic to replicate. environment with upward social mobility, we have found that such an affordable Consistent with our commitment to option to buy our products is an impor- provide our consumers with the right tant competitive tool. It enables us not beverage at the right temperature, as (15 2010 When completed, our recently signed r e p o r t agreement to acquire Grupo Industrias Lácteas will make us a leading producer of a n n u a l dairy products in Panama. f e m s a part of our new commercial model, we a leading manufacturer and distributor of have made important improvements dairy products and non-carbonated to our cooler coverage in the Brazilian beverages in that market. Since this 600 market. In only one day, we set a record company produces the leading brand in + for cooler placement in the Coca-Cola the juice sector, this transaction will SKUs will be added to bottling system—installing 5,000 coolers position Coca-Cola FEMSA as the top at selected client stores. This efficient juice maker in Panama. Overnight, we will our already broad portfolio cooler platform will complement our add approximately 600 SKUs to our in Panama point-of-sale initiatives and reinforce our already broad portfolio, placing us in a employees’ capabilities to implement more favorable position to match our large-scale strategies precisely. primary local competitor’s offering in terms of category integration. Assuming Growing through Value-Creating this transaction is approved and com- Acquisitions pleted successfully, this business will To further consolidate our position as the become part of the non-carbonated leading multi-category beverage player in beverage platform that we share with our our industry, in October 2010, we signed partner, The Coca-Cola Company. a preliminary agreement to acquire Grupo Industrias Lácteas in Panama. This acquisition will also provide an ex- With a national footprint, this company is cellent opportunity for our employees to

16) develop the capabilities to manage a true 2010 multi-category beverage portfolio. They will learn to market, sell, and distribute r e p o r t dairy and value-added products—one of the most dynamic segments in terms of

growth, scale, and value in the worldwide a n n u a l non-alcoholic beverage market. More-

over, the resulting acquisition of a cold f e m s a distribution system will allow us to identi- fy prospective synergies with our existing distribution system and to leverage the full potential of this portfolio across our supply chain through our cooler equip- ment at the point of sale.

Furthermore, in October 2010, we completed a transaction with a Brazilian subsidiary of The Coca-Cola Company to produce, sell, and distribute Matte Leão brand tea products. This transaction will reinforce our company’s non-carbonated product offering under the joint venture platform we share with our partner, The Coca-Cola Company, and the rest of the Brazilian Coca-Cola bottling system. The integration of this extensive line of tea products not only complements our existing offering of non-carbonated bev- erages, but it enables us to participate significantly in a very important bever- age category in the region—extending our avenues for growth in the Brazilian beverage industry. This line of more than 40 ready-to-drink SKUs supported this category’s important growth since its full incorporation to our portfolio.

As we continue to analyze the opportu- nities in the beverage industry, we will maintain our disciplined, efficient efforts to grow our business both organically and through acquisitions that create value for our stakeholders, enabling us to stay ahead of the curve. •

Our integration of Matte Leão ready-to-drink tea products extends our avenues for growth in the Brazilian beverage industry.

(17 2010

FEMSA Comercio r e p o r t FEMSA Comercio again produced an excellent a n n u a l

set of results. Total revenues rose 16.3% to Ps. 62.259 billion. Our revenue growth came f e m s a from our continued store expansion and our comparable same-store sales growth—driven by an increase in store traffic as well as a moderate improvement in average customer ticket. For the year, our same-store sales growth was best-in-class in Mexico, strengthening our position as an industry benchmark.

Leveraging what we do best... dynamic expansion

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18.7% gross profit growth year over year

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20) Our capability to identify and launch new 2010 stores quickly, effectively, and profitably r e p o r t is a key to our success. Opening three stores a n n u a l per day, we reached a total of 8,426 OXXO stores in 2010. f e m s a

Gross profit grew 18.7% to Ps. 21.0 of 8,426 stores. We also made progress in billion, resulting in a 70 basis point gross Colombia, where we continue to learn and margin expansion to reach 33.8% of total adapt our business platform to meet local revenues. Our gain in gross margin largely market dynamics. For example, we are fine reflected our effective revenue manage- tuning our value proposition—adding the ment, our positive collaboration with our key capability to offer such products as freshly supplier partners, and our improved mix of baked bread, gourmet coffee, and a variety higher margin products and services. of fast food offerings—to satisfy local consumer needs. As we advance in our Income from operations increased understanding of this key new market, we 16.7% to Ps. 5.200 billion. This figure are also growing our network of stores in reflects our growing number of stores, Bogota, from five at the end of 2009 to 17 higher operating expenses from such at the end of 2010. 1,092 items as higher utility tariffs at the store level; the strengthening of FEMSA A key to our success in our core Mexican new stores opened Comercio’s organizational structure, market is our capability to identify and primarily investments in information launch new stores quickly—three stores per in 2010 technology-related projects, and deploy- day—successfully, and profitably. To this end, ment capabilities that were deferred in our proprietary models help us to identify 2009 due to our cautious consumer appropriate store locations, store formats, outlook at the beginning of that year; and product categories. These models use and one-time expenses related to natu- location-specific demographic data and ral disasters that occurred during 2010. our knowledge of similar locations to tailor As a result, operating margin remained the store’s layout, as well as its product and in line with the previous year. service offerings, to suit the target market. Even as the number of our convenience Positive Strategic Growth stores continues to climb, we keep honing Building on our position as a convenience our processes. Consequently, the success store chain, in 2010, OXXO opened a rate of our new store openings remains at record 1,092 new stores to reach a total an all-time high.

always ready, always there

(21 We also continue to refine the market network synchronized with our warehouse 2010 segmentation and differentiation of our operations to ensure the proper transporta- store formats to more effectively serve the tion and care of the product. We ensure the

r e p o r t quality of store orders and inventory control needs of our consumers. Based on our consumer intelligence, we developed the at every stage of the distribution process. framework for three main types of stores, As OXXO grows, we will continually evolve a n n u a l segmented by the predominant consump- our supply chain to efficiently manage the tion occasions that attract our customers increasing size and complexity of our grow- f e m s a to our stores and differentiated by their ing array of offerings. layout and product mix. Therefore, these stores are particularly designed to serve Enhanced Value Proposition consumer populations whose needs skew We continually enhance our value propo- towards indulgence consumption, home sition to enable our stores to provide replenishment, or base/multi-purpose. consumers with the consistent quality products and services that they’ve come Efficient Supply Chain Management to expect from OXXO. Among our product We continually improve our core compe- initiatives, we launched two new flavors tencies and capabilities to advance our of Mexico’s most recognized brand of hot operating performance. As part of these beverages. In addition to the seven existing efforts, we invest in information manage- flavors of our proprietary andatti brand, we ment systems to optimize our supply introduced Florencia (cinnamon and vanilla chain management. flavored cappuccino) and the new hot chocolate to stimulate and satisfy the tastes We use our information technology plat- of a growing number of OXXO patrons. form, and detailed processes to manage We also continue with our home replenish- the supply chain. Through our demand ment strategy offering, which includes an planning system, we replenish our stores extensive range of pantry staples—such with the items they need to satisfy our as beans, rice, cooking oil, canned goods, consumers. Together, these systems among others—at highly competitive prices and processes will continue to improve to appeal to a broader array of consumers, product availability, minimize stock-outs, especially housewives and those with increase inventory turnover, and achieve on-the-go consumption patterns. high levels of service. Beyond our expanding mix of products, Furthermore, our 11 distribution centers in- we continue to broaden the scope of our creasingly use the information generated by existing convenient one-stop services our demand planning system to design and —from certain mortgage, micro-lender, execute the logistics required to provide and utility payments to purchases of successful, on-time delivery of products airline tickets and electronic airtime for sale at our stores. Each center serves recharges, to the payment for purchases an average of 765 stores, replenishing the made through leading online retailers inventory of more than 2,000 products at and auction sites. In this way, we enable least twice a week through a distribution our consumers to accomplish a number

OXXO Stores units

8,426

7,334 As OXXO grows, we continually improve 6,374 5,563 our core competencies and capabilities to 4,847 manage the increasing size and complexity of our business.

06 07 08 09 10

% annual growth 14.8 14.6 15.1 14.9 22) 2010

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of necessary tasks at a single, nearby preeminent choice for consumer interface location that is usually open 24/7. For in Mexico. This increases its attractiveness example, in Monterrey and the surround- for potential service-provider partners who ing state of Nuevo León, we now offer seek a network of outlets that bring them OXXO shoppers the ability to purchase in contact with the Mexican consumer at and replenish Feria, an electronic contact- a regional or national level. Indeed, today less smart card that enables them to travel OXXO enjoys relationships with more than almost effortlessly on the public transit sys- 400 companies in the services category. tem. Moreover, in December 2010, we initi- ated a pilot correspondent bank program At the end of the day, OXXO’s grow- with BBVA Bancomer, Mexico’s largest ing ubiquity and continually improving 6.5 financial institution (in terms of customers value proposition mean that we increas- + million and deposits). Through this program, cus- ingly reinforce our motto: always ready, transactions a day and tomers will be able to make cash deposits always there. • more than 2.3 billion a year to their bank accounts and make payments toward the balance of their bank credit at OXXO cards at OXXO. We look forward to estab- lishing this program across the country with a growing number of banks in Mexico.

By efficiently serving and satisfying their daily needs, OXXO is increasingly a part of the lives of consumers across Mexico. The number of transactions carried out at OXXO—more than 6.5 million a day and more than 2.3 billion a year—means that the chain continues to secure its position as the (23 2010

Social Responsibility r e p o r t At FEMSA, our goal is to operate as a sustainable company, consistently working in a socially a n n u a l responsible manner. We continually question and f e m s a analyze our performance, identify ways in which we can create value for everyone involved in our actions, and communicate honestly with our stakeholders.

Leveraging what we do best... sustainable development

24) 2010

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120years upholding a work ethic of simultaneously creating economic and social value

(25 2010

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26) To further the sustainability of our company, 2010 we work to create conditions that enable us to r e p o r t grow, excel, and prevail as an organization. a n n u a l

f e m s a

The result of years of evolution—and responsibility initiatives are objectively many lessons learned—our corporate measured, evaluated, and aligned with social responsibility strategy recognizes the business’ strategy. that we must identify and address both internal and external factors. To that end, With the goal of being a good neighbor, our corporate social responsibility perfor- OXXO developed a platform that en- mance is driven by: ables the company to focus its corpo- • Our corporate DNA, the result of a rate social responsibility programs on 120-year, value-based work ethic. reforestation, environmental education, • The management of short- and long- recycling, the rehabilitation of public term risks, while leveraging initiatives spaces, and the promotion of health that benefit our company and the com- and sports. munities where we operate. To ensure that we allocate our efforts With this in mind, in 2010, we began and resources to those areas in which to develop a strategic corporate social we have the knowledge and exper- responsibility agenda for each of our tise to achieve the maximum benefit core businesses that ensures the con- for everyone involved, our programs sideration of the material issues of our remain focused on our four core areas industries. Furthermore, we worked on of social responsibility: Quality of Life the creation of Key Performance Indica- in the Company, Health and Wellness, tors to assure that our corporate social Community Engagement, and Environ- responsibility programs are aligned mental Care. with our vision and business strategies, as well as with their management and To keep our stakeholders abreast of measuring processes. Ultimately, these our sustainability performance, we have two tools will allow us to evaluate and produced reports since 2005. For the measure our sustainability performance third consecutive year, we followed the and improve the quality of information Global Reporting Initiative Guidelines 75 required to make decisions. (GRI G3) to produce our 2010 Sustain- % ability Report. Verified by the consulting less energy consumption At Coca-Cola FEMSA, we focused on firm KPMG Mexico, our report achieved fortifying the Environmental Manage- an application level of A+, the highest with Imbera’s coolers, ment Plan, which serves as a tool to en- level available. Herein, we share some compared to those produced sure that the business’ corporate social of the most relevant actions taken dur- ing the year, and welcome you to read in the year 2000 our full 2010 Sustainability Report on our website at: http://www.femsa.com/en/social/

Our commitment to be Quality of Life in the Company a socially responsible Since our foundation, we have promoted the achievement of a company is the result of balanced lifestyle among our employ- 120 years of evolution— ees and their families. To this end, we and numerous lessons have established a Social Development Strategy comprised of seven elements learned. present in a well-balanced individual: values, social, family, health, econom- ics, work, and education. Bearing this in mind, we have developed a (27 variety of programs that address these • Through our Let’s Play initiative, more 2010 elements. than 8,800 children from marginalized • From a portfolio of more than communities in Venezuela participated r e p o r t

1,494 online and on-site educational in baseball clinics. activities, more than 68,300 • 351,000 people benefited from employees took a class through programs that promote sports and the a n n u a l FEMSA University in 2010. adoption of healthy lifestyles. • US$ 18.4 million was invested in train- f e m s a ing and educational programs. Community Engagement • FEMSA conducted several pilot pro- As part of a community, we promote grams, using home-office and initiatives that improve the quality of part-time formats. life of our stakeholders, and we seek to • Through the Inclusive Workplace establish win-win relationships. Since our System, 1,610 people with disabilities, foundation 120 years ago, we have rec- A+ senior citizens, and other vulnerable ognized that education is the engine for groups were employed at all organiza- both personal and community develop- level achieved by tional levels. ment. This is why we especially support our 2010 Sustainability • The Mexican Center for Philanthropy educational programs. Report, according (CEMEFI) recognized the results OXXO achieved in relation to an in- • 931,000 people benefited from our to the GRI Guidelines clusive workplace with the 2010 Best community engagement programs. Practice in Corporate Social Responsi- • Through eight Community Learn- bility Award. ing Centers in Colombia, Coca-Cola FEMSA, the Tecnológico de Health and Wellness Monterrey, and other partners provided At FEMSA, we assume an active formal and technical education to un- role in the creation of a culture of health derprivileged communities, promoting and wellness—today the promotion of the reconciliation and development of healthy life-styles is part of our corporate communities that have been particu- identity. Recognizing that a healthy com- larly affected by violence. munity is best suited to achieve economic • OXXO’s Rounding-Up program col- and social development, we support lected US$ 6.4 million from its custom- programs that cultivate a wholesome work ers for the benefit of 190 charitable environment and vigorous communities. institutions across Mexico. • FEMSA invested US$ 10.8 million in • FEMSA invested US$ 24.7 million educational, cultural, and economic in Occupational Safety and Health development programs. programs. • Through Charting My Own Destiny Environmental Care program, more than 64,700 students Our environmental strategy is based on from five Mexican states and Brazil three pillars: achieve water neutrality by im- developed the skills they need to make proving the efficient use of water and aqui- responsible decisions in their lives. fer replenishment; introduce materials from

We offer an array of programs and services to enable our employees and their families to enjoy a balanced lifestyle.

28) 2010

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17,000

people in Nicaragua and f e m s a Colombia now have access to water through FEMSA Foundation’s Safe Water Initiative

renewable sources, increase recycling, and access to, sustainable use and con- of hurricane Matthew, the unit’s first reduce waste; and climate change mitiga- servation of water; and Quality of Life, intervention was in Veracruz, where it dis- tion by enhancing energy efficiency and which focuses on improving nutrition tributed almost 80,000 liters of drinking using renewable sources of energy. and health. The Foundation invests in water to over 5,000 people. proposals that produce valuable, mea- This year, FEMSA made the commit- surable, strategic, environmental, and/ In 2010, the Foundation undertook a ment that, by 2013, all of its businesses or social impacts on the people of Latin number of other Sustainable Develop- in Mexico will satisfy 85% of their energy America. It also aims to generate long- ment projects. Among them, it worked needs with wind power. term benefits, which may be replicated jointly with Pronatura to install 15 hect- • Coca-Cola FEMSA positioned itself in other communities. To maximize ares of closed ponds and 30 hectares of among the leaders of the Coca-Cola the impact of its work, the Foundation contour leveled ditches in the Cumbres bottling system in the efficient use of seeks to join its efforts and resources de Monterrey National Park. Together water, achieving the benchmark of 1.26 with like-minded strategic partners. with Fund for Peace, it constructed liters of water per liter of beverage pro- 263 rain-water-harvesting systems in duced at its Toluca plant in May, 2010. In 2010, FEMSA Foundation extended its the communities of Huasteca Potosina. • Together with Coca-Cola de México, presence beyond Mexico, benefiting people Through its collaboration with the Ayú from 2007 to 2010, we have planted in Central and South America. In the area Foundation, 241 families from the Mixtec more than 12 million trees in Mexico. of Sustainable Development, the Safe region of Oaxaca received access to • Coca-Cola FEMSA introduced the Water Initiative is providing access to water drinking water. Moreover, the Foundation PlantBottle™; 30% of the materials for 17,000 people in Nicaragua and Colom- continues to invest in the Green Technol- for this bottle come from renewable bia. Through its use of sustainable technol- ogies project in the State of Mexico for sources, and its carbon footprint is 15% ogy and its work with civil society organiza- the conservation of the Amanalco-Valle lower than conventional PET bottles. tions, local communities, governments, and de Bravo watershed, introducing eco- • 70% of OXXO stores have imple- water providers, this initiative raises people’s nomical and alternative technologies that mented the Intelligent Store System, expectations for development, improving generate savings and support sustain- reducing their energy consumption health and productivity, while decreasing able water use in the community. 12% by ensuring the optimal use of the rate of school dropouts. refrigeration, interior and exterior light- In the area of Quality of Life, FEMSA ing, and air conditioning. This initiative In September 2010, FEMSA Founda- Foundation, in collaboration with the Na- saved 110,200 gigajoules of energy. tion presented and put into operation the tional Institute of Medical Sciences and Come for Water project, the first water Nutrition Salvador Zubirán, established FEMSA Foundation purification vehicle for disaster response. the Chair in Nutrigenomics at the Tec- Established in November, 2008, the mis- This mobile unit is tailored to the specific nológico de Monterrey’s Biotechnology sion of FEMSA Foundation is to gener- needs of the Mexican population, which Center. The Chair will pursue scientific ate long-term social value in Latin is highly vulnerable to natural disasters. research in three areas: evaluation of the American communities by supporting With support and advice from the Civil effect of diet’s interaction with genes- projects designed to achieve benefits Protection Department of the State of health; engineering and processing of that help improve the quality of life of Nuevo León, the Foundation designed functional foods; and genetic design and present and future generations. this vehicle, which provides affected production of novel, agronomically forti- communities of Mexico with 43,000 fied foods. For more information about FEMSA Foundation supports initia- liters of drinking water—the equivalent FEMSA Foundation, including its projects tives in two strategic areas: Sustainable of 71,000 20-ounce bottles—and 730 and initiatives, please visit: Development, which focuses on the kilograms of ice daily. After the onslaught www.femsafoundation.org. (29 2010 FEMSA Operating Overview r e p o r t Coca-Cola FEMSA Brands: Alpina • Aquarius • Bebere • Black Fire • Blak • Brisa • Burn • Canada Dry

a n n u a l • Carioca • Cepita • Chinotto • Ciel • Coca-Cola • Coca-Cola Light • Coca-Cola Zero • Crush • Crystal

• Dasani • Del Valle • Delaware Punch • Epika • Fanta • Fanta Zero • Fresca • Freskolita • Fruitopia • f e m s a Frutsi • Glaceau Vitamin Water • Gladiator • Guarapan • Hi-C • Hit • Hugo • I9 • Ju-C • Kin • Kist • Kuat • Kuat Zero • Lift • Manantial • Matte Leão • Mundet • Nestea • Nevada • Polar • Powerade • Premio Prisco • Quatro • Quatro Liviana • Roman • Sangria Mundet • Schweppes • Seagrams • Senzao • Shangri-la • Sidral Mundet • Simba • Soda Clausen • Soda Kin • Sonfil • Sprite • Sprite Zero • Squirt • SunFrut • Super Malta • Tai • Vallefrut • Zero • OXXO Brand: andatti •

Mercosur Latincentro Brazil

Country Mexico Panama Mexico & Colombia Nicaragua Colombia Costa Rica Costa Argentina Guatemala Venezuela

FEMSA Company Coca-Cola FEMSA Comercio

FEMSA Ownership % 53.7 1 100

Sales Volume 1,242 2 189 2 476 2 137 2 244 2 211 2 _

Revenues 3 38,782 33,360 31,314 62,259

Income from Operations 3 6,605 5,008 5,466 5,200

Plants / Stores 9 2 4 5 6 4 8,426

Distribution Facilities 83 5 27 25 32 32 11

Distribution Routes 4 4,008 302 1,996 550 1,136 1,052 _

Brands 5 35 32 35 31 20 11 1

Clients 621,053 77,502 191,847 104,275 370,112 211,568 6.5 6

Headcount 7 68,449 73,101

Note: Only includes core business information. 1 The remaining 31.6% and 14.7%, are owned by The Coca-Cola Company and the investing public, respectively. 2 Millions of unit cases (case equivalent to 24 8-ounce bottles). 3 Expressed in millions of Mexican pesos (Ps). 4 Includes third-party distributors. 5 Includes brand extensions. 6 Millions of clients per day based on the number of daily transactions. 7 Includes third-party and centralized services headcount.

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OXXO andatti hot strategic beverages > In growth > We addition to the seven opened a record existing flavors of 1,092 new stores our propietary andatti to reach a total of brand, we introduced 8,426 stores. We Florencia and the are also growing our new hot chocolate network of stores in to stimulate and Bogota, from five in satisfy the taste of a 2009 to 17 at 2010. growing number of OXXO patrons. n OXXO n Beverages and OXXO n Beverages

New distribution center in Argentina > It will serve more than 25,000 clients, deliver 150,000 unit cases of beverages, and be able to receive more than 100 trucks from our production facilities on a daily basis

Water savings > Over 15 billion liters of water saved in the last six years across Matte Leão our Latin American plants which is transaction equivalent to the > The integration average annual of this extensive water consumption line of ready-to- of 43,000 families of drink tea products, five members complements our 150 existing offering + of non-carbonated thousand employees beverages in Brazil. in Latin America

(31 2010

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Business Units Highlights

Total Revenues Income from Operations billions of Mexican pesos billions of Mexican pesos Coca-Cola FEMSA 103.456 102.767 17.079 Amid an extremely challenging eco- 15.835 nomic and consumer environment, 82.976 13.695 11.486 Coca-Cola FEMSA generated strong 69.251 10.293 top- and bottom-line results for the 64.046 year. In 2010, total revenues grew 0.7 percent to Ps. 103.5 billion, and income from operations increased 7.9 percent to Ps. 17.1 billion. 06 07 08 09 10 06 07 08 09 10 % annual % annual growth 8.1 19.8 23.9 0.7 growth 11.6 19.2 15.6 7.9

% operating margin 16.6 16.5 15.4 16.5

Total Revenues Income from Operations billions of Mexican pesos billions of Mexican pesos FEMSA Comercio 62.259 5.200 FEMSA Comercio posted another 53.549 4.457 good year in the face of strong economic headwinds. In 2010, total 47.146 42.103 3.077 revenues increased 16.3 percent to 36.835 2.320 Ps. 62.3 billion, and income from 1.667 operations surged 16.7 percent to Ps. 5.2 billion—resulting in a record operating margin of 8.4 percent. 06 07 08 09 10 06 07 08 09 10 % annual % annual growth 14.3 12.0 13.6 16.3 growth 39.2 32.6 44.8 16.7

% operating margin 5.5 6.5 8.3 8.4

32) EBITDA* Total Assets Headcount billions of Mexican pesos billions of Mexican pesos thousands 114.061 68.4 21.022 110.661 67.4 97.958 65.0 19.746 87.178 17.116 80.364 58.1 13.278 14.434 56.7

06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 % annual % annual % annual growth 8.7 18.6 15.4 6.5 growth 8.4 12.4 13.0 3.1 growth 2.5 11.9 3.7 1.5

EBITDA* Total Assets Headcount billions of Mexican pesos billions of Mexican pesos thousands

23.677 73.1 6.797 19.693 60.9 5.787 17.185 54.1 14.284 46.6 4.208 12.311 41.1 3.285 2.473

06 07 08 09 10 06 07 08 09 10 06 07 08 09 10 % annual % annual % annual growth 32.8 28.1 37.5 17.5 growth 16.0 20.3 14.6 20.2 growth 13.3 16.1 12.5 20.0

*EBITDA equals Operating Income plus Depreciation, Amortization and other non-cash items.

(33 2010 Executive Team r e p o r t Our deep bench of talented executives leads our unwavering pursuit of excellence as an international industry leader. Our team continues to extend our strong track record of sustainable, profitable growth—creating value year after year. Together, they leverage what we do best

a n n u a l to increase our corporate and financial flexibility, to take advantage of strategic opportunities, and to achieve a superior competitive position

in our industry. In the process, they ensure and instill FEMSA’s legacy of integrity well into the future. f e m s a

José Antonio Fernández Carbajal Javier Astaburuaga Sanjines Genaro Borrego Estrada Chairman of the Board and Chief Executive Officer of FEMSA Chief Financial Officer and Vice-President of Strategic Vice-President of Corporate Affairs Mr. Fernández is currently the Chairman and CEO Development Genaro Borrego joined FEMSA in September 2007 of FEMSA. José Antonio Fernández Carbajal was Javier Astaburuaga joined FEMSA in 1982. In as Vice-President of Corporate Affairs. Prior to that, named CEO of FEMSA in January 1995 and has 2006, he was named FEMSA’s CFO and Vice- Mr. Borrego was elected as a Federal Congress- served as Chairman of the Board of FEMSA since President of Strategic Development. Prior to that, man for the LII Legislature from 1982 to 1985. 2001. On May 2010, he was also named Vice- Mr. Astaburuaga Sanjines served as co-CEO After that, he served as Governor of the Mexican Chairman of the Board of Heineken Holding and of FEMSA Cerveza, Vice-President of Sales for State of Zacatecas from 1986 to 1992 and in early Chairman of the Americas Committee of Heineken, Northern Mexico, CFO of FEMSA Cerveza, Vice- 1992 he was elected President of the political created to oversee the strategic direction of the President of Corporate Development for FEMSA, party PRI for one year. From 1993 to 2000, he led business opportunities in that region. Before and Chief Information Officer of FEMSA Cerveza. the Mexican Social Security Institute (IMSS) and becoming CEO of FEMSA, Mr. Fernández Carbajal Mr. Astaburuaga earned a Bachelor’s degree in he was the President of the Interamerican Social served as the CEO of OXXO. He also held posi- Public Accounting from Tecnológico de Monterrey. Security Conference. In 2000, he was also elected tions in FEMSA’s corporate area, as well as in the as a Senator of the Federal Congress to represent commercial department of FEMSA Cerveza. Mr. Alfonso Garza Garza the State of Zacatecas during the LVIII and LIX Fernández Carbajal is also Chairman of the Board Executive Vice-President of Human Resources Legislatures. He holds a degree in Industrial Rela- and Strategic Procurement, Business Processes, of Coca-Cola FEMSA, Vice-Chairman of the Board and Information Technology tions from Universidad Iberoamericana. of Tecnológico de Monterrey, Chairman of the Alfonso Garza joined FEMSA in 1985 and was Carlos Salazar Lomelín Board of FEMSA’s Foundation, the U.S. Mexico named Executive Vice President of Human Re- Chief Executive Officer of Coca-Cola FEMSA Foundation, and participates on Boards of Grupo sources in 2005. Prior to that, he held various posi- Carlos Salazar joined FEMSA in 1973 and he has Financiero BBVA Bancomer, Grupo Industrial Bim- tions at FEMSA Cerveza and FEMSA Empaques held several senior management positions across bo, Xignux, Industrias Peñoles, Aerolíneas Volaris, (Packaging), including the management of FEMSA FEMSA, including: Vice-President of Grafo Regia, Grupo Televisa among others. He co-directs the Packaging and Grafo Regia. In January 2009, Plásticos Técnicos Mexicanos S.A., the International Chapter Mexico of the Woodrow Wilson Center as he was appointed as Vice-President of Strategic Division of FEMSA Cerveza, Commercial Plan- President, and starting 20 years ago, he has been a Procurement, Business Processes, and Informa- ning in Grupo Visa, and CEO of FEMSA Cerveza. professor of the course of Planning Systems in the tion Technology of FEMSA. Mr. Garza earned a Since 2000, he was appointed CEO of Coca-Cola Industrial and Systems Engineering degree in Tec- Bachelor’s degree in Industrial Engineering from FEMSA. In 2010, he was awarded with the medal nológico de Monterrey, at campus Monterrey. Mr. Tecnológico de Monterrey and completed post- of Distinguished Citizen by the state of Nuevo León. Fernández Carbajal earned a bachelor’s degree in graduate courses at IPADE. industrial and systems engineering and a master’s He was President of the Comisión Siglo XXI in Monterrey and Executive Director of CINTERMEX. degree in business administration from Tecnológico José González Ornelas de Monterrey. Vice-President of Administration and Corporate He has been a professor in economics for a number Control of FEMSA of years at the Tecnológico de Monterrey and he Federico Reyes García José González assumed the current position in is the current President of the Advisory Board of Vice-President of Corporate Development of FEMSA 2002. He first joined FEMSA in 1973, where he the EGADE Business School of this Institution. He Mr. Reyes assumed his current position in January held different positions in the organization, such holds a B.A. in Economics and a Master in Business 2006, after serving as Vice-President of Finance as Finance Information Vice-President. In 1987, Administration from this institution. He also has and Corporate Development of FEMSA since he was CFO of FEMSA Cerveza and in 1994, graduate studies in Economic Development in Italy 1999. Starting in 1987, he was associated with he was named Vice-President of Planning and and a Management Program from the IPADE in FEMSA as an external advisor, and he formally Corporate Development of FEMSA and CEO of Mexico, among other studies in different countries. joined FEMSA in 1992 as Vice-President of Cor- FEMSA Logística. He is a board member of several porate Development. Between 1993 and 1999, he international companies, he participates as Auditing Eduardo Padilla Silva was CEO of Seguros Monterrey Aetna and Valores Committee Secretary of FEMSA’s and Coca-Cola Chief Executive Officer of FEMSA Comercio Monterrey Aetna and Executive Vice-President of FEMSA’s board and sits on the controller board Eduardo Padilla joined FEMSA in 1997 as the Insurance and Pension Division at Bancomer at Tecnológico de Monterrey. He is also part of FEMSA’s Director of Strategic Planning and Financial Group. He rejoined FEMSA in 1999. Mr. the Instituto de Contadores Públicos de Nuevo Corporate Control. In 2000 he was named CEO of Reyes holds a Bachelor’s degree in Accounting León Directive Committee and he is President of FEMSA Strategic Businesses—which include Pack- from Tecnológico de Monterrey. the Club de Fútbol Monterrey board. He holds a aging, Logistics and OXXO. Since 2004, he has Bachelor’s degree in Accounting from Universidad focused as CEO of FEMSA Comercio. Before join- Autónoma de Nuevo León and undertook post- ing FEMSA, Mr. Padilla served as CEO of Terza, a graduate studies in Business Administration from subsidiary of Grupo ALFA, from 1987 to 1996. Mr. different universities in Mexico and abroad. Padilla earned a Bachelor’s degree in Mechanical and Administrative Engineering from Tecnológico de Monterrey and a Master’s degree in Business Administration from Cornell University. He also has completed Graduate studies at IPADE.

34) 2010 Governance Standards r e p o r t For more than a century, the FEMSA Board of Directors has guided our company’s dynamic growth in accordance with the highest standards of corporate governance. We are committed to the quality of our disclosure practices, and adhere to best corporate governance

practices. We comply with the standards set forth in the Mexican Securities Law and the pertinent provisions of the United States’ a n n u a l

Sarbanes-Oxley Act. Moreover, we were among the leaders to embrace the Code of Best Corporate Governance Practices, established by the Mexican Entrepreneurial Council. f e m s a

We work to ensure that our company promotes financial transparency, accountability, and high ethical standards. Based on a sound foundation of responsible corporate governance, we can sustainably build our business—delivering the results that our shareholders, consumers, employees, and other stakeholders expect from FEMSA.

Audit Committee The Audit Committee is responsible for (1) reviewing the accuracy and integrity of FEMSA’s quarterly and annual financial state- ments in accordance with accounting, internal control and auditing requirements, (2) the appointment, compensation, retention, and oversight of the independent auditor, who reports directly to the Audit Committee, (3) reviewing related party transactions other than in the ordinary course of FEMSA’s business and (4) identifying and following up on contingencies and legal proceed- ings. The Audit Committee has implemented procedures for receiving, retaining, and addressing complaints regarding accounting, internal control, and auditing matters, including the submission of confidential, anonymous complaints from employees regarding questionable accounting or auditing matters. To carry out its duties, the Audit Committee may hire independent counsel and other advisors. As necessary, the company compensates the independent auditor and any outside consultant hired by the Audit Commit- tee and provides funding for ordinary administrative expenses incurred by the Audit Committee in the course of its duties. Alexis E. Rovzar de la Torre is the Chairman of the Audit Committee. Members include a financial expert, José Manuel Canal Hernando, Francisco Zambrano Rodríguez, and Alfonso González Migoya—all of them independent directors. The Secretary of the Audit Committee is José González Ornelas, head of FEMSA’s internal audit department.

Corporate Practices Committee The Corporate Practices Committee, which is comprised of independent directors, is responsible for preventing and/or reduc- ing the risk of performing operations that could damage FEMSA’s value or that benefit a particular group of shareholders. The Corporate Practices Committee (1) may call a shareholders’ meeting and include such matters as it may deem appropriate for that meeting’s agenda, (2) approve policies on the use of the company’s assets or related party transactions, (3) approve the Chief Executive Officer’s and relevant officers’ compensation, and (4) support the Board of Directors in the elaboration of reports on ac- counting practices. Lorenzo H. Zambrano is the Chairman of this Committee. Members include Carlos Salguero and Helmut Paul. The Secretary of the Corporate Practices Committee is Alfonso Garza Garza, FEMSA’s Vice President of Human Resources.

Finance Committee The Finance Committee’s responsibilities include (1) evaluating the investment and financing policies proposed by the Chief Executive Officer and (2) identifying risk factors to which the corporation is exposed, as well as evaluating its management poli- cies. Ricardo Guajardo Touché is Chairman of the Finance Committee. Members include Robert E. Denham, Francisco Javier Fernández Carbajal, Alfredo Livas Cantú, and Federico Reyes García. The Secretary of the Committee is Javier Astaburuaga Sanjines, FEMSA’s Chief Financial Officer.

For more information on how our corporate governance practices differ from those followed by United States companies under NYSE listing standards, please refer to the Corporate Governance section of our website: www.femsa.com/investor.

(35 2010 Board of Directors r e p o r t Our Board of Directors is at the head of FEMSA’s corporate governance system, guided by what is in the best long-term interests of our company’s shareholders and other stakeholders. Our Board is responsible for approving our corporate strategy; advising management

a n n u a l on significant issues; defining and overseeing the implementation of our key values and vision; and reviewing and approving related-party

transactions and transactions not in the ordinary course of business.

f e m s a In addition to our executive team, our Board of Directors is supported by its committees: the Audit Committee, the Finance Committee, and the Corporate Governance Committee. Our Board appoints and supervises these committees, which assist and make recommendations to our Board in their respective areas of responsibility.

Series “B” Directors Series “D” Directors

José Antonio Fernández Carbajal Francisco Javier Fernández c Armando Garza Sada Chairman of the Board and Chief Executive Officer Private Business Consultant and Private Investor Chairman of the Board of Grupo Alfa, S.A.B de C.V. of Fomento Económico Mexicano, S.A.B. de C.V. Elected 2005 Elected 2006 Elected 1984 Alternate: Javier Astaburuaga Sanjines c Alternate: Eduardo Padilla Silva Alternate: Federico Reyes García c Alexis E. Rovzar de la Torre a1 Eva Garza Lagüera Gonda Ricardo Guajardo Touché c Executive Partner of White & Case, S.C. Private Investor Former Chairman of the Board of BBVA Bancomer Law Firm Elected 1999 Financial Institution Elected 1989 Alternate: Paulina Garza Lagüera Gonda Elected 1988 Alternate: Francisco Zambrano Rodrígueza a1 Alternate: Othón Páez Garza Bárbara Garza Lagüera Gonda Helmut Paul b1 Private Investor Carlos Salguero b1 Owner of H. Paul & Company LLC Elected 2002 Chairman of the Board of Salguero Holdings BVI Corporate Finance Consulting Firm Alternate: Enrique F. Senior Hernández and Salguero Hotels Chile; and partner at Salguero Elected 1988 Hotels AR Alternate: Michael Larson 1 José Fernando Calderón Rojas Elected 1995 Chairman of the Board and Chief Executive Officer Alternate: Alfonso González Migoya a1 Lorenzo H. Zambrano b1 of Franca Servicios, S.A. de C.V., Servicios Admi- Chairman of the Board and nistrativos de Monterrey, S.A de C.V., Regio Franca, Alfredo Livas Cantú c1 Chief Executive Officer of S.A. de C.V., and Franca Industrias, S.A. de C.V. President of CEMEX, S.A.B. de C.V. Real Estate Company Praxis Financiera, S.C. Cement and Construction Materials Elected 2005 Financial Consulting Firm Elected 1995 Alternate: Francisco José Calderón Rojas Elected 1995 Alternate: Francisco Garza Zambrano 1 Alternate: Sergio Deschamps Ebergenyi 1 Consuelo Garza de Garza Robert E. Denham c Founder and Former President of Asociación Roberto Servitje Sendra Partner at Munger, Tolles & Olson LLP Nacional Pro-Superación Personal, A.C. (ANSPAC) Chairman of the Board Law Firm Non-Profit Organization Grupo Industrial Bimbo, S.A.B de C.V. Elected 2001 Elected 1995 Food Company Alternate: José González Ornelas a Alternate: Alfonso Garza Garza c Elected 1995 Alternate: Juan Guichard Michel Max Michel Suberville Honorary Chairman of the Board of Mariana Garza Lagüera Gonda El Puerto de Liverpool, S.A.B de C.V. and Private Private Investor Investor Elected 2005 Department Store Chain Alternate: Carlos Salazar Lomelín Elected 1985 Alternate: Max Michel González José Manuel Canal Hernando a1 Secretary Private Consultant Carlos Eduardo Aldrete Ancira Alberto Bailleres Elected 2003 Chairman of the Board Alternate: Ricardo Saldívar Escajadillo 1 Alternate Secretary of Grupo Bal S.A. de C.V., Industrias Peñoles, Arnulfo Treviño Garza S.A.B. de C. V, Fresnillo plc, Grupo Palacio de Hierro, S.A.B. de C.V., Grupo Profuturo, S.A.B. Committees: de C.V., Instituto Tecnológico Autónomo de México a) Auditing and Director at Valores Mexicanos Casa de Bolsa, b) Corporate Practices S.A. de C.V. c) Finance and Planning Mining and Metallurgic Industry Insurance Company Relation: Department Store Chain 1) Independent Brokerage Firm Elected 1995 Alternate: Arturo Fernández Pérez

36) Contact Information

Investor Relations General Counsel Juan Fonseca Carlos E. Aldrete Maximilian Zimmermann General Anaya No. 601 Pte. Phone: (52) 81 8328-6167 Colonia Bella Vista Fax: (52) 81 8328-6080 Monterrey, Nuevo León e-mail: [email protected] México, C.P. 64410 Phone: (52) 81 8328-6180

Corporate Communication Independent Accountant Carolina Alvear Mancera, S.C. Erika De la Peña Member practice of Ernst & Young Global Phone: (52) 81 8328-6046 Av. Lázaro Cárdenas No. 2321 Pte. Piso 5 Fax: (52) 81 8328-6117 Col. Residencial San Agustín e-mail: [email protected] San Pedro Garza García, Nuevo León México, C.P. 66260 Phone: (52) 81 8152-1800

For more Information, visit us at: Stock Exchange and Symbol www.femsa.com Fomento Económico Mexicano, S.A.B. de C.V. www.femsa.com/investor stock trades on the Bolsa Mexicana de Valores (BMV) in the form of units under the symbols FEM- SA UBD and FEMSA UB. The FEMSA UBD units also trade on The New York Stock Exchange, Inc. (NYSE) in the form of ADRs under the symbol FMX.

Depositary Bank and Registrar The Bank of New York Mellon BNY Mellon Shareowner Services P.O. Box 358516 Pittsburgh, PA 15252-8516 Toll Free Number for Domestic Calls: 1 (888) BNY-ADRS (269-2377)

: www. signi .com.mx International Callers: 201-680-6825 e-mail: [email protected] d e s i g n

(: Website: www.bnymellon.com/shareowner

The FEMSA 2010 Annual Report may contain certain forward-looking statements concerning FEMSA and its subsidiaries’ future performance and should be considered as good faith estimates of FEMSA and its subsidiaries. These forward- looking statements reflect management’s expecta- tions and are based upon currently available data. Actual results are subject to further events and uncertainties which could materially impact the Company’s subsidiaries’ actual performance. annual report 2010

General Anaya No. 601 Pte. Col. Bella Vista Monterrey, Nuevo León México, C.P. 64410

www.femsa.com [email protected]

Cert no. SCS-COC-000648