b) Retained earnings include the statutory legal reserve. The General Corporate Law requires that at least 5% of net income of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value. The legal reserve may be capitalized but may not be distributed unless the entity is dissolved. The legal reserve must be replenished if it is reduced for any reason. The legal reserve as of December 31, 2010 and 2009 amounted Ps. 105,602 and is included as part of the retained earnings.

c) The balances of the equity tax account as of December 31, 2010 and 2009 are:

Earnings distributed in excess of the balances of the Net Tax Profit Account (CUFIN ) will be subject to income tax payable by the companies at the rate in force. At December 31, 2010 the Company’s CUFIN balance is Ps. 835,767.

d) As of December 31, 2010 and 2009, the Company has a stock option plan that consists of 945,741 and 1,072,432 approved stock options of the Company, respectively.

A total of 978,298 stock options were initially granted to the key executives. During 2007 these grants were made at an exercise price of 98.08 Mexican pesos, which was in excess of the shares’ underlying fair value at the grant date. During 2008, a total of 29,929 options were exercised, and 335,853 options were cancelled upon separation of the related employees. In addition, during 2009 the Company increased the number of shares available in the stock option plan by 73,232 and granted 321,549 options at an exercise price of 43.54 Mexican pesos. During 2010 the Company did not increase any of the shares underlying its stock options plan, nor did it grant any new options. However a total of 126,691 stock options were exercised in 2010. Also during 2010, 612,516 options were forfeited as the right for them to be exercised concluded.

The executives have the right to exercise one-third of their total options granted per year. The right to exercise the option expires after one year from the grant date or, in some cases, after 180 days from the departure of the executive from the Company. Given the condition of the equity markets in 2008 and 2009, the Company’s Compensation Committee authorized the modification of the terms of the awards. Specifically, the duration of the program for options granted up to December 31, 2008, was extended whereby the exercise of awards if not made in the previously specified period, could be exercised one year following but not later than December 31, 2010.

During 2009, the Company also made changes to the underlying option grants made in 2007 and 2009 so as for them to now be ultimately settled with issuance of Company shares rather than with the payment of Company cash. Both of these events were considered substantive changes to the underlying terms of the previous stock option grants, and compensation expense related to these changes has been re-measured accordingly.

The following information is an analysis of stock option activity during the years:


The weighted average exercise price of stock options outstanding as of December 31, 2010 is as follows:



The average fair value of all the stock options granted was 39.30, 15.63 and 6.02 Mexican pesos per stock option, during the years ended December 31, 2010, 2009 and 2008, respectively.

During the year ended December 31, 2010, 126,691 of the stock options granted in 2009 were exercised at an exercise price of Ps. 43.54, resulting in an increase of Ps. 5,516 in the equity.

Key assumptions used to calculate the fair value for the years ended December 31, 2010, 2009 and 2008 are as follows:

Total compensation cost related to vested stock option awards not recognized was Ps. 4,212 at December 31, 2010. Compensation cost related to vested stock option awards totaled Ps. 10,638 at December 31, 2009. Total compensation cost related to vested stock option awards not recognized was Ps. 3,687 at December 31, 2008.

e) On March 10, 2008, the Board of Directors authorized the Company to repurchase up to $250 million in treasury stock through market transaction. The Company did not repurchased treasury shares during 2010. During the year ended December 31, 2009, the Company repurchased 49,500 treasury shares for Ps. 1,398.

f) As of December 31, 2010 and 2009, 800,383 and 187,867 shares remain in treasury, respectively. As of December 31, 2008, 999,200 shares legally remain in treasury.