Mexico of Evolution

www.grupofamsa.com www.famsa.com

GRUPO FAMSA, S.A.B. DE C.V. 2010 ANNUAL REPORT Evol 2010 ANNUALREPORT Exp eri ution & ence

YEARS CONTENTS

02 CORPORATE PROFILE

03 FINANCIAL HIGHLIGHTS

04 40 YEARS DEVELOPING A SOLID GROWTH PLATFORM

06 LETTER FROM THE CHAIRMAN OF THE BOARD AND THE CHIEF EXECUTIVE OFFICER 40

08 UNIQUE VALUE-CREATING SYNERGIES

10 WE EVOLVE TO SERVE OUR CUSTOMERS YEARS BETTER

12 BUSINESS UNITS 14 FAMSA MEXICO OF EVOLUTION

16 FAMSA USA

18 BANCO AHORRO FAMSA AND EXPERIENCE

20 SOCIAL RESPONSIBILITY

22 CORPORATE GOVERNANCE TO DRIVE OUR

26 MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE FINANCIAL RESULTS FUTURE

29 CONSOLIDATED FINANCIAL STATEMENTS Corporate Profile

Since the opening of our first store in 1970, we have evolved into a leading public company in the retail industry, operating a unique portfolio of complementary business units that drive our growth in Mexico and abroad.

Founded in 1970, in Monterrey, Nuevo Leon, Grupo Famsa has consolidated its position as a leading specialty retailer, focusing its efforts on meeting families’ diverse consumption, financing and saving needs.

Throughout its history, Grupo Famsa has developed a solid portfolio of complementary businesses based on consumer credit and savings. Famsa Mexico, Banco Ahorro Famsa and Famsa USA, our three business units, provide a comprehensive value offer aimed at enhancing the quality of life of a market segment that demands personalized service and credit options that are not provided by the traditional banking sector.

The synergies between Famsa Mexico, Banco Ahorro Famsa and Famsa USA serve to strengthen the company’s performance. In just four years, Banco Ahorro Famsa has become one of Mexico’s most important banking institutions by integrating successfully with Famsa Mexico. Similarly, Famsa USA is now positioned as a leading competitor in the furniture, electronics and household appliances retail segments, reflecting its replication of the Famsa Mexico business model.

Grupo Famsa currently operates an extensive network of 359 stores with 284 bank branches in 24 Mexican states, and 51 stores in the five U.S. states with the largest Hispanic population.

The collective potential of Grupo Famsa’s business platform, combined with 40 years’ experience evolving in an orderly manner and overcoming major external challenges, positions the company to extend its long track record of sustainable growth.

2 AR 2010 Financial Highlights

2010 2009 2008 2007(b) 2010 vs 2009

Operating Figures

Total Stores 410 410 421 390 Famsa Mexico 359 357 369 351 0.6% Famsa USA 51 53 52 39 -3.8% Banco Ahorro FAMSA 284 276 277 176 2.9%

Active Credit Accounts (Millions) 1.76 1.67 1.69 1.44 5.3%

Employees 17,595 16,192 18,364 18,207 8.7%

Financial Results (a)

Net Sales $14,993 $14,947 $14,762 $14,181 0.3% Famsa Mexico (c) $11,494 $10,832 $11,133 $11,326 6.1% Famsa USA $3,390 $4,096 $3,594 $2,808 -17.3% Other $1,009 $763 $849 $969 32.2% Inter-segment (d) -$900 -$744 -$814 -$922 20.9%

Gross Profit $7,632 $7,592 $7,229 $6,489 0.5% EBITDA $1,702 $1,554 $1,456 $1,654 9.5% Operating Income $1,307 $1,123 $1,037 $1,329 16.4% Net Income $706 $97 $561 $518 624.8%

Gross Margin 50.9% 50.8% 49.0% 45.8% EBITDA Margin 11.3% 10.4% 9.9% 11.7% Net Margin 4.7% 0.7% 3.8% 3.7%

Balance Sheet Accounts(a)

Assets $25,668 $22,604 $21,008 $16,317 13.6% Liabilities $16,682 $14,237 $13,713 $9,838 17.2% Stockholders’ Equity $8,986 $8,367 $7,295 $6,479 7.4%

(a) Millions of Mexican pesos, except percentages (b) Millions of constant Mexican pesos at December 31, 2007 (c) Including Banco Ahorro Famsa (d) Intercompany sales

SALES EBITDA STORES RETAIL AREA CAGR: 1.9% CAGR: 0.9% CAGR: 1.7% CAGR: 3.1% 14,181 14,762 14,947 14,993 1,654 1,456 1,554 1,702 390 421 410 410 494,325 547,415 544,456 541,387

2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 2007 2008 2009 2010 Millions of Mexican pesos Millions of Mexican Square meters CAGR: Compound Annual pesos Growth Rate

3 AR 2010 40 years developing a solid Grupo FAMSA growth platform ’70s OFFERING PERSONALIZED SERVICE AND CREDIT AVAILABILITY

Fabricantes Muebleros, S.A. de C.V. opened its first store in Monterrey, N.L., offering personalized service and credit availability to support families who needed financing to purchase furniture and household appliances.

During its first decade of operations, Famsa’s focus on personalized service and closeness to its customers allowed the company to understand the needs of its target market and thereby enrich its value offer.

’80s CONSOLIDATING THE BUSINESS MODEL

Famsa consolidated its store network by focusing on customers’ needs and implementing a disciplined expansion strategy. Corporación Famsa, S.A. was incorporated to integrate emerging businesses and reinforce the company’s market position.

Impulsora Promobien, S.A. de C.V. was created to offer affiliate company employees Famsa credits payable through payroll deductions, thus broadening the customer base and improving the quality of the company’s credit portfolio.

Mayoramsa, S.A. de C.V. was founded to provide wholesale services for retailers located in diverse Mexican municipalities, extending Famsa’s presence to places where it had not yet opened its own stores.

Expormuebles, S.A. de C.V. was created in order to expand the company’s scope and develop furniture design and manufacturing skills adapted to Famsa customers’ particular needs.

4 AR 2010 40 years developing a solid growth platform ’90s REPLICATING THE BUSINESS MODEL AND REINFORCING THE BASES TO DRIVE GROWTH

Grupo Famsa, S.A. de C.V. successfully expanded its coverage to Mexico’s largest cities, operating a total of 185 stores nationwide and increasing its product portfolio to include clothing, footwear, accessories and jewelry.

A nationwide advertising campaign was deployed for the first time and the company’s Distribution Centers and Transfer Centers began operations.

During 1999, in preparation for the implementation of a more aggressive expansion plan, the company’s financial position was reinforced with the investment of two major funds in the company’s capital stock.

21st Century UNLEASHING THE COMPANY’S GROWTH POTENTIAL

Grupo Famsa, S.A.B. de C.V. unleashed its huge Lastly, as a result of an ambitious growth potential during the first decade of the implementation plan and its successful century, extending its nationwide coverage, integration with Famsa Mexico, Banco Ahorro expanding its operations to the United States, Famsa became one of Mexico’s leading banking listing on the Mexican Stock Exchange and institutions. As of year-end 2010, it operated a creating Banco Ahorro Famsa. network of 284 branches and managed one of the top ten consumer credit portfolios in the During these ten years, Grupo Famsa’s entire Mexican banking system. commercial network grew more than throughout its entire history, with the opening of 174 stores and 284 bank branches in Mexico and 51 stores in the United States.

Replicating the Famsa Mexico model, Famsa USA opened its first store in 2001 in Los Angeles, California to serve the U.S.’s growing Hispanic market.

In 2006, Grupo Famsa successfully listed on the Mexican Stock Exchange as a publicly traded company and obtained a license to set up its own bank: Banco Ahorro Famsa, S.A.

5 AR 2010 Letter from the Chairman of the Board and the Chief Executive Officer

To our Stockholders: 2010 represented a memorable year for us, not only because it was our 40th anniversary, but also because it marked the end of the economic crisis and the beginning of a recovery that will allow us to resume our growth initiatives. Today, we are proudly celebrating 40 years of evolution to better serve our customers; we now have a unique platform of complementary businesses with great potential both in Mexico and abroad. During 2009, we implemented a comprehensive plan to overcome the challenges resulting from the global economic crisis and to reinforce the bases of our business model. We are pleased to affirm that the timely actions implemented one year ago were crucial for capitalizing on the beginnings of economic recovery in 2010. In Mexico, we were able to grow our stores’ productivity by underpinning the solid demand for personal loans and stimulating the recovery of durable product categories after the prolonged downturn. Famsa Mexico’s same-store sales rose 6.6% in 2010, compared to a 4.3% decline in 2009. The launch of new models, the setup of more attractive displays and the rollout of targeted promotions resulted in a more than 15% growth in the furniture category and 22% expansion in the computer category during the second half of 2010. Moreover, we implemented a comprehensive plan to become one of Mexico’s leading motorcycle retailers. During its first year, our proprietary motorcycle brand, KURAZAI, became one of the four top-selling motorcycle brands in the country. Banco Ahorro Famsa is now ranked 9th in the number of branches, 10th in the balance of its consumer credit portfolio and 15th in the balance of its deposits, according to figures published by the Mexican National Banking and Securities Commission at the end of 2010. More importantly, during 2010, our bank’s capitalization index (ICAP) rose from 11.9% to 13.1%, reflecting its solid operations. The stability of Banco Ahorro Famsa’s non-performing loans index, the steady growth of its deposit base and its successful incursion into complementary businesses consolidated our bank’s position throughout the year. The non-performing loans ratio (CNBV: Indice de Morosidad, IMOR) remained in a range close to 11.6%. Deposits totaled Ps$8,907 million, 6 AR 2010 Letter from the Chairman of the Board and the Chief Executive Officer

having grown steadily at a quarterly rate of 5.5%, and the average cost of funding decreased from 8.1% in the first quarter of 2010 to 6.1% in fourth quarter 2010. Through Banco Ahorro Famsa, we also ventured successfully into micro, small and medium- sized business financing. This new growth front supports Mexico’s production activities and complements our traditional consumer financing operations. Famsa USA capitalized on the recent economic recovery in some of the states in which it operates by providing a differentiated value offer based on personalized service, credit availability and synergies with Famsa Mexico. Despite the worst ever decline in sales during the first quarter of 2010, Famsa USA’s same-store sales grew 3.6% during the last quarter of the year. The diversification of our geographic coverage in the USA and our exposure to different product lines allowed us to leverage the recovery in some markets and categories at the end of 2010. Such is the case in Texas, where our fourth-quarter sales rose over 13%. We would like to thank all Famsa employees for their invaluable contribution to overcoming, with talent, passion and creativity, the challenges we faced during the year. We are also very grateful to our customers, creditors, suppliers and the community in general for the trust they have placed in us for over 40 years. Finally, we would like to reiterate our commitment to you, our stockholders, to creating value by capitalizing on the great potential of our unique business portfolio and continuing our extended track record of disciplined, profitable growth.

Humberto Garza González Humberto Garza Valdéz Chairman of the Board of Directors Chief Executive Officer 7 AR 2010 Unique value-creating synergies

Grupo Famsa focuses on satisfying diverse needs for consumer goods, financing and savings for the middle and lower-middle income segments of the population through a unique platform of complementary businesses.

8 AR 2010 The synergies shared by our three business units strengthen Grupo Famsa’s position and drive its performance.

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9 AR 2010 We evolve to serve our customers better

Our customers’ diverse needs and our firm commitment to offer them the market’s best alternatives have driven the orderly evolution of our business model.

In this way, we identified our customers’ pressing need for banking services. Through Banco Ahorro Famsa, they now benefit from solid saving and financing instruments.

The accessibility of our banking services and the enormous market potential are clear. By the end of 2010, almost 1 million accountholders had entrusted their savings to Banco Ahorro Famsa.

Our customers benefit from solid savings and financing instruments.

10 AR 2010 We also ventured into the motorcycle industry, serving our customers’ urgent need for affordable personal transportation. Driven by a successful implementation, our proprietary brand, KURAZAI, became one of the four best-selling motorcycle brands in Mexico during its first year.

Backed by 40 years’ experience, we will continue evolving to better meet our customers’ needs for consumer goods, financing and saving.

11 AR 2010 Business Units

FAMSA MEXICO 40 YEARS OF PERSONALIZED SERVICE AND CREDIT AVAILABILITY

• Sales: Ps$11,494 million • 359 stores • 418 thousand m2 • Presence in 24 states

12 AR 2010 FAMSA USA EMBRACING THE GREAT POTENTIAL OF THE HISPANIC MARKET

• Sales: Ps$3,390 million • 51 stores • 123 thousand m2 • Presence in 5 states

BANCO AHORRO FAMSA ONE OF MEXICO’S LEADING BANKING INSTITUTIONS

• Loan Portfolio: Ps$13,090 million • Bank deposits: Ps$8,907 million • 284 bank branches

13 AR 2010 Famsa Mexico

With 40 years’ experience, Famsa Mexico has focused on providing the middle and lower- middle income segments of the Mexican population with accessible financing to acquire a growing portfolio of products and services. It currently operates a network of 359 stores in 24 Mexican states and has been the cornerstone of Grupo Famsa’s growth platform throughout its history.

SAME-STORE SALES IN 2010 INCREASED 6.6% COMPARED TO A 4.3% DECLINE IN 2009

Since 2007, Famsa Mexico has worked closely with Banco Ahorro Famsa to integrate the bank’s operations by installing bank branches inside its network of stores and introducing the bank’s products and services to its existing customer base. As of year-end 2010, 277 of the total 284 Banco Ahorro Famsa branches were installed inside Famsa Mexico stores and over half of Famsa Mexico’s customers were making use of their Famsa credit line through credit cards issued by Banco Ahorro Famsa.

14 AR 2010 The solid demand for personal loans, combined with Famsa Mexico’s efforts to reactivate core durable goods categories such as furniture and computers, and the decisive boost to our motorcycle category, translated into a significant 6.6% gain in same-store sales (SSS) in 2010, compared to a 4.3% decline in 2009.

Famsa Mexico: Same Store Sales

15%

KURAZAI IS NOW 10%

ONE OF MEXICO’S 5% FOUR BEST-SELLING 0% MOTORCYCLE BRANDS -5% -10%

-15%

-20% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Famsa Mexico continues to implement initiatives to optimize its infrastructure in SALES STORES order to strengthen its financial and operating CAGR: 0.5% CAGR: 0.8% performance. As a result, adjustments were made to the commercial network with the 11,326 11,133 10,832 11,494 351 369 357 359 closure of three stores in 2010.

Now that the Mexican market has shown stronger signs of recovery, we are successfully capitalizing on the control and optimization 2007 2008 2009 2010 2007 2008 2009 2010 Millions of Mexican pesos initiatives implemented over the past few CAGR: Compound Annual years. This has enabled Famsa Mexico to Growth Rate resume its store expansion strategy with the opening of five new stores in 2010. 15 AR 2010 Famsa USA

Famsa USA mainly serves the Hispanic segment in the United States through a network of 51 stores located in five of the states with the highest concentration of potential customers.

Hispanics are the fastest growing population in the United States and Famsa USA seeks to fulfill their specific consumer and financing needs.

Famsa USA has successfully positioned itself in the Hispanic market through a differentiated value offer that replicates some of Famsa Mexico’s core competencies. This business unit’s sales in the furniture, electronics and household appliance categories rank it as one of the 60 largest retailers of these products in the United States.

In face of the economic downturn that adversely affected the economy of Hispanic consumers, Famsa USA focused on the recovery of its stores’ productivity during 2010. Through these efforts, it was successful in reverting an extended period of declining quarterly same-store sales since 2008, achieving 3.6% fourth quarter 2010 same- store-sales growth.

16 AR 2010 Famsa USA has continued with its operating optimization efforts in order to drive the profitability of its retail network, resulting in the selective closure of two stores during 2010.

The geographic diversification of Famsa USA’s network of stores and its attractive product portfolio made it possible to capitalize on the early recovery in demand in some markets and several core product categories, driving results in 2010. An example of this was the upturn in the Texan market during the fourth quarter, resulting in a 13% sales growth.

Our differentiated value offer based on personalized customer service, credit availability Famsa USA: and synergies with Famsa Mexico enabled Famsa Same Store Sales USA to reinforce its competitive position and 10% reap the benefits of the nascent improvement in consumption in this important market. 0%

-10%

-20%

Famsa USA complements -30% Grupo Famsa’s business 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 SALES STORES portfolio by opening CAGR: 6.5% CAGR: 9.4% the doors to a market with immense potential 2,808 3,594 4,096 3,390 39 52 53 51 outside Mexico.

2007 2008 2009 2010 2007 2008 2009 2010 Millions of Mexican pesos CAGR: Compound Annual Growth Rate 17 AR 2010 Banco Ahorro Famsa

Banco Ahorro Famsa offers banking products based on the personalized service that is characteristic of all Grupo Famsa’s business units.

The bank’s operations reinforce a virtuous circle: Banco Ahorro Famsa customers benefit from the accessible savings and financing products offered by a regulated banking institution, while Banco Ahorro Famsa develops a stable bank deposit base that underpins credit availability and contributes to the entry of new users into the Mexican financial system.

After just four years of operations, Banco Ahorro Famsa now ranks as one of Mexico’s most important banks, reflecting an ambitious implementation plan and the bank’s successful integration with Famsa Mexico. According to figures published by the Mexican National Banking and Securities Commission (Dec. 2010), Banco Ahorro Famsa is ranked 9th in bank branches, 10th in its consumer loan portfolio and 15th in bank deposits.

18 AR 2010 Rank Mexico Number of Bank Branches: 9

Loan Portfolio: 10

Bank Deposits: 15

Source: Mexican National Banking and Securities Commission (Dec. 2010)

Banco Ahorro Famsa’s solid position is also reflected in its Capitalization Index, which rose from 11.9% to 13.1% in 2010, driven by the stability of its loan portfolio and the Banco Ahorro Famsa: decrease in its average cost of funding, Cost of Funding among other factors. 10%

As a result of extensive synergies with Famsa Mexico, Banco Ahorro Famsa’s deposit base 8% has grown consistently at an average rate of 5.5% every quarter, reaching a total of 6% almost 1 million customers. In addition, the bank’s average quarterly cost of funding decreased to 6.1% by the end of the fourth 4% quarter of 2010. 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10

The deployment of 284 bank branches LOANS DEPOSITS nationwide, the development of a stable CAGR: 187.4% CAGR: 225.8% bank deposit base, the sustained reduction

in the cost of funding and the successful 552 3,564 9,471 13,090 258 3,132 7,377 8,907 integration of Famsa Mexico’s existing consumer credit operations have set the stage for Banco Ahorro Famsa’s next growth phase. 2007 2008 2009 2010 2007 2008 2009 2010 Millions of Mexican pesos Millions of Mexican CAGR: Compound Annual pesos Growth Rate 19 AR 2010 Social Responsibility

Grupo Famsa is committed to the communities it serves, both through support for community development organizations and professional development programs for its more than 17,000 employees.

Our network of stores and logistics infrastructure form the basis of the support we constantly offer to communities affected by natural disasters, such as Hurricanes Alex and Karl in the states of Nuevo Leon and Veracruz this year. Grupo Famsa is in permanent contact with state and federal government agencies and with community support organizations in order to guarantee efficient collection and distribution efforts in such cases.

We acknowledge that our people are the driving force of Grupo Famsa, which is why all our employees are given the opportunity to develop and advance within the company from a human, technical and professional perspective. The company currently offers more than 150 institutional training programs in face-to-face and online courses.

Through Banco Ahorro Famsa, we also support organizations and initiatives that focus on education and development for young people. For example, we collaborate with Fundación Quiera which contributes to institutions that work with homeless children and youths.

We also participate in the Bécalos program, which benefits thousands of students and teachers through academic scholarships awarded for them to complete specific educational levels.

Our commitment to Mexico’s development is permanent and we will continue to work to broaden the scope of our efforts to help the nation’s communities.

20 AR 2010 We will continue working to broaden the scope of our efforts to help the nation’s communities.

21 AR 2010 CORPORATE Governance Management Team Grupo Famsa, S.A.B. de C.V.

Humberto Garza Valdéz Chief Executive Officer

Oziel Mario Garza Valdéz Vice President of Clothing and Verochi

Luis Gerardo Villarreal Rosales Chief Operating Officer

Abelardo García Lozano Chief Financial Officer

Héctor Padilla Ramos Vice President of Merchandise

Héctor Hugo Hernández Lee Vice President of Human Resources

Horacio Marchand Flores Vice President of Strategic Planning and Marketing

Martín Urbina Villarreal Vice President of Famsa Mexico

Adrián Jorge Lozano Lozano Vice President of Banco Ahorro Famsa

Ignacio Ortiz Lambretón Vice President of Famsa USA

Corporate Governance Practices

Grupo Famsa’s positive performance rests on sound Corporate Governance practices in compliance with the “Code of Best Corporate Practices” recommended by the Mexican Stock Exchange and the National Banking and Securities Commission. This has resulted in the optimal functioning of the company’s Board of Directors, which, in coordination with the Audit Committee and the Corporate Practices Committee, is responsible for planning, approving and supervising all of the Company’s operations.

AR 2010 Board of Directors Grupo Famsa, S.A.B. de C.V.

Don Humberto Garza González Director Humberto Garza Valdéz Director Hernán Javier Garza Valdéz Director Oziel Mario Garza Valdéz Director Horacio Marchand Flores Director Salvador Kalifa Assad Independent Director Jorge Luis Ramos Santos Independent Director Alejandro Sepúlveda Gutiérrez Independent Director

Officers of Grupo Famsa’s Board of Directors: Don Humberto Garza González. Chairman (*) Luis Gerardo Villarreal Rosales. Secretary (*) Ricardo Maldonado Yañez. Prosecretary (*) Officers who are not members of the Board of Directors

Don Humberto Garza González is the founder and Chairman of the Board of Grupo Famsa.

Humberto Garza Valdéz holds a Bachelor’s degree in Business Administration from the Universidad de Monterrey (UDEM). He received a Master’s degree in Higher Business Management from the Instituto para la Alta Dirección de Empresas (IPADE). He has 25 years’ experience in the company, serving as Deputy CEO for 11 years and CEO for the past 14.

Hernán Javier Garza Valdéz holds a Bachelor’s degree in Economics from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and two Master’s degrees, one in Business Administration from the University of Notre Dame and another in Information Systems from ITESM. He has 23 years’ experience in the company and currently serves as Project Director.

Oziel Mario Garza Valdéz holds a Bachelor’s degree in Business Administration from Universidad de Monterrey (UDEM) and a Master’s degree from Instituto Panamericano de Alta Dirección de Empresas (IPADE). He has 17 years’ experience in the company, serving as Commercial Director of the Monterrey Region for five years and Vice President of Clothing and Verochi during the last 11 years.

Salvador Kalifa Assad has been a member of the Board of Directors of Grupo Famsa since 1997. Dr. Kalifa holds a Bachelor’s degree in Economics from Instituto Tecnológico y de Estudios Superiores de Monterrey, as well as Master’s and Doctoral degrees in Economics from Cornell University. He currently runs his own consulting firm, Consultores Económicos Especializados, S.A. de C.V., and provides economic analysis for several Mexican newspapers, for which he also writes editorial columns. He was Director of Economic Studies at Grupo Alfa for seven years and collaborated with Grupo Financiero GBM-Atlántico. He has also been a member of the Boards of Directors of Grupo IMSA, Verzatec and Banorte.

Horacio Marchand Flores holds a Bachelor’s degree in Business Administration from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and a Master’s degree in Business Administration and Marketing from the University of Texas. Before joining Grupo Famsa as Vice President of Strategic Planning and Marketing, he worked as Director of Sales at Alestra, S. de R.L. de C.V. and as Vice President of Marketing at Iusacell, S.A. de C.V. He founded the firm Marchand y Asociados which specializes in strategy and marketing projects. He has been a Member of the Board and Treasurer of Monterrey’s Chamber of Commerce, a Member of the Executive Committee of Confederación de Cámaras Nacionales de Comercio, Servicios y Turismo (CONCANACO) and a Member of the Board of Consejo de Instituciones del Estado de Nuevo León (CCINLAC).

AR 2010 Jorge Luis Ramos Santos is currently Deputy President of Heineken Americas. He has worked as CEO of Cervecería Cuauhtémoc Moctezuma and, before that, as Human Resources Vice President and Chief Commercial Officer of Femsa Cerveza. He holds a Bachelor’s degree in Accounting and Business Administration from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and a Master’s degree in Business Administration from the Wharton School of the University of Pennsylvania. He currently sits on the boards of diverse private and public companies in Latin America, as well as of several business organizations and universities in Mexico.

Alejandro Sepúlveda Gutiérrez served as Assistant Director of Financial Information at Alfa Corporativo, S.A. de C.V. for 25 years. He also worked at Fundidora Monterrey S.A. for 12 years, where his last post was Corporate Comptroller, and where he participated as a member of the Board of Directors of the mining and commercial companies. He also collaborated on the Accounting Principles Commission of the Mexican Institute of Public Accountants for two years as a Director and two years as Chairman. He holds a Bachelor’s degree in Public Accounting from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM) and a Master’s degree in Business Administration from the Texas Christian University, and has also completed a Higher Business Management program at IPADE.

Audit Committee

Alejandro Sepulveda Gutiérrez Chairman Salvador Llarena Arriola Jorge Luis Ramos Santos

Corporate Practices Committee

Alejandro Sepulveda Gutiérrez Chairman Salvador Llarena Arriola Jorge Luis Ramos Santos

Board of Directors Banco Ahorro Famsa, S.A., Multiple Banking Institution

Luis Gerardo Villarreal Rosales Director Hernán Javier Garza Valdéz Director Oziel Mario Garza Valdéz Director Adrián Jorge Lozano Lozano Director Héctor Medina Aguiar Independent Director Ernesto Ortiz Lambretón Independent Director Salvador Kalifa Assad Independent Director Bernardo Guerra Treviño Independent Director

Officers of Banco Ahorro Famsa’s Board of Directors:

Luis Gerardo Villarreal Rosales Chairman (*) Ricardo Maldonado Yañez Secretary (*) Humberto Loza López Prosecretary (*) Officers who are not members of the Board of Directors

AR 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE OPERATING RESULTS AND FINANCIAL POSITION OF GRUPO FAMSA

FOR THE YEAR ENDED DECEMBER 31, 2010

INCOME STATEMENT

Net Sales

As of December 31, 2010, Grupo Famsa’s consolidated net sales totaled Ps$14,993 million, 0.3% above the previous year. Famsa Mexico posted net sales of Ps$11,494 million, an increase of 6.1%. However, the economic pressures on Hispanic consumers in the United States and the appreciation of the Mexican peso led to a 17.3% decline in Famsa USA’s annual net sales. Excluding the foreign exchange rate effect, Famsa USA’s net sales decreased 11.1% year-over-year.

The consolidated net sales of stores that have been operating for more than 12 months (same-store sales) rose 3.4% compared to 2009, excluding the foreign exchange rate effect. Famsa Mexico’s annual same-store sales grew 6.6%, driven by an increase in personal loans and the recovery of demand for diverse core durable goods categories. Famsa USA’s same-store sales fell 11.8% in U.S. dollar terms. Nevertheless, it is important to note that Famsa USA’s same-store sales achieved positive growth in the fourth quarter of 2010 for the first time since 2008.

Cost of Sales and Gross Profit

Grupo Famsa’s 2010 cost of sales was Ps$7,361 million, 0.1% above that of the previous year. Consolidated gross profit reached Ps$7,632 million, 0.5% above 2009, with an expansion of 10 basis points in gross margin. The combination of shifts in the sales mix and promotions implemented throughout the year resulted in the company posting a stable consolidated gross margin.

Operating Expenses

Consolidated operating expenses for 2010 totaled Ps$6,325 million, Ps$143 million less than in 2009. Savings in advertising expenses and a decrease in the provision for doubtful accounts, together with the initiatives implemented in previous years to optimize operations, resulted in a 2.2% decrease in 2010 consolidated operating expenses.

AR 2010 Operating Income

Grupo Famsa’s 2010 consolidated operating income grew 16.4% year-over-year to Ps$1,307 million. The consolidated operating margin increased from 7.5% in 2009 to 8.7% in 2010, driven by the decrease in operating expenses and rise in consolidated gross profit.

Comprehensive Financing Expense

Grupo Famsa’s 2010 comprehensive financing expense fell 12.7% year-over-year to Ps$1,079 million. Interest paid during 2010 decreased 3.3% compared to 2009, mainly as a result of the improvement in Banco Ahorro Famsa’s cost of funding.

Moreover, the Ps$126 million foreign-exchange loss posted in 2009 became a moderate gain in 2010, driven by the greater stability of the foreign exchange market and, more importantly, the company’s refinancing with U.S. dollar-denominated liabilities, thus diminishing Grupo Famsa’s net long U.S. dollar position maintained through Famsa USA’s operating assets.

Grupo Famsa does not have any exposure to derivative instruments and the Treasury follows a disciplined policy of investing exclusively in fixed-income securities.

Net Income

As of December 31, 2010, Grupo Famsa’s consolidated net income was Ps$706 million, 624.8% above that of 2009. The increase in consolidated operating income and the decrease in comprehensive financing expense led to a 206.1% growth in before-tax earnings. Additionally, a deferred tax credit resulted from temporary differences.

AR 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE OPERATING RESULTS AND FINANCIAL POSITION OF GRUPO FAMSA

BALANCE SHEET

Accounts Receivable The balance of accounts receivable as of December 31, 2010 was Ps$16,572 million, an increase of 17.3% year-over-year. The growth in personal loans and the development of Banco Ahorro Famsa’s non-consumption portfolio (e.g. MSME loans) are two of the main factors that led to the rise in consolidated accounts receivable.

Inventory

At year-end 2010, the balance of inventories was Ps$2,218 million, 4.7% above that of 2009. Famsa Mexico’s opening of four new stores during fourth quarter 2010 and the moderate sales performance during December were the main factors that contributed to this increase.

Net Debt

Net debt at the close of 2010 was Ps$3,754 million. The 57.4% year-over-year increase reflects a 20.0% growth in gross debt and a decline in the 2010 cash balance from that of 2009. It is important to note that on July 20, 2010 Grupo Famsa successfully concluded its first long-term bond issuance in international credit markets, amounting to US$200 million and maturing in 2015. Approximately 80% of the net proceeds were used to refinance short-term indebtedness. This issuance mitigates Grupo Famsa’s exposure to financial market volatility, increasing the average life of the company’s consolidated debt, and also significantly reduces the company’s exposure to foreign exchange rate volatility by improving the balance between its dollar- denominated assets and liabilities.

Bank Deposits

As of December 31, 2010, the consolidated bank deposit balance was Ps$8,907, 20.7% above the previous year. Approximately 92% of this amount corresponds to deposits in one of Grupo Famsa’s products with some form of time commitment. The average rate of our bank deposits reached a level of 6.1% during 4Q10, significantly below the 6.4% rate that had been estimated at the beginning of the year. Bank deposits continue to offer an optimal source of financing for the credits granted to Mexican customers, thus mitigating Grupo Famsa’s exposure to conventional credit market volatility and significantly reducing the company’s consolidated cost of funding.

Stockholders’ Equity

The consolidated balance of stockholders’ equity grew 7.4% year-over-year to Ps$8,986 million at year-end 2010.

AR 2010 CONSOLIDATED FINANCIAL Statements

GRUPO FAMSA, S. A. B. DE C. V. AND SUBSIDIARIES CONTENTS

31 Report of independent auditors 32 Consolidated balance sheets 33 Consolidated statements of income 34 Consolidated statements of changes in stockholders’ equity 36 Consolidated statements of cash flows 37 Notes to the consolidated financial statements

AR 2010 REPORT OF INDEPENDENT AUDITORS

To the Stockholders of Grupo Famsa, S. A. B. de C. V.

Monterrey, N. L., April 13, 2011

We have audited the consolidated balance sheets of Grupo Famsa, S. A. B. de C. V. and subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income, of changes in stockholders’ equity and of cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with 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 and that they were prepared in accordance with Mexican Financial Reporting Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the financial reporting standards 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 aforementioned consolidated financial statements present fairly, in all material respects, the consolidated financial position of Grupo Famsa, S. A. B. de C. V. and subsidiaries at December 31, 2010 and 2009, and the consolidated results of their operations, the changes in their stockholders’ equity and their cash flows for the years ended, in conformity with Mexican Financial Reporting Standards.

Pricewaterhouse Coopers, S. C.

Héctor Puente Segura Audit Partner

AR 2010 GRUPO FAMSA, S. A. B. DE C. V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2010 AND 2009 Thousands of Mexican Pesos 2010 2009

ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 3.d) Ps 1,114,459 Ps 1,706,086 Trade accounts receivable (Note 4) 16,572,420 14,131,100 Taxes recoverable 1,253,048 573,601 Other accounts receivable 576,668 538,891 Inventories (Notes 3.g and 5) 2,218,262 2,118,045

Total current assets 21,734,857 19,067,723

PROPERTY, LEASEHOLD IMPROVEMENTS AND FURNITURE AND EQUIPMENT (Note 6) 2,561,666 2,731,880 GOODWILL (Note 3.j) 241,096 241,096 DEFERRED CHARGES (Note 3.l) 68,902 102,559 OTHER ASSETS (Note 3.m) 60,466 97,551 DEFERRED INCOME TAX (Note 12) 952,812 327,517 DEFERRED EMPLOYEES’ PROFIT SHARING (Notes 3.s and 12) 48,256 36,117

Total assets Ps 25,668,055 Ps 22,604,443

LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES WITH FINANCIAL COST: Interest-bearing demand deposits and time-deposits (Note 3.o) Ps 8,907,298 Ps 7,376,769 Short-term debt (Note 8) 2,194,615 2,889,947

11,101,913 10,266,716 CURRENT LIABILITIES WITHOUT FINANCIAL COST: Suppliers 2,063,965 1,729,420 Accounts payable and accrued expenses 864,576 897,876 Income tax payable 18,181 182,948

2,946,722 2,810,244

Total current liabilities 14,048,635 13,076,960

LONG-TERM LIABILITIES: Long-term debt (Note 8) 2,486,348 1,009,640 Estimated liability for labor benefits (Notes 3.p and 9) 146,972 150,477

Total long-term liabilities 2,633,320 1,160,117

Total liabilities 16,681,955 14,237,077

STOCKHOLDERS’ EQUITY (Note 10): Capital stock 2,472,600 2,472,600 Additional paid-in capital 3,068,488 3,068,488 Retained earnings 3,295,306 2,589,682 Cumulative translation adjustment 128,862 219,437

Total majority interest 8,965,256 8,350,207 Minority interest 20,844 17,159

Total stockholders’ equity 8,986,100 8,367,366

COMMITMENTS (Note 13) SUBSEQUENT EVENTS (Note 17) Total liabilities and stockholders’ equity Ps 25,668,055 Ps 22,604,443

The accompanying notes are an integral part of these financial statements.

AR 2010 GRUPO FAMSA, S. A. B. DE C. V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009 Thousands of Mexican Pesos

2010 2009

Net sales Ps 14,992,877 Ps 14,946,922 Cost of sales (7,360,971) (7,355,212)

Gross margin 7,631,906 7,591,710 Operating expenses (6,325,036) (6,468,548)

Operating income 1,306,870 1,123,162 Comprehensive financing expense, net (Note 11) (1,079,051) (1,235,556) 227,819 (112,394)

Other (expenses) income, net (110,612) 1,926 Income (loss) before income tax 117,207 (110,468)

Income tax (Note 12) 592,102 210,128

Consolidated net income 709,309 99,660 Net income corresponding to minority interest (3,685) (2,305)

Net income corresponding to majority interest Ps 705,624 Ps 97,355

Earnings per share corresponding to majority interest, in pesos Ps 1.61 Ps 0.22

The accompanying notes are an integral part of these financial statements.

AR 2010 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Additional Capital paid-in Retained stock capital earnings

Balances at December 31, 2008 Ps 2,252,187 Ps 2,078,758 Ps 2,633,104 Ps 316,675 Ps 7,280,724 Ps 14,245 Ps 7,294,969

Changes in 2009: Net income 97,355 97,355 2,305 99,660 Write-off of preoperating expenses (Note 3.l) (134,167) (134,167) 609 (133,558) Cumulative translation adjustment (97,238) (97,238) (97,238) Comprehensive loss (36,812) (97,238) (134,050) 2,914 (131,136) Increase in capital stock and paid-in capital 218,182 962,958 1,181,140 1,181,140 Resale of own shares 2,231 26,772 (6,610) 22,393 22,393 220,413 989,730 (6,610) 1,203,533 1,203,533 Balances at December 31, 2009 (Note 10) 2,472,600 3,068,488 2,589,682 219,437 8,350,207 17,159 8,367,366

Changes in 2010: Net income 705,624 705,624 3,685 709,309 Cumulative translation adjustment (90,575) (90,575) (90,575)

Comprehensive income 705,624 (90,575) 615,049 3,685 618,734

Balances at December 31, 2010 (Note 10) Ps 2,472,600 Ps 3,068,488 Ps 3,295,306 Ps 128,862 Ps 8,965,256 Ps 20,844 Ps 8,986,100

The accompanying notes are an integral part of these financial statements.

AR 2010 GRUPO FAMSA, S. A. B. DE C. V. AND SUBSIDIARIES FOR THE YEARS 2010 AND 2009 Thousands of Mexican Pesos

Cumulative Total Total translation majority Minority stockholders’ adjustment interest interest equity

Balances at December 31, 2008 Ps 2,252,187 Ps 2,078,758 Ps 2,633,104 Ps 316,675 Ps 7,280,724 Ps 14,245 Ps 7,294,969

Changes in 2010: Net income 705,624 705,624 3,685 709,309 Cumulative translation adjustment (90,575) (90,575) (90,575)

Comprehensive income 705,624 (90,575) 615,049 3,685 618,734

Balances at December 31, 2010 (Note 10) Ps 2,472,600 Ps 3,068,488 Ps 3,295,306 Ps 128,862 Ps 8,965,256 Ps 20,844 Ps 8,986,100

AR 2010 GRUPO FAMSA, S. A. B. DE C. V. AND SUBSIDIARIES CONSOLIDATED STATEMENTS FOR THE YEARS 2010 AND 2009 OF CASH FLOWS Thousands of Mexican Pesos 2010 2009

Operations

Net income (loss) before income tax Ps 117,207 (Ps 110,468)

Items relating to investing activities: Depreciation and amortization 394,759 431,267 Allowance for doubtful accounts 1,076,640 1,225,817 Gain on sale of property, plant and equipment (2,082) (1,735) Estimated liability for labor benefits 26,890 30,848 Deferred employees profit sharing (12,139) (17,342) Interest gain (3,309) (15,935)

Items relating to financing activities: Interest expense 1,088,829 1,125,446

Accounts receivable (3,517,960) (2,419,965) Inventories (167,236) 43,445 Other accounts receivable, deferred charges and other assets (811,372) (448,584) Suppliers 335,306 (203,829) Other accounts payable and accrued expenses (183,294) (235,509) Income tax paid (197,956) (405,736) Net cash flow used in operating activities (1,855,717) (1,002,280)

Investment

Acquisition of property, leasehold improvements, furniture and equipment (196,465) (280,742) Sale of property, leasehold improvements, furniture and equipment 5,000 11,234 Interest collected 3,309 15,935 Net cash flow used in investing activities (188,156) (253,573) Resources to be provided by financing activities (2,043,873) (1,255,853)

Financing

Interest paid (987,575) (1,132,510) New short-term debt and bank loans 4,247,026 2,991,136 Payments of short-term debt and bank loans (3,367,056) (5,999,529) Bank customers’ deposits 1,530,529 4,245,098 Increase in capital stock and paid-in capital 1,181,140 Resale of own shares 22,393 Net cash flow from financing activities 1,422,924 1,307,728 (Decrease) increase in net cash and cash equivalent (620,949) 51,875 Adjustments to cash flow as a result of changes in exchange rates 29,322 205,676 Cash and cash equivalent at beginning of year 1,706,086 1,448,535 Cash and cash equivalent at end of year Ps 1,114,459 Ps 1,706,086

Cash and cash equivalent Ps 926,946 Ps 1,514,218 Restricted cash 187,513 191,868 Ps 1,114,459 Ps 1,706,086 The accompanying notes are an integral part of these financial statements.

AR 2010 GRUPO FAMSA, S. A. B. DE C. V. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED AS OF DECEMBER 31, 2010 AND 2009 Thousands of Mexican Pesos (see Note 3) FINANCIAL STATEMENTS (except where otherwise indicated)

NOTE 1 - ACTIVITIES OF THE COMPANIES

The main activities of Grupo Famsa, S. A. B. de C. V. and its subsidiaries (“Grupo Famsa” or the “Company”) consist of the purchase and sale of household appliances, furniture, clothing, cellular telephones and other durable consumer products (“retail operations”), as well as the manufacture of furniture. The Company’s sales are made on credit and in cash to both wholesale and retail customers. The Company is also engaged in the consumer finance sector by providing banking and credit services to its retail customers, in conformity with the Mexican Law of Credit Institutions (LIC). The Company’s financial activities are regulated by the National Banking and Securities Commission (CNBV) and the Bank of Mexico (Banxico).

The Company’s principal subsidiaries and its ownership percentage are: Ownership % at December 31, 2010 2009

Retail sales:

Fabricantes Muebleros, S. A. de C. V. 99.93 99.87 Famsa del Centro, S. A. de C. V. 100.00 100.00 Famsa del Pacífico, S. A. de C. V. 100.00 99.99 Famsa Metropolitano, S. A. de C. V. 99.94 99.94 Impulsora Promobien, S. A. de C. V. 99.04 99.04 Famsa, Inc., a subsidiary organized under the laws, of California and headquartered in California, U.S.A. (“Famsa USA”) 100.00 100.00

Administrative services:

Corporación de Servicios Ejecutivos Famsa, S. A. de C. V. 100.00 100.00 Corporación de Servicios Ejecutivos, S. A. de C. V. 99.21 99.21 Promotora Sultana, S. A. de C. V. 99.99 99.99 Suministro Especial de Personal, S. A. de C. V. 99.99 99.99

Manufacturing and other:

Auto Gran Crédito Famsa, S. A. de C. V. 99.99 99.99 Expormuebles, S. A. de C. V. 99.90 99.90 Mayoramsa, S. A. de C. V. 99.89 99.89 Verochi, S. A. de C. V. 99.92 99.92 Geografía Patrimonial, S. A. de C. V. (1) 53.75 53.75

Financial entities supporting retail sales:

Banco Ahorro Famsa, S. A., Institución de Banca Múltiple (2) 99.79 99.79

(1) Geografía Patrimonial, S. A. de C. V., located in Monterrey, N. L., was incorporated in November 2009 and began operations in that month. Its main activity consists of leasing real estate to related parties.

(2) Banco Ahorro Famsa, S. A., Institución de Banca Multiple (BAF) is authorized to provide banking and credit services by the Ministry of Finance and Public Credit (SHCP). BAF is subject to inspection and supervision by the CNBV and Banxico.

AR 2010 NOTE 2 - SIGNIFICANT EVENTS

Following a period of global economic contraction, in 2010 Grupo Famsa achieved a recovery in its main business segments: Mexico and the United States of America (USA), as follows:

a) Mexico

In Mexico, the sales of stores with more than twelve-month operations “Same Store Sales” experienced an increase in 2010 due to a series of implemented strategies that increased stores productivity. Further to reinforcing the offer of personal loans, specific initiatives were carried out that increased the demand for durable goods categories. On the other hand, BAF consolidated its position as one of the most important bank institutions in Mexico. In accordance with figures published by the CNBV in December 2010, it occupied the 10th place in consumer credit portfolio balance, 9th place in number of bank branches and 15th place in the balance of bank deposits. Additionally, in 2010 BAF satisfactorily started financing Micro, Small and Medium Companies (MiPYME), complementing the traditional consumer financing business relative to consumption and diversifying the risk of its credit portfolio.

b) USA

Due to the implementation of several promotion strategies and to an improvement in the USA economy, demand for core product categories (furniture, electronics and appliances) improved significantly during the fourth quarter of 2010.

c) Refinancing debt program

As part of a debt refinancing program, Grupo Famsa undertook the following actions:

i. Beginning the third quarter of 2010, Grupo Famsa carried out an issuance of senior notes pursuant to rule 144A/Reg. S in the USA and European markets for a term of five years. Most of the proceeds from this issuance were used for refinancing short-term debt in order to extend the average term of the Company’s debt (see Note 8 paragraph 2).

ii. During February and March 2011, the Company issued aggregate principal amounts of US$40 million dollars and $1,000 million Mexican pesos, respectively, under commercial euro paper program subscribed for US$100 million and a commercial paper subscribed for $2,000 million Mexican pesos, respectively (see Note 17).

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Following is a summary of the most significant accounting policies followed by Grupo Famsa and its subsidiaries:

a. Basis of presentation and disclosures

The accompanying consolidated financial statements and notes were approved for issuance on April 13, 2011 by Humberto Garza Valdez (Chief Executive Officer) and Abelardo García Lozano (Chief Financial Officer).

The accompanying consolidated financial statements at December 31, 2010 and 2009, fully comply with Mexican Financial Reporting Standards (MFRS) so as to present fairly the Company’s financial position.

The financial statements of Famsa USA, which are prepared in accordance with the United States Generally Accepted Accounting Principles, and the financial statements of BAF, which are prepared in accordance with accounting rules and practices established by the CNBV, are both conformed to MFRS for consolidation purposes.

The Company presents the statement of income based on functional classification, since grouping costs and expenses on this basis allows the various levels of income to be presented. In addition, for convenience of the reader, operating income is presented separately since it is a relevant analytical component of the financial information of the Company and has been disclosed by the Company on a regular basis in accordance with industry practice.

According to the provisions of MFRS B-10 “Effects of Inflation”, the Mexican economy is not inflationary, since cumulative inflation has been below 26% (threshold for defining whether an economy should be considered as inflationary) in the most recent three-year period. Therefore, as of January 1, 2008 the Company discontinued the recognition of the effects of inflation on the financial information (disconnection from inflationary accounting). Consequently, the financial statements as of December 31, 2010 and 2009 have been prepared based on the modified historical cost model. The Mexican inflation rates for the years ended December 31 are shown below:

at December 31

2010 2009 2008

For the year 4.40% 3.57% 6.53%

For the three most recent years 15.19% 14.48% 15.01%

AR 2010 The accumulated inflation of the most recent three years in certain countries in which Grupo Famsa and its subsidiaries operate has not exceeded 26%.

In 2010 and 2009, the Company has identified the Mexican peso as the recording currency, the functional currency and the reporting currency for the Mexican subsidiaries, therefore it was not necessary to perform any conversion process. The financial statements of Famsa USA (foreign currency operations) that maintain the recording currency and the functional currency other than the reporting currency were converted to the functional currency in accordance with the procedures described in FRS B-15 “Conversion of foreign currency”.

Beginning on January 1, 2010 the following MFRS issued by the Mexican Financial Reporting Standards Board and effective as of that date, have been adopted by the Company.

MFRS B-2 “Statement of cash flows”: it modifies the presentation of the effects of change in the exchange rate and fair value changes in cash and cash equivalents with the purpose of showing both effects in a specific line, thus presenting more clearly the reconciliation of the balance of cash and cash equivalents at the beginning and end of the period. See statement of cash flows.

MFRS C-1 “Cash and cash equivalents”: it establishes standards for the accounting treatment and disclosure of cash, restricted cash and available investments, in addition to incorporating new terminology to make it consistent with other MFRS previously issued. Also, it modifies the presentation of restricted cash and cash equivalents. See paragraph d.

MFRS C-13 “Related parties”: requires the reporting entity to inform the name of the direct or indirect parent company which issues financial statements available for public use and broadens disclosures on controlling entities. See Note 13. b. Use of estimates

The preparation of the financial information in accordance with MFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and reported revenues, costs and expenses for the reporting years. Actual results could differ from those estimates. The main captions subject to these estimates include the following: impairment of long-lived assets, allowances for doubtful accounts, allowance for deferred income tax asset and labor obligations (liabilities). c. Basis for consolidation

The consolidated financial statements comprise the accounts of Grupo Famsa and all subsidiaries over which it has direct control (see Note 1). All significant intercompany transactions and balances between Grupo Famsa and its subsidiaries have been eliminated in consolidation. d. Cash and cash equivalents

Cash is recorded at nominal value and comprises cash in check accounts, petty cash and short-term bank deposits.

Cash equivalents comprise the following: i) On-demand temporary investment: these are highly liquid investments with maturities of less than three months and are stated at acquisition cost and are subsequently stated at fair value at year end. The effects from changes in its value and the interest earned are charged or credited directly to income on an accrued basis. At December 31, 2010 and 2009, the on-demand deposits amounted to Ps652,106 and Ps1,254,920, respectively. ii) Restricted cash: represents limited cash in BAF and Famsa USA. Restricted cash in BAF comprises: a) deposits required by monetary regulations and made with Banxico, which earn a funding rate, b) inter-bank short-term loans, which do not exceed more than three working days, and c) purchased foreign currency, the agreed settlement date on which is subsequent to the transaction date. The restricted cash from Famsa USA is cash maintained due to down payments received from customers as a commitment to make the purchase.

Commencing January 1, 2010, the Company adopted the provisions established in the new MFRS C-1 “Cash and cash equivalents”. This standard requires that restricted cash is presented in the balance sheet under the “Cash and cash equivalent” caption, as consequence, at December 31, 2009 the restricted cash was retrospectively reclassified in order to comply with the new presentation of this item. At December 31, 2010 and 2009 the restricted cash from BAF amounted to Ps177,266 and Ps182,733, respectively, and for Famsa USA, it amounted to Ps10,247 and Ps9,135, respectively, and are included in the balance sheet under the “Cash and cash equivalent” caption. e. Revenue recognition

The Company derives revenues from retail operations primarily through the sale of products such as household appliances, furniture, clothing, electronics and cellular telephones, as well as the granting of personal loans and issuance of other financial services products offered through the subsidiary BAF.

Revenue from retail sales is recognized upon completion of the revenue recognition process, which occurs when merchandise is shipped or delivered to customers in accordance with the terms of an agreement of sale, there is a fixed or determinable selling price, title and risk of loss have been transferred, and collectability is reasonably assured. Most of these conditions are satisfied at the time of delivery to customers and at the issuance of the sales receipt. Allowances for estimated returns and discounts are provided when sales are recorded. Revenue originated from the sale of extended warranties is recognized at the time of sale since the amount is not significant.

The Company offers to customers an option to pay in installments (weekly, bi-weekly or monthly) rather than in cash at the time of purchase. Revenues from installment sales and revenues for financing on loans granted are recognized at the date of sale and the credit is granted, respectively, since the average period for the recovery in full of the amount of these sales is less than one year.

AR 2010 f. Trade accounts receivable and allowance for doubtful accounts

The Company maintains an allowance for doubtful accounts related to customers’ receivables for estimated losses resulting from customers’ inability to make timely payments, including interest on finance receivables. The amount of the allowance for doubtful accounts is based on various factors including the length of past due payments, the current business environment, past practices (represented as a percentage of sales), historical experience and the estimated recoverable value of the related sold item, since, in some cases, the sold item is treated as collateral under the sale contract. The Company’s management believes that the allowance for doubtful accounts is adequate and sufficient to cover any losses associated with the accounts receivable and loan portfolio.

g. Inventories and cost of sales

Inventories of household appliances, furniture, clothes and other products for sale to third parties are stated at the lower of historical cost or market value; cost is determined using the average cost method.

The cost of sales recognizes the historical cost determined under the valuation method described in the paragraph above.

h. Shipment and handling of merchandise

Shipping and handling fees paid by customers are included in net sales. Costs associated with handling the Company’s products and shipping them to customers is classified in cost of sales when incurred.

i. Advance payments for advertising

The Company contracts its media advertising, mainly television and press, directly and through its subsidiaries. The related agreements stipulate payments for these services which are charged to income as they are accrued. The services are rendered in the course of one year. At December 31, 2010, prepaid advertising costs amounted to Ps52,093 (Ps132,441 at December 31, 2009); this amount is included in the balance sheet under “Other accounts receivable”.

j. Business acquisitions, goodwill and intangible assets

In accordance with the standards in effect, Grupo Famsa has adopted the following accounting guidelines for business acquisitions: i) all acquisitions are accounted for as purchases; the purchase price of assets acquired and related liabilities is allocated based on their fair value at the date of acquisition; ii) intangible assets acquired are subject to identification, valuation and recognition; and iii) goodwill represents the purchase price portion not so allocated.

Goodwill is not amortized and is subject to periodic testing for impairment.

In order to be recognized, intangible assets must be identifiable and must provide future economic benefits; in addition, control over such benefits is also required. They are classified as having:

i) Indefinite useful life - These are not amortized and are subject to annual impairment testing; at the date of issuance of these financial statements no circumstances that might affect their useful lives have been identified.

ii) Finite useful life - These are amortized by applying the straight-line method, based on the estimated useful lives determined in accordance with the expected future economic benefits, and are subject to impairment tests, when appropriate.

k. Property, leasehold improvements, furniture and equipment and depreciation

Property, leasehold improvements, furniture and equipment and the related accumulated depreciation are stated as follows: a) acquisitions from January 1, 2008 at historical cost; b) acquisitions of domestic origin carried out up to December 31, 2007 at restated value determined by applying factors derived from the National Consumer Price Index (NCPI) through December 31, 2007 to the acquisition cost; and c) acquisitions of assets of foreign origin at historical cost stated in the currency of the country of origin by applying factors derived from the general inflation index of the country of origin through December 31, 2007, translated to Mexican pesos using the exchange rate prevailing at December 31, 2007. Consequently, property, leasehold improvements, furniture and equipment are stated at modified historical cost.

Depreciation is calculated by the straight-line method based on the estimated useful lives of the assets as determined by the companies. The amortization period for leasehold improvements is determined based on the term of the lease agreement.

Property, leasehold improvements, furniture and equipment are subject to recognition impairment testing. At December 31, 2010 and 2009, no circumstances that might affect their useful lives have been identified.

l. Deferred charges

Deferred charges are stated at historical cost. They comprise principally: a) costs and expenses, including placement discounts originated by lines of credit contracted (see Note 8) and which are amortized over the term of such liabilities; b) costs related to the development and implementation of computer systems; and c) installation, preoperating and start-up expenses of Famsa USA, all of which are subject to amortization. In 2009, since MFRS C-8 “Intangible assets” became effective, the Company wrote-off all unamortized preoperating expenses relating to the year 2002 and prior years of Famsa USA, amounting to approximately Ps134,167, to retained earnings.

m. Other assets

This item comprises mainly guarantee deposits.

n. Transactions in foreign currency and exchange differences

Monetary assets and liabilities in foreign currencies, mainly U.S. dollars (US$), are stated in Mexican currency at the rates of exchange in effect at the balance-sheet date. Exchange differences arising from changes in exchange rates between the transaction and settlement dates or the balance-sheet date are charged or credited to comprehensive financing (expense) income. 40

AR 2010 o. Demand deposits and time-deposits

The Company’s liabilities include BAF’s funding liabilities, including interest-bearing demand deposits (savings, deposits and checking accounts) as well as time-deposits (certificates of deposits and promissory notes). These liabilities are recorded at the contracted transaction value plus accrued interest, which are charged to income on an accrual basis. At December 31, 2010 and 2009, BAF’s funding liabilities with third parties were as follows:

2010 2009

Demand deposits: Savings deposits (interest-bearing) Ps 4,929,075 Ps 1,423,699 Checking accounts (non-interest-bearing) 203,623 138,063

Time-deposits: From the general public 3,857,017 5,881,238

8,989,715 7,443,000

Less demand and term deposits of subsidiary companies 82,417 66,231

Total Ps 8,907,298 Ps 7,376,769

p. Estimated liability for labor benefits (employees’ benefits)

The benefits granted by the Company to its employees, including defined benefit plans, are summarized as follows: direct benefits (salaries, over-time, vacations, holidays and paid absences, etc.) are expensed as incurred and the liabilities are expressed at nominal value, due to their short-term nature. Compensated absences according to legal or contractual provisions are not cumulative. The Company does not have any long-term direct benefit plans.

The Company does not have any employees’ defined contribution benefit plans, except for those required by the Social Security laws.

The benefits at the end of the labor relationship, other than those caused by restructuring (legal indemnities for dismissal, seniority premium plan, voluntary separation, etc.), are recognized based on studies by independent actuaries using the projected unit credit method.

The transition liability, which includes past services, and actuarial gains and losses, are amortized over the lesser of the period pending to be amortized or five years.

q. Comprehensive financing income (expense)

This item is determined by grouping in the statement of income all interest and other financial income and expense, exchange gains and losses, and the gain or loss on monetary position. r. Income tax

The income tax that is showed in the consolidated income statement represents the tax incurred during the year and the effects of deferred tax determined in each subsidiary. The Company uses the comprehensive asset and liability method to determine the deferred tax asset or liability, and related income/expense for deferred income taxes, for all the temporary differences between the carrying values for financial reporting and tax values of assets and liabilities. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realizable. The Company recognized deferred income tax rather than deferred flat tax since financial and tax projections prepared by the Company show that it will be paying income tax in the foreseeable future.

s. Employees’ profit sharing

Deferred profit sharing is recorded based on the method described in paragraph r. above, when related payment or recovery is likely to occur.

The current and deferred profit sharing expenses or benefits are included in other expenses in the income statement. t.Shares held in treasury

The maximum limit for the acquisition of the Company’s own shares is determined based on stockholders’ resolutions. Shares acquired are held in treasury and their acquisition cost is charged to stockholders’ equity as follows: a portion is charged to capital stock at its modified historical cost and the excess to the reserve of repurchase for shares (included in the retained earnings caption). These amounts are stated at historical cost.

AR 2010 u. Stockholders’ equity

The capital stock, paid-in capital, retained earnings and cumulative translation adjustment are stated as follows: i) movements in these accounts occurring after January 1, 2008, are stated at historical value, and ii) movements occurring before January 1, 2008 are stated at their restated historical cost, determined by the application to their originally-determined values of factors derived from the NCPI up to December 31, 2007. Consequently, the different stockholders’ equity concepts are stated at modified historical cost.

The additional paid-in capital represents the excess of the payment for subscribed shares over their nominal value.

v. Comprehensive (loss) income

Comprehensive (loss) income is represented by the net income and items required by specific accounting standards to be reflected in stockholders’ equity but which do not constitute capital contributions, reductions or distributions. The amounts of comprehensive (loss) income in 2010 and 2009 are stated in modified historical pesos.

w. Earnings per share

Earnings per share are computed by dividing the net income for the year by the weighted average number of common shares outstanding during the year. There are no effects arising from potentially dilutive shares.

x. Foreign currency operations

The accounting records of Famsa USA are stated in the currency of its country and in accordance with the applicable accounting principles. For purposes of including the individual financial statements of the foreign subsidiary in the consolidated financial statements of Grupo Famsa they are converted to Mexican FRS considering a non-inflationary economic environment, as described below:

• Assets and liabilities at December 31, 2010 and 2009 using the exchange rates prevailing at each closing date (Ps12.35 and Ps13.04, respectively). • Stockholders’ equity was converted using historical exchange rates. • Revenues, costs and expenses of 2010 and 2009 were converted using the monthly average exchange rates of each year, which were Ps12.62 and Ps13.41, respectively.

The change in the net investment in the U.S. subsidiary resulting from the fluctuation in the exchange rate is included in stockholders’ equity as cumulative translation adjustment.

y. Business segment information

The standards of MFRS B-5 “Financial information by segments” require the Company to analyze its organizational structure and its reporting system for the purpose of identifying segments. In practice, the Company distinguishes business segments by geographical area.

These segments are jointly managed since the goods, services and the markets are similar. Resources are allocated to the segments considering management strategies. The Company’s activities are performed through different subsidiaries (see Note 1). Operations among segments are recorded at market value.

Note 14 shows the information by segment which management uses to analyze, manage and control the business and evaluate its operating income.

z. Risk concentration

The principal financial instruments maintained by the Company under a credit risk concentration correspond to cash in banks and cash equivalents, as well as trade accounts receivable. Cash and cash equivalents are maintained in recognized financial institutions. The relative investments are in fixed interest. The risk concentration regarding trade accounts receivable is significant since the Company managed a credit portfolio of approximately 1,760,000 accounts (unaudited) at December 31, 2010 (1,670,000 in 2009). However, there is an allowance for doubtful accounts based on a percentage of the net credit sales. Additionally, in order to reduce risks, the Company in Mexico requires that all credit granted must be secured by the goods purchased and by a guarantor.

NOTE 4 - TRADE ACCOUNTS RECEIVABLE

At December 31 this caption comprised the following: 2010 2009

Trade accounts receivable: Commercial business Ps 3,479,472 Ps 4,950,949 Financial sector 13,941,491 9,903,712 17,420,963 14,854,661

Less - Allowance for doubtful accounts (1) 848,543 723,561

Net Ps 16,572,420 Ps 14,131,100

(1) In 2010 and 2009, the allowance charged to income was Ps1,076,640 and Ps1,225,817, respectively. 42

AR 2010 NOTE 5 - INVENTORIES

Inventories consisted of the following: 2010 2009

Products (*) Ps 1,891,438 Ps 1,767,294 Clothing, footwear and jewelry 309,873 329,988 Merchandise in transit, advances to suppliers and others 16,951 20,763 Total Ps 2,218,262 Ps 2,118,045

(*) Comprises mainly electronic products, household appliances and furniture.

NOTE 6 - PROPERTY, LEASEHOLD IMPROVEMENTS AND FURNITURE AND EQUIPMENT

At December 31 this item comprised the following: Depreciation 2010 2009 rate

Land Ps 326,252 Ps 326,252 Construction in progress 52,435 17,596 378,687 343,848

Buildings and construction 356,840 361,483 3% Leasehold improvements 2,442,602 2,406,634 8% Furniture and equipment 1,107,678 1,070,029 10% Transportation equipment 248,968 253,640 22% Data-processing equipment 500,452 489,867 24% 4,656,540 4,581,653 Accumulated depreciation (2,473,561) (2,193,621) 2,182,979 2,388,032

Net carrying value Ps 2,561,666 Ps 2,731,880

Depreciation charged to income represented annual average rates of 8.5% in 2010 and 9.4% in 2009.

In accordance with the lease agreements, the leasehold improvements will become the property of the lessor at the termination of the agreements.

NOTE 7 - FOREIGN CURRENCY POSITION

At December 31, 2010 and 2009, the exchange rates were 12.35 and 13.04 nominal pesos to the U.S. dollar, respectively, according to Banxico. At April 13, 2011, the dates of issuance of the audited financial statements, the exchange rate was 11.83 nominal pesos to the U.S. dollar.

Amounts shown in this note are expressed in thousands of U.S. dollars (US$), since this is the currency in which most of the Company’s foreign currency transactions are carried out.

At December 31 the Company had the following foreign currency assets and liabilities:

2010 2009

Monetary assets US$ 259,484 US$ 263,617 Monetary liabilities 230,568 114,227

Monetary position in foreign currency US$ 28,916 US$ 149,390

Nonmonetary assets (inventories) US$ 45,127 US$ 46,352

In the years ended December 31, 2010, the Company had direct imports of inventories totaling US$14.3 million (US$8.6 million in 2009). 43

AR 2010 NOTE 8 - SHORT-TERM LOANS AND LONG-TERM DEBT

At December 31 the total consolidated debt was as follows:

Interest 2010 2009 rate (*)

Grupo Famsa:

Mexican pesos: Amounts fully drawn down from short-term revolving credit lines: Banco Inbursa, S. A. Ps 450,000 Banca del Bajío, S. A. Ps 100,000 100,000 8.88% Banco Santander Serfin, S. A. 100,000 100,000 8.89% Banorte, S. A. 149,995 299,996 8.60%

Issuance of debt certificates (1): Short-term 1,671,725 567,700 8.15% Long-term 1,000,000 2,021,720 2,517,696 U.S. dollars: Issuance of foreign debt: Senior notes 144A/Reg. S (2) 2,469,920 11.00% Euro-commercial paper 926,103 2,469,920 926,103

Banco Ahorro Famsa, S. A., Institución de Banca Múltiple: Mexican pesos: Nacional Financiera, S. N. C. (3) 16,428 9,640 9.00%

Famsa USA: U.S. dollars: Amounts drawn down from credit line with: Deutsche Bank AG (4) 172,895 182,611 2.43% GE Capital Corporation 263,537 172,895 446,148

Total debt 4,680,963 3,899,587

Short-term debt (2,194,615) (2,889,947)

Long-term debt Ps 2,486,348 Ps 1,009,640

(*) Nominal rates at December 31, 2010.

AR 2010 (1) On September 11, 2009, the Company issued, through a public offering on the Mexican stock exchange (Bolsa Mexicana de Valores S. A. B. de C. V.), a series of commercial paper (certificados bursátiles) in the aggregate principal amount of Ps1,000 million. This commercial paper was priced at a spread of 250 bps over the 28-day TIIE interbank rate, matures on August 12, 2011, and was assigned “A(mex)” and “HRA” ratings by Fitch México, S. A. de C. V. and HR Ratings de México, S. A. de C. V., respectively. The net proceeds of this issue were used by the Company for working capital and to pay off short-term debt. The debt certificates are payable in monthly installments starting in March 2011 and ending in August 2011. Both the long- and short-term local bonds have been registered with the “Registro Nacional de Valores” maintained by the CNBV.

Long-term local bonds issued pursuant to this program are partially guaranteed by Nacional Financiera, S. N. C. (“NAFIN”) as part of a credit agreement with NAFIN. NAFIN is obliged to pay up to 50% of the outstanding amount of principal and ordinary interest due and unpaid on the bonds should Grupo Famsa default, provided that, at no time will NAFIN pay more than Ps500 million. The note by which this bond was issued was also executed by NAFIN as guarantor.

Additionally, the long-term local bonds contain certain restrictive covenants which, among other things, limit the ability to:

• Change or modify the main business purpose or activities of the Company. • Incur additional debt in an amount higher than three times the stockholders’ equity as of the date of issuance of the bonds. • Pay dividends or reduce the capital stock without the prior written consent of NAFIN. • Guarantee third party obligations, except for obligations assumed by the employees, subsidiaries and affiliates. • Enter into or carry out any transaction with financial derivative instruments.

(2) In July 2010, the Company issued senior notes for an amount of US$200 million, under the rule 144A/Reg. S, in the foreign market, at a rate of 11% and maturing in July 2015. The senior notes are guaranteed by the retail, manufacturing and other subsidiaries (see Note 1). The notes were assigned “B” and “B+” ratings by Standard & Poors and Fitch Ratings, respectively. The notes may not be offered or sold within the United States.

(3) Loans contracted by BAF with NAFIN and payable in 2014 and 2015.

(4) In 2010, Famsa USA renewed a line of credit with Deutsche Bank AG for US$14 million, with final maturity in 2011, which was fully drawn down.

At December 31, 2010, and at the date of issuance of these financial statements, the Company had satisfactorily complied with such covenants and restrictions.

AR 2010 NOTE 9 - ESTIMATED LIABILITY FOR LABOR BENEFITS

The liabilities and costs relating to seniority premiums and pension plans to which employees are entitled after 15 years of service, are recognized on the basis of actuarial studies performed by independent actuaries. The Company has also established plans to cover compensation in the event of dismissal, based on actuarial studies made by independent actuaries.

The reconciliation between the initial and final balances of the defined benefit obligations (DBO) present value for the year 2010 is as follows:

Pension Severance Seniority plan compensations premiums Total

DBO at January 1, 2010 Ps 3,800 Ps 104,778 Ps 41,899 Ps 150,477 Add (less): Net cost for the period 670 12,625 13,161 26,456 Payments charged to liability for labor benefits (13,549) (3,819) (17,368) Cost of obligation settlements 127 4 131 Actuarial losses (earnings) 495 1,306 (11,997) (10,196) Others (2,179) (349) (2,528)

DBO at December 31, 2010 Ps 4,965 Ps 103,108 Ps 38,899 Ps 146,972

The reconciliation between the present value of the DBO and the fair value of Plan Assets (PA) and the Net Projected Liability (NPL) recognized in the balance sheet is as follows:

2010 2009

Concepto Pension Severance Seniority plan compensation premiums Total Total DBO Ps 5,274 Ps 106,574 Ps 39,074 Ps 150,922 Ps 151,920 Less: PA - - - - - Funding status 5,274 106,574 39,074 150,922 151,920 Less: Net transition liability 309 1,163 40 1,512 2,496 Actuarial losses (earnings) (57) (57) (1,020) Others 2,360 135 2,495 (33)

NPL at December 31 Ps 4,965 Ps 103,108 Ps 38,899 Ps 146,972 Ps 150,477

AR 2010 An analysis of the net period costs is as follows.

2010 2009

Item Pension Severance Seniority plan compensation premiums Total Total Labor cost Ps 225 Ps 3,861 Ps 9,977 Ps 14,063 Ps 14,733 Financing cost 291 8,009 3,163 11,463 11,534 Net transition liability 154 755 20 929 1,028 Cost of early settlement of obligations (1) 127 4 131 2,050 Cost of recognition of actuarial losses (earnings) of the year 494 1,306 (11,997) (10,197) 250 Other 95 8,546 1,860 10,501 1,253

Total Ps 1,259 Ps 22,604 Ps 3,027 Ps 26,890 Ps 30,848

(1) This concept relates to cost of early settlement of obligations, different than restructuring or discontinuing operations.

Rates used in the calculation of projected obligations for benefits and plan yields:

2010 2009

Discount rate (%) 7.00% 8.25%

Salary increase rate (%) 5.00% 5.00%

NOTE 10 - STOCKHOLDERS’ EQUITY

In the Ordinary General Meeting held on April 27, 2010, the stockholders agreed that the fund created for the purchase and sale of Company’s own shares will be up to a maximum amount of Ps110 million. At December 31, 2010, the Company had 259,700 shares (259,700 shares in 2009) held in treasury and the market value per share at that date was Ps22.89 (Ps25.03 in 2009).

On July 17, 2009, the existing stockholders approved an increase in the capital stock through the issuance of 109,090,909 Series A, Class II shares of common stock, with no par value, corresponding to the variable portion of the capital stock of the Company.

AR 2010 At December 31, 2010, the capital stock is comprised of the following:

Number Amount of shares

Description

Fixed capital (minimum): Series “A” Class “I”, common, nominative shares, without par value 330,097,385 Ps 660,195

Variable capital: Series “A” Class “II”, common, nominative shares, without par value 109,090,909 218,182

Restatement 1,594,223

Capital stock 439,188,294 Ps 2,472,600

The net income for the period is subject to the legal provision requiring at least 5% of the income for each period to be set aside to increase the legal reserve until it reaches an amount equivalent to 20% of the capital stock. At December 31, 2010 the retained earnings include Ps260,283 and Ps520,566, applicable to the legal reserve and to the reinvestment reserve, respectively.

Dividends paid are not subject to income tax if they are paid from the after-tax earnings account (“CUFIN”). Dividends paid in excess of this account are subject to a tax equivalent to 42.86% if paid in 2011. The tax is payable by the Company and may be credited against the normal income tax payable by the Company in the year in which the dividends are paid or in the following two years or, if appropriate, against the flat tax of the year. Dividends, which are paid from retained earnings previously taxed, are not subject to any tax withholding or payment.

In the event of a capital reduction, any excess of stockholders’ equity over capital contribution accounts (“CUCA”), the latter restated in accordance with the provisions of the Income Tax Law, is accorded the same tax treatment as dividends. At December 31, 2010 and 2009, the CUCA amounted to Ps6,279,223 and Ps6,014,581, respectively.

NOTE 11 - COMPREHENSIVE FINANCING INCOME (EXPENSE), NET

This caption comprised the following: 2010 2009

Financial expense (Ps 1,088,829) (Ps 1,125,446) Financial income 3,309 15,935 Exchange (loss) gain, net 6,469 (126,045)

(Ps 1,079,051) (Ps 1,235,556)

NOTE 12 - INCOME TAX, ASSET TAX, FLAT TAX AND EMPLOYEES’ PROFIT SHARING

Grupo Famsa determines its taxable income (loss) and employees’ profit sharing on an individual Company stand-alone basis. The tax result differs from the accounting result due to the temporary differences arising from comparing the book value and the tax value of each asset and liability account in the balance sheet, as well as items only affecting the net income or the taxable income of the year.

In accordance with the changes to the Mexican Income Tax Law published on December 7, 2009, the income tax rate for the years 2010 through 2012 will be 30%, for 2013 29% and from 2014 onwards 28%. At December 31, 2009 the aforementioned changes in tax rates gave rise to a net increase in deferred income tax of Ps12,372 with the corresponding effect on income for the year, which was determined based on the expected reversal of temporary items at the rates which will be in effect.

AR 2010 The net credit (charge) to consolidated income for Income Tax and Flat Tax were as follows:

2010 2009

Income tax:

Current (Ps 6,336) (Ps 94,860) Deferred 625,290 625,177

Total income tax 618,954 530,317

Flat tax: Current (26,852) (320,189)

Total tax on profits Ps 592,102 Ps 210,128

The reconciliation between the statutory and effective income tax rates is shown below:

2010 2009

Income tax at statutory rate 30% 28%

Add (deduct) effect of income tax on: Permanent nondeductible differences 157% 7% Effect inflationary adjustment for tax purposes 31% 15% Other permanent differences 287% 140%

Effective income tax rate 505% 190%

The movement of deferred income tax at December 31 was as follows:

2010 2009

Balance at beginning of year (Ps 155,986) Ps 469,191 Change in the year (625,290) (625,177)

Balance at end of year (Ps 781,276) (Ps 155,986)

AR 2010 At December 31 the principal temporary differences requiring recognition of deferred income tax were as follows:

2010 2009

Trade accounts receivable Ps 227,025 Ps 591,464 Advance payments and others provisions, net (11,807) 287,025 Inventories 476,033 643,058 Property, furniture and equipment, net (193,810) (129,574) Allowance for doubtful accounts (729,797) (357,088) Estimated liability for labor benefits (146,972) (150,477) Tax effect of credit sales (126,173) (230,880) Employees’ profit sharing payable (2,616) (2,898) Deferred employees’ profit sharing 48,256 36,117 Tax loss carryforwards (3,664,039) (2,059,828) (4,123,900) (1,373,081)

Less - Allowance for deferred income tax 1,526,640 860,172 (2,597,260) (512,909)

Income tax rate (*) 30% 30% Deferred income tax (asset) liability (781,276) (155,981) Recoverable asset tax (171,536) (171,536)

Deferred income tax (asset) liability, net (Ps 952,812) (Ps 327,517)

(*) Weighted average rate at the date temporary differences are expected to be realized.

The Company had unused tax loss carryforwards in Mexico and the United States, expiring in the following years:

2011 Ps 87,715 2012 11,603 2017 27,652 2018 53,438 2019 1,036,998 2020 919,993 2,137,399 (1) 2021 a 2030 1,526,640 (2) Ps 3,664,039

(1) The foregoing amounts are shown at their inflation-indexed amount through December 31, 2010.

(2) Famsa USA has tax loss carryforwards totaling US$124 million (equivalent to Ps1,526,640), expiring in 2030; however, the Company has created an allowance covering such tax loss carryforwards since the U.S. operations have not historically generated taxable income.

The flat tax of the period is calculated by applying a 17.5% rate to net income based on cash flows. Such net income represents the difference between the total income collected from taxable activities, less the authorized tax deductions paid. In addition, this amount can be further reduced by flat tax credits, based on the procedures established in the law. Flat tax is paid only when it exceeds the income tax payable.

AR 2010 Any asset tax exceeding the income tax effectively paid up to December 31, 2007 (the date when asset tax was abrogated) is susceptible of reimbursement according to the Flat Tax Law. The Company has the right to recover the asset tax paid for a cumulative amount of Ps171,536, which is composed as follows: 2011 Ps 7,689 2012 14,782 2013 16,315 2014 19,369 2015 11,054 2016 41,731 2017 60,596 Ps 171,536

Employees’ profit sharing was determined at the rate of 10% on taxable income adjusted as prescribed by the Income Tax Law.

The net charge (credit) to income for employees’ profit sharing is as follows:

2010 2009

Employees’ profit sharing: Current (Ps 1,604) (Ps 1,933) Deferred 12,139 17,342

Total profit sharing (1) Ps 10,535 Ps 15,409

(1) Profit sharing is included in the consolidated statement of income in “Other (expenses) income, net”.

At December 31 the principal temporary differences requiring recognition of deferred employees’ profit sharing were as follows:

2010 2009

Estimated liability for labor benefits (Ps 146,972) (Ps 150,477) Advance payments (274,055) (141,390) Property, furniture and equipment, net (61,535) (69,300)

(482,562) (361,167)

Profit sharing rate 10% 10% Deferred profit sharing asset (Ps 48,256) (Ps 36,117)

NOTE 13 - COMMITMENTS

The majority of the subsidiary companies have entered into long-term lease agreements (some with related parties) covering properties occupied by their stores. Following is a description of the main agreements entered into with related parties: a) Real Property Leases

As of December 31, 2010, the Company had 40 long-term lease agreements in place with the controlling shareholders and various entities controlled by them, in respect of the retail space used by several of the stores. The terms of all such agreements are substantially identical and are consistent with standard industry practices and real estate market prices.

Rentals payable related to lease agreements are as follows:

Related Other parties Total

2011 Ps 836,417 Ps 102,416 Ps 938,833 2012 to 2015 3,345,668 409,664 3,755,332 Ps 4,182,085 Ps 512,080 Ps 4,694,165

AR 2010 In 2010 and 2009 total rental expense was as follows:

2010 2009

Third parties Ps 796,588 Ps 808,255 Related parties 97,539 95,946 Total Ps 894,127 Ps 904,201

b) Asset management

The Company has entered into various asset management agreements with affiliates and other entities controlled by the principal shareholders, covering account collection services and the management and investment of the proceeds of such collections, in exchange for a commission payable on an annual basis.

NOTE 14 - INFORMATION BY BUSINESS SEGMENT

The Company manages and evaluates its continuing operations through three business segments: Mexico (national retail stores, personal car financing and financial sector), U.S.A. (foreign retail stores) and other businesses in Mexico (wholesale, manufacturing of furniture and footwear catalog business). The Company controls and evaluates its continuing operations on a consolidated basis. Its activities are carried out through its subsidiary companies.

Company management uses operating income before depreciation as the measurement of segment performance as well as to evaluate development, make general operating decisions and assign resources.

The information by business segment is as follows:

2010

Mexico USA Other Subtotal Intersegment Consolidated

Net sales (1) Ps 11,494,305 Ps 3,389,749 Ps 1,009,376 Ps 15,893,430 (Ps 900,553) Ps 14,992,877 Cost of sales (5,767,399) (1,633,031) (852,166) (8,252,596) 891,625 (7,360,971)

Gross margin 5,726,906 1,756,718 157,210 7,640,834 (8,928) 7,631,906 Operating expenses (2) (3,962,062) (1,891,836) (133,323) (5,987,221) 56,944 (5,930,277)

Operating income before depreciation and amortization 1,764,844 (135,118) 23,887 1,653,613 48,016 1,701,629 Depreciation and amortization (263,342) (127,613) (3,804) (394,759) (394,759)

Operating income Ps 1,501,502 (Ps 262,731) Ps 20,083 Ps 1,258,854 Ps 48,016 Ps 1,306,870

Additional segmental disclosure:

Total assets Ps 23,529,749 Ps 3,928,838 Ps 432,333 Ps 27,890,920 (Ps 2,222,865) Ps 25,668,055

Total liabilities Ps 16,167,485 Ps 2,609,335 Ps 128,000 Ps 18,904,820 (Ps 2,222,865) Ps16,681,955

Capital expenditure Ps 144,696 Ps 15,935 Ps 938 Ps 161,569 Ps Ps 161,569

AR 2010 2009

Mexico USA Other Subtotal Intersegment Consolidated

Net sales (1) Ps 10,832,302 Ps 4,096,420 Ps 763,259 Ps 15,691,981 (Ps 745,059) Ps 14,946,922 Cost of sales (5,442,821) (1,979,884) (736,038) (8,158,743) 803,531 (7,355,212)

Gross margin 5,389,481 2,116,536 27,221 7,533,238 58,472 7,591,710 Operating expenses (2) (3,730,026) (2,244,221) (115,901) (6,090,148) 52,867 (6,037,281)

Operating income before depreciation and amortization 1,659,455 (127,685) (88,680) 1,443,090 111,339 1,554,429 Depreciation and amortization (279,406) (147,827) (4,034) (431,267) (431,267)

Operating income Ps 1,380,049 (Ps 275,512) (Ps 92,714) Ps 1,011,823 Ps 111,339 Ps 1,123,162

Additional segmental disclosure:

Total assets Ps 19,748,208 Ps 4,356,669 Ps 501,473 Ps 24,606,350 (Ps 2,001,907) Ps 22,604,443

Total liabilities Ps 13,681,730 Ps 2,444,816 Ps 112,438 Ps 16,238,984 (Ps 2,001,907) Ps 14,237,077

Capital expenditure Ps 290,737 Ps 29,889 Ps 3,157 Ps 323,783 Ps Ps 323,783

(1) Net sales are realized in the respective countries disclosed above. (2) Depreciation and amortization are not included.

NOTE 15 - NEW FINANCIAL REPORTING STANDARDS

During December 2009 and 2010, the Mexican Financial reporting Standards Board issued a series of Mexican Financial Reporting Standards (MFRS), which will become effective as of January 1, 2011. It is considered that such MFRS will not substantially affect the financial information presented by the Company:

MFRS B-5 “Financial information by segment” sets forth the general standards for disclosure of financial information by segments, allowing the presentation of information by segment in a manner more consistent with the related financial statements; additionally, it also allows the user of such information to analyze the entity from a management approach. This standard will replace Statement B-5 “Financial information by segment”, in force until December 31, 2010.

MFRS B-9 “Interim financial information” sets forth the standards for the determination and presentation of interim financial information for external purposes and, among other changes, requires presentation of the statements of changes in stockholders’ equity and of cash flows; these statements were not required by Statement B-9 “Interim financial information”, in effect until December 31, 2010.

MFRS C-4 “Inventory”, of retrospective application, establishes the particular standards of valuation, presentation and disclosure for the initial and subsequent recognition of inventory; additionally it removes the direct cost method as a permitted valuation system and the inventory cost allocation formula known as last-in, first-out (LIFO). This standard leaves Bulletin C-4 “Inventory”, effective up to December 31, 2010, without effect.

MFRS C-5 “Advance payments”, of retrospective application, establishes, among other, the particular standards of valuation, presentation and disclosure relative to the line item, advance payments. It also establishes that advance payments for the purchase of inventory, and property, machinery and equipment should be presented in the advance payment caption and not in inventory or property, machinery and equipment, as previously required; additionally it establishes that advance payments related to the acquisition of goods should be presented in the balance sheet in current or non-current assets. This standard leaves Bulletin C-5 “Advanced payments” effective up to December 31, 2010, without effect.

MFRS C-6 “Property, plant and equipment”, of prospective application (except on disclosure aspects), establishes the particular standards of valuation, presentation and disclosure related to property, plant and equipment; it also establishes: a) property, plant and equipment used to develop or maintain biological and extractive industries assets are now under its scope, and b) that components of a property, plant and equipment item with a different useful life from the rest of the item should be depreciated separately. This MFRS becomes effective as of January 1, 2011, except for the changes arising from the segregation of its components which have a useful life clearly different from the main asset. In this case, and for entities which have not performed such segregation, the applicable standard will become effective for periods commencing January 1, 2012. This standard leaves Bulletin C-6 “Property, plant and equipment” effective up to December 31, 2010, without effect.

AR 2010 MFRS C-18 “Liabilities associated with the retirement of assets and restoration of the environment”, of retrospective application, establishes the particular standards for the initial and subsequent recognition of a provision relative to liabilities associated with retirements of property, plant and equipment components, and outlines the matters which should be considered and disclosed in connection with the recognition of such liabilities.

NOTE 16 - INTERNATIONAL FINANCING REPORTING STANDARDS (IFRS) ADOPTION

From January 1, 2012 onward, in connection with the Resolution Modifying the General Rules Applicable to the Issuers of Securities and Other Participants in the Securities Market issued on January 27, 2009, the Company, as a participant in the Mexican Securities Market, will be required to prepare its financial statements in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

At April 13, 2011, date of issuance of these financial statements, the Company is currently analyzing the adoption effects of the IFRS pursuant to the rules contained in the IFRS 1 “First-time Adoption of International Financial Reporting Standards”. For such purposes, the Company considered as a basis for the implementation of IFRS the financial information issued at December 31, 2010.

NOTE 17 - SUBSEQUENT EVENTS

At April 13, 2011, date of issuance of these audited financial statements, the following subsequent events were present:

a) On February 15, 2011, the Company drew down US$40 million, at a rate of 7.62%, pursuant to a 2009 euro-commercial paper program amounting to US$100 million. The net proceeds of this issue were used by the Company for working capital and to refinance existing debt.

b) In 2011, the Company placed a revolving commercial paper for an amount of Ps2,000 million for a term of five years. On March 25, 2011, the Company issued aggregate principal amount of Ps1,000 million pursuant to such unsecured commercial paper program at a spread of 280 bps over the TIIE interbank rate and maturing in 2014. The net proceeds of this issue were used to refinance debt maturing in 2011 (see Note 8 paragraph 1). The issuance of this commercial paper is guaranteed by the retail, manufacturing and other subsidiaries (see Note 1).

AR 2010 CONTACT INFORMATION FOR STOCKHOLDERS

Hernán F. Lozano Investor Relations Director [email protected] t. (0181) 8389 9078

Corporate Offices: Pino Suarez # 1202 nte. Zona Centro C.P. 64000 Monterrey, N. L., Mexico t. (0181) 8389 9000

Stock Market and Ticker Symbol: Mexican Stock Exchange (BMV) GFAMSA www.grupofamsa.com www.famsa.com

Grupo Famsa, S.A.B. de C.V.’s annual reports and other written materials may contain forward-looking statements and disclosures, projected financial results and expectations for Grupo Famsa and its subsidiaries’ future performance which should be considered as estimates made in good faith by Company Management on the basis of the information available when the document was prepared. Investors are cautioned that any such forward-looking statements and disclosures are subject to inherent risks and uncertainties, as well as to factors that could cause the Company’s results, plans, objectives, expectations, performance and achievements to be totally different at any given time. Such risks and uncertainties include changes in general economic, political, government and/or commercial conditions on a national and/or global level, as well as changes in interest rates, inflation, foreign exchange volatility, product prices, customer demand and competition, as well as others. As a result of these risks and uncertainties, real results may differ substantially from the forward-looking statements and disclosures presented in this document. Grupo Famsa does not assume any responsibility or obligation related to variations that these forward-looking statements and disclosures may contain, nor for any other information coming from official sources or third parties.

AR 2010 www.grupofamsa.com www.famsa.com

GRUPO FAMSA, S.A.B. DE C.V. 2010 ANNUAL REPORT Evol 2010 ANNUALREPORT Exp eri ution & ence

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